Gustafson v. BAC Home Loans Servicing, LP
294 F.R.D. 529
C.D. Cal.2013Background
- This is a proposed nationwide class action challenging force-placed insurance (FPI) practices by Bank of America Defendants, Balboa, Meritplan, and Newport.
- Plaintiffs allege Defendants used contractual authority to compel force-placed hazard insurance and charged improper or excessive costs.
- Newport, Balboa, and Meritplan underwrote FPI; Balboa and Meritplan billed BANA, which then passed charges to borrowers via escrow or new escrow accounts.
- BANA outsourced tracking/monitoring of hazard insurance to Newport; three-cycle letters were sent to borrowers before force placement.
- The operative complaint (TAC) asserts UCL, breach of contract, breach of the implied covenant, and unjust enrichment claims, seeking class treatment for those charged with FPI from 2007 to 2011.
- Court applies Nedlloyd framework and Mazza governmental-interest analysis to evaluate choice-of-law and the viability of a nationwide UCL class.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a nationwide UCL class is permissible under Nedlloyd choice-of-law. | Plaintiffs contend California law should apply for all class claims. | Defendants argue choice-of-law provisions designate foreign law; California law should not govern nationwide class claims. | Choice-of-law provisions are enforceable; nationwide UCL class denied. |
| Whether Mazza governmental-interest test supports applying California law for a nationwide class. | California has significant contact/aggregation with class claims. | Foreign states have stronger interests; California’s interest is attenuated. | Foreign states’ interests predominate; nationwide class not certified. |
| Whether Rule 23 requirements are satisfied for commonality and predominance. | Many common questions exist about FPI structure, charges, and tracking; damages class-wide. | State-law variations and individualized issues defeat commonality and predominance. | Commonality and predominance not met; no nationwide class certification. |
| Whether breach of contract claim can be certified given contract variation across loans. | Contracts uniformly permit lender action to maintain property; breaches arise from FPI provisions. | There are thousands of templates with material variations; extrinsic evidence required; state-law differences predominate. | Material contract-terms differences and state-law variation defeat certification. |
| Whether breach of implied covenant and unjust enrichment claims can be certified given state-law heterogeneity. | Common framework across states; damages/mechanisms uniform enough for class treatment. | Multiple states require different elements/remedies; individualized inquiries necessary. | State-law differences and need for individualized showing defeat class treatment. |
Key Cases Cited
- Nedlloyd Lines B.V. v. Super. Ct., 3 Cal.4th 459 (Cal. 1992) (choice-of-law scope includes all related claims within the contract)
- Washington Mutual Bank, FA v. Super. Ct., 24 Cal.4th 906 (Cal. 2001) (enforceability of choice-of-law provisions using Restatement factors)
- Mazza v. American Honda Motor Co., Inc., 666 F.3d 581 (9th Cir. 2012) (governing-law analysis for nationwide class actions under Mazza framework)
- Dukes v. Wal-Mart Stores, Inc., 131 S. Ct. 2541 (U.S. 2011) (class-action requirements and rigorous analysis for certification)
- Comcast Corp. v. Behrend, 133 S. Ct. 1426 (U.S. 2013) (predominance standard in class actions is demanding and requires common proof)