By Jonathan Stempel
NEW YORK (Reuters) - A federal appeals court on Friday rejected a bid to revive a $54.8 million jury verdict against Wells Fargo & Co, saying the trial judge had authority to take the "drastic step" of decertifying the class action after the award was made.
In a decision that could end 15 years of litigation, the 2nd U.S. Circuit Court of Appeals in Manhattan said U.S. District Judge John Koeltl met a high legal standard in finding that borrowers whose mortgages had been owned or serviced by The Money Store and HomEq Servicing could not sue as a group.
Borrowers accused The Money Store and HomEq of improperly charging late fees, after their loans had gone into default.
A Manhattan jury held Wells Fargo liable in December 2014. The San Francisco-based bank faced possible liability because of various mergers, including its 2008 purchase of Wachovia Corp.
Paul Grobman, a lawyer for the plaintiffs, said Friday's decision interfered with his clients' constitutional right to a jury trial.
"The decision is unprecedented," Grobman said in an interview. "It allows a court under the guise of reviewing class certification to overturn a jury verdict in violation of the 7th Amendment. We're considering all available legal avenues."
Wells Fargo spokesman Jim Hines declined to comment.
In voiding the verdict and decertifying the class action, Koeltl in May 2015 found no proof that the defendants had a contractual relationship, known as privity, with plaintiffs whose loans they serviced but did not originate.
Writing for the appeals court, Circuit Judge Dennis Jacobs said Koeltl had discretion to decertify the class action, given that his conclusions implicitly meant he thought the jury's findings were at least "seriously erroneous."
Jacobs said that met a standard requiring a trial judge mulling decertification after a jury verdict to defer to jurors' factual findings unless they were "seriously erroneous," a "miscarriage of justice" or "egregious."
"Without class-wide evidence that class members were in fact in privity with The Money Store, the fact-finder would have to look at every class member's loan documents to determine who did and who did not have a valid claim," Jacobs wrote.
The case is Mazzei v. The Money Store et al, 2nd U.S. Circuit Court of Appeals, No. 15-2054.
(Reporting by Jonathan Stempel in New York; Editing by Jeffrey Hodgson and Frances Kerry)