Opinion
Case Number C 07-04108 JF (HRL).
December 15, 2008
ORDER GRANTING MOTIONS TO DISMISS SECOND AMENDED COMPLAINT
This disposition is not designated for publication in the official reports.
[re: doc. nos. 157, 159, 160, 161, 162, 165, 172]
On August 9, 2007, Plaintiff Michael Blomquist, a licensed mortgage and real estate agent proceeding pro se, filed the instant action against Washington Mutual, Kerry K. Killinger, Joseph W. Saunders, Countrywide Home Loans, Inc., Angelo Mozilo, Ken Thompson, Citigroup Corp., Sandford Weill, Charles Prince, Goldman Sachs Group, Inc., Henry Paulson, Bear Stearns Co., James Cayne, The McGraw Hill Co., Harold McGraw III, Wells Fargo Co., Patricia R. Callahan, Herbert M. Sandler, Rock Holdings, Inc., Experian Corp., Fimalac, Inc., Moodys Corp., James E. Gilleran, John M. Reich, John D. Hawke Jr., John C. Dugan, Susan Schmidt Bies, Donald E. Powell, Sheila C. Blair and Does 1-50 (collectively, "Defendants"). On July 23, 2008, the Court granted the motion by certain Defendants to dismiss Plaintiff's First Amended Complaint ("FAC") without leave to amend, and granted Plaintiff leave to file a Second Amended Complaint ("SAC") against the remaining Defendants. Those remaining Defendants now move to dismiss the SAC for failure to state a claim upon which relief may be granted. Plaintiff did not file opposition to the motions. For the reasons set forth below, the motions to dismiss will be granted, without leave to amend.
Five individual motions to dismiss were filed by the various Lender Defendants and their corporate officers. Two motions for joinder also were filed. Because of the similar postures of the Lender Defendants, the motions for joinder will be granted and the motions to dismiss will be considered together.
I. BACKGROUND
Both Plaintiff's initial complaint and the FAC allege a broad conspiracy among lenders, investment banks, and rating agencies to enable the funding of illegal home loans. Plaintiff alleges that such actions were the root cause of the current housing market meltdown and worldwide financial crisis. The Court dismissed the FAC without leave to amend as to the investment banks and rating agencies, referred to herein as the Non-Lender Defendants, because Plaintiff did not have standing to assert claims based upon alleged injuries to society as a whole. The Court granted Plaintiff leave to file an amended complaint with respect to the remaining Defendants (the "Lender Defendants"). To help Plaintiff address the standing issue, the Court instructed that "[i]n his amended complaint, [Plaintiff] must allege specifically which Lender Defendants approached him or his agents about arranging illegal loans and when they did it." July 23, 2008 Order at 6.
The Non-Lender Defendants are Goldman Sachs Group, Inc., Henry Paulson, The McGraw Hill Companies, Inc., Harold McGraw, III, Fitch Group, Inc. (sued as Fimalac, Inc.), Moody's Corporation, and Experian Holdings, Inc. (sued as Experian Corp.). Final judgment was entered in favor of the Non-Lender Defendants on July 25, 2008.
The Lender Defendants include Washington Mutual, Countrywide Home Loans, Inc., Wachovia Corp., Wells Fargo Co., Citigroup, The Bear Stearns Companies, Inc., Kerry Killinger, Joseph Saunders, Patricia R. Callahan, Angelo Mozilo, Sanford Weill, Charles Prince, James Cayne, Herbert M. Sandler, and Ken Thompson. On November 10, 2008, Washington Mutual filed a notice of automatic stay in light of its bankruptcy filing. Accordingly, this order applies to all Lender Defendants except Washington Mutual.
Plaintiff filed the SAC on September 4, 2008, several days after the deadline imposed by the Court for filing any amended pleading. The operative SAC contains many of the same allegations contained within the prior pleadings. Essentially, the thrust of the SAC is that Plaintiff lost business as a result of the Lender Defendants' fraudulent loan practices. Because he refused to participate in the issuance of loans that allegedly were based on inflated income and other false representations, Plaintiff's revenue declined, and eventually Plaintiff had to close his real estate business.
After Plaintiff failed to file the SAC within the time allotted by the Court, several of the Lender Defendants moved to dismiss the SAC. Because Plaintiff is proceeding pro se, the Court allowed the instant action to proceed despite Plaintiff's tardiness.
In granting leave to file the SAC, the Court explicitly instructed Plaintiff not only to omit any claims against the Non-Lender Defendants but also to omit any claims against the Lender Defendants for securities fraud. In contravention of these instructions, the SAC contains claims against the Non-Lender Defendants and alleges claims for securities fraud against all Defendants. On October 1, 2008, the Court ordered that any allegations against the Non-Lender Defendants and any allegations of securities fraud against the Lender Defendants be stricken from the SAC.
The SAC contains few allegations of any direct contact with the Lender Defendants or their agents. In the few instances of such contact that are alleged, the nature of the interaction is that an agent of one of the Lender Defendants would approach Plaintiff or one of Plaintiff's employees and offer to engage in a home loan transaction. Plaintiff alleges that he refused to do business with the Lender Defendants on these occasions because he had concerns about engaging in potentially fraudulent transactions. The SAC does not allege that Plaintiff actually entered into a financial transaction with any of the Lender Defendants.
The SAC asserts seven "counts" against all the named defendants: two counts based on alleged RICO violations, 18 U.S.C. § 1960 et seq.; two counts based on alleged antitrust violations under the Sherman Act, 15 U.S.C. §§ 1, 15; one count under California's Unfair Competition Law ("UCL"), Cal. Bus. Prof. Code, § 17200 et seq.; one count for negligence; and one count for negligent and intentional infliction of emotional distress. See SAC ¶¶ 135-185.
II. LEGAL STANDARD
When considering a motion to dismiss, the plaintiff's allegations are taken as true and the Court must construe the complaint in the light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969). A complaint may be dismissed for failure to state a claim upon which relief can be granted for one of two reasons: (1) lack of a cognizable legal theory or (2) insufficient facts under a cognizable legal theory. Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955 (2007). See also Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008) ("Dismissal is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.").
The pleading of a pro se litigant is held to a less stringent standard than a pleading drafted by an attorney and is to be afforded the benefit of any doubt. Haines v. Kerner, 404 U.S. 519, 520 (1972). A pro se litigant must be given leave to amend at least once unless it is absolutely clear that the deficiencies of the complaint cannot be cured by amendment. See Lucas v. Dep't of Corr., 66 F.3d 245, 248 (9th Cir. 1995). Nevertheless, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 127 S. Ct. at 1964-65 (2007) (citations omitted).
III. DISCUSSION
The Lender Defendants argue that Plaintiff again has failed to allege sufficient facts showing that he has standing to assert a viable claim based upon any of the numerous legal theories set forth in the SAC. In addition, even assuming that Plaintiff has standing, the Lender Defendants contend that Plaintiff has failed to plead sufficient facts to support any of the claims. As noted previously, Plaintiff did not file a written opposition to these arguments. A. StandingArticle III of the Constitution "requires the party who invokes the court's authority to show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant, and that the injury can be fairly traced to the challenged action and is likely to be redressed by a favorable decision." Valley Forge Christian Coll. v. Am. United for Separation of Church and State, Inc., 454 U.S. 464, 472 (1982) (internal quotations omitted). Thus, standing to bring a federal claim requires (1) injury in fact, (2) causation, and (3) redressability. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). The elements necessary to establish standing are "not mere pleading requirements but rather an indispensable part of the Plaintiffs' case, [and] each element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation." Id. at 561.
As a threshold matter, it bears repeating that Plaintiff may not assert claims on behalf of society as a whole. Warth v. Seldin, 422 U.S. 490, 500 (1975) ("when the asserted harm is a `generalized grievance' shared in substantially equal measure by all or a large class of citizens, that harm alone normally does not warrant exercise of jurisdiction."). As relevant here, Plaintiff lacks standing to assert claims for any alleged injuries to third parties.
The SAC also fails to set forth sufficient facts with respect to any harm alleged to have been suffered by Plaintiff personally. Plaintiff must allege at least one injury that is fairly traceable to the conduct of a Lender Defendant. The three specific incidents described within the SAC fail to satisfy this requirement. In paragraph 63 of the SAC, Plaintiff alleges that Lender Defendant Wells Fargo was aware that Plaintiff's name had been added unlawfully to an account owned by an loan originator. The SAC contains no further details as to the significance of Wells Fargo's alleged awareness and does not state that Plaintiff suffered any injury as a result. See SAC ¶ 63. Plaintiff also alleges that on at least two occasions, a Countrywide representative approached one of Plaintiff's loan agents regarding refinancing for two separate borrowers who would not qualify for loans unless their income was inflated. Id. at ¶¶ 117-120. In each instance, the Countrywide agent solicited Plaintiff's agent to participate in a loan supported by income inflation. Id. However, Plaintiff barred his agent from participating in the transaction because he did not want to participate in the fraudulent procurement of a loan. See id. at ¶ 120. The SAC does not contain any information with respect to whether the borrowers ultimately received a loan from Countrywide. It appears that the alleged injury in each of these instances was that Plaintiff lost business revenue because he refused to participate in a questionable transaction with Countrywide.
When an alleged injury results from a plaintiff's voluntary decision to abstain from certain activity, rather than engaging in the allegedly wrongful act itself, it is not "fairly traceable" to the challenged conduct. See McConnell v. FEC, 540 U.S. 93, 226-28 (2003). In McConnell, a group of candidates for political office challenged a provision in the Bipartisan Campaign Reform Act of 2002 (BCRA) increasing the "hard money" limits on campaign donations. Id. at 226-28. The basis for their claim was that the BCRA put them at a competitive disadvantage in fundraising because they did not wish to accept the donations allowable under the increased limits — which they believed were fundamentally unfair — whereas their political opponents would accept such donations. See id. at 228. The Court held the plaintiffs' "own personal `wish' not to solicit or accept large contributions" was "their personal choice." Id. As such, the plaintiffs failed "to allege an injury in fact that is `fairly traceable' to BCRA." Id.
In the instant case, any alleged economic injury to Plaintiff arose out of his refusal to do business with the Lender Defendants. This is a form of injury that the Supreme Court has found to not be redressable because it is not "fairly traceable" to any conduct on the part of the Lender Defendants. See McConnell, 540 U.S. at 228. Accordingly, the statutory claims based upon Plaintiff's alleged economic damages, namely Plaintiff's claims under RICO and the Sherman Act, fail for lack of standing. Plaintiff's UCL claim also fails for lack of standing because it too is subject to the standing requirements of Article III. See Daro v. Sup. Ct., 151 Cal. App. 4th 1079, 1097 (2007). Accordingly, because Plaintiff has failed to comply with the Court's express instructions with respect to standing and because Plaintiff has failed to oppose the instant motions, the RICO, antitrust, and UCL claims will be dismissed without leave to amend. B. Negligence and Emotional Distress
Even if Plaintiff had standing to assert such claims, the SAC includes mostly legal conclusions, rather than factual allegations, in support of such claims. See Twombly, 127 S. Ct. at 1964-65 (to survive a motion to dismiss, the SAC must contain more than "labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.").
The SAC adds claims for negligence, negligent infliction of emotional distress, and intentional infliction of emotional distress to Plaintiff's original allegations. To assert a claim for negligence, a plaintiff must allege that the defendant owed a duty to the plaintiff that subsequently was breached, and such breach was the proximate cause of the plaintiff's injury. See Ditto v. McCurdy, 510 F.3d 1070, 1078 (9th Cir. 2007). Negligent infliction of emotional distress has the same elements as a claim for negligence. Lawson v. Mgmt. Activities, 69 Cal. App. 4th 652, 656 (1999). Accordingly, such a claim requires that a duty existed that was breached, and such breach was the direct cause of emotional distress. Id. at 657. Here, the SAC contains no facts that show that any Lender Defendant owed a duty to Plaintiff. Accordingly, Plaintiff's claims for negligence and negligent infliction of emotional distress are subject to dismissal. Because Plaintiff added these claims without leave of the Court and failed to oppose the instant motions, leave to amend will be denied.
Intentional infliction of emotional distress requires that a plaintiff plead "(1) outrageous conduct by the defendant, (2) intention to cause or reckless disregard of the probability of causing emotional distress, (3) severe emotional suffering and (4) actual and proximate causation of the emotional distress." Bogard v. Employers Cas. Co., 164 Cal. App. 3d 602, 616 (1985). Plaintiff's claim fails because he has not alleged the first required element, which courts have defined as requiring extreme and outrageous conduct going beyond all bounds of decency. See Schneider v. TRS, Inc., 938 F. 2d 986, 992 (9th Cir. 1991). At most, the behavior by the Lender Defendants may have violated certain laws, but that uncertainty regarding the legality demonstrates that as a matter of law such behavior was not extreme or outrageous. The claim for intentional infliction of emotional distress also will be dismissed and leave to amend will be denied for the same reasons applicable to Plaintiff's other newly added and unauthorized claims.
IV. ORDER
Good cause therefor appearing, IT IS HEREBY ORDERED that the Lender Defendants' motions to dismiss Plaintiff's SAC are GRANTED, without leave to amend. Because Plaintiff did not file written opposition to the instant motions, he was foreclosed from presenting any substantive arguments in opposition. Plaintiff may file a motion under Fed.R.Civ.P. 60(b) if he believes there are valid grounds for relief from this order.IT IS SO ORDERED.