Real Estate Appraiser Defeats Class Certification Request

A federal district court in New York has rejected a motion for class certification in a case asserting violations of the Securities and Exchange Act of 1934 against a real estate appraisal company that alleged that the defendants had fraudulently inflated appraisal values at the direction of their client, Washington Mutual, Inc.  

The lead plaintiff, Berks County Employees' Retirement Fund, a pension fund, brought suit in June 2008 against First American Corporation, a public holding company that provides financial products and services; First American eAppraiseIT, LLC ("eAppraiseIT"), a First American subsidiary that offers real estate appraisal services to mortgage lenders, real estate agents, and investors; and five of their current and former officers and directors. The complaint alleged, among other things, that the defendants' "improper appraisal practices rendered [their] statements about the quality and accuracy of [their] appraisal business and compliance with ethical and legal guidelines false and misleading" and "caused certain of [their] reported financial information, including revenues associated with home appraisal, to be materially overstated." Berks moved to certify a class of "all persons or entities who purchased and/or otherwise acquired common stock issued by First American Corporation between and including April 26, 2006 and November 6, 2007."
 
The court rejected Berks’ motion, finding, among other things, that Berks had not demonstrated that the defendants' alleged misstatements and omissions were material. Berks therefore could not avail itself of a presumption of reliance, and, the court concluded, issues subject to individualized proof would predominate over common issues with respect to each of Berks' claims.
 
The case is Berks County v. First American Corp., 08 Civ. 5654 (LAK) (S.D.N.Y. Aug. 30, 2010). Attorneys involved include James J. Sabella, Stuart M. Grant, Michael J. Barry, and Peter B. Andrews, Grant & Eisenhofer; and Robert F. Serio, Aric H. Wu, and Gabriel Herrmann, Gibson, Dunn & Crutcher.