United States District Court, N.D. California
LATASHA MCLAUGHLIN, on behalf of herself and all others similarly situated, Plaintiff,
WELLS FARGO BANK, NA, Defendant.
ORDER CERTIFYING TWO CLASSES
WILLIAM ALSUP UNITED STATES DISTRICT JUDGE.
TILA action, plaintiff borrower seeks certification of two
classes. This order certifies a damages class and a
declaratory class for TILA claims, appoints the named
plaintiff as class representative, and appoints
plaintiff's counsel of record as class counsel.
Named Plaintiff Latasha McLaughlin.
named plaintiff, Latasha McLaughlin, brings this Truth in
Lending Act (TILA) action against defendant bank, the owner
and servicer of her home mortgage. Plaintiff borrower alleges
that the bank breached its TILA obligation to provide her
with an accurate payoff statement regarding her home
2014, plaintiff borrower returned home to find that her
home's pipes had burst and her home had flooded
(McLaughlin Tr. at 27:4-29:6). Plaintiff borrower submitted a
claim to her insurance company, which issued a series of
checks jointly payable to plaintiff borrower and the
bank. Plaintiff borrower endorsed the checks and
turned them over to the bank. In total, the bank held a
balance of $16, 490.35 of insurance proceeds (McLaughlin Tr.
at 27-29, 40).
borrower retained a contractor to repair the damage to her
home. A series of disagreements over the contractor's
work ensued and plaintiff borrower fired the contractor in
May 2014. A subsequent inspection by the bank concluded that
only 20 percent of the repairs had been completed. Plaintiff
borrower disputed the amount she owed the contractor and
filed a lawsuit against the contractor.
borrower then contacted the bank about how to proceed with
the repairs to her home. A bank representative advised her to
find another contractor. Using her own money, plaintiff
borrower proceeded to make the repairs. The bank, however,
refused to release any of the funds to pay for the additional
repairs (McLaughlin Tr. 77, 81, 91).
in September 2014, plaintiff borrower fell behind on her
mortgage payments, in part because she used her own money to
pay for the repairs. As of April 2015, her past due balance
totaled $11, 019.52. The bank informed plaintiff borrower
that it had accelerated her debt and referred her mortgage
for foreclosure (Compl. ¶ 35-36).
March 2015 and again in April 2015, plaintiff borrower
submitted requests for a payoff statement from the bank in
order to investigate the possibility of re-financing her loan
or conducting a short sale (McLaughlin Tr. 112, 136). Neither
payoff statement reflected the insurance proceeds. In
response to the April request, the bank sent plaintiff
borrower a payoff statement declaring her outstanding balance
to be $188, 825.17, which included unpaid principal,
interest, escrow overdraft, advance balances, late charges,
and foreclosure costs. This statement did not address the
$16, 490.35 in insurance payments, which the bank still held
(Compl. ¶¶ 37-39).
23, 2015, plaintiff borrower filed this action. Three months
later, in September of 2015, plaintiff borrower settled the
dispute with the contractor and the bank issued the
contractor a check for $4, 000 from the insurance proceeds.
The additional insurance proceeds were then applied by the
bank to the past due balance on the mortgage (McLaughlin Tr.
at 113, 141-142).
September 2005, plaintiff borrower obtained a mortgage in the
amount of $156, 370.00 for her home in Tennessee. In 2012,
the bank became the owner of that deed (see Dkt. No.
36). The deed of trust specifically addressed insurance
All or any part of the insurance proceeds may be applied by
Lender, at its option, either (a) to the reduction of the
indebtedness under the Note and this Security Instrument . .
., or (b) to the restoration or repair of the damaged
Property . . . . Any excess insurance proceeds over an amount
required to pay all outstanding indebtedness under the Note
and this Security Instrument shall be paid to the entity
legally entitled thereto.
Truth in Lending Act and Regulation Z.
stated purpose of the Truth in Lending Act is "to assure
a meaningful disclosure of credit terms" to consumers
and authorizes the Consumer Financial Protection Bureau to
implement regulations to promote this purpose. 15 U.S.C.
1601(a); 15 U.S.C. 1639(g). Under TILA's Regulation Z, a
lender, assignee, or loan servicer must, in response to a
borrower's request, provide an "accurate statement
of the total outstanding balance that would be required to
pay the consumer's obligation in full as of a specific
date" based on the "best information
available." 12 C.F.R. 1023.36(c)(3); 78 Fed. Reg. 10902,
10958 (Feb. 14, 2013).
Bank's Practices and Procedures.
bank maintains certain practices with respect to requests for
a payoff statement. A borrower can request that a written
payoff statement be sent to them either by going online,
calling an automated telephone program, or talking with a
customer service representative. A borrower can also access
payoff information without receiving a written payoff
statement by viewing the information online, prompting an
automated telephone program, or by requesting it from a
customer service representative over the phone (Leo Tr.
payoff statement is typically generated automatically and, in
the usual course, a payoff statement does not
include insurance proceeds held in a restricted escrow
account (id. at 32). In certain limited
circumstances, a payoff statement is not generated
automatically. For example, if a homeowner specifically
requests that insurance proceeds be included on the
statement, or if a loan is in foreclosure, the request is
sent to the Payoff Quotes Group (id. at 21, 30). In
that case, a determination is made as to whether "funds
are owed to contractors for repairs made or initiated from
the insurance proceeds." If any funds are owed, the
insurance proceeds are not included on the payoff statement
(Opp. at 5; Insley-Pruitt Decl. Ex. G).
23, 2015, plaintiff borrower filed a complaint in this
action. The bank subsequently moved to dismiss, arguing that
TILA does not require lenders to list insurance proceeds on
payoff statements. An order denied the bank's motion,
holding that "an accurate payoff statement should have
deducted the insurance proceeds still held by the bank and at
least should have added a note that the impounded funds
potentially could be used for home repair in the event the
loan was not paid off" (Dkt. No. 36 at 2-3). The bank
then moved for leave to file a motion for reconsideration of
that order. An order denied that motion, noting, in pertinent
part, that the bank had already raised all of the same
arguments on the motion to dismiss (Dkt. No. 46).
Specifically, the order noted that plaintiff borrower had
previously argued that "insurance proceeds may be owed
to a contractor" but explained that the order on the
motion to dismiss had rejected those arguments.
February 2016, the bank moved to stay all proceedings pending
the Supreme Court's decision in Spokeo, Inc. v.
Robins, arguing that the decision would impact whether
or not plaintiff borrower had standing to assert her
individual and class claims. An order denied the stay of all
proceedings, noting that "plaintiff Latasha McLaughlin
has alleged harm going well beyond the bare violation of a
federal statute" (Dkt. No. 89 at 1). The order noted,
however, that Spokeo could affect the construction
of a potential class at the Rule 23 stage and postponed the
hearing on the class certification motion until the decision
came down in Spokeo. On May 16, 2016, the Supreme
Court reached a decision in Spokeo. The parties have
provided supplemental briefing on the impact of
Spokeo, which is considered below.
order follows full briefing and oral argument.
Claims for Relief and ...