United States of America v. Real Property

Filing 90

ORDER DISMISSING GREENCO'S CLAIM re 15 . Signed by JUDGE J. MICHAEL SEABRIGHT on 1/23/2014. (afc)CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). All participants are registered to receive electronic notifications.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
UNITED STATES OF AMERICA,

)
)
Plaintiff,
)
)
vs.
)
)
REAL PROPERTY LOCATED AT
)
2855 PETER STREET IN
)
HONOLULU, HAWAII, TITLED IN )
THE NAME OF DEBRA
)
ANAGARAN, AND DESIGNATED
)
AS TAX MAP KEY NUMBER (1) 3-4- )
032-059, TOGETHER WITH ALL
)
APPURTENANCES AND
)
IMPROVEMENTS,
)
)
Defendant.
)
________________________________ )
)
DEBRA ANAGARAN; GREENCO
)
RECOVERY LLC; and FV-1 IN
)
TRUST FOR MORGAN STANLEY
)
MORTGAGE CAPITAL HOLDINGS )
LLC,
)
)
Claimants.
)
________________________________ )

CIVIL NO. 08-00523 JMS-RLP

ORDER DISMISSING GREENCO’S
CLAIM

ORDER DISMISSING GREENCO’S CLAIM

I. INTRODUCTION
On November 20, 2008, the United States of America (the
“Government”) filed this forfeiture action against real property located at 2855
Peter Street, Honolulu, Hawaii (the “subject property”). Greenco Recovery LLC
(“Greenco”) filed a claim and answer based on its alleged interest in a loan and
second mortgage on the subject property.
Before the court is the Government’s Motion to Dismiss Claim and
Answer Filed by Greenco (“Motion to Dismiss”), pursuant to Federal Rule of Civil
Procedure 41(b), based on Greenco’s alleged abandonment of its claim, failure to
prosecute, and violation of Local Rules 83.1(h), 83.6(b), and 83.11. Doc. No. 79.
In addition, this court Ordered Greenco to Show Cause why its claim should not be
dismissed for failure to prosecute and failure to follow this court’s rules. Doc. No.
81. For the following reasons, the court DISMISSES Greenco’s claim.
II. BACKGROUND
A.

Factual Background
On November 20, 2008, the Government filed a Complaint for

Forfeiture under seal alleging that the subject property was obtained by Debra
Anagaran (“Anagaran”) using proceeds traceable to mail fraud and/or wire fraud.
Doc. No. 1, Compl. ¶ 8. The Complaint further alleged that Anagaran fraudulently
2

obtained two mortgages on the subject property from New Century Mortgage
Corporation (“New Century”). Id. ¶¶ 11-19. In addition to Anagaran and New
Century, the Complaint identified Mortgage Electronic Registration Systems, Inc.
(“MERS”) as a potential claimant by virtue of the two mortgages issued by New
Century. Id. ¶ 3. On April 1, 2009, the Complaint was unsealed and the
Government provided written notice of this forfeiture action to all known potential
claimants, including Anagaran, New Century, and MERS. On May 28, 2009,
Anagaran filed a claim and answer. Doc. No. 13. Greenco, as the alleged
successor-in-interest to the second mortgage between New Century and Anagaran,
filed an answer on May 29, 2009, and a claim on June 15, 2009. Doc. Nos. 14-15.
On July 10, 2009, the Clerk of Court entered default against all
persons and entities claiming or having any interest in the subject property except
for Anagaran and Greenco. Doc. No. 22. And on October 30, 2009, partial
default judgment was entered against New Century, MERS, and their successorsin-interest with respect to the first mortgage. Doc. No. 39. However, on
November 5, 2010, FV-1 in Trust for Morgan Stanley Mortgage Capital Holdings
LLC (“FV-1”), as the successor-in-interest to the first mortgage between New
Century and Anagaran, filed a claim and answer pursuant to an October 29, 2010
Order (Doc. No. 57) setting aside the entry of default and partial default judgment
3

against New Century and its nominees and successors-in-interest with regard to the
first mortgage. Doc. Nos. 58-59.
Meanwhile, on July 30, 2009, the court stayed this action pending
resolution of the related criminal action against Anagaran. Doc. No. 27. On
September 18, 2009, the stay was partially lifted to allow the Government to
pursue, among other actions, a settlement with Greenco. Doc. No. 29-2, Order at
2.1 That same day, counsel for Greenco filed a Motion to Withdraw as Counsel
(“Motion to Withdraw”). Doc. No. 30. In support of the Motion to Withdraw,
counsel stated that:
3. On or about July 21, 2009, we were instructed to
withdraw as counsel for GREENCO RECOVERY LLC.
4. GREENCO RECOVERY LLC transferred its claim
and/or interest in the property which is the subject of this
forfeiture proceeding to DD Acquisition Sub LLC, a
Delaware limited liability company. . . .
5. Quantum Servicing Corporation [“Quantum”] is its
agent for the servicing of the mortgage loan secured by
the subject property. All notices, pleadings and other
documents and correspondences pertaining to this case,
Civil No. CV08-00523, should be provided to the
following:
DD Acquisition Sub LLC
c/o Quantum Servicing Corporation
1

Later, on April 5, 2012, the court again stayed the matter for administrative reasons.
Doc. No. 69.
4

6302 E. Martin Luther King Blvd., Suite 300
Tampa, FL 33619
Attn: Douglas M. Greer
Tel. [phone]
Id., Doi Decl. ¶¶ 3-5. The Motion to Withdraw provided the following notice:
DD Acquisition Sub LLC, through its servicing agent,
Quantum Servicing Corporation, is hereby notified that
they are responsible for complying with all court orders
and time limitations established by any applicable rules.
DD Acquisition Sub LLC, through its servicing agent,
Quantum Servicing Corporation, is further notified that
they cannot appear without counsel admitted to practice
before this court, and absent prompt appearance of
substitute counsel, pleadings, motions, and other papers
may be stricken and default judgment or other sanctions
may be imposed against them.
Doc. No. 30, Mot. to Withdraw at 1-2. On September 30, 2009, the Motion to
Withdraw was granted. Doc. No. 37.
In August 2009, counsel for the Government, and Douglas Greer at
Quantum, “discussed the need to substitute DD Acquisition in place of Greenco as
a party in the action.” Doc. No. 79-2, Moriyama Decl. ¶ 11; see Doc. No. 30, Doi
Decl. ¶ 5 (identifying Douglas Greer as the contact at Quantum). No motion or
pleading was filed to substitute DD Acquisition, or any other successor or assign,
in place of Greenco in this action.2 The Government’s last contact with Douglas
2

According to Greenco, the current owner of the beneficial interest in the second
mortgage is Greenco Sub II LLC, a subsidiary of Greenco. See Doc. No. 85, Greenco Opp’n at
(continued...)
5

Greer on behalf of Greenco and/or DD Acquisition was February 2010. Id. ¶¶ 11,
14. In fact, no substitute counsel appeared on behalf of Greenco or DD
Acquisition until December 23, 2013, after the Government filed its Motion to
Dismiss. See Doc. No. 84, Notice of Appearance (appearing for Greenco).
On January 25, 2013, Anagaran pled guilty to mail fraud and agreed
to forfeit the subject property. Shortly thereafter, the Government and FV-1
entered into negotiations to resolve FV-1’s claim.3 On November 1, 2013, the
Government and FV-1 reached a settlement “conditioned upon the United States
prevailing against any competing claims, including claims by the property owner
and other lienholders.” See Doc. No. 78, Settlement Agreement ¶ 4. The
Government attempted to settle Greenco’s claim, but despite numerous attempts,
was unable to contact anyone on behalf of Greenco, DD Acquisitions, or their
nominee, successor, or assigns prior to filing the instant Motion to Dismiss.4
2

(...continued)

2-3 n.1.
3

A stipulation for withdrawal of Anagaran’s claim and consent to forfeiture was filed
on May 28, 2013. Doc. No. 75.
4

The Government details the following attempts to contact an appropriate Greenco
representative:
1.
a phone call to Douglas Greer in Spring 2013 during which
counsel spoke to Jose Rivas who informed her that Mr. Greer was
no longer employed by Quantum and that the loan in question was
released to Strategic Recovery Group;
2.
a March 8, 2013 letter to Strategic Recovery Group, via certified
(continued...)
6

The entities servicing the second mortgage loan changed several times
and the individual contacts “within those entities changed as people left jobs.”
Doc. No. 85, Greenco Opp’n at 2. Greenco learned of the pending Motion to
Dismiss after it was served on Quantum, at the last known address on file,5 which
then contacted Greenco through Clayton Holdings, LLC, an umbrella servicing
entity for Greenco, DD Acquisition and Quantum. Id. Shortly thereafter, Greenco
obtained new counsel to renew pursuit of its claim. Id.
///
///
4

(...continued)

mail, at the address provided by Mr. Rivas that was returned
unopened with a stamp “Undeliverable as Addressed. Unable to
Forward;”
3.
a phone call to Strategic Recovery Group at the number
provided by Mr. Rivas during which counsel spoke to
several people and was eventually advised to send notice of
this action to Phillip Livingston at Vantium
Capital/Strategic Recovery;
4.
a May 6, 2013 notice letter to Mr. Livingston, via certified
mail, that according to a return receipt was received on
May 13, 2013, and to which no response was received by
the Government;
5.
a May 14, 2013 final notice letter, via certified mail,
addressed to Greenco and DD Acquisition Sub LLC in care
of Quantum, at the last known address for Douglas Greer
that was provided in this action, which according to a
return receipt was received on May 20, 2013, but to which
no response was received by the Government.
See Doc. No. 79-2, Moriyama Decl. ¶¶ 18-22.
5

This was the same address to which the Government sent its May 14, 2013 final notice

letter.
7

B.

Procedural Background
On December 2, 2013, the Government filed the instant Motion to

Dismiss, Doc. No. 79, and an Ex Parte Motion requesting the court to decide the
Motion to Dismiss without a hearing or alternatively, to shorten time for such
hearing (“Ex Parte Motion”). Doc. No. 80. On December 3, 2013, the court
granted the Ex Parte Motion to determine the Motion to Dismiss without a hearing
and independently ordered Greenco to show cause by December 23, 2013 why its
claim should not be dismissed for failure to prosecute and failure to follow this
court’s rules. Doc. No. 81. On December 19, 2013, FV-1 filed a Motion for
Joinder to the Motion to Dismiss. Doc. No. 84. New counsel for Greenco filed a
Notice of Appearance, Doc. No. 84, and a Response in Opposition to the Motion to
Dismiss and to the Order to Show Cause on December 23, 2013. Doc. No. 85.
The Government filed a Reply on January 3, 2013, Doc. No. 86, and FV-1 filed a
Reply on January 6, 2013. Doc. No. 87. Pursuant to the court’s December 3, 2013
ruling and Local Rule 7.2(d), the court finds this matter suitable for disposition
without a hearing.
///
///
///

8

III. DISCUSSION
A.

Motion to Dismiss/Inherent Power of the Court
1.

Rule 41(b)
The Government seeks an order, pursuant to Rule 41(b), dismissing

Greenco’s claim based on allegations that Greenco abandoned and failed to
prosecute its claim and violated Local Rules 83.1(h),6 83.6,7 and 83.118 by failing
to retain substitute counsel and failing to file a notice of change of address within
fourteen days after the address provided by Greenco’s former counsel was no
longer valid.
Rule 41(b) provides, in pertinent part:
If the plaintiff fails to prosecute or to comply with these
rules or a court order, a defendant may move to dismiss
the action or any claim against it. Unless the dismissal
order states otherwise, a dismissal under this subdivision
(b) and any dismissal not under this rule . . . operates as
an adjudication on the merits.

6

Local Rule 83.1(h) requires counsel and pro se parties to file and serve any change of
address (of counsel or of a pro se party) within fourteen (14) days of the change.
7

Local Rule 83.6(b) requires withdrawing counsel to provide notice to a client that is a
corporation, partnership or other legal entity that “such entity cannot appear without counsel
admitted to practice before this court[.]”
8

Local Rule 83.11 prohibits “[b]usiness entities, including but not limited to
corporations, partnerships, limited liability partnerships, limited liability corporations, and
community associations” from appearing pro se and specifies that such entities “must be
represented by an attorney.”
9

Fed. R. Civ. P. 41(b). Rule 41(b) grants district courts discretion to dismiss an
action for failure to prosecute, to comply with federal or local rules of civil
procedure, or to comply with court orders. See, e.g., Chambers v. NASCO, Inc.,
501 U.S. 32, 44 (1991) (recognizing the court’s authority “sua sponte to dismiss a
suit for failure to prosecute”); Hells Canyon Pres. Council v. U.S. Forest Serv.,
403 F.3d 683, 689 (9th Cir. 2005) (determining that pursuant to Rule 41(b), courts
may dismiss an action sua sponte for failure to prosecute or comply with rules of
civil procedure or the court’s orders).
The Local Rules are in accord. See L.R. 11.1 (“Failure of counsel or
of a party to comply with any provision of these rules is a ground for imposition of
sanctions, including . . . dismissal, . . . consistent with applicable law.”); L.R.
83.1(h) (authorizing sanctions, including dismissal, for failure to “file and serve on
all other parties who have appeared in the action any change of address”);
L.R. 83.6 (recognizing that a corporation, partnership, or other legal entity may not
appear without counsel, requiring withdrawing counsel to provide notice of such
fact and of a client’s obligation to comply with all court rules and deadlines, and
authorizing imposition of default judgment or other sanctions absent prompt
appearance of substitute counsel).

10

A Rule 41(b) dismissal “must be supported by a showing of
unreasonable delay.” Omstead v. Dell, Inc., 594 F.3d 1081, 1084 (9th Cir. 2010)
(citing Henderson v. Duncan, 779 F.2d 1421, 1423 (9th Cir. 1986)). And, the
court must weigh the following five factors when determining whether to impose a
Rule 41(b) sanction of dismissal: (1) the public’s interest in expeditious resolution
of litigation; (2) the court’s need to manage its docket; (3) the risk of prejudice to
the defendant; (4) the availability of less drastic alternatives; and
(5) the public policy favoring the disposition of cases on their merits. Id. (citing
Henderson, 779 F.2d at 1424).
Courts appear divided, however, as to whether Rule 41(b) authorizes
dismissal of in rem civil forfeiture claims. Compare United States v.
Approximately $189,040.00 in U.S. Currency, 2013 WL 4714177, at *2 (E.D. Cal.
Aug. 9, 2013) (determining that Rule 41(b) and similar local rules for the Eastern
District of California “logically apply with equal force to the prosecution of a
claim by a claimant in a civil forfeiture action”), with United States v. U.S.
Currency In the Amount of Six Hundred Thousand Three Hundred and Forty One
Dollars and No Cents ($600,341.00), 240 F.R.D. 59, 63 (E.D.N.Y. 2007) (finding
that Rule 41(b) does not apply to in rem claimants), and Societe Int’l Pour
Participations v. Rogers (Societe Int’l), 357 U.S. 197, 207 (1958) (stating that

11

Rule 41(b) “is on its face appropriate only as a defendant’s remedy”).
2.

Inherent Power of the Court
On December 3, 2013, this court ordered Greenco to show cause “why

its claim should not be dismissed for failure to prosecute and failure to follow this
court’s rules.” Doc. No. 81.
“District courts have inherent power to control their dockets,” and in
exercising that power, a court may impose sanctions including dismissal of an
action. Thompson v. Hous. Auth. of L.A., 782 F.2d 829, 831 (9th Cir. 1986); see
also Link v. Wabash R.R. Co., 370 U.S. 626, 629-31, 633 (1962) (recognizing
courts’ power to control their dockets, with or without motion, and noting that in
appropriate circumstances, the court may dismiss a complaint for failure to
prosecute without notice or hearing). This inherent power is recognized in Rule
83: “A judge may regulate practice in any manner consistent with federal law,
rules adopted under 28 U.S.C. §§ 2072 and 2075, and the district’s local rules.” It
is “broader and more flexible than the authority specified in [Rule] 41(b).” Van
Bronkhorst v. Safeco Corp., 529 F.2d 943, 951 (9th Cir. 1976) (citing Link, 370
U.S. at 630-32). Thus, a court may dismiss an action with prejudice based on a
party’s failure to prosecute or failure to comply with federal or local rules of civil
procedure. See, e.g., Ghazali v. Moran, 46 F.3d 52, 53-54 (9th Cir. 1995)

12

(affirming district court’s discretionary dismissal for failure to comply with local
rules); Buss v. W. Airlines, Inc., 738 F.2d 1053, 1054 (9th Cir. 1984) (affirming
dismissal for failure to comply with local rules); U.S. Currency in the Amount of
Six Hundred Thousand Three Hundred and Forty One Dollars and No Cents
($600,341.00), 240 F.R.D. at 64 (recognizing court’s inherent authority to dismiss
claim in civil forfeiture action for failure to prosecute).
Before exercising its inherent power to dismiss an action for failure to
prosecute or comply with court rules, the court must consider the same five
Henderson factors applicable to Rule 41(b) dismissals. Thompson, 782 F.2d at
831. “The first two of these factors favor the imposition of sanctions in most
cases, while the [fifth] cuts against a default or dismissal sanction. Thus the key
factors are prejudice and availability of lesser sanctions.” Wanderer v. Johnson,
910 F.2d 652, 656 (9th Cir. 1990) (applying Henderson factors to Rule 37 sanction
of default for failure to comply with discovery rules).
3.

Analysis
Whether this court considers dismissal of Greenco’s claim under Rule

41(b) or the court’s inherent power, the analysis is the same. See Omstead, 594
F.3d at 1084 (applying Henderson factors to Rule 41(b) dismissal); Thompson,
782 F.2d at 831 (applying the five Henderson factors to dismissal pursuant to the

13

court’s inherent power). Thus, the court simply turns to a discussion of the
Henderson factors.
a.

The public’s interest in expeditious resolution of litigation

The first Henderson factor -- the public’s interest in expeditious
resolution of litigation -- always favors dismissal. Pagtalunan v. Galaza, 291 F.3d
639, 642 (9th Cir. 2002). Greenco’s failure to prosecute its claim certainly
undermines the expeditious resolution of litigation. The court permitted Greenco’s
counsel to withdraw in September, 2009. But Greenco remained AWOL, despite
good faith efforts to contact it by the Government, until new counsel filed an
appearance on December 23, 2013. This factor weighs heavily in favor of
dismissal.
b.

The court’s need to manage its docket

The court’s need to manage its docket also favors dismissal. See id.
(“It is incumbent upon the court to manage its docket without being subject to
routine noncompliance of litigants[.]”). The only thing standing in the way of
closing this action is Greenco’s outstanding claim. The other claims in this action
were resolved months ago. Anagaran withdrew her claim on May 28, 2013, and
FV-1 settled its claim on November 1, 2013, conditioned upon entry of a final
judgment and decree of forfeiture. Allowing Greenco’s claim to proceed would

14

only add to the court’s already busy docket and delay final resolution of FV-1’s
claim and settlement. This factor weighs in favor of dismissal.
c.

The risk of prejudice

The third Henderson factor -- risk of prejudice to the defendants, or in
this case, the Government and FV-1 (the other claimant) -- strongly favors
dismissal. When determining whether opposing parties have been prejudiced, the
court examines whether a party’s conduct threatens to interfere with the rightful
decision of the case or impairs the parties’ ability to go to trial. Malone v. U.S.
Postal Serv., 833 F.2d 128, 131 (9th Cir. 1987). Here, Greenco’s conduct has
interfered with the timely resolution of this action and threatens to nullify a
settlement obtained months ago between the remaining parties.
Greenco concedes that despite receiving adequate notice of its
obligations under the Local Rules, neither it, nor any subsequent nominee, assign,
or servicer, hired substitute counsel after directing prior counsel to withdraw in
2009. Doc. No. 85, Opposition at 2, 5. Greenco also concedes that neither it nor
any subsequent servicer updated its contact information after Quantum no longer
serviced the loan. Id. at 2, 6. Furthermore, because of failures completely of its
own making, Greenco concedes that its claim “seems to have fallen through the
cracks and been lost in the shuffle.” Doc. No. 85, Greenco Opp’n at 2.

15

Despite the stay, the Government and FV-1 began discussions
concerning FV-1’s claim in June 2012. Settlement negotiations were complicated
due to the need to obtain an appraisal of the subject property, a squatter who
refused access, and the unresolved Greenco claim. Doc. No. 79-1, Gov’t Mot. at
10; Doc. No. 87, FV-1 Reply at 5. The Government and FV-1 incurred the costs of
appraisal and legal fees while Greenco’s claim lay dormant. And by its terms, the
settlement between FV-1 and the Government cannot be finalized while Greenco’s
claim remains pending. Should Greenco’s claim be allowed to proceed -- despite
Greenco’s lack of diligence -- FV-1 and the Government would be required to
reopen settlement negotiations, incur additional legal expenses, and experience
further delay, effectively nullifying their prior efforts. Both the Government and
FV-1 have expended significant time and resources on this action. Greenco’s lack
of diligence has unreasonably delayed resolution of this action and continued delay
will further prejudice the remaining parties. This factor weighs heavily in favor of
dismissal.
d.

The availability of less drastic alternatives

Less drastic alternatives to dismissal may include a warning or formal
reprimand, along with another opportunity to comply with the Local Rules, a fine,
and/or imposition of costs or attorney fees. See In re Phenylpropanolamine (PPA)

16

Prod. Liab. Litig., 460 F.3d 1217, 1228 (9th Cir. 2006) (citation omitted).
However, where noncompliance -- particularly a failure to provide current contact
information -- is solely the fault of the litigant, and thwarts the timely prosecution
of an action, no lesser sanctions are appropriate or available. See Carey v. King,
856 F.2d 1439, 1441 (9th Cir. 1988) (determining no lesser sanction was available
and affirming dismissal where failure to update contact information in violation of
court rules was the litigant’s “own fault”).
Under the circumstances of this case, there is no appropriate less
drastic alternative available. Greenco received actual notice and a warning that it
needed to comply with the Local Rules. In 2009, Greenco’s prior counsel provided
clear notice of Greenco’s obligation to comply with the court’s Local Rules
requiring the substitution of counsel and updating the proper party and current
contact information. Greenco concedes that the Government’s counsel discussed
the need to comply with those rules months after Greenco’s prior counsel
withdrew. Greenco cannot explain its failure, or that of subsequent servicers,
assigns, or nominees, to comply with the Local Rules or to monitor this action and
prosecute its claim once the underlying criminal action had been resolved. Rather,
Greenco detailed multiple changes in ownership and servicing of the second
mortgage loan, did not refute prior counsel’s representation that Greenco and/or

17

Quantum directed counsel to withdraw from the action, and conceded that “part of
the problem was the lack of counsel to serve as a contact and manage the claim as
servicing was transferred.” Doc. No. 85, Greenco Opp’n at 10. Greenco’s
conduct, coupled with its failure to obtain and promptly substitute counsel, may
have resulted in the unforeseen consequence of failure to prosecute its claim, but
given the clear notice and warning of non-compliance with the Local Rules,
Greenco’s conduct was hardly inadvertent. The non-compliance and delay rest
squarely with Greenco.
Having already received notice and a warning, as well as an
opportunity to provide good cause for its failure to prosecute and comply with
Local Rules, additional less drastic alternatives are not available. Thus, this factor
weighs in favor of dismissal.
e.

The public policy favoring disposition of cases on their merits

The last Henderson factor -- the public policy favoring disposition of
cases on their merits -- would not be served by dismissing Greenco’s claim.
However, this factor is far outweighed by the preceding four factors. Cf. Malone,
833 F.2d at 133 n.2 (determining that four factors heavily supporting dismissal
outweigh the fifth public policy factor against dismissal). Greenco’s failure to

18

comply with the Local Rules and failure to prosecute its claim have unreasonably
delayed resolution of this action to the detriment of the court and remaining
parties.
IV. CONCLUSION
Based on the foregoing, Greenco’s claim is DISMISSED.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, January 23, 2014.

/s/ J. Michael Seabright
J. Michael Seabright
United States District Judge

United States v. Real Property Located at 2855 Peter Street, Civ. No. 08-00523 JMS-RLP,
Order Dismissing Greenco’s Claim

19