Virostek et al v. IndyMac Mortgage Services et al

Filing 39

ORDER Affirming and Adopting Magistrate Judge's Recommendation. Order adopting Report and Recommendations re 30 Report and Recommendations Order granting in part and denying in part 11 Motion to Dismiss Plaintiffs' First Amended Complaint Pursuant to Fed. R. Civ. P. 12(b)(6). ORDERED that Plaintiffs are granted leave to file by Thursday, February 2, 2012, a Second Amended Complaint by Chief Judge Wiley Y. Daniel on 01/03/12.(jjh, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Wiley Y. Daniel
Civil Action No. 11-cv-00030-WYD-MEH
JOHN B. VIROSTEK and
ROBIN WOOD-VIROSTEK,
Plaintiffs,
v.
INDY-MAC MORTGAGE SERVICES;
ONEWEST BANK;
DEUTSCHE BANK NATIONAL TRUST; and
MORTGAGE ELECTRONIC REGISTRATION SYSTEM (MERS),

ORDER AFFIRMING AND ADOPTING
MAGISTRATE JUDGE'S RECOMMENDATION

THIS MATTER is before the Court in connection with Defendants IndyMac Mortgage
Services, OneWest Bank, FSB, Deutsche Bank National Trust and Mortgage Electronic
Registration Systems’ Motion to Dismiss Plaintiffs’ First Amended Complaint Pursuant to
Fed. R. Civ. P. 12(b)(6) filed March 21, 2011. This motion was referred to Magistrate
Judge Hegarty for a recommendation by Order of Reference of January 12, 2011 and
Memorandum of March 28, 2011. A Recommendation of United States Magistrate Judge
was issued on September 6, 2011, which is incorporated herein by reference. See 28
U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b).
Magistrate Judge Hegarty recommends therein that Defendants’ Motion to Dismiss
be granted in part and denied in part. Specifically, he finds that the Court lacks subject
matter jurisdiction over the Colorado Consumer Protection Act [“CCPA”] claim and any
contract claims based upon the identity of the noteholder and these claims should be

dismissed. (Recommendation at 8-12, 23.) He finds that Plaintiff’s claim for rescission of
a contract under the Truth in Lending Act [“TILA”]is barred by the statute of repose and is
also subject to dismissal. (Id. 13-14, 23.) Additionally, he finds that Plaintiffs alleged
sufficient factual allegations to state a claim of fraud only as to Defendant IndyMac
Mortgage Services [“IndyMac”] but not the other Defendants. (Id. 16-17, 23.) Thus, he
recommends that the fraud claim be dismissed as to all Defendants except IndyMac. He
also finds that Plaintiffs failed to provide sufficient factual allegations as to the claims for
damages under the Truth in Lending Act [“TILA”], breach of contract, breach of good faith
and fair dealing, breach of implied contract, and breach of fiduciary duty against all the
Defendants, and that these claims be dismissed. (Id. 15-16, 18-21, 23.)
In light of the recommendation to dismiss all claims over which this Court has
original jurisdiction, Magistrate Judge Hegarty stated “it would be proper to further
recommend that the District Court decline to exercise supplemental jurisdiction over the
Plaintiffs’ state law claims.” (Recommendation at 15.) Alternatively, he recommended that
Plaintiffs be allowed to file a Second Amended Complaint, consistent with Fed. R. Civ. P.
8 and 9(b), as to the claims for fraud (except as to Defendant IndyMac), damages for
violation of the TILA, breach of contract, breach of implied contract, breach of good faith
and fair dealing, and breach of fiduciary duty against the Defendants. (Id. at 21-22.)
Magistrate Judge Hegarty advised the parties that specific written objections were
due within fourteen (14) days after service of the Recommendation. (Recommendation at
1, n. 1.) Despite this advisement, no objections were filed by any party to the Magistrate
Judge's Recommendation. No objections having been filed, I am vested with discretion to
review the Recommendation “under any standard [I] deem[] appropriate.” Summers v.
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Utah, 927 F.2d 1165, 1167 (10th Cir. 1991); see also Thomas v. Arn, 474 U.S. 140, 150
(1985) (stating that "[i]t does not appear that Congress intended to require district court
review of a magistrate's factual or legal conclusions, under a de novo or any other
standard, when neither party objects to those findings"). Nonetheless, though not required
to do so, I review the Recommendation to "satisfy [my]self that there is no clear error on
the face of the record."1 See Fed. R. Civ. P. 72(b) Advisory Committee Notes.
Having reviewed the Recommendation, I am satisfied that there is no clear error on
the face of the record. I agree with Magistrate Judge Hegarty’s sound analysis and accept
it in its entirety the recommendation to grant in part and deny in part Defendants’ Motion
to Dismiss. Thus, I deny Defendants’ Motion to Dismiss as to Plaintiff’s fraud claim against
Defendant IndyMac, and grant the Motion as to all other claims and all other Defendants.
The caption will hereafter be amended to reflect this decision.
However, I still must resolve the issue of whether to decline to exercise
supplemental jurisdiction over the remaining state law claim of fraud or to allow Plaintiff to
file a Second Amended Complaint over the claims for which they failed to allege sufficient
factual allegations under Rule 12(b)(6). If the only claims to be amended were state law
claims, I would decline to accept supplemental jurisdiction. However, Magistrate Judge
Hegarty found pleading deficiencies with respect to a claim over which this Court has
original jurisdiction—a claim for damages under the Truth in Lending Act. Plaintiffs may
be able to state such a claim if they plead sufficient factual allegations.
Thus, I find that it is proper to keep the case in this Court (at least for now) and to

1

Note, this standard of review is something less than a "clearly erroneous or contrary to law" standard
of review, Fed. R. Civ. P. 72(a), which in turn is less than a de novo review, Fed. R. Civ. P. 72(b).

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allow Plaintiffs the opportunity to amend the complaint to attempt to cure the pleading
deficiencies. This is consistent with the general practice in this Circuit of not dismissing a
case under Rule 12(b)(6) until the plaintiff has been provided notice and an opportunity to
amend the complaint to cure the defective allegations. Hall v. Bellmon, 935 F.2d 1106,
1110 (10th Cir. 1991). Accordingly, Plaintiffs may, within thirty days, file a Second
Amended Complaint as to the following claims which were dismissed under Rule 12(b)(6):
fraud (except as to Defendant IndyMac), damages for violation of the TILA, breach of
contract, breach of implied contract, breach of good faith and fair dealing and breach of
fiduciary duty). I agree with Magistrate Judge Hegarty that amendment would be futile as
to the CCPA claim and the claim for rescission under the TILA; thus, these claims may not
be asserted in the Second Amended Complaint.
Based on the foregoing, it is
ORDERED that the Recommendation of United States Magistrate Judge dated
September 6, 2011, is AFFIRMED and ADOPTED. In accordance therewith, it is
ORDERED that Defendants IndyMac Mortgage Services, OneWest Bank, FSB,
Deutsche Bank National Trust and Mortgage Electronic Registration Systems’ Motion to
Dismiss Plaintiffs’ First Amended Complaint Pursuant to Fed. R. Civ. P. 12(b)(6) filed March
21, 2011 (ECF No. 11) is GRANTED IN PART AND DENIED IN PART. Specifically, it is
ORDERED that Defendants’ Motion to Dismiss is GRANTED as to the Colorado
Consumer Protection Act claim, any contract claims based upon the identity of the
noteholder, and the claim for rescission under TILA, and these claims are DISMISSED
WITH PREJUDICE. Defendants’ Motion to Dismiss is also GRANTED as to the claims of

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fraud (except as to IndyMac Mortgage Services), damages under the Truth in Lending Act,
for breach of contract, breach of good faith and fair dealing, breach of implied contract, and
breach of fiduciary duty, and these claims are DISMISSED WITHOUT PREJUDICE.
Defendants’ Motion to Dismiss is DENIED as to the claim of fraud against Defendant
IndyMac Mortgage Services. Finally, it is
ORDERED that Plaintiffs are granted leave to file by Thursday, February 2, 2012,
a Second Amended Complaint asserting the claims of fraud (except as to IndyMac),
damages under the Truth in Lending Act, for breach of contract, breach of good faith and
fair dealing, breach of implied contract, and breach of fiduciary duty, if they so choose, in
accordance with this Recommendation and all applicable local and federal court rules.
Dated: January 3, 2012
BY THE COURT:

s/ Wiley Y. Daniel
Wiley Y. Daniel
Chief United States District Judge

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