Choudhuri v. Specialized Loan Servicing

Background

Kabita Choudhuri filed a second amended complaint against Specialized Loan Servicing, Bosco Credit, Zillow Group, and Dryden Capital. She alleged that the defendants conspired to defraud her by illegally foreclosing on her home. The court had previously allowed certain claims against Specialized and Bosco to be amended, while dismissing other claims and some claims against Zillow with prejudice.

The second amended complaint added Dryden, which Choudhuri alleged was the current legal owner of the property. The complaint appeared to assert claims under the Real Estate Settlement Procedures Act, the Homeowner Bill of Rights, the Racketeer Influenced and Corrupt Organizations Act, California’s Unfair Competition Law, and the False Claims Act. It also requested default judgment against Zillow. Dryden and Zillow moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not allege enough facts to state a legally recognizable claim.

Dryden

Dryden argued that it was a bona fide purchaser for value without notice of Choudhuri’s dispute. A bona fide purchaser is a buyer who acquires an interest in property without knowledge or notice of another person’s prior interest. The court took judicial notice of a trustee’s deed recorded on December 20, 2022, and a grant deed issued to Dryden on May 11, 2023. The court did not take judicial notice of Dryden’s privately obtained preliminary title report.

The court held that the deeds showed Dryden was a bona fide purchaser and that Choudhuri had not alleged facts showing Dryden knew about her claims before purchasing the property. The court rejected Choudhuri’s arguments that Dryden had to be liable because a purchaser must conduct due diligence and that Dryden had submitted fraudulent documents. It concluded that Dryden could not be held directly or indirectly liable in the dispute.

The court granted Dryden’s motion to dismiss all claims against it. It also held that the pleading’s defects could not be cured by amendment, so the claims were dismissed with prejudice. The court’s conclusion described this as dismissal without leave to amend.

Zillow

The court noted that it had already dismissed Choudhuri’s claims against Zillow under the Real Estate Settlement Procedures Act, Regulation X, and the Homeowner Bill of Rights with prejudice. It dismissed those claims against Zillow again with prejudice.

Choudhuri also appeared to allege that Zillow unlawfully posted information about the property, including an auction listing. Zillow relied on Section 230 of the federal Communications Decency Act. Section 230 generally protects an interactive computer service from liability when a plaintiff seeks to treat it as the publisher or speaker of information supplied by another party.

The court found that Zillow’s online real-estate database qualified as an interactive computer service. It further found that Choudhuri sought to hold Zillow liable as the publisher of auction notices and that the complaint indicated Zillow hosted information from public sources rather than creating the content itself. The court therefore held that Section 230 barred those claims as a matter of law.

Default-judgment request

The court read the second amended complaint as renewing Choudhuri’s request for default judgment against Zillow. It declined to grant that request because the amended complaint did not establish sufficient service. The court also noted that the proof of service had handwritten changes that conflicted with Choudhuri’s earlier affidavit and cited the federal rules’ preference for resolving cases on their merits.

Disposition

The court granted Dryden’s and Zillow’s motions to dismiss. All claims against Dryden were dismissed with prejudice and without leave to amend. Choudhuri’s claims against Zillow were again dismissed with prejudice. The court also declined to grant default judgment against Zillow.