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

Background

Paul Dorian alleged that Community Loan Servicing, LLC reported inaccurate information to credit-reporting agencies after charging his escrow account for property taxes associated with properties that he said were unrelated to the mortgaged property. He alleged that the inaccurate reporting lowered his credit score, caused him to be denied or receive less favorable refinancing terms, and caused more than $450,000 in damages, along with emotional distress and out-of-pocket expenses.

Dorian asserted five claims: violation of the federal Fair Credit Reporting Act (FCRA), violation of California’s Consumer Credit Reporting Agencies Act (CCRAA), libel, negligence, and breach of fiduciary duty. Community Loan Servicing moved to dismiss the second amended complaint under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. It also moved under Rule 12(f) to strike Dorian’s request for punitive damages.

Motion to Dismiss

The court dismissed Dorian’s breach-of-fiduciary-duty claim with prejudice because Dorian did not oppose dismissal of that claim.

The court held that the FCRA does not cover credit reports used to obtain credit primarily for business purposes. It therefore dismissed with prejudice Dorian’s FCRA claims based on refinancing the five Florida rental properties and the Prospect Avenue property in San Francisco. The court reached the same result for the corresponding CCRAA claims and dismissed those claims with prejudice.

The court declined to dismiss the FCRA claim concerning the Parkside Drive property at the pleading stage. Dorian alleged that his in-laws lived there, and the court stated that Community Loan Servicing did not respond to his argument that refinancing that property involved a family purpose. The court also denied dismissal of that claim based on alleged deficiencies in the pleading of damages and on standing, finding that a recorded deed submitted by Community Loan Servicing did not establish that the Parkside Drive property was owned by a trust rather than Dorian individually.

The court denied dismissal of the CCRAA claim on Community Loan Servicing’s argument that federal and Florida law governed the dispute. The court found that the company cited no supporting authority and did not explain why its reporting to credit-reporting agencies fell within the mortgage’s governing-law provision.

The court held that Dorian’s libel and negligence claims were preempted, meaning displaced, by the FCRA provision governing information furnishers. The court dismissed both claims with prejudice, despite Dorian’s allegations that the company acted maliciously or intended to injure him.

Motion to Strike

The court denied the motion to strike Dorian’s punitive-damages claim and references to punitive damages. Relying on Ninth Circuit precedent, the court held that a request for damages cannot be removed through a Rule 12(f) motion to strike. The court stated that a challenge to the sufficiency of the punitive-damages allegations should instead be made through a motion to dismiss.

Disposition

The motion to dismiss was granted in part and denied in part. Dorian’s breach-of-fiduciary-duty, libel, and negligence claims were dismissed with prejudice. His FCRA and CCRAA claims based on the Florida properties and the Prospect Avenue property were also dismissed with prejudice. The remaining claims were FCRA and CCRAA claims based on the Burnett Avenue and Parkside Drive properties. The motion to strike was denied.