Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-md-02119/USCOURTS-azd-2_09-md-02119-7/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1601 Truth in Lending

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

IN RE Mortgage Electronic Registration

Systems (MERS) Litigation

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This Order Applies to:

CV 10-217-PHX-JAT

CV 10-218-PHX-JAT

CV 10-219-PHX-JAT

CV 10-268-PHX-JAT

CV 10-401-PHX-JAT

CV 10-413-PHX-JAT

CV 10-415-PHX-JAT

CV 10-455-PHX-JAT

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MDL DOCKET NO. 09-2119-JAT

ORDER

Before the Court are Plaintiffs’ motions for leave to file amended complaints in the

above-captioned member cases (Doc. 508, 515, 524, 525, 526, 530, 564, 573) and Plaintiffs’

motions to remand three cases, Mesi v. Washington Mutual, F.A., et al., CV 10-218-PHXJAT, Youngren v. Ownit Mortgage Solutions, Inc., et al., CV 10-219-PHX-JAT, and Huynh

v. First National Bank of Nevada, et al., CV 10-217-PHX-JAT, back to state court (Doc. 521,

639, 640). Defendants MERSCORP, Inc. and Mortgage Electronic Registration Systems,

Inc. (collectively, “MERS”) filed a response to all eleven motions (Doc. 676). Defendant

Sierra Pacific Mortgage Company, Inc. (“Sierra Pacific”) filed a response (Doc. 673)

opposing the motion for leave regarding Lee v. Sierra Pacific Mortgage Co., et al., 10-268-

PHX-JAT. Defendant Bank of America, N.A. filed responses to the motion for leave and the

motion to remand regarding Mesi (Doc. 669, 814). Defendants Countrywide Bank, FSB,

Case 2:09-md-02119-JAT Document 1055 Filed 08/16/10 Page 1 of 10
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1

 The various defendants who filed the responses at Docket 669-672 and 814 will be

collectively referred to as “Bank of America.”

2

 For example, in Caffee v. First National Bank of Nevada, et al. Plaintiff Sabrina M.

Caffee filed the Motion to Remand to State Court just ten days after Defendants filed the

Petition for Removal. CV 10-415-PHX-JAT, Doc. 26-1 at 4. The Court does not have

access to the complete docket from the Nevada courts in some of the cases, but it appears that

Plaintiffs immediately sought remand in most of these cases. 

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Countrywide Home Loans, Inc., Countrywide Financial Corp., Lisa Klimenko, Bank of

America Corporation, N.A., Recontrust Company, N.A. filed a response to the motion for

leave regarding Gillespie v. Countrywide Bank, FSB, et al., CV 10-413-PHX-JAT (Doc.

670). Defendants Countrywide Home Loans, Inc., Kumud Patel, Countrywide Financial

Corp., Bank of America Corporation, N.A., Recontrust Company, N.A. filed a response to

the motion for leave regarding Huck v. Countrywide Home Loans, Inc., et al., CV 10-401-

PHX-JAT (Doc. 671). Defendants Countrywide Home Loans, Inc., Recontrust Company,

N.A., Countrywide Financial Corp., and Bank of America Corporation, N.A. filed a response

to the motion for leave regarding Caffee v. First National Bank of Nevada, et al., CV 10-415-

PHX-JAT (Doc. 672).1

 Defendant Litton Loan Servicing LP (“Litton”) filed responses to

the motion for leave and the motion to remand regarding Youngren (Doc. 714, 716).

Defendants Chase Home Finance LLC (“Chase”) and First Horizon Home Loans (“First

Horizon”) each filed a response to the motion for leave regarding Barlow v. BNC Mortgage,

Inc., et al., CV 10-455-PHX-JAT (Doc. 726, 728). The Plaintiffs in Mesi filed a reply in

support of their Motion to Remand (Doc. 882).

I. Background 

The above-captioned eight cases, Barlow, Caffee, Gillespie, Huck, Huynh, Lee, Mesi,

and Youngren were all initiated in Nevada state court. Defendants removed the cases to

federal court and, at least in some cases, the Plaintiffs immediately moved to remand the

cases to state court, but were denied.2

 The eight cases were then transferred to this Court as

part of the MERS MDL. Pursuant to the Judicial Panel on Multidistrict Litigation’s orders,

this Court has undertaken to determine which claims related to the operation and formation

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of MERS and were to remain as part of the MDL, and which claims were not so related and

remanded to the transferor courts. As to Huynh, Lee, Mesi, and Youngren, the Court has

already made the determination of remand status (Doc. 409), but as to Barlow, Caffee,

Gillespie, and Huck, remand status has not been determined.

On April 4, 2010, Plaintiffs in Barlow, Caffee, Gillespie, and Huck joined the

plaintiffs in fifteen other member cases, all represented by the same counsel, in filing a

Renewed Motion to Remand to the Judicial Court in and for the State of Nevada County of

Origin (Doc. 253). The motion sought remand for lack of subject matter jurisdiction despite

the fact that the complaints all contained reference to federal law violations such as the Truth

in Lending Act. To accomplish this feat, the motion purported to “withdraw” these federal

claims and then, alleging that there is an insufficient amount in controversy to sustain

diversity jurisdiction, moved for remand. The Court denied the motion, without prejudice,

as an improperly framed effort to amend the pleadings (Doc. 368). 

On May 10, 2010, Litton filed a motion to dismiss the case (Doc. 453). On May 24,

2010, Plaintiff Youngren filed a Motion to Amend/Correct Complaint (Doc. 515), and on

May 26, 2010, Plaintiff Youngren filed a Response in Opposition and Renewed Motion to

Remand to State Court (Doc. 521). Plaintiffs’ motions for leave to amend in the other seven

cases were filed between May 24, 2010 and May 29, 2010. Plaintiffs’ two other motions to

remand to state court were filed on June 6, 2010.

II. Motions for Leave to File Amended Complaints

A. Legal Standard

Motions to amend pleadings to add claims or parties are governed by Federal Rule of

Civil Procedure 15(a), which provides:

A party may amend the party's pleading once as a matter of course within: 

(A) 21 days after serving it, or 

(B) if the pleading is one to which a responsive pleading is required, 21

days after service of a responsive pleading or 21 days after service of a

motion under Rule 12(b), (e), or (f), whichever is earlier. Otherwise a

party may amend the party's pleading only by leave of court or by written

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consent of the adverse party; and leave shall be freely given when justice

so requires.

Fed. R. Civ. P. 15(a)(1-2). While the decision to grant or deny a motion to amend is within

the discretion of the district court, “Rule 15(a) declares that leave to amend ‘shall be freely

given when justice so requires’; this mandate is to be heeded.” Foman v. Davis, 371 U.S.

178, 182 (1962); see, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330

(1971); United States v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir. 2001) (“A

district court’s discretion to deny leave to amend . . . is not absolute.”) (citing Foman); “In

exercising its discretion[,] . . . a court must be guided by the underlying purpose of Rule

15—to facilitate decision on the merits rather than on the pleadings or technicalities. . . .

Thus, Rule 15’s policy of favoring amendments to pleadings should be applied with extreme

liberality.” Eldridge v. Block, 832 F.2d 1132, 1135 (9th Cir. 1987) (citations omitted); “This

liberality . . . is not dependent on whether the amendment will add causes of action or

parties.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987).

The extremely liberal policy in favor of amendments, however, is subject to some

limitations. The Supreme Court of the United States has established that motions to amend

should be granted unless the district court determines that there has been a showing of: (1)

undue delay; (2) bad faith or dilatory motives on the part of the movant; (3) repeated failure

to cure deficiencies by previous amendments; (4) undue prejudice to the opposing party; or

(5) futility of the proposed amendment. Foman, 371 U.S. at 182; see SmithKline Beecham,

245 F.3d at 1052; Texaco, Inc. v. Ponsoldt, 939 F.2d 794, 798 (9th Cir. 1991); “Generally,

this determination should be performed with all inferences in favor of granting the motion.”

Griggs v. Pace Am. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999) (citation omitted).

Significantly, “[t]he party opposing amendment bears the burden of showing prejudice,”

futility, or one of the other permissible reasons for denying a motion to amend. DCD

Programs, 833 F.2d at 187; see Richardson v. United States, 841 F.2d 993, 999 (9th Cir.

1988) (stating that leave to amend should be freely given unless opposing party makes “an

affirmative showing of either prejudice or bad faith”).

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Additionally, a court must consider whether approving the amendment implicates the

court’s subject matter jurisdiction. Payne v. Parkchester N. Condos., 134 F.Supp. 2d 582,

584 (S.D.N.Y. 2001). If plaintiffs are authorized to drop all of their federal claims, then the

court may, in its discretion, remand the case or, under extraordinary circumstances, retain the

state claims under supplemental jurisdiction. In making the determination whether to

remand, the court must weigh “the values of judicial economy, convenience fairness, and

comity” and “whether the plaintiffs have tried to manipulate the forum.” Id. (citing

Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 & 357 (1988)). Courts are divided on

whether plaintiffs’ tactically striking their federal claims after removal for purpose of

securing remand amounts to manipulation. Some courts have found tactical striking to be

pure forum manipulation. See, e.g., Lyster v. First Nationwide Bank Fin., 829 F.Supp. 1163,

1165 (N.D. Cal. 1993) (“the first amended complaint may not be used to defeat the removal

of plaintiff’s case to federal court”); 6 Charles Alan Wright, Arthur R. Miller, & Mary Kay

Kane, Federal Practice and Procedure § 1477 (2010) (“a party may not employ Rule 15(a)

to interpose an amendment that would deprive the district court of jurisdiction over a

removed action”). However, the Ninth Circuit has found this tactic not intrinsically

manipulative: 

The defendant is not obligated to remove; rather, he has the choice either to

submit to state court resolution of his claims, or to assert his right to a federal

forum. If the defendant rejects the plaintiff’s offer to litigate in state court and

removes the action, the plaintiff must then choose between federal claims and

a state forum. Plaintiffs in this case chose the state forum. They dismissed their

federal claims and moved for remand with all due speed after removal. There

was nothing manipulative about that straightforward tactical decision, and

there would be little to be gained in judicial economy by forcing plaintiffs to

abandon their federal causes of action before filing in state court.

Baddie v. Berkeley Farms, Inc., 64 F.3d 487, 491 (9th Cir.1995), overruled on other grounds

by Martin v. Franklin Capital Corp., 546 U.S. 132 (2005); see also, e.g., Chow v. Hirsch,

No. C-98-4619, 1999 WL 144873, at *5 (N.D. Cal. Feb. 22, 1999) (Plaintiff did not attempt

to “manipulate” the forum when she “made a strategic decision to concentrate on her state

law claims in an attempt to have them heard in state court.”). Thus, in the Ninth Circuit, a

plaintiff’s motion for leave to amend that strategically strikes federal claims is not

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3

 “MERS does not object to Plaintiff’s Motions to Amend.” (Doc. 676 at 3.)

Similarly, Bank of America “takes no position with respect to the [Motions for Leave to

Amend]” (Doc. 669 at 2; Doc. 670 at 2; Doc. 671 at 2; Doc. 672 at 2), Chase “does not

necessarily oppose the Motion to Amend to withdraw claims” (Doc. 726 at 2), and First

Horizon also “takes no position” (Doc. 728 at 2).

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manipulative “unless there is reason to believe that the inclusion of federal claims was to put

the defendants through the removal-remand procedure,” Popov v. Countrywide Financial

Corp., No. CIV 09-2780 GEB EFB PS, 2009 WL 5206679, at *3 (E.D. Cal. Dec. 18, 2009).

B. Analysis

All parties agree that Plaintiffs need leave of court to amend their pleadings. Most

defendants do not oppose to the motions for leave to amend.3

 However, Sierra Pacific

opposes the Motion for Leave to Amend filed in Lee and Litton opposes the Motion for

Leave to Amend filed in Youngren. Both oppositions argue that the proposed amendments

are futile in that none of the claims in the proposed amended complaints would survive a

motion to dismiss under Rule 12(b)(6). (Doc. 716 at 5-14; Doc. 673 at 5-9.) At this point,

given the extremely liberal policy in favor of amendments and Plaintiffs’ clear aim of

securing remand to state court, the Court will not consider the futility arguments. However,

this decision is made without prejudice to the parties filing 12(b)(6) motions on these

grounds should the cases not ultimately be remanded to state court.

Additionally, Litton also opposes the motion for leave to amend as “a bad faith

attempt to destroy the Court’s jurisdiction.” (Doc. 716 at 4.) Litton argues that

“amendments offered for the purpose of destroying removal jurisdiction are made in bad

faith, and should be denied.” Id. (citing McCabe v. General Foods Corp., 811 F.2d 1336,

1340 (9th Cir. 1987) (affirming a district courts denying leave to amend where plaintiff

added additional defendants to destroy diversity) and Sorosky v. Burroughs Corp., 826 F.2d

794, 805 (9th Cir. 1987) (affirming a district court denying leave to amend where the plaintiff

added another defendant to destroy diversity). Litton has overstated the rule and offered

inapposite citations. While some attempts to amend the complaint and destroy the court’s

basis for subject matter jurisdiction are made in bad faith, not all such amendments are

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4

 The Motion for Leave to Amend in Barlow will be denied as to Defendant BNC

Mortgage Inc. due to the automatic stay installed as part of BNC’s bankruptcy proceedings.

The motion will be granted as to all other defendants.

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intrinsically manipulative. Baddie, 64 F.3d at 491. If the tactical decision to drop federal

claims is made at the outset of the federal proceedings, and there is no evidence that the

federal claims were initially included to drag the litigation through the removal-remand

procedure, then the court may grant the motion for leave to amend.

In Youngren, Plaintiff has moved to amend at an early stage of the case, before any

discovery has been conducted. There is no indication that proceeding in state court would

be wasteful or duplicative because there is no showing that any court or party has yet

invested substantial resources into this case. Additionally, there is no evidence that Plaintiff

initially included the federal claims to bait Defendants into the removal-remand yo-yo.

Taking all pertinent factors into account, the scales tip in favor of granting Plaintiff’s motion

to amend.

As the same reasoning applies and no other parties have opposed Plaintiffs’ seven

other motions for leave to amend, the Court will also grant these motions.4

 

III. Motions to Remand to State Court

A. Legal Standard

It is clear and unambiguous under federal case law that an MDL transferee court may

remand a tag-along case to state court. The Judicial Panel on Multidistrict Litigation

(“Panel”) has concluded repeatedly that “pending motions to remand [MDL-transferred

actions] to their respective state courts can be presented to and decided by the transferee

judge.” In re Ford Motor Co. Crown Victoria Police Interceptor Prods. Liab. Litig., 229

F.Supp.2d 1377, 1378 (J.P.M.L. 2002); see also In re W. States Wholesale Natural Gas

Antitrust Litig., 290 F.Supp.2d 1376, 1378 (J.P.M.L. 2003); In re Prof’l Hockey Antitrust

Litig., 369 F.Supp. 1117 (J.P.M.L. 1975). This rule differs from the rule for remands to a

transferor court, which may only be effected by the Panel. 28 U.S.C. § 1407; see also

R.P.J.P.M.L. 7.6. 

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When all federal claims in a removed action are dismissed, the Court is not required

to remand the case to state court. Whether a case is subject to removal based on federal

question is determined by the allegations in the complaint at the time of removal.

Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). “It is well settled that a federal court

does have the power to hear claims that would not be independently removable even after

the basis for removal jurisdiction is dropped from the proceedings.” Harrell v. 20th Century

Ins. Co., 934 F.2d 203, 205 (9th Cir. 1991).

Generally, under 28 U.S.C. § 1367, “The district courts may decline to exercise

supplemental jurisdiction over a claim under subsection (a) if (1) the claim raises a novel or

complex issue of State law, (2) the claim substantially predominates over the claim or claims

over which the district court has original jurisdiction, (3) the district court has dismissed all

claims over which it has original jurisdiction, or (4) in exceptional circumstances, there are

other compelling reasons for declining jurisdiction.” 28 U.S.C. § 1367 (c) (2010). While

discretion to decline to exercise supplemental jurisdiction over state law claims is triggered

by the presence of one of the conditions in § 1367(c), it is informed by the values “of

economy, convenience, fairness, and comity.” Allen v. City of Los Angeles, 92 F.3d 842, 846

(9th Cir. 1996). However, in the ordinary case, when all claims over which the district court

has original jurisdiction have been dismissed before trial, the remaining state law claims will

be remanded to state court. Carnegie-Mellon, 484 U.S. at 350 n. 7 (“in the usual case in

which all federal-law claims are eliminated before trial, the balance of factors . . . will point

toward declining to exercise jurisdiction over the remaining state-law claims”). 

B. Analysis

In Plaintiffs’ Motions for Leave to Amend, Plaintiffs are clearly attempting to dismiss

all of their federal claims in order for the Court to remand these actions to state court

pursuant to 28 U.S.C. § 1367 (c)(3). The Court will grant the motions to amend, as discussed

above, and finds that it may exercise its discretion to grant the motions to remand.

However, the Court is not satisfied with the briefing on several issues pertaining to

the motions to remand. This shortcoming is due, in part, to the fact that the motions to

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5

 Litton argues that Plaintiff has conceded complete diversity in Youngren, but the

Proposed Amended Complaint in Youngren contains two named Nevada defendants (Doc.

515-1 at 5-6).

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amend had not been granted when these motions to remand to state court were filed. Thus,

none of the Defendants have squarely addressed whether Plaintiffs’ proposed amended

complaints contain any claims over which this Court retains original jurisdiction. Litton and

Bank of America have apparently failed to brief this issue because the motion to amend had

not yet been granted and the earlier complaints were still operative (Doc. 714 at 3-4, Doc.

814 at 3-5). MERS, meanwhile, incorrectly interpreted the amended complaints as focusing

“entirely on issues unrelated to the operation and formation of MERS and involve loan

origination issues” (Doc. 676 at 3). Thus, the Court will allow supplemental briefing on

whether federal question jurisdiction or diversity jurisdiction exists under the amended

complaints in Mesi, Youngren,

5

 and Huyhn, or whether any fraudulent joinder has occurred.

Defendants may file additional briefing opposing one or more of the motions by August 27,

2010. Plaintiffs may file additional briefing supporting their respective motions by

September 6, 2010.

Several defendants in Huynh, Mesi, and Youngren have not filed any response to

Plaintiffs’ various Motions to Remand to State Court. The non-responding defendants should

be aware that the deadline for responding to these motions passed weeks ago. Therefore, to

the extent these defendants fail to serve and file responses to these motions by August 27,

2010, the Court will deem this non-compliance as consent to the summary granting of the

motion pursuant to Local Rule of Civil Procedure 7.2(i).

Accordingly,

IT IS ORDERED that Plaintiffs’ Motions (Doc. 508, 515, 524, 525, 526, 530, 564)

for leave to file amended complaints in the above-captioned member cases (Caffee, Gillespie,

Huck, Huynh, Lee, Mesi, and Youngren) is GRANTED. Plaintiffs may, within three days of

the date of this Order, file their amended complaints as attached to their Motions for Leave

to Amend.

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IT IS FURTHER ORDERED that Plaintiff’s Motion (Doc. 573) for leave to file an

amended complaint in Barlow is DENIED as to Defendant BNC Mortgage Inc. due to the

automatic stay in place, but is GRANTED as to all other Defendants. Plaintiff may, within

three days of the date of this Order, file an amended complaint.

IT IS FURTHER ORDERED that Defendant Litton Loan Servicing LP’s Motion

to Dismiss (Doc. 453) is DENIED AS MOOT.

IT IS FURTHER ORDERED, with regards to Plaintiffs’ Motions (Doc. 521, 639,

640) to remand Mesi, Youngren, and Huynh to state court, the Court will allow the parties

to file additional briefing. Defendants may file additional briefing opposing one or more of

the motions by August 27, 2010. Plaintiffs may file additional briefing supporting their

respective motions by September 6, 2010.

DATED this 16th day of August, 2010.

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