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In Re Wells Fargo Mortgage-Backed Certificates Litigation

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION


December 27, 2010

IN RE WELLS FARGO MORTGAGE-BACKED CERTIFICATES LITIGATION

The opinion of the court was delivered by: Lucy H. Koh United States District Judge

United States District Court For the Northern District of California

ORDER ENTERING FINAL JUDGMENT AS TO CERTAIN DISMISSED OFFERINGS PURSUANT TO FED. R. CIV. P. 54(b)

On October 19, 2010, this Court issued an order dismissing claims relating to certain 18 mortgage-backed securities from this case, with prejudice, on the basis that they were not timely.

See October 19, 2010 Order (Dkt. No. 299) at 5-11. Specifically, the Court found that, in the 20 existing circumstances, a complaint alleging claims on behalf of named plaintiffs who were 21 without standing to bring those claims did not toll the statute of limitations for later assertions of 22 those claims. Id. The Ten Dismissed Offerings were the Wells Fargo Mortgage Backed Securities 23

2007-10, 2007-13, 2007-AR4, 2006-7, 2006-10, 2006-AR16, 2006-AR19, 2006-18, 2006-20 24

Trusts, and the Wells Fargo Alternative Loan 2007-PA1 Trust. On November 18, 2010, certain 25

Plaintiffs*fn1 in this putative class action (hereinafter, the "In re Wells Fargo" action) filed an 26 administrative motion for entry of final judgment as to these Ten Dismissed Offerings pursuant to 2 Fed. R. Civ. P. 54(b), so that they may pursue an appeal of this dismissal. See 54(b) Motion (Dkt. 3

In addition to claims relating to the Ten Dismissed Offerings, the Order dismissed claims of 5 additional parties relating to a different Offering, the 2006-AR15 Trust. See October 19, 2010 6

"General Retirement," and dismissing claims brought in a separate action by First Star Bank). 8

Offerings were dismissed, namely, that the statute of limitations on these claims had not been 10 tolled by the assertion of claims ultimately dismissed for lack of standing. Accordingly, the Motion to Intervene to assert claims relating to the 2006-AR15 Trust in the instant case was 13 denied. See First Star Bank v. Wells Fargo Mortg. Backed Sec. 2006-AR15 Trust ("First Star"), 14

No. 10-cv-3508 LHK, Dkt. No. 36.

Both First Star Bank and General Retirement have appealed 15 these rulings. See First Star action Notice of Appeal (Dkt. No. 37); In re Wells Fargo action 16

Defendants filed an opposition to Plaintiff's 54(b) Motion, objecting that the motion was

18 not appropriate for briefing on an administrative motion schedule. Subsequently, the Court set an 19 abbreviated briefing schedule, and Defendants submitted a further opposition. See Suppl. Opp'n. 20

(Dkt. No. 322). The Plaintiffs replied. Dkt. No. 327. Based on the papers submitted, the Court 21 finds that it is appropriate to enter the dismissal of the Ten Dismissed Offerings as a final 22 judgment, pursuant to Fed. R. Civ. P. 54(b). 23

No. 302). 4

Order at 12-14 (denying Motion to Intervene by General Retirement System of the City of Detroit, 7

Claims relating to the 2006-AR15 Trust were dismissed for the same reason that the Ten Dismissed 9 separate action brought by First Star Bank was dismissed with prejudice, and General Retirement's 12

Notice of Appeal (Dkt. No. 304). 17

The October 19, 2010 Order did not dispose of all claims and issues in the In re Wells

Fargo matter; therefore, the Order is not appealable without a further order from this Court 25 directing "entry of a final judgment" as to the dismissed claims or parties. Fed. R. Civ. P. 54(b). 26

Entry of final judgment is within the "sound judicial discretion" of this Court. Curtiss-Wright 27

Corp. v. General Elec. Co., 446 U.S. 1, 10 (1980). In determining whether to enter a final 28 judgment, the Court must first determine if the judgment is final. Curtiss-Wright, 446 U.S. 1, 7-8 2

(1980). Claims relating to the Ten Dismissed Offerings were dismissed with prejudice. Therefore, 3 judgment as to those claims was final. 4

5

Next, the Court must consider whether there is any just reason for delay. The Supreme

Court has noted that "[n]ot all final judgments on individual claims should be immediately 6 appealable, even if they are in some sense separable from the remaining unresolved claims . . . in 7 deciding whether there are no just reasons to delay the appeal of individual final judgments in a 8 setting such as this, a district court must take into account judicial administrative interests as well 9 as the equities involved. Consideration of the former is necessary to assure that application of the 10

11

Rule effectively preserves the historic federal policy against piecemeal appeals." Curtiss-Wright, 446 U.S. at 8 (internal citations and quotations omitted). 12

13 to delay the appeal. As conceded by Defendants in their Oppositions to this Motion, the issue of 14 whether or not the statute of limitations on Plaintiffs' claims was tolled by the filing of the In re 15

Wells Fargo action is the same issue being appealed by First Star Bank and General Retirement in 16 their separate appeals. See Opp'n. (Dkt. No. 308) at 4; Suppl. Opp'n (Dkt. No. 322) at 8. As 17 discussed at length in the parties' briefing on the tolling issue and in the Court's October 19, 2010 18

Order, this legal question has not been decided by the Ninth Circuit and therefore appears ripe for 19 appellate review. Entry of final judgment on the Ten Dismissed Offerings will permit the various 20 appeals on this issue to proceed more or less at the same time, such that they might be consolidated 21 and heard together if the Ninth Circuit chooses. See Fed. R. App. P. 3(b)(2). This way, the 22

Plaintiffs as well as General Retirement and First Star Bank will have an opportunity to be heard 23 on an issue dispositive of all their claims. 24

25 dismissal of the Ten Dismissed Offerings, or create additional determinations on this issue 26 potentially implicating additional appeals. Curtiss-Wright, 446 U.S. at 8. Contrary to Defendants' 27 argument in their Oppositions, the Court will not decide whether or not the Ten Dismissed 28

Regarding the interests of judicial administration, the Court finds that there is no just reason

In addition, no further decisions in the In re Wells Fargo matter will alter the Court's Offerings were barred by any additional statute of limitations, as these Offerings are no longer at 2 issue in the In re Wells Fargo matter. As the Defendants have represented, each Offering is a 3 separate event, with its own unique set of facts and circumstances, and therefore distinct factual 4 issues. Thus, there is no reason to assume that future rulings made by this Court regarding the 5

Plaintiffs may appeal previous decisions relating to both the Ten Dismissed Offerings and other 7

Offerings still at issue will have implications for the Ten Dismissed Offerings. Although the 6

Offerings at the conclusion of the litigation, this is not a good reason to prevent the Plaintiffs from 8 being heard while the Ninth Circuit considers the statute of limitations issue now. Defendants' 9 stated concern about crowding the Ninth Circuit's "overwhelmed" docket seems to ignore the fact 10 that the Ninth Circuit will have to address this question anyway because the First Star and General Retirement appeals are properly before it. If the Court refuses to grant Plaintiffs' motion, it will 12 only serve to prevent Plaintiffs from being heard on this issue. 13

14 inequitable to allow the requested appeal to proceed now. Defendants argue that if Plaintiffs are 15 successful on appeal, "the parties would be required to revisit class certification discovery, expert 16 work, and briefing to account for the Ten Offerings . . . and . . . many of the same witnesses would 17 have to be deposed again." Suppl. Opp'n. at 7. The problem with this argument is that the 18 concerns Defendants highlight only worsen over time. If the Plaintiffs are made to wait until after 19 this case is completely resolved before appealing the dismissal of the Ten Dismissed Offerings, and 20 the dismissal is ultimately reversed, it will likely require an entirely new action, with another class 21 certification motion and potentially a second trial. If Plaintiffs proceed with their appeal now, 22 there is at least a chance that the Ten Dismissed Offerings can be addressed by the trial in this case. 23

Regarding the equities between the parties, the Defendants have not shown that it would be The Court is not persuaded by Defendants' other arguments in opposition to this Motion.

Defendants rely on a Ninth Circuit case reversing a 54(b) order giving final judgment status to a 25 dismissal of a wrongful constructive discharge while claims of discrimination and retaliation based 26 on the same factual allegations were not yet determined. Wood v. GCC Bend LLC, 422 F.3d 873, 27 882 (9th Cir. 2005). Unlike Wood, the tolling issue presented by the Ten Dismissed offerings is 28 not a "routine case" and does not present the same set of facts that will be implicated by the 2 ongoing claims in the In re Wells Fargo case. The stipulated order from the Southern District of 3

New York, also relied upon by Defendants, is simply an agreement between the parties in that case 4 that dismissal of certain claims will not be immediately appealable, and like the Wood case, bears 5 little factual resemblance to this case. In re IndyMac Mortgage-Backed Sec. Litig., 09-Civ.-04583 6

(LAK), Docket No. 262, at 2 (S.D.N.Y. Sept. 8, 2010). Finally, Defendants' reliance on a decision 7 refusing to issue a Rule 54(b) Order regarding a dismissal based on statute of limitations, from 8 another mortgage-backed securities case, is distinguishable. In re Morgan Stanley Mortg. Pass-9

Through Certificates Litig., 09-Civ-2137(LTS), 2010 WL 3239430 (S.D.N.Y Aug. 17, 2010). It 10 appears that in that case there were no co-pending appeals of the same judgment.

12 case pending the outcome of the appeal. See Suppl. Opp'n. at 8-10. A stay pending appeal may be 13 granted in the Court's discretion, if it would serve the "interests of efficiency and fairness" to stay 14 the case. See Doe v. University of Cal., No. C-92-2284 SAW, 1993 U.S. Dist. LEXIS 12876 at *5 15 (N.D. Cal. Sept. 2, 1993).*fn2 In support of their request for a stay, Defendants cite many cases from 16 outside the Ninth Circuit. Most of these cases simply report that a court ordered a stay in 17 connection with entering final judgment pursuant to Rule 54(b), without providing analysis as to 18 why this decision was reached. See, e.g., Utah Power Light Co. v. Fed. Ins. Co., 983 F.2d 1549, 19 1551 (10th Cir. 1993) (reporting that district court stayed proceedings pending appeal, without 20 discussing the reasons for this decision). Defendants particularly focus on an Eastern District of 21

Pennsylvania decision where the court stayed a class action pending appeal of the final dismissal of 22 one set of class members' claims. Stadler v. McCulloch, 882 F. Supp. 1524, 1527 (E.D. Pa. 1995). 23

In Stadler, the court had already ruled on one motion for class certification, and granted the stay in 24 25 part to avoid deciding multiple additional class certification motions and a new trial on related 2 issues. Id., 882 F. Supp. at 1527-28. 3

Given the circumstances of this case, the Court finds that a stay would not serve the 4 interests of efficiency and fairness. If the Ninth Circuit reverses the Court's dismissal of the Ten 5 Dismissed Offerings, the Court may amend the case schedule to allow discovery and trial relating 6 to these Offerings. In the case of reversal, forcing the Plaintiffs to wait until final resolution of the 7 remaining claims at issue to appeal will greatly increase the risk that a second action and trial on 8 the Ten Dismissed Offerings will be needed. 9

Accordingly, the Court hereby GRANTS Plaintiffs' request and enters final judgment under

Rule 54(b) as to the dismissal of claims relating to the Ten Dismissed Offerings on the grounds that the statute of limitations as to these claims was not tolled. 12

IT IS SO ORDERED.


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