MEMORANDUM OF OPINION AND ORDER
Bеfore the Court are Plaintiffs Frederick and Lorraine Gawry and Ingrid Carr’s Motion for Class Certification and Appointment of Class Counsel
(ECF No.
74) and Defendants Countrywide Home Loans, Inc. and Countrywide Home Loans Servicing EP’s Motions to Strike Class Allegations as to Putative Class 1(b)
(ECF No.
75) and for Summary Judgment as to All Claims Asserted by Plaintiff Ingrid Carr
(ECF No. 76).
For the following reasons, Plaintiffs’ Motion for Class Certification is DENIED, Defendants’ Motion to Strike Class Allegations as to Putative Class 1(B) is GRANTED, and Defendants’ Motion for Summary Judgment as to All Claims Asserted by Plaintiff Ingrid Carr is GRANTED. Because these decisions leave no viable causes of action, this case is
I. FACTS
In December, 2003, Plaintiffs Frederick and Lorraine Gawry (“the Gawrys”) executed an adjustable rate note in the amount of $310,250.00 and a mortgage securing that note. ECF No. 70 at ¶ 13. Shortly thereafter, Countrywide Home Loans, Inc. (collectively with Countrywide Home Loans Servicing LP, “Countrywide” or “Defendants”) acquired the Gawrys’ note and mortgage which contained a prepayment/refinancing penalty. ECF No. 70 at ¶ 15; ECF No. 71 at 2. In June, 2005, the Gawrys paid off their note in full prior to its expiration date in order to refinance. ECF No. 70 at ¶ 17. To obtain a paid note and release of the mortgage lien, the Gawrys were required to pay Countrywide an $8.910.53 penalty, amounting to 2.87% of the original principal loan amount. Id. at ¶ 18-20.
Similarly, in August, 2004, Plaintiff Ingrid Carr (“Carr” or collectively with the Gawrys, “Plaintiffs”) executed an adjustable rate note in the original principal amount of $92,800.00 and a mortgage securing that note, expressly made pursuant to R.C. § 1343. ECF No. 70 at ¶22, 24. Shortly thereafter, Countrywide acquired Carr’s Note and Mortgage. Id. at ¶25. Carr’s Note contained a prepayment rider imposing a 5% prepayment penalty of the original principal loan amount if Carr fully paid off the loan within three years of the date of the note. Id. at ¶ 27. Three years passed, during which time Carr did not fully pay off the loan and thus did not incur any prepayment charge. ECF No. 76 at 1.
On February 6, 2007, Plaintiffs filed this class action complaint against Defendants Countrywide Home Loans, Inc. and Countrywide Home Loans Servicing LP (collectively, “Countrywide”). ECF No. 1. Plaintiffs, individually and on behalf of those similarly situated, bring several claims alleging that Countrywide violated Ohio Revised Code (“R.C.”) § 1343 prohibiting residential mortgage prepayment or refinancing penalties in excess of 1% of the original principal loan amount.
The Gawrys sue on behalf of Ohio residents who paid a prepayment or refinancing penalty in excess of the limits imposed by R.C. § 1343.011(C) during the six years prior to this action (“Class I”). ECF No. 70 at ¶ 28. Class I asserts four causes of action including: usury; unfair and deceptive trade practices that violate Ohio Consumer Sales Practices Act; unjust enrichment; and violation of Ohio public policy. Id. at ¶¶ 41, 51-52, 57, 61. For relief, the Gawrys request: damages in the amount the penalties exceed 1% of the original principal loan amount; a declaration that Countrywide violated R.C. § 1343.011(C) and that the prepayment provisions are therefore void and unenforceable; and appropriate injunctive and equitable relief including an award of litigation costs and attorney fees. Id. at pp. 10,12.
Carr seeks to represent those Ohio residents whose note contains a similar prepayment rider, but have not yet paid a prepayment penalty (“Class II”). Class II joins Class I in all claims except unjust enrichment. Class II requests: entry of a Court order that they may rescind or reform their loan documents to eliminate the allegedly usurious prepayment penalty provisions; а declaration that the respective notes violate R.C. § 1343.011(C); damages sustained because of the increased cost of credit created by the inclusion of the prepayment penalty provision in their notes;
1
and appropriate injunctive and equitable relief including an award of
On April 9, 2007 Countrywide filed a motion to dismiss for lack of subject matter jurisdiction arguing that the Gawrys’ claims should be dismissed because: (1) Countrywide’s prior offer to refund the Gawrys’ penalty in the amount it exceeded Ohio’s 1% limit mooted the Gawrys’ claim; (2) the Gawrys failed to notify Countrywide of their claim and therefore denied Countrywide the contractually obligated opportunity to cure the alleged injury; and (3) Carr lacks standing to sue because she did not pay the prepayment penalty and thus suffered no concrete injury. ECF No. 7. The Court denied the motion to dismiss on June 13, 2007. ECF No. IS. Subsequently, the Court engaged the parties in frequent telephone conferences to facilitate settlement. On December 19, 2007, after the parties notified the Court of their inability to settle any claims, Countrywide filed a motion for summary judgment against Ingrid Carr arguing, again, that Carr lacked standing and that her state law claims аre preempted by federal law. ECF No. 21. On August 25, 2008 the Court denied Countrywide’s motion for summary judgment concluding that unresolved questions of material fact precluded summary judgment. ECF No. 4,9.
With the Court’s assistance, the parties settled the claims of certain Class I members by dividing the class into two subclasses: (a) those individuals against whom Countrywide did not possess a preemption defense (“Class 1(a)”); and (b) those individuals against whom Countrywide intends to present a preemption defense (“Class 1(b)”). The settlement required Countrywide to refund the prepayment penalty each Putative Class 1(a) member paid in excess of 1% of their original principal loan amount. To effectuate the settlement, on September 22, 2008, Plaintiffs amended the Second Complaint to add a Fifth Claim for Relief alleging a cause of action specifically on Putative Class I(a)’s behalf and moved for class certification of Putative Class 1(a). ECF No. 50. Pursuant to a February 3, 2009 fairness hearing, the Court approved the settlement by certifying Class 1(a) and entering final judgment on Class I(a)’s claims, dismissing their claims with prejudice. ECF No. 67.
Pursuant to the Court’s October 20, 2008 Scheduling Order, the parties subsequently engaged in discovery regarding class certification. ECF No. 58. On March 23, 2009, the parties filed the three motions now before the Court. Plaintiffs filed a Motion for Class Certification (“Motion for Class Certification”) of Classes 1(b) and II under Federal Rules of Civil Procedure 23(b)(2) and/or 23(b)(3). ECF No. 74. Countrywide filed a Motion to Strike Class Allegations as to Putative Class 1(b) (“Motion to Strike”) alleging that because there is no viable representative for Putative Class 1(b), class allegations in the complaint should be removed. ECF No. 75. Additionally, Countrywide filed a Motion for Summary Judgment as to All Claims Asserted by Plaintiff Ingrid Carr (“Motion for Summary Judgment”) arguing that she cannot recover her requested relief because she lacks evidence proving she suffered any cognizable harm. ECF No. 76. Responses and replies have all been filed.
II. STANDING
As an initial matter, Countrywide argues the Court should deny class certification because the Gawrys and Carr lack standing.
ECF No. 82-1
at 29. Countrywide claims the Gawrys lack standing because they voluntarily settled their individual
Plaintiffs argue that Countrywide cannot attempt to “pick off’ its named representatives in order to defeat class certification.
ECF No. 81
at 16. Plaintiffs’ contend the Gawrys may continue to represent the remaining members of Class I despite settlement of their individual claims because delays caused by unsuccessful settlement negotiations and Countrywide’s filing of motions ultimately denied warrant application of the “relation back” doctrine (i.e. that the Court should judge the Gawrys’ standing at the time the complaint was filed to preserve the merits of Putative Class I(b)’s claims).
Id.
at 17-18 (citing
Sosna v. Iowa,
While the Gawrys’ claims are moot because they have been sеttled and dismissed with prejudice (ECF No. 67), even if their case had not settled, they cannot represent putative Class 1(b) because they are not and have never been members of this class. The Supreme
Court stated in
Sosna v. Iowa,
Carr also may not represent Putative Class 1(b) because she did not pay Countrywide a prepayment penalty, a prerequisite to membership in that class. Additionally, Carr’s claim is now moot and consequently she cannot represent Putative Class II. To maintain a class action, “a named plaintiff [must have] a [live] case or controversy at the time the complaint is filed and at the time the class action is certified.”
Sosna,
III. RULE 23(b)(3) CERTIFICATION
Under Federal Rule of Civil Procedure 23(b)(3), a class action may be maintained if, along with meeting the prerequisites of Rule 23(a), 3 “the court finds that the questions of law fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”
The matters relevant to that inquiry include: (A) the interests of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the difficulties likely to be encountered in the management of a class action. Id.
A. PREDOMINANCE
The predominance inquiry tests whether the proposed class is sufficiently cohesive to warrant adjudication by representation.
Beattie v. CenturyTel, Inc.,
In their Opposition to Plaintiffs Motion for Class Certification, Countrywide argues that Plaintiffs have not met Rule 23(b)(3)’s predominance requirement because individualized evidence is required to: (1) determine to which putative class members R.C. § 1343.011(C) actually applies; (2) resolve Countrywide’s defenses; and (3) calculate damages. ECF No. 82-1 at 16-28. Analyzing and balancing each of these arguments individually, certification under Rule 23(b)(3) is inappropriate because the predominance requirement is not satisfied.
1. R.C. § mS.OU(C)
R.C. § 1343.011(C), pursuant to which Plaintiffs’ claims are brought, prohibits prepayment charges in excess of 1% for
Countrywide argues that individualized evidence is required to determine whether a putative class member’s mortgage qualifies for protection under R.C. § 1343.011(A)(2). ECF No. 82-1 at 16. Countrywide admits that while it can easily identify the instances where a prepayment penalty in excess of 1% was charged, it does not have the information pertaining to whether those instances are covered by R.C. § 1343.011(C) “in [an] easily accessible computerized format.” Id. at n. 8. Plaintiffs argue Countrywide has the information needed to assess whether a class member’s loan is protected under R.C. § 1343.011(C) and that because the class is limited to “residential mortgages,” all class members, by definition, may bring claims under that statute. ECF No. 91 at 11.
Countrywide’s argument, couched in terms of predominance, is directed more towards class definition and determining an individual’s membership in that class. One important purpose of a class definition is to “facilitate] a cоurt’s ability to ascertain its membership in some objective manner.”
Crawley v. Ahmed,
Civ. No. 08-14040,
Here, however, Class 1(b) and II are defined, in pertinent part, as “those who have incurred and/or paid ... and those whom are ... subject to, or will become subject to ... residential mortgage prepayment or refinancing penalties.” ECF No. 91 at 11 (emphasis omitted). This class definition provides an objective method for determining whether an individual is a member of the proposed class — -whether they were subject to, or will be subject to, an illegal residential mortgage prepayment penalty. Such a determination, even if not available in easily accessible cоmputerized format, will not involve an “extensive factual inquiry” that will degenerate into a series of subjective mini-trials. Accordingly, defining membership in this putative class is not an appropriate basis for finding a lack of predominance and Defendants’ argument is rejected.
2. Countrywide’s Defenses
Countrywide intends to assert at trial several defenses including: (1) Plaintiffs’ claims are preempted by federal banking laws; (2) Plaintiffs’ claims are preempted by the Alternative Mortgage Transactions Parity Act (“AMTPA”); (3) some putative class members lack standing because they initiated bankruptcy proceedings; and (4) under the Voluntary Payment Doctrine (“VPD”) those putative class members who voluntarily paid the prepayment penalty cannot recover damages. ECF No. 82-1 at 16-25. Countrywide claims the defenses defeat predominance because they require individualized fact-finding to resolve. Id. at 17-8.
“Because a defendant’s evidence may be probative of class cohesive
a. Banking Preemption
Countrywide asserts that it plans to raise as a defense that the Home Owners’ Loan Act (“HOLA”), 12 U.S.C.
§ 1461 et seq., and the National Bank Act (“NBA”), 12 U.S.C. § 1 et seq., preempt the claims of all members of putative Class 1(B) and many members of putative Class II. A critical issue in this case is whether Countrywide is even eligible to assert these banking preemption defenses. For example, while HOLA covers federal savings associations, Countrywide admits that it is not a federal savings association. ECF No. 19 at 3. Nevertheless, Countrywide argues that it is entitled to preemption under HOLA when it acquires a mortgage originated by a federal savings association. ECF No. 82-118. Thus, Countrywide claims resolution of its banking preemption defense hinges on transaction specific evidence, including: which entity originated the loan; whether that entity was entitled to claim preemption; the nature of the original assignment; whether all interests in the loan were assigned to Countrywide; and how the parties interpreted the language of the loan documents. Id. at 19-20.
Plaintiffs contend Countrywide’s federal banking preemption “is a legal defense that must be resolved by the Court” and should be uniformly adjudicated class-widе. ECF No. 91 at 12. Specifically, Plaintiffs argue that the individual factual inquires cited by Countrywide are unnecessary because the Court need only determine the legal issue of whether “preemption travels” from a federal savings association to a non-federal savings association in connection with the sale of a residential mortgage. Id. at 14.
The flaw in Plaintiffs’ argument is that the individual inquiries are unnecessary only if the Court determines the legal issue of preemption in Plaintiffs’ favor. If the legal issue of preemption is resolved in favor of Defendants, the Court will necessarily have to delve into the specific details of each individual transaction to determine whether Countrywide is entitled to a pre
That is not to say that the Court will determine the legal issue of banking preemption in favor of Defendants. After briefing was completed, the Supreme Court held, in a June 29, 2009 decision, that the NBA does not prohibit ordinary enforcement of state law.
Cuomo v. The Clearing House Assoc.,
557 U.S.-,
Nevertheless, a motion for class certification is not the appropriate forum for resolving on the merits such a critical legal issue as HOLA preemption.
See Rodney v. Northwest Airlines, Inc.,
b. AMTPA Preemption
Countrywide asserts that the AMTPA preempts class members’ claims when the loan originators that were entitled to assert AMTPA preemption assigned their defenses to Countrywide. ECF No. 82-1 at 21. This is very similar to Countrywide’s argument regarding banking preemption. Accordingly, Countrywide argues that resolution of this defense requires individualized assessments regarding the status of the loan originator (see supra) plus a determination whether the originator is a qualifying “housing creditor” under 12 U.S.C. § 3804(a). Id.
Plaintiff argues that Countrywide’s AMTPA defense should be resolved with class-wide evidence, stating:
“[t]he determinative issue under Countrywide’s AMTPA defense is not whether Countrywide comes under the auspices of AMTPA regulation, but whether the Ohio legislature opted out of the Depository Income and Deregulation Act (“DIDA”), the AMTPA’s enabling legislation. And if not, whether the AMTPA, prior to July, 2003, when the Office of Thrift Supervision (“OTS”) saw fit to сhange its position on prepayment penalties, preempted Ohio’s reasonable limitation (not prohibition) set forth in R.C. § 1343.011(C).”
ECF No. 91 at 14 n. 2.
Essentially, both parties argue the same thing under AMTPA preemption as they did under banking preemption. For example, Plaintiffs state that “whether Countrywide can legally purchase a housing creditor’s right of preemption afforded it under the AMTPA are, like Countrywide’s theory asserting preemption under the NBA and HOLA issues of law to be resolved by the Court.”
ECF No. 91
at 17. Countrywide
c. Lack of Standing Due to Bankruptcy Proceedings
Next, Countrywide argues that some putative class members lack standing because they initiated bankruptcy proceedings. Id. at 23. This defense, Countrywidе alleges, cannot be litigated class-wide because it involves analysis of three individual issues: “(1) whether the borrower filed a bankruptcy proceeding after being assessed a prepayment charge; (2) whether the borrower’s cause of action against Countrywide became part of the bankruptcy estate; and (3) whether the trustee later made some filing, or the bankruptcy court some order, allowing the borrower to pursue the cause of action against Countrywide.” Id.
Plaintiffs mischaracterize Defendants’ argument as requiring denial of class certification under Rule 23 “if the possibility exists that any putative class members may be in bankruptcy proceedings ...” ECF No. 91 at 17. Countrywide only asserts that they possess a standing defense to some potential class members who filed bankruptcy proceedings after obtaining their loans and that the “defense cannot be litigated on a class-wide basis.” ECF No. 82-1 at 23.
Plaintiffs nonetheless continue to argue that predominance is not defeated simply because some putative class members may have filed bankruptcy proceedings and that absent class members “need not make an individual showing of standing for the purposes of Rule 23 certification.”
ECF No. 91
at 18.
4
Plaintiffs are correct that the standing of the individual class members need not be determined at a Rule 23 class certification inquiry.
See In re Northwest Airlines Corp.,
d. Voluntary Payment Doctrine
Countrywide alleges that various members of putative Class 1(b) are barred from making a claim because they voluntarily paid the usurious prepayment charge.
ECF No. 82-1
at 24. Under the voluntary payment doctrine or defense (“VPD”), which is recognized in Ohio,
Scott v. Fairbanks Capital Corp.,
Plaintiffs’ first argument that the defense is inapplicable to the claims at issue for public policy reasons must be rejected. Under similar circumstances where a plaintiff alleged violation of R.C. § 1343.01, the Ohio Sixth District Court of Appeals upheld the voluntary payment defense where the usurious payment was voluntarily made based upon a mistake of law.
Luebke v. Moser,
Even if the Court were to ignore the
Luebke
ruling immediately discussed
supra,
Plaintiffs’ claim that the VPD does not apply to mistakes of law must also be rejected. Citing the Restatement (Third) of Restitution & Unjust Enrichment at Comment e, Plaintiffs challenge Countrywide’s assertion that a mistake of law is not an exception to the voluntary payment defense.
ECF No. 91
at 21. Plaintiffs criticize Countrywide’s use of
State ex rel. Dickman v. Defenbacher,
Next, Plaintiffs argue that, were the VPD applicable, it would not preclude class certification because courts assume that consumer class members do not knowingly or voluntarily pay more than required, making individualized inquiries unnecessary. ECF No. 91 at 20-21. That is, the Court can infer that a class member would not voluntarily pay a prepayment penalty in excess of 1% when state law dictates a maximum prepayment penalty of 1%. The problem with Plaintiffs’ argument is that where a plaintiff derives a benefit from contracting to pay more than required, the Court cannot make that assumption. The Gawrys contracted for a higher prepayment penalty in exchange for a lower interest rate on their loan. See ECF No. 83, Ex. D (“Prepayment Option Disclosure” form signed by Plaintiff Lorraine Gawry explaining a 1% interest rate reduction from 7.5% to 6.5% and a $208.32 monthly payment reduction for the “reduced rate option” with a prepayment penalty as compared to the standard adjustable rate mortgage). It is likely that other class members were provided similar options. Thus, individual inquiries would be required to explore whether the benefits received by putative class members rendered payment of the prepayment penalty voluntary.
Finally, Plaintiffs argue that, even if the Court accepts Countrywide’s characterization of the VPD, all the penalties were paid under duress as a matter of law and should be resolved with common evidence. ECF No. 91 at 22. Plaintiffs state the payments were “most likely” made in connection with the sale or refinancing of a residentially mortgaged property. Id. Therefore, putative class members had to pay the usurious prepayment penalty or be unable to sell or refinance their property. Id. This situation, Plaintiffs argue, constitutes duress as a matter of law. Id.
Plaintiffs argument again fails to recognize that some putative class members may have accepted a usurious prepayment penalty in exchange for a more favorable loan term, such as a lower interest rate. Thus, while the usurious penalty may have acted as an impediment to sale or refinancing, the benefit received in exchange for the prepayment penalty may have ultimately placed certain putative class members in better positions than had they not been subject to the prepayment penalty. While that does not render the prepayment penalty legal, it does not rise to the level of duress. Accordingly, it cannot be said that the usurious prepayment penalty constitutes duress as a matter of law. Therefore the individual circumstances of each transaction will have to be examined, weighing against a finding of predominance.
3. Damage Calculation 6
Countrywide argues that individual issues predominate in computing damages.
Plaintiffs argue that damages can be easily calculated as simply the prepayment penalty paid in excess of 1% of the original loan. ECF No. 91 at 25. Plaintiffs criticize Countrywide’s use of thе benefits rule arguing that Countrywide has offered no evidence proving that putative class members received lower interest rates. Id. at 24. Plaintiffs claim Countrywide has the required figures to calculate damages in their computer system or document image database. ECF No. 7k at 19. Finally, Plaintiffs state that disparate damage awards among class members does not defeat predominance. ECF No. 91 at 23.
Courts within the Sixth Circuit have held that if common issues predominate, class certification should not be denied simply because individual class members are entitled to differing damages.
Violette v. P.A. Days, Inc.,
Ohio applies the benefits rule which states, in pertinent part, that “the value of the benefit conferred is considered in mitigation of damages to the extent that [it] is equitable.”
Cline v. American Aggregates Corp.,
Because Countrywide’s formula is appropriate, the trier of fact must determine the benefits each class member received from their excessive prepayment penalty. Thus, the nature of the damage calculation would be individualized. For example, in determining the “benefits received” variable, the trier of fact would have to determine both the interest rate with the incurred prepayment penalty and what the interest would have been had a lower prepayment penalty been charged. While the incurred rate is easily determined, the hypothetical rate had there been a higher prepayment penalty been charged is not. Therefore, the damages calculation would require the trier of fact to plug in different variables based on distinct factors of each individual (i.e. credit score, relationship with the loan originator, etc.). The individualized nature of determining the variables to the formula weigh against a finding of predominance.
Rodney v. Northwest Airlines, Inc.,
B. SUPERIORITY
Having determined that the predominance requirement has not been met, it is unnecessary to examine whether the class action is the superior method for adjudicating the controversy. Nevertheless, considering the extent of the individual issues and evidence, the claims of numerous class members would break down into mini-trials. The class action would thus not be the superior means of resolving this case.
IV. RULE 23(b)(2) CERTIFICATION
Plaintiffs alternatively have moved to be certified as a Rule 23(b)(2) class. Rule 23(b)(2) permits class certification if the four requirements of Rule 23(a) are satisfied and “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive or corresponding declaratory relief is appropriate respecting the class as a whole ...” Fed.R.Civ.P. 23(b)(2).
Rule 23(b)(2) class actions are referred to as a “mandatory” class action because class members may not opt out of
Countrywide argues the classes should not be certified because it did not act on grounds generally applicable to the putative classes and Plaintiffs’ requested relief is inappropriate for a 23(b)(2) class. Id. Plaintiffs contend that the instant case is well-suited for 23(b)(2) certification because the putative classes are cohesive and Countrywide acted on grounds generally applicable to the classes thus making Plaintiffs’ requested declaratory relief appropriate. ECF No. 74, 91.
A. REQUESTED RELIEF ■
1. Declaratory v. Injunctive Relief
Countrywide first argues that 23(b)(2) certification is improper because Plaintiffs’ requested relief is only “declaratory in nature” and will not serve as a later basis for injunctive relief.
ECF No. 82-1
at 29 (citing
Bolin v. Sears, Roebuck & Co.,
In response, Plaintiffs argue that they seek more than declaratory relief. ECF No. 91 at 29. They note that injunctive relief is incorporated in the requested damages for Claim #2 (violation of Ohio Consumer Sales Practices Act) and, additionally, that Plaintiffs “seek all relief the court deems appropriate.” Id. (emphasis added). Furthermore, Plaintiffs claim that even if they sought only declaratory relief, Rule 23(b)(2)’s requirements are satisfied because there is no requirement that both declaratory and injunctive relief be requested. Id.
Rule 23(b)(2) permits class certification where “final injunctive relief
or
corresponding declaratory relief [is appropriate] with respect to the class as a whole.” Fed.R.Civ.P. 23(b)(2) (emphasis added). Declaratory or injunctive relief must be the predominant relief sought.
Coleman v. Gen. Motors Acceptance Corp.,
Countrywide’s argument that the putative classes cannot be certified because only declaratory relief is sought is unpersuasive. The plain text of Rule 23(b)(2) rebuts that argument stating that it applies where “final injunctive
or
corresponding declaratory relief’ is appropriately sought for the class as a whole. Courts within the Sixth Circuit have used a plain language reading of Rule 23(b)(2) to hold that either final injunctive or declaratory relief is appropriate.
See Bacon v. Honda of America Mfg. Inc.,
Countrywide next argues that, although Plaintiffs seek a declaration that the prepayment charges were illegal, putative Class I(b)’s predominant relief sought is monetary and therefore Rule 23(b)(2) is not applicable.
ECF No. 82-1
at 33-34. Plaintiffs counter by arguing that monetary damages do not predominate in this case because the “liability of the defendant can be determined by means of objective standards, can be easily calculated, and are not dependent on intangible, subjective differences that require time consuming efforts by the court on a case by case basis.”
ECF No. 91
at 28-9 (citing
Schemmer v. Chartone, Inc.,
Civ. No. 1:05-cv-02923AA,
Monetary damages, to an extent, are recoverable by 23(b)(2) class.
See Coleman v. Gen. Motors Acceptance Corp.,
A “critical factor” in the predominance of monetary damages is “whether [the] relief requested requires individualized damages determination or is susceptible to calculation on a class-wide basis.”
Coleman,
First, Plaintiffs’ request for monetary damages is not incidental to the requested declaratory relief. “[A]n action seeking a declaration that certain conduct constitutes a breach of conduct would not qualify under Rule 23(b)(2) because the effect simply is to lay the basis for a damage award rather than injunctive relief.”
Daffin v. Ford Motor Co.,
Civ. No. C-l-00-458,
Furthermore, Plaintiffs’ requested monetary damages are subject to precisely the “intangible and subjective differences” between each class member that even Plaintiffs note defeat 23(b)(2) certification.
Allison,
Putative Class II seeks a declaration that the prepayment provisions contained in their residential mortgages are void and unenforceable. ECF No. 70 at ¶ 43(b). Additionally, Class II seeks rescission of the allegedly usurious prepayment penalty provisions and reformation of those provisions to contain a 1% prepayment penalty.
Countrywide argues that rescission and reformation cannot be determined class-wide and claims that class certification is often denied when these remedies are sought because they are “highly fact-specific and individualized.”
ECF No. 82-1
at 32. (quoting
Clark v. State Farm, Mutual Automobile Insurance Co.,
Plaintiffs argue that reformation is a type of remedy that falls squarely within the scope of 23(b)(2) class certification. ECF No. 91 at p. 31. Plaintiffs state that reformation is inappropriate relief for a class action only where “extensive inquiry into the factual nature of each class member’s contract is necessary to dеtermine the appropriate changes.” Id. Plaintiffs, however, dispute that such extensive factual inquiries are required in the instant case and claim that “reformation of the notes to reset the prepayment penalty to 1% would be identical for every Class II member.” Id. Plaintiffs claim that all Countrywide would have to do is send a notice with an amended prepayment penalty provision to Class II members informing them that their prepayment penalty is now 1%. Id.
“The general rule [under Ohio law] is that a party seeking to rescind a contract or other instrument ... must first place the other
in statu quo,
by returning all money, property, or other benefits received by him under the contract which is sought to be rescinded.... ”
Passa v. City of Columbus,
Civ. No. 2:03-cv-81,
Rescission is a “purely personal remedy” and thus is incompatible with class action suits.
James v. Home Construction Co. of Mobile Inc.,
Thus, rescission and reformation of Class ITs contracts with Countrywide to eliminate the allegedly usurious prepayment penalty is incompatible with a class action proceeding. The Court, for example, cannot simply reduce an individual’s 3% or 4% prepayment penalty to 1%. Because rescission requires the parties to be placed back in the status quo at the time of contract formation, the Court would have to “unwind the clock” and attempt to determine what interest rate each specific loаn originator would have offered each individual class member at the time the mortgage was executed. This is a highly fact-intensive inquiry that diminishes the cohesiveness of Putative Class II beyond that permitted by Rule 23(b)(2). Accordingly, because the relief requested by the putative classes is not appropriate for certification, Plaintiffs’ motion to certify under Rule 23(b)(2) is denied. 9
Y. MOTION FOR SUMMARY JUDGMENT AS TO PLAINTIFF CARR
Countrywide has moved for summary judgment as to all claims asserted by Plaintiff Carr. Their argument is essentially that Carr lacks standing to bring a claim for being subject to a mortgage rider with a prepayment penalty provision because Carr cannot obtain any of the relief sought in her complaint. Several undisputed facts are critical to Countrywide’s arguments. First, Carr’s prepayment penalty rider expired on August 24, 2007. Second, Carr never paid a prepayment penalty. Third, Carr’s property was foreclosed upon in 2008 and ultimately sold in 2009, thus extinguishing the prepayment penalty rider and rendering it incapable of being rescinded and reformed.
For standing, a party must establish: “(1) ... an injury in fact ...; (2) the injury is fairly traceable to the conduct of defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. In the context of a declaratory judgment action, allegations of past injury alone are not sufficient to confer standing. The plaintiff must allege and/or demonstrate actual present harm or a significant possibility of a future harm.”
Fieger v. Michigan Supreme. Court,
In her complaint, Carr seeks rescission and reformation of her contract to eliminate the prepayment provision, a declaration that the rider violates R.C. § 1343.011(C), and unspecified equitable or injunctive relief.
10
Given that the prepayment rider has been extinguished, rescission and reformation of a contract provision that no longer exists will not redress any injury suffered. Similarly, because “[i]n the context of a declaratory judgment action, allegations of past injury alone are not sufficient to confer standing!, t]he plaintiff must allege and/or demonstrate actual present harm or a significant possibility of a future harm,”
Fieger,
VI. MOTION TO STRIKE CLASS ALLEGATIONS AS TO PUTATIVE CLASS 1(B)
Defendants have also moved to strike class allegations as to putative Class 1(b) because none of the named Plaintiffs may represent the class. As discussed
infra,
the Gawry’s cannot represent putative Class 1(b) because they have been dismissed from the case and never were members of that class, and Carr cannot represent putative Class 1(b) because she also was never a member of that class.
Beattie v. CenturyTel, Inc.,
VII. CONCLUSION
Plaintiffs’ Motion for Class Certification (ECF No. 74) is hereby DENIED, Defendants’ Motion for Summary Judgment as to Ingrid Carr (ECF No. 76) is hereby GRANTED and Dеfendants’ Motion to Strike Class Allegations as to Putative Class 1(b) (ECF No. 75) is hereby GRANTED. Denial of class certification leaves only individual claims remaining. The only individual claims are those of named Plaintiffs Frederic and Lorraine Gawry and Ingrid Carr. Because the Gawrys’ claims were previously dismissed with prejudice (ECF No. 67) and Carr’s claims have hereby been dismissed, there remain no viable causes of action. The third amended complaint (ECF No. 70) is therefore DISMISSED in its entirety and this case is accordingly DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.
Notes
. Plaintiffs have subsequently dropped this claim for monetary damages.
See ECF No. 91
. Where "the controversy involving the named Plaintiffs is such that it becomes moot as to them before the district court can reasonably be expected to rule on a certification motion"
Sosna
contemplated that certification could relate back to the time of filing based "upon the circumstances of the particu
. The parties do not dispute that the requirements of Rule 23(a) have been satisfied.
. As support, Plaintiffs cite
Wilborn v. Dun & Bradstreet Corp.,
. In Continental Casualty, pursuant to an insurance policy, the plaintiff insurer made a claim payment to an employer who was defrauded when an employee deposited a check into his personal account instead of the company’s account. Id. at 968. As part of the insurance policy, the employer then assigned to the plaintiff its legal rights against the employee and the defendant bank who deposited the fraudulently obtained check. Id. The bank alleged that because the insurance company had voluntarily paid the money to the employer without legal challenge, even though it was not contractually obligated to do so, it was foreclosed from seeking relief from the bank. Id. at 970. Noting that public policy weighed against permitting a VPD defense where subrogation claims arise by contract or agreement, the Court denied the bank's VPD defense because it would force insurers to always resist prompt payments of claims in order to preserve their subrogation rights. Id. at 971.
. This section applies only to putative Class 1(b) members because they have already paid
. As evidence for this position, Countrywide points out that the Gawry’s rate reduction was four times larger than Carr's reduction.
. In Rodney, Plaintiffs sought damages against an airline for attempting to "illegally dominate and control” the air travel market at three different airports. Id. at 784. Plaintiffs moved for class certification on behalf of the airline’s frequent flyer passengers who bought tickets into or out of the airports in question. Id. The proposed damages formula compared prices charged by the airline for 74 different routes with a calculated "base fare” of competitors’ pricing for routes of similar mileage. Id. at 791. Certification was denied because "[t]he different variables that would be plugged into the formula are specific to the individual routes” and damage calculation would also "involve analysis of the distinct characteristics of various [of the defendant airline’s] routes” which "certainly does not favor class certification.” Id.
. The Court need not reach the issue of whether Defendants acted on grounds generally applicable to the class.
. As discussed supra, Carr no longer seeks monetary damages. See ECF No. 91 at 33 (stating that no monetary relief is sought by Class II members and that "the only relief requested is for declaratory, injunctive, and equitable relief in the context of the remedy of reformation.”)
. While the Court rejected the argument that Carr lacks standing in its June 13, 2007 denial of Countiywide’s motion to dismiss (ECF No. 13), circumstances have since changed. Carr's prepayment provision has expired and she no longer seeks monetary damages pursuant to the allegation that the prepayment penalty injured her credit. Had Carr been able to sufficiently allege and/or demonstrate financial damage, she would have standing. Similarly, since the Court’s August 25, 2008 denial of motion for summary judgment (ECF No. 49) which did not address Defendants’ standing argument, Carr’s property has been foreclosed upon and sold, extinguishing the prepayment penalty rider.