U.S. Bank Nat’l Ass’n v. Breer et al., No. 717-10-12 Wncv (Tomasi, J., May 17, 2016).
[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
accompanying data included in the Vermont trial court opinion database is not guaranteed.]

                                              VERMONT SUPERIOR COURT

SUPERIOR COURT                                                                              CIVIL DIVISION
Washington Unit                                                                             Docket No. 717-10-12 Wncv

                                          │
U.S. Bank National Association, as        │
Trustee, successor in interest to Bank of │
America, National Association, as         │
Trustee (s/b/m to LaSalle Bank National │
Association) as Trustee for Wells Fargo │
Home Equity Trust Mortgage                │
Pass-Through Certificates, Series 2004-1,│
 Plaintiff,                               │
                                          │
 v.                                       │
                                          │
Bonnie Breer, CitiFinancial, Inc., and    │
Occupants residing at 86 Porter Road      │
in Cabot, Vermont,                        │
 Defendants.                              │
                                          │

                                                 Opinion And Order On
                                        Ms. Breer’s Motion To Certify Class Action

           This is a residential foreclosure action filed by Plaintiff U.S. Bank, N.A., in

its capacity as Trustee for Wells Fargo Home Equity Trust Mortgage Pass-Through

Certificates, Series 2004-1, against Ms. Bonnie Breer. U.S. Bank alleges that Ms.

Breer has made no payments on her modified, fixed-rate mortgage loan since 2011.

Ms. Breer filed a counterclaim alleging fraudulent nondisclosure, constructive

fraud, and consumer fraud. She requests damages and a declaration that her note
and mortgage are unenforceable. Before the Court is her motion to certify the

common law fraud claims as a class action.1 U.S. Bank opposes class certification.

       The Court held a hearing on the motion in February. Based on the written

submissions of the parties and the oral arguments, the Court concludes that Ms.

Breer has failed to satisfy her burden of demonstrating commonality and

predominance as contemplated by Vt. R. Civ. P. 23. Her certification motion is

denied.

       1.     Background

       Following a divorce, and with poor credit, Ms. Breer sought to refinance her

mortgage loan. She eventually did so with an adjustable-rate loan from Wells Fargo

Home Mortgage, Inc. (WFHMI), in 2004. According to the terms of the Note, the

interest rate was fixed at 8.875% for the first two years. Then, it would reset every

six months on specified “change dates.” Each reset rate would be 7.5% plus the

most recent six-month U.S. dollar-denominated LIBOR (London Interbank Offered

Rate) published in the Wall Street Journal. The first reset rate could not exceed

11.875%. Thereafter, it could not exceed 14.875%. It could never go below 8.875%,

and it could never go up or down more than 1% after the first change date. The

terms of the loan permitted her to refinance or otherwise prepay without penalty

after the first two years, at the time of the first rate reset.




1 Ms. Breer has acknowledged that her statutory consumer fraud claim is
inappropriate for class certification.


                                             2
        “LIBOR is an interbank lending rate that is commonly used as an index and

for the settlement of various types of legal-financial contracts, including ARMs.”

Report of Timothy J. Riddiough, Ph.D. at 3 (filed Aug. 24, 2015). It is determined

based on submissions from selected panel banks.2 Id. at 7. A component of the

relevant LIBOR is the six-month Treasury rate. Id. at 3. WFHMI has never been a

panel bank. Bank of America, N.A., (BANA) was a panel bank at all times relevant

to this case. Id. at 8.

        Once Ms. Breer’s loan was originated, WFHMI endorsed the Note in blank

and assigned it to a trust, Wells Fargo Home Equity Trust Mortgage Pass-Through

Certificates, Series 2004-1 (the Trust), where it was securitized with over 6,600

other residential mortgage loans from around the country.3 WFHMI has acted as

servicer for the Trust ever since. LaSalle Bank, N.A., was the original Trustee (and

holder of the Note following securitization). In 2007, BANA acquired LaSalle Bank,

and became the Trustee. In 2012, U.S. Bank, N.A., became the Trustee.4

        Ms. Breer had the misfortune of taking on an adjustable rate mortgage

indexed to LIBOR just as LIBOR began to increase. After her rate started to reset,

her monthly payment increased substantially. She did not seek to refinance the




2A far more expansive explanation of LIBOR is available in the record but that it is
unnecessary to recount all of the details here.

3Again, a far more expansive explanation of the origination and securitization
process is available in the record but it is unnecessary to recount all of the details
here.

4   It bears noting that WFHMI, LaSalle, and BANA are not parties to this case.
                                           3
loan. By 2009, she was in default. In May 2009, WFHMI modified her loan by

adding the deficiency to principal and fixing the interest rate at 4.875%. The

modification lowered her monthly payment considerably. Nevertheless, at some

point in 2011, she quit making payments (including for taxes and insurance) and

has made none since. It is this modified loan that is the subject of the foreclosure

claim.

         Ms. Breer alleges that the property that secures her loan sits within the

spillway easement for the Marshfield dam, has flooded several times since her

refinancing in 2004, is unmarketable, and that WFHMI breached some duty to so

warn her in the course of her 2004 refinancing. She also alleges that WFHMI

duped her into thinking that its closing lawyer actually was representing her, and

that the lawyer pressured her into signing all of the loan documents without

reading anything or understanding what she was agreeing to. Though some of

these allegations are mentioned in passing in the certification briefing, they do not

appear to be the focus of the class action request.

         The common law claims for which she seeks class certification relate to

increasing LIBOR rates that, in turn, caused her payment rates to increase. The

alleged fraud asserted has several moving parts, which may be summarized

generally as follows: (1) WFHMI should have warned her that a LIBOR-indexed,

adjustable rate loan was predatory and otherwise inappropriate for her; (2) WFHMI

knew or should have known that LIBOR was about to skyrocket because it was

overwhelming financial markets with high-risk mortgage debt that the debtors



                                            4
would never be able to pay back (and presumably should have so warned her); (3)

BANA manipulated LIBOR so that it would be artificially increased on her (and

other typical) change dates by its conduct as a LIBOR panel member; and (4)

WFHMI knew all along that BANA and the other LIBOR panel members were

manipulating LIBOR to her detriment, profited from that, and never so advised her.

She proposes various agency law theories to attribute BANA’s and WFHMI’s

alleged misdeeds to the Trust itself and to rebut U.S. Bank’s claim that it is a

holder in due course.

      The nationwide class Ms. Breer proposes includes all persons with LIBOR-

indexed loans that ever were assigned to the Trust. Only a total of five or six such

loans relate to mortgages on Vermont properties, however. The many thousands of

other such loans relate to properties in all other states.

      2.     Class Certification—Vt. R. Civ. P. 23

      As the Vermont Supreme Court has said, “class actions are intended to be of

limited and special application, not to be casually resorted to or authorized. This is

because, improperly used, they can seriously compromise many due process rights

of those involved.” George v. Town of Calais, 135 Vt. 244, 245 (1977); see also

Halliburton Co. v. Erica P. John Fund, Inc., 134 S.Ct. 2398, 2424 n.7 (2014)

(Thomas, J., dissenting) (noting the “in terrorem” influence certification exerts on

the class opponent). The burden of proof on a Vt. R. Civ. P. 23 certification motion

is on the movant, Ms. Breer in this case. See William B. Rubinstein, Newberg on

Class Actions § 7:20 (5th ed.) (WL updated Dec. 2015) [hereinafter, “Newberg”].



                                           5
      There are four prerequisites for a class action, “numerosity, commonality,

typicality, and adequacy of representation.” Alger v. Dep’t of Labor & Industry,

2006 VT 115, ¶ 36, 181 Vt. 309, 327–28; Vt. R. Civ. P. 23(a). In other words: there

must be enough members of the class to warrant a class action; the class members’

claims must have issues of fact or law in common; the class representative’s claim

must be typical of those of the other class members; and the class representative’s

counsel must be capable of the undertaking.

      If all of those prerequisites are satisfied, the certification question turns to

whether one of the “more onerous conditions” of Vt. R. Civ. P. 23(b) also is satisfied.

Wright v. Honeywell Intern., Inc., 2009 VT 123, ¶ 9, 187 Vt. 123, 129. Subsection

(b)(1) applies in situations where individual litigation would create incompatible

standards for the class opponent or impair the rights of nonparties. Subsection

(b)(2) applies to class-wide injunctive relief. See Wal-Mart Stores, Inc. v. Dukes, 564

U.S. 338, 360–61 (2011) (“Rule 23(b)(2) applies only when a single injunction or

declaratory judgment would provide relief to each member of the class. . . . [I]t does

not authorize class certification when each class member would be entitled to an

individualized award of monetary damages.”). Subsection (b)(3) generally applies

when common issues of law or fact predominate over individual issues and

proceeding as a class action is superior to allowing individual litigation to unfold on

its own. Ms. Breer seeks certification pursuant Vt. R. Civ. P. 23(b)(3).

       The additional requirements for certification under Vt. R. Civ. P. 23(b)(3) are



                                           6
as follows:

         the court finds that the questions of law or fact common to the
         members of the class predominate over any questions affecting only
         individual members, and that a class action is superior to other
         available methods for the fair and efficient adjudication of the
         controversy. The matters pertinent to the findings include: (A) the
         interest of members of the class in individually controlling the
         prosecution or defense of separate actions; (B) the extent and nature of
         any litigation concerning the controversy already commenced by or
         against members of the class; (C) the desirability or undesirability of
         concentrating the litigation of the claims in the particular forum; (D)
         the difficulties likely to be encountered in the management of a class
         action.

“These requirements reflect the fact that special caution must be exercised in class

actions of this type because of the loose affiliation among the class members, which

is thought to magnify the risks inherent in any representative action.” 7A Charles

Alan Wright, et al., Federal Practice & Procedure: Civil 3d § 1777 (WL updated Apr.

2016).

         3.    Analysis

         The Vt. R. Civ. P. 23 inquiry in this case is complicated at the outset by Ms.

Breer’s heavy focus on the broad courses of conduct alleged against BANA and

WFHMI without detailing her claims with specificity, including by spelling out

exactly how she believes the law applies to them and how nationwide classes could

be crafted effectively to raise them. This makes the analysis a murkier endeavor

than it ought to be.5



5 Under Fed. R. Civ. P. 23(c)(1)(B), in certifying a class action, a court must be able
to describe the classes and claims with specificity. Newberg § 7:28. The Vermont
rule does not contain the same express provision as the federal rule, though it likely
should be interpreted to the same effect because without that specificity, potential
                                             7
        In any event, the commonality and predominance requirements counsel

strongly against certification in this case. It is insufficient for purposes of

commonality to simply come up with some issue, however general, that the

proposed class members’ claims may have in common. As the United States

Supreme Court has explained,

        What 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. Dissimilarities within the proposed class are what have
        the potential to impede the generation of common answers.

Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L.

Rev. 97, 131–132 (2009) (emphasis added), quoted in Wal-Mart Stores, 564 U.S. at

350.6

        Predominance complements commonality by testing “whether proposed

classes are sufficiently cohesive to warrant adjudication by representation.”

Amchem Products, Inc. v. Windsor, 521 U.S. 591, 623 (1997). “As the predominance

test is meant to help courts identify cases in which aggregate treatment would be



class members cannot effectively determine whether to opt out of the class action.
See id. In this case, even if the Court otherwise were inclined to grant certification,
it would be hard-pressed to describe Ms. Breer’s claims and the class or classes to
which they apply with the requisite degree of specificity.

6The majority’s treatment of commonality in Wal-Mart Stores, according to the
dissent, improperly subsumed the predominance analysis. See Wal-Mart Stores,
564 U.S. at 376 (Ginsburg, J., dissenting). The distinction mattered in that case
because, as the dissent posited, only a Fed. R. Civ. P. 23(b)(2) class was at issue,
and there is no predominance requirement in that event. In this case, where
commonality blends into predominance matters little, if at all, because both
requirements apply. See 7A Charles Alan Wright, et al., Federal Practice &
Procedure: Civil 3d § 1763 (WL updated Apr. 2016).
                                            8
efficient, it focuses on the extent to which the issues in the cases are common as

opposed to individual—the more common the issues, the more likely it is that the

case will be processed efficiently in the aggregate; the less common the issues, the

less likely efficient resolution will be furthered by aggregation.” See Newberg

§ 4:49. “This is more of a qualitative than quantitative analysis.” Id. § 4.50.

      It’s the Court’s belief that individual issues would swamp any common ones if

certification were granted in this case. To arrive at common issues, Ms. Breer

describes (in briefing and in her expert reports) the objectionable conduct of BANA

and WFHMI in very generalized terms. During some period in the course of her

LIBOR-indexed loan, she asserts that LIBOR was artificially increased on change

dates by LIBOR panel members, of which BANA was but one. Whatever BANA did

wrong and whatever effect it may have had on LIBOR and any class member,

WFHMI necessarily was aware of it, somehow profited from it, and never so advised

the class members. It also engaged in myriad, discrete practices that, collectively,

can be described as steering marginal mortgagors into predatory loans. Doing so

directly harmed each mortgagor affected by any particular such practice and, in the

aggregate, all of this destabilized the economy and caused LIBOR to skyrocket

whereas otherwise it presumably would not have. All of this is attributable, via

unconventional agency law theories, to the Trust and now prevents U.S. Bank from

claiming holder in due course status. To the extent that it could make sense in the

abstract to say that the class members have all of the above in common, the

generality of Ms. Breer’s assertions does little to demonstrate that proceeding as a



                                           9
10
class action is likely to “generate common answers apt to drive the resolution of the

litigation” rather than mire this case in individual issues.

      Predominance has not been shown. Ms. Breer proposes two common law

fraud claims for current or past mortgagors of property in every state.7 She has not

attempted to explain why the law of Vermont would apply to the lion’s share of

claims that are based on property in other states. Presumably, the tort and agency

law of the state in which each such property exists would apply to claims arising out

of loans secured by that property. See Restatement (Second) of Conflict of Laws §§

145 (torts), 291 (agency); see also Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 821

(1985) (“[W]hile a State may . . . assume jurisdiction over the claims of plaintiffs [in

a class action] whose principal contacts are with other States, it may not use this

assumption of jurisdiction as an added weight in the scale when considering the

permissible constitutional limits on choice of substantive law. It may not take a

transaction with little or no relationship to the forum and apply the law of the

forum in order to satisfy the procedural requirement that there be a ‘common

question of law.’”). “The class proponent bears the burden of showing that

application of substantive laws from multiple jurisdictions does not defeat

predominance. Courts have rejected certification when the proponent’s choice of law

analysis was insufficiently thorough.” Newberg § 4:61 (emphasis added); see also

Amchem Products, 521 U.S. at 624 (noting that “[d]ifferences in state law” can



7With so few mortgagors having anything to do with Vermont, a class limited to
Vermont mortgagors would come nowhere near satisfying the numerosity
requirement.
                                           11
“compound the[] disparities” among class members for predominance purposes).

Ms. Breer barely touches on the matter.

      The Court has no basis for any conclusion that somehow only Vermont law

would apply to all class claims, much less that the law of the many states is so

similar that a class action makes sense, especially in light of the complicated and

nuanced nature of the claims. This alone shows that the proposed class cannot be

certified. See 7A Charles Alan Wright, et al., Federal Practice & Procedure: Civil 3d

§ 1780.1 (WL updated Apr. 2016) (“As a matter of general principle, the

predominance requirement of Rule 23(b)(3) will not be satisfied if the trial court

determines that the class claims must be decided on the basis of the laws of

multiple states.”).

      Numerous issues that probably would require claim-by-claim proofs are

apparent, including at least the following: (1) the extent to which any mortgagor

may or may not have relied on any representations or omissions and whether that

reliance was justified; (2) precisely what those representations or omissions were;

(3) whether the mortgagor worked with an independent mortgage broker as Ms.

Breer did and whether and how that broker’s conduct might affect liability to any

particular claimant; (4) how liability may be affected by the individual terms of each

loan, including the various change dates and prepayment terms; (5) whether, when,

and how each loan was refinanced or modified; (6) what loan terms were predatory

or inappropriate given each mortgagor’s risk profile and goals; (7) whether the

mortgagor refinanced, defaulted, or paid in full; and (8) the amount of damages



                                          12
accruing to each mortgagor in relation to however any liability might eventually be

established. Indeed, in light of the individual attention such claims typically

require, class action status is often denied in cases alleging common law fraud. See

McHan v. Grandbouche, 99 F.R.D. 260, 266-67 (D. Kan. 1983)

         Additionally, as the events underlying the fraud purportedly took place in

2004-2006, see Supplemental Affidavit of John Summa at 21 n.50 (filed Oct. 15,

2015) (taking the position that the financial incentive to manipulate LIBOR up

ended sometime in 2006), the class claims present substantial statute of limitations

issues that also will likely need individual determination. Vermont’s limitations

statute may apply universally to the claims of all proposed class members.

Compare the 1971 version of the Restatement (Second) of Conflict of Laws § 142

under which the Vermont statute would apply universally with the 1988 revision

under which it would apply to Vermont claims only; Marine Midland Bank v.

Bicknell, 2004 VT 25, ¶ 7, 176 Vt. 389, 393 (apparently endorsing the heavily

criticized and then firmly rejected conceptualization of the matter in the 1971

version of the Restatement but without discussing the 1988 revision); Unifund CCR

Partners v. Jenkins, No. 158-7-09 Oecv, 2009 WL 6565294, Decision Re: Defendant’s

Motion to Dismiss (Vt. Super. Ct. Nov. 10, 2009) (discussing this question and

deferring to Bicknell, regardless of its rationale, as binding precedent). Or, if the

Court were to adopt the 1988 approach, multiple statutes of limitations would

apply.




                                           13
      In any event, even under the Vermont statute, the proper determination of

when each class member’s claims accrued, and hence whether they are barred,

would depend on the specifics of the discovery rule as it applies to each party. As

Ms. Breer herself points out, the discovery rule presents a question of fact. See Pike

v. Chuck’s Willoughby Pub, Inc., 2006 VT 54, ¶ 18, 180 Vt. 25, 33 (2006)

(“Determination of the date of accrual under the discovery rule is a factual issue

that generally should be decided by the jury.”). While limitations issues often can

be determined on a classwide basis, the same is not always so for “torts that arise

on discovery.” Newberg § 4:57 n.4. This would be the case here. An inquiry into

discovery would have to be undertaken for each claimant. In Ms. Breer’s case, for

example, she argues that, based on the discovery rule, she can bring this case

because she claims to have learned of the alleged fraud just under six years before

she filed her complaint.

      In short, regardless whether Ms. Breer has properly established any common

issues, she has completely failed to satisfy the predominance requirement. Rather

than showing that a class action would be an efficient way to proceed, the prospect

is that certification would result in the aggregation of thousands of claims that

would, in significant measure, need to be litigated separately.

      That determination leads the Court to conclude that Ms. Breer has also failed

to establish that a class action is a superior vehicle to address the claims raised. Vt.

R. Civ. P. 26(b)(3). While she notes that an individual plaintiff may have difficulty

managing such claims, she is represented by experienced counsel who appears well



                                          14
versed in the relevant issues, and has already retained an economic expert. She

appears well prepared to prosecute her case. To the extent ongoing funding is a

concern, the Court notes that proof of fraud has the potential for an award of

punitive damages, and Ms. Breer’s Consumer Protection Act claim has the potential

for penalties and attorney’s fees, 9 V.S.A. § 2461(b).

      Lastly, Ms. Breer has not persuaded the Court that this jurisdiction has any

meaningful connection to the alleged fraudulent activities such that allowing a

national class action here would make sense. Only six Vermont loans out of many

thousands nationally could even possibly fall within the class, and that number may

actually be lower. Although Vermont will often suffer less numerous instances of

harm based on its population, the existence of six potential plaintiffs indicates that

Vermont, as opposed to other jurisdictions, has been only slightly impacted by the

alleged fraud. Moreover, few, if any, of the alleged perpetrators of the fraud reside

in Vermont, and few witnesses are located here. See Newberg § 4.71 (noting that

concentrating the litigation in a particular forum may be “particularly appropriate

when that court has already made several preliminary rulings, when a particular

forum is more geographically convenient for the parties, [or] when other similar

actions have been consolidated before the court”).




                                          15
                          Conclusion

For the foregoing reasons, Ms. Breer’s class certification motion is denied.

Dated this __ day of May 2016 at Montpelier, Vermont.

                                        _____________________________
                                        Timothy B. Tomasi,
                                        Superior Court Judge




                                   16
