Young v. Wells Fargo & Co.

• Decision Date: 27 October 2009
• Docket Number: No. 4:08-cv-507 RP-CFB.,4:08-cv-507 RP-CFB.
• Citation: 671 F.Supp.2d 1006
• Parties: Gregory YOUNG, Odetta Young, Edward Huyer, Connie Huyer, and Sue Ann Ross, on behalf of themselves and all others similarly situated, Plaintiffs, v. WELLS FARGO & COMPANY and Wells Fargo Bank, N.A., Defendants.
• Court: U.S. District Court — Southern District of Iowa

671 F.Supp.2d 1006

Gregory YOUNG, Odetta Young, Edward Huyer, Connie Huyer, and Sue Ann Ross, on behalf of themselves and all others similarly situated, Plaintiffs, v. WELLS FARGO & COMPANY and Wells Fargo Bank, N.A., Defendants.

No. 4:08-cv-507 RP-CFB.

United States District Court, S.D. Iowa, Central Division.

October 27, 2009.

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Deborah Clark-Weintraub, Whatley Drake & Kallas LLC, Michael R. Reese,

Kim E. Richman, Reese Richman LLP, New York, NY, Roxanne Barton Conlin, Roxanne Conlin & Associates, Des Moines, IA, Sara C. Hacker, Whatley Drake & Kallas LLC, Birmingham, AL, Mario A. Pacella, J. Preston Strom, Jr., Strom Law Firm LLC, Columbia, SC, for Plaintiffs.

Michael A. Giudicessi, Faegre & Benson LLP, Des Moines, IA, Mark D. Lonergan, Michael J. Steiner, John B. Sullivan, Joshua Eric Whitehair, Severson & Werson, San Francisco, CA, for Defendants.

MEMORANDUM OPINION AND ORDER

ROBERT W. PRATT, Chief Judge.

Before the Court is Defendants', Wells Fargo & Co. (hereinafter "WFC") and Wells Fargo Bank, N.A. (hereinafter "WFB") (collectively "Wells Fargo" or "Defendants"), Motion to Dismiss the Corrected First Amended Complaint and Strike Allegations or, in the alternative, Motion for a More Definite Statement (hereinafter "Motion to Dismiss"), filed on April 6, 2009. Clerk's No. 51. Plaintiffs, Gregory Young and Odetta Young (collectively "the Youngs"), Edward Huyer and Connie Huyer (collectively "the Huyers"), and Sue Ann Ross ("Ross"), (collectively "Plaintiffs") filed their Response to the Motion to Dismiss on May 6, 2009. Clerk's No. 63. Wells Fargo filed a Reply in Support of the Motion to Dismiss on May 27, 2009. Clerk's No. 64. The Court heard oral arguments on the Motion to Dismiss on August 17, 2009. Clerk's No. 81. The matter is fully submitted.

I. FACTUAL AND LEGAL ALLEGATIONS

The allegations in this putative class action center around Wells Fargo's use of a computer system that, according to Plaintiffs, is programmed to automatically assess excessive mortgage servicing fees following late payments. First Am. Compl. (hereinafter "Compl.") ¶ 3. Each named Plaintiff has a home mortgage with Wells Fargo. Id. ¶¶ 44, 56, 66. The Huyers also have a second home mortgage, which they obtained from Star Funding, LLC. Id. ¶ 54. Each of these mortgages is serviced by WFB, through its mortgage servicing division, Wells Fargo Home Mortgage. Id. ¶¶ 44, 56, 66. Plaintiffs allege that Wells Fargo uses a specially programmed computer software platform, called the Fidelity Mortgage Servicing Package (hereinafter "Fidelity MSP"), to manage and administrate its mortgage servicing, and that the system has been used to systematically charge unwarranted, improper, and unreasonable property inspection fees and late fees. Id. ¶¶ 1-3, 27, 37. With respect to the property inspection fees, Plaintiffs allege that the Fidelity MSP system is programmed to automatically charge as many property inspection fees as possible, irrespective of whether they are reasonably necessary. Id. ¶¶ 3, 51, 63. They highlight that Wells Fargo's computer system ordered property inspections while mortgagors continued to make payments on their home mortgages, that each property inspection is only a drive-by inspection, and that no one reviews the results of the property inspections. Id. ¶¶ 34-35, 47-51, 59-63. Plaintiffs argue that this practice of indiscriminately ordering, and charging borrowers for, property inspections is unreasonable and violates the terms of the mortgage agreements. Id. ¶¶ 20-21, 40.

Regarding the late fees, Plaintiffs contend that the Fidelity MSP system was programmed to "stack" late fees by misapplying incoming payments after a missed payment. Id. ¶¶ 3, 52-53, 64-65; Tr.¹ at 37, 48. Plaintiffs assert that payments they made after missing a payment have been applied to outstanding fees and costs before satisfying principal and interest. Compl. ¶¶ 3. According to Plaintiffs, this practice violates the terms of the borrowers' mortgage agreements and results in additional and wrongfully charged late fees. Id. ¶¶ 3, 20, 21.

Plaintiffs allege that Wells Fargo knew, or recklessly disregarded, that the property inspection fees and late fees were unreasonable and unlawful, and that the Fidelity MSP system was intentionally designed and operated to defraud mortgagors, who had their mortgages serviced by Wells Fargo. Id. ¶¶ 37-38, 83. In addition, Plaintiffs assert that Wells Fargo repeatedly sent Plaintiffs materially false and misleading agreements, contracts, and monthly mortgage statements by mail and wire, and that the scheme was designed to conceal its existence, i.e., by listing the property inspection fees as "other charges" on mortgage statements. Id. ¶¶ 40-41.

Plaintiffs bring this action on behalf of themselves, as well as a nationwide class defined as "all persons who were charged computer-generated fees by Wells Fargo as a result of a late payment of their mortgage." Id. ¶ 90. Plaintiffs claim Defendants have violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961, et seq. (Counts I-II); various states consumer protection laws (Counts III-VI); and that Wells Fargo's actions constitute common law fraud, deceit and/or misrepresentation, and unjust enrichment (Counts VII-VIII). Id. ¶ 10. Wells Fargo sets forth numerous argument in its Motion to Dismiss, asserting individual failings in the RICO and state law claims, as well as a failure to set forth each claim with sufficient particularity. In addition, Wells Fargo requests the Court strike a portion of the Complaint. In the alternative to its arguments for dismissal, Wells Fargo asserts that each of the claims are vague and ambiguous, and it asks the Court to order a more definite statement of each. The Court will address each request.

II. DISMISSAL OF ROSS UNDER THE FIRST-FILED RULE

As an initial matter, the Court addresses Wells Fargo's request that Ross be dismissed as a named Plaintiff under the first-filed rule. Wells Fargo points out that Ross has another action pending in the Eastern District of California that presents the same claims as the present action. E.D. Cal. Case No. 2:09-cv-319; see also Clerk's No. 52, Ex. I (hereinafter "California Action").² Wells Fargo argues that Ross should be dismissed as a named Plaintiff because Ross's California Action was filed on December 8, 2008, several months before she joined this putative class action as a named Plaintiff on March 6, 2009. Plaintiffs counter that the "first-filed" rule does not apply here because Ross's California Action seeks different relief based on different events, and because the present action was filed on August 5, 2008, several months before Ross filed her California Action.

When an action is pending in two different courts, "[t]o conserve judicial resources and avoid conflicting rulings, the first-filed rule gives priority, for purposes of choosing among possible venues when parallel litigation has been instituted in separate courts, to the party who first establishes jurisdiction." Nw. Airlines, Inc. v. Am. Airlines, Inc., 989 F.2d 1002, 1006 (8th Cir.1993); U.S. Fire Ins. Co. v. Goodyear Tire & Rubber Co., 920 F.2d 487, 488 (8th Cir.1990) ("The well-established rule is that in cases of concurrent jurisdiction, `the first court in which jurisdiction attaches has priority to consider the case.'") (quoting Orthmann v. Apple River Campground Inc., 765 F.2d 119, 121 (8th Cir.1985)). "This first-filed rule `is not intended to be rigid, mechanical, or inflexible,' but is to be applied in a manner best serving the interests of justice. The prevailing standard is that `in the absence of compelling circumstances,' the first-filed rule should apply." Nw. Airlines, Inc., 989 F.2d at 1005. It is within a district court's discretion to apply the first-filed rule. Anheuser-Busch, Inc. v. Supreme Int'l Corp., 167 F.3d 417, 419 (8th Cir. 1999).

Ross's California Action brings suit against Wells Fargo, as well as several other mortgage servicers, for wrongful and unlawful acts in the negotiation and servicing of her home mortgage loans and associated foreclosure proceedings. In her California Action, Ross presents claims under both California statutory law and RICO based on, inter alia, the alleged fact that "defendants added costs and charges to the payoff amount of the note that were not justified or proper under the terms of the note or law." California Action, Compl. at 8. Both the factual allegation and the remedy requested obviously overlap with the allegations and requested remedy in the present class action. Therefore, this Court's jurisdiction over Ross's claim in the present action and the California Court's jurisdiction over her California Action are "parallel."

Further, though this putative class action was filed by the Youngs and the Huyers on August 5, 2008, Ross was not added as a named Plaintiff until the Amended Complaint was filed on March 6, 2009. Compare Clerk's No. 40 (transferring the case to Iowa from the District of California before Ross was added as a named Plaintiff) with Clerk's No. 41 (amending the Complaint to include Ross as a named Plaintiff). Only after a class has been certified and the unnamed class members are given notice, an opportunity to be heard, and a chance to opt out, can a court maintain jurisdiction over absent class members. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812-13, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985). It follows that before a putative class action is certified, the Court does not have jurisdiction over the claims of unnamed plaintiffs. Since the putative class has not yet been certified and because Ross did not join this class action as a named Plaintiff until after she filed her California Action on December 8, 2008, the Court concludes that the California court had jurisdiction over...