Northern California Judges Rule in Lending Cases

Drawing courtesy of www.lumaxart.com.

Several judges have recently released opinions on lending laws.

Adamian v. Bank of America, Marcus Adamian sued BOA and other banks for foreclosing on his house in violation of California law.  His fourth claim accused the banks of a violation of California's Unfair Competition Law (UCL) predicated on a violation of the Truth in Lending Act (TILA).  The banks moved to dismiss the fourth claim for failure to state a claim upon which relief can be granted.  Mr. Adamian, interestingly, did not dispute the dismissal of that claim.  Judge Lucy Koh dismissed the claim with prejudice and remanded the case to the Superior Court.

In Mira v. American Home Mortgage Service Inc., Alfonso and Carla Mira allege their mortgage was obtained by fraud and sued the lenders in state court.  The lenders removed the case to federal court under TILA and moved to dismiss the case.  The Miras did not file a response to the dismissal motion and Judge Saundra Brown Armstrong dismissed the case.

Rippere v. Wells Fargo is a similar case to Mira above, the plaintiff pro se alleges she was a victim of a fraudulent real estate transaction.  As Ms. Rippere explained, "defendants, acting in concert and collusion with others [unnamed in the complaint], induced [her] to enter into a predatory loan agreement with [d]efendant." Judge William Alsup found the complaint confusing and ordered Ms. Rippere to produce a more definite statement of her allegations.

Watts v. Enhanced Recovery Corp raises the interesting and unsettled question of what kind of injury is necessary to plead a claim under California's Unfair Competition Law (UCL).  Ms. Watts is suing a plethora of people for allegedly collecting a debt that she did not owe.  However, it is not clear that she acted in reliance on the requests for payment, which would prevent her from asserting a restitution interest in the money and may doom her UCL complaint.  Judge Lucy Koh explains the tension.

Some courts have held that the availability of restitution is actually a standing requirement under the UCL. These courts have concluded that the 2004 amendment limits standing to Plaintiffs who have suffered a loss of money or property that is recoverable in restitution under the UCL. See e.g., Silvaco Data Systems v. Intel Corp. (Cal. Ct.App. 2010) (“The 2004 amendment essentially stripped private plaintiffs of the power to maintain such a suit unless they could assert an entitlement to restitutionary relief in their own right. A private plaintiff unable to state a factual basis for personally recovering such relief can no longer maintain an action under the UCL.”); Buckland v. Threshold Enterprises, Ltd. (Cal. Ct. App. 2007) (“Because remedies for individuals under the UCL are restricted to injunctive relief and restitution, the import of the requirement is to limit standing to individuals who suffer losses of money or property that are eligible for restitution.”); Walker v. Geico General Ins. Co. (9th Cir. 2009) (affirming ruling that Plaintiff lacked standing because “he cannot establish the requisite ‘lost money or property’ for purposes of monetary relief under the UCL”).

Other courts have found standing where a plaintiff alleged some loss of money or property, even if the loss was not eligible for restitution.  See, e.g., Swain v. CACH, LLC (N.D. Cal. 2009) [Ware, J.] (“Plaintiff will have standing if she alleges a loss of money or property in which she had prior possession or a vested legal interest, even if that loss is not eligible for restitution.”); Aron v. U-Haul Co. of Cal. (Cal. Ct. App. 2006) (holding that plaintiff's allegations of economic loss by being required to purchase excess fuel from a third party before returning truck to defendant were sufficient for standing under the UCL, without discussing restitution). In Clayworth, the California Supreme Court considered an appellate court decision finding that Plaintiffs lacked standing because they had fully mitigated their damages and thus could not recover in restitution. In that case, the Court held that the standing requirement does not require "that plaintiffs prove compensable loss at the outset," but did not address how the standing requirement applies outside the unusual facts of Clayworth. The Court did state, however, that "the right to seek injunctive relief under section 17203 is not dependent on the right to seek restitution."  It thus appears that inability to allege a loss recoverable in restitution should not bar standing under the UCL to seek injunctive relief.  However, if Plaintiff seeks only restitution, she may need to allege facts tending to show that she is entitled to that remedy under the UCL in order to establish standing or to state a claim for relief.

Internal citations removed and hyperlinks added.  She dismissed the UCL claim with leave to amend.