Liguori, Jr. v. Wells Fargo Bank, N.A.

Background

William Liguori, Jr.; Tricia Liguori; Jose Aguilar; and Elizabeth Manley brought a proposed class action against Wells Fargo Bank, N.A. They alleged violations of the Real Estate Settlement Procedures Act, a federal mortgage-servicing law, and state law.

The plaintiffs alleged that errors in Wells Fargo’s automated software for residential mortgage-loan servicing caused Wells Fargo to deny them loan modifications or temporary repayment plans for which they otherwise would have qualified under programs including the Home Affordable Modification Program and Federal Housing Administration programs. Aguilar and Manley alleged that U.S. Bank later sold their home at a foreclosure sale. The Liguoris alleged that Wells Fargo caused their home to be sold at a foreclosure sale. The plaintiffs also alleged that Wells Fargo sent them a 2018 letter acknowledging that software errors had caused denials of trial loan modifications to which they otherwise would have been entitled.

Related Settlement Litigation

A proposed nationwide class action, referred to in the opinion as Hernandez v. Wells Fargo Bank, N.A., was pending in the U.S. District Court for the Northern District of California. That court had certified a nationwide breach-of-contract class involving people who, between 2010 and 2018, qualified for certain loan modifications or repayment plans, were not offered one because excessive attorneys’ fees were included in Wells Fargo’s decision-making process, and whose homes Wells Fargo sold in foreclosure.

The parties in that related case negotiated a settlement. The California court granted preliminary approval and later held a hearing on final approval, but continued that hearing. The Judicial Panel on Multidistrict Litigation had denied a request to combine the related cases, noting that a stay of other cases could minimize overlapping proceedings while the settlement proceeded.

Motions Before the Court

Wells Fargo moved under Rule 12(b)(6) to dismiss the complaint for failure to state a claim. It also moved to stay this case until the California court decided whether to grant final approval of the proposed nationwide settlement.

The plaintiffs opposed the stay. They argued that delay would prejudice them because they had lost the opportunity to save their homes and because Aguilar and Manley might not fall within the proposed settlement class. They also stated that the Liguoris expected to seek separation from this case because they planned to participate in the pending settlement.

Court’s Analysis

The court applied five factors used to decide whether to stay a case: the plaintiffs’ interest in moving forward and the possible prejudice from delay; the defendant’s interests and burdens; the courts’ interests; the interests of nonparties; and the public interest. The court also considered whether Wells Fargo had shown a clear hardship or inequity from having to proceed while the related settlement was pending.

The court found that the first factor supported a stay because delay alone did not establish prejudice, and the harm from the plaintiffs’ loss of an opportunity to save their homes had occurred years earlier and was not caused or changed by the requested stay. The court also concluded that the Liguoris remained parties to this case. Even if they later left, the court found that Aguilar and Manley continued to assert claims for a proposed class that substantially overlapped with the settlement class.

The second and third factors supported a stay because proceeding could require Wells Fargo and the court to conduct duplicative discovery and motion practice. The court noted that some proposed class members might qualify for the related settlement but could ultimately opt out. Waiting could therefore narrow or reduce unnecessary pretrial work.

The fourth and fifth factors also supported a stay. The court stated that a stay would reduce the possibility of conflicting orders in substantially similar litigation and promote judicial efficiency. Because discovery had not begun and the dismissal motion had already been fully briefed, the court found that the briefing could be refiled and decided after the California court resolved the final-approval motion and this case’s stay was lifted.

Disposition

The court GRANTED Wells Fargo’s motion to stay until the Northern District of California determined whether to grant final approval of the proposed nationwide settlement. The case was STAYED until further court order. Wells Fargo was ordered to notify the court within ten days after the California court resolved the final-approval motion.

The court TERMINATED Wells Fargo’s motion to dismiss without prejudice to refiling if and when the stay was lifted. The court did not decide the merits of the plaintiffs’ claims or whether the complaint stated a claim.