Montano et al v. First Light Federal Credit Union

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
RALPH MONTANO and
ELSIE M. MONTANO,
Debtors. 	No. 7-04-17866 SL
RALPH MONTANO and
ELSIE MONTANO,
Plaintiffs,
v. 	No. 07-1026 S
FIRST LIGHT FEDERAL CREDIT UNION,
Defendant.
MEMORANDUM OPINION ON MOTION TO RECONSIDER ORAL
RULINGS OF MARCH 24, 2008 STATUS CONFERENCE (DOC 33)
This matter is before the Court on Plaintiff’s Motion to
Reconsider the oral rulings made at the March 24, 2008 status
conference (doc 33). 	Counsel for the parties are listed in the
service section below. 	For the reasons set forth below, the
Court finds the Motion to Reconsider well taken and finds that it
should be granted. 	This is a core proceeding.
HISTORY OF CASE
Plaintiffs filed their original complaint on February 19,
2007 (doc 1). 	Defendant First Light Federal Credit Union (First
Light) filed its answer March 30, 2007 (doc 4). 	Plaintiffs filed
a motion to amend, to include other plaintiffs and to have the
case certified as a class action (doc 5). 	The matter then came
before the Court for a pretrial conference on April 9, 2007, at
which time the Court asked for briefs solely on the issue of
subject matter jurisdiction over the proposed parties to the
amended complaint. 	See Order Resulting from Initial Pretrial
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1Plaintiffs have not yet filed a Motion to Appoint Class
Counsel. 	They should do so promptly.
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Conference (doc 7). 	First Light filed a response to the Motion
to Amend (doc 10), and Plaintiffs replied (doc 11). 	The Court
issued a Memorandum Opinion on September 10, 2007, finding that
Plaintiffs should be granted leave to file an amended complaint
provided the proposed class was restricted to members who
received their bankruptcy discharges from the District of New
Mexico. 	(Doc 16). 	The Court then entered a First Scheduling
Order on September 26, 2007, ordering Plaintiffs to amend their
complaint within 15 days, appointing R. “Trey” Arvizu, III
interim counsel for the putative class pending certification,
limiting discovery to the issues of class identification,
certification, maintenance and appointment of class counsel,
restricting the scope of discovery to certain persons and fixing
a deadline of December 17, 2007 for filing a Motion for Class
Certification and Motion for Appointment of Class Counsel. 	(Doc
18).
Plaintiffs filed their first amended complaint on October 1,
2007 (doc 19), and a Motion for Class Certification on October
12, 2007 (doc 21) with a Memorandum in Support (doc 22) 1. 	First
Light answered the first amended complaint on October 16, 2007
(doc 23). 	On November 5, 2007, the Court conducted a continued
initial pretrial conference and orally ruled that before
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addressing other issues, the Court would decide whether the
action should be certified as a class action. 	See Order
Resulting from Initial Pretrial Conference, doc 25. 	That Order
also directed First Light to respond to the Motion to Certify and
Plaintiff to reply. 	The Order also stated:
The parties have agreed, at this point, that there is
no need for an evidentiary hearing and the Court may
render its decision based on the briefs filed in this
adversary proceeding. 	If either party later determines
an evidentiary hearing is necessary, that party will
contact the other party, and then they both will
contact the Court for a hearing on the matter.
First Light responded to the Motion for Class Certification on
December 3, 2007 (doc 27). 	Plaintiffs replied to the response on
January 8, 2008 (doc 30).
DISCUSSION
Although, on paper, the issue of class certification was
ready for ruling, the Court analyzed the pleadings and determined
that there were some material fact questions about the merits of
the case. 	Therefore, the Court scheduled a status conference for
March 24, 2008 at which time it sua sponte raised issues more
properly brought up in connection with a motion to dismiss, which
had not been filed. 	The Court ordered further briefs on issues
relating to dismissal. 	Plaintiffs timely filed their Motion for
Reconsideration on March 31, 2008 asking the Court to 1)
reconsider its oral rulings of March 24, 2008, 2) delay all
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2“Grounds warranting a motion to reconsider include (1) an
intervening change in the controlling law, (2) new evidence
previously unavailable, and (3) the need to correct clear error
or prevent manifest injustice. 	Thus, a motion for
reconsideration is appropriate where the court has misapprehended
the facts, a party’s position, or the controlling law.” 	Servants
of the Paraclete v. Does, 204 F.3d 1005, 1012 (10 th Cir.
2000)(Citations omitted).
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further briefing in the case pending reconsideration, and 3)
grant the motion for class certification. 	(Doc 33).
The Court has reviewed the law and finds that the Motion for
Reconsideration should be granted to correct clear error 2. 	It is
error to consider whether a plaintiff has stated a valid claim
before ruling on a request for class certification.
When considering a motion for class certification, the
court must not address the merits of the case. 	“We
find nothing in either the language or history of Rule
23 that gives a court any authority to conduct a
preliminary inquiry into the merits of a suit in order
to determine whether it may be maintained as a class
action.” 	Eisen v. Carlisle & Jacquelin, 417 U.S. 156,
177, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974). 	“ ‘In
determining the propriety of a class action, the
question is not whether the plaintiff or plaintiffs
have stated a cause of action or will prevail on the
merits, but rather whether the requirements of Rule 23
are met.’ ” Id. at 178, 94 S.Ct. 2140 (quoting Miller
v. Mackey International, 452 F.2d 424 (5th Cir.1971)).
Smith v. Aon Corp., 238 F.R.D. 609, 614 (N.D. Ill. 2006). 	See
also Shelter Realty Corp. v. Allied Maintenance Corp., 574 F.2d
656, 661 n. 15 (2 nd Cir. 1978)(When deciding class motion,
District Judge is prohibited from conducting an inquiry into the
merits of the case; the judge can consider affidavits and
exhibits, and should accept the complaint allegations as true);
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Blackie v. Barrack, 524 F.2d 891, 901 n. 17 (9 th Cir. 1975),
cert. denied, 429 U.S. 816 (1976):
The court is bound to take the substantive allegations
of the [class action] complaint as true, thus
necessarily making the class order speculative in the
sense that the plaintiff may be altogether unable to
prove his allegations. 	While the court may not put the
plaintiff to preliminary proof of his claim, it does
require sufficient information to form a reasonable
judgment. 	Lacking that, the court may request the
parties to supplement the pleadings with sufficient
material to allow an informed judgment on each of the
Rule’s requirements.
Therefore, the March 24, 2008 oral ruling should be set aside.
This Court should decide the class certification motion before
hearing or deciding the merits of the case. 	An Order will be
entered granting the Motion for Reconsideration, vacating the
existing briefing schedule, and restoring the Certification
Motion to the pending list of cases under advisement.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	September 24, 2008
copies to:
R Trey Arvizu, III
PO Box 1479
Las Cruces, NM 88004-1479
Kelly Albers
650 Montana Ave Ste D
Las Cruces, NM 88001-4294
R Thomas Dawe
Lewis and Roca Jontz Dawe, LLP
PO Box 1027
201 Third Street, NW Suite
1950
Albuquerque, NM 87103-1027
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