In Re Community Bank Of Northern Virginia, s. 08-3621, 08-3790, 08-3791, 08-3857, 09-2001.

Citation622 F.3d 275
Decision Date20 October 2010
Docket NumberNos. 08-3621, 08-3790, 08-3791, 08-3857, 09-2001.,s. 08-3621, 08-3790, 08-3791, 08-3857, 09-2001.
PartiesIn re COMMUNITY BANK OF NORTHERN VIRGINIA and Guaranty National Bank of Tallahassee Second Mortgage Loan Litigation (MDL 1674) Objecting Class Members, Appellants (08-3621) (Pursuant to Fed. R.App. P. 12(a)) Alabama and Georgia Objecting Class Members, Appellants (08-3790) (Pursuant to Fed. R.App. P. 12(a)) Richard H. Heady, Jr., Robert Rowley, Arline Rowley, Galen Hurt, Darrell Turner, Michael Rich, Edna Rich, Patrick Franklin, Michael Graham, Tracy Graham, Eric Lewis, Barbara Lewis, David Davidson, Michael Moore, Karla Moore, Anthony Dixon and Kathy Dixon, Appellants (08-3791). (Pursuant to Fed. R.App. P. 12(a)) Troy Elliott, Lorraine Oswald and Ruth D. Mathis-Wisseh, Appellants (08-3857) (Pursuant to Fed. R.App. P. 12(a)) John Drennen; Rowena Drennen; David Garner; Diane Garner; Shawn Starkey; Lorene Starkey, Appellants v. PNC Bank National Association; GMAC-Residential Funding Corporation, a Minnesota Corporation; Homecomings Financial Network Inc., a Delaware Corporation.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

OPINION TEXT STARTS HERE

Garrett M. Hodes, Esquire, David M. Skeens, Esquire, J. Michael Vaughan, Esquire, Roy Frederick Walters, Esquire (Argued), Walters, Bender, Strohbehn & Vaughan, Kansas City, MO, Michael J. Cartee, Esquire, John J. Lloyd, Esquire, Cartee & Lloyd, Tuscaloosa, AL, C. Knox McLaney, III, Esquire, McLaney & Associates, Montgomery, AL, Franklin R. Nix, Esquire, Law Offices of Franklin R. Nix, Atlanta, GA, John W. Sharbrough, III, Esquire, The Sharbrough Law Firm, Mobile, AL, Scott C. Borison, Esquire, Legg Law Firm, Frederick, MD, J. Jerome Hartzell, Esquire (Argued), Hartzell & Whiteman, Raleigh, NC, Mallam J. Maynard, Esquire, Wilmington, NC, Robert B. Smith, Esquire, Smith, Cohen & Mork, Pittsburgh, PA, for Appellants.

Eric G. Calhoun, Esquire, Travis & Calhoun, Dallas, TX, R. Bruce Carlson, Esquire (Argued), Gary F. Lynch, Esquire, Carlson Lynch, New Castle, PA, Daniel O. Myers, Esquire, A. Hoyt Rowell, III, Esquire, Richardson, Patrick, Westbrook & Brickman, Mount Pleasant, SC, Kevin Oufnac, Esquire, Richardson, Patrick, Westbrook & Brickman, Charleston, SC, Thomas L. Allen, Esquire (Argued), Roy W. Arnold, Esquire, David J. Bird, Esquire, Donna M. Doblick, Esquire, Nina M. Faber, Esquire, Reed Smith, Darryl J. May, Esquire (Argued), Ballard Spahr, David G. Oberdick, Esquire, Meyer, Unkovic & Scott, Pittsburgh, PA, F. Douglas Ross, Esquire, Odin, Feldman & Pittleman, Fairfax, VA, J. Scott Watson, Esquire, Federal Deposit Insurance Corporation, Arlington, VA, for Appellees.

Before: SCIRICA * , Chief Judge, AMBRO, Circuit Judge and JONES ** , District Judge.

OPINION OF THE COURT

AMBRO, Circuit Judge.

                +-----------------+
                ¦Table of Contents¦
                +-----------------¦
                +-----------------+
                 
                +----------------------------------------+
                ¦I.¦Factual and Procedural Background¦279¦
                +----------------------------------------+
                 
                +-------------------------------------------------------------+
                ¦¦A.¦The Alleged Predatory Lending Scheme                 ¦279¦
                ++--+-----------------------------------------------------+---¦
                ¦¦B.¦The Separate Class Actions and the Initial Settlement¦280¦
                ++--+-----------------------------------------------------+---¦
                ¦¦C.¦The Objectors                                        ¦282¦
                ++--+-----------------------------------------------------+---¦
                ¦¦D.¦The Prior Appeal                                     ¦284¦
                ++--+-----------------------------------------------------+---¦
                ¦¦E.¦The Proceedings on Remand                            ¦285¦
                +-------------------------------------------------------------+
                 
                +-----------------------------------------------------------------------------+
                ¦¦¦1.¦The Hobson Action                                                   ¦285¦
                +++--+--------------------------------------------------------------------+---¦
                ¦¦¦2.¦The Objectors Withdraw Their Motion to Intervene                    ¦285¦
                +++--+--------------------------------------------------------------------+---¦
                ¦¦¦3.¦The District Court's Viability Briefing                             ¦285¦
                +++--+--------------------------------------------------------------------+---¦
                ¦¦¦4.¦The Modified Settlement                                             ¦286¦
                +++--+--------------------------------------------------------------------+---¦
                ¦¦¦5.¦The District Court Determines the TILA/HOEPA Claims Are Not Viable  ¦287¦
                +++--+--------------------------------------------------------------------+---¦
                ¦¦¦6.¦The District Court Appoints a “Friend of the Court”                 ¦288¦
                +++--+--------------------------------------------------------------------+---¦
                ¦¦¦  ¦The District Court Denies the Objectors' Renewed Motion to          ¦   ¦
                ¦¦¦7.¦Intervene, Conditionally Re-Certifies the Class, and Preliminarily  ¦289¦
                ¦¦¦  ¦Approves the Modified Settlement                                    ¦   ¦
                +++--+--------------------------------------------------------------------+---¦
                ¦¦¦8.¦The District Court Certifies the Class and Approves the Modified    ¦289¦
                ¦¦¦  ¦Settlement                                                          ¦   ¦
                +-----------------------------------------------------------------------------+
                 
                +---------------------------------------------+
                +----+------------------------------------+---¦
                ¦II. ¦Jurisdiction and Standards of Review¦290¦
                +----+------------------------------------+---¦
                +----+------------------------------------+---¦
                ¦III.¦Discussion                          ¦290¦
                +---------------------------------------------+
                 
                +----------------------------+
                ¦¦A.¦Class Certification ¦291¦
                +----------------------------+
                 
                +-----------------------------------------------------------------------+
                ¦¦¦1.¦Legal Standards                                               ¦291¦
                +++--+--------------------------------------------------------------+---¦
                ¦¦¦2.¦Statute-of-Limitations Issues at the Class Certification Stage¦292¦
                +++--+--------------------------------------------------------------+---¦
                ¦¦¦3.¦The District Court's Analysis                                 ¦295¦
                +-----------------------------------------------------------------------+
                 
                +---------------------------------------------------------+
                ¦¦¦¦a.¦The District Court's Relation-Back Analysis    ¦295¦
                ++++--+-----------------------------------------------+---¦
                ¦¦¦¦b.¦The District Court's Equitable Tolling Analysis¦301¦
                +---------------------------------------------------------+
                 
                +-----------------------------------+
                ¦¦¦4.¦Adequacy of Representation¦303¦
                +-----------------------------------+
                 
                +-----------------------------------+
                ¦¦¦¦a.¦The Class Representatives¦303¦
                ++++--+-------------------------+---¦
                ¦¦¦¦b.¦Class Counsel            ¦304¦
                +-----------------------------------+
                 
                +-------------------------------------+
                ¦¦¦5.¦The North Carolina Objectors¦308¦
                +-------------------------------------+
                 
                +-----------------------------------------------------------------------------+
                ¦¦B.¦The Fairness of the Settlement                                       ¦311¦
                ++--+---------------------------------------------------------------------+---¦
                ¦¦C.¦The Objectors' Renewed Motion to Intervene                           ¦312¦
                ++--+---------------------------------------------------------------------+---¦
                ¦¦D.¦The Objectors' Renewed Petition for Mandamus to Recuse the District  ¦313¦
                ¦¦  ¦Judge                                                                ¦   ¦
                +-----------------------------------------------------------------------------+
                 
                +-------------------+
                +---+-----------+---¦
                ¦IV.¦Conclusion ¦315¦
                +-------------------+
                

This is the second appeal from the certification of a consolidated “settlement only” nationwide class action that alleged an illegal home equity lending scheme involving two banks and a company that purchased second mortgage loans from them. Certain members of the class (the Objectors) contest the District Court's decisions certifying that class and approving the class settlement. (This shorthand, however, does not include the objecting class members from North Carolina, whose arguments we address separately in Part III.A.5 below.) As it was in the prior appeal, the principal dispute remains the named plaintiffs' and class counsel's decision not to make claims against the defendants under the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”), and the Home Ownership and Equity Protection Act (“HOEPA”), id. § 1639. The Objectors contend that the failure to do so renders the named plaintiffs and class counsel inadequate class representatives.

We conclude that the District Court-by approaching the adequacy-of-representation questions on remand as though it were ruling on a motion to amend pursuant to Federal Rule of Civil Procedure 15(c) or a motion to dismiss pursuant to Rule 12(b)(6)-applied the wrong legal standard in ruling on class certification under Rule 23. We thus reluctantly vacate again the Court's certification decision and its approval of the class settlement, and remand for further proceedings. In doing so, we continue to reject (i) the claim that the District Court abused its discretion in denying the Objectors' renewed motion to intervene, and (ii) their renewed petition for mandamus to recuse the District Judge in this case.

I. Factual and Procedural Background A. The Alleged Predatory Lending Scheme

The complex factual and procedural history of these matters is set out at length in our prior opinion, and we only summarize it here. See In re Community Bank of N. Va., 418 F.3d 277 (3d Cir.2005) (“ Community Bank I ”). These class actions involve the alleged predatory lending scheme of the Shumway/Bapst Organization (“Shumway”), a residential mortgage loan business involved in facilitating the making of high-interest, mortgage-backed loans to debt-laden homeowners. Because Shumway is...

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