Wells Fargo’s “Scorched Earth” Bid to Dismiss Fraud Case

Wells Fargo is no stranger to claims that it engages in shady residential lending and foreclosure practices. We regularly investigate and prosecute commercial claims involving America’s 3rd largest lender. Their behavior on the commercial side is no better.

In June of 2015, Latasha McLaughlin filed suit against Wells Fargo. She claimed the bank was wrongly pushing her into foreclosure even though it was holding over $16,000 in insurance claim funds. McLaughlin said the bank should have used those funds to make mortgage payments. She says when she received a payoff statement from Wells Fargo, it didn’t disclose or mention that the bank was holding insurance monies.

Latasha wasn’t alone. Her case was later certified as a class action case by a federal judge in San Francisco. Big banks don’t like class actions. They know that in wrongful foreclosure cases, most homeowners can’t afford to take on big banks. Since homeowners in foreclosure are already struggling financially, banks know they can outspend the homeowners and can afford better lawyers. Unfortunately, homeowners usually lose foreclosure cases (and not because they don’t have a good case).

All that changes in a class action. Suddenly the bank isn’t facing one homeowner, they are facing thousands or tens of thousands. And in cases of this size, some lawyers will take the case on a contingent fee basis. The homeowners suddenly can compete on the same playing field and the stakes are much higher for the bank.

That is what is going on in Latasha McLaughlin’s wrongful foreclosure class case against Wells Fargo. The bank has been fighting tooth and nail to have the case dismissed or at least avoid class certification. So far, they have lost.

The bank’s first move came last year when the bank sought to dismiss the lawsuit claiming it didn’t have an obligation to disclose to homeowners’ funds available to pay down the mortgage. The court ruled against the bank. Undeterred, the bank moved the court to reconsider. Once again the bank lost. Still undeterred (and obviously desperate), the bank asked the court to stay the case so it could appeal. Yet again, they lost.

In June, U.S. District Court Judge William Alsup certified that all borrowers who received payoff statements that failed to disclose the existence of insurance claim funds and Wells Fargo borrowers at risk of receiving inaccurate payoff statements were covered by the class. Knowing that the case was going to proceed, Wells Fargo next decided to try to get the class decertified. In our opinion, Wells Fargo wants to manage their risk. If they are going to lose at trial, its better to lose just one case and not thousands.

The bank has now filed an appeal to the 9th Circuit Court of Appeals seeking to overturn the class certification. While they are awaiting word on their appeal, they have again asked the trial judge to halt the lawsuit, this time claiming they will be “irreparably harmed” if the case goes forward. This the bank’s seventh motion this year!

According to Latasha McLaughlin, Wells Fargo “has embarked on a scorched earth litigation strategy rehashing failed arguments and seeking delay of this case at every conceivable turn.

We agree. In fact, we think it is ironic that a bank worth $1.8 trillion can even claim it faces irreparable harm by the lawsuit. If anyone is facing irreparable harm, it is homeowners facing foreclosure and whose homes have been damaged (often by flood waters, hence the reason the bank is holding insurance proceeds).

Unfortunately, millions of homeowners continue to struggle to remain in their homes. Instead of helping these homeowners, we see big banks such as Wells Fargo and Bank of America routinely (and wrongfully) deny HAMP modifications, file foreclosures based on forged documents and engage in a wide range of other predatory foreclosure practices. 

Although we can’t accept individual foreclosure cases, it is important to publish these stories so that others know how big banks behave.

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A word about our practice and the cases we handle. 

MahanyLaw and our partners at Judge, Lang & Katers are lender liability lawyers. That means we sue banks. Our practices are limited to large cases against banks in which there are at least $5 million in actual losses or class cases. We wish that we could take every predatory banking case, unfortunately we simply do not have enough lawyers to do so.

At times we consider class action cases like the case detailed in this post. If you are asking yourself the question “How can I sue my bank?” and think you may have a class case, contact attorney Antony Dietz at [hidden email] or by telephone at (248) 789-5551. If you have a case involving losses greater than $5 million or lost your home even though you were never in default, contact attorney Brian Mahany at [hidden email]. Please accept our apologies in advance if we do not respond because you do not qualify. We sometimes receive dozens of inquiries daily. Unless you meet our guidelines, we cannot always respond to everyone and do not make exceptions to the types of case we accept.

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