The opinion of the court was delivered by: Stanley S. Brotman, United States District Judge
OPINION ON PLAINTIFFS' MOTION FOR CLASS CERTIFICATION
OPINION ON CROSS MOTIONS FOR SUMMARY JUDGMENT
The purchase of a home is likely to be the most significant financial investment a person makes. Although buying a home is a rewarding experience, it at times can be confusing and daunting, especially for first-time home buyers. Plaintiff Tracey Szczubelek, a first-time home buyer, filed this action on behalf of herself and others similarly situated, against Defendants Cendant Mortgage Corporation ("Cendant") and Speedy Title & Appraisal Review Services Corporation ("STARS") (collectively "Defendants") challenging the allegedly unlawful practice by Cendant of combining the actual cost of a property appraisal with the administrative costs associated with the appraisal and charging only one fee.
Plaintiffs ask the Court to certify a punitive class pursuant to Fed.R.Civ.P. 23 based on Defendants' alleged violation of the New Jersey Consumer Fraud Act ("NJCFA"). Plaintiffs also make a partial Motion for Summary Judgment on the issue of the Defendants' liability under the NJCFA. Defendants oppose Plaintiffs' motions and move for summary judgment on all counts of Plaintiffs' Amended Complaint pursuant to Fed.R.Civ.P. 56(c).
I. FACT BACKGROUND AND PROCEDURAL HISTORY
1. Defendants Cendant and STARS
Cendant is a New Jersey corporation with its principal place of business and corporate headquarters in Mount Laurel, New Jersey. (Defs.' Statement of Facts ¶ 1.) STARS is a Maryland corporation with its principal place of business in Moorestown, New Jersey.*fn1 (STARS' Answer ¶ 3; Defs.' Statement of Facts ¶ 2.) STARS offers customers "appraisal management services," which entails the following: providing appraiser quality insurance, ordering the appraisals, processing appraisals, and appraisal underwriting. (Defs.' Statement of Facts ¶¶ 2-3.) STARS employees do not conduct the actual property appraisals, that is, the inspection of the property, taking photographs, and researching comparable properties. (Pls.' Class Mem. at 8.) Rather, STARS contacts local appraisers to do this work, acting as a "middle man" between the mortgage company and the actual appraiser. (Defs.' Statement of Facts ¶ 5.)
STARS and Cendant have a Settlement Services Agreement (the "Agreement"), where STARS provides Cendant "appraisal management services" for Cendant's customers at Cendant's request. (Id. ¶ 3.) According to Defendants, "appraisal management services" entails locating a qualified licensed appraiser, negotiating a fee for the appraisal services, arranging a time for appraiser to visit the property to be appraised, paying the appraiser, and making sure the appraisal is complete, supports the loan the borrower is seeking, and is submitted in a timely fashion. (Decl. of Rebecca Mairone ¶¶ 3-4, 6-8; Defs.' Opp'n Mem. to Class Cert. at 24.) Plaintiffs disagree with Defendants' characterization of STARS "appraisal management services" and argue that STARS employees merely duplicate the work of the appraiser and Cendant loan officers. (Pls.' Statement of Facts that Preclude Entry of Summ. J. on Behalf of Defs. ¶ 4.)
Plaintiff Tracey Szczubelk
In December 1999, Tracey Szczubelek ("Plaintiff" or "Szczubelek") obtained a mortgage loan from Cendant to purchase a home located at 690 Greenbrook Road, Plainfield, New Jersey (the "Greenbrook Road property"). (Am. Compl. ¶ 24.) A condition of the mortgage loan was that Szczubelek obtain an appraisal on the Greenbrook Road property.
Approximately three months before she closed on the property, Cendant provided Szczubelek a Good Faith Estimate of Settlement Costs which indicated, inter alia, that the appraisal fee for her loan would cost approximately $275. (Pls.' Ex. C at D00051-D00053.) A short time after applying for a mortgage, Szczubelek was mailed several documents from Cendant detailing the conditions of the loan and the appraisal process. (Pls.' Class Mem. at 3.) One such document contained a "Third Party Services Providers" section which stated:
We will be selecting certain suppliers to provide
settlement services to you. These suppliers are
referred to as "settlement service providers." We will
require the use of certain settlement service providers.
Right now, we do not know who will be selected to
perform these services, but it will be an approved and
accepted settlement service provider that we have
previously used with our customers. . . . Your HUD-1
Settlement Statement at closing will disclose the
service provider who actually provided the services and
the actual costs paid by you.
(Pls.' Ex. C at D00054.)
Another document, the "Affiliated Business Arrangement Disclosure Statement," explained business relationships Cendant maintained with third parties, including STARS. The disclosure contained the following language:
This is to give you notice that Cendant Mortgage
Corporation ("CENDANT") has a business relationship with
[STARS]*fn2, who provides appraisal services for
customers of CENDANT. [STARS] and CENDANT are both
wholly-owned subsidiaries of PHH Holdings Corporation
which is wholly-owned subsidiary of PHH Corporation.
The cost of providing your appraisal services is
described on your attached Good Faith Estimate. Because
of this relationship, this referral may provide CENDANT
a financial or other benefit. You are NOT required to
use [STARS] as a condition for settlement of your loan.
THERE ARE FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS
AVAILABLE WITH SIMILAR SERVICES. YOU ARE FREE TO SHOP
AROUND TO DETERMINE THAT YOU ARE RECEIVING THE BEST
SERVICES AND THE BEST RATE FOR THESE SERVICES.
Appraisers selected by our customers must receive prior
approval by PHH before providing appraisal services.
(Pls.' Ex. C at 00062) (emphasis in original.)
Defendants argue that this disclosure "fully informed" Szczubelek of both the relationship between Cendant and STARS and that, at her request, she could hire her own appraiser. (Defs.' Opp'n Mem. to Class Cert. at 8.) (See also id. at 10) ("Ms. Szczubelek was provided all of the material information necessary to allow her to make an informed choice regarding her appraisal.") Plaintiffs, however, maintain that the two statements are inconsistent and confusing to borrowers. (Pls.' Class Mem. at 4.) Szczubelek states she was never informed she could have saved money by procuring her own licensed appraiser and was left with the impression after speaking with Cendant loan officers that Cendant chooses the appraiser. (See Dep. of Tracey Szczubelek at 87, 91) (hereinafter "Szczubelek Dep.")
Although on September 21, 1999, she signed a statement indicating that she "received, read, and understood" the loan documents presented to her (Pls.' Ex. C at D00050), it is unclear whether Szczubelek actually read or skimmed the "Affiliated Business Arrangement Disclosure Statement" or understood its contents. (Szczubelek Dep. at 56-57, 60.) According to Plaintiffs, Cendant's borrowers received dozens of pages of documents and the reference to STARS is "inconspicuously made to the borrower by way of a standard form. . . ." (Pls.' Class Mem. at 3.) The reference to STARS, Plaintiffs charge, "is made in the context of a one inch thick stack of papers sent to borrowers. Notably, this one page does not require the signature of the borrower and is sent to the borrower after the loan application is made." (Id.)
All parties agree Szczubelek never investigated the cost of an independent appraiser or requested that she be permitted to use her own appraiser. (Szczubelek Dep. at 59,74; Defs.' Opp'n Mem. to Class Cert. at 4.) Since Szczubelek did not inform Cendant that she wanted to hire her own appraiser, Cendant requested STARS obtain the required appraisal on the Greenbrook Road property. After being contacted by Cendant, STARS located R.A.S. Appraisals, Inc. ("R.A.S."), a local appraiser, who completed the appraisal on the Greenbrook Road property. On December 22, 1999, R.A.S. completed the appraisal for a cost of $150.00, which it billed STARS. (Pls.' Ex. B, R.A.S. Invoice.)
At settlement, Cendant charged Szczubelek a $275.00 appraisal fee. (Am. Compl., ¶ 24; Pls.' Ex. A to Am. Compl.) According to the HUD-1 Settlement Statement Worksheet, the $275 was paid "to Cendant." (Pls.' Ex. C, D00025.) Both parties agree that the entire $275 charge was transferred from Cendant to STARS. (Pls.' Class Mem. at 2; Defs.' Ex 1, Decl. of Annette Voellinger at ¶ 12 (hereinafter "Voellinger Dec.")) STARS then paid R.A.S. $150 for the appraisal and retained the rest of the money, $125, as a fee for "appraisal management services."
Plaintiff's Complaint and the Procedural History of This
On June 12, 2000, Plaintiffs filed a class action Complaint alleging that Cendant unlawfully overcharged its borrowers for appraisal services and intentionally deceived borrowers by lumping together the two separate appraisal-related charges, one paid to the appraiser and one paid to STARS. Subsequently, on October 9, 2001, Plaintiffs were permitted to amend their Complaint to add additional parties and claims. Plaintiffs' Amended Complaint charges violations of the Real Estate Settlement Procedures Act 12 U.S.C. § 2601, et seq. (Count I); the New Jersey Consumer Fraud Act (Count II); the Truth in Lending Act, 15 U.S.C. § 1601, et seq. (Count IV); and negligent misrepresentation under the New Jersey common law (Count III). Plaintiffs seek both monetary damages and injunctive relief.
Plaintiffs now move for class certification and partial summary judgment limited to the claims brought under the New Jersey Consumer Fraud Act. Defendants move for summary judgment on all claims. The Court now decides the motions on the papers pursuant to Fed.R.Civ.P. 78.
STANDARD FOR CLASS CERTIFICATION
When reviewing a motion for class certification, a court must undergo a thorough examination of the factual and legal allegations the case presents. See Barnes v. American Tobacco Co., 161 F.3d 127, 140 (3d. Cir. 1998), cert. denied, 526 U.S. 1114 (1999). Thus, "it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question." General Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 160 (1982). See also Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 166 (3d Cir. 2001) ("Because the determination of a certification request invariably involves some examination of factual and legal issues underlying the plaintiff's cause of action, a court may consider the substantive elements of the plaintiffs' case in order to envision the form that a trial on those issues would take.") (quoting 5 Moore's Federal Practice § 23.46).
To maintain a class action, the four requirements of Rule 23(a) — numerosity, commonality, typicality, and adequacy of representation — must be satisfied.*fn3 See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 609 (1997); Baby Neal ex rel. Kanter v. Casey, 43 F.3d 48, 55 (3d Cir. 1994). Finally, to be certified the class must also fit within one of the three categories of actions described in Rule 23(b). See Amchem Prods., 521 U.S. at 614.
The burden of demonstrating fulfillment of these requirements lies with the party seeking class certification, in this case the Plaintiffs.*fn4 See Katz v. Carte Blanche Corp., 496 F.2d 747 (3d Cir.) cert. denied, 419 U.S. 884 (1974); Vargas v. Calabrese, 634 F. Supp. 910, 920 (D.N.J. 1986); Chevalier v. Baird Sav. Ass'n., 72 F.R.D. 140, 144 (E.D.Pa. 1976). The plaintiff must do more than simply reiterate conclusory allegations to satisfy the requirements of Rule 23. See In re Am. Med. Sys., Inc., 75 F.3d 1069, 1079 (6th Cir. 1996); Stambaugh v. Kansas Dep't of Corrections, 151 F.R.D. 664, 671 (D.Kan. 1993). Instead, the plaintiff must allege facts demonstrating that all of the requirements for bringing a class action are fulfilled. See In re Am. Med. Sys., 75 F.3d at 1083. Failure to satisfy any of the requirements is fatal, and class certification must be denied. See Falcon, 459 U.S. at 161. See also Jackson v. Motel 6 Multipurpose, Inc., 130 F.3d 999, 1005 (11th Cir. 1997).
Plaintiffs move for certification only on their state consumer fraud claim. Plaintiffs seek to certify a class that consists of "all persons who have paid for property appraisals for residential homes in New Jersey valued at $500,000 or less through Cendant Mortgage Corporation between April 1, 1996 and the present and who were referred to Speedy Title and Appraisal Review Services Corporation for appraisal services." (Pls.' Mot. for Class Cert. at 2.) According to Plaintiffs, because individual reliance is not required under the NJCFA, class certification is appropriate. (Pls.' Class Mem. at 21.) They also ask that the Court appoint Szczubelek as the named class representative. (Id.)
Defendants raise a plethora of reasons why they believe this case cannot be maintained as a class action. At the outset Defendants raise a standing issue, arguing that Szczubelek cannot serve as a class representative because she has not suffered any injury under the NJCFA. (Defs.' Opp'n Mem. to Class Cert. at 8-11.) Next, they argue Szczubelek's claims are not common or typical of other punitive class members. (Id. at 11-20.) Defendants further argue Plaintiff cannot demonstrate the requisite numerosity. (Id. at 20-22.) Then, Defendants charge that individual fact-specific issues preclude a finding of predominance and superiority. (Id. at 26-28.) Finally, Defendants argue Plaintiffs' attorneys are not adequate to serve as class counsel. (Id. at 28-29.) The Court will address each of these arguments in the order they are listed in Rule 23.
The first requirement set forth by Rule 23 is that the proposed class must be so numerous that joinder of all members is impracticable. Fed.R.Civ.P. 23(a)(1). This requirement does not demand that joinder would be impossible, but rather that joinder would be extremely difficult or inconvenient. See Liberty Lincoln Mercury, Inc. v. Ford Mktg. Corp., 149 F.R.D. 65, 73 (D.N.J. 1993) (impracticability does not mean impossibility, but rather that the difficulty or inconvenience of joining all members calls for class certification).
Whether joinder of all of the class members would be impracticable depends on the circumstances surrounding the case and not merely on the number of class members. See General Tel. Co. of the Northwest v. E.E.O.C., 446 U.S. 318, 329 (1980) (numerosity requires examination of specific facts of each case and imposes no absolute numerical limitations). See also Liberty Lincoln Mercury, 149 F.R.D. at 73 (number is not, by itself, determinative); Ardrey v. Federal Kemper Ins. Co., 142 F.R.D. 105, 109 (E.D.Pa. 1992) (same). While no minimum number of plaintiffs is required, "generally if the named plaintiff demonstrates that the potential number of plaintiffs exceeds 40, the first prong of Rule 23(a) has been met." Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001). Additionally, it is not necessary to demonstrate the precise number of class members when a reasonable estimate can be inferred from facts in the record. See, e.g., Lloyd v. City of Philadelphia, 121 F.R.D. 246, 249 (E.D.Pa. 1988) (noting that a court may certify a class whose size is unknown "if common sense or common knowledge indicates that it will be large."); Shamberg v. Ahlstrom, 111 F.R.D. 689, 698 (D.N.J. 1986) (plaintiffs need not specify the exact number of class members). See also In re Alcoholic Beverages Litig., 95 F.R.D. 321, 324 (E.D.N.Y. 1982) ("A class action may proceed upon estimates as to the size of the proposed class.").
Here, Plaintiffs propose a class consisting of "all persons who have paid for property appraisals for residential homes in New Jersey valued at $500,000 or less through Cendant Mortgage Corporation between April 1, 1996 and the present and who were referred to Speedy Title and Appraisal Review Services Corporation for appraisal services." (Pls.' Mot. for Class Cert. at 2.) Plaintiffs claim Cendant "has accepted appraisal fees from thousands of similarly situated plaintiffs in New Jersey" during the relevant time period. (Pls.' Class Mem. at 26.) They base this figure on the fact that from 1996 through 2000, Cendant closed on 39,280 loans in New Jersey. (Id. at 9; 25.) Additionally, Plaintiffs argue that the vast geographic dispersion of the proposed class members, most if not all of whom are located within New Jersey, makes joinder impracticable. (Id. at 25-26.) Defendants criticize Plaintiffs' figure, arguing that it is based on Plaintiffs' assumptions and that speculation alone cannot establish a showing of numerosity. (Defs.' Opp'n Mem. to Class Cert. at 21-22) (citing Marcial v. Coronet Ins. Co., 880 F.2d 954, 957 (7th Cir. 1989). Instead, they classify Plaintiff Szczubelek as "a class of one." (Id. at 2.)
The Court finds Defendants' agreements unpersuasive. As noted by the Court of the Eastern District of Pennsylvania, specific numbers are not required when "common sense" manifests that a reasonable estimate can be inferred from the facts. Lloyd, 121 F.R.D. at 249. See also Liberty Lincoln Mercury, 149 F.R.D. at 73 (exact size of proposed class not required). See also Zeidman v. J. Ray McDermott & Co., Inc., 651 F.2d 1030, 1038 (5th Cir. 1981) ("In order to satisfy his burden with respect to [numerosity], a plaintiff must ordinarily demonstrate some evidence or reasonable estimate of the number of purported class members.") (emphasis added).
Additionally, the focus is not strictly on the number of punitive class members, but also on whether "joinder of all members is impracticable" Fed.R.Civ.P. 23(a)(1). Various factors beyond the number of class members are relevant to determining impracticability, including: judicial economy; geographic dispersion of the class members; financial resources of the class members; and the ability of claimants to institute individual suits. See Liberty Lincoln, 149 F.R.D. at 74 (practicability depends on size of class, ease of identifying members and determining addresses, ease of service on members if joined, geographic dispersion, and ability of class members to pursue individual suits); Brosious v. Children's Place Retail ...