Wells Fargo Spinoff Suits Dismissed as Duplicative
(CN) - A federal judge dismissed overlapping class claims alleging Wells Fargo ducked a settlement from an earlier case on "Pick-a-Payment" mortgage loans.
Jennifer Murphy, Richard D'Alessio and Paul McDermed separately sued Wells Fargo Home Mortgage over alleged settlement breaches from the other case, In re: Wachovia Corp. "Pick-A-Payment" Mortgage Marketing and Sales Practices Litigation, assigned to U.S. District Judge Jeremy Fogel.
That multidistrict litigation represented the consolidation of assorted "Pick-a-Payment" class actions filed in district courts around the country, including the first-filed action filed in northern California, Mandrigues v. World Savings, Inc., et al.
Fogel approved a written settlement agreement (MDL-SA) in the consolidated actions in 2010.
Murphy, D'Alessio and McDermed claimed, however, that Wells Fargo breached the settlement by applying an inaccurate definition of "imminent default" in denying loan modification applications (Murphy action); inflating home values, causing unwarranted loan modification denials (D'Alessio action); and improperly denying access to additional loan modifications (McDermed action).
In 2012, Murphy claimed Wells Fargo and others approved fewer than 3 percent of loan modifications after acquiring "troubled" mortgage loans effectively "for nothing," adding the bank's "greed seems to have no bounds."
Murphy and 30 other named plaintiffs filed a federal complaint against Wells Fargo, Wachovia, World Savings Bank and Golden West Financial, claiming they failed to honor a settlement agreement in the class action against Wachovia in northern California.
Wells Fargo purchased Wachovia, and its "Pick-a-Payment" loan portfolio, for $15.1 billion, on the heels of IRS Notice 2008-83, issued Sept. 30, 2008, according to the complaint.
When defendants in the related cases moved to dismiss, U.S. District Judge Susan Illston agreed Monday.
"A District Court retains broad discretion to control its docket and may exercise its discretion to dismiss a duplicative later-filed action, to stay that action pending resolution of the previously filed action, to enjoin the parties from proceeding with it, or to consolidate both actions," Illston wrote.
"By filing these separate complaints, plaintiffs have invited this court to assume the risk that its decisions may be inconsistent with Judge Fogel's decisions on the same issues," she added. "This court declines that invitation. Given the availability and active pursuit of these claims in the original forum, the only appropriate resolution here is dismissal without leave to amend of these duplicative actions."
The lawsuits also violate a jurisdictional clause in the settlement agreement, Illston said.
"In addition to the claim splitting prohibition, each complaint must be dismissed because this court's consideration of any of them would violate the parties' contract," she wrote. "Plaintiffs and defendants in all three actions are parties to the MDL-SA. That contract contains very specific provisions that govern enforcement disputes. ... By its plain language, the underlying action remains open for the limited purpose of resolving disputes over the parties' adherence to the contract."
Illston called it "remarkable" that the parties here would "file entirely new putative class action complaints in order to compel defendants' adherence to the contract, rather than, or in addition to, litigating the same issues in the underlying action." "There is no question that the Murphy, D'Alessio, and McDermed actions are covered by the MDL-SA's jurisdictional clause: each action seeks judicial review of disputes involving Wells Fargo's adherence to the MDL-SA," the 14-page ruling states. "Thus, the court finds that the MDL-SA prevents it from adjudicating these matters. In addition to the improper claim splitting discussed above, deference to the parties' contract requires that this court dismiss these actions with prejudice."
Illston vacated a hearing scheduled for Aug. 30, and dismissed each action without leave to amend.