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Michael J. Bell et al v. Federal Home Loan Mortgage Corporation et al

September 28, 2012

MICHAEL J. BELL ET AL., PLAINTIFFS,
v.
FEDERAL HOME LOAN MORTGAGE CORPORATION ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge

ORDER: GRANTING DEFENDANT LITTON LOAN SERVICING LP'S MOTION TO DISMISS SECOND AMENDED COMPLAINT; and [Doc. No. 30]

DENYING DEFENDANT AMERICAN EAGLE REAL ESTATE INC.'S MOTION TO DISMISS SECOND AMENDED COMPLAINT [Doc. No. 31]

Pending before the Court are Defendants Litton Loan Servicing LP's and American Eagle Real Estate, Inc.'s (respectively, "Litton" and "American Eagle," and collectively "Defendants") motions to dismiss Plaintiffs' Second Amended Complaint ("SAC"). The Court previously granted Defendants' motions to dismiss the First Amended Complaint and dismissed Plaintiffs' fraud-based claims for failure to satisfy Federal Rule of Civil Procedure 9(b)'s particularity requirement. The Court also dismissed Plaintiffs' fraudulent concealment and negligent misrepresentation claims against Litton because Plaintiffs did not allege Litton owed them a duty of disclosure or care. Plaintiffs have since filed the SAC, and the instant pending motions ensued. The Court now GRANTS Litton's motion, DISMISSES the claims against Litton without leave to amend, and DENIES American Eagle's motion.

I.BACKGROUND

The Court previously set out the facts of this case in its Order granting Litton's and American Eagle's motions to dismiss. [See Doc. No. 28.] After the Court dismissed Plaintiffs' claims against Litton and American Eagle, Plaintiffs filed the SAC, re-alleging claims against these Defendants for (1) Fraudulent Inducement (to enter contract); (2) Fraud -- Intentional Misrepresentation; (3) Fraudulent Concealment; and (4) Fraud -- Negligent Misrepresentation.

II.LEGAL STANDARDs

A. Motions to Dismiss

A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "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. Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations, brackets, and citations omitted).

In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal conclusions need not be taken as true merely because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987); W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Similarly, "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. Fed. Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998). In determining the propriety of a Rule 12(b)(6) dismissal, generally, a court may not look beyond the complaint for additional facts. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998).

B. Federal Rule of Civil Procedure 9(b)

Federal Rule of Civil Procedure 9(b) requires that allegations of "fraud or mistake must state with particularity the circumstances constituting fraud." The "circumstances" required by Rule 9(b) are the "who, what, when, where, and how" of the fraudulent activity. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003); Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993). In addition, the allegation "must set forth what is false or misleading about a statement, and why it is false." Vess, 317 F.3d at 1106 (quoting In re Glenfed, Inc. Secs. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994)). However, "intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b); see also Neubronner, 6 F.3d at 672. This heightened pleading standard ensures that "allegations of fraud are specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong." Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985).

In cases involving multiple defendants, "Rule 9(b) does not allow a complaint to merely lump multiple defendants together but require[s] plaintiffs to differentiate their allegations . . . and inform each defendant separately of the allegations surrounding his alleged participation in the fraud." Swartz v. KPMG LLP, 476 F.3d 756, 765-66 (9th Cir. 2007); see also Pegasus Holdings v. Veterinary Ctrs. of Am., Inc., 38 F. Supp. 2d 1158, 1163 (C.D. Cal. 1998) (where an action involves multiple defendants, a plaintiff "must provide each and every defendant with enough information to enable them to know what misrepresentations are attributable to them and what fraudulent conduct they are charged with.") (citations omitted).

Rule 9(b)'s heightened pleading requirement "protects potential defendants-especially professionals whose reputations in their fields of expertise are most sensitive to slander-from the harm that comes from being charged with the commission of fraudulent acts." Semegen, 780 F.2d at 731. Providing detailed notice to defendants also prevents plaintiffs from filing complaints "as a pretext for the discovery of unknown wrongs." Bly-Magee v. Cal., ...


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