119 F.4th 679
9th Cir.2024Background
- In 2007, Teri Nguyen obtained a mortgage loan secured by property in Monte Sereno, California; after defaulting on the loan, Nguyen transferred the property to Rose Court, LLC, which she manages.
- The loan was transferred through several banks, ultimately to U.S. Bank; Select Portfolio Servicing (SPS) acted as servicer, and Quality Loan Service Corp. as trustee.
- Rose Court/Ngyuen initiated multiple state and federal lawsuits challenging the foreclosure, each time voluntarily dismissing the actions.
- Rose Court filed for bankruptcy, but U.S. Bank obtained relief from the automatic stay and foreclosed on the property.
- After foreclosure, Rose Court filed an adversary action in bankruptcy, seeking to amend its complaint to assert, again, a fraud-based wrongful-foreclosure claim.
- The bankruptcy court denied leave to amend, applying Federal Rule of Civil Procedure 41(a)(1)(B)'s two-dismissal rule; the district court affirmed, and Rose Court appealed only the denial of leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of Rule 41(a)(1)(B) Two-Dismissal Rule | Prior voluntary dismissals do not bar amendment here | Prior dismissals of same claim preclude further action | The two-dismissal rule applies; Rose Court is barred from reasserting the claim |
| Definition of "Same Claim" Under Rule 41 | These are not the same claims—different facts/parties | Claims arise from the same transaction and are identical | Claims are the same because they arise from the same underlying nucleus of facts |
| Defendants Covered by Rule 41 Bar | U.S. Bank not named previously, so rule shouldn't apply | All defendants are "substantially the same" or in privity | Rule could apply to new parties in privity or closely related to prior defendants |
| Raising New Theory on Appeal | Should be allowed to assert a new theory for amendment | New theory not preserved below; not properly before court | Court declines to consider new theory raised for first time on appeal |
Key Cases Cited
- Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (explains rationale for Rule 41 two-dismissal rule)
- Taylor v. Sturgell, 553 U.S. 880 (federal common law governs preclusive effect of federal judgments)
- Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497 (federal courts in diversity apply state preclusion law unless incompatible with federal interest)
- Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708 (transactional test for res judicata—same nucleus of operative facts)
- DKN Holdings LLC v. Faerber, 352 P.3d 378 (California test for claim preclusion—same cause, same parties, judgment on merits)