RESIDENTIAL MORTGAGE LOAN TRUST 2013-TT2 BY US BANK NATIONAL ASSOCIATION v. LLOYD et al
Filing
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DECISION AND ORDER ON DEFENDANT JOANE K. LLOYD'S MOTION TO DISMISS ON ABSTENTION GROUNDS AND REQUEST FOR JUDICIAL NOTICE re 39 Motion REQUEST FOR JUDICIAL NOTICE; denying 9 Motion to Dismiss By JUDGE D. BROCK HORNBY. (jib)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
RESIDENTIAL MORTGAGE LOAN
TRUST 2013-TT2, BY U.S. BANK
NATIONAL ASSOCIATION,
PLAINTIFF
V.
JOANE K. LLOYD,
ET AL.,
DEFENDANTS
GLENNIS J. LLOYD,
BIW FIVE COUNTY CREDIT UNION,
DJM, LLC,
SNOWFLAKE HOLDINGS F/K/A
DOWNEAST ENERGY,
PARTIES-IN-INTEREST
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CIVIL NO. 2:15-CV-466-DBH
DECISION AND ORDER ON DEFENDANT JOANE K. LLOYD’S
MOTION TO DISMISS ON ABSTENTION GROUNDS AND
REQUEST FOR JUDICIAL NOTICE
This case presents the question whether the abstention doctrine
announced in Burford v. Sun Oil Co., 319 U.S. 315, 331-33 (1943), applies to a
legislatively and judicially created program governing Maine’s residential
foreclosure process. After oral argument on April 20, 2016, I conclude that the
circumstances here do not overcome this court’s virtually unflagging obligation
to exercise jurisdiction where it exists, and I DENY the defendant’s motion to
dismiss based on Burford abstention.
PROCEDURAL HISTORY
The plaintiff Residential Mortgage Loan Trust 2013-TT2, by U.S. Bank of
America as legal title trustee (hereafter “Residential Mortgage”) brought a
complaint in this court alleging six counts against the defendant Joane K. Lloyd1
for foreclosure (Count I), breach of note (Count II), breach of contract (Count III),
quantum meruit (Count IV), unjust enrichment (Count V), and Writ of Assistance
pursuant to 28 U.S.C.A. § 1651 (2006 & Supp. 2015) (Count VI). In essence the
lawsuit seeks to collect on the Note and foreclose the mortgage on the defendant’s
house. The defendant Joane Lloyd responded by filing a motion to dismiss,
arguing that this federal court should abstain, under Burford v. Sun Oil Co.,
from exercising its jurisdiction because the Maine Foreclosure Diversion
Program, devised jointly by the legislative and judicial branches of Maine, has
created a pretrial mediation process involving a matter of “ongoing critical public
policy” with procedures impossible to replicate in the federal system. Def.’s Mot.
to Dismiss on Abstention Grounds at 11, 19 (ECF No. 9).
In February, I held a conference with counsel to discuss the proper
mechanism for creating the factual record upon which I could base my decision
on the motion to dismiss. Thereafter, the defendant submitted evidence in the
form of affidavits from various people involved in Maine’s Foreclosure Diversion
Program, see Affs. in Support of Def.’s Mot. to Dismiss (and attached exhibits)
(ECF No. 34-37), and requested that I take judicial notice, pursuant to Fed. R.
Civ. P. 201, of six “facts” related to the origin of the Foreclosure Diversion
Another defendant, Robert G. Wade, has been dismissed as a defendant, and default has
entered against the parties-in-interest.
1
2
Program and the interaction of the Maine Legislature and Judiciary to create a
comprehensive framework for foreclosure cases in Maine, see Def.’s Request for
Judicial Notice (ECF No. 38). The plaintiff opposed the defendant’s motion to
dismiss, arguing that Burford is inapplicable to this case because there is no
separate and distinct administrative body charged with reviewing foreclosures in
Maine (and thus no threat of federal interference with a state regulatory system)
and because this District’s local rule addressing alternative dispute resolution is
capable of replicating the mediation processes in the Foreclosure Diversion
Program. See Pl.’s Opp’n to Def.’s Mot. to Dismiss at 2, 7-8 (ECF No. 19); Pl.’s
Opp’n to Def.’s Mem. Regarding Evidence Offered in Support of Mot. to Dismiss
On Abstention Grounds & Reply to Request for Judicial Notice at 5-7 (ECF No.
46). I heard oral argument on the defendant’s motion on April 20, 2016.
BACKGROUND
After the housing crisis a few years ago, Maine’s Foreclosure Diversion
Program was established in response to the substantial increase of foreclosure
matters in state courts. See L.D. 1418, Emergency Preamble (124th Legis. 2009).
Title 14, section 6321-A of the Maine Revised Statutes, enacted as emergency
legislation in 2009, instructed the Supreme Judicial Court of Maine to adopt
rules to “establish a foreclosure mediation program to provide mediation in
actions for foreclosure of mortgages on owner-occupied residential property with
no more than 4 units that is the primary residence of the owner-occupant.” 14
M.R.S.A. § 6321-A(3) (Supp. 2015); see P.L. 2009, ch. 402, § 18 (emergency,
effective June 15, 2009). The statute directed that the foreclosure mediation
3
program “must address all issues of foreclosure, including but not limited to
reinstatement of the mortgage, modification of the loan and restructuring of the
mortgage debt.” 14 M.R.S.A. § 6321-A(3). Through section 6321-A, the Maine
Legislature aimed to create a simple, stream-lined process for unrepresented
Maine homeowners who wanted to participate in mediation: specifically requiring
that homeowners receive, with the summons and complaint for foreclosure
actions, a one page answer form that constituted a complete answer to the
foreclosure complaint, gave the homeowner the opportunity to assert all
affirmative defenses, and ensured participation in mediation. See id. § 6321A(2). The statute mandates the following:
-
The state court must assign mediators to the program who
“[a]re trained in mediation and relevant aspects of the law
related to real estate, mortgage procedures, foreclosure or
foreclosure prevention; [h]ave knowledge of community-based
resources that are available in the judicial districts in which
they serve; [h]ave knowledge of mortgage assistance
programs; [a]re trained in using the relevant Federal Deposit
Insurance Corporation forms and worksheets; [a]re
knowledgeable in principal loss mitigation and mortgage loan
servicing guidelines and regulations; and [a]re capable of
facilitating and likely to facilitate identification of and
compliance with principal loss mitigation and mortgage loan
servicing guidelines and regulations,” id. § 6321-A(7)(A);2
This description reflects the subsection as amended in 2014, after Maine’s Attorney General
conducted a comprehensive study of Maine’s foreclosure process and generated a report to
present to the Judiciary Committee for recommendations on how to create a more efficient and
effective Foreclosure Diversion Program. See Attorney Janet Mills Foreclosure Report, Joint
Standing
Committee
on
the
Judiciary
(Jan.
2014),
available
at
https://www1.maine.gov/ag/docs/2014.01.30%20AG%20Mills%20Foreclosure%20Report.pdf
(ECF No. 38 (attached as exhibits 1-3)). Based on the recommendations in that report, the
Legislature amended subsection seven to heighten the qualifications for mediators in the
program—specifying that they must be trained in real estate, mortgage, and foreclosure law, and
be knowledgeable in principal loss mitigation and mortgage loan servicing guidelines and
regulations. See P.L. 2013, ch. 521, § F-1.
2
4
-
The mediator, at any time during the process, can refer the
homeowner to a housing counselor or mortgage assistance
program, id. § 6321-A(8);
-
A final judgment in a foreclosure action may not issue until a
mediator’s report has been completed indicating whether the
mediation resulted in settlement or dismissal, whether the
parties reached any agreements during mediation, whether
either party failed to negotiate in good faith, and the time
frames established by the parties for all actions to be taken,
id. § 6321-A(9), (13);
-
Certain parties must appear at the mediation, id. § 6321A(11); and
-
“Each party and each party’s attorney . . . shall make a good
faith effort to mediate all issues. If any party or attorney fails
to attend or to make a good faith effort to mediate, the court
may impose appropriate sanctions,” id. § 6321-A(12).
In response to the Legislature’s directive, the Supreme Judicial Court of
Maine adopted Rule 93 of the Maine Rules of Civil Procedure in 2010, which
created the Foreclosure Diversion Program. See M.R. Civ. P. 93. The Program,
managed by an employee of the Maine Judicial Branch, is a comprehensive
mediation process for foreclosures in Maine. See id. 93(b)(2). In addition to the
requirements of section 6321-A, Rule 93 authorizes the implementation of
“informational sessions” for homeowners faced with foreclosure to ensure that
homeowners have the necessary information regarding foreclosure proceedings
and the diversion program, M.R. Civ. P. 93(c)(2); prohibits a mortgagee from filing
any dispositive motions or requests for admissions prior to the completion of
mediation “or until the court orders that mediation shall not occur,” id. 93(d)(1);
requires the presence at mediation of “the plaintiff, or a representative of the
plaintiff, who has the authority to agree to a proposed settlement, loan
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modification, or dismissal of the action,” id. 93(h)(1)(D); authorizes the mediator
to conduct multiple sessions at court locations throughout the state to effectively
guide the parties through the diversion program, id. 93(i), (l); and allows the
court, if it finds that a party “fail[ed] to attend or to make a good faith effort to
mediate,” to order sanctions including, but not limited to, “tolling of interest and
other charges pending completion of mediation, assessment of costs and fees,”
awarding attorney fees, entry of judgment, dismissal without prejudice, and/or
dismissal with prejudice, id. 93(j). Mediation through the Foreclosure Diversion
Program is mandatory for those who fall under the ambit of section 6321-A, and
only the homeowner/mortgagor, upon a finding by the court that there is good
cause and that the homeowner/mortgagor is making a “free choice,” may waive
mediation under the Rule. M.R. Civ. P. 93(m); see 14 M.R.S.A. § 6321-A(2).
JURISDICTION
This case does not involve any federal cause of action or question of federal
law.3 This court has subject-matter jurisdiction based purely on diversity of
citizenship, and the amount in controversy exceeds the jurisdictional amount.
28 U.S.C.A. § 1332 (2009 & Supp. 2015).
Count VI—Writ of Assistance—purports to be based on a federal statute, 28 U.S.C.A. § 1651.
Section 1651 provides: “[A]ll courts established by Act of Congress may issue all writs necessary
or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles
of law.” Count VI states that the plaintiff “seeks the issuance of a Writ of Assistance, to enforce
the foregoing money judgment, and authorizing the United States Marshal Service . . . to take
any and all necessary steps to execute the foregoing judgment . . . .” Compl. ¶ 74 (ECF No. 1).
But at oral argument, the plaintiff’s lawyer conceded that there is no “foregoing money judgment”
as yet, and that this claim is premature. I therefore treat Count VI as withdrawn. If it were not
withdrawn, I would dismiss it.
3
6
ANALYSIS
I begin by addressing the defendant’s request to accept as evidence the
affidavits submitted in support of her motion to dismiss and her request for
judicial notice. At oral argument, the plaintiff admitted that the information in
the documents was accurate. But the plaintiff maintains that, even if that
information is correct, Burford abstention is not warranted.
Because the
accuracy of this information is not contested, I accept the facts as submitted. I
note, however, that these facts are not susceptible to judicial notice under Fed.
R. Civ. P. 201 because they are not adjudicative facts and therefore do not fall
within the scope of that rule. See Fed. R. Civ. P. 201 advisory committee’s note
to 1972 (detailing that the rule applies only to adjudicative facts, which “are
simply the facts of the particular case,” and not legislative facts, which “are those
which have relevance to legal reasoning and the law-making process, whether in
the formulation of a legal principle or ruling by a judge or court or in the
enactment of a legislative body”); Chico Service Station, Inc. v. Sol P.R. Ltd., 633
F.3d 20, 23 n.1 (1st Cir. 2011) (drawing the facts of a Burford abstention case
on appeal “from the district court’s opinion as well as various documents
submitted below in support of the defendant’s motion to dismiss”); see also Getty
Petroleum Mktg., Inc. v. Capital Terminal Co., 391 F.3d 312, 321-23 & n.12 (1st
Cir. 2004) (Lipez, J., concurring) (discussing the “doctrine of judicial notice”
generally and its application to adjudicative versus legislative facts).
The difficult question is the applicability of the abstention doctrine
announced in Burford v. Sun Oil Co. In Burford, Sun Oil Company attacked the
7
validity of an order of the Texas Railroad Commission granting Burford a permit
to drill wells in an East Texas oil field. 319 U.S. at 316-17. The Supreme Court
ordered the “federal equity court to stay its hand” because the Texas legislature
had provided
a unified method for the formulation of policy and
determination of cases by the Commission and by the state
courts. The judicial review of the Commission’s decision . . .
is expeditious and adequate. Conflicts in the interpretation
of state law, dangerous to the success of state policies, are
almost certain to result from the intervention of the lower
federal courts.
Id. at 333-34. That approach has become known as Burford abstention. Over
the years, the Supreme Court has polished the holding of Burford into the
following test:
Where timely and adequate state-court review is available, a
federal court sitting in equity must decline to interfere with
the proceedings or orders of state administrative agencies:
(1) when there are ‘difficult questions of state law bearing on
policy problems of substantial public import whose
importance transcends the result in the case then at bar’; or
(2) where the ‘exercise of federal review of the question in a
case and in similar cases would be disruptive of state efforts
to establish a coherent policy with respect to a matter of
substantial public concern.’
New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491 U.S. 350, 361 (1989)
(“NOPSI”) (quoting Colo. River Water Conservation Dist. v. United States, 424
U.S. 800, 814 (1976)).
The First Circuit has faithfully adhered to the Supreme Court’s direction
regarding
the
circumstances
where
Burford
abstention
is
appropriate,
recognizing that “[a]s the common refrain goes, ‘federal courts have a virtually
unflagging obligation . . . to exercise the jurisdiction given them.’” Chico Serv.
Station, Inc., 633 F.3d at 29 (quoting Ankenbrandt v. Richards, 504 U.S. 689,
8
705 (1992) (internal quotation marks omitted)). The First Circuit has repeatedly
stated that abstaining under Burford is only for “exceptional circumstances.” Id.
“As a general proposition, these ‘exceptional circumstances’ lie ‘where denying a
federal forum would clearly serve an important countervailing interest,’ such as
‘regard for federal-state relations’ or ‘wise judicial administration.’” Id. (quoting
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996) (internal quotation
marks omitted)).
As the defendant acknowledged at oral argument, the Supreme Court and
First Circuit have held that these “exceptional circumstances” exist when the
matter before the federal court involves a state administrative scheme or the
review of substantive orders from state administrative agencies:
4
“‘The
fundamental concern in Burford is to prevent federal courts from bypassing a
state administrative scheme and resolving issues of state law and policy that are
committed in the first instance to expert administrative resolution.’” Sevigny v.
Emp’rs Ins. of Wausau, 411 F.3d 24, 27 (1st Cir. 2005) (quoting Pub. Serv. Co.
of N.H. v. Patch, 167 F.3d 15, 24 (1st Cir. 1998)); see Fragoso v. Lopez, 991 F.2d
878, 883 (1st Cir. 1993) (holding that Burford and its progeny “shield[ ] state
administrative agencies from federal court interference” (internal quotation
The only exception that I have found to this general proposition—where Burford has been
applied even without a state administrative scheme at issue or the review of an order from an
administrative body—is in cases involving “sensitive legal questions about the duties and
privileges of parties to a then existing marriage.” Dunn v. Cometa, 238 F.3d 38, 42 (1st Cir.
2001); see Ankenbrandt v. Richards, 504 U.S. 689, 706 (1992) (“[T]he abstention principles
developed in [Burford] might be relevant . . . if a federal suit were filed prior to effectuation of a
divorce, alimony, or child custody decree, and the suit depended on a determination of the status
of the parties.”). Federal recognition of the states’ autonomy regarding regulating and overseeing
domestic relationships, however, is unparalleled. To use this narrow exception to justify applying
Burford to the present case would paint with too broad a brush.
4
9
marks omitted)).
But there is no state administrative scheme at issue here
(Maine could have created one, in lieu of the scheme it did create through the
legislative and judicial branches, but it did not), and I am not being asked to
review an order from a state adjudicative body, administrative or judicial.
“While Burford’s principle of deference to state administrative bodies could
be interpreted expansively, requiring that federal courts abstain from hearing
any case involving important state regulatory policies, [the First Circuit has]
declined to give it so broad a reading.” Chico Serv. Station, Inc., 633 F.3d at
29-30 (internal quotation marks and citation omitted). The First Circuit has
“cautioned that the Burford doctrine does not require abstention merely because
the federal action may impair operation of a state administrative scheme or
overturn state policy.” Id. at 30; see Fragoso, 991 F.2d at 882 (noting that, under
the formulation in NOPSI, Burford abstention is limited to “narrowly
circumscribed situations where deference to a state’s administrative processes
for the determination of complex, policy-laden, state-law issues would serve a
significant local interest and would render federal-court review inappropriate”);
see also Sevigny, 411 F.3d at 29 (“[D]ifficult state law questions alone are not
enough for Burford abstention.”). Rather, “[i]n light of the strong presumption
in favor of the exercise of jurisdiction . . . Burford abstention must only apply in
unusual circumstances, when federal review risks having the district court
become the regulatory decision-making center.” Chico Serv. Station, Inc., 633
F.3d at 30 (emphasis added) (internal quotation marks omitted). There is no
such risk here.
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I would be delighted to leave Maine home foreclosures to the state courts,
and I am sympathetic to the defendant’s judicial and public policy argument—it
is clear that the mediators in Maine’s Foreclosure Diversion Program have been
trained and have developed specialized knowledge in this area of law. Absent
explicit waiver by the defendant homeowner, mediation is required, M.R. Civ. P.
93(c), (m), and Maine’s trial courts have accumulated a body of case law,
developing rapidly, to determine when financial institutions are mediating in
good faith, as required by Maine Rule of Civil Procedure 93(j), and if not, have
ordered appropriate sanctions. See U.S. Bank v. Sawyer, 2014 ME 81, ¶¶ 14-17,
95 A.3d 608, 611-12 (and cases cited therein); Bank of N.Y. Mellon v. Chase, No.
RE-13-03, 2016 Me. Super. Ct. (Feb. 22, 2016) (recent trial court order for
sanctions when a financial institution failed to mediate in good faith over a period
including eight mediation sessions and two notices of noncompliance with the
Foreclosure Diversion Program).
None of that is available in federal court.
Moreover, I do not accept the plaintiff’s contention that the District of Maine’s
local rules are adequate to replicate the state mediation program (I have no
authority to order the parties to mediate in a similar fashion with a mediator of
my choosing who would have such specialized knowledge, see Local Rule 83.11).
Nevertheless, at the end of the day, Maine has chosen to have a foreclosure
system that uses court lawsuits, not administrative proceedings, and when the
parties to a lawsuit are diverse in their citizenship, the Constitution and
Congress have chosen to give federal courts jurisdiction (if the jurisdictional
amount in controversy is satisfied). U.S. CONST. art. III, § 2; 28 U.S.C.A. § 1332.
11
The Maine statutes and the Law Court’s decisions establish the substance of
state law, and this federal court can and will apply it. Over the last few years,
the Maine Law Court has provided substantial guidance in resolving issues
involving mortgages and foreclosures, and this court will steadfastly apply the
substantive law the Maine Law Court and the Maine Legislature have mandated,
as required by Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). I recognize
that the state justices of Maine may well be more competent at mediating and
settling these cases and that the Foreclosure Diversion Program is undoubtedly
far more sophisticated than any that this federal court can offer, but that
difference does not justify denying an out-of-state plaintiff its right to a federal
forum.
I also recognize that the First Circuit has questioned whether a
“comprehensive framework” established by a state to handle a certain area of
law, in and of itself, “creates a state administrative agency, as opposed to a
judicial structure, to which deference under Burford may be paid,” Fragoso, 991
F.2d at 883, or whether certain state “schemes” could be “analogized to an
agency” for purposes of applying the Burford doctrine, Sevigny, 411 F.3d at 28.
Justice Kennedy, in a Supreme Court concurring opinion, stated that “[t]he fact
that a state court rather than an agency was chosen to implement [a state’s]
scheme provided more reason, not less, for the federal court to stay its hand.”
Quackenbush, 517 U.S. at 733 (Kennedy, J., concurring) (emphasis added).
Perhaps the First Circuit will conclude that Maine’s Foreclosure Diversion
Program is the kind of state “scheme” with which the federal courts should not
12
interfere out of principles of comity. See id. at 725-26; see also Fed. Home Mortg.
Loan Corp. v. Briggs, 556 F. App’x 557, 558 (8th Cir. 2014) (holding that the
district court did not abuse its discretion in abstaining under Burford because
Minnesota’s “eviction statutes provide a comprehensive and detailed framework
for the efficient processing by the Minnesota courts of large numbers of eviction
actions”); Fed. Home Loan Mortg. Corp. v. Litano, No. 15-CV-10019-MAP, 2015
WL 3632334, at *2 (D. Mass. June 1, 2015) (“State courts undeniably have far
more experience than federal courts with the procedural and substantive niceties
of eviction practice.
For this reason, absent the strong statutory-based
argument, the court might well conclude that abstention would be appropriate
here under Burford.”); Ocwen Loan Servicing, LLC v. Mickna, No. 5:14-CV05330, 2015 WL 685264, at *6 (W.D. Ark. Feb. 17, 2015) (in light of the fact that
“Arkansas law governing foreclosure and eviction actions is highly developed,
governs here, and the State court has expertise in this area, the Court holds that
even if federal subject-matter jurisdiction were proper, it would abstain.”).5 But
See generally Gordon G. Young, Federal Court Abstention and State Administrative Law From
Burford to Ankenbrandt: Fifty Years of Judicial Federalism under Burford v. Sun Oil Co., and
Kindred Doctrines, 42 DEPAUL L. REV. 859 (1993). Among other observations, Professor Young
noted: “Most courts have continued to apply Burford to cases in which scrutiny of state
administrative agency action is sought, often suggesting that Burford has no application beyond
such a context.” Id. at 901. Regarding the Supreme Court’s decision in NOPSI, Professor Young
said that the Court “seemed to change the basic scope of Burford abstention. Describing that
doctrine as designed to avoid ‘interference with the proceedings or orders of state administrative
agencies,’ the Court appeared to limit its use to cases involving such entities.” Id. at 910-11.
(quoting NOPSI, 491 U.S. at 361). But Professor Young was critical of that limitation. Id. at 913.
He also noted:
Most opinions discussing the doctrine acknowledge the Supreme Court’s clearly
stated policy that such abstention is to occur only in extraordinary circumstances.
Despite this, some courts of appeals have affirmed federal district court decisions
to abstain in cases not involving state administrative agencies, based upon the
presence of complex and unclear state law.
Id. at 900 (footnote omitted).
5
13
neither the Supreme Court not the First Circuit has yet reached such a
conclusion.
It is my constitutional duty as a United States District Court Judge to
exercise jurisdiction unless the Supreme Court and the First Circuit have
interpreted the law to allow me to abstain. There is no state administrative
scheme at issue here, and the defendant is not asking me to review any
substantive order from any adjudicative body. The issues presented in this case
“are not so intertwined with issues of agency authority or state regulatory policy
that their federal-court resolution would imperil a complex regulatory scheme.”
Sevigny, 411 F.3d at 29. Given the First Circuit’s recent examination of the
Burford abstention doctrine in Chico Service Station, Inc. v. Sol Puerto Rico Ltd.
and the cases cited therein, I conclude that under the governing precedents this
case does not present the exceptional circumstances where Burford abstention
is appropriate.
CONCLUSION
I DENY the defendant’s motion to dismiss based on Burford abstention.
SO ORDERED.
DATED THIS 29TH DAY OF APRIL, 2016
/S/D. BROCK HORNBY
D. BROCK HORNBY
UNITED STATES DISTRICT JUDGE
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