Schmidt v. Coldwell Banker Residential et al

Filing 16

ORDER DENYING 15 RENEWED REQUEST FOR TEMPORARY RESTRAINING ORDER AND INJUNCTION; DENYING RENEWED REQUESTS FOR LEAVE TO RECORD NOTICE OF PENDENCY OF ACTION. Signed by Judge Edward J. Davila on 3/20/2013. (ejdlc1, COURT STAFF) (Filed on 3/20/2013) (Additional attachment(s) added on 3/20/2013: # 1 Certificate of Service) (ecg, COURT STAFF).

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION
CASE NO. 5:13-cv-00986 EJD

RODERIC MALCOLM SCHMIDT,

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ORDER DENYING RENEWED REQUEST
FOR TEMPORARY RESTRAINING
ORDER AND INJUNCTION; DENYING
RENEWED REQUESTS FOR LEAVE TO
RECORD NOTICE OF PENDENCY OF
ACTION

Plaintiff(s),
For the Northern District of California

United States District Court

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v.
COLDWELL BANKER RESIDENTIAL
BROKERAGE, et. al.,

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[Docket Item No(s). 15]

Defendant(s).
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I.

INTRODUCTION

On March 7, 2013, the court denied Plaintiff Roderic Malcolm Schmidt’s (“Plaintiff”)

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request for a temporary restraining order (“TRO”) and injunction as well as his requests to record

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Notices of Pendency of Action, otherwise known as lis pendens, against two parcels of property

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alleged to be subject to an imminent sale. See Docket Item No. 13. As explained in the written

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order, the allegations in the Complaint did not demonstrate a likelihood that Plaintiff would succeed

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on the merits because the causes of action asserted were not entirely clear. Id. The requests for

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leave to record lis pendens were also denied for that same reason. Id.

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Plaintiff filed a First Amended Complaint (“FAC”) on March 11, 2013. See Docket Item

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No. 15. Based on this pleading, Plaintiff renews his requests for a TRO, injunction and for leave to

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file lis pendens. Having carefully reviewed the FAC, the court finds these matters suitable for

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CASE NO. 5:13-cv-00986 EJD
ORDER DENYING RENEWED REQUEST FOR TEMPORARY RESTRAINING ORDER AND INJUNCTION;
DENYING RENEWED REQUESTS FOR LEAVE TO RECORD NOTICE OF PENDENCY OF ACTION

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disposition without a hearing pursuant to Civil Local Rule 7-1(b). Since they fare no better than

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their predecessors, the renewed requests will be denied for the reasons explained below.

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II.

BACKGROUND

According to the allegations in the FAC, Plaintiff’s father purchased two parcels of real

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property located in Pacific Grove, California - one in 1957 (the “Lobos property”) and one in 1962

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(the “Walnut property”) - which he subsequently transferred to a family trust, known as the Schmidt

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Family Trust, in the 1980s or 1990s. See FAC, at ¶¶ 12, 14, 19. The “Doe” and “Roe” defendants

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are the accountant and lawyer for the trust, the latter having drafted the terms of the trust. Id. at ¶¶

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2, 3, 19. The current trustee is Plaintiff’s brother. Id. at ¶ 19. Plaintiff and his brother are both

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For the Northern District of California

United States District Court

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beneficiaries. Id.
The Lobos and Walnut properties are the childhood homes of Plaintiff and his brother, and

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Plaintiff alleges each are “unique and irreplaceable.” Id. at ¶ 15. Plaintiff further alleges his father

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wanted Plaintiff to inherit the Lobos and Walnut properties, and that these intentions were put in

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writing “somewhere.” Id. at ¶ 17. In the FAC, he claims the Lobos and Walnut properties are “his

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rightful inheritance.” Id. at ¶ 30.

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In 2010, Plaintiff’s father passed away leaving the Lobos and Walnut properties in the trust,
which was then rendered irrevocable. Id. at ¶ 31.

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Beginning on or about January 17, 2012, it appears that Plaintiff and his brother, through the

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lawyer for the trust, began to discuss the possibility of distributing to Plaintiff the Lobos and Walnut

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properties. Id. at ¶ 32. However, on or about February 21, 2013, it appears that Plaintiff’s brother,

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along with the lawyer and the accountant, decided to sell the two properties rather than distribute

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them to Plaintiff, and then listed the properties with Defendant Coldwell Banker Residential

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Brokerage. Id. at ¶¶ 7, 40.

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Plaintiff now alleges that the lawyer and accountant for the trust made material

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misrepresentations to induce his father to create the trust and to transfer the Lobo and Walnut

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properties. Id. at ¶ 21. Plaintiff also alleges that the lawyer and accountant made material

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misrepresentations to induce his brother, as trustee, to sell the properties rather than distributing

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CASE NO. 5:13-cv-00986 EJD
ORDER DENYING RENEWED REQUEST FOR TEMPORARY RESTRAINING ORDER AND INJUNCTION;
DENYING RENEWED REQUESTS FOR LEAVE TO RECORD NOTICE OF PENDENCY OF ACTION

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them to Plaintiff. Id. at ¶ 39. Plaintiff believes the sales were secretly arranged in order to defraud

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Plaintiff. Id. at ¶ 45.

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Plaintiff asserts one cause of action for fraud against the lawyer and accountant for the trust.

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As relief, Plaintiff requests the court set aside the deeds transferring the Lobos and Walnut

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properties to the trust and the listing agreements with Coldwell Banker and enjoin the sales.

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Plaintiff also “reserves the right to request the Court replace Lawyer and Accountant and also to

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replace the Trustee.”

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III.

LEGAL STANDARD

As it did previously, the court begins this discussion with the legal standard that applies. The
standards for issuing a TRO and preliminary injunction are the same. See New Motor Vehicle Bd.

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For the Northern District of California

United States District Court

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of Cal. v. Orrin W. Fox Co., 434 U.S. 1345, 1347 n.2 (1977). A preliminary injunction is “an

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extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to

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such relief.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). “The proper legal

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standard for preliminary injunctive relief requires a party to demonstrate (1) ‘that he is likely to

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succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of preliminary

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relief, (3) that the balance of equities tips in his favor, and (4) that an injunction is in the public

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interest.” Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009).

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As a corollary to this test, the Ninth Circuit has also found a preliminary injunction

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appropriate if “serious questions going to the merits were raised and the balance of the hardships tips

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sharply in the plaintiff’s favor,” thereby allowing preservation of the status quo where complex legal

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questions require further inspection or deliberation. Alliance for the Wild Rockies v. Cottrell, 622

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F.3d 1045, 1049 (9th Cir. 2010).

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“These formulations are not different tests but represent two points on a sliding scale in

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which the degree of irreparable harm increases as the probability of success on the merits

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decreases.” Big Country Foods, Inc. v Board of Educ. of the Anchorage Sch. Dist., 868 F.2d 1085,

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1088 (9th Cir. 1989). But “[u]nder either formulation, the moving party must demonstrate a

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significant threat of irreparable injury, irrespective of the magnitude of the injury.” See id.

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CASE NO. 5:13-cv-00986 EJD
ORDER DENYING RENEWED REQUEST FOR TEMPORARY RESTRAINING ORDER AND INJUNCTION;
DENYING RENEWED REQUESTS FOR LEAVE TO RECORD NOTICE OF PENDENCY OF ACTION

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IV.

DISCUSSION

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In the FAC, Plaintiff has remedied the primary deficiency identified in the order addressing

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his prior request for injunctive relief. Indeed, Plaintiff has clarified that he intends to assert a cause

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of action for common law fraud against the lawyer and accountant for the trust. Plaintiff has also

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included additional factual allegations.

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Those amendments are helpful because the court may now proceed to construe the FAC

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under the necessary elements. But in doing so, it becomes apparent that Plaintiff still has not met his

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burden to demonstrate a likelihood of success on the merits.

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Under California law, a plaintiff asserting fraud must allege facts supporting the following
elements: “(1) misrepresentation; (2) knowledge of falsity; (3) intent to defraud or to induce reliance

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For the Northern District of California

United States District Court

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(4) justifiable reliance; and (5) resulting damage.” Engalla v. Permanente Med. Group, Inc., 15 Cal.

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4th 951, 974 (1997).

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In federal court, claims which sound in fraud are subject to a heightened pleading standard.

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Fed. R. Civ. Proc. 9(b) (“In alleging fraud or mistake, a party must state with particularity the

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circumstances constituting fraud or mistake.”); Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th Cir.

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2007) (“Rule 9(b) imposes heightened pleading requirements where ‘the object of the conspiracy is

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fraudulent.’”). The allegations must be “specific enough to give defendants notice of the particular

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misconduct which is alleged to constitute the fraud charged so that they can defend against the

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charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727,

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731 (9th Cir. 1985). To that end, the allegations must contain “an account of the time, place, and

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specific content of the false representations as well as the identities of the parties to the

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misrepresentations.” Swartz, 476 F.3d at 764 (emphasis added). In other words, these claims must

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generally contain more specific facts than is necessary to support other causes of action.

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The FAC does not satisfy the particularity required by Rule 9, mainly because Plaintiff has

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not identified the lawyer and accountant for the trust by name. Instead, he has chosen to use “doe”

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references. “As a general rule, the use of ‘John Doe’ to identify a defendant is not favored” and is

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only proper when “where the identity of alleged defendants will not be known prior to the filing of a

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CASE NO. 5:13-cv-00986 EJD
ORDER DENYING RENEWED REQUEST FOR TEMPORARY RESTRAINING ORDER AND INJUNCTION;
DENYING RENEWED REQUESTS FOR LEAVE TO RECORD NOTICE OF PENDENCY OF ACTION

1

complaint.” Gillespie v. Civiletti, 629 F.2d 637, 642 (9th Cir. 1980). Here, the use of “doe”

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references is improper since other allegations in the FAC establish that Plaintiff must know the

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identities of the lawyer and the accountant, or can easily learn their identities from another source.

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See FAC, at ¶ 3 (“Defendant John Doe (‘Accountant’) is the accountant for the Trust, and for many

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years was father’s accountant.”), ¶ 32 (“On January 17, 2012, Plaintiff wrote to Lawyer by email . . .

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Lawyer responded two days later . . . .”).

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Moreover, the court is concerned that an injunctive order which restricts the activity of “doe”

render the order impermissibly vague. See Schmidt v. Lessard, 414 U.S. 473, 476 (1974). Indeed,

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the FAC would only support a TRO directed at the “doe” defendants since the fraud cause of action

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For the Northern District of California

defendants would violate the specificity requirement of Federal Rule of Civil Procedure 65(d) and

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United States District Court

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is not asserted against Coldwell Banker.

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In addition, Plaintiff does not have standing to assert a direct claim for fraud against the

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lawyer and accountant based on the allegations in the FAC. The prudential limitation on standing in

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federal court “encompasses ‘the general prohibition on a litigant’s raising another person’s legal

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rights, the rule barring adjudication of generalized grievances more appropriately addressed in the

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representative branches, and the requirement that a plaintiff’s complaint fall within the zone of

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interests protected by the law invoked.’” Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 12

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(2004) (quoting Allen v. Wright, 468 U.S. 737, 751 (1984)).

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In its current form, the fraud cause of action is based solely on misrepresentations allegedly

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made to Plaintiff’s father and Plaintiff’s brother, not to Plaintiff himself. The allegations also

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establish that it was Plaintiff’s father who relied on the misrepresentations to create the trust and his

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brother who relied on misrepresentations to list the properties for sale. But absent circumstances not

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relevant here, a plaintiff asserting fraud based on misrepresentation must establish personal reliance

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on the misrepresentation. See Brown v. Super. Ct., 44 Cal. 3d 1049, 1070-71 (1988) (“In order to

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prevail in an action for fraud, a plaintiff must show that the defendant made misrepresentations upon

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which he relied to his detriment, and that such misrepresentations were made with fraudulent

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knowledge or intent.”). These allegations may be sufficient to establish standing for Plaintiff’s

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CASE NO. 5:13-cv-00986 EJD
ORDER DENYING RENEWED REQUEST FOR TEMPORARY RESTRAINING ORDER AND INJUNCTION;
DENYING RENEWED REQUESTS FOR LEAVE TO RECORD NOTICE OF PENDENCY OF ACTION

1

brother or for the representative authorized to bring claims on behalf of Plaintiff’s father, but not for

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Plaintiff. While Plaintiff may have standing to assert other causes of action as a trust beneficiary,

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the prudential limitation on standing precludes him from bringing a cause of action for

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misrepresentation based on the alleged facts.

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For these reasons, the court finds that Plaintiff is unable to demonstrate a likelihood to

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success on the merits, and that this inability outweighs any degree of equity, irreparable harm or

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amount of public interest which may favor a TRO. Furthermore, Plaintiff has not raised the type of

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“serious questions” sufficient to justify injunctive relief. Plaintiff’s renewed request will therefore

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be denied.

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For the Northern District of California

United States District Court

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V.

ORDER

Based on the foregoing, Plaintiff’s renewed request for a TRO and injunction is DENIED.

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The renewed request for leave to file Notices of Pendency of Action is also DENIED because

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Plaintiff has not asserted a viable “real property claim” under California Code of Civil Procedure §

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405.4 due to lack of standing.

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The court will not entertain further requests for injunctive relief prior to service of process in

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this action, and any post-service request must contain all of the documents listed in Civil Local Rule

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65-1(a). Failure to comply as directed will result in an order summarily denying the request.

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The court schedules this action for a Case Management Conference on May 10, 2013, at

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10:00 a.m. The parties shall file a Joint Case Management Statement or separate statements under

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Civil Local Rule 16-9(a) on or before May 3, 2013.

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IT IS SO ORDERED.

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Dated: March 20, 2013
EDWARD J. DAVILA
United States District Judge

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CASE NO. 5:13-cv-00986 EJD
ORDER DENYING RENEWED REQUEST FOR TEMPORARY RESTRAINING ORDER AND INJUNCTION;
DENYING RENEWED REQUESTS FOR LEAVE TO RECORD NOTICE OF PENDENCY OF ACTION