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25 September 2008

Mayer Brown Wins Seventh-Circuit Truth-in-Lending Case
AmLaw Litigation Daily

AmLaw Litigation Daily; September 25, 2008

Jeff Sarles quoted on the US Court of Appeals for the 7th Circuit overturning a lower court ruling that had allowed other borrows to join a couple who is suing a bank over deceptive lending practices.  If the 7th Circuit had permitted the class action to proceed, borrowers would ultimately face more expensive loans, he said.

Mortgage lenders are right up there with Wall Street bankers on the who's-to-blame-for-the-financial-crisis list. Luckily for them, appellate litigation is not a popularity contest. On Tuesday the mortgage lending industry dodged a bullet when the Seventh Circuit reversed a district court's certification of a class of 8,000 borrowers seeking rescission of their loans from Chevy Chase Bank. The 2-1 appellate ruling saves mortgage lenders--who face similar suits across the country--from what Chevy Chase lead appellate counsel Jeffrey Sarles of Mayer Brown calls "intolerable liability." If the Seventh Circuit had permitted the class action to proceed, Sarles told us, borrowers would ultimately face more expensive loans.

The name plaintiffs in the case alleged that Chevy Chase had violated the Truth in Lending Act by not disclosing material terms of their loans or using confusing terminology in disclosure statements. Milwaukee federal district court judge Lynn Adelman issued a sweeping ruling in the case, certifying a class of borrowers and granting a summary judgment motion that gave the entire class the right to rescind their mortgages. The Seventh Circuit ruling lets the bank breathe a big sigh of relief.

In a statement, plaintiffs lawyers at Milwaukee's Demet & Demet said they disagreed with the appeals court's decision. "The language of [the Truth in Lending Act] does not ban class certifications for rescission," they said. "The Seventh Circuit ignored the plain language of the statute." Demet & Demet lawyers also said they would seek an en banc hearing before the entire Seventh Circuit.

Reprinted with permission from the September 25, 2008 edition of AmLaw Litigation Daily © 2008 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

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