April 7, 2009

Federal Trial Court Grants Motion to Strike Class Claims for TILA Rescission and Motion to Dismiss in Payment Option Loan Lawsuit

In a first of its kind decision in the more than 40-putative class actions challenging so-called “payment option” loans, a California federal court granted the defendant-lender’s motion to strike plaintiffs’ claims and allegations seeking class-wide rescission under the Truth in Lending Act. The same decision also granted the lender’s motion to dismiss in its entirety.

Bigverdi v. Countrywide Bank FSB involves TILA, California Unfair Competition Law and fraudulent omissions challenges to so-called “payment option” loans. In striking plaintiffs’ claims for class-wide rescission under TILA, the court relied on Andrews v. Chevy Chase Bank, 545 F.3d 570, 578 (7th Cir. 2008), which held that TILA rescission class actions may not be maintained as a matter of law. The Andrews decision was reported in Goodwin Procter’s September 24, 2008 Consumer Financial Services Special Alert. Click here for the Special Alert.

Further, in dismissing plaintiffs’ claims for a second time, the court again accepted and adopted all of Countrywide’s arguments for dismissal, including that (1) plaintiffs’ state law challenges to the loans were preempted under TILA, the National Bank Act and the Home Owner’s Loan Act, and (2) plaintiffs failed to state claims for a violation of the UCL and fraudulent omissions. Goodwin Procter partners Tom Hefferon, Dave Permut and Brooks Brown represented Countrywide in this case. Click here for Bigverdi v. Countrywide Bank, FSB, C.D. Cal. No. 07-3454-AHS (FMOx) (March 26, 2009).