At this point in my practice, there are certain judges whose opinions I just automatically look for: the Chicago triumvirate of Posner, Easterbrook, and Wood; the often-covered Judge Rakoff in the S.D.N.Y.; and Judge William Alsup of the Northern District of California. Regardless of the result--and there have been a few I've privately bemoaned--you can guarantee that Judge Alsup's opinions will be well-reasoned and as fair as he can make them. [Disclosure: I have never practiced in front of Judge Alsup, and have no cases pending in front of him.]

Judge Alsup has issued a new opinion denying certification in a lending-discrimination class action against Wells Fargo: Pileggi v. Wells Fargo Bank, NA, 2013 U.S. Dist. LEXIS 115817 (N.D. Cal. Aug. 14, 2013). The plaintiffs alleged that Wells Fargo had wrongly denied them a mortgage because it had not considered early withdrawals from an IRA as part of their joint income. Wells Fargo admitted that it had (mistakenly) denied their mortgage, but argued that the single mistake did not constitute a "policy" of discrimination. Nonetheless, the plaintiffs sought certification under Rule 23(b)(2) on behalf of a class of all individuals who were younger than 59 and a half years old (the mistaken threshold Wells Fargo relied on) and had been denied under similar circumstances.

Judge Alsup found that the proposed class--which sought injunctive and declaratory relief voiding Wells Fargo's "policy"--was overbroad. As he reasoned:


This class definition encompasses four distinct subgroups: (1) individuals whose loan applications were denied after March 16, 2010, (2) individuals whose loan applications were approved after March 16, 2010, (3) individuals whose loan applications remain pending, and (4) individuals who will apply in the future. At least the first two subclasses are problematic.


First, for those individuals whose applications were denied, the record does not demonstrate whether there is any likelihood that they will have further interactions with Wells Fargo. Individuals who subsequently chose to reapply with another bank may have no reason to return to Wells Fargo. Injunctive relief would not provide them with any benefit. It is possible that some such individuals might have a continuing relationship with Wells due to other accounts, or, like the Pileggis, reserve an intention to one day return to the Wells Fargo fold. But on the current record this is speculation. Plaintiffs have not come forward with evidence sufficient under Behrend to show that any individuals whose applications were denied and who want to return to Wells Fargo exist (other than themselves).

Second, there is no evidence that individuals whose loan applications were approved notwithstanding the alleged policy were harmed. Thus, injunctive relief would not provide them any benefit either. Plaintiffs contend that loan approval, despite a discriminatory policy, can still be actionable because the discrimination may result in less favorable terms to the applicant. This is plausible but unsubstantiated. Plaintiffs have not come forward with sufficient evidence under Behrend demonstrating that any applicants who received less favorable terms exist.


Judge Alsup also found that the plaintiffs had not met their burden of demonstrating numerosity. Despite discovery and a round of supplemental briefing, the plaintiffs offered no evidence of the composition of the class.


Whether a sufficient number of class members could have been identified using more traditional methods is not apparent from the record. Regardless, apart from their own experience, plaintiffs have not submitted any evidence regarding the constituents of the proposed class. The upshot is that class numerosity has not been established.


There are several takeaways from this opinion for defense counsel:

  • Numerosity remains a powerful argument, particularly where plaintiffs seek to inflate a one-time error into a class action.
  • The evidentiary requirements announced in Behrend apply equally to Rule 23(b)(2) certification.
  • When plaintiffs seek "injunctive and declaratory relief," it is always worth asking whether that will actually benefit the class as defined.