Matter of Wilborn, No. 09-20415 (5th Cir., June 18, 2010)

Holdings:

1) Bankruptcy court has jurisdiction pursuant to 28 U.S.C. sections 157(a) and 1334(b) to certify classes of debtors under Fed. R. Bankr. P. 7023.

2) Where class of chapter 13 debtor/plaintiffs did not satisfy the requirements of Rule 23(b)(2) and (3) in that their claims would require individual factual resolutions and determinations of damages, certification of class was improper.

Facts: The Bankruptcy Court for the Southern District of Texas certified a class of chapter 13 debtor/plaintiffs who filed Adversary Proceedings against Wells Fargo Bank, N.A., alleging that it charged and collected fees and costs during the pendency of the debtors’ bankruptcy proceedings which were both unreasonable and unapproved. The class of debtors alleged that Wells Fargo had violated section 506(b) of the Bankruptcy Code, which permits creditors to recover reasonable costs incurred in connection with the bankruptcy and which are allowed under the underlying contract, and Federal Rules of Bankruptcy Procedure, Rule 2016, which provides that a creditor must apply to the court to receive compensation from the estate. The Bankruptcy Court certified the question of class certification to the Fifth Circuit Court of Appeals.

Discussion: As an initial matter, the Fifth Circuit found that bankruptcy courts have jurisdiction to certify classes of debtors even though some members of the class may have cases before other bankruptcy judges in the same district. The court found jurisdiction was settled in the bankruptcy court for a particular district rather than in the individual judges within that district. “The placement of jurisdiction in the bankruptcy court here was proper, and based upon the general order of reference, the scope of the bankruptcy court’s jurisdiction was unrestricted.”

The court turned to the issue of whether the debtor class met the requirements for class certification set forth in Rule 23(a) and (b) of the Federal Rules of Civil Procedure. Although the court found that the four requirements of Rule 23(a)—numerosity, commonality, typicality, and adequacy of representation—were met, it held that the class in this case did not satisfy the requirement of Rule 23(b)(2) and (3). With respect to Rule 23(b)(2), the court found that individual monetary relief would not be incidental to a general order of injunctive or declaratory relief and that each debtor would have to have his or her damages determined on an individual basis. Additionally, under Rule 23(b)(3) the common issues did not predominate over individual issues because “The circumstances surrounding the charging of fees required an individual assessment of the claims.”