Martindale v. Megastar Fin. Corp.

• Decision Date: 15 November 2021
• Docket Number: 2:20-cv-01983-MCE-DMC
• Parties: LAURIE MARTINDALE, on behalf of herself and all others similarly situated, Plaintiff, v. MEGASTAR FINANCIAL CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of California

LAURIE MARTINDALE, on behalf of herself and all others similarly situated, Plaintiff,
v.
MEGASTAR FINANCIAL CORPORATION, Defendant.

No. 2:20-cv-01983-MCE-DMC

United States District Court, E.D. California

November 15, 2021

MEMORANDUM AND ORDER

MORRISON C. ENGLAND JR. SENIOR UNITED STATED DISTRICT JUDGE

Through the present action, Plaintiff Laurie Martindale (“Plaintiff”) asserts both individual and class claims against Defendant MegaStar Financial Corporation (“Defendant”) for violation of the Rosenthal Fair Debt Collection Practices Act, California Civil Code §§ 1788 et seq. (“Rosenthal Act”); violation of California's Unfair Competition Law, California Business and Professions Code §§ 17200 et seq. (“UCL”); and breach of contract. First Amended Compl., ECF No. 11 (“FAC”). Presently before the Court is Defendant's Motion to Dismiss Plaintiff's FAC for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). ECF No. 14. This matter has been fully briefed. ECF Nos. 15, 16, 18. For the reasons set forth below, Defendant's Motion is GRANTED in part and DENIED in part.^[1]

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BACKGROUND

On November 13, 2018, Plaintiff purchased a home in Anderson, California, through a loan from Defendant and secured a mortgage on the property (“Mortgage Agreement”). FAC ¶ 31; see Ex. A, ECF No. 11, at 18-32. As the lender, Defendant retained the servicing rights to the mortgage, serviced the mortgage loan, collected payments, and performed services for Plaintiff. FAC ¶ 33. According to the FAC, each time a borrower makes a mortgage payment over the phone, Defendant charges the borrower a fee of at least $2.00 (“Pay-to-Pay Fee”). Id. ¶ 35. For example, Plaintiff alleges that on October 29, 2019, Defendant charged her a $2.00 fee for making a mortgage payment over the phone. Id. ¶ 36. Defendant collects these fees even though it knows that such fees are not authorized under the Mortgage Agreement. Id. ¶ 37 (citing Ex. A, ECF No. 11 at 27 ¶ 14). The usual cost that a servicer like Defendant pays to process a mortgage payment over the phone is $0.50 or less per transaction, which means that the actual cost to Defendant to process such payments is well below the amounts charged to the borrowers and Defendant purportedly pockets the difference as profit. FAC ¶ 28.

STANDARD

On a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) “requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief' in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require

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detailed factual allegations. However, “a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. (internal citations and quotations omitted). A court is not required to accept as true a “legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the pleading must contain something more than “a statement of facts that merely creates a suspicion [of] a legally cognizable right of action”)).

Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket assertion, of entitlement to relief.” Twombly, 550 U.S. at 555 n.3 (internal citations and quotations omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only ‘fair notice' of the nature of the claim, but also ‘grounds' on which the claim rests.” Id. (citing Wright & Miller, supra, at 94, 95). A pleading must contain “only enough facts to state a claim to relief that is plausible on its face.” Id. at 570. If the “plaintiffs . . . have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed.” Id. However, “[a] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very remote and unlikely.'” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

A court granting a motion to dismiss a complaint must then decide whether to grant leave to amend. Leave to amend should be “freely given” where there is no “undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to be considered when deciding whether to grant leave to amend). Not all of these factors

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merit equal weight. Rather, “the consideration of prejudice to the opposing party . . . carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that “the complaint could not be saved by any amendment.” Intri-Plex Techs. v. Crest Group, Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006, 1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989) (“Leave need not be granted where the amendment of the complaint . . . constitutes an exercise in futility . . . .”)).

ANALYSIS

A. Notice and Cure Provision

Paragraph 20 of the Mortgage Agreement includes a “notice and cure” provision, which obligates both the lender and borrower to notify the other party before commencing legal action and to allow that party a reasonable period of time in which to take corrective action. Ex. A, ECF No. 11, at 28 ¶ 20. In the FAC, Plaintiff alleges that she sent the requisite notice to Defendant on October 1, 2020, stating, in part, that “[i]n the event that we are unable to reach a resolution of this demand within fourteen days, [Plaintiff] intends to file a complaint for the foregoing relief against [Defendant] on behalf of herself and those similarly situated.” FAC ¶ 72; see Ex. B, ECF No. 11, at 34-35. Plaintiff filed her original complaint the following day on October 2, 2020, but points out that the requisite notice was sent to Defendant more than 30 days before the filing of the FAC on December 30, 2020. Compare Ex. B, ECF No. 11, at 34, with ECF Nos. 1, 11. In any event, Plaintiff alleges that Defendant failed to respond to the notice or address the allegations contained therein. FAC ¶ 72. Defendant argues that Plaintiff should have sent the notice and provided an opportunity to cure in advance of the filing of the original complaint, not the FAC, and thus Defendant was not given any reasonable period to take corrective action prior to this lawsuit. Mot. Dismiss, ECF No. 14, at 6-7.

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When a complaint fails to contain any allegations that the plaintiff complied with a notice and cure provision, courts, including this one, have afforded plaintiffs an opportunity to allege compliance and send the requisite notice with an opportunity to cure before filing an amended complaint. See Contreras v. Nationstar Mortgage LLC, No. 2:16-cv-00302-MCE-EFB, 2017 WL 3438769, at *4-5 (E.D. Cal. Aug. 10, 2017) (granting leave to amend to allow plaintiffs to provide defendant notice and an opportunity to cure); see also Jackson v. Atlantic Savings of Am., No. C 13-05755 CW, 2014 WL 4802879, at *6 (N.D. Cal. Sept. 26, 2014) (“If Plaintiff wishes to pursue this claim in any amended complaint, she must first give Defendants notice of her claims within seven days of the date of this order. Defendants will then have twenty-one days to cure before these claims can be re-filed.”). Because Defendant received the requisite notice and was given an opportunity to cure before the filing of the FAC, the Court will not dismiss the FAC for failure to comply with the notice and cure provision.

B. Count I: Violation of the Rosenthal Act

The purpose of the Rosenthal Act is “to prohibit debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and to require debtors to act fairly in entering into and honoring such debts.” Cal. Civ. Code § 1788.1(b). To achieve this end, the Rosenthal Act “prohibits a host of unfair and oppressive methods of collecting debt, but to be liable . . . a defendant must fall under its definition of ‘debt collector.'”^[2] Izenberg v. ETS Servs., LLC, 589 F.Supp.2d 1193, 1199 (C.D. Cal. 2008).

Under the Rosenthal Act, “every debt collector collecting or attempting to collect a consumer debt shall comply with the provisions of Sections 1692b to 1692j, inclusive, of, and shall be subject...