Hall v. MortgageIt, Inc. et al
Filing
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ORDER Denying without prejuduce 57 Motion to Amend. Granting 50 and 53 Motion's to Dismiss. Signed by Judge James C. Mahan on 7/6/2011. (Copies have been distributed pursuant to the NEF - SLR)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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CYNTHIA HALL,
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2:09-CV-2233 JCM (GWF)
Plaintiff,
v.
MORTGAGEIT, INC., et al.,
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Defendants.
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ORDER
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Presently before the court is defendants Countrywide Home Loans, Inc.’s and Mortgage
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Electronic Registration Systems, Inc.’s (hereinafter “MERS”) motion to dismiss for failure to state
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a claim (doc. #50). Defendant MortgageIt, Inc., has joined Countrywide’s and MERS’ motion. (Doc.
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#61). Defendant Chicago Title has also moved to dismiss the complaint (doc. #53). Plaintiff
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Cynthia Hall has opposed defendants Countrywide Home Loans, Inc.’s and MERS’ motion to
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dismiss and alternatively has requested leave to amend (doc. #57), to which defendants Countrywide
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and MERS have filed a reply (doc. #60).
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Plaintiff’s complaint (doc. #1) stems from the alleged wrongful foreclosure on her property
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located at 1361 Cranston Ct., Las Vegas, Nevada. In January of 2007, plaintiff executed two
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promissory notes with MortgageIt and secured the notes with first and second deeds of trust (doc.
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#50). The deeds of trust were recorded with MERS as the nominee of the beneficiary (doc. #50).
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In July of 2008, plaintiff’s home was foreclosed upon due to her default on the first deed of trust
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(doc. #50).
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James C. Mahan
U.S. District Judge
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Plaintiff commenced her suit in 2009 in the Eighth District Court of Clark County, Nevada,
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which was then later removed to the MERS multi-district litigation (“MDL”) in the U.S. District
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Court, District of Arizona (doc. #57). The Honorable Judge Teilborg of the MERS court remanded
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to this court claims unrelated to the formation and/or operation of the MERS system on May 17,
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2010 (doc. #26). The MDL court recently dismissed plaintiff’s remaining non-remanded claims due
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to plaintiff’s failure to respond to defendants’ March 2011 motion to dismiss (doc. #51).
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As to the remanded claims before this court, a month after the defendants filed a motion to
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dismiss these claims in June of 2010, plaintiff filed for bankruptcy. Thereafter, plaintiff filed a
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motion to stay (doc. #45). Because the property was sold before bankruptcy was filed, defendants
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filed a motion to lift the stay, which was granted when plaintiff failed to file an opposition and failed
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to appear for the hearing on the motion (doc. #51). Thus, the defendants’ present motions are
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properly before the court as the stay has now been lifted (doc. #51).
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The remanded claims, which are the subjects of the instant motion to dismiss, consist of
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claims (3) fraudulent concealment, (4) unconscionability, and part of claim (5) unjust enrichment
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(doc. #26). These claims deal with the “loan origination and collection practices, or otherwise stray
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from the common factual core of the MDL (multi-district litigation).” (Doc. #26).
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I.
Chicago Title’s Motion to Dismiss
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Defendant Chicago Title is also seeking to dismiss remanded claims three, four, and five
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against it (doc. #53). Plaintiff to date has not filed a response to defendant Chicago Title’s motion
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to dismiss. Local Rule 7-2 treats an opposing party’s failure “to file points and authorities in
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response to any motion” as “consent[ing] to the granting of the motion.” But see Ghazali v. Moran,
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46 F.3d 52 (9th Cir. 2003) (suggesting courts cannot dismiss a case solely because a party did not
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comply with the local rules). However, in considering the present motion along with the Ghazali
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factors, the court dismisses the claims against defendant Chicago Title without prejudice.
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II.
Motion to Dismiss
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“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted
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as true, to ‘state a claim for relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.Ct. 1937,
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James C. Mahan
U.S. District Judge
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1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Where a
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complaint pleads facts that are ‘merely consistent’ with a defendant’s liability, it ‘stops short of the
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line between possibility and plausibility of entitlement to relief.’” Id. (citing Twombly, 550 U.S. at
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557). However, where there are well pled factual allegations, the court should assume their veracity
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and determine if they give rise to relief. Id. at 1950.
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A.
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Plaintiff’s third claim for relief, fraudulent concealment, alleges that defendants failed to
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inform the plaintiff that, based solely on her stated income, her credit rating, and the ratio of her
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assets and liabilities, she could not qualify for the subject loans.
Fraudulent Concealment
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Fraudulent concealment occurs when a seller of real or personal property purposely conceals
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information about the item being purchased that would be material to the purchaser’s decision to
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purchase the property. See Villa v. First Guar. Financial Corp., No. 2:09-cv-02161-GMN-RJJ, 2010
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WL 2953954, at *4 (D. Nev. July 23, 2010). The claim consists of five elements:
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(1) [T]he defendant concealed or suppressed a material fact; (2) the defendant
was under a duty to disclose the fact to the plaintiff; (3) the defendant
intentionally concealed or suppressed the fact with the intent to defraud the
plaintiff; that is, the defendant concealed or suppressed the fact for the
purpose of inducing the plaintiff to act differently than she would have if she
had known the fact; (4) the plaintiff was unaware of the fact and would have
acted differently if she had known of the concealed or suppressed fact; (5)
and, as a result of the concealment or suppression of the fact, the plaintiff
sustained damages.
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Dow Chemical Co. v. Mahlum, 970 P.2d 98, 110 (Nev. 1998), overruled in part on other grounds
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by GES, Inc. v. Corbitt, 21 P.3d 11 (Nev. 2001).
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However, the claim asserted in the complaint is essentially one of “suitability” labeled as
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“fraudulent concealment.” See also Villa, 2010 WL 2953954, at *4 (suggesting that the plaintiffs’
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fraudulent concealment claim, on the basis that the lender failed to inform plaintiffs that they would
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not qualify for the loan, was essentially a “suitability” claim for relief). Plaintiff alleges that the
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defendants had a duty to issue a loan suitable to plaintiff’s financial situation. She also claims that
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she was not adequately informed about the full terms of the loan agreement, interest rate, risks and
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disadvantages of the loan. However, the court, viewing the complaint in a light most favorable to
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James C. Mahan
U.S. District Judge
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the plaintiff, will evaluate the claim under both standards.
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Assuming this is a “suitability” claim, which concerns the relationship between lenders and
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borrowers, lenders do not owe borrowers fiduciary duties, a finding of which would be required to
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sustain such a claim. See Giles v. Gen. Motors Acceptance Corp., 494 F.3d 865, 882 (9th Cir. 2007)
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(suggesting that the Nevada Supreme Court would not recognize a fiduciary relationship as a matter
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of law between a lender and borrower); Weingartner v. Chase Home Fin. LLC, 707 F.Supp.2d 1276,
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1288 (D. Nev. 2010) (noting that a fiduciary duty exists in Nevada between doctor and patient,
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between attorney and client, but not between lender and debtor – indeed such parties are
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“adversaries, not fiduciaries.”).
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Moreover, the lender’s efforts to determine creditworthiness and ability to repay by a
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borrower are for “the lender’s protection, not the borrower’s.” Renteria v. United States, 452
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F.Supp.2d 910, 922–23 (D. Ariz. 2006) (noting that the borrower has a duty to rely on their own
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judgment and risk assessment to determine whether or not to accept the loan). Furthermore, even
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assuming such a duty existed, plaintiff does not allege that she relied on defendants to verify her
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income. Rather, plaintiff included the information on the loan application herself. Finally, the terms
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of the loan are clear; although somewhat complex, they are not concealed.
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Even evaluating the claim as one of fraudulent concealment, the claim fails. Plaintiff does
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not explain how the defendants could be responsible for any misrepresentations or omissions when
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they did not participate in the loan origination process or communicate with the plaintiff regarding
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loan origination whatsoever (doc. #50). To meet the standard of Federal Rule of Civil Procedure
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9(b), the plaintiff must present details regarding the “time, place, and manner of each act of fraud,
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plus the role of each defendant in each scheme.” Lancaster Com. Hosp. v. Antelope Valley Hosp.
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Dist., 940 F.2d 397, 405 (9th Cir. 1991). Plaintiff has failed to meet this higher pleading standard.
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Accordingly, claim three is dismissed.
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B.
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Plaintiff has dismissed her unconscionability claim against defendants MERS and
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Countrywide Home Loans, Inc. (doc. #57). She seeks to amend this claim only as to defendant
Unconscionability
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James C. Mahan
U.S. District Judge
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MortgageIt (doc. #57).
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Unconscionability is not a claim for relief, but rather is a defense to a breach of contract
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claim; therefore, plaintiff’s claim will be treated as a request for declaratory judgment that the
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mortgage is unconscionable and unenforceable. See Villa, 2010 WL 2953954, at *5. Generally, both
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procedural and substantive unconscionability must be present in order for a court to exercise its
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discretion to refuse to enforce a contract on this ground. Burch v. County of Washoe, 49 P.3d 647,
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650 (Nev. 2002); see also Villa, 2010 WL 2953954, at *5 (stating plaintiffs’ claim for
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unconscionability with regards to their mortgage default was implausible because there was no
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procedural unconscionability, hence the court need not consider substantive unconscionability).
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Procedural unconscionability exists when a party lacks a meaningful opportunity to agree
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to a contract’s terms; it often involves the use of fine print or complicated, misleading language.
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D.R. Horton, Inc. v. Green, 96 P.3d. 1159, 1162 (Nev. 2004). A contract is substantively
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unconscionable when the contract’s terms and the circumstances at the time of the execution are so
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one-sided as to oppress or unfairly surprise an innocent party. Guerra v. Hertz Corp., 504 F.Supp.2d
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1014, 1021 (D. Nev. 2007) (citation omitted).
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Here, the plaintiff’s claim for unconscionability fails. She does not claim she lacked a
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meaningful opportunity to agree to the contract terms, nor does she allege that the terms of the loan
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agreement are substantively unconscionable. Furthermore, the procedures and processes concerning
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home loans and mortgages are strictly regulated by numerous federal acts including the Truth In
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Lending Act (“TILA”), 15 U.S.C. § 1601 et seq.; the Home Ownership and Equity Protection Act
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(“HOEPA”), within Regulation Z, 12 C.F.R. § 226; and the Real Estate Settlement Procedures Act
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(“RESPA”), 12 U.S.C. § 2601 et seq. The defendants have to abide by these standards to ensure that
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the loans made to the plaintiff are substantively fair. Plaintiff has not alleged that the defendants
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failed to do so here.
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Even had plaintiff asserted claims under TILA or RESPA on the face of the complaint, her
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claims are nonetheless time-barred under the applicable one-year statute of limitations. See 15
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U.S.C. § 1640(e); 12 U.S.C. § 2614. Therefore plaintiff’s claim of unconscionability is dismissed
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James C. Mahan
U.S. District Judge
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as to defendant MortgageIt.
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C.
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Plaintiff’s fifth claim for relief alleges unjust enrichment (doc. #1). Unjust enrichment is a
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quasi-contract theory that allows the court to prevent “the unjust retention of money or property of
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another against the fundamental principles of justice or equity and good conscience.” Asphalt
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Products Corp. v. All Star Ready Mix, Inc., 898 P.2d 699, 701 (Nev. 1995). However, “an action
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for unjust enrichment is not available when there is an express written contract, because no
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agreement can be implied when there is express agreement.” Leasepartners Corp. v. Robert L..
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Brooks Trust, 924 P.2d 182, 187 (Nev. 1997).
Unjust Enrichment
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Whereas the court has declined to rescind the contract as unconscionable under claim four,
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an “express agreement” exists between the parties. Accordingly, plaintiff has not alleged a viable
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claim of unjust enrichment, and claim five is dismissed. See Topaz Mut. Co., Inc. v. Marsh, 839
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P.2d 606, 613 (Nev. 1992) (finding that an unjust enrichment cannot lie where there is an express
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written agreement) (citation omitted).
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III.
Motion to Amend
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In plaintiff’s reply (doc. #57), she asks this court for leave to amend her complaint. Federal
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Rule of Civil Procedure 15(a) provides that leave to amend “shall be freely given when justice so
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requires,” and absent a showing of an “apparent reason,” such as undue delay, bad faith, dilatory
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motive, prejudice to the defendants, futility of the amendments, or repeated failure to cure
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deficiencies in the complaint by prior amendment. Moore v. Kayport Package Express, Inc., 885
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F.2d 531, 538 (9th Cir. 1989). Furthermore, the local rules of federal practice in the District of
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Nevada require that a plaintiff submit a proposed amended complaint along with a motion to amend.
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LR 15-1(a).
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Here, plaintiff has not complied with Local Rule 15-1(a) and has failed to attach a proposed
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amended complaint to her motion. However, the court also notes that this does not provide, on its
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own, sufficient grounds to deny the motion to amend.
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noncompliance with a local rule, the district court is required to weigh several factors: “(1) the
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James C. Mahan
U.S. District Judge
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Before dismissing an action for
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public’s interest in expeditious resolution of litigation; (2) the court’s need to manage its docket; (3)
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the risk of prejudice to the defendants; (4) the public policy favoring disposition of cases of their
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merits; and (5) the availability of less drastic sanctions.” Ghazali v. Moran, 46 F.3d 52, 53 (9th Cir.
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1995) (citing Henderson v. Duncan, 779 F.2d 1421, 1423 (9th Cir. 1986)).
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Weighing the factors identified in Ghazali, the court finds that amendment would be futile.
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Plaintiff has not shown how amending the complaint will cure any of its defects listed above. See
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Universal Mortg. Co., Inc. v. Prudential Ins. Co., 799 F.2d 458, 459-460 (9th Cir. 1986) (stating that
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there is no need to grant amendment when it would be futile) (citation omitted).
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Accordingly,
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that plaintiff Hill’s motion to
amend (doc. #57) be, and the same hereby is, DENIED without prejudice.
IT IS FURTHER ORDERED that defendants MortgageIt Inc.’s, Countrywide Home Loans,
Inc.’s, and MERS’ motion to dismiss (doc. #50) be, and the same hereby is, GRANTED.
IT IS FURTHER ORDERED that defendant Chicago Title’s motion to dismiss (doc. #53)
be, and the same hereby is, GRANTED.
DATED July 6, 2011.
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UNITED STATES DISTRICT JUDGE
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James C. Mahan
U.S. District Judge
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