Equity Recovery Specialists LLC v. Select Portfolio Servicing Incorporated

• Court: District Court, D. Arizona
• Decided: August 16, 2023
• Docket: 2:21-cv-01889
• Status: Unknown

Opinion

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Equity Recovery Specialists LLC, No. CV-21-01889-PHX-DWL 10 Plaintiff, ORDER 11 v. 12 Select Portfolio Servicing Incorporated, et al., 13 Defendants. 14 15 INTRODUCTION 16 In December 2020, Plaintiff Equity Recovery Specialists, LLC (“Plaintiff”) bought

17 a parcel of real estate for just over $16,000 at a public auction. The property had been 18 abandoned by its previous owner, who stopped making mortgage payments or paying

19 homeowners’ association (“HOA”) fees in 2012. The auction arose after the HOA sued

20 the previous owner to recover the overdue HOA fees, obtained a default judgment, and 21 forced the property sale to satisfy the judgment. 22 The property was encumbered by a deed of trust (“DOT”) in favor of Deutsche Bank

23 National Trust Company (“Deutsche Bank”). The DOT secured a $160,000 home loan

24 that had been extended to the previous owner by Deutsche Bank’s predecessor-in-interest.

25 However, Deutsche Bank and its loan servicer, Select Portfolio Servicing, Inc. (“SPS”)

26 (together, “Defendants”), had not taken any steps following the 2012 abandonment to 27 collect on the overdue mortgage payments. After the auction, the property remained 28 encumbered by the DOT. Case 2:21-cv-01889-DWL Document 60 Filed 08/16/23 Page 2 of 37

1 In March 2021, Plaintiff sent a letter to SPS. After identifying various reasons why 2 (in Plaintiff’s view) Defendants would be legally barred from attempting to collect on the 3 underlying loan or enforce the DOT, the letter stated: “[Plaintiff] would prefer to reach an 4 amicable resolution as to all issues arising out of or relating to the Loan as opposed to 5 litigating these contested issues. Enclosed herewith is a check for $10,000 offered in 6 accord and satisfaction for you to release the DOT. See A.R.S. § 47-3311. Depositing the 7 enclosed check will be deemed an acceptance of this offer.” (Doc. 11 at 56.) SPS, in turn, 8 endorsed and deposited the $10,000 check that was enclosed with the letter but informed 9 Plaintiff that it had applied the proceeds to the outstanding loan balance. 10 Nevertheless, Plaintiff interpreted SPS’s conduct as proof that the offer in the March 11 2021 letter had been accepted (and that the property was no longer encumbered by the 12 DOT). Afterward, Plaintiff took out a hard money loan to develop the property, engaged 13 in renovations, and eventually sold the property for over $320,000 to a third-party buyer. 14 Plaintiff guaranteed the sale with a warranty deed. Defendants have since refused to release 15 the DOT, arguing among other things that SPS’s act of cashing the $10,000 check did not 16 serve as acceptance of the offer in the March 2021 letter. 17 In this lawsuit, Plaintiff seeks a judicial determination that Defendants must release 18 the DOT, as well as unspecified damages. Plaintiff’s overarching theory is that, by cashing 19 the $10,000 check that was enclosed with the March 2021 letter (which stated that the 20 check was in exchange for releasing the DOT), Defendants accepted the offer and formed 21 a binding contract that they must honor. 22 Now pending before the Court are the parties’ cross motions for summary judgment. 23 (Docs. 47, 48.) For the following reasons, both motions are denied but Defendants are 24 granted leave to file a successive summary judgment motion on the issue of preemption. 25 … 26 … 27 … 28 …

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1 RELEVANT BACKGROUND 2 I. Preliminary Matters 3 Each side raises objections to portions of the other side’s summary judgment 4 submissions. Because these objections bear on whether several key facts are genuinely 5 disputed, the Court begins there. 6 A. Factual Assertions Supported Only By Citations To The Complaint 7 Plaintiff’s summary judgment motion contains a statement of facts. (Doc. 48 at 6- 8 10.) To substantiate many of the asserted facts in this portion of the motion, Plaintiff cites 9 exhibits that were filed as attachments to the motion. (Id.) However, in some instances, 10 the sole source of support is a citation to the First Amended Complaint (“FAC”). (Id.) 11 Defendants object to this approach under Rule 56(c), arguing that they “object to 12 the factual background set out by Plaintiff . . . to the extent that it incorporates allegations 13 from the [FAC] that Plaintiff has failed to support with admissible evidence.” (Doc. 52 at 14 3.) Specifically, Defendants identify the following four factual assertions in Plaintiff’s 15 motion as unsupported: 16 (1) “SPS is the only party charged by Deutsche with enforcement of the DOT, protection of the beneficiaries’ financial interests and to 17 communicate with the trust.” 18 (2) “SPS is the only entity authorized to accept payments or communicate with Deutsche under one or more loan servicing agreement(s) by the 19 authority and extent as alleged in the DOT.” 20 (3) “As the result of acceptance and endorsement of the tendered check under the terms of the First Letter, Defendants became obligated to release the 21 DOT.” 22 (4) “Defendants are in breach of their obligation to release the lien arising out of the contact [sic] formed expressly, or by implication through their 23 actions.” 24 (Id. at 3-4.) 25 In reply, Plaintiff contends: “These objections should be overruled as the verbiage 26 is superfluous. Defendants’ witness, Michelle Simon, testifies that: Deutsche was the 27 trustee for the loan and that servicing of the loan was transferred from SunTrust to SPS. 28 Extensive SPS activity is described in servicing the account for Deutsche. The exclusivity

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1 allegations are immaterial as Deutsche is the trustee and SPS serviced the account.” (Doc. 2 56 at 5.) In support of this contention, Plaintiff cites paragraphs 10 and 16 of one of the 3 declarations that Defendants attached to their motion. (Id.) There, an SPS representative, 4 Michelle Simon (the admissibility of whose testimony is addressed in later portions of this 5 order), made the following assertions: (1) “Deutsche Bank National Trust Company, as 6 Trustee, in trust for registered Holders of GSAA Home Equity Trust 2007-2, Asset-Backed 7 Certificates, Series 2007-2 is the current noteholder” (Doc. 47-3 at 4 ¶ 10); and (2) “On 8 December 1, 2018, SPS took over as the servicer of the Loan on behalf of Deutsche Bank. 9 See Notice of Servicing Transfer dated November 28, 2018, a complete and authentic copy 10 of which is attached hereto as Exhibit 4, which is maintained by SPS among the Loan 11 Records in the normal course of business.” (Doc. 47-3 at 4 ¶ 16). 12 Defendants’ objections are well-taken. As an initial matter, although Plaintiff asks 13 for the objections to be “overruled,” it is not clear that Plaintiff actually seeks to defend the 14 sufficiency of the evidentiary foundation for at least some of the challenged factual 15 assertions. Rather, Plaintiff appears to view the challenged factual assertions as 16 “superfluous” and “immaterial” to the summary judgment analysis. If so, it’s unclear why 17 Plaintiff would have any quarrel with Defendants’ objections being sustained. 18 Even assuming that Plaintiff does, in fact, oppose the objections, Defendants are 19 entitled to relief on the merits. It was Plaintiff’s burden to substantiate the factual assertions 20 appearing in its motion by “citing to particular parts of materials in the record, including 21 depositions, electronically stored information, affidavits or declarations, stipulations . . . , 22 admissions, interrogatory answer, or other materials.” See Fed. R. Civ. P. 56(c)(1)(A). 23 Cross-references to allegations in the complaint do not suffice. See, e.g., Briggs v. 24 Blomkamp, 70 F. Supp. 3d 1155, 1166 (N.D. Cal. 2014) (“[A]llegations in a complaint are 25 not evidence that can be used to support or oppose summary judgment.”). Thus, on their 26 face, the challenged factual assertions are deficient and the Court may disregard them for 27 summary judgment purposes. See Fed. R. Civ. P. 56(c)(3) (“The court need consider only 28 the cited materials, but it may consider other materials in the record.”).

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1 Finally, even assuming it might be permissible for a summary judgment movant to 2 remedy this sort of omission by belatedly identifying, in its reply brief, evidence that 3 supports the factual assertions contained in the motion, Plaintiff has not done so here—the 4 cross-referenced paragraphs from the Simon declaration fail to substantiate the four 5 challenged factual assertions. Therefore, the Court does not consider those assertions for 6 purposes of summary judgment. 7 B. McCaffrey And Simon 8 As noted, one of the exhibits attached to Defendants’ summary judgment motion is 9 a declaration from SPS employee Michelle Simon. (Doc. 47-3 at 2-12.) In its response 10 brief, Plaintiff characterizes Simon as “an undisclosed corporate legal affairs insider” and 11 argues that Defendants’ production of the Simon declaration thus amounts to “an ambush.” 12 (Doc. 50 at 18-19.) Plaintiff further contends that, as a remedy for this ambush, it was 13 entitled to “hire an expert for rebuttal.” (Id. at 19.) To that end, attached as an exhibit to 14 Plaintiff’s response brief is a declaration from William McCaffrey, who identifies himself 15 as “a Consultant for Housing Mortgage Consultants, Inc.” who is qualified “to render 16 opinions on [certain] topic areas,” including “the securitization of mortgage loans.” (Id. at 17 35-37.) In their reply, Defendants move to strike McCaffrey’s declaration and to disregard 18 all of the references in Plaintiff’s brief to the McCaffrey declaration, arguing that 19 “Plaintiff’s disclosure of Mr. McCaffrey as an expert and fact witness is untimely and 20 violates the Court’s Case Management Order and Rule 26.” (Doc. 55 at 1-2.) 21 The starting point for analyzing Defendants’ challenge to the McCaffrey declaration 22 is Rule 26(a) of the Federal Rules of Civil Procedure. Under Rule 26(a)(1)(A)(i), which 23 deals with the disclosure of fact witnesses, “a party must, without awaiting a discovery 24 request, provide to the other parties . . . the name and, if known, the address and telephone 25 number of each individual likely to have discoverable information—along with the subjects 26 of that information—that the disclosing party may use to support its claims or defenses, 27 unless the use would be solely for impeachment.” Meanwhile, Rule 26(a)(2)(D), which is 28 entitled “Time to Disclose Expert Testimony,” provides that “[a] party must make [required

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1 expert] disclosures at the times and in the sequence that the court orders.” 2 Rule 37(c)(1) specifies the consequences for violating Rule 26(a)’s duties of 3 disclosure. It provides that “[i]f a party fails to provide information or identify a witness 4 as required by Rule 26(a) . . . , the party is not allowed to use that information or witness 5 to supply evidence on a motion . . . unless the failure was substantially justified or is 6 harmless.” Id. This rule “‘gives teeth’ to Rule 26’s disclosure requirements by forbidding 7 the use at trial of any information that is not properly disclosed.” Goodman v. Staples The 8 Off. Superstore, LLC, 644 F.3d 817, 827 (9th Cir. 2011), superseded by rule on other 9 grounds as recognized in Shrader v. Papé Trucks, Inc., 2020 WL 5203459, *2 n.2 (E.D. 10 Cal. 2020). See also Liberty Ins. Co. v. Brodeur, 41 F.4th 1185, 1191 (9th Cir. 2022) (one 11 of the sanctions authorized by Rule 37(c)(1) is that “when a witness is not disclosed by a 12 party then, as a sanction, that witness cannot testify”). 13 “The party requesting sanctions [under Rule 37] bears the initial burden of 14 establishing that the opposing party failed to comply with the [applicable] disclosure 15 requirements.” Silvagni v. Wal-Mart Stores, Inc., 320 F.R.D. 237, 241 (D. Nev. 2017). If 16 the movant makes this showing, “the party is not allowed to use that information or witness 17 to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially 18 justified or is harmless.” Liberty Ins. Corp., 41 F.4th at 1190. When evaluating substantial 19 justification and harmlessness, courts often consider (1) prejudice or surprise to the other 20 party; (2) the ability of that party to cure the prejudice; (3) the likelihood of disruption of 21 trial; and (4) willfulness or bad faith. Id. at 1192. 22 “Rule 37(c)(1) is an ‘automatic’ sanction that prohibits the use of improperly 23 disclosed evidence,” such that “litigants can escape the ‘harshness’ of exclusion only if 24 they prove that the discovery violations were substantially justified or harmless.” 25 Merchant v. Corizon Health, Inc., 993 F.3d 733, 740 (9th Cir. 2021) (citation omitted). 26 Nevertheless, “[t]he automatic nature of the rule’s application does not mean that a district 27 court must exclude evidence that runs afoul of Rule 26(a) or (e). . . . Rather, the rule is 28 automatic in the sense that a district court may properly impose an exclusion sanction

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1 where a noncompliant party has failed to show that the discovery violation was either 2 substantially justified or harmless.” Id. (citation omitted). The “party facing sanctions 3 under [Rule 37(c)(1)] bears the burden of showing that a sanction other than exclusion is 4 better suited to the circumstances.” Id. at 741. “[A] noncompliant party must ‘avail himself 5 of the opportunity to seek a lesser sanction’ by formally requesting one from the district 6 court.” Id. (citation omitted). 7 Here, the first part of the analysis is straightforward—Plaintiff violated its 8 disclosure obligations under Rule 26(a) in relation to McCaffrey. Under the scheduling 9 order, expert disclosures were due by the end of December 2022 and fact discovery closed 10 on January 6, 2023. (Doc. 35 at 2-3.) Nevertheless, Plaintiff first disclosed McCaffrey as 11 a potential fact and expert witness on March 6, 2023, via Plaintiff’s Second Supplemental 12 Disclosure Statement: 13 Mr. McCaffrey is a rebuttal factual witness to Michelle Simon or any other SPS witness concerning SPS’ general business practices and procedures 14 and/or the reporting and accounting history of the subject loan and/or the general business practices and procedures of loan servicers and/or reporting 15 and accounting practices. Mr. McCaffrey will rebut the conclusions implied in the declaration testimony of lay witness Michelle Simon as untrustworthy 16 and misleading for those outside the loan servicing industry. Mr. McCaffrey will testify consistently with his declaration that is disclosed herewith. Mr. 17 McCaffrey is also disclosed as an expert witness for the subject of residential home loan servicing by companies such as SPS. 18 19 (Doc. 55-1 at 9, emphasis omitted. See also Doc. 55-1 at 3 ¶ 4 [“Plaintiff did not disclose 20 to [Defendants] the identity of Mr. McCaffrey or the anticipated nature of his testimony 21 prior to March 6, 2023.”].) Because this disclosure occurred well after the expiration of 22 the relevant deadlines in the scheduling order, it was untimely. 23 The real dispute is whether Plaintiff can meet its resulting burden of showing that 24 the disclosure violation was “substantially justified or harmless.” The Court construes 25 Plaintiff’s response brief as focusing only on substantial justification—specifically, that 26 Defendants’ late disclosure of Simon was sanctionable and justified Plaintiff’s even later 27 retention and disclosure of McCaffrey, which was necessary to enable Plaintiff to rebut 28 Simon’s late-disclosed opinions and factual assertions.

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1 Plaintiff’s substantial-justification argument fails for two independent reasons. 2 First, Plaintiff has not identified any authority suggesting that a permissible self-help 3 remedy for the untimely disclosure of a witness by an opposing party is an even more 4 untimely disclosure of another witness by the aggrieved party. To the extent Plaintiff 5 believes Defendants violated their disclosure obligations under Rule 26(a) in relation to 6 Simon, Plaintiff’s remedy was to seek the exclusion of Simon under Rule 37(c) (which 7 Plaintiff has not done). Plaintiff was not, in contrast, entitled to unilaterally (and without 8 leave of Court) retain and disclose a new witness months after the expiration of the relevant 9 deadlines in the scheduling order.1 10 Second, Plaintiff’s substantial-justification argument also fails for the alternative 11 reason that the premise underlying Plaintiff’s self-help theory—that Defendants committed 12 a sanctionable disclosure violation in relation to Simon—is inaccurate. In their initial 13 disclosure statement, which was provided to Plaintiff in July 2022 (well before the close 14 of fact discovery), Defendants identified the following individual: 15 16 1 As noted, a party “facing sanctions” under Rule 37(c)(1) may attempt to identify “a sanction other than exclusion is better suited to the circumstances.” Merchant, 993 F.3d at 17 741. But this is not what Plaintiff attempted to do here. In its motion papers, Plaintiff did not attempt to identify an alternative sanction (such as reopening discovery to allow 18 McCaffrey to be deposed) that is less drastic than the sanction of exclusion. Rather, Plaintiff effectively argued that no sanction should be imposed because its conduct was 19 substantially justified. During oral argument (and presumably in response to the forfeiture analysis as to this issue that appeared in the tentative ruling issued before oral argument), 20 Plaintiff argued for the first time that reopening discovery to allow a McCaffrey deposition would be a permissible alternative sanction. Not only does this argument come too late, 21 but the Court rejects it on the merits—reopening discovery at this juncture of the case would be disruptive and harmful to Defendants. Ollier v. Sweetwater Union High Sch. 22 Dist., 768 F.3d 843, 862-63 (9th Cir. 2014) (“Orderly procedure requires timely disclosure so that trial efforts are enhanced and efficient, and the trial process is improved. The late 23 disclosure of witnesses throws a wrench into the machinery of trial. A party might be able to scramble to make up for the delay, but last-minute discovery may disrupt other plans. 24 And if the discovery cutoff has passed, the party cannot conduct discovery without a court order permitting extension. This in turn threatens whether a scheduled trial date is viable. 25 And it impairs the ability of every trial court to manage its docket.”); Wong v. Regents of Univ. of Cal., 410 F.3d 1052, 1062 (9th Cir. 2005) (“If Wong had been permitted to 26 disregard the deadline for identifying expert witnesses, the rest of the schedule laid out by the court months in advance, and understood by the parties, would have to have been 27 altered as well. Disruption to the schedule of the court and other parties in that manner is not harmless. Courts set such schedules to permit the court and the parties to deal with 28 cases in a thorough and orderly manner, and they must be allowed to enforce them, unless there are good reasons not to.”).

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1 A knowledgeable and qualified representative of Select Portfolio Servicing, Inc. has knowledge and information regarding the events and circumstances 2 that are alleged in the Complaint, the history of the Property at issue in the Complaint, and SPS’s business records, and is expected to testify regarding 3 the same. 4 (Doc. 50 at 29.) About two months later, in September 2022, Plaintiff propounded 5 interrogatories and requests for admission to Defendants. (Doc. 38.) Among other things, 6 Plaintiff sought more information about Defendants’ theory as to how the $10,000 check 7 was deposited and whether the deposit resulted in acceptance of the offer set forth in 8 Plaintiff’s March 2021 cover letter. (Doc. 55-1 at 22-23.) In a response provided in 9 November 2022 (still before the close of fact discovery), Defendants explained, in relevant 10 part, that “[u]pon receipt of the March 21, 2022 [sic] Letter, SPS separated the $10,000.00 11 check from the letter and processed the check as a payment on the Loan pursuant to the 12 terms of the Loan documents and SPS’s routine practices and procedures. This was done 13 as matter of course, independent of SPS’s review of and response to the contents March 14 22, 2021 Letter.” (Id. at 28.) Defendants also expressly offered to “produce a Rule 30(b)(6) 15 witness that can testify as to how the check was processed.” (Id. at 36.) However, Plaintiff 16 never asked Defendants to identify the name of the SPS representative who would be 17 testifying about these topics and never sought to notice a Rule 30(b)(6) deposition of SPS. 18 (Id. at 5-6 ¶¶ 13, 18.) 19 It is against this backdrop that Defendants produced Simon’s declaration on 20 February 3, 2023, as an attachment to their summary judgment motion. (Doc. 49-1 at 2- 21 12.)2 In the declaration, Simon explains that she is “familiar with SPS’s loan boarding 22 process, which is the process by which loans are screened before being serviced by SPS” 23 and “SPS’s policies and procedures discussed herein, including but not limited to the 24 handling of incoming inquiries, mail, and payments by SPS’s various departments.” (Id. 25 at 3 ¶¶ 4-5.) Simon’s declaration goes on to describe SPS’s policies and procedures for 26 27 2 Although the declaration itself does not identify Simon’s position at SPS, Defendants previously produced interrogatory responses that Simon signed on behalf of 28 SPS in her capacity as “the Document Control Officer of Defendant, Select Portfolio Servicing, Inc. (‘SPS’).” (Doc. 55-1 at 39.)

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1 handling incoming payments and specifically explains, in relation to the disputed issues in 2 this case, that the check Plaintiff sent to SPS in March 2021 was separated from its attached 3 letter as a routine matter of processing and the $10,000 was applied to the loan balance 4 rather than as acceptance of any agreement. (Id. at 8-9 ¶¶ 23-30.) Simon also authenticates 5 nearly 150 pages of attachments.3 (See, e.g., id. at 4 ¶¶ 7-9 [authenticating the note and 6 DOT]; id. at 5-7 ¶¶ 16-27 [authenticating the transfer to SPS and SPS transaction history].) 7 Defendants’ disclosure efforts in relation to Simon were sufficient under Rule 8 26(a)(1)(A)(i). As noted, that rule requires the disclosure of both “the name . . . of each 9 individual likely to have discoverable information” and “the subjects of that information.” 10 As for the former requirement, although Defendants did not identify Simon by name in 11 their July 2022 disclosure—instead, she was generically identified as “[a] knowledgeable 12 and qualified representative of Select Portfolio Servicing” (Doc. 50 at 29)—many courts 13 and commentators have concluded that when, as here, a party seeks to disclose a corporate 14 representative who will testify about corporate policies, it is not necessary to identify that 15 individual by name. 1 Gensler, Federal Rules of Civil Procedure, Rule 26, at 793 (2022) 16 (“The term ‘individuals’ [in Rule 26(a)(1)(A))] does not include corporate entities or 17 individuals who later testify for the entity under Rule 30(b)(6).”); Moore v. Computer 18 Assocs. Int’l, Inc., 653 F. Supp. 2d 955, 959 (D. Ariz. 2009) (denying plaintiff’s motion to 19 strike an affidavit from a corporate representative that was submitted for the first time at 20 summary judgment, where the plaintiff argued that the affidavit was improper because the 21 defendant never identified the corporate representative by name in its Rule 26 disclosures, 22 because Rule 26’s disclosure requirement is “limited to individuals and exclusive of 23 corporate entities, an exclusion which would necessarily apply to individuals who testify 24 on behalf of corporate entities”). The Court finds those cases and authorities persuasive, 25 while acknowledging that the Ninth Circuit does not appear to have spoken definitively on 26 the issue and that some courts have reached contrary conclusions. See generally Hooks v. 27 28 3 Simon also explains that the “total amount due and owing on the Loan in April 2021 was $263,737.84.” (Doc. 49-1 at 12 ¶ 49.)

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1 GEICO Gen. Ins. Co., Inc., 2016 WL 5415134, *8 (M.D. Fla. 2016) (“[T]he Court 2 acknowledges that there is authority on both sides of this issue.”) (collecting cases). 3 Similarly, as for Rule 26(a)(1)(A)(i)’s other requirement (i.e., disclosure of “the 4 subjects” of the information possessed by the individual), the Court again concludes that 5 although the governing law is not entirely settled,4 Defendants’ disclosure effort was 6 sufficient. Defendants disclosed that SPS’s corporate representative had “information 7 regarding the events and circumstances that are alleged in the Complaint, the history of the 8 Property at issue in the Complaint, and SPS’s business records.” (Doc. 50 at 29.) Although 9 these descriptions are admittedly pitched at a high level of generality and don’t identify 10 what SPS’s corporate representative would actually be saying about SPS’s check-deposit 11 process, such a level of detail is at least arguably not required by Rule 26(a)(1)(A)(i), which 12 only calls for a description of “the subjects of that information” about which the witness 13 has knowledge. Notably, other portions of Rule 26(a) call not only for the disclosure of 14 the “subjects” that a particular witness will address, but also for the disclosure of the 15 specific opinions the witness holds in relation to those subjects. See Fed. R. Civ. P. 16 26(a)(2)(B)(i) (for experts who must provide a written report, requiring disclosure of “a 17 complete statement of all opinions the witness will express and the basis and reasons for 18 them”); Fed. R. Civ. P. 26(a)(2)(C)(i)-(ii) (for experts who need not provide a written 19 report, requiring disclosure not only of “the subject matter on which the witness is expected 20 to present evidence” but also “a summary of the facts and opinions to which the witness is 21 expected to testify”). This suggests, by implication, that Rule 26(a)(1)(A)(i) requires 22 something less (and that Defendants’ disclosure efforts here satisfied that lesser standard). 23 Alternatively, even if that SPS’s disclosures in relation to Simon were deficient 24 under Rule 26 (either as to the identity of the corporate representative or to the subjects of 25 the information possessed by that witness), any deficiency was substantially justified and 26 4 27 See generally Lipari v. U.S. Bancorp, N.A., 2008 WL 2874373, *2 (D. Kan. 2008) (“This Court has found only a handful of cases that address the degree of specificity 28 required under Rule 26(a)(1)(A)(i) regarding the subject of the discoverable information known by the potential witness.”).

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1 harmless. Substantial justification is present because, for the reasons discussed, there is at 2 least some authority suggesting that Defendants’ approach was sufficient. As for 3 harmlessness, SPS made crystal clear to Plaintiff, through other timely disclosures as part 4 of the discovery process, that its position was that the check had been separated from the 5 letter before the deposit and cashed pursuant to SPS’s standard process for handling 6 incoming payments. SPS also went out of its way to offer up a corporate representative to 7 sit for a Rule 30(b)(6) deposition on this topic (an offer that Plaintiff ignored) and disclosed, 8 albeit in a roundabout way, that Simon was a knowledgeable representative who could 9 testify about SPS’s records and check-handling process. Given this backdrop, Plaintiff 10 cannot credibly claim that it was surprised by the contents of Simon’s declaration, which 11 simply repeats the statements SPS previously made about its check-cashing process. Cf. 12 Liberty Ins. Corp., 41 F.4th at 1190 (“[T]he purported defect—that the Brodeurs disclosed 13 Jerry could testify only about the claims in the ‘underlying lawsuit’ as opposed to 14 disclosing that he could testify about the claims in the ‘current lawsuit’—was harmless 15 because Liberty filed this action for the sole purpose of determining its coverage 16 obligations to the Brodeurs and Jerry Brodeur was the only witness who testified about 17 facts relevant to his Liberty insurance policy.”); Garrett v. Trans Union, L.L.C., 2006 WL 18 2850499, *7 (S.D. Ohio 2006) (“Citifinancial argues, and this Court agrees, that Plaintiff’s 19 motion is meritless and should be denied because . . . even if there was a discovery 20 violation, the violation is harmless because Plaintiff always knew that a representative of 21 Citifinancial would testify.”). 22 Plaintiff’s brief also seems to suggest that Defendants’ disclosure efforts in relation 23 to Simon were deficient because she was only disclosed as a fact witness and her 24 declaration “goes beyond summarization and leaks into opinion.” (Doc. 50 at 19.) Any 25 such argument lacks merit. Plaintiff does not identify any specific portions of Simon’s 26 declaration that purportedly qualify as opinions—instead, Plaintiff criticizes Simon’s 27 declaration in its entirety, as well as all 13 attached exhibits. (Cf. Doc. 55 at 4 [“Yet, 28 Plaintiff does not point to a single statement in Ms. Simon’s Declaration that is opinion

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1 rather than fact.”].) Additionally, as discussed in later portions of this order, the relevant 2 portions of the Simon declaration that the Court has considered when resolving the parties’ 3 summary judgment arguments deal with facts, not opinions. 4 Plaintiff also seems to challenge the foundation for Simon’s personal knowledge. 5 (Doc. 50 at 19 [“How does she know? Her testimony is not authenticated by documents 6 or even as hearsay from identifiable employees.”].) But that argument is undermined by 7 Simon’s inclusion of over 100 pages of supporting exhibits (Doc. 49-1 at 14-157), as well 8 as her avowal that she is “familiar with SPS’s loan boarding process, which is the process 9 by which loans are screened before being serviced by SPS” and “SPS’s policies and 10 procedures discussed herein, including but not limited to the handling of incoming 11 inquiries, mail, and payments by SPS’s various departments” (id. at 3 ¶¶ 4-5). Cf. Fed. R. 12 Evid. 602 (“A witness may testify to a matter only if evidence is introduced sufficient to 13 support a finding that the witness has personal knowledge of the matter. Evidence to prove 14 personal knowledge may consist of the witness’s own testimony.”). 15 In sum, Plaintiff violated Rule 26(a) by disclosing McCaffrey after the relevant 16 disclosure deadlines had expired; Defendants did not violate Rule 26(a) with respect to 17 Simon (and even if they had, any violation was substantially justified and harmless); 18 Plaintiff’s late disclosure of McCaffrey was not substantially justified or harmless; 19 McCaffrey’s declaration will be excluded under Rule 37(c)(1) as a sanction for the 20 disclosure violation; and Simon’s declaration (even though Plaintiff has not formally 21 sought to exclude it as a discovery sanction) is properly before the Court for summary 22 judgment purposes. 23 C. Factual Assertions In Defendants’ Response To Plaintiff’s Motion 24 In their response to Plaintiff’s motion for summary judgment, Defendants 25 “incorporate, as though set forth fully herein, Part II (‘RELEVANT FACTUAL 26 BACKGROUND’) of Defendants’ Motion for Summary Judgment [Dkt. 47] and all 27 exhibits thereto.” (Doc. 52 at 3.) In its reply, Plaintiff objects to this approach because it 28 “is forced to speculate on which facts it is obligated to address by the Reply Brief.” (Doc.

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1 56 at 4.) 2 Plaintiff’s objection is unavailing. “[W]hen parties submit cross-motions for 3 summary judgment, each motion must be considered on its own merits. In fulfilling its 4 duty to review each cross-motion separately, the court must review the evidence submitted 5 in support of each cross-motion.” Fair Hous. Council of Riverside Cty., Inc. v. Riverside 6 Two, 249 F.3d 1132, 1136 (9th Cir. 2001) (cleaned up). Therefore, to the extent Plaintiff 7 is concerned that there is insufficient space in the reply to contest Defendants’ factual 8 assertions, the Court will look to Plaintiff’s response to Defendants’ motion for summary 9 judgment (Doc. 50) and incorporate those objections by reference. Plaintiff seeks no 10 additional relief. 11 D. Plaintiff’s Counsel’s Statement To Defense Counsel 12 In response to Plaintiff’s motion, Defendants included a declaration from their 13 counsel, who avows that, during a call on October 19, 2021, Plaintiff’s counsel said 14 something to the effect of “SPS probably did not understand the nature of the tender from 15 Plaintiff and mistakenly assumed that he represents the borrower, Mr. Schmid.” (Doc. 52 16 at 3; Doc. 52-1 at 2-3 ¶¶ 3-4.) In its reply, Plaintiff objects on what appear to be four 17 grounds: (1) the conversation involved “settlement discussions” and is thus inadmissible 18 under Rule 408; (2) the challenged statement is “hearsay”; (3) Plaintiff’s counsel “had no 19 personal knowledge” as to SPS’s knowledge, and thus lacked foundation to make 20 statements on that topic; and (4) “any words spoken, as hypothetical for settlement 21 purposes, have no probative value.” (Doc. 56 at 4.) Plaintiff’s counsel also submitted a 22 declaration explaining he “engaged in settlement discussions under the hypothetical that 23 [Defense counsel] is right and there was a mistake in the interest of case resolution.” (Doc. 24 56 at 20.) 25 The Court agrees with Plaintiff that the challenged statement is objectionable and 26 not properly before the Court at summary judgment. As an initial matter, Plaintiff has 27 submitted evidence that the challenged statement occurred in the context of settlement 28 negotiations between the parties and Defendants have not submitted any controverting

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1 evidence as to that issue. Perhaps the Court is missing something, but this seems like a 2 rather obvious situation where Rule 408 would apply. See Fed. R. Evid. 408(a)(2) 3 (identifying “a statement made during compromise negotiations about the claim” as one of 4 the categories of evidence that “is not admissible—on behalf of either party—either to 5 prove or disprove the validity . . . of a disputed claim”). Additionally, the challenged 6 statement represents, at most, Plaintiff’s counsel’s equivocal speculation about SPS’s 7 intent and mindset. Defendants make no effort to explain why such a statement would be 8 relevant and admissible, let alone dispositive, at summary judgment. 9 II. Relevant Facts 10 Having resolved the parties’ various evidentiary objections (and excluded certain 11 factual assertions in Plaintiff’s motion, McCaffrey’s declaration, and Plaintiff’s counsel’s 12 statement), the Court now proceeds to compile a summary of the relevant facts, which is 13 taken from the parties’ summary judgment submissions and other documents in the record. 14 The facts are uncontroverted unless otherwise noted. 15 In 2006, non-party Brian Schmid (“Schmid”) bought a home in Maricopa, Arizona, 16 which is located in Pinal County (the “Property”). (Doc. 47-1.) Schmid also executed a 17 note that was secured by a first-position DOT. (Doc. 47-2.) The note was for $160,000. 18 (Id. at 1.) The DOT was recorded in November 2006 in the Pinal County Recorder’s 19 Office. (Doc. 47-4.) The current beneficiary of the DOT, following an assignment, is 20 Deutsche Bank. (Doc. 11 at 37.) 21 In or around August 2012, Schmid abandoned the Property and stopped making 22 mortgage and HOA fee payments. (Doc. 49-1 at 4 ¶ 11.) Neither Defendants nor their 23 predecessor initiated foreclosure proceedings at that time. (Id. at 4 ¶ 14.)5 24 On November 7, 2017, the HOA filed a lawsuit against Schmid in Pinal County 25 5 26 The reason for this is disputed. Plaintiff contends that Defendants were plainly delinquent in enforcing their rights. (See, e.g., Doc. 47 at 8 [asserting Defendants are 27 barred from collecting on the debt because of the statute of limitations].) Defendants contend that “Schmid was serving in active duty on the United States Army and [was] thus 28 subject to the protections of the Servicemembers Civil Relief Act.” (Doc. 49-1 at 4 ¶ 14; id. at 18 [Schmid service record].)

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1 Superior Court for unpaid assessments, fines, fees, and other monies owed to the HOA. 2 Acacia Crossings Homeowners Assn. v. Schmid, No. CV-2017-01-1999 (Pinal Cnty. Super. 3 Ct. Nov. 7, 2017).6 4 On June 8, 2020, the HOA obtained a default judgment against Schmid. (Doc. 48 5 at 24.) 6 On September 23, 2020, the court in the HOA lawsuit ordered that the Property be 7 sold by sheriff’s sale pursuant to the default judgment. (Doc. 48 at 24. See also Acacia 8 Crossings Homeowners Assn. v. Schmid, No. CV-2017-01-1999 (Pinal Cnty. Super. Ct. 9 June 8, 2020).) 10 On December 31, 2020, the Property was sold at a public auction conducted by the 11 Pinal County Sheriff. (Doc. 11 at 44-45, 48.) Plaintiff purchased the Property for 12 $16,655.54. (Id.) 13 After the sale, Steve Villarreal, Plaintiff’s manager, contacted Schmid for additional 14 information related to “the DOT and underlying loan” and learned that SPS “is acting as 15 the loan servicer for the underlying loan secured by the DOT.” (Doc. 48 at 24.) 16 On March 22, 2021, Plaintiff sent a letter to SPS. (Doc. 11 at 55-56.) The caption 17 of this letter included the phrases “NOTICE: DEBT BARRED BY STATUTE OF 18 LIMITATIONS,” “DEMAND: RELEASE DEED OF TRUST,” and “ACCORD AND 19 SATISFACTION.” (Id. at 55.) The letter was sent to SPS at P.O. Box 65277, Salt Lake 20 City, UT 841657 and by email to “crdocs@sls.net.” (Id.) In the body of the letter, Plaintiff 21 wrote the following: 22 Please be advised this firm has been retained to represent the interests of Equity Recovery Specialists, LLC (“ERS”) with respect to its ownership 23 interest in real property located at 44916 W. Gavilan Dr., Maricopa, AZ 85239 (“Property”) and your attempt to collect a debt arising from the above 24 referenced loan number that is secured by a first position deed of trust recorded in the Pinal County Recorder’s on October 3, 2006, at document 25 6 The Court takes judicial notice of the complaint and judgment. Khoja v. Orexigen 26 Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018) (“[A] court may take judicial notice of matters of public record . . . .”). 27 7 Defendants argue and present evidence that this address is “publicly published by 28 SPS as the address to send a ‘Notice of Error or Information Request or Qualified Written Request.’” (Doc. 47 at 6; Doc. 49-1 at 147.)

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1 number 2006-139462 (“Loan”). No one, including your attorneys, employees, agents, successors or assigns is authorized to contact my client 2 directly. All communications must come through this office. 3 The Property used to be owned by Bryan Schmid (“Mr. Schmid”) and is subject to the Acacia Crossing Homeowners Association (“HOA”). Mr. 4 Schmid has not paid on this loan since August 2012 and has not paid the HOA since about then. Mr. Schmid moved out of the Property at about that 5 time and abandoned any interest. No one has lived in the Property since 2012. According to Mr. Schmid, the previous loan servicer was aware that 6 he abandoned the property, thus triggering the lender’s duty to mitigate, which may only be accomplished through debt acceleration and a non- 7 judicial foreclosure or a lawsuit against Mr. Schmid on the debt. Stated another way, a loan servicer cannot sit back and accrue default interest while 8 letting the collateral sit vacant for nearly ten years. If there was not an actual debt acceleration, the duty to mitigate triggered a de facto acceleration. 9 The HOA finally filed suit against Mr. Schmid and obtained a judgment of 10 foreclosure against him on or about June 8, 2020, for seriously delinquent HOA dues, fines and other charges. A sheriff’s sale did take place on or 11 about December 31, 2020 and my client, ERS, was the winning bidder. See Sheriff’s Certificate of Sale on Foreclosure, enclosed herewith. 12 As stated above, there is no excuse for the Property to sit abandoned for 13 nearly 10 years without any payment. SPS and/or its predecessors in interest had a duty to mitigate and the debt was as good as accelerated. Accordingly, 14 any collection on the promissory note or enforcement of the DOT is barred by the six-year statute of limitations. See A.R.S. § 33-816 & A.R.S. 15 § 12-548; see also, Andra R. Miller Designs, LLC v. U.S. Bank, N.A., 418 P.3d 1038, 1040 (Ariz. App. 2018). Even assuming arguendo that the debt 16 was not accelerated, collection efforts on any installment payments over six-years old are barred by the statute of limitations. Based upon a recent 17 payoff, SPS is attempting to collect the full balance. 18 Nonetheless, ERS would prefer to reach an amicable resolution as to all issues arising out of or relating to the Loan as opposed to litigating these 19 contested issues. Enclosed herewith is a check for $10,000 offered in accord and satisfaction for you to release the DOT. See A.R.S. § 47-3311. 20 Depositing the enclosed check will be deemed an acceptance of this offer. ERS takes no position with respect to any issues by and between Mr. Schmid 21 and SPS. 22 Should you reject this offer, please consider this letter as ERS formal debt dispute pursuant to the FDCPA and request for debt verification. Please 23 include the Loan’s full payment history as well as any/all communications sent by SPS (or its predecessor(s) in interest) since January 1, 2009, for debt 24 acceleration evaluation purposes. 25 I look forward to your prompt compliance with the above requests. Please do not hesitate to contact me should you have any questions or wish to discuss. 26 27 (Doc. 11 at 55-56.) Enclosed with the letter was a check made out to SPS in the amount 28 of $10,000, the Sheriff’s Certificate Upon Sale, and a document tiled “Authorization for

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1 Release of Information.” (Id. at 56, 58.) In relevant part, the “Authorization for Release 2 of Information” explains: 3 By signing below, I/we hereby authorize and instruct The Law Office of Kyle A. Kinney, PLLC to contact lienholders, both in writing and by phone. I 4 further authorize the release of information to The Law Office of Kyle A. Kinney, PLLC. I understand statement and/or fax fees may be incurred and 5 authorize and agree to pay for said charges. 6 (Doc. 49-1 at 134.) The “For” line of the check says, “For accord & satisfaction 44916 W. 7 Gavilan Dr. Maricopa 85239 Loan: 0023278708.” (Doc. 11 at 58.) 8 On March 31, 2021, SPS mailed a letter to Schmid informing him that “SPS recently 9 received a check sent to a non-payment address for SPS. This payment has been processed 10 and credited to the account. In order to ensure all future payments are applied as efficiently 11 as possible, please sent all future payments to the payment address below.” (Doc. 49-1 at 12 149.) 13 On April 5, 2021, SPS mailed a letter to Plaintiff’s counsel. (Doc. 49-1 at 151.) In 14 relevant part, the letter explains: “SPS received your recent inquiry(ies) on 03/31/2021. 15 We will review your request(s) and route to the appropriate department for handling. If a 16 response is required, one will be provided to you within 30 days from the date we received 17 your inquiry(ies).” (Id.) The letter indicated that the “Customer Name” was “Bryan 18 Schmid.” (Id.) 19 That same day, SPS sent a separate letter to Plaintiff’s counsel informing him that 20 “Deutsche Bank National Trust Company” is the trustee and owner of the property and that 21 “SPS is the mortgage servicer of the account.” (Doc. 49-1 at 153.) No customer name was 22 listed, only an account number and property address. (Id.) 23 On April 12, 2021, SPS endorsed and deposited the $10,000 check. (Doc. 11 at 60; 24 Doc. 31 at 6 ¶ 48 [“Defendants admit only that SPS endorsed and deposited the check. SPS 25 denies that it did so on April 14, 2021.”].) As discussed in later portions of this order, the 26 parties dispute the legal significance of this act. Citing the terms of the March 2021 letter, 27 Plaintiff asserts that SPS cashed the check as an acceptance of Plaintiff’s DOT-release 28 offer. (Doc. 48 at 14 [“SPS deposited the check for consideration as authorized by the

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1 terms of the March 22, 2021, cover letter , , , without rejection of the terms or counter- 2 offer.”].) Defendants contend, in reliance on Simon’s declaration, that the check was 3 cashed pursuant to “SPS’s routine practices and procedures.” (Doc. 49-1 at 8 ¶ 30.) More 4 specifically, Simon explains that after “the Mail Center separated the $10,000 Check from 5 the March 22, 2021 Letter and imaged the check together with the envelope that contained 6 it,” “the QWR Department immediately re-routed it to Cashiering,” which, in turn, “entered 7 a note into SPS’s account history for the Loan that the customer had sent payment to an 8 incorrect payment address” and then “processed the check . . . as a payment on the Loan 9 pursuant to the terms of the Loan documents and SPS’s routine practices and procedures.” 10 (Id. 7-8 ¶¶ 26-28.) In other words, Defendants contend that, instead of depositing the check 11 as an acceptance of the offer to release the DOT, “SPS applied the proceeds to the Loan 12 account.” (Id. at 8 ¶ 31.) 13 On April 30, 2021, SPS sent another letter to Plaintiff’s counsel. (Doc. 49-1 at 155.) 14 This letter was addressed to “BRYAN SCHMID.” (Id.) In relevant part, SPS explained 15 “you requested all communication be to your office” but informed Plaintiff that “Mr. 16 Schmid is enrolled in paperless statements.” (Id.) Under the heading “Allegations,” the 17 letter stated that SPS “reviewed your claims and find no merit to your allegations. SPS is 18 confident that the servicing of the loan by SPS has been compliant with all applicable state 19 and federal regulations.” (Id. at 156.) Under the heading “Validation of Debt,” the letter 20 stated that SPS “service[s] the account according to the terms of the InterestFirst Note and 21 Deed of Trust.” (Id.) Finally, the letter concluded that “[a]s of this letter, the account is 22 due for June 1, 2013.” (Id.) Two documents were attached to the letter: the “InterestFirst 23 Note and Deed of Trust” and the “SPS Transaction History and the SunTrust Mortgage 24 Customer Account Activity Statement.” (Id.) 25 On July 22, 2021, Plaintiff (through Plaintiff’s counsel) sent another letter to SPS, 26 both via paper mail and email. (Doc. 11 at 62-63.) The caption of this letter included the 27 phrases “NOTICE: DEBT SETTLED VIA ACCORD AND SATISFICTION” and 28 “DEMAND: RELEASE DEED OF TRUST.” (Id. at 62, emphasis omitted.) In the body

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1 of the letter, Plaintiff wrote in relevant part as follows: 2 Please be advised that this firm sent Select Portfolio Servicing, Inc. (“SPS”) a letter dated March 22, 2021, together with a check for $10,000, as accord 3 and satisfaction of the full amount of the seriously stale debt regarding the above referenced loan number (the “Letter”). This firm represents Equity 4 Recovery Specialists, LLC (“ERS”) who is an investor that purchased the subject property at a homeowner’s association sheriff’s foreclosure sale and 5 is now the title holder of the subject property; this firm does not represent the borrower on the above referenced loan account. 6 The [March 2021] Letter could not have been clearer: the Letter tendered an 7 instrument as full satisfaction of the debt pursuant to pursuant to A.R.S. § 47-3311. A copy is enclosed for your ease of reference. SPS deposited the 8 check on April 12, 2021. A.R.S. § 47-3311(c)(2) provided SPS with a 90-day grace period to change its mind and refund the $10,000 to ERS. That period 9 expired on July 12, 2021. No tender was received. As of the date of this letter, ERS has not been given a release of deed of trust nor has one been 10 recorded with the Maricopa County Recorder’s Office. 11 PLEASE BE ADVISED THAT your deposit of ERS’ check constituted an acceptance of full satisfaction of the debt pursuant to A.R.S. § 47-3311; 12 PLEASE BE FURTHER ADVISED THAT pursuant to A.R.S. 13 § 47-3311(C)(2), SPS failed to tender the $10,000 back to ERS thus the deed of trust must be released. 14 PLEASE BE FURTHER ADVISED THAT SPS is now obligated to 15 record a release of the deed of trust recorded in the Pinal County Recorder’s on October 3, 2006, at document number 2006-139462 pertaining to the 16 above referenced loan (the “DOT”). 17 IT IS HEREBY DEMANDED THAT you release the DOT no later than August 25, 2021 or this office will file a lawsuit against you to enforce the 18 accord and satisfaction agreement (i.e., requiring you to release the DOT) and will seek all of ERS’ costs and attorney fees incurred therein. 19 20 (Id. at 62-63.) SPS did not respond to this letter. (See generally Doc. 47.) To date, SPS 21 has not returned the $10,000. (Doc. 31 ¶ 52 [“Defendants admit that SPS did not record a 22 lien release, provide a release to Plaintiff’s counsel, or return the $10,000.00 paid to SPS 23 via the Check prior to the date of the filing of the FAC.”].) 24 On November 17, 2021, Plaintiff “conveyed title by Warranty Deed” to a non-party 25 buyer for $322,000. (Doc. 11 at 51-53.; Doc. 48 at 24.) “In order to facilitate the sale 26 [Plaintiff] gave a guarantee that the lien would be released.” (Doc. 48 at 24.) 27 III. Procedural History 28 On September 27, 2021, Plaintiff initiated this action by filing a complaint in Pinal

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1 County Superior Court. (Doc. 1-3 at 5-12.) Defendants later timely removed the action to 2 this Court. (Doc. 1.) 3 On December 6, 2021, Plaintiff filed the operative FAC. (Doc. 11.) 4 On December 28, 2021, Defendants filed a motion to dismiss. (Doc 15.) 5 On January 11, 2022, Plaintiff filed a response. (Doc. 17.) 6 On January 25, 2022, the parties filed a stipulation of dismissal as to Counts Three 7 and Five of the FAC. (Doc. 21.) 8 That same day, Defendants filed a reply in support of the motion to dismiss. (Doc. 9 23.) 10 On May 6, 2022, the Court granted Defendants’ motion to dismiss in part and denied 11 it in part. (Doc. 28.) The Court granted the parties’ stipulated dismissal of Count Three 12 (accord and satisfaction) and Count Five (equitable indemnification). (Id. at 11-12.) The 13 Court denied the motion to dismiss as to Count One (breach of express contract) and Count 14 Two (breach of implied contract). (Id. at 8-11.) Plaintiff did not dispute the dismissal of 15 Count Four (quasi contract-estoppel). (Id. at 14-15.). The Court authorized Plaintiff to file 16 a second amended complaint to cure the defects in Count Four (id. at 15-16), but Plaintiff 17 subsequently declined to do so. 18 On February 3, 2023, the parties filed cross-motions for summary judgment. (Docs. 19 47, 48.) Those motions are now fully briefed. (Docs. 49-50, 52, 55-56.) 20 On August 1, 2023, the Court issued a tentative order. (Doc. 58.) 21 On August 15, 2023, the Court held oral argument. (Doc. 59.) 22 LEGAL STANDARD 23 “The court shall grant summary judgment if [a] movant shows that there is no 24 genuine dispute as to any material fact and the movant is entitled to judgment as a matter 25 of law.” Fed. R. Civ. P. 56(a). “A fact is ‘material’ only if it might affect the outcome of 26 the case, and a dispute is ‘genuine’ only if a reasonable trier of fact could resolve the issue 27 in the non-movant’s favor.” Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d 28 1119, 1125 (9th Cir. 2014). The court “must view the evidence in the light most favorable

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1 to the nonmoving party and draw all reasonable inference in the nonmoving party’s favor.” 2 Rookaird v. BNSF Railway Co., 908 F.3d 451, 459 (9th Cir. 2018). “Summary judgment 3 is improper where divergent ultimate inferences may reasonably be drawn from the 4 undisputed facts.” Fresno Motors, 771 F.3d at 1125. 5 A party moving for summary judgment “bears the initial responsibility of informing 6 the district court of the basis for its motion, and identifying those portions of ‘the pleadings, 7 depositions, answers to interrogatories, and admissions on file, together with the affidavits, 8 if any,’ which it believes demonstrate the absence of a genuine issue of material fact.” 9 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “In order to carry its burden of 10 production, the moving party must either produce evidence negating an essential element 11 of the nonmoving party’s claim or defense or show that the nonmoving party does not have 12 enough evidence of an essential element to carry its ultimate burden of persuasion at trial.” 13 Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). “If . . . 14 [the] moving party carries its burden of production, the nonmoving party must produce 15 evidence to support its claim or defense.” Id. at 1103. 16 “If the nonmoving party fails to produce enough evidence to create a genuine issue 17 of material fact, the moving party wins the motion for summary judgment.” Id. There is 18 no issue for trial unless enough evidence favors the non-moving party. Anderson v. Liberty 19 Lobby, Inc., 477 U.S. 242, 249 (1986). “If the evidence is merely colorable or is not 20 significantly probative, summary judgment may be granted.” Id. at 249-50. At the same 21 time, the evidence of the non-movant is “to be believed, and all justifiable inferences are 22 to be drawn in his favor.” Id. at 255. “[I]n ruling on a motion for summary judgment, the 23 judge must view the evidence presented through the prism of the substantive evidentiary 24 burden.” Id. at 254. Thus, “the trial judge’s summary judgment inquiry as to whether a 25 genuine issue exists will be whether the evidence presented is such that a jury applying that 26 evidentiary standard could reasonably find for either the plaintiff or the defendant.” Id. at 27 255. 28 As noted, “when parties submit cross-motions for summary judgment, [e]ach

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1 motion must be considered on its own merits,” but the Court must consider all evidence 2 submitted in support of both cross-motions when separately reviewing the merits of each 3 motion. Fair Hous. Council of Riverside Cty., 249 F.3d at 1136 (quotation marks omitted). 4 For “the party with the burden of persuasion at trial”—usually the plaintiff—to succeed in 5 obtaining summary judgment in its favor, it “must establish beyond controversy every 6 essential element” of each claim on which summary judgment is sought. S. Cal. Gas Co. 7 v. City of Santa Ana, 336 F.3d 885, 888 (9th Cir. 2003). The party without the burden of 8 persuasion at trial—usually the defendant—is entitled to summary judgment where it 9 establishes that the party with the burden of persuasion will be unable to prove at least one 10 element of its claim in light of the undisputed facts. Celotex Corp., 477 U.S. at 322-23. 11 This distinction reflects that the burden is ultimately on the proponent of each claim to 12 prove it. Id. (“Rule 56(c) mandates the entry of summary judgment, after adequate time 13 for discovery and upon motion, against a party who fails to make a showing sufficient to 14 establish the existence of an element essential to that party’s case, and on which that party 15 will bear the burden of proof at trial. In such a situation, there can be ‘no genuine issue as 16 to any material fact,’ since a complete failure of proof concerning an essential element of 17 the nonmoving party’s case necessarily renders all other facts immaterial.”). 18 DISCUSSION 19 The only relevant difference between Counts One and Two is that Count One 20 characterizes SPS’s act of cashing the check as “express[]” acceptance of the offer set forth 21 in the March 2021 letter while Count Two characterizes it as “implied[]” acceptance. Thus, 22 with respect to both motions, the Court addresses Counts One and Two together. 23 I. Defendants’ Motion For Summary Judgment 24 A. Accord And Satisfaction 25 1. The Parties’ Arguments 26 Defendants argue they are entitled to summary judgment on Plaintiff’s breach of 27 contract claims for three reasons. (Doc. 47 at 2.) Because the first two reasons are distinct 28 from the third, the Court will group them accordingly. Defendants’ first two arguments

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1 are that (1) “to the extent that Plaintiff’s contract claims derive from an attempted accord 2 and satisfaction” pursuant to A.R.S. § 47-3311, Plaintiff cannot satisfy the required 3 statutory elements; and (2) to the extent Plaintiff is not attempting to assert such a statutory 4 claim, and instead “improperly tried to plead around the required statutory elements for 5 accord and satisfaction by couching the same claim as two separate breach of contract 6 claims,” those claims are preempted by A.R.S. § 47-3311. (Id.) 7 In response, Plaintiff argues that Defendants’ first argument fails because 8 “[Plaintiff] has standing as it owned the secured Property on March 22, 2021 when the 9 offer was made. The DOT, as the enforcement tool, embodies a claim for money conferring 10 standing to Plaintiff as the party against whom a claim is made. [Plaintiff’s] offer clearly 11 stated it was not made to resolve Schmid’s debt. Defendants lack standing to raise A.R.S 12 § 47-3311 as a defense as they are not protected as the debtor under the statute. . . . The 13 value of the lien is not liquid and subject to dispute.” (Doc. 50 at 5-6.) As for Defendants’ 14 second argument, Plaintiff responds that “[n]o cases are offered holding A.R.S. § 47-3311 15 as preemptive” and, at any rate, “Defendants[] waived preemption and all other defenses 16 to the offer when they accepted [Plaintiff’s] performance.” (Id. at 6.) 17 In reply, Defendants argue that “Plaintiff fails to show that it has standing under 18 A.R.S. § 47-3311 or could otherwise meet the elements of the statute” and “fails to show 19 that its offer of an accord and satisfaction was legally valid.” (Doc. 55 at 1.) 20 2. Analysis 21 Defendants’ first argument, which addresses whether Plaintiff could have prevailed 22 on a statutory accord-and-satisfaction claim under A.R.S. § 47-3311, does not provide a 23 basis for granting summary judgment in Defendants’ favor. Although Plaintiff asserted 24 such a claim at the outset of the case, Plaintiff later agreed that this claim could be 25 dismissed. (Doc. 28 at 12 [“Per the parties’ stipulation, Count Three is dismissed with 26 prejudice.”].) Plaintiff has also clarified that its remaining breach-of-contract claims are 27 not accord-and-satisfaction claims under § 47-3311. It is therefore unnecessary—at least 28 for purposes of Defendants’ first argument—to analyze the hypothetical validity of

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1 Plaintiff’s since-dismissed claim (or to address Plaintiff’s argument that Defendants would 2 lack standing to oppose such a hypothetical claim). 3 As for Defendants’ second argument, which is that § 47-3311 preempts Plaintiff’s 4 breach of contract claims, the Court concluded in the tentative ruling issued before oral 5 argument that Defendants were not entitled to relief, even though their preemption theory 6 presented a “closer call,” in light of the Arizona courts’ exacting standards for finding 7 preemption8 and Defendants’ failure, in their motion papers, “to explore the legislative 8 history of § 47-3311 or identify any express evidence of preemptive intent.” (Doc. 58 at 9 25-28.) 10 During oral argument, in an apparent attempt to address this omission, Defendants 11 cited an array of new cases and statutory provisions that they did not cite in their motion 12 papers. On the one hand, this approach is improper and frustrating. Preemption challenges 13 are complicated and ordinarily require much more development than the cursory treatment 14 Defendants provided in their motion papers. Additionally, by citing their best authorities 15 for the first time during oral argument, Defendants deprived Plaintiff (and the Court) of the 16 opportunity to meaningfully respond to those authorities. On the other hand, the question 17 of preemption is ultimately a question of law that Defendants did raise (however cursorily) 18 in their motion papers, and counsel’s description of the newly cited authorities during oral 19 argument suggests that the preemption analysis in the tentative ruling may require further 20 development. 21 Under the circumstances, the Court concludes that the best, most efficient solution 22 is to deny Defendants’ current preemption-based request for summary judgment without 23 8 Hayes v. Continental Ins. Co., 872 P.2d 668, 676-77 (Ariz. 1999) (noting that “even 24 in situations in which the legislature can constitutionally abrogate, preempt, or deny common-law rights, given the importance of those concepts in Arizona history and 25 jurisprudence, we are reluctant to interpret a statute in favor of denial or preemption . . . if there is any reasonable doubt about the legislature’s intent” and that courts “will not find 26 divestiture unless stated clearly, explicitly, and unambiguously” and should “generally decline[] to find preemption of a cause of action in the absence of a very clear statement of 27 legislative intent or, better yet, a clear statement in the statute’s text”). See also Zambrano v. M & RC II, LLC, 517 P.3d 1168, 1173 (Ariz. 2022) (“The freedom to contract has long 28 been considered a ‘paramount public policy’ under our common law that courts do not lightly infringe.”) (citation omitted).

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1 prejudice and authorize Defendants to file a successive summary judgment motion limited 2 to that issue. This will ensure that Plaintiff has a full and fair opportunity to address 3 Defendants’ argument and cited authorities. Hoffman v. Tonnemacher, 593 F.3d 908, 911 4 (9th Cir. 2010) (holding that “district courts have discretion to entertain successive motions 5 for summary judgment” and noting that “allowing a party to file a second motion for 6 summary judgment” can be “logical” and “foster[ ] the ‘just, speedy, and inexpensive’ 7 resolution of suits”) (quoting Fed. R. Civ. P. 1). 8 B. Mutual Assent 9 1. The Parties’ Arguments 10 Defendants’ final summary judgment argument is that “even if Plaintiff’s breach of 11 contract claims were not preempted, the indisputable facts demonstrate there was no 12 manifestation of mutual assent between Plaintiff and Defendants. SPS treated the letter as 13 a dispute and request for debt verification from the borrower, thereby implicitly rejecting 14 Plaintiff’s offer of accord and satisfaction. SPS only deposited the $10,000 check as a 15 matter of course without consideration of the purported offer. Indeed, SPS was unaware 16 of the nature of Plaintiff’s proposal prior to depositing the check and, more importantly, 17 Plaintiff was on notice of that fact such that it could not have reasonably believed its 18 purported offer was accepted. Accordingly, there was no objective manifestation of mutual 19 assent, or actual meeting of the mind.” (Doc. 47 at 2.) In support of this position, 20 Defendants emphasize that “Plaintiff sent the purported offer to an improper address” and 21 that, based on this improper address, “the Mail Center that processed it separated the 22 $10,000 Check from the letter pursuant to SPS procedures, resulting in both the letter and 23 the check being routed separately within SPS.” (Id. at 13-14.) Defendants contend that, 24 because the check and the letter were separated, “SPS understood the check to be a mere 25 loan payment” and processed it as such. (Id. at 14.) Defendants further contend that SPS’s 26 April 30 letter “implicitly rejected any settlement of debt at that time and further put 27 Plaintiff on notice that SPS did not view its indorsement and cashing of the check as 28 creating any sort of agreement between [Plaintiff] and SPS.” (Id. at 15.) Finally,

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1 Defendants argue that “both the April 5, 2021 Acknowledgment Letter and the April 30, 2 2021 Letter put Plaintiff on notice that SPS did not even understand that [Plaintiff’s 3 counsel] represented a third party proposing an accord and satisfaction; rather, those letters 4 put Plaintiff on notice that SPS misapprehended that [Plaintiff’s counsel] represented Mr. 5 Schmid.” (Id.) 6 In response, Plaintiff contends: “A ‘meeting of the minds’ is not a requirement for 7 the formation of an implied contract. Defendants[] manifested assent by their acceptance 8 of performance by [Plaintiff]. Defendants do not offer any authority in support [of] their 9 notion of an ‘implicit rejection.’” (Doc. 50 at 6.) Plaintiff further contends that 10 “Defendants manifested assent either expressly; by the written endorsement on the back of 11 the check, or implicitly; by cashing the check for consideration and failing to reject the 12 offer within ninety days. Defendants’ failure to return the money for almost two years 13 ratified their acceptance of the contract and [Plaintiff’s] performance. Defendants 14 manifested assent to either an express contract, an implied contract, or both.” (Id. at 8.) 15 Plaintiff also contends that “Defendants imply a mistake was made by offering self-serving 16 declaratory testimony from Michelle Simon, their corporate-legal spokesperson. 17 Implication from conclusionary lay assumptions does not measure-up against hard factual 18 evidence.” (Id. at 10.)9 Finally, Plaintiff contends “[e]ven assuming, arguendo, the offer 19 was deficient under A.R.S. § 47-3311, such that the rejection period is stretched beyond 20 ninety-days, Defendants have failed to refund the consideration over these past twenty- 21 three months. Manifestation of assent is the only reasonable conclusion. Defendants offer 22 no alternative explanation for keeping the consideration.” (Id.) 23 In reply, Defendants reiterate that “there was no manifestation of mutual assent 24 necessary to form a contract, express or implied, because, although SPS deposited the 25 $10,000 Check, Plaintiff admittedly did not contemplate that a binding contract would form 26 9 Plaintiff also asserts that Simon’s testimony is deficient in various ways (Doc. 50 at 27 6) and that, based on McCaffrey’s testimony, “Defendants are either lying or incapable of determining what happened to the $10,000.00 consideration” (id. at 12). However, as 28 discussed in earlier portions of this order, the Court does not consider McCaffrey’s testimony for purposes of summary judgment and does consider Simon’s.

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1 under the terms of its offer until Plaintiff retained the proceeds of the Check for a period 2 of 90 days, and during that time Plaintiff was put on notice that SPS did not even understand 3 that an offer had been made.” (Doc. 55 at 11.) Defendants also argue that, “[a]s to 4 Plaintiff’s contention that Defendants failed to return the funds, Plaintiff does not dispute 5 that it never requested a return of the funds. In addition, Plaintiff fails to address the fact 6 that, under Arizona law, there is no manifestation of mutual assent if the party making an 7 offer could not have reasonably believed, from an objective standpoint, that the other 8 party’s conduct manifested assent.” (Id.)10 According to Defendants, Plaintiff could not 9 have “reasonably believed SPS’s acceptance of the Check and failure to return the funds 10 was a manifestation of mutual assent.” (Id.) 11 2. Analysis 12 “[I]n an action based on breach of contract, the plaintiff has the burden of proving 13 the existence of the contract, breach of the contract, and resulting damages.” Chartone, 14 Inc. v. Bernini, 83 P.3d 1103, 1111 (Ariz. Ct. App. 2004). As for the first element, “[f]or 15 an enforceable contract to exist, there must be an offer, an acceptance, consideration, and 16 sufficient specification of terms so that obligations involved can be ascertained.” K-Line 17 Builders, Inc. v. First Fed. Sav. & Loan Ass’n, 677 P.2d 1317, 1320 (Ariz. Ct. App. 1983) 18 (quoting Restatement (Second) of Contracts § 50). 19 “It is well-established that before a binding contract is formed, the parties must 20 mutually assent to all material terms. A distinct intent common to both parties must exist 21 without doubt or difference, and until all understand alike there can be no assent. If one 22 party thinks he is buying one thing and the other party thinks he is selling another thing, 23 no meeting of the minds occurred, and no contract is formed.” Hill-Shafer P’ship v. 24 Chilson Family Trust, 799 P.2d 810, 814 (Ariz. 1990) (citations omitted). Such mutual 25 assent must be “based on objective evidence, not on the hidden intent of the parties.” Id. 26 at 815. 27 28 10 To the extent Defendants challenge the substance of McCaffrey’s testimony (see, e.g., Doc. 55 at 5), those arguments need not be addressed given McCaffrey’s exclusion.

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1 One way of showing a lack of mutual assent is to show that the words of the 2 purported agreement are “uncertain or ambiguous” or have a “dual meaning.” Id. at 815- 3 16 (citations omitted). Additionally, “extrinsic facts could create ‘a latent ambiguity in 4 otherwise clear and intelligible language.’” Id. at 815 (citing Buckmaster v. Dent, 707 P.2d 5 319, 321 (Ariz. Ct. App. 1985)). However, even in the absence of ambiguity or dual 6 meaning, “[a]s long as the misunderstandings of the parties are reasonable under the 7 specific circumstances of the case, a court may properly find a lack of mutual assent.” Id. 8 at 816. See also id. at 815 (noting that the court of appeals “held that [a party] cannot claim 9 . . . that no meeting of the minds existed as to an essential term” when the contractual term 10 itself “contained no ambiguity or ambivalence” before explaining that “[a]lthough the court 11 of appeals’ logic has a certain force to it, we cannot agree with it”). 12 Applying these standards, Defendants have not demonstrated, at least for summary 13 judgment purposes, that the purported contract is void due to a lack of mutual assent. As 14 an initial matter, Defendants’ attack on mutual assent differs from how such attacks are 15 often made. As discussed, a party may seek to demonstrate a lack of mutual assent by 16 showing that the words of the purported contact were “uncertain or ambiguous” or had a 17 “dual meaning.” Hill-Shafer P’ship, 799 P.2d at 814. Such claims usually arise when 18 parties execute a written contract but there is a dispute about the wording or meaning of a 19 particular clause. See, e.g., Buckmaster, 707 P.2d 319 (ordering rescission of contract due 20 to “a latent ambiguity as to the meaning intended by the parties for the phrase ‘an easement 21 for ingress and egress over the Entrance Street,’” which undermined “the required meeting 22 of the minds”). But that is not the case here. The words used by Plaintiff when 23 communicating the offer—“Enclosed herewith is a check for $10,000 offered in accord 24 and satisfaction for you to release the DOT. Depositing the enclosed check will be deemed 25 an acceptance of this offer” (Doc. 11 at 55-56)—were crystal clear.11 26 11 During oral argument, Defendants seemed to argue that the concepts of dual meaning and ambiguity are implicated here because the March 2021 letter constituted an 27 offer to enter into one specific type of agreement—i.e., an accord and satisfaction under § 47-3311—and thus they could not have understood that the act of cashing the check 28 might qualify as assent to the different type of agreement that Plaintiff now contends was formed—i.e., an express or implied contract that, as Plaintiff has now clarified, is not

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1 Accordingly, Defendants’ lack-of-mutual-assent theory here is best characterized as 2 a claim that the parties attached materially different meanings to the act by which 3 Defendants purportedly manifested their asset to Plaintiff’s offer—i.e., SPS’s act of 4 cashing the $10,000 check. The starting point for analyzing this claim is § 19 of the 5 Restatement (Second) of Contracts.12 Section 19, which is entitled “Conduct as 6 Manifestation of Assent,” provides: 7 (1) The manifestation of assent may be made wholly or partly by written 8 or spoken words or by other acts or by failure to act. 9 (2) The conduct of a party is not effective as a manifestation of his assent 10 unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents. 11 (3) The conduct of a party may manifest assent even though he does not 12 in fact assent. In such cases a resulting contract may be voidable 13 because of fraud, duress, mistake, or other invalidating cause.

14 Id. 15 Given these principles, it is clear that SPS’s act of cashing the $10,000 check 16 potentially could qualify as assent to Plaintiff’s offer, even if Defendants did not 17 subjectively intend for it to do so. As noted, § 19(1) clarifies that a manifestation of assent 18 19 governed by § 47-3311. Whatever the potential merit of this argument at trial, the Court declines to address it now because Defendants did not distinctly raise it as one of their 20 grounds for seeking summary judgment. See Fed. R. Civ. P. 56(f) (a district court may grant summary judgment “on grounds not raised by a party” only “[a]fter giving notice and 21 a reasonable time to respond”). To the contrary, the arguments in Defendants’ motion regarding mutual assent hinge on the premises that “SPS only deposited the $10,000 check 22 as a matter of course without consideration of the purported offer” and that Defendants “did not even understand the basic nature of the March 22, 2021 Letter as conveying an 23 offer on behalf of [Plaintiff].” (Doc. 47 at 2, 16-17.) Similarly, although Defendants asserted during oral argument that the contract claims in Counts One and Two fail due to 24 a lack of consideration (because an offer to settle a debt for pennies on the dollar, where there is no bona fide dispute as to the legitimacy of the debt, is illusory), this is another 25 example of an argument that was not properly raised in Defendants’ motion papers. Although Defendants argued in their motion that the $10,000 offer would be insufficient 26 consideration for purposes of a statutory claim under § 47-3311 (Doc. 47 at 9-10), they did not argue that a non-statutory contract claim would fail for the same reason. 27 12 This section has been cited with approval by Arizona courts. See, e.g., Johnson v. 28 Earnhardt’s Gilbert Dodge, Inc., 132 P.3d 825, 828 (Ariz. 2006); Carroll v. Lee, 712 P.2d 923, 926 (Ariz. 1986).

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1 may be made by “acts” and § 19(3) clarifies that “[t]he conduct of a party may manifest 2 assent even though he does not in fact assent.” See also Restatement (Second) of Contracts 3 § 19, cmt. a (“Conduct may often convey as clearly as words a promise or an assent to a 4 proposed promise.”); id., cmt. d (“Actual mental assent is not essential to the formation of 5 an informal contract enforceable as a bargain.”); Walker v. Rogers, 182 S.W.3d 761, 768 6 (Mo. Ct. App. 2006) (“When Gene signed his name above the restrictive indorsement 7 placed on the check by Ben, Gene indicated that he accepted the offer in a manner invited 8 by the offeree, i.e., indorsement of the check.”); Rockwood Mfg. Corp. v. AMP, Inc., 806 9 F.2d 142, 144-45 (7th Cir. 1986) (noting that “courts have held that the act of cashing a 10 check can function as an acceptance of an offer in certain circumstances” and collecting 11 cases).13 12 As for whether SPS’s act of cashing the check was, in fact, an effective 13 manifestation of assent, § 19(2) provides that “[t]he conduct of a party is not effective as a 14 manifestation of his assent unless he intends to engage in the conduct and knows or has 15 reason to know that the other party may infer from his conduct that he assents.” Id. It 16 seems undisputed that the first part of this standard (“intends to engage in the conduct”) is 17 satisfied here. Defendants do not argue that SPS accidentally deposited the check. 18 As for the second part of the § 19(2) standard, which is whether the party disputing 19 the existence of mutual assent “knew or had reason to know that the other party may infer 20 from his conduct that he assents,” the undisputed evidence submitted by Defendants 21 establishes that Defendants did not actually know that Plaintiff would infer, from SPS’s 22 act of cashing the $10,000 check, that Defendants had agreed to accept Plaintiff’s offer. 23 The Simon declaration establishes that the letter was separated from the check upon 24 delivery and that the proceeds were applied to the loan balance pursuant to SPS’s routine 25 check-handling process. There is simply no evidence that anybody at SPS or Deutsche 26 27 13 In a related vein, although the general rule is that “an offeror does not have power to cause the silence of the offeree to operate as acceptance,” this rule is subject to various 28 exceptions. Restatement (Second) of Contracts § 69, cmt. a. One of those exceptions arises “where the offeree silently takes offered benefits.” Id.

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1 Bank actually realized, during the check handling and processing sequence, that Plaintiff 2 would perceive the act of cashing the check as a manifestation of asset to the settlement 3 offer. 4 The true dispute, then, concerns whether Defendants “had reason to know” that 5 Plaintiff would infer assent from the act of cashing the check. Comment b to § 19 explains 6 that “[r]eason to know is to be distinguished from knowledge and from ‘should know.’ 7 Knowledge means conscious belief in the truth of a fact; reason to know need not be 8 conscious. ‘Should know’ imports a duty to others to ascertain facts; the words ‘reason to 9 know’ are used both where the actor has a duty to another and where he would not be acting 10 adequately in the protection of his own interests were he not acting with reference to the 11 facts which he has reason to know.” Comment c to § 19 further explains that “[i]n effect 12 there must be either intentional or negligent creation of an appearance of assent.” 13 On the one hand, Defendants have advanced a variety of reasons why a rational 14 juror could conclude that they lacked any “reason to know” that Plaintiff would infer assent 15 from the act of cashing the check. As noted in the Simon declaration, Plaintiff sent the 16 letter and check to an address that wouldn’t ordinarily be used by SPS to process the sort 17 of settlement offer being presented here; SPS, following its ordinary procedures, separated 18 the check from the letter, such that they were routed to different divisions within SPS that 19 later processed them separately; SPS treated the check as a loan payment once it was 20 processed; and SPS subsequently communicated to Plaintiff, in various ways, its mistaken 21 belief that Plaintiff had tendered the $10,000 check as a loan payment. Indeed, even 22 Plaintiff seems to acknowledge—in the course of objecting to the timing and foundation 23 of the Simon declaration—that “[a] fair reading of her Declaration . . . implies that SPS 24 cashed the check just as part of one big, excusable, misunderstanding.” (Doc. 50 at 19.) 25 Although Plaintiff apparently believes that the existence of a “big, excusable, 26 misunderstanding” is irrelevant to the question of contract formation under Arizona law 27 and § 19 of the Restatement, Plaintiff is wrong for the reasons described above. 28 Additionally, although a lack of mutual assent must be “based on objective evidence, not

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1 on the hidden intent of the parties,” Hill-Shafer P’ship, 799 P.2d at 815, Defendants have 2 come forward with such objective evidence here, in the form of the objective facts (wrong 3 address, separating the check from the letter, applying the proceeds to the loan balance, 4 etc.) described by Simon. See also Muchesko v. Muchesko, 955 P.2d 21, 24 (Ariz. Ct. App. 5 1997) (“Courts may look at . . . the conduct of the parties[] and the surrounding 6 circumstances in deciding whether a contract existed or whether a meeting of the minds 7 occurred.”). 8 On the other hand, in Empire Machinery Co. v. Litton Bus. Tel. Sys., 566 P.2d 1045 9 (Ariz. Ct. App. 1977), the Arizona Court of Appeals addressed a similar question to the 10 one presented here—whether the act of cashing a check and retaining the proceeds could 11 be considered assent to a contract offer—and concluded that the trial court erred in 12 resolving that question in either side’s favor at summary judgment because “in our opinion 13 the cashing of Empire’s down payment check raises an issue of fact as to whether Litton 14 assented to the contract.” Id. at 1050. Similarly, in Oppedahl & Larson v. Network 15 Solutions, Inc., 3 F. Supp. 2d 1147 (D. Colo. 1998), where one of the disputed issues was 16 whether cashing a check constituted acceptance of a contract offer, the district court 17 conducted a comprehensive survey of cases that “both support the cashing or retention as 18 acceptance rule and those that reject it” before concluding that “whether such an act 19 constitutes an acceptance is a question of fact” that could not be resolved at summary 20 judgment. Id. at 1162-64. These outcomes are consistent with the courts’ usual approach 21 of treating disputes over mutual assent as questions of fact to be resolved by the jury. See, 22 e.g., P.E. Sys., LLC v. CPI Corp., 289 P.3d 638, 643 (Wash. 2012) (“Contract formation 23 requires an objective manifestation of mutual assent of both parties. . . . Mutual assent to 24 definite terms is normally a question of fact for the fact finder.”) (citations omitted); Brown 25 v. Stored Value Cards, Inc., 2022 WL 17844168, *1 (9th Cir. 2022) (explaining that, under 26 Oregon law, “[m]utual assent, historically referred to as the meeting of the minds, may be 27 expressed in words or inferred from the actions of the parties” and that “[w]hether a 28 particular statement or act (or failure to act) constitutes a manifestation of intent is a

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1 question of fact”) (cleaned up); M.J. Daly & Sons, Inc. v. City of West Haven, 783 A.2d 2 1138, 1142 (Conn. Ct. App. 2001) (“Without a mutual assent, or a meeting of the minds, 3 there cannot be a valid accord. Whether a meeting of the minds has occurred is a factual 4 determination.”) (citations and internal quotation marks omitted). 5 Given these precedents, the Court is concerned that it would be invading the 6 province of the jury if it were to decide, as a matter of law, that there was no mutual assent. 7 Assessing whether “the misunderstandings of the parties are reasonable under the specific 8 circumstances of the case,” as contemplated by Hill-Shafer Partnership, seems like a 9 quintessential jury question here, where the reasonableness and reason-to-know inquiries 10 will involve an evaluation both of Plaintiff’s tactics (which a rational juror could view as 11 intentionally calculated to generate a misunderstanding) and of Defendants’ conduct in 12 cashing the check without reading the cover letter (which a rational juror could view as 13 negligent) and thereafter retaining the proceeds. Even though the basic facts are largely 14 undisputed, the inferences to be drawn from those facts are hotly—and genuinely— 15 disputed. Defendants are not entitled to summary judgment under these circumstances. 16 Fresno Motors, 771 F.3d at 1125 (“Summary judgment is improper where divergent 17 ultimate inferences may reasonably be drawn from the undisputed facts.”). 18 Finally, to the extent it is also necessary to consider § 20 of the Restatement 19 (Second) of Contracts in resolving the parties’ dispute over § 19(2) and mutual assent,14 20 the provision further supports the conclusion that summary judgment must be denied here. 21 Section 20, which is entitled “Effect of Misunderstanding,” provides: 22 (1) There is no manifestation of mutual assent to an exchange if the 23 parties attach materially different meanings to their manifestations and 24 25 (a) neither party knows or has reason to know the meaning attached by the other; or 26 27 14 Comment a to § 20 explains that “Subsection (1) states the implications of the rule 28 of § 19(2) as to the meaning of ‘manifestation of mutual assent’ in cases of mistake in the expression of assent.”

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1 (b) each party knows or each party has reason to know the meaning 2 attached by the other.

3 (2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if 4 5 (a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first 6 party; or 7 (b) that party has no reason to know of any different meaning 8 attached by the other, and the other has reason to know the meaning attached by the first party. 9 10 Id. 11 Turning to § 20(1), the first part of this test is easily satisfied here—the undisputed 12 evidence establishes that the parties subjectively “attach[ed] materially different meanings 13 to their manifestations,” as Plaintiff thought it had reached a settlement while Defendants 14 merely thought they were processing a mortgage payment. The real dispute, again, is over 15 whether each side had “reason to know” about the other side’s understanding. As to that 16 issue, comment b to § 20 explains that “[t]he meaning given to words or other conduct 17 depends to a varying extent on the context and on the prior experience of the parties. . . . 18 [M]aterial differences of meaning are a standard cause of contract disputes, and the 19 decision of such disputes necessarily requires interpretation of the language and other 20 conduct of the parties in the light of the circumstances.” As with the dispute over “reason 21 to know” for § 19(2) purposes, the Court construes these considerations as raising 22 legitimate factual disputes that cannot be resolved in either side’s favor at summary 23 judgment. Fresno Motors, 771 F.3d at 1125. 24 II. Plaintiff’s Motion For Summary Judgment 25 Broadly, Plaintiff argues it is entitled to summary judgment for three reasons: (1) the 26 parties entered into an express contract by the writing of the March 2021 letter and the 27 written endorsement of the check; (2) the parties entered into an implied contract through 28 the March 2021 letter and the performance of depositing the check and/or retaining the

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1 check proceeds for 23 months; and (3) specific performance of the contract is the required 2 remedy because Plaintiff cannot maintain a quiet title action “as it lacks an interest in the 3 Property.” (Doc. 48 at 11-16.) 4 In response, Defendants reiterate the arguments set forth in their affirmative motion 5 for summary judgment and identify two additional reasons—unilateral mistake and 6 unconscionability—why Plaintiff’s motion should be denied. (Doc. 52 at 5-15.) 7 Defendants also question whether Plaintiff is entitled to specific performance and contend 8 that the only appropriate remedy is recission and return of the $10,000. (Id. at 15-17.) 9 In reply, Plaintiff argues, inter alia, that mutual assent “is not required for an implied 10 contract”; that Defendants’ unilateral-mistake theory impermissibly shifts the risk to 11 Plaintiff; that Defendants have offered no evidence that Plaintiff’s counsel understood the 12 April 5 or April 30 letters as a rejection or that “the address was chosen in bad faith to trick 13 SPS”; and that the sophisticated nature of the parties undermines Defendants’ 14 unconscionability arguments. (See generally Doc. 56.) 15 Plaintiff’s request for summary judgment is denied. Contrary to Plaintiff’s 16 suggestion, a meeting of the minds (i.e., mutual assent) is required for both an express and 17 implied contract. Pyeatte v. Pyeatte, 661 P.2d 196, 202 (Ariz. Ct. App. 1982) (“Contracts 18 consist of an offer, acceptance, consideration, and intent by the parties to be bound by the 19 contract. . . . An implied-in-fact contract is a true contract, differing from an express 20 contract only insofar as it is proved by circumstantial evidence rather than by express 21 written or oral terms.”); id. at 203 (“To support her claim for restitution on the basis of an 22 implied-in-fact contract, appellee must demonstrate the elements of a binding contract.”). 23 And as explained in Part I.B.2 above, the question of mutual assent presents a jury issue in 24 this case. Just as the Court could not resolve this issue in Defendants’ favor in relation to 25 their affirmative summary judgment motion, the Court cannot resolve it in Plaintiff’s favor 26 in relation to Plaintiff’s affirmative motion. This conclusion makes it unnecessary to 27 address Defendants’ other theories for opposing summary judgment on the contract- 28 formation issue. See Restatement (Second) of Contracts § 19, cmt. d (“[T]he fact that

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1 apparent assent is not genuine may have legal significance in rendering the contract 2 voidable or unenforceable for mistake . . . . Where there is no manifestation of mutual 3 assent, on the other hand, the contractual relations of the parties are not affected, and such 4 inquiries are unnecessary.”). Finally, because Plaintiff has not conclusively established the 5 existence of a valid contract, it is unnecessary to address the parties’ arguments regarding 6 the availability of specific performance as a potential remedy for the breach of that contract. 7 See, e.g., Shreeve v. Greer, 173 P.2d 641, 644 (Ariz. 1946) (“Specific performance . . . is 8 available when there exists [among other things] [a] valid binding contract . . . .”); Gable 9 v. Miller, 104 So.2d 358, 360 (Fla. 1958) (“It is fundamental that a prerequisite of a decree 10 for specific performance is the existence of a valid contract.”) (citation omitted). 11 III. Attorneys’ Fees 12 Defendants request an award of attorneys’ fees and costs. (Doc. 47 at 17.) This 13 request is governed by A.R.S. § 12-341.01, which provides that “[i]n any contested action 14 arising out of a contract, express or implied, the court may award the successful party 15 reasonable attorney fees.” Here, because there is not yet any successful party, Defendants’ 16 request is premature. 17 Accordingly, 18 IT IS ORDERED that Defendants’ motion for summary judgment (Doc. 47) and 19 Plaintiff’s motion for summary judgment (Doc. 48) are denied. 20 IT IS FURTHER ORDERED that Defendants may, within 30 days of the issuance 21 of this order, file a successive summary judgment motion limited to the issue of 22 preemption. 23 Dated this 16th day of August, 2023. 24 25 26 27 28

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