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Gibson v. Credit Suisse AG

United States District Court, Ninth Circuit

August 16, 2013

L.J. GIBSON, BEAU BLIXSETH, AMY KOENIG, VERN JENNINGS, MARK MUSHKIN, MONIQUE LAFLEUR, and GRIFFEN DEVELOPMENT, LLC, JUDY LAND, and RE: CHARLES DOMINGUEZ, each individually, and on behalf of others similarly situated Plaintiffs,
v.
CREDIT SUISSE AG, a Swiss corporation; CREDIT SUISSE SECURITIES (USA), LLC, a Delaware limited liability company, CREDIT SUISSE FIRST BOSTON, a Delaware limited liability corporation; CREDIT SUISSE CAYMAN ISLAND BRANCH, an entity of unknown type; CUSHMAN & WAKEFIELD, INC., a Delaware corporation and DOES 1 through 100 inclusive, Defendants.

REPORT AND RECOMMENDATION RE: PLAINTIFFS' MOTION TO CERTIFY CLASS (Docket No. 286.) CUSHMAN & WAKEFIELD'S MOTION TO EXCLUDE THE EXPERT REPORT AND RELATED TESTIMONY OF RANDALL BELL (Docket No. 319)

RONALD E. BUSH, Magistrate Judge.

Now pending before the Court are the following motions: (1) Plaintiffs' Motion to Certify Class (Docket No. 286), and (2) Defendant Cushman and Wakefield, Inc.'s Motion to Exclude the Expert Report and Related Testimony of Randall Bell (Docket No. 319). Having carefully reviewed the record, participated in oral argument, and otherwise being fully advised, the undersigned enters the following Report and Recommendation:

I. BACKGROUND

Plaintiffs purchased real property and homes in high-end, resort-style developments known as Lake Las Vegas, Tamarack, Ginn Sur Mer, and Yellowstone Club. This case has many moving parts; however, the general backdrop of Plaintiffs' claims relates to the manner in which Credit Suisse AG, Credit Suisse Securities (USA), LLC, Credit Suisse First Boston, and Credit Suisse Cayman Island Branch (collectively "Credit Suisse"), with appraisals prepared by Cushman & Wakefield, Inc. ("Cushman & Wakefield), marketed and implemented financing for each of the above-referenced developments.

Specifically, Plaintiffs allege that Credit Suisse masterminded a scheme - made possible by Cushman & Wakefield's creative, yet allegedly unlawful, Total Net Value ("TNV") appraisal methodology - to (1) induce the developers of these exclusive master-planned communities ("MPCs") to borrow huge sums of money through non-recourse loans from Credit Suisse, and (2) persuade these same developers to take out their equity in these developments, capitalizing on misleading future growth projections.

According to Plaintiffs, this deliberate strategy (which Plaintiffs refer to as the "Loan to Own" scheme) not only generated tens of millions of dollars in upfront "loan fees" for Credit Suisse, it also provided Credit Suisse with unfettered access to each MPC's confidential, proprietary, and key business information which, in turn, allowed Credit Suisse to assume lender advisory and "co-developer" roles within the MPCs. Once inside the door, Plaintiffs claim that Credit Suisse was then able to direct to the development of, and influence capital decisions for, the MPCs until the expected financial collapse of the developments under the weight of unsustainable debt.

Having "syndicated" its creditor status in the meantime and, thus, allegedly transacting away the inevitable financial consequences of default, Plaintiffs further contend that Credit Suisse intentionally positioned itself to take over the MPCs as a result of the subsequent, but nonetheless anticipated, bankruptcy and/or receivership proceedings - the apparent genesis of Plaintiffs' "Loan to Own" phraseology.

As property owners within these allegedly doomed-from-the-beginning MPCs, Plaintiffs claim that it was the deliberate, unorthodox manner in which Defendants created, marketed, implemented, managed, and controlled massive loan amounts that ultimately prevented the developers (at each of the four MPCs) from constructing and/or maintaining promised common area amenities that, naturally, make up the resorts themselves. To this end, Plaintiffs accuse Defendants of engaging in predatory lending practices and, pursuant to FRCP 23, move "to certify for class action treatment the claims for tortious interference with Plaintiffs' existing vested property and contractual rights, involving amenities and facilities, and for negligent harm to the same, as set forth in the Third Amended Complaint."[1] See Mem. in Supp. of Class Cert., p. 1 (Docket No. 286, Att. 1).

II. REPORT

A court's decision to certify a class is discretionary, with FRCP 23 guiding the court's exercise of that discretion. See Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944 (9th Cir. 2009). A plaintiff bears the burden of demonstrating each of the four requirements of FRCP 23(a) and at least one of the three requirements of FRCP 23(b). See Lozano v. AT & T Wireless Servs., Inc., 504 F.3d 718, 724 (9th Cir. 2007).

FRCP 23(a) requires a plaintiff to demonstrate (1) that the proposed class is sufficiently numerous, (2) that it presents common issues of fact or law, (3) that it will be led by one or more class representatives with claims typical of the class, and (4) that the class representatives will adequately represent the class. See Gen. Tel. Co. of the S.W. v. Falcon, 457 U.S. 147, 161 (1982); see also Fed.R.Civ.P. 23(a)(1)-(4). If a plaintiff satisfies the FRCP 23(a) requirements, he must also show that the proposed class action meets one of the three requirements of FRCP 23(b). See Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001). Here, Plaintiffs invoke only FRCP 23(b)(3) which requires them to show that "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed.R.Civ.P. 23(b)(3).

FRCP 23 is not a "mere pleading standard"; instead, it places an evidentiary burden on a plaintiff who hopes to represent a class. See Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011) ("A party seeking class certification must affirmatively demonstrate his compliance with the Rule - that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc."). To satisfy that burden, the court must conduct a "rigorous analysis" that may involve the merits of plaintiff's underlying claims. See id. at 2551-52 ("Frequently, that rigorous analysis' will entail some overlap with the merits of plaintiff's underlying claim. That cannot be helped. [T]he class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's cause of action.'") (quoting Falcon, 457 U.S. at 160). Any overlap, however, must be no more extensive than necessary to ensure that the plaintiff has satisfied FRCP 23's prerequisites. See Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S.Ct. 1184, 1195 (2013) ("Merits questions may be considered to the extent - but only to the extent - that they are relevant to determining whether the [FRCP 23] prerequisites for class certification are satisfied.").

While Plaintiffs originally sought to certify one class of post-2004 homebuyers at the four MPCs ( see Pls.' Third Am. Compl., ¶ 47 (Docket No. 129)), they now request certification of four separate subclasses (one for each MPC) of all "persons or entities" who acquired, for consideration, any "interest, entitlement, or privilege for the access, utilization or benefit of any facility...[, ] club membership or recognized amenity" in one of the MPCs and whose "facility, club membership or amenity became impaired, reduced, discontinued or deleteriously impacted." See Mem. in Supp. of Class Cert., pp. 7-8 (Docket No. 286, Att. 1). Plaintiffs contend that this defined "Class" (comprised of the four subclasses) satisfies the requirements of FRCP 23. See id. at p. 8. Cushman & Wakefield and Credit Suisse disagree, arguing that Plaintiffs' failure to satisfy (1) FRCP 23(a)'s requirements of commonality, typicality, and adequacy of representation, [2] as well as (2) FRCP 23(b)'s predominance and superiority requirements, renders certification improper. See Cushman & Wakefield's Opp. to Class Cert., p. 8 (Docket No. 318); Credit Suisse's Opp. to Class Cert., p. 3 (Docket No. 320).

A. FRCP 23(a)(2): Commonality

A class has sufficient commonality if "there are questions of law or fact common to the class." Fed.R.Civ.P. 23(a)(2). Although FRCP 23(a)(2)'s commonality requirement is "less rigorous" than the companion requirements of FRCP 23(b)(3) ( see Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998)), it does not merely mean any question underlying all class members' claims. See Wal-Mart, 131 S.Ct. at 2551 ("Any competently crafted class complaint literally raises common questions.') (quoting Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U.L.Rev. 97, 131-32 (2009)). Instead, "[w]hat matters to class certification... is not the raising of common questions' - even in droves - but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.'" Id. (quoting Nagareda, supra, at 132) (emphasis in original). Still, "[t]he test or standard for meeting the [FRCP] 23(a)(2) prerequisite [of commonality] is qualitative rather than quantitative; that is, there need be only a single issue common to all members of the class.'" Lewis v. First Am. Title Ins. Co., 265 F.R.D. 536, 555 (D. Idaho 2010) (quoting Newberg on Class Actions § 3:10). Thus, FRCP 23(a)(2)'s commonality requirement requires that all class members' claims "depend upon a common contention, " and that the common contention be "capable of classwide resolution - which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Wal-Mart, 131 S.Ct. at 2551.

Here, Plaintiffs' Third Amended Complaint alleges that, relative to each MPC, class members were promised a specified set of amenities, but that Defendants' Loan to Own Scheme ultimately contributed to these MPCs' ruin and, as a result, led to the diminishment, retrenchment, and wholesale elimination of the contracted-for amenities. In other words, whether the MPCs were deprived of the promised amenities and whether such deprivations were a function of the alleged Loan to Own scheme represent a set of common questions whose answers are "apt to drive" a classwide resolution of Plaintiffs' claims. Whatever dissimilarities may exist between the class members (and there are several, as pointed out by Cushman & Wakefield ( see Cushman & Wakefield's Opp. to Class Cert., pp. 18-19 (Docket No. 318), that are of notable concern ( see infra )), they do not operate to foreclose the existence of a nonetheless common contention, the answer to which may resolve integral components of Plaintiffs' tortious interference with contract and negligence claims. See Meyer v. Portfolio Recovery Assocs., LLC, 707 F.3d 1036, 1041 (9th Cir. 2012) ("The existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class.") (citing Hanlon, 150 F.3d at 1019); Ginsburg v. Comcast Cable Commc'ns Mgmt. LLC, 2013 WL 1661483, *5 (W.D. Wash. 2013) ("Where a plaintiff identifies at least one common question, differences between class members' claims are not relevant to the commonality inquiry."); but see Wal-Mart, 131 S.Ct. at 2551 ("Dissimilarities within the proposed class are what have the potential to impede the generation of common answers.'") (quoting Nagareda, supra, at 132).

Therefore, these considerations establish commonality under the permissive standard of FRCP 23(a)(2). See Hanlon, 150 F.3d at 1019 ("[FRCP] 23(a)(2) has been construed permissively.").

B. FRCP 23(a)(3): Typicality

To demonstrate typicality, Plaintiffs must show that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed.R.Civ.P. 23(a)(3). As the United States Supreme Court explained:

The commonality and typicality requirements of [FRCP] 23(a) tend to merge. Both serve as guideposts for determining whether under the particular circumstances maintenance of a class action is economical and whether the named plaintiff's claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected.

Falcon, 457 U.S. at 157, n.13. "Typicality refers to the nature of the claim or defense of the class representative[s], and not to the specific facts from which it arose or the relief sought.'" Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (quoting Weinberger v. Thornton, 114 F.R.D. 599, 603 (S.D. Cal. 1986). "The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.'" Id. (quoting Schwartz v. Harp, 108 F.R.D. 279, 282 (C.D. Cal. 1985)). In short, although they need not be substantially identical, representative claims are typical if they are "reasonably co-extensive with those of absent class members." Hanlon, 150 F.3d at 1020.

Here, Plaintiffs argue that, as class representatives, their claims rely upon an "identical fact pattern, " alongside the "exact same legal theories" as those advanced by members of the Class. See Mem. in Supp. of Class Cert., p. 12 (Docket No. 286, Att. 1). In particular, Plaintiffs assert that (1) their tortious interference with contract and negligence claims are both premised upon a single course of conduct: Defendants' alleged Loan to Own scheme; and that (2) Plaintiffs and Class members have suffered the same injury: loss of promised amenities associated with property ownership at their respective MPC. See id. In response, Defendants do not challenge the overall similarities between Plaintiffs' claims and those of the rest of the Class; rather, on the issue of typicality, Defendants imply that Plaintiffs are subject to unique defenses that threaten to become the focus of the litigation. See Credit Suisse's Opp. to Class Cert., p. 12 (Docket No. 320) (citing Hanon, 976 F.2d at 508).

As to Defendants' retort, it is true that courts have held that class certification is inappropriate if "there is a danger that absent class members will suffer if their representative is preoccupied with defenses unique to it.'" Hanon, 976 F.2d at 508 (quoting Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 180 (2nd Cir. 1990)). However, to the extent Defendants offer such a reason as a stand-alone basis for rejecting Plaintiffs' class certification efforts (on typicality grounds), it is overstated. But see infra.

Of the named Plaintiffs - L.J. Gibson, Beau Blixseth, Mark Mushkin, Amy Koenig, Judy Land, Monique LaFleur, Griffen Development, Charles Dominguez, and Vern Jennings - Credit Suisse points only to Messrs. Blixseth and Mushkin as being exposed to unique defenses not shared by other members in the Class - Mr. Blixseth's standing to bring his claim; and Mr. Mushkin's prior knowledge/assumption of the risk, along with potential res judicata defenses. See Credit Suisse's Opp. to Class Cert., pp. 12-17 (Docket No. 320).[3] There is no question that such defenses may not exist as to other Class members' claims and, therefore, are naturally unique to both Mr. Blixseth and Mr. Mushkin. Still, the question is not whether defenses specific to the representative parties exist at all in the abstract (surely many class certification proceedings yield a litany of defenses particular to represented parties if examined long and hard enough via class certification fact discovery); instead, the appropriate inquiry toward addressing the typicality prerequisite is whether a "major focus" of the litigation will be on those defenses. See Hanon, 976 F.2d at 509. Regardless of the above-stated defenses' merits, the undersigned is not convinced that their resolution through the course of this action will significantly prejudice other Class members' claims moving forward when understanding that, despite such defenses, (1) Plaintiffs consistently allege to have been adversely affected by the same conduct as the putative class, (2) Plaintiffs assert injuries in the same general manner as would all other class members ( but see infra ), and (3) the legal standards applicable to Plaintiffs' tortious interference with contract and negligence claims are not materially different across the jurisdictions applicable for each MPC.

With all this in mind, and recognizing that the representative parties comprise persons from each MPC, the representative claims are sufficiently ...


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