Plascencia et al v. Lending 1st Mortgage et al

Filing 323

ORDER by Judge Claudia Wilken DENYING PLAINTIFFS 285 SECOND MOTION TO AMEND THE CLASS CERTIFICATION ORDER AND PLAINTIFFS 300 MOTION FOR LEAVE TO FILE AN AMENDMENT TO THE THIRD AMENDED COMPLAINT. (ndr, COURT STAFF) (Filed on 1/26/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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ARMANDO PLASCENCIA; and MELANIA
PLASCENCIA, individually and on
behalf of all others similarly
situated,
Plaintiffs,

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United States District Court
For the Northern District of California

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v.
LENDING 1ST MORTGAGE; LENDING 1ST
MORTGAGE, LLC; EMC MORTGAGE
CORPORATION; and DOES 1-10,
Defendants.

No. C 07-4485 CW
ORDER DENYING
PLAINTIFFS’ SECOND
MOTION TO AMEND
THE CLASS
CERTIFICATION
ORDER AND
PLAINTIFFS’ MOTION
FOR LEAVE TO FILE
AN AMENDMENT TO
THE THIRD AMENDED
COMPLAINT
(Docket Nos. 285
and 300)

________________________________/
Plaintiffs Armando and Melania Plascencia seek to amend the

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class definitions in the class certification order to add

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individuals who obtained loans through lenders other than Lending

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1st, which were subsequently acquired by EMC through its Early

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Purchase Program (EPP), and to add Socorro Chaidez as class

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representative for the Truth in Lending Act (TILA) claim.
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Plaintiffs also seek to amend the Third Amended Complaint (3AC) to
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add Chaidez as a named plaintiff.

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and Lending 1st Mortgage, LLC (collectively, Lending 1st) and EMC

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Mortgage Corporation oppose Plaintiffs’ motions.

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Plaintiffs’ motions under submission on the papers.

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considered the arguments presented in the parties’ filings, the

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Court DENIES Plaintiffs’ motions.

Defendants Lending 1st Mortgage

The Court took
Having

BACKGROUND

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Because the Court’s orders on EMC’s motion to dismiss (Docket

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No. 53) and Plaintiffs’ motion for class certification (Docket No.

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178) explain Plaintiffs’ allegations in sufficient detail, they

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will not be repeated here in their entirety.

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In sum, Plaintiffs brought this action on August 29, 2007,

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alleging that EMC is an entity that bundles, securitizes and sells
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mortgages.

Plaintiffs aver that they obtained an Option

United States District Court
For the Northern District of California

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Adjustable Rate Mortgage (OARM) from Lending 1st, which was

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subsequently purchased by EMC.

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violated the federal Truth-in-Lending Act (TILA) and California’s

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Unfair Competition Law (UCL) and committed common law fraud

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because Lending 1st failed to disclose clearly and conspicuously:

They allege that Defendants

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(1) the actual interest rate on Plaintiffs’ mortgage; (2) the fact
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that the initial one-percent interest rate on their loan was a
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discounted rate; and (3) the fact that negative amortization was

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certain to occur with their loan.

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On August 21, 2009, the Court granted in part Plaintiffs’

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motion for class certification.

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to prosecute Plaintiffs’ TILA claim, because their circumstances

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The Court did not certify a class

were not typical of the class, in that Plaintiffs’ claims would be

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barred by TILA’s one year statute of limitations unless they could
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be saved by equitable tolling.

The Court nevertheless addressed

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whether the TILA claim satisfied the Rule 23(b)(3) predominance

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requirement, because “counsel may move to substitute a new class
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representative whose TILA claim satisfies the typicality

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requirement.”

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Aug. 21, 2009 Order at 16.

Based on evidence that Lending 1st provided a uniform set of

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loan documents to all of its borrowers, the Court certified

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Plaintiffs’ UCL and common law fraud claims for class treatment.

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All individuals who, between August 29, 2003 and the
date that Notice is mailed to the Class, have or have
had a Monthly Option ARM loan that: (a) was originated
by LENDING 1st MORTGAGE and then sold or owned by
LENDING 1st MORTGAGE or EMC MORTGAGE CORPORATION; (b)
was secured by real property in the United States; and
(c) was originated or otherwise approved by Defendant
LENDING 1st MORTGAGE within the State of California.

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On November 16, 2010, the Court denied Plaintiffs’ first

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United States District Court
For the Northern District of California

The class is defined as follows:

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motion to amend the class certification order to add individuals

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who also obtained OARMs with similar terms from lenders other than

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Lending 1st, which were also subsequently acquired by EMC through

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its Early Purchase Program (EPP).

The Court stated that

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“Plaintiffs offer[ed] no evidence that each of the EPP lenders

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used uniform loan documents in connection with the OARMs sold to

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EMC,” that EMC “mandated uniform disclosures,” or that “all the

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EPP participants” used “the sample documents included in [EMC’s]

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Seller Guide.”

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November 16, 2010 Order, at 4-5.

The Court found,

“Without such documentary evidence, individualized inquiries into

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whether each putative class member was misled would predominate
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over common questions of fact,” and that, accordingly,
certification of an expanded class was not appropriate.

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Id. at 6.

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Plaintiffs filed the current motion to amend the class

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certification on November 9, 2011, seeking to change the

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definition for the class UCL and common law fraud claims to be as

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follows:

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United States District Court
For the Northern District of California

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All individuals who, between August 29, 2003 and the
date that Notice is mailed to the Class, have or have
had a Monthly Option ARM loan that: (i) was either
originated by LENDING 1st MORTGAGE, or was purchased by
EMC MORTGAGE CORPORATION through its Early Purchase
Program; and (ii) was secured by real property in the
state of California, or was secured by real property in
the United States but was originated or otherwise
approved by a lender located within the State of
California.
Plaintiffs also represent that they have now located a class

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member to serve as a class representative for the TILA claim,

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Socorro Chaidez, whose OARM loan was originated on November 14,

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2006, and move to amend the class certification order to add

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Chaidez as such.

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Plaintiffs propose to define the TILA class as

follows:

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All individuals in the United States who, from August
29, 2006 to the date the Court certifies the TILA Class,
have or have had a monthly option ARM loan with the
following common characteristics: (i) the loan was
originated by Lending First and/or was purchased by EMC
through its Early Purchase Program and used each of the
following form loan documents: BSR 4004 (10/6/05), BSR
1040 (10/6/05), and BSR 1041 (10/7/05); and (ii) the
loan was secured by real property in the United States.

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On December 2, 2011, after the briefing schedule had been
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enlarged pursuant to a stipulation between the parties, Defendants

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filed their oppositions to Plaintiffs’ motion to amend class

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certification order.

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Plaintiffs sought to amend the class certification order to add

Defendants argued, among other things, that

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Chaidez as a class representative, but did not seek to amend the

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complaint to add her as a named Plaintiff.

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Thereafter, on December 8, 2011, Plaintiffs filed their

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motion to amend the complaint to add Chaidez as a named Plaintiff.

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DISCUSSION

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I.

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Amendment of Class Definition for UCL and common law fraud
claims

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Plaintiffs seek to amend the class definitions for their UCL
and common law fraud claims in order to encompass additional

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United States District Court
For the Northern District of California

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borrowers whose loans originated through lenders other than

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Lending 1st.

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“An order that grants or denies class certification may be
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altered or amended before final judgment.”

Fed. R. Civ. P.

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23(c)(1)(C); see also Armstrong v. Davis, 275 F.3d 849, 872 n.28

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(9th Cir. 2001).

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certification order “in the light of subsequent developments in

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the litigation,” any amendment thereto must satisfy the

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Although a district court may revisit a class

requirements of Rule 23.

Gen. Tel. Co. of Sw. v. Falcon, 457 U.S.

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147, 160 (1982).
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EMC argues that Plaintiffs are seeking to certify a class

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that is broader than the class that it identified in the Third

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Amended Complaint (3AC) and that it is seeking relief for claims

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that were not plead, because the proposed class is not limited to

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loans that were obtained “through Defendants.”

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Nob Hill Masonic Management, 1996 U.S. Dist. LEXIS 22599, at *5

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See Berlowitz v.

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(N.D. Cal.) (Patel, J.) (refusing to consider a broader class

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definition than that which was contained in the complaint).

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Plaintiffs do not dispute that they may not expand the class

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beyond the claims that they plead in their operative complaint

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without first seeking leave to amend the complaint.

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Instead,

Plaintiffs argue that the definition in the 3AC is sufficiently

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broad to contain individuals whose OARM loans originated though
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lenders other than Lending 1st, as long as the loans were then

United States District Court
For the Northern District of California

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purchased by EMC.

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“already disposed of EMC’s argument,” because of the way the Court

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defined the currently operative classes.

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Plaintiffs further argue that the Court has

In the 3AC, Plaintiffs limit their class members to
“individuals who . . . received an Option ARM loan through

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Defendants.”

3AC ¶ 49.

In earlier briefing, Plaintiffs

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themselves asserted that the language “through Defendants” clearly
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limited the claims that they were making to Option ARM loans that

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were originated by Lending 1st and not by entities other than

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Lending 1st.

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Class Cert., Docket No. 159, at 6.

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Plaintiffs make the opposite argument and now instead assert that

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See Pls.’ Reply in Further Support of their Mot. for
In the current briefing,

this language is “sufficiently broad to include the current

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proposed class” of individuals whose Option ARM loan “was either
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originated by Lending First or was purchased by EMC.” Pls.’ Reply
to EMC’s Opp. to Pls.’ Second Mot. to Amend Class Cert. Order, 8.

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However, language throughout the 3AC demonstrates that the

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allegations made are limited to loans originating with Lending

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1st.

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Lending 1st was “engaged in the business of promoting, marketing,

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distributing and selling the Option Arm loans that are the subject

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See, e.g., 3AC ¶¶ 3, 4 (alleging that at all relevant times

of this Complaint”); 19 (“LENDING 1st sold a variety of home

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loans.

The ARM or adjustable rate mortgages are the loans that

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are the subject of this Complaint.”).

The 3AC also clearly

United States District Court
For the Northern District of California

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alleges that Defendants were directly involved with selling the

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Option ARM loans to the putative class members.

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¶¶ 19-38 (stating, for example, that “Plaintiffs, along with

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thousands of other similarly situated consumers, were sold an

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Option ARM home loan by Defendants”).

See generally 3AC

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Plaintiffs rely on the current class definition to assert
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that “the Court has already disposed of EMC’s argument that
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‘through Defendants’ somehow limits the current proposed

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definition.”

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Amend Class Cert. Order, 8.

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current class definition.

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definitions does incorporate this limitation.

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Pls.’ Reply to EMC’s Opp. to Pls.’ Second Mot. to
However, Plaintiffs misrepresent the

The actual text of the current class
For both the UCL

and common law fraud claims, the class definition encompasses only

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those individuals whose Option ARM loan “was originated by Lending
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1st Mortgage and then sold or owned by Lending 1st Mortgage or EMC

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Mortgage Corporation.”

Order Defining Class, Docket No. 191, 2.

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In their argument, Plaintiffs remove the requirement that the
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subject loan “was originated by Lending First” and just state that

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it “includes loans that were ‘sold or owned by . . . EMC . . .”

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Pls.’ Reply to EMC’s Opp. to Pls.’ Second Mot. to Amend Class

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Cert. Order, 8.

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Accordingly, the Court finds that Plaintiffs’ proposed
amendment would expand the class beyond the claims that they plead

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in their operative complaint and DENIES Plaintiffs’ motion to
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amend the class certification order to the extent Plaintiffs seek

United States District Court
For the Northern District of California

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to expand the certified classes to encompass individuals with

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loans originated by lenders other than Lending First.

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The Court notes that, if Plaintiffs were to seek leave to

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amend the complaint to encompass the expanded claims, they would

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have to overcome a number of issues, including establishing

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diligence in seeking to amend and a lack of prejudice to the
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opposing party given the advanced state of the litigation and the
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breadth of the additional claims.

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futile for multiple reasons, including Plaintiffs’ possible lack

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of standing to prosecute claims involving lenders other than

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Lending 1st unless they add additional named plaintiffs, and

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statute of limitations problems, because it is not apparent that

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Further, amendment may be

the new claims would relate back to the original date of filing or

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be saved by tolling under American Pipe & Construction Co. v.
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Utah, 414 U.S. 538 (1974).

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II.

Addition of Socorro Chaidez as Representative for TILA Class
and Certification of TILA Class
Plaintiffs move to amend the complaint to add Socorro Chaidez

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as a replacement class representative for the TILA statutory
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damages claim and to amend the class certification order to name
her as such.
Generally, Federal Rule of Civil Procedure 15(a) provides for

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liberal allowance of amendments to pleadings.

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party seeks to amend the pleadings after the deadline set by court

United States District Court
For the Northern District of California

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However, where a

order, Rule 16(b) applies.
Defendants argue that the deadline to amend the pleadings has

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already passed, because the deadline set by the scheduling order
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for such amendments was September 2, 2008.

See Docket No. 63

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(setting the deadline to add additional parties or claims).

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Plaintiffs argues that the case management order has been amended

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five times in this case.

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because none of these amendments extended the deadline to add

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This argument is unavailing, however,

additional parties or claims.

See Docket Nos. 192, 199, 201, 249,

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and 270.

To the extent that Plaintiffs appear to argue that the

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operative deadline is the deadline for dispositive motions, such a

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reading of the case management order would render meaningless the

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order’s separate deadline for adding additional parties or claims.

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See Pls.’ Reply to EMC’s Opp. to Pls.’ Mot. to File Am., 2.

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Plaintiffs also point to the language in the class

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certification order, in which the Court elected to discuss whether

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Plaintiffs’ TILA claim satisfied the Rule 23(b)(3) predominance

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requirement even though the named Plaintiffs were not typical of

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the class, because “counsel may move to substitute a new class

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representative whose TILA claim satisfies the typicality

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requirement.”

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Plaintiffs appear to argue that this was a blanket

authorization for them to make such a motion at any time, without

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seeking relief from the deadline in the case management order.
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Id.

This argument completely misconstrues the meaning of the

United States District Court
For the Northern District of California

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language, which was simply to explain why the Court chose to

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address the predominance requirement for the TILA claim.

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not supersede the case management order or grant permission to

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counsel to do so at any time without first seeking leave.

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Accordingly, because the operative deadline set by the case

It did

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management order was September 2, 2008, which has since passed,
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the Court will construe Plaintiffs’ motion to amend the complaint
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to substitute Chaidez as a motion for modification of the case

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schedule pursuant to Rule 16(b).

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Under Rule 16(b), “[a] schedule shall not be modified except

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upon a showing of good cause and by leave of the district judge.”

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Fed. R. Civ. Pro. 16(b).

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Where a schedule has been filed, the

plaintiff's ability “to amend his complaint [is] governed by Rule

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16(b), not Rule 15(a).”

Johnson v. Mammoth Recreations, Inc., 975

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F.2d 604, 608 (9th Cir. 1992).

Therefore, a party seeking to

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amend a pleading after the date specified in a scheduling order

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must first show “good cause” for the amendment under Rule 16(b),
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and second, if good cause is shown, the party must demonstrate

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that the amendment is proper under Rule 15.

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Id.

In order to determine whether good cause exists, courts

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primarily consider the diligence of the party seeking the

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modification.

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Id. at 609; see also Coleman v. Quaker Oats Co.,

232 F.3d 1271, 1294 (9th Cir. 2000).

“[N]ot only must parties

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participate from the outset in creating a workable Rule 16
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scheduling order but they must also diligently attempt to adhere

United States District Court
For the Northern District of California

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to that schedule throughout the subsequent course of the

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litigation.”

Jackson v. Laureate, Inc., 186 F.R.D. 605, 607 (E.D.

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Cal. 1999).

A party moving for an amendment to a scheduling order

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must therefore show that the scheduling order imposes deadlines

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that have become unworkable notwithstanding its diligent efforts

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to comply with the schedule, and that it was diligent in seeking
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the amendment once it became apparent that extensions were
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necessary.

Id. at 608.

Defendants argue that Plaintiffs were not diligent in seeking

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to substitute Chaidez.

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2009, when the Class Certification Order was issued, what issue

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they would need to address to add a proper class representative

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for the TILA claim.

Plaintiffs have known since August 21,

EMC attests that Plaintiffs have had a list

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containing the names of every borrower in the certified class
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since April 22, 2010, including the date on which each loan was

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originated, and thus could have located a class member without a

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time-barred TILA claim at that time.
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See

Meinertzhagen Decl. ¶¶

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2-3, Ex. A.

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date of loan origination, Plaintiffs had the documents sufficient

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to identify Chaidez as having the capacity to serve as the TILA

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representative for more than a year and a half before they

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actually sought to add her to the complaint.

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Thus, because they had a list containing her name and

Plaintiffs’ argument that they lacked copies of her loan

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documents until shortly before her deposition is unavailing,
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because the list they did have provided information sufficient to

United States District Court
For the Northern District of California

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identify her as a suitable class representative.

Further,

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Plaintiffs already knew that her loan documents were identical to

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those of the Plascencias, based on the evidence they presented in

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their class certification motion.

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that EMC did not seek absent class member discovery until August

Likewise, Plaintiffs’ argument

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2011 is also unavailing, because it was not EMC’s responsibility
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to identify and locate a TILA class representative for Plaintiffs.
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Plaintiffs do not dispute that they received this list or explain

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why they did not conduct their own investigation or use the list

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provided to locate a class member to pursue the TILA claim;

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instead, Plaintiffs state without elaboration that the purpose of

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this list was to send class notices.

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Plaintiffs primarily argue that they were diligent because

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they only learned that Chaidez was “willing to serve as a Class
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representative” in September 2011 when Defendants deposed her.

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However, as discussed above, Plaintiffs provide no explanation for

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why they failed to get in touch with her at an earlier date to
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assess her willingness to do so, rather than waiting for

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Defendants to seek out depositions of absent class members, which

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Plaintiffs then vigorously opposed.

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argue, Plaintiffs waited almost two months after Chaidez’s

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deposition to seek to amend the class definitions to include her

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Further, as both Defendants

and almost three months to seek to add her to the complaint.

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Plaintiffs provide no explanation for the delay, other than to
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United States District Court
For the Northern District of California

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characterize their actions as “expeditious.”
Accordingly, the Court finds that Plaintiffs did not act

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diligently in seeking to amend the complaint and that they have

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failed to present good cause to modify the scheduling order to

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allow them to do so.

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amend the complaint to add Socorro Chaidez as a named plaintiff.

Thus, the Court DENIES Plaintiffs’ motion to

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Because Plaintiffs do not have a named plaintiff who may serve as
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a proper class representative for the TILA statutory damages
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claim, the Court DENIES Plaintiffs’ motion to amend the class

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certification order to certify a class to prosecute the TILA claim

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and to add Chaidez as the representative for that class.

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CONCLUSION

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For the foregoing reasons, Plaintiffs’ second motion to amend

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the class certification order and Plaintiffs’ motion for leave to

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file an amendment to the third amended complaint are DENIED

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(Docket Nos. 285 and 300).

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IT IS SO ORDERED.

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Dated: 1/26/2012

CLAUDIA WILKEN
United States District Judge

United States District Court
For the Northern District of California

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