Filed 5/25/21 Munro v. First American Title CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

JASON MUNRO,

Plaintiff and Appellant,

v.

FIRST AMERICAN TITLE

COMPANY,

Defendant and Respondent. B295805

(Los Angeles County

Super. Ct. No.

BC370141/JCCP4751)

APPEAL from a n order of the Superior Court of Los

Angeles County, Maren E. Nelson, Judge. Affirmed.

The Bernheim Law Firm, Steven J. Bernheim, Nazo S.

Semerjian; Friedman Rubin, Richard H. Friedman; Shernoff

Bidart Echeverria, Michael J. Bidart and Steven P. Messner, for

Pla intiff and Appellant.

Dentons US, Ronald D. Kent, Joel D. Siegel, Susan M.

Walker, and Paul M. Kakuske, for Defendant and Respondent.2 Plaintiff Jason Munro (Munro) sued defendant First

American Title Company ( FATCO ) and related entities in 2007,

alleging various state law claims

. Among them was a claim

under California’s Unfair Competition Law (UCL) that was

predicated on an alleged violation of the Real Estate Settlement

Procedures Act (RESPA) (12 U.S.C. § 260 1 et seq. ). S ome 12

years after the lawsuit was filed , Munro sought leave to file a

fourth amended complaint that would add a freestanding RESPA

claim (i.e., a violation of RESPA itself, not a violation alleged as a

UCL predicate) . We consider whether the tr ial court abused its

discretion when it concluded Munro’s delay in seeking leave to

amend

, and the prejudicial effect of such delay on FATCO

,

warranted denial of leave to amend

.

I. BACKG ROUND

A. The Initial and Operative Complaints

Munro and another named plaintiff, Elizabeth Wilmot,

purchased homes in California and received title and escrow

services from FATCO

. In 2007, they filed a putative class action

alleging, among other things, they were referred to FATCO for

title and escro w services by third parties who received “ unlawful

inducements ” (alternately characterized as referrals or

kickbacks) from FATCO

. The complaint alleged the inducements

violated the UCL because they are unlawful under RESPA, which

prohibits giving or recei ving anything of value “ pursuant to any

agreement or understanding

. . . that business incident to or a

part of a real estate settlement service involving a federally

related mortgage loan shall be referred to any person. ” ( 12

U.S.C. § 2607(a). ) The comp laint did not include a standalone3

RESPA claim, however, and the complaint took care to assert

“[f]ederal jurisdiction over this action does not exist.” 1

After two intervening amendments, Munro filed t he

operative third amended complaint in 2010

. It define s a sub class

of persons who paid for title insurance or escrow services by

FATCO for property located in California “who were referred to

[FATCO] by a home builder or developer who received a

commission, compensation, kickback, or other conside ration or

thing of value from [FATCO] .” Munro, the only named plaintiff

belonging to this putative sub class, allege s he was referred to

FATCO by the developer of his property and the developer

received discounts and services from FATCO

.

Like all the comp laints that preceded it, t he operative

complaint allege d th ese referrals or kickbacks constituted unfair

competition because they are unlawful under RESPA

. No

freestanding RESPA claim was alleged, and the complaint

continued to include an assertion that “[f]ederal jurisdiction does

not exist”

— plus the further statement that Munro was seeking

class

- wide “damages, restitution, and disgorgement of monies

wrongfully taken” but not “fine[s] or an administrative penalty

. ”

The operative complaint additionally allege d o ther state law

causes of action for breach of fiduciary duty, fraud, and

constructive fraud

, and these were based, in part, on allegations

of inducements paid to homebuilders and developers for referrals.

1 In a related case with a similar UCL claim that was filed by

the same attorneys representing Munro, the attorneys defeated

FATCO’s attempt to remove the action to federal court by

contending no federal ques tion jurisdiction exists when a RESPA

violation is alleged as the predicate for a UCL violation, rather

than on a standalone basis.4 B. Litigation Stays and the Request to File a Fourth

Amended Complaint

Munro deposed witnesses employed by the developer of his

property and FATCO in 2008

. He also served interrogatories and

requests for production of documents relating to the alleged

RESPA violations in 2010 and 2011. The case was stayed

intermittently between 2009 and 2016 as the result of a motion to

disqualify FATCO’s attorneys

, various motions in related cases

,

and appeals

.

In April 2018, Munro moved for leave to file a fourth

amended complaint

, adding a freestanding RESPA claim

. (Two

months later, Munro also asked to voluntarily dismiss all causes

of action other than his UCL claim from the operative complaint,

a request the trial court granted.) Munro did not explain why his

earlier pleadings did not include a standalone RESPA claim

, but

he contended there would be no prejudice to FATCO because the

amended complaint allege d no new facts and the alleged RESPA

violation was already a predicate for recovery under the UCL.

The only statement s bearing on when Munro determined

further amendment of the complaint was advisable and on the

reasons why leave to amend was not sought ear lier

— both are

required by the Rules of Court (Cal. Rules of Court, rule

3.1324(b)(3)

- (4))

— came in declaration s submitted with Munro’s

reply brief in support of leave to amend. A declaration, authored

by Richard Friedman (Friedman), one of Munro’s attorney s,

stated: “After a review of all of the factual information obtained

in discovery, extensive legal research, and many hours of

consultation with experts, [Munro’s attorneys] recently reached

the conclusion that there was no viable class

- wide damages

theo ry available under the existing non

- RESPA state causes of5

action, and that a fre e standing RESPA cause of action provides

an efficient, straightforward damages theory, readily susceptible

to class treatment.” A declaration by another of Munro’s

attorneys, Nazo Semerjian (Semerjian), stated, among other

things, that FATCO “produced thousands of documents relating

to Munro’s homebuilder inducement claim, including

communications with homebuilders evidencing the negotiation of

fees for title and escrow service s” in late 2016.

C. The Trial Court Denies Leave to Amend

After hearing argument from counsel and soliciting

supplemental briefing, the trial court denied Munro’s motion for

leave to amend. T he trial court concluded Friedman’s declaration

was improperly submitted only in reply but, regardless, there

still was no adequate explanation of when the facts giving rise to

the proposed amendment were discovered and why the

amendment was not made earlier. The court accordingl y found

that Munro’s request for leave to amend was plagued by delay

and, further, that FATCO was prejudiced by that delay.

As to prejudice specifically, the trial court found the

proposed amendment would prejudice FATCO in two related

ways. First, bec ause the only relief available to Munro under the

UCL was restitution, FATCO had “focused its defensive efforts ”

and discovery practice on “ determining whether restitution could

be recovered

. . . , rather than on defending against the facts

supporting the RESPA claim itself.” Second, the court found

defending against the statutory penalties recoverable under a

freestanding RESPA claim would require depositions of third

party builders for more than 600 developments concerning

transactions that occurred as early as 15 years before, in 2003

.6

The court concluded the proposed pleading change that would

require FATCO to locate witnesses and discover what recollection

they had of events long ago to defend against a RESPA claim was

prejudicial.

A fter the trial court denied leave to file a fourth amended

complaint, Munro asked the trial court to dismiss his UCL claim

( the last remaining claim in the operat ive complaint ) to enable

him to immediately take an appeal from the trial court’s order

denying further leave to amend the complaint. That is the appeal

now before us for resolution

.

II. DISCUSSION

The trial court was correct to deny Munro leave to file

another amended complaint. In our view, Munro’s inadequately

explained delay in seeking leave to allege a standalone RESPA

claim

— which smacks of a conscious, strategic choice to avoid

removal of the action to federa l court

— is reason enough to justify

the trial court’s decision. But the trial court further found the

long delay in alleging a direct RESPA claim would prejudice

FATCO, and this was undoubtedly correct: If yet another

amendment were permitted, FATCO ’s abi lity to defend against

assessment of statutory penalties would require the company to

undertake far more extensive discovery than it had (to probe

whether FATCO accepted any fee, kickback, or thing of value

pursuant to an “agreement or understanding” with a developer)

,

and undertaking such discovery would be more burdensome and

less productive at this late date

.7 A. Applicable Law and Standard of Review

“ The court ma y

. . . , in its discretion, after notice to the

adverse party, allow, upon any terms as may be just, an

amendment to any pleading

. . . .” ( Code Civ. Pro., § 473, 2 subd.

(a)(1). ) “We review a denial of leave to amend for abuse of

discretion. ” ( Miles v. City of Los Angeles (2020) 56 Cal.App.5th

728, 739 ( Miles ) .)

Section 473 “h as received a very liberal interpretation by

the courts of this state. [Citations.] In spite of this policy of

liberality, a court may deny a good amendment in proper form

where there is unwarrante d delay in presenting it. [Citations.]

On the other hand, where there is no prejudice to the adverse

party, it may be an abuse of discretion to deny leave to amend.

[Citation.]” ( Thompson Pacific Construction, Inc. v. City of

Sunnyvale (2007) 155 Cal.Ap p.4th 525, 544

- 545 ; Melican v.

Regents of University of California (2007) 151 Cal.App.4th 168,

175 [reviewing courts are “less likely to find an abuse of

discretion where

. . . the proposed amendment is “‘“offered after

long unexplained delay

. . . or where there is a lack of

diligence”’ ” ” ] ( Melican ) .) Prejudice to the party opposing a

proposed amendm ent may include increased discovery burdens.

( Magpali v. Farmers Group (1996) 48 Cal.App.4th 471, 486

- 487 ;

Miles

, supra

, 56 Cal.App.5th at 739.)

2 Undesignated statutory references that follow are to the

Code of Civil Procedure.8 B. Munro’s Tactical Decision to Delay Pleading a

Standalone RESPA Claim Warrants Denial of Leave

to Amend Even Absent a Showing of Prejudice

In his opening brief, Munro argues the timing of his motion

for leave to amend is not alone sufficient to justify its denial. H e

lists 23 cases ( th ough only two from this century) intended to

establish the proposition that unexplained or unreasonable delay

in asserting a claim cannot by itself justify denying leave to

amend because a part y may amend its pleading at any point in

the proceedings, including during trial. The list is incomplete

and unconvincing. There is ample authority that a strategic

decision to delay asserting a known claim

, without any further

showing

, can justify denial of leave to amend. (See, e.g., Doe v.

Los Angeles County Dept. of Children & Family Services (2019) 37

Cal.App.5th 675, 689 ; Huff v. Wil kins (2006) 138 Cal.App.4th

732, 765 [“‘ even if a good amendment is proposed in proper form,

unwarranted delay in presenting it may

— of itself

— be a valid

reason for denial ’”] ; Record v. Reason (1999) 73 Cal.App.4th 472,

486 ; Melican

, supra

, 151 Cal.App.4th at 175; see also Green v.

Rancho Santa Margarita Mortgage Co

. (1994) 28 Cal.App.4th

686, 692 [“ There is a platoon of authority to the effect that a long

unexcused delay is sufficient to uphold a trial judge ’ s decision to

deny the opportunity to amend pleadings, particularly where the

new amendment would interject a new issue which requires

further discovery ”] ( Green )

. ) T hat sort of delay is what we have

here.

It is indisputable that Munro knew, from the outset of this

litigation, that he had a potential claim against defendant for

violating RESPA ; an asserted RESPA violation was the express

predicate of his UCL claim. It also is beyond dispute that9

Munro’s newfound desire to add a standalone RESPA claim to his

lawsuit was not predicated on any recently discovered new facts;

his briefs in the trial court and this court repeatedly emphasize

his proposed fourth amended complaint added no new factu al

allegations. In addition, when requesting leave to amend, Munro

opted not to provide the explanation of the circumstances and

reasons prompting the request as required by the rules of court.

( Cal. Rules of Court, rule 3.1324 (b) [A party seeking leave to

amend should state “(3) [w]hen the facts giving rise to the

amended allegations were discovered[ ] and [¶] (4) [t]he reasons

why the request for amendment was not made earlier”].) The

reason for the vague, inadequate explanation given is

understandable : there simply was no good explanation to

provide

. 3

3 Semerjian ’s declaration mentions th e stay lifted in late

2016 but makes no effort to articulate why Munro did not include

the RESPA cause of action in his third amended complaint or

why he waited until April 2018 to seek leave to amend.

Friedman’s declaration is vague and conclusory, menti oning only

a “recent” realization of the advisability of pleading a standalone

RESPA claim and mentioning documents produced in discovery

as late as 2016 without shedding any light on why these

documents made a RESPA cause of action any more viable than

it was years before. Friedman’s declaration does explain why

Munro intended to dismiss his state law causes of action

, but it is

silent as to why he did not plead the RESPA cause of action

earlier. Indeed, Munro’s counsel conceded in the trial court that

it was “correct” that “there [was] no showing Munro could not

have put forth his RESPA claim when his action was filed in

2007.”10 Instead

, Munro’s failure to explain, the absence of new

facts discovered, Munro’s knowledge of the RESPA claim from

the outset, and, most tellingly, the conspicuous allegation in all of

Munro’s complaints that the re was no federal jurisdiction over

the lawsuit rather obviously signals that the delay in pleading a

standalone RESPA claim was to gain a perceived tactical

advantage : to avoid removal of the action to federal court. That

Munro later changed his mind and decided, after the UCL claim

was the only one left standing, that the possibility of removal to

federal court was the lesse r of the existing evils (particularly in

light of established law that prior state court rulings are not

binding on a federal court presiding over a removed action (see

,

e.g., Granny Goose Foods, Inc. v. Brotherhood of Teamsters (1974)

415 U.S. 423, 437 ) ) is immaterial

. 4 Second guessing one’s

litigation strategy does not mean the original decision made was

not itself strategic. And Munro’s conscious, strategic decision to

avoid asserting a claim until late in the litigation is proper

grounds by itself to refuse to permit amendment. (See, e.g.,

Green

, supra

, 28 Cal.App.4th at 693

- 694 [acknowledging the

defendant’s argument “ that, in the absence of any prejudice, it

was an abuse of discretion not to let the [defendant] amend its

pleadings ” but holding there was no abuse of discretion in

4 Munro suggests that permitting denial of leave to amend

solely on a showing of long, strategically motivated delay in

asserting a claim would be inconsistent with section 473,

subdivision (a). To be sure, denying leave to amend solely on a

s howing of neglect, excusable or not, might well create tension

with case law interpreting section 473, subdivision (a). But , as

the cases we have cited hold, denying leave for the sort of delay

involved here does not conflict with section 473, subdivision (a).11

denying leave to amend when the defendant’s “ lack of any excuse

for not pleading the defens e earlier ,” gave rise to an inference of

“ legal gamesmanship in its purest sense ”].)

C. T he Trial Court Correctly Concluded the Delay

Prejudiced FATCO

, Which Means Denial of Leave to

Amend Was Unquestionably Proper

M unro concedes that “RESPA provides a straightforward

statutory penalty not available under the other counts, which

raise more complicated issues associated with damages, punitive

damages and restitution.” Indeed, among other penalties,

persons who violate RESPA are “ liable to the person or persons

charged for the settlement service involved in the violation in an

amount equal to three times the amount of any charge paid for

such settlement service. ” ( 12 U.S.C. § 2607(d)(2). ) Although no

such penalty is available under the UCL, Mu nro contends

FATCO had similar exposure on his causes of action for fraud,

constructive fraud, and breach of fiduciary duty

, for which he

sought to recover compensatory and punitive damages.

Even if the amount of FATCO ’s potential liability for

compensatory and punitive damages might have been equal to or

greater than the penalt ies available under RESPA

— which we do

not decide

— the trial court’s prejudice finding is not based on the

magnitude of FATCO ’s exposure. It is based, rather, on FATCO ’s

ca lculation that it could defeat Munro’s state law causes of action

without addressing whether there was a prohibited “agreement

or understanding” between FATCO and all the various property

developers because Munro was not entitled to restitution or

damages

.12 The trial court reasoned FATCO would be prejudiced by the

need to “shift gears” from a focus on “determining whether

restitution could be recovered under the UCL if the underlying

RESPA claim were proven” to “defending against the facts

supporting the RESPA claim itself.” Unlike Munro’s state law

causes of action based on alleged RESPA violations, recovery on a

freestanding RESPA cause of action would not require proof of

entitlement to restitution or damages

, which means the focus of

FATCO’s defense would likely, and maybe even necessarily,

switch to establishing the facts concerning FATCO’s relationship

between all of the various property developers alleged to have

paid referral fees or “kickbacks

. ” 5

Munro nevertheless contends that even if FATCO did not

need to defend the underlying RESPA violation earlier in the

litigation, FATCO did undertake relevant discovery

. 6 Munro

5 Munro faults the trial court for focusing on the UCL

without discussing compensatory and punitive damages available

under his other state law causes of action. But the trial court’s

discussion was driven by Munro ’s emphasis that FATCO needed

to defend the underlying RESPA violation in the context of his

UCL cause of action. Moreover , the trial court’s reasoning

— that

recovery under the state law causes of action required a showing

that a freestanding RESPA claim would not

— applies with equal

force to all of Munro’s state law causes of action.

6 Munro also argues FATCO “focused its defensive efforts on

preventing Munro from learning the information needed to prove

the RESPA violations

. ” Even if true, this is irrelevant to whether

the proposed amen dment would prejudice FATCO . The trial

court’s denial of Munro’s motion for leave to amend did not , as

Munro puts it, “reward [FATCO] for its ‘stonewalling’” because,13

emphasizes FATCO served document requests and

interrogatories relating to the underlying RESPA violations in

2007 and 2008. The trial court acknowledged this discovery, but

explained that “very little has been done by way of deposition to

explain those documents, including depositions of third party

builders themselves

. . . . This includes depositions related to

some 641 subdivisions. ” In addition to the burden that taking a

large number of additional depositions would place on FATCO

,

the trial court emphasized witnesses’ memories were likely to

have faded: “As [FATCO] demonstrated, even when third parties

were deposed in 2008

. . . , they had little or no recollection of the

transaction.” Under these circumstances, the prejudice to

FATCO

, when combined with Munro’s delay in advancing a

freestanding RESPA claim

, undoubtedly establishes the trial

court’s denial o f leave to amend was not an abuse of discretion

. ( P&D Consultants, Inc. v. City of Carlsbad (2010) 190

Cal.App.4th 1332, 1345 [need for additional discovery supported

denial of leave to amend]; Green

, supra

, 28 Cal.App.4th at 692 .)

as Munro concedes , the proposed RESPA cause of action is not

based on new facts.14 DISPOSITION

T he trial court’s order is affirmed. FATCO shall recover its

costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

BAKER, Acting P. J.

We concur:

MOOR , J.

KIM, J.