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In Re: Wachovia Corporation "Pick- A-Payment" Mortgage Marketing and Sales Practices Litigation.

November 19, 2012


The opinion of the court was delivered by: Jeremy Fogel United States District Judge

**E-Filed 11/19/2012**

United States District Court For the Northern District of California

ORDER RE MOTIONS HEARD OCTOBER 16, 2012 [re: dkt. entries 299, 307, 322, 326, 339, 342, 343, 344, 349, 318]

Before the Court are ten motions arising from the settlement of this class action litigation:

18 motions for relief from the class action settlement filed by Dina Flotte (Dkt. Entry 299) and Nick 19 John Makreas (Dkt. Entry 307); six motions to enforce the class action settlement agreement filed 20 by Defendants (Dkt. Entries 322, 326, 339, 342, 343, and 344); a motion to quash filed by Catherine 21 Czyz (Dkt. Entry 349); and a motion to compel enforcement of the settlement agreement filed by 22 Thomas Worthington (Dkt. Entry 318). The Court expressly has retained "continuing jurisdiction to 23 interpret and enforce the settlement agreement." Dkt. Entry 207, Order Granting Final Approval Of 24 Class Action Settlement, at 4. The Court thus has subject matter jurisdiction over the motions. See 25 Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 380-81 (1994) (district court has 26 subject matter jurisdiction if its dismissal order expressly retains jurisdiction over disputes arising 27 from the settlement agreement). The Court has considered both the written briefing with respect to 28 each motion and the oral argument presented by those parties and attorneys who appeared at the 5 action settlement agreement binds all class members who did not do so." In re Am. Express Fin. 6 hearing on October 16, 2012.*fn1


A. Opt Out

"Absent a violation of due process or excusable neglect for failure to timely opt out, a class- Advisors Sec. Litig., 672 F.3d 113, 129 (2d Cir. 2011). The Court may relieve a party from a final 7 judgment or order under Federal Rule of Civil Procedure 60(b)(1) upon a showing of "mistake, 8 inadvertence, surprise, or excusable neglect." Fed. R. Civ. P. 60(b)(1). Moreover, the Court may 9 extend the time within which an act must be done "on motion made after the time has expired if the 10 party failed to act because of excusable neglect." Fed. R. Civ. P. 6(b)(1)(B). Under these authorities, the Court may grant a request for a late opt out if the class member demonstrates that his

or her failure to opt out in the time and manner provided by the class notice was a result of 13 excusable neglect. Factors to be included in a court's analysis of a claim of excusable neglect 14 include (1) the danger of prejudice to the opposing party, (2) the length of delay in seeking relief 15 and the impact of such delay on judicial proceedings, (3) the reason for the delay, including whether 16 it was within the reasonable control of the movant, and (4) whether the movant acted in good faith. 17

Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380, 395 (1993). 18

Under the All Writs Act, federal courts have the power to "issue all writs necessary or

20 appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." 21

"interfere, derogate, or conflict with federal judgments, orders, or settlements." Hanlon v. Chrysler 23 Corp., 150 F.3d 1011, 1025 (9th Cir. 1998) (internal quotation marks and citation omitted). 24 25

B. Enforcement Of Settlement 19

28 U.S.C. § 1651. This power encompasses the authority to enjoin state court proceedings that 22

1, Flotte Decl., ¶ 2. She obtained a pick-a-payment loan from World Savings FSB, predecessor in 5 interest to Wachovia Mortgage,*fn2 in August 2006. Id. She has not made a payment on her mortgage 6 loan since August 2008, and the unpaid principal balance on her loan is in excess of $1 million. 7

Flotte claims that she did not receive a notice of the class action but learned about it in

February 2011 from her mother, who also had a pick-a-payment loan with Wachovia. Dkt. Entry 10

immediately and was informed that she had to opt out of the class action if she wished to bring her

own lawsuit. Dkt. Entry 299-1, Flotte Decl., ¶ 3. She claims that the Wachovia representative with 13 whom she spoke referred her to a website that contained information about the class action lawsuit. 14

Id. However, according to Flotte, the website was down each time she tried to access it. Id. Flotte 15 asserts that she called Wachovia back and was instructed to send Wachovia a letter stating that she 16 wished to opt out of the class action. Id. at ¶ 4. Flotte claims that she mailed such a letter to 17 Wachovia on February 22, 2011 and sent it by facsimile on the same date. Id. On October 4, 2011, 18 she filed a lawsuit against Wachovia and related entities in the Alameda Superior Court, Flotte v. 19 Wachovia Mortgage Corp., et al., Case No. RG11598402. Id. ¶ 5. After filing the lawsuit, she 20 received a check in the amount of $178.04 in settlement of the class action lawsuit. Id. ¶ 6. She has 21 not cashed the check. Id. 22

Unfair Competition Law ("UCL"). Dkt. Entry 299, Motion, p. 2. Defendants Wachovia et al. 24 contend that Flotte may not assert a UCL claim in her state court action because such claim is barred 25 by the class action settlement approved by this Court on May 17, 2011. Flotte acknowledges that 26


A. Dina Flotte's Motion For Relief From Settlement (Dkt. Entry 299)

Dina Flotte ("Flotte") is a resident of Dublin, Alameda County, California. Dkt. Entry 299-

Dkt. Entry 305, Dolan Decl., ¶ 3. She is a Class C member. Id. 8


299-1, Flotte Decl., ¶ 3; Dkt. Entry 299, Motion, p. 2. Flotte states that she called Wachovia

Flotte's state court lawsuit asserts four claims, including one for violation of California's

she failed to follow the proper procedure for opting out of the class action. However, she seeks 2 relief from the judgment in this case on the grounds that she did not receive formal notice of the 3 class action and followed Wachovia's directions in sending the opt out directly to Wachovia instead 4 of to the class action administrator. 5

6 action administrator, Rust Consulting, Inc. ("Rust Consulting"), states in her declaration that class 7 notice was sent to Flotte at her current address in Dublin and was not returned as undeliverable. 8

Defendants dispute Flotte's version of events. Amy Lake ("Lake"), an employee of the class

Dkt. Entry 306, Lake Decl., ¶ 7. Lake also states that Rust Consulting monitored the settlement 9 website carefully, and that she is not aware of any instance in which the website was not 10 functioning. Id. ¶ 8. Michael Dolan ("Dolan"), an operations analyst with Wells Fargo, states in his

declaration that Wells Fargo*fn3 did not receive the letter or facsimile requests for opt out that Flotte

claims to have sent in February 2011. Dkt. Entry 305, Dolan Decl., ¶ 7. He also explains that each 13 time a borrower calls Wells Fargo's customer service department, the time, date, and substance of 14 the call are logged; once logged these notes cannot be changed. Id. ¶ 8. Dolan has reviewed the 15 notes associated with Flotte's mortgage and there is no indication that Flotte called Wells Fargo at 16 any time in February 2011, nor is there any indication that a customer service representative 17 instructed Flotte to send an opt out directly to Wells Fargo. Id. ¶ 9. Wells Fargo customer service 18 personnel are trained not to provide any information about how to opt out of the class, but rather are 19 trained to direct the borrower to call Rust Consulting or visit the settlement website. Id. ¶ 8. 20

Finally, Dolan states that Wells Fargo solicited Flotte to apply for a loan modification on multiple 21 occasions, but Flotte failed to return Wells Fargo's telephone calls and failed to provide information 22 necessary to process her modification application. Id. ¶¶ 4-5. Dolan also submitted a supplemental 23 declaration following the hearing, in which he states that Flotte last applied for a loan modification 24 in February 2010, at which time she was offered a loan modification but failed to accept it. Dkt. 25

Entry 359, Suppl. Dolan Decl., ¶ 3. 26

2 relief she requests is warranted. Defendants would be prejudiced by having to defend a state law 3

UCL claim that they reasonably believed had been settled. While she does offer an explanation for 4 her delay in seeking to opt out of the settlement, that explanation is contradicted by credible 5 evidence submitted by Defendants. It appears that Flotte has remained in her home for more than 6 four years without making any mortgage payments whatsoever, and that when she was offered a 7 loan modification almost two years ago she failed to accept it. Based upon this record, Flotte's 8 request for a late opt out will be denied. 9

Nick John Makreas ("Makreas"), proceeding pro se, requests relief from the class action

settlement on the ground that he mailed a timely opt out pursuant to the provisions of the class

notice. He submits an "affidavit of truth" stating that he mailed his opt out on February 21, 2011, 13 well before the March 16, 2011 deadline. Dkt. Entry 307, Exhs. 1-2. He received a settlement 14 check in the amount of $178.04. Id. Exh. 6. It is not clear when he received the check -- the check 15 and accompanying correspondence are dated October 7, 2011, but Makreas states in his motion that 16 he received the check in November 2011. Dkt. Entry 307, Motion, p. 2 and Exh. 6. Makreas 17 represents that he did not cash the check but instead marked it "VOID" and sent it to the Court. He 18 states that he assumed that the check had been sent to him in error, but that when he followed up in 19

Makreas filed the present motion for relief on January 4, 2012. Dkt. Entry 307, Motion. 21

Makreas. Dkt. Entry 312, Lake Decl., ¶ 8. Makreas theorizes that the unreliability of the United 23

Applying the Pioneer factors, the Court concludes that Flotte has not demonstrated that the

B. Nick John Makreas's Motion For Relief From Settlement (Dkt. Entry 307) 10

December 2011, he was advised that he was not on the opt out list. Dkt. Entry 307, Motion, p. 3. 20

Amy Lake of Rust Consulting states in her declaration that no opt out was received from

States Postal Service may explain why Rust Consulting did not receive the opt out. He offers 24 evidence of other, unrelated occasions on which the Postal Service made errors. Dkt. Entry 316, 25

Defendants will suffer prejudice if Makreas is permitted to opt out, as they are entitled to

27 rely upon the fact that the case has been settled against all class members who failed to opt out by 28

Reply, Exhs. A and B. 26

March 2011. However, there is no record evidence that undermines Makreas's declaration. The Court found Makreas, who appeared telephonically at the hearing pro se, to be credible. He filed 2 the present motion within two months of receiving a settlement check. That delay is not 3 unreasonable given the fact that it spanned the winter holidays and given Makreas's pro se status. 4

Defendants remind the Court that they were entitled to withdraw from the settlement if the

6 number of opt outs were too high, and that finality in the number of opt outs was very important in 7 their decision to go forward with the settlement. This argument is not particularly compelling given 8 the fact that the Court has received fewer than fifteen requests for late opt out since judgment was 9 entered. 10

Defendants move to enforce the settlement against Lansing and Lura Eberling, Class C

members who are litigating against Defendants in the United States District Court for the Central 13

01831-AG. Defendants seek an injunction precluding the Eberlings from litigating in that action 15 claims that were released in the settlement of this action. 16

17 settlement of the present action. They are suing Wachovia and related entities for claims arising out 18 of their pick-a-payment mortgage. Dkt. Entry 329, Opp. & Decl. of Craig Boucher, p. 5. They 19 initially filed suit in the California ...

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