Mazzei v. Money Store, 308 F.R.D. 92

Background

Joseph Mazzei obtained a 1994 uniform Fannie Mae form mortgage note from The Money Store; he defaulted, the servicer accelerated the loan, and Mazzei paid off the loan in October 2000 after being assessed various fees (including late charges and attorney/outsourcing fees).
Mazzei sued The Money Store, TMS Mortgage, Inc., and HomEq Servicing (the Money Store defendants) asserting, inter alia, two breach-of-contract class claims: (1) Post-Acceleration Late Fee Class — charging late fees after loans were accelerated and later paid off; and (2) Fee Split Class — charging attorney fees that were allegedly shared with nonlawyer Fidelity.
The Court certified both classes in 2012. After a two-week trial in December 2014, the jury found for Mazzei and the Late Fee Class (awarding about $54.8 million) and for the defendants on the Fee Split claim.
Mazzei moved for a new trial on the Fee Split claim (Rule 59). Defendants moved to decertify the Late Fee Class (Rule 23(c)(1)) and alternatively for judgment as a matter of law on the Late Fee claim (Rule 50(b)).
The trial record included competing experts on industry practice, database analyses of millions of loans (Ocwen Database), and testimony about PSAs, servicing arrangements, and whether payments to Fidelity constituted improper fee-splitting or unreasonable attorneys’ fees.
Key factual disputes: whether loans in the class were actually accelerated (experts assumed acceleration after ~90 days delinquency), whether servicers were in contractual privity with borrowers whose loans they only serviced, and whether attorney fees were impermissibly shared with Fidelity.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a new trial on Fee Split is warranted	Mazzei: trial tainted by spoliation (New Invoice System) and verdict against weight of evidence on fee-splitting; Buechner affidavit and restitution instruction errors	Defs: spoliation sanction already limited; plaintiff had other discovery options and failed to pursue witnesses; evidence insufficient	Denied — no miscarriage of justice; sanction posture and evidentiary rulings appropriate; jury credibility findings upheld
Whether defendants breached Note by charging post-acceleration late fees classwide	Mazzei: servicer practice and expert testimony show routine post-acceleration late fees; Ocwen DB supports class damages	Defs: plaintiffs relied on assumptions (90-day acceleration); some loans may not have been accelerated; damages estimate unreliable	Trial verdict in plaintiffs’ favor on liability; but decertification later upheld because of privity failure (see below)
Whether servicers had contractual privity with class members whose loans were only serviced	Mazzei: evidence of PSAs and industry practice establishes assignment/contractual relationship classwide	Defs: servicers are nonsignatories for many loans; no classwide evidence of valid assignments or assumption of obligations	Held for defendants: plaintiff failed to prove privity for serviced-only loans; class decertified because Rule 23 requirements not met
Whether Rule 50(b) judgment is required on Late Fee claim	Defs: complete absence of classwide evidence of privity and acceleration makes jury verdict unsupportable	Mazzei: jury was entitled to infer acceleration and contractual relationships from industry testimony and database	Court: would grant Rule 50(b) as alternative — absence of classwide privity evidence means judgment for defendants on class claim (but court instead decertified class)

Key Cases Cited

AMW Materials Testing, Inc. v. Town of Babylon, 584 F.3d 436 (2d Cir. 2009) (standard for new trial when jury verdict is seriously erroneous)
Nimely v. City of New York, 414 F.3d 381 (2d Cir. 2005) (same; cited for Rule 59 standard)
Beal Bank v. Crystal Props. Ltd., L.P., 268 F.3d 743 (9th Cir. 2001) (acceleration requires notice/demand; holder must take affirmative action to notify debtor)
Boucher v. Syracuse Univ., 164 F.3d 113 (2d Cir. 1999) (district courts should reassess class rulings as case develops)
Jarvis v. Ford Motor Co., 283 F.3d 33 (2d Cir. 2002) (waiver of jury instruction objections rule)
Logan v. Bennington Coll. Corp., 72 F.3d 1017 (2d Cir. 1995) (standard for granting judgment as a matter of law under Rule 50)
Galdieri-Ambrosini v. Nat’l Realty & Dev. Corp., 136 F.3d 276 (2d Cir. 1998) (jury verdict must rest on more than conjecture; cited for absence-of-evidence rule)