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Cassese v. Washington Mutual

September 30, 2009


The opinion of the court was delivered by: Spatt, District J.


In this class action, named plaintiffs Denise Cassese, George Scott Rush, and Richard Schroer (the "plaintiffs") allege that Washington Mutual, Inc. ("WMI"); Washington Mutual Bank, formerly known as Washington Mutual Bank, FA ("WMB"); Washington Mutual Bank, FSB; Former State-Chartered Washington Mutual Bank; and Washington Mutual Home Loans, Inc. (collectively, the "defendants') imposed and collected unlawful fees, prepayment penalties, and finance charges from them in connection with their mortgage loans. The defendants state that the fees charged were for additional services, such as providing borrowers with payoff statements, either through the mail or via facsimile.


At the time that this action was commenced, WMB was a federally chartered savings association, engaged in the practice of mortgage banking, home loan lending, and loan servicing, in New York, New Jersey, North Carolina, and other states. Each plaintiff is an individual who entered into loan agreements originated and/or serviced by WMB. The plaintiffs allege that they entered into standard form mortgage agreements and notes that stated that they could make full or partial prepayments of the principal amount of their loans at any time without penalty. The plaintiffs allege that they were improperly charged additional fees in violation of their loan agreements at the time that they sought to prepay their mortgages. Collectively, the Court refers to these fees as the "Disputed Charges.

B. Procedural History

Plaintiffs Cassese and Rush commenced this action on June 6, 2005. On September 7, 2007, the Court ruled on defendants' motion to dismiss pursuant to FED. R. CIV. P. 12(b)(6) and motion to strike pursuant to FED. R. CIV. P. 12(f) and 8(a). The Court dismissed Counts I, II, III, and IV of the plaintiffs' second amended complaint, alleging violations of the Truth in Lending Act, 15 U.S.C. §§ 1601-1693r, the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. §§ 2601-2617, and various state law causes of action. Remaining after the Court's decision were the plaintiffs' claims for violation of the New York General Business Law as well as other state consumer protection statutes, and common law claims for breach of contract, unjust enrichment, and fraud. On June 27, 2008, the Court denied the plaintiffs' motion for reconsideration, stating that although the Count I claims pursuant to TILA were dismissed with prejudice as to the named plaintiffs, potential TILA claims of the putative class members could be raised, if appropriate, at a later time. In addition, the Court denied the plaintiffs' motion for class certification for lack of adequate representation as to the Count I claims.

On July 28, 2008, the plaintiffs renewed their motion to certify a class. The motion was opposed separately by two groups of defendants. WMB opposed class certification as to it, while WMI, Washington Mutual Bank, FSB, Former State-Chartered Washington Mutual Bank, and Washington Mutual Home Loans, Inc. joined in opposition, arguing that they are all improper defendants because the named plaintiffs were borrowers of WMB alone, and therefore the latter defendants could not have assessed the Disputed Charges to the plaintiffs.

By letter dated October 1, 2008, counsel for the defendants advised the court that as of September 25, 2008, the Office of Thrift Supervision, a federal agency possessing authority to regulate insured financial institutions, like WMB, appointed the Federal Deposit Insurance Corporation ("FDIC") as receiver for WMB for the purpose of liquidation. On October 24, 2008, the FDIC, acting as receiver for WMB, filed a Notice of Substitution of Party, of the FDIC for WMB. On the same day, the FDIC moved for a mandatory 90 day stay of this action pursuant to 12 U.S.C. § 1821(d)(12)(A)(ii). On October 30, 2008, following a teleconference in this matter, the Court granted the FDIC's request for a mandatory stay. The mandatory stay expired on December 24, 2008.

In addition, on December 1, 2008, WMI filed a notice of automatic stay pursuant to a voluntary petition for bankruptcy protection under Chapter 11 of the United States Code filed in the United States Bankruptcy Court for the District of Delaware.

On December 22, 2008 the plaintiffs' counsel advised this Court by letter that the FDIC had established December 30, 2008 as the bar date for the filing of claims against WMB for resolution by the FDIC claims review process. The plaintiffs requested that the Court either resolve the class certification motion so that they could proceed to file claims either individually or on behalf of the class, as appropriate, or to extend the FDIC claims filing deadline. In addition, in light of the bankruptcy filing of WMI, the plaintiffs' counsel represented that the plaintiffs did not oppose a modification of their proposed class definition to exclude WMI until such time as the automatic bankruptcy stay expired.

The FDIC as Receiver for WMB opposed plaintiffs' request, arguing that the Court was without authority to extend the claims bar date beyond December 30, 2008 because the claims process is committed to the exclusive power and discretion of the FDIC-Receiver. Further, The FDIC moved for an additional stay until the earlier of (i) September 14, 2009, or (ii) 180 days after the named plaintiffs submitted their claims to the administrative claims process.

On December 29, 2008, the Court granted the class certification motion as to defendant WMB only, reserving the class certification determination as to the remaining defendants. The Court appointed a class pursuant to Fed. R. Civ. P. 23(b)(2) and (b)(3) as follows:

All consumers or borrowers in the United States and its territories who had a mortgage, deed of trust, home loan, co-operative loan, home equity loan or line of credit secured by a residence, which loan was serviced by Washington Mutual Bank, formerly known as Washington Mutual Bank, FA and who paid or will be demanded to pay prohibited fees, charges and/or penalties (often but not always termed "Fax Fees," "Payoff Statement Fees," "Recording Fees," or "UCC-3 Fees" by Washington Mutual Bank, formerly known as Washington Mutual Bank, FA in Payoff Statements) in connection with requests for payoff statements or payoff amounts or the prepayment, repayment, discharge, satisfaction or settlement of loans secured by a residence.

In addition, the Court noted that it would make "no pronouncements about the form in which the claims of the class members should be submitted to the FDIC or whether the FDIC must accept those claims." Cassese v. ...

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