Ditech Financial, LLC v. SFR Investment Pool 1, LLC et al

Filing 41

ORDER. IT IS THEREFORE ORDERED that this case is STAYED. Once the United States Supreme Court proceedings in Bourne Valley and Saticoy Bay have concluded, any party may move to lift this stay. IT IS FURTHER ORDERED that the pending 14 and 15 motions to dismiss are Denied without prejudice to their refiling within 20 days of the order lifting the stay. Signed by Judge Jennifer A. Dorsey on 03/01/2017. (Copies have been distributed pursuant to the NEF - NEV)

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1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 4 Ditech Financial, LLC, 5 Plaintiff 2:16-cv-01880-JAD-GWF Order Staying Case and Denying Motions Without Prejudice 6 v. 7 SFR Investment Pool 1, LLC, et al., 8 [ECF No. 14, 15] Defendants 9 10 11 As I noted in Freedom Mortgage v. Las Vegas Development Group,1 in the years 12 following Las Vegas’s real estate crash, lenders and investors were at odds over the legal effect 13 of a homeowners association’s (HOA’s) nonjudicial foreclosure of a superpriority lien on a 14 lender’s first trust deed. The Nevada Supreme Court settled the debate in SFR Investments Pool 15 1, LLC v. U.S. Bank,”2 making winners out of the investors who purchased foreclosure properties 16 in HOA sales and losers of the lenders who gambled on the opposite result, elected not to satisfy 17 the HOA liens to prevent foreclosure, and thus saw their interests wiped out by sales that often 18 yielded a small fraction of the loan balance. The Nevada Supreme Court recently reaffirmed the SFR principles in Saticoy Bay v. 19 20 Wells Fargo and expressly held that “the Due Process Clauses of the United States and Nevada 21 Constitutions are not implicated in an HOA’s nonjudicial foreclosure of a superpriority lien.”3 22 But when a Ninth Circuit panel considered the same issue in Bourne Valley Court Trust v. Wells 23 Fargo Bank, it held that Chapter 116’s nonjudicial foreclosure scheme “facially violated 24 25 26 27 28 1 Freedom Mortgage Corp. v. Las Vegas Dev. Grp., LLC, 106 F. Supp. 3d 1174, 1180 (D. Nev. 2015). 2 SFR Inv. Pool 1 v. U.S. Bank, 334 P.3d 408, 419 (Nev. 2014). 3 Saticoy Bay v. Wells Fargo, 133 Nev. Adv. Op. 5 (Jan. 26, 2017). 1 mortgage lenders’ constitutional due process rights” before it was amended in 2015.4 Parties in 2 both Bourne Valley and Saticoy Bay have indicated their intent to file petitions for certiorari in 3 the United States Supreme Court,5 so the constitutionality of portions of Nevada’s non-judicial 4 foreclosure statute may ultimately be decided by the United States Supreme Court.6 5 This case concerns a non-judicial foreclosure sale. Ditech challenges that sale as a taking 6 and a violation of its right to due process, among other things.7 Dismissal motions that implicate 7 Bourne Valley and Saticoy Bay are pending.8 To save the parties from the need or inclination to 8 invest resources further briefing the effect of these decisions before the United States Supreme 9 Court has ruled on the petitions for certiorari review in these cases, I sua sponte stay all 10 proceedings in this case and deny the pending motions to dismiss without prejudice. 11 Discussion 12 A district court has the inherent power to stay cases to control its docket and promote the 13 efficient use of judicial resources.9 When determining whether a stay is appropriate pending the 14 resolution of another case—often called a “Landis stay”—the district court must weigh: (1) the 15 possible damage that may result from a stay, (2) any “hardship or inequity” that a party may 16 17 4 18 19 20 21 22 23 24 Bourne Valley Ct. Trust v. Wells Fargo Bank, 2016 WL 4254983, at *5 (9th Cir. Aug. 12, 2016). 5 The Nevada Supreme Court has stayed issuance of the remittitur until June 21, 2017, to allow time to seek certiorari. Saticoy Bay, Nev. S. Ct. Case No. 68630, Doc. 17-04543 (Feb. 8, 2017). The United States Supreme Court has extended the deadline for the Bourne Valley cert petition to April 3, 2017. Case No. 16A753 (Feb 24, 2017). 6 See S.C.R. 10(a) (suggesting that a conflict between a circuit court and “a state court of last resort” on “an important federal question” can be a basis for granting review on a writ of certiorari). 25 7 ECF No. 1 at ¶¶ 42–47, 52–57. 26 8 ECF Nos. 14, 15. 27 9 28 Landis v. North American Co., 299 U.S. 248, 254–55 (1936); Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007). 2 1 suffer if required to go forward, (3) “and the orderly course of justice measured in terms of the 2 simplifying or complicating of issues, proof, and questions of law” that a stay will engender.10 3 After weighing these considerations, I find that a Landis stay is appropriate here. I address these 4 considerations in reverse order. 5 A. A stay will promote the orderly course of justice. At the center of this case is an HOA-foreclosure sale under NRS Chapter 116 and the 6 7 competing arguments that the foreclosure sale either extinguished the mortgagor’s security 8 interest or had no legal effect because the statutory scheme violates due process and the takings 9 clause. The United States Supreme Court’s consideration of petitions for certiorari in Bourne 10 Valley and Saticoy Bay has the potential to be dispositive of this case or at least of discrete issues 11 that it presents. As the jurisprudence in this area of unique Nevada law continues to evolve, the 12 parties in the scores of foreclosure-challenge actions pending in this courthouse file new motions 13 or move to supplement the ones that they already have pending, often resulting in docket- 14 clogging entries and an impossible-to-follow chain of briefs in which arguments are abandoned 15 and replaced. Staying this case pending the Supreme Court’s disposition of the petitions for 16 certiorari in Bourne Valley and Saticoy Bay will permit the parties to evaluate—and me to 17 consider—the viability of the claims under the most complete precedent. This will simplify and 18 streamline the proceedings and promote the efficient use of the parties’ and the court’s resources. 19 B. Hardship and inequity 20 Both parties face the prospect of hardship if I resolve the claims or issues in this case 21 before the petitions for certiorari have been decided. A stay will prevent further unnecessary 22 briefing and the expenditures of time, attorney’s fees, and resources that could be wasted—or at 23 least prematurely spent—should the Supreme Court take up these cases. Indeed, the parties in 24 this case filed supplemental briefs when the Saticoy Bay opinion was handed down. A stay 25 pending the resolution of these cases in the United States Supreme Court will curb that urge to 26 file a new brief every time something occurs in these cases. 27 28 10 Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005). 3 1 C. 2 Damage from a stay The only potential damage that may result from a stay is that the parties will have to wait 3 longer for resolution of this case and any motions that they have filed or intend to file in the 4 future. But a delay would also result from any rebriefing or supplemental briefing that may be 5 necessitated if the Supreme Court grants certiorari and resolves this circuit-state split. So it is not 6 clear to me that a stay pending the Supreme Court’s disposition of the petitions for certiorari will 7 ultimately lengthen the life of this case. I thus find that any possible damage that the extension 8 of this stay may cause the parties is minimal. 9 D. 10 The length of the stay is reasonable. Finally, I note that a stay of this case pending the disposition of the petitions for certiorari 11 in Bourne Valley and Saticoy Bay is expected to be reasonably short. The petition in Bourne 12 Valley is due April 3, 2017, and the petition in Saticoy Bay is due April 25, 2017. Because the 13 length of this stay is directly tied to the petition proceedings in those cases, it is reasonably brief, 14 and it is not indefinite. 15 16 Conclusion IT IS THEREFORE ORDERED that this case is STAYED. Once the United States 17 Supreme Court proceedings in Bourne Valley and Saticoy Bay have concluded, any party 18 may move to lift this stay. 19 20 21 IT IS FURTHER ORDERED that the pending motions to dismiss [ECF Nos. 14, 15] are DENIED without prejudice to their refiling within 20 days of the order lifting the stay. DATED: March 1, 2017 22 _______________________________ ____________ _ _ _____ Jennifer A. Dorsey Dorsey orse United States District Judge 23 24 25 26 27 28 4

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