On June 25, 2024, the U.S. District Court for the Northern District of California denied motions by Umpqua Bank to decertify a class of alleged Ponzi scheme victims and for summary judgment on the class’s entitlement to prejudgment interest. In 2020, after the discovery of an alleged scheme in which the principals of Professional Financial Investors were allegedly using new investor money to pay existing investors, a group of defrauded investors sued Umpqua Bank for allegedly aiding and abetting the scheme. As reported in our January 2023 edition, the court certified a class of individual investors and found that the case should proceed to trial. Umpqua attempted to decertify the class on the grounds that California law “cannot be applied to the claims of at least some of the plaintiff class members who currently reside in other states or in foreign countries, and that therefore partial decertification is warranted.”

The court denied Umpqua’s class motion, emphasizing the focus of the scheme’s activities on the state of California. The real estate investment fund involved properties throughout California and employed California residents. The court held that the plaintiffs did not need to spell out the connection of the case to California, given that “the connection of California to all of the class members’ claims was self-evident.” The Court further held that, in class action suits, the defendants generally have the initial burden of showing that material differences in foreign law preclude application of forum law to the entire class. The plaintiffs have only the burden to show it would be constitutional to apply California law.

Through a motion for partial summary judgment, Umpqua also sought to preclude the investor plaintiffs from recovering prejudgment interest. The bank argued that, in connection with their claims against Professional Financial Investors in its bankruptcy case, the investors gave up their right to recover prejudgment interest and that Umpqua’s derivative liability cannot exceed the liability of the debtor itself. The court disagreed and reasoned that collateral estoppel and judicial estoppel did not preclude the investors’ entitlements prejudgment interest because plaintiffs could have recovered interest in the bankruptcy had the estate been large enough.

The case is Camenisch v. Umpqua Bank, No. 20-cv-5905 (N.D. Cal. June 25, 2024). The plaintiffs are represented by Gibbs Law Group LLP, Silver Law Group, and also the Law Office of Geoffrey A. Munroe. Umpqua Bank is represented by Reed Smith LLP and Stoll Berne. The opinion is available here.