24 CFR § 3500.13—Questions Or Suggestions From Public And Copies Of Public Guidance Documents Under Regulation X (Real Estate Settlement Procedures Act-RESPA)

As a resource for class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of Regulation X. Congress gave authority to the Secretary of the Department of Housing and Urban Development (HUD) to promulgate regulations for RESPA, and the regulations are set forth in 24 CFR § 3500.1 et seq. The regulations concerning questions or suggestions from public and copies of public guidance documents are set forth in § 3500.13, which provides:

§ 3500.13. Relation to State laws

(a) State laws that are inconsistent with RESPA or this part are preempted to the extent of the inconsistency. However, RESPA and these regulations do not annul, alter, affect, or exempt any person subject to their provisions from complying with the laws of any State with respect to settlement practices, except to the extent of the inconsistency.

(b) Upon request by any person, the Secretary is authorized to determine if inconsistencies with State law exist; in doing so, the Secretary shall consult with appropriate Federal agencies.

(1) The Secretary may not determine that a State law or regulation is inconsistent with any provision of RESPA or this part, if the Secretary determines that such law or regulation gives greater protection to the consumer.

(2) In determining whether provisions of State law or regulations concerning affiliated business arrangements are inconsistent with RESPA or this part, the Secretary may not construe those provisions that impose more stringent limitations on affiliated business arrangements as inconsistent with RESPA so long as they give more protection to consumers and/or competition.

Statutes & Rules Uncategorized

State Farm/Hurricane Katrina Class Action Defense Cases—Guice v. State Farm: Mississippi Federal Court Rejects Effort To Certify “Slab Case” Class Action Against State Farm Due To Lack Of Typicality

Class Action Certification of Slab Case Insurance Claims Against Homeowners’ Insurer Inappropriate Because Individual Proof Issues Exist in Each Case so the Claims Fail to Satisfy the Typicality Requirement for Class Actions Under Rule 23 Mississippi Federal Court Holds

Plaintiff filed a class action against her homeowners insurance carrier, State Farm, alleging that after Hurricane Katrina totally destroyed her home, State Farm had improperly denied coverage “on the grounds that the destruction of the insured property was caused solely by water in the form of storm surge flooding, a peril excluded under the terms of the policy at issue.” Guice v. State Farm Fire & Cas. Co., Civil Action No.1:06CV001 LTS-RHW (S.D. Miss. March 22, 2007) [Slip Opn., at 1]. Plaintiff moved the court to certify a class action against State Farm on behalf of homeowners whose properties fall within the category of “slab cases” – viz., homes where Hurricane Katrina left only the foundation. Id. The district court denied plaintiff’s motion, id., at 2, and plaintiff requested reconsideration of the class action certification issue, id., at 1. The district court denied plaintiff’s motion, reaffirming that the slab cases against State Farm are not appropriate for class action treatment.

The federal court began its analysis by noting that the practical effect of granting plaintiff’s motion would be “entry of judgment as a matter of law for the liability limits application to the ‘slab cases’ under the State Farm homeowners policies that applied to those properties.” Slip Opn., at 1. However, while at the time of the first class action certification motion none of the individual “slab case” lawsuits against State Farm had been tried, the federal court now had the benefit of having presided over three such cases, explaining at page 2:

Certification of Class Actions Class Action Court Decisions Uncategorized

Enron Class Action Defense Case-Regents v. Credit Suisse: Certification Of Securities Class Action Seeking $40 Billion Overturned By Fifth Circuit Because Classwide Presumption Of Reliance Did Not Apply

Fifth Circuit Holds that District Court’s Erroneous Definition of “Deceptive Acts” Resulted in Mistaken Application of Presumption of Reliance in Certifying Class Action Against Banks, Necessitating Reversal of Class Certification Order

After Enron’s collapse in 2001, dozens of class action and individual lawsuits were filed against numerous defendants for violations of Section 10(b) of the Securities Exchange Act of 1924 and Rule 10b-5; more than 30 of these actions were consolidated in the district court for the Southern District of Texas and Regents of the University of California was named lead plaintiff. Regents of the Univ. of Cal. v. Credit Suisse First Boston (USA), Inc., 482 F.3d 372 (5th Cir. 2007) [Slip Opn., at 3]. “Years of discovery have ensued, and tens of millions of documents have been produced.” Id. In 2006, the district court granted plaintiff’s motion to certify the litigation as a class action, id., at 3-4. Defense attorneys sought and received permission from the Fifth Circuit to file an interlocutory appeal, id., at 2; the Circuit Court reversed.

As the Circuit Court admitted, the facts of this case are “difficult to detail” so we simply quote the Court’s broad summary: “Plaintiffs allege that defendants Credit Suisse First Boston (“Credit Suisse”), Merrill Lynch & Company, Inc. (“Merrill Lynch”), and Barclays Bank PLC (“Barclays Bank”) (collectively “the banks”) entered into partnerships and transactions that allowed Enron Corporation (“Enron”) to take liabilities off of its books temporarily and to book revenue from the transactions when it was actually incurring debt. The common feature of these transactions is that they allowed Enron to misstate its financial condition; there is no allegation that the banks were fiduciaries of the plaintiffs, that they improperly filed financial reports on Enron’s behalf, or that they engaged in wash sales or other manipulative activities directly in the market for Enron securities.” Slip Opn., at 2. In essence, the class actions alleged that the banks knew Enron executives were manipulating financial information to inflate the company’s stock price to maximize their personal compensation. Id.

In certifying the class action, the district court concluded that a “deceptive act” under Rule 10b-5(c)3 includes participation in a “transaction whose principal purpose and effect is to create a false appearance of revenues,” and that Rule 10b-5(a)’s prohibition of any “scheme . . . to defraud” creates joint and several liability for individuals who commit deceptive acts in furtherance of such a scheme. Slip Opn., at 3. At the Fifth Circuit explained, “The court’s theory of scheme liability considerably simplified finding commonality among the plaintiffs with respect to loss causation. The court stated that ‘a reasonable argument can be made that where a defendant knowingly engaged in a primary violation of the federal securities laws that was in furtherance of a larger scheme, it should be jointly and severally liable for the loss caused by the entire overarching scheme, including conduct of other scheme participants about which it knew nothing.’” Id., at 3-4. The district court also concluded that plaintiffs could rely on “classwide presumptions of reliance for omissions and fraud on the market” because it believed the banks breached a “duty not to engage in a fraudulent ‘scheme,’” and concluded that plaintiffs need not demonstrate market efficiency or reliance to invoke the fraud-on-the market presumption of reliance under Rule 10-5(a) or (c), believing this to be required only for claims under Rule 10-5(b). Id.

Certification of Class Actions Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Microsoft Class Action Defense Case-In re Microsoft I-V Cases: California Appellate Court Affirms Cy Près Provision Of $1 Billion Class Action Settlement

California State Court Holds that Provision in Class Action Settlement for Cy Près Distribution of Unclaimed and Unredeemed Vouchers to Public Schools did not Violate State Law

In February 1999, plaintiffs filed a putative class action against Microsoft in state court alleging violations of California’s Cartwright Act and Unfair Competition Law based on “‘exclusionary and restrictive practices’ that resulted in software overcharges [for Windows and MS-DOS] passed on to the class members.” In re Microsoft I-V Cases, 135 Cal.App.4th 706, 710 (Cal.App. 2006). Because we focus here on the cy près distribution of unclaimed settlement proceeds, we note only that following a 1999 federal court trial of state and federal antitrust actions, the district court found against Microsoft, see United States v. Microsoft Corp., (D. D.C. 1999) 84 F.Supp.2d 9), and a wave of class action lawsuits against the company followed. Other California class action cases against Microsoft were coordinated with plaintiffs’ class action, and the coordinated cases became the Microsoft I-V Cases. After the court certified the coordinated litigation as a class action, the parties reached a $1.1 billion settlement and presented it to the court for approval. In re Microsoft I-V Cases, at 711. In approving the class action settlement, the trial court rejected the arguments by an objector to the cy près distribution of unclaimed settlement proceeds, and the objector appealed. The Court of Appeal affirmed.

In broad terms, the class action settlement provides for vouchers as direct compensation to members of the class, In re Microsoft I-V Cases, at 711-13. In the event that less than $1.1 billion was claimed, then the agreement provided for cy près distribution of the balance of the settlement proceeds such that Microsoft retained one-third of the unclaimed settlement funds, and two-thirds would be distributed to eligible schools. Id., at 713-14. Similarly, if consumers obtained vouchers but failed to redeem them, then Microsoft would retain one-third of the unused settlement funds, and two-thirds would be distributed to schools. Id., at 714. If schools failed to redeem the vouchers within six years, then they would be given to “other needy organizations in California” upon court approval. Id., at 715.

Class Action Court Decisions Uncategorized

CAFA Class Action Defense Cases-Progressive West v. Preciado: Class Action Fairness Act Of 2005 (CAFA) Does Not Permit Cross-Defendant To Remove Class Action Cross-Complaint Ninth Circuit Holds

Ninth Circuit Holds that Amendment of Class Action Cross-Complaint did not “Commence” New Action for Purposes of Removal under CAFA (Class Action Fairness Act of 2005), and that CAFA would not Avail a Plaintiff/Cross-Defendant Because CAFA Permits only a “Defendant” to Remove a Class Action to Federal Court

In December 2004, Progressive West Insurance Company filed a breach of contract lawsuit against its insured in California state court; on February 17, 2005 – the day before the effective date of the Class Action Fairness Act of 2005 (CAFA) – the insured filed a cross-complaint alleging violations of California’s Unfair Competition Law (UCL) and seeking to prosecute the cross-complaint as a class action. Progressive West Ins. Co. v. Preciado, 479 F.3d 1014 (9th Cir. March 6, 2007) [Slip Opn., 2]. The initial class action allegations were deficient, and in August 2006 the trial court granted plaintiff leave to amend the cross-complaint to assert the necessary allegations for a class action. Id. Progressive responded by removing the class action to federal court on the basis of CAFA, id.; the federal court remanded the class action to state court and the Ninth Circuit granted Progressive’s request for leave to appeal, id., at 3. The Court of Appeals affirmed the district court order, holding that CAFA did not confer federal court jurisdiction over the putative class action.

Urging the Ninth Circuit to follow the Seventh Circuit opinion in Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805 (7th Cir. 2005), Progressive argued that CAFA governed the class action complaint because under California’s “relation back” doctrine the “amended cross-complaint commenced a new action because it substantially changed the nature of the action from an individual action to a representative [class] action.” Slip Opn., at 4-5. The Ninth Circuit declined the invitation. The appellate court reaffirmed that a class action is “commenced” for purposes of removal under CAFA “when a suit becomes ‘a cognizable legal action in state court’ under ‘[a] state’s own laws and rules of procedure.’” Id., at 4 (citation omitted). California law deems an action “commenced” as of the date the complaint, or cross-complaint, is filed with the court, id. (citations omitted). Under California law, then, the class action complaint against Progressive “commenced” for purposes of CAFA on February 15, 2005 – the date the initial cross-complaint was filed. Id.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

CAFA Class Action Defense Cases-McAtee v. Capital One: Ninth Circuit Holds That Naming Doe Defendant Does Not Commence New Action For Purposes Of Class Action Fairness Act Of 2005 (CAFA)

Under California Law, Class Action is not “Commenced” under Class Action Fairness Act of 2005 (CAFA) by Amending Complaint to Name Doe Defendant Ninth Circuit Holds

In August 2004, plaintiff Ball filed a class action in California state court against various Capital One entities alleging that certain provisions of defendants’ credit card contracts constituted unlawful business practices. McAtee v. Capital One, F.S.B., ___ F.3d ___ (9th Cir. March 16, 2007) [Slip Opn., 2-3]. Three months later, California voters passed Proposition 64 which necessitated that a plaintiff must have suffered actual injury in order to have standing to bring a claim under California’s Unfair Competition Law (UCL), and this new requirement applied to cases pending at the time of its passage. _Id._, at 3. In May 2005, the trial court precluded Ball from pursuing her claims against the named Capital One defendants; an amended complaint was filed naming McAtee as the new party-plaintiff. _Id._ Defense attorneys removed the class action to federal court on the basis of the Class Action Fairness Act of 2005 (CAFA), which became effective February 18, 2005, arguing that the substitution of plaintiffs constituted the commencement of a “new action” within the meaning of CAFA, _id._, at 3-4. The federal court remanded the action, holding that the class action had been commenced in August 2004 when Ball filed the original class action complaint, _id._, at 4. Following remand, McAtee amended the complaint to add Capital One Bank as a party-defendant and dismissing the original Capital One entities as defendants; defense attorneys again removed the class action to federal court under CAFA, and the federal court again granted plaintiff’s motion for remand. _Id._ The Ninth Circuit granted defendant’s petition for appeal and affirmed the remand order.

As a matter of first impression in the Ninth Circuit, the Court of Appeals addressed “whether substitution of a named defendant for a Doe defendant in a California state court action commences a civil action against the new named defendant within the meaning of CAFA.” Slip Opn., at 4-5. The question of when an action is “commenced” for purposes of removal under CAFA turns on state law, id., at 7-8. In this regard, the Ninth Circuit rejected the approach taken by some other federal courts that relies, at least in part, on state-law relation back doctrine. Id., at 8-9. The appellate court explained that “[w]hen the ultimate question before the court is whether to dismiss an action for lack of timeliness, it makes sense to apply the relationship back doctrine, for in such cases the very survival of the action is at issue.” Id., at 9. But the consequences are far less severe when the issue is commencement for purposes of jurisdiction only: “The case will be allowed to go forward, in some forum, whether CAFA applies or not. If CAFA applies, the action may go forward in federal court if a defendant files a timely motion for removal. If CAFA does not apply, the action must go forward in state court unless there is some other basis for removal to federal court.” Id., at 10. For this reason, the relation back doctrine simply does not apply to a determination of whether a class action filed in state court may be removed under CAFA: the Ninth Circuit “simply look[s] to the date on which the original complaint in the action was filed.” Id., at 11.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

24 CFR § 3500.12—Regulations Restricting Fees Charged By Lenders In Connection With Federally-Related Mortgage Loans Under Regulation X (Real Estate Settlement Procedures Act-RESPA)

As a resource for class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of Regulation X. Congress gave authority to the Secretary of the Department of Housing and Urban Development (HUD) to promulgate regulations for RESPA, and the regulations are set forth in 24 CFR § 3500.1 et seq. The regulations restricting fees charged by lenders in connection with federally-related mortgage loans are set forth in § 3500.

Statutes & Rules Uncategorized

Employment Law Class Action Lawsuits Regain Top Spot In Weekly California State And Federal Court Class Action Filings

In order to assist California defense attorneys in anticipating the claims against which they may have to defend, we provide weekly, unofficial summaries of the legal categories for new class actions filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant timeframe.

Class Actions In The News Uncategorized

24 CFR § 3500.11—Mailing Of Documents Under Regulation X (Real Estate Settlement Procedures Act-RESPA)

For class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of Regulation X. Congress gave authority to the Secretary of the Department of Housing and Urban Development (HUD) to promulgate regulations for RESPA, and the regulations are set forth in 24 CFR § 3500.1 et seq. The regulations concerning the mailing of documents are set forth in § 3500.11, which provides:

Statutes & Rules Uncategorized

Class Action Defense Cases—In re CitiFinancial: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff’s Motion Supported By Defense To Centralize Class Action Litigation In Northern District of Illinois

Judicial Panel Agrees with Plaintiffs and Defense that Class Action Cases Warranted Pretrial Coordination Pursuant to 28 U.S.C. § 1407, Rejecting Arguments of Sole Plaintiff’s Lawyer in Opposition to Request Five class action lawsuits (Connecticut, Illinois, Massachusetts, Missouri and Wisconsin) were filed against CitiFinancial Services and others alleging that certain prescreened mailings from Citifinancial violated the federal Fair Credit Reporting Act (FCRA) because defendants improperly used consumer reports for purposes of mailing prescreened offers of credit for loans to plaintiffs and potential class members.

Class Action Court Decisions Multidistrict Litigation Uncategorized