754 F.3d 772 (9th Cir. 2014)
IN RE: MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., JONATHAN E. ROBINSON; SALLY J. ROBINSON-BURKE; ROSA A. SILVAS; JOSEPHA S. LOPEZ; JOSE TRINIDAD CASAS; MARIA C. CASAS; LYNDON B. GRAVES; TYRONE EVENSON; MICHELLINA EVENSON; BRYAN GRAY, [for complete list of plaintiff/appellants, see Notice of Appeal]; PABLO LEON, Plaintiffs-Appellants,
AMERICAN HOME MORTGAGE SERVICING, INC.; AMERICA'S SERVICING COMPANY; AMERICA'S WHOLESALE LENDER; AURORA LOAN SERVICES, LLC; AZTEC FORECLOSURE CORP.; BAC HOME LOANS SERVICING LP; BANK OF AMERICA, NA; BANK OF NEW YORK MELLON; CALIFORNIA RECONVEYANCE CO.; CENTRAL MORTGAGE CO.; COOPER CASTLE LAW FIRM LLP; CR TITLE SERVICES, INC.; DEUTSCHE BANK; EXECUTIVE TRUSTEE SERVICES, LLC; FEDERAL HOME LOAN MORTGAGE CORPORATION; FEDERAL HOUSING FINANCE AGENCY; FEDERAL NATIONAL MORTGAGE ASSOCIATION; FIDELITY NATIONAL TITLE INSURANCE CO.; FIRST AMERICAN LOAN STAR TRUSTEE SERVICES, LLC; FIRST HORIZON HOME LOAN CORP.; G.E. MONEY BANK; GMAC MORTGAGE, LLC; HOUSEKEY FINANCIAL CORP.; HSBC MORTGAGE CORPORATION, USA; HSBC MORTGAGE SERVICES, INC.; HSBC BANK, U.S.A., N.A.; IB PROPERTY HOLDINGS; JPMORGAN CHASE BANK; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; MERSCORP, INC.; MORTGAGE IT, INC.; MTC FINANCIAL, INC., DBA Trustee Corps.; NATIONAL CITY MORTGAGE; PNC FINANCIAL SERVICES GROUP, INC.; NATIONAL DEFAULT SERVICING CORP.; NDEX WEST LLC; OLD REPUBLIC NATIONAL TITLE INSURANCE CO.; QUALITY LOAN SERVICE CORPORATION; RECONTRUST COMPANY; SAXON MORTGAGE, INC.; T.D. SERVICE COMPANY; UTLS DEFAULT SERVICES, LLC; WELLS FARGO BANK, NA; WESTERN PROGRESSIVE TRUSTEE, LLC; CITYMORTGAGE, INC.; LIME FINANCIAL SERVICES LIMITED, Defendants - Appellees
United States Court of Appeals, Ninth Circuit
June 12, 2014
Argued and Submitted, San Francisco, California:
November 7, 2013.
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Appeal from the United States District Court for the District of Arizona. D.C. No. 2:09-md-02119-JAT. James A. Teilborg, Senior District Judge, Presiding.
Robert Hager and Treva Hearne (argued), Hager & Hearne, Reno, Nevada; William A. Nebeker, Valerie R. Edwards (argued), and Lisa Irene Streu, Koeller Nebeker Carlson & Haluck, LLP, Phoenix, Arizona; and Sheryl Serreze, Reno Law Group, LLC, Reno, Nevada, for Plaintiffs-Appellants.
Andrew Martin Jacobs, Snell & Wilmer, LLP, Tucson, Arizona; Andrew R. Louis, Buckley Sandler, LLP, Washington, D.C.; Cynthia Lynn Alexander and Kelly Harrison Dove, Snell & Wilmer, LLP, Las Vegas, Nevada; Patrick G. Byrne, Gregory J. Marshall, Barbara Dawson, Snell & Wilmer, LLP, Phoeniz, Arizona; Michael R. Pennington, Bradley Arant Boult Cummings, LLP, Birmingham, Alabama; Matthew P. Previn, Buckley Sandler LLP, New York, New York; Henry Faulkner Reichner and Ira S. Lefton, Reed Smith LLP, Philadelphia, Pennsylvania; Thomas Hefferon (argued) and Joseph Yenouskas, Goodwin Proctor LLP, Washington, D.C.; Gary Edward Schnitzer, Kravitz, Schnitzer, Sloane and Johnson, Las Vegas, Nevada; Gregory B. Iannelli, Bryan Cave, LLP, Phoenix, Arizona; Thomas Justin Cunningham, Hugh Balsam, J. Matthew Goodin, Phillip Russell Perdew, Locke Lord, LLP, Chicago, Illinois; Justin Donald Balser, Akerman Senterfitt, Denver, Colorado; Kristin Schuler-Hintz, McCarthy & Holthus, LLP, Las Vegas, Nevada; Paul M. Levine, Matthew A. Silverman, McCarthy, Holthus & Levine, LLP, Scottsdale, Arizona; Robert W. Norman, Houser & Allison, APC, Irvine, California; Ariel Edward Stern, Akerman, LLP, Las Vegas, Nevada; Jonathan D. Fink, Wright, Finlay & Zak, Newport Beach, California; Christopher Jorgensen, Lewis Roca Rothgerber, LLP, Las Vegas, Nevada; Ann Martha Andrews, Lewis Roca Rothgerber, LLP, Phoenix, Arizona; Stefan M. Palys, Stinson Morrison Hecker, LLP, Phoenix, Arizona; David Ray Hall, Parsons Behle & Latimer, Salt Lake City, Utah; LeAnn Pedersen Pope, Danielle Jean Szukala, Burke, Warren, Mackay & Serritella, PC, Chicago, Illinois; Jennifer Reiter, Maynard Cronin Erickson Curran & Sparks, PLC, Phoenix, Arizona; Kent F. Larsen, Joseph T. Prete, Smith Larsen & Wixom, Las Vegas, Nevada; Laurel I. Handley, Pite Duncan, LLP, San Diego, California; David Winthrop Cowles, William Morris Fischbach, III, Leonard McDonald, Jr., Tiffany & Bosco, PA, Phoenix, Arizona; Kevin Hahn, Malcolm & Cisneros, Irvine, California; Aaron Michael Waite, The Cooper Castle Law Firm, LLP, Las Vegas, Nevada; Lucia Nale, Thomas V. Panoff, Mayer Brown, LLP, Chicago, Illinois; Lauren Elliott Stine, Quarles & Brady, LLP, Phoenix, Arizona; Karen Ann Braje, Dennis Peter Maio, Reed Smith, LLP, San Francisco, California; Michael Q. Eagan, Jr., Elizabeth Allen Frohlich, Morgan Lewis & Bockius, LLP, San Francisco, California; Lorenzo Emilio Gasparetti, Reed Smith, LLP, Los Angeles, California; Ira S. Lefton, Reed Smith, LLP, Philadelphia, Pennsylvania; Gregory Wendell Falls, Sherman & Howard, LLC, Phoenix, Arizona; Mark S. Landman, Landman Corsi Ballaine & Ford PC, New York, New York; Howard Lindenberg, Federal Home Loan Mortgage, McLean, Virginia; Jill L. Nicholson, Jonathan William Garlough, Joanne Lee, Foley & Lardner, LLP, Chicago, Illinois; Howard N. Cayne, David Fauvre, Arnold & Porter, LLP, Washington, D.C.; Steven Edward Guinn, Laxalt & Normura, Ltd., Reno, Nevada; James R. Condo, Snell & Wilmer, LLP, Phoenix, Arizona; Christina Wang (argued), Fidelity National Law Group, Henderson, Nevada; Neil Ackerman, Neil Ackerman, LLP, Las Vegas, Nevada; Keith Beauchamp, Roopali H. Desai, Coppersmith Schermer & Brockelman, PLC, Phoenix, Arizona; Benjamin B. Klubes, Buckler Sandler, LLP, Washington, D.C.; Robert Bruce Allensworth, Gregory N. Blase, Brian M. Forbes, K& L Gates, LLP, Boston, Massachusetts; Rachel E. Donn, Marilyn Fine, Meier & Fine, LLC, Las Vegas, Nevada; Peter E. Dunkley, Wolfe & Wyman, LLP, Las Vegas, Nevada; Gregory L. Wilde, Tiffany & Bosco, PA, Las Vegas, Nevada; Douglas Erickson, Maynard Cronin Erickson Curran & Sparks, PLC, Phoenix, Arizona; Robert M. Brochin (argued) and Benjamin Weinberg, Morgan Lewis & Bockius, LLP, Miami, Florida; Brian J. Schulman, Laura Sixkiller, Greenberg Traurig, LLP, Phoenix, Arizona; Richard Joseph Reynolds (argued), Burke Williams & Sorensen, LLP, Santa Ana, California; William F. Hyder, William F. Hyder, PC, Phoenix, Arizona; David H. Pittinsky, Ballard Spahr, LLP, Philadelphia, Pennsylvania; Abran Vigil, Ballard Spahr, LLP, Las Vegas, Nevada; Adam Kyle Bult, Brownstein Hyatt Farber Schreck, LLP, Las Vegas, Nevada; Edward A. Treder, Barrett Daffin Frappier Treder & Weiss, LLP, Diamond Bar, California; Ann Martha Andrews, Lewis Roca Rothgerber, LLP, Phoenix, Arizona; Barbara Dawson, Snell & Wilmer, LLP, Phoenix, Arizona; Kelly Harrison Dove, Snell & Wilmer, LLP, Las Vegas, Nevada; Randall W. Edwards, O'Melveny & Myers, LLP, San Francisco, California; Elizabeth Lemond McKeen, O'Melveny & Myers, LLP, Newport Beach, California, for Defendants-Appellees.
Before: A. Wallace Tashima, William A. Fletcher, and Jacqueline H. Nguyen, Circuit Judges. Opinion by Judge W. Fletcher.
W. FLETCHER, Circuit Judge:
Mortgage Electronic Registration Systems, Inc. (" MERS" ), a subsidiary of MERSCORP, Inc., operates an electronic mortgage registration system (" the MERS System" ). MERS is distinct from the MERS System. The MERS System is a private electronic database that records the ownership of and servicing rights in home loans. Various financial institutions are members of the MERS System. We described the operation of the System in our recent decision in Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1039 (9th Cir. 2011). We have before us an appeal from an order of the district court dismissing plaintiffs' claims related to the formation and operation of the MERS System. We dismiss in part, affirm in part, and reverse in part.
Under the MERS System, the lender owns the home loan borrower's (or mortgagor's) promissory note. MERS, as the " nominee" of the lender and of any assignee of the lender, is designated in the deed of trust (or mortgage) as the " beneficiary" (or mortgagee) under the deed of trust. (For convenience, we will use the terms " borrower," " deed of trust," and " beneficiary," rather than " mortgagor," " mortgage," and " mortgagee." ) MERS rather than the lender or lender's assignee is recorded as the beneficiary under the deed of trust in the recording system of the county where the property is located.
Use of the MERS System typically begins when a borrower from a MERS member signs a promissory note and a deed of trust. The MERS member takes possession of the note, and MERS is recorded as the beneficiary under the deed of trust. The note is almost always assigned to others, often several times over. If the note is assigned to a MERS member, MERS remains the beneficiary under the deed of
trust. MERS contends that there is no need to record the assignment of the note so long as the assignee is a MERS member. However, when an assignment is made to a nonmember of MERS, the identity of the assignee is recorded. About half of the residential mortgages in the United States are now recorded with MERS named as the beneficiary under the deed of trust. See Robo-signing, Chain of Title, Loss Mitigation, and Other Issues in Mortgage Servicing: Hearing Before the Subcomm. on Hous. and Cmty. Opportunity of the H. Comm. on Fin. Servs., 111th Cong. 101 (2010) (statement of R.K. Arnold, President and CEO, MERSCORP, Inc.); see also Jesse Hamilton, U.S. Regulators Examining Departures at Mortgage Registry, Bloomberg (Apr. 15, 2014, 9:01 PM), http://www.bloomberg.com/news/2014-04-16/u-s-regulators-examining-departures-at-mortgage-registry.html.
The MERS System has been sharply criticized. See,...