Family Home and Finance Ctr. v. Federal Home Loan

• Decision Date: 07 May 2008
• Docket Number: No. 06-56521.,06-56521.
• Citation: 525 F.3d 822
• Parties: FAMILY HOME AND FINANCE CENTER, INC., a California Corporation doing business as Park Place Funding; Daisy J. Phillips, also known as DJ Phillips doing business as All Star Financial; Mark Gallagher, Plaintiffs-Appellants, v. FEDERAL HOME LOAN MORTGAGE CORPORATION, a District of Columbia Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

525 F.3d 822

FAMILY HOME AND FINANCE CENTER, INC., a California Corporation doing business as Park Place Funding; Daisy J. Phillips, also known as DJ Phillips doing business as All Star Financial; Mark Gallagher, Plaintiffs-Appellants, v. FEDERAL HOME LOAN MORTGAGE CORPORATION, a District of Columbia Corporation, Defendant-Appellee.

No. 06-56521.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 7, 2008.

Filed May 7, 2008.

Julian B. Bellenghi, Michael J. Collins, Collins & Bellenghi, Newport Beach, CA, for the plaintiffs-appellants.

Kelli L. Sager, Davis Wright Tremaine, Los Angeles, CA; Graciela M. Rodriguez, King & Spalding, Washington, D.C., for the defendant-appellee.

Appeal from the United States District Court for the Central District of California; Percy Anderson, District Judge, Presiding. D.C. No. CV-05-08752-PA.

Before: ALFRED T. GOODWIN, ANDREW J. KLEINFELD, and JAY S. BYBEE, Circuit Judges.

GOODWIN, Circuit Judge:

Family Home and Finance Center, Inc., doing business as Park Place Funding, along with Daisy J. Phillips and Mark Gallagher (collectively "Park Place") appeal the summary judgment in favor of Federal Home Loan Mortgage Corporation ("Freddie Mac") on claims against Freddie Mac for intentional interference with contract, unfair competition under California Business & Professions Code § 17200, and defamation. Park Place also assigns error to the district court's denial of its Federal Rule of Civil Procedure 56(f) request to defer ruling on Freddie Mac's motion for summary judgment. The district court had jurisdiction pursuant to 12 U.S.C. § 1452(f). We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

I. BACKGROUND

Park Place operates a mortgage broker business initiating loan applications from prospective borrowers and presenting the applications to lenders for processing and potential funding. National City Mortgage Company ("National City"), who is not a party to this appeal, processed and funded many of Park Place's loan applications and sold the loans to Freddie Mac. Freddie Mac in turn would sell Participation Certificates, or interests, in pools of loans to capital market investors, or keep the loans for its own investment.

In December 2004, a capital market investor notified Freddie Mac that some loans included in its mortgage pools were prepaying at a faster than normal rate, thus reducing the investor's anticipated rate of return. Freddie Mac contacted National City to look into the pools with rapid prepayment rates, and both National City and Freddie Mac investigated the prepayment activity. Park Place had been encouraging its borrowers to apply for initial loans at a high interest rate, and then to engage in early refinancing, which resulted in a rising curve of rapid prepayment. These prepayments violated no law, and may have been in accordance with National City's lending policies.

National City notified Park Place of its intent to terminate their mortgage broker contract in March 2005, and terminated the contract soon thereafter. Also in March 2005, Freddie Mac began to investigate Park Place's business practices. In July 2005, Freddie Mac first notified Park Place of its intent to put Park Place on the Exclusionary List, a list which identifies entities with whom Freddie Mac will no longer transact business. Freddie Mac had determined that Park Place's loans were not of investment quality.

Park Place appealed to Freddie Mac's Exclusionary List Appeal Committee. That committee denied the appeal, and on January 31, 2006, Park Place was put on the Exclusionary List. The List is published only to those lenders who sell or service loans to Freddie Mac, and the effect of exclusion is to prohibit excluded entities from participating in business transactions with Freddie Mac. Park Place was effectively denied access to the principal market for the loans it was writing because it was placed on the List.

In March 2006, Park Place filed an amended complaint in the district court seeking damages for intentional interference with contract, unfair competition, and defamation. Park Place alleged that Freddie Mac intentionally interfered with its contract to broker mortgage loans to National City. The district court granted summary judgment in favor of Freddie Mac on this claim because Park Place had no admissible evidence that Freddie Mac influenced or caused National City to terminate the contract with Park Place, or intended that result.

Park Place also alleged that by placing it on the Exclusionary List, Freddie Mac engaged in unfair competition and defamation. The district court granted summary judgment against these claims, for reasons that will be discussed below.

Park Place attributes any deficit in its evidence to the denial of its request under Fed.R.Civ.P. 56(f) to defer ruling on summary judgment. Park Place's request alleged that Freddie Mac had engaged in dilatory tactics preventing it from obtaining relevant evidence. The district court denied the request because Park Place failed to articulate the specific facts it hoped to elicit, and did not show how such facts would defeat summary judgment. Also, the district court denied the request because Park Place failed to file timely motions to compel discovery or extend the discovery cutoff date.

II. DISCUSSION

A. Intentional Interference with Contract

Under California law, a claim for intentional interference with contract requires: (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of the contract; (3) defendant's intentional acts designed to induce breach or disruption of the contract; (4) actual breach or disruption; and (5) resulting damage. Pac. Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal.3d 1118, 270 Cal. Rptr. 1, 791 P.2d 587, 589-90 (1990). We agree with the district court that Park Place's claim fails because there was no admissible evidence that Freddie Mac influenced or caused National City to terminate its mortgage broker contract with Park Place, intentionally or otherwise.

Park Place contends that the testimony of its president, Mark Gallagher, proved that Freddie Mac influenced National City to terminate the contract. Gallagher testified only that a National City employee had told him that Freddie Mac and National City would shut Park Place down. That testimony, which may have been admissible hearsay to show National City's state of mind, does not connect Freddie Mac in any way to National City's decision. The district court correctly inferred that, at best, the testimony suggests that National City may have colluded with Freddie Mac to stop handling Park Place business. But the statement does not shed any light on the intentions of Freddie Mac.

Park Place also contends that circumstantial evidence precludes summary judgment. The circumstantial evidence tended to prove that Park Place had been a profitable mortgage broker for National City, which no one denied, and that National City may have been reluctant to terminate its contract with Park Place. The evidence also showed that Freddie Mac may have known about Park Place's rapid refinancing strategy before National City terminated the contract. Even if, as Park Place seems to allege, Freddie Mac was negligent in its tardy discovery that it was dealing in problematic loans, evidence of negligence is not proof of intentional interference by Freddie Mac with Park Place's contract. A necessary element of Park Place's claim is proof that Freddie Mac's action was designed to accomplish interference. This evidence proved only that Freddie Mac would no longer buy a product it could not sell to its customers. It proved nothing about interference with the originators of those products.

B. Unfair Competition

Whether a business practice constitutes unfair competition under Cal. Bus. & Prof.Code § 17200 "involves an examination of [that practice's] impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer." People v. Duz-Mor Diagnostic Lab., Inc., 68 Cal.App.4th 654, 662, 80 Cal.Rptr.2d 419 (1998). The district court concluded that Freddie Mac's placement of Park Place on its Exclusionary List did...