HAPPY ST. PATRICK’S DAY! And best wishes of The Day for a better Day than in 2014!
Claim preclusion or res judicata based on the payment of money in class action settlements is following a pattern. These efforts are being greeted with some success so far when used by Wells Fargo in lender force-placed insurance (“LFPI”) cases, for example. See ST. PATRICK’S DAY, 2014: THE DAY THAT BARRED ALL CLAIMS, supposedly.
Now the efforts are being followed by a provider of force-placed insurance, American Security Insurance Company or ASIC and a mortgage servicer, Ocwen, and their related affiliates and subsidiaries and partners. Following in the footsteps of Wells Fargo in this regard, ASIC and Ocwen have also obtained settlements and immunity orders in one case pending in the United States District Court for the Southern District of Florida. The Court Orders were again entered on orders proposed by the parties after the parties settled their alleged class action in an LFPI case. The Court Orders purportedly provide immunity, i.e., res judicata, to preclude every LFPI claim in every other lawsuit filed against the defendants ASIC and Ocwen et al. anywhere in the United States. This fairly describes the huge settlement class that was certified in the Miami case of Lee v. Ocwen Loan Servicing, No. 0:14-cv-60649, 2015 WL 178220, *4 (S.D. Fla. Report and Recommendations of U.S. Magistrate Judge Jonathan Goodman, January 13, 2015), report and recommendations adopted, 2015 WL 309441 (S.D. Fla. January 23, 2015 Order by USMJ Jonathan Goodman sitting by consent of the parties after his report and recommendations were made 10 days earlier).
However, class settlement certification can be attacked. One recognized ground for a collateral attack is inadequate representation on issues common to the class which is certified for settlement. See Hecht v. United Collection Bureau, Inc., 691 F.3d 218, 221-24 (2d Cir. 2012), and cases cited in it. See generally the outstanding article by Georgene Vairo, “Is the Class Action Really Dead? Is That Good or Bad for Class Members?” 64 Emory L.J. 477 (2014).
In the Lee case filed against ASIC and Ocwen, et al., the class certified for settlement consists of “[a]ll borrowers in the United States who within the Settlement Class Period [of January 1, 2008 through January 23, 2015] were charged by Ocwen under a hazard, flood, flood gap or wind-only LPI Policy for residential property ….” Lee v. Ocwen Loan Servicing, No. 0:14-cv-60649, 2015 WL 178220, *3 (S.D. Fla. January 13, 2015 Report and Recommendations of U.S. Magistrate Judge Jonathan Goodman), report and recommendations adopted by USMJ Jonathan Goodman sitting by consent of the parties, 2015 WL 309441 (S.D. Fla. January 23, 2015 Order by USMJ Jonathan Goodman). Essentially the settlement class certified in Lee is “all borrowers within the United States.”
Any common questions of law or fact there may be in Lee do not predominate over individualized determinations required for various potential claims of nonparties. As good as the Lee plaintiffs’ attorneys undoubtedly are at their profession, they are only from 3 States: New Jersey, New York, and Florida. Their clients, the plaintiffs in the Lee lawsuit in Miami, provide an additional 4 States, at least according to the First Amended Complaint, Docket No. 106 filed 12.01.14; the plaintiffs in the FAC are from Florida, Massachusetts, Illinois, New Jersey, New York, Texas, and Virginia. Among their alleged claims are claims for damages for Florida unjust enrichment and tortious interference, breach of fiduciary duty, violation of the implied covenant of good faith and fair dealing, and alleged violations as well of the Florida Deceptive and Unfair Trade Practices Act.
Claims alleged for unjust enrichment under Florida law and the law of other States, together with alleged violations of Florida’s implied covenant of good faith and fair dealing, were previously held to make a nationwide class of lender force-placed insurance plaintiffs, i.e., homeowners-mortgagors, uncertifiable as a matter of law because differences between the States in their application of these laws require individualized determinations of fact, thus predominating over any questions of law or fact in common in the settlement class. This holding was reached in an earlier lender force-placed insurance practices case in the same Southern District of Florida: Kunzelmann v. Wells Fargo Bank, N.A., No. 9:11-cv-81373-DMM, 2013 WL 139913, *7-*10 (S.D. Fla. January 10, 2013).
The same holding has been reached concerning claims alleged under the Florida Deceptive and Unfair Trade Practice Act in the Southern District in another earlier case, although that case did not involve lender force-placed insurance practices. The holding in that case was that “[g]iven the significant variation in unfair trade practices statutes throughout the country, and the lack of a showing by [plaintiff] to the contrary, the Court finds that [plaintiff] has failed to establish that common issues predominate with respect to the unfair trade practices claims.” Karhu v. Vital Pharmaceuticals, Inc., No. 13-60768-CIV, 2014 WL 815253, *10 (S.D. Fla. March 3, 2014)(the Court in the Karhu case also held, for the same reasons, that the putative class action plaintiff did not meet his burden of establishing that common issues predominate “with regard to the unjust enrichment claims of the Proposed Classes”), dismissed without prejudice by Order filed on March 27, 2014, notice of appeal filed on April 15, 2014 regarding denial of class certification and dismissal. (As of this writing, the appeal in Karhu is still pending.)
In determining the settlement class in Lee, the Magistrate Judge cited a precedent which held that the Court is not endorsing any evidence or arguments in that process. However the Magistrate Judge also purported to make determinations that the settlement class in Lee should be certified in part because “[t]here are questions of law or fact common to the members of the Settlement Class.” The Court in Lee made this determination without ever mentioning what those common questions are, let alone making any attempt to identify even one of them as “predominant”.
The Magistrate Judge also certified the settlement class in Lee in part because “Plaintiffs’ claims are typical of the claims of the other members of the Settlement Class.” Lee v. Ocwen Loan Servicing, No. 0:14-cv-60649, 2015 WL 178220, at p. *3, ¶ 5 (S.D. Fla. January 13, 2015 Report and Recommendations of Goodman, USMJ), adopted, 2015 WL 309441 (S.D. Fla. January 23, 2015; Goodman, USMJ). The claims of the Lee plaintiffs are not typical, and neither the plaintiffs nor their settlement class attorneys can possibly represent the claims of the other members of the class under the laws of the 40+ States which they cannot invoke. See, e.g., Karhu v. Vital Pharmaceuticals, Inc. (S.D. Fla. March 3, 2014); Kunzelmann v. Wells Fargo Bank (S.D. Fla. January 10, 2013), both cited and discussed above.
At the time of the Magistrate Judge’s recommendations on the Lee plaintiffs’ motion to certify, the Court also confronted objections to preliminary approval of the settlement by nonparties in Lee who were parties in a separate pending case in the Central District of California, Valdez v. Saxon Mort. Serv’s, Inc., No. 2:14-cv-03595-CAS-MAN (C.D. Cal.). The Court in Lee overruled the objections of the nonparties from the Valdez case in California. However, the Lee Court ruled that if the Valdez parties want to object at the final settlement hearing in Lee, then they can do so, provided of course that they file their written objections in the Lee Court file no later than 30 days before the final hearing, and provided that they also file a notice of intent to appear in person, and provided also that they serve on Lee counsel their respective notices with all of their evidence attached to it, among other things.
In the Lee case, the trial judge ruled that the parties could not appeal if the settlement were finally approved unless they followed the preliminary certification order’s instructions faithfully. The Magistrate Judge held in Lee that if an objecting person does not obey these instructions to the letter, then that person “shall be foreclosed from seeking any review of the Settlement or the terms of the Agreement by appeal or other means ….” Lee v. Ocwen Loan Servicing, No. 0:14-cv-60649, 2015 WL 178220, at p. *7, ¶ 12 (S.D. Fla. January 13, 2015 Report and Recommendations of Goodman, USMJ), adopted, 2015 WL 309441 (S.D. Fla. January 23, 2015; Goodman, USMJ).
In sum, the preliminary settlement order submitted by the parties and signed by the Magistrate Judge in Lee contemplates that objections to the settlement and to the Preliminary Order approving the settlement will be considered at the Final Approval Hearing. The final hearing, now rescheduled by Court Order (Dkt. No. 127), is due to be held in Miami on June 11, 2015. Objections presented in compliance with the Court’s preliminary Order are due to be entertained at that time. Please be governed accordingly.
The author’s forthcoming book on “Lender Force-Placed Insurance Practices” is scheduled for publication this Spring by the American Bar Association.
Please Read The Disclaimer. ©2015 by Dennis J. Wall. All rights reserved. No Claim to Original U.S. Government Works.