Hernandez v. Wells Fargo Bank, N.A.

Background

The plaintiffs alleged that Wells Fargo serviced their mortgage loans and failed to offer mortgage modifications even though they met the requirements of the Home Affordable Modification Program, or HAMP. Wells Fargo later discovered a calculation error that misstated certain fees and resulted in incorrect mortgage-modification denials.

The operative complaint asserted breach of contract, intentional infliction of emotional distress, wrongful foreclosure, violations of California’s Homeowners Bill of Rights and unfair-competition law, and violations of state consumer-protection laws. The plaintiffs sought certification of a nationwide class and several state subclasses.

Third Amended Complaint

The plaintiffs sought leave to add Sandra Campos, whose property was secured by an instrument issued by the Federal Housing Administration. The court found good cause to permit the amendment and granted the motion for leave to file a third amended complaint. The court directed the plaintiffs to file it by February 6 at noon.

Class-Certification Standard

The court applied Federal Rule of Civil Procedure 23. That rule requires proposed class representatives to show numerosity, common legal or factual questions, typical claims, and adequate representation. For the proposed nationwide class, the plaintiffs also had to show that class treatment was superior to other ways of resolving the dispute and that common questions predominated over individualized ones.

Breach-of-Contract Class

The court denied the plaintiffs’ proposed classes but certified a narrower nationwide class under Rule 23(b)(3) for the breach-of-contract claim. The certified class includes:

- people in the United States who, between 2010 and 2018, qualified for a home-loan modification or repayment plan under requirements of government-sponsored enterprises such as Fannie Mae and Freddie Mac, the Federal Housing Administration, or HAMP; - people who were not offered a modification or repayment plan by Wells Fargo because excessive attorney’s fees were included in the loan-modification decision process; and - people whose homes Wells Fargo sold in foreclosure.

The court concluded that the class was sufficiently numerous, even though the record identified at least 33 members. Geographic dispersion and the members’ lack of financial resources supported certification. The court also found common questions because the claims concerned standardized Fannie Mae/Freddie Mac and Federal Housing Administration contracts and whether those contracts required Wells Fargo to provide notice about available loan modifications.

The court recognized that state-law differences and some individualized evidence might arise, but found those issues manageable. It also found that limiting the class to people whose homes were foreclosed would allow damages to be calculated using common evidence concerning the equity lost through foreclosure. The court found the claims of Debora Granja and Sandra Campos typical of the class and found both them and their counsel adequate representatives. On balance, the court found a nationwide class superior to individual litigation.

Other Proposed Classes and Claims

The court denied certification of an issue class concerning whether Wells Fargo’s conduct was “outrageous” for purposes of the intentional-infliction-of-emotional-distress claim. That question depended on differing state laws and the facts of each borrower’s situation.

The court denied certification of the proposed state consumer-law subclasses because common issues would not predominate. It also denied certification of the proposed California classes involving California’s unfair-competition law and Homeowners Bill of Rights because joinder was practicable and the proposed class had at most 24 members. The court denied certification of the California and Georgia wrongful-foreclosure subclasses because they had at most 15 and 18 members, respectively, and were not sufficiently numerous. The court stated that damages would be obtainable through the contract claim.

Other Motion and Disposition

Wells Fargo sought leave to file a supplemental brief concerning the calculation of restitution by the plaintiffs’ damages expert. Because the court limited certification to the breach-of-contract claim and did not certify the unfair-competition claim, it denied that administrative motion as moot.

The court’s overall disposition was that the plaintiffs’ motion for class certification was granted in part and denied in part. The class was certified only for the breach-of-contract claim, Debora Granja and Sandra Campos were appointed class representatives, and Michael Schrag and Richard Paul were appointed class counsel. The parties were ordered to submit a proposal for notifying the class.