Jonathon Rowles v. Chase Home Finance, LLC Reply Memo in Support of Petition for TRO

8/8/2019 Jonathon Rowles v. Chase Home Finance, LLC Reply Memo in Support of Petition for TRO

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IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF SOUTH CAROLINA

BEAUFORT DIVISION

Jonathon Rowles, individually and )

as class representative of others ) Civil Action No.: 9:10-cv-01756-MBSsimilarly situated )

)Plaintiff, )

) REPLY MEMORANDUM IN SUPPORTv. ) OF MOTION FOR

) PRELIMINARY INJUNCTIONChase Home Finance, LLC, )

)Defendant. )

______________________________ )

The question before the Court is whether the Defendant should be preliminarily enjoined

from issuing what it characterizes as refund correspondence to putative class members

implicated by the instant lawsuit until the Court may rule upon the pending Rule 23(d) motion

filed by the Plaintiff seeking Court-established guidelines for any such communications.

The Defendant, Chase Mortgage, LLC, argues that the Plaintiff has failed to establish the

requisite elements of a motion for preliminary injunction. For the following reasons, Chase is

incorrect and a preliminary injunction should be ordered.

ANALYSIS

I. The Plaintiff is Likely to Succeed on the MeritsThe parties disagree as to the appropriate context in which to consider whether the

underlying matter to which this motion pertains is likely to succeed on the merits. Defendant

wrongly insists that the likelihood of the success of the Plaintiffs claims must drive the Courts

consideration while, in reality, the Court should consider the likelihood of success of the pending

Rule 23(d) motion.

9:10-cv-01756-MBS Date Filed 01/03/11 Entry Number 18 Page 1 of 13


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Typically, a motion for preliminary injunction pertains to some action implicating the

ultimate substantive rights at issue in the underlying litigation. Such was the situation in Real

Truth About Obama, Inc. v. Fed. Election Comm'n, 575 F.3d 342 (4th Cir. 2009).

Because a preliminary injunction affords, on a temporary basis, therelief that can be granted permanently after trial, the party seekingthe preliminary injunction must demonstrate by a clear showing

that, among other things, it is likely to succeed on the merits attrial.

Real Truth About Obama, Inc. v. Fed. Election Comm'n, 575 F.3d 342, 345 (4th Cir. 2009) cert.

granted, judgment vacated, 130 S. Ct. 2371, 176 L. Ed. 2d 764 (U.S. 2010) and adhered to in part

sub nom. The Real Truth About Obama, Inc. v. F.E.C., 607 F.3d 355 (4th Cir. 2010). Here, the

underlying dispute giving rise to the motion for preliminary injunction is not the case itself, but

rather is the Plaintiffs pending motion for a Rule 23(d) order governing the parties contact with

putative class members.

In this unique situation, it is useful to consider the underlying purpose of a preliminary

injunction. As long recognized by the Fourth Circuit,

The purpose of the preliminary injunction is to preserve the statusquo until the rights of the parties can be fairly and fullyinvestigated and determined by strictly legal proofs and accordingto the principles of equity.

Meiselman v. Paramount Film Distrib. Corp., 180 F.2d 94, 97 (4th Cir. 1950). The rights of the

parties pertaining to the instant motion are those implicated by Rule 23(d)not those litigated

within the underlying suit. Along the same lines, the preservation of the status quo sought by the

plaintiff is only to the extent necessary for the Court to issue an order in response to the

Plaintiffs fully-briefed motionrather than a restriction of action pending trial. Thus it is

appropriate to analyze the likelihood of success within the context of the pending Rule 23(d)

motion rather than the body of the lawsuit itself.



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Pertinent authority establishes that the likelihood of success analysis is to be

considered in tandem with considerations of the potential for irreparable injury to the moving

party. As the Eastern District of North Carolina observed,

a correlation exists between the likelihood of plaintiff's success onthe merits and the probability of irreparable injury to it. As thecourt in Blackwelder noted, if the likelihood of success is great, theneed for showing the probability of irreparable injury is less.Conversely, if the likelihood of success is remote, there must be astrong showing of the probability of irreparable injury to justifyissuance of the injunction.

Combined Ins. Co. of Am. v. Investors Consol. Ins. Co., 499 F. Supp. 484, 487 (E.D.N.C. 1980).

The Fifth Circuit Court of Appeals has described the interrelation of the two criteria as a sliding

scale balancing the hardships associated with the issuance or denial of a preliminary

injunction with the degree of likelihood of success on the merits. Florida Med. Ass'n, Inc. v. U.

S. Dept. of Health, Ed. & Welfare, 601 F.2d 199, 203 (5th Cir. 1979), citing State of Texas v.

Seatrain International, S. A., 518 F.2d 175, 180 (5th Cir. 1975); Siff v. State Democratic

Executive Committee, 500 F.2d 1307 (5th Cir. 1974).

The Defendant does not dispute that the Court possesses the authority, under Fed. R. Civ.

P. 23(d), to issue guidelines governing all parties communications with putative class members.

Indeed, the Supreme Court recognized that authority in Gulf Oil Co. v. Bernard, 452 U.S. 89,

101 S. Ct. 2193, 68 L. Ed. 2d 693 (1981). Rather the Defendant argues that, under the present

circumstances, there is no justification for any court supervision whatsoever of the parties

contact with putative class membersincluding the Defendants proposed refund

correspondence.

The analysis of the likelihood of success of the Plaintiffs rule 23(d) motion is closely

linked to the more thorough review of irreparable injury, discussed below.



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actions3 and SCRA actions filed as class complaints but resolved prior to a ruling upon

certification or still currently pending.4

II. The Plaintiff and Putative Class Members are Likely to Suffer IrreparableHarm in the Absence of Preliminary Relief

The Defendants memorandum in opposition fails to address the extraordinarily delicate

situation in which the putative class members, such as Captain Rowles, find themselves. Rather

Defendant insists that Captain Rowles offers only speculation as to how Chases proposal for

returning potential overpayments to individuals would in any way [be abusive, coercive or

misleading]. (Dkt. 17, p. 2) Substantial prejudice, however, stems from the combination of the

class members facing the enormous pressure of serving on active duty in the military while being

asked to consider refund correspondence that may affect the both the substantive rights of the

class members to monetary recovery and/or the procedural rights of the same individuals to

participate in this class action.

The Defendants response to these concerns is the inclusion of a Frequently Asked

Questions toll free phone number within its correspondence. Despite federal courts grave

concerns regarding unilateral, in-person contact, see, e.g., Kleiner v. First Nat. Bank of Atlanta, 751

F.2d 1193, 1202-03 (11th Cir. 1985), the Defendant insists that its staff members will doggedly

adhere to a prepared script in all conversations with putative class members. What the Defendant

3 See Hormel v. U S, 17 F.R.D. 303 (S.D.N.Y. 1955); Emmet v. Whittier, 164 F. Supp. 563

(D.D.C 1958).

4See, e.g., Fourte v. Countrywide Home Loans, Inc., 2:07-cv-01363-PGS-ES (D.N.J.)(Motion to

Certify currently pending); Venneman v. BMW Financial Services NA, LLC, 2:09-cv-05672-

PGS-ES (D.N.J.)(Case pending as putative class action; no motion to certify yet filed); Moll v.

Ford Consumer Finance Co., Inc., 1998 U.S. Dist. LEXIS 3638, 1998 WL 142411; 1:97-cv-

05044 (N.D. Ill. 1998) (Stipulation of Dismissal filed after motion to dismiss SCRA claim was

denied).



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may be waiving; or 2) remove yourself from the line of active duty in order to contact chase via

telephone.

In disputing the threat of harm stemming from the proposed refund payments,

Defendant insists that at worst, putative class members could be made whole with the refunds.

(Dkt. 17, p. 14) The first flaw with this argument is a class member being made whole is

subject to the whim and whimsy of the Defendant. Both Captain Rowles and the Court, it seems,

should accept whatever definition of whole the Defendant chooses though the Defendant

declines to produce to either the Plaintiff or the Court a spreadsheet of putative class members,

the damages suffered, and the refunds offered.

5

More revealing, however, is the fact that Chase

disputes the putative class members entitlement to punitive and consequential damages, despite

the fact that such damages are explicitly provided for within the SCRA.

The penalties provided under subsection (e) are in addition to and

do not preclude any other remedy available under law to a person

claiming relief under this section, including any award for

consequential or punitive damages.

50 App. U.S.C.A. 527(f). As Plaintiff noted in his initial motion, even District Courts

approving the issuance of refund correspondence have noted the real potential for abuse where

the class action vehicle offer[s] the possibility of a more favorable result than the proposed

settlement. Cox Nuclear Med. v. Gold Cup Coffee Services, Inc., 214 F.R.D. 696, 699 (S.D.

Ala. 2003).

The Defendant insists that such concerns are of no importance here because the fact that

a borrower cashed a check for his potential actual damages neither waives his request for other

5Undoubtedly such a document exists. Assuming the Defendant was being truthful when it

informed the Plaintiff that it planned to begin processing checks two weeks ago, at a bareminimum a calculation of refunds and a mailing list is in the possession of the Defendant.



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damages, nor determines the total amount of such damages. (Dkt. 17, p. 14) This assertion

implicates both legal and practical concerns that directly implicate the rights of the putative class

members under the instant action.

First, barring a specific stipulation from the Defendant to the contrary, whether the

acceptance of a refund check constitutes a waiver of additional rights (with or without a

release) may implicate a fifty state survey of common and statutory law. A district court's duty

to determine whether the plaintiff has borne its burden on class certification requires that a court

consider variations in state law when a class action involves multiple jurisdictions. Castano v.

Am. Tobacco Co., 84 F.3d 734, 741 (5th Cir. 1996). For example, it is clear that the affirmative

defense of accord and satisfaction is a matter of state law. See Richards v. Delta Air Lines, Inc.,

453 F.3d 525, 528 (D.C. Cir. 2006)(Richards failed to meet this standard because Delta's

accord and satisfaction affirmative defense ... will require the application of varying state laws

and a case-by-case factual inquiry.) Defendant emphasizes that it is not requiring the putative

class members to sign a release in exchange for the refund, but it is clear that release and

accord and satisfaction are separate contractual defenses. Holland v. United States, 621 F.3d

1366, 1377 (Fed. Cir. 2010). Thus, even if no releases are executed in exchange for refund

checks, the putative class members could adversely impact their ability to participate in a class

action if their negotiation of the refund check implicates issues of state law (including, but not

necessarily limited to, accord and satisfaction).6

6 This is not a hypothetical concern. The State of Utah, for example, has held that the negotiationof a refund check may constitute accord and satisfaction even when the individual negotiatingthe check intended to seek additional amounts through litigation.

[W]e find that Estate Landscape's negotiation of the $8,613 checksatisfied Mountain Bell's obligation, regardless of EstateLandscape's subjective intent to recover the full amount throughlitigation. While it is true that, as with any contract, the parties



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unnecessary. It goes without saying that Captain Rowles true concernand that of all of the

putative class members currently or formerly on active duty overseasis of a much more

fundamental nature than others could hope to comprehend. To hint otherwise is nothing short of

insulting to Captain Rowles.

`As to the purpose of Plaintiffs counsel, it should be noted that the motion for a

preliminary injunction did not relyat allupon some sort of protection of attorneys fees. This

stands in stark contrast to the case, cited by Defendant, of Boulas v. J.P. Morgan Chase & Co., et

al., No. 1:09-CV-00348-PAG (N.D. Ohio). There the Plaintiff sought to prohibit payments to

putative class members solelybased upon a supposed threat to attorneys fees and was roundly

rebuffed. Particularly in this jurisdiction the wisdom of such a strategy is hard to comprehend as

it is well-established that contingency fee agreements such as that sought to be enforced within

Boulas are not binding upon a district court in its determination of appropriate attorneys fees in

the class action context. In re MRRM, P.A., 404 F.3d 863, 867 (4th Cir. 2005), citing Barber v.

Kimbrell's, Inc., 577 F.2d 216, 226 (4th Cir.1978).

III. Balance of Equities Tips in Favor of Preliminary InjunctionDefendant balances the equities by insisting that there is no threat of harm to the

putative class while there is likely to be harm to Chases normal course of business, were it

restricted from sending such refunds. (Dkt. 17, p. 22) Evidence of such harm is found in

paragraph 3 of the DeAtley affidavit which describes Chases normal course of business as

including the issuing of refunds where overpayments have been discovered. Several problems

exist with this contention.

First, the proposed preliminary injunction does not restrict Chase from issuing refunds.

If, in fact, the Court grants the requested injunction Chase will be prohibited from contacting

putative class members only while Plaintiffs Rule 23(d) motion remains pending. Furthermore,



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the pending motion does not request a total prohibition of contact with putative class members

and does not seekin any wayto prevent the issuance of Defendants proposed refunds.7

Secondly, the time period in which Defendants actions will be restricted is very limited.

As of today, Plaintiff has filed its rule 23(d) motion (Dkt. 15), Defendant has responded with a

memorandum in opposition (Dkt. 17), and Plaintiffs reply is due to be filed on January 10, 2011.

Thus this matter will be fully briefed and ready for argument within the next seven (7) days. Any

harm identified by the Defendant that will result from this brief delay of the issuance of its

refunds is, no doubt, minimal and is outweighed by the very real threat of confusion,

misrepresentation and a compromise of the rights of the putative class members.

IV. Preliminary Injunction is in the Public InterestAs was noted in the Plaintiffs initial memorandum, the underlying purpose of the

Servicemembers Civil Relief Act is

to provide for, strengthen, and expedite the national defense through

protection extended by this Act [said sections] to servicemembers of the

United States to enable such persons to devote their entire energy to the

defense needs of the Nation.

50 App. U.S.C.A. 502(1). Since the advent of the SCRA in 1940, numerous times the Supreme Court

and the Fourth Circuit have paid particular deference to the policies embraced by the Act. The Soldiers'

and Sailors' Civil Relief Act is always to be liberally construed to protect those who have been

obliged to drop their own affairs to take up the burdens of the nation. Boone v. Lightner, 319

7

What the Plaintiff proposed to Chase as alternatives to unilateral contact constitutedin theopinions of Plaintiffs counsela middle ground between unbridled contact with putative class

members and an absolute prohibition of contact. It was hoped that these suggestions might serve

as a starting point for the crafting of a carefully drawn order that limits speech as little as

possible, consistent with the rights of the parties under the circumstances. Gulf Oil at 102, 101

S. Ct. at 2201.



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U.S. 561, 575, 63 S. Ct. 1223, 1231, 87 L. Ed. 1587 (1943); see also Le Maistre v. Leffers, 333

U.S. 1, 6, 68 S. Ct. 371, 373, 92 L. Ed. 429 (1948); California v. Buzard, 382 U.S. 386, 395, 86

S. Ct. 478, 484, 15 L. Ed. 2d 436 (1966); United States v. Onslow County Bd. of Educ., 728 F.2d

628, 636 (4th Cir. 1984). The purpose of the instant motion is to provide the Court with adequate

time to consider and craft an appropriate order that simultaneously preserves the policies of the

Act and the Defendants freedom of expression. The minimal restriction upon the parties in the

meantime is justified by these venerable goals.

V. A Nominal Bond is AppropriateDespite the limited reach of the proposed preliminary injunction, Defendant requests that

the Plaintiff post a cash bond that encompasses both the total refund amount, as well as any pre-

judgment interest. (Dkt. 17, p. 23) The First Circuit has recognized that the purpose of security

deposit required to obtain a preliminary injunction is for payment of such costs and damages as

may be incurred or suffered by any party who is found to have been wrongfully enjoined or

restrained. Northeast Airlines, Inc. v. Nationwide Charters & Conventions, Inc., 413 F.2d 335

(1st Cir. 1969). Considering this underlying purpose, there is no readily identifiable reason as to

why the Plaintiff should be required to post the total refund amount as this figure does not

represent a potential cost or damage but rather an expenditure already allocated for payment.

Along the same lines, prejudgment interest seems inappropriate as no judgment has been

issued in this case andif we are to believe Defendantno judgment is likely to accrue.

At any rate, as noted in the initial memorandum, the Fourth Circuit has noted that when

the risk posed by a preliminary injunction to the restrained party is low a nominal bond of zero

dollars ($0.00) may be appropriate. Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 424

n. 3 (4th Cir. 1999). Plaintiff asserts that such is the case here.



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Respectfully submitted,

s/ Richard A. Harpootlian

Richard A. Harpootlian (Fed. I.D. # 1730)Graham L. Newman (Fed. I.D. # 9746)RICHARD A. HARPOOTLIAN, P.A.1410 Laurel StreetPost Office Box 1040Columbia, South Carolina 29202(803) 252-4848(803) 252-4810 (facsimile)[email protected]@harpootlianlaw.com

William B. Harvey, III (Fed. I.D. # 1762)HARVEY & BATTEY, P.A.1001 Craven StreetPost Office Drawer 1107Beaufort, South Carolina 29901-1107(843) 524-3109(843) 524-6973 (facsimile)[email protected]

ATTORNEYS FOR PLAINTIFF ANDPLAINTIFF CLASS

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Jonathon Rowles v. Chase Home Finance, LLC Reply Memo in Support of Petition for TRO

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