The truth about many class actions is that, when actually tested, they often fail, whether due to lack of evidence or faulty legal theories. That means a plaintiff’s attorney will have doggedly pursued a losing case. Mortgage servicer Homeward Residential, Inc., recently defeated a class action by repeatedly putting the plaintiff’s claims to test.
In the decision, King v. Homeward Residential, Inc., a mortgage borrower accused Homeward of improperly charging her for force-placed insurance, which is also known as lender-placed insurance (LPI). Lenders buy those policies when a mortgage borrower allows insurance on the covered home to lapse. The premiums for those policies are typically exorbitant–much higher than one would find on the open market. Numerous class actions have been filed about LPI, with varying degrees of success.
The plaintiff in King had achieved what she thought was a definitive victory: the presiding court of appeals (the United States Court of Appeals for the Eighth Circuit) had reversed the dismissal of her claims. That meant she could rest assured that her claims would survive through class certification. Indeed, in that scenario, many companies would likely settle, recognizing that the relevant appellate court had already ruled against them.
But not Homeward. No, instead, the company resisted the all-important motion for class certification—and Homeward prevailed. The trial court declined to certify a class because the plaintiff had two separate potential subclasses: people who were overcharged for LPI and people for whom no LPI should have ever been purchased in the first place. Because King belonged only to the latter subclass, she could not adequately represent people in the other one. Also, determining alleged overcharges depended on the characteristics of individual homes and could not be accomplished on a classwide basis. The denial of class certification all but ended the proceedings.
This case illustrates the old adage about a dog chasing a car and not knowing what to do when it finally catches it. Class-action defendants should not rule out the possibility of taking plaintiffs to task, forcing them to confront the failings of their own theories.