William J. Paatalo v. JPMORGAN CHASE BANK, N.A., as acquirer of certain assets

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
WILLIAM J. PAATALO,
Plaintiff-Appellant,
v.
JPMORGAN CHASE BANK, N.A., as
acquirer of certain assets and liabilities of
Washington Mutual Bank from the Federal
Deposit Insurance Corporation, as
Receiver for Washington Mutual Bank and
U.S. BANK NA, as Trustee, as successor
in interest to Bank of America, National
Association, as Trustee, as successor by
merger to Lasalle Bank, National
Association, as Trustee for WAMU
Mortgage pass through certificate series
2007-OA3 Trust,
Defendants-Appellees.
No. 14-35931
D.C. No.
1:13-cv-00128-SEH-CSO
MEMORANDUM*
WILLIAM J. PAATALO,
Plaintiff-Appellant,
v.
No. 15-35445
D.C. No. 1:13-cv-00128-SEH
FILED
MAR 20 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.

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THE MACKOFF/KELLOGG LAW
FIRM; et al.,
Defendants-Appellees,
and
JPMORGAN CHASE BANK, N.A., as
acquirer of certain assets and liabilities of
Washington Mutual Bank from the Federal
Deposit Insurance Corporation, as
Receiver for Washington Mutual Bank and
U.S. BANK NA, as Trustee, as successor
in interest to Bank of America, National
Association, as Trustee, as successor by
merger to Lasalle Bank, National
Association, as Trustee for WAMU
Mortgage pass through certificate series
2007-OA3 Trust,
Defendants.
Appeal from the United States District Court
for the District of Montana
Sam E. Haddon, District Judge, Presiding
Argued and Submitted March 7, 2017
Portland, Oregon
Before: O’SCANNLAIN, FISHER, and FRIEDLAND, Circuit Judges.
William Paatalo appeals from the district court’s grant of summary judgment
dismissing his Montana state law claims against the Mackoff Kellogg Law Firm,
Charles Peterson, and Jason Henderson (collectively “Mackoff”). He also appeals
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from the district court’s grant of a Fed. R. Civ. P. 12(b)(6) motion dismissing his
claims against J.P. Morgan Chase Bank (“Chase”) and U.S. Bank, Trustee of the
WaMu Mortgage Pass-Through Certificates Series 2007-OA3 Trust (the Trust
itself is referred to as the “2007-OA3 Trust” and the Trustee is referred to as “U.S.
Bank, Trustee”). Because the facts are known to the parties, we repeat them only as
necessary to explain our decision.
I
The district court did not err in dismissing Paatalo’s claims of actual fraud,
constructive fraud, and negligent misrepresentations against Mackoff. Paatalo’s
claims arise from alleged misrepresentations made by Mackoff regarding its
capacity as trustee of the 2007-OA3 Trust during previous litigation between the
parties.1 Paatalo v. J.P. Morgan Chase Bank, No. CV 10-119-BLG-CSO, 2012
WL 2505742 (D. Mont. June 28, 2012) (hereinafter Paatalo I). Paatalo’s claims
fail because there is no evidence that Paatalo had a right to rely on any
representation made or that Paatalo was ignorant of the falsity of any
representation. See Mont. Code Ann. § 28-2-406 (defining constructive fraud);
Harpole v. Powell Cnty. Title Co., 309 P.3d 34, 38 (Mont. 2013) (defining
1 That litigation concerned Chase’s attempt to foreclose on Paatalo’s
property. Mackoff was the trustee of the Deed of Trust of such property.
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negligent misrepresentation); Town of Geraldine v. Mont. Mun. Ins. Auth., 198
P.3d 796, 801 (Mont. 2008) (defining actual fraud).
II
A
The district court properly dismissed Paatalo’s claims of (1) breach of
contract, (2) breach of implied covenant, (3) libel, and (4) violation of the Fair
Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., because they
were barred by issue preclusion. All of the key factual issues underlying the current
claims were resolved against Paatalo in Paatalo I. Issue preclusion applies if “(1)
the issue at stake was identical in both proceedings; (2) the issue was actually
litigated and decided in the prior proceedings; (3) there was a full and fair
opportunity to litigate the issue; and (4) the issue was necessary to decide the
merits.” Oyeniran v. Holder, 672 F.3d 800, 806 (9th Cir. 2012).
In Paatalo I the court concluded that the Mackoff settlement did not bind
Chase or the 2007-OA3 Trust. 2012 WL 2505742, at *11–12. This knocks out the
breach of contract and breach of implied covenant claims, since they are based on
the factual premise that the settlement did bind Chase and the 2007-OA3 Trust.
The Paatalo I court also concluded that the Note and Deed of Trust were
enforceable and Chase had the right to initiate a non-judicial foreclosure on
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Paatalo’s property. Id. at *7. Paatalo’s libel and FDCPA claims rely on the factual
premise that the Note and Deed of Trust are invalid and unenforceable. Thus, issue
preclusion bars these claims for reasons similar to the contract claims. To the
extent the libel and FDCPA claims are based on the binding nature of the Mackoff
settlement, these claims fail for the same reason the contract claims fail.
B
Finally, we are left with Paatalo’s claims of actual fraud, constructive fraud,
and negligent misrepresentations against U.S. Bank, Trustee. These claims are
based on the same factual premises as the claims against Mackoff discussed above.
The district court erred in concluding that claim preclusion barred these claims,
because Paatalo could not have brought them at the time he filed his complaint in
Paatalo I. See Cabrera v. City of Huntington Park, 159 F.3d 374, 382 n.12 (9th
Cir. 1998) (per curiam) (concluding that claim preclusion does not block a claim
that “arose” while a prior suit “was already pending”).2 Nevertheless, all these
claims still fail for the same merits-based reasons that the claims against Mackoff
fail. The district court’s error is harmless.
III
2 As discussed above, these claims arise from supposed misrepresentations
made to Paatalo by the defendants during the Paatalo I litigation.
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The judgment of the district court is AFFIRMED.
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