Madison v. First Magnus Financial Corporation et al

Filing 167

ORDER granting 145 Motion for Relief of Pla Sherryl Madison. FURTHER ORDERED directing the Clerk to reopen this matter. FURTHER ORDERED that because the 2nd amended complaint and notices of lis pendens filed on 4/20/09 (dkt. ##156, 159-64) were unt imely and because pla was represented by counsel at the time, pla is directed to either file a new 2nd amended complaint or file notice that she adopts the 2nd amended complaint which was improperly filed ( 156 ) on or before 5/29/09. FURTHER ORDERED granting 166 Motion to Withdraw as Attorney conditioned upon his compliance with Local Rule of Civil Procedure 83.3(b). Counsel is directed to provide the current address and phone number of Ms. Madison to the Court by 5/1/09 and timely serve the information upon all other parties or their attorneys. FURTHER ORDERED directing Mr. Jung to mail a copy of this order to Ms. Madison on or before 4/28/09. (See document for full details). Signed by Judge G Murray Snow on 4/27/2009. (LAD)

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WO

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

) ) ) Plaintiff, ) ) vs. ) ) F I R S T M A N G U S F I N A N C I A L) C O R P O R A T I O N ; L E H M A N) B R O T H E R S HOLDINGS, INC.;) M O R T G A G E E L E C T R O N I C) REGISTRATION SYSTEMS, INC.;) G M A C M O R T G A G E , L L C ;) T R A N S N A T I O N A L FINANCIAL) N E T W O R K , I N C . ; F R E M O N T) INVESTMENT & LOAN COMPANY;) H O M E C O M I N G S F I N A N C I A L) NETWORK, LLC; INDYMAC BANK,) F S B ; U S B A N K N A T I O N A L) ASSOCIATION; FIDELITY NATIONAL) FORECLOSURE SOLUTIONS; AMC) M O R T G A G E SERVICES, INC.;) UNIFIED CAPITAL GROUP, INC.;) COMMUNITY LENDING SERVICE,) I N C . ; A R G E N T M O R T G A G E) COMPANY, LLC; WASHINGTON) MUTUAL BANK; LITTON LOANS &) ) HOMEEQ SERVICING, INC., ) ) Defendants. ) SHERRYL L. MADISON,

No. CV-08-1562-PHX-GMS ORDER

Pending before the Court are the Motion for Relief of Plaintiff Sherryl L. Madison (Dkt. # 145) and the Motion to Withdraw of Attorney Robert R. Jung (Dkt. # 166). For the

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reasons set forth below, the Court grants Plaintiff's motion and conditionally grants Mr. Jung's Motion to Withdraw. BACKGROUND Plaintiff Sherryl Madison is an Arizona resident who allegedly owns real property in Arizona at the following addresses: (1) 24220 N. 53rd Avenue, Glendale, Arizona 85310; (2) 522 E. Glendale Avenue, Phoenix, Arizona 85020; (3) 2302 E. Lincoln Drive, Phoenix, Arizona 85016; (4) 16083 West Morning Glory Street, Goodyear, Arizona 85338; (5) 18607 N. 45th Drive, Glendale, Arizona, 85308; and (6) 7384 W. Utopia Road, Glendale, Arizona 85308. In her First Amended Complaint ("FAC"), Plaintiff alleged that, "[b]etween December 15, 2003 and July 2006, [she] refinanced and/or purchased [those properties]." (Dkt. # 81 ¶ 14.) Plaintiff allegedly obtained financing related to the various properties in the amounts of $428,000, $176,000, $440,800, $750,000, $261,250, $492,000, $637,000, and $975,000 from various financial institutions. The financing was obtained pursuant to promissory notes secured by deeds of trust on each property. Apparently, non-judicial trustee sales have or are being pursued in respect to all six of Plaintiff's properties due to Plaintiff's default on her promissory notes. Defendants consist of the various financial/real estate institutions that were or are involved in some manner with either the purchase, refinance, and/or the trustee sales of one or more of Plaintiff's properties. Plaintiff filed her FAC on November 20, 2008, seeking recision of the promissory notes executed in connection with the six properties and seeking damages from all Defendants jointly and severally. (Dkt. # 81 at 62.) In the FAC, Plaintiff attempted to assert twenty-two causes of action, nine claims for relief, and a claim entitled "Compelling Partition" against all entities named as defendants. (See id. ¶¶ 36-205.) Among the claims in the FAC were allegations that Defendants violated various provisions of the Truth in Lending Act, 15 U.S.C. § 1601 et seq., the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq., the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. On March 19, 2009, pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court dismissed the FAC for Plaintiff's failure to comply with Federal Rules of Civil Procedure 8, -2-

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9, and 10. (Dkt. # 143.) Plaintiff was given the option to replead by March 31, 2009, in the form of a second amended complaint. In the Order, the Court warned Plaintiff that should she elect not to file a second amended complaint, the matter would be terminated. (Id. at 1213.) Plaintiff failed to file a second amended complaint by the March 31 deadline and the matter was consequently terminated. On April 8, 2009, Plaintiff, despite being represented by counsel, filed a pro se Motion for Relief from the March 19 Order pursuant to Federal Rule of Civil Procedure 60(b)(6), claiming that she had been abandoned by her attorney. (Dkt. # 145.) On April 21, 2009, pursuant to Local Rule of Civil Procedure 83.3(c)(2), the Court, in its discretion, conducted a hearing to allow Ms. Madison to be heard, notwithstanding that fact that she was still represented by counsel. At the hearing, Ms. Madison reasserted her motion for relief and argued that the failure to file a second amended complaint was a direct result of her attorney's conduct. (See Dkt. # 157.) After the hearing was concluded, Ms. Madison filed a notice with the Court indicating that she had previously filed a complaint against Mr. Jung with the Arizona State Bar. (Dkt. # 165.) In her bar compliant, Ms. Madison indicated that she was seeking the removal of Mr. Jung as her counsel. (Id. at 4.) Thereafter, on April 21, 2009, Mr. Jung filed a Motion to Withdraw seeking leave of the Court to cease his representation of Ms. Madison. (Dkt. # 166.) On April 20, 2009, nearly three weeks after the Court's deadline for filing an amended complaint, Ms. Madison filed a second amended complaint (Dkt. # 156) and six Notices of Lis Pendens (Dkt. ## 159-64). DISCUSSION I. Federal Rule of Civil Procedure 60(b)(6) Federal Rule of Civil Procedure 60(b)(6) is a catchall provision that allows the district court to grant relief from a judgment or order for "any other reason that justifies relief." Rule 60(b)(6) is "used sparingly as an equitable remedy to prevent manifest injustice" and "is to be utilized only where extraordinary circumstances prevented a party from taking timely action to prevent or correct an erroneous judgment." United States v. Alpine Land & Reservoir Co., 984 F.2d 1047, 1049 (9th Cir. 1993); see also Cmty. Dental Servs. v. Tani, -3-

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282 F.3d 1164, 1167 (9th Cir. 2002) (concluding that Rule 60(b)(6) is available in "extraordinary circumstances" where the movant is able to show "both injury and circumstances beyond his control that prevented him from proceeding with . . . the action in a proper fashion"). Plaintiff argues that she is entitled to relief under this subsection due to her counsel's gross negligence. She claims that her counsel's "neglect to file [a second amended complaint] as directed by the court's March 19, 2009 order deprived [her] of her rights to adequate and effective representation and risks her opportunity to present the facts of the case."1 (Dkt. # 145 at 3.) In Tani, a defense attorney was found to have committed gross negligence when he "abandoned his duties as an attorney" by failing to file papers, failing to oppose a motion to strike his answer, and failing to attend hearings. Tani, 282 F.3d at 1171. These actions were so egregious that they could not "be characterized as simple attorney error or mere neglect." Id. (internal quotation marks omitted). The Court granted relief from a default judgment entered against the defendant, holding that "where the client has demonstrated gross

In her filings, Plaintiff continually refers to caselaw indicating that pro se litigants are not held to the same standards as attorneys. (See, e.g., Dkt. # 145 at 3.) While the Court recognizes this point in the context of pleading, see Hughes v. Rowe, 449 U.S. 5, 9 (1980) ("It is settled law that the allegations of [a pro se plaintiff's] complaint, however inartfully pleaded are held to less stringent standards than formal pleadings drafted by lawyers.") (quotations omitted), Plaintiff is reminded that she is still subject to the same rules and limitations placed on attorneys and that she will not be granted immunity from the rules merely because she may be proceeding pro se in the future. See Pagtalunan v. Galaza, 291 F.3d 639, 640-43 (9th Cir. 2002) (holding that the district court did not err in dismissing a pro se plaintiff's habeas corpus petition for failing to comply with a court order); Ghazali v. Moran, 46 F.3d 52, 54 (9th Cir. 1995) (holding that the district court did not err in dismissing a pro se plaintiff's civil rights complaint for failing to comply with a local rule); United States v. Flewitt, 874 F.2d 669, 675 (9th Cir. 1989) (stating that pro se litigants are subject to the same good faith limitations imposed on lawyers, as officers of the court); King v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1986) ("Pro se litigants must follow the same rules of procedure that govern other litigants."); Jacobsen v. Filler, 790 F.2d 1362, 1364 (9th Cir. 1986) ("[P]ro se litigants in the ordinary civil case should not be treated more favorably than parties with attorneys of record."). -4-

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negligence on the part of his counsel, a default judgment against the client may be set aside pursuant to Rule 60(b)(6)." Id. at 1169. The court noted that "judgment by default is an extreme measure and a case should, whenever possible, be decided on the merits" and therefore Rule 60(b), as applied to default judgments, is "remedial in nature and must be liberally applied." Id. at 1169-70 (quotation and citations omitted). While the Ninth Circuit has not explicitly extended the Tani holding beyond the default judgment context, see Latshaw v. Trainer Wortham & Co., 452 F.3d 1097, 1103 (9th Cir. 2006) (declining to extend the holding of Tani to the context of Rule 68 judgments and stating that "[o]ur decision in Tani was explicitly premised upon the default judgment context of the case"), it has not expressly held whether the gross negligence standard may be applicable in the context before this Court. In two recent unpublished cases, however, the Ninth Circuit has extended the Tani holding to a non-default-judgment context. In Spates-More v. Henderson, 305 F. App'x 449 (9th Cir. 2008), the Ninth Circuit remanded a case in which the district court had failed to consider the gross negligence standard and application of Rule 60(b)(6) to an order granting summary judgment on the basis of the opposing party's non-opposition to the motion. Although the case did not involve default judgment, it did involve a judgment predicated upon a basis similar to default ­ "an innocent party is forced to suffer drastic consequences" due to the failure of the party to properly prosecute or defend her case. Tani, 282 F.3d at 1170. The court noted that the plaintiff's attorney had "effectively abandoned his client," noting that the attorney had: twice failed to file timely oppositions to motions to dismiss; did not return phone calls; did not attend a pre-trial meeting that a local rule required; did not file an opposition to summary judgment; did not move for relief from summary judgment until more than seventy days after judgment was entered; and told opposing counsel there was `no point' in doing so. Henderson, 305 F. App'x at 451. The Ninth Circuit concluded that "[i]t is unreasonable to hold the client responsible for his acts in these circumstances. These failures went far beyond simple attorney error and perhaps constituted gross negligence and extraordinary circumstances sufficient to justify relief under 60(b)(6)." Id. -5-

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Likewise, in Moore v. United States, 262 F. App'x 828 (9th Cir. 2008), the Ninth Circuit concluded that a district court "erred in denying relief under Rule 60(b)(6)" where an attorney's gross neglect resulted in the granting of summary judgement based on the defaulting party's failure to respond to the summary judgment motion. Id. at 829. The court held that "the attorney `virtually abandoned' the Moores in failing to respond to the motion for summary judgment, even after being warned that such an omission would result in a summary grant of the motion" and concluded that "the attorney abandoned his advocacy of the Moores' cause and crossed the line into the `gross negligence' we described in Tani." Id. Therefore, in Tani, Henderson, and Moore, the Ninth Circuit has sanctioned the application of Rule 60(b)(6) where an attorney's gross neglect results in the ultimate consequence ­ a judgment not predicated upon the actual merits of the case, but rather upon the party's failure to prosecute or defend his case. See also Shepard Claims Serv., Inc. v. William Darrah & Assocs., 796 F.2d 190, 195 (6th Cir. 1986) ("Although a party who chooses an attorney takes the risk of suffering from the attorney's incompetence, we do not believe that this record exhibits circumstances in which a client should suffer the ultimate sanction of losing his case without any consideration of the merits because of his attorney's neglect and inattention."). Like the attorneys in Tani, Henderson, and Moore, Plaintiff's attorney made numerous errors while handling Plaintiff's case. Despite receiving notice of dismissal and knowledge of the deadline for repleading the matter, Mr. Jung failed to properly inform his client of the developments, failed to notify her when the deadline was imminent, failed to file a second amended complaint despite assurances the he would do so, and even avoided corresponding with Plaintiff after the deadline was missed. Nor did Mr. Jung file a motion for relief on behalf of his client. His deficient representation resulted in the "ultimate sanction" against Plaintiff ­ the loss of her ability to present the merits of her case ­ imposed not based upon the merits of her case, but rather on her counsel's failure to file an amended complaint with the Court. -6-

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Under the totality of the circumstances, Mr. Jung's conduct appears to meet the gross negligence standard set forth in Tani, Henderson, and Moore. The record indicates that Mr. Jung "virtually abandoned his client by failing to proceed with his client's [case]." Tani, 282 F.3d at 1170-71. His deficient representation was intensified by his failure to apprise Plaintiff of the developments in her case and by his representations that he would perform his responsibilities as her counsel (see Dkt. # 145 Ex. A), thereby "depriving [Plaintiff] of the opportunity to take action to preserve [her] rights," Tani, 282 F.3d at 1171. Because the facts indicate that Plaintiff's failure to file a second amended complaint resulted from her counsel's grossly negligent conduct, Plaintiff is entitled to relief, pursuant to Rule 60(b)(6), from the judgment of the Court terminating her case. Therefore, IT IS HEREBY ORDERED that the Motion for Relief of Plaintiff Sherryl Madison (Dkt. # 145) is GRANTED. IT IS FURTHER ORDERED directing the Clerk of the Court to reopen this matter. IT IS FURTHER ORDERED that because the Second Amended Complaint and Notices of Lis Pendens filed on April 20, 2009, (Dkt. ## 156, 159-64), were untimely, and because Plaintiff was represented by counsel at the time, Plaintiff is directed to either file a new second amended complaint or file notice that she adopts the Second Amended Complaint which was improperly filed (Dkt. # 156), on or before May 29, 2009. Plaintiff is reminded that, in doing so, she MUST otherwise comply with the Court's March 19, 2009 Order (Dkt. # 143). Failure to do so may result in the dismissal of the action pursuant to Federal Rule of Civil Procedure 41(b) and possibly sanctions pursuant to Federal Rule of Civil Procedure 11. IT IS FURTHER ORDERED that the Motion to Withdraw of Attorney Robert R. Jung (Dkt. # 166) is GRANTED conditioned upon his compliance with Local Rule of Civil Procedure 83.3(b). Given the circumstances surrounding Mr. Jung's representation and the fact that Ms. Madison obviously seeks his removal, Mr. Jung need not obtain the written approval of Ms. Madison. However, because counsel failed to provide the current address and telephone number of Ms. Madison in his Motion to Withdraw ­ as required under Local -7-

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Rule 83.3(b) ­ he is directed to provide that information to the Court by May 1, 2009, and timely serve the information upon all other parties or their attorneys. IT IS FURTHER ORDERED directing Mr. Jung to mail a copy of this Order to Ms. Madison on or before April 28, 2009. DATED this 27th day of April, 2009.

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