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ServiceLink NLS, LLC v. Cooper Castle Law Firm, LLC

United States District Court, D. Nevada

January 27, 2017

SERVICELINK NLS, LLC, Plaintiff,
v.
COOPER CASTLE LAW FIRM, LLC d/b/a COOPER CASTLE LAW FIRM LLP, CAREN CASTLE, LAWRENCE CASTLE, AND AARON WAITE, Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS (ECF No. 29)

          ANDREW P. GORDON UNITED STATES DISTRICT JUDGE

         Defendant Cooper Castle Law Firm, LLC forecloses on homes for mortgage lenders. Cooper Castle hired plaintiff ServiceLink NLS, LLC to provide title services for some of these foreclosures. ServiceLink alleges that Cooper Castle has not paid its invoices for several years even though lenders have been reimbursing the firm for ServiceLink's work. ServiceLink brings claims for breach of contract, unjust enrichment, constructive trust, breach of fiduciary duty, conversion, and fraud. It brought these claims against the law firm and the three individuals who operate the firm.

         The individual defendants now move to dismiss all of the claims against them, and the firm moves to dismiss the claims of fraud, breach of fiduciary duty, and constructive trust against it. I grant the motion in part. ServiceLink's complaint, at best, alleges that the law firm breached a contract by not paying ServiceLink's invoices-there are no facts to state plausible claims against the individual defendants. I therefore dismiss all claims against the individuals.

         As to Cooper Castle, ServiceLink fails to allege specific facts about what fraudulent statements the firm made, so I dismiss that claim. But Cooper Castle's arguments for dismissing the constructive trust and breach of fiduciary duty claims fall short. Cooper Castle contends that ServiceLink cannot sue for constructive trust (a trust over specific property) because its complaint alleges that the defendants already spent ServiceLink's money-thus it has admitted there is no specific property left to attach. But ServiceLink merely alleges that the defendants misappropriated money; it never concedes that the defendants do not still have some in their possession. As to the fiduciary duty claim, Cooper Castle argues that this claim fails under Rule 9's strict pleading standard-but Rule 8 applies to this claim, not Rule 9. I therefore deny Cooper Castle's motion as to ServiceLink's fiduciary and constructive trust claim.

         I. BACKGROUND

         A. ServiceLink and Cooper Castle's relationship.

         Cooper Castle has been retained by many banks to handle foreclosure proceedings against defaulted borrowers.[1] Cooper Castle, in turn, has hired ServiceLink to perform various tasks associated with the non-judicial foreclosure (such as checking title documents).[2]

         ServiceLink alleges that it entered into contracts with Cooper Castle to provide these services, [3] but its complaint suggests that the parties had a more complicated relationship than a simple arms-length contract. ServiceLink alleges that although it contracted directly with Cooper Castle, ServiceLink was really working for the lenders that had hired the law firm.[4]

         According to ServiceLink, when a lender wanted ServiceLink to perform title services, the lender would use Cooper Castle as an intermediary to handle the invoicing.[5] ServiceLink would perform its services, bill Cooper Castle, and Cooper Castle would pass those fees directly through to the lenders without any markup.[6] The lender would then remit payment to Cooper Castle to pass back to ServiceLink.[7] ServiceLink thus alleges that Cooper Castle was effectively a trustee who simply held money and distributed it between lenders and ServiceLink.

         B. Cooper Castle allegedly stops paying ServiceLink but fraudulently induces it to keep working for the firm.

         Starting in August of 2010, ServiceLink alleges that Cooper Castle stopped passing some of the lenders' payments back to ServiceLink. In other words, Cooper Castle was receiving payments from the lenders earmarked for ServiceLink but not turning them over to ServiceLink. ServiceLink had no way of knowing that Cooper Castle was receiving payments from lenders because, in the foreclosure industry, it's common for lenders to significantly delay payments while waiting for the lengthy foreclosure process to play out.[8]

         ServiceLink's complaint is not clear about why Cooper Castle had an obligation to pay ServiceLink within a certain time frame after receiving payments from lenders. ServiceLink does not allege that its contract with Cooper Castle contained any "timely payment" terms.[9] It may be suggesting that this obligation arose from some trust duty Cooper Castle took on by acting as an intermediary (despite the fact that, presumably, the parties had a contract outlining their relationship in writing).[10] It may also be suggesting that Cooper Castle had this duty because it made representations to ServiceLink outside of the parties' contract.[11] ServiceLink alleges that it relied on these misrepresentations in continuing to work for Cooper Castle.[12]

         II. ANALYSIS

         A. Standard for Motions to Dismiss

         A properly pleaded complaint must provide "a short and plain statement of the claim showing that the pleader is entitled to relief."[13] While Rule 8 does not require detailed factual allegations, it demands "more than labels and conclusions" or a "formulaic recitation of the elements of a cause of action."[14] "Factual allegations must be enough to rise above the speculative level."[15] Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to "state a claim to relief that is plausible on its face."[16]

         B. Claims against the individual defendants for breach of contract, unjust enrichment, conversion, and piercing Cooper Castle's corporate veil.

         ServiceLink's unjust enrichment and conversion claims against the individual defendants fail because there are no specific allegations plausibly suggesting that any of those defendants ever received anything, personally, from ServiceLink. As a preliminary note, I must ignore ServiceLink's conclusory allegations that the individual defendants "received, misappropriated, and misused" ServiceLink's money.[17] There are no specific facts plausibly suggesting that any of the individual defendants received anything from ServiceLink. Alleging that a company received property does not mean that that company's managers received the property.

         Nor are there any specific facts to make ServiceLink's breach of contract or veil-piercing claims plausible as to these individual defendants. As ServiceLink admits, the complaint never suggests that the individual defendants were parties to a contract with it.[18] The only parties to the contract were ServiceLink and the Cooper Castle firm. ServiceLink argues that it should be allowed to proceed against the individual defendants on the theory that they are alter egos of Cooper Castle. But even if I were to entertain that theory, there are no specific allegations plausibly suggesting that the individual defendants are alter egos of the firm.[19]

         I thus dismiss the unjust enrichment, breach of contract, conversion, and veil-piercing claims as to all of the individual defendants.[20]

         C. ...


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