Rocket Mortgage moves to quash class action suit against it

After the nation's top court ruled in favor of Rocket Mortgage, the Detroit-based company asked the United States Court of Appeals for the Fourth Circuit in early June to decertify a class action suit that questions the lender's appraisal practices more than a decade ago. The mortgage lender is also requesting for the court to overturn a $9.7 million judgment in favor of the plaintiffs.

The initial lawsuit filed in 2012 claims that Quicken Loans, now Rocket, used inflated appraisal values of 2,769 properties refinanced from 2004 to 2009 in West Virginia. By doing so, the lender created a situation where borrowers faced a greater likelihood of having an "upside down" mortgage, in which the principal is higher than the value of the property.

It allegedly did so by sharing borrowers' estimates of their property values with its affiliated title and valuation company Title Source, now Amrock. In court documents, Rocket claims that this was "a common practice that was entirely consistent with appraisal standards at the time" and that the rules regarding contact between lenders and appraisers changed after 2009. 

Plaintiffs allege this conduct violated civil conspiracy laws, the terms of their contracts, and the West Virginia Consumer Credit and Protection Act.

In January 2022, the case made its way to the U.S. Supreme Court, but a previous Fourth Circuit decision largely in favor of the class was ultimately vacated in a 5-4 decision. It was then remanded back to the lower court for further consideration in light of a ruling in TransUnion LLC v. Ramirez, which set a requirement that members of a class action must prove they were actually injured in order to be awarded damages.

The Detroit-based megalender noted in its recent appeal that borrowers in the class, which is represented by plaintiff Phillip Alig, were not harmed, and as such, the class action should be nullified and the damages award should be withdrawn. Furthermore, the lender pointed out in its appeal that nearly half the appraisals on the class members' loans came in below the borrowers' estimates, negating the claims made of inflated values.

William Jay, partner at Goodwin Procter LLP and the legal counsel for Rocket, noted the Supreme Court "made it crystal clear that the Constitution requires plaintiffs prove they were actually injured (not theoretically injured) in order to be awarded money damages in Federal Court."

"The Plaintiffs in this case have failed to provide any evidence at all to support that a single class member, let alone every class member, has suffered any injury," he said in a written statement. "As a result, we look forward to being fully vindicated and the class being decertified."

An attorney representing the class action plaintiffs did not immediately respond to a request for comment. 

Following the Supreme Court's decision to dismiss the lawsuit last year and calls from Rocket for the class to be dissolved, the plaintiffs' counsel again made the argument that violations of West Virginia law was the main thing to be considered.

"The district court and the Fourth Circuit had to predict whether Rocket's practice of using biased appraisals to inflate mortgages — a practice that has since been universally prohibited — amounted to 'unconscionable inducement' under West Virginia's Consumer Credit and Protection Act," the response brief said. "West Virginia's courts have already concluded that Rocket's practice violates the WVCCPA."