finalopeningrecd9thcir

8/9/2019 FinalOpeningRecd9thCir

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UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Salma Merritt & David Merritt 9th Cir. Case No. 09-17678

Appellants Originating Court Case No.C09-01179 JW

vs.

Countrywide Financial Corp. Et Al.,

Appellees.

APPEALANTS INFORMAL BRIEF(attach additional sheets as necessary)

1. Jurisdiction

a. Timeliness of Appeal:

(i) Date of entry of judgment or orderOf originating court: October 28, 2009

(ii) Date of service of any motion made after judgment (other thanFor fees and costs): N/A in this appeal

(iii) Date of entry of order deciding motion: N/A

(iv) Date notice of appeal filed: November 25, 2009

Case: 09-17678 04/15/2010 Page: 1 of 22 ID: 7303902 DktEntry: 4-1


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Cir. Case No. 09-17678 Page 2

2. What are the facts of your case? The Merritts are first time home

buyers. They became victims along with other unsuspecting Americans by

defendants predatory lending practices that deliberately targeted those not versed innewly devised lending instruments. With a particular focus on minorities and other

more vulnerable Americans, chief defendants Mozilo, Sambol and Countrywide

representatives, created, implemented and enforced policies and practices that misled

and ultimately harmed the Merritts (and thousands of others) through false and

misleading publicity, duplicitous assurances, unethical negotiations and concealing

loan documents and critical information from borrowers.

As the misrepresentations, irreparable material lost and detrimental impact, of

defendants business practices became clearer, research was initiated that not only

began to uncover defendants routines and practices to mislead, divest and defraud the

Merritts (and others), but uncovered ties between defendants Mozilo, Sambol, Lewis,

Stumpf, Colyer, Chen, Benson and others. This became clearly evident in 2009 after

loan documents in the possession of the defendants were released. It took three (3)

years of persistent requests before they were made available. Legal authorities and

professional underwriters examined documents and are in agreement that fraud and

lending violations were committed by defendants in the sale and funding of the

Merritts home.

Direct communication with the defendants and their agents took place over

years, and confirmation was given that transmittal of letters, e-mails, faxes and

content of phone conversations to those in responsibility within Countrywide was in

each case affirmed. The history includes, but is not limited to: More than four with

executive staff of Mozilo and Sambol in 2006; over six in 2007; more than ten in

2008; five conversations with executive staff of Lewis in 2008; three times with



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Stumpfs executive staff in 2008; and twelve times with both Stumpf and Lewis in

2009.

In the Second Amended Complaint (SAC), the charges of fraudulent and

predatory lending practices upon the Merritts by the defendants (as briefly noted

above and referenced inAppendix A attached hereto) were delineated and submitted

to the district court in March 2009. It was necessary to file at that time in order to

meet the three year Statute of Limitations. The filing was incomplete due to the

refusal of the defendants to supply the critical information that documented their

fraudulent and predatory practices. The SAC was then voluntarily amended twice to

correct factual errors. The district court did not afford an opportunity to amend inorder to correct what it deemed later to be deficient, although deficiencies would be

due to the Merritts not being trained lawyers and the refusal to permit discovery.

The SAC specific allegations are referenced in the attachedAppendix A for

purposes of this Appeal and are incorporated as if fully set forth as facts herein.

(** Please See Appendix A For SAC Factual Paragraph References**)

3. What did you ask the originating court to do (for example, awarddamages, give Injunctive relief, etc.)? The Merritts asked for jury trial, return of

the approximately $200,000 which they have invested, award TILA & RESPApenalties, punitive damages, injunction and any other relief that would be just andproper.

4. State the claim you raised at the originating court: (1) Truth in Lending

Act; (2) Real Estate Settlement Procedures Act; (3) Intentional Race discrimination;

(4) 15 USC 1125 False Advertising; (5) Illegal Debt Collection; (6) 12 CFR

226.23(a), 6500 FDIC 226.19 &15 USC 1601 violations; (7) Calif. Unfair Bus.



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Prac. And Bus.& Proff. Codes 17200 &17500; (8) Calif. Fraud & Deceit; (9)

Calif. Breach of Contract & Fiduciary duty; (10) Debt-to-Income Ratio; and, (11)

Racketeer Influenced & Corrupt Organization Act.

5(a) What Issues are you raising on appeal?

Issue A: The District Court Erred In Not Equitably Tolling Statute of

Limitations By Ruling On Disputed Material Fact Regarding SAC Allegations That

The Merritts Did Not Receive Key TILA & RESPA Loan Documents.

The District Court Erred by Ignoring Over 20 Allegations Showing

Defendants Policies, Practices and Omissions To Conceal Right To

Rescind, Finance Charges and Other Documents and Information From the

Merritts Which Would Show Fraud Had Been Committed Upon Them

Despite Their Diligence To Uncover Such.

The District Court Erred In Ruling On Issues Of Material Fact Regarding

Whether the Merritts Communiques Are Qualified Written Requests.

Issue B: The District Court Erred When It Judged The Merits Of Allegations

Regarding False/Misleading Advertising Then Limited Its Selection To

Exclude More/Specific Ones, Before Holding Allegations To Be Puffery.

The District Courts Holding of Puffery Is Based on a Very Selective Read-

ing of the Second Amended Complaint (SAC) And Is Inconsistent With

Principles Of What Constitutes False/Misleading Versus True/Correct

Which Should Be Left For Trier Of Facts.



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Issue C: The District Court Erred By Ignoring 99% of SACs Non-Conclusory

Conspiracy And Other Allegations, Pro Se Standards And Did Not Properly Apply

Twombly And Iqbals Standards To RICO Claim Or Race Discrimination

The District Court Erred By Failing To Grant Discovery Requests And

Explain To Pro Se Litigants What It Deemed To Be Conclusory And

Implausible Then Permit The Merritts To Amend For The First Time In

Addressing District Courts Concerns

5(b) What district court did wrong: ARGUMENT, POINTS & AUTHORITIES

A. The District Court Erred In Not Equitably Tolling Statute of Limita-

tions By Ruling On Disputed Material Fact Regarding SAC AllegationsThat The Merritts Did Not Receive Key TILA & RESPA Loan

Documents.

(i) Equitable Tolling

Here, the district court ruled on material issue of fact. The SAC clearly alleges

an intentional lending-fraud schemes perpetrated on targeted members of the

community. Deception, lies and withholding information were common documented

tactics employed. The Merritts were not versed in the internal mechanisms and

exploitative maneuverings of Countrywide, Wells Fargo and Bank of America. At all

times, the defendants had and kept full, absolute control over the only completed loan

documents, and refused to make them available or release them until January 2009,

just prior to the right to rescind three year Statute of Limitations term.

Limitations under TILAs 1640(e) runs from the date of consummation of

the transaction but equitable tolling may suspend the limitations period until

the borrower discovers or had reasonable opportunity to discover the fraud or non-

disclosures that form the basis of the TILA action. Fraudulent concealment and



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equitable tolling are factual determinations. King v. State of California, 784 F.2d 910,

915 (9th

Cir.1986).

Moreover, since the applicability of the equitable tolling doctrine often

depends on matters outside the pleadings, it is not generally amenable to resolution

on a Rule 12(b)(6) motion. Cervantes v. City of San Diego, 5 F.3d 1273, 1276 (9th

Cir.1993). Courts should only dismiss a case on statute of limitations grounds if the

assertions of the complaint, read with the required liberality, would not permit the

plaintiff to prove that the statute was tolled.Jablon v. Dean Witter & Co., 614 F.2d

677, 682 (9th

Cir.1980). For this reason, we have reversed dismissals where the

applicability of the equitable tolling doctrine depended upon factual questions not

clearly resolved in the pleadings. Supermail Cargo, Inc. v. U.S., 68 F.3d 1204,

1206-07 (9th

Cir.1995).

Among the circumstances to which courts may look in determining the

applicability of equitable tolling is whether the complainant has been induced or

tricked by his adversarys misconduct into allowing the filing deadline to pass.Id. at

1207, citingIrwan, 498 US at 96. Statute of limitations should be tolled despite all

due diligence, a plaintiff is unable to obtain vital information bearing on the existence

of the claims.Id. at 1207.

The SAC alleges the Merritts, not trained in law or lending industry, struggled

to get information from sophisticated lending experts. They contacted top officials of

Countrywide (CHL), Bank of America (BOA) and Wells Fargo (WF) defendants

Mozilo, Sambol, Lewis and Stumpf once it was clear within a year that defendant

Colyer was not fulfilling his promises to place them in low-interest 30-year fixed

mortgage. Although they did not entitle their communiqus as Qualified Written

Request for Documents, the contents of requests gave notice to each of these



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defendants, including Colyer, in 2006, 2007 and 2008, that the Merritts had not

received their filled-in documents.

Being that the Merritts were not issued documents until 2009, this raised an

issue of material fact for jury as to whether defendants deliberately concealed

information from them, which in any event would still toll limitations until 2009. The

SAC makes this adequately clear; however, if the district court was unclear about this

it should have asked the Meritts questions at the hearing to understand it better. No

questions were asked.

These defendants were telling the Merritts, or having their staff tell them, we

are looking into it, its being sent to proper personnel, well be in touch, what

would you like to know? and would either provide vague, confusing, false or no

information about their loans. Defendants Colyer, Mozilo and Sambol directly and

through their offices tricked the Merritts into believing that refinancing into 3%

interest; 30-year fix loan was being worked on SAC 153. They gained the Merritts

direct trust through phone conversations, e-mails and face-to-face talks; and implicit

trust by TV, Mailings, Internet, Radio and Marketing phone calls, but neverprovided

disclosures to them until 2009. Once the documents was obtained the Merritts took

them to lawyers, underwriters and others who evaluated them independently from

each other and reported numerous TILA, RESPA, Fraud and other state and federal

violations, some of which is filed in Plaintiffs Request for Judicial Notice in

opposition to Motion to Dismiss.

This Court mandates that even if there be no special circumstances or efforts

on the part of the party committing the fraud to conceal it from plaintiffs, equitable

tolling still must be applied.In re United Ins. Management, Inc., supra, at 1385.



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The decision to not afford the mandated 3-year time limit for rescinding,

tolling the 1-year TILA and RESPA statutes, was based on extrinsic documents that

defendants presented viaJudicial Notice. This raised another factual, not legal,

dispute. Specifically, the SAC alleges that the Merritts were left only with blank loan

documents; and, no documents on some information, pursuant to policy 51, 142,

146, 303, 327. The defendants do not deny this, but only countered by presenting the

very documents which were not disclosed until 2009, and which were not leftwith

the Merritts. Additionally, the Merritts opposed this by presenting their own Request

for Judicial Notice containing the only documents ever left in 2006 blank, unsigned

and missing ones which supported SAC allegations. The district court refused their

request for judicial notice, and tried these facts without summary judgment

procedures being afforded. This was judicially unfair.

As a general rule, a district court may not consider any material beyond the

pleadings in ruling on a Rule 12(b)(6) motion. There are exceptions, which

mandates conversion to Summary Judgment Motion. First, a court may consider

material which is properly submitted as part of the complaint without converting

the motion . If the documents are not physically attached to the complaint, they

may be considered if the documents authenticity is not contested and the

plaintiffs complaint necessarily relies on them.Lee v. City of Los Angeles, 250

F.3d 668, 688 (9th

Cir.2001). district court abused its discretion by taking notice of

disputed matters.Id. at689.Id. 689-90.

Not only did the Merritts dispute the authenticity of documents by way of SAC

allegations and Opposition briefs, but the SAC relies only on the blankand unsigned

documents of the Merritts, notthose filled in forms of the defendants.



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The district court failed to follow its own, as well as 9th

Circuit rulins, which

rejects accepting judicial notice when the complaint itself alleges that theRight to

Rescindand other documents were not left with plaintiffs. SeeBurch v. GMAC

Mortgage, LLC, Slip Copy 2010 WL 934088 (ND Cal.2010) and citations therein.

This means that the district court should have left disputed issues for Trier of

facts. It compounded errors by not recognizing that concealment of documents and

information, warranted tolling statute of limitations until January 2009. It also erred

by holding the Merritts to a much higher standard than what this Court mandates for

pro se litigants. TILA was created to assure a meaningful disclosure of credit terms

so consumer[s] will be able to compare the various credit terms available to

him and avoid the uninformed use of credit, and to protect unfair billing. 15

USC 1601;Mourning v. Family Publication Services, 411 US 356, 364-65 (1973).

False and misleading statements also violate TILA. Smith v. Chapman, 614 F.2d 968,

977 (5th

Cir.1980).

The Merritts filed their request to rescind within the 3 year limitation period.

They did so under the interpretation that once the lender accepted request, it would

return all of plaintiffs $200,000 and they would turn over the home, leaving them as

they originally had been before the fraudulent acts.Ljepara v. MLSC Properties, 511

F.2d 935, 944 (9th

Cir.1975), especially since the TILA violations are so egregious

the district court had discretion to follow such a procedure. Yamamoto v. Bank of NY,

329 F.3d 1167, 1171 (9th

Cir.2003). Here the district court did not allow a chance.

The district court ruled that SAC was unintelligible. Grant it, the Merritts are

not trained in law and did their best to present claims as a lawyer would. They were

redundant and wordy. But should their right to seek justice be swept away due to their

lack of skill? The court went to the merits of the SAC in a very selective way and



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ignored concealment allegations on one hand, then weighed material facts on the

other. No layperson could have survived such standards, only a skilled practitioner.

(ii) RESPA Qualified Written Request

The district court weighed the factual merits of the allegations regarding the

Merritts communiqus that defendants Colyer, Mozilo, Sambol, Lewis and Stumpf

received in 2006, 2007 and 2008. It held that it did not believe communiqus only a

few out of more than 2 dozen were submitted to court were Qualified Written

Request, although communiqus cited names, loan numbers and detailed issues.

Defendant Colyer begun receiving requests within days after loans closed, but

not until the end of 2006, did the Merritts send formal letters demanding, inter alia,

the missing and filled-in loan documents. From late 2006, then repeatedly through

2007, 2008 and 2009, they sent formal letters, first to Sambol then Mozilo and later to

Lewis and Stumpf. The Merritts have other letters that goes into more details than

what was submitted to district court. They had no idea that the district court would

not hold an evidentiary hearing if it decided to weigh facts outside of SAC.

This Appeal is somewhat analogous to an Alabama case where a plaintiff sent

3 letters to the servicer of loan and defendants moved for summary judgment saying

that they were not qualified written requests. That court ruled that letters did not

have to be entitled such, but only had to convey what 12 USC 2605(e)(1)(B) calls

for. Namely, consumer name, account number and sufficient detail regarding

information sought.Rawlings v. Dovenmuehle Mortg., Inc., 64 F.Supp.2d 1156,

1161-62 (MD Ala.1999). Here, it was not even at a Summary Judgment stage.

Apparently the district court wanted to see communiqus entitled as such, for

the Merritts inadvertently met 2605 criteria each time they wrote them. It was the

way any professional would write. Alternatively, the district court misinterpreted the



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communiqus contents. In any event, the Merritts believe that once the district court

ruled on the factual basis of these communiqus, then it should have converted

motion to dismiss into Summary Judgment, afforded discovery and held a hearing.

The letters were actually presented to demonstrate why tolling statute of limitations

was warranted.

By deciding that their communiqus were not qualified written requests the

district court abandoned the legislative imperative that RESPA, as well as TILA, are

remedial statutes that should be liberally construed in favor of consumers. See

Jackson v. Grant, 890 F.2d 699, 704-05 (9th

Cir.1986).

NOTE: The Merritts request this Court to apply this and previous section

arguments to district courts dismissals of 12 CFR 226.23(a)(3); 6500 FDIC 226.19

and 15 USC 1601, since they were dismissed due to same statute of limitation

grounds. Equitable tolling applies to all federal statutes.In re United Ins.

Management, Inc., 14 F.3d 1380, 1385(9th

Cir.1993).

B. The District Court Erred When It Judged The Merits Of Allegations

Regarding False/Misleading Advertising Then Limited Its Selection ToExclude More Specific Ones, Before Holding Allegations To Be Puffery

The SAC alleges that the defendants deliberately ordered, enforced and

directed subordinates to create television, radio, internet, mail and telemarketing

advertisements which claimed CHL would provide African-, Latino- and other

minority Americans with 30-year fixed mortgages, 1% interest rates, trustworthy

brokers who would provide the best loans for them. SeeAppendix A.

The district court has focused on just a few allegations from the SAC and

labeled them as general which are not directed to specific product or service. At the

Rule 12(b) hearing it made no mention that it was looking for, and the Merritts would

need, to identify more specific ones. For if it had actually read the SAC, or asked the



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Merritts for more precise allegations they would have referenced the court to SAC

and evidence, if need be, showing advertisements promising home mortgage for 1

to 3% interest rates; 30-year fixed home mortgage; CHL home loans are the

lowest in the nation; pay no closing costs and more. SeeAppendix A.

Basically, the district court treated the Merritts as if they were trained lawyers.

They had no way of knowing that the court wanted more specificity unless the court

made it known. The Merritts have the evidence of more specific false advertisements

which can also be inferred via SAC. They also needed a liberal reading of SAC,

discovery and afforded an opportunity to amend based on discovery results.

Additionally, selecting and isolating a few allegations as the district court did,

takes facts outside the context of the SAC as a whole, and makes them seem general.

However, if the specific allegations regarding defendants Mozilo and Sambol intent

to mislead minorities through false advertisements are included with the TV, internet

and other marketing content promising No Closing Cost, 1% Interest Rates, 30-

year fix, as well as Best, Honest, and Americas Number One Lender, then

what can be portrayed as puffery, becomes very false and misleading.

The Merritts respectfully request this Court to apply its reasoning found in

Siracusano v. Matrixx Initiatives, Inc., 585 F.3d 1167 (9th

Cir.2009), where those

defendants told plaintiffs and the Public one thing while knowing all along it was

false. Here, Mozilo and Sambol each personally reported over-and-over to the Public

that they were leading CHL to use vigorous and highest standards in underwrit-

ing loans that made all of CHLs loans healthy and sound, which ensured the

Merritts as they were privy to these broadcaststhat CHL was trustworthy to

purchase their home loan through.



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This Court holds that when defendants represents one thing to the Public that

they know to be materially false or misleading, and there is a likelihood that

reasonable people would consider it important in making decision, then such should

go to fact-finder and not be dismissed.Id. at1171.

Lastly, all of this should have been left for the Trier of fact and was not

appropriate for Motion to Dismiss stage as argued above.

C. The District Court Erred By Ignoring 99% SACs Non-Conclusory

Conspiracy And Other Allegations,Pro Se Standards And Did Not

Properly Apply Twombly And Iqbals Standards to RICO Claim

Or Race Discrimination

The Merritts contend that: (1) the district courts application of plausibility

standard was neither correctly applied nor transparent; (2) that it improperly conclud-

ed that the SAC did not state plausible claims for relief; and, (3) when the plausibility

test is accurately applied, the SAC show plausible allegations and claims.

The district court ruled that SAC allegations do not go from the possible to

plausible in regards to race discrimination and RICO claim. According toBell Atl.

Corp. v. Twombly, 550 US 544 (2007), an allegation is possible if it is in neutral

territory, i.e. leaves open the likelihood of some other, more suggestive reason for

the misconduct. 49 B.C.L. Rev. 431, 446 (2008). Moreover, the plausibility standard

requires only that the inference from the well-pleaded factual allegations to the

purported unlawful conduct be reasonable. If it is, a court mustdraw it and the

complaint should not be dismissed. 94 Minn. L.Rev. at 536 (2010). Even if it strikes

a savvy judge that actual proof is improbable, and that a recovery is very remote

and unlikely. Twombly 550 US at 556.

Iqbal and Twombly mandates for an inferential standard which weighs the

viability ofinferences to be applied, not the truth orproofof the complaint.Id. at 533



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to 34. Also, 94 Minn. L.Rev. 512, The Plausibility Standard(2010). Hence, conduct

must be suggestive at the pleading stage and raise a reasonable expectation that dis-

covery will reveal evidence of illegal agreement. Twombly, if. Reaffirmed byIqbal

(Plausibility is shown by factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.Ashcroft v. Iqbal,

173 L.Ed.2d 868, 874 (2008).

The first error that the district court made was not identifying the non-conclu-

sory allegations. It only focused on what it saw as conclusory.Iqbalprovides a two-

step process if a complaint lacks specificity. Step One: separate legal-conclusions

from non-conclusory allegations. Step Two: Accept non-conclusory ones as true and

determine if they plausibly give rise to an entitlement to relief.Iqbal at L.Ed.2d

884-85.

Although the plausibility test is not actually required here because the SAC

does contain the who, what, when, where and how, the Merritts present the following:

Professor Steinman is instructive: [A]n allegation is only conclusory when it

fails to identify the real-world acts or events (or, one might say, the transactions or

occurrences) that took place. 43 Akron L.Rev. at 26,Reconstructing Pleading:

Twombly, Iqbal and the Limited Role of the Plausibility Inquriy (2009).

This action is filled with hundreds of real-world acts or events which the

district court somehow missed. If, for the sake of arguendo, there were only conclu-

sory allegations, it should have taken its time to explain such deficiencies and invite

the Merritts to amend with more.Munz v. Parr, 758 F.2d 1254, 1256 (8th Cir.1985).

1. Plausibility Standard DISCRIMINATION

For some reason, the district court only selected one (1) allegation regarding

HELOC out of more than 30 precise ones and over 100 other allegations that



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showed the results and implementation of defendants targeting minorities with

discriminatory purposes and how the Merritts were caught in their web. It extracted

some words from the more than 200 specific allegations, which illustrate RICO

activities and claim, then ignored the allegations themselves. This method took words

out of their pleading-context by creating a context which is foreign to SAC as a

whole. Then the district court labeled these out-of-context words as vague and

conclusory, while ignoring the 200 plus factual, non-legal and non-conclusory

allegations.

The Merritts apologize to this Court for the number of allegations, but they had

a very steep learning curve regarding how to present thousands of facts under the law

and do not believe they should be penalized for having defendants who happen to

have committed such sweeping actions against them and other Americans.

Paragraphs 24 to 60 of SAC are mostly specific plans, actions, orders,

statements and omissions personally taken by principle defendants Mozilo, Lewis,

Sambol and Stumpf. Paragraphs 61 to 147are specific experiences of the Merritts at

the hands of co-conspirators Colyer, Benson, Chen, Doe 1, with the express repeated

orders and authorizations of Mozilo and Sambol. From paragraphs 148 to 200 are

additional particulars showing every defendant committing acts or omissions directly

related to the Merritts. About 25% more specific allegations are found from 201 to

321, others are general. The claims themselves, 322 onward, are Causes of Action.

There are two types of allegations for the Court to review for discrimination.

First are the ones which specifically reference such purposes, motivations and

actions: SAC 37, 46, 51, 54, 79, 92, 126, 149-154, 160, 162, 182-83, 187, 299,

308-11, 316. Secondly, the remaining allegations between 26-321, make up the

consequences of discriminatory policies and practices. As laypersons, the Merritts



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attempted to show how they would not have been treated as they had been if not for

the policies and actions designed to target African-Americans and other minorities.

To bring home this point, the district court did not make its determination base

on an actual allegation, but one (1) paragraph from the Third Cause of Action which

only contains limited factual allegations 345. None of the actual allegations which

show talks, orders, decisions, actions et cetera, are mere labels and conclusions or

formulaic recitations of the elements of a cause of action asIqbal ruled against.

All the elements of 42 USC 1981 are met: 1) Merritts are of African- and

Pakistani-American decent; 2) Discrimination was due to their race; 3) They were

involved in contract for real property; 4) they have approximately $200,000 losses in

their own funds invested along with distress, countless time et cetera.

This Court, along with other Circuits, holds that the plausibility standard does

not apply to race discrimination employment actions. The Merritts presume that the

same would be true here. Tamayo v. Blagojevich, 526 F.3d 1074, 1084-85 (7th

Cir.2008)(UnderTwombly, Sex and Race discrimination cases are still only required

to plead general, not specific facts. Also, Skaff v. meridian N. Amer. Bev. Hills, 506

F.3d 832, 841042 (9th

Cir.2007) andEdwards v. Marin Park, 356 F3d 1058 (9th

Cir.2004).

Nonetheless, the SAC meets the plausible standard in that it depicts specific

conduct. I.e. Defendants Mozilo and Sambol own words, decisions and actions show

targeting African-, Latino- and other minority Americans with subprime loans,

because, in their reasoning, White-sophisticated borrowers could not be persuaded to

purchase subprime products on the scale they were conspiring to achieve. Minorities

were most susceptible because they were most vulnerable and easy targets for such

practices. When coupled with the allegations that White borrowers were constantly



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afforded prime, not subprime loans, and the practices of withholding loan documents,

charging higher fees, higher interest rates et cetera was reserved for minorities, then

plausibility is very much clear.

2. RICOs Plausibility

The district court erred on RICO claim by: 1) holding the Merritts to a standard

used for trained lawyers; 2) misapplied full Rule 9(b) standards; and, 3) Again

misapplied plausibility standard.

[P]ro se complaint, however inartfully pleaded, must be held to less stringent

Standards than formal pleadings drafted by lawyers.Erickson v. Pardus, 167

L.Ed.2d 1081, 1087(2007). When RICOpro seplaintiff has been denied documents

that could support claim, Rule 9(b) is to be relaxed. Corley v. Rosewood Care Center,

142 F.3d 1041, 1050-51 (7th

Cir.1998). A lenient application of Rule 9(b) is allowed

in a limited class of corporate fraud cases where the evidence of fraud is within a

defendants exclusive possession. US ex rel. Mason v. State Farm Mut. Auto Ins.

Co., 2008 WL 2857372, *14 (D.Id.2008), quotingLee v. Smith Kline Beecham, Inc.,

245 F.3d 1048, 1052 (9th Cir.2001). Including when facts are on information and

belief. China Nat. Chem. Constr. Chongquing Co., V. kit Kung, 2007 WL 433196

(slip op)(DC Or.2007).

Although the district court opened its order acknowledgingpro sepleading

standards, its actions demonstrate very stringent, non-pro se standard. E.g. refused to

even apply the relaxed standards afforded to lawyers who present RICO or Corporate

fraud actions. If standards should be relaxed for professionals trained in law, how

much more leeway should the district court have afforded the Merritts?

The allegations show, inter alia, that defendants Mozilo and Sambol conspired

to use a separate division of Countrywide Corporation. Namely, CHL, which they



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focused on subprime lending to minorities. This was separate from its traditional

prime lending. They later conspired with defendants Lewis and Stumf to join their

undertaking and these four defendants acted concertedly to train, instruct, authorize

subordinates and agents such as defendants Colyer, Benson, Chen, Doe 1 et al to

implement their scheme. It is an elaborate corporate conspiracy of fraud here which

was systemic and not just something that happen to the Merritts. SeeAppendix A.

18 USC 1961(4) mandates an enterprise is an individual, partnership, corpo-

ration, association associated in fact although not a legal entity. The SAC alleges

CHL enterprise up to 2009, and later BofA enterprise from July 2009 on. SAC 383

et seq. Defendants operated with a common purpose (2) an ongoing organization

and (3) function as a continuing unit. meeting associated-in-fact. Odom v.

Microsoft Corp., 486 F.3d 541, 552 (9th

Cir.2007). The district court refused to admit

this of defendants.

Racketeering can be shown through the use of mails or wires to commit fraud.

It is not necessary to show that the victim was induced by misrepresentation

nor that the victim was misled. United States v. Goldberg, 455 F.2d 479, 481 (9th

Cir.1972). The district court again ignores allegations and extracts words out of entire

SAC which mischaracterized them.

Specifically, the SAC show supervisory/managing defendants ordering subor-

dinates to devise marketing materials targeted to minorities to convince them to buy

Countrywide subprime loan products against their self-interests. They ordered for

junk mail, letters, TV and Radio commercials, Internet and phone calls to saturate

them with representations. It just so happens that the Merritts were in fact induced

and mislead along with millions of others.



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The SAC shows defendants ordering subordinates to call and send mail and

emails to the Merritts. These claimed that CHL would afford 1% interest rate & 30

year-fix mortgage loans, had trustworthy staff who would put their interest first, place

them in most affordable loan, save them money, charge no closing fees et cetera.

Also, the Merritts communicated with each defendant, except Benson, on an indivi-

dual basis via telephone, faxes and e-mails which solidified or covered-up the fraud

which they and their subordinates had perpetrated upon them. Remember that the

Merritts had been put off in 2006, 2007 and 2008 about their loan documents.

Appendix A.

While these things were being represented to the Merritts and the public, the

SAC shows that each of these defendants knew that CHL was not providing 1%

loans, always charged closing costs, never afforded 30-year fix to minorities, provide

the worst possible loan product, conceal that they qualified for FHA loan, set them up

to default with or without the loss of income gave kickbacks to agents who really

did not do work, falsified and withhold loan documents and trained staff perform

such things. The sheer enormity of the allegations show the need for discovery, but

the Merritts specific requests to ensue discovery made it explicit.Id. & Appendix B.

Yes, with a little input from district court, the Merritts could have redrafted a

better complaint; however, the SAC allegations reports the personal actions and inter-

actions of every defendant in enough detail to give them notice under Rule 8. The

Merritts know that defendants Mozilo and Sambol, in their own personally stated

words,planned and ordered minorities to be targeted with subprime loans in order to

transfer equity to themselves; personally ordered the lowering and elimination of

underwriting standards for this purpose; ordered for false/misleading advertising to be



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broadcasted; supervised the development of training manuals and programs to falsify

loan documents and leave blank ones with minority borrowers. Id.

Very few would say that these allegations suggest something different then

what they allege. Twombly and Iqbal directs courts to apply a kind of judicial

commonsense when determining whether allegations are plausible. The Merritts do

not believe that even this was applied. For after they filed this action, other cases and

news broke out during mid to late 2009, confirming that defendants Sambol, Mozilo,

Lewis et al committed many of SAC main facts. Other district courts in and out of

California are allowing RICO and Fraud claims to go forward to discovery and juries.

For some reason, the district court refused to assess allegations as a whole or

the SAC as a whole and relax standards. It selected words alone.

Its true, as defendants point out, that plaintiffs havent alleged precisely

which parts of which contracts three of the stop-work orders affected. But the

complaint describes the orders in sufficient detail to give defendants ample notice of

plaintiffs loss causation theory, and to give us some assurance that the theory has a

basis in fact.Berson v. Applied signal Tech.,Inc., 527 F3d 982, 989-990 (9th

Cir.2008).

The defendants never raised a question that the Merritts did not experience

what is alleged in SAC, but in fact admitted that the misconduct was limited to the

local CHL defendants and agents. What they failed to address is how did the agents

come to learn such practices, how is there a national systemic consistency of practices

towards minorities and why have defendants Mozilo, Sambol, Lewis and Stumpf

remained silent and permitted fraud to continue even after every American home

learned of it? The SAC alleges and How and more.



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The district court did not identify the non-conclusory allegations which would

go towards demonstrating RICO violation.

2 The District Court Erred By Failing To Grant Discovery Requests

And Explain ToPro Se Litigants What It Deemed To Be ConclusoryAnd Implausible Then Permit The Merritts To Amend For TheFirstTime In Addressing District Courts Concerns

The Merritts requested for discovery to ensue within SAC by filing requests

with district court and defendants. The defendants flatly said that the Merritts did not

have a right to discovery before motion to dismiss was ruled on. The district court

ignored request altogether. TheIqbal court mandates that plausible grounds which

infers agreement simply calls for enough fact to raise a reasonable expectation that

discovery will reveal evidence of illegal agreement. Citing Twombly, 550 US at

545.

The district court criticizes the Merritts for alleging unnamed persons along

with defendants. This fails to recognize that they are not required to identify

particular employee in claim of fraud against corporate defendants Odom v.

Microsoft Corp., 486 F.3d 541 (9th

Cir.2007). Perhaps it did not like some of thedates, but fraudulent misrepresentation occurred in or around 1993 was sufficiently

precise as to the when requirement of Rule (9). Shaw v. Pimco Advis. Fund Man.,

341 F.Supp.2d 454 (DC NY 2004). Further, the plaintiffs pleaded causation with

sufficient particularity by alleging particular facts indicating that but for the circum-

stances that the fraud concealed, their investment would not have lost its value.

Berson v. Applied Sig. Tech., 527. F.3d (9

th

Cir.2008). And finally, claim made outtime and place of alleged fraudulent notices but did not contain information about

notices specific contents with sufficient particularity. Yet still did notwarrant

dismissal forpro se litigant.Edwards v. Marin Park, 356 F.3d 1058 (9th

Cir.2004).



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GivenIqbals fact-pleading requirements, discovery was absolutely necessary

to address any areas that district found weak or not plausible findings. The Merritts

have since learned defendants were not honest with them and the district court did not

afford them basic provision under rules. Namely, that [d]iscovery need not cease

during pendency of a motion to dismiss. SK Hand Tool Corp. v. Dresser Indus, 852

F.2d 936, 945 n.II (7th

Cir.1988).

The Merritts can guaranty that their allegations in the SAC will find support in

discovery because it recounts actual life events and not the figment of imagination.

Denying such was another significant error of the district court which the Merritts

humbly request this Court to reverse and remand.

8. Do you have any other cases pending in this court? NO

If so, give the name and docket number of each case.

9. Have you filed any previous cases which have been decided by this court?

NO

If so, give the name and docket number of each case.

Respectfully submitted,

Dated: April 15, 2010David Merritt, Pro Se660 Pinnacles TerraceSunnyvale, CA 94085Tel: [email protected]

Dated: April 15, 2010

Salma Merritt, Pro se

660 Pinnacles TerraceSunnyvale, CA [email protected]
