On October 28, 2022, the U.S. Court of Appeals for the Fourth Circuit in Alig v. Rocket Mortgage vacated and remanded for reconsideration a district court order certifying a class of mortgage borrowers, highlighting an important Article III standing issue in class action lawsuits. See Alig v. Rocket Mortgage, LLC, 52 F.4th 167 (4th Cir. 2022). The Alig decision relies on the United States Supreme Court’s decision in TransUnion LLC v. Ramirez and follows a grant of certiorari, vacatur, and remand from the U.S. Supreme Court. The decision provides further ammunition for the argument that all putative class members must have a demonstrable injury in order to recover damages in a class action. Indeed, the grant of certiorari by the Supreme Court in Alig is itself a signal that this defense is one that should not be discounted by defendants finding themselves the subject of class action litigation.
In Alig v. Quicken Loans, No. 5:12-CV-114, 2016 WL 10489897 (N.D. W.Va. June 2, 2016), the U.S. District Court for the Northern District of West Virginia certified a proposed class of West Virginia residents who refinanced mortgages between 2004 and 2009 and for whom the defendant obtained appraisals using a form that included an estimated value for the property. According to the plaintiffs, they paid for independent appraisals, but received appraisals that were tainted when the defendant exposed the appraisers to a “target number” in the appraisal request. The District Court agreed, granted class certification, and further granted summary judgment for Plaintiffs on claims of unconscionable inducement under the West Virginia Code, breach of contract, and conspiracy. The District Court awarded the plaintiffs nearly $10 million in statutory damages.
On appeal, the Fourth Circuit affirmed in part and vacated in part, rejecting the defendant’s argument that the class included uninjured class members without standing, but holding that the District Court erred in its analysis of the breach of contract claim. The Court of Appeals remanded for the District Court to consider whether class members suffered any damages at all as to the breach of contract claim. Alig v. Quicken Loans, Inc. 990 F.3d 782 (2021). Three months later, the United States Supreme Court issued the opinion in TransUnion LLC v. Ramirez, holding that every class member must have Article III standing for each claim that they assert, requiring proof of concrete harm in order to recover damages. 141 S. Ct. 2190 (2021). In Ramirez, the Supreme Court determined that a large part of a certified class that had been awarded statutory damages lacked standing where errors in their credit reporting were never disseminated to third parties, and reversed and remanded for consideration in the first instance whether class certification was appropriate.
Quicken Loans then filed a petition for writ of certiorari, arguing that members of the Alig class lacked standing under Ramirez. The Supreme Court in January granted the petition, vacated the judgment of the Fourth Circuit, and remanded the case “for further consideration in light of [Ramirez.]” Rocket Mortgage, LLC v. Alig, 142 S.Ct. 748 (2022). The Fourth Circuit concluded on remand from the Supreme Court that “the district court should apply TransUnion to the facts of this case in the first instance” and vacated and remanded to the District Court for further proceedings. As the defendant pointed out in the petition for certiorari, the Alig case highlights the standing problem when one set of named plaintiffs—or “perfect plaintiffs”—establish standing with atypical injuries, while a significant part of the class simultaneously has no injury and lacks standing.
Although the District Court has not yet addressed these issues on remand, Alig provides good reason for class action defendants to meaningfully consider whether the plaintiff can establish injury for each class member on a class-wide basis and to challenge Article III standing when that burden is not met. That said, defendants must remain mindful that Ramirez addressed the issue of standing in federal court but says nothing about standing in state court. Thus, a defendant challenging standing in federal court based on Ramirez must be careful to not inadvertently find itself defending a significant class action in state court where the standing analysis may be different.