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7/1/2015 Petersenv.BankofAmericaCorp.,232Cal.App.4th238Cal:CourtofAppeal,4thAppellateDist.,3rdDiv.2014GoogleScholar
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232Cal.App.4th238(2014)181Cal.Rptr.3d330
CHRISTINAI.PETERSENetal.,PlaintiffsandAppellants,v.
BANKOFAMERICACORPORATIONetal.,DefendantsandRespondents.
No.G048387.
December11,2014.
CourtofAppealsofCalifornia,FourthDistrict,DivisionThree.
*240BrookstoneLaw,VitoTorchia,Jr.,SasanBehnood,CarlosE.MacManusandDeronColbyforPlaintiffsandAppellants.
240
BryanCave,StuartW.Price,TrevorAllenandDouglasE.WinterforDefendantsandRespondents.
OPINION
BEDSWORTH,ActingP.J.
Thisappeal,afterasuccessfuldemurrerformisjoinder,teststhelimitsofCalifornia'spermissivejoinderstatute,section378oftheCodeofCivilProcedure.[1]Therearenolessthan965plaintiffs*241listedinthecaptionofthethirdamendedcomplaint.Strictlyspeaking,though,thisisa"massaction,"nota"classaction."Hadthiscasebeenfiledpriorto2005,inallprobabilityitwouldhavebeenfiledasaclassaction.However,in2005,CongressenactedtheClassActionFairnessActof2005(CAFA)codifiedat28UnitedStatesCodesection1332(d).(SeegenerallyVisendiv.BankofAmerica(9thCir.2013)733F.3d863,866867(Visendi).)CAFAallowstheremovaltofederalcourtofstatecourtclassactionswhenthereisaclasswith100ormoreclassmembers,withatleastoneclassmemberfromadifferentstatethanatleastonedefendant,andthereismorethan$5millionatstake.(2NewbergonClassActions(5thed.2012)6:14,pp.542646.)Thatiscertainlythiscaseifithadbeenfiledasaclassaction.Andperhapsevenifithadnotbeensopleaded.
241
Wefacetwoquestionsofstatelaw:First,despitetheratherstaggeringnumberofjoinedplaintiffs,doesthethirdamendedcomplaintallege,totrackthestatutorylanguageofsection378,the"same...seriesoftransactions"thatwillentaillitigationofatleastonecommonquestionoflaworfact?[2]Focusingonthelanguageofthestatuteandtheapplicableprecedentconstruingit,weconcludeitdoes.Justafewyearsaftersection378'samendmentin1927,ourSupremeCourtdeclaredthestatute'ssameseriesoftransactionslanguageistobeconstruedbroadlyinfavorofjoinder.(Joergerv.PacificGas&ElectricCo.(1929)207Cal.8,19[276P.1017].)Ithasneverretreatedfromthatposition.
Thethirdamendedcomplaintallegesthatinthemid2000's,defendantCountrywideFinancialCorporationdevelopedatwoprongbusinessstrategytoincreaseitsprofits:First,Countrywidewouldusecaptiverealestateappraiserstoprovidedishonestappraisalsthatwouldinflatehomepricesbeyondlevelsthatwouldotherwiseprevailinanhonestmarketsecond,CountrywidewouldinduceitsborrowerstheseplaintiffsinparticulartotakeloansCountrywideknewtheycouldnotaffordbymisleadingthemastotheirabilitytorepaytheirloans,includingmisrepresentingkeytermsoftheloansthemselves.Countrywidedidthisbecauseithadnointentionofkeepingtheloansonitsbooks,butintendedtobundlethemintosaleabletranchesandsellthemtoinvestors.
*242The965plaintiffsarepeoplewhoborrowedmoneyfromCountrywideinthemid2000's,totheirultimatechagrin.Asweexplainbelow,therearesufficientcommonquestionsoflawandfactinthiscasetosatisfysection378,includingwhetheramortgagelenderhasadutytoitsborrowersnottoencourage"highball,"dishonestappraisalsandwhether
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7/1/2015 Petersenv.BankofAmericaCorp.,232Cal.App.4th238Cal:CourtofAppeal,4thAppellateDist.,3rdDiv.2014GoogleScholar
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Countrywidereallyhadadeliberatestrategyofplacingborrowersintoloansit"knew"andtheword"knew"isakeypartofplaintiffs'pleadingtheycouldnotafford?
Itisimportanttonoteattheoutsetthatthisisaproceduralcase,soweexpressnoopiniononthelegalorfactualmeritsofplaintiffs'claimsvisvisCountrywide'sallegedtwoprongstrategy.Todrawaparalleltoclassactioncertificationprocedures,permissivejoinderisfundamentallyaproceduralmatterwherethefocusisnotonthemerits,butonwhetherthereissufficientcommonalitytosatisfytherequirementsoftherelevantstatute.(SeeBrinkerRestaurantCorp.v.SuperiorCourt(2012)53Cal.4th1004,10241025[139Cal.Rptr.3d315,273P.3d513](Brinker).)
Theapplicabilityofsection378isthecomparativelyeasyquestion.Languageandprecedentdictatetheresult.TheharderquestioniswhetherCalifornia'sproceduresgoverningpermissivejoinderareuptothetaskofmanagingmassactionslikethisone.Again,weanswerintheaffirmative.Andagain,Brinkerprovidestherelevanttemplate.Whilewereversethejudgmentdismissingallbutoneplaintiffformisjoinder,weemphasizethatonremandthetrialcourtwillhavetoconsideravarietyofproceduraltoolswithwhichtoorganizethiscaseintoappropriateandmanageablesubclaimsandsubclasses.(Cf.Brinker,supra,53Cal.4thatp.1004[existenceofsubclassesmadeascertainmentofviabilityofdiscretetypesofwageandhoursclaimsmanageable].)Whiletheironyofrequiringthecasetobedividedintotrancheshasnotescapedus,weareconfidentthetrialcourtcanhandlethetask.
I.FACTS
A.TheThirdAmendedComplaint
Form
Theoperativecomplainthereisthethirdamendedone,filedJune2012.Itisover14inchestall.Thefirstpageisfoundonpage5412ofvolume19oftheclerk'stranscriptandcontinuesonuntiltheproofofserviceafterthelastexhibitonpage8554ofvolume29.Yes,thethirdamendedcomplaintis3,142pageslong.
Butitsorganizationismoreintuitivethanthatwouldsuggest.Thecomplaintconsistsofamain,narrativebodyofallegationstotaling208pages,*243followedbyanappendixAthatreadslikeaseriesofminicomplaintsnarratingthe(rathersimilar)loanacquisitionexperiencesofvariousplaintiffs.Mostofthosenarrativesarevariationsonthesametheme:AcouplewentinforaloantheamountneededwasalreadyaninflatedfigurebecauseofCountrywide'spriorpricefixingoftherelevantrealestatemarket.ThecouplethenreliedonloanofficersatCountrywidetoplacetheminaloantheycouldafford,buttheloanofficershidcertainaspectsoftheloanfromthem,usuallytheexistenceofaballoonpayment,sometimesnegativeamortization,sometimesachangeinthetermsorcalculationofinterestrates.Andfinally,whentheGreatRecessionhitandthelocalrealestatebubbleburstdecreasingeverybody'shomevalues,theseplaintiffsdiscoveredtheycouldnotaffordtheirloans,couldnotaffordtorefinance,andsustainedvariouskindsofensuingfinancialdamage.
243
AppendixAextends1,771pagesfromtheendofvolume19ofthereporter'stranscriptthroughthemiddleofvolume25.Thenbegintheexhibits.ExhibitAconsistsofaseriesofemailsacquiredbyplaintiffs,theupshotofwhichseemstobethattherewereplentyofpeopleinCountrywidewhowereexpressingmisgivingsaboutthefirm'svariousloan"products"andloanstrategiesinthemid2000's.ExhibitBconsistsofafewpagesofCountrywide'sownpublisheddescriptionofitsvariousloanproducts.(ExhibitBlookslikeasalesbrochure.)FinallycomeexhibitsCthroughMMM,whichtakeupthebetterpartofaboutfourvolumesofclerk'stranscript,extendingatotalof1,106pages.Theseappeartobeaseriesoffilesconsistingofformforeclosuredocumentspertainingtoasubsetoftheplaintiffsnamely90orsowhoareallegingwrongfulforeclosure.Thesedocumentsmostlyincludenoticesofdefaultandnoticesofsaleinindividualcases.[3]
B.Content
7/1/2015 Petersenv.BankofAmericaCorp.,232Cal.App.4th238Cal:CourtofAppeal,4thAppellateDist.,3rdDiv.2014GoogleScholar
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Whilethethirdamendedcomplaintlistssixentitiesasdefendants,[4]theyarenow,essentially,onedefendantCountrywideasabsorbedbyBankofAmericaCorporation.Thatis,allsixentitiesareeitherdirectlycontrolledbyBankofAmerica,whichhadearlierabsorbedCountrywide,orareownedbyoraffiliatedwitheitherCountrywideorBankofAmerica.[5]
*244Summarizingthecomplainteventheabridgedversionconsistingofjustthe208pagesoftraditionalallegationspresentsachallenge.Rhetoricalflourishesabound,reminiscentofWilliamJenningsBryan'sfamouscrossofgoldspeechfromthelate19thcentury(whichcometothinkofit,wasalsoaboutbanking).[6]Thebasicnarrativehasbeenrecountedinseveralcourtdecisions,[7]butitcan,wethink,besummarizedinjustonesentence:Sometimeinthemid2000's,Countrywidechangedthenormalgameplanof*245anyhomemortgagelenderfrommakingaprofitableloanthatispaidbackovertimetoanewgameplanbywhichitwouldmakeitsprofitsbyoriginatingloans,thentranchingthem(choppingthemupintolittlebitsandpieces)andsellingthemonthesecondarymarkettounsuspectinginvestorswhowouldthemselvesassumetherisktheborrowerscouldnotrepay.[8]Atroot,everythinginthethirdamendedcomplaintisanelaborationonthatthemeinsofarasitdirectlyaffectedtheseplaintiffborrowersfromCountrywide.
244
245
Inordertomakethenewgameplanwork,Countrywideallegedlyengagedinaninterrelatedseriesoftransactionstheneteffectofwhichwastosaddleplaintiffswithloanstheycouldnotafford.Thisseriesconsistedoftwoidentifiablephases:Phase1wastocreateanotherwiseartificialupwardspiralofappreciatingpropertyvalues.ThisupwardspiralwasallegedlyaccomplishedbyCountrywideusingitsowncaptiveappraisalcompany,defendantLandsafe,to"falsely"inflateallvaluations.TheinflatedvaluestookonalifeoftheirownwhichinflatedallpropertyvaluesinCalifornia.[9]
*246Phase2wastoinduceborrowerstotakeimprovidentloans.Normallyaprudentlenderwouldwanttolendtoacreditworthyborrowerwhocouldpaybacktheloanatthestatedinterestrate.ButgivenCountrywide'snewmodelbusinessplaninwhichtheultimatepayeesoftheloansweregoingtobeoutsideinvestorswhowouldtakethehindmost,Countrywidewantedtosaddleborrowerswiththemaximumamountofdebtpossibleanyriskofdefaultwouldbebornebyinvestorsonthesecondarymarket.Meanwhile,Countrywidewouldpocketloanfees,commissionsandprofitsfromthesaleofloansafterthoseloansweretranchedandsecuritized.Thekeytothesecondprong,i.e.,toinducingborrowersintofinancialimprovidence,wastomisleadthemastoloanterms.
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ThespecificmisleadingstatementsallegedlymadetotheseplaintiffsarescatteredthroughoutappendixA,soisolatingthemallintomanageablegroupsisachore.[10]Twobroadthemes,however,canbeidentified:First,Countrywideloanofficersandsalespeopleareallegedtohavemadebroadassurancestoeachoftheplaintiffsthattheycould"afford"theirloans.[11]Second,hereandthereinappendixAareallegationsthatloanrepresentativesfromCountrywidedidnotdiscloseinterestrateadjustmentsorloantermssuchaswhenaninitialfixedrateloansuddenlybecameanadjustableloan.
Bythetimeofthethirdamendedcomplaint,ithadcrystallizedintofourcausesofaction:intentionalmisrepresentation,negligentmisrepresentation,unfaircompetition,andwrongfulforeclosure.Thefirstthreeapplytoallplaintiffs,theforeclosureclaimtoonly90ofthem.Thewrongfulforeclosureclaim,interestinglyenough,presentsaspristineacommonissueoflawasitispossibletoimagine:Itstheoryisthatthevariousindividualforeclosureswereallunlawfulbecausetheeventualtrusteeswhoforeclosedontheloanwerenottheoriginalagentsdesignatedintheloanpapers.Theclaimthuspresentsatidy,discretequestionoflawcommontoall90foreclosureplaintiffs.
*247C.TrialCourtDisposition247
Defendantsdemurredtothethirdamendedcomplaintonthegroundofmisjoinderofplaintiffsinviolationofsection378.[12]Thetrialcourtsustainedthedemurrerwithoutleavetoamendanddismissedalltheplaintiffs"withoutprejudicetotherightsoftheotherplaintiffstofiletheirowncomplaints,"exceptforfirstnamedplaintiff,Wright.Thejudgesaid:"TheCourtunderstandstheimportanceoftheseclaimstothehomeowners,buttheproblemappearstobethattheyhavebeenimproperlyjoinedinasinglecasebasedinthewaytheThirdAmendedComplainthasbeenwritten.While
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certainlyplaintiffWrightisentitledtogoforwardwithhisclaims,thelanguageofthecomplaintdraftedbyhiscounselinitsfourthversionsetsforthseparatetransactions,loanapplicationsandapprovals,withmanyoftheloansoriginatingwiththirdparties.Underthecontrollinglaw,CCPsection378,thereappearstobeamisjoinderoftheplaintiffs.Theclaimsoftheotherhomeownerscanstillgoforward,buttheywillhavetofiletheirowncomplaints."
InJanuary2013,ajudgmentofdismissalwasenteredinfavorofdefendantsagainstallplaintiffsexceptforWrighthencethetitleofthecasebeforeusderivesfromthesecondnamedplaintiffinthecaption,ChristinaI.Petersen.Thedismissalwas"withoutprejudicetotherightsofthedismissedPlaintiffstofiletheirowncomplaints."Plaintiffsfiledtwonoticesofappeal.Theythatis,about800oftheoriginal965filedanoticeofappealfromthejudgmentofdismissal.Itisthisappealwithwhichouropinionismainlyconcerned.
Butbackinthesecondamendedcomplaint,therehadbeenacauseofactionforfraudulentconcealment.Thatfraudulentconcealmentclaimhadbeendismissedonthemerits,pursuanttoademurrer.Theorderdismissingthefraudulentconcealmentclaimisalsothesubjectofasecondappeal.Wedonotaddressthesubstanceofthissecondappeal.Becauseofourdispositionoftheappealfromtheorderdismissingallplaintiffs(butone)formisjoinder,thereisnofinaljudgmentinthiscase.Accordingly,wedismisstheappealfromthefraudulentconcealmentcauseofactionbecauseitwouldviolatetheonefinaljudgmentruleforustoconsideritsmeritsinthisproceeding.(SeeKurwav.Kislinger(2013)57Cal.4th1097,1107[162Cal.Rptr.3d516,309P.3d838][notingpolicyagainstpiecemealappeals]Morehartv.CountyofSantaBarbara(1994)7Cal.4th725,741,fn.9[29Cal.Rptr.2d804,872P.2d143][same].)Rather,ourfocusisonthepermissivejoinderofsuchalargenumberofplaintiffsinthis"massaction."
*248II.DISCUSSION248
A.PermissiveJoinderUnderSection378
(1)Californiaprocedurallawisinfusedwithasolicitude,ifnotanaltogetheroutrightpreference,fortheeconomiesofscaleachievedbyconsolidatingrelatedcasesintoasingle,centrallymanagedproceeding.Classactionsthemselves,assetforthinsection382,constitutethemostobviousexample,sincetheyallowtheadjudicationofcommonissuesofliabilitybasedontheaggregationofclaimsinoneproceeding,usuallyinacontextwhereadjudicatingthoseclaimspiecemealwouldbeimpracticable.(SeeVasquezv.SuperiorCourt(1971)4Cal.3d800,816[94Cal.Rptr.796,484P.2d964]accord,CityofSanJosev.SuperiorCourt(1974)12Cal.3d447,457[115Cal.Rptr.797,525P.2d701][observinga"recognizedpolicyfavoring""appropriateclassactions"].)
Theaffinityforeconomiesofscalemanifestsitselfinanumberofotherproceduralcontexts.Theseincludethestatutorypreferenceincriminallawthatfavorsconsolidationofchargesagainstmultipledefendantswherethereiscrossadmissibility[13]andrulesofcourtrequiringdesignationofrelatedcasestoavoid"substantialduplicationofjudicialresourcesifheardbydifferentjudges."[14]Itevenshowsupinthecommonlawdoctrineofresjudicataandtheappellatedoctrineoftheonefinaljudgmentrule.[15]
Itisalsomanifestedbythestatutoryprovisionbeforeusnowtheonethatallowsforpermissivejoinderinsection378.AnimportantaspectoftheLegislature'sdraftingofthestatuteshouldnotgounremarked:Whilemanyproceduralstatutescommitdiscretiontothetrialjudge,thisstatutecommitsdiscretiontotheplaintiffs...totheplaintiffsthemselves.Ifthereisarighttoreliefarisingoutofthesameseriesoftransactions,itistheplaintiffswhogettodecidewhethertojointogetherinacommonaction.Considerthesyntaxoftheopeningtosection378thewaytheLegislaturewroteit:"Allpersonsmayjoininoneactionasplaintiffsif:[](1)Theyassertanyrighttoreliefjointly...."(Italicsadded.)Itistheplaintiffswhomaketheinitialdecisiontofilejointly.
*249(2)Inthiscase,thekeywordsonwhichthatchoiceturnsare"same...seriesoftransactions."Asfarbackasthelate1920's,intheimmediatewakeofthe1927amendmentofsection378,ourSupremeCourtnotedthatthepermissivejoinderstatutereflectedtheLegislature'sdesirethatjoinderbeliberallyconstruedsoastopreventthediseconomyofa"multiplicity"ofcases.SaidthecourtinJoergerv.PacificGas&ElectricCo.,supra,207Cal.atpages1920:"Oneofthe
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objectsofthereformedorcodeprocedureistosimplifythepleadingsandconductofactions,andtopermitthesettlementofallmattersofcontroversybetweenpartiesinoneaction,sofarasmaybepracticable....Topermitajoinderwherepossiblemakesmanifestlyfortheexpeditiousdispositionoflitigationwithoutworkinghardshiptoanypartydefendant,andforthisreasonstatutesrelatingtojoindershouldbeliberallyconstrued,unlessexpresslyforbidden,totheendthatamultiplicityofsuitsmaybeprevented."(Italicsadded.)
Thehighcourtexpressedsimilarsentimentsagain,relativelysoonafterthestatute'samendmentinKraftv.Smith(1944)24Cal.2d124,129[148P.2d23].SodidtheCourtofAppeal.(SeeBussetv.CaliforniaBuildersCo.(1932)123Cal.App.657,666[12P.2d36][notingjoinderstatures"shouldbeliberallyconstruedinfurtheranceofadministrativeefficiency"]Morrisv.Duncan(1936)14Cal.App.2d635,639[58P.2d669]accord,Colemanv.TwinCoastNewspaper,Inc.(1959)175Cal.App.2d650,653[346P.2d488][thejoinderstatute"shouldbeliberallyconstruedsoastopermitjoinderwheneverpossibleinfurtheranceof[its]purpose"].)TheRutterGrouptreatiseoncivilprocedurebeforetrialhasaccordinglydrawntheobviousconclusion:"Therequirementthattherighttoreliefarisefromthe`sametransactionorseriesoftransactions'isconstruedbroadly.Itissufficientifthereisanyfactualrelationshipbetweentheclaimsjoined(andthistendstomergewiththe`commonquestion'requirement,below)."(Weil&Brown,Cal.PracticeGuide:CivilProcedureBeforeTrial(TheRutterGroup2014)2:211,p.260.1(rev.#1,2013),someitalicsadded(hereinafterRutterCaliforniaCivilProcedureTreatise).)
Section378isbasedonrule20oftheFederalRulesofCivilProcedure(28U.S.C.)(seeRodriguezv.BethlehemSteelCorp.(1974)12Cal.3d382,407,fn.28[115Cal.Rptr.765,525P.2d669]),andthefederalrulehasbeeninterpretedtoincludethesameadjurationtoliberalapplication:"Requirementsliberallyconstrued:Therequirementsgoverningpermissivejoinderareconstruedliberallyinordertopromotetrialconvenienceandtoexpeditefinaldeterminationofdisputes:`UndertheRules,theimpulseistowardentertainingthebroadestpossiblescopeofactionconsistentwithfairnesstothepartiesjoinderofclaims,partiesandremediesisstronglyencouraged.'"(Schwarzeretal.,Cal.PracticeGuide:FederalCivilProcedureBeforeTrial*250(TheRutterGroup2014)7:138,p.757(rev.#1,2014),boldfaceomitted,quotingMineWorkersv.Gibbs(1966)383U.S.715,724[16L.Ed.2d218,86S.Ct.1130].)
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(3)Broadconstructionofsection378hasbeenexemplifiedinaseriesofappellatedecisionsovertheyears.ThemostinstructiveisAnayav.SuperiorCourt(1984)160Cal.App.3d228[206Cal.Rptr.520].There,multiplejoinderwasupheldinacaseinvolvingwidespreadexposuretohazardouschemicals.Anayaallowedthejoinderof200plaintiffsonthebasisthatexposuretoaharmfulchemicalinvolved"thesameseriesoftransactions"eventhoughtheplaintiffswereexposedatdifferenttimesandindifferentways.(Id.atp.233.)InAnayatherewereasinthecaseathandlotsofdifferencesintheindividualdamagessustainedbytheplaintiffsfromthedefendants'conduct.ButtheAnayacourtpointedoutthatthekeyquestionwastheexistenceof"commonquestionsoflawandfact,"andnotwhether,asthedefendantshademphasized,therewere"differencesintheevidencetobepresentedandinthelegaltheoriestobeusedbythevariousplaintiffs."(Ibid.)The"point"ofsection378,saidthecourt,istoallowjoinderwhere"`anyquestionoflaworfactcommontoall'plaintiffswillarise."(160Cal.App.3datp.233.)AndAnayathought"any"means"any."Thewordwasemphasizedbythecourt.(Ibid.)
BroadconstructionwasalsothewatchwordinStateFarmFire&CasualtyCo.v.SuperiorCourt(1996)45Cal.App.4th1093,1113[53Cal.Rptr.2d229].[16]InStateFarm,multiplejoinderwasallowedinNorthridgeearthquakelitigationbecausetherewasanallegedlyfraudulent"systematic"practiceofdeceivingpolicyholders.(45Cal.App.4thatp.1113.)StateFarmallowedthejoinderof165Northridgeearthquakeclaimantswhoassertedthattheywerethevictimsofacleverinsurancepolicyswitch:Theirearthquakeendorsementstoallriskpolicieshadbeenreplacedwithaseparateearthquakepolicynottetheredtotheallriskpolicy,resultinginlowertotalcoverage.(45Cal.App.4thatp.1099.)
Significantlyforourpurposes,theplaintiffsinStateFarmfurtherallegedthataftertheearthquaketheysuffered"some15differenttypesof`improperclaimshandlingprocesses'"whichwere"`systematically,methodicallyandgenerally'"implementedbytheinsurer.(StateFarmFire&CasualtyCo.v.SuperiorCourt,supra,45Cal.App.4thatpp.10991100.)Thediversityof*251thoseclaims,however,didnotpreventjoinder,eventhoughtheynecessarilyentailedindividualizedfactsanalogoustotheindividualloantransactionsbeforeusnow.
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InsomewaysStateFarmappliesafortioritocertainoftheallegationsbeforeusnow.Whiletheremightbeaplethoraofwaysto"lowball"propertyinsuranceclaims,therearecomparativelyfewwaysto"highball"appraisalsbasically,asthethirdamendedcomplaintalleges,youcansimplyusenoncomparablepropertiesascomparables,orrelyonpreviouslymadedishonestappraisalsofcomparables.And,whilebadfaithinsuranceadjustmentinvolvesavarietyofsmalltricksandsubjectivenegotiatingpressures,herethewaysinwhichdefendantsallegedlymisledborrowersconstituteadiscretesetofonlyafewitemsmainlyunexpectedballoonpaymentsandswitchesfromfixedtoadjustablerates.IfthejoinderofawidevarietyofclaimshandlingpracticeswasappropriateunderStateFarm,thejoinderofvariousformsofloanimproprietyhereseemsequallycorrect.
Afurthermanifestationofthebroadconstructionrequiredundersection378isfoundinMoev.Anderson(2012)207Cal.App.4th826[143Cal.Rptr.3d841].InMoe,twopatientsallegedtheywerevictimsofseparatesexualassaultsallegedlycommittedbyaphysician.Tobesure,joinderwasnotappropriateastothephysician,sincetheassaultsinvolved"separateanddistinct"events"duringseparateanddistincttimeperiods."(Id.atp.833.)Buttheclaimsagainstthemedicalgroupforwhichthephysicianworkedwasadifferentstory.Joinderwasappropriateastothesingleemployersincethesamebasicissueofnegligentsupervisionandhiringwascommontoboth(otherwisedisparate)plaintiffs,andwouldinvolvethesameevidenceagainstasingledefendant.Thecourtsaid:"Thus,aswasthecaseinAnaya,plaintiffshaveassertedarighttoreliefarisingoutofthesameseriesoftransactions.Sotooaretherecommonissuesoflaworfact.ThesameevidencewithrespecttoHealthworks'shiringandsupervisionofAndersonwillneedtobeadducedinseparatelawsuitsifjoinderisnotallowed."(Id.atp.836,italicsadded.)Needlesstosay,inthecasebeforeusthereismuchinthewayofcommonevidenceandtheoriesofliabilityandmuchofthesameevidencewillhavetoberepeatedlyproducedifjoinderisnotallowed.Indeed,weshuddertothinkoftheduplicationofeffortifevenadozenofthe800orsoplaintiffswhohavebroughtthisappealhaveindividualtrialsonliabilityissues.
Finally,Adamsv.Albany(1954)124Cal.App.2d639[269P.2d142]issimilarlyinstructive.There,joinderofnolessthan40setsofhomebuyers(recentwarveterans)washeldproper.Eventhoughthedefendantargueditsallegedfraudulentschemeinvolvedtortsthattookplaceatdifferenttimesandplaces,andeventhoughtheevidenceastoonehousewouldhavenoprobativevalueastoanyotherhouse,theappellatecourtinvokedthe"series*252oftransactions"languagefromsection378andsaiditwasenoughthatdefendantwasallegedtohaveengagedinaconspiracytodefraudtheveteransbysellingthemsubstandardhousing.Ashere,Adamsisacasewherethealleged"businessplan"ofthedefendantwascommontomultipledefendants,eveniftheirspecificdamagesmightvary.
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InlightofStateFarm,Anaya,MoeandAdams,itwouldbeamajordeparturefromCaliforniacaselawconstruingsection378forustoupholdthetrialcourt'sdemurrerformisjoinderinthiscase.Thiscaseismerelyaquantitativelynotqualitativelylargerversionofthosefour,particularlyStateFarmandAdams.
Here,wehavealreadyidentifiedthetwocoreaspectsofthecommonplanallegedinthethirdamendedcomplaintthatnecessarilywillentailcommonevidence(1)whetherCountrywidedeliberatelyencourageddishonestappraisalsand(2)whetherCountrywideencourageditsloanofficerstoconcealloanterms.Thesetwoaspectsdevolveintoseveralquestionsoflaworfactbearingonliability.Herearefourthatcomereadilytomind:(a)whetherCountrywidehadaconsciousbusinessplantopressureorotherwiseundulyinfluenceappraiserstodishonestlyinflateappraisals(b)ifitdid,whetherevensuchdishonestappraisalscouldhavethecumulativeeffectofinflatingrealestatemarketsinawaythatmighthavecausedbuyersand/orborrowersinthosemarketstopaymore,orborrowmore,thantheyotherwisemighthave(c)eveniftheydid,whethersuchmarginallyextraborrowedmoneyconstitutescognizabledamagesundersometheoryoflawand(d)whetherafailuretoexpresslywarnbuyersorborrowersaboutsuchkeytermsofawrittenloanagreement,suchaschangesfromfixedtoadjustablerates,ortheneedtomakeaballoonpaymentattheendareactionableundersometheoryoffraudorunfairbusinesspractice.
Weemphasizeagainthatthiscaseinvolvesessentiallyonlyonelender,Countrywide,operatinginconjunctionwithitscaptiveappraisalagents.WhileCountrywidecitesanumberoffederalcasesthatconcludedtherehadbeenmisjoinder,thesefederalcasesmerelymakethepointthatgenuinelymultipledefendantsdonotfallwithinthefederalpermissivejoinderrule.[17]
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(4)Wefurtheremphasizethatourconclusionjoinderispermissibleisbasedoncommonalityregardingliability,notdamages.Thereisadirect*253parallelhere(again)toclassactions.Whiletheindividualdamagesamongthese965plaintiffsofcoursevarywidely,thatisnotthesalientpoint.(SeeBrinker,supra,53Cal.4thatp.1022["`Asageneralruleifthedefendant'sliabilitycanbedeterminedbyfactscommontoallmembersoftheclass,aclasswillbecertifiedevenifthemembersmustindividuallyprovetheirdamages.'[Citations.]"].)Thesalientpointisthatliabilityisamenabletomassactiontreatment.
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Finally,wemustobservethattwooverallpoliciesofthelawareservedbyjoinderinthisinstance.Oneisaccesstojustice.Torequiretheseplaintiffstofileseparatelynotonlyclogsupthecourts,butalsodeprivesthemofeconomiesofscaleotherwiseavailableundersection378,particularlyinregardtotheclearlycommonproofbearingonCountrywide'sallegedtwoprongedschemetobothfixpricesandmisleadborrowersastoloanterms.Asfaraswecantell,thesameexpertsandwhistleblowerswillbecommontoallcausesofactionbasedonvariationsofmisrepresentationorunfaircompetition.
Thesecondistheconservationofjudicialresources.Thereisanobviousburdentothetrialcourtifjoinderisnotallowed.AppendixAshowsthattherearesome800orsopotentialindividualactionsoutthere(assumingthatthe165oftheoriginal965plaintiffswhodidnotjointhisappealnolongercare),waitingtocometroopinginassinglesnipers,notasonereadymade,manageablebattalion.Itwouldnottakemanysuchactionsbeforethetrialcourtwouldbefacedwiththeadministrivialtaskofsettingupagrandcoordinatedaction,whichinallprobabilitybecauseitwillinvolvedifferentplaintiffsanddifferentactionswillbehardertomanagethanthisone,singleaction.(Cf.404[authorizingcoordination]Stats.1992,ch.696,1(b)(1)(C),pp.30023003["TheLegislaturefurtherfindsanddeclaresthat:[]...[]...Scarcejudicialresourcesmustbeusedinanefficientmanner...."].)[18]Putanotherway,massjoinderhereholdsthepromiseof*254actuallydecreasingtrialcourtcasemanagementtime.Unlessweadoptthecynicalviewthatrequiringeachplaintifftoproceedagainstthecorporatedefendantswillmaketheircasesgoaway,wehavetoconsiderthisaspectofthecase.
254
B.Management
Andinregardtoadministrativetasksahead,wemustofferwhatwecaninthewayofguidanceforthetrialcourtonremand.Wesay"wemust"becausewebelievesendingthis3,000pluspagethirdamendedcomplaintcasebacktothetrialcourtwithoutguidancewouldbenothinglessthanoppressive.IfwearegoingtosendMobyDickbacktothetrialcourt,weshouldatleastprovideaharpoonortwo.Countrywide'sargumentthatthesheerheftofthis965plaintiffactionisundulyburdensomedoescarrysomeforce.ButwethinkthelawofCaliforniaprocedurestrikesagoldenmeanhere.Ontheonehand,itisunfairtotheseplaintiffstodeprivethemofthecommonalitiesofproofandwitnessesinherentintheirbasictheoryagainstCountrywide.Asnoted,thesameexpertsandwhistleblowerscanbeanticipatedtoprovideevidenceforalltheseplaintiffs.Ontheotherhand,itisunfairtoCountrywidetosaddleitwiththeamorphous,inchoateheapofallegationsthatcurrentlyconstitutesthethirdamendedcomplaintasdraftedandstructured.Soletusbeplain:Onremandthetrialcourtwillhavethepowertorequireplaintiffs'counseltowhipthethirdamendedcomplaint'sdesultoryandscatteredallegationsagainstCountrywideintoatightlystructuredsetofmanageablesubclaimsandsubclasses.OurdecisiondoesnotrequireittocommencejuryselectionatAnaheimStadium.[19]
(5)Injustice,saidAristotle,canconsistintreatingunequalsequallyoroftreatingequalsunequally.So,justasthereisaproceduralsolicitudeforconsolidationtoassureaccesstojusticethatfavorsjoinderandclassactions,thereiscorrespondingcontrapuntalrecognitioninprocedurallawthattrialcourtssometimesneedtocategorizeandsubdivideclaimsandclassestotreatthemeffectively.Wefinditinsuchproceduresasthediscretionoftrialcourtstoseverarbitralclaimsfromnonarbitralones(e.g.,Doanv.StateFarmGeneralIns.Co.(2011)195Cal.App.4th1082,10981099[125Cal.Rptr.3d793]),theauthoritytoorderseparatetrialsinordertoavoidprejudice(1048)andimportantforourpurposeheretheabilitytoorganizeclassactionsintoappropriatesubclasses.(SeegenerallyBrinker,supra,53Cal.4th1004[useofsubclassesallowedcourttoascertainvalidityofsomeclaims*255andinvalidityofothers]Aguiarv.CintasCorp.No.2(2006)144Cal.App.4th121,125[50Cal.Rptr.3d135]["Becausethecomplexitiesofthecaseonwhichthetrialcourtreliedtofindclasscertificationinappropriatecanbeaddressedbytheuseofsubclasses...we
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reversetheorderdenyingcertificationandremandthematterwithdirectionsforthetrialcourttocertifytwosubclassesofCintasemployees...."]CanonU.S.A.,Inc.v.SuperiorCourt(1998)68Cal.App.4th1,5[79Cal.Rptr.2d897][notingobligationoftrialcourttoconsiderpossiblecreationofsubclassesincontextofclasscertification].)
Thetrialcourthastheauthoritytorequirethevariousclassesandclaimsfoundinthethirdamendedcomplaintbeproperlyanddigestiblyorganized.Thisiseasilya"complex"actionunderrule3.400(c)(5)[claimsinvolvingmasstorts]oftheCaliforniaRulesofCourt.Assuch,judicialadministrationstandardscontemplatethedesignationofonejudgewhowillhavethepowertoidentifyphasesforthelitigationandsettimelimitsonthosephases,andadjudicatelegalandevidentiarysubissuespretrial.[20]
Asstatedearlier,today'sdecisionisalsowithoutprejudiceastowhetherCAFAapplies.(Cf.Bullardv.BurlingtonNorthernSantaFeRailwayCo.(7thCir.2008)535F.3d759[CAFAremovalupheld]Koralv.BoeingCo.(7thCir.2011)628F.3d945,947[CAFAremovalpremature,butnoting"amassactionisaformofclassaction"]Romov.TevaPharmaceuticalsUSA,Inc.(9thCir.2013)731F.3d918,924[noCAFAremovalofstatecourtcoordinatedproceedingsbecauseofabsenceofproposalforjointtrial].)Likewise,itiswithoutprejudicetoeithersidetobringaclasscertificationmotion.(SeeCal.RulesofCourt,rule3.764(a)(1)[anypartymaymovetocertifyaclass].)
Finally,becauseweremandthecasebacktothetrialcourt,thereis,asyet,nofinaljudgment,sowearedismissingtheappealfromtheorderdismissingthecauseofactionforfraudulentconcealment.Obviouslyweexpressnoopiniononthemeritsofthatcauseofactionnow.
*256III.DISPOSITION256
Thejudgmentdismissingthoseplaintiffswhohavefilednoticesofappealinthisactionisreversed,andthecaseremandedwithdirectionstoconductfurtherproceedingsnotinconsistentwiththisopinion.Becausethisisaninterlocutoryappealwithoutfinaldispositionofthecause,wedonotawardappellatecostsnow.Rather,weauthorizethetrialjudge,attheconclusionofproceedings,toawardtheappellatecostsofthisappealasheorshebelievesservetheinterestsofjustice.
Thompson,J.,concurred.
FYBEL,J.,Dissenting.
Irespectfullydissent.Iwouldaffirmthecorrectdecisionofthetrialcourt.Theresultofthemajority'sdecisiontoreversethetrialcourtwillbeasbreathtakingasitislegallyunsupported.Themajorityisapprovingthejoinderoftheclaimsofsome818plaintiffhomeloanborrowerswiththeclaimsofthefirstnamedplaintiff,JohnP.Wright,intoasinglemassivelawsuit.[1]Thisvastjoinderofborrowers'claimsisunprecedentedunderCaliforniaandfederallaw.
Joiningtheclaimsofsomanyplaintiffsnotonlyisunprecedented,butalsoisnotjustifiedbytherelevantstandardsandprinciplesgoverningjoinder.CodeofCivilProceduresection378,subdivision(a)(1)(section378(a)(1))permitsjoinderonlyiftworequirementsaresatisfied:(1)theclaimsariseoutofthesametransactionoroccurrenceand(2)thereisacommonlegalorfactualquestion.Plaintiffs'thirdamendedcomplaint(theComplaint)doesnotcomeclosetosatisfyingthestandardsforjoinderundersection378(a)(1).
Plaintiffs'claimsdidnotariseoutofthesametransactionoroccurrencerather,theyaroseoutofover1,000separateanddistinctloanandloanmodificationtransactionsinvolvingdifferentborrowers,andmanythirdpartyoriginatorsandlenders.Theloantransactionsweremadeatdifferenttimesoverasixyearperiodsomeloanswerepurchasemoneyloans,whileotherloansrefinancedexistingones.EachloantransactionwassecuredbyadifferentparcelofrealpropertyinCaliforniaandinvolvedadifferentappraisal.Theloanshadvarioustermsandwereatdifferentinterestratessomewerefixedrateloans,whileotherswerevariablerateloans.Notalllenderswerethesame.Eachloantransactioninvolveddifferentloanbrokersandagents,whomadedifferentrepresentationstoeachplaintiff.
*257Themajorityopinionisinerrorforthefollowingfiveprincipalreasons:257
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1.EachLoanTransactionIsDistinct.Themajorityopinion,ataminimum,oversimplifiestheComplaint'sallegationsinanattempttofindcommonalityamongstthediverseclaimsof818AppealingPlaintiffs.AlthoughtheComplaintallegedDefendantsengagedinaschemetodefraud,eachoftheseborrowersenteredintoadifferentloantransactionsecuredbyadifferentparcelofrealpropertyandsupportedbyadifferentappraisal.Themajorityismistakeninassertingthelenderwasthesameforeachloan,asmanylenderswerethirdpartieswhohavenotbeennamedasdefendants.FormanyoftheAppealingPlaintiffs,theComplaintanditsattachmentsdonotincludebasicinformationabouttheloantransaction.
2.IssuesofLiabilityAreNotSubjecttoCommonProof.Themajorityopinionassertsthattheissuesofliabilityaresubjecttocommonproofandindividualquestionsofdamagescanbeaddressedthroughtrialcourtmanagement.TheComplaintitselfrevealsthoseassertionstobeincorrect.AsIwillexplainindetail,Plaintiffsdidnotallegethatacommon,uniformsetofmisrepresentationswasmadetoeachofthem.NorhaveAppealingPlaintiffsarguedinanyoftheirbriefsoratoralargumentthatuniformrepresentationsweremade.Thus,torecoveronthecauseofactionforintentionalmisrepresentationorthecauseofactionfornegligentmisrepresentation,eachandeveryplaintiffyes,eachoneofthemwillhavetosubmitevidencetoproveliabilityanddamages.Likewise,eachofthe90plaintiffsassertingwrongfulforeclosuremustindividuallyprovethefactsspecifictohimorherestablishingthatforeclosureprocedureswerenotfollowed.
Resolvingtheclaimsofall818AppealingPlaintiffsinasinglelawsuit,therefore,definitelywouldnotpromotejudicialeconomyandfairnessasrequiredbylawquitethecontrary,the"megasuit"mandatedbythemajoritypromisestobeanunjustifiedadministrativenightmare.
3.AnalogousCaseLawIsAgainstJoinder.Forgoodreason,courtswhichhaveaddressedtheissueofjoinderofborrowers'claimsinthesamecircumstancespresentedinthislawsuithaveconsistentlyheldsuchattemptsatjoindertobeimproper.InpartIII.,Idiscuss11opinionsdecidedbytheUnitedStatesCourtsofAppeals,includingtheNinthCircuit,andUnitedStatesDistrictCourts,includingtheCentralDistrictandNorthernDistrictofCalifornia.Allofthemconcludethatplaintiffborrowers,whomadethesameclaimsasAppealingPlaintiffs,weremisjoinedbecauseeachloanwasaseparatetransaction.FederallawonjoinderisthesameasCalifornialawonjoinder.Bothinitsanalysisandconclusion,themajorityopinionisinconflictwithallofthosecases.Instead,themajorityreliesontheprincipleofbroadconstructionandusesthatprincipletostretchsection378(a)(1)pastits*258breakingpoint.TheCaliforniaappellatecaseswhich,themajorityclaims,exemplifytheapplicationoftheprincipleofbroadconstructioninupholdingjoinder,aroseinverydifferentcontextsandhadfardifferentfactsfromthosepresentedinthiscase.Innoneofthosecasesdidjoinderactuallydependonbroadconstructionofsection378(a)(1).
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4.ThisIsNotaClassAction.ThemajorityopinionessentiallyrecaststheComplaintasaclassaction.Letusbeplainupfront:PlaintiffsdidnotfiletheComplaintasaclassactionandtheComplaintincludesnoclassorsubclassallegations.Plaintiffsdidnotaskforclasscertification.Thequestionbeforethetrialcourtwhetherthe965(includingWright)plaintiffsweremisjoinedwasanallornothingproposition.AppealingPlaintiffsneverarguedhereorinthetrialcourtthatthislawsuitshouldbetreatedasaclassactionordividedintosubclassesorsubgroups.Indeed,indirectresponsetoquestionsaboutsubclassesposedatoralargumentbymycolleagues,AppealingPlaintiffs'counselflatlystatedtheonlyissuepresentedwaswhetherPlaintiffs'claimswereproperlyjoined,notwhethersubclassescouldorshouldbecreated.
Themajorityopinion'streatmentoftheComplaintisreminiscentofthefamousstorytoldbyAbrahamLincoln.Aboywasaskedhowmanylegshiscalfwouldhaveifhecalleditstailaleg.Theboyreplied,"Five."Thecorrectanswer,ofcourse,isfour.Callingacalf'stailaleg"wouldnotmakeitaleg."(Rice,ReminiscencesofAbrahamLincolnbydistinguishedmenofhistime(rev.ed.1909)p.242.)Likewise,treatingalawsuitasaclassactiondoesnotmakeitone.Theissuepresentedtousiswhetherthe818AppealingPlaintiffswereproperlyjoinedundersection378(a)(1),notwhetherorunderwhatcircumstancesAppealingPlaintiffsshouldbetreatedasaclass.
5.ThisCaseShouldNotBeTreatedasaClassAction.Themajorityadvisesthepartiestousesubclassesa
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procedurepeculiartoclassactionsanddrawsa"directparallel"withclassactionsbasedonsupposedcommonalityonissuesofliability,withonlydamagestobeindividuallycalculated.(Maj.opn.,ante,atpp.252253.)ThemajoritystatesitsdecisioniswithoutprejudicetowhethertheClassActionFairnessActof2005,28UnitedStatesCodesection1332(d)(CAFA)applies.(Maj.opn.,ante,atp.255.)ThemajorityistellingthetrialcourtandAppealingPlaintiffsthislitigationreallyshouldbetreatedasaclassaction,whichcouldthenbedividedintothesubissuesandsubclassesrevealedbythemajority'sreadingoftheComplaint.Howcantherebesubclasseswithoutaclass?
WhilecounselforDefendantswillbesurprisedbythemajority'sapproach,noonewillbemoresurprisedthancounselforAppealingPlaintiffs,whohavedisclaimedthepremiseonwhichthemajorityopinionrests.Whenaskedat*259oralargumentaboutthepossibilityofsubclasses,AppealingPlaintiffs'counselstatedtheissuepresentedwaswhetherthetrialcourterredbydenyingjoinder.Themajorityerroneouslycallsthislawsuita"`massaction'"(maj.opn.,ante,atp.241),butthatisatermfoundinCAFA,28UnitedStatesCodesection1332(d)(11)(B),andDefendantschosenottoremovethisactiontofederalcourt.[2]
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Theplaintiffsinanycivillitigation,includingtheonesinthiscase,aredeemedtobethemastersoftheircomplaint(Aryehv.CanonBusinessSolutions,Inc.(2013)55Cal.4th1185,1202[151Cal.Rptr.3d827,292P.3d871])andarenolessthemastersoftheirlitigationstrategy.Oursystemis,afterall,anadversarialone.AppealingPlaintiffsarerepresentedbyablecounselwithyearsofcivillitigationexperiencewhomadethestrategicdecisionstodrafttheComplaintastheydidandtopursuePlaintiffs'claimsinaparticularway.Plaintiffschosenottobringaclassactionandchosenottoseparatethemselvesintosubclassesorsubgroups.ItisnotappropriateforustosecondguessthosedecisionsandgiveunsolicitedadvicepurportingtotellAppealingPlaintiffsthebestwayforthemtodrafttheirowncomplaintandpursuetheirownclaims.
ItbearsrepeatingthattheonlyissuebeforeusontheappealfromthejudgmentofdismissaliswhetherthestatutoryrequirementsforjoinderaresatisfiedbasedontheallegationsoftheComplaint.Thetrialcourt,afterfullyconsideringtherelevantfactorsandissues,wascorrecttosustain,withoutleavetoamend,Defendants'demurrertotheComplaint.AnyAppealingPlaintiffisfreetofilehisorherownlawsuit,includingarepresentativeactionunderCalifornia'sunfaircompetitionlaw.
I.
ALLEGATIONS
A.
OverviewoftheComplaint
TheComplaintis210pagesinlength,and,inaddition,hasa1,772pageappendixandattaches1,259pagesoftitleandloandocuments.AllegationsspecifictoeachplaintiffweremadeinappendixAtotheComplaint.
TheComplaintassertedfourcausesofaction:(1)intentionalmisrepresentation,(2)negligentmisrepresentation,(3)unfaircompetitioninviolationof*260BusinessandProfessionsCodesection17200etseq.,and(4)wrongfulforeclosure.AllPlaintiffssoughtdamagesforintentionalmisrepresentationandnegligentmisrepresentation.Ofthe965Plaintiffs,90werepartiestothewrongfulforeclosurecauseofaction.
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B.
TheParties
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1.Plaintiffs
All965PlaintiffsareCaliforniaresidents.TheComplaintallegedeachplaintiff"borrowedmoneyfromoneormoreoftheDefendantsoritssubsidiariesoraffiliatesorsuccessorsandassignsbetweenJanuary1,2003,andDecember31,2008,securedbyadeedoftrustonhisorherCaliforniarealestate(s)"and"oneormoreoftheDefendantshaveactedasServicerorsomeothercontrolorcapacityoverprocessingtheloan."
AppendixAandtheexhibitsshowPlaintiffs'claimsarosefromabout1,100loanandloanmodificationtransactionsoverthesixyearperiodfromJanuary1,2003,throughDecember31,2008.Asto154plaintiffs,appendixAtotheComplaintdidnotidentifybasicinformationsuchasthelender,thelocationofthesecuredrealproperty,theamountoftheloan,orthestatusoftheloan.
2.Defendants
Countrywideanditsfounderandchiefexecutiveofficer,AngeloMozilo,wereallegedtohavedevisedthemassivefraudulentschemethatisthesubjectoftheComplaint.CountrywideHomeLoanswasthemortgagebankingsubsidiaryofCountrywide.
LandSafe,Inc.,wasawhollyownedsubsidiaryofCountrywide.TheComplaintalleged,"Land[S]afeAppraisalsisadivisionofLand[S]afe,whichconductedtheappraisalsofPlaintiffs."
BofAacquiredCountrywidein2008.CountrywidewasmergedintoBofA,whichabsorbedandtookoverCountrywide'soperationsandemployees.TheComplaintallegedBofAconductedthebusinessformerlyconductedbyCountrywideand"ha[s]continuedtheunlawfulpracticesofCountrywidesinceOctober31,2007,including...writingfraudulentmortgages."
ReconTrustCompany,N.A.,wasawhollyownedsubsidiaryofBofAandactedastrusteeunderthedeedsoftrustsecuringrealestateloansheldor*261servicedbyBofA.TheComplaintalleged,"BofA...andtheotherBankDefendants...haveregularlyusedReconTrusttoforeclose,astrusteewithpowerofsale,trustdeedsonCaliforniarealty."CTCRealEstateServiceswasallegedtohave"actedalongsideandinconcertwithBofAincarryingouttheconcealmentdescribedherein...."
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C.
GeneralAllegations
TheunderlyingtheoryoftheComplaintisDefendantsceasedactingasconventionallendersandinstead"morphedintoanenterpriseengagedinsystematicfrauduponitsborrowers."TheComplaintallegedthatDefendantsengagedin"amassiveandcentrallydirectedfraud"bywhichtheyplacedhomeownersintoloanswhichDefendantsknewtheycouldnotafford(andonwhichthehomeownersinevitablywoulddefault),abandonedindustrystandardunderwritingguidelines,andengagedinamarketfixingschemebyusinginflatedappraisalstoartificiallyraisehomepricesthroughoutCalifornia.
AccordingtotheComplaint,thereasonwhyDefendantswereabletocarryoutthisschemewasthattheysecuritizedtheloansandsoldtheminbulkto"unsuspecting"thirdpartyinvestorsataheftyprofit.SinceDefendantsintendedtoselltheloans,ratherthanholdthemandearnprofitfromtheinterestgenerated,theyallegedlynolongerhadanincentivetofollow,andintentionallyabandoned,soundunderwritingstandards.Defendantsallegedlyusedintentionallyinflatedappraisalstojustifythesizeoftheloans,andtheartificiallyinflatedrealestatevaluesinturnallowedDefendantstocontinuetogeneratemoreinflatedloansthatcouldbesecuritizedandsoldinbulktoinvestors.
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NotallloanswereoriginatedbyDefendants,andtheComplaintalleged,withnofactualdetail,thatunnamedthirdpartybanksandlenders"actedatthebehestanddirectionoftheCountrywideDefendants,oragreedtoparticipateknowinglyorunknowinglyinthefraudulentscheme."
D.
CausesofActionoftheComplaint
1.IntentionalMisrepresentation
Inthefirstcauseofaction,forintentionalmisrepresentation,PlaintiffsallegedDefendants,"throughDefendants'securitiesfilings,speeches,advertisements,publicutterances,websites,brokers,loanconsultants,branches,*262andcommunicationswithclients,andothermedia,"madeaseriesofpartialmisrepresentationscreatingadutyto"speakthewholetruth"andtodisclosematerialfacts.Theseeightpartialmisrepresentationsincluded:
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1.Theborrower'sloanpaymentwouldbeforaspecifiedsum,"wheninrealitysuchpaymentwasonlyavailableforalimitedundisclosedperiodoftimeandwouldthendrasticallyincrease."
2.Theamountofpaymentsundertheloanwouldbe"constant"andtheborrowerwouldbeabletoaffordthosepayments,wheninrealitytheloanpaymentslaterwouldincreaseandtheborrowerwouldnotbeabletoaffordthosepayments.
3.Theborrowerqualifiedfortheloan,wheninrealitytheborroweronlyqualifiedbecauseDefendantsfalsifiedincomeandassetdocumentation.
4.Countrywideloanedmoneyinconformancewithitsunderwritingguidelines,andthatitslendingstandardsweresafe.
5.Theborrower'sloanpaymentwouldcoverbothprincipalandinterest,wheninrealitythepaymentswouldnotcoverprincipalandwouldnotcovertheminimuminterestontheloanresultingindeferredinterest.
6.Bymakingtheminimumpaymentonanadjustableratemortgageloan(ARM),theborrowermightdeferinterestwhen,inreality,makingtheminimumpaymentdefinitelywouldresultindeferredinterest.
7.Paymentschedulescreatedthefalseimpressionthatbymakingtherecommendedpayments,borrowerswouldnotnegativelyamortizetheirloans.
8.BymakingtheminimumpaymentduringtheinitialinterestrateperiodofanARM,borrowerswouldbepayingbothinterestandprincipal,wheninrealitytheywouldbepayingneither,resultinginnegativeamortization.
Inadditiontothosepartialmisrepresentations,theComplaintallegedDefendantsmadeaseriesofaffirmativemisrepresentations"throughDefendants'securitiesfilings,speeches,advertisements,publicutterances,websites,brokers,loanconsultants,branches,andcommunicationswithclientsandothermedia."The13affirmativemisrepresentationsincluded:
1.Theborrowerscouldaffordtheirloans.
2.Defendants'calculationsconfirmedthattheborrowerscouldaffordtheirloansandcould"shouldertheadditionaldebtresultingfromDefendant[s']loans,inlightofPlaintiffs'otherdebtsandexpenses."
*2633.Aborrower'squalificationforaloanwasthesameasbeingabletoaffordaloan.263
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4.BymakingtheminimumpaymentonanARM,theborrowerwouldnotbedeferringinterestandwouldbepayingbothprincipalandinterest.
5."[T]hevaluearrivedatbyDefendants'appraisalsofPlaintiffs'propertywasindeedthetruevalueofPlaintiffs'property."
6."[T]hevaluearrivedatbyDefendants'appraisalsofPlaintiffs'propertywassufficienttojustifythesizeoftheloantheywerebeinggiven."
7.Theactualtermsoftheloans,includingtheinterestrate,whethertheloanwasvariableorfixed,thedurationofanyfixedperiod,andtheinclusionofaprepaymentpenalty.
8.Defendantsfollowedtheirownunderwritingguidelinesandmadeloansonlytoqualifiedborrowers.
9.Defendantswerefinanciallysound.
10."Defendantswereengagedinlendingofthehighestcaliber."
11.TheloansofferedbyDefendantswere"safeandsecure."
12.Theborrowerswouldbeabletorefinancetheirloansatalatertime.
13.Defendantswouldmodifytheborrowers'loans.
TheComplaintallegedthatinjustifiablerelianceonthesepartialandaffirmativemisrepresentations,Plaintiffsenteredintoloanandmortgagetransactionsintowhichtheyotherwisewouldnothaveentered,andwhichtheycouldnotaffordfromtheoutsetorcouldnotaffordoncethevariableratefeatureorballoonpaymenttookeffect.TheComplaintdidnotallegetheclaimed21misrepresentations,oranycombinationofthem,wereuniformlymadetoall965Plaintiffs.AsshownbyappendixAandtheexhibitstotheComplaint,eachoftheseloanandloanmodificationtransactionswasdistinct.
2.NegligentMisrepresentation
Thesecondcauseofaction,fornegligentmisrepresentation,wasbasedonthesamemisrepresentationsthatformedthebasisfortheintentionalmisrepresentationcauseofaction,butallegedthosemisrepresentationsweremadenegligently.
*2643.UnfairCompetition264
Thethirdcauseofactionassertedunfaircompetitioninviolationoftheunfaircompetitionlaw,BusinessandProfessionsCodesection17200etseq.TheunfaircompetitioncauseofactionallegedDefendants'allegedmassiveschemeoffraudandDefendants'fraudulentmisrepresentationstoPlaintiffswerefraudulent,unfair,andviolated"numerousfederalandstatestatutesandcommonlawprotectionsenactedforconsumerprotection,privacy,tradedisclosure,andfairtradeandcommerce."
Intheunfaircompetitioncauseofaction,Plaintiffsallegedtheysufferedfinancialinjuryincluding"lossofequityintheirhouses,costsandexpensesrelatedtoprotectingthemselves,reducedcreditscores,unavailabilityofcredit,increasedcostsofcredit,reducedavailabilityofgoodsandservicestiedtocreditratings,increasedcostsofthoseservices,aswellasfeesandcosts,including...attorneys'feesandcosts."Asaremedyforunfaircompetition,Plaintiffssoughtinjunctivereliefandrestitution.
4.WrongfulForeclosure
NinetyplaintiffsassertedafourthcauseofactionforwrongfulforeclosureinviolationofCivilCodesection2924.The
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Complaintsetforththebasisforthewrongfulforeclosureclaimforeachofthese90plaintiffs.
II.
LegalStandardsGoverningJoinder
CodeofCivilProceduresection378providesthatpartiestoanactionmaybejoinedasplaintiffsiftheirrighttoreliefarisesfromthe"sametransaction,occurrence,orseriesoftransactionsoroccurrences"andthereis"anyquestionoflaworfactcommontoall."(378(a)(1).)[3]"Thus,inordertobejoinedtogetherasplaintiffsinalawsuit,plaintiffsmustsatisfytworequirements:(1)theymustallegethesametransactionoroccurrenceand(2)acommonlegalorfactualquestion."(StateFarmFire&CasualtyCo.v.SuperiorCourt(1996)45Cal.App.4th1093,11121113[53Cal.Rptr.2d229],*265italicsadded(StateFarm),disapprovedonanothergroundinCelTechCommunications,Inc.v.LosAngelesCellularTelephoneCo.(1999)20Cal.4th163,184185[83Cal.Rptr.2d548,973P.2d527].)
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CodeofCivilProceduresection378isbasedonrule20oftheFederalRulesofCivilProcedure(28U.S.C.)(Rule20).(Rodriguezv.BethlehemSteelCorp.(1974)12Cal.3d382,407,fn.28[115Cal.Rptr.765,525P.2d669].)Rule20(a)(1)provides:"(1)Plaintiffs.Personsmayjoininoneactionasplaintiffsif:[](A)theyassertanyrighttoreliefjointly,severally,orinthealternativewithrespecttoorarisingoutofthesametransaction,occurrence,orseriesoftransactionsoroccurrencesand[](B)anyquestionoflaworfactcommontoallplaintiffswillariseintheaction."
Indeterminingwhatconstitutesa"transaction"or"occurrence"underRule20(a)(1)(A),federalcourtshavelookedtorule13(a)oftheFederalRulesofCivilProcedure(28U.S.C.),whichgovernscompulsorycounterclaims.(Alexanderv.FultonCounty,Georgia(11thCir.2000)207F.3d1303,1323,overruledonanothergroundinMandersv.Lee(11thCir.2003)338F.3d1304,1328,fn.52.)"ForthepurposesofRule13(a),`"[t]ransaction"isawordofflexiblemeaning.Itmaycomprehendaseriesofmanyoccurrences,dependingnotsomuchupontheimmediatenessoftheirconnectionasupontheirlogicalrelationship.'"(Alexanderv.FultonCounty,Georgia,supra,atp.1323,quotingMoorev.N.Y.CottonExchange(1926)270U.S.593,610[70L.Ed.750,46S.Ct.367].)
TheultimateconsiderationinassessingjoinderofplaintiffsunderRule20iswhethertheclaimsaresologicallyconnectedthatresolvingallissuesinonelawsuitwouldpromotejudicialeconomyandfairness.AsphrasedbytheUnitedStatesCourtofAppealsfortheSecondCircuit:"Indeterminingwhetheraclaim`arisesoutofthetransaction...thatisthesubjectmatteroftheopposingparty'sclaim',thisCircuitgenerallyhastakenabroadview,notrequiring`anabsoluteidentityoffactualbackgrounds...butonlyalogicalrelationshipbetweenthem.'[Citation.]Thisapproachlookstothelogicalrelationshipbetweentheclaimandthecounterclaim[citation]andattemptstodeterminewhetherthe`essentialfactsofthevariousclaimsaresologicallyconnectedthatconsiderationsofjudicialeconomyandfairnessdictatethatalltheissuesberesolvedinonelawsuit.'[Citation.]"(U.S.v.Aquavella(2dCir.1979)615F.2d12,22seeAbrahamv.AmericanHomeMortgageServicing,Inc.(E.D.N.Y.2013)947F.Supp.2d222,228229(Abraham)Petersonv.Regina(S.D.N.Y.2013)935F.Supp.2d628,637.)"[T]hecentralpurposeofRule20istopromotetrialconvenienceandexpeditetheresolutionofdisputes,therebyeliminatingunnecessarylawsuits."(Alexanderv.FultonCounty,Georgia,supra,207F.3datp.1323seeCoughlinv.Rogers(9thCir.1997)130F.3d1348,1351["Rule20isdesignedtopromotejudicialeconomy,andreduceinconvenience,delay,andaddedexpense."].)
*266III.266
Plaintiffs'ClaimsDidNotArisefromtheSameTransactionorOccurrenceorSeriesofTransactionsorOccurrences.
AppealingPlaintiffsassertthatalloftheirclaimsforreliefarisefromthesametransactionoroccurrenceorseriesoftransactionsoroccurrencesbecause"thegravamen"oftheirlawsuitis"thefraudulentschemecommontoallPlaintiffs"
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and"theharmsallegedbyPlaintiffshereinwerethecommonresultofDefendants[']practicesandpolicies."(Boldfaceomitted.)Ademurreristreatedasadmittingallmaterialfactsproperlypleaded(Moev.Anderson(2012)207Cal.App.4th826,830831[143Cal.Rptr.3d841](Moe)and,therefore,thefactsallegedofamassiveandsystematicfraudperpetratedbyDefendantsaredeemedtrue.
But,onitsface,theComplaint,alongwiththeappendixandexhibits,showsPlaintiffs'claimsarosefromover1,000separateanddistinctloanandloanmodificationtransactions.Theappendixandtheexhibitsdisclosethetransactionsinvolveddifferentborrowers,anumberofthirdpartyoriginatorsandlenders,andmanydifferentloanbrokersandofficersindifferentlocations.
Theloantransactionsweremadeatdifferenttimesoverasixyearperiodstretchingfrom2003,atimeofprosperity,through2008,atthepeakofthefinancialcrisis.Someloanswerepurchasemoneyloans,whileotherloansrefinancedexistingones.EachloantransactionwassecuredbyadifferentparcelofrealpropertyinCaliforniaandinvolvedadifferentappraisal.Theloanshadvarioustermsandweremadeatdifferentinterestratessomewerefixedrateloanswhileotherswerevariablerateloans.AsDefendantspointout,asto154plaintiffs,theComplaintdidnotidentifythelender,thelocationofthesecuredproperty,theloanamount,thetypeofloan,orthestatusoftheloan.
Contrarytothemajority'sassertion,notallAppealingPlaintiffshadthesamelender.Manyhadthirdpartylenders,withnamessuchasMillenniumMortgageCorp.,BrooksAmericaMortgageCorporation,GlobalLending,Maverick,HilsboroughCorporation,PacificPanMortgage,J&RLending,Inc.,andDynamicMortgageFinancialCorporation.
Theclaimsofeachplaintiffaroseoutofdiscretefactsandcircumstancesrelatedtothatplaintiff'sparticularloantransaction.Suchclaimsarenotconnectedtoeachotherandnotsusceptibletocommonproof.
*267Plaintiffshaveallegedthreecausesofactionwhichseekdamages:intentionalmisrepresentation,negligentmisrepresentation,andwrongfulforeclosure.[4]Significantly,AppealingPlaintiffsdidnotallege,nordotheyargue,thatDefendantsuniformlymadethesamemisrepresentationstoeachplaintiffbythesameperson,oreventhroughthesamemedium.Instead,PlaintiffsbroadlyallegedDefendantsmademisrepresentationsthroughtheir"securitiesfilings,speeches,advertisements,publicutterances,websites,brokers,loanconsultants,branches,andcommunicationswithclients,andothermedia."
267
Whichmisrepresentations,ifany,weremadetoaparticularplaintiff,bywhom,andthroughwhichmedium,wouldhavetobeprovenindividually.Toestablishliabilityforintentionalmisrepresentationandnegligentmisrepresentation,eachofthemorethan818AppealingPlaintiffswouldhavetoprovethespecificrepresentationsmadetohimorher,provetherepresentationwasfalse,andproverelianceonthatrepresentation."[I]solating"(maj.opn.,ante,atp.246)thevariousrepresentationsintothematicsubgroupsordiscrete,manageablecategories,asthemajoritydirectsPlaintiffstodo,wouldnotsolvetheproofproblem.
Forthosereasons,themajorityis,Ibelieve,mistakeninconcludingthisisacaseinwhichissuesofliabilityaresubjecttocommonproof,leavingonlydamagestobeindividuallyprovenandcalculated.EvenweretheallegationsthatDefendantsperpetratedamassiveandsystematicfraudproven,inordertorecoverdamages,eachPlaintiffwouldstillhavetoprovetheessentialfactsofhisorherowncase.Thatproofwouldneedtoincludeheorshereliedonfraudulentornegligentmisrepresentationstohisorherdetriment,theloanwasunsuitedtohimorher,thevalueofhisorherhomewasinflatedduetoDefendants'actionsandnotsomeothercause,theappraisalusedwasinfactinflated,andheorshesuffereddamagesfromtheinflatedvalue.Eachofthe90plaintiffsallegingwrongfulforeclosurewouldhavetoproveindividuallyhowandwhytheforeclosureofhisorherdeedoftrustwaswrongful.
Federalcourtshaveaddressedjoinderoftheclaimsofmassivenumbersofplaintiffborrowersunderthesameorsimilarcircumstancesandtheoriesofrecovery.Thosecourtsconsistentlyhaveconcludedthatgroupsofplaintiffswhowerepursuingclaimsbasedonindividualmortgagetransactionsweremisjoined.InVisendiv.BankofAmerica,N.A.(9thCir.2013)733F.3d863,866(Visendi),theUnitedStatesCourtofAppealsfortheNinthCircuitaddressedwhether137plaintiffs,whohadsued25financialinstitutions,weremisjoined.Theplaintiffsallegedthedefendants'deceptivemortgagelendingandsecuritizationpracticesdiminishedthevalueoftheirhomes,impairedtheircreditscores,and
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compromisedtheirprivacy.(Ibid.)Theplaintiffs*268assertedeightcausesofaction,includingrescission,fraud,andnegligentmisrepresentation.(Ibid.)TheNinthCircuitconcludedtheallegationslackedthefactualsimilarityrequiredforjoinderunderRule20(a)(1)(A):"Thiscaseinvolvesover100distinctloantransactionswithmanydifferentlenders.Theseloansweresecuredbyseparatepropertiesscatteredacrossthecountry,andsomeoftheproperties,butnotall,weresoldinforeclosure.WhilePlaintiffsallegeinconclusoryfashionthatDefendants'misconductwas`regularandsystematic,'theirinteractionswithDefendantswerenotuniform.Factualdisparitiesofthemagnitudeallegedaretoogreattosupportpermissivejoinder."(Visendi,supra,atp.870.)
268
InBarberv.America'sWholesaleLender(M.D.Fla.2013)289F.R.D.364,365(Barber),thecomplaintassertedclaimsbyatleast18differentborrowersagainstatleastninedifferentlendersarisingoutof15separatemortgagesenteredintowith10differentlenders.Theplaintiffsallegedtheymistakenlybelievedtheywereenteringintoa"traditionalborrower/lenderrelationshipwithDefendants"wheninfacttheloanswere"`conduit'loans"thatweretobepooledintomortgagebackedinvestmentvehicles.(Id.atp.366.)Theplaintiffsalsoallegedtheysufferedharmwhentheirloansweresoldtothirdpartyinvestorsaspartofthesecuritizationprocess.(Ibid.)Thedistrictcourtconcludedtheplaintiffsweremisjoined,eventhoughtheirclaimsraisedsimilarlegalissues,because"eachindividualloanmadebyaDefendanttoaPlaintiffwasaseparate`transaction'or`occurrence.'"(Id.atp.367.)
InAbraham,supra,947F.Supp.2datpage226,theplaintiffswereseveralhundredcurrentandformerhomeownerswhosuedseveraldozenmortgageoriginatorsandservicers.Theplaintiffsallegedthedefendantsinducedthemtoenterintomortgagesbasedoninflatedappraisalsfailedtocomplywithunderwritingguidelinespurposefullyavoidedlocalrecordationstatutesbundled,packaged,andsoldtheirmortgagestoinvestors"whilesimultaneouslybettingagainstthosemortgages"andfailedtousefederalfundstohelptheplaintiffsasrequiredbylaw.(Id.atpp.226,227.)Asaresult,theplaintiffsclaimed,theylostequityintheirhomes,suffereddamagestotheircreditratings,andincurredunnecessarycostsandexpenses.(Ibid.)Theplaintiffsassertedvarioustortcausesofaction,includingfraud,deceit,fraudulentconcealment,andintentionalandnegligentmisrepresentation.(Id.atp.226.)
Thedistrictcourtgrantedthedefendants'motiontodismissbasedonmisjoinderunderRule20.(Abraham,supra,947F.Supp.2datpp.226,228230.)Thecourtconcludedthe"`"essentialfactsofthevariousclaims"'"werenot"`"logicallyconnected"'"because"`[t]hefactssurroundingeachloantransactionareseparateanddistinct.'"(Id.atpp.228229.)Citingaseriesofotherdistrictcourtdecisions,theAbraham*269courtconcluded,"[i]tiswellestablishedthatseparateloantransactionsbydifferentlendersdonotconstituteasingletransactionoroccurrenceandclaimsbyplaintiffswhoengagedinthoseseparatetransactionsgenerallycannotbejoinedinasingleaction."(Id.atp.229.)"Here,"thecourtstated,"severalhundredPlaintiffshaveassertedclaimsagainstseveraldozenmortgageoriginatorsandservice[r]sregardingdifferentmortgagesissuedindifferentstatesoveranineyearperiod.[Citation.]...Plaintiffs'separatemortgagetransactionsdonotconstituteasingletransactionoroccurrenceunderRule20...."(Ibid.)Thecourtalsoconcludedtheplaintiffs'allegationsthedefendantswereinvolvedinacommonschemewereunsupportedandspeculative,andinsufficienttoestablisharelatedseriesoftransactionsoroccurrencessoastopermitjoinder.(Id.atpp.229230,233234.)
269
OnpointisPadronv.OneWestBank(C.D.Cal.,Apr.7,2014,No.2:14cv01340ODW(Ex))2014U.S.Dist.Lexis47947,page*7(Padron),a"massaction"whichhadbeenremovedunderCAFAtofederalcourt.InPadron,thefederaldistrictcourtaddressedtheissueofjoinderofplaintiffsinalawsuitallegingatheoryofasystematicschemetodefraudcarriedoutbythedefendantsthatissimilar,ifnotidentical,tothatallegedinthiscase.InPadron,121plaintiffs,whojoinedinaCAFAmassaction,alleged,asPlaintiffsdointhiscase,thatthedefendants,whichincludedthelender,mortgageservicers,theFederalDepositInsuranceCorporation,andarealestateappraiser,"`hadceasedactingasconventionalmoneylendersandinsteadmorphedintoanenterpriseengagedinsystematicfrauduponitsborrowers.'"(Padron,supra,2014U.S.Dist.Lexis47947atpp.*5*6.)Theplaintiffsallegedthedefendantsplacedthemintoloansthedefendantsknewtheplaintiffscouldnotafford,abandonedindustrystandardunderwritingguidelines,concealedormisrepresentedtheloantermstoinduceconsent,andintentionallyinflatedappraisalvaluesthroughacompliantappraisalcompany"`knowingthattheirschemewouldcausetheprecipitousdeclineinvaluesofallhomesthroughoutCalifornia.'"(Id.atp.*6.)Attachedtotheplaintiffs'complaintwasa264pageappendixprovidingafactualsummaryforeachplaintiff.(Id.atpp.*6*7.)
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ThedistrictcourtdismissedalltheplaintiffsexceptforthefirstoneonthegroundtheyhadnotsatisfiedthejoinderrequirementsofRule20(a).(Padron,supra,2014U.S.Dist.Lexis47947atpp.*5,*8*9.)Thecourtfoundtheactiontobe"virtuallyidenticaltoVisendi"inthattheplaintiffsallegedthedefendantshadacommonscheme,conspiracy,orpolicytointentionallyplacethemintodangerousloans,misrepresentthemortgageterms,artificiallyinflateappraisalprices,andengageinshamloanmodifications.(Id.atpp.*12*13.)Thecourtagreedwiththedefendantsthat"`theevocationofthevaguestrategy,scheme,or"conspiracy"cannottranscendtherealitythateachPlaintiff'stransactionisdiscrete,unique,andbasedonPlaintiffspecific*270factsandcircumstances.'"(Id.atp.*13.)Thecourtfoundnocommonissuesoflaworfact,stating,"itappearstheonlyglueholdingPlaintiffs'disparateclaimstogetheristhefactthateachinvolvesamortgage,andtheCourtwillthereforehavetoaddresslegalquestionsrelatedtoeachmortgage."(Id.atp.*14.)
270
Visendi,Barber,Abraham,andPadronsupporttheconclusionthateachofthemortgagetransactionsthatarethesubjectoftheComplaintisaseparate,distincttransaction.ThedistrictcourtinPadronaddressedthematterofjoinderinacomplaintthatappearstobeavirtualcopyoftheonepleadedinthiscase.Granted,thosefederalcasesarenotcontrollingandcanbedistinguishedinsomerespects.Anydistinctionsdonotdetract,however,fromthecentralpointofdirectanalogy:Hundredsofmortgagetransactions,ofdifferenttypes,madebyhundredsofborrowers,withvariousoriginatorsandlenders,withdifferinginterestratesandterms,madeoverasixyearperiodstretchingfromtimesofeconomicprosperitytonearcollapseofthefinancialsystem,constituteseparateanddistincttransactionsthatdonotariseoutofthesametransactionoroccurrenceorseriesoftransactionsoroccurrences.
Visendi,Barber,Abraham,andPadronarebutthetipoftheiceberg.Manyotherfederaldecisionsfromacrossthenationhavereachedtheconclusionthatsimilarclaimsmadebyhomeloanborrowersarenotsusceptibletojoinder,forexample:
D'Angelisv.BankofAmerica,N.A.(E.D.N.Y.,Jan.16,2014,No.13CV5472(JS)(AKT))2014U.S.Dist.Lexis6087,page*7.("Here,Plaintiffs'claimsdonotariseoutofthesametransactionoroccurrence.Thiscaseinvolveseightdifferentlendersandover100discreteloanssecuredatdifferenttimesforseparatepropertiesacrosstwentyeightdifferentstates.")
Martinv.BankofAmerica,N.A.(E.D.N.Y.,Mar.12,2014,No.13Civ.02350(ILG)(SMG))2014U.S.Dist.Lexis32231,pages*4,*10*13,*15*16.(Districtcourtgrantsmotiontoseverclaimsbroughtby119plaintiffborrowers.)
Garnerv.BankofAmericaCorp.(D.Nev.,May13,2014,No.2:12CV02076PMPGWF)2014U.S.Dist.Lexis66203,page*10.("WhilePlaintiffshereallegeinsomedetailanoverarchingconspiracyandcoordinatedconduct,whichtheVisendiplaintiffsapparentlydidnotallegeorallegedonlyinconclusoryfashion,Plaintiffs'claimsneverthelesswillentailindividualizedinquiry,suchaswhatrepresentationsweremadetothembytheirrespectiveloanofficersandwhethereachPlaintiffjustifiablyreliedonthoseallegedmisrepresentations.")
*271Kaliev.BankofAmericaCorp.(S.D.N.Y.2013)297F.R.D.552,555,557.(Districtcourtgrantedmotiontoseverclaimsbroughtby16plaintiffsbecauseeachofthem"enteredintoadifferentloantransactionatadifferenttime...relate[d]toadistinctproperty.")
271
Gonzalezv.BankofAmerica,N.A.(N.D.Cal.,Aug.24,2012,No.121007SC)2012U.S.Dist.Lexis120702,pages*4*5.(Thirtyplaintiffsimproperlyjoinedbecausetheirclaimsaroseoutofatleast26loantransactions.)
Richardsv.DeutscheBankNationalTrustCo.(C.D.Cal.,Aug.15,2012,No.CV124786DSF(RZx))2012U.S.Dist.Lexis115302,page*2.("ThetestforpermissivejoinderisnotmetinthiscaseaseachPlaintiff'sclaiminvolvesadifferentloantransactionandforeclosure.Plaintiffs'whollyunsupportedandspeculativeallegationthatthevariousDefendantsconspiredtodefraudeachindividualPlaintiff...doesnotsatisfytherequirementthatPlaintiffs'claimsariseoutofthesametransaction,occurrence,orseriesofoccurrences,nordoesitobviatetheneedforseparateproofastoeachindividualclaim."(citation
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omitted))
Martinezv.EncoreCreditCorp.(C.D.Cal.,Sept.30,2009,No.CV095490AHM(AGRx))2009U.S.Dist.Lexis96662,pages*5*6.(Improperjoinderof19plaintiffswithclaimsarisingoutofdistinctfactsinvolvingmortgageson15separateproperties.)
TheComplaintinthiscaseisnotdistinguishableinanymeaningfulwayfromthecomplaintsfoundbythesefederalcourtstobebasedonmisjoinderofplaintiffs,exceptinonerespectsize.TheComplaintinthiscase,with965plaintiffs,818ofwhomhaveappealed,dwarfseventhelargestofthefederallawsuits.
IV.
"BroadConstruction"ofCodeofCivilProcedureSection378DoesNotJustifyJoinderof818AppealingPlaintiffs.
Inconcludingjoinderisproper,themajorityemphasizesthatCodeofCivilProceduresection378mustbebroadlyorliberallyconstrued.Whilethatisanundisputedproposition(StateFarm,supra,45Cal.App.4thatp.1113seeKraftv.Smith(1944)24Cal.2d124,129[148P.2d23]["`statutesrelatingtojoindershouldbeliberallyconstrued...'"]),broadconstructionisnotasubstituteforrigorousapplicationofthestatutorystandardstotheComplaint.Section378cannotbeconstruedbroadlyorliberallyenoughtojustifyjoinderoftheclaimsofthe818AppealingPlaintiffsinthiscase.Asapanelofthis*272courthassaid,albeitinadifferentcontext,"liberalconstructioncanonlygosofar."(Soriav.Soria(2010)185Cal.App.4th780,789[111Cal.Rptr.3d91].)
272
Accordingtothemajority,broadconstructionofCodeofCivilProceduresection378isexemplifiedbyfourCaliforniaappellatecourtopinionsupholdingjoinder.Iwillanalyzeeachofthemandexplainwhynoneofthosecasessupportsthemajority'sconclusion.InAnayav.SuperiorCourt(1984)160Cal.App.3d228,231[206Cal.Rptr.520](Anaya),some218employeesandtheirfamilymembersjoined,inasinglelawsuit,theirclaimstheysufferedinjuriesfromexposuretohazardouschemicalswhileworkingforthedefendantsoveraperiodof20to30years.TheCourtofAppealheldtheplaintiffswereproperlyjoined,stating:"Theemployeesaresaidtohavebeenexposedtoharmfulchemicalsatonelocationoveraperiodofmanyyearsbyinhalation,drinkingofwater,andphysicalcontact.Thus,theywereallinvolvedinthesameseriesoftransactionsoroccurrencesandassertrightstorelieftherefrom.Thefactthateachemployeewasnotexposedoneveryoccasionanyotheremployeewasexposeddoesnotdestroythecommunityofinterestlinkingthesepetitioners."(Id.atp.233.)
ThemajorityfindsAnayainstructivebecauseinthatcaseissuesofliabilitywerecommonwhilethedifferencesbetweeneachplaintiff'sclaimwerelimitedtoindividualdamages.InAnaya,supra,160Cal.App.3datpage233,theemployeessufferedinjurybyexposuretothesameharmfulchemicalsatthesamelocationwhileworkingforthesameemployer.Inmarkedcontrast,inthiscase,theissuesofliabilityarenotcommon.AsIhaveexplained,evenifPlaintiffsprovedtheirallegationsDefendantsengagedinamassandsystematicfraud,eachofthehundredsofPlaintiffsnonethelesswouldhavetoproveliabilityastohimorher.Plaintiffs,whoarerelatedonlybythefacttheyliveinCalifornia,enteredintohundredsofdifferentloantransactions,eachsecuredbydifferentrealproperty,throughavarietyofbrokersandagents,whomadedifferingsetsofrepresentations,andtheloanswerefundedbymanylenders.Puttingasidethedifficultiesincomparingatoxictortactionwithabreachofcontract/securedrealproperty/businesstortaction,theanalogybetweenAnayaandthiscaseisinapt.
ThemajorityalsopositsthatAnayasupportsjoinderinthiscasebecausetheAnayacourtemphasizedthatCodeofCivilProceduresection378permitsjoinderwhen"`anyquestionoflaworfactcommontoall'plaintiffswillarise."(Anaya,supra,160Cal.App.3datp.233.)Suchaninterpretationofsection378relatestothesecondrequirementofsection378(a)(1)andignoresthefirst.Ifjoindercouldbeaccomplishedwheneveranysinglecommonquestionoflaworfactarises,thenthescopeofsection378wouldbeboundlessanduntetheredtoarequirementofsection378(a)(1)thattheright*273needstobe"inrespectof"or"arisingoutofthesametransaction,occurrence,orseriesoftransactionsor273
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occurrences."
Asanotherexampleofbroadconstruction,themajorityoffersMoe,supra,207Cal.App.4thatpages827828,inwhichtwopatientsallegedtheywerevictimsofseparatesexualassaultscommittedbyaphysician.Thepatientsandtheirhusbandssuedthephysicianandhistwoemployersformedicalmalpractice,battery,andvariousothertorts.(Id.atp.828.)Thetrialcourtsustainedademurrerwithoutleavetoamendbasedonmisjoinderofplaintiffs,andtheCourtofAppealaffirmedastothephysician.(Ibid.)TheMoecourtconcludedtheeventsallegeddidnotconstituteasingletransactionbecausetwosetsofplaintiffsweresuingfor"separateanddistinctsexualassaultsduringseparateanddistincttimeperiods."(Id.atp.833.)"[T]hegravamenofplaintiffs'claimsagainst[thephysician]istheharmfulsexualtouchingthatwasperpetratedagainsteachvictimonseparateoccasions."(Id.atp.834.)Butastothedefendantemployers,thecourtheldtheplaintiffswereproperlyjoinedbecausetheclaimsagainsttheemployersarosefromthesamerelatedseriesoftransactionsthenegligenthiringandsupervisionofthephysician.(Id.atp.835.)
Moeisapt,themajoritysays,because,here,asinthatcase,"thereismuchinthewayofcommonevidenceandtheoriesofliability...."(Maj.opn.,ante,atp.251.)ButMoebearsnosimilarityfactuallyorlegallytothiscaseandprovidesnoassistanceinidentifyingwhatthatcommonevidenceorthosecommontheoriesmightbe.
Particularlyinstructive,accordingtothemajority,areStateFarm,supra,45Cal.App.4th1093,andAdamsv.Albany(1954)124Cal.App.2d639[269P.2d142](Adams).InStateFarm,supra,45Cal.App.4thatpages10981099,theCourtofAppealheldtheclaimsof165plaintiffsagainsttheirinsurerswereproperlyjoinedinasingleaction.Theplaintiffsallegedtheinsurershadengagedinasystematicpracticetodeceivetheirinsuredsregardingthepurchaseofearthquakeinsurance.(Id.atp.1113.)Theplaintiffsallegedtheinsurers,withoutadequatenoticeofareductioninthescopeofcoverage,issuedpoliciesofearthquakecoveragetoreplaceendorsementstocoveragewithoutachangeinpremium.(Ibid.)Inaddition,thecomplaintallegedsystematicclaimshandlingpractices.(Ibid.)TheCourtofAppealconcludedthoseallegationsestablished,atleastatthepleadingstage,properjoinderoftheplaintiffsunderCodeofCivilProceduresection378.(StateFarm,supra,atp.1114.)
InStateFarm,supra,45Cal.App.4thatpage1113,eachplaintiffpurchasedthesamehomeownersinsurancepolicywithidenticalearthquakecoveragefromthesameinsurer,andwereallegedlydefraudedinpreciselythe*274sameway.Thatisnotthecasehere.ThemajoritynotesthattheplaintiffsinStateFarmallegedtheysuffered15differenttypesofimproperclaimshandlingprocesses,and"[i]fthejoinderofawidevarietyofclaimshandlingpracticeswasappropriateunderStateFarm,thejoinderofvariousformsofloanimproprietyhereseemsequallycorrect."(Maj.opn.,ante,atp.251.)
274
TheStateFarmcourtconcludedjoinderwasproper,however,bothbecausetheplaintiffsallegedtheinsurersengagedinsystematicclaimshandlingpracticesandbecausetheyissuedpoliciesreducingthescopeofcoveragewithoutadequatenotice.(StateFarm,supra,45Cal.App.4thatp.1113.)Theallegationsofthelatterpractice,thecourtstated,"clearlyreflectaclaimcontainingcommonfactscentraltotheallegeddeception."(Ibid.)Asfortheformerpractice,thecomplaintallegedthedefendantsengagedin15differentclaimshandlingpracticesastoalltheplaintiffs.(Id.atpp.10991100.)TheCourtofAppealnotedthat"[w]hilenoteveryplaintiffmayhavebeenvictimizedbythesameclaimshandlingpractice,thatisamatterwhichcanberesolvedindiscovery...."(Id.atp.1113.)Inotherwords,thecomplaintitselfallegedclaimshandlingpracticescommontoalltheplaintiffs.SincetheCourtofAppealwasaddressingthetrialcourt'sorderoverrulingademurrer,theallegationsofthecomplainthadtobeacceptedastrue,withtheprovisothattheclaimscouldbesortedoutindiscovery.Here,thedifferencesbetweentheclaimsofeachoftheAppealingPlaintiffsareapparentfromthefaceoftheComplaintanditsattachments,andPlaintiffshaveneitherallegednorarguedasystemicsetofmisrepresentationsmadeuniformlytoeachofthem.
InAdams,supra,124Cal.App.2datpage640,eachplaintiffenteredintothesamecontractwiththesamedeveloper,whoallegedlyoverchargedthemandfailedtobuildtheirhomesinconformitywiththesamerequiredplansandspecifications.Allthehomeswerepartofthesamesubdivision,eachofthetransactionswas"exactlysimilarinkindandmannerofoperation,"andthesamemisrepresentationsweremadetoeachoftheplaintiffs.(Id.atp.647.)Theagreementsandinstrumentsinvolveddifferedonly"forincidentalvariationsindetails."(Ibid.)ThefactsofAdamsarenot
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evenremotelysimilartotheallegationsoftheComplaintinthiscase.
NoneofthesecasesAnaya,Moe,StateFarm,orAdamssupportsjoinderofthe818AppealingPlaintiffsintoasinglelawsuitunderabroadconstructionofCodeofCivilProceduresection378.InnoneofthesecaseswasbroadconstructionthedrivingforcebehindtheCourtofAppeal'sdecisiontoupholdjoinder.Ineachcase,theCourtofAppeal,thoughnotingtheprincipleofbroadconstruction,appliedthestandardsofsection378oritsstatutorypredecessortothefactsathandtoreachaconclusion.
*275Themajorityarguesthiscaseismerelya"quantitatively"largerversionofAnaya,Moe,StateFarm,andAdams.(Maj.opn.,ante,atp.252.)But,asIhaveexplained,thefactsandallegationsofthosecasesarenotqualitativelysimilarintheremotestwaytotheallegationsoftheComplaint.Itmakesfarmoresensetoturnforguidancetoauthoritythatisqualitativelysimilartothislawsuit.Wehavesuchauthorityinabundance:Visendi,Barber,Abraham,Padron,andthehostofotherfederalcasesdealingwiththeveryissuespresentedbythisappeal.ThatauthoritysquarelydemonstratesthetrialcourtdidnoterrbyconcludingAppealingPlaintiffsweremisjoined.ThemajorityattemptstodistinguishVisendi,Barber,andAbrahaminafootnotebydescribingthemas"merelymak[ing]thepointthatgenuinelymultipledefendantsdonotfallwithinthefederalpermissivejoinderrule."(Maj.opn,ante,atp.252&fn.17.)Themajority'scharacterizationofthosecasesisinaccurateandundulydismissive.Indeed,asshown,thefederalpermissivejoinderruleisthesameasCalifornia's.
275
V.
ProvidingLitigationStrategytoAppealingPlaintiffsIsNeitherAppropriatenorWarranted.
Themajorityoffersadvicefordealingwithalawsuitofthe818AppealingPlaintiffs.ThemajorityadvisesAppealingPlaintiffs'counseltogobackandredraftthe"desultoryandscattered"allegationsoftheComplaintintosomethingbrieferandtoincludesubclassestomakethecasemoremanageable.(Maj.opn.,ante,atp.254.)TheComplaintdoesnotsufferfromlackoforganization,certainty,thoroughness,orclarity.TheComplaintisindeedlengthy,particularlywiththeattachments,butthelengthisdirectlyattributabletotheenormousnumberofplaintiffsjoined,thecausesofactionsasserted,andthenatureofthefraudulentschemealleged.
Moreimportantly,AppealingPlaintiffsdidnotaskforouradviceindraftingtheComplaint,anditisnotourstogive.AppealingPlaintiffsarethemastersoftheComplaint,andwemustaccepttheComplaint'sallegations"atfacevalue"(Aryehv.CanonBusinessSolutions,Inc.,supra,55Cal.4thatp.1202),includingitsorganization,length,andtheoriesandmodesofrecoveryasserted.BasedontheComplaint,aspresentedtous,wemustdecideonlywhetherjoinderwasproper.
Themajorityasserts,"theabilitytoorganizeclassactionsintoappropriatesubclasses"is"importantforourpurposehere."(Maj.opn.,ante,atp.254.)Subclassesareanimportanttoolformakingclassactionsmoreefficient(Vasquezv.SuperiorCourt(1971)4Cal.3d800,821[94Cal.Rptr.796,484P.2d964])but,asIemphasizedattheoutset,thisisnotaclassaction.*276Plaintiffschosenottobringaclassaction.Atoralargument,AppealingPlaintiffs'counselconfirmedthiswasnotaclassactionandthecreationofsubclasseswasnotanissueonappeal.Themajority'sspeculationastowhatPlaintiffsshouldhaveallegedis,inmyview,inappropriateandisanilladvisedadvisoryopinion.Themajority'ssuggestionthatAppealingPlaintiffsandthetrialcourtcomeupwithsubclassesservestoemphasizemypoint:Plaintiffsweremisjoinedinthefirstplace.
276
Themajoritycallsthiscaseamassactionratherthanaclassaction,andsaysitsdecisioniswithoutprejudiceastowhetherCAFAapplies.(Maj.opn,ante,atp.255.)AsIsaidatthebeginning,theterm"massaction"isfoundinCAFA,andmassactionsarenotrecognizedintheCodeofCivilProcedure.Amassactionisbydefinitionaclassactionmaderemovabletofederalcourt.(28U.S.C.1332(d)(11).)IfPlaintiffs'lawsuitisamassactionunderCAFA,thenDefendants,who,likePlaintiffs,arerepresentedbyskilledandexperiencedcounsel,havechosen,forwhateverreason,notto
7/1/2015 Petersenv.BankofAmericaCorp.,232Cal.App.4th238Cal:CourtofAppeal,4thAppellateDist.,3rdDiv.2014GoogleScholar
https://scholar.google.com/scholar_case?case=6418298636726377212&q=peterson+v+bank+of+america&hl=en&as_sdt=2006 21/24
removeit.Inanyevent,Plaintiffs'lawsuitmightnotbeamassactionbecausetheComplaintallegesthatalloftheclaimsintheactionarosefrom"aneventoroccurrence"withintheStateofCaliforniaandthatPlaintiffssufferedtheirinjuriesinthisstate.(28U.S.C.1332(d)(11)(B)(ii)(I).)
Finally,themajorityseekstoofferthetrialcourthelpinmanagingthislitigationbehemothbyremindingthecourtofitsinherentpowertocontroltheorderofissuestobetried,tosuperviseandcontrollitigation,andtoconservejudicialresources.(Maj.opn.,ante,atpp.254255&fn.20.)Iamsurethetrialjudge,whoisanexcellentandrespectedjurist,waswellawareofthosepowersandtheneedtoconservejudicialresources,andconsideredthemwhensustainingthedemurrerformisjoinder.Inanyevent,theclaimshavebeenmisjoinedundersection378(a)(1)forallthereasonsIhavediscussedandthemajorityopinionisinconflictwithmanyopinionsfacingtheidenticalissues.
AffirmingthejudgmentofdismissalwouldnotleavePlaintiffswithoutrecourseorrecompense.EachPlaintiffcanpursuehisorherownlawsuitforfraud,negligentmisrepresentation,and,asthecasemaybe,wrongfulforeclosure.Inaddition,theComplaintallegesacauseofactionforunfaircompetitioninviolationofCalifornia'sunfaircompetitionlaw,BusinessandProfessionsCodesection17200etseq.,basedontheallegationsthatDefendantsengagedinamassiveconspiracyandfraudulentschemetoplaceborrowersintoloansforwhichtheywereunsuited,tosecuritizeandsellthoseloansonthesecondarymarket,andtoartificiallyinflaterealestatepricesinCalifornia.BusinessandProfessionsCodesection17203permitsrecoveryof*277restitutionwithoutindividualizedproofofdeception,reliance,andinjury.(Peopleexrel.Harrisv.Sarpas(2014)225Cal.App.4th1539,1548[172Cal.Rptr.3d25].)
277
[1]AllundesignatedstatutoryreferencesinthisopinionaretotheCodeofCivilProcedure.
[2]Hereisthecompletetextofsection378:
"(a)Allpersonsmayjoininoneactionasplaintiffsif:
"(1)Theyassertanyrighttoreliefjointly,severally,orinthealternative,inrespectoforarisingoutofthesametransaction,occurrence,orseriesoftransactionsoroccurrencesandifanyquestionoflaworfactcommontoallthesepersonswillariseintheactionor
"(2)Theyhaveaclaim,right,orinterestadversetothedefendantinthepropertyorcontroversywhichisthesubjectoftheaction.
"(b)Itisnotnecessarythateachplaintiffbeinterestedastoeverycauseofactionorastoallreliefprayedfor.Judgmentmaybegivenforoneormoreoftheplaintiffsaccordingtotheirrespectiverighttorelief."
[3]TheexceptionisexhibitQ,which,forsomereason,wasleftblankforfutureuse.
[4]BankofAmerica,N.A.,CountrywideFinancialCorporationandCountrywideHomeLoans(Countrywide),ReconTrustCompany,N.A.,CTCRealEstateServicesandLandsafe,Inc.(Landsafe).
[5]BankofAmericatookoverCountrywideatthebeginningoftheGreatRecession.(SeegenerallyNote,Banktown:AssessingBlamefortheNearCollapseofCharlotte'sBiggestBanks(2011)15N.C.BankingInst.423.)Theacquisitionhasbeenaheadacheeversince.(Seeid.atp.453["TheCountrywideFinancialacquisitionhassubjectedBankofAmericatolargepenaltiesandlitigationcosts."].)
Inthisopinionwemostlyreferto"Countrywide"asthedefendantbecause,insubstance,thiscomplaintprimarilytargetsCountrywide'sloanandappraisalpracticesbackinthemid2000's.
[6]Thefamousspeechevenmadeaspecificreferencetoa"bankingconspiracy."Inthatvein,thethirdamendedcomplaintincludessuchexuberantallegationsas:
"Withgreedastheirmotive,DefendantssetoutuponamassiveandcentrallydirectedfraudbywhichDefendantsplacedhomeownersintoloanswhichDefendantsknewPlaintiffscouldnotafford,abandonedindustrystandardunderwritingguidelines,andintentionallyinflatedtheappraisalvalueofhomesthroughoutCaliforniaforthesolepurposeofherdingasmanyborrowersastheycouldintothelargestloanspossiblewhichDefendantswouldthensellonthesecondarymarketatinflatedvaluesforunimaginable,illgottenprofit(wildlysurpassingtheprofittheywouldmakebyholdingtheloans),knowingthattheirschemewouldcausetheprecipitousdeclineinvaluesofallhomesthroughoutCalifornia,includingthoseofPlaintiffsherein."
"Likecattle,PlaintiffborrowerswereledtotheslaughterbyDefendantsandtheirgreed."
"Where,ashere,corporategreedexceedstheextantandimperativepublicneedforinformeddisclosure,thelawmustnotsanction."
7/1/2015 Petersenv.BankofAmericaCorp.,232Cal.App.4th238Cal:CourtofAppeal,4thAppellateDist.,3rdDiv.2014GoogleScholar
https://scholar.google.com/scholar_case?case=6418298636726377212&q=peterson+v+bank+of+america&hl=en&as_sdt=2006 22/24
[7]SeeVisendi,supra,733F.3d863,866("Plaintiffsalleged,amongotherthings,thattheinstitutions'deceptivemortgagelendingandsecuritizationpracticesdecreasedthevalueoftheirhomes,impairedtheircreditscores,andcompromisedtheirprivacy.")Grahamv.BankofAmerica,N.A.(2014)226Cal.App.4th594,599600[172Cal.Rptr.3d218]("Takingissuewithindustrywidemortgagebankingpractices,Grahamseekstoholddefendantsresponsibleforthedeclineinhispropertyvalueaswellasthecollapseoftherealestatemarket.").
PerhapsthemostsuccinctstatementbyapublishedCaliforniacourtopinionofCountrywide'sroleintheGreatRecessioncanbefoundinBankofAmericaCorp.v.SuperiorCourt(2011)198Cal.App.4th862,865[130Cal.Rptr.3d504](BankofAmerica2011):"By2005,CountrywidewasthelargestmortgagelenderintheUnitedStates,originatingover$490billioninloansinthatyearalone.Countrywide'sfounderandCEO,AngeloMozilodeterminedthatCountrywidecouldnotsustainitsbusiness`unlessituseditssizeandlargemarketshareinCaliforniatosystematicallycreatefalseandinflatedpropertyappraisalsthroughoutCalifornia.CountrywidethenusedthesefalsepropertyvaluationstoinducePlaintiffsandotherborrowersintoeverlargerloansonincreasinglyriskyterms.'Moziloknew`theseloanswereunsustainableforCountrywideandtheborrowersandtoacertaintywouldresultinacrashthatwoulddestroytheequityinvestedbyPlaintiffsandotherCountrywideborrowers.'[]MoziloandothersatCountrywide`hatchedaplanto"pool"theforegoingmortgagesandsellthepoolsforinflatedvalue.Rapidly,thesetwointertwinedschemesgrewintoabrazenplantodisregardunderwritingstandardsandfraudulentlyinflatepropertyvalues...inordertotakebusinessfromlegitimatemortgageproviders,andmovedontomassivesecuritiesfraudhandinhandwithconcealmentfrom,anddeceptionof,Plaintiffsandothermortgageesonanunprecedentedscale.'"
Inthecasebeforeus,thethirdamendedcomplaintlargelyechoestheallegationsmadeinBankofAmerica2011,exceptthestyleisbitmorerococo.
[8]Whywereinvestorswillingtopartwiththeirmoneysoeasily?Basically,theanswerisinvestorsfeltconfidentthat"therisk"hadbeenprudentlydispersed.OurcolleaguesintheFifthDistricthaveprovidedthishelpfuldescriptionoftheprocess:"Insimplifiedterms,`securitization'istheprocesswhere(1)manyloansarebundledtogetherandtransferredtoapassiveentity,suchasatrust,and(2)thetrustholdstheloansandissuesinvestmentsecuritiesthatarerepaidfromthemortgagepaymentsmadeontheloans.[Citation.]Hence,thesecuritiesissuedbythetrustare`mortgagebacked.'"(Glaskiv.BankofAmerica(2013)218Cal.App.4th1079,1082,fn.1[160Cal.Rptr.3d449]seeAkopyanv.WellsFargoHomeMortgage,Inc.(2013)215Cal.App.4th120,142[155Cal.Rptr.3d245][notingthatbecauseofsecuritization,"`thinlycapitalizedmortgagebankersandfinancecompanies'"wereableto"`originateloansforsaleonthesecondarymarket.'[Citation.]"]Engel&McCoy,ATaleofThreeMarkets:TheLawandEconomicsofPredatoryLending(May2002)80Tex.L.Rev.1255,1275[quotedbyAkopyan].)
Backtothethirdamendedcomplaint.Inadditiontotheasitturnedout,flawedriskspreadingtheoryofsecuritization,thedocumentallegesinvestorsthoughttheyhadinsuranceforloandefaultsbyusing"creditdefaultswaps,"whichareformsofinsuranceagainstloandefaults.Paragraphs142through146ofthethirdamendedcomplaintconstituteaphilippicagainstcreditdefaultswaps.(E.g.,par.146a.,"NobelprizewinningeconomistGeorgeAkerlofpredictedthatCDSwouldcausethenextmeltdown....")
[9]Paragraph98ofthethirdamendedcomplaintencapsulatesthisallegation:"98.AtCountrywideandDefendants'behest,andattheirdirection,LandsafeAppraisalsbegansystematicallyinflatingthevaluationstheyrendereduponthesubjectpropertiesofeachloan,includingtheloansofPlaintiffsherein.Asiscommonknowledgeintherealestateindustry,appraisersarerequiredtocalculatethevalueofahomebasedalmostentirelyonthevalueofothernearbyhomes(calledcomparablesaka`comps').Defendants,includingCountrywideandBankofAmericaseizedonthisvulnerabilityinthesystem.ExercisingdominionoverLandsafe,CountrywidedirectedLandsafetobeginsystematicallyinflatingthevaluationstheyrendereduponthesubjectpropertiesofeachoftheirloans(includingloansofPlaintiffsherein),knowingthatbydoingsotheirfalselyinflatedvaluationswouldactascompsuponwhichnumerousotherappraisersbasedtheirvaluationsofotherhomes.LandSafe'sandDefendants'inflatedappraisalscausedotherhomestobevaluedformorethantheywereworth,whichinturnactedasthepredicateforevenhighappraisals,andwhich,inturn,causedevenmorehomestobevaluedformorethantheywereworth.Theresultwasaviciousselffeedingexponentialcycle,bothexpectedandintendedbyDefendantstheresultwastheintentional,systematic,artificialinflationofhomevaluesthroughoutCalifornia."(Italicsomitted.)
[10]AswestressinpartII.B.ofthisopinion,thetrialcourtwillhavethepoweronremandtorequireplaintiffs'counseltoundertakethatchoreinthefirstinstance.
[11]Inthatregardthereareironicallegationsoffraudulentconductinuringtotheostensiblebenefitofso