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Dodaro v. Standard Pacific Corp.

March 31, 2010

JAMES F. DODARO, AS AN INDIVIDUAL AND ON BEHALF OF ALL OTHER SIMILARLY SITUATED, PLAINTIFF,
v.
STANDARD PACIFIC CORP.; STANDARD PACIFIC HOMES, INC.; STANDARD PACIFIC MORTGAGE, INC.; AND DOES 1 THROUGH 10, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: VIRGINIA A. Phillips United States District Judge

[Motion filed on January 22, 2010]

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS FOR LACK OF STANDING, WITH PREJUDICE, AND DENYING DEFENDANTS' MOTION TO STRIKE AS MOOT

Defendants' Motions to Dismiss and to Strike came before the Court for hearing on March 15, 2010. After reviewing and considering all papers filed in support of, and in opposition to, the Motions, as well as the arguments advanced by counsel at the hearing, the Court GRANTS the Motion to Dismiss and DENIES the Motion to Strike as moot.

I. BACKGROUND

A. Plaintiff's Allegations

Plaintiff James F. Dodaro ("Plaintiff") alleges he purchased a new residence in November 2005 in Riverside County, California from Standard Pacific Homes, made a down payment of about 60% of the total purchase price, financed the balance of the purchase through Family Lending Services. Inc. (now Standard Pacific Mortgage), and still lives in the residence. (First Amended Complaint ("FAC") ¶ 35.)

Plaintiff brings this putative class action on behalf of himself and a national class including "[a]ll Standard Pacific Homes customers who purchased a new Standard Pacific Homes house from January 1, 2004, through December 31, 2006, and put 20% or more down toward the purchase of the house[,]" or alternatively, "a class of new Standard Pacific Homes customers whose homes are located in California." (FAC ¶¶ 48-49.)

Plaintiff alleges "on information and belief" that before 2004, Defendants Standard Pacific Corp., doing business as Standard Pacific Homes, and Standard Pacific Mortgage, Inc. (collectively, "Defendants" or "Standard Pacific Defendants") implemented a "scheme" to increase the number of houses sold in Plaintiff's neighborhood and the amount of profit per sale. (FAC ¶ 18.) The "scheme" was intended to "convince government entities, then the community, and finally buyers that Defendants were building a traditional neighborhood with stable owners who occupied their homes and who were vested in the community and the neighborhood." (FAC ¶ 19.) "Implicit in this marketing scheme was that Defendants were making a good-faith effort to sell homes to buyers who [Defendants] expected could afford to buy the houses and would be stable neighbors." (Id.)

Plaintiff alleges that he was provided "marketing materials that depicted the community as a stable, family[-]based neighborhood." (FAC ¶¶ 35, 36.) Plaintiff also alleges "on information and belief" that Defendants represented that Standard Pacific does not sell homes to investors and discourages speculation. (FAC ¶ 38.)

Plaintiff alleges Defendants engaged in a scheme to market the houses to, and provide financing for, "unqualified buyers who posed an abnormally high risk of foreclosure . . . to increase both the number of sales and the prices of the houses in same neighborhoods in which Defendants were selling to traditionally qualified and low-foreclosure- risk buyers." (FAC ¶ 20.) Plaintiff generally alleges that Defendants assisted and encouraged the "unqualified" buyers to appear qualified. (FAC ¶ 23.)

Plaintiff asserts that Defendants "concealed and intentionally failed to disclose to prospective buyers . . . that numerous houses in the neighborhoods were being purchased by unqualified and high-foreclosure-risk buyers, despite Defendants' knowledge that this could, and likely would over time, have a material negative effect on the value and desirability of the house and the neighborhood." (FAC ¶ 29.) Plaintiff alleges Defendants also failed to disclose that "they had sold houses, and planned to sell houses in the future, to investors who would not occupy the houses." (FAC ¶ 44.)

Plaintiff alleges two theories of harm stemming from Defendants' conduct. First, Plaintiff alleges he "paid inflated prices for [his] house[]" as a result of Defendants' failure to disclose that "Defendants had sold houses . . . to unqualified and high-foreclosure-risk buyers. . . [and] to investors who would not occupy the houses." (FAC ¶¶ 45, 48.) Secondly, Plaintiff alleges he suffered an injury years after purchasing his house when the real estate market declined and the "unqualified" buyers defaulted on their loans and lost their houses in foreclosure proceedings, which led to a decline in the value of Plaintiff's residence. (FAC ¶ 47.)

B. Procedural History

On September 3, 2009, Plaintiff filed a putative class action against the Standard Pacific Defendants. On the same day, Plaintiff's counsel filed seven other similar class actions*fn1 ("Homebuilder Actions") alleging that the homebuilder defendants and their mortgage lending affiliates engaged in conduct that "artificially inflated" the purchases prices of plaintiffs' residences and eventually reduced their value.

On October 23, 2009, the Standard Pacific Defendants filed a "Motion to Consolidate," which sought to consolidate the eight Homebuilder Actions. The Court denied the Motion to Consolidate. On November 18, 2009, the Homebuilder Actions were transferred to this Court. On December 21, 2009, Plaintiff filed the FAC, which removed Defendant Standard Pacific Homes, Inc. and added allegations regarding the two remaining defendants, Standard Pacific Corp, doing business as Standard Pacific Homes, and Standard Pacific Mortgage, Inc. The substance of the claims remains unchanged.

Plaintiff alleges five claims: (1) fraud; (2) negligent misrepresentation; (3) violation of California's Unfair Business Practices Act, Cal. Bus. & Prof. Code §§ 17200, et seq.; (4) violation of Cal. Bus. & Prof. Code §§ 17500, et seq.; and (5) breach of the implied covenant of good faith and fair dealing.

On January 22, 2010, Defendants filed: (1) a Motion to Dismiss the First Amended Complaint ("Motion"), and (2) a Motion to Strike Portions of the First Amended Complaint. It their Motion to Dismiss, Defendants incorporate by reference the arguments advanced by defense counsel in Stephens, et al. v. Lennar Corp, et al., ED09-CV1668-VAP (DTBx) and Nielson, et al. v. Shea Homes, Inc, et al., ED09-CV1673-VAP (DTBx). (Mot. at 3-4.) On February 22, 2010, Plaintiff filed Opposition*fn2 to both Motions. On March 4, 2010, Defendants filed a Reply for both Motions.

Defendants argue the FAC should be dismissed for the following reasons: (1) Plaintiff lacks constitutional standing to bring this action; and (2) Plaintiff fails to state a claim as to each cause of action under 12(b)(6). (Mot. at 1.)

II. LEGAL STANDARD FOR MOTION TO DISMISS UNDER RULE 12(b)(6)

Rule 12(b)(6) allows a party to bring a motion to dismiss for failure to state a claim upon which relief can be granted. As a general matter, the Federal Rules require only that a plaintiff provide "'a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957) (quoting Fed. R. Civ. P. 8(a)(2)); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In addition, the Court must accept all material allegations in the complaint -- as well as any reasonable inferences to be drawn from them -- as true. See Doe v. United States, 419 F.3d 1058, 1062 (9th Cir. 2005); ARC Ecology v. U.S. Dep't of Air Force, 411 F.3d 1092, 1096 (9th Cir. 2005).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic, 550 U.S. at 555 (citations omitted). Rather, the allegations in the complaint "must be enough to raise a right to relief above the speculative level." Id.

In other words, the allegations must be plausible on the face of the complaint. See Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937, 1949 (2009). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it stops short of the line ...


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