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Marc Dagupion v. Green Tree Servicing

December 7, 2011


The opinion of the court was delivered by: Susan Oki Mollway Chief United States District Judge



Before the court is a motion by Defendant PNC Bank, National Association ("PNC") to sanction Plaintiff Marc Dagupion ("Dagupion") and his attorney pursuant to Rule 11 of the Federal Rules of Civil Procedure. Dagupion filed this lawsuit alleging that Defendants, including PNC, violated state and federal statutes in handling his residential mortgage loans. PNC moves for sanctions alleging numerous deficiencies in Dagupion's First Amended Complaint ("FAC"). Dagupion's attorney has been warned multiple times by this judge and other judges in this district that the continued filing of complaints with the specific deficiencies found in Dagupion's FAC will likely result in sanctions. As Dagupion's attorney repeats his oft-criticized practices, the court grants PNC's motion.


Rule 11(b) of the Federal Rules of Civil Procedure requires that parties present arguments that are warranted by law and non-frivolous. All parties must "certif[y] that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances":

(2) the claims, defenses, and other legal contentions are warranted by existing law or by a non-frivolous argument for extending, modifying, or reversing existing law or for establishing new law; [and]

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery . . ..

Fed. R. Civ. P. 11(b). Rule 11 applies to all pleadings and written motions filed with the court, including complaints. Fed. R. Civ. P. 11(a). If the court determines that Rule 11(b) has been violated, "the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation." Fed. R. Civ. P. 11(c).

"Rule 11 imposes a duty on attorneys to certify that they have conducted a reasonable inquiry and have determined that any papers filed with the court are well grounded in fact . . . ." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990). Thus, before filing a complaint, a party has an "affirmative duty" to conduct a reasonable inquiry into the facts and law of the case. See Lloyd v. Schlag, 884 F.2d 409, 412 (9th Cir. 1989). The conduct of the signing party is "one of objective reasonableness under the circumstances." Hudson v. Moore Bus. Forms, Inc., 836 F.2d 1156, 1159 (9th Cir. 1987). A showing of subjective bad faith is not required. See Smith v. Ricks, 31 F.3d 1478, 1488 (9th Cir. 1986).

When a complaint is the focus of Rule 11 proceedings, the Ninth Circuit instructs district courts to "conduct a two-prong inquiry to determine (1) whether the complaint is legally or factually baseless from an objective perspective, and (2) if the attorney has conducted a reasonable and competent inquiry before signing and filing it." Holgate v. Baldwin, 425 F.3d 671, 676 (9th Cir. 2005) (quoting Christian v. Mattel, Inc., 286 F.3d 1118, 1127 (9th Cir. 2002)). The Ninth Circuit uses the word "frivolous" as shorthand to denote that a filing is "both baseless and made without a reasonable and competent inquiry." Id. (quotation marks omitted).


A. Factual Background.

The FAC sets forth the following factual background. First Amended Complaint, July 14, 2011, ECF No. 36. On April 12, 2007, Dagupion purchased property in Wailuku, Hawaii, on the island of Maui. Id. ¶ 18. National City Mortgage, through Defendant Loan Network, LLC ("Loan Network"), provided Dagupion with two loans. Id. ¶ 20. National City Mortgage was PNC's predecessor. Loan Network allegedly committed various wrongful acts in completing the loan application. For example, Loan Network allegedly failed to provide Dagupion with a completed copy of the loan application, id. ¶ 23; overstated Dagupion's income to "increase his chances of qualifying for a loan he ordinarily would not" qualify for, id. ¶ 26; failed to provide federally and state mandated disclosures; and concealed material terms of the loan, id. ¶ 43.

Dagupion's loan was transferred to Defendant Green Tree Servicing, LLC, in 2009. Id. ¶ 50. Also in 2009, Dagupion requested a modification of his loan, but his request was denied. Id. ¶ 48. Green Tree informed Dagupion that the "investor/owner of the loan was unwilling to modify." Id. ¶ 51. Green Tree allegedly failed to respond to Dagupion's request for identification of the owner of the loan and for a copy of the original note and mortgage. Id. ¶¶ 53, 55. On April 6, 2011, Fannie Mae filed for ejectment in state court. Id. ¶ 57.

B. Procedural History.

On February 24, 2011, Dagupion filed the original complaint in this case, naming the same Defendants now named in the FAC, and alleging that Defendants had violated state and federal statutes in connection with Dagupion's mortgage loans. Complaint, Feb. 24, 2011, ECF No. 1. Green Tree and PNC filed separate motions to dismiss the complaint. Green Tree Servicing, LLC's Motion to Dismiss Plaintiff's Complaint, April 4, 2011, ECF No. 12; Defendant PNC Bank, National Association, Successor by Merger to National City Mortgage, A Division of National City Bank, Incorrectly Named in the Complaint as National City Mortgage Co.'s Motion to Dismiss Complaint, April 20, 2011, ECF No. 16.

On June 23, 2011, this court granted the motions and dismissed the complaint without prejudice because it lacked sufficient factual detail to support its claims. Order Dismissing Complaint, June 23, 2011, ECF No. 35. The court explained that the complaint was virtually identical to other complaints submitted by Dagupion's attorney in other cases and dismissed by this court. The court said, "[Counsel] has known for at least three months that this boilerplate Complaint was rejected by this court and yet never filed an Amended Complaint." Id. at 6. The court gave Dagupion leave to amend, but cautioned counsel to comply with his Rule 11 obligations. Id. at 9.

Dagupion filed an amended complaint, the FAC in issue, on July 14, 2011. Green Tree moved to dismiss. Defendant Green Tree Servicing LLC's Motion to Dismiss Plaintiff's First Amended Complaint Filed July 14, 2011, July 28, 2011, ECF No. 37. On September 14, 2011, the court granted Green Tree's motion as unopposed, noting that rather than substantively opposing the motion, Dagupion's attorney had stated that he was too busy to address every case, motion, and pleading, and that Dagupion needed to file a motion to amend the complaint further. Order Dismissing First Amended Complaint with Respect to Defendant Green Tree Servicing, LLC ("Order Dismissing FAC") at 2, Sept. 9, 2011, ECF No. 41. The court gave Dagupion until September 29, 2011, to seek leave to file a Second Amended Complaint, again instructing counsel to ensure that no unwarranted claims were asserted. Order Dismissing FAC at 3. On September 29, 2011, Dagupion moved for leave to file a Second Amended Complaint. Plaintiff Marc Dagupion's Motion for Leave to File Second Amended Complaint, Sept. 9, 2011, ECF No. 42. Magistrate Judge Chang denied Dagupion's motion to file a Second Amended Complaint on November 10, 2011. Order 1) Denying Plaintiff's Motion For Leave to File Second Amended Complaint and 2) Denying Defendant Green Tree Servicing, LLC's Motion for Leave to File Surreply, Nov. 15, 2011, ECF No. 69.

On September 30, 2011, PNC filed the present motion seeking Rule 11 sanctions against Dagupion and his attorney. In compliance with Rule 11, on September 7, 2011, PNC served Dagupion's attorney with a proposed Motion for Sanctions and a Rule 11 letter requesting that Dagupion withdraw the FAC.

Defendant PNC Bank, National Association's Motion for Rule 11 Sanctions ("Motion") Ex. A, ECF No. 44-2. When PNC subsequently filed its motion with the court, Dagupion informed the court that he planned to dismiss the FAC and asked PNC to withdraw the motion. Plaintiff Marc Dagupion's Position Statement, Oct. 31, 2011, ECF No. 59. Dagupion did not withdraw the FAC. Magistrate Judge Chang later granted Dagupion leave to file a late opposition. ECF No. 66.


At the outset, the court emphasizes that Dagupion's attorney has been warned before that asserting unwarranted claims is a violation of his Rule 11 obligations. See Order Dismissing Complaint at 9; Order Dismissing FAC at 3; Rey v. Countrywide Home Loans, Inc., Civil No. 11-00142 JMS/KSC, 2011 WL 2160679, at *3 (D. Haw. June 1, 2011). A judge in this district has recently sanctioned Dagupion's attorney in a case similar to this one for violating Rule 11. Rey v. Countrywide Home Loans, Inc., Civil No. 11-00142 JMS/KSC, 2011 WL 4103704 (D. Haw. Sept. 13, 2011). In that case, the attorney submitted an amended complaint that asserted dismissed claims without making any substantive changes to them. Id. at *3.

This district, like many others, has recently seen a marked increase in suits against lenders involved in foreclosures. Id. Many complaints may be filed by the same attorney in nearly identical form, and judges in this district have entered numerous orders outlining the pleading requirements for the various commonly pled claims. Dagupion's attorney has represented plaintiff borrowers in several dozen of these cases. Often, he files a "form complaint" similar to the original complaint in this action, asserting claims that courts have repeatedly dismissed for failure to state a cognizable claim. See, e.g., Rey, 2011 WL 2160679; Casino v. Bank of Am., 2011 WL 1704100 (D. Haw. May 4, 2011); Letvin v. Amera Mortg. Corp., 2011 WL 1603635 (D. Haw. Apr. 27, 2011); Rymal v. Bank of Am., 2011 WL 1361441 (D. Haw. Apr. 11, 2011); Enriquez v. Aurora Loan Services, LLC, 2011 WL 1103809 (D. Haw. Mar. 22, 2011); Kapahu v. Bac Home Loans Servicing, LP, 2010 WL 2734774 (D. Haw. July 8, 2010).

In dismissing the original complaint in this action, this court "caution[ed] [counsel] to comply with his Rule 11 obligations in all future filings with this court." Order Dismissing Complaint at 9. This court further stated that "[a]ny future filing that fails to comply with those obligations may result in serious repercussions, including but not limited to substantial financial sanctions." Id. In particular, the court instructed counsel that any amended complaint should not include any unwarranted claims, such as claims barred by the relevant statute of limitations, and that he must have a good faith basis for bringing specific claims to avoid possible sanctions. Id. at 11. Furthermore, the court stated: "because the claims asserted in various 'form complaints' filed by [counsel] on behalf of his clients have been rejected numerous times, Dagupion should consider whether it is appropriate to assert them in this action at all." Id. at 12.

Dagupion's attorney has disregarded the court's warning. He does not say that this disregard flows from his conclusion that this court will be reversed when he appeals. He simply appears not to put in the time to address the court's concerns. Dagupion's FAC asserts nineteen causes of action, including all eleven of the claims asserted in the original complaint. PNC argues that all nineteen of the causes of actions as pled in the FAC are deficient and states how each cause of action warrants Rule 11 sanctions.

Dagupion's opposition does not address PNC's arguments. Instead, it mostly attacks the entire mortgage lending industry without even mentioning PNC. Where it does respond to the present motion, it appears to assert that (1) PNC has not provided Dagupion with sufficient time to respond because the Rule 11 motion did not provide proper notice by specifically identifying the alleged deficiencies; (2) counsel is aware of alleged lender abuse across the nation in the mortgage market that forms the legal and factual bases for the FAC; (3) the similarity of the FAC to other complaints counsel has filed does not render the FAC frivolous; (4) the volume of his cases and the rapidly developing law have prevented counsel from having "sufficient time to go back and address the alleged deficiencies"; and (5) even though the FAC was "inarticulately" drafted due to "concealment by lenders and their predecessors and successors," a good faith effort has been made and "enough information has been pled that would enable a party to answer and participate in discovery." Plaintiff Marc Dagupion's Memorandum in Opposition to Defendant PNC Bank, National Association's Motion for Rule 11 Sanctions ("Opposition") at 4-14, Nov. 11, 2011, ECF No. 67.

These arguments are unavailing. As PNC's reply states, "The Opposition offers nothing in the way of meritorious argument or evidentiary support." Defendant PNC Bank, National Association's Reply to Plaintiff's Memorandum in Opposition, Nov. 16, 2011, ECF No. 70. The opposition does not respond to any of the substantive deficiencies identified by PNC. Most astoundingly, counsel states that "[i]n a perfect world, we can learn about how the court views certain claims and we can go back and fix claims raised in other cases." Opposition at 12. Counsel ignores the rulings he has received in many of his cases addressing many of the claims asserted in Dagupion's FAC. He has had more than ample opportunity to learn how this district views the claims he has brought, and he has had opportunities to modify those claims based on the rulings he has received. He should be intimately familiar with the requirements for pleading the claims in Dagupion's FAC.

The court thus agrees that sanctions are warranted, but based on only some of Dagupion's causes of action. See Holgate v. Baldwin, 425 F.3d 671, 677 (9th Cir. 2005) ("[T]he mere existence of one non-frivolous claim in a complaint does not immunize it from Rule 11 sanctions." (quotation marks omitted)) ...

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