Daily Blast December 11, 2014

Yesterday, the California Court of Appeal, Fourth Appellate District, Division Three (Orange County), published its opinion in Peterson, et al. v. Bank of America, et al. (Dec. 11, 2014, G048387) ___ Cal.App.4th ___, analyzing whether the third amended complaint, joining 965 plaintiffs, conforms with Code of Civil Procedure section 378 regarding permissive joinder. The Court of Appeal determined that the third amended complaint establishes the “same … series of transactions” that will entail litigation of at least one common question of law or fact. (Slip opn., pp. 2-3.)

This case arose from defendant Countrywide Financial Corporation (“Countrywide”) engaging in dishonest home loans and appraisals that inflated home prices in the mid-2000’s. (Slip opn., p. 3.) The 965 plaintiffs are people who borrowed money from Countrywide in the mid-2000’s. (Ibid.)  Defendants demurred to the third amended complaint on the ground of misjoinder of plaintiffs in violation of section 378. The trial court granted defendants’ demurrer without leave to amend and dismissed all but one plaintiff. (Id. at p. 9.) 800 of the 965 plaintiffs appealed. (Ibid.)

The California Court of Appeal recognized this case tests the limits of California’s permissive joinder statute, Code of Civil Procedure section 378. (Slip opn., p. 2.) However, the Court of Appeal held there were sufficient common questions of law and fact to satisfy section 378. (Id. at p. 3.) The court stated that upholding the demurrer for misjoinder would be a major departure from California case law broadly construing the statute’s same-series-of-transactions language in favor of joinder. (Id. at p. 2.) The third amended complaint alleges two aspects that will entail common evidence: (1) whether Countrywide deliberately encouraged dishonest appraisals, and (2) whether Countrywide encouraged its loan officers to conceal loan terms. (Id. at p. 15.) The court emphasized that its conclusion that joinder is permissible is based on commonality regarding liability, not damages. (Id. at p. 16.) The court also held that two overall policies of the law are served by joinder in this case: access to justice and conservation of judicial resources. (Id. at p. 17.)

Justice Fybel wrote an extensive dissent. Justice Fybel was of the opinion that separate loan transactions by different lenders do not constitute a single transaction or occurrence and broad construction of section 378 does not justify joinder of 818 plaintiffs. (Dissenting Slip opn., pp. 17, 21.)

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