Source: http://md.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20130426_0000855.DMD.htm/qx
Timestamp: 2017-01-17 06:50:21
Document Index: 566675874

Matched Legal Cases: ['§ 2601', '§ 2607', '§ 8', '§ 1292', '§ 1292', '§ 7', '§ 8', '§ 8', '§ 3500']

| Minter v. Wells Fargo Bank, N.A.
This case has been pending for over five years. Since May, 2011, it has been proceeding as a class action and, presently, there are more than 150, 000 class members divided between the certified Timely and Tolling Classes. Over the years, the case has been pared down by Plaintiffs, see e.g. ECF No. 396 (Letter from Plaintiffs' Counsel to Court), and the Court. Most recently, the Court granted, in part, and denied, in part, motions for summary judgment filed by Defendants. ECF Nos. 470 & 471. Following that ruling, Plaintiffs' only remaining claims are for violations of certain provisions of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §§ 2601 et. seq., specifically, 12 U.S.C. § 2607(a)[1] and 2607(c). A four-week jury trial on liability issues is scheduled to start in less than two weeks.[2]
A. Defendants' Conditional Motion to Certify a Question of Law to the Fourth Circuit and Defendants' Motion to Dismiss for Lack of Jurisdiction
Defendants have requested that the Court certify a question to the Fourth Circuit regarding the viability of Plaintiffs' claims under § 8(c). ECF No. 481 at 2. While it is true that the question Defendants seek to have certified meets many of the requirements of 28 U.S.C. § 1292(b), other aspects of their motion give the Court pause. First, any delay in seeking certification must be reasonable. See, e.g., Morris v. Flaig , 511 F.Supp.2d 282, 314-15 (E.D.N.Y. 2007); Century Pacific, Inc. v. Hilton Hotels Corp. , 574 F.Supp.2d 369, 371 (S.D.N.Y. 2008); see also Safety-Kleen, Inc. v. Wyche , 274 F.3d 846, 867 (4th Cir. 2001) (holding that weighing a delay in seeking certification of a question of law is built into considerations of excusable neglect and lack of prejudice). Here, Plaintiffs' legal theory was determined to be viable years ago, see ECF No. 253 at 48 (May 3, 2011, memorandum opinion holding "Plaintiffs' reading of RESPA is sound."), they made clear their intention to abandon any claim for economic damages eight months ago, see ECF No. 396, and the Court ruled on Defendants' summary judgment motions two months ago.[3] Thus, the Court determines that Defendants have unreasonably delayed in seeking certification. Second, while the Court may not lean as far as Plaintiffs in calling conditional nature of the motion "gimmicky, " it fails to see the relevance of any connection to the motion for certification of a question of law to the Maryland Court of Appeals that is presently pending in Petry v. Prosperity Mortgage Co., Civ. No. 08-1642. That this case is related to Petry is certainly clear to the Court, but it will not decide Defendants' motion under § 1292(b) based on a goose and gander argument. Defendants' motion for certification of a question of law will therefore be denied.
In Defendants' motion to dismiss they argue that Plaintiffs have not been injured within the meaning of Article III and that Plaintiffs cannot satisfy statutory standing requirements under RESPA. The Court sees no need to review, in any detail, its understanding of Congress' intent when it passed RESPA, which Defendants acknowledge is the key in this inquiry. ECF No. 476-1 at 10. It should suffice to say, once again, that the right to be free from transaction-specific economic harm is not the only right that RESPA created[4] and that RESPA was intended to prevent practices that have market-distorting effects, such as those alleged by Plaintiffs here (i.e., Prosperity is a sham or an undisclosed ABA). ECF No. 253 at 25-26 (citing Robinson v. Fountainhead Title Group Corp. , 252 F.R.D. 275 (D. Md. 2008) ("Congress amended RESPA to exempt [ABAs] from liability only in certain circumstances because of the concern that the harm caused by ABAs was not limited to an increase in settlement costs, but extended to a lack of impartiality in referrals and a general decrease in competition in the settlement services market.") (internal quotations and citations omitted)). Thus, the harm resulting from a violation of RESPA "is not limited to inflating transaction-specific costs, " but also includes a distortion of competition in the market. ECF No. 253 at 35. Against this background, the Court has little difficulty maintaining its conclusion that Plaintiffs have standing to pursue their claims without proving that they were economically damaged. ECF No. 253 at 47-48 ("Plaintiffs... have standing to pursue their theory of liability under Section 8.") (citing Edwards v. First American Corp. , 610 F.3d 514, 518 (9th Cir. 2010); Carter , 553 F.3d at 989; Alston , 585 F.3d at 755).
B. Defendants' Motion to Decertify Tolling and Timely Classes
An order granting class certification is not an untouchable determination. As Fed.R.Civ.P. 23(c)(1)(C) provides, "an order that grants or denies class certification may be altered or amended before final judgment." Indeed, "an order certifying a class must be reversed if it becomes apparent, at any time during the pendency of the proceeding, that class treatment of the action is inappropriate." Stott v. Haworth , 916 F.2d 134, 139 (4th Cir. 1990) (emphasis added). The breadth of this obligation, however, is tempered by commentary in the Advisory Committee Notes which provide that altering certification is appropriate "upon fuller development of the facts." 1996 Amendment Advisory Committee Notes. Other commentators have cautioned that courts should be wary of motions to decertify which simply reargue certification "[i]n the absence of materially changed or clarified circumstances." 3 Newberg on Class Actions § 7:47 (4th ed. 2012). If such circumstances are present, however, a motion to decertify is reviewed against the same standards as a motion to certify (i.e., the requirements of Rule 23). Chisolm v. TranSouth Fin. Corp. , 194 F.R.D. 538, 544 (E.D. Va. 2000).
2. Tolling Class
Defendants have moved to decertify the Tolling Class. On
January 5, 2012 the Court certified a class composed of:
The elements of equitable tolling must be established by the Tolling Class, in addition to the substantive elements of the alleged RESPA violations. And, as the Court has previously explained, equitable tolling is only available when "(1) the defendant fraudulently concealed facts that are the basis of the plaintiff's claim, and (2) the plaintiff failed to discover those facts within the statutory period, despite (3) the exercise of due diligence." ECF No. 307 at 7 (quoting Supermarket of Marlington, Inc. v. Meadow Gold Dairies, Inc. , 71 F.3d 119, 122 (4th Cir. 1995)). "The circumstances under which equitable tolling has been permitted are therefore quite narrow." ECF No. 470 at 32-33 (quoting Chao v. Virginia Dept. of Transp. , 291 F.3d 276, 283 (4th Cir. 2002)) (internal quotations omitted).
When the Court certified the Tolling Class it noted that it was possible that proving equitable tolling might become unmanageable and thus warrant the Court's exercise of discretion to decertify the class. ECF No. 307 at 27 n.11. At summary judgment, the Court again expressed concern that proving tolling would be unmanageable. ECF No. 470 at 37-38. There, the Court denied Defendants' motion for summary judgment "as to [Named Plaintiff Lizbeth] Binks' claim" id. at 37, but stated that it would consider the viability of the class claim in light of its concerns about manageability after the trial in Petry where, by happenstance, the statute of limitations was twelve years, the same period covered by the Tolling Class. Id . The Court now determines that "the likely difficulties in managing a class action, " by the Tolling Class, under the circumstances of this case, warrant decertification. Fed.R.Civ.P. 23(b)(3)(D).
The Court's concern about manageability revolves around the concealment and due diligence elements of tolling. When it certified the Tolling Class, the Court acknowledged that some level of individualized inquiry into due diligence would indeed be necessary. ECF No. 307 at 17-19. It stated, however, that
[b]efore reaching this potentially individual issue, the Court will need to determine the common issues of whether Defendants' course of conduct served to conceal class members' potential claims and whether any information received during that common course of conduct should have provoked class members to inquire into Prosperity's affiliations and operations.
Plaintiffs respond by suggesting that evidence from the class members' individual transactions "creates, at worst, a jury question whether Class members were on notice to inquire about the true roles of Prosperity and Wells Fargo in their transactions" and that "alone does not warrant decertification." ECF No. 492 at 26. But, therein lies the manageability (or unmanageability) issue. The problem is not that the circumstances of class members' transactions may create a jury question; it is that it only creates that jury question as to some class members and not others.[5] Managing a class action where some class members had a duty to inquire while others did not, presents substantial logistical and mental challenges for the Court and jury which warrant decertification in this already complicated case.
3. Timely Class
a. Decertification Is Not Appropriate
Defendants also argue that decertification is required because they are entitled to show that any compensation received from Plaintiffs was for actual services rendered pursuant to 12 U.S.C. 2607(c)(2), and that this evidence is not amenable to class-wide proof. ECF No 479-1 at 35. That may be the case but, as outlined in the Court's April 23, 2013, letter, ECF No. 534, whether Defendants were compensated for actual services rendered has no bearing on a finding that Defendants are liable and thus Defendants' argument does not provide a basis for decertifying the class as it regards the alleged § 8(c)(4)(A) violation.[6]
Defendants argue that the Timely Class should be decertified as it relates to Plaintiffs' sham theory primarily because the HUD Ten Factor Test cannot be applied, or be manageably applied, on a class-wide basis. The Court finds no merit in Defendants' contention. The Court has previously explained that "[n]o single factor is determinative... rather, the factors are weighed in light of specific facts to determine whether a specific entity is a sham." ECF No. 253 at 37. Thus, while consideration of the changes to the test factors over the years is relevant to the jury's analysis, those changes do not suggest that application of the test to Prosperity cannot be done on a class-wide basis.[7] Moreover, the Court understands that application of the test may result in a complex and protracted trial (hence, the liability phase is scheduled for four weeks), but does not foresee it "degenerate[ing] into chaos as" Defendants seem to suggest. ECF No. 479-1 at 50 n. 41 (quoting Lloyd v. Gen. Motors Corp., 266 F.R.D. 98, 105 (D. Md. 2010)). Complexity, by itself, is not a basis for decertification. See generally Lloyd, 266 F.R.D. at 105.
In sum, Defendants' arguments are insufficient for the Court to reverse its earlier conclusion that "the questions of... 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 [this] controversy." Fed.R.Civ.P. 23(b).
b. The Timely Class Is Overbroad
While the Court will not accept Defendants' invitation to decertify the Timely Class, it is sensitive to Defendants' concern that the Timely Class is overbroad. At oral argument, Defendants clearly highlighted relevant distinctions between Plaintiffs' broker theory and sham theory which are not reflected in the class definition. As to Plaintiffs' sham theory, Defendants argue that the class is overbroad to the extent that it includes individuals who were not referred to Prosperity by Long & Foster. They reason that because the basic premise under that theory is that Prosperity was created as a sham entity to funnel referral fees to Long & Foster, only individuals who were referred to Prosperity by Long & Foster would be able to recover under that theory. ECF No. 479-1 at 30. Plaintiffs' response to that argument essentially confirms its validity; they counter that Defendants' argument fails because "every one of Prosperity's loans was the subject of a (non-disclosed) ABA referral - from Prosperity as broker to Wells Fargo as table-funded lender." ECF No. 492 at 45 (emphasis in original). That referral, however, is relevant to Plaintiffs' broker theory, not to their sham theory.
It is true, as Plaintiffs observe, that when the Court issued its initial certification decision in 2011, it opined that the "gravamen" or "focus" of Plaintiffs' sham claim was whether Prosperity was a bona fide provider of settlement services and that "all borrowers who used Prosperity will have the same claim and will have to overcome the same defenses. Thus, as goes the sham-ABA allegation of the Named Minter Plaintiffs, so goes the sham-ABA allegation of the entire [Timely] Class.'" ECF No. 492 at 39 (quoting ECF No. 253 at 57). That observation was not made, however, in response to any argument regarding Long & Foster-referred borrowers, but simply to note that the determination of Prosperity's legitimacy vel non under the HUD Ten Factor Test would be typical across the class and across time. See supra, n.7. As Plaintiffs also observe, later in that same opinion, "the Court declined to certify a sub-class of Long & Foster customers, holding that doing so would unnecessarily complicate and obscure the larger question regarding the legitimacy or illegitimacy of Prosperity.'" Id . (quoting ECF No. 253 at 59). This quoted language, however, related to the Court's decision not to certify a Class for a claim under § 8(a).
The Court agrees with Defendants that, unlike Plaintiffs' broker theory, only those referred to Prosperity by Long & Foster would be able to prevail under Plaintiffs' sham theory. While it is conceivable that a jury could evaluate the merits of a sham theory applicable to a class composed only of those who were referred by Long & Foster at the same time as it considers a broker theory applicable to a different and much broader class, the Court is deeply concerned about adding any more complexity to the jury's task than it already bears. For this reason, the Court will limit the class of Plaintiffs to those who were referred to Prosperity by Long & Foster.
Under Plaintiffs' broker theory, Defendants argue that the class is overbroad because it includes individuals whose loans were not transferred to Wells Fargo, but were sold to other investors. ECF No. 479-1 at 25-26. Plaintiffs do not take on Defendants' argument directly, but suggest that Wells Fargo decided which loans to keep and which to transfer to third-party investors, which is an indication of Wells Fargo's control over Prosperity's lending, funding, and assignment process. ECF No. 492 at 37-38. The Court agrees with Defendants. Because table-funding requires that the loan be assigned to the person advancing the funds, 24 C.F.R. § 3500.2(b), those whose loans were sold directly - not by way of a preliminary transfer to Wells Fargo - to third-party investors, plainly cannot establish that their loans were table-funded by Wells Fargo. The Court will therefore modify the Timely Class to exclude those individuals.