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Wells Fargo beats appeal over voided mortgage late fees verdict


(Reuters) — A federal appeals court on Friday rejected a bid to revive a $54.8 million jury verdict against Wells Fargo & Co, saying the trial judge had authority to take the “drastic step” of decertifying the class action after the award was made.

In a decision that could end 15 years of litigation, the 2nd U.S. Circuit Court of Appeals in Manhattan said U.S. District Judge John Koeltl met a high legal standard in finding that borrowers whose mortgages had been owned or serviced by The Money Store and HomEq Servicing could not sue as a group.

Borrowers accused The Money Store and HomEq of improperly charging late fees, after their loans had gone into default.

A jury in Manhattan held Wells Fargo liable in December 2014. The San Francisco-based bank had faced liability on the claims because of various mergers, including its 2008 purchase of Wachovia Corp.

Paul Grobman, a lawyer for the plaintiffs, declined immediate comment.

Daniel Pollack, the lead trial lawyer for Wells Fargo in the case, said he was pleased with the result, and referred further inquiries to the bank. Wells Fargo had no immediate comment.

In voiding the verdict and taking the “drastic step” of decertifying the class action, Judge Koeltl in May 2015 found no proof that the defendants had a contractual relationship, known as privity, with plaintiffs whose loans they serviced but did not originate.

The plaintiffs appealed, saying the class was properly certified, and citing their constitutional right to a jury trial under the 7th Amendment.

But in Friday’s decision, Circuit Judge Dennis Jacobs said Judge Koeltl had discretion to decertify the class action, given that his conclusions implicitly meant he thought the Manhattan jury’s findings were at least “seriously erroneous.”

Judge Jacobs said that met a standard requiring a trial judge mulling decertification after a jury verdict to defer to jurors’ factual findings unless they were “seriously erroneous,” a “miscarriage of justice” or “egregious.”

“Without class-wide evidence that class members were in fact in privity with The Money Store, the fact-finder would have to look at every class member’s loan documents to determine who did and who did not have a valid claim,” Judge Jacobs wrote.

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