Source: http://updates.mwbllp.com/2015/01/fyi-cal-app-ct-reverses-dismissal-of.html
Timestamp: 2019-04-21 00:54:32+00:00

Document:
The California Court of Appeals, Fourth District, recently reversed the dismissal of a complaint filed by 965 plaintiffs, holding that the borrowers’ separate loan and loan modification transactions presented sufficient common questions of law and fact for a “mass joinder” action under Cal. Code Civ. P. § 378.
This appeal involved six entities that were owned or controlled by a parent company, which was later absorbed by and merged into the mortgage lender (collectively referred to as “Defendants”). The plaintiff borrowers (collectively referred to as “Plaintiffs”) alleged that Defendants orchestrated an elaborate scheme to inflate property values through its own appraisal company, and induced Plaintiffs into risky loans by misrepresenting the loan terms.
Specifically, Plaintiffs alleged that Defendants’ loan officers and sales representatives made broad assurances that the loans would be affordable, and failed to disclose interest rate adjustments. Plaintiffs’ Complaint asserted four causes of action: intentional misrepresentation, negligent misrepresentation, unfair competition, and wrongful foreclosure.
Defendants demurred to the complaint on the ground of misjoinder of plaintiffs in violation of section 378 of California Code of Civil Procedure (“CCP”). The trial court sustained the demurrer without leave to amend and dismissed all the plaintiffs “without prejudice to the rights of the other plaintiffs to file their own complaints,” except for the first-named plaintiff.
On appeal, the issue before the Appellate Court was whether the permissible joinder of such a large number plaintiffs in this “mass action” is proper under CCP § 378.
See CCP § 378(a), (b).
Similarly, in State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093, multiple joinder was allowed for 165 claimants in the Northridge earthquake litigation, based on allegedly fraudulent “systematic” practice of deceiving policyholders. The plaintiffs in State Farm alleged that they suffered “some 15 different types of improper claims handling processes” which were “systematically, methodically and generally” implemented by the insurer. Notwithstanding the diversity of those claims, the court in State Farm held that joinder was permissible even though the claims entailed individualized facts for each claimant.
In Moe v. Anderson (2012) 207 Cal.App.4th 826, two patients alleged they were victims of separate sexual assaults committed by a physician. Joinder was not appropriate as to the physician since the assaults involved “separate and distinct” events “during separate and distinct time periods.” However, the court in Moe determined that joinder was appropriate for the medical group for which the physician worked because the same basic issue of negligent supervision and hiring was common to both plaintiffs, and would involve the same evidence against a single defendant.
In addition, the court in Adams v. Albany (1954) 124 Cal.App.2d 639 held that joinder of 40 sets of homebuyers was proper notwithstanding the defendant’s argument that its alleged fraudulent scheme involved torts that took place at different times and places. The Adams court invoked the “series of transactions” language from section 378 and determined that it was enough that the defendant was alleged to have engaged in a conspiracy to defraud.
Relying on State Farm, Anaya, Moe and Adams, the Appellate Court determined that it would be a “major departure from California case law construing section 378” to uphold the trial court’s demurrer for misjoinder in this case.
As the Appellate Court explained, the two core aspects of the common plan alleged in Plaintiffs’ Complaint will entail common evidence: (1) whether Defendants deliberately encouraged dishonest appraisals and (2) whether Defendants encouraged its loan officers to conceal loan terms. Although these two aspects devolve into several questions of law or fact bearing on liability, the Appellate Court reemphasized that joinder is based on commonality regarding liability, not damages, and this case involved essentially one lender operating with its captive appraisal agents.
In addition, the Appellate Court noted that separate lawsuits by these plaintiffs would clog up the courts if joinder was not allowed. Mass joinder here would likely decrease trial court case management time and conserve judicial resources.
Accordingly, the Appellate Court reversed the dismissal of Plaintiffs’ complaint, and remanded with instructions to conduct further proceedings consistent with its opinion.

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