Wilcox v. Lloyds TSB Bank, PLC et al
Filing
429
ORDER GRANTING DEFENDANT'S MOTION TO STAY PROCEEDINGS PENDING RESOLUTION OF DISPOSITIVE MOTIONS, RULE 23(F) PETITION, AND ANY RESULTING APPEAL AND VACATING TRIAL DATE re 402 - Signed by JUDGE ALAN C KAY on 3/7/2016. &qu ot;For the foregoing reasons, the Court GRANTS Lloyds' Motion to Stay, and this case is STAYED as to all matters until the Ninth Circuit rules on Lloyds' Rule 23(f) Petition. Accordingly, the Court VACATES the currently sch eduled trial date. In the event the Ninth Circuit denies the Petition, the Court will issue an order setting forth dates for the trial and final pretrial conference, and other deadlines. Should the Ninth Circuit grant the Petition, the case will b e stayed until further ruling by the Ninth Circuit regarding the merits of the composition of the class." "In light of this Order, Plaintiffs' Fourth Ex Parte Motion to Modify the Court's Rule 16 Scheduling Order before Magistrate Judge Puglisi should be stayed until the Ninth Circuit rules on Lloyds' Rule 23(f) Petition and, depending on the Ninth Circuit's ruling, this Court either sets a new trial date (and final pretrial conference date and ot her deadlines) or stays the case pending the Ninth Circuit's further consideration of the merits of Lloyds' Petition regarding the appropriate constitution of the class." re 422 , 178 Motion terminated: 402 MOTION to Stay [Lloyds TSB Bank PLC's Motion to Stay Proceedings Pending Resolution of Dispositive Motions, Rule 23(F) Petition, and Any Resulting Appeal] filed by Lloyds TSB Bank, PLC. Case stayed. (emt, )< FONT SIZE=1>CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
___________________________________
)
BRADLEY WILLCOX, FRANK DOMINICK,
)
and MICHELE SHERIE DOMINICK,
)
)
Plaintiffs,
)
)
v.
) Civ. No. 13-00508 ACK-RLP
)
LLOYDS TSB BANK, PLC and DOES
)
1-15,
)
)
Defendants.
)
___________________________________)
ORDER GRANTING DEFENDANT’S MOTION TO STAY PROCEEDINGS PENDING
RESOLUTION OF DISPOSITIVE MOTIONS, RULE 23(F) PETITION, AND ANY
RESULTING APPEAL AND VACATING TRIAL DATE
For the reasons set forth below, the Court GRANTS
Defendant Lloyds TSB Bank PLC’s Motion to Stay Proceedings
Pending Resolution of Dispositive Motions, Rule 23(f) Petition,
and Any Resulting Appeal (“Motion to Stay”).
ECF No. 402.
Further, the Court vacates the trial date.
PROCEDURAL BACKGROUND
The Court and parties are familiar with the extensive
factual and procedural history of this case, and the Court will
not repeat it here except as necessary.
On March 27, 2015, Plaintiffs filed the operative
Third Amended Complaint (“TAC”).
ECF No. 100.
The TAC names
Frank Dominick, Michele Sherie Dominick, and Bradley Willcox
(collectively, “Plaintiffs”) as class representatives and brings
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claims against Lloyds TSB Bank, PLC, now known as Lloyds Bank
PLC (“Lloyds” or “Defendant”) for Breach of Contract (Count I)
and Breach of an Implied Term Limiting Lloyds’ Discretion to
Change the Interest Rate (Count II).
Id. ¶¶ 6-8, 55-72.
Trial in this case was earlier set to commence on May
17, 2016.
ECF No. 178.
I.
Class Certification and Rule 23(f) Petition
On July 15, 2015, Plaintiffs filed a Motion for Class
Certification pursuant to Federal Rule of Civil Procedure 23.
ECF No. 156.
After briefing and oral argument from the parties,
Magistrate Judge Puglisi issued his Findings and Recommendation
to Grant in Part and Deny in Part Plaintiffs’ Motion for Class
Certification (“F&R”) on November 12, 2015.
ECF No. 317.
The
F&R recommended: (1) certifying the instant case as a class
action, (2) appointing Willcox (but not the Dominicks) as class
representative, (3) appointing Alston Hunt Floyd & Ing and
Steptoe & Johnson LLP as class counsel, (4) directing the
parties to meet and confer regarding notice to class members,
(5) denying any remaining relief requested in Plaintiffs’ class
certification motion, and (6) defining the certified class as:
All persons and entities who entered prior
to August 2009 into an IMS [International
Mortgage System] loan with Lloyds that
contained
a
Hong
Kong
choice-of-law
provision and an interest rate provision
based upon Cost of Funds and who are, or
were at any time during entering into such
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an IMS loan, residents or citizens of the
State of Hawaii, or owners of property in
Hawaii that was mortgaged to secure any such
IMS loan.
Id. at 31-32.
Lloyds filed objections to the F&R on November
25, 2015, ECF No. 332, to which Plaintiffs filed a Response on
December 9, 2015, ECF No. 335.
The parties also submitted
supplemental Reply and Sur-Reply briefs on December 17, 2015 and
December 28, 2015, respectively.
ECF Nos. 337, 340.
On January 8, 2016, the Court issued an Order Adopting
in Part, Rejecting in Part, and Modifying in Part the Findings
and Recommendations to Grant in Part and Deny in Part
Plaintiffs’ Motion for Class Certification (“Class Certification
Order”).
ECF No. 366.
For the reasons explained therein, the
Court adopted the F&R over Lloyds’ objections, except as to the
class definition, which the Court modified to include only
plaintiffs of U.S. and Canadian citizenship.
On January 22, 2016, pursuant to Federal Rule of Civil
Procedure 23(f), Lloyds filed with the Ninth Circuit a Petition
for Permission to Appeal the class certification Order (“Rule
23(f) Petition”).
ECF No. 397.
Plaintiffs filed an Opposition
to the Rule 23(f) Petition on February 1, 2016, 9th Cir., No.
16-80009 (“Pls.’ Rule 23(f) Opp.”), ECF No. 4, and an Emergency
Motion to Expedite Review of the Rule 23(f) Petition (“Emergency
Motion”) on February 18, 2016, 9th Cir., No. 16-80009, ECF No.
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7.
On February 29, 2016, Lloyds filed an Opposition to
Plaintiffs’ Emergency Motion.
9th Cir., No. 16-80009, ECF No.
8.
II.
Summary Judgment
Meanwhile, on October 16, 2015, Plaintiffs and Lloyds
filed cross-motions for summary judgment.
Lloyds moved for
summary judgment as to both of Plaintiffs’ Counts I and II.
Def. Lloyds’ Mot. for Summ. J. at 4, ECF No. 249.
See
Plaintiffs
moved for summary judgment only as to their Count I and
requested “immediate declaratory relief” as to that claim.
Pls.’ Mot. for Partial Summ. J. on Their and the Putative
Class’s Claim for Breach of Contract at 1, ECF No. 251.
On December 29, 2015, the parties filed their
Oppositions to the respective cross-motions for summary
judgment.
See Pls.’ Opp’n to Def.s’ MSJ, ECF No. 347; Def.
Lloyds’ Mem. of Law in Opp’n to Pls.’ Mot. for Partial Summ. J.,
ECF No. 348.
On January 5, 2016, each party filed a Reply in
support of its summary judgment motion.
See Reply in Supp. of
Pls.’ MSJ, ECF No. 358; Def. Lloyds’ Reply Mem. of Law in Supp.
of Lloyds’ Mot. for Summ. J., ECF No. 360.
The Court held a two-day hearing regarding the crossmotions for summary judgment on January 19-20, 2016.
On
February 11, 2016, the Court issued an Order Denying Plaintiffs’
Motion for Partial Summary Judgment on Their and the Putative
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Class’s Claim for Breach of Contract on Count I, Denying
Plaintiffs’ Request for Declaratory Relief, Granting in Part and
Denying in Part Defendant’s Motion for Summary Judgment, and Sua
Sponte Granting Partial Summary Judgment to Plaintiffs on Count
II (“Summary Judgment Order”).
III.
ECF No. 419.
Lloyds’ Motion to Stay and Plaintiffs’ Motion to
Modify the Court’s Rule 16 Scheduling Order
On February 3, 2016, Lloyds filed with this Court a
Motion to Stay.
ECF No. 402.
Magistrate Judge Puglisi
thereafter suspended the parties’ obligations to meet and confer
regarding notice to potential class members and to submit to the
Court a proposed class notice and distribution plan until the
Court issues a decision on the pending Motion to Stay.
ECF No.
405.
On February 23, 2016, Plaintiffs filed an Opposition
to Lloyds’ Motion to Stay (“Pls.’ Opp.”).
ECF No. 425.
Lloyds
filed a Reply in support of its Motion (“Def.’s Reply”) on March
1, 2016.
ECF No. 428.
Pursuant to Local Rule 7.2(e), the Court
elected to consider Lloyds’ Motion to Stay without a hearing.
ECF No. 406.
Separately, on February 16, 2016, Plaintiffs filed a
Fourth Ex Parte Motion to Modify the Court’s Rule 16 Scheduling
Order (“Pls.’ Mot.”).
ECF No. 422.
In their Motion, Plaintiffs
seek to extend the non-dispositive motions deadline until at
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least three weeks after resolution of Lloyds’ Rule 23(f)
Petition, as well as schedule a settlement conference, for which
the current Rule 16 Scheduling Order does not provide.1
Mot. at 1.
Pls.’
Plaintiffs’ Motion is set to be decided by
Magistrate Judge Puglisi.
ECF No. 424.
BRIEF SUMMARY OF FACTUAL BACKGROUND
The instant case involves the issuance by Lloyds of
certain dual currency loans (also referred to as International
Mortgage System (“IMS”) loans).
Dual currency loans are
mortgage loans with a currency switching feature that allows
borrowers to switch the currency of their loans between United
States dollars and other currencies.
See TAC ¶¶ 1-3, ECF No.
100.
Lloyds is organized under the laws of the United
Kingdom but maintains branches throughout the world, including a
1
In Lloyds’ Reply in support of its Motion to Stay, Lloyds
argues that problems will arise if Plaintiffs’ “piecemeal stay”
is granted. Def.’s Reply at 8. Plaintiffs want to file nondispositive motions up to three weeks after the Ninth Circuit
rules on Lloyds’ Rule 23(f) Petition. Pls.’ Mot. at 1.
In addition to the potential problems that could arise in
this context, the Court is also concerned with problems that
have arisen regarding the lack of discovery in this case. The
Court made a finding in its Summary Judgment Order that the LTP
charge represented an actual cost to Lloyds, but that a question
remained as to whether it was appropriate to pass that cost on
to Plaintiffs as an actual cost of funding the IMS loans.
Summary Judgment Order at 36. The Court also noted that Lloyds’
parent, LBG, the organization most knowledgeable regarding this
and other questions the Court raised, has not been joined as a
party to this lawsuit, nor has adequate discovery been obtained
from LBG regarding the composition of the LTP. Id. at 36 n.16.
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Hong Kong branch from which it issued IMS loans to Plaintiffs.
See id. ¶¶ 1-3, 9.
Lloyds is a wholly-owned subsidiary of
Lloyds Banking Group, PLC (“LBG”).
I.
Id. ¶ 9.
The “Cost of Funds” Provision in Lloyds’ IMS
Loans
The IMS loans at issue in this case were made from
approximately 2005-2009 and secured by mortgages on real
property in Hawaii and California.
Id. ¶¶ 15, 21-22, 28-30.
The loans have an interest rate that is set at 1.5% above
Lloyds’ “Cost of Funds,” with the interest rate fixed for
successive three-month periods.
Id. ¶¶ 2, 16.
The “Cost of
Funds” is defined (with immaterial differences) in the loan
documents as:
[T]he cost (calculated to include the costs
of complying with liquidity and reserve
asset
requirements)
in
respect
of
any
currency expressed as a percentage rate of
funding for maintaining the Advance or
Advances in that currency as conclusively
nominated by the Bank from time to time.
Id. ¶ 2.
Interest payments on the loans are due, and the
interest rate recalculated, at the end of each three-month
period.
Id. ¶ 16.
Plaintiffs’ claims for breach of contract
(Count I) and breach of an implied contractual term (Count II)
allege that Lloyds impermissibly included in its Cost of Funds
calculation a charge that constituted neither an actual cost to
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Lloyds in funding the loans nor a liquidity requirement.
Id. ¶¶
55-72.
II.
Allegations Regarding Lloyds’ Cost of Funds
Plaintiffs claim that, in or around 2009, Lloyds added
several new basis points to its Cost of Funds calculation in
order to reflect the imposition by its parent company, LBG, of a
“liquidity transfer pricing” (“LTP”) charge.
Id. ¶ 5.
According to Plaintiffs, the LTP charge added to the
Cost of Funds an amount “based not on the actual cost of funds
for the Loans, but for Lloyds’ parent’s significantly longerterm set of obligations.”
Id.
Plaintiffs argue that this
represented Lloyds’ attempt to pass on to borrowers “the cost of
funding Lloyds’ parent’s overhead and operations as a whole, not
just the cost of funding their own IMS Loans.”
original omitted).
Id. (emphasis in
Plaintiffs further observe that, during the
period when Lloyds was increasing its Cost of Funds, standard
interest rate indices such as the London Inter-Bank Offered Rate
(“LIBOR”) decreased.
Id.
¶ 4.
As noted above, Plaintiffs filed their operative TAC
on March 27, 2015.
They allege that Lloyds’ inclusion of the
LTP charge in its Cost of Funds constitutes a breach of the
express terms of Plaintiffs’ loan agreements and a breach of an
implied term limiting Lloyds’ discretion to change Plaintiffs’
interest rates.
See id. ¶¶ 55-72.
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STANDARD
Federal Rule of Civil Procedure 23(f) permits a party
to “appeal from an order granting or denying class-action
certification . . . if a petition for permission to appeal is
filed with the circuit clerk within 14 days after the order is
entered.”
However, a petition for permission to appeal a class
certification order “does not stay proceedings in the district
court unless the district judge or the court of appeals so
orders.”
Id.
In considering a motion to stay pursuant to Rule
23(f), a district court will apply the traditional four-prong
test laid out by the Supreme Court:
“(1) whether the stay
applicant has made a strong showing that he is likely to succeed
on the merits; (2) whether the applicant will be irreparably
injured absent a stay; (3) whether issuance of the stay will
substantially injure the other parties interested in the
proceeding; and (4) where the public interest lies.”
Hilton v.
Braunskill, 481 U.S. 770, 776 (1987); Leiva-Perez v. Holder, 640
F.3d 962, 964 (9th Cir. 2011); Gray v. Golden Gate Nat’l
Recreational Area, No. 08-CV-00722, 2011 WL 6934433, at *1 (N.D.
Cal. Dec. 29, 2011) (applying the four-prong test in the context
of a Rule 23(f) petition).
The Ninth Circuit has held that in the stay context,
like the preliminary injunction context, these factors should be
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examined on a flexible “continuum,” which is “essentially the
same as the ‘sliding scale’ approach.”
964.
Leiva-Perez, 640 F.3d at
Under this approach, “a stronger showing of one element
may offset a weaker showing of another.”
Id.
“If anything, a
flexible approach is even more appropriate in the stay context.”
Id. at 966 (emphasis in original).
“Whereas the extraordinary
remedy of injunction is the means by which a court directs the
conduct of a party . . . with the backing of its full coercive
powers, a stay operates only upon the judicial proceeding itself
. . . either by halting or postponing some portion of the
proceeding, or by temporarily divesting an order of
enforceability.”
Id. (internal quotation marks omitted).
DISCUSSION
As a preliminary matter, the Court notes that to the
extent Lloyds’ Motion to Stay relies on the resolution of
dispositive motions, that issue is now moot because the Court
issued its Summary Judgment Order on February 11, 2016.
419.
ECF No.
Thus, the Court considers Lloyds’ Motion solely with
respect to the Rule 23(f) Petition and any resulting appeal.
I.
Likelihood of Success on the Merits
The first factor the Court must consider is whether
Lloyds makes a “strong showing that [it] is likely to succeed on
the merits.”
Id.
However, Lloyds need not demonstrate that it
is “more likely than not” that it will win on the merits.
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Id.
Rather, it will be enough if Lloyds can show that it has raised
a “serious legal question” in its Rule 23(f) Petition.
967-68.
Id. at
When relying on a serious legal question to satisfy the
first prong, a movant must also show that the balance of
hardships tips sharply in its favor.
Brown v. Wal-Mart Stores,
Inc., No. 5:09-CV-03339-EJD, 2012 WL 5818300, at *2 (N.D. Cal.
Nov. 15, 2012) (citing Alliance for the Wild Rockies v.
Cottrell, 632 F.3d 1127, 1132 (9th Cir. 2011)).
Lloyds argues that its Rule 23(f) Petition raises
serious legal questions the Ninth Circuit has yet to consider,
namely, “whether superiority can be met by a proposed class
whose significant overseas connections would permit them to
relitigate in one or more foreign jurisdictions, none of which
would more likely than not apply res judicata to this Court’s
rulings.”
Motion to Stay at 12; Rule 23(f) Petition at 1.
In
its Rule 23(f) Petition, Lloyds argues that approximately two
thirds of the loans subject to the proposed class contain
“significant non-U.S. indicia.”
Rule 23(f) Petition at 5-6.
Lloyds defines these as loans that contain non-U.S. “(1)
borrower residency at the time of loan application; (2) last
reported borrower residency; (3) last reported borrower
nationality; and/or (4) subject property.”
Id. at 6.
Notably,
as required by the Class Certification Order, each of the
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borrowers in the putative class is either a U.S. or Canadian
citizen.
Class Certification Order at 38.
Lloyds maintains that the proposed class, which
contains a significant number of loans with these “non-U.S.
indicia,” reflects an increasing trend of class actions
involving members with access to foreign jurisdictions – an
issue Lloyds contends the Ninth Circuit has yet to address.
Rule 23(f) Petition at 14-16.
Lloyds cites to a string of
Second Circuit and Southern District of New York cases as
evidence of courts’ growing concern regarding the res judicata
effects of these class actions.
See, e.g., Bersch v. Drexel
Firestone, Inc., 519 F.2d 974, 997 (2d Cir. 1975); In re Vivendi
Universal, S.A., 242 F.R.D. 76, 105-06, 109 (S.D.N.Y. 2007).
Plaintiffs counter that Lloyds’ Rule 23(f) Petition
fails to present an unsettled, serious legal question, and that
“no court has rejected participation by U.S. citizens as class
members simply because they live abroad, based on the
defendant’s speculation that they may not be bound by res
judicata if they were to sue in the other country.”
23(f) Opp. at 1.
Pls.’ Rule
To underscore their point, Plaintiffs note
that none of the decisions Lloyds cites excluded U.S. citizens
from a proposed class on the basis that they lived abroad.
at 7.
Id.
Instead, Plaintiffs argue, the term “non-U.S. indicia” is
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a new, overly broad standard Lloyds’ counsel has attempted to
create.
Id. at 1, 4.
Furthermore, Plaintiffs emphasize that the Ninth
Circuit only grants Rule 23(f) Petitions in rare circumstances.
Id. at 5-6; Chamberlan v. Ford Motor Co., 402 F.3d 952, 955 (9th
Cir. 2005) (“We begin with the premise that Rule 23(f) review
should be a rare occurrence.”).
They argue that interlocutory
appeals such as this one are time-consuming and disruptive to
the case, and that “[a]ny novel theories of class action law
Lloyds wishes to pursue will not evade review in any appeal from
the final judgment, and those theories therefore cannot justify
an immediate Rule 23(f) appeal.”
Pls.’ Rule 23(f) Opp. at 1, 6.
The Court notes that much of the case law and
commentary Lloyds cites in support of its Rule 23(f) Petition
fails to support a position that goes as far as Lloyds’ “nonU.S. indicia” concept.
Instead, most of the discourse Lloyds
references seems to focus on the threat posed by foreign
citizens involved in U.S. class actions, without expressing
similar concerns regarding U.S. citizens that live abroad.
See
Rule 23(f) Petition at 14-16 (citing Bersch, 519 F.2d at 992,
997 (excluding from the class “all purchasers other than persons
who were residents or citizens of the United States,” where such
United States citizens lived both in the United States and
abroad); In re Vivendi, 242 F.R.D. at 105-06, 109 (certifying a
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class that excluded German and Austrian citizens, but that
included citizens from the United States, France, England, and
the Netherlands and provided no distinction between American
citizens resident in the United States and those living abroad);
Rhonda Wasserman, Transnational Class Actions and
Interjurisdictional Preclusion, 86 NOTRE DAME L. REV. 313, 313
(2011) (discussing the ramifications of U.S. class actions
involving “foreign citizens or . . . foreign defendants,” but
neglecting to specifically consider the consequences of class
actions comprised of American citizens living abroad) (emphasis
added)).
Nevertheless, the Court also notes that this argument
implicitly recognizes that this is a novel area of law, even if
the Ninth Circuit, should it accept the Rule 23(f) Petition,
eventually agrees with Plaintiffs that Lloyds’ position is
“extreme.”
See Pls.’ Rule 23(f) Opp. at 1.
The numerous
sources to which Lloyds cites discussing the increasing
prevalence of multinational class actions certainly reinforce
the likelihood that courts will eventually address the legal
issue Lloyds raises in its Petition.
See Rule 23(f) Petition at
14-15.
The Court therefore finds that Lloyds has raised a
serious legal question in its Rule 23(f) Petition.
The first
factor therefore weighs in favor of granting a stay.
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II.
Balance of Hardships (Including Whether Lloyds
Will Be Irreparably Injured Absent a Stay and
Whether Issuance of a Stay Will Substantially
Injure Plaintiffs)
The Court next considers whether Lloyds will be
irreparably injured absent a stay, as well as whether granting a
stay will substantially injure Plaintiffs.
Because Lloyds
relied on a “serious legal question” in satisfying the first
prong, the balance of hardships must tip strongly in favor of
Lloyds.
Brown, 2012 WL 5818300 at *2.
Lloyds contends that without a stay it will be forced
to spend a significant amount of time and resources preparing
for a trial only two and a half months out from now.
Stay at 16-17.
Motion to
Furthermore, Lloyds emphasizes that preparing
for a trial against the proposed class is an entirely different
exercise from trial preparation involving a much smaller class
or individual plaintiffs, meaning that the Ninth Circuit’s
decision on the Rule 23(f) Petition could “rearrange this case
from the ground up.”
Id. at 17.
Plaintiffs, on the other hand, argue that the claims
are the same whether the action involves individuals or a
certified class, and that Lloyds cannot credibly argue it would
prepare for trial in a materially different manner depending on
how the Ninth Circuit rules.
Pls.’ Rule 23(f) Opp. at 16.
Lloyds counters that while Plaintiffs’ burden for presenting
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proof may be the same regardless of class size, the size of the
class determines the stakes of this case for Lloyds.
Reply at 9-10.
Def.’s
Lloyds contends that class size could therefore
change everything from trial strategy to settlement
negotiations.
Id. at 10.
In the Rule 23(f) context, courts have found
irreparable injury where failure to issue a stay would result in
“substantial time and resources being spent on the litigation.”
Gray, 2011 WL 6934433 at *3; Brown, 2012 WL 5818300 at *4
(finding irreparable harm to defendant due to “potentially
substantial fees” and unnecessary discovery in the absence of a
stay).
But see Monaco v. Bear Stearns Companies, Inc., Case No.
CV 09-05438 SJO, 2012 WL 12506860, at *4 (C.D. Cal. 2012)
(“[L]itigation costs in and [of] themselves generally do not
constitute irreparable injury.”).
The Court finds persuasive Lloyds’ contention
regarding the interrelatedness of its trial preparations and the
size of the class.
Because a decision by the Ninth Circuit to
modify or decertify the putative class could require Lloyds to
overhaul its trial strategy, failure to issue a stay could
result in a significant waste of litigation costs and resources.
The Court therefore finds the potential for irreparable harm to
Lloyds weighs in favor of a stay.
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Lloyds also argues that issuance of class notice at
this juncture could irreparably harm the bank by “seriously
damaging goodwill.”
Id. at 18.
Plaintiffs counter that the
borrowers on the 121 loans subject to the proposed class have
known about the LTP increases for years, by virtue of the
changes to interest rates they were required to pay on their
loans.
See Pls.’ Br. at 14-15.
Therefore, they argue, Lloyds
will not suffer an irreparable reputational injury upon any
premature issuance of class notice.
Id.
The Court agrees with Lloyds that premature issuance
of class notice could certainly damage Lloyds’ reputation.
First, it is not clear whether each member of the putative class
is aware of the pending litigation regarding Lloyds’ IMS loan
products.
Second, even if a member is aware of the litigation,
that member’s receipt of notice that purports to involve him in
such a lawsuit increases that individual’s personal investment
in the case.
Aside from the heightened emotion and awareness of
the lawsuit that notice would bring, such notice could also
cause potential class members to hire attorneys to assist them
in making a decision whether or not to opt out of the class;
whereas the Ninth Circuit ultimately might rule they should not
be included in the class.
The Court therefore finds that the
irreparable reputational injury Lloyds could face upon premature
issuance of class notice weighs in favor of a stay.
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Next, the only harm that Plaintiffs claim is that a
stay “would create prejudice for Plaintiffs and the class as the
parties would lose at least two months of pretrial work and
trial will almost certainly be even further delayed.”
Id. at 2.
Yet in the same breath Plaintiffs contend that “[c]ontinuing
with trial preparation will not be in vain regardless of the
Circuit’s ruling on the 23(f) Petition.”
Id. at 1-2.
Thus, if
it is Plaintiffs’ contention that continuing with trial
preparation will not be in vain notwithstanding the possibility
that the Ninth Circuit may accept the appeal – an event that
could delay trial for many months – then it makes little sense
to say that a decision by this Court to briefly stay proceedings
while the Ninth Circuit considers the Rule 23(f) Petition will
cause prejudice.
In fact, should the Ninth Circuit consider the Rule
23(f) Petition on an expedited basis in light of Plaintiffs’
Emergency Motion and ultimately decline the appeal, any delay in
trial will be minimal.
If anything, a decision not to stay the
case could cause harm to Plaintiffs in the same way that it does
Lloyds, by forcing Plaintiffs to expend time and resources
preparing for an impending trial that may look vastly different
depending on the outcome of the Ninth Circuit’s Rule 23(f)
decision.
The Court therefore finds that issuance of a stay
will not substantially injure Plaintiffs.
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Third, Lloyds also argues that failure to issue a stay
could cause harm to the putative class members should the Ninth
Circuit modify or decertify the proposed class.
21.
Def.’s Br. at
Specifically, if the parties are obligated to disseminate
class notice prior to such a decision, significant confusion
could result to potential class members who would be uncertain
whether they needed to opt out of the class or whether they were
still included in the class action at all.
5818300 at *4.
Id.; Brown, 2012 WL
In fact, Plaintiffs agree that the parties
should not disseminate class notice until resolution of Lloyds’
Rule 23(f) Petition, though they do claim that the Court can
delay notice without granting a stay.
Pls.’ Opp. at 1, 15.
In light of the harm to Lloyds if a stay is not
issued, the lack of harm to Plaintiffs if it is, and the
potential harm to the putative class absent a stay, the Court
finds that the balance of hardships tips sharply in favor of
Lloyds.
See Brown, 2012 WL 5818300 at *5 (finding that the
balance of hardships tipped sharply in favor of the moving party
where there was “at least some harm” to that party, a lack of
substantial injury to the non-moving party, and potential harm
to class members).
III.
Public Interest
The Court finds that a brief stay in proceedings would
better ensure the efficient use of both judicial and party
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resources while the Ninth Circuit decides whether to accept the
serious legal question raised in the Rule 23(f) Petition.
See
Brown, 2012 WL 5818300 at *5 (stating that the public has an
interest in “the efficient use of judicial resources” and
finding a stay would “help to ensure the proper resolution of
the important issues raised in this case by preventing
potentially wasteful work on the part of the court and the
parties while the Ninth Circuit considers the serious legal
question raised”) (internal quotation marks omitted).
Thus, the
public interest weighs in favor of a stay.
Upon considering the four factors a court must analyze
when deciding whether or not to grant a stay, the Court finds
that a stay in this circumstance is appropriate.
Specifically,
Lloyds has raised a serious legal question in its Rule 23(f)
Petition to the Ninth Circuit; Lloyds is at risk of irreparable
financial and reputational injury absent a stay; issuance of a
stay will not substantially injure Plaintiffs, and in fact,
failure to issue a stay could actually be harmful to both
Plaintiffs and potential class members; and a stay will better
ensure the efficient use of judicial resources, which is in the
public interest.
CONCLUSION
For the foregoing reasons, the Court GRANTS Lloyds’
Motion to Stay, and this case is STAYED as to all matters until
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the Ninth Circuit rules on Lloyds’ Rule 23(f) Petition.
Accordingly, the Court VACATES the currently scheduled trial
date.
In the event the Ninth Circuit denies the Petition, the
Court will issue an order setting forth dates for the trial and
final pretrial conference, and other deadlines.
Should the
Ninth Circuit grant the Petition, the case will be stayed until
further ruling by the Ninth Circuit regarding the merits of the
composition of the class.
The Court notes that it appears at a minimum that the
trial date will have to be moved to May 31, 2016; although at
this point the Court does not know how long trial will take, and
that is a concern.
Further, a final pretrial conference will
need to be held at least two weeks prior to the trial date,
given the numerous motions in limine and issues regarding jury
instructions the Court anticipates.
The Court also notes that
Plaintiffs have requested an extension of the non-dispositive
motions deadline until three weeks after the Ninth Circuit rules
on the Rule 23(f) Petition, which could present further
scheduling issues.
Pls.’ Mot. at 1.
Finally, there is also the issue of class notice.
The
parties still need to agree on the type of notice, with that
determination dependent on further action by the Ninth Circuit.
Assuming the Ninth Circuit decides the Rule 23(f) Petition 21
days from the date of Plaintiffs’ Emergency Motion, it should be
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making a decision by March 10, 2016.
If the parties take two
weeks to agree on class notice and give putative class members
50 days from the date notices are mailed to opt out of the
class,2 the earliest date a pretrial conference could take place
is Monday, May 16, 2016.
All of that said, there has been no indication whether
the Ninth Circuit is considering Lloyds’ Petition as an
emergency matter pursuant to Plaintiffs’ Emergency Motion,
considering Lloyds filed an Opposition to the Motion.
It is
therefore uncertain whether the Ninth Circuit will decide the
Petition by March 10, 2016 or sometime in April.3
In light of this Order, Plaintiffs’ Fourth Ex Parte
Motion to Modify the Court’s Rule 16 Scheduling Order before
Magistrate Judge Puglisi should be stayed until the Ninth
Circuit rules on Lloyds’ Rule 23(f) Petition and, depending on
the Ninth Circuit’s ruling, this Court either sets a new trial
date (and final pretrial conference date and other deadlines) or
stays the case pending the Ninth Circuit’s further consideration
2
The Court assumes an opt-out period of 50 days because this was
the amount of time Lloyds and the named plaintiffs in Dugan gave
to prospective class members. Dugan v. Lloyds TSB Bank, Civ.
No. 3:12-cv-02549-WHA (N.D. Cal.), ECF No. 425-11.
3
The Court appreciates that these uncertainties impose
scheduling and other difficulties with parties, their
representatives, witnesses, and counsel, who are situated from
Hong Kong to London.
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of the merits of Lloyds’ Petition regarding the appropriate
constitution of the class.
IT IS SO ORDERED.
DATED:
Honolulu, Hawai’i, March 7, 2016.
________________________________
Alan C. Kay
Sr. United States District Judge
Willcox v. Lloyds TSB Bank, PLC, et al., Civ. No. 13-00508 ACK-RLP, Order
Granting Defendant’s Motion to Stay Proceedings Pending Resolution of
Dispositive Motions, Rule 23(f) Petition, and Any Resulting Appeal and
Vacating Trial Date.
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