Fitzgerald et al v. American Savings Bank F.S.B. et al

Filing 36

ORDER: (1) DISMISSING PLAINTIFFS' COMPLAINT WITHOUT PREJUDICE AS TO ALL DEFENDANTS; (2) DENYING AS MOOT DEFENDANTS' MOTION FOR SUMMARY JUDGMENT; AND (3) VACATING THE HEARING 9 . Excerpt of Order: ~ " ;The Complaint is therefore DISMISSED WITHOUT PREJUDICE as against all Defendants in this action with leave to amend no later than thirty (30) days from the filing of this Order....." ~ Signed by JUDGE DAVID ALAN EZRA on 10/13/2011. (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). 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
TIMOTHY J. FITZGERALD AND
VIRGINIA PARSONS,
Plaintiffs,
vs.
AMERICAN SAVINGS BANK,
F.S.B,; MERSCORP, INC.,’
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS;
MARC IOANE, ASSISTANT VP
OF AMERICAN SAVINGS BANK,
FSB AND CERTIFYING OFFICER
OF MERS; SUSAN TILDEN LAU,
SR. VP PRESIDENT OF
AMERICAN SAVINGS BANK FSP
AND CERTIFYING OFFICER OF
MERS; AND DOES 1 THROUGH
20 INCLUSIVE,
Defendants.
_____________________________

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CV. NO. 11-00199 DAE-RLP

ORDER: (1) DISMISSING PLAINTIFFS’ COMPLAINT WITHOUT
PREJUDICE AS TO ALL DEFENDANTS; (2) DENYING AS MOOT
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT;
AND (3) VACATING THE HEARING
Pursuant to Local Rule 7.2(d), the Court finds this matter suitable for
disposition without a hearing. After reviewing the motions and the supporting and
opposing memoranda, the Court DISMISSES WITHOUT PREJUDICE

Plaintiffs’ Complaint against all Defendants, DENIES AS MOOT Defendants’
Motion for Summary Judgment (Doc. # 9), and VACATES the Hearing on this
matter set for October 14, 2011.
BACKGROUND
On March 28, 2011, Plaintiffs Timothy J. Fitzgerald and Virginia
Parsons (collectively “Plaintiffs”) filed a Complaint in this Court against
Defendants American Savings Bank, F.S.B., Merscorp, Inc., Mortgage Electronic
Registration Systems (“MERS”), Marc Ioane, and Susan Tilden (collectively
“Defendants”), alleging that Plaintiffs had been lured into a predatory mortgage
loan. (“Compl.,” Doc # 1.) Specifically, Plaintiffs’ Complaint alleges the
following Counts:
•

Count I:

Violations of the Sherman/Clayton Anti-Trust

Acts. (FAC ¶¶ 173–98.)
•

Count II:

Violations of the Hawaii Anti-Trust/Anti-

Monopoly Acts. (Id. ¶¶ 199–203.)
•

Count III:

Misrepresentation. (Id. ¶¶ 204–19.)

•

Count IV:

Unfair and Deceptive Acts or Practices. (Id.

¶¶ 220–35.)
•

Count V:

Breach of Fiduciary duty. (Id. ¶¶ 236–45.)
2

•

Count VI:

•

Count VII: Slander of Title (Id. ¶¶ 251–61.)

•

Count VIII: Injunctive Relief. (Id. ¶¶ 262–67.)

Unjust Enrichment. (Id. ¶¶ 246–50.)

Plaintiffs reside in the State of Hawaii. (Id. ¶ 5.) On or about July
2007, Plaintiffs began researching a lender to purchase a parcel of property located
at 2276 W. Vineyard Street, Wailuku, Hawaii (the “Subject Property”). On
December 17, 2007, Plaintiffs executed a promissory note agreeing to pay
$800,775.00 to American Savings Bank, F.S.B. (“ASB”) as Lender. (Id. ¶ 63.)
The note states the interest rate is “six and one-quarter percent (6.625%).” (Id.; see
also, “Note,” Compl., Ex. 1, at 1). The note included funds for the construction of
Plaintiffs’ residence on the Subject Property. (Compl. ¶ 64.) On the same day
Plaintiffs entered into a mortgage, which was recorded in the Bureau of
Conveyances on December 26, 2007. (Id. ¶ 66; see also “Mortgage,” Compl., Ex.
2.) ASB is listed on the mortgage as the originating lender and MERS is the
mortgagee “acting solely as a nominee for Lender and Lender’s successors and
assigns.” (Mortgage at 2.)
Sometime around 2009, Plaintiffs defaulted. (Doc. # 10-1 ¶ 12.)
Defendants thereafter initiated a non-judicial foreclosure sale. (Compl., Ex. 7.)

3

Plaintiffs received notice of the foreclosure sale and an auction was scheduled for
December 15, 2009. (Doc. # 10-1 ¶ 13.)
The day before the scheduled auction, on December 14, 2009,
Plaintiff Parsons filed for Chapter 11 Bankruptcy in the United States Bankruptcy
Court for the District of Hawaii. (“DCSF,” Doc. # 10, Ex. G.) On May 3, 2010,
Defendant MERS was granted relief from the automatic stay in Plaintiff Parson’s
bankruptcy case. (DCSF, Exs. H, I.) On June 15, 2011, Plaintiff Fitzgerald filed
for Chapter 13 bankruptcy. (DCSF, Ex. J.)
On November 8, 2010, Plaintiff Parsons’s bankruptcy case was
converted from Chapter 11 to Chapter 7, and Dane S. Field was appointed as the
bankruptcy Trustee. (DCSF, Ex. K.) On February 8, 2011, a Discharge of Debtor
was filed in Plaintiff Parsons’s bankruptcy case. (DCSF, Ex. L.)
On January 13, 2011, Defendant ASB was granted relief from the
automatic stay in Plaintiff Fitzgerald’s bankruptcy case. (DCSF, Ex. M.) On
March 3, 2011, Defendant ASB was granted relief from the codebtor stay in
Plaintiff Fitzgerald’s bankruptcy case. (DCSF, Ex. N.)
On March 11, 2011, by assignment of mortgage, MERS assigned its
rights, title and interest in the mortgage to ASB. (“Assignment,” DCSF, Ex. F.)

4

On March 23, 2011, Plaintiffs filed their Complaint. Plaintiffs allege
that Defendant ASB “was not forthcoming about the economic collapse or the
overall securities fraud that caused the nation’s economic decline.” (Id. ¶ 91.)
Plaintiffs also contend that Defendant BAS “has failed to provide a valid
assignment from MERS of the mortgage that they split away from the note in [a]
securitization scheme.” (Id. ¶ 126.) Plaintiffs also complain that “ASB did not
hold the note and mortgage in June 2010 when MERS was granted the relief from
stay in Parsons’s bankruptcy.” (Id. ¶ 128.) This “deception” allegedly resulted in
Plaintiffs’ inability to modify their loan. (Id. ¶ 130.) Finally, Plaintiffs contend
that MERS, as an entity, “circumvents the state’s recording statutes.” (Id. ¶ 140.)
On June 1, 2011, Defendants filed a Motion for Summary Judgment.
(“MSJ,” Doc. # 9.) On August 8, 2011, Plaintiffs filed their Opposition.
(“Opp’n,” Doc. # 24.) On August 15, 2011, Defendants filed their Reply.
(“Reply,” Doc. # 26.)
STANDARD OF REVIEW
I.

Motion for Summary Judgment
Rule 56 requires summary judgment to be granted when “the

pleadings, the discovery and disclosure materials on file, and any affidavits show
that there is no genuine issue as to any material fact and that the movant is entitled
5

to judgment as a matter of law.” Fed. R. Civ. P. 56(c); see also Porter v. Cal. Dep’t
of Corr., 419 F.3d 885, 891 (9th Cir. 2005); Addisu v. Fred Meyer, Inc., 198 F.3d
1130, 1134 (9th Cir. 2000). A main purpose of summary judgment is to dispose of
factually unsupported claims and defenses. Celotex Corp. v. Catrett, 477 U.S. 317,
323–24 (1986).
Summary judgment must be granted against a party that fails to
demonstrate facts to establish what will be an essential element at trial. See id. at
323. A moving party without the ultimate burden of persuasion at trial—usually,
but not always, the defendant—has both the initial burden of production and the
ultimate burden of persuasion on a motion for summary judgment. Nissan Fire &
Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). The burden
initially falls upon the moving party to identify for the court those “portions of the
materials on file that it believes demonstrate the absence of any genuine issue of
material fact.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d
626, 630 (9th Cir. 1987) (citing Celotex Corp., 477 U.S. at 323).
Once the moving party has carried its burden under Rule 56, the
nonmoving party “must set forth specific facts showing that there is a genuine
issue for trial” and may not rely on the mere allegations in the pleadings. Porter,
419 F.3d at 891 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256
6

(1986)). In setting forth “specific facts,” the nonmoving party may not meet its
burden on a summary judgment motion by making general references to evidence
without page or line numbers. S. Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885,
889 (9th Cir. 2003); Local Rule 56.1(f) (“When resolving motions for summary
judgment, the court shall have no independent duty to search and consider any part
of the court record not otherwise referenced in the separate concise statements of
the parties.”). “[A]t least some ‘significant probative evidence’ ” must be
produced. T.W. Elec. Serv., 809 F.2d at 630 (quoting First Nat’l Bank of Ariz. v.
Cities Serv. Co., 391 U.S. 253, 290 (1968)). “A scintilla of evidence or evidence
that is merely colorable or not significantly probative does not present a genuine
issue of material fact.” Addisu, 198 F.3d at 1134. Further, the Ninth Circuit has
“refused to find a ‘genuine issue’ where the only evidence presented is
‘uncorroborated and self-serving’ testimony.” Villiarimo v. Aloha Island Air, Inc.,
281 F.3d 1054, 1061 (9th Cir. 2002) (citing Kennedy v. Applause, Inc., 90 F.3d
1477, 1481 (9th Cir. 1996)). “Conclusory allegations unsupported by factual data
cannot defeat summary judgment.” Rivera v. Nat’l R.R. Passenger Corp., 331 F.3d
1074, 1078 (9th Cir. 2003).
When “direct evidence” produced by the moving party conflicts with
“direct evidence” produced by the party opposing summary judgment, “the judge
7

must assume the truth of the evidence set forth by the nonmoving party with
respect to that fact.” T.W. Elec. Serv., 809 F.2d at 631. In other words, evidence
and inferences must be construed in the light most favorable to the nonmoving
party. Porter, 419 F.3d at 891. The court does not make credibility determinations
or weigh conflicting evidence at the summary judgment stage. Id.; see also Nelson
v. City of Davis, 571 F.3d 924 (9th Cir. 2009) (“[C]redibility determinations, the
weighing of the evidence, and the drawing of legitimate inferences from the facts
are jury functions, not those of a judge.”) (citations omitted). However, inferences
may be drawn from underlying facts not in dispute, as well as from disputed facts
that the judge is required to resolve in favor of the nonmoving party. T.W. Elec.
Serv., 809 F.2d at 631.
II.

Federal Rules of Civil Procedure 8 and 12
The court may dismiss a complaint pursuant to Federal Rule of Civil

Procedure (“Rule”) 12(b)(6) on its own motion. See Omar v. Sea-Land Serv., Inc.,
813 F.2d 986, 991 (9th Cir. 1987) (“A trial court may dismiss a claim sua sponte
under [Rule] 12(b)(6). Such a dismissal may be made without notice where the
claimant cannot possibly win relief.”); Ricotta v. California, 4 F. Supp. 2d 961, 968
n.7 (S.D. Cal. 1998) (“The Court can dismiss a claim sua sponte for a Defendant
who has not filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6).”); see also
8

Baker v. Dir., U.S. Parole Comm’n, 916 F.2d 725, 727 (D.C. Cir. 1990) (holding
that district court may dismiss cases sua sponte pursuant to Rule 12(b)(6) without
notice where plaintiff could not prevail on complaint as alleged). Additionally, a
paid complaint that is “obviously frivolous” does not confer federal subject matter
jurisdiction and may be dismissed sua sponte before service of process. Franklin v.
Murphy, 745 F.2d 1221, 1227 n.6 (9th Cir. 1984); see also Fed. R. Civ. P.
12(h)(3); Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 593 (2004)
(“[I]t is the obligation of both district court and counsel to be alert to jurisdictional
requirements.”); Branson v. Nott, 62 F.3d 287, 291 (9th Cir. 1995) (“[D]ismissal of
Branson’s complaint was required because the district court lacked subject matter
jurisdiction . . . .”).
The court may also sua sponte dismiss a complaint for failure to
comply with Federal Rule of Civil Procedure (“Rule”) 8. Rule 8 mandates that a
complaint include a “short and plain statement of the claim,” Fed. R. Civ. P.
8(a)(2), and that “each allegation must be simple, concise, and direct.” Fed. R.
Civ. P. 8(d)(1). A complaint that is so confusing that its “‘true substance, if any, is
well disguised’” may be dismissed sua sponte for failure to satisfy Rule 8. Hearns
v. San Bernardino Police Dep’t, 530 F.3d 1124, 1131 (9th Cir. 2008) (quoting
Gillibeau v. City of Richmond, 417 F.2d 426, 431 (9th Cir. 1969); Simmons v.
9

Abruzzo, 49 F.3d 83, 86 (2d Cir. 1995) (stating that a district court has the power
to sua sponte dismiss a complaint for failure to comply with Rule 8 where the
complaint is so confused, ambiguous, or unintelligible that its true substance is
well disguised); see also McHenry v. Renne, 84 F.3d 1172, 1180 (9th Cir. 1996)
(“Something labeled a complaint but written . . . , prolix in evidentiary detail, yet
without simplicity, conciseness and clarity as to whom plaintiffs are suing for what
wrongs, fails to perform the essential functions of a complaint.”); Nevijel v. N.
Coast Life Ins. Co., 651 F.2d 671, 673 (9th Cir. 1981) (“A complaint which fails to
comply with [Rule 8] may be dismissed with prejudice[.]”).
Put slightly differently, a district court may dismiss a complaint for
failure to comply with Rule 8 where it fails to provide the defendants fair notice of
the wrongs they have allegedly committed. See McHenry, 84 F.3d at 1178–80
(affirming dismissal of complaint where “one cannot determine from the complaint
who is being sued, for what relief, and on what theory, with enough detail to guide
discovery”); cf. Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1105 n.4
(9th Cir. 2008) (finding dismissal under Rule 8 was in error where “the complaint
provide[d] fair notice of the wrongs allegedly committed by defendants and [did]
not qualify as overly verbose, confusing, or rambling”). Rule 8 requires more than
“the-defendant-unlawfully-harmed-me accusation[s]” and “[a] pleading that offers
10

labels and conclusions or a formulaic recitation of the elements of a cause of action
will not do.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citations and
quotations omitted). “The propriety of dismissal for failure to comply with Rule 8
does not depend on whether the complaint is wholly without merit.” McHenry, 84
F.3d at 1179.
The court may “begin by identifying pleadings that, because they are
no more than conclusions, are not entitled to the assumption of truth.” Iqbal, 129
S. Ct. at 1950. Legal conclusions must be supported by factual allegations. Id.
“When there are well-pleaded factual allegations, a court should assume their
veracity and then determine whether they plausibly give rise to an entitlement to
relief.” Id.
DISCUSSION
For the reasons set forth below, the Court sua sponte concludes that
the Complaint should be dismissed. The Court is cognizant that Defendants have
filed a Motion for Summary Judgment, but finds that it is premature to rule on the
merits of that Motion as Plaintiffs have not yet stated a claim upon which relief can
be granted.

11

I.

Counts I: Violation of the Sherman/Clayton Antitrust Acts
In Count I, Plaintiffs allege violations of Sections 1 and 2 of the

Sherman Antitrust Act and seek relief for these violations pursuant to Section 4 of
the Clayton Antitrust Act. (Compl. ¶¶ 194, 196.) Plaintiffs have failed to plead
these counts with sufficient specificity.
Section 1 of the Sherman Act prohibits “[e]very contract, combination
in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce
among the several States, or with foreign nations.” 15 U.S.C. § 1. To state a claim
under Section 1, “‘claimants must plead not just ultimate facts (such as a
conspiracy), but evidentiary facts which, if true, will prove: (1) a contract,
combination or conspiracy among two or more persons or distinct business entities;
(2) by which the persons or entities intended to harm or restrain trade or commerce
. . . (3) which actually injures competition.’” William O. Gilley Enters., Inc. v.
Atlantic Richfield Co., 588 F.3d 659, 669 (9th Cir. 2009) (per curiam) (quoting
Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1047 (9th Cir. 2008)); see also Coal.
for ICANN Transparency, Inc. v. VeriSign, Inc., 611 F.3d 495, 501–02 (9th Cir.
2010) (same).
Section 2 of the Sherman Act makes it illegal to “monopolize, or
attempt to monopolize, or combine or conspire with any other person or persons, to
12

monopolize any part of the trade or commerce among the several States, or with
foreign nations.” 15 U.S.C. § 2. Monopolization and attempted monopolization
are the two traditional claims asserted under Section 2. To state a claim for
monopolization, the plaintiff must sufficiently allege: “‘(1) the possession of
monopoly power in the relevant market and (2) the willful acquisition or
maintenance of that power as distinguished from growth or development as a
consequence of a superior product, business acumen, or historic accident.’” John
Doe 1 v. Abbott Labs., 571 F.3d 930, 933 n.3 (9th Cir. 2009) (quoting Eastman
Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 481 (1992)); Alaska
Airlines v. United Airlines, Inc., 948 F.2d 536, 540–41 (9th Cir. 1991) (same); see
also MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124, 1130 (9th Cir. 2004)
(listing the elements of a monopolization claim).
Sections 1 and 2 of the Sherman Act thus “focus on different
problems.” See Alaska Airlines v. United Airlines, Inc., 948 F.2d 536, 540–41
(9th Cir. 1991). Whereas “concerted conduct is subject to sanction [under
Section 1] if it merely restrains trade, unilateral conduct is subject to sanction
[under Section 2] only if it either actually monopolizes or threatens
monopolization.” Id. at 541 (citing Copperweld Corp. v. Independence Tube
Corp., 467 U.S. 752, 767–69 (1984)); see also Am. Needle, Inc. v. Nat’l Football
13

League, 130 S. Ct. 2201, 2208–09 (2010) (stating that although Section 1 applies
only to concerted action that restrains trade, Section 2 covers both concerted and
independent action, but only if that action monopolizes or threatens actual
monopolization, a category which is narrower than restraint of trade).
Regardless of the provision purportedly violated, an antitrust plaintiff
must demonstrate that the injury in question is “injury of the type the antitrust laws
were intended to prevent.” Brunswick, 429 U.S. at 489. Indeed, the antitrust laws
“were enacted for ‘the protection of competition, not competitors.’” Id. at 488
(quoting Brown, 370 U.S. at 320); see also Cascade Health Solutions, 515 F.3d at
501–02 (recognizing the Supreme Court’s “long and consistent adherence to the
principle that the antitrust laws protect the process of competition, and not the
pursuits of any particular competitor”).
A plaintiff seeking damages pursuant to Section 4 of the Clayton Act
must show causal antitrust injury, and to obtain injunctive relief pursuant to
Section 16 of the Clayton Act, a plaintiff must allege threatened antitrust injury.1

1

Section 4 of the Clayton Act provides treble damages to “any person who
shall be injured in his business or property by reason of anything forbidden in the
antitrust laws.” 15 U.S.C. § 15. Section 16 of the Clayton Act provides that “[a]ny
person, firm, corporation, or association shall be entitled to sue for and have
injunctive relief . . . against threatened loss or damage by a violation of the antitrust
laws.” 15 U.S.C. § 26.
14

Cargill, 479 U.S. at 109–13. The purpose of the antitrust injury requirement is to
“ensure[] that the harm claimed by the plaintiff corresponds to the rationale for
finding a violation of the antitrust laws in the first place, and it prevents losses that
stem from competition from supporting suits by private plaintiffs for either
damages or equitable relief.” Atlantic Richfield Co. v. USA Petroleum, Inc., 495
U.S. 328, 342 (1990). As such, “[t]o show antitrust injury, a plaintiff must prove
that his loss flows from an anticompetitive aspect or effect of the defendant’s
behavior [because] it is inimical to the antitrust laws to award damages for losses
stemming from acts that do not hurt competition.” Rebel Oil Co., Inc. v. Atlantic
Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995) (citing Atlantic Richfield, 495
U.S. at 334); see also Cascade Health Solutions, 515 F.3d at 902 (“‘Plaintiffs must
prove antitrust injury, which is to say injury of the type the antitrust laws were
intended to prevent and that flows from that which makes defendants’ acts
unlawful. The injury should reflect the anticompetitive effect either of the
violation or of anticompetitive acts made possible by the violation.’”) (quoting
Brunswick, 429 U.S. at 489).
Plaintiffs have failed to adequately allege causal antitrust injury and
Count I therefore fails. The crux of Defendants’ argument is that MERS and ASB,
as well as other “large private banking institutions within the United States” agreed
15

to establish a scheme “by which they would and did set up a private system of
recording interests.” (Compl. ¶ 175.) Subsequently, these banks “used their
combined market power in the financial industry to take control of the market for
private securitization of mortgages.” (Id. ¶ 176.) Plaintiffs complain that
“subsequent to the creation of MERS, the Big Banks and MERS used their control
over the residential mortgage market by inflating the market for residential
properties . . . .” (Id. ¶ 179.) Plaintiffs allege that “[b]ecause larger loans
generated larger fees, the originators would steer customers toward larger loans
with promises of real estate investment growth.” (Id. ¶ 184.) Finally, Plaintiffs
contend that establishing MERS as a “nominee” serves to “protect and insulate
Defendant ASB from otherwise valid claims and defenses by mortgagors and
borrowers. . . .” (Id. ¶ 193(a).) Plaintiffs contend that this conduct “violates the
Sherman Anti-Trust Act.” (Id. ¶ 194.)
The Complaint is utterly devoid of any factual allegations which
support these contentions. For instance, there is no explanation or allegations to
how these banks “used their combined market power in the financial industry to
take control of the market.” Nor do Plaintiffs explain how, exactly, “subsequent to
the creation of MERS, the Big Banks and MERS used their control over the
residential mortgage market by inflating the market for residential properties . . . .”
16

Finally there simply is no allegation, beyond conclusory statements, that
Defendants engaged in any sort of anticompetitive conduct. Without sufficiently
alleging antitrust injury, this count of the Complaint cannot survive. Accordingly
the Court DISMISSES Count I of the Complaint.
II.

Count II: Violation of the Hawaii Antitrust and Anti-Monopoly Acts
Plaintiffs, relying on their factual allegations with respect to Count I,

allege a violation the Hawaii Monopolization Act, Hawaii Revised Statutes § 4809. (TAC ¶ 115.) The act provides that “[n]o person shall monopolize, or attempt
to monopolize, or combine or conspire with any other person to monopolize any
part of the trade or commerce in any commodity in any section of the State.” Haw.
Rev. Stat. § 480-9.
The close relationship between federal antitrust law and Hawaii
antitrust law has long been established. See, e.g., Robert’s Hawaii Sch. Bus v.
Laupahoehoe Transp. Co., Inc., 982 P.2d 853, 881 n.29 (Haw. 1999) (noting the
similarities between Section 2 of the Sherman Antitrust Act and Haw. Rev. Stat.
§ 480-9.) Indeed, the “[l]egislative history of Hawaii’s antitrust law clearly
indicates that the state laws are to be interpreted and construed in harmony with
analogous federal antitrust laws.” Island Tobacco Co., Ltd. v. R. J. Reynolds
Indus., Inc., 513 F. Supp. 726, 738 (D. Haw. 1981). Similar to federal law,
17

therefore, Hawaii courts require plaintiffs in antitrust proceedings to plead the
“nature of the competition” to “ensure that the injury results from a competitionreducing aspect of the defendant’s behavior.” Davis v. Four Seasons Hotel Ltd.,
228 P.3d 303, 325 (Haw. 2010) (citing and relying on federal law). Thus,
Plaintiffs’ failure to sufficiently allege any anticompetitive conduct as discussed
with respect to Count I is applicable to Count II as well. Accordingly the Court
DISMISSES Count II of the Complaint.
III.

Count III: Misrepresentation
The Third Count alleges that “Defendant ASB did not disclose to

plaintiffs that MERS would be their mortgagee essentially separating the mortgage
from the note and creating an inability to effectively communicate or negotiate.”
(Compl. ¶ 212.) Plaintiffs claim that “ASB intentionally misrepresented the actual
mortgagee and mortgage by creating an ambiguous document.” (Id. ¶ 213.)
Plaintiffs contend that had they “known of Defendant ASB’s true intention to
arbitrarily deny them the opportunity to refinance or modify their loans . . . ,
Plaintiffs would not have entered into the loan transactions.” (Id. ¶ 216.) As a
result of these alleged fraudulent misrepresentation, Plaintiffs claim to be entitled
to damages. (Id. ¶ 218.)

18

The Court finds that Plaintiffs’ allegations are insufficient to satisfy
the more rigorous pleading requirements of Rule 9 that apply to allegations of
fraud or mistake. See Fed. R. Civ. P. 9(b) (requiring a party to state with
particularity the circumstances constituting fraud or mistake). The claim must “be
accompanied by the ‘who, what, when, where, and how’ of the misconduct
charged.” Kearns, 567 F.3d at 1120. A plaintiff “must state the time, place and
specific content of the false representations as well as the identities of
the parties to the misrepresentation.” Alan Neuman Productions, Inc. v. Albright,
862 F.2d 1388, 1393 (9th Cir. 1988).
The allegations of misconduct related to this Count are over broad and
general in nature. Specifically, Plaintiffs do not detail what specific conduct
resulted in the fraudulent misrepresentation to survive Iqbal-Twombly. (See, e.g.,
FAC ¶¶ 125, 126.) For instance, Plaintiffs claim that ASB “intentionally
misrepresented” the actual mortgagee and mortgage by creating an “ambiguous
document.” But there is no accompanying facts describing the “who, what, when,
where, and how” of this allegation. Kearns, 567 F.3d at 1120. Further, it does not
seem to the Court that Defendants engaged in any misrepresentation. The
mortgage itself plainly states the role that MERS would play in Plaintiffs’ home
loan. Plaintiffs signed the mortgage. How this apparent disclosure somehow
19

qualifies as a misrepresentation is unclear to the Court. See Cervantes v.
Countrywide Home Loans, Inc., ---F.3d---, 2011 WL 3911031, at *5. (9th Cir.
Sept. 7, 2011) (concluding similarly).
Accordingly, the Court DISMISSES Plaintiffs’ Complaint with
respect to Count III.
IV.

Count IV: Unfair and Deceptive Acts or Practices
Plaintiffs claim that Defendants engaged in unfair or deceptive acts

and practices (“UDAP”) in violation of HRS §§ 480-2(a) and 481A-3. (Compl.
¶¶ 220–35.)
Hawaii Revised Statute section 480-2(a) provides that “[u]nfair
methods of competition and unfair or deceptive acts or practices in the conduct of
any trade or commerce are unlawful.” Haw. Rev. Stat. § 480-2(a). “Two distinct
causes of action have emerged under [section] 480-2(a): (1) claims alleging unfair
methods of competition; and (2) claims alleging unfair or deceptive acts or
practices.”2 Haw. Med. Ass’n v. Haw. Med. Serv. Ass’n, Inc., 148 P.3d 1179,
2

Although “[a]ny person” may bring an action for unfair methods of
competition in violation of section 480-2, only consumers, the attorney general, or
the director of the office of consumer protection may bring an action for unfair or
deceptive acts or practices in violation of section 480-2. Haw. Rev. Stat. § 4802(d), (e); see also Davis v. Four Seasons Hotel, Ltd., 228 P.3d 303, 307 (Haw.
2010). A “consumer” is a “natural person who, primarily for personal, family, or
(continued...)
20

1207 (Haw. 2006); see also Star Markets, Ltd. v. Texaco, Inc., 945 F. Supp. 1344,
1346 (D. Haw. 1996). HRS § 481A-3 similarly prohibits “deceptive trade
practice[s].”
Plaintiffs contend that Defendants violated these statutes by: (1)
targeting financially unsophisticated and otherwise vulnerable consumers for
inappropriate credit products; (2) offering a credit line as bait and then failing to
address the promise after the loan was completed; (3) failing to adequately disclose
the true costs and risks of the subject loan and its inappropriateness for Plaintiffs;
(4) failing to protect the Plaintiffs’ construction loan funds; (5) falsely representing
MERS as a holder of the note in a position to foreclose; (6) falsely using Fannie
Mae and Freddie Mac mortgage loan forms; (7) making false statements regarding
the documents in the possession of MERS and/or ASB; (8) making a property loan
at the time when the bank was experiencing high losses due to the sale of risky and
deflated mortgage backed securities; and (9) continuing to use MERS to hold/hide
the mortgage while the bank collected cash down payments and closing costs from
the Plaintiffs. (Compl. ¶ 145.)

2

(...continued)
household purposes, purchases, attempts to purchase, or is solicited to purchase
goods or services or who commits money, property, or services in a personal
investment.” Haw. Rev. Stat. § 480-1.
21

Plaintiffs have again failed to allege sufficiently this count of the
Complaint. Plaintiffs have alleged no facts which suggest that any of the
Defendants were targeting financially unsophisticated or otherwise vulnerable
consumers. Nor have Plaintiffs proffered facts with respect to Defendants’ failure
to adequately disclose “the true nature of MERS.”3 There are no factual allegations
which suggest that the lender failed to disclose that it approved loans based on
certain documents.
Plaintiffs’ allegation that Defendants falsely represented or failed to
fully and completely disclose information to Plaintiffs is also insufficient. These
are fraudulent allegations and Plaintiffs have failed to satisfy the “who, what,
where, when, and how” requirement of Rule 9(b). Kearns, 567 F.3d at 1120.
In sum, there is simply no factual premise or basis alleged in the
complaint that supports Plaintiffs’ UDAP claim. Plaintiffs have utterly failed to
allege facts that could give rise to this cause of action. See Iqbal, 129 S. Ct. at
1949 (“[A Complaint] demands more than an unadorned, the
defendant-unlawfully-harmed-me accusation.”); Twombly, 550 U.S. at 555
(“Factual allegations must be enough to raise a right to relief above the speculative

3

Indeed, as discussed, Defendants seemingly completely disclosed the role
MERS would play in their home loan.
22

level.”). The Court therefore DISMISSES Plaintiffs’ Complaint with respect to
Count IV.
V.

Count V: Breach of Fiduciary Duty
Plaintiffs allege that Defendants owed and breached to Plaintiffs a

fiduciary duty in connection with their loan. (See Compl. ¶¶ 236–45.) Generally
there exists no fiduciary duty between borrowers and lenders. Unless a special
relationship exists between a borrower and lender that elevates the lender's
responsibility, the standard “arms-length business relationship” applies. Giles v.
General Motors Acceptance Corp., 494 F.3d 865, 883 (9th Cir. 2007); see also
Pension Trust Fund for Operation Engineers v. Federal Ins. Co., 307 F.3d 944, 954
(9th Cir. 2002).
In the instant Complaint, Plaintiffs make no allegations suggesting
that their relationship to Defendants is anything other than an ordinary,
arms-length, lender-borrower relationship. Plaintiffs claim that ASB was a
fiduciary because they provided a loan and loan services to them which would
“allow them to satisfy their obligations without risk of losing their property.”
Plaintiffs here have effectively described a simple arms-length, lender-borrower
relationship. Without more, the Court cannot conclude that Defendants owed

23

Plaintiffs a fiduciary duty. The Court therefore DISMISSES Count V of the
Complaint.
VI.

Count VI: Unjust Enrichment
Plaintiffs next allege that they are entitled to unjust enrichment.

Plaintiffs specifically claim that “Defendant ASB has been unjustly enriched at the
expense of the Plaintiffs [] and maintenance of the enrichment would be contrary to
the rules and principles of equity.” (Compl. ¶ 250.)
To prevail on an unjust enrichment claim, a plaintiff must show that:
1) it has conferred a benefit upon the defendant, and 2) that the retention of the
benefit was unjust. Wadsworth v. KSL Grant Wailea Resort, Inc., ---F. Supp. 2d
----, No. 08-00527, 2010 WL 5146521, at *11 (D. Haw. December 10, 2010).
As a general rule, “[a]n action for unjust enrichment cannot lie in the
face of an express contract.” Porter v. Hu, 169 P.3d 994 (Haw. App. 2007); see
also Goodwin v. Executive Trustee Servs., LLC, 680 F. Supp. 2d 1244, 1255 (D.
Nev. 2010) (“An action ‘based on a theory of unjust enrichment is not available
when there is an express, written contract, because no agreement can be implied
when there is an express agreement.’” (quoting Leasepartners Corp. v. Robert L.
Brooks Trust Dated November 12, 1975, 942 P.2d 182, 187 (Nev. 1997)));
MacDonald v. Hayner, 715 P.2d 519, 522 (Wash. App. 1986) (“A party to a valid
24

express contract is bound by the provisions of that contract, and may not disregard
the same and bring an action on an implied contract relating to the same matter, in
contravention of the express contract.”) Here both the note and the mortgage were
express agreements that Plaintiffs executed in connection with their loan which
govern the parties rights and obligations. Plaintiffs cannot, therefore, pursue an
unjust enrichment claim.
Accordingly the Court DISMISSES Count VI of the Complaint.
VII. Count VII: Slander of Title
Count VII of the complaint alleges Slander of Title. Specifically,
Plaintiffs allege that “[t]he recording of the ambiguous mortgage document by
MERS, as mortgagee and nominee for ASB directly impairs the vendibility of the
property on the open market.” (Compl. ¶ 256.) This alleged recording of an
ambiguous mortgage was, according to Plaintiffs, motivated by “fraud and
malice” because ASB and MERS “ knew or should have known that bifurcation of
the mortgage and the note invalidates the transaction [and] MERS has no written
authority to assign any such documents . . . .” (Id. ¶ 261.)
Slander of title is “a tortious injury to property resulting from
unprivileged, false, malicious publication of disparaging statements regarding the
title to property owned by plaintiff, to plaintiff's damage.” Southcott v. Pioneer
25

Title Co., 21 Cal. Rptr. 917, 919 (Cal. App. 1962) (citations omitted). “To
establish slander of title at common law, a plaintiff must show falsity, malice, and
special damages, i.e., that the defendant maliciously published false statements that
disparaged a plaintiff's right in property, causing special damages.” B & B Inv.
Group v. Gitler, 581 N.W.2d 17, 20 (Mich. App. 1998); see also Manhattan Loft,
LLC v. Mercury Liquors, Inc., 93 Ca. Rptr. 3d 457, 464 (Cal. App. 2009)
(establishing elements as “(1) a publication, (2) which is without privilege or
justification, (3) which is false, and (4) which causes direct and immediate
pecuniary loss.”).
Plaintiffs have once more run afoul of Twombly-Iqbal. There is no
allegation as to why the assignment was false aside from conclusory allegations.
Further the Court finds that Plaintiffs have insufficiently alleged that any false
publication was done with malice. First, the Court notes again that, to the extent its
malice claim is based on fraudulent conduct, Plaintiffs have failed to satisfy the
heightened pleading standard of Rule 9. (See Compl. ¶ 261.) A claim based on
fraudulent conduct must “be accompanied by the ‘who, what, when, where, and
how’ of the misconduct charged.” Kearns, 567 F.3d at 1120. Plaintiffs have made
no such showing. In any event, having failed sufficiently to allege that the

26

recording itself was false, it cannot be that Plaintiffs sufficiently alleged that BAC
knew the assignment was false as suggested by the FAC.
The Court therefore DISMISSES Plaintiffs’ Complaint with respect
to Count VII.
VIII. Count VIII: Injunctive Relief
Count VIII of the Complaint asserts a claim for injunctive relief to
prevent Defendants from foreclosing on the Subject Property. (Compl.
¶¶ 262–67.) Plaintiffs’ request for injunctive relief appears to be a request for
relief derivative of their other claims and not a standalone claim. Because the
Court finds that all of Plaintiffs’ claims should be dismissed, and because Plaintiffs
fail to allege any facts showing that they are entitled to this equitable remedy, the
Court finds that Plaintiffs’ claim for injunctive relief should be dismissed as well.
Accordingly, the Court DISMISSES Count VIII of the Complaint.
IX.

Cervantes v. Countrywide Home Loans, Inc.
In addition to failing to allege sufficiently the causes of actions as

outlined supra, the Court has grave doubts about the validity of the factual
predicate underlying most, if not all, of Plaintiffs’ claims in light of Cervantes.
There, plaintiffs argued that they could amend their complaint to illustrate that

27

certain “aspects of the MERS system are fraudulent.” 2011 WL 3911031 at *1.
The Ninth Circuit disagreed.
The Ninth Circuit first outlined how the MERS system functions. (Id.
at *1–2.) The court next described plaintiffs’ theory of the case as follows:
One of the main premises of the plaintiffs’ lawsuit here is that the
MERS system impermissibly “splits” the note and deed by facilitating
the transfer of the beneficial interest in the loan among lenders while
maintaining MERS as the nominal holder of the deed.
The plaintiffs’ lawsuit is also premised on the fact that MERS
does not have a financial interest in the loans, which, according to
plaintiffs, renders MERS’s status as a beneficiary a sham. MERS is
not involved in originating the loan, does not have any right to
payments on the loan, and does not service the loan. MERS relies on
its members to have someone on their own staff become a MERS
officer with the authority to sign documents on behalf of
MERS . . . As a result, most of the actions taken in MERS’s own
name are carried out by staff at the companies that sell and buy the
beneficial interest in the loans.
Id. at *2. Ultimately the Ninth Circuit rejected plaintiffs’ arguments. The court
first found that plaintiffs had “not identified any representations made to them
about the MERS system and its role in their home loans that were false and
material.” Id. at *4. Nor did the plaintiffs allege with specificity that they “were
misinformed about MERS’s role as a beneficiary, or the possibility that their loans
would be resold and tracked through the MERS system.” Id. The plaintiffs also
“failed to show that the designation of MERS as a beneficiary caused them any

28

injury by, for example, affecting the terms of their loans, their ability to repay the
loans, or their obligations as borrowers.” Id.
Moreover, the Ninth Circuit also found that plaintiffs’ claims were
undercut by the terms in [the] standard deed of trust, which describe
MERS’s role in the homeloan. For example the plaintiffs allege they
were defrauded because MERS is a “sham” beneficiary without a
financial interest in the loan, yet the disclosures in the deed indicate
that MERS is acting “solely as nominee for Lender and Lender’s
successors and assigns” and holds “only legal title to the interest
granted by Borrower in this Security Instrument.” Further, while the
plaintiffs indicate that MERS was used to hide who owned the loan,
the deed states that the loan or a partial interest in it “can be sold one
or more times without prior notice to Borrower,” but that “[i]f there is
a change in Loan Servicer, Borrower will be given written notice of
the change” as required by consumer protection laws. Finally, the
deed indicates that MERS has “the right to foreclose and sell the
property.” By signing the deeds of trust, the plaintiffs agreed to the
terms and were on notice of the contents. . . . In light of the explicit
terms of the standard deed signed by [plaintiffs] it does not appear that
the plaintiffs were misinformed about MERS’s role in their home
loans.
Id. at *5.
The Ninth Circuit in Cervantes also considered and rejected the
“splitting of the note” theory of liability:
Even if we were to accept the plaintiffs’ premises that MERS is a
sham beneficiary and the note is split from the deed, we would reject
the plaintiffs’ conclusion that, as a necessary consequence, no party
has the power to foreclose. The legality of MERS’s role as a
beneficiary may be at issue where MERS initiates a foreclosure in its

29

own name, or where the plaintiffs allege a violation of state recording
and foreclosure statutes based on the designation. . . .
Further, the notes and deeds are not irreparably split: the split only
renders the mortgage unenforceable if MERS or the trustee, as
nominal holders of the deeds are not agents of the lenders.
Id. at *7.
The mortgage at issue in the instant case contains identical language
to the mortgage at issue in Cervantes. Specifically, the mortgage put Plaintiffs on
notice that MERS had “the right to foreclose and sell the Property.” (Mortgage at
3.) The mortgage also provided that MERS was acting “solely as nominee for
Lender and Lender’s successors and assigns” (id. at 2) and holds “only legal title to
the interest granted by Borrower in this Security Instrument” (id. at 3).
Accordingly, per the mortgage, MERS was granted the right to foreclose on the
property on behalf of the lenders in the event of Plaintiffs’ default. Plaintiffs were
aware of MERS’s role as they signed the mortgage. See Cervantes, 2011 WL
3911031 at *5. Therefore, it seems that Plaintiffs’ theories of liability are not
tenable in light of Cervantes.
X.

Dismissal without Prejudice
Pursuant to Rule 15(a)(2), courts should “freely give leave [to amend]

when justice so requires.” Further, “requests for leave should be granted with

30

extreme liberality.” Moss v. U.S. Secret Service, 572 F.3d 962, 792 (9th Cir.
2009). “Dismissal without leave to amend is improper unless it is clear . . . that the
complaint could not be saved by an amendment.” Id. “However, ‘liberality in
granting leave to amend is subject to several limitations.’” Cafasso, U.S. ex rel. v.
Gen. Dynamics C4 Sys., 637 F.3d 1047, 1058 (9th Cir. 2011) (quoting Ascon
Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989)). “Those
limitations include undue prejudice to the opposing party, bad faith by the movant,
futility, and undue delay.” Id. (citing Ascon Props, 866 F.2d at 1160). “Further,
‘[t]he district court’s discretion to deny leave to amend is particularly broad where
plaintiff has previously amended the complaint.’” Id. (quoting Ascon Props, 866
F.2d at 1160).
The Court recognizes that it may be possible for Plaintiffs to state a
claim if provided the opportunity to amend their Complaint. The Complaint is
therefore DISMISSED WITHOUT PREJUDICE as against all Defendants in
this action with leave to amend no later than thirty (30) days from the filing of this
Order.4 Failure to do so and to cure the pleading deficiencies will result in
dismissal of this action with prejudice. Plaintiffs are advised that the amended

4

Plaintiffs are advised, however, to take a close look at Cervantes before
refiling their Complaint.
31

complaint must clearly state how each of the named defendants have injured them,
and it must also clearly identify the statutory provisions under which Plaintiffs’
claims are brought consistent with this Order. In granting leave to amend the
Court does not here limit Plaintiffs’ amended pleading only to the causes of action
presently contained in the Complaint—Plaintiffs may allege new theories of
liability if they so choose.
CONCLUSION
For these reasons the Court DISMISSES WITHOUT PREJUDICE
Plaintiffs’ Complaint against all Defendants, DENIES AS MOOT Defendants’
Motion for Summary Judgment (Doc. # 9), and VACATES the Hearing on this
matter set for October 14, 2011.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, October 13, 2011.

_____________________________
David Alan Ezra
United States District Judge

Fitzgerald et al. v. American Savings Bank, F.S.B. et al., Cv. No. 11-00199 DAERLP; ORDER: (1) DISMISSING PLAINTIFFS’ COMPLAINT WITHOUT
PREJUDICE AS TO ALL DEFENDANTS; (2) DENYING AS MOOT
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT; AND (3)
VACATING THE HEARING
32