Benito et al v. Indymac Mortgage Services, No. 2:2009cv01218 - Document 88 (D. Nev. 2010)

Court Description: ORDER granting in part and denying in part 16 Motion to Certify Class with FRCP 23. Parties to submit proposed order in 30 days. Plaintiffs' Class counsel for Certified Subclass C appointed. New representation due in 30 days. Referred to Magistrate Leen for hearing with counsel within the next 60 days. Signed by Judge Philip M. Pro on 5/21/10. (Copies have been distributed pursuant to the NEF - AXM)
Download PDF
Benito et al v. Indymac Mortgage Services Doc. 88 1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 *** 7 8 9 10 11 12 13 14 15 16 17 18 LUIS ARMANDO BENITO, RAYMOND ) BISSAILLON, BEOP CHUON, ) NORMAN TATE, CAROLS PADILLA ) VELASCO, ELENA WOODARD, STEVE ) AYRES, JAMES BAILEY, CESAR ) COVELLI SR., VALERIE DUNLAP, ) PERRY ESCOBAR, FIROUZEH ) FOROUZMAND, MARLEN GARCIA, ) ANTOINETTE GILL, ROBERT ) GRIEBEL, DORINE HORVATH, LUCH ) LOU, MATTHEW MOORE, MARIA ) PARRA, MARK SANDERS, ANTHONY ) SUGGS, AND MICHAEL ZANG. ) ) Plaintiffs, ) ) v. ) ) INDYMAC MORTGAGE SERVICES, a ) Division of ONEWEST BANK, FSB, ) ) ) Defendants. ) ) 2:09-CV-001218-PMP-PAL ORDER 19 20 21 22 On May 18, 2010, the Court conducted a hearing regarding Plaintiffs’ fully briefed Motion for Class Certification (Doc. #16). By this motion, Plaintiffs seek to certify four proposed classes for injunctive and 23 declaratory relief pursuant to Rule 23(a)(b)(2) of the Federal Rules of Civil Procedure. 24 Proposed Class A consist of all persons in Nevada who signed a written loan contract with 25 Indymac Bank FSB “Indymac” on or after 2003 for which the lender knowingly made loans 26 without first determining the borrower had the ability to repay. Proposed Subclass A, 1 consist of persons in Nevada who signed a written loan contract with Indymac on or after 2 2003 through 2007, wherein Defendant OneWest, as successor to Indymac, knowingly 3 made loans by virtue of the presumed equity in the property, without first determining that a 4 borrower had the ability to repay the loans, in violation of NRS § 598D.100. Proposed 5 Subclass B consist of all persons in Nevada who signed a written loan contract with 6 Indymac on or after 2007 wherein OneWest, as successor to Indymac, knowingly made an 7 unlawful home loan without using any commercially reasonable means to determine the 8 borrower had the ability to repay the home loan, in violation of NRS § 598D.100. Proposed 9 Subclass C consists of all OneWest customers who have been sued by OneWest whereby it 10 sought wrongful foreclosure and/or wrongful eviction, by utilizing the laws and judicial 11 system of the State of Nevada in violation of NRS § 80.55. Plaintiffs’ Amended Complaint (Doc. #14) alleges nine separate claims for relief. 12 13 Essentially, Plaintiffs’ claims revolve around the allegation that they had adjustable rate 14 mortgages (ARM) with Indymac, and that when their ARM’s came due, their mortgage 15 payments doubled. Plaintiffs contend Indymac failed to inform Plaintiffs their mortgage 16 payments could increase to such a degree. Plaintiffs also allege that when they sought 17 financial assistance from OneWest, OneWest refused to negotiate and began foreclosing on 18 Plaintiffs’ properties even though OneWest is not registered to do business in Nevada and 19 has no registered agent in Nevada. The parties have agreed that, at least until the motion for 20 class certification now before the Court is decided, OneWest will not initiate foreclosure 21 proceedings against any named or potential Plaintiff with properties located in Nevada, so 22 as to avoid constant amendment of Plaintiffs’ Complaint. 23 /// 24 /// 25 /// 26 /// 2 I. CLASS CERTIFICATION 1 The Court may certify a class under Federal Rule of Civil Procedure 23(a) only 2 3 if: (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. 4 5 6 7 In addition to these requirements, a plaintiff also must show it has satisfied at least one of 8 the three conditions in Rule 23(b). Here, Plaintiffs rely only upon Rule 23(b)(2), which 9 requires a party seeking certification to show the party opposing the class has acted or 10 refused to act on grounds generally applicable to the class thus making appropriate 11 injunctive or declaratory relief with respect to the class as a whole. The party seeking 12 certification bears the burden of showing requirements of Rule 23 are satisfied. Dukes v. 13 Wal-Mart, Inc., 509 F.3d 1168, 1176 (9th Cir. 2007). 14 A. Class Definition 15 Although not technically a Rule 23 requirement, definition of the class is a key 16 consideration at the certification stage. Rule 23(c)(1)(B) requires an order certifying a class action 17 to “define the class and the class claims, issues, or defenses.” Defining the class is “of critical 18 importance because it identifies the persons (1) entitled to relief, (2) bound by a final judgment, 19 and (3) entitled under Rule 23(c)(2) to the ‘best notice practicable’ in a Rule 23(b)(3) action. The 20 definition must be precise, objective, and presently ascertainable.” Ann. Manual For Complex 21 Litig., § 21.222. Generally, it is inappropriate to define a class in such a way that class 22 membership cannot be identified until the merits are resolved. See Ann. Manual For Complex 23 Litig., § 21.222; Hagen v. City of Winnemucca, 108 F.R.D. 61, 63-64 (D. Nev. 1985). “An 24 identifiable class exists if its members can be ascertained by reference to objective criteria.” Ann. 25 Manual For Complex Litig., § 21.222. 26 /// 3 1 OneWest argues the class is not readily identifiable because, as defined, each class 2 would require a finding that OneWest violated Nevada law by knowingly making the loan without 3 determining the borrower had the ability to repay. Thus, the class member in Class A and 4 Subclasses A and B would not be identifiable until after a trial on the merits. As to Subclass C, 5 OneWest argues that class likewise is identifiable only after trial because it states the foreclosures 6 were “wrongful,” which is a merits question. 7 Essentially, Plaintiffs defend this point only as to Subclass C. Plaintiffs respond 8 that a class is readily identifiable because one would only have to conduct a search of 9 pending cases in Nevada state court in which OneWest is seeking to foreclose to identify 10 class members. Plaintiffs argue that because OneWest is not registered to do business in 11 Nevada and has no registered agent here, it is not entitled to use the Nevada judicial system 12 to foreclose on any property in the state. Thus, any foreclosure by OneWest in the state 13 would be wrongful regardless of whether the borrower is in default. 14 OneWest does not respond to this argument about not being registered to do 15 business in Nevada, and thus not qualified to use the Nevada judicial system to foreclose or 16 evict. Proposed Subclass C would be a readily ascertainable class, as it would be 17 identifiable by the objective criteria of any attempt by OneWest to use the Nevada judicial 18 system to foreclose or evict. Unlike proposed Class A and Subclass A and B, it would not 19 require any inquiry into the merits of each case prior to defining the class because Plaintiffs 20 contend OneWest is ineligible to use the Nevada judicial system by virtue of OneWest’s 21 status, or lack thereof, not because of anything unique to any particular borrower. Thus the 22 Court finds proposed Subclass C is a readily ascertainable class. 23 However, Plaintiffs do not sufficiently identify an ascertainable class for the 24 other proposed subclasses. Plaintiffs appear to suggest that the mere fact of being a 25 borrower on an Indymac loan would suffice. However, that is not how the proposed classes 26 are defined. Identification of a class member for Class A, Subclass A, and Subclass B 4 1 would require a finding on the merits that OneWest (via its predecessor Indymac) 2 knowingly made loans without first determining the borrower had the ability to repay. A 3 determination of who falls into that class could not be made without a merits determination 4 first, particularly as to the “knowingly” requirement. Consequently, there is no readily 5 ascertainable class for Class A, Subclass A, or Subclass B, and class certification for these 6 classes must be denied. As discussed below, the same problem exists for other parts of the 7 class certification analysis for proposed class A and Subclasses A and B. 8 9 B. Rule 23(a) 1. Numerosity 10 Rule 23(a)’s “numerosity” requirement is met where the party seeking 11 certification shows the class is “so numerous that joinder of all members is impracticable.” 12 Fed. R. Civ. P. 23(a)(1). “‘[I]mpracticability’ does not mean ‘impossibility,’ but only the 13 difficulty or inconvenience of joining all members of the class.’” Harris v. Palm Springs 14 Alpine Estates, Inc., 329 F.2d 909, 913-14 (9th Cir. 1964) (quoting Advertising Specialty 15 Nat’l Ass’n v. FTC, 238 F.2d 108, 119 (1st Cir. 1956)). 16 OneWest concedes it has many loans in Nevada, but argues there has been no 17 showing on this prong and that Plaintiffs have not been acting like this is a class action, 18 instead joining plaintiffs as they go along. Plaintiffs respond that they have done so 19 because that is what the parties agreed to do to avoid multiple amendments to add parties. 20 The Court finds Plaintiffs’ have met the “numerosity” requirement. 21 22 2. Commonality Rule 23(a)’s second requirement is that common questions of fact or law exist. 23 The class need not share in common all questions of fact and law. Dukes, 509 F.3d at 1177. 24 Rather, common legal issues with divergent facts or common facts with disparate legal 25 remedies may satisfy the commonality requirement. Id. “The commonality test is 26 qualitative rather than quantitative - one significant issue common to the class may be 5 1 sufficient to warrant certification.” Id. The Ninth Circuit construes the commonality 2 requirement “permissively.” Staton v. Boeing Co., 327 F.3d 938, 953 (9th Cir. 2003). Plaintiffs argue common questions of law and fact exist, including whether the loan 3 4 agreements comply with Nevada law, whether Indymac knowingly made loans without 5 determining the borrower’s ability to repay, whether OneWest has refused to negotiate 6 modifications, whether OneWest has used the Nevada law to evict people in violation of Nevada 7 law, and the class seeks common injunctive relief. OneWest argues there is no commonality 8 because each loan would have to be examined to determine whether Indymac knowingly 9 made the loan without determining the borrower’s ability to repay. The court finds commonality is lacking for Class A and Subclasses A and B. 10 11 Even if Plaintiffs could show Indymac used a standard loan form and they have presented 12 no such evidence, a standard form does not establish that in each case Indymac knowingly 13 made the loan without determining the borrower’s ability to repay. That would require an 14 individualized determination in each case. Likewise, there is no common question as to 15 OneWest’s alleged refusal to negotiate modifications. OneWest has presented evidence that 16 Plaintiffs have had somewhat different experiences in relation to modification. Some have 17 applied and been denied, some have been offered a modification which they rejected, one 18 accepted the modification, and others never even requested a modification. 19 However, members of Subclass C would share a common question of law as to 20 whether OneWest wrongfully foreclosed using Nevada’s judicial procedures when it was 21 not registered to do business in the state nor had a registered agent here. Whether OneWest 22 could resort to the judicial system given its status is a question common to all members of 23 the class regardless of their individual circumstances, so long as OneWest initiated 24 foreclosure and/or eviction proceedings in Nevada state court against them. 25 /// 26 /// 6 1 2 3. Typicality In assessing whether a proposed class representative’s claims are typical, the 3 Court must consider whether the injury allegedly suffered by the named plaintiffs and the 4 rest of the class resulted from the same alleged conduct of the defendant. Dukes, 509 F.3d 5 at 1184. A class representative’s claims need not be substantially identical to other 6 members’ claims. Id. Rather, typicality is satisfied if the named plaintiff’s claims are 7 “reasonably coextensive with those of absent class members . . . .” Id. (quotation omitted). 8 Minor differences in the nature of the specific injuries class members suffered do not defeat 9 typicality. Armstrong v. Davis, 275 F.3d 849, 868-69 (9th Cir. 2001). 10 Plaintiffs contend the class representatives’ claims are typical of the class 11 because they rest on similar legal arguments and each class member signed written 12 boilerplate loan agreements pursuant to which Indymac made loans without determining 13 whether the borrowers had the ability to repay. Plaintiffs also argue Benito’s claim is 14 typical of the class because OneWest used the Nevada judicial system to evict him without 15 first registering to do business in the State. 16 OneWest argues that discovery conducted thus far shows none of the five named 17 Plaintiffs deposed by OneWest during certification discovery falls within any of the 18 proposed classes. OneWest argues that because it did not originate any of the loans, it 19 cannot be liable to Class A or Subclasses A and B. Additionally, OneWest argues none of 20 the five Class representatives are members of Subclass C because their properties have not 21 been foreclosed and they have not been evicted. 22 OneWest is correct that no class can be certified under Class A or Subclasses A 23 or B because OneWest did not originate any of the loans, and it did not assume any 24 liabilities arising from Indymac’s alleged failure to determine a borrower’s ability to repay. 25 Moreover, the named Class representatives’ claims are not typical of the class even if one 26 could be constituted because it would require individual determinations on each loan as to 7 1 whether Indymac made the loan knowing the borrower lacked the ability to repay. 2 Although Plaintiffs allege boilerplate loan documents were used in all cases, discovery has 3 demonstrated this is not accurate. Indeed, not all loans for named Plaintiffs even originated 4 with Indymac thus the record does not establish Indymac used a boilerplate document 5 knowing the borrower on any particular loan could not repay. 6 However, a class can be certified under Subclass C because that class is directed 7 at activities undertaken by OneWest after having taken over the loans. OneWest argues 8 there is no named Plaintiff who is in foreclosure or eviction proceedings. It is undisputed 9 that named Plaintiff Benito was foreclosed upon and evicted, however because the actions 10 are complete as to him, he’s not entitled to injunctive relief, which is the only type of class 11 Plaintiffs attempt to assert right now. However, OneWest has indicated in its papers that 12 the only thing stopping it from commencing foreclosures on the other named Plaintiffs is 13 the stipulation of the parties that OneWest would not do so pending decision on the instant 14 Motion for Class Certification Several of the named Plaintiffs are in default on their loans 15 and thus, but for the stipulation, would face foreclosure proceedings or the imminent threat 16 of foreclosure. OneWest has indicated that once this Court makes its ruling on class 17 certification, it is free to start foreclosing on any Plaintiff in default on a loan. The Court 18 finds the typically requirement is met as to proposed Subclass C. 19 4. Adequate Representation 20 A plaintiff shows he or she adequately will represent the class by demonstrating 21 the proposed class representative has no conflicts of interest with the proposed class. 22 Dukes, 509 F.3d at 1185. In addition to showing the named representatives have no conflict 23 with the class, the plaintiff must show class counsel is qualified and competent. Dukes, 509 24 F.3d at 1185. 25 26 Plaintiffs argue the Class representatives adequately represent the class because Benito entered into a loan with Indymac, and Indymac made the loan by virtue of the 8 1 presumed equity in the property without determining Benito had the ability repay. 2 OneWest resorted to Nevada’s judicial system to evict Benito from the property. Plaintiffs 3 further contend their counsel are qualified, experienced, and able to conduct the litigation 4 and there are no conflicts of interest between Benito, the other named Plaintiffs, and the 5 putative class. 6 OneWest argues that Plaintiffs’ counsel is not adequate because OneWest wanted 7 to conduct stacked depositions (more than one deposition occurring at a single time) but 8 Plaintiffs’ counsel refused, saying they lacked the staff to do so. OneWest thus contends 9 Plaintiffs’ counsel lacks resources to conduct this case as a class action. As for the class 10 representatives, OneWest contends Benito is not an appropriate representative because he 11 lied on his loan application and he is employed by Plaintiffs’ counsel. OneWest also argues 12 that because the various named Plaintiffs are in different stages of the process, they may 13 have different and possibly conflicting interests. 14 The Court rejects OneWest’s argument that Plaintiffs’ counsel’s refusal to engage 15 in stacked depositions warrants a finding that Plaintiffs’ counsel is inadequate. The Court 16 finds Plaintiffs’ counsel are indeed qualified and experienced, and adequate to represent the 17 proposed Plaintiffs’ classes. 18 As for adequacy of the class representatives, as discussed above there is no 19 adequate representative for any class except Subclass C. OneWest challenges Benito’s 20 status as an adequate representative for Subclass C because he lied on his loan application 21 about his income, and thus there would be an individual defense against him not applicable 22 to the class. That would not affect his status as a representative of Subclass C. The only 23 issue in Subclass C is whether OneWest has a right to use the Nevada judicial system to 24 foreclose or evict when it is not registered here. Whether Benito lied on his loan 25 application will have no direct bearing on that question. OneWest argues Benito is not an 26 adequate class representative because he works for Plaintiffs’ counsel. Plaintiffs’ counsel 9 1 denies Benito works for them. Regardless, because Benito already has been foreclosed 2 upon and evicted, he would not have standing to seek injunctive relief as a representative of 3 Subclass C. Nevertheless, the other named Plaintiffs face imminent threat of foreclosure 4 and/or eviction proceedings once the stipulation in this case is lifted. OneWest has 5 indicated it will foreclose upon borrowers in default once the stipulation is lifted, which will 6 occur upon this Court’s ruling on the class certification motion. Several of the named 7 Plaintiffs are in default and thus would be subject to foreclosure proceedings. Such 8 Plaintiffs’ adequately represent the interest of Subclass C. 9 In sum, class certification must be denied under Rule 23(a) for Class A and 10 Subclasses A and B for lack of an ascertainable class, lack of commonality, lack of 11 typicality, and lack of an adequate representative. However, the Court finds Subclass C is 12 certifiable under Rule 23(a). 13 B. Rule 23(b) 14 In addition to satisfying Rule 23(a), a plaintiff also must show at least one of the 15 Rule 23(b) categories applies. Plaintiffs seek to certify only under Rule 23(b)(2). Rule 16 23(b)(2) provides for class certification where the party opposing the class has acted or 17 refused to act on grounds generally applicable to the class thus making appropriate 18 injunctive or declaratory relief with respect to the class as a whole. “Rule 23(b)(2) 19 certification is not appropriate where monetary relief is ‘predominant’ over injunctive relief or 20 declaratory relief.” Dukes v. Wal-Mart Stores, Inc., --- F.3d ----, 2010 WL 1644259, *36 (9th Cir. 21 2010). Whether monetary relief predominates is a case-by-case inquiry. Id. The Court must 22 consider “the objective ‘effect of the relief sought’ on the litigation,” including “whether the 23 monetary relief sought determines the key procedures that will be used, whether it introduces new 24 and significant legal and factual issues, whether it requires individualized hearings, and whether its 25 size and nature-as measured by recovery per class member-raise particular due process and 26 manageability concerns would all be relevant.” Id. None of these factors is determinative. Id. 10 Plaintiffs argue Indymac/OneWest have acted in a similar manner to all members of the 1 2 class by engaging in predatory lending practices and then used the Nevada legal system to evict 3 without complying with Nevada law. OneWest argues that Plaintiffs have failed to show OneWest 4 acted or refused to act on grounds generally applicable to the class because OneWest did not 5 originate any of the loans at issue. Additionally, OneWest argues that the allegations that OneWest 6 made each loan knowing the borrower could not repay, that Indymac misrepresented the loans’ 7 terms, or that OneWest wrongfully foreclosed cannot be demonstrated on a class wide basis, as 8 each would involve individualized inquiries. Moreover, OneWest argues Plaintiffs are not entitled 9 to certify a class under Rule 23(b)(2) because their claims for damages predominate over claims for 10 declaratory or injunctive relief. As discussed with respect to the Rule 23(a) factors, Plaintiffs have not shown common 11 12 conduct as to all class members in relation to loan origination because whether Indymac knowingly 13 made loans without determining a borrower’s ability to repay would require individual 14 determinations on each loan. Likewise, whether OneWest refused to negotiate modifications will 15 be an individual determination, as it is undisputed that OneWest in fact has offered modifications 16 to some Plaintiffs already. 17 However, the Court finds Subclass C is certifiable. OneWest has acted common to the 18 class when it seeks to foreclose and/or evict in Nevada state court while allegedly not registered to 19 do business in the state and having no registered agent here. As to this class, injunctive relief 20 would predominate for a class of individuals who had not yet been foreclosed upon or evicted, but 21 who were under threat of such litigation. They would want to stop foreclose altogether, as real 22 property is unique and damages may not remedy their harm. For those like Benito who already 23 have been evicted, money damages would be the only possible relief, and thus no class could be 24 certified for injunctive relief for a class of already foreclosed/evicted borrowers. 25 /// 26 /// 11 II. CONCLUSION 1 For the foregoing reasons, the Court concludes that Plaintiffs’ Motion for Class 2 3 Certification should be granted only as to proposed Subclass C. At the close of the May 18 hearing the Court inquired of counsel whether efforts 4 5 were ongoing to process loan modification applications when submitted by various 6 Plaintiffs. Counsel for OneWest advised they were, but noted it is a slow process 7 dependent in part on each Plaintiff submitting a complete loan modification application 8 with all necessary supporting documentation. The Court concludes that the involvement of the Magistrate Judge assigned to 9 10 this case, the Honorable Peggy A. Leen, may be helpful in bringing the parties together to 11 streamline and expedite the process of submitting and considering loan modification 12 applications from Plaintiffs in the action and future members of proposed Subclass C. 13 Therefore, the Court will include in this Order a provision referring the case to Magistrate 14 Judge Leen for such proceedings as she deems appropriate to assist the parties in this 15 regard. 16 IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Class Certification 17 (Doc. #16) is GRANTED to the limited extent that Plaintiffs’ Proposed Subclass C is 18 hereby Certified in accord with provisions of FRCP 23. 19 20 21 IT IS FURTHER ORDERED that Plaintiffs’ Motion for Class Certification (Doc. #16) is DENIED in all other respects. IT IS FURTHER ORDERED that counsel for the parties shall forthwith meet 22 and confer, and shall within thirty (30) days of the date of the this Order file with the Court 23 a proposed Order for Notice of the Class Action certified herein in accord with FRCP 23(c). 24 IT IS FURTHER ORDERED that in accord with FRCP 23(g), Matthew Q. 25 Callister, Esq., and Brooke A. Bohlke, Esq., of the Law Firm of Callister & Reynolds are 26 hereby appointed as Plaintiffs’ Class counsel for Certified Subclass C. 12 1 IT IS FURTHER ORDERED that within 30 days of the date of this Order, 2 counsel for Plaintiffs shall designate new representative Plaintiffs for certified Subclass C. 3 IT IS FURTHER ORDERED that this case is referred to the Honorable Peggy 4 A. Leen, United States Magistrate Judge for scheduling a hearing with counsel for the 5 parties to this action within the next 60 days to address the progress of processing loan 6 modification applications of Plaintiffs. 7 8 DATED: May 21, 2010. 9 10 11 PHILIP M. PRO United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 13