Judges hear push-back against Countrywide case consolidation

Legal News Line Sep. 25, 2008, 3:40pm

Jerry Brown (D)

BOSTON (Legal Newsline)--Lawyers representing California Attorney General Jerry Brown argued against Countrywide Financial Co.'s request to have the many lawsuits filed against it consolidated into one federal case during a U.S. Judicial Panel on Multidistrict Litigation held at Harvard University on Thursday.

The California Attorney General's legal team was joined by San Diego City Attorney Mike Aguirre and lawyers representing Illinois Attorney General Lisa Madigan who also argued for their respective lawsuits to be returned to the local jurisdiction.

Attorneys in the hearing said it went largely as planned. Christine Gasparac, spokeswoman for the California attorney general's office said a decision is expected within a week.

California and Illinois were the first states to sue Countrywide, now owned by Bank of America, for its predatory lending practices, which they allege has contributed to the rising number of foreclosures. Brown's amended suit claims that Countrywide offered its employees and managers financial incentive for selling customers risky, more expensive loans.

Attorneys general from Connecticut, Florida and West Virginia each later filed similar suits against the mortgage company, but they were not involved in this initial jurisdictional hearing.

Aguirre, who filed a suit of his own on behalf of San Diego, told Legal Newsline Bank of America's appeal to consolidate the numerous lawsuits against Countrywide acted as a delay tactic that would cause more homeowners to lose their homes.

"Bank of America/Countrywide is misusing the federal courts to delay," Aguirre said he told the panel, "which is allowing them to continue to foreclose on predatory loans that we think are unlawful."

Aguirre said he told the panel that local jurisdictions would be better suited than the federal courts to help homeowners work with Countrywide to save their homes.

"We are suffering dearly in San Diego," Aguirre said. "We are trying to stop all those foreclosures so we don't destroy those neighborhoods. Many of those homeowners, even though they are current, are having trouble selling or refinancing because of all the vacant properties around them."

Aguirre said he was encouraged in speaking with the other legal teams assembled, including the lawyers representing the California Attorney General's office.

"They did a good job," Aguirre said of Brown's legal team.
Aguirre and Brown have sparred publicly in recent weeks over Brown's lack of support for a foreclosure moratorium, something Aguirre has been an outspoken proponent of.

Illinois Attorney General Lisa Madigan has filed suit in Cook County seeking a temporary 90-day injunction against foreclosures. But Brown has said he needs to further study the impact of a moratorium, and that the complexity of the situation does not lend itself to simple solutions.

But Aguirre said he was encouraged during Thursday's hearing.

"Let's just say we ended the day more positively than we started. And we were all on the same side," he said.

Aguirre said negotiations with Bank of America need to start with limiting or stopping foreclosures.

"It doesn't do us any good to have a lot of empty houses that are destroying the neighborhoods and then later on come back and get cash for the state of California, he said. "You need the right remedy for the immediate problem."

Aguirre said he hopes the conversations he had with Brown's legal team will open the door for more communication about the foreclosure moratorium.

"If we could talk the attorney general into taking off the political hat and putting on the law enforcement hat," Aguirre said, "we can make some progress."

Aguirre said Brown is seeking civil penalties in a settlement, which could come too late for people who lose their homes.

"Recovering penalties is a solution to the wrong problem," Aguirre said.

Brown has said in recent weeks that Aguirre was simply "grandstanding" while his office did the serious work of negotiating a settlement with Bank of America.

Gasparac said the lawyers representing California's Attorney General's office during the hearing had no public comment regarding a moratorium.

During the hearing Aguirre asked the panel that his case be returned to San Diego, despite Brown's overlapping jurisdiction.

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