NOAH L. GRYNBERG (SBN 296080) LAHAINA ARANETA (SBN … … · v. WELLS FARGO & COMPANY; and WELLS FARGO BANK, N.A., Defendants. CASE NO.: 2:15-cv-02923-PSG-AS PLAINTIFF’S OPPOSITION

i CASE NO.: 2:15-CV-02923-PSG-AS

PLAINTIFF’S OPPOSITION TO DEFS’ MOTION TO DISMISS

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NOAH L. GRYNBERG (SBN 296080) Email: [email protected] BRENT R. BOOS (SBN 292808) [email protected] LAHAINA ARANETA (SBN 289853) [email protected] LOS ANGELES CENTER FOR COMMUNITY LAW AND ACTION 1137 North Westmoreland Avenue, #16 Los Angeles, CA 90029 Tel: (310) 866-7527 Attorneys for Plaintiff MARIA ALVAREZ

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA – WESTERN DIVISION

MARIA ALVAREZ, Plaintiff, v. WELLS FARGO & COMPANY; and WELLS FARGO BANK, N.A., Defendants.

CASE NO.: 2:15-cv-02923-PSG-AS

PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Date: September 28, 2015 Time: 1:30 p.m. Judge: Hon. Philip S. Gutierrez Courtroom: 880 Trial Date: None Set Complaint Filed: April 20, 2015

Case 2:15-cv-02923-PSG-AS Document 24 Filed 09/04/15 Page 1 of 34 Page ID #:204

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TABLE OF CONTENTS Page I. INTRODUCTION.............................................................................................. 1

II. STANDARD OF REVIEW ......................................................................... 2

III. ARGUMENT ............................................................................................... 2 A. Plaintiff Adequately Pled Grounds for Liability Against Defendant Wells Fargo & Co. ........................................................................................................... 2 B. The Home Owners’ Loan (“HOLA”) Act Does Not Preempt Plaintiff’s State Law Claims................................................................................................... 3

1. HOLA does not preempt state law claims to the extent that they only incidentally affect lending operations. ............................................................... 3 2. Plaintiff’s state law claims are based on allegations of conduct incidental to WSB’s lending operations.................................................................................. 4

C. Plaintiff’s Fraud and Negligent Misrepresentation Claims are Adequately Pled. ...................................................................................................................... 7

1. Plaintiff’s claims are not time-barred........................................................... 7 2. Plaintiff’s loan modification does not bar her fraud and negligent misrepresentation claims. ................................................................................... 9 3. The actions of the Sanchez brothers are properly imparted to Wells Fargo as successor-in-interest to WSB. ...................................................................... 10 4. Plaintiff’s fraud claim satisfies the heightened pleading requirements of Rule 9(b)........................................................................................................... 12

D. Plaintiff’s Has Adequately Pled Her Claims for Aiding and Abetting Fraud and Aiding and Abetting Fiduciary Duty Against Wells Fargo. ......................... 13 E. Plaintiff Has Adequately Pled a Claim Under Business & Professions Code § 17200. ............................................................................................................... 14 F. Plaintiff’s Claim for Reverse Redlining Under the Federal Fair Housing Act is Adequately Pled. ....................................................................................... 14

1. Plaintiff’s FHA claim is timely. ................................................................. 14


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a. Plaintiff has alleged that the 2014 denial of her mortgage modification application constituted a separate violation of the FHA................................. 15

b. Equitable tolling renders Plaintiff’s claims timely. ................................ 15

c. Plaintiff’s FHA claim is timely under the continuing violations doctrine.. ................................................................................................................. 17

2. The 2010 modification agreement is irrelevant to Plaintiff’s FHA claims.19 3. Plaintiff properly states claims under the FHA.......................................... 20

a. Plaintiff has adequately pled a disparate impact violation...................... 21

b. Plaintiff has adequately pled a claim for intentional targeting. .............. 24 G. Plaintiff Has Adequately Pled a Claim for Restitution. ............................. 24

IV. CONCLUSION.......................................................................................... 25


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TABLE OF AUTHORITIES Page(s)

Cases Amaral v. Wachovia Mortg. Corp., 692 F.Supp.2d 1226 (E.D. Cal. 2010) ............. 6 Ashcroft v. Iqbal, 556 U.S. 662 (2009)..................................................................... 2 Barkley v. Olympia Mortg. Co., No. CV 04-875 RJD, 2007 WL 243781 (E.D.N.Y.

Aug. 22, 2007) ..................................................................................................... 23 Basset v. Ruggles, No. CV-F-09-528 OWW/SMS, 2009 WL 2982895 (E.D. Cal.

Sept. 14, 2009) ....................................................................................................... 7 Berryman v. Merit Prop. Mgmt., Inc., 152 Cal.App.4th 1544 (Cal. Ct. App. 2007)13 Bertoli v. Wachovia Corp., FSB, No. C11-03432 THE, 2011 WL 5244687 (N.D.

Cal. Nov. 3, 2011) .............................................................................................. 4, 7 Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001) .............................. 12 Boyd v. U.S. Postal Service, 752 F.2d 410, 414 (9th Cir. 1985) ............................. 15 Buick v. World Savings Bank, 637 F.Supp.2d 765 (E.D. Cal. 2008)...................... 11 Casault v. Federal National Mortgage Association, 915 F.Supp.2d 1113 (C.D. Cal. 2012). .................................................................................................................... 4, 7 CenterPoint Energy, Inc. v. Sup. Ct. 157 Cal.App.4th 1101 (Cal. Ct. App. 2007) ... 2 City of Los Angeles v. Wells Fargo & Co, 22 F. Supp. 3d 1047 (C.D. Cal. 2014).. 3,

10, 24, 25 Clement v. United Homes, LLC, 2012 WL 6720701 (E.D.N.Y. Dec. 27, 2012).... 16 Cosio v. Simental, No. CV 08-6853 PSG (PLAx), 2009 WL 201827 (C.D. Cal. Jan.

27, 2009). ............................................................................................................... 6 Council v. Better Homes Depot, Inc., No. 04 CV 5620(NGG)(KAM), 2006 WL

2376381 (E.D.N.Y Aug 16, 2006) ....................................................................... 16 Davidson v. Bd. of Governors, 920 F.2d 441 (7th Cir. 1990) ................................. 16 Dekalb Cnty. v. HSBC North America Holdings, Inc., Civil Action No. 1:12-CV-

03640-SCJ, 2013 WL 7874104 (N.D. Ga. Sept. 25. 2013). ................................ 18


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Diaz v. Bank of America Home Loan Servicing, No. CV 09-9286 PSG (MANx), 2010 WL 5313417 (C.D. Cal. Dec. 16, 2010) ............................................... 20, 23

eCash Technologies, Inc. v. Guagliardo, 210 F.Supp.2d 1138 (C.D. Cal. 2001) .... 2 E-Fab, Inc. v. Accountants, Inc. Servs., 153 Cal.App.4th 1308 (Cal. Ct. App. 2007)

................................................................................................................................ 8 Garcia v. Brockway, 526 F.3d 456, 465 (9th Cir. 2008) ................................... 15, 18 Goodwin v. Executive Trustee Services, LLC, 680 F.Supp.2d 1244 (D. Nev. 2010).

.............................................................................................................................. 19 Hargraves v. Capital City Mortg. Corp., 140 F.Supp.2d 7 (D.D.C. 2000) ............ 17 Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982)................................... 17, 18 Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009) ..................................... 12 Leong v. Potter, 347 F.3d 1117 (9th Cir. 2003) ...................................................... 15 Lomboy v. SCME Mortg. Bankers, No. C-09-1160 SC, 2009 WL 1457738 (N.D.

Cal. May 26, 2009) .............................................................................................. 18 McCauley v. Home Loan Inv. Bank, F.S.B., 710 F.3d 551 (4th Cir. 2013) ............... 5 Monaco v. Bear Stearns Companies, Inc. No. CV 09-05438 SJO (JCx) 2011 WL

4059801 (C.D. Cal. Sept. 12, 2011)....................................................................... 2 Munoz v. International Home Capital Corp., No. C 03-01099 RS, 2004 WL

3086907 (N.D. Cal. May 4, 2004) ....................................................................... 20 Naulty v. Greenpoint Mortg. Funding, Inc., No. C 09-1542 MHP, C 09-1545 MHP,

2009 WL 2870620 (N.D. Cal. Sept. 3, 2009) ........................................................ 7 Neilson v. Union Bank of Cal., N.A., 290 F.Supp.2d 1101 (C.D. Cal. 2003)... 13, 14 Norgart v. Upjohn Co., 21 Cal.4th 383 (Cal. 1999) .................................................. 7 Oakland Raiders v. Oakland-Alameda Cnty. Coliseum, Inc., 144 Cal.App.4th 1175

(Cal. Ct. App. 2006)............................................................................................... 9 Ohno v. Yasuma, 723 F.3d 984, 1006 (9th Cir. 2013) ............................................. 24 Ojo v. Farmers Grp., Inc., 600 F.3d 1205 (9th Cir. 2010) ...................................... 21


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Pacific Rollforming, LLC v. Trakloc Int’l, LLC, No. CV 07-1897, 2008 WL 4183916 (S.D. Cal. Sept. 8, 2008) ......................................................................... 3

Pack v. Fort Washington II, 689 F.Supp.2d 1237 (E.D. Cal. 2009)....................... 20 Pascual v. Wells Fargo Bank, N.A., No. CV 13-02005-KAW, 2013 WL 4066946

(N.D. Cal. Aug. 8, 2013)................................................................................ 18, 19 Phillips v. Better Homes Depot, Inc., No. 02-CV-1168 (ERK), 2003 WL 25867736

(E.D.N.Y. Nov. 12, 2003) .................................................................................... 16 Plata v. Long Beach Mortg. Co., No. C 05-02746 JF, 2005 WL 3417375 (N.D.

Cal. Dec. 13, 2005) .............................................................................................. 10 Ramirez v. GreenPoint Mortg. Funding, Inc., 633 F.Supp.2d 922 (C.D. Cal. 2008)

.............................................................................................................................. 21 Reyes v. Premier Home Funding, Inc., 640 F.Supp.2d 1147 (N.D. Cal. 2009) 10, 11 Santa Maria v. Pac. Bell, 202 F.3d 1170 (9th Cir. 2000)........................................ 15 Schied v. Bodinson Manufacturing Co., 79 Cal.App.2d 134 (Cal. Ct. App. 1947). 9,

10, 19, 20 Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001 (9th Cir. 2008)............................... 4 Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002) ......................................... 21, 22 Taguinod v. World Savings Bank, FSB, 755 F.Supp.2d 1064 (C.D. Cal. 2010). ..... 5 Taylor v. Accredited Home Lenders, Inc., 580 F.Supp.2d 1062 (S.D. Cal. 2008) 18,

21 Texas Dep’t of Housing and Comm. Affairs v. The Inclusive Communities Project,

Inc., 135 S.Ct. 2507 (2015) .................................................................................. 21 Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) .............................. 12

Statutes 12 U.S.C. § 1461 et seq. ........................................................................................... 3 42 U.S.C. § 3605(a) ................................................................................................ 23 42 U.S.C. § 3613(a)(1)(A)...................................................................................... 14 Cal. Code Civ. P. § 338(d)........................................................................................ 7


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Other Authorities “Preemption of State Laws Applicable to Credit Card Transactions” ¶ IIC (Opinion

of OTS Chief Counsel, Dec. 24, 1996), 1996 WL 767462.................................... 5 12 C.F.R. § 560.2.................................................................................................. 4, 6 OTS, Final Rule, 61 Fed.Reg. 50951, 50966-67 (Sept. 30, 1996) ........................... 4 Fed. R. Civ. P. 12...................................................................................................... 2 Fed. R. Civ. P. 8.................................................................................................. 3, 11 Fed. R. Civ. P. 9................................................................................................ 11, 12


1 CASE NO.: 2:15-CV-02923-PSG-AS


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I. INTRODUCTION This case is about housing discrimination. Plaintiff Maria Alvarez

(“Plaintiff”) is a woman in her 60s and an immigrant to this country from Mexico.1 Between 2005 and 2007, she was targeted by a group of mortgage brokers named Richard, Oscar, and Ernesto Sanchez (“the Sanchez brothers”) for a series of high-cost mortgage loans.2 The Sanchez brothers targeted her because they knew she was an unsophisticated borrower and a monolingual Spanish speaker who would not understand the loan products they were peddling.3

The Sanchez brothers convinced Plaintiff to refinance her home three times over a three-year period by promising that they would invest the proceeds from her new mortgage loans on her behalf.4 These investments were never made. Instead, the Sanchez brothers kept many of the loan proceeds for themselves, leaving Plaintiff with two residential mortgage loans that would ultimately call for combined monthly payments more than twice her monthly income.5

Two of the refinance agreements the Sanchez brothers brokered for Plaintiff were made by World Savings Bank, FSB (“WSB”).6 WSB is the predecessor-in-interest to the Wells Fargo Defendants.7 The first agreement (“the First WSB Loan”) increased Plaintiff’s prior principal balance by nearly $10,000.8 The second agreement (“the Second WSB Loan”) increased Plaintiff’s principal balance by over $50,000 and called for eventual monthly payments of more than $2,600.9 On

1 Complaint, ECF No. 1 (“Complaint”) ¶ 31. 2 Id. ¶¶ 32-54. 3 Id. ¶¶ 93, 103. 4 Id. ¶¶ 32, 35, 48. 5 Id. ¶¶ 39-40, 47. 6 Id. ¶¶ 35-46. 7 Id. ¶ 80. The Wells Fargo Defendants will be referred to collectively in this Opposition as “Wells Fargo”. 8 Id. ¶ 35. 9 Id. ¶ 39.




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the date of origination, Plaintiff’s monthly income was about $1,200.10 WSB was not a passive participant in the Sanchez brothers’ scheme to

defraud Plaintiff of her savings. Instead, WSB knew what the Sanchez brothers were doing, and decided to work with them because it wanted to share in their profits.11

Wells Fargo now moves to dismiss in light of these facts.

II. STANDARD OF REVIEW In reviewing a motion to dismiss pursuant to Rule 12(b)(6), “[t]he Court must accept as true all material allegations in the complaint, as well as reasonable inferences to be drawn from them.”12 A court reviewing a motion to dismiss should “assume [the] veracity” of all well-pleaded factual allegations “and then determine whether they plausibly give rise to an entitlement to relief.”13

III. ARGUMENT A. Plaintiff Adequately Pled Grounds for Liability Against Defendant

Wells Fargo & Co. Under California law, “a successor company has liability for a predecessor’s actions if: (1) the successor expressly or impliedly agrees to assume the subject liabilities . . . [;] (2) the transaction amounts to a consolidation or merger of the successor and the predecessor[;] (3) the successor is a mere continuation of the predecessor[;] or (4) the transfer of assets to the successor is for the fraudulent purpose of escaping liability for the predecessor’s debts.”14 “Furthermore, the

10 Id. 11 Id. ¶¶ 75-77. 12 eCash Technologies, Inc. v. Guagliardo, 210 F.Supp.2d 1138, 1143 (C.D. Cal. 2001). 13 Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009). 14 Monaco v. Bear Stearns Companies, Inc. No. CV 09-05438 SJO (JCx) 2011 WL 4059801, at *19 (C.D. Cal. Sept. 12, 2011) (quoting CenterPoint Energy, Inc. v. Sup. Ct. 157 Cal.App.4th 1101, 1120 (Cal. Ct. App. 2007)).




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liberal requirements of Rule 8(a)(2) apply to . . . successor-in-interest allegations concerning [d]efendants.”15 Plaintiff alleges, “[b]ased on information reported pursuant to the Home Mortgage Disclosure Act, . . . [that] Defendant[] Wells Fargo & Company . . . [is] responsible for residential home loans acquired from, and/or sold by or through, [WSB]”16 as WSB’s successor in interest.17 The Complaint makes clear that Plaintiff alleges successor liability as a result of Wells Fargo & Co.’s acquisition of the Second WSB Loan, one of two subject loans in this case.18 In City of Los Angeles v. Wells Fargo & Co.,19 the court found that nearly identical allegations of successor liability were sufficient to satisfy the liberal pleading standards of Rule 8(a).20 Likewise, Plaintiff’s allegations regarding successor liability are sufficient to place Wells Fargo & Co. on notice that it is liable for discriminatory lending by WSB.21

B. The Home Owners’ Loan Act (“HOLA”) Does Not Preempt Plaintiff’s State Law Claims. 1. HOLA does not preempt state law claims to the extent that they

only incidentally affect lending operations. The Home Owners’ Loan Act (“HOLA”)22 granted the Office of Thrift Supervision (“OTS

15 Id. (quoting Pacific Rollforming, LLC v. Trakloc Int’l, LLC, No. CV 07-1897, 2008 WL 4183916, at *3 (S.D. Cal. Sept. 8, 2008)). 16 Complaint ¶¶ 1, 18, 80. 17 Id. ¶¶ 46, 92, 126. 18 Id. ¶ 1. 19 22 F. Supp. 3d 1047 (C.D. Cal. 2014). 20 Id. at 1062. 21 See Pacific Rollforming, LLC, 2008 WL 4183916, at *3 (holding allegation that defendants were “liable for . . . alleged material non-disclosures as [the lender’s] successors-in-interest” was sufficient to satisfy the pleading standards of Rule 8(a)). 22 12 U.S.C. § 1461 et seq.




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”) authority to promulgate implementing regulations governing savings banks. OTS’s implementing regulations23 included a preemption provision specifying a list of state law regulations preempted by HOLA.24 However, Section 560.2(c) of the implementing regulations also explicitly exempted from preemption a host of state laws “to the extent that they only incidentally affect the lending operations of Federal savings associations. . . .”25 “Only claims that are specific to a defendant’s lending activities, as distinguished from legal duties applicable to all businesses, are preempted under HOLA.”26 State laws imposing requirements not specifically contemplated by the preemption provision of Section 560.2(b) are therefore exempt from HOLA preemption if they “fit within the confines of [Section 560.2(c)].”27

2. Plaintiff’s state law claims are based on allegations of conduct incidental to WSB’s lending operations.

In Casault v. Federal National Mortgage Association,28 the court noted that “[t]he duty not to commit fraud is [a] general legal duty” applicable to all businesses and therefore generally exempt from HOLA preemption.29 Casault involved a claim for fraud based on allegations that a lender’s customer service representatives “purposely denied receiving Plaintiffs’ documents or purposely allowed Plaintiffs’ application documents to expire.”30 The court held that the

23 12 C.F.R. § 560.2. 24 Id. § 560.2(b). 25 Id. § 560.2(c). 26 Bertoli v. Wachovia Corp., FSB, No. C11-03432 THE, 2011 WL 5244687, at *3 (N.D. Cal. Nov. 3, 2011). 27 Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 2008) (quoting OTS, Final Rule, 61 Fed.Reg. 50951, 50966-67 (Sept. 30, 1996)). 28 915 F.Supp.2d 1113 (C.D. Cal. 2012). 29 Id. at 1132. 30 Id.




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defendant’s alleged conduct was “merely incidental to [the defendant’s] role as a lender” and that a claim for fraud based on such conduct was not preempted by HOLA.31 Similarly, in Taguinod v. World Savings Bank, FSB,32 the court held that a state law fraud claim was not preempted by HOLA, reasoning that cases finding HOLA preemption of fraud claims “typically address issues related to fees, disclosures and interest rates”.33

Plaintiff bases her state law fraud and negligent misrepresentation claims on allegations that WSB, through its agents the Sanchez brothers, induced her to enter into the WSB Loans by representing that the Sanchez brothers would invest a portion of the loan proceeds on her behalf.34 Plaintiff alleges that the Sanchez brothers made these representations as agents of WSB even though they had no intention of investing any of Plaintiff’s loan proceeds.35 The conduct Plaintiff attributes to WSB in her Complaint flies in the face of “the basic norms that undergird commercial transactions,”36 conduct underlying state law claims that OTS specifically intended to exempt from HOLA preemption.37 State laws seeking to prevent businesses from making fraudulent promises about supposed investment opportunities are not targeted at lenders in particular, nor do they regulate the specific universe of loan transactions. Plaintiff’s state law fraud and negligent

31 Id. 32 755 F.Supp.2d 1064 (C.D. Cal. 2010). 33 Id. at 1070; see also McCauley v. Home Loan Inv. Bank, F.S.B., 710 F.3d 551, 557 (4th Cir. 2013); “Preemption of State Laws Applicable to Credit Card Transactions” ¶ IIC (Opinion of OTS Chief Counsel, Dec. 24, 1996), 1996 WL 767462, at *5 (noting that the OTS did not intend to preempt state laws “that establish the basic norms that undergird commercial transactions”). 34 Complaint ¶¶ 7, 35, 76, 88. 35 Id. ¶ 89. 36 “Preemption of State Laws Applicable to Credit Card Transactions” ¶ IIC, 1996 WL 767462, at *5. 37 Id.




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misrepresentation claims therefore fit within the category of state tort law claims specifically exempted from HOLA preemption under Section 560.2(c)(4). Wells Fargo argues that each of Plaintiff’s state law claims is preempted under 12 C.F.R. § 560.2(b)(4), (9), and (10) because these claims “seek to impose requirements on the lender to advise a potential borrower as to whether a particular loan product is in his or her best interests, to provide Spanish versions of the loan documents, and to make other disclosures above and beyond what is required by federal law.”38 Plaintiff’s claims do no such thing. Instead, Plaintiff’s state law fraud and negligent misrepresentation claims seek to hold Wells Fargo liable for its predecessor-in-interest’s affirmative misrepresentations regarding issues completely outside the traditional scope of a loan transaction. The fact that WSB’s fraudulent conduct was incidental to a loan origination does not mean that state law claims based on such conduct are preempted.39

Wells Fargo cites a number of cases purportedly supporting its contention that state law fraud claims against a lender are preempted by HOLA. These cases are inapposite. In Cosio v. Simental,40 this Court held that the plaintiffs’ state law negligence and elder abuse claims were preempted by HOLA because they “turn[ed] on the alleged fact that [the defendants] convinced Plaintiffs to enter into complicated, risky and oppressive loans” and that the defendants “failed to provide them with the terms, risks and consequences of that type of loan and that [one of the defendants] charged them fees for these oppressive refinances.”41 Unlike the allegations in Cosio, Plaintiff’s state law fraud and misrepresentation claims do not

38 Defs’ Mot. to Dismiss, ECF No. 21 (“MTD”) at 7. 39 Id. 40 No. CV 08-6853 PSG (PLAx), 2009 WL 201827 (C.D. Cal. Jan. 27, 2009). 41 Id. at 5 (internal quotations omitted).




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turn on the particular terms of the WSB Loans or on disclosures or omissions by WSB regarding the terms of the loans.42

Each of Plaintiff’s remaining state law claims is based on the same allegations underlying Plaintiff’s fraud and negligent misrepresentation claims.43 For the reasons stated above, these claims are also exempt from HOLA preemption.44

C. Plaintiff’s Fraud and Negligent Misrepresentation Claims are Adequately Pled. 1. Plaintiff’s claims are not time-barred. Wells Fargo argues that Plaintiff’s fraud and negligent misrepresentation

claims are time-barred because the statute of limitations for each claim is three years45 and two years,46 respectively.47 California’s Code of Civil Procedure (“CCP”) provides that a cause of action for fraud “is not deemed to have accrued

42 Complaint ¶¶ 88-89. The remainder of the cases Wells Fargo cites on this issue are likewise inapposite. E.g. Amaral v. Wachovia Mortg. Corp., 692 F.Supp.2d 1226, 1237-38 (E.D. Cal. 2010) (considering allegation that a lender gave the plaintiff false information concerning the processing of a loan application); Naulty v. Greenpoint Mortg. Funding, Inc., No. C 09-1542 MHP, C 09-1545 MHP, 2009 WL 2870620, at *4 (N.D. Cal. Sept. 3, 2009) (considering allegations “regarding the terms of credit . . . provided to plaintiffs, disclosures [the lender] did or did not give to plaintiffs, [the lender’s] underwriting standards, and [the lender’s] marketing and servicing of the loans”); Basset v. Ruggles, No. CV-F-09-528 OWW/SMS, 2009 WL 2982895, at *19-20 (E.D. Cal. Sept. 14, 2009) (considering allegations regarding misrepresentations and nondisclosure of the specific terms of a loan). 43 Complaint ¶¶ 109-10, 117-18, 125-26, 129, 146. 44 Casault, 915 F.Supp.2d at 132 (“HOLA does not preempt UCL claims in which the predicated acts were violations of the general legal duties with which every business must comply.” (quoting Bertoli, 2011 WL 5244687, at *3) (internal quotations omitted)). 45 Cal. Code Civ. P. § 338(d). 46 Id.§ 335.1. 47 MTD at 9.




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until the discovery, by the aggrieved party, of the facts constituting the fraud. . . .”48 This statutory “discovery rule” may also be implied by the courts where discovery of other causes of action is also reasonably delayed.49 The operative concern in determining whether a cause of action has accrued under the discovery rule “is not plaintiff’s discovery of [a third party’s misconduct], but rather its discovery of [the] defendant’s independent wrongdoing.”50

In E-Fab, Inc. v. Accountants, Inc. Services,51 the court considered whether a fraud claim had accrued where the plaintiff had prior knowledge of a third party’s fraudulent conduct but was unaware that the defendant had misrepresented the third party’s qualifications in recommending her services.52 The court held that “the accrual trigger in th[e] case was plaintiff’s discovery that defendant had misrepresented [the third party’s] record and qualifications, not any earlier notice of [the third party’s] fraud.”53 Since the plaintiff adequately alleged “facts showing the time and surrounding circumstances of the discovery of the cause of action upon which [it] relied”54 and the inability to have made earlier discovery,55 and since the discovery occurred within the limitations period, the plaintiff’s claims were deemed timely.56

The parallels between E-Fab and the present case are apparent. Plaintiff’s fraud claim turns on the relationship between the Sanchez brothers and WSB in 2005 and 2006.57 Plaintiff alleges that WSB consciously and purposefully 48 Cal. Code. Civ. P. § 338(d). 49 Norgart v. Upjohn Co., 21 Cal.4th 383, 397 (Cal. 1999). 50 E-Fab, Inc. v. Accountants, Inc. Servs., 153 Cal.App.4th 1308, 1321 (Cal. Ct. App. 2007). 51 153 Cal.App.4th 1308 (Cal. Ct. App. 2007). 52 Id. at 1323. 53 Id. 54 Id. at 1324. 55 Id. at 1325. 56 Id. at 1326. 57 Complaint ¶ 92.




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coordinated its efforts with the Sanchez brothers to target Latino borrowers for high-risk, high-cost loans.58 The question of whether Plaintiff was on notice prior to 2014 that the Sanchez brothers committed fraud by failing to make a series of promised investments is a question of fact that should not be disposed of at this stage of the litigation. However, even if she were aware of what the Sanchez brothers had done, she was certainly unaware that WSB entered into an agency relationship with the Sanchez brothers when the loans were originated for the purpose of endorsing and benefitting from the brothers’ fraudulent conduct. Plaintiff only discovered this relationship in 2014, when she showed her loan documents to an attorney.

Given Plaintiff’s reasonable delay in discovering the facts underlying her claims for fraud and negligent misrepresentation, they are timely and should be allowed to proceed.

2. Plaintiff’s loan modification does not bar her fraud and negligent misrepresentation claims.

Wells Fargo also contends that Plaintiff’s fraud and negligent misrepresentation claims are barred by the 2010 loan modification agreement.59 Wells Fargo cites Schied v. Bodinson Manufacturing Co.60 in support of the proposition that the loan modification somehow precludes Plaintiff’s state law claims because Plaintiff affirmed the validity of the discriminatory mortgage contract by agreeing to modify its terms.61 Schied held that a plaintiff “with full knowledge of the facts constituting the fraud complained of”62 had waived his claim for fraud by intentionally affirming the contract underlying the claim.63

58 Id. ¶ 76. 59 MTD at 10. 60 79 Cal.App.2d 134 (Cal. Ct. App. 1947). 61 MTD at 10. 62 Schied, 79 Cal.App.2d at 142. 63 Id. at 142, 145.


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More recent decisions from the California Court of Appeal have noted the “truism that the existence of waiver is ordinarily a question of fact.”64

Schied is completely inapposite here. As explained above, Plaintiff did not have “full knowledge of the facts constituting the fraud complained of,” nor did she intend to affirm the Second WSB Loan, when she executed the 2010 loan modification agreement. Her sole intention in agreeing to the 2010 loan modification was to lower her mortgage payments.65 Allowing Wells Fargo to claim waiver here would allow lenders to make loans of the kind alleged in the Complaint and then nearly immediately offer their borrowers still-unsustainable loan modifications that would both guarantee an eventual foreclosure and bar the borrower from ever seeking redress of the lender’s conduct. Such a result would be absurd and should be avoided.

3. The actions of the Sanchez brothers are properly imparted to Wells Fargo as successor-in-interest to WSB.

Wells Fargo argues further that Plaintiff’s state law claims fail because they are based in part on allegations of an agency relationship between WSB and the Sanchez brothers.66 Wells Fargo would have the Court conclude that these claims fail merely by virtue of their basis in an agency relationship between a lender and mortgage broker. This argument flies in the face of established law “reject[ing] a bright line rule that a mortgage broker may never be the agent of a lender.”67 “[G]eneral allegations of agency between a broker and lender are [therefore] sufficient to survive a motion to dismiss on a negligence claim under California 64 Oakland Raiders v. Oakland-Alameda Cnty. Coliseum, Inc., 144 Cal.App.4th 1175, 1191 (Cal. Ct. App. 2006). 65 Complaint ¶ 39. 66 MTD at 11. 67 Reyes v. Premier Home Funding, Inc., 640 F.Supp.2d 1147, 1160 (N.D. Cal. 2009); see also City of Los Angeles v. Wells Fargo & Co., 22 F.Supp.3d 1047, 1062 (C.D. Cal. 2014) (citing Reyes in holding agency allegations that each defendant was the agent of the other sufficient to survive a motion to dismiss).


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law.”68 In Reyes v. Premier Home Funding, Inc., the plaintiff alleged that “each of the Defendants was the agent . . . of each other defendant . . . [and e]ach Defendant was acting within the course and scope of such agency or employment in doing the things alleged.”69 The court held that such allegations were sufficient to plead an agency relationship between a mortgage broker and a lender.70

Plaintiff’s allegations regarding the agency relationship between WSB and the Sanchez brothers are likewise sufficient to satisfy the requirements of Rule 8(a). Plaintiff alleges throughout her Complaint that the Sanchez brothers “were acting as agents of WSB when they perpetrated their fraud against [Plaintiff].”71 These extensive allegations are more than enough to plead the existence of an agency relationship.

Wells Fargo cites Buick v. World Savings Bank72 in support of its argument that Plaintiff’s allegations fail to plead an agency relationship between WSB and the Sanchez brothers.73 Buick held that a plaintiff’s allegations failed to plead an agency relationship between broker and lender where the agency allegations stemmed from a letter in which the lender specifically prohibited the broker from representing himself as the lender’s agent.”74 The holding in Buick is therefore specific to the facts of the case and is inapplicable here.

68 Id. (citing Plata v. Long Beach Mortg. Co., No. C 05-02746 JF, 2005 WL 3417375, at *8 (N.D. Cal. Dec. 13, 2005) (collecting cases)). 69 Id. 70 Id. The court dismissed the negligence claim rooted in the agency relationship on other grounds. Id. 71 Complaint ¶ 44; see also id. ¶¶ 75, 92. 72 637 F.Supp.2d 765 (E.D. Cal. 2008). 73 MTD at 11. 74 Buick, 637 F.Supp.2d at 775. Buick appears to state erroneously in its agency discussion that the letter prohibited the broker from representing himself “as an agent of Plaintiff.” Id. The court appears to have corrected the error in its subsequent reference to the letter, where it states that the letter prohibited the broker “from representing himself as an agent of [the lender].” Id.


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4. Plaintiff’s fraud claim satisfies the heightened pleading requirements of Rule 9(b).

Rule 9(b) of the Federal Rules of Civil Procedure requires a plaintiff to plead fraud with particularity.75 Rule 9(b) demands that the circumstances constituting the alleged fraud be specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong.”76 A plaintiff must therefore plead “the who, what, when, where, and how of the misconduct charged” to satisfy the requirements of Rule 9(b).77

Plaintiff has pled fraud with sufficient particularity under Rule 9(b). Her Complaint alleges that in the days leading up to and including December 8, 2006,78 the Sanchez brothers, as agents of WSB,79 misrepresented to Plaintiff that they would invest some of the proceeds of the Second WSB Loan on her behalf.80 Plaintiff alleges that she relied on these misrepresentations when she executed the Second WSB Loan, and that she has been damaged as a result.81 Plaintiff pleads damages in spite of the 2010 loan modification, as Plaintiff alleges that she is still in a worse position as a result of the Second WSB Loan than she would have been in had she never been victimized by the alleged fraudulent scheme.82 These

75 Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). 76 Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)) (internal quotations omitted). 77 Vess, 317 F.3d at 1106. 78 Complaint ¶ 41. 79 Id. ¶¶ 44, 92. Wells Fargo argues that WSB never made any misrepresentations in this case. MTD at 12. Plaintiff has already explained above why the fraudulent conduct of the Sanchez brothers is properly imputed to WSB, and therefore to Wells Fargo, under an agency theory. Supra sec. III.C.3. 80 Complaint ¶ 88. 81 Id. ¶ 90. 82 Id. ¶ 43.


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allegations are sufficient to put Wells Fargo on notice of the who, what, when, where, and how of the alleged fraud. Wells Fargo knows who said what to Plaintiff, when and where it was said, why the speaker had the authority to say what he said, and how Plaintiff was damaged as a result of the speaker’s misrepresentations. Plaintiff’s fraud and negligent misrepresentation claims are therefore adequately pled.

D. Plaintiff’s Has Adequately Pled Her Claims for Aiding and Abetting Fraud and Aiding and Abetting Breach of Fiduciary Duty Against Wells Fargo. Wells Fargo argues further that Plaintiff’s aiding and abetting claims are

barred (1) by HOLA, (2) waiver, and (3) the relevant statutes of limitations.83 For the reasons stated above in the context of Plaintiff’s claims for fraud and negligent misrepresentation, these arguments fail here, as well.

Wells Fargo also argues that Plaintiff’s aiding and abetting breach of fiduciary duty claim fails because Wells Fargo (or presumably WSB) did not owe Plaintiff a fiduciary duty.84 Wells Fargo reasons that aiding and abetting liability only attaches where the aider and abettor’s “conduct, separately considered, constitutes a breach of duty to the third person.”85

Wells Fargo’s argument mischaracterizes the law. “[U]nder California law, a defendant may be found liable for aiding and abetting a breach of fiduciary duty even though the defendant owes no independent duty to the plaintiff, so long as the aider and abettor knows of, and substantially assists, the primary violator’s breach of duty.”86 As detailed above, WSB knew the Sanchez brothers would target

83 MTD at 13-14. 84 Id. at 14. 85 Id. at 14 (quoting Berryman v. Merit Prop. Mgmt., Inc., 152 Cal.App.4th 1544, 1559 (Cal. Ct. App. 2007)). 86 Neilson v. Union Bank of Cal., N.A., 290 F.Supp.2d 1101, 1137 (C.D. Cal. 2003).


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Plaintiff for a predatory loan because of her race and national origin, and that they would misrepresent their intention to invest the proceeds of the loan on Plaintiff’s behalf in order to induce her to accept the loan terms.87 Moreover, WSB’s participation was integral to the scheme: the Sanchez brothers could not have engaged in their fraudulent conduct without the participation of a lender eager to make multiple high-cost, high-risk loans to the same unsuspecting borrower.88 Since WSB had knowledge of the alleged scheme and substantially assisted in its execution, it can properly be held liable for aiding and abetting a breach of fiduciary duty under California law.

E. Plaintiff Has Adequately Pled a Claim Under Business & Professions Code § 17200. Wells Fargo argues that Plaintiff’s claim under § 17200 fails because (1) it is

preempted, (2) it is based on other state law claims that fail, and (3) it is time-barred.89 Each of these arguments has been addressed above in Sections III.B-D. For the reasons stated in those Sections, Wells Fargo’s argument fails here, as well.

F. Plaintiff’s Claim for Reverse Redlining Under the Federal Fair Housing Act is Adequately Pled. 1. Plaintiff’s FHA claim is timely. Private civil actions brought pursuant to the FHA are governed by a two-

year statute of limitations.90 The period begins to run “after the occurrence or the termination of an alleged discriminatory housing practice.”91

87 Complaint ¶¶ 7, 75-76. 88 Neilson, 290 F.Supp.2d at 1132 (holding that a plaintiff pled an aiding and abetting claim where the aider and abettor was “a key factor” in an element of the alleged fraudulent scheme). 89 MTD at 15. 90 42 U.S.C. § 3613(a)(1)(A). 91 Id.


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a. Plaintiff has alleged that the 2014 denial of her mortgage modification application constituted a separate violation of the FHA.

Wells Fargo argues that Plaintiff’s FHA claim is time-barred because the only FHA violation Plaintiff alleges in her Complaint concerns the origination of the Second WSB Loan in 2006.92 Wells Fargo conveniently ignores Plaintiff’s well-pled allegations regarding the denial by Wells Fargo of her application for a loan modification in 2014.93 Plaintiff alleges that “Wells Fargo imposed stricter loan modification and refinance requirements beginning in or about 2010 and continues to impose such requirements today.”94 Plaintiff claims, on the basis of statistical evidence, that these stricter modification and refinance qualification requirements “have a disparate impact on Latino borrowers. . . .”95 Since Plaintiff was denied a loan modification by Wells Fargo in 2014, Plaintiff’s FHA claim was brought well within the two-year limitations period.

b. Equitable tolling renders Plaintiff’s claims timely. “Equitable tolling may be applied if, despite all due diligence, a plaintiff is unable to obtain vital information bearing on the existence of his claim.”96 The doctrine “focuses on a plaintiff's excusable ignorance and lack of prejudice to the defendant.”97 “The time period for filing a complaint of discrimination begins to run when the facts that would support a charge of discrimination would have been apparent to a similarly situated person with a reasonably prudent regard for his

92 MTD at 16. 93 Complaint ¶ 72. 94 Id. ¶ 70. 95 Id. ¶¶ 67, 71. 96 Santa Maria v. Pac. Bell, 202 F.3d 1170, 1178 (9th Cir. 2000). 97 Leong v. Potter, 347 F.3d 1117, 1123 (9th Cir. 2003).


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rights.”98 Recently, this Circuit made clear that equitable tolling applies to FHA claims.99

Plaintiff could not possibly have determined that WSB’s policies and practices had a disparate impact on her and other Latino borrowers in Los Angeles before she consulted with an attorney in August 2014.100 Likewise, she could not have known that she was intentionally targeted for high-cost, high-risk loans by WSB on the basis of race and national origin until she consulted with an attorney.101 WSB’s obvious efforts to squeeze as many thousands of dollars out of Plaintiff as possible in 2005 and 2006 only became clear when Plaintiff reviewed the closing documents for the WSB Loans with her attorney and understood for the first time the charges she incurred and that she paid out to WSB and the Sanchez brothers at the time the loans were originated.102 Plaintiff was even unaware of the unsustainably high mortgage payments she was expected to make under the Second WSB Loan because Wells Fargo modified the loan in 2010, when Plaintiff’s payments had only increased by about $200 per month since the loan origination.103 Additionally, prior to consulting with an attorney, Plaintiff could not

98 Boyd v. U.S. Postal Service, 752 F.2d 410, 414 (9th Cir. 1985). 99 Garcia v. Brockway, 526 F.3d 456, 465 n.8 (9th Cir. 2008) (noting, “[c]ontrary to the dissent’s claim,” that it had not held “that Congress intended to bar equitable tolling for all FHA claims”). Garcia rejects the plaintiff’s discovery rule arguments. Id. at 465. However, as Garcia was a design-and-construction case, its holding regarding the applicability of the discovery rule may not extend to reverse redlining claims. The discovery rule may therefore be appropriate to toll the statute of limitations in this case, as well. See, e.g., Clement v. United Homes, LLC, 2012 WL 6720701, at *8 (E.D.N.Y. Dec. 27, 2012). 100 Complaint ¶¶ 84-86. 101 Council v. Better Homes Depot, Inc., No. 04 CV 5620(NGG)(KAM), 2006 WL 2376381, at *10 (E.D.N.Y Aug 16, 2006) (“In matters of fraud and discrimination, including predatory lending cases, plaintiffs are deemed to be aware of their right of action from the point at which they met with counsel.”). 102 Complaint ¶¶ 36, 42. 103 Id. ¶ 43.


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have been aware, and was not aware, of the disparate impact of WSB’s policies and practices, which only becomes apparent upon analysis of aggregated data.104 Finally, contrary to Wells Fargo’s contentions, Plaintiff had no reason to bring her loan documents to an attorney until she received a notice of trustee’s sale in 2014.105 Given the application of the doctrine of equitable tolling, further questions as to the nature of WSB’s discriminatory policies or conduct are factual and should not be addressed at this stage of the litigation.106

c. Plaintiff’s FHA claim is timely under the continuing violations doctrine.

In Havens Realty Corp. v. Coleman,107 the Supreme Court held that “a continuing violation of the Fair Housing Act should be treated differently from one discrete act of discrimination.”108 The Court cautioned against a “wooden application” of the FHA’s statute of limitations, “which ignores the continuing nature of the alleged violation[] [and] only undermines the broad remedial intent of 104 Davidson v. Bd. of Governors, 920 F.2d 441, 445 (7th Cir. 1990) (holding that statute of limitations period is tolled until plaintiff pleading disparate impact claim has “enough evidence to determine whether the practice is unlawful,” so long as “he could not obtain that evidence with due diligence”); Phillips v. Better Homes Depot, Inc., No. 02-CV-1168 (ERK), 2003 WL 25867736, at *25 (E.D.N.Y. Nov. 12, 2003) (“There is a difference between being aware that you got a bad deal and being aware that you were discriminated against in a systematic fashion.”). 105 Complaint ¶ 89. Plaintiff’s modified loan payments under the 2010 loan modification obscured the original terms of the Second WSB Loan, which Plaintiff would never have reviewed had she not been sent a notice of sale by her second lienholder, at least until those payments increased past sustainable levels, as well. Id. ¶ 43. 106 Hargraves v. Capital City Mortg. Corp., 140 F.Supp.2d 7, 18 (D.D.C. 2000) (holding that “the character of defendants’ activities would need to be examined at trial before a determination can be made as to whether those activities were independently discriminatory”). 107 455 U.S. 363 (1982). 108 Id. at 380.


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Congress embodied in the Act. . . .”109 As a result, the Court held that “where a plaintiff, pursuant to the [FHA], challenges not just one incident of conduct violative of the Act, but an unlawful practice that continues into the limitations period, the complaint is timely when it is filed within [the limitations period] of the last asserted occurrence of that practice.”110 The continuing violations doctrine renders Plaintiff’s FHA claims timely. Violations of the FHA occurred when Plaintiff was issued the second in a set of high-risk, high-cost, and abusive mortgage loans by WSB and each time WSB and its Wells Fargo as its successor-in-interest acted to enforce the discriminatory contracts.111 Since Wells Fargo has demanded payment pursuant to the final such contract within the two-year period pursuant to the filing of this lawsuit, Plaintiff’s claim is timely. In support of its contention that the continuing violations doctrine does not apply to these facts, Wells Fargo cites Garcia v. Brockway112 for the unremarkable proposition that “[t]he ability to privately enforce [the FHA] only lasts for two years from the time of the violation, and any private party that suffers injury only after the limitations period has run will be unable to file a civil action.”113 Plaintiff does not dispute that claims brought under the FHA are governed by a two-year limitations period. The point of the continuing violations doctrine is that an FHA

109 Id. 110 Id. at 380-81 (footnote omitted). 111 Taylor v. Accredited Home Lenders, Inc., 580 F.Supp.2d 1062, 1066 (S.D. Cal. 2008) (“The Court agrees that each mortgage statement that seeks inflated payments for the loan based upon discriminatory terms is another [FHA] violation visited upon Plaintiff.”); Lomboy v. SCME Mortg. Bankers, No. C-09-1160 SC, 2009 WL 1457738, at *8 (N.D. Cal. May 26, 2009) (citing Taylor in support of a similar proposition under the Equal Credit Opportunity Act); Dekalb Cnty. v. HSBC North America Holdings, Inc., Civil Action No. 1:12-CV-03640-SCJ, 2013 WL 7874104, at *10 (N.D. Ga. Sept. 25. 2013). 112 526 F.3d 456 (9th Cir. 2008). 113 MTD at 17 (quoting Garcia, 526 F.3d at 464) (internal quotations omitted).


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claim is timely where a plaintiff challenges an unlawful practice that continues into the two-year period, as Plaintiff does in this case.114

Wells Fargo cites two more cases in support of its argument that the continuing violations doctrine should not apply here. The first, Pascual v. Wells Fargo Bank, N.A.,115 is an unpublished decision that had nothing to do with the FHA: the Pascual plaintiff brought six claims for relief under state law, none of which even remotely implicated discriminatory housing practices.116 The second, Goodwin v. Executive Trustee Services, LLC,117 is a case from the District of Nevada where the district court rejected a continuing violations theory “because [the plaintiff] claim[ed] to have suffered only a single incident of conduct violative of the [FHA], namely the ‘less-than-favorable loan.’”118 The only continuing violation the Goodwin plaintiff explicitly alleged was a vague “continuing violation whereby each Defendant has engaged in a pattern or extended practice of exploiting the market of Hispanics, the disabled and women.”119 As these cases either do not involve claims under the FHA or reject the application of the continuing violations doctrine due to the particular deficiencies of a plaintiff’s pleadings, they are inapposite.

Because Plaintiff alleges both separate and continuing violations of the FHA within the statute’s two-year limitations period, Plaintiff’s FHA claims are timely and should be allowed to proceed.

2. The 2010 modification agreement is irrelevant to Plaintiff’s FHA claims.

114 Havens, 455 U.S. at 380-81. 115 No. CV 13-02005-KAW, 2013 WL 4066946 (N.D. Cal. Aug. 8, 2013). 116 Id. at *1 (listing the plaintiff’s six state law claims). 117 680 F.Supp.2d 1244 (D. Nev. 2010). 118 Goodwin, 680 F.Supp.2d at 1251. 119 Id.


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Wells Fargo also contends that Plaintiff’s FHA claims are barred by the 2010 loan modification agreement.120 For the second time in its motion, Wells Fargo cites to Schied v. Bodinson Mfg. Co.,121 this time in support of its argument that the loan modification somehow precludes Plaintiff’s FHA claims because Plaintiff affirmed the validity of the discriminatory mortgage contract by agreeing to modify its terms.122

Schied has absolutely no applicability to Plaintiff’s claims under the FHA. It is a California state case interpreting state law waiver rules in the context of a claim for fraudulent inducement to contract. For these reasons and for the reasons stated above in Section III.B.2, the 2010 loan modification does not bar Plaintiff’s FHA claims.

3. Plaintiff properly states claims under the FHA. A plaintiff seeking to establish a prima facie case of reverse redlining under

the FHA must show “(1) that she is a member of a protected class; (2) that she applied for and was qualified for loans; (3) that the loans were given on grossly unfavorable terms; and, (4) that the lender continues to provide loans to other applicants with similar qualifications, but on significantly more favorable terms.”123 A plaintiff satisfies the fourth prong of the analysis by alleging either disparate impact or disparate treatment.124 Additionally, “if the plaintiff presents direct evidence that the lender intentionally targeted her for unfair loans . . . the

120 MTD at 18. 121 79 Cal.App.2d at 141. 122 MTD at 18. 123 Munoz v. International Home Capital Corp., No. C 03-01099 RS, 2004 WL 3086907, at *4 (N.D. Cal. May 4, 2004). 124 Diaz v. Bank of America Home Loan Servicing, No. CV 09-9286 PSG (MANx), 2010 WL 5313417, at *5 (C.D. Cal. Dec. 16, 2010); Pack v. Fort Washington II, 689 F.Supp.2d 1237, 1243 (E.D. Cal. 2009).


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plaintiff need not also show that the lender makes loans on more favorable terms to others.”125

Plaintiff has alleged that she is a member of a protected class,126 that she applied for and was qualified for loans including the Second WSB Loan,127 and that the loans were given on grossly unfavorable terms.128 Plaintiff has also satisfied the fourth prong of the analysis by alleging disparate impact and intentional discrimination. Plaintiff’s FHA claims are there sufficiently pled.129

a. Plaintiff has adequately pled a disparate impact violation.

The Supreme Court held last term that disparate impact claims are cognizable under the FHA.130 To survive a motion to dismiss, a complaint alleging a disparate impact violation need only identify a facially neutral policy or practice that results in disparate impact on a protected class.131 Courts in this Circuit have found that allegations concerning statistical disparities in the provision of high-risk, high-cost loans to minority borrowers are sufficient to state a claim for disparate impact where those statistics are derived from data provided by a list of subprime lenders including the defendant lender.132 Statistical evidence derived 125 Munoz, 2004 WL 3086907, at *4. 126 Complaint ¶ 31. 127 Id. ¶¶ 35-42. 128 Id. ¶¶ 39-40 (alleging that the payments on the Second WSB Loan were due to increase to $2,641.55 per month even though Plaintiff’s monthly income at the loan origination was about $1,200.00). 129 See also Swierkiewicz v. Sorema N.A., 534 U.S. 506, 510 (2002) (“The prima facie case . . . is an evidentiary standard, not a pleading requirement.”). 130 Texas Dep’t of Housing and Comm. Affairs v. The Inclusive Communities Project, Inc., 135 S.Ct. 2507, 2518-19 (2015); see also Ojo v. Farmers Grp., Inc., 600 F.3d 1205, 1208 (9th Cir. 2010) (recognizing disparate impact claims under the FHA). 131 Ramirez v. GreenPoint Mortg. Funding, Inc., 633 F.Supp.2d 922, 928 (C.D. Cal. 2008). 132 Taylor, 580 F.Supp.2d at 1068-69.


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even from other lenders whose policies and practices parallel those of the defendant lender is sufficient to state a disparate impact claim.133

The allegations in the Complaint meet the standard required of a disparate impact claim at this stage of the litigation. Plaintiff identifies two facially neutral policies as the source of the discriminatory effects she suffered: the provision of discretion to loan officers and others responsible for mortgage lending and the institution of stricter requirements for loan modification applicants.134 The first policy consists of a number of elements, including failure to monitor the discretion provided and the provision of incentives to those responsible for mortgage lending to issue loans . . . that [were] costlier than better loans for which they qualif[ied].”135 Plaintiff alleges that this first policy in turn had a disproportionate impact on Latino borrowers.136 Plaintiff alleges statistical disparities in the rates at which Latino borrowers receive residential mortgage loans with dangerous terms that predisposed them to default137 and disparities in the rate of foreclosures among Latino borrowers.138 The statistical evidence cited in the Complaint goes far beyond what is necessary to state a claim for disparate impact.139

In its sole attempt to strike at the substance of Plaintiff’s disparate impact allegations, Wells Fargo argues that Plaintiff fails to state a claim against it under the FHA because it had no role in the 2006 loan origination.140 Wells Fargo contends that WSB’s policies and practices should form the basis for Plaintiff’s

133 Ramirez, 633 F.Supp.2d 922 at 928. 134 Complaint ¶¶ 70-71, 137. 135 Id. ¶ 137. 136 Id. ¶¶ 58-69. 137 Id. ¶ 59. 138 Id. ¶¶ 60-62, 64-65. 139 Swierkiewicz, 534 U.S. at 510 (2002). 140 MTD at 18.


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FHA claim.141 Wells Fargo characterizes the Complaint as “entirely silent” on the WSB policies and practices that would support such a claim.142

Wells Fargo’s argument in this instance is a blatant mischaracterization of the substance of Plaintiff’s allegations. Even a cursory look through Plaintiff’s Complaint reveals scores of references to the WSB policies and practices giving rise to Plaintiff’s FHA claims. First, Plaintiff notes explicitly that her Complaint “will . . . refer to WSB and Wells Fargo as ‘Wells Fargo’ except in instances where differentiation is necessary for narrative purposes.”143 Thus, where Plaintiff alleges that Wells Fargo is responsible for the discretionary pricing policy described above,144 the referenced policy was obviously WSB’s. Plaintiff alleges that this policy led “WSB[] . . . to push low-income minority borrowers into subprime and dangerous loans [that] have led to disproportionate rates of foreclosure in minority neighborhoods.”145 The relationship between the policy and its effects is no better demonstrated than by the example of the Sanchez brothers, who were granted near total discretion by WSB to target Latino borrowers like Plaintiff for a series of predatory loans146 and who reaped tremendous financial rewards at the closings of both WSB loans.147

Wells Fargo’s argument also completely ignores Plaintiff’s allegation that Wells Fargo’s strict loan modification guidelines have a disparate impact on Latino borrowers.148 This policy is separate from the WSB policies at play in the

141 Id. 142 Id. 143 Id. ¶ 1 n.2. 144 Id. ¶ 137. 145 Id. ¶ 63. 146 Id. ¶¶ 35-39. 147 Id. ¶¶ 36, 42. 148 Id. ¶¶ 66, 73, 83.


24 CASE NO.: 2:15-CV-02923-PSG-AS


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origination of the WSB loans and thus form a separate basis for a disparate impact claim.149

b. Plaintiff has adequately pled a claim for intentional targeting.

Allegations of intentional targeting can support a claim under the FHA “in lieu of evidence of disparate treatment.”150 A plaintiff states a claim for intentional targeting under the FHA where she alleges that a lender “offered sub-prime loans to Spanish-speaking borrowers in order to deceive them.”151

These are exactly the allegations Plaintiff states in her Complaint. Plaintiff alleges that “WSB . . . targeted low-income Spanish-speaking immigrants for [subprime] loans because they knew that the borrowers could not understand the loan documents they were signing and that the borrowers would trust the brokers UHL employed to translate and communicate the loan terms accurately.”152 Plaintiff further alleges that “WSB . . . encouraged UHL and its agents to find low-income Latino borrowers with poor English-language skills who could be convinced to accept grossly unfavorable loan terms and who would likely default on their loans.”153 Contrary to Wells Fargo’s contentions,154 Plaintiff’s claim for intentional targeting is thus sufficiently pled.

G. Plaintiff Has Adequately Pled a Claim for Restitution. Wells Fargo argues that Plaintiff’s claim for restitution fails because (1) it is preempted, (2) Plaintiff waived the claim by accepting the 2010 loan modification, and (3) the claims on which Plaintiff’s claim for restitution depends are barred.155 149 42 U.S.C. § 3605(a). 150 Diaz, 2010 WL 5313417, at *5 (quoting Barkley v. Olympia Mortg. Co., No. CV 04-875 RJD, 2007 WL 243781, at *14 (E.D.N.Y. Aug. 22, 2007)). 151 Id. 152 Complaint ¶ 76. 153 Id. ¶ 77. 154 MTD at 18. 155 Id. at 19.


25 CASE NO.: 2:15-CV-02923-PSG-AS


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Plaintiff has addressed these arguments above in Sections III.B-F. For the reasons stated in those Sections, these arguments fail here, as well. Wells Fargo also argues that Plaintiff’s claim fails because restitution does not serve as an independent cause of action.156 As this Court has recently noted, however, the inquiry in considering the viability of a claim labeled as “restitution” “goes beyond that broad statement because . . . courts in California are actually divided as to whether a claim labeled as ‘restitution’ or ‘unjust enrichment’ should proceed.”157 The relevant inquiry is therefore “whether the plaintiff has properly pleaded a claim for quasi-contract—that the defendant has been unjustly enriched at the expense of the plaintiff—regardless of the label or title the plaintiff puts on the claim.”158 Plaintiff’s allegations demonstrate that Wells Fargo has been unjustly enriched at Plaintiff’s expense. WSB, Wells Fargo’s predecessor-in-interest, collected thousands of dollars at the closings of the various WSB loans,159 as well as thousands of dollars in inflated loan payments.160 Wells Fargo has continued to collect these loan payments, which remain inflated in spite of the 2010 loan modification.161 Given the particular allegations in Plaintiff’s Complaint, Plaintiff’s claim for restitution should be allowed to proceed.

IV. CONCLUSION For the reasons set out above, Plaintiff respectfully requests that the Court deny Defendants’ Motion to Dismiss.

156 Id. 157 City of Los Angeles v. Wells Fargo, 22 F.Supp.3d at 1060 (citing Ohno v. Yasuma, 723 F.3d 984, 1006 n.25 (9th Cir. 2013) (“The Supreme Court of California and California Courts of Appeal have recognized actions for relief under the equitable doctrine of unjust enrichment.”). 158 Id. at 1061. 159 Complaint ¶¶ 42-44, 141. 160 Id. at 39. 161 Id. ¶ 43.


26 CASE NO.: 2:15-CV-02923-PSG-AS


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Respectfully submitted,

DATED: September 4, 2015 LOS ANGELES CENTER FOR

COMMUNITY LAW AND ACTION By: /s/ Noah Grynberg Noah Grynberg [email protected] Attorneys for Plaintiff MARIA ALVAREZ


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CERTIFICATE OF SERVICE

I, the undersigned, declare that I am over the age of 18 and am not a party to this action. I am employed in the City of Los Angeles, California; my business address is 1137 N. Westmoreland Ave., #16, Los Angeles, CA 90029. On the date below, I served a copy of the foregoing document entitled: PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS on the interested parties in said case as follows:

Served by the Court’s CM/ECF System and by Facsimile:

Attorneys for Defendants, Wells Fargo & Company and Wells Fargo Bank, N.A.

Jeremy E. Schulman, Esq.

[email protected] ANGLIN, FLEWELLING, RASMUSSEN, CAMPBELL & TRYTTEN LLP

199 S. Los Robles Avenue, Suite 600 Pasadena, California 91101-2459

Tel.: (626) 535-1900 Fax: (626) 577-7764

I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. This declaration is executed in Los Angeles, California on September 4, 2015. Noah Grynberg /s/ Noah L. Grynberg Type or Print Name Signature of Declarant


Documents

NOAH L. GRYNBERG (SBN 296080) LAHAINA ARANETA (SBN … … · v. WELLS FARGO & COMPANY; and WELLS FARGO BANK, N.A., Defendants. CASE NO.: 2:15-cv-02923-PSG-AS PLAINTIFF’S OPPOSITION