In re Mounce
| Decision Date | 27 May 2008 |
| Docket Number | Adversary No. 04-05182-LMC.,Bankruptcy No. 03-55022-LMC. |
| Citation | 390 B.R. 233 |
| Parties | In re Andrew MOUNCE & Valerie Mounce, Debtors. Valerie Mounce, On Behalf of Herself and all Others Similarly Situated, Plaintiffs, v. Wells Fargo Home Mortgage, Inc., Defendant. |
| Court | U.S. Bankruptcy Court — Western District of Texas |
Gary Klein, Roddy Klein & Ryan, Shennan Kavanagh, Boston, MA, Melvin N. Eichelbaum, Eichelbaum Law Office, San Antonio, TX, for Plaintiffs.
Melissa S. Hayward, Locke Lord Bissell & Liddell LLP, Thomas A. Connop, Locke Liddell & Sapp, PLLC, Dallas, TX, for Defendant.
Pending before the court is a motion for class certification (the "Motion") under Federal Rule of Civil Procedure 23(b)(2) & (3), filed by plaintiff Valerie Mounce, on behalf of herself and others similarly situated.1 A hearing was held on the Motion on August 21, 2007, and the parties have been given ample time to provide briefing on the issues presented in this case. For the reasons that follow, the motion will be granted in part and denied in part.
The plaintiff is also a co-debtor in the related chapter 7 bankruptcy case, originally filed with her husband in 2003. She commenced this adversary proceeding on December 22, 2004, by filing a complaint against Wells Fargo Home Mortgage, Inc. ("Wells Fargo"). In her complaint, she asserts counts of Wells Fargo's alleged misrepresentations, breaches of contract, and coercion.2 Before the commencement of this underlying bankruptcy case, Wells Fargo was the servicing agent for the plaintiffs home loan. At that time, she and her husband were current on their loan payments to Wells Fargo. Later, during the case, however, she and her husband fell behind on their mortgage payments, and Wells Fargo moved for relief from stay. That motion resulted in an agreed order between Wells Fargo and the plaintiff in which the plaintiff agreed to cure the post-petition arrearage and also agreed to pay "post-petition attorney's fees and costs incurred by [Wells Fargo] `in bringing this [Lift Stay] Motion in the amount of $600.00."3 Ms. Mounce contends that she paid these fees and costs as directed by the terms of that agreed order. The subject of her complaint is that she says Wells Fargo misrepresented the amount of fees and costs that it actually incurred to the law firm of Brice, Vander, Linden & Wernick, P.C. ("Brice") for bringing the lift stay action, so that the "agreed order" directed her to pay more in fees than Wells Fargo had actually incurred. She adds that Wells Fargo declined to reimburse the fees she paid that exceeded the amount Wells Fargo actually incurred.
As the named plaintiff in this putative class action, Ms. Mounce contends that her dealings with Wells Fargo were not unique to her. In fact, she says, what happened in her case reflected Wells Fargo's standard practice, particularly for cases in which Brice represented Wells Fargo.4 She has thus moved for certification of the Relief From Stay Overcharge Class, which is defined as follows:
All individuals:
(1) who had or have a home mortgage loan serviced by Wells Fargo;
(2) who filed for bankruptcy under chapter 7 or 13 in any judicial district in the state of Texas;
(3) whose loan Wells Fargo referred to Brice, Vander, Linden & Wernick, P.C. for bankruptcy services;
(4) against whom Wells Fargo filed a motion for relief from stay; and
(5) from whom Wells Fargo demanded and/or collected fees and costs in connection with the motion for relief from stay during a time period between the date five years prior to the filing of the First Amended Class Action Complaint5 and the present.
See Motion, Dkt. # 107.
Wells Fargo objects to the Motion, arguing first that there is no cognizable cause of action for coercion under federal or Texas law. Second, argues Wells Fargo, the proposed class cannot be certified under Federal Rule 23(b)(3) because an essential element of the plaintiffs fraud claim is detrimental reliance on Wells Fargo's alleged misrepresentations. Because reliance is a highly individualized issue, argues Wells Fargo, certification of this class would be inappropriate—a trial on the merits of the class' claims would only degenerate into multiple separate trials. Wells Fargo's third argument is that the agreements between Wells Fargo and each putative class member are distinct, so there cannot be a common issue determinable on a class-wide basis. Finally, Wells Fargo contends, its defenses require the introduction of evidence pertaining to independent negotiations between Brice attorneys and individual class members. Because these negotiations, are highly individualized issues, says Wells Fargo, its defenses will cause this class action to degenerate into multiple separate trials. This case thus cannot be certified under the federal rules and the applicable case law of this circuit, so the argument goes.
The plaintiff responds that there is only one real issue in this case, and that is whether Wells Fargo has over-charged putative class members for fees which were not actually incurred in the course of bringing Wells Fargo's motion for relief from stay in each respective bankruptcy case. All other matters are common issues of law or fact, she argues, or may be determined on a class-wide basis. The relevant terms of each class member's loan documents are the same or substantially the same, and the terms of the orders lifting stay, or the agreed orders modifying stay, in each putative class member's bankruptcy case all required payment of the same $600.00 fee as a standard fee, purportedly charged by Brice to Wells Fargo, and then allegedly passed on to the debtors via standard terms in the orders modifying or terminating the stay. According to Ms. Mounce, Wells Fargo actually incurred fees less than the number represented in each respective order. Ms. Mounce further contends that proof of class members' individual reliance on Wells Fargo's representations will not be necessary, because it may be established constructively, based on Brice's standardized lift stay practices and the bankruptcy courts' endorsements of those standardized forms of order submitted by Brice on behalf of Wells Fargo. As for damages, inequality in amounts alone does not mean that individual issues will predominate, argues the plaintiff, particularly when the calculation of damages will require the application of a simple formula. In this case, Ms. Mounce contends that the fees actually incurred by Wells Fargo can be obtained through discovery of Brice's invoices and then easily determined class-wide without introducing evidence from each putative class member.
For the reasons set out in greater detail in this opinion, the court finds that class certification is appropriate under Rule 23(b)(3).
The court finds that the matters asserted in this adversary proceeding could arise only in the context of a case under title 11, and so this court has subject matter jurisdiction over this proceeding. 28 U.S.C. § 1334(b). For that reason, and because the claims asserted against Wells Fargo affect creditor-debtor relationships, this adversary proceeding is a core proceeding such that this court may hear and make final determinations on the merits of the claims asserted. See Geruschat v. Ernst & Young, LLP (In re Seven Fields Dev. Corp.), 505 F.3d 237, 263 (3d Cir. 2007) (); 28 U.S.C. §§ 157(b)(1) & (b)(2)(O). This matter is an adversary proceeding under Bankruptcy Rule 7001(1),6 and so the court applies Part VII of the Federal Rules of Bankruptcy Procedure to the present matter. Venue is also proper under section 1409(a) of title 28.
The plaintiff asks for class certification on three causes of action: breach of contract, misrepresentation, and coercion. As a threshold matter, the court could find no authority, nor could the plaintiff cite any, for the recognition of the coercion theory as an independent cause of action under either Texas or federal law. The plaintiff offers, at best, the argument that coercion "is associated with a breach of contract cause of action."7 The plaintiff in effect argues that by the simple fiat of Wells Fargo's superior bargaining power, the putative class members have a separate and distinct cause of action against Wells Fargo. While unequal bargaining power may lend itself to certain contractual defenses, this court declines to create such a new, independent cause of action not previously recognized by the Fifth Circuit or the Supreme Court of Texas. As it would be improper to certify a class action under a legal theory which is not cognizable under applicable state and federal law, this court cannot grant the plaintiffs motion as to this particular claim. The plaintiffs' remaining causes of action—breach of contract and negligent misrepresentation (or fraud)—are cognizable under Texas jurisprudence. The court will discuss class certification under these two remaining theories. While Texas substantive law will apply to the plaintiffs remaining claims,8 class certification is a matter of federal procedure and thus is governed by Rule 23 of the Federal Rules of Civil Procedure. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938); Hanna v. Plumer, 380 U.S. 460, 463-64, 85 S.Ct. 1136, 1140, 14 L.Ed.2d 8 (1965); see generally 19 WRIGHT, MILLER & COOPER, FEDERAL PRACTICE & PROCEDURE 2D Jurisdiction §§...
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