United States District Court, D. Montana, Billings Division
WILLIAM J. PAATALO, Plaintiff,
FIRST AMERICAN TITLE COMPANY OF MONTANA, INC., et. al., Defendants.
ORDER and FINDINGS
AND RECOMMENDATIONS OF UNITED STATES MAGISTRATE JUDGE
CAROLYN S. OSTBY,
On March 20, 2014, this Court issued Findings and Recommendations
addressing various motions to dismiss and motions for summary judgment. See
Findings and Recommendations of U.S. Magistrate Judge (ECF 55) .
Judge Haddon adopted this Court's recommendations in full, resulting in the
dismissal of all claims against J.P. Morgan Chase Bank, N.A. ("Chase"), U.S.
Bank, N.A. ("U.S. Bank") as Trustee for WaMu Mortgage Pass-Through Certificate
Series 2007-OA3 Trust ("2007-OA3 Trust"), First American Title Company of
Montana, Inc. ("First American"), Dalia Martinez ("Martinez"), Stillwater
Abstract Company d/b/a Stillwater Abstract & Title Co. Inc. ("Stillwater"), and
Shelly Noe ("Noe"). See Order Adopting F&R (ECF 62). Accordingly, the
only defendants remaining in the case are the Mackoff Kellogg Law Firm - Charles
J. Peterson ("Mackoff Kellogg") and Jason J. Henderson ("Henderson").
Now pending is Mackoff Kellogg's and Henderson's joint motion to
dismiss for failure to state a claim. ECF 56. Also pending are Paatalo's
Motion and Request for Judicial Notice ( ECF 57 ) and Motion for
Extension to File Notice of Appeal ( ECF 71 ). Having considered the
parties' arguments and submissions, the Court rules as follows.
In the Court's March 20, 2014 Findings and Recommendations, the Court
reviewed the background facts pertinent to the pending motions. See ECF 55
at 2-8. The Court will not repeat those facts here except as necessary to
explain this ruling.
III. PARTIES' ARGUMENTS
Mackoff Kellogg and Henderson argue that all of Paatalo's claims
against them fail to state a claim upon which relief may be granted. They first
argue that the breach of contract and breach of the implied covenant claims fail
because it is clear that neither Mackoff Kellogg nor Henderson breached the
Settlement Agreement. ECF 56-1 at 6. They argue that the Settlement
Agreement only bound Paatalo and Mackoff Kellogg, and any action taken by a
party not subject to the agreement cannot constitute a breach. Id . at 6-7.
Second, Defendants argue that the fraud, constructive fraud, and
negligent misrepresentation claims fail because Paatalo has not met the pleading
requirements of such claims. Additionally, Mackoff Kellogg argues that it did
not make a representation that it had the capacity to bind any other Defendant.
Id. at 8. They argue that Mackoff Kellogg used the name "Mackoff Kellogg Law
Firm - Charles J. Peterson as successor Trustee to WAMU Mortgage Pass-Through
Certificate Series 2007-OA3 Trust" in the Settlement Agreement because that was
the precise name of the entity that Paatalo named in his Complaint in
Paatalo I (CV 10-119-BLG-RFC-CSO). Mackoff Kellogg argues that it never
acted as trustee of the 2007-OA3 Trust, but instead used the name above to avoid
confusion and ensure that the proper entity was dismissed from Paatalo I
pursuant to the Settlement Agreement. Id . at 10. Defendants further
argue that they owed no duty to Paatalo that could form a basis for constructive
fraud or negligent misrepresentation claims. Id . at 12-13.
Third, Defendants argue that the FDCPA claim fails because Mackoff
Kellogg was not acting as trustee of Paatalo's Deed of Trust at the time of the
foreclosure proceedings, and therefore it did not take any action as trustee to
enforce the debt Paatalo owed on the Note. Id . at 15. Defendants also
argue that any involvement in collection efforts by them as legal counsel for
others was not improper because the Settlement Agreement did not absolve Paatalo
of his obligation under the Note. Id.
Respecting the breach of contract and breach of the implied covenant
claims, Paatalo continues to maintain that the Settlement Agreement with Mackoff
Kellogg bound all other Defendants in the prior action, and therefore any
attempt to foreclose on his home constitutes a breach of that contract. ECF
66 at 6-10. Respecting the fraud, constructive fraud, and negligent
misrepresentation claims, Paatalo contends that Mackoff Kellogg intentionally
misrepresented that it was the trustee of the 2007-OA3 Trust, the beneficiary of
his Deed of Trust, and that he justifiably relied on this representation to his
detriment. Id . at 10-12. Finally, respecting the FDCPA claim, Paatalo
argues that Mackoff Kellogg and Henderson acted as legal counsel for both First
American and U.S. Bank, and therefore may be held liable for their actions in
attempting to collect a debt that Paatalo contends no longer existed. Id . at
IV. LEGAL STANDARD
A cause of action may be dismissed under Rule 12(b)(6) either when it
asserts a legal theory that is not cognizable as a matter of law, or if it fails
to allege sufficient facts to support an otherwise cognizable legal claim.
SmileCare Dental Group v. Delta Dental Plan of California, Inc., 88 F.3d
780, 783 (9th Cir. 1996). In addressing a Rule 12(b)(6) challenge, the Court
accepts all factual allegations in the complaint as true ( Hospital Bldg. Co.
v. Trustees of the Rex Hospital, 425 U.S. 738, 740 (1976)), and construes
the pleading in the light most favorable to the nonmoving party. Tanner v.
Heise, 879 F.2d 572, 576 (9th Cir. 1989). The Court is not, however,
required to accept as true allegations that contradict exhibits attached to the
complaint or allegations that are merely conclusory, unwarranted deductions of
fact, or unreasonable inferences. Daniels-Hall v. Nat'l Educ. Ass'n,
629 F.3d 992, 998 (9th Cir. 2010).
The Court's standard of review under Rule 12(b)(6) is informed by Rule
8(a)(2) which requires that a pleading contain "a short and plain statement of
the claim showing that the pleader is entitled to relief[.]" Ashcroft v.
Iqbal, 556 U.S. 662 (2009) (quoting Rule 8). To survive a motion to
dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its
face.'" Ashcroft, 129 S.Ct. at 1949. "A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged."
As a general rule "a district court may not consider any material
beyond the pleadings in ruling on a Rule 12(b)(6) motion." Lee v. City of
Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (citation omitted). The
Court may, however, consider "material which is properly submitted as part of
the complaint[, ]" or take judicial notice of "matters of public record" without
converting a motion to dismiss to a motion for summary judgment. Id.,
250 F.3d at 688-89. Specifically, the Court may take judicial notice of other
court proceedings. Duckett v. Godinez, 67 F.3d 734, 741 (9th Cir.
1995), and Emrich v. Touche Ross & Co., 846 F.2d 1190, 1198 (9th Cir.
1988); see also Burbank-Glendale-Pasadena Airport Authority v. City
of Burbank, 136 F.3d 1360, 1364 (9th Cir. 1998) (allowing judicial notice
of pleadings in other cases).
Paatalo's claims against Mackoff Kellogg and ...