Free Brief - District Court of California - California

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Stephen M. Rummage, pro hac vice 2 Jonathan M. Lloyd, pro hac vice Martin Fineman (Cal. Bar No. 104413) 3 Sam N. Dawood (Cal. Bar No. 178862) DAVIS WRIGHT TREMAINE LLP 4 505 Montgomery Street, Suite 800 San Francisco, California 94111-6533 5 Telephone: (415) 276-6500 Facsimile: (415) 276-6599 6 Email: [email protected] [email protected] 7 8 Attorneys for Defendant Washington Mutual Bank 9 10 IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE

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12 SIDNEY SCHOLL and FELTON A. SPEARS, ) JR., on behalf of themselves and all others ) Case No. 5:08-cv-00868 (HRL) 13 similarly situated, ) ) CLASS ACTION 14 Plaintiffs, ) ) DEFENDANT WASHINGTON MUTUAL 15 v. ) BANK S MEMORANDUM OF POINTS 16 ) AND AUTHORITIES IN SUPPORT OF WASHINGTON MUTUAL, INC., a Washington ) MOTION TO DISMISS PLAINTIFFS 17 corporation; WASHINGTON MUTUAL BANK, ) FIRST AMENDED COMPLAINT 18 FA (aka WASHINGTON MUTUAL BANK); ) FIRST AMERICAN EAPPRAISEIT, a Delaware) 19 corporation; and LENDER S SERVICE, INC., ) Date: Tuesday, July 15, 2008 ) Time: 10:00 a.m. 20 Defendants. ) Department: SJ, Courtroom 2, 5th Floor ) 21 ) 22 23 24 25 26 27 28
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1 2 I. 3 II. 4 III. 5 IV. 6 7 8 9 10 B.

TABLE OF CONTENTS INTRODUCTION ................................................................................................................. 1 FACTUAL BACKGROUND................................................................................................ 2 STATEMENT OF ISSUES ................................................................................................... 4 ARGUMENT AND AUTHORITY....................................................................................... 4 A. Plaintiffs RESPA Claim Does Not State a Claim against WMB. ............................ 5 1. 2. Plaintiffs Cannot Assert a Claim against WMB under Section 8(a) of RESPA........................................................................................................... 6 Plaintiffs Cannot Assert a Claim against WMB under Section 8(b) of RESPA........................................................................................................... 9

Plaintiffs Have Not Stated any Claims under State Law......................................... 12 1. 2. Federal Law Preempts Plaintiffs State Law Claims................................... 12 Even If They Were Not Preempted, Plaintiffs UCL, CLRA, Breach Of Contract and Unjust Enrichment Claims Fail as a Matter of State Law...... 17

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CONCLUSION ................................................................................................................... 25

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TABLE OF AUTHORITIES CASES

3 Anunziato v. eMachines, Inc., 402 F. Supp. 2d 1133 (C.D.Cal. 2005) ..............................................................................19 4 Augustine v. FIA Credit Servs., N.A., 5 485 F. Supp. 2d 1172 (E.D.Cal. 2007) ..............................................................................20 6 Balistreri v. Pacifica Police Dept., 901 F.2d 696 (9th Cir. 1990) ...............................................................................................4 7 Bell Atlantic Corp. v. Twombly, 8 550 U.S. _ , 127 S. Ct. 1955 (2007) ....................................................................................5 9 Berry v. Am. Express Publishing, Inc., 147 Cal.App.4th 224 (2007) ..............................................................................................20 10 Boulware v. Crossland Mortgage Corp., 11 291 F.3d 261 (4th Cir. 2002) ..........................................................................................6,10 12 Boursiquot v. Citibank F.S.B., 323 F. Supp. 2d 350 (D.Conn. 2004)............................................................................16,17 13 Branch v. Tunnell, 14 14 F.3d 449 (9th Cir. 1994) .................................................................................................2 15 Buckland v. Threshold Enterprises, Ltd., 155 Cal.App.4th 798 (2007) ..............................................................................................18 16 Cal. Medical Ass n, Inc. v. Aetna U.S. Healthcare of Cal., Inc., 17 94 Cal.App.4th 151 (2001) ................................................................................................25 18 Cattie v. Wal-Mart Stores, Inc., 504 F. Supp. 2d 939 (S.D.Cal. 2007) ...........................................................................18,19 19 Chaires v. Chevy Chase Bank, F.S.B., 20 748 A.2d 34 (Md.App. 2000) ............................................................................................16 21 Chamberlan v. Ford Motor Co., 369 F. Supp. 2d 1138 (N.D.Cal. 2005).........................................................................20,22 22 Cohen v. JP Morgan Chase & Co., 23 498 F.3d 111 (2nd Cir. 2007) .......................................................................................11,12 24 Corbett v. Hayward Dodge, Inc., 119 Cal.App.4th 915 (2004) ..............................................................................................21 25 Falk v. General Motors Corp., 26 496 F. Supp. 2d 1088 (N.D.Cal. 2007).........................................................................22,25 27 Fidelity Fed. Sav. & Loan Ass n v. de la Cuesta, 458 U.S. 141 (1982) ..........................................................................................................13 28
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1 Friends of Yosemite Valley v. Norton, 348 F.3d 789, 796 (9th Cir. 2003) .....................................................................................11 2 Gauvin v. Trombatore, 682 F. Supp. 1067 (N.D. Cal. 1988)..................................................................................22 3 4 Gen-Probe, Inc. v. Amoco Corp., Inc., 926 F. Supp. 948 (S.D. Cal. 1996) ....................................................................................22 5 Geraci v. Homestreet Bank, 347 F.3d 749 (2003) .....................................................................................................10,11 6 7 Haehl v. Washington Mut. Bank, F.A., 277 F. Supp. 2d 933 (S.D.Ind. 2003)............................................................................15,16 8 Hall v. Time, Inc., 158 Cal.App.4th 847 (Jan. 7, 2008)...................................................................................19 9 10 Haug v. Bank of America, N.A., 317 F.3d 832 (8th Cir. 2003) .............................................................................................10 11 Hernandez v. Hilltop Financial Mortgage, Inc., 2007 WL 3101250 (N.D.Cal. Oct. 22, 2007) ....................................................................21 12 13 Jefferson v. Chase Home Finance LLC, No. C06-6510, 2007 WL 1302984 (N.D.Cal. May 3, 2007).............................................21 14 Kagan v. Gibraltar Savs. & Loan Ass n, 35 Cal.3d 582 (1984) .........................................................................................................21 15 16 Knox v. Ameriquest Mortgage Co., No. C05-00240, 2005 WL 1910927 (N.D.Cal. Aug. 10, 2005) ........................................21 17 Kruse v. Wells Fargo Home Mortgage, Inc., 383 F.3d 49 (2d Cir. 2004) ................................................................................................10 18 19 Krzalic v. Republic Title Co., 314 F.3d 875 (7th Cir. 2002) .............................................................................................10 20 Laster v. T-Mobile USA, Inc., 407 F. Supp. 2d 1181 (S.D.Cal. 2005) ..............................................................................19 21 22 Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001) ...............................................................................................2 23 Leonard v. Northwest Airlines, Inc., 605 N.W.2d 425 (Minn. Ct. App. 2000)............................................................................12 24 25 Lopez v. World Sav. & Loan Assn., 105 Cal.App.4th 729 (Cal. Ct. App. 2003)........................................................................14 26 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) ..........................................................................................................18 27 28 McCarthy v. United States, 850 F.2d 558 (9th Cir. 1988) .............................................................................................18
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1 2 McKell v. Washington Mut., Inc., 142 Cal.App.4th 1457 (2006) ..................................................................................21,23,24

3 Melchior v. New Line Productions, Inc., 106 Cal.App.4th 779 (2003) ..............................................................................................25 4 Monroig v. Washington Mut. Bank, FA, 19 A.D.3d 563 (2005)........................................................................................................15 5 6 Moskowitz v. Washington Mut. Bank, F.A., 768 N.E.2d 262 (Ill. App. 2002)..............................................................................12,16,17 7 North Star Int l v. Arizona Corp. Comm n, 720 F.2d 578 (9th Cir. 1983) ...............................................................................................4 8 9 Nymark v. Heart Fed. Sav. & Loan Ass n, 231 Cal.App.3d 1089, 1096 (1991) ...................................................................................12 10 O Brien v. Camisasca Automotive Manufacturing, Inc., 73 Cal.Rptr.3d 911 (Mar. 27, 2008) ..................................................................................19 11 12 Parrish v. Nat. Football League Players Ass n, 534 F. Supp. 2d 1081 (N.D.Cal. 2007)..............................................................................24 13 People ex rel. Lockyer v. Brar, 115 Cal.App.4th 1315 (2004) ............................................................................................18 14 15 Pfizer, Inc. v. Superior Court, 146 P.3d 1250 (2006) ........................................................................................................19 16 Prince-Servance v. BankUnited, FSB, No. 07 C 1259, 2007 WL 3254432 (N.D.Ill. Nov. 1, 2007)..............................................15 17 18 Roe v. Unocal Corp., 70 F. Supp. 2d 1073 (C.D. Cal. 1999) .................................................................................4 19 Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384 (3rd Cir. 2005).............................................................................................10 20 21 Schuetz v. Banc One Mortgage Corp., 292 F.3d 1004 (9th Cir. 2002) .............................................................................................6 22 Silvas v. E*Trade Mortgage Corp., 514 F.3d 1001 (Jan. 30, 2008) ............................................................................14,15,16,17 23 24 Sosa v. Chase Manhattan Mortgage Corp., 348 F.3d 979 (11th Cir. 2003) ...........................................................................................10 25 Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S. Ct. 2499 (2007).........................................................................................................2 26 27 Thornhill Publ'g Co. v. Gen. Tel. & Elecs., 594 F.2d 730 (9th Cir. 1979) .............................................................................................18 28
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1 Van Slyke v. Capital One Bank, 503 F. Supp. 2d 1353 (N.D.Cal. 2007).........................................................................20,21 2 Washington Mut. Bank, FA v. Superior Court, 95 Cal.App.4th 606 (2002) ...........................................................................................12,15 3 4 Wilens v. TD Waterhouse Group, Inc., 120 Cal.App.4th 746 (2003) ..............................................................................................22 5 6 STATUTES AND REGULATIONS AND RULES

7 12 U.S.C. § 1464 ...........................................................................................................................13 8 12 U.S.C. § 2601 ..........................................................................................................................5,6 9 12 U.S.C. § 2607 ..................................................................................................................5,6,9,10 10 12 U.S.C. § 2614 .............................................................................................................................5

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11 28 U.S.C. § 1332(d)(2) ..................................................................................................................12 12 12 C.F.R. § 560.2............................................................................................................14,15,16,17 13 12 C.F.R. § 564.4.............................................................................................................................3 14 12 C.F.R. § 564.5.......................................................................................................................3,8,9 15 24 C.F.R. § 3500.14................................................................................................................6,7,8,9 16 Cal. Bus. & Prof. Code § 17204 ....................................................................................................18 17 Cal. Civ. Code § 1770(a) ...............................................................................................................20 18 Cal. Civ. Code § 1780(c) ...............................................................................................................20 19 Cal. Civ. Code § 1761(b)...............................................................................................................21 20 Fed. R Civ. P. 12(b)(1) ..................................................................................................................18 21 Fed. R Civ. P. 12(b)(6) ................................................................................................................2, 4 22 Fed. R. Civ. P. 9(b)........................................................................................................................20 23 AGENCY INTERPRETATIONS 24 61 Fed. Reg. 50951 (Sept. 30, 1996) .............................................................................................14 25 26 Frequently Asked Questions on the Appraisal Regulations and the Interagency Statement on Independent Appraisal and Evaluation Functions (March 22, 2005) ............................8

27 Interagency Statement, Independent Appraisal and Evaluation Functions (Oct. 28, 2003)...........8 28 OTS Letter P-99-3 (Mar. 10, 1999) ..........................................................................................14,16
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1 OTS Letter P-2006-2 (Mar. 7, 2006) .............................................................................................14 2 3 OTHER AUTHORITIES

4 Daniel Schwarcz, Beyond Disclosure: The Case For Banning Contingent Commissions, 25 Yale L. & Pol y Rev. 289 (2007) ........................................................................................7 5 6 7 8 9 10

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1 I. 2 3 4 5 6 7 8 9 10 11 INTRODUCTION Plaintiffs First Amended Complaint (the Complaint ) amounts to a cynical, opportunistic attempt to profit from the subprime crisis by borrowers who cannot plausibly claim any harm arising out of their loan transactions with Washington Mutual Bank ( WMB ). Plaintiffs have collected factual allegations from the press and borrowed core assertions from a highly publicized complaint that the New York Attorney General filed against First American eAppraiseIT ( EA ). From these, they have cobbled together a series of claims about appraisals on WMB loans, labeled as seven different causes of action. WMB disputes the accuracy of Plaintiffs factual allegations. But even if one takes their version of the facts as true, Plaintiffs non-specific allegations of appraisal malpractice which do not even assert that the appraisals incorrectly valued Plaintiffs properties do not state federal or state claims against WMB, for the following reasons:

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First, the federal Real Estate Settlement Procedures Act ( RESPA ) does not provide a cause of action for an alleged lack of appraisal independence. Plaintiffs cannot assert a claim under Section 8(a) of RESPA because appraisals that lenders order in connection with loan transactions do not involve a referral of settlement services to borrowers, as required to assert a claim under Section 8(a). Nor have Plaintiffs stated a claim under RESAP Section 8(b). Even the most liberal interpretation of Section 8(b) requires that they allege either a split of a settlement fee, a markup of a fee, or payment for a service that was not provided at all. They have not done so. Second, Plaintiffs state law claims fall short on both federal law and state law grounds. Acting pursuant to an express Congressional grant of authority, the federal Office of Thrift Supervision ( OTS ) has by regulation preempted state statutory and common law claims that purport to regulate a federal savings association s activities in originating real estate secured loans. For that reason, federal law preempts and requires dismissal of Plaintiffs state law claims against WMB. Even if their state law claims were not preempted, Plaintiffs have not satisfied, and could not satisfy, the pleading requirements for those claims. Plaintiffs do not have standing to assert UCL claims because they have not alleged that they suffered damages as a result of WMB s actions. Their CLRA claim falls short because (a) mortgage loans do not fall within the CLRA; (b) Plaintiffs have not alleged a representation or omission; and (c) Plaintiffs have not alleged
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damages. Plaintiffs breach of contract claim fails because they have not identified any contractual promise that WMB violated. And California law does not recognize a distinct unjust enrichment claim. II. FACTUAL BACKGROUND

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Plaintiffs Sidney Scholl and Felton Spears obtained real estate secured loans from WMB. Complaint, ¶¶ 58, 63. To verify the value of the properties that Scholl and Spears offered as security, WMB ordered and obtained appraisals and charged Scholl and Spears appraisal fees as a cost of originating their loans. Complaint, ¶¶ 59, 64. WMB obtained these appraisals through EA, a third-party appraisal management company to whom WMB outsourced some appraisal functions beginning in 2006. Complaint, ¶¶ 33, 35, 59, 64. (Although Scholl and Spears also have sued Lender s Service, Inc. ( LSI ), another appraisal management company, neither Plaintiff s appraisal appears to have been performed by an appraiser contracted through LSI.) Plaintiffs transactions with WMB were for mortgage loans, not appraisals. As to Ms. Scholl, the transaction documents show that on or about September 9, 2006, she and two coinvestors signed a real estate purchase and sale agreement to buy a newly-built home in Oklahoma for $289,000. Declaration of Stephen M. Rummage ( Rummage Decl. ), Ex. E.1 After signing the agreement, Ms. Scholl contacted WMB to seek a loan (not an appraisal), and she submitted an application for a mortgage loan in the amount of $231,200 to finance that purchase. WMB arranged for an appraisal of the property. Rummage Decl., Ex. B. Elizabeth Angelo of Angelo Appraisal Service, Inc., performed the appraisal in mid-September 2006, valuing the Scholl Property at the price that Ms. Scholl and her partners had agreed to pay, i.e., $289,000 (the Scholl Appraisal ). Ms. Scholl executed a promissory note and mortgage, WMB funded Ms. Scholl s mortgage loan, and her purchase of this investment property closed on October 3, 2006, using funds provided by WMB. Rummage Decl., Exs. A, C & D.
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In ruling on a Rule 12(b)(6) motion, the Court may consider documents submitted with or 26 incorporated into the complaint by reference and otherwise central to its allegations, as well as matters that may be judicially noticed. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S. Ct. 27 2499, 2509 (2007) (citing 5B Wright & Miller § 1357); Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). Defendants reliance on documents referred to in Plaintiffs complaint 28 does not convert the motion to dismiss into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994) (citation omitted).
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Mr. Spears engaged in a standard refinancing transaction. In early 2007, Mr. Spears and his wife submitted an application for a $178,000 loan (not an appraisal) from WMB. In approving that loan, WMB relied on an appraisal performed by Kathryn Kumamoto of Deborah Garrett & Associates, which valued the Spears property at $525,000 (the Spears Appraisal ). Rummage Decl., Ex. G. Mr. Spears executed a promissory note and deed of trust, and WMB funded Mr. Spears s secured loan with the requested $178,000, which allowed Mr. Spears to pay off an existing loan on his home and receive $19,000 in cash. Rummage Decl., Ex. F, H & I. The transaction closed on March 2, 2007. Both Ms. Scholl and Mr. Spears thus sought and received loans from WMB. Neither Ms. Scholl nor Mr. Spears has alleged that they came to WMB seeking appraisals or that the appraisals WMB obtained and relied on in connection with their loans inflated the values of their property. Neither Ms. Scholl nor Mr. Spears has alleged any flaws in the appraisers selection or evaluation of comparable properties (indeed, in Ms. Scholl s case, two of the comparables appear to have been located in the same housing development as her property) or in any other aspects of the appraisers valuation methods. Neither has alleged that the appraisals led to a foreclosure on their property or otherwise harmed them economically. (Such an allegation would be especially implausible as to Mr. Spears, who received a loan for only one-third of the appraised value of his property.) In short, these Plaintiffs have not alleged that the appraisals that WMB obtained were off by a nickel much less that they suffered any ascertainable loss as a result of any supposed

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inaccuracies in the appraisal amount. Instead, Ms. Scholl and Mr. Spears rely on non-specific allegations concerning a supposed lack of independence by the appraisers used on WMB loans generally. Federal regulations promulgated by the OTS, WMB s primary regulator, and guidelines issued by the OTS and other federal regulators, require that appraisals conducted in connection with federally related real estate loan transactions comply with generally accepted appraisal standards, embodied in the Uniform Standards of Professional Appraisal Practice ( USPAP ). See 12 C.F.R. § 564.4. These include a requirement of appraiser independence. See 12 C.F.R. § 564.5. Plaintiffs allege that WMB s outsourcing arrangements with EA and LSI violated USPAP requirements, including the
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requirement of appraiser independence. Complaint ¶¶ 33-56. But these Plaintiffs obtained loans from WMB, not appraisals, and WMB secured appraisals to protect its interests as a secured lender, not to provide guidance to its borrowers. Moreover, even if all else were true, Plaintiffs still have not alleged that the appraisals on which WMB relied in making loans to them were improperly performed or inflated. The Complaint s vague allegations do not state a claim, and WMB therefore now moves to dismiss. III. STATEMENT OF ISSUES

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A.

Whether Plaintiffs have stated a federal claim under RESPA, given their inability

to allege any referral of appraisal services, any split of fees for appraisal services, any markup of the charge for appraisal services, or a complete failure to provide the services for which they paid? B. Whether Plaintiffs have alleged any viable state law claims? 1. Whether federal law preempts Plaintiffs state law claims, given that the

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OTS has expressly preempted all state statutory or common law regulation of initial charges, disclosures and advertising, and processing [or] origination of real estate secured loans? 2. Assuming no preemption, whether Plaintiffs have stated viable state law

claims given that their Complaint does not allege (a) any actionable misrepresentation or omission by WMB; (b) any sale of a service, as the CLRA uses that term; (c) any damage or ascertainable loss; or (d) any promise that WMB broke in outsourcing its appraisal function. IV. ARGUMENT AND AUTHORITY

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A motion to dismiss under Rule 12(b)(6) tests a complaint s legal sufficiency. North Star Int l v. Arizona Corp. Comm n, 720 F.2d 578, 581 (9th Cir. 1983) (citing Peck v. Hoff, 660 F.2d 371, 374 (8th Cir. 1981)) (affirming dismissal); Roe v. Unocal Corp., 70 F. Supp. 2d 1073, 1075 (C.D. Cal. 1999) (granting motion to dismiss). The court may dismiss an action under Rule 12(b)(6) based upon 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) (citing Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir. 1984)). As the Supreme Court recently made clear, a plaintiff s obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a
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formulaic recitation of the elements of a cause of action will not do. Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1964-65 (2007) (citations omitted). A complaint must contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory. Id. at 1969 (quoting Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1155 (9th Cir. 1989)). Although the court takes factual allegations in a complaint to be true, those allegations must be enough to raise a right to relief above the speculative level. Id. at 1965 (citing 5 C. Wright & A. Miller, Federal Practice & Procedure § 1216, pp. 235-36 (3d ed. 2004)). A. Plaintiffs RESPA Claim Does Not State a Claim against WMB.

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In Count I of their Complaint, Plaintiffs purport to assert a federal claim under the Real Estate Settlement Procedures Act ( RESPA ) based on alleged deficiencies in appraisals that WMB obtained through EA and LSI. But Congress did not create RESPA to provide a remedy for alleged malpractice in providing real estate services. Instead, Congress enacted RESPA to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country [such as] kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services.

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17 12 U.S.C. §§ 2601(a), (b)(2). The structure of RESPA Section 8 reflects this purpose, seeking to 18 prevent these abusive practices by means of two specific prohibitions: Section 8(a) proscribes 19 the payment of fee[s], kickback[s] or thing[s] of value in exchange for referrals of settlement 20 services, while Section 8(b) forbids people from giving or receiving any portion, split, or 21 percentage of fees charged in connection with the settlement of certain mortgage-related 22 transactions other than for services actually performed. 12 U.S.C. § 2607. 23 Plaintiffs vague allegations of appraisal malpractice do not fit under Section 8. Plaintiffs

24 have not alleged (and cannot allege) under Section 8(a) that WMB referred any settlement 25 services, let alone received compensation for doing so. As to Section 8(b), they have not alleged
2 26 that WMB split or marked up an appraisal fee or that an appraisal was not performed at all.

27 28 Plaintiff Sidney Scholl s RESPA claim is also barred under RESPA s statute of limitations, as her loan transaction closed more than one year before Plaintiffs sued. 12 U.S.C. § 2614.
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1.

Plaintiffs Cannot Assert a Claim against WMB under Section 8(a) of RESPA.

RESPA Section 8(a) provides: No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.

6 12 U.S.C. § 2607(a). The section thus prohibits fees for referrals. Schuetz v. Banc One 7 Mortgage Corp., 292 F.3d 1004, 1009 (9th Cir. 2002); see also Boulware v. Crossland Mortgage 8 Corp., 291 F.3d 261, 266 (4th Cir. 2002) (describing Section 8(a) as seek[ing] to eliminate 9 kickbacks or referral fees paid to a third party [by] prohibit[ing] the payment of formal

10 kickbacks or fees for the referral of business ). To assert a claim under Section 8(a), a plaintiff 11 must allege (1) the payment or receipt of a thing of value; (2) an agreement or understanding; and

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12 (3) a referral of settlement business. 24 C.F.R. § 3500.14. Plaintiffs have not alleged either that 13 WMB received a thing of value in exchange for a referral or that WMB made a referral at all. 14 15 a. Plaintiffs Have Alleged Payment of a Thing of Value.

The prohibition against trading a thing of value for a referral addresses the practice of

16 settlement service providers giving compensation, gifts or free services in exchange for referrals of 17 business. RESPA s implementing regulation, Regulation X, broadly defines thing of value to 18 include a wide variety of fees, discounts, services, and so on. See 24 C.F.R. § 3500.14(d). In 19 forbidding such transfers of consideration from the settlement service provider to the referral 20 source, Congress and HUD sought to eliminate kickbacks or referral fees that tend to increase 21 unnecessarily the costs of certain settlement services. 12 U.S.C. § 2601(b)(2). 22 Here, Plaintiffs apparently intend to allege that WMB functioned as the referral source,

23 receiving some thing of value from EA and LSI. But Plaintiffs have not alleged that EA or LSI 24 gave WMB any gifts, gratuities or other consideration in exchange for referrals, which might 25 increase the cost of appraisals. Instead, Plaintiffs circular allegations identify high-value 26 appraisals themselves as the thing of value that WMB received in exchange for the supposed 27 referral of appraisal services to EA, LSI and various Proven Appraisers. Complaint, ¶¶ 84-86. 28
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But this cannot be. The appraisals are the settlement service; they cannot simultaneously be both the purchased settlement service and an illicit kickback. WMB cannot find any case suggesting that the paid provision of a settlement service can satisfy the definition of a thing of value. If the service itself could constitute the prohibited thing of value, then every service provider who sought to satisfy a client (and potential referral source) in the expectation of future business would thereby violate RESPA. Congress never intended RESPA to reach that far. b. Plaintiffs Have Not Alleged a Referral.

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Plaintiffs RESPA claim does not contain any reference to a referral, apart from Plaintiffs pro forma quotation of Section 8(a). Complaint, ¶ 83. In fact, fundamental distinctions between appraisals and other settlement services show that Plaintiffs cannot allege a referral. Borrowers have the opportunity to select the providers of many settlement services used in connection with their real estate loan transactions. And when consumers purchase a home, they typically rely on a number of market intermediaries, such as realtors and mortgage brokers, who themselves provide advice on choosing additional service providers such as lawyers and lending institutions. Daniel Schwarcz, Beyond Disclosure: The Case For Banning Contingent Commissions, 25 Yale L. & Pol y Rev. 289, 312 (2007) (emphasis added). The borrower s ability to select among settlement service providers creates the opportunity for illicit referrals. In these situations, the third-party service provider may make side payments to the market intermediary in exchange for its referral of business. Id. Congress therefore passed RESPA Section 8(a) to prevent that sort of quid pro quo in exchange for a referral. Id. at 313. Consistent with that purpose, HUD has thus defined referral : (1) A referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business. (2) A referral also occurs whenever a person paying for a settlement service or business incident thereto is required to use (see §3500.2, required use ) a particular provider of a settlement service or business incident thereto.
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24 C.F.R. § 3500.14(f) (emphasis added).3 These definitions require the involvement of three parties: the person making the referral (the one who influence[es] the selection), the party who receives the referral (the one who makes the selection), and the third-party service provider. The appraisals alleged in the Complaint, however, do not involve these three parties. Borrowers dealing with federally regulated lenders such as WMB not only do not select appraisers, they cannot choose (and do not use ) real estate appraisers for their transactions. WMB s regulator mandates that either the lender must conduct an appraisal itself or the appraiser shall be engaged directly by the regulated institution or its agent. 12 C.F.R. § 564.5(b)(1).4 The OTS precludes borrower selection of appraisers to preserve appraisal independence: Independence is compromised when an institution uses an appraiser who is recommended by the borrower or allows the borrower to select the appraiser from the institution s list of approved appraisers. Institutions may not use an appraisal prepared by an individual who was selected or engaged by a borrower. An institution s use of a borrowerordered appraisal violates the agencies appraisal regulations. Interagency Statement, Independent Appraisal and Evaluation Functions, at 2 (Oct. 28, 2003); see also Frequently Asked Questions on the Appraisal Regulations and the Interagency Statement on Independent Appraisal and Evaluation Functions ( Interagency FAQs ), Question 14 (Mar. 22, 2005) ( the borrower may not recommend an appraiser to the institution or select the appraiser ). In other words, while lenders may pass on the cost of the appraisal to the borrower, Interagency FAQs, Question 14, the borrower cannot be part of the process of obtaining the appraisal. The requirement that federally regulated lenders obtain appraisals (and the complementary prohibition on borrower-obtained appraisals) excludes appraisals from HUD s definition of referrals. Because borrowers cannot play any role in obtaining appraisals, they cannot select[] [the] provider of a settlement service. 24 C.F.R. § 3500.14(f)(1). Similarly, because a

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12 13 14 15 16 17 18 19 20 21 22 23 24 24 C.F.R. § 3500.2 defines required use as a situation in which a person must use a particular provider of a settlement service in order to have access to some distinct service or 26 property, and the person will pay for the settlement service of the particular provider or will pay a 27 charge attributable, in whole or in part, to the settlement service. Here, as discussed more fully below, the appraisers provided their services to WMB, not to borrowers. 4 WMB is subject to regulations promulgated by the OTS, whose regulations are materially 28 identical to the OCC regulations that Plaintiffs erroneously cite throughout the Complaint.
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federally regulated lender always must select the appraiser it uses for the loans it originates, this selection cannot be a required use by the borrower under 24 C.F.R. § 3500.14(f)(2). Instead,

as the OTS regulation makes clear, the lender (not the borrower) uses the appraisal service in lieu of an in-house appraisal function. See 12 C.F.R. § 564.5. The fact that WMB may have paid a fee to EA and LSI for services in obtaining appraisers and managing the appraisal process does not alter this conclusion. To the extent that EA and LSI selected appraisers in connection with WMB s real estate loan transactions (as the Complaint alleges), they did so as WMB s agents or contractors. But RESPA does not prohibit the payment of a fee (C) by a lender to its duly appointed agent for services actually performed in the making

of a loan. 12 U.S.C. § 2607(c)(1); see also 24 C.F.R. § 3500.14(g)(1)(iii).5 2. Plaintiffs Cannot Assert a Claim against WMB under Section 8(b) of RESPA.

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Count I also purports to assert a claim under Section 8(b) of RESPA, 12 U.S.C. § 2607(b).

14 This claim asserts that, due to the alleged lack of independence of Plaintiffs appraisals, those 15 appraisals were valueless and Plaintiffs never received the appraisal service for which they 16 were charged by Defendants. Complaint, ¶¶ 81, 82. But Plaintiffs do not allege that WMB split 17 the appraisal fee with another party, which courts have required for a plaintiff to state a claim 18 under Section 8(b). Moreover, even if a plaintiff could assert an unearned fee claim under 19 RESPA Section 8(b) in the absence of a fee split, Plaintiffs have not alleged such a claim. 20 21 22 23 24 25 26 27 28 In fact, Plaintiffs allege that WMB (not EA or LSI) impermissibly selected the appraisers. Complaint, ¶¶ 33-56. If one accepts that allegation as true, then Plaintiffs Section 8(a) claim boils down to the illogical assertion that WMB unlawfully referred appraisers to itself.
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Subsection 8(b) of RESPA provides: (b) Splitting charges No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. 12 U.S.C. § 2607(b) (emphasis added). The text of Section 8(b), aptly entitled Splitting charges, unambiguously prohibits a person only from giving or receiving any portion, split, or percentage

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of fees charged in connection with the settlement of certain mortgage-related transactions other than for services actually performed. 12 U.S.C. § 2607(b). Plaintiffs have not pleaded a claim under any of the three theories that federal appellate courts have recognized as the basis for a recovery under Section 8(b): First, several federal appellate courts have held that Section 8(b) unambiguously prohibits only transactions in which the defendant shares a portion, split, or percentage of the charge with another party. See Haug v. Bank of America, N.A., 317 F.3d 832, 836 (8th Cir. 2003) ( Section 8(b) is an anti-kickback provision that unambiguously requires at least two parties to share a settlement fee in order to violate the statute ); Krzalic v. Republic Title Co., 314 F.3d 875, 879 (7th Cir. 2002); Boulware, 291 F.3d at 265. While the Ninth Circuit has not squarely addressed the meaning of Section 8(b), it has implicitly endorsed this common-sense understanding of the statute by noting that the statute prohibits the payment of any percentage or division of a charge except for services actually rendered. Geraci v. Homestreet Bank, 347 F.3d 749, 751 (9th Cir. 2003) (emphasis added). Plaintiffs have not alleged that WMB split or shared appraisal fees. Second, a few federal appellate courts have permitted mark-up claims in which a plaintiff alleges that the lender outsourced a settlement service to a third party, charged the borrower more than it paid the third-party provider, and kept the excess. But even this reading of Section 8(b) requires that the lender split the total fee with a third-party service provider; courts that have adopted this reading therefore reject as improper price regulation overcharge claims in which plaintiffs simply assert that their lender assessed to them a fee that exceeded the lender s cost for the service. See, e.g., Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384, 386 (3d Cir. 2005) (tax service and flood certification fees split between lender and third party vendors who performed services; rejecting claims related to overcharges by lender); Kruse v. Wells Fargo Home Mortgage, Inc., 383 F.3d 49, 53 (2d Cir. 2004) (tax service, flood certification and document preparation fees split between lender and third parties; rejecting claims related to overcharges); Sosa v. Chase Manhattan Mortgage Corp., 348 F.3d 979, 983-84 (11th Cir. 2003) (fee split between lender and contractors providing courier or messenger services).

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Plaintiffs have not alleged (and could not allege) a markup of a charge split between WMB and an appraiser. At most they have alleged that they paid too much for the appraisals because the appraisals had little value. But, as every circuit to consider the issue has held, such overcharge claims do not state a claim under Section 8(b). Third, unlike every other circuit to consider the issue, the Second Circuit has recognized a cause of action under Section 8(b) where two parties did not split the challenged fee. In Cohen v. JP Morgan Chase & Co., 498 F.3d 111 (2d Cir. 2007), the court held that the words any portion, split, or percentage of any charge in Section 8(b) could be read to include the entirety of such charges, found the statute ambiguous, and therefore deferred to a HUD policy statement permitting a Section 8(b) claim for undivided fees for which no services at all were rendered. This Court should not follow the minority view of Section 8(b) articulated in Cohen, which departs from the text of the statute particularly in its artificial interpretation of the phrase portion, split, and contradicts other circuits interpretations of

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or percentage to include all of a charge

Section 8(b).6 Further, the Ninth Circuit s characterization of Section 8(b) as prohibit[ing] the payment of any percentage or division of a charge except for services actually rendered, Geraci, 347 F.3d at 751, suggests a narrower interpretation of the section than Cohen adopted.7 In any event, Plaintiffs have not stated a claim even under Cohen. In Cohen, the lender assessed a fee to the borrower but allegedly provided no settlement service at all in return. Cohen, 498 F.3d 111. (The settlement fee was a $225 post-closing fee, for which plaintiff alleged the lender had done nothing. Id. at 113-14.) The Second Circuit found such an undivided, unearned fee distinct from a mere overcharge for a service actually performed, and it reversed the district court s dismissal of the claim. Here, Scholl and Spears did receive appraisals (and they tacitly concede that the appraisers worked on those appraisals), Complaint, ¶¶ 59, 64; they allege only

See Haug, 317 F.3d at 838-40 (rejecting HUD s interpretation of Section 8(b) because statute unambiguous); Krzalic, 314 F.3d at 881 (same); Boulware, 291 F.3d at 266-67 (same). 26 7 Division means one of the parts, sections or groups into which something is divided, 27 while percentage is defined as a proportion or share in relation to a whole or an amount that varies in proportion to a larger sum. Webster s II New College Dictionary 340, 28 836 (3d ed. 2005). See Friends of Yosemite Valley v. Norton, 348 F.3d 789, 796 (9th Cir. 2003) (looking to dictionary definitions of undefined statutory terms).
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that the appraisals Plaintiffs

received were not worth the paper on which they were printed and

were otherwise valueless. Id., ¶ 81. These allegations amount to a claim that the Plaintiffs were overcharged for a service actually performed, distinguish Plaintiffs allegations from Cohen, and preclude Plaintiffs from asserting an undivided, unearned fee claim under Section 8(b), even assuming the Ninth Circuit would recognize Cohen s elastic formulation of RESPA. B. Plaintiffs Have Not Stated any Claims under State Law.

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California law does not impose on a lender a duty of care to a borrower in appraising the borrower s collateral to determine if it is adequate security for a loan, at least when the [lender s] involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money. Nymark v. Heart Fed. Sav. & Loan Ass n, 231 Cal.App.3d 1089, 1096 (1991) (citations omitted). Apparently recognizing this limitation, Plaintiffs attempt to fit their appraisal malpractice theory into other state statutory and common law causes of action.8 But the Court should dismiss these state law claims, for two reasons: (1) federal law preempts the assertion of state law claims against a federal savings association, such as WMB, based on loan origination activities, including the assessment of origination-related fees; and (2) Plaintiffs have not alleged the essential elements of their state causes of action. 1. Federal Law Preempts Plaintiffs State Law Claims.

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WMB is a federally chartered savings association. See Request for Judicial Notice ( RJN ), Exs. A, B; see also Washington Mut. Bank, FA v. Superior Court, 95 Cal.App.4th 606, 613 (2002) (recognizing WMB as a federal savings association); Moskowitz v. Washington Mut. Bank, FA, 768 N.E.2d 262, 264 (Ill. App. Ct. 2002) (same). Accordingly, federal law regulates all facets of WMB s lending operations. In particular, Congress authorized the Office of Thrift Supervision ( OTS ) to issue sweeping preemptive regulations, and the OTS has done so. Because federal preemption bars relief under any set of facts consistent with the pleadings, the complaint fails to state a claim and must be dismissed. Leonard v. Northwest Airlines, Inc., 605 N.W.2d 425, 428 (Minn. Ct. App. 2000) (citations omitted). Even after dismissing Plaintiffs RESPA claim, this Court will have jurisdiction over the state law claims pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2).
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a.

Congress Granted the OTS Exclusive Authority to Regulate the Lending Operations of Federal Savings Associations.

In passing the Home Owners Loan Act ( HOLA ), Congress empowered the OTS to issue regulations to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as Federal savings associations giving primary consideration of the best practices of thrift institutions in the United States. 12 U.S.C. § 1464(a). As the United States Supreme Court has explained, Congress made this federal power exclusive: Congress plainly envisioned that federal savings and loans would be governed by what the [OTS] not any particular State deemed to be the best practices. ... Thus, the statutory language suggests that Congress expressly contemplated, and approved, the [OTS] s promulgation of regulations superseding state law. Fidelity Fed. Sav. & Loan Ass n v. de la Cuesta, 458 U.S. 141, 161-62 (1982) (citation omitted). Further, Congress made the OTS s exclusive power expansive. The broad language of [HOLA] expresses no limits on the [OTS] s authority to regulate the lending practices of federal savings and loans. As one court put it, [i]t would have been difficult for Congress to give the [OTS] a broader mandate. Id. at 161 (emphasis added) (quoting Glendale Fed. Sav. & Loan

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Ass n v. Fox, 459 F. Supp. 903, 910 (C.D. Cal. 1978)). b. The OTS Has Completely Occupied the Field of Lending Regulations Applicable to Federal Savings Associations.

17 18

Consistent with the broad congressional mandate the Supreme Court recognized in de la

19 Cuesta, the OTS has occupied the entire field of lending regulations applicable to federal savings 20 associations, including WMB. In 1996, the OTS promulgated new regulations emphasizing the 21 broad scope of its preemptive power: 22 23 24 25 26 27 28 Occupation of field. Pursuant to sections 4(a) and 5(a) of the HOLA, 12 U.S.C. 1463(a), 1464(a), OTS is authorized to promulgate regulations that preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of federal savings associations, to enable federal savings associations to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA. To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering lowcost credit to the public free from undue regulatory duplication and burden), OTS hereby occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings
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associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) of this section or § 560.110 of this part. For purposes of this section, state law includes any state statute, regulation, ruling, order or judicial decision.

4 12 C.F.R. § 560.2(a) (emphasis added). The OTS explained its preemptive purpose as follows: 5 instead of being subject to a hodgepodge of conflicting and overlapping state lending

6 requirements, federal thrifts are free to originate loans under a single set of uniform federal laws 7 and regulations. 61 Fed. Reg. 50951, 50965 (Sept. 30, 1996) (OTS comments on § 560.2). 8 Accordingly, when a plaintiff challenges a federal savings association s lending practices

9 under state law, federal law preempts the claim. [T]he federal regulation is intended to preempt 10 all state laws purporting to regulate any aspect of the lending operations of a federally chartered 11 savings association, whether or not OTS has adopted a regulation governing the precise subject of

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12 the state provision. Lopez v. World Sav. & Loan Ass n, 105 Cal.App.4th 729, 738 (2003) 13 (emphasis added). The Ninth Circuit recently described the regulatory scope of HOLA and these 14 implementing regulations as so pervasive as to leave no room for state regulatory control. Silvas 15 v. E*Trade Mortgage Corp., 514 F.3d 1001, 1004 (9th Cir. 2008) (quoting Conference of Fed. 16 Sav. & Loan Ass ns v. Stein, 604 F.2d 1256, 1260 (9th Cir. 1979)); see also OTS Letter P-2006-2, 17 at 3 (Mar. 7, 2006) (describing federal regulatory scheme as exclusive, leaving no room for state
9 18 regulation, conflicting or complementary ).

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c.

OTS Regulations Expressly Preempt All of Plaintiffs NonFederal Claims.

The OTS s preemption regulation provides analytical guideposts for determining the scope of preemption, chief among them being a list of non-exclusive [i]llustrative examples of the types of state laws preempted. 12 C.F.R. § 560.2(b). These examples of expressly preempted state laws include any state statutes or common law principles that purport to regulate:

Borrowers have ample federal protection. Borrowers interests are protected not only by the 26 elaborate network of federal borrower-protection statutes applicable to federal thrifts, including the Truth in Lending Act, the Real Estate Settlement Procedures Act, [and] the Equal Credit 27 Opportunity Act, among others, but also by separate OTS regulations forbidding unfair practices and specific OTS regulations regarding appraisals. See 61 Fed. Reg. at 50965-66; 12 C.F.R. § 28 564.1 et seq.; see also OTS Letter P-99-3, at 18 (Mar. 10, 1999). Plaintiffs RESPA claim implicitly recognizes the primacy of federal law in this area.
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Loan-related fees, including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees ; Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents ; and Processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages. 12 C.F.R. §§ 560.2(b)(5), (9) & (10). As the Ninth Circuit recently held, if a state law is listed in [this list of exemplar preempted laws in] paragraph (b) the analysis will end there; the law is

preempted. Silvas, 514 F.3d at 1005 (citing 61 Fed. Reg. at 50966) (emphasis added). Applying Section 560.2(b), courts have held that federal law preempts state law claims with respect to federal savings associations loan origination activities and any fees associated with origination. See, e.g., Silvas, 514 F.3d 1001 (lock-in fees, related disclosures, advertising); Prince-Servance v. BankUnited, FSB, No. 07 C 1259, 2007 WL 3254432 (N.D. Ill. Nov. 1, 2007) (yield spread premium); Haehl v. Washington Mut. Bank, F.A., 277 F. Supp. 2d 933, 940 (S.D. Ind. 2003) (reconveyance fees assessed at origination); Monroig v. Washington Mut. Bank, FA, 800 N.Y.S.2d 416 (N.Y. App. Div. 2005) (same); Washington Mut. Bank v. Superior Court, 95 Cal.App.4th 606 (pre-closing interest). On its face, 12 C.F.R. § 560.2(b) preempts all of Plaintiffs non-federal claims, each of which seeks to use California law to regulate the manner in which WMB obtained real estate appraisals and the fees that it passed on to borrowers for those appraisals.10 Despite characterizing WMB s alleged failure to obtain independent appraisals as an unfair, unlawful and

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fraudulent business practice (Claims II-IV), a misrepresented home appraisal service (Claim V), a breach of Plaintiffs contracts with WMB (Claim VI), and a means of unjustly enriching WMB (Claim VII), Plaintiffs claims all boil down to the same assertion: WMB somehow told Plaintiffs attempt to use state law to regulate WMB s mortgage lending and associated appraisal practices is particularly inappropriate because the OTS has promulgated specific regulations governing federal savings associations use of appraisals in connection with their lending activities. See 12 C.F.R. § 564.1 et seq.
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Plaintiffs that it was providing them with independent appraisals, as USPAP required, but failed to do so. 12 C.F.R. § 560.2(b) preempts all of these claims: Each of Plaintiffs non-federal claims repeats the same allegations concerning the means whereby WMB hired EA and LSI to obtain appraisals on its behalf, and how its actions allegedly destroyed the independence of those appraisals. Because this entire process of obtaining appraisals occurred as an integral part of WMB s processing [or] origination of mortgages, federal law preempts each of these claims pursuant to subparagraph (10) of 12 C.F.R. § 560.2(b). See, e.g., Haehl, 277 F. Supp. 2d at 940 (subparagraphs (5) and (10) preempted state statutory and common law claims, including unjust enrichment claim, arising out of fees assessed at loan origination); Plaintiffs state law claims challenge, directly or indirectly, appraisal fees WMB assessed at the closing of Plaintiffs loan transactions. But these fees are loan-related fees and initial charges. See Chaires v. Chevy Chase Bank, F.S.B., 748 A.2d 34, 46 (Md. Ct. Spec. App. 2000). Federal law therefore preempts each of these claims pursuant to subparagraph (5) of 12 C.F.R. § 560.2(b); see, e.g., Silvas, 514 F.3d at 1005-06 (UCL claims challenging a loan fee and loan-related advertising and disclosures concerning that fee are preempted by subparagraphs (5) and (9)); Boursiquot v. Citibank F.S.B., 323 F. Supp. 2d 350, 354-56 (D. Conn. 2004) (CUTPA claims based on fax statement fee, retention of taxes and fees and private mortgage insurance charges preempted under subparagraphs (5) and (9)); Haehl 277 F. Supp. 2d at 940; Moskowitz, 768 N.E.2d at 263-66 (state consumer protection act and breach of contract claims challenging payoff statement fee preempted under subparagraphs (5) and (9)); OTS Letter P-99-3, at 16 ( to the extent that the UC[L] is being used to regulate the imposition of loan-related fees the UC[L] is preempted ); and Plaintiffs claims of fraudulent practices in violation of the UCL (Count IV) and the CLRA (Count V), and supposedly leading to unjust enrichment (Count VII), all rely on alleged representations by WMB that the appraisals it requested and received, copies of which it provided to Ms. Scholl and Mr. Spears, complied with federal appraisal standards. Complaint, ¶¶ 108, 115 & 125. To the extent these claims seek to impose disclosure requirements or liability for
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disclosures (or omissions) relating to appraisals, federal law preempts them pursuant to subparagraph (9) of 12 C.F.R. § 560.2(b). See Silvas, 514 F.3d at 1005-06; Boursiquot, 323 F. Supp. 2d at 354-56; Moskowitz, 768 N.E.2d at 263-66. Plaintiffs in similar cases have argued that state laws of general application escape preemption on the theory that they only incidentally affect a federal savings association s lending operations and therefore are not preempted pursuant to § 560.2(c). But as the Ninth Circuit emphasized in Silvas, the regulatory exception to preemption is intended to be interpreted narrowly and [a]ny doubt should be resolved in favor of preemption. Silvas, 514 F.3d at 1005. In Silvas, plaintiffs argued that preemption did not apply under Section 560.2(c) because their claims rested on California contract, commercial, and tort law. Id. at 1006. The Ninth Circuit rejected this argument. The court agreed that if a state law appears in the non-exhaustive list of preempted laws in Section 560.2(b), the analysis will end there; the law is preempted. Id. at 1005 (emphasis added). For that reason, the court did not need to reach the question of whether the law fits within the confines of paragraph (c) [of 12 C.F.R. § 560.2] because Appellants claims are based on types of laws listed in paragraph (b). Silvas, 514 F.3d at 1006-07. Here, as in Silvas, Plaintiffs base their claims on the types of laws listed in Section 560.2(b), which expressly preempts those laws and the non-federal claims based upon them. For that reason, Section 560.2(c) s narrow exception to preemption cannot save Plaintiffs claims.11 2. Even If They Were Not Preempted, Plaintiffs UCL, CLRA, Breach Of Contract and Unjust Enrichment C