Lofton v. Wells Fargo Home Mortg., of Wells Fargo Bank, N.A., A146282

• Decision Date: 28 September 2018
• Docket Number: A146282
• Citation: 27 Cal.App.5th 1001,238 Cal.Rptr.3d 626
• Court: California Court of Appeals Court of Appeals
• Parties: Dawn LOFTON et al., Plaintiffs and Respondents, v. WELLS FARGO HOME MORTGAGE, A DIVISION OF WELLS FARGO BANK, N.A., Defendant and Respondent. Initiative Legal Group, APC, Appellant, v. Terri Maxon, Intervenor and Respondent.

27 Cal.App.5th 1001

238 Cal.Rptr.3d 626

Dawn LOFTON et al., Plaintiffs and Respondents,

v.WELLS FARGO HOME MORTGAGE, A DIVISION OF WELLS FARGO BANK, N.A., Defendant and Respondent.

Initiative Legal Group, APC, Appellant,

v.Terri Maxon, Intervenor and Respondent.

A146282

Court of Appeal, First District, Division 3, California.

Filed September 28, 2018

Initiative Legal Group, Joseph A. Hearst for Appellant, Initiative Legal Group.

Drescher Law Firm, Robert E. Drescher, Valencia; Steven A. Soloway for Movants and Appellants, Marsha Kaye and Linda Summers.

Kevin J. McInerney, San Diego, James F. Clapp, Carlsbad, for Plaintiff and Respondent, Dawn Lofton.

Chavez & Gertler, Mark A. Chavez, Mill Valley, Nance F. Becker, San Francisco, for Intervenor and Respondent Terri Maxon.

Littler Mendelson, Mary D. Walsh, Lindbergh Porter, Jr., San Francisco, for Defendant and Respondent Wells Fargo Home Mortgage.

Siggins, P.J.

In Lofton v. Wells Fargo Home Mortgage (2014) 230 Cal.App.4th 1050, 179 Cal.Rptr.3d 254 (Lofton I ), we affirmed a temporary restraining order (TRO) that required appellant Initiative Legal Group, APC (ILG) to deposit into a court supervised escrow account over $5 million of settlement proceeds it claimed were attorneys’ fees in cases it brought against Wells Fargo Home Mortgage, Inc. (Wells Fargo), on behalf of some 600 former clients. The TRO was predicated on an allegation that ILG's clients were in fact members of a class compensated by a $19 million settlement of class action claims approved by the San Francisco Superior Court in this case, Lofton v. Wells Fargo Home Mortgage (Lofton), and that ILG was compensating itself out of its separate settlement without court approval for class claims resolved by the Lofton settlement.

The Factual and Procedural Background portion of our Lofton I opinion sets forth the unique factual context of this case. In part, those facts showed that ILG concealed from the Lofton court and its class member clients the $6 million settlement with Wells Fargo for payment of its attorney's fees in violation of California Rules of Court, Rule 3.769 (b). (Lofton, supra, 230 Cal.App.4th at p. 1063, 179 Cal.Rptr.3d 254 )

In light of ILG's attempt to arrogate to itself millions in fees for claims resolved in Lofton, we queried whether the record would support any fee award to ILG and indicated that, if the allegations supporting the TRO were true, "it would be within the court's jurisdiction to review the supplemental fee agreement and to order the ILG attorneys to disgorge some or all of the fees already received." (Lofton I, supra, 230 Cal.App.4th at p. 1064, 179 Cal.Rptr.3d 254.) We held that consideration of these issues on remand would "fall within the scope of the court's continuing jurisdiction under [Code of Civil Procedure] section 664.6, section 128 and the court's equitable authority to ensure the fair and orderly administration of justice and protect the integrity of its judgment in the class action." (Lofton, I, supra, 230 Cal.App.4th at p. 1068, 179 Cal.Rptr.3d 254.)

On remand, the trial court considered exactly those issues and more, and concluded ILG was not entitled to an award of attorney's fees. The monies on deposit with the court were instead directed to be paid to the Lofton class members who participated in the settlement, including ILG's clients. ILG and parties who sought to intervene and vacate the Lofton and ILG settlements appeal. We affirm.

BACKGROUND

A. The Parties

Plaintiffs and respondents Lofton et alia are a class of home mortgage consultants who alleged they were misclassified as exempt employees by Wells Fargo. Since 2005, they were represented by class counsel Kevin McInerney and James Clapp. (Lofton, I, supra, 230 Cal.App.4th at p. 1054, 179 Cal.Rptr.3d 254.) Appellant ILG is a law firm that represented approximately 600 Wells Fargo home mortgage consultants alleging the same claim as the Lofton class in multiple lawsuits brought on behalf of 30 to 90 plaintiffs in each. (Id. at p. 1055, 179 Cal.Rptr.3d 254.) Marc Primo Pulisci, G. Arthur Meneses, Joseph S. Liu and Monica Ballarama were attorneys affiliated with ILG. Mark Yablonovich was an attorney formerly affiliated with ILG who filed the putative class action Peña v. Wells Fargo that was dismissed because its claims were resolved by the Lofton settlement.¹ Burke Huber was an attorney affiliated with Yablonovich. Appellants Linda Summers and Marsha Kaye are members of the Lofton class and were clients of ILG. They sought to intervene following our remand and moved to vacate the Lofton and ILG settlements. Yablonovich and Huber represented Summers and Kaye respectively when the motions to intervene were filed but withdrew when motions to disqualify them from such representation were pending. Respondent Wells Fargo Home Mortgage is the defendant in Lofton and in the individual and putative class cases filed by ILG and Yablonovich. Respondent Maxon is also a member of the Lofton class and former client of ILG.² In September 2012, Maxon filed a putative class action against ILG and four of its attorneys for secretly settling its clients’ claims with Wells Fargo without their knowledge or participation. (Lofton, supra, 230 Cal.App.4th at p. 1058, 179 Cal.Rptr.3d 254 ) At the same time, Maxon intervened in this case and obtained the temporary restraining order that we affirmed in the previous appeal, freezing the funds ILG was to pay itself out of the Wells Fargo settlement. (Id. at pp. 1059-1060, 179 Cal.Rptr.3d 254 ) Maxon is represented by Mark Chavez and Richard Zitrin.

B. The Proceedings on Remand

Following our remittitur, the superior court conducted a case management conference in April 2015, issued an order directing the parties to provide detailed information about the Lofton and ILG settlements, invited motions for attorneys’ fees, and set June 24, 2015 as a hearing date for injunctive relief, pending motions and applications, including "[t]he status and determination of the disposition of the $5.9 million Wells Fargo transferred to ILG." At that time, there were before the court motions to intervene filed by appellants Kaye, Summers and others, Summers’ motion to vacate the Lofton judgment, Maxon's motion for an injunction and to enforce the settlement agreement, Maxon's motion for attorney's fees and a slew of evidentiary objections and requests for judicial notice. We will discuss only the evidence and proceedings concerning the issues raised in this appeal.

1. The Summers/Kaye Intervention Motion

Summers moved to intervene and to vacate the Lofton judgment and the ILG settlement Kaye joined in Summers’ motion. The motion to vacate the judgment was supported with a declaration from Summers’ attorney Mark Yablonovich who was present at the 2011 mediation between Wells Fargo, the Lofton plaintiffs and ILG. The Yablonovich declaration contains facts specifying the scope of his representation of Ms. Summers, but otherwise contains no factual showing supporting the need or timeliness for her intervention. The court denied the motion as untimely and because it would unduly enlarge the issues before the court.

2. ILG's Arguments Before the Court at the Injunction Hearing

ILG raised a host of challenges to the court's ability to consider and order any disposition of the settlement fund it negotiated with Wells Fargo. First, it argued that the court had no jurisdiction over the ILG settlement insofar as the court was relying on the concept of exclusive concurrent jurisdiction. Second, it argued the court's equitable power did not extend to any remedy designed for a subclass of the Lofton class (ILG clients) who had an adequate remedy at law in their separate action against ILG filed in September 2012. It then argued that any relief ordered in this case that characterized the ILG settlement funds as anything other than a private agreement between ILG and its 600 clients would require the court to vacate both settlements, and provide, at the very least, new notices to the plaintiffs and the opportunity to opt out of the Lofton class. Finally, ILG argued that any final order of distribution of the funds would be premature because there were issues concerning a group of plaintiffs represented by McInerny and Clapp who did not participate in the settlement, and proceeding to the merits on the record developed before the court would deny ILG its rights to due process under law.

3. Home Mortgage Consultant Litigation Against Wells Fargo as It Bore upon Exclusive Concurrent Jurisdiction.

The first case was Mevorah v. Wells Fargo Home Mortgage (Mevorah) filed in 2005 by counsel Kevin McInerney in San Francisco Superior Court on behalf of a putative class. Wells Fargo removed that case to federal court. The Northern District of California certified the case as a class action, but the Ninth Circuit vacated certification and remanded the case back to the district court. Mevorah was pending before the district court, and class counsel was going to file a renewed motion for class certification when Wells Fargo agreed to the mediation in Mevorah that settled the class claims. The instant case (Lofton) was filed in the San Francisco Superior Court on March 24, 2011 for the purpose of seeking approval of the class settlement agreed to in the Mevorah mediation. Class counsel explained in seeking approval that Lofton was filed in state court to avoid addressing whether certification of the class could be done under federal law in Mevorah, even for settlement purposes. Mevorah was voluntarily dismissed in December 2011 following approval of the Lofton settlement.

After Mevorah was filed in 2005 but before Lofton was filed in 2011, ILG filed a dozen cases on behalf of groups of home mortgage consultants against Wells Fargo. One of them, Strickler v. Wells Fargo Bank (Strickler), was a PAGA representative action, and at least one, Hollander v. Wells Fargo Bank (Hollander), was a class action. The other 10 were individual cases...