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Mark Buchanan and Brian Shaw v. Homeservices Lending LLC.

April 25, 2013


The opinion of the court was delivered by: M. James Lorenz United States District Court Judge


This putative class action stems from an action initially brought by Plaintiff Mark Buchanan on April 29, 2011 against Defendants Homeservices Lending LLC (HSL) and Doherty Employment Group, Inc.. On February 27, 2012, the Court granted a Joint Motion for Consolidation to also include Plaintiff Brian Shaw's claims against Defendants in this action. [Doc. #35] On October 11, 2012, Plaintiffs filed a Second Amended Complaint alleging three "class action claims for relief" in addition to several individual claims for violations federal and California state wages and hours laws. On October 29, 2012, Plaintiffs filed a Motion for Class Certification of the "class action claims" pursuant to Federal Rule of Civil Procedure 23 [Doc. #51], which Defendants oppose. [Doc. #58] On the same day, Defendants filed a Motion to Deny Class Certification of the alleged class action claims [Doc. #52], which Plaintiffs oppose. [Doc. #58] For the reasons that follow, Plaintiffs' motion for class certification will be denied without prejudice and Defendants' motion to deny certification will be granted.


HSL is a loan originating joint venture between Wells Fargo and HomeServices of America. (Mot. to Den. at 2.) From approximately January 2008 to March 30, 2011, Plaintiff Mark Buchanan was employed by HSL as a Home Mortgage Consultant (HMC). (SAC ¶ 7.) HMCs gather financial data and other information from potential borrowers, attempt to find appropriate home mortgage loans for borrowers, and then close the mortgage transactions. (Mot. to Den. at 3.) HMCs then receive commissions on their dollar loan volume. (Id.)

The class action claims stem from fees paid by HMCs and HMC Jrs. for marketing programs provided by HSL including website marketing fees, e-business card marketing fees, and mailer marketing fees. (SAC ¶¶ 57-70.) The website marketing fees, including a set up charge and monthly payment, went towards a website that marketed HSL loan products and allowed applicants to submit applications online (Mot. to Certify at 3-4; Mot. to Den. at 3-4.) The e-business card program provided HMCs with virtual business cards embedded at the bottom of HMCs' e-mails with their picture, contact information, and a link to mortgage rates for a one time fee. (Mot. to Certify at 6; Mot. to Den. at 4.) The mailer marketing fees included those allegedly paid for additional mailings and postcard expenses on behalf of the HMCs. (Mot. to Certify at 7-8.) Plaintiffs allege that HSL deducted these fees from the HMC's pay stubs or charged them directly to the HMCs' credit cards. (Mot. to Certify at 3, 6, 8.)

Plaintiffs contend that deductions for these marketing items without reimbursement violated California labor laws. Plaintiffs allege that the paystub deductions and charges for the website, e-business cards, and mailings were necessary and ordinary business expenses HSL improperly deducted in violation of California Labor Code § 221. (SAC ¶ 58.) Plaintiffs further allege that HSL violated California Labor Code § 2802 by failing to reimburse the expenses to HMCs, and additionally violated California Business and Professions Code § 17200 et seq. by engaging in unfair business practices. (Id. at ¶¶ 63, 68-70.)

Plaintiffs moved to certify these claims under Federal Rule of Civil Procedure 23(a) and 23(b)(3) to proceed on behalf of the class of at least 120 HMCs and HMC Jrs. employed by HLS since January 2008. (Mot. to Certify at 1.) The proposed class includes three sub-classes for HMCs during the period who had deductions or charges for each of the three types of marketing expenses. (Id. at 2-3.)

Legal Standard

"The class action is an exception to the usual rule that litigation is conducted by and on behalf of individual named parties only. In order to justify a departure from that rule, a class representative must be a part of the class and possess the same interest and suffer the same injury as the class members." Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011) ("Dukes") (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979). To fit within the exception, "a party seeking to maintain a class action 'must affirmatively demonstrate his compliance' with [Federal Rule of Civil Procedure] 23.'" Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013) (quoting Dukes, 131 S. Ct. At 2551-52).

Rule 23 contains two sets of requirements. First, "[r]ule 23(a) ensures that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate. The Rule's four requirements-numerosity, commonality, typicality, and adequate representation-effectively limit the class claims to those fairly encompassed by the named plaintiff's claims." Dukes, 131 S. Ct. at 2550 (internal quotation marks and citations omitted). Second, "[w]here a putative class satisfies all four requirements of 23(a), it still must meet at least one of the three additional requirements outlined in 23(b)." United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int'l Union AFL-CIO, CLC v. ConocoPhillips Co., 593 F.3d 802, 806 (9th Cir. 2010).

Plaintiffs seek certification under Rule 23(b)(3) (see Mot. to Certify at 15-20), which provides:

A class action may be maintained if Rule 23(a) is satisfied and if:

(3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include:

(A) the class members' interests in individually controlling the prosecution or defense of separate actions;

(B) the extent and nature of any litigation concerning the controversy already begun by ...

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