California Fellow Forrest Hainline recently achieved a significant victory for client PHH Mortgage Corporation before the California Court of Appeal. Mr. Hainline first entered the case after a three-month billing dispute between PHH and an individual borrower led a jury in Yuba County, California, to award the borrower with not only $160,000 in economic damages, but also $16 million in non-economic and punitive damages. After Mr. Hainline’s successful post-trial motions and recent appellate victory, this entire award has been thrown out.
The dispute centered on a loan modification agreement PHH signed with Philip Linza. PHH initially failed to transfer an outstanding escrow balance into principal, and thus sent Linza several incorrect mortgage statements and, when Linza did not pay the incorrect amounts on those statements, several incorrect foreclosure notices. After Linza refused to pay his mortgage even after those mistakes were corrected, PHH sought to foreclose, and Linza responded by filing this suit for breach of contract, negligence, fraud, intentional infliction of emotional distress (IIED) and intentional interference with contract.
PHH’s prior attorneys put up almost no defense at trial – indeed, the Court of Appeal wrote that it “find[s] PHH’s passive acquiescence in defending the action perplexing.” For instance, Linza was allowed to testify at trial, with no objection, meaningful cross-examination or rebuttal, that when Linza reached out to PHH to try to correct the billing error, a top company servicing executive told him that PHH welcomed a suit from Linza because PHH has a “bus load” of attorneys to throw at him, and that PHH likes it when borrowers default because it lets PHH collect more fees.
The jury ultimately awarded Linza approximately $160,000 in economic damages, $300,000 in non-economic damages, and $15.7 million in punitive damages. The trial judge added approximately $179,000 in attorney’s fees based on a provision in the loan agreement that the prevailing party is entitled to attorney’s fees in any dispute.
At this point, PHH hired Mr. Hainline. He and his team moved for JNOV (judgment notwithstanding the verdict) on Linza’s tort claims and related non-economic and punitive damages awards, and for a new trial on breach of contract and economic damages. In a significant victory, the trial court granted PHH’s motion for JNOV, but it denied the motion for a new trial.
Linza appealed the JNOV ruling, and PHH cross-appealed the denial of its new-trial motion. Briefing extended over 18 months, and Linza ultimately submitted over 175 pages of briefing. Given the size of the jury verdict, the case was subject to significant scrutiny. On October 23, 2017, the Court of Appeal not only affirmed the trial court’s JNOV ruling, but also agreed with PHH that there was not sufficient evidence in the record to support the jury’s economic damages award. The Court of Appeal thus remanded for a new trial on economic damages. The court also vacated the attorney’s fee award because there is currently no damages award in Linza’s favor, and Linza thus cannot be the prevailing party. Forrest is looking forward to returning to Yuba County trial court for a trial on Linza’s economic damages.
California Fellow Forrest Hainline of Goodwin Procter LLP is a nationally known trial lawyer who has tried more than 100 cases before courts, juries, administrative agencies and arbitration panels throughout the United States. He has appeared in the Supreme Court of the United States and has argued before seven U.S. Courts of Appeals. Mr. Hainline tries complex cases that he simplifies so courts and juries can understand them. He has tried antitrust, major products liability, patent and trademark, mass tort, California’s Proposition 65, consumer class action and products labeling cases, and distribution and competition matters. He is often brought in to try cases within months of trial. Mr. Hainline has extensive experience representing food, beverage, and hospitality companies. He is a Fellow of the Litigation Counsel of America.