1 2 UNITED STATES DISTRICT COURT 3 DISTRICT OF NEVADA 4 * * * 5 Federal Housing Finance Agency; et al., Case No. 2:16-cv-02242-JAD-BNW 6 Plaintiffs, ORDER 7 v. 8 Saticoy Bay, LLC, 9 Defendant. 10 11 Plaintiffs are the Federal Housing Finance Agency (“FFHA”), Federal National Mortgage 12 Association, and Federal Home Loan Mortgage Corporation. ECF No. 1. Before the Court is their 13 motion to amend the complaint to add certain series LLCs as defendants. ECF Nos. 75, 76. 14 Defendant responded at ECF No. 102. Plaintiffs replied at ECF No. 103. The Court resolves the 15 matter on the briefings, as it finds that oral argument is not necessary. For the reasons discussed 16 below, the Court grants Plaintiffs’ motion. 17 I. BACKGROUND 18 This is one of the many cases before our courts in which the Plaintiffs seek to quiet title 19 and a declaration that the foreclosure sale by a homeowners’ association did not extinguish their 20 liens. See ECF No. 1 at 2. Plaintiffs filed their initial complaint in 2016 to confirm the validity of 21 deeds of trusts for over 30 properties against Defendant Saticoy Bay, LLC. See ECF No. 76 at 1. 22 Defendant is a master company comprised of smaller companies, called series LLCs, that operate 23 under its umbrella. Id. Each property at issue, apart from one, is owned by a series LLC. See ECF 24 No. 102 at 3. In their initial complaint, Plaintiffs only named Saticoy Bay, LLC as a defendant. 25 ECF No. 1. 26 Throughout this case, the parties have disputed whether Plaintiffs were required to name 27 the series LLCs as defendants. See, e.g., ECF No. 66. In granting Plaintiffs’ summary judgment 1 individually sue the series LLCs. See id. (citing Nev. Rev. Stat. § 86.296(2)). Defendant appealed 2 the decision to the Ninth Circuit, and it certified the question to the Nevada Supreme Court. ECF 3 Nos. 67, 68. The Nevada Supreme Court held that “a series LLC created pursuant to NRS 86.296 4 must be sued in its own name . . . provided the series LLC has observed the corporate formalities 5 provided for in NRS 86.296(3).” Fed. Hous. Fin. Agency v. Saticoy Bay LLC, 139 Nev. Adv. Op. 6 15, 531 P.3d 1232, 1233 (2023). Consequently, the Ninth Circuit remanded the case to this Court 7 for further findings. See ECF No. 71. The Court held a status conference to discuss the Ninth 8 Circuit and Nevada Supreme Court rulings, and instructed Plaintiffs to move to amend their 9 complaint to add the relevant series LLCs as defendants. ECF No. 74. 10 Plaintiffs contend that the Court should grant leave to amend because their claims are not 11 futile, substantially prejudicial, or unduly delayed (and that, in any event, they have demonstrated 12 good cause and excusable neglect). ECF No. 76 at 6–18; ECF No. 103 at 2–3. Defendant disputes 13 each of Plaintiffs’ arguments. ECF No. 102 at 8–11. The Court first addresses whether Plaintiffs 14 have established good cause and excusable neglect before considering the parties’ arguments on 15 futility, prejudice, and undue delay. 16 II. DISCUSSION 17 A. Good Cause and Excusable Neglect 18 When a party moves to amend the pleadings after the expiration of the deadline 19 established in the scheduling order, courts review the request through a two-step process. First, 20 courts resolve the motion to amend the scheduling order, which is governed by the “good cause” 21 standard outlined in the Federal Rule of Civil Procedure 16(b). See, e.g., Johnson v. Mammoth 22 Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992). “Rule 16(b)’s ‘good cause’ standard 23 primarily considers the diligence of the party seeking the amendment.” Id. at 609. Courts look to 24 whether the deadline set in the scheduling order “cannot reasonably be met despite the diligence 25 of the party seeking the amendment.” Id. The party seeking amendment bears the burden of 26 establishing diligence. See, e.g., Morgal v. Maricopa County Bd. Of Sup’rs, 284 F.R.D. 452, 460 27 (D. Ariz. 2012). 1 In addition to showing good cause, Plaintiffs must also establish that their failure to act 2 was the result of excusable neglect. See Branch Banking & Trust Co. v. DMSI, LLC, 871 F.3d 3 751, 764–65 (9th Cir. 2017); see also LR 26-3. Courts consider at least four factors in 4 determining whether neglect is excusable: (1) the danger of prejudice to the opposing party; (2) 5 the length of the delay and its potential impact on the proceedings; (3) the reason for the delay; 6 and (4) whether the movant acted in good faith. Branch Banking, 871 F.3d at 765. The 7 determination of whether neglect is excusable is ultimately an equitable one, taking account of all 8 relevant circumstances surrounding the party’s omission. See Pioneer Inv. Servs. Co. v. 9 Brunswick Assoc. Ltd. P’ship, 507 U.S. 380, 395 (1993). This equitable determination is left to 10 the discretion of the district court. See Pincay v. Andrews, 389 F.3d 853, 860 (9th Cir. 2004). 11 Plaintiffs moved to amend on November 17, 2023. ECF No. 75. Though the scheduling 12 order set the deadline to amend the pleadings and add parties for September 24, 2019, Defendant 13 filed an appeal after that deadline. See ECF No. 23 (Scheduling Order); ECF No. 62 (filing the 14 Notice of Appeal on December 17, 2020). The Ninth Circuit’s mandate was filed on August 22, 15 2023, and the district judge held a status conference regarding the judgment less than two months 16 later. See ECF No. 71 (Ninth Circuit Mandate); ECF No. 74 (Minutes of Proceedings regarding 17 Status Conference). At the conference, the district judge directed Plaintiffs to move to amend 18 within 30 days. ECF No. 74. 19 Plaintiffs argue that good cause exists because they could not have complied with the 20 original September 2019 deadline given that the Nevada Supreme Court opinion and subsequent 21 Ninth Circuit mandate were not filed until 2023. ECF No. 76 at 7. They further argue that they 22 were diligent in seeking amendment by following this Court’s instructions to move to amend by 23 November 17, 2023. Id. Defendant contends that Plaintiffs have not shown good cause because 24 Defendant advised them to add the series LLCs before the amendment deadline passed. ECF No. 25 102 at 4. Defendant also contends that Plaintiffs have not shown excusable neglect under the four 26 factors. See id. at 9–10. Plaintiffs reply that they have shown excusable neglect, even though the 27 standard does not apply here. ECF No. 103 at 2. 1 As discussed above, both the good cause and excusable neglect standards must be met. 2 First, the Court finds good cause because Plaintiffs have been diligent in seeking amendment. 3 Until the Nevada Supreme Court ruled on the question, it was unclear whether Plaintiffs needed 4 to sue each series LLC in its individual capacity. After the Nevada Supreme Court and Ninth 5 Circuit rulings were entered, Plaintiffs complied with the district judge’s instructions to move to 6 amend within 30 days. In sum, the Court finds good cause for the delay because Plaintiffs could 7 not have met the 2019 deadline, no matter how diligently they may have acted, given that the 8 appellate court rulings came out years later. See Johnson v.
Free access — add to your briefcase to read the full text and ask questions with AI
1 2 UNITED STATES DISTRICT COURT 3 DISTRICT OF NEVADA 4 * * * 5 Federal Housing Finance Agency; et al., Case No. 2:16-cv-02242-JAD-BNW 6 Plaintiffs, ORDER 7 v. 8 Saticoy Bay, LLC, 9 Defendant. 10 11 Plaintiffs are the Federal Housing Finance Agency (“FFHA”), Federal National Mortgage 12 Association, and Federal Home Loan Mortgage Corporation. ECF No. 1. Before the Court is their 13 motion to amend the complaint to add certain series LLCs as defendants. ECF Nos. 75, 76. 14 Defendant responded at ECF No. 102. Plaintiffs replied at ECF No. 103. The Court resolves the 15 matter on the briefings, as it finds that oral argument is not necessary. For the reasons discussed 16 below, the Court grants Plaintiffs’ motion. 17 I. BACKGROUND 18 This is one of the many cases before our courts in which the Plaintiffs seek to quiet title 19 and a declaration that the foreclosure sale by a homeowners’ association did not extinguish their 20 liens. See ECF No. 1 at 2. Plaintiffs filed their initial complaint in 2016 to confirm the validity of 21 deeds of trusts for over 30 properties against Defendant Saticoy Bay, LLC. See ECF No. 76 at 1. 22 Defendant is a master company comprised of smaller companies, called series LLCs, that operate 23 under its umbrella. Id. Each property at issue, apart from one, is owned by a series LLC. See ECF 24 No. 102 at 3. In their initial complaint, Plaintiffs only named Saticoy Bay, LLC as a defendant. 25 ECF No. 1. 26 Throughout this case, the parties have disputed whether Plaintiffs were required to name 27 the series LLCs as defendants. See, e.g., ECF No. 66. In granting Plaintiffs’ summary judgment 1 individually sue the series LLCs. See id. (citing Nev. Rev. Stat. § 86.296(2)). Defendant appealed 2 the decision to the Ninth Circuit, and it certified the question to the Nevada Supreme Court. ECF 3 Nos. 67, 68. The Nevada Supreme Court held that “a series LLC created pursuant to NRS 86.296 4 must be sued in its own name . . . provided the series LLC has observed the corporate formalities 5 provided for in NRS 86.296(3).” Fed. Hous. Fin. Agency v. Saticoy Bay LLC, 139 Nev. Adv. Op. 6 15, 531 P.3d 1232, 1233 (2023). Consequently, the Ninth Circuit remanded the case to this Court 7 for further findings. See ECF No. 71. The Court held a status conference to discuss the Ninth 8 Circuit and Nevada Supreme Court rulings, and instructed Plaintiffs to move to amend their 9 complaint to add the relevant series LLCs as defendants. ECF No. 74. 10 Plaintiffs contend that the Court should grant leave to amend because their claims are not 11 futile, substantially prejudicial, or unduly delayed (and that, in any event, they have demonstrated 12 good cause and excusable neglect). ECF No. 76 at 6–18; ECF No. 103 at 2–3. Defendant disputes 13 each of Plaintiffs’ arguments. ECF No. 102 at 8–11. The Court first addresses whether Plaintiffs 14 have established good cause and excusable neglect before considering the parties’ arguments on 15 futility, prejudice, and undue delay. 16 II. DISCUSSION 17 A. Good Cause and Excusable Neglect 18 When a party moves to amend the pleadings after the expiration of the deadline 19 established in the scheduling order, courts review the request through a two-step process. First, 20 courts resolve the motion to amend the scheduling order, which is governed by the “good cause” 21 standard outlined in the Federal Rule of Civil Procedure 16(b). See, e.g., Johnson v. Mammoth 22 Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992). “Rule 16(b)’s ‘good cause’ standard 23 primarily considers the diligence of the party seeking the amendment.” Id. at 609. Courts look to 24 whether the deadline set in the scheduling order “cannot reasonably be met despite the diligence 25 of the party seeking the amendment.” Id. The party seeking amendment bears the burden of 26 establishing diligence. See, e.g., Morgal v. Maricopa County Bd. Of Sup’rs, 284 F.R.D. 452, 460 27 (D. Ariz. 2012). 1 In addition to showing good cause, Plaintiffs must also establish that their failure to act 2 was the result of excusable neglect. See Branch Banking & Trust Co. v. DMSI, LLC, 871 F.3d 3 751, 764–65 (9th Cir. 2017); see also LR 26-3. Courts consider at least four factors in 4 determining whether neglect is excusable: (1) the danger of prejudice to the opposing party; (2) 5 the length of the delay and its potential impact on the proceedings; (3) the reason for the delay; 6 and (4) whether the movant acted in good faith. Branch Banking, 871 F.3d at 765. The 7 determination of whether neglect is excusable is ultimately an equitable one, taking account of all 8 relevant circumstances surrounding the party’s omission. See Pioneer Inv. Servs. Co. v. 9 Brunswick Assoc. Ltd. P’ship, 507 U.S. 380, 395 (1993). This equitable determination is left to 10 the discretion of the district court. See Pincay v. Andrews, 389 F.3d 853, 860 (9th Cir. 2004). 11 Plaintiffs moved to amend on November 17, 2023. ECF No. 75. Though the scheduling 12 order set the deadline to amend the pleadings and add parties for September 24, 2019, Defendant 13 filed an appeal after that deadline. See ECF No. 23 (Scheduling Order); ECF No. 62 (filing the 14 Notice of Appeal on December 17, 2020). The Ninth Circuit’s mandate was filed on August 22, 15 2023, and the district judge held a status conference regarding the judgment less than two months 16 later. See ECF No. 71 (Ninth Circuit Mandate); ECF No. 74 (Minutes of Proceedings regarding 17 Status Conference). At the conference, the district judge directed Plaintiffs to move to amend 18 within 30 days. ECF No. 74. 19 Plaintiffs argue that good cause exists because they could not have complied with the 20 original September 2019 deadline given that the Nevada Supreme Court opinion and subsequent 21 Ninth Circuit mandate were not filed until 2023. ECF No. 76 at 7. They further argue that they 22 were diligent in seeking amendment by following this Court’s instructions to move to amend by 23 November 17, 2023. Id. Defendant contends that Plaintiffs have not shown good cause because 24 Defendant advised them to add the series LLCs before the amendment deadline passed. ECF No. 25 102 at 4. Defendant also contends that Plaintiffs have not shown excusable neglect under the four 26 factors. See id. at 9–10. Plaintiffs reply that they have shown excusable neglect, even though the 27 standard does not apply here. ECF No. 103 at 2. 1 As discussed above, both the good cause and excusable neglect standards must be met. 2 First, the Court finds good cause because Plaintiffs have been diligent in seeking amendment. 3 Until the Nevada Supreme Court ruled on the question, it was unclear whether Plaintiffs needed 4 to sue each series LLC in its individual capacity. After the Nevada Supreme Court and Ninth 5 Circuit rulings were entered, Plaintiffs complied with the district judge’s instructions to move to 6 amend within 30 days. In sum, the Court finds good cause for the delay because Plaintiffs could 7 not have met the 2019 deadline, no matter how diligently they may have acted, given that the 8 appellate court rulings came out years later. See Johnson v. Mammoth Recreations, Inc., 975 F.2d 9 604, 609 (9th Cir. 1992). 10 Second, the Court finds that Plaintiffs’ delay in moving to amend was the result of 11 excusable neglect. Even though the four-year delay (factor two) is long, the reason for this delay 12 (factor three) is excusable because the Plaintiffs did not know that they needed to add the series 13 LLCs as defendants until the Nevada Supreme Court issued its decision in July of 2023. 14 Moreover, the delay does not prejudice Defendant (factor one) because there are no new legal 15 theories or claims, and because Plaintiffs seek to add series LLCs that Defendant expected to be 16 part of the case. See ECF No. 102 at 4 (noting that Defendant repeatedly advised Plaintiffs to 17 name indispensable parties, i.e., the series LLCs). Lastly, the Plaintiffs acted in good faith (factor 18 four) by moving to amend in accordance with the Court’s instruction at the status conference. See 19 ECF No. 74. Accordingly, the Court finds that the reasons for Plaintiffs’ delay in moving to 20 amend satisfy the good cause and excusable neglect standards. 21 B. Rule 15 22 If the movant has established good cause and excusable neglect, courts will then examine 23 whether amendment is proper under Rule 15. Fed. R. Civ. P. 15(a). “The court should freely give 24 leave when justice so requires.” Id. “The court considers five factors [under Rule 15] in assessing 25 the propriety of leave to amend—bad faith, undue delay, prejudice to the opposing party, futility 26 of amendment, and whether the plaintiff has previously amended the complaint.” United States v. 27 Corinthian Colls., 655 F.3d 984, 995 (9th Cir. 2011). “The standard for granting leave to amend 1 should be denied, including the burden of establishing prejudice.” Underwood v. O’Reilly Auto 2 Enterprises, LLC, 342 F.R.D. 338, 343 (D. Nev. 2022) (internal citations omitted). Here, the 3 parties dispute futility, prejudice, and undue delay. 4 i. Futility 5 When examining futility, courts apply an identical legal standard to the one under Federal 6 Rule of Civil Procedure 12(b)(6). See Miller v. Rykoff–Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 7 1988). Under this standard, the Court is “bound to accept” plead facts as true. Ashcroft v. Iqbal, 8 556 U.S. 662, 678 (2009). An amendment is futile only if no set of facts can be proved under the 9 amendment that would constitute a valid claim or defense. Miller, 845 F.2d at 214. “Denial of 10 leave to amend on [futility grounds] is rare. Ordinarily, courts will defer consideration of 11 challenges to the merits of a proposed amended pleading until after leave to amend is granted and 12 the amended pleading is filed.” GMAC Mortgage LLC v. Nevada Association Services, Inc., No. 13 2:13-cv-01157-GMN-NJK, 2018 WL 487101, at *2 (D. Nev. Jan. 5, 2018) (internal citations and 14 quotations omitted). “Deferring ruling on the sufficiency of the allegations is preferred in light of 15 the more liberal standards applicable to motions to amend and the fact that the parties’ arguments 16 are better developed through a motion to dismiss or a motion for summary judgment.” Id. 17 (internal citations omitted). 18 Here, Defendant argues that amendment is futile because the statute of limitations has run. 19 ECF No. 102 at 11. Defendant states that 12 U.S.C. § 4617(b)(12)(A)(i), which provides a six- 20 year statute of limitations, applies here. Id. Citing a Ninth Circuit case, Defendant argues that 21 Plaintiffs’ claims are time barred because a foreclosure sale triggers the statute of limitations to 22 run. Id. (citing M&T Bank v. SFR Invs. Pool 1, LLC, 963 F.3d 854, 857 (9th Cir. 2020). Plaintiffs 23 argue that the Nevada Supreme Court’s decision in U.S. Bank, N.A. v. Thunder Properties, Inc., 24 should control, in which the court held that a HOA’s foreclosure sale alone is not enough to 25 trigger the statute of limitations under Nev. Rev. Stat. § 40.010. 503 P.3d 299, 306 (Nev. 2022); 26 ECF No. 76 at 8. Relying on this case, Plaintiffs contend that the statute of limitations has not 27 started to run because they have not received notice of an affirmative act by the series LLCs to 1 Alternatively, Plaintiffs argue that even if the statute of limitations has run, they should 2 still be able to bring their claims against the series LLCs because these claims “relate[] back,” 3 under Rule 15(c). Id. at 10. Defendant argues that the proposed amendments do not relate back 4 because the series LLCs did not have notice of the claims and did not know, nor should have 5 known, that this action would be brought against them. ECF No. 102 at 12. Plaintiffs disagree. 6 ECF No. 76 at 9–15. 7 Here, considering that the Court is “bound to accept” Plaintiffs’ plead facts as true, it is 8 not clear that Plaintiffs would not be able to plead valid claims. Moreover, Plaintiffs’ and 9 Defendant’s arguments regarding the statute of limitations and Rule 15(c) issues would be better 10 developed through a motion to dismiss or motion for summary judgment. Therefore, the Court 11 finds that Plaintiffs’ proposed amendments are not futile. 12 ii. Prejudice 13 Defendant argues that allowing Plaintiffs to add the series LLCs as defendants will be 14 prejudicial because Defendant will need to continue litigating this case even though the Court has 15 already rendered judgment on the property it owns. ECF No. 102 at 10–11. Plaintiffs argue that 16 Defendant has not met its burden to establish substantial prejudice. ECF No. 103 at 9. Plaintiffs 17 further argue that amendment will not substantially prejudice Defendant because no additional 18 discovery is needed, and they are not introducing new facts or legal theories. Id. 19 Here, Plaintiffs’ proposed amendment seeks the same claims under the same legal 20 theories. Moreover, Defendant’s interests are aligned with those of the proposed defendants, such 21 that it will require little preparation to defend them. See, e.g., Atl. Pier Assocs., LLC v. Boardakan 22 Rest. Partners, LP, No. CIV.A. 08-4564, 2010 WL 3431875, at *5 (E.D. Pa. Aug. 30, 2010) 23 (holding that “adding Taubco as a defendant [] does not present new facts or legal theories which 24 would prejudice the defendants by requiring them to engage in additional discovery and 25 preparation to defend against them.”). Additionally, Defendant likely expected the series LLCs to 26 be part of the case because it repeatedly advised Plaintiffs to name the series LLCs as defendants. 27 See ECF No. 102 at 4. Thus, the Court finds that Defendant has not met its burden to show 1 ili. Undue Delay 2 Defendant argues that the Court should deny leave to amend because Plaintiffs unduly 3 || delayed by moving to amend four years after the 2019 deadline to amend pleadings. /d. at 10. 4 || Plaintiffs counter that they had no reason to name the series LLCs as defendants under the law 5 || until the Nevada Supreme Court opinion came out in July of 2023. ECF No. 103 at 2. When 6 || assessing undue delay under Federal Rule of Civil Procedure 15, courts consider “whether the 7 || moving party knew or should have known the facts and theories raised by the amendment in the 8 || original pleadings.” Jackson v. Bank of Hawaii, 902 F.2d 1385, 1388 (9th Cir. 1990). Here, 9 || Plaintiffs did not know, and had no reason to know, that they were obligated to sue the series 10 || LLCs at the time they filed their original complaint because the Nevada Supreme Court had not 11 || yet ruled on the issue. Thus, the Court does not find that Plaintiffs unduly delayed in seeking 12 || amendment. 13 In sum, the Court holds that Defendant has not met its burden to show why the Court 14 || should deny leave to amend. Following the Court’s instruction, Plaintiffs seek to add the series 15 || LLCs as defendants now because of the recent Nevada Supreme Court decision on the issue. 16 || Given the liberal standards governing leave to amend, the Court grants Plaintiffs’ motion. 17 || I. CONCLUSION 18 IT IS THEREFORE ORDERED that Plaintiffs’ motion to amend (ECF No. 75) is 19 || GRANTED. 20 21 DATED: May 30, 2024 22 23 i pamela nreibern B DA WEKSLER 24 UNITED STATES MAGISTRATE JUDGE 25 26 27 28