Class Action Fairness Act – Special CAFA Rules for Appealability of Remand Orders Lawyers Should Know

When defending against a class action, it is important to understand that special rules apply under Class Action Fairness Act (CAFA) concerning the appealability of remand orders. Whether a federal district court order remanding an action to state court may be reviewed on appeal is important to any defendant, but special rules apply if the action has been removed to federal court under the Class Action Fairness Act of 2005. Because the focus of this article is on appellate review of district orders granting motions to remand a lawsuit to state court a case removed under CAFA, removal and remand are not discussed here; discussions of each may be found in separate articles, as is a discussion concerning appellate review of remand orders in non-CAFA cases.

Class Action Fairness Act (CAFA) Uncategorized

Considerations Regarding Removal to Federal Court: Defense Of Class Action Claims Alleging RESPA Violations Part III

Part III Considerations Regarding Removal to Federal Court

A lender that must defend itself against a class action alleging violations of RESPA may benefit from removing the case to federal court. A defendant may remove a case to federal court if there is any “separate and independent” claim subject to federal question jurisdiction: “A federal court has removal jurisdiction if the plaintiff’s claims are either exclusively federal or there is a separate and independent federal question. 28 U.S.C. § 1441. In order for a defendant to remove, the federal claims must appear on the face of plaintiff’s well-pleaded complaint. Tingey v. Pixley-Richards West, Inc., 953 F.2d 1124, 1129 (9th Cir. 1992).” Lyons v. Alaska Teamsters Emplr. Serv. Corp., 188 F.3d 1170, 1171 (9th Cir. 1999). A separate article considers removal under CAFA (Class Action Fairness Act of 2005).

In federal court, Rule 23 of the Federal Rules of Civil Procedure governs class actions. Federal courts examine the numerosity, commonality, and typicality of the plaintiff’s claims. The courts also consider whether separate lawsuits would create a risk of inconsistent adjudications that would require the defendant comply with incompatible directions. In state court, however, California Code of Civil Procedure section 382 governs class actions. The “community of interest” requirement for class certification in state court consists of three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. While the standards may appear to be substantively identical, they are quite different in practice. In my opinion, the federal law governing class actions is much better developed than California state law. It is also my opinion that a corporate defendant is well served to remove a case to federal court whenever possible.

Once removed, the federal court may, in its discretion, adjudicate the entire case, including state claims that could not be adjudicated under the federal court’s original jurisdiction. 28 U.S.C. § 1441(c). Removal is proper even if the plaintiff’ federal claim is meritless, see Barraclough v. ADP Auto. Claims Services, 818 F. Supp. 1310, 1312 (N.D. Cal. 1993), and removal is proper even if the relief the plaintiff seeks is unavailable under the federal claim, see Caterpillar Inc. v. Williams, 482 U.S. 386, 391, n.4 (1987).

With respect to RESPA claims, RESPA requires a lender to provide a HUD-1 or HUD-1A settlement statement to “clearly itemize all charges imposed upon the Borrower,” and that this settlement statement is required by 12 U.S.C. § 2603(a). A lender is required also to provide borrowers with “a Good Faith Estimate” (the “GFE”) to include “estimates of the amounts or ranges of all settlement costs likely to be incurred at the closing,” and the GFE is required by 12 U.S.C. § 2604(c) and Regulation X, 24 C.F.R. section 3500.7(a). Thus, if the Complaint alleges that the lender surprised borrowers with additional closing costs, then the basis of the lawsuit is an alleged violation of federal law: if the lender had disclosed properly all closing costs as required by RESPA and Regulation X, then the plaintiff would not have been injured.

RESPA/TILA Class Actions Uncategorized

Federal Court versus State Court Jurisdiction: Defense Of Class Action Claims Alleging RESPA Violations Part II

Defending Class Action Claims Alleging RESPA Violations

Part II Federal Court versus State Court Jurisdiction

Even though RESPA is a federal statute, many class action lawsuits against lenders alleging RESPA violations are filed in state court. Defending class action RESPA claims requires a careful analysis of the specific statute(s) at issue, as this will dictate whether the action may be removed to federal court. While RESPA grants concurrent jurisdiction to state courts as to certain matters, Congress expressly limited concurrent jurisdiction to those sections of RESPA governed only by sections 2605, 2607 and 2608. 12 U.S.C. § 2614. Otherwise, federal jurisdiction is exclusive.

That Congress afforded state courts concurrent jurisdiction only over certain portions of RESPA and retained exclusive federal court jurisdiction over the balance of RESPA is not unique. For example, as the Ninth Circuit has held, “Bankruptcy courts have exclusive jurisdiction over nondischargeability actions brought pursuant to 11 U.S.C. § 523(a)(2), (4), (6) and (15),” Rein v. Providian Fin. Corp., 270 F.3d 895, 904 (9th Cir. 2001) (citations omitted) (italics added), but “Bankruptcy courts and state courts have concurrent jurisdiction over all [other] nondischargeability actions,” id., at n.15 (italics added). “For example, there is concurrent state and federal jurisdiction over § 523(a)(5) nondischargeability actions,” id., at 904 n.15 (citations omitted) (italics added), but a creditor could not seek relief from stay and pursue in state court a nondischargeability claim “with regard to its § 523(a)(2) claims because state courts lack jurisdiction to adjudicate § 523(a)(2) actions,” id., at 904 (italics added).

Plaintiffs’ alleged violations of 12 U.S.C. sections 2603 and 2604 must be heard in federal court because state courts lack jurisdiction to consider them. To hold otherwise would be to conclude that Congress idly specified limitations in 12 U.S.C. § 2614 on the scope of concurrent jurisdiction when it intended that no such limitations exist.

RESPA/TILA Class Actions Uncategorized

Overview of Statute and Summary of Jurisdiction: Defense Of Class Action Claims Alleging RESPA Violations Part I

Defending Class Action Claims Alleging RESPA Violations Part I Overview of Statute and Summary of Jurisdiction Many lenders have had to defend themselves against class actions alleging violations of RESPA. In simplest terms, the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. sections 2601 et seq., and Regulation X (24 C.F.R. sections 3500 et seq.) governs disclosures to borrowers of the closing costs associated with residential loan transactions. RESPA is a “consumer protection” statute, enacted in 1974 to protect borrowers whose loans will be secured by a mortgage against one-to-four family residential property.

RESPA/TILA Class Actions Uncategorized

Class Action Firm Indicted for Paying Kickbacks to Clients to Serve as Plaintiffs

Class action plaintiff firm Milberg Weiss Bershad & Schulman LLP learned on May 18, 2006, that it had been indicted by federal prosecutors in Los Angeles for paying more than $11 million in kickbacks to clients to serve as plaintiffs. The 102-page, 20-count criminal indictment also names two of the firm’s top partners, David Bershad and Steven Schulman. Nathan Koppel and Peter Lattman of the Wall Street Journal reported on the fallout from the indictment, including “the Ohio attorney general firing the powerhouse law firm as counsel in a class-action case.

Class Actions In The News Uncategorized

Hardy v. Regions Mortgage Class Action Defense Case: Eleventh Circuit Holds No Private Right Of Action Under RESPA

District Court Properly Granted Defense Motion for Judgment on the Pleadings in Class Action Because no Private Right of Action Exists Under Federal Real Estate Settlement Practices Act (RESPA) Eleventh Circuit Holds On May 26, 2006, the Court of Appeals for the Eleventh Circuit affirmed a judgment entered on a motion for judgment on the pleadings in a putative class action alleging RESPA (Real Estate Settlement Practices Act) violations on the ground that no private right of action exists under Section 10 of RESPA.

Class Action Court Decisions RESPA/TILA Class Actions Uncategorized

Class Action Defense Cases–Buckeye Check Cashing v. Cardegna

Arbitration Agreements: Who Decides Legality of Arbitration Clause? On February 21, 2006, the United States Supreme Court addressed “whether a court or an arbitrator should consider the claim that a contract containing an arbitration provision is void for illegality.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. ___, 126 S.Ct. 1204, 1207 (2006). Plaintiffs filed a putative class action alleging that the interest rates in various deferred-payment transactions with Buckeye Check Cashing “in which they received cash in exchange for a personal check in the amount of the cash plus a finance charge” were usurious.

Arbitration Class Action Court Decisions Uncategorized

En Banc Denied in Amalgamated Transit v. Laidlaw Transit — Class Action Defense Cases

CAFA (Class Action Fairness Act of 2005) Requires That Appeal From Grant Or Denial of Motion to Remand Must Be Made Within 7 Days Ninth Circuit Holds On May 22, 2006, the Court of Appeals for the Ninth Circuit refused to reconsider en banc its decision in Amalgamated Transit Union Local 1309 v. Laidlaw Transit Serv., Inc., 435 F.3d 1140 (9thCir. 2006). However, six justices dissented from the denial of rehearing en banc, and severely criticized as an “abuse of our judicial power” the decision to read “less” as “more.

Class Action Court Decisions Uncategorized

Amalgamated Transit Union v. Laidlaw Transit — Class Action Defense Cases

CAFA (Class Action Fairness Act of 2005) Requires Appeal From Grant or Denial of Motion to Remand Be Made Within 7 Court Days Ninth Circuit Holds On January 26, 2006, the Court of Appeals for the Ninth Circuit denied a motion to dismiss as untimely an appeal under CAFA (Class Action Fairness Act of 2005) from a district court order denying a motion to remand a putative class action to state court.

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

Class Action Defense Issues: Certification of Class Actions Numerosity Requirement Under Rule 23(a)(1)

Defending Class Actions: Certification Under Rule 23 – Part II

The Numerosity Requirement of Rule 23(a)(1)

In defending a class action, the single most important motion facing a defendant is the plaintiff’s motion to certify a class. Rule 23(a) requires that the plaintiff demonstrate numerosity, commonality and typicality, and that the class members will be adequately represented, and must additionally demonstrate that the action satisfies Rule23(b). The class action requirements of Rule 23 are mandatory. Thus, class certification requires that the prospective class representative satisfy the elements set forth in Rule 23(a), as well as the elements of Rule 23(b) (discussed in a separate article) be met. General Telephone Co. of Southwest v. Falcon, 457 U.S. 152, 102 S.Ct. 2364 (1982) (reversing class certification for failure to analyze Rule 23 requirements). This article discusses the numerosity requirement of Rule 23(a).

Rule 23(a)(1) of the Federal Rules of Civil Procedure provides that a class action may not be maintained unless “the class is so numerous that joinder of all members is impracticable.” It has been said that numerosity and commonality “form the core of the class-action concept.” Newberg on Class Actions, “Prerequisites for Maintaining a Class Action,” §3:13, p.316. However, no bright line or threshold exists at which the numerosity requirement is met. Each circumstance must be examined on a case-by-case basis. General Telephone Co. v. E.E.O.C., 446 U.S. 318, 330, 100 S.Ct. 1698 (1980).

There are, of course, the obvious cases. See e.g., Georgine v. Amchem Products, Inc., 83 F.3d 610, 626 n.11 (3rd Cir. 1996), aff’d, Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231 (1997) (“This class, which may stretch into the millions, easily satisfies the numerosity requirement.”); In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768, 800 (3rd Cir. 1995), cert. denied, General Motors Corp. v. French, 516 U.S. 824, 116 S.Ct. 88 (1995) (“The numerosity requirement of Rule 23(a) is plainly satisfied in this action encompassing nearly six million truck owners.”); Ballard v. Equifax Check Services, Inc., 186 F.R.D. 589, 594 (E.D. Cal.1999) (class of “approximately 1.4 million California residents” satisfied numerosity).

Certification of Class Actions Uncategorized