Felhaber Larson is pleased to report that a federal jury in St. Paul awarded its client a verdict of nearly $29 million in a case involving bad mortgage loans sold before the 2008 financial crisis. When interest and attorneys’ fees are factored in, the verdict could approach $60 million.
Felhaber Larson was among the trial counsel that brought Residential Funding Co. LLC v. Home Loan Center Inc., part of In Re: RFC and ResCap Liquidating Trust Litigation on behalf of the ResCap Liquidating Trust (“ResCap”), a successor to Residential Funding Co. LLC (“RFC”), against Home Loan Center (“HLC”), a former unit of Lending Tree. ResCap claimed that HLC, among others, sold them substandard mortgage loans that ResCap subsequently resold to various mortgage-backed securities trusts. After the housing bubble collapsed in the late 2000’s, those trusts sued RFC for the heavy losses sustained as a result of those loans, contributing to RFC’s decision to file for bankruptcy in 2012.
ResCap was then created to oversee the liquidation of RFC and to pursue possible claims on behalf of RFC’s creditors. One such claim was against HLC for having sold RFC the bad loans in the first place, which contributed to RFC having to file for bankruptcy and pay off its creditors. ResCap contended that HLC was required by contract to indemnify it for those payments to creditors.
Verdict for ResCap
Much of the case revolved around the extent to which the “Client Guide” (the document setting forth the representations and warranties HLC made to RFC about the quality standards of the loans) applied to the loans that HLC sold to RFC – ResCap said the Guide applied to all loanssold by HLC, but HLC disagreed. Despite the complexity of the case, it took the jury less than three hours to sift through the evidence and find resoundingly in favor of ResCap.
ResCap has filed more than 80 such cases and has recovered more than $1.2 billion in settlement of its various claims. There are more cases to be tried and more verdicts to be pursued, but this case sets a high bar for the value of ResCap’s damages and the strength of its indemnity claim.
Felhaber Larson tried the case along with Quinn Emanuel Urquhart & Sullivan LLP, and Carpenter Lipps & Leland LLP.