Hudson v. Wells Fargo & Company

Background

Kurt L. Hudson, representing himself, brought a proposed class action against Wells Fargo Bank, N.A. (the Bank) and Wells Fargo & Company (the Holding Company). He alleged that he obtained a mortgage loan from the Bank in 2005 for a second home in Florida, later defaulted after hardships associated with the 2008 recession, and applied for a loan modification under the Home Affordable Modification Program and the National Mortgage Settlement. He alleged that the Bank denied the application because of errors in its loan-modification software and failed to disclose those errors. The complaint asserted nine causes of action, including contract, unfair-competition, fraud, fiduciary-duty, and Racketeer Influenced and Corrupt Organizations Act claims.

The Bank acknowledged in its reply that it had publicly disclosed software errors that caused denials for certain borrowers. It said that it voluntarily created a remediation program, sent letters and some checks, and offered mediation to affected borrowers. Hudson alleged that he was denied a modification because of the faulty software, but admitted that the Bank did not contact him about the remediation program.

Class Allegations

Hudson sought to represent a proposed class of approximately 1,152,000 people. The court held that a person representing himself cannot serve as a proposed class representative or act as an attorney for other people. It therefore granted the motion to dismiss the claims brought on behalf of the proposed class, without prejudice to reasserting those claims if Hudson obtained counsel.

Claims Against Wells Fargo Bank, N.A.

The Bank argued that the court lacked personal jurisdiction, meaning the court lacked authority to exercise power over that defendant. Hudson was an Illinois resident, the mortgage concerned a Florida property, the Bank’s mortgage-servicing business was located in Iowa, and the Bank’s computer servers were located in Florida. Hudson argued that the Bank conducted substantial business in California and had serviced mortgages for California properties, but the court found those allegations insufficient.

The court concluded that Hudson had not shown either general personal jurisdiction or specific personal jurisdiction over the Bank. His claims did not arise from the Bank’s mortgage services for California properties; they concerned his Florida property. The court therefore granted the motion to dismiss the claims against the Bank for lack of personal jurisdiction.

Claims Against Wells Fargo & Company

The Holding Company’s principal place of business was in California, but Hudson alleged that the Bank—not the Holding Company—serviced his mortgage. The court explained that a parent company is not automatically liable for a subsidiary’s conduct. Under the alter-ego theory discussed by the court, a parent may be held responsible only in limited circumstances involving both a lack of meaningful separateness between the entities and an injustice or fraud that would result from treating them as separate.

Hudson alleged that the Holding Company controlled the Bank’s management, hiring, policies, and business strategy. The court held that those allegations alone did not establish alter-ego liability. Hudson also suggested in his opposition brief that the Holding Company participated in the wrongdoing, but the court found that he did not explain in the complaint what misconduct the Holding Company itself committed. The court therefore granted the motion to dismiss the claims against the Holding Company.

Motion to Strike

The defendants asked the court to strike the excess pages of Hudson’s 44-page opposition brief. Hudson said he exceeded the page limit inadvertently because of vision problems. The court agreed that he violated the local rules but exercised its discretion to deny the motion to strike. It warned that his status as a self-represented litigant did not excuse compliance with federal rules, local rules, and standing orders in the future.

Disposition

The court granted the motions to dismiss and denied the motion to strike. It stated that it could not conclude at that stage that amendment would be futile and gave Hudson until August 12, 2022, to file an amended complaint. The order warned that failure to amend could result in dismissal of the action without further leave to amend, and that an amended complaint would be dismissed if it did not correct the deficiencies identified in the order.