David Allen v. J P Morgan Chase Bank NA et al

Filing 53

MINUTES (IN CHAMBERS) by Judge A. Howard Matz: The Court DENIES Plaintiffs Request to increase the demand for punitive damages. Based on the foregoing, the Court DENIES Plaintiffs Motion to Amend their First Amended Complaint 47 . No hearing is necessary. Fed. R. Civ. P. 78; Local Rule 7-15. (jp)

O
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 11-3609 AHM (CWx)

Title

DAVID ALLEN, et al. v. JP MORGAN CHASE BANK N.A., et al.

Present: The
Honorable

Date

July 25, 2012

A. HOWARD MATZ, U.S. DISTRICT JUDGE

Stephen Montes

Not Reported

Deputy Clerk

Court Reporter / Recorder

Attorneys NOT Present for Plaintiffs:

Proceedings:

Tape No.

Attorneys NOT Present for Defendants:

IN CHAMBERS (No Proceedings Held)

Plaintiffs David Allen, John David Allen, the Estate of Jamie Lamar Allen, and
Kelly Lamar, pro se, have moved for leave to file a Second Amended Complaint (“SAC”)
amending their First Amended Complaint (“FAC”).1 For the following reasons, the Court
DENIES Plaintiffs’ motion.
I.

BACKGROUND

In June 2005, Plaintiffs obtained a mortgage loan secured by a Deed of Trust in
favor of Washington Mutual Bank FA,2 with California Reconveyance Company
(“CRC”) as the trustee. On January 24, 2008, Quality Loan Service Corp. replaced CRC
as the new trustee. An Assignment of the Deed of Trust (“the Assignment”) was
recorded on June 17, 2009, transferring the beneficial interest in the Deed of Trust to
Wells Fargo Bank NA (“Wells Fargo”). On that same day, CRC was substituted back in
as the new trustee. When Plaintiffs became delinquent on their mortgage payments, CRC
recorded a Notice of Default and a Notice of Trustee’s Sale. Plaintiffs then applied for a
loan modification under the Home Affordable Modification Program (“HAMP”) in
January 2010. (Defs.’ Mot. to Dismiss 2, Dkt. 19.) The following chronology tracks the
instant litigation after Plaintiffs’ HAMP modification package was denied:

1

Dkt. 47.

2

JP Morgan Chase Bank NA (“Chase Bank”) is the successor in interest to WaMu.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 11-3609 AHM (CWx)

Title

DAVID ALLEN, et al. v. JP MORGAN CHASE BANK N.A., et al.

Date

Date

July 25, 2012

Event

Citation

April 27, 2011

Plaintiffs file a lawsuit, alleging four claims:
(1) Breach of Contract
(2) Promissory Estoppel
(3) Violation of Cal. Bus. & Prof. Code § 17200
(4) Violation of Cal. Civ. Code §§ 1572, 1709, 1710
(Fraud)
Plaintiffs name as Defendants JP Morgan Chase Bank
NA, Washington Mutual Bank FA, and Does 1 through
10, Real Parties in Interest.

Dkt. 1

5/25/2011

Defendants move to dismiss the Complaint. The Court
denies the motion as to counts 1 through 3, but
dismisses Count 4 (Fraud) with leave to amend.

Dkt. 12

10/3/2011

Plaintiffs file the FAC, alleging the following causes of
action:
(1) Breach of Contract
(2) Promissory Estoppel
(3) Unfair Business Practices, in violation of
California’s Unfair Competition Law, Bus. &
Prof. Code § 17200
(4) Fraud
Plaintiffs add as Defendants Chase Home Finance LLC
and California Reconveyance Company.

Dkt. 17

10/17/2011

Defendants move to dismiss the fraud claim. The Court
denies the motion.

Dkt. 19;
Dkt. 24

12/12/2011

Defendants answer the FAC, asserting 21 affirmative
defenses.

Dkt. 26

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 11-3609 AHM (CWx)

Title

DAVID ALLEN, et al. v. JP MORGAN CHASE BANK N.A., et al.

Date

Date

July 25, 2012

Event

Citation

2/17/2012

Plaintiffs file their First Requests for Production of
Documents eight days after the formal commencement
of discovery, containing 32 requests. Request No. 1
seeks trust organizing documents and examination of
the original promissory note “to verify lawful
assignment.”

Allen
Decl. ¶ 6,
Dkt. 51

3/22/2012

Defendants respond to Plaintiffs’ First Requests for
Production of Documents and object to many of the
requests.3

Pls.’
Reply
3:12-15;
Allen
Decl. ¶ 8

4/11/2012

Plaintiffs serve a formal Request to Meet and Confer
with Defendants to resolve the disputed discovery
responses.

Allen
Decl. ¶ 12

4/16/2012

Deadline to amend the pleadings or add a party,
pursuant to the 2/6/2012 Scheduling Order.

Dkt. 39

5/1/2012

Defendants agree at Meet and Confer to provide to
Plaintiffs the Promissory Note, the Pooling & Service
Agreement, the Mortgage Loan Purchase Agreement,
and other documents. The Promissory Note was
produced for copying on June 13, 2012. It is not clear
from the parties’ papers whether any of the other
documents were produced.

Allen
Decl. ¶¶
14-18;
Pls.’
Reply
5:16-20

3

Defendants do not specifically respond to Plaintiffs’ claims that they have failed to comply with
individual discovery requests. Instead, they state that they have complied with Plaintiffs’ Requests and
have provided responsive documents. (Defs.’ Opp’n 4:25-27 (“Defendants deny . . . that they have
unjustifiably failed to produce documents requested during discovery. To the contrary, Defendants
have, in good faith, responded to discovery and produced responsive documents.”).)
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O
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 11-3609 AHM (CWx)

Title

DAVID ALLEN, et al. v. JP MORGAN CHASE BANK N.A., et al.

Date

Date

July 25, 2012

Event

Citation

5/15/2012

Defendants provide responsive documents. Plaintiffs
claim that the documents consist of “2,377 pages of
miscellaneous documents which were unsorted, were
not divided into categories, and did not specify which
[document requests] they purported to satisfy.” It is not
clear from the record whether Plaintiffs relied on these
documents in framing their proposed Second Amended
Complaint (“SAC”).

5/31/2012

Plaintiffs file this Motion to Amend the FAC, and they
Dkt. 47
attach a proposed SAC, to do the following:
•
(1) Clarify and plead with more specificity counts
1 through 4, which “are essentially unchanged
from the [FAC]” (Mot. 12:9-11);
•
(2) Add six causes of action (Counts 6 through
10) for: breach of the covenant of good faith and
fair dealing, intentional infliction of emotional
distress, negligent infliction of emotional distress,
cancellation of instrument, quiet title, and quasicontract;
•
(3) Increase the demand for punitive damages;
and
•
(4) Add as a party Wells Fargo Bank NA.

II.

Pls.’
Reply 4:46, 5:1315; Allen
Decl. ¶ 19

LEGAL STANDARD

Generally, Rule 15(a) liberally allows for amendments to pleadings. Coleman v.
Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). However, once the Court files a
pretrial scheduling order establishing a timetable for amending the pleadings, Rule 16
applies. Id. (citing Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607-09 (9th
Cir. 1992)). Under Rule 16(b), a party seeking to amend the pleadings after date
specified in the scheduling order must first show “good cause” for amendment. Johnson,
975 F.2d at 608. “‘Good cause’ means scheduling deadlines cannot be met despite [the]
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 11-3609 AHM (CWx)

Date

Title

July 25, 2012

DAVID ALLEN, et al. v. JP MORGAN CHASE BANK N.A., et al.

party’s diligence.” Id. at 609 (internal citations omitted). When the party seeking the
amendment was not diligent, “the inquiry should end.” Id.
In this case, Plaintiffs moved under Rule 15 of the Federal Rules of Civil
Procedure. The Court applies Rule 16, however, because the Scheduling Order, which
set April 16, 2012 as the deadline to amend the pleadings or add a party, is in effect.
III.

ANALYSIS
1.

The Original Claims: Breach of Contract, Promissory Estoppel, Unfair
and Unlawful Business Practices, and Fraud (Counts 1 through 4)

Plaintiffs’ motion seeks leave to amend the FAC to clarify these four causes of
action. Although they admit that these claims “are essentially unchanged from the FAC,”
(Pls.’ Mot. to Amend 10:1–2, 12:10–11), Plaintiffs argue that newly discovered evidence
“gives added substance to the allegations.” (Pls.’ Mot. to Amend 10:28.) That evidence
consists of an April 13, 2011, Office of the Comptroller of the Currency Consent Cease &
Desist Order, which cites Chase Bank for “unsafe or unsound banking practices,” and a
February 9, 2012, Federal Reserve Board National Mortgage Settlement Agreement,
which sanctions Chase Bank for the same types of unsound banking practices. Both of
these documents were available in the public domain and therefore available to Plaintiffs
before the deadline for amending the pleadings.4
The substance of Plaintiffs’ claims has not changed. Plaintiffs’ theories have not
changed. As far as the Court can tell, in the proposed SAC Plaintiffs merely change the
wording of a few paragraphs in the FAC, which the Court already found sufficient to
withstand a motion to dismiss. Indeed, the proposed references to the supposed “newly
discovered evidence” are just that - - references to evidence, not grounds for or the basis
of a new theory. As such, plaintiffs are entitled to attempt to use this evidence anyway,
to support their existing claims. Accordingly, the Court DENIES Plaintiffs’ motion to

4

Plaintiffs have not revealed when they became aware of the documents or when the documents
became available in the public domain. The record does show, however, that Plaintiffs possessed at
least the Cease & Desist Order prior to February 21, 2012. See Pls.’ Request for Judicial Notice 1 n.1,
Dkt. 46.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 11-3609 AHM (CWx)

Date

Title

July 25, 2012

DAVID ALLEN, et al. v. JP MORGAN CHASE BANK N.A., et al.

amend with respect to Counts 1 through 4.
2.

Proposed Counts 5, 6, and 7: Tortious Breach of the Covenant of Good
Faith and Fair Dealing, Intentional Infliction of Emotional Distress, and
Negligent Infliction of Emotional Distress

Plaintiffs’ motion and reply are not clear on the interrelationship of these causes of
action. As far as the Court can tell, Plaintiffs’ theory is that the parties were engaged in a
“special relationship” by virtue of their contractual dealings. Plaintiffs argue that when
the party with more bargaining power in a special relationship breaches the covenant of
good faith and fair dealing, the weaker party suffers a greater degree of emotional
distress. See Pls. Reply 10:7-9 (stating that Plaintiffs seek to add these causes of action
“to properly allege a fiduciary duty owed to the Plaintiffs by the Defendants as the
underlying grounds for a claim of infliction of emotional distress which was improperly
pleaded in the FAC”). They appear to argue that without a cause of action for tortious
breach of the covenant of good faith and fair dealing, the contract remedies prayed for in
the FAC are inadequate to permit full recovery.
Plaintiffs offer two reasons for their failure to allege tortious breach of the
covenant of good faith and fair dealing in the Complaint and FAC: (1) “ignorance of the
law,” and (2) “newly discovered evidence of a ‘pattern and practice of conduct’ by the
Defendants” stemming from the Consent Cease & Desist Order and the National
Mortgage Settlement Agreement. (Pls. Mot. 12:14-16.) Plaintiffs further aver that they
need to add this cause of action because it “is a logical extension of [their] request for
relief for breach of contract where breach sounds in tort and contract remedies are
inadequate.” (Pls. Mot. 12:19-20.)
Plaintiffs also argue that they should be able to amend the FAC to add causes of
action for intentional infliction of emotional distress and negligent infliction of emotional
distress because they actually pleaded the relevant conduct and acts of Defendants in the
Complaint and FAC, and merely erred in stating the claims as prayers for damages rather
than as separate causes of action in the FAC. See Pls.’ Mot. 18:26-27, 20:18-20 (citing
FAC 35:6-10 (“As to Count 4 of the Complaint, a finding that the Defendants have
violated § 1572 of the California Civil Code, actual fraud; that . . . the Plaintiffs have
suffered extreme emotional distress as a direct and proximate result thereof; and that the
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 11-3609 AHM (CWx)

Date

Title

July 25, 2012

DAVID ALLEN, et al. v. JP MORGAN CHASE BANK N.A., et al.

Plaintiffs are entitled to compensatory damages . . . .”)).
It is likely that Plaintiffs’ effort to convert a standard commercial relationship into
a fiduciary relationship would be futile. It also is equally likely that the two “emotional
distress” proposed causes of action could not withstand a Rule 12(b)(6) motion. But
there are other reasons why Plaintiffs should not be permitted to allege these claims.
Specifically, Plaintiffs do not argue that they lacked facts or the opportunity to allege
these claims in their previous complaints. Instead, Plaintiffs contend that their errors
stemmed from “ignorance of the law.” (Pls.’ Mot. to Amend 12:14-15.) The Court is
aware that Plaintiffs are proceeding pro se and its prior rulings reflect sensitivity to their
difficulty. But rules are rules and Plaintiffs’ excuses are not a sufficient basis to allow for
amendment at this stage. Accordingly, the Court DENIES Plaintiffs’ motion to amend
with respect to Counts 5, 6, and 7.
3.

Counts 8, 9, and 10: Cancellation of Instrument, Quiet Title, and QuasiContract

These are the only counts which Plaintiff alleges against Wells Fargo, which was
not previously named as a defendant, but is referred to in the FAC, e.g., ¶¶ 54-56.
Moreover, these causes of action are truly incomprehensible and they do not state viable
claims. Amendment may be denied on that basis alone. Plaintiffs have a potentially
viable lawsuit under the FAC. But they appear intent on pursuing fanciful claims that
will cause them to fall into the trap of engaging in endless pleading disputes. They
should focus on their existing claims. Moreover, if they wish to add Wells Fargo to those
claims, they may do so by designating it as a Defendant previously sued as a “Doe
Defendant” - - providing they specify in which of the pending claims Wells Fargo may be
named a defendant and do so consistent with the requirements of Rule 11. 5
DISCOVERY
5

In this regard, the Court notes that Plaintiffs seek to add as a party Wells Fargo based on its role
as a trustee for the trust that purportedly holds the beneficial interests of the loan that is the subject of
this lawsuit. Plaintiffs argue that “the economic interest of Wells Fargo Bank was not clear, is not clear,
and its legal standing is challenged pending discovery” of the trust organizing documents currently
being withheld by Defendants. (Pls.’ Reply 6:14-17.)
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 11-3609 AHM (CWx)

Date

Title

July 25, 2012

DAVID ALLEN, et al. v. JP MORGAN CHASE BANK N.A., et al.

Plaintiffs argue that leave to amend should be granted because Defendants
withheld documents during discovery that show “Defendants never had standing to
contract with the Plaintiffs in the first place,” and that this contention, if true, changes the
nature of Plaintiffs’ request for relief. (Pls.’ Mot. 6:23-25.) The requested discovery
includes “the organizing documents of the trust that purports to hold beneficial interest in
the Plaintiffs’ mortgage” (“the trust organizing documents”). (Pls. Mot. 23:27-24:1.)
The trust organizing documents are comprised of Plaintiffs’ original promissory note, the
Pooling & Service Agreement, and the Mortgage Loan Purchase Agreement. (Pls. Mot.
24:1-4.) According to Plaintiffs, as of June 18, 2012, Defendants have only made
available the promissory note, which they produced on June 13, 2012, two weeks before
Plaintiffs filed the instant motion.
The Court is not in a position to evaluate whether Defendants’ counsel have
complied with the rules and with their obligations, but if the Plaintiffs’contentions are
accurate, the Court would have grave concerns about their conduct. The Non-Expert
Discovery cut-off is September 10, 2012. If these unrepresented Plaintiffs are forced to
seek Orders compelling compliance with their requests or imposing sanctions on
Defendants, and if such motions are not fully adjudicated by the September 10th
deadline, the Court will entertain an application by Plaintiffs to extend that deadline.
Defendants, in short, should not take advantage of these unrepresented plaintiffs.

4.

Increased Demand for Punitive Damages

Plaintiffs raise three arguments in support of their increased demand for punitive
damages: (1) Plaintiffs have learned of new evidence that supports their allegations of
Defendants’ wrongdoing; (2) Defendants have engaged in improper conduct with respect
to the litigation process; and (3) Plaintiffs are entitled to treble damages under Cal. Civ.
Code § 3345 because Defendants are attempting to exploit Plaintiff David Allen’s
disability. (Pls.’ Mot. 26:1-27:24.)

None of these arguments warrants amendment. The Court deems item 5 under the
Prayer for Relief in the FAC to allow Plaintiffs to seek to recover punitive damages if
they succeed in proving their fraud claim.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 11-3609 AHM (CWx)

Date

Title

July 25, 2012

DAVID ALLEN, et al. v. JP MORGAN CHASE BANK N.A., et al.

A party’s litigation conduct, if found to be improper, may provide grounds for
sanctions but is not an appropriate consideration for an assessment of punitive damages.
Accordingly, the Court DENIES Plaintiffs’ request to increase the demand for punitive
damages.
IV.

CONCLUSION

Based on the foregoing, the Court DENIES Plaintiffs’ motion to amend their First
Amended Complaint.
No hearing is necessary. Fed. R. Civ. P. 78; Local Rule 7-15.

:
Initials of Preparer

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SMO

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