15-1891 Garrido v. Money Store



### UNITED STATES COURT OF APPEALS **FOR THE SECOND CIRCUIT**



## SUMMARY ORDER

**R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT**  **. C**  **ITATION TO A SUMMARY ORDER FILED**
**ON OR AFTER J** **ANUARY 1,**  **2007, IS PERMITTED AND IS GOVERNED BY**  **F EDERAL**  **R ULE OF**  **A PPELLATE**  **P ROCEDURE**  **32.1 AND THIS COURT**  **’ S**  **L OCAL**  **R ULE**  **32.1.1. W**  **HEN CITING A SUMMARY ORDER IN A**
**DOCUMENT FILED WITH THIS COURT ,**  **A PARTY MUST CITE EITHER THE F**  **EDERAL A** **PPENDIX OR AN**
**ELECTRONIC DATABASE (**  **WITH THE NOTATION “**  **SUMMARY ORDER ”).**  **A PARTY CITING A SUMMARY ORDER MUST** 
**SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL .** 
**At a stated term of the United States Court of Appeals** 1 **for the Second Circuit, held at the Thurgood Marshall United** 2 **States Courthouse, 40 Foley Square, in the City of New York,** 3 **on the 23 rd** **day of May, two thousand sixteen.** 4 5 **PRESENT: AMALYA L. KEARSE,** 6 **RALPH K. WINTER,** 7 **DENNIS JACOBS,** 8 **Circuit Judges**

**.** 9 10
- - - - - - - - - - - - - - - - - - - -X 11 **LINDA U. GARRIDO and JOHN GARRIDO, on** 12 **behalf of themselves and all others** 13 **similarly situated,** 14 **Plaintiffs-Appellants ,**  15 16 **RUTH ANN GUTIERREZ and LORI JO** 17 **VINCENT, on behalf of themselves and** 18 **all others similarly situated,** 19 **Plaintiffs ,**  20 21 **-v.- 15-1891** 22 23 **THE MONEY STORE, TMS MORTGAGE, INC.,** 24 **HOMEQ SERVICING CORP.,** 25 **Defendants-Appellees ,**  26 27

1**MOSS, CODILIS, STAWIARSKI, MORRIS,** 1 **SCHNEIDER & PRIOR, LLP, OCWEN LOAN** 2 **SERVICING, LLC, WELLS FARGO BANK,** 3 **N.A., BARCLAYS CAPITAL REAL ESTATE,** 4 **INC., JOHN DOE CORPORATIONS 1-3, as** 5 **successors in interest to The Money** 6 **Store, TMS Mortgage, Inc. and HomEq** 7 **Servicing Corp.,** 8 **Defendants**

**.** * 9
- - - - - - - - - - - - - - - - - - - -X 10 11 **FOR APPELLANTS:** Paul S. Grobman, The Law Offices 12 of Paul Grobman, New York, New 13 York. 14 15 **FOR APPELLEES:** Daniel A. Pollack, Edward T. 16 McDermott, Anthony Zaccaria, 17 Minji Kim, McCarter & English, 18 LLP, New York, New York. 19 20 Appeal from a judgment of the United States District 21 Court for the Southern District of New York (Koeltl, J. ). 22 23 **UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED** 24 **AND DECREED**that the judgment of the district court be 25
**AFFIRMED**

. 26 27 Linda and John Garrido (the “Garridos”) appeal the 28 February 2, 2015, denial of their motion for class 29 certification under Fed. R. Civ. P. 23(b)(3), which merged 30 into the judgment of the United States District Court for 31 the Southern District of New York (Koeltl, J. ). The 32 judgment dismissed with prejudice the Garridos’ claims 33 against defendants-appellees (the “Money Store 34 Defendants”). 1 The Garridos allege common-law fraud in 35

* The Clerk of Court is directed to amend the official caption in this case to conform to the listing of the parties above.

1The Garridos and Money Store Defendants stipulated to dismissal of the Garridos’ claims with prejudice and to entry of final judgment, and agreed that the Garridos would retain appellate rights limited solely to the denial of class certification. We treat the so-ordered stipulation of

2connection with the Money Store Defendants’ debt collection 1 practices. We assume the parties’ familiarity with the 2 underlying facts, the procedural history, and the issues 3 presented for review. 4 5 The Garridos sought to certify a class of all borrowers 6 on loans owned or serviced by the Money Store Defendants who 7 were charged attorneys’ fees and expenses that the Money 8 Store Defendants had not yet paid to their attorneys 2(as 9 indicated by the absence of a date in the “Check Confirmed” 10 field of an invoice processing database used by the Money 11 Store Defendants), from January 2001 to the present; they 12 contend that the Money Store Defendants committed fraud by 13 representing (falsely) to borrowers that such reimbursement 14 was due, before making such remuneration to counsel. The 15 district court determined that the Garridos did not satisfy 16 the commonality requirement of Fed. R. Civ. P. 23(a)(2); the 17 adequacy of representation requirement of Fed. R. Civ. P. 18 23(a)(4); or the predominance requirement of Fed. R. Civ. P. 19 23(b)(3). We review the denial of class certification for 20 abuse of discretion. Myers v. Hertz Corp. , 624 F.3d 537, 21 547 (2d Cir. 2010). 3The party seeking class certification 22 must prove by a preponderance of the evidence that each Rule 23 23 requirement is met. Id. (citing Amchem Prods., Inc. v. 24 Windsor , 521 U.S. 591, 614 (1997)). 25 26 The district court did not abuse discretion in 27 determining the Garridos failed to prove that “the questions 28 of law or fact common to class members predominate over any 29 questions affecting only individual members . . . .” Fed. 30 R. Civ. P. 23(b)(3). We therefore do not reach other 31 issues. 32 33

dismissal with prejudice as a final judgment. See Fed. R. Civ. P. 54(a).

2The Garridos contend that loan documents required the Money Store Defendants to pay any attorneys’ fees before requesting reimbursement from putative class members.

3Factual findings underlying the district court’s decision are reviewed for clear error; articulation of the legal standards is reviewed de novo ; and application of the law to the facts is reviewed for abuse of discretion. In re IPO Sec. Litig. , 471 F.3d 24, 40-41 (2d Cir. 2006).

3“Considering whether ‘questions of law or fact common 1 to class members predominate’ begins, of course, with the 2 elements of the underlying cause of action.” Erica P. John 3 Fund, Inc. v. Halliburton Co. , 131 S. Ct. 2179, 2184 (2011). 4 A New York common law fraud claim requires proof of a 5 representation of material fact, falsity, scienter, 6 reasonable reliance, and injury. Small v. Lorillard Tobacco 7 Co. , 720 N.E.2d 892, 898 (N.Y. 1999); Stuart Silver Assocs., 8 Inc. v. Baco Dev. Corp. , 665 N.Y.S.2d 415, 417 (App. Div. 9 1997). 10 11 The district court did not clearly err in ruling that 12 the Garridos failed to show that any uniform representation 13 was made to all putative class members. The Garridos relied 14 on testimony and documentary evidence regarding (i) paper 15 and electronic invoices and (ii) payoff quotes. The 16 district court found that these items were not routinely 17 sent to class members, because invoices were sent by third 18 parties to the Money Store Defendants, not to borrowers; and 19 payoff quotes were prepared and sent to borrowers only when 20 specifically requested. 21 22 Without proof of a uniform representation, the Garridos 23 cannot use class-wide evidence to prove “the central 24 disputed issues in a fraud action”: a material 25 representation; its falsity; and reliance. Moore v. 26 PaineWebber, Inc. , 306 F.3d 1247, 1253 (2d Cir. 2002) 27 (“[F]raud claims based on uniform misrepresentations made to 28 all members of the class . . . are appropriate subjects for 29 class certification because the standardized 30 misrepresentations may be established by generalized proof. 31 Where there are material variations in the nature of the 32 misrepresentations made to each member of the proposed 33 class, however, class certification is improper because 34 plaintiffs will need to submit proof of the statements made 35 to each plaintiff, the nature of the varying material 36 misrepresentations, and the reliance of each plaintiff upon 37 those misrepresentations in order to sustain their 38 claims.”); see alsoFed. R. Civ. P. 23(b)(3) advisory 39 committee’s note, 1966 amendment (“[A]lthough having some 40 common core, a fraud case may be unsuited for treatment as a 41 class action if there was material variation in the 42 representations made . . . .”). 43 44 The Garridos contend that (mis)representations may be 45 presumed because members of the putative class paid the 46 alleged fees, and “[t]he conclusion that borrowers might 47

4have paid such legal fees and expenses without ever being 1 told they were owed would . . . ‘deny human nature, run 2 counter to the traditional presumption in favor of actors 3 operating under rational economic choice, and leave the 4 Court with an absurd conclusion.’” Br. of Appellants 30 5 (quoting Chisolm v. TranSouth Fin. Corp. , 194 F.R.D. 538, 6 561 (E.D. Va. 2000) (discussing doctrine of presumed 7 reliance ); see alsoReply Br. 7 (“It cannot be meaningfully 8 disputed that a party which obtains reimbursement for a 9 purported legal fee or other expense which it never incurred 10 commits fraud–-‘the fraud is in asking [a party] to pay a 11 debt that it does not owe because the debt was never 12 incurred by the [first party].’” (quoting United States ex 13 rel. Westmoreland v. Amgen, Inc. , 812 F. Supp. 2d 39, 67 (D. 14 Mass. 2011) (False Claims Act))). 15 16 However, the claim is not that borrowers were 17 fraudulently charged for attorneys’ fees that the Money 18 Store Defendants did not incur ; the claim is that borrowers 19 were fraudulently charged for attorneys’ fees that the Money 20 Store Defendants had not yet paid . It would be speculation 21 to conclude from the fact of payment that a representation 22 was made to all putative class members that the Money Store 23 Defendants had already paid these fees, or even that the 24 fees were currently “owed” pursuant to the borrowers’ loan 25 agreements. Some borrowers may have paid fees after 26 speaking with a representative over the phone. Others may 27 have received payoff quotes. Who knows what was or was not 28 communicated? 4 29 30 The Garridos cite no authority that representations of 31 fact (as opposed to reliance on those representations) can 32 be presumed in a common-law fraud action, and such a 33 presumption is not reasonable under the theory of this case. 34 Without class-wide proof of what representations were or 35 were not made, these claims cannot be proved on a class-wide 36 basis. Cf. In re U.S. Foodservice Inc. Pricing Litig. , 729 37 F.3d 108, 120 (2d Cir. 2013) (holding that, where uniform 38 representations in the form of invoices were sent to all 39 class members, “payment may constitute circumstantial proof 40

4The Garridos entered only one payoff quote into evidence, so there is no evidence even that payoff quotes were prepared in a uniform manner such that putative class members who did receive them received uniform representations.

5of reliance based on the reasonable inference that customers 1 who pay the amount specified in an inflated invoice would 2 not have done so absent the invoice’s implicit 3 representation that the invoiced amount was honestly owed”). 4 5 The Garridos argue that they might be able to prove 6 their fraud case on a class-wide basis through evidence of 7 spoliation, and ask us to take judicial notice of a ruling 8 in a related action, in which the district court found that 9 the Money Store Defendants had failed to preserve their 10 invoice database system in its previously accessible form. 11 SeeMazzei v. Money Store , 308 F.R.D. 92, 100-03 (S.D.N.Y. 12 2015). Even if this argument were not waived for failure to 13 raise it below, seeBr. of Appellees 45-47, it does not bear 14 on the outcome of this appeal. The Garridos do not argue 15 that the unpreserved database contained evidence of any 16 uniform representation; to the contrary, the database at 17 issue appears to contain the invoices already discussed 18
supra , which were never sent to borrowers. 5 19 20 For the foregoing reasons, and finding no merit in the 21 Garridos’ other arguments, we hereby **AFFIRM** the judgment of 22 the district court. 23 24 FOR THE COURT: 25 CATHERINE O’HAGAN WOLFE, CLERK 26 27

5The district court denied in Mazzei the type of trial sanctions the Garridos appear to seek here.

6