Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_08-cv-00678/USCOURTS-caed-1_08-cv-00678-0/pdf.json

Parties Involved:
Guild Mortgage Company
Defendant
Adam Nelson
Plaintiff

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

ADAM NELSON, individually and on

behalf of all others similarly

situated,

Plaintiff,

v.

GUILD MORTGAGE COMPANY,

Defendant.

 

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1:08-cv-0678 OWW GSA

SCHEDULING CONFERENCE ORDER 

Discovery Conference:

9/17/08 8:15 Ctrm. 3

Motion for Class

Certification Filing

Deadline: 1/14/09

Opposition Filing Deadline:

2/13/09

Reply Filing Deadline:

3/6/09

Hearing on Motion for Class

Certification: 3/30/09

10:00 Ctrm. 3 

I. Date of Scheduling Conference.

August 20, 2008.

II. Appearances Of Counsel.

Seeger Weiss LLP by Mary Schimmel, Esq., appeared on behalf

of Plaintiff. 

K&L Gates LLP by Irene C. Freidel, Esq., appeared on behalf

of Defendant. 

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III. Summary of Pleadings. 

Plaintiff’s Statement

1. This is a putative class action. Plaintiff filed his

complaint on May 14, 2008. The complaint asserts six causes of

action and seeks a variety of legal remedies. There are two

contract causes of action: breach of contract (Count 5) and

breach of the implied covenant (Count 6). The Unfair Competition

Law, Business and Professions Code §§ 17200 et seq., is the basis

for two causes of action (Counts 2 and 4). The Truth in Lending

Act (“TILA”), 15 U.S.C. §§ 1601, et seq., is the basis for an

additional cause of action (Count 1). Plaintiff also asserts a

cause of action for fraudulent omissions (Count 3). By Joint

Stipulation of the parties, Defendant’s Answer to the Complaint

was filed on August 8, 2008.

2. Plaintiff, individually and on behalf of class members,

alleges Defendant failed to make adequate disclosures in

violation of TILA in connection with the Option ARM home loan

Defendant sold to Plaintiff and other California consumers. 

Plaintiff alleges that the Option ARM loans and the documents

Defendant used to sell them violate TILA. Plaintiff contends

that TILA requires all lenders, including Defendant, to make

certain disclosures to borrowers concerning the terms and

conditions of their home loans in a clear and conspicuous manner. 

Plaintiff alleges that Defendant failed to clearly and

conspicuously disclose, in their loan documents and in the

federally required TILA disclosure statements: (a) the actual

interest rate Defendant charged Plaintiff and consumers on their

loans; (b) the payments on the notes at the initial low interest

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rate absolutely would result in negative amortization and that

the principal balance absolutely would increase as a result; and

(c) that the initial interest rate provided was discounted and

does not reflect the actual interest that Plaintiff, and others,

were paying on the loans. Plaintiff seeks the right of

rescission, individually and on behalf of the Class, under TILA,

as well as damages.

3. Plaintiff further alleges that Defendant violated

California’s UCL. Plaintiff has alleged two separate causes of

action for violations of the UCL (Cal. Bus. & Prof. Code

§§ 17200, et seq.) One UCL cause of action is premised on the

“unlawful” prong of the UCL and is predicated solely on

Defendant’s failure to comply with TILA. The other UCL cause of

action is premised on the “unfair” and “fraudulent” prongs of

Plaintiff’s UCL; it is based on allegations that Defendant sold

deceptive financial products to consumers. Plaintiff seeks

restitution and equitable relief on these claims.

4. Last, Plaintiff alleges that Defendant breached the

express terms of the written contract entered by and between

Plaintiff and Defendant by failing to apply any portion of

Plaintiff’s loan payments, which were based on the initial low

interest rate, to reduce the principal balance on the loan. 

Defendant also failed to provide the low interest rate to

Plaintiff’s loan in the manner agreed by the parties. Plaintiff

seeks damages and/or other equitable relief on these causes of

action.

Defendant’s Statement.

1. Defendant Guild Mortgage Company denies that it is

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liable to Plaintiff Adam Nelson in any respect. This case turns

on disclosures that were provided to Mr. Nelson and each putative

class member by their mortgage broker and/or Guild Mortgage when

their Option ARM loans were originated, processed and/or closed. 

An Option ARM loan has an adjustable interest rate and allows the

borrower to make one of several possible payment amounts each

month ranging from a minimum payment amount, which may cause

negative amortization to occur, to a fully-amortized 30-year (or

15-year) payment. Plaintiff applied for and obtained his Option

ARM loan and, in the process, received and signed several

disclosures from Guild Mortgage, including a Note and Adjustable

Rate Program Disclosure, that disclosed the terms and operation

of his loan. The question raised by Plaintiff’s claims on the

merits is whether the disclosures Plaintiff received, prior to

loan funding, regarding the terms and operation of his Option ARM

loan were adequate and appropriate in light of applicable legal

requirements. Guild Mortgage contends that Plaintiff’s claims do

not have a factual or legal basis. The written disclosures

Plaintiff received and signed complied in all respects with TILA;

the terms and operation of Plaintiff’s loan were otherwise

properly disclosed to him; and he knowingly and voluntarily

agreed to those terms. Thus, there is no basis for Plaintiff’s

claims under federal or state law.

2. Further, Guild Mortgage contends that Plaintiff’s

claims are not appropriate for certification. For example,

Plaintiff’s claims are based on individualized disclosure issues,

and as such, Plaintiff will not be able to satisfy the

requirements for certification under Fed. R. Civ. P. 23. 

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Similarly, Plaintiff’s claim that Guild Mortgage violated TILA

entitling Plaintiff and the putative class to loan rescission

cannot be certified as a matter of Ninth Circuit law. 

IV. Orders Re Amendments To Pleadings.

1. Plaintiff may amend the pleadings to name other

entities in the loan “chain.” Plaintiff proposes that since the

identity of these potential Defendants cannot be known until

further discovery is conducted, that the court allow amendments

to the pleadings to that effect until December 15, 2008. 

Defendant denies that Plaintiff is entitled to amend his

complaint to the extent that any proposed amendment fails to

satisfy the requirements of Fed. R. Civ. P. 15. 

V. Factual Summary.

A. Admitted Facts Which Are Deemed Proven Without Further

Proceedings. 

1. Plaintiff is an individual resident of the Eastern

District of California. 

2. Defendant, Guild Mortgage Company, is a

corporation incorporated in the State of California, with its

principal place of business in the Southern District of

California at San Diego. 

3. Plaintiff, Adam Nelson, is a consumer who obtained

an Option ARM mortgage loan from Guild Mortgage. 

B. Contested Facts.

1. The parties dispute whether disclosures provided

to Plaintiff regarding his Option ARM loan violated federal

and/or state law. 

2. All other facts are contested. 

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VI. Legal Issues.

A. Uncontested.

1. Jurisdiction exists under 28 U.S.C. § 1331 and the 

Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. 

2. Venue is proper under 28 U.S.C. § 1391.

3. The supplemental jurisdiction of the Court is

invoked under 28 U.S.C. § 1367, as Plaintiffs have claims for

alleged unfair competition under California Business &

Professions Code §§ 17200 et seq.; rescission; and related

issues. 

B. Contested. 

1. All remaining legal issues are contested. 

VII. Consent to Magistrate Judge Jurisdiction.

1. The parties have not consented to transfer the 

case to the Magistrate Judge for all purposes, including trial.

VIII. Corporate Identification Statement.

1. Any nongovernmental corporate party to any action in

this court shall file a statement identifying all its parent

corporations and listing any entity that owns 10% or more of the

party's equity securities. A party shall file the statement with

its initial pleading filed in this court and shall supplement the

statement within a reasonable time of any change in the

information. 

IX. Discovery Plan and Cut-Off Date.

1. Plaintiff’s proposal: Plaintiff will be seeking

discovery related to Defendant’s conduct in connection with the

formulation, development, implementation and marketing of

adjustable rate mortgages and home equity loans. Plaintiff does

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not believe that bifurcation between “class discovery” and

“merits discovery” is appropriate given that issues relating to

certification of the class and Defendant’s liability are

inextricably intertwined. However, Plaintiff does believe that

the parties’ initial discovery efforts should be concentrated on

documents and facts that will have an impact on whether class

certification is appropriate.

2. Defendant Guild Mortgage Company’s proposal: In the

pre-class certification phase of discovery, Defendant Guild

Mortgage will be seeking discovery related to the merits of

Plaintiff’s individual claim and his adequacy to serve as a

representative of the putative class. Guild Mortgage proposes

that initial discovery be limited to discovery about Plaintiff’s

individual claims and the class action requirements of Fed. R.

Civ. P. 23 (“Phase I Discovery”), with discovery about the claims

of the absent class members (“Phase II Discovery”) deferred until

after the Court’s ruling on class certification. Guild Mortgage

believes that the class certification question is a threshold

issue that should be decided early in the litigation, as it will

promote settlement discussions and will help the parties and the

Court manage the case most effectively and efficiently. See Fed.

R. Civ. P. 23(c)(1) (stating that the court should decide

certification “[a]s soon as practicable” after commencement of a

case filed as a class action); see also Manual for Complex

Litigation, § 21.04 (4th Ed.) (stating that “[c]ourts often

bifurcate discovery between certification issues and those

related to the merits of the allegations.”). Guild Mortgage

proposes that the Court hold a further status conference

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following its decision, if any, on class certification. If a

class is certified, the parties and the Court could address at

that conference the appropriate scope and extent of Phase II

discovery, if any. 

2. The parties’ initial disclosures shall be made pursuant

to Rule 26(a) on or before September 3, 2008. 

3. Stipulation re: Electronically Stored Information: The

parties will propose and endeavor to file a Joint Stipulation

covering the production of electronically stored information on

or before September 15, 2008. 

4. The parties have not agreed as to limitations on

discovery. 

5. Class Certification: Plaintiff shall file its class

certification motion on or before January 14, 2009. Defendant’s

opposition shall be filed on or before February 13, 2009. 

Plaintiff’s reply shall be filed on or before March 6, 2009. The

motion for class certification shall be heard on March 30, 2009,

at 10:00 a.m.

6. Further Scheduling Conference: Once the issue of class

certification is determined, a Further Scheduling Conference

shall be held to fix the remaining dates for the resolution of

this action. 

X. Motions - Hard Copy.

1. The parties shall submit one (1) courtesy paper copy to

the Court of any motions filed that exceed ten pages and any

motions that have exhibits attached. Exhibits shall be marked

with protruding numbered or lettered tabs so that the Court can

easily identify such exhibits. 

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XI. Trial Date.

1. Plaintiff demands a jury trial. Defendant has not

demand a jury. 

2. Counsels' Estimate Of Trial Time:

a. Based on the determination of whether the case is

certified as a class action, the estimate is up to 4 days if it

is not a class action; the estimate is 14-21 days, if a class is

certified. 

XII. Settlement Conference.

1. A Settlement Conference will be set in accordance with

the outcome of the class certification motion. 

2. Unless otherwise permitted in advance by the

Court, the attorneys who will try the case shall appear at the

Settlement Conference with the parties and the person or persons

having full authority to negotiate and settle the case on any

terms at the conference. 

3. Permission for a party [not attorney] to attend

by telephone may be granted upon request, by letter, with a copy

to the other parties, if the party [not attorney] lives and works

outside the Eastern District of California, and attendance in

person would constitute a hardship. If telephone attendance is

allowed, the party must be immediately available throughout the

conference until excused regardless of time zone differences. 

Any other special arrangements desired in cases where settlement

authority rests with a governing body, shall also be proposed in

advance by letter copied to all other parties. 

4. Confidential Settlement Conference Statement. 

At least five (5) days prior to the Settlement Conference the

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parties shall submit, directly to the Magistrate Judge's

chambers, a confidential settlement conference statement. The

statement should not be filed with the Clerk of the Court nor

served on any other party. Each statement shall be clearly

marked "confidential" with the date and time of the Settlement

Conference indicated prominently thereon. Counsel are urged to

request the return of their statements if settlement is not

achieved and if such a request is not made the Court will dispose

of the statement.

5. The Confidential Settlement Conference

Statement shall include the following: 

a. A brief statement of the facts of the 

case.

b. A brief statement of the claims and 

defenses, i.e., statutory or other grounds upon which the claims

are founded; a forthright evaluation of the parties' likelihood

of prevailing on the claims and defenses; and a description of

the major issues in dispute.

c. A summary of the proceedings to date.

d. An estimate of the cost and time to be

expended for further discovery, pre-trial and trial.

e. The relief sought.

f. The parties' position on settlement,

including present demands and offers and a history of past

settlement discussions, offers and demands. 

XIII. Request For Bifurcation, Appointment Of Special Master, 

Or Other Techniques To Shorten Trial. 

1. The parties have not specifically agreed on whether

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discovery should be conducted in phases. This will be addressed

at a discovery conference to be held September 17, 2008, at 8:15

a.m. All parties may appear telephonically. 

XIV. Related Matters Pending.

1. There are no related matters. However, there are a

multitude of nearly identical “Option ARM” class actions pending

against other Defendants throughout California’s federal judicial

districts. 

XV. Compliance With Federal Procedure.

1. The Court requires compliance with the Federal

Rules of Civil Procedure and the Local Rules of Practice for the

Eastern District of California. To aid the court in the

efficient administration of this case, all counsel are directed

to familiarize themselves with the Federal Rules of Civil

Procedure and the Local Rules of Practice of the Eastern District

of California, and keep abreast of any amendments thereto.

XVI. Effect Of This Order.

1. The foregoing order represents the best

estimate of the court and counsel as to the agenda most suitable

to bring this case to resolution. The trial date reserved is

specifically reserved for this case. If the parties determine at

any time that the schedule outlined in this order cannot be met,

counsel are ordered to notify the court immediately of that fact

so that adjustments may be made, either by stipulation or by

subsequent scheduling conference. 

2. Stipulations extending the deadlines contained

herein will not be considered unless they are accompanied by

affidavits or declarations, and where appropriate attached

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exhibits, which establish good cause for granting the relief

requested. 

3. Failure to comply with this order may result in

the imposition of sanctions. 

IT IS SO ORDERED.

Dated: August 20, 2008 /s/ Oliver W. Wanger 

emm0d6 UNITED STATES DISTRICT JUDGE

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