Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-00218/USCOURTS-azd-2_10-cv-00218-0/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1331(a) Fed. Question: Real Property

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1

 The parties have fully briefed this issue pursuant to the Court’s Order on Practices

and Procedures (Doc. #87). Although the parties sought “remand” of certain claims to the

transferor court, under Section 1407(a), remands to a transferor court can only be effected

by the Judicial Panel on Multidistrict Litigation. 28 U.S.C. § 1407; see also R.P.J.P.M.L.

7.6. The Court, thus, stresses that this order is solely a determination of which claims are

pending before this Court and which claims remain in their respective transferor courts,

pursuant to the Panel’s transfer orders. 

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

IN RE Mortgage Electronic Registration

Systems (MERS) Litigation

)

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MDL DOCKET NO. 09-2119-JAT

ORDER

In the transfer order establishing this consolidated multidistrict litigation (“MDL”),

the Judicial Panel on Multidistrict Litigation (“Panel”) stated, “IT IS FURTHER ORDERED

that claims unrelated to the formation and/or operation of the MERS system are

simultaneously remanded to their respective transferor courts.” (Doc. #1.) The parties

contest which claims in each of the various cases relate to the formation and/or operation of

MERS.1

 This Order addresses the following cases (transferred by Doc. ##38, 58):

First Plaintiff’s Name Arizona Case Number Original Jurisdiction Case Number

Stoffels CV 10-0215-PHX-JAT 3:08-468 (Nevada)

Hearne CV 10-0216-PHX-JAT 3:08-500 (Nevada)

Huynh CV 10-0217-PHX-JAT 3:09-577 (Nevada)

Mesi CV 10-0218-PHX-JAT 3:09-582 (Nevada)

Case 2:10-cv-00218-JAT Document 43 Filed 04/23/10 Page 1 of 9
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2Countrywide Home Loans, Inc., BAC Home Loans Servicing LP f/k/a Countrywide

Home Loans Servicing LP, ReconTrust Company, N.A., and Bank of America, N.A.

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Youngren CV 10-0219-PHX-JAT 3:09-595 (Nevada)

Burke CV 10-0220-PHX-JAT 3:09-653 (Nevada)

Dalby CV 10-0221-PHX-JAT 3:09-659 (Nevada)

Lee CV 10-0268-PHX-JAT 3:09-590 (Nevada)

I. General Interpretation of the Transfer Order

In the initial transfer order, the Panel transferred to this Court all allegations within

these actions that “the various participants in MERS formed a conspiracy to commit fraud

and/or that security instruments are unenforceable of foreclosures are inappropriate due to

MERS’s presence as a party” or that otherwise concern “the formation and operation” of

MERS. (Doc. #1.) However, the Panel simultaneously remanded unrelated claims to their

transferor courts, finding that “plaintiffs’ claims relating to loan origination and collection

practices do not share sufficient questions of fact with claims regarding the formation and

operation” of MERS and their inclusion “would needlessly entangle the litigation in

unrelated, fact-intensive issues.” Id.

Accordingly, this Court will not retain claims that, although naming MERS as a

defendant, allege conduct primarily related to loan origination and collection practices, or

otherwise stray from the common factual core of the MDL. Only causes of action that in

essence turn on the formation or operation of MERS, no matter how framed, have been

transferred to undersigned.

Defendants Mortgage Electronic Registration Systems, Inc. and MERSCORP, Inc.

(collectively, “Moving Defendants”) filed a Motion to Remand Claims. (Doc. #135.) Two

defendants, Citimortgage, Inc. and Litton Loan Servicing LP, each filed responses that

expressed complete agreement with the manner in which Moving Defendants suggested the

claims be disposed. (Doc. ##184, 197.) Several other defendants2

 (“Responding

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3

 CV 10-0218-PXH-JAT (Mesi), Doc. #1-2 at 32; CV 10-0217-PXH-JAT (Huynh),

Doc. #1 at 15; CV 10-0268-PXH-JAT (Lee), Doc. #1-1, ¶ 42; CV 10-0219-PXH-JAT

(Youngren), Doc. #1 at 48. 

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Defendants”) have responded with some different suggested classification of claims. (Doc.

#198.) Plaintiffs did not respond. MERS replied. (Doc. #240.)

II. Claims on Which the Parties Do Not Agree

Within these eight “tag-along” actions there are three types of claims over which the

parties disagree: unfair lending practices, fraud in the inducement, and unjust enrichment.

Within these three categories some claims are contested while others with identical language

are uncontested. To maintain consistency, the Court will dispose of like claims alike even

where no party has urged that disposition in a particular case. The Court will dispose of

Plaintiffs’ requests for injunctive relief and declaratory relief differently than the parties had

agreed. Otherwise, as to types of claims for which the appropriate disposition is undisputed,

the Court adopts the parties’ determinations and will not engage in detailed discussion. 

A. Unfair Lending Practices

Plaintiffs assert claims for unfair lending practices in Mesi (Third Claim), Huynh

(First Claim), Lee (First Claim), and Youngren (First Claim). In each of these claims,

Plaintiffs allege that the loans made “were based upon stated income with no verification of

the Plaintiffs’ ability to repay.”3

 

Responding Defendants argue that the unfair lending practices claim in Mesi has been

remanded because it neither specifically mentions MERS nor explicitly relates to the

formation or operation of MERS. (Doc. #198 at 2.) Acknowledging this, Moving

Defendants theorize that Plaintiffs incorporated by reference allegations earlier in the

complaint that MERS was used “to engage in predatory and unfair lending practices.” (CV

10-218-PHX-JAT, Doc. #1, ¶ 21.) Thus, Moving Defendants contend, the claim should be

retained.

The Court disagrees. The inquiry into how rigorously Defendants verified the income

of potential borrowers before issuing a loan is one which would entangle this Court in the

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4

 See, e.g., CV 10-0221-PHX-JAT (Dalby), Doc. #1 at 68-69.

5 Id.

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fact-intensive weeds unrelated to the common factual core of the MDL. Therefore, the unfair

practices claim in Mesi (Third Claim) has been remanded to the transferor court. Consistent

with this reasoning, the identical claims in Huynh (First Claim), Lee (First Claim), and

Youngren (First Claim) have also been remanded. 

B. Fraud in the Inducement

Plaintiffs assert identical claims for fraud in the inducement in Hearne (Second

Claim), Burke (Second Claim), and Dalby (Second Claim). There are also similar claims for

fraud in the inducement in Huynh (Twelfth Claim), Mesi (Thirteenth Claim), Lee (Fourteenth

Claim), Youngren (Twelfth Claim) and Stoffels (Fifth Claim). 

Responding Defendants argue that the fraud in the inducement claims in Hearne and

Dalby should be split with a portion retained and a portion remanded. (Doc. #198 at 3.) The

claims allege that Defendants failed to disclose material terms of the loans, concealed the

risks of the transactions, and misrepresented the ability of Plaintiffs to qualify for their loans.4

Such allegations relate to loan origination without any common core of fact to the operation

of MERS. On the other hand, the claims also allege that Defendants failed to disclose that

they “had no lawful right to foreclose upon” the properties, failed to notify Plaintiffs that

their obligations on the notes had been discharged, and knew that Defendants were not

holders in due course of the notes.5

 These allegations are based on alleged deficiencies in

the notes created by the operation of MERS. As either set of allegations would be logically

sufficient to establish a liability, this Court will split these claims. Remanded are the

allegations that defendants “failed to disclose the material terms of the loans and incidental

services to Plaintiff at the execution of the closing papers,” “concealed the true terms of the

loans, and the risks of the transactions, including, but not limited to, negative amortization,

prepayment penalty provisions, the risk of default and the risk of foreclosure from Plaintiff,”

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6

 CV 10-216-PHX-JAT (Hearne), Doc. #120 at 21, ¶¶ 77, 79-80; CV 10-221-PHXJAT (Dalby), Doc. #1 at 68-69, ¶¶ 68, 70-71.

7

 CV 10-0219-PXH-JAT (Youngren), Doc. #1 at 69-70, ¶¶ 107-09; CV 10-0220-PHXJAT (Burke), Doc. #1-1 at 22-23, ¶¶ 56, 58-59; CV 10-0218-PXH-JAT (Mesi), Doc. #1-2 at

31-32, ¶¶ 113-15; CV 10-0268-PXH-JAT (Lee), Doc. # 1-1 at 52-53, ¶¶ 112-14; CV

10-0217-PXH-JAT (Huynh), Doc. #1 at 65-66, ¶¶ 106-08.

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 CV 10-216-PHX-JAT (Hearne), Doc. #120 at 39-40, ¶¶ 129, 131 (“Specifically,

Plaintiffs have been injured in their property and lost their cash and personal investments and

right to peaceful enjoyment of their primary residences in a variety of ways, including but

not limited to: All borrowers who were targeted for and lured into the mortgages sold by

Defendants were kept from knowing the true purpose of the securitization and the use of the

funds of the investors. This constituted a misrepresentation that caused Plaintiffs to make

their monthly payments from the cash that represented the equity in their home to the

Defendants. Moreover, upon information and belief, the variety of additional and separate

payments charged for services and other items tangential to the loan were prohibitive. The

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and “misrepresented the ability of Plaintiff to qualify for the loans.”6

 All other allegations

of these claims have been transferred to the undersigned.

 No responding brief addressed the similar claims in Huynh (Twelfth Claim), Mesi

(Thirteenth Claim), Lee (Fourteenth Claim), or Youngren (Twelfth Claim), but the Court

finds that the same reasoning applies. Therefore, the Court will split these claims as well.7

All parties agree that the unique fraud in the inducement claim in Stoffels has been remanded

and the Court concurs.

C. Unjust Enrichment

Plaintiffs assert practically identical claims for unjust enrichment in Hearne (Fifth

Claim), Burke (Fifth Claim), and Dalby (Fifth Claim). Responding Defendants argue that

the unjust enrichment claims in Hearne and Dalby should be split with a portion retained and

a portion remanded. (Doc. #198 at 3-4.) Moving Defendants, in their reply, concede that this

outcome would be consistent with this Court’s March 22nd Order. (Doc. #240 at 9.)

In Hearne and Dalby there are two distinguishable bases for a claim of unjust

enrichment. In each claim two paragraphs contain allegations relating to the origination of

the loans,8

 but the remainder of the allegations relate to the operation of MERS. Because

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result is that Plaintiffs assumed financial burdens that they would not otherwise have

assumed, and paid Defendants funds to which the Defendants were not entitled nor owed.

. . .

Plaintiffs have paid an inflated interest rate that, upon information and belief, would not have

been agreed to but for the failure to understand the documents and otherwise disclose the true

terms and costs of the loans, tangential services, and out-of-pocket costs and that the housing

market would not, as represented by the Defendants and their agents, the “lenders” continue

to increase in value but would, because of the acts of the Defendants, crash and cause

catastrophic loss of value in the real estate market.); CV 10-221-PHX-JAT (Dalby), Doc. #1

at 55-56, ¶¶ 120, 122 (same).

9

 CV 10-0220-PHX-JAT (Burke), Doc. #1-2 at 2-3, ¶¶ 108, 110.

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either set of alleged facts would be logically sufficient to support a claim of unjust

enrichment, this Court will bifurcate the unjust enrichment claims in Hearne and Dalby. In

both cases, a claim for unjust enrichment on theories related to MERS will remain with the

undersigned as part of the MDL and a claim for unjust enrichment based on loan origination

issues has been remanded to the transferor court.

The claim for unjust enrichment in Burke (Fifth Claim) also contains an identical two

paragraphs, so it too will be bifurcated, retained in part and remanded in part.9

The claims for unjust enrichment in Huynh (Tenth Claim), Mesi (Eleventh Claim), Lee

(Twelfth Claim), Youngren (Tenth Claim) and Stoffels (Sixth Claim) do not contain any

allegations unrelated to the common factual core of this MDL and are each retained in full.

D. Injunctive Relief and Declaratory Relief

Injunctive relief is not a cause of action but a remedy. However, it has been

separately listed as a claim in Stoffels (Eighth Claim), Hearne (Sixth Claim), Huynh (Third

Claim), Mesi (Second Claim), Lee (Third Claim), and Youngren (Third Claim). There is no

reason to foreclose the remedy of injunctive relief either in the proceedings before this Court

or in the proceedings before the transferor courts. Therefore, each of these claims for relief

will be retained in part, i.e., to the extent they are based on claims related to the formation

and operation of MERS, and has been remanded in part.

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The Declaratory Judgment Act “does not provide an independent cause of action.” 

S. Jackson & Son, Inc. v. Coffee, Sugar & Cocoa Exch., Inc., 24 F.3d 427, 431 (2d Cir.

1994). Because of that fact, the appropriateness of remand depends on the underlying causes

of action for which declaratory relief is sought. Plaintiffs request declaratory relief in Stoffels

(Ninth Claim), Hearne (Seventh Claim), Mesi (First Claim), Lee (Fourth Claim), Burke

(Sixth Claim), and Dalby (Sixth Claim). Each of those cases contain some substantive claims

that are remanded and others that are retained, these claims for declaratory relief should be

bifurcated. Therefore, each of these claims for relief has been retained in part and remanded

in part.

Accordingly,

IT IS ORDERED that with respect to Stoffels (CV 10-215-PHX-JAT), claims 2-4,

6, 7 and part of claims 8 and 9 remain with the undersigned as part of the MDL and claims

1, 5 and part of claims 8 and 9 have been remanded to the transferor court. MERS shall file

a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Hearne (CV 10-216-PHX-JAT)

claims 1, 3, and 4 and part of claims 2, 5, 6 and 7 remain with the undersigned as part of the

MDL and part of claims 2, 5, 6 and 7 have been remanded to the transferor court. 

IT IS FURTHER ORDERED that with respect to Huynh (CV 10-217-PHX-JAT)

claims 2 and 4-11 and part of claims 3 and 12 remain with the undersigned as part of the

MDL and claim 1 and part of claims 3 and 12 have been remanded to the transferor court.

MERS shall file a copy of this Order with the transferor court within the next two business

days.

IT IS FURTHER ORDERED that with respect to Mesi (CV 10-218-PHX-JAT)

claims 4-12 and part of claims 1, 2 and 13 remain with the undersigned as part of the MDL

and claim 3 and part of claims 1, 2 and 13 have been remanded to the transferor court.

MERS shall file a copy of this Order with the transferor court within the next two business

days.

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IT IS FURTHER ORDERED that with respect to Youngren (CV 10-219-PHX-JAT)

claims 2 and 4-11 and part of claims 3 and 12 remain with the undersigned as part of the

MDL and claim 1 and part of claims 3 and 12 have been remanded to the transferor court.

MERS shall file a copy of this Order with the transferor court within the next two business

days.

IT IS FURTHER ORDERED that with respect to Burke (CV 10-220-PHX-JAT)

claims 1, 3, and 4 and part of claims 2, 5 and 6 remain with the undersigned as part of the

MDL and part of claims 2, 5 and 6 have been remanded to the transferor court. 

IT IS FURTHER ORDERED that with respect to Dalby (CV 10-221-PHX-JAT)

claims 1, 3, and 4 and part of claims 2, 5 and 6 remain with the undersigned as part of the

MDL and part of claims 2, 5 and 6 have been remanded to the transferor court. 

IT IS FURTHER ORDERED that with respect to Lee (CV 10-268-PHX-JAT)

claims 2 and 5-13 and part of claims 3, 4 and 14 remain with the undersigned as part of the

MDL and claim 1 and part of claims 3, 4 and 14 have been remanded to the transferor court.

MERS shall file a copy of this Order with the transferor court within the next two business

days.

IT IS FURTHER ORDERED that the Clerk of the Court shall file a copy of this

Order in each member case listed on pages 1-2.

IT IS FURTHER ORDERED that with respect to any claims that are staying with

this Court, Defendants shall answer or otherwise respond to those claims within the time

limits set in the Practice and Procedure Order (Doc. #87); with respect to any claims that

have been remanded to the transferor courts, Defendants shall answer or otherwise respond

to those claims within fifteen days of this Order, unless any order of the transferor court is

inconsistent with this Order, in which case, the order of the transferor court shall control.

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IT IS FURTHER ORDERED within 5 days of this Order, MERS shall file all

documents related to a case bifurcated herein into the record of the transferor court in that

particular case. (Because this Court will not transfer the entire MDL file and docket to any

individual transferor court, this will insure the Judge in the transferor court has a complete

record for that specific case).

DATED this 23rd day of April, 2010.

Case 2:10-cv-00218-JAT Document 43 Filed 04/23/10 Page 9 of 9