U.S. Appeals Court Boots Nevada AG Foreclosure Suit Back To State Court; Rejects BofA's Attempt To Shop For Friendlier Federal Forum

Reuters reports:

• A federal appeals court on Friday granted Nevada's request to send its lawsuit alleging mortgage modification and foreclosure abuses against Bank of America Corp back to Nevada state court. The 9th U.S. Circuit Court of Appeals reversed a decision by a lower court, which had concluded that the lawsuit belonged in federal court.(1)



• Nevada's complaint, filed in Clark County, Nevada, in January 2011, alleges that Bank of America misled consumers about the terms of its home mortgage modification and foreclosure processes. Nevada also accused the bank of violating terms of a consent judgment it and several of its subsidiaries had entered into with the state in February 2009. After Bank of America removed the lawsuit to federal court, Nevada's request to send it back to state court was denied.



• Chief Judge Robert Clive Jones of the District of Nevada ruled that the lawsuit belonged in his court because the lawsuit was a class action, which gives federal courts jurisdiction. But the three-judge panel for appeals court disagreed, finding that a case filed by a state's attorney general did not qualify as a class action. It also ruled that Nevada had an interest in keeping the lawsuit in its own state.



• "Nevada's strong sovereign interest in enforcing its state laws -- and its state-law-created Consent Judgment -- in the courts of its own state weighs in favor of remand to state," the panel wrote. Bank of America did not immediately respond to a request for comment.(2)

Source: Court sides with Nevada in BoA foreclosure case (9th Circuit sends case back to Nevada state court; Lawsuit alleges mortgage abuses against Bank of America).

For the court ruling, see State of Nevada v. Bank of America Corp., No. 12-15005 (March 2. 2012) (for publication).

For an earlier post, see Desperate BofA Resorting To Forum Shopping In Search Of Better Outcome From Federal Court In Response To Nevada AG's Recent Misconduct Allegations?

(1) A September, 2011 article in the Reno Gazette-Journal (article no longer available on their website, but a copy can be found here) on this story contained the following excerpt on Bank of America's blatant attempt to forum-shop this case into federal court so the case can be heard by 'friendlier judicial ears'):

• But with Bank of America successfully kicking up the original case to federal court earlier this year -- and potentially skipping the state courts -- Nevada's amended complaint against the bank faces a more uncertain outcome, if past federal judgments are any indication.



• "This is such a big deal because 99-plus percent of these cases in federal court are disposed of without evidence ... and in summary fashion," said Geoffrey Giles, a Reno lawyer. "Banks are actually winning these cases hands down and they will do anything to get their case removed to federal court because they know they can get a better deal. It's the most rank example of forum shopping."



• Forum shopping is the practice of trying to get a case heard in a court that is more likely to render a favorable verdict. The case's removal from state court to the U.S. Ninth Circuit was opposed by Nevada Attorney General Catherine Cortez Masto. Bank of America violated state law -- not federal law -- so the case should be decided by Nevada courts, Masto said.

***

• At the heart of Giles' appeal and Masto's argument to have the Bank of America case remanded is a long-standing debate on whether federal courts should be allowed to remove cases directly related to state law from state courts. The debate is at the center of an ongoing case, "Chapman vs, Deutsche Bank," which is being heard at the Nevada Supreme Court.



• The case could potentially put the brakes on state court cases being snatched by federal courts, with the exception of class-action lawsuits. "The issue is, should federal judges be making rulings on Nevada state law?" Giles said. "You basically have federal courts telling Nevada how its foreclosure statutes work and that's wrong. That should be up to the Nevada Supreme Court, but federal courts have consistently refused to buy those arguments."

(2) An ABA Journal article (see Judge Says Firm Must Explain ‘Fraudulent’ Removals or Pony Up $25K) offers this observation on the legal maneuver used by BofA to find a friendlier forum to defend against a lawsuit, one commonly used in civil cases by big-time corporate defendants and their white-shoe law firms in lawsuits brought by (possibly under-financed) individuals and other plaintiffs on behalf of individuals, of moving a case from a state to a federal court:

• [I]t is widely believed that plaintiffs, particularly individuals rather than corporations, fare better in state courts where they have greater likelihood of getting to a jury and often benefit from more favorable interpretations of law. Defendants in turn tend to prefer the federal courts. Thus removals can become a cat-and-mouse game in which a plaintiff names a party having nothing to do with the matter as one of the defendants to prevent the other side from removing the matter to federal court. That court can find fraudulent joinder and keep the case or remand it.

• But studies have shown a greater increase in recent years of defendants removing cases to federal court, only for them to be dispatched back to state court for erroneous removal. One researcher, a third-year student at New York University School of Law, found that most often in such situations, the plaintiffs are individuals. And the rate of their cases being remanded back to state court is higher, too, wrote Christopher Terranova in last summer’s edition of the Willamette Law Review (PDF).

• He adds that “the delays and costs of that extra procedural step to federal court are more costly and burdensome for most individual plaintiffs than they are for bigger defendants with more assets."

For the above-referenced Willamette Law Review article, see Erroneous Removal As A Tool For Silent Tort Reform: An Empirical Analysis Of Fee Awards And Fraudulent Joinder (article also available at http://ssrn.com/abstract=1073402).

For an example of one Federal judge excoriating a lawyer and law firm for, according to the judge, their history of fraudulent removal requests of cases from state court to Federal court, see Hollier v. Willstaff Worldwide, Case 6:08-cv-01382-TLM-CMH (W.D. La. 2009):

• Sadly, the Court is not surprised by G.W. Premier’s counsels’ tactics in this proceeding as Ungarino & Eckert, L.L.C.’s reputation proceeds it. This case is but one in a long line of fraudulent and improper removals that Ungarino & Eckert, and more specifically Matthew Ungarino, have filed in this and other districts. [...] [For more, see Hollier v. Willstaff Worldwide (pp. 4-9).]