Alig v. Quicken Loans Inc.

Decision Date10 March 2021
Docket NumberNo. 19-1059,19-1059
Citation990 F.3d 782
Parties Phillip ALIG; Sara J. Alig; Roxanne Shea; Daniel V. Shea, Individually and on Behalf of a Class of Persons, Plaintiffs - Appellees, v. QUICKEN LOANS INC.; Amrock Inc., f/k/a Title Source, Inc., d/b/a Title Source Inc. of West Virginia, Incorporated, Defendants - Appellants, and Dewey V. Guida; Appraisals Unlimited, Inc.; Richard Hyett, Defendants.
CourtU.S. Court of Appeals — Fourth Circuit

ARGUED: Theodore J. Boutrous, Jr., GIBSON, DUNN & CRUTCHER, LLP, Los Angeles, California, for Appellants. Deepak Gupta, GUPTA WESSLER PLLC, Washington, D.C., for Appellees. ON BRIEF: Helgi C. Walker, GIBSON, DUNN & CRUTCHER LLP, Washington, D.C.; William M. Jay, Thomas M. Hefferon, Brooks R. Brown, Keith Levenberg, Washington, D.C., Edwina B. Clarke, GOODWIN PROCTER LLP, Boston, Massachusetts, for Appellants. John W. Barrett, Jonathan R. Marshall, Charleston, West Virginia, Patricia M. Kipnis, BAILEY & GLASSER LLP, Cherry Hill, New Jersey; Gregory A. Beck, GUPTA WESSLER PLLC, Washington, D.C.; Jason E. Causey, James G. Bordas, Jr., BORDAS & BORDAS, PLLC, Wheeling, West Virginia, for Appellees.

Before NIEMEYER, WYNN, and FLOYD, Circuit Judges.

Affirmed in part and vacated and remanded in part by published opinion. Judge Wynn wrote the majority opinion, in which Judge Floyd joined. Judge Niemeyer wrote a dissenting opinion.

WYNN, Circuit Judge:

Plaintiffs are a class of "[a]ll West Virginia citizens who refinanced" a total of 2,769 mortgages with Defendant Quicken Loans Inc. from 2004 to 2009, "for whom Quicken [Loans] obtained appraisals" from Defendant Amrock Inc., an appraisal management company formerly known as Title Source, Inc. ("TSI").1 J.A. 627.2

Plaintiffs allege that pressure tactics used by Quicken Loans and TSI to influence home appraisers to raise appraisal values to obtain higher loan values on their homes constituted a breach of contract and unconscionable inducement under the West Virginia Consumer Credit and Protection Act. The district court agreed and granted summary judgment to Plaintiffs.

We agree with the district court that class certification is appropriate and that Plaintiffs are entitled to summary judgment on their statutory claim. However, we conclude that the district court erred in its analysis of the breach-of-contract claim. Accordingly, we affirm in part and vacate and remand in part.


Viewing the evidence in the light most favorable to Defendants, the record shows the following.3

In refinancing mortgages for thousands of West Virginia homes during the class period, Quicken Loans asked potential borrowers to complete an application; sign a uniform deposit agreement authorizing Quicken Loans to "advance out-of-pocket expenses on [the borrower's] behalf" for an appraisal, a credit report, or both; and provide a deposit averaging $350. J.A. 381. Quicken Loans also collected information from potential borrowers, including an estimated value of their homes.

Quicken Loans relayed the borrower's estimates of value to TSI, which passed those estimates on to contracted appraisers via appraisal engagement letters. If an appraisal came back lower than the estimated value, appraisers received phone calls from TSI drawing their attention to the estimated value and asking them to take another look. There is no evidence to suggest that borrowers were aware of these practices.

Plaintiffs’ and Defendants’ experts agreed that, during the class period, providing the borrower's estimate of value to the appraiser was common in the industry. Additionally, although the 20082009 Uniform Standards of Professional Appraisal Practice ("Uniform Appraisal Standards") indicated that appraisers could not ethically accept an appraisal assignment with a specific value listed as a condition , the chairman of the organization that issues the Uniform Appraisal Standards testified that an appraiser did not violate those standards merely by accepting an assignment that included an owner's estimate of value. The record includes significant testimony from appraisers that borrowers’ estimates of value did not influence them. Finally, the record includes testimony that the estimated value served the legitimate purposes of helping appraisers determine whether to accept an assignment and, upon acceptance, assess an appropriate fee.

Nevertheless, authorities warned lenders before and during the class period that providing estimated values to appraisers was improper. For instance, a 1996 letter from the U.S. Department of Housing and Urban Development to mortgagees instructed that appraisers were required to certify "that the appraisal [was] not based on a requested minimum valuation, [or] a specific valuation or range of values." S.J.A. 857. A 1999 letter from the Office of the Comptroller of the Currency to the Appraisal Standards Board voiced some concern with the practice of providing the owner's estimate of value and warned "employees of financial institutions" against "pressuring appraisers to raise their value conclusions to target values." S.J.A. 861. And in 2005, the Office of the Comptroller of the Currency noted that "the information provided by the regulated institution should not unduly influence the appraiser or in any way suggest the property's value ." Off. of the Comptroller of the Currency et al., Frequently Asked Questions on the Appraisal Regulations and the Interagency Statement on Independent Appraisal and Evaluation Functions , Fed. Deposit Ins. Corp. (Mar. 22, 2005), (emphasis added) (saved as ECF opinion attachment). While the 2005 guidance was not binding on Defendants, it is relevant to understanding regulators’ thoughts on the issue at the time.

Furthermore, during the class period, Defendants stopped providing appraisers with estimated home values in other states—such as neighboring Ohio—where lenders faced mounting legal pressure against the practice. And they ceased the practice altogether in 2009, "right around the time that the [Home] Valuation Code of Conduct was agreed to and defined for the marketplace." J.A. 235. That Code of Conduct prohibits lenders or appraisal management companies from providing an estimated value to an appraiser in a refinancing transaction.4 By 2011, Quicken Loans itself recognized that "influenc[ing] the appraiser to set [the] home at any certain value .... is illegal and unethical." J.A. 107.

The record thus indicates that the acceptability of this practice shifted dramatically during the class period. What started out as a common (though questionable) practice became one that, in short order, was explicitly forbidden—and viewed as unethical by Quicken Loans itself.

Yet the record reveals no such qualms on the part of Defendants during the class period. In one internal email from 2007, which had the subject line "Asking for the max increase available," an Operations Director for Quicken Loans wrote that TSI was "getting a lot of calls from appraisers stating that they can't reach our requested value and asking what should they do." District Ct. Docket No. 206-2 at 39 (emphasis added). He instructed employees to include in value-appeal requests "something along the lines of ‘any additional value would be appreciated.’ " Id. A second email from a different Quicken Loans employee a few weeks later suggests that Quicken Loans’ usual process at the time involved ordering value appeals and second appraisals, as well as "arguing over value appeal orders and debating values with bankers and appraisers."5 S.J.A. 711. The email continued:

[Fannie Mae] is being dragged into a law suit [sic] in the state of New York over lender pressure on appraisals. I don't think the media or any other mortgage company ... would like the fact we have a team who is responsible to push back on appraisers questioning their appraised values .... Ohio is very specific in regards to asking for appeals and they say it is illegal. Other[ ] states I am sure will jump on board.

Id. (emphasis added). One recipient of the latter email testified in 2009 that the purpose of providing the estimated value was to "give[ ] an appraiser an ability to see what they are going to potentially look at the property at [sic]" and to "give[ ] them a heads up as to what the client thinks the home is worth." S.J.A. 709.

Dewey Guida, an appraiser routinely contracted by Quicken Loans and TSI, testified during a deposition that prior to 2009, TSI always included the borrower's estimate of value, but he could not recall whether other companies did so. He agreed that these estimated values were a "tip-off." S.J.A. 674. He testified that he largely ignored the estimated value "unless the value didn't come in. Then we received some phone calls about it[.]" S.J.A. 669. If the appraisal "wasn't at the estimated value," he clarified, "I would get a call on it" from TSI "with the value." Id. These calls were "[v]ery vague," but in essence, Defendants were saying: "We had an estimated value of this amount of money. You appraised at this amount. ... [C]ould you relook at it? ... [I]s there a reason why?" Id.

Class representatives Phillip and Sara Alig refinanced their mortgage through Quicken Loans in 2007. The Aligs estimated their home to be worth $129,000, and Quicken Loans passed this information along to TSI, who, in turn, passed it on to Guida. Guida appraised the home to be worth $122,500. He then received a request from Defendants to revisit the appraisal and raise it to $125,500 based on a modification to the data points for the closest comparison house. Guida testified that such requests from his clients for "straight value increase[s]" were not common, but he acknowledged that he complied and raised the appraised value to $125,500, though he could not recall doing so. S.J.A. 671. The Aligs obtained a loan from Quicken Loans for about $113,000. Plaintiffs’ two experts estimated that the actual 2007 value of the...

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