United States District Court, W.D. Washington, Tacoma
BRIAN S. NELSON, on behalf of himself and all others similarly situated, Plaintiff,
DITECH FINANCIAL, LLC, Defendant.
ORDER DENYING MOTION TO DISMISS
B. Leighton, United States District Judge.
MATTER is before the Court on Defendant Ditech Financial
LLC's Motion to Dismiss [Dkt. #30]. Plaintiff Brian
Nelson sued his loan servicer, Ditech, claiming it violated
the Servicemembers Civil Relief Act (SCRA) when it refused to
forgive excess interest collected on a home equity loan
during Nelson's nearly ten years of active duty in the
National Guard. See 50 U.S.C. § 3937. Ditech
moves to dismiss, arguing that it is not liable for
overcharges made by other loan servicers, prior to
Ditech's purchase of Nelson's loan.
opened a $90, 000 adjustable rate Home Equity Line of Credit
(HELOC) at Equity 1 Lenders Group in August 2005. On October
14, 2005, he was ordered to report for active military duty
in two weeks. Sometime before he reported, he borrowed funds
against the HELOC and informed Equity 1 that he would report
for active duty on October 29, 2005. The initial interest
rate on the borrowed funds was 11.75%.
requires lenders to charge active duty borrowers no more than
6% interest on a variety of loans. Loans secured by the
service member's home are limited to 6% during active
duty and for one year thereafter. Any interest in excess of
the limit “is forgiven.” 50 U.S.C. §
1 was therefore obligated to reduce Nelson's interest
rate to 6% while he was on active duty. It did not make this
adjustment, and instead continued to charge him 11.75% (the
initial rate), with periodic fluctuations tracking the prime
rate. Nelson remained on active duty for nearly 10 years.
During that time, his loan was sold to different loan
servicers at least five times. All of the servicers,
including the servicer at the time Nelson retired, Ditech,
charged far more than 6%. Nelson retired from active duty on
August 31, 2015.
asked Ditech to forgive the excess interest he had paid
during active duty. Ditech agreed that it would not
charge him more than 6%, and forgave the excess from the date
it purchased and began servicing the loan-October 2013-until
one year after he retired. But Ditech refused to forgive the
excess interest Nelson paid to prior loan servicers,
claiming it was not responsible for its failure to
comply with the SCRA.
sued. He claims Ditech routinely violates the SCRA by denying
service members' claims for reduced interest when the
excess interest was charged before Ditech serviced the loan.
He seeks to represent a class of similarly situated Ditech
customers seeking Declaratory and Injunctive relief,
reformation of contracts and damages.
seeks dismissal with prejudice and without leave to amend. It
argues that Nelson cannot plausibly allege that Ditech did
anything to cause him to overpay interest from 2005
to 2013, and that the SCRA does not makes the successor
servicer liable for the breaches of its “wholly
unrelated” predecessors. It emphasizes that Nelson did
not assert (and his complaint does not factually support) a
breach of contract claim. It argues that he cannot
effectively amend it to do so by arguing breach of contract
in his responsive brief.
argues that he as plausibly alleged facts supporting an SCRA
claim. He emphasizes the SCRA's purpose-to protect active
duty service members-and the fact that Courts uniformly hold
that it is to be broadly and liberally construed to that end.
under Fed.R.Civ.P. 12(b)(6) may be based on either the lack
of a cognizable legal theory or the absence of sufficient
facts alleged under a cognizable legal theory. Balistreri
v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th
Cir. 1990). A plaintiff's complaint must allege facts to
state a claim for relief that is plausible on its face.
See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A
claim has “facial plausibility” when the party
seeking relief “pleads factual content that allows the
court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id.
Although the court must accept as true the Complaint's
well-pled facts, conclusory allegations of law and
unwarranted inferences will not defeat an otherwise proper
12(b)(6) motion to dismiss. Vazquez v. Los Angeles
Cty., 487 F.3d 1246, 1249 (9th Cir. 2007); Sprewell
v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.
2001). “[A] plaintiff's obligation to provide the
‘grounds' of his ‘entitle[ment] to
relief' requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action
will not do. Factual allegations must be enough to raise a
right to relief above the speculative level.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(citations and footnotes omitted). This requires a plaintiff
to plead “more than an unadorned,
Iqbal, 556 U.S. at 678 (citing id.).
issue is whether the SCRA requires the borrower to chase down
each lender or servicer that overcharged him, or whether he
can recover the entire excess from his current servicer
(which presumably ...