Ghafoori v. Bank of America Home Loans

Background

Saeed Ghafoori and Gissou Beykpour Ghafoori, who represented themselves, sued Bank of America Home Loans, Bank of America, N.A. Successor by Merger to Bank of America Home Loan Servicing, Bank of New York Mellon, CWALT, Inc., and Mortgage Electronic Registration Systems. The plaintiffs alleged that misconduct involving their mortgage led them to stop making loan payments and that Bank of New York Mellon attempted foreclosure by recording a notice of default in 2016.

The plaintiffs alleged that the parties settled an earlier state-court case in 2019. They said the settlement required the defendants to rescind the 2016 notice of default and refrain from foreclosure activity until after August 1, 2019, while keeping the settlement confidential. The plaintiffs claimed that the defendants disclosed settlement terms and the deadline to prospective buyers, preventing a sale of the property before the deadline. They also alleged that the defendants later re-recorded the notice of default and failed to extend the sale deadline by 90 days.

The plaintiffs later alleged that Bank of America provided a broker property valuation in 2023 and that they tried to negotiate a purchase of the loan note and deed of trust. They filed this federal case on March 1, 2024, and later filed a second amended complaint after the court gave them an opportunity to establish federal jurisdiction.

Jurisdiction

Federal subject-matter jurisdiction is a court’s power to hear a particular type of case. The court considered diversity jurisdiction and federal-question jurisdiction.

For diversity jurisdiction, the court found that the plaintiffs had not alleged complete diversity, meaning that every plaintiff must be a citizen of a different state from every defendant. The plaintiffs alleged that they were California citizens and that CWALT, Inc. was headquartered in California. Because the plaintiffs and CWALT therefore had the same alleged state citizenship, the court found that complete diversity was absent. The plaintiffs also failed to state where MERS was incorporated or where it had its principal place of business.

For federal-question jurisdiction, the plaintiffs relied primarily on the Real Estate Settlement Procedures Act and Regulation X, a federal mortgage-servicing regulation. They alleged failures to acknowledge and evaluate a loss-mitigation application, foreclosure activity while such an application was pending, and failure to provide an appeal opportunity after a denial. The court found these allegations insubstantial because the plaintiffs never alleged that they actually submitted a loss-mitigation application, what they submitted, when they submitted it, or to whom they submitted it. The court also found that the alleged damages appeared to result from the alleged settlement breach and failed 2023 purchase offer, rather than from a Regulation X violation.

The court further found that the alleged breach of the 2019 settlement did not appear to involve the types of conduct for which the cited RESPA provisions provide a private right of action. The court noted that the complaint also made passing references to other federal laws but that the plaintiffs did not discuss those references in their response to the order to show cause.

Procedural History and Ruling

The defendants’ motion to dismiss the first amended complaint was denied as moot at the July 25, 2024 hearing. The court also denied the plaintiffs’ first motion for a temporary restraining order without prejudice. After the plaintiffs filed a renewed motion, the court granted a temporary restraining order to preserve the status quo while it considered the matter.

After a later hearing, the court ordered the plaintiffs to show cause why the case should not be dismissed for lack of subject-matter jurisdiction and warned that this was their final opportunity to establish jurisdiction. The court concluded that the plaintiffs had not pleaded a substantial federal claim despite multiple opportunities to do so.

Judge Donna M. Ryu dismissed the complaint without prejudice for lack of federal subject-matter jurisdiction. The court dissolved the temporary restraining order and directed the Clerk to close the case.