Federal Housing Finance Agency et al v. Las Vegas Development Group

Filing 39

ORDER denying 29 Motion to Dismiss. Signed by Chief Judge Gloria M. Navarro on 9/11/2017. (Copies have been distributed pursuant to the NEF - JM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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FEDERAL HOUSING FINANCE AGENCY, )
in its capacity as Conservator of Federal
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National Mortgage Association and Federal
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Home Loan Mortgage Corporation; FEDERAL )
NATIONAL MORTGAGE ASSOCIATION; )
and FEDERAL HOME LOAN MORTGAGE )
CORPORATION,
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Plaintiffs,
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vs.
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LAS VEGAS DEVELOPMENT GROUP,
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LLC; LVDG, LLC; and LAS VEGAS
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DEVELOPMENT, LLC,
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Defendants.
)
)

Case No.: 2:16-cv-1187-GMN-CWH
ORDER

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Pending before the Court is the Motion to Dismiss,1 (ECF No. 29), filed by Defendants

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LVDG, LLC (“LVDG”), and Las Vegas Development, LLC (“Las Vegas Development”)

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(collectively “Defendants”). Plaintiffs Federal Home Loan Mortgage Corporation (“Freddie

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Mac”), Federal Housing Finance Agency (“FHFA”), and Federal National Mortgage

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Association (“Fannie Mae”) (collectively “Plaintiffs”) filed a Response, (ECF No. 34), and

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Defendants filed a Reply, (ECF No. 37). For the reasons discussed below, Defendants’ Motion

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is DENIED.

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Although Defendants framed their Motion as a motion to dismiss, based on the relief for which the Motion is
asking, the Motion is in fact a motion to sever. Accordingly, the Court will interpret the Motion as a motion to
sever.

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I.

BACKGROUND
This case arises out of HOA foreclosure sales of nine properties where Plaintiffs’ liens

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continued to encumber the properties during the sales. (First Am. Compl. (“FAC”) ¶ 1, ECF

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No. 16). Plaintiffs allege that “Defendants are the current record owner of at least nine

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properties that have been the subject of completed HOA [f]oreclosure [s]ales and are

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encumbered by [Plaintiffs’] [l]iens.” (Id. ¶ 5). As such, Plaintiffs assert that 12 U.S.C.

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§ 4617(j)(3), the Federal Foreclosure Bar that permits Plaintiffs to have an interest in the

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properties, preempts NRS § 116.3116, which extinguishes Plaintiffs’ interest. (See, e.g., id.

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¶ 56). Plaintiffs therefore allege that the HOA foreclosure sales did not extinguish Plaintiffs’

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interests in the properties. (Id.).

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On May 26, 2016, Plaintiffs filed their Complaint, (ECF No. 1), and on July 14, 2016,

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Plaintiffs filed their First Amended Complaint. In their First Amended Complaint, Plaintiffs

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allege causes of action for: (1) declaratory relief and (2) quiet title. (FAC ¶¶ 40–59). On

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October 18, 2016, Defendants filed the instant Motion seeking to sever themselves from the

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present action. (See generally Mot. to Dismiss (“MTD”)).

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II.

LEGAL STANDARD

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Rule 20(a)(2) of the Federal Rules of Civil Procedure provides that, in order for more

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than one defendant to be joined together in an action, the defendants must meet two specific

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requirements: (1) the right to relief asserted against each defendant must arise out of or relate to

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the same transaction or occurrence or series of transactions or occurrences; and (2) a question

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of law or fact common to all defendants must arise in the action. Fed. R. Civ. P. 20(a)(2). “If

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the test for permissive joinder is not satisfied, a court, in its discretion, may sever the misjoined

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parties, so long as no substantial right will be prejudiced by the severance.” Coughlin v. Rogers,

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130 F.3d 1348, 1350 (9th Cir. 1997) (citing Fed. R. Civ. P. 21). If the district court chooses to

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sever the case, it may do so by dismissing “all but the first named [defendant] without prejudice

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to the institution of new, separate lawsuits [against] the dropped [defendants].” Id.

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III.

DISCUSSION

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Defendants assert that they should be severed because Plaintiffs’ First Amended

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Complaint “focus[es] on particularized houses, mortgages, deeds of trust, HOA’s [sic],

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collection agents, association sales, buyers, sellers, and details surrounding the . . . alleged

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‘purchase’ of 9 completely different loans secured by 9 completely different real properties

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owned by 3 different Defendants.” (MTD 8:23–26) (emphasis in original).
Conversely, Plaintiffs contend that this case concerns “a central legal issue: whether 12

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U.S.C. § 4617(j)(3) (the “Federal Foreclosure Bar”) precludes the extinguishment of Fannie

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Mae’s and Freddie Mac’s property interests via HOA foreclosure sales.” (Resp. 3:2–5).

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Plaintiffs continue that the three Defendants “are Nevada limited liability corporations created

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by the same principals and that share similar names, the same business address, the same

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counsel, and conduct the same business of purchasing properties that have been the subject of

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HOA foreclosure proceedings.” (Id. 3:8–11). Plaintiffs therefore assert that joinder is favored

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here.

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Rule 20(a)’s rule for joinder of parties “is designed to promote judicial economy and

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reduce inconvenience, delay, and added expense.” Coughlin, 130 F.3d at 1351. The Ninth

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Circuit has indicated that Rule 20 must be “construed liberally in order to promote trial

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convenience and to expedite the final determination of disputes, thereby preventing multiple

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lawsuits.” See, e.g., League to Save Lake Tahoe v. Tahoe Reg’l Planning Agency, 558 F.2d 914,

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917 (9th Cir. 1977); see also United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 724 (1966)

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(noting that the “impulse is toward entertaining the broadest possible scope of action consistent

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with fairness to the parties; joinder of claims, parties and remedies is strongly encouraged”).

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To meet Rule 20(a)’s first requirement, Plaintiffs’ claims must arise from “the same

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transaction, occurrence, or series of transactions or occurrences.” Fed. R. Civ. P. 20(a)(2)(A).

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“By its terms, this provision requires factual similarity in the allegations supporting [p]laintiffs’

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claims.” Visendi v. Bank of Am., N.A., 733 F.3d 863, 870 (9th Cir. 2013). In Visendi, the Ninth

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Circuit held that “[s]uch factual similarity is absent here” because the case involved “over 100

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distinct loan transactions with many different lenders,” the loans “were secured by separate

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properties scattered across the country,” and “some of the properties, but not all, were sold in

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foreclosure.” Id.

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Here, Defendants do not have such disparate factual differences. The nine properties in

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this case all had their loans purchased by either Fannie Mae or Freddie Mac. (Compl. ¶ 28).

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The properties were not “scattered across the country,” or even scattered across the State of

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Nevada, but were all located in the greater Las Vegas area, including Henderson and North Las

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Vegas. (Id.). Finally, all of the properties in this case were sold in foreclosure. (Id. ¶¶ 29–37).

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Although Defendants attempt to draw parallels to the facts in Visendi to support severance, the

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Court disagrees and instead holds that there is sufficient factual similarity here to adequately

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meet Rule 20(a)’s first requirement.

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To meet Rule 20(a)’s second requirement, Plaintiffs’ claims must present “any question

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of law or fact common to all defendants.” Fed. R. Civ. P. 20(a)(2)(B). In Visendi, the Ninth

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Circuit held that the plaintiffs’ claims of invalid assignment, mistake, and negligence “each

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require particularized factual analysis,” and that the plaintiffs’ merely alleging that the

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defendants violated these same laws in comparable ways was insufficient under Rule 20(a).

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Visendi, 733 F.3d at 870.

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Here, Defendants allege that there is no question of law common to all defendants

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because Plaintiffs’ claims include quiet title, which would require a particularized factual

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analysis. (See MTD 8:9). Conversely, Plaintiffs state that the main common issue is not quiet

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title, but rather “whether the Federal Foreclosure Bar preempts the State Foreclosure Statute,”

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which directly affects Defendants’ title. (Resp. 11:8–10). The Court agrees with Plaintiffs.

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Because Plaintiffs’ claim of quiet title is dependent on whether the Federal Foreclosure Bar

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applies—a claim that is factually uniform to all properties at issue in this action—the Court

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finds that Rule (20)(a)’s second requirement is met. Accordingly, Defendants’ Motion seeking

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to sever Defendants is denied.

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IV.

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CONCLUSION
IT IS HEREBY ORDERED that Defendants’ Motion to Dismiss, (ECF No. 29), is

DENIED.
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DATED this _____ day of September, 2017.

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___________________________________
Gloria M. Navarro, Chief Judge
United States District Judge

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