Articles from March 2013

The New York Times reports that law schools are starting law firms, ostensibly to provide real-world training to law students and provide legal aid to underserved populations, but with the additional benefits of providing a soft landing for graduates unable to get a job and boosting law-school employment statistics.

The Times article focuses on the non-profit firm, Alumni Law Group, established by Arizona State University, and includes a photo of two Arizona State students working on an unemployment benefits case (presumably for outside clients, not themselves). Arizona State and other schools that have launched similar programs cast these organizations in visionary terms, pointing to the school-affiliated firms as providing affordable legal services to those who might otherwise be unable to retain representation.

While the Times article reaches to portray the trend as one being adopted by more elite schools — comparing it to the business school certificate at the University of Pennsylvania and credit-for-work program at the University of Virginia — for now Arizona State is in the company of perennial US News & World Report rankings laggards Thomas Jefferson Law School in California and Pace Law School in New York. There is no word yet whether these newly-created firms will be ranked by Vault and other prominent sources of law firm rankings.

Contending that Wells Fargo has only offered the loan modification negotiated as part of the 2010 “Pick-a-Payment” class settlement (resolving claims related to Wells Fargo’s home mortgage practices) to a small fraction of the consumers intended to benefit from it, the settling class members have invoked the continuing jurisdiction provision and asked the federal court that presided over the case to audit and, if necessary, enforce Wells Fargo’s compliance with the settlement. See Pls’ Supp. Mem. P. & A. for Prelim Injunction, In re: Wachovia Corp. “Pick-a-Payment” Mortgage Marketing and Sales Practices Litigation, No. 09-02015 (N.D. Cal. Jan. 11, 2013). The class members allege that Wells Fargo has breached the parties’ settlement agreement by denying agreed-to and judicially approved loan modifications, taking inconsistent positions as to class members’ loan modification eligibility, and presenting inaccurate loan modification data to the court. Id. at 1.

The parties agreed to settle claims growing directly out of the 2008 home mortgage crisis and based on allegations that Wachovia Bank (acquired by Wells Fargo) failed to disclose that borrowers opting for artificially low monthly payments under the so-called “Pick-a-Payment” program could realize a net increase in their loan principal, and an eventual balloon payment far in excess of the initial monthly payments (and well beyond most borrowers’ means). A key provision of the settlement, therefore, was the establishment of a loan modification program, which was intended to align the class members’ loan repayment obligations with their ability to pay.

Class members now claim that Wells Fargo has been imposing onerous loan modification requirements and rejecting the vast majority of loan modification applications submitted. See id. at 3-5. Among other impediments, the class members allege that Wells Fargo erected hard-to-satisfy criteria for the “imminent default” prerequisite to loan modification, while expressly not considering obvious measures of borrowers’ financial hardship such as a recent bankruptcy filing. Id. at 6. Additionally, the class members contend that Wells Fargo made deliberately unrealistic assessments of how much money the class members would need to pay for necessities such as food and child health care, and used those assessments as a basis for denying the settlement’s agreed-to injunctive relief. Id. at 7-8.

The challenge to Wells Fargo’s compliance with the settlement’s core terms has been accompanied by unusually extensive post-settlement discovery, consisting of document requests and depositions intended to expose how Wells Fargo’s administration of the loan modification applications resulted in only a small proportion of class members actually getting their loans meaningfully modified.

Given that the parties are engaged in a discovery skirmish attendant to the motion to enforce the settlement, it is likely to be some time yet before Northern District Judge Jeremy Fogel issues a decision. When that decision is issued, however, it is expected to be widely influential both in conditioning settling defendants’ compliance with settlement terms and in defining the range of vigilance undertaken by class counsel in ensuring such compliance.

On remand from the U.S. Supreme Court, the Ninth Circuit has issued the latest iteration of a class certification decision that has been in continual flux even as it has been widely cited in wage and hour class actions. See Wang v. Chinese Daily News, Inc., No. 08-55843 (9th Cir. Mar. 4, 2013) (slip opinion available here). In October of 2011, the U.S. Supreme Court vacated Wang v. Chinese Daily News, Inc., 623 F.3d 743 (9th Cir. 2010), and remanded it “for further consideration in light of Wal-Mart Stores, Inc. v. Dukes.”

In the underlying action, a hybrid FLSA collective action and state-law wage and hour class action, the district court had granted certification under both Federal Rule 23(b)(2) and 23(b)(3). On appeal to the Ninth Circuit, the appellate panel affirmed the certification under Rule 23(b)(2) and on that basis found it unnecessary to consider the certification under 23(b)(3). However, in this most recent ruling, the Ninth Circuit found that the monetary damages sought by the plaintiff were in no sense “incidental,” and on that basis altogether vacated the district court’s Rule 23(a)(2) analysis and directed the district court to conduct a Dukes-compliant analysis, stating: “Plaintiffs must show ‘significant proof that [CDN] operated under a general policy of [violating California labor laws].’” Slip op at 10 (internal citation omitted).

However, plaintiffs need not show that every question in the case, or even a preponderance of questions, is capable of classwide resolution. So long as there is “even a single common question,” a would-be class can satisfy the commonality requirement of Rule 23(a)(2). Id. The Ninth Circuit directed the district court to two of its recent class certification decisions, In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 958–59 (9th Cir. 2009) and Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944–48 & n.14 (9th Cir. 2009), and ordered it to conduct its analysis on remand consistent with the predominance jurisprudence articulated in those cases. Slip op. at 13.

Once again, therefore, while Dukes has plainly imposed a more demanding class certification standard, that standard has not proved to be the insuperable obstacle to certification that many had predicted when Dukes was issued.

The Ninth Circuit has declined to revisit the 2012 decision of a three-judge panel affirming the $9.5 million class action settlement involving Facebook’s controversial “Beacon” advertising system. See Lane v. Facebook, __ F.3d __, 2013 WL 765140 (9th Cir. 2013). In an order issued on February 26, 2013, the court denied defendants’ petitions for rehearing and rehearing en banc. Barring review by the U.S. Supreme Court, this brings to a close a multi-year saga for the Beacon settlement, which the parties first agreed to in 2009.

In the complaint, class members alleged that the now-discontinued Beacon program illegally monitored and shared Facebook users’ online shopping and search activity, compiling purchasing patterns and entertainment preferences and selling that information. The parties negotiated a settlement that would devote the entire net proceeds to the creation of the “Digital Trust Foundation,” with the objective of educating Internet users and merchants alike on issues related to privacy, prevention of identity theft, and the improper use of personal information. The settlement, approved in 2010 by U.S. District Judge Richard Seeborg, also required Facebook to discontinue the much-criticized Beacon program, and has successfully withstood criticism that the all-injunctive-relief settlement provisions were inadequate.

The ruling comes amid somewhat greater scrutiny being applied to similar cy pres settlements, where settlement proceeds only indirectly address the at-issue conduct in the underlying lawsuits. Last year, Judge Seeborg rejected a settlement in which Facebook proposed to resolve claims that it had misappropriated users’ names and likenesses with a $10 million charitable contribution. And the battle around the Beacon settlement might not yet be over, as the U.S. Supreme Court’s recent receptiveness to hearing cases where class action jurisprudence is at issue suggests that this relatively aggressive use of the cy pres doctrine might be vulnerable to Supreme Court review.