Toland v. Nationstar Mortgage LLC et al

Filing 37

ORDER re 12 Motion to Remand. Further Case Management Conference set for 10/18/2018 10:00 AM in San Francisco, Courtroom 11, 19th Floor. Case Management Statement due by 10/11/2018. Signed by Judge James Donato on 7/13/2018. (jdlc3S, COURT STAFF) (Filed on 7/13/2018)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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TAQUELIA WASHINGTON TOLAND, et
al.,

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United States District Court
Northern District of California

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Plaintiffs,

Case No. 3:17-cv-02575-JD
ORDER RE REMAND

v.

Re: Dkt. No. 12

NATIONSTAR MORTGAGE LLC, et al.,
Defendants.

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Plaintiffs filed this putative class action in California state court alleging that defendants’

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debt collection and debt reporting practices violate California law. Defendants removed to federal

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court under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(2). See Dkt. No. 1.

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Plaintiffs challenge removal on the ground that defendants cannot establish the $5,000,000

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minimum amount in controversy that CAFA requires. Dkt. No. 12. After oral argument, the

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parties submitted supplemental briefs and declarations on the amount in controversy. Dkt. Nos.

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35, 36. Defendants have shown by a preponderance of the evidence that the lawsuit places at least

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$5,000,000 in controversy. The motion to remand is denied.

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LEGAL STANDARD

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“When, as here, a defendant’s assertion of the amount in controversy is challenged, both

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sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-

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in-controversy requirement has been satisfied.” LaCross v. Knight Transportation Inc., 775 F.3d

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1200, 1202 (9th Cir. 2015) (quoting Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547,

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554 (2014)) (internal quotation marks and ellipses omitted). Defendants bear the burden of proof

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and must “persuade the court that the estimate of damages in controversy is a reasonable one.”

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Ibarra v. Manheim Investments, Inc., 775 F.3d 1193, 1197 (9th Cir. 2015). “[W]hen the defendant

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relies on a chain of reasoning that includes assumptions to satisfy its burden of proof, the chain of

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reasoning and its underlying assumptions must be reasonable ones.” LaCross, 775 F.3d at 1202

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(citing Ibarra, 775 F.3d at 1199). See generally Chin v. Cole Haan, LLC, No. 16-CV-02154-JD,

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2016 WL 7211841, at *1 (N.D. Cal. Dec. 13, 2016).

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DISCUSSION
As alleged in the complaint, plaintiffs purchased and moved into a condo in Hayward,

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California in 2006. They took out a purchase-money first mortgage and a purchase-money second

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mortgage. Plaintiffs defaulted on the first mortgage and in 2012, the condo was sold in a non-

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judicial foreclosure that left an unsatisfied balance on the second mortgage. Plaintiffs say they are
not personally liable under California law for the deficiency on the second mortgage, but that

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United States District Court
Northern District of California

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defendants Nationstar Mortgage LLC and Veripro Solutions Inc. still sent them letters stating that

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they had balances due and encouraging them to “Pay the reduced payoff amount listed above to

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settle this debt in full.” See, e.g., Dkt. No. 1 at 23, 36. Defendants also reported plaintiffs’ second

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mortgages to credit agencies as delinquent.

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Plaintiffs allege that these debt collection letters and credit reporting practices are negligent

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and willful violations of the Rosenthal Fair Debt Collection Practices Act, the Consumer Credit

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Reporting Agencies Act (“CCRAA”), and the Unfair Competition Law. They seek to sue on

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behalf of all persons who “obtained a second mortgage, or home equity line of credit, secured by a

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deed of trust on property located in California . . . and, after a foreclosure or short sale of the

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dwelling, any of the defendants (1) sent the person a letter in the form of Exhibits ‘A’ and/or ‘C’

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within the period beginning four years preceding the filing of this action and continuing until the

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date of Judgment; and/or (2) reported such person’s second mortgage loan or home equity line of

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credit to one or more of the credit reporting agencies.” Id. at 20.

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Plaintiffs seek, among other relief, punitive damages under the CCRAA. Id. at 29. That

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statute provides for up to $5,000 in punitive damages for willful violations and allows plaintiffs to

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sue up to “seven years from the earliest date on which liability could have arisen.” Cal. Civ. Code

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§§ 1785.31(2)(B), 1785.33. The parties do not dispute that as alleged on the face of the complaint,

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each member of the proposed class would be eligible to seek $5,000 in punitive damages.
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Consequently, the Court has jurisdiction under CAFA if the putative class has at least 1,000

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members.
Defendants’ supplemental brief and declaration establish that there are likely at least 1,000

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members in the putative class. The complaint was filed March 2017, and the proposed class

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period begins in March 2013. As of July 2017, Nationstar identified 6,882 loans that it services

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with junior mortgages or home equity lines of credit secured by real property in California that

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were “charged off” after March 2013. Dkt. No. 18-1 at 2. Nationstar’s general practice is to

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charge off junior liens if the proceeds of a trustee’s sale on a senior lien are not sufficient to satisfy

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the junior lien. Dkt. No. 18-2 at 2-3. Charged-off balances are reported to credit reporting
agencies the following month. Dkt. No. 18-3 at 2. Because Nationstar cannot identify potential

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United States District Court
Northern District of California

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class members without manually reviewing its files, it surveyed the 6,882 loans to estimate what

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proportion of those loans were purchase-money loans charged off as a result of foreclosure on a

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senior lien. 1 Nationstar selected 105 files at random after excluding a subset of loans charged off

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before Nationstar acquired those servicing rights, since it was less likely that Nationstar had all the

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necessary records related to those loans. Dkt. No. 35-1 at 3. For 52 loan files, Nationstar was

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unable to determine the purpose of the loan at all. For the remaining 53 loan files, Nationstar

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found that 10 were purchase-money loans charged off as a result of a foreclosure on a senior lien.

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Id. Extrapolating to the 6,882 loans as a whole, Nationstar estimates that there are around 1,300

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putative class members.

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Plaintiffs object that because Nationstar excluded files for which it did not have complete

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records, Nationstar cannot extrapolate from the sample of 53 to the pool of 6,882 total loans. See

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Dkt. No. 36 at 3. Contrary to what plaintiffs’ briefing appears to suggest, Nationstar is not

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required to prove the amount in controversy within a 99 percent confidence interval. Nationstar is

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subject to a preponderance of the evidence standard, and it may rely on reasonable assumptions

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and inferences to show the amount in controversy. Here, plaintiffs argue that Nationstar’s

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The declaration from the Nationstar employee who ran the query actually states that he identified
6,882 such loans, but a later declaration refers to 6,822 loans. See Dkt. No. 35-1 at 3. Regardless
of whether there were 6,882 loans or 6,822 loans, Nationstar has established that there are likely at
least 1,000 members in the putative class.
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sampling method is subject to “frame bias” and “statistical uncertainty” but have not identified any

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reason to believe that class members are over-represented in the sample of 53 loans that Nationstar

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examined. Consequently, the Court finds that Nationstar has satisfied its burden of proof and

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shown that at least $5,000,000 is in controversy.
CONCLUSION

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The motion to remand is denied. The stay is lifted. The Court sets a case management

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conference for October 18, 2018. A joint case management statement is due by October 11,

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2018.

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IT IS SO ORDERED.
Dated: July 13, 2018

United States District Court
Northern District of California

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JAMES DONATO
United States District Judge

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