Munoz v. PHH Corp.
| Decision Date | 11 August 2014 |
| Docket Number | CASE NO. 1:08-CV-00759 |
| Court | U.S. District Court — Eastern District of California |
| Parties | EFRAIN MUNOZ, et al., individually and on behalf of all others similarly situated; Plaintiffs v. PHH CORPORATION, et al., Defendants |
ORDER GRANTING MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS AND GRANTING LEAVE TO AMEND
Before the Court is a motion for partial judgment on the pleadings filed by PHH Corporation, PHH Mortgage Corporation, PHH Home Loans, LLC, and Atrium Insurance Corporation ("Defendants," collectively). Doc. No. 256, ("Mot."). The motion for partial judgment on the pleadings pertains to the intervention of Plaintiff-Intervenor Marcella Villalon ("Plaintiff-intervenor"), and all others similarly situated. The motion is predicated upon the failure to plead facts sufficient to state a claim for application of equitable tolling and/or equitable estoppel to the 1-year statute of limitations, 12 U.S.C. § 2614, for alleged violations of Real Estate Settlement Procedures Act ("RESPA") Section 8, 12 U.S.C. § 2607. Defendants' motion for partial judgment on the pleadings will be granted. Plaintiff-intervenor will be granted leave to amend for equitable tolling and equitable estoppel.
Defendant PHH provides real estate mortgages nationwide. PHH wholly-owns Atrium Insurance Corporation. Atrium provides reinsurance services to private mortgage insurance ("PMI") providers. Typically, PMI providers are unaffiliated with the mortgage provider. In turn, PMI providers decrease their risk by acquiring reinsurance, through companies such as Atrium, in exchange for a percentage of the PMI provider's premiums. Captive reinsurance occurs when the mortgage provider also provides the reinsurance.
Congress enacted RESPA to increase real estate settlement process transparency and protect consumers from abusive business practices. See 12 U.S.C. § 2601. In relevant part, Section 8(a) provides:
"No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person."
12 U.S.C. § 2607(a). Contrarily, Section 8(b) provides:
"No person shall give and no person shall accept any portion, split, or percentage, of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed."
12 U.S.C. § 2607(b).
Plaintiffs acquired mortgages from PHH and provided down payments of less than 20% of the home purchase prices. PHH required Plaintiffs, due to their less-than-20% down payments, to purchase PMI in order to protect PHH against the risk of default. Plaintiffs allege that PHH organized a scheme whereby PHH selected the specific PMI provider. In turn, PHH required selected PMI providers to acquire reinsurance through Atrium. Plaintiffs allege that reinsurance through Atrium was illusory, no actual transfer of risk occurred. Specifically, Plaintiffs allege:"The millions of dollars in premiums accepted from private mortgage insurers: (a) were not for services actually furnished or performed; and/or (b) exceeded the value of such services." Doc. No. 96, FAC at ¶ 90. Thus, Atrium's share of PMI premiums constituted kickbacks and fee-splits in violation of RESPA Section 8.
On June 02, 2008, Efrain Munoz, Leona Lovette, and Stephanie Melanie ("Plaintiffs," collectively) filed a class action complaint against Defendants for alleged violations of RESPA Section 8, Doc. Nos. 1 and 2, each plaintiff having obtained their home loan within one year prior to filing the complaint, Doc. No. 96, FAC at ¶¶ 10-15. On December 10, 2010, Plaintiffs filed their First Amended Complaint ("FAC"). Doc. No. 96, FAC. The FAC included arguments for the application of equitable tolling and equitable estoppel to RESPA's one-year statute of limitations for Section 8 claims. Doc. No. 96, FAC at ¶¶ 99-111.
The FAC lacked a named plaintiff for the putative tolled class of plaintiffs. On May 30, 2013, Plaintiff-intervenor, who obtained her loan on March 1, 2007, filed a motion to intervene on behalf of the tolling class of individuals who obtained mortgage loans and private mortgage insurance through PHH's alleged captive mortgage reinsurance arrangements between January 1, 2004 and June 1, 2007. Doc. No. 231. In lieu of filing a pleading, Plaintiff-intervenor filed a declaration and adopted the FAC allegations, including the equitable tolling and equitable estoppel allegations as set forth in FAC at ¶¶ 99-111. Doc. No. 231-4, ("Ciolko Decl. 1"), Exhibit B at ¶ 9.
On November 27, 2013, Defendants subsequently filed the present motion, a Rule 12(c) partial judgment on the pleadings. Plaintiff-intervenor opposes the motion. Doc. No. 259, ("Opposition"). Defendants filed a reply brief to Plaintiff-intervenor's opposition. Doc. No. 260, ("Reply").
"After the pleadings are closed--but early enough not to delay trial-- a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). In the Ninth Circuit, "Rule 12(c) is functionally identical to Rule 12(b)(6) and ... the same standard of review applies to motions brought under either rule." Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 n. 4 (9th Cir. 2011) (internal quotations omitted). "When considering a Rule 12(c) dismissal, we must accept the facts as pled by the nonmovant." Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1053 (9th Cir. 2011). "A judgment on the pleadings is properly granted when, taking all the allegations in the non-moving party's pleadings as true, the moving party is entitled to judgment as a matter of law." Ventress v. Japan Airlines, 603 F.3d 676, 681 (9th Cir. 2010). "Courts have discretion to grant leave to amend in conjunction with 12(c) motions." Moran v. Peralta Community College Dist., 825 F. Supp. 891, 893 (N.D. Cal. 1993) (citing Amersbach v. City of Cleveland, 598 F.2d 1033, 1038 (6th Cir. 1979)).
On a Rule 12(c) motion, if matters not contained in the pleadings are presented to the court and the court relies upon them, the court must convert the motion to one for summary judgment under Rule 56. Fed. R. Civ. P. 12(d). Courts may, nonetheless, avoid converting to a motion for summary judgment and still consider matters not contained in the pleadings if the matters are documents incorporated by reference or matters of judicial notice. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). "[C]ourts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on [Rule 12(c) motions for judgment on the pleadings], in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice." Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007). "[A] court may consider a writing referenced in a complaint but not explicitly incorporated therein if the complaint relies on the document and its authenticity is unquestioned."Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007); United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) (); see also Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998) (superceded by statute on other grounds as recognized in Abrego v. The Dow Chem. Co., 443 F.3d 676, 681 (9th Cir.2006)) (under a Rule 12(b)(6) motion, allowing the District Court to consider ERISA-regulated plan documents that were referenced in the complaint and first amended complaint but that were not attached to either pleading, but upon which plaintiff's claims necessarily relied and whose authenticity was not challenged).
The Court must decide what information is within its purview to consider when ruling on the present motion. Defendants adamantly object to the Court considering the Deed of Trust (Doc. No. 259-1, ("Ciolko Decl. 2"), Exhibit B) that was first provided after Defendant filed the present motion. Doc. No. 260, Reply at 2-3. Defendants firmly assert that, "[T]he sole support for [Plaintiff-intervenor's] assertions resides in the newly attached Disclosure" and Plaintiff-intervenor is attempting to amend the pleading to include this "integral" document. Doc. No. 260, Reply at 2:24-3:1, 3:7.
Defendants rely on Parrino v. FHP, Inc., 146 F.3d 699 (9th Cir. 1998) to assert that, "[T]he law does not permit such extrinsic reliance by Plaintiffs." Doc. No. 260, Reply at 4:1-2. Defendants misunderstand Parrino's application of the doctrine of incorporation by reference. In Parrino, an insured man sued his health insurance carrier for refusing to authorize payment for brain tumor therapy. The plaintiff attempted to surmount the defendant's motion to dismiss by not referencing health plan documents in his complaint. Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998). Defendants are correct that Parrino upheld the applicability of the doctrine of incorporation by reference to allow the defendant to introduce evidence that was crucial to theplaintiff's complaint but to which the plaintiff failed to reference in his complaint. Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998). Parrino did not, however, preclude the plaintiff from invoking incorporation by reference.
The Court is not aware of any Ninth Circuit case law that eliminates Rule 12(c)'s permissive nature of allowing plaintiffs to attach or not attach exhibits to pleadings. Cf. Fed. R. Civ. P. 8(a)(2) (...
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