Class Action Defense Blog

Iowa Federal Court Remands to State Court Class Action Lawsuits Challenging Cable Television Franchise Fees Holding that Class Action Claims were not Preempted by Federal Cable Communications Policy Act and that Class Action Complaints did not “Arise Under” Federal Law

Seven putative class action lawsuits were filed in state court against various Iowa cities challenging as illegal a cable television franchise fee tax, and defense attorneys removed the class action to federal court arguing that the claims for damages in the class action complaints are preempted by the Federal Cable Communications Policy Act, 47 U.S.C. § 521 et seq. (Federal Cable Act). Lindstrom v. City of Des Moines, Iowa, 470 F.Supp.2d 1002, 1004-05 (S.D. Iowa 2007). Plaintiffs moved to remand the class action to state court, arguing that their class action lawsuits did not contain any federal claims. Id., at 1005. The district court summarized the class action complaints as follows: “Plaintiffs have stated only a single claim that arises under state law, i.e., whether the Cities can collect the cable franchise fees, in amounts exceeding the reasonable costs of regulating the activity, without express authorization by the Iowa Legislature.” Id. The district court granted the motion and remanded the class action to state court.

The district court recognized that the defense bore the burden of establishing subject matter jurisdiction, Lindstrom, at 1006. While the class action did not state federal claims, defense attorneys argued that the claims were preempted by the Federal Cable Act, id. The federal court stated that “nothing on the face of [the class action complaints] raises a federal question,” id., so the issue was whether the Federal Cable Act completely preempts the state law cause of action in the class actions, id., at 1007. After a detailed analysis, see id., at 1007-10, the court held that the class action claims were not preempted by the Federal Cable Act because the cities were charging less than the maximum tax allowed by federal law and that this would further, not undermine, the intent of the Act, id., at 1010. The court rejected also a defense argument that the class action is preempted because it conflicts with the Act’s definition of “franchise fees,” id., at 1010-11, and that removal was proper because the class action claims “arise under” federal law, id., at 1011-12.

Continue reading "Class Action Defense Cases-Lindstrom v. City of Des Moines: Court Rejects Defense Effort To Remove Class Action To Federal Court Holding Class Action Claims Not Preempted By Federal Cable Act" »

Posted In: Class Action Court Decisions

Class Action Complaint Properly Dismissed Because no Private Rights of Action Exist for Alleged Violations of Sections 34(b), 36(a) and 48(a) of the Federal Investment Company Act of 1940 (ICA), and Section 36(b) Claim Failed as a Matter of Law Second Circuit Court Holds

Plaintiffs filed a putative class action against various Eaton Vance entities under sections 34(b), 36(a) and 48(a) of the federal Investment Company Act of 1940 (ICA) arising out of the marketing, managing, and distributing shares of various Eaton Vance mutual funds. Bellikoff v. Eaton Vance Corp., 481 F.3d 110, 113-14 (2d Cir. 2007). The thrust of the class action complaint was that defendants paid kickbacks to brokers who promoted the sale of Eaton Vance mutual funds, that the increase in fund assets meant higher advisory fees paid to certain defendants “while providing no benefits to the funds or the fund investors,” and that the advisory fees paid were too high. Id., at 114. Defense attorney’s moved to dismiss the class action, arguing that no private rights of action exist under ICA for the claims alleged, id. The district court agreed with the defense and dismissed the class action; the Second Circuit affirmed.

The class action complaint alleged that defendants entered into arrangements with Morgan Stanley, Salomon Smith Barney, Wachovia and others that included “(1) cash payments to brokers in return for the brokers' agreement to promote sales of fund shares; (2) directing fund portfolio brokerage to brokers in return for agreements by the brokers to promote the funds (a practice known as “directed brokerage”); and (3) excessive commission arrangements with brokers.” Bellikoff, at 114. At bottom, “as more investors were drawn to the funds through these arguably nefarious business practices, the fees paid to various defendants mushroomed,” id. The Second Circuit noted that SEC had investigated and sanctioned Morgan Stanley “for accepting impermissible payments from the defendants here in exchange for aggressively pushing Eaton Vance funds over other comparable investment options” while “fail[ing] to disclose adequately certain material facts to its customers ... [namely that] it collected from a select group of mutual fund complexes amounts in excess of standard sales loads and Rule 12b-1 trail payments.” Id., at 114-15. The SEC fine resulted in the predictable Pavlovian response. In the words of the Circuit Court, “Smelling blood in the water, five investors then filed complaints . . . against Eaton Vance and many of its affiliated entities, alleging, inter alia, violations of the ICA, the Investment Advisers Act, and breaches of fiduciary duties.” Id., at 115.

Continue reading "Class Action Defense Cases-Bellikoff v. Eaton Vance: Second Circuit Affirms Judgment For Defense In Investment Company Act Class Action Holding That No Private Rights Of Action Exist For Claimed Violations Of The Act" »

Posted In: Class Action Court Decisions

District Court Abused its Discretion in Certifying Nationwide Class Action Because Numerous and Substantial Differences in Applicable Substantive laws Precluding Finding that Rule 23(b)(3) Predominance Test was Met Fifth Circuit Holds

Plaintiffs filed a putative class action against General Motors in Louisiana federal court, alleging that the sensors on 1998 and 1999 Cadillac DeVilles were defective. Cole v. General Motors Corp., 484 F.3d 717, 2007 WL 1054697, *1 (5th Cir. 2007). Plaintiffs’ moved to certify the lawsuit as a nationwide class action; defense attorneys opposed the motion, arguing in part that substantial differences in substantive laws among the 51 jurisdictions precluded a finding of predominance under FRCP Rule 23(b)(3). The district court rejected the defense arguments and certified a nationwide class action as requested. The defense filed an interlocutory appeal under Rule 23(f), arguing that the lower abused its discretion in certifying the class action, id., at *3. The Fifth Circuit agreed with the defense and reversed.

In September 2000, after receiving 300 reports of airbags deploying inadvertently, GM sent a voluntary recall notice to all 224,000 DeVille record owners/lessees stated that “a defect which relates to motor vehicle safety exists and may manifest itself in your 1998 or 1999 model year Cadillac DeVille” in that “the side impact air bags in your car [may] deploy unexpectedly, without a crash, as you start your car or during normal driving.” Cole, at *1. GM expected to have sufficient replacement parts by April 2001, but availability was delayed until May 2001, id. However, GM was able to replace 40,000 parts by November 2000, id. Plaintiffs Beverly Cole, Anita S. Perkins and Jewell P. Lowe received the voluntary recall notice: the Court of Appeals described them as follows: “Lowe is the mother of one of plaintiffs' counsel, Perkins is a paralegal for another of plaintiffs' counsel, and Cole is the paralegal's cousin.” Id. None of them had experienced a side airbag deploying inadvertently, but they filed a federal court class action against GM one month after receiving GM’s September 2000 letter, id. In November 2000, GM offered to replace the sensors in plaintiffs’ cars, but the offer was rejected “because GM did not extend the offer to all DeVille owners and GM would not answer questions about the source of the parts, the number available, and whether the SISMs had been properly tested.” Id. Plaintiffs dismissed this class action but filed a new class action in Louisiana state court in December 2000; defense attorneys removed the class action to federal court in January 2001 on the basis of diversity jurisdiction, id., at *1-*2.

Continue reading "Class Action Defense Cases-Cole v. General Motors: Fifth Circuit Agrees With Defense That Lower Court Erred In Certifying Nationwide Class Action Because Of Numerous Differences In Several Jurisdictions" »

Posted In: Class Action Court Decisions

Plaintiffs in Class Action Alleging Failure to Pay Overtime in Violation of Federal Fair Labor Standards Act (FLSA) Demonstrated that they were “Similarly Situated” to Putative Class Members thus Supporting Court Order Granting Motion to Conditionally Certify Lawsuit as a Class Action and to Provide Notice to Class Members Kansas Federal Court Holds

Plaintiffs filed a class action complaint in Kansas federal court against their employer, Heartland Services, alleging failure to pay overtime in violation of the federal Fair Labor Standards Act (FLSA). Bishop v. Heartland Services, Inc., 242 F.R.D. 612, 613 (D. Kan. 2007). Plaintiffs filed a motion requesting the court to certify the lawsuit as a class action and to authorize notice to putative class members, id.; defense attorneys opposed the motion on the grounds that (1) the class involved only 21 people, and (2) “there has been no indication of interest by other potential class members,” id., at 614. The district court held that the employees were similarly situated with the putative class sufficient to warrant notice to the class of conditional certification of a class action.

Under the FLSA, class action treatment is governed by 29 U.S.C. § 216(b), which provides: “An action to recover the liability prescribed in either of the preceding sentences may be maintained...by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.” However, the statute fails to define the critical phrase, “similarly situated.” The district court noted that the Tenth Circuit has adopted the “ad hoc” method for determining whether the employee seeking class action treatment is “similarly situated” to members of the putative class, Bishop, at 613 (citing Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1105 (10th Cir. 2001)). The “ad hoc” method allows the district court to make a preliminary “notice stage” determination, which “‘require[s] nothing more than substantial allegations that the putative class members were together the victims of a single decision, policy, or plan.’” Id., at 614 (citation omitted). The district court explained that “[t]his standard is a lenient one,” id., and that while Thiessen suggests that “substantial allegations” are sufficient, plaintiffs in the current case “presented limited evidence in support of their claims.” Id. After the court “conditionally” certifies the lawsuit as a class action for purposes of notice, then the parties complete discovery and present evidence to support “a stricter ‘similarly situated’ standard.” Bishop, at 614 (citing Thiessen, 267 F.3d at 1102-03).

In analyzing plaintiffs’ motion for conditional certification of a class action, the district court held that plaintiffs’ allegations - viz., that all putative class members are employees with “same or similar job titles” who performed “same or similar job duties” at the same Kansas facility and were paid under a common Employee Compensation Agreement - adequately established that plaintiffs were similarly situated for purposes of notice stage conditional class action certification. Bishop, at 614. The court rejected defense arguments that the class was too small - allegedly consisting of only 21 people - because the defense failed to provide admissible evidence supporting its claim, id. The court rejected defense claims that “there has been no indication of interest by other potential class members” on the same ground, id. Accordingly, the court granted plaintiffs’ motion to conditionally certify the lawsuit as a class action and approved notice to putative class members, id., at 614-15.

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

As a reference for class action defense attorneys who defend against securities class action litigation, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress provided a safe harbor for forward-looking statements for purposes of private securities class action lawsuits, in 15 U.S.C. § 78u-5, which states:

§ 78u–5. Application of safe harbor for forward-looking statements

(a) Applicability

This section shall apply only to a forward-looking statement made by—

(1) an issuer that, at the time that the statement is made, is subject to the reporting requirements of section 78m (a) of this title or section 78o (d) of this title;

(2) a person acting on behalf of such issuer;

(3) an outside reviewer retained by such issuer making a statement on behalf of such issuer; or

(4) an underwriter, with respect to information provided by such issuer or information derived from information provided by such issuer.

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Posted In: Statutes & Rules

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 action lawsuits 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. Labor law class action cases generally top the list, with the “competition” often running a distant second. Yet again, employment-related class action cases topped the list of weekly class action filings. This report covers the time period from May 4 – May 10, 2007, during which time approximately 47 new class action cases were filed in the California state and federal courts listed above. Employment-related class actions accounted for 45% of these cases, with 21 new cases. No other class action category satisfied the 10% threshold for this list.

Posted In: Class Actions In The News

Judicial Panel Grants Defense Request, Unopposed by Plaintiffs, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 of Class Action Lawsuits Alleging Antitrust Conspiracy

Four federal antitrust class action lawsuits, two in Tennessee and two in Indiana, were filed against various defendants alleging that they “engaged in a conspiracy to artificially increase, maintain, and/or stabilize prices of orthopaedic implants.” In re Orthopaedic Implant Device Antitrust Litig., 483 F.Supp.2d 1355 (Jud.Pan.Mult.Lit. 2007). Defense attorneys for several of the defendants – specifically, Zimmer Holdings, Zimmer, Inc., Stryker Corp., Biomet, DePuy Orthopaedics and/or DePuy, Inc., Johnson & Johnson, and Smith & Nephew plc and Smith & Nephew, Inc., id., at 1355 n.2 – filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of Indiana; plaintiffs’ lawyers did not oppose the motion, and agreed as well to centralization in the Northern District of Indiana. Id. The Judicial Panel granted the motion to centralize the class actions and agreed that the Southern District of Indiana was an appropriate transferee court, noting that it is the district “where related grand jury proceedings are located and the first-filed action is pending, [and] enjoys the support of all parties.” Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

In Putative Class Action Against Computer Manufacturer, California Federal Court Holds that Texas Choice of Law Provision in Computer Sales Agreement is Valid and Arbitration Clause Containing Class Action Waiver is Enforceable

Plaintiffs filed a class action against Dell alleging defects in its notebook computers. Omstead v. Dell, 473 F.Supp.2d 1018, 1021 (N.D. Cal. 2007). Defense attorneys moved to stay the class action and compel arbitration pursuant to the Federal Arbitration Act (FAA), id., at 1020. The arbitration clause contained a class action waiver, prohibiting customers from initiating or participating in class action litigation with Dell, id., at 1022. The district court granted the defense motion, holding that the class action waiver did not invalidate the arbitration clause.

Plaintiffs propose to litigate a class action on behalf of purchasers of Dell notebook computers alleging that they were “manufactured with three defects – inadequate cooling systems, a power supply that prematurely fails when used as intended, and motherboards that prematurely fail when used as intended.” Omstead, at 1021. The defense moved to stay the class action and compel arbitration based on the sales agreement provided to its computer purchasers; that agreement states that Texas law shall apply to any dispute arising out of the purchase of the computer and contains an arbitration clause governed by the FAA. Id. Further, all sales confirmations advised purchasers that the “Conditions and Terms of Sale” contain “a dispute resolution clause.” Id. Plaintiffs did not dispute receiving the sales agreement; rather, they argued that California law governed whether the arbitration clause therein was enforceable, not Texas law, and that under California law the class action waiver provision was unenforceable. Omstead, at 1022.

Continue reading "Class Action Defense Cases-Omstead v. Dell: California Federal Court Grants Defense Motion To Stay Class Action Litigation And Compel Arbitration Where Arbitration Clause Contains Class Action Waiver" »

Posted In: Arbitration, Class Action Court Decisions

Uncertainty as to Whether Seventh Circuit will Hold that Class Action Under TILA (Truth-in-Lending Act) may seek Rescission Warrants Stay of Proceedings Pending Appeal Wisconsin Federal Court Holds

Plaintiff filed a class action against Chevy Chase Bank alleging various violations of the federal Truth-in-Lending Act (TILA). Ultimately, the district court extended by three years the borrowers’ rescission period based on its finding that the bank materially violated TILA, and certified the litigation as a class action “leaving the decision as to whether to actually seek rescission to each individual class member.” Andrews v. Chevy Chase Bank, FSB, 474 F.Supp.2d 1006, 1007 (E.D. Wis. 2007). Defense attorneys sought appellate review of the class action certification order under FRCP Rule 23(f), and the Circuit Court permitted the appeal, id. The defense thereafter sought a stay of the trial court proceedings pending appeal; the district court granted the request.

The district court applied the standard balancing test applicable to stay requests in the Seventh Circuit: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” Andrews, at 1007 (citation omitted). The bulk of the court’s order is devoted to an analysis of the First Circuit’s opinion in McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir. 2007), which held that class actions seeking rescission are inappropriate under TILA. Id., at 1007-10. Not surprisingly, the district court found it unlikely that the defense would prevail on appeal with respect to the class certification order, id., at 1110.

However, the federal court recognized that the Seventh Circuit may well accept the reasoning of its sister circuit in McKenna, and recognized further the likelihood that it “defined the class too broadly” in that the district court failed to “take into account that TILA prohibits certain borrowers from rescinding.” Andrews, at 1110. The court decided to grant the defense stay request because, even though it considered the irreparable injury/public interest factors to be “close,” in that both the plaintiffs and defense presented cogent arguments concerning prejudice, the court concluded that clarification as to whether a TILA class action can seek rescission tipped the scale in favor of the stay. Id.

Posted In: Certification of Class Actions, Class Action Court Decisions, RESPA/TILA Class Actions

Judicial Panel Grants Request, Supported by Defense, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 in the Northern District of California, Rejecting Request of Non-Moving Plaintiffs to Transfer Class Actions to Central District of California

Seven federal antitrust class action lawsuits were filed against various defendants alleging a “conspiracy to fix the price of graphics processing units, which are a type of specialized semiconductor”; all but one of these class actions were filed in the Northern District of California, with the remaining class action filed in the Central District of California. In re Graphics Processing Units Antitrust Litig., 483 F.Supp.2d 1356, 1356 (Jud.Pan.Mult.Lit. 2007). Plaintiffs’ lawyers in four of the Northern District actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) pursuant to 28 U.S.C. § 1407 requesting centralization of the class action litigation in the Northern District of California. Id. None of the parties opposed pretrial coordination of the class actions, but they did not agree on the appropriate transferee court. Defense attorneys for three of the defendants supported class action centralization and agreed with moving parties that the Northern District of California was the appropriate transferee court; however, plaintiffs in the three remaining class actions and plaintiffs in five tag-along class actions, while supporting centralization, argued for transfer to the Central District of California. Id. The Judicial Panel granted the motion to centralize the class actions and selected the Northern District of California because "[o]ver twenty of the actions of which the Panel has been notified have been brought in that district” and because “two of the defendants have their principal places of business there” so “relevant documents and witnesses are likely located in the San Francisco area." Id., at 1357.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Defense Claims of $75,000 Controversy for Diversity Jurisdiction and $5 Million Controversy for Removal Jurisdiction under Class Action Fairness Act of 2005 (CAFA) were Speculative Warranting Remand of Class Action to State Court

Plaintiff filed a putative class action against Esurance Insurance in Illinois state court alleging bad faith in the processing of insurance claims. Defense attorneys removed the class action to federal court arguing diversity jurisdiction and removal jurisdiction under the Class Action Fairness Act of 2005 (CAFA). Atteberry v. Esurance Ins. Services, Inc., 473 F.Supp.2d 876, 877 (N.D. Ill. 2007). Faced with the issue of whether the class action should be remanded to state court, the defense conceded that the class action was not subject to removal at the time it filed the notice of removal, but argued that plaintiff’s subsequent amendment of the class action complaint “operated to trigger potential removability.” Id. The district court disagreed and remanded the class action to state court.

The thrust of the defense argument was its interpretation of state law permitting a statutory award of up to $60,000 plus attorney fees for the bad faith handling of an insurance claim. Atteberry, at 877. The district court found the argument wanting in two respects. First, the federal court held that the defense failed to establish that the maximum statutory penalty would be awarded, characterizing the defense evidence as a “hypothetical valuation,” id. Second, the defense improperly assumed attorney fees in excess of $15,000 because “only fees already incurred at the time that federal jurisdiction is invoked, not anticipated fees, may be counted toward the requisite amount in controversy.” Id. (citing Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955, 958 (7th Cir. 1998)). In the words of the Seventh Circuit, “jurisdiction depends on the state of affairs when the case begins; what happens later is irrelevant.” Gardynski-Leschuck, 142 F.3d at 958.

Turning to the question of removal jurisdiction under CAFA, the district court held that the defense “has indulged [in] nothing beyond unsupported speculation as to the size of the potential class and hence as to the prospect . . . that the $5 million jurisdictional minimum under CAFA is at issue.” Id., at 878. Accordingly, the federal court remanded the lawsuit to the Illinois state court.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

As a resource for the class action defense lawyer who defends against securities class action litigation, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress set forth general provisions governing private securities class action litigation in 15 U.S.C. § 78u–4, which provides as follows:

§ 78u–4. Private securities litigation

(a) Private class actions

(1) In general

The provisions of this subsection shall apply in each private action arising under this chapter that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure.

(2) Certification filed with complaint

(A) In general

Each plaintiff seeking to serve as a representative party on behalf of a class shall provide a sworn certification, which shall be personally signed by such plaintiff and filed with the complaint, that—

(i) states that the plaintiff has reviewed the complaint and authorized its filing;

(ii) states that the plaintiff did not purchase the security that is the subject of the complaint at the direction of plaintiff’s counsel or in order to participate in any private action arising under this chapter;

(iii) states that the plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary;

(iv) sets forth all of the transactions of the plaintiff in the security that is the subject of the complaint during the class period specified in the complaint;

(v) identifies any other action under this chapter, filed during the 3-year period preceding the date on which the certification is signed by the plaintiff, in which the plaintiff has sought to serve as a representative party on behalf of a class; and

(vi) states that the plaintiff will not accept any payment for serving as a representative party on behalf of a class beyond the plaintiff’s pro rata share of any recovery, except as ordered or approved by the court in accordance with paragraph (4).

Continue reading "15 U.S.C. § 78u–4--Congressional Provisions Applicable To Private Securities Litigation Pursuant To The Private Securities Litigation Reform Act (PSLRA)" »

Posted In: Statutes & Rules

In order to assist California class action defense attorneys in anticipating claims against which they may have to defend, we provide weekly an unofficial summary of legal categories for 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. This report covers the time period of April 27 – May 3, 2007. We include only those categories that contain 10% or more of the class action filings during the relevant timeframe. Approximately 42 class action lawsuits were filed in these California state and federal courts during that time period, of which 20 involved employment law class action claims, which represents approximately 48% of the class actions filed during this time period. The only other category to break the 10% threshold consisted of alleged unfair business practice class actions, which include false advertising claims, with 7 new class action filings (17%).

Posted In: Class Actions In The News

Presumption of Reliance may be Applied in Fraud Class Action Lawsuit Where Defendant’s Omission is Primarily at Issue, and Existence of Individual Statute of Limitations Defenses does not Preclude Certification of Class Action Washington Federal Court Holds

Plaintiffs filed a putative class action against Carrier Corporation for misrepresentation, violation of Washington’s Consumer Protection Act (WCPA), unjust enrichment and breach of warranty alleging that the company “concealed a known defect in its high-efficiency condensing furnaces.” Grays Harbor Adventist Christian School v. Carrier Corp., ___F.Supp.2d ___ (W.D. Wash. May 1, 2007) [Slip Opn., at 2]. Plaintiffs moved to certify the lawsuit as a class action, id., at 1; defense attorneys opposed certification as a class action, primarily arguing that the commonality and superiority requirements of Rule 23(b)(3) had not been met, id., at 5. The district court certified the class action as requested, concluding that the requirements of FRCP Rule 23(a) and (b)(3) have been met.

The district court first addressed the requirements of Rule 23(a). Because the putative class consists of thousands of members, the court found that Rule 23(a)(1)’s numerosity requirement had been met. Grays, at 3. The federal court further found that the proposed class action “clearly” satisfied Rule 23(a)(2)’s commonality requirement, explaining at page 3:

Continue reading "Class Action Defense Cases-Grays v. Carrier: Washington Federal Court Rejects Defense Arguments Against Certification Of Class Action Holding The Presumption Of Reliance Applied In This Fraud Class Action" »

Posted In: Certification of Class Actions, Class Action Court Decisions

Trial Court Order on Motion for Judgment on the Pleadings in Fair Debt Collection/Unfair Competition Law Class Action Violated One-Way Intervention Rule but Remedy is Vacating of Order Rather than Barring Class Action to Proceed California Supreme Court Holds

Sandra Gonzalez filed a class action cross-complaint against Fireside Bank alleging inter alia violations of California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) for failing to comply with the statutory notice requirements for collection of a deficiency judgment on vehicle sales contracts. Fireside Bank v. Superior Court, 56 Cal.Rptr.3d 861, 2007 WL 1112020, *1 (Cal. April 16, 2007). Gonzalez moved for judgment on the pleadings, and for an order certifying her lawsuit as a class action. The bank objected to any ruling on the merits of the class action until after the court first ruled on the motion to certify a class action, arguing that the one-way intervention rule required that procedure be followed. The trial court promised to rule on the class action certification first, but instead it simultaneously granted both motions. The Supreme Court held that this was error, and vacated the order granting the motion for judgment on the pleadings.

Gonzalez purchased a vehicle for her father, obtaining dealer financing but intending that her father use and pay for the vehicle. Fireside, at *1. The sales contract was assigned to Fireside Bank, and the loan went into default so the bank repossessed the vehicle, id. The bank sent Gonzalez a notice advising her of her redemption rights but overstating the amount due by $2700. Id. The bank then filed a lawsuit against Gonzalez seeking a deficiency judgment; Gonzalez filed a cross-complaint alleging that the bank failed to comply with the Rees-Levering Motor Vehicle Sales and Finance Act (Rees-Levering) in that the bank’s notice of intent was defective, thereby precluding the bank from seeking a deficiency judgment. Id., at *2. In part, the cross-complaint alleged violations of Rees-Levering and of California’s unfair competition law (UCL), id. The bank conceded that the notice contained a mistake, attributing it to a “computer error” and admitting that 3,000 other borrowers also received inaccurate notices. Id. Gonzalez moved for judgment on the pleadings on the bank’s complaint; the bank opposed the motion arguing, in part, that “before obtaining a ruling on the motion Gonzalez must seek or forswear certification of a class . . . and the trial court should take the motion off calendar or deny it without prejudice until class issues, if any, were resolved.” Id. The trial court postponed ruling on the motion, id.

Gonzalez amended her cross-complaint to assert the Rees-Levering Act and UCL claims on behalf of “all persons who had received postrepossession [sic] notices from Fireside Bank on accounts started in California in which the listed redemption amount failed to subtract the credit for unearned finance charges,” and then moved the court to certify the action as a class action. Fireside, at *2. The bank opposed the motion, id. The trial court set the hearing on the motion to certify a class action for the same date as the hearing on the motion for judgment on the pleadings; in so doing, the court indicated that it would likely certify a class action. Id., at *3. The bank also objected to any ruling on the motion for judgment on the pleadings until after the class certification issue was resolved, id. The Supreme Court noted at page *3 that “The trial court assured counsel that it was ‘not going to rule’ on the motion for judgment on the pleadings ‘until I decide the issue of certification.’” Id. But the trial court issued orders not only granting the motion to certify a class action, but also granting the motion for judgment on the pleadings based on its finding that the bank had "failed to comply with the notice requirements under the Rees-Levering Act” and therefore the bank could not recover a deficiency judgment. Id.

Continue reading "Class Action Defense Cases-Fireside Bank v. Superior Court: California Court Reaffirms Importance Of One-Way Intervention Rule In Class Action Alleging Fair Debt Collection And Unfair Competition Violations" »

Posted In: Certification of Class Actions, Class Action Court Decisions

Federal Court Holds that Putative Class Members are not “Current Parties” to Class Action, and that Rule 41 Applies to Class Action Plaintiffs Requiring Consent of Defendant for Dismissal

Plaintiffs filed a putative class action against their title insurer, First American, alleging that the prices charged by First American for title insurance issued in connection with refinance transactions violate state law. First American filed a counterclaim against plaintiffs and joined two parties as third-party defendants. Ten months after filing the class action, plaintiffs’ lawyer sought leave of court to file a second amended class action complaint for the purpose of substituting class representatives. Barnes v. First American Title Ins. Co., 473 F.Supp.2d 798, 799 (N.D. Ohio 2007). Defense attorneys opposed the motion on several grounds including (1) the existence of counterclaims unique to plaintiffs, precluding dismissal absent a stipulation with First American; (2) the absence of good cause in that plaintiffs knew the facts underlying the motion at the time they filed the class action; (3) the proposed amendment to the class action complaint “does not assert new claims but rather seeks a wholesale substitution of parties with different facts and discovery”; (4) the resulting prejudice to First American in that substantial discovery had been completed during the preceding 10 months; and (5) the joinder by First American, as third-party defendants, the agents who sold plaintiffs the title policies at issue. Id. The district court agreed with the first and third arguments, and denied the motion to substitute class representatives.

Believing that they could not adequately represent the proposed class, plaintiffs’ lawyer sought to substitute in as class representatives Dean and Aimee Hickman in place of Randolph and Stacie Barnes because the Barnes’ are involved in probate court litigation in which “Mr. Barnes' brother asserts the deed for the subject property that was subsequently refinanced by the Barnes was forged or obtained by fraud.” Barnes, at 799. Plaintiffs relied upon the general rule that leave to amend should be liberally granted and argued that “courts routinely grant leave to substitute parties in class action litigation.” Id. The district court recognized that the Sixth Circuit is “very liberal” in allowing complaints to be amended, id., at 800, but nonetheless denied the motion.

Continue reading "Class Action Defense Cases-Barnes v. First American: Ohio Federal Court Denies Motion To Amend Class Action Complaint To Substitute New Class Representatives" »

Posted In: Class Action Court Decisions

California Appellate Court Holds Wal-Mart Defense Attorneys Failed to Properly Move to Seal Records Filed with Court During Litigation of Labor Law Class Action, Reversing Trial Court Order Sealing Class Action Records

In February 2001, a class action was filed against Wal-Mart in California state court alleging violations of various labor laws; defense and plaintiff attorneys stipulatedd to a confidentiality and protective order governing documents filed with the court during the class action litigation, and the trial court entered a Protective Order in February 2002. Savaglio v. Wal-Mart Stores, Inc., ___ Cal.App.4th ___ (Cal.App. April 9, 2007) [Slip Opn., at 2]. The Protective Order provided that certain documents filed in the class action would be "conditionally sealed" pending a motion for an order permanently sealing the records, id. The class action was vigorously fought, and Wal-Mart filed petitions with the California Court of Appeal for writ relief following the trial court order certifying the lawsuit as a class action and following the trial court order denying Wal-Mart's motion for summary adjudication. Id., at 3. Defense attorneys did not seal any of the records filed with appellate court, id., at 1, 4, and did not file a motion in the trial court to permanently seal the records filed with the court, id., at 1, 5. A newspaper sought to review the documents filed in the class action, and Wal-Mart responded with a motion to permanently seal the records. Id., at 1. The trial court granted the defense motion in part, ordering that certain documents filed during the class action litigation be permanently sealed; the appellate court reversed.

The newspaper first sought the records filed in the class action litigation. Savalgio, at 3-4. The newspaper then sought access to the appellate records, and were advised by the clerk that the records of the Court of Appeal were not sealed, id., at 4. In response, Wal-Mart sent a letter to clerk representing that the records had been sealed by the trial court and thus should be deemed sealed on appeal; the appellate court agreed to conditionally seal the records pending a determination by the trial court of whether the records it were in fact sealed, id. at 5. The trial court denied the newspaper's motion to unseal the records, and wal-Mart filed a motion with the trial court to permanently seal the records. Id. Ultimately, the trial court ordered a "small portion" of the records permanently sealed, id. The newspaper moved for attorney fees under California Code of Civil Procedure section 1021.5, but the trial court denied the motion. Id., at 6. The newspaper appealed both rulings.

Continue reading "Wal-Mart Class Action Defense Case-Savaglio v. Wal-Mart: Records Filed With Court In Labor Law Class Action Were Not Properly Sealed Thus Entitling News Agency To Access To Records Filed "Conditionally Under Seal" In Class Action California Court Holds" »

Posted In: Class Action Court Decisions

Federal Court for the District of Columbia Holds that Class Action Under District of Columbia Laws Predicated on Foreign Currency Exchange Rates Charged at Russian Hotel need not be Dismissed for Forum Non Conveniens and Survived Motion to Dismiss for Failure to State a Claim

Plaintiffs filed a putative class action against Marriott for unfair business practices under the Consumer Protection Procedures Act of the District of Columbia (CPPA) alleging that the company misrepresents the pricing practices at Marriott’s Moscow Hotel, specifically with respect to the exchange rates quoted by Marriott to its customers. Shaw v. Marriott Int’l, Inc., 474 F.Supp.2d 141, 142-43 (D.D.C. 2007). The action had been filed in the superior court, but the defense removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Id., at 143, 147 n.5. Plaintiff Shaw reserved a room at the Marriott-owned Renaissance Moscow Hotel at a rate of $425 per night. Id., at 143. The Marriott website stated that the exchange rate was 27.78 Russian rubles to the dollar, but when he checked out of the hotel, his bill reflected an exchange rate of 32 rubles to the dollar, id. Other class representatives had similar experiences. Id. Defense attorneys filed a motion to dismiss the class action for failure to state a claim or on the ground of forum non conveniens because the events central to the class action took place in Russia, id., at 144, which the district court denied, id., at 142.

The district court began with the forum non conveniens argument. The court readily concluded that the defense argument misstated the allegations of the class action complaint because the defense focused on acts in Russia and alleged violations of Russian law. Shaw, at 144-45. In point of fact, the court held, the class action focused on events that transpired at Marriott’s corporate headquarters in the District of Columbia and on violations of District of Columbia laws, id. The federal court also found that a balancing of the public and private interest factors supports keeping the case in the District of Columbia, id., at 145-46. Further, “There is no question that testimony from Marriott's witnesses related to these claims is more accessible in the District of Columbia, as are business records and other documents.” Id., at 146.

Continue reading "Class Action Defense Cases-Shaw v. Marriott: Federal Court Holds Class Action Under District Of Columbia Unfair Business Practice Laws Properly Brought In United States And Survives Motion To Dismiss" »

Posted In: Class Action Court Decisions

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 skip because 24 CFR § 3500.20 was removed and reserved; the next RESPA regulation, therefore, is found at 24 CFR § 3500.21, which sets forth the regulations concerning the transfer of mortgage servicing. Section 3500.21 provides in full:

§ 3500.21. Mortgage servicing transfers;/p>

(a) Definitions.As used in this section:

Master servicer means the owner of the right to perform servicing, which may actually perform the servicing itself or may do so through a subservicer.

Mortgage servicing loan means a federally related mortgage loan, as that term is defined in § 3500.2, subject to the exemptions in § 3500.5, when the mortgage loan is secured by a first lien. The definition does not include subordinate lien loans or open-end lines of credit (home equity plans) covered by the Truth in Lending Act and Regulation Z, including open-end lines of credit secured by a first lien.

Qualified written request means a written correspondence from the borrower to the servicer prepared in accordance with paragraph (e)(2) of this section.

Subservicer means a servicer who does not own the right to perform servicing, but who does so on behalf of the master servicer.

Transferee servicer means a servicer who obtains or who will obtain the right to perform servicing functions pursuant to an agreement or understanding.

Transferor servicer means a servicer, including a table funding mortgage broker or dealer on a first lien dealer loan, who transfers or will transfer the right to perform servicing functions pursuant to an agreement or understanding.

(b) Servicing Disclosure Statement and Applicant Acknowledgement; requirements.(1) At the time an application for a mortgage servicing loan is submitted, or within 3 business days after submission of the application, the lender, mortgage broker who anticipates using table funding, or dealer who anticipates a first lien dealer loan shall provide to each person who applies for such a loan a Servicing Disclosure Statement.This requirement shall not apply when the application for credit is turned down within three business days after receipt of the application. A format for the Servicing Disclosure Statement appears as Appendix MS-1 to this part. Except as provided in paragraph (b)(2) of this section, the specific language of the Servicing Disclosure Statement is not required to be used, but the Servicing Disclosure Statement must include the information set out in paragraph (b)(3) of this section, including the statement of the borrower's rights in connection with complaint resolution. The information set forth in Instructions to Preparer on the Servicing Disclosure Statement need not be included on the form given to applicants, and material in square brackets is optional or alternative language.

(2) The Applicant's Acknowledgement portion of the Servicing Disclosure Statement in the format stated is mandatory. Additional lines may be added to accommodate more than two applicants.

(3) The Servicing Disclosure Statement must contain the following information, except as provided in paragraph (b)(3)(ii) of this section:

(i) Whether the servicing of the loan may be assigned, sold or transferred to any other person at any time while the loan is outstanding.If the lender, table funding mortgage broker, or dealer in a first lien dealer loan does not engage in the servicing of any mortgage servicing loans, the disclosure may consist of a statement to the effect that there is a current intention to assign, sell, or transfer servicing of the loan.

(ii) The percentages (rounded to the nearest quartile (25%)) of mortgage servicing loans originated by the lender in each calendar year for which servicing has been assigned, sold, or transferred for such calendar year. Compliance with this paragraph (b)(3)(ii) is not required if the lender, table funding mortgage broker, or dealer on a first lien dealer loan chooses option B in the model format in paragraph (b)(4) of this section, including in square brackets the language "[and have not serviced mortgage loans in the last three years.]".The percentages shall be provided as follows:

(A) This information shall be set out for the most recent three calendar years completed, with percentages as of the end of each year.This information shall be updated in the disclosure no later than March 31 of the next calendar year. Each percentage should be obtained by using as the numerator the number of mortgage servicing loans originated during the calendar year for which servicing is transferred within the calendar year and, as the denominator, the total number of mortgage servicing loans originated in the calendar year. If the volume of transfers is less than 12.5 percent, the word "nominal" or the actual percentage amount of servicing transfers may be used.

(B) This statistical information does not have to include the assignment, sale, or transfer of mortgage loan servicing by the lender to an affiliate or subsidiary of the lender. However, lenders may voluntarily include transfers to an affiliate or subsidiary.The lender should indicate whether the percentages provided include assignments, sales, or transfers to affiliates or subsidiaries.

(C) In the alternative, if applicable, the following statement may be substituted for the statistical information required to be provided in accordance with paragraph (b)(3)(ii) of this section: "We have previously assigned, sold, or transferred the servicing of federally related mortgage loans."

(iii) The best available estimate of the percentage (0 to 25 percent, 26 to 50 percent, 51 to 75 percent, or 76 to 100 percent) of all loans to be made during the 12-month period beginning on the date of origination for which the servicing may be assigned, sold, or transferred. Each percentage should be obtained by using as the numerator the estimated number of mortgage servicing loans that will be originated for which servicing may be transferred within the 12-month period and, as the denominator, the estimated total number of mortgage servicing loans that will be originated in the 12-month period.

(A) If the lender, mortgage broker, or dealer anticipates that no loan servicing will be sold during the calendar year, the word "none" may be substituted for "0 to 25 percent." If it is anticipated that all loan servicing will be sold during the calendar year, the word "all" may be substituted for "76 to 100 percent."

(B) This statistical information does not have to include the estimated assignment, sale, or transfer of mortgage loan servicing to an affiliate or subsidiary of that person. However, this information may be provided voluntarily. The Servicing Disclosure Statements should indicate whether the percentages provided include assignments, sales or transfers to affiliates or subsidiaries.

(iv) The information set out in paragraphs (d) and (e) of this section.

(v) A written acknowledgement that the applicant (and any co-applicant) has/have read and understood the disclosure, and understand that the disclosure is a required part of the mortgage application. This acknowledgement shall be evidenced by the signature of the applicant and any co-applicant.

(4) The following is a model format, which includes several options, for complying with the requirements of paragraph (b)(3) of this section.The model format may be annotated with additional information that clarifies or enhances the model language.The lender or table funding mortgage broker (or dealer) should use the language that best describes the particular circumstances.

(i) Model Format: The following is the best estimate of what will happen to the servicing of your mortgage loan:

(A) Option A.We may assign, sell, or transfer the servicing of your loan while the loan is outstanding.[We are able to service your loan[.][,] and we [will] [will not] [haven't decided whether to] service your loan.]; or

(B) Option B.We do not service mortgage loans[.][,] [and have not serviced mortgage loans in the past three years.]We presently intend to assign, sell, or transfer the servicing of your mortgage loan. You will be informed about your servicer.

(C) As appropriate, the following paragraph may be used:

We assign, sell, or transfer the servicing of some of our loans while the loans are outstanding, depending on the type of loan and other factors.For the program for which you have applied, we expect to [assign, sell, or transfer all of the mortgage servicing] [retain all of the mortgage servicing] [assign, sell, or transfer ___% of the mortgage servicing].

(ii) [Reserved]

(c) Servicing Disclosure Statement and Applicant Acknowledgement; delivery.The lender, table funding mortgage broker, or dealer that anticipates a first lien dealer loan shall deliver Servicing Disclosure Statements to each applicant for mortgage servicing loans.Each applicant or co-applicant must sign an Acknowledgement of receipt of the Servicing Disclosure Statement before settlement.

(1) In the case of a face-to-face interview with one or more applicants, the Servicing Disclosure Statement shall be delivered at the time of application. An applicant present at the interview may sign the Acknowledgment on his or her own behalf at that time. An applicant present at the interview also may accept delivery of the Servicing Disclosure Statement on behalf of the other applicants.

(2) If there is no face-to-face interview, the Servicing Disclosure Statement shall be delivered by placing it in the mail, with prepaid first-class postage, within 3 business days from receipt of the application.If co-applicants indicate the same address on their application, one copy delivered to that address is sufficient.If different addresses are shown by co-applicants on the application, a copy must be delivered to each of the co-applicants.

(3) The signed Applicant Acknowledgment(s) shall be retained for a period of 5 years after the date of settlement as part of the loan file for every settled loan.There is no requirement for retention of Applicant Acknowledgment(s) if the loan is not settled.

(d) Notices of Transfer; loan servicing. (1) Requirement for notice. (i) Except as provided in this paragraph (d)(1)(i) or paragraph (d)(1)(ii) of this section, each transferor servicer and transferee servicer of any mortgage servicing loan shall deliver to the borrower a written Notice of Transfer, containing the information described in paragraph (d)(3) of this section, of any assignment, sale, or transfer of the servicing of the loan.The following transfers are not considered an assignment, sale, or transfer of mortgage loan servicing for purposes of this requirement if there is no change in the payee, address to which payment must be delivered, account number, or amount of payment due:

(A) Transfers between affiliates;

(B) Transfers resulting from mergers or acquisitions of servicers or subservicers; and

(C) Transfers between master servicers, where the subservicer remains the same.

(ii) The Federal Housing Administration (FHA) is not required under paragraph(d) of this section to submit to the borrower a Notice of Transfer in cases where a mortgage insured under the National Housing Act is assigned to FHA.

(2) Time of notice. (i) Except as provided in paragraph (d)(2)(ii) of this section:

(A) The transferor servicer shall deliver the Notice of Transfer to the borrower not less than 15 days before the effective date of the transfer of the servicing of the mortgage servicing loan;

(B) The transferee servicer shall deliver the Notice of Transfer to the borrower not more than 15 days after the effective date of the transfer; and

(C) The transferor and transferee servicers may combine their notices into one notice, which shall be delivered to the borrower not less than 15 days before the effective date of the transfer of the servicing of the mortgage servicing loan.

(ii) The Notice of Transfer shall be delivered to the borrower by the transferor servicer or the transferee servicer not more than 30 days after the effective date of the transfer of the servicing of the mortgage servicing loan in any case in which the transfer of servicing is preceded by:

(A) Termination of the contract for servicing the loan for cause;

(B) Commencement of proceedings for bankruptcy of the servicer; or

(C) Commencement of proceedings by the Federal Deposit Insurance Corporation(FDIC) or the Resolution Trust Corporation (RTC) for conservatorship or receivership of the servicer or an entity that owns or controls the servicer.

(iii) Notices of Transfer delivered at settlement by the transferor servicer and transferee servicer, whether as separate notices or as a combined notice, will satisfy the timing requirements of paragraph (d)(2) of this section.

(3) Notices of Transfer; contents. The Notices of Transfer required under paragraph (d) of this section shall include the following information:

(i) The effective date of the transfer of servicing;

(ii) The name, consumer inquiry addresses (including, at the option of the servicer, a separate address where qualified written requests must be sent), and a toll-free or collect-call telephone number for an employee or department of the transferee servicer;

(iii) A toll-free or collect-call telephone number for an employee or department of the transferor servicer that can be contacted by the borrower for answers to servicing transfer inquiries;

(iv) The date on which the transferor servicer will cease to accept payments relating to the loan and the date on which the transferee servicer will begin to accept such payments. These dates shall either be the same or consecutive days;

(v) Information concerning any effect the transfer may have on the terms or the continued availability of mortgage life or disability insurance, or any other type of optional insurance, and any action the borrower must take to maintain coverage;

(vi) A statement that the transfer of servicing does not affect any other term or condition of the mortgage documents, other than terms directly related to the servicing of the loan; and

(vii) A statement of the borrower's rights in connection with complaint resolution, including the information set forth in paragraph (e) of this section.Appendix MS-2 of this part illustrates a statement satisfactory to the Secretary.

(4) Notices of Transfer; sample notice. Sample language that may be used to comply with the requirements of paragraph (d) of this section is set out in Appendix MS-2 of this part.Minor modifications to the sample language may be made to meet the particular circumstances of the servicer, but the substance of the sample language shall not be omitted or substantially altered.

(5) Consumer protection during transfer of servicing. During the 60-day period beginning on the effective date of transfer of the servicing of any mortgage servicing loan, if the transferor servicer (rather than the transferee servicer that should properly receive payment on the loan) receives payment on or before the applicable due date (including any grace period allowed under the loan documents), a late fee may not be imposed on the borrower with respect to that payment and the payment may not be treated as late for any other purposes.

(e) Duty of loan servicer to respond to borrower inquiries.

(1) Notice of receipt of inquiry. Within 20 business days of a servicer of a mortgage servicing loan receiving a qualified written request from the borrower for information relating to the servicing of the loan, the servicer shall provide to the borrower a written response acknowledging receipt of the qualified written response.This requirement shall not apply if the action requested by the borrower is taken within that period and the borrower is notified of that action in accordance with the paragraph (f)(3) of this section.By notice either included in the Notice of Transfer or separately delivered by first-class mail, postage prepaid, a servicer may establish a separate and exclusive office and address for the receipt and handling of qualified written requests.

(2) Qualified written request; defined. (i) For purposes of paragraph (e) of this section, a qualified written request means a written correspondence (other than notice on a payment coupon or other payment medium supplied by the servicer) that includes, or otherwise enables the servicer to identify, the name and account of the borrower, and includes a statement of the reasons that the borrower believes the account is in error, if applicable, or that provides sufficient detail to the servicer regarding information relating to the servicing of the loan sought by the borrower.

(ii) A written request does not constitute a qualified written request if it is delivered to a servicer more than 1 year after either the date of transfer of servicing or the date that the mortgage servicing loan amount was paid in full, whichever date is applicable.

(3) Action with respect to the inquiry. Not later than 60 business days after receiving a qualified written request from the borrower, and, if applicable, before taking any action with respect to the inquiry, the servicer shall:

(i) Make appropriate corrections in the account of the borrower, including the crediting of any late charges or penalties, and transmit to the borrower a written notification of the correction. This written notification shall include the name and telephone number of a representative of the servicer who can provide assistance to the borrower; or

(ii) After conducting an investigation, provide the borrower with a written explanation or clarification that includes:

(A) To the extent applicable, a statement of the servicer's reasons for concluding the account is correct and the name and telephone number of an employee, office, or department of the servicer that can provide assistance to the borrower; or

(B) Information requested by the borrower, or an explanation of why the information requested is unavailable or cannot be obtained by the servicer, and the name and telephone number of an employee, office, or department of the servicer that can provide assistance to the borrower.

(4) Protection of credit rating. (i) During the 60-business day period beginning on the date of the servicer receiving from a borrower a qualified written request relating to a dispute on the borrower's payments, a servicer may not provide adverse information regarding any payment that is the subject of the qualified written request to any consumer reporting agency (as that term is defined in section 603 of the Fair Credit Reporting Act, 15 U.S.C. 1681a).

(ii) In accordance with section 17 of RESPA (12 U.S.C. 2615), the protection of credit rating provision of paragraph (e)(4)(i) of this section does not impede a lender or servicer from pursuing any of its remedies, including initiating foreclosure, allowed by the underlying mortgage loan instruments.

(f) Damages and costs. (1) Whoever fails to comply with any provision of this section shall be liable to the borrower for each failure in the following amounts:

(i) Individuals.In the case of any action by an individual, an amount equal to the sum of any actual damages sustained by the individual as the result of the failure and, when there is a pattern or practice of noncompliance with the requirements of this section, any additional damages in an amount not to exceed $1,000.

(ii) Class Actions. In the case of a class action, an amount equal to the sum of any actual damages to each borrower in the class that result from the failure and, when there is a pattern or practice of noncompliance with the requirements of this section, any additional damages in an amount not greater than $1,000 for each class member.However, the total amount of any additional damages in a class action may not exceed the lesser of $500,000 or 1 percent of the net worth of the servicer.

(iii) Costs.In addition, in the case of any successful action under paragraph (f) of this section, the costs of the action and any reasonable attorneys' fees incurred in connection with the action.

(2) Nonliability.A transferor or transferee servicer shall not be liable for any failure to comply with the requirements of this section, if within 60 days after discovering an error (whether pursuant to a final written examination report or the servicer's own procedures) and before commencement of an action under this section and the receipt of written notice of the error from the borrower, the servicer notifies the person concerned of the error and makes whatever adjustments are necessary in the appropriate account to ensure that the person will not be required to pay an amount in excess of any amount that the person otherwise would have paid.

(g) Timely payments by servicer. If the terms of any mortgage servicing loan require the borrower to make payments to the servicer of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the mortgaged property, the servicer shall make payments from the escrow account in a timely manner for the taxes, insurance premiums, and other charges as the payments become due, as governed by the requirements in § 3500.17(k).

(h) Preemption of State laws. A lender who makes a mortgage servicing loan or a servicer shall be considered to have complied with the provisions of any State law or regulation requiring notice to a borrower at the time of application for a loan or transfer of servicing of a loan if the lender or servicer complies with the requirements of this section.Any State law requiring notice to the borrower at the time of application or at the time of transfer of servicing of the loan is preempted, and there shall be no additional borrower disclosure requirements. Provisions of State law, such as those requiring additional notices to insurance companies or taxing authorities, are not preempted by section 6 of RESPA or this section, and this additional information may be added to a notice prepared under this section, if the procedure is allowable under State law.

Posted In: Statutes & Rules

To aid California class action defense attorneys in anticipating claims against which they may have to defend, we provide weekly an unofficial summary of legal categories for 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. This report covers the time period of April 20 – April 26, 2007. We include only those categories that contain 10% or more of the class action filings during the relevant timeframe. Approximately 51 class action lawsuits were filed in these California state and federal courts during that time period, of which 21 involved employment law class action claims, which represents approximately 41% of the class actions filed during this time period. The only other categories to break the 10% threshold consisted of alleged unfair business practice class actions, which include false advertising claims, with 10 new class action filings (20%), and class actions alleging violations of the federal Americans with Disabilities Act (ADA), with 8 new filings (16%).

Posted In: Class Actions In The News