Franklin v. CitiMortgage, Inc., 2012 WL 10192 (S.D. Ohio Jan. 3, 2012).

In this action, a District Court in Ohio held that it can calculate classwide damages by multiplying the estimated economic value of the plaintiff’s claims by the number of class members who have claims typical to the plaintiff. 

The plaintiff brought a class action lawsuit in the Hamilton County, Ohio Court of Common Pleas alleging that the defendant, CitiMortgage, charged him “Delinquency Expenses” even though it did not actually incur these costs, and that CitiMortgage fraudulently or recklessly induced him and other borrowers to pay these expenses.

The plaintiff had obtained a mortgage loan in 2003 that was serviced by CitiMortgage. He did not make a mortgage payment that was due on November 1, 2008, and his January 2009 monthly statement listed a $15.00 charge for “Delinquency Expenses.”  The statement defined these as “third-party expenses such as property inspection fees, property preservation costs, appraisal costs, and attorneys fees” incurred due to the plaintiff’s default. The plaintiff alleged that additional charges for “Delinquency Expenses” appeared on subsequent monthly mortgage statements. He asked CitiMortgage to provide verification of these charges, but it failed to do so.

The plaintiff accordingly sought to represent a class of all Ohio residents who, in the last four years, received a CitiMortgage mortgage monthly statement that included delinquency expenses, and who paid those expenses, and sought compensatory and punitive damages, interest and attorney’s fees.

CitiMortgage timely filed its notice of removal in the District Court asserting federal jurisdiction pursuant to CAFA, 28 U.S.C. §§ 1332(d). 

According to CitiMortgage’s records, 20,630 active loans in Ohio include delinquency expenses charged on the loan as of June 30, 2011. CitiMortgage argued that as long as each class member sought “an average of at least $242.37 in damages,” the amount in controversy requirement was satisfied. CitiMortgage then identified several delinquency expense charges on two of the plaintiff’s account statements, as well as items the plaintiff challenged in his pre-suit letters to CitiMortgage. These materials were attached to the plaintiff’s written discovery requests that were filed with the complaint in the state court, and were served on CitiMortgage with the complaint. The plaintiff’s June 24, 2010 letter to CitiMortgage questioned $552.09 in cumulative delinquency expenses charged to him.

The plaintiff sought remand of the case, arguing that CitiMortgage had not satisfied its burden of demonstrating that the amount in controversy exceeded CAFA’s jurisdictional minimum of $5 million. He noted that his complaint was silent concerning any specific damages he might have suffered or that he sought to recover, and he did not allege any classwide damages allegedly caused by CitiMortgage. While he admitted that he “might” eventually seek to recover as much as $621.09 in delinquency charges he contended were unlawfully imposed, his complaint did not make that express allegation.  

The District Court, however, denied the plaintiff’s motion to remand.  

The Court noted that the only reference in the complaint to a specific delinquency expense was his allegation that he was charged $15 in January 2009.  The plaintiff claimed that other unspecified charges appeared in subsequent months.  The plaintiff’s initial discovery requests and the materials he attached to them included several of his monthly mortgage statements and his pre-suit correspondence with CitiMortgage.  Multiplying the expenses that the plaintiff directly questioned in his June 2010 letter, expenses which he contended were typical of the putative class, by the number of Ohio mortgage holders who had been charged delinquency expenses (20,630), yielded estimated classwide damages of at least $12,813,086. 

The plaintiff, however, responded that the Court may not go beyond the face of his complaint to estimate the value of the claims he asserts, and that it was improper to assume that each and every putative class member might claim the same amount. 

The Court observed that many courts have determined the amount in controversy not solely from the four corners of the complaint, but based on the entire record as it existed at the time of removal. The Court pointed that here, the plaintiff’s pre-suit letters contesting specific delinquency expenses sufficiently supported CitiMortgage’s argument that a reasonable estimate of the plaintiff’s damages were $552.09, at a minimum.  

Thus, the closer question before the Court was whether it is proper to calculate classwide damages by multiplying the estimated economic value of the plaintiff’s claims by the number of Ohio customers whose statements have included some type of delinquency expense. The plaintiff argued that there was nothing in his complaint alleging or suggesting that each and every putative class member was charged the same amount, and that it would be natural to expect variations among charges to each accountholder.  

The Court noted that Frederico v. Home Depot, 507 F.3d 188 (3rd Cir.2007) was analogous to this case. In Frederico, plaintiff sued Home Depot for late charges she was charged when she attempted to return a rental truck to the store but found the rental counter closed. She sued for herself and on behalf of “thousands” of similarly-situated customers under the state’s consumer fraud protection statute, alleging that she had been overcharged $287.14 in late fees. The court accepted defendant’s argument that the plaintiff’s claim represented an average of the damages at issue for each member of the putative class.  

Similarly, in E–Shops, Corp. v. U.S. Bank Nat’l Assn., 2011 WL 1324574 (D. Minn. Apr. 7, 2011), an unauthorized data breach of defendant’s confidential account information resulted in fraudulent credit cards used to buy goods from plaintiff. The bank credited its customers, which caused chargebacks to plaintiff. The plaintiff alleged that chargebacks to its account exceeded $11,000 over several months, and that a “large number” of accountholders had been victimized by the data breach. The court assumed that if plaintiff’s loss of over $11,000 was typical of the putative class members’ claims, the class would only need to reach 450 members to exceed CAFA’s jurisdictional limit. Given plaintiff’s allegation of “large numbers” of affected cardholders and the lack of any binding stipulation limiting classwide damages, the court found defendant had established the likelihood of at least $5 million in damages. (Editors’ Note: See CAFA Law Blog analysis of E–Shops posted on July 15, 2011.)

Here, the Court disagreed with the plaintiff that CitiMortgage should have provided more specific information about the delinquency expenses charged to each of the 20,630 active loans in Ohio. The Court maintained that it is not incumbent upon a defendant to establish to a legal certainty that the amount in controversy exceeds the jurisdictional threshold, but merely to show that it is more likely than not that the damages will exceed that threshold. The plaintiff specifically alleged that his claim was typical of the putative class he sought to represent, and he did not deny that prior to suit, he disputed at least $552 in expenses. The fact that he did not allege that amount in his complaint did not preclude the Court from considering his pre-suit contentions regarding the expenses, the Court remarked. Given the undisputed size of the class, the Court found that CitiMortgage had shown it more likely than not that the damages being claimed would exceed $5 million. 

The Court, therefore, denied the plaintiff’s motion to remand.