BROWN v. WELLS FARGO BANK, N.A.

Filing 48

MEMORANDUM OPINION. Signed by Judge Barbara Jacobs Rothstein on 3/18/14. (lcbjr4)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
LATAWNYA S. BROWN,
Plaintiff,
Civil Action No. 11-cv-1156 (BJR)

v.

MEMORANDUM OPINION

WELLS FARGO BANK, N.A.,
Defendant.

GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
Plaintiff LaTawnya Brown (“Brown”) brought suit against Defendant Wells Fargo Bank,
N.A. (“Wells Fargo”), alleging that Wells Fargo’s predecessor, World Savings Bank, F.S.B.
(“World Savings”) committed common law fraud and violated the District of Columbia
Consumer Protection Procedures Act (“CPPA”). Wells Fargo moves for summary judgment on
all counts. See Dkt. #40. Upon consideration of Wells Fargo’s motion, Brown’s opposition
thereto, and the record in this case, this Court grants the motion.
I. FACTUAL BACKGROUND
In 2006, Brown sought to refinance the mortgage on a property she owns in Washington,
D.C. (“the Property”). Compl. ¶ 13, Ex. B at 1, 3. Brown contacted Landmark Funding, LLC
(“Landmark”), a mortgage broker. Pl’s. Opp’n Am. Mot. Summ. J. ¶ 3b. On November 7, 2006,
she signed a loan application to be submitted by Landmark to World Savings. Id. The application
signed by Brown stated that Brown earned $25,000 per month and that the Property was worth
$2,200,000. Id. ¶¶ 3d-g. Neither Landmark nor World Savings endeavored to verify Brown’s

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income. 1 Def’s. Am. Mot. Summ. J. at 7; Statement of Undisputed Facts (“SUF”) ¶ 37. On the
basis of this application, as well as a credit inquiry and an independent appraisal of the property
at issue, World Savings approved Brown’s application. Def’s. Am. Mot. Summ. J. at 7; SUF ¶¶
40-41. The independent appraiser, acting on World Savings’ behalf, opined in December 2006
that the Property was worth $1,100,000. Def’s. Am. Mot. Summ. J. at 7; SUF ¶ 43. World
Savings then offered Brown a $750,000 thirty-year Option Adjustable Rate Mortgage, also
known as a “Pick-a-Payment” mortgage, with a payment cap. 2 Def’s. Am. Mot. Summ. J. at Ex.
13. On January 3, 2007, Brown signed the note. Id. In March 2007, Brown received copies of her
mortgage documents. Id. at Ex. 18. Within months of signing the note, Brown’s mortgage was
experiencing significant negative amortization and she was notified that she was in default in the
loan statement dated August 2, 2007. Brown fell behind on her payments and was in and out of
default until 2010 when she ceased making payments. Id. at Ex. 4.
Pick-a-Payment mortgages issued by World Savings were the subject of a class action
lawsuit, which included 517,783 class members and resulted in a settlement. In re Wachovia
Corp. “Pick-A-Payment” Mortgage Marketing and Sales Practices Litigation, Nos. 07-4497-JF
and 09-2015-JF, 2011 WL 1877630 (N.D. Cal. May 17, 2011). Prior to the settlement, World
Savings was acquired by Wachovia Mortgage Corporation. Def’s. Am. Mot. Summ. J. at 1 n. 2.
The settlement resolved all claims regarding the origination of Pick-a-Payment loans by
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This type of loan is known as a “stated income loan,” which allows the application to be processed and the loan to
be approved without any verification of the stated income. The applicant need only attest to the veracity of the
statements. Def’s. Am. Mot. Summ. J. at 7; Statement of Undisputed Facts (“SUF”) ¶ 37.
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The Pick-a-Payment mortgage product allows consumers to select among four payment plans. Def’s. Am. Mot.
Summ. J. at Ex. 13. The first allows consumers to pay more than would be necessary to pay off the mortgage in
thirty years, thus reducing the term of the mortgage. The second requires standard payments based on the thirty-year
term. The third requires only an interest payment, which does nothing to reduce the principal. The fourth allows
consumers to pay even less than the interest due, which results in negative amortization. Id. The rate on Brown’s
mortgage was subject to adjustment based on an index, with a maximum rate established in the note. Id. The note
also contained a payment cap which limited how much Brown’s payment could increase year over year. Id. Because
of this payment cap, even the interest-only payment plan could lead to negative amortization if the payment required
to cover the interest rose above the cap.

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Wachovia, its subsidiaries, and its predecessors between August 1, 2003 and December 31,
2008. 3 In re Wachovia Corp., 2011 WL 1877630 at *3. Under the terms of a settlement in that
lawsuit, Wachovia agreed to pay consumers $50,000,000 to settle their claims. Id. at *1-2.
Brown admits she received a check from the settlement, although she never cashed it. Def’s. Am.
Mot. Summ. J. at Ex. 3. Wells Fargo acquired Wachovia Mortgage Corporation subsequent to
the settlement. Id. at 1, n. 2.
II. PROCEDURAL HISTORY
On June 22, 2011, Brown filed this action asserting three counts against Wells Fargo.
First, Brown alleged that World Savings committed common law fraud by misrepresenting the
payments she would owe, misrepresenting the likelihood of negative amortization, using
prepayment penalties to keep her in a harmful loan, and steering her into a riskier loan despite
her qualification for a safer option. Compl. ¶¶ 96-107. Second, Brown alleged that World
Savings or its agents committed common law fraud by submitting a false loan application on her
behalf which misrepresented her assets and income such that she would be approved for a loan
product for which she would not otherwise qualify. Id. ¶¶ 108-21. Third, Brown alleged that
World Savings violated several provisions of the CPPA, D.C. Code § 28-3904. Id. ¶¶ 122-28.
On June 22, 2012, this Court granted in part a motion by Wells Fargo to dismiss Brown’s
complaint for failure to state a claim upon which relief could be granted. Dkt. #16, Brown v.
Wells Fargo Bank, N.A., 869 F. Supp. 2d 51 (D.D.C. 2012). Brown’s first count was dismissed
on the grounds that District of Columbia common law was preempted by the federal Home

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Thus, Brown’s mortgage was included in the time period addressed by the settlement. Def’s. Am. Mot. Summ. J. at
Ex. 13.

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Owners’ Loan Act of 1933 (“HOLA”), 12 U.S.C. §§ 1461 et. seq. 4 Id. at 55-56. Brown’s second
count of fraud and the CPPA claims were also preempted by HOLA, except as they relate to any
alleged misrepresentation of Brown’s assets and income by World Savings. Id. at 62-64. This
Court determined that Wells Fargo was not entitled to a claim preclusion defense at that stage of
the litigation because Wells Fargo failed to demonstrate that it had made the best practicable
efforts to ensure Brown received notice of the class action settlement. Id. at 66.
Wells Fargo now moves for summary judgment on all remaining counts. See Dkt. #40.
Wells Fargo renews its contention that all of Brown’s claims are precluded by the previous class
action settlement. Wells Fargo also argues that Brown filed her suit after the statute of limitations
had expired on each of her claims. Finally, Wells Fargo claims Brown has not established
sufficient evidence by which a reasonable trier of fact could find in her favor.
III. LEGAL STANDARD
“The court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). “[A] complete failure of proof concerning an essential element of the nonmoving
party's case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S.
317, 325 (1986); see also Paige v. Drug Enforcement Admin., 665 F.3d 1355, 1358 (D.C. Cir.
2012).
IV. ANALYSIS
The Court finds that Brown’s claims are precluded by the settlement of the previous class
action. Under the doctrine of res judicata, once a claim is litigated and that litigation results in a
final decision on the merits, be it by a motion for summary judgment, by a trial, or by a
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The law in this area changed on July 21, 2010 with the enactment of the Dodd–Frank Wall Street Reform and
Consumer Protection Act ,which now establishes that federal regulation under HOLA does not occupy the field of
regulation of lending. Pub. L. No. 111-203, § 1046(a), 124 Stat. 1376, 2017 (2010) (codified at 12 U.S.C. § 1465).

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settlement between the parties resulting in a final judgment, the issue is decided permanently.
Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 77 n. 1 (1984). A class action
settlement has the same preclusive effect as a prior individual action settlement if the moving
party can show that the nonmoving party “was adequately represented by a party who actively
participated in the litigation.” Taylor v. Sturgell, 553 U.S. 880, 884 (2008).
As set forth below, to establish that a plaintiff’s claim is precluded under res judicata by a
prior class action, a defendant must show that: (1) the plaintiff was a member of the class, (2)
class members received the best notice of the proposed settlement practicable under the
circumstances, (3) the plaintiff in the instant action did not opt out, and (4) the claims resolved
by the class action included those the plaintiff seeks to assert.
1.

Brown was a Member of the In re Wachovia Corp. Class

In order to show that Brown’s claims are precluded by the In re Wachovia Corp. class
settlement, Wells Fargo must first show that Brown was a member of that class. See Cooper v.
Federal Reserve Bank of Richmond, 467 U.S. 867, 874 (1984) (citing Supreme Tribe of Ben–Hur
v. Cauble, 255 U.S. 356, (1921) (“There is of course no dispute that under elementary principles
of prior adjudication a judgment in a properly entertained class action is binding on class
members in any subsequent litigation.”). The Court is convinced that Brown was indeed a class
member. See Def’s. Am. Mot. Summ. J. at Ex. 13 (Brown’s signed mortgage note dated January
2, 2007); In re Wachovia Corp., 2011 WL 1877630 at *3 (certifying the settlement class as
including all World Savings Pick-a-Pay mortgages originated between August 1, 2003 and
December 31, 2008); Def’s. Am. Mot. Summ. J. at Ex. 21 (affidavit of In re Wachovia Corp.
settlement administrator Amy Lake attesting to Brown’s name on the list of class members).

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Because Brown was a member of the In re Wachovia Corp. class, she can be bound by the terms
of its settlement.
2.

Notice to Brown
a.

Efforts to Deliver Notice

It is incumbent upon Wells Fargo to show that it took the necessary steps to provide “the
best notice practicable under the circumstances.” Eisen v. Carlisle & Jacquelin, 417 U.S. 156,
173 (1974). A first-class mailing to all class members is sufficient. Peters v. Nat’l R.R.
Passenger Corp., 966 F.2d 1483, 1486 (D.C. Cir. 1992). Actual notice is not required. Id. “‘[I]f
the absent class members fail to opt out of the class action, [they] will be bound by the court's
action, including settlement and judgment, even though those individuals never actually received
notice.’” Pigford v. Veneman, 355 F. Supp. 2d 148, 162 (D.D.C. 2005) (alteration in original)
(quoting Reppert v. Marvin Lumber & Cedar Co., Inc., 359 F.3d 53, 56-57 (1st Cir. 2004); see
also Hallman v. Pa. Life Ins. Co., 536 F. Supp. 745, 748-49 (N.D. Ala. 1982) (rejecting actual
notice requirement and applying res judicate where defendant took steps to provide best
practicable notice). The In re Wachovia Corp. settlement included a certification by the court
that Wells Fargo had sent notices to all class members, and Brown was a member of the class at
the time. Def’s. Am. Mot. Summ. J. at Ex. 19.
This Court previously declined “to infer that because Brown is a class member and
because the Wachovia court found that class members received notice by direct mail, notice to
her was sufficient.” Brown, 869 F. Supp. 2d at 65. To buttress its earlier argument, Wells Fargo
adds that the settlement check Brown eventually received was mailed using the same mailing list
as the original notice to class members. Def’s. Rep. Supp. Am. Mot. Summ. J. at 2, n. 2; SUF ¶
66. . Wells Fargo also furnishes the affidavit of Amy Lake, the settlement administrator for the

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class action suit. Lake attested that Brown was on the list of recipients for notification of the
settlement, that the address associated with Brown matches the property at issue in this case, that
the letters were mailed out, and that the notice sent to Brown was not returned to the sender.
Def’s. Am. Mot. Summ. J. at Ex. 21. The additional information provided by Wells Fargo
convinces the Court that the best practicable efforts were used to provide notice to Brown. 5
Because a showing of actual notice is not required under Peters, 966 F.2d at 1486, and Wells
Fargo has shown that the best practicable efforts were made to give notice to Brown, the delivery
efforts were sufficient.
b.

Contents of the Notice

Brown argues that even if notice was provided, its content was insufficient to inform her
of the legal effect of the class action. Pl’s. Opp’n Am. Mot. Summ. at 31. Brown argues that the
preclusive effect of a class action settlement is limited to such claims as were clearly noted as
being included in the action within the notice sent to parties. Id. (citing Twigg v. Sears, Roebuck
& Co., 153 F.3d 1222, 1228 (11th Cir. 1998)). The plaintiff in Twigg alleged that the defendant
had billed for services never performed. 153 F.3d at 1228. The defendant argued that a prior
class action barred the plaintiff’s claim, but the court rejected the defendant’s res judicata
argument because the notice sent to class members in the prior action only mentioned billing for
improper or unnecessary repairs. Id. This case is unlike Twigg. The notice sent out in In re
Wachovia Corp. noted that the lawsuit addressed “claims that the Defendants violated various
state and federal laws in connection with the Pick-a-Payment mortgage loan product.” Def’s.

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Elsewhere in her briefing, Brown implies that she actually did receive notice of the class action. In response to
Wells Fargo’s assertion that Brown’s claim is time-barred, Brown argues that the existence of the class action
should toll the statute of limitations. Brown’s timeliness argument would make sense only if the Court assumes that
she was indeed aware of the pending class action and was waiting to see if that litigation would address her
individual claims. This implies actual notice. The Court need not decide that question here, though, as the best
practicable efforts were used.

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Rep. Supp. Am. Mot. Summ. J. at Ex. 1. The notice also directed class members to a website
where the settlement agreement in full could be found and directed class members to the section
involving release of claims. Id. The release states that class members not opting out release
claims against Wachovia “arising out of…the origination of the Settlement Class Member’s
Pick-a-Payment mortgage loan.” Def’s. Am. Mot. Summ. J. at Ex. 19, p. 31-32. The notice gave
recipients ample opportunity to review the website and find exactly what they stood to gain and
to lose by remaining in or opting out of the class settlement. Thus, the notice given to class
members was sufficient to preclude claims regarding the same issues.
3.

Brown’s Failure to Opt Out

“‘[I]f the absent class members fail to opt out of the class action, [they] will be bound by
the court's action, including settlement and judgment.’” Pigford, 355 F. Supp. 2d at 162
(alteration in original) (quoting Reppert, 359 F.3d at 56-57 (1st Cir. 2004)). It is undisputed that
Brown admitted in her deposition that she did not opt out of the settlement agreement in In re
Wachovia Corp. Def’s. Am. Mot. Summ. J. at Ex. 3. The settlement administrator verified this.
Id. at Ex. 21. Because Brown did not opt out of the settlement, she can be bound by its terms.
4.

Similarity of the Class’s Claims to Brown’s

In order to have preclusive effect, the class action must have provided a sufficient forum
to litigate the claims at issue. See Taylor, 553 U.S. at 884 (conditioning preclusive effect upon
whether the plaintiff “was adequately represented by a party who actively participated in the
[prior] litigation”).
Brown argues that the class representatives in In re Wachovia Corp. lacked standing to
bring a claim under the District of Columbia’s CPPA, and so her CPPA claim cannot be
precluded. See Pl’s. Opp’n Am. Mot. Summ. J. at 33-34. In advancing this theory, Brown

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ignores the breadth of the claims released under the settlement. Even in the absence of a named
plaintiff with a CPPA claim, a court may still approve a release that encompasses CPPA and
other state law claims. See, e.g., In re Vitamins Antitrust Litig., No. 99-197(TFH), 2000 WL
1737867, at *5 (D.D.C. March 31, 2000) (“[I]t is well-settled that ‘in order to achieve a
comprehensive settlement that would prevent relitigation of settled questions,’ in a class action, a
court may permit a broad release of claims based on overlapping factual predicates”) (quoting
City P’ship Co. v. Atl. Acquisition Ltd. P’ship, 100 F.3d 1041, 1044 (1st Cir. 1996)); Class of
Plaintiffs v. Seattle, 955 F.2d 1268, 1287 (9th Cir. 1992) (“The weight of authority holds that a
federal court may release not only those claims alleged in the complaint, but also a claim ‘based
on the identical factual predicate as that underlying the claims in the settled class action even
though the claim was not presented and might not have been presentable in the class action.’”)
(quoting TBK Partners, Ltd. v. W. Union Corp., 675 F.2d 456, 460 (2d Cir. 1982)). Indeed, to
deny a nationwide class action settlement the ability to release related state law claims, even on
behalf of those class members not residing in the states with a named plaintiff, could undermine
the efficiency of class actions. Furthermore, the laws of different states in the area of consumer
protection will always vary to some degree, but federal policy favors class actions and
settlements which resolve issues with as few separate actions as practicable.
Variations from state-to-state in the form of state law claims would always prevent a
nationwide settlement, thereby defeating the efficiencies of the class action settlement
mechanism. Such a position is plainly against the public policy favoring class action
settlements and courts frequently and routinely approve nationwide class settlements,
including consumer class actions involving state law claims.
In re Wireless Telephone Federal Cost Recovery Fees Litigation, No. MDL 1559, 4:03–MD–
015, 2004 WL 3671053, at *15 (W.D. Mo. April 20, 2004).

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In this case, the settlement agreement is dispositive. The release portion of the settlement
agreement released Wachovia from any claim arising from the origination of class members’
Pick-a-Pay mortgages in any court. Def’s Am. Mot. Summ. J. at Ex. 19 ¶ V(A). That release
includes any sort of claim that could be brought under state unfair competition and consumer
protection laws, as well as claims of fraudulent misrepresentation. Id. at ¶ 1.6. Brown’s surviving
claims all relate to misrepresentations that she alleges occurred in the origination process for her
mortgage. The surviving claims fall squarely within the confines of the claims litigated in the
class action. Brown’s claims are sufficiently congruent with those litigated, settled, and released
in the In re Wachovia Corp. class action to be precluded.
Accordingly, Wells Fargo has established all elements of res judicata and Brown’s claims
regarding the origination of her mortgage are precluded. 6 For the reasons stated herein, Wells
Fargo’s Motion for Summary Judgment is granted. 7 An order consistent with this opinion will
issue.

March 18, 2014

BARBARA J. ROTHSTEIN
UNITED STATES DISTRICT JUDGE

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Brown asserts that Wells Fargo should be judicially estopped from bringing a res judicata defense because it
allegedly failed to modify Brown’s loan as required by the settlement agreement. See Pl’s. Opp’n Am. Mot. Summ.
J. at 32-33. The In re Wachovia Corp. settlement agreement states that a class member who seeks to argue that she
or he was denied the relief granted by the settlement may bring suit in the court which oversaw that settlement.
Def’s. Am. Mot. Summ. J. at Ex. 19 ¶ XIV (“The Parties agree that the Court shall retain exclusive and continuing
jurisdiction over the Lawsuit, the Parties, Settlement Class Members, and the Settlement Administrator in order to
interpret and enforce the terms, conditions, and obligations under this Agreement.”). Brown may seek to enforce the
settlement agreement in that forum, but may not seek to avoid the binding nature of the release by alleging that
Wells Fargo has avoided its own obligations under the settlement.
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Because Wells Fargo’s motion is granted on res judicata grounds, the Court needs not address Wells Fargo’s other
arguments.

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