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Miller v. Wells Fargo Bank, N.A.

United States District Court, S.D. Florida

February 22, 2017

ANNA MILLER, Plaintiff,
v.
WELLS FARGO BANK, N.A., Defendant.

          ORDER ON MOTION FOR CLASS CERTIFICATION

          URSULA UNGARO UNITED STATES DISTRICT JUDGE

         THIS CAUSE is before the Court upon Plaintiffs Motion for Class Certification, D.E. 165.

         THE COURT has considered the Motion, the pertinent portions of the record and is otherwise fully advised in the premises. For reasons set forth below, Plaintiffs Motion is DENIED.

         I. Background

         On March 31, 2016, Plaintiff, Anna Miller ("Plaintiff), filed the instant putative class action, alleging claims for: (1) breach of contract (Count I); and (2) declaratory and injunctive relief (Count II). D.E. 1. Plaintiff alleges that Defendant, Wells Fargo Bank, NA. ("Defendant" or "Wells Fargo"), wrongfully charged and collected from Plaintiff and the proposed class members "post-payment interest" (interest collected by a lender after the borrower has paid the full unpaid principal of the loan), without providing adequate disclosures under HUD and FHA regulations. Plaintiff alleges that under HUD and FHA regulations, all underlying FHA-insured loans must contain certain uniform provisions. Id. ¶¶ 1-7. Of particular relevance to this case, Plaintiff alleges that 24 C.F.R. § 203.558 required Wells Fargo to provide borrowers with "a form approved by the [FHA]" before Wells Fargo was permitted to collect post-payment interest. Id. ¶¶ 4, 86. Plaintiff contends, both in her Complaint and the instant Motion, that Wells Fargo was required and failed to issue to borrowers a document containing specific language approved and authorized by the FHA before collecting post-payment interest, once Plaintiff and proposed class members either inquired about paying off their loan, requested payoff figures, or tendered to Wells Fargo the full unpaid principal of the loans. Id. ¶¶ 54-58. In other words, Wells Fargo should have sent to Plaintiff and other borrowers a form containing language "approved by the FHA" that pertained to post-payment interest in response to a borrower's inquiry, request for payoff figures, or tender of prepayment; Wells Fargo's failure to do so, followed by its collection of post-payment interest, renders it liable for breach of the promissory note.

         In the instant Motion, Plaintiff moves to certify the following nationwide class under Fed.R.Civ.P. 23(a) and 23(b)(3):

Any person who had a FHA-insured loan for which (1) the Date of the Note is within a period beginning on June 1, 1996 and ending on January 20, 2015; (2) Wells Fargo, as of the date the total amount due on the loan was brought to zero, was the owner or otherwise held legal title to the Note; (3) Wells Fargo collected interest for any period after the total amount due on the loan was brought to zero (i.e., Wells Fargo collected "post-payment interest"); and (4) Wells Fargo collected post-payment interest during the applicable statute of limitations period, as shown by Exhibit E.

         D.E. 165 p. 6. Plaintiffs proposed class includes approximately 1, 059, 518 borrowers that paid post-payment interest in the collective amount of $254, 391, 118.21. D.E. 165 p. 7, 165-1 p. 9.

         In addition to her briefing, Plaintiff submits the following exhibits in support of her Motion: (1) the expert reports of two certified public accounts, Dr. Karen Fortune ("Dr. Fortune"), D.E. 165-1, and Dr. Karl A. Jarek ("Dr. Jarek"), D.E. 200-1; (2) the expert report of a computer science analyst, David Loshin ("Dr. Loshin"), D.E. 165-2; (3) excerpts of testimony from the depositions of Plaintiff, D.E. 200-2, and Jody Leo, Defendant's Rule 30(b)(6) witness ("Ms. Leo"), D.E. 165-3; (4) Plaintiffs declaration submitted in support of her Motion, D.E. 200-3; (5) Plaintiffs promissory note and payoff statement, D.E. 165-4, D.E. 165-9; (6) a chart containing the statute of limitations for breach of contract claims in each state, D.E. 165-5; (7) a chart documenting HUD's revisions to language regarding post-payment interest disclosures that were allegedly approved by the FHA, D.E. 165-7; (8) a 50-state survey of the elements for a breach of contract claim, D.E. 165-14; (9) a 50-state survey showing that a waiver defense requires proof of knowledge, D.E. 200-5; (10) an email chain from Defendant's employees concerning their allegedly inadequate post-payment disclosure form, D.E. 165-8; (11) Defendant's responses to Plaintiffs discovery requests, D.E. 165-6, 200-4; and (12) declarations from Plaintiffs counsel regarding their qualifications, D.E. 165-10 through D.E. 165-13.

         Defendant opposes Plaintiffs Motion and submits the following exhibits in support: (1) Plaintiffs promissory note and payoff statement, D.E. 171-1, 171-3; (2) excerpts of testimony from the depositions of: (a) Plaintiff, (b) Ms. Leo, (c) Nicholas Fasois, Defendant's investor relationship manager, and (d) Jeremy Smith, a plaintiff in related Case No. 16-21146-UU, Smith v. U.S. Bank, N.A., D.E. 171-2, 171-8, 171-9, 171-12; (3) correspondence between Defendant and Plaintiffs counsel concerning HUD's requirement to disclose whether borrowers would be required to pay post-payment interest, D.E. 171-4; (4) the expert report of former FHA Commissioner, Brian Montgomery ("Mr. Montgomery"), D.E. 171-5; (5) the expert report of a former director at HUD, Meg Burns ("Ms. Burns"), D.E. 171-6; (6) the expert report of a former deputy director at HUD, Karen Garner ("Ms. Garner'), D.E. 171-7[1]; (7) the Declaration of Ms. Leo in Support of Defendant's Opposition to Plaintiffs Motion for Class Certification, D.E. 171- 10; (8) the rebuttal expert report of Dr. Fortune, D.E. 171-11; (9) Plaintiffs responses to Defendant's discovery requests, D.E. 171-13, 171-14; and (10) Plaintiffs fee agreement between her and her counsel in this case, D.E. 171-15.

         II. Discussion

         A. Legal Standard

         A class may only be certified if the court is satisfied, after rigorous analysis, that the prerequisites of Rule 23 have been satisfied. Gilchrist v. Bolger, 733 F.2d 1551, 1555 (11th Cir. 1984). A plaintiff seeking class certification carries the burden of proof and must "affirmatively demonstrate" that all of the requirements of Rule 23 are met. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011); Rustein v. Avis Rent-A-Car Sys., Inc., 211 F.3d 1228, 1233 (11th Cir. 2000).

         As an initial matter, Rule 23(a) contains an implicit, threshold requirement that the proposed class be "adequately defined and clearly ascertainable." See, e.g., Rink v. Cheminova, Inc., 203 F.RD. 648, 659 (M.D. Fla. 2001) (citing DeBremaecker v. Short, 433 F.2d 733, 734 (5th Cir. 1970) ("It is elementary that in order to maintain a class action, the class sought to be represented must be adequately defined and clearly ascertainable.")).[2] Rule 23(a) further contains four explicit prerequisites: "(1) the class is so numerous that joinder of all members is impracticable; (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." These four prerequisites are commonly referred to as "numerosity, commonality, typicality, and adequacy of representation." Valley Drug Co. v. Geneva Pharm., Inc., 350 F.3d 1181, 1188 (11th Cir. 2003).

         In addition to the requirements of Rule 23(a), a plaintiff must also demonstrate that at least one of the three alternative requirements of Rule 23(b) has been met. Pickett v. Iowa Beef Processors, 209 F.3d 1276, 1279 (11th Cir. 2000).

         Here, Plaintiff only argues for certification under Rule 23(b)(3) on grounds 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." See Fed. R. Civ. P. 23(b)(3). D.E. 165, 200. In other words, "there must be common questions of law or fact among the class relating to . . . substantive claims . . . [that] predominate such that they have a direct impact on every class member's effort to establish liability that is more substantial than the impact of individualized issues in resolving the claim or claims of each class member. Vega, 564 F.3d at 1270 (internal citations and quotations omitted). "Where, after adjudication of the classwide issues, plaintiffs must still introduce a great deal of individualized proof or argue a number of individualized legal points to establish most or all of the elements of their individual claims, such claims are not suitable for class certification under Rule 23(b)(3)." Klay v. Humana, Inc., 382 F.3d 1241, 1255 (11th Cir. 2004).

         A district court has broad discretion in determining whether to certify a class. Washington v. Brown & Williamson Tobacco Corp., 959 F.2d 1566, 1569 (11th Cir. 1992). "Although a court should not determine the merits of a case at the class certification stage, the court can and should consider the merits of the case to the degree necessary to determine whether the requirements of Rule 23 will be satisfied." Valley Drug Co., 350 F.3d at 1188 n. 15; see also Hudson v. Delta Airlines, 90 F.3d 451, 457 (11th Cir. 1996) (stating it is sometimes necessary to probe behind the pleadings before coming to rest on the certification question).

         B. Analysis

         i. Whether the putative class is adequately defined and clearly ascertainable

         Rule 23 includes an implied threshold requirement that the proposed class be "adequately defined and clearly ascertainable." See, e.g., Rink, 203 F.R.D. at 659. "The Court must be able to look to objective criteria to accurately delineate membership in the class and identifying class members must be a manageable process that requires little individual inquiry." Gregware v. Scotts Miracle-gro Co. & The Scotts Co., LLC, No. 1:13-CV-24581-UU, 2014 WL 12531536, at *3 (S.D. Fla. Oct. 20, 2014).

         As stated above, Plaintiff seeks to certify the following class:

Any person who had a FHA-insured loan for which (1) the Date of the Note is within a period beginning on June 1, 1996 and ending on January 20, 2015; (2) Wells Fargo, as of the date the total amount due on the loan was brought to zero, was the owner or otherwise held legal title to the Note; (3) Wells Fargo collected interest for any period after the total amount due on the loan was brought to zero (i.e., Wells Fargo collected "post-payment interest"); and (4) Wells Fargo collected post-payment interest during the applicable statute of limitations period, as shown by Exhibit E.

         D.E. 165 p. 6. Plaintiffs proposed class includes approximately 1, 059, 518 borrowers that paid post-payment interest aggregating $254, 391, 118.21. D.E. 165 p. 7, 165-1 p. 9. Defendant objects to the size of Plaintiffs proposed class and, moreover, argues the proposed class is not adequately defined or clearly ascertainable, for four reasons. First, Defendant argues that 24 C.F.R. § 203.558(b)(1) provides that "a form approved by the Commissioner" must only be provided "in response to the mortgagor's inquiry, request for payoff figures, or tender of prepayment, " such that any borrowers who never requested a disclosure should not be included in the class. D.E. 171 p. 14 (emphasis added). Defendant represents that it and Plaintiff have no data concerning whether 22, 825 borrowers "ever requested a disclosure" and that, for this reason, these 22, 825 borrowers do not belong in the proposed class. Id.

         Second, Defendant argues that 35, 486 borrowers included in Plaintiffs calculation of proposed class members failed to pay any interest when paying off their loan. Because these borrowers did not pay post-payment interest at all, Defendant argues that these borrowers should be excluded from the proposed class. Id.

         Third, Defendant argues that Plaintiff "included Indiana borrowers beyond March 31, 2010, and Mississippi borrowers beyond March 21, 2013, both of which are beyond the applicable statute of limitations." Id. Plaintiff concedes that these 9, 590 borrowers should be excluded from the proposed class. D.E. 200 p. 6.

         Lastly, Defendant argues that the proposed class is not clearly ascertainable because "Plaintiff has defined her class in a way that it includes every borrower who has ever paid post-payment interest, regardless of circumstances." D.E. 171 p. 15. In other words, "Plaintiffs putative class does not exclude, as it must, borrowers who (1) reside in states that do not recognize Plaintiffs legal theory, (2) cannot show causation between Wells Fargo's disclosure and their harm, or (3) waived their claim against Wells Fargo because they knowingly and voluntarily paid post-payment interest." Id. Thus, according to Defendant, Plaintiffs proposed class is not clearly ascertainable because it includes individuals with no legally cognizable claim. Id.

         Plaintiff responds to each of Defendant's arguments. First, Plaintiff argues that 24 C.F.R. § 203.558(b)(1) also requires that Defendant provide "a form approved by the Commissioner . . . in response to . . . tender of prepayment." D.E. 200 p. 4 (emphasis added). Because there is no dispute that each of the proposed class members tendered prepayment by paying off their mortgages in full, Section 203.558 applies. Id.

         Second, Plaintiff argues that the evidence shows that the 35, 486 borrowers referenced by Defendant did pay post-payment interest by "making several monthly payments in advance" which, according to Defendant's Rule 30(b)(6) testimony, would have included post-payment interest. Id. p. 5. Plaintiff also argues that if the Court disagrees with her position, then it should still certify the class while excluding these 35, 486 borrowers. Id. p. 6.

         Lastly, Plaintiff argues that Defendant improperly conflates its arguments about predominance, which are properly considered under Rule 23(b)(3), with the inquiry of whether the proposed class is ascertainable, which hinges on whether members "can be ascertained by reference to objective criteria." Id.; Bussey v. Macon Cty. Greyhound Park, Inc., 562 F.App'x 782, 787-88 (11th Cir. 2014) (internal citations omitted).

         The Court finds that the proposed class is adequately defined. Based on evidence submitted to the Court and, in particular, the expert reports of Plaintiff s expert, Dr. Fortune, and Defendant's expert, Dr. Jarek, there is no doubt that the parties can readily determine: (1) which borrowers submitted an "inquiry, request for payoff figures, or tender of prepayment;" (2) whether Defendant provided any disclosures, including Defendant's allegedly inadequate form disclosure, in response to borrowers' inquiries, requests or tenders of prepayment; and (3) whether borrowers paid post-payment interest. D.E. 165-1, 171-11, 200-1. This is enough to satisfy the ascertainability requirement of Rule 23, especially since the Eleventh Circuit has made clear that "manageability concerns that a court might face after class members have already been identified-for example, concerns about whether particular class members are entitled to relief in light of individualized reliance, causation, and damages issues" is more properly considered under Rule 23(b)(3). Karhu v. Vital Pharm., Inc., 621 F.App'x 945, 950 (11th Cir. 2015); Bussey, 562 F.App'x at 787-88 (noting that an identifiable class exists if a court can, based on objective criteria, identify class members in a "manageable process that does not require much, if any, individual inquiry" (internal citations omitted)). In other words, when considering whether Plaintiff has satisfied the implicit, threshold requirements of ascertainability under Rule 23, the Court only considers whether "class members can be identified at all, at least in any administratively feasible (or manageable) way." Id. Because Plaintiff has shown that she can identify class members in a manageable way, the proposed class is adequately defined and clearly ascertainable. See Karhu, 621 F.App'x at 950; see also Bussey, 562 F.App'x at 787-88.

         The Court will now address the explicit requirements of Rule 23(a) and Rule 23(b)(3). While the Court concludes that Plaintiff fails to meet her burden of proving that common legal and factual issues predominate over individual ones under Rule 23(b)(3), it will nonetheless analyze whether Plaintiff has met her burden under both Rule 23(a) and Rule 23(b)(3).

         ii. Rule 23(a)

         a. Numerosity

         Under Rule 23(a), the Court first determines whether the proposed class "is so numerous that joinder of all members is impracticable." Fed.R.Civ.P. 23(a)(1). Numerosity is "generally a low hurdle." Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1267 (11th Cir. 2009). "[W]hile there is no fixed numerosity rule, generally less than twenty-one is inadequate, more than forty adequate, with numbers between varying according to other factors." Cox v. Am. Cost Iron Pipe Co., 784 F.2d 1546, 1553 (11th Cir. 1986) (internal quotations and citations omitted).

         Defendant does not dispute that Plaintiff has met her burden of proving numerosity under Rule 23(a). The numerosity requirement under Rule 23(a) is easily satisfied here, as the proposed class includes approximately 1, ...


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