California Federal Court Holds RESPA, TILA Not Necessary Elements of California UCL Claims

On March 16, the U.S. District Court for the Northern District of California remanded state law claims made against a servicer because, though referenced in the complaint, the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) were not necessary elements of the claims. Briggs v. First Nat’l Lending Servs., No. C 10-00267, 2010 WL 962955 (N.D. Cal. Mar. 16, 2010). In Briggs, the plaintiff borrowers applied for a loan to refinance their residence and alleged that the company that completed their loan application on their behalf misrepresented the loan by, among other things, leading them to believe that the new loan was in their best interest and not disclosing a kickback payment to the company from the lender. The borrowers subsequently filed suit, alleging claims of fraud, unjust enrichment, and violations of California’s Unfair Competition Law (UCL) against several defendants, including the loan servicer. The servicer removed the action to federal district court, arguing that removal was proper because the state law claims were based on and incorporated alleged violations of TILA and RESPA. The court, however, remanded the claims to state court, reasoning that (i) although the borrowers’ UCL claim was based on TILA, the complaint pleaded alternative theories based solely on state law, and (ii) while a section of the complaint alleged that the loan purchaser was subject to TILA, RESPA, and their respective enabling regulations and that the remaining sections of the complaint “stat[ed] that all preceding paragraphs of the complaint are incorporated as though fully set forth herein,” the complaint did not therefore incorporate by reference TILA or RESPA as a necessary element of the complaint.