Alert September 05, 2012

New Jersey Federal Court Rejects Class Action Alleging Home Refinancing Foreclosure Violations

The United States District Court for the District of New Jersey held that plaintiffs’ class claims arising out of an incorrect payoff notification were barred by New Jersey’s entire controversy doctrine. Plaintiffs alleged that the mortgage servicer sent them a payoff statement for an amount more than what was due. After a final foreclosure judgment was entered against plaintiffs, plaintiffs sought to refinance their mortgage and requested their payoff balance from their servicer. Plaintiffs claimed the payoff statement was for more than what plaintiffs owed. After paying the allegedly incorrect amount, plaintiffs filed a class action based on the overcharge.

The Court held that plaintiffs’ claims were barred by the entire controversy doctrine, which “‘compels the parties, when possible to bring all claims relevant to the underlying controversy in one legal action,’ including defenses and counterclaims.” The Court concluded that plaintiffs’ claims should have been raised in the foreclosure action and rejected plaintiffs’ argument that they did not have the opportunity to raise the claims in the foreclosure proceeding because a final judgment had already been issued.  In rejecting plaintiffs’ argument, the Court noted that the court in a foreclosure action “retains jurisdiction until either: (1) if the home is sold at the sheriff’s sale, the later of ten days after the sheriff’s sale or the delivery of the sheriff’s deed; or (2) if the sheriff’s sale is averted by payoff, until payment is made, the judgment is entered, and the case is dismissed.”