Banneck v. Federal National Mortgage Association
Filing
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ORDER DENYING MOTION TO CERTIFY MAY 18, 2018 ORDER FOR INTERLOCUTORY REVIEW by Judge William H. Orrick denying 76 Motion. (jmdS, COURT STAFF) (Filed on 10/29/2018)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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JAMES BANNECK,
Plaintiff,
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Case No. 17-cv-04657-WHO
v.
FEDERAL NATIONAL MORTGAGE
ASSOCIATION,
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United States District Court
Northern District of California
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ORDER DENYING MOTION TO
CERTIFY MAY 18, 2018 ORDER FOR
INTERLOCUTORY REVIEW
Defendant.
Re: Dkt. No. 76
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INTRODUCTION
Intervenor, the Federal Housing Finance Agency (“FHFA”), requests an amendment to the
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May 18, 2018 Order adding language that “the court is of the opinion that this order involves a
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controlling question of law as to which there is substantial ground for difference of opinion and
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that an immediate appeal from the order may materially advance the ultimate termination of the
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litigation.” This would certify an interlocutory review of the Order and resolve two controlling
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questions of law: (i) whether 12 U.S.C. § 4617(f) (the “Equitable Relief Bar”) prohibits injunctive
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relief against defendant Federal National Mortgage Association (“Fannie Mae”) while in an FHFA
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conservatorship; and (ii) whether 12 U.S.C. § 4617(j)(4) (the “Penalty Bar”) prohibits statutory
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damages against Fannie Mae while in an FHFA conservatorship. These are not controlling
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questions of law and an interlocutory appeal would protract this litigation. For the reasons
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discussed below, the motion to certify the May 18, 2018 Order for interlocutory review under 28
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U.S.C. § 1292(b) is DENIED.
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BACKGROUND1
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Banneck filed his consumer class action against Fannie Mae on August 12, 2017, asserting
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two California Consumer Credit Reporting Agencies Act (“CCRAA”) claims and one claim under
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the federal Fair Credit Reporting Act (“FCRA”). See Compl. (Dkt. No. 1). He alleged that Fannie
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Mae’s Desktop Underwriter (“DU”) system, used by lenders to determine loan eligibility,
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generated DU Findings Reports that inaccurately identified sales as foreclosures and prevented
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consumers from getting loan applications approved. He also claimed that Fannie Mae prohibited
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mortgage originators from giving consumers a copy of their DU Findings Reports.
After an initial motion to dismiss, Banneck amended his complaint on March 21, 2018.
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See Amended Compl. (Dkt. No. 45). Fannie Mae filed a second motion to dismiss asserting that it
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United States District Court
Northern District of California
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was not subject to the CCRAA and FCRA. According to Fannie Mae, under the Housing and
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Economic Recovery Act of 2008 (“HERA”) it could not be liable for statutory damages due to the
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Penalty Bar, or injunctive relief due to the Equitable Relief Bar. See Mot. to Dismiss Amended
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Compl. (Dkt. No. 49).
On May 18, 2018, I denied Fannie Mae’s second motion to dismiss, finding the statutory
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damages claim for alleged FCRA violations against Fannie Mae did not implicate HERA’s
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Penalty Bar. I also found HERA’s Equitable Relief Bar did not preclude Banneck from seeking
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injunctive relief under CCRAA. In response to the May 18, 2018 Order, FHFA moved to
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intervene as conservator for Fannie Mae, seeking interlocutory review of the prior Order. See
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Mot. to Intervene (Dkt. No. 61).
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DISCUSSION
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For the court to certify the two questions FHFA seeks to resolve by interlocutory review,
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there must be: (i) a controlling question of law; (ii) substantial grounds for difference of opinion;
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and (iii) a likelihood that an immediate appeal may materially advance the ultimate termination of
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the litigation. 28 U.S.C. § 1292(b). Generally, interlocutory review is applied “only in
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exceptional cases where decision of an interlocutory appeal might avoid protracted and expensive
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The facts in this case were summarized at length in the May 18, 2018 Order on Motion to
Dismiss Amended Complaint. See Order (Dkt. No. 58).
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litigation. It was not intended merely to provide review of difficult rulings in hard cases.” U.S.
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Rubber Co. v. Wright, 359 F.2d 784, 785 (9th Cir. 1966). Certification is at the discretion of the
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district court. Swint v. Chambers Cnty. Comm’n, 514 U.S. 35, 47 (1995). I find FHFA has not
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met its burden of satisfying all three requirements to justify the extraordinary remedy it seeks.
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I.
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CONTROLLING QUESTION OF LAW
The first requirement that FHFA raise a controlling question of law is satisfied if
“resolution of the issue on appeal could materially affect the outcome of the litigation.” In re
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Cement Litig., 673 F.2d 1020, 1026 (9th Cir. 1982). The challenged issues need not be
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dispositive of the entire lawsuit to be controlling. See Kuehner v. Dickinson & Co., 84 F.3d 316,
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319 (9th Cir. 1996). Even though there is no definition of a controlling question of law, examples
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United States District Court
Northern District of California
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include fundamental inquiries like “who are necessary and proper parties, whether a court to
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which a cause has been transferred has jurisdiction, or whether state or federal law should be
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applied.” Cement Litig., 673 F.2d at 1026 (citing United States v. Woodbury, 263 F.2d 784, 787
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(9th Cir. 1959)). Relevant to the issues in this case, where an outcome “would not result in the
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wrong party prevailing, but rather the calculation of any potential final judgment,” it does not rise
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to the level of a controlling question of law materially affecting the outcome of the litigation.
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Zulewski v. Hershey Co., Case No. 11-cv-05117-KAW, 2013 WL 1334159, at *1 (N.D. Cal. Mar.
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29, 2013).
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FHFA argues that its appeal would “materially affect the outcome of the litigation”
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because a reversal would require the dismissal of Banneck’s claims for statutory damages and
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injunctive relief. See Mot. at 5. Banneck responds that the claims will proceed on actual damages
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regardless of such an appeal, and that the questions for which FHFA seeks review are not
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substantially the same as exemplary controlling questions of law previously identified by the
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Ninth Circuit. See Reply at 3–4.
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Some courts have adopted the view that a question is controlling if a resolution “may
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appreciably shorten the time, effort, or expense of conducting a lawsuit,” as FHFA argues, but the
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Ninth Circuit has rejected this approach in analyzing the first requirement of a controlling question
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of law. Cement Litig., 673 F.2d at 1027 (finding that the focus on time, effort, or expense is
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“essentially reading the controlling question of law” requirement out of section 1292(b).”).
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Regardless of the result on appeal, Banneck’s claims under the CCRAA and FCRA would remain.
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Certifying an interlocutory appeal would not necessarily avoid the protracted litigation of this case
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to determine other remedies like actual damages.
Additionally, before I would even reach the question of an appropriate remedy, Banneck
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still must establish defendant’s liability. See Order at 14–15 (finding “if Fannie Mae has acted
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beyond, or contrary to, its statutorily prescribed, constitutionally permitted, powers or function[,]
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it would not be protected by HERA.” (internal quotations omitted)). FHFA is correct that an
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immediate appeal would, if successful, preclude statutory damages due to the Penalty Bar and
injunctive relief due to the Equitable Relief Bar, but “in the name of avoiding costly litigation [ ] it
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United States District Court
Northern District of California
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ignores the chance that this Court might resolve the matter at the liability phase. F.T.C. v. Swish
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Mktg., Case No. 09-cv-03814-RS, 2010 WL 1526483, at *2 (N.D. Cal. Apr. 14, 2010).
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Accordingly, FHFA has not persuasively demonstrated to me that the issues for which it seeks an
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interlocutory review are controlling questions of law.
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II.
SUBSTANTIAL GROUNDS FOR DIFFERENCE OF OPINION
A substantial ground for difference of opinion exists where “novel and difficult questions
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of first impression are presented” on which “fair-minded jurists might reach contradictory
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conclusions.” Reese v. BP Exploration (Ak.) Inc., 643 F.3d 681, 688 (9th Cir. 2001). Some
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examples of substantial ground for difference of opinion include cases in direct conflict with the
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holding in the Order sought for interlocutory review, or a split in authority on the questions posed.
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See Bennett v. SimplexGrinnell LP, No. 11-cv-01854-JST, 2014 WL 4244045, at *2 (N.D. Cal.
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Aug. 25, 2014). “A party’s strong disagreement with the Court’s ruling is not sufficient for there
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to be a substantial ground for difference.” Couch v. Telescope Inc., 611 F.3d 629, 633 (9th Cir.
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2010).
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FHFA argues there are reasonable alternatives to the questions it seeks for certification,
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because courts have not definitively ruled on these points of law. On the first question, whether
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the Equitable Relief Bar prohibits injunctive relief against Fannie Mae while in an FHFA
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conservatorship, the May 18 Order found that the Ninth Circuit’s analysis of a similar provision,
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§1821(j), did not extend a bar to injunctive relief in situations where the receiver asserts authority
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beyond what was granted to it as a receiver. See Order at 14 (citing Sharpe v. F.D.I.C., 126 F.3d
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1147, 1155 (9th Cir. 1997). By its reference to analysis of § 1821(j), the Ninth Circuit made it
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clear that the Equitable Relief Bar turned on an agency acting within, or beyond, “its statutorily
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prescribed, constitutionally permitted, powers or functions.” Sharpe, 126 F.3d at 1155; see also
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Sahni v. Am. Diversified Partners, 83 F.3d 1054, 1058 (9th Cir. 1996) (holding Section 1821(j)
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barred a request for rescission because “the FDIC was acting well within its broad statutory
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powers as receiver when it sold the HUD partnerships.”). I do agree with FHFA that there are
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grounds for difference of opinion on injunctive relief. I applied § 1821(j) by analogy to the
question of HERA’s Equitable Relief Bar due to an absence of direct authority, and there is a split
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United States District Court
Northern District of California
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in the circuits analyzing that statute.
As for the second question of law, whether the Penalty Bar prohibits statutory damages
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against Fannie Mae while in an FHFA conservatorship, there is not the same degree of uncertainty
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in the Ninth Circuit. FHFA does not provide case law demonstrating a recognized circuit split.
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The May 18 Order discussed how the Ninth Circuit’s decision in Bateman v. Am. Multi-Cinema,
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Inc., 623 F.3d 708, 718 (9th Cir. 2010), demonstrated that the provisions are not punitive and
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therefore, the Penalty Bar was inapplicable. The Order also cited several cases from other circuits
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consistent with the analysis in Bateman. See Order at 7–8. FHFA’s desire to certify the second
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question for interlocutory review is merely a disagreement with my prior ruling, not a substantial
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ground for difference of opinion.
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III.
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MATERIAL ADVANCEMENT
The final requirement that an appeal must be “likely to materially speed the termination of
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the litigation” is related to the first requirement that there be a controlling question of law.
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Ambrosio v. Cogent Commc’ns, Inc., No. 14-cv-02182-RS, 2016 WL 777775, at *3 (N.D. Cal.
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Feb. 29, 2016) (quoting Villarreal v. Caremark LLC, 85 F. Supp. 3d 1063, 1071 (D. Ariz. 2015)).
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Considering the effect of a reversal on the case, an interlocutory appeal materially advances the
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termination of the litigation where it “promises to advance the time for trial or to shorten the time
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required for trial.” Dukes v. Wal-Mart Stores, Inc., 01-cv-02252-CRB, 2012 WL 6115536, at *5
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(N.D. Cal. Dec. 10, 2012) (quoting 16 Federal Practice & Procedure § 3930 at n. 39 (2d ed.)).
FHFA contends that resolving the questions of Banneck’s entitlement to statutory damages
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and injunctive relief in its favor would advance the termination of this litigation because only
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claims of actual and compensatory damages would remain. See Mot. at 12-13. It also suggests
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that without an immediate appeal these issues would languish through summary judgment and
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class certification and evade review until a final judgment, long after substantial time and
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resources are poured into the litigation. In response, Banneck argues that regardless of the
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outcome on appeal, his claims will continue either as is or with limited remedies that will still
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need to be resolved through litigation.
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Particularly relevant to the Penalty Bar issue, “most courts have found that damages do not
United States District Court
Northern District of California
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constitute ‘material advancement.’” Zulewski, 2013 WL 1334159, at *2 (finding any reversal
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would only reduce damages but not resolve entire causes of action or the litigation of the
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substantive claim); see also Sonoda v. Amerisave Mortg. Corp., 11-cv-1803-EMC, 2011 WL
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3957436, at *3 (N.D. Cal. Sept.7, 2011) (finding unspecified damages are insufficient to create
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exceptional circumstances); Swish Mktg., 2010 WL 1526483, at *4 (finding the issue of an
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appropriate remedy is not exceptional when liability has not yet been established).
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The Ninth Circuit’s decision on the proposed interlocutory appeal would not resolve
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liability and the remaining damages issues at trial, no matter the outcome reached on the
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possibility of recovering statutory damages or injunctive relief. See Swish Mktg., 2010 WL
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1526483, at *4 (finding the issue is not exceptional when liability has not yet been established);
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see also Realtek Semiconductor Corp. v. LSI Corp., No. C-12-03451-RMW, 2013 WL 3568314, at
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*3 (N.D. Cal. July 12, 2013) (“The possibility of avoiding some liability does not comport with
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the purpose of § 1292(b) certification, which is to be used only in ‘exceptional circumstances’ not
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present here.”). An interlocutory appeal would not satisfy the “material advancement” factor.
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CONCLUSION
For the reasons stated, the motion to certify the May 18 Order for interlocutory review is
DENIED.
IT IS SO ORDERED.
Dated: October 29, 2018
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William H. Orrick
United States District Judge
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United States District Court
Northern District of California
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