Edyta Gryglak v. HSBC Bank USA, N.A.

• Court: Court of Appeals for the Ninth Circuit
• Decided: May 4, 2023
• Docket: 22-15630
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAY 4 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

EDYTA GRYGLAK, FKA Edyta A. No. 22-15630 Fromkin, D.C. No. Plaintiff-Appellant, 2:17-cv-01514-JCM-NJK

v. MEMORANDUM* HSBC BANK USA, N.A., as trustee for Wells Fargo Home Equity Asset-Backed Certificates, Series 2006-3, by its Attorney- in-fact Wells Fargo Bank, N.A.; et al.,

Defendants-Appellees.

Appeal from the United States District Court for the District of Nevada James C. Mahan, District Judge, Presiding

Argued and Submitted April 11, 2023 San Francisco, California

Before: PAEZ, CLIFTON, and H.A. THOMAS, Circuit Judges.

Edyta Gryglak (“Gryglak”) appeals the district court’s summary judgment in

favor of HSBC Bank USA, N.A., as trustee for Wells Fargo Home Equity Asset-

Backed Certificates, Series 2006-3, by its attorney-in-fact Wells Fargo Bank, N.A.;

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Wells Fargo Bank, N.A.; and Wells Fargo Asset Securities Corporation

(collectively, “Wells Fargo”), on her breach of contract claim. Gryglak also

appeals the dismissal of her claim under the Fair Debt Collection Practices Act

(“FDCPA”). We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

1. Breach of Contract. In 2021, Wells Fargo moved for summary judgment a

second time1 on the breach of contract claim, arguing that Gryglak had violated

Federal Rule of Civil Procedure Rule 26(a) by failing to make initial disclosures of

her damages, and requesting that the court exclude Gryglak’s damages evidence

under Rule 37(c)(1). In March 2022, the district court entered an order precluding

all of Gryglak’s damages evidence and granting summary judgment to Wells

Fargo. This appeal followed.

We review de novo a district court’s grant of summary judgment. Reynaga

v. Roseburg Forest Prods., 847 F.3d 678, 685 (9th Cir. 2017). We review the

imposition of discovery sanctions under Rule 37 for abuse of discretion. Henry v.

Gill Indus., Inc., 983 F.2d 943, 946 (9th Cir. 1993) (citation omitted).

A. Rule 26(a). Under Rule 26(a), a party must, “without awaiting a

discovery request, provide to the other parties . . . a computation of each category

of damages claimed by the disclosing party.” Fed. R. Civ. P. 26(a)(1)(A)(iii). In

1 Wells Fargo moved for summary judgment for the first time in September 2018, but the district court denied that motion. Subsequently, the court granted Wells Fargo leave to file a second motion for summary judgment.

2 this case, each party was due to exchange initial disclosures by October 16, 2017.

See Fed. R. Civ. P. 26(a)(1)(C).

The parties agree that Gryglak failed to comply with Rule 26(a)’s disclosure

requirements. Instead, she repeatedly claimed new theories of damages throughout

the course of litigation. She first identified potential damages in a response to an

interrogatory from Wells Fargo in July 2018. In her response, she claimed losses

resulting from: “(i) attorneys fees and costs . . . (ii) impairment of her credit rating .

. . (iii) inability to refinance or sell the Property . . . and (iv) fear of foreclosure and

. . . emotional pain and suffering.” Subsequently, Gryglak asserted a new theory in

her opposition brief to Wells Fargo’s first motion for summary judgment, claiming

that Wells Fargo had charged her “late fees and interest” in excess of the monthly

$1,824.07 imposed by a Chapter 11 Bankruptcy Reorganization Plan (“Plan”).

The parties later characterized this theory as the “Escrow Damages Theory,”

because the excess fees represented charges for escrow-related items. Finally, in

her opposition brief to Wells Fargo’s second summary judgment motion, Gryglak

asserted three new theories of damages, which the parties refer to as the “New

Damages Theories”: 1) the expense of participating in foreclosure mediation; 2)

late fees; and 3) the lost opportunity of not refinancing her mortgage. Plainly,

none of Gryglak’s categories of damages were properly disclosed according to

Rule 26(a).

3 B. Rule 37(c)(1). The disclosure requirements in Rule 26(a) are enforced by

applying the sanction provision in Rule 37(c)(1). Under Rule 37(c)(1), “[i]f a party

fails to provide information or identify a witness as required by Rule 26(a) . . . the

party is not allowed to use that information or witness to supply evidence on a

motion, at a hearing, or at a trial.” Fed. R. Civ. P. 37(c)(1). This exclusion

provision is generally “self-executing” and “automatic.” Yeti by Molly, Ltd. v.

Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001) (citation omitted).

There are two express exceptions to Rule 37(c)(1): if the party’s failure to

make a Rule 26(a) disclosure is either “substantially justified or harmless,” then the

information may still be introduced. Id. (citing Fed. R. Civ. P. 37(c)(1)). Gryglak

asserts that the district court erred in excluding her damages evidence because one

or both of the Rule 37(c)(1) exceptions applies to excuse her non-compliance. As

the party facing sanctions, it is her burden to prove that her disclosure violations

were substantially justified or harmless. R & R Sails, Inc. v. Ins. Co. of Pa., 673

F.3d 1240, 1246 (9th Cir. 2012).

The district court did not abuse its discretion by excluding Gryglak’s

damages evidence under Rule 37(c). First, Gryglak offers no reasonable

justification for why she failed to comply with Rule 26(a). She asserts that Wells

Fargo never “complained” about the lack of disclosures and the district court never

issued an order compelling her to provide them, but the rule imposes an affirmative

4 obligation on parties to make disclosures “without awaiting a discovery request.”

Fed. R. Civ. P. 26(a).

Second, Gryglak has not demonstrated that her discovery violations were

harmless. There are several factors we consider in determining whether a

discovery violation is harmless, including: “(1) prejudice or surprise to the party

against whom the evidence is offered; (2) the ability of that party to cure the

prejudice; (3) the likelihood of disruption of the trial; and (4) bad faith or

willfulness involved in not timely disclosing the evidence.” Lanard Toys, Ltd. v.

Novelty, Inc., 375 Fed. Appx. 705, 713 (9th Cir. 2010).

The district court reasonably determined that Wells Fargo suffered prejudice

as a result of Gryglak’s Rule 26(a) violation. As the court found, Wells Fargo was

forced to litigate this matter for multiple years—including two rounds of summary

judgment motions and an appeal to the Ninth Circuit—without having a clear

understanding of the damages Gryglak claims to have suffered. Gryglak insists

that she is not responsible for any harm to Wells Fargo because she was unaware

of the Escrow Damages Theory until Wells Fargo produced billing statements on

May 10, 2018, which was seven months after Rule 26(a) disclosures were due. But

parties are not excused from Rule 26(a) requirements simply because they

discovered new evidence at a later date. Under Rule 26(e)(1)(A), parties are

required “to supplement their prior disclosures ‘in a timely manner’ when the prior

5 response is ‘incomplete or incorrect.’” Hoffman v. Constr. Protective Servs., Inc.,

541 F.3d 1175, 1179 (9th Cir. 2008), as amended (Sept. 16, 2008).

The district court reasonably found the prejudice against Wells Fargo could

not be cured and that there was a likelihood of disruption of any trial. The court’s

finding that Gryglak “needlessly prolong[ed] this litigation for years” is supported

by the record. Contrary to Gryglak’s contention, the parties could not have

proceeded to trial after the first round of summary judgment briefing without a

clear understanding of the damages Gryglak sought. Her delayed disclosures

disrupted the district court litigation process and wasted the parties’ resources.

The district court reasonably found that Gryglak acted in bad faith. We have

explained that, when a Rule 37(c)(1) sanction will be dispositive of a party’s claim,

a district court must consider (1) “whether the claimed noncompliance involved

willfulness, fault, or bad faith” and (2) “the availability of lesser sanctions.” R & R

Sails, Inc., 673 F.3d at 1247. The district court found that Gryglak’s conduct

“reek[ed] of bad faith” because she repeatedly raised new theories of damages in

response to summary judgment motions, when all of those theories “were readily

available for [her] to disclose years ago or too hypothetical to be considered at

summary judgment.” Gryglak challenges this finding, but her arguments are

unavailing.

6 With respect to the New Damages Theories, Gryglak argues that Wells

Fargo had notice of these claims because they are similar to those raised in her

responses to the July 2018 interrogatories. But even if some of Gryglak’s theories

overlapped, she has taken inconsistent positions on what damages she seeks to

recover. In fact, in her opposition brief to Wells Fargo’s first motion for summary

judgment, Gryglak abandoned the damages she identified in her interrogatory

responses and conceded “that most . . . [we]re not recognizable under a breach of

contract claim.” Gryglak’s inconsistent, ever-shifting arguments resemble bad

faith “gamesmanship,” which has prevented Wells Fargo from meaningfully

responding to her claims for years.

Finally, the district court reasonably considered the availability of lesser

sanctions to the extent it was required to do so. A court is only required to

consider a lesser sanction when a party “formally request[s] one from the district

court.” Merchant v. Corizon Health, Inc., 993 F.3d 733, 741 (9th Cir. 2021).

Gryglak “neither moved for an alternative sanction nor moved for reconsideration

of the district court’s ruling on [the] motion.” Id. at 742. Nonetheless, the court

briefly considered the issue and stated that lesser sanctions would not be

appropriate. This finding was reasonable in light of the record.

7 Because the district court reasonably exercised its discretion in excluding

Gryglak’s damages evidence, the court did not err in granting summary judgment

to Wells Fargo on the breach of contract claim.

2. FDCPA Claim. Gryglak contests the district court’s dismissal of her

claim under the FDCPA and the denial of her motion for reconsideration of that

ruling. “We review the denial of leave to amend for an abuse of discretion, but we

review the question of futility of amendment de novo.” United States v. United

Healthcare Ins. Co., 848 F.3d 1161, 1172 (9th Cir. 2016) (cleaned up). Here, the

court dismissed Gryglak’s claim as futile because it found that neither Wells Fargo

nor HSBC Bank could qualify as a “debt collector” under the FDCPA.

Accordingly, we review the court’s dismissal de novo.

The FDCPA “prohibits ‘debt collector[s]’ from making false or misleading

representations and from engaging in various abusive and unfair practices.” Heintz

v. Jenkins, 514 U.S. 291, 292 (1995). A debt collector is “any person who uses

any instrumentality of interstate commerce or the mails in any business the

principal purpose of which is the collection of any debts, or who regularly collects

or attempts to collect, directly or indirectly, debts owed or due or asserted to be

owed or due another.” 15 U.S.C. § 1692a(6). One exemption to this definition is

that “the person who originated the debt, such as a creditor to whom the debt was

originally owed, is not considered a debt collector.” De Dios v. Int’l Realty &

8 Invs., 641 F.3d 1071, 1074 (9th Cir. 2011) (emphasis added) (citing 15 U.S.C.

§ 1692a(6)(F)(ii)).

Gryglak’s FDCPA claim is foreclosed by Schlegel v. Wells Fargo Bank, NA,

720 F.3d 1204, 1208-09 (9th Cir. 2013). Gryglak’s complaint contained no facts

suggesting that Wells Fargo or HSBC’s “principal purpose” is debt collection, or

that either entity “regularly collects or attempts to collect” debts owed to another.

15 U.S.C. § 1692(a)(6); Schlegel, 720 F.3d at 1209-10. Contrary to Gryglak’s

argument, Wells Fargo did not file a proof of claim in bankruptcy court “using”

HCBC’s name as its own, in violation of 15 U.S.C. § 1692(a)(6). And HSBC

Bank’s “collection efforts . . . relate only to debts owed to itself,” because it had

received beneficial interest in the loan before the 2016 foreclosure proceeding.

Schlegel, 720 F.3d at 1209. Because Gryglak’s complaint did not “plausibly allege

that Wells Fargo [or HSBC] is a debt collector under § 1692a(6),” we “affirm the

district court’s dismissal of [Gryglak’s] FDCPA claim.” Id. at 1210.

AFFIRMED.