Lawyers eager to sue real estate companies are celebrating a recent decision involving Community Bank of Northern Virginia (CBNV), a financial institution that PNC Bank, N.A., acquired in 2007. The plaintiffs in the underlying case accuse CBNV of funneling excess settlement fees to a non-depository lender, whose earnings are capped by law. The opinion exposes real estate professionals to a significantly heightened risk of class liability.

The events at issue occurred more than 13 years ago and have been the subject of three separate rulings by the United States Court of Appeals for the Third Circuit. During the earlier two appeals, rogue borrowers successfully objected to class settlements of $33 million and $47.6 million. During the third go-around, the objectors joined forces with the original plaintiffs and together they convinced a federal judge in Pennsylvania to certify a much larger class. PNC appealed.

The prior objectors, with their new-found allies, continued their winning streak. The Third Circuit rejected PNC’s arguments, one after another—even those were based firmly on the appellate court’s earlier holdings. For example, conflicts of interest that had derailed an earlier settlement were, miraculously, “no longer a problem,” the Third Circuit ruled.


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