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Efrain Munoz, et al v. Phh Corporation

September 8, 2011


The opinion of the court was delivered by: Dennis L. Beck United States Magistrate Judge


Defendants PHH Corporation, PHH Mortgage Corporation, PHH Home Loans, LLC, and Atrium Insurance Corporation filed the instant motion for an order staying this case pending the United States Supreme Court's ruling in the matter of First American Financial Corporation v. Denise P. Edwards, No. 10-708 ("Edwards"). Plaintiffs Efrain Munoz, Leona Lovette, Stephanie Melani, Iris Grant, John Hoffman and Daniel Maga, II ("Plaintiffs"), individually and as proposed class representatives, filed an opposition, to which Defendants replied. Finding the matter suitable for decision without oral argument pursuant to Local Rule 230(g), the Court vacated the hearing scheduled for August 26, 2011, and deemed the matter submitted.


Plaintiffs initiated this action in June 2008. The operative complaint asserts a single cause of action against Defendants for violation of the Real Estate Settlement Procedures Act of 1974 ("RESPA").

According to the complaint, Plaintiffs in this case obtained mortgage loans. As none of them paid 20% down for their respective home purchases, they were required to purchase private mortgage insurance ("pmi") to protect the lender in the event of default. The pmi premium is paid by the borrower and is usually collected by the lender with the borrower's monthly payments.

Plaintiffs allege that PHH, the residential mortgage lender, referred them to one or more private mortgage insurers for the purchase of pmi and they had no opportunity to comparison shop. The private mortgage insurers referred by PHH had separate reinsurance agreements with Defendant Atrium, an affiliate of PHH Corporation. Plaintiffs characterize Defendant Atrium as a "captive" reinsurer because it is affiliated with the lender and it provides reinsurance primarily (or exclusively) for loans the lender originates that require pmi. In other words, Plaintiffs contend that PHH enters into "captive reinsurance arrangements," by which it refers its borrowers to private mortgage insurers who agree to reinsure with Atrium. Plaintiffs argue that this arrangement results in the payment to Atrium of kickbacks and unearned fees in violation of RESPA because Atrium assumes very little or no actual risk in exchange for a portion of Plaintiffs' monthly premiums. Plaintiffs conclude that Defendants' reinsurance contracts did not provide real or commensurately priced reinsurance in violation of Section 8(a) and (b) of RESPA.

Plaintiffs seek damages in an amount equal to three times the amounts they have paid or will have paid for private mortgage insurance as of the date of judgment.*fn1 First Amended Complaint ("FAC") ¶¶ 86-98.


Defendants now seek a stay on the grounds that by granting certiorari in Edwards, the United States Supreme Court will rule on the same issue of constitutional standing that is presented in this case; that is, whether a plaintiff pursuing a claim under section 8 of RESPA, who has not suffered any injury in fact, has standing under Article III, § 2 of the United States Constitution.

Plaintiffs oppose the stay, contending that the Supreme Court's determination in Edwards will not dispose of their claims as they have alleged an injury in fact. Plaintiffs' contentions lack merit.

As discussed more fully below, a stay of these proceedings is warranted.

I. Legal Standard

"[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants." Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). When considering whether to grant or refuse a stay, the court weighs competing interests including: (1) the possible damage which may result from granting the stay; (2) the hardship or inequity which a party may suffer in being required to go forward; and (3) the orderly course of justice measured in terms of simplifying or complicating issues, proof, and questions of law which could be expected to result from a stay. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962).

"A trial court may, with propriety, find it efficient for its own docket and the fairest course for the parties to enter a stay of an action before it, pending resolution of independent proceedings which may bear upon the case." Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1465 (9th Cir. 1983) (quoting Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 863-864 (9th Cir. 1979). For a stay to be appropriate it is ...

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