Hallie v. Wells Fargo Bank NA et al
Filing
99
OPINION AND ORDER GRANTING 94 Second MOTION to Dismiss. Court DIRECTS the Clerk to ENTER JUDGMENT in favor of Defendants Wells Fargo Bank, N.A., Wells Fargo Insurance, Inc. and American Security Insurance Company, and against Plaintiff Judith Hallie. Case is TERMINATED and all further settings in this action are hereby VACATED. Signed by Chief Judge Philip P Simon on 4/27/15. cc: Hallie, pro se (mc)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
JUDITH HALLIE, individually
and on behalf of a class,
Plaintiff,
)
)
)
)
v.
)
)
WELLS FARGO BANK, N.A.,
)
WELLS FARGO INSURANCE, INC.,
)
AMERICAN SECURITY INSURANCE )
COMPANY, AND ASSURANT, INC., )
Defendants.
)
2:12-cv-00235-PPS-APR
OPINION AND ORDER
Judith Hallie brings this action against Defendants American Security Insurance
Company (“ASIC”), Wells Fargo Bank, and Wells Fargo Insurance over forced-placed
insurance Wells Fargo put on Hallie’s home when she didn’t have insurance coverage
as required by her mortgage agreement. The defendants moved to dismiss the case
initially for failure to state a claim. Those motions were never decided because the case
was stayed pending the decision of a similar case before the Seventh Circuit. Then,
settlement discussions heated up in a class action in Florida that included Hallie’s
claims, and this led to further delay. Now the defendants’ new Motion to Dismiss is
pending. Because Hallie failed to properly opt out of the Florida class settlement, her
case has been settled, and she cannot continue to pursue settled claims in this Court. So
as explained in this Order, judgment will be granted in favor of the defendants.
BACKGROUND
This case was stayed in February 2014 pending the outcome of settlement
proceedings in a related case that the parties informed the Court might apply to this
case as well. (Docket Entry 78.) In October 2014 the defendants notified the Court of the
approval of the class action settlement in Fladell v. Wells Fargo Bank, N.A., No. 13-cv60721-FAM (S.D. Fla.). (DE 80.) The defendants’ notification stated that the Fladell
settlement encompasses Hallie’s claims, so I ordered Hallie to file relevant dismissal
papers based on the settlement. (DE 81.) In December Hallie, through her counsel, filed
a status report disputing the defendants’ characterization of the Florida settlement –
Hallie said she had filed a timely request for exclusion from the settlement in August
2014, so her claims weren’t released. (DE 84.) The defendants responded that Hallie
failed to properly opt out of the Florida settlement because she hadn’t personally signed
her request for exclusion, and instead her counsel had sent the letter on her behalf. (DE
85.) Thus, by failing to properly opt out, she was bound by the settlement of the Florida
case. Hallie’s adherence to this technical requirement has now become the fulcrum of
this case. Hallie has not responded to the defendants’ argument that her opt-out was
improper.
Because the outcome of Hallie’s own case hinges on the doings in the Fladell
case, I need to step back and talk about the time line in that case in order to put the
current dispute into some context. The Fladell class settlement was preliminarily
approved on March 17, 2014, and with that approval came the class notice and the
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scheduling of deadlines for opting out and the final approval hearing. (DE 95 at 3, DE
95-1.1) A class member could opt out of the class and settlement by sending a written
request for exclusion to the settlement administrator postmarked 30 days or more
before the final approval hearing which was scheduled for September 18, 2014. The optout notice had to meet certain requirements that the court set out:
To be valid, the Request for Exclusion must: (a) identify the
case name and number; (b) identify the name and address of
the Settlement Class Member; (c) be personally signed by
the Settlement Class Member requesting exclusion; and (d)
contain a statement that indicates a desire to be excluded
from the Settlement Class in the Fladell Litigation, such as “I
hereby request that I be excluded from the proposed
Settlement Class in the Fladell Class Action.” Mass or class
opt outs shall not be allowed.
(DE 95 at 3; DE 95-1 at 7-8 (¶ 11) (emphasis added).) This means Hallie had five months
to sign and send a very simple opt-out notice. Yet her lawyer sent a request for
exclusion from the settlement class on Hallie’s behalf on August 18, 2014. The lawyer
signed it; Hallie did not. (DE 84-1 at 2.) The court’s instructions could not have been
much clearer in their requirement that Hallie sign the opt-out herself – that’s what
“personally” means. See “Personally,” Merriam-Webster Dictionary,
http://www.merriam-webster.com/dictionary/personally (last visited Apr. 27, 2015)
(“used to say that something was done or will be done by a particular person and not
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I can and do take judicial notice of filings in the Fladell case. See, e.g., Bond v.
Jpmorgan Chase Bank, N.A., 526 Fed. Appx. 698, 699 (7th Cir. 2013) (citing Keller v. United
States, 657 F.3d 675, 679 n.2 (7th Cir. 2011); Opoka v. I.N.S., 94 F.3d 392, 394 (7th Cir.
1996)).
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by someone else ”). The requirement was not opaque or hidden, nor was quick
turnaround expected. Nonetheless, Hallie’s lawyer sent in the facially defective request
for Hallie’s exclusion from the class settlement.
There’s more: shortly after the parties filed the status report and response
regarding Hallie’s opt-out, Hallie’s counsel moved to withdraw from representing her
in this case. (DE 86.) Counsel reported being unable to contact Hallie. Magistrate Judge
Rodovich granted that motion. (DE 87.) Then, several days later, Hallie moved to
prohibit withdrawal. (DE 88.) Hallie explained that she had maintained lines of
communication, but had been on vacation, that her counsel had called the wrong phone
number in the past, and that the case was too far along for Hallie to find a new lawyer.
Hallie claimed that counsel was negotiating a mortgage modification for her. Hallie’s
counsel filed a response disputing Hallie’s characterizations (DE 90): counsel said Hallie
had not been in constant communication, counsel had never used an incorrect phone
number, and counsel had informed Hallie that they were not negotiating and would not
attempt to negotiate a loan modification, as well as the fact that counsel did not
represent Hallie in the foreclosure. Judge Rodovich held a hearing in January 2015
where he denied Hallie’s motion seeking to keep her counsel, and set deadlines for the
current dispositive motion. (DE 91.) At that hearing Hallie stated that she had opted
out, and Judge Rodovich confirmed that she understood she needed to present any
argument on that basis to me. Hallie said she understood. (Recording of hearing
referenced in DE 91.)
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Wells Fargo filed its motion to dismiss (DE 94), which ASIC joined. (DE 96.)
Hallie, representing herself when the motion to dismiss was filed, never responded, and
has not filed anything at all since the defendants moved to dismiss.
ANALYSIS
First I must address a matter of form. The present motion is styled a motion to
dismiss under Federal Rule of Civil Procedure 41(b), or alternatively under Rule
12(b)(6). Rule 41(b) allows involuntary dismissal upon a defendant’s motion due to the
plaintiff’s failure to prosecute or to comply with the rules or a court order. The
defendants don’t explain how Rule 41(b) is applicable. The defendants’ alternative
theory is that Hallie fails to state a claim, so the case should be dismissed under rule
12(b)(6). But that’s not quite right, either. The legal doctrine underlying the defendants’
argument for dismissal is res judicata:
Where a final judgment has been rendered on the merits of a
claim, res judicata protects the finality of that judgment and
prevents parties from undermining it by attempting to
relitigate the claim. Res judicata promotes predictability in
the judicial process, preserves the limited resources of the
judiciary, and protects litigants from the expense and
disruption of being haled into court repeatedly. In federal
court res judicata has three elements: (1) an identity of
parties; (2) a final judgment on the merits; and (3) an identity
of the cause of action (as determined by comparing the suits’
operative facts). Where it applies, res judicata prevents the
relitigation of claims already litigated as well as those that
could have been litigated but were not.
Palka v. City of Chicago, 662 F.3d 428, 437 (7th Cir. 2011) (citations omitted). “Since res
judicata is an affirmative defense, the defendant should raise it and then move for
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judgment on the pleadings under Rule 12(c).” Carr v. Tillery, 591 F.3d 909, 913 (7th Cir.
2010) (citations omitted). Still, the Seventh Circuit has affirmed district court decisions
dismissing cases based on res judicata even when the trial court mistakenly referred to
the decision as coming under Rule 12(b)(6), see id., so the defendants’ nomenclature is of
no consequence here.
Rule 12(c) is also the proper vehicle for dismissal here if we look at the Fladell
settlement as a release of Hallie’s claims. The Fladell settlement effects a release of
Hallie’s claims in this case. “A release is an affirmative defense under Fed. R. Civ. P.
8(c)(1). Dismissing a case on the basis of an affirmative defense is properly done under
Rule 12(c), not Rule 12(b)(6).” Yassan v. J. P. Morgan Chase & Co., 708 F.3d 963, 975-76
(7th Cir. 2013) (citing Brownmark Films, LLC v. Comedy Partners, 682 F.3d 687, 690 n.1
“(reminding that even ‘though district courts have granted Rule 12(b)(6) motions on the
basis of affirmative defenses and this court has affirmed those dismissals, we have
repeatedly cautioned that the proper heading for such motions is Rule 12(c), since an
affirmative defense is external to the complaint’)”). The upshot is that I will construe the
defendants’ motion as one arising under Rule 12(c).
Here’s the big picture: the Fladell class settlement applied to all class members
who did not opt out of the settlement. Ms. Hallie was a class member in the Fladell
litigation. The class members who did not opt out got relief pursuant to settlement, and
cannot pursue the claims covered under the settlement any further. See, e.g., Mars Steel
Corp. v. Continental Ill. Nat’l Bank & Trust Co., 834 F.2d 677, 680 (7th Cir. 1987) (the court
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approved the class settlement, “thus extinguishing by operation of res judicata the
claims of all class members who had not opted out”). There has never been any dispute
about whether Hallie’s claims in this case sit under the Fladell umbrella, and Hallie’s
attorney did not object to a stay during settlement proceedings in Fladell. (DE 77.) The
only question is whether Hallie opted out such that she may continue to pursue her case
in this Court, or whether her claims were resolved in the Fladell settlement, effectively
extinguishing her case here.
The requirement that a class member must personally sign her opt-out is
admittedly technical. But it is enforceable here. It was a clear requirement, and
plaintiff’s counsel had five months to meet it, yet didn’t get around to jotting an eightline note opting out and mailing it until the day before the deadline. Any deadlinebased reason for Hallie not signing herself is a problem of her or her counsel’s own
making. The personal signature requirement also seems to be a standard requirement in
class actions, and it’s not onerous. See, e.g., De Leon v. Bank of Am., N.A., No.
6:09-cv-1251-Orl-28KRS, 2014 U.S. Dist. LEXIS 74056, at *18 (M.D. Fla. May 29, 2014)
(“The Request for Exclusion must be personally signed by the Settlement Class
Member.”); In re Ferrero Litig., No. 11-CV-00205-H (CAB), 2012 U.S. Dist. LEXIS 15174, at
*13 (S.D. Cal. Jan. 23, 2012) (“The Request for Exclusion must be personally signed by
the Class Member.”); Montgomery v. Beneficial Consumer Disc. Co., No. 04-CV-2114, 2005
U.S. Dist. LEXIS 3249, at *5-6 (E.D. Pa. Mar. 2, 2005) (same; discussing In re Household
Lending Litig., Civ. A. No. 02-1240 CW (N.D. Cal. Apr. 30, 2004)).
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The purpose of requiring the class member to actually sign the opt out – as
opposed to allowing a lawyer to sign it for her – is to give assurance to the defendants
that the class member does not wish to be bound by the settlement. The requirement of
a personally signed, individual opt-out notice is rational given the court’s interest in
avoiding mass or large sub-class opt outs. The section of the preliminary class
settlement approval in Fladell ends with this sentence: “Mass or class opt outs shall not
be allowed.” Class actions and class settlements would lose their effectiveness if internal
struggles among different plaintiffs’ lawyers and factions of plaintiffs were paired with
an easy way to fragment the class. Requiring a personally signed, individual request for
exclusion from class settlement heightens the likelihood that each class plaintiff will
make an informed, individualized decision whether to opt out, and courts want to
encourage this careful decisionmaking process. Hallie’s counsel should have well
understood this requirement. They are experienced class action consumer lawyers who
– according to their Web site – purport to “focus [their] practice exclusively on
consumer protection and class action law,” but missed this very simple requirement.
Web site home page of Edelman, Combs, Latturner & Goodwin, LLC,
http://www.edcombs.com/ (last visited Apr. 27, 2015).
Because Hallie’s opt-out request was deficient on its face, it was ineffective in
opting her out of the Fladell class. Her case is subject to the Fladell settlement. Therefore
her continued pursuit of her case here is barred by res judicata, and the defendants’
motion for judgment in the case is granted under Rule 12(c).
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Finally, it’s also worth noting that neither Hallie’s counsel (before withdrawal)
nor Hallie (after withdrawal) has filed anything at all relating to the issue of the
effectiveness of the opt-out request. Nothing was filed either in reply to the defendants’
response to the plaintiff’s status report, or in response to the defendants’ motion to
dismiss. Judge Rodovich confirmed during the hearing on withdrawal of counsel that
Hallie understood she needed to address before me the effectiveness of the opt-out
notice in response to the defendants’ argument for dismissal, and Hallie said she
understood. Yet she filed nothing in response by the March 6 deadline (which came and
went over seven weeks ago), nor any request for an extension, nor anything at all.
Under this circumstance, where the opt-out was plainly deficient and no argument of
any kind (sounding in law, fact, or fairness) has been made, the Court won’t go looking
for potential fact disputes or possible fairness arguments to defeat dismissal. Where a
plaintiff fails to respond to a non-frivolous, dispositive argument the court may infer
acquiescence to that argument, and “[t]hat acquiescence operates as a waiver . . . .”
Cincinnati Ins. Co. v. Eastern Atl. Ins. Co., 260 F.3d 742, 747 (7th Cir. 2001).
CONCLUSION
For the foregoing reasons, the defendants’ motion for judgment on the pleadings
is GRANTED. (DE 94.) The Court DIRECTS the Clerk to ENTER JUDGMENT in favor
of Defendants Wells Fargo Bank, N.A., Wells Fargo Insurance, Inc. and American
Security Insurance Company, and against Plaintiff Judith Hallie. The Clerk of Court is
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DIRECTED to treat this civil action and any remaining pending motions as
TERMINATED. All further settings in this action are hereby VACATED.
SO ORDERED.
ENTERED: April 27, 2015
/s/ Philip P. Simon
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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