The opinion of the court was delivered by: The Honorable David O. Carter, Judge
Julie Barrera Not Present Courtroom Clerk Court Reporter
ATTORNEYS PRESENT FOR PLAINTIFFS: ATTORNEYS PRESENT FOR DEFENDANTS: NONE PRESENT NONE PRESENT
PROCEEDING (IN CHAMBERS): ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS
Before the Court is a Motion to Dismiss Plaintiff's Complaint ("Motion to Dismiss") (Docket 27) in the above-captioned case filed by LSI Appraisal, LLC ("LSI"); Fidelity National Information Services, Inc. ("FNIS"); Lender Processing Services, Inc. ("LPS, Inc."); Lender Processing Services, LLC ("LPS, LLC"); LPS Property Tax Solutions, Inc., f/k/a Fidelity National Tax Service, Inc. ("FNTS"); LSI Title Company ("LSI Title Co."); and LSI Title Agency, Inc.'s ("LSI Title
(collectively, "Defendants"). The Court finds this matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; Local Rule 7-15. After considering the moving, opposing and replying papers, and for the reasons discussed below, the Court hereby GRANTS in part and DENIES in part the Motion to Dismiss.
The Federal Deposit Insurance Corporation ("FDIC" or "Plaintiff"), as Receiver of Washington Mutual Bank ("WaMu"), brings this action based on an Appraisal Outsourcing Services Agreement ("LSI Agreement") entered into by WaMu and LSI on October 16, 2006. Complaint, ¶ 2; Exhibit "A." Pursuant to the LSI Agreement, LSI was to provide appraisal services that it represented and warranted would conform to federal and state law, regulatory guidelines, and all applicable industry standards, including the Uniform Standards of Professional Appraisal Practice ("USPAP").*fn1 Id. LSI also agreed to insure the competency and qualifications of its appraisers and to conduct a meaningful quality control review of the appraisals. Id. Further, FNTS entered into a Performance Guaranty Agreement on October 16, 2006 ("Guaranty Agreement"). Id. at ¶ 4; Exhibit "B." Pursuant to the Guaranty Agreement, FNTS agreed, unconditionally and irrevocably, to guarantee "all obligations" undertaken by LSI under the LSI Agreement. Id. at ¶ 52.
Plaintiff alleges that, despite the representations and promises LSI made to WaMu, at least 220 of LSI's appraisal services failed to comply with federal and state law, regulatory guidelines, and the USPAP. Id. at ¶ 3. Specifically, Plaintiff avers that (1) LSI used appraisers who lacked the skill, experience, and qualifications necessary to perform the appraisals; (2) LSI's "quality control" of the appraisals was severely inadequate; and (3) to date, out of 220 appraisals that the FDIC and its experts have allegedly reviewed, more than 75 percent were found to have multiple egregious violations of the USPAP and applicable industry standards. Id. at ¶¶ 3, 30. As a result, Plaintiff claims that LSI delivered appraisals that were prepared in a grossly negligent manner and that contained substantially inflated appraisal values. Id. at ¶ 3. But for the inflated appraisals provided by LSI, Plaintiff alleges that WaMu would not have made the residential mortgage loans at issue and would not have suffered losses on
As to FNIS; LPS, Inc.; LPS, LLC; FNTS; LSI Title Co.; and LSI Title Agency (collectively, "Other Defendants"), Plaintiff alleges that they controlled or directed LSI's actions and, as such, are directly liable for the damages resulting from the grossly negligent appraisal services LSI
Id. at ¶ 4. Plaintiff claims that, during the 18 month period in which LSI provided the appraisal services at issue: (1) LSI's ultimate parent company was FNIS; (2) FNIS owned LPS, Inc.; (3) LPS, Inc. owned LPS, LLC; (4) LPS, LLC owned FNTS; (5) FNTS owned LSI Title Co., which owned LSI Title Agency; and (6) LSI Title Agency owned LSI. Id. at ¶ 35. Accordingly, Plaintiff alleges that there was such a unity of interest and ownership among these entitles that the separateness of the entities ceased to exist with regard to the appraisal services provided by LSI to WaMu. Plaintiff further claims that treating the grossly negligence appraisal services provided by LSI to WaMu as acts of LSI alone would cause an inequitable result. Id. at ¶ 38.
On May 9, 2011, a copy of the Complaint was filed in this Court (Docket 1), alleging four causes of action: (1) gross negligence against all defendants; (2) breach of contract against LSI; (3) breach of contract against FNTS; and (4) alter ego, single business enterprise, joint venture against FNIS; LPS, Inc.; LPS, LLC; FNTS, LSI Title Co.; and LSI Title Agency. On July 22, 2011, Moving Defendants brought the instant Motion to Dismiss under Fed. R. Civ. P. 12(b)and, in the alternative with respect to the contract claim against Defendant LSI, to stay the proceeding until arbitration of such
Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiff's allegations fail to state a claim upon which relief can be granted. Dismissal for failure to state a claim does not require the appearance, beyond a doubt, that the plaintiff can prove "no set of facts" in support of its claim that would entitle it to relief. Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1968 (2007) (abrogating Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99 (1957)). In order for a complaint to survive a 12(b)(6) motion, it must state a claim for relief that is plausible on its face. Ashcroft v. , 129 S.Ct. 1937, 1950 (2009). A claim for relief is facially plausible when the plaintiff pleads enough facts, taken as true, to allow a court to draw a reasonable inference that the defendant is liable for the alleged conduct. Id. at 1949. If the facts only allow a court to draw a reasonable inference that the defendant is possibly liable, then the complaint must be dismissed. Id. Mere legal conclusions are not to be accepted as true and do not establish a plausible claim for relief. Id. at 1950.Determining whether a complaint states a plausible claim for relief will be a context-specific task requiring the court to draw on its judicial experience and common sense. Id.
In evaluating a 12(b)(6) motion, review is "limited to the contents of the complaint." Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir. 1994). However, exhibits attached to the complaint, as well as matters of public record, may be considered in determining whether dismissal was proper without converting the motion to one for summary judgment. See Parks School of Business, Inc. , 51 F.3d 1480, 1484 (9th Cir. 1995); Mack v. South Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Further, a court may consider documents "on which the complaint 'necessarily relies' if: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). "The Court may treat such a document as 'part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6)'." Id.
Dismissal without leave to amend is appropriate only when the Court is satisfied that the deficiencies in the complaint could not possibly be cured by amendment. Jackson v. Carey, 353 F.3d 750, 758 (9th Cir. 2003) (citing Chang v. Chen, 80 F.3d 1293, 1296 (9th Cir. 1996)); Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).
1. First Claim: Gross Negligence Against ...