In a recent Memorandum and Order, Judge Richard G. Stearns of the United States District Court for the District of Massachusetts denied class certification in a case brought on behalf of Massachusetts residents whose homes were foreclosed, or against whom an invalid foreclosure process was initiated, between November 20, 2004 and December 31, 2008. Manson et al. v. GMAC Mortgage, LLC et al., No. 08-12166 (D. Mass. April 30, 2012). Plaintiffs in their Complaint sought class wide relief consisting of declaratory relief, and reimbursement of costs and fees and consequential damages incurred as a result of the foreclosure process. Defendants included servicers and the trustee for mortgages held in securitized pools, which mortgages secured loans originated by other entities, and the law firms that represented the servicers and the trustee during the foreclosure of those mortgages.
Plaintiffs' class claims, which included wrongful foreclosure, improper notice, breach of the duty of good faith and reasonable diligence, violations of the Fair Debt Collection Practices Act, and violations of Mass. Gen. Laws chapter 93A, arose out of an issue addressed by the Massachusetts Supreme Judicial Court in U.S. Bank Nat'l Ass'n v. Ibanez, 458 Mass. 637 (2011). In Ibanez, the Court held that under Massachusetts law a foreclosure by sale that does not strictly comply with the terms of Mass. Gen. Laws chapter 244, § 14, including the requirement that a foreclosing party that is not the original mortgagee obtain a valid assignment of the underlying mortgage before commencing foreclosure, is void and not merely voidable. For this reason, Plaintiffs wanted all members of the putative class notified that, despite being declared in default on their mortgages, they may nonetheless have a property interest in their present or former homes, and also for Defendants to reimburse those putative class members for costs, fees, and consequential damages incurred as a result of the allegedly flawed foreclosure process.
In denying class certification, Judge Stearns found that Plaintiffs failed to satisfy the necessary elements of commonality and typicality under Fed. R. Civ. P. 23(a). He also determined that Plaintiffs could not meet the required criteria under Fed. R. Civ. P. 23(b), including predominance and superiority for a damages class under Rule 23(b)(3), and the heightened standard for an injunctive relief class under Rule 23(b)(2) after the Supreme Court's decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).
The primary stumbling block for Plaintiffs was the lack of any common "glue" to bind the proposed classes together. As Judge Stearns put it: "[T]he determination of whether [Mass. Gen. Laws ch. 244, § 14] was in fact violated would require 8,000 highly individualized and case-specific inquiries," thereby defeating the policy behind certifying a class in the first place. The Court made this determination not only with respect to the more rigorous requirement of predominance under Rule 23(b)(3), but also concerning the basic prerequisite of commonality under Rule 23(a)(2). Nor was a class action superior, in the Court's view, to other alternatives such as an action by the Massachusetts Attorney General seeking injunctive relief on behalf of affected consumers, and separate actions by individual putative class members, not all of whom may even want to pursue restoration of their interest in their former property.
Regarding Plaintiffs' claims for injunctive relief, Judge Stearns echoed Wal-Mart's recent teachings that class certification under Rule 23(b)(2) is not authorized when individual members of the putative class seek different injunctions or declaratory relief, or when they seek individualized awards of monetary damages. In the words of the Court: "Here, given their differing circumstances, and the differing types of equitable relief they seek, plaintiffs' request is precisely that which the Supreme Court said in Wal-Mart cannot be granted."
Mortgage lenders, servicers, and foreclosure counsel are currently facing a variety of lawsuits, including class actions, in a number of jurisdictions asserting broad based attacks on the foreclosure process. Massachusetts is a non-judicial foreclosure state. In judicial foreclosure states, for instance Maine, the claims asserted on behalf of the putative class relate to alleged defects in court filings, such as summary judgment affidavits, in addition to the documents necessary to perfect the foreclosing party's mortgage interest, such as mortgage assignments. Although plaintiffs' counsel in these cases focus on the same type of documentary error allegedly occurring across multiple foreclosure proceedings as a basis to proceed with class litigation, Judge Stearns' decision in the Manson case recognizes the individualized nature of each separate foreclosure proceeding, in particular how each individual mortgagor is impacted adversely, if at all, by the conduct complained of. This is not just a question of damages, but goes also to causation as an essential element of the causes of action class counsel assert. In addition, the rationale of the Manson decision supports recognizing the superiority of other remedies already available to the foreclosed parties, both in the individual foreclosure proceedings themselves and through states' attorneys general, as a basis to deny class certification in these cases in judicial as well as non-judicial foreclosure states.
Originally published 05/15/2012
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