A California federal judge on Friday, June 13, 2014 issued a broad class certification ruling in a case against U.S. Bank brought by Nichols Kaster, PLLP on behalf of borrowers who were force placed with flood insurance. In its order, the court certified multi-state classes of borrowers spanning forty different states to pursue claims against U.S. Bank for breach of their mortgage agreements stemming from U.S. Bank’s force-placed insurance practices. In addition, the Court separately certified classes of borrowers in California and New Mexico to pursue claims against U.S. Bank and its force-placed insurance vendor, American Security Insurance Company (“ASIC”), for unjust enrichment, unfair business practices, and/or breach of the covenant of good faith and fair dealing.
The Plaintiffs allege that together U.S. Bank and ASIC (an affiliate of Assurant) developed a scheme whereby U.S. Bank would receive kickbacks and other forms of compensation from ASIC in exchange for purchasing force-placed flood insurance from ASIC, which were then built into the charges to borrowers. In addition, Plaintiffs allege that U.S. Bank and ASIC force placed flood insurance coverage that was significantly backdated, charging borrowers for coverage for periods of time that had already passed and which pre-dated any notice to such borrowers that their coverage was deficient. The net result, Plaintiffs allege, is that U.S. Bank and ASIC reaped significant income from the force-placement of flood insurance while borrowers were forced to pay grossly inflated amounts for coverage that provided little or no benefit to them.
In her 56-page opinion certifying the proposed classes, Magistrate Judge Laurel Beeler comprehensively analyzed the evidence before the Court, and found that “[n]othing in the record suggests that issues of unfairness are not susceptible to class-wide proof.” In addition, the Court held that purported differences in state law did not preclude certification of the multi-state classes, which include borrowers in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
In reaction to the ruling, Plaintiff’s Counsel Kai Richter stated, “We are pleased with the Court’s decision, which allows thousands of U.S. Bank borrowers to have their claims heard. We look forward to vigorously representing the classes.”
Plaintiffs are represented by Kai H. Richter and Megan D. Yelle from Nichols Kaster, PLLP, which has offices in Minneapolis, Minnesota and San Francisco, California. The case is entitled Ellsworth v. U.S. Bank, No. 3:12-cv-02506-LB (N.D. Cal.). Additional information can be found at www.nka.com.