Photo of Steven C. Corhern

Steven is an associate in Balch & Bingham's Birmingham office. Steven's practice focuses on complex litigation. He has practiced in both state in federal courts across the southeast and at the trial and appellate levels. He has represented lenders in a variety of contexts, including the Truth-in-Lending Act, Telephone Consumer Protection Act (TCPA), Real Estate Settlement Procedures Act (RESPA), and other federal statutes and regulations. Before joining Balch & Bingham, Steven clerked for the Hon. Emmett R. Cox of the Eleventh Circuit and for the Hon. Virginia Emerson Hopkins of the Northern District of Alabama.

A recent Supreme Court decision may allow defendants to avoid lawsuits in distant courts that have little or no connection to the lawsuit, especially in cases (such as mass actions) where the claims of out-of-state plaintiffs are joined with those of in-state plaintiffs.  In Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., — U.S. —, 137 S. Ct. 1773, 1775 (2017), the Supreme Court held that a California state court did not have personal jurisdiction to adjudicate claims against a drug company, at least for the plaintiffs who were not California residents and who had not alleged a connection between the alleged injury and the state of California.  While law school civil procedure professors spend weeks covering personal jurisdiction, the defense rarely appears in real-world practice because most plaintiffs’ attorneys are smart enough to avoid a fight over jurisdiction.  Thus, defendants may give this defense only cursory consideration at the outset of a lawsuit.  Following Bristol-Myers, defendants may want to more carefully consider the personal jurisdiction defense as a way to avoid litigation in a hostile forum.

Continue Reading Defendants should consider personal jurisdiction defense following Supreme Court decision, especially when the claims of out-of-state plaintiffs are joined with those of in-state plaintiffs.

Alabama law permits the creation of public corporations known as “improvement districts,” which can then issue bonds that are similar to bonds issued by a municipal corporation. These bonds can be used to finance improvements within the district. In Aliant Bank v. Four Star Investments, Inc., the Alabama Supreme Court allowed claims against the directors of one of these improvement districts to go forward despite claims of immunity. The Court also allowed certain fraud claims to go forward against the directors as well as other related individuals and entities. In addition to authorizing lenders to bring suit, the opinion also serves as a strong reminder that lenders should monitor their collateral and promptly investigate any signs of misconduct.

Continue Reading Alabama Supreme Court: Lender can sue directors of a public improvement district for negligence, breach of fiduciary duty

In a victory for defendants, the Eleventh Circuit recently agreed that a mere procedural violation—the kind of injury that has become the favorite of the plaintiffs’ bar—is insufficient to confer Article III standing. More specifically, the Eleventh Circuit concluded that a certified return receipt will satisfy a lender’s obligation under Regulation X to provide written acknowledgment of a request for information within five days. Though this decision is unpublished, it is persuasive authority that may guide the district courts within the Eleventh Circuit.

In Meeks v. Ocwen Loan Servicing, LLC, No. 16-15536, Charles Meeks sent a Request for Information to his mortgage servicer via certified mail. The servicer’s agent signed the return receipt the same day the request was received. The receipt was then returned to the Meeks’ counsel. Several months later, Meeks sued the servicer and attached the certified receipt to his complaint.

Meeks asserted two claims against the servicer: (1) the servicer violated Regulation X by not sending him written acknowledgment of the Request for Information within 5 days and (2) that the servicer had shown a reckless disregard for the requirements of Regulation X. After the case was removed, the district court dismissed the first count for failure to state a claim and the second count for lack of standing. On appeal, the Eleventh Circuit affirmed.

The Court pointed out that no other circuit court has considered whether a certified receipt satisfies the written response obligation under Regulation X. Rather than engage in a lengthy legal analysis, the Court focused on the undisputed facts. Because there was no serious dispute that Meeks had received the certified receipt, Meeks had failed to state a claim under Regulation X. Put another way, a failure to send a notice of acknowledgment is unnecessary when the undisputed evidence shows that the borrower knew the request had been received.

More important, the Court concluded that Meeks lacked standing to bring a pattern or practice claim. Pointing to the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548-49 (2016), the Court noted that an injury must be both concrete and particularized in order to confer Article III standing. Meeks had not suffered an injury because it was undisputed that he had received the return receipt. Even though Meeks argued that this receipt was deficient under Regulation X, the Eleventh Circuit held that this deficiency was nothing more than “a bare procedural violation” that was insufficient to create a “real, concrete injury.”

Meeks is important for two reasons. First, it holds that a procedural deficiency alone—here, the failure to send a written acknowledgment within five days—is insufficient to confer standing when the undisputed evidence shows that the deficiency caused no injury to the plaintiff. On this point, Meeks is in tension with another unpublished Eleventh Circuit decision, Church v. Accretive Health, Inc., 654 F. App’x 990 (11th Cir. 2016), which held that the FDCPA creates a statutory right to receive certain information and that a failure to include this information in the debtor’s letter to the plaintiff was a sufficient injury to confer standing. Because neither opinion is published, neither will be binding on a subsequent Eleventh Circuit panel. Moreover, it may be possible to reconcile the holdings in Meeks and Church. In Meeks, it was undisputed that the plaintiff had received the benefit established by the procedural right while in Church it was not clear that the plaintiff had actually received the information that the statute required.  It is also worth pointing out that many post-Spokeo courts have declined to extend Spokeo to its logical conclusions. At the very least, this apparent contradiction signals that the law on this issue is evolving. The Eleventh Circuit is likely to address this issue in a published opinion in the future.

Second and for purposes of Regulation X specifically, Meeks holds that a certified return receipt can satisfy a lender’s obligations under Regulation X when there is no dispute that the borrower received the return receipt. This holding may be somewhat limited however because plaintiffs’ counsel may not attach the receipts to their complaints or will deny receiving them. Meeks also leaves open the question of what happens if the receipt is received by the borrower more than five days after the lender signs it. Still, lenders should look for ways to bring their case within Meeks as doing so will create a strong argument for dismissal in district courts within the Eleventh Circuit.

Last month, the Eleventh Circuit rejected a plaintiff’s bid to keep her class action in state court even though CAFA’s local controversy exception would have required a remand. In Blevins v. Aksut, No. 16-11585, — F.3d —, (11th Cir. Mar. 1, 2017), the Court held that the “local controversy” exception to CAFA jurisdiction does not apply when the federal court has an independent basis for subject matter jurisdiction.

Elizabeth Blevins, on behalf of herself and a putative class, sued Seydi Aksut, M.D. and several affiliated persons and entities, alleging that they operated an unlawful scheme to defraud them. Dr. Aksut would allegedly falsely tell patients that they required heart surgery and would perform these unnecessary surgeries. The defendants would then bill patients for the procedures. After learning about the practice, Blevins filed suit in an Alabama state court, asserting that Dr. Aksut and his co-defendants violated the Racketeer Influenced and Corrupt Organizations Act. The defendants removed the case to federal court and moved to dismiss.

Blevins filed a motion to remand, contending that CAFA’s local-controversy provision prohibited the trial court from exercising jurisdiction. The local controversy exception directs federal courts to decline to exercise CAFA jurisdiction when certain criteria are met, including when two-thirds or more of the proposed class members are citizens of the state where the action was filed, the defendant is a citizen of the same state, and the principal injuries occurred in the same state.

The trial court denied Blevins’s motion to remand, and she appealed to the Eleventh Circuit, which affirmed. The Court explained that CAFA was one way to get class actions into federal court, not the exclusive way to do so. As such, the “local controversy” exception does not apply when a federal court has an independent basis for jurisdiction. In this case, the plaintiff asserted claims under a federal statute—RICO—which gave the district court federal question jurisdiction. The removal was proper on that basis. Interestingly, after affirming the denial of the motion to remand, the Eleventh Circuit reversed the district court’s dismissal of the lawsuit, holding that payments made to a medical provider are compensable injuries under RICO.

Blevins is a reminder that CAFA is not the only basis for removing a class action to federal court. Class actions could also be removed when they assert a claim under federal law, independently meet the requirements for diversity jurisdiction, the case relates to a bankruptcy proceeding, or there is some other independent basis for federal jurisdiction. Accordingly, when considering whether to remove, Defendants should remember to consider all possible bases for federal subject matter jurisdiction.

In Sims v. JPMC Specialty Mortgage, LLC, No. 2150437, a borrower had been involved in two previous lawsuits arising out of a mortgage servicer’s foreclosure upon the borrower’s property. The servicer obtained summary judgment in the trial court based on the doctrine of res judicata.  The Alabama Court of Civil Appeals reversed, finding that genuine issues of material fact precluded summary judgment based on res judicata.

Continue Reading Alabama Court of Civil Appeals reverses summary judgment granted in favor of mortgage servicer based on res judicata defense.

The Alabama legislature recently adopted legislation to prevent class actions in federal court under the Alabama Deceptive Trade Practice Act (“ADTPA”). As reported here last summer, the Eleventh Circuit held in Lisk v. Lumber One Wood Preserving LLC, 792 F.3d 1331 (11th Cir. 2015) that the ADTPA’s prohibition on class actions does not apply in federal court. Thus, a private plaintiff could bring a class action under the ADTPA by suing in federal court. Not surprisingly, several plaintiff counsel began bringing these previously unavailable class actions following the Lisk decision.

Continue Reading The Alabama Legislature Solves Problem Created by the Eleventh Circuit

A class action filed last week in the Northern District of Georgia disputes the ability of a lender to charge post-payment interest for certain home mortgage loans when the lender has not provided a very specific disclosure form. In Felix v. SunTrust Mortgage, Inc., No. 16-66, Sarah Felix alleges the she took out an FHA-insured loan in in 2009. When she sold her home in 2015, she requested a payoff statement from the lender. According to Ms. Felix, the lender sent the payoff statement on April 6 and included interest for the entire month of April in the total payoff amount. Though Ms. Felix paid off the loan on April 8, she alleges that she was still charged interest for the entire month of April.

Continue Reading New class action complaint alleges that post-payment interest charges for certain home mortgages are invalid because of insufficient disclosures under 24 C.F.R. § 203.558

Following the Alabama Supreme Court’s decision last Friday in Moore-Dennis v. Franklin, Nos. 1131142, 1131176, Alabama lenders should immediately review their account agreements to ensure any amendments to those agreements will survive judicial scrutiny. This is especially true for any lenders who have used electronic means to notify account holders of an amendment.

When Joseph Franklin became a customer of PNC Bank, he received an account agreement in the mail. This agreement did not contain an arbitration provision, but it did provide that PNC could unilaterally amend the agreement by providing proper notice to Franklin. In 2013, Franklin’s niece, Tamara Franklin, suspected a PNC employee was stealing from him. At PNC’s urging, Tamara was added to Franklin’s account. At that time, Tamara changed Franklin’s email address but, according to her, did not consent to receive online notifications from PNC. Shortly after Tamara was added, PNC unilaterally amended the account agreement to add an arbitration provision. PNC communicated this change to Franklin and Tamara by posting a notice to Franklin’s online-banking profile. Later, when Franklin sued PNC for theft among other things, PNC moved to compel arbitration. The trial court denied this motion.

On appeal, Chief Judge Moore authored an opinion affirming the trial court. Judge Moore concluded that electronic notification of an arbitration agreement is insufficient to show that a customer was aware of the arbitration provision and had agreed to be bound by it. Instead, a bank must show that customer actually accessed the specific e-mail or visited the specific web page containing the arbitration provision. Though PNC had sent Tamara emails stating that Franklin’s bank statements were ready for review electronically, none of the e-mails contained the text of the arbitration provision, a link to the provision, or any indication that the message was important and would impact Franklin’s legal rights. Because PNC Bank had not proved that Tamara or Franklin had accessed an e-mail or visited a web page containing the arbitration provision, it had failed to show that there was a binding agreement to arbitrate Franklin’s claims.

Importantly, only one judge (Judge Parker) joined Chief Judge Moore’s opinion. Seven judges concurred in the result only. Judge Shaw, writing specially, explained that PNC’s account agreement appeared to require PNC to provide notice of an amendment by mail. Therefore, PNC’s electronic notice to Franklin was insufficient to amend that agreement and add the arbitration provision.

Because Chief Judge Moore’s opinion was only joined by one other justice, it is not binding upon lower courts. Still, lower courts that are already hostile to arbitration may adopt its reasoning and require lenders to show that a customer specifically accessed the email or webpage containing the arbitration provision. For that reason, lenders should review whether they could make this showing if required to do so. Even if Chief Judge Moore’s opinion is not followed by lower courts, Judge Shaw’s concurrence is a reminder that an amendment must be made according to the terms of the controlling account agreement. Thus, if a lender has used electronic means to notify its customers of an amendment to an account agreement, that lender should review the controlling agreement and determine whether such notice was effective. If there is doubt, it may be appropriate for the lender to resend proper notice to ensure the amendment will withstand judicial scrutiny.

The text of the opinion is available here.

The Eleventh Circuit recently dismissed an appeal from an order compelling arbitration because the appealing party failed to file a notice of appeal within thirty days of that order. For lenders, this opinion serves as a sharp reminder that a trial court order can be final and appealable even though a final judgment has not yet been entered. Instead, an order can be final and appealable if it effectively resolves the case on the merits. Thus, lenders should always examine whether an adverse order should be appealed immediately. If there is any doubt about the proper time to appeal, the lender should consider filing a notice of appeal so that it does not lose the right to appeal that decision.

In the case United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union AFL-CIO-CLC, USW Local 200 v. Wise Alloys, LLC, 807 F.3d 1258 (11th Cir. Dec. 8, 2015), a union and Wise Alloys LLC (“the Company”) entered a collective bargaining agreement (“CBA”) which, among other things, created a schedule of gradually increasing health care premiums over a five-year period. To offset these increases, the CBA included cost-of-living adjustments designed to offset the increasing premiums. The CBA also included an arbitration provision.

One year after the parties signed the CBA, a dispute arose between the union and the Company regarding the manner in which the cost-of-living adjustments and premium increases would work. The parties failed to resolve their differences and, in 2010, the union invoked the CBA’s arbitration provision. When the Company refused to arbitrate, the union sought an order compelling arbitration . Importantly, the only relief requested in the union’s Complaint was an order compelling arbitration. Following cross-motions for summary judgment, the trial court granted the union’s motion and compelled arbitration. However, in its order, the trial court expressed an opinion, sua sponte, that “the case should be stayed, rather than dismissed, pending a final resolution following arbitration.” The court determined that Section 3 of the Federal Arbitration Act, as well as Circuit precedent, required a stay. Consequently, the clerk administratively closed the case.

The case proceeded to arbitration where the union prevailed. The district court case was reopened and the court granted the union’s motion to enforce the arbitration award and entered a final judgment.

The Company appealed the decision to compel arbitration to the Eleventh Circuit, which dismissed the appeal for lack of jurisdiction.  The Court concluded that the order compelling arbitration had effectively ended the case on the merits because it resolved the only claim for relief and left nothing for the trial court to do but enforce its decision. Thus, the order compelling arbitration became final and appealable on the date it was entered rather than the date of the judgment. Because the Company had not filed a notice of appeal within 30 days of the order compelling arbitration, the Court had no jurisdiction to consider that appeal. The Eleventh Circuit rejected the argument that the district court’s “stay” had extended the time to appeal. It noted that the only claim in the Complaint was for an order compelling arbitration. Because there were no substantive claims contained in the Complaint, there was nothing for the district court to stay. Thus, the purported stay was without force or effect.

United Steel is a reminder that a trial court order can be final and appealable even if a final judgment has not yet been entered. For that reason, lenders should review adverse and largely dispositive rulings from a trial court to determine whether the decision should be immediately appealed. If there is any doubt as to the appropriate time to appeal, the lender should consider filing a notice of appeal. Even if the appeal is ultimately dismissed as premature, that result may be preferable to losing the right to appeal entirely.

In Jones v. Wells Fargo Bank, N.A., No. 15-30031, — F. App’x —, (5th Cir. Sept. 29, 2015), the Fifth Circuit reversed the dismissal of a lawsuit against Wells Fargo for its alleged failure to disclose known mold problems, even though the sales contract contained an “as is” waiver that specifically addressed mold. Jones is thus a reminder that merely including an “as is” waiver in a sales contract will not bar all litigation arising from an alleged failure to disclose known material facts.

In September 2010, Wells Fargo foreclosed upon a home in Bossier City, Louisiana. The plaintiff, Britney N. Jones, alleged that Wells Fargo was alerted that the house contained black mold in January 2010 (before the foreclosure) and in October 2010 (after the foreclosure). Jones further alleged that, on both occasions, Wells Fargo was provided with a mold remediation plan but chose to do nothing. Instead, Wells Fargo actually performed cosmetic work to conceal the mold.

In December 2011, Wells Fargo sold the home to Jones. The sales contract included an “as is” waiver stating that Jones was purchasing the house without any warranties or representations. It also included a waiver that specifically address the possibility that mold might exist:

Buyer is hereby advised that mold and/or other microscopic organisms may exist at the property . . . . Buyer acknowledges and agrees to accept full responsibility/risk for any matters that may result from microscopic organisms and/or mold and to hold harmless, release, and indemnify Seller and Seller’s managing agents from any liability/recourse/damages (financial or otherwise). Buyer understands that Seller has taken no action to remediate mold. . . . The purpose of this disclaimer is to put Buyers on notice to conduct their own due diligence regarding this matter using appropriate, qualified experts. . . .

After her children developed respiratory problems, Jones obtained an environmental assessment that disclosed the mold. She then sued Wells Fargo in federal court alleging claims for fraud and redhibition under Louisiana law. Wells Fargo moved to dismiss the complaint under Rule 12(b)(6), arguing that the “as is” language and the language that Wells Fargo had “taken no action to remediate mold” barred Jones’s claims. The district court agreed and dismissed the lawsuit with prejudice.

On appeal, the Fifth Circuit reversed, concluding that, under Louisiana law, the waivers were ineffective to bar Jones’s claims. First, the Court noted that the wavier language—which merely noted that mold “may” exist—was insufficient to disclose the mold problem, especially in light of Wells Fargo’s knowledge that mold did, in fact, exist. Second, citing several Louisiana state-court cases, the Court noted that a seller may not use a contractual waiver to avoid disclosing known material defects. Accordingly, the Court held the “as is” waivers in the sales contract were unenforceable.

Jones is a potent reminder to lenders that “as is” language in a contract may not foreclose potential liability arising from an alleged failure to disclose material information during a sales transaction. While the Fifth Circuit’s opinion turned on Louisiana law, the result might be the same in other states throughout the Southeast. For example, Florida law appears to be similar to the Louisiana law cited in Jones. See Bowman v. Barker, 172 So. 3d 1013, 1016 (Fla. Dist. Ct. App. 2015) (“The fact that this house was sold ‘as is’ does not make summary judgment appropriate. The duty to disclose known defects . . . continues to exist for a home sold ‘as is.’”). On the other hand, such waivers would appear to effectively foreclose liability under Alabama law, see Cornelius v. Austin, 542 So. 2d 1220, 1223 (Ala. 1989) (“Alabama retains the caveat emptor rule with regard to the resale of used residential real estate.”), though the Alabama Supreme Court has suggested that “as is” language might not absolve a seller from disclosing known material defects that might impact a buyer’s health and safety in some circumstances, see Blaylock v. Cary, 709 So. 2d 1128, 1131 (Ala. 1997). Accordingly, lenders should be mindful that merely including “as is” language in a sales contract may not bar all litigation arising from an alleged failure to disclose.

The full opinion in Jones v. Wells Fargo Bank, N.A. is available here.