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Fleshman v. Wells Fargo Bank, N.A.

United States District Court, D. Oregon

July 23, 2015

JANET C. FLESHMAN and TIBERIU ANTON, Plaintiffs,
v.
WELLS FARGO BANK, N.A., a foreign company, Defendant.

David Richardson, PDX LAW GROUP P.C., Portland, Oregon, Attorney for Plaintiff.

Robert E. Sabido, Timothy J. Fransen, COSGRAVE VERGEER KESTER LLP, Portland, Oregon, Attorneys for Defendant.

OPINION & ORDER

MARCO A. HERNANDEZ, District Judge.

Plaintiffs Janet Fleshman and Tiberiu Anton bring this mortgage-related action against Wells Fargo Bank. Plaintiffs move for leave to file a Third Amended Complaint. I grant the motion in part and deny it in part.

PROCEDURAL BACKGROUND

Plaintiffs filed this action on November 19, 2013. Defendant was served in late January 2014. Based on conferrals between counsel in an effort to avoid Defendant moving to dismiss the Complaint, Plaintiffs filed a First Amended Complaint on March 7, 2014. Defendant moved to dismiss the First Amended Complaint in April 2014. On June 17, 2014, I granted the motion, dismissing Plaintiffs' negligence claim with prejudice but allowing Plaintiffs to re-plead their breach of contract and unfair trade practices claims. On July 1, 2014, Plaintiffs filed a Second Amended Complaint, re-pleading the two claims and adding a claim under the Fair Credit Reporting Act, 15 U.S.C. § 1681s-2(b). Defendant filed an Answer to that pleading on August 1, 2014.

Because it took over eight months to have pleadings in place, the case schedule set by the Court upon commencement of the action was moot. A Rule 16 Conference was set for April 22, 2015. At that time, Plaintiffs informed the Court they would seek leave to file a Third Amended Complaint. I ordered that any motion for leave to amend be filed by May 1, 2015. I set a further scheduling conference for May 15, 2015. On May 1, 2015, Plaintiffs moved for an extension of time in which to file the motion to amend. I granted a short extension, until May 6, 2015. Plaintiffs filed the motion for leave to amend on that date. At the May 15, 2015 scheduling conference, the following deadlines were established: dispositive motions were due by July 1, 2015 with oral argument on any such motions set for September 1, 2015. A pretrial conference was set for November 30, 2015. Trial was set for December 8, 2015.

While the Court expected the parties to move their case along after the Answer was filed on August 1, 2014 and to engage in discovery, it is obvious there were problems. Plaintiffs did serve 118 requests for admission, 79 requests for production, and 19 interrogatories on Defendant in September 2014, but they were in violation of Federal Rule of Civil Procedure 26(d)(1) and Local Rule 26-1(4) because no Rule 26(f) discovery planning conference had occurred. The parties held that conference in November 2014 during which Plaintiffs agreed to reexamine and consider limiting their discovery requests before re-serving them. The parties also agreed to explore settlement. Plaintiffs agreed to informally provide Defendant with information supporting their alleged damages including a credit report.

Although it appears that Plaintiffs never re-served their discovery requests, on January 19, 2015 Plaintiffs sent Defendant a credit report to substantiate the credit reporting claim and damages. Plaintiffs' counsel states that he was unable to revise and limit the discovery requests without additional knowledge regarding the "root causes of the allegations." Richardson June 9, 2015 Decl. at ¶ 7. Plaintiffs' counsel reports that Plaintiffs were forced to conduct their own financial and activity audit for three separate loans in order to provide updated case and damages information to Defendant. Id . Additionally, Plaintiffs were experiencing increasing damages as a result of alleged ongoing problems. Id.

Plaintiffs also note that after they filed their Second Amended Complaint and before they sought leave to file a Third Amended Complaint, they attempted to work with Defendant directly, through third parties including the Oregon Attorney General's Office, and by participating in an Oregon Foreclosure Avoidance Program case initiated by Defendant. Defendant, however, withdrew that case in November 2014. And, while Plaintiffs did not inform the Court until late April 2015 that they were going to seek leave to amend, Plaintiffs' counsel told Defendant's counsel on February 4, 2015 that the Second Amended Complaint would need to be amended again. He set to work on those amendments.

Although the Court-imposed deadline to file the motion for leave was May 1, 2015, Plaintiffs waited until April 29, 2015 to forward a copy of the proposed pleading to Defendant and did not forward the more than 250 pages of exhibits until the next day, April 30, 2015, making it almost impossible for Defendant to assess whether it would consent to the filing of the Proposed Third Amended Complaint by the May 1, 2015 motion filing deadline. Thus, Plaintiffs' delay forced them to request an extension of time to file the motion to allow Defendant time to review the proposed pleading. As is now obvious, Defendant opposes the motion. Defendant served its first discovery requests on Plaintiffs on May 15, 2015. Richardson June 9, 2015 Decl. at ¶ 14.

STANDARDS

Under Federal Rule of Civil Procedure 15, if a party cannot amend as a matter of course under Rule 15(a)(1), "a party may amend its pleading only with the opposing party's written consent or with the court's leave." Fed.R.Civ.P. 15(a)(2). "The court should freely give leave when justice so requires." Id . However, the court need not grant leave to amend where the amendment "(1) prejudices the opposing party; (2) is sought in bad faith; (3) produces an undue delay in litigation; or (4) is futile." AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946, 951 (9th Cir. 2006). Futility alone can justify denial of the motion. Gonzalez v. Planned Parenthood of L.A., 759 F.3d 1112, 1116 (9th Cir. 2014), cert. denied, 135 S.Ct. 1313 (2015). Prejudice to the opposing party carries the "greatest weight" in determining whether to deny leave to amend. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

DISCUSSION

Plaintiffs' Proposed Third Amended Complaint expands the factual background allegations from fourteen paragraphs to forty-four paragraphs, adds two new claims, adds a new defendant, and adds many new facts in support of the individual claims. Attach. 2 to Motion for Leave to Amend. Defendant opposes the motion based on undue delay, prejudice, and futility.

I. Undue Delay & Prejudice

Defendant argues that contrary to Plaintiffs' contention in their motion, many of the newly added factual allegations were not recently discovered because the alleged events occurred in late 2012 and early 2013, almost one year before Plaintiffs filed their original Complaint in November 2013. Defendant does not oppose amendment, on the basis of undue delay, of newly asserted "post-filing facts, " but it does oppose the addition of facts that were known or should have been known to Plaintiffs before the commencement of the litigation.

Plaintiffs concede that some paragraphs in the proposed pleading contain facts that predate the original Complaint. But, they state that these facts were included in the prior versions of the Complaint and others were added in response to Defendant's request for more detailed information on damages. Additionally, they assert that many of the facts were discovered only during their "investigation" which appears to have been occurring from July 2014 through at least February 2015.

There is no dispute that this case is already old, having been filed approximately twenty months ago. But, it is not clear which party is to blame for the fact that the case is stuck in the pleading stage. While Plaintiffs took some time to initially serve Defendant, Defendant then successfully worked with Plaintiffs to avoid motion practice and Plaintiff filed a First Amended Complaint. Defendant requested an extension of time to respond to that pleading, then sought to dismiss it. Both parties received extensions of time for briefing the motion. A decision was issued in mid-June 2014 and Plaintiffs timely filed a Second Amended Complaint on July 1, 2014. Defendant again requested an extension of time to respond to that pleading, eventually filing an Answer on August 1, 2014. Both parties bear responsibility for the fact that the pleadings were not finalized until eight and one-half months after the case was filed.

Both parties also bear responsibility for the case stalling after that point. Although Plaintiffs' discovery requests were premature and perhaps not sufficiently limited in scope, Plaintiffs did at least initiate discovery. It is unclear why it took the parties two additional months to have a Rule 26(f) discovery planning conference. Given that the case was almost one year old at that point, the parties should have put more effort into moving the case along. Plaintiffs state they were pursuing non-litigation remedies. But, that does not absolve them of their responsibility to attend to litigation or of the expectation that discovery should have commenced as soon as the discovery planning conference occurred. They also state they were attempting to gather additional information in order to pare down the discovery requests. While this may have been a worthwhile endeavor, at some point it should have been clear that they needed to serve some initial discovery requests to get the case moving. Plaintiffs also fail to explain why it took from February 2015 when Plaintiffs' counsel states he told Defendant that Plaintiffs would seek leave to amend the Second Amended Complaint, until early May 2015 to actually file that motion.

Defendant, meanwhile, served no discovery requests of its own until May 15, 2015. And, according to Plaintiffs, it withdrew from the foreclosure mediation process without meaningfully participating.

As these facts demonstrate, both parties have failed to sufficiently attend to the case. While Plaintiffs perhaps bear more of the blame, I cannot conclude that Plaintiffs' actions alone are why the case is almost two years old with the pleadings still in flux.

Moreover, some of the newly added allegations which pre-date the filing of the original Complaint or even the Second Amended Complaint, are expanded background facts which do not allege significant new conduct. For example, Paragraph 7 in the Second Amended Complaint alleges that in January 2013 Plaintiffs applied to refinance their 2011 Loan in order to extensively remodel their Portland residence. Sec. Am. Compl. at ¶ 7. In the Proposed Third Amended Complaint, they embellish that allegation by detailing the home improvements that were part of the remodel. Prop. Third Am. Compl. at ¶ 8. In the Second Amended Complaint, they alleged that Defendant "seriously mishandled" the refinance application after providing an initial closing date of March 15, 2013. Sec. Am. Compl. at ¶ 7. In the proposed pleading, they add more detail by alleging that Defendant represented the application was deemed complete on January 15, 2013 and that the refinance would close on March 15, 2013. Prop. Third Am. Compl. at ¶ 8.

Paragraph 10 in the Proposed Third Amended Complaint repeats an allegation in the Second Amended Complaint that while Defendant delayed processing the refinance allegation, Plaintiffs lived in their garage, stopped the renovations they had started, and lost business. Prop. Third Am. Compl. at ¶ 10; Sec. Am. Compl. at ¶ 7. Paragraph 10 of the proposed pleading does add facts from March and April 2013 that were obviously known to Plaintiffs before filing this action, but they do not significantly alter the gist of the allegation which is that Defendant unnecessarily delayed processing Plaintiffs' January 2013 refinance application and caused Plaintiffs harm. Prop. Third Am. Compl. at ¶ 10 (adding facts that on March 14, 2013, Plaintiffs notified Defendant that Plaintiff had to stop renovation work until the loan closed; that in April 2013, Plaintiffs suggested to Defendant that Defendant refund the appraisal fee and Plaintiffs would apply elsewhere; and that Defendant refused to refund that fee and told Plaintiffs their application was complete on April 17, 2013 but took no action on it until mid-May 2013).

Delay, by itself, will not support denying leave to amend. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987). Given that the delays in this case are not solely attributable to Plaintiffs, and given that many of the newly-added allegations do not significantly alter the basis of the claims but instead provide additional factual detail about various transactions and communications, they are not prejudicial to Defendant. There is no basis for denying the motion because of undue delay.

In addition to undue delay, Defendant contends that it is prejudiced by this late motion in two ways. First, Defendant contends that Plaintiffs' premature service of excessive discovery requests before the Rule 26(f) planning conference, failure to provide information related to their alleged damages, and failure to re-serve more reasonably tailed discovery requests, allowed Plaintiffs to delay this litigation while increasing their alleged damages from $300, 000 in the Second Amended Complaint to $5.8 million in the Proposed Third Amended Complaint. The fact that Plaintiffs have pleaded increased damages in their proposed pleading is not relevant to the issue of whether they should be granted leave to amend, especially when Plaintiffs allege that Defendant continues to engage in conduct causing them harm. And contrary to Defendant's position, Plaintiff's counsel states he did provide Defendant with a credit report in January 2015 to substantiate the credit reporting claim and damages. Plaintiffs' counsel also states that Plaintiffs were working on their own to obtain financial information because Defendant was unwilling to investigate or provide information (1) in response to the Oregon Attorney General's Office inquiries and (2) in the context of the Oregon Foreclosure Avoidance Program. Defendant's argument is essentially a delay argument which I have already rejected. I do not see this as a "prejudice" argument sufficient to defeat a motion for leave to amend.

Second, Defendant argues that given the impending dispositive motion deadline, Defendant will be hampered in its ability to evaluate a new pleading that is almost twice as long as the operative pleading, is accompanied by 230 pages of exhibits, and seeks damages twenty-times more than the operative pleading. Defendant contends that it will be unable to assemble ...


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