Gibson et al v. Credit Suisse Securities USA, LLC et al

Filing 511

MEMORANDUM DECISION AND ORDER Defendant Cushman & Wakefield's Motion to Exclude the Expert Testimony of Douglas W. Haney and D. Michael Mason (Docket No. 434 ) is DENIED, without prejudice. Signed by Judge Ronald E. Bush. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jp)

UNITED STATES DISTRICT COURT
DISTRICT OF IDAHO

L.J. GIBSON, BEAU BLIXSETH, AMY KOENIG,
VERN JENNINGS, MARK MUSHKIN,
MONIQUE LEFLEUR, and GRIFFEN
DEVELOPMENT, LLC, JUDY LAND, and
CHARLES DOMINGUEZ, each individually, and
on behalf of others similarly situated
Plaintiffs,

Case No.: CV 10-1-EJL-REB
REPORT AND RECOMMENDATION
RE:
PLAINTIFFS’ RENEWED MOTION
FOR PARTIAL SUMMARY
JUDGMENT
(Docket No. 421)

vs.
CREDIT SUISSE AG, a Swiss corporation;
CREDIT SUISSE SECURITIES (USA), LLC, a
Delaware limited liability company, CREDIT
SUISSE FIRST BOSTON, a Delaware limited
liability corporation; CREDIT SUISSE CAYMAN
ISLAND BRANCH, an entity of unknown type;
CUSHMAN & WAKEFIELD, INC., a Delaware
corporation and DOES 1 through 100 inclusive,
Defendants.

PLAINTIFFS’ MOTION FOR LEAVE
TO FILE FOURTH AMENDED
COMPLAINT ADDING 60
PLAINTIFF PARTIES
(Docket No. 451)
MEMORANDUM DECISION AND
ORDER RE:
DEFENDANT CUSHMAN &
WAKEFIELD’S MOTION TO
EXCLUDE THE EXPERT
TESTIMONY OF DOUGLAS W.
HANEY AND D. MICHAEL MASON
(Docket No. 434)

Now pending before the Court are (1) Plaintiffs’ Renewed Motion for Partial Summary
Judgment (Docket No. 421); (2) Plaintiffs’ Motion for Leave to File Fourth Amended Complaint
Adding 60 Plaintiff Parties (Docket No. 451); and (3) Defendant Cushman & Wakefield, Inc.’s
(“Cushman & Wakefield”) Motion to Exclude the Expert Testimony of Douglas W. Haney and
D. Michael Mason (Docket No. 434). Having heard the oral argument of the parties, carefully
considered the record, and otherwise being fully advised, the undersigned issues the following
Report and Recommendation and Memorandum Decision and Order:

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 1

I. GENERAL BACKGROUND
Plaintiffs purchased real property and homes in resort-style developments known as Lake
Las Vegas, Tamarack, Ginn Sur Mer, and Yellowstone Club. This case has many moving parts,
as reflected by the breadth of the docket; however, the general backdrop of Plaintiffs’ claims
relates to the manner in which Defendant Credit Suisse,1 with appraisals prepared by Defendant
Cushman & Wakefield, marketed and implemented financing for each of the above-referenced
developments.
More specifically, Plaintiffs allege that Credit Suisse was the mastermind behind a “Loan
to Own” scheme – made possible by Cushman & Wakefield’s creative, yet allegedly unlawful
(more on that later), Total Net Value (“TNV”) appraisal methodology – to (1) induce the
developers of certain first-class and exclusive master-planned communities (“MPCs”) to borrow
huge sums of money through non-recourse loans from Credit Suisse, and (2) persuade these
same developers to take out their equity in these developments, all the while capitalizing on
misleading future growth projections.
Credit Suisse recognized that these MPCs would, in turn, be burdened with excessive and
unsustainable debt, Plaintiffs contend, and Credit Suisse not only expected, but intended for the
loans to fail, leaving each of the developments incomplete and undercapitalized. According to
Plaintiffs, this deliberate strategy generated tens of millions of dollars in upfront “loan fees” for
Credit Suisse, while also providing Credit Suisse with unfettered access to each MPC’s
confidential, proprietary, and key business information – allowing Credit Suisse to assume

1

Unless otherwise indicated, the term “Credit Suisse” is used to collectively describe
Defendants Credit Suisse AG, Credit Suisse Securities (USA), LLC, Credit Suisse First Boston,
and Credit Suisse Cayman Island Branch.
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 2

lender advisory and “co-developer” roles with the MPCs as it directed their development, and to
influence the MPCs’ capital decisions until their inevitable financial collapse.
In the meantime, having “syndicated” its creditor status and, thus, transacting away the
allegedly preordained financial consequences of default, Plaintiffs further submit that Credit
Suisse intentionally positioned itself to take over the MPCs as a result of the subsequent, but
nonetheless anticipated, bankruptcy and/or receivership proceedings – the apparent genesis of
Plaintiff’ “Loan to Own” characterization.
II. RELEVANT PROCEDURAL BACKGROUND
There has never been a question as to the gravamen of Plaintiffs’ case, as previously
described by this Court:
[T]he Loan to Own scheme, premised upon misleading appraisals, initially justified
massive loans, but, later, so burdened the developer’s borrowers, that the resorts’
occupants were left with unfinished amenities once those developers defaulted on
their loans – allegedly, all by design. According to Plaintiffs, Credit Suisse’s and
Cushman & Wakefield’s participation in the Loan to Own scheme violated
customary real estate valuation practices to Plaintiffs’ ultimate detriment . . . .
2/17/11 Rpt. & Recomm., p. 49 (Docket No. 106). This theory, and Plaintiffs’ related sharp
critique of Cushman & Wakefield’s appraisals, is confirmed by a sampling of the allegations
within Plaintiffs’ Third Amended Complaint, where, for example, Plaintiffs state in relevant part:
¶6.

Unbeknownst to the MPCs, however, each Cushman & Wakefield appraisal
(used as an illicit inducement toward a ruinous Credit Suisse loan) was
thoroughly and materially false and deceptive because it massively inflated
the resorts’ calculated net worth of operations, and their corresponding
ability to incur and adequately service loan debt without destroying their
viability:
(i)

Specifically, the Cushman & Wakefield appraisals employed an
inappropriate – and expressly illegal – appraisal methodology termed
“Total Net Value”,” which presented MPCs with purported
operational values and projected revenues for their enterprises that

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 3

had not been discounted in such a way (e.g., back to present day
value) so as to provide accurate and reliable bases for configuring
reasonable debt load capacity; in point of fact, the TNV appraisal
methodology was so inherently misleading to sales and loan
transactions that it failed to conform to applicable United States
appraisal and lending standards, as mandated by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, 12
U.S.C. § 3331, et seq. (“FIRREA”), and the Uniform Standards of
Professional Appraisal Practice (“USPAP”) adopted by each
applicable state.
(ii)

Credit Suisse and Cushman & Wakefield deployed their seductive
TNV appraisals with full and explicit knowledge of their illegality;
indeed, Credit Suisse was so acutely aware of the appraisals’
prohibition under United States law that it created and attempted to
use a sham overseas “subsidiary” entity – denominated “Credit
Suisse Cayman Island Branch” – to try and funnel any loan
transactions with MPCs through this offshore operation to avoid the
purview of both FIRREA and USPAP; notably, on information and
belief, the Credit Suisse Cayman Island Branch was at all relevant
times nothing more than a postal drop, with no actual cognizable
banking operations.

¶13.

And as contemplated by Credit Suisse, the bank has resultantly achieved total
control and/or ownership of Tamarack, Lake Las Vegas, Ginn Sur Mer, and
Yellowstone after their falls – at hugely discounted prices – by directly or
indirectly receiving such rights through various bankruptcies, receiverships,
and by using sham debtors in possession to avoid its responsibility as the
actual developer in control of these MPCs. Credit Suisse approached each
MPC requesting that it be allowed to re-appraise each resort to more
accurately reflect its true value for which it could base a loan to each of them.
As more fully described below and as to each MPC, the appraisals were in
violation of FIRREA and USPAP and were part of a scheme to use a
methodology that violated state and federal laws, appraisal guidelines, and
approved standards. All of the appraisals for which the loans were based
were grossly inflated and designed to take over each resort as part of a preplanned scheme.

¶21.

As part of its scheme, Credit Suisse knew and planned in early 2004, that
once it made its loans based on inflated appraisals that violated USPAP and
FIRREA, that it was critical to announce directly to existing property owners
and prospective property owners that it had made loans to each of the MPCs
because the use of the name and bank, Credit Suisse, as lender and lending
advisor, would entice existing property owners to build-out their properties
and for others to purchase properties in each MPC. . . . .

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 4

¶55.

Credit Suisse, in anticipation of the economic slowdown, did not want to be
the sole developer for the MPCs as it would have to fund and maintain all of
the obligations to the Plaintiffs and property owners once the developers
failed or were foreclosed upon as a result of the inflated Credit Suisse loan.
Knowing that its loans were based on grossly inflated appraisals that violated
USPAP and FIRREA, Credit Suisse knew that the resorts would ultimately
fail. Yet, this was part of the plan. . . . .

¶77.

Cushman & Wakefield knew or should have known that the Credit Suisse
loans for which it was preparing these TNV and Total Net Proceeds
[(“TNP”)] appraisals would encumber not only the developers’ interest in the
MPCs, but also the bundle of rights that each prospective and existing
homeowner had in each MPC’s amenities . . . . And because the values
concluded to in the . . . appraisals were inflated far above what would have
been concluded to in a legitimate “as-is” market value, FIRREA and USPAP
compliant appraisal, Cushman & Wakefield knew or should have known that
the amount of the Credit Suisse loans for which these . . . appraisals were
being prepared, would be far in excess of what would be allowed under
prudent lending practices.

¶78.

By appraising the value of Plaintiffs’ bundle of rights in the MPCs, Cushman
& Wakefield owed a duty to Plaintiffs to appraise the MPCs according to
FIRREA and USPAP and not to appraise the MPCs according to the TNV
and TNP methodology which was in derogation of all accepted appraisal
standards and which resulted in a grossly inflated appraisal value.

¶79.

The appraisals were inflated and violated USPAP and FIRREA in the
following ways:
a.

Based on the information contained within the appraisals, the
appraisal transmittal letters between Credit Suisse and Cushman &
Wakefield, and the Credit Agreements between the MPCs and Credit
Suisse, Cushman & Wakefield, Credit Suisse and the appraisals
themselves were all subject to the requirements of FIRREA and
USPAP. In fact, the Lake Las Vegas, Yellowstone Club, Tamarack
and Ginn Sur Mer appraisals stated that they complied with USPAP
when in fact they did not. The Ginn Sur Mer appraisal even stated
that it complied with FIRREA when in fact it did not.

b.

In part, the statutes and regulations of which Defendants and the
appraisals were subject to, include without limitation, the following:
MT-ADC § 24.207.402; MCA § 37-54-303; MCA § 37-54-201;

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 5

IDAPA §§ 24.18.01.004, 24.18.01.700; I.C. § 54-4106; NAC
§ 645C.400; N.R.S. § 645C.140; N.R.S. § 645C.280; N.R.S.
§ 645C.170; 12 U.S.C. § 331; 12 U.S.C. § 3339; 12 C.F.R. § 323.4;
12 C.F.R. § 34.44; 12 C.F.R. § 564.4; 12 C.F.R. § 225.64; 12 C.F.R.
§ 564.4.
c.

In relevant part, and without limitation, the appraisals prepared by
Cushman & Wakefield for Credit Suisse for the MPCs violated
USPAP and FIRREA by concluding to the unheard of TNV or TNP
valuation premise which failed to properly discount to present value
and over a period of time the projected revenues to be generated from
each MPC, and which therefore resulted in a much higher value
conclusion than would have occurred under a legitimate “as-is”
market value conclusion.

¶98.

With its Loan to Own strategy and prey identified, Credit Suisse confronted
the single most difficult obstacle to its otherwise assuredly profitable
enterprise – the fact that applicable United States regulations and standards
prohibited the very type of unlawful appraisal methodologies that Credit
Suisse required for the highly leveraged loan product. To the contrary, the
provisions of FIRREA and USPAP mandated that before they could originate
their contemplated loans, Credit Suisse’s American-based banking facilities
must create and supply accurate and appropriately informative business/real
estate appraisals of the MPCs and their included collateral in compliance
with the appraisal standards of USPAP and FIRREA. Such appraisals were
intended to, and would in fact, educate the MPCs about the relative size of
financial risks entailed in any Credit Suisse loan.

¶99.

Cognizant that USPAP and FIRREA-compliant appraisals would be certain
to alert the MPCs of the massive and destructive over-leveraging that Credit
Suisse planned to offer – and the near inevitability of debilitating debt
service, default, and failure – Credit Suisse invented an insidious yet
ingenious avenue for their evasion. It first determined to utilize (and
possibly create for such sole purpose) an offshore bank “branch” in the
Cayman Islands for the putative origination of any Loan to Own products.
In this manner, Credit Suisse sought to structure the transactions so that
United States statutes and regulations purportedly did not apply, and the
protections that those statutes offered to the MPCs (and to any ultimate
holders of the risk of default on their debt . . .) could be circumvented.

¶101. Having thus attempted to achieve shadow immunity from United States
financial laws with its Cayman Island branch, Credit Suisse sought to involve
a collusive partner in its Loan to Own plot – indeed, a co-conspirator without
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 6

which the entire scheme would have been impossible. Specifically, Credit
Suisse knew well that: (1) its ability to seduce MPCs into borrowing
oppressive, commercially unreasonably loan amounts hinged almost
exclusively on an apparent business appraisal which could justify them, and;
(2) an accurate and appropriately informative appraisal would spell almost
certain rejection of any excessive loan offered. Consequently, Credit Suisse
required a purportedly independent appraisal house which could be depended
on to supply each Loan to Own victim with a tailored appraisal of its
business that would make even a fatally burdensome loan amount appear
easily manageable and low-risk. Moreover, the appraisal house in question
would need to produce such misleading numbers with full knowledge that it
violated governing United States laws and standards.
¶102. Although Credit Suisse purported to employ its Cayman Islands branch to
fund these loans in an artifice to evade United States laws, its domestic
banking entities were the ones responsible for ordering the TNV and TNP
appraisals and marketing, negotiating, and originating the loans. . . . .
¶104. Together, Defendants Credit Suisse and Cushman & Wakefield devised the
TNV appraisal method that would serve as their primary tool of deception in
the solicitation and sale of the Loan to Own loans. This appraisal form was
directly intended by Defendants to unrealistically inflate and overvalue the
apparent worth of MPCs, making them seem comfortably able to assume the
excessive amounts of debt load which would otherwise look ill-advised or
even crippling.
TNV appraisals accomplished this dissimulation
predominantly by failing to apply standardized discounting methods which
were critically and concretely required by all applicable United States
financial/real estate standards and regulations, inclusive of FIRREA and
USPAP. In so doing, TNV directly violated these governing laws and
regulations in a material manner which was well known to both Credit Suisse
and Cushman & Wakefield, and rendered the methodology inappropriate and
deceptive for purposes of communicating about the loans which Defendants
intended to sell to all the subject MPCs.
¶106. Yet, despite their patent understanding of the illegality and fundamentally
misleading nature of TNV, both Defendants agreed and proceeded to utilize
that appraisal methodology in furtherance of their Loan to Own enterprise.
As time would demonstrate, the deceptive artifice worked to perfection,
causing the downfall of every MPC to receive it, directly engendering the
derogation of the [Plaintiffs’] rights and interests.
Pls.’ TAC, ¶¶ 6, 13, 21, 55, 77-79, 98-99, 101-102, 104, 106 (Docket No. 131).

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 7

Consistent with these same allegations, Plaintiffs now move for partial summary
judgment, zeroing in on Cushman & Wakefield’s appraisals:
Partial summary judgment is proper in this case because there are no genuine issues
of material fact and because Plaintiffs are entitled to judgment as a matter of law.
Specifically, the appraisals issued by Cushman & Wakefield were required, by
federal law, federal regulation, state law, state regulation, and, by agreement, to be
market value appraisals performed in accordance with USPAP. The appraisals that
were issued employed a novel methodology dreamed-up jointly by Credit Suisse and
Cushman & Wakefield. That method was deceptive because it purported to report
a value without actually reporting value. Finally, without the appraisals, Credit
Suisse could not have accomplished its goal of entering into the credit agreements
with the four Master Planned Communities (MPCs)
Pls.’ MPSJ., pp. 1-2 (Docket No. 140).2 Plaintiffs posit that, “without the appraisals, Credit
Suisse could not have accomplished its goal of entering into the credit agreements with the four
MPCs.” Id. at p. 2. In turn, Plaintiffs ask this Court to make nine distinct (but related, in part)
rulings (the “Requested Rulings”) as a matter of law:
Ruling No. 1: Each of the loan transactions at issue was a real estate-related
financial transaction which (A) a federal financial institutions regulatory agency
regulated; and (B) required the services of an appraiser.
Ruling No. 2: Each initial appraisal, and subsequent appraisal, performed by
Cushman & Wakefield for Credit Suisse was required to be a “market value”
appraisal (as defined by 12 C.F.R. §§ 225.62(a) and (g)) prepared in accordance with
the Uniform Standards of Professional Appraisal Practice (“USPAP”).

2

Plaintiffs originally moved for partial summary judgment on May 13, 2011. See Pls.’
MPSJ (Docket No. 140). On November 30, 2011, U.S. District Judge Edward J. Lodge
“mooted” that motion, “without prejudice with leave to Plaintiffs to later renew the arguments
raised therein once Defendants’ [then-pending] motions to dismiss are resolved and, if
applicable, Defendants have answered Plaintiffs’ applicable Complaint.” 11/30/11 MDO, p. 5
(Docket No. 180); see also Pls.’ Mot. for Suspension of Further Proceedings on Pls.’ MPSJ
(Docket No. 216) (requesting leave to suspend Motion for Partial Summary Judgment until
renewal and after Court order on class certification); 5/18/12 Order (granting Plaintiffs’
unopposed motion to suspend). Defendants’ motions to dismiss are now resolved (along with
Plaintiffs’ intervening motion to certify class) and, on October 7, 2013, Plaintiff filed the atissue Renewed Motion for Partial Summary Judgment, relying largely upon the briefing
originally submitted in support of their original Motion for Partial Summary Judgment. See Pls.’
Renewed MPSJ (Docket No. 421).
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 8

Ruling No. 3: Each initial appraisal, and subsequent appraisal, was not an
“appraisal” under 12 C.F.R. § 225.62(a) and did not comply with USPAP.
Ruling No. 4: The “Total Net Value” (or Total Net Proceeds) methodology did not
set forth a “market value” under 12 C.F.R. §§ 225.62(a) and (g), and did not comply
with USPAP.
Ruling No. 5: The initial Yellowstone Club appraisal, and any subsequent appraisal,
performed by Cushman & Wakefield for Credit Suisse was required to be prepared
in accordance with the Uniform Standards of Professional Appraisal Practice
(“USPAP”) the Standards of Professional Practice and the Code of Ethics of the
Appraisal Institute because Cushman & Wakefield and Credit Suisse agreed that
each appraisal would be prepared in accordance with USPAP, the Standards of
Professional Practice and the Code of Ethics of the Appraisal Institute.
Ruling No. 6: Each initial appraisal, and subsequent appraisal, performed by
Cushman & Wakefield for Credit Suisse was required to be compliant with USPAP
because the relevant State licensing boards’ rules and regulations required the
appraisers to issue appraisals that complied with USPAP.
Ruling No. 7: Credit Suisse and Cushman & Wakefield jointly designed, developed,
implemented, and utilized the Total Net Value (or Total Net Proceeds) methodology.
Ruling No. 8: Each appraisal that employed the Total Net Value (or Total Net
Proceeds) methodology was deceptive because it simultaneously (1) reported a
value; and (2) failed to report a value.
Ruling No. 9: Cushman & Wakefield substantially assisted Credit Suisse in
accomplishing Credit Suisse’s goal of entering the credit agreements with the
borrowers at each of the four MPCs.
Id. at pp. 2-3; see also Mem. in Supp. of Pls.’ MPSJ, pp. 8-10 (Docket No. 140, Att. 1).
Defendants oppose Plaintiffs’ efforts to secure the Requested Rulings and, hence, the
entirety of Plaintiffs’ Renewed Motion for Partial Summary Judgment – arguing that the loans to
the four MPCs were not subject to FIRREA and, therefore, could not have violated FIRREA or
USPAP. See Credit Suisse Opp. to Renewed MPSJ, pp. 6-17 (Docket No. 432); Cushman &
Wakefield Opp. to Renewed MPSJ, pp. 10-18 (Docket No. 433). In doing so, Defendants also

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 9

challenge Plaintiffs’ use of two appraiser expert opinions/declarations (from Douglas Haney and
Michael Mason) concerning the legal legitimacy of the appraisals preceding the four loans, with
Cushman & Wakefield separately moving to exclude their respective testimonies. See Cushman
& Wakefield Mot. to Exclude (Docket No. 434).
Independent of their Renewed Motion for Partial Summary Judgment, Plaintiffs also
move for leave to file a Fourth Amended Complaint to tweak a corporate designation, add 60
plaintiff parties to the action, and adjust the amount of claimed damages accordingly. See Pls.’
Mot. for Leave to File FAC, pp. 1-2 (Docket No. 451) (“The Fourth Amended Complaint differs
from the Third Amended Complaint in only the following respects: (1) The addition of 60 new
parties plaintiff, and the addition of the “LLC” designation to the titles of two of the Credit
Suisse Defendants; and (2) Amendment of the claim for damages to the sum of “approximately
$67 Million” for the total 69 Plaintiffs.”). Defendants oppose the amendments, generally
arguing that the proposed amended complaint not only is devoid of factual allegations relating to
any of the new plaintiffs (what they bought, when they bought, what they relied on, whether they
lost or made money, whether they sold or still hold their properties, etc.), and that such an
amendment will significantly multiply the nature of the proceedings and delay a case already
more than four years old. See Cushman &Wakefield Opp. to Mot. for Leave to File FAC, pp. 512 (Docket No. 458); Credit Suisse Joinder (Docket No. 459).
III. STANDARDS OF REVIEW
A.

Motion for Summary Judgment
A principal purpose of summary judgment is to “isolate and dispose of factually

unsupported claims . . . .” Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). It is “not a

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 10

disfavored procedural shortcut,” but is instead the “principal tool[ ] by which factually
insufficient claims or defenses [can] be isolated and prevented from going to trial with the
attendant unwarranted consumption of public and private resources.” Id. at 327. “[T]he mere
existence of some alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment; the requirement is that there be no genuine
issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).
The moving party bears the initial burden of demonstrating the absence of a genuine
issue of material fact. See Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001). To carry
this burden, the moving party need not introduce any affirmative evidence (such as affidavits or
deposition excerpts) but may simply point out the absence of evidence to support the nonmoving
party’s case. See Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 532 (9th Cir. 2000).
This shifts the burden to the nonmoving party to produce evidence sufficient to support a
jury verdict in its own favor. See Anderson, 477 U.S. at 256-57. The “party opposing summary
judgment must direct [the Court’s] attention to specific triable facts.” S. Cal. Gas Go., 336 F.3d
at 889. Thus, the nonmoving party must go beyond the pleadings and show “by [its] affidavits,
or by the depositions, answers to interrogatories, or admissions on file” that a genuine issue of
material fact exists. Celotex, 477 U.S. at 324. The Court must draw all justifiable inferences in
favor of the nonmoving party, including questions of credibility and the weight to be accorded
particular evidence, and must view the facts in the light most favorable to the nonmoving party.
See Kaelin v. Globe Communications Corp., 162 F.3d 1036, 1039 (9th Cir. 1998).
The party bearing the burden of proof at trial “must establish beyond controversy every
essential element of its . . . claim.” S. Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 11

Cir. 2003) (adopting decision of district court “as our own”). A moving party “may rely on a
showing that a party who does have the trial burden cannot produce admissible evidence to carry
its burden as to the fact.” Fed. R. Civ. P. 56(c)(1)(B) (advisory committee note).
B.

Motion to Amend
Federal Rule of Civil Procedure 15(a) provides that, once a responsive pleading has been

served, a party may amend its pleading “only with the opposing party’s written consent or the
court’s leave. The court should freely give leave when justice so requires.” Fed. R. Civ. P.
15(a)(2). The Ninth Circuit Court recognizes that “the underlying purpose of Rule 15 [is] to
facilitate [a] decision on the merits, rather than on the pleadings or technicalities,” and, therefore,
“Rule 15's policy of favoring amendments to pleadings should be applied with extreme
liberality.” Chudacoff v. University Med. Cent. of Southern Nev., 649 F.3d 1143, 1152 (9th Cir.
2011) (quoting United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981)).
The decision whether to grant or deny a motion to amend pursuant to Rule 15(a) rests in
the sole discretion of the trial court. The four factors that are commonly used to determine the
propriety of a motion for leave to amend are: (1) undue delay, bad faith or dilatory motive on the
part of the movant; (2) repeated failure to cure deficiencies by amendments previously allowed;
(3) undue prejudice to the opposing party by virtue of allowance of the amendment; and (4)
futility of amendment. See C.F. ex. Rel. Farnan v. Capistrano Unified School Dist., 654 F.3d
975, 985 n.5 (9th Cir. 2011) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).
However, “[t]hese factors . . . are not of equal weight in that delay, by itself, is
insufficient to justify denial of leave to amend.” Webb, 655 F.2d at 979 (“The mere fact that an
amendment is offered late in the case is . . . not enough to bar it.”); Bowles v. Beade, 198 F.3d

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 12

752, 758 (9th Cir. 1999). “Only where prejudice is shown or the movant acts in bad faith are
courts protecting the judicial system or other litigants when they deny leave to amend a
pleading.” Webb, 655 F.2d at 980 (citation omitted). The Ninth Circuit has held that although
all these factors are relevant to consider when ruling on a motion for leave to amend, the “crucial
factor is the resulting prejudice to the opposing party.” Howey v. United States, 481 F.2d 1187,
1189 (9th cir. 1973). Indeed, prejudice is the touchstone of the inquiry under Rule 15(a). See
Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). Ultimately,
“[u]nless undue prejudice to the opposing party will result, a trial judge should ordinarily permit
a party to amend its complaint.” Howey, 481 F.2d at 1190.
IV. REPORT/DISCUSSION
A.

Plaintiffs’ Renewed Motion for Partial Summary Judgment (Docket No. 421)
Plaintiffs’ Renewed Motion for Summary Judgment attacks the appraisals issued for each

of the four MPCs – namely, that they were misleading and illegal because they only estimated
the net case flow each MPC would generate over its lifetime (the allegedly suspect TNV
appraisal methodology), without discounting those revenues to present value and, therefore,
without opining as to the MPCs’ actual market value. As a result, Plaintiffs claim that the
appraisals violated FIRREA and USPAP; indeed, Plaintiffs’ Requested Rulings largely depend
upon a finding that the MPCs’ appraisals should have complied with FIRREA and USPAP.
1.

FIRREA and USPAP: What Are They?

Following the Savings and Loan financial failures and the resulting crises of the 1980s,
Congress passed FIRREA, responding to the adverse effects of “faulty and fraudulent” appraisals
upon the financial integrity of lending institutions – that is, the financial consequences of inflated

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 13

appraisals in the large number of Savings and Loan failures when property values did not cover
defaulted loans. See Bolden v. KB Home, 618 F. Supp. 2d 1196, 1202 (C.D. Cal. 2008) (citing
H. Rep. No. 101-54(I), at 311 (1989)). Therefore, Congress designed FIRREA:
to provide that Federal financial and public policy interests in real estate related
transactions will be protected by requiring that real estate appraisals utilized in
connection with federally related transactions are performed in writing, in
accordance with uniform standards, by individuals whose competency has been
demonstrated and whose professional conduct will be subject to effective
supervision.
Bolden, 618 F. Supp. 2d at 1202 (quoting 12 U.S.C. § 3331).
Relevant here, FIRREA’s enforcement provision provides:
[I]t shall be a violation . . . for a financial institution to seek, obtain, or give money
or any other thing of value in exchange for the performance of an appraisal by a
person who the institution knows is not a State certified or licensed appraiser in
connection with a federally related transaction.
12 U.S.C. § 3349(a). FIRREA goes on to define “financial institution” and “federally related
transaction” (as well as terms within those definitions) as follows:
•

Financial Institution: “[A]n insured depository institution . . . or an insured
credit union . . . .” 12 U.S.C. § 3350(7).
•

•

Insured Depository Institution: “[A]ny bank or savings association
the deposits of which are insured by the [Federal Deposit Insurance]
Corporation . . . .” 12 U.S.C. 1813(c)(2).

Federally Related Transaction: “[A]ny real estate-related financial
transaction which (A) a federal financial institutions regulatory agency or the
Resolution Trust Corporation engages in, contracts for, or regulates; and (B)
requires the services of an appraiser.” 12 U.S.C. § 3350(4).
•

Real Estate-Related Financial Transaction: “[A]ny transaction
involving (A) the sale, lease, purchase, investment in or exchange of
real property, including interests in property, or the financing thereof;
(B) the refinancing of real property or interest in real property; and
(C) the use of real property or interests in property as security for a

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 14

loan or investment, including mortgage-backed securities.”
U.S.C. § 3350(5).
•

12

Federal Financial Institutions Regulatory Agencies: “[T]he Board of
Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office of the Comptroller of the Currency,
the Office of Thrift Supervision, and the National Credit Union
Administration.” 12 U.S.C. § 3350(6).

Unwrapping these definitions reveals that FIRREA applies to (by attempting to assert
greater regulatory control over) federally insured deposits and federally insured/regulated
depository institutions. See, e.g., FIRREA, Pub.L. No. 101-73, §§ 101(9 & 10), 103 Stat. 183
(1989) (discussing FIRREA’s purpose as, in part, “strengthen[ing] the enforcement powers of
Federal regulators of depository institutions” and “strengthen[ing] the civil sanctions of criminal
penalties for defrauding or otherwise damaging depository institutions and their depositors”)
(emphasis added); H. Rep. No. 101-222, at 393 (1989) (FIRREA designed to “curtail
investments and other activities of savings associations that pose unacceptable risks to the
Federal deposit insurance funds”) (emphasis added); Bolden, 618 F. Supp. 2d at 1204 (“The
legislative history [of FIRREA] further indicates an interest in addressing fraudulent appraisals
by federal financial institutions.”) (emphasis added); S. Rep. 101-19, pp. 35-36 (1989) (“Many
loans and other transactions entered into by federally insured financial institutions are
collateralized by real estate. While repayment ability forms the primary determinant of
creditworthiness, the value of collateral and reasonable ratio of loan to collateral value provide
important protections against loss. Thus, the quality of real estate appraisals can significantly
affect the soundness of insured institutions and, ultimately, the Federal deposit insurance
system.”) (emphasis added); Wertz v. Washington Mut. Bank, 2008 WL 1882843, *1 (E.D. Cal.
2008) (“[Office of Thrift Supervision] also regulates the preparation and use of real estate
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 15

appraisals by federally regulated financial institutions pursuant to [FIRREA].”) (emphasis
added); U.S. v. Bank of New York Mellon, 941 F. Supp. 2d 438, 443 (S.D.N.Y. 2013) (“In
passing FIRREA, Congress sought to deter fraudulent conduct that might put federally insured
deposits at risk.”) (emphasis added); Fidelity Nat. Info. Solutions, Inc. v. Sinclair, 2004 WL
764834, *1 & *7 (E.D. Pa. 2004) (“[FIRREA] put in place protections to shore up the financial
integrity of federally insured financial institutions. . . . . The plain language of the statute and
the legislative history point to a singular purpose for FIRREA, which is not to regulate the entire
real estate appraisal process, but instead to protect federal financial institutions from the dangers
associated with fraudulent or poorly executed appraisals. Given this focus, it is unreasonable to
read FIRREA as making any indication, express or otherwise, that the statute was intended to
control real estate transactions beyond those involving federal financial institutions.”) (emphasis
added).
Hence, as to the above-referenced real estate appraisals issued in connection with
federally related transactions (defined supra), FIRREA authorizes federal financial institutions
regulatory agencies (defined supra) to “prescribe appropriate standards” for their performance.
12 U.S.C. § 3339. These agencies require, among other things, that such appraisals “[c]onform
to generally accepted appraisal standards as evidence by [USPAP]” – the “generally accepted
standards for professional appraisal practice in the United States.” Bolden, 618 F. Supp. 2d at
1202 (quoting 12 C.F.R. §§ 34.44, 225.64, 323.4, 564.4).
Among other things, USPAP requires an appraiser to “identify the type and definition of
value” when developing a real property appraisal. USPAP Standards Rule 1-2(c). Importantly,
USPAP recognizes the existence of various standards of value, including, but not limited to,

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 16

market value; therefore, so long as an appraisal discloses the type and definition of value
considered therein (be it market value or some other value), the appraisal is USPAP-compliant in
this discrete respect. See id; see also USPAP Definitions, attached as Exs. 14-17 to Abdollahi
Decl. (Docket No. 433, Att. 5) (“. . . . In appraisal practice, value must always be qualified – for
example, market value, liquidation value, or investment value.”); 2012-2013 USPAP FAQ No.
157, attached as Ex. 14 to Abdollahi Decl. (Docket No. 433, Att. 5) (“USPAP does not provide
any specific definition of value or endorse any particular source; it merely defines the general
components required to establish a market value definition. Sources of value definitions could
include, for example, a regulatory agency, a legal jurisdiction, an engagement letter, or a
textbook.”); 2012-2013 USPAP FAQ No. 159 & 2006 FAQ No. 88, attached as Exs. 14 & 15 to
Abdollahi Decl. (Docket No. 433, Att. 5) (“As part of identifying the problem to be solved, the
appraiser must identify the type and definition of value, but USPAP does not require the use of
any specific type or definition of value. . . . . The source of the definition of value could be as
simple as provided in the engagement letter.”) In other words, USPAP does not require that an
appraisal done in connection with the financing of real property be a market value appraisal. But
compare with 12 C.F.R. § 225.62(a) & (g) (FIRREA regulation defining appraisal as “. . . setting
forth an opinion as to the market value of an adequately described property . . . .”).
2.

The Requested Rulings Sought by Plaintiffs’ Renewed Motion for Partial
Summary Judgment Cannot Be Made as a Matter of Law

For the most part, Plaintiffs’ Requested Rulings require this Court to find as a matter of
law that FIRREA applied to the four MPC appraisals. Such a conclusion, however, depends on
many things, including a finding that these appraisals involve (a) financial institutions, and that
they were made (b) in connection with federally related transactions – as those terms are defined
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 17

by FIRREA (see supra). However, the record spread out beneath Plaintiffs’ Renewed Motion
for Partial Summary Judgment – reflected largely in the parties’ respective contentions (outlined
in tabular format below) – reveals questions of fact precluding a finding that Credit Suisse
(including its related entities) is a financial institution and/or that the appraisals involved here
involve federally related transactions. The pertinent details of the record that lay bare those
questions of fact include:
PLAINTIFFS

CREDIT SUISSE

CUSHMAN & WAKEFIELD

“Credit Suisse First Boston
(USA), Inc., Credit Suisse
(USA), Inc., and Credit Suisse
Securities (USA) LLC, were
regulated by, among others, the
Board of Governors of the
Federal Reserve System.”
Mem. in Supp. of Pls.’ MPSJ,
p. 7 (Docket No. 140, Att. 1).

“Accordingly, FIRREA by its
explicit terms applies only to
loans made by insured
depository institutions. None of
the Credit Suisse Defendants
accept federally-insured
deposits; FIRREA was entirely
inapplicable to the loans and is
irrelevant to this case.” Credit
Suisse Opp. to Renewed MPSJ,
p. 2 (Docket No. 432).

“The loans were arranged by
Credit Suisse’s Cayman Islands
Branch, which is not regulated
under FIRREA.” Cushman &
Wakefield Opp. to Renewed
MPSJ, p. 1 (Docket No. 433).

“However, as will be shown,
Plaintiffs believe Credit Suisse
misled the Court when it stated
that no member of any of the
‘lending groups’ in any of the
credit agreements was
‘federally-regulated.’” Mem. in
Supp. of Pls.’ MPSJ, p. 13, n.3
(Docket No. 140, Att. 1).

“NONE OF THE CREDIT
SUISSE ENTITIES
INVOLVED IN THE
TRANSACTION ARE
INSURED DEPOSITORY
INSTITUTIONS . . . . . None of
those [Credit Suisse Defendant]
entities are or were insured
depository institutions.” Credit
Suisse Opp. to Renewed MPSJ,
p. 3 (Docket No. 432) (emphasis
in original).

“[A]ll of the Credit Agreements
were entered into by CS
Cayman. That entity was not
(and has never been) regulated
by any of the relevant
regulatory entities. . . . .
Because the loans were arranged
and made by an entity not
covered by FIRREA, they were
not subject to FIRREA’s
appraisal requirements.”
Cushman & Wakefield Opp. to
Renewed MPSJ, pp. 11-12
(Docket No. 433).

“Therefore, every U.S.-based,
and federally-regulated Credit
Suisse entity (such as Credit
Suisse Securities (USA) LLC,
and Credit Suisse First Boston,
LLC) were members of the
lending groups.” Mem. in
Supp. of Pls.’ MPSJ, pp. 13-14
(Docket No. 140, Att. 1).

“None of the Credit Suisse
Defendants is an insured
depository institution; no part of
the funds dispensed to any of the
four MPCs consisted of insured
deposits.” Credit Suisse Opp. to
Renewed MPSJ, p. 6 (Docket
No. 432).

“The relevant facts are that the
loans were arranged and funded
by an entity that was outside the
scope of FIRREA. . . . Thus,
the loans were not ‘federally
related transactions.’” Cushman
& Wakefield Opp. to Renewed
MPSJ, p. 12 (Docket No. 433).

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 18

“In its filings with the
Securities & Exchange
Commission, Credit Suisse
represented that Credit Suisse
Securities (USA) LLC, and
Credit Suisse First Boston,
LLC were ‘subject to
significant bank regulatory
restrictions [. . .] imposed
pursuant to [. . .] regulations
and interpretations of [The
Board of Governors of the
Federal Reserve System],’ the
Gramm-Leach-Bliley Act of
1999 (GLBA) and ‘related
Board [The Board of
Governors of the Federal
Reserve System] regulations.’”
Mem. in Supp. of Pls.’ MPSJ,
p. 14 (Docket No. 140, Att. 1).

“The Credit Suisse Defendants
do not accept insured deposits
and they are not ‘insured
depository institutions’ subject
to the restrictions and
enforcement mechanisms of
Title XI of FIRREA. Thus, the
loans at issue were not subject to
FIRREA and thus cannot have
violated FIRREA.” Credit
Suisse Opp. to Renewed MPSJ,
p. 8 (Docket No. 432).

“Moreover, Plaintiffs have not
shown that Credit Suisse First
Boston (USA), Inc. or Credit
Suisse Securities (USA), LLC
(the other identified affiliate)
was subject to regulation by any
of the relevant agencies for
purposes of the loan
transactions.” Cushman &
Wakefield Opp. to Renewed
MPSJ, pp. 12-13 (Docket No.
433).

“In addition to explicitly
including federally-regulated
Credit Suisse entities as
Lenders, the credit agreements
also defined Lenders to include
federally-regulated and insured
U.S. banks.” Mem. in Supp. of
Pls.’ MPSJ, p. 14 (Docket No.
140, Att. 1).

“The transactions at issue in this
case did not imperil federal
deposit insurance funds. Neither
FIRREA nor the FRB’s
implementing regulations apply
to Credit Suisse or to the MPC
loans.” Credit Suisse Opp. to
Renewed MPSJ, p. 10 (Docket
No. 432).

“FIRREA does not apply to the
loan transactions for an
additional (and independent)
reason - none of the relevant
Credit Suisse entities was a
depository institution that
accepts federally insured
deposits. . . . . Here, CS
Cayman, the signatory to the
loan transactions, did not accept
federally insured deposits when
the loans were made, and as
such was outside the realm of
FIRREA. Nor did any of the
Credit Suisse entities that
received the appraisals – Credit
Suisse First Boston, Credit
Suisse First Boston LLC, or
Credit Suisse Securities (USA)
LLC – accept federally insured
deposits from 2004-2006. As
such, FIRREA is irrelevant to
these entities and to the loan
transactions.” Cushman &
Wakefield Opp. to Renewed
MPSJ, p. 13, n.12 (Docket No.
433).

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 19

“Therefore, there is no genuine
issue of material fact as to
whether the lending group in
each transaction included
federally-regulated institutions,
and Plaintiffs respectfully
request that Ruling No. 1 be
granted.” Mem. in Supp. of
Pls.’ MPSJ, p. 14 (Docket No.
140, Att. 1).

“Plaintiffs never assert that
Credit Suisse was an insured
depository institution and,
likewise, never present a legal
argument as to why the
regulations they cite apply to
Credit Suisse.” Credit Suisse
Opp. to Renewed MPSJ, p. 12
(Docket No. 432).

“The appraisals themselves
were issued to the federallyregulated entities, Credit Suisse
First Boston and Credit Suisse
Securities (USA) LLC, for the
stated function of ‘potential
financing.’” Mem. in Supp. of
Pls.’ MPSJ, pp. 14-15 (Docket
No. 140, Att. 1).

“Plaintiffs have not pled and
cannot plead a federal financial
or public policy interest in a loan
made by a lending group, none
of which are federally-regulated
or insured by federal deposit
insurance funds, to a resort real
estate developer, allegedly with
adverse consequences for owners
of multi-million dollar resort
homes.” Credit Suisse Mot. to
Dismiss Pls.’ TAC, p. 22
(Docket No. 135).

“Moreover, Plaintiffs’
presumption that Credit Suisse
First Boston or Credit Suisse
Securities (USA), LLC is
‘federally regulated’ for
purposes of FIRREA is
incorrect, or at least disputed.
Credit Suisse First Boston is the
former name of Credit Suisse,
AG. Credit Suisse AG is (and
was) a Swiss banking
corporation regulated by the
Swiss Financial Market
Supervisory Authority. Credit
Suisse Securities (USA) LLC
(formerly known as Credit
Suisse First Boston, LLC) is not
a bank at all, but a Delaware
limited liability company.
Neither entity receives federally
insured funds. Nor was either
entity subject to regulation for
purposes of FIRREA. Cushman
& Wakefield Opp. to Renewed
MPSJ, pp. 14-15 (Docket No.
433).

“The effect of that duplicitous
act [involving Credit Suisse’s
Cayman Islands branch] does
not change the fact that the
appraisals were provided to
federally-regulated and insured
entities for the purpose of
financing. The inquiry ends
there.” Mem. in Supp. of Pls.’
MPSJ, p. 15 (Docket No. 140,
Att. 1).

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 20

“Issuing a non-FIRREA, nonUSPAP compliant appraisal to
a federally-regulated and
insured lending institution ‘for
purposes of financing’ is a
violation of FIRREA, USPAP,
and the state laws and
regulations that implemented
USPAP and their regulation of
appraisers.” Mem. in Supp. of
Pls.’ MPSJ, p. 15 (Docket No.
140, Att. 1).
“Rulings 1 and 2 should be
made because there is no
genuine issue of material fact
as to whether the transactions at
issue were real estate-related
financial transactions in excess
of $1,000,000 involving
lenders regulated by the Board
of the Federal Reserve.” Mem.
in Supp. of Pls.’ MPSJ, p. 17
(Docket No. 140, Att. 1).

The parties’ arguments and counter-arguments on the fundamental issue concerning the
extent (if any) of federal regulation surrounding the MPCs’ financing are like “ships passing in
the night.” It may be that the involved parties and the transactions themselves ultimately
implicate FIRREA; however, the current record does not make such a finding indisputably clear
to warrant this Court saying so as a matter of law. Without an affirmative finding that FIRREA
applied to the four MPC appraisals, Requested Ruling No. 1 is impossible. It is therefore
recommended that Plaintiffs’ Renewed Motion for Partial Summary Judgment be denied in this
respect.3

3

Plaintiffs’ alternate argument that a “federally regulated” or “insured U.S. bank” could
later be assigned allocations of interest in the MPCs’ loans is similarly lacking. See Mem. in
Supp. of Pls.’ MPSJ, p. 14 (Docket No. 140, Att. 1). Not only is the factual strength of such a
statement in question, given the affirmative denials of such made by Credit Suisse and Cushman
& Wakefield, but Plaintiffs cite no law supporting the notion that FIRREA applies to every
syndicated loan from the outset if a bank insured in connection with other, clearly applicable
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 21

Likewise, in the context of this case, any requirement that the at-issue appraisals discuss
market values presupposes FIRREA’s underlying application – said another way, without
FIRREA, there is no requirement that appraisers use a market value methodology. Because it
cannot be said on this record that FIRREA applies, and because USPAP allows an appraiser to
opine to other definitions of value, Requested Ruling No. 2 cannot be made. It is therefore
recommended that Plaintiffs’ Renewed Motion for Partial Summary Judgment be denied in this
respect.
The record is certain that (1) Cushman & Wakefield’s appraisals did not meet the
definition of “appraisal” under 12 C.F.R. § 225.62(a), and (2) the TNV/TNP methodology did
not set forth “market value” under 12 C.F.R. §§ 225.62(a) and (b). The Plaintiffs would say that
a ruling from the Court stating as much is, in part, what Requested Ruling Nos. 3 and 4 seek.
However, a “ruling” as to those factual details – without FIRREA’s statutory vestments – is of
no consequence otherwise and becomes simply an abstraction, especially when considering that
appraisals need not opine exclusively on market value under USPAP. So, even though Cushman
& Wakefield’s appraisals do not align with FIRREA’s requirements, it cannot be said that they
are inconsistent with USPAP as a matter of law, which is what the undersigned perceives is the
thrust of Requested Ruling Nos. 3 and 4. It is therefore recommended that Plaintiffs’ Renewed
Motion for Partial Summary Judgment be denied in this respect.4

transactions, might, at some indeterminate future time, purchase an interest in the paper of a loan
transaction not subject to FIRREA when it was made. Cf. 12 C.F.R. § 2265.65(b)(2)(ii) (“A
regulated institution also may accept an appraisal that was prepared by an appraiser engaged
directly by another financial services institution, if . . . [t]he regulated institution determines that
the appraisal conforms to the requirements of this subpart and is otherwise acceptable.”).
4

Similarly, through Requested Ruling No. 8, Plaintiffs ask the Court to conclude that the
TNV/TNP methodology was deceptive. To the extent this request is grounded upon either
FIRREA or USPAP, it is rejected for the reasons already discussed; to the extent this request is
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 22

Requested Ruling Nos. 5 and 6 also address the need for the Cushman & Wakefield
appraisals to comply with USPAP generally. Neither Credit Suisse nor Cushman & Wakefield
dispute this notion. See Credit Suisse Opp. to Renewed MPSJ, p. 17-18 (Docket No. 432);
Cushman & Wakefield Opp. to Renewed MPSJ, p. 19 (Docket No. 433). Still, both argue
against the entry of any related ruling without Plaintiff identifying how any such ruling is
dispositive or relevant to any of their causes of action. See id. The undersigned agrees that,
while there does not appear to be any dispute concerning the applicability of USPAP to
Cushman & Wakefield’s appraisals, such an affirmative finding is advisory in nature without a
context to other aspects of the case as it continues to evolve. There is no purpose, or appropriate
basis, to issue what is essentially only an advisory ruling, without either a procedural frame for
such a ruling (a claim for a declaratory judgment, for example) or some further tie to an ultimate
claim for relief. It is therefore recommended that Plaintiffs’ Renewed Motion for Partial
Summary Judgment be denied in this respect.
Finally, Requested Ruling No. 7 addresses the TNV’s development and the use by and
between Credit Suisse and Cushman & Wakefield; and Requested Ruling No. 9 addresses the
extent of Cushman & Wakefield’s assistance in syndicating the loans. To begin, not only are
such rulings fact-driven, but, additionally, Plaintiffs offer very little by way of evidence to
support these rather nuanced findings – above and beyond, that is, the undisputed fact that Credit
Suisse syndicated loans to the four MPCs and that Cushman & Wakefield performed initial
appraisals with respect thereto. See Credit Suisse Opp. to Renewed MPSJ, pp. 5-6 (Docket No.

based on something other than FIRREA or USPAP, it involves disputed issues of fact that
preclude a finding as a matter of law. It is therefore recommended that Plaintiffs’ Renewed
Motion for Partial Summary Judgment be denied in this respect.
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 23

432). The current record will not support a ruling of the nature sought in Requested Ruling Nos.
7 and 9. It is therefore recommended that Plaintiffs’ Renewed Motion for Partial Summary
Judgment be denied in this respect.5
B.

Plaintiffs’ Motion for Leave to File Fourth Amended Complaint (Docket No. 451)
In accord with this Court’s November 19, 2013 Case Management Order outlining a

January 31, 2014 deadline to join parties, Plaintiffs’ Motion for Leave to File Fourth Amended
Complaint operates as an attempt to add 60 new parties6 to the queue of Plaintiffs, along with a
corresponding increase in alleged damages. See Pls.’ Mot. for Leave to File FAC, pp. 1-2
(Docket No. 451).7 Whether to allow the requested amendment/joinder is within this Court’s
discretion. See supra.
Plaintiffs’ most recent amendment efforts do not contain any obvious indicia of undue
delay, bad faith, or dilatory motive. Rather, Plaintiffs seek their amendment consistent with the
Court’s mandated deadline for doing so (there also has been a related filing, apparently to
5

Cushman & Wakefield argues that the affidavits of Douglas Haney (Docket Nos. 59 &
68, Att. 1) and the expert declaration of D. Michael Mason (Docket No. 142), offered by
Plaintiffs in connection with their Renewed Motion for Partial Summary Judgment should be
rejected as improper. See Cushman & Wakefield Mot. to Exclude (Docket No. 434). While
certain of Cushman & Wakefield’s arguments in these respects have the undersigned’s attention
(particularly as to opinions relating to ultimate issues of law), this Recommendation that
Plaintiffs’ Renewed Motion for Summary Judgment be denied and that the related Requested
Rulings not be entered was made independent of the viability of Plaintiffs’ experts’ opinions.
Therefore, Cushman & Wakefield’s Motion to Exclude is denied as moot, without prejudice to
later renew, if necessary, at a later date.
6

Or a number closer to 89, if one follows the position of Cushman & Wakefield that the
married couples count as two Plaintiffs, not one. See Cushman & Wakefield Opp. to Mot. for
Leave to File FAC, p. 3, n. 1 (Docket No. 458). Plaintiffs do not seem to disagree. See Pls.’
Reply in Supp. of Mot. for Leave to File FAC, p. 2 (Docket No. 469).
7

Plaintiffs also look to add an “LLC” designation to the titles of two of the Credit Suisse
Defendants. See Pls.’ Mot. for Leave to File FAC, p. 1 (Docket No. 451). Credit Suisse does
not seem to object to this discrete request.
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 24

preserve those same “new” individuals’ claims, of a separate action in this Court (the “Barker”
action), which occurred after the denial of class certification). Further, the current proposed
amendment is more-or-less unrelated to Plaintiffs’ extensively-litigated, previous attempts at
amendment (since polished down by Defendants’ multiple motions to dismiss). Still, the
exponential increase in the number of Plaintiffs will inescapably substantially increase the
manageability issues of an already unwieldy and aging case. Such factors loom large when
considering Plaintiffs’ Motion for Leave to File Fourth Amended Complaint.
The relevant inquiry is not so much whether the additional parties will have their day in
court (given the companion Barker action), because all is not lost in the event Plaintiffs’ Motion
for Leave to File Fourth Amended Complaint is denied. Even so, efficiencies and conservation
of resources suggest that it makes little sense to start anew with Barker and “re-invent the wheel”
relative to these new parties’ clearly-interrelated factual and legal claims. Efficiency is the key
consideration, but only when any added Plaintiffs will be in the same procedural slot as the
existing Plaintiffs, with the latter’s same causes of action against Defendants. Plaintiffs’ counsel
suggested this to be the case during oral argument, commenting:
We concede that, if the 60 join, all the rulings that this Court has made relative to the
nine [existing Plaintiffs] are binding on the 60 and so we don’t enhance anybody’s
burden. The Defendants put in their briefing that, well, that will cause for delay
because there will be new motions to dismiss. Well, I certainly think Your Honor
can control that one. . . . . So, we have notice pleadings and we have pleadings and
we have pled that these 60 people have the same causes of action and the same
factual basis as do the original nine. Also, I can represent to the Court that to the
best of our knowledge, there’s not a single one of them that has any of those claims
in the causes of actions that were reserved for [Plaintiffs] L.J. Gibson, and I think
Beau Blixseth, and Amy Koenig. They were all the vanilla type as the rest of them.
4/29/14 Hrg. Tr., pp. 79-80 (Docket No. 492). If the opposite was true, what would be the point
of allowing the joinder by amendment of so many more parties now?
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 25

With this premise in mind, it bears emphasis that Plaintiffs’ Motion states in no uncertain
terms that the proposed Fourth Amended Complaint is but a “duplicate” of their original, pristine
Third Amended Complaint, with few exceptions (the simple listing of the 60 new parties,
organized by MPC; adding “LLC” to two of the Credit Suisse Defendants; and increasing the
damages amount). See Prop. FAC (Docket No. 451, Att. 1). A closer view, however, suggests
that the proposed Fourth Amended Complaint stakes more ground than it is entitled to occupy.
To begin, a comparison of the two (the proposed Fourth Amended Complaint and the Third
Amended Complaint) indicates that the proposed Fourth Amended Complaint is not so benignly
framed as Plaintiffs suggest. Moreover, there have been significant rulings made upon the
claims contained in the Third Amended Complaint since its April 22, 2011 filing. For example,
of the seven claims for relief in the Third Amended Complaint, two (fraud and negligent
misrepresentation) have been dismissed altogether; three (breach of fiduciary duty, unjust
enrichment, and violations of consumer protection statutes) remain only for Plaintiffs Gibson,
Blixseth, and Koenig; and just two (tortious interference with contract and negligence) are still
available to all the current Plaintiffs. See 3/30/12 Order, pp. 22-23 (Docket No. 210).
So, to be clear, granting Plaintiffs’ Motion for Leave to File Fourth Amended Complaint
would add 60 new Plaintiffs, but limit them to only two claims against Defendants: tortious
interference with contract and negligence.8 Duplication and additional proceedings would result,
lengthening any resolution further for the foreseeable future, to be sure. Nonetheless, when
considered against what would follow in the Barker case if no amendment was permitted, such a
resolution still advances the collective ball in a positive, economical, and more manageable way.

8

Not only did Plaintiffs’ counsel essentially admit to this during oral argument (see
supra), but Plaintiffs’ proposed Fourth Amended Complaint contains no factual specifics that
would revive any of the previously-dismissed claims – even if that was procedurally proper.
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 26

At the same time, allowing the requested amendment (at least as to the addition of new
parties) might unfairly compromise Defendants’ ability to raise underlying jurisdictional
challenges to these new parties’ individual claims, as any new claims are not subject to a classwide handling of the issues because of the Court’s denial of class certification. As of now, such
objections can be anticipated, but are impossible to foresee and adjudicate because of the lack of
factual particulars in Plaintiffs’ proposed Fourth Amended Complaint. For example, Plaintiffs’
proposed Fourth Amended Complaint does not identify where each new Plaintiff resides, to say
nothing of the absence of allegations relating to their respective lot purchases at the MPCs.
Taking all of these considerations into account, it is recommended that Plaintiffs’ Motion
for Leave to File Fourth Amended Complaint be denied, without prejudice, with the directive
that (1) Plaintiffs may renew their Motion for Leave to File Fourth Amended Complaint within
14 days of District Judge Lodge’s Order on this Report and Recommendation (or such other date
certain as determined by District Judge Lodge), should they chose to do so; (2) Plaintiffs be
permitted to conditionally add the proposed additional Plaintiffs; (3) the claims raised on behalf
of such proposed additional Plaintiffs be limited to tortious interference with contract and
negligence; and (4) Plaintiffs be required to include in any amended pleading those allegations
necessary to establish this Court’s jurisdiction over the new parties and their individual claims.9
After the filing of a new motion to amend containing a more finely-tuned, but still only
proposed amended complaint, the Defendants will then be free to object to the granting of such a
motion on futility grounds. They cannot, however, re-argue the points raised in either opposing
Plaintiffs’ original Motion for Leave to File Fourth Amended Complaint or matters previously

9

As previously-discussed, Plaintiffs should also be permitted to add the “LLC”
designation to the titles of two of the Credit Suisse Defendants.
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 27

argued in their motions to dismiss. From there, the Court will consider and decide whether to
allow (and if allowed, the final form of) a Fourth Amended Complaint. The case will then
proceed toward trial with the parties and claims that are put at issue. An updated scheduling
order to include a trial setting will follow.
V. RECOMMENDATION/ORDER
1.

Based on the foregoing, IT IS HEREBY RECOMMENDED that:
A.

Plaintiffs’ Renewed Motion for Partial Summary Judgment (Docket No.

421) be DENIED.
B.

Plaintiffs’ Motion for Leave to File Fourth Amended Complaint Adding

60 Plaintiff Parties (Docket No. 451) be DENIED, without prejudice, with the following
understanding moving forward:
i.

That Plaintiffs be permitted to renew their Motion for Leave to File

Fourth Amended Complaint within 14 days of U.S. District Judge Edward J. Lodge’s Order on
this Report and Recommendation (or such other date certain as determined by Judge Lodge),
should they chose to do so;
ii.

That Plaintiffs be permitted to conditionally add the proposed

additional Plaintiffs and the “LLC” designation to the titles of two of the Credit Suisse
Defendants;
iii.

That the causes of action raised on behalf of such proposed

additional Plaintiffs within any amended complaint be limited to two claims: tortious
interference with contract and negligence;
iv.

That Plaintiffs include in any amended complaint those allegations

necessary to establish this Court’s jurisdiction over the new parties and their individual claims;
REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 28

v.

That Defendants are permitted to oppose any renewed Motion for

Leave to File Fourth Amended Complaint, consistent with the Rules of Civil Procedure and this
District’s Local Civil Rules; and
vi.

That any opposition from Defendants to a renewed Motion for

Leave to File Fourth Amended Complaint not include arguments previously raised in either
opposing Plaintiffs’ original Motion for Leave to File Fourth Amended Complaint (beyond any
jurisdictional arguments) or moving to dismiss.
Pursuant to District of Idaho Local Civil Rule 72.1(b)(2), a party objecting to a
Magistrate Judge’s recommended disposition “must serve and file specific, written objections,
not to exceed twenty pages . . . within fourteen (14) days. . ., unless the magistrate or district
judge sets a different time period.” Additionally, the other party “may serve and file a response,
not to exceed ten pages, to another party’s objections within fourteen (14) days after being
served with a copy thereof.”
2.

Additionally, based on the foregoing, IT IS HEREBY ORDERED that Defendant

Cushman & Wakefield’s Motion to Exclude the Expert Testimony of Douglas W. Haney and D.
Michael Mason (Docket No. 434) is DENIED, without prejudice.
DATED: July 31, 2014

Honorable Ronald E. Bush
U. S. Magistrate Judge

REPORT AND RECOMMENDATION/MEMORANDUM DECISION AND ORDER - 29