United States District Court, D. Nevada
J. Dawson United Sates District Judge
before the Court is Defendant's Motion to Dismiss (#18).
Plaintiff filed a response in opposition (#22) to which
Defendant replied (#32). Additionally, before the Court is
Plaintiff's Motion to Stay (#35).
action arises out of a dispute over property purchased by
Robert and Judy Colegrove (hereinafter referred to as the
Colegroves) on or about October 22, 2008. The Colegroves
financed the purchase with a $211, 654 loan from BAC Home
Loans Servicing LP, a company which later merged with
Plaintiff, Bank of America, N.A., (hereinafter referred to as
BANA). The Colegroves' property was managed by a
homeowners' association (HOA) run by Defendant, Inspirada
Community Association (hereinafter referred to as Inspirada).
By March 30, 2011, the Colegroves failed to pay their HOA
dues resulting in a debt of $1, 608.56. As a result,
Defendant law firm, Leach, Johnson, Song & Gruchow
(hereinafter referred to as LEACH), who represented Inspirada
during foreclosure proceedings, recorded a notice of
delinquent assessment lien against the property on April 4,
2011. LEACH then recorded a delinquent assessment lien on
June 2, 2011. The foreclosure sale occurred on or about
August 22, 2013 and the property was sold to Defendant, LVDG
LLC Series 128 (LVDG), for $8, 200.00. Pursuant to NRS
116.3116, Inspirada's lien was superior to the first deed
of trust held by BANA which allowed Inspirada to collect the
amount it was owed before any other interest holder,
claims that the foreclosure price was unreasonably lower than
the fair market value and less than four percent of the value
of the unpaid principal on the senior deed of trust. On
November 6, 2015, BANA submitted the dispute to the Nevada
Real Estate Division (hereinafter referred to as NRED) for
mediation pursuant to NRS 38.220(1). However, after more than
five months passed without NRED scheduling the mediation,
BANA proceeded with the present action. BANA now seeks
declaratory judgment against all Defendants, and has sought
damages from LEACH and Inspirada for wrongful foreclosure and
violation of the good faith provisions of NRS 116.1113. LEACH
has moved to dismiss Plaintiff's complaint.
may dismiss a plaintiff's complaint for “failure to
state a claim upon which relief can be granted.”
Fed.R.Civ.P. 12(b)(6). A properly pled complaint must provide
“a short and plain statement of the claim showing that
the pleader is entitled to relief.” F.R.C.P. 8(a)(2);
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007). 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.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (citations omitted). Factual allegations must
be enough to raise a right to relief above the speculative
level. Twombly, 550 U.S. at 555. Thus,
“[to]survive a motion to dismiss, a complaint must
contain sufficient factual matter to ‘state a claim for
relief that is plausible on its face.'”
Iqbal, 556 U.S. at 678 (citation omitted).
Iqbal, the Supreme Court clarified the two-step
approach district courts are to apply when considering
motions to dismiss. First, a district court must accept as
true all well-pled factual allegations in the complaint;
however, legal conclusions or mere recitals of the elements
of a cause of action, supported only by conclusory
statements, are not entitled to the assumption of truth.
Id. at 678. Second, a district court must consider
whether the factual allegations in the complaint allege a
plausible claim for relief. Id. at 679. A claim is
facially plausible when the plaintiff's complaint alleges
facts that allow the court to draw a reasonable inference
that the defendant is liable for the alleged misconduct.
Id. at 678. Further, where the complaint does not
permit the court to infer more than the mere possibility of
misconduct, the complaint has “alleged-but it has not
show[n]-that the pleader is entitled to relief.”
Id. at 679 (internal quotation marks omitted). Thus,
when the claims in a complaint have not crossed the line from
conceivable to plausible, the complaint must be dismissed.
Twombly, 550 U.S. at 570. Moreover, “[a]ll
allegations of material fact in the complaint are taken as
true and construed in the light most favorable to the
non-moving party.” In re Stac Elecs. Sec.
Litig., 89 F.3d 1399, 1403 (9th Cir. 1996) (citation
Motion to Dismiss, LEACH presents several arguments as to why
this Court should dismiss BANA's claims. LEACH first
argues that lawyers owe no duty to third parties when
providing legal services to their clients, and therefore
LEACH cannot be held liable for the legal services the firm
provided to co-Defendant, Inspirada. See Shawmut Bank,
N.A. v. Kress Associates, 33 F.3d 1477 (9th Cir. 1994)
(holding that under California case law, lawyers owe no duty
to third parties who are not the beneficiaries of the legal
as BANA has pointed out, it is suing LEACH for conducting the
allegedly wrongful foreclosure on behalf of Inspirada, which
BANA argues is a collection service rather than a legal
service. This distinction is important because lawyers are
not exempt from all liability to third parties when acting to
collect debt that is owed to their client. See Fox v.
Citicorp Credit Servs, Inc., 15 F.3d 1507, 1513 (9th
Cir. 1994) (holding that an attorney was not exempt from
liability under the Fair Debt Collections Practices Act when
that attorney filed an application for a writ of garnishment
on behalf of his client). BANA asserts in its Complaint that
LEACH facilitated a wrongful foreclosure on the disputed
property on behalf of Inspirada. Though BANA does not claim
that LEACH is liable under federal debt collection law,
LEACH's involvement with the foreclosure is comparable to
the actions taken by the attorneys in Fox.
Additionally, LEACH has failed to provide any binding
authority that would definitively extinguish the firm's
liability to BANA in this situation. For these reasons, the
Court disagrees with LEACH's argument that an attorney
owes no duty to a third party in this context.
also claims that BANA's complaint is barred because BANA
failed to mediate the dispute, as required by NRS 38.310,
before filing a claim with this Court. NRS 38.310 mandates
that any civil action based on the interpretation,
application, and enforcement of the governing documents of an
HOA, must first be submitted to mediation. Unless the parties
agree otherwise, the mediation must be completed within 60
days. NRS § 38.310. Cases that do not comply
with these requirements must be dismissed. Id.
contends that it submitted this case to NRED thereby
exhausting any administrative requirements that NRS 38.310
may impose. Additionally, BANA argues that NRS 38.310 does
not apply because it is a beneficiary of a deed of trust,
rather than a homeowner. See U.S. Bank Nat. Ass'n v.
NV Eagles, LLC, Case No. 2:15-cv-00786-RCJ-PAL, 2015 WL
4475517, at *3 (D. Nev. July 21, 2015) (declining to extend
section 38.310 beyond homeowners in disagreement with their
HOAs); See also Nationstar v. Shadow Hills Master
Ass'n, Case No. 2:15-cv- 1320-GMN- PAL, 2015 WL
9592498, at *2 (D. Nev. Dec. 31, 2015) (stating Section
38.310 does not apply to beneficiaries of deeds of trust).
Other courts in this District have held that the language of
NRS 38.310 does not limit its applicability to any particular
type of party. See Nationstar Mortgage, LLc v. Sundance
Homeowners Ass'n Inc., Case No. 2:15-cv- 01310-
GWF-APG, 2016 WL 1259391, at *4 (D. Nev. Mar. 20, 2016)
(finding the statute's plain language does not allow for
any exceptions based on the identity of the parties to the
suit); See also U.S. Bank, N.A. v. Woodchase Condominium
Homeowners Association, Case No. 2:15-cv-01153-GWF-APG,
2016 WL 1734085, at *2 (D. Nev. May 2, 2016) (beneficiaries
of deeds of trust are required to mediate under Section
38.310). The Supreme Court of Nevada has not yet ruled on the
issue. See Nationstar Mortg., LLC v. Sundance
Homeowners Ass'n, Inc., Case No.
2:15-cv-01310-APG-GWF, 2016 WL 1259391, at *4.
LEACH argues that BANA's claim must be dismissed for
failure to state a claim upon which relief may be granted.
LEACH bases this claim on two arguments: first, that the firm
is not a proper party to the Bank's claim for quiet
title/declaratory relief because LEACH does not claim an
interest in the property that is adverse to the bank; and
second, that BANA's claims for breach of NRS 116.1113 and
wrongful foreclosure fail as a matter of law.
BANA's First Cause of Action: Quiet ...