JPMorgan Chase Bank N.A. v. Sierra Pacific Mortgage Company, Inc.
Filing
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ORDER denying 15 Motion to Dismiss signed by Judge John A. Mendez on 12/10/13. (Kaminski, H)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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JPMORGAN CHASE BANK, N.A., a
National Banking Association,
No.
2:13-cv-01397-JAM-KJN
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Plaintiff,
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ORDER DENYING DEFENDANT’S
MOTION TO DISMISS
v.
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SIERRA PACIFIC MORTGAGE COMPANY,
INC., a/k/a SIERRA PACIFIC
MORTGAGE CO., INC., a/k/a SIERRA
PACIFIC MTG. CO., INC.,
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Defendant.
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This matter is before the Court on Defendant Sierra Pacific
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Mortgage Company, Inc.’s (“Defendant”) Motion to Dismiss and in
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the alternative Motion for a More Definite Statement (Doc. #15)
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in relation to Plaintiff JPMorgan Chase Bank, N.A.’s
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(“Plaintiff”) Complaint (Doc. #1). 1
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Opposition (Doc. #16) and Defendant filed an amended Reply (Doc.
Plaintiff filed an
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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
scheduled for October 23, 2013.
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#19).
I.
FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
The Complaint states three causes of action against
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Defendant: (1) breach of contract (breaches of representations
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and/or warranties), (2) breach of contract (obligation to
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repurchase loans), and (3) indemnity or in the alternative
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specific performance.
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from Plaintiff’s complaint.
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The following factual summary is derived
Plaintiff is a national banking association organized under
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the laws of the United States.
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California corporation doing business as a residential finance
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lender and mortgage banker.
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entered into a written Correspondent Origination and Sales
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Agreement – Closed Loan Purchases (“Correspondent Agreement”)
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governing the duties and obligations of each party with respect
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to the origination, sale and transfer of residential mortgage
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loans by Defendant to Plaintiff.
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Comp. ¶ 1.
¶ 2.
Defendant is a
In May 1996, the parties
¶ 5.
The Correspondent Agreement required all loans submitted by
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Defendant to comply with the Chase Correspondent Manual.
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Pursuant to the agreement, Defendant represented and warranted
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that all loans sold to Plaintiff: (1) complied with certain
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regulations, requirements and standards; (2) were fully
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insurable; (3) did not include facts or circumstances that could
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reasonably result in investors regarding the loans as
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unacceptable investments, cause the loan to become delinquent or
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adversely affect the marketability of the loan; (4) contained no
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representations or warranties containing any untrue statements of
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material fact; and (5) the appraisal provided an accurate
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¶ 6.
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estimate of the bona fide market value of the property.
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Exh. A (Correspondent Agreement) § 4.2.
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¶ 7;
The Correspondent Agreement provides that Defendant is
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obligated to repurchase a loan (or property) in the event of
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certain circumstances, including the following: (1) existence of
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an incurable breach or representation or warranty or Defendant’s
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failure to cure any curable defect; (2) failure to provide
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required documentation or timely satisfy other requirements of
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the agreement; (3) Plaintiff’s repurchase of any loan from a
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third party buyer due to defects existing prior to or
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contemporaneous with Plaintiff’s purchase; or (4) the loan or
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credit file contained fraudulent documents.
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§§ 5.1, 5.2.
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against “any and all losses, damages, fines, costs or expenses of
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any nature, including loss of marketability and attorney’s fees
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and costs, resulting from breach of any representation or
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warranty, covenant or agreement, made by” Defendant.
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§ 5.4.
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Comp. ¶ 8 & Exh. A.
Defendant also agreed to indemnify Plaintiff
Id. Exh. A
The parties also executed a number of addenda that became
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part of the Correspondent Agreement.
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Correspondent Agreement further provides that the agreement and
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its interpretation will be governed by New Jersey law.
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Exh. A § 7.8.
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Comp. ¶ 5.
The
¶ 10;
The Complaint points to eighteen specific loans out of the
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thousands transferred from Defendant to Plaintiff.
Comp. Exh. B;
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Opp. at p. 4.
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of provisions in the Correspondent Agreement with regards to
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these identified loans.
Plaintiff alleges that Defendant breached a number
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In the first cause of action, Plaintiff alleges the loans
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numbered 1-6, 10, 11 and 14 (as indicated in Exh. B) failed to
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comply with the terms and conditions of the Correspondent
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Agreement and Manual in that Defendant failed to cure and/or
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events subsequent to their origination triggered obligations
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Defendant did not meet, all in breach of the Correspondent
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Agreement.
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Exhibit B to the Complaint.
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failed and refused to repurchase the loans or otherwise cure the
Comp. ¶ 15.
Plaintiff identifies these defects in
¶ 16.
Despite notice, Defendant has
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claims regarding them, resulting in damages to Plaintiff.
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¶¶ 17-
In the second cause of action, Plaintiff alleges that it
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received demands from its investors for Plaintiff to repurchase
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each of the loans in Exhibit B or to indemnify them from loss.
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¶ 23.
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loans or indemnify Plaintiff pursuant to the terms of the
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Correspondent Agreement.
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by refusing or failing to so comply, resulting in damages to
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Plaintiff.
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In turn, Plaintiff demanded that Defendant repurchase the
¶ 24.
Defendant breached the agreement
¶¶ 26-27.
In the third cause of action, Plaintiff alleges that
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Defendant failed to indemnify Plaintiff pursuant to the agreement
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for “loss, damages, fines, costs or expenses, including loss of
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marketability and attorneys’ fees and costs” suffered as a result
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of the loans failing to conform to the representations and
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warranties made by Defendant in relation to the eighteen loans
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identified in Exhibit B.
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alternative request for specific performance regarding those
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loans identified in Exhibit B where foreclosures have not yet
¶¶ 29-34.
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Plaintiff makes an
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occurred and/or where the real property underlying the loans has
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not been sold to third parties.
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the “unique and specific nature of mortgage loans” it has no
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adequate remedy at law and the Court should order Defendant to
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perform its repurchase obligations pursuant to the Correspondent
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Agreement.
Plaintiff alleges that due to
¶¶ 37, 43.
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II.
A.
OPINION
Legal Standard
A party may move to dismiss an action for failure to state a
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claim upon which relief can be granted pursuant to Federal Rule
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of Civil Procedure 12(b)(6).
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plaintiff must plead “enough facts to state a claim to relief
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that is plausible on its face.”
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556 U.S. 662, 570 (2007).
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district court must accept all the allegations in the complaint
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as true and draw all reasonable inferences in favor of the
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plaintiff.
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overruled on other grounds by Davis v. Scherer, 468 U.S. 183
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(1984); Cruz v. Beto, 405 U.S. 319, 322 (1972).
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To survive a motion to dismiss a
Bell Atlantic Corp. v. Twombly,
In considering a motion to dismiss, a
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974),
“First, to be entitled to the presumption of truth,
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allegations in a complaint or counterclaim may not simply recite
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the elements of a cause of action, but must sufficiently allege
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underlying facts to give fair notice and enable the opposing
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party to defend itself effectively.”
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1202, 1216 (9th Cir. 2011), cert. denied, 132 S. Ct. 2101, 182 L.
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Ed. 2d 882 (U.S. 2012).
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are taken as true must plausibly suggest an entitlement to
Starr v. Baca, 652 F.3d
“Second, the factual allegations that
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relief, such that it is not unfair to require the opposing party
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to be subjected to the expense of discovery and continued
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litigation.”
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are therefore not entitled to the presumption of truth.
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v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at
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555).
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claim supportable by a cognizable legal theory.
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Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990).
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Id.
Assertions that are mere “legal conclusions”
Ashcroft
Dismissal is appropriate when a plaintiff fails to state a
Balistreri v.
Upon granting a motion to dismiss for failure to state a
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claim, a court has discretion to allow leave to amend the
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complaint pursuant to Federal Rule of Civil Procedure 15(a).
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“Dismissal with prejudice and without leave to amend is not
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appropriate unless it is clear . . . that the complaint could not
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be saved by amendment.”
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Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).
Eminence Capital, L.L.C. v. Aspeon,
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B.
Discussion
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Defendant contends Plaintiff’s claims should be dismissed
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pursuant to F. R. Civ. P. 12(b)(6) because the complaint
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contains only legal conclusions unsupported by factual
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allegations.
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to the Correspondent Agreement undermines Plaintiff’s entire
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complaint because the subsequently executed rider changes the
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terms upon which the loans were transferred.
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MTD at p. 10.
It further argues that an addendum
Id. at pp. 14-15.
In the alternative, or if the Court grants leave to amend,
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Defendant moves the Court to order Plaintiff to submit a more
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definite statement that complies with the Federal Rules of Civil
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Procedure.
MTD at pp. 15-17.
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1.
Breach of Contract Claims
To establish a breach of contract under New Jersey law, a
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plaintiff must show that “the parties entered into a valid
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contract, that the defendant failed to perform his obligations
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under the contract and that the plaintiff sustained damages as a
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result.”
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Super. Ct. App. Div. 2007).
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Murphy v. Implicito, 392 N.J. Super. 245, 265 (N.J.
In the Complaint, Plaintiff alleges that the parties
entered into a contract, namely the Correspondent Agreement,
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which was attached to the Complaint.
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claims in the first and second causes of action, Plaintiff
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alleges that Defendant failed to meet its obligations under the
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identified contract with respect to certain loans transferred
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under the contract, constituting a breach.
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specifically identifies the loans from which the claims arise,
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the alleged defects, breaches and/or the ground for repurchase
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or make whole demand.
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Plaintiff repurchased the loans from investors or was forced to
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“makewhole” the investor.
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which it made its final demand to Defendant to comply with its
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obligations under the Correspondent Agreement.
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further alleges damages resulting from Defendant’s failure to
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perform its obligations under the agreement.
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In its breach of contract
Exhibit B
It also includes the date upon which
Exhibit B provides the date upon
Plaintiff
The Court finds that the Complaint sufficiently alleges the
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underlying facts supporting its breach of contract claims.
See
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Starr v. Baca, 652 F.3d at 1216.
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the precise loans and the grounds from which the claims arise.
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These factual allegations plausibly suggest that Plaintiff is
Defendant has fair notice of
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entitled to some relief.
Id.
Defendant’s reliance on Roberts v. UBS AG, No. CV F 12–0724
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LJO SKO, 2013 WL 1499341, at *19-20 (E.D. Cal. 2013) is
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misplaced.
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on the ground that they were “vague and conclusory.”
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However, here, Plaintiff identifies “verbatim” the provisions of
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the Correspondent Agreement at issue and attached the agreement
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to the complaint.
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leading the court to dismiss the claims.
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There the court dismissed breach of contract claims
Id.
The plaintiff in Roberts did no such thing,
Id.
The Roberts case
is entirely distinguishable.
Although Defendant argues in its Reply that it “needs more
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information” regarding the loans at issue, it does not
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specifically state that it cannot identify which loans are being
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referenced in Exhibit B.
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assumes the detail provided therein is sufficient to put
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Defendant on notice of the loans from which Plaintiff’s claims
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arise.
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Reply at p. 10.
Therefore, the Court
Defendant also argues the rider attached and incorporated
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into the Correspondent Agreement altered its obligations with
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respect to certain loans.
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potential defenses identified by Defendant may ultimately
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absolve Defendant of liability.
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litigation, the Court takes the allegations as true and draws
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all reasonable inferences in favor of Plaintiff.
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and claims as pleaded state a plausible entitlement to relief
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sufficient for Plaintiff to have met its burden.
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MTD at pp. 14-15.
This and other
However, at this stage in the
The agreement
Accordingly, the Court hereby denies Defendant’s Motion to
Dismiss the breach of contract claims.
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2.
Third Cause of Action
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Under New Jersey law, indemnity contracts are interpreted in
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accordance with the rules governing the construction of contracts
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generally.
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103 N.J. 177, 191 (1986).
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Ramos v. Browning Ferris Indus. of S. Jersey, Inc.,
The Complaint alleges the Correspondent Agreement provided
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for Defendant to indemnify Plaintiff in certain circumstances
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against specific losses.
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those specific losses have been suffered and that Defendant has
Comp. ¶ 29.
It further alleges that
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failed to indemnify Plaintiff after notice.
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Complaint alleges that, as a result, it has incurred damages.
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¶ 34.
¶ 32.
The
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The Court finds that Plaintiff has met its burden at this
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stage of the litigation and has sufficiently pleaded the third
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cause of action.
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Motion to Dismiss the third cause of action.
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3.
Accordingly, the Court denies Defendant’s
Motion for a More Definite Statement
Defendant contends the Court should order Plaintiff to
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submit a more definite statement pursuant to Fed. R. Civ. P.
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12(e) so that the Complaint complies with Rules 9(g) and 10(b).
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MTD at pp. 15-17.
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more definite statement of a pleading to which a responsive
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pleading is allowed but which is so vague or ambiguous that the
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party cannot reasonably prepare a response.”
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a.
Rule 12(e) provides:
“A party may move for a
Special Damages
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Defendant argues that Plaintiff’s request for “losses,
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damages, fines, costs or expenses of any nature, including loss
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of marketability” are special damages requiring Plaintiff to
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specifically state them.
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MTD at p. 16; F. R. Civ. P. 9(g).
Regarding a breach of contract claim, although both special
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and general damages must be the natural and proximate
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consequence of the alleged breach, “general damages are such as
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inevitably follow, while special damages are such as may, or may
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not, follow.”
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Corp., No. C 02-5286 CW, 2005 WL 645389, at *17-18 (N.D. Cal.
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2005).
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alleged contractual breach.
City and County of San Francisco v. Tutor-Saliba
General damages are those that the law implies from the
Id.
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The Correspondent Agreement specifically provides that
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Defendant will indemnify Plaintiff in the event of a breach
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against the very damages sought.
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direct and foreseeable result upon the occurrence of a breach.
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Accordingly, the Court denies Defendant’s motion for a more
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definite statement with respect to the damages sought.
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if at a later stage of this litigation, it is determined that
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Plaintiff does in fact seek special damages, the Court may deny
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them.
However,
Tutor-Saliba Corp., 2005 WL 645389, at *18.
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Therefore, these damages are a
b.
Rule 10(b)
Defendant contends that Plaintiff has combined claims
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arising from eighteen distinct loans into three causes of
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action.
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pleading results in confusion as Plaintiff is “all over the map
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in terms of which of its three ‘claims’ apply to which loans.”
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Defendant requests the Court to order Plaintiff to state each
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claim founded on a separate transaction or occurrence in a
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separate count.
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MTD at pp. 16-17.
It argues that the “shotgun”
Rule 10(b) provides that “each claim founded on a separate
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transaction or occurrence . . . must be stated in a separate
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count or defense,” but only if doing so “would promote clarity.”
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“Shotgun pleadings are pleadings that overwhelm defendants with
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an unclear mass of allegations and make it difficult or
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impossible for defendants to make informed responses to the
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plaintiff’s allegations.
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v. Wachovia Securities, LLC, No. SACV 09-0766 AG (ANx), 2010 WL
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2674456, at *4 (C.D. Cal. 2010).
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They are unacceptable.”
Sollberger
Each of the claims is based on a single contract, the
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Correspondent Agreement, which involves only the parties to this
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action.
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over the map” in identifying which claims apply to which loans,
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each cause of action specifically identifies which of the loans
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listed in Exhibit B that particular claim arises from.
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¶¶ 12, 23, 30.
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separately list identical claims to multiple loans under the
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same agreement would not promote clarity; rather, it would
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simply be redundant.
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motion for a more definite statement.
Despite Defendant’s contention that Plaintiff is “all
Comp.
The Court finds that requiring Plaintiff to
Accordingly, the Court denies Defendant’s
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III.
ORDER
For the reasons set forth above, the Court DENIES
Defendant’s Motion to Dismiss in its entirety.
IT IS SO ORDERED.
Dated: December 10, 2013
____________________________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE
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