Opinion ID: 808599
Heading Depth: 2
Heading Rank: 1

Heading: General Applicability to the Class

Text: “Instead of requiring common issues, 23(b)(2) requires common behavior by the defendant towards the class.” Casa Orlando Apartments, Ltd. v. Fed. Nat’l Mortg. Ass’n, 624 F.3d 185, 198 (5th Cir. 2010). “The court may certify a class under Rule 23(b)(2) if ‘the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole.’” Bolin, 231 F.3d at 975 (citing Fed. R. Civ. Proc. Rule 23(b)(2)). The bankruptcy court did not abuse its discretion when it concluded that Countrywide’s fee charging actions in alleged derogation of Rule 2016(a) were generally applicable to the narrowly certified “unapproved fees” class of approximately 125 individuals. Countrywide charged every class member purportedly unauthorized fees in contravention of Rule 2016(a). It is this alleged common behavior towards all members of the class—“systematically ignor[ing] Rule 2016(a) by charging unauthorized fees”—that led to the class members allegedly being harmed in the same way. See Bolin, 231 F.3d at 975 n.22. As the bankruptcy court explained, “[t]he [class action] therefore eliminates piecemeal litigation concerning whether Countrywide must seek Court approval for fees that it imposes: once the class is certified and the injunction is granted or denied, that issue will be resolved as to all class members.” Countrywide argues that our decision in Wilborn II, involving similar facts to the instant case, mandates that class certification be denied. Wilborn II, however, was exactingly adhered to by the bankruptcy court, which extensively applied Wilborn II’s reasoning to redefine and narrow the instant class and appropriate respecting the class as a whole. 6 Case: 11-40056 Document: 00511988853 Page: 7 Date Filed: 09/14/2012 No. 11-40056 proposed injunction and to deny class certification as to any damages. The Wilborn II plaintiffs alleged that, “for each named plaintiff and each unnamed class member Wells Fargo impermissibly charged post-petition fees and costs without obtaining approval from the bankruptcy court, as purportedly required by Title 11 and [Federal Rule of Bankruptcy Procedure 2016].” 609 F.3d at 752. The bankruptcy court granted class certification for the plaintiffs’ claims for declaratory judgment, disgorgement, injunctive relief, and sanctions. Id. at 751. On appeal, after rejecting class certification under Rule 23(b)(3), we determined that class certification was also improperly granted under Rule 23(b)(2) because “[a]gain, the circumstances and court orders differ between the judges and cases. And the injunctive or declaratory relief sought by the plaintiffs must predominate over claims for monetary relief.” Id. at 757 (citing Maldonado, 493 F.3d at 524). We concluded that to determine which fees should be disgorged, the bankruptcy court would have to conduct an individual assessment of each individual’s claims to figure out how and why certain fees were charged or paid. Id. at 756–57.6 Such an assessment would include deciding whether debtors agreed to the fees, whether the parties entered into an agreement to modify the stay or agreed to a loan modification, whether the bankruptcy court approved of the fees, and whether the defendant had a viable defense to each particular plaintiff’s fees. Id. In the instant case, the bankruptcy court conformed its ruling explicitly to our Wilborn II decision, explaining how it would not include damages claims in its class certification grant because, “when damages enter the fray, individualized issues begin to predominate as the Court must consider the harm 6 Although these citations refer to the portion of Wilborn II that analyzes class certification under Rule 23(b)(3), the Rule 23(b)(2) discussion incorporates by reference the earlier Rule 23(b)(3) discussion. See Wilborn II, 609 F.3d at 757 (“For similar reasons, class certification is improper under Rule 23(b)(2). . . . Again, the circumstances and court orders differ between the judges and cases.”). 7 Case: 11-40056 Document: 00511988853 Page: 8 Date Filed: 09/14/2012 No. 11-40056 suffered by each class member on a case-by-case basis.” Similarly, because disgorgement and other damages claims were also excluded from this class action, Countrywide will not be required to adjudicate and repay fees, again, responding to our direction in Wilborn II that individualized disgorgements not be resolved through class action procedure. “[Rule 23(b)(2)] is clear that claims seeking injunctive or declaratory relief are appropriate for (b)(2) class certification.” Allison, 151 F.3d at 411. The injunction being sought would target only the alleged Countrywide practice of viewing Rule 2016(a) as inapplicable to any fee assessed post-petition but charged post-discharge and, accordingly, any practice of never seeking approval of such fees under Rule 2016(a). If Plaintiffs prevail, Countrywide would no longer be able to collect or attempt to collect fees within the scope of Rule 2016(a) that, according to its own readily accessed and comprehensive AS-400 database, were incurred post-petition and pre-discharge yet have not been authorized for collection pursuant to Rule 2016(a).7 “The focus is properly upon Countrywide’s fee assessment and collection practice, not on the individualized manner in which each class member may have been affected by the practices.”8 As a result, the injunctive claim on 7 In abundance of caution to avoid individualized litigation and a loss of class homogeneity, the bankruptcy court made clear that even injunctive success for the class to ensure Countrywide’s compliance with Rule 2016(a) might mean specific fees validly collected by Countrywide will be retained. 8 The bankruptcy court’s single-issue injunctive class redefinition and application of Wilburn II demonstrate that Countrywide’s alleged fee practice defenses will not be implicated or compromised in this litigation. In fact, that concern, with careful inquiry into the named Plaintiffs’ cases, was the basis for the bankruptcy court’s broad application of Wilborn II to refuse certification even as to non-disgorgement damages claims. Regardless, our caselaw is clear that courts are “free . . . as often as necessary before judgment” to reconsider whether class certification continues to be appropriate. McNamara v. Felderhof, 410 F.3d 277, 280 (5th Cir. 2005) (citations omitted); see also Richard v. Byrd, 709 F.2d 1016, 1019 (5th Cir. 1983) (holding, before the 2003 amendments to Rule 23, that a district judge must decertify a class as appropriate). As contemplated by the bankruptcy court, it can determine across individual cases at trial whether authorization pursuant to Rule 2016(a) is unnecessary in circumstances where Countrywide would invoke waiver, estoppel, voluntary payment, or res judicata as a 8 Case: 11-40056 Document: 00511988853 Page: 9 Date Filed: 09/14/2012 No. 11-40056 its own does not involve “the myriad issues that may arise in each case as to whether and how fees and costs were imposed.” Wilborn II, 609 F.3d at 757.9 The bankruptcy court made factual findings based on multiple days of testimony and the fifty volume record and concluded therefrom that many of the factors cited by Countrywide as requiring an individualized assessment of claims are readily identifiable in Countrywide’s AS-400 database. For each mortgagor, the AS-400 database tracks the type and amount of all fees; whether a fee was classified as recoverable (collectable) or non-recoverable (not collectable); the funds pre- and post-petition; all payments; the mortgagor’s bankruptcy filings; the status, case number, and chapter of the mortgagor’s bankruptcy case; the name of the trustee handling the mortgagor’s bankruptcy case; the date of the chapter 13 plan confirmation; and all information relevant to the escrow and principal balance of the mortgage. After a firsthand review of the evidence, the bankruptcy court determined, based on testimony by one of Countrywide’s witnesses, that Countrywide’s AS-400 database was searchable, making the information easily ascertainable without court intervention.10 Since defense. The injunction, the court clarified, would not impede the retention or recovery of validly assessed fees. 9 Additionally, “there is no concern that ‘the legitimate interests of potential class members who might wish to pursue their monetary [damages] claims individually’ would be interfered with by this class certification.” James v. City of Dallas, Tex., 254 F.3d 551, 572–73 (5th Cir. 2001) (quoting Allison, 151 F.3d 415), abrogated on other grounds by M.D. ex rel. Stukenberg v. Perry, 675 F.3d 832, 839–41 (5th Cir. 2012) (explaining that, contrary to prior Fifth Circuit caselaw that “[t]he fact that some of the Plaintiffs may have different claims, or claims that may require some individualized analysis, is not fatal to commonality,” the Supreme Court held in Dukes v. Walmart, 131 S. Ct. 2541 (2011), that “[c]ommonality requires the plaintiff to demonstrate that the class members have suffered the same injury.” (internal quotation marks omitted)). The proposed injunction does not indicate that it would have any preclusive effect on any of the individual plaintiffs’ damages claims. 10 The bankruptcy court pointed out that “[t]he only relevant data noticeably absent from the AS-400 database is information concerning court authorization of fee awards”; consequently, the bankruptcy court explained that any fees already agreed upon by the parties would not be considered as a part of the class action. 9 Case: 11-40056 Document: 00511988853 Page: 10 Date Filed: 09/14/2012 No. 11-40056 “Countrywide could [] query all the fees charged to every Countrywide account in the Southern District of Texas, or even to every mortgage account nationwide,” the bankruptcy court faced unique facts that allowed it to conclude that it would not need to determine on a loan-by-loan basis whether fees were improperly charged. Next, Countrywide argues that its conduct cannot be generally applicable to the class because Countrywide had no policy concerning Rule 2016(a) compliance. However, the bankruptcy court did not abuse its discretion when it determined that because “Countrywide assessed and charged fees to the class according to its understanding that its conduct was not regulated by Rule 2016(a) . . . . Plaintiffs have sufficiently alleged behavior applicable to the class as a whole under Rule 23(b)(2) and Bolin.” The bankruptcy court reasonably determined, based on the extensive record, that Countrywide had a regular practice for dealing with fees accrued post-petition but charged post-discharge and Rule 2016(a). When it perceived that compliance with Rule 2016(a) was not required, Countrywide had a practice of noncompliance. The bankruptcy court summarized its findings from evidence submitted to it as follows: Multiple employees of Countrywide, each of whom was intimately familiar with Countrywide’s relevant bankruptcy and fee collection policies, testified that Countrywide would regularly assess fees without any concern for Rule 2016(a)’s requirements. The employees also testified that Countrywide would regularly classify unauthorized fees as recoverable from debtors in the AS-400 database.11 11 The instant case, therefore, is distinguishable factually from Dukes v. Walmart, where the Supreme Court held that the plaintiffs had offered insufficient evidence to show that the discriminatory treatment at issue was typical of Wal-Mart’s employment practices. 131 S. Ct. at 2554–55 (discussing and applying Bolin). The Supreme Court noted that WalMart had a specific policy forbidding sex discrimination, and individual Wal-Mart managers were using their discretion over hiring matters to discriminate. Id. at 2553–54. In contrast, the bankruptcy court found that Plaintiffs in the present case have identified a regular practice within Countrywide of not following Rule 2016(a). See also id. at 2555. It is not the case that Countrywide required its employees to follow Rule 2016(a) but individual employees 10 Case: 11-40056 Document: 00511988853 Page: 11 Date Filed: 09/14/2012 No. 11-40056 In addition, Countrywide contends that the bankruptcy court was mistaken when it concluded that Countrywide’s behavior was generally applicable to the class because there was no legal consensus regarding whether Rule 2016(a) applied to post-petition mortgage fees. However, this fact does not impact the general applicability of Countrywide’s behavior because Countrywide treated all class members the same, failing to seek approval in every case. Irrespective of any legal uncertainty as to Rule 2016(a), Countrywide consistently did not apply for authorization pursuant to Rule 2016(a); there was no contradictory or sporadic treatment of Rule 2016(a) by Countrywide that would militate against certification of this class.12 Finally, Countrywide argues, citing Meyer v. Brown & Root Construction Co., 661 F.2d 369 (5th Cir. 1981), that the proposed injunction would be improper because it merely orders Countrywide to obey the law. Countrywide’s argument misinterprets Meyer. In Meyer, the district court enjoined the defendant from “‘engaging in the stated unlawful employment practice.’” Id. at 373. The defendant argued that such language was too vague because it merely ordered the defendant to obey the law generally rather than identifying what conduct was specifically prohibited. Id. We rejected that argument, holding that the injunction was sufficiently specific because the judgment made it clear that the unlawful employment practice being prohibited was “constructively discharging plaintiff when she was pregnant” in violation of Title VII. Id. chose not to; in fact, no Countrywide employee filed a Rule 2016(a) application during the time period identified in the class definition. 12 Countrywide argues that to the extent that it did have a Rule 2016(a) policy, that policy was to defer decision-making to local counsel. However, local counsel was not charged with determining whether a fee fell within the scope of Rule 2016(a) or deciding whether or not bankruptcy court approval in compliance with Rule 2016(a) should be sought; instead, Countrywide only asserts that local counsel determined whether to seek approval of fees in ways other than complying with Rule 2016(a), including agreed orders and amended proofs of claim. 11 Case: 11-40056 Document: 00511988853 Page: 12 Date Filed: 09/14/2012 No. 11-40056 Injunctions are problematic when they order a defendant to obey the law but do not simultaneously indicate what law the defendant needs to obey. Id. We did not hold that injunctions that order a defendant to obey a specific law are problematic. See id. Therefore, we conclude that the bankruptcy court did not abuse its discretion by determining that Countrywide’s failure to seek bankruptcy court approval under Rule 2016(a) is generally applicable, under these facts probingly ascertained by the bankruptcy court, to this narrow class.