This past July, a jury in Yuba, California awarded a homeowner, Mr. Phillip Linza, $16.2 million after he sued PHH Mortgage for, generally speaking, treating him like he was… well, a kickball or something as he tried to get a loan modification. His story wasn’t really any different than that of countless others, except for how it ended in a jury trial and the equivalent of a winning lottery ticket.
Most everyone I interviewed about the case, including Mr. Linza’s lawyers, expected the decision to be appealed and the award probably reduced to some lesser amount, but yesterday when the judge ruled on motions filed by PHH Mortgage in response to the multi-million verdict, he must have shocked at least a few when they learned that he had slashed the amount of the award by $16,042,000… to $158,000.
Let’s face it, compared with a check for $16.2 million… reeling in a check for $158,000 might seem so small you’d almost want to throw it back in the lake.
The judge agreed with PHH’s motion arguing that there was no basis for punitive damages, and completely threw out the entire punitive damage award, which was originally $15.7 million. He also slashed the amount of compensatory damages awarded by the jury from $513,000… to a paltry $158,000. On the other side of the proverbial coin, PHH also asked for a new trial, but that motion was denied.
I spoke with attorney Steven Foondos, who is the managing partner at the firm representing Mr. Linza, United Law Center in Northern California, the day after the judge’s ruling was released. And as you might imagine, he was still reeling from the blow to some degree, but like any good lawyer faced with such a dramatic outcome, was also already chomping at the bit to appeal what he considers more than a mere travesty of justice.
Much of what Foondos said was what I expected to hear… that it was beyond outrageous for the judge to have completely disregarded the jury’s work… that the judge’s ruling was so out of line that it sets up a stronger appeal than would have otherwise been possible… and that basically the judge didn’t know his hind quarters from a securitized trust.
Steve is going to be my guest on a Mandelman Matters Podcast later today, so look for that in the next day or two. But, until then, according to Foondos…
“This should not have been taken out of the hands of the jury, and frankly it has allowed us to set up an appeal that is so clear that I’m confident we will prevail. We should all remember that this is a war that’s been going on for more than six years now and there are still many battles to be fought. But I will admit… this ruling was perplexing.”
Distressing, yes… but how distressing?
Perhaps most notable was how the judge characterized Mr. Linza’s degree of emotional distress resulting from the actions of PHH Mortgage during the loan modification process.
The judge’s ruling, which you can read in its entirety below, explained that to recover under the claim for “Intentional Infliction of Emotional Distress,” the facts that must be proven include:
Outrageous conduct that is “so extreme as to exceed all bounds of that usually tolerated in a civilized society.”
Intent by Defendant to cause emotional distress or that Defendant acted with reckless disregard that Plaintiff would suffer emotional distress.
That the Plaintiff suffered “severe or extreme” emotional distress.
The ruling provides a certain amount of legal wrangling, and the citing of past decisions related to the claim for “Intentional Infliction of Emotional Distress,” but it seemed like the bottom-line was that the judge saw it as a question of degree, saying…
“The evidence here is insufficient to establish conduct ‘so extreme as to exceed all bounds of that usually tolerated in a civilized society.’ Defendant made some errors in statements sent to Plaintiff that the evidence shows were due to his loan modification documentation not catching up with his existing loan accounting. The statements attributable to the loss mitigation supervisor were insensitive but not outrageous.
There was no evidence that the errors made were intentional or made in reckless disregard of causing emotional distress. Three statements with errors were sent in April and May before a correct statement was sent out at the end of July. There was no evidence presented as to why this happened other than from Defendant.
Defendant’s explanation is basically that the paperwork got delayed. This is far from the conduct that is intentional or made with reckless disregard that plaintiff would suffer emotional distress.”
Okay, so I do see one thing much more clearly now…
It’s not just a simple lack of empathy on the part of the court. It’s that you cannot adequately convey what it’s like to be in limbo over one’s home as your servicer does its best three-ring circus imitation, to someone who has never even been close to being in that situation.
You see it in the judge’s characterization of the conduct measured against the standard of being “so extreme as to exceed all bounds of that usually tolerated in a civilized society.” As he says, PHH Mortgage made some “errors in statements” sent to Mr. Linza, and I suppose if that’s how you characterize it, well… it would be hard to say that making “errors in statements” rises to the level of behavior that exceeds all bounds tolerated in a civilized society.
But it’s not just about making errors in statements. It’s about WHO is making such errors, WHEN the errors are being made, and WHAT is potentially on the line as a result of the errors.
For example, if the WHO is your health club… the WHEN is in June… and the WHAT is your gym membership during months when you tend to get your exercise outdoors anyway… well, so what? However, if the WHO is your oncologist, the WHEN is during cancer treatments, and the WHAT is your life… then the “errors in statements” takes on entirely new levels of gravitas, right?
Well, in this case, the WHO is your bank… the WHEN is during the foreclosure process… and the WHAT is the loss of your home… well, that’s a pretty big deal, but even that alone doesn’t even come close to being an adequate description of what’s going on because it’s not happening in a vacuum.
It’s happening after the President of the United States told the country about the program and its purpose. It’s happening after your bank has invited you into this process of applying for a loan modification. And it’s happening as months roll by and it becomes that much harder to ever catch up should you ultimately be denied.
You see, what happens is that you start to struggle making your payment, but the bank won’t even talk to you about it until you’re 2-3 months delinquent, so finally that’s where you are… and if the bank were to tell you that you’ve been denied in a month or so, then you might be able to do something to bring the loan current, but that almost never happens.
It’s a process that takes months upon months, and as each month passes, and the uncertainty of the outcome is made clearer by the clown-like behavior of your servicer along the way, the certainty that you will not be able to catch up should you be denied becomes set in stone.
And now you’ve gone from just applying for something… to your current life being entirely dependent on something working, while you see evidence every day that you are in an environment where nothing is working.
It’s the sort of thing that can first induce panic in even the most resolute and optimistic individuals, followed by waves of sadness as you come to accept the irrevocable nature of your situation. And after that, all that’s left is anger and finally disgust at your government, your bank, and a society that turns its back on doing anything about it.
I’m quite sure that I’ll never feel the same way I once did about my government, and that’s really saying something considering I’ve lived through such examples of honor and competence as Vietnam, Kent State, Watergate, trading-arms-for-hostages, oral sex in the Oval Office, whatever the run-up to the Iraq War was, and the total embarrassment that followed Hurricane Katrina. All of those things combined pale in comparison to my government’s inconceivably inept ongoing handling of the foreclosure crisis.
And if you think I’m exaggerating, consider that we lost 65,000 in Vietnam over Lord-only-knows how many years dithering in that South East Asian swamp, how many lives do you suppose have been lost over the foreclosure crisis? Less than 65,000? Maybe… I’m not sure about that, but maybe. We’ve lost eight millions homes… I’m sure in terms of life expectancies we’ve lost quite a few.
However, in this case, we’re only talking about “errors in statements,” so it’s not that big a deal, obviously. Here’s how the judge viewed the severity of emotional distress involved
“There was insufficient evidence that Plaintiff’s claimed emotional distress was severe or extreme. He went to the doctor only once. He took some pills that weren’t identified. His medical costs were about $200.”
Okay, so here’s the meat of the matter to the judge’s way of thinking. Only one doctor’s visit clearly told the judge that Mr. Linza was not in that bad a condition, because if he were he would have gone to the doctor a lot more than once… he would have identified the pills he was popping like candy, and the whole affair surely would have cost more than a couple hundred bucks.
I don’t know Mr. Linza, but I can tell you that going to see my doctor for anything but the flu or a broken bone sort of ailment is about as productive as going to visit my florist. My doctor doesn’t work all that well with anything that doesn’t run a fever, produce phlegm… or show up on an X-ray.
Were it me instead of Mr. Linza, I think I would have turned to street drugs before I bothered my HMO gatekeeper-physician… oh, and of course, alcohol… copious amounts of alcohol.
As to the $200… I don’t know… maybe his brother-in-law is a doctor… or maybe that amount could cover the co-pays associated with a few visits to a chiropractor and/or therapist, if you were prone to such things. I’d probably suffer along without seeking assistance from the medical community, partially because I wouldn’t want to admit to my doctor that I was in foreclosure, for the same reasons I wouldn’t tell anyone else I know.
The judge continues…
“While a potential foreclosure has been a possibility, Defendant hasn’t pursued that for over two years during which time Plaintiff has had no rent or mortgage expense because he made no mortgage or property tax payments.”
Okay, that’s true on the face of it, but it would be more valid if the servicer would have told Mr. Linza that’s what he could expect in advance. Like, if PHH had said in the beginning, “Don’t worry about foreclosure, we won’t be pursuing that for at least two years, and you won’t have to pay a dime related to your mortgage that entire time.
That, I would agree, would be a stress reducer big time. But it’s not what happens during the loan modification process… rather throughout the entire application process you are sent increasingly heavy handed letters about the prospect of losing your home at any time. Is not paying for two years an economic benefit… yes. But it’s no picnic at the beach, I’ll tell you that because it’s not that you’re not making payments, it’s that you can’t… you aren’t allowed to make them.
After the first few months they even stop sending you statements, so you don’t even know how much you owe as the seemingly never ending process limps along with all the grace of someone with cerebral palsy running the 100 yard dash in the Special Olympics.
And the judge finally concludes…
“Plaintiff complained of lost sleep and nausea, of being upset, hurt, stressed, and angry, but he was mostly ‘just pissed’ as he testified. Plaintiff walks his dog, prays, and goes out with friends. He hasn’t gone to counseling for any stress. While there has been some stress associated with this experience, the evidence is not sufficient to establish that it was severe or extreme.”
And there you have it. The moral of this story is that if you plan to turn to the courts for relief from being abused during the loan modification process, make sure you see every kind of doctor imaginable and bring lots of empty Oxycontin pill bottles with you to court… or maybe just buy some crack cocaine and bring that in… knock a few holes in your walls at home using a bicycle pump just for the oddness it connotes… beat the crap out of some neighborhood kid over the holidays or at least admit fantasizing about doing so in your dreams each night… and for God’s sake whatever you do, don’t walk your dog or pray.
Or, wait… I’ve got a good idea here… buy a staunch looking ventriloquist’s dummy that looks like an elderly matron and bring it with you to court. Turn to her often and shake her head like you think she’s admonishing you for something… and absolutely take her with you on the stand to testify.
Explain to the judge that Mrs. Helen Wellenmellon would like to have her day in court.
Finally, consider getting yourself removed from the courtroom for refusing to stop your dummy from telling the judge that he farted and that we need a recess because the smell is offending her delicate olfactory sensibilities.
That ought to be the end of anyone wondering whether the stress you’ve endured was “extreme or severe,” wouldn’t you think?
Breach of Contract and Compensatory Damages…
The judge did uphold the claim for breach of contract, and did recognize that Mr. Linza is owed some past and potentially some future economic damages. The jury had set the compensatory damages at $513,000, but the judge only saw them as being right around $158,000 to cover such things as medical, lost income, and other miscellaneous amounts.
Back in Foreclosure… Again.
The worst part of the whole thing, however, is that Mr. Linza now finds his home once again in foreclosure, and although I don’t expect that his home will ultimately be lost to the foreclosure process, obviously anything is possible when you’re talking foreclosure defense. At this point, it’s not completely clear what PHH Mortgage will now do related to foreclosing on Linza’s home.
The comparison does look bad… but I think the news is actually good.
Say what? You heard me.
The outcome is still a good one for Mr. Linza and other homeowners in California and potentially elsewhere.
From $16.2 million to $158,000… and I’d like to thank the jury for their hard work and dedication in this matter.
Okay, so the lawyers are absolutely going to appeal this latest ruling, and I’m sure there’s no shortage of legal arguments to be made as a result of the slashing of the jury’s verdict to such a degree. So, we’ll just have to watch and see what happens from here, but I don’t think it should be important to homeowners today because I still think Mr. Linza has won.
Now, I realize that I’ve just devoted quite a few paragraphs to showcasing what I see as being wrong with the judge’s perspective on Mr. Linza’s experience and resulting damages. But, none of that was meant to say that Mr. Linza should be upset at the way this has now gone because I’m here to tell you that this outcome for Mr. Linza and countless other homeowners is actually really good news… even with the damages reduced to $158,000.
Put the $16.2 million award completely out of your mind… like it never happened.
What if I was to tell you, the homeowner that’s been or is currently being jerked around in the loan modification process, that you could turn to the courts, walk away with $158,000 for your trouble, and ultimately save your home from foreclosure… all in about a year? What would you say?
How about, “Where do I sign up?” Would that be close? That’s what I would say.
See what I mean… erase the $16.2 million from your memory banks and look what happens to your perceptions of the greatly reduced $158,000… all of a sudden n$158,000 sounds like a lot of dough, does it not?
What’s the worst case for Mr. Linza at this point? His loan was around $240,000 plus the arrearages, which I suppose could amount to six figures… but still. He can’t be more than $158,000 behind, right? So, assuming that’s true, then worst case he can simply bring the loan current with his compensatory damage award money. Problem solved, foreclosure stopped, and a good time was had by all.
No, I know it’s not the best outcome imaginable, but it’s still a darn good one… lest we forget, one that millions of homeowners since 2008 would have done almost anything to have as their own.
Also, $158,000 is plenty to motivate homeowners to fight to protect their rights if being mistreated in the loan modification process, and it’s plenty to put a chill up the collective leg of servicers over the prospect of hundreds if not thousands of the same types of decision showing up in the headlines.
It’s even possible that you could bring such a suit now, depending on how the statute of limitations affects your specific claims, and whether the statute can be tolled… oh, but there I go sounding like a lawyer and I am not, so let’s cut it right there. I are only the dumb writer in this story, if you have questions, you need to talk to a handful of attorneys and see what everyone says about your case.
(SIDE BAR: Here is a link to the questionnaire (or, if you prefer, Jury Verdict Form) completed by the actual members of the jury that awarded Mr. Linza $16.2 million. It’s a fascinating look behind the curtain of the lawsuit in order to see just how the jury was thinking and instructed to think.)
The point is that this decision, I think… even at $158,000 as opposed to millions, is every bit as potentially powerful and valuable for California’s homeowners who are treated tortuously during the loan modification and/or foreclosure process. I think the attorneys at United Law did outstanding work on this case, and Mr. Linza is lucky to have found them and hired them.
And again, they’ll appeal… from talking to Steve Foondos I get the sense he may not sleep a full night until the appeal is filed. I can tell he’s walking around typing it in his mind… which is why I’m so happy not being a lawyer. Walking around like that is known to cause brain damage in overweight house pets and hairless marsupials.
I have a friend that’s practiced law for almost 40 years. Sometimes right in the middle of dinner, he jumps up and says something like: “I think that lacks foundation.” Everyone always laughs, but we all recognize that the legal profession has clearly damaged him… it’s like he’s staring in his own version of “Born of the 4th of July.”
So, I’m staying tuned to this case to see where things go from here and the Good Lord willing, I’ll still be here at the end of Mr. Linza’s trials and travails to but a bow on the whole thing, helping you understand what happened and why… and sharing my analysis and opinion along the way.
In this case, I think this outcome is still a very positive one no matter the precipitous drop in damages imposed by the judge, although soon to be appealed… it’s still a whole lot better than maybe 99 percent of what’s been decided in favor of homeowners.
It’s a successful breach of contract case handled in about a year, with $158,000 going to the homeowner. How can that ever be a bad thing?
Mandelman out.
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Have a different point of view on this topic?
Email it to: mandelman@mac.com.
We can talk about it.
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Epilogue
When I spoke with Steven Foondos yesterday, he started out half jokingly saying something to the effect of: “Martin, I’m not a conspiracy theory guy, but this is the sort of thing that makes me consider being one.” Like I said, he was kidding to make a point, but the reality is that the judge required PHH to post a $5 million bond against the $16.2 million jury award… you’ll find a more detailed explanation in United Law’s press release of September 29th…
Linza v. PHH Mortgage Corporation et al.
PHH Mortgage Ordered to Bond $5 million Against Trial Award During 115 Day Post-Trial Period; Linza Home Stayed from Foreclosure During 115 Day Period.
Why would he feel the need to do that at the end of September if he knew how he would rule related to the issues of punitive and compensatory damages?
I don’t think this judge is in cahoots with anyone, I don’t think he’s the least bit corrupt… I think he believes that he’s done the right thing here by reducing the award and throwing out the punitive damages. And maybe he’s right in some respects and wrong in others… I’m not an attorney, you realize, nor have I studied the law as it applies here, so I really don’t know.
If I had to venture a guess, I’d say that the best answer would be found somewhere in the middle.
And therein lies the biggest problem with our existing laws when it comes to foreclosure defense litigation… the judges cannot order that a loan be modified. All they can do is rule to somehow wipe out the mortgage, leave it unsecured, or get the homeowner some money… that’s it.
They never want to rule in such a way to give the homeowner a free house… a windfall as the outcome of this mess, but since they can’t order the loan modified, there’s not much they can do to make things right in many of these cases.
That situation has to change… the legislature needs to give judges the power to rule in such a way that a borrower’s loan must be modified… a court ordered loan modification, if you will.
That would make a significant difference in the court’s role and effectiveness bringing this crisis under control, and modifying the egregious behavior servicers continue to exhibit on a regular basis. Just a free house or a foreclosure are not enough tools for judges if they are to be capable of delivering justice in the form of equitable solutions to foreclosure defense litigation.
There’s only one way this sort of legislation ever comes to pass and that’s if it starts with homeowners and attorneys writing to their elected representatives to say that the law must be changed and why. Without those sorts of beginnings, it will never gain the support needed to pass, and I would predict, die in legislative committee.
So, that means you… whoever you are. If you want to see the situation related to foreclosures improve in this country, then stay involved, stay informed, and get more active politically… even if all that means is that you write a couple of letters each year.
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Here it is… the Court’s Ruling Reducing Award for Damages in Linza v. PHH Mortgage to $158,000… it’s not long, and it is an interesting, if occasionally maddening, analysis of the case to read whether lawyer or lay person.
Court Reduces Linza v. PHH from $16.7 million to $158,000