United States District Court, D. Kansas
MEMORANDUM AND ORDER
E. BIRZER UNITED STATES MAGISTRATE JUDGE.
matter is before the Court on Plaintiff's Motion and
Memorandum in Support of Order for Corrective Notice to be
Issued to Putative Class Members (ECF No.
67). The Court has considered Plaintiff's motion
and memorandum, Defendant Wells Fargo Bank, N.A., d/b/a/
Wells Fargo Dealer Services, Inc.'s (“Wells
Fargo”) opposition brief (ECF No. 83), the Affidavits
(ECF Nos. 93-94), and oral arguments from the February 2,
2018 hearing. For the reasons set forth below,
Plaintiff's motion is
putative class action stems from allegations surrounding
Wells Fargo's repossession of 1, 150 servicemembers'
vehicles without court orders in violation of Section 3952(a)
of the Servicemembers Civil Relief Act between the time
period of January 2006 through October 4, 2016
(“SCRA”). (ECF No. 20, ¶¶ 76-86; ECF
No. 83-8, Ex. A).In the fall of 2016, Wells Fargo entered
two consent orders with two governmental agencies pledging to
remedy this SCRA violation. Part of this remedy includes
sending settlement offers to affected servicemembers in
exchange for the return of signed releases, approved by the
Department of Justice (“DOJ”), absolving Wells
Fargo of future SCRA liability. Between August 31, 2017 and
November 10, 2017, Wells Fargo sent settlement offers to
servicemembers without any mention of the existence of this
lawsuit as a potential class action. Having discovered its
omission, in mid-November of 2017, Wells Fargo revised its
letters to include details on the class action allegations,
and allowed servicemembers who signed releases the option to
rescind the release, keep the settlement money, and be a part
of the class action, if certified. Plaintiff asks this Court,
pursuant to its power under Fed.R.Civ.P. 23(d), to invalidate
all releases obtained during the period of August 31, 2017 to
November 15, 2017 and to order Wells Fargo to issue
Consent Orders and Remediation Obligations
September 29, 2016, Wells Fargo entered into a consent order
with the Comptroller of the Currency of the United States of
America (“OCC Consent Order”), relating not only
to the SCRA repossession violations, but also to Wells
Fargo's failure to comply with other SCRA laws. (ECF No.
83-5, Article I, ¶¶ 1-3). The OCC Consent Order
covered a period from 2006 to 2016. (Id.). On
October 4, 2016, a different consent order, one entered
between Wells Fargo and the DOJ (“DOJ Consent
Order”), became effective, and so remains until April
4, 2019. (ECF No. 83-4, p. 23). The DOJ Consent Order
concerned Wells Fargo's repossession of SCRA-protected
servicemembers' vehicles without court orders from
January 1, 2008 through July 1, 2015. (Id. at ¶
Consent Orders require Wells Fargo to remedy the SCRA
violations. (ECF No. 83-4, ¶¶ 8-36; ECF No. 83-5,
Articles III-V). As relevant here, Wells Fargo is required to
remediate all SCRA-protected customers whose vehicles were
repossessed without a court order from January 1, 2006
(look-back period for the OCC Consent Order) through October
4, 2016, the effective date of the DOJ Consent Order. (ECF
No. 83-3, ¶ 5; ECF No. 83-5, Article V(1) and (2)(a),
(d); ECF No. 83-4, ¶¶ 19-21). Also, while the DOJ
Consent Order is effective, Wells Fargo is to remedy any
additional non-compliant SCRA repossession accounts it finds.
(ECF No. 83-4, ¶¶ 19, 45).
interest here, the Consent Orders require Wells Fargo to: (1)
offer affected servicemembers $10, 000 in compensation, plus
lost equity in the repossessed vehicle and interest accrued
on that lost equity, and develop a “Remediation
Plan” to administer this compensation (ECF No. 83-4,
¶¶ 22, 24; ECF No. 83-5, Article V); (2) delete the
tradelines for the affected accounts (ECF No. 83-4, ¶
32; ECF No. 83-5, Article V(4)(d)(i)); (3) provide a
“cost-free means for affected servicemembers to contact
it, including . . . a toll-free telephone number” (ECF
No. 83-4, ¶ 25); and (4) internally audit and validate
its compliance with the Consent Orders. (ECF No. 83-2,
103:4-9; ECF No. 83-3, ¶ 12; ECF No. 83-5, Article
addition, the DOJ Consent Order sets forth several
requirements governing the content, timing, and manner of
Wells Fargo's communications with affected servicemembers
regarding the compensation offers. (ECF No. 83-4, Article V).
Specifically, the communications are required to be in letter
form, provided to the DOJ for review and approval, and
accompanied by the approved release. (Id. at ¶
26). Wells Fargo is then required to mail up to a total of
four letters to each affected servicemember, referred to by
Wells Fargo as the Initial Letter, Second Notice, Third
Notice, and Final Notice. (ECF No. 83-3, ¶ 9). Finally,
within 21 calendar days of receiving a signed release, Wells
Fargo is to mail out the remediation check. (ECF No. 83-4,
identified 413 repossessions between January 1, 2008 and July
1, 2015 not in compliance with the SCRA. (ECF No. 83-4,
¶ 20). Wells Fargo later identified another 150
violations between January 1, 2006 (the OCC Consent
Order's lookback period) and October 4, 2016 (DOJ Consent
Order's effective date), for an initial total of 563
repossessions (“Initial Population”). (ECF No.
83-3, ¶ 8; ECF No. 83-8, Ex. A).
sometime between June and August 31, 2017, after this lawsuit
was filed, and the class action allegations made, Wells Fargo
identified another 587 non-compliant repossession accounts
(“Additional Population”). Wells Fargo began
sending out settlement letters to these servicemembers
pursuant to its obligations under the Consent Orders, but
without any mention of the possible class action. (ECF No.
83-3, ¶¶ 13-18, 21; ECF No. 83-4, ¶ 19). Wells
Fargo's communications to this Additional Population is
the subject of concern.
discussion of how Wells Fargo discovered these 587 additional
accounts is therefore relevant. The Consent Orders require
Wells Fargo, on a continuing basis, to internally audit and
validate compliance with its remediation obligations,
including identifying all repossessions potentially subject
to remediation. (ECF No. 83-3, ¶ 12; ECF No. 83-2,
103:4-16). In June of 2017, while complying with the DOJ
audit requirements, Wells Fargo identified additional auto
finance loans, which predated its acquisition of Wachovia in
2008. (ECF No. 83-3, ¶ 13; ECF No. 83, pp. 6-7, n.2).
These additional loans were not part of the Initial
Population review described above because they had not been
converted following the merger. (Id.). Wells Fargo,
sometime between June of 2017 and August 31, 2017, reviewed
these additional repossession accounts and discovered that
587 were subject to remediation under the Consent Orders.
(Id. at ¶¶ 13-16). This brings the total
repossessions to 1, 150. (ECF No. 83-8, Ex. A).
April 10, 2017, Plaintiff filed his initial Complaint against
Wells Fargo alleging (1) violations of the SCRA; (2)
violations of the Utah Consumer Sales Practices Act; and (3)
conversion. (ECF No. 1, ¶¶ 50-71). On June 20,
2017, Wells Fargo filed an Amended Answer generally denying
the allegations. (ECF No. 10). On July 9, 2017, Plaintiff
moved for leave to amend to add class action allegations.
(ECF No. 14). The Court held a Scheduling Conference on July
12, 2017 where it ordered the parties to exchange initial
disclosures, but delayed entering a Scheduling Order until
Plaintiff's motion for leave to amend was ruled on. (ECF
20, 2017, Wells Fargo opposed the motion for leave to amend
arguing the class size was shrinking due to settlements being
obtained under the DOJ Consent Order. (ECF No. 16, p. 1).
However, on August 31, 2017, Wells Fargo withdrew its
objection after having identified the Additional Population
discussed above, and because these servicemembers would be
potential class members. (ECF No. 18, p. 1). Wells Fargo,
unknown to the Court or Plaintiff, began sending out
settlement letters to the Additional Population
(i.e., putative class members) on this date as well.
(ECF No. 83-3, ¶ 17).
Court granted Plaintiff's motion for leave to amend on
September 1, 2017 (ECF No. 19), and Plaintiff filed his First
Amended Class Action Complaint (“Class Action
Complaint”) on September 15, 2017 (ECF No. 20). The
Court held a Scheduling Conference and entered a Scheduling
Order on October 6, 2017. (ECF No. 28). Wells Fargo answered
the Class Action Complaint on October 13, 2017. (ECF No. 30).
several court conferences with the parties regarding the
varied intervals of the issuance of the letters and releases,
and the content, or lack thereof, of the communications to
the putative class, Plaintiff motioned the court to
invalidate the releases. (ECF Nos. 33, 43, 57, 67, 69).
Wells Fargo's Letter Campaign
August 31, 2017 and November 10, 2017, Wells Fargo mailed out
hundreds of letters and releases (consisting of Initial
Letters, Second Notices, Third Notices, and Final Notices) to
the Additional Population without any mention of the class
action allegations. (ECF No. 83-3, ¶¶ 17-20).
mid-November, however, Wells Fargo revised these letters to
include details about the alleged class action, including,
among other things, Plaintiff's counsel's contact
information and a Wells Fargo-controlled toll-free number to
call in case of questions. (ECF No. 83-3, ¶¶ 22,
24; ECF No. 67-8; ECF No. 67-9; ECF No. 67-11).
for servicemembers who already accepted payments and signed
releases in response to letters without the alleged class
action details, Wells Fargo prepared a Supplemental Letter.
(ECF No. 83-3, ¶ 23). In addition to the above details,
the Supplemental Letters provide options on proceeding if the
servicemember (i) had not signed a release and wished to be a
part of the proposed class action; (ii) had already accepted
the settlement but wished to be a part of the proposed class
action; (iii) had already accepted the settlement and did not
want to be a part of the proposed class action; or (v) wanted
to proceed with the settlement offer. (ECF No. 67-10).
servicemember accepted the settlement offer, but wished to be
a part of the proposed class action, Wells Fargo directed
them to sign, date and return an attached form rescinding the
release. (Id.; ECF No. 83-3, ¶ 23). Wells Fargo
also directed those servicemembers to keep the settlement
money, but advised this may affect any recovery received if
the class action is certified and damages awarded. (ECF No.
November 13, 2017 and December 28, 2017, hundreds of revised
Initial Letters, Second Notices, Third Notices, Final
Notices, and Supplemental Letters were sent to the Additional
Population. (ECF No. 83-3, ¶ 24). To date, Wells Fargo
has received 368 releases from this population, 53 of which
have been rescinded. (Id. at ¶¶ 25-26; ECF
No. 83-8, Ex. A; ECF No. 83-9, Ex. B).
argues the letters sent from August 31, 2017 to November 15,
2017, are secretive, confusing and misleading, and asks this
Court per Rule 23(d) to invalidate all releases obtained
during this period and order Wells Fargo to issue corrective
notices. (ECF No. 67, p. 27).
well settled Defendants have a right to communicate
settlement offers directly to putative class
members. However, pursuant to Gulf Oil Co. v.
Bernard,  if those communications are found to be
abusive, district courts have “both the duty and broad
authority” to regulate such communications under Rule
23(d). Such regulation can include invalidating
releases and issuing corrective notices.
any order regulating communications should be “based on
a clear record and specific findings that reflect a weighing
of the need for a limitation and the potential interference
with the rights of the parties.” This is because
only “such a determination can ensure that the court is
furthering, rather than hindering, the policies embodied in
the Federal Rules Civil Procedure, especially Rule
23.” The moving party, therefore, must
demonstrate the communication at issue is “abusive in
that ‘it threatens the proper functioning of the
litigation.'” Examples of abusive communications
are those that are false, misleading or confusing, contain
material omissions, or are coercive or
even if there is clear evidence of abusive communications
with potential class members, a court may only impose
“the narrowest possible relief which would protect the
respective parties.” Overly broad relief can
violate the First Amendment.
argues the releases obtained between August 31, 2017 and
November 15, 2017 should be invalidated and corrective
notices sent because of Wells Fargo's secretive,
misleading and confusing communications. Wells Fargo denies
its letters are secretive, misleading or confusing. It states
it has a right to directly communicate settlement offers to
putative class members and is obligated to do so under the
Consent Orders. Wells Fargo further argues it has already
taken the necessary corrective action by revising its letters
to include details about the Class Action Complaint and by
offering servicemembers the chance to rescind releases and
keep the settlement payments.
Wells Fargo's Alleged ...