Locked doors.

In journalism, there's a saying: “Your mother loves you? Check it out.”

The same sentiment could apply in litigation, as lawyers from Kirkland & Ellis demonstrated on Friday.

The Kirkland team convinced Senior U.S. District Judge Marsha Pechman in Seattle to de-certify a 19,000-member class seeking $1 billion in damages, and to dismiss the case against their client, Safeguard Properties.

It was one of those snazzy feats of lawyering that shows why Kirkland lawyers get the big bucks.

The team led by partner Leonid Feller was hired by Safeguard about six months ago—at which point, the case had been pending for two years, the class had been certified and summary judgment briefing was underway.

But after some serious digging—and a refusal to take any of the plaintiff's assertions at face value—the Kirkland team found the suit's Achilles heel.

As a 'gotcha' example, it's fabulous. Because class actions requirements don't get much more basic than this: You need an eligible named plaintiff.

Kirkland's client, Safeguard, is in the business of “property preservation.” When homeowners default on their mortgages, Safeguard gets hired by the lender or mortgage servicer to make sure the property doesn't become blighted, vandalized or generally fall into disrepair before foreclosure is complete.

Makes sense, right? Nobody likes an empty house with an overgrown lawn and broken windows.

The problem, according to the plaintiffs, is that sometimes Safeguard (or its vendors) will enter the house and change the locks while people are still living there.

“Safeguard has a common course of conduct whereby it wrongfully and forcibly enters borrowers' properties prior to completion of a foreclosure to perform destructive and disruptive acts, including destroying the existing lock(s) on a borrower's home, removing the borrower's destroyed locks from the home, damaging property inside the home, and removing the borrower's personal property from the home,” states the complaint by Jeffers, Danielson, Sonn & Aylward in Wenatchee, Washington.

The complaint includes allegations that “borrowers reported returning home following Safeguard's forcible entry to find personal possessions smashed with a sledgehammer in the front yard, damaged china and family photos, a lost coin collection, and even a missing family cat.”

The suit sought to hold Safeguard liable under Washington's Consumer Protection Act and various trespass and tort theories for every lock change performed by Safeguard in the state.

Safeguard claimed that it only changes the locks on a secondary door (so residents would still have access through their main door), and only does so in instances where “two independent vendors separately determine that a property has been abandoned.”

Maybe so, but things still looked bleak for the company after the Washington Supreme Court in 2016 held that state law prohibits a lender from taking possession of property before foreclosure. Lenders had relied on entry provisions in the deeds of trust for the authority to do so, but the court ruled that those provisions conflict with state law.

In January, Pechman certified the class, rejecting arguments by Safeguard's then-counsel from Lee Smart in Seattle that the alleged damages were too individualized to be lumped together.

“In the Ninth Circuit, a variable amount of damages between class members will not defeat certification if they are bound by a common question of liability,” the judge wrote, adding that “the matter of amount of damages can if necessary be bifurcated into a separate, non-class proceeding.”

Gulp.

That's when Safeguard hired Kirkland.

Based on a search of public records—which apparently no one else bothered to do—the Kirkland team realized that the named plaintiff, John Bund II, had a fundamental problem.

Bund claimed standing as the executor of his father's estate. That meant he “stands in the shoes of the estate as the owner of the property,” the plaintiffs lawyers wrote. The judge agreed he was an eligible class representative.

But the Kirkland lawyers discovered that in 2013, Bund created a family trust and transferred his father's house from the estate to the trust. It was “for tax purposes,” Bund said in a declaration after the Kirkland revelation. “I have never understood that the transfer (or the trust itself) in any way changed my role or responsibilities in managing and caring for” the property.

His own lawyers didn't even know about it. “At no time did Mr. Bund mention to me that the property had been transferred to a trust and none of the materials and documents that I reviewed made any mention of any trust,” wrote Clay Gatens of Jeffers Danielson. The plaintiffs' lawyer called it “minor pleading error,” and “proposed that the parties stipulate to amend the complaint to add the trust as a named plaintiff.”

(Cue Kirkland lawyers laughing hysterically.)

It was enough for Pechman to boot Bund as the named plaintiff.

“Bund filed a lawsuit on behalf of the estate regarding a property to which the estate did not hold title at the time of filing. He had no standing to file this suit and the court had no jurisdiction over it,” the judge wrote on Oct. 19. “In the absence of standing on the part of the sole named plaintiff at the outset of the litigation, the law of the Ninth Circuit is clear: the class must be decertified and the matter dismissed.”

Granted, Pechman dismissed the case without prejudice. The plaintiffs' team could refile. But the Kirkland lawyers also threw considerable shade on the work that their opponents have done.

They pointed out that the plaintiffs lawyers had struck out before in finding representatives.  One couple was dismissed because there was no evidence that Safeguard took any action related to their property, while another's only evidence of damage was a sticker that Safeguard placed on their door. A third admitted to moving out before their locks were changed.

“After nearly three years of litigation and voluminous discovery from Safeguard, plaintiffs' counsel have been unable to identify a single appropriate representative for the class they seek to represent, that is, individuals actually living in their homes who suffered a lock change as a result of Safeguard's preservation activities,” wrote Kirkland's Feller and local counsel from Davis Wright Tremaine.

They also pointed out that the judge never officially appointed class counsel, and stressed that the plaintiffs lawyers have filed five overlapping class actions in various Washington courts—a potential conflict of interest.

The judge agreed.

“The court takes this opportunity to express its concern over potential representation problems which arose over the course of this case,” she wrote, flagging “the prosecution of multiple class action lawsuits throughout the state, cases with such closely related legal and factual issues that, inevitably, the class members begin to overlap from suit to suit.”

“And it is not only the fact that advising one client to take a settlement may impact other clients or class members in other cases involving the same counsel,” she continued. “Exercising that fundamental responsibility of representation in an area of litigation where successful settlements rise or fall on the number of class members who accept them also means, in the contingency-driven world of class action litigation, that it will ultimately impact the lawyers' own 'paydays.' It is a situation ripe for conflict.”

And not exactly an invitation for these lawyers to refile.

 

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