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Vathana v. Everbank

March 15, 2010


The opinion of the court was delivered by: Richard Seeborg United States District Judge


In this breach of contract action, plaintiff Ek Vathana moves to certify a class of investors whom he contends are similarly situated to himself in relation to defendants EverBank, EverBank Financial Corporation, and EverBank World Markets (collectively, "EverBank"). As explained in further detail below, the putative class meets the four requirements of Rule 23(a), and common issues of law and fact predominate among the members of the putative class consistent with Rule 23(b)(3). Therefore, Vathana's motion for class certification will be granted.


Vathana filed this putative class action in Santa Clara County Superior Court in April 2009, and EverBank removed the case to this Court in May 2009. Vathana then moved to remand, while EverBank moved to dismiss. Both motions were denied. Vathana now brings this motion for class 3 certification.*fn1

The evidence adduced thus far reveals the following undisputed facts. Among its other financial products, EverBank offers an investment vehicle known as a WorldCurrency CD (WCCD). The concept behind this CD, according to the complaint, "is that one can send a deposit of US Dollars to EverBank, that EverBank will then convert those US Dollars to any one of a number of different foreign currencies, and that EverBank will hold those funds for a term in the form of a Certificate of Deposit and add interest thereto at the end of the term." In July 2008, (CD 771). The value of CD 771 at the time of investment was 743,045.22 ISK. In September 2008,

Vathana invested 40,040.07 USD in a second ISK WCCD (CD 237). The value of CD 237 at the time was 3,525,527.75 ISK. Both CDs had a term of three months. and Terms & Conditions Agreement" (the Agreement). It provided that investors had three options when their CDs matured: (1) liquidation of the CD; (2) return of the interest and re-investment of the principal; or (3) rollover of the CD and its proceeds by re-investing in the same currency for the same maturity, at the current prevailing interest rate. Unless EverBank heard otherwise from the investor, the third option operated as the default.*fn2

In early October 2008, the Republic of Iceland faced a severe monetary crisis, and the national government imposed sudden, significant controls on the amount of ISK that could be purchased by foreign investors. According to EverBank, these exchange controls reduced or eliminated EverBank's ability to purchase new ISK WCCDs for its customers. In October 2008 and for a time thereafter, EverBank notified its ISK WCCD holders via email that the banking crisis in [did] not have a way of rolling ISK CDs." Exh. A & B to Gaffney Decl. requesting that the CD be rolled over. The instruction also stated, "I will not accept a forced liquidation conversion. If you choose to close my accounts, I demand you send me the actual physical ISKs." Nonetheless, EverBank closed CD 771 on October 20, 2008, and, two days later, converted it into USD at what Vathana contends was "an incredibly low interest rate" in comparison to published rates. Specifically, at the time of its conversion, CD 771 was valued at 747,676.53 ISK, and EverBank converted it to 2,958.03 USD. Thus, Vathana's loss over the three-month term 13 of CD 771 was 6,489.46 USD.

US dollars at an allegedly unfavorable exchange rate. At the time of its conversion, the CD was valued at 3,547,501.93 ISK, and EverBank converted it into 16,339. USD. Thus, Vathana's loss over the three-month term of CD 237 was 23,700.88 USD.

Court in April 2009. The sole cause of action listed in the complaint was for breach of contract.

Iceland was presenting problems for its routine currency exchanges, and that EverBank "currently 5 On October 18, 2008, CD 771 matured, and Vathana sent EverBank a written instruction Similarly, in December 2008, CD 237 matured, and EverBank closed and converted it into Based on these events, Vathana filed a putative class action in Santa Clara County Superior Specifically, Vathana alleged that EverBank had breached the Agreement by closing out CDs 771 21 and 237 and converting them into US currency, rather than by re-investing their value in more CDs 22 denominated in ISK, as Vathana had instructed. Additionally, he contended that a breach occurred 23 when EverBank utilized an unreasonable ISK-USD conversion rate to close out his CDs.*fn3 Further, 24 he alleged that a class of individual WCCD owners had experienced similar wrongs. EverBank 2 removed the action to this Court in May 2009. Vathana moved to remand the case, and EverBank moved to dismiss the complaint. Both motions were denied.

Vathana has now filed this motion for class certification, asking that the Court certify a class defined as "All purchasers of an EverBank WorldCurrency Certificate of Deposit denominated in Icelandic krona which matured between October 8 and December 31, 2008." EverBank's records, upon which both parties rely, indicate that EverBank closed 695 ISK WCCDs during the relevant time period, affecting a total of 563 investors. This putative class, according to Vathana, is entitled to restitution damages-that is, damages measured by subtracting the proceeds in USD generated from the closure of the CD during the last quarter of 2008 from the purchase price in USD on the date the investor bought the CD from EverBank (whether as a new CD or through automatic reinvestment of an old CD).*fn4 Measured this way, the putative class's alleged damages total court and guided by Rule 23 of the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 23; see also Cummings v. Connell, 316 F.3d 886, 895 (9th Cir. 2003). A court may certify a class if a plaintiff demonstrates that all of the prerequisites of Federal Rule of Civil Procedure 23(a) have been met, as well as at least one of the requirements of Federal Rule of Civil Procedure 23(b). See Rule 23(a) provides four prerequisites that must be satisfied for class certification: (1) the class must be so numerous that joinder of all members is impracticable, (2) questions of law or fact exist that are 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. Fed. R. Civ. P. 23(a). A plaintiff must also establish that one or more of


The decision as to whether to certify a class is committed to the discretion of the district Fed. R. Civ. P. 23; see also Valentino v. Carter-Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1996).

the grounds for maintaining the suit are met under Rule 23(b), including (1) that there is a risk of substantial prejudice from separate actions; (2) that declaratory or injunctive relief benefitting the class as a whole would be appropriate; or (3) that common questions of law or fact predominate and the class action is superior to other available methods of adjudication. Fed. R. Civ. P. 23(b). In this case, Vathana's motion focuses on Rule 23(b)(3). This subsection encompasses "those cases in which a class action would achieve economies of time, effort, and expense, and promote uniformity of decision as to ...

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