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Garner v. Bank of America Corporation

United States District Court, D. Nevada

May 13, 2014

MICHAEL GARNER, et al., Plaintiffs,
v.
BANK OF AMERICA CORPORATION, et al., Defendants.

ORDER

PHILIP M. PRO, District Judge.

Presently before the Court is Defendants' Motion to Dismiss Plaintiffs' First Amended Complaint (Doc. #29), filed on January 14, 2014. Plaintiffs filed an Opposition (Doc. #30) on January 28, 2014. Defendants filed a Reply (Doc. #31) on February 7, 2014.

I. BACKGROUND

Plaintiffs are thirty-eight Nevada residents who borrowed money from one or more of the Defendants between January 2003 and December 2008 to purchase real property in Nevada, the loans being secured by first deeds of trust on the properties. (First Am. Compl. (Doc. #25) at 7 & Appx. A.) Defendants are banks, mortgage servicing companies, trustees, and appraisal companies who provided the loans, serviced the mortgages, appraised the properties, were involved in loan modifications, and/or were involved in the foreclosure of the properties. (Id. at 8-13.)

Plaintiffs originally brought this action in Nevada state court, asserting against Defendants various claims related to the origination, servicing, and foreclosure of their mortgages. (Pet. for Removal (Doc. #1), Ex. A.) Defendants removed the action to this Court on December 5, 2012. (Pet. for Removal.) Defendants previously filed a motion to dismiss, which this Court granted in part and denied in part, with leave for Plaintiffs to amend. (Order (Doc. #24).) Plaintiffs filed a First Amended Complaint on October 29, 2013. Plaintiffs assert twenty-seven claims grouped into five categories: (1) intentionally placing borrowers into loans they could not afford (counts 1-5); appraisal inflation (counts 6-9); market fixing (counts 10-13); deception in loan modification (counts 14-22); and wrongful foreclosure (counts 23-27).

Defendants now move to dismiss, arguing Plaintiffs are improperly joined in a single action, and the Court therefore should dismiss without prejudice all Plaintiffs except the first-named Plaintiffs, Michael Garner and Laura Garner. Defendants further argue that Plaintiffs' fraudulent and negligent loan origination claims in counts 1-5 should be dismissed as barred by the statute of limitations. Defendants argue Plaintiffs' individual appraisal inflation claims in counts 6-9 should be dismissed because Plaintiffs fail to allege fraud with particularity, Plaintiffs fail to allege justifiable reliance, and Plaintiffs fail to explain how Defendants controlled appraisers. Defendants also argue negligence claims cannot be based on appraisals because appraisals are non-actionable opinions. Defendants also contend count 9 is based on a federal statute and regulation which does not provide for a private right of action. As to Plaintiffs' market fixing claims in counts 10-13, Defendants argue these claims should be dismissed because Defendants had no duty to disclose anything to an arms-length borrower, Plaintiffs cannot rely on a fraud-on-the-market theory for justifiable reliance, Nevada does not recognize a negligence claim for appraisals, and Plaintiffs fail to allege sufficient facts to support an antitrust claim. As to counts 14-27, Defendants argue the Garners do not assert loan modification fraud or wrongful foreclosure, but to the extent the Court finds the other Plaintiffs are not misjoined, the seven Plaintiffs who assert these claims fail to state a claim.

Plaintiffs respond they are properly joined in one action because their claims arise out of the same series of transactions or occurrences and Plaintiffs raise at least one common question of law or fact. Plaintiffs contend their loan origination claims in counts 1-5 are timely because they have alleged they did not discover their claims until 2011 or 2012 and discovery is a fact question not suitable to resolution at the dismissal stage.

As to the individual appraisal fraud-based claims in counts 6-9, Plaintiffs argue they adequately have pled fraud with particularity, both in the general allegations in the First Amended Complaint as well as particularized allegations as to each Plaintiff in the Appendix attached to the First Amended Complaint. Plaintiffs argue that Nevada would recognize appraiser liability for intentionally erroneous appraisals and for negligent misrepresentations due to the appraiser's superior knowledge. Plaintiffs also contend Defendants had a duty to disclose because they exceeded their role as a conventional lender.

With respect to their antitrust claim, Plaintiffs argue they adequately have alleged facts showing the appraisers colluded with the banks to inflate property values. Plaintiffs further contend their deceptive loan modification and wrongful foreclosure claims are properly pled. Plaintiffs concede dismissal of counts 9 and 13.

II. DISCUSSION

A. Joinder

Defendants contend Plaintiffs are not properly joined in a single action because their allegations involve different loans, obtained from different lenders, at different times, based on different representations, with different loan terms, for different properties. Defendants also contend only some Plaintiffs have claims related to modifications or foreclosures, and each modification or foreclosure will involve different facts. Defendants thus argue Plaintiffs' claims do not arise out of the same transaction or series of transactions, and Plaintiffs should not be joined in a single lawsuit. Defendants request the Court sever and dismiss without prejudice all claims but those of the first-named Plaintiffs, Michael and Laura Garner. The Court previously declined to sever in response to Defendants' first Motion to Dismiss, but Defendants note that since the Court's ruling, the United States Court of Appeals for the Ninth Circuit ruled in a similar case that joinder was not appropriate.

Plaintiffs respond that the Complaint alleges they are common victims of Defendants' conspiracy, and thus their claims, while distinct in the particulars, arise out of the same series of transactions with Defendants. Plaintiffs also contend there are common questions of fact and law that make joinder appropriate. Plaintiffs argue the new Ninth Circuit case is distinguishable because the plaintiffs in that case purchased property throughout the United States, the allegations were vague and conclusory, and the case involved a greater number of plaintiffs and defendants than in the present action.

Pursuant to Federal Rule of Civil Procedure 20(a), plaintiffs may be joined in one action if (1) "they assert any right to relief jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences, " and (2) "any question of law or fact common to all plaintiffs will arise in the action." Even if these requirements are met, the Court determines whether joinder is appropriate in a particular case, considering the "principles of fundamental fairness, " and any potential prejudice. Coleman v. Quaker Oats Co. , 232 F.3d 1271, 1296 (9th Cir. 2000) (quotation omitted). The Court should consider Rule 20's purposes, including promoting judicial economy and reducing inconvenience, delay, and expense. Coughlin v. Rogers , 130 F.3d 1348, 1351 (9th Cir. 1997). If joinder is not appropriate, the Court may sever and dismiss without prejudice all inappropriately joined plaintiffs except the first-named plaintiff, "so long as no substantial right will be prejudiced by the severance." Id. at 1350 (citing Fed.R.Civ.P. 21). Whether to sever lies within the Court's discretion. Id.

The Court previously declined to sever "at the present stage of the case." (Order (Doc. #24) at 7.) Since the Court's ruling, the Ninth Circuit issued Visendi v. Bank of America, N.A. , 733 F.3d 863 (9th Cir. 2013). In Visendi, 160 plaintiffs sued 15 financial institutions, alleging the defendants engaged in deceptive mortgage lending practices and mismanaged loan modifications, resulting in declining property values and impaired credit scores. 733 F.3d at 866. The plaintiffs owned property throughout the United States and obtained their loans from different financial institutions. Id . The defendants moved to dismiss on the grounds that the plaintiffs were misjoined. Id . The district court did not reach the issue of misjoinder, instead finding that the defendants improperly removed the action under the Class Action Fairness Act of 2005 ("CAFA"). Id. at 866-67.

On appeal, the Ninth Circuit determined the defendants properly removed the action under CAFA. Id. at 867-70. The Ninth Circuit further held that the plaintiffs were misjoined because their claims did not arise out of the same transaction, occurrence, or series of transactions or occurrences. Id. at 870. Specifically, the Visendi Court concluded that factual similarity was lacking because the case involved "over 100 distinct loan transactions with many different lenders" which were "secured by separate properties scattered across the country, " and some, but not all, went into foreclosure. Id . The Visendi Court further held the plaintiffs' claims did not involve a common question of law or fact because the plaintiffs "own separate and unrelated properties across the country, they entered into separate loan transactions, and their dealings with Defendants were necessarily varied." Id . Additionally, the particular types of claims the plaintiffs asserted ...


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