Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-11-17615/USCOURTS-ca9-11-17615-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE: MORTGAGE ELECTRONIC

REGISTRATION SYSTEMS, INC.,

JONATHAN E. ROBINSON; SALLY J.

ROBINSON-BURKE; ROSA A. SILVAS;

JOSEPHA S. LOPEZ; JOSE TRINIDAD

CASAS; MARIA C. CASAS; LYNDON

B. GRAVES; TYRONE EVENSON;

MICHELLINA EVENSON; BRYAN

GRAY, [for complete list of

plaintiff/appellants, see Notice of

Appeal]; PABLO LEON,

Plaintiffs-Appellants,

v.

AMERICAN HOME MORTGAGE

SERVICING, INC.; AMERICA’S

SERVICING COMPANY; AMERICA’S

WHOLESALE LENDER; AURORA

LOAN SERVICES, LLC; AZTEC

FORECLOSURE CORP.; BAC HOME

LOANS SERVICING LP; BANK OF

AMERICA, NA; BANK OF NEW YORK

MELLON; CALIFORNIA

RECONVEYANCE CO.; CENTRAL

MORTGAGE CO.; COOPER CASTLE

LAW FIRM LLP; CR TITLE SERVICES,

No. 11-17615

D.C. No.

2:09-md-02119-

JAT

OPINION

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2 IN RE: MERS

INC.; DEUTSCHE BANK; EXECUTIVE

TRUSTEE SERVICES, LLC; FEDERAL

HOME LOAN MORTGAGE

CORPORATION; FEDERAL HOUSING

FINANCE AGENCY; FEDERAL

NATIONAL MORTGAGE

ASSOCIATION; FIDELITY NATIONAL

TITLE INSURANCE CO.; FIRST

AMERICAN LOAN STAR TRUSTEE

SERVICES, LLC; FIRST HORIZON

HOME LOAN CORP.; G.E. MONEY

BANK; GMAC MORTGAGE, LLC;

HOUSEKEY FINANCIAL CORP.; HSBC

MORTGAGE CORPORATION, USA;

HSBC MORTGAGE SERVICES, INC.;

HSBC BANK, U.S.A., N.A.; IB

PROPERTY HOLDINGS; JPMORGAN

CHASE BANK; MORTGAGE

ELECTRONIC REGISTRATION

SYSTEMS, INC.; MERSCORP, INC.;

MORTGAGE IT, INC.; MTC

FINANCIAL, INC., DBA Trustee

Corps.; NATIONAL CITY MORTGAGE;

PNC FINANCIAL SERVICES GROUP,

INC.; NATIONAL DEFAULT

SERVICING CORP.; NDEX WEST

LLC; OLD REPUBLIC NATIONAL

TITLE INSURANCE CO.; QUALITY

LOAN SERVICE CORPORATION;

RECONTRUST COMPANY; SAXON

MORTGAGE, INC.; T.D. SERVICE

COMPANY; UTLS DEFAULT

SERVICES, LLC; WELLS FARGO

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IN RE: MERS 3

BANK, NA; WESTERN PROGRESSIVE

TRUSTEE, LLC; CITYMORTGAGE,

INC.; LIME FINANCIAL SERVICES

LIMITED,

Defendants - Appellees.

Appeal from the United States District Court

for the District of Arizona

James A. Teilborg, Senior District Judge, Presiding

Argued and Submitted

November 7, 2013—San Francisco, California

Filed June 12, 2014

Before: A. Wallace Tashima, William A. Fletcher,

and Jacqueline H. Nguyen, Circuit Judges.

Opinion by Judge W. Fletcher

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4 IN RE: MERS

SUMMARY*

Multidistrict Litigation / Property Law

Addressing multidistrict litigation raising claims related

to the formation and operation of the MERS System, a private

electronic database that records the ownership of and

servicing rights in home loans, the panel dismissed an appeal

from an order of the Judicial Panel on Multidistrict Litigation

and affirmed in part and reversed in part the Multidistrict

Litigation Court’s dismissal of the plaintiffs’ consolidated

amended complaint. 

The panel also ordered stayed a portion of the appeal in

light of a defendant’s bankruptcy proceedings.

The plaintiffs were borrowers who resided in Arizona,

California, Nevada, Oregon, and South Carolina, and whose

notes and deeds of trust were processed through the MERS

System. The defendants were various financial institutions

that had interests in the notes and deeds of trust or had

otherwise been involved in the operation of the MERS

System.

The panel dismissed the plaintiffs’ appeal from the

JPML’s order transferring cases to the MDL Court for

consolidated pretrial litigation on the ground that mandamus

is the exclusive mechanism for reviewing JPML orders.

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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IN RE: MERS 5

The panel held that the plaintiffs had waived their

arguments regarding the MDL Court’s orders determining

which claims the JPML had remanded to transferor courts,

and which it had transferred to the MDL Court.

The panel held that the MDL Court did not convert the

defendants’ motion to dismiss into a motion for summary

judgment.

The panel reversed the district court’s dismissal of

Count I, seeking relief based on violations of Arizona’s false

documents statute when the defendants allegedly filed false

notices of trustee sale, notices of substitution of trustee, and

assignments of deed of trust. The plaintiffs alleged that these

documents were notarized in blank and “robosigned” with

forged signatures.

The panel affirmed the dismissal of Count II, alleging that

the defendants had committed, or would commit, the tort of

wrongful foreclosure, in violation of Arizona, California, and

Nevada law, because the MERS System impermissibly

“splits” ownership of the note from ownership of the deed of

trust, thereby making the promissory note unsecured and

unenforceable in any foreclosure proceeding. The panel held

that these claims failed because none of the plaintiffs alleged

lack of default, tender to cure the default, or an excuse from

tendering.

The panel affirmed the dismissal of Count III, alleging

that nonjudicial foreclosures conducted under Nev. Rev. Stat.

§ 107.080 were improper.

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6 IN RE: MERS

The panel affirmed the dismissal of Count V, alleging

aiding and abetting wrongful foreclosure under Arizona,

California, and Nevada law.

The panel affirmed the dismissal of Count VI, alleging

aiding and abetting predatory lending under Arizona,

California, and Nevada law, on the basis that claims

concerning loan origination practices had been remanded to

the transferor courts by the JPML.

The panel affirmed the district court’s denial of leave to

amend the complaint.

COUNSEL

Robert Hager and Treva Hearne (argued), Hager & Hearne,

Reno, Nevada; William A. Nebeker, Valerie R. Edwards

(argued), and Lisa Irene Streu, Koeller Nebeker Carlson &

Haluck, LLP, Phoenix, Arizona; and Sheryl Serreze, Reno

Law Group, LLC, Reno, Nevada, for Plaintiffs-Appellants.

Andrew Martin Jacobs, Snell & Wilmer, LLP, Tucson,

Arizona; Andrew R. Louis, Buckley Sandler, LLP,

Washington, D.C.; Cynthia Lynn Alexander and Kelly

Harrison Dove, Snell & Wilmer, LLP, Las Vegas, Nevada;

Patrick G. Byrne, Gregory J. Marshall, Barbara Dawson,

Snell & Wilmer, LLP, Phoeniz, Arizona; Michael R.

Pennington, Bradley Arant Boult Cummings, LLP,

Birmingham, Alabama; Matthew P. Previn, Buckley Sandler

LLP, New York, New York; HenryFaulkner Reichner and Ira

S. Lefton, Reed Smith LLP, Philadelphia, Pennsylvania;

Thomas Hefferon (argued) and Joseph Yenouskas, Goodwin

Proctor LLP, Washington, D.C.; Gary Edward Schnitzer,

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IN RE: MERS 7

Kravitz, Schnitzer, Sloane and Johnson, Las Vegas, Nevada;

Gregory B. Iannelli, Bryan Cave, LLP, Phoenix, Arizona;

Thomas Justin Cunningham, Hugh Balsam, J. Matthew

Goodin, Phillip Russell Perdew, Locke Lord, LLP, Chicago,

Illinois; Justin Donald Balser, Akerman Senterfitt, Denver,

Colorado; Kristin Schuler-Hintz, McCarthy& Holthus, LLP,

Las Vegas, Nevada; Paul M. Levine, Matthew A. Silverman,

McCarthy, Holthus & Levine, LLP, Scottsdale, Arizona;

Robert W. Norman, Houser & Allison, APC, Irvine,

California; Ariel Edward Stern, Akerman, LLP, Las Vegas,

Nevada; Jonathan D. Fink, Wright, Finlay & Zak, Newport

Beach, California; Christopher Jorgensen, Lewis Roca

Rothgerber, LLP, Las Vegas, Nevada; Ann Martha Andrews,

Lewis Roca Rothgerber, LLP, Phoenix, Arizona; Stefan M.

Palys, Stinson Morrison Hecker, LLP, Phoenix, Arizona;

David Ray Hall, Parsons Behle & Latimer, Salt Lake City,

Utah; LeAnn Pedersen Pope, Danielle Jean Szukala, Burke,

Warren, Mackay & Serritella, PC, Chicago, Illinois; Jennifer

Reiter, Maynard Cronin Erickson Curran & Sparks, PLC,

Phoenix, Arizona; Kent F. Larsen, Joseph T. Prete, Smith

Larsen & Wixom, Las Vegas, Nevada; Laurel I. Handley,

Pite Duncan, LLP, San Diego, California; David Winthrop

Cowles, William Morris Fischbach, III, Leonard McDonald, 

Jr., Tiffany & Bosco, PA, Phoenix, Arizona; Kevin Hahn,

Malcolm & Cisneros, Irvine, California; Aaron Michael

Waite, The Cooper Castle Law Firm, LLP, Las Vegas,

Nevada; Lucia Nale, Thomas V. Panoff, Mayer Brown, LLP,

Chicago, Illinois; Lauren Elliott Stine, Quarles & Brady,

LLP, Phoenix, Arizona; Karen Ann Braje, Dennis Peter Maio,

Reed Smith, LLP, San Francisco, California; Michael Q.

Eagan, Jr., Elizabeth Allen Frohlich, Morgan Lewis &

Bockius, LLP, San Francisco, California; Lorenzo Emilio

Gasparetti, Reed Smith, LLP, Los Angeles, California; Ira S.

Lefton, Reed Smith, LLP, Philadelphia, Pennsylvania; 

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8 IN RE: MERS

Gregory Wendell Falls, Sherman & Howard, LLC, Phoenix,

Arizona; Mark S. Landman, Landman Corsi Ballaine & Ford

PC, New York, New York; Howard Lindenberg, Federal

Home Loan Mortgage, McLean, Virginia; Jill L. Nicholson,

Jonathan William Garlough, Joanne Lee, Foley & Lardner,

LLP, Chicago, Illinois; Howard N. Cayne, David Fauvre,

Arnold & Porter, LLP, Washington, D.C.; Steven Edward

Guinn, Laxalt & Normura, Ltd., Reno, Nevada; James R.

Condo, Snell & Wilmer, LLP, Phoenix, Arizona; Christina

Wang (argued), Fidelity National Law Group, Henderson,

Nevada; Neil Ackerman, Neil Ackerman, LLP, Las Vegas,

Nevada; Keith Beauchamp, Roopali H. Desai, Coppersmith

Schermer & Brockelman, PLC, Phoenix, Arizona; Benjamin

B. Klubes, Buckler Sandler, LLP, Washington, D.C.; Robert

Bruce Allensworth, GregoryN. Blase, Brian M. Forbes, K&L

Gates, LLP, Boston, Massachusetts; Rachel E. Donn,

Marilyn Fine, Meier & Fine, LLC, Las Vegas, Nevada; Peter

E. Dunkley, Wolfe & Wyman, LLP, Las Vegas, Nevada;

Gregory L. Wilde, Tiffany& Bosco, PA, Las Vegas, Nevada;

Douglas Erickson, Maynard Cronin Erickson Curran &

Sparks, PLC, Phoenix, Arizona; Robert M. Brochin (argued)

and Benjamin Weinberg, Morgan Lewis & Bockius, LLP,

Miami, Florida; Brian J. Schulman, Laura Sixkiller,

Greenberg Traurig, LLP, Phoenix, Arizona; Richard Joseph

Reynolds (argued), Burke Williams & Sorensen, LLP, Santa

Ana, California; William F. Hyder, William F. Hyder, PC,

Phoenix, Arizona; David H. Pittinsky, Ballard Spahr, LLP,

Philadelphia, Pennsylvania; Abran Vigil, Ballard Spahr, LLP,

Las Vegas, Nevada; Adam Kyle Bult, Brownstein Hyatt

Farber Schreck, LLP, Las Vegas, Nevada; Edward A. Treder,

Barrett Daffin Frappier Treder & Weiss, LLP, Diamond Bar,

California; Ann Martha Andrews, Lewis Roca Rothgerber,

LLP, Phoenix, Arizona; Barbara Dawson, Snell & Wilmer,

LLP, Phoenix, Arizona; Kelly Harrison Dove, Snell &

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IN RE: MERS 9

Wilmer, LLP, Las Vegas, Nevada; Randall W. Edwards,

O’Melveny & Myers, LLP, San Francisco, California;

Elizabeth Lemond McKeen, O’Melveny & Myers, LLP,

Newport Beach, California, for Defendants-Appellees.

OPINION

W. FLETCHER, Circuit Judge:

Mortgage Electronic Registration Systems, Inc.

(“MERS”), a subsidiary of MERSCORP, Inc., operates an

electronic mortgage registration system (“the MERS

System”). MERS is distinct from the MERS System. The

MERS System is a private electronic database that records the

ownership of and servicing rights in home loans. Various

financial institutions are members of the MERS System. We

described the operation of the System in our recent decision

in Cervantes v. Countrywide Home Loans, Inc., 656 F.3d

1034, 1039 (9th Cir. 2011). We have before us an appeal

from an order of the district court dismissing plaintiffs’

claims related to the formation and operation of the MERS

System. We dismiss in part, affirm in part, and reverse in

part.

I. Background

Under the MERS System, the lender owns the home loan

borrower’s (or mortgagor’s) promissory note. MERS, as the

“nominee” of the lender and of any assignee of the lender, is

designated in the deed of trust (or mortgage) as the

“beneficiary” (or mortgagee) under the deed of trust. (For

convenience, we will use the terms “borrower,” “deed of

trust,” and “beneficiary,” rather than “mortgagor,”

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10 IN RE: MERS

“mortgage,” and “mortgagee.”) MERS rather than the lender

or lender’s assignee is recorded as the beneficiary under the

deed of trust in the recording system of the county where the

property is located.

Use of the MERS System typically begins when a

borrower from a MERS member signs a promissory note and

a deed of trust. The MERS member takes possession of the

note, and MERS is recorded as the beneficiary under the deed

of trust. The note is almost always assigned to others, often

several times over. If the note is assigned to a MERS

member, MERS remains the beneficiary under the deed of

trust. MERS contends that there is no need to record the

assignment of the note so long as the assignee is a MERS

member. However, when an assignment is made to a

nonmember of MERS, the identity of the assignee is

recorded. About half of the residential mortgages in the

United States are now recorded with MERS named as the

beneficiary under the deed of trust. See Robo-signing, Chain

of Title, Loss Mitigation, and Other Issues in Mortgage

Servicing: Hearing Before the Subcomm. on Hous. and Cmty.

Opportunity of the H. Comm. on Fin. Servs., 111th Cong. 101

(2010) (statement of R.K. Arnold, President and CEO,

MERSCORP, Inc.);see also Jesse Hamilton, U.S. Regulators

Examining Departures at Mortgage Registry, Bloomberg

(Apr. 15, 2014, 9:01 PM), http://www.bloomberg.com/news/

2014-04-16/u-s-regulators-examining-departures-at-mortga

ge-registry.html.

The MERS System has been sharply criticized. See, e.g.,

Tanya Marsh, Foreclosures and the Failure of the American

Land Title Recording System, 111 Colum. L. Rev. Sidebar 19,

23–24 (2011) (noting that MERS has been a “controversial

innovation” and highlighting that the System’s “inherent

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IN RE: MERS 11

opaqueness” mayconceal “shoddyrecordkeepingpractices”);

Christopher L. Peterson, Foreclosure, Subprime Mortgage

Lending, and the Mortgage Electronic Registration System,

78 U. Cin. L. Rev. 1359, 1374, 1407 (2010) (outlining

MERS’s “[q]uestionable” legal foundations and arguing that

“[t]he shift away from recording loans in the name of actual

mortgagees and assignees represents an important policy

change that erodes not only the tax base of local

governments, but also the usefulness of the public land title

information infrastructure”); Christopher L. Peterson, Two

Faces: Demystifying the Mortgage Electronic Registration

System’s Land Title Theory, 53 Wm. & Mary L. Rev. 111,

120, 125–27 (2011) (criticizing the “incoherence of MERS’s

legal position” regarding MERS’s status with respect to

mortgages registered in the MERS System, which is

“exacerbated by a corporate structure that is so unorthodox as

to be considered arguably fraudulent,” and criticizing the

unreliability of the MERS database); David P. Weber, The

Magic of the Mortgage Electronic Registration System: It Is

and It Isn’t, 85 Am. Bankr. L.J. 239, 239–40, 264 (2011)

(describing MERS’s “imperfect implementation and lack of

transparency”); see also Michael Powell & Gretchen

Morgenson, MERS? It May Have Swallowed Your Loan,

N.Y. Times, March 6, 2011, http://www.nytimes.com/2011/

03/06/business/06mers.html(describing the “mounting” legal

challenges facing MERS).

The obvious advantage of the MERS System is that it

allows residential lenders to avoid the bother and expense of

recording every change of ownership of promissory notes. 

See, e.g., Phyllis K. Slesinger & Daniel McLaughlin,

Mortgage Electronic Registration System, 31 Idaho L. Rev.

805, 808 (1995); About Us, MERS, http://www.mersinc.org/

about-us/about-us (last visited May 5, 2014) (stating that

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12 IN RE: MERS

MERS was “created by the mortgage banking industry to

streamline the mortgage process”). Critics have pointed out,

however, that this advantage accrues almost exclusively to

financial institutions, and that the MERS System has a

number of disadvantages: It has substantially undermined

what had been a comprehensive, stable, and relativelyreliable

public system of recording interests in residential real estate. 

Ownership of notes for residential loans that are processed

through the MERS System is now recorded in the System’s

electronic database, but that information is not available to

the general public. It is impossible to determine from an

inspection of county records who is the actual owner of any

note secured by a deed of trust for which MERS is named as

the beneficiary. The familiar county-by-county public

recording system has thus been replaced, in significant part,

by a largely invisible and not always reliable system of

voluntary record-keeping byMERS members. See, e.g., Alan

M. White, Losing the Paper – Mortgage Assignments, Note

Transfers, and Consumer Protection, 24 Loy. Consumer L.

Rev. 468, 502–04 (2012). Further, because the identities of

the actual owners of the notes and beneficiaries of the deeds

of trust are not public knowledge, renegotiation of mortgage

loans processed through the MERS System is very difficult,

often impossible. The MERS System has also facilitated the

bundling of promissory notes into investment pools, and the

sale of interests in those pools to downstream investors. 

Before the mortgage loan crisis in 2008, the bundling of notes

and sale of interests to investors greatly encouraged the flow

of money into the overheated residential mortgage market.

Some states have enacted legislation to mitigate the

difficulties created by the widespread use of the MERS

System. Many of these statutes seek to increase transparency

in the foreclosure process by requiring that foreclosure

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IN RE: MERS 13

notices provide more information to the homeowner about the

parties involved in the foreclosure proceedings. See

generally John Rao et al., Nat’l Consumer Law Ctr.,

Foreclosures 146–47 & n.349 (3d ed. 2010) (compiling laws

in California, Colorado, Georgia, Maine, Maryland,

Massachusetts, New Jersey, and North Carolina). California,

under whose law a number of claims in this case arise, has

recently enacted the Homeowner Bill of Rights. Among

other things, the new California statute seeks to ensure that

“borrowers who may qualify for a foreclosure alternative are

considered for, and have a meaningful opportunity to obtain,

available loss mitigation options,” including by streamlining

communication between the distressed borrower and

foreclosing party. See Assemb. B. 278, 2011–2012 Leg.,

Reg. Sess. (Cal. 2012); S.B. 900, 2011–2012 Leg., Reg. Sess.

(Cal. 2012).

There has been a wave of litigation in state and federal

courts challenging various aspects of the MERS System. 

Almost all of the relevant law is state rather than federal. The

results under state law have been inconsistent. See Weber,

supra, at 246–56 (cataloguing the “schizophrenic position of

state courts” on issues relating to the MERS System). Some

state supreme courts have upheld the MERS System on issues

ranging from foreclosure authority to recording requirements. 

See, e.g., Renshaw v. Mortg. Elec. Registration Sys., Inc.,

315 P.3d 844, 846–47 (Idaho 2013) (holding that MERS may

be a beneficiary as nominee for the lender, that assignments

of the deed of trust between MERS members need not be

recorded, that MERS was not liable to the borrower in

negligence, and that the Idaho Consumer Protection Act did

not provide a cause of action to the borrower); Jackson v.

Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487, 501

(Minn. 2009) (holding that Minnesota law does not require

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14 IN RE: MERS

recording of assignments of promissory notes among MERS

members); Edelstein v. Bank of N.Y. Mellon, 286 P.3d 249,

252 (Nev. 2012) (stating that, although a split note and deed

are not enforceable, under Nevada law “any split is cured

when the promissory note and the deed of trust are

reunified”); Bucci v. Lehman Bros. Bank, FSB, 68 A.3d 1069,

1081, 1083–89 (R.I. 2013) (holding that MERS had the

contractual authority to invoke the power of sale and the right

to foreclose and that Rhode Island law did not preclude

foreclosure where the noteholder and the mortgagee were not

the same entity).

Other state supreme courts have reached essentially

opposite conclusions. See, e.g., Mortg. Elec. Registration

Sys., Inc. v. Sw. Homes of Ark., 301 S.W.3d 1, 4 (Ark. 2009)

(holding that, because MERS receives no payments on the

debt, it is not the beneficiary, even though it is so designated

in the deed of trust); Landmark Nat’l Bank v. Kesler,

216 P.3d 158, 166–67 (Kan. 2009) (“[I]n the event that a

mortgage loan somehow separates interests of the note and

the deed of trust, with the deed of trust lying with some

independent entity, the mortgage may become

unenforceable.”); Mortg. Elec. Registration Sys., Inc. v.

Saunders, 2 A.3d 289, 297 (Me. 2010) (holding that MERS

lacked standing to foreclose as the lender’s nominee); CPT

Asset Backed Certificates, Series 2004-EC1 v. Cin Kham,

278 P.3d 586, 592–93 (Okla. 2012) (holding that the putative

noteholder lacked standing to foreclose because MERS

lacked authority to assign the note, though it arguably had

authority to assign the mortgage); Brandrup v. ReconTrust

Co., N.A., 303 P.3d 301, 304–05 (Or. 2013) (en banc)

(holding that MERS was not the “beneficiary” of a deed of

trust under the Oregon Trust Deed Act absent conveyance to

MERS of the beneficial right to repayment, and that MERS

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IN RE: MERS 15

could not hold or transfer legal title to the deed as the lender’s

nominee); Bain v. Metro. Mortg. Grp., Inc., 285 P.3d 34

(Wash. 2012) (en banc) (holding that “MERS is an ineligible

‘“beneficiary” within the terms of the Washington Deed of

Trust Act’ if it never held the promissory note or other debt

instrument secured by the deed of trust,” and that

“characterizing MERS as the beneficiary has the capacity to

deceive” and may give rise to an action under the Consumer

Protection Act); see also MERSCORP, Inc. v. Romaine,

861 N.E.2d 81, 88–89 (N.Y. 2006) (Kaye, C.J., dissenting in

part) (identifying concerns with the MERS system and “at

least a disparity between the relevant statute . . . and the

burgeoning modern-day electronic mortgage industry”).

Federal courts, applying state law, have reached similarly

disparate results. Compare, e.g., Montgomery Cnty., Pa. v.

MERSCORP, Inc., 904 F. Supp. 2d 436, 441 (E.D. Pa. 2012)

(applying Pennsylvania law and holding that the County’s

allegations that MERS violated recording statutes by failing

to record assignments stated a claim for relief), In re Thomas,

447 B.R. 402, 412 (Bankr. D. Mass. 2011) (applying

Massachusetts law and holding that “[w]hile the assignment

purports to assign both the mortgage and the note, MERS . . .

was never the holder of the note, and therefore lacked the

right to assign it. . . . MERS is never the owner of the

obligation secured by the mortgage for which it is the

mortgagee of record”), and In re Wilhelm, 407 B.R. 392, 404

(Bankr. D. Idaho 2009) (applying Idaho law and holding that

MERS is not authorized “either expressly or by implication”

to transfer notes as the “nominal beneficiary” of the lender),

with Town of Johnston v. MERSCORP, Inc., 950 F. Supp. 2d

379, 384 (D.R.I. 2013) (holding Rhode Island law does not

require recording of assignments among MERS members);

DeFranceschi v. Wells Fargo Bank, N.A., 837 F. Supp. 2d

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16 IN RE: MERS

616, 623 (N.D. Tex. 2011) (granting summary judgment to

defendants on plaintiffs’ claims that assignments by MERS

were invalid and rendered foreclosure defective), and Moore

v. McCalla Raymer, LLC, 916 F. Supp. 2d 1332, 1344–45

(N.D. Ga. 2013) (applying Georgia law and holding that, even

assuming the plaintiff had standing to challenge the

foreclosure on the theory that MERS assignments were

invalid, that theory did not provide a basis for a wrongful

foreclosure claim).

A number of federal lawsuits challenging the formation

and operation of the MERS System were consolidated by the

Judicial Panel on Multidistrict Litigation (“the JPML”) and

transferred in part to a Multidistrict Litigation Court (“the

MDL Court”) in the District of Arizona. The JPML

remanded to the respective transferor courts “claims unrelated

to the formation and/or operation of the MERS system.” 

Judge Teilborg of the MDL Court issued a series of orders

determining which claims had been transferred to the MDL

Court, and which had been remanded to the transferor courts. 

In an early order on the merits, the MDL Court dismissed

several of the transferred actions. We affirmed that dismissal

in Cervantes. 656 F.3d 1034.

Plaintiffs in the remaining actions before the MDL Court

filed a single Consolidated Amended Complaint (“CAC”). 

Plaintiffs are borrowers who reside in Arizona, California,

Nevada, Oregon, and South Carolina, and whose notes and

deeds of trust were processed through the MERS System. 

Defendants are various financial institutions who have, or

have had, interests in the notes and deeds of trust, or who

have otherwise been involved in the operation of the MERS

System. The MDL Court dismissed the CAC with prejudice,

and plaintiffs timely appealed.

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IN RE: MERS 17

For the reasons that follow, we dismiss in part, affirm in

part, and reverse in part.

II. Standard of Review

We review orders of the JPML only by writ of

mandamus. 28 U.S.C. § 1407(e); see id. § 1651(a). We

review de novo the district court’s dismissal of a complaint

under Rule 12(b)(6) of the Federal Rules of Civil Procedure. 

Lacey v. Maricopa Cnty., 693 F.3d 896, 911 (9th Cir. 2012)

(en banc). The district court’s denial of leave to amend is

reviewed for abuse of discretion. Drew v. Equifax Info.

Servs., LLC, 690 F.3d 1100, 1105 (9th Cir. 2012).

III. Discussion

A. JPML Order

Appellants contend on appeal that the JPML erred in

transferring the cases to the MDL Court for consolidated

pretrial litigation. Mandamus is the exclusive mechanism for

reviewing JPML orders. 28 U.S.C. § 1407(e); see In re

Wilson, 451 F.3d 161, 168 (3d Cir. 2006); In re Food Lion,

Inc., Fair Labor Standards Act “Effective Scheduling” Litig.,

73 F.3d 528, 534 (4th Cir. 1996). Appellants have not sought

a writ of mandamus, and we dismiss for lack of jurisdiction

their appeal of the JPML Order.

B. MDL Court Remand Orders

Appellants contend that the MDL Court erred in

determining which claims were remanded to the transferor

courts under the JPML Order. They argue that the MDL

Court exceeded its authority in deciding which claims were

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remanded. They also argue that the MDL Court was

inconsistent in determining which claims were remanded to

the transferor courts under the JPML Order. They made

neither argument to the MDL Court.

Generally, arguments not raised in the district court will

not be considered for the first time on appeal. Exxon

Shipping Co. v. Baker, 554 U.S. 471, 487 (2008); see also

Pinney v. Nokia, Inc., 402 F.3d 430, 452 (4th Cir. 2005)

(holding that plaintiffs had waived the issue of remand by

failing to raise it with the JPML or the district court). We see

no reason to depart from our general practice here. We hold

that appellants have waived their arguments regarding the

MDL Court’s remand orders.

C. Summary Judgment

Appellants contend that the MDL Court improperly

converted defendants’ motion to dismiss for failure to state a

claim into a motion for summary judgment. We disagree.

The Federal Rules provide for sua sponte conversion of a

Rule 12(b)(6) motion to dismiss to a Rule 56 motion for

summary judgment “if . . . matters outside the pleadings are

presented to and not excluded by the court.” Fed. R. Civ. P.

12(d). The district court must notify the parties before taking

such action, in order to provide to the parties a fair

opportunity to present material relevant to summary

judgment. Id.; Garaux v. Pulley, 739 F.2d 437, 438–39 (9th

Cir. 1984).

Nothing in the record suggests that the MDL Court

considered extraneous materials in ruling on defendants’

motion to dismiss under Rule 12(b)(6). The record makes

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clear that the MDL Court dismissed the CAC based only on

the deficiencies in the CAC. See Mendiondo v. Centinela

Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008)

(explaining that Rule 12(b)(6) provides for dismissal where

“the complaint lacks a cognizable legal theory or sufficient

facts to support a cognizable legal theory”).

D. Dismissal of the Complaint

The MDLCourt dismissed with prejudice all claims in the

CAC. The CAC is long and somewhat diffuse, not always

making clear the state whose law is at issue. Further,

appellants’ brief on appeal does not specify with complete

clarity which claims in the CAC they contend were

improperly dismissed. As best we can determine, appellants

appeal the dismissals of Count I (violation of Ariz. Rev. Stat.

§ 33-420 (false documents)); Count II (wrongful foreclosure

under Arizona, California, and Nevada law); Count III

(violation of Nev. Rev. Stat. § 107.080 (nonjudicial

foreclosure)); Count V (aiding and abetting wrongful

foreclosure under Arizona, California, and Nevada law); and

Count VI (aiding and abetting predatory lending under

Arizona, California, and Nevada law). Some of these claims

were brought against fewer than all of the defendants. Claims

brought under Oregon law were withdrawn in the MDL

Court, and claims brought under South Carolina law were not

raised in appellants’ opening brief. The appeal from the

dismissal of claims brought against defendant-appellee CalWestern Reconveyance Corporation has been automatically

stayed, under a separate order, because of the pendency of

Cal-Western’s bankruptcy proceeding.

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1. Count I: Ariz. Rev. Stat. § 33-420

The CAC seeks damages and declaratory relief based on

alleged violations of Arizona’s false documents statute, Ariz.

Rev. Stat. § 33-420. The statute provides in relevant part:

A. A person purporting to claim an interest

in, or a lien or encumbrance against, real

property, who causes a document asserting

such claim to be recorded in the office of the

county recorder, knowing or having reason to

know that the document is forged, groundless,

contains a material misstatement or false

claim or is otherwise invalid is liable to the

owner . . . of the real property for the sum of

not less than five thousand dollars, or for

treble the actual damages caused by the

recording, whichever is greater, and

reasonable attorney fees and costs of the

action.

B. The owner or beneficial title holder of the

real property may bring an action pursuant to

this section . . . as provided for in the rules of

procedure for special actions. This special

action may be brought based on the ground

that the lien is forged, groundless, contains a

material misstatement or false claim or is

otherwise invalid. The owner or beneficial

title holder may bring a separate special action

to clear title to the real property or join such

action with an action for damages as

described in this section. . . .

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. . . .

D. A document purporting to create an

interest in, or a lien or encumbrance against,

real property not authorized by statute,

judgment or other specific legal authority is

presumed to be groundless and invalid.

The CAC alleges that defendants filed false notices of trustee

sale, notices of substitution of trustee, and assignments of

deed of trust. The CAC alleges that these documents were

notarized in blank and “robosigned” with forged signatures. 

Appellants seek damages and declaratory relief against

clouding of their title based on these allegedly forged

documents.

Writing in 2011, the MDL Court dismissed Count I on

four grounds. None of these grounds provides an appropriate

basis for dismissal. We recognize that at the time of its

decision, the MDL Court had plausible arguments under

Arizona law in support of three of these grounds. But

decisions by Arizona courts after 2011 have made clear that

the MDL Court was incorrect in relying on them.

First, the MDL Court concluded that § 33-420 does not

apply to the specific documents that the CAC alleges to be

false. However, in Stauffer v. U.S. Bank National Ass’n,

308 P.3d 1173, 1175 (Ariz.Ct. App. 2013), the Arizona Court

of Appeals held that a § 33-420(A) damages claim is

available in a case in which plaintiffs alleged as false

documents “a Notice of Trustee Sale, a Notice of Substitution

of Trustee, and an Assignment of a Deed of Trust.” These are

precisely the documents that the CAC alleges to be false.

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Second, the MDL Court held that appellants’ claims

under § 33-420 are time-barred. However, in Sitton v.

Deutsche Bank National Trust Co., 311 P.3d 237, 241 (Ariz.

Ct. App. 2013), the Arizona Court of Appeals held that

damages claims under § 33-420(A) are subject to a four-year

statute of limitations. The allegedly false documents upon

which the CAC relies date from no earlier than February 15,

2008. Appellants’ complaint was filed within the four-year

statute of limitations for even the earliest purported false

document. The Arizona courts have not made a comparably

definitive pronouncement as to the limitations period for

claims brought under § 33-420(B), whether brought as

separate claims or joined to damages claims. But at least one

case has suggested that a § 33-420(B) claim asserts a

continuous wrong that is not subject to any statute of

limitations as long as the cloud to title remains. State v.

Mabery Ranch, Co., 165 P.3d 211, 227 (Ariz. Ct. App. 2007).

Third, the MDL Court held that appellants lacked

standing to sue under § 33-420 on the ground that, even if the

documents were false, appellants were still obligated to repay

their loans. In the view of the MDL Court, because

appellants were in default they suffered no concrete and

particularized injury. However, on virtually identical

allegations, the Arizona Court of Appeals held to the contrary

in Stauffer. The plaintiffs in Stauffer were defaulting

residential homeowners who brought suit for damages under

§ 33-420(A) and to clear title under § 33-420(B). One of the

grounds on which the documents were alleged to be false was

that “the same person executed the Notice of Trustee Sale and

the Notice of Breach, but because the signatures did not look

the same, the signature of the Notice of Trustee Sale was

possibly forged.” Stauffer, 308 P.3d at 1175 n.2. The trial

court dismissed on the pleadings. The Arizona Court of

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Appeals reversed the dismissal under both §§ 33-420(A) and

(B). It wrote:

Appellees argue that the Stauffers do not have

standing because the Recorded Documents

have not caused them any injury, they have

not disputed their own default, and the

Property has not been sold pursuant to the

Recorded Documents. The purpose of A.R.S.

§ 33-420 is to “protect property owners from

actions clouding title to their property.” We

find that the recording of false or fraudulent

documents that assert an interest in a property

may cloud the property’s title; in this case, the

Stauffers, as owners of the Property, have

alleged that they have suffered a distinct and

palpable injury as a result of those clouds on

their Property’s title.

Id. at 1179 (citation omitted).

The Court of Appeals not only held that the Stauffers had

standing based on their “distinct and palpable injury.” It also

held that they had stated claims under §§ 33-420(A) and (B). 

The court held that because the “Recorded Documents

assert[ed] an interest in the Property,” the trial court had

improperly dismissed the Stauffers’ damages claim under

§ 33-420(A). Id. at 1178. It then held that because the

Stauffers had properly brought an action for damages under

§ 33-420(A), they could join an action to clear title of the

allegedly false documents under § 33-420(B). The court

wrote:

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The third sentence in subsection B states that

an owner “may bring a separate special action

to clear title to the real property or join such

action with an action for damages as

described in this section.” A.R.S. § 33-420.B. 

Therefore, we find that an action to clear title

of a false or fraudulent document that asserts

an interest in real property may be joined with

an action for damages under § 33-420.A.

Id. We therefore conclude, based on Stauffer, that appellants

have standing to sue.

Fourth, the MDL Court held that appellants had not

pleaded their robosigning claims with sufficient particularity

to satisfy Federal Rule of Civil Procedure 8(a). We disagree. 

Section 33-420 characterizes as false, and therefore

actionable, a document that is “forged, groundless, contains

a material misstatement or false claim or is otherwise

invalid.” Ariz. Rev. Stat. §§ 33-420(A), (B) (emphasis

added). The CAC alleges that the documents at issue are

invalid because they are “robosigned (forged).” The CAC

specifically identifies numerous allegedly forged documents. 

For example, the CAC alleges that notice of the trustee’s sale

of the property of Thomas and Laurie Bilyea was “notarized

in blank prior to being signed on behalf of Michael A. Bosco,

and the party that is represented to have signed the document,

Michael A. Bosco, did not sign the document, and the party

that did sign the document had no personal knowledge of any

of the facts set forth in the notice.” Further, the CAC alleges

that the document substituting a trustee under the deed of

trust for the property of Nicholas DeBaggis “was notarized in

blank prior to being signed on behalf of U.S. Bank National

Association, and the party that is represented to have signed

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the document, Mark S. Bosco, did not sign the document.” 

Still further, the CAC also alleges that Jim Montes, who

purportedly signed the substitution of trustee for the property

of Milan Stejic had, on the same day, “signed and recorded,

with differing signatures, numerous Substitutions of Trustee

in the Maricopa County Recorder’s Office . . . . Many of the

signatures appear visibly different than one another.” These

and similar allegations in the CAC “plausibly suggest an

entitlement to relief,” Ashcroft v. Iqbal, 556 U.S. 662, 681

(2009), and provide the defendants fair notice as to the nature

of appellants’ claims against them, Starr v. Baca, 652 F.3d

1202, 1216 (9th Cir. 2011).

We therefore reverse the MDL Court’s dismissal of

Count I.

2. Count II: Wrongful Foreclosure

Appellants contend that defendants have committed, or

will commit, the tort of wrongful foreclosure, in violation of

Arizona, California, and Nevada law. They argue that the

MERS System impermissibly “splits” ownership of the note

from ownership of the deed of trust, thereby making the

promissory note unsecured and unenforceable in any

foreclosure proceeding. The MDL Court concluded that

Arizona, California, and Nevada permit “splitting” the note

from the deed of trust.

The principle that ownership of the note and the deed of

trust must be unified has a long common-law pedigree. For

example, the Supreme Court wrote in Carpenter v. Longan,

83 U.S. 271 (1872), “The note and mortgage are inseparable;

the former as essential, the latter as an incident. An

assignment of the note carries the mortgage with it, while an

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assignment of the latter alone is a nullity.” Id. at 274. 

However, the degree to which this principle has been

preserved in the laws of Arizona, California and Nevada, and

the extent of its application in particular situations, is not

entirely clear. We need not address appellants’ argument

about “splitting” the note from the deed of trust in order to

decide their claims of tortious wrongful foreclosure. The

claims fail for another reason: None of the appellants has

alleged lack of default, tender to cure the default, or an

excuse from tendering.

Arizona, though a nonjudicial foreclosure state, has not

expressly recognized the tort of wrongful foreclosure. See

Herring v. Countrywide Home Loans, Inc., No. CV-06-2622-

PHX-PGR, 2007 WL 2051394, at *5 (D. Ariz. July 13, 2007)

(noting that Arizona has neither affirmatively recognized nor

denied the existence of a cause of action for wrongful

foreclosure). But even if we were to assume that the tort of

wrongful foreclosure exists in Arizona, one of its elements

would very likely be lack of default or tender to cure the

default, as is required under California and Nevada law, or an

excuse from the tender requirement, as recognized by

California. Cf. Ariz. Rev. Stat. § 33-807(A) (providing for a

power of sale only after a breach or default in performance of

the contract or contracts).

California law requires that, in order to bring a valid

claim for tortious wrongful foreclosure, the plaintiff must

allege that

(1) the trustee or mortgagee caused an illegal,

fraudulent, or willfully oppressive sale of real

property pursuant to a power of sale in a

mortgage or deed of trust; (2) the party

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attacking the sale (usually but not always the

trustor or mortgagor) was prejudiced or

harmed; and (3) in cases where the trustor or

mortgagor challenges the sale, the trustor or

mortgagor tendered the amount of the secured

indebtedness or was excused from tendering.

Lona v. Citibank, N.A., 134 Cal. Rptr. 3d 622, 633 (Cal. Ct.

App. 2011) (collecting cases) (emphasis added). Excuses

from California’s tender requirement are the following:

(1) the underlying debt is void, (2) the

foreclosure sale or trustee’s deed is void on its

face, (3) a counterclaim offsets the amount

due, (4) specific circumstances make it

inequitable to enforce the debt against the

party challenging the sale, or (5) the

foreclosure sale has not yet occurred.

Chavez v. Indymac Mortg. Servs., 162 Cal. Rptr. 3d 382, 390

(Cal. Ct. App. 2013).

Nevada law requires that a trustor or mortgagor show a

lack of default in order to proceed with a wrongful

foreclosure claim. The Nevada Supreme Court stated in

Collins v. Union Federal Savings & Loan Ass’n, 662 P.2d

610 (Nev. 1983):

An action for the tort of wrongful foreclosure

will lie if the trustor or mortgagor can

establish that at the time the power of sale was

exercised or the foreclosure occurred, no

breach of condition or failure of performance

existed on the mortgagor’s or trustor’s part

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which would have authorized the foreclosure

or exercise of the power of sale. Therefore,

the material issue of fact in a wrongful

foreclosure claim is whether the trustor was in

default when the power of sale was exercised.

Id. at 304 (citations omitted).

Because none of the appellants has shown a lack of

default, tender, or an excuse from the tender requirement,

appellants’ wrongful foreclosure claims cannot succeed. We

therefore affirm the MDL Court’s dismissal of Count II.

3. Count III: Nev. Rev. Stat. § 107.080

Section 107.080 of the Nevada Revised Statutes specifies

procedures that must be followed for nonjudicial foreclosures. 

A trustee sale may be set aside for lack of substantial

compliance with any of the requirements of § 107.080. Nev.

Rev. Stat. § 107.080(5)(a). Damages may be awarded if the

foreclosing party has failed to comply with specified waiting

periods or with notice and recording requirements specified

in § 107.080. Id. § 107.080(7).

Appellants contend that the Nevada nonjudicial

foreclosures, conducted under § 107.080, were improper. 

The CAC alleges that none of the parties issuing the notice of

default or the notice of the trustee’s sale was “the beneficiary,

the successor in interest to the beneficiary, or the trustee

appointed by the lender.” The basis for their contention is

that, once MERS was designated as the beneficiary under the

deed of trust, the deed of trust and the note were irreparably

split. The CAC states that the “specific facts” for each

Nevada plaintiff are contained in Exhibit 4 to the CAC. The

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key language in Exhibit 4, repeated verbatim for each Nevada

plaintiff, is as follows: “Any appointment by MERS of a

successor trustee or any assignment to a successor beneficiary

was invalid, as MERS is not a true beneficiary under the deed

of trust because, as alleged herein, MERS disclaims any right

to any interest in the property of the proceeds of the loan.”

We disagree with appellants’ contention. After the

decision of the MDL Court and just before the completion of

briefing in this appeal, the Nevada Supreme Court decided

Edelstein v. Bank of New York Mellon, 286 P.3d 249 (Nev.

2012). Edelstein makes clear that MERS does have the

authority, for purposes of § 107.080, to make valid

assignments of the deed of trust to a successor beneficiary in

order to reunify the deed of trust and the note. The court

wrote:

Designating MERS as the beneficiary does

. . . effectively “split” the note and the deed of

trust at inception because . . . an entity

separate from the original note holder . . . is

listed as the beneficiary (MERS). . . .

However, this split at the inception of the loan

is not irreparable or fatal. . . . [W]hile

entitlement to enforce both the deed of trust

and the promissory note is required to

foreclose, nothing requires those documents to

be unified from the point of inception of the

loan. . . . MERS, as a valid beneficiary, may

assign its beneficial interest in the deed of

trust to the holder of the note, at which time

the documents are reunified.

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Id. at 259–60; see also Bergenfield v. Bank of Am., 302 P.3d

1141 (Nev. 2013) (“Nevada law permits the severance and

independent transfer of deeds of trusts and promissory notes

without impairing the right to ultimately foreclose. . . . But in

order to nonjudicially foreclose a deed of trust of an owneroccupied residence, the party seeking foreclosure must

demonstrate that it is both ‘the current beneficiary of the deed

of trust and the current holder of the promissory note.’

[Edelstein,] 286 P.3d at 255; see NRS 107.080.”).

We therefore affirm the MDL Court’s dismissal of

Count III.

4. Count V: Aiding and Abetting Wrongful Foreclosure

Under Arizona, California, and Nevada Law

The CAC alleges that several defendants aided and

abetted wrongful foreclosure. Aiding-and-abetting liability

depends on the existence of an underlying tort. See, e.g.,

Wells Fargo Bank v. Ariz. Laborers Local No. 395 Pension

Trust Fund, 38 P.3d 12, 23 (Ariz. 2002) (en banc). As

explained above, appellants have not stated a valid wrongful

foreclosure claim under the laws of Arizona, California, or

Nevada. Their claim for aiding and abetting wrongful

foreclosure therefore necessarily fails, and we affirm the

MDL Court’s dismissal of Count V.

5. Count VI: Aiding and Abetting Predatory Lending

Under Arizona, California, and Nevada Law

The CAC alleges that several of the defendants aided and

abetted MERS members in fraudulently inducing appellants

to enter into loan agreements. This allegation concerns loan

origination practices; such claims have been remanded to the

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transferor courts by the JPML. The MDL Court properly

held that this count did not relate to the formation and

operation of the MERS System. We therefore affirm its

dismissal of Count VI.

E. Leave to Amend

Appellants contend that they should have been given

leave to amend their complaint. The MDL Court considered

the factors set forth in Foman v. Davis, 371 U.S. 178, 182

(1962), that govern assessments of whether to grant leave to

amend. The MDL Court based its decision largely on the

futility of amendment, along with the fact that appellants had

already had the opportunity to file multiple complaints,

including before the MDL Court, and that additional

amendments would entail some level of prejudice to the

defendants. We conclude that the MDL Court acted within

its discretion in denying leave to amend and therefore affirm.

Conclusion

We dismiss appellants’ challenge to the JPML Order for

lack of jurisdiction. Except for Count I, we affirm the MDL

Court’s dismissal of the CAC. As to Count I, we reverse and

remand for further proceedings consistent with this opinion. 

Each side shall bear its own costs on appeal.

DISMISSED in part, AFFIRMED in part,

REVERSED in part, and REMANDED.

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