In a consolidated multi-district litigation putative class action involving allegations of improper handling of HAMP loan modifications by a large mortgage servicer, the U.S. Court of Appeals for the Ninth Circuit recently affirmed the district court’s order denying the putative class plaintiffs’ motion for class certification, holding that the district court correctly determined that individual issues predominated over common issues.

The opinion was not published, and is non-precedential.  A copy of the opinion is available at:  Link to Opinion.

Among other things, the putative class plaintiffs alleged that the defendant servicer supposedly improperly denied permanent HAMP loan modifications, and supposedly breached loan modification agreements with homeowners.

The Ninth Circuit began its analysis by recounting that a ruling on class certification will be reversed only if the district court clearly abuses its discretion.  The Court then addressed whether the district court applied the correct legal standard under Federal Rule of Civil Procedure 23, finding that there was no dispute that it did so.

The dispute before the Court, however, was whether “the district court’s findings of fact, and its application of those findings of fact to the correct legal standard, were illogical, implausible, or without support in inferences that may be drawn from facts in the record.” This is what the putative class plaintiffs argued.

The Court found that the district court did not abuse its discretion in denying class certification under Rule 23(b)(3) because, as required by the Ninth Circuit’s decision in Wang v. Chinese Daily News, Inc., “the district court’s analysis focused on the relationship between the common and individual issues in the case … [determining] that individual issues predominated over common issues, because determination of the deadline by which [the defendant mortgagee] was allegedly required to grant or deny permanent modification could not be made ‘simply by identifying the MED [Modification Effective Date] as stated in the TPP [Trial Payment Plan Agreement].’”

The Court reasoned that “such a determination would also require inquiry into issues unique to each class member” and therefore that class treatment was not appropriate.

The Ninth Circuit noted that the district court supported its decision to deny class certification with specific examples, such as “the parties’ course of conduct, changes in income, inaccurately or incompletely reported income, oral and written representations regarding documentation still needed and other modification options ….” The Court agreed with the district court that such “additional considerations were critical to determining not only whether [defendant] had breached the TPP, but also the amount of damages.”

The Court also found that the district court “did not abuse its discretion by denying class certification under Rule 23(b)(1), because Plaintiffs failed to ‘affirmatively demonstrate [their] compliance’ with Rule 23(b)(1).” Specifically, the Ninth Circuit noted that their “arguments under Rule 23(b)(1) were ‘cursory’ and lacked ‘any substantive explanation as to why the reasoning in [the cases Plaintiffs cited] would support certification on the facts and law in this case.”

Finally, the Ninth Circuit found that “the district court did not abuse its discretion by denying class certification under Rule 23(b)(2)” because the putative class plaintiffs raised a new argument for the first time on appeal by framing “their legal theory as seeking declaratory relief to qualify under Rule 23(b)(2)” while they argued to the district court that their legal theory was based on injunctive relief prohibiting the defendant from collecting certain fees and requiring corrective reporting.  Because the argument was not raised in the district court, the Court held it was waived.