Opinion
NO. CIV. S 08-1650 FCD KJM.
October 28, 2008
MEMORANDUM AND ORDER
This matter is before the court on defendants Beazer Homes Holdings Corp., Beazer Homes USA Inc., and Security Title Insurance Company's (collectively "defendants") motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure or, in the alternative, for summary judgment pursuant to Rule 56. Plaintiffs Angel Maxion and Daisy Maxion ("plaintiffs") oppose the motion and request a denial or continuance of defendants' summary judgment motion under Rule 56(f). For the reasons set forth below, defendants' motion to dismiss is DENIED, and plaintiffs' motion to continue the hearing on defendants' motion for summary judgment is GRANTED.
Any further references to a "Rule" or "Rules" are to the Federal Rules of Civil Procedure unless otherwise stated.
Although plaintiffs do not refer to Rule 56(f) specifically, the court construes their opposition as seeking relief thereunder. Plaintiffs have introduced facts sufficient to support a Rule 56(f) continuance as set forth below.
Because oral argument will not be of material assistance, the court orders this matter submitted on the briefs. E.D. Cal. L.R. 78-230(h).
BACKGROUND
The facts contained herein are drawn from plaintiffs' first amended complaint. (See Pls.' First Amended Complaint ("FAC"), filed July 17, 2008.)
Defendants Beazer Homes Holdings Corp. and Beazer Homes USA Inc. (collectively "Beazer") build and sell new homes. (FAC ¶ 4.) In or about March 1999, Beazer created defendant Security Title Insurance Company ("Security Title"), a wholly owned subsidiary, as a captive title reinsurance company. (Id. at ¶¶ 21, 23.) Reinsurance is a service whereby an insurance company (the "primary" insurer) has a second insurance company (the "reinsurer") reinsure its risk. Beazer used Security Title to reinsure transactions referred by Beazer to outside title insurers. (Id. at ¶ 21.) Through its reinsurance arrangements, Beazer allegedly obtained monies for the referral of title insurance business. (Id.) Plaintiffs allege that the purported reinsurance service and fee were not bona fide, but instead were a sham established to disguise kickbacks and fee splitting amongst defendants and primary title insurance companies. (Id. at ¶ 26.)
Plaintiffs purchased a new home from Beazer in or about October 2005. (Id. at ¶ 20.) Plaintiffs allege that Security Title acted as a title reinsurer for this transaction and accordingly received part of the premiums for the title insurance paid to the primary title insurance company. (Id. at ¶ 23.) Defendants did not inform plaintiffs of the reinsurance agreement between Security Title and the primary title insurer, and plaintiffs did not learn of the agreement until October 2007. (Id. at ¶¶ 33, 34.) In October 2007, defendants settled an action with the United States Department of Housing and Urban Development ("HUD") that accused defendants of accepting kickbacks in violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2607. (Id.)
Plaintiffs filed the instant action on March 12, 2008. The FAC asserts claims for RESPA violations, breach of contract, fraudulent concealment, negligence, unfair business practices, and restitution. Defendants now move to dismiss plaintiffs' claims as untimely. In the alternative, defendants move for summary judgment on all of plaintiffs' claims based on their contention that no reinsurance agreements were made in the instant case.
STANDARD
A. Rule 12(b)(6)
On a motion to dismiss, the allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). The court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n. 6 (1963). Thus, the plaintiff need not necessarily plead a particular fact if that fact is a reasonable inference from facts properly alleged. See id.
Nevertheless, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged."Associated Gen. Contractors of Calif., Inc. v. Calif. State Council of Carpenters, 459 U.S. 519, 526 (1983). Moreover, the court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n. 2 (9th Cir. 1986).
Ultimately, the court may not dismiss a complaint in which the plaintiff alleged "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1973 (2007). Only where a plaintiff has not "nudged [his or her] claims across the line from conceivable to plausible," is the complaint properly dismissed. Id. "[A] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002) (quoting Hudson v. King Spalding, 467 U.S. 69, 73 (1984)).
B. Rule 56(f)
When a party opposing a motion for summary judgment cannot present "facts essential to justify his opposition" to the motion, Rule 56(f) permits the party to submit an affidavit stating such reasons, and the court may continue or deny the motion if the opposing party needs to discover essential facts.Garrett v. City and County of San Francisco, 818 F.2d 1515, 1518 (9th Cir. 1987) (citing Hancock v. Montgomery Ward Long Term Disability Trust, 787 F.2d 1302, 1306 (9th Cir. 1986)). Specifically, Rule 56(f) provides:
Should it appear from the affidavits of a party opposing the motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.
Fed.R.Civ.Proc. 56(f). The burden is on the party seeking additional discovery to demonstrate that the information sought exists, and that it would prevent summary judgment. Nidds v. Schindler Elevator Corp., 113 F.3d 912, 921 (9th Cir. 1996). The moving party must also demonstrate that it diligently pursued previous discovery opportunities. Qualls v. Blue Cross of California, 22 F.3d 839, 844 (9th Cir. 1994).
The Ninth Circuit has noted that "denial of a Rule 56(f) application is generally disfavored where the party opposing summary judgment makes (a) a timely application which (b) specifically identifies (c) relevant information, (d) where there is some basis for believing the information sought actually exists." Visa Int'l Serv. Ass'n v. Bankcard Holders of Am., 784 F.2d 1472, 1475 (9th Cir. 1986). Rule 56(f) motions "`should be granted almost as a matter of course' unless `the nonmoving party has not diligently pursued discovery of the evidence.'" Wichita Falls Office Assoc. v. Banc One Corp., 978 F.2d 915, 919 n. 4 (5th Cir. 1992) (quoting International Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1267 (5th Cir. 1991)); Burlington, 323 F.3d at 773; see also Qualls, 22 F.3d at 844.
ANALYSIS
A. Defendants' Motion to Dismiss
Defendants move to dismiss plaintiffs' RESPA claim on the ground that it is barred by the applicable statute of limitations. Defendants further contend that plaintiffs' remaining state law claims must be dismissed as they are premised solely on the alleged RESPA violations.
In light of the court's holding below that the RESPA claim is timely filed, defendants' arguments concerning the remaining state law claims are moot, and the court does not address those issues herein.
Private RESPA claims carry a one-year statute of limitations. 12 U.S.C. § 2614. Defendants contend that the statutory period began no later than January 2006, the date defendants allege the loan closed. (Defs.' Mot. to Dismiss Pls.' First Am. Compl. or, in the Alternative, For Summ. J. ("Defs.' Mot."), 5:8-10, filed Aug. 28, 2008.) Although plaintiffs did not file their complaint until March 12, 2008, they contend that their RESPA claim is timely pursuant to the doctrines of equitable tolling, equitable estoppel, and/or delayed discovery.
As to the first doctrine, equitable tolling is applicable to RESPA claims where, "despite all due diligence, a plaintiff is unable to obtain vital information bearing on the existence of his claim." Santa Maria v. Pacific Bell, 202 F.3d 1170, 1178 (9th Cir. 2000). If a plaintiff is unaware of his claim, despite the exercise of due diligence, the statutory limitation period is tolled for so long as a reasonable plaintiff would not have known of a possible claim. In other words, the statutory period does not begin to run until the plaintiff should reasonably be aware of the existence of a possible claim. Socop-Gonzalez v. I.N.S., 272 F.3d 1176, 1195-96 (9th Cir. 2001) (holding that the statute of limitations in the alien petitioner's motion to reopen deportation proceedings was equitably tolled where an Immigration and Naturalization Service officer negligently provided petitioner with incorrect advice regarding deportation proceedings).
Defendants mistakenly argue that plaintiffs are not entitled to equitable tolling because they have not adequately pled "fraudulent concealment." Defendants' argument confuses equitable tolling with equitable estoppel, an independent tolling doctrine. "Equitable estoppel . . . may come into play if the defendant takes active steps to prevent the plaintiff from suing in time — a situation [often referred to as] fraudulent concealment."Johnson v. Henderson, 314 F.3d 409, 414 (9th Cir. 2002). However, "[u]nlike equitable estoppel, equitable tolling does not depend on any wrongful conduct by the defendant to prevent the plaintiff from suing. Instead it focuses on whether there was excusable delay by the plaintiff." Santa Maria, 202 F.3d at 1178. Thus, while fraudulent concealment can support tolling of the statute of limitations where it renders a plaintiff unable to obtain vital information regarding his claim, it is not necessary for a plaintiff to establish fraudulent concealment in all cases. As stated above, to invoke the doctrine of equitable tolling, a plaintiff must show only that he "was unable to obtain vital information regarding the existence of a claim despite [his own] due diligence." Kay v. Wells Fargo Co., 247 F.R.D. 572, 578 (N.D. Cal. 2007) (holding that plaintiff home-buyer should have known of the possible existence of a RESPA claim where the defendant fully informed the plaintiff of its reinsurance agreement).
To establish fraudulent concealment, and thereby to invoke the doctrine of equitable estoppel, a plaintiff must show that: (1) the defendant actively mislead the plaintiff as to the operative facts that gave rise to his claim, and (2) the plaintiff had neither actual nor constructive knowledge of the operative facts despite his diligence in trying to uncover them. Thorman v. Am. Seafoods Co., 421 F.3d 1090, 1094 (9th Cir. 2005); accord Grimmet v. Brown, 75 F.3d 506, 515 (9th Cir. 1996).
In this case, assuming the truth of the facts as alleged in the FAC, the court cannot find that plaintiffs knew or should have known of the possible existence of a RESPA claim prior to the disclosure of the HUD settlement in October 2007. Plaintiffs specifically allege that they did not know of the reinsurance agreement before October 2007, and nothing in the pleading suggests that they should have been aware of their claim prior to that date. (Id. at ¶¶ 33, 34.) Indeed, defendants do not argue that plaintiffs should have been aware of a possible RESPA claim before October 2007. Instead, they argue only that plaintiffs could not have known of a possible claim because, in fact, no such claim existed. Defendants' argument ignores the standard under Rule 12(b)(6), under which the court must assume the truth of plaintiffs' allegations. Because plaintiffs have alleged the existence of a reinsurance agreement, defendants' contention that no agreement exists presents a factual issue which cannot be resolved on a motion to dismiss. Plaintiffs' allegations in the FAC are sufficient to establish a basis for equitable tolling. Under the facts alleged in the FAC, the statutory period was tolled until the disclosure of the HUD settlement in October 2007, and plaintiffs' complaint, filed in March 2008, was therefore timely.
Because plaintiffs' complaint was timely filed pursuant to the doctrine of equitable tolling, the court does not reach plaintiffs' arguments regarding equitable estoppel or delayed discovery.
B. Defendants' Motion for Summary Judgment
Defendants move for summary judgment on all of plaintiffs' claims based on their contention that no reinsurance agreements were made in the instant case.
Preliminarily, plaintiffs ask the court to deny defendants' motion for summary judgment based on defendants' failure to file an accompanying statement of undisputed facts. Eastern District Local Rule 56-260(a) requires that:
Each motion for summary judgment or summary adjudication shall be accompanied by a "Statement of Undisputed Facts" that shall enumerate discretely each of the specific material facts relied upon in support of the motion and cite the particular portions of any pleading, affidavit, deposition, interrogatory answer, admission or other document relied upon to establish that fact.
While the court notes defendants' failure to include a statement of undisputed facts, such failure is immaterial in light of the court's decision to grant plaintiffs' request for a continuance pursuant to Rule 56(f).
However, in conjunction with submitting a supplemental memorandum of points and authorities, as set forth below, defendants shall file the required statement of undisputed facts.
Next, plaintiffs contend the motion should be continued because discovery has not yet commenced. (Pls.' Opp'n to Defs.' Mot. to Dismiss Pls.' First Am. Compl. or, in the Alternative, for Summ. J. ("Pls.' Opp'n"), 15:26-27, filed Sep. 19, 2008.) Although defendants do not contest that no discovery has taken place, they argue that plaintiffs have failed to identify the specific documents that plaintiffs believe provide the basis for the complaint. (Defs.' Reply at 7:1-15.) However, courts recognize that "where . . . no discovery whatsoever has taken place, the party making a Rule 56(f) motion cannot be expected to frame its motion with great specificity as to the kind of discovery likely to turn up useful information, as the ground for such specificity has not yet been laid." Burlington N. Santa Fe R.R. Co. v. Assiniboine and Sioux Tribes, 323 F.3d 767, 774 (9th Cir. 2003). "Although Rule 56(f) facially gives judges the discretion to disallow discovery when the non-moving party cannot yet submit evidence supporting its opposition, the Supreme Court has restated the rule as requiring, rather than merely permitting, discovery `where the non-moving party has not had the opportunity to discover information that is essential to its opposition.'" Metabolife Int'l, Inc. v. Wornick, 264 F.3d 832, 846 (9th Cir. 2001) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 n. 5, (1986)) (emphasis added).
Plaintiffs have met the requirements of Rule 56(f) by identifying several facts, through the declaration of their counsel, which they believe are essential to their claim and would allow them to oppose defendants' motion for summary judgment. The discovery plaintiffs believe is relevant includes: "(1) obtaining production of the complete file for plaintiffs' transaction, (2) obtaining documents relating to defendants' reinsurance program, including when it ceased, (3) deposing W. Mark Berry, who submitted a declaration in support of defendants' motion, (4) deposing defendants' person most knowledgeable regarding defendants' reinsurance program, and (5) deposing defendants' person most knowledgeable regarding plaintiffs' transaction." (Haffner Decl. ¶ 2).
Plaintiffs contend that they need to obtain this evidence to determine whether defendants' reinsurance arrangement was still in place at the time of plaintiffs' transaction, and whether plaintiffs' title insurance was reinsured by defendant Security Title. (Pls.' Opp'n at 16:3-6.) In the HUD settlement, defendants state that "no new title reinsurance business was written after 2005." (Pls.' Opp'n, Ex. 2.) However, plaintiffs argue that their title insurance was written during 2005, before defendants ceased their reinsurance business. (Pls.' Opp'n, Ex 1.) In response, defendants present the declaration of W. Mark Berry, Vice President of Security Title. In his declaration, Berry states that "the title insurance purchased by [plaintiffs] in connection with their loan was not part of any reinsurance agreement involving Security Title." (Berry Decl. ¶ 9.)
In light of defendants' conflicting statements regarding the duration of their reinsurance business, plaintiffs have met their burden of demonstrating that additional discovery is needed to uncover critical and potentially dispositive information regarding (1) whether defendants' reinsurance arrangement was still in place at the time of plaintiffs' transaction, and (2) whether plaintiffs' title insurance was reinsured by Security Title. See Garrett, 818 F.2d 1515, 1518-19 (9th Cir. 1987) (holding that plaintiff satisfied the requirements of Rule 56(f) where the plaintiff's declaration made clear that he sought personnel records for the purpose of demonstrating that similarly situated employees were being treated differently on the basis of race).
Therefore, because plaintiffs have sufficiently demonstrated that additional discovery is needed to adequately respond to defendants' motion, the court continues defendants' motion for summary judgment pending discovery as set forth below:
(1) The parties have until January 30, 2009, to conduct discovery pertaining to the issues raised by defendants' motion for summary judgment.
(2) Defendants shall file a supplemental memorandum of points and authorities in support of their motion for summary judgment, addressing the discovery, on or before February 27, 2009.
(3) Plaintiffs shall file a supplemental opposition addressing the same on or before March 13, 2009.
(4) Defendants' reply thereto shall be filed on or before March 20, 2009.
(5) Defendants' motion for summary judgment is continued to March 27, 2009, at 10:00 a.m., in Courtroom 2.
CONCLUSION
For the foregoing reasons, defendants' motion to dismiss is DENIED, and plaintiffs' motion to continue defendants' motion for summary judgment pending discovery pursuant to Rule 56(f) is GRANTED. Defendants' motion for summary judgment is hereby continued to March 27, 2009.IT IS SO ORDERED.