Deutsch Bank Nat'l Trust Co. v. Fidelity Nat'l Title Ins. ( 2021 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS OCT 28 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
DEUTSCHE BANK NATIONAL TRUST No. 20-15849
COMPANY, as indenture Trustee for
American Home Mortgage Investment Trust D.C. No. 3:19-cv-468-MMD-WGC
2007-2,
District of Nevada, Reno
Plaintiff-Appellant,
MEMORANDUM*
v.
FIDELITY NATIONAL TITLE
INSURANCE COMPANY; LAWYERS
TITLE INSURANCE CORPORATION,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Nevada
Miranda M. Du, Chief District Judge, Presiding
Submitted October 20, 2021**
San Francisco, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Before: GOULD and WALLACE, Circuit Judges, and VITALIANO,*** District
Judge.
Appellant Deutsche Bank National Trust Company (“Deutsche”) appeals
from the judgment of the district court dismissing, pursuant to Rule 12(b)(6), its
complaint against Fidelity National Title Insurance Company (“Fidelity”) and
Lawyers Title Insurance Corporation (“Lawyers Title”) without leave to amend.
Generally, the denial of leave to amend a complaint is reviewed for an abuse of
discretion, United States v. United Healthcare Ins. Co., 848 F.3d 1161, 1172 (9th
Cir. 2016), but, where a complaint is dismissed with prejudice and leave to amend
is denied as futile, the decision to deny leave is reviewed de novo. See id.In this lawsuit, Deutsche sought to dispute Fidelity’s declination of coverage
under a title insurance policy issued to Deutsche on a property located within the
bounds of a homeowners’ association (“HOA”). After Deutsche’s mortgagors
defaulted on their HOA assessments, the HOA foreclosed on its lien securing the
delinquency and sold the property to a buyer. After the sale, Deutsche filed a
complaint for quiet title against the buyer in Nevada state court, and, in connection
with the quiet title action, requested indemnity or defense from Fidelity pursuant to
the policy’s terms.
***
The Honorable Eric N. Vitaliano, United States District Judge for the
Eastern District of New York, sitting by designation.
2
When Fidelity denied the request, Deutsche sued, seeking damages for
Fidelity’s failure to defend and indemnify it under the title insurance policy,
engendering appellees’ motion to dismiss the complaint. The district court granted
the motion in its entirety, dismissing all of Deutsche’s claims without leave to
amend any of them. In its appellate briefing, Deutsche seeks, in principal part,
leave to amend its claims for breach of contract, breach of the implied covenant of
good faith and fair dealing, and for violation of Nevada Revised Statute 686A.310,
which imposes civil liability on an insurer for a host of “unfair” claims settlement
practices.1
In its papers opposing appellees’ motion to dismiss the complaint, Deutsche,
referencing it for the first time, attached a copy of a Fidelity insurance claims
manual. The manual was probative of a variety of insurance products Fidelity
offered that provide title insurance for property located within a homeowners’
association, which could arguably support Deutsche’s claims. Nonetheless, having
already determined that the title insurance policy was unambiguous and noting that
the proffered manual was extrinsic to the complaint, the district court declined to
consider it in deciding Fidelity and Lawyers Title’s motion to dismiss. Clearly, as
1
Since they are not mentioned in any way in its opening brief, appellant has
surrendered any appeal from the district court’s judgment dismissing its fiduciary
duty claim and all of its claims against Lawyers Title, a company which had
previously fully merged into Fidelity. See Smith v. Marsh, 194 F.3d 1045, 1052
(9th Cir. 1999).
3
evidentiary matter extrinsic to the complaint, the district court was well within its
discretion not to consider the manual in determining appellees’ motion to dismiss.
See Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). Evidentiary
matter extrinsic to a complaint is, however, properly considered in assessing
whether an attempt to amend the dismissed complaint would be clearly futile. See
Nunes v. Ashcroft, 375 F.3d 805, 810 (9th Cir. 2004).
Ordinarily, leave to amend a complaint should be granted with great
liberality. Desertrain v. City of Los Angeles, 754 F.3d 1147, 1154 (9th Cir. 2014).
This is especially so where, as here, the pleader has never been afforded an
opportunity to amend. See Fontana v. Haskin, 262 F.3d 871, 877 n.3 (9th Cir.
2001). Any decision of the district court dismissing a complaint and denying an
opportunity to amend it as futile is subject to review de novo. United States v.
Corinthian Colls., 655 F.3d 984, 995 (9th Cir. 2011).
Conducting such de novo review, there can be no doubt that the manual is
probative on the issue of whether an attempted amendment of Deutsche’s claims
would be, as the test requires, clearly futile. See Sonoma Cty. Ass'n of Retired
Emps. v. Sonoma Cty., 708 F.3d 1109, 1118 (9th Cir. 2013). For example, the
manual could be read to support the amendment of Deutsche’s statutory claim for
unfair claims settlement practices. Similarly, since Nevada law permits courts to
consider the custom and practices of the trade even when construing a contract that
4
is unambiguous in its terms, see Galardi v. Naples Polaris, LLC, 301 P.3d 364,
367 (Nev. 2013), the manual might be read to support amendment of the breach of
contract claim as well.
Accordingly, read with liberality, the contents of the manual sufficiently
establishes that it was error for the district court to conclude that amendment of
Deutsche’s complaint was clearly futile and, therefore, that it was error to refuse
Deutsche the opportunity to attempt amendment of its claims for breach of
contract, breach of the implied covenant of good faith and fair dealing, and for
violation of Nevada’s law barring insurers from unfair claims settlement practices.2
REVERSED IN PART AND REMANDED.
2
Because we hold that the district court abused its discretion in denying Deutsche
leave to amend its claims, we need not directly reach the question of whether the
original complaint sufficiently pleaded claims for relief. See, e.g., U.S. ex rel.
Tamanaha v. Furukawa Am., Inc., 445 F. App'x 992, 994 (9th Cir. 2011).
5