Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-05144/USCOURTS-cand-3_05-cv-05144-31/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1391 Personal Injury

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UNITED 

STATES 

DISTRICT 

COURT

For the Northern District of California

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UNITED 

STATES 

DISTRICT 

COURT

For the Northern District of California

UNITED STATES DISTRICT COURT

Northern District of California

MICHAEL GARCIA and COURTNEY

GARCIA,

Plaintiffs,

v.

FIDELITY MORTGAGE COMPANY et al.,

Defendants.

_____________________________________/

No. C 05-5144 MHP (MEJ)

AMENDED REPORT &

RECOMMENDATION RE DAMAGES

(Amended to correct objection filing

deadline)

On May 5, 2009, the Honorable Marilyn Hall Patel, the presiding judge in this action, issued

a Memorandum & Order regarding Plaintiffs’ Motion for Default Judgment. (Dkt. #95.) In her

Order, Judge Patel granted default judgment in favor of Plaintiffs and against Defendant Joel

Atwater. However, Judge Patel found that Plaintiffs had not submitted sufficient documentation and

testimony regarding his claimed damages to enable the Court to determine the dollar amount it

should award to Plaintiffs. (Id. at 6.) Accordingly, Judge Patel referred the matter to the

undersigned to hold an evidentiary hearing on the issue of damages and to make findings of fact and

recommendations regarding the specific amounts that should be awarded. Judge Patel also

instructed Plaintiffs that, at the hearing, they will need to provide evidentiary support, such as

documents, affidavits, or witness or expert testimony to corroborate their claimed damages. (Id.) 

Further, with respect to each area of damages Plaintiffs requested, Judge Patel outlined what

evidence Plaintiffs would need to submit and what questions Plaintiffs would need to address to

enable the undersigned to make a recommendation regarding the proper amount of damages

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recoverable. 

Following Judge Patel’s Order, and in advance of the September 3, 2009 evidentiary hearing,

Plaintiffs did not file any supplementary materials addressing the issues Judge Patel had outlined or

submitting evidence to support their damages claims. Consequently, the undersigned issued an

Order continuing the evidentiary hearing to allow Plaintiffs one last opportunity to marshal and

present whatever evidence they have substantiating their damages and to specifically address Judge

Patel’s questions. On September 24, 2009, the undersigned held an evidentiary hearing regarding

Plaintiffs’ damages. At that time, the Court questioned Plaintiffs’ counsel as to why Plaintiffs had

still not filed any supplemental materials in support of their claims. To allow Plaintiffs a final

opportunity to submit evidence, the undersigned set the matter for a further hearing on October 22,

2009. Prior to that hearing, on October 14, 2009, Plaintiffs filed a Supplemental Declaration in

Support of Entry of Default Judgment (Dkt. #100). The undersigned then held a second evidentiary

hearing on October 22, 2009. Having considered Plaintiffs’ written submissions and supporting

materials, and the evidence presented at the hearings, the undersigned now RECOMMENDS as

follows. 

A. Compensatory Damages 

1. Out-of-Pocket Damages

In her Order, Judge Patel found that Plaintiffs were entitled to their out-of-pocket damages. 

However, aside from the costs of refinancing their loans, it was unclear what other damages

Plaintiffs were requesting. (Dkt. #95 at 7.) Accordingly, Judge Patel instructed Plaintiffs to provide

the undersigned with evidence documenting the out-of-pocket damages they have incurred. (Id.) 

In their Supplemental Declaration, Plaintiffs indicate that they are seeking $19,874.30 in outof-pocket damages, all of which relate to the fees and penalties they incurred as a result of having to

refinance their mortgage. (Suppl. Decl. ¶4.) Plaintiffs indicate that they incurred: (1) $5,517 in new

loan charges; (2) $160 in recording fees; (3) $150 in notary fees; (4) $11,925.80 in prepayment

penalties and related fees; and (5) $2,121.50 in escrow and title charges. Plaintiffs have attached the

closing statement on the new loan they obtained to their Supplemental Declaration. The

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undersigned has reviewed the closing statement and finds that each of the amounts is reflected on

the closing statement. The undersigned therefore finds that Plaintiffs have presented sufficient

evidence substantiating their damages relating to the refinance and should be awarded these

amounts. 

2. Emotional Distress

In her Order, Judge Patel found that Plaintiffs had credibly established that they suffered

emotional distress as a result of Defendant Atwater’s conduct. (Dkt. #95 at 7.) She therefore

instructed the undersigned to make findings of fact regarding Plaintiffs’ emotional distress and

recommend an appropriate award. (Id.) Plaintiffs have requested $20,000 in emotional distress

damages. In support, Plaintiffs proffer statements in their Supplemental Declaration that, as a result

of their dealings with Defendant Atwater, their relationships with their family members have been

strained, and they have experienced anxiety and “physical suffering and distress.” (Supp. Decl. ¶8.) 

At the evidentiary hearing, the undersigned asked Plaintiffs whether they had any additional

information to add regarding their emotional distress. Plaintiffs’ counsel reiterated that Plaintiffs

have experienced significant stress as a result of Defendant Atwater’s fraud and having to refinance

their house. Plaintiffs, however, did not offer any more specific facts regarding the symptoms

stemming from the distress or any related economic losses they incurred in treating such conditions. 

Like Judge Patel, the undersigned finds Plaintiffs’ representations that they experienced emotional

distress to be credible. However, aside from their general descriptions set forth above, Plaintiffs

have not offered any specific facts or evidence to support their requested amount of damages. 

Accordingly, the Court finds that an award of $10,000 is appropriate. 

3. Compensatory Damages Already Awarded Against Other Defendants

Finally, Judge Patel noted in her Order that Plaintiffs’ compensatory damages award against

Defendant Atwater must be offset against any compensatory damages that have already been

awarded to Plaintiffs against any other defendants in this case. (Dkt. #95 at 7-8.) Plaintiffs have not

indicated that they obtained a judgment against any other defendant in this matter. However, to the

extent Plaintiffs have already been awarded compensatory damages against any of the other

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defendants in this matter, Plaintiffs’ compensatory damages against Defendant Atwater should be

reduced accordingly. 

4. Compensatory Damages Recommendation

In sum, with respect to compensatory damages, the undersigned RECOMMENDS that the

Court award Plaintiffs $19,874.30 in out of pocket damages and $10,000 for emotional distress, for a

total of $29,874.30 in compensatory damages. 

B. Punitive Damages 

Judge Patel previously determined that Plaintiffs had established by clear and convincing

evidence that they are entitled to punitive damages in this case. (Dkt. #95 at 8-9.) Plaintiffs have

requested that the Court award $10,000 in punitive damages. Under California law, when assessing

punitive damages courts are to consider: (1) the degree of reprehensibility of the defendant’s

conduct; (2) the amount of compensatory damages awarded to the plaintiff; and (3) the wealth of the

defendant. Neal v. Farmers Ins. Exchange, 21 Cal. 3d 910, 928 (1978); see also Harrell v. Kepreos,

No. CIV S-06-0849, 2008 WL 619117, at *4 (E.D. Cal. Mar. 4, 2008).

With respect to the first factor, as Judge Patel highlighted in her Order, Defendant Atwater

made a series of misrepresentations to Plaintiffs, including that he could secure a mortgage for

Plaintiffs that they could afford, after the monthly mortgage payments exceeded what he had

represented to Plaintiffs, and that he could refinance the mortgage to reduce their monthly payments. 

(Dkt. #95 at 8.) Defendant Atwater also falsified information on Plaintiffs’ loans applications

without their knowledge and misrepresented other material terms of the loans to Plaintiffs. (Id. at 2.)

As a result of Defendant Atwater’s conduct, Plaintiffs incurred significant damages and suffered

emotional distress. These facts demonstrate the reprehensibility of Defendant Atwater’s conduct

and support the need for punitive damages to deter him from similar conduct in the future. 

As to the second factor, as indicated above, the undersigned recommends that the Court

award $29,874.30 in compensatory damages. Plaintiffs’ requested amount of punitive damages is

thus less than the amount of her compensatory damages and is not excessive in relation to their

actual damages. 

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Looking at the final factor, which focuses on the defendant’s financial condition, Plaintiffs

have not submitted any evidence addressing this factor. The California Supreme Court has indicated

that evidence of a defendant’s financial condition is a prerequisite to an award of punitive damages

in order to ensure that the award will actually serve to deter the defendant’s conduct. Adams v.

Murakami, 54 Cal. 3d 105, 119 (1991). Without such information, the undersigned cannot

determine whether the amount of punitive damages Plaintiffs seek exceeds the amount necessary to

properly punish and deter Defendant Atwater from future misconduct. See id. at 110. 

Consequently, because Plaintiffs have not met their burden of producing evidence on this factor, the

undersigned RECOMMENDS that the Court DENY WITHOUT PREJUDICE Plaintiffs’ request

for an award of $10,000 in punitive damages and GRANT Plaintiffs leave to marshal evidence

relating to Defendant Atwater’s financial condition and move for reconsideration of the proper

amount of punitive damages that should be awarded. 

C. Damages for Violation of RESPA

With respect to Plaintiffs’ damages under RESPA, Judge Patel indicated that Plaintiffs

needed to provide additional information and evidence on the second prong of the two-prong test for

determining whether the yield spread premium Plaintiffs paid was permissible. (Dkt. #95 at 10.) In

their Supplemental Declaration, Plaintiffs indicate that they are abandoning their claim to damages

under RESPA. (Suppl. Decl. ¶¶4, 9.) Accordingly, this issue is moot. 

D. Disgorgement Pursuant to California Unfair Business Practices Law

In her Order, Judge Patel found that Plaintiffs had established Defendant Atwater’s actions

violated California business law, and therefore California’s unfair competition law, such that

Plaintiffs could disgorge Defendant Atwater of any money Plaintiffs paid him in connection with his

unlawful business practices. (Dkt. #95 at 11.) Toward this end, Judge Patel directed Plaintiffs to

prepare and provide evidence as to what money they paid Defendant Atwater in connection with his

provision of real estate services. (Id.) To guide Plaintiffs, the Court explained that the settlement

statement that Plaintiffs submitted was insufficient to establish the amount they paid to Defendant

Atwater. (Id.) Specifically, the Court noted that although Plaintiffs alleged that they paid $10,500

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in broker’s commission, the settlement statement indicated that the amount came from the seller’s

funds. (Dkt. #95 at 11.) The Court further noted that although Plaintiffs claimed they paid $14,295

in fees to Fidelity, Plaintiffs failed to explain how they arrived at this amount. (Id.) Finally, the

Court noted that even if Plaintiffs could establish the total amount in real estate and mortgage broker

fees, Plaintiffs must provide evidence corroborating their allegations that Defendant Atwater was

paid all but $500 of this amount. (Id.) 

Following the issuance of Judge Patel’s Order, Plaintiffs did not submit any other

documentation or provide any explanation addressing the issues Judge Patel previously raised. 

Rather, their Supplemental Declaration merely restates the same information Plaintiffs previously

presented to Judge Patel. Thus, for the reasons Judge Patel previously articulated, Plaintiffs have

failed to sufficiently establish the amount of money they paid Defendant Atwater in connection with

his unlawful business practices. The undersigned therefore RECOMMENDS that the Court DENY

Plaintiffs’ request for disgorgement of $24,295 from Defendant Atwater. 

E. Attorneys’ Fees and Costs 

In her Order, Judge Patel found that Plaintiffs are entitled to attorneys’ fees and costs under

RESPA and advised Plaintiffs on the proper procedure under the Civil Local Rules for seeking such

awards. (Dkt. #95 at 11-12.) In their Supplemental Declaration Plaintiffs state that they are no

longer seeking an award of attorneys’ fees in connection with their RESPA claim. (Supp. Decl. ¶9.) 

Although Plaintiffs did not address costs, Plaintiffs did not provide any figure or documentation to

support an award of costs. Thus, at this point, Plaintiffs appear to have abandoned any request for

an award of costs. Based on these developments, the undersigned RECOMMENDS that the Court

DENY Plaintiffs’ request for attorneys’ fees and costs as moot. 

III. CONCLUSION

Based on the undersigned’s consideration of Plaintiffs’ Declarations, supporting documents,

and evidence presented at the hearing, the undersigned RECOMMENDS as follows:

Plaintiffs should be awarded $29,874.30 in compensatory damages. Plaintiffs’ request for an

award of $10,000 in punitive damages should be DENIED WITHOUT PREJUDICE. Plaintiffs’

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UNITED 

STATES 

DISTRICT 

COURT

For the Northern District of California

requests for damages under RESPA, disgorgement of fees paid to Defendant Atwater, and attorneys’

fees and costs should be DENIED AS MOOT. 

Pursuant to 28 U.S.C. § 636(b)(1) and Federal Rule of Civil Procedure 72(b)(2), a party may

serve and file objections to this Report and Recommendation 14 days after being served.

IT IS SO ORDERED.

Dated: January 6, 2010 _______________________________

Maria-Elena James 

Chief United States Magistrate Judge 

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