Fergerstrom v. PNC Bank, N.A. et al
ORDER (1) ADOPTING MAGISTRATE JUDGE'S FINDINGS AND RECOMMENDATION DENYING PLAINTIFF'S MOTION FOR AN ORDER OF REMAND; AND (2)ADMINISTRATIVELY CLOSINGCASE 56 . Signed by JUDGE DERRICK K. WATSON on 4/25/2014. ~ [t]he Court h ereby OVERRULES Fergerstrom's Objections and ADOPTS the Magistrate Judge's February 27, 2014 Findings and Recommendation to (1) Deny Plaintiff's Motion for an Order of Remand and (2) Grant PNCs Motion to Stay Pending Appeal of Related Cases. The case is hereby stayed and ordered administratively closed. It may be reopened by the Clerk of Court, without payment of any further filing fee, upon issuance of the Ninth Circuits mandates in the pending, related appeals or upon further order of this Court. The parties shall notify the Court within ten (10) days following the disposition of any related appeal. The administrative closing of this case is solely an administrative matter and does not impact, in any manner, any party 039;s rights or obligations, has no impact on any limitation period, and does not alter in any manner any previous rulings by the Court. (ecs, )CERTIFICATE OF SERVICEParticipants registered to receive electr onic 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 HAWAI`I
individually and on behalf of all others
PNC BANK, N.A., a national banking
association; DEREK W.C. WONG; and
DOE DEFENDANTS 1-50,
CIVIL NO. 13-00526 DKW-RLP
ORDER (1) ADOPTING
PLAINTIFF’S MOTION FOR AN
ORDER OF REMAND; AND (2)
ORDER (1) ADOPTING MAGISTRATE JUDGE’S
FINDINGS AND RECOMMENDATION DENYING
PLAINTIFF’S MOTION FOR AN ORDER OF REMAND;
AND (2) ADMINISTRATIVELY CLOSING CASE
Fergerstrom objects to a portion of the Magistrate Judge’s February 27,
2014 Findings and Recommendation (“F&R”) denying his motion to remand.
Because the Magistrate Judge correctly found that Fergerstrom’s proposed class
exceeds 100 members, and because PNC timely asserted this Court’s jurisdiction
pursuant to the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d),
the Court ADOPTS the Findings and Recommendation and overrules Fergerstrom’s
Fergerstrom filed his complaint against PNC Bank, N.A., and attorney
Derek W.C. Wong in Hawaii state court on September 9, 2013. On October 10,
2013, PNC filed its Notice of Removal, contending that this Court has diversity
jurisdiction under 28 U.S.C. § 1332. Although both Fergerstrom and Wong are
citizens of Hawai‘i, PNC alleged that Wong was fraudulently joined to this action
and his presence therefore does not defeat diversity. On November 7, 2013, PNC
filed a Supplemental Jurisdictional Statement, asserting that this Court also has
jurisdiction over this action pursuant to CAFA.
Fergerstrom alleges a putative class consisting of:
All consumers within the meaning of H.R.S. Chapter 480 who
owned real property in Hawai‘i and who were subjected to a
notice of foreclosure sale under H.R.S. § 667-5 prepared by
Defendant Derek Wong or the law firm of Routh Crabtree &
Olson by or on behalf of Defendant PNC (or NCB before its
merger with PNC) claiming for PNC or NCB the rights of a
mortgagee with a power of sale and as to whose property
Defendant PNC or NCB thereby caused the sale or transfer of the
property on or after September 9, 2009.
Complaint ¶ 12. He alleges that the number of mortgagors who fall within the class
definition is “more than 50 and less than 100.” Id. ¶ 15.
More specifically, the complaint alleges that Defendants “breached
their duties to act in good faith to sell the properties to the owners’ best advantage
and to use reasonable diligence to secure the best possible price” by adopting
foreclosure policies and practices designed to deter public participation and “chill”
bid prices at non-judicial foreclosure auctions. Id. ¶ 9. According to Fergerstrom,
Defendants created a non-judicial foreclosure system that reduced competition
between PNC and third-party bidders at auctions, allowing PNC to purchase
properties on credit bid at lower prices. Id. ¶¶ 10-11, 24, 56, 64. Fergerstrom
asserts that the sale procedures implemented by Defendants constitute unfair and
deceptive acts or practices under Hawaii Revised Statutes (“HRS”) Chapter 480.
Id. ¶¶ 38, 48-56.
Fergerstrom filed a motion to remand on November 8, 2013. Because
the Magistrate Judge concluded that the Court has CAFA jurisdiction over this
matter, the Magistrate Judge did not address PNC’s alternative fraudulent joinder
argument. The Magistrate Judge recommended that the Court deny the motion to
remand and grant PNC’s Motion to Stay Pending Appeal of Related Cases.
Fergerstrom objects to the portion of the F&R denying the motion to remand.
STANDARD OF REVIEW
When a party objects to a magistrate judge’s findings or
recommendations, the district court must review de novo those portions to which the
objections are made and “may accept, reject, or modify, in whole or in part, the
findings or recommendations made by the magistrate judge.” 28 U.S.C.
§ 636(b)(1); see also United States v. Raddatz, 447 U.S. 667, 673 (1980); United
States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (“[T]he district
judge must review the magistrate judge’s findings and recommendations de novo if
objection is made, but not otherwise.”).
Under a de novo standard, this Court reviews “the matter anew, the
same as if it had not been heard before, and as if no decision previously had been
rendered.” Freeman v. DirecTV, Inc., 457 F.3d 1001, 1004 (9th Cir. 2006); see also
United States v. Silverman, 861 F.2d 571, 576 (9th Cir. 1988). The district court
need not hold a de novo hearing. However, it is the Court’s obligation to arrive at
its own independent conclusion about those portions of the magistrate judge’s
findings or recommendation to which a party objects. United States v. Remsing,
874 F.2d 614, 616 (9th Cir. 1989).
Fergerstrom objects on the grounds that (1) the Magistrate Judge erred
in concluding that Fergerstrom’s proposed class includes more than 100 members;
(2) the assertion of CAFA jurisdiction was untimely; and (3) there was no fraudulent
joinder of Defendant Wong. As discussed herein, the Court agrees with the
Magistrate Judge that the class size satisfies CAFA’s numerosity requirement and
that CAFA jurisdiction was timely asserted. The Court need not and does not reach
Fergerstrom’s objection relating to fraudulent joinder.
Jurisdiction Pursuant to CAFA
CAFA vests federal district courts with original jurisdiction of any civil
action in which (1) the aggregate number of proposed plaintiffs is one hundred or
greater, (2) any member of the plaintiff class is a citizen of a state different from any
defendant, and (3) the amount in controversy exceeds the sum or value of $5 million,
exclusive of interest and costs. 28 U.S.C. § 1332(d); Standard Fire Ins. Co. v..
Knowles, 133 S. Ct. 1345, 1348 (2013). The second element requires only
“minimal diversity.” See Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1024 (9th
Cir. 2007); 28 U.S.C. § 1332(d)(2).
Fergerstrom does not object to the Magistrate Judge’s finding that the
minimal diversity and $5 million amount in controversy requirements have been met
here. The only issue is numerosity of the class—whether the Magistrate Judge
erred in concluding that the proposed class size exceeds 100.
The Numerosity Requirement Has Been Satisfied
Fergerstrom defines his proposed class as consumers “subjected to a
notice of foreclosure sale under H.R.S. § 667-5” on behalf of “Defendant PNC (or
NCB before its merger with PNC) claiming for PNC or NCB the rights of a
mortgagee with a power of sale and as to whose property Defendant PNC or NCB
thereby caused the sale or transfer of the property on or after September 9, 2009.”
Complaint ¶ 12. He contends that the proposed class consists of 90 members. See
Objections at 2.
In order to reach his count, however, Fergerstrom excludes the
following mortgagors from his proposed class: i) 26 mortgagors where PNC acted as
the loan servicer for a mortgagee other than itself, rather than as the mortgagee
(Sales Nos. 75-91); ii) 9 mortgagors whose mortgagee was National City Real Estate
Services, LLC (“NCRES”) (Sales Nos. 17, 70-73); and iii) 2 mortgagors in a sale
conducted by RCO Hawaii, the current incarnation of Wong’s law firm, previously
known as Routh Crabtree & Olson (Sales No. 74). The Magistrate Judge found
these exclusions to be inconsistent with Fergerstrom’s own class definition. The
Magistrate Judge further determined that when accounting for these improperly
excluded mortgagors, CAFA’s 100-person numerosity requirement was easily met.
The Court reviews each of these categories of mortgagors in turn.1
1. Sales In Which PNC Was The Loan Servicer,
Not The Mortgagee
Fergerstrom objects to the inclusion of 26 mortgagors where PNC
conducted the foreclosure sale as a loan servicer, not as the listed mortgagee (Sale
Nos. 75-91). The Notices of Sale in these instances listed the mortgagee invoking
the power of sale as “C/O” various PNC or National City entities, and listing the
mortgagee’s address as the headquarters of what is now PNC Mortgage. See PNC
Response at 23; Objections at 18-19 (listing associated entities and address).
Even if PNC acted solely as the loan servicer in these sales as
Fergerstrom alleges, the mortgagors are included in the class as defined. Under
Fergerstrom’s proposed definition, the relevant sales notices need only be prepared
on behalf of PNC or NCB “claiming for PNC or NCB the rights of a mortgagee.”
Compl. ¶ 12 (emphasis added). Here, PNC claimed the rights of the mortgagees in
There are an additional 15 mortgagors whom Fergerstrom excluded from his class definition
because they lacked standing. Although the Magistrate Judge did not examine these additional
exclusions because they were unnecessary to the CAFA numerosity count, this Court addresses the
propriety of certain of these exclusions, infra.
the notices. Fergerstrom’s definition does not limit the class to notices issued
where PNC or NCB is itself the mortgagee. Accordingly, the 26 mortgagors
associated with these sales are properly included in the proposed class. See Dkt.
No. 56 at 11-12. These 26 class members alone bring the proposed class above the
Foreclosure Sales Conducted In The Name Of NCRES
The Magistrate Judge correctly included nine mortgagors as proposed
class members whose sales were brought by PNC in the name of NCRES (Sales
Nos. 17 and 70-73). Dkt. No. 56 at 12. NCRES was a wholly-owned subsidiary of
NCB, which merged into PNC Bank, N.A. NCRES likewise is a wholly-owned
affiliate whose sole member was PNC at the time of the sales in 2010. See
Cunningham Decl. ¶ 2 and attached Exhibits. Accordingly, the NCRES
foreclosures were brought on behalf of PNC or NCB, and these nine mortgagors fall
within the proposed class definition.
Foreclosure Sale By Another RCO Hawaii Attorney
Fergerstrom objects to the inclusion of two mortgagors involved in a
foreclosure sale in which the notice was not signed by Wong (Sales No. 74).
Although the Notice of Sale was signed by a different attorney at RCO Hawaii,
LLLC, Wong was responsible for the service and posting of the Notice of Sale and
he conducted the sale. See Wong Affidavit of Sale (Dkt. No. 52-1). The
Magistrate Judge noted that Wong was an attorney for the Routh, Crabtree & Olson
law firm both when it was previously known as “Routh Crabtree Olsen, P.S.” and
the current entity “RCO Hawaii, LLLC.” The Court agrees that Sales No. 74 is
properly included within the defined class because the Notice of Sale was prepared
by RCO Hawaii, LLLC, the current iteration of the Routh Crabtree & Olson firm
that has employed Defendant Wong since at least May 2009. See Dkt. No. 56 at 13.
Accordingly, the two related mortgagors are members of the putative class. These
two, together with the nine mortgagors involved in the NCRES foreclosures (Sales
Nos. 17 and 70-73), satisfy the CAFA numerosity threshold, even if the Court were
to exclude the other groups of mortgagors urged by Fergerstrom (i.e., sales where
PNC acted as loan servicer and mortgagors in bankruptcy).
Class Members Involved in Bankruptcy Proceedings
Fergerstrom contends that 11 mortgagors should be excluded for lack
of standing because they filed for bankruptcy following the foreclosure sale, and,
accordingly, their claims are the property of the bankruptcy estates. The Magistrate
Judge did not reach this issue because he had already found the CAFA threshold was
met. Dkt. No. 56 at 14.
The Court agrees with PNC that putative class members who have
declared bankruptcy should be counted for CAFA purposes. As Fergerstrom
acknowledges, bankrupt class members’ claims can proceed with the consent of the
trustee. See Objections at 22. Here, there has been no class notice or class
certification to date. For purposes of the threshold jurisdictional
determination—rather than certification—there is no compelling reason to exclude
these mortgagors. As noted by PNC, these class members may have post-discharge
damages, which remain with the debtor, rather than the estate. That is consistent
with Fergerstrom’s allegations of continuing damages based on the deprivation of
the rental value of the property from the date the mortgagors lost possession. See
Complaint ¶ 40. Moreover, it may be possible for absent debtor class members to
reopen their bankruptcy cases to seek to be part of the class. Therefore, these 11
debtors should be counted as members of the putative class, which alone would
bring the proposed class count above the CAFA threshold.
PNC’s Timely Assertion of CAFA Jurisdiction
Fergerstrom objects to PNC’s assertion of CAFA jurisdiction after the
initial 30-day removal window. PNC filed its Notice of Removal on October 10,
2013, based on a fraudulent joinder theory. On November 7, 2013, PNC filed a
Supplemental Jurisdictional Statement asserting that this Court also has jurisdiction
over this action under CAFA. Fergerstrom argues that the Supplemental
Jurisdictional Statement is untimely under 28 U.S.C. §§ 1446(b)(1) and (b)(3). The
Magistrate Judge, relying on Roth v. CHA Hollywood Medical Center, L.P., 720
F.3d 1121 (9th Cir. 2013), and Rea v. Michaels Stores, Inc., 742 F.3d 1234 (9th Cir.
2014), found that PNC’s assertion of CAFA jurisdiction was timely because the
complaint was indeterminate as to CAFA jurisdiction, and PNC promptly asserted it
after conducting an investigation that revealed its basis. Indeed, as noted in the
F&R, Fergerstrom affirmatively alleged that the proposed class included “less than
100 persons” in an effort plainly designed to thwart CAFA jurisdiction. Complaint
The removal statutes generally require a party to remove a case within
30 days of receiving the complaint. See 28 U.S.C. § 1446, 1453(b). The statutes
provide an exception to this rule: “if the case stated by the initial pleading is not
removable, a notice of removal may be filed within 30 days after receipt by the
defendant, through service or otherwise, of a copy of an amended pleading, motion,
order or other paper from which it may first be ascertained that the case is one which
is or has become removable.” Id. § 1446(b)(3). The Ninth Circuit recently held:
in Roth v. CHA Hollywood Medical Center, L.P., that the two
30-day periods are not the exclusive periods for removal. 720
F.3d 1121, 1124-25 (9th Cir. 2013). In other words, as long as
the complaint or “an amended pleading, motion, order or other
paper” does not reveal that the case is removable, the 30-day
time period never starts to run and the defendant may remove at
Rea, 742 F.3d at 1238.
“[A] defendant does not have a duty of inquiry if the initial pleading or
other document is ‘indeterminate’ with respect to removability. Thus, even if a
defendant could have discovered grounds for removability through investigation, it
does not lose the right to remove because it did not conduct such an investigation
and then file a notice of removal within thirty days of receiving the indeterminate
document.” Roth, 720 F.3d at 1125. Here, the Court agrees that grounds for
removal could not be determined from the face of the complaint because
Fergerstrom affirmatively alleged there were “less than 100” homeowners in his
proposed class. PNC timely invoked CAFA jurisdiction upon investigating and
discovering that Fergerstrom’s allegation regarding the number of proposed class
members was incorrect. Thus, under Ninth Circuit case law, PNC may assert the
supplemental grounds for removal, even though more than thirty days had passed
since being served with the complaint.
The Magistrate Judge did not reach PNC’s alternate ground for
removal—fraudulent joinder. The Court likewise does not reach this issue.
Whether Wong was properly joined does not affect CAFA jurisdiction and therefore
need not be addressed here. See Serrano, 478 F.3d at 1024 (explaining that
“minimal diversity” suffices under CAFA).
PNC’s Motion to Stay
Fergerstrom does not object to the portion of the F&R granting PNC’s
request to stay this matter pending appeals in related cases. Accordingly, the Court
ADOPTS this portion of the F&R.
On the basis of the foregoing, and after careful de novo review and
consideration of the Findings and Recommendation and record in this matter, the
Court hereby OVERRULES Fergerstrom’s Objections and ADOPTS the Magistrate
Judge’s February 27, 2014 Findings and Recommendation to (1) Deny Plaintiff’s
Motion for an Order of Remand and (2) Grant PNC’s Motion to Stay Pending
Appeal of Related Cases.
The case is hereby stayed and ordered administratively closed. It may
be reopened by the Clerk of Court, without payment of any further filing fee, upon
issuance of the Ninth Circuit’s mandates in the pending, related appeals or upon
further order of this Court. The parties shall notify the Court within ten (10) days
following the disposition of any related appeal. The administrative closing of this
case is solely an administrative matter and does not impact, in any manner, any
party’s rights or obligations, has no impact on any limitation period, and does not
alter in any manner any previous rulings by the Court.
IT IS SO ORDERED.
DATED: HONOLULU, HAWAI‘I, April 25, 2014.
Wayne Fergerstrom v. PNC Bank et al.; CV 13-00526 DKW-RLP; ORDER (1)
ADOPTING MAGISTRATE JUDGE’S FINDINGS AND
RECOMMENDATION DENYING PLAINTIFF’S MOTION FOR AN
ORDER OF REMAND; AND (2) ADMINISTRATIVELY CLOSING CASE
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