The United States District Court for the Eastern District of California recently denied class certification in a case alleging wrongdoing by a loan servicer in connection with the Home Affordable Modification Program (“HAMP”). Plaintiff brought the putative class action after defendant foreclosed on his home, seeking to represent a nationwide class of homeowners who had received permanent modification agreements (“PMAs”) for loan modifications that defendant failed to timely put into effect.
Plaintiff argued that certification was appropriate under Federal Rule of Civil Procedure 23(b)(3) or, alternatively, as an issues class under Rule 23(c)(4) on the question of whether defendant breached its PMAs. Plaintiff also sought certification of subclasses alleging fraud, promissory estoppel, and breach of the implied covenant of good faith and fair dealing where state laws would allow such claims. Defendants argued that class members lacked Article III standing, that plaintiff failed to show ascertainability and typicality under Rule 23(a) and predominance and superiority under Rule 23(b)(3), and that plaintiff did not provide any analysis of state law differences. The court agreed.
The decision followed recommendations by a magistrate judge, which the district judge adopted in full. The magistrate had first addressed Article III, stating that a named plaintiff must establish standing before a class can be certified and citing Wal-Mart v. Dukes for the proposition that absent class members must also satisfy Article III. Plaintiff’s proposed class failed on the latter requirement, as plaintiff was merely speculating that defendant’s policies damaged putative class members, while defendant provided evidence that no harm had been suffered. Plaintiff thus had not shown that absent class members suffered an injury-in-fact.
Next, the magistrate had found that plaintiff had not satisfied commonality, typicality, or predominance. Although plaintiff argued that whether or not defendant breached its PMAs was a common question capable of classwide resolution, the magistrate noted there was no showing that the agreements were form contracts and refused to assume that key provisions were the same in every one. Furthermore, the magistrate found that plaintiff’s claims were not typical where he had suffered an injury but putative class members had not. Lastly, plaintiff failed to show common issues predominated despite his argument that the determination of whether defendant breached its contracts was the same in every state. The magistrate stated that when a class action implicates the laws of all fifty states, a plaintiff must conduct an “extensive choice of law analysis” to show that Rule 23(b) has been satisfied. Here, plaintiff failed to do so.
With regard to the proposed subclasses, the magistrate noted that plaintiff failed to provide an analysis of Rule 23(a) factors, and, in particular, had not established numerosity. Finally, the magistrate addressed plaintiff’s assertion that an issues class could be certified under Rule 23(c)(4). Although the Ninth Circuit has supported issues classes where predominance is lacking, superiority must be present. Here, however, practical problems such as the need to evaluate the laws of all fifty states and the terms of various PMAs precluded certification. Thus, the court adopted the magistrate’s findings and recommendations and denied certification.