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Styx v. Wells Fargo Bank

March 24, 2010

JOHN STYX AND ILIAN STEFANOV, PLAINTIFFS,
v.
WELLS FARGO BANK, N.A., DEFENDANT.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Defendant Wells Fargo Bank, N.A. removed this case to federal court shortly after plaintiffs John Styx and Ilian Stefanov filed a second amended complaint, which they filed on behalf of a putative class of similarly situated plaintiffs. Wells Fargo based the removal on the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d). Styx and Stefanov have moved to remand the case to state court. The parties agree that remand turns on whether "the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs." Id. § 1332(d)(2)(A).

Background

Styx and Stefanov purchased real estate of which Wells Fargo was the seller or the seller's agent. They entered into standard form contracts that called for closing to take place on a particular date scheduled by Wells Fargo. They attended and did what they were required to do, but no one from Wells Fargo attended. Wells Fargo had sent documents and instructions to the closing agent (a title company) in advance of the closing. The instructions directed the title company not to disburse funds or turn over possession of the real estate to the purchaser until Wells Fargo gave approval. Wells Fargo then withheld approval for several days. As a result, Styx and Stefanov did not get title or possession when they were supposed to. This, they allege, breached their contracts with Wells Fargo. They allege that they suffered actual damages consisting of the incremental amounts of interest they paid on their mortgage loans and for property insurance for the period of delay, plus the absence of a "tax proration" that covered the extra days before the actual transfer of title, and the loss of use of the funds they put up for the sale for the period of delay.

The plaintiffs allege that Wells Fargo has a pattern and practice of engaging in this sort of conduct when it is the seller or agent for the seller of real estate. They seek certification of a class consisting of all persons who from May 1999 through the present contracted to purchase real estate in Illinois from Wells Fargo or with Wells Fargo as selling agent for another mortgage lender and who suffered financial loss because Wells Fargo delayed completing the closing and transfer of title beyond the scheduled date.

In the second amended complaint that they filed in state court, plaintiffs added claims under the Illinois Consumer Fraud Act (ICFA). They allege that Wells Fargo has engaged in an ongoing practice of representing that closing will take place at a particular time while concealing that it does not intend to proceed at that time; concealing the fact that the purchaser will not receive title or possession on the date set for closing; and making misrepresentations regarding the tax proration amount based on the scheduled closing date. They allege that Wells Fargo knew in advance that it would not have anyone attend the closings it had scheduled.

The plaintiffs' actual damages on the ICFA claims consist of the same actual damages sought on the breach of contract claims. Plaintiffs also include a request for attorney's fees, though the parties agree that this does not count toward the $5,000,000 threshold. Plaintiffs make no reference to punitive damages in their second amended complaint. For the ICFA claims, plaintiffs seek certification of a class of all purchasers from May 1, 2006 to the present, a significantly shorter period than the proposed breach of contract class.

In removing the case, Wells Fargo contended that "there are at least 10,000 purchase transactions potentially at issue here for the period of 2006 through 2009 alone." Notice of Removal ¶ 16. Wells Fargo based this contention on the affidavit of Mary Sohlberg, a vice president of the bank's "structured products group." Sohlberg said that she made her affidavit "based upon my personal knowledge and based on information obtained from company records and individuals with knowledge of the matters described herein." Sohlberg Affid. ¶ 2. On the contention regarding the number of transactions, Sohlberg said that "[b]ased on my inquiry of certain employees [with knowledge], I determined that for the period of 2006 through 2009, Wells Fargo was the seller of more than 10,000 properties in the State of Illinois." Id. ¶ 4.

In its notice of removal, Wells Fargo also noted that plaintiffs' counsel had told the state court that one of the plaintiffs had suffered about $90 in damages. If that is the average, Wells Fargo argued, the actual damages would reach around $900,000 for 10,000 potential plaintiffs. And that figure, Wells Fargo stated, accounted only for three years of the class period for the breach of contract claims. Wells Fargo also noted that punitive damages are available on the plaintiffs' ICFA claim and that "[t]he Supreme Court has noted that punitive damages will not offend due process as long as they are less than the compensatory damages award multiplied by ten." Id. ¶ 18. Wells Fargo inferred from this that punitive damages could be as high as $9,000,000, well over the CAFA threshold by itself.

In seeking remand, plaintiffs argued that "any contention that the amount in controversy will exceed $5,000,000.00 [is] highly speculative without any basis in fact." Pls.' Mot. Contesting Jurisd. ¶ 4. They made a detailed argument for the proposition that actual damages for the class would not exceed $2,000,000.

Plaintiffs first attacked the figure of 10,000 potential plaintiffs for 2006-09 proposed by Sohlberg in her affidavit. They argued that to the extent Sohlberg relied on what others told her -- which is what she said she did to derive the 10,000 figure -- her affidavit was inadmissible hearsay. Second, plaintiffs pointed out that even if the Sohlberg affidavit is correct, it assumes that all closings were delayed. Plaintiffs note that they served interrogatories on Wells Fargo to try to ascertain the number of closing that actually were delayed but that Wells Fargo had declined (at least for now) to answer them.

Third, plaintiffs' attorney, acting as a summary witness, stated in an affidavit that he had examined records to determine the total number of deeds recorded in Cook, DuPage, and Lake Counties with Wells Fargo as grantor for the entire breach of contract class period of May 1999 through November 2009. The total was 4,088. These counties, counsel noted (with supporting data), constitute fifty-four percent of the total population of Illinois. Extrapolating on that basis yielded an estimated total of 7,570 Illinois deeds on which Wells Fargo was grantor during the longer breach of contract class period. Plaintiffs rounded this figure up to 8,000 for the sake of argument.

Plaintiffs then proposed an analysis for why the total actual damages would be well under $2,000,000 even under a best-case (for them) scenario:

- First, drawing on the damages claimed by Styx -- actual damages of $87.44 based on a purchase price of $75,000 and a five day delay -- and Stefanov -- actual damages of $220.56 based on a purchase price of $120,650 and an eight day delay, plaintiffs argued that actual damages are likely to average 0.025% of the purchase price per day of delay. (That is a smidgen above the percentage for Styx and Stefanov.) - Second, plaintiffs' attorney provided an affidavit detailing his review of the recordings of all deeds in Lake County, Illinois from May through November 2009 in which Wells Fargo was the "grantor." The average sale price was about $118,000. Though noting that Lake County has the highest cost of living in Illinois, plaintiffs' attorney adopted for his calculation a higher average sale price, $130,000. - Third, using the longer eight day delay Stefanov experienced as the ...


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