8/4/2019 Appendix D Sample Complaints CA02_D
1/46
Appendix D Sample Complaints
This appendix provides ten sample class action complaints.
Additional examples of class action complaints are included on the
companion CD-Rom to this volume. That CD contains the com-
plaints found in this appendix and additional examples of class
action complaints relating to debt collection, overcharges for ex-
tended warranties, forced-placed insurance, odometer fraud, re-
volving repossession scams, failure to provide repossession no-
tices, other auto dealer practices, auto pawns, auto leases, mortgage
refinancing, mortgage servicer practices, loan brokers, mobile
home park conditions, land installment sales, real estate broker
fraud, campground membership fraud, nursing home quality, in-
fertility clinics, rent-to-own, home improvement financing, tele-
phone overcharges, student loans, trade school fraud, merchants
illegal reaffirmation of debts discharged in bankruptcy, and tax
agency filing baseless proof of claims in chapter 13 bankruptcies.
Even more sample complaints in individual actions are found in
NCLCs Consumer Law Pleadings on CD-Rom With Index Guide
(cumulatively updated on an annual basis).
D.1 Predatory Lending by a Non-BankHome Equity Lender (Samuel)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
)
)Mildred E. Samuel,
)on behalf of herself
)and all others similarly situated,
)Plaintiffs
)
v. )
)
)EquiCredit Corporation,
)U.S. Bank National Association,
)Trustee,
)Defendants
)
CIVIL ACTION NO.
00-6196
CLASS ACTION
SECOND AMENDED COMPLAINTCLASS ACTION
I. NATURE OF THE ACTION
1. This is a class action by a low-income homeowner seeking
relief from the predatory mortgage lending practices of a non-bank
home equity lender, EquiCredit Corporation (EquiCredit), a
wholly-owned subsidiary of Bank of America. These practices
violate numerous federal and state consumer protection laws. The
specific predatory practices challenged include the following:
a. EquiCredit relies almost exclusively on brokers to obtain
loan applications from homeowners. The broker fees paid by
EquiCredit from its customers loans are in reality compensation
from EquiCredit to the brokers for the referral of business, and are
not based on valid enforceable broker contracts between brokers
and consumers. EquiCredits policies permit and encourage bro-
kers to violate state law and to collect excessive and unreasonable
fees without establishing a valid broker contract.
b. A bait and switch lending scheme whereby homeowners
are induced to apply for home improvement financing, but
EquiCredit arranges and offers only a first mortgage refinancing
loan, dictating the amounts to be included in the mortgage loans
without regard to the amount sought by the borrower, so that
EquiCredit and its brokers can make a more expensive loan and
obtain a first position lien on borrowers homes.
c. EquiCredits high-cost loans are frequently made to borrow-
ers who lack the reasonable ability to repay the loans, and therefore
put the borrowers at high risk of losing their homes.
d. EquiCredit engages in reverse redlining, in that its loans are
disproportionately made to African-American and Hispanic home-
owners, and homeowners in predominantly African-American and
Hispanic neighborhoods, on unfair and onerous terms, and its
foreclosures are also disproportionately concentrated in minority
neighborhoods.
2. Plaintiffs bring this case under the following federal and state
consumer protection laws: the Truth in Lending Act, 15 U.S.C.
1601 et seq. (TILA), the Home Ownership and Equity Protec-
tion Act of 1994, 15 U.S.C. 1602 et seq. (HOEPA), the Real
Estate Settlement Procedures Act, 12 U.S.C. 2601 et seq.
(RESPA), the Equal Credit Opportunity Act, 15 U.S.C. 1691
et seq. (ECOA), the Fair Housing Act, 42 U.S.C. 3601-3631
(FHA), the Pennsylvania Unfair Trade Practices and Consumer
Protection Law, 73 P.S. 201-1 et seq. (CPL or UDAP), the
Pennsylvania Credit Services Act, 73 P.S. 2181-2192 (CSA),
the Pennsylvania Home Improvement Finance Act, 73 P.S.
500-101 et seq. (HIFA), the Pennsylvania Loan Interest and
Protection Law, known as Act No. 6 of 1974, 41 P.S. 101 et seq.
(Act 6) and under other Pennsylvania statutory and common
law.
II. JURISDICTION AND VENUE
3. Jurisdiction over this matter is conferred upon this Court by
28 U.S.C. 1331, 1337. Supplemental jurisdiction over Plaintiffs
state law claims is granted by 28 U.S.C. 1367.
4. Venue lies in this judicial district in that the events which
gave rise to this claim occurred here and the property which is the
subject of the action is situated within this district.
239
8/4/2019 Appendix D Sample Complaints CA02_D
2/46
III. PARTIES
5. Plaintiff Mildred E. Samuel is a natural person residing at
[Address].
6. Defendant EquiCredit Corporation (EquiCredit) is a cor-
poration engaged in the business of consumer lending in Pennsyl-
vania and elsewhere with places of business located at One Ne-
shaminy Interplex, Suite 206, Trevose, Pennsylvania, 19053-6933
and 525 Plymouth Road, Plymouth Meeting, Pennsylvania 19462.
EquiCredits headquarters is located at 10401 Deerwood ParkBoulevard, Jacksonville, Florida 32256. At all times relevant
hereto, EquiCredit, in the ordinary course of its business, acted on
more than 150 consumer credit applications annually and was a
creditor within the meaning of ECOA, 15 U.S.C. 1691a(e), and
TILA, 15 U.S.C. 1602.
7. Defendant U.S. Bank National Association, f/k/a First Bank
National Association Trustee under various pooling and servicing
agreements (US Bank), is trustee for several pools of mortgage
backed securities that are the assignee of Plaintiffs loans. It has its
principal place of business at U.S. Bank Place,601 Second Avenue,
South Minneapolis, Minnesota, 55402. US Bank, in its capacity as
trustee for various trusts, is the current holder of the Plaintiffs and
class members loans.
IV. FACTUAL ALLEGATIONS
A. EquiCredit
8. EquiCredit markets itself as a pioneer in the so-called
subprime lending industry, with more than forty years of tradi-
tion. See www.EquiCredit.com.
9. As a subprime lender, EquiCredit specializes in making loans
to consumers with below average credit histories. As an industry,
subprime lending has experienced tremendous growth in recent
years. From 1993 to 1998, subprime refinancing lending increased
890 percent, while refinancing by prime lenders grew by only 2.5
percent.1
10. EquiCredit and its parent company, Bank of America
(BOA) are a major participant in the subprime lending industry.At the end of 1999, BOA was the largest servicer of subprime
mortgage loans in the United States, with a portfolio of over $22
billion. In 1998 EquiCredit originated or underwrote approxi-
mately $3.7 billion in mortgage loans. Through the first three
months of 1999, the total was approximately $1.6 billion.2
11. EquiCredit packages its loans to consumers and issues
mortgage-backed securities to raise additional capital for its op-
erations. For example, the Prospectus Supplement shows a pooling
by EquiCredit of 12,781 mortgage loans from 48 states,including
1,343 from Pennsylvania. The total principal balance of the loans
was $825,683,542.96.3
12. The annual interest rates on the pooled mortgages with fixed
rates ranged from 5.75% to 19.45%, with a weighted average of
approximately 10.28%. Approximately 90.87% of the loans weresecured by first mortgage liens on the consumers home. 4
13. To originate mortgage loans, EquiCredit markets it loan
products very heavily to mortgage brokers. EquiCredit uses adver-
tising, presentations at conventions and meetings, and other pro-
motional activities, to contact persons licensed or unlicensed as
loan brokers, and to encourage the brokers to offer loans to low
income persons with little or no credit standing for the purpose of
assisting them in arranging for the loans from EquiCredit. By way
of example, in Philadelphia, Pennsylvania EquiCredit has utilized
Express Equity, James Holleran, Arrow Building Systems, Inc. andArcher Funding, Inc. as persons to assist or work with EquiCredit
in originating loans. These entities or persons are referred to
hereinafter as brokers.
14. These brokers act as sales agents for EquiCredit in that they
perform numerous functions on behalf of EquiCredit including but
not limited to taking and preparing a loan application, arranging an
appraisal, gathering credit information, and structuring mortgage
loans to meet EquiCredits underwriting requirements.
15. EquiCredit establishes various policies and procedures in
order to make it more attractive for brokers to arrange loans with
EquiCredit rather than other lenders, including
(a) not requiring written broker contracts until loan closing,
(b) having class members sign an EquiCredit form document
acknowledging the validity of the broker fee at closing,(c) setting unreasonably high ceilings for the amount of broker
fees, and
(d) the other policies and practices challenged in this action.
B. The Role of the Brokers
16. The brokers solicit and offer services in the form of providing
advice and assistance to consumer homeowners in seeking exten-
sions of credit. The brokers also undertake to obtain credit for
homeowners by arranging appraisals, obtaining credit information,
preparing loan applications and documents and other similar activi-
ties. These services are performed for payment to be paid from the
proceeds of the EquiCredit loans eventually obtained by the brokers.
17. The brokers services are sold as a result of, or in connec-
tion with, a contact with class members at their homes or bytelephone.
18. The services are offered to consumers for personal, family
and household matters. Extensions of credit obtained by the bro-
kers are subject to the Federal Trade Commission Preservation of
Claims Trade Regulation, 16 C.F.R. 433.1 (1976) (the Holder
Rule). The Holder Rule requires that any installment loan contract
entered into as a result of a transaction with a seller of services
must contain the following contractual provision:
NOTICE
ANY HOLDER OF THIS CONSUMER CREDIT
CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEBTOR COULD AS-SERT AGAINST THE SELLER OF GOODS OR
SERVICE OBTAINED WITH THE PROCEEDS
HEREOF, RECOVERY HEREUNDER BY THE
DEBTOR SHALL NOT EXCEED AMOUNTS PAID
BY THE DEBTOR HEREUNDER.
19. The Holder Rule requires that any holder of the installment
contract will be subject to any claims the buyer has against the
seller of services.
1 R. Scheessele, 1998 HMDA Highlights, U.S. Department of
Housing and Urban Development (September 1999).
2 Prospectus Supplement to Prospectus dated June 9, 1999 relat-
ing to Registration No. 333-71489, EquiCredit Home Equity
Loan Trust 1999-2 (hereafter, Prospectus Supplement).
3 Prospectus Supplement at S-21, 22.
4 Prospectus Supplement at S-18, 19.
Appx. D.1 Consumer Class Actions: A Practical Litigation Guide
240
8/4/2019 Appendix D Sample Complaints CA02_D
3/46
C. The Pennsylvania Consumer Protection Law and Credit
Services Act
20. Pennsylvanias Consumer Protection Law (CPL) re-
quires that all contracts for services resulting from a contact with
the consumer at the consumers home, or by telephone, must be in
writing and provided at the point or sale or contracting. 73 P.S.
201-7(b). Such written contract must contain notices about rights
of cancellation within three days from the date of contracting. 73
P.S. 201-7.21. The Pennsylvania Credit Services Act (CSA) regulates
all persons who, for money or valuable consideration, obtain
extensions of credit for persons seeking an extension of credit or
who advise or assist such persons in obtaining credit. 73 P.S.
2182. Persons or entities performing these services are called
credit service organizations. This definition covers the activities
of mortgage brokers.
22. The CSA imposes comprehensive duties of written disclo-
sure on credit services organizations. Credit services organizations
must enter into written contracts with persons seeking the credit
and, before entering such contracts, must provide a written infor-
mation sheet. 73 P.S. 2184, 2185 and 2186. The Information
Sheet must provide a complete and detailed description of the
services to be performed . . . and the total amount the buyer willbecome obligated to pay for the services . . . 73 P.S. 2186.
23. A credit services organization must obtain a dated, written
contract with the consumer that contains the following:
(a) a statement in conspicuous, 10-point bold type which pro-
vides a right of cancellation within five days;
(b) the terms and conditions of payment, including the total
amounts of all payments to be made by the person seeking credit
whether to the credit services organization or to some other person;
(c) a full and detailed description of the service to be per-
formed by the credit services organization for the person seeking
credit including the estimated time for performing such services;
and
(d) the business address of the credit services organization or its
agents.24. The brokers utilized by EquiCredit are governed by both the
CPL and the CSA. The brokers are therefore required by Pennsyl-
vania law to provide consumers a written contract as soon as a
broker contract is formed, and to provide written disclosures and
cancellation rights. 73 P.S. 201-7, 2185, 2186.
25. These required written disclosures are material to consum-
ers because they provide notice and understanding about (a) the
amount they will pay the broker and the lender in fees; (2) the type
of loan contemplated; and (b) the type of security to be provided.
Such disclosures protect consumers against bait and switch
schemes whereby brokers may promise one type or amount of a
loan orally, but then obtain substantially different loan terms, which
are not disclosed to consumers until loan closing, when it is
psychologically and practically difficult for the consumer to seekother loan alternatives. They also prevent consumers from misun-
derstanding the role of the broker, and the fact that the broker will
receive a fee separate from lender fees and charges.
26. EquiCredit has adopted a policy or practice pursuant to
which brokers do not provide and/or are not required by EquiCredit
to provide any written contract, or disclosures required by Penn-
sylvania law at the time the broker submits a loan application or
first makes inquiries about a loan with EquiCredit. EquiCredits
policy or practice is merely to require the broker to provide a
signed broker agreement with the loan documents after the loan
closing.
27. EquiCredit does require the broker to send EquiCredit a
written statement of the amount the broker expects to be paid from
the loan by EquiCredit with the loan application, but this written
fee expectation is not provided to the consumer.
28. As standard practice, brokers utilized by EquiCredit do not
provide the required written contractual disclosures, or the right to
cancel the broker contract, prior to closing EquiCredit mortgageloans.
29. EquiCredit also has a policy or practice of setting unrea-
sonably high limits on the amount of the brokers fees, and of not
requiring that the brokers fees bear any reasonable relationship to
services provided to the consumer.
D. The Real Estate Settlement Procedures Act Ban on Unearned
Fees
30. The Real Estate Settlement Procedures Act (RESPA)
prohibits payment of fees in connection with a residential mortgage
loan for a referral, when the fee is not based on services actually
provided to the consumer.
31. In 1998, the United States Department of Housing and
Urban Development (HUD) issued a policy statement regardingRESPA and its application to mortgage broker fees. The HUD
policy statement made it clear that lenders like EquiCredit had a
duty to insure that broker fees were not paid from loan proceeds
unless the fees were reasonably related to actual services con-
tracted for by, and provided to, the consumer.
E. Facts Regarding Plaintiff Mildred E. Samuel
32. In 1982, Plaintiff Mildred Samuel and her husband pur-
chased their home at [Address] in a modest section of North
Philadelphia. Mrs. Samuels husband passed away in June 1989
and she now lives alone in the home. She is a 67-year-old
African-American retired postal worker.
33. Mrs. Samuel paid off the original mortgage on her home in
March 1997.34. In December 1999, Mrs. Samuel contracted with James M.
Holleran (Holleran) and Arrow Building Systems, Inc. (Arrow
Building), for various improvements and repairs to her home to
be made by Arrow Building, as a result of a contact with her at her
residence and/or by telephone.
35. Holleran promised to arrange financing for the home im-
provements on Mrs. Samuels behalf.
36. Unbeknownst to Mrs. Samuel, Holleran used his corpora-
tion, Archer Funding Corp. to act as a broker, and to present a
mortgage loan application to Defendant EquiCredit.
37. Holleran and Archer Funding regularly referred consumers
to EquiCredit for loans in 1998 and 1999.
38. EquiCredit decided not to extend Mrs. Samuel a loan in the
amount or on the terms that she requested. Rather, EquiCreditdecided to offer Mrs. Samuel a substantially larger consolidation
mortgage loan, including refinancing her utility and tax bills.
39. EquiCredit never notified Mrs. Samuel of its denial of Mrs.
Samuels credit application nor did it ever notify Mrs. Samuel of
its counteroffer, pursuant to section 1691(d)(1) of ECOA.
40. EquiCredit created a written loan application in Mrs. Sam-
uels name. This application was seen by Mrs. Samuel for the first
time at the closing of the loan.
41. The application overstated Mrs. Samuels income and did
Sample Complaints Appx. D.1
241
8/4/2019 Appendix D Sample Complaints CA02_D
4/46
not reflect her monthly or annual payments for real estate taxes,
homeowners insurance, or other debts paid monthly by Mrs.
Samuel. The loan application stated that Mrs. Samuels income was
$1,161.09 a month. However, her actual income was $873 each
month in Social Security benefits, net of the Medicare deduction.
Mrs. Samuel did not indicate that she had any other source of
income, and in fact had none.
42. As a result of the EquiCredit loan, Mrs. Samuel went from
having no mortgage payment to undertaking to pay $357.39 out ofher $870.00 net monthly income for fifteen (15) years. The $357.39
payment did not include real estate taxes and homeowners insur-
ance, or any of her other fixed obligations, and therefore left her
with an unreasonably small residual income.
43. The loan closing took place on or about December 10, 1999
at Plaintiffs home, about one week after Holleran inspected Mrs.
Samuels home for the first time, and only a short time after Mrs.
Samuel was first contacted by Holleran and Arrow Building.
44. Present at the closing in Mrs. Samuels home were Holle-
ran, Walter Ackah, a legal assistant for the law firm of Kotsopoulos
& Bennett P.C., and Mrs. Samuel.
45. Mrs. Samuel did not have a meaningful opportunity to read
the loan documents at the closing because Holleran and Ackah kept
presenting her with the papers and instructing her to sign.46. As part of the loan closing, Mrs. Samuel was required to
sign a document purporting to confirm that three days had elapsed
after the loan closing, and she did not intend to exercise her right
under TILA to rescind the loan. This notice had the purpose and
effect of undermining the borrowers right to reconsider the loan
and rescind it for three days after closing.
47. While Plaintiff had initially requested a home improvement
loan, instead, she was required to sign a note in the amount of
$30,100, secured by a mortgage on her home. The note amount
included, in addition to the $18,000 in home improvements, the
sums of $1,656.33 to the City of Philadelphia for real estate taxes,
$2,932.75 for water/sewer bills, $825.32 to Philadelphia Gas
Works and $835 for electric service. At no time did Mrs. Samuel
request or apply for a refinancing loan to pay off her tax, water andutility bills. In fact, EquiCredit made an overpayment on her gas
bill, leaving Mrs. Samuel with a credit. In addition, Mrs. Samuel
was charged a broker fee of $1709.63, a $250 appraisal fee, a
$270 processing fee and other various charges and fees. Mrs.
Samuel also unknowingly purchased credit life insurance with a
$300.00 premium.
48. As a result, instead of borrowing $18,000 for home im-
provements, Plaintiff ended up borrowing over $30,000 at an
annual percentage rate of 13.26% for taxes, water, utility bills and
life insurance she did not request.
49. Mrs. Samuel also was required to pay $898.25 in miscel-
laneous fees for items including recording the deed, transfer of
taxes, title insurance, a credit report check, and closing fees, plus
$2,689.63 in finance charges, including a $1,709.63 broker fee, asa condition of getting a loan she did not want.
50. Mrs. Samuel was never told the amount of the broker fee,
given a written disclosure of the fee or a written agreement, or any
notice of her right to cancel the broker contract, and never agreed
to pay the broker fee, at any time prior to the loan closing.
51. The $1,709.63 broker fee did not bear any reasonable
relationship to the services performed by Archer Funding.
52. At all relevant times Holleran, Arrow Builders and Archer
Funding acted as agents for Defendant EquiCredit, in that they
performed numerous lender functions, including taking a loan
application, gathering supporting information, arranging an ap-
praisal, structuring a loan to meet EquiCredits underwriting re-
quirements, and in numerous other respects.
53. EquiCredit, Holleran, Archer Funding and Arrow Builders
all engaged in fraudulent or deceptive conduct in their dealings
with Mrs. Samuel, including, but not limited to:
a. failing to clearly explain the role of the broker and the amount
and basis of compensation prior to becoming involved and per-forming services; failing to clearly explain the Defendants motives
in requiring Mrs. Samuel to borrow additional sums to pay her tax
and water bills and other debts, so that EquiCredit could have a first
mortgage loan and therefore evade Pennsylvania usury laws;
b. failing to clearly explain the advantages and disadvantages of
a consolidation loan; and
c. failing to explain to Mrs. Samuel her right of rescission.
54. On April 20, 2000, Mrs. Samuels counsel sent a notice of
rescission to EquiCredit at both its Jacksonville, Florida and
Trevose, Pennsylvania addresses, exercising Mrs. Samuels right
under TILA to rescind the loan, based on TILA and HOEPA
violations.
55. EquiCredit did not comply with Mrs. Samuels demand for
rescission within the time allowed by TILA.
V. CLASS ACTION ALLEGATIONS
56. Plaintiff brings this action on behalf of herself and on behalf
of the following class (the Class):
all homeowners in the Commonwealth of Pennsylvania who,
during the six year period preceding the filing of this action (the
Class Period), entered into loan transactions with Defendant
EquiCredit which resulted in a mortgage on their homes, and which
included one or both of the following features:
A) some portion of the loan proceeds was used to pay a broker
fee,
B) some portion of the loan proceeds were used to fund home
improvements, Excluded from the Class are the Defendants and all
officers and directors of the Defendants.57. The members of the Class are so numerous that joinder of
all members is impracticable. There are approximately 12,000
class members in Pennsylvania.
58. Plaintiffs claims are typical of the claims of the members
of the Class. The losses to the Plaintiff were caused by the same
course of conduct that gave rise to the claims of other members of
the Class.
59. Plaintiff will fairly and adequately protect the interest of the
Class. Plaintiff has no conflict of interest with other members of the
Class. Plaintiff has retained experienced counsel qualified in class
action litigation who are competent to assert the interests of the
Class.
60. Defendants have acted on grounds generally applicable to
the plaintiff Class, such that final declaratory and injunctive reliefis appropriate with respect to the Class as a whole. In particular,
Plaintiff seeks injunctive relief preventing foreclosure of class
members homes and restitution of the illegal broker fees, as well
as declaratory relief regarding the illegality of Defendants prac-
tices.
61. Common questions of law and fact predominate over ques-
tions which may affect only individual members of the Class
because Defendants have acted or refused to act on grounds
generally applicable to the Class.
Appx. D.1 Consumer Class Actions: A Practical Litigation Guide
242
8/4/2019 Appendix D Sample Complaints CA02_D
5/46
62. Among the questions of law and fact common to the
members of the Class are:
(a) Whether paying broker a fee based on a purported contract
document first provided at loan closing violates the CSA or the
CPL, and whether failing to insure broker compliance with door-
to-door sales written contract and 3-day cancellation notice rule is
a CPL violation by EquiCredit.
(b) Whether excessive, percentage-based broker fees violate
RESPAs prohibition on fee splitting or kickbacks, and/or are CPLviolations.
(c) Whether EquiCredit was required to provide a notice of
counteroffer under ECOA, where class members applied for home
improvement financing, and EquiCredit implicitly denied the re-
quested financing and offered mortgage refinancing and consoli-
dation loans instead.
(d) Whether EquiCredit violated the CPL or other laws by
failing to include the FTC Preservation of Claims Notice in class
members notes when the notes were purchase money loans as
defined by the FTC Rule.
(e) Whether the loans from EquiCredit were home improve-
ment installment contracts within the meaning of HIFA, and
whether Defendants violated HIFAs restrictions on loan fees and
costs, including the ban on broker fees.(f) Whether EquiCredits imposition of charges prohibited by
HIFA, including broker fees, constitutes an unfair and deceptive
trade practice under UDAP.
(g) Whether EquiCredits imposition of charges prohibited by
HIFA subjects it to liability under Pennsylvania usury law.
(h) Whether the promise to finance home improvements, when
in reality a first mortgage refinancing is contemplated, is a CPL
violation.
(i) Whether EquiCredits lending practices discriminate against
African-American and Hispanic borrowers, or borrowers living in
predominantly African-American or Hispanic neighborhoods, in
violation of the Fair Housing Act and ECOA.
(j) Whether Plaintiff and members of the Class have sustained
damages by reason of EquiCredits wrongful conduct and, if so, theproper measure of damages; and
(k) Whether Plaintiff and members of the Class are entitled to
injunctive or declaratory relief.
63. A class action is superior to all other available methods for
the fair and efficient adjudication of this controversy because such
treatment will permit a large number of similarly situated persons
to prosecute their common claims in a single forum simultaneously
efficiently and without the unnecessary duplication of evidence,
effort and expense that numerous individual actions would engen-
der. Class treatment also will permit the adjudication of relatively
small claims by certain members of the Class who could not afford
to litigate individually such claims against sizable corporate de-
fendants.
64. Plaintiffs know of no difficulty to be encountered in themanagement of this action that would preclude maintenance as a
class action.
VI. CLAIMS
Count IRESPA
65. EquiCredit makes or invests in residential real estate loans
aggregating more than $1 million per year. The transactions at
issue in this case were, therefore, federally related mortgage
loans within the meaning of sections 2602 and 2607 of RESPA.
66. In the course of the transaction with Plaintiff Samuel, and
the transactions with members of the Class, Defendant EquiCredit
gave, and the brokers received, a fee, kickback or thing of value
pursuant to an understanding between the broker and EquiCredit
that the broker would refer business to EquiCredit, in violation of
12 U.S.C. 2607(a).
67. In the course of the transaction with Plaintiff Samuel, andthe transactions with members of the Class, EquiCredit gave the
brokers a portion, split or percentage of the settlement charges
collected from the borrowers, other than for services actually
performed by the brokers, in violation of 12 U.S.C. 2607(b).
68. As the result of these violations of RESPA, Defendant
EquiCredit is liable to Plaintiff Samuel and the Class, pursuant to
12 U.S.C. 2607(d) for statutory damages in the amount of three
times the broker fees imposed, plus reasonable attorneys fees and
costs.
Count II: CSA and CPL Claims Regarding
Broker Fee Agreements
69. EquiCredit aids and abets the violation of PennsylvaniasCSA and CPL laws by brokers, and/or is engaged in a civil
conspiracy with brokers to violate Pennsylvania law. EquiCredit
fails to require brokers to submit a signed broker agreement with
any loan application, and instead only requires that the agreement
be provided and signed at closing.
70. EquiCredit also uniformly fails to insure that any broker
contract entered into as a result of a door-to-door sale or telephone
solicitation contains the three-day cancellation notice required by
Pennsylvania Law, 73 Pa. Stat. 201-7, and fail to include the
FTCs Preservation of Claims and Defenses notice in contracts
when its inclusion is required.
71. EquiCredit and its closing agents represent to class mem-
bers at loan closings that broker fees must be paid and are due and
owing on the basis of a valid broker fee agreement when they arenot.
72. Defendants conduct constitutes unfair and deceptive acts
and practices prohibited by Pennsylvanias CPL. Plaintiff class
members suffered damages including, but not limited to, the illegal
broker fees, as a result. Class members are entitled to rescission
and treble damages.
Count III: ECOA
73. EquiCredits refusal to provide small loans and/or second
mortgages for home improvements or other purposes as requested
by borrowers, its failure to notify applicants of the fact that it is
denying their initial credit request and making a counteroffer, and
its insistence on refinancing the homeowners prior mortgage, has
a discriminatory impact on African-American homeowners and onneighborhoods with substantial percentages of African-American
homeowners.
74. EquiCredits failure to provide proper notice of its counter-
offers to class members also violates the notice requirements of
ECOA and regulations thereunder.
75. EquiCredit makes loans disproportionately to homeowners
in predominantly African-American and Hispanic neighborhoods,
compared to other lenders and even other subprime mortgage
lenders.
Sample Complaints Appx. D.1
243
8/4/2019 Appendix D Sample Complaints CA02_D
6/46
76. Equicredits loans are made on terms and conditions that are
unfair and onerous and unduly create a risk of foreclosure.
77. Among other unfair terms, EquiCredit allows brokers to
charge excessive and unreasonable fees that bear no relation to the
cost or value of any services provided, and itself charges fees
and rates that are excessive in light of the borrowers credit and
collateral and consequent risk.
78. EquiCredits pricing policies have a disparate impact on
minority borrowers, especially African-American borrowers. Forexample and without limitation, EquiCredits policy of allowing
brokers to charge up to 12% of the loan prior to 1999, and then up
to 8%, and its interest rate add-ons for row homes and small loan
amounts, have a discriminatory effect on African-American and
Hispanic borrowers, and borrowers in predominantly African-
American and Hispanic neighborhoods.
79. As a result of EquiCredits violation of ECOA, Plaintiff
Samuel is entitled to actual and punitive damages and attorneys
fees, pursuant to 15 U.S.C. 1691e.
80. As a result of EquiCredits violation of ECOA, EquiCredit
is liable to the Class pursuant to 15 U.S.C. 1691e(b) for actual and
punitive damages and attorneys fees.
Count IV: Fair Housing Act (FHA)
81. EquiCredit discriminates against African-American and
Hispanic borrowers and borrowers in predominantly African-
American and Hispanic neighborhoods by targeting them for loans
on unfair terms, and making unaffordable loans that create an
undue risk of foreclosure, and by foreclosing disproportionately on
homes in such neighborhoods.
82. EquiCredit also discriminates against protected groups in
the manner set forth in Count III, above.
83. As a result of EquiCredits violation of the Fair Housing
Act, plaintiff and the Class are entitled to injunctive relief against
Defendants discriminatory lending and foreclosure practices, ac-
tual and punitive damages.
Count V: Pennsylvania Usury Law (HIFA)
84. The credit transactions between Plaintiffs and certain class
members and EquiCredit were home improvement installment
contracts within the meaning of HIFA.
85. The transactions were structured in violation of an express
prohibition in HIFA, section 500-407, against charging consumers
fees, costs, commissions or other charges not authorized by the act.
The transactions also included consolidation of other cash loans, in
violation of section 500-408 of HIFA.
86. HIFA specifically prohibits the charging of broker fees, a
prohibition that is systematically violated by Defendants.
87. Under Pennsylvanias Loan Interest and Protection Law
(Act 6 of 1974, 41 P.S. 101-503) and the CPL, Plaintiffs and
members of the Class are entitled to recover damages of three timesthe amount of the excess charges paid, plus reasonable attorneys
fees and costs. 41 P. S. 502, 503; 73 P. S. 201-9.2.
Count VI: CPL ViolationsForeclosures
88. EquiCredit has adopted underwriting standards that do not
adequately measure ability to repay, allows exceptions to its guide-
lines, and does not have sufficient verification procedures to ensure
that borrower income is adequately determined and considered.
89. In particular and without limitation, EquiCredit systemati-
cally fails to take into account monthly payments required for
borrowers to pay real estate taxes, homeowners insurance, and
other fixed obligations apart from the mortgage payment, in cal-
culating debt ratios and residual incomes, and has an unreasonably
low residual income standard and/or disregards that standard.
90. As a result of EquiCredits practices its mortgages often
exceed the ability of borrowers to repay and result in foreclosure
of class members homes.91. Through its conduct and the conduct of its closing agents,
EquiCredit represents to borrowers that the mortgage loans it offers
are affordable and reasonably expected to be repaid given the
borrowers income and household composition.
92. The requests for income information, the written applica-
tion and approval process and the closing all convey to the
borrower the message that EquiCredit is a responsible lender
making a loan it reasonably expects the borrower can afford to
repay, when in truth and in fact, EquiCredit does not have a
reasonable basis to expect successful repayment by its borrowers,
and experiences default rates in excess of 20% on some loan pools.
93. The making of loans to borrowers with insufficient income
to repay them, and that are therefore likely to lead to foreclosure,
is an unfair and deceptive practice in violation of the ConsumerProtection Law, 73 Pa. Stat. 201-2(v),(xv), (xxi) and 201-3.
94. Members of the class whose homes have been or are
threatened with foreclosure have suffered or will suffer an eco-
nomic loss as a result of EquiCredits unfair trade practices.
95. Class members are therefore entitled to injunctive relief,
treble damages and attorneys fees and any other appropriate relief,
pursuant to 73, Pa. Stat. 201-9.2.
Count VII: HOEPAPlaintiff Samuel Only
96. Ms. Samuels loan was a high cost loan covered by HOEPA
because the points and fees charged to her exceeded 8% of the net
loan amount, as those terms are defined in TILA and Regulation Z,
15 U.S.C. 1602(aa), 1639.97. EquiCredit failed to provide Ms. Samuel with the special
3-day advance disclosures required by HOEPA, 15 U.S.C.
1639(a), (b).
98. EquiCredit has adopted underwriting standards that do not
adequately measure ability to repay, allows exceptions to its guide-
lines, and does not have sufficient verification procedures to ensure
that borrower income is adequately determined and considered.
99. In particular and without limitation, EquiCredit systemati-
cally fails to take into account monthly payments required for
borrowers to pay real estate taxes, homeowners insurance, and
other fixed obligations apart from the mortgage payment, in cal-
culating debt ratios and residual incomes, and has an unreasonably
low residual income standard and/or disregards that standard.
100. EquiCredit has engaged in a pattern or practice of makingloans to borrowers with high cost mortgage loans without regard to
their ability to pay, in violation of HOEPA, 15 U.S.C. 1639(f),
including the loan made to Plaintiff Samuel.
101. Plaintiff Samuel is therefore entitled to rescission of her
mortgage loan, together with appropriate declaratory and injunc-
tive relief and actual and statutory damages.
Count VIIITILA-Plaintiff Samuel Only
102. As a result of the violations of TILA and Regulation Z,
Appx. D.1 Consumer Class Actions: A Practical Litigation Guide
244
8/4/2019 Appendix D Sample Complaints CA02_D
7/46
pursuant to sections 1635(a) and 1640(a) of TILA, Defendants
EquiCredit and US Bank, Trustee are liable to Plaintiff Samuel for
(a) Rescission of the transactions between Plaintiff and
EquiCredit, including a declaration that Plaintiff is not liable for
any finance charges or other charges imposed by EquiCredit.
(b) Termination of any security interest in Plaintiffs property
created under the transactions.
(c) Return of any money or property given by the Plaintiff to
anyone, including EquiCredit, in connection with the transactions.(d) Actual and statutory damages pursuant to section 1640(a)(1),
(3) and (4) of TILA.
(e) Reasonable attorneys fees and costs.
Count IX: Fraud, CPL and Breach of Fiduciary Duty,
Plaintiff Samuel Only
103. At all relevant times, Archer Funding and James Holleran
acted as agents for EquiCredit in soliciting Plaintiff Mildred Sam-
uel to enter into a home improvement financing arrangement
funded by EquiCredit, in preparing and structuring her mortgage
application, and in controlling the disbursement of loan proceeds.
Moreover, EquiCredit aided and abetted the fraudulent conduct of
Archer Funding and James Holleran, and benefitted from the fruitsof their fraud.
104. At the loan closing at Mrs. Samuels home, the settlement
agent, Mr. Ackah, whispered to Mrs. Samuel that the $1,709.63 fee
to Archer Funding listed on the settlement sheet was to be paid to
Holleran. This was the first time that Archer Funding was identified
to Mrs. Samuel.
105. Mrs. Samuel did not knowingly agree to engage a third-
party broker and pay him additional compensation.
106. If Holleran or Archer Funding were in fact acting as a
mortgage broker for Mrs. Samuel, the conduct in steering her to a
high-priced home equity loan refinancing transaction with points
and fees in excess of 8% of the loan and refinancing her tax and
utility debt, was a gross violation of their fiduciary duty toward
Mrs. Samuel.107. Holleran converted an $18,000 check from the loan pro-
ceeds to his own use, and the home repairs to Ms. Samuels home
were never completed pursuant to the home improvement contract.
The repairs that were done were shoddily done and are defective,
are presently falling apart and were never completed to a reason-
able standard of workmanship. No work whatsoever has been done
on Mrs. Samuels kitchen.
108. Prior to and at the loan closing, EquiCredit, its closing
agent, Holleran and Archer Funding made material misrepresen-
tations and omitted material information in order to induce Mrs.
Samuel to consummate the home equity loan, including, but not
limited to:
(a) the failure to disclose to her that a broker was being engaged
who would be paid separately from the lender and that the brokeragreement was a separate agreement that she had three days to
cancel if she so chose;
(b) the failure to disclose to her that her request for a loan for
home improvements was being rejected, and the reasons it was
being rejected;
(c) the representations made to her at the loan closing that the
home equity loan was beneficial and necessary for her to get the
loan;
(d) failing to clearly explain the EquiCredits motives in requir-
ing Mrs. Samuel to borrow additional sums to pay taxes and utility
bills, so that EquiCredit could have a first mortgage loan and
thereby evade Pennsylvania usury laws;
(e) representing that Holleran and his companies would perform
home improvements on Mrs. Samuels home when he had no such
intent.
109. The conduct of EquiCredit, Holleran and Archer Funding
constituted unfair or deceptive acts or practices within the meaning
of the CPL in that, among other reasons,(a) EquiCredit and the broker arranged a transaction for Plaintiff
which imposed credit costs and charges expressly prohibited by
federal and Pennsylvania law, which is a per se unfair or deceptive
practice;
(b) EquiCredit and the broker represented to Plaintiff that the
consolidation and refinancing of pre-existing debt would be ben-
eficial to her when in fact it was not, 73 P.S. 201-2(v);
(c) EquiCredit and the broker did not provide Mrs. Samuel with
notice of her right to cancel the alleged broker contract, which was
sold as a result of a contact with Mrs. Samuel at her residence,
in violation of 73 P.S. 201;
(d) EquiCredit and the broker violated federal and state statutes
in connection with the transaction, which is per se unfair and
deceptive conduct in violation of the CPL; and(e) EquiCredit and the broker engaged in deceptive conduct
which created a likelihood of confusion or of misunderstanding, 73
P.S. 201-2(4)(xxi), including, without limitation, the specific
representations and omissions described above.
110. The above misrepresentations and omissions were made
with knowledge of their falsity and with the intent to induce Mrs.
Samuel to enter into the contracts, and Plaintiff reasonably relied
on them and suffered damages as a result.
111. Defendant EquiCredit is liable to Plaintiff Samuel for
treble damages, attorneys fees and other appropriate relief, pursu-
ant to 73 P.S. 201-9.2 and common law.
VII. PRAYER FOR RELIEF
WHEREFORE, Plaintiff, individually and on behalf of the
Class, requests the following relief:
A. An Order certifying the proposed Class under Rule 23 of the
Federal Rules of Civil Procedure and appointing Plaintiff and her
counsel to represent the Class;
B. An Order declaring that EquiCredits actions as described
above are in violation of the statutes and regulations set forth
above;
C. An Order declaring that EquiCredit has engaged in a pattern
or practice of extending credit to consumers based on the consum-
ers collateral without regard to the consumers repayment ability;
D. An Order enjoining Defendants from continuing to engage in
the illegal, unfair and deceptive practices described above;
E. An Order enjoining Defendants EquiCredit and US Bankfrom initiating or continuing foreclosure proceedings with respect
to the homes of members of the Class;
F.An Order requiring EquiCredit and/or US Bank to notify class
members of their right to cancel their broker agreements and
receive restitution of broker fees,
G. All relief set forth above following each individual Count
asserted by the individual named Plaintiff and the Class;
H. Treble damages;
I. Statutory damages;
Sample Complaints Appx. D.1
245
8/4/2019 Appendix D Sample Complaints CA02_D
8/46
J. Attorneys fees and costs; and
K. Such other relief at law or equity as the Court may deem just
and proper.
[Attorney for Plaintiff]
[Date]
D.2 Class Complaint under 23(b)(2)Seeking Injunctive andDeclaratory Relief (Kalima)
IN THE CIRCUIT COURT OF THE FIRST CIRCUIT
STATE OF HAWAII
)
)LEONA KALIMA, DIANNE
)BONER AND JOSEPH CHING,
)on behalf of themselves and
)all others similarly situated,
)Plaintiffs,
)
v. )
)
)STATE OF HAWAII,
)STATE OF HAWAII
)DEPARTMENT OF HAWAIIAN
)HOME LANDS; STATE OF
)HAWAII HAWAIIAN HOME
)LANDS TRUST INDIVIDUAL
)CLAIMS REVIEW PANEL,
)BENJAMIN CAYETANO, in
)his official capacity as Governor
)of
)the State of Hawaii,
)JOHN DOES 1-10, JANE DOES
)1-10, DOE CORPORATIONS
)1-10, DOE PARTNERSHIPS
)1-10 AND DOE GOVERN-
)MENTAL ENTITIES 1-10,
)Defendants.
)
CIVIL NO.
(Class Action)
COMPLAINT;
EXHIBITS 1 AND 2;
DEMAND FOR JURY
TRIAL; AND
SUMMONS TO
ANSWER CIVIL
COMPLAINT
COMPLAINT
Representative Plaintiffs Leona Kalima, Diane Boner and Jo-
seph Ching (Representative Plaintiffs) above-named, through
their attorneys, Davis Levin Livingston Grande and the Law
Offices of Carl M. Varady, file this Complaint against Defendants
and allege as follows:
INTRODUCTION
1. This class action is for declaratory and injunctive relief and
for monetary damages by 2,721 Native Hawaiian beneficiaries of
the Hawaiian Home Lands Trust for breaches of that trust by
Defendants.
2. Representative Plaintiffs Leona Kalima, Dianne Boner and
Joseph Ching seek declaratory and injunctive relief pursuant to
Hawaii Rules of Civil Procedure 23(b)(1) and 23(b)(2) on behalf
of themselves and all other individuals similarly situated as fol-
lows:
a. A declaration that Plaintiffs and others similarly situated have
the right to sue Defendants in Circuit Court under HRS Chapter
674 for breach of Defendants trust obligations under the Hawaiian
Homes Commission Act of 1920.
b. A declaration that Plaintiffs and others similarly situated have
the right to sue Defendants in Circuit Court under HRS Chapters673 and/or 661 for Defendants breach of trust obligations to
Plaintiffs and all others similarly situated by delaying and failing to
complete the claims resolution process established under HRS
Chapter 674, and
c. A declaration that Plaintiffs have claims which allow them to
recover individual compensation for waiting an unreasonably long
period of time to be awarded land (waiting list claims) under the
Hawaiian Homes Commission Act of 1920 and for other types of
compensable claims for relief.
d. A declaration which determines the nature and elements of
compensation allowed under HRS Chapters 674, 673 and/or 661
for Plaintiffs claims.
3. In addition to the above claims for declaratory and injunctive
relief Representative Plaintiffs seek monetary relief and damagespursuant to Hawaii Rules of Civil Procedure 23(b)(3) on behalf of
themselves and all other individuals similarly situated under HRS
Chapter 674, HRS Chapter 673 and/or HRS Chapter 661 for
Defendants breach of their trust obligations to Plaintiffs under the
Hawaiian Homes Commission Act of 1920.
BACKGROUND
4. Under HRS Chapter 674, the State of Hawaii established the
Hawaiian Home Lands Trust Individual Claims Review Panel
(Panel) and a claims review process under which individual
beneficiaries of the Hawaiian home lands trust may resolve claims
for actual damages arising out of or resulting from a breach of trust,
which occurred between August 21, 1959, and June 30, 1988, andwas caused by an act or omission of an employee of the State in the
management and disposition of trust resources. HRS 674-1. The
Panel was empowered to hear and render Advisory Opinions to the
Legislature on claims filed with it by Native Hawaiian beneficia-
ries. The Legislature was then empowered to take action upon the
claims presented to it by the Panel.
5. Under the Chapter 674 claims review process, individual
beneficiaries were given a right to sue in circuit court upon their
filing a notice with the panel by October 1, 1999 that they did not
accept legislative action taken upon their claim. HRS 674-17.
Such suits are required to be filed in Circuit Court by December 31,
1999. HRS 674-19.
6. Because the Legislature took no action on 2,721 of the claims
filed with the Panel (the claims of Representative Plaintiffs and theproposed class), Defendant State of Hawaii has taken the position
that these 2,721 claimants will lose their right to file suit under
HRS Chapter 674 as of January 1, 2000.
7. If Defendants are correct and Plaintiffs have no right to sue
under HRS Chapter 674, the States failure to complete the Chapter
674 process and/or its failure to complete the process in a timely
manner constitutes a breach of trust violation under HRS Chapter
673 or alternatively constitutes a breach of contract under HRS
Chapter 661.
Appx. D.2 Consumer Class Actions: A Practical Litigation Guide
246
8/4/2019 Appendix D Sample Complaints CA02_D
9/46
8. Irrespective whether their claims arise under HRS Chapter
674, 673 and/or 661, Representative Plaintiffs seek monetary
damages on behalf of themselves and all others similarly situated
for Defendants breach of trust obligations to individual beneficia-
ries.
JURISDICTION AND VENUE
9. This Court has subject matter jurisdiction to hear the claims
in this Complaint pursuant to Hawaii Revised Statutes 603-21.5
(general jurisdiction), Hawaii Revised Statutes 603-21.5 and
632-1 (declaratory relief), Hawaii Revised Statutes 674-17
(breach of trust claims arising between 1959 and 1988) , Hawaii
Revised Statutes 673-1 (breach of trust claims arising after 1988),
and Hawaii Revised Statutes 661-1 et seq. (breach of contract).
10. Under HRS Chapters 674, 673 and 661, the State of Hawaii
has waived its sovereign immunity to be sued subject to certain
prefiling requirements.
11. This Court has personal jurisdiction over Defendants pur-
suant to Hawaii Revised Statutes 674-16, Hawaii Revised
Statutes 673-1 and Hawaii Revised Statutes 661-1.
12. This Court has venue over the claims in this Complaint
pursuant to Hawaii Revised Statutes 603-36 and Hawaii Re-vised Statutes 674-17, Hawaii Revised Statutes 673-1 Hawaii
Revised Statutes 661-1.
PREFILING REQUIREMENTS
13. Under Hawaii Revised Statutes Chapter 674, a claimant
must timely file a claim with the Panel by August 31, 1995. After
Panel consideration of the claim, the Panel was empowered to
render Advisory Opinions on the claims presented to it and make
a recommendation to the Legislature for action on the claims. After
legislative action on the Panel recommendation, individual or
classes of claimants have the right to sue in Circuit Court upon 1)
the filing of a notice of intent to sue by October 1, 1999 HRS
674-17 and 2) filing of a lawsuit by December 31, 1999. HRS
674-19.14. On September 30, 1999, Plaintiffs through the Native Ha-
waiian Legal Corporation filed a written notice of intent to sue on
behalf of the proposed classes of plaintiffs, a true and correct copy
of which is attached as Exhibit 1. This letter satisfies the require-
ment of HRS 674-17.
15. Under Hawaii Revised Statutes 673-3, Plaintiffs must
exhaust all administrative remedies available, and shall have
given not less than sixty days written notice prior to filing of the
suit that unless appropriate remedial action is taken suit shall be
filed.
16. On December 29, 1999, Plaintiffs through Davis Levin
Livingston Grande and the Law Offices of Carl Varady, filed a
written notice and request for remedial action to be taken. Plaintiffs
have attached as Exhibit 2 a true and correct copy of the requiredprefiling written notice. This letter satisfies the requirement of HRS
673-3.
17. Under Hawaii Revised Statutes 673-3 All executive
branch departments shall adopt in accordance with chapter 91, such
rules as may be necessary to specify the procedures for exhausting
any remedies available. The executive branch departments of the
State of Hawaii have not adopted any rules pursuant to HRS
chapter 91 so there are no administrative remedies to be exhausted
by Plaintiffs.
PARTIES
18. Plaintiff Joseph Ching is a resident of the State of Hawaii
and who is a Native Hawaiian beneficiary as that term is defined in
HRS Chapter 674. Plaintiff Joseph Ching timely filed a breach of
trust claim with the Panel. That breach of trust claim:
a. Was adjudicated in Plaintiffs favor by the Panel;
b. Was the basis of an advisory opinion by the Panel;
c. Was presented to the Legislature for action; and
d. The Legislature took no action on the Panels recommended
remedial action regarding Plaintiff Joseph Chings breach of trust
claim.
19. There are 418 claimants (putative plaintiffs of Subclass 1)
similarly situated to Plaintiff Joseph Ching since they all had
breach of trust claims which a) were adjudicated in their favor by
the Panel, b) each of which was the basis of an advisory opinion
by the Panel, c) were presented to the Legislature for action, and
d) the Legislature took no action on the Panels recommended
remedial action regarding these claimants breach of trust claims.
20. Plaintiff Dianne Boner is a resident of the State of Hawaii
who is a Native Hawaiian beneficiary as that term is defined in
HRS Chapter 674. Plaintiff Dianne Boner timely filed a breach of
trust claim with the Panel. That breach of trust claim:a. Was adjudicated by the Panel;
b. Was the basis of an advisory opinion by the Panel;
c. Was not presented to the Legislature for action; and
d. Because it was not presented to the Legislature for action, the
Legislature took no action on the Panels recommended remedial
action regarding Plaintiff Dianne Boners breach of trust claim.
21. There are 53 claimants (putative plaintiffs of Subclass 2)
similarly situated to Plaintiff Diane Boner since they all had breach
of trust claims which a) were adjudicated in their favor by the
Panel, b) each of which was the basis of an advisory opinion by the
Panel, c) which were not presented to the Legislature for action,
and d) because the claims were not presented to the Legislature for
action, the Legislature took no action on the Panels recommended
remedial action regarding these claimants breach of trust claims.22. Plaintiff Leona Kalima is a resident of the State of Hawaii
who is a Native Hawaiian beneficiary as that term is defined in
HRS Chapter 674. Plaintiff Leona Kalima timely filed a breach of
trust claim with the Panel. That breach of trust claim:
a. Was timely filed with the Panel for adjudication;
b. Was not presented by the Panel to the Legislature for action;
and
c. The Legislature took no action on Plaintiff Leona Kalimas
breach of trust claim.
23. There are 2,250 claimants (putative plaintiffs of Subclass 3)
similarly situated to Plaintiff Leona Kalima since they all timely
filed breach of trust claims which a) were presented to the Panel for
adjudication, b) were presented by the Panel to the Legislature for
action, and c) the Legislature took no action on these claimantsbreach of trust claims.
24. Defendant State of Hawaii is a sovereign entity which
assumed trust and fiduciary responsibilities for Native Hawaiian
beneficiaries of the Hawaiian Homes Commission Act of 1920 in
its state constitution upon Hawaiis admission as a state in 1959.
Defendant State of Hawaii has waived its sovereign immunity to
be sued herein under
25. Defendant State of Hawaii Department of Hawaiian Home
Lands (DHHL) is a department within Defendant State of
Sample Complaints Appx. D.2
247
8/4/2019 Appendix D Sample Complaints CA02_D
10/46
Hawaii and which was charged by the State of Hawaii to
discharge the State of Hawaiis duty to act as trustee on behalf of
all Native Hawaiian beneficiaries pursuant to the Hawaiian Homes
Commission Act of 1920.
26. Defendant Hawaiian Home Lands Trust Individual Claims
Review Panel (Panel) is an administrative agency set up to
administer the individual claims for breach of trust by Native
Hawaiian beneficiaries.
27. Defendant Benjamin Cayetano is sued in his official capac-ity as Governor of the State of Hawaii and the chief administrative
officer responsible for administration of the Hawaiian Home Lands
Trust Individual Claims Review Panel, which is an executive
agency within the Department of Commerce and Consumer Affairs
under the supervision and control of the Office of Governor.
28. Pursuant to Hawaii Revised Statutes 674-16, Defendant
State of Hawaii and Defendant State of Hawaii Department of
Hawaiian Home Lands have waived their immunity from liability
for actual damages suffered by an individual beneficiary arising out
of or resulting from a breach of trust or fiduciary duty, which
occurred between August 21, 1959 to June 30, 1988 and was
caused by an act or omission of an employee of the State in the
management and disposition of trust resources.
29. Pursuant to Hawaii Revised Statutes 673-1, DefendantState of Hawaii and Defendant State of Hawaii Department of
Hawaiian Home Lands have waived their immunity from liability
for actual damages suffered by an individual beneficiary arising out
of or resulting from a breach of trust or fiduciary duty, which
occurred after June 30, 1988 and was caused by an act or omission
of an employee of the State in the management and disposition of
trust resources.
30. Pursuant to Hawaii Revised Statutes 661-1, the State of
Hawaii and Defendant State of Hawaii Department of Hawaiian
Home Lands have waived their immunity for damages as a result
of breaches of contract explicitly or impliedly entered into with
individuals. The settlement of individual beneficiary claims,
through legislation and administrative rules, establish a contract
that was breached by the State.31. Defendants State of Hawaii, State of Hawaii Department
of Hawaiian Homes Lands, Defendant Hawaiian Home Lands
Trust Individual Claims Review Panel and Benjamin Cayetano are
collectively referred to as Defendants.
32. The Defendants designated as JOHN DOES 1-10, JANE
DOES 1-10, DOE CORPORATIONS 1-10, DOE PARTNER-
SHIPS 1-10 and DOE GOVERNMENTAL ENTITIES 1-10 (here-
inafter collectively referred to as Doe Defendants) are sued
herein under fictitious names for the reason that their true names
and identities are presently unknown to Plaintiff, despite Plaintiffs
diligent and good faith efforts to obtain this information, except
that said Doe Defendants were connected in some manner with the
named Defendant and were individuals, corporations, parent cor-
porations, divisions, subsidiaries, entities, agents, representatives,associations, affiliates, associates, co-venturers, business entities,
employers, employees, servants, vendors, suppliers, manufactur-
ers, subcontractors and contractors, or governmental entities, agen-
cies or bodies, responsible in some manner presently unknown to
Plaintiffs for the injuries and damages to Plaintiffs. Plaintiffs
hereby pray for leave to certify the true names and capacities,
activities and/or responsibilities of said Doe Defendants when the
same are ascertained.
FACTUAL ALLEGATIONS
33. Plaintiffs are individual beneficiaries of the Hawaiian
Homes Commission Act of 1920 who were eligible to receive the
benefits of homesteading and related programs from the Hawaiian
Home Lands Trust (Trust).
THE HAWAIIAN HOME LANDS TRUST
34. In 1920, the Congress of the United States of Americapassed the Hawaiian Homes Commission Act of 1920, as amended
(42 Stat. 108 (July 9, 1921), establishing a land trust to be
administered by the Territory of Hawaii, and later the State of
Hawaii, to rehabilitate the Native Hawaiian people by, inter alia,
making them eligible to receive the benefits of homesteading and
related programs from the Hawaiian Home Lands Trust. The State
of Hawaii accepted responsibilities as trustee of the Hawaiian
Home Lands Trust on behalf of eligible Native Hawaiians as a
condition of its admission to the Union under 4 and 5 of the
Hawaii Admission Act, Pub. L. 86-3, 73 Stat. 4 (March 18, 1959)
as well as pursuant to Article XII, 2 and 3 of the Hawaii
Constitution.
35. Under the Hawaiian Homes Commission Act of 1920, as
amended, the State of Hawaii was charged as trustee to oversee theoperations carried out under the authority of the Hawaiian Homes
Commission Act and to fulfill and discharge all obligations con-
sistent with its position as trustee. The duties included: adminis-
tration of a land trust for the sole benefit of Native Hawaiians and
rehabilitation of Native Hawaiians through resettlement of them on
Trust lands.
HAWAIIAN HOMES INDIVIDUAL CLAIMS REVIEW PANEL
36. In 1988, the Hawaii State Legislature passed Act 395, The
Native Hawaiian Judicial Trusts Relief Act, which was signed by
the Governor and codified as HRS Chapter 673.
37. Chapter 673 gave Native Hawaiian beneficiaries the right to
sue the State of Hawaii in Circuit Court for breaches of trustoccurring after June 30, 1988 by the State of Hawaii of the
Hawaiian Home Lands Trust under Article XII, Sections 1, 2 and
3 of the Hawaii Constitution and the Hawaiian Homes Commis-
sion Act of 1920.
38. Chapter 673 also provided procedural requirements for
instituting suit, including 1) prefiling notice to the State of Hawaii,
2) sixty day period for State to take requested remedial action and
3) two-year statute of limitation for instituting a breach of trust
claim.
39. Act 395, codified as Chapter 673 also directed the Governor
to present a proposal to the 1991 Legislature to resolve controver-
sies relating to trust breaches that occurred during the period
between the Statehood and June 30, 1988, and were not included
within Chapter 673.40. As required by Act 395, in 1991, the Governor submitted to
the Legislature An Action Plan to Address Controversies Under
the Hawaiian Home Lands Trust and the Public Land Trust
(Action Plan). Under the Action Plan, the Governor proposed
creating a Board of Individual Claims Resolution to hear claims of
actual economic losses suffered by individual beneficiaries of the
Hawaiian Home Lands Trust for 1959 through 1988 claims.
41. In response to the Action Plan, in 1991 the Hawaii State
Legislature passed Act 323, codified as HRS Chapter 674, which
Appx. D.2 Consumer Class Actions: A Practical Litigation Guide
248
8/4/2019 Appendix D Sample Complaints CA02_D
11/46
established the Hawaiian Home Lands Trust Individual Claims
Review Panel (Panel) and a claims review process under
which individual beneficiaries of the Hawaiian home lands trust
may resolve claims for actual damages arising out of or resulting
from a breach of trust, which occurred between August 21, 1959,
and June 30, 1988, and was caused by an act or omission of an
employee of the State in the management and disposition of trust
resources. HRS 674-1.
42. Chapter 674 authorized the Panel to review and evaluate themerits of claims brought by individual beneficiaries, to render
findings, and to recommend monetary damages and other relief in
an advisory opinion to the Legislature regarding the merits of each
claim. HRS 674-1. Chapter 674 was enacted to grant individu-
als affected by the Hawaii Home Lands Trust . . .the right to settle
their individually affected controversies (as opposed to controver-
sies that affect the beneficiaries as whole) by suing directly in
Circuit Court. 1991 Hawaii State Legislature Conference Com-
mittee Report No. 64 at 1.
43. Under Act 323 as originally passed, the filing deadline to
submit claims to the Panel was August 31, 1993. HRS 674-7
(1991). The deadline to file a written notice that the claimant does
not accept legislative action on his or her claim was October 1,
1994, HRS 674-17(b) (1991) and the statute of limitations forfiling an action in circuit court was September 30, 1996 HRS
674-19 (1991), two years after the written notice was required to
be filed with the panel.
44. Under Chapter 674, the Panel was to submit its final report
to the 1994 legislature in regular session, including a summary of
each claim brought, the panels findings and advisory opinion
regarding the merits of each claim and an estimate of the probable
compensation or recommended corrective action. HRS 674-14
(1991).
45. The Panel members were appointed in April 1992, promul-
gated rules to govern operations and, in February 1993, began
accepting claims filed by individual beneficiaries of the Hawaiian
Home Lands Trust.
46. Because of delays in forming the Panel, the 1993 HawaiiState Legislature revised the various deadlines it established in
1991. The deadline to file claims with the panel was extended from
August 31, 1993 to August 31, 1995. HRS 674-7 (1993) (Act
351). The deadline to file a written notice that the claimant does not
accept legislative action on his or her claim was extended from
October 1, 1994 to October 1, 1997. HRS 674-17(b) (1993) (Act
351). The statute of limitations for filing an action in circuit court
was extended from September 30, 1996 to September 30, 1999,
HRS 674-19 (1993) (Act 351), two years after the written notice
was required to be filed with the panel. The deadline to submit the
final report to the legislature was extended from the 1994 legisla-
ture to the 1997 legislature. HRS 674-14 (1993) (Act 351).
47. In 1994, the Hawaii State Legislature considered and
approved the Panels decisions in two cases. 1994 Hawaii StateLegislature, Act 129. By approving the Panels actions with regard
to these two claimants, the enactment of Act 129 authorized these
claimants to bring suit in Circuit Court pursuant to HRS 674-17
in the event they did not accept the action of the Legislature on
their claims, subject only to their compliance with the requirement
under HRS 674-17(b) that timely notice of their rejection of the
Legislatures action be filed with the Panel.
48. In 1995, during Special Session, the Legislature adopted
Act 14, which is based expressly on the Action Plan and Act 395.
Act 14 overrode prior precedent and stated its intent to settle all
Hawaii Home Lands breach of trust claims allowed by Act 395 for
claims arising during the period August 21, 1959, through July 1,
1988, except those permitted by Chapter 674, HRS. Act 14 pro-
vided further for the payment of $600 million dollars in settlement
for Hawaiian land trust claims, exclusive of those under Chapter
674, HRS. Act 14 states that its effect is res judicata as to all other
Hawaiian land trust claims for the period of August 21, 1959, and
July 1, 1988.49. Although Act 14 was intended to resolve controversies
arising out of management, administration, supervision of the
trust, or disposition . . .of any lands or interests in land which are
or were or are alleged to have been Hawaiian home lands,Act 14
specifically exempted the individual claims resolution process
established by Chapter 674:
Nothing in this section shall replace or affect the
claims of beneficiaries with regard to . . .(c) Hawai-
ian home lands trust individual claims brought
pursuant to chapter 674, Hawaii Revised Statutes,
except as otherwise provided in sections 14, 15 and
16 of this Act.
1995 Hawaii State Legislature, Act 14, 4.
50. Section 14, 15 and 16 of Act 14 (1995) revised portions of
Chapter 674 by amending the definition of actual damages in HRS
674-2; shortening the statute of limitations time period in HRS
674-19 from September 30, 1999, HRS 674-19 (Act 351), to
September 30, 1998, and adding a provision to Chapter 674
precluding title-related claims from the claims process.
51. In 1997, the Panel prepared and submitted its Report to the
Governor and the 1997 Hawaii Legislature. In its Report, the
Panel determined that several categories of claims were compens-
able under Chapter 674, including claims based on an unreasonably
long wait for a homestead (waiting list claims), construction
claims, lost application claims and others. Report to the Governor
and the 1997 Hawaii Legislature, submitted by The HawaiianHome Lands Trust Individual Claims Review Panel (1997 Re-
port), Table II.
52. In its 1997 Report, the Panel reported that it received 4,327
claims from 2,752 claimants by August 31, 1995, the deadline
established by the 1993 Legislature. 1997 Report at i. By the end
of 1996, the Panel had rendered advisory opinions on 172 claims
affecting 147 claimants. Through the 1997 Report, the Panel
recommended legislative action on 162 claims for damages ap-
proximating $6.7 million. 1997 Report at i and Table III6.
53. However, because the Panel was unable to complete its
review of all claims in 1997, it requested a two-year extension to
review all claims and file its final report with the Legislature.
54. The 1997 Legislature agreed to extend the Panels existence
and passed Act 382. Act 382 retained the deadline to file claimswith the Panel as August 31, 1995. HRS 674-7 (1993) (Act 351).
The deadline to file a written notice that the claimant does not
accept legislative action on his or her claim was extended from
October 1, 1997 to October 1, 1999. HRS 674-17(b) (1997) (Act
382). The statute of limitations for filing an action in circuit court
was extended from September 30, 1998 to December 31, 1999,
HRS 674-19 (1997) (Act 382), three months after the written
notice was required to be filed with the panel. The deadline to
submit the final report to the legislature was extended from the
Sample Complaints Appx. D.2
249
8/4/2019 Appendix D Sample Complaints CA02_D
12/46
1997 legislature to the 1999 legislature. HRS 674-14 (1997) (Act
382).
55. In considering the Panels advisory decisions on claims,
including claims for damages, the 1997 Legislature took no action
on the claims that had been presented and instead created a separate
process to determine the types of compensable claims and the
amounts to be paid by passage of Act 382.
56. The separate process created by Act 382 was a working
group consisting of the Attorney General, Director of Budget andFinance, Chair of the Hawaiian Homes Commission and the Panel
Chair to prescribe a formula and any criteria necessary to qualify
and resolve claims filed under HRS Chapter 674. The working
group planned to eliminate large numbers of claims. The working
group was declared to be unconstitutional in Apa v. Cayetano, Civil
No. 97-4641-11, First Circuit Court, State of Hawaii (Order
Granting in Part and Denying in Part Plaintiffs Motion for Sum-
mary Judgment and for Permanent Injunction filed on April 17,
1998, entered December 30, 1998; Order Granting in Part and
Denying in Part Executive Defendants Motion for Summary
Judgment filed on April 24, 1998, entered December 30, 1998) and
the Panel therefore did not apply the working groups formula and
criteria for compensation.
57. In 1999, the Panel submitted its second report to theHawaii State Legislature. As of December 31, 1998, the Panel had
closed or issued recommendations on 2,050 claims, representing
47% of the total number of claims filed. Report to the Governor
and the 1999 Hawaii Legislature, submitted by The Hawaiian
Home Lands Trust Individual Claims Review Panel at 17 (1999
Report). In the 1999 Report, which covered claims reviewed by
the Panel in 1997 and 1998, the Panel recommended a total of $9.7
million in damages for 346 claims involving 246 claimants.
58. By 1999, the total number of claims submitted by the Panel
to the Legislature was 509: 163 claims submitted to the 1997
Legislature and 346 claims submitted to the 1999 Legislature. The
total amount of damages recommended by the Panel was approxi-
mately $16.4 million ($6.7 million in 1997 and $9.7 million in
1999). The 1999 Legislature took no action on either the 163claims submitted to it in 1997 or the 346 claims submitted to it in
1999.
59. Because more than 53% (2,277 claims) of the 4,327 claims
filed with the Panel were still unresolved at the time of its 1999
Report, the Panel requested the Legislature to further extend the
time necessary to complete review of the remainder of the claims.
The 1999 Legislature passed H.B. 1675, House Draft 1, Senate
Draft 1, Conference Draft 1 (H.B. 1675) which among other
things proposed to extend the deadline to submit a written notice
that the claimant does not accept legislative action on his or her
claim from October 1, 1999 to October 1, 2000 (H.B. 1675, 4).
It also proposed to extend the statute of limitations for filing an
action in circuit court from to December 31, 1999 to December 31,
2000 (H.B. 1675, 5). Finally, it proposed to extend the Panelsexistence and the deadline to submit the final report to the legis-
lature from the 1999 legislature to the 2000 legislature. (H.B. 1675,
2-3).
60. Governor Benjamin Cayetano vetoed H.B. 1675 in April
1999. Because H.B. 1675 was vetoed, the deadline for a claimant
to file written notice rejecting legislative action on the claim is
currently October 1, 1999. The deadline to file a claim in Circuit
Court is December 31, 1999. These deadlines remain in effect even
though no legislative action has been taken on 509 claims on which
the Panel rendered an advisory opinion and even though 2,277
claims have had no advisory opinion rendered by the Panel at all.
61. As of September 30, 1999, the disposition of the 2,752
claimants who timely filed claims with the Panel is as follows:
Number of claimants who settled their claims 31
Number of claimants who timely filed
claims with the Panel for whom the Panel
did not issue Advisory Opinions recom-mending relief and whose claims were not
submitted to the Legislature by the Panel
(including (Plaintiff Kalima) 2,250
Number of claimants who had Advisory
Opinions issued by the Panel recommend-
ing relief which were not reported to the
Legislature for which the Legislature pro-
vided no relief (including Plaintiff Boner) 53
Number of claimants who had Advisory
Opinions issued by the Panel which were
reported to the Legislature for which the
Legislature provided no relief (including
Plaintiff Ching) 418
62. As of September 30, 1999, there are 2,721 claimants who
had no legislative action taken on their claims. The State of
Hawaii has taken the position that these claimants are precluded
from exercising their Chapter 674 right to sue for breaches of trust
because the Legislature failed to act on their claims.
CLASS ALLEGATIONS
63. The Representative Plaintiffs bring this action as a class
action under Hawaii Rules of Civil Procedure 23(a), 23(b)(1),
23(b)(2) and 23(b)(3) on behalf of themselves and all others
similarly situated in Hawaii as members of a proposed plaintiff
class (the Class) which would have three subclasses defined as
follows:a. Subclass 1:
All Hawaii home land trust beneficiaries who timely filed a
claim with the Hawaii Home Lands Trust Individual Claims
Review Panel (Panel) for whom the Panel issued an Advisory
Opinion which was submitted to the Legislature, excluding any
beneficiaries whose claims were either approved by the Legis-
lature or settled.
Subclass 1 consists of at least 418 individuals.
b. Subclass 2:
All Hawaii home land trust beneficiaries who timely filed a
claim with the Hawaii Home Lands Trust Individual Claims
Review Panel (Panel) for whom the Panel issued an Advisory
Opinion which was not submitted to the Legislature, excludingany beneficiaries whose claims were either approved by the
Legislature or settled.
Subclass 2 consists of at least 53 individuals.
c. Subclass 3:
All Hawaii home land trust beneficiaries who timely filed a
claim with the Hawaii Home Lands Trust Individual Claims
Review Panel (Panel) for whom the panel did not render an
advisory opinion recommending damages or other relief and for
whom there was no legislative action taken, excluding any
Appx. D.2 Consumer Class Actions: A Practical Litigation Guide
250
8/4/2019 Appendix D Sample Complaints CA02_D
13/46
beneficiaries whose claims were either approved by the Legis-
lature or settled.
Subclass 3 consists of at least 2,250 individuals.
64. Class requirements under HRCP 23(a) are met in that:
a. The class is so numerous that joinder of all members is
impractical. There are 1845 members of the Class consisting of
418 members of Subclass 1, 53 members of Subclass 2 and
2,250 members of Subclass 3.
b. There are questions of law and fact common to the class
as follows:
1. All Class Members timely filed claims with the Panel;
2. All Class Members claims were not dismissed or settled
during Panel consideration;
3. All Class Members have common Chapter 674 procedures
applied to the Panel, Legislative and Judicial consideration
of their claims;
4. The State has contended that none of the class members is
entitled to sue under Chapter 674 for breach of trust
violations;
5. The State has contended that certain claims of the class
members are not compensable, including waiting list
claims; and6. All class members have suffered damage as a result of
Defendants breach of their trust obligations.
c. The claims of the Representative Plaintiffs are typical of
the claims of the Class, because Representative Plaintiffs and all
Class Members were damaged by the same wrongful conduct
committed by Defendants as alleged herein.
d. The Representative Plaintiffs will fairly and adequately
represent the interests of the Class. The interests of Represen-
tative Plaintiffs are coincident with, and not antagonistic to,
those of the Class. In addition, Representative Plaintiffs are
represented by counsel who are experienced and competent in
the prosecution of complex class action litigation.
65. Class requirements under HRCP 23(b)(1) are met for Plain-
tiffs declaratory and injunctive relief (Counts I and II below)because the prosecution of separate actions by individual members
of the class would create the risk of inconsistent or varying
adjudications with respect to individual members of the class
which would establish incompatible standards of conduct on behalf
of the state or adjudications with respect to individuals which
would as a practical matter be dispositive of the interests of the
other members not parties to the adjudications or substantially
impair or impede their ability to protect their interest.
66. Class requirements under HRCP 23(b)(2) are met for Plain-
tiffs declaratory and injunctive relief (Counts I and II below)
because the party opposing the class (Defendants herein) have
acted or refused to act on grounds generally applicable to the class,
thereby making appropriate final injunctive relief or corresponding
declaratory relief with respect to the class as a whole.67. Class requirements under HRCP 23(b)(3) are met for Plain-
tiffs damages claims (Counts III and IV below) because
a. The questions of law and fact common to the members of
the class are important and predominate over any questions
affecting only individual members because Defendants have
acted on grounds generally applicable to the Class:
1. The legal obligations of Defendants;
2. The knowledge and conduct of the Defendants;
3. Damages to Plaintiffs.
Class action treatment is superior to the alternatives, if any, for
the fair and efficient adjudication of the controversy alleged herein.
Such treatment will permit a large number of similarly situated
persons to prosecute their common claims in a single forum
simultaneously, efficiently and without the duplication of effort and
expense that numerous individual actions would engender. There
are no difficulties likely to be encountered in the management of
this class action that would preclude its maintenance as a class
action, and no superior alternative exists for the fair and efficientadjudication of the controversy. Separate cases could produce
varying adjudications with respect to individual members, result-
ing in conflicting and incompatible standards of conduct.
COUNT IDECLARATION AND INJUNCTION FOR
RIGHT TO SUE UNDER HRS CHAPTER 674,
OR ALTERNATIVELY UNDER HRS CHAPTER 673
AND/OR HRS CHAPTER 661
68. Representative Plaintiffs incorporate by reference the alle-
gations of all the paragraphs above.
69. Plaintiffs request declaratory and injunctive relief as fol-
lows:
a. A declaration that Plaintiffs have a right to sue for damagesunder HRS Chapter 674, irrespective of any pre-filing require-
ments therein, because of breaches of trust by Defendants.
b. A declaration that Plaintiffs and others similarly situated
have the right to sue Defendants in Circuit Court under HRS
Chapters 673 and/or 661 for Defendants breach of trust obli-
gations to Plaintiffs and all others similarly situated by delaying
and failing to complete the claims resolution process established
under HRS Chapter 674.
COUNT IIDECLARATION THAT WAITING LIST AND
OTHER CLAIMS ARE COMPENSABLE AND WHICH
DETERMINES THE NATURE AND ELEMENTS
OF COMPENSATION UNDER HRS CHAPTER 674,
HRS CHAPTER 673 AND/OR HRS CHAPTER 66170. Representative Plaintiffs incorporate by reference the alle-
gations of all the paragraphs above.
71. Representative Plaintiffs request a declaration that claims
for Native Hawaiian beneficiaries who had to wait an unreasonable
amount of time are compensable under HRS Chapter 674, HRS
Chapter 673 and/or HRS Chapter 661 as well as other claims to be
determined by the Court.
72. Representative Plaintiffs request a declaration which deter-
mines the nature and elements of compensation allowed under
HRS Chapters 674, 673 and/or 661 for Plaintiffs claims.
COUNT IIIBREACH OF TRUST
73. Representative Plai