Ocwen Loan Servicing, LLC v. BFP Investment 5, LLC

Filing 33

ORDER that 30 Motion to Lift Stay is DENIED. Signed by Judge Andrew P. Gordon on 11/17/2017. (Copies have been distributed pursuant to the NEF - MMM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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OCWEN LOAN SERVICING, LLC,

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Case No. 2:15-cv-01841-APG-CWH

Plaintiff,
v.
BFP INVESTMENTS 5, LLC,
Defendant.

ORDER DENYING MOTION TO LIFT
STAY
(ECF No. 30)

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This is one of many disputes over the effect of a nonjudicial foreclosure sale conducted by

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a homeowners association (“HOA”) after the prior owner failed to pay HOA assessments. On

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August 12, 2016, a divided Ninth Circuit panel in Bourne Valley Court Trust v. Wells Fargo Bank

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held that Nevada Revised Statutes Chapter 116’s HOA nonjudicial foreclosure scheme, as it

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existed before the statutory scheme was amended in 2015, “facially violated mortgage lenders’

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constitutional due process rights.” 832 F.3d 1154, 1155 (9th Cir. 2016); but see id. at *6-11

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(Wallace, J., dissenting). That holding was based on Bourne Valley’s interpretation of Nevada

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law. See id. at 1159 (rejecting proposed interpretation of Nevada Revised Statutes § 116.31168(1)

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to incorporate § 107.090 requiring mandatory notice to junior lienholders). I previously stayed

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this case pending the conclusion of the proceedings at the U.S. Supreme Court in Bourne Valley

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and in Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home, 388 P.3d 970 (Nev.

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2017). ECF No. 27. Those proceedings concluded when the Supreme Court denied certiorari.

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Ocwen Loan Servicing, LLC thus moves to lift the stay. However, the Supreme Court of
Nevada recently accepted the following certified question from a judge in this district:
Whether NRS § 116.31168(1)’s incorporation of NRS § 107.090 required a
homeowner’s association to provide notices of default and/or sale to persons or
entities holding a subordinate interest even when such persons or entities did not
request notice, prior to the amendments that took effect on October 1, 2015?

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Nev. S. Ct. Case No. 72931 (Order Accepting Certified Question, Directing Briefing and

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Directing Submission of Filing Fee, filed June 13, 2017); Bank of New York Mellon v. Star Hill

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Homeowners Ass’n, 2:16-cv-02561-RFB-PAL, ECF No. 41. Given the Supreme Court of

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Nevada’s recent unpublished decisions, it is likely that the court will hold that § 116.31168(1)’s

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incorporation of § 107.090 required the HOAs to provide notice to junior lienholders, thus

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undermining the lynchpin of Bourne Valley’s due process analysis. See, e.g., PNC Bank v. Saticoy

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Bay LLC Series 5633 Desert Creek, Case No. 70909, at n.1 (Nev. Oct. 13, 2017) (unpublished)

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(noting that the court observed in SFR Investments Pool 1, LLC v. U.S. Bank, 334 P.3d 408, 419

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(Nev. 2014) that Nevada Revised Statutes § 116.31168 “incorporated NRS 107.090 (2013),

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which required that notices be sent to a deed of trust beneficiary” and citing to the Bourne Valley

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dissent); see also Premier One Holdings, Inc. v. Wells Fargo Bank, Case No. 70638 (Nev. Jul. 11,

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2017) (unpublished) (same). To save the parties’ and the court’s resources, I deny the motion to

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lift the stay, and I extend the stay of all proceedings in this case pending the Supreme Court of

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Nevada’s answer to the certified question.

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A district court has the inherent power to stay cases to control its docket and promote the

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efficient use of judicial resources. Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936);

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Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007).

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When determining whether to stay a case pending the resolution of another case, I must consider

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(1) the possible damage that may result from a stay, (2) any “hardship or inequity” that a party

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may suffer if required to go forward, (3) “and the orderly course of justice measured in terms of

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the simplifying or complicating of issues, proof, and questions of law” that a stay will engender.

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Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005). I find that a Landis stay is

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appropriate here.

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The crux of the parties’ dispute is whether the HOA foreclosure sale extinguished the

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deed of trust. If the HOA sale was void because Chapter 116 is facially unconstitutional, then the

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parties’ dispute is, in large part, resolved or at least simplified. The Bourne Valley opinion

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resolves this question one way in federal court while the Saticoy Bay decision resolves the same

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question the opposite way in state court. I entered the prior stay in anticipation of the U.S.

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Supreme Court potentially resolving this untenable conflict, but the Supreme Court denied

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certiorari.

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That does not end the matter, however. When a federal right depends on the interpretation

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of state law (as the due process challenge under a Bourne Valley analysis does), the federal courts

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must apply the interpretation of that law given by the state’s highest court. Hemmings v.

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Tidyman’s Inc., 285 F.3d 1174, 1203 (9th Cir. 2002). If the state’s highest court has not decided

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the particular issue, then “federal courts must predict how the state’s highest court would resolve

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it.” Id. Bourne Valley thus is only a prediction of how the Supreme Court of Nevada would

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decide the issue. And that prediction binds lower courts only “in the absence of any subsequent

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indication” from the state’s highest court that the Ninth Circuit panel’s “interpretation was

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incorrect.” Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 885 n.7 (9th Cir. 2000). Absent

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an about-face by the Supreme Court of Nevada, that court’s response to the certified question

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likely will constitute “subsequent indication” that Bourne Valley’s interpretation of Nevada law

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was incorrect.

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In this district, as the jurisprudence and the parties’ arguments in this area evolve, the

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parties file new motions or move to supplement the pending briefs, burdening our already-busy

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docket. The Supreme Court of Nevada’s answer to the certified question will inspire more

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motions and supplements. I have many cases involving HOA foreclosures and the parties in

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those cases no doubt will eventually raise the Bourne Valley due process argument. Staying this

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case pending the answer to the certified question will permit the parties to present arguments and

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evidence in the context of complete and resolved precedent, and it will allow me to evaluate the

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claims in light of this legal authority. Consequently, a continued stay will simplify the

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proceedings and promote the efficient use of the parties’ and the court’s resources.

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Resolving the claims or issues in this case before the answer to the certified question

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could impose a hardship on the parties. A stay will prevent unnecessary or premature briefing on

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what impact the Supreme Court of Nevada’s answer will have on this case.

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The only potential damage that may result from a stay is that the parties will have to wait

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longer for resolution of this case and any motions that they intend to file in the future. But a

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delay would also result from new briefing that may be necessitated once the Supreme Court of

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Nevada issues its opinion. So a stay will not necessarily lengthen the life of this case. Any

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possible damage that a stay may cause is minimal.

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The stay may be short. The reply brief before the Supreme Court of Nevada is due by the

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end of this month. The length of this stay is tied to the Supreme Court of Nevada’s issuance of

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its answer to the certified question, and it is not indefinite. Once that decision is issued, any party

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may move to lift the stay.

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IT IS THEREFORE ORDERED that plaintiff Ocwen Loan Servicing, LLC’s motion to

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lift stay (ECF No. 30) is DENIED. Once the Supreme Court of Nevada has answered the

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certified question in Bank of New York Mellon v. Star Hill Homeowners Association, 2:16-cv-

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2561-RFB-PAL/Nev. S. Ct. Case No. 72931, any party may move to lift this stay.

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DATED this 17th day of November, 2017.

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ANDREW P. GORDON
UNITED STATES DISTRICT JUDGE

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