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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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JAMES W. MCGARRY (pro hac vice)
JMcGarry@goodwinlaw.com
GOODWIN PROCTER LLP
100 Northern Avenue
Boston, MA 02210
Tel.: +1 617 570 1000
Fax: +1 617 523 1231
SABRINA M. ROSE-SMITH (pro hac vice)
SRoseSmith@goodwinlaw.com
MATTHEW L. RIFFEE (pro hac vice)
MRiffee@goodwinlaw.com
GOODWIN PROCTER LLP
1900 N Street, NW
Washington, DC 20036
Tel.: +1 202 346 4000
Fax: +1 202 346 4444
Attorneys for Defendant
BANK OF AMERICA, N.A.
[ADDITIONAL COUNSEL LISTED IN SIGNATURE BLOCK]
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
SAN DIEGO DIVISION
IN RE: BANK OF AMERICA
CALIFORNIA UNEMPLOYMENT
BENEFITS LITIGATION
Case No. 3:21-MD-02992-GPC-MSB
MEMORANDUM OF POINTS
AND AUTHORITIES IN
SUPPORT OF DEFENDANT’S
MOTION TO STAY PENDING
SUPREME COURT REVIEW
Date:
April 25, 2025
Time:
1:30 P.M.
Ctrm:
2D – 2nd Floor
Judge:
Hon. Gonzalo P. Curiel
Case 3:21-md-02992-GPC-MSB Document 415-1 Filed 02/07/25 PageID.25495
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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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As the Court is aware, this multidistrict litigation involves Plaintiffs’ challenge
to a short-lived anti-fraud strategy that Bank of America N.A. (“BANA”) used to
respond to the massive explosion of fraud in connection with the prepaid debit cards
that BANA issued to Plaintiffs and class members pursuant to a contract with
California’s Employment Development Department (“EDD”). On August 29, 2024,
Plaintiffs filed a motion for class certification (Dkt. 324), which was argued before
the Court on January 17, 2025 (Dkt. 408).
On January 24, 2025—only one week after the Court’s hearing on Plaintiff’s
motion—the United States Supreme Court granted certiorari to review the Ninth
Circuit’s decision in Laboratory Corp. of America Holdings v. Davis, No. 24-0304.
The Court specified that it will decide this question: “Whether a federal court may
certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some
members of the proposed class lack any Article III injury.” 2025 WL 288305 (U.S.
Jan. 24, 2025). At a minimum, the outcome of Laboratory Corp. will be relevant to
the pending motion due to BANA’s argument that the presence of uninjured class
members precludes certification when the process of identifying them before
judgment would predominate over individual issues (Dkt. 349, at 34–35), and
Plaintiffs’ response that Rule 23 “does [not] preclude certification of a class that
potentially includes more than a de minimis number of uninjured class members”
(Dkt. 378, at 3). Briefing in Laboratory Corp. will be complete by April 21, 2025,
meaning the case will be argued in April and decided by June 2025 (before the end
of the Supreme Court’s current Term).
Therefore, given both the imminent Supreme Court guidance that has the
potential to reverse the course of this litigation and the short delay involved, this
Court should exercise its discretion and stay all proceedings in this case, including
the issuance of any order on class certification, pending the Supreme Court’s decision
in Laboratory Corp.
///
Case 3:21-md-02992-GPC-MSB Document 415-1 Filed 02/07/25 PageID.25496
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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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BACKGROUND
I.
BANA’s Opposition to Plaintiffs’ Motion for Class Certification
BANA’s opposition to Plaintiffs’ motion for class certification (“Opposition”
or “Opp.”) argued that the Supreme Court’s decision in TransUnion LLC v. Ramirez,
594 U.S. 413 (2021), precludes class certification in this case. Dkt. 349, at 34–35.
Specifically, BANA argued that TransUnion established that “[e]very class member
must have Article III standing”—i.e., a “concrete injury in fact”—“in order to recover
individual damages,” and that “Plaintiffs’ putative classes include multiple types of
cardholders with no injury,” including: “(i) criminals who defrauded the EDD with
fraudulent benefits claims; (ii) legitimate beneficiaries and criminals alike who
defrauded BANA with fraudulent transaction disputes; (iii) legitimate cardholders
who disputed their own transactions by honest mistake; and (iv) legitimate
cardholders already compensated for their potential injuries.” Id. (citing TransUnion,
594 U.S. 413, 431–33). BANA further argued that the consumer-specific evidentiary
process required to distinguish class members who were actually injured from those
who were not “defeats predominance,” and therefore precludes certification of the
class. Id.
In support of these arguments, BANA cited multiple reports from government
bodies regarding the rampant and unprecedented rates of benefits fraud infiltrating
the system at the time, including the California State Auditor’s determination that
this “criminal assault on the benefits system” involved more than $32 billion in stolen
funds (id. at 1, citing DX 111) and the U.S. Government Accountability Office’s
report that 11 to 15% of unemployment benefits paid during the pandemic were
fraudulent, and that the Pandemic Unemployment Assistance program, in particular,
1 “DX” refers to documents cited in the Appendix of Exhibits to the Declaration of
Laura Brys in Support of Defendant’s Memorandum of Points and Authorities in
Opposition to Plaintiffs’ Motion for Class Certification, Dkt. 350-1.
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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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had an improper payment rate of 35.9% (id. at 6, citing DX 14).2 BANA also directed
the Court to various examples of class members as to whom BANA has compelling
evidence that they lack injury sufficient to support standing, including photographs
of putative class members making the transactions that they denied making. See id.
at 19–23, 34–37; see also DX 3; DX 7; DX 55; DX 56; DX 57; DX 58; DX 59; DX
60; DX 61; DX 62.
These examples were illustrative, but not exhaustive. BANA has reason to
believe many more criminal fraudsters are embedded in Plaintiffs’ proposed class for
multiple reasons. The first is the extremely high levels of benefits enrollment fraud
that the state and federal agencies determined occurred but has not been and may
never be caught. Id. at 36 (citing DX 79). BANA also opposed Plaintiffs’ notion that
all of these people have already been filtered out by virtue of the claims process in
the regulatory settlement on several grounds. As discussed at length in the Opposition
and during argument, many of the class member claims were paid for reasons other
than individual determinations that the claims were valid. Id. at 3, 13. In many other
cases, the evidence available is not as conclusive as the cases where fraudsters were
caught on camera: photographs are not always available. So while photographs can
implicate some class members as fraudsters, the lack of photographs does not
exonerate anybody or legitimize their claims. The borderline cases where the parties
would have to litigate whether the class member is a fraudster or not based on
disputed evidence obviously require even more extensive individual mini-trials than
those where the existing evidence is conclusive.
2 See also, e.g., DX 13 (Jan. 26, 2021 report by California Legislative Analyst); DX
14 (Sept. 10, 2024 report by U.S. House Oversight Committee); DX 16 (June 2021
report by EDD to California Legislature); DX 17 (Nov. 19, 2020 letter from
California State Auditor); DX 54 (Dec. 15, 2023 report by U.S. Office of Inspector
General); DX 79 (Feb. 8, 2023 testimony by U.S. Inspector General); DX 87 (May
2022 report by U.S. Government Accountability Office); DX 88 (Jan. 2021 report by
California State Auditor); and DX 89 (Jan. 2021 report by California State Auditor).
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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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II.
Plaintiffs’ Reply Brief
Plaintiffs responded to BANA’s argument by directing the Court repeatedly to
the Ninth Circuit’s decision in Olean Wholesale Grocery Coop., Inc. v. Bumble Bee
Foods LLC, 31 F.4th 651 (9th Cir. 2022) (en banc). See, e.g., Dkt. 378 at 2, 3, 15.
Plaintiffs argued, based on Olean, that in this Circuit, “Rule 23 does not preclude
‘certification of a class that potentially includes more than a de minimis number of
uninjured class members.’” Id. at 2 (quoting Olean, 31 F.4th at 669).
When presented with airtight evidence that their class as defined includes not
just members lacking Article III injury but actual criminal fraudsters, Plaintiffs
argued that the presence of these fraudsters “would not be enough to preclude
certification under Rule 23(b)(3).” Id. at 15 (citing Olean, 31 F.4th at 669). In
Plaintiffs’ view, false claimants “can be managed through Phase 2 proceedings or a
claim administration process, after a classwide trial on the predominating common
issues.” Id. at 2.
III.
The Supreme Court’s Grant of Certiorari in Laboratory Corp.
The Supreme Court is now primed to decide whether the rule of law adopted
by the Ninth Circuit in Olean is correct. In Laboratory Corp., the Supreme Court will
hear and decide “[w]hether a federal court may certify a class action pursuant to
Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class
lack any Article III injury.”3 The Supreme Court further set an expedited schedule
for briefing in Laboratory Corp., ordering the petitioner’s brief to be filed by March
5, 2025, the respondent’s brief to be filed by March 31, 2025, and the petitioner’s
reply brief to be filed by April 21, 2025, setting the case up for oral argument in the
session that ends April 30, 2025, and a decision before the end of the Supreme
Court’s current Term in June 2025. See id.
3 Laboratory Corp., 2025 WL 288305.
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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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ARGUMENT
I.
Legal Standard
This Court has broad discretion to stay proceedings under its inherent
authority. “[T]he power to stay proceedings is incidental to the power inherent in
every court to control the disposition of the causes on its docket with economy of
time and effort for itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299
U.S. 248, 254 (1936). This power includes the power to stay proceedings “pending
resolution of independent proceedings which bear upon the case.” Leyva v. Certified
Grocers of Cal. Ltd., 593 F.2d 857, 863 (9th Cir. 1979). Exercising this discretion is
appropriate when the resolution of another matter will directly affect the issues before
the court. Mediterranean Enters v. Ssangyong Corp., 708 F.2d 1458, 1465 (9th Cir.
1983); San Diego Padres Baseball P’ship v. United States, 2001 WL 710601, at *1
(S.D. Cal. May 10, 2001).
The propriety of a “Landis Stay” requires the court to weigh “the competing
interests which will be affected by the granting or refusal to grant a stay.” Lockyer v.
Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005) (quoting CMAX, Inc. v. Hall, 300
F.2d 265, 268 (9th Cir. 1962)). These competing interests include “the possible
damage which may result from the granting of a stay, the hardship or inequity which
a party may suffer in being required to go forward, and the orderly course of justice
measured in terms of the simplifying or complicating of issues, proof, and questions
of law which could be expected to result from a stay.” Id. (quoting CMAX, Inc., 300
F.2d at 268).
II.
The Court Should Stay This Action Pending the Supreme Court’s
Ruling in Laboratory Corp.
The interests of efficiency and judicial economy will be served if the Court
exercises its discretion to stay this case, including deferring any entry of an order on
Plaintiffs’ motion for class certification, pending the Supreme Court’s ruling in
Laboratory Corp. Given that the Supreme Court’s decision is expected by the end of
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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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the Term in June, the short pause will not cause any undue hardship to Plaintiffs, and
would prevent both parties from expending substantial resources on proceedings that
may need to be re-litigated, or may even be rendered unnecessary, based on the
Supreme Court’s decision.
First, a stay will promote judicial economy because the Supreme Court’s
decision in Laboratory Corp. will resolve a critical—and potentially case
dispositive—issue before this Court. As the grant of certiorari reflects, the Courts of
Appeals are divided on the question of whether a class that includes members lacking
Article III standing can be certified under Rule 23(b)(3). The Ninth Circuit is in the
minority in taking the view that the presence of even a significant number of
uninjured class members does not prohibit certification.4 Other Circuits require the
number of uninjured class members to be de minimis.5 And some hold that a class
may not be certified at all if it includes any members who have suffered no Article
III injury.6 Before Olean, that was the rule in this Circuit, too. See Mazza v. Am.
Honda Motor Co., 666 F.3d 581, 594 (9th Cir. 2012) (“‘[No] class may be certified
that contains members lacking Article III standing.’”) (quoting Denny, 443 F.3d at
264).
4 Olean, 31 F.4th at 669; Cordoba v. DIRECTV, LLC, 942 F.3d 1259, 1267 (11th
Cir. 2019).
5 E.g., In re Rail Freight Fuel Surcharge Antitrust Litig., 934 F.3d 619, 624–25 (D.C.
Cir. 2019) (affirming denial of class certification where evidence showed 12.7% of
proposed class members were uninjured); In re Nexium Antitrust Litig., 777 F.3d 9,
30–32 (1st Cir. 2015) (affirming certification of class where “the number of uninjured
members [] is not so large as to render the class impractical or improper, or to cause
non-common issues to predominate”).
6 Denny v. Deutsche Bank AG, 443 F.3d 253, 263 (2nd Cir. 2006) (“no class may be
certified that contains members lacking Article III standing”); Halvorson v. Auto-
Owners Life Ins. Co., 718 F.3d 773, 778 (8th Cir. 2013); Johannessohn v. Polaris
Indus. Inc., 9 F.4th 981, 987 (8th Cir. 2021) (“If members who lack the ability to
bring a suit themselves are included in a class, the court lacks jurisdiction over their
claims.”).
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DEFENDANT’S MOT. TO STAY
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Under this Circuit’s current approach—exemplified by the Laboratory Corp.
decision—a district court could certify a class that includes even large numbers of
uninjured members. See Olean, 31 F.4th at 669 (Rule 23(b)(3) “permit[s] the
certification of a class that potentially includes more than a de minimis number of
uninjured class members”). But there are limits to this. Under Olean, “[w]hen
individualized questions relate to the injury status of class members, Rule 23(b)(3)
requires that the court determine whether individualized inquiries about such matters
would predominate over common questions.” Id. at 668. Thus, while the Court may
attempt to “winnow out those non-injured members at the damages phase of the
litigation,” Ruiz Torres v. Mercer Canyons, Inc., 835 F.3d 1125, 1137 (9th Cir. 2016),
if the individualized inquiries necessary to do so are likely to predominate,
certification is not appropriate. Accord, e.g., Rail Freight, 934 F.3d at 627 (“Given
the need in this case for at least 2,037 individual determinations of injury . . ., the
district court did not abuse its discretion in denying class certification on the ground
that common issues do not predominate.”).
Which of these competing views the Supreme Court ultimately adopts will
bear directly on the course of this action. BANA has demonstrated that there are
uninjured criminal fraudsters in Plaintiffs’ proposed class as defined. See Dkt. 349 at
19–23, 34–37; see also DX 3; DX 7; DX 55; DX 56; DX 57; DX 58; DX 59; DX 60;
DX 61; DX 62. Plaintiffs do not dispute that these class members lack injury or
standing under Article III—they just claim it “would not be enough to preclude
certification” and is a “tiny percentage,” anyway. Dkt. 378 at 15. The Supreme Court
is certain to address whether Plaintiffs are correct on whether this is “enough to
preclude certification.” And, depending on the answer to that question, it may yet
also give guidance on whether the “percentage” makes a difference and what
percentage, if any, is too “tiny” to matter. In that event, the parties would likely need
to present supplemental briefing and argument on the new legal standard and the
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MEMORANDUM OF POINTS & AUTHORITIES ISO
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percentages of the uninjured—or on the evidentiary inquiries needed even to estimate
the percentages of the uninjured.
No matter how the Supreme Court resolves this issue, it will heavily inform
the Court’s resolution of a key dispute between the parties. It makes little sense for
either the parties or the Court to expend resources on upcoming motions that may be
impacted by the Supreme Court’s forthcoming decision in just a few months. See
Fernandez v. CoreLogic Credco, 2021 WL 1311270, at *4 (S.D. Cal. Apr. 8, 2021)
(holding that proceeding with a class action when an impending Supreme Court
decision may “shed[] light on Rule 23 or Article III standing requirements” is “at
odds with the judicial principles of efficacy”); Ludlow v. Flowers Foods, Inc., 2020
WL 773253, at *3 (S.D. Cal. Feb. 18, 2020) (holding that stay is appropriate where
proceeding without stay “could result in the Parties unnecessarily expending
resources engaging in motion practice and planning and preparing for trial . . . based
on the wrong standard”) (internal quotations omitted). Given that class certification
orders are “inherently tentative” and subject to amendment or reconsideration “at any
time” before judgment, it likewise makes little sense for the Court to invest resources
into issuing a class certification order that it may very well need to reconsider or
revise under a new legal standard after Laboratory Corp. is decided. Davidson v.
O'Reilly Auto Enters., LLC, 968 F.3d 955, 964 n.7 (9th Cir. 2020) (quoting Coopers
& Lybrand v. Livesay, 437 U.S. 463, 469 n.11 (1978)). Thus, the interests of judicial
economy and efficiency are best served here by a stay pending clarity from the
Supreme Court on this critical issue.
Second, a brief stay here would be equitable and result in no undue hardship
to Plaintiffs. Courts in this district regularly grant requests for brief stays of
proceedings when the outcome of a pending appeal is likely to clarify key issues in
the case, recognizing that a short, time-limited stay poses little or no risk of prejudice
to the non-moving party. See, e.g., Frantz v. Force Factor, LLC, 2020 WL 8666386,
at *5 (S.D. Cal. Nov. 16, 2020) (granting stay pending outcome of U.S. Supreme
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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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Court case); Nguyen v. Marketsource, Inc., 2018 WL 2182633 (S.D. Cal. May 11,
2018) (same); Ludlow, 2020 WL 773253, at *2 (granting stay pending resolution of
question certified to the California Supreme Court). In Nguyen, the district court
explained that “the possible prejudice or harm to [p]laintiff from granting a stay under
these circumstances is slight,” given that such a stay “would not be open-ended and
will likely be relatively short.” 2018 WL 2182633, at *6; see also Ludlow, 2020 WL
773253, at *2 (no prejudice from stay where the “wait for an answer to [the]
important issue would be neither indefinite nor unreasonable”). An opinion in
Laboratory Corp. is anticipated in June 2025, so the requested stay here would
similarly be of a brief, definite duration.7
Given that Plaintiffs seek only monetary damages on behalf of the class and
not injunctive or other equitable relief, any harm from delaying that potential
recovery does not justify denying the stay. Indeed, Plaintiffs’ putative class is defined
to include only those people who have already been reimbursed for their
unauthorized transaction claims, and who have already received additional
consequential harm payments pursuant to BANA’s regulatory remediation plan.
Dkt. 324, at 15. A stay here would briefly delay only Plaintiffs’ attempts to treble
those damages they have already been paid. See Ludlow, 2020 WL 773253, at *2
(“Mere delay in receiving damages is an insufficient basis to deny a stay.”); see also
Nguyen 2018 WL 2182633, at *6 (plaintiff “will [] not be unduly prejudiced or
harmed by a delay in receiving monetary relief”). Plaintiffs also cannot point to any
risk of harm the requested stay poses to evidence and discovery, given that fact
discovery is nearly complete. Cf. Frantz, 2020 WL 8666386, at *3 (even where
discovery is ongoing, a brief stay “minimally delay[ing] discovery” pending a
7 If this motion is granted, either BANA or the parties jointly will notify the Court
within seven (7) days of the issuance of the Laboratory Corp. opinion so that the
Court can set a status conference to discuss lifting the stay and the effect of the
opinion on class certification and subsequent proceedings.
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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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relevant Supreme Court decision is appropriate). Plaintiffs thus face no harm from
the brief stay requested here.
CONCLUSION
For the forgoing reasons, BANA respectfully requests that the Court grant this
motion and stay all proceedings in this action, including the entering of an order on
Plaintiffs’ motion for class certification, pending the Supreme Court’s decision in
Laboratory Corp. BANA or the parties jointly will alert the Court within seven (7)
days of the opinion’s issuance, so that the Court can set a status conference.
Dated: February 7, 2025
Respectfully submitted,
By: s/ James W. McGarry
JAMES W. MCGARRY (pro hac vice)
JMcGarry@goodwinlaw.com
GOODWIN PROCTER LLP
100 Northern Avenue
Boston, MA 02210
Tel.: +1 617 570 1000
Fax: +1 617 523 1231
THOMAS M. HEFFERON (pro hac vice)
THefferon@goodwinlaw.com
SABRINA M. ROSE-SMITH (pro hac vice)
SRoseSmith@goodwinlaw.com
MATTHEW L. RIFFEE (pro hac vice)
MRiffee@goodwinlaw.com
GOODWIN PROCTER LLP
1900 N St. NW
Washington, DC 20036
Tel: +1 202 346 4000
Fax: +1 202 346 4444
LAURA G. BRYS (SBN 242100)
LBrys@goodwinlaw.com
GOODWIN PROCTER LLP
601 S Figueroa St., Suite 4100
Los Angeles, CA 90017
Tel.: +1 213 426 2500
Fax: +1 617 346 4444
VALERIE A. HAGGANS (pro hac vice)
VHaggans@goodwinlaw.com
LINDSAY E. HOYLE (pro hac vice)
LHoyle@goodwinlaw.com
GOODWIN PROCTER LLP
620 Eighth Avenue
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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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New York, NY 10018
Tel: +1 212 813-8800
Fax: +1 212 355-3333
YVONNE W. CHAN (pro hac vice)
YChan@jonesday.com
JONES DAY
100 High Street
Boston, MA 02110
Tel.: +1 617 960 3939
Fax: +1 617 449 6999
JANICE P. BROWN (SBN 114433)
jbrown@myersnave.com
MATTHEW B. NAZARETH (SBN 278405)
mnazareth@myersnave.com
MEYERS NAVE
600 B Street, Suite 1650
San Diego, CA 92101
Attorneys for Defendant
BANK OF AMERICA, N.A.
Case 3:21-md-02992-GPC-MSB Document 415-1 Filed 02/07/25 PageID.25506
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MEMORANDUM OF POINTS & AUTHORITIES ISO
DEFENDANT’S MOT. TO STAY
CASE NO. 21-MD-02992-GPC-MSB
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CERTIFICATE OF SERVICE
I hereby certify that I electronically filed the foregoing with the clerk of the
court for the United States District Court for the Southern District of California by
using the CM/ECF system on February 7, 2025. I further certify that all participants
in the case are registered CM/ECF users and that service will be accomplished by the
CM/ECF system. I certify under penalty of perjury that the foregoing is true and
correct.
Executed:
February 7, 2025
s/ James W. McGarry
Case 3:21-md-02992-GPC-MSB Document 415-1 Filed 02/07/25 PageID.25507
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