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August 2020: Ninth Circuit Victory for Safeguard Properties

August 2020

Quinn Emanuel obtained an important appellate victory in the United States Court of Appeals for the Ninth Circuit for Safeguard Properties, in a class action alleging violations of consumer protection laws and seeking over $1 billion in damages.  

Our client, Safeguard Properties, is the largest property preservation company in the country.  When a home goes into foreclosure and is abandoned by the homeowner, Safeguard is hired by 150 different banks and federal government agencies to maintain the property until the foreclosure process is complete, which can sometimes take two years or more. As part of those preservation activities, Safeguard changes a lock on the back door of the house so that they can perform monthly inspections and complete necessary repairs. The bank permits Safeguard to conduct such lock changes pursuant to a clause in standard-form mortgage contracts allowing the bank to make entry in the event of default and abandonment.

In 2016, in an unrelated case called Jordan v. Nationstar Mortgage LLC, the Washington state Supreme Court held in a 6-3 decision—contrary to federal guidance and the laws of 49 other states—that mortgage clauses permitting entry prior to the completion of foreclosure were invalid. The Washington legislature implemented a legislative fix, but class actions quickly followed for pre-2016 conduct. Several major banks and mortgage servicers quickly settled claims for tens of millions of dollars. But because Safeguard worked for all of the banks, they had many times the number of potential class members as any single bank. Before we were retained to take over the case from prior counsel, Safeguard was facing a 19,000-plaintiff certified class and a $1 billion demand.

Within six months, the class against Safeguard was decertified and the case was dismissed. The district court’s ruling had two prongs: (1) Safeguard acted in good faith under existing law prior to the Washington Supreme Court decision, defeating plaintiffs’ claims under the Washington Consumer Protection Act; and (2) the original named plaintiff in the case committed a massive fraud on the court and never actually owned the property he sued about, depriving him of standing. The court ruled that even though there were later-named plaintiffs added to the operative complaint, the absence of standing by the original plaintiff made the case a nullity and required even the later-added plaintiffs to be dismissed without prejudice. These were difficult legal issues, and it didn’t help when the Washington Attorney General filed an amicus brief siding with the plaintiffs and asking the Ninth Circuit to reinstate the consumer protection claim.  

On July 14, 2020, the Ninth Circuit declined Plaintiffs-Appellants’ certification request and affirmed the dismissal of the consumer protection claim, confirming that Safeguard acted in good faith under existing law and therefore could not be liable. As a result of this decision, this former 19,000-plaintiff class action will now proceed as single plaintiff, non-class, individual trespass claim.