Dahar v. PennyMac Loan Services LLC ( 2024 )

1 2 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA 3 4 Tim Dahar, Case No.: 2:23-cv-01020-CDS-MDC 5 Plaintiff Order Granting Defendant’s Motion to Dismiss and Motion to Strike, and Denying 6 v. Motion to Seal 7 Pennymac Loan Services, LLC, [ECF Nos. 7, 11, 15] 8 Defendant 9 10 Pro se plaintiff Tim Dahar brings this lawsuit following a non-judicial foreclosure on his 11 property. ECF No. 1-1. Defendant Pennymac Loan Services, LLC moves to dismiss the complaint 12 (ECF No. 7) arguing that Dahar has failed to state a claim. Pennymac also moves to seal an 13 exhibit accompanying its reply (ECF No. 11), and to strike Dahar’s surreply (ECF No. 15). For 14 the reasons set forth below, I grant Pennymac’s motion to dismiss and motion to strike, and 15 deny its motion to seal. 16 I. Background 17 In April 2015, Dahar refinanced the real property located at 4540 San Rafael Ave in Las 18 Vegas, Nevada with All Western Mortgage, Inc. Deed of Trust, Def.’s Ex. A, ECF No. 8-1 at 3. In 19 February 2019, the deed of trust was assigned to Pennymac. Assignment of Deed of Trust, Def.’s 20 Ex. B, ECF No. 8-1 at 13. Dahar disputes the transfer of the loan to Pennymac, and the monthly 21 escrow amounts determined by Pennymac beginning in November of 2021. ECF No. 1-1 at 5, 7–8. 22 Pennymac asserts that Dahar’s loan was referred to foreclosure in November of 2022. Def.’s Ex. 23 A; ECF No. 12-1 at 2. Dahar seeks to stop the non-judicial foreclosure. On May 22, 2023, Dahar 24 initiated this action in the Eighth Judicial District Court for Clark County, Nevada. ECF No. 1-1. 25 Pennymac removed his action to this court on June 30, 2023. ECF No. 1. Pennymac now moves 26 to dismiss this suit for failure to state a claim on which relief may be granted, or alternatively, for 1 failure to comply with Federal Rule of Civil Procedure 8(a). Mot. to Dismiss, ECF No. 7. For the 2 reasons discussed below, the motion to dismiss is granted. 3 II. Legal standard 4 The Federal Rules of Civil Procedure require a plaintiff to plead “a short and plain 5 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). 6 Dismissal is appropriate under Fed. R. Civ. P. 12(b)(6) where a pleader fails to state a claim upon 7 which relief can be granted. Fed. R. Civ. P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 8 (2007). A pleading must give fair notice of a legally cognizable claim and the grounds on which 9 it rests, and although a court must take all factual allegations as true, legal conclusions couched 10 as factual allegations are insufficient. Twombly, 550 U.S. at 555. 11 Accordingly, Fed. R. Civ. P. 12(b)(6) requires “more than labels and conclusions, and a 12 formulaic recitation of the elements of a cause of action will not do.” Id. To survive a motion to 13 dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to 14 relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 15 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that 16 allows the court to draw the reasonable inference that the defendant is liable for the misconduct 17 alleged.” Id. This standard “asks for more than a sheer possibility that a defendant has acted 18 unlawfully.” Id. 19 If the court grants a motion to dismiss for failure to state a claim, leave to amend should 20 be granted unless it is clear that the deficiencies of the complaint cannot be cured by 21 amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). Pursuant to Fed. R. 22 Civ. P. 15(a), a court should “freely” give leave to amend “when justice so requires,” and in the 23 absence of a reason such as “undue delay, bad faith or dilatory motive of the part of the movant, 24 repeated failure to cure deficiencies by amendment previously allowed, undue prejudice to the 25 opposing party by virtue of allowance of the amendment, futility of the amendment, etc.” Foman 26 v. Davis, 371 U.S. 178 (1962). 1 III. Discussion 2 A. Pennymac’s motion to dismiss is granted. 3 Dahar’s complaint does not explicitly enumerate the causes of action. Liberally 4 construing it, it appears that the complaint alleges violations of the (1) Fair Debt Collection 5 Practices Act (FDCPA); (2) Real Estate Settlement Procedures Act (RESPA); (3) Consumer 6 Credit Protection Act (CCPA); (4) a number of state laws; and (5) Nevada Homeowner Bill of 7 Rights (NHBR). Compl., ECF No. 1-1. Pennymac moves to dismiss the complaint, arguing that 8 the FDCPA claim should be dismissed because it fails as a matter of law as non-judicial 9 foreclosure by a loan servicer does not constitute debt collection. ECF No. 7 at 5. Pennymac 10 asserts that the RESPA claim should be dismissed because there is no private right of action for 11 that regulation. Id. at 6–7. Lastly, Pennymac contends that Dahar fails to state a claim of any 12 “material violation” under NHBR. Id. at 7. 13 14 15 Dahar alleges that Pennymac violated provisions of the FDCPA by acting as a debt 16 collector. ECF No. 1-1 at 4. Pennymac counters that enforcement of a security interest through 17 non-judicial foreclosure does not constitute debt collection subject to most provisions of the 18 FDCPA. ECF No. 7 at 5. I agree. 19 Congress passed the FDCPA “to eliminate abusive debt collection practices by debt 20 collectors” while ensuring that “those debt collectors who refrain from using abusive debt 21 collection practices are not competitively disadvantaged.” 15 U.S.C. § 1692(e). The FDCPA 22 requires and prohibits certain activities by “debt collectors” that are done “in connection with 23 the collection of any debt.” 15 U.S.C. §§ 1692c (prohibiting certain communications), 1692d 24 (prohibiting harassment or abuse), 1692e (prohibiting false or misleading representations), 1692f 25 (prohibiting unfair practices), 1692g (requiring validation of debts). However, a business 26 engaged in no more than the kind of security interest enforcement at issue in nonjudicial 1 foreclosure proceedings falls outside of the purview of the FDCPA, except for the limited 2 purpose of §1692f(6). Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029, 1031 (2019); Dowers v. 3 Nationstar Mortg., LLC, 852 F.3d 964, 971 (9th Cir. 2017); see also Gillespie v. Countrywide Bank FSB, 4 2011 WL 3652603 at *2 (D. Nev. Aug. 19, 2011) (stating without elaboration that “activities 5 undertaken in connection with a nonjudicial foreclosure do not constitute debt collection under 6 the FDCPA.”). Section 1692f(6) prohibits taking or threatening to take any nonjudicial action to 7 effect dispossession or disablement of property if (1) there is no present right to possession of 8 the property claimed as collateral through an enforceable security interest; (2) there is no 9 present intention to take possession of the property; or (3) the property is exempt by law from 10 such dispossession or disablement. 15 U.S.C. §1692f(6). 11 Dahar’s complaint, however, does not allege a violation of this specific provision. Nor 12 does his complaint allege facts which, liberally construed, would plausibly assert any of the 13 three above-referenced prohibitions under Section 1692f(6). While Dahar complains that “[he] 14 had never heard of [Pennymac Loan Services LLC]” until they started sending him billing 15 statements (ECF No. 1-1 at 5), he does not allege that Pennymac had no enforceable security 16 interest under Nevada law; nor does he allege that Pennymac had no intention to take 17 possession of the property (the opposite), nor that his property was exempt from dispossession 18 or disablement under law. See generally id. These are insufficient. But because it is unclear if the 19 deficiencies can be cured by amending the complaint, I dismiss his FDCPA claim without 20 prejudice and with leave to amend. 21 22 23 Dahar alleges that he did not consent to Pennymac servicing his loan. He further asserts 24 that he was overbilled due to Pennymac’s accounting errors. Resp., ECF No. 9 at 9–10. 25 Pennymac argues that there is no private right of action for the provisions of RESPA that Dahar 26 cites and even if there is, he does not allege a viable claim. Reply, ECF No. 10 at 3. Dahar lists the 1 following RESPA provisions in his complaint: 12 CFR § 1024.17, 12 CFR § 1024.35, 12 CFR § 2 1024.35A, 12 CFR § 1024.35B, 12 CFR § 1024.35H, 12 CFR § 1024.38A, 12 CFR § 1024.38B. ECF 3 No. 1-1 at 4. 4 “A plaintiff may only bring a cause of action to enforce a federal law if the law provides a 5 private right of action.” Nisqually Indian Tribe v. Gregoire, 623 F.3d 923, 929 (9th Cir. 2010). There is 6 no private right of action for 12 C.F.R. § 1024.17 or 12 C.F.R. § 1024.38. See, e.g., Herman v. Mr. Cooper 7 Grp. Inc., 2023 U.S. Dist. LEXIS 188891, at *5–6 (S.D.N.Y. Oct. 19, 2023) 8 (“[No] private right of action exists under Section 2609 of RESPA or its implementing 9 regulation, 12 C.F.R. § 1024.17.”) (citing Dolan v. Fairbanks Cap. Corp., 930 F. Supp. 2d 396, 418 10 (E.D.N.Y. 2013) (collecting cases)); In re Wells Fargo Forbearance Litig., 2023 U.S. Dist. LEXIS 11 76443, at *16 (N.D. Cal. May 2, 2023) (dismissing claim under 12 C.F.R. § 1024.38 with 12 prejudice because no private right of action). Consequently, these claims are thus dismissed 13 with prejudice. 14 But courts are split on whether there is a private right of action under 12 CFR § 1024.35. 15 Compare Lage v. Ocwen Loan Servicing LLC, 839 F.3d 1003, 1007 (11th Cir. 2016) (“If the servicer fails 16 to respond adequately to the borrower's notice of error, then the borrower has 17 a private right of action to sue the servicer under RESPA.”), and Sutton v. CitiMortgage, Inc., 228 F. 18 Supp. 3d 254, 271 (S.D.N.Y. 2017) (assuming for the sake of the motion at issue that 19 a private right of action under 12 C.F.R. § 1024.35 exists), with Watts v. Mortg. Bridge Sols., LLC, 20 2016 WL 8188768, at *6 (E.D. Mich. Dec. 7, 2016) (“Under Regulation X, a borrower is only 21 permitted a private cause of action for a violation under § 1024.41, which specifically provides 22 that ‘[a] borrower may enforce the provisions of this section....’”), adopted by, 2017 WL 438745 23 (E.D. Mich. Feb. 1, 2017), and Miller v. HSBC Bank U.S.A., N.A., 2015 WL 585589, at *11 (S.D.N.Y. Feb. 24 11, 2015) (holding that § 1024.35 “does not provide a private right of action”), and Willson v. Bank 25 of Am., N.A., 2016 WL 8793204, at *8 (S.D. Fla. May 2, 2016) (noting same). 26 1 Accordingly, I make no determination at this point as to whether 12 CFR § 1024.35 2 contains a private right of action because Dahar’s complaint fails to state any actionable claim 3 under any articulated provision of RESPA sufficient to give either the court or defendant fair 4 notice of the basis of the claim(s) upon which Dahar seeks relief. Starr v. Baca, 652 F.3d 1202, 1216 5 (9th Cir. 2011) (A complaint “must contain sufficient allegations of underlying facts to give fair 6 notice and to enable the opposing party to defend itself effectively.”); see also Fed. R. Civ. P. 8 (“A 7 pleading that states a claim for relief must contain: . . . . a short and plain statement of the claim 8 showing that the pleader is entitled to relief”). Instead, I dismiss Dahar’s 12 CFR § 1024.35 claim 9 under Fed. R. Civ. P. 8(a) without prejudice and with leave to amend. If Dahar wishes to amend 10 his complaint to bring any future alleged violations of RESPA, he must state the specific RESPA 11 provision or provisions, containing a private right of action, and accompany that provision with 12 factual allegations which plausibly state the basis for the relief he seeks. 13 14 15 Alleged within the section entitled “Jurisdiction and Venue,” are violations of the 16 “Consumer Credit Protection Act chapter 4 sec. 161 and title VI sec. 602.” ECF No. 1-1 at 4. 17 However, Dahar merely cites the CCPA and does not provide any further allegations as to why 18 he has a cause of action under the CCPA. In order to proceed, Dahar must establish that 19 Pennymac did not have a permissible purpose for requesting his credit report. Here, Dahar fails 20 to state any factual allegations supporting a CCPA claim. Accordingly, these claims are 21 dismissed without prejudice under 12(b)(6) and with leave to amend for failing to state a claim 22 upon which relief can be granted. 23 24 25 26 1 state law and Nevada Homeowner Bill of Rights (NHBR) claims 2 are dismissed without prejudice and with leave to amend. 3 Dahar makes several references to Nevada state law in his complaint, including the 4 Nevada’s Homeowner Bill of Rights, Nevada Revised Statutes (NRS) 107.400 et seq., several 5 provisions to NRS Chapter 205. ECF No. 1-1 at 3–4. Liberally construed, his complaint may also 6 assert a quiet title or wrongful foreclosure claim under Nevada law. Id. at 5–14. But Dahar does 7 not articulate a claim for relief under any particular Nevada law—in part, because he fails to 8 specifically allege facts particular to any one specific provision or claim under Nevada law that 9 might entitle him to relief. As a result, Dahar’s state law claims are thus dismissed under Rule 8 10 and Rule 12(b)(6) for failure to state a claim. Starr, 652 F.3d at 1216 (A complaint “must contain 11 sufficient allegations of underlying facts to give fair notice and to enable the opposing party to 12 defend itself effectively.”); see also Fed. R. Civ. P. 8, 12(b)(6). Because it is unclear if amendment 13 can cure these pleading issues, I dismiss Dahar’s state law claims without prejudice and with 14 leave to amend. If Dahar wishes to amend his complaint to bring any future alleged violations of 15 Nevada state law, he must state the specific statute provision(s) or law(s) under which he states 16 a claim, and accompany that provision with factual allegations which plausibly state the basis 17 for the relief he seeks. 18 IV. Pennymac’s motion to seal is denied. 19 Pennymac seeks to seal an exhibit containing correspondence to Dahar and a breakdown 20 of loan payments and account history that contains account balance information in connection 21 with its motion to dismiss. ECF No. 12-1. Pennymac argues that the information within the 22 exhibit is “confidential and protected[,]” and the sensitive nature of its contents outweighs the 23 public interest in disclosure. ECF No. 11 at 3. Pennymac asserts that the public’s interest in these 24 records “does not promote the public’s understanding of the judicial process[.]” Id. And further 25 asserts that the information contained in the exhibit is designated nonpublic information under 26 15 U.S.C. § 6809(4)(A) and 12 C.F.R. §§ 1016.3(p)(1)(i); 1016.3(q)(2)(i). Id. at 2. 1 In the Ninth Circuit there is “a strong presumption in favor of access to court records.” 2 Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003). To overcome this 3 presumption, a party must articulate “compelling reasons” justifying nondisclosure, such as use 4 of the record to gratify spite, permit public scandal, circulate libelous statements, or release 5 trade secrets. Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1179 (9th Cir. 2006). “The mere 6 fact that the production of records may lead to a litigant’s embarrassment, incrimination, or 7 exposure to further litigation will not, without more, compel the court to seal its records.” Id. 8 The public interest in full disclosure of documents is grounded upon “ensuring the ‘public’s 9 understanding of the judicial process and of significant public events.’” Id. (citations omitted). 10 The court has inherent power over its own records and files, and access may be denied where 11 the court determines that the documents may be used for improper purposes. Id.; Nixon v. Warner 12 Comm’n., Inc., 435 U.S. 589, 598 (1978); Hagestad v. Tragesser, 49 F.3d 1430, 1433–34 (9th Cir. 1995). 13 Pennymac does not demonstrate compelling reasons to seal the exhibit by citing the 14 Gramm-Leach Bliley Act. ECF No. 11 at 2. While Pennymac asserts that privacy interests 15 outweigh the public’s interest in accessing these documents (see ECF No. 15 at 3), “[s]imply 16 invoking a blanket claim, such as privacy . . . will not, without more, suffice to exempt a 17 document from the public’s right of access.” Kamakana, 447 F.3d. at 1185. Pennymac does not 18 explain how these documents could “become a vehicle for improper purposes” or how the 19 information within the exhibit will infringe on Dahar’s privacy interests if publicly available. See 20 id. at 1179, 1185. Indeed, Pennymac has already properly redacted the loan number on the exhibit 21 it seeks to seal. ECF No. 12-1. Pennymac contends that, “[t]he content of the correspondence 22 qualifies as [nonpublic information] if it includes personally identifiable financial information 23 such as the original principal balance, the borrower’s name, loan number, interest rate, and 24 repayment terms.” ECF No. 11 at 2. However, much of the information within the documents 25 that Pennymac seeks to seal, such as the correspondence, the borrower’s name, loan number, 26 loan amount, and payment history have already been made public in Dahar’s complaint, his 1 response to the motion to dismiss, and other filings. See, e.g., ECF No. 1-1 at 12–5, 52–5; ECF No. 7 2 at 2; ECF No. 9 at 22–24. Moreover, the documents do not include any personal identifying 3 information such as the borrower’s social security number, date of birth, or financial account 4 numbers. Accordingly, Pennymac’s motion to file its exhibit under seal is denied. 5 V. Pennymac’s motion to strike is granted. 6 On August 9, 2023, Dahar filed a surreply to Pennymac’s motion to dismiss without leave 7 of the court. ECF No. 13. Pennymac filed a motion to strike the surreply, arguing that the filing 8 does not comply with the local rules and has unfairly prejudiced it. See generally ECF No. 15. 9 A surreply is an additional reply brief filed by the non-moving party after the underlying 10 motion has already been fully briefed. Hammler v. Lyons, 2023 WL 113764, at *1 (E.D. Cal. Jan. 5, 11 2023) (citations omitted). The Federal Rules of Civil Procedure do not expressly permit the 12 filing of a surreply, and this district’s local rules do not permit surreplies without first obtaining 13 the court’s leave. Instead, Local Rule 7-2(b) allows only for a motion, a response, and a reply. LR 14 7-2(b). That same rule explicitly states that “[s]urreplies are not permitted without leave of 15 court; motions for leave to file a surreply are discouraged.” Id. (emphasis added). 16 Because surreplies are discouraged, “[o]nly the most exceptional or extraordinary 17 circumstances warrant permitting a surreply to be filed.” Stevens v. Prentice, 2018 WL 3758577, at 18 *1 (D. Nev. Aug. 8, 2018) (citation omitted). I do not find any exceptional or extraordinary 19 circumstances here that would warrant the filing of a surreply. Accordingly, Pennymac’s motion 20 to strike the surreply is granted. The court will not consider the surreply, nor the substantive 21 responses contained in Pennymac’s motion to strike. 22 VI. Conclusion 23 IT IS THEREFORE ORDERED that Pennymac’s motion to dismiss [ECF No. 7] is 24 GRANTED. Dahar’s FDCPA claims are dismissed without prejudice and with leave to amend, 25 his RESPA claims are dismissed without prejudice and with leave to amend, and his state law 26 claims are dismissed without prejudice and with leave to amend. 1 If Dahar chooses to file an amended complaint, he must do so no later than February 23, 2024. The amended complaint must be titled “First Amended Complaint” and must be complete in itself, meaning it cannot reference the previously filed complaint. The first amended complaint must comply with Federal Rule of Civil Procedure 8 and contain a short and plain statement describing the underlying facts sufficient to give defendant fair notice of the claims 6] against it upon which Dahar seeks relief. If Dahar does not file an amended complaint by that 7|| date, this action will be dismissed without prejudice for failure to state a claim. 8 ITIS FURTHER ORDERED that Pennymac’s motion to seal [ECF No. 1] is DENIED. The Clerk of Court is kindly instructed to unseal exhibit A, ECF No. 12. 10 IT IS FURTHER ORDERED that Pennymac’s motion to strike Dahar’s surreply [ECF 11] No. 15] is GRANTED. The Clerk of Court is directed to strike Dahar’s surreply (ECF No. 13) 12]| from the docket. / ) B Dated: February 1, 2024 Lf 14 C7 — b Uno cP Judge 16 17 18 19 20 21 22 23 24 25 26 10