Shaterian v. Wells Fargo Bank, N.A.
829 F. Supp. 2d 873
N.D. Cal.2011Background
- Shaterian purchased a Mill Valley home in 2003 and sought a 2007 refinance to access equity and fund home improvements.
- The loan financiered by Wells Fargo predecessor Wachovia (formerly WSB) was an Option ARM/pick-a-payment loan disclosed via Note and TILDS; disclosure and terms allegedly favored negative amortization.
- Diablo Funding Group acted as broker; Wells Fargo/Wachovia's related documents and relationships are alleged to have involved a joint scheme with Diablo.
- A Notice of Default was recorded October 2010, with a foreclosure sale set for February 2011, and Shaterian later filed for bankruptcy and a federal/state-court action ensued.
- Shaterian filed a Second Amended Complaint (SAC) in August 2011 asserting ten claims arising from the loan and foreclosure process; Wells Fargo moved to dismiss and strike on September 2, 2011.
- The court granted in part and denied in part Wells Fargo’s motions, dismissing several claims without leave to amend and denying others, including a TILA claim and certain non-preempted state-law claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TILA disclosures/scope sustain Shaterian’s rescission claim. | Shaterian contends disclosures were inadequate beyond negative amortization and rescission is viable. | Wells Fargo argues only the loan program disclosure needs to address negative amortization, not the TILDS. | TILA claim survives; rescission and disclosures plausibility denied dismissal. |
| Whether state-law claims are preempted by HOLA under 12 C.F.R. § 560.2. | Shaterian argues non-preempted basis for several state-law claims; preemption limited to covered categories. | Wells Fargo argues most claims are preempted as landed under lending regulation. | Claims 3, 4, 5, 6, 7, 8, 9 largely not preempted; Claim 2 preempted; Claim 10 preempted to extent it concerns Claim 2. |
| Whether UCL claim based on misrepresentations is preempted or viable. | UCL claim survives where based on non-TILA written disclosures and broader misrepresentations. | UCL claim is preempted if grounded solely in TILA disclosures. | UCL claim not preempted to the extent it rests on non-written or outside-TILA misrepresentations. |
| Whether the breach of written contract claim is viable. | WSB/Wells Fargo promised payments would cover principal and interest. | The Note does not promise such coverage; pick-a-payment allows various minimum payments. | Breach of written contract claim dismissed for lack of a concrete promise. |
| Whether aiding and abetting fraud survives and is adequately pleaded. | WSB/Diablo jointly induced borrowers through fraudulent omissions; WSB aided and abetted. | Claim fails to plead particular misrepresentations and failing duties; not sufficiently pleaded. | Aiding and abetting fraud claim survives; sufficiently pleaded with particularized facts under Rule 9(b); not preempted. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for factual allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (factual allegations must be plausible)
- Swartz v. KPMG LLP, 476 F.3d 756 (9th Cir. 2007) (Rule 9(b) specificity requirements for fraud)
- Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001 (9th Cir. 2008) (preemption framework under HOLA §560.2)
- Nymark v. Heart Fed. Sav. & Loan Ass'n., 231 Cal.App.3d 1089 (Cal. Ct. App. 1991) (lender duty beyond pure contracting)
- Mabry v. Superior Court, 185 Cal.App.4th 208 (Cal. Ct. App. 2010) (defining remedies under California Civ. Code § 2923.5)
- Celador Int'l Ltd. v. Walt Disney Co., 347 F. Supp. 2d 846 (C.D. Cal. 2004) (clarifying superfluous pleading concepts in contract claims)
- Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal.App.3d 1371 (Cal. Ct. App. 1990) (distinguishing superfluous contract claims)
- Starr v. Baca, 633 F.3d 1191 (9th Cir. 2011) (pleading standards for updated circuit cases)