JPMorgan Chase Bank N.A. v. Sierra Pacific Mortgage Company, Inc.

Filing 77

ORDER signed by Judge John A. Mendez on 8/27/15 ORDERING for the reasons set forth above, the Court GRANTS Plaintiff's motion as follows: The claims related to Loans 5, 8, 15, 16, and 18 are dismissed with prejudice. The claims related to Loan 17 are dismissed without prejudice. The Court accepts for purposes of this case the factual determination that Plaintiff did not suffer damages related to Loan 17 at the time of filing the complaint or as of August 12, 2015. Defendant is d irected to file a declaration detailing its costs and fees related to Loan 17 only, as described above, within fourteen days of this order. That declaration is to include information pertaining to the criteria set out in Local Rule 293(c). (Becknal, R)

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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.,

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2:13-cv-01397-JAM-KJN

Plaintiff,

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No.

v.
Sierra Pacific Mortgage
Company, Inc.,

ORDER GRANTING IN PART AND
DENYING IN PART PLAINTIFF’S
MOTION FOR LEAVE TO AMEND THE
COMPLAINT

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Defendant.
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Defendant Sierra Pacific Mortgage Company (“Defendant”)

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allegedly sold Plaintiff JPMorgan Chase Bank (“Plaintiff”)

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defective loans in breach of a contract, and failed to indemnify

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Plaintiff for its losses.

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eighteen such loans, before realizing - almost two years later -

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that it had in fact suffered no damages related to six of them.

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It now seeks to amend the Complaint to drop the defunct claims.

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The Court dismisses these six loans from the case on the terms

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described below. 1

Plaintiff brought this suit based on

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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 August 19, 2015.
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I.

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FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

In the 1990s, the parties entered into a contract

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delineating Plaintiff’s purchase of residential mortgages from

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Defendant.

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due diligence to ensure that the loans sold were of a certain

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quality.

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contractually-required standards, Defendant agreed to indemnify

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Plaintiff for losses and to repurchase the defective loan.

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Compl. ¶¶ 7-9.

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Compl. (Doc. #1) ¶ 5.

Compl. ¶¶ 6-7.

Defendant agreed to conduct

In the case that a loan fell below the

Defendant allegedly sold Plaintiff eighteen loans that did

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not meet these standards.

Compl. ¶¶ 15, 19, Exh. B.

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discovering the quality issues, Defendant had resold the loans

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to outside investors.

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came to light, the investors demanded compensation from

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Plaintiff, who repurchased the loans from its investors.

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¶¶ 16, 17.

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indemnify it for any losses and repurchase these loans.

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¶ 17.

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contract and breach of an indemnity agreement on each of the

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eighteen loans.

See Compl. ¶ 16.

Before

When the low quality

Compl.

Plaintiff, in turn, requested that Defendant
Compl.

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When Defendant refused, Plaintiff sued for breach of

Compl. ¶¶ 16, 17, 19, 24, 32.

Almost two years after filing suit, Plaintiff discovered

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information in its own files indicating that it had actually

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suffered no damages on six of the loans at issue (hereinafter,

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Loans 5, 8, 15, 16, 17, and 18, in reference to Exhibit B of the

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complaint).

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moves to amend its Complaint to drop the claims related to those

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loans (Doc. #56).

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#71).

Mot. at 4; see Jenkins Decl. ¶ 8.

Plaintiff now

Defendant opposes the motion in part (Doc.

Defendant also filed a notice of supplemental authority
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(Doc. #76).

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II.

OPINION

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A.

Legal Standard

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The parties offer multiple legal standards for the Court to

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apply to this motion, including Federal Rules of Civil Procedure

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15, 16, and 41.

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for leave to amend the complaint,” Plaintiff essentially seeks

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to voluntarily dismiss certain claims.

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(“Chase no longer wishes to pursue its claims related to Loans

Although Plaintiff entitled its filing “motion

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5, 8, 15, 16, 17, and 18 . . . .”).

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See Mot. at 3:10-11

dismissal standard therefore applies.

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Rule 41(a)’s voluntary

This rule provides that “an action may be dismissed at the

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plaintiff’s request only by court order, on terms that the court

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considers proper.”

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within the “sound discretion” of the Court, and may be with or

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without prejudice.

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*4 (C.D. Cal. Dec. 20, 2013).

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for voluntary dismissal under Rule 41(a)(2) unless a defendant

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can show that it will suffer some plain legal prejudice as a

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result.”

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The Court must determine “(1) whether to allow dismissal;

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(2) whether the dismissal should be with or without prejudice;

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and (3) what terms and conditions, if any, should be imposed.”

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Williams v. Peralta Cmty. Coll. Dist., 227 F.R.D. 538, 539 (N.D.

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Cal. 2005).

Fed. R. Civ. P. 41(a)(2).

Dismissal is

Gilabert v. Logue, 2013 WL 6804663, at *2,
A court “should grant a motion

Smith v. Lenches, 263 F.3d 972, 975 (9th Cir. 2001).

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B.

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Plaintiff requests dismissal of its claims related to Loans

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Analysis

5 and 8 with prejudice, and Loans 15-18 without prejudice.
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Mot.

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at 4.

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argues that the Court should also dismiss Loans 15-18 with

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prejudice – or in the alternative, without prejudice but under

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certain conditions, including reimbursement of attorney’s fees

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related to these claims. 2

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Defendant’s non-opposition, the Court dismisses with prejudice

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Loans 5 and 8.

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prejudice as well for the following reasons.

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Defendant does not oppose dismissal of Loans 5 and 8, but

Opp. at 8-9, 15.

In light of

Loans 15, 16, and 18 are dismissed with

Plaintiff seeks dismissal of its claims related to Loans

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15, 16, and 18 on the basis that after filing the Complaint, it

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“determined that it had been reimbursed for the payments” to

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investors and therefore Plaintiff “has not currently suffered an

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injury-in-fact in the form of actual damages[.]”

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In other words, Plaintiff lately discovered that it is not

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entitled to relief on these loans, because Plaintiff lost no

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money.

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are an element of each of Plaintiff’s causes of action.

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Martinez v. Welk Grp., Inc., 907 F. Supp. 2d 1123, 1131 (S.D.

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Cal. 2012) (breach of contract); Travelers Cas. & Sur. Co. of

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Am. v. Evans, 2012 WL 3132653, at *3 (E.D. Cal. July 31, 2012)

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report and recommendation adopted in relevant part, 2012 WL

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4468422 (E.D. Cal. Sept. 26, 2012) (indemnity).

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therefore dismisses Loans 15, 16, and 18 from this action with

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prejudice.

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Mot. at 4-5.

Indeed, the claims are now meritless, because damages
See

The Court

See Gilabert, 2013 WL 6804663, at *4 (dismissing

Plaintiff in reply states that “[t]he Court does not need to
consider the Opposition because it was not timely filed.” Reply
at 2 n.1. Plaintiff alleges no prejudice caused by Defendant’s
one-day delay in filing, so this de minimis violation of Local
Rule 230(c) will not prevent the Court from ruling on the merits
of the parties’ arguments.
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with prejudice per Rule 41(a)(2) “[i]n light of the conclusion

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that this is a meritless SLAPP suit”); Altman v. HO Sports Co.,

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2009 WL 4163512, at *2 (E.D. Cal. Nov. 23, 2009) (“[T]he Court

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has already determined that the products liability claim against

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Sims is meritless.

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dismissing this claim [under Rule 41(a)(2)] with prejudice.”).

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There is nothing inequitable about

Plaintiff argues that the Court must dismiss these loans

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without prejudice because it suffered no injury in fact.

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at 4.

Mot.

According to Plaintiff, such a dismissal based on

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standing must always be without prejudice.

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or not this latter point is true as a matter of law, it is

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inapplicable here because, as discussed above, damages are an

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element of each of Plaintiff’s causes of action.

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damages therefore goes to the merits of Plaintiff’s case, and

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dismissal with prejudice is proper.

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Mot. at 5.

Whether

The absence of

As to Loan 17, Plaintiff represents that it “determined

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that JPMorgan Mortgage Acquisition Corporation funded the

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payment to [the investor] for the losses . . . and has not yet

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required [Plaintiff] to reimburse it.”

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Court grants dismissal of this claim without prejudice, based on

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Plaintiff’s representation that it will likely incur damages in

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the future.

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Mot. at 4:18-19.

The

This outcome will cause no “plain legal prejudice” to

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Defendant.

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of which prevail.

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Defendant offers several theories of prejudice, none

Defendant first argues that it will lose its right to a

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jury trial.

Loss of this right may in general be prejudicial,

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but here it is so uncertain as to be inapplicable.
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Cf.

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Westlands Water Dist. v. United States, 100 F.3d 94, 96-97 (9th

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Cir. 1996) (“[T]he threat of future litigation which causes

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uncertainty is insufficient to establish plain legal

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prejudice.”).

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“could allow [Plaintiff] to refile claims on [Loan 17] in a

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different jurisdiction that will enforce the [parties’

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contractual] jury waiver[.]”

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“might” file elsewhere in a jurisdiction that “could potentially

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enforce the [] jury waiver[,]” Opp. at 12:1-2, is too

Defendant states that dismissal without prejudice

Opp. at 10:8-9.

That Plaintiff

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speculative, and the Court sees no actual prejudice.

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Defendant’s argument that Plaintiff could “potentially re-

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litigate [Loan 17] in a forum that would deny Sierra the benefit

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of fee reciprocity” fails for the same reason.

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13:12-13.

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See Opp. at

Defendant’s remaining theories amount to complaints about

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the inconvenience and expense of litigation, which are not

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equivalent to legal prejudice.

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F.R.D at 540.

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in failing to realize its error earlier (namely, anytime in the

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past two years).

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prejudice that would prevent the Court from dismissing the claim

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at the stage - almost a year before trial.

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Scheduling Order at 6 (setting trial for June 2016).

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See Opp. at 13-14; Williams, 227

The Court does not sanction Plaintiff’s behavior

But Defendant has demonstrated no legal

See Third Amended

As to the conditions applied to dismissal of Loan 17,

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Defendant proposes – and Plaintiff agrees to – a stipulation

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that Plaintiff did not “suffer[] damages” related to Loan 17 “as

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of the date of filing the Complaint and [] it still has not

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suffered damages” related to that loan.
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Reply at 10:16-18; Opp.

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at 15.

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The Court accepts this agreed-upon condition.

The Court also accepts Defendant’s proposed condition to

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impose attorney’s fees and costs on Plaintiff.

Such imposition

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is “usually considered necessary for the protection of the

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defendant[,]” Stevedoring Servs. of Am. v. Armilla Intern. B.V.,

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889 F.2d 919, 921 (9th Cir. 1989) (citation omitted), and the

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Court finds it proper here, where the inclusion of Loan 17 in

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the case was apparently Plaintiff’s own error.

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Court limits the award to costs and fees attributable solely to

However, the

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Loan 17.

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incurred before Plaintiff informed Defendant of its intent to

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dismiss the allegations related to Loan 17.

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Defendant, it was so informed on May 28, 2015.

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¶ 8.

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The Court also limits the award to costs and fees

According to
Jenkins Decl.

Finally, the Court does not accept Defendant’s third

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proposed condition.

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hypothetical discovery disputes of hypothetical future cases,

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and therefore will not order that the present discovery be

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“usable and admissible in any subsequent litigation.”

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15:12.

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The Court declines to get involved in

III.

Opp. at

ORDER

For the reasons set forth above, the Court GRANTS

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Plaintiff’s motion as follows:

The claims related to Loans 5,

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8, 15, 16, and 18 are dismissed with prejudice.

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related to Loan 17 are dismissed without prejudice.

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accepts for purposes of this case the factual determination that

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Plaintiff did not suffer damages related to Loan 17 at the time

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The claims
The Court

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of filing the complaint or as of August 12, 2015. 3

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directed to file a declaration detailing its costs and fees

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related to Loan 17 only, as described above, within fourteen

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days of this order.

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pertaining to the criteria set out in Local Rule 293(c).

Defendant is

That declaration is to include information

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IT IS SO ORDERED.

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Dated: August 27, 2015

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August 12 is the date Plaintiff filed its reply (Doc. #74)
agreeing to this proposed stipulation.
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