Tobler v. Sables, LLC

• Decision Date: 04 August 2020
• Docket Number: No. 19-15251,19-15251
• Citation: 968 F.3d 1010
• Parties: Dennis TOBLER; Cindi F. Tobler, Plaintiffs-Appellants, v. SABLES, LLC; Bayview Loan Servicing, LLC; The Bank of New York Mellon, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

968 F.3d 1010

Dennis TOBLER; Cindi F. Tobler, Plaintiffs-Appellants,

v.SABLES, LLC; Bayview Loan Servicing, LLC; The Bank of New York Mellon, Defendants-Appellees.

No. 19-15251

United States Court of Appeals, Ninth Circuit.

Submitted June 2, 2020^* Portland, Oregon

Filed August 4, 2020

Harold P. Gewerter, Harolder P. Gewerter Esq. Ltd., Las Vegas, Nevada, for Plaintiffs-Appellants.

Natalie L. Winslow and Jamie K. Combs, Akerman LLP, Las Vegas, Nevada, for Defendants-Appellees.

Before: Marsha S. Berzon, Daniel P. Collins, and Lawrence VanDyke, Circuit Judges.

COLLINS, Circuit Judge:

Dennis and Cindi Tobler appeal from the district court's dismissal of their complaint alleging contractual and tortious breaches of the implied covenant of good faith and fair dealing against Bank of New York Mellon ("BNYM") and its agents, Sables, LLC and Bayview Loan Servicing, LLC (collectively, "Defendants"). We review de novo the district court's dismissal of the complaint for failure to state a claim, see Zimmerman v. City of Oakland , 255 F.3d 734, 737 (9th Cir. 2001), and finding no error, we affirm.

I

In October 2011, BNYM acquired all beneficial interest in the deed of trust that secured the mortgage on the Toblers’ Las Vegas residence. After the Toblers fell behind on their mortgage payments, they sought to avoid foreclosure by invoking Nevada's foreclosure mediation program. As we explain in further detail below, that program allows a delinquent Nevada mortgagor to seek a loan modification by requesting mediation with the lender in accordance with the applicable Nevada statute and the "Foreclosure Mediation Rules" promulgated under it. See infra at 1012–13. Since 2017, the manner in which a homeowner triggers the mediation program is by the filing of a mediation "petition" in the state court. See Nev. Rev. Stat. § 107.086(3). The lender may not proceed with foreclosure while that petition remains pending. Id .

Under the auspices of this mediation program, the Toblers attempted on three occasions between September 2014 and July 2018 to mediate with BNYM's agents over the loan delinquency, but these efforts were unsuccessful.¹ On July 24, 2018, after the third mediation had failed, the mediator filed a report with the state court recommending that the Toblers’ mediation petition be dismissed. Under the applicable rules, the Toblers then had 10 days in which to request relief to avoid dismissal, but they did not do so. Noting that "[n]o timely objections ha[d] been filed" to the mediator's report, the state court dismissed the Toblers’ mediation petition on August 22, 2018. The Toblers did not appeal that dismissal.

Having completed the mediation process, on October 18, 2018, Sables, LLC served the Toblers with a Notice of Trustee's Sale. In response, the Toblers on November 1, 2018 belatedly filed in state court a petition for judicial review of the July 2018 mediation. However, because that petition had not been filed within the 10-day period, it was stricken as untimely.

On the same day that they filed their belated petition for judicial review, the Toblers also filed this civil action against Defendants in Nevada state court. The Toblers’ complaint asserted that Defendants had acted in bad faith in the mediation process, thereby breaching their contractual and tort-based duties arising from the implied covenant of good faith and fair dealing. The Toblers sought compensatory and punitive damages, as well as declaratory and injunctive relief. Defendants removed the case to the district court based on diversity jurisdiction under 28 U.S.C. § 1332. Defendants thereafter moved to dismiss the complaint for failure to state a claim, and the district court granted that motion. This appeal followed.

II

The question before the district court was whether a request for judicial relief under Nevada's Foreclosure Mediation Rules is the exclusive remedy under Nevada law for challenging a lender's conduct in the foreclosure mediation process. It appears that this recurring issue² has yet to be addressed by the Nevada Supreme Court in a precedential decision, and we are thus tasked with deciding that "issue[ ] of state law as we believe the state's highest court would decide [it]." HS Servs., Inc. v. Nationwide Mut. Ins. Co. , 109 F.3d 642, 644 (9th Cir. 1997). We agree with the district court that, under Nevada law, the Toblers’ exclusive remedy for seeking to challenge Defendants’ mediation-related conduct was a timely request for judicial review. As a result, the Toblers’ various causes of action based on Nevada common-law duties failed to state a claim upon which relief could be granted.

The relevant terms of the Nevada foreclosure mediation program are set forth in § 107.086 of the Nevada Revised Statutes and in the "Foreclosure Mediation Rules" issued by the Nevada Supreme Court under § 107.086(12).³ Subject to certain exceptions, the program allows any Nevada homeowner facing nonjudicial foreclosure to petition the state court for mediation before a designated mediator. See Nev. Rev. Stat. § 107.086(3). Both sides must participate in the mediation in good faith, and each must provide specified documents to the other. See id . § 107.086(5)–(6) ; Nev. Foreclosure Mediation Rule ("F.M.R.") 13. While the mediation is ongoing, "no further action may be taken to exercise the power of sale." Nev. Rev. Stat. § 107.086(3).

If the mediation results in an agreement, the mediator notifies the state court, which then enters an order reflecting the agreed-upon loan modification. See Nev. Rev. Stat. § 107.086(9). If the mediation fails, then the mediator must make an initial determination whether the parties complied with their obligations under the program. Id . § 107.086(6), (8). If the mediator determines that the lender failed to participate in good faith or did not provide the required documents, then the mediator must submit a recommendation to the state court proposing sanctions against the lender, which may include requiring a specified loan modification. Id . § 107.086(6). But if the mediator determines that the parties acted in good faith, the mediator must then submit a recommendation that the mediation petition "be dismissed," and the state court may thereafter issue an order dismissing the petition. Id . § 107.086(8). Although the statute plainly contemplates that the parties will be afforded an opportunity to respond to the mediator's recommendation before the state court issues its order, the statute leaves the details of that procedure to the rules promulgated by the Nevada Supreme Court. Those rules provide that, "[f]ollowing submission of the mediator's statement, within 10 days, either party may submit a request for appropriate relief" to the state court. Nev. F.M.R. 20(2). The state court must then issue an appropriate order either granting an agreed-upon loan modification, dismissing the petition, or sanctioning the lender. Id . 20(3). If the mediation petition is dismissed, a certificate is subsequently issued that (if there is no other legal obstacle) allows the lender to proceed with the foreclosure. Nev. Rev. Stat. § 107.086(8).

Because "[t]he goal of foreclosure mediation is to produce an agreed-upon loan modification," the applicable judicial review provisions establish an "expedited" proceeding to promptly address any failure to participate in the mediation in good faith or to otherwise abide by the mediation rules. Holt v. Regional Trustee Servs. Corp. , 127 Nev. 886, 266 P.3d 602, 606–07 (2011) (en banc). Specifically, the ability to request judicial relief in response to the mediator's report "affords a way to challenge compliance with the statutory attendance, production, and good faith requirements" of the mediation program. Id . at 606. Given that the success of the mediation program requires prompt enforcement of its requirements, the Nevada Supreme Court has stated that an immediate request "for judicial review is the exclusive remedy for a homeowner seeking to enforce an agreement reached in the mediation program," Surgeoner-Jernigan v. CitiMortgage, Inc. , 2012 WL 5857293, at *1 (Nev. Nov. 16, 2012) (unpublished "order of affirmance") (emphasis added), and that the Foreclosure Mediation Rules " ‘necessitate strict compliance’ " with the applicable deadline for seeking such judicial review, Nationstar Mortg., LLC v. Rodriguez , 132 Nev. 559, 375 P.3d 1027, 1028 (2016) (en banc) (quoting Leyva v. National Default Servicing Corp. , 127 Nev. 470, 255 P.3d 1275, 1279 (2011) (en banc)). The Nevada Supreme Court has further underscored the exclusive nature of that judicial-review remedy by holding that objections to the...