Court Opinion

ID: 4689877
Source: CourtListenerOpinion
Date Created: 2021-05-25 18:03:23.452648+00
Date Added: 2024-06-11T08:04:56.812108
License: Public Domain

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   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for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,                                                     B295805

          Plaintiff and Appellant,                                (Los Angeles County
                                                                  Super. Ct. No.
          v.                                                      BC370141/JCCP4751)

 FIRST AMERICAN TITLE
 COMPANY,

          Defendant and Respondent.

      APPEAL from an 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
Plaintiff and Appellant.
      Dentons US, Ronald D. Kent, Joel D. Siegel, Susan M.
Walker, and Paul M. Kakuske, for Defendant and Respondent.
      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. § 2601 et seq.). Some 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 trial 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. BACKGROUND
       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 escrow 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 receiving 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 complaint did not include a standalone

                                  2
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 the
operative third amended complaint in 2010. It defines a subclass
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 consideration or
thing of value from [FATCO].” Munro, the only named plaintiff
belonging to this putative subclass, alleges he was referred to
FATCO by the developer of his property and the developer
received discounts and services from FATCO.
       Like all the complaints that preceded it, the operative
complaint alleged these 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 alleged other 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 question jurisdiction exists when a RESPA
violation is alleged as the predicate for a UCL violation, rather
than on a standalone basis.

                                 3
      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 alleged no new facts and the alleged RESPA
violation was already a predicate for recovery under the UCL.
       The only statements bearing on when Munro determined
further amendment of the complaint was advisable and on the
reasons why leave to amend was not sought earlier—both are
required by the Rules of Court (Cal. Rules of Court, rule
3.1324(b)(3)-(4))—came in declarations submitted with Munro’s
reply brief in support of leave to amend. A declaration, authored
by Richard Friedman (Friedman), one of Munro’s attorneys,
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
theory available under the existing non-RESPA state causes of

                                4
action, and that a freestanding 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 services” 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. The 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 accordingly 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, because 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.

                                5
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.
       After 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 operative 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 federal 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 ability 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.

                                6
       A.     Applicable Law and Standard of Review
       “The court may . . . , 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 “has 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 unwarranted 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.App.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 amendment 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.

                                  7
      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. He
lists 23 cases (though 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 party 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. Wilkins (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).) That 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 that

                                 8
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 factual
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 the 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, mentioning 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.”

                                 9
       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 there 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 lesser 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
showing 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).

                                 10
denying leave to amend when the defendant’s “lack of any excuse
for not pleading the defense earlier,” gave rise to an inference of
“legal gamesmanship in its purest sense”].)

      C.     The Trial Court Correctly Concluded the Delay
             Prejudiced FATCO, Which Means Denial of Leave to
             Amend Was Unquestionably Proper
      Munro 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, Munro 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 penalties 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
calculation 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.

                                11
       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 amendment 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,

                               12
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 of 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.

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                           DISPOSITION
      The 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.

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