Opinion
Case No. 13-cv-05769-BLF
06-13-2014
FAREED SEPEHRY-FARD, Plaintiff, v. COUNTRYWIDE HOME LOANS. INC., et al., Defendants.
ORDER DISMISSING CASE FOR
LACK OF SUBJECT MATTER
JURISDICTION
In this lawsuit for quiet title, defendants Countrywide Home Loans, Inc. ("Countrywide"), ReconTrust Company, N.A. ("ReconTrust"), The Bank of New York Mellon ("BONY"), and Mortgage Electronic Registration Systems, Inc. ("MERS") (collectively, "Defendants") have filed three identical motions to dismiss the Complaint on the grounds of res judicata and failure to state a claim on which relief can be granted. (Def.'s Mots., ECF 5, 13, 30) Plaintiff Fareed :Sepehry-Fard ("Plaintiff") opposed all three motions. (Pl.'s Opp., ECF 20, 29; Pl.'s Supp. Opp., ECF 38).
Plaintiff's opposition to Countrywide's motion and BONY's first motion is largely identical, (Pl.'s Opp., ECF 20, 29), while Plaintiff's opposition to BONY's second motion differs from his other opposition briefs, (Pl.'s Supp. Opp., ECF 38).
The Court held a hearing on the motions on June 5, 2014 wherein the Court, sua sponte, raised the issue of subject matter jurisdiction over this lawsuit. For the reasons stated herein, the Court finds that the case must be DISMISSED for lack of subject matter jurisdiction.
Plaintiff also filed a Motion for Leave to File First Amended Complaint ("MFL") on April 22, 2014. (Pl.'s MFL, ECF 56) Defendants opposed that motion. (Def.'s Opp. to MFL, ECF 59-60) The Court has considered the Motion for Leave to File First Amended Complaint without oral argument and reviewed the proposed amended pleading in order to determine whether the proposed amendments would be permissible if the Court determined that it lacked subject matter jurisdiction in regard to the initial pleading. Because the Court finds that the proposed amendments are not permissible due to a lack of subject matter jurisdiction over the case as originally presented, the Court DENIES the Motion for Leave to File First Amended Complaint.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff, proceeding pro se, filed this original action on December 12, 2013 seeking to quiet title to a house located at 18314 Baylor Avenue, Saratoga, CA 95070 ("Property"). The sole claim, as repeated throughout the Complaint, is for quiet title. (See Compl., at 1:4, ¶¶ 1, 18-20, 61-63) Plaintiff's allegations are lengthy and at times veer into legal argument. What can be gleaned from the few factual allegations and the documents attached to the Complaint is that Plaintiff's Property is subject to two mortgage loans executed in September 2005 (collectively, "Notes"). (See Compl., Exh. A, at 12-65; Def.'s Req. for Judicial Notice ("RJN") Exhs. A-B, ECF 6, 13-1, 30-1) The Deeds of Trust identify Countrywide as the "Lender," ReconTrust as the "Trustee," and MERS as beneficiary and nominee. (See id.) Thereafter, defendants BONY and MERS engaged in an assignment transaction pursuant to which BONY became the beneficiary of the Notes. (See Compl. Exh. F) It appears that the Notes may have subsequently been pooled with other loans and securitized. (See Compl. ¶¶ 49-50, 56-58)
Plaintiff, though he attached these documents to the Complaint, has not requested judicial notice of the deeds of trust, and in fact opposes Defendants' request that they be judicially noticed. (See Def.'s RJN Exhs. A-B, ECF 6, 13, 30; Pl.'s RJN Opp., ECF 18, 27) The district court may take notice of facts not subject to reasonable dispute that are "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). The Court concludes that the public documents submitted by Defendants are not subject to reasonable dispute and are proper subjects of judicial notice.
Plaintiff alleges that the assignment between MERS and BONY was either invalid or fraudulent. (See id. ¶¶ 23-25, 38-45, 64-70) Plaintiff further alleges that the securitization of his Notes discharged any debt owed thereunder. (See id. ¶¶ 49-50, 56-58) Plaintiff does not allege that Defendants have taken any collection activity or made an adverse claim to the Property, though Defendants have provided evidence that a notice of default was recorded and then rescinded in 2010. (See Def.'s RJN Exhs. E-F) Plaintiff's theory for quiet title appears to rest on the contention that either because the Notes were invalidly or fraudulently assigned or because the Notes were securitized and discharged the debt owed, Defendants do not have standing to enforce the Notes because they are not "real parties in interest" or "holder[s] in due course." (See id. ¶¶ 43-47, 51, 54) Plaintiff thus alleges that "the Title is clouded," (id. ¶ 18), and requests the Court to "enter a judgment for a Quiet Title Action," (id. ¶ 19). (See also id. ¶¶ 62-63)
All references to Defendants' RJN are to the most recently filed version at ECF 30-1.
On April 22, 2014, after the briefing on Defendants' motions to dismiss had concluded, Plaintiff filed his Motion for Leave to File First Amended Complaint. (Pl.'s MFL, ECF 56) In the proposed First Amended Complaint ("FAC"), Plaintiff seeks to add thirteen additional claims against all Defendants for (1) negligence; (2) violation of the Federal Telephone Consumer Protection Act of 1991 ("TCPA"); (3) violation of California's Business and Professions Code Sections 17200, et seq. ("UCL"); (4) violation of the Fair Debt Collection Practices Act ("FDCPA"); (5) violation of 18 U.S.C. §§ 1963-1965 (collectively, "RICO claims"); (6) violation of 42 U.S.C. §§ 1981-1982 (collectively, "Civil Rights claims"); (7) accounting; (8) violation of the Truth in Lending Act ("TILA"); and (8) violation of the Real Estate Settlement Procedures Act ("RESPA"). Defendants opposed this motion for leave to amend, arguing that Plaintiff's new claims are also barred by res judicata, and that permitting amendment would be futile because Plaintiff' s proposed new claims either do not satisfy Rule 8(a), or are time barred, or both. (See Def.'s Opp. to MFL)
II. LEGAL STANDARDS
A. Federal Jurisdiction
"Federal courts are courts of limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Federal jurisdiction generally arises in one of two ways: (1) from the presence of a federal question, or (2) from complete diversity of the parties, where the amount in controversy exceeds $75,000. See 28 U.S.C. §§ 1331, 1332. Federal Rule of Civil Procedure 8(a)(1) requires a federal plaintiff to include in the complaint "a short and plain statement of the grounds for the court's jurisdiction," because "[a] party invoking the federal court's jurisdiction has the burden of proving the actual existence of subject matter jurisdiction." Thompson v. McCombe, 99 F.3d 352, 353 (9th Cir. 1996); see also Kokkonen, 511 U.S. 375, 377 ("It is to be presumed that a cause lies outside this limited jurisdiction and the burden of establishing the contrary rests upon the party asserting jurisdiction.").
Federal subject matter jurisdiction must "exist as of the time the action is commenced." Morongo Band of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d 1376, 1380(1988). Jurisdiction cannot be "expanded by judicial decree," Kokkonen, 511 U.S. 375, 377, nor can it be conferred on the district court by agreement or consent, Morongo, 858 F.2d 1376, 1380. "If jurisdiction is lacking at the outset, the district court has 'no power to do anything with the case except dismiss.'" Id. (quoting 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 2844, at 332 (1986)).
B. Leave to Amend
A plaintiff may amend the complaint once as a matter of course within 21 days after serving, or after service of a motion under Rule 12(b). Fed. R. Civ. P. 15(a)(1). Any other amendments can only be made "with the opposing party's written consent or the court's leave." Fed. R. Civ. P. 15(a)(2). Leave to amend should generally be freely given "when justice so requires." Id. However, certain factors can weigh against generous leave to amend, including "undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment." Foman v. Davis, 371 U.S. 178,182 (1962); Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to be considered when deciding whether to grant leave to amend).
Additionally, although the party invoking federal jurisdiction may generally amend the complaint to correct a defective jurisdictional allegation, see 28 U.S.C. § 1653, or to prove that jurisdiction does in fact exist, federal jurisdiction cannot be created by amendment if it does not exist at the outset. See 3 James Wm. Moore et al., Moore's Federal Practice ¶ 15.14[3], at 15-40, (3d ed. 2013); see also Morongo, 858 F.2d 1376, 1380-1381 (if district court lacked subject matter at the outset, then "court's various orders, including that granting leave to amend the complaint, were nullities"); Libhartv. Santa Monica Dairy Co., 592 F.2d 1062, 1065 (9th Cir. 1979) (complaint filed in state court and removed to federal court did not state any basis for federal jurisdiction, thus there was no jurisdiction to entertain a later amendment to the complaint).
III. DISCUSSION
A. Subject Matter Jurisdiction Over the Operative Complaint
The Court has an independent obligation to insure that it has subject matter jurisdiction over a matter. See Fed. R. Civ. P. 12(h)(3); Snell v. Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 2002) (court may raise question of subject matter jurisdiction, sua sponte, at any time during the pendency of the action). Thus, although neither party has raised the issue of subject matter jurisdiction, the Court must examine the issue sua sponte because Plaintiff s jurisdictional allegations in the operative Complaint are problematic.
i. Federal Question Jurisdiction
Federal question jurisdiction is determined from the face of a well-pled complaint that "establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law in that federal law is a necessary element of one of the well-pleaded claims." Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 808 (1988) (quoting Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. California, 463 U.S. 1, 13, 27-28 (1983)). Federal question jurisdiction is only invoked when a "plaintiff's statement of his own cause of action shows that it is based upon federal law." Vaden v. Discover Bank, 556 U.S. 49, 60 (2009).
Plaintiff has attempted to invoke federal question jurisdiction by reference to two federal statutes: the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq., and the Declaratory Judgment Act ("DJA"), 18 U.S.C. § 2201. (Compl. ¶¶ 2, 3) The DJA does not itself confer federal question jurisdiction—there must still be an independent basis for the court's jurisdiction over a plaintiff's claim, Gritchen v. Collier, 254 F.3d 807, 811 (9th Cir. 2001)—so in essence Plaintiff has only invoked federal question jurisdiction pursuant to the FDCPA. However, the Plaintiff has not actually asserted a claim under the FDCPA; the sole claim in the Complaint is one for quiet title, a state law claim. (See generally Compl.) As such, based on the claims alleged in the Complaint, mere reference to the FDCPA does not confer jurisdiction over this case.
ii. Diversity Jurisdiction
For diversity, federal courts have subject matter jurisdiction where (1) opposing parties are citizens of different states and (2) the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a). "[A] party seeking to invoke diversity jurisdiction should be able to allege affirmatively the actual citizenship of the relevant parties" on the face of the complaint in order to confirm that all parties are diverse. Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001) (emphasis added).
Plaintiff has invoked the diversity jurisdiction of this Court, (Compl. ¶ 3), but that form of jurisdiction is also not apparent from the Complaint. First, Plaintiff neglected to allege the citizenship of any named party, including himself, even though he was required to do so. Fed. R. Civ. P. 8(a)(1); see (Compl. ¶¶ 9-17). For individuals, "[a] person's domicile is her permanent home, where she resides with the intention to remain or to which she intends to return." See Kanter, 265 F.3d 853, 857. For the corporate entities, 28 U.S.C. § 1332(c)(1) required Plaintiff to allege their states of incorporation as well as their principal places of business.
Had Plaintiff properly alleged the parties' respective citizenship, it would be clear that complete diversity between the parties is missing. Considering the location of the property at issue, Plaintiff is presumably domiciled in the state of California. (See Compl. 2:5-20) It also appears that Defendant ReconTrust would be deemed a citizen of California based upon its place of business. (See id. Ex. A, at 12). In fact, numerous courts have found that ReconTrust Company N.A. is a citizen of California for purposes of diversity jurisdiction. See, e.g., McGuire v. ReconTrust Co., N.A., No. 2:11-CV-02787-KJM, 2014 WL 2118231, at *2 (E.D. Cal. May 21, 2014); Fazio v. Bank of New York Mellon, No. C 13-554 MEJ, 2013 WL 3855552, at *3 (N.D. Cal. July 24, 2013); Bedalla v. Bank of Am., N.A., No. 12-CV-02307-RMW, 2012 WL 5464635, at *1 (N.D. Cal. Nov. 8, 2012).
During the June 5, 2014 hearing, counsel for Defendant ReconTrust acknowledged that ReconTrust's principal place of business is in California and that it would be deemed a citizen of California for purposes of diversity jurisdiction. Moreover, it appears that Plaintiff effectively concedes that the Court lacks diversity jurisdiction over the original Complaint: in his proposed FAC, Plaintiff alleges that "Defendant, ReconTrust Company, N.A., 1800 Tapo Canyon Road, Simi Valley, CA 93063 is under the jurisdiction of state of California." (PL's MFL ¶ 16, ECF 56) It is thus apparently undisputed that Plaintiff and ReconTrust are both citizens of California. As such there is no complete diversity between the parties upon which to base diversity jurisdiction.
Because the Court has neither federal question nor diversity jurisdiction over the operative Complaint, the Complaint must be DISMISSED for lack of subject matter jurisdiction.
B. Plaintiff's Motion for Leave to Amend
The time permitted for amending the Complaint as of right pursuant to Rule 15(a)(1) has passed. Because the Court lacks subject matter jurisdiction over the operative Complaint, the only remaining question to address is whether the Court should entertain Plaintiff's motion for leave to file an amended complaint.
"If jurisdiction is lacking at the outset, the district court has 'no power to do anything with the case except dismiss.'" Morongo, 858 F.2d 1376, 1380 (quoting 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 2844, at 332 (1986)). As described above, Plaintiff seeks to add thirteen new claims on top of the quiet title claim, many of which invoke federal statutes such as the FDCPA, TCP A, TILA, and RESPA. Plaintiff seeks leave to amend on the basis that "justice requires the court to give leave for Plaintiff to file Plaintiff's Amended Complaint since the framers put the highest level of importance on the property ownership and rights." (Pl.'s MFL, 2 n. 1) Plaintiff seeks to add new facts to support his new federal claims, and it is not clear which claims, if any, can be based on facts alleged in the original Complaint. More fatally, Plaintiff has not explained how these new federal law claims prove that jurisdiction did in fact exist at the outset of the case, why he couldn't assert these claims earlier, or why any of these newly invoked federal statutes is essential to his quiet title claim. Plaintiff, when questioned at the hearing, simply stated that federal question jurisdiction could be found in the proposed FAC.
The Court notes that Plaintiff's forty-four page long "Motion for Leave of Court to File First Amended Complaint and First Amended Complaint" combines his request for leave and his proposed FAC into a single document. It is not clear where the motion ends and the FAC begins. The 207 paragraph FAC is interspersed with legal argument, and it is frequently difficult to discern what is a factual allegation, and what is legal argument, as Plaintiff's statement of each cause of action incorporates all preceding paragraphs by reference. (See Pl.'s MFL 32-42) Moreover, Plaintiff's allegations fail to differentiate between the actions of each of the individual defendants, only ever referring to them in the collective. This alone would be sufficient reason to deny leave to amend on the basis of futility. Such vague and confusing allegations are subject to dismissal because "[p]rolix, confusing complaints such as the one[] plaintiff[] filed in this case impose unfair burdens on litigants and judges." McHenry v. Renne, 84 F.3d 1172, 1177 (9th Cir.1996) (cited by Sepehry-Fard v. Dep't Stores Nat'l Bank, No. 13-cv-03131-WHO, 2013 WL 5537126, at *6 (N.D. Cal. Oct. 4, 2013); Sepehry-Fard v. Bank of New York Mellon, N.A., No. 5:12-CV-1260 LHK, 2013 WL 4030837, at *6 n.6 (N.D. Cal. Aug. 5, 2013)).
Although Plaintiff identified the FDCPA as a source of jurisdiction in the original Complaint, Plaintiff asserted no claim under the statute. As the Court has already noted, this reference to the FDCPA is not a defective allegation of jurisdiction; Plaintiff's statement of his own claim in the original Complaint does not show that it is based on federal law.
A plaintiff is the master of his complaint. Here, it is apparent from Plaintiff's own briefing that he intended to bring a claim for quiet title. (See Pl.'s Opp. ¶ 58 ("This action after all is a Quite [sic] Title action"), Pl.'s Supp. Opp. ¶ 6 ("Again and again, this is a Quite [sic] Title action")) Even in reply to Defendants' opposition to his motion for leave to file an amended complaint, Plaintiff argues that the court "must order Defendants to Quite [sic] Title Plaintiff's real property." (Pl.'s Reply ¶ 59, ECF 63) Thus, Plaintiff's statement of his own case consistently explains that this case is primarily one for quiet title, a state law claim that can only remain in federal court if there is subject matter jurisdiction. Plaintiff cannot obfuscate this fact by including in his proposed FAC allegations of federal-law questions that are not apparently essential to his original claim. See Morongo, 858 F.2d 1376, 1383 (citing Franchise TaxBd., 463 U.S. 1, 10).
The Court notes that Plaintiff's twenty-seven page "consolidated reply" is well in excess of the fifteen pages permitted by the local rules. Plaintiff is reminded that pro se parties are still bound by the Federal Rules as well as the applicable local rules. Civ. L.R. 3-9(a).
Although leave to amend should be freely granted, a plaintiff cannot create jurisdiction by amendment where jurisdiction did not exist at the outset of a case. Plaintiff's invocation of a myriad of federal statutes in the proposed FAC in an apparent attempt to recharacterize the primary issue and convince the Court to retain jurisdiction does not suffice to confer jurisdiction where there was none. Plaintiff suggested at the hearing that the Court should liberally grant his request for leave to amend the Complaint on the grounds that he is not an attorney and is generally unfamiliar with the legal requirements regarding pleading. In response to Plaintiff's request, the Court first notes that Plaintiff is not a stranger to the federal court. Contrary to his modest assertions, the Court views Plaintiff as a sophisticated pro se litigant based upon the numerous federal court cases he has filed over the years. See Sepehry-Fard v. GreenPoint Mortg. Funding, Inc., No. 5:13-CV-04535 EJD, 2014 U.S. Dist. LEXIS 49302 (N.D. Cal. April 8, 2014) (dismissing complaint for quiet title for lack of subject matter jurisdiction); Sepehry-Fard v. Dep't Stores Nat'l Bank, No. 5:13-cv-03131-WHO, 2014 WL 595067 (N.D. Cal. Feb. 14, 2014) (FDCPA, TCPA, negligence, and UCL claims dismissed, after twice granting leave to amend, for failure to state a claim); Sepehry-Fard v. Aurora Bank FSB, No. 5:12-cv-00871-EJD, 2013 WL 2239820 (N.D. Cal. May 21, 2013) (civil rights claims based on similar facts as alleged in this case dismissed for failure to state a claim); Sepehry-Fard v. The Bank of New York Mellon, N.A., No. 5:12-CV-12600 LHK, 2013 WL 4030837 (N.D. Cal. Aug. 5, 2013) (civil rights claims based on the same facts as alleged in this case dismissed, after leave to amend, for failure to state a claim). Plaintiff is presumably aware of federal pleading standards and the bases for federal jurisdiction.
That being said, the Court would grant Plaintiff the same liberal opportunity to amend the pleadings as any other pro se litigant if the law supported such a right. Here, lacking subject matter jurisdiction, the Court does not have the authority to do so. Therefore, because Plaintiff's arguments and proposed amendments do not prove that the Court had jurisdiction at the outset, the Court accordingly finds that it has no power to do anything with the case except dismiss. Morongo, 858 F.2d 1376, 1380.
In addition to this clear pronouncement from the Ninth Circuit, the Court is persuaded by the reasoning of other courts that have denied leave to amend where, as here, a plaintiff sought amendment to assert a federal claim in an effort to create jurisdiction where jurisdiction was lacking over an original complaint that alleged only state law claims. See Leonard J. Strandberg & Assocs. v. Misan Const. Corp., No. 08CV2939 SJF ETB, 2010 WL 1565485, at *5-6 (E.D.N.Y. Apr. 19, 2010) (no leave to amend where court did not have diversity jurisdiction over original complaint asserting only state law claims and plaintiff sought leave to add a federal civil RICO claim); Falise v. Am. Tobacco Co., 241 BR. 63, 65-67 (E.D.N. Y. 1999) (same, and collecting cases); Broad v. DKP Corp., No. 97 CTV. 2029 (LAP), 1998 WL 516113, at *4-7 (S.D.N.Y. Aug. 19, 1998) aff'd, 182 F.3d 898 (2d Cir. 1999).
C. Plaintiff's Other Motions
Plaintiff has also filed several motions for miscellaneous relief, namely three motions to demand that the Court facilitate a grand jury to prosecute and disqualify Defendants' counsel, (ECF 16, 23, 28); Plaintiff's application for Court authorization to record a lis pendens, (ECF 24); Plaintiff's motion for an evidentiary hearing and to disqualify Defendants' counsel, (ECF 50); and Plaintiff's motion to claim and exercise constitutional rights, (ECF 66). Because the Court lacks subject matter jurisdiction, these motions are DENIED as moot. Morongo, 858 F.2d 1376, 1380-1381 (if jurisdiction is lacking, any court order other than one dismissing the case is a nullity); accord United States v. Boe, 543 F.2d 151, 159 (C.C.P.A. 1976).
IV. ORDER
For the foregoing reasons, the Complaint is DISMISSED, without leave to amend, for lack of subject matter jurisdiction. The case is DISMISSED without prejudice.
The Clerk of the Court is instructed to close the file in the case.
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BETH LABSON FREEMAN
United States District Judge