Mazzei v. Money Store, No. 15-2054 (2d Cir. 2016)
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Plaintiff filed a class action against The Money Store, alleging overcharge of late fees on mortgages. After plaintiff prevailed in the jury trial, the district court granted defendants' post-verdict motion to decertify a class that was previously certified pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3), and entered judgment in favor of plaintiff only. The court held that a district court has power, consistent with the Seventh Amendment and Rule 23, to decertify a class after a jury verdict and before the entry of final judgment; in considering such decertification (or modification), the district court must defer to any factual findings the jury necessarily made unless those findings were “seriously erroneous,” a “miscarriage of justice,” or “egregious.” Applying these principles, the court concluded that the district court did not abuse discretion in determining that Rule 23’s requirements were not met and in decertifying the class. Accordingly, the court affirmed the judgment. An accompanying summary order affirms the denial of plaintiff’s motion for a new trial as to a second claim.
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15-2054 Mazzei v. Money Store 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2015 (Argued: May 19, 2016 Decided: July 15, 2016) Docket No. 15-2054 - - - - - - - - - - - - - - - - - - - -x JOSEPH MAZZEI, on behalf of himself and all others similarly situated, Plaintiff-Appellant, - v.THE MONEY STORE, TMS MORTGAGE INC., HOMEQ SERVICING CORP., Defendants-Appellees.* - - - - - - - - - - - - - - - - - - - -x Before: KEARSE, WINTER, and JACOBS, Circuit Judges. Plaintiff-appellant Joseph Mazzei initiated a class 32 action against The Money Store et al., alleging, inter alia, 33 overcharge of late fees on mortgages, and prevailed in a 34 jury trial. * The United States District Court for the The Clerk of Court is directed to amend the official caption in this case to conform to the listing of the parties above. 1 Southern District of New York (Koeltl, J.) (i) granted 2 defendants-appellees’ post-verdict motion to decertify 3 (under Federal Rule of Civil Procedure 23(c)(1)(C)) a class 4 that was previously certified pursuant to Rule 23(a) and 5 (b)(3); and (ii) entered judgment in favor only of Mazzei, 6 the putative class representative. 7 We hold that a district court has power, consistent 8 with the Seventh Amendment and Rule 23, to decertify a class 9 after a jury verdict and before the entry of final judgment. 10 We also hold that, in considering such decertification (or 11 modification), the district court must defer to any factual 12 findings the jury necessarily made unless those findings 13 were “seriously erroneous,” a “miscarriage of justice,” or 14 “egregious.” 15 the district court did not abuse discretion in determining 16 that Rule 23’s requirements were not met and in decertifying 17 the class. 18 19 20 21 22 23 24 Applying these principles, we conclude that An accompanying summary order affirms the denial of Mazzei’s motion for a new trial as to a second claim. Affirmed. PAUL S. GROBMAN (Neal DeYoung, Sharma & DeYoung, on the brief), New York, New York, for Appellant. 2 1 2 3 4 5 6 7 DANIEL A. POLLACK (Edward T. McDermott, Anthony Zaccaria, Minji Kim, on the brief), McCarter & English, LLP, New York, New York, for Appellees. DENNIS JACOBS, Circuit Judge: 8 Plaintiff-appellant Joseph Mazzei initiated a class 9 action against The Money Store et al., alleging, inter alia, 10 overcharge of late fees on mortgages, and prevailed in a 11 jury trial. 12 Southern District of New York (Koeltl, J.) (i) granted 13 defendants-appellees’ post-verdict motion to decertify 14 (under Federal Rule of Civil Procedure 23(c)(1)(C)) a class 15 that was previously certified pursuant to Rule 23(a) and 16 (b)(3); and (ii) entered judgment in favor only of Mazzei, 17 the putative class representative. The United States District Court for the 18 We hold that a district court has power, consistent 19 with the Seventh Amendment and Rule 23, to decertify a class 20 after a jury verdict and before the entry of final judgment. 21 We also hold that, in considering such decertification (or 22 modification), the district court must defer to any factual 23 findings the jury necessarily made unless those findings 24 were “seriously erroneous,” a “miscarriage of justice,” or 25 “egregious.” Applying these principles, we conclude that 3 1 the district court did not abuse discretion in determining 2 that Rule 23’s requirements were not met and in decertifying 3 the class. 4 5 An accompanying summary order affirms the denial of Mazzei’s motion for a new trial as to a second claim. 6 Affirmed. 7 8 BACKGROUND 9 In 1994, Joseph Mazzei obtained a mortgage loan from 10 his employer, The Money Store. 11 Store was a loan servicer and mortgage lender. 12 missed payments on the loan for years beginning in late 13 1997, and received three notices of default in 1998. 14 1999, The Money Store changed ownership, and Mazzei was laid 15 off. 16 and became HomEq Servicing Corp. 17 At that time, The Money Mazzei In Soon after, The Money Store ceased originating loans Early in 2000, The Money Store’s servicing operator, 18 TMS Mortgage Inc., notified Mazzei that he was in default; 19 Mazzei’s loan was “accelerated” (i.e., the entire sum of 20 principal and interest became due) and foreclosure 21 proceedings were begun. 22 by filing for bankruptcy, and ultimately paid the full Mazzei avoided a foreclosure sale 4 1 balance of the loan, with interest and various default fees. 2 These fees included, inter alia, attorney’s fees, and ten 3 late fees of $26.76 each--five of which were incurred after 4 acceleration. 5 Mazzei then sued The Money Store, TMS Mortgage Inc., 6 and HomEq Servicing Corp. (collectively, “The Money Store”) 7 for breach of contract, on behalf of a putative class, 8 challenging the imposition of post-acceleration late fees 9 (and attorney’s fees2). Citing terms set forth in the 10 Fannie Mae form loan documents that Mazzei signed when the 11 mortgage loan was originated, Mazzei contended that the Note 12 contemplated the imposition only of pre-acceleration late 13 fees, and that the imposition of post-acceleration late fees 14 violated the agreement. 15 Mazzei achieved certification of the class, defined as: 16 17 18 19 20 All similarly situated borrowers who signed form loan agreements on loans which were owned or serviced by the defendants and who from March 1, 2000 to the present . . . were charged: (A) late fees after the borrower’s loan was accelerated, 2 The attorney’s fees claim is disposed of in a summary order issued simultaneously with this opinion. Mazzei also asserted claims under the Fair Debt Collection Practices Act (“FDCPA”), the Truth in Lending Act (“TILA”), and the Real Estate Settlement Procedures Act (“RESPA”), as well as a claim of unfair deceptive business practices under California statutory law; none of these additional claims went to trial, and they are not at issue on this appeal. 5 1 2 and where the accelerated loan was paid off (“Post Acceleration Late Fee Class”) . . . . 3 Order for Certification of Class Action, Mazzei v. Money 4 Store, No. 01-CV-5694 (JGK) (RLE) (S.D.N.Y. Jan. 29, 2013), 5 ECF No. 187; see also Mazzei v. Money Store, 288 F.R.D. 45, 6 56, 66-69 (S.D.N.Y. 2012).3 7 The class definition was later amended on consent to 8 exclude borrowers who signed loan mortgage agreements after 9 November 1, 2006, and (for administrative purposes) to close 10 on June 2, 2014. 11 5694 (JGK) (RLE) (S.D.N.Y. June 3, 2014), ECF No. 267. 12 Order, Mazzei v. Money Store, No. 01-CV- The certified class action eventually went to trial. 13 The jury returned a verdict in favor of Mazzei and the class 14 on the late fee claims. 15 awarded the class approximately $32 million plus prejudgment 16 interest. 17 the remaining claims.) It awarded Mazzei $133.80, and it (The jury found in favor of The Money Store on 18 After trial, and before the entry of judgment, The 19 Money Store moved for decertification of the class pursuant 20 to Federal Rule of Civil Procedure 23(c)(1)(C), or, in the 3 The district court declined to certify three additional potential classes that corresponded to three additional breach-of-contract theories. See Mazzei, 288 F.R.D. at 57-62. 6 1 alternative, the entry of judgment as a matter of law on the 2 class late fee claims pursuant to Federal Rule 50. 3 class was composed of borrowers whose loans were either 4 owned by The Money Store (via origination or assignment) or 5 serviced by it. 6 Mazzei’s failure to prove class-wide privity of contract 7 between The Money Store and those borrowers whose loans it 8 only serviced, and did not own. 9 that Mazzei’s failure to prove privity with respect to such The Both motions were based in relevant part on The district court agreed 10 absent class members defeated class certification on grounds 11 of typicality and predominance. 12 therefore granted The Money Store’s motion for 13 decertification of the class. 14 F.R.D. 92, 106-07, 109-13 (S.D.N.Y. 2015). 15 court also opined that it would have granted The Money 16 Store’s motion for judgment as a matter of law if 17 decertification had not been appropriate. 18 Judgment was entered for Mazzei on his individual late fee 19 claim. 20 21 The district court Mazzei v. Money Store, 308 The district Id. at 113. Mazzei challenges the decertification4 on the grounds, inter alia, that decertification is unavailable after a jury 4 Mazzei also appeals the district court’s denial of Mazzei’s motion for a new trial on the fee-splitting claim. See Mazzei, 308 F.R.D. at 100-06. We affirm that decision in an accompanying summary order. 7 1 verdict in favor of a certified class; that the findings 2 made to support decertification were incompatible with the 3 Seventh Amendment; and that the Rule 23 requirements for 4 class certification were satisfied. We affirm. 5 6 DISCUSSION 7 I 8 9 Federal Rule of Civil Procedure 23(c)(1)(C) provides that “[a]n order that grants or denies class certification 10 may be altered or amended before final judgment.” Fed. R. 11 Civ. P. 23(c)(1)(C). 12 class may not be decertified after a jury verdict in its 13 favor because such decertification is tantamount to 14 overturning a jury verdict, for which the only procedural 15 avenue available is judgment as a matter of law under Rule 16 50(b); and decertification would violate the class members’ 17 Seventh Amendment right to a jury trial.5 Mazzei argues nevertheless that a 5 Defendants do not argue that these arguments are waived, although it is unclear that Mazzei raised them in the district court. In any event, because our waiver doctrine is “prudential, not jurisdictional, we have discretion to consider waived arguments, and we have exercised this discretion where necessary to avoid a manifest injustice or where the argument presents a question of law and there is no need for additional fact-finding.” Bogle-Assegai v. Connecticut, 470 F.3d 498, 504 (2d Cir. 8 1 A 2 Federal Rule 23 and our case law confirm that a 3 district court may decertify a class after a jury verdict 4 and before the entry of final judgment.6 5 appeal of a denial of a motion to decertify after a jury 6 verdict in a class’s favor, we observed that “a district 7 court may decertify a class if it appears that the 8 requirements of Rule 23 are not in fact met.” 9 Solitron Devices, Inc., 673 F.2d 566, 572 (2d Cir. 1982) In deciding an Sirota v. 10 (discussing post-trial motion to decertify after jury 11 verdict in favor of subclass); see also Rossini v. Ogilvy & 12 Mather, Inc., 798 F.2d 590, 596 (2d Cir. 1986) (affirming 13 decertification of one class after bench trial based on 14 evidence; reversing decertification of two other classes). 15 A district court’s exercise of discretion is set forth 16 clearly in both the wording and commentary of Rule 23. 17 Fed. R. Civ. P. 23(c)(1)(C) (“An order that grants or denies See 2006) (internal quotation marks, citations, and brackets omitted). Because defendants do not argue waiver, and because Mazzei’s argument involves a constitutional right and a question of law, we consider the argument. 6 Of course, the Federal Rules authorize the use of additional post-trial procedural devices, such as a motion for a new trial. See, e.g., Fed. R. Civ. P. 59(a). Mazzei’s argument either overlooks or ignores these procedures. 9 1 class certification may be altered or amended before final 2 judgment.”); Fed. R. Civ. P. 23(c)(1) advisory committee’s 3 notes to 2003 amendment (“A determination of liability after 4 certification, however, may show a need to amend the class 5 definition. 6 proceedings.”); see also 7AA Wright et al., Federal Practice 7 & Procedure § 1785.4 (3d ed. 2016 update) (“Reference to the 8 final judgment [in Rule 23(c)(1)(C)] avoids a possible 9 ambiguity under the prior rule, making clear that after a 10 determination of liability it may be permissible to amend 11 the class definition or subdivide the class if it becomes 12 necessary in order to define the remedy or if 13 decertification is warranted.”). 14 Decertification may be warranted after further Indeed, because the results of class proceedings are 15 binding on absent class members, see Fed. R. Civ. P. 16 23(c)(3), the district court has the affirmative “duty of 17 monitoring its class decisions in light of the evidentiary 18 development of the case.” 19 1016, 1019 (5th Cir. 1983) (“The district judge must define, 20 redefine, subclass, and decertify as appropriate in response 21 to the progression of the case from assertion to facts.”); 22 see Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812 Richardson v. Byrd, 709 F.2d 10 1 (1985) (“[T]he Due Process Clause of course requires that 2 the named plaintiff at all times adequately represent the 3 interests of the absent class members.” (emphasis added)). 4 The power to decertify a class after trial when appropriate 5 is therefore not only authorized by Federal Rule 23 but is a 6 corollary.7 7 B 8 9 The Seventh Amendment, which applies in federal court proceedings, is not to the contrary. The Amendment has two 10 parts: The Trial by Jury Clause preserves a litigant’s 11 right to a jury trial in a subset of civil cases; the 12 Reexamination Clause provides that “no fact tried by a jury, 7 See also In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 141 (2d Cir. 2001) (concluding that district court did not abuse discretion in certifying class where it “specifically recognized its ability to modify its class certification order, sever liability and damages, or even decertify the class if such an action ultimately became necessary”), overruled on other grounds by In re IPO Sec. Litig., 471 F.3d 24 (2d Cir. 2006), and superseded by statute on other grounds as stated in Attenborough v. Constr. & Gen. Bldg. Laborers’ Local 79, 238 F.R.D. 82, 100 (S.D.N.Y. 2006); Boucher v. Syracuse Univ., 164 F.3d 113, 118 (2d Cir. 1999) (“[U]nder Rule 23(c)(1), courts are ‘required to reassess their class rulings as the case develops.’” (quoting Barnes v. Am. Tobacco Co., 161 F.3d 127, 140 (3d Cir. 1998))); Green v. Wolf Corp., 406 F.2d 291, 298 & n.10 (2d Cir. 1968) (Kaufman, J.) (a court should err on the side of certification because certification “is always subject to modification should later developments during the course of the trial so require” (quoting Esplin v. Hirsi, 402 F.2d 94, 99 (10th Cir. 1968))). 11 1 shall be otherwise re-examined in any Court of the United 2 States, than according to the rules of the common law.” 3 U.S. Const. amend. VII. 4 As to Mazzei, there is no Seventh Amendment issue at 5 all. 6 the amount awarded him by the jury. 7 constitutional right to represent a class; whether he may do 8 so is purely a matter of Rule 23. 9 Mazzei will receive damages on his individual claim in And he has no As to the class, there is no violation. The right of 10 absent class members to adjudication by jury is unimpaired. 11 Their claims survive by virtue of American Pipe tolling. 12 See American Pipe & Constr. Co. v. Utah, 414 U.S. 538 13 (1978). 14 action tolls the statute of limitations with respect to all 15 absent would-be class members until the time class 16 certification is denied. 17 554; Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 353-54 18 (1983). 19 class who wishes to do so may file an individual action 20 seeking breach-of-contract damages on a similar claim (so 21 long as the individual action is instituted during whatever 22 amount of time remains in the limitations period). 23 Crown, Cork & Seal, 462 U.S. at 347, 353-54. Under this rule, the filing of a putative class See American Pipe, 414 U.S. at Therefore, any putative member of the decertified 12 See 1 The district court’s decertification thus has the same 2 effect as would a grant of a motion for a new trial pursuant 3 to Federal Rule 59(a). 4 mean that there must be a new trial, or that there will be 5 one; it just means that there can be one if an individual 6 claimant chooses to continue pursuit of the claim. 7 beyond dispute that the grant of such a motion does not 8 violate the Seventh Amendment. 9 Humanities, Inc., 518 U.S. 415, 432-33 (1996); Byrd v. Blue 10 Ridge Rural Elec. Coop., Inc., 356 U.S. 525, 539-40 (1958); 11 Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 250 (1940); 12 Raedle v. Credit Agricole Indosuez, 670 F.3d 411, 418 (2d 13 Cir. 2012); United States v. Landau, 155 F.3d 93, 104-06 (2d 14 Cir. 1998). 15 The grant of such a motion does not It is See Gasperini v. Ctr. for There are many procedural devices that impose “judicial 16 control on juries,” Binder v. Long Island Lighting Co., 57 17 F.3d 193, 202 (2d Cir. 1995), abrogated in part on other 18 grounds in banc by Fisher v. Vassar Coll., 114 F.3d 1332, 19 1340 (2d Cir. 1997), and such controls are not only 20 compatible with the Seventh Amendment jury trial right, but 21 necessary to the institution. 22 R.R. Co., 289 F.2d 797, 805 (2d Cir. 1961) (“The jury does 23 not function alone, but in cooperation with the judge See Dagnello v. Long Island 13 1 presiding over the trial. . . . Without judicial supervision 2 over what Blackstone called the ‘misbehavior’ of juries, a 3 trial by jury would lack one of ‘the essentials of the jury 4 trial as it was known to the common law before the adoption 5 of the Constitution.’” (footnotes omitted)). 6 controls include certain procedures that were “not in 7 conformity with practice at common law when the Amendment 8 was adopted.” 9 Permissible Gasperini, 518 U.S. at 436 n.20. The right of absent class members to a jury trial is 10 protected, not impaired, by the Rule 23(c)(1)(C) 11 decertification procedure, which protects their due process 12 rights (and defendants’) by ensuring that any class claim 13 that proceeds to final judgment--and thus binds them--is 14 fairly and appropriately the subject of class treatment. 15 See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 349 (2011) 16 (“Rule 23(a) ensures that the named plaintiffs are 17 appropriate representatives of the class whose claims they 18 wish to litigate.”); Amchem Prods., Inc. v. Windsor, 521 19 U.S. 591, 621 (1997) (“Subdivisions (a) and (b) [of Rule 23] 20 focus court attention on whether a proposed class has 21 sufficient unity so that absent members can fairly be bound 22 by decisions of class representatives.”); Shutts, 472 U.S. 23 at 812 (consistent with the Due Process Clause, absent class 14 1 members may be bound to a class judgment only if they are 2 adequately represented by the named plaintiffs); Hansberry 3 v. Lee, 311 U.S. 32, 42-43, 45 (1940) (same); see also supra 4 Part I.A. 5 6 C Decertification in this case provokes a further 7 question: the power of the court to make the findings that 8 supported its ruling. 9 district court’s determination that Mazzei had failed to Decertification was based on the 10 prove through class-wide evidence at trial that borrowers 11 whose loans were only serviced (not owned) by The Money 12 Store were nevertheless in a contractual relationship with 13 The Money Store. 14 proved that absent class members were in privity with The 15 Money Store--was both relevant to the (de)certification 16 motion and an element of the class’s merits claim. 17 the merits, the jury obviously found that privity has been 18 established. 19 This factual question--whether Mazzei And on Normally, the district court resolves factual issues 20 related to class certification, making its findings based on 21 the preponderance of the evidence,8 even if they overlap 8 See Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196, 202-03 (2d Cir. 2008) (holding that the “preponderance of the evidence standard applies to evidence proffered to establish Rule 23's requirements”). 15 1 with the merits of the case. 2 & Trust Funds, 133 S. Ct. 1184, 1195 (2013) (“Merits 3 questions may be considered to the extent . . . that they 4 are relevant to determining whether the Rule 23 5 prerequisites for class certification are satisfied.”); 6 Dukes, 564 U.S. at 351 (“Frequently that ‘rigorous [Rule 23] 7 analysis’ will entail some overlap with the merits of the 8 plaintiff’s underlying claim. 9 But such findings do not bind the trier of fact. See Amgen v. Conn. Ret. Plans That cannot be helped.”). In re IPO, 10 471 F.3d at 41. 11 factual finding impact the district court’s decision about 12 whether decertification is appropriate or not? 13 The question becomes: How does a jury’s We hold that when a district court considers 14 decertification (or modification) of a class after a jury 15 verdict, the district court must defer to any factual 16 findings the jury necessarily made unless those findings 17 were “seriously erroneous,” a “miscarriage of justice,” or 18 “egregious.” 19 standard that a district court applies to a Rule 59 motion 20 for a new trial on weight-of-the-evidence grounds; and we 21 conclude that it is appropriate in this context as well.9 See Raedle, 670 F.3d at 418. 9 This is the The judge is permitted to “weigh the evidence and the credibility of witnesses and need not view the evidence in the light most favorable to the verdict winner,” but “should 16 1 As to questions of fact that are not necessarily decided by 2 the jury’s verdict, the court can make its own factual 3 findings based on the preponderance of the evidence as is 4 usually done when making a determination about class 5 certification. 6 For the reasons discussed supra (Part I.B), the Seventh 7 Amendment is not violated by the district court’s evaluation 8 of trial evidence in ruling on the procedural issue of 9 decertification. That is what trial judges do when 10 considering a motion for a new trial on the ground that the 11 verdict was against the weight of the evidence. 12 155 F.3d at 106 (the Seventh Amendment does not prevent a 13 district court from “substitut[ing] its view of the evidence 14 for that of the jury, provided the judge is ‘convinced that 15 the jury has reached a seriously erroneous result or that 16 the verdict is a miscarriage of justice’”). 17 time, we have explained that the judge’s power to do so is 18 in “tension” with the Seventh Amendment. 19 at 418; Landau, 155 F.3d at 105 (same). 20 “tension” (here, with the Reexamination Clause), it is See Landau, At the same Raedle, 670 F.3d Given that rarely disturb a jury’s evaluation of a witness’s credibility . . . simply because the judge disagrees with the jury.” Raedle, 670 F.3d at 418 (citations and internal quotation marks omitted). 17 1 imprudent and likely improper to further relax the standard 2 by which a trial court may “substitute its view of the 3 evidence for that of the jury.” 4 By respecting the jury’s work, the Seventh Amendment issue 5 is avoided.10 6 jury has already done; and it fits the post-trial procedural 7 scheme set forth in Federal Rules 50(b) and 59(a). 8 9 Landau, 155 F.3d at 106. This approach makes full use of the work the Mazzei argues that post-verdict decertification should be constrained by the Rule 50 standard of “legally 10 insufficient evidence.” 11 Galdieri-Ambrosini v. Nat’l Realty & Dev. Corp., 136 F.3d 12 276, 289 (2d Cir. 1998). 13 called for because (unlike the grant of a Rule 50 motion) 14 decertification does not resolve the claims of the class-- 15 which withstand decertification and survive unimpaired. 16 “seriously erroneous” formulation better comports with the 17 district court’s authority to manage the class action and to See Fed. R. Civ. P. 50(a)(1); That stringent standard is not 10 The See also 11 Wright et al., Federal Practice & Procedure § 2806 (3d ed. 2016 update) (“The judge’s power to set aside the verdict is supported by clear precedent at common law and, far from being a denigration or a usurpation of jury trial, has long been regarded as an integral part of trial by jury as we know it. On the other hand, a decent respect for the collective wisdom of the jury, and for the function entrusted to it in our system, certainly suggests that in most cases the judge should accept the findings of the jury, regardless of the judge’s own doubts in the matter.” (footnote omitted)). 18 1 protect the rights of absent class members, see, e.g., Fed. 2 R. Civ. P. 23(d), (e); it respects the trial court’s 3 position as best-situated to evaluate class issues, see In 4 re Sumitomo Copper Litig., 262 F.3d 134, 139 (2d Cir. 2001) 5 (referring to Second Circuit’s “longstanding view that the 6 district court is often in the best position to assess the 7 propriety of the class”); and it recognizes Rule 23's 8 explicit contemplation of post-merits decertification, 9 see Fed. R. Civ. P. 23(c)(1)(C). 10 11 12 II A district court order granting or denying class 13 certification is reviewed for abuse of discretion. 14 Hertz Corp., 624 F.3d 537, 547 (2d Cir. 2010). 15 standard applies to the ultimate decision on class 16 certification and to rulings on each of the Rule 23 17 requirements. 18 certification is given greater deference than a decision 19 denying certification (or, a fortiori, an order decertifying 20 a class). 21 128, 137 (2d Cir. 2015) (citing Moore v. PaineWebber, Inc., 22 306 F.3d 1247, 1252 (2d Cir. 2002)). Id. Myers v. This A district court decision granting See Johnson v. Nextel Commc’ns Inc., 780 F.3d 23 19 1 A plaintiff seeking certification of a Rule 23(b)(3) 2 damages class action has the burden to establish numerosity, 3 commonality, typicality, adequacy of representation, 4 predominance of common questions of law or fact, and the 5 superiority of a class action to other procedures. 6 Civ. P. 23(a), (b)(3); see Amgen, 133 S. Ct at 1191; 7 Teamsters Local 445, 546 F.3d at 202-03. 8 decertification motion, Mazzei retained the burden to 9 demonstrate that these requirements were satisfied. Fed. R. In opposing the See 10 Rossini, 798 F.2d at 596-600; cf. Rubinstein, Newberg on 11 Class Actions § 7:22 (5th ed. 2016 update) (when a defendant 12 moves for an order denying class certification, the burden 13 to prove compliance with Rule 23 remains with the 14 plaintiff). 15 The class included borrowers whose loans were either 16 owned or serviced by The Money Store. 17 contract claim on its behalf, Mazzei was required to prove, 18 inter alia, that class members were in a contractual 19 relationship with defendants. 20 Greystone Bus. Credit II LLC, 631 F.3d 42, 52 (2d Cir. 21 2011). 22 prove through class-wide evidence the existence of privity 23 between The Money Store and those class members whose loans To prove a breach-of- See Diesel Props S.R.L. v. The decertification was based on Mazzei’s failure to 20 1 were serviced but not owned by it. 2 was relevant both to the merits of the class claim and to 3 the certification inquiry. 4 This factual question The jury found that privity was proven; the district 5 court found to the contrary, and determined that typicality 6 and predominance were therefore both lacking. 7 (Part I.C), the district court was required to defer to the 8 jury’s finding of fact as to privity unless the finding was 9 “seriously erroneous,” a “miscarriage of justice,” or As held supra 10 “egregious.” 11 court ruled in the alternative that the evidence for such a 12 finding was legally insufficient.11 13 evidence legally insufficient, the court a fortiori found 14 that the jury’s finding was at least “seriously erroneous.” 15 16 It is therefore significant that the district Having found the This was not an abuse of discretion. We also conclude that the district court did not abuse discretion in 11 Defendants moved in the alternative for judgment as a matter of law pursuant to Rule 50(b), and the district court explained that it would grant this motion were it to reach it. See Mazzei, 308 F.R.D. at 113 (“[D]efendants would be entitled to judgment as a matter of law on the claim on behalf of the Late Fee Class because of the ‘complete absence of evidence’ supporting a contractual relationship between the members of the Late Fee Class and the defendants.” (quoting Galdieri-Ambrosini, 136 F.3d at 288-90)). In fact, the district court appears to have applied the Rule 50 standard in adjudicating the motion for decertification. See id. at 110-13. 21 1 determining that, given the failure of class-wide evidence 2 as to privity at trial, Rule 23(a) and (b)(3) requirements 3 were not satisfied and decertification was therefore 4 warranted. 5 A 6 To establish privity, Mazzei relies exclusively on 7 testimony by Adam Levitin, Mazzei’s opening expert witness 8 concerning mortgages and mortgage securitizations, and the 9 single Pooling and Service Agreement (“PSA”) introduced at 10 trial, which applied to Mazzei’s 1994 loan.12 11 testified generally as to mortgages and securitizations, 12 described the life of a hypothetical loan issued to “Betty 13 Borrower,” and (in the course of that testimony) opined that 14 the hypothetical servicer of the hypothetical borrower’s 15 loan would be assigned rights to payment; and that if the 16 servicer did not credit those payments Betty Borrower could 17 sue the servicer for breach of contract. 18 also App’x 2792 (opining that “once you have delegated 19 duties under the contract, you have stepped into the shoes 20 of the original party to the contract”). 12 Levitin App’x 2787-89; see Mazzei’s spoliation-based argument was not raised below and is therefore waived. See In re Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 133 (2d Cir. 2008); see also Dist. Ct. Dkt. 497; App’x 5302-17. 22 1 Levitin also opined that the PSA for Mazzei’s loan 2 (which was originated by a defendant entity in 1994) imposed 3 certain duties on the servicer (another defendant) in 4 connection with servicing the loan, including the power to 5 waive or modify the terms of the loan and to collect checks, 6 assess fees, etc. 7 opined, was “typical” of the securitization industry, “not 8 an outlier deal.” 9 App’x 2804-05. Mazzei’s PSA, Levitin App’x 2811. However, Levitin specifically conceded that he was 10 “expressing no opinion whatsoever on the defendants in this 11 case.” 12 role I’ve been asked to play here explaining the background 13 of how mortgage lending works today”). 14 other evidence linking Levitin’s testimony about the 15 hypothetical borrower and about the mortgage and 16 securitization industries generally to the particular loans 17 of absent class members.13 App’x 2813; see also App’x 2807 (describing “the And there was no We conclude that, given 13 Mazzei argues that The Money Store did not object to Levitin’s testimony, and that testimony regarding industry custom and practice is admissible in breach-of-contract actions. See Br. of Appellant 48; Reply Br. 17 (citing cases). True; but the issue is whether the testimony (admissible or not) supported the jury finding that a contract existed between defendants and absent class members. See Cherry River Music Co. v. Simitar Entm’t, Inc., 38 F. Supp. 2d 310, 319 & n.56 (S.D.N.Y. 1999) (“industry custom and usage . . . ‘cannot create a contract where there has been no agreement by the parties’” (quoting 23 1 Levitin’s disclaimer as to the particulars of the case, and 2 for substantially the reasons stated in the district court’s 3 opinion, Levitin’s testimony was not an impediment to the 4 court’s conclusion that the jury’s verdict was “seriously 5 erroneous,” a “miscarriage of justice,” or “egregious.”14 6 B 7 “Rule 23(a) ensures that the named plaintiffs are 8 appropriate representatives of the class whose claims they 9 wish to litigate,” Dukes, 564 U.S. at 349, by “effectively 10 ‘limit[ing] the class claims to those fairly encompassed by 11 the named plaintiff’s claims,’” General Tel. Co. of Sw. v. 12 Falcon, 457 U.S. 147, 156 (1982) (quoting General Tel. Co. 13 of Nw. v. EEOC, 446 U.S. 318, 330 (1980)). 14 Typicality requires that “the disputed issue[s] of law 15 or fact occupy essentially the same degree of centrality to 16 the named plaintiff’s claim as to that of other members of 17 the proposed class.” 18 191 F.3d 283, 293 (2d Cir. 1999) (internal quotation marks Cardidad v. Metro-N. Commuter R.R., Stulsaft v. Mercer Tube & Mfg. Co., 43 N.E.2d 31, 33 (N.Y. 1942)) (citing cases)). 14 Since the Rule 59(a) standard applies in this context, we need not decide whether Levitin’s generalized testimony was legally insufficient to support a jury finding that class members whose loans were not originated by (or expressly assigned to) The Money Store were in privity. 24 1 omitted), overruled on other grounds by In re IPO, 471 F.3d 2 24. 3 that . . . ‘the named plaintiff’s claim and the class claims 4 are so interrelated that the interests of the class members 5 will be fairly and adequately protected in their absence.’” 6 Marisol A. ex rel. Forbes v. Giuliani, 126 F.3d 372, 376 (2d 7 Cir. 1997). 8 9 One purpose of the typicality requirement is “to ensure The Money Store did not deny its contractual relationship with class members (such as Mazzei) whose loans 10 it owned; but it did dispute privity as to other class 11 members. 12 not owned by The Money Store were in fact in privity with 13 The Money Store is an issue central to the claims of those 14 class members. 15 individual claim (a misalignment of interests that may be 16 one reason for Mazzei’s failure to introduce sufficient 17 evidence on their behalf). 18 ruling as to typicality was not an abuse of discretion.15 Whether borrowers whose loans were serviced but The issue is not central to Mazzei’s The district court’s post-trial 19 15 Mazzei argues for the first time on appeal that, if he was no longer “typical,” the court should have simply substituted a new class representative. This argument is waived for failure to raise it below. See In re Nortel Networks, 539 F.3d at 133; see also Dist. Ct. Dkt. 497; App’x 5302-17. 25 1 “The ‘predominance’ requirement of Rule 23(b)(3) ‘tests 2 whether proposed classes are sufficiently cohesive to 3 warrant adjudication by representation.’” Myers, 624 F.3d 4 at 547 (quoting Amchem, 521 U.S. at 623). “The 5 requirement’s purpose is to ‘ensure[] that the class will be 6 certified only when it would achieve economies of time, 7 effort, and expense, and promote uniformity of decision as 8 to persons similarly situated, without sacrificing 9 procedural fairness or bringing about other undesirable 10 results.’” 11 A.G. Edwards & Sons, Inc., 502 F.3d 91, 104 (2d Cir. 2007)). 12 “Therefore the requirement is satisfied ‘if resolution of 13 some of the legal or factual questions that qualify each 14 class member’s case as a genuine controversy can be achieved 15 through generalized proof, and if these particular issues 16 are more substantial than the issues subject only to 17 individualized proof.’” 18 1252). 19 Id. (quoting Cordes & Co. Fin. Servs., Inc. v. Id. (quoting Moore, 306 F.3d at A class-wide resolution to the privity question was not 20 possible because, without class-wide evidence that class 21 members were in fact in privity with The Money Store, the 22 fact-finder would have to look at every class member’s loan 23 documents to determine who did and who did not have a valid 26 1 claim. 2 certification . . . is . . . the capacity of a classwide 3 proceeding to generate common answers apt to drive the 4 resolution of the litigation. 5 proposed class are what have the potential to impede the 6 generation of common answers.” (quoting Nagareda, Class 7 Certification in the Age of Aggregate Proof, 84 N.Y.U. L. 8 Rev. 97, 132 (2009))). 9 See Dukes, 564 U.S. at 351 (“What matters to class Dissimilarities within the The district court identified the common questions 10 raised in the pleading: whether defendants charged post- 11 acceleration late fees and whether this breached the Fannie 12 Mae form agreement. 13 decisions” for the court to determine that these questions 14 did not predominate over the individual questions of whether 15 each class member was in a contractual relationship with 16 defendants. 17 of class certification for failure to demonstrate 18 predominance of common issues over individualized defenses). It was “within the range of permissible See Myers, 624 F.3d at 550-51 (affirming denial 19 20 21 III “[O]rdinarily, if a court discerns a conflict . . . the 22 proper solution is to create subclasses of persons whose 23 interests are in accord.” Boucher v. Syracuse Univ., 164 27 1 F.3d 113, 118-19 (2d Cir. 1999) (quoting Payne v. Travenol 2 Labs, Inc., 673 F.2d 798, 812 (5th Cir. 1982)). 3 however, there was no apparent basis on which the court or 4 the parties could have determined which members of the Late 5 Fee Class had loans that were owned by The Money Store, and 6 which had loans that were only serviced by The Money Store. 7 So decertification was appropriate rather than a narrowing 8 of the class definition or creation of subclasses. 9 Here, Mazzei cites testimony that The Money Store originated 10 130,000 of the approximately 185,000 loans that were being 11 serviced by it in 2000, the beginning of the class period, 12 and speculates that the Late Fee Class’s loans were among 13 these defendant-originated loans. 14 all about which, if any, of these loans satisfied criteria 15 for membership in the class. 16 stopped originating loans in 200116; by 2003, The Money 17 Store was servicing approximately 380,000 loans; and the 18 class period extended into 2014. 19 years, the database contained over one million loans. 20 entirely unclear how many loans serviced by The Money Store 21 during the full class period were owned by it. There is no evidence at Notably, The Money Store 16 Over its full span of One example loan that Mazzei’s database expert presented to the jury was originated in 2006–-this loan could not have been originated by The Money Store. 28 It is 1 2 CONCLUSION For the foregoing reasons, the judgment is affirmed. 29
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