Rozich v. MTC Financial Incorporated

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Robert Rozich, No. CV-23-00210-PHX-DWL

10 Plaintiff, ORDER

11 v.

12 MTC Financial Incorporated, et al.,

13 Defendants. 14 15 Robert Rozich (“Plaintiff”) contacted his loan servicer, LoanCare, LLC 16 (“LoanCare”), to express concerns regarding his ability to make future payments to First 17 Citizens Bank and Trust Company (“CIT”) on an outstanding home equity line of credit. 18 In response, LoanCare told Plaintiff he would have to be delinquent for three months before 19 he could apply for hardship relief. However, after Plaintiff went into delinquency based 20 on that advice and then submitted a loan modification application, LoanCare denied relief 21 based on CIT’s eligibility requirements. In this action, Plaintiff sued several defendants 22 under an array of legal theories. All of Plaintiff’s claims have either been settled or 23 dismissed except for those against CIT. 24 Now pending before the Court is CIT’s motion to dismiss. (Doc. 50.) For the 25 reasons that follow, the motion is granted but Plaintiff is granted leave to amend. 26 BACKGROUND 27 I. Factual Allegations 28 The following facts, presumed true, are derived from Plaintiff’s operative pleading, 1 the First Amended Complaint (“FAC”). (Doc. 21.) 2 Former Defendant MTC Financial Inc. (“MTC”) is a California corporation that 3 operates in Arizona. (Id. ¶ 2.) 4 Defendant CIT is a bank that operates in Arizona. (Id. ¶ 3.) 5 Former Defendant LoanCare is a company that services loans, including in Arizona. 6 (Id. ¶ 4.) 7 On July 31, 2007, Plaintiff obtained a $150,000 home equity line of credit (“the 8 HELOC”). (Id. ¶¶ 8, 11.) The HELOC is secured by a deed of trust (“DOT”) on Plaintiff’s 9 home in Phoenix. (Id.) In 2010, the DOT was assigned to CIT. (Id. ¶ 10.) “The DOT was 10 a Secondary Lien, with a Wells Fargo-Home Mortgage having a secured loan in first 11 position.” (Id. ¶ 12.) 12 The “monthly payment for the Wells Fargo-Home Mortgage loan was . . . $1,377.” 13 (Id. ¶ 13.) The “monthly mortgage payment under the HELOC would fluctuate based on 14 the amount of the interest only payments,” with an “estimated average per month paid by 15 Plaintiff” of $1,093.75. (Id. ¶ 14.) 16 In 2007, “[u]pon obtaining the HELOC, the entire line of credit under the 17 HELOC . . . was placed in Plaintiff’s bank account without his permission or knowledge[,] 18 which would require him to pay interest on the entire amount of the HELOC.” (Id. ¶ 15.) 19 Plaintiff “immediately returned the funds to the lender, but already having the interest 20 assessed on the entire amount of the HELOC Plaintiff transferred all of the funds in the 21 HELOC to his account.” (Id. ¶ 16.) “Defendants” then “close[d] the credit line within 22 one . . . year of funding the loan, for reasons not having to do with Plaintiff.” (Id. ¶ 17.) 23 “On or before July of 2018 Plaintiff contacted LoanCare because he foresaw 24 difficulties in making future payments on the HELOC.” (Id. ¶ 18.) “LoanCare informed 25 Plaintiff that he would have to be delinquent three . . . or so months before hardship relief 26 would be granted.” (Id. ¶ 19.) “LoanCare1 did not discuss with Plaintiff other options 27

28 1 In paragraph 73 of the FAC, Plaintiff suggests that he expected CIT to discuss these options as with him as well, which CIT failed to do. 1 available, including refinance, so that Plaintiff could remain in good standing and continue 2 his monthly payments without issue.” (Id. ¶ 21.) “Plaintiff never had been delinquent on 3 the payments for the HELOC.” (Id. ¶ 20.) “Around this time LoanCare removed Plaintiff’s 4 access to the online HELOC account,” which meant “Plaintiff could not make or review 5 payments and balances online as he always had before.” (Id. ¶¶ 22-23.) 6 “In September of 2018, Plaintiff submitted his Borrower Response Package/Loss 7 Mitigation Application . . . based on the previous instructions from LoanCare to first allow 8 the HELOC payments to become delinquent and apply for relief.” (Id. ¶ 25.) 9 On September 21, 2018, LoanCare responded that Plaintiff’s application was 10 incomplete. (Id. ¶ 26.) Plaintiff then provided additional information. (Id. ¶ 27.) 11 On or around October 30, 2018, LoanCare confirmed in a letter to Plaintiff that the 12 application was complete but also noted that it “encourage[d] [Plaintiff] to consider 13 contacting servicers of any other mortgage loans secured by the same property to discuss 14 available loss mitigation options.” (Id. ¶¶ 27, 30.) 15 On or around November 13, 2018, LoanCare told Plaintiff in a letter that “although 16 [he] may have a hardship, [he] d[id] not qualify for a loan modification.” (Id. ¶ 32.) The 17 letter stated Plaintiff “was not eligible for a repayment plan, unemployment forbearance, 18 or traditional modification trial, because the HELOC was not a first lien.” (Id. ¶ 35, internal 19 quotation marks omitted.) The letter also stated that the denial of the application was 20 “based on eligibility requirements of CIT.” (Id. ¶ 37.) Before this letter, “LoanCare had 21 never informed Plaintiff that because the HELOC was not a first lien, Plaintiff would not 22 qualify under any plan,” although it “knew at all times the HELOC was in second position.” 23 (Id. ¶¶ 36-37.) 24 In March 2019, Plaintiff submitted a second mitigation application. (Id. ¶ 38.) On 25 April 15, 2019, Plaintiff received a second rejection letter from LoanCare, which provided 26 the same explanation that was provided in the first rejection letter. (Id. ¶¶ 39, 42, 43.) 27 In November 2019 and April 2020, LoanCare rejected successive applications from 28 Plaintiff for the same reason. (Id. ¶¶ 44-45, 48, 52-53, 56-57.) 1 In September 2021, Plaintiff enlisted the help of an individual named Charles M. 2 Bartkiewicz to assist him with his fifth application. (Id. ¶¶ 60-62.) In an October 15, 2021 3 letter, LoanCare informed Bartkiewicz that it “does not offer refinancing,” so “the only 4 options for Plaintiff were to reinstate the account . . . , a short sale, or a discounted pay 5 off.” (Id. ¶¶ 62-63.) The October 15, 2021 letter “also for the first time, invite[d] Plaintiff 6 to make a settlement offer for a lien release.” (Id. ¶ 64.) Bartkiewicz then made three 7 settlement offers on Plaintiff’s behalf, but none were accepted, and CIT “refused to ever 8 provide a counteroffer.” (Id. ¶¶ 65-66.) 9 In a May 6, 2022 letter rejecting the second settlement offer, LoanCare stated that 10 “the account remains due for the January 6, 2019, payment and the unpaid principal 11 balance” was $126,407.70. (Id. ¶ 66.) In other words, “LoanCare was taking the position 12 that from July 2007 through December 2018, Plaintiff had only paid” $23,592.30 “towards 13 the principal.” (Id. ¶¶ 66-68.) “After Plaintiff’s online access to his account was revoked 14 by Defendants, Plaintiff has never been provided an accounting showing the basis of the 15 unpaid principal balance as . . . $126,407.70.” (Id. ¶ 70.) 16 Plaintiff alleges that “LoanCare and CIT purposely prolonged the period that 17 Plaintiff negotiated with the Defendants so that the Plaintiff would be in considerable 18 arrears which would make his ability to obtain new financing from any institution 19 increasingly difficult to impossible.” (Id. ¶ 71.) “During the entirety of this process, 20 Defendants negatively reported each late payment destroying Plaintiff’s good credit 21 rating.” (Id. ¶ 72, internal quotation marks omitted.) “Had LoanCare and/or CIT initially 22 told Plaintiff to offer an amount for a discounted payoff and release of lien instead of 23 advising [him] to resubmit multiple applications, then either a settlement could have been 24 reached or Plaintiff would still have been in a position to obtain new financing with CIT 25 or [an]other lender based on his then good credit and equity.” (Id. ¶ 73.) 26 II. Procedural History 27 On December 13, 2022, Plaintiff commenced this action in Maricopa County 28 Superior Court. (Doc. 1 ¶ 1.) 1 Shortly after filing the complaint, Plaintiff obtained a temporary restraining order 2 (“TRO”) to enjoin the then-impeding trustee’s sale of Plaintiff’s home. (Doc. 42-1 at 2-5.) 3 On January 31, 2023, LoanCare removed the action to this Court. (Doc. 1.) 4 On March 9, 2023, after Plaintiff and MTC announced they had reached a settlement 5 (Doc. 16), the Court dismissed all of Plaintiff’s claims against MTC. (Doc. 18.) 6 On April 7, 2023, Plaintiff filed the FAC. (Doc. 21.) The FAC asserts five claims 7 against LoanCare and CIT: (1) breach of contract; (2) breach of the implied covenant of 8 good faith and fair dealing; (3) violation of the Arizona Consumer Fraud Act 9 (“ACFA”); (4) violation of the Real Estate Settlement Procedures Act (“RESPA”); and (5) 10 violation of the Truth in Lending Act (“TILA”). (Id. ¶¶ 74-106.) 11 On May 22, 2023, LoanCare moved to dismiss the FAC. (Doc. 25.) 12 On October 26, 2023, the Court granted LoanCare’s motion to dismiss. (Doc. 28.) 13 On November 13, 2023, after Plaintiff declined to file a Second Amended 14 Complaint as authorized in the dismissal order, the Court dismissed LoanCare. (Doc. 29.) 15 On November 14, 2023, the Court issued an order to show cause (“OSC”) why 16 Plaintiff’s claims against CIT should not be dismissed for failure to prosecute. (Doc. 30.) 17 On November 28, 2023, Plaintiff filed a response to the OSC. (Doc. 31.) Plaintiff 18 affirmed his intent to pursue his claims against CIT, acknowledged that he “inadvertently 19 failed to effectuate service of the [FAC] on [CIT],” and expressed his “hopes the Court will 20 allow some additional time to effectuate the service of the [FAC] of [CIT] and opportunity 21 to respond.” (Id. at 2.) 22 On November 29, 2023, the Court deemed the OSC satisfied but ordered Plaintiff 23 to promptly serve CIT and file proof of service. (Doc. 32.) 24 On December 8, 2023, Plaintiff filed a proof of service indicating that CIT had been 25 served with the FAC on December 5, 2023. (Doc. 33.) 26 On December 20, 2023, MTC recorded a notice of trustee’s sale with the Maricopa 27 County Recorder, indicating that a trustee’s sale of Plaintiff’s property was scheduled for 28 March 27, 2024. (Doc. 42-1 at 7.) 1 On December 21, 2023, Plaintiff filed an application for default as to CIT. (Doc. 2 34.) The Clerk later entered the default against CIT. (Doc. 35.) 3 On March 8, 2024, Plaintiff filed motions for default judgment and attorneys’ fees 4 against CIT. (Docs. 36, 37.) 5 That same day, counsel for Plaintiff and CIT began exchanging emails regarding 6 the planned trustee’s sale, with Plaintiff taking the position that the state-court TRO 7 “remains enforceable” (Doc. 42-1 at 12) and CIT taking the position that “[we] do not agree 8 that a temporary restraining order issued by the Superior Court in December, 2022 has 9 remained in effect for the last 15 months notwithstanding removal of the case to United 10 States District Court” (Doc. 42-2 at 12). 11 On March 15, 2024, notwithstanding that disagreement, CIT agreed to postpone the 12 trustee’s sale to May 1, 2024. (Doc. 42-2 at 24.) Additionally, CIT informed Plaintiff that 13 it “would likely be open to a further postponement pending the outcome of litigation.” (Id. 14 at 12.) 15 On March 18, 2024, CIT filed a motion to set aside the default. (Doc. 39.) That 16 same day, CIT filed a response to the motion for default judgment. (Doc. 41.) 17 On March 21, 2024, Plaintiff filed a motion for expedited relief concerning the 18 trustee’s sale. (Doc. 42.) 19 On March 22, 2024, the Court issued an order requiring expedited briefing as to 20 CIT’s motion to set aside default and staying the briefing as to Plaintiff’s motions for 21 default judgment and attorneys’ fees. (Doc. 43.) 22 On March 29, 2024, after full expedited briefing (Docs. 44, 45), the Court granted 23 CIT’s motion to set aside the default and denied Plaintiff’s motions for default judgment 24 and attorneys’ fees. (Doc. 46.) 25 On April 5, 2024, after full briefing (Docs. 47, 48), the Court denied Plaintiff’s 26 expedited motion to preclude the trustee’s sale. (Doc. 49.) 27 On April 12, 2024, CIT filed the pending motion to dismiss the FAC. (Doc. 50.) 28 The motion is now fully briefed (Docs. 52, 55) and neither side requested oral argument. 1 DISCUSSION 2 I. Legal Standard 3 Under Rule 12(b)(6), “to survive a motion to dismiss, a party must allege sufficient 4 factual matter, accepted as true, to state a claim to relief that is plausible on its face.” In re 5 Fitness Holdings Int’l, Inc., 714 F.3d 1141, 1144 (9th Cir. 2013) (internal quotation marks 6 omitted). “A claim has facial plausibility when the plaintiff pleads factual content that 7 allows the court to draw the reasonable inference that the defendant is liable for the 8 misconduct alleged.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). When 9 evaluating a Rule 12(b)(6) motion, “all well-pleaded allegations of material fact in the 10 complaint are accepted as true and are construed in the light most favorable to the non- 11 moving party.” Id. at 1444-45 (quoting Ashcroft, 56 U.S. at 678). However, the court need 12 not accept legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678-80. 13 Moreover, “[t]hreadbare recitals of the elements of a cause of action, supported by mere 14 conclusory statements, do not suffice.” Id. at 678. The court also may dismiss due to “a 15 lack of a cognizable legal theory.” Mollett v. Netflix, Inc., 795 F.3d 1062, 1065 (9th Cir. 16 2015) (citation omitted). 17 II. Count One—Breach Of Contract 18 A. The Parties’ Arguments 19 In Count One of the FAC, Plaintiff asserts a claim for breach of contract. (Doc. 21 20 ¶¶ 74-83.) The FAC alleges that the underlying contract was the DOT, that LoanCare acted 21 as CIT’s agent with respect to the DOT, and that CIT (via LoanCare) breached the DOT in 22 three ways: (1) CIT “breached [its] duty to provide only a line of credit able to be used on 23 a revolving nature by initially advancing the full amount of the HELOC without Plaintiff’s 24 knowledge or consent, then closing it altogether”; (2) CIT “breached [its] duty to apply all 25 Plaintiff’s payments in the required order”; and (3) CIT “breached [its] duty by not 26 providing a notice of acceleration and opportunity for Plaintiff to reinstate his account or 27 bring court action to defend acceleration and/or sale.” (Id.) 28 CIT argues that Count One should be dismissed because Plaintiff “fails to allege 1 what provisions of the alleged contract [CIT] breached, and fails to allege, with any 2 specificity whatsoever, any damages that resulted from such a breach.” (Doc. 50 at 3.) 3 CIT also argues that “Plaintiff fails to allege, with any specificity whatsoever, how his 4 payments were misapplied and fails to allege that his loan was accelerated or that 5 foreclosure proceedings were initiated.” (Id. at 3-4.) 6 Plaintiff responds that the FAC “goes into great detail as to most of these areas, and 7 if not, can be cured with a simple amendment.” (Doc. 52 at 4.) Plaintiff also argues that, 8 under the DOT, CIT had a duty “to provide a line of credit able to be used on a revolving 9 nature, which [CIT] did not do for the entire time of the HELOC.” (Id.) Plaintiff next 10 argues that CIT breached its contractual duties by failing “to apply all Plaintiff’s payments 11 in a certain order,”2 by failing “to provide an accounting,” and by failing “to provide a 12 notice of acceleration and opportunity for Plaintiff to reinstate his account or bring court 13 action to defend acceleration and/or sale . . . .” (Id.) Plaintiff argues that these duties 14 “derive” as a matter of “common sense” from unspecified “provisions” within the DOT 15 and that the FAC’s “allegations, taken as whole, provide [CIT] with the requisite notice 16 under Rule 8, Fed.R.Civ.P.” (Id. at 4-5.) Regarding damages, Plaintiff argues that the 17 FAC alleges damages with sufficient specificity in the form of “unpaid principal, excess 18 fees, accrued interest, attorney fees and costs, and other compensatory, consequential, and 19 statutory damages as applicable.” (Id. at 5.) In support, Plaintiff cites Seven Words LLC 20 v. Network Sols., 260 F.3d 1089 (9th Cir. 2001). Id. Plaintiff argues that unless CIT can 21 show prejudice from the lack of a more detailed computation of damages at this stage, he 22 need not produce such a computation until discovery. (Id.) 23 CIT reiterates its arguments in its reply and adds that Plaintiff’s allegation in 24 paragraph 15 of the FAC that a breach occurred in 2007 when the “full amount” was 25 “initially advanced” cannot succeed because “the statute of limitations for a breach of 26 contract action is six years.” (Doc. 55 at 2.) 27 2 Paragraph 78 of the FAC lists the appropriate order as: “1. Prepayment charges; 2. 28 Amounts due on the Account to secure advances; Escrow payments; 4. Late charges; 5. Finance charges and other fees; 6. Accrued finance charges; and 7. Principal balance.” 1 B. Analysis 2 A breach of contract claim has three elements under Arizona law: (1) the existence 3 of a contract, (2) its breach, and (3) resulting damages. Graham v. Asbury, 540 P.2d 656, 4 657 (Ariz. 1975). 5 The Court agrees with CIT that the FAC’s allegations are insufficient to establish 6 the second element of breach. Plaintiff alleges that certain duties arose from the DOT as a 7 matter of “common sense,” including the duty to provide a line of credit on a “revolving 8 nature” (Doc. 21 ¶ 77), to apply payments in a particular order (id. ¶ 78), and to provide 9 notice of acceleration and/or sale (id. ¶ 79). However, Plaintiff does not provide a copy of 10 the DOT as an attachment to the FAC and fails to tether his allegations to any particular 11 provision within the DOT. Additionally, even assuming CIT might owe the alleged duties 12 to Plaintiff under the DOT, the FAC does not plead any facts suggesting that CIT breached 13 those duties—the FAC does not, for example, explain how CIT failed to provide credit of 14 a “revolving nature,” how CIT misapplied the payments, or how a failure to abide by the 15 payment application order listed in paragraph 78 of the FAC caused Plaintiff harm. Nor 16 does Plaintiff allege that CIT had a duty under the DOT to provide a proper “accounting.” 17 Dismissal for failure to state a claim is warranted under these circumstances. See, e.g., 18 Kramer v. Ocwen Loan Servicing LLC, 2014 WL 1827158, *5 (D. Ariz. 2014) (“Kramer 19 makes reference to the Deed of Trust only once in his complaint, and has neither attached 20 a copy nor identified any relevant sections. Kramer does not allege any particular breach 21 of that contract, nor does he allege any benefit under that contract that was impaired. . . . 22 [N]othing in the Deed of Trust guarantees Kramer the right to receive truthful information 23 about the loan modification process. Kramer has failed to identify benefits due under the 24 loan origination contract or how Defendants impaired those benefits with the requisite 25 specificity.”); Ripa v. Fed. Nat. Mortg. Ass’n, 2013 WL 5705426, *4 (D. Ariz. 2013) 26 (“Plaintiff does not explain, however, how the actions of Defendants breached the Note 27 and Deed of Trust. Indeed, Plaintiff makes reference to the Deed of Trust only once in his 28 Complaint and has neither attached a copy nor identified any relevant sections. Plaintiff 1 does not allege any particular breach of that contract, nor does he allege any benefit under 2 that contract that was impaired.”); Schultz v. BAC Home Loans Servicing, LP, 2011 WL 3 3684481, *3 (D. Ariz. 2011) (“Plaintiff has pointed to no authority showing she was owed 4 any accounting on the note, nor provided the Court with any evidence that any payments 5 she made were not, in fact, credited to her. For all these reasons, Plaintiff has failed to state 6 a claim for relief in Count One.”).3 7 III. Count Two—Breach Of The Implied Covenant Of Good Faith And Fair Dealing 8 A. The Parties’ Arguments 9 In Count Two of the FAC, Plaintiff asserts a claim for breach of the implied 10 covenant of good faith and fair dealing. (Doc. 21 ¶¶ 84-88.) The FAC alleges that the 11 underlying contract was the DOT and that “Defendants have a long history into the present 12 of committing wrongful acts against borrowers, including those complained of by the 13 Plaintiff, including failure to provide a proper accounting, purposely not applying or 14 misapplying payments, not informing Plaintiff [of] his rights as required under the DOT, 15 constantly telling Plaintiff to submit another application knowing it will be denied because 16 it is a second lien, not informing Plaintiff that LoanCare cannot ‘refinance’ until October 17 2021, and not negotiating in good faith to purposely cause delay all the while negatively 18 reporting to credit agencies so Plaintiff has no hope of refinancing with any lender.” (Id. 19 ¶ 86.) The FAC continues: “Defendants’ actions to mislead and deceive Plaintiff into 20 default so that his application would be granted, knowing the applications would be denied, 21 all the while negatively reporting to credit agencies, and forever ruining his opportunity to 22 refinance, was an act of malice, purposely and knowingly done to harm Plaintiff.” (Id. 23 ¶ 87.) 24 CIT moves to dismiss Count Two because Plaintiff “fails to explain what acts or 25 omissions of [CIT] allegedly breached the implied covenant of good faith and fair dealing, 26

27 3 Given this determination, it is unnecessary to resolve CIT’s other arguments as to why Count One should be dismissed, including the statute-of-limitations argument raised 28 for the first time in CIT’s reply. Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007) (“The district court need not consider arguments raised for the first time in a reply brief.”). 1 and fails to describe how an alleged breach by [CIT] prevented him from receiving the 2 benefits and entitlements of the deed of trust in question.” (Doc. 50 at 4.) CIT also argues 3 that “Plaintiff’s allegations are entirely conclusory, devoid of specificity, and [Plaintiff] 4 fails to allege, with any specificity whatsoever, what damages he allegedly suffered as a 5 result of [CIT’s] alleged conduct.” (Id.) 6 Plaintiff responds that, in paragraph 86 of the FAC, he “was specific to all of [CIT’s] 7 actions and non-actions in support of his claim for breach of good faith and fair dealing.” 8 (Doc. 52 at 6.) 9 In reply, CIT reiterates its earlier arguments and also identifies the statute of 10 limitations as a reason why Plaintiff should be required to provide further details about the 11 challenged acts (and whether they occurred within the statutory period). (Doc. 55 at 2-3.) 12 B. Analysis 13 “Arizona law implies a covenant of good faith and fair dealing in every contract.” 14 Keg Rests. Ariz., Inc. v. Jones, 375 P.3d 1173, 1186 (Ariz. Ct. App. 2016). “The covenant 15 requires that neither party do anything that will injure the right of the other to receive the 16 benefits of their agreement.” Wagenseller v. Scottsdale Mem’l Hosp., 710 P.2d 1025, 1038 17 (Ariz. 1985). “[A] party may . . . breach its duty of good faith without actually breaching 18 an express covenant in the contract.” Wells Fargo Bank v. Arizona Laborers, Teamsters 19 & Cement Masons Loc. No. 395 Pension Tr. Fund, 38 P.3d 12, 29 (Ariz. 2002). 20 The Court agrees with CIT that Plaintiff has not pleaded a valid claim for breach of 21 the implied covenant. Many of the allegations in paragraph 86 of the FAC are simply 22 vague, conclusory labels—for example, that CIT has committed “wrongful acts” and was 23 “not negotiating in good faith.” (Doc. 21 ¶ 86.) These are not well-pleaded facts and are 24 not entitled to a presumption of truth. Iqbal, 556 U.S. at 678-80. Moreover, the implied 25 covenant does not exist to vindicate “some unspecified notion of fairness.” Villegas v. 26 Transamerica Fin. Servs., Inc., 708 P.2d 781, 784 (Ariz. Ct. App. 1985). In light of 27 Plaintiff’s failure to provide a copy of the DOT or at least plead concrete details about its 28 provisions, Plaintiff has failed to plausibly establish that CIT’s conduct deprived him of 1 specific benefits flowing from the DOT. Schwartz v. Chase Home Fin., LLC, 2010 WL 2 5151326, *2 (D. Ariz. 2010) (“[E]ven if plaintiff contended that Chase breached its duty 3 of good faith and fair dealing implied in the Deed of Trust, plaintiff fails to allege that 4 Chase acted to impair any of plaintiff’s contract benefits. Because plaintiff has not 5 provided us with the Deed of Trust, we have no way of knowing the contract benefits to 6 which plaintiff was entitled. Because plaintiff’s complaint does not contain sufficient 7 factual matter, which, if accepted as true, would state a claim for relief that is plausible on 8 its face, the claim must be dismissed.”) (cleaned up). 9 Other allegations in the FAC, although more specific, are simply not covered by the 10 implied covenant. For example, the allegation that CIT failed to “inform[] Plaintiff that 11 LoanCare cannot refinance until October 2021” (Doc. 21 ¶ 86) does not establish that CIT 12 deprived Plaintiff of any benefit flowing from the DOT. It merely identifies an action that 13 Plaintiff views as unfair, and Plaintiff does not allege that the DOT contains a provision 14 that entitles him to the right to receive truthful information about the loan modification 15 process. Cf. Kramer, 2014 WL 1827158 at *5 (dismissing implied-covenant claim because 16 “nothing in the Deed of Trust guarantees [the plaintiff] the right to receive truthful 17 information about the loan modification process”). Similarly, although the FAC alleges 18 that CIT failed to “negotiat[e] in good faith to purposely cause delay” (Doc. 21 ¶ 86), “the 19 implied covenant of good faith and fair dealing does not extend to negotiation.” Vera v. 20 Wells Fargo Bank, N.A., 2011 WL 334286, *3 (D. Ariz. 2011). Nor does CIT failing “to 21 provide a proper accounting” violate any alleged benefit flowing from the DOT to Plaintiff. 22 Finally, as for the allegation that CIT “negatively report[ed] to credit agencies” (Doc. 21 23 ¶ 86), Plaintiff once again fails to show how such conduct might conceivably deprive him 24 of a benefit flowing from the DOT. Vera, 2011 WL 334286 at *3 (dismissing implied- 25 covenant claim where “plaintiff has not pled facts suggesting that Wells Fargo was 26 obligated to refrain from reporting to the credit bureaus”). 27 For these reasons, Count Two is dismissed.4 28 4 As with Count One, this conclusion makes it unnecessary to reach CIT’s other 1 III. Count Three—ACFA 2 A. The Parties’ Arguments 3 In Count Three of the FAC, Plaintiff asserts a claim for consumer fraud in violation 4 of the ACFA. (Doc. 21 ¶¶ 89-94.) Plaintiff alleges that “Defendants partook in deceptive 5 and unfair acts and/or practice, fraud, false pretense, false promise, misrepresentation, or 6 concealment, suppression or omission of material facts with intent that Plaintiff rely on 7 such concealment, suppression or omission, in connection with advising Plaintiff to allow 8 the HELOC to go into default for roughly three (3) months, advising Plaintiff to fill out 9 multiple applications, knowing they would not be granted for the same reason that the 10 HELOC was a second lien, not informing Plaintiff of certain rights, [and] not informing 11 Plaintiff that LoanCare could not ‘refinance’ until much later and too late.” (Id. ¶ 90.) 12 Plaintiff also alleges fraud in relation to a $10 monthly fee. (Id. ¶¶ 91-92.) 13 CIT seeks dismissal of Count Three because “the alleged ‘advisements’ were not 14 made in connection with the ‘sale or advertisement of merchandise,’ Plaintiff fails to allege 15 that he actually relied on such advertisements, Plaintiff fails to allege that he suffered any 16 alleged injury as a proximate cause of such advertisements, and Plaintiff fails to allege the 17 injuries that he suffered with specificity.” (Doc. 50 at 5.) CIT also argues that “Plaintiff’s 18 claim for violation of A.R.S. § 6-635 fails because it does not apply to the HELOC loan in 19 question pursuant to A.R.S. § 6-602.” (Id.) 20 In response, Plaintiff does not dispute any of these points and states that he 21 understands that Count Three is “likely subject to dismissal.” (Doc. 52 at 7). 22 B. Analysis 23 Given Plaintiff’s non-opposition, and for the reasons stated in an earlier order 24 dismissing Count Three as to LoanCare (Doc. 28 at 7-9), Count Three is dismissed. 25 IV. Count Four—RESPA 26 A. The Parties’ Arguments 27 In Count Four of the FAC, Plaintiff asserts a claim for violating RESPA. (Doc. 21 28 dismissal arguments related to Count Two. 1 ¶¶ 95-101.) More specifically, the FAC alleges that CIT violated 12 C.F.R. § 1024.39(b). 2 (Doc. 21 ¶¶ 96.)5 3 CIT seeks dismissal of Count Four for three reasons: (1) § 1024.39(b) “does not 4 confer upon borrowers a private right of action against lenders”; (2) § 1024.39(b) “only 5 applies to delinquent borrowers, and Plaintiff has failed to allege that he is a delinquent 6 borrower”; and (3) Plaintiff fails to allege the damages he suffered from the violation with 7 “any specificity whatsoever.” (Doc. 50 at 5-6.) 8 Plaintiff responds to CIT’s first argument by citing the Court’s previous order 9 granting LoanCare’s motion to dismiss, in which the Court declined to rule on whether 10 § 1024.39(b) confers a private right of action because Plaintiff had failed to allege the 11 required damages resulting from the § 1024.39(b) violation. (Doc. 52 at 7.) Plaintiff now 12 concedes that he has failed to allege such damages and seeks leave to do so. (Id. at 7-8.) 13 In response to CIT’s second argument, Plaintiff argues that by elsewhere in the FAC 14 admitting default and indebtedness, he has effectively alleged that he was a delinquent 15 borrower. (Id.) 16 CIT reiterates its arguments in reply. (Doc. 55 at 4-5.) 17 B. Analysis 18 Because Plaintiff concedes he failed to plead damages resulting from a RESPA 19 violation, Count Four is dismissed. 20 V. Count Five—TILA 21 A. The Parties’ Arguments 22 In Count Five of the FAC, Plaintiff asserts a claim for violating TILA. (Doc. 21 23 ¶¶ 102-06.) After alleging that “[s]ervicers are required to implement qualified loss 24 mitigation plan[s] based on standard industry practice” pursuant to “the guidelines issued 25 by the Secretary of the Treasury under the Emergency Economic Stabilization Act of 26

27 5 Although the FAC also includes allegations regarding 12 C.F.R. § 1024.41(d) (Doc. 21 ¶ 98), Plaintiff does not defend the sufficiency of that portion of Count Four in his 28 response and concedes it is “likely subject to dismissal.” (Doc. 52 at 8.) Accordingly, the analysis here is limited to the parties’ dispute over 12 C.F.R. § 1024.39(b). 1 2008,” Plaintiff alleges that “LoanCare, for the first time, after almost three (3) years of 2 dealings, specifically stated in the October 21, 2021, letter that refinancing was not an 3 available option because it was a servicer.” (Id. ¶¶ 103, 105.) According to Plaintiff, this 4 resulted in unspecified “violations of TILA.” (Id. ¶ 106.) 5 CIT argues that Count Five should be dismissed because it “fails to allege that [CIT] 6 violated any specific provision of TILA, and fails to allege any specific damages that he 7 suffered as a result of an alleged violation of TILA by [CIT].” (Doc 50 at 6.) 8 In response, Plaintiff argues that the FAC was not intended to allege a claim based 9 directly on a violation of TILA. (Doc. 52 at 8-9.) According to Plaintiff, the FAC was not 10 intended to allege that the Home Affordable Modification Program (“HAMP”) guidelines, 11 such as 15 U.S.C. § 1639a(c), create a legal duty, but rather that the guidelines “describe a 12 duty of care that was not met by [CIT], and that the standard of care is set forth by [those 13 guidelines], to include a loan modification, workout, or other loss mitigation plan, a loan 14 sale, real property disposition, trial modification, pre-foreclosure sale, and deed in lieu of 15 foreclosure, and a refinancing of a mortgage.” (Id. at 9.) Plaintiff thus contends that Count 16 Five is “based on negligence” and seemingly argues that CIT owed him a duty “to offer 17 certain programs,” which it then breached “by not offering the entirety of the programs.” 18 (Id.) Plaintiff cites Markle v. HSBC Mortg. Corp. (USA), 844 F. Supp. 2d 172 (D. Mass. 19 2011), to support this theory and requests leave to amend to better explain that theory. (Id.) 20 In its reply, CIT reiterates its earlier arguments and adds that Markle supports its 21 contention that 15 U.S.C. § 1639a(c) does not create a legal duty “to comply with HAMP 22 guidelines or else face lawsuits.” (Doc. 55 at 5.) 23 B. Analysis 24 The Court agrees with CIT that Count Five is subject to dismissal. As an initial 25 matter, only the most liberal reading of the FAC could support Plaintiff’s contention that 26 Count Five is not a claim arising directly under § 1639a(c)—in which case it would be 27 subject to dismissal—but rather is a negligence claim and merely seeks to use the 28 guidelines referenced in § 1639a(c) to set the standard of care. Nowhere does the FAC 1 mention negligence. Moreover, paragraph 103 of the FAC provides that “[s]ervicers are 2 required to implement qualified loss mitigation plan[s] . . . as set forth by the guidelines” 3 and paragraph 106 provides that Plaintiff’s damages were as “a result of [CIT’s] violations 4 of TILA.” This language suggests that CIT’s alleged violations of TILA—not its breach 5 of any otherwise-owed duty—form the basis of Plaintiff’s claim. 6 But even assuming Plaintiff was attempting to assert a negligence claim, he has not 7 alleged with sufficient specificity the source of CIT’s otherwise-owed duty to comply with 8 § 1639a(c). If Plaintiff meant to suggest the source of this duty is the DOT, then the FAC 9 fails to allege this with sufficient specificity for all of the reasons stated earlier regarding 10 Counts One and Two. Courts have not hesitated to dismiss similar claims. Wright v. Chase 11 Home Fin. LLC, 2011 WL 2173906, *1 (D. Ariz. 2011) (granting motion to dismiss where 12 “Plaintiff asserts that HAMP amended her note and deed of trust to impose additional 13 duties on defendants”); Short v. Chase Home Fin. LLC, 2011 WL 9160941, *3 (D. Ariz. 14 2011) (granting motion to dismiss, even though “Plaintiffs assert that they have not brought 15 suit to enforce HAMP,” because “this assertion is belied by the complaint’s 16 allegations . . . [which] make clear . . . that the central issue in this case is Chase’s 17 compliance with HAMP”). 18 For these reasons, Count Five is dismissed. See also Mollett, 795 F.3d at 1065 19 (dismissal may be based on “a lack of a cognizable legal theory”). 20 VI. Leave to Amend 21 A. The Parties’ Arguments 22 CIT asks the Court to dismiss without leave to amend because any amendment 23 would be futile: “Plaintiff fails to allege any wrongful acts or omissions on the part of 24 [CIT], save, perhaps the alleged denial of ‘applications’ . . . and it is entirely unclear as to 25 how a denial of applications for loan modification or otherwise would give rise to a claim 26 against Defendant.” (Doc. 50 at 7.) 27 Plaintiff requests leave to amend in the event of dismissal and argues that CIT “does 28 not adequately explain why an amendment could not cure [CIT’s] allegations that the FAC 1 does not allege wrongful acts or omissions.” (Doc. 52 at 10.) 2 B. Analysis 3 Rule 15(a) of the Federal Rules of Civil Procedure “advises the court that ‘leave [to 4 amend] shall be freely given when justice so requires.’” Eminence Cap., LLC v. Aspeon, 5 Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (citation omitted). “This policy is ‘to be applied 6 with extreme liberality.’” Id. (citation omitted). Thus, leave to amend should be granted 7 unless “the amendment: (1) prejudices the opposing party; (2) is sought in bad faith; (3) 8 produces an undue delay in litigation; or (4) is futile.” AmerisourceBergen Corp. v. 9 Dialysist W., Inc., 465 F.3d 946, 951 (9th Cir. 2006). 10 Applying these standards, Plaintiff’s request for leave to amend is granted. As the 11 Court noted when granting Plaintiff’s request for leave to amend the FAC in the aftermath 12 of LoanCare’s successful motion to dismiss (which raised many of the same arguments 13 that CIT raises here), “[a]lthough LoanCare may be correct that any amendment attempt 14 would be futile, as Plaintiff’s claims against LoanCare are being dismissed based on legal 15 deficiencies that, as far as the Court can tell, could not be cured through the pleading of 16 additional facts, the policy of extreme liberality underlying Rule 15(a) counsels in favor of 17 giving Plaintiff one more chance at amendment.” (Doc. 28 at 17.) 18 … 19 … 20 … 21 … 22 … 23 … 24 … 25 … 26 … 27 … 28 … 1 Accordingly, 2 IT IS ORDERED that: 3 1. CIT’s motion to dismiss (Doc. 50) is granted. 4 2. Plaintiff may file a Second Amended Complaint (“SAC”) as to CIT within || 14 days of the issuance of this order. Any changes shall be limited to attempting to cure 6|| the deficiencies raised in this order and Plaintiff shall, consistent with LRCiv 15.1(a), attach a redlined version of the pleading as an exhibit. 8 3. If Plaintiff does not file a SAC within 14 days of the issuance of this order, 9|| the Clerk shall dismiss CIT as a Defendant and, because CIT is the last remaining 10 || Defendant, the Clerk shall then enter judgment accordingly and terminate this action. 11 Dated this 9th day of October, 2024. 12 13 am ae? 14 f CC —— Dominic W. Lanza 15 United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28

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