308 F.R.D. 266
N.D. Cal.2015Background
- Plaintiffs James and Zane Rees own a Scotts Valley, CA property and fell behind on mortgage payments after business troubles; they applied for loan modifications in 2014 and appealed two denials.
- Plaintiffs allege PNC (servicer) and Deutsche (trustee) mishandled or rejected appeals (including alleged deletion of an appeal and missed deadlines), while continuing foreclosure proceedings (Notice of Default and Notice of Trustee’s Sale recorded).
- Plaintiffs sued in state court for violations of California HBOR (Cal. Civ. Code §§ 2923.6, 2924.17, 2923.7), seeking injunctive relief, statutory, exemplary/punitive damages (under Cal. Civ. Code § 3294), and attorneys’ fees; case was removed to federal court.
- Defendants moved under Fed. R. Civ. P. 12(f) to strike portions of the First Amended Complaint (FAC) seeking statutory, exemplary, and punitive damages.
- Court took judicial notice of public recording documents (deed of trust, assignments, Notice of Default, Notice of Trustee’s Sale) and considered whether punitive/statutory damages allegations were subject to striking as redundant, immaterial, impertinent, or scandalous.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether statutory damages prayer duplicates punitive/exemplary damages | Plaintiffs concede statutory damages claim is limited to Cal. Civ. Code § 3294(a) punitive/exemplary damages | Statutory damages are duplicative and should be stricken | Court: Granted motion to strike statutory damages as redundant |
| Whether punitive/exemplary damages are precluded as a matter of law | Punitive damages available under § 3294 for non-contract claims alleging malice/ oppression/fraud | Punitive damages barred as a matter of law or otherwise unavailable here | Court: Denied — striking on that ground is improper under Ninth Circuit precedent (Whittlestone) |
| Whether FAC lacks sufficient factual allegations to plead punitive damages under § 3294(a) | Plaintiffs allege malicious, willful, conscious disregard and conduct calculated to injure | Defendants argue mere conclusory assertions are insufficient under California law | Court: Denied — under federal pleading standards (Rules 8/9), general allegations of malice are sufficient at motion-to-strike stage |
| Whether punitive damages against corporate defendants require allegations of officer-level authorization/ratification under § 3294(b) | Plaintiffs allege agency, concerted action, and facts from which authorization/ratification can be inferred | Defendants say FAC fails to plead advance knowledge/authorization by an officer, director, or managing agent and thus punitive claims should be stricken | Court: Denied — court finds allegations (agency, concerted plan, facts indicating calculated misconduct) plausibly permit inference of authorization/ratification; not proper to strike at this stage |
Key Cases Cited
- Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375 F.3d 861 (9th Cir. 2004) (courts may take judicial notice of undisputed public records)
- Fantasy, Inc. v. Fogerty, 984 F.2d 1524 (9th Cir. 1993) (defines immaterial/impertinent matter for Rule 12(f))
- Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970 (9th Cir. 2010) (Rule 12(f) cannot be used to strike damages claims precluded as a matter of law)
- Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880 (9th Cir. 1983) (motion to strike can avoid litigation of spurious issues)
- Clark v. Allstate Ins. Co., 106 F. Supp. 2d 1016 (S.D. Cal. 2000) (federal pleading standards allow general allegations of malice; state heightened pleading conflicts with Fed. R. Civ. P.)