Class Suit Over "Fraudulent" Mortgage Fees Stays in Federal Court
Michael F. Bahler | Bloomberg Law
The U.S. District Court for the Southern District of Ohio allowed a defendant in a putative class action removed under the Class Action Fairness Act of 2005 (CAFA), Pub. L. No. 109-2, 119 Stat. 4, to multiply an estimate of the named plaintiff’s damages by the number of putative class members to meet CAFA’s jurisdictional minimum.
In 2003, Ohio resident Terry Franklin obtained a mortgage loan that was serviced by defendant CitiMortgage, Inc. He missed a mortgage payment in November 2008, and a $15 “Delinquency Expenses” charge appeared on his January 2009 statement. According to the statement, the charge covered “third-party expenses such as property inspection fees, property preservation costs, appraisal costs, and attorneys fees.” He continued to receive the delinquency charges on later statements and contacted CitiMortgage for an explanation. The company allegedly refused to verify the accuracy of the charges.
In July 2011, Franklin commenced a putative class action in Ohio state court on behalf of a state-wide class of borrowers who in the past four years paid delinquency expenses that appeared on a CitiMortgage monthly statement. The complaint sought compensatory and punitive damages. In September 2011, CitiMortgage removed the case to federal court under CAFA.
Franklin moved to remand, arguing that CitiMortgage failed to satisfy the CAFA requirement that the amount in controversy exceed $5 million. His complaint did not allege a specific dollar amount as to his damages or his injury, nor did it allege any classwide damages. Opposing remand, CitiMortgage referenced a pre-suit June 2010 letter Franklin sent to the company questioning $552 in cumulative delinquency expenses. It also adduced proof that there were 20,630 active loans in Ohio that had been billed delinquency expenses charges. Even if each of these borrowers only sought on average $242.37 in damages, the company calculated, the jurisdictional minimum would be met.
Franklin countered that it was improper to calculate classwide damages for purposes of CAFA’s jurisdictional minimum by multiplying the estimated value of his claims by the number of putative class members. He stated that nothing in his complaint suggested that each borrower was charged the same amount in delinquency expenses and logic dictated that the amounts varied. He added that CitiMortgage possessed specific information showing how much each borrower was charged but chose not to disclose the records.
The Court declined to draw a negative inference over CitiMortgage’s alleged failure to provide more specific information as to each borrower’s charges, writing it “is not incumbent upon a defendant to establish to a legal certainty that the amount in controversy exceeds the jurisdictional threshold, but merely to show that it is more likely than not that the damages will exceed that threshold.” It further noted that just because a complaint is silent as to damages does not disqualify pre-suit evidence speaking to economic injury. The Court stated that “[m]ultiplying the [$552 in] expenses that Plaintiff directly questioned in his June 2010 letter, expenses which he contends are typical of the putative class, by the [20,630 putative class members] yields estimated classwide damages of at least $12,813,086.”
Finding that CitiMortgage demonstrated that it was more likely than not that the amount in controversy exceeded $5 million, the Court denied the remand motion and retained jurisdiction over the case.
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