United States District Court, E.D. North Carolina, Western Division
TERRENCE W. BOYLE, CHIEF UNITED STATES DISTRICT JUDGE.
cause comes before the Court on plaintiffs' motion to
certify class and appoint class counsel as well as
defendants' motions to exclude plaintiffs' expert
testimony and evidence of damages. The appropriate responses
and replies have been filed, and a hearing on the matters was
held before the undersigned on May 28, 2019, at Raleigh,
North Carolina. In this posture the motions are ripe for
ruling and, for the reasons that follow, the motion to
certify class is granted in part, the motion to exclude the
testimony of Arthur Olsen is denied, the motion to exclude
the testimony of Jonathan Shefftz is granted, and the motion
to exclude damages evidence is denied without prejudice.
Gary and Ann Childress, Russell and Suzannah Ho, and Michael
Clifford, filed this case on behalf of themselves and others
similarly situated alleging claims against defendants for
violations of the Servicemembers Civil Relief Act (SCRA), 50
U.S.C. §§ 3901 et seq., breach of
contract, violation of the Truth in Lending Act, 15 U.S.C.
§ 1637(b), negligence, negligent misrepresentation,
violation of the Delaware Consumer Fraud Act, Del. Code Ann.
Tit. 6 § 2511, et seq., violation of the North
Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen.
Stat. § 75-1.1, et seq., and breach of
fiduciary duty. In addition to damages, plaintiffs seek a
constructive trust and an accounting. [DE 1].
SCRA requires that all debts incurred by members of the armed
services before being called to active duty are reduced to a
6% interest rate from the date of deployment through the
period of active duty, and that all financial institutions
must forgive interest above the rate of 6%.
Id.¶1. Plaintiffs allege that
defendants, JP Morgan Chase & Co., JP Morgan Chase Bank,
N.A., Chase Bank USA, and Chase BankCard Services
(collectively referred to herein as Chase), offered active
duty military members more generous benefits than those
required by the SCRA. Id. ¶ 2. Plaintiffs
allege that, despite the requirements of the SCRA and its own
beneficial contractual terms with active-duty customers,
Chase charged an illegally high interest rate and improper
fees on the debts of thousands of servicemembers, allowed
these unlawful interest charges to improperly inflate
servicemembers' principal balances, and then charged
compound interest on these inflated balances. Id.
¶ 3. Plaintiffs then allege that Chase concealed its
SCRA violations from the thousands of military families
impacted. Plaintiffs and others did not discover the
violations until 2016 when Chase sent misleading
correspondence and checks to some military customers.
Id. ¶ 4.
September 18, 2013, Chase Bank USA, JP Morgan Chase Bank, and
JPMorgan Bank and Trust Company entered into a consent order
with the Office of the Comptroller of the Currency (OCC). [DE
196] Delaney Decl. ¶ 14. The consent order concerned
Chase's discovery that it had not implemented effective
controls of its SCRA benefits process, and Chase
self-reported this issue to the OCC. [DE 195 at 12]. Chase
contends that the consent order was designed to remediate any
customers potentially affected by Chase's ineffective
SCRA controls. Id. The remediation was designed to
be overinclusive and to minimize the risk that SCRA-eligible
customers would be excluded. Delaney Decl. ¶ 16. For
those accounts identified, Chase identified the amount of
interest charged over 6% and any eligible fees assessed.
Id. ¶ 29. For any amount of remediation that
was $10 or more, Chase "provided the greater of $500 or
three times the total remediation amount, net (after
trebling) of any prior correction credits it had granted the
servicemember." Id. ¶ 30. The consent
order covered the period of January 1, 2005, through
September 18, 2013. Id. ¶14.
6, 2016, Chase Bank USA, with whom he maintained accounts,
mailed plaintiff Gary Childress a check for $6, 899, in
remediation funds. Id. ¶ 47. The check was
accompanied by a letter which stated
We're writing to apologize because we may have charged
you interest and/or fees incorrectly when you may have been
eligible for Servicemember's Civil Relief Act benefits or
protections. . . . We're refunding you the interest
and/or fees, plus an additional amount for that
Id. Gary Childress deposited the check on or about
May 16, 2016. Id.
Bank USA calculated a remediation amount for plaintiff
Russell Ho of $570.00, and mailed him a check for the same
with a substantially similar letter as above on May 13, 2016.
Russell Ho deposited the check on May 27, 2016. Id.
¶ 69. After determining that plaintiff Michael Clifford
had previously been fully compensated for any overcharges by
prior remediations, Chase Bank USA calculated a remediation
amount of $1, 044.00 meant only to compensate Clifford for
any inconvenience that the prior overcharges had caused.
Id. ¶ 98. Chase Bank USA mailed plaintiff
Clifford a check for that amount along with a substantially
similar letter as above, with the clarification that the
amount enclosed was an inconvenience payment, on May 6, 2016.
Clifford deposited the check on May 17, 2016. Id.
seek to define the class as follows:
All persons who, at any time on or after September 11, 2001
(the "Class Period"), received reduced interest
and/or fee benefits from Defendants on a credit card
obligation or account because of an obligor's military
service, but excluding persons who have executed a release of
the rights claimed in this action.
[DE 229; 231]. Plaintiffs further seek appointment of
plaintiffs Gary Childress, Russell Ho, and Michael Clifford
as class representatives. Id. Plaintiffs have
clarified that the class will be limited to credit card
holders whose claims concern only defendant Chase Bank USA,
N.A. [DE 229 at 4-5]. Plaintiffs have further clarified that
their claims proceed against Chase for its own conduct and
not for those of predecessor banks. Id. at 5.
Finally, plaintiffs seek appointment of the law firms of
Shanahan McDougal, Smith and Lowney, and Keller Rohrback as
class counsel. Id.
support of their motion to certify class, plaintiffs have
proffered the opinions of two experts, Arthur Olsen and
Jonathan Shefftz, which defendants seek to exclude under
Federal Rule of Evidence 702, Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Federal
Rule of Evidence 37. Defendants further seek to exclude any
evidence of damages offered by plaintiffs in connection with
any motion or at trial for failure to comply with Federal
Rule of Civil Procedure 26(a)(1)(A)(iii).
Motions to exclude expert testimony.
outset, the Court notes that there is no controlling
precedent which dictates whether to conduct a
Daubert analysis at the class certification stage or
how focused or full that analysis should be. See,
generally, 3 Newberg on Class Actions § 7:24 (5th
ed. 2014). The Court is persuaded by authorities which have
concluded that where a movant has proffered expert testimony
in support of its motion for class certification, and such
testimony is critical to the issue of class certification, a
full Daubert inquiry is appropriate. In re Blood
Reagents Antitrust Litig., 783 F.3d 183, 187 (3d Cir.
2015); see also Campbell v. Nat'l R.R. Passenger
Corp., 311 F.Supp.3d 281, 295 (D.D.C. 2018); Soutter
v. Equifax Info. Servs. LLC, 299 F.R.D. 126, 131 (E.D.
702 of the Federal Rules of Evidence allows a qualified
witness to offer an expert opinion if
(a) the expert's scientific, technical, or other
specialized knowledge will help the trier of fact to
understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and
(d) the expert has reliably applied the principles and
methods to the facts of the case.
Fed. R. Evid. 702(a)-(d). The offering party bears the burden
of demonstrating by a preponderance of the evidence that the
expert testimony it seeks to introduce meets the requirements
of Fed.R.Evid. 702. See Daubert v. Merrell Dow Pharm.,
Inc., 509 U.S. 579, 592 n.10 (1993). The court must make
a preliminary assessment as to whether the proposed
expert's reasoning and methodology is scientifically
valid and whether such reasoning and methodology may be
appropriately applied to the facts that are at issue.
Id. at 592. The primary concern for a court is
whether the proposed expert testimony is reliable and
relevant. In re Lipitor (Atorvastatin Calcium)
Mktg., Sales Practices & Prod. Liab. Litig. (No II) MDL
2502, 892 F.3d 624, 637 (4th Cir. 2018). In making such
determination, a court is not bound by a definitive list and
may consider a wide variety of factors, including testing,
error rates, and acceptability in the relevant community.
Daubert, 50 U.S. at 593; Kumho Tire Co. v.
Carmichael, 526 U.S. 137, 141 (1999).
Testimony of Arthur Olsen.
Olsen is an information technology consultant and has offered
an expert opinion on the acertainability of the putative
class and the calculation of potential class members'
damages. Olsen is the principal of an information technology
(IT) firm and has over twenty years of professional IT
experience; Olsen specializes in the areas of data analysis,
database development, and database administration support.
[DE 175] Olsen Decl. ¶ 2. Olsen has litigation
experience in which he has analyzed historical bank data from
over thirty U.S. banks in order to determine whether damaged
class members could be ascertained and to calculate
individual damages from those class members. Id.
primary challenges to Olsen's testimony are that it is
not grounded in fact and that it relies on insufficient
assumptions. For example, Olsen opines that the class is
readily identifiable based upon Chase's data,
specifically the data that Chase used to generate customers
who may qualify for its OCC-approved remediation. As to class
members outside the remediation period, Olsen opines that
they can be identified because Chase provided them with
military benefits, and Chase maintains a database that codes
borrowers based upon the membership in its SCRA program.
Id. ¶¶ 12-13. Olsen further opines that
the calculation of class damages can be accomplished using
data available to Chase, and that an algorithm can be
developed to accomplish this objective. Id.
objects to Olsen's opinions because he does not identify
specific data on which he will rely, but rather relies
somewhat broadly on "data available to Chase."
While such an objection may be appropriate in other
circumstances, Olsen's declaration is clear that, as in
other litigation involving large banks, including litigation
involving JP Morgan Chase Bank, Olsen has been and would here
be able to use customer and account information that Chase
maintains in order to accurately ascertain the class and
calculate class damages. While Chase makes much of
Olsen's reliance on Chase's own calculations and
formulations for its remediation payments, arguing that the
parameters for remediation qualification were different from
the parameters which would be used to identify class members
or calculate class damages here, it is difficult to
understand how if Chase could utilize an algorithm and data
searches to determine which of its customers should be
remediated, Olsen could not, using the same and possibly
additional data, perform similar calculations. See
[DE 207] Olsen Dep. at 90-91. It cannot be seriously disputed
that Chase knows who its customers are and which are members
of its SCRA program. Chase further has access to account
information, including the interest rates that it has been
what constrains Olsen's expert opinion at this stage is
the subject of discovery disputes between the parties. What
is before the Court today, however, is not whether
Olsen's damages calculation is accurate, but whether his
expert opinion that he will be able to ascertain the class
and calculate class damages is sufficiently relevant and
reliable. See [DE 207] Olsen Dep. at 83 ("My
role is to say... this type of data exist, and it can be
used. I can use it, but I'll need some further
information about exactly how this data should be
used."). The Court finds that it is. Olsen has conducted
similar analyses in other cases and, when permitted access to
the relevant data, the Court persuaded that he can do so
here. The Court is mindful of the limited extent of
Olsen's current opinion - that he believes that the data
exist and that he can use the data to determine the members
of the putative class and the calculation of class damages.
Of course, Chase may challenge any future opinion Olsen
renders as to actual class members or damages when the case
is ready for trial, but at this stage the Court will not
exclude his testimony.
Testimony of Jonathan Shefftz.
Shefftz is an independent consultant who focuses on the
application of financial economics to the analysis of
individuals, businesses, and municipalities. [DE 176] Shefftz
Decl. ¶ 3. He has been qualified as an expert a number
of times in United States District Court. Id. ¶
4. Here, he opines that plaintiffs Gary and Anne Childress
suffered post-remediation period damages in the form of
overcharges and excess tax liability. Id. ¶ 5.
In order to reach this conclusion Shefftz relied on the
analysis provided by Chase's expert Jennifer McCabe. In
essence, Shefftz reviewed McCabe's analysis and performed
simple arithmetical calculations to determine that the
Childresses incurred damages after Chase had provided them
with a remediation check. See [DE 212] Shefftz Dep. at 93.
plaintiffs oppose excluding Shefftz's testimony, they
concede that "all of the same conclusions reached by Mr.
Shefftz could be reached by the Court without any expert
assistance . . .." [DE 228 at 6]. Shefftz's
declaration does not offer any technical or specialized
expertise that will assist the Court in making its
determination as to whether plaintiffs have satisfied the
burden under Fed.R.Civ.P. 23 to certify a class. See
McCall v. Skyland Grain LLC, No. 08-CV-01128PABBNB, 2010
WL 1435369, at *3 (D. Colo. Apr. 9, 2010) (conducting simple