Robinson v. American Home Mortgage Servicing, Inc.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

IN RE: MORTGAGE ELECTRONIC No. 11-17615
REGISTRATION SYSTEMS, INC.,
D.C. No.
2:09-md-02119-
JONATHAN E. ROBINSON; SALLY J. JAT
ROBINSON-BURKE; ROSA A. SILVAS;
JOSEPHA S. LOPEZ; JOSE TRINIDAD
CASAS; MARIA C. CASAS; LYNDON OPINION
B. GRAVES; TYRONE EVENSON;
MICHELLINA EVENSON; BRYAN
GRAY, [for complete list of
plaintiff/appellants, see Notice of
Appeal]; PABLO LEON,
Plaintiffs-Appellants,

v.

AMERICAN HOME MORTGAGE
SERVICING, INC.; AMERICA’S
SERVICING COMPANY; AMERICA’S
WHOLESALE LENDER; AURORA
LOAN SERVICES, LLC; AZTEC
FORECLOSURE CORP.; BAC HOME
LOANS SERVICING LP; BANK OF
AMERICA, NA; BANK OF NEW YORK
MELLON; CALIFORNIA
RECONVEYANCE CO.; CENTRAL
MORTGAGE CO.; COOPER CASTLE
LAW FIRM LLP; CR TITLE SERVICES,
2 IN RE: MERS

INC.; DEUTSCHE BANK; EXECUTIVE
TRUSTEE SERVICES, LLC; FEDERAL
HOME LOAN MORTGAGE
CORPORATION; FEDERAL HOUSING
FINANCE AGENCY; FEDERAL
NATIONAL MORTGAGE
ASSOCIATION; FIDELITY NATIONAL
TITLE INSURANCE CO.; FIRST
AMERICAN LOAN STAR TRUSTEE
SERVICES, LLC; FIRST HORIZON
HOME LOAN CORP.; G.E. MONEY
BANK; GMAC MORTGAGE, LLC;
HOUSEKEY FINANCIAL CORP.; HSBC
MORTGAGE CORPORATION, USA;
HSBC MORTGAGE SERVICES, INC.;
HSBC BANK, U.S.A., N.A.; IB
PROPERTY HOLDINGS; JPMORGAN
CHASE BANK; MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC.; MERSCORP, INC.;
MORTGAGE IT, INC.; MTC
FINANCIAL, INC., DBA Trustee
Corps.; NATIONAL CITY MORTGAGE;
PNC FINANCIAL SERVICES GROUP,
INC.; NATIONAL DEFAULT
SERVICING CORP.; NDEX WEST
LLC; OLD REPUBLIC NATIONAL
TITLE INSURANCE CO.; QUALITY
LOAN SERVICE CORPORATION;
RECONTRUST COMPANY; SAXON
MORTGAGE, INC.; T.D. SERVICE
COMPANY; UTLS DEFAULT
SERVICES, LLC; WELLS FARGO
 IN RE: MERS 3

BANK, NA; WESTERN PROGRESSIVE
TRUSTEE, LLC; CITYMORTGAGE,
INC.; LIME FINANCIAL SERVICES
LIMITED,
Defendants - Appellees.

Appeal from the United States District Court
for the District of Arizona
James A. Teilborg, Senior District Judge, Presiding

Argued and Submitted
November 7, 2013—San Francisco, California

Filed June 12, 2014

Before: A. Wallace Tashima, William A. Fletcher,
and Jacqueline H. Nguyen, Circuit Judges.

Opinion by Judge W. Fletcher
4 IN RE: MERS

SUMMARY*

Multidistrict Litigation / Property Law

Addressing multidistrict litigation raising claims related
to the formation and operation of the MERS System, a private
electronic database that records the ownership of and
servicing rights in home loans, the panel dismissed an appeal
from an order of the Judicial Panel on Multidistrict Litigation
and affirmed in part and reversed in part the Multidistrict
Litigation Court’s dismissal of the plaintiffs’ consolidated
amended complaint.

The panel also ordered stayed a portion of the appeal in
light of a defendant’s bankruptcy proceedings.

The plaintiffs were borrowers who resided in Arizona,
California, Nevada, Oregon, and South Carolina, and whose
notes and deeds of trust were processed through the MERS
System. The defendants were various financial institutions
that had interests in the notes and deeds of trust or had
otherwise been involved in the operation of the MERS
System.

The panel dismissed the plaintiffs’ appeal from the
JPML’s order transferring cases to the MDL Court for
consolidated pretrial litigation on the ground that mandamus
is the exclusive mechanism for reviewing JPML orders.

*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
 IN RE: MERS 5

The panel held that the plaintiffs had waived their
arguments regarding the MDL Court’s orders determining
which claims the JPML had remanded to transferor courts,
and which it had transferred to the MDL Court.

The panel held that the MDL Court did not convert the
defendants’ motion to dismiss into a motion for summary
judgment.

The panel reversed the district court’s dismissal of
Count I, seeking relief based on violations of Arizona’s false
documents statute when the defendants allegedly filed false
notices of trustee sale, notices of substitution of trustee, and
assignments of deed of trust. The plaintiffs alleged that these
documents were notarized in blank and “robosigned” with
forged signatures.

The panel affirmed the dismissal of Count II, alleging that
the defendants had committed, or would commit, the tort of
wrongful foreclosure, in violation of Arizona, California, and
Nevada law, because the MERS System impermissibly
“splits” ownership of the note from ownership of the deed of
trust, thereby making the promissory note unsecured and
unenforceable in any foreclosure proceeding. The panel held
that these claims failed because none of the plaintiffs alleged
lack of default, tender to cure the default, or an excuse from
tendering.

The panel affirmed the dismissal of Count III, alleging
that nonjudicial foreclosures conducted under Nev. Rev. Stat.
§ 107.080 were improper.
6 IN RE: MERS

The panel affirmed the dismissal of Count V, alleging
aiding and abetting wrongful foreclosure under Arizona,
California, and Nevada law.

The panel affirmed the dismissal of Count VI, alleging
aiding and abetting predatory lending under Arizona,
California, and Nevada law, on the basis that claims
concerning loan origination practices had been remanded to
the transferor courts by the JPML.

The panel affirmed the district court’s denial of leave to
amend the complaint.

COUNSEL

Robert Hager and Treva Hearne (argued), Hager & Hearne,
Reno, Nevada; William A. Nebeker, Valerie R. Edwards
(argued), and Lisa Irene Streu, Koeller Nebeker Carlson &
Haluck, LLP, Phoenix, Arizona; and Sheryl Serreze, Reno
Law Group, LLC, Reno, Nevada, for Plaintiffs-Appellants.

Andrew Martin Jacobs, Snell & Wilmer, LLP, Tucson,
Arizona; Andrew R. Louis, Buckley Sandler, LLP,
Washington, D.C.; Cynthia Lynn Alexander and Kelly
Harrison Dove, Snell & Wilmer, LLP, Las Vegas, Nevada;
Patrick G. Byrne, Gregory J. Marshall, Barbara Dawson,
Snell & Wilmer, LLP, Phoeniz, Arizona; Michael R.
Pennington, Bradley Arant Boult Cummings, LLP,
Birmingham, Alabama; Matthew P. Previn, Buckley Sandler
LLP, New York, New York; Henry Faulkner Reichner and Ira
S. Lefton, Reed Smith LLP, Philadelphia, Pennsylvania;
Thomas Hefferon (argued) and Joseph Yenouskas, Goodwin
Proctor LLP, Washington, D.C.; Gary Edward Schnitzer,
 IN RE: MERS 7

Kravitz, Schnitzer, Sloane and Johnson, Las Vegas, Nevada;
Gregory B. Iannelli, Bryan Cave, LLP, Phoenix, Arizona;
Thomas Justin Cunningham, Hugh Balsam, J. Matthew
Goodin, Phillip Russell Perdew, Locke Lord, LLP, Chicago,
Illinois; Justin Donald Balser, Akerman Senterfitt, Denver,
Colorado; Kristin Schuler-Hintz, McCarthy & Holthus, LLP,
Las Vegas, Nevada; Paul M. Levine, Matthew A. Silverman,
McCarthy, Holthus & Levine, LLP, Scottsdale, Arizona;
Robert W. Norman, Houser & Allison, APC, Irvine,
California; Ariel Edward Stern, Akerman, LLP, Las Vegas,
Nevada; Jonathan D. Fink, Wright, Finlay & Zak, Newport
Beach, California; Christopher Jorgensen, Lewis Roca
Rothgerber, LLP, Las Vegas, Nevada; Ann Martha Andrews,
Lewis Roca Rothgerber, LLP, Phoenix, Arizona; Stefan M.
Palys, Stinson Morrison Hecker, LLP, Phoenix, Arizona;
David Ray Hall, Parsons Behle & Latimer, Salt Lake City,
Utah; LeAnn Pedersen Pope, Danielle Jean Szukala, Burke,
Warren, Mackay & Serritella, PC, Chicago, Illinois; Jennifer
Reiter, Maynard Cronin Erickson Curran & Sparks, PLC,
Phoenix, Arizona; Kent F. Larsen, Joseph T. Prete, Smith
Larsen & Wixom, Las Vegas, Nevada; Laurel I. Handley,
Pite Duncan, LLP, San Diego, California; David Winthrop
Cowles, William Morris Fischbach, III, Leonard McDonald,
Jr., Tiffany & Bosco, PA, Phoenix, Arizona; Kevin Hahn,
Malcolm & Cisneros, Irvine, California; Aaron Michael
Waite, The Cooper Castle Law Firm, LLP, Las Vegas,
Nevada; Lucia Nale, Thomas V. Panoff, Mayer Brown, LLP,
Chicago, Illinois; Lauren Elliott Stine, Quarles & Brady,
LLP, Phoenix, Arizona; Karen Ann Braje, Dennis Peter Maio,
Reed Smith, LLP, San Francisco, California; Michael Q.
Eagan, Jr., Elizabeth Allen Frohlich, Morgan Lewis &
Bockius, LLP, San Francisco, California; Lorenzo Emilio
Gasparetti, Reed Smith, LLP, Los Angeles, California; Ira S.
Lefton, Reed Smith, LLP, Philadelphia, Pennsylvania;
8 IN RE: MERS

Gregory Wendell Falls, Sherman & Howard, LLC, Phoenix,
Arizona; Mark S. Landman, Landman Corsi Ballaine & Ford
PC, New York, New York; Howard Lindenberg, Federal
Home Loan Mortgage, McLean, Virginia; Jill L. Nicholson,
Jonathan William Garlough, Joanne Lee, Foley & Lardner,
LLP, Chicago, Illinois; Howard N. Cayne, David Fauvre,
Arnold & Porter, LLP, Washington, D.C.; Steven Edward
Guinn, Laxalt & Normura, Ltd., Reno, Nevada; James R.
Condo, Snell & Wilmer, LLP, Phoenix, Arizona; Christina
Wang (argued), Fidelity National Law Group, Henderson,
Nevada; Neil Ackerman, Neil Ackerman, LLP, Las Vegas,
Nevada; Keith Beauchamp, Roopali H. Desai, Coppersmith
Schermer & Brockelman, PLC, Phoenix, Arizona; Benjamin
B. Klubes, Buckler Sandler, LLP, Washington, D.C.; Robert
Bruce Allensworth, Gregory N. Blase, Brian M. Forbes, K&L
Gates, LLP, Boston, Massachusetts; Rachel E. Donn,
Marilyn Fine, Meier & Fine, LLC, Las Vegas, Nevada; Peter
E. Dunkley, Wolfe & Wyman, LLP, Las Vegas, Nevada;
Gregory L. Wilde, Tiffany & Bosco, PA, Las Vegas, Nevada;
Douglas Erickson, Maynard Cronin Erickson Curran &
Sparks, PLC, Phoenix, Arizona; Robert M. Brochin (argued)
and Benjamin Weinberg, Morgan Lewis & Bockius, LLP,
Miami, Florida; Brian J. Schulman, Laura Sixkiller,
Greenberg Traurig, LLP, Phoenix, Arizona; Richard Joseph
Reynolds (argued), Burke Williams & Sorensen, LLP, Santa
Ana, California; William F. Hyder, William F. Hyder, PC,
Phoenix, Arizona; David H. Pittinsky, Ballard Spahr, LLP,
Philadelphia, Pennsylvania; Abran Vigil, Ballard Spahr, LLP,
Las Vegas, Nevada; Adam Kyle Bult, Brownstein Hyatt
Farber Schreck, LLP, Las Vegas, Nevada; Edward A. Treder,
Barrett Daffin Frappier Treder & Weiss, LLP, Diamond Bar,
California; Ann Martha Andrews, Lewis Roca Rothgerber,
LLP, Phoenix, Arizona; Barbara Dawson, Snell & Wilmer,
LLP, Phoenix, Arizona; Kelly Harrison Dove, Snell &
 IN RE: MERS 9

Wilmer, LLP, Las Vegas, Nevada; Randall W. Edwards,
O’Melveny & Myers, LLP, San Francisco, California;
Elizabeth Lemond McKeen, O’Melveny & Myers, LLP,
Newport Beach, California, for Defendants-Appellees.

OPINION

W. FLETCHER, Circuit Judge:

Mortgage Electronic Registration Systems, Inc.
(“MERS”), a subsidiary of MERSCORP, Inc., operates an
electronic mortgage registration system (“the MERS
System”). MERS is distinct from the MERS System. The
MERS System is a private electronic database that records the
ownership of and servicing rights in home loans. Various
financial institutions are members of the MERS System. We
described the operation of the System in our recent decision
in Cervantes v. Countrywide Home Loans, Inc., 656 F.3d
1034, 1039 (9th Cir. 2011). We have before us an appeal
from an order of the district court dismissing plaintiffs’
claims related to the formation and operation of the MERS
System. We dismiss in part, affirm in part, and reverse in
part.

I. Background

Under the MERS System, the lender owns the home loan
borrower’s (or mortgagor’s) promissory note. MERS, as the
“nominee” of the lender and of any assignee of the lender, is
designated in the deed of trust (or mortgage) as the
“beneficiary” (or mortgagee) under the deed of trust. (For
convenience, we will use the terms “borrower,” “deed of
trust,” and “beneficiary,” rather than “mortgagor,”
10 IN RE: MERS

“mortgage,” and “mortgagee.”) MERS rather than the lender
or lender’s assignee is recorded as the beneficiary under the
deed of trust in the recording system of the county where the
property is located.

Use of the MERS System typically begins when a
borrower from a MERS member signs a promissory note and
a deed of trust. The MERS member takes possession of the
note, and MERS is recorded as the beneficiary under the deed
of trust. The note is almost always assigned to others, often
several times over. If the note is assigned to a MERS
member, MERS remains the beneficiary under the deed of
trust. MERS contends that there is no need to record the
assignment of the note so long as the assignee is a MERS
member. However, when an assignment is made to a
nonmember of MERS, the identity of the assignee is
recorded. About half of the residential mortgages in the
United States are now recorded with MERS named as the
beneficiary under the deed of trust. See Robo-signing, Chain
of Title, Loss Mitigation, and Other Issues in Mortgage
Servicing: Hearing Before the Subcomm. on Hous. and Cmty.
Opportunity of the H. Comm. on Fin. Servs., 111th Cong. 101
(2010) (statement of R.K. Arnold, President and CEO,
MERSCORP, Inc.); see also Jesse Hamilton, U.S. Regulators
Examining Departures at Mortgage Registry, Bloomberg
(Apr. 15, 2014, 9:01 PM), http://www.bloomberg.com/news/
2014-04-16/u-s-regulators-examining-departures-at-mortga
ge-registry.html.

The MERS System has been sharply criticized. See, e.g.,
Tanya Marsh, Foreclosures and the Failure of the American
Land Title Recording System, 111 Colum. L. Rev. Sidebar 19,
23–24 (2011) (noting that MERS has been a “controversial
innovation” and highlighting that the System’s “inherent
 IN RE: MERS 11

opaqueness” may conceal “shoddy recordkeeping practices”);
Christopher L. Peterson, Foreclosure, Subprime Mortgage
Lending, and the Mortgage Electronic Registration System,
78 U. Cin. L. Rev. 1359, 1374, 1407 (2010) (outlining
MERS’s “[q]uestionable” legal foundations and arguing that
“[t]he shift away from recording loans in the name of actual
mortgagees and assignees represents an important policy
change that erodes not only the tax base of local
governments, but also the usefulness of the public land title
information infrastructure”); Christopher L. Peterson, Two
Faces: Demystifying the Mortgage Electronic Registration
System’s Land Title Theory, 53 Wm. & Mary L. Rev. 111,
120, 125–27 (2011) (criticizing the “incoherence of MERS’s
legal position” regarding MERS’s status with respect to
mortgages registered in the MERS System, which is
“exacerbated by a corporate structure that is so unorthodox as
to be considered arguably fraudulent,” and criticizing the
unreliability of the MERS database); David P. Weber, The
Magic of the Mortgage Electronic Registration System: It Is
and It Isn’t, 85 Am. Bankr. L.J. 239, 239–40, 264 (2011)
(describing MERS’s “imperfect implementation and lack of
transparency”); see also Michael Powell & Gretchen
Morgenson, MERS? It May Have Swallowed Your Loan,
N.Y. Times, March 6, 2011, http://www.nytimes.com/2011/
03/06/business/06mers.html (describing the “mounting” legal
challenges facing MERS).

The obvious advantage of the MERS System is that it
allows residential lenders to avoid the bother and expense of
recording every change of ownership of promissory notes.
See, e.g., Phyllis K. Slesinger & Daniel McLaughlin,
Mortgage Electronic Registration System, 31 Idaho L. Rev.
805, 808 (1995); About Us, MERS, http://www.mersinc.org/
about-us/about-us (last visited May 5, 2014) (stating that
12 IN RE: MERS

MERS was “created by the mortgage banking industry to
streamline the mortgage process”). Critics have pointed out,
however, that this advantage accrues almost exclusively to
financial institutions, and that the MERS System has a
number of disadvantages: It has substantially undermined
what had been a comprehensive, stable, and relatively reliable
public system of recording interests in residential real estate.
Ownership of notes for residential loans that are processed
through the MERS System is now recorded in the System’s
electronic database, but that information is not available to
the general public. It is impossible to determine from an
inspection of county records who is the actual owner of any
note secured by a deed of trust for which MERS is named as
the beneficiary. The familiar county-by-county public
recording system has thus been replaced, in significant part,
by a largely invisible and not always reliable system of
voluntary record-keeping by MERS members. See, e.g., Alan
M. White, Losing the Paper – Mortgage Assignments, Note
Transfers, and Consumer Protection, 24 Loy. Consumer L.
Rev. 468, 502–04 (2012). Further, because the identities of
the actual owners of the notes and beneficiaries of the deeds
of trust are not public knowledge, renegotiation of mortgage
loans processed through the MERS System is very difficult,
often impossible. The MERS System has also facilitated the
bundling of promissory notes into investment pools, and the
sale of interests in those pools to downstream investors.
Before the mortgage loan crisis in 2008, the bundling of notes
and sale of interests to investors greatly encouraged the flow
of money into the overheated residential mortgage market.

Some states have enacted legislation to mitigate the
difficulties created by the widespread use of the MERS
System. Many of these statutes seek to increase transparency
in the foreclosure process by requiring that foreclosure
 IN RE: MERS 13

notices provide more information to the homeowner about the
parties involved in the foreclosure proceedings. See
generally John Rao et al., Nat’l Consumer Law Ctr.,
Foreclosures 146–47 & n.349 (3d ed. 2010) (compiling laws
in California, Colorado, Georgia, Maine, Maryland,
Massachusetts, New Jersey, and North Carolina). California,
under whose law a number of claims in this case arise, has
recently enacted the Homeowner Bill of Rights. Among
other things, the new California statute seeks to ensure that
“borrowers who may qualify for a foreclosure alternative are
considered for, and have a meaningful opportunity to obtain,
available loss mitigation options,” including by streamlining
communication between the distressed borrower and
foreclosing party. See Assemb. B. 278, 2011–2012 Leg.,
Reg. Sess. (Cal. 2012); S.B. 900, 2011–2012 Leg., Reg. Sess.
(Cal. 2012).

There has been a wave of litigation in state and federal
courts challenging various aspects of the MERS System.
Almost all of the relevant law is state rather than federal. The
results under state law have been inconsistent. See Weber,
supra, at 246–56 (cataloguing the “schizophrenic position of
state courts” on issues relating to the MERS System). Some
state supreme courts have upheld the MERS System on issues
ranging from foreclosure authority to recording requirements.
See, e.g., Renshaw v. Mortg. Elec. Registration Sys., Inc.,
315 P.3d 844, 846–47 (Idaho 2013) (holding that MERS may
be a beneficiary as nominee for the lender, that assignments
of the deed of trust between MERS members need not be
recorded, that MERS was not liable to the borrower in
negligence, and that the Idaho Consumer Protection Act did
not provide a cause of action to the borrower); Jackson v.
Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487, 501
(Minn. 2009) (holding that Minnesota law does not require
14 IN RE: MERS

recording of assignments of promissory notes among MERS
members); Edelstein v. Bank of N.Y. Mellon, 286 P.3d 249,
252 (Nev. 2012) (stating that, although a split note and deed
are not enforceable, under Nevada law “any split is cured
when the promissory note and the deed of trust are
reunified”); Bucci v. Lehman Bros. Bank, FSB, 68 A.3d 1069,
1081, 1083–89 (R.I. 2013) (holding that MERS had the
contractual authority to invoke the power of sale and the right
to foreclose and that Rhode Island law did not preclude
foreclosure where the noteholder and the mortgagee were not
the same entity).

Other state supreme courts have reached essentially
opposite conclusions. See, e.g., Mortg. Elec. Registration
Sys., Inc. v. Sw. Homes of Ark., 301 S.W.3d 1, 4 (Ark. 2009)
(holding that, because MERS receives no payments on the
debt, it is not the beneficiary, even though it is so designated
in the deed of trust); Landmark Nat’l Bank v. Kesler,
216 P.3d 158, 166–67 (Kan. 2009) (“[I]n the event that a
mortgage loan somehow separates interests of the note and
the deed of trust, with the deed of trust lying with some
independent entity, the mortgage may become
unenforceable.”); Mortg. Elec. Registration Sys., Inc. v.
Saunders, 2 A.3d 289, 297 (Me. 2010) (holding that MERS
lacked standing to foreclose as the lender’s nominee); CPT
Asset Backed Certificates, Series 2004-EC1 v. Cin Kham,
278 P.3d 586, 592–93 (Okla. 2012) (holding that the putative
noteholder lacked standing to foreclose because MERS
lacked authority to assign the note, though it arguably had
authority to assign the mortgage); Brandrup v. ReconTrust
Co., N.A., 303 P.3d 301, 304–05 (Or. 2013) (en banc)
(holding that MERS was not the “beneficiary” of a deed of
trust under the Oregon Trust Deed Act absent conveyance to
MERS of the beneficial right to repayment, and that MERS
 IN RE: MERS 15

could not hold or transfer legal title to the deed as the lender’s
nominee); Bain v. Metro. Mortg. Grp., Inc., 285 P.3d 34
(Wash. 2012) (en banc) (holding that “MERS is an ineligible
‘“beneficiary” within the terms of the Washington Deed of
Trust Act’ if it never held the promissory note or other debt
instrument secured by the deed of trust,” and that
“characterizing MERS as the beneficiary has the capacity to
deceive” and may give rise to an action under the Consumer
Protection Act); see also MERSCORP, Inc. v. Romaine,
861 N.E.2d 81, 88–89 (N.Y. 2006) (Kaye, C.J., dissenting in
part) (identifying concerns with the MERS system and “at
least a disparity between the relevant statute . . . and the
burgeoning modern-day electronic mortgage industry”).

Federal courts, applying state law, have reached similarly
disparate results. Compare, e.g., Montgomery Cnty., Pa. v.
MERSCORP, Inc., 904 F. Supp. 2d 436, 441 (E.D. Pa. 2012)
(applying Pennsylvania law and holding that the County’s
allegations that MERS violated recording statutes by failing
to record assignments stated a claim for relief), In re Thomas,
447 B.R. 402, 412 (Bankr. D. Mass. 2011) (applying
Massachusetts law and holding that “[w]hile the assignment
purports to assign both the mortgage and the note, MERS . . .
was never the holder of the note, and therefore lacked the
right to assign it. . . . MERS is never the owner of the
obligation secured by the mortgage for which it is the
mortgagee of record”), and In re Wilhelm, 407 B.R. 392, 404
(Bankr. D. Idaho 2009) (applying Idaho law and holding that
MERS is not authorized “either expressly or by implication”
to transfer notes as the “nominal beneficiary” of the lender),
with Town of Johnston v. MERSCORP, Inc., 950 F. Supp. 2d
379, 384 (D.R.I. 2013) (holding Rhode Island law does not
require recording of assignments among MERS members);
DeFranceschi v. Wells Fargo Bank, N.A., 837 F. Supp. 2d
16 IN RE: MERS

616, 623 (N.D. Tex. 2011) (granting summary judgment to
defendants on plaintiffs’ claims that assignments by MERS
were invalid and rendered foreclosure defective), and Moore
v. McCalla Raymer, LLC, 916 F. Supp. 2d 1332, 1344–45
(N.D. Ga. 2013) (applying Georgia law and holding that, even
assuming the plaintiff had standing to challenge the
foreclosure on the theory that MERS assignments were
invalid, that theory did not provide a basis for a wrongful
foreclosure claim).

A number of federal lawsuits challenging the formation
and operation of the MERS System were consolidated by the
Judicial Panel on Multidistrict Litigation (“the JPML”) and
transferred in part to a Multidistrict Litigation Court (“the
MDL Court”) in the District of Arizona. The JPML
remanded to the respective transferor courts “claims unrelated
to the formation and/or operation of the MERS system.”
Judge Teilborg of the MDL Court issued a series of orders
determining which claims had been transferred to the MDL
Court, and which had been remanded to the transferor courts.
In an early order on the merits, the MDL Court dismissed
several of the transferred actions. We affirmed that dismissal
in Cervantes. 656 F.3d 1034.

Plaintiffs in the remaining actions before the MDL Court
filed a single Consolidated Amended Complaint (“CAC”).
Plaintiffs are borrowers who reside in Arizona, California,
Nevada, Oregon, and South Carolina, and whose notes and
deeds of trust were processed through the MERS System.
Defendants are various financial institutions who have, or
have had, interests in the notes and deeds of trust, or who
have otherwise been involved in the operation of the MERS
System. The MDL Court dismissed the CAC with prejudice,
and plaintiffs timely appealed.
 IN RE: MERS 17

For the reasons that follow, we dismiss in part, affirm in
part, and reverse in part.

II. Standard of Review

We review orders of the JPML only by writ of
mandamus. 28 U.S.C. § 1407(e); see id. § 1651(a). We
review de novo the district court’s dismissal of a complaint
under Rule 12(b)(6) of the Federal Rules of Civil Procedure.
Lacey v. Maricopa Cnty., 693 F.3d 896, 911 (9th Cir. 2012)
(en banc). The district court’s denial of leave to amend is
reviewed for abuse of discretion. Drew v. Equifax Info.
Servs., LLC, 690 F.3d 1100, 1105 (9th Cir. 2012).

III. Discussion

A. JPML Order

Appellants contend on appeal that the JPML erred in
transferring the cases to the MDL Court for consolidated
pretrial litigation. Mandamus is the exclusive mechanism for
reviewing JPML orders. 28 U.S.C. § 1407(e); see In re
Wilson, 451 F.3d 161, 168 (3d Cir. 2006); In re Food Lion,
Inc., Fair Labor Standards Act “Effective Scheduling” Litig.,
73 F.3d 528, 534 (4th Cir. 1996). Appellants have not sought
a writ of mandamus, and we dismiss for lack of jurisdiction
their appeal of the JPML Order.

B. MDL Court Remand Orders

Appellants contend that the MDL Court erred in
determining which claims were remanded to the transferor
courts under the JPML Order. They argue that the MDL
Court exceeded its authority in deciding which claims were
18 IN RE: MERS

remanded. They also argue that the MDL Court was
inconsistent in determining which claims were remanded to
the transferor courts under the JPML Order. They made
neither argument to the MDL Court.

Generally, arguments not raised in the district court will
not be considered for the first time on appeal. Exxon
Shipping Co. v. Baker, 554 U.S. 471, 487 (2008); see also
Pinney v. Nokia, Inc., 402 F.3d 430, 452 (4th Cir. 2005)
(holding that plaintiffs had waived the issue of remand by
failing to raise it with the JPML or the district court). We see
no reason to depart from our general practice here. We hold
that appellants have waived their arguments regarding the
MDL Court’s remand orders.

C. Summary Judgment

Appellants contend that the MDL Court improperly
converted defendants’ motion to dismiss for failure to state a
claim into a motion for summary judgment. We disagree.

The Federal Rules provide for sua sponte conversion of a
Rule 12(b)(6) motion to dismiss to a Rule 56 motion for
summary judgment “if . . . matters outside the pleadings are
presented to and not excluded by the court.” Fed. R. Civ. P.
12(d). The district court must notify the parties before taking
such action, in order to provide to the parties a fair
opportunity to present material relevant to summary
judgment. Id.; Garaux v. Pulley, 739 F.2d 437, 438–39 (9th
Cir. 1984).

Nothing in the record suggests that the MDL Court
considered extraneous materials in ruling on defendants’
motion to dismiss under Rule 12(b)(6). The record makes
 IN RE: MERS 19

clear that the MDL Court dismissed the CAC based only on
the deficiencies in the CAC. See Mendiondo v. Centinela
Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008)
(explaining that Rule 12(b)(6) provides for dismissal where
“the complaint lacks a cognizable legal theory or sufficient
facts to support a cognizable legal theory”).

D. Dismissal of the Complaint

The MDL Court dismissed with prejudice all claims in the
CAC. The CAC is long and somewhat diffuse, not always
making clear the state whose law is at issue. Further,
appellants’ brief on appeal does not specify with complete
clarity which claims in the CAC they contend were
improperly dismissed. As best we can determine, appellants
appeal the dismissals of Count I (violation of Ariz. Rev. Stat.
§ 33-420 (false documents)); Count II (wrongful foreclosure
under Arizona, California, and Nevada law); Count III
(violation of Nev. Rev. Stat. § 107.080 (nonjudicial
foreclosure)); Count V (aiding and abetting wrongful
foreclosure under Arizona, California, and Nevada law); and
Count VI (aiding and abetting predatory lending under
Arizona, California, and Nevada law). Some of these claims
were brought against fewer than all of the defendants. Claims
brought under Oregon law were withdrawn in the MDL
Court, and claims brought under South Carolina law were not
raised in appellants’ opening brief. The appeal from the
dismissal of claims brought against defendant-appellee Cal-
Western Reconveyance Corporation has been automatically
stayed, under a separate order, because of the pendency of
Cal-Western’s bankruptcy proceeding.
20 IN RE: MERS

1. Count I: Ariz. Rev. Stat. § 33-420

The CAC seeks damages and declaratory relief based on
alleged violations of Arizona’s false documents statute, Ariz.
Rev. Stat. § 33-420. The statute provides in relevant part:

A. A person purporting to claim an interest
in, or a lien or encumbrance against, real
property, who causes a document asserting
such claim to be recorded in the office of the
county recorder, knowing or having reason to
know that the document is forged, groundless,
contains a material misstatement or false
claim or is otherwise invalid is liable to the
owner . . . of the real property for the sum of
not less than five thousand dollars, or for
treble the actual damages caused by the
recording, whichever is greater, and
reasonable attorney fees and costs of the
action.

B. The owner or beneficial title holder of the
real property may bring an action pursuant to
this section . . . as provided for in the rules of
procedure for special actions. This special
action may be brought based on the ground
that the lien is forged, groundless, contains a
material misstatement or false claim or is
otherwise invalid. The owner or beneficial
title holder may bring a separate special action
to clear title to the real property or join such
action with an action for damages as
described in this section. . . .
 IN RE: MERS 21

....

D. A document purporting to create an
interest in, or a lien or encumbrance against,
real property not authorized by statute,
judgment or other specific legal authority is
presumed to be groundless and invalid.

The CAC alleges that defendants filed false notices of trustee
sale, notices of substitution of trustee, and assignments of
deed of trust. The CAC alleges that these documents were
notarized in blank and “robosigned” with forged signatures.
Appellants seek damages and declaratory relief against
clouding of their title based on these allegedly forged
documents.

Writing in 2011, the MDL Court dismissed Count I on
four grounds. None of these grounds provides an appropriate
basis for dismissal. We recognize that at the time of its
decision, the MDL Court had plausible arguments under
Arizona law in support of three of these grounds. But
decisions by Arizona courts after 2011 have made clear that
the MDL Court was incorrect in relying on them.

First, the MDL Court concluded that § 33-420 does not
apply to the specific documents that the CAC alleges to be
false. However, in Stauffer v. U.S. Bank National Ass’n,
308 P.3d 1173, 1175 (Ariz. Ct. App. 2013), the Arizona Court
of Appeals held that a § 33-420(A) damages claim is
available in a case in which plaintiffs alleged as false
documents “a Notice of Trustee Sale, a Notice of Substitution
of Trustee, and an Assignment of a Deed of Trust.” These are
precisely the documents that the CAC alleges to be false.
22 IN RE: MERS

Second, the MDL Court held that appellants’ claims
under § 33-420 are time-barred. However, in Sitton v.
Deutsche Bank National Trust Co., 311 P.3d 237, 241 (Ariz.
Ct. App. 2013), the Arizona Court of Appeals held that
damages claims under § 33-420(A) are subject to a four-year
statute of limitations. The allegedly false documents upon
which the CAC relies date from no earlier than February 15,
2008. Appellants’ complaint was filed within the four-year
statute of limitations for even the earliest purported false
document. The Arizona courts have not made a comparably
definitive pronouncement as to the limitations period for
claims brought under § 33-420(B), whether brought as
separate claims or joined to damages claims. But at least one
case has suggested that a § 33-420(B) claim asserts a
continuous wrong that is not subject to any statute of
limitations as long as the cloud to title remains. State v.
Mabery Ranch, Co., 165 P.3d 211, 227 (Ariz. Ct. App. 2007).

Third, the MDL Court held that appellants lacked
standing to sue under § 33-420 on the ground that, even if the
documents were false, appellants were still obligated to repay
their loans. In the view of the MDL Court, because
appellants were in default they suffered no concrete and
particularized injury. However, on virtually identical
allegations, the Arizona Court of Appeals held to the contrary
in Stauffer. The plaintiffs in Stauffer were defaulting
residential homeowners who brought suit for damages under
§ 33-420(A) and to clear title under § 33-420(B). One of the
grounds on which the documents were alleged to be false was
that “the same person executed the Notice of Trustee Sale and
the Notice of Breach, but because the signatures did not look
the same, the signature of the Notice of Trustee Sale was
possibly forged.” Stauffer, 308 P.3d at 1175 n.2. The trial
court dismissed on the pleadings. The Arizona Court of
 IN RE: MERS 23

Appeals reversed the dismissal under both §§ 33-420(A) and
(B). It wrote:

Appellees argue that the Stauffers do not have
standing because the Recorded Documents
have not caused them any injury, they have
not disputed their own default, and the
Property has not been sold pursuant to the
Recorded Documents. The purpose of A.R.S.
§ 33-420 is to “protect property owners from
actions clouding title to their property.” We
find that the recording of false or fraudulent
documents that assert an interest in a property
may cloud the property’s title; in this case, the
Stauffers, as owners of the Property, have
alleged that they have suffered a distinct and
palpable injury as a result of those clouds on
their Property’s title.

Id. at 1179 (citation omitted).

The Court of Appeals not only held that the Stauffers had
standing based on their “distinct and palpable injury.” It also
held that they had stated claims under §§ 33-420(A) and (B).
The court held that because the “Recorded Documents
assert[ed] an interest in the Property,” the trial court had
improperly dismissed the Stauffers’ damages claim under
§ 33-420(A). Id. at 1178. It then held that because the
Stauffers had properly brought an action for damages under
§ 33-420(A), they could join an action to clear title of the
allegedly false documents under § 33-420(B). The court
wrote:
24 IN RE: MERS

The third sentence in subsection B states that
an owner “may bring a separate special action
to clear title to the real property or join such
action with an action for damages as
described in this section.” A.R.S. § 33-420.B.
Therefore, we find that an action to clear title
of a false or fraudulent document that asserts
an interest in real property may be joined with
an action for damages under § 33-420.A.

Id. We therefore conclude, based on Stauffer, that appellants
have standing to sue.

Fourth, the MDL Court held that appellants had not
pleaded their robosigning claims with sufficient particularity
to satisfy Federal Rule of Civil Procedure 8(a). We disagree.
Section 33-420 characterizes as false, and therefore
actionable, a document that is “forged, groundless, contains
a material misstatement or false claim or is otherwise
invalid.” Ariz. Rev. Stat. §§ 33-420(A), (B) (emphasis
added). The CAC alleges that the documents at issue are
invalid because they are “robosigned (forged).” The CAC
specifically identifies numerous allegedly forged documents.
For example, the CAC alleges that notice of the trustee’s sale
of the property of Thomas and Laurie Bilyea was “notarized
in blank prior to being signed on behalf of Michael A. Bosco,
and the party that is represented to have signed the document,
Michael A. Bosco, did not sign the document, and the party
that did sign the document had no personal knowledge of any
of the facts set forth in the notice.” Further, the CAC alleges
that the document substituting a trustee under the deed of
trust for the property of Nicholas DeBaggis “was notarized in
blank prior to being signed on behalf of U.S. Bank National
Association, and the party that is represented to have signed
 IN RE: MERS 25

the document, Mark S. Bosco, did not sign the document.”
Still further, the CAC also alleges that Jim Montes, who
purportedly signed the substitution of trustee for the property
of Milan Stejic had, on the same day, “signed and recorded,
with differing signatures, numerous Substitutions of Trustee
in the Maricopa County Recorder’s Office . . . . Many of the
signatures appear visibly different than one another.” These
and similar allegations in the CAC “plausibly suggest an
entitlement to relief,” Ashcroft v. Iqbal, 556 U.S. 662, 681
(2009), and provide the defendants fair notice as to the nature
of appellants’ claims against them, Starr v. Baca, 652 F.3d
1202, 1216 (9th Cir. 2011).

We therefore reverse the MDL Court’s dismissal of
Count I.

2. Count II: Wrongful Foreclosure

Appellants contend that defendants have committed, or
will commit, the tort of wrongful foreclosure, in violation of
Arizona, California, and Nevada law. They argue that the
MERS System impermissibly “splits” ownership of the note
from ownership of the deed of trust, thereby making the
promissory note unsecured and unenforceable in any
foreclosure proceeding. The MDL Court concluded that
Arizona, California, and Nevada permit “splitting” the note
from the deed of trust.

The principle that ownership of the note and the deed of
trust must be unified has a long common-law pedigree. For
example, the Supreme Court wrote in Carpenter v. Longan,
83 U.S. 271 (1872), “The note and mortgage are inseparable;
the former as essential, the latter as an incident. An
assignment of the note carries the mortgage with it, while an
26 IN RE: MERS

assignment of the latter alone is a nullity.” Id. at 274.
However, the degree to which this principle has been
preserved in the laws of Arizona, California and Nevada, and
the extent of its application in particular situations, is not
entirely clear. We need not address appellants’ argument
about “splitting” the note from the deed of trust in order to
decide their claims of tortious wrongful foreclosure. The
claims fail for another reason: None of the appellants has
alleged lack of default, tender to cure the default, or an
excuse from tendering.

Arizona, though a nonjudicial foreclosure state, has not
expressly recognized the tort of wrongful foreclosure. See
Herring v. Countrywide Home Loans, Inc., No. CV-06-2622-
PHX-PGR, 2007 WL 2051394, at *5 (D. Ariz. July 13, 2007)
(noting that Arizona has neither affirmatively recognized nor
denied the existence of a cause of action for wrongful
foreclosure). But even if we were to assume that the tort of
wrongful foreclosure exists in Arizona, one of its elements
would very likely be lack of default or tender to cure the
default, as is required under California and Nevada law, or an
excuse from the tender requirement, as recognized by
California. Cf. Ariz. Rev. Stat. § 33-807(A) (providing for a
power of sale only after a breach or default in performance of
the contract or contracts).

California law requires that, in order to bring a valid
claim for tortious wrongful foreclosure, the plaintiff must
allege that

(1) the trustee or mortgagee caused an illegal,
fraudulent, or willfully oppressive sale of real
property pursuant to a power of sale in a
mortgage or deed of trust; (2) the party
 IN RE: MERS 27

attacking the sale (usually but not always the
trustor or mortgagor) was prejudiced or
harmed; and (3) in cases where the trustor or
mortgagor challenges the sale, the trustor or
mortgagor tendered the amount of the secured
indebtedness or was excused from tendering.

Lona v. Citibank, N.A., 134 Cal. Rptr. 3d 622, 633 (Cal. Ct.
App. 2011) (collecting cases) (emphasis added). Excuses
from California’s tender requirement are the following:

(1) the underlying debt is void, (2) the
foreclosure sale or trustee’s deed is void on its
face, (3) a counterclaim offsets the amount
due, (4) specific circumstances make it
inequitable to enforce the debt against the
party challenging the sale, or (5) the
foreclosure sale has not yet occurred.

Chavez v. Indymac Mortg. Servs., 162 Cal. Rptr. 3d 382, 390
(Cal. Ct. App. 2013).

Nevada law requires that a trustor or mortgagor show a
lack of default in order to proceed with a wrongful
foreclosure claim. The Nevada Supreme Court stated in
Collins v. Union Federal Savings & Loan Ass’n, 662 P.2d
610 (Nev. 1983):

An action for the tort of wrongful foreclosure
will lie if the trustor or mortgagor can
establish that at the time the power of sale was
exercised or the foreclosure occurred, no
breach of condition or failure of performance
existed on the mortgagor’s or trustor’s part
28 IN RE: MERS

which would have authorized the foreclosure
or exercise of the power of sale. Therefore,
the material issue of fact in a wrongful
foreclosure claim is whether the trustor was in
default when the power of sale was exercised.

Id. at 304 (citations omitted).

Because none of the appellants has shown a lack of
default, tender, or an excuse from the tender requirement,
appellants’ wrongful foreclosure claims cannot succeed. We
therefore affirm the MDL Court’s dismissal of Count II.

3. Count III: Nev. Rev. Stat. § 107.080

Section 107.080 of the Nevada Revised Statutes specifies
procedures that must be followed for nonjudicial foreclosures.
A trustee sale may be set aside for lack of substantial
compliance with any of the requirements of § 107.080. Nev.
Rev. Stat. § 107.080(5)(a). Damages may be awarded if the
foreclosing party has failed to comply with specified waiting
periods or with notice and recording requirements specified
in § 107.080. Id. § 107.080(7).

Appellants contend that the Nevada nonjudicial
foreclosures, conducted under § 107.080, were improper.
The CAC alleges that none of the parties issuing the notice of
default or the notice of the trustee’s sale was “the beneficiary,
the successor in interest to the beneficiary, or the trustee
appointed by the lender.” The basis for their contention is
that, once MERS was designated as the beneficiary under the
deed of trust, the deed of trust and the note were irreparably
split. The CAC states that the “specific facts” for each
Nevada plaintiff are contained in Exhibit 4 to the CAC. The
 IN RE: MERS 29

key language in Exhibit 4, repeated verbatim for each Nevada
plaintiff, is as follows: “Any appointment by MERS of a
successor trustee or any assignment to a successor beneficiary
was invalid, as MERS is not a true beneficiary under the deed
of trust because, as alleged herein, MERS disclaims any right
to any interest in the property of the proceeds of the loan.”

We disagree with appellants’ contention. After the
decision of the MDL Court and just before the completion of
briefing in this appeal, the Nevada Supreme Court decided
Edelstein v. Bank of New York Mellon, 286 P.3d 249 (Nev.
2012). Edelstein makes clear that MERS does have the
authority, for purposes of § 107.080, to make valid
assignments of the deed of trust to a successor beneficiary in
order to reunify the deed of trust and the note. The court
wrote:

Designating MERS as the beneficiary does
. . . effectively “split” the note and the deed of
trust at inception because . . . an entity
separate from the original note holder . . . is
listed as the beneficiary (MERS). . . .
However, this split at the inception of the loan
is not irreparable or fatal. . . . [W]hile
entitlement to enforce both the deed of trust
and the promissory note is required to
foreclose, nothing requires those documents to
be unified from the point of inception of the
loan. . . . MERS, as a valid beneficiary, may
assign its beneficial interest in the deed of
trust to the holder of the note, at which time
the documents are reunified.
30 IN RE: MERS

Id. at 259–60; see also Bergenfield v. Bank of Am., 302 P.3d
1141 (Nev. 2013) (“Nevada law permits the severance and
independent transfer of deeds of trusts and promissory notes
without impairing the right to ultimately foreclose. . . . But in
order to nonjudicially foreclose a deed of trust of an owner-
occupied residence, the party seeking foreclosure must
demonstrate that it is both ‘the current beneficiary of the deed
of trust and the current holder of the promissory note.’
[Edelstein,] 286 P.3d at 255; see NRS 107.080.”).

We therefore affirm the MDL Court’s dismissal of
Count III.

4. Count V: Aiding and Abetting Wrongful Foreclosure
Under Arizona, California, and Nevada Law

The CAC alleges that several defendants aided and
abetted wrongful foreclosure. Aiding-and-abetting liability
depends on the existence of an underlying tort. See, e.g.,
Wells Fargo Bank v. Ariz. Laborers Local No. 395 Pension
Trust Fund, 38 P.3d 12, 23 (Ariz. 2002) (en banc). As
explained above, appellants have not stated a valid wrongful
foreclosure claim under the laws of Arizona, California, or
Nevada. Their claim for aiding and abetting wrongful
foreclosure therefore necessarily fails, and we affirm the
MDL Court’s dismissal of Count V.

5. Count VI: Aiding and Abetting Predatory Lending
Under Arizona, California, and Nevada Law

The CAC alleges that several of the defendants aided and
abetted MERS members in fraudulently inducing appellants
to enter into loan agreements. This allegation concerns loan
origination practices; such claims have been remanded to the
 IN RE: MERS 31

transferor courts by the JPML. The MDL Court properly
held that this count did not relate to the formation and
operation of the MERS System. We therefore affirm its
dismissal of Count VI.

E. Leave to Amend

Appellants contend that they should have been given
leave to amend their complaint. The MDL Court considered
the factors set forth in Foman v. Davis, 371 U.S. 178, 182
(1962), that govern assessments of whether to grant leave to
amend. The MDL Court based its decision largely on the
futility of amendment, along with the fact that appellants had
already had the opportunity to file multiple complaints,
including before the MDL Court, and that additional
amendments would entail some level of prejudice to the
defendants. We conclude that the MDL Court acted within
its discretion in denying leave to amend and therefore affirm.

Conclusion

We dismiss appellants’ challenge to the JPML Order for
lack of jurisdiction. Except for Count I, we affirm the MDL
Court’s dismissal of the CAC. As to Count I, we reverse and
remand for further proceedings consistent with this opinion.
Each side shall bear its own costs on appeal.

DISMISSED in part, AFFIRMED in part,
REVERSED in part, and REMANDED.