Choudhuri v. Specialized Loan Servicing

Background

Kabita Choudhuri filed a second amended complaint against Specialized Loan Servicing, LLC, Bosco Credit LLC, Zillow Group, Inc., and Dryden Capital, Inc. She alleged that the defendants conspired to defraud her by illegally foreclosing on her home. The court had previously addressed the claims against Zillow and Dryden in a separate order. In an earlier order, the court dismissed many claims and allowed Choudhuri to amend claims against Specialized and Bosco for fraud, violations of the Racketeer Influenced and Corrupt Organizations Act, the Homeowner Bill of Rights, the Real Estate Settlement Procedures Act, and Regulation X.

The second amended complaint grouped its allegations into three counts. The court understood the complaint to assert claims involving the Real Estate Settlement Procedures Act, the Homeowner Bill of Rights, the Racketeer Influenced and Corrupt Organizations Act, California’s unfair-competition law, the federal False Claims Act, Regulation X, and fraud.

Specialized’s Motion to Strike

Choudhuri moved to strike Specialized’s motions, arguing that the motion for judgment on the pleadings was premature and that she had not received sufficient notice of the summary-judgment motion. The court found that the pleadings were closed as to Specialized and that Specialized had provided sufficient notice. The court denied Choudhuri’s motion to strike.

Specialized’s Motion for Judgment on the Pleadings

The court granted Specialized’s motion for judgment on the pleadings as to the fraud claim. Choudhuri alleged that Specialized applied illegal fees and unfair interest rates, made fraudulent filings, ignored her qualified written requests, and made false promises. The court found that she did not provide enough specific facts to support fraud under the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). Because the court had previously dismissed the fraud claim on the same grounds, it granted judgment on the pleadings for Specialized and dismissed the claim with prejudice.

The court also granted judgment on the pleadings for Specialized on the civil racketeering claim. Choudhuri did not provide enough detail about the alleged fraud and did not adequately plead an ongoing enterprise involving Specialized, Bosco, and Dryden. The court dismissed that claim with prejudice.

As to the Homeowner Bill of Rights claim under California Civil Code section 2923.6, the court found that Choudhuri sufficiently alleged that Specialized was her mortgage servicer. But she did not adequately allege that her loan-modification application was her first application or that a material change in her financial circumstances justified another application. The court therefore granted judgment on the pleadings for Specialized and dismissed the claim with prejudice.

The court denied judgment on the pleadings as to Choudhuri’s claim under section 2605(e)(1)(A) of the Real Estate Settlement Procedures Act. Choudhuri alleged that she sent Specialized a qualified written request about her loan servicing and that Specialized did not answer it. The court held that it could not weigh evidence at the pleading stage, but it later resolved this claim through summary judgment.

The court granted judgment on the pleadings for Specialized on the Regulation X claim. Although Choudhuri adequately alleged that Specialized was a loan servicer, she did not allege the scheduled foreclosure-sale date or when a foreclosure sale occurred. The court dismissed the claim with prejudice.

Specialized’s Motion for Summary Judgment

The court granted summary judgment for Specialized on Choudhuri’s Real Estate Settlement Procedures Act claim. Specialized argued that it never received a qualified written request from Choudhuri in 2022. Although Choudhuri generally referred to exhibits as evidence that she mailed the request, the court found that she had not produced evidence showing that she mailed a qualified written request to Specialized’s designated address. The court concluded that she had not shown a genuine dispute of material fact.

The court also granted summary judgment for Specialized on the Homeowner Bill of Rights claims under California Civil Code sections 2923.3 and 2924b. The record included an affidavit stating that the notice of default was mailed to Choudhuri by certified mail on September 9, 2021. The court held that the law required mailing the notice, not proof that Choudhuri actually received it.

Bosco’s Motion to Dismiss

The court granted Bosco’s motion to dismiss. It allowed judicial notice of the existence and recording of several public real-estate documents and court orders, but not the truth of disputed facts contained in those materials.

The court dismissed Choudhuri’s fraud claim against Bosco because she did not allege enough facts to meet Rule 9(b)’s heightened pleading standard. Because Choudhuri had not previously had an opportunity to amend that claim as to Bosco, the court granted leave to amend.

The court dismissed Choudhuri’s racketeering claim against Bosco because it was based on the same insufficient allegations concerning fraud and an alleged enterprise involving Bosco and Specialized. Because Choudhuri had not previously had an opportunity to amend that claim as to Bosco, the court also granted leave to amend it.

The court dismissed the Homeowner Bill of Rights section 2923.6 claim against Bosco with prejudice. That statute applies only to first-lien mortgages or deeds of trust. The documents showed that Bosco’s deed of trust was a subordinated, non-first lien, so the court found that the statute did not apply and that amendment would be futile.

The court dismissed the Real Estate Settlement Procedures Act claim against Bosco with prejudice because Choudhuri did not adequately allege that Bosco was a loan servicer. The court also dismissed the Regulation X claim against Bosco with prejudice for the same reason.

Finally, the court dismissed with prejudice Choudhuri’s Homeowner Bill of Rights claims under sections 2923.3 and 2924b. The court found that Bosco’s subordinated lien was separate from the senior loan and that Bosco was not the trustee of record for the foreclosure sale at issue. The court concluded that amendment would be futile.

Disposition

The court denied Choudhuri’s motion to strike. It granted in part and denied in part Specialized’s motion for judgment on the pleadings, granted Specialized’s alternative motion for summary judgment, and dismissed all claims against Specialized with prejudice. It granted Bosco’s motion to dismiss, granted leave to amend only the fraud and racketeering claims against Bosco, and dismissed the remaining claims against Bosco with prejudice. Choudhuri could file an amended complaint within 21 days to cure the identified deficiencies; otherwise, the case would be dismissed with prejudice.