David Merritt v. Countrywide Financial Corporation , 583 F. App'x 662 ( 2014 )

FILED
NOT FOR PUBLICATION JUL 16 2014
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
DAVID MERRITT, pro se; SALMA No. 09-17678
MERRITT,
D.C. No. 5:09-cv-01179-JW
Plaintiffs - Appellants,
v. MEMORANDUM*
COUNTRYWIDE FINANCIAL
CORPORATION, a Delaware corporation;
et al.,
Defendants - Appellees.
Appeal from the United States District Court
for the Northern District of California
James Ware, District Judge, Presiding
Argued and Submitted November 9, 2012
San Francisco, California
Before: KLEINFELD and BERZON, Circuit Judges, and SMITH, District Judge.**
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable William E. Smith, District Judge for the U.S. District
Court for the District of Rhode Island, sitting by designation.
Plaintiffs appeal from the district court’s dismissal with prejudice of their
pro se complaint. We affirm in part, vacate in part, and remand for further
proceedings.1
1. As to defendants’ alleged nondisclosures in March 2006, we affirm the
dismissal of plaintiffs’ Truth in Lending Act (“TILA”) damages claim as time-
barred. The TILA statute of limitations runs from when “the borrower discovers or
had reasonable opportunity to discover the fraud or nondisclosures that form the
basis of the TILA action.” King v. California, 784 F.2d 910, 915 (9th Cir. 1986).
Taking as true plaintiffs’ allegation that they received blank disclosure forms in
March 2006, “nothing prevented [them] from comparing” those blank forms with
“TILA’s statutory and regulatory requirements,” and thereby discovering the
failure to disclose. Hubbard v. Fidelity Fed. Bank, 91 F.3d 75, 79 (9th Cir. 1996);
see also Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1045 (9th
Cir. 2011).
2. The district court did not separately consider plaintiffs’ other TILA
damages claims, which are predicated on separate TILA violations alleged to have
occurred in February 2009 — namely, that Countrywide failed to respond to
plaintiffs’ rescission notice — and so were timely filed. We reinstate plaintiffs’
1
We address plaintiffs’ rescission claim under the Truth in Lending Act as
well as their claims under Section 8 of the Real Estate Settlement Practices Act in a
separate opinion issued concurrently with this memorandum disposition.
TILA damages claims on this theory of liability and remand to the district court for
further proceedings.
3. We vacate the dismissal of plaintiffs’ claim under Section 6 of the Real
Estate Settlement Practices Act (“RESPA”), 12 U.S.C. § 2605, and remand to the
district court for further proceedings, including, at the appropriate stage, review of
the plaintiffs’ letters to determine which, if any, were qualified written requests
under the standards newly established in Medrano v. Flagstar Bank, 704 F.3d 661,
666 (9th Cir 2012). Plaintiffs’ letters are not in the record before this court, so we
are unable to apply the Medrano framework in the first instance.
4. We affirm the dismissal of plaintiffs’ RESPA Section 9 claim. There is no
remaining viable defendant for this claim, as plaintiffs have settled with the
“seller.” See 12 U.S.C. § 2608(b).
5. We vacate the district court’s dismissal with prejudice of the Merritts’
Section 1981 claim and remand to the district court with instructions that the
plaintiffs be granted leave to amend the complaint as to that claim. “Unless it is
absolutely clear that no amendment can cure the defect . . . a pro se litigant is
entitled to notice of the complaint’s deficiencies and an opportunity to amend prior
to dismissal of the action.” Lucas v. Dep’t of Corr., 66 F.3d 245, 248 (9th Cir.
1995) (per curiam). Here, although the plaintiffs filed multiple complaints, they
did so before any district court ruling on their complaint. The first time the district
court evaluated the plaintiffs’ complaint was in the context of granting defendants’
motion to dismiss with prejudice.
While the court must accept a plaintiff’s well-pleaded facts as true at the
motion to dismiss stage, Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009) (“It is the
conclusory nature of respondent’s allegations, rather than their extravagantly
fanciful nature, that disentitles them to the presumption of truth.”), and the court
must construe the pleadings of a pro se plaintiff liberally, Estelle v. Gamble, 429
U.S. 97, 106 (1976), the plaintiffs in this case state that certain pleaded facts are
“hypothetical.” The court need not accept as true facts that the pleader does not
even claim to be true. The plaintiffs do not identify which facts are supported by
reasonable information and belief and which facts are hypothetical, so the court
cannot know which facts to accept as true for purposes of evaluating the motion to
dismiss. Therefore, the complaint in its current form does not support a plausible
claim for relief.
We cannot say that amendment would be futile, however, as the existing
complaint may contain sufficient allegations that are supported by reasonable
information and belief to state a claim for relief under Section 1981. The problem
is that, as currently drafted, the district court cannot know which facts are real and
which are imagined. Therefore, we remand the case with instructions for the
district court to provide the plaintiffs “specific notice of the complaint’s
deficiencies and an opportunity to amend.” Lucas, 66 F.3d at 249. In its notice, the
district court need not provide a paragraph-by-paragraph analysis, but rather should
emphasize that the amended complaint should contain only a “short and plain
statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P
8(a)(2), which includes facts based on at least information and belief. Perington
Wholesale, Inc. v. Burger King Corp., 631 F.2d 1369, 1372 (10th Cir. 1979)
(“[Pleading on ‘information and belief’ in appropriate circumstances fits well with
the spirit of the rules.”). The complaint may include allegations that are “not based
on the firsthand knowledge of the person making the allegation . . . but that person
nevertheless, in good faith, believes the allegation to be true.” Pirraglia v. Novell,
Inc., 339 F.3d 1182, 1189 (10th Cir. 2003) (internal citation and quotation marks
omitted). It should be emphasized that Rule 11 sanctions may be available, if, at
the summary judgment stage, it turns out that any of the plaintiffs’ surviving
“hypothetical” allegations are baseless. See Zaldivar v. City of Los Angeles, 780
F.2d 823, 831 (9th Cir. 1986). With these instructions, the plaintiffs may file an
amended complaint; it will remain to be seen whether that complaint states a claim.
6. Both parties moved this court to take judicial notice of numerous
documents. We deny all of the motions for judicial notice (Dkt. # 78, 86, 109,
114). “It is rarely appropriate for an appellate court to take judicial notice of facts
that were not before the district court.” Flick v. Liberty Mut. Fire Ins. Co., 205 F.3d
386, 392 n.7 (9th Cir. 2000).
Judge Kleinfeld dissents for the reasons stated in his dissent to the published
opinion in this case.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.