Rey v. Countrywide Home Loans, Inc. et al

Filing 42

ORDER (1) Issuing Rule 11 Sanctions Against Plaintiff's Counsel, Robin Horner; And (2) Granting Leave To File A Second Amended Complaint re 41 . Signed by JUDGE J. MICHAEL SEABRIGHT on 9/13/11. (gls, )CERTIFICATE OF SE RVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
LISA HINANO REY,

)
)
Plaintiff,
)
)
vs.
)
)
COUNTRYWIDE HOME LOANS,
)
INC.; BANK OF AMERICA d/b/a BAC )
HOME LOANS SERVICING, LP;
)
JOHN DOES 1-100; JANE ROES 1)
100; DOE CORPORATIONS,
)
PARTNERSHIPS AND OTHER
)
ENTITIES 1-10
)
)
Defendants.
)
________________________________ )

CIVIL NO. 11-00142 JMS/KSC
ORDER (1) ISSUING RULE 11
SANCTIONS AGAINST
PLAINTIFF’S COUNSEL, ROBIN
HORNER; AND (2) GRANTING
LEAVE TO FILE A SECOND
AMENDED COMPLAINT

ORDER (1) ISSUING RULE 11 SANCTIONS AGAINST PLAINTIFF’S
COUNSEL, ROBIN HORNER; AND (2) GRANTING LEAVE TO FILE A
SECOND AMENDED COMPLAINT
I. INTRODUCTION
This court has repeatedly warned Plaintiff Lisa Hinano Rey’s
(“Plaintiff”) attorney, Robin Horner (“Horner”), that he must allege claims that are
warranted by existing law or by a nonfrivolous argument for extending, modifying,
or reversing existing law or for establishing new law. Despite these warnings,
Horner submitted an Amended Complaint that includes claims that are legally
baseless and which this court had already dismissed without leave to amend.

In light of Horner’s apparent disregard for their Federal Rule of Civil
Procedure 11 obligations, on August 26, 2011, the court ordered Plaintiff and
Horner to show cause why Rule 11 sanctions should not be imposed (the “August
26, 2011 OSC”). On September 2, 2011, Plaintiff and Horner filed a Response to
the Order to Show Cause, and a hearing was held on September 12, 2011. As
explained below, the court finds that Rule 11 sanctions are warranted and
SANCTIONS Horner as follows.
II. BACKGROUND
As the court recited in its August 26, 2011 OSC, on March 7, 2011,
Horner commenced this action on behalf of Plaintiff by filing a boilerplate
Complaint (that is, a nearly identical Complaint that Horner has filed in several
other actions) alleging claims against Defendants Countrywide Home Loans, Inc.
and Bank of America d/b/a/ BAC Home Loans Servicing, LP (collectively,
“Defendants”), for violations of various federal and state laws stemming from a
mortgage transaction concerning real property located at 7429 Ainanani Place,
Honolulu, Hawaii.
This court had already dismissed several of the boilerplate Complaints
Horner had filed in other actions. Accordingly, on June 1, 2011, the court
dismissed the Complaint for the same reasons the court had already outlined to
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Horner on numerous occasions (the “June 1, 2011 Order”). See Doc. No. 21.
Specifically, the June 1, 2011 Order dismissed Plaintiff’s claims for Truth in
Lending Act (“TILA”) rescission and injunctive relief without leave to amend, and
dismissed Plaintiff’s other claims with leave to amend. In dismissing the
Complaint, the June 1, 2011 Order further warned Horner of his Rule 11
obligations:
Plaintiff’s counsel’s insistence on bringing the same
deficient claims in each action, despite the numerous
orders by the court explaining their deficiencies, results
in a waste of parties’ and this court’s resources. The
court therefore strongly cautions Plaintiff’s counsel that
he must be mindful of his duty to bring claims that are
“warranted by existing law or by a nonfrivolous
argument for extending, modifying, or reversing existing
law or for establishing new law.” Fed. R. Civ. P.
11(b)(2).
Doc. No. 21, June 1, 2011 Order at 8.
Plaintiff failed to timely file an Amended Complaint, and this action
was dismissed on June 29, 2011. Doc. Nos. 23, 24. Plaintiff subsequently filed a
Motion to Reopen the action, arguing excusable neglect on the basis that
“administrative error” caused Horner to miss the deadline to file an Amended
Complaint.
On August 12, 2011, the court granted Plaintiff’s Motion to Reopen,
but warned Horner that the proposed Amended Complaint submitted in support of
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the Motion to Reopen “appears to suffer from many of the same deficiencies as the
Complaint and which this court outlined in dismissing the Complaint.” Doc. No.
32 at 5. The August 12, 2011 Order further explained:
Deficiencies of the proposed Amended Complaint
include, but are not necessarily limited to, failure to
follow the court’s June 1, 2011 Order. For example, that
Order dismissed Plaintiff’s TILA rescission claim
without leave to amend, yet the proposed Amended
Complaint includes a claim for TILA rescission. Further,
the proposed Amended Complaint lumps “Defendants”
together such that it is unclear what each Defendant
allegedly did that can form the basis of a claim. Plaintiff
must carefully review the court’s June 1, 2011 Order
dismissing the Complaint to determine what claims she
can amend and how to state a claim that is plausible on
its face. Realleging claims dismissed without leave to
amend is sanctionable.
Id. at 5 n.2 (emphasis added).
Despite these warnings, Plaintiff filed an Amended Complaint on
August 24, 2011 that did not substantively differ from the proposed Amended
Complaint.
III. FEDERAL RULE OF CIVIL PROCEDURE 11
Federal Rule of Civil Procedure 11(b) requires that parties present
arguments that are warranted by the law and non-frivolous:
By presenting to the court a pleading, written motion, or
other paper -- whether by signing, filing, submitting, or
later advocating it -- an attorney or unrepresented party
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certifies that to the best of the person’s knowledge,
information, and belief, formed after an inquiry
reasonable under the circumstances:
(1) it is not being presented for any improper
purpose, such as to harass, cause unnecessary
delay, or needlessly increase the cost of litigation;
[and]
(2) the claims, defenses, and other legal
contentions are warranted by existing law or by a
nonfrivolous argument for extending, modifying,
or reversing existing law or for establishing new
law . . . .
Rule 11 applies to all pleadings, written motions and other papers presented to the
court. Fed. R. Civ. P. 11(a).
Rule 11 “subject[s] litigants to potential sanctions for insisting upon a
position after it is no longer tenable . . . .” Fed. R. Civ. P. 11 advisory committee’s
note (1993). In determining whether a party has violated Rule 11, the court applies
an objective reasonableness standard. Yagman v. Republic Ins., 987 F.2d 622, 628
(9th Cir. 1993). A showing of subjective bad faith is not required. See Smith v.
Ricks, 31 F.3d 1478, 1488 (9th Cir. 1994) (noting that sanctions cannot be avoided
by the “empty head, pure heart” defense); Zaldivar v. City of L.A., 780 F.2d 823,
831 (9th Cir. 1986), overruled on other grounds by Cooter & Gell v. Hartmarx
Corp., 496 U.S. 384 (1990) (noting that the certification requirements of Rule 11
are violated “if the paper filed . . . is frivolous, legally unreasonable or without
factual foundation, even though . . . not filed in subjective bad faith”).
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The court may, on its own, “order an attorney, law firm, or party to
show cause why conduct specifically described in the order has not violated Rule
11(b).” Fed. R. Civ. P. 11(c)(3); see also Fed. R. Civ. P. 11(c)(5) (providing that a
court may not issue sanctions on its own “unless it issued the show-cause order
under Rule 11(c)(3) before voluntary dismissal or settlement of the claims made by
or against the party that is, or whose attorneys are, to be sanctioned”).
Violation of Rule 11(b) can, after notice and reasonable opportunity to
respond, result in sanctions:
If, after notice and a reasonable opportunity to respond,
the court determines that Rule 11(b) has been violated,
the court may impose an appropriate sanction on any
attorney, law firm, or party that violated the rule or is
responsible for the violation. . . .
Fed. R. Civ. P. 11(c); see also Local Rule 11.1 (allowing the court to sanction a
party for failure to comply with the Local Rules).
IV. DISCUSSION
A.

Rule 11 Sanctions Are Warranted
As applied to complaints, the Ninth Circuit has interpreted the Rule 11

standard as requiring a “‘a two-prong inquiry to determine (1) whether the
complaint is legally or factually baseless from an objective perspective, and (2) if
the attorney has conducted a reasonable and competent inquiry before signing and
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filing it.’” Holgate v. Baldwin, 425 F.3d 671, 676 (9th Cir. 2005) (quoting
Christian v. Mattel, Inc., 286 F.3d 1118, 1127 (9th Cir. 2002)). A complaint is
“frivolous” if it “is both baseless and made without a reasonable and competent
inquiry.” Id. (quotations omitted). The court addresses these prongs in turn.
1.

Whether the Amended Complaint Is Legally or Factually Baseless
from an Objective Perspective
The August 26, 2011 OSC outlined that several claims in the

Amended Complaint appeared legally baseless, and Horner’s Response fails to
persuade the court this conclusion is incorrect.
For example, the August 26, 2011 OSC explained that the June 1,
2011 Order dismissed Plaintiff’s claims for unconscionability, failure to act in
good faith, and negligent and/or intentional infliction of emotional distress for
failure to state a claim, but with leave to amend if possible. The Amended
Complaint included these same claims (Counts VI, IX, and XIII) once again,
without any apparent substantive changes from the Complaint. In other words,
except for changing some minor wording, Horner sets forth the same general
allegations in support of these claims and failed to substantially amend these
claims in any manner whatsoever to address the deficiencies of these claims
outlined in the June 1, 2011 Order.
In light of the June 1, 2011 Order’s dismissal of these claims,
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Horner’s decision to present these same claims in the Amended Complaint without
any substantive changes appears legally baseless, and Horner fails to explain how,
in light of the June 1, 2011 Order, any of these claims has a legal and/or factual
basis. For example, Horner argues that the unconscionability claim is based on the
fact that the originator of the loan committed various misdeeds, including
falsifying Plaintiff’s income, failing to follow generally accepted underwriting
standards, using a wrong DTI ratio, and failing to disclose illegal activities. Doc.
No. 37, Pl.’s Resp. ¶ 9. But this argument itself is frivolous -- the June 1, 2011
Order rejected that Plaintiff could base an unconscionability claim on such
conduct, and explained that this claim can be asserted only “to prevent the
enforcement of a contract whose terms are unconscionable.” Doc. No. 21, June 1,
2011 Order at 24. In other words, Horner made no efforts to state this claim based
on any unconscionable contract terms and clearly should have known this claim
was legally baseless in light of the June 1, 2011 Order.
As to their claim of failure to act in good faith, Horner argues that this
claim is warranted because Defendants failed to act in a fair manner where Plaintiff
was offered a loan modification and the servicer proceeded with foreclosure
anyway. Doc. No. 37, Pl.’s Resp. ¶ 10. This argument ignores that Horner
included these same facts in the Complaint and they were specifically found to be
8

insufficient to state a claim -- the June 1, 2011 Order explained that a party cannot
breach the covenant of good faith before a contract is formed. Again, Horner
provides no reason why, given the June 1, 2011 Order, this claim has any basis in
law or fact.
As to their emotional distress claim, Horner argue that this claim is
warranted in light of Plaintiff’s efforts at loan modification and Defendants’
foreclosure, Doc. No. 37, Pl.’s Resp. ¶ 11, but the June 1, 2011 Order already
dismissed this same claim on the basis that its allegations are “simply too
generalized and lacking clarity to satisfy the requirements of Rule 8.” Doc. No. 21,
at 36. Horner made no attempt to clarify the emotional distress claim by alleging
in any meaningful way how Defendants’ various alleged misdeeds caused her
emotional distress. Accordingly, presenting this claim once again without any
substantive changes is objectively baseless.
The August 26, 2011 OSC also explained that the Amended
Complaint’s claims for TILA damages and Real Estate Settlement Procedures Act
of 1974 (“RESPA”) claims based on consummation of the loan appeared to be
baseless because the June 1, 2011 Order dismissed these claims as time-barred, and
the Amended Complaint included no allegations suggesting a basis for equitable
tolling of the applicable statutes of limitations. In response, as to the RESPA claim
9

(and presumably the TILA damages claim as well), Horner “ha[s] no comment.”1
Doc. No. 37, Pl.’s Resp. ¶ 14. The court therefore finds these claims legally and
factually baseless.
As to the Amended Complaint’s claim for injunctive relief (Count X),
the August 26, 2011 OSC explained that this claim had already been dismissed
without leave to amend on the basis that a claim for injunctive relief, standing
alone, is not a cause of action. See Doc. No. 21, June 1, 2011 Order at 31-32. In
response, Horner asserts that such claim is appropriate because they are seeking
declaratory and injunctive relief. Doc. No. 37, Pl.’s Resp. ¶ 12. The June 1, 2011
Order clearly explained, however, that “injunctive relief may be available if
Plaintiff is entitled to such a remedy on an independent cause of action,” but “a
claim for ‘injunctive relief’ standing alone is not a cause of action. Doc. No. 21,
June 1, 2011 Order at 32. Horner had no basis to allege this claim once again.
Finally, the August 26, 2011 OSC explained that the Amended
Complaint’s claim for TILA rescission appeared baseless because the June 1, 2011
Order dismissed the TILA rescission claim “without leave to amend,” and the
August 12, 2011 Order explicitly warned Plaintiff that her proposed Amended

1

Horner does not specifically address the TILA damages claim in their Response such
that the “no comment” response as to RESPA appears to apply equally to the TILA damages
claim.
10

Complaint could not include a TILA rescission claim. Horner’s response to the
August 26, 2011 OSC -- that “the successor lender fraudulently concealed the right
to rescind” -- does not change the fact that Plaintiff was not granted leave to amend
this claim. And if Horner had adequately analyzed the June 1, 2011 Order, he
would know that an assertion of fraudulent concealment cannot save an untimely
TILA rescission claim -- the June 1, 2011 Order explained that the TILA rescission
statute, 15 U.S.C. § 1635(f), is an absolute statute of repose barring “any [TILA
rescission] claims filed more than three years after the consummation of the
transaction.” Miguel v. Country Funding Corp., 309 F.3d 1161, 1164 (9th Cir.
2002) (citing King v. California, 784 F.2d 910, 913 (9th Cir. 1986)). Equitable
tolling does not apply. See Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998).
In sum, the court finds that the Amended Complaint’s claims for
unconscionability, failure to act in good faith, negligent and/or intentional
infliction of emotional distress, injunctive relief, RESPA (to the extent based on
the consummation of the loan),2 and TILA damages and rescission are legally
baseless.

2

The court recognizes that the Amended Complaint also asserts a RESPA violation for
failure to respond to a Qualified Written Request. The court does not at this time address the
sufficiency of this allegation. In fact, no party should draw any conclusion as to the adequacy of
the remaining claims -- the court simply is not addressing them in this Order.
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2.

Whether Horner Has Conducted a Reasonable and Competent
Inquiry Before Signing and Filing the Amended Complaint
The purpose of this second inquiry is “to assist courts in discovering

whether an attorney, after conducting an objectively reasonable inquiry into the
facts and law, would have found the complaint to be well-founded.” Holgate, 425
F.3d at 677 (citing Christian, 286 F.3d at 1127).
The court is at a loss of how any objectively reasonable attorney, after
reading the June 1, 2011 Order, would have concluded that any of the six claims
discussed above were well-founded. The June 1, 2011 Order explained precisely
what Horner must do to allege certain claims, and also dismissed other claims
without leave to amend. Horner clearly failed to follow the instructions of the June
1, 2011 Order. As the August 26, 2011 OSC explained, if Horner disagreed with
the June 1, 2011 Order, he could either choose not to file an amended complaint
and instead appeal the dismissal, or file an amended pleading that attempts to
correct the deficiencies of the original pleading. In this case, Horner did neither.
Perhaps most shocking, however, is that Horner’s response to the
August 26, 2011 OSC shows a total lack of recognition of his violation of this
court’s June 1, 2011 Order or his Rule 11 obligations. Most striking, Horner
attempts to explain the appropriateness of realleging claims for injunctive relief
and TILA rescission even though the court dismissed the claims without leave to
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amend. Horner’s excuses for his conduct only emphasize his lack of understanding
regarding his responsibilities to this court.
For example, Horner asserts that he cannot “do everything personally”
and relied on the assistance of others. Doc. No. 37, Pl.’s Resp. ¶ 2. Horner further
asserts that he “concluded the claims could be alleged because we were informed
everyone took care to comply with the court’s order.” Id. ¶ 8. That Horner is busy
and relied on others is not an excuse -- by submitting and signing a pleading,
Horner is certifying that to the best of his “knowledge, information, and belief,
formed after an inquiry reasonable under the circumstances [that] the claims . . . are
warranted by existing law or by a nonfrivolous argument for extending, modifying,
or reversing existing law or for establishing new law.” Fed. R. Civ. P. 11(b)(2).
Horner’s Rule 11 obligations apply in each case and to all documents he presents
to the court, and apply regardless of who he relies on to help him or how many
other cases he has pending that require his attention.3
3

At the time of this Order, Horner is listed as counsel in twenty-eight open cases in the
District of Hawaii. Horner has been warned of his Rule 11 duties and/or sanctioned for failure to
follow the court’s Rules in several cases. See, e.g., Moniz v. Am. Home Mortg. Servicing, Inc.,
2011 WL 2746805, at *5 (D. Haw. July 13, 2011) (“Counsel is reminded that he must have a
good faith basis for bringing specific claims to avoid possible sanctions.”); Dagupion v. Green
Tree Servicing, LLC, 2011 WL 2532848, at *4 (D. Haw. June 23, 2011) (warning Horner that
“[a]ny future filing that fails to comply with [his Rule 11] obligations may result in serious
repercussions, including but not limited to substantial financial sanctions.”); Levy v. Wells Fargo
Bank, 2011 WL 2493055, at *2 (D. Haw. June 22, 2011) (outlining a number of Local Rules
Horner failed to follow and warning him that “if he violates these rules again, or if he continues
(continued...)
13

Horner also asserts that “we” reviewed various documents which he
believed supported the claims he was asserting. Doc. No. 37, Pl.’s Resp. ¶ 5. This
assertion is hard to believe -- if Horner had simply reviewed the June 1, 2011
Order when crafting the Amended Complaint, he would have known that the six
claims discussed above were wholly deficient and/or improper. And for the most
part, Horner did not include additional facts that would support his claims.
Horner further suggests that he should be granted “latitude” because
“we live in unprecedented times where rampant and unrestrained greed of lending
and servicing entities have caused an economic crisis the likes of which most of us
have not seen in our lifetimes,” and the court must be “flexible as to allow justice
to be served.” Doc. No. 37, Pl.’s Resp. ¶ 18. Whatever the recent events may be,
they do not give litigants a reprieve from their obligations to state legally
cognizable claims pursuant to Rules 8, 11, and 12, and they certainly do not give
litigants a license to ignore clear orders from this court.
3

(...continued)
to flout the court’s local rules, he will be subject to sanctions.”); Cootey v. Countrywide Home
Loans, Inc., 2011 WL 2441707, at *3 (D. Haw. June 14, 2011) (listing cases that have dismissed
a similar complaint brought by Horner, and warning that “these deficient complaints result in a
waste of parties’ and this court’s resources, and Plaintiffs’ counsel must be mindful of his duty to
bring claims that are ‘warranted by existing law or by a nonfrivolous argument for extending,
modifying, or reversing existing law or for establishing new law.’” (quoting Federal Rule of
Civil Procedure 11(b)(2))). The court does not, however, take into consideration Horner’s
myriad violations of court rules in other cases in determining that Rule 11 sanctions should issue
in this case, or the amount of the sanction. Horner is cautioned, however, that any future Rule 11
violations would likely result in increased sanctions.
14

Finally, Horner argues that “the alleged violations were not done
intentionally and in flagrant disregard of any court order . . . .” Doc. No. 37, Pl.’s
Resp. ¶ 16.4 This argument ignores that a Rule 11 violation does not require
intentional misconduct, and the court need not (and does not at this time) make any
finding as to subjective bad faith. Indeed, “[c]ounsel can no longer avoid the sting
of Rule 11 sanctions by operating under the guise of a pure heart and empty head.”
See Smith, 31 F.3d at 1488. Viewed objectively, the claims in the Amended
Complaint were baseless and no reasonable attorney would have included them as
pled after the June 1, 2011 Order.
In sum, based on the information known to Horner at the time he filed
the Amended Complaint (in particular, the June 1, 2011 Order), the court
concludes that Horner did not conduct an objectively reasonable inquiry into the
facts and law. The court therefore finds that Rule 11 sanctions are warranted.

4

At the September 12, 2011 hearing, Horner reiterated that he did not submit the
Amended Complaint with any bad intentions. He further asserted that although he is very busy
and relies on others in his office to perform certain tasks, he understands that he is ultimately
responsible for what he submits to the court. The court appreciates Horner’s candor in
acknowledging how he came to submit the Amended Complaint, and makes no finding of bad
faith at this time. The court expects that now that Horner is aware of what he must do to comply
with Rule 11, he will make the necessary changes in how he runs his office to prevent another
Rule 11 violation. If the another similar violation occurs, Horner’s excuse of being too busy -in light of these warnings of what he must do to comply with Rule 11 -- may be insufficient to
suggest a lack of subjective bad faith.
15

B.

Appropriate Sanctions
A determination of sanctions is largely within the discretion of the

court, with these principles in mind:
A sanction imposed under this rule must be limited to
what suffices to deter repetition of the conduct or
comparable conduct by others similarly situated. The
sanction may include nonmonetary directives; an order to
pay a penalty into court; or, if imposed on motion and
warranted for effective deterrence, an order directing
payment to the movant of part or all of the reasonable
attorney’s fees and other expenses directly resulting from
the violation.
Fed. R. Civ. P. 11(c)(4). “[T]he court must not impose a monetary sanction . . .
against a represented party for violating Rule 11(b)(2).” Fed. R. Civ. P.
11(c)(5)(A).
Weighing the extent of the Rule 11 violation as well as the need to
deter repetition of similar conduct in both this action and in other actions, the court
finds that sanctions against Horner are warranted. Specifically, the court finds
appropriate a monetary sanction against Horner in the amount of $750.00 payable
to the court. Although the court makes no finding as to subjective bad faith,
Horner has unquestionably ignored the court’s previous warnings as to his Rule 11
obligations. This monetary sanction is limited but nonetheless appropriate to deter
future conduct by Horner in this and other actions, and to deter comparable
16

conduct by others similarly situated.
The court does not at this time, however, sanction Plaintiff as
previously contemplated by striking the objectively baseless claims discussed
above from the Amended Complaint. The court finds that Plaintiff should not be
penalized for her counsel’s Rule 11 violation; dismissal of claims is more
appropriate through Rules 8 and 12. See PAE Gov’t Servs., Inc. v. MPRI, Inc.
514 F.3d 856, 859 n.3 (9th Cir. 2007). Because several of the claims in the
Amended Complaint are frivolous, however, -- either because the court dismissed
them without leave to amend and/or Plaintiff did not change the allegations to
correct the deficiencies the court previously identified -- the court will grant
Plaintiff one more opportunity to amend her Complaint to comply with Rule 11. If
Plaintiff chooses, she may file a Second Amended Complaint by September 27,
2011. A responsive pleading to either the Amended Complaint or Second
Amended Complaint (if filed) is due by October 21, 2011.
V. CONCLUSION
Based on the above, the court SANCTIONS Horner $750.00 for
violation of Federal Rule of Civil Procedure 11. By September 19, 2011, Horner
shall deliver a check for $750, payable to “Clerk, U.S. District Court.” The check
should reflect the notation “Civ. No. 11-00142 JMS/KSC;” and the payment
17

should be accompanied by a copy of this Order.
If Plaintiff chooses, she may file a Second Amended Complaint by
September 27, 2011. A responsive pleading to either the Amended Complaint or
Second Amended Complaint (if filed) is due by October 21, 2011.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, September 13, 2011.

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

Rey v. Countrywide Home Loans, Inc., et al., Civ. No. 11-00142 JMS/KSC, Order (1) Issuing
Rule 11 Sanctions Against Plaintiff’s Counsel, Robin Horner; and (2) Granting Leave to File a
Second Amended Complaint

18