Brantley et al v. Boyd et al

Filing 197

ORDER by Judge Samuel Conti granting in part and denying in part 158 Motion for Partial Summary Judgment; denying 168 Motion for Partial Summary Judgment (sclc2, COURT STAFF) (Filed on 4/1/2011)

Brantley et al v. Boyd et al

Doc. 197

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For the Northern District of California

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

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LARRY TYRONE BRANTLEY, SR., ELLEN ) BRANTLEY, ) ) Plaintiffs, ) v. ) ) GARRETT BOYD, MODO REALTY, INC., ) ROYAL CROWN MORTGAGE, INC., ) SERGEI KLYAZMIN, ACADEMY ESCROW, ) ) Defendants. ) _________________________________ ) I. INTRODUCTION

Case No. 07-6139 SC ORDER RE PLAINTIFFS' MOTIONS FOR PARTIAL SUMMARY JUDGMENT

Before the Court are two Motions for Partial Summary Judgment filed by Plaintiffs Larry Brantley and Ellen Brantley ("Plaintiffs"). Plaintiffs' first Motion seeks partial summary ECF No. 159

judgment against Defendant Academy Escrow ("Academy"). ("First MSJ"). The Motion is fully briefed.

ECF Nos. 177 ("First

Opp'n"), 183 ("First Reply").

Plaintiffs' second Motion seeks

partial summary judgment against Defendants Modo Realty, Inc. ("Modo Realty"), Royal Crown Mortgage, Inc. ("Royal Crown Mortgage"), and Sergei Klyazmin ("Klyazmin") (collectively, "the Klyazmin Defendants"). also fully briefed. Reply"). Upon consideration of all the papers submitted, the Court concludes that the matter is appropriate for decision without oral ECF No. 169 ("Second MSJ"). This Motion is

ECF Nos. 178 ("Second Opp'n"), 194 ("Second

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argument.

For the following reasons, the Court GRANTS IN PART and

DENIES IN PART Plaintiffs' Motion for Partial Summary Judgment against Academy, and the Court DENIES Plaintiffs' Motion for Partial Summary Judgment against the Klyazmin Defendants.

II.

BACKGROUND The Court has previously detailed the procedural and factual

background of this dispute. Order").

See ECF No. 129 ("Nov. 19, 2009

This Order will therefore assume familiarity with the

background of this case and will provide only a brief summary here. In short, at the urging of Defendant Garrett Boyd ("Boyd"), a friend of Plaintiffs' niece, Plaintiffs took out a loan in the amount of $180,000 from Praveen Chandra ("Chandra") secured by their real property located at 3120 San Andreas, Union City, California. Nov. 19, 2009 Order at 3. Plaintiffs allege that Boyd

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1

promised to pay them $25,000 if they took out the loan and held the funds in escrow for sixty days so that Boyd could use the escrow account to "show some money on paper" to help him obtain a loan to purchase a $2.1 million property. MSJ at 17. Boyd, representing himself to be Plaintiffs' nephew, contacted Klyazmin, a real estate broker and sole owner of Modo Realty and Royal Crown Mortgage, to request a $180,000 loan against Plaintiffs' property and a $2.1 million loan for Boyd's personal use in purchasing another property. Nov. 19, 2009 Order at 2-3; Klyazmin's ECF No. 125 ("FAC") ¶ 10; Second

Guillory Decl.1 Ex. C ("Klyazmin Dep.") at 87:11-88:3.

Dorothy Guillory, attorney for Plaintiffs, filed a declaration, ECF No. 160, and a supplemental declaration, ECF No. 161, in 2

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employee Jessica Skiff ("Skiff") then contacted Chandra and secured his agreement to loan Plaintiffs $180,000 to be secured by their Union City property. party to the loan. Nov. 19, 2009 Order at 3. Boyd was not a

Id. Academy

Academy served as the escrow agent for the loan.

prepared the Escrow Instructions, which provided that the funds would be disbursed to Plaintiffs at the end of the escrow period. Nov. 19, 2009 Order at 4, 12; Supp. Guillory Decl. Ex. 11 ("Escrow Instructions").2 The instructions provided, in block capitals,

that "NO NOTICE, DEMAND OR CHANGE OF INSTRUCTIONS SHALL BE OF ANY EFFECT IN THIS ESCROW UNLESS GIVEN IN WRITING BY ALL PARTIES AFFECTED THEREBY." at 4. Escrow Instructions at 2; Nov. 19, 2009 Order

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Nevertheless, on May 4, 2007, after receiving oral

instructions from Boyd, Academy wired the funds in escrow to Boyd's bank account. Nov. 19, 2009 Order at 5. Id. at 6. Plaintiffs

The loan came due on July 1, 2007.

refused to repay the loan claiming they never received the loan funds. Id. They sued various entities, including Academy and the

Klyazmin Defendants, after Chandra attempted to foreclose on their home due to their failure to repay the loan. See FAC. Plaintiffs

assert five claims against the Klyazmin Defendants: violations of the Truth in Lending Act ("TILA") and the Real Estate Settlement

support of Plaintiffs' First MSJ. She also filed a third declaration, ECF Nos. 170-172 ("Third Guillory Decl."), in support of Plaintiffs' Second MSJ, and a fourth declaration, ECF No. 195 ("Fourth Guillory Decl."), in support of Plaintiffs' Second Reply.
2

Academy objects that the Escrow Instructions, along with all of Plaintiffs' evidence submitted in support of the First MSJ, is not properly before the Court because of various defects in the Guillory Declarations. First Opp'n at 3. These objections are addressed in section IV.A.1 below. 3

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Procedures Act ("RESPA"), breach of fiduciary duty, negligent failure to supervise, and intentional infliction of emotional distress. Id. Plaintiffs assert these same claims -- as well as a Id.

claim for conversion -- against Academy.

In their first Motion, Plaintiffs seek summary adjudication of their breach of fiduciary duty, conversion, and RESPA claims against Academy. First MSJ at 2. In their second Motion,

Plaintiffs seek summary adjudication of their breach of fiduciary duty and negligent supervision claims against the Klyazmin Defendants. Second MSJ at 2.

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11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 III. LEGAL STANDARD "The standards and procedures for granting partial summary judgment, also known as summary adjudication, are the same as those for summary judgment." Mora v. Chem-Tronics, Entry of

Inc., 16 F. Supp. 2d 1192, 1200 (S.D. Cal. 1998).

summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Civ. P. 56(c). Fed. R.

The movant bears the initial burden of See To

demonstrating the absence of a genuine issue of fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

survive a motion for summary judgment, the responding party must present competent evidence that creates a genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 "The evidence of the nonmovant is to

U.S. 242, 248-52 (1986).

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be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255.

IV.

DISCUSSION A. Plaintiffs' First Motion for Summary Adjudication

In their first Motion, Plaintiffs seek partial summary judgment against Academy Escrow on their claims for RESPA violations, breach of fiduciary duty, and conversion.3 MSJ at 2. 1. Academy's Evidentiary Objections First

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As a preliminary matter, Academy has raised numerous evidentiary objections in its Opposition. It has also filed a ECF

separate document further explicating those objections. No. 177-2.

As Civil Local Rule 7-3(b) requires evidentiary

objections to a motion to be contained within the opposition brief, the Court only considers Academy's evidentiary objections raised in their Opposition and disregards the separate filing of objections. In its Opposition, Academy argues that all of Plaintiffs' evidence should be excluded on the grounds that Plaintiffs have failed to properly authenticate or establish sufficient foundation for their exhibits. First Opp'n at 3, 10.

First, Academy argues that the authenticating declarations filed by Plaintiffs' counsel do not comply with the requirements for such declarations set forth in 28 U.S.C.

Plaintiffs' Notice of Motion and Re-Notice of Motion stated that they would seek summary judgment on their TILA claim. See ECF Nos. 158, 164. Plaintiffs admit that this was an error and they do not seek summary judgment on that claim. First Reply at 2. 5

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§ 1746 because they do not include the language "under the laws of the United States of America." First Opp'n at 9.

Contrary to Academy's assertion, 28 U.S.C. § 1746 does not require such language if declarations are executed within the United States. 28 U.S.C. § 1746(2). In the declarations at

issue, Plaintiffs' counsel states: "I certify under penalty of perjury under the laws of the State of California that the foregoing is true and correct." Guillory Decl. at 3. Oakland, California. Guillory Decl. at 3; Supp.

The declarations were executed in Id. They meet the requirements set This objection is OVERRULED.

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forth in 28 U.S.C. § 1746.

Academy next contends that Plaintiffs' exhibits have not been properly authenticated because Guillory's declarations do not lay proper foundation to establish that the attached exhibits -- deposition excerpts and various exhibits used during depositions -- are what they purport to be. Opp'n at 10. First

Academy notes that Guillory's declarations do

not attest that the exhibits are "true and correct copies" and do not indicate who excerpted the depositions or how the excerpting process was done. Id.

"A deposition or an extract therefrom is authenticated in a motion for summary judgment when it identifies the names of the deponent and the action and includes the reporter's certification that the deposition is a true record of the testimony of the deponent." Orr v. Bank of America NT & SA, Each of the deposition

285 F.3d 764, 774 (9th Cir. 2002).

excerpts attached to Guillory's declaration meets these requirements. See Guillory Decl. Exs. A-E. Academy's

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objection is therefore OVERRULED with regard to the deposition excerpts attached as exhibits A-E to the Guillory Declaration. Next, Academy objects to Exhibit F attached to Guillory's Supplemental Declaration, which contains documents used as exhibits at depositions of the witnesses in this case. These

documents include a number of email communications, as well as documents from the escrow transaction such as the escrow instructions, deed of trust, note secured by deed of trust, and wire transfer receipts. See Supp. Guillory Decl. Ex. F.

Academy contends that these documents have not been properly authenticated. First Opp'n at 10. Most of these documents

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are not necessary to Plaintiffs' Motion against Academy, and the Court therefore does not address Academy's objections to them. However, one document in Exhibit F -- the Escrow Instructions -- is necessary to Plaintiffs' Motion. The Court

OVERRULES Academy's objection that the Escrow Instructions have not been properly authenticated. Federal Rule of

Evidence 901(a) provides that authentication requires "evidence sufficient to support a finding that the matter in question is what its proponent claims." Fed. R. Evid. 901(a).

Thus, to comply with Rule 901(a), Plaintiffs must provide evidence sufficient to support a finding that the Escrow Instructions attached to Guillory's Supplemental Declaration are an accurate copy of the Escrow Instructions produced by Academy in relation to Plaintiffs' loan. relatively low burden in two steps. Plaintiffs meet this

First, Guillory's

Supplemental Declaration attests under penalty of perjury that

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the Escrow Instructions attached to her declaration are the same Escrow Instructions that were introduced as Exhibit 11 at depositions in this case. Supp. Guillory Decl. ¶ 3. Second,

in his deposition testimony, Larry Brantley testifies that Exhibit 11, bearing the same Bates stamp as the document submitted by Guillory, is an accurate copy of the Escrow Instructions prepared in connection with his escrow account and bearing his and his wife's initials and signatures. Guillory Decl. Ex. B ("L. Brantley Dep.") at 78:6-25, 79:1-25. Taken together, Guillory's Supplemental Declaration and Larry Brantley's testimony are sufficient to support a finding that the Escrow Instructions submitted by Plaintiffs in Exhibit F are a true and correct copy of the instructions at issue in this case.4 2. Plaintiffs' Third Claim for Violation of the RESPA Plaintiffs' third claim alleges violation of the RESPA.5

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4

The Court further notes that an identical copy of the Escrow Instructions was submitted by Sheryl Traum, attorney for Praveen Chandra, as Exhibit 9-d to Traum's Declaration in support of Chandra's Motion for Summary Judgment against Academy. ECF Nos. 108, 109. Academy did not object at that time. The Court found the Escrow Instructions admissible and relied heavily on them in awarding partial summary judgment against Academy in its November 19, 2009 Order. See Nov. 19, 2009 Order at 4, 9. The law of the case doctrine bars Academy from relitigating the admissibility of the contents of this document to the extent they have already been incorporated into the Court's November 19, 2009 Order.
5

Academy contends that Plaintiffs' request for summary adjudication of their RESPA claim is not properly before the Court because Plaintiffs' Notice of Motion and Re-Notice of Motion did not state that they would seek summary judgment on that claim. First Opp'n at 2. The Court rejects this argument. Plaintiffs' Memorandum of Points and Authorities, filed one day after their Notice of Motion, makes unmistakably clear that Plaintiffs move for 8

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The RESPA requires that lenders and their non-exclusive agents provide borrowers with a good faith estimate of costs, known as an "estimated HUD-1," and a final settlement statement, known as a "final HUD-1." 12 U.S.C. §§ 2603(b), 2604(c); 24

CFR §§ 3500.7, 3500.8; see also Plaza Home Mortg., Inc. v. N. American Title Co., Inc., 184 Cal. App. 4th 130, 133 n.1 (Ct. App. 2010). Plaintiffs contend that Academy violated the First

RESPA by failing to provide them with these documents. MSJ at 23. Academy does not contend otherwise.

It is well established that the RESPA does not provide a private right of action for violations of the disclosure provisions in 12 U.S.C. §§ 2603-2604. See, e.g., Bloom v.

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Martin, 865 F. Supp. 1377, 1385 (N.D. Cal. 1994) (holding no private right of action exists under 12 U.S.C. § 2403); Spurlock v. Carrington Mortg. Servs., No. 09-cv-2273, 2010 U.S. Dist. LEXIS 80221, *26-27 (N.D. Cal. Aug. 4, 2010) (holding no private right of action exists under 12 U.S.C. § 2604(c) or any related regulations). Plaintiffs' third claim

for RESPA violations is therefore DISMISSED as to all Defendants. 3. Plaintiffs' Fifth Claim for Breach of Fiduciary Duty Plaintiffs move for summary adjudication of their fifth claim for breach of fiduciary duty. First MSJ at 15. Escrow

holders owe fiduciary duties to all parties to the escrow, including the duty to strictly comply with the escrow

summary adjudication on their RESPA claim. Academy therefore had ample notice of the grounds for Plaintiffs' motion. 9

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instructions.

Kangarlou v. Progressive Title Co., Inc., 128 Here, there can be L.

Cal. App. 4th 1174, 1179 (Ct. App. 2005).

no dispute that the Brantleys were parties to the escrow. Brantley Dep. at 78:6-25, 79:1-25; Escrow Instructions.

Moreover, as the Court already determined in its November 19, 2009 Order, there is no genuine issue that Academy failed to comply with the escrow instructions when it disbursed the funds to Boyd. Nov. 19, 2009 Order at 13. Academy therefore Plaintiffs have

breached its fiduciary duties to Plaintiffs.

offered evidence that the disbursement to Boyd caused them injury. As a result of Academy's disbursement of the funds to

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Boyd, Plaintiffs were unable to repay the loan and were subjected to foreclosure proceedings. Guillory Decl. Ex. A Plaintiffs claim an While

("E. Brantley Dep.") at 88:5-25, 89:1-11.

assortment of resultant damages, as discussed below.

there are genuine issues of fact as to the amount of damages Plaintiffs incurred, there is no genuine issue that they incurred at least some damages as a result of Academy's actions. For example, there is no genuine issue of fact that

they were forced to pay costs and attorneys' fees to defend against the foreclosure proceedings. Guillory Decl. ¶ 3.

Therefore, the Court GRANTS Plaintiffs' motion for summary adjudication as to liability against Academy on their fifth claim for breach of fiduciary duty. 4. Plaintiffs' Eighth Claim for Conversion

Plaintiffs also seek summary adjudication against Academy of their eighth claim for conversion. First MSJ at 20.

Conversion is an intentional tort that consists of the

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wrongful exercise of dominion or control over the property of another. Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, Three

451 (Ct. App. 1997) (internal quotations omitted).

elements are required to establish a cause of action for conversion: (1) the plaintiff's ownership or right to possession of the property at the time of the conversion; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages. Id. It is not necessary

that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property. Id. Money can be the subject of an action for

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conversion if a specific sum capable of identification is involved. Id. at 452.

Although it is an intentional tort, conversion does not require a showing of wrongful intent. Rather, the intent

required for conversion is merely "an intent to exercise a dominion or control over the goods which is in fact inconsistent with the plaintiff's rights." Varela v. Wells

Fargo Bank, 15 Cal. App. 3d 741, 749-50 (Ct. App. 1971) (internal quotations omitted). As stated in Varela:

The foundation for the action of conversion rests neither in the knowledge nor the intent of the defendant. It rests upon the unwarranted interference by defendant with the dominion over the property of the plaintiff from which injury to the latter results. Therefore, neither good nor bad faith, neither care nor negligence, neither knowledge nor ignorance, are of the gist of the action. Id. (internal quotations omitted). Plaintiffs contend that, by distributing the escrow funds to Boyd, Academy wrongfully exercised control over the funds,

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depriving Plaintiffs of their right to possession and resulting in their injury. First MSJ at 21-22. The Court

finds that the evidence supports Plaintiffs' claim and that no genuine issue of fact exists with regard to Academy's liability for conversion. First, there is no genuine issue of fact that Plaintiffs had the right to possession of the escrow funds at the time the funds were transferred to Boyd. Plaintiffs were the

borrowers entitled to the loan funds under a note and deed of trust securing their real property, and they signed written escrow instructions directing the disbursement of the funds to themselves. L. Brantley Dep. at 78:6-25, 79:1-25; Escrow The Escrow Instructions provide that all "funds

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Instructions.

due the respective parties herein are to be mailed to the addresses set out below their respective signatures, unless otherwise instructed." 2009 Order at 4. Escrow Instructions at 2; Nov. 19,

The same document identifies Larry Brantley

and Ellen Brantley as the borrowers, and it provides their mailing address. Id. at 3.

Second, there is no genuine issue of fact that Academy intentionally exercised control over the funds in a manner that deprived Plaintiffs of their right of possession. Academy admits that it wired the funds to Boyd's bank account. Guillory Decl. Ex. D ("Lyon Dep.") at 224:19-225:16. Academy

also admits that one of its agents manually entered Boyd as the recipient. Id. at 216:13-217:21. Thus, Academy's

exercise of control over the funds was an intentional act.

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Lastly, there is no genuine issue of fact that Academy's actions caused injury to Plaintiffs. When Chandra sought to

have his loan repaid by Plaintiffs, they were unable to do so because the loan funds had never been sent to them. Brantley Dep. at 102:4-11. L.

Plaintiffs were therefore

subjected to foreclosure proceedings and were forced to pay costs and attorneys' fees to defend against the foreclosure. Guillory Decl. ¶ 3. Academy does not offer evidence to contradict Plaintiffs' evidence cited above. Rather, Academy argues that Plaintiffs'

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conversion claim is barred by the doctrines of the law of the case and collateral estoppel because the Court denied summary judgment on a conversion claim brought by Chandra against Academy in its November 19, 2009 Order. The Court disagrees. First Opp'n at 11.

The law of the case doctrine bars a

court from reconsidering an issue already decided by the same court, or a higher court, in the identical case.6 United The

States v. Alexander, 106 F.3d 874, 876 (9th Cir. 1997).

issue decided in the Court's November 19, 2009 Order differs from the issue decided here. Unlike Plaintiffs, Chandra

alleged that Academy was liable for conversion because it "participated in Boyd's theft of the loan funds." ("Chandra's MSJ").
6

ECF No. 107

In denying summary adjudication of

The doctrine of collateral estoppel is inapplicable in this context because, among other reasons, it bars relitigation of certain issues decided in prior actions. See United States v. Hernandez, 572 F.2d 218, 220 (9th Cir. 1978) (explaining that the collateral estoppel doctrine holds that "[w]hen an issue of fact or law is actually litigated and determined by a final and valid judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim"). 13

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Chandra's conversion claim, the Court held that "there are genuine issues of material fact as to whether Academy Escrow participated in Boyd's theft of the funds because Boyd has not been found guilty of theft and the evidence suggests Academy Escrow had no prior knowledge that Boyd would spend the money." Nov. 19, 2009 Order at 15. Here, Plaintiffs do not Rather,

allege that Academy participated in a theft at all.

they allege that the act of releasing escrow funds to Boyd was itself a wrongful exercise of control over Plaintiffs' property, which deprived Plaintiffs of their right to possess the property and thus constituted conversion. 21-22. First MSJ at

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The Court has not previously decided this issue.

Academy also points to testimony by Angie Lyon, Academy's escrow officer in charge of Plaintiffs' transaction, stating that she did not know that Boyd had lied about being related to Plaintiffs. First Opp'n at 12. Academy presumably offers

this testimony to show that it lacked knowledge of Boyd's misrepresentations. While this may have been relevant to a

claim such as Chandra's, which alleged that Academy knowingly participated in Boyd's theft, it has no relevance to Plaintiffs' conversion claim. Accordingly, the Court GRANTS summary adjudication against Academy as to liability on Plaintiffs' eighth claim for conversion. 5. Damages First, they

Plaintiffs allege the following damages.7

7

The Court again rejects Academy's argument that Plaintiffs did not sufficiently clarify in their Notice of Motion that they were 14

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seek $200,000 due to the alleged lost use of equity in their home. First MSJ at 25. They assert that they relied on home

equity loans to pay living expenses in the past and have been unable to obtain such loans since foreclosure proceedings were implemented against them. 89:2. E. Brantley Dep. at 45:1-5, 88:21-

Second, they seek attorneys' fees and costs from the

instant lawsuit and from the prior lawsuit brought by Plaintiffs to enjoin the foreclosure proceedings against them. Id. at 26-27. Third, they seek prejudgment interest at a rate

of ten percent per annum from the date on which the funds were disbursed to Boyd. Id. at 27. Finally, it is unclear whether

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they also seek additional damages due to the humiliation and embarrassment they allegedly suffered because of the foreclosure action. Id. at 13.

The Court finds that genuine issues of fact exist as to the amount of damages Plaintiffs are entitled to from Academy. Plaintiffs have provided no basis for their calculation of $200,000 in damages from lost use of equity. They have

further stated that the attorneys' fees and costs associated with this litigation are still accruing. Guillory Decl. ¶ 4.

Furthermore, Plaintiffs have not clarified whether they seek further damages for their emotional distress. Therefore, the

Court finds that summary adjudication as to damages is improper and Plaintiffs shall prove their damages at trial.

seeking summary adjudication not just damages as well. First Opp'n at 13. Plaintiffs' brief in support of their day, provided Academy with sufficient intentions. 15

as to liability but as to The Court finds that Motion, filed the following notice of Plaintiffs'

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Plaintiffs' request for summary adjudication as to damages is DENIED. B. Plaintiffs' Second Motion for Summary Adjudication

In their second Motion, Plaintiffs seek summary adjudication of their breach of fiduciary duty and negligent failure to supervise claims against the Klyazmin Defendants. Second MSJ at 2. As a preliminary matter, the Klyazmin

Defendants have filed a separate document stating objections to the Third Guillory Declaration. ECF No. 180. This filing

violates Civil Local Rule 7-3(b), which requires all evidentiary objections to a motion to be contained within the opposition brief. Accordingly, the Court disregards this

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filing and only considers evidentiary objections raised in the Opposition. 1. Plaintiffs' Fifth Claim for Breach of Fiduciary Duty Plaintiffs first seek summary adjudication of their fifth claim against the Klyazmin Defendants for breach of fiduciary duty. Second MSJ at 2. The elements of a cause of action for

breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach. Stanley v. Richmond, 35 Plaintiffs contend

Cal. App. 4th 1070, 1086 (Ct. App. 1995).

that the Klyazmin Defendants served as their real estate agents and mortgage brokers for the $180,000 loan transaction and owed Plaintiffs fiduciary duties as such. Second MSJ at 15-16. FAC ¶ 12;

The Klyazmin Defendants do not dispute

that they were brokers for the Brantleys and owed them

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fiduciary duties.

Rather, they contend that they did not

breach any duties owed to Plaintiffs and, in the alternative, that even if they did breach fiduciary duties owed to Plaintiffs, any such breach was not the proximate cause of Plaintiffs' damages. Second Opp'n at 9, 11.

When a real estate agent or mortgage broker acts as a borrower's agent in negotiating a loan, the agent or broker owes a variety of fiduciary duties to the borrower. Union Mortg., 24 Cal. 3d 773, 782 (1979). Wyatt v.

Among these duties

are the duty to disclose all material facts concerning the transaction that might affect the principal's decision and the duty to refrain from representation of multiple parties in the same transaction without full disclosure to and consent from all principals involved. Loughlin v. Idora Realty Co., 259 The broker or agent

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Cal. App. 2d 619, 629 (Ct. App. 1968).

also has a duty to investigate the material facts of the transaction; "he cannot accept information received from others as being true, and transmit it to the principal, without either verifying the information or disclosing to the principal that the information has not been verified." Salahutdin v. Valley of Calif., Inc., 24 Cal. App. 4th 555, 562 (Ct. App. 1994). A real estate agent or broker breaches

his or her duties by failing to exhibit the degree of care and skill ordinarily shown by professionals in the industry. Carleton v. Tortosa, 14 Cal. App. 4th 745, 754-55 (Ct. App. 1993). The degree of care and skill required to fulfill a

professional duty ordinarily is a question of fact that may require testimony by professionals in the field if the matter

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is within the knowledge of experts only.8

Id.; see also

Carson v. Facilities Development Co., 36 Cal.3d 830, 844-845 (Ct. App. 1984). Plaintiffs contend that the Klyazmin Defendants breached their fiduciary duties in three ways. First, Plaintiffs

allege that they breached the duty to disclose material facts by failing to inform Plaintiffs that Boyd's attempt to secure financing to purchase the $2.1 million property had failed prior to Plaintiffs executing their loan agreement with Chandra. Second MSJ at 17; Second Reply at 7. Plaintiffs

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offer deposition testimony showing that the Klyazmin Defendants knew that the sole reason for Plaintiffs pursuing the loan from Chandra was to assist Boyd in purchasing the $2.1 million property (Skiff Dep. at 79:21-25, 80:1-25, 121:125), that the Klyazmin Defendants were unable to secure financing for Boyd's $2.1 million loan (Skiff Dep. at 81:718), and that the Klyazmin Defendants nevertheless proceeded to obtain the $180,000 loan for the Brantleys without informing them that they had been unable to secure Boyd's $2.1

8

The Klyazmin Defendants contend that expert testimony is always required to establish a professional standard of care. Second Opp'n at 12. Accordingly, they assert that summary adjudication should be granted in their favor because Plaintiffs have not produced expert testimony regarding the appropriate standard of care in this case. Id. at 23. As Carleton and Carson make clear, the Klyazmin Defendants misconstrue the law on this point. While expert testimony may be necessary to establish professional negligence, it is not a per se requirement. 14 Cal. App. 4th at 754-55. Lysick v. Walcom, 258 Cal. App. 2d 136, 155-56 (Ct. App. 1968), on which the Klyazmin Defendants rely, does not hold otherwise. The Lysick court held that, where the trial court had decided that expert testimony was required to determine the applicable standard of care based on the facts of the case, the trial court later erred by instructing the jury that it could reject the expert testimony if it chose to do so. Id. 18

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million loan (E. Brantley Dep. at 186:2-15). Second, Plaintiffs assert that, in addition to representing Plaintiffs, the Klyazmin Defendants represented Chandra regarding the $180,000 loan and represented Boyd in his quest to secure financing for the $2.1 million property. Plaintiffs allege that this multiple representation without obtaining Plaintiffs' consent violated the Klyazmin Defendants' duty of undivided loyalty. Reply at 8. Second MSJ at 17;

As evidence in support of this claim, Plaintiffs

cite Skiff's testimony that she considered both the Brantleys and Chandra to be her clients with regard to the loan transaction. Skiff Dep. at 71:6-25, 72:1-5.9 Perplexingly,

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they also cite Skiff's testimony that she did not consider Boyd to be her client with regard to the transaction. Dep. at 109:6-16. Skiff

Plaintiffs assert that Skiff did not inform

the Brantleys of any dual representation, but the testimony they cite to support this claim is silent on the matter. Reply at 8 (citing Skiff Dep. at 67:4-24, 68-1-10). The cited

testimony establishes that Skiff knew she had a duty to disclose dual representation, but it does not establish that she failed to do so. Third, Plaintiffs allege that the Klyazmin Defendants breached their duty to investigate material facts of the transaction by failing to investigate Boyd's claims that he was Plaintiffs' nephew or that he was their real estate broker.
9

Second MSJ at 18.

They cite Skiff's testimony that

Plaintiffs also cite Skiff Dep. at 95:24-25, 96:1-5. Second Reply at 8. However, these portions of Skiff's testimony are not included in the excerpt provided by Plaintiffs. 19

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she never took any steps to confirm Boyd's representations. Skiff Dep. at 81:19-25, 82:1-3, 83:14-25. The only evidence the Klyazmin Defendants offer to counter Plaintiffs' assertion of breach is a sworn report and declaration from their expert witness Harold A. Justman opining that their conduct comported with industry custom and practice and did not constitute a breach of their fiduciary duties. See ECF No. 181 ("Justman Report"). However, as

Plaintiffs note in their Second Reply, Justman's testimony is not admissible evidence in support of the Opposition because the Klyazmin Defendants did not comply with the disclosure requirements of Federal Rule of Civil Procedure 26(a)(2). Under Rule 26(a)(2)(A), a party must disclose the identity of any witness it may use at trial to present expert testimony. Unless otherwise stipulated or ordered by the

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court, the disclosure must be accompanied by a written report prepared and signed by the expert witness and containing, among other things, a complete statement of all opinions the witness will express and the basis for them. 26(a)(2)(B). Fed. R. Civ. P.

These disclosures must be made by the deadline Fed. R. Civ. P. 26(a)(2)(D). If a party

set by the court.

fails to make the required disclosures by the court-imposed deadline, then it may not use the witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or harmless. 37(c)(1). On May 13, 2009, the Klyazmin Defendants disclosed their intention to offer Justman's opinions as expert testimony at Fed. R. Civ. P.

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trial.

Fourth Guillory Decl. ¶ 3, Ex. A ("Expert Witness The Expert Witness Designation stated that

Designation").

Justman would "offer opinions regarding the conduct of the parties and their agents involved with the various real estate transactions at issue in this case." Id. at 2:11-12. It

further stated that Justman would opine on such matters as whether the Klyazmin Defendants owed any duty to Plaintiffs in the transactions at issue, the applicable standard of care, whether the Klyazmin Defendants breached any duty owed to Plaintiffs, whether Plaintiffs suffered damages, and whether Plaintiffs acted reasonably. Id. at 2. After producing the

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Expert Witness Designation, the Klyazmin Defendants failed to provide Plaintiffs with a written report prepared by Justman containing a complete statement of his opinions and the basis and reasons for them before the discovery deadline set by the Court. Fourth Guillory Decl. ¶ 3. ECF No. 148. Discovery closed on

December 1, 2010.

The Klyazmin Defendants

finally filed Justman's report along with their Opposition on January 28, 2011. They have offered no justification for The

their failure to disclose the report during discovery.

Court finds that this failure was not harmless, as it deprived Plaintiffs of the opportunity to depose Justman on the basis for his opinions and seek rebuttal testimony if desired. Accordingly, the Court finds Justman's testimony inadmissible. Aside from Justman's testimony, Defendants do not offer evidence to support their argument that they did not breach any duties owed to Plaintiffs. Instead, the bulk of their

argument contends that even if they did breach fiduciary

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duties owed to Plaintiffs, any such breach was not a proximate cause of Plaintiffs' injuries. Second Opp'n at 9-12. They

argue that Academy's disbursement of the funds to Boyd was the sole proximate cause of harm to Plaintiffs.10 Id. By

contrast, Plaintiffs offer two theories of how the Klyazmin Defendants' actions caused Plaintiffs' damages. First, they

contend that if the Klyazmin Defendants had informed them that Boyd did not obtain financing for the $2.1 million loan, they would not have proceeded to borrow the $180,000 from Chandra because the sole purpose for doing so was to assist Boyd with his purchase. Second MSJ at 17. In support of this theory,

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Plaintiffs cite Larry Brantley's testimony stating the same. L. Brantley Dep. at 100:9-16. Second, Plaintiffs argue that

Skiff's failure to investigate Boyd's misrepresentations "enabled Boyd to pass himself off as the Brantleys' nephew and to obtain the monies from escrow." Second Reply at 9.

Causation is generally a question of fact reserved for the jury. Ulloa v. McMillin Real Estate & Mortg., Inc., 149 To prove proximate

Cal. App. 4th 333, 337 (Ct. App. 2007).

cause in a breach of fiduciary duty claim, the plaintiff must show that the defendant's conduct was "a substantial factor" in causing the plaintiff's harm. Stanley, 35 Cal. App. at

The Klyazmin Defendants imply that this Court, by finding Academy liable for breach of fiduciary duty to Chandra in its November 19, 2009 Order, held that Academy's actions were the sole proximate cause of "the damages in this action." Second Opp'n at 13. This misconstrues the Court's holding. The Court held that Academy's actions were a proximate cause of Chandra's injury, and the Court holds today that Academy's actions were a proximate cause of Plaintiffs' injury. These holdings do not preclude a finding that actions of other defendants also proximately caused injury to Plaintiffs. 22

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1095.

Here, Plaintiffs' evidence has not met their burden of

proving that no genuine issue of material fact exists under this standard of causation. Plaintiffs' causation arguments

involve hypothetical determinations of what Plaintiffs and other parties would have done if Skiff had taken certain actions. Reasonable jurors could disagree about these The jury should have the opportunity to hear

determinations.

Plaintiffs' testimony and evaluate these arguments firsthand. For the foregoing reasons, the Court DENIES Plaintiffs' motion for summary adjudication of Plaintiffs' claim against the Klyazmin Defendants for breach of fiduciary duty. 2. Plaintiffs' Sixth Claim for Negligent Supervision Lastly, Plaintiffs seek summary adjudication of their claim against the Klyazmin Defendants for negligent failure to supervise. Second MSJ at 18. An employer is liable for

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negligent supervision of an employee if it "knew or should have known that hiring the employee created a particular risk or hazard, and that particular harm materializes." Delfino v.

Agilent Tech., Inc., 145 Cal. App. 4th 790, 815 (Ct. App. 2006). Plaintiffs allege that Klyazmin negligently failed to supervise Skiff, and that as a result Skiff's actions -specifically her failure to disclose that she was representing multiple parties to the transaction and to inform Plaintiffs that Boyd's attempt to secure funding for the $2.1 million property had failed -- injured Plaintiffs. Second MSJ at 19.

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Skiff's alleged actions underlying this claim are the same actions that Plaintiffs allege constituted a breach of fiduciary duty. As explained above, a genuine issue of material fact exists

as to whether these actions were the proximate cause of any injury to Plaintiffs. Therefore, at a minimum, a genuine issue of fact

exists here as to whether Klyazmin's alleged failure to properly supervise Skiff was the proximate cause of any injury to Plaintiffs, i.e., whether Klyazmin's actions led any "particular harm [to] materializ[e]." Agilent, 145 Cal. App. 4th at 815.

Summary adjudication of Plaintiffs' negligent supervision claim against the Klyazmin Defendants is therefore inappropriate. Accordingly, the Court DENIES Plaintiffs' motion for summary adjudication of their negligent supervision claim against the Klyazmin Defendants. /// /// /// /// /// /// /// /// /// /// /// /// /// ///

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V.

CONCLUSION For the foregoing reasons, Plaintiffs Larry Brantley and Ellen

Brantley's Motion for Summary Adjudication against Defendant Academy Escrow is GRANTED IN PART and DENIED IN PART. The Motion

is GRANTED in favor of Plaintiffs as to liability only with regard to Plaintiffs' fifth claim for breach of fiduciary duty and eighth claim for conversion against Academy Escrow. as to damages. The Motion is DENIED

Plaintiffs shall prove their damages at trial.

Plaintiffs' third claim for violation of the RESPA is not a cognizable claim and is therefore DISMISSED with regard to all Defendants. Plaintiffs' Motion for Summary Adjudication against Modo Realty, Inc., Royal Crown Mortgage, Inc., and Sergei Klyazmin is DENIED.

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IT IS SO ORDERED.

Dated: April 1, 2011 UNITED STATES DISTRICT JUDGE

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