General Retirement System of the City of Detroit v. The Wells Fargo Mortgage Backed Securities 2006-AR18 Trust et al
Filing
472
ORDER Denying Objectors' Oral Motion for Leave to Seek Discovery. Signed by Judge Lucy H. Koh on 11/14/11. (lhklc3, COURT STAFF) (Filed on 11/14/2011)
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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
United States District Court
For the Northern District of California
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In Re WELLS FARGO MORTGAGEBACKED CERTIFICATES LITIGATION
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Case No.: 09-CV-01376-LHK
ORDER DENYING OBJECTORS’
ORAL MOTION FOR LEAVE TO SEEK
DISCOVERY
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Pursuant to the Court’s July 26, 2011 Order Preliminarily Approving Settlement, Providing
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for Notice and Scheduling Hearing (“Preliminary Approval Order,” ECF No. 447), the Court held a
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fairness hearing (“Final Approval Hearing”) on October 27, 2011 on Lead Plaintiffs’ Motion for
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Final Approval of Class Action Settlement (ECF No. 451) and Motion for Attorneys’ Fees and
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Reimbursement of Litigation Expenses (ECF No. 452). The Preliminary Approval Order provided
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that any Class Member who timely served proper written objections would be given the
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opportunity to be heard at the Final Approval Hearing and to show cause why the proposed
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Settlement should or should not be approved as fair, reasonable, adequate, and in the best interests
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of the Settlement Class, or why Judgment should or should not be entered thereon. See ECF No.
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447 ¶ 13; see also Fed. R. Civ. P. 23(e)(5).
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Only two Class Members filed an objection to the Settlement. Neuberger Berman Europe,
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Ltd., as Agent for Sealink Funding, Ltd., and Bayerische Landesbank (“Objectors”) object solely
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on grounds that the Settlement’s release is vague and does not clearly disavow release of
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Case No.: 09-CV-01376-LHK
ORDER DENYING OBJECTORS’ ORAL MOTION FOR LEAVE TO SEEK DISCOVERY
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contractual representation and warranty claims allegedly held by the Offerings’ trusts—which are
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indisputably not Class Members—against various affiliates of Wells Fargo, and which are
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allegedly worth up to $1.2 billion. Objectors do not contend that these claims are unfairly released
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by the Settlement; rather, “in an abundance of caution,” they seek an order “clarifying that the
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Settlement does not intend to, and does not, compromise in any fashion the potential contractual
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representation and warranty claims belonging to the Offerings’ trusts.” ECF No. 460 at 4.
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Objectors were given the opportunity to be heard at the Final Approval Hearing.
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The Court declines to require additional “clarifying” language. Objectors have not
identified what specific representations and warranties were purportedly breached, and to the
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United States District Court
For the Northern District of California
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Court’s knowledge, no such claims have yet been asserted. In the face of nothing more than
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unidentified and purely hypothetical “potential” claims held by the Offerings’ trusts, such
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clarifying language would amount to an advisory opinion, which is generally disfavored. See, e.g.,
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Cicero v. DirecTV, Inc., 2010 WL 2991486, at *7-8 (C.D. Cal. July 27, 2010) (refusing to address
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whether particular claims fell within the release because to do so would involve “rendering an
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advisory opinion”); Larson v. Sprint Nextel Corp., 2010 WL 234934, at *15-16 (D.N.J. Jan 15,
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2010) (rejecting objection seeking to have court declare release ineffective as to certain potential
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claims, explaining that “such matters are not presently before this Court and, therefore, will not be
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addressed at this juncture”); In re AOL Time Warner ERISA Litig., 2006 WL 2789862, at *12
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(S.D.N.Y. Sep. 27, 2006) (declining to rule on whether objector’s state court claims would be
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released by the settlement because the “facts necessary for a resolution of this question are not
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before the Court”).
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Moreover, the Court finds the scope of the Settlement’s release language proper. The
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Release applies only to Class Members, which both Objectors and the Parties alike agree the Trusts
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are not, and releases only Class Members’ “Settled Claims,” which are limited to claims “that were
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asserted, could have been asserted, or that arise out of the same transactions or occurrences as the
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claims that were asserted, in the action.” See Stip. ¶ 1(ll). The Settlement’s release language is
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similar to language previously approved by the Ninth Circuit and by other courts in this District.
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See, e.g., Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1287 (9th Cir. 1992) (“The weight of
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Case No.: 09-CV-01376-LHK
ORDER DENYING OBJECTORS’ ORAL MOTION FOR LEAVE TO SEEK DISCOVERY
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authority holds that a federal court may release not only those claims alleged in the complaint, but
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also a claim based on the identical factual predicate as that underlying the claims in the settled
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class action even though the claim was not presented and might not have been presentable in the
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class action.” (internal quotation marks omitted)); In re Connetics Corp. Sec. Litig., Case No. 07-
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02940-SI (N.D. Cal.) (Final Judgment and Order of Dismissal with Prejudice dated Oct. 9, 2009),
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ECF No. 199 (approving similar release language, see ECF No. 190-2); In re Maxim Integrated
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Prods., Inc. Sec. Litig., Case No. C-08-00832-JW (N.D. Cal.) (Final Judgment and Order of
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Dismissal with Prejudice dated Sep. 29, 2010), ECF No. 294 (same, see ECF No. 271). The Court
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therefore does not find Objectors’ objection to be a proper basis for withholding final approval of
United States District Court
For the Northern District of California
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the Settlement.
Objectors were given the opportunity to be heard at the Final Approval Hearing, and at the
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end of the hearing, orally moved for leave to seek discovery from the parties relating to the content
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of their settlement negotiations for the purpose of proving that the alleged contractual
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representation and warranty claims belonging to the Offerings’ trusts were not contemplated as part
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of this suit or its settlement.
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At the outset, the Court notes that Objectors waived their discovery request by failing to
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raise it at the time they filed their objection. However, even if Objectors had timely filed their
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request, the Court does not find that they are entitled to the discovery they seek. “Class members
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who object to a class action settlement do not have an absolute right to discovery.” Jaffe v.
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Morgan Stanley & Co., 2008 WL 346417 at *2 (N.D. Cal. Feb. 7, 2008) (Henderson, J.); accord
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Wixon v. Wyndham Resort Dev. Corp., 2011 WL 3443650 at *2 (N.D. Cal. Aug. 8, 2011) (White,
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J.); Hemphill v. San Diego Ass’n of Realtors, Inc., 225 F.R.D. 616, 619 (S.D. Cal. 2004). “While
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objectors are entitled to meaningful participation in the settlement proceedings, and leave to be
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heard, they are not automatically entitled to discovery,” particularly not when discovery would
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unduly burden the parties or cause unnecessary delay. Jaffe, 2008 WL 346417 at *2. In
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determining whether to grant an objector’s request for discovery, courts generally consider three
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factors: (1) the nature and amount of previous discovery; (2) whether there is a reasonable basis for
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Case No.: 09-CV-01376-LHK
ORDER DENYING OBJECTORS’ ORAL MOTION FOR LEAVE TO SEEK DISCOVERY
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the discovery requests; and (3) the number and interests of objectors. See Wixon, 2011 WL
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3443650 at *2 (citing Hemphill, 225 F.R.D. at 620 (internal citations omitted)).
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Here, all three factors weigh against granting Objectors leave to seek discovery. First, the
parties engaged in extensive discovery in an adversarial setting before reaching the proposed
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Settlement. Second, Objectors fail to identify a reasonable basis for requiring the parties to
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disclose the highly sensitive contents of their settlement negotiations. “Settlement negotiations
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involve sensitive matters,” and therefore “discovery of settlement negotiations is proper only where
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the party seeking it lays a foundation by adducing from other sources evidence indicating that the
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settlement may be collusive.” Lobatz v. U.S. W. Cellular of Cal., Inc., 222 F.3d 1142, 1148 (9th
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United States District Court
For the Northern District of California
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Cir. 2000) (internal quotation marks, citations, and alterations omitted); see also Hemphill, 225
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F.R.D. at 620 (“[D]iscovery of evidence pertaining to settlement negotiations is appropriate only in
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rare circumstances.”). This Settlement was the product of a hard-fought case litigated for over two
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years. Objectors have made no allegation of suspected collusion between the parties. Finally, only
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two Class Members of the more than 7,000 that received Court-approved notices filed an objection,
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and their objection asserts not their own interests as Class Members, but rather the interests of the
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Offerings’ trusts, which, as previously discussed, both Objectors and the Parties agree are not
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members of the Settlement Class.
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The Court finds that Objectors have had a meaningful opportunity to be heard, the Court
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has sufficient facts before it to evaluate the Settlement, and discovery would unduly burden the
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parties and cause unnecessary delay. Accordingly, Objectors’ requests for clarifying language in
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the Settlement release terms and for leave to seek discovery regarding the Parties’ settlement
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negotiations are DENIED.
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IT IS SO ORDERED.
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Dated: November 14, 2011
_________________________________
LUCY H. KOH
United States District Judge
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Case No.: 09-CV-01376-LHK
ORDER DENYING OBJECTORS’ ORAL MOTION FOR LEAVE TO SEEK DISCOVERY
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