In re Countrywide Financial Corp. Mortgage Marketing and Sales Practices Litigation

A federal judge in California denied certification for a putative class of more than 500,000 borrowers who alleged that Analysis Group client Countrywide Financial Corporation defrauded them by steering them toward subprime and pay option adjustable rate mortgages regardless of their qualifications or ability to meet financial terms. The plaintiffs alleged that the defendants advised them to take on "toxic and unaffordable" products to drive up the number of loans that could then be resold in the secondary market as mortgage-backed securities.

A team from Analysis Group, including Managing Principal Adam Decter, Vice President Dov Rothman, and affiliates Timothy J. Riddiough and James Levinsohn, was retained by Goodwin Procter LLP to address issues of class certification. At the center of the matter were two different loan products (subprime and pay option adjustable rate mortgages) offered by four divisions of Countrywide, each of which employed its own marketing materials, techniques, and sales structures and protocols. Dr. Riddiough, a professor of real estate and urban land economics at the University of Wisconsin, and Dr. Levinsohn, a professor of economics and management at Yale University, examined and opined on issues relating to commonality, predominance, and causation.

Citing Dr. Riddiough's report in his decision, Judge Dana M. Sabraw ruled that, given the different terms and disclosures presented to differently situated borrowers, individual issues predominated over common ones. "Some borrowers were pleased, others were ultimately disappointed … but understood the risks up-front, while still others felt victimized. Individual inquiries abound under these circumstances. Plaintiffs' motion for class certification is therefore denied."

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