JENNIFER L. THURSTON, Magistrate Judge.
Dennis Burton sought a loan modification in 2009 after he had fallen behind in his mortgage payments. He complied with the terms of his trial period plan offered by Nationstar, during which he was required to make reduced mortgage payments. Given his compliance, he was offered a permanent loan modification. Burton signed the documents to complete the modification and had them notarized and, eventually, returned both of the needed original copies. Though Nationstar approved the modification by signing the documents, the loan was never "booked, " meaning the modified loan was never entered into the system. Burton stopped making his payments timely and then stopped making them altogether. Nationwide foreclosed on the home. In this action, Burton seeks to certify a class of borrowers in all 50 states who suffered due to Nationstar's "sign then book" policy.
In support of his motion, Burton supplies sparse evidence that absent class members suffered damages as a result of Nationstar's policy, and Nationstar provides evidence that no one suffered harm similar to Burton. Burton also fails to provide a sufficient examination of the law that would apply to his nationwide class and fails to address the Rule 23(a) factors as to his proposed subclasses.
The Court has read and considered the pleadings and supporting documents and heard oral arguments of counsel. For the reasons set forth below, the Court recommends Plaintiff's motion for class certification be DENIED.
I. HAMP BACKGROUND
Congress passed the Emergency Economic Stabilization Act, Pub. L. No. 110-343, 122 Stat. 3756 in 2008. This included the Troubled Asset Relief Program, "which required the Secretary of the Treasury, among many other duties and powers, to implement a plan that seeks to maximize assistance for homeowners and... encourage the servicers of the underlying mortgages... to take advantage of... available programs to minimize foreclosures.'" Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878, 885 (9th Cir. 2013) (quoting Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 556 (7th Cir. 2012); 12 U.S.C. § 5219(a)). In response, the Treasury Department initiated the Home Affordable Modification Program ("HAMP") "to incentivize banks to refinance mortgages of distressed homeowners so they could stay in their homes." Corvello, 728 F.3d at 880.
Home loan servicers such as Nationstar and Fannie Mae signed a Servicer Participation Agreement, agreeing "to identify homeowners who were in default or would likely soon be in default on their mortgage payments, and to modify the loans of those eligible under the program." Wigod, 673 F.3d at 556. Under the Servicer Participation Agreement, "servicers would receive a $1, 000 payment for each permanent modification, along with other incentives." Id. Servicers were directed to perform loan modification pursuant to "guidelines and procedures issued by the Treasury, " and follow "any supplemental documentation, instructions, bulletins, letters, directives, or other communications... issued by the Treasury." Id.
The Treasury set out the process for applying for and receiving loan modification in Treasury Supplemental Directive 09-01 ("SD 09-01"). See Corvello, 728 F.3d at 880. The Ninth Circuit summarized the process as follows:
First, borrowers supply information about their finances and their inability to pay their current mortgage to the servicer, and the servicer must evaluate whether the borrowers qualify for a loan modification. S.D. 09-01. The servicer computes modified mortgage payments on the basis of the borrowers' information. Id.
For borrowers who appear eligible to participate in HAMP, the servicer then prepares a TPP. The TPP requires borrowers to submit documentation to confirm the accuracy of their initial financial representations, and to make trial payments of the modified amount to the servicer. The servicer must use the documentation to "confirm that the borrower[s]" meet the eligibility criteria for a permanent modification. Id.
In the step most critical to this litigation, the servicer then must report to the borrowers the results of the eligibility determinations. Id. If a borrower does not qualify for the HAMP program, the servicer must not only alert the borrower, but must consider alternatives. The servicer should "promptly communicate that [ineligibility] determination to the borrower in writing and consider the borrower for another foreclosure prevention alternative." Id. For borrowers who have made all their payments and whose representations remain accurate, the servicer must offer a permanent home loan modification. Id.
Corvello, 728 F.3d at 880-81.
II. PROCEDURAL HISTORY
In his second amended complaint, Plaintiff reports he had a mortgage on his home in Bakersfield, California. (Doc. 45 at 3, ¶ 11.) He asserts he "was qualified and eligible to participate in the [Home Affordable Modification Program] under all applicable directives and guidelines. ( Id. ) Plaintiff entered into a Trial Payment Plan ("TPP") agreement with Nationstar, which was effective on May 6, 2009. ( Id. at 7, ¶ 25.) Through the TPP, Plaintiff agreed:
I understand that after I sign and return two copies of the Plan to the Lender, the Lender will send me a signed copy of this Plan if I qualify for the Offer or will send me written notice that I do not qualify for the Offer. This Plan will not take effect unless and until both the Lender and I sign it and Lender provides me with a copy of this Plan with the Lender's signature.
( Id. at 7, ¶ 24.) Plaintiff reports that he "timely made each of the $1, 921.58 monthly trial payments due to Nationstar on May 6, 2009, June 1, 2009, and July 1, 2009." ( Id., ¶ 27.) Nationstar sent Plaintiff a Permanent Modification Agreement ("PMA") with "a Modification Effective Date of August 1, 2009." ( Id., ¶ 28.) Plaintiff "executed the PMA promptly on August 25, 2009 and returned it to Nationstar, " whose representative "countersigned the PMA on or about October 9, 2009 and sent the signed PMA back to [Plaintiff]." ( Id. )
Plaintiff alleges that he "waited for Nationstar to record and otherwise put his PMA into effect as its terms required." (Doc. 45 at 7, ¶ 30.) According to Plaintiff, he "telephoned Nationstar repeatedly, and was told that all the paperwork had been received and that Nationstar simply had to "book" the modification." ( Id. ) Plaintiff reports Nationstar's "representative instructed [him] to keep paying the amount set forth in the PMA, or $1, 915.20." ( Id. ) Plaintiff asserts he "continued to pay" the amount required in the PMA, but "received a Notice of Trustee's sale indicating the property had been sold." ( Id. at 7, ¶ 31.) After receiving the Notice, Plaintiff contacted Nationstar and was "assured... this was not an actual foreclosure and again, that the permanent modification simply needed to be booked.'" ( Id. )
On December 2, 2009, Plaintiff received a letter from Nationstar "informing him that he was in default, that he immediately owed Nationstar over $24, 000, and that Nationstar was preparing to proceed to foreclosure." (Doc. 45 at 8, ¶ 32.) Further, Plaintiff alleges: "The letter further informed Burton that he should explore a HAMP modification, which the letter described as a government sponsored program that included a trial plan-completely ignoring the fact that Burton had already completed a HAMP trial plan and he was actually waiting for Nationstar to cause his loan to become permanently modified." ( Id. ) Plaintiff "believ[ed] that Nationstar was not going to honor the PMA, " and obtained employment in Colorado. ( Id., ¶¶ 33, 34.) He reports that he "temporarily relocated to Colorado to pursue the employment opportunity and earn additional money in an attempt to save his home" on January 17, 2010. ( Id., ¶ 34.)
Plaintiff alleges that while he worked in Colorado, his "wife and seven children were still residing full time at the Bakersfield property." (Doc. 45 at 8, ¶ 34.) However, "[in] a letter dated March 7, 2010, Nationstar indicated that it was terminating the PMA and dropping Burton from the HAMP because... his property was not owner occupied, ' and that it was proceeding with the foreclosure." ( Id., ¶ 35.) Plaintiff contends, "Nationstar had no such authority to re-evaluate [his] eligibility in March 2010, several months after his PMA's Modification Effective Date." ( Id. at 9, ¶35.)
According to Plaintiff, "Nationstar has deprived homeowners of their contractual right to receive a timely permanent modification consistent with the terms of the signed PMA." (Doc. 45 at 6, ¶ 22.) Plaintiff alleges: "Instead of timely performing tasks as required, Nationstar serially failed to book' or implement modifications by the later of the Modification Effective Date in the PMA or the date when Nationstar countersigned the PMA." ( Id. at 10, ¶ 40.) Rather, Plaintiff asserts Nationstar "countersigned PMAs and then took no action whatsoever, allowing the file to age' instead of permanently modifying the loans." ( Id. ) Based upon these facts, Plaintiff states the following causes of action against Nationstar: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) promissory estopped ("pled in the alternative" to the breach of contract), fraudulent misrepresentation. ( Id. at 12-19.) Further, Plaintiff seeks to "challenge Nationstar's serial failure to timely honor its PMAs" by representing a class defined as:
All homeowners nationwide who received permanent modification agreements (PMAs) signed by Nationstar from January 2009 through the date when Nationstar implemented its "book then sign" procedure for PMAs, whose permanent modifications Nationstar did not book by the Effective Date stated in the PMA or by the day Nationstar executed the PMA, whichever is later.
(Doc. 45 at 9, ¶¶ 22, 38.) Accordingly, Plaintiff's claims are brought individually and on behalf of the putative class. ( Id. at 12-19.)
Plaintiff filed the motion for class certification now pending before the Court on July 28, 2014. (Doc. 69.) Defendant filed its opposition on August 25, 2014, asserting Plaintiff fails to meet the burden to demonstrate class certification is appropriate. (Doc. 72.) Plaintiff filed a brief in reply on September 8, 2010 (Doc. 80), to which Defendant filed a sur-reply on September 18, 2014 (Doc. 84).
III. LEGAL STANDARDS FOR CLASS CERTIFICATION
Class certification is governed by the Federal Rules of Civil Procedure, which provide: "One or more members of a class may sue or be sued as representative parties on behalf of all." Fed.R.Civ.P. 23(a). A class action is proper 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.
Fed. R. Civ. P. 23(a). In general, these prerequisites are referred to as numerosity, commonality, typicality, and adequacy of representation, and "effectively limit the class claims to those fairly encompassed by the named plaintiff's claims." General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 155-56 (1982) (citing General Telephone Co. v. EEOC, 446 U.S. 318, 330 (1980)). When a proposed class satisfies the prerequisites of Rule 23(a), the Court must determine whether the class is maintainable under Rule 23(b). Leyva v. Medline Indus., 716 F.3d 510, 512 (9th Cir. 2013); Narouz v. Charter Communs., LLC, 591 F.3d 1261, 1266 (9th Cir. 2010).
A party seeking class certification bears the burden of demonstrating that each element of Rule 23 is satisfied, and "must affirmatively demonstrate... compliance with the Rule." Wal-Mart Stores, 131 S.Ct. at 2551; Doninger v. Pacific Nw. Bell, Inc., 563 F.2d 1304, 1308 (9th Cir. 1977). The Court must conduct a "rigorous analysis, " which may require the Court "to probe behind the pleadings before coming to rest on the certification question." Wal-Mart Stores, 131 S.Ct. at 2551 (quoting Falcon, 457 U.S. at 160-61). The Court has an affirmative duty to consider the merits of an action "to the extent that they overlap with class certification issues." Ellis, 675 F.3d at 981 ("a district court must consider the merits if they overlap with the Rule 23(a) requirements") (citing Wal-Mart Stores, 131 S.Ct. at 2551-52). As a result, the Court may consider material evidence to determine Rule 23 requirements are satisfied. Blackie v. Barrack, 524 F.2d 891, 901 (9th Cir. 1975).
IV. PLAINTIFF'S MOTION FOR CLASS CERTIFICATION
Plaintiff asserts he and the proposed class members are homeowners who had PMAs with Nationstar that were signed by Nationstar representatives beginning January 2009. According to Plaintiff, "when generating PMAs to be sent to borrowers, Nationstar would include Modification Effective Dates that were up to sixty (60) days before Nationstar believed the loan would be put into effect." (Doc. 69 at 16.) For example, Plaintiff notes that "his PMA contained an effective date of August 1, 2009-twenty days before Nationstar even mailed the PMA to [Plaintiff], " although "the PMA was to be put into effect in October 2009." ( Id. ) Further, Plaintiff contends: "Nationstar has produced no example from the relevant period of time (when sign-then-book was in use) to show that any borrower's loan was booked prior to the Effective Date set forth in the borrower's PMA." ( Id. ) Based upon these allegations, Plaintiff moved to certify a class defined as:
All homeowners nationwide who received permanent modification agreements (PMAs) signed by Nationstar from January 2009 through the date when Nationstar implemented its "book then sign" procedure for PMAs, whose permanent modifications Nationstar did not book by the Effective Date stated in the PMA or by the day Nationstar executed the PMA, whichever is later.
(Doc. 69 at 17.) Plaintiff contends the prerequisites of Rule 23(a) are satisfied, and certification of the proposed class is appropriate under Rule 23(b)(3). ( Id. ) In addition, Plaintiff asserts the proposed class may be certified "under Rule 23(c)(4), which allows the Court to certify classes with respect to specific issues-in this case, whether Nationstar's sign-then-book process breached its PMAs with borrowers." ( Id. )
In his reply papers, Plaintiff argues the Court should also certify the following sub-classes: (1) a thirteen-state "implied covenant subclass, " encompassing the states that imply the duty of good faith and fair dealing in each contract; (2) a six-state "fraud subclass; and (3) a four-state "promissory estoppel subclass." (Doc. 80 at 3-6.) Finally, Plaintiff contends an issues class should be certified if he is unable to meet the requirements of Rule 23(a) and (b), because such a class "would negate the need for every class member to prove Nationstar's liability thousands of times over." ( Id. at 13.)
V. DEFENDANT'S OPPOSITION TO CLASS CERTIFICATION
Defendant Nationstar opposes certification of the proposed class, arguing Plaintiff has attempted "to manufacture a class claim based on a procedural nuance that never affected anyone." (Doc. 72 at 14.) Defendant asserts: "The date on which a modification was booked is not even significant-to the borrower or to Nationstar-since Nationstar booked all modifications to take effect as of the modification effective date' identified in the parties' agreement, regardless of which date the modification was actually booked in Nationstar's system. No one suffered any harm during the brief interval between signing and booking." ( Id. ) As a result, Defendant argues Plaintiff "falls short of meeting his burden of showing his proposed "sign-then-book" claim satisfies Fed.R.Civ.P. 23's requirements." ( Id. )
According to Defendant, Plaintiff is unable to satisfy the requirements of Rule 23(a) because the class includes members without Article III standing, the class is not ascertainable, and Plaintiff "is an atypical representative." (Doc. 72 at 14-15. 25.) Further, Defendant argues Plaintiff failed to meet his burden to demonstrate the requirements of Rule 23(b)(3) are satisfied because: (1) Plaintiff proposes a nationwide class but "provides no analysis of state-law differences on those claims or Nationstar's defenses to them; (2) the claim for breach of contract requires individual evidence including "putative class members' performance and damages, " and the claims for "implied covenant, promissory estoppel, and fraud claims raise yet more individual issues;" and (3) "[p]roblems of individual proof and manageability preclude the required showing of superiority." ( Id. at 14-15.) In addition, Defendant argues the class should not be certified under Rule 23(c)(4)(A). ( Id. at 15.)
VI. DISCUSSION AND ANALYSIS
"[T]hose who seek to invoke the jurisdiction of the federal courts must satisfy the threshold requirement imposed by Article III of the Constitution by alleging an actual case or controversy." City of Los Angeles v. Lyons, 461 U.S. 95, 101 (1983). The Ninth Circuit explained, "[T]he Constitution mandates that prior to our exercise of jurisdiction there exist a constitutional case or controversy, ' that the issues presented are definite and concrete, not hypothetical or abstract.'" Thomas v. Anchorage Equal Rights Comm'n, 220 F.3d 1134, 1138 (9th Cir. 2000) (quoting Ry. Mail Assoc. v. Corsi, 326 U.S. 88, 93 (1945)). To satisfy the "case or controversy" requirement, a plaintiff must establish standing under Article III to bring suit. Human Life of Wash., Inc. v. Brumsickle, 624 F.3d 990, 1000 (9th Cir. 2010); see also Skaff v. Meridien N. Am. Beverly Hills, LLC, 506 F.3d 832, 938 (2007) ("standing is an essential and unchanging part of the case-or-controversy requirement of Article III"). To establish standing-and thus show an actual case or controversy-a plaintiff "must demonstrate (1) an injury-in-fact, (2) causation, and (3) a likelihood that the injury will be redressed by a decision in the plaintiff's favor." Human Life, 624 F.3d 1000 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)).
Prior to evaluating Plaintiff's proposed classes under Rule 23, the Court must determine whether Plaintiff has standing to assert his claims. The Ninth Circuit explained that standing "is a jurisdictional element that must be satisfied prior to class certification. LaDuke v. Nelson, 762 F.2d 1318, 1325 (9th Cir. 1985). Consequently, the Court should address the issue of standing prior to certifying a class. See Easter v. Am. West Fin., 381 F.3d 948, 962 (9th Cir.2004). In a proposed class action, "if none of the named plaintiffs purporting to represent a class establishes the requisite of a case or controversy with the defendants, none may seek relief on behalf of himself or any other member of the class." Lierboe v. State Farm Mut. Auto. Ins. Co., 350 F.3d 1018, 1022 (9th Cir. 2003).
Further, a class must be defined to include only individuals with Article III standing. See Wal-Mart Stores, 131 S.Ct. at 2552 (acknowledging "the necessity" to exclude putative class members who "lack[ed] standing to seek injunctive or declaratory relief" from a proposed class). As such, the Ninth Circuit has determined that "no class may be certified that contains members lacking Article III standing." Mazza v. Am. Honda Motor, 666 F.3d 581, 594 (9th Cir. 2012) (quoting Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir. 2006). Similarly, other circuits have determined class certification was not appropriate when it was not clear that class members had Article III standing for the claims presented. See, e.g., Adashunas v. Negley, 626 F.2d 600, 604 (7th Cir. 1980) (affirming the denial of class certification where it was not clear "the proposed class members have all suffered a constitutional or statutory violation warranting some relief"); Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023, 1034 (8th Cir. 2010) ("a class cannot be certified if it contains members who lack standing"). Consequently, the Court must determine whether the class proposed by Plaintiff contains only individuals who have standing under Article III.
Defendant does not dispute that Plaintiff has standing under Article III but asserts that the proposed class is overbroad because it "would consist primarily, if not entirely, of persons who lack standing." (Doc. 72 at 35.) Defendant reports that "HAMP modifications were generally signed and booked within two to three days of delivery, " and the loan modifications were booked to be "retroactive to the agreement's effective date." ( Id., citing Kemp Decl., Ex. B [53:10-54-21, 101:14-102:12, 102:20-103:19, 111:17-113:15]; Doc. 72-4 at 4, Johnson Decl., ¶ 11.) Therefore, Defendant asserts the putative class members "suffered no harm stemming from any delay' in booking, " which renders the borrowers unable to show an "injury-in-fact." ( Id. ) On the other hand, Plaintiff argues "all Class members have Article III standing because-regardless of the length of their delay or whether Nationstar eventually modified their loans-all experienced some delay in the booking of their modifications." (Doc. 80 at 12.)
Importantly, a claim for breach of contract arises under state law. In California, a plaintiff must demonstrate (1) the existence of a contract, (2) performance by the plaintiff, (3) breach by the defendants, and (4) damages. Alcalde v. NAC Real Estate Invs. & Assignments, Inc., 316 Fed.App'x 661, 662 (9th Cir. 2009) (citing First Comm. Mortgage Co. v. Reece, 89 Cal.App.4th 731 (Ct. App. 2001)); see also Haberbush v. Clark Oil Trading Co., 33 Fed.App'x 896, 898 (9th Cir. 2002) (identifying "agreement, consideration, performance by plaintiff, breach by defendant, and damages" as elements to a breach of contract). Further, California law requires a showing of "appreciable and actual damage" to assert a breach of contract claim. Aguilera v. Pirelli Armstrong Tire Corp., 223 F.3d 1010, 1015 (9th Cir. 2000). Nominal damages and speculative harm do not suffice. Ruiz v. Gap, Inc., 622 F.Supp.2d 908, 917 (N.D. Cal. 2009).
Similarly, "palpable economic injuries have long been recognized as sufficient to lay the basis for standing." Sierra Club v. Morton, 405 U.S. 727, 733-34 (1972); see also Comm. v. Reno, 98 F.3d 1121, 1130 (9th Cir. 1996) ("[e]conomic injury is clearly a sufficient basis for standing"). Here, Plaintiff offers no evidence of damage suffered by any of the absent class members and, instead, speculates that the delay caused borrowers to suffer "damages in the form of delayed incentive payment accrual time and prolonged negative credit reporting." (Doc. 69 at 12.) However, Nationstar presents evidence that the booking occurred within "[t]wo to three days tops" of receiving the signed originals from the borrower. ( See Doc. 76-2 at 13, Kellett Depo. 53:16-22).
Erin Johnson, the Assistant Vice President of Nationstar Mortgage LLL, reports that the policy of Nationstar was to book loans to take effect on the "modification effective date" identified in the PMAs, "even though that date may have already lapsed." (Doc. 72-4 at 3, Johnson Decl. ¶ 8.) This ensured that future entitlement to incentive pay would not be impacted by the delay. ( Id. at 3.) Also, if a borrower made payment after the "modification effective date" identified in the PMA and the date the modification was booked by Nationstar, the payments were "applied as payments on the modified loan, " and the borrowers "receive[d] credit for those payments for purposes for HAMP's pay-for-performance program." ( Id. ) Any late fees, likewise, were waived once the load was booked. ( Id. )
Plaintiff claims also that absent class members suffered damages because a delay impacts the borrower's credit rating due to the consequent delay in providing a revised report to the credit reporting agencies demonstrating that the PMA had been implemented. This damage claim is unsupported by evidence and there is no showing that the contract required a revised report to the credit agencies at any particular time or that the usual time for making the revised report was impacted by the one-to-three day delay. ( Id. at 4.) More important is the evidence, supplied by Plaintiff, that a credit score is negatively impacted by the implementation of the PMA (Doc. 69-1 at 49) so any delay in reporting the PMA seems to work in the borrower's favor.
Given this analysis, there is no evidence the absent class members who received loan modifications booked by Nationstar suffered the damages presumed by Plaintiff in his motion for class certification. Because Plaintiff has not met his obligation of establishing the requisite injury-in-fact for the absent class members,  the Court finds he has not met his burden of showing the putative class members have Article III standing. For this reason, the Court recommends Plaintiff's motion for class certification of all borrowers processed under Nationstar's "sign-then-book" policy be DENIED.
B. The Nationwide Class
Even if the putative class members have standing, Plaintiff fails to meet his burden to demonstrate class certification is appropriate under Rule 23(a), because the commonality and typicality requirements are not satisfied.
A class must be "so numerous that joinder of all members is impracticable." Fed.R.Civ.P. 23(a)(1). This requires the Court to consider "specific facts of each case and imposes no absolute limitations." EEOC, 446 U.S. at 330. Although there is no specific numerical threshold, joining more than one hundred plaintiffs is impracticable. See Immigrant Assistance Project of Los Angeles Cnt. Fed'n of Labor v. INS, 306 F.3d 842, 869 (9th Cir. 2002) ("find[ing] the numerosity requirement... satisfied solely on the basis of the number of ascertained class members... and listing thirteen cases in which courts certified classes with fewer than 100 members").
According to Plaintiff, "Nationstar admits that it was using the sign-then-book policy from at least the start of HAMP in May 2009 through January 2010." (Doc. 69 at 18; Exh. O.) Plaintiff reports Nationstar's counsel revealed during an informal telephonic conference with the Court that "Nationstar had identified between 7, 000 and 7, 500 borrowers who had been processed under the pre-January 2010 sign-then-book procedure." (Doc. 69 at 13, citing Doc. 69-2 at 42, Woodrow Decl. ¶ 18.) Beyond reporting the estimation made by counsel, Plaintiff presents no evidence of the number of borrowers who entered into loan modification agreements with Defendant during the relevant time period. On the other hand, Nationstar reports that it determined "there were 2, 548 accounts that were mailed permanent modification agreements between the inception of HAMP and January 2010." (Doc. 72-4 at 8, Johnson Decl. ¶ 36.) Accordingly, Defendant does not dispute that the numerosity element of the proposed class is satisfied.
Rule 23(a) requires "questions of law or fact common to the class." Fed.R.Civ.P. 23(a)(2). The commonality requirement has been construed permissively; not all questions of law and fact need to be common. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). "However, it is insufficient to merely allege any common question." Ellis v. Costco Wholesale Corp., 657 F.3d 970, 981 (9th Cir. 2011). Commonality must be shown by a "common contention" that is "of such a nature that it is capable of classwide resolution-which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011).
Plaintiff observes that "[c]laims arising out of form contracts are particularly appropriate for class action treatment." (Doc. 69 at 20) (quoting Flanagan v. Allstate Ins. Co., 242 F.R.D. 421, 428 (N.D. Ill. 2007)). According to Plaintiff, the Court should consider the PMAs entered into by Nationstar and homeowners "as form contracts" because "the terms of the PMAs and the process each borrower was subjected to in light of Nationstar's interpretation of those terms-the sign-then-book process-were substantively identical." ( Id. ) With the PMAs being interpreted as form contracts, Plaintiff asserts there is a "common question of whether Nationstar breached its borrowers' PMAs by subjecting them to the sign-then-book process." ( Id. at 19.) Further, Plaintiff contends "the instant proceedings will generate a common answer for every Class Member-yes, Nationstar breached their form PMAs when it signed but then waited to book their modifications." ( Id. at 21.) Consequently, Plaintiff concludes the commonality requirement of Rule 23(a)(2) is satisfied. ( Id. )
Significantly, Plaintiff's arguments for commonality are premised on the finding that Nationstar's PMA documents were a "form contract." ( See Doc. 69 at 20; Doc. 80 at 3) Yet there is no evidence support this assertion. Nationstar informed Plaintiff during discovery that its "HAMP program was limited prior to 2010, " and as a result, the company "did not use template HAMP communications before 2010." (Doc. 69-2 at 25.) Nationstar reported that its employees "manually prepared HAMP correspondences and contracts prior to 2010." ( Id. ) Moreover, though Plaintiff's counsel reports that Nationstar produced "thousands of pages of template HAMP contracts" (Doc. 69-2 at 39, Woodrow Decl. ¶ 7), this evidence has not been presented to the Court nor has Plaintiff provided any analysis of the variability, if any, from contract-to-contract. Rather, Plaintiff presents only his PMA and a single blank Home Affordable Modification Agreement. ( See Doc. 69, Exhs. B and C.)
The bottom of Plaintiff's PMA indicates it is Fannie Mae/Freddie Mac Uniform Instrument Form 3157, entitled "MULTISTATE HOME AFFORDABLE MODIFICATION AGREEMENT - SINGLE FAMILY." (Doc. 69-1 at 43.) It indicates the document was revised on "05-01-09." ( Id. ) The "template" provided by Plaintiff is also a Form 3157 and indicates it was revised in October 2010. ( Id. at 52.) Thus, from the face of the evidence, there are at least three versions of the Home Affordable Modification Agreement at issue here-one in use before May 1, 2009, the May 1, 2009 revision and the October 2010 version. The second two of these documents appear to have the same key issues. However, the Court is unaware of the terms of the earlier document.
As noted above, Plaintiff makes no effort to compare the terms of the agreements, but assumes the Court will extrapolate the terms of his PMA to the putative class, encompassing all borrowers who entered into a loan modification agreement with Nationstar. Though these contracts may be the same in many respects, there is no evidence of this and the Court lacks the authority to presume the key terms of all three PMAs are identical. Consequently, Plaintiff fails to show that the PMAs for all of the putative class members should be considered a "form contract, " or that breaches of the PMAs may be demonstrated with common evidence.
On the other hand, Defendant points out that the in 2009, the federal guidelines changed frequently which means that some of the loans were governed by different standards. (Doc. 72-4 at 3) For example, Defendant's evidence shows that as to some loans, Nationstar was allowed to continue the TPP and the original modification effective date by months. Id . Plaintiff fails to address how this evidence impacts the analysis related to the proposed class and it casts significant doubt upon whether commonality is shown.
As a result, the Court finds Plaintiff fails to establish that the commonality requirement is satisfied. See Wal-Mart Stores, 131 S.Ct. at 2551 ("[w]hat matters to class certification... is not the raising of common questions' - even in droves - but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation").
Even if the Court accepts that all of the PMAs contained the same key terms and that the interpretation of the contract only from Nationstar's perspective would, somehow, constitute a common question for the entire class, Plaintiff's claims are not typical of the class.
The typicality requirement demands the "claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed.R.Civ.P. 23(a)(3). A claim or defense is not required to be identical but "reasonably co-extensive" with those of the absent class members. Hanlon, 150 F.3d at 1020. "The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct." Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (internal quotation marks and citation omitted); see also Kayes v. Pac. Lumber Co., 51 F.3d 1449, 1463 (9th Cir. 1995) (typicality is satisfied when named plaintiffs have the same claims as other members of the class and are not subject to unique defenses).
Plaintiff contends the typicality requirement is satisfied because "[l]ike every other Class Member, [Plaintiff] was processed under Nationstar's sign-then-book procedure prior to January 2010 and, as is the case with every other Class Member, Nationstar failed to book his modification by the Effective Date..." (Doc. 69 at 21-22.) Given these facts, Plaintiff asserts that he "suffered the same legal injury as everyone else-a breach of his PMA and the denial of benefits it contained for which he bargained." ( Id. at 22.)
Nationstar maintains that Plaintiff is the only individual whose approved PMA was not booked into its system. (Doc. 72 at 36) ("Burton's claim is not that there was a delay between the date his loan modification was countersigned and the date it was booked, but rather that Nationstar never booked the modification at all. No other putative class member has that claim.") As discussed above, there is a lack of evidence that the putative class members suffered damages as a result of any alleged delay in booking. Where some of the class members have not suffered any injury, yet the class representative has been injured, the typicality requirement of Rule 23(a) is not satisfied. See, e.g., O'Neill v. Gourmet Sys. of Minnesota, Inc., 219 F.R.D. 445, 453 (W.D. Wis. 2002) (finding no typicality when many of the proposed class members suffered no injury); see also In re New Motor Vehicles Canadian Export, No. MDL 1532, 2006 WL 623591, at *3 (D. Me. Mar. 10, 2006) rev'd on other grounds, 522 F.3d 6 , 27-28 (1st Cir. 2008) (assessing standing under typicality). Indeed, where the plaintiff has suffered damages and the putative class members have not, the Court cannot conclude he suffered "the same or similar injury, " as is required by Rule 23(a)(3). Therefore, the Court finds Plaintiff fails to meet his burden to demonstrate the typicality requirement is satisfied.
4. Adequacy of Representation Absentee class members must be adequately represented for judgment to be binding upon them.
Hansberry v. Lee,
311 U.S. 32, 42-43 (1940). Accordingly, this prerequisite is satisfied when the "representative parties will fairly and adequately protect the interests of the class." Fed.R.Civ.P. 23(a)(4). "[R]esolution of this issue requires that two questions be addressed: (a) do the named plaintiffs and their counsel have any conflicts of interest with other class members and (b) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?" In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 462 (9th Cir. 2000) (citing Hanlon, 150 F.3d at 1020).
According to Plaintiff, he "can adequately represent the Class Members." (Doc. 69 at 22.) Plaintiff asserts there are no "actual conflicts between [Plaintiff] and the rest of the Class Members" because he "doesn't have any interest antagonistic to the Class Members." ( Id. at 22-23.) In addition, Plaintiff contends he is "committed to the vigorous prosecution of this case, " and "has taken his duties as a putative class representative seriously. ( Id. at 23.) For example, Plaintiff "sat for his (full day) deposition... [and] answered all discovery propounded on him completely and on time." ( Id. )
Further, Plaintiff asserts "proposed Class Counsel have significant experience litigating large national class actions against banks and other financial institutions, specifically on claims challenging conduct under HAMP." (Doc. 69 at 23.) Plaintiff reports the proposed counsel "argued and won reinstatement of a putative HAMP class action in the case of Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 568 (7th Cir. 2012), the first federal appellate decision to hold that aggrieved HAMP borrowers could pursue claims against HAMP servicers under State breach of contract laws." ( Id., citing Doc. 69-2 at 38, Woodrow Decl. ¶ 5.) As a result, Plaintiff contends "proposed Class Counsel are among the leading attorneys in the Country with respect to HAMP class action litigation." ( Id. ) Therefore, Plaintiff concludes the class representatives and proposed class counsel will adequately represent the classes as required by Rule 23(a). ( Id. at 23-24.)
Importantly, however, because Plaintiff has not satisfied the prerequisites of commonality and typicality under Rule 23(a), he would not be a proper representative of the class. See Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1027 (9th Cir. 2011) (affirming a finding that the named plaintiffs "are not proper class representatives" because their claims were "not typical of the class members").
B. Rule 23(b) Requirements
If an action meets the prerequisites of Rule 23(a), the party seeking class certification must demonstrate the action is appropriate under Rule 23(b). Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997). Plaintiff contends this class action meets the requirements of Rule 23(b)(3), and certification is proper because "common issues predominate over any claimed individual issues." (Doc. 69 at 24.)
Class certification under Rule 23(b)(3) is an "adventuresome innovation, " and allows for class certification in cases where "questions of law or fact common to the members of the class predominate over any questions affecting only individual members, " and where "a class action is superior to other available methods for fair and efficient adjudication of the controversy." Fed.R.Civ.P. 23(b)(3); Amchem Prods., 521 U.S. at 615. When the issues of a case "require the separate adjudication of each class member's individual claim or defense, a Rule 23(b)(3) action would be inappropriate." Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1189 (9th Cir. 2001). Therefore, the Court must examine "whether the proposed classes are sufficiently cohesive to warrant adjudication by representation." Amchem Prods., 521 U.S. at 623.
Plaintiff argues individualized inquiries are avoided in this action because the proposed class "includes only those borrowers who had received a signed PMA, signifying that their eligibility had already been confirmed and their modifications were already legally binding." (Doc. 69 at 24.) Plaintiff asserts that "no differences in state laws are present in this case that could defeat predominance." ( Id., n. 11.) Plaintiff contends, "The law regarding whether Nationstar breached its contracts is the same in all fifty states." ( Id. ) (citing Klay v. Humana, Inc., 382 F.3d 1241, 1263 (11th Cir. 2004) ("A breach is a breach is a breach, whether you are on the sunny shores of California or enjoying a sweet autumn breeze in New Jersey.") Thus, Plaintiff argues Defendant "cannot rely on claimed differences in state laws to block a finding of predominance." ( Id. )
Defendants disputes this and argues the predominance requirement of Rule 23(b)(3) is not satisfied due to the "variances in applicable state law." (Doc. 72 at 18.) According to Defendant, this "is a critical deficiency that in itself warrants denial of the entire motion." ( Id., citing Cunningham Charter Corp. v. Learjet, Inc., 258 F.R.D. 320, 332-33 (S.D. Ill. 2009) ("If a plaintiff fails to present a sufficient choice of law analysis, [he] fails to meet [his] burden of proof on Rule 23(b)(3)'s predominance requirement").
Along these lines, Defendant argues the state law analysis performed by Plaintiff "falls far short of showing state-law variances poses no insuperable obstacles to classwide resolution of his four state-law claims." (Doc. 84 at 2.) For example, Defendant asserts: "[S]tate laws vary on whether a borrower can sue for breach of contract if he is in breach or cannot demonstrate performance. Other states provide a defense of first material breach.'" ( Id., citation omitted.) Because homeowners' modification agreements, original notes and deeds of trust "must be construed as one contract, " Defendant argues, and "default on the loan may bar his or her contract claim under some states' laws." ( Id. at 3, citing, e.g., In re Bank of Am. Home Affordable Modification Program (HAMP) Contract Litig., 2013 WL 4759649, at *12 (D. Mass. Sept. 4, 2013) ("Plaintiffs' individual performance is a necessary part of their breach of contract claim"). Defendant notes also that state laws vary regarding whether extrinsic evidence should be considered to interpret meaning of terms in a contract, such as the term "modification effective date, " "even when the meaning appears unambiguous." ( Id., quoting Foad Consulting Grp. Inc. v. Azzalino, 270 F.3d 821, 826 (9th Cir. 2001).
According to Plaintiff, the arguments set forth by Defendant do not defeat class certification. Plaintiff asserts "the core facts are common to the class, " and as a result "differences in state law can be appropriately managed." (Doc. 80 at 2.) He asserts "any variations in implied covenant, promissory estoppel, and fraud claims can be managed by certifying subclasses as to only those states with laws substantially similar to California." ( Id. at 3.) Though Plaintiff provides a table demonstrating highlighted portions of cases to show the commonality of the legal requirements from state to state, the analysis is so sparse and so incomplete as to provide little assistance to the Court.
Even still, Plaintiff contends "the Court should find that the common issue-whether Nationstar breached its PMAs by subjecting them to the sign-then-book process-predominates over any individual issues." (Doc. 69 at 27.) Plaintiff recognizes "[t]he damages suffered in this case are indeed likely to differ depending on certain factors, such as the length of delay between the Effective Date and when the loan was actually booked, whether the borrower incurred unlawful fees, whether the borrower was reported as being delinquent to credit bureaus, and whether the borrower lost his or her home." ( Id. at 26, n. 13.) Plaintiff suggests that to address any individualized issues related to damages, the Court either "sever the liability phase from the damages phase" or "order Class Counsel to craft a class notice that requests additional information from class members about the categories of damages they suffered." ( Id. at 26-27.)
Plaintiff asserts also the "proposed Class meets the requirements of superiority and manageability." (Doc. 69 at 27.) Plaintiff's counsel reports "this is the only class action [he] is aware of challenging this particular sign-then-book policy." ( Id. at 28, citing Doc. 69-2 at 41, Woodrow Decl. ¶13.) Plaintiff argues that "individual actions are unlikely to be brought" by putative class members, and that "[a]llowing individual courts to reach separate decisions on the issue threatens to introduce a level of uncertainty and inconsistency into Nationstar's HAMP obligations and the rights of its borrowers." ( Id. at 28-29.) Plaintiff concludes "the Court should find that the proposed class action would be superior and manageable, " and that the requirements of Rule 23(b)(3) are satisfied. ( Id. at 29; see also id. at 27-29.)
Defendant observes the superiority requirement is defeated because "adequate individual remedies exist" for any homeowners who believe they suffered damages under the "sign-then-book" policy: "[A]s the many mortgage-related cases in the federal courts attest, individual plaintiffs are normally well-motivated to bring any claims they might have in order to save their homes." (Doc. 72 at 37, quoting In re Bank of Am. Home Affordable Modification Program (HAMP) Contract Litig., 2013 WL 4759649 at *14 (D. Mass. Sept. 4, 2013)).
When, as here, the laws of up to all fifty states are implicated, the plaintiff has a "burden to conduct an extensive choice of law analysis and show that the requirements of Rule 23(b)(3) are not defeated. Bobbitt v. Milberg, LLP, 285 F.R.D. 424, 428 (citing Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1189 (9th Cir. 2001); Lozano v. AT & T Wireless Services, Inc. 504 F.3d 718, 728 (9th Cir. 2007); Castano v. Am. Tobacco Co., 84 F.3d 734, 741 (5th Cir. 1996)). Here, Plaintiff failed to conduct this analysis. Regardless, the Court declines to discuss further whether the proposed class satisfies the requirements of Rule 23(b) because of Plaintiff's failure to meet his burden of establishing the Rule 23(a) factors. See Amchem Prods., 521 U.S. at 614 (explaining a court only reaches the requirements of Rule 23(b) when a party seeking class certification demonstrates the proposed classes satisfy the prerequisites of Rule 23(a)).
Based upon the foregoing, the Court recommends Plaintiff's motion for certification of the nationwide class of borrowers be DENIED.
C. Plaintiff's Proposed Subclasses
Without conceding Defendant's arguments related to the differences in state law, Plaintiff argues the Court should certify the following sub-classes: (1) a thirteen-state "implied covenant subclass, " ...