Denial Of Class Certification In Litigation Alleging Wrongful Foreclosure Of Consumer Mortgages: Manson Et Al. v. GMAC Mortgage, LLC Et Al.

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...