Choudhuri v. Specialised Loan Servicing

Background

Kabita Choudhuri, proceeding without a lawyer, asserted federal and state-law claims against Specialised Loan Servicing and Bosco Credit LLC concerning the servicing of her mortgage loans. The court had previously dismissed her original complaint under Federal Rule of Civil Procedure 12(b)(6), which addresses failure to state a legally sufficient claim, and denied her request for emergency injunctive relief. Bosco’s motion to dismiss the first amended complaint had previously been granted. Choudhuri then filed a second amended complaint, and Bosco moved to dismiss it under Rule 12(b)(6).

The court found the motion suitable for decision without oral argument and granted in part and denied in part Bosco’s motion.

Claims dismissed or allowed to proceed

Count One—fraud. The court dismissed Choudhuri’s fraud claim against Bosco because the allegations did not plausibly show that Bosco was liable for fraud. Choudhuri alleged that Bosco failed to apply payments she made from 2005 to 2010 to a claimed debt exceeding $200,000, but she did not explain how the debt failed to account for those payments or why that failure was fraudulent. The court also found that the allegations did not meet the heightened requirement that fraud be pleaded with particular details. Choudhuri received one final opportunity to allege that Bosco fraudulently failed to apply the prior payments.

Count Two—negligence and implied covenant. The court dismissed the claims for negligence and breach of the implied covenant of good faith and fair dealing. The allegations that Bosco owed obligations, acted deceptively, acted negligently, and breached a duty of care were conclusory and did not explain what Bosco did. Because Choudhuri had already been told about these deficiencies and had not corrected them, the court dismissed Count Two with prejudice.

Count Three—promissory estoppel, the Holder Rule, and RESPA. The court allowed part of Count Three to proceed. It found that Choudhuri plausibly alleged a violation of the Real Estate Settlement Procedures Act (RESPA), a federal law governing mortgage-loan servicing. She alleged that she sent Bosco multiple qualified written requests about her loan and received no response. The court determined that the attached request met the statutory requirements. Although Choudhuri did not expressly identify RESPA in the complaint, the court liberally construed her self-represented filing and found that Bosco had fair notice of the claim. Bosco argued that the request had been sent to the wrong address and that Choudhuri’s damages resulted from her failure to make payments, but the court said those factual disputes could not be resolved on a motion to dismiss.

Count Four—dual tracking. The court dismissed with prejudice the claims based on federal and California prohibitions against “dual tracking,” which the court described as beginning foreclosure proceedings while discussing loan modifications with a borrower. The court held that these protections did not apply to Bosco because Bosco held an equity line rather than the first-lien mortgage. The federal regulation excludes open-end lines of credit, and the California protection applies only to first-lien mortgages or deeds of trust.

Count Five—debt collection and California law. The court dismissed the Fair Debt Collection Practices Act claim for lack of facts supporting a plausible violation. It also dismissed the claim under California Civil Code section 2924.11 because that provision, like the California dual-tracking protection, applies only to first-lien mortgages. In light of the multiple opportunities to plead these claims, the court dismissed them with prejudice.

Count Six—harassment, contract, and quiet enjoyment. The court dismissed these claims for failure to state a claim but gave Choudhuri one final opportunity to replead them. The court found no facts showing that Bosco’s notices of default created liability for harassment, and it said the allegations that agents videotaped and verbally abused Choudhuri were presented as potential trial testimony rather than as a properly pleaded claim. The complaint also did not identify the relevant contract or explain how Bosco breached it, and it did not plead facts supporting a violation of the covenant of quiet enjoyment.

RICO and conspiracy allegations

Choudhuri repeatedly alleged that Specialised Loan Servicing conspired with Bosco in violation of the Racketeer Influenced and Corrupt Organizations Act, a federal statute commonly called RICO. The court found that the second amended complaint did not adequately allege either a conspiracy or a RICO claim and said that arguments added in the opposition brief could not replace facts in the complaint. Nevertheless, the court gave Choudhuri one final opportunity to try to plead those allegations.

Disposition and case management

The court stated that only the RESPA claim could proceed at that time. Choudhuri could file an amended complaint by August 10, 2020, addressing only the conspiracy, RICO, harassment, and prior-payment allegations involving Bosco. She could not reassert the other dismissed claims or add new claims or defendants without the court’s permission. Failure to comply with those limits could result in dismissal with prejudice under Rule 41(b), and failure to amend by the deadline would result in dismissal of Count One, Count Six, and the conspiracy and RICO claims under that rule.

Bosco could not foreclose on the property until the court resolved any amended complaint. The court referred the foreclosure-related action to its Alternative Dispute Resolution Unit for a telephone conference about mediation or a settlement conference. Except for filing a permitted amended complaint, the case was stayed in all respects while those proceedings were pending.