Opinion ID: 796307
Heading Depth: 3
Heading Rank: 2

Heading: The class-wide fraud finding is supported by the evidence

Text: 36 Turning to the factual findings made by the jury, we review a denial of a motion for judgment as a matter of law de novo, Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d 998, 1005 (9th Cir.2004), and a district court's denial of a motion for new trial for abuse of discretion. Navellier v. Sletten, 262 F.3d 923, 948 (9th Cir.2001). Even under the de novo standard, the court must draw all reasonable inferences in favor of the nonmoving party, keeping in mind that credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge. Hangarter, 373 F.3d at 1005 (internal quotation marks and citations omitted). Judgment as a matter of law should be granted only if the verdict is against the great weight of the evidence, or it is quite clear that the jury has reached a seriously erroneous result. Id. (internal citations omitted). The jury concluded that First Alliance had committed systemic fraud on a class-wide basis, and the district judge did not find this conclusion to be erroneous. 37 The evidence in this case supports the finding by the jury that there was, in fact, a centrally-orchestrated scheme to mislead borrowers through a standardized protocol the sales agents were carefully trained to perform, which resulted in a large class of borrowers entering into loan agreements they would not have entered had they known the true terms. We note in particular the standardized training program for sales agents, which included a script that was required to be memorized and strict adherence to a specific method of hiding information and misleading borrowers, discussed in the district court's separate findings of fact at 298 B.R. at 656-58. The record shows, for instance, that loan officers were trained to misrepresent the monthly payment on the loan to make it appear lower than the borrower's prior mortgage payment, and when asked about points, to falsely state that all fees and costs have already been computed into your monthly payment, and then to immediately redirect the borrower's attention to another document. That First Alliance's fraudulent system of inducing borrowers to agree to unconscionable loan terms did not consist of a specifically-worded false statement repeated to each and every borrower of the plaintiff class, traceable to a specific directive in the Track, does not make First Alliance immune to class-wide accountability. The class action mechanism would be impotent if a defendant could escape much of his potential liability for fraud by simply altering the wording or format of his misrepresentations across the class of victims. 38 Lehman also attempts to undermine the class-wide fraud determination by focusing on the reliance element, arguing that the borrowers could not have justifiably relied upon oral misrepresentations when they signed documents that contradicted those oral statements. The argument is that the plaintiffs should have known better than to rely on their loan officers' misrepresentations, because the fine print in their loan documents told a different story. But it was by design that the borrowers did not understand that the loan documents told a different story. The whole scheme was built on inducing borrowers to sign documents without really understanding the terms. As the district court found, First Alliance borrowers justifiably relied on the representations of the loan officers in light of their experience and knowledge in entering into the loan transaction. 298 B.R. at 668. We find unpersuasive in this case the defense that plaintiffs should not have relied on statements that were made with the fraudulent intent of inducing reliance. 39 While the legal standards for class treatment of a fraud action in federal court are governed by federal law, the merits of the Borrowers' fraud claim are grounded in state law. Therefore, whether or not a borrower's reliance on misrepresentations was justified in this case depends on California law. To that end, the California Supreme Court has instructed that a misrepresentation may be the basis of fraud if it was a substantial factor in inducing plaintiff to act and . . . it need not be the sole cause of damage. Vasquez v. Superior Court of San Joaquin County, 4 Cal.3d 800, 94 Cal.Rptr. 796, 484 P.2d 964, 973 n. 9 (1971). First Alliance's misrepresentations were at least a substantial factor in inducing the plaintiffs to enter loan agreements. We conclude that the district court's treatment of the fraud claims was both legally and factually sound. The denial of Lehman's motions for judgment as a matter of law and for new trial was proper. 40