Puruganan et al v. HSBC Bank USA, National Association et al
Filing
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ORDER by Judge ARMSTRONG denying 14 Motion for TRO (lrc, COURT STAFF) (Filed on 11/13/2012)
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UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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OAKLAND DIVISION
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6 ERNESTO S. PURUGANAN and
Case No: C 12-05168 SBA
ISABELITA G. PURUGANAN,
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Plaintiffs,
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vs.
ORDER DENYING PLAINTIFFS’
RENEWED MOTION FOR A
TEMPORARY RESTRAINING
ORDER
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HSBC BANK USA, NATIONAL
Docket 14
10 ASSOCIATION as Trustee for ACE
SECURITIES CORP. HOME EQUITY
11 LOAN TRUST, SERIES 2005-HE7, ASSET
BACKED PASS-THROUGH
12 CERTIFICATES; MORTGAGE
ELECTRONIC REGISTRATION
13 SYSTEMS, INC., and DOES 1 through 100,
Defendants.
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The parties are presently before the Court on Plaintiffs Ernesto S. Puruganan and
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Isabelita G. Puruganan’s renewed Motion for a Temporary Restraining Order and Order to
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Show Cause re Preliminary Injunction (“Renewed Motion for TRO”). Having read and
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considered the papers filed in connection with this matter and being fully informed, the
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Court hereby DENIES the motion for the reasons set forth below. The Court, in its
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discretion, finds this matter suitable for resolution without oral argument. See Fed. R. Civ.
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P. 78(b); N.D. Cal. Civ. L.R. 7-1(b).
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I.
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BACKGROUND
Plaintiffs are the owners of real property located at 1832 Sunnyvale Avenue, Walnut
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Creek, California (“the Property”), where they operate an elder care business. See Compl.
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¶ 11, Dkt. 1; Puruganan Decl. ¶ 4, Dkt. 14-3. On August 10, 2005, Plaintiffs executed a
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promissory note in the amount of $736,000, secured by a Deed of Trust recorded against
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the Property. Compl. ¶ 11, Dkt. 1. The Deed of Trust identifies WMC Mortgage
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(“WMC”) as the lender, Westwood Associates (“Westwood”) as the trustee, and Mortgage
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Electronic Registration System (“MERS”) as the Lender’s nominee and beneficiary. Id.
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Ex. A. The Deed of Trust contains a power of sale authorizing the sale of the Property to
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satisfy the borrower’s obligations under the mortgage. Id. at 2. At the time the loan closed
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or shortly thereafter, Plaintiffs’ loan allegedly was sold to the ACE Securities Corp. Home
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Equity Loan Trust, Series 2005-HE7 (“MBS Trust”). Id. ¶ 12.
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At some point, Plaintiffs fell behind on their mortgage payments, resulting in the
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recording of a Notice of Default and Election to Sell Under Deed of Trust (“NOD”) against
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the Property by Northwest Trustee Services, Inc. (“Northwest”) on May 17, 2011. Id. Ex.
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B. Northwest recorded the NOD as the agent for the beneficiary under the Deed of Trust.
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Id. At the time the NOD was recorded, Plaintiffs were $43,634.20 in arrears. Id.
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On August 24, 2011, all rights under the Deed of Trust were transferred to HSBC
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Bank USA (“HSBC”), as trustee for the MBS Trust. Compl. Ex. C. On the same date, a
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Substitution of Trustee was recorded which substituted Northwest as the trustee in place of
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Westwood. Id. Ex. D.
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On October 24, 2011, Northwest recorded a Notice of Trustee’s Sale against the
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Property indicating that the Property was to be sold at a non-judicial foreclosure sale on
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November 18, 2011. Compl. Ex. E. On a date not specified in the record, the foreclosure
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sale was delayed to October 11, 2012, and again to November 13, 2012. Puruganan Decl.
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¶ 4. The trustee’s sale has since been cancelled. Epsha Letter, Dkt. 19.1
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A.
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On October 4, 2012, attorney Christopher P. Epsha of Business Affairs Consultants
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Inc. ALC, filed a Verified Complaint in this Court on behalf of Plaintiffs. As Defendants,
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the Complaint names HSBC and MERS, and alleges causes of action styled as:
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(1) Wrongful Foreclosure; (2) Quiet Title; (3) Fraud; (4) Cancellation of Instruments;
PROCEDURAL HISTORY
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The Court takes judicial notice of Northwest’s website, which indicates that the
trustee’s sale of the Property has been “cancelled.” See http://www.usaforeclosure.com/propertySearchResults.aspx?new=&ci=&c=&s=&sN=&sZ=&tNum=7777.
28 16230&pAddr=&rdr=1&fci=Walnut%20Creek (last visited Nov. 9, 2012).
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(5) Violation of Business and Professions Code § 17200; (6) Unjust Enrichment;
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(7) Slander of Title; and (8) Violation of California Civil Code § 2932.5. The Court’s
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subject matter jurisdiction is predicated upon diversity jurisdiction, 28 U.S.C. § 1332.
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Compl. ¶ 10.
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Along with the Complaint, Plaintiffs filed an ex parte Motion for a Temporary
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Restraining Order and Order to Show Cause re Preliminary Injunction (“First Motion for
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TRO”). Dkt. 2. In that motion, Plaintiffs sought to enjoin the foreclosure sale then
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scheduled for October 11, 2012. The Court denied the motion, finding, inter alia, that
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Plaintiffs failed to demonstrate good cause for failing to provide Defendants with notice of
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the action or the TRO request. Dkt. 12. The Court’s Order indicated that Plaintiffs could
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renew their motion after they had served the Complaint and motion on Defendants. Id. at 4.
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In addition, the Court specified that Plaintiffs must first meet and confer with Defendants
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“in an effort to reach a mutually agreeable postponement of the trustee’s sale to facilitate
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Defendants’ ability to submit a brief in response to Plaintiffs’ motion.” Id.2
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On November 6, 2012, almost a month after the Court denied Plaintiff’s First
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Motion for TRO, Plaintiffs attempted, for the first time, to serve Defendants with the
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Complaint. See Decl. of Janice Quimby Re Service of Verified Complaint and Renewed
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Motion for Temporary Restraining Order (“Quimby Decl. Re Serv.”) ¶¶ 2-3, Dkt. 15. On
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the same date, Plaintiffs filed the instant Renewed Motion for TRO, which again seeks to
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enjoin the now-cancelled trustee’s sale. In an apparent attempt to comply with the Court’s
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prior order to meet and confer with Defendants, non-attorney Janice Quimby, who works
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for Mr. Epsha in an unspecified capacity, claims that she unsuccessfully attempted to
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persuade Defendants to delay the trustee’s sale. See Decl. of Janice Quimby Re
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On the same date that it denied Plaintiff’s First Motion for TRO, the Court issued
an order referring this action to the Court’s Alternative Dispute Resolution (“ADR”) Unit,
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was suitable for mediation or a settlement conference. Dkt. 10. The initial conference
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Plaintiffs’ counsel did not make any attempt to serve the Complaint until November 6,
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Compliance with the Meet and Confer Requirements of the Court’s October 10, 2012 Order
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Denying Plaintiff’s Application for a Temporary Restraining Order (“Quimby Decl. Re
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Compliance”) ¶¶ 2-11, Dkt. 14-1. Defendants have not responded to the Renewed Motion
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for TRO, and it is unclear whether that they have accepted service of process.
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II.
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LEGAL STANDARD
The same standard applies to a motion for a TRO and a motion for a preliminary
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injunction. See Stuhlbarg Int’l Sales Co. v. John D. Brush & Co., 240 F.3d 832, 839 n.7
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(9th Cir. 2001). To obtain a TRO or preliminary injunction, the moving party must show:
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(1) a likelihood of success on the merits; (2) a likelihood of irreparable harm to the moving
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party in the absence of preliminary relief; (3) that the balance of equities tips in the moving
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party’s favor; and (4) that an injunction is in the public interest. Winter v. Natural Res.
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Def. Council, Inc., 555 U.S. 7, 20 (2008). Under the Ninth Circuit’s “sliding scale”
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approach, the first and third elements are to be balanced such that “serious questions” going
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to the merits and a balance of hardships that “tips sharply” in favor of the movant are
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sufficient for relief so long as the other two elements are also met. Alliance for the Wild
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Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (9th Cir. 2011). “A TRO is an extraordinary
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remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such
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relief.” Niu v. United States, 821 F. Supp. 2d 1164, 1168 (C.D. Cal. 2011) (citing Winter,
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555 U.S. at 22).
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III.
DISCUSSION
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A.
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The gist of Plaintiffs’ claims is that Defendants have no legal right to foreclose on
LIKELIHOOD OF SUCCESS
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the Property. California Civil Code sections 2924 through 2941 govern non-judicial
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foreclosures initiated under a deed of trust. Gardner v. Am. Home Mortg. Serv., Inc., 691
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F. Supp. 2d 1192, 1102 (E.D. Cal. 2010). Under this statutory scheme, a non-judicial
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foreclosure (also known as a trustee’s sale) may be initiated by a “trustee, mortgagee, or
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beneficiary, or any of their authorized agents . . . .” Cal. Civ. Code § 2924(a). The
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foreclosure process is commenced by the recording of a NOD. Id. § 2924(a)(1). Id.
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(emphasis added). If the default is not cured within three months of the NOD, a notice of
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sale may be given which states the time and place of the sale. Id. § 2924(a)(3). A “person
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authorized to record the notice of default or the notice of sale” includes “an agent for the
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mortgagee or beneficiary, an agent of the named trustee, any person designated in an
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executed substitution of trustee, or an agent of that substituted trustee.” Id. § 2924b(b)(4).
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Where, as here, the deed of trust contains an express provision granting a power of sale, the
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beneficiary may pursue nonjudicial foreclosure. See Knapp v. Doherty, 123 Cal.App.4th
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76, 86 (2004).
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According to Plaintiffs, the NOD was recorded on May 17, 2011, on behalf of
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HSBC. Plaintiffs argue that HSBC had no power to record a NOD because HSBC was not
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assigned the Deed of Trust until three months later on August 24, 2011. Mot. at 11. This
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contention is unsupported by the record. The NOD, a copy of which is attached to the
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Complaint, was recorded by Northwest as the agent for the beneficiary under the Deed of
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Trust. Compl. Ex. B at 2. The Deed of Trust identifies MERS as the beneficiary
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thereunder. Id. Ex. A at 1. Thus, despite Plaintiffs’ assertions to the contrary, it does not
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appear that the NOD was recorded by Northwest on behalf of HSBC. Rather, HSBC is
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merely referenced in the NOD as the entity which Plaintiffs should contact to determine the
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amount in arrears or arrange payment to stop the foreclosure. Id. at 1. The Court is
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therefore not persuaded at this juncture that Plaintiffs are likely to succeed on their claims.
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B.
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Plaintiffs contend that they will suffer irreparable harm in the absence of a TRO
IRREPARABLE HARM
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because they will lose their business if the Property is foreclosed upon. Mot. at 15. As an
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initial matter, Plaintiffs must show that they face both “immediate and irreparable injury[.]”
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Fed. R. Civ. P. 65(b)(1)(A) (emphasis added). Since the trustee’s sale has been cancelled,
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it is questionable whether Plaintiffs face an immediate threat of foreclosure. That aside,
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Plaintiffs’ delay in seeking relief undermines their claim of irreparable harm. Despite
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knowing since October 2011 that the Property was scheduled for a trustee’s sale, Plaintiffs
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waited for over a year before undertaking legal action to enjoin the anticipated sale. In
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addition, Plaintiffs waited almost a month after the Court denied Plaintiffs’ First Motion for
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TRO before attempting to serve Defendants with the Complaint. While delay in seeking a
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TRO is not dispositive, it certainly militates against any claim of urgency. See Miller ex
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rel. NLRB v. Cal. Pac. Med. Ctr., 991 F.2d 536, 544 (9th Cir. 1993) (“that [the moving
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party] tarried so long before seeking this injunction is . . . relevant in determining whether
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relief is truly necessary”); Oakland Tribune, Inc. v. Chronicle Publishing Co., Inc, 762 F.2d
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1374, 1377 (9th Cir. 1985) (“Plaintiff’s long delay before seeking a preliminary injunction
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implies a lack of urgency and irreparable harm.); Lydo Enters. v. City of Las Vegas, 745
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F.2d 1211, 1213 (9th Cir. 1984) (“A delay in seeking a preliminary injunction is a factor to
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be considered in weighing the propriety of relief.”); see also Dahl v. Swift Distribution,
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Inc., No. CV 10-00551 SJO (RZx), 2010 WL 1458957, at *4 (C.D.Cal. Apr. 1, 2010)
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(finding that an eighteen-day delay in filing TRO application “implies a lack of urgency
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and irreparable harm.”).
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C.
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Next, Plaintiffs allege that they and their clients face will face undue hardship if the
BALANCE OF EQUITIES
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Property is foreclosed upon and that there are no equitable considerations that favor
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Defendants. Mot. at 15. Not so. Plaintiffs’ claims that Defendants improperly commenced
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the foreclosure process must be balanced against the fact that Plaintiffs have defaulted on
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their mortgage in the amount of $43,634.20. Compl. Ex. B. Plaintiffs have made no
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showing that they have made any attempt to pay down that amount or otherwise bring
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themselves current on their debt. This weighs against Plaintiffs in terms of whether a TRO
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should issue. See Quach v. Bank of Am., Nat. Ass’n, No. C 12-5037 EJD, 2012 WL
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4498873, at *4 (N.D. Cal., Sept. 28, 2012) (“the court must be mindful that foreclosure
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proceedings have commenced against Plaintiff due to her failure to pay according to the
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terms of the Deed of Trust she executed. For this reason, Plaintiff’s complaint of
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irregularity must be viewed with an eye of inequity.”).
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The Court also has serious concerns regarding Plaintiffs’ failure to comply with the
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Court’s earlier order regarding the prerequisites for renewing their request for a TRO. On
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October 10, 2012, the Court denied Plaintiffs’ First Motion for TRO based on Plaintiffs’
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delay in seeking relief and failure to serve the Defendants with either the Complaint or the
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Motion for TRO. Dkt. 12. Notably, the Court instructed that Plaintiffs could renew their
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motion only “after they have provided proper notice to Defendants of the Verified
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Complaint and their motion for a TRO.” Id. at 4. In addition, the Court specified that
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“before renewing their motion, Plaintiffs must first meet and confer with Defendants in an
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effort to reach a mutually agreeable postponement of the trustee’s sale to facilitate
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Defendants’ ability to submit a brief in response to Plaintiffs’ motion.” Id.
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Instead of undertaking efforts to serve Defendants with the Complaint expeditiously,
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Plaintiffs waited until November 6, 2012, almost a month after the Court issued its order,
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before attempting to effect service. See Quimby Decl. Re Serv. ¶¶ 2-5. Notably, Plaintiffs
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attempted service on the same date that they filed their Renewed Motion for TRO. Not
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only has Plaintiffs’ delay in service eliminated Defendants’ ability to respond to the instant
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motion, it also has undermined the Court’s efforts to have this case evaluated by the ADR
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Unit for a possible early mediation or settlement conference. Indeed, had Plaintiffs served
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the Complaint earlier as envisioned by the Court, the parties would have already have been
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able to participate in the ADR Unit’s program for foreclosure and mortgage fraud cases,
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which thereby may have obviated the need for the instant motion.
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Equally problematic is Plaintiffs’ assertion that they met and conferred with
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Defendants prior to renewing their motion. The record shows that Plaintiffs’ counsel,
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Christopher Epsha, did not himself make a good faith effort to communicate with
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Defendants or their counsel. See Quimby Decl. Re Compliance ¶¶ 2-11. Rather, those
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efforts were spearheaded by non-attorney Janice Quimby, who works for Mr. Epsha. Since
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Mr. Epsha is counsel of record for Plaintiffs, the Court’s expectation was that he, or another
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licensed attorney working at his direction, would personally meet and confer with
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Defendants. Not only is Mr. Epsha’s apparent delegation of such Court-ordered
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responsibility is outrageous, it is both the spirit and intent of the Court’s meet and confer
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order.
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D.
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Lastly, Plaintiffs contend that the public interest favors the issuance of a TRO in
PUBLIC INTEREST
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order to compel Defendants to “strictly adhere to the provisions of California’s non-judicial
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foreclosure statute[.]” Mot. at 15. As discussed, however, there is no indication, based on
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the limited record presented, that Defendants failed to comply with their statutory
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obligations. As such, the Court is not persuaded that the public interest favors the issuance
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of the requested TRO.
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IV.
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CONCLUSION
In sum, the Court finds that Plaintiffs have failed to make a clear showing that they
are entitled to a TRO under the four factors set forth in Winter. Accordingly,
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IT IS HEREBY ORDERED THAT:
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Plaintiffs’ Renewed Motion for a TRO is DENIED.
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2.
This Order terminates Docket No. 14.
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IT IS SO ORDERED.
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Dated: November 13, 2012
______________________________
SAUNDRA BROWN ARMSTRONG
United States District Judge
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