Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_23-cv-00596/USCOURTS-caed-2_23-cv-00596-2/pdf.json

Parties Involved:
Keller Mortgage, LLC
Defendant
Nationstar Mortgage LLC
Defendant
Tamberlyn Tibbetts
Plaintiff
Steve F. Tibbetts
Plaintiff
U.S. Bank National Association
Defendant

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

STEVE F. TIBBETTS and

TAMBERLYN TIBBETTS,

Plaintiffs,

v.

KELLER MORTGAGE, LLC, dba 

KELLER MORTGAGE, NATIONSTAR 

MORTGAGE LLC, and NATIONSTAR 

MORTAGE LLC, dba MR. COOPER, 

U.S. BANK NATIONAL 

ASSOCIATION and DOES 1-20, 

inclusive,

Defendants.

No. 2:23-cv-00596-JAM-CKD

ORDER GRANTING DEFENDANT KELLER 

MORTGAGE, LLC’S MOTION TO 

DISMISS

This case arises from a mortgage rescission transaction 

between Plaintiffs Steve F. Tibbetts and Tamberlyn Tibbetts 

(collectively, “Plaintiffs”) and Defendant Keller Mortgage, LLC, 

dba Keller Mortgage (“Defendant Keller”). Plaintiffs’ claim the 

actions of Defendant Keller, as well as those of Defendant U.S. 

Bank National Association (“Defendant U.S. Bank N.A.”), Defendant 

Nationstar Mortgage, LLC. (“Defendant Nationstar”), and Defendant 

Nationstar Mortgage LLC, dba Mr. Cooper (“Defendant Cooper”), 

after Plaintiffs rescinded their loan agreement, resulted in 

damages to Plaintiffs’ credit ratings and has caused Plaintiffs 

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to suffer emotional distress.

Before the Court is Defendant Keller’s motion to dismiss 

Plaintiffs’ claims against Defendant Keller for (1) Breach of 

Contract; (2) Breach of Fiduciary Duty; and (3) Constructive 

Fraud. See Mot. To Dismiss. (“Mot.”), ECF No. 19. Additionally, 

Defendant Keller moves the Court to dismiss Plaintiffs’ request 

for attorney’s fees and punitive damages. Id. Plaintiffs 

opposed this Motion. Opp’n, ECF No. 22. Defendant Keller 

replied. Reply, ECF No. 23.

I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

The facts are taken from the Second Amended Complaint

(“SAC”), as well as the exhibits filed in support of the SAC, and 

assumed to be true for the purposes of this motion. See Federal 

Rules of Civil Procedure Rule 10(c) (“A copy of a written 

instrument that is an exhibit to a pleading is a part of the 

pleading for all purposes.”). 

In March of 2021, Plaintiffs took out a home equity line of 

credit through Defendant Keller (“Original Equity Loan”), secured 

against their real property. SAC ¶ 12, ECF No. 17. 

In April of 2022, Plaintiffs began the process of

refinancing the Original Equity Loan. Id. ¶ 13. 

In May of 2022, Defendant Keller issued a new loan to 

Plaintiffs (“May 2022 Refinanced Equity Loan”). Id. ¶ 14. 

Plaintiffs were to use the May 2022 Refinanced Equity Loan to pay 

the balance on the Original Equity Loan and begin a construction 

project on their real property. Id.

///

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In June of 2022, Plaintiffs received a letter from Defendant 

Keller advising them that during closing of the May 2022

Refinanced Equity Loan, Defendant Keller provided an incorrect 

Right to Cancel form to Plaintiffs. Id. ¶ 16. Defendant Keller 

provided Plaintiffs a new form, extending Plaintiffs’ deadline to 

cancel the May 2022 Refinanced Equity Loan. Id.; See also Exh. 1 

to SAC, ECF No. 17.

Prior to the extended deadline, Plaintiffs signed the new 

form and sent the executed document to an employee of Defendant 

Keller, in accordance with the instructions on the form. SAC 

¶ 17; Exh. 1 to SAC. Defendant Keller failed to respond to this 

executed form. SAC ¶ 18. 

On July 7, 2022, Defendant Keller and Plaintiffs opened 

escrow to rescind the May 2022 Refinanced Equity Loan. Id.

¶¶ 18, 47. At some point before this date, the May 2022 

Refinanced Equity Loan was sold by Defendant Keller to Defendant 

U.S. Bank N.A. Id. ¶ 19. Defendant Cooper became the servicer. 

Id.

On July 25, 2022, Defendant Keller issued a new loan to 

Plaintiffs and Plaintiffs returned the construction funds, 

placing Plaintiffs in the position they were prior to the May 

2022 Refinanced Equity Loan. Id. ¶¶ 18, 36.

At some point between July 7, 2022, and July 25, 2022, the 

May 2022 Refinanced Equity Loan was repurchased by Defendant 

Keller from Defendant U.S. Bank N.A. Id. ¶ 20. As part of the 

repurchase, Defendant Keller was required to reconvey the May 

2022 note and deed of trust. Id. ¶ 37; Exh. 6 to SAC. 

///

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Plaintiffs allege they did not receive a copy of the

recorded Substitution of Trustee and Full Reconveyance, in 

violation of California Civil Code § 2941. See generally SAC

¶¶ 22, 41, 52, 54, 58. Additionally, Plaintiffs allege Defendant 

Keller failed to notify Defendants U.S. Bank N.A., Nationstar, 

and Cooper that a reconveyance had taken place. Id. ¶ 40. 

Plaintiffs contend the failure of Defendant Keller to mail 

them a copy of the reconveyance documents caused Defendant Cooper 

to continue seeking enforcement of the May 2022 Refinanced Equity

Loan after it was rescinded. See generally id. ¶¶ 23-31. As a 

result, Plaintiffs were reported by Defendant Cooper as 

delinquent on the May 2022 Refinanced Equity Loan, which resulted 

in “significant deterioration of their credit worthiness.” Id.

¶ 33.

Additionally, Plaintiffs claim Defendant Keller breached its

fiduciary duty to act in the best interest as trustee of the deed 

of trust under California Civil Code § 2941.

Finally, Plaintiffs allege Defendant Keller committed 

constructive fraud under California Civil Code § 1573.

II. OPINION

A. Legal Standard

A Rule 12(b)(6) motion challenges the complaint as not 

alleging sufficient facts to state a claim for relief. Fed. R. 

Civ. P. 12(b)(6). “To survive a motion to dismiss [under 

12(b)(6)], a complaint must contain sufficient factual matter, 

accepted as true, to state a claim for relief that is plausible 

on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 

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(internal quotation marks and citation omitted). While 

“detailed factual allegations” are unnecessary, the complaint 

must allege more than “[t]hreadbare recitals of the elements of 

a cause of action, supported by mere conclusory statements.” 

Id. When a plaintiff fails to “state a claim upon which relief 

can be granted,” the Court must dismiss the suit. Fed. R. Civ. 

P. 12(b)(6). 

In considering a motion to dismiss for failure to state a 

claim, a court generally accepts as true the allegations in the 

complaint and construes the pleading in the light most favorable 

to the plaintiff. Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 

588 (9th Cir. 2008). “In sum, for a complaint to survive a 

motion to dismiss, the non-conclusory ‘factual content,’ and 

reasonable inferences from that content, must be plausibly 

suggestive of a claim entitling the plaintiff to relief.” Moss 

v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009). 

To defeat a motion to dismiss, a plaintiff must “plead 

enough facts to state a claim to relief that is plausible on its 

face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 

(2007). Plausibility under Twombly requires “factual content 

that allows the court to draw a reasonable inference that the 

defendant is liable for the misconduct alleged.” Ashcroft, 556 

U.S. at 678. “At this stage, the Court ‘must accept as true all 

of the allegations contained in a complaint.’” Id. But it need 

not “accept as true a legal conclusion couched as a factual 

allegation.” Id. 

Conclusory allegations are not to be considered in the 

plausibility analysis. Id. at 679 (“While legal conclusions can 

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provide the framework of a complaint, they must be supported by 

factual allegations.”) 

B. Judicial Notice

Defendant Keller requests the Court take judicial notice of 

three documents: (1) the recorded Deed of Trust executed by 

Plaintiffs for the May 2022 Loan; (2) the recorded Deed of Trust 

executed by Plaintiffs for the July 2022 Loan; and (3) the 

recorded Substitution of Trustee and Full Reconveyance for the 

May 2022 Loan. Mot. at 2; Req. for Judicial Notice, ECF No. 19-

2. The Court does not need to take Judicial Notice of these 

documents since it can, and has, considered them under the 

incorporation-by-reference doctrine. See Khoja v. Orexigen 

Therapeutics, Inc., 899 F.3d 988, 1002 (9th Cir. 2018) 

(explaining that unlike rule-established judicial notice, 

incorporation-by-reference is a judicially created doctrine that 

treats certain documents as though they are part of the 

complaint itself when the plaintiff refers extensively to the 

document or it forms the basis of plaintiff’s claim). 

C. Discussion

1. Claim One: Breach of Contract

In general, real estate contracts are subject to the 

general law of contracts. The elements for a breach of contract 

claim include the following: (1) the contract, (2) plaintiff's 

performance or excuse for nonperformance, (3) defendant's 

breach, and (4) the resulting damages to plaintiff. Careau &

Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1388 

(1990).

///

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Here, Plaintiffs argue Defendant Keller breached “both the 

May 2022 [Refinanced Equity] Loan and the July 2022 Loan.” SAC 

¶ 40. These breaches, Plaintiffs allege, occurred when 

Plaintiffs “had not received a copy of the Substitution of 

Trustee and Full Reconveyance” prepared and recorded by 

Defendant Keller’s legal team. SAC ¶ 37. Plaintiffs claim they 

performed all obligations required of them, however, Defendant 

Keller failed to notify the purchaser of the May 2022 Refinanced

Equity Loan that a reconveyance took place. Id. ¶ 40. 

Defendant Keller, Plaintiffs argue, breached its obligations as 

required under California Civil Code § 2941. Id. ¶ 41.

Defendant Keller, on the other hand, contends Plaintiffs’ 

claim fails because Plaintiffs have failed to allege a contract 

that required Defendant Keller to notify the owners of the May 

2022 Refinanced Loan. Mot. at 5:24-26. The Court agrees.

Plaintiffs have not provided the Court with any evidence 

that there was an agreement between Plaintiffs and Defendant 

Keller which imposed upon Defendant Keller an obligation to 

notify the May 2022 Refinanced Equity Loan’s purchaser of the 

reconveyance. Plaintiffs reference their deed of trust with 

Defendant Keller, stating that paragraph 23 of the deed of trust

requires Defendant Keller to request that the trustee reconveys

the property back to Plaintiffs after full repayment. SAC ¶ 37. 

The full terms of paragraph 23 state:

23. Reconveyance. Upon payment of all sums secured by 

this Security Instrument, Lender shall request Trustee 

to reconvey the Property and shall surrender this 

Security Instrument and all notes evidencing debt 

secured by this Security Instrument to Trustee. 

Trustee shall reconvey the Property without warranty 

to the person or persons legally entitled to it. 

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Lender may charge such person or persons a reasonable 

fee for reconveying the Property, but only if the fee 

is paid to a third party (such as the Trustee) for 

services rendered and the charging of the fee is 

permitted under Applicable Law. If the fee charged 

does not exceed the fee set by Applicable Law, the fee 

is conclusively presumed to be reasonable.

Exh. 6 to SAC, ECF No. 17. Although there is a requirement that 

Defendant Keller request the trustee reconvey the property to 

Plaintiffs, there are no terms requiring Defendant Keller to 

notify the purchaser of the reconveyance, nor to provide 

Plaintiffs a copy of the Substitution of Trustee and Full 

Reconveyance. Plaintiffs’ allegations in the SAC are

insufficient to support their breach of contract claim.

The Court notes, within their breach of contract cause of 

action, Plaintiffs allege Defendant Keller “breached its 

obligations as a Trustee to the [Plaintiffs] as required by 

Civil Code section 2941.” SAC ¶ 41. While California Civil 

Code § 2941 imposes statutory requirements on Defendant Keller 

after an obligation has been satisfied, See Cal. Civ. Code 

§ 2941(b), an action under § 2941 is one in tort rather than 

contract because it seeks damages for violation of a statutory 

duty. Pintor v. Ong, 211 Cal. App. 3d 837, 841 (1989). The 

duty to reconvey exists in express provisions of the statute, 

regardless of any contractual obligations. Id. Therefore, if 

Plaintiffs are claiming that Defendant Keller violated a

statutory requirements of § 2941, the action would be in tort 

not breach of contract. Accordingly, Plaintiffs’ claim for 

breach of contract is dismissed without prejudice.

///

///

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2. Claim Two: Breach of Fiduciary Duty

Ordinarily, Plaintiffs’ claim is no fiduciary duty in a 

lender-borrower relationship. Ragland v. U.S. Bank Nat'l Ass'n, 

209 Cal. App. 4th 182, 206 (2012) (“No fiduciary duty exists 

between a borrower and lender in an arm's length transaction.”);

Lawrence v. Bank of Am., 163 Cal. App. 3d 431, 437 (1985); Price 

v. Wells Fargo Bank, 213 Cal. App. 3d 465, 476 (1989). A lender 

owes no duty of care to a borrower when the lender’s involvement 

of the loan does not exceed the customary role in arm’s length 

lending and servicing. Sheen v. Wells Fargo Bank, N.A., 12 Cal. 

5th 905, 927 (2022), reh'g denied (June 1, 2022).

In a lender-borrower relationship, a special relationship 

can exist in certain circumstances, which may result in 

fiduciary obligations, however, the relationship must be beyond 

the scope of the traditional arm’s length transaction. Barrett 

v. Bank of Am., 183 Cal. App. 3d 1362, 1369 (1986)

(“Confidential and fiduciary relations are in law, synonymous 

and may be said to exist whenever trust and confidence is 

reposed by one person in another.”); Brown v. Wells Fargo Bank, 

N.A., 168 Cal. App. 4th 938, 961 (2008) (determining that a 

bank’s employee inducing elderly and frail individuals to rely 

on the bank to handle their financial affairs constitutes a 

fiduciary relationship.). A lender will owe a fiduciary duty to 

a borrower if it excessively controls or dominates the borrower. 

Pension Tr. Fund for Operating Engineers v. Fed. Ins. Co., 307 

F.3d 944, 955 (9th Cir. 2002).

In lending transactions involving deeds of trust, a trustee 

of a deed of trust is not a true trustee and does not hold 

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fiduciary obligations. Yvanova v. New Century Mortg. Corp., 62 

Cal. 4th 919, 927 (2016). A trustee of a deed of a trust merely 

acts as an agent for the borrower-trustor and the lenderbeneficiary. Id.; Biancalana v. T.D. Serv. Co., 56 Cal. 4th 

807, 819 (2013). 

Here, Plaintiffs argue Defendant Keller breached their 

fiduciary duty as trustee of the deed of trust. SAC at ¶ 48. 

Plaintiffs argue upon the recordation of the Substitution of 

Trustee and Full Reconveyance, Defendant Keller became the 

trustee of the deed of trust and owed a duty to “act with the 

utmost good faith in the best interests of Plaintiffs.” Id. 

Plaintiffs argue Defendant Keller breached this duty when it 

failed to act as a reasonably careful loan provider and failed 

to fulfill its obligations under California Civil Code § 2941. 

Id. ¶¶ 51, 52.

Defendant Keller, however, argues it was not a fiduciary. 

Mem. in Supp. of Mot., ECF No. 19-1 at 9:15-17. Rather, its

relationship with Plaintiffs was that of a lender-borrower under 

a contract. Id. 

Plaintiffs claim a fiduciary relationship began when 

Defendant Keller stepped in as trustee, Opp’n at 14, and 

Defendant Keller breached this duty when it failed to provide a 

copy of the recorded reconveyance to Plaintiffs. Id. The 

failure to provide this document was the proximate cause of 

damages suffered by Plaintiffs. Id.

Here, the facts establishing the parties’ relationship can 

be summarized as follows: (a) Defendant Keller was the initial 

loan provider of the Original Equity Loan; (b) Defendant Keller 

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and Plaintiffs reached an agreement on refinancing the Original 

Equity Loan; and (c) Plaintiffs properly rescinded that loan 

with Defendant Keller, placing them back in the position they 

were prior to the refinance.

The Court finds that no fiduciary relationship between 

Plaintiffs and Defendant Keller existed. Although Defendant 

Keller was the trustee identified in the deed of trust, the law 

is clear that a trustee of a deed of trust is not a fiduciary. 

There are no fiduciary obligations as a trustee of a deed of 

trust, or even just as a lender, absent facts suggesting 

otherwise. Yvanova v. New Century Mortg. Corp., 62 Cal.4th at 

927.

There are no facts alleged which establish Defendant Keller 

acted in any fiduciary capacity with Plaintiffs, such as 

Defendant Keller offering Plaintiffs financial advice or 

Plaintiffs providing Defendant Keller with confidential, 

privileged information, believing they were in a position of 

trust. Plaintiffs have not alleged any facts that create more 

than a typical arm’s length lending and servicing transaction. 

Additionally, Plaintiffs have not alleged any facts that support 

Defendant Keller, acting as trustee, acted more than a passive 

agent for the parties.

Plaintiff’s second claim for breach of fiduciary duty is 

dismissed without prejudice. 

3. Claim Three: Constructive Fraud

Constructive fraud exists when there is a breach of duty,

without actual fraudulent intent, in which the person at fault 

gains an advantage by misleading another with whom they owed a 

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duty. Cal. Civ. Code § 1573. Constructive fraud depends on the

existence of a fiduciary relationship of some kind and arises

from a breach of duty in that relationship. Mark Tanner Constr.

v. Hub Internat. Ins. Servs., 224 Cal. App. 4th 574, 588 (2014);

Ragland v. U.S. Bank Nat'l Ass'n, 209 Cal. App. 4th 182, 207

(2012); Barrett v. Bank of Am., 183 Cal. App. 3d 1362, 1369

(1986); Darrow v. Robert A. Klein & Co., 111 Cal. App. 310, 316

(Cal. Dist. Ct. App. 1931). Like fraud claims, an action for 

constructive fraud requires a heightened pleading standard in 

which the action must be pled with specificity. Schauer v. 

Mandarin Gems of Cal., Inc., 125 Cal. App. 4th 949, 960 (2005). 

Here, Plaintiffs argue Defendant Keller committed

constructive fraud in violation of California Civil Code § 1573

because Plaintiffs reasonably relied on Defendant Keller as the

substituted trustee to comply with California Civil Code § 2941. 

SAC ¶ 58. Plaintiffs state Defendant Keller’s failure to

provide Plaintiffs a copy of the recorded Substitution and Full

Reconveyance of the Deed of Trust caused damages to Plaintiffs. 

Id. Defendant Keller’s failure to disclose to the other

defendants that the May 2022 Refinanced Equity Loan was

reconveyed and repurchased was a substantial factor in causing

Plaintiffs’ harm. Id. ¶¶ 59, 60. 

Defendant Keller argues it did not owe Plaintiffs a

fiduciary duty, thus, Plaintiffs’ constructive fraud claim

fails. Mem. in Supp. of Mot. at 11:13-19. The Court agrees.

First, as detailed above, Plaintiffs have failed to show

that Defendant Keller owed Plaintiffs a fiduciary duty, or that

it was in a position of trust or confidence. Absent facts

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demonstrating a fiduciary relationship, Plaintiffs’ constructive

fraud claim fails. 

Second, Plaintiffs have failed to allege that Defendant

Keller, or any other party, gained any advantage by Defendant

Keller’s failure to disclose that the May 2022 Refinanced Equity 

Loan was reconveyed and repurchased. 

Third, Plaintiffs repeatedly state that Defendant Keller’s

failure to provide the copy of the recorded Substitution and

Full Reconveyance of Deed of Trust caused Plaintiffs’ damages. 

Plaintiffs, however, have failed to allege facts demonstrating

causation to establish “but-for” Defendant Keller failing to

provide the documentation, Plaintiffs would not have been

injured.

For all these reasons, Plaintiffs’ claim for constructive

fraud is dismissed without prejudice. 

4. Request for Attorney’s Fees

Defendant Keller requests the Court dismiss Plaintiffs’ 

claim for attorney’s fees. Mot. at 2. Under California law, the

prevailing party is not entitled to attorney’s fees unless 

provided for by contract or statute. Cal. Code Civ. Proc. §

1021; See also Cal. Code Civ. Proc. § 1033.5(a)(10) (establishing

attorney’s fees are allowable as costs when authorized by (a) 

contract; (b) statute; or (c) law.). 

Plaintiffs have not cited to a statute or any other law that 

entitles them to attorney’s fees in this case. Under California 

Civil Code § 1717, Plaintiffs also cannot recover attorney’s fees 

unless the action is under the contractual obligations set forth 

in the deed of trust. Cal. Civ. Code § 1717. Because 

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Plaintiffs’ breach of contract claim fails, there is no action on 

the deed of trust and Plaintiffs are not entitled to attorney’s 

fees.

Plaintiffs’ claim for attorney’s fees is dismissed without 

prejudice.

5. Punitive Damages Claim

Defendant Keller also requests an Order dismissing

Plaintiffs’ claim for punitive damages. Mot. at 2. Defendant 

Keller argues Plaintiffs fail to allege any facts in which 

fraudulent, malicious, or oppressive conduct could be inferred. 

Mem. in Supp. of Mot. at 14 (citing Kelley v. Corr. Corp. of Am., 

750 F.Supp.2d 132, 1447 (E.D. Cal. 2010)). 

If a cause of action bars recovery of certain damages, the 

request for damages can be dismissed in a Rule 12(b)(6) motion. 

Vaughan v. Anderson Reg'l Med. Ctr., 849 F.3d 588, 590 (5th Cir. 

2017); Beluca Ventures LLC v. Einride Aktiebolag, No. 21-CV06992-WHO, 2022 WL 17252589, at *5 (N.D. Cal. Nov. 28, 2022) 

(determining if punitive damages are unavailable as a matter of 

law, a motion to dismiss under Rule 12(b)(6) is procedurally 

proper.).

California Civil Code § 3294(a) allows punitive damages 

under certain circumstances by way of “punishing the defendant” 

in actions not arising from a contract. Here, Plaintiffs claims 

for breach of fiduciary duty and constructive fraud were the only

non-contractual claims against Defendant Keller. Both claims 

have been dismissed. 

Given the failure of Plaintiffs to properly plead a tortious 

claim against Defendant Keller, as a matter of law, Plaintiffs 

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request for punitive damages also fails and is dismissed without 

prejudice. Copelan v. Infinity Ins. Co., 359 F.Supp.3d 926, 930 

(C.D. Cal. 2019) (determining punitive damages request fails when 

underlying claims fail). 

III. ORDER

For the reasons set forth above, the Court GRANTS Defendant 

Keller’s Motion to Dismiss claims one, two and three against it 

WITHOUT PREJUDICE. The Court also GRANTS Defendant Keller’s 

Motion to Dismiss Plaintiffs’ request for attorney’s fees and 

punitive damages WITHOUT PREJUDICE. If Plaintiffs elect to amend 

their complaint, they shall file their Third Amended Complaint 

within twenty days (20) of this Order. Defendants’ responsive 

pleadings are due twenty days (20) thereafter. 

IT IS SO ORDERED.

Dated: October 12, 2023

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