The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge
ORDER DENYING MOTION TO DISMISS; GRANTING MOTION TO STRIKE; GRANTING LEAVE TO AMEND APPRAISAL,
Defendant Gerald Levitt ("Levitt"), dba Gerald Levitt Appraisal, moves to dismiss the claims alleged by Plaintiff Federal Deposit Insurance Corporation ("FDIC"), as receiver for IndyMac Bank, pursuant to Fed.R.Civ.P. 12(b)(6) and to strike its claim for attorney's fees and costs pursuant to Fed.R.Civ.P. 12(f). The FDIC only opposes the motion to dismiss. Pursuant to Local Rule 7.1(d)(1), this matter is appropriate for decision without oral argument. For the reasons set forth below, the court denies the motion to dismiss, grants the motion to strike the prayer for attorney's fees without prejudice, and grants 10 days leave to amend from the date of entry of this order.
On June 10, 2011 the FDIC, as receiver for IndyMac Bank, (Compl. ¶1), filed a complaint against Levitt alleging six claims for relief: three for breach of contract and three for negligent misrepresentation. The complaint also requests an award of attorney's fees and costs. In broad brush, FDIC alleges that Levitt negligently misrepresented and breached its contractual duties by preparing property appraisals containing numerous material misrepresentations, including gross over-evaluation of the properties at issue, which resulted in damages to the FDIC.
In 2007, the FDIC alleges that Levitt entered into agreements with three separate mortgage brokers - - Diamond Valley Funding, Southern Fidelity Mortgage, LLC, and Western Thrift and Loan - - to prepare appraisals for real properties located in San Marcos, El Cajon, and San Diego, California. (Compl. ¶¶8, 18, 28). With respect to each appraisal, Levitt agreed and represented that:
The lender/client may disclose or distribute this appraisal report to: . . . another lender at the request of the borrower, the mortgagee or its successors and assigns, mortgage insurers, government sponsored enterprises, and other secondary market participants . . . without having to get the appraiser's consent. . .
The borrower, another lender at the request of the borrower, the mortgagee or its successors and assigns, mortgage insurers, government sponsored enterprises, and other secondary market participants may rely on this appraisal report as part of any mortgage finance transaction that involves one or more of these parties.
Any intentional or negligent misrepresentation(s) contained in this appraisal report may result in civil liability. . . . (Compl. ¶¶12, 22, 32).
FDIC alleges that Levitt breached the appraisal contract by, among other things,
(1) misrepresenting the value of the properties; (2) using improper and negligently selected comparable sales; and (3) did not comply with the Uniform Standards of Professional Appraisal Practice ("USPAP"). (Compl. ¶14, 24, 34). FDIC alleges it suffered damages on the San Marcos, El Cajon, and San Diego properties in the amounts of $376,458, $362,588, and $355,006, respectively. FDIC also seeks interest, costs and attorney's fees.
Levitt now moves to dismiss both claims and to strike the prayer for attorney's fees.
Federal Rule of Civil Procedure 12(b)(6) dismissal is proper only in "extraordinary" cases. United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). Courts should grant 12(b)(6) relief only where a plaintiff's complaint lacks a "cognizable legal theory" or sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). Courts should dismiss a complaint for failure to state a claim when the factual allegations are insufficient "to raise a right to relief above the speculative level." Bell Atlantic Corp v. Twombly, 550 U.S. 544, 555 (2007) (the complaint's allegations must "plausibly suggest" that the pleader is entitled to relief); Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) (under Rule 8(a), well-pleaded facts must do more than permit the court to infer the mere possibility of misconduct). "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." Id. at 1949. Thus, "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. The defect must appear on the face of the complaint itself. Thus, courts ...