Opinion & Order — Eric Greathouse et al. v. Capital Plus Financial, LLC et al. (Document 83)
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Opinion & Order in Eric Greathouse, et al. v. Capital Plus Financial, LLC, et al., No. 4:22-CV-0686-P, in the U.S. District Court for the Northern District of Texas, Fort Worth Division, Document 83 filed 09/06/23, dated September 6, 2023. The Court denies Plaintiffs' Motion for Class Certification, ECF No. 67, in a case where Plaintiffs allege that PPP loans assigned SBA numbers by Capital Plus were never funded. The background states that Capital Plus approved 472,036 loans in less than five months in 2021, and Plaintiffs seek nationwide, North Carolina and California classes with claims for breach of contract, the California Unfair Competition Law and the North Carolina Unfair and Deceptive Trade Practices Act. The Court concludes that numerosity and commonality are not met and that common questions do not predominate and a class action is not a superior method.
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“Opinion & Order — Eric Greathouse et al. v. Capital Plus Financial, LLC et al. (Document 83).”
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Case 4:22-cv-00686-P Document 83 Filed 09/06/23 Page 1 of 15 PageID <pageID>
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
ERIC GREATHOUSE, ET AL.,
Plaintiffs,
v. No. 4:22-CV-0686-P
CAPITAL PLUS FINANCIAL,
LLC, ET AL.,
Defendants.
OPINION & ORDER
Before the Court is Plaintiffs’ Motion for Class Certification. ECF No.
67. For the reasons stated below, the motion is DENIED.
INTRODUCTION
Class actions exist for the “promotion of efficiency and economy of
litigation.” Crown v. Parker, 462 U.S. 345, 349 (1983). So even when
multiple people are wronged by the same party, they must prove that
litigating their claims via class action will serve these two interests. But
when differing factual scenarios exist between all Plaintiffs, these two
interests are frustrated. Thus, common answers are just as important
as common questions when dealing with a nationwide class.
Plaintiffs in this case appear to have legitimate grievances. But the
questions common to all potential class members do not give the same
answers—making the potential adjudication of this class inefficient and
uneconomic. For this reason, the Court DENIES the motion.
FACTUAL & PROCEDURAL BACKGROUND
In 2020, Congress passed the CARES Act, which provided for the
Payroll Protection Program (“PPP”)—a loan assistance program for
businesses financially burdened by local, state, and federal restrictions.
This act required a comprehensive plan to disperse over $800 billion
dollars to countless qualified businesses in a short timeframe. As a
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result, the government worked with private lenders to streamline the
approval process.
Private lenders were tasked with processing PPP loan applications
and submitting completed applications to the SBA for processing. The
SBA would then approve the applications by assigning an SBA number.
Once an SBA number was assigned, the lenders were required to
disburse the funds within ten days of approval. If paperwork associated
with the process was incomplete, lenders were also under a duty—in this
narrow situation—to cancel the SBA number and loan process within 20
calendar days of approval. Private lenders were incentivized to process
loans by government fees paid out upon completion of the approval
process. To further assist lenders with the approval process, the Federal
Reserve instituted the Paycheck Protection Program Liquidity Facility
(“PPPFL”), which advanced funds through non-recourse loans to lenders
who could provide proof of approvals and disbursements of PPP loans as
collateral.
In 2021, Defendant Capital Plus Financial LLC (“Capital Plus”)—a
wholly owned subsidiary of Defendant Crossroads Inc.—began
approving PPP loans. And in less than five months, Capital Plus
approved an astonishing 472,036 loans. The volume of loans approved
was so numerous that they became the second largest lender of PPP
loans in 2021—outperforming nearly every recognizable financial
institution in the country. To aid in this overwhelming process, Capital
Plus enlisted help from outside providers to process the hundreds of
thousands of applications because of capacity constraints.
Capital Plus and Crossroads made an astonishing $970.5 million in
revenue in mere months by capitalizing on PPP approval fees. On top of
this, Capital Plus—due to their massive quantity of “approved” loans—
drew down nearly $7.5 billion in funding from the PPPFL program.
After the PPP window closed, Crossroads paid out a $238.9 million
dividend to shareholders. Most of the dividend money went to insiders
in the company like Defendants Alpert and Donnelly who together
owned 62.8% of outstanding shares.
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But while the income of Capital Plus and Crossroads soared,
complaints from individuals approved for loans did as well. Plaintiffs
allege that—although they received SBA numbers—funds were never
disbursed to them. And because of this failure to fund, Plaintiffs could
not go to another lender as they were restricted from doing so once a
valid SBA number was assigned to them. Plaintiffs also allege that
because an SBA number was assigned to them, they are still under the
legal obligation to pay back money that they never received. While
Plaintiffs were approved and suffered similar injuries, their situations
after approval differ. Some loans were denied and canceled because of
inconsistent paperwork. Some loans were disbursed but rejected by
banks for various reasons. And some were disbursed but mysteriously
never arrived.
Because of the alleged faults of Crossroads, Capital Plus, and its
directors, a group of Plaintiffs bring this suit under the Class Action
Fairness Act seeking redress of their injuries under three claims: (1)
Breach of Contract; (2) The California Unfair Competition Law (“UCL);
and (3) The North Carolina Unfair and Deceptive Trade Practices Act
(“NCUDTPA”).
Plaintiffs now move for class certification.
B. Proposed Classes
1. Nationwide Class
Plaintiff Eric Greathouse is a citizen of Arkansas who owns an
insurance inspection business. Plaintiff Tiffany Sumrall is a citizen of
Texas who owns a landscaping business. Plaintiff Cori Pericho is a
citizen of Hawaii who owns a messenger and delivery service. Plaintiff
John Pinkney is a citizen of Texas who owns a cable communications
business. Plaintiff Alicia Mena is a citizen of Arizona who owns a
housecleaning business. These Plaintiffs were assigned SBA numbers
by Capital Plus, but their loans remain unfunded. As a result, they
collectively seek to represent a nationwide class and bring a claim for
breach of contract.
Plaintiffs seek certification of this class under the following criteria:
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All persons and entities in the United States and its
territories Guam, Northern Mariana Islands, Puerto Rico,
and U.S. Virgin Islands who, in 2021, applied for PPP loans
with defendant CPF as the lender for whom the SBA
provided an SBA loan number, and who executed and
submitted their Loan Documents but did not receive the
PPP loan proceeds.
ECF No. 68 at 2.
2. North Carolina Subclass
Plaintiff Barbara Myles is a citizen of North Carolina who owns a
business that assists independent artists. Myles was assigned an SBA
number by Capital Plus, but her loan remains unfunded. Myles seeks to
represent a North Carolina subclass and brings a claim under the
NCUDTPA together with a breach-of-contract claim.
Plaintiffs seek certification of this subclass under the following
criteria:
All persons and entities in North Carolina who, in 2021,
applied for PPP loans with defendant CPF as the lender for
whom the SBA provided an SBA loan number, and who
executed and submitted their Loan Documents but did not
receive the PPP loan proceeds.
ECF No. 68 at 2.
3. California Subclass
Lastly, Plaintiff Ernesto Covarrubias is a citizen of California who
owns an auto repair business. Plaintiff Joshua Smith is also a citizen of
California who owns and operates a delivery and human resource and
consulting business. These Plaintiffs were also assigned SBA numbers
by Capital Plus, and their loans were never funded. Covarrubias and
Smith seek to represent a California subclass and bring a claim under
the UCL together with a breach-of-contract claim.
Plaintiffs seek certification of this subclass under the following
criteria:
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All persons and entities in California who, in 2021, applied
for PPP loans with defendant CPF as the lender for whom
the SBA provided an SBA loan number, and who executed
and submitted their Loan Documents but did not receive
the PPP loan proceeds.
ECF No. 68 at 2.
LEGAL STANDARD
A. Class Certification
Class actions are “an exception to the usual rule that litigation is
conducted by and on behalf of the individual named parties only.” Wal-
Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011) (citation omitted).
Federal Rule of Civil Procedure 23 controls whether this limited
exception applies. A party seeking class certification thus “bear[s] the
burden of proof to establish that the proposed class satisfies the
requirements of Rule 23.” M.D. ex rel. Stukenberg v. Perry, 675 F.3d 832,
837 (5th Cir. 2012). In doing this, a plaintiff “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, and so on.” Chavez v. Plan Benefit Servs., Inc.,
957 F.3d 542, 545–46 (5th Cir. 2020) (internal quotations omitted)
(emphasis in original).
Because of the extraordinary nature of class actions, Rule 23 requires
a “rigorous analysis.” Id. Rule 23 thus requires courts “to probe behind
the pleadings before coming to rest on the certification question.” Dukes,
564 U.S. at 350–51. As a result, the Court’s mandated duty is to:
“understand the claims, defenses, relevant facts, and applicable
substantive law to make a meaningful determination. If some of the
determinations cannot be made without a look at the facts, then the
judge must undertake that investigation.” Chavez, 957 F.3d at 546.
After this analysis, a court must “detail with specificity its reasons”
behind its conclusions, “explain and apply the substantive law governing
the plaintiffs’ claims to the relevant facts and defenses,” and
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“articulat[e] why the issues are [or are not] fit for class wide resolution.”
Id. This is not a rubber-stamp procedure.
This process exists because “certification can coerce a defendant into
settling on highly disadvantageous terms regardless of the merits of the
suit.” Id. And further, after certifying a class, any judgment binds absent
class members forever. See Richardson v. Wells Fargo Bank, N.A., 839
F.3d 442, 454 (5th Cir. 2016). Thus, the “existence of a class
fundamentally alters the rights of present and absent members.”
Chavez, 957 F.3d at 547.
ANALYSIS
A. Ascertainably
Defendants argue that the proposed classes are not ascertainable
because (1) their definitions create a “fail-safe” class and (2) the
definitions are too indefinite. The Court disagrees.
To maintain a class action “the class sought to be represented must
be adequately defined and clearly ascertainable.” DeBremaecker v.
Short, 433 F.2d 733, 734 (5th Cir. 1970). A “fail-safe” class occurs where
“membership can only be ascertained by a determination of the merits
of the case because the class is defined in terms of the ultimate question
of liability.” In re Rodriguez, 695 F.3d 360, 369–70 (5th Cir. 2012)
(internal citations omitted). In other words, “the class definition is
framed as a legal conclusion.” Id. Despite the unique nature of these
classes, the Fifth Circuit has explicitly rejected a rule against certifying
fail-safe classes. Id. Thus, a fail-safe class may have qualifications that
go “to both questions of liability and damages, but [may not be] so vague
that potential class members are unascertainable.” Simms v. Jones, 296
F.R.D. 485, 507 (N.D. Tex. 2013) (Lynn, J.).
Plaintiffs define their potential class as follows: “All persons … who,
in 2021, applied for PPP loans with defendant CPF as the lender and for
whom the SBA provided an SBA loan number, and who executed and
submitted their Loan Documents but did not receive the PPP loan
proceeds.” ECF No. 68 at 2. Aside from dates and entities, the class boils
down to these qualifiers: (1) whether an SBA number was issued, and
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(2) whether funds were not disbursed. For starters, it is unclear if this
class calls for a legal conclusion on liability. As discussed later, the
failure to disburse PPP loan proceeds itself, under the contractual and
statutory obligations present, does not always put liability in play. And
next, even if the class was strictly defined by an issue of liability—which
is not fatal to begin with—it is a cut and dry class that is easily
ascertainable based on loan data kept by Defendants. The two needed
characteristics—an SBA number and a failure to receive loan proceeds—
are easily identifiable with available data. By this definition and with
the extensive records kept by Defendants, it is easy to define who is in
and who is out of the class without resorting to a scavenger hunt.
The class is thus ascertainable. The Court next addresses the Rule
23(a) requirements.
B. Rule 23(a) Requirements
Rule 23(a) prescribes four prerequisites for class certification. The
four requirements are (1) that the class is so numerous that joinder of
all members is impracticable (“numerosity”), (2) that there are questions
of law or fact common to the class (“commonality”), (3) that the claims
and defenses of the parties are typical of the claims or defenses of the
class (“typicality”); and (4) that the representative parties will fairly and
adequately protect the interest of the class (“adequacy of
representation”). FED. R. CIV. P. 23(a); see also Angell v. GEICO
Advantage Ins. Co., 67 F.4th 727, 736 (5th Cir. 2023).
The Court concludes that Plaintiffs do not meet the first three
requirements.
1. Numerosity is not met.
Rule 23(a)(1) requires that “the class is so numerous that joinder of
all members is impracticable.” Fed. R. Civ. P. 23(a)(1). To meet this
standard, a plaintiff “must ordinarily demonstrate some evidence or
reasonable estimate of the number of purported class
members.” Zeidman v. J. Ray McDermott & Co., Inc., 651 F.2d 1030,
1038 (5th Cir. 1981).
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Plaintiffs have failed to meet this standard. In their motion,
Plaintiffs note that at the time of the filing, they could not give an
estimate as to the class size. As a result, Plaintiffs stated that they
intended “to file supplemental submissions concerning numerosity or an
amended motion for class certification following discovery.” ECF No. 68
at 15. It has been over seven months since the filing of this motion and
the Court has not received any further information. And Discovery has
been available to Plaintiffs during this entire time. See ECF No. 47
(denying Defendants’ motion to stay discovery).
As a result of this failure to provide any evidence or reasonable
estimate on the potential number of class members, numerosity is not
met. But even if Plaintiffs’ motion satisfied numerosity, it still fails other
requirements under Rule 23(a).
2. Commonality is not met.
Defendants next assert that Plaintiff’s proposed classes lack
commonality. The Court agrees.
Commonality requires “questions of law or fact common to the class.”
FED. R. CIV. P. 23(a)(2). While this seems simple, “[w]hat matters to
class certification is not the raising of common questions—even in
droves—but rather, the capacity of a class-wide proceeding to generate
common answers apt to drive the resolution of the litigation.” Dukes, 564
U.S. at 350 (emphasis in original). Any competent attorney can raise
similar questions, but the answer to these questions must essentially
“resolve an issue that is central to the validity of each one of the
class member’s claims in one stroke.” Stukenberg, 675 F.3d at 840
(emphasis in original). This serves the ultimate drive of the class
action procedure: efficiency. If every individual plaintiff requires his or
her own in-depth factual analysis, the purpose of the class action is
defeated—rendering the litigation unruly and inefficient.
Plaintiffs present eight common questions of law and fact: 1
1 Plaintiffs’ briefing initially presented ten common questions; however, two of
them are inapplicable now as Plaintiffs’ unjust enrichment claims were dismissed.
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(1) Whether Capital Plus breached all class members’
standard form Loan Documents;
(2) Whether Capital Plus’s failure to fund these PPP loans
also violated the SBA’s funding rule and CPF’s
obligations to obtain and use advances it obtained from
the PPPLF to fund PPP loans, be paid SBA fees only on
funded loans, and report accurately to the SBA
regarding PPP loan funding and PPP lending;
(3) Whether each Defendant procured fees for PPP loans
that CPF did not make;
(4) Whether Crossroads controlled CPF;
(5) Whether Donnelly and Alpert controlled Crossroads
and Capital Plus.
(6) Whether and, if so, how Plaintiffs and class members
suffered damages as a result of Defendants’ alleged
misconduct and the proper measure of relief;
(7) As to the California Subclass, whether Defendants’
misconduct violated the UCL again only in the
alternative, to the extent that Plaintiffs’ contract
claims fail to provide adequate relief to the members of
the California Subclass;
(8) As to the North Carolina Subclass, whether
Defendants’ misconduct violated the NCUDTPA.
ECF No. 68 at 20.
These questions boil down to one issue with commonality. The
central question in this case—as Plaintiff notes—is whether CPF failed
to fund Plaintiffs’ loans or timely cancel them. ECF No. 75 at 2. The
breach of contract and state-law claims hinge on this question. If
Defendants were indeed required to cancel every unfunded loan within
twenty days, the reasons behind their failure to fund do not matter—
thus resolving Plaintiffs’ claims in one stroke.
This is Plaintiffs’ exact argument. They claim that if their loans had
problems, Capital Plus should not have issued an SBA number to begin
with or should have reported cancelation within twenty calendar days
in line with the federal regulations. To back this up, Plaintiffs bring
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affidavits from multiple “experts” on PPP loan funding. 2 These experts
claim that any failure to cancel a loan “for whatever reason” within
twenty days of issuance of an SBA number would “be inconsistent with
the program … [and] in violation of the rules.” ECF No. 69 at 82. But
while this reading of the provision would solve the commonality issue
here, the Court disagrees with this interpretation.
The provision at issue states that “[l]oans for which funds have not
been disbursed because a borrower has not submitted required loan
documentation within 20 calendar days of loan approval shall be
cancelled by the lender.” 86 FR 3692, 3710 (emphasis added). The plain
text of this provision only applies to one narrow situation: when a
borrower fails to submit “required documentation.” Id. The provision
does not address whether cancelation is required if Plaintiffs filled out
the documentation incorrectly or if Plaintiffs’ bank bounced the funds.
Indeed, there are many possibilities where loans might remain
unfunded that fall outside of this narrow statutory provision. And
looking to the class representatives’ individual cases, this appears to be
a substantial part of what happened—evidencing the difficulties with
certifying this class. The Lead Plaintiffs each fall into different
categories as to why they never received payment—all outside the
narrow twenty-day-cancelation provision. The Court addresses the
individual situation of each Lead Plaintiff in turn.
Pinkney: The only Plaintiff that appears to fall close to the statutory
cancelation circumstance is Pinkney, whose loans were allegedly
canceled due to “inconsistent” paperwork and suspected fraud. ECF No.
74 at 12. Pinkney does not dispute that his loan was canceled but insists
that it was canceled outside the 20-day window and after the PPP
program ended—leaving him with no recourse to obtain another loan.
ECF No. 75 at 4.
2 The Court is allowed to consider and investigate facts at the class certification
stage. See Chavez, 957 F.3d at 546. The Court is not considering this testimony in an
“expert” capacity, but only in a way to better understand certain issues of the case
which squarely rest on the SBA lending rules. Determining the correct procedure of
the PPP loan process is at the core of this motion. Defendants Motion to Strike (ECF
No. 71) is thus DENIED.
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But “inconsistent” paperwork is different from incomplete
paperwork. So Pinkney’s situation could still fall outside the statutory
and contractual requirement to cancel the loan within twenty days. And
the provision at issue does not provide for timelines of cancelation for
suspected fraud.
Greathouse, Covarrubias, Sumrall, Myles, Pericho, and Mena:
These Plaintiffs experienced different issue with their loans. Capital
Plus claims that their funds were disbursed, but that the individuals’
banks returned the funds for different reasons unique to each Plaintiff. 3
ECF No. 74 at 9–11. Plaintiffs do not dispute this fact. Defendants claim
that these Plaintiffs were denied diligence review after bank rejection
because they “failed to submit requested materials or because the
materials they submitted did not resolve the issues identified.” ECF No.
73 at 10. Only Plaintiff Sumrall’s loan went through this enhanced
review process after submitting requested materials. 4 Id.
Again, this situation is not considered in the regulation at issue. The
PPP program issued no guidance or duty on how to handle bank
rejections.
Smith: Smith’s loan was allegedly disbursed by Capital Plus to his
bank by an ACH payment. ECF No. 74 at 15. Capital Plus alleges that
the funds were never returned from the bank and are probably in limbo
somewhere outside of its realm of statutory responsibility. Id. This is yet
3 Greathouse’s bank rejected the loan listing ACH rejection code R23, “Credit Entry
Refused by Receiver.” ECF No. 74 at 10.
Covarrubias’s bank rejected the loan listing ACH rejection code R02, “Account
Closed.” Id. Myles’s bank rejected the loan listing ACH rejection code R03, “No
Account/Unable to Locate Account.” Id.
Pericho’s bank rejected the loan listing ACH rejection code R03, “No
Account/Unable to Locate Account.” Id. at 11.
Mena’s bank rejected the loan listing ACH rejection code R17, “File Record Edit
Criteria” with the additional notation “QUESTIONABLE.” Id.
4 Sumrall’s bank first rejected the loan listing ACH rejection code R16, “Account
Frozen/Entry Refused per OFAC Instructions.” Id. After providing another account
number through enhanced due diligence review Sumrall’s bank again rejected the loan
listing ACH rejection code R02, “Account Closed.” Id.
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another area that likely falls outside the considerations of the contract
and the regulation at hand.
The varying circumstances of Lead Plaintiffs’ loan processes show
that many situations could cause a funding failure after an SBA number
was assigned. 5 And the specific failures applicable to all lead Plaintiffs
likely fall out of the statutory and contractual obligation to “cancel” the
loan within twenty days. This makes certifying a class for a breach of
contract nearly impossible given the many possible answers that resolve
the question “why were the funds not disbursed?”
The expansive state claims under the UCL and the NCDUTPA—
though broader in their application—also offer little in shoring up the
commonality question. Lead Plaintiffs present multiple fact patterns
that, taken individually, could be unfair, illegal, or deceptive. But, as
evidenced by their individual circumstances, the answers to the central
questions once again vary widely. These differing answers do not lend
well to the adjudication of any of these claims by class action.
Commonality is not present.
3. Typicality is not met.
Defendants next assert—for similar reasons—that typicality is not
met. The Court agrees.
The test of typicality concerns three questions: (1) whether other
members have the same or similar injury, (2) whether the action is based
on conduct which is not unique to the named plaintiffs, and (3) whether
other class members have been injured by the same course of conduct.
Miller v. Grand Canyon Univ., Inc., 540 F. Supp. 3d 625, 634–35 (N.D.
Tex. 2021) (citations omitted). In short, “class certification should not be
granted if there is a danger that absent class members will suffer if their
representative is preoccupied with defenses unique to it.” Id.; see also
Zachery v. Texaco Expl. & Prod., Inc., 185 F.R.D. 230, 240 (W.D. Tex.
5 Plaintiff does not object or dispute the facts provided by Defendants regarding
each Lead Plaintiff’s individual loan circumstances. ECF No. 75 at 4. But even if they
did dispute them or the facts were not individually true, the possibility of the many
avenues presented still prevents this Court from finding common answers to the
questions provided under a commonality analysis.
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1999) (“Where unique defenses against a named plaintiff exist, the
Court must consider the potential danger that the attention to this
individual defense might harm the class.”). For this reason, “[t]he
commonality and typicality requirements of Rule 23(a) tend to merge.”
Dukes, 564 U.S. at 350 n.5.
Plaintiffs argue that typicality is met because all SBA number
recipients signed identical loan packages with Capital Plus leaving them
with the same injuries when Capital Plus failed to fund them. While this
satisfies the first question of similar injury, Plaintiffs claims are lacking
in the next two questions.
As shown in the Court’s discussion of commonality, Defendants
assert different factual defenses for nearly every Lead Plaintiff. ECF No.
74 at 9–12. And many of these factual scenarios likely fall outside the
statutory and contractual duties of the PPP loans at issue. The
Plaintiffs’ differing circumstances thus implicate different defenses—a
central concern of typicality. Each Plaintiff is left fending off divergent
factual defenses that they must rebut to succeed on their claims—taking
clear precedence over the scenarios of absent class members. Because of
this, the action is based on conduct that is unique to each named
Plaintiff. And because the Lead Plaintiffs’ circumstances are so factually
diverse, it is unknown how many other changed circumstances might
exist with absent class members.
Typicality is not present.
* * *
Because numerosity, commonality, and typicality are not met,
Plaintiffs’ motion for class certification fails under Rule 23(a)(2). 6 The
Court next addresses Defendants’ arguments under Rule 23(b)(3).
C. Rule 23(b)(3) Requirements
Defendants next argue that Plaintiffs’ class certification also fails
under Rule 23(b)(3). FED. R. CIV. P. 23(b)(3). Rule 23(b)(3) requires that
“questions of law or fact common to class members predominate over
6
Seeing that Plaintiffs motion fails under the first three central requirements of Rule 23(a)(2),
the Court finds it unnecessary to address the adequacy of representation present in this case.
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any questions affecting only individual members, and that a class action
is superior to other available methods for fairly and efficiently
adjudicating the controversy.” Id.
For the following reasons, the Court finds that the Rule 23(b)(3)
requirements are not met.
1. Common questions of fact do not predominate.
Defendants assert that common questions of fact do not predominate
as required by Rule 23(b)(3). The Court agrees.
Factual predominance requires that “proposed classes are
sufficiently cohesive to warrant adjudication by representation.” Cruson
v. Jackson Nat’l Life Ins. Co., 954 F.3d 240, 253 (5th Cir. 2020). As with
commonality and typicality “the risk of voluminous and individualized
extrinsic proof defeating predominance runs particularly high where a
defendant raises substantial affirmative defenses.” Id. at 256.
For the same reasons that prevent this Court from finding
commonality or typicality, Plaintiffs’ claims also fail to satisfy Rule
23(b)(3) as common questions of fact do not predominate over
individualized questions in this proposed class. As evidenced above, the
reasons for why a loan was not funded is an individualized affair that
presents too many unique scenarios to properly be considered under a
class action. ECF No. 74 at 9–12. And because the central identity of
this entire case rests on this question, the lack of predomination of
common facts is fatal under Rule 23(a)(3).
Factual predominance is not present.
2. A class action is not a superior method of adjudicating this
case.
Defendants last argue that—because of the divergent factual
scenarios of the lead and potential Plaintiffs—a class action is not the
best method for adjudicating this case. They are correct.
“Superiority” requires that a class action is “superior to other
available methods for fairly and efficiently adjudicating the
controversy.” FED. R. CIV. P. 23(b)(3). This involves a “fact-specific
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analysis and will vary depending on the circumstances of any given
case,” Madison v. Chalmette Refin., LLC, 637 F.3d 551, 555 (5th Cir.
2011). The fact specific inquiry requires a court to assess “the relative
advantages of alternative procedures.” Ibe v. Jones, 836 F.3d 516, 529
(5th Cir. 2016).
Given the divergent factual scenarios present in this case, a class
action appears unmanageable. ECF No. 74 at 9–12. At risk of sounding
repetitive, the many circumstances that might lead to an unfunded loan
would result in an ununiform and chaotic class. Id. Thus, “the principal
purposes of the class-action procedure—promotion of efficiency and
economy of litigation—would thereby be frustrated.” Crown, 462 U.S. at
349. As a result, individual claims—where each Plaintiff can argue the
specific facts of their unfunded loans—are a better method of remedying
the alleged wrongs present in this case.
* * *
Because common questions of fact do not predominate and a class
action in not a superior method of adjudicating this case, Plaintiffs’
motion for class certification fails under Rule 23(b)(3) requirements. 7
ORDER
For the reasons stated above, The Court DENIES Plaintiffs’ Motion
for Class Certification. ECF No. 67.
SO ORDERED on this 6th day of September 2023.
7 Seeing that Plaintiffs motion clearly fails under these central requirements of
Rule 23(b)(3), the Court finds it unnecessary to address the other 23(b)(3) issues raised
by Defendants.
15
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