Common issues warranted class certification in action by borrowers challenging interest calculation

Law Reporter, Dec 1998

Common issues warranted class certification in action by borrowers challenging interest calculation.

Hamilton v. Ohio Sav. Bank, 694 N.E.2d 442 (Ohio 1998).

The Ohio Supreme Court ruled class certification of an action by borrowers challenging a bank's method of calculating interest on their home mortgage loans was appropriate because of the common issues involved.

Here, a bank executed mortgages containing a clause that charged borrowers interest at rates allegedly exceeding their contractual agreement. Three borrowers sued the bank, alleging breach of contract. The bank then sent a letter to 2,700 borrowers informing them that their loans would not amortize within the intended term and offering them a choice of increased monthly payments or extended contractual terms. The letter did not inform the borrowers of the suit, and implied they had benefited from the miscalculation. One thousand four hundred borrowers opted to alter their payments or terms. The trial court denied plaintiffs' motion for class certification.

Reversing the trial court's order, the state high court noted the prerequisites for a class action suit are ( 1 ) an identifiable class must exist with an unambiguous definition; (2) the named representatives must be members of the class; ( 3 ) the class must be so numerous that joinder of all members is impracticable; (4) there must be common questions of law or fact; (5) the claims or defenses of the representative parties must be typical of the claims or defenses of the class; (6) the representative parties must fairly and adequately protect the interests of the class; and (7) the common questions must predominate over questions affecting only individual members, and a class action must be the best method to adjudicate these questions.

The court rejected defendant's argument that the proposed class description was insufficiently identifiable because inquiry into each plaintiff's knowledge of the interest rate system would be required. The court noted that class status should be based on the defendant's behavior toward a group, rather than the states of mind of the group's members. Observing that the bank had identified 2,700 affected borrowers without inquiring into their individual understanding of the rate system in order to send the notification letters, the court held that the class was clearly defined.

The court noted further that proof of reliance in this case may be inferred. Because plaintiffs knew the loan statements offered a certain-allegedly misstated-interest rate, the quoted rate presumptively influenced their decision to borrow from defendant.

The court also rejected defendant's argument that assessing practicability of joinder should be based on the number of filings rather than potential class members. Recognizing that defendant's letter had failed to inform borrowers of the suit and appeared to present a benefit to them, the court found the lack of interventions irrelevant and the interests of the absent class members still protected. Finding all the other elements of a class action satisfied, the court remanded.

Plaintiffs' Counsel: *Steven M. Weiss, Cleveland, Ohio *Robert E. Sweeney, Cleveland, Ohio

[Documents in this case are available through the Court Documents section at p. 403, courtesy of Mr. Weiss.]