ORDER AND OPINION GRANTING CLASS CERTIFICATION
THIS CAUSE comes before the Court upon the Plaintiffs’ Motion for Class Certification and Incorporated Memorandum of Law, (DE 3262) (the “Motion”). The Court has carefully considered the Motion, response, reply, supplemental memoranda, and the documents attached to them, as well as the parties’ voluminous evidentiary submissions and the oral argument of counsel. For the reasons that follow, the Court grants the Motion.
INTRODUCTION
These cases arise from Wells Fargo Bank, N.A.’s (“Wells Fargo” or the “Bank”) alleged scheme to wrongfully extract overdraft fees from Plaintiffs and similarly situated Wells Fargo consumers across the country. Through the use of specially designed software, Wells Fargo allegedly collected millions of dollars in excessive overdraft fees as a result of this scheme, much of it from Wells Fargo’s most vulnerable customers. Plaintiffs allege that Wells Fargo disseminated uniform misrepresentations and manipulated debit card transactions by, among other things, paying items even when accounts lacked sufficient funds and by employing a bookkeeping device to post debit-card transactions from highest-to-lowest dollar amount. Plaintiffs further allege that these account manipulations were applied in the same manner to all class members by Wells Fargo’s standardized “Hogan” system, causing funds in customer accounts to be depleted more rapidly, resulting in more overdrafts and more overdraft fees. Plaintiffs also allege that, in many instances, overdraft fees were imposed at times when, but for Wells Fargo’s manipulations, there were sufficient funds in the consumers’ accounts to cover the transaction. Plaintiffs have offered evidence to show that Wells Fargo did not disclose its manipulations to its customers, and took active steps to keep elements of this scheme secret. Wells Fargo disputes that it has committed any violations of law.
Plaintiffs now seek certification of their common law claims for breach of the contractual duty of good faith and fair dealing, unjust enrichment, and unconscionability, as well as statutory consumer protection claims
FACTUAL BACKGROUND
Without making conclusive findings of fact at this pretrial stage, the following record evidence is material to the Court’s rigorous analysis of the class certification requirements.
Wells Fargo is a national bank headquartered in San Francisco, California. In 2001, Wells Fargo changed its existing practice of posting debit transactions from lowest to highest dollar amount, and began posting them from highest to lowest dollar amount at the end of each business day. Ex. 4 (“Ex.” refers to exhibits to the Motion). From 2001 until November 2010,
After it began posting debit transactions from highest to lowest dollar amount, Wells Fargo implemented several closely allied initiatives that were also allegedly designed to drive up the Bank’s revenue from overdraft fees. Wells Fargo referred to these initiatives as its Balance Sheet Engineering ( “BSE”) project. Exs. 4,15, 20. Wells Fargo estimated that the various “phases” of this scheme would increase its overdraft fee revenue by over $100 million annually. Exs. 14, 21.
First, beginning on December 1, 2001, and continuing through July 1, 2010, Wells Fargo “commingled” debit card transactions with checks and ACH transactions in a single posting group before re-sequencing the entire group of transactions from high to low. Exs. 4, 14, 22.
Second, Wells Fargo implemented what it referred to internally as a “shadow line” of credit. Exs. 4, 14. Prior to 2002, Wells Fargo declined debit card purchases and ATM withdrawals where the checking account lacked sufficient funds to cover the transaction at the time it was attempted. In 2002, however, Wells Fargo began approving such transactions up to a secret credit limit that it determined for each customer through computer algorithms. Exs. 2, 4, 10, 25. Wells Fargo adopted this “shadow line” of credit for debit card transactions in May 2002 and for ATM withdrawals in September 2002, and utilized it for both debit card transactions and ATM withdrawals in all states until July 2010. Ex. 23. As the phrase “shadow line” intimates, Wells Fargo neither disclosed to customers the existence of this line of credit nor the specific amount of credit for which the Bank had authorized their accounts to go into the negative. Ex. 2. At the point of sale or at an ATM machine, Wells Fargo customers were not informed that a given transaction would be approved into overdraft via the “shadow line,” nor provided an opportunity to cancel the transaction. Exs. 2, 5. The “shadow line” was meant to drive up the Bank’s overdraft fee revenue by a projected tens of millions of dollars each year. Exs. 2, 4, 9,14.
Third, Wells Fargo not only failed to disclose its re-sequencing and allied practices to customers, it disseminated affirmative misrepresentations about its debit posting practices. For example, Wells Fargo’s “Checking, Savings & More” marketing brochure represented to customers that debit purchases were “automatic” and debit cards would function just like cash. Ex. 37. Likewise, the ‘Welcome Jacket” that Wells Fargo regularly provided customers upon account opening stated: “Simply present the card to the merchant or swipe it through the key-pad____Each purchase is automatically deducted from your primary cheeking account.” Ex. 38. Other Wells Fargo marketing materials similarly informed customers that money would come out of their checking account “automatically” or “immediately” when they made a debit card purchase. E.g., Exs. 39-47. In fact, sums were not deducted “automatically” or “immediately”—instead, as discussed above, the Bank held the transactions and posted them in the middle of the night, in a, high-to-low order. Further, although Wells Fargo was regularly paying debit transactions even when a checking account lacked sufficient funds to cover them, its website promised customers that by using a debit card, “you can’t spend more than you have.” Ex. 45. As for Wells Fargo’s form account agreement, it underwent only minor changes throughout the class period: each iteration disclosed (a) that the Bank “may” post debit transactions from high to low and (b) that the Bank retained discretion to post transactions however it wished, and without any notice to the customer. Exs. 28, 31. In addition, the account statements that Wells Fargo sent to its checking account customers listed transactions separately by type, notwithstanding the Bank’s practice of “commingling” check, ACH, and debit card transactions and posting them from high to low in a single batch. Taken together, Wells Fargo’s disclosures plausibly had the effect of obfuscating the reordering and allied practices that comprised the Bank’s alleged scheme.
CLASS CERTIFICATION STANDARDS
The Court must undertake a rigorous analysis into whether the Rule 23 prerequisites are met. Klay v. Humana, Inc.,
Courts “formulate some prediction as to how specific issues will play out in order to determine whether common or individual issues predominate in a given case.” Waste Mgmt. Holdings v. Mowbray,
Rule 23(a) states that a class may be certified “only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a). If the Court finds that the criteria of Rule 23(a) are satisfied, it then must also find that the class fits within one of the three categories in Rule 23(b) in order to certify.
DISCUSSION
I. The Class Definition
Before considering the express Rule 23 requirements, the Court considers whether a class exists that can adequately be defined. Singer v. AT & T Corp.,
All Wells Fargo customers in the United States, excluding the States of California and Indiana,3 who had or have one or more consumer accounts and who, from applicable statutes of limitation through August 13, 2010 (the “Class Period”), incurred one or more overdraft fees as a result of Wells Fargo’s practice of sequencing debit card transactions from highest to lowest, except for such overdraft fees incurred by former Wachovia customers pursuant to Wells Fargo carrying out the practices and policies of Wachovia.
Excluded from the Class are Wells Fargo; its parents, subsidiaries, affiliates, officers, and directors; any entity in which Wells Fargo has a controlling interest; all customers who make a timely election to be excluded; and all judges assigned to this litigation and their immediate family members.
Plaintiffs also seek the certification of subclasses for specific claims as set forth in their Proposed Trial Plan for Trial of Class Claims (the “Trial Plan”). These subclasses are discussed toward the end of this Order.
The Court concludes first that the proposed class definition satisfies the requirements of Rule 23 in that certification does not require a merits determination. The ascertainability or definiteness inquiry, which “ensures that a proposed class will actually function as a class,” Byrd v. Aaron’s Inc.,
The Court further concludes that Plaintiffs have adequately identified a baseline posting order for comparison purposes. Plaintiffs allege that all customers who were charged additional overdraft fees, as compared to what they would have been charged under a low-to-high posting practice, were harmed by Wells Fargo’s high-to-low re-ordering scheme. See Reply in Support of Class Certification, DE 3361 at 6-9. Wells Fargo utilized low-to-high posting for debits before it switched to high-to-low posting (Ex. 4 at 24-26), and a trier of fact could reasonably find that this is the proper baseline as it minimizes the occurrence of overdraft charges for the benefit of consumers. Thus, the members of the class are those persons who incurred one or more additional overdraft fees from the high-to-low posting order than they would have incurred had the Bank maintained its preexisting low-to-high posting order. Comparing the results of high-to-low sequencing (which yields the greatest number of overdraft fees) to low-to-high sequencing (which yields the lowest number of overdraft fees) defines the outer parameters of the class, generating the largest group affected by the high-to-low practice within the meaning of the class definition. Plaintiffs’ expert, Mr. Olsen, can determine who these class members are by using the Bank’s own data. The Court finds that this class definition is precise, objective, and properly tailored to the underlying conduct at issue.
The composition of the class, and those persons bound by the judgment, will not vary if the trier of fact ultimately decides that a less consumer-friendly posting order than low-to-high is appropriate, or even that a high-to-low posting order is consistent with the Bank’s contractual and other obligations. 7A Wright, Miller & Kane, Federal Practice & Procedure: Civil 3d § 1760 (3d ed. 2005) (“If the general outlines of the membership of the class are determinable at the outset of the litigation, a class will be deemed to exist.”). This subsequent determination of the good-faith posting order will affect, if anything, the amount of damages only. Klay,
The Court also concludes that the class definition is not impermissibly vague, notwithstanding that its start date is tied to the applicable statutes of limitation instead of to a specific date. Courts commonly certify classes with start dates linked to the statute of limitations where, as here, the challenged conduct predates the relevant limitations periods. See, e.g., Vega v. T-Mobile USA, Inc.,
Thus, because class membership is reasonably defined through objective criteria, the Court finds that the class is ascertainable.
II. Rule 23(a)
A. Numerosity
The first requirement of Rule 23(a) is that the class must be “so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). “[A] numerical yardstick is not the determinant for class certification; rather a court should examine the numbers involved to see if joinder of all is impossible or impracticable.” Hastings-Murtagh v. Texas Air Corp.,
Although the exact number of class members here is not presently known, it appears to run in the millions, making joinder of them all impracticable if not impossible. Wells Fargo does not seriously contest numerosity except to argue that the arbitration clause in its form contract defeats numerosity by requiring the absent class members to submit to arbitration, leaving only the named Plaintiffs in these cases. But the arbitration clause in Wells Fargo’s account agreement is permissive, not mandatory. See Garcia v. Wachovia Corp.,
The absent class members, however, are not before this Court until the point of certification. As the Eleventh Circuit held in the most recent appeal of these cases, “Certification of a class is the critical act which reifies the unnamed class members and, critically, renders them subject to the court’s power.” In re Checking Account Overdraft Litig.,
Accordingly, the Court finds that the nu-merosity requirement of Rule 23 is satisfied.
B. Commonality and Typicality
Rule 23(a)’s commonality prerequisite requires that there be at least one issue common to all members of the class. The “commonality” requirement of Rule 23(a)(2) “is a ‘low hurdle’ easily surmounted.” Rolland v. Patrick, No. 98-30208,
Relying on Wal-Mart Stores, Inc. v. Dukes, — U.S. -,
Unlike the plaintiffs in Dukes, these Plaintiffs have submitted evidence of a common corporate policy or practice, namely, Wells Fargo’s systematic, computerized, and uniform manipulation and re-ordering of debit card transactions, its development and implementation of the allied “commingling” and “shadow line” practices, and its misrepresentations of its overdraft practices, all to increase the number of overdraft fees imposed. Plaintiffs provided substantial evidence of Wells Fargo’s uniform overdraft scheme, thereby satisfying both the commonality and typicality standards. “Of course, when a group of plaintiffs suffer under a uniform policy, the commonality test is often satisfied, even after Dukes.” Oakley v. Verizon Commc’ns, Inc., No. 09-9175,
• Manipulated and re-ordered transactions in order to increase the number of overdraft fees imposed;
• Concealed from class members the limits of their overdraft “shadow” credit line, the existence of such a limit, and the fact that the Bank would pay transactions into overdraft instead of declining to authorize them;
• Concealed from class members the fact that checks, ACH transactions, and debit card transactions would be “commingled” together in a single batch upon account posting;
*641 • Concealed from class members the purpose and consequences of its reordering scheme: increasing overdraft fee occurrences and revenue;
• Decided not to alert class members that an ATM withdrawal or debit card transaction would trigger an overdraft fee if processed and not to provide them with an opportunity to cancel the transaction;
• Imposed overdraft fees when, but for the re-sequencing, checking accounts would have contained sufficient funds;
• Delayed posting transactions so that class members were charged overdraft fees even when the account contained sufficient funds to cover the transactions; and
• Purveyed uniform misrepresentations that a debit card functioned just like cash and that customers couldn’t spend more than they had in their account.
The Court finds that, based on the evidence presented, Plaintiffs’ claims arise out of the same course of conduct and are based on the same legal theories as those of the absent class members.
The alleged scheme, moreover, entailed more than just the high-to-low posting order. The “commingling” and “shadow line” practices, together with the uniform misrepresentations about how the Bank was processing debit card transactions, combined to cause more overdrafts and greater revenue for the Bank. These practices were integral to the scheme, and they involve common issues which implicate common proof. It has long been true that “a fraud perpetrated on numerous persons by the use of similar misrepresentations may be an appealing situation for a class action,” and such is the case here. See Fed.R.Civ.P. 23(b)(3) advisory committee’s note (1966).
Typicality requires that “the claims or defenses of the representative parties are typical of the claims or defenses of the class.” Fed.R.Civ.P. 23(a)(3). The typicality test centers on “whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named class plaintiffs, and whether other class members have been injured by the same course of conduct.” Hanon v. Dataprods. Corp.,
“The test for typicality, like commonality, is not demanding.” In re Disposable Contact Lens Antitrust Litig.,
Factual differences will not render a claim atypical if the claim arises from the same event or practice or course of conduct that gives rise to the claims of the class members, and if it is based on the same legal theory____ Indeed, even relatively pronounced factual differences will generally not preclude a finding of typicality where there is a strong similarity of legal theories. Where an action challenges a policy or practice, the named plaintiffs suffering one specific injury from the practice can represent a class suffering other injuries, so long as all the injuries are shown to result from the practice.
Baby Neal for and by Kanter v. Casey,
The common issues arising from Wells Fargo’s overdraft scheme are shared by Plaintiffs and the class, and there is no material factual valuation that would place the interests of the class in jeopardy. Courts have regularly found that typicality is satisfied where a defendant has engaged in a common course of misrepresentation or concealment, even where class representatives were not subject to identical contracts. See Salvagne v. Fairfield Ford, Inc.,
Wells Fargo claims that Plaintiffs have different expectations and preferences in posting order and cannot be typical of the class. Yet it is the defendant’s common course of conduct that governs considerations of typicality, not the class representatives’ subjective expectations or preferences. See Johnson v. GEICO Cas. Co.,
Wells Fargo contends that Plaintiffs’ claim for breach of the contractual covenant of good faith and fair dealing requires an assessment of individual expectations. To the extent expectations are relevant, however, an objective standard governs; individual expectations are irrelevant. See Union Bank,
Differences in the degree of customer awareness do not establish atypicality here. Plaintiffs allege that Wells Fargo’s concealment of its overdraft policies prevented both Plaintiffs and the class members from gaining sufficient knowledge to understand Wells Fargo’s scheme and how it could affect them. Some customers’ knowledge of Wells Fargo’s high-to-low posting order alone, without awareness of Wells Fargo’s “shadow line” and “commingling” systems (which Wells Fargo uniformly concealed from customers), does not bar class certification. The evidence regarding Wells Fargo’s scheme, including its uniform misrepresentations and concealment of its overdraft practices, renders Plaintiffs’ unjust enrichment and uncon-scionability claims typical of the class claims. See Spencer v. Hartford Fin. Servs. Group, Inc.,
Wells Fargo also cites supposedly divergent customer preferences to argue that damage calculations will differ, and that the identity of the class members that have been damaged will vary, depending upon the alternative posting order selected. Class membership is discussed above, and will not vary on this basis. Further, as noted above, individual preferences are irrelevant. Differences in the amount of damages suffered by the class representatives and the class do not, of course, affect typicality. Kornberg,
Nor are the claims of the New Mexico and Washington Plaintiffs rendered atypical because Wells Fargo used a variant of high-to-low posting in those states. The so-called “TOD” initiative, which the Bank tested in New Mexico and Washington to find out if it could reap even more overdraft fee revenue (Exs. 75, 76, 78; Reply Ex. 74, 77), nonetheless relied on exactly the same high-to-low re-sequencing as everywhere else—just within two separate batches sorted based upon whether transactions were carried out on that day or on a previous day. This minor difference is insufficient to defeat typicality where this variant utilized the same basic debit re-sequencing practice and the Bank implemented the same allied practices of “commingling” and “shadow line” in the test States. Neither did the form account agreement in these states ever plainly disclose how Wells Fargo was actually sequencing charges when it posted them.
One of the New Mexico Plaintiffs, Marc Martinez, had his account closed with a negative balance, but this does not make him atypical of the class. Many other class members also had their accounts closed—in part because of the Bank’s scheme that triggered a slew of fees. Moreover, to the extent it may be appropriate to offset damages based on such “charged off” amounts, those amounts can readily be applied as an offset or to reduce the amount the account holder may owe. See, e.g., Spicer v. Chicago Bd. Options Exchange, Inc.,
Finally, Plaintiffs have proposed discrete multi-state subclasses for some of the state law claims, to ensure that the class representatives’ claims are materially identical to those of all other class members they represent. The Court addresses below the application of these subclasses, which provide additional assurances of typicality. Based on the foregoing, the Court finds that the commonality and typicality requirements are met.
The Court must also be satisfied that the “representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a)(4). This requirement is met when (i) the class representatives have no interests conflicting with the class; and (ii) the representatives and their attorneys will properly prosecute the actions. Sosna v. Iowa,
The Court is satisfied that the named Plaintiffs will fairly and adequately represent the interests of the class and each relevant subclass. The central issues here— the existence, consequences, and propriety of Wells Fargo’s alleged scheme to manipulate debit card transactions to increase the number of overdraft fees it could assess—are common to the claims of Plaintiffs and the other members of the class. Based on the evidence in the record regarding the named Plaintiffs, including their deposition testimony, they each have a strong interest in proving the alleged scheme, establishing its unlawfulness, demonstrating the impact of the conduct, and obtaining redress. Wells Fargo contested adequacy at the class certification hearing on the grounds that, because of the subclass arrangements, some Plaintiffs may end up pursuing only one of the common law claims against the Bank. However, Wells Fargo cites nothing suggesting a class representative needs to maintain any more than one cause of action in order to properly pursue or secure complete relief for the represented class or subclass. Accordingly, the Court finds that the named Plaintiffs “share the true interests of the class” and are adequate representatives. Hastings-Murtagh,
The Court is not persuaded that there exists an intra-class conflict over which alternative posting order should be used to calculate damages. To the extent individual preference with regard to posting order is relevant, there does not appear to be any competent evidence that class members would prefer a high-to-low posting order over any of the possible alternatives, such as chronological or low-to-high. See Gutierrez,
The Court further finds that Plaintiffs’ counsel have no interests that are antagonistic to those of the absent class members and that they have diligently represented their clients and the absent class members. The law firms seeking to represent the class here include very qualified and experienced lawyers. The Court has thoroughly reviewed the firm resumes setting forth their experience and expertise in class actions, and notes that their work has been consistently excellent in this MDL. The Court is therefore satisfied that the Plaintiffs and the firms seeking appointment as class counsel will properly and adequately prosecute these cases.
The Court therefore appoints as class representatives Marc Martinez, a resident of New Mexico; Ivy Graham, a resident of New Mexico; Dolores Gutierrez, a resident of Oregon; Karen and Edward Wiekman, residents of Oregon; Michael Dehn, a resident of Washington State; Alex Zankich, a resident of Washington State; and William Rucker, a resident of Washington State. In addition, the Court appoints the following firms as class counsel pursuant to Fed.R.Civ.P. 23(g): Podhurst Orseck, P.A.; Bruce S. Rogow, P.A.; Grossman Roth, P.A.; Lieff Cabraser Heimann & Bernstein LLP; Webb, Klase &
III. Rule 23(b)(3)
Plaintiffs bring these actions under Rule 23(b)(3), which requires (i) that questions of law or fact common to class members predominate over any questions affecting individual members, and (ii) that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.
A. Predominance
“Common issues of fact and law predominate if they ‘have a direct impact on every class member’s effort to establish liability and on every class member’s entitlement to injunctive and monetary relief.’” Klay,
The predominance inquiry focuses on the number and significance of common issues. It does not require a complete absence of individual issues. Cox v. Am. Cast Iron Pipe Co.,
Here, “irrespective of the individual issues which may arise, the focus of the litigation” will be “the alleged common course” of unfair conduct embodied in Wells Fargo’s alleged scheme to maximize overdraft fees through the reordering of transactions at account posting. Sargent v. Genesco, Inc.,
Plaintiffs allege that Wells Fargo’s course of conduct commonly, and adversely, affected the entire class, and submitted extensive evi
Wells Fargo points out two primary variations in the applicable account agreements, including language describing its high-to-low posting practice. These differences do not alter the analysis. Both the pre- and post-October 2004 versions of the account agreement purported to confer total discretion in Wells Fargo; neither fully discloses the facts of the Bank’s high-to-low posting practice or its practice of paying charges into overdraft without customer consent. The variations in the disclosures do not defeat predominance. Whether the disclosures in its account agreements sufficed to adequately inform the class members of Wells Fargo's practices is a question common to all class members, and one which predominates over the individual issues. Cf. Gutierrez,
Unique defenses rarely predominate where a common course of conduct is shown. Wahl v. Midland Credit Mgmt.,
As discussed below, Plaintiffs have met their burden of showing that common issues of fact and law will predominate within the subclasses they have proposed for each of their claims. As this Court observed in Union Bank, the Court may certify multi-state classes even if “different claims or issues are subject to different bodies of law that are not the same in functional content but nonetheless present a limited number of patterns that the court ... can manage by means of’ sub-classing.
(i) Breach of the Contractual Covenant of Good Faith and Fair Dealing
The Court finds that Plaintiffs have appropriately and timely alleged breach of the contractual covenant of good faith and fair dealing. Further, the Court is not persuaded by Wells Fargo’s objection that individual class members’ subjective preferences for posting order and expectations concerning overdraft fees will undermine the common issues that give rise to this claim. The reasonable expectations of a party to a form contract are judged objectively, from the perspective of a reasonable person, making the subjective views of class members irrelevant.
(ii) Unjust Enrichment
Unjust enrichment claims can be certified for class treatment where common circumstances bear upon whether the defendant’s retention of a benefit from class members was unjust. See James D. Hinson Elec. Contr. Co. v. Bellsouth Telecomms., Inc.,
There is general agreement among courts that the “minor variations in the elements of unjust enrichment under the laws of the various states ... are not material and do not create an actual conflict.” Pennsylvania Emp., Benefit Trust Fund v. Zeneca, Inc.,
Based on the record presently before the Court, Vega v. T-Mobile USA, Inc.,
(Hi) Unconscionability Claims
The Court finds that common issues also predominate as to the unconscionability claims. Because unconscionability is judged “at the time the contract was made,”
Common issues also predominate for procedural unconscionability, which looks to such considerations as the disparity in bargaining power between the parties, e.g., Kinkel v. Cingular Wireless LLC,
* * * * * *
Wells Fargo’s corporate policies “constitute the very heart” of the claims for which Plaintiffs seek class certification. As a result, common issues will predominate because those policies “would necessarily have to be re-proven by every plaintiff.” Klay,
In Klay, the court ultimately found certification of the breach of contract claims inappropriate given the individualized issues of fact they entailed, even though questions of contract law were common to the whole class. Id. at 1261. There were many different defendants with many different contracts with many different provider groups. Moreover, because the defendants breached the contracts through a variety of means and differing computer algorithms that were not subject to generalized proof, each physician would have to prove a variety of individual circumstances leading to the breach. Id. at 1263-64.
Similar problems precluded certification in Sacred Heart, where there were substantial variations in the terms of over 300 hospital contracts that were individually negotiated, leading the court to find that “the diversity of the material terms is overwhelming.” Sacred Heart,
Judge Alsup’s certification in the California class action, Gutierrez v. Wells Fargo Bank, N.A., is instructive. As here, Wells Fargo insisted that individual issues predominated. Judge Alsup, however, disagreed because the “challenged practice is a standardized one applied on a routine basis to all customers.”
B. Superiority
A class action constitutes the only realistic way Plaintiffs’ claims can be adjudicated. “Separate actions by each of the class members would be repetitive, wasteful, and an extraordinary burden on the courts.” Kennedy v. Tallant,
Class treatment is superior to other available methods for the fair and efficient adjudication of this controversy. Nearly all of the class members in these actions have claims that are so small that it would cost them much more to litigate individually than they could ever hope to recover in damages, and thus there is no reason to believe that the putative class members have any particular interest in controlling their own litigation. Wells Fargo suggests some class members may have preferred an alternative posting order, but the legal and expert costs alone needed to litigate the case and calculate the damages would far exceed any individual class member’s recovery, and Wells Fargo does not demonstrate anything to the eon-
As discussed above, class members are ascertainable through objective criteria: Wells Fargo’s own records of individuals who were assessed overdraft fees. As he did in Gutierrez, Plaintiffs’ expert has proposed to identify members of the class by running queries in Wells Fargo’s computer database. Such work will be ministerial in nature, and will not be plagued by unique class member issues. So too, damages will be calculated using the same Wells Fargo records used to identify the class members. These facts make these cases eminently manageable as a class action, and multiple individual lawsuits would be substantially less manageable in any event. See Klay,
The Court finds that Plaintiffs have met the superiority requirement of Rule 23(b)(3).
C. Affirmative Defenses
Wells Fargo’s affirmative defenses do not defeat class certification. Affirmative defenses must meet the pleading standards in Iqbal and Twombly. See Castillo v. Roche Labs., Inc., No. 10-20876-CIV,
Wells Fargo’s affirmative defenses do not defeat certification for the additional reason that they raise common questions of proof that predominate over individualized issues. Many of the affirmative defenses require a party to have had full knowledge of the circumstances in order for the defense to prevail, including ratification,
Other affirmative defenses such as accord and satisfaction, ratification, and set-off pertain to damages, and can be accounted for in Plaintiffs’ expert’s calculations. See Union Bank,
Wells Fargo contends that class certification must be denied because there are individual issues regarding the application of various States’ statutes of limitations as an affirmative defense. Courts consistently hold, however, that the statute of limitations does not bar class certification, even when individual issues are certain to exist.
The dominant issue here, as it was in Union Bank, is whether Wells Fargo “engaged in a systematic scheme to extract the greatest possible number of overdraft fees from Plaintiffs and similarly situated [Wells Fargo] consumers across the country.”
D. The Use of Subclasses
The Court also finds that the creation of subclasses to address variations in state law is appropriate here and makes these cases manageable and suitable for class treatment. See, e.g., Klay,
may authorize aggregate treatment of multiple claims, or of a common issue therein, by way of a class action if the court determines that
(1) a single body of law applies to all such claims or issues;
(2) different claims or issues are subject to different bodies of law that are the same in functional content; or
(3) different claims or issues are subject to different bodies of law that are not the same in functional content but nonetheless present a limited number of patterns that the court ... can manage by means of identified adjudicatory procedures.
American Law Institute, Principles of the Law: Aggregate Litigation § 2.05(b) (2010). Complete uniformity of state law is not required so long as there are no material conflicts among the laws. See Southern States Police Benev. Ass’n v. First Choice Armor & Equip., Inc.,
The proposed special verdict forms and supporting surveys of law submitted by Plaintiffs with their Trial Plan illustrate that the variations among the applicable state laws are not material and can be managed to permit a fair and efficient adjudication by the trier of fact. As detailed in Plaintiffs’ Trial Plan, for their claims for breach of the covenant of good faith and fair dealing, Plaintiffs propose three subclasses. For unjust enrichment, Plaintiffs propose two subclasses. For uneonscionability, three. In addition, there are two statutory subclasses covering New Mexico and Washington only. Each subclass will have its own start date linked to the statute of limitations for each of those claims. For the reasons stated above, common issues predominate with respect to each of these claims. As set forth below, the subclasses proposed by Plaintiffs involve materially identical legal standards and will facilitate the manageability of these actions on a class basis.
(i) Breach of the Contractual Covenant of Good Faith and Fair Dealing Claims
The glue that binds together these subclasses is the Restatement (Second) of Con
(ii) Unjust Enrichment Claims
The Court previously ruled that Plaintiffs may proceed in the alternative on claims for unjust enrichment and breach of the contractual covenant of good faith and fair dealing. DE 305 at 32-33. As the Court noted, Wells Fargo may attempt to force an election of remedies (at law or in equity) through motion practice at an appropriate juncture, but the coexistence of these unjust enrichment claims with contractual claims does not affect the manageability of the class action itself. At their core, each unjust enrichment subclass flows from the principles enshrined in the Restatement (First) of Restitution § 1 & cmt. a (1937). See Trial Plan at 14-15 & Exhibits cited therein. While the Court has previously discussed its view that unjust enrichment requires the same essential showing in every jurisdiction—the defendant unjustly obtained a benefit at the plaintiffs expense such that restitution is warranted— Plaintiffs here propose certifying two distinct subclasses, which is certainly appropriate. Specifically, the states in Subclass 1 require a showing that (i) the plaintiff conferred a benefit and (ii) the defendant accepted or retained it, (iii) under circumstances that make it unjust or inequitable for the defendant to retain the benefit. The states in Subclass 2 require an additional showing that the defendant “appreciated” the benefit, e.g., by drawing interest on it. As alluded to above, many courts have certified multi-state unjust enrichment claims under circumstances similar to those here. See, e.g., Tera-zosin Hydrochloride,
(iii) Unconscionability Claims
Plaintiffs’ Trial Plan also proposes three workable subclasses for their unconscionability claims, all of which derive from Section 2-302 of the Uniform Commercial Code. The only differences among the states’ laws pertain to whether both procedural and substantive unconscionability are required. See Trial Plan at 15-16 & Exhibits cited therein. Subclass 1 includes states the law of which requires procedural and substantive uneon-scionability, and hence subsumes Subclass 3, which includes states which require either procedural or substantive unconscionability. The law in Subclass 2 states, meanwhile, requires only substantive unconscionability. At the hearing on class certification, Wells Fargo disputed the ability of Plaintiffs who reside in Subclass 3 states to adequately represent class members in Subclass 1 states. The Court disagrees, based on its assessment that the evidence here presents a strong case for both procedural uncon-seionability (focusing on bargaining power disparities and contract formation problems) and substantive unconscionability (focusing
The Court has previously addressed whether unconscionability may be pled as an affirmative claim. See DE 305 at 26 (concluding that while unconscionability is normally a defense, that is not uniformly true and in the circumstances of these cases, it is appropriate to permit it as an affirmative claim). The Court remains convinced that this conclusion is correct, and that the Court’s equitable powers permit a declaration that Wells Fargo’s contractual clauses purporting to reserve discretion to re-sequence debit card transactions from highest to lowest so as to maximize overdraft charges are unconscionable under each of the relevant states’ laws. Again, the Court finds that Wells Fargo’s customers’ individual preferences, knowledge, and levels of sophistication are not relevant to this inquiry.
(iv) The Court further certifies a statutory subclass under the New Mexico consumer protection statute, N.M. Stat. § 57-12-3, which prohibits trade practices determined to be unfair, deceptive, or unconscionable, as those terms are defined in N.M. Stat. § 57-12-2.
(v) The Court similarly certifies a statutory subclass under the Washington consumer protection statute, Wash. Rev.Code § 19.86.020, which prohibits trade practices determined to be unfair or deceptive as injurious to the public interest, Wash. Rev.Code § 19.86.093.
* * * * * *
Lastly, Wells Fargo maintained at the class certification hearing that the Court should not certify subclasses represented by Plaintiffs from various underlying actions on the basis that the Court must remand each action to its originating jurisdiction at the close of pretrial proceedings. However, each and every subclass possesses a materially identical legal claim and is headed up by Bank customers who share that claim and have ample incentive to prosecute it. There are no “headless” subclasses, and customers in every state in which Wells Fargo did business (except Indiana, which is excluded), stand to recoup their allegedly excessive overdraft fees through at least one cause of action. The Court’s plan appropriately protects the interests of all class members to the extent feasible, given these named Plaintiffs and state laws, while also affording Wells Fargo the ability to defend itself in every instance. Rule 23 calls for nothing more.
The MDL mechanism, like Rule 23, aims to promote the just and efficient resolution of related civil actions. 28 U.S.C. § 1407. Congress created the MDL process to satisfy the need for judicial authority to manage matters of substantial controversy which, absent coordination, could “disrupt the functions of the Federal Courts.” H.R.Rep. No. 1130, 90th Cong., 2d Sess. 1 (1968), reprinted in 1968 U.S.C.C.A.N. 1898, 1899 (Feb. 28, 1968). The MDL system is accordingly framed to ensure that related cases will receive “uniform and expeditious treatment,” with the Court enjoying “broad discretion to structure a procedural framework for moving the cases as a whole as well as individually”; an MDL truly witnesses “a special breed of complex litigation where the whole is bigger than the sum of its parts.” In re PPA Prods. Liab. Litig.,
It is not only these core principles, but also this Court’s ability to exercise its discretion pragmatically and prudently to sequence trials and to remand discrete subclasses for trial, that counsel in favor of the Court’s determination herein. See generally Fed.R.Civ.P. 16(c) (authorizing the court to adopt special procedures, including ordering separate trials where appropriate on claims or issues). Other ease management mechanisms—e.g., amended pleadings in the originating jurisdictions to add Plaintiffs from
For all the foregoing reasons, the Court certifies Plaintiffs’ proposed subclasses, as defined in the table below.
CONCLUSION
After careful consideration, and being fully advised as set forth above and in accordance with the findings herein, it is hereby
ORDERED, ADJUDGED, AND DECREED as follows:
1. Plaintiffs’ Motion for Class Certification (DE 3262) be, and the same is, hereby GRANTED. The Court certifies the following class.
All Wells Fargo customers in the United States, excluding the States of California and Indiana, who had or have one or more consumer accounts and who, from applicable statutes of limitation through August 13, 2010 (the “Class Period”), incurred one or more overdraft fees as a result of Wells Fargo’s practice of sequencing debit card transactions from highest to lowest, except for such overdraft fees incurred by former Wachovia customers pursuant to Wells Fargo carrying out the practices and policies of Wachovia.
Excluded from the Class are Wells Fargo; its parents, subsidiaries, affiliates, officers and directors; any entity in which Wells Fargo has a controlling interest; all customers who make a timely election to be excluded; and all judges assigned to this litigation and their immediate family members.
2. The Court appoints Plaintiffs Marc Martinez, Ivy Graham, Dolores Gutierrez, Karen and Edward Wickman, Michael Dehn, Alex Zankich, and William Rucker as representatives of the class, and as representatives of the following certified subclasses.
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3. The Court also appoints the following firms as class counsel pursuant to Fed. R.Civ.P. 23(g): Podhurst Orseck, P.A.; Bruce S. Rogow, P.A.; Grossman Roth, P.A.; Lieff Cabraser Heimann & Bernstein LLP; Webb, Klase & Le-mond, LLC; Trief & Oik; Baron & Budd, P.C.; and Golomb & Honik, P.C.15
Notes
As discussed more fully below, in deciding class certification, the Court does not determine whether Plaintiffs allegations are true, or whether they will ultimately prevail on the merits. Rather, the Court considers the factual record to determine whether the requirements of Rule 23 are satisfied
. On November 1, 2010, Wells Fargo discontinued its practice of re-sequencing debit transactions in high-to-low order in California, to comply with the injunction entered by the United States District Court for the Northern District of California. Gutierrez v. Wells Fargo Bank, N.A.,
. Wells Fargo's "commingling” practice applied nationwide except for in Nevada, where Wells Fargo posted checks separately and in serial order pursuant to a state law (Exs. 11, 12), and in Washington State and New Mexico. In a pilot program in the latter states, the Bank divided transactions into two batches—those executed on a prior day, and those executed on the business day of posting—and posted the first batch's transactions first (commingled, and high to low) and the second batch’s second (commingled, and high to low). Exs. 4, 5, 10, 24.
. The Court's exclusion of Indiana customers follows the suggestion of Plaintiffs at the class certification hearing, in response to Wells Fargo’s argument that Indiana was not included within any of their proposed subclasses. This omission, in turn, resulted from the absence of an Indiana Plaintiff and the fact that Indiana law is not materially identical to the laws of the other states with respect to the claims grouped in the various subclasses. Missouri and Kansas are not included in any proposed subclass either; however, Wells Fargo did not do business in those states as of 2008, as the Bank represented to the Securities and Exchange Commission in a February 2008 disclosure.
. This principle remains true after Comcast Corp. v. Behrend, - U.S. -,
. The typicality and commonality requirements are distinct but interrelated, as tire Supreme Court noted: " 'The commonality and typicality requirements of Rule 23(a) tend to merge. Both serve as guideposts for determining whether under the particular circumstances maintenance of a class action is economical and whether the named plaintiff's claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence.’ ” Cooper v. Southern Co.,
. These facts are referenced in greater detail in the discussion of predominance below.
. See, e.g., Parcel Tankers, Inc. v. M/T Stolt Luisa Pando,
. See also County of Monroe v. Priceline.com, Inc., 265 F.R.D. 659, 671 (S.D.Fla.2010); Cassese v. Wash. Mut., Inc.,
. See Zapatha v. Dairy Mart, Inc.,
. Ratification: Thorstenson v. ARCO Alaska, Inc., 780 P.2d 371, 374-75 (Alaska 1989); United Bank v. Mesa N.O. Nelson Co.,
. Waiver: Carr-Gottstein Foods Co. v. Wasilla, LLC,
. Voluntary Payment: Moody v. Lloyd’s of London,
. Lane v. Kitzhaber,
. Piscioneri v. Commonwealth Land and Title Ins. Co., Civ.A. No. 010764,
. The Court will separately address the procedure for providing notice to class members regarding the certification of the class and these claims.