Gates v. Kassam

Background

Tyrious Gates, representing himself, brought federal and state claims concerning the refinancing and nonjudicial foreclosure of his property. His second amended complaint alleged, among other things, that defendants misrepresented how refinancing funds would be applied, charged a 9.999% interest rate, falsified an assignment of a deed of trust, and improperly conducted a trustee’s sale.

Gates asserted claims including cancellation of mortgage instruments, quiet title, intentional and negligent misrepresentation, civil extortion, intentional infliction of emotional distress, conspiracy claims, violations of California law, and claims under the Racketeer Influenced and Corrupt Organizations Act. He sought an accounting, declarations, and injunctions.

Wendy Y. Medina filed one motion to dismiss. A group of other defendants—including Athas Capital Group, Inc., RAMA Capital Partners, LLC, The RAMA Fund, LLC, Alim Kassam, Brian O’Shaughnessy, Alex Urmersbach, FCI Lender Services, Inc., California TD Specialists, Timothy Griffith, Michael Griffith, and Jeffrey Griffith—filed another. Peter Bao had not appeared and had not moved for dismissal.

Court’s analysis

The court applied Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not allege enough facts to state a legally recognized and plausible claim. Although courts must read a self-represented litigant’s complaint liberally, the complaint still must provide the required facts and comply with the federal pleading rules.

As to Medina, the court found that the complaint offered only a few allegations: that she received part of a commission on the loan and advised Kassam to sign the assignment fraudulently. The complaint did not adequately explain Medina’s relationship to Kassam, how she allegedly directed the conduct, or how receiving a commission created liability for the alleged refinancing misrepresentation. The court found these allegations too limited to support the claims asserted against her, including fraud-based claims subject to a heightened requirement for particularity.

As to the remaining moving defendants, the court found that several were mentioned only once and that the allegations did not explain who they were, how they related to the dispute, or what misconduct each allegedly committed. The allegations concerning FCI Lender Services likewise did not explain its relevance or wrongdoing sufficiently to support a claim.

The court also addressed the allegations against Athas Capital Group, Inc., RAMA Capital Partners, LLC, The RAMA Fund, LLC, and Kassam. It held that the alleged 9.999% interest rate was not usurious as a matter of law because California law permits a written contract involving a real-property loan to set an interest rate of up to 10 percent, subject to the provision discussed by the court. The court therefore did not need to decide the defendants’ alternative argument that the loan was exempt from usury laws.

The court rejected Gates’s theory that Kassam’s signature on the assignment made the foreclosure unlawful. It explained that Gates was not a party to or beneficiary of the assignment and that the injury he identified—the foreclosure—would have occurred regardless of which entity was named as trustee. The court therefore concluded that Gates could not invalidate the assignment on the alleged misrepresentation about Kassam’s affiliation with the Mortgage Electronic Registration System.

The court did not address every individual cause of action because it found that the underlying acts, as alleged, did not create liability in the manner asserted. It also discussed the tender rule as guidance for any amended complaint. That rule generally requires a plaintiff challenging a completed foreclosure sale to allege an unconditional tender of the secured debt. The court found Gates’s alleged tender conditional and found that the complaint did not plausibly allege that he had the means to satisfy the loan obligations.

Disposition

The court GRANTED both motions to dismiss, Docket Nos. 43 and 47. The dismissal applied to the claims against all moving defendants and was granted with one final opportunity to amend. The court did not conclude that amendment was definitively futile.

Any amended complaint had to be filed within 35 days. It could not name new defendants or add new causes of action, although Gates could narrow the case by removing defendants or causes of action. The court instructed him to identify the specific conduct attributable to each defendant and to provide specific supporting facts for each cause of action.

The court also ordered the defendants who removed the case to obtain consent from defendants who had not joined the notice of removal and file a supporting report by September 4, 2024. Gates was ordered to show cause, in a response due September 11, 2024, why Peter Bao should not be dismissed under Rule 4(m) for lack of service. The order did not dismiss Bao at that time.