Sutcliffe et al v. Wells Fargo Bank, N.A.

Filing 58

ORDER granting in part and denying in part 49 Motion to Strike (jcslc1, COURT STAFF) (Filed on 10/9/2012)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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VICKI AND RICHARD SUTCLIFFE,

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Plaintiffs,
v.

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WELLS FARGO BANK, N.A.,
Defendant.

United States District Court
Northern District of California

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Case No. C-11-06595 JCS
ORDER GRANTING IN PART AND
DENYING IN PART MOTION BY
DEFENDANT WELLS FARGO BANK,
N.A. TO STRIKE OR, IN THE
ALTERNATIVE, TO REQUIRE
PLAINTIFFS TO MODIFY THE
PUTATIVE CLASS DEFINITION SET
FORTH IN PLAINTIFFS’ FIRST
AMENDED CLASS ACTION
COMPLAINT [Docket No. 49]

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I.

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INTRODUCTION
Defendant Wells Fargo Bank, N.A. (“Wells Fargo”) brings a Motion to Strike, or in the

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Alternative, to Require Plaintiffs to Modify the Putative Class Definition Set Forth in Plaintiffs’

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First Amended Complaint (“the Motion”). The Court finds that the Motion is suitable for

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determination without oral argument, pursuant to Civil Local Rule 7-1(b). Accordingly, the

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motion hearing that was specially set for Thursday, October 16 at 1:30 p.m. is vacated. The Case

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Management Conference set for the same date and time shall remain on calendar.

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II.

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BACKGROUND
Plaintiffs filed this action on behalf of a putative class, alleging that Wells Fargo engages

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in “fraudulent, unfair and unconscionable debt collection practices” whereby it induces borrowers
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facing foreclosure to enter into a trial loan modification plan (“Trial Plan”) with the promise of a

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permanent loan modification when, in fact, it has no intention of offering such a modification and

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instead, is merely seeking to collect additional loan payments. First Amended Complaint

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(“FAC”), ¶ 1. Plaintiffs further allege that Wells Fargo ultimately refuses to modify most of these

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borrowers’ loans and that even those borrowers who are eventually offered a permanent

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modification suffer financial and emotional harm due to the long period of time in which Wells

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Fargo continues to collect payments under the Trial Plan after the initial trial period has passed,

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including the negative impact on their credit score. FAC ¶ 5.
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The original complaint in this action was filed on December 21, 2011 by Plaintiffs Vicki

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and Richard Sutcliffe, who alleged that Wells Fargo had offered them a Trial Plan, that they

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complied with its terms, and that they had continued to make payments under the Trial Plan for

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months but had never rececived a loan modification. The Sutcliffs, as representatives of a

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United States District Court
Northern District of California

putative class, asserted claims for violation of California’s Unfair Competition Law (“UCL”),
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breach of contract, breach of implied covenant of good faith and fair dealing, and rescission and
restitution.
Wells Fargo brought a motion to dismiss on February 17, 2012. In its reply brief on that
motion, Wells Fargo informed the Court that the Sutcliffes had recently been offered, and had

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accepted, a permanent loan modification. The Court granted in part and denied in part Wells
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Fargo’s motion to dismiss in an order issued on May 9, 2012 (“the May 9 Order”). The Court

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dismissed the UCL claim to the extent it was based on the Fair Debt Collection Practices Act,

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dismissed the rescission/ restitution claim, and dismissed the breach of contract claim on the basis

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that Plaintiffs failed to allege cognizable damages. May 9 Order at 31. It permitted Plaintiffs to

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amend the complaint to allege, if they could, damages arising out of the alleged breach of
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contract. Id. The Court also stated that no further amendment would be permitted. Id.
On June 8, 2012, Plaintiffs filed their First Amended Complaint. In it, Plaintiffs added a

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class representative, Michael Enneking, who allegedly was offered a Trial Plan and complied with

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its terms but – after making payments under the plan for months – was ultimately denied a
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permanent modification. FAC ¶¶ 58-91. In the First Amended Complaint, Plaintiffs assert

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claims for violation of California’s UCL, breach of contract and breach of the implied covenant of

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good faith and fair dealing.

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The Class definition in the First Amended Complaint is virtually identical to the one

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contained in the original complaint and states as follows:
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United States District Court
Northern District of California

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Plaintiffs bring this action as a class action on behalf of all homeowners nationwide who
received a trial loan modification proposal substantially similar to the Trial Plan from any
of the Defendants; made the payments set forth in the proposal; provided true information
with respect to all representations required by the proposal; and were either (a) denied a
permanent loan modification; (b) offered an illusory “modification” on terms substantially
similar to their unmodified loan; and/or (c) who received, entered into, and complied with
the above described Forbearance Plans from Wells Fargo, consisting of the Offer Letter
and Agreement, in substantially the same form(s) presented to Plaintiffs.
FAC, ¶ 94.
In the Motion, Wells Fargo asks the Court to strike the class definition pursuant to Rule

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23(d)(1)(D) of the Federal Rules of Civil Procedure or order its modification prior to the
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commencement of discovery, arguing that the class definition is deficient in three respects.

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Motion at 1-2. First, Wells Fargo contends that a case-by-case analysis of each borrower’s loan

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records will be necessary to determine if the borrower has met the requirement that class members

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must have “provided true information with respect to all representations” required by the Trial

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Plan. Id. at 7-8. Because it is not administratively feasible for the court to determine whether
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borrowers have provided true information, the class is not ascertainable and cannot be maintained,

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Wells Fargo asserts. Id. at 8 (citing Lukovsky v. City and Council of San Francisco, 2006 WL

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140574, at *2 (N.D. Cal. Jan. 17, 2006)).

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Second, to the extent that the class includes a subclass of borrowers who were offered an

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“illusory ‘modification’ on terms substantially similar to their unmodified loan” (subsection b of
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the class definition in paragraph 94), Wells Fargo argues that the name plaintiffs do not have

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standing to assert claims on behalf of such borrowers because neither the Sutcliffes nor Mr.

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Enneking alleges that Wells Fargo offered them an illusory modification. Id. at 8-10 (citing

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Sosna v. Iowa, 419 U.S. 393, 403 (1975); Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 n.

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20 (1976)).

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Third, Wells Fargo argues that the definition is overbroad to the extent it includes
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borrowers “who received, entered into, and complied with the above described Forbearance Plans

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from Wells Fargo, consisting of the Offer Letter and Agreement, in substantially the same form(s)

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presented to Plaintiffs” (subsection c of the class definition). Motion at 10-11. According to

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Wells Fargo, this sub-class sweeps into the class definition “innumerable borrowers that have not

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United States District Court
Northern District of California

been subjected to any of the purported misconduct alleged in the [First Amended Complaint]
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and, most important, have not sustained any injury.” Id. at 10. Courts facing similar class

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definitions have granted motions to strike, Wells Fargo contends, citing Hovsepian v. Apple, Inc.,

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2009 WL 5069144 (N.D. Cal. 2009) and Tietsworth v. Sears, 720 F. Supp. 2d 1123 (N.D. Cal.

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2010).1

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In their opposition brief, Plaintiffs argue that the Motion is premature because discovery
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has not yet been conducted and Plaintiffs have not yet brought a motion for class certification.

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Opposition at 5. Because the class definition is so closely tied to the factual and legal issues that

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are addressed in the context of class certification, Plaintiffs assert, courts are generally reluctant to

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strike class definitions at the pleading stage of the case. Id. at 5-8. Even if the Court decides that

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it is appropriate to reach the merits, Plaintiffs argue, the class definition in the First Amended
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Complaint is sufficient. Id. at 9-16. In particular, Plaintiffs contend that the class definition is

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Wells Fargo has also filed a request for judicial notice in support of the Motion requesting that
the Court take judicial notice of certain documents that were referenced in the FAC in connection
with class representative Michael Enneking. See Docket No. 50 (citing F.R. Evid. 201(d)).
Plaintiffs do not oppose the request, which is GRANTED.

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readily ascertainable and that the name plaintiffs have standing to represent the putative class as it
is currently defined. Id.

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As to the question of whether class membership is sufficiently ascertainable, Plaintiffs
contend that the class is “adequately defined and clearly ascertainable” because the provision of

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truthful information is one of the explicit requirements of the Trial Plan that must be signed by the
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borrower. Id. at 11 (citing FAC ¶ 94). The Trial Plan also puts the burden on the lender to

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determine if any representations are untrue. Id. Therefore, Plaintiffs assert, class membership

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can be ascertained by reviewing Wells Fargo’s business records to determine whether borrowers

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returned signed Trial Plan documents. Id. This method is feasible, Plaintiffs assert, even if it may

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United States District Court
Northern District of California

impose some burden on Wells Fargo. Id. n. 3 (citing In re TFT-LCD (Flat Panel) Antitrust
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Litigation, 267 F.R.D. 583, 592 (N.D. Cal. 2010)).2
With respect to standing, Plaintiffs reject Wells Fargo’s characterization of their class

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definition as including sub-classes. Opposition at 10. Instead, Plaintiffs assert, their class

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definition defines a “single class of individuals who received a Trial Plan and complied with its

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terms but were not offered a permanent loan modification, thus constituting a breach of Wells’s
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obligations.” Id. (citing FAC ¶ 94). As to the alleged illusory modification, referred to in

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subsection b of the class definition, Plaintiffs note that the First Amended Complaint includes

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allegations that Wells Fargo did, in fact, extend a forebearance offer that required the Sutcliffes to

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make payments that were equal to their full mortgage payments and were significantly higher

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than the payments required under the Trial Plan. Id. (citing FAC ¶¶ 40, 44, 58, 61-63, 80). In any
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event, Plaintiffs assert, there is no standing problem arising out of this aspect of the class

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Plaintiffs also suggest that they may not seek to certify “a class defined precisely in this
manner.” See id. at 10-11.
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definition because Plaintifs are not alleging a separate class seeking recovery for illusory loan
modifications. Id. at 13.
Plaintiffs also rejects Wells Fargo’s assertion that the Court should strike the class
definition because it includes a subclass who merely received the Trial Plan and may not have

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suffered any injury, referred to in subsection c. Id. at 14. According to Plaintiffs, when the class
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definition is read in light of Paragraph 94 of the First Amended Complaint, it is clear that “[e]very

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person in the class definition received and complied with the Trial Plan and yet did not receive a

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permanent modification from Wells.” Id.

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Finally, Plaintiffs request that the Court allow it to amend the class definition if the Court

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United States District Court
Northern District of California

finds that it is deficient. Id. at 16.
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In its reply brief, Wells Fargo contends that Plaintiffs have implicitly admitted that the

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class definition was deficient and have abandoned the subclasses referred to in subsections b and

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c of the class definition. Reply at 1. Accordingly, Wells Fargo asserts, the Court should strike

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those subclasses from the class definition in paragraph 94 of the First Amended Complaint. Id.

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Wells Fargo further asserts that the Motion was not premature because Plaintiffs’ class definition,
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as drafted in the First Amended Complaint, would have permitted “seemingly boundless

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discovery.” Id. at 2. In addition, “[w]ere it not for Plaintiffs’ clarification of the class definition

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via their Opposition to this Motion,” Wells Fargo argues, “the parties may have been subjected to

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an unnecessarily confusing discovery process – untethered to the claims pled and the actual class

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asserted.” Id. Therefore, a motion to strike was justified in order to preserve time and resources,
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Wells Fargo asserts. Id. (citing Stearns v. Select Comfort Retail Corp., 2009 WL 4723366, at *14

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(N.D. Cal. Dec. 4, 2009)). Finally, Wells Fargo continues to maintain that the class is not

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ascertainable because of the requirement in subsection a of the class definition that borrowers

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must have provided truthful information but drops its request that the Court strike this subsection
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in light of “Plaintiff’s concession that subsections (b) and (c) are not properly part of the class

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definition.” Id. Rather, Wells Fargo intends to raise this issue at the class certification stage of

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the case.

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III.

ANALYSIS

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A. Legal Standard
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Rule 23 of the Federal Rules of Civil Procedure sets forth the prerequisites for maintaining

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a class action and requires that the court must, at “[a]n early practicable time” “determine by

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order whether to certify the action as a class action.” Fed.R. Civ. P. 23(a), (b), (c). Further,
pursuant to Rule 23(d)(1)(D), the district court may issue orders in a class action that “require that

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United States District Court
Northern District of California

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the pleadings be amended to eliminate allegations about representation of absent persons and that

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the action proceed accordingly.” District courts have broad discretion to control the class

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certification process, including whether to permit discovery in connection with class certification.

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See Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 942 (9th Cir. 2009). Similarly, the

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district court has broad discretion as to when to address whether a class should be certified and the

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adequacy of a class definition. As the Ninth Circuit stated in Vinole, “[o]ur cases stand for the

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unremarkable proposition that often the pleadings alone will not resolve the question of class

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certification and that some discovery will be warranted.” Id. As a result, district courts rarely

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strike class allegations at the pleading stage. See In re Wal-Mart Stores, Inc. Wage and Hour

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Litigation,505 F.Supp.2d 609, 615 (N.D.Cal., May 29, 2007) (“while there is little authority on

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this issue within the Ninth Circuit, decisions from courts in other jurisdictions have made clear

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that dismissal of class allegations at the pleading stage should be done rarely and that the better

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course is to deny such a motion because the shape and form of a class action evolves only through

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the process of discovery”). Nonetheless, where is is apparent from the pleadings that a class

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cannot be maintained, districts courts may strike class allegations prior to discovery. See

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Hovsepian v. Apple, Inc., 2009 WL 5069144, at * 2 (N.D. Cal. Dec. 17, 2009).

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B. Whe
ether the Co
ourt Should Strike Sub
d
bsections (b) and (c) of the Class D
Definition

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While it is rarely ap
t
ppropriate to strike class allegations prior to disc
covery, Plain
ntiffs have
con
nceded that they are not seeking to certify a sepa
t
arate class se
eeking recov
very for illusory loan

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modifications. Nor do Plai
intiffs seek to certify a cl
lass of borro
owers based solely on th fact that
he

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they received, entered into and complie with a for
y
e
ed
rebearance p like the one offered to
plan

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Pla
aintiffs. Rath Plaintiff have stipu
her,
fs
ulated that cla members also must n have bee offered a
ass
s
not
en

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per
rmanent mod
dification aft complyin with the fo
ter
ng
forebearance plan. Wells Fargo, in tu
e
s
urn,

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con
ncedes that with these co
w
oncessions, th standing problems it raised in the Motion are adequately
he
e
e

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add
dressed. Bec
cause the cla definition as currentl stated in t First Am
ass
n,
ly
the
mended Comp
plaint, does

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not reflect Plain
t
ntiffs’ conce
essions but in
nstead sugge that Plai
ests
intiffs are seeking to cert a class
tify

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United States District Court
Northern District of California

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that is significa
t
antly broader the Court GRANTS th Motion as to subsectio (b) and ( of
r,
G
he
s
ons
(c)

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par
ragraph 94.

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C. Ascertainabilit of the Cla
ty
ass

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Wells Fargo has agr
F
reed to defer the questio of whethe the class is ascertainab until
r
on
er
s
ble

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clas certification. Accordi
ss
ingly, the Motion is DEN
M
NIED witho prejudice as to that qu
out
e
uestion.

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IV.
.

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CONCL
LUSION
The Mo
otion is GRA
ANTED in pa and DEN
art
NIED in part as stated ab
bove. The Co strikes
ourt

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sub
bsections (b) and (c) of Paragraph 94 of Plaintiff First Ame
P
4
fs’
ended Comp
plaint.

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Dat October 9, 2012
te:

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___
__________
___________
___
Jos
seph C. Sper
ro
Un
nited States M
Magistrate Ju
udge

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