Dorian v. Community Loan Servicing, LLC fka Bayview Loan Servicing

Background

Paul Dorian alleged that Community Loan Servicing, LLC told him he owed more than $34,000 because it had paid property taxes on two properties in San Francisco and Tracy. Dorian alleged that the company had no connection to those properties and should not have used his escrow account to pay the taxes. After he refused to pay, he alleged that the company removed his ability to make online or automatic payments on other loans and made payment more difficult.

Dorian also alleged that Community Loan Servicing reported that he was 120 days late on a mortgage loan for a property in Riviera Beach, Florida, and reported that he owed more than $12,000. He alleged that the information was inaccurate because he had made timely mortgage payments and that the company continued reporting the information after credit reporting agencies sent it his dispute. He claimed a lower credit score, difficulty refinancing several of seven properties, higher interest rates, and more than $450,000 in damages.

Dorian filed an amended complaint asserting five claims: violation of the Fair Credit Reporting Act; violation of California Civil Code section 1785.25, concerning inaccurate information furnished to credit reporting agencies; violation of the Rosenthal Fair Debt Collection Practices Act; breach of contract; and violation of California’s unfair competition law under its unlawful and fraudulent provisions. Community Loan Servicing moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to state a legally viable claim.

Judicial Notice

The court denied as moot the request to judicially notice the original complaint and amended complaint because they were already part of the court record. The court judicially noticed a recorded Florida mortgage as an official public record and overruled Dorian’s objection to that document.

Fair Credit Reporting Act Claim

The court held that Dorian had not alleged enough facts to plausibly show that the credit reports were “consumer reports” covered by the Fair Credit Reporting Act. The statute covers reports used or expected to be used for purposes such as credit primarily for personal, family, or household purposes or employment. Dorian alleged that he was a consumer and that the reports were consumer reports, but the court found those allegations conclusory. The complaint did not explain how the reports were used or allege facts supporting a reasonable inference that they were used for a covered purpose. The court dismissed this claim with leave to amend.

California Credit-Reporting Claim

The court dismissed Dorian’s claim under California Civil Code section 1785.25 for the same reason. Because the complaint did not sufficiently allege that the reports were consumer reports under the federal law, it also did not sufficiently allege that they were covered under the California statute. The court dismissed the claim with leave to amend.

Rosenthal Act Claim

Dorian alleged that Community Loan Servicing falsely represented the amount or legal status of his debt and sought amounts not authorized by the agreement creating the debt. The court explained that the Rosenthal Act applies to consumer debt, including mortgage debt, incurred primarily for personal, family, or household purposes. The court found Dorian’s allegation that the debt was consumer debt conclusory and found that the complaint did not allege facts supporting a reasonable inference that the Riviera Beach mortgage was incurred for a personal, family, or household purpose. The court dismissed this claim with leave to amend.

Breach-of-Contract Claim

Dorian alleged that the parties had a mortgage contract, that he performed his obligations, and that Community Loan Servicing breached the contract by charging him for unrelated property taxes and reporting inaccurate credit information. The court held that the complaint did not identify the material terms of the specific contract or the particular contractual obligations that Community Loan Servicing allegedly breached. Although Dorian did not dispute that the recorded Florida mortgage was the relevant contract, he did not identify any provision in that mortgage that the company allegedly violated. The court dismissed the breach-of-contract claim with leave to amend.

Unfair-Competition Claim

Dorian’s claim under California’s unfair competition law had two parts. The unlawful-practices theory was based on the alleged Rosenthal Act and California credit-reporting violations. Because the court found that the complaint did not state those underlying claims, it dismissed the unlawful-practices theory with leave to amend.

The fraudulent-practices theory was based on Dorian’s allegation that the mortgage represented that the company would charge only amounts authorized by the mortgage and would not charge him for unrelated taxes. The court held that the complaint did not allege a duty to disclose and did not describe the alleged deceptive statements with the detail required by Federal Rule of Civil Procedure 9(b). The court dismissed the fraudulent-practices theory with leave to amend.

Disposition

Judge Donna Ryu granted Community Loan Servicing’s motion to dismiss. The court dismissed each of the five claims with leave to amend and ordered Dorian to file a second amended complaint within 14 days of the order. The opinion does not state that any claim was dismissed with prejudice.