In a huge multi-plaintiff, multi-jurisdictional MERS case, the Ninth Circuit reversed the federal district court’s dismissal of the plaintiffs’ claims related to false documents recorded to effect foreclosure in Arizona:
Writing in 2011, the MDL Court dismissed Count I on
four grounds. None of these grounds provides an appropriate
basis for dismissal. We recognize that at the time of its
decision, the MDL Court had plausible arguments under
Arizona law in support of three of these grounds. But
decisions by Arizona courts after 2011 have made clear that
the MDL Court was incorrect in relying on them.
First, the MDL Court concluded that § 33-420 does not
apply to the specific documents that the CAC alleges to be
false. However, in Stauffer v. U.S. Bank National Ass’n,
308 P.3d 1173, 1175 (Ariz. Ct. App. 2013), the Arizona Court
of Appeals held that a § 33-420(A) damages claim is
available in a case in which plaintiffs alleged as false
documents “a Notice of Trustee Sale, a Notice of Substitution
of Trustee, and an Assignment of a Deed of Trust.” These are
precisely the documents that the CAC alleges to be false
Second, the MDL Court held that appellants’ claims
under § 33-420 are time-barred. However, in Sitton v.
Deutsche Bank National Trust Co., 311 P.3d 237, 241 (Ariz.
Ct. App. 2013), the Arizona Court of Appeals held that
damages claims under § 33-420(A) are subject to a four-year
statute of limitations. The allegedly false documents upon
which the CAC relies date from no earlier than February 15,
2008. Appellants’ complaint was filed within the four-year
statute of limitations for even the earliest purported false
document. The Arizona courts have not made a comparably
definitive pronouncement as to the limitations period for
claims brought under § 33-420(B), whether brought as
separate claims or joined to damages claims. But at least one
case has suggested that a § 33-420(B) claim asserts a
continuous wrong that is not subject to any statute of
limitations as long as the cloud to title remains. State v.
Mabery Ranch, Co., 165 P.3d 211, 227 (Ariz. Ct. App. 2007).
Third, the MDL Court held that appellants lacked
standing to sue under § 33-420 on the ground that, even if the
documents were false, appellants were still obligated to repay
their loans. In the view of the MDL Court, because
appellants were in default they suffered no concrete and
particularized injury. However, on virtually identical
allegations, the Arizona Court of Appeals held to the contrary
in Stauffer. The plaintiffs in Stauffer were defaulting
residential homeowners who brought suit for damages under
§ 33-420(A) and to clear title under § 33-420(B). One of the
grounds on which the documents were alleged to be false was
that “the same person executed the Notice of Trustee Sale and
the Notice of Breach, but because the signatures did not look
the same, the signature of the Notice of Trustee Sale was
possibly forged.” Stauffer, 308 P.3d at 1175 n.2. The trial
court dismissed on the pleadings. The Arizona Court ofAppeals reversed the dismissal under both §§ 33-420(A) and
(B). It wrote:
Appellees argue that the Stauffers do not have
standing because the Recorded Documents
have not caused them any injury, they have
not disputed their own default, and the
Property has not been sold pursuant to the
Recorded Documents. The purpose of A.R.S.
§ 33-420 is to “protect property owners from
actions clouding title to their property.” We
find that the recording of false or fraudulent
documents that assert an interest in a property
may cloud the property’s title; in this case, the
Stauffers, as owners of the Property, have
alleged that they have suffered a distinct and
palpable injury as a result of those clouds on
their Property’s title.
Id. at 1179 (citation omitted).
The Court of Appeals not only held that the Stauffers had
standing based on their “distinct and palpable injury.” It also
held that they had stated claims under §§ 33-420(A) and (B).
The court held that because the “Recorded Documents
assert[ed] an interest in the Property,” the trial court had
improperly dismissed the Stauffers’ damages claim under
§ 33-420(A). Id. at 1178. It then held that because the
Stauffers had properly brought an action for damages under
§ 33-420(A), they could join an action to clear title of the
allegedly false documents under § 33-420(B). The court
The third sentence in subsection B states that
an owner “may bring a separate special action
to clear title to the real property or join such
action with an action for damages as
described in this section.” A.R.S. § 33-420.B.
Therefore, we find that an action to clear title
of a false or fraudulent document that asserts
an interest in real property may be joined with
an action for damages under § 33-420.A.
Id. We therefore conclude, based on Stauffer, that appellants
have standing to sue.
Fourth, the MDL Court held that appellants had not
pleaded their robosigning claims with sufficient particularity
to satisfy Federal Rule of Civil Procedure 8(a). We disagree.
Section 33-420 characterizes as false, and therefore
actionable, a document that is “forged, groundless, contains
a material misstatement or false claim or is otherwise
invalid.” Ariz. Rev. Stat. §§ 33-420(A), (B) (emphasis
added). The CAC alleges that the documents at issue are
invalid because they are “robosigned (forged).” The CAC
specifically identifies numerous allegedly forged documents.
For example, the CAC alleges that notice of the trustee’s sale
of the property of Thomas and Laurie Bilyea was “notarized
in blank prior to being signed on behalf of Michael A. Bosco,
and the party that is represented to have signed the document,
Michael A. Bosco, did not sign the document, and the party
that did sign the document had no personal knowledge of any
of the facts set forth in the notice.” Further, the CAC alleges
that the document substituting a trustee under the deed of
trust for the property of Nicholas DeBaggis “was notarized in
blank prior to being signed on behalf of U.S. Bank National
Association, and the party that is represented to have signed
the document, Mark S. Bosco, did not sign the document.”
Still further, the CAC also alleges that Jim Montes, who
purportedly signed the substitution of trustee for the property
of Milan Stejic had, on the same day, “signed and recorded,
with differing signatures, numerous Substitutions of Trustee
in the Maricopa County Recorder’s Office . . . . Many of the
signatures appear visibly different than one another.” These
and similar allegations in the CAC “plausibly suggest an
entitlement to relief,” Ashcroft v. Iqbal, 556 U.S. 662, 681
(2009), and provide the defendants fair notice as to the nature
of appellants’ claims against them, Starr v. Baca, 652 F.3d
1202, 1216 (9th Cir. 2011).
We therefore reverse the MDL Court’s dismissal of