Manson et al v. GMAC Mortgage, LLC et al
Filing
257
Judge Richard G. Stearns: ORDER entered denying 218 Motion to Certify Class; denying 220 Motion to Certify Class (RGS, law3)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 08-12166-RGS
DARLENE MANSON, GERMANO DEPINA, ROBERT LANE and ANN
COILEY, and GERALDO DOSANJOS, on behalf of themselves and all others
similarly situated
v.
GMAC MORTGAGE, LLC, U.S. BANK NATIONAL TRUST ASSOCIATION,
as Trustee for the Structured Asset Securities Corporation Mortgage Pass-Through
Certificates 2006-EQ1, and as Trustee for Credit Suisse First Boston 2005-9, and
EMC MORTGAGE CORPORATION, and HARMON LAW OFFICES, P.C., and
ABLITT LAW OFFICES, P.C.
MEMORANDUM AND ORDER ON PLAINTIFFS’
MOTIONS FOR CLASS CERTIFICATION
April 30, 2012
STEARNS, D.J.
This putative class-action was brought by Massachusetts residents whose homes
were foreclosed, or against whom an invalid foreclosure process was initiated, between
November 20, 2004, and December 31, 2008. Plaintiffs seek declaratory relief in the
form of notice to class members that despite being declared in default on their
mortgages, they may nonetheless have a property interest in their present or former
homes.1 They also request that any costs and fees assessed against class members as
a result of the foreclosure process be deducted from any remaining mortgage balance
due and that class members who have lost their homes be reimbursed for any
consequential damages.2 See Consolidated Am. Class Action Compl. (Compl.) ¶ 6.3
Plaintiffs maintain that the defendant foreclosing entities and law firm defendants have
repeatedly violated Massachusetts statutory requirements by foreclosing on properties
(or aiding foreclosure) without first obtaining valid assignments of the underlying
1
In U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 646 (2011), the Supreme
Judicial Court (SJC) of Massachusetts held that under Massachusetts law a foreclosure
by sale that does not strictly comply with the statutory terms of Mass. Gen. Laws. ch.
244, § 14, is void (and not merely voidable). See also Bevilacqua v. Rodriguez, 460
Mass. 762, 778 (2011) (“Our recent decision in the case of [Ibanez] . . . concluded that
‘[a]ny effort to foreclose by a party lacking ‘jurisdiction and authority’ to carry out a
foreclosure under [the relevant] statutes is void.’ We decline the invitation to revisit
this issue.”). When a foreclosure is void, the foreclosure is a legal nullity and the
parties are returned to the position they would have been in, but for the invalid
foreclosure. See Oum v. Wells Fargo, N.A., --- F. Supp. 2d ----, 2012 WL 390271, at
*5 (D. Mass. Feb. 8, 2012).
2
Plaintiffs assert that costs and fees for the foreclosure were charged to
mortgagors’ accounts and remain either a part of the principal balance or a part of any
deficiency owed.
3
Plaintiffs assert claims of wrongful foreclosure (Count I); improper notice
(Count II); breach of the duty of good faith and reasonable diligence (Count III);
violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et
seq. (Count IV); and violations of Mass. Gen. Laws ch. 93A (Count V). The named
plaintiffs additionally bring specific individual claims of wrongful foreclosure and
breach of the duty of good faith and reasonable diligence against various defendants
(Counts VI through XIII).
2
mortgages. See Mass. Gen. Laws ch. 244, § 14 & ch. 183, § 21. See also Compl. ¶
4.
PROCEDURAL BACKGROUND
On December 31, 2008, the underlying lawsuit was removed to the federal
district court from the Massachusetts Superior Court on federal question grounds. On
July 28, 2010, after some initial motion practice, the action was stayed pending the
decision of the SJC in Ibanez. In January of 2011, Ibanez was published, and this court
ordered briefing on the impact of the decision on this case.
On November 15, 2011, plaintiffs filed motions to certify a class against the
foreclosing entity defendants, and, separately, a class against the law firm defendants.
Oppositions from the defendants soon followed. Plaintiffs filed replies to both sets of
oppositions. Law firm defendant Harmon Law Offices, P.C. (Harmon) filed a surreply.
Oral argument was heard on March 14 and 16, 2012.
FACTUAL BACKGROUND
GMAC Mortgage, LLC (GMAC), U.S. Bank National Trust Association as
Trustee for the Structured Asset Securities Corporation Mortgage Pass-Through
Certificates 2006-EQ1, and as Trustee for Credit Suisse First Boston 2005-9 (U.S.
Bank), and EMC Mortgage Corporation (EMC) are financial institutions that offer,
inter alia, mortgage banking services. Relevant to this action, EMC and GMAC
3
serviced home mortgage loans while U.S. Bank acted as the trustee for the securitized
mortgage pools.
When mortgagors default on their loans, servicing institutions – such as
defendants – are responsible for initiating foreclosure proceedings.4 In this regard, the
servicing defendants relied on law firm defendants Harmon and Ablitt Law Offices P.C.
(Ablitt) to pursue collections and to insure compliance with the differing foreclosure
formalities in each jurisdiction, including the necessity of executing an assignment prior
to initiating foreclosure.
In October of 2006, plaintiff Darlene Manson refinanced her home in Stoneham,
Massachusetts, with a loan from Aegis Lending Corp. (Aegis) in the amount of
$346,000, secured by a mortgage. Statement of Facts in Support of Motions to Certify
Class (SOF) ¶ 2; Pls.’ Mot. Ex. 3. The mortgage document named Mortgage Electronic
Registration Systems, Inc. (MERS) as the mortgagee. SOF ¶ 3. On February 19, 2008,
after Manson’s loan had gone into default, she received a letter from Harmon notifying
her that GMAC was the present holder of her mortgage, and that it intended to invoke
4
U.S. Bank, acting as a trustee, had retained Wells Fargo to service the loans
relevant to this case. With respect to GMAC and EMC, written agreements between
GMAC and EMC and the respective mortgagees provided that GMAC and EMC – as
the loan servicers – would foreclose in the servicer’s name. Typically the mortgagee
granted a power of attorney to the loan servicer for this purpose.
4
its power of sale. Id. ¶ 4.5 On March 25, 2008, GMAC conducted the foreclosure sale
and bought the home. Id. ¶ 6. On April 29, 2008, an employee of Harmon executed
a mortgage assignment that transferred Manson’s mortgage from MERS to GMAC. Id.
¶ 7. The assignment was recorded in the Middlesex South Registry of Deeds on May
6, 2008. Id. ¶ 8. In 2009, Manson was evicted from the home. Id. ¶ 10.6
Plaintiffs Ann Coiley and Robert Lane refinanced their home in Billerica,
Massachusetts, in September of 2006 with a loan from Argent Mortgage Company,
LLC (Argent), in the amount of $283,000, secured by a mortgage.7 SOF ¶ 12; Compl.
5
On February 27, March 5, and March 12, 2008, notice was published in the
Stoneham Independent newspaper announcing the foreclosure of Manson’s home by
GMAC. Through Harmon, GMAC also preserved its right to seek a deficiency against
Manson. Id. ¶ 5.
6
According to foreclosing entity defendants, Manson admits that she was not
then, and is not now, in a position to reinstate her loan. Foreclosing Entity Defs.’
Opp’n at 10.
7
According to the foreclosing entity defendants the following structure was in
place: Argent is a wholly owned subsidiary of Ameriquest Capital Corporation (ACC).
Pursuant to a Mortgage Loan Purchase and Warranties agreement, Argent originated
loans and transferred them to Ameriquest Mortgage Company (also a wholly owned
subsidiary of ACC). Ameriquest Mortgage was additionally a party to a September 17,
2004 Mortgage Loan Purchase and Interim Servicing Agreement (MLPA) providing
for the transfer of loans from Ameriquest Mortgage to EMC. On November 30, 2006,
Ameriquest Mortgage assigned and conveyed the Lane and Coiley mortgage loan (as
well as 718 others) to EMC pursuant to the MLPA. Ameriquest Mortgage transferred
the servicing of the Lane and Coiley loan to EMC on January 22, 2007. Foreclosing
Entity Defs.’ Opp’n at 11.
5
Ex. T. On December 19, 2007, and again on July 11, 2008, after the loan had gone into
default, Ablitt notified Coiley and Lane that EMC, the entity that currently held their
mortgage, intended to invoke its power of sale. SOF ¶ 13.8 On September 9, 2008,
after the foreclosure had been noticed in EMC’s name, a representative of Argent
executed an assignment of the mortgage to EMC.9 The assignment was recorded in the
Middlesex North Registry of Deeds on November 6, 2008. SOF ¶ 15.10 On September
15, 2008, EMC conducted a foreclosure sale on the home. Id. ¶ 17. Eviction
proceedings ensued, but were later dismissed.11 SOF ¶ 18. EMC allegedly refused to
accept rent from Coiley and Lane in exchange for their continued occupancy of the
property, but the couple were permitted to remain in the home. Id. ¶ 19.
In April of 2006, plaintiff Germano DePina obtained a loan in the amount of
8
“On July 17, July 24 and July 31, 2008, newspaper notice was published
announcing the foreclosure of the Lane and Coiley home by EMC, which again was
identified as the present holder of the Lane and Coiley Mortgage and the entity that was
to invoke the power of sale to foreclose. EMC also preserved its right to seek a
deficiency against Ms. Coiley and Mr. Lane.” Id. ¶ 14.
9
EMC asserts that the 2008 assignment merely confirmed the prior assignment
from 2006 pursuant to the MLPA transaction. Foreclosing Entity Defs.’ Opp’n at 11.
10
The assignment “indicated that it was ‘effective’ on November 30, 2006, but
did not indicate that it was confirmatory of an earlier assignment, nor did it identify an
earlier transaction to which Argent and EMC were parties.” Id. ¶ 16.
11
According to EMC, eviction proceedings were dismissed by way of a joint
stipulation entered on April 24, 2009. Foreclosing Entity Defs.’ Opp’n at 12.
6
$336,000, from EquiFirst Corporation (EquiFirst) to purchase a home in Roxbury,
Massachusetts, in exchange for which he granted EquiFirst a mortgage.12 SOF ¶ 20.
MERS was the named mortgagee. Id. ¶ 21. DePina defaulted on the loan, and in April
of 2008, Harmon issued a notice of sale, informing him that U.S. Bank held his
mortgage in its capacity as trustee of a specified trust and that U.S. Bank intended to
foreclose. Id. ¶ 23.13 In April of 2009,14 Harmon executed an assignment of the
mortgage from MERS to U.S. Bank; the assignment was then recorded in the Suffolk
Registry of Deeds. SOF ¶ 25.15 The foreclosure never in fact occurred, as DePina
12
U.S. Bank asserts the following additional details: on June 1, 2006, EquiFirst
transferred the loan (with an assortment of others) to Lehman Brothers Bank FSB; it
was then assigned (as part of the larger portfolio) to Lehman Brothers Holdings Inc.;
and then conveyed to Structured Asset Securities Corp.; which in turn conveyed all
“right, title, and interest” in the portfolio (of which the DePina loan was part) to U.S.
Bank as Trustee. Foreclosing Entity Defs.’ Opp’n at 12.
13
The requisite statutory notice was published in the Boston Herald, see Mass.
Gen. Laws ch. 244, § 14. Id. ¶ 24. Defendants assert that DePina also received a prior
letter from Harmon on January 7, 2008, explaining that it was retained by America’s
Servicing Company “a d/b/a of the Wells Fargo division that services residential
mortgages” to foreclose. Foreclosing Entity Defs.’ Opp’n at 13.
14
U.S. Bank asserts that the confirmatory assignment was executed on February
5, 2009. Foreclosing Entity Defs.’ Opp’n at 13.
15
“The DePina Assignment states that it was ‘effective’ on January 3, 2008, but
did not indicate that it was a confirmatory assignment, nor did it indicate that it was
confirming an earlier transaction to which MERS and U.S. Bank were parties.” SOF
¶ 26.
7
entered into a trial period under the Home Affordable Modification Program (HAMP)
in October of 2009.16 SOF ¶ 27. According to plaintiffs, the costs and fees associated
with the initial foreclosure process were folded into DePina’s unpaid principal balance
as part of his loan modification.17 SOF ¶ 27.
Plaintiff Geraldo Dosanjos obtained a loan in August of 2005 from Credit Suisse
First Boston Financial Corp. in the amount of $356,250 to purchase a home in Millis,
Massachusetts, and, in exchange, granted an accompanying mortgage. Id. ¶ 28. MERS
was the named mortgagee.18 SOF ¶ 29. In August of 2007, after Dosanjos went into
default on his loan, Harmon sent him a notice of sale identifying U.S. Bank as the entity
that held his mortgage in a trustee capacity and informing him that U.S. Bank intended
16
DePina and several other plaintiffs sued Wells Fargo based on its alleged
failure to modifiy their loans under HAMP. See Bosque v. Wells Fargo Bank, N.A.,
No. 10-10311-FDS (D. Mass. Feb. 23, 2010). After DePina was given the opportunity
to have his loans further modified under HAMP, his claims were dismissed. Foreclosing
Entity Defs.’ Opp’n at 13.
17
According to U.S. Bank, DePina claims at least $3,264 in damages for fees
and costs associated with the foreclosure proceedings that were added to his principal
balance. He did not specify any other damages during his deposition. Foreclosing
Entity Defs.’ Opp’n at 14.
18
Again, U.S. Bank adds further details: “On September 1, 2005, the loan
transferred to U.S. Bank, as Trustee, via the Credit Suisse First Boston 2005-9 passthrough securitization transaction, in which Credit Suisse conveyed all right, title, and
interest to the portfolio including Mr. Dosanjos’s loan to U.S. Bank, as Trustee,
pursuant to a Pooling and Servicing Agreement.” Foreclosing Entity Defs.’ Opp’n at
14.
8
to foreclose.19 Id. ¶ 30. On September 27, 2007, U.S. Bank conducted a foreclosure
sale and bought the property. Id. ¶ 32. On October 3, 2007, Harmon executed an
assignment of the mortgage from MERS to U.S. Bank, and the assignment was
recorded in the Norfolk Registry of Deeds in January of 2008.20 Id. ¶ 33.
The law firm defendants, Harmon and Ablitt, were responsible for “enforcing
security interests created by mortgages on residential property through foreclosure and
related default services.” Id. ¶¶ 50-51, 66. Upon initiation of foreclosure proceedings,
the borrower becomes responsible for any fees charged in connection with the
foreclosure. According to plaintiffs, Harmon and Ablitt taxed these costs and fees to
the borrowers’ accounts. Id. ¶ 48.21 Harmon also participated in the process of
“calling for, drafting and executing the mortgage assignments” at issue, and executed
assignments by virtue of their power-of-attorney privileges. Id. ¶ 56. The law firm
defendants also oversaw the execution of the power-of-sale by way of auction and
19
The requisite notice of foreclosure was made in the appropriate locally
circulated newspaper. Id. ¶ 31.
20
“The Dosanjos Assignment stated that it was ‘effective’ on July 5, 2007, but
did not indicate that it was a confirmatory assignment, nor indicate that it was
confirming an earlier transaction to which MERS and U.S. Bank were parties.” Id. ¶
34.
21
The foreclosing entity defendants note that “for obvious reasons, these fees
and costs were almost never recovered.” Foreclosing Entity Defs.’ Opp’n at 5.
9
made entry on the property, as the representative of the foreclosing entity. Id. ¶¶ 6162, 73, 75-76.
DISCUSSION
“[D]istrict courts have broad discretion to grant or deny class certification.”
McCuin v. Sec’y of Health & Human Servs., 817 F.2d 161, 167 (1st Cir. 1987).
“Plaintiffs have the burden of proving that class certification is appropriate, and to do
so they ‘must establish the four elements of Rule 23(a) and one of the several elements
of Rule 23(b).’” DeRosa v. Massachusetts Bay Commuter Rail Co., 694 F. Supp. 2d
87, 95 (D. Mass. 2010), quoting Smilow v. Sw. Bell Mobile Sys., Inc., 323 F.3d 32, 38
(1st Cir. 2003); see Fed. R. Civ. P. 23(a)-(b).
The Rule 23(a) elements are (1) numerosity, (2) commonality, (3) typicality, and
(4) adequacy of representation. Although at least one core issue of fact or law must
shape the class, Rule 23(a) does not require that every class member share every
factual and legal predicate of the action. See In re Lupron® Mktg. and Sales Practice
Litig., 228 F. R. D. 75, 88 (D. Mass. 2005), citing In re Gen. Motors Corp. Pick-up
Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 817 (3d Cir. 1995). Rule 23(b)
requires that one of its three prongs be satisfied.22
22
For purposes of this case, the
Plaintiffs request the court find Rule 23(b)(2), or (b)(3), or both, satisfied. See
Lemon v. Int’l Union of Operating Eng’rs, 216 F. 3d 577, 581 (7th Cir. 2000) (“The
10
plaintiffs must show either that “(2) the party opposing the class has acted or refused
to act on grounds that apply generally to the class, so that final injunctive relief or
corresponding declaratory relief is appropriate respecting the class as a whole; or (3)
the court finds that the questions of law or fact common to class members predominate
over any questions affecting only individual members, and that a class action is superior
to other available methods for fairly and efficiently adjudicating the controversy.” Fed.
R. Civ. P. 23(b)(2) & (b)(3).
Putative Class Against Foreclosing Entity Defendants23
Plaintiffs seek to certify three classes defined as follows:
GMAC Class: All Massachusetts residents against whose property a
foreclosure process was commenced or completed for which GMAC was
named as foreclosing mortgagee between November 20, 2004, and
December 31, 2008, and for which there is a recorded mortgage
assignment transferring the subject mortgage into the name of GMAC
executed after the date on which the Notice of Sale associated with that
foreclosure process was issued under Massachusetts law.
U.S. Bank Class: All Massachusetts residents against whose property a
foreclosure process was commenced or completed for which U.S. Bank
as Trustee was named as foreclosing mortgagee for a trust serviced by
district court could certify a Rule 23(b)(2) class for the portion of the case addressing
equitable relief and a Rule 23(b)(3) class for the portion of the case addressing
damages.”).
23
Plaintiffs’ Amended Consolidated Complaint pleads a defendant class, but
plaintiffs assert in their motions that they are not presently moving for certification of
such a class.
11
Wells Fargo or America’s Servicing Company between November 20,
2004, and December 31, 2008, and for which there is a recorded
mortgage assignment transferring the subject mortgage into the name of
U.S. Bank as Trustee for a particular trust executed after the date on
which the Notice of Sale associated with that foreclosure process was
issued under Massachusetts law.
EMC Class: All Massachusetts residents against whose property a
foreclosure process was commenced or completed for which EMC was
named as foreclosing mortgagee between November 20, 2004, and
December 31, 2008, and for which there is a recorded mortgage
assignment transferring the subject mortgage into the name of EMC
executed after the date on which the Notice of Sale associated with that
foreclosure process was issued under Massachusetts law.
Rule 23(a)
“[C]ertification is proper only if ‘the trial court is satisfied, after a rigorous
analysis, that the prerequisites of Rule 23(a) have been satisfied. Frequently that
‘rigorous analysis’ will entail some overlap with the merits of the plaintiff’s underlying
claim.
That cannot be helped.
‘[T]he class determination generally involves
considerations that are enmeshed in the factual and legal issues comprising the
plaintiff’s cause of action.’” Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 25512552 (2011) (internal citations omitted).
Numerosity
As a practical matter, the numerosity requirement is met whenever the joinder
of members of a proposed class is not feasible. Plaintiffs contend that the proposed
12
classes are sufficiently numerous because they encompass more than 8,000 present or
former homeowners. See SOF ¶¶ 64, 78-79. Joinder of this number of plaintiffs is
manifestly impracticable. The records of the law firm defendants indicate that at a
minimum over forty foreclosures involving U.S. Bank and EMC are at issue. Id.
GMAC does not challenge numerosity. EMC and U.S. Bank, however, see the
matter differently. They assert that the law firm defendants’ documents “say nothing
about whether other documentation establishes defendants’ ownership of the loans and
standing to foreclose . . . the most that plaintiffs can say is that there might be an Ibanez
problem with respect to as many as forty loans, but determining the actual number
would require the review of additional (and case-specific) evidence entirely absent from
their analysis.” Foreclosing Entity Defs.’ Opp’n at 27-28. The court does not agree.
Based on the publicly recorded documents, the likelihood that at least forty Ibanez
violations did occur is sufficient to meet the “low threshold for numerosity.”
Garcia-Rubiera v. Calderon, 570 F.3d 443, 460 (1st Cir. 2009), citing Stewart v.
Abraham, 275 F.3d 220, 226-227 (3d Cir. 2001) (“No minimum number of plaintiffs
is required to maintain a suit as a class action, but generally if the named plaintiff
demonstrates that the potential number of plaintiffs exceeds [forty], the first prong of
13
Rule 23(a) has been met.”).24
Commonality
“What matters to class certification . . . is not the raising of common ‘questions’
– even in droves – but, rather the capacity of a classwide proceeding to generate
common answers apt to drive the resolution of the litigation.” Wal-Mart Stores, 131 S.
Ct. at 2551 (citation omitted). To get to the heart of whether the commonality
requirement is met, the court must examine “considerations that are enmeshed in the
factual and legal issues comprising the plaintiff’s cause of action.” Id., at 2552
(citations omitted).
The glue that purports to bind the proposed class is the possibility of collective
Mass. Gen. Laws ch. 244, § 14 (Ibanez) violations. However, the determination of
whether the statute was in fact violated would require 8,000 highly individualized and
case-specific inquiries. In other words, the glue would only adhere after the merits of
each case had been fully investigated and only in those instances in which an Ibanez
violation in fact was uncovered. At that point, however, there would no longer be any
common questions of fact or law – all that would remain is the calculation of plaintiffs’
24
So-called “Ibanez violations” are prevalent enough in the Commonwealth to
have caused the Attorney General of Massachusetts to file a complaint against
foreclosing entities (including some of the named defendants here) for committing such
violations. See Commonwealth of Massachusetts v. Bank of Am., Civil Action No. 114363 (Dec. 1, 2011).
14
varying damages (if any).25
Plaintiffs, for their part, attempt a salvage operation by arguing that there is at
least one common question of law to be answered before class issues can be resolved.
They contend that Ibanez did not decide whether a foreclosure sale ostensibly
authorized by a pre-sale assignment is nonetheless voided by a contradictory post-dated
assignment that is recorded only after the sale. Plaintiffs assert that because the public
is entitled to rely on the title record for its truth, a post-dated recorded assignment takes
precedence over an unrecorded pre-sale assignment. See Bd. of Selectmen of Hanson
v. Lindsay, 444 Mass. 502, 508 (2005) (citations omitted) (“In this Commonwealth,
‘[b]ecause of the long-recognized inevitability and ubiquity of controversies over land,
the Massachusetts Bay Colony enacted a recording act as early as 1640 for the declared
purpose that ‘[e]very man may know what estate or interest other men may have in
houses, lands or other hereditaments they are to deal.’”).
Defendants counter that a post-dated recording merely acts as an official
confirmation of the prior assignment. Moreover, defendants argue that the SJC
effectively settled this issue by the approach that it took in Ibanez. There, only after
25
As defendants (correctly) point out, Ibanez, as amplified by Bevilacqua, has
already answered the question of law that precipitated the original filing of this case,
that is, whether a foreclosing entity is required to be in possession of a valid assignment
of the mortgage prior to the foreclosure.
15
being persuaded that an executed pre-sale assignment “clearly and specifically
identif[ying] the mortgage at issue as among those assigned” could not be located in the
underlying securitization documents, did the SJC deem the foreclosure on Ibanez’s
property void under Mass. Gen. Laws ch. 244, § 14. See Ibanez, 458 Mass. at 651.
Most important, a declaration by this court of the import of the SJC’s effort to
grapple with the legal significance of post-dated recorded assignments would not
“drive the resolution of the litigation,” see Wal-Mart, 131 S. Ct. at 2251, and is
therefore irrelevant to a commonality determination. A post-dated recorded assignment
becomes relevant under Ibanez only after an off-record assignment is identified. This
necessarily occurs only at the conclusion of the inquiry into the individual
circumstances of each prospective class member. This is too late in the game to qualify
as a “common” question for class certification purposes.26
26
For similar reasons plaintiffs cannot demonstrate that their putative class is
ascertainable. “While not explicitly mentioned in Rule 23, an implicit prerequisite to
class certification is that a ‘class’ exists – in other words, it must be ‘administratively
feasible for the court to determine whether a particular individual is a member.’”
Donovan v. Philip Morris USA, Inc., 268 F. R. D. 1, 9 (D. Mass. 2010), quoting Kent
v. SunAmerica Life Ins. Co., 190 F. R. D. 271, 278 (D. Mass. 2000). It is not possible
to ascertain a class relying solely on public records, as plaintiffs would have the court
do, because a post-dated recording evinces only the possibility that a particular
homeowner might fall within the class. As defendants argue, only by an inquiry into
the securitization documents (or other pooling agreements) that underlie most of the
mortgages at issue can this possibility become a certainty. See Ibanez, 458 Mass. at
651 (“Where a pool of mortgages is assigned to a securitized trust, the executed
16
Typicality
“The commonality and typicality requirements of Rule 23(a) tend to merge. Both
serve as guideposts for determining whether under the particular circumstances
maintenance of a class action is economical and whether the named plaintiff’s claim
and the class claims are so interrelated that the interests of the class members will be
fairly and adequately protected in their absence. Those requirements therefore also
tend to merge with the adequacy-of-representation requirement, although the latter
requirement also raises concerns about the competency of class counsel and conflicts
of interest.” Wal-Mart, 131 S. Ct. at 2551 n.5, quoting Gen. Tel. Co. of Sw. v. Falcon,
457 U.S. 147, 158 n.13 (1982). The purpose of the typicality requirement is to “align
the interests of the class and the class representatives so that the latter will work to
benefit the entire class through the pursuit of their own goals.” In re Prudential Ins.
Co. of Am. Sales Practice Litig., 148 F.3d 283, 311 (3d Cir. 1998). The alignment
with absent class members need not, however, be perfect. See In re Credit Suisse, 253
F. R. D. 17, 23 (D. Mass. 2008). That damages may differ among the various class
members, for example, “is of little consequence to the typicality determination when
agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage
loans that clearly and specifically identifies the mortgage at issue as among those
assigned, may suffice to establish the trustee as the mortgage holder.”).
17
the common issue of liability is shared.” In re Lorazepam & Clorazepate Antitrust
Litig., 202 F. R. D. 12, 28 (D. D. C. 2001), quoting Lewis v. Nat’l Football League,
146 F. R. D. 5, 9 (D. D. C. 1992).
The class representative nominees fall into several categories of putative class
membership: those whose homes have been foreclosed and who have been evicted
(Manson and Dosanjos); those whose homes have been foreclosed but who have yet
to be evicted (Lane and Coiley); and those who kept their homes pursuant to a HAMP
mortgage modification but who incurred extra fees and charges as a result of the
initiation of the foreclosure process (DePina). Plaintiffs argue that the difference in
circumstances among the nominees does not necessarily disqualify them as “typical”
class representatives (which is true). The problem, rather, is that the representative
plaintiffs are “atypical” because they have already received the primary relief sought
for all class members, that is, notice-relief. Plaintiffs seek to require defendants to
notify affected present or former homeowners (estimated to be some 8,000 in total) that
they may have a latent interest in their properties. But the representative plaintiffs are
already well-aware of this latent property interest – and to vindicate their rights requires
only review of the documents underlying their mortgages to determine whether an
Ibanez violation occurred.
Adequacy
18
Under the fourth and final requirement of Rule 23(a), the named plaintiffs must
show that the proposed action will fairly and adequately protect the interests of the
class. “The [adequacy] rule has two parts. The moving party must show first that the
interests of the representative party will not conflict with the interests of any of the
class members, and second, that counsel chosen by the representative party is qualified,
experienced, and able to vigorously conduct the proposed litigation.” Andrews v.
Bechtel Power Co., 780 F.2d 124, 130 (1st Cir. 1985).27 With respect to the first part
of the rule, the court is persuaded that were a class to be certified plaintiffs’ divergent
options (as to whether they might seek to resume mortgagor status or choose to remain
free of the encumbrances of “underwater” property or accept some other relief) would
not lead to conflicts of interest with potential class members. This, however, is beside
the point as plaintiffs cannot met the commonality and typicality requirements of Rule
23(a).
Rule 23(b)(2)
Although plaintiffs do not meet the requirements of Rule 23(a), I will address
27
It is unnecessary to address the second requirement of the adequacy test as this
court has recently found members of plaintiffs’ counsel team to meet the adequacy test
of Federal Rule of Civil Procedure 23(g)(1)(A), and has appointed members of the team
to serve as interim co-lead counsel in a national multi-district matter involving
mortgage-related issues. See, e.g., In re JPMorgan Chase Mortg. Modification Litig.,
No. 1:11-MD-2290-RGS.
19
Rule 23(b) for completeness purposes.
Rule 23(b)(2) requires a showing that
defendants “acted or refused to act on grounds generally applicable to the class,
thereby making appropriate final injunctive relief or corresponding declaratory relief
with respect to the class as a whole.” See Wal-Mart, 131 S. Ct. at 2557 & 2558 (For
classes certified under (b)(2) “the relief sought must perforce affect the entire class at
once . . . . The Rule provides no opportunity for . . . (b)(2) class members to opt out,
and does not even oblige the District Court to afford them notice of the action.”).
According to plaintiffs, class litigation will most efficiently address the
uncertainty created by Ibanez regarding the title to a number of Massachusetts
properties.28 Plaintiffs seek injunctive relief that includes: (1) notice to former
mortgagors that the foreclosure process they were subjected to may be void and that
they may have a latent property interest in their foreclosed property; (2) a cancellation
of any indebtedness that may have been assessed to mortgagor accounts as a result of
the void foreclosure process; (3) corrective credit reporting; and (4) an order enjoining
defendants from conducting future foreclosures without obtaining valid prior
28
At oral argument defendants contended that, in reality, title insurance
companies have assumed responsibility for most title problems, and, in contrast to
plaintiffs’ assertions, the state of title in Massachusetts is not in “chaos.”
20
assignments of the underlying mortgages.29 Finally, plaintiffs seek a declaration that
the foreclosures on their properties are void.
For their part, defendants argue that plaintiffs do not meet the Rule 23(b)(2)
injunctive standard, as it has recently been refined in Wal-Mart. “[The Rule] does not
authorize class certification when each individual class member would be entitled to
a different injunction or declaratory judgment against the defendant. Similarly, it does
not authorize class certification when each class member would be entitled to an
individualized award of monetary damages.” Wal-Mart, 131 S. Ct. at 2557 (emphasis
in original). Here, given their differing circumstances, and the differing types of
equitable relief they seek, plaintiffs’ request is precisely that which the Supreme Court
said in Wal-Mart cannot be granted.30
Rule 23(b)(3)
Plaintiffs also seek certification pursuant to Fed. R. Civ. P. 23(b)(3). Under this
29
With respect to this last request, defendants maintain that they have ceased the
practice and have every incentive not to recidivate.
30
The court will comment briefly on the likely frustrations of granting the relief
plaintiffs request. Sending thousands of former homeowners a notice of the possibility
that they may have some beneficial interest in their former homes if (and only if) they
desire (and are able) to resume their mortgage payments is an offer pregnant with
expectation but with little likelihood of actually conferring much by way of tangible
reward.
21
prong of Rule 23, plaintiffs request monetary damages including foreclosure fees and
other costs paid to or assessed by the defendants, as well as any consequential damages
resulting from the foreclosure. See Wal-Mart, 131 S. Ct. at 2558 (“We think it clear
that individualized monetary claims belong in Rule 23(b)(3).”).
Framed for situations in which “class-action treatment is not as clearly
called for” as it is in Rule 23(b)(1) and (b)(2) situations, Rule 23(b)(3)
permits certification where class suit “may nevertheless be convenient and
desirable.” Adv. Comm. Notes, 28 U.S.C. App., p. 697. To qualify for
certification under Rule 23(b)(3), a class must meet two requirements
beyond the Rule 23(a) prerequisites: Common questions must
“predominate over any questions affecting only individual members”; and
class resolution must be “superior to other available methods for the fair
and efficient adjudication of the controversy.” In adding “predominance”
and “superiority” to the qualification-for-certification list, the Advisory
Committee sought to cover cases “in which a class action would achieve
economies of time, effort, and expense, and promote . . . uniformity of
decision as to persons similarly situated, without sacrificing procedural
fairness or bringing about other undesirable results.”
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 615 (1997).31 “The policy at the very
core of the class action mechanism is to overcome the problem that small recoveries
31
“Rule 23(b)(3) includes a nonexhaustive list of factors pertinent to a court’s
‘close look’ at the predominance and superiority criteria: ‘(A) the interest of members
of the class in individually controlling the prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already
commenced by or against members of the class; (C) the desirability or undesirability
of concentrating the litigation of the claims in the particular forum; (D) the difficulties
likely to be encountered in the management of a class action.’” Id. at 615-616.
22
do not provide the incentive for any individual to bring a solo action prosecuting his or
her rights.” Id. at 617, quoting Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th
Cir. 1997).
Predominance
“The Rule 23(b)(3) predominance inquiry tests whether proposed classes are
sufficiently cohesive to warrant adjudication by representation.” Amchem, 521 U.S. at
623. Plaintiffs argue that common issues predominate over individual ones because the
crux of the adjudication will focus on reconciling electronic records in various public
registries with the records kept by the law firm defendants relating to foreclosures
conducted (and assignments executed) on behalf of their clients – the foreclosing entity
defendants. They further contend that the calculation and award of any consequential
damages could be resolved in summary proceedings, and would not overwhelm the
common issues of law. However, because, as previously explained, plaintiffs do not
meet the test for commonality, the common issues of law almost by definition do not
predominate over the individualized ones.
Superiority
Finally, the court is not convinced that a class action is the superior method for
adjudicating plaintiffs’ rights. After this case was filed, the Massachusetts Attorney
General brought an action against a number of foreclosing entities, including GMAC,
23
in the state court alleging, inter alia, that these entities violated Mass. Gen. Laws ch.
244, §14, by foreclosing on homes without valid assignments of the underlying
mortgages. Complaint, Commonwealth of Massachusetts v. Bank of Am., No. 11-3463,
(Mass. Super. Dec. 1, 2011), ¶ 26-27, 30, 122.32 The Attorney General’s Complaint
requests a declaratory judgment that the defendants in that action properly register all
instruments that transfer the beneficial interest in a mortgage secured by registered
land; the imposition of civil penalties of up to $5,000 for each violation of Mass. Gen.
Laws ch. 93A (based, in part, on the violations of Mass. Gen. Laws ch. 244, §14); an
order
enjoining all defendants . . . from: initiating any foreclosure without first
obtaining a valid, written assignment of the mortgage or other appropriate
written documentation verifying that it is the holder of the mortgage;
publishing any notice pursuant to Mass. Gen. Laws ch. 244, §14 that fails
to identify the present holder of the mortgage . . . [and] [r]equiring each
of the Bank Defendants to take all actions necessary to cure defects in
title resulting from its initiation of foreclosure proceedings on mortgages
secured by land within the Commonwealth where (i) it was not the holder
of such mortgages or (ii) it published notices that failed to accurately
identify the present holder of the mortgage . . . .
Id. The Attorney General’s requested relief largely overlaps that which the plaintiffs
32
U.S. Bank and EMC are not named parties to that action, but EMC is a
subsidiary of JPMorgan Chase, a named defendant. That action has been stayed
pending the finalization of the national settlement against the country’s five largest loan
servicers. See http://www.nationalmortgagesettlement.com.
24
seek here. Cf. Cartwright v. Viking Indus., Inc., 2009 WL 2982887, at *14 (E. D. Cal.
Sept. 14, 2009) (pending state action was not a bar to class certification where the
parallel state action “was not brought on behalf of the public or by a state agency”).
It remains open for plaintiffs such as Manson, Lane, Coiley, DePina, and
Dosanjos, to pursue individual actions against defendants. If the foreclosing entity
associated with each of these plaintiffs cannot produce evidence that the assignment of
the plaintiff’s mortgage was made prior to initiation of the foreclosure, then the
consequences of the void foreclosure can be determined.33 Other potential plaintiffs
are likely to be deterred by the practical considerations. As plaintiffs’ counsel
conceded at oral argument, the majority of putative class members will be unable or
uninterested in restoring their mortgages and may choose to negotiate some other type
33
Defendants argue (correctly) that it is not their burden at this stage in the
proceedings to produce exonerating evidence. Nevertheless, the court notes that while
it is possible that a schedule of the pooled mortgages that “clearly and specifically”
identifies the particular plaintiffs’ mortgages may exist, defendants have not shown that
the mortgages of each of the named plaintiffs was indeed part of a specific pool despite
the fact that they produced to the court voluminous records including pooling
arrangements and trust documents. Defendants rely on declarations from Denise
Apicella, Vice President and Senior Counsel of ACC (Dkt # 243), and James McGarry,
a partner with the law firm Goodwin Procter (Dkt # 246), to assert that the named
plaintiffs’ mortgages were part of the listed pooling arrangements. However, at no
point do the exhibits attached to the affidavits, which are copies of the securitization
agreements, clearly identify each plaintiff’s mortgage as included in the relevant pool.
See Dkt # 243, Ex. 1 at 15; Dkt # 246, Ex. 16; Dkt # 246, Ex. 220; Dkt # 246, Ex. 17.
25
of settlement with the foreclosing entity in their cases,34 or just as likely may be content
to see the Attorney General’s enforcement action run its course.
Putative Class Against Law Firm Defendants
Plaintiffs’ general contention is that Harmon and Ablitt, working at the behest
of the foreclosing entity defendants, knowingly initiated foreclosures in the absence of
the required prior assignments of the underlying mortgages. Plaintiffs assert that “not
only were the Law Firm Defendants the primary actors in prosecuting these void
foreclosures, they are also directly responsible for the public record that confirms the
error.” Pls.’ Mot. at 2. Plaintiffs seek to certify two classes defined as:
Harmon Law Class: All Massachusetts residents against whose property
a foreclosure process was commenced or completed by Harmon Law on
behalf of any entity between November 20, 2004 and December 31, 2008
for which there is a recorded mortgage assignment transferring the subject
mortgage to the foreclosing entity executed after the date on which the
Notice of Sale associated with that foreclosure process was issued under
Massachusetts Law.
Ablitt Law Class: All Massachusetts residents against whose property a
foreclosure process was commenced or completed by Ablitt Law on
behalf of any entity between November 20, 2004 and December 31, 2008
for which there is a recorded mortgage assignment transferring the subject
mortgage to the foreclosing entity executed after the date on which the
Notice of Sale associated with that foreclosure process was issued under
34
The court notes that some banks are now permitting homeowners to deed their
equitable interest in the home to the banks in exchange for a lease-back of the premises
at a more manageable rent. See Nick Timiraos, BofA Tests an Option to Foreclosure,
The Wall Street Journal, March 23, 2012, at C1.
26
Massachusetts Law.
Id. at 3.35
The arguments set out by plaintiffs for certifying these classes against the law
firm defendants, as well as the relief sought, is largely identical to the claims brought
against the foreclosing entity defendants. Plaintiffs seek to put the burden of giving
notice to class members of the void foreclosures on the law firm defendants, and also
seek statutory damages pursuant to the Federal Debt Collection Practices Act
(FDCPA), 15 U.S.C. § 1992k(a)(2) (incidental to the injunctive relief sought pursuant
to Rule 23(b)(2), see Wal-Mart, 131 S. Ct. at 2560-2561), as well as any actual
damages attributable to the invalid foreclosure process.
The law firm defendants, for their part, adopt the arguments advanced by the
foreclosing entities as to why class certification is inappropriate. Law Firm Defs.’
Opp’n at 6. The law firm defendants point out (correctly) that they can be found liable
only if a client of theirs violated Mass. Gen. Laws ch. 244, §14, that is, their liability
is dependant on a foreclosing entity being found to have committed an Ibanez violation.
As a result, the same lack of commonality and typicality that attaches to the claims
against the foreclosing entities bars class certification with respect to the law firm
35
The proposed class definitions are essentially the same as those proposed for
the defendant foreclosing entities.
27
defendants.
The law firm defendants also argue that even were certification proper, and even
if Ibanez violations were uncovered, they owed no duty to the putative class members
with respect to three of the claims (wrongful foreclosure; improper notice; and breach
of the duty of good faith and reasonable diligence). The court agrees. A lawyer
representing a lender owes no duty to the borrower. See Balerna v. Gilberti, 2012 WL
379592, at *2 n.4 (D. Mass. Feb. 7, 2012) (omitting cited cases) (“Massachusetts law
makes it as plain as a pikestaff that an attorney does not owe a fiduciary duty to a
person who she does not represent.”). “There is only one possible exception: ‘in
certain circumstances a lawyer owes a duty of care to a nonclient who he or she knows
will rely on the services rendered.’” Id., quoting Kirkland Constr. Co. v. James, 39
Mass. App. Ct. 559, 561 (1995). Plaintiffs themselves allege that the notices Harmon
and Ablitt sent to homeowners included statements such as “PLEASE BE ADVISED
THAT THIS OFFICE IS ATTEMPTING TO COLLECT A DEBT AND THAT ANY
INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.” Compl. ¶
63. No reasonable person receiving such a notice would believe that the sender was
seeking to act on his or her behalf.36
36
The Mass. Gen. Laws ch. 93A claims are also problematic, as a lawyer
generally cannot be held liable for actions taken on behalf of a client where the lawyer
28
With respect to the FDCPA claims, the defendant law firms contend that
“foreclosure is not debt collection.”37 Law Firm Defs.’ Opp’n at 12. They rely on
Speleos v. BAC Home Loans Servicing, L.P., 2011 WL 4899982, (D. Mass. Oct. 14,
2011), for the proposition that the law firms “cannot be held liable under the general
provisions of § 1692(f) because [they were] not collecting a debt but rather enforcing
has not injected himself directly into trade or commerce, but instead is performing
customary legal duties (such as sending notices regarding potential mortgage loan
defaults or conducting a foreclosure on behalf of a client). See First Enters., Ltd. v.
Cooper, 425 Mass. 344, 347-348 (1997).
37
In their Complaint, plaintiffs assert that the law firms
violated 15 U.S. C. § 1692(f), which prohibits debt collectors from using
unfair or unconscionable means to attempt to collect a debt. Included
among the violations of that section are instances in which the debt
collector takes or threatens to take any nonjudicial action to effect
dispossession or disablement of property if there is no present right to
possession of the property claimed as collateral through an enforceable
security interest. 15 U.S.C. § 1692(f)(6)(A). By sending communications
on behalf of an entity that was not the proper holder of a mortgage
assignment at that time, the Law Firm Defendants violated 15 U.S.C. §
1692(e)(2), which prohibits debt collectors from using any false,
deceptive or misleading representation or means in connection with the
collection of any debt. By sending communications on behalf of an entity
that was not the proper holder of an assignment at that time, the Law Firm
Defendants violated § 1692(g), which requires a debt collector to
disclose, either in the initial communication or in a notice within five days
of the initial communication, the correct name of the creditor to whom the
debt is owed.
Compl. ¶¶ 328-330.
29
a security interest.” Id. at *6. Plaintiffs, for their part, argue that when Speleos is read
further, defendants’ argument collapses.
Defendant may, of course, still be liable under § 1692f(6), which is
specifically applicable to the enforcement of security interests. See
Maynard v. Cannon, P.C., 650 F. Supp. 2d 1138, 1142-43 (D. Utah
2008) (holding that law firm engaged solely to initiate a nonjudicial
foreclosure by enforcing the security interest was subject only to §
1692f(6)). That subsection prohibits enforcing such an interest where
there is “no present right to possession of the property claimed as
collateral.” § 1692f(6)(A). The question is thus whether OrlansMoran
foreclosed on the Property when there was no present right to possess it.
Id. Here, as noted in Speleos, the law firms were attempting to enforce a security
interest when they lacked authority to do so. “A court should look to state law
requirements to determine whether there was a present right to possession under the
FDCPA.” Id., quoting Revering v. Norwest Bank Minn., N.A., 1999 WL 33911360, at
*5 (D. Minn. Nov. 30, 1999). General Laws ch. 244, §14, is conclusive on the issue:
if a violation of the statute occurred then the law firm defendant in question had no
present right to possession, and the FDCPA protections are triggered. The circle,
however, remains unbroken. If a section 14 violation occurred, then the law firm
whose client is implicated may be liable under the FDCPA.
Because of this
contingency, the FDCPA claims add no real heft to the class certification argument.
ORDER
For the foregoing reasons, plaintiffs’ motions for class certification with respect
30
to the claims against the foreclosing entity defendants, and, separately, against the law
firm defendants, are DENIED.
SO ORDERED.
/s/ Richard G. Stearns
________________________________
UNITED STATES DISTRICT JUDGE
31
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