CLASS ACTION DEFENSE BLOG
Welcome to Michael J. Hassen's Blog. Here you will find over 2,000 articles related to class actions.
Whether Lender Violated TILA, RESPA or State’s Consumer Loan Act Irrelevant to Determination of Class Certification Motion because Plaintiffs Adequately Alleged such Violations Washington Federal Court Holds
Plaintiffs filed a class action against their lender NovaStar Mortgage for violations of Washington’s Consumer Protection Act (CPA) alleging that it failed to disclose it paid mortgage brokers a yield spread premium (YSP) in connection with their loans; the class action complaint was premised on NovaStar’s purported failure to provide written disclosures required by the federal Real Estate Settlement Procedures Act (RESPA), the federal Truth in Lending Act (TILA), Washington’s Consumer Loan Act (CLA), and the plaintiffs’ deeds. Pierce v. NovaStar Mortgage, Inc., 238 F.R.D. 624, 625 (W.D. Wash. 2006). In response to plaintiffs’ first motion to certify the lawsuit as a class action, the district court agreed with defense attorneys that plaintiffs had failed to demonstrate numerosity or typicality as required by Rule 23(a) and also failed to establish the predominance and superiority elements required by Rule 23(b); it therefore denied the motion, but did so without prejudice. Id. On plaintiffs’ renewed motion for class certification, the court rejected defense objections and granted the motion.
By way of background, to establish a violation of the CPA one must prove “(1) an unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) that impacts the public interest; (4) and causes injury to the plaintiff in his or her business or property; and (5) such injury is causally linked to the unfair or deceptive act.” Pierce, at 626 (citation omitted). A plaintiff may satisfy the first two elements by proving that the act in question is a per se unfair trade practice: “A per se unfair trade practice exists when, by statute, the Legislature declares an unfair or *627 deceptive act in trade or commerce and the statute has been violated.” Id., at 626-27 (citations omitted). Under Washington law, “[a] violation of the CLA . . . is explicitly deemed a violation of the first and second elements of the CPA,” id., at 627 (citation omitted). In denying the first motion for class certification, the district court believed that “verbal disclosures and independent knowledge of the YSP were relevant to determining whether NovaStar violated the CPA.” Id., at 626. Plaintiffs’ lawyers disagreed, arguing in the renewed motion that “verbal disclosures are irrelevant to class certification because they seek to establish a per se violation of the Consumer Protection Act by proving that NovaStar violation the Consumer Loan Act.” Id.
Certification of Class Actions Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
Read more...
California Court Surprisingly Holds that Under Certain Circumstances Plaintiffs need not be Members of Class to Serve as Class Representatives and that, as Matter of First Impression, Rescission Under TILA (Truth-in-Lending Act) is a Personal Remedy Unsuitable for Class Action Treatment
Plaintiffs filed a putative class-action lawsuit against their lender alleging inter alia violations of the federal Truth In Lending Act (TILA) arising from the lender’s failure to disclose certain closing fees charged in connection with refinance loans. LaLiberte v. Pacific Merc. Bank, 147 Cal.App.4th 1. 53 Cal.Rptr.3d 745, 746 (Cal.App. 2007). Defense attorneys demurred to the class-action complaint on the ground that the class allegations failed to establish commonality; the trial court agreed but granted plaintiffs leave to amend. After extensive motion practice, plaintiffs filed a third amended class-action complaint seeking to represent a single class of borrowers who obtained loans after November 20, 2002. Id., at 746-47. Defense attorneys again demurred, this time on the ground that because the putative class representatives secured their loans in April 2002, they were not members of the class they sought to represent. Id., at 747. The trial court agreed, and sustained the demurred to the class action allegations without leave to amend. Id. as a matter of first impression, the California appellate court affirmed the trial court’s order, holding that rescission under TILA was not suitable for class action treatment.
Under California law, “An order sustaining demurs to class action allegations ‘is appealable to the extent that it prevents further proceedings as a class action.’” LaLiberte, at 747 (citation omitted). In this case, two standards of review apply on appeal. The first involves the independent judgment exercised by an appellate court in reviewing an order sustaining a demurrer; the second involves whether the trial court abused its discretion in denying leave to amend. Id., at 747-48 (citations omitted). The trial court had relied upon Payne v. United California Bank, 23 Cal.App.3d 850 (Cal.App. 1972), in support of its conclusion that plaintiffs lacked standing to sue on behalf of the proposed class because they were never members of that class. See id., at 748. The Court of Appeal disagreed, holding that La Sala v. American Sav. & Loan Ass’n, 5 Cal.3d 864 (Cal. 1971), was more on point. Id.
Certification of Class Actions Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
Read more...
Maryland Court Holds that Federal Real Estate Settlement Procedures Act (RESPA) Claims were not Tolled by Filing of Class Action Complaint Where Defendants were not Named and had No Notice of RESPA Claims Until After Limitations Period Expired
In October 2003 plaintiff filed a putative class action in Maryland federal court against four entitles for violations of RESPA (Real Estate Settlement Procedures Act) and various state laws, arising out of her May 2003 purchase of a home, alleging sham business arrangements and the charging of fees in violation of RESPA. Robinson v. Fountainhead Title Group Corp., 447 F.Supp.2d 478, 481 (D. Md. 2006). In January 2006, plaintiff filed a Third Amended Complaint naming three new defendants which were served on January 20. 2006; prior to being served, none of these defendants had notice of any of the prior class action complaints. Id., at 482. Defense attorneys moved to dismiss the action; the federal court agreed with defense arguments that RESPA’s one year statute of limitations period had run and granted the motion.
Plaintiff purchased a home in May 2003 and financed the purchase. Robinson, at 482. The district court explained that “RESPA claims brought under [12 U.S.C.] § 2607 must be brought within ‘1 year . . . from the date of the occurrence of the violation.'” Id., at 483 (quoting 12 U.S.C. § 2614). The defense argued that the limitations period began to run on the date that escrow closed on the home purchase, and that the new defendants had not been added as party-defendants until after the one-year period expired. Id. Plaintiff’s lawyer, relying on American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), countered that the filing of the original complaint tolled the statute of limitations period on the RESPA claims. Id. The district court disagreed, concluding that American Pipe did not support plaintiff’s theory.
Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
Read more...
Lawsuit Alleging Violations of Federal Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) Based on Failure to Provide Written Disclosure of YSPs (Yield Spread Premiums) Allowed to Proceed as Class Action
Plaintiffs filed a class action against NovaStar Mortgage alleging violations of Washington’s Consumer Protection Act (CPA) based on the lender’s failure to disclose in writing the payment of yield spread premiums (YSPs) in violation of the federal Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA), and Washington’s Consumer Loan Act (CLA). Pierce v. NovaStar Mortgage, Inc., ___ F.Supp.2d ___ (W.D. Wash. October 31, 2006) [Slip Opn., at 1-2]. The district court denied plaintiffs’ first motion to certify a class, agreeing with defense counsel that plaintiffs had not demonstrated numerosity or typicality under Rule 23(a) and had failed to establish the predominance and superiority elements of Rule 23(b). _Id._, at 2. Defense attorneys opposed class certification largely on the ground that YSPs were not required to be disclosed in writing; the federal court agreed, holding that “verbal disclosures and independent knowledge of the YSP were relevant” in evaluating whether NovaStar violated RESPA, TILA or CLA, _id._ However, in connection with a renewed motion to certify the lawsuit as a class action, the court rejected that defense argument and granted plaintiffs’ motion.
In considering the renewed motion for class certification, the district court stated that class certification turned on “whether verbal disclosures are legally relevant” to the CPA claims. Slip Opn., at 3. Plaintiffs argued that verbal disclosures were irrelevant because the lender was required to disclose YSPs in writing under the CLA, and because violations of the CLA are per se violations of the CPA. Id., at 2. Defense attorneys argued that the CLA does not require written disclosure of YSPs. Id., at 4. While the federal court found that plaintiffs had not cited any provision of the CLA requiring lenders to disclose YSPs, it determined that this was irrelevant, explaining at page 5:
Certification of Class Actions Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
Read more...
California Court Holds as Matter of First Impression that RESPA Prohibits Lender from Marking Up Costs of Another Provider’s Services Without Providing Additional Services of its Own
Plaintiffs filed a putative class action lawsuit against Washington Mutual Bank in California state court alleging inter alia violations of California’s unfair competition laws (UCL), Consumers Legal Remedies Act (CLRA), and breach of contract. “The basis of all causes of action was defendants’ overcharging plaintiffs for underwriting, tax services, and wire transfer fees in conjunction with home loans. Defendants charged plaintiffs more for these services than defendants paid the service providers.” McKell v. Washington Mutual Bank, ___ Cal.App.4th ___, 2006 WL 2664130 (Cal.App. September 18, 2006) [Slip Opn., at 2]. Plaintiffs’ UCL claim was premised upon alleged violations of the California Residential Mortgage Lending Act (CRMLA) and the federal Real Estate Settlement Procedures Act (RESPA) and Regulations X, among other state and federal laws. Slip Opn., at 5. The trial court granted a defense motion to dismiss the class action complaint, presumably on the ground that the claims “turn on the alleged existence of an agreement requiring Washington Mutual to charge no more than pass-through costs for underwriting, tax services, and wire transfers,” _id._, at 3, which plaintiffs could not do. The California Court of Appeal affirmed in part and reversed in part. We do not here discuss those aspects of the trial court’s ruling that the divided appellate court opinion affirmed. Rather, we focus on the Court of Appeal’s holdings that plaintiffs had adequately pleaded UCL and breach of contract claims.
The appellate court first held that the trial court did not err “in requiring plaintiffs to plead a factual basis for implying an agreement by [the Bank] to charge only pass-though costs,” Slip Opn., at 8. But in analyzing the UCL claims, the Court of Appeal explained at page 10,
Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
Read more...
Federal District Court Properly Granted Defense Motion to Dismiss RESPA Class Action Because Congress did not Expressly Prohibit Servicers from Charging Fees for Payoff Statements
Borrowers filed a putative class action against GMAC Mortgage Corporation alleging that it violated the federal Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §§ 2601-2617, “by charging a $20 fee each time the plaintiffs requested their payoff amount from GMAC’s website,” and alleging also breach of contract. The defense moved to dismiss the complaint. The district court granted the motion to dismiss the RESPA claim, but declined to exercise jurisdiction over the contract claim. The Eighth Circuit affirmed. Watt v. GMAC Mortgage Corp., 457 F.3d 781, 782 (8th Cir. 2006).
Plaintiffs argued that RESPA requires responses to “qualified written requests” be provided free of charge because RESPA does not affirmatively state that loan servicers may charge fees for such responses: “Since RESPA imposes a duty to respond but does not stated that servicers may charge fees for statements sent in response to qualified written requests, the [plaintiffs] argue, servicers are prohibited from charging fees.” Watt, at 783. The Circuit Court disagreed, holding at page 783:
Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
Read more...
Georgia Federal District Court Holds that TILA (Truth in Lending Act) and Regulation Z do not Require Disclosure of “Administrative Charges”
A putative class action was filed in state court alleging inter alia that a dental fee payment plan violated the federal Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 et seq., and Regulation Z because the lender kept a portion of the loan proceeds to cover an “administrative charge” rather than forwarding all sums borrowed to the dentist. Jones v. People’s Heritage Bank, 433 F.Supp.2d 1328 (S.D. Ga. 2006). The district court agreed with defense attorneys that the terms of the loan were fairly disclosed, and so dismissed the federal TILA claim in the class action complaint and remanded the balance of the action to state court.
Plaintiff required $10,000 in dental work, half of which was covered by insurance. To pay the remaining $5,000, plaintiff elected to finance the dental work through a dental fee plan offered by her dentist through a lender, AmeriFee. The loan contract stated that the $5,000 would be paid to the dentist; AmeriFee, however, kept 7.5% of the loan amount ($375) as an “administrative charge.” Plaintiff’s class action complaint alleged that the failure to disclose the “administrative charge” for loan transactions violated TILA. Jones, at 1329. Specifically, the class action complaint alleged that this conduct violated state law and constituted a breach of contract, and that it also violated TILA and Reg Z “by failing to disclose and by making a misrepresentation of the amount financed and to whom the amount of the loan was paid.” Id., at 1331. In essence, plaintiff argued that her loan amount should have been only $4,625 – the amount the dentist received – and that the $375 administrative fee qualified as a “finance charge,” id., at 1333.
Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
Read more...
Federal District Court Grants Defense Motion to Dismiss TILA Claims Against Lender Upholding Releases Signed by Plaintiffs and Distinguishing Case from Others that Held TILA Releases Void
Two homeowners filed suit against a lender seeking rescission and statutory damages for its alleged failure to make disclosures required under the federal Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 et seq. Tucker v. Beneficial Mortgage Co., ___ F.Supp.2d ___, 2006 WL 1975769 (E.D. Va. 2006). Defense attorneys moved to dismiss the complaint on the grounds that plaintiffs were bound by a class action settlement negotiated by the Virginia Attorney General, and that the action was brought outside TILA’s one-year limitations period. The district court agreed with the defense, specifically holding that plaintiffs released their TILA claims as part of the class action settlement, and that “[p]laintiffs may waive their rights to bring TILA claims in a class action lawsuit.” Slip Opn., at 2.
Briefly, plaintiffs refinanced their home with Beneficial Mortgage in September 2002 – three months before the Virginia Attorney General negotiated a settlement of a consumer class action lawsuit against the lender. Plaintiffs affirmatively joined the settlement and in October 2003 signed a general release absolving Beneficial of liability for “all civil claims . . . whether known or unknown.” Slip Opn., at 3-4 (citation omitted). In September 2004, plaintiffs sought to rescind their Beneficial loan on the grounds that Beneficial “failed to make certain material TILA and Home Ownership and Equity Protection Act (‘HOEPA’) disclosures regarding the loan, including finance charges, the amount financed, and the annual percentage rate.” Id., at 4. Plaintiffs then filed suit in October 2005, alleging that these failures extended their right to rescind the transaction to three years. Id. The district court disagreed.
Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
Read more...
Federal District Court Grants Motion to Strike Third-Party Complaint for Indemnity/Contribution Against Parent
Plaintiffs Kristen and William McSherry Jr. (“William Jr.”) filed suit against Capital One FSB and others alleging violations of the federal Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and Truth in Lending Act (TILA), together with Washington state law claims for defamation and invasion of privacy. McSherry v. Capital One FSB, ___ F.R.D. ___, 2006 WL 1420839 (W.D. Wash. 2006). Capital One filed a third-party complaint against plaintiff’s father, William McSherry Sr., (“William Sr.”) for indemnity and contribution because “[a]ccording to several documents in the record, including Plaintiffs’ complaint, it appears that the debt allegedly incurred by [William Jr.], may have been incurred by [William Sr.].” Slip Opn., at 2. The district court granted plaintiffs’ motion to strike, finding that “[w]hile it does appear that Capital One’s allegedly tortuous actions or omissions would not have occurred but for [William Sr.’s] alleged actions, this is not enough.” _Id_., at 1 and 12.
The federal court began with a summary of federal law on impleader actions, noting that it must be based on “an assertion of the third-party defendant’s derivative liability to the third-party plaintiff” and that it “cannot be used to assert any . . . rights to recovery arising from the same transaction or occurrence as the underlying action.” Slip Opn., at 3-4 (citation omitted). Here, the plaintiffs’ complaint was carefully drafted to seek damages solely based on Capital One’s acts or omissions in response to communications from plaintiffs concerning the debt:
Class Action Court Decisions FCRA Class Actions RESPA/TILA Class Actions Uncategorized
Read more...
Green Tree v. Randolph: U.S. Supreme Court Upholds Order Compelling Arbitration Pursuant to Lender’s Arbitration Provision under Federal Arbitration Act (FAA) Because Plaintiff Did Not Establish that Arbitral Forum would be Prohibitively Expensive: Truth in Lending Act (TILA) Class Action Claims Properly Dismissed
In Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000), the United States Supreme Court addressed two issues: (1) whether a court order granting a defense motion to compel arbitration and dismissing (rather than staying) the plaintiff’s claims is immediately appealable under the Federal Arbitration Act (FAA), 9 U.S.C. § 16(a)(3) as a “final decision with respect to an arbitration”; and (2) whether an arbitration provision that is silent on the question of allocation and amount of arbitration fees and costs is unenforceable for failure to “affirmatively protect a party from potentially steep arbitration costs.” Id., at 82. The putative class action against Green Tree alleged violations of the federal Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 et seq., and arose from a loan to the putative class action representative for the purchase of a mobile home evidenced by a Manufactured Home Retail Installment Contract and Security Agreement that expressly provided for all disputes to be resolved by finding arbitration under the provisions of the FAA. Id., at 82-83 and n.1. Plaintiff asserted that Green Tree violated TILA by failing to disclose a specific insurance requirement as a finance charge; she later added a claim under the federal Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691 et seq. based on the requirement that she arbitrate her statutory claims for relief. The district court granted the class action defense team’s motion to compel arbitration and dismissed plaintiff’s claims with prejudice. The court also denied the plaintiff’s request to certify the case as a class action. Id., at 83.
Arbitration Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
Read more...