In Manson v. GMAC Mortgage, LLC, 2012 U.S. Dist. LEXIS 59492 (D. Mass. Apr. 30, 2012), Goodwin Procter assisted its clients GMAC Mortgage LLC and Wells Fargo Bank, as servicer of two U.S. Bank mortgage trusts, in defeating a motion to certify a class of home-mortgage borrowers who alleged that foreclosures performed on their properties were void due to defects in the chain of title to the foreclosing institution. The plaintiffs relied on a decision of the Supreme Judicial Court of Massachusetts, U.S. Bank N.A. v. Ibanez, 941 N.E.2d 40 (Mass. 2011), which invalidated two foreclosure sales on the ground that the institutions on whose behalf the foreclosure proceedings were brought could not demonstrate that they held the mortgage at the time of the sale.
Before Ibanez, lenders and servicers could rely on a Massachusetts Real Estate Bar Association Title Standard providing that so long as a mortgage is properly assigned to the foreclosing entity, it will be given effect regardless whether it is executed before or after the foreclosure sale. Ibanez upheld a Massachusetts Land Court decision finding that standard contrary to Massachusetts law. The original Land Court opinion and the S.J.C.'s decision prompted numerous lawsuits in Massachusetts – most on an individual basis, but some purporting to represent a class – based on so-called "Ibanez violations," challenging foreclosure sales and seeking to return title to the properties to the borrowers who had defaulted on their loans. An action seeking to address alleged Ibanez violations was also brought by the Massachusetts Attorney General.
In denying the Manson plaintiffs' motion for class certification, the district court accepted the defendants' argument that there was no common question capable of driving the resolution of the litigation on a class-wide basis. The defendants relied on language in Ibanez clarifying that a post-foreclosure assignment will not be deemed defective when it merely confirms unrecorded agreements properly assigning the mortgage to the foreclosing entity prior to the sale, and maintained that the question whether such a valid chain of title exists is one that would have to be assessed on an individual basis for each alleged class member. The court agreed, holding that "the determination of whether the statute was in fact violated would require 8,000 highly individualized and case-specific inquiries," and thus "[t]he glue that purports to bind the proposed class . . . would adhere only after the merits of each case had been fully investigated and only in those instances in which an Ibanez violation in fact was uncovered."
The decision represents another example of Rule 23(a)'s commonality requirement defeating class certification as a result of Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2451 (2011), where the Court held that a common question capable of satisfying Rule 23(a)(2) "must be of such a nature that it is capable of class-wide resolution – which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke."
Goodwin Procter LLP is one of the nation's leading law firms, with a team of 700 attorneys and offices in Boston, Los Angeles, New York, San Diego, San Francisco and Washington, D.C. The firm combines in-depth legal knowledge with practical business experience to deliver innovative solutions to complex legal problems. We provide litigation, corporate law and real estate services to clients ranging from start-up companies to Fortune 500 multinationals, with a focus on matters involving private equity, technology companies, real estate capital markets, financial services, intellectual property and products liability.
This article, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin Procter LLP or its attorneys. © 2012 Goodwin Procter LLP. All rights reserved.
