Opinion
No. 2:12-cv-02502-GEB-KJN
01-06-2016
ANTONIO ESQUIVEL and BEATRIZ ESQUIVEL, individually, on behalf of all others similarly situated, and on behalf of the general public, Plaintiffs, v. BANK OF AMERICA, N.A.; BANK OF AMERICA CORPORATION; and Does 1 through 10, inclusive, Defendants.
ORDER DENYING PLAINTIFFS' MOTION FOR CLASS CERTIFICATION
Plaintiffs seek class certification under Federal Rules of Civil Procedure ("Rules") 23(a) and 23(b)(3) of the following class: "All California residential mortgage loan borrowers who, since August 15, 2009, signed and returned Bank of America's offer of a permanent FHA HAMP modification [agreement] where Bank of America recorded a lien in favor of the Secretary of Housing and Urban Development pursuant to the modification [agreement]." (Pls.' Mem. of P. & A. in Supp. of Mot. for Class Certification ("Class Mot.") 7:13-16, ECF No. 83.) Defendants oppose the motion, arguing:
Plaintiffs Antonio and Beatriz Esquivel defaulted on their mortgage loan and received a permanent loan modification from Bank of America under the Federal Housing Administration's Home Affordable Modification
Program ("FHA-HAMP"). They complain that Bank of America took too long to implement their modification, and therefore seek to certify a class of borrowers on the theory that Bank of America took too long to implement everybody's modification. That putative class is defined to include every borrower who signed and returned an FHA-HAMP permanent-modification agreement — without regard to how long it took Bank of America to modify their loans. Plaintiffs do not support their motion with any evidence that every other borrower (or any other borrower) had to wait too long for their modification. Plaintiffs simply ask this Court to assume that however long it took, it was too long, and constituted a breach of Bank of America's contractual obligations and a violation of various California statutes.(Defs.' Opp'n to Class Mot. ("Opp'n") 1: 1-11, ECF No. 88.)
I. BACKGROUND
Plaintiffs argue they "fell behind on their mortgage payments and applied to Bank of America for an affordable loan modification" in order to avoid defaulting on their loan; "[a]fter . . . successful[] complet[ion of] Bank of America's application process and a three-month Temporary Payment Plan, the Bank offered Plaintiffs a permanent FHA HAMP [affordable loan] modification via [an offer letter]." (Class Mot. 4:4-9.) Plaintiffs contend this offer constitutes "a legally binding offer of a permanent loan modification to each FHA loan borrower, provided only that the borrower [provides a notarized signature] and return[s or returned] the commitment letter, modification agreement, and subordinate note." (Id. 10:16-18.) Plaintiffs contend "a class-wide common issue [exists] that [Plaintiff construes] Bank of America['s offer letter as] . . . a legally binding offer, [that] the members of the class accepted." (Id. 11:4-7.)
Bank of America responds to Plaintiffs contention that each modification agreement is binding upon an offeree's acceptance, as follows:
The discovery record shows a number of material terms that appear in some loan-modification agreements but not in others, even within the universe of FHA-HAMP agreements. For example:
(Id. 15:18-16:13)• Some of the agreements provide that "[t]he Loan Documents will not be modified unless and until (1) Lender approves this Agreement and (2) the Modification Effective Date . . . has occurred." E.g., Ex. 15 at 687060. Other agreements, in contrast, omit the first condition . . .
• Some of the agreements provide that "[t]he Loan Documents will not be modified unless and until the modification is approved by the Bankruptcy Court in my bankruptcy case." E.G., Ex. 15 at 687061 . . .
• Some but not all of the agreements require the borrower to obtain flood insurance as a condition of the modification. E.g., Ex. 14 at 677149.
• Some but not all of the agreements require the borrower to warrant that "[t]he property currently has no materially adverse physical condition(s)." E.g., ex. 15 at 687060.
• Some but not all of the agreements require the borrower to warrant that "I do not have any other FHA-insured mortgage." Id.
• Some but not all of the agreements require the borrower to warrant that I currently have sufficient income to support the financial obligations under the Loan Documents as modified by this Agreement.
Bank of America further responds that "[each form included] a number of additional conditions that bear on whether a valid modification agreement exists". (Id. 16:14-17.) Bank of America contends: "[d]etermining whether any given borrower has a valid loan-modification agreement . . . and whether [Bank of America] has an obligation under that agreement to modify the borrower's loan, cannot be decided without determining whether each of these conditions has been satisfied." (Id. 17:23-25.) Bank of America asserts the referenced conditions include an offeree's obligation to "cooperate fully with the Lender" in obtaining documents and in "execut[ing] such other documents as may be necessary." (Id. 17:12-20.)
Plaintiffs argue because "the class is defined as borrowers against whose homes Bank of America recorded a subordinate HUD lien . . . [t]he recordation of HUD liens establishes that all members of the Class either met [the specified contingencies], or the bank waived them." (Class Mot. 11:9-14.)
Bank of America counters:
Nowhere . . . does HUD intimate . . . any requirement that the servicer complete its determination of the borrower's eligibility for the permanent modification within the [time period required for recordation] . . . Plainly following HUD's recording rules cannot possibly mean that all borrowers 'met' all necessary contingencies in every case. Nor is there any basis in the law for Plaintiffs' contention that following HUD's recording rules operated as a 'waive[r]' of the condition.(Opp'n 24:9-23.)
Plaintiffs contend Bank of America breached the loan modification agreement by failing to timely implement the terms of the modification agreement, and that since such breaches are systematic occurrences their motion should be granted. (Class Mot. 1:1-6.) Plaintiffs essentially argue that Bank of America fails to treat each agreement as binding until the terms of the agreement are input into its servicing system, even though the effective date of each agreement is when it is or was executed. (1:23-28.) Plaintiffs argue that "[w]hile th[e Bank's] process [of closing the modification] is going on, Bank of America continues to seek to collect the unmodified loan payments from the borrower" and to report any delinquency to credit reporting agencies. (Class Mot. 6:20-25.) Plaintiffs also argue: "Only at the conclusion of this process will Bank of America's automated credit reporting system report the borrower's loan correctly under the terms of the modification . . . ." (Id. 7:1-5.)
Bank of America rejoins its goal "is to implement the modified loan terms retroactive to 'the time of [the modification] offer'[,]" but "[i]n some cases . . . the Bank must collect the required funds or take other steps to remedy the issue preventing the modification from going through." (Opp'n 5:20-22.) Bank of America argues:
Depending on . . . individual circumstances, the issue might be remedied quickly and the modification implemented shortly after the [] lien is recorded; or the issue might take some time to remedy and the modification takes longer to implement; or the issue may not be remediable and Bank of America must release the lien . . . Conversely, there are cases where loan modifications are implemented long before the lien is recorded.(Id. 5:26-6:3.)
Bank of America further argues:
Half the borrowers who received FHA-HAMP modifications had them implemented within two days of the recording of the HUD lien. Ex. 1 ¶ 14. Four out of five borrowers had them implemented within a month of recording. Id. ¶ 15. There are outliers such as the Plaintiffs whose modifications take longer for reasons that cannot be discerned without consulting their individual loan files.(Id. 9: 15-19.)
Plaintiffs allege in their Complaint that the Bank's delay in implementing the terms of the FHA-HAMP modifications, whilst continuing to collect unmodified loan payments, and reporting any payment delinquencies to credit reporting agencies, constitutes a breach of contract, and violates the following California laws: the Consumer Reporting Agencies Act (Cal. Civ. Code §§1785, et seq., "CRAA"), the Rosenthal Fair Debt Collection Practices Act (Cal. Civ. Code §§1788, et seq., "the Rosenthal Act"), and the Unfair Competition statute (Cal. Bus. & Prof. Code §17200, "UCL").
II. DISCUSSION
A. Class Certification
Class certification is governed by Rule 23. "Parties seeking class certification bear the burden of demonstrating that they have met each of the four requirements of [Rule] 23(a) and at least one of the requirements of Rule 23(b)." Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011) (citing Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir.), amended by 273 F.3d 1266 (9th Cir. 2001)).
Under Rule 23(a), the party seeking certification must establish:
(1) the class is so numerous that joinder of all members is impracticable,Fed. R. Civ. P. 23(a)(paragraph breaks added).
(2) there are questions of law or fact common to the class,
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and
(4) the representative parties will fairly and adequately protect the interests of the class"
Plaintiffs rely solely on Rule 23(b)(3) of the Rule 23(b) requirements. Under Rule 23(b)(3),
Class action may be maintained if Rule 23(a) is satisfied and if: (3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy . . .Fed. R. Civ. P. 23(b)(3) (emphasis added).
1. Predominance
"Plaintiffs have not met their burden of showing that common questions predominate, which is fatal to class certification under Rule 23(b)(3) [; therefore,] the Court does not address the threshold requirements of Rule 23(a) or the Rule 23(b)(3) requirement of superiority." Moua v. Jani-King of Minn. Inc., No. 08-4942 ADM/JSM, 2010 WL 93578, at *2 (D.Minn. Mar. 12, 2010)(citing Steering Comm. V. Exxon Mobile Corp., 461 F.3d 598, 601, 604 (5th Cir. 2006)); see also Edwards v. Ford Motor Corp., No. 11-CV-1058-MMA(BLMJ), 2012 WL 2866424, at *2, 4-11 (S.D. Cal. June 12, 2012)(declining to address other elements relevant to class certification when predominance under Rule 23(b)(3) is not met).
Plaintiffs argue "predominance is satisfied as to each claim because Bank of America's class-wide liability turns on the uniform . . . [o]ffer [l]etters and modification agreements, and the Bank's uniform reporting and collection practices after receiving those documents . . ." (Class Mot. 13:8-12.) Specifically Plaintiffs argue: "The FHA-HAMP compliance and title 'contingencies' are minor issues on a class wide basis because all class members had HUD liens recorded against their homes." (Id. 13:15-17.)
Plaintiffs contend that "it is well recognized that individual issues, such as damages calculations do not preclude class certification." (Id. 14:1-2.) Further, Plaintiffs argue that common issues predominate for the CCRA claims (Id. 14:14-24); Rosenthal Act claims (Id. 14:25-15:14); and UCL claims (Id. 15:15-16:1).
Defendants rejoin:
The individual questions that predominate here include: Did each borrower properly accept the offer? Was a contract formed? What conditions did the contract place on performance? Did the borrower satisfy them? Did Bank of America perform its obligations under the contract in a timely fashion? If not, was the borrower damaged by the delay—and if so, how?(Opp'n 31:8-12.)
Defendants further rejoin that "each putative class member's damages claim would need to be considered and analyzed separately, without any reference to a common formula or other common approach." (Id. 32:4-6.)
Plaintiffs reply that the class may be certified as a statutory damages class without a showing of any actual damages. (Pl.'s Reply to Defs.' Opp'n to Mot. for Class Cert. ("Reply") 19:22-23, ECF No. 89.) Further, Plaintiffs reply: "Courts routinely certify class actions with respect to common issues where it is necessary to determine class member damages through a distinct process." (Reply 20:14-16.)
Defendants have demonstrated that any common issue that Plaintiffs allege would not predominate over individualized questions. First, the Court would have to conduct separate evidentiary hearings to determine whether each FHA-HAMP loan modification contract's conditions were satisfied. See Campion v. Old Republic Home Prot. Co., 272 F.R.D. 517, 530 (S.D. Cal. 2011) (finding that Rule 23(b)(3)'s predominance requirement was not met where "an individual inquiry into the handling of each class member's claim would be necessary to determine whether a breach occurred"). Second, Plaintiffs have not demonstrated that "damages are capable of measurement on a classwide basis." See Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1433 (2012) (holding that a plaintiff seeking class certification bears the burden of "establishing that damages are capable of measurement on a classwide basis.")
Therefore, Plaintiffs have failed to establish Rule 23(b)(3) predominance and Plaintiff's motion for class certification is DENIED. Dated: January 6, 2016
/s/_________
GARLAND E. BURRELL, JR.
Senior United States District Judge