Class Action Alleging Failure to Disclose “Loan-Related” Fees Improperly Certified as Class Action because Class Membership Turned on Finding of Defendant’s Liability and because Class Definition Failed to Adequately Describe “Loan-Related” Fees and Services, Requiring Reversal of Trial Court Order Missouri Supreme Court Holds
Plaintiffs filed a class action in Missouri state court against Allied Mortgage Capital Corporation alleging violations of the state’s Merchandising Practices Act “by misrepresenting charges for third-party services in connection with their loan transaction.” Vandyne v. Allied Mortgage Capital Corp., 242 S.W.3d 695, 696 (Mo. 2008). The class action alleged that Allied “failed to disclose costs incurred in processing Plaintiffs’ loans”; plaintiffs moved to certify the lawsuit as a class action, defining the class “in part as those individuals who paid costs based upon alleged ‘nondisclosures and false, unfair, deceptive or misleading disclosures’ by Allied.” Id., at 697. Defense attorneys objected that the definition of the class “requires the court to resolve a paramount liability question in order to identify class membership.” Id. The trial court granted plaintiffs’ motion for class action certification, but the Missouri Supreme Court unanimously reversed.
The Supreme Court agreed with defense attorneys that the definition of the class was improper; it held, however, that “the class definition can be cured by eliminating the phrase ‘nondisclosures and false, unfair, deceptive or misleading disclosures’ from the class definition.” Vandyne, at 697. The Supreme Court also agreed with a separate defense argument, that the definition of the class “is insufficiently definite with respect to defining what fees and services are ‘loan-related.’” Id. The Court explained that “the question as to whether a particular service or fee is ‘loan-related’ can only be reached through an analysis of each individual potential class members’ loan documents.” Id. Class counsel apparently represented at oral argument that, on remand, the class action complaint would be amended to “state separately those fees and services as to which class certification is sought.” Id., at 697-98
NOTE: The Missouri Supreme Court rejected a defense objection to the adequacy of class counsel based on the fact that “one of the attorneys for the class is the brother-in-law of the named plaintiff.” See Vandyne, at 698. The Court explained that “Missouri courts utilize a case-by-case approach that vests the circuit court with discretion to determine whether, under the facts of individual cases, plaintiffs and class counsel can adequately represent the class.” Id. (citation omitted). “The fact that one attorney for the class is related to a named plaintiff does not necessarily mean that counsel or the class representative cannot adequately represent other aggrieved mortgage customers.” Id. On the record before it, the Supreme Court concluded that defense attorneys had not established that class counsel could not adequately represent the class. Id.