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16CV300096
Santa Clara — Civil
Fred W. Schwinn (SBN 225575)
Raeon R. Roulston (SBN 255622)
Matthew C. Salmonsen (SBN 302854)
CONSUMER LAW CENTER, INC.
38 West Santa Clara Street
San Jose, California 95113-1806
Telephone Number: (408) 294-6100
Facsimile Number: (408) 294-6190
Email Address: fred.schwinn@sjconsumerlaw.com
Attorneys for Defendant/Cross-Complainant
MARIA ANTONIA CANUL
Electronically Filed
by Superior Court of CA,
County of Santa Clara,
on 8/24/2022 5:19 PM
Reviewed By: R. Walker
Case #16CV300096
Envelope: 9799754
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
VELOCITY INVESTMENTS, LLC,
Plaintiff,
Vv.
MARIA CANUL,
Defendant.
MARIA ANTONIA CANUL, on behalf of
herself and all others similarly situated,
Cross-Complainant,
Vv.
VELOCITY INVESTMENTS, LLC, a New
Jersey limited liability company; VELOCITY
PORTFOLIO GROUP, INC., a Delaware
corporation; and ROES 2 through 10,
inclusive,
Cross-Defendants.
COMES NOW Defendant/Cross-Complainant, MARIA ANTONIA CANUL, by and through
counsel of Consumer Law Center, Inc., and hereby submits this Reply Memorandum of Points and
Case No. 16CV300096
(Unlimited Civil Case)
Assigned for All Purposes to the
Honorable Patricia M. Lucas (Dept. 3)
REPLY MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF
DEFENDANT/CROSS-COMPLAINANT’S
MOTION FOR CLASS CERTIFICATION
Hearing Date: August 31, 2022
Hearing Time: 1:30 p.m.
Hearing Dept.: 3
191 North First Street
San Jose, California
Hearing Location:
Authorities in Support of Defendant/Cross-Complainant’s Motion for Class Certification.
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REPLY MEMORANDUM OF POINTS AND AUTHORITIES
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I. ARGUMENT
A. THE CLASS IS ASCERTAINABLE BECAUSE THERE IS NO OVERLAP
BETWEEN THIS CLASS AND THOSE IN THE OTHER VELOCITY CASES
A class action case with a single cause of action regarding a botched form debt collection
Complaint is the quintessential case that is ripe for class certification. As expected for such a case, the
putative class herein is easily ascertainable, and numerous. Common issues of fact and law exist and
predominate over issues that affect only individual class members, thus satisfying the commonality
requirement. CANUL’s claim is typical of the claims of the members of the class. Certification of a
class in a case like this should not reasonably be opposed. The only option open to debt buyer
defendants in situations like this is to choose to attack the proposed class representative or her counsel.
Thus, Cross-Defendants, VELOCITY INVESTMENTS, LLC (“VELOCITY”) and VELOCITY
PORTFOLIO GROUP, INC. (“VPGT”), do so here. Cross-Defendants aim to disqualify CANUL’s
counsel and manufacture an alleged conflict because of the existence of similar litigation against them
being prosecuted by CANUL’s counsel. Despite the personal attacks on CANUL’s counsel, Cross-
Defendants’ legal arguments are really just a new spin on same meritless arguments raised in Cross-
Defendants’ ill-fated special motion to strike, and the related motion for discovery — that of Cross-
Defendants’ joint enterprise attempting to evade liability on the basis of a claimed low net worth.
However, as shown below, the class in this case is ascertainable because there is no overlap with the
other matters in which VPGI and VELOCITY are cross-defendants. Moreover, CANUL’s counsel are
adequate. Finally, a class action is a superior method for resolving this litigation.
1. The Subject Velocity Cases
Cross-Defendants’ first argument is that the proposed class herein is not ascertainable because
of the existence of four other pending class action cases in which VELOCITY and VPGI are cross-
defendants, and the consumer is represented by CANUL’s counsel. These matters are:
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+ Velocity Investments, LLC v. Jayawardena, Santa Clara No. 19CV357372 (“Jayawardena’’);
+ Velocity Investments, LLC y. Nguyen, San Joaquin No. STK-CV-UCC-2019-0015406
(“Nguyen”);
+ Velocity Investments, LLC v. Pascual, Santa Clara No. 18CV338986 (“Pascual’);' and
+ Velocity Investments, LLC v. Sipin, Santa Clara No. 20CV370503 (“Sipin”).
Cross-Defendants claim that the class in this case is not ascertainable because it “overlaps” with
the other classes. That assertion is simply false. To support this argument, Cross-Defendants accurately
quote the proposed class definitions in these cases, but do so in a misleading way.
As noted in her moving papers, CANUL seeks certification of a class, defined as follows:
All persons with addresses in California against whom Cross-Defendants filed a
collection Complaint in the form of Exhibit “1” to the First Amended Class Action
Cross-Complaint for Declaratory Relief and Damages herein, in an attempt to collect a
charged-off consumer debt originally owed to WEBBANK, which was sold or resold to
VELOCITY on or after January 1, 2014, during the period October 24, 2018, through
the date of class certification.’
While that wording is similar to those in Jayawardena, Nguyen, Pascual, and Sipin, the
substance of the wording is what matters. Because “in the form of Exhibit ‘1’ to the [Complaint]”
means something completely different across the five different Complaints filed by three separate law
firms with (at least) three distinct alleged charge-off creditors.
For example, in this case, the Complaint was filed by FarMar Law Group, P.C., the alleged
charge-off creditor is LendingClub Corporation, and the document attached to the Complaint that
Cross-Defendants claim shows their compliance with the California Fair Debt Buying Practices Act
(“Debt Buyer Act”) is a purported Truth-in-Lending Act (“TILA”) disclosure.’ In Pascual, the
' Pascual is also pending in this department before the Hon. Patricia M. Lucas, with a similar posture.
? Evidence Offered in Support of Defendant/Cross-Complainant’s Motion for Class Certification,
Exhibit “A” 435.
> See Request for Judicial Notice in Support of Defendant/Cross-Complainant’s Motion for Class
Certification (“RIN”) 1, 6, 7, 8, 9, and Exhibits “1,” “6,” “7,” “8,” and “9.”
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Complaint was also filed by FarMar Law Group, P.C., however the alleged charge-off creditor is
Prosper Funding, LLC, and the document attached to the Complaint that Cross-Defendants claim shows
their compliance with the Debt Buyer Act is a purported TILA disclosure.‘ In Sipin, the Complaint was
filed by Resurgent Legal Group, PC, the alleged charge-off creditor is an investor or investors for
whom LendingClub Corporation acts as servicer, and the document attached to the Complaint that
Cross-Defendants claim shows their compliance with the Debt Buyer Act is a purported “Loan
Summary & Borrower Agreement.”* In Jayawardena, the Complaint was filed by Mandarich Law
Group, LLP, the alleged charge-off creditor is LendingClub Corporation, and the document attached to
the Complaint that Cross-Defendants claim shows their compliance with the Debt Buyer Act is a
purported “Loan Summary & Borrower Agreement.® Finally, in Nguyen, the Complaint was filed by
Mandarich Law Group, LLP, the alleged charge-off creditor is LendingClub Corporation, and the
document attached to the Complaint that Cross-Defendants claim shows their compliance with the Debt
Buyer Act is a purported “Borrower Agreement.” This information is summarized in the table below.
Case Counsel Alleged Charge-off Creditor | 1788.58(b) Document
Canul FarMar Law Group, PC LendingClub Corporation Truth in Lending
Pascual FarMar Law Group, PC Prosper Funding, LLC Truth in Lending
Sipin Resurgent Legal Group, PC |Investor(s) (serviced by Loan Summary &
LendingClub Corporation) Borrower Agreement
Jayawardena |Mandarich Law Group, LLP | LendingClub Corporation Loan Summary &
Borrower Agreement
Nguyen Mandarich Law Group, LLP | LendingClub Corporation Borrower Agreement
As the Court can see from the chart, there is no overlap between this proposed class and the
other four, because neither Pascual, Sipin, Jayawardena, nor Nguyen has the same combination of form
“ See RIN 442, 10, 11, 12, and Exhibits “10,” “11,” and “12.”
5 See RIN 43, and Exhibit “3.”
5 See RIN 44, and Exhibit “4.”
” See RIN 44, and Exhibit “4.”
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collection Complaint, alleged charge-off creditor, and alleged Civil Code § 1788.58(b) document as in
the case at bar. Moreover, despite their claim of overlap, Defendants were able to provide the class size
and a class list in discovery for each of the cases. Finally, the silver bullet to Defendants’ lack of
ascertainability argument based on overlap is this: the class list provided by Cross-Defendants for
purposes of the Belaire-West notice does not contain the names of any of the other 4 consumer
plaintiffs.’ CANUL will make the class list available for the Court’s examination in camera if
requested.
B. THERE IS NO CONFLICT FOR PROPOSED CLASS COUNSEL
Cross-Defendants’ opposition effectively seeks to disqualify proposed Class Counsel, claiming
that representation of multiple classes against the same defendants creates a conflict. As such, the Court
may find opinions from cases discussing attorney disqualification helpful. “Trial courts in civil cases
have the power to order disqualification of counsel when necessary for the furtherance of justice.
Exercise of that power requires a cautious balancing of competing interests. The court must weigh the
combined effect of a party’s right to counsel of choice, an attorney’s interest in representing a client, the
financial burden on a client of replacing disqualified counsel and any tactical abuse underlying a
disqualification proceeding against the fundamental principle that the fair resolution of disputes within
our adversary system requires vigorous representation of parties by independent counsel.” Mills Land
& Water Co. v. Golden W. Ref. Co. (1986) 186 Cal.App.3d 116, 126 (internal citations omitted).
Importantly, “[i]n the realm of class actions, the rules of disqualification cannot be applied so as to
defeat the purpose of the class proceedings. Rather, the circumstances of each case must be evaluated.”
Sharp v. Next Entertainment Inc. (2008) 163 Cal.App.4th 410, 434; see also Lazy Oil Co. v. Witco
Corp. (3d Cir. 1999) 166 F.3d 581, 589-590 (traditional rules of professional conduct cannot be applied
mechanically in the realm of class actions).
® See Supplemental Declaration of Fred W. Schwinn filed herewith at 493-5.
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The cases cited above deal with either individual actions, or a single class case where there were
conflicts between the named plaintiffs, their union, and a law firm which seemingly had attorneys
working on both sides of the matter. CANUL could not find published California authority directly on
point. However, this Court may find instructive opinions from class action cases litigated in federal
district courts.’ In the certification process, the Court should be wary of a Defendant’s disingenuous
attempt to protect the class by disqualifying class counsel. As the Seventh Circuit observed:
[I]t is often the defendant, preferring not to be successfully sued by anyone, who
supposedly undertakes to assist the court in determining whether a putative class should
be certified. When it comes, for instance, to determining whether ‘the representative
parties will adequately protect the interest of the class,’ or the plaintiffs ability to
finance the litigation, ‘it is a bit like permitting the fox, although with a pious
countenance, to take charge of the chicken house.
Eggleston v. Chicago Journeymen Plumbers Local Union No, 130 (7th Cir. 1981) 657 F.2d 890, 895.
Unlike the cases cited by VPGI and VELOCITY, Lou v. Ma Labs., Inc. (N.D.Cal. Jan. 8, 2014,
No. C 12-05409 WHA) 2014 U.S.Dist.LEXIS 2665, and Ortiz v. Fibreboard Corp. (1999) 527 U.S.
815, the cases currently before the Court do not present a “limited fund scenario,” i.e., a situation where
Cross-Defendants might not have the ability to pay judgments in both Canul and Pascual. Such a
situation would require both classes to compete for the same limited pool of funds and which could
create a conflict of interest for CANUL’s counsel, who would be representing both classes. Statutory
damages in each of these cases is limited to a maximum of 1% of each Cross-Defendants’ net worth,
pursuant to California Civil Code § 1788.62(b) — a total of 2% for both cases. Therefore, the Canul and
Pascual classes are not “competing for the same limited funds”; each class seeks its own 1% of Cross-
Defendants’ net worth leaving the remaining 98% for operating capital, and for other classes which
may seek redress for Cross-Defendants’ widespread and generally unchecked violations of California’s
debt collection laws.
° Cross-Defendants’ opposition largely relies on federal district court opinions.
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Other courts that have considered similar arguments by defendants opposing certification have
concluded that representing multiple classes or clients against a single defendant is no barrier to
certification unless there is an actual conflict. In Sandoval v. MI Auto Collisions Ctrs., the Northern
District of California district court reasoned as follows:
According to [Newberg on Class Actions § 3:75 (Sth ed.)], “[iJn general, class counsel
may represent multiple sets of litigants—whether in the same action or in a related
proceeding—-so long as the litigants’ interests are not inherently opposed.” /d. Newberg
notes that concurrent representation may be beneficial in some situations, and that courts
have found counsel inadequate due to conflicts where “the recovery of one group in one
forum inherently conflicts with the recovery of the other.” Jd. Newberg sets forth
examples such as where a limited fund means that the recovery of one claimant will cut
directly into recovery by another, where substantive law permits recovery by only one or
the other set of litigants, where one client is litigating an appeal to a class action
settlement in which another client claimed recovery, and where counsel’s actions have
generated conflicts between class representatives and the class. /d.
Sandoval v. M1 Auto Collisions Ctrs. (N.D.Cal. 2015) 309 F.R.D. 549, 570.
Newberg notes that concurrent representation may be beneficial in some situations, and
that courts have found counsel inadequate due to conflicts where “the recovery of one
group in one forum inherently conflicts with the recovery of the other.” Jd. Newberg sets
forth examples such as where a limited fund means that the recovery of one claimant
will cut directly into recovery by another, where substantive law permits recovery by
only one or the other set of litigants, where one client is litigating an appeal to a class
action settlement in which another client claimed recovery, and where counsel’s actions
have generated conflicts between class representatives and the class. Id.
Sandoval v. Ali (N.D.Cal. 2014) 34 F.Supp.3d 1031, 1047, citing Newberg on Class Actions § 3:75 (5th
ed.). No such circumstance is possible here. Because the legal questions in Canul and Pascual are
nearly identical, there is zero impetus for CANUL’s counsel to settle the two cases for any amount less
than 1% of the net worth of each Cross-Defendant. Moreover, should the matters not settle informally,
any resolution of this matter by this Court (or a reviewing court) should necessarily be the same in both
cases. Thus not only is there no current conflict, any possibility of a future conflict is pure speculation.
Courts have generally held that the mere existence of parallel representation does not create an
insurmountable conflict of interest. See Bell v. Brockett (4th Cir. 2019) 922 F.3d 502; and Jn re Nat'l
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Football League Players Concussion Injury Litig. (3d Cir. 2016) 821 F.3d 410, 429-30 (no conflict of
interest where lawyer represented subclass for future injury claimants and also represented nine
plaintiffs with current symptoms in two separate lawsuits against defendant). “Most courts have held
that class counsel may represent more than one class against the same set of defendants in large part
because of the procedural safeguards in place to protect the proposed class; i.e., the court must approve
any proposed settlement.” Mehl v. Canadian Pacific Railway Ltd. (D.N.D. 2005) 227 F.R.D. 505, 515
(emphasis added), citing Dietrich v. Bauer, (S.D.N.Y. 2000) 192 F.R.D. 119. Further, courts are in
general agreement that “speculative” conflicts resting on “string[s] of suppositions ... do not preclude a
finding that class counsel is adequate.” /n re BearingPoint, Inc. Securities Litigation (E.D.Va. 2006)
232 F.R.D. 534, 541; see also Sheftelman v. Jones, 667 F. Supp. 859, 865 (N.D.Ga. 1987).
That said, some courts have found that “[c]ounsel cannot represent different classes of plaintiffs
with conflicting claims who are seeking recovery from a common pool of assets.” Jn re Cardinal
Health, Inc. ERISA Litig. (S.D.Ohio 2005) 225 F.R.D. 552, 557; see also Kuper v. Quantum Chem.
Corp. (S.D.Ohio 1992) 145 F.R.D. 80, 82 (disqualifying potential conflict existed where counsel sought
to represent two plaintiff classes seeking to recover from a common pool of assets); Jackshaw Pontiac,
Inc. v. Cleveland Press Pub. Co. (N.D.Ohio 1984) 102 F.R.D. 183, 192. In another instance, counsel’s
failure to disclose their involvement in other lawsuits to clients and failure to disclose settlement offers
and negotiations to clients led to a finding that counsel was inadequate for Rule 23 purposes. See Krim
v. pcOrder.com, Inc. (W.D. Tex. 2002) 210 F.R.D. 581, 589-91.
Krim was discussed by the Eastern District of Texas in Verde v. Stoneridge, Inc. (E.D.Tex. Nov.
7, 2016, No. 6:14-CV-225) 2016 U.S.Dist.LEXIS 187212. The reasoning therein is useful here:
Stoneridge argues that a conflict of interest exists because Hossley & Embry is involved
in multiple lawsuits against the same defendants. Doc. No. 192 at 22 (citing Krim v.
pcOrder.com, Inc., 210 F.R.D. 581, 589 (W.D. Tex. 2002)).
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The Court in Krim analyzed extensively the reasons why counsel’s representation in
multiple cases could lead to conflicts of interest. 210 F.R.D. at 589-91. In concluding
that class counsel’s conflicts of interest rendered its representation inadequate, the Court
considered that counsel was involved in multiple class actions against the same
defendants in different jurisdictions, no class had been certified in any of the cases, and
counsel did not disclose these other cases to the proposed class representatives. Krim,
210 F.R.D. at 590.
While this initially seems similar to the instant case, there are key differences that
distinguish Krim. The Court in Krim noted that one class representative was a member in
multiple class actions which could lead to conflicting advice from counsel. 210 F.R.D. at
590. Although a class has not been certified in the pending Oklahoma action, that
proposed class specifically excludes any individual who is a member of the class
certified in the instant case. Doc. No. 201 at 34. Thus, there is no concern that a member
of the class in this case could also be a member of the class in the Oklahoma case. The
majority of the concerns noted by the Court in Krim, arise from the fact that the different
classes could have potential overlap. In this case, Verde has explicitly sought to ensure
that there is no overlap between potential classes and, to the extent that there may be, has
offered to modify the class definition to confirm that there is no overlap. Doc. No. 201 at
34. Thus, Verde argues that any potential conflicts of interests with regard to class
counsel can be eliminated. Defendants have not shown that there are any conflicting
interests between the proposed class in the Oklahoma case and the proposed class in the
instant case. “In general, class counsel may represent multiple sets of litigants—whether
in the same action or in a related proceeding—so long as the litigants’ interests are not
inherently opposed.” Newberg on Class Actions § 3:75 (Sth ed.); see also Sandoval v.
MI Auto Collisions Centers, 309 F.R.D. 549, 570 (N.D. Cal. 2015).
Verde, supra, 2016 U.S.Dist.LEXIS 187212, at *18-20.
As noted above, there is no overlap between this class and any of the other four. Moreover,
statutory damages in each of these cases is limited to a maximum of 1% of Cross-Defendants’ net
worth. That is, recovery in consumer cases like this is not in the form of a “pot plan,” as other types of
class actions tend to be. Therefore, the Canul and Pascual classes are not “competing for the same
limited funds.” It seems fairly uncontroversial that even if each of the classes recovers the maximum
possible amount, that would only add up to 5% of Cross-Defendants net worth, something Cross-
Defendants could easily satisfy. See Keilholtz v. Lennox Hearth Prods. (N.D.Cal. 2010) 268 F.R.D.
330, 338 (finding no evidence that the plaintiffs in multiple classes had antagonistic interests and that
defendants appeared to be able to satisfy a judgment in both cases); and Williams v. Cent. Transp. Intl,
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Inc. (E.D.Mo. Nov. 7, 2014, No. 4:13-CV-2009 CEJ) 2014 U.S.Dist.LEXIS 158565 (explaining that the
principle articulated in Ma Labs “is narrowly premised on the goal of ‘eliminat[ing] conflicting
interests of counsel’ in circumstances in which a class or different classes would involve diverse groups
with conflicting litigation objectives”).
Ultimately it seems clear that on the facts of this case, Cross-Defendants’ objection to proposed
Class Counsel is a form of tactical abuse. Notably, “the potential for conflicting judgments is not
resolved by disqualifying Plaintiffs’ counsel.” Sandoval v. M1 Auto Collisions Ctrs., supra, 309 F.R.D.
at 570. The reality is that given the dearth of consumer protection attorneys willing to prosecute novel
class actions like this one, requiring that the classes obtain separate counsel may very well result in no
recovery for any of the classes. Additionally, the Court should not condone Cross-Defendants’
complaints about litigation costs, when Cross-Defendants chose to adopt a stalwart litigation strategy.
The statutory cap on damages was always known by Cross-Defendants and their counsel. Cross-
Defendants and their insurer could have decided to attempt to settle the matter quickly rather than
multiply the litigation. None of Cross-Defendants’ arguments preclude certification.
Notwithstanding the above, to the extent the Court believes a cautious approach to be the most
prudent, the Court could require the class definition to specifically preclude a class member from
participation in more than one class and/or order that the notice to class members disclose the alleged
“conflict.” See Shefielman, supra, 667 F.Supp. at 865.
C. A CLASS ACTION IS SUPERIOR TO INDIVIDUAL LAWSUITS
None of Cross-Defendants’ arguments herein shows that a class action is not a superior method
of handling the claims in this lawsuit. CANUL has set forth her superiority argument at length in
Section V(E) of her moving papers and will not reproduce them in full here.
This case involves the filing and serving of nearly identical form collection Complaints to 1,845
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California consumers, each of which violates the Debt Buyer Act in the same identical ways. Each
victim of Cross-Defendants’ unlawful collection practices could recover a maximum of $1,000 in an
individual case. See Civil Code § 1788.62(a)(2). As a class, they are entitled to statutory damages not to
exceed the lesser of $500,000, or 1 percent of the net worth of each Cross-Defendant. See Civil Code §
1788.62(b). Moreover, most of the class members who received the offending form collection
Complaint have no knowledge that their rights are being violated by illegal collection practices. By
pursuing this case as a class action, CANUL is essentially informing the individual members of the
class that their rights have been violated and that they may be entitled to recover. If not for this class
action, Cross-Defendants would be able to retain the benefits of abusive debt collection practices.
The fact that the members of the class could potentially receive more in an individual case is
simply a necessary by-product of the cap on statutory damages, and not a bar to certification.
Additionally, class certification also benefits Cross-Defendants as opposed to 1,845 individual lawsuits
each seeking $1,000 in statutory damages, plus attorneys’ fees and costs attorney fees. If each of the
1,845 members of the class knew their rights had been violated and decided to take their case to court
individually, the courts would be inundated with cases. Judicial economy alone is a persuasive reason to
certify this class action.
II. CONCLUSION
All of the requirements for class certification have been met. Thus, CANUL requests that the
Court certify this action to proceed as a class action, appoint CANUL as class representative, and
appoint CANUL’s counsel at Consumer Law Center, Inc., as class counsel.
00000
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REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Dated: August 24, 2022
CONSUMER LAW CENTER, INC.
By:
O Fred W. Schwinn (SBN 225575)
Raeon R. Roulston (SBN 255622)
CO Matthew C. Salmonsen (SBN 302854)
CONSUMER LAW CENTER, INC.
38 West Santa Clara Street
San Jose, California 95113-1806
Telephone Number: (408) 294-6100
Facsimile Number: (408) 294-6190
Email Address: fred.schwinn@sjconsumerlaw.com
Attorneys for Defendant/Cross-Complainant
MARIA ANTONIA CANUL
«lis
REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096
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16CV300096 Santa Clara — Civil Fred W. Schwinn (SBN 225575) Raeon R. Roulston (SBN 255622) Matthew C. Salmonsen (SBN 302854) CONSUMER LAW CENTER, INC. 38 West Santa Clara Street San Jose, California 95113-1806 Telephone Number: (408) 294-6100 Facsimile Number: (408) 294-6190 Email Address: fred.schwinn@sjconsumerlaw.com Attorneys for Defendant/Cross-Complainant MARIA ANTONIA CANUL Electronically Filed by Superior Court of CA, County of Santa Clara, on 8/24/2022 5:19 PM Reviewed By: R. Walker Case #16CV300096 Envelope: 9799754 SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CLARA VELOCITY INVESTMENTS, LLC, Plaintiff, Vv. MARIA CANUL, Defendant. MARIA ANTONIA CANUL, on behalf of herself and all others similarly situated, Cross-Complainant, Vv. VELOCITY INVESTMENTS, LLC, a New Jersey limited liability company; VELOCITY PORTFOLIO GROUP, INC., a Delaware corporation; and ROES 2 through 10, inclusive, Cross-Defendants. COMES NOW Defendant/Cross-Complainant, MARIA ANTONIA CANUL, by and through counsel of Consumer Law Center, Inc., and hereby submits this Reply Memorandum of Points and Case No. 16CV300096 (Unlimited Civil Case) Assigned for All Purposes to the Honorable Patricia M. Lucas (Dept. 3) REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT/CROSS-COMPLAINANT’S MOTION FOR CLASS CERTIFICATION Hearing Date: August 31, 2022 Hearing Time: 1:30 p.m. Hearing Dept.: 3 191 North First Street San Jose, California Hearing Location: Authorities in Support of Defendant/Cross-Complainant’s Motion for Class Certification. M11 M1 REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Coe IND 10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 I. ARGUMENT A. THE CLASS IS ASCERTAINABLE BECAUSE THERE IS NO OVERLAP BETWEEN THIS CLASS AND THOSE IN THE OTHER VELOCITY CASES A class action case with a single cause of action regarding a botched form debt collection Complaint is the quintessential case that is ripe for class certification. As expected for such a case, the putative class herein is easily ascertainable, and numerous. Common issues of fact and law exist and predominate over issues that affect only individual class members, thus satisfying the commonality requirement. CANUL’s claim is typical of the claims of the members of the class. Certification of a class in a case like this should not reasonably be opposed. The only option open to debt buyer defendants in situations like this is to choose to attack the proposed class representative or her counsel. Thus, Cross-Defendants, VELOCITY INVESTMENTS, LLC (“VELOCITY”) and VELOCITY PORTFOLIO GROUP, INC. (“VPGT”), do so here. Cross-Defendants aim to disqualify CANUL’s counsel and manufacture an alleged conflict because of the existence of similar litigation against them being prosecuted by CANUL’s counsel. Despite the personal attacks on CANUL’s counsel, Cross- Defendants’ legal arguments are really just a new spin on same meritless arguments raised in Cross- Defendants’ ill-fated special motion to strike, and the related motion for discovery — that of Cross- Defendants’ joint enterprise attempting to evade liability on the basis of a claimed low net worth. However, as shown below, the class in this case is ascertainable because there is no overlap with the other matters in which VPGI and VELOCITY are cross-defendants. Moreover, CANUL’s counsel are adequate. Finally, a class action is a superior method for resolving this litigation. 1. The Subject Velocity Cases Cross-Defendants’ first argument is that the proposed class herein is not ascertainable because of the existence of four other pending class action cases in which VELOCITY and VPGI are cross- defendants, and the consumer is represented by CANUL’s counsel. These matters are: -1- REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Coe IND 10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 + Velocity Investments, LLC v. Jayawardena, Santa Clara No. 19CV357372 (“Jayawardena’’); + Velocity Investments, LLC y. Nguyen, San Joaquin No. STK-CV-UCC-2019-0015406 (“Nguyen”); + Velocity Investments, LLC v. Pascual, Santa Clara No. 18CV338986 (“Pascual’);' and + Velocity Investments, LLC v. Sipin, Santa Clara No. 20CV370503 (“Sipin”). Cross-Defendants claim that the class in this case is not ascertainable because it “overlaps” with the other classes. That assertion is simply false. To support this argument, Cross-Defendants accurately quote the proposed class definitions in these cases, but do so in a misleading way. As noted in her moving papers, CANUL seeks certification of a class, defined as follows: All persons with addresses in California against whom Cross-Defendants filed a collection Complaint in the form of Exhibit “1” to the First Amended Class Action Cross-Complaint for Declaratory Relief and Damages herein, in an attempt to collect a charged-off consumer debt originally owed to WEBBANK, which was sold or resold to VELOCITY on or after January 1, 2014, during the period October 24, 2018, through the date of class certification.’ While that wording is similar to those in Jayawardena, Nguyen, Pascual, and Sipin, the substance of the wording is what matters. Because “in the form of Exhibit ‘1’ to the [Complaint]” means something completely different across the five different Complaints filed by three separate law firms with (at least) three distinct alleged charge-off creditors. For example, in this case, the Complaint was filed by FarMar Law Group, P.C., the alleged charge-off creditor is LendingClub Corporation, and the document attached to the Complaint that Cross-Defendants claim shows their compliance with the California Fair Debt Buying Practices Act (“Debt Buyer Act”) is a purported Truth-in-Lending Act (“TILA”) disclosure.’ In Pascual, the ' Pascual is also pending in this department before the Hon. Patricia M. Lucas, with a similar posture. ? Evidence Offered in Support of Defendant/Cross-Complainant’s Motion for Class Certification, Exhibit “A” 435. > See Request for Judicial Notice in Support of Defendant/Cross-Complainant’s Motion for Class Certification (“RIN”) 1, 6, 7, 8, 9, and Exhibits “1,” “6,” “7,” “8,” and “9.” -2- REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Coe IND 10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 Complaint was also filed by FarMar Law Group, P.C., however the alleged charge-off creditor is Prosper Funding, LLC, and the document attached to the Complaint that Cross-Defendants claim shows their compliance with the Debt Buyer Act is a purported TILA disclosure.‘ In Sipin, the Complaint was filed by Resurgent Legal Group, PC, the alleged charge-off creditor is an investor or investors for whom LendingClub Corporation acts as servicer, and the document attached to the Complaint that Cross-Defendants claim shows their compliance with the Debt Buyer Act is a purported “Loan Summary & Borrower Agreement.”* In Jayawardena, the Complaint was filed by Mandarich Law Group, LLP, the alleged charge-off creditor is LendingClub Corporation, and the document attached to the Complaint that Cross-Defendants claim shows their compliance with the Debt Buyer Act is a purported “Loan Summary & Borrower Agreement.® Finally, in Nguyen, the Complaint was filed by Mandarich Law Group, LLP, the alleged charge-off creditor is LendingClub Corporation, and the document attached to the Complaint that Cross-Defendants claim shows their compliance with the Debt Buyer Act is a purported “Borrower Agreement.” This information is summarized in the table below. Case Counsel Alleged Charge-off Creditor | 1788.58(b) Document Canul FarMar Law Group, PC LendingClub Corporation Truth in Lending Pascual FarMar Law Group, PC Prosper Funding, LLC Truth in Lending Sipin Resurgent Legal Group, PC |Investor(s) (serviced by Loan Summary & LendingClub Corporation) Borrower Agreement Jayawardena |Mandarich Law Group, LLP | LendingClub Corporation Loan Summary & Borrower Agreement Nguyen Mandarich Law Group, LLP | LendingClub Corporation Borrower Agreement As the Court can see from the chart, there is no overlap between this proposed class and the other four, because neither Pascual, Sipin, Jayawardena, nor Nguyen has the same combination of form “ See RIN 442, 10, 11, 12, and Exhibits “10,” “11,” and “12.” 5 See RIN 43, and Exhibit “3.” 5 See RIN 44, and Exhibit “4.” ” See RIN 44, and Exhibit “4.” -3- REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Coe IND 10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 collection Complaint, alleged charge-off creditor, and alleged Civil Code § 1788.58(b) document as in the case at bar. Moreover, despite their claim of overlap, Defendants were able to provide the class size and a class list in discovery for each of the cases. Finally, the silver bullet to Defendants’ lack of ascertainability argument based on overlap is this: the class list provided by Cross-Defendants for purposes of the Belaire-West notice does not contain the names of any of the other 4 consumer plaintiffs.’ CANUL will make the class list available for the Court’s examination in camera if requested. B. THERE IS NO CONFLICT FOR PROPOSED CLASS COUNSEL Cross-Defendants’ opposition effectively seeks to disqualify proposed Class Counsel, claiming that representation of multiple classes against the same defendants creates a conflict. As such, the Court may find opinions from cases discussing attorney disqualification helpful. “Trial courts in civil cases have the power to order disqualification of counsel when necessary for the furtherance of justice. Exercise of that power requires a cautious balancing of competing interests. The court must weigh the combined effect of a party’s right to counsel of choice, an attorney’s interest in representing a client, the financial burden on a client of replacing disqualified counsel and any tactical abuse underlying a disqualification proceeding against the fundamental principle that the fair resolution of disputes within our adversary system requires vigorous representation of parties by independent counsel.” Mills Land & Water Co. v. Golden W. Ref. Co. (1986) 186 Cal.App.3d 116, 126 (internal citations omitted). Importantly, “[i]n the realm of class actions, the rules of disqualification cannot be applied so as to defeat the purpose of the class proceedings. Rather, the circumstances of each case must be evaluated.” Sharp v. Next Entertainment Inc. (2008) 163 Cal.App.4th 410, 434; see also Lazy Oil Co. v. Witco Corp. (3d Cir. 1999) 166 F.3d 581, 589-590 (traditional rules of professional conduct cannot be applied mechanically in the realm of class actions). ® See Supplemental Declaration of Fred W. Schwinn filed herewith at 493-5. -4- REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Coe IND 10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 The cases cited above deal with either individual actions, or a single class case where there were conflicts between the named plaintiffs, their union, and a law firm which seemingly had attorneys working on both sides of the matter. CANUL could not find published California authority directly on point. However, this Court may find instructive opinions from class action cases litigated in federal district courts.’ In the certification process, the Court should be wary of a Defendant’s disingenuous attempt to protect the class by disqualifying class counsel. As the Seventh Circuit observed: [I]t is often the defendant, preferring not to be successfully sued by anyone, who supposedly undertakes to assist the court in determining whether a putative class should be certified. When it comes, for instance, to determining whether ‘the representative parties will adequately protect the interest of the class,’ or the plaintiffs ability to finance the litigation, ‘it is a bit like permitting the fox, although with a pious countenance, to take charge of the chicken house. Eggleston v. Chicago Journeymen Plumbers Local Union No, 130 (7th Cir. 1981) 657 F.2d 890, 895. Unlike the cases cited by VPGI and VELOCITY, Lou v. Ma Labs., Inc. (N.D.Cal. Jan. 8, 2014, No. C 12-05409 WHA) 2014 U.S.Dist.LEXIS 2665, and Ortiz v. Fibreboard Corp. (1999) 527 U.S. 815, the cases currently before the Court do not present a “limited fund scenario,” i.e., a situation where Cross-Defendants might not have the ability to pay judgments in both Canul and Pascual. Such a situation would require both classes to compete for the same limited pool of funds and which could create a conflict of interest for CANUL’s counsel, who would be representing both classes. Statutory damages in each of these cases is limited to a maximum of 1% of each Cross-Defendants’ net worth, pursuant to California Civil Code § 1788.62(b) — a total of 2% for both cases. Therefore, the Canul and Pascual classes are not “competing for the same limited funds”; each class seeks its own 1% of Cross- Defendants’ net worth leaving the remaining 98% for operating capital, and for other classes which may seek redress for Cross-Defendants’ widespread and generally unchecked violations of California’s debt collection laws. ° Cross-Defendants’ opposition largely relies on federal district court opinions. -5- REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Coe IND 10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 Other courts that have considered similar arguments by defendants opposing certification have concluded that representing multiple classes or clients against a single defendant is no barrier to certification unless there is an actual conflict. In Sandoval v. MI Auto Collisions Ctrs., the Northern District of California district court reasoned as follows: According to [Newberg on Class Actions § 3:75 (Sth ed.)], “[iJn general, class counsel may represent multiple sets of litigants—whether in the same action or in a related proceeding—-so long as the litigants’ interests are not inherently opposed.” /d. Newberg notes that concurrent representation may be beneficial in some situations, and that courts have found counsel inadequate due to conflicts where “the recovery of one group in one forum inherently conflicts with the recovery of the other.” Jd. Newberg sets forth examples such as where a limited fund means that the recovery of one claimant will cut directly into recovery by another, where substantive law permits recovery by only one or the other set of litigants, where one client is litigating an appeal to a class action settlement in which another client claimed recovery, and where counsel’s actions have generated conflicts between class representatives and the class. /d. Sandoval v. M1 Auto Collisions Ctrs. (N.D.Cal. 2015) 309 F.R.D. 549, 570. Newberg notes that concurrent representation may be beneficial in some situations, and that courts have found counsel inadequate due to conflicts where “the recovery of one group in one forum inherently conflicts with the recovery of the other.” Jd. Newberg sets forth examples such as where a limited fund means that the recovery of one claimant will cut directly into recovery by another, where substantive law permits recovery by only one or the other set of litigants, where one client is litigating an appeal to a class action settlement in which another client claimed recovery, and where counsel’s actions have generated conflicts between class representatives and the class. Id. Sandoval v. Ali (N.D.Cal. 2014) 34 F.Supp.3d 1031, 1047, citing Newberg on Class Actions § 3:75 (5th ed.). No such circumstance is possible here. Because the legal questions in Canul and Pascual are nearly identical, there is zero impetus for CANUL’s counsel to settle the two cases for any amount less than 1% of the net worth of each Cross-Defendant. Moreover, should the matters not settle informally, any resolution of this matter by this Court (or a reviewing court) should necessarily be the same in both cases. Thus not only is there no current conflict, any possibility of a future conflict is pure speculation. Courts have generally held that the mere existence of parallel representation does not create an insurmountable conflict of interest. See Bell v. Brockett (4th Cir. 2019) 922 F.3d 502; and Jn re Nat'l -6- REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Coe IND 10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 Football League Players Concussion Injury Litig. (3d Cir. 2016) 821 F.3d 410, 429-30 (no conflict of interest where lawyer represented subclass for future injury claimants and also represented nine plaintiffs with current symptoms in two separate lawsuits against defendant). “Most courts have held that class counsel may represent more than one class against the same set of defendants in large part because of the procedural safeguards in place to protect the proposed class; i.e., the court must approve any proposed settlement.” Mehl v. Canadian Pacific Railway Ltd. (D.N.D. 2005) 227 F.R.D. 505, 515 (emphasis added), citing Dietrich v. Bauer, (S.D.N.Y. 2000) 192 F.R.D. 119. Further, courts are in general agreement that “speculative” conflicts resting on “string[s] of suppositions ... do not preclude a finding that class counsel is adequate.” /n re BearingPoint, Inc. Securities Litigation (E.D.Va. 2006) 232 F.R.D. 534, 541; see also Sheftelman v. Jones, 667 F. Supp. 859, 865 (N.D.Ga. 1987). That said, some courts have found that “[c]ounsel cannot represent different classes of plaintiffs with conflicting claims who are seeking recovery from a common pool of assets.” Jn re Cardinal Health, Inc. ERISA Litig. (S.D.Ohio 2005) 225 F.R.D. 552, 557; see also Kuper v. Quantum Chem. Corp. (S.D.Ohio 1992) 145 F.R.D. 80, 82 (disqualifying potential conflict existed where counsel sought to represent two plaintiff classes seeking to recover from a common pool of assets); Jackshaw Pontiac, Inc. v. Cleveland Press Pub. Co. (N.D.Ohio 1984) 102 F.R.D. 183, 192. In another instance, counsel’s failure to disclose their involvement in other lawsuits to clients and failure to disclose settlement offers and negotiations to clients led to a finding that counsel was inadequate for Rule 23 purposes. See Krim v. pcOrder.com, Inc. (W.D. Tex. 2002) 210 F.R.D. 581, 589-91. Krim was discussed by the Eastern District of Texas in Verde v. Stoneridge, Inc. (E.D.Tex. Nov. 7, 2016, No. 6:14-CV-225) 2016 U.S.Dist.LEXIS 187212. The reasoning therein is useful here: Stoneridge argues that a conflict of interest exists because Hossley & Embry is involved in multiple lawsuits against the same defendants. Doc. No. 192 at 22 (citing Krim v. pcOrder.com, Inc., 210 F.R.D. 581, 589 (W.D. Tex. 2002)). -7- REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Coe IND 10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 The Court in Krim analyzed extensively the reasons why counsel’s representation in multiple cases could lead to conflicts of interest. 210 F.R.D. at 589-91. In concluding that class counsel’s conflicts of interest rendered its representation inadequate, the Court considered that counsel was involved in multiple class actions against the same defendants in different jurisdictions, no class had been certified in any of the cases, and counsel did not disclose these other cases to the proposed class representatives. Krim, 210 F.R.D. at 590. While this initially seems similar to the instant case, there are key differences that distinguish Krim. The Court in Krim noted that one class representative was a member in multiple class actions which could lead to conflicting advice from counsel. 210 F.R.D. at 590. Although a class has not been certified in the pending Oklahoma action, that proposed class specifically excludes any individual who is a member of the class certified in the instant case. Doc. No. 201 at 34. Thus, there is no concern that a member of the class in this case could also be a member of the class in the Oklahoma case. The majority of the concerns noted by the Court in Krim, arise from the fact that the different classes could have potential overlap. In this case, Verde has explicitly sought to ensure that there is no overlap between potential classes and, to the extent that there may be, has offered to modify the class definition to confirm that there is no overlap. Doc. No. 201 at 34. Thus, Verde argues that any potential conflicts of interests with regard to class counsel can be eliminated. Defendants have not shown that there are any conflicting interests between the proposed class in the Oklahoma case and the proposed class in the instant case. “In general, class counsel may represent multiple sets of litigants—whether in the same action or in a related proceeding—so long as the litigants’ interests are not inherently opposed.” Newberg on Class Actions § 3:75 (Sth ed.); see also Sandoval v. MI Auto Collisions Centers, 309 F.R.D. 549, 570 (N.D. Cal. 2015). Verde, supra, 2016 U.S.Dist.LEXIS 187212, at *18-20. As noted above, there is no overlap between this class and any of the other four. Moreover, statutory damages in each of these cases is limited to a maximum of 1% of Cross-Defendants’ net worth. That is, recovery in consumer cases like this is not in the form of a “pot plan,” as other types of class actions tend to be. Therefore, the Canul and Pascual classes are not “competing for the same limited funds.” It seems fairly uncontroversial that even if each of the classes recovers the maximum possible amount, that would only add up to 5% of Cross-Defendants net worth, something Cross- Defendants could easily satisfy. See Keilholtz v. Lennox Hearth Prods. (N.D.Cal. 2010) 268 F.R.D. 330, 338 (finding no evidence that the plaintiffs in multiple classes had antagonistic interests and that defendants appeared to be able to satisfy a judgment in both cases); and Williams v. Cent. Transp. Intl, ~8- REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Coe IND 10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 Inc. (E.D.Mo. Nov. 7, 2014, No. 4:13-CV-2009 CEJ) 2014 U.S.Dist.LEXIS 158565 (explaining that the principle articulated in Ma Labs “is narrowly premised on the goal of ‘eliminat[ing] conflicting interests of counsel’ in circumstances in which a class or different classes would involve diverse groups with conflicting litigation objectives”). Ultimately it seems clear that on the facts of this case, Cross-Defendants’ objection to proposed Class Counsel is a form of tactical abuse. Notably, “the potential for conflicting judgments is not resolved by disqualifying Plaintiffs’ counsel.” Sandoval v. M1 Auto Collisions Ctrs., supra, 309 F.R.D. at 570. The reality is that given the dearth of consumer protection attorneys willing to prosecute novel class actions like this one, requiring that the classes obtain separate counsel may very well result in no recovery for any of the classes. Additionally, the Court should not condone Cross-Defendants’ complaints about litigation costs, when Cross-Defendants chose to adopt a stalwart litigation strategy. The statutory cap on damages was always known by Cross-Defendants and their counsel. Cross- Defendants and their insurer could have decided to attempt to settle the matter quickly rather than multiply the litigation. None of Cross-Defendants’ arguments preclude certification. Notwithstanding the above, to the extent the Court believes a cautious approach to be the most prudent, the Court could require the class definition to specifically preclude a class member from participation in more than one class and/or order that the notice to class members disclose the alleged “conflict.” See Shefielman, supra, 667 F.Supp. at 865. C. A CLASS ACTION IS SUPERIOR TO INDIVIDUAL LAWSUITS None of Cross-Defendants’ arguments herein shows that a class action is not a superior method of handling the claims in this lawsuit. CANUL has set forth her superiority argument at length in Section V(E) of her moving papers and will not reproduce them in full here. This case involves the filing and serving of nearly identical form collection Complaints to 1,845 -9- REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Coe IND 10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 California consumers, each of which violates the Debt Buyer Act in the same identical ways. Each victim of Cross-Defendants’ unlawful collection practices could recover a maximum of $1,000 in an individual case. See Civil Code § 1788.62(a)(2). As a class, they are entitled to statutory damages not to exceed the lesser of $500,000, or 1 percent of the net worth of each Cross-Defendant. See Civil Code § 1788.62(b). Moreover, most of the class members who received the offending form collection Complaint have no knowledge that their rights are being violated by illegal collection practices. By pursuing this case as a class action, CANUL is essentially informing the individual members of the class that their rights have been violated and that they may be entitled to recover. If not for this class action, Cross-Defendants would be able to retain the benefits of abusive debt collection practices. The fact that the members of the class could potentially receive more in an individual case is simply a necessary by-product of the cap on statutory damages, and not a bar to certification. Additionally, class certification also benefits Cross-Defendants as opposed to 1,845 individual lawsuits each seeking $1,000 in statutory damages, plus attorneys’ fees and costs attorney fees. If each of the 1,845 members of the class knew their rights had been violated and decided to take their case to court individually, the courts would be inundated with cases. Judicial economy alone is a persuasive reason to certify this class action. II. CONCLUSION All of the requirements for class certification have been met. Thus, CANUL requests that the Court certify this action to proceed as a class action, appoint CANUL as class representative, and appoint CANUL’s counsel at Consumer Law Center, Inc., as class counsel. 00000 -10- REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096Dated: August 24, 2022 CONSUMER LAW CENTER, INC. By: O Fred W. Schwinn (SBN 225575) Raeon R. Roulston (SBN 255622) CO Matthew C. Salmonsen (SBN 302854) CONSUMER LAW CENTER, INC. 38 West Santa Clara Street San Jose, California 95113-1806 Telephone Number: (408) 294-6100 Facsimile Number: (408) 294-6190 Email Address: fred.schwinn@sjconsumerlaw.com Attorneys for Defendant/Cross-Complainant MARIA ANTONIA CANUL «lis REPLY MEMORANDUM OF POINTS AND AUTHORITIES Case No. 16CV300096