Terry v. Wasatch Advantage Group, LLC ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, ex rel. No. 2:15-cv-00799-KJM-DB DENIKA TERRY and ROY HUSKEY III, 12 and each of them for themselves individually, and for all other persons 13 similarly situation and on behalf of the ORDER UNITED STATES OF AMERICA, 14 Plaintiffs/Relators, 15 v. 16 WASATCH ADVANTAGE GROUP, 17 LLC, WASATCH PROPERTY MANAGEMENT, INC., WASATCH 18 POOL HOLDINGS, LLC, CHESAPEAKE COMMONS HOLDINGS, LLC, LOGAN 19 PARK APARTMENTS, LLC; LOGAN PARK APARTMENTS, LP, 20 Defendants. 21 22 23 Plaintiffs’ motion seeking (1) clarification, or in the alternative, amendment of the 24 class definition, (2) compilation of the class list, (3) approval of the proposed class notice, and 25 (4) amendments to the scheduling order is before the court. Mot., ECF No. 107. Defendants 26 oppose the motion only to the extent it seeks to redefine the operative class period previously 27 certified by the court. Opp’n, ECF No. 108. All other forms of relief sought by plaintiffs are 28 unopposed. Id. On the issue of class definition, plaintiffs have lodged a reply. Reply, ECF No. 1 112. On August 23, 2019, the court heard oral argument on the matter; counsel Laura Ho 2 appeared for plaintiffs and counsel Ryan Matthews appeared for defendants. For the reasons 3 explained below, plaintiffs’ motion is GRANTED in its entirety. 4 I. BACKGROUND 5 Given the lengthy history of this case, the court need not rehash the factual and 6 procedural background beyond what is relevant to the present motion.1 Plaintiffs initiated this 7 putative class action on April 14, 2015. Compl., ECF No. 1. Since then, the complaint has 8 undergone four rounds of amendment. See First Am. Compl., ECF No. 25; Second Am. Compl., 9 ECF No. 66; Third Am. Compl. (“TAC”), ECF No. 71-2; Fourth Am. Compl. (“FAC”), ECF No. 10 98. From inception, plaintiffs have consistently described the relevant class period “as the time 11 period starting [four or six] years prior to the date of filing of this Complaint.” See Compl. ¶¶ 39, 12 41 (six-year class period); First Am. Compl. ¶¶ 39, 41 (same); Second Am. Compl. ¶¶ 41, 43 13 (same); TAC ¶¶ 44, 47 (four-year class period); FAC ¶¶ 47, 50 (same). 14 On July 30, 2018, citing to plaintiffs’ Third Amended Complaint, the court 15 certified the Rule 23(b)(3) “reimbursement class”2 as follows: 16 All persons who, in the time period starting four years prior to the date of filing this Complaint through the final resolution of this 17 matter, (1) have been tenants at any of Defendants’ California properties; (2) have participated in the “Section 8” Housing Choice 18 Voucher Program in connection with their tenancies at the California properties; and (3) have paid additional charges set forth in 19 Additional Services Agreements in excess of their individual portions of the contract set forth in the HAP Contracts. 20 21 Class Cert. Order at 13 (citing TAC ¶ 44). 22 What is meant by “the time period starting four years prior to the date of filing this 23 Complaint” is the subject of dispute here. Plaintiffs contend this four-year class period begins 24 April 14, 2011, exactly four years prior to the filing of the initiating complaint. Mot. at 9; Reply 25 1 For a thorough explanation of the factual and procedural background of this matter, refer 26 to the court’s July 30, 2018 preliminary class certification order. Class Cert. Order, ECF No. 92, at 2–5. 27 2 The court also certified a second class under Rule 23(b)(2), the “injunctive relief class.” 28 Class Cert Order at 13. The scope of the injunctive relief class is not at issue here. 1 at 2. Defendants believe the four-year class period runs from the date of the operative Fourth 2 Amended Complaint. See generally Opp’n. As discussed below, the court GRANTS plaintiffs’ 3 motion in its entirety and defines the class period to begin April 14, 2011. 4 II. DISCUSSION 5 A. Plaintiffs’ Arguments 6 Plaintiffs ask the court to clarify that when certifying the class period as “starting 7 four years prior to the date of filing this Complaint,” the court meant from the initial complaint, 8 and thus the class period begins April 14, 2011. Mot. at 9. Alternatively, if the court’s 9 certification order ambiguously defines the class period, plaintiffs ask the court to adopt their 10 interpretation because it relates the class claims back to the filing of the original complaint. Id. 11 As to the latter argument, plaintiffs rely on the relation-back doctrine rooted in 12 Federal Rule of Civil Procedure 15(c) and apply the Ninth Circuit’s three-part test set forth in In 13 re Syntex Corp. Sec. Litig., 95 F.3d 922, 935 (9th Cir. 1996), for expanding the class scope. The 14 Syntex test requires: “(1) the original complaint gave the defendant adequate notice of the claims 15 of the newly proposed plaintiff; (2) the relation back does not unfairly prejudice the defendant; 16 and (3) there is an identity of interests between the original and newly proposed plaintiff.” 17 95 F.3d at 935. Applying this test, plaintiffs contend (1) defendants had adequate notice “because 18 the original complaint . . . alleged violations based on general conduct and practices by Wasatch 19 that Wasatch knew applied to its Section 8 tenants across California” and “the complaint directly 20 referred to the scope of Defendants’ entire portfolio of residential properties and explicitly 21 reserved the right to amend the class definition if supported by discovery”; (2) defendants will not 22 be prejudiced “because the expanded class’s claims are identical to the claims set forth in the 23 original complaint, and depend on common methods of proof”; and (3) “members of the 24 expanded certified class based on the Third Amended Complaint share an identity of interests 25 with members of the putative class in the original complaint because they are bringing identical 26 claims.” Mot. at 10–11. 27 To the extent “four years prior to the date of filing this Complaint” is ambiguous, 28 plaintiffs reason their interpretation is consistent with the nature of the class certification 1 pleadings and, moreover, defendants “were on notice of the temporal scope of Plaintiffs’ class 2 claims based on the parties’ earlier discovery dispute . . . and although they discussed the 3 proposed class definition in their opposition to class certification, they did not suggest that it 4 temporally limited the class period . . . .” Id. at 12. 5 Alternatively, plaintiffs argue that if the court determines the current class period 6 is limited to the four years preceding the Third Amended Complaint, the court should exercise its 7 discretion to amend the class definition exercising its authority under Rule 23. Id. Plaintiffs 8 assert that modifying the class-period definition “would not change a single element of the 9 Court’s Rule 23 analysis from its July 30, 2018 [class certification] order[,]” would not prejudice 10 defendants who have been on notice of state-wide claims and received voluminous discovery 11 dating back to 2011, and will not meaningfully affect the nature of the litigation because the 12 claims of property residents prior to 2014 verse current residents are nearly identical. Id. Finally, 13 plaintiffs maintain they expeditiously moved for amendment of the class definition upon 14 discovering defendants’ divergent interpretation. Id. 15 B. Defendants’ Arguments 16 Defendants counter that the plain language of the court’s certification order and 17 the Third and Fourth Amended Complaints clearly define the class period as limited by the four 18 years prior to “that Complaint,” meaning the operative complaint, not the original complaint. 19 Opp’n at 2–4 (emphasis in original). Defendants argue that “complaint” is not synonymous with 20 “action” or “matter”; thus, when plaintiffs’ own definition refers to “this Complaint,” its only 21 natural interpretation is that of the operative complaint in which the words are contained. Id. at 22 3–4. 23 Defendants also argue the Syntex relation-back test does not apply here, but rather 24 applies only when plaintiffs seek to amend a complaint to expand the class and statute of 25 limitations issues are at play. Id. at 3. Those circumstances are not present here, defendants 26 contend, because “[w]hat Plaintiffs truly seek to do is to alter their class definition in order to 27 artificially expand the class that they themselves defined.” Id. 28 ///// 1 Finally, defendants argue that, at this stage in the litigation, plaintiffs’ requested 2 relief is subject to a showing of “good cause” under the Pretrial Scheduling Order because 3 “Plaintiffs are, in effect, seeking to amend their pleadings to assert a new class definition.” Id. at 4 4. Additionally, defendants argue although the court has discretion to amend the class definition, 5 it may do so only “in light of subsequent developments in the litigation.” Id. at 6 (emphasis in 6 original) (citation omitted). In sum, defendants contend plaintiffs have made neither a showing of 7 good cause nor that subsequent developments justify amending the class period as plaintiffs 8 request. Id. 9 C. Analysis 10 As explained below, the court finds that sufficient justification exists to define the 11 class period as beginning April 14, 2011, exercising its discretionary authority under Rule 23. 12 The court thus need not resolve whether the relation-back doctrine applies. See Cornwell v. Wells 13 Fargo Bank, NA, No. EDCV 11-833-VBF(OPX), 2011 WL 13225033, at *2 n.1 (C.D. Cal. 14 Aug. 29, 2011) (ignoring defendant’s alternative arguments after deciding motion on narrower 15 grounds). 16 Rule 23(c)(1)(C) provides: “An order that grants or denies class certification may 17 be altered or amended before final judgment.” Fed. R. Civ. P. 23(c)(1)(C). “The purpose of Rule 18 23(c)(1)(C) is to afford district courts the latitude to amend an existing class certification order, or 19 an order denying class certification, in light of subsequent developments.” Friend v. Hertz Corp., 20 No. C-07-5222 MMC, 2014 WL 4415988, at *2 (N.D. Cal. Sept. 8, 2014) (citing General 21 Telephone Co. v. Falcon, 457 U.S. 147, 160 and n.16 (1982) for “holding, under predecessor to 22 Rule 23(c)(1)(C), ‘after a certification order is entered, the judge remains free to modify it in the 23 light of subsequent developments in the litigation.’”); see also Amgen Inc. v. Connecticut Ret. 24 Plans & Tr. Funds, 568 U.S. 455, 479 n.9 (2013) (noting “that certifications are not frozen once 25 made. Rule 23 empowers district courts to ‘alte[r] or amen[d]’ class-certification orders based on 26 circumstances developing as the case unfolds” (citing Fed. R. Civ. P. 23(c)(1) (1988); Rule 27 23(c)(1)(C) (2013)). This latitude, however, is limited, as “Rule 23(c)(1)(C) applies where 28 ‘subsequent developments’ warrant revisiting a class certification decision.” Hayes v. Magnachip 1 Semiconductor Corp., No. 14-CV-01160-JST, 2017 WL 512777, at *1 (N.D. Cal. Feb. 8, 2017); 2 see also Daniel F. v. Blue Shield of California, No. C 09-2037 PJH, 2015 WL 3866212, at *3 3 (N.D. Cal. June 22, 2015) (“Rule 23(c)(1)(C) does not reference motions to alter or amend class 4 certification orders, and it is not a separate mechanism by which a party can seek reconsideration 5 of a prior order relating to class certification. Rather it is simply a provision authorizing the court 6 to alter or amend an order relating to class certification at any time prior to judgment.”); Ms. L. v. 7 U.S Immigration & Customs Enf’t, 330 F.R.D. 284, 292 (S.D. Cal. 2019) (“[M]odification of the 8 class definition falls squarely within the confines of Supreme Court precedent and Rule 9 23(c)(1)(C), which give courts broad discretion to alter or amend a class definition considering 10 subsequent developments in a case.” (citing Armstrong v. Davis, 275 F.3d 849, n.28 (9th Cir. 11 2001)). 12 What constitutes a sufficient “subsequent development” falls within the court’s 13 discretionary power to decide. For example, in Ms. L, plaintiffs moved for clarification, or in the 14 alternative, to modify the class definition because the initial class definition omitted “potentially 15 ‘thousands’” of parents who otherwise would be eligible for reunification with their children after 16 separation during immigration proceedings. 330 F.R.D. at 287. Defendants opposed the motion, 17 arguing, among other things, expanding the class “would run afoul of the adequacy, typicality and 18 commonality requirements of Federal Rule of Civil Procedure 23(a), and present ascertainability 19 problems.” Id. In granting plaintiffs’ motion to modify the class definition, the court found that 20 plaintiffs’ discovery of additional parent-child separations, in addition to an intervening report 21 from the Office of Inspector General revealing a significant increase in the number of separated 22 children, were subsequent developments sufficient to modify the class. Id. at 287–92. 23 Conversely, in Hayes, the court struck plaintiffs’ second motion for class 24 certification because “there [were] no ‘subsequent developments’ that justif[ied] Plaintiffs’ 25 second motion for class certification. As Plaintiffs admit[ted] in their opposition brief, their 26 pending motion contain[ed] no new arguments and relie[d] on no new evidence.” 2017 WL 27 512777, at *2. Likewise, in Hartman v. United Bank Card, Inc., 291 F.R.D. 591, 597 (W.D. 28 Wash. 2013), the court denied plaintiffs’ motion for leave to file a second motion for class 1 certification because plaintiffs “identified no changed circumstances that would warrant a second 2 motion for class certification.” In so doing, the court explained, “Plaintiffs must show some 3 justification for filing a second motion, and not simply a desire to have a second or third run at 4 the same issues.” Id. 5 The situation here, although occasioned by less weighty circumstances as those in 6 Ms. L, nonetheless warrants refinement of the class definition. If anything, Ms. L makes clear that 7 where post-certification circumstances, evidentiary or otherwise, dictate the need for modification 8 or refinement of a class definition, the court has discretion to act accordingly. Here, the need for 9 a more precise definition of the class period is readily apparent, as the parties possess 10 diametrically opposing views as to how the phrase “this Complaint” defines the four-year class 11 period. In plaintiffs’ view, as noted, “this Complaint” harkens back to the language of the 12 original complaint and is used consistently within each subsequent amendment; thus, the four- 13 year period prior to “this Complaint” can refer only to April 14, 2011. Reply at 2. Defendants, 14 on the other hand, suggest what they say is a facial reading of the class definition that fixes the 15 class period at four years prior to the Fourth Amended Complaint, which would be September 20, 16 2014. Opp’n at 7. Such divergent interpretations of the class period justify clarification. 17 Plaintiffs argue amendment to clarify the class definition “is particularly 18 appropriate . . . where the alteration by Plaintiffs would not change the legal theory of the case, 19 the scope of discovery, or any element of Rule 23 analysis, and where Defendants do not claim 20 . . . they would be prejudiced by the amendment.” Reply at 4. Plaintiffs further assert they were 21 not aware of defendants’ interpretation of the Reimbursement Class until June 12, 2019, “and 22 therefore could not have anticipated the need for the clarification or amendment they now request 23 any earlier.” Id. Defendants argue there have been no subsequent developments to justify 24 amendment of the class definition, and thus no good cause. Opp’n at 6. 25 Plaintiffs are correct. Unlike Hayes and Hartman, where plaintiffs were merely 26 attempting to “have a second or third run at the same issues” without presenting new evidence or 27 argument, plaintiffs here provide sufficient justification that upon learning of defendants’ 28 interpretation of the class period, which drastically differed from their own, they expeditiously 1 sought clarification from the court, and in so doing, have presented new argument for the court’s 2 consideration. Because ambiguity regarding the class period will pose difficulties when 3 assembling and providing notice to potential class members, court intervention is necessary. 4 Moreover, defendants make no contention the requirements of Rule 23 will be 5 disrupted or they will be prejudiced by a more precise definition of the class period. See Reply at 6 3 (citing Federal Judicial Center, Manual for Complex Litigation, Third § 30.18 (1995) 7 (“Reconsideration [of a class definition] under Rule 23(c)(1) may be on motion of any party or 8 sua sponte by the court issuing a show cause order. . . . In deciding whether to modify its original 9 decision, the court should consider not only the requirements of Rule 23(a) and (b) in the light of 10 the facts and issues of the case, but also whether the parties or the class would be unfairly 11 prejudiced by a change in the proceedings at that point.”) (alteration in Reply)). Plaintiffs 12 credibly assert modification “would not change the legal theory of the case, the scope of 13 discovery, or any element of Rule 23 analysis, and [] Defendants do not claim, and could not 14 credibly argue, [] they would be prejudiced by the amendment.” Reply at 4. Where “proposed 15 modifications [to class definitions] are minor, require no additional discovery, and cause no 16 prejudice to defendants[,]” the court may grant amendment more freely. In re TFT-LCD (Flat 17 Panel) Antitrust Litig., 267 F.R.D. 583, 591 (N.D. Cal. 2010), amended in part, No. M 07-1827 18 SI, 2011 WL 3268649 (N.D. Cal. July 28, 2011). 19 Additionally, although “ascertainability” is not a per se requirement under Rule 23, 20 see In re Lidoderm Antitrust Litig., No. 14-MD-02521-WHO, 2017 WL 679367, at *25 (N.D. 21 Cal. Feb. 21, 2017) (citing Briseno v. ConAgra Foods, Inc., 844 F.3d 1121, 1125 (9th Cir. 2017)), 22 it is, nonetheless, essential that the “identity of class members must be ascertainable by reference 23 to objective criteria.” In re TFT-LCD, 267 F.R.D. at 592 (citation omitted). Given the roughly 24 three-year gap between the parties’ interpretations of when the class period should begin, a failure 25 to refine terms here would leave the court and parties without the objective criteria necessary to 26 adequately define the class. 27 Given the justification for amendment of the class period, the court must also 28 ensure plaintiffs’ interpretation of the class period is permissible. For one, although the court 1 does not reach the relation-back question, it notes there are no statute of limitations questions 2 here, which ordinarily require an in-depth examination when considering amendment. See 3 Syntex, 95 F.3d at 935; see also Besig v. Dolphin Boating & Swimming Club, 683 F.2d 1271, 4 1278 (9th Cir. 1982) (“The relation back theory applies almost exclusively to avoid the statute of 5 limitations when amendment to the complaint will not prejudice the defendant.”). Second, the 6 court notes plaintiffs use of the phrase “this Complaint” has remained consistent through each 7 amendment. See Compl. ¶¶ 39, 41; First Am. Compl. ¶¶ 39, 41; Second Am. Compl. ¶¶ 41, 43; 8 TAC ¶¶ 44, 47; FAC ¶¶ 47, 50. Therefore, one could reasonably presume if the class period was 9 indeed anchored to the definition contained in the initial complaint, that by preserving that same 10 phrase from one amendment to the next, plaintiffs intended the meaning of the phrase remain the 11 same across amendments. 12 Moreover, to the extent defendants contend they were not on notice of plaintiffs’ 13 purported interpretation of the class period, plaintiffs adequately address this concern by noting 14 the evidence in support of their class certification motion dated back to 2011. Mot. at 12 (citing 15 Lavine Decl., ECF No. 72-5, Ex. A at 13–20 (2011-2012 HAP contract), Ex. B at 1–9, 18–22 16 (Additional Services Agreements from 2011 and 2012), Ex. C at 15–42 (leases from 2011 and 17 2012), Ex. D at 1–9 (2013 ledger encompassing charges from 2011), Ex. E at 2, 5, 8 (monthly 18 costs breakdowns from 2011 and 2012)). Defendants were aware of the “temporal scope of 19 Plaintiffs’ class claims based on the parties’ discovery dispute” as they “did not suggest [the 20 proposed class definition] temporally limited the class period to the four years preceding the 21 motions for class certification and to amend the complaint.” Id. (citing ECF Nos. 47 (motion to 22 compel), 48 (order on motion to compel), 78 at 19–20 (defendants’ opposition to class 23 certification motion addressing class definition)). Additionally, the court’s reliance on evidence 24 supporting class certification in no way suggested the class period was confined to the four-year 25 period preceding the Third Amended Complaint. See, e.g., Class Cert. Order at 4 (“Resident 26 Ledger for the Huskey residence for the month of January 2012”), 17 (“Terry’s Resident Ledger 27 shows $310.25 was due on February 4, 2013[,] without differentiation between contract rent and 28 1 unpaid additional charges, such as the washer/dryer rental charge from February 1, 2013[,] and 2 renter’s insurance charge from February 1, 2013.”). 3 Finally, there is merit to plaintiffs’ argument that crediting defendants’ position 4 would beget an illogical result. Reply at 2 (“Plaintiffs could not have altered the certified class 5 unilaterally by changing the class period in a complaint filed after the Court’s certification order.” 6 (emphasis in original)). If the class period were to begin running four years prior to the date of 7 the Fourth Amended Complaint, as defendants suggest, that would effectively modify the class 8 period certified by the court in its July 30, 2018 order, which relied on the class definition 9 supplied by the Third Amended Complaint.3 Such perfunctory adjustments to the class period run 10 counter to Rule 23’s exacting standards and the concerns raised by defendants’ here. 11 In light of the analysis above, a permissible, and the most fair and reasonable, 12 interpretation of the phrase “this Complaint” is one that refers to the original complaint; 13 consequently, the class period must be anchored to the “time period starting four years prior to the 14 filing of” the April 14, 2015 complaint, meaning the class period began April 14, 2011. 15 To the extent Rule 16(b) applies, for the same reasons articulated above, the court 16 finds plaintiffs have satisfied Rule 16(b)’s “good cause” standard such that amendment of the 17 class period is justified. 18 D. Additional Matters 19 Plaintiffs’ motion requests three additional forms of relief: (1) order demanding 20 defendants produce a class list, (2) amendment to the scheduling order, and (3) approval of class 21 notice. These requests are unopposed.4 22 As to plaintiffs’ request to amend the scheduling order, it appears the court’s July 23 11, 2019 stipulation and order has resolved this request. ECF No. 111. However, if the parties 24 3 Although the parties stipulated to the filing of the Fourth Amended Complaint to 25 substitute Tamara Livingston as the new class representative for the Rule 23(b)(2) class, the amendment would nonetheless have the same effect on the class period if defendants’ position 26 were true. See ECF Nos. 94, 95. 27 4 At hearing, defendants confirmed their non-opposition to these components of plaintiffs’ 28 motion remains unchanged if the court clarifies the class period as beginning April 14, 2011. 1 desire additional amendments to the scheduling order, the court will consider such requests 2 through the filing of a stipulation and proposed order. 3 As to the remaining requests for a class list production and approval of class 4 notice, the motion is GRANTED. Within 21 days of this order defendants shall compile and 5 produce the class list for the Reimbursement Class dating back to April 14, 2011, and the class 6 list shall include class members’ names and any available standard identifying information and be 7 produced in manipulable electronic form, such as Excel. KCC Class Action Services is hereby 8 appointed as the class action administrator and plaintiffs’ proposed class notice form and 9 procedures, including the mailing of class notice by U.S. mail and the proposed 35-day opt-out 10 period, are hereby approved, Plaintiffs may proceed forthwith with providing notice to the class. 11 III. CONCLUSION 12 For the foregoing reasons, plaintiffs’ motion for clarification, or in the alternative, 13 amendment of the class definition, compilation of the class list, approval of proposed class notice 14 and amendments to the scheduling order is GRANTED. This order resolves ECF No. 107. 15 Accordingly, 16 1. The class period for the Reimbursement Class, as defined in the court’s order 17 on class certification and set out above, begins on April 14, 2011, four years 18 prior to the filing of the initial complaint in this action; 19 2. Within 21 days of this order, defendants shall compile and produce the class 20 list for the Reimbursement Class dating back to April 14, 2011, and the class 21 list shall include class members’ names and any available standard identifying 22 information, such as last known contact information, and be produced in 23 manipulable electronic form, such as Excel; 24 3. KCC Class Action Services is hereby appointed as the class action 25 administrator for this case; 26 4. Plaintiffs’ proposed class notice form and procedures, including the mailing of 27 class notice by U.S. mail and the proposed 35-day opt-out period, are hereby 28 approved and class notice is therefore ordered to proceed accordingly; and 1 5. Should the parties desire additional amendments to the scheduling order 2 beyond those approved by the court on July 11, 2019, ECF No. 111, the court 3 will consider such request upon the filing of a stipulation and proposed order. 4 IT IS SO ORDERED. 5 DATED: January 14, 2020. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28