Sharp v. Nationstar Mortgage LLC et al

Filing 16

ORDER by Judge Lucy H. Koh finding as moot 5 Motion to Dismiss; granting 11 Motion to Dismiss (lhklc3S, COURT STAFF) (Filed on 9/3/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
For the Northern District of California

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SAN JOSE DIVISION

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)
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)
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Plaintiffs,
)
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v.
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NATIONSTAR MORTGAGE, LLC, and
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unknown business entity; AURORA
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COMMERCIAL CORP., an unknown business )
entity; and DOES 1 through 25, inclusive,
)
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Defendants.
)
)
TODD SHARP and MARIA SHARP,
individuals,

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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS

Plaintiffs Todd Sharp and Maria Sharp (“the Sharps”) allege that Defendants Nationstar

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Mortgage, LLC (“Nationstar”) and Aurora Commercial Corp. (“Aurora”) (collectively,

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“Defendants”) engaged in predatory lending practices to Plaintiffs’ detriment. Before the Court is

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Defendants’ Motion to Dismiss. ECF No. 11. The Motion has been fully briefed. The Court finds

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the matter suitable for decision without oral argument under Civil Local Rule 7-1(b) and

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VACATES the hearing set for September 4, 2014, at 1:30 p.m. Having considered the submissions

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of the parties and relevant law, the Court GRANTS Defendants’ Motion to Dismiss without

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prejudice for the reasons stated below.

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I.

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BACKGROUND
A.

Factual Background
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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

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On or around September 27, 2006, the Sharps took out a $997,500 loan from Blue Adobe

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Financial Services, Inc. (“Blue Adobe”) secured by a deed of trust against real property located at

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25011 Hidden Mesa Court, Monterey, California (“the property”). (“SAC”) ECF No. 8 ¶¶ 1, 10-11.

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1.

Foreclosure Timeline

Due to the Sharps’ failure to stay current on the loan, Cal-Western Reconveyance recorded

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a notice of default on June 17, 2009. Id. ¶¶ 13-14. On November 15, 2010, the deed of trust was

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assigned to Aurora. ECF No. 11-2 at 8. After the Sharps failed to cure the delinquency, a notice of

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trustee’s sale was recorded on December 15, 2010, setting a sale date of January 4, 2011. Id. at 5.

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The sale did not proceed, however, and on June 28, 2012, Aurora assigned the deed of trust to

United States District Court
For the Northern District of California

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Nationstar. Id. at 12; SAC ¶ 26.
A second notice of trustee’s sale was recorded on December 18, 2012, setting a sale date of

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January 15, 2013. ECF No. 11-2 at 15. The property was eventually sold at public auction on

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March 5, 2013, at which time it reverted to Nationstar. Id. at 18-19.

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After purchasing the property, Nationstar filed an unlawful detainer action against the

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Sharps in Monterey County Superior Court on March 28, 2013. ECF No. 11-3 at 8; SAC ¶ 28. On

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July 2, 2013, the state court entered judgment against the Sharps and in favor of Nationstar, and

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issued a writ of possession. ECF No. 11-3 at 27; ECF No. 11-4 at 2.

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2.

The Sharps’ Allegations

The Sharps allege that sometime prior to February 2009, the Sharps contacted Aurora and

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requested an alternative to foreclosure. SAC ¶¶ 17-18. On February 17, 2009, following a series of

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agreements written on Aurora letterhead, the Sharps began making payments to Aurora to avoid

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foreclosure and to help the Sharps earn the right to refinance. Id. The Sharps allege that these

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written agreements were intended as foreclosure prevention alternatives. Id. ¶ 21. The Sharps also

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allege that in return for these payments, Aurora promised to modify the Sharps’ loan. Id. ¶¶ 18, 22.

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On November 24, 2010, Aurora returned the Sharps’ most recent payment and notified the

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Sharps that the payment did not make the loan current, that the Sharps’ had no arrangement with

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Aurora to bring the loan current, and thus that the loan would be referred to foreclosure. Id. ¶ 23.

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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

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The Sharps now bring six causes of action against Defendants: (1) intentional

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misrepresentation; (2) negligent misrepresentation; (3) breach of contract; (4) breach of the implied

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covenant of good faith and fair dealing; (5) promissory estoppel; and (6) negligence. Id. at 5-12.

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The Sharps also bring two additional causes of action against Aurora only concerning the

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foreclosure postponement payments: (1) conversion and (2) embezzlement. Id. at 1.

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3.

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The Sharps’ Bankruptcy Petitions

The Sharps have also collectively submitted four bankruptcy petitions and received a series

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of automatic stays from any act to obtain possession of property of the estate until the time of

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dismissal or discharge of the bankruptcy proceedings. See, e.g., ECF No. 11-8 at 7 (noting that the

United States District Court
For the Northern District of California

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court lifted the automatic stay in Todd Sharp’s bankruptcy proceeding on December 18, 2013).

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Maria Sharp filed a bankruptcy petition in the Central District of California on July 23, 2013. ECF

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No. 11-5 at 6. Todd Sharp filed a bankruptcy petition in the Northern District of California on July

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24, 2013. ECF No. 11-4 at 7. Maria filed a second bankruptcy petition in the Central District of

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California on October 7, 2013, ECF No. 11-6 at 5, and a third bankruptcy petition in the Central

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District of California on February 3, 2014, ECF No. 11-7 at 5. None of these bankruptcy petitions

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disclosed the Sharps’ claims against Nationstar and Aurora. See ECF No. 11-4 at 17 (Todd Sharp

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acknowledging that he had no “counterclaims of the debtor”); ECF No. 11-5 at 20 (Maria Sharp

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acknowledging that she had no “counterclaims of the debtor”); ECF No. 11-6 at 19 (same); ECF

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No. 11-7 at 17 (same).

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B.

Procedural History

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On January 6, 2014, the Sharps filed their original complaint in Monterey County Superior

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Court. ECF No. 1 at 2. On January 22, 2014, the Sharps filed a First Amended Complaint. Id. On

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February 25, 2014, Defendants removed the pleading to this Court. Id. Defendants filed a motion to

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dismiss pursuant to Federal Rule 12(b)(6) on March 4, 2014. ECF No. 5. Rather than respond to

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Defendants’ motion, the Sharps filed the SAC on March 28, 2014.1 ECF No. 8. On April 8, 2014,

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Defendants filed the instant Motion to Dismiss. (“Mot.”) ECF No. 11. Defendants accompanied

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The filing of the SAC mooted Defendants’ first motion to dismiss. Accordingly, Defendants’ first
motion to dismiss, ECF No. 5, is DENIED as moot.
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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

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their Motion with a Request for Judicial Notice. ECF No. 11-1. On April 22, 2014, the Sharps filed

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an Opposition to the Motion to Dismiss. (“Opp’n”) ECF No. 12. Defendants replied on April 29,

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2014. (“Reply”) ECF No. 13.

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II.

LEGAL STANDARDS

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A.

Motion to Dismiss

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Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint to include “a

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short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.

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8(a)(2). A complaint that fails to meet this standard may be dismissed pursuant to Federal Rule of

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Civil Procedure 12(b)(6). The Supreme Court has held that Rule 8(a) requires a plaintiff to plead

United States District Court
For the Northern District of California

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“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550

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U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that

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allows the court to draw the reasonable inference that the defendant is liable for the misconduct

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alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard is not akin to a

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probability requirement, but it asks for more than a sheer possibility that a defendant has acted

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unlawfully.” Id. (internal quotation marks omitted). For purposes of ruling on a Rule 12(b)(6)

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motion, a court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings

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in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co.,

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519 F.3d 1025, 1031 (9th Cir. 2008).

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However, a court need not accept as true allegations contradicted by judicially noticeable

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facts, Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000), and the “[C]ourt may look

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beyond the plaintiff’s complaint to matters of public record” without converting the Rule 12(b)(6)

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motion into one for summary judgment, Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995).

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Nor is the court required to “‘assume the truth of legal conclusions merely because they are cast in

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the form of factual allegations.’” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (per

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curiam) (quoting W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981)). Mere “conclusory

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allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss.”

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Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004); accord Iqbal, 556 U.S. at 678.

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Furthermore, “a plaintiff may plead herself out of court” if she “plead[s] facts which establish that
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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

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[s]he cannot prevail on h[er] . . . claim.” Weisbuch v. Cnty. of L.A., 119 F.3d 778, 783 n.1 (9th Cir.

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1997) (internal quotation marks and citation omitted).

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B.

Request for Judicial Notice

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The Court generally may not look beyond the four corners of a complaint in ruling on a

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Rule 12(b)(6) motion, with the exception of documents incorporated into the complaint by

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reference, and any relevant matters subject to judicial notice. See Swartz v. KPMG LLP, 476 F.3d

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756, 763 (9th Cir. 2007) (per curiam); Lee v. City of L.A., 250 F.3d 668, 688-89 (9th Cir. 2001).

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Under the doctrine of incorporation by reference, the Court may consider on a Rule 12(b)(6)

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motion not only documents attached to the Complaint, but also documents whose contents are

United States District Court
For the Northern District of California

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alleged in the Complaint, provided the Complaint “necessarily relies” on the documents or contents

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thereof, the document’s authenticity is uncontested, and the document’s relevance is uncontested.

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Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010). The purpose of this rule is to

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“prevent plaintiffs from surviving a Rule 12(b)(6) motion by deliberately omitting documents upon

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which their claims are based.” Swartz, 476 F.3d at 763 (alterations omitted) (internal quotation

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marks omitted).

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The Court also may take judicial notice of matters that are either (1) generally known

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within the trial court’s territorial jurisdiction or (2) capable of accurate and ready determination by

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resort to sources whose accuracy cannot reasonably be questioned. Fed. R. Evid. 201(b). Proper

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subjects of judicial notice when ruling on a motion to dismiss include legislative history reports,

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see Anderson v. Holder, 673 F.3d 1089, 1094 n.1 (9th Cir. 2012); court documents already in the

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public record and documents filed in other courts, see Holder v. Holder, 305 F.3d 854, 866 (9th

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Cir. 2002); and publicly accessible websites, see Caldwell v. Caldwell, No. 05-4166, 2006 WL

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618511, at *4 (N.D. Cal. Mar. 13, 2006).

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C.

Leave to Amend

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If the Court determines that the complaint should be dismissed, it must then decide whether

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to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend

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“should be freely granted when justice so requires,” bearing in mind that “the underlying purpose

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of Rule 15 . . . [is] to facilitate decision on the merits, rather than on the pleadings or
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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

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technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (internal quotation

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marks omitted). Nonetheless, a court “may exercise its discretion to deny leave to amend due to

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‘undue delay, bad faith or dilatory motive on part of the movant, repeated failure to cure

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deficiencies by amendments previously allowed, undue prejudice to the opposing party. . . , [and]

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futility of amendment.’” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th Cir.

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2010) (alterations in original) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).

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III.

DISCUSSION

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Defendants make a series of arguments to support their Motion to Dismiss. First,

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Defendants argue that the Sharps are judicially estopped from pursuing their claims. Mot. at 4.

United States District Court
For the Northern District of California

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Second, Defendants argue that the Sharps’ misrepresentation claims, conversion claim, and

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embezzlement claim are both time-barred and insufficiently pleaded. Id. at 6-10. Third, Defendants

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argue that the breach of contract and breach of implied covenant of good faith and fair dealing

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claims fail because the Sharps have not alleged the existence of a valid contract to modify the loan.

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Id. at 10-12. Fourth, Defendants argue that the Sharps’ claim for promissory estoppel is

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insufficiently pleaded. Id. at 12-13. Finally, Defendants argue that the Sharps’ negligence claim

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fails because Aurora and Nationstar did not owe the Sharps any duty of care. Id. at 13. As

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discussed below, the Court concludes that the Sharps are judicially estopped from pursuing this

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action. Accordingly, the Court does not reach Defendants’ remaining arguments.

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A.

Judicial Notice

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“Even if a document is not attached to a complaint, it may be incorporated by reference into

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a complaint if the plaintiff refers extensively to the document or the document forms the basis of

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the plaintiff’s claim.” United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). “The defendant

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may offer such a document, and the district court may treat such a document as part of the

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complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under

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Rule 12(b)(6).” Id.

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Here, several of the Sharps’ claims for relief depend upon information contained in the

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Sharps’ deeds of trust, the substitutions of trustee, the notice of default, the trustee’s deeds upon

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sale, and the Sharps’ four bankruptcy petitions. Moreover, with respect to the documents relating to
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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

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the Sharps’ bankruptcy proceedings and orders entered in state court, such matters are judicially

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noticeable because they are matters of public record. See Holder, 305 F.3d at 866. Accordingly, the

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Court GRANTS Defendants’ request for judicial notice.

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B.

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Defendants move to dismiss the Sharps’ claims on the basis of judicial estoppel. Mot at 4.

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Specifically, Defendants assert that the Sharps failed to disclose an action against Nationstar and

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Aurora on their bankruptcy petitions, and thus are estopped from pursuing the instant litigation. Id.

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Judicial estoppel is an equitable doctrine, invoked by a court at its discretion, which

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Judicial Estoppel

precludes a party from gaining an advantage by asserting one position and subsequently taking a

United States District Court
For the Northern District of California

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clearly inconsistent position. Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir.

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2001); Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990). The doctrine applies to prevent a

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party from asserting inconsistent positions in different cases, as well as in a single litigation. Id. at

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783.The Supreme Court has identified three factors that courts may consider in determining

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whether to apply the doctrine of judicial estoppel: (1) whether a party’s position is “clearly

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inconsistent” with its earlier position; (2) whether the first court accepted the party’s earlier

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position; and (3) whether the party seeking to assert an inconsistent position would derive an unfair

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advantage if not estopped. New Hampshire v. Maine, 532 U.S. 742, 750-51 (2001). “In addition to

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these factors, the Ninth Circuit examines ‘whether the party to be estopped acted inadvertently or

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with any degree of intent.’” Milton H. Greene Archives, Inc. v. CMG Worldwide, Inc., 568 F. Supp.

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2d 1152, 1164 (C.D. Cal. 2008) (internal quotations marks omitted); see also Montgomery v. Nat’l

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City Mortg., No. 12-1359, 2012 WL 1965601, at *6 (N.D. Cal. May 31, 2012) (“The Ninth Circuit

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has noted that ‘[j]udicial estoppel seeks to prevent the deliberate manipulation of the courts’ and,

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therefore, it is ‘inappropriate . . . when a party’s prior position was based on inadvertence or

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mistake.’ . . . There does not appear to be any good reason as to why this statement should not hold

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true in the bankruptcy context . . . .” (quoting Helfand v. Gerson, 105 F.3d 530, 536 (9th Cir.

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1997))).

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“In the bankruptcy context, a party is judicially estopped from asserting a cause of action

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not raised in a reorganization plan or otherwise mentioned in the debtor’s schedules or disclosure
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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

1

statements.” Hamilton, 270 F.3d at 783 (citing Hay v. First Interstate Bank of Kalispell, N.A., 978

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F.2d 555, 557 (9th Cir. 1992)). The application of judicial estoppel in the bankruptcy setting is

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important “to protect the integrity of the bankruptcy process,” for “[t]he debtor, once he institutes

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the bankruptcy process, disrupts the flow of commerce and obtains a stay and the benefits derived

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by listing all his assets.” Id. at 785 (emphasis added). Finally, because the Bankruptcy Code

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subjects debtors to a “continuing duty to disclose all pending and potential claims,” judicial

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estoppel bars a plaintiff from pursuing a claim that the plaintiff failed to disclose in his bankruptcy

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proceeding even when the claim arose after the bankruptcy petition was initially filed. Id. at 784

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(“Judicial estoppel will be imposed when the debtor has knowledge of enough facts to know that a

United States District Court
For the Northern District of California

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potential cause of action exists during the pendency of the bankruptcy, but fails to amend his

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schedules or disclosure statements to identify the cause of action as a contingent asset.”); see also

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In re Coastal Plains, Inc., 179 F.3d 197, 208 (5th Cir. 1999) (“The duty of disclosure in a

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bankruptcy proceeding is a continuing one, and a debtor is required to disclose all potential causes

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of action.” (internal quotation marks omitted)).

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In this case, the facts and events upon which the Sharps base their claims occurred between

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February 17, 2009, when the Sharps began to make foreclosure postponement payments to Aurora,

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and March 25, 2013, when Nationstar filed an Unlawful Detainer action in state court to obtain

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ownership of the property. SAC ¶¶ 17-28. Thus, the Sharps had “knowledge of enough facts to

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know [of] a potential cause of action” against Defendants by the end of March 2013 at the latest.

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In spite of being on notice of the existence of facts that purportedly support a cause of

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action against Defendants, none of the Sharps’ four bankruptcy petitions, all of which were filed

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after March 2013, disclosed any claims against Nationstar or Aurora. See ECF No. 11-4 at 17; ECF

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No. 11-5 at 20; ECF No. 11-6 at 19; ECF No. 11-7 at 17. Maria Sharp’s first bankruptcy petition

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was filed on July 23, 2013, ECF No. 11-5 at 6, while Todd Sharp’s bankruptcy petition was filed

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on July 24, 2013, ECF No. 11-4 at 7. Maria’s second and third bankruptcy petitions were filed on

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October 7, 2013 and February 3, 2014. ECF No. 11-6 at 5; ECF No. 11-7 at 5. Indeed, Maria’s

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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

1

third bankruptcy petition was filed after the initiation of this lawsuit.2 Compare ECF No. 1 at 2

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(noting that the Sharps filed their original Complaint on January 6, 2014), with ECF No. 11-7 at 5

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(noting that Maria Sharp filed her third bankruptcy petition on February 3, 2014).

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Weighing the factors that govern the application of judicial estoppel, the Court finds that

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the Sharps are judicially estopped from pursuing their claims in this case. By failing to list claims

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against Aurora and Nationstar in their bankruptcy petitions, the Sharps have asserted “clearly

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inconsistent” positions across cases. See Hamilton, 270 F.3d at 784 (“[Plaintiff] clearly asserted

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inconsistent positions. He failed to list his claims against [defendant] as assets on his bankruptcy

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schedules, and then later sued [defendant] on the same claims.”). Further, the bankruptcy courts

United States District Court
For the Northern District of California

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“accepted” this position and granted the Sharps the benefit of four automatic stays. See id. at 784-

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85 (“Our holding does not imply that the bankruptcy court must actually discharge debts before the

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judicial acceptance prong may be satisfied. The bankruptcy court may ‘accept’ the debtor’s

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assertions by relying on the debtor’s nondisclosure of potential claims in many other ways. . . .

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[Plaintiff] did enjoy the benefit of [] an automatic stay . . . .”); see also Swendsen v. Ocwen Loan

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Servicing, LLC, No. 13-2082, 2014 WL 1155794, at *5 (E.D. Cal. Mar. 21, 2014) (automatic

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bankruptcy stay is sufficient to meet judicial acceptance prong); HPG Corp. v. Aurora Loan Servs.,

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LLC, 436 B.R. 569, 578 (E.D. Cal 2010) (same).

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As to unfair advantage, the Sharps’ failure to disclose their claims against defendants

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deceived the bankruptcy court and thus undermined the integrity of the bankruptcy process. See

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Hamilton, 270 F.3d at 784-85; see also Swendsen, 2014 WL 1155794, at *6 (“The law in this area

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is clear: a plaintiff who has received the benefit of an automatic stay under 11 U.S.C. § 362(a)

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would receive an unfair advantage by prosecuting claims against a defendant after failing to

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disclose those claims in his bankruptcy proceedings.”). Finally, the SAC does not allege any facts

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that would indicate that the Sharps’ failure to disclose their claims against Defendants was the

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result of inadvertence or mistake, and the Court is skeptical that any such allegations would be

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plausible considering that Maria’s third bankruptcy petition was filed nearly two weeks after her

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2

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The Sharps received the benefit of an automatic stay pursuant to 11 U.S.C. § 362 upon filing each
of their petitions. Each petition was subsequently dismissed. See ECF No. 11-5 at 2; ECF No. 11-6
at 2; ECF No. 11-7 at 2; ECF No. 11-8 at 2.
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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

1

counsel in the instant case filed a first amended complaint, verified by both Todd and Maria Sharp,

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in the instant case. See ECF No. 1-1 at 4, 29.

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The Sharps’ arguments against the application of judicial estoppel are not persuasive. The

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Sharps acknowledge that they failed to disclose the causes of action set forth in their Complaint in

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their bankruptcy filings, See Opp’n at 5-6. Nevertheless, the Sharps assert that the failure to

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disclose was “ultimately immaterial as each of the Plaintiffs’ Bankruptcies were [sic] subsequently

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dismissed without a Court approved or creditor adopted reorganization plan.” Id. at 6. The Sharps

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cite to Gottlieb v. Kest, 141 Cal. App. 4th 110 (2006), for the proposition that “when a ‘bankruptcy

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court dismisses a case without confirming a plan of reorganization, judicial estoppel does not bar a

United States District Court
For the Northern District of California

10

claim that should have been discarded in bankruptcy, because nothing that has happened in the

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bankruptcy court affected any unpaid creditor’s right to pursue the debtor.’” Opp’n at 5 (quoting

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Gottlieb, 141 Cal. App. 4th at 137-138).

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Gottlieb is a California state court case. Although the Sharps contend that state law controls

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the application of judicial estoppel here, id., the Ninth Circuit has squarely held that federal law

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governs the application of judicial estoppel in cases removed from state court. See Rissetto v.

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Plumbers & Steamfitters Local 343, 94 F.3d 597, 603 (9th Cir. 1996) (“[F]ederal law governs the

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application of judicial estoppel in federal court.”); Malfatti v. Mortg. Elec. Registrations Sys., Inc.,

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Case No. 11-3142, 2013 WL 3157868, at *6 (N.D. Cal. June 20, 2013) (“Federal law on judicial

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estoppel governs cases in federal courts regardless of whether they involve state law claims.”).

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Accordingly, Gottlieb is not binding on this Court. While the Court acknowledges that Gottlieb

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looked to federal cases in reaching its holding, see 141 Cal. App. 4th at 138-41, the Court does not

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find the reasoning in Gottlieb persuasive and instead follows other federal district courts in the

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Ninth Circuit that have held that obtaining an automatic bankruptcy stay is sufficient “judicial

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acceptance” to trigger judicial estoppel. See, e.g., Swendsen, 2014 WL 1155794, at *5; HPG Corp.,

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436 B.R. at 578.

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In their Opposition, the Sharps further claim that their repeated failure to disclose their

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claims against Defendants was an “unintentional mistake[]” resulting from “not having adequate

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representation.” Opp’n at 6. This allegation does not appear in the SAC and is thus not properly
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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

1

considered for purposes of Defendants’ Motion to Dismiss. See Akhtar v. Mesa, 698 F.3d 1202,

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1212 (9th Cir. 2012) (“When reviewing a motion to dismiss, we consider only allegations

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contained in the pleadings, exhibits attached to the complaint, and matters properly subject to

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judicial notice.” (internal quotation marks omitted)). Moreover, Todd Sharp was represented by

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bankruptcy counsel throughout his proceeding, which lasted from July to December, 2013. See

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ECF No. 11-4. In any event, inadequate legal representation, by itself, is insufficient to establish

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inadvertence or mistake. See Montgomery, 2012 WL 1965601, at *7 (pro se plaintiff could not

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avoid judicial estoppel by claiming that pro se status rendered him ignorant of the Bankruptcy

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Code’s disclosure requirements). The Court therefore finds that the Sharps have failed to allege

United States District Court
For the Northern District of California

10

facts to support a claim that the failure to disclose claims against Nationstar and Aurora in the

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Sharps’ bankruptcy petitions was the result of inadvertence or mistake.

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IV.

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CONCLUSION
For the foregoing reasons, the Court GRANTS Defendants’ Motion to Dismiss. Although

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the Court is doubtful that the Sharps will be able to plead facts sufficient to avoid the application of

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judicial estoppel in an amended pleading, the possibility that the Sharps may be able to plead facts

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to establish that the failure to disclose claims against Defendants in the Sharps’ bankruptcy

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petitions resulted from inadvertence or mistake leads the Court to conclude that amendment would

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not necessarily be futile. Accordingly, the Court will grant leave to amend.

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Should the Sharps elect to file an amended complaint, they shall do so within 21 days of

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this Order. Failure to meet the 21-day deadline or failure to cure the deficiencies identified in this

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Order will result in a dismissal with prejudice. The Sharps may not add new claims or parties

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without leave of the Court or stipulation of the parties pursuant to Federal Rule of Civil Procedure

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15.

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IT IS SO ORDERED.

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Dated: September 3, 2014

_________________________________
LUCY H. KOH
United States District Judge

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Case No.: 14-CV-00831-LHK
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS