Merritt v. Morgan

• Decision Date: 24 April 2018
• Docket Number: Case No. 17-CV-06101-LHK
• Parties: DAVID MERRITT, et al., Plaintiffs, v. JP MORGAN, et al., Defendants.
• Court: U.S. District Court — Northern District of California

DAVID MERRITT, et al., Plaintiffs, v. JP MORGAN, et al., Defendants.

Case No. 17-CV-06101-LHK

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

April 24, 2018

ORDER GRANTING MOTIONS TO DISMISS AS TO JPMORGAN CHASE, STRUCTURED ASSET MORTGAGE INVESTMENTS II, JAMIE DIMON, AND AISLING DESOLA; DENYING AS MOOT MOTION TO DISMISS AS TO REAL TIME RESOLUTIONS AND ERIC GREEN

Re: Dkt. Nos. 58, 60, 62

Plaintiffs Salma and David Merritt ("Plaintiffs") sued JPMorgan Chase, N.A., Jamie Dimon,¹ David Gillis, Structured Asset Mortgage Investments II, Inc., John Costango, Aisling Desola, Specialized Loan Servicing, LLC, Tobey Wells, Ami McKernan, Michael Ward, Zieve Brodnax & Steele LLP, John Steele, Michael Busby, U.S. Bank N.A., Andrew Cecere, Bryan Cave, James Goldberg, David McCall, Beverly Brooks, Avi Marcus, Real Time Resolutions, and Eric Green (collectively, "Defendants"), asserting causes of action for accounting, violation of theFair Debt Collection Practices Act, RICO, common law fraud, violation of the Uniform Commercial Code, unjust enrichment, and deprivation of constitutional rights. Before the Court are three motions to dismiss the first amended complaint. Having considered the parties' briefs, the relevant law, and the record in this case, the Court GRANTS the motions to dismiss.

I. BACKGROUND

A. Factual Background

Plaintiffs obtained a home loan from Countrywide Financial Services ("CFC") in 2006, secured by a deed of trust against Plaintiffs' property in Sunnyvale, California. Request for Judicial Notice ("RJN"), ECF No. 58-1, Exh. A.² Plaintiffs stopped making payments on their loan in October 2008. FAC ¶ 29.

Plaintiffs sued CFC in March 2009 in the Northern District of California, alleging a range of claims including violations of the Truth in Lending Act, gender and race discrimination, state law fraud, and violations of the Fair Debt Collection Practices Act ("FDCPA"). See Merritt v. Countrywide Fin. Corp., No. 09-cv-1179 ("Merritt I"). After the district court dismissed their case with prejudice, Plaintiffs refiled their state law claims in state court and appealed the districtcourt's dismissal to the Ninth Circuit. Merritt v. Countrywide Fin. Corp., No. 09-cv-1179-BLF, 2015 WL 5542992, at *5 (N.D. Cal. Sept. 17, 2015); Merritt v. Mozilo, No. 109CV159993 (Cal. Sup. Ct.) ("Merritt II"). The Ninth Circuit reversed in part and remanded. Merritt v. Countrywide Fin. Corp., 759 F.3d 1023, 1041 (9th Cir. 2014). Upon remand, the district court allowed Plaintiffs to amend their pleadings and eventually dismissed the case with prejudice. Merritt I, 2016 WL 6573989 (N.D. Cal. June 29, 2016). Plaintiffs' appeal in Merritt I is currently pending before the Ninth Circuit. See Merritt v. Countrywide Fin. Corp., Case No. 16-16311; FAC ¶ 39.

Similarly, in state court, the trial court sustained defendants' demurrers in Merritt II, but the California Court of Appeal reversed in part and remanded on at least two appeals. Merritt v. Mozilo, No. H037414, 2013 WL 4942063 (Cal. Ct. App. Sept. 13, 2013); Merritt v. Wells Fargo Bank, N.A., 2011 WL 6330596 (Cal. Ct. App. Dec. 19, 2011). Another appeal is currently pending before the California Court of Appeal. See Merritt v. Mozilo, No. H041560; FAC ¶ 39.

Plaintiffs devote almost 200 paragraphs of the FAC to describing a series of alleged conversations between Defendants and their unidentified employees between 2004 and 2014. Allegedly, these conversations were about Plaintiffs' loan and Defendants' alleged schemes to conceal fraud committed by Bear Stearns and to commit fraud on the various courts hearing Merritt I and Merritt II. See FAC ¶¶ 40-227. Plaintiffs also allege that Defendants conspired to record fraudulent assignments of Plaintiffs' deed of trust and to threaten Plaintiffs in an effort to collect on the fraudulent loan. See, e.g., id. ¶¶ 54-58, 81-82, 90-93, 100, 106.

Plaintiffs explain that they only recount events between 2006 and 2009 "for the purposes of background/historical facts in order to demonstrate motives or intents for the pattern of racketeering." Id. ¶ 1. Plaintiffs assert that their claim is based on events from 2010 through 2017 that transpired after the "alleged fraudulent 2006 origination, servicing[, and] 2009 modification of loans." Id. ¶¶ 2-3. The longest limitations period for Plaintiffs' asserted claims is four years, which applies to their RICO claims. See Pincay v. Andrews, 238 F.3d 1106, 1108-09 (9th Cir. 2001). Thus, the Court recounts Plaintiffs' allegations about events from October 2014 and afterin more detail than Plaintiffs' allegations about events that would be time-barred.

First, many of Plaintiffs' claims are premised on their underlying allegation that there was fraud or other defects in the securitization and assignments of their note. Specifically, Plaintiffs allege that CFC sold their note to "Bear Stearns ARM trust, mortgage pass-through certificates, series 2006-2." FAC ¶ 43. Plaintiffs allege on information and belief that the original endorsed note was never delivered to the custodian of the trust, "making it void under California [law] and [the Uniform Commercial Code]." Id. Plaintiffs allege that in each year between 2009 and 2017, they "called and sent letters to CFC, BofA, Bryan Cave, Recontrust, SLS and ultimately US Bank, JP Morgan, Zieve, Brodnax and Steele and their respective[] CEOs and Board of Directors for a copy of the endorsed note and proof that it along with the Deed of Trust assignment was actually delivered to" the Bear Stearns trust. Id. ¶ 47. Plaintiffs allege that until September 2017, Defendants told Plaintiffs that they could not locate the original note, but in September 2017 Defendants claimed to have the original note. Id. ¶ 48.

Plaintiffs allege that Dimon and the JPMorgan board knew that Plaintiffs' mortgage was based on unspecified fraud and, wanting to distance themselves from the fraud, Dimon and the JPMorgan board arranged in April and May 2011 for US Bank to become Trustee on the Deed of Trust. Id. ¶¶ 50-51, 56, 125-131. Somehow Bank of America allegedly became involved, and Plaintiffs allege that Bank of America falsified a reassignment of Deed of Trust naming US Bank as Trustee and recorded the reassignment with Santa Clara County in May 2011. Id. ¶¶ 55-58, 135-46. Plaintiffs allege that these actions were the formation of the "JP Morgan-SLS Enterprise" for the purposes of their civil RICO claim. See id. ¶¶ 119-20.

The most recent alleged conspiracy concerned a plan "to threaten and intimidate the plaintiffs into paying an unlawful debt (produced through falsification of county records) by presenting Plaintiffs with a claim to collect debt based on an assignment of deed of trust which was falsified in May 2011; a fraudulent modification agreement which is void as of February 2009 and produced by fraud as well as the December 2016 substitution of trustee." FAC ¶ 248. Theconspiracy began in November 2016, when Defendant Goldberg allegedly:

placed a call from his San Francisco office to Defendant Gillis and other[s] and informed them that he believed that since he was successful in obstructing Plaintiffs['] state and federal case[s] that[] they are still trying to pursue them through appeals and may very well succeed again, and he believed that it was now time for JP Morgan to threaten and intimidate Plaintiffs with debt collection in a more forceful way to not only intimidate and threaten them but as punishment for being so tenacious on their claims and for refusing to dismiss their cases against these and other defendants in state and federal courts.

...

On or about December 2016, Gillis spoke with Dimond in his office, explaining Goldberg's idea to threaten and intimidate Plaintiffs by actually pursuing foreclosure against them versus merely threatening them with such and Dimond told Gillis that he agreed with this idea, then told Gillis for him and other Unknown GCs [to] implement the idea by contacting US Bank, SAMI and SLS counterparts asking each if they would do this for JP Morgan in exchange for certain compensation.

...

Continuing on information and belief, Cecere told the Unknown GC in December 2016, in his office that he agreed with the idea and to inform Gillis to tell Dimond that he would initiate foreclosure proceedings against the Plaintiffs based on the falsified Assignment and fraudulent mortgage; but he informed Dimond that MERS did not actually have the authority to transfer trusteeship to US Bank in 2011 and MERS was only the nominee without any interest in Plaintiffs['] mortgage.

...

On or about December 22, 2016, Defendant Mckernan told Steele, based on information and belief, that she agreed to implement the plan and thereat [sic] she me[t] with Defendant Ward in his office, explaining Goldberg and Dimond's plan and ask[ed] if he were willing to falsify a Substitution of Trustee to give the appearance that he was a legitimate employee of US Bank making the substitution; portraying US Bank as a legitimate trustee for the Bear Stearns trust, although it was not, and substitute Zieve Brodnax & Steele in its place so that he, Mckernan and Wells can have them foreclos[e] on Plaintiffs['] property in order to punish them for their litigation.

FAC ¶¶ 228, 230, 232, 244.

Plaintiffs allege that Defendants Ward and McKernan falsified a substitution of trustee in late December 2016 in order to proceed with foreclosure on Plaintiffs' home. Id. ¶¶ 246-47. JPMorgan then "directed US Bank to target the Plaintiffs for debt collection by directing Wells and SLS to resume sending notices to them for payment of mortgage which CFC and BofAwaived standing on [sic] to collect after eight years of Plaintiffs refusing to make payments until they corrected the fraud which was committed against them." Id. ¶ 249.

Plaintiffs do not allege any specific notices or communications that they received from any of the Defendants, but Plaintiffs do generally refer to SLS contacting P...