Khan v. ReconTrust Company
3:12-cv-01107
N.D. Cal.Apr 22, 2015Background
- Plaintiff Rahila Khan (pro se) obtained two mortgages in 2006 for property in Fremont, CA and fell behind on payments beginning in 2009. She alleges repeated loan-modification dealings with Bank of America from 2009–2013 and a later servicing transfer to Select Portfolio Servicing, Inc. (SPS).
- Notices of default and related recorded documents show significant arrearages and servicer actions; Bank of America indicated efforts to comply with Cal. Civ. Code § 2923.5 in a recorded declaration.
- Khan sued originally in 2012 naming ReconTrust and Bank of America; the court previously dismissed claims against ReconTrust with prejudice and allowed a limited amendment to add SPS to a surviving fraud claim.
- Khan’s Third Amended Complaint (TAC) alleges four claims against Bank of America and SPS: (1) fraud, (2) conversion, (3) intentional infliction of emotional distress, (4) negligent infliction of emotional distress; she also seeks attorney’s fees, statutory damages, and civil penalties.
- Defendants moved to dismiss. The court dismissed the three non-fraud claims without prejudice (because Khan was not permitted to add new claims at this late stage), dismissed Khan’s fraud claim against SPS with prejudice for failure to plead the necessary elements, and allowed Khan’s fraud claim against Bank of America to survive. The court struck Khan’s prayer for attorney’s fees, statutory damages, and civil penalties. Khan may not file a Fourth Amended Complaint; Bank of America must answer the TAC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Khan may add new tort claims (conversion; IIED; negligent infliction of emotional distress) in TAC after court’s prior amendment limits and scheduling deadline | Khan added these claims in the TAC asserting harms from loan-modification and servicing conduct | Defendants argued amendment was untimely and not permitted under Rule 16(b) and the court’s earlier orders | Dismissed without prejudice — court disallowed new claims at this late stage (no good cause under Rule 16(b)); Khan cannot re-plead them in this action |
| Whether fraud claim against SPS was sufficiently pleaded under California law | Khan alleges SPS ignored/modification terms, raised payments, added charges, and refused payments — implying fraudulent conduct | SPS argued Khan failed to allege any specific false misrepresentation, scienter, justifiable reliance, or particularized facts required by fraud pleading standards | Dismissed with prejudice — fraud elements (false representation, intent, justifiable reliance, damages) not plausibly alleged; court had given prior opportunities to amend |
| Whether fraud claim against Bank of America survives | Khan alleges Bank of America made promises/loan-modification representations and then cancelled/modification was not honored | Bank of America moved to dismiss but prior orders had allowed fraud claim versus Bank of America to survive | Survived — fraud claim against Bank of America remains (court order: Bank must answer) |
| Whether Khan’s prayer for attorney’s fees, statutory damages, and civil penalties is proper given pro se status and pleadings | Khan requested fees and statutory penalties as relief | Bank of America moved to strike these requests noting pro se plaintiffs cannot recover attorney’s fees and no statutory basis was pled | Struck — attorney’s fees, statutory damages, and civil penalties removed from prayer (pro se cannot recover attorney’s fees and no basis shown) |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must contain factual content to permit plausible inference of liability)
- Kay v. Ehrler, 499 U.S. 432 (pro se litigant cannot recover attorney’s fees)
- Lopez v. Smith, 203 F.3d 1122 (9th Cir.) (pro se plaintiffs generally given leave to amend unless futile)
- Ferdik v. Bonzelet, 963 F.2d 1258 (9th Cir.) (dismissal with prejudice appropriate after repeated failure to cure pleading defects)
- Glenn K. Jackson Inc. v. Roe, 273 F.3d 1192 (9th Cir.) (sets out California fraud elements)