Settlement hurt private lawsuits, lawyer says

First published Sept. 26, 2004:

Although state regulators doubted that private lawsuits against Household International could succeed, many of the company's Whatcom County mortgage borrowers did wind up with a better deal through litigation pressed by Wenatchee lawyer Robert Parlette.

Newly released records from the office of Washington Attorney General Christine Gregoire show that in the first few months of 2002, the attorney general's consumer protection attorneys had a friendly relationship with Parlette. Parlette shared information with state attorneys to aid in their investigation, even as he pursued a class-action consumer protection case in U.S. District Court aimed at requiring the company to compensate all its mortgage customers in the state.

But that relationship broke down, according to the records, after state officials became convinced that they ought to work out a settlement with Household. E-mails from Paul Silver, then head of the consumer protection division, indicate that Silver believed Parlette stood little chance against the company's legal team. In his e-mails, Silver said he thought Parlette would have a tough time convincing a federal judge to declare his case a statewide class action

In one e-mail, Silver asked Parlette to move more slowly on the private lawsuit, because if he moved too quickly and Household won rounds in court, the company would be harder to deal with.

"The more they prevail on motions and issues, the more confidence they'll have that they can keep winning," Silver wrote.

In e-mails to Silver, Parlette said his own settlement offers to Household, seeking better terms on his clients' loans, had been rebuffed. Also in his e-mails, Parlette pleaded with Silver to file a legal brief supporting his effort to get a federal court order blocking Household from foreclosing on mortgage borrowers in Washington until the private lawsuit was decided.

"I think letting (Household) divide us was a bad mistake," Parlette wrote to Silver.

Silver replied that he preferred to concentrate on settlement talks rather than courtroom battles.

On June 26, 2003, after a federal judge denied Parlette's attempt to have his lawsuit declared a statewide class action, Parlette fired an angry e-mail to Assistant Attorney General David Huey.

"I feel so badly for those who have lost, or will lose, their homes and I know if the AG's office had joined in the attempts to get a stay of foreclosures it would have worked," Parlette wrote. "Anyway it is all done now and it leaves me with a pit in my stomach to think (Household) got away with it."

Parlette wrote that he believed the state settlement had undermined his case.

Despite the rebuff at the federal level, Parlette continued to press his clients' claims in Whatcom County Superior Court. In November 2003, Household agreed to a separate settlement with Whatcom County customers, even though some of them had accepted a share of the state settlement.

In a press release, a Household spokesman said the company was agreeing to a special deal with customers from the Bellingham office because employees there had used "markedly different" sales practices in getting homeowners to agree to loans.

Under the local deal, first mortgages that often had interest rates above 12 percent were lowered to 7.5 percent, and the company agreed to pay refunds of loan points above 4 percent. At the time, Parlette said the average benefit to local borrowers would amount to about $63,000.

But the local settlement was not made public until thousands of other Household borrowers in Washington and elsewhere had agreed to take a share of the state settlement and signed away the right to pursue further claims.

Under the terms of the local settlement, plaintiffs and attorney Parlette agreed not to make additional public statements, and Parlette and plaintiff Jeanie Luna declined to be interviewed for this article.