Gaudin v. Saxon Mortgage Services, Inc.

Filing 102

ORDER GRANTING PLAINTIFF'S MOTION FOR CLASS CERTIFICATION AND APPOINTMENT OF CLASS COUNSEL, SETTING CASE MANAGEMENT CONFERENCE by Judge Jon S. Tigar; granting 81 Motion to Certify Class. (wsn, COURT STAFF) (Filed on 8/5/2013)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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MARIE GAUDIN,

Case No. 11-cv-01663-JST

Plaintiff,
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v.
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SAXON MORTGAGE SERVICES, INC.,
Defendant.

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ORDER GRANTING PLAINTIFF’S
MOTION FOR CLASS
CERTIFICATION AND
APPOINTMENT OF CLASS COUNSEL,
SETTING CASE MANAGEMENT
CONFERENCE

United States District Court
Northern District of California

Re: ECF No. 81
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Plaintiff Marie Gaudin (“Plaintiff”) alleges that Defendant Saxon Mortgage Services, Inc.
(“Defendant”) offered her a Trial Period Plan (“TPP”) loan modification document pursuant to the
federal Homeowners Affordable Modification Program (“HAMP”), and then unjustifiably failed
to deliver on promises contained within the document. First Amended Complaint (“FAC”), ECF

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No. 39, at ¶¶ 1-6. Plaintiff now moves to certify a class of California borrowers who entered into
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HAMP TPPs with Defendant through October 1, 2009, and made at least three trial period
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payments, but did not receive HAMP loan modifications (the “Proposed Class”). Plaintiff’s

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Notice of Motion and Motion for Class Certification and Appointment of Class Counsel;
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Memorandum of Points and Authorities (“Motion”), ECF No. 81, at 1:21-28.

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After considering the papers, the arguments of the parties at oral argument, and good cause
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appearing, the Court now GRANTS the motion.
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I.

BACKGROUND

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A.

Factual Background1
In October 2008, Congress enacted the Emergency Economic Stabilization Act, P.L. 110-

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343, 122 Stat. 3765. “The centerpiece of the Act was the Troubled Asset Relief Program (TARP),

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which required the Secretary of the Treasury, among many other duties and powers, to ‘implement

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a plan that seeks to maximize assistance for homeowners and . . . encourage the servicers of the

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underlying mortgages . . . to take advantage of . . . available programs to minimize foreclosures.”

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Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 556 (7th Cir. 2012) (citing 12 U.S.C. § 5219(a)).

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“Pursuant to this authority, in February 2009 the Secretary set aside up to $50 billion of TARP

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funds to induce lenders to refinance mortgages with more favorable interest rates and thereby

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United States District Court
Northern District of California

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allow homeowners to avoid foreclosure.” Id. This program, the Making Home Affordable

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program, included HAMP as one of its central components.
HAMP is a voluntary program designed to induce servicers to provide permanent loan

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modifications to borrowers who are in default or at risk of default. Wigod, 673 F.3d at 556; see

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also U.S. Department of the Treasury, Supplemental Directive 09-01 (April 6, 2009), available at

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https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd0901.pdf. Under HAMP,

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mortgage servicers receive financial incentives from the government for each permanent

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modification they provide. Id. The program is designed to authorize modifications when it is

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Both parties have requested that the Court take judicial notice of U.S. Treasury Department
documents that have been posted on the Internet. ECF Nos. 76 & 85. “[I]nformation
ongovernment agency websites . . . [has] often been treated as [a] proper subject[] for judicial
notice.” Paralyzed Veterans of Am. v. McPherson, Case No. C064670SBA, 2008 WL 4183981, at
*5 (N.D. Cal. Sept. 9, 2008). The information contained in the documents is not disputed and the
accuracy of the source is not reasonably questionable. See Fed. R. Evid. 201(b). Therefore, the
Court grants the requests. Plaintiff objects on hearsay grounds to certain representations in the
Monsivais Declaration, but the Court did not need to consider the truth of those assertions in
resolving this motion, and so the objections are ovveruled as moot. See ECF No. 94, at 11:11-17.
Finally, Plaintiff objects to the expert damages report of Allan Kleidon, ECF No. 88-8, on the
following grounds: (1) that “it is essentially 17 extra pages of legal argument,” in violation of the
Local Rules; (2) “that it is not admissible expert opinion testimony because it cannot ‘help the
trier of fact to understand the evidence or to determine a fact in issue,’ Fed. R. Evid. 702(a)”; (3)
that pages four through seven of the declaration “are complete hearsay and lacking in any
foundation”; (4) “the recitation of the law with respect to what remedies are available, is
impermissible expert witness testimony.” These objections are overruled.
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(1) possible to create an alternate payment schedule that is affordable for the borrower given his or

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her income, and (2) financially profitable for the investor. Id. To accomplish these goals, the

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program provided that a modification was warranted only if the borrower met certain income

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requirements and other criteria, and if a net present value assessment showed that a modified

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mortgage would produce a greater return to the servicer than the unmodified mortgage. Id.

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Defendant Saxon entered into an agreement with the Treasury Department to participate in

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HAMP in April 2009. Declaration of Veronica Monsivais in Opposition to Plaintiff’s Motion for

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Class Certification and Appointment of Class Counsel (“Monsivais Decl.”), ECF No. 89, at ¶¶ 6-7

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& Exh. 1. Defendant received written and verbal direction in implementing the program from the
Treasury Department, including a form TPP that Defendant utilized through at least October,

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United States District Court
Northern District of California

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2009. Deposition of Tim Lightfoot, ECF No. 88-1, at 10:20-12:15, 21:12-22:3, 30:7-17, 43:6-14.

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Plaintiff Marie Gaudin owns a condominium subject to a mortgage loan that has been

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serviced by Defendant since December 2006. Monsivais Decl., at ¶ 23; Declaration of Plaintiff

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Marie Gaudin in Support of Motion for Class Certification (“Gaudin Decl.”), ECF No. 74, at ¶ 4.

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In April 2009, Plaintiff provided income and other information to Defendant’s representatives for

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a potential HAMP modification. Monsivais Decl., at ¶ 24; Gaudin Decl., at ¶¶ 6-7. In May 2009,

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Saxon sent Plaintiff the subject TPP offer as part of a standard HAMP application package.

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Monsivais Decl., at ¶ 24; Gaudin Decl., at ¶ 8. The Court described the provisions of the TPP in a

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previous order:

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Gaudin’s TPP bears an “effective date” of June 1, 2009, and is titled,
“Home Affordable Modification Trial Period Plan.” Immediately
below the title is a parenthetical stating, “Step One of Two–Step
Documentation process.” The first full paragraph of text provides, in
relevant part, “if I am in compliance with this Trial Period Plan (the
“Plan”) and my representations in Section 1 continue to be true in all
material respects, then the Lender will provide me with a Home
Affordable Modification Agreement . . . .” (Emphasis added.) The
second paragraph continues, “I understand that after I sign and
return two copies of this 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 I and the Lender sign it and Lender
provides me with a copy of this Plan with the Lender's signature.”
(Emphasis added.) The TPP is in fact signed by both Gaudin and
the lender, thereby implying that the lender found Gaudin to be
qualified for a permanent loan modification.
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Paragraph 2 G of the TPP is also relevant to evaluating Saxon's potential obligations. It provides:
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United States District Court
Northern District of California

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I understand that the Plan is not a modification of the Loan
Documents and that the Loan Documents will not be modified
unless and until (i) I meet all of the conditions required for
modification, (ii) I receive a fully executed copy of the a
Modification agreement, and (iii) the Modification Effective Date
has passed. I further understand and agree that the Lender will not
be obligated or bound to make any modification of the Loan
Documents if I fail to meet any one of the requirements under this
Plan. I understand and agree that the Lender will not be obligated or
bound to make any modification of the Loan Documents or to
execute the Modification Agreement if the Lender has not received
an acceptable title endorsement and/or subordination agreements
from other lien holders, as necessary, to ensure that the modified
mortgage Loan retains its first Lien position and is fully enforceable.
(Emphasis added).
Finally, paragraph 3 of the TPP provides that the lender will make
certain specified adjustments to calculate the new monthly payment
amount. Then, “[i]f I comply with the requirements in Section 2 and
my representations in Section 1 continue to be true in all material
respects, the Lender will send me a Modification Agreement for my
signature which will modify my Loan Documents as necessary to
reflect this new payment amount and waive any unpaid late charges
accrued to date.” The paragraph concludes by explaining that upon
execution of the Modification Agreement the TPP terminates and
that the modified loan agreement thereafter governs the relationship
between the parties.
Order Denying Motion to Dismiss Amended Complaint (“Second Order”), ECF No. 51, 2011 WL

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5825144, at *2-3 (Nov. 17, 2011). Plaintiff signed and submitted the TPP, and Defendant
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countersigned it and returned it to her. Gaudin Decl., at ¶¶ 8-10. Plaintiff made the three monthly
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payments called for in the TPP, and continued making the monthly payments thereafter,
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eventually making 13 such payments. Gaudin Decl., at ¶¶ 12-13. Defendant later notified
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Plaintiff that it would not provide her with a loan modification – at first, on the erroneous grounds

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that she had not made her payments, but ultimately, on the grounds that she did not qualify for
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HAMP because her income was too low. Gaudin Decl., at ¶¶ 12-14; Monsivias Decl., at ¶ 26.
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Defendant claims that Plaintiff initially misstated her income in her conversations with Defendant.
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Monsivais Decl., at ¶¶ 24-26. Plaintiff denies this. Reply Declaration of Plaintiff Marie Gaudin,
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ECF No. 96, at ¶ 5.
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B.

Procedural Background
Plaintiff brought a proposed class action complaint in April 2011, bringing causes of action

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for breach of contract/implied covenant of good faith and fair dealing, rescission and restitution

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pursuant to Cal. Civ. Code §§ 1688-89, violation of the Rosenthal Fair Debt Collection Practices

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Act (“Rosenthal Act”), Cal Civ. Code §§ 1788 et seq., and violation of California’s Unfair

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Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq. ECF No. 1. Defendant

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moved to dismiss because, inter alia, the TPP was not an enforceable contract. ECF No. 12. The

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Court concluded that “the face of the document . . . strongly suggests” that it was an enforceable

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commitment, and that at least at the pleading stage Defendant had not shown that it failed for lack
of consideration or indefinite terms. Order Granting Motion to Dismiss, with Leave to Amend

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United States District Court
Northern District of California

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(“First Order”), ECF No. 36, 820 F. Supp. 2d 1051, 1053 (N.D. Cal. 2011). However, after

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concluding that the TPP “was not, in and of itself a permanent modification, or an unconditional

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commitment by the lender to provide one,” the Court dismissed the complaint without prejudice

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because Plaintiff “has not alleged that all of the conditions under which Saxon might be obligated

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to provide her a lender-executed permanent modification agreement were actually satisfied.” Id.

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Plaintiff filed an amended complaint, bringing the same claims but this time expressly

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alleging that the TPP conditions had been satisfied. FAC, at ¶¶ 29-30. Defendant again moved to

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dismiss. ECF No. 41. Since “the original complaint was dismissed on grounds that Gaudin had

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entirely failed to allege satisfaction of the conditions set forth in the TPP, and “[t]he amended

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complaint remedie[d] that defect,” the Court denied the motion. Second Order, 2011 WL

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5825144, at *4 (N.D. Cal. Nov. 17, 2011). The Court also stated that:

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As the order dismissing the original complaint found, the TPP
makes very clear that it is not, in and of itself, a loan modification
nor is it an unconditional commitment by the lender to provide one.
Saxon insists that any obligations it had under the TPP were limited
to evaluating Gaudin's eligibility for a loan modification under the
federal guidelines of the HAMP program, and to provide her a loan
modification agreement if and only if she proved to be eligible under
those guidelines and had otherwise complied with all her obligations
under the TPP. The flaw in Saxon's argument is that express
language of the TPP simply does not include any such limitation or
condition. To the contrary, the TPP indicates that while it may
initially be presented to the borrower only as an offer to determine
eligibility, once the lender returns a signed copy of it to the borrower
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(rather than notifying the borrower that he or she does not “qualify
for the Offer”), then the borrower's eligibility for permanent
modification has been determined, and the only remaining
contingencies are those listed specifically in the TPP and
summarized above.

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Saxon flatly states that, “[t]he TPP conditions Plaintiff's ability to
obtain a permanent loan modification agreement on a number of
factors, including . . . Plaintiff meeting all of the conditions required
for modification under the HAMP guidelines,” but it has pointed to
no language in the TPP embodying such a limitation. While, as
noted above, paragraph 2G requires the borrower to “meet all of the
conditions required for modification,” there is no indication that any
of those conditions are to be found outside the four corners of the
TPP. Additionally, to the extent that language arguably could be
understood as referring to some broader (and unstated) rules for
eligibility under HAMP or otherwise, then the lender's return of the
signed TPP implies the borrower has been found to be qualified
under such criteria.

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Id., 2011 WL 5825144, at *3-4. Plaintiff then filed this motion for class certification.
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United States District Court
Northern District of California

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Jurisdiction

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This Court has jurisdiction pursuant to the provisions of the Class Action Fairness Act, 28
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U.S.C. § 1332(d) et seq.
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D.

Legal Standard

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Class certification under Rule 23 is a two-step process. First, Plaintiff must demonstrate
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that the four requirements of 23(a) are met: “numerosity,” “commonality,” “typicality,” and
“adequacy.” “One or more members of a class may sue or be sued as representative parties on

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behalf of all members only if (1) the class is so numerous that joinder of all members is
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impracticable; (2) there are questions of law or fact common to the class; (3) the claims or
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defenses of the representative parties are typical of the claims or defenses of the class; and (4) the
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representative parties will fairly and adequately protect the interests of the class.” Fed. R. Civ.
Pro. 23(a). “Class certification is proper only if the trial court has concluded, after a ‘rigorous
analysis,’ that Rule 23(a) has been satisfied.” Wang v. Chinese Daily News, Inc., 709 F.3d 829,

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833 (9th Cir. 2013) (quoting Wal-Mart Stores, Inc. v. Dukes, --- U.S. ---, 131 S.Ct. 2541, 2551
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(2011)).
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Second, a plaintiff must also establish that one of the bases for certification in Rule 23(b)
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are met. Here, Plaintiff invokes 23(b)(3), which requires plaintiffs to prove the elements of
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“predominance” and “superiority”: “questions of law or fact common to class members

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predominate over any questions affecting only individual members, and . . . a class action is

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superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.

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R. Civ. Pro. 23(b)(3).

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The party seeking class certification bears the burden of demonstrating by a preponderance

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of the evidence that all four requirements of Rules 23(a) and at least one of the three requirements

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under Rule 23(b) are met. See Wal–Mart, 131 S.Ct. at 2551 (“A party seeking class certification

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must affirmatively demonstrate his compliance with the Rule—that is, he must be prepared to

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prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.”).
In addition, “[w]hile it is not an enumerated requirement of Rule 23, courts have

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United States District Court
Northern District of California

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recognized that “in order to maintain a class action, the class sought to be represented must be

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adequately defined and clearly ascertainable.” Vietnam Veterans of Am. v. C.I.A., 288 F.R.D.

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192, 211 (N.D. Cal. 2012) (quoting DeBremaecker v. Short, 433 F.2d 733, 734 (5th Cir.1970)).

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“[A] class definition is sufficient if the description of the class is ‘definite enough so that it is

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administratively feasible for the court to ascertain whether an individual is a member.’” Vietnam

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Veterans, 288 F.R.D. at 211 (quoting O’Connor v. Boeing N. Am., Inc., 184 F.R.D. 311, 319

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(C.D. Cal. 1998)).

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II.

ANALYSIS

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A.

Defined and Ascertainable Class
Plaintiff argues, and Defendant does not dispute,2 that she has satisfied this requirement

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since Defendant’s records identify each individual borrower who fits within the class. See

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Declaration of Peter Fredman, Esq. in Support of Motion for Class Certification and Appointment

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of Class Counsel, ECF No. 84, at ¶¶ 8-9. It is administratively feasible to ascertain whether

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Defendant’s opposition brief contains no section specifically disputing that a class is
ascertainable, but it does state in a footnote that the arguments it raises in opposition to
commonality also apply to the requirement that there be an ascertainable class. Saxon Mortgage
Services, Inc.’s Memorandum of Law in Opposition to Plaintiff’s Motion for Class Certification
and Appointment of Class Counsel (“Opp.”), at 13:17, n. 22. Defendant does not raise any
arguments relating to an ascertainable class beyond those that apply to commonality, however, and
as discussed at III-C, infra, the Court finds that commonality is satisfied.
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individuals are members of the class.

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Numerosity
Plaintiff argues, and Defendant does not dispute, that the number of potential class

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members is large enough that the “joinder of all members is impracticable.” Fed R. Civ. Pro.

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23(a)(1). After reviewing the large number of potential class members, the Court agrees.

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C.

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Commonality
“[F]or purposes of Rule 23(a)(2) [e]ven a single [common] question will do. Wal-Mart,

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131 S. Ct. at 2556 (internal citation omitted). Where questions common to class members present

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significant issues that can be resolved in a single adjudication “there is clear justification for
handling the dispute on a representative rather than on an individual basis.” Amchem Products,

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United States District Court
Northern District of California

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Inc. v. Windsor, 521 U.S. 591, 623 (1997) (internal quotation marks and citation omitted).

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However, the common contention “must be of such a nature that it is capable of classwide

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resolution—which means that determination of its truth or falsity will resolve an issue that is

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central to the validity of each one of the claims in one stroke.” Wal-Mart, 131 S.Ct. at 2551.

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“What matters to class certification . . . is not the raising of common ‘questions’—even in

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droves—but, rather the capacity of a classwide proceeding to generate common answers apt to

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drive the resolution of the litigation.” Id. (quoting Richard A. Nagareda, Class Certification in the

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Age of Aggregate Proof, 84 N.Y.U.L.Rev. 97, 131–132 (2009)).

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Here, there are significant common questions of law and fact concerning the nature and

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scope of the TPP. Motion, at 14:25-27 (“everyone in the Class entered into the same TPP with

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Saxon and made at least the three trial payments it called for but did not obtain the loan

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modification.”) Among these questions are the following: (1) “Saxon’s uniform practices,

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including its admission that it did not consider the TPP legally binding”, Motion at 17:27-28;

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(2) whether the TPP is an enforceable contract, once it has been fully executed, see Motion at

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2:14-15, 16:8-11, 16:23-24; and if it became binding when executed, “whether the Class may

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recover some or all of their trial payments, nominal damages, or any other remedies under

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California law”, id. at 16:27-17:1, see also id. at 17:10-12 (“the legal nature, meaning and effect of

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the TPP, and, as applicable, the remedy available for Saxon’s failure to honor it”); and, with
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respect to Plaintiffs’ UCL claim, “whether the public would likely be deceived,” id. at 19:24-20:2.

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The parties strongly dispute the nature and scope of the TPP. To Defendant, it was merely

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an application for a loan modification, and any obligations Defendant incurred were contingent

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upon it further investigating and determining whether the applicant’s circumstances qualified the

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applicant for inclusion in the program. To Plaintiff, it was a binding contract, which, after being

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signed and countersigned by both parties, affirmed that Defendant would provide a loan

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modification if Plaintiff made the three TPP payments. By determining whether the TPP is an

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enforceable contract and whether the parties’ performance obligations are fully contained within

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it, the Court can resolve an issue central to the viability of the Proposed Class Members’ claims.

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D.

Typicality and Adequacy of Representation

United States District Court
Northern District of California

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“The purpose of the typicality requirement is to assure that the interest of the named

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representative aligns with the interests of the class.” Hanon v. Dataproducts Corp., 976 F.2d 497,

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508 (9th Cir. 1992). “The test of typicality ‘is whether other members have the same or similar

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injury, whether the action is based on conduct which is not unique to the named plaintiffs, and

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whether other class members have been injured by the same course of conduct.’” Id. (quoting

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Schwartz v. Harp, 108 F.R.D. 279, 282 (C.D. Cal.1985). “The adequacy of representation

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requirement . . . requires that two questions be addressed: (a) do the named plaintiffs and their

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counsel have any conflicts of interest with other class members and (b) will the named plaintiffs

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and their counsel prosecute the action vigorously on behalf of the class?” In re Mego Fin. Corp.

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Sec. Litig., 213 F.3d 454, 462 (9th Cir. 2000).

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“The adequacy-of-representation requirement ‘tend[s] to merge’ with the commonality and

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typicality criteria of Rule 23(a).” Amchem, 521 U.S. at 626, n. 20 (1997) (quoting Gen. Tel. Co.

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of Sw. v. Falcon, 457 U.S. 147, 158, n. 13 (1982). Among other functions, these requirements

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serve as ways to determine whether “the named plaintiff’s claim and the class claims are so

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interrelated that the interests of the class members will be fairly and adequately protected in their

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absence.” Falcon, 457 U.S. at 158, n. 13.

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Plaintiff’s alleged injury is similar to, even precisely the same as, the injury for which class
counsel will seek redress on behalf of all other members of the Proposed Class. Defendant’s
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issuance and countersigning of the TPP constitutes a single course of conduct to which all Class

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Members were subject. Plaintiff’s claims are sufficiently interrelated to the interests of the other

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Class Members.

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Defendant argues that Plaintiff is subject to unique defenses because Defendant will argue

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that she misrepresented her income in her TPP application. The Court is not convinced that this

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threat rises to a level posing “a danger that absent class members will suffer if their representative

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is preoccupied with defenses unique to it.” Hanon, 976 F. 2d at 508. Defendant’s argument is

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similar to the same arguments it intends to raise in response to all Class Members: it will argue

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that, even after the TPP was signed and countersigned, Defendant was still legally permitted to

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United States District Court
Northern District of California

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refuse to provide a loan modification for various reasons. This defense does not defeat typicality.
Defendant also argues that Plaintiff cannot establish typicality and adequacy of

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representation because other members of the Proposed Class may not benefit from the relief

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Plaintiff is seeking. For example, Defendant argues that some Class Members may not benefit

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from the remedy of rescission and restitution, because they may have benefitted from paying the

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lower TPP payments and may not want to be returned to the status quo ante. Plaintiff’s complaint,

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motion, and reply brief could be clearer in describing the theory of damages she will seek on

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behalf of the Proposed Class. However, the Court does not understand Plaintiff to be committed

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to seeking rescission and restitution as the only remedy she will seek for all Class Members. See

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FAC 13:3-23 (seeking, among other relief, rescission, restitution, monetary damages, and

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statutory damages). In any case, typicality is primarily an inquiry into alignment of interest rather

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than an investigation into the forms of relief for which the named plaintiff has prayed. See Hanon,

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976 F.2d at 508; see also Simpson v. Fireman’s Fund Ins. Co., 231 F.R.D. 391, 396 (N.D.Cal.

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2005) (“In determining whether typicality is met, the focus should be ‘on the defendants’ conduct

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and plaintiff's legal theory,’ not the injury caused to the plaintiff”) (quoted approvingly in Lozano

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v. AT & T Wireless Servs., Inc., 504 F.3d 718, 734 (9th Cir. 2007). “[A] class may also be

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certified solely on the basis of common liability, with individualized damages determinations left

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to subsequent proceedings.” Newberg on Class Actions § 4:54 (5th ed.). The Court can also at a

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later stage certify subclasses of plaintiffs depending upon their particular situations, if it turns out
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to be necessary. At this stage, the Court can conclude that Plaintiff’s interest and injury are

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sufficiently typical of those possessed by the Proposed Class Members, and that she will

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adequately represent their interests in this litigation.

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E.

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Predominance and Superiority
“Considering whether ‘questions of law or fact common to class members predominate’

begins, of course, with the elements of the underlying cause of action.” Erica P. John Fund, Inc. v.

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Halliburton Co., --- U.S. ---, 131 S. Ct. 2179, 2184 (2011). In determining whether common

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questions predominate, the Court identifies the substantive issues related to plaintiff’s claims (both

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the causes of action and affirmative defenses); then considers the proof necessary to establish each

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element of the claim or defense; and considers how these issues would be tried. See Schwarzer, et

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United States District Court
Northern District of California

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al., Cal. Prac. Guide Fed. Civ. Pro. Before Trial Ch. 10-C § 10:412. The predominance inquiry

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requires that plaintiff demonstrate that common questions predominate as to each cause of action

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for which plaintiff seeks class certification. Amchem, 521 U.S. at 620.

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The Court analyzes each of the causes of action brought by Plaintiff in turn.

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1.

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“The elements of a cause of action for breach of contract are (1) the existence of the

Breach of Contract

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contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant's breach, and

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(4) the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811,

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821 (2011). Plaintiff submits that “common issues predominate . . . because interpretation of the

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TPP is a matter of law,” and that because the Proposed Class and Defendant “each executed the

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same TPP document, the questions pertaining to its nature, meaning and effect may be ‘resolved

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with one stroke.’” Motion, at 16:13-14. The question under 23(b)(3) is whether this common

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question predominates over individual questions.

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Defendant argues that proving breach of contract will require individualized

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determinations going to each of the four elements of breach of contract. Namely, it argues that the

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Court will need to determine whether each Class Member provided sufficient consideration (and

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thereby whether a contract existed), whether each Class Member performed her obligations under

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the contract (and therefore whether Defendant breached) and the amount of damages owed.
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a.

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Performance

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Plaintiff’s theory of the case is that the TPP is an enforceable contract and that it contains

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within it all of the obligations necessary to determine breach and performance. See Transcript of

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Proceedings, ECF No. 100, at 23:20-24:1. If that legal question is resolved in its favor, there are

5

no individualized issues going to performance that remain to be addressed. The question can be

6

resolved with a legal determination that is common to the Proposed Class.

7

Plaintiff also argues in the alternative that, if there any other conditions on Defendant’s
obligation to perform, it is only those – as the Court said in its second order – that are “listed

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specifically in the TPP.” Second Order, 2011 WL 5825144, at *3; see also Reply Br., at 11:10-21.

10

The only performance obligations cited by Defendant that are in the TPP are that “[i]f prior to the

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United States District Court
Northern District of California

8

prior to the Modification Effective Date, (i) the Lender does not provide me a fully executed copy

12

of this Plan and the Modification Agreement; (ii) I have not made the Trial Period payments

13

required under Section 2 of this Plan; or (iii) the Lender determines that my representations in

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Section 1 are no longer true and correct, the Loan Documents will not be modified and this Plan

15

will terminate.” The Class Members by definition satisfy the first two of these categories. The

16

third condition incorporates by reference the lender’s representations from Section 1 of the TPP,

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namely that:

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A.

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B.

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C.

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D.

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E.

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F.

I am unable to afford my mortgage payments for the reasons
indicated in my Hardship Affidavit and as a result, (i) I am
either in default or believe I will be in default under the Loan
Documents in the near future, and (ii) I do not have
sufficient income or access to sufficient liquid assets to make
the monthly mortgage payments now or in the near future;
I live in the Property as my principal residence, and the
Property has not been condemned;
There has been no change in the ownership of the Property
since I signed the Loan Documents;
I am providing or already have provided documentation for
all income that I receive (and I understand that I am not
required to disclose any child support or alimony that 1
receive, unless I wish to have such income considered to
qualify for the Offer);
Under penalty of perjury, all documents and information I
have provided to Lender pursuant to this Plan, including the
documents and information regarding my eligibility for the
program, are true and correct; and
If Lender requires me to obtain credit counseling, I will do
so.
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TPP, at 1. To determine whether an individual lender performed under the alleged contract, the

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Court will need to determine individually not whether each of these representations were true, but

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whether the Lender determined that these representations were no longer true and correct. This

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can be ascertained reasonably easily from the available evidence. Defendant’s records reveal that

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it did not deny modifications to borrowers for the reasons listed in Section 1-C, 1-E or 1-F.

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Monsivias Decl., at ¶ 19. Defendant only denied modifications to a single borrower for reasons

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relating to Section 1-A, denied modification to about 1% of Proposed Class Members for reasons

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relating to 1-B, and denied modification to about 9% of Proposed Class Members for reasons

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relating to 1-D. Id. Therefore, even on Plaintiff’s secondary theory of the case, for at least 90% of

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United States District Court
Northern District of California

the Proposed Class, it does not appear that individualized determinations will be necessary to
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determine performance.

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b.

Breach

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Defendant’s brief does not appear to cite individualized issues going to breach beyond

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those that form the other side of the coin of performance. See Opp., at 19:7-19. That is to say,

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Defendant argues that it can only unjustifiably fail to perform where the lender fulfilled the

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requirements of the alleged contract. This begs the question discussed supra.

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c.

Consideration

“[T]o find consideration . . . the promisee must confer (or agree to confer) a benefit or must

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suffer (or agree to suffer) prejudice.” Steiner v. Thexton, 48 Cal. 4th 411, 420-21 (2010).

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Defendant argued in both of its motions to dismiss that Plaintiff failed to incur any obligation

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because she had a pre-existing duty to make her mortgage payments. The Court rejected this

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argument twice. First Order, 820 F.Supp. 2d at 1054; Second Order, 2011 WL 5825144, at *4.

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The first time, the Court agreed with the reasoning of another court in this district that “the TPP

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payments are sufficient consideration and the additional consideration suffered was the credit
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1

consequences of their partial mortgage payments and fulfilling the burdensome documentation

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requirements of the loan modification approval process.” Lucia v. Wells Fargo Bank, N.A., 798

3

F. Supp. 2d 1059, 1067 (N.D. Cal. 2011) (although that court held the consideration was sufficient

4

to support the existence of the contract to participate in the TPP for the three month trial period,

5

but not a contract for permanent modification after the trial period expired). The second time, this

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Court went on to note that “[a]dditionally, by promising to comply with the terms of the TPP,

7
Gaudin exposed herself to greater liability for interest and late charges should permanent
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modification not be consummated.” Second Order, 2011 WL 5825144, at *4.
Defendants now contend that “[a]lthough Saxon maintains that Plaintiff cannot

United States District Court
Northern District of California

11

demonstrate consideration, at a minimum, the issue of consideration is individualized,” and that

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the Court must determine whether each borrower was exposed to additional interest or charges,

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and whether any borrowers suffered negative credit consequences. If Plaintiff intends to argue

14

that certain specific borrowers incurred legal detriment for reasons other than incurring the

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16

obligations in the TPP, then the Court agrees that individualized issues would predominate. But

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the Court understands Plaintiff to be arguing that incurring the obligations in the TPP itself

18

constitutes valid consideration. That legal question can be resolved on a class-wide basis. If the

19

question is resolved in Defendant’s favor, then the class would be ripe for decertification, since the

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Court is unlikely to allow Plaintiffs to argue on a class-wide base that individual plaintiffs

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tendered sufficient consideration because of their particular circumstances. But if the common
question is resolved in Plaintiff’s favor, no individualized determination into the lenders’

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particular circumstances will be necessary.

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d.

Damages

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Even if it would require the court to consider the underlying merits of a case, a court must

27

“entertain arguments against [a Plaintiff’s] damages model,” where those arguments “[bear] on the

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propriety of class certification.” Comcast Corp. v. Behrend, --- U.S. ---, 133 S. Ct. 1426, 1432
14

1

(2013). However, “the presence of individualized damages cannot, by itself, defeat class

2

certification under Rule 23(b)(3).” Leyva v. Medline Indus. Inc., --- F.3d ---, Case No. 11-56849,

3

2013 WL 2306567, at *3 (9th Cir. May 28, 2013).

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Defendant relies heavily on Comcast, in which the plaintiff’s “[damages] model assumed

5

the validity of all four theories of antitrust impact initially advanced by [plaintiffs],” even though

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only one of those theories remained in the case. Comcast, 133 S. Ct. at 1434. Plaintiff proposes

7
no calculation that would assess damages on the basis of dismissed or abandoned theories of
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liability.
Beyond a citation to the Eastern District of Kentucky, Defendants cite no authority in

United States District Court
Northern District of California

11

which courts found that individual damages issues predominated in similar situations. Even in

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that case, the court denied certification because plaintiffs “have offered no manageable way to

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calculate damages across the entire class.” Cowden v. Parker & Associates, Inc., Case No. CIV.A.

14

5:09-323-KKC, 2013 WL 2285163, at *7 (E.D. Ky. May 22, 2013). In this case, the calculation of

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damages, if plaintiffs prevail, does not appear to be an obstacle.
“Courts in every circuit have . . . uniformly held that the 23(b)(3) predominance

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requirement is satisfied despite the need to make individualized damage determinations.”

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2 Newberg on Class Actions § 4:54 (5th ed.) “Indeed, a class may also be certified solely on the

20

basis of common liability, with individualized damages determinations left to subsequent

21

proceedings.” Id. Given this standard, and the Court’s understanding of Plaintiff’s theory of

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damages, common issues predominate over individualized damage assessments.
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2.

Rescission and Restitution

Restitution is “synonymous” with unjust enrichment, and “there is no cause of action in

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California for unjust enrichment.” Melchior v. New Line Prods., Inc., 106 Cal. App. 4th 779, 793,

27

(2003). As for rescission, it is available under Cal. Civ. Code § 1689 when, inter alia, “the

28

consent of the party rescinding . . . was given by mistake, or obtained through duress, menace,
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1

fraud, or undue influence, exercised by or with the connivance of the party as to whom he

2

rescinds,” or “[i]f the consideration for the obligation of the rescinding party fails, in whole or in

3

part, through the fault of the party as to whom he rescinds.” Proving this will involve substantially

4

the same issues discussed supra, and the common issues predominate over individualized

5

inquiries.

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3.

Rosenthal Act

The Rosenthal Act creates state-law liability for a “debt collector collecting or attempting

8
9

to collect a consumer debt,” Cal. Civ. Code § 1788.17, who fails to comply with requirements of
the Federal Debt Collections Practices Act (“FDCPA”), at 15 U.S.C. §§ 1692b-1692j. 15 U.S.C.

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United States District Court
Northern District of California

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§ 1692e(10) prohibits “[t]he use of any false representation or deceptive means to collect or

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attempt to collect any debt.”

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14

Proving that Defendant made false representations or deceptive means to collect debt will
mainly involve an inquiry into the nature of the TPP itself and Defendant’s uniform practices

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related to issuing it to borrowers and countersigning it. Defendant points out that Plaintiff’s

17

motion does mention other allegedly deceptive practices Defendant engaged in when it made other

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verbal and written communications to Plaintiff. Opp. at 23:5-12. Again, however, the Court

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understands Plaintiff to be arguing on that she can prove the falsity or deceptiveness of

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Defendant’s practices from the four corners of the TPP itself and from Defendant’s uniform

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practices. On that understanding, common issues predominate.

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Defendant argues that the Court will need to engage in an individualized inquiry to
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24

determine whether each borrower was in default at the time Defendant began serving his or her

25

loan, because only borrowers so situated may bring a Rosenthal Act claim. This determination

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would be a relatively simple one to undertake, and so it does not defeat predominance. But in any

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case, it appears that the Rosenthal Act, unlike the FDCPA, does not require a borrower to be in

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default to bring a claim. “Despite the overlap between the federal and state statutory schemes, the
16

1

definition of ‘debt collector’ is broader under California law” than it is under the FDCPA. Selby

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v. Bank of Am., Inc., Case No. 09CV2079 BTM JMA, 2010 WL 4347629, at *6 (S.D. Cal. Oct.

3

27, 2010). The FDCA’s definition of ‘debt collector’ specifically excludes those who collect “a

4

debt which was not in default at the time it was obtained,” but the Rosenthal Act’s definition of

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‘debt collector’ does not contain this limitation. Compare 15 U.S.C. § 1692a(6)(F)(iii) with Cal.

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Civ. Code § 1788.2(c).

7
Determining damages from the proposed Rosenthal Act violation may not be as formulaic
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9

as Plaintiff suggests. See Transcript of Proceedings, ECF No. 100, at 10:21-22. The $500,000
statutory damages amount in 15 U.S.C § 1692k(a)(2)(B) is a ceiling rather than an automatic

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United States District Court
Northern District of California

10

entitlement. See Cal. Civ. Code § 1788.17 (incorporating “the remedies in Section 1692k” into

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the Rosenthal Act). But, for the same reasons discussed supra, the need to engage in an

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individualized damages inquiry does not defeat class certification.

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4.

UCL

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16

“[U]nder the [UCL] ‘there are three varieties of unfair competition: practices which are

17

unlawful, unfair or fraudulent.’” In re Tobacco II Cases, 46 Cal. 4th 298, 311 (2009) (quoting

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Daugherty v. American Honda Motor Co., Inc. 144 Cal.App.4th 824, 837 (2006)).

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20
21

a.

Unlawful Practices

“[U]nder the unlawful prong, the UCL ‘‘borrows’ violations of other laws and treats them
as unlawful practices’ that the unfair competition law makes independently actionable.’” Aryeh v.

22
Canon Bus. Solutions, Inc., 55 Cal. 4th 1185, 1196 (2013) (quoting Cel–Tech Communications,
23
24

Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163, 180 (1999)). Plaintiff’s unlawful

25

practices claim on her Rosenthal Act claim, and proving it will require the same proof. For the

26

same reasons discussed at III-E-3, supra, common issues predominate.

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28
17

1
2

b.

Unfair Practices

Considering whether a business practice violates the UCL’s unfair practices prong requires

3

either that the court balance the practice’s harm to the consumer against the benefit to the

4

defendant, or else consider whether the practice violates the letter or spirit of a legislatively

5

declared policy or poses an actual or threatened impact on competition. See Lozano, 504 F.3d at

6
7

735-37. In either case, as above, proving the claim will primarily require an investigation into the
TPP itself and Defendant’s uniform practices. Plaintiff argues that Defendant’s “systematic

8
9

breach” of the TPP constitutes an unfair practice, and as discussed at III-E-1, supra, common
issues predominate in determining that breach. Determining whether the breach constitutes an

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United States District Court
Northern District of California

10

“unfair practice” within the meaning of the UCL does not require an individualized inquiry that

12

would predominate over the common issues.

13
14

c.

Fraudulent Practices

“[T]o state a claim under . . . [the UCL’s fraudulent prong] it is necessary only to show that

15
16

members of the public are likely to be deceived.” Kasky v. Nike, Inc., 27 Cal. 4th 939, 951,

17

(2002) (internal quotation omitted). “The fraudulent business practice prong of the UCL has been

18

understood to be distinct from common law fraud,” a “distinction [that] reflects the UCL’s focus

19

on the defendant's conduct, rather than the plaintiff's damages, in service of the statute's larger

20

purpose of protecting the general public against unscrupulous business practices.” In re Tobacco

21

II Cases, 46 Cal. 4th 298, 312 (2009).

22
For much the same reasons discussed above, common issues predominate in determining
23
24

whether the practices at issue were “fraudulent” under the UCL. As above, Defendant objects to

25

the fact that the FAC mentions certain other allegedly fraudulent communications that were

26

specifically made to Plaintiff and not to other members of the Proposed Class. To the extent that

27

Plaintiff seeks to recover under the UCL based on practices that were specific to her or on other

28

practices that were specific to other individual members of the class, she is unlikely to be able to
18

1

maintain a certified class. But to the extent that Plaintiff makes her claim on the basis of the TPP

2

itself and Defendant’s uniform practices as they apply generally to the Proposed Class, there is no

3

predominance obstacle.

4

5.

5

A class action is “superior to other available methods for fairly and efficiently adjudicating

6

Superiority

the controversy.” Fed. R. Civ. Pro. 23(b)(3). “The superiority inquiry under Rule 23(b)(3)

7
requires determination of whether the objectives of the particular class action procedure will be
8
9

achieved in the particular case.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1023 (9th Cir. 1998).
There is no reason to think any alternative procedures for adjudicating the claims of the individual

11
United States District Court
Northern District of California

10

class members would be superior to a class action proceeding. Even if proposed Class Members

12

could still maintain individual actions not barred by the applicable statute of limitations, it would

13

not be fairer or more efficient for them to do so.

14

“[C]ertification pursuant to Rule 23(b)(3) . . . is appropriate ‘whenever the actual interests

15
16

of the parties can be served best by settling their differences in a single action.’” Hanlon, 150 F.3d

17

at 1022 (quoting 7A Wright & Miller, Federal Practice & Procedure § 1777 (2d ed.1986)). This is

18

the case here.

19

IV.

20
21

CONCLUSION
For the foregoing reasons, the Court GRANTS Plaintiff Marie Gaudin’s motion to certify a

class of California borrowers who entered into HAMP TPPs with Saxon effective on or before

22
October 1, 2009, and made at least three trial period payments, but did not receive HAMP loan
23
24

modifications.

25

///

26

///

27

///

28

///
19

1

The Court also GRANTS Plaintiff’s motion to appoint Plaintiff’s counsel, Daniel

2

Mulligan, Esq. of Jenkins Mulligan & Gabriel LLP and Peter Fredman, Esq. of the Law Office of

3

Peter Fredman, as counsel for the aforementioned class.

4
5

IT IS SO ORDERED.
Dated: August 3, 2013

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8

______________________________________
JON S. TIGAR
United States District Judge

9
10

United States District Court
Northern District of California

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