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Coronado v. National Default Servicing Corp.

United States District Court, E.D. California

April 5, 2017

IVAN CORONADO and TAMMI CORONADO, Plaintiffs,
v.
NATIONAL DEFAULT SERVICING CORPORATION, SELECT PORTFOLIO SERVICING INC., MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., WELLS FARGO BANK, N.A., successor by merger to Wells Fargo Bank Minnesota, N.A., f/k/a Northwest Bank Minnesota, N.A., solely as trustee for Structured Asset Mortgage Investment II Inc., Bear Stearns Mortgage Funding Trust 2006-AR4, Mortgage Pass-Through Certificates, Series 2006- R4, Defendants.

          FINDINGS AND RECOMMENDATIONS THAT THE DISTRICT COURT IMPOSE TERMINATING SANCTIONS AND DISMISS THIS CASE

          SHEILA K. OBERTO UNITED STATE MEGISTRATE JUDGE.

         Before the Court are the following two motions: (1) Defendant Select Portfolio Servicing, Inc.'s (“Defendant Select”) Motion for Terminating Sanctions, or in the Alternative for Issue and Evidentiary Sanctions, and to Modify Scheduling Order (“Defendant Select's Motion”), (Doc. 29); and (2) a Motion for Reconsideration and for Terminating Sanctions, or in the Alternative for Issue and Evidentiary Sanctions (the “Remaining Defendants' Motion”), (Doc. 30), brought by Defendants National Default Servicing Corporation, Mortgage Electronic Registration Systems, Inc., and Wells Fargo Bank, N.A., as trustee (together, the “Remaining Defendants”). For the reasons provided herein, the undersigned recommends that the presiding district court judge GRANT Defendant Select's Motion, (Doc. 29), and the Remaining Defendants' Motion, (Doc. 30), insofar as all Defendants request that the Court impose terminating sanctions and dismiss this action, in its entirety.

         I. BACKGROUND

         This action arises out of Plaintiffs' purported default on the mortgage for certain property and Defendants' subsequent election to sell the property. Plaintiffs have proceeded pro se since the inception of this case.

         On May 20, 2015, Plaintiffs filed the Complaint against Defendants[1] in the Superior Court of California, County of Fresno. (Doc. 1, Ex. 4.) Defendant Select then removed this case to this Court on December 9, 2015.[2] (Doc. 1.)

         The Complaint includes the following claims against all Defendants: (1) First Cause of Action―violation of the California Homeowners Bill of Rights; (2) Second Cause of Action―violation of California Civil Code § 2923.5; (3) Third Cause of Action―negligence; (4) Fourth Cause of Action―violation of California Business and Professions Code Section 17200, et seq., (5) Fifth Cause of Action―constructive fraud; (6) Sixth Cause of Action―slander of title; (7) Seventh Cause of Action―quiet title; (8) Eighth Cause of Action―declaratory relief; (9) Ninth Cause of Action―injunctive relief. (See id., Ex. 4 ¶¶ 42-128.) Beyond the declaratory and injunctive requests included in the Eighth and Ninth Causes of Action, the Complaint also includes requests for (1) special, general, compensatory, treble, and punitive damages, (2) restitution, and (3) attorneys' fees and costs. (See Id. at 31.)

         On May 15, 2016, Defendant Select propounded first sets of interrogatories to each Plaintiff (the “Discovery Requests”). (See Doc. 13, Ex. 2 at 2-31.) The Discovery Requests pertained to a wide range of topics, such as evidence supporting all of Plaintiffs' claims and the damages Plaintiffs allegedly suffered. (See Id. at 10-14, 25-29.) The Remaining Defendants did not propound the Discovery Requests and the Discovery Requests do not otherwise indicate that the Remaining Defendants joined with Defendant Select in propounding these interrogatories. (See Id. at 2-31.)

         On June 29, 2016, Defendant Select filed a motion to compel, in which it requested that the Court compel responses to the Discovery Requests, as well as additional requests for production of documents. (Doc. 13.) In an order entered on August 1, 2016, the undersigned granted this motion to compel and ordered Plaintiffs “to respond, without objections, to the [Discovery Requests] by no later than August 26, 2016.”[3] (Doc. 18.)

         On October 11, 2016, Defendants filed a Motion for Terminating Sanctions or in the Alternative for Issue and Evidentiary Sanctions (the “First Motion for Terminating Sanctions”). (Doc. 20.) In the First Motion for Terminating Sanctions, Defendants asserted that Plaintiffs had “failed to provide any responses to the” Discovery Requests. (Id. at 5 (emphasis omitted).) Defendants argued that the Court should therefore “dismiss this matter, with prejudice.” (Id. at 11.)

         In its order entered on December 2, 2016 (together with the undersigned's August 1, 2016 order, the “Discovery Orders”), the undersigned denied the First Motion for Terminating Sanctions without prejudice as to Defendant Select. (Doc. 26 at 1-2.) As the Remaining Defendants did not propound the Discovery Requests―or otherwise join Defendant Select in propounding the Discovery Requests―the undersigned denied the First Motion for Terminating Sanctions with prejudice as to the Remaining Defendants. (Id. at 2.) The undersigned also again ordered “Plaintiffs to provide full responses, without objections, to [the Discovery Requests] by no later than Friday, December 16, 2016.”[4] (Id.) Finally, the undersigned ordered that it would “hold a hearing regarding the status of this matter on Wednesday, December 21, 2016.” (Id.)

         The undersigned subsequently held a status conference on December 21, 2016. (Doc. 27.) Plaintiffs failed to appear at this status conference. (Doc. 28 at 2.) During this status conference, Defendants indicated that they would again file motions for terminating sanctions. (Id.) Defendants also stated that they would seek reconsideration of the undersigned's December 2, 2016 order, insofar as the undersigned denied the First Motion for Terminating Sanctions with prejudice as to the Remaining Defendants. (Id.) The undersigned therefore provided the following briefing schedule for these motions: (1) Defendants could “file their motions for terminating sanctions and reconsideration of the” undersigned's December 2, 2016 order “by no later than January 3, 2017;” (2) “Plaintiffs [could] file an opposition brief to these motions by January 17, 2017;” and (3) “Defendants [could] file their reply brief in support of these motions by January 24, 2017.” (Id.)

         On January 3, 2017, Defendant Select filed Defendant Select's Motion, (Doc. 29), and the Remaining Defendants filed the Remaining Defendants' Motion, (Doc. 30). To date, Plaintiffs have not filed an opposition to either Defendant Select's Motion or the Remaining Defendants' Motion. Defendants also have not filed any reply briefs in support of these two motions.

         On February 8, 2017, the undersigned held a hearing regarding Defendant Select's Motion and the Remaining Defendants' Motion. (Doc. 35.) “Plaintiffs did not make an appearance at this hearing despite a phone call by defense counsel to [Plaintiffs'] last known telephone number” at the designated time for the hearing. (Doc. 36.) At this hearing, “Defendants state[d] . . . that, to date, Plaintiffs . . . failed to comply with” the undersigned's August 1, 2016 order by not responding, without objections, to the Discovery Requests. (Id.) As such, in an order entered on the same date, the undersigned cautioned “Plaintiffs that [the undersigned] will recommend that the district court dismiss this entire case if Plaintiffs fail to respond to [the Discovery Requests] by no later than Wednesday, February 22, 2017.” (Id.) The undersigned's February 8, 2017 order was served on Plaintiffs by mail and there is no indication on the docket for this case that Plaintiffs did not receive this order―or, indeed, any of the undersigned's orders.

         On February 23, 2017, Defendants filed notice “that Plaintiffs have not responded (in any way whatsoever) to [the Discovery Requests], to date.” (Doc. 38 at 2.) The docket for this case does not otherwise provide any indication that Plaintiffs have responded to the Discovery Requests.

         Finally, in the Remaining Defendants' Motion, the Remaining Defendants first request that the undersigned reconsider its December 2, 2016 order to the extent the undersigned denied the First Motion for Terminating Sanctions with prejudice as to the Remaining Defendants. (See Doc. 30 at 8-12.) In an order entered on February 8, 2017, the undersigned granted the Remaining Defendants' Motion, but only “to the extent the [Remaining] Defendants request[ed] reconsideration of the [undersigned's] December 2, 2016 order.” (Doc. 37 at 5.) The undersigned therefore modified its December 2, 2016 order by denying the First Motion for Terminating Sanctions without prejudice as to the Remaining Defendants. (Id.) Consequently, the Remaining Defendants' request for reconsideration in the Remaining Defendants' Motion, (see Doc. 30 at 8- 12), has been resolved, but the remainder of this motion―including the Remaining Defendants' request for terminating sanctions, (see Id. at 13-18)―is still pending before the Court.

         II. STANDING FOR THE REMAINING DEFENDANTS

         The undersigned must address a preliminary issue before turning to Defendants' requests for terminating sanctions. In particular, only Defendant Select propounded the Discovery Requests that are the subject of the undersigned's Discovery Orders. (See, e.g., Doc. 13, Ex. 2 at 2-31.) However, all Defendants now request terminating sanctions for Plaintiffs' failure to follow the Discovery Orders by not responding to the Discovery Requests. (See Doc. 29 at 16; Doc. 30 at 22.) Nonetheless, for the reasons that follow, the undersigned finds that all Defendants have standing to seek this sanction.

         In Payne v. Exxon Corp., the Ninth Circuit addressed a case where the district court dismissed the entire action against two defendants due to the plaintiffs' failure to comply with a discovery order, even though only one of the defendants propounded the discovery that was the subject of the discovery order. 121 F.3d 503, 507 (9th Cir. 1997). In addressing the plaintiffs' argument that dismissal of the claims against both defendants was improper, the Payne court noted that Federal Rule of Civil Procedure 37(b)(2)―which provides for terminating sanctions, see Fed. R. Civ. P. 37(b)(2)(A)(v)―does not include a “standing limitation” that “limit[s] the district court's dismissal authority to claims against the party who propounded discovery, ” Payne, 121 F.3d at ...


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