The opinion of the court was delivered by: Eduardo C. Robreno, J.
On May 1, 2008, Plaintiffs John Rodriguez, Jennifer Worthington, Bobby Crouther, Jesus Conchas and Rosa Maria Conchas ("Plaintiffs") filed a complaint, alleging that Defendants National City Bank and National City Corporation ("Defendants") have demonstrated an established pattern and practice of racial discrimination in the financing of residential home purchases, in violation of the Fair Housing Act, 42 U.S.C. § 3601 ("FHA") and the Equal Credit Opportunity Act, 15 U.S.C. § 1691 ("ECOA"). Specifically, Plaintiffs allege that Defendants' "Discretionary Pricing Policy" authorizes a subjective surcharge of additional points, fees, and credit costs to an otherwise objective risk- based financing rate, the application of which has a widespread discriminatory disparate impact on minority applicants for home mortgage loans. (Compl. ¶¶ 1,3.)
Plaintiffs now bring a Motion for Final Approval of Settlement and Certification of Settlement Class, as well as a Motion for Attorneys Fees. For the reasons set forth below, the Court will deny both motions.
On May 1, 2008, Plaintiffs filed their complaint. Defendants denied all claims and asserted numerous defenses to both liability and class certification. On June 23, 2008, the Defendants filed an initial Motion to Dismiss. On September 5, 2008, Plaintiffs filed their Amended Complaint. Defendants responded by filing a Motion to Dismiss Plaintiff's Amended Complaint on September 22, 2008. After briefing and oral argument, by Order dated December 11, 2008, the Court denied Defendants' Motion to Dismiss Plaintiffs' Amended Complaint.
On March 31, 2009, Plaintiffs filed a Second Amended Complaint, the operative Complaint, which added two additional Plaintiffs, Luis and JoAnn Ramos, as well as The PNC Financial Services Group as a successor-in-interest to the National City Defendants. Defendants answered the Complaint on April 20, 2009, and simultaneously moved to dismiss all claims in this case relating to mortgage loans originated by First Franklin Corp. (a former subsidiary of National City), as such claims are the subject of separate consolidated actions pending in the United States District Court for the Northern District of California entitled In re First Franklin Corp., No. 08-CV-1515. On May 7, 2009, pursuant to a stipulation by the parties, the Court struck paragraph 83 of the Complaint and dismissed all claims relating to mortgage loans originated by First Franklin. Thereafter, the parties engaged in discovery.
Defendants produced documentation of pricing policies and procedures, including rate sheets provided to brokers and loan officers throughout the United States. Defendants also provided proprietary data submitted by National City to the federal government under the Home Mortgage Disclosure Act ("HMDA"). The loan data produced by Defendants, for each of more than two million loans originated from 2001 to 2008, included the annual percentage rate ("APR"), the term of the loan, the rate spread, the interest rate for the loan, the borrower's income, the borrower's ethnicity and race, the borrower's credit score, the borrower's debt-to-income ratio, the loan-to-value ratio, the prepayment terms, the origination fee for wholesale loans, the amortization type (e.g. fixed, ARM or adjustable rate mortgage, or interest only with balloon), the annual interest rate cap for ARM loans, and other ARM data. The two million loans included all of the loans originated by Defendants to Caucasian, Hispanic and African American borrowers, of which about 15% were to borrowers identified as African American or Hispanic.
While discovery was proceeding, on December 14, 2009, the parties met to explore the possibility of a negotiated settlement. Thereafter, in an effort to facilitate settlement, the parties retained an experienced class action mediator, Jonathan Marks ("Marks"), to assist their efforts. The parties held several telephone conversations with Marks and exchanged lengthy mediation briefs and reply briefs with regard to both the legal and factual issues in the case. Plaintiffs provided Defendants with their expert's preliminary regression analysis in support of their claims, and Defendants responded with criticisms of the analysis based upon their experts' analysis. The parties participated in an in-person mediation from May 12-13, 2010. With Plaintiffs' and Defendants' experts present and after a two-day mediation, the parties arrived at a proposed settlement on behalf of the class that would resolve all issues.
Accordingly, Plaintiffs filed a Motion for Preliminary Approval of Settlement on July 15, 2010 that the Court granted on July 22, 2010. On December 9, 2010, Plaintiffs filed a Motion for Final Approval of Settlement and Certification of Settlement Class, as well as a Motion for Attorneys Fees. Thus, the Court held a Fairness Hearing on December 16, 2010. At this hearing, the parties did not offer any evidence, other than what was in the record, and did not proffer any witnesses. The parties relied on the arguments set forth in their papers.
The Court had some concern regarding the settlement agreement and on January 4, 2011, the Court ordered that the parties may provide additional briefing addressing the following:
(1) the differences and similarities between Defendant's Foreclosure Avoidance Programs and the loss mitigation and/or foreclosure avoidance counseling that will be provided by the National Council of La Raza and Neighborhood Housing Services of Chicago; (2) the differences and similarities between the services provided by the National Council of La Raza and Neighborhood Housing Services of Chicago; (3) a description of how the National Council of La Raza and Neighborhood Housing Services of Chicago were selected, addressing: any connections between counsel and the organizations, whether or not the organizations provide referrals for counsel, and why two organizations were selected instead of one; (4) a description of how the $75,000 amount to be given to both National Council of La Raza and Neighborhood Housing Services of Chicago was determined, including an estimation of services and costs; and (5) a description of the work performed and the involvement of the representative plaintiffs. On February 18, 2011, both parties filed supplemental briefing on these issues.
While the Court was considering the supplemental briefing, the United States Supreme Court issued its opinion in Wal-Mart Stores, Inc. v. Dukes, a case that the parties had recognized in their briefing as being highly relevant to this case. 131 S. Ct. 2541 (2011). In light of the opinion's implication on class certification in this case, on July 5, 2011, the Court gave the parties the opportunity to file supplemental briefing as to: (1) whether Wal-Mart Stores, Inc. v. Dukes is relevant to class certification in this case; and if so (2) the legal analysis of the implications of the Wal-Mart Stores, Inc. v. Dukes opinion to this case. On July 22, 2011, both parties filed supplemental briefing on this issue.
Plaintiffs' Motion for Final Approval of Settlement and Certification of Settlement Class and Motion for Attorney Fees are ...