Bordas: Quicken Loans ruling a win for consumers

By John O'Brien | Dec 7, 2012

CHARLESTON – An attorney involved in a recent state Supreme Court decision is pleased the court decided attorneys fees can be applied when calculating punitive damages.

Jim Bordas, of the Wheeling firm Bordas and Bordas, said the court was right to affirm Ohio County Circuit Court Judge Arthur Recht’s 2011 decision. Recht awarded almost $600,000 in attorneys fees and litigation costs, then used that amount to help determine the amount of punitive damages owed to Lourie Brown.

“We… consider it to be a significant victory for the Browns and consumers throughout the State of West Virginia that the Supreme Court found that the attorneys fees that the Browns were awarded as a result of the tremendous amount of work done by their attorneys can be considered as part of the ratio when analyzing the appropriate amount of punitive damages to be awarded,” Bordas said.

On Feb. 17, 2011, Recht awarded more than $2.1 million in punitive damages – an amount that represented three times the amount of compensatory damages, attorneys fees and litigation costs combined. He had awarded almost $500,000 in attorneys fees and $100,000 in litigation costs.

He followed a 1991 decision to calculate the amount of punitive damages. Recht wrote the Quicken Loans case was “one of the more confusing, confounding and complex cases both factually and legal that has ever been before” him. Quicken Loans did not challenge the amount of attorneys fees.

On Nov. 21, the state Supreme Court, in an opinion authored by Justice Thomas McHugh, found that Quicken Loans committed fraud and violated various provisions of the West Virginia Consumer Credit and Protection Act in a mortgage loan with Brown, an Ohio County resident.

Brown had responded to a pop-up advertisement on her computer in May 2006 and submitted an online application in an effort to consolidate debt and lower monthly payments. She was contacted by Quicken Loans.

Brown alleged the company gave her a larger loan than necessary after an inflated appraisal and lied about refinancing after the loan was in place. Eventually, she defaulted on the loan.

Recht agreed with her argument, and he added attorneys fees and costs in with the compensatory damages awarded to arrive at the $2.1 million figure. The Supreme Court affirmed that decision, with McHugh writing that attorneys fees and costs awarded under the WVCCPA should be included in the formula.

With a $700,000 settlement from two other defendants, Brown’s total recovery was nearly $3.7 million – a figure that didn’t sit well with Quicken Loans given the cost of the loan was $145,000.

The court, though, found Quicken did not disclose an “enormous” balloon payment of more than $100,000.

The case was remanded for a new calculation of damages.

The court agreed with Quicken that it should receive a $700,000 credit for the settlement between Brown and the other defendants – the appraiser and appraisal company. Most likely, the credit will offset the compensatory damages awarded, leaving a balance of zero.

That credit, however, will not apply to any punitive damages. As to the punitive damages issue, the court ruled Recht did not conduct a “meaningful and adequate” analysis under the 1991 decision.

Under that decision, factors to be considered in awarding punitive damages include:

-Punitive damages should bear a reasonable relationship to the harm that is likely to occur from the defendant’s conduct as well as to the harm that actually has occurred;

-The reprehensibility of the defendant’s conduct;

-If the defendant profited from its wrongful conduct, the punitive damages award should discourage future bad acts;

-Punitive damages should bear a reasonable relationship to compensatory damages; and

-The financial position of the defendant.

Those filing amicus briefs in the case included the National Association of Consumer Advocates, Mountain State Justice, state Attorney General Darrell McGraw and the West Virginia Association for Justice.

The WVAJ is the state’s trial lawyers association. Scott Blass of Bordas and Bordas is the group’s president.

“We look forward to the circuit court providing a more detailed order that sets forth the analysis that was used to award over $2 million in punitive damages,” Bordas said.

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