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Ornstein v. Bank of New York Mellon

United States District Court, D. Arizona

September 25, 2018

Ian Neal Ornstein, Plaintiff,
Bank of New York Mellon, Defendant.


          Hon. Rosemary Marquez, United States District Judge

         Pending before the Court is Defendant's Motion to Dismiss for Failure to State a Claim, or In the Alternative, Motion for More Definite Statement (Doc. 10). Also pending is Plaintiff's Motion to Disregard Defendant's Late Reply (Doc. 22), as well as the Plaintiff's Notice to the Court to Take Notice of Numerous False Statements (Doc. 27).[1] The Court will grant the Motion to Dismiss, deny the Motion to Disregard, and decline to impose sanctions on either party.

         I. Background

         Plaintiff's pro se Complaint brings seven claims[2] against Defendant Bank of New York Mellon asserting that Defendant committed statutory and regulatory violations in addition to causes of action based in contract and tort in its capacity as a lender.[3] (See Doc. 1.) In the Complaint, Plaintiff alleges that he executed a $378, 750 promissory note (“the Note”) in July 2006, which was secured by his home located at 6655 North Donna Beatrix Circle, Tucson, Arizona 85718 (“the Property”). (Doc. 1 at 6; see also Doc. 1-1 at 18-21.) He further alleges that beginning in July 2008 some of his loan repayments were returned, mostly without explanation. (Id.) Defendant became a trustee on the deed in April 2011. (Doc. 1 at 6.) Plaintiff seeks compensatory and punitive damages and a stay of a writ of restitution. (Doc. 1 at 18.)

         II. Plaintiff's Motion to Disregard & Notice Re: False Statements

         Plaintiff asks the Court to disregard Defendant's Reply in support of its Motion to Dismiss because it was untimely filed. (Doc. 22.) Defendant responded to the Motion providing an apology to the Court as well as an explanation as to why the Reply was untimely filed. (Doc. 23 at 2-3.) The Response asks that the Court strike the Motion to Disregard for failure to comply with LRCiv 7.1(a) and seeks a Court order requiring Plaintiff to update his contact information.[4] (Id.)

         Plaintiff's Notice of Defendant's False Statements lists three instances in which James Ugalde, counsel for Defendant, made statements that Plaintiff asserts constitute perjury and subornation of perjury under 18 U.S.C. §§ 1621 and 1622, respectively. (See Doc. 27). Plaintiff requests “that the Court take appropriate action to sanction James Ugalde.” (Doc. 27 at 4.) Defendant responded to the Notice asserting that none of Mr. Ugalde's conduct is sanctionable, addressing the particulars of Plaintiff's allegations of perjury, and suggesting that the Court “should consider sanctioning or reprimanding Ornstein.” (See Doc. 31.)

         At this time the Court will deny Plaintiff's Motion to Disregard despite Defendant's untimely Reply, see LRCiv 83.6, and will decline to impose any sanctions based on the conduct described in the Motion and Notice. The Court is concerned that the parties have taken to pursuing this litigation in a needlessly contentious manner; going forward, the parties are encouraged to file motions only if they have merit and if they are for the primary purpose of assisting the Court in justly and expeditiously resolving this lawsuit.

         III. Defendant's Motion to Dismiss

         The seven claims in Plaintiff's Complaint are: (1) three consumer protection-related federal regulatory and statutory violations, (2) breach of contract, (3) violation of A.R.S. § 12-1622(C), (4) violation of a Pima County Superior Court order, (5) “false documents, ” (6) defamation, and (7) intentional infliction of emotional distress. Defendant seeks to have all of these claims dismissed on the grounds that they fail to state a claim upon which relief may be granted, are insufficiently pled and indefinite, or are unsupported by factual allegations. (Doc. 10 at 1-2); Fed.R.Civ.P. 12(b)(6). Defendant states that Plaintiff has failed to make any allegations entitling him to compensatory damages, let alone punitive damages.[5] (Doc. 10 at 15-16.) Defendant alternatively asks that Plaintiff be required to provide a more definite statement. (Doc. 10 at 1); Fed.R.Civ.P. 12(e).

         Plaintiff responds in opposition to the motion and asks that “the Court take judicial notice of Defendant's Numerous False Statements, of which only thirteen [are] addressed in [the] Response.” (Doc. 18 at 1.) He claims that these false statements violate 31 U.S.C. § 3730(b). (Id.) In addition, Plaintiff asserts that he has not received Defendant's filings at his address on North Beatrix Circle in violation of the Federal Rules;[6] however he also informs the Court that he was required to vacate that property on May 21, 2018. (Id. at 3.) Plaintiff has an obligation to file a notice of address change 14 days before the effective date of the change. LRCiv 83.3(d). Thus, the Court will require Plaintiff to file a notice of address change within 7 days of this Order and will decline to address any issues regarding service under Fed.R.Civ.P. 5 until Plaintiff's mailing address is corrected.

         Generally, Plaintiff contests the assertion that any of his claims have been previously litigated and argues that they are not barred by res judicata and alternatively that “res judicata is rejected when its application would result in manifest injustice.”[7](Doc. 18 at 3-4, 10 (quoting Tipler v. E.I. DuPont de Mours and Co., 443 F.2d 125, 128 (6th Cir. 1971).) He also rejects Defendant's arguments that his various claims are insufficiently pled or vague; he cites to the statutes and regulations upon which he bases his claims in support of this argument. (Id. at 5-6.) Plaintiff states that he never defaulted on his loan, so any of Defendant's assertions to the contrary are false. (Id. at 6.) He also makes an argument appearing to contest Defendant's right to foreclose on his property. (Doc. 18 at 12.) Finally, Plaintiff repeats comparisons in his Complaint of his case to Holms v. Wells Fargo Home Mortgage, Inc., 514 S.W.3d 590 (Mo. 2017) (en banc). (Id. at 15-17.)

         Defendant replied in support of its Motion to Dismiss (Doc. 21). Primarily, the Reply argues that Plaintiff's Response to the Motion to Dismiss is nonresponsive and that, as a result, the Court should grant the Motion as uncontested. (Id. at 1-3.) Defendant concludes its Reply by asking that the Court dismiss the Complaint with prejudice.

         As to Plaintiff's Claim 1, Defendant asserts that the regulations are “inapplicable to Plaintiff, barred by res judicata, and untimely” and for those reasons must be dismissed. (Doc. 10 at 7.) Defendant asserts that 24 C.F.R. § 201.50 does not apply to Plaintiff's loan because the value of the loan was too high to fall within the Department of Housing and Urban Development's (“HUD”) purview, and that Plaintiff made no allegation in the Complaint that Defendant was subject to the regulation. (Id. at 7-8.) In support of the contention that these claims are barred by res judicata, Defendant points to a 2015 case filed by Plaintiff in the Maricopa County Superior Court (No. CV2015-052615) (“Wrongful Foreclosure Case”), [8] which was dismissed because Plaintiff failed to obtain an injunction of the trustee's sale as required by A.R.S. § 33-811(C). (Id. at 8-9.) In addition, Defendant argues the Wrongful Foreclosure Case addresses why the instant case should be barred under A.R.S. § 33-811(C). (Id. at 9.) Finally, Defendant argues that claims under 15 U.S.C. § 1639c(h) and 12 U.S.C. § 2605(e)(2) are barred by three-year statutes of limitations because all of the conduct described in the Complaint necessarily took place before the April 7, 2015 trustee's sale. (Id. at 9-10.) In any event, Defendant explains that under Arizona law, lenders do not owe their borrowers a fiduciary duty. (Id. at 11.)

         Plaintiff responds that Defendant does owe him a fiduciary duty and that the case Defendant cited for the rule that lenders do not owe borrowers a fiduciary duty is not controlling. (Doc. 18 at 9-10 (quoting as contrary law Silving v. Wells Fargo Bank, NA, 800 F.Supp.2d 1055 (D. Ariz. 2011)).

         Defendant asserts that Claims 2 and 3 also fail based on res judicata. (Doc. 10 at 10-11.) Both Claims, according to Defendant, are further barred by A.R.S. § 33-811(C) (Id. at 11), and Claim 3's reliance on A.R.S. § 12-1622(C) is misplaced because that section is inapplicable to the sale at issue here. (Id. at 11.) Specifically, this sale was instead subject to the requirements of A.R.S. § 33-801 et seq., and since Defendant was not a “seller” within the meaning of the statute, it is also inapplicable. (Id.)

         Defendant argues that the Court must dismiss Claim 4 both because it fails to state a claim upon which relief may be granted and because Plaintiff is currently litigating an action based on the same facts, so the Court should refrain from exercising jurisdiction based on the Colorado River abstention doctrine. (Doc. 10 at 13 (citing Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976)).)

         As to Plaintiff's Claim 5, Defendant asserts that the one-sentence claim does not satisfy the pleading requirements and therefore must be dismissed. (Doc. 10 at 11-12.) Similarly, Defendant contends, Claim 6 fails to state a claim because it does not satisfy the pleading requirements of the Federal Rules, nor does it bring any factual allegations as to the elements of an Arizona defamation claim. (Id. at 12-13.)

         As to Claim 7, Defendant points out that the primary case Plaintiff cites in support of his claim is not binding on this Court. (Doc. 10 at 14.) Further, Plaintiff failed to plead any of the elements of an emotional distress claim. (Id.) Defendant additionally argues that Plaintiff cannot claim emotional distress from wrongful foreclosure because foreclosure on the property was not wrongful. (Id.; see Doc. 10-7.)

         A. Standard of Review on a Motion to Dismiss

         A complaint must include a “short and plain statement . . . showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). While Rule 8 does not require in-depth factual allegations, it does require more than “labels[, ] conclusions, [or] a formulaic recitation of the elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). There must be sufficient “factual content [to] allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         Dismissal under Rule 12(b)(6) may be “based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). When reviewing a motion to dismiss pursuant to Rule 12(b)(6), a court takes “all factual allegations set forth in the complaint . . . as true and construed in the light most favorable to plaintiffs.” Lee v. City of L.A., 250 F.3d 668, 679 (9th Cir. 2001). However, only well-pleaded facts are given a presumption of truth. Iqbal, 556 U.S. at 679. Conclusory allegations-that is, allegations that “simply recite the elements of a cause of action” without supplying underlying facts to support those elements-are not “entitled to the presumption of truth.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

         The Court may “consider certain materials-documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice- without converting [a] motion to dismiss into a motion for summary judgment.” United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). “[I]t is proper for the district court to ‘take judicial notice of matters of public record outside the pleadings' and consider them for purposes of the motion to dismiss.” Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988) (quoting MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986)). Further, the Court is not required to “accept as true allegations that contradict matters properly subject to judicial notice . . . .” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

         As the United States Court of Appeals for the Ninth Circuit has instructed, courts must “continue to construe pro se filings liberally.” Hebbe v. Pliler, 627 F.3d 338, 342 (9th Cir. 2010). A pro se “complaint ‘must be held to less stringent standards than formal pleadings drafted by lawyers.'” Id. (quoting Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam)).

         If a complaint falls short of meeting the necessary pleading standards, a district court should dismiss with leave to amend unless the deficiencies of a pleading “could not possibly be cured by the allegation of other facts.” Lacey v. Maricopa Cnty., 693 F.3d 896, 926 (9th Cir. 2012) (“We have adopted a generous standard for granting leave to amend from a dismissal for failure to state a claim . . . .”). Failing to give leave to amend when a plaintiff could include additional facts to cure a complaint's deficiencies is an abuse of discretion. AE ex rel. Hernandez v. Cnty. of Tulare, 666 F.3d 631, 637-38 (9th Cir. 2012).

         B. ...

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