Andrews v. Chevy Chase Bank, Fsb
| Citation | 474 F.Supp.2d 1006 |
| Decision Date | 14 February 2007 |
| Docket Number | No. 05C0454.,05C0454. |
| Parties | Susan and Bryan ANDREWS, Plaintiffs, v. CHEVY CHASE BANK, FSB, Defendant. |
| Court | U.S. District Court — Eastern District of Wisconsin |
Kevin J. Demet, Donal M. Demet, Demet & Demet SC, Milwaukee, WI, for Plaintiffs.
David J. Cynamon, Osman A. Handoo, Pillsbury Winthrop Shaw Pittman LLP, Washington, DC, Michael J. Aprahamian Foley & Lardner LLP, Milwaukee, WI, for Defendant.
On January 16, 2007, I concluded that defendant violated the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., in several respects. I also concluded that a number of the violations were material as defined in § 1638(f) and 12 C.F.R. § 226.23 and, as a result, extended by three years the time that borrowers aggrieved by such violations had to exercise their right of rescission pursuant to § 1635. Pursuant to Fed.R.Civ.P. 23(b)(2), I certified a class of such borrowers, leaving the decision as to whether to actually seek rescission to each individual class member. Defendant appealed my decision certifying a class, and pursuant to Fed.R.Civ.P. 23(f), the court of appeals permitted the appeal. Subsequently, also pursuant to Rule 23(f), defendant asked me to stay proceedings in this court pending appeal. On February 3, 2007, I granted the stay, and in the present memorandum I explain my reasons for doing so.
In determining whether to grant defendant's request for a stay, I applied the balancing test applicable to injunctions and other stays pending appeal. See In re Lorazepam & Clorazepate Antitrust Litig., 208 F.R.D. 1, 3 (D.D.C.2002). The balancing test requires consideration of:
(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.
In re Application of Procter & Gamble Co., 334 F.Supp.2d 1112, 1117 (E.D.Wis. 2004) (quoting Hilton v. Braunskill, 481 U.S. 770, 776, 107 S.Ct. 2113, 95 L.Ed.2d 724 (1987)).
I first discuss the likelihood that defendant will succeed on appeal. Defendant argued that it is likely to succeed on appeal because (1) TILA bars certification of a class of borrowers who have the right to seek rescission, and (2) even if TILA does not bar certification of such a class, I defined the class too broadly. Notwithstanding McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir.2007), I found defendant's first argument unpersuasive. With all due respect to the First Circuit, nothing in the text of TILA supports the proposition that TILA bars courts from certifying classes whose members may seek rescission. Moreover, in concluding that TILA bars certification of such classes, the McKenna court used legislative intent and legislative history in a way that the Seventh Circuit has condemned.
Congress enacted TILA in 1968. Initially fearful that sizeable damage awards could harm the credit industry, some district courts found that TILA did not permit class actions, and others found various reasons for denying class certification. See, e.g., Ratner v. Chem. Bank, N.Y. Trust Co., 329 F.Supp. 270, 274 (S.D.N.Y. 1971). However, in Wilcox v. Commerce Bank of Kansas City, 474 F.2d 336, 344 (10th Cir.1973), the Tenth Circuit rejected the notion that TILA prohibited class actions, concluding that "there is nothing in the Act itself, the Rule [Rule 23] or the notes of the Advisory Committee on Rules of Civil Procedure with respect to it which expressly or impliedly precludes class actions of this type of case." Id. Noting the relative absence of recorded legislative intent, the court concluded that "[t]o find any congressional intent to preclude at all events treatment of such cases under Rule 23 would be a work of clairvoyance and not of construction or interpretation." Id. Thus, the court concluded that under TILA district courts should certify classes if the requirements of Rule 23 were satisfied.
The Seventh Circuit reached the same conclusion. In Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161, 1163 (7th Cir.1974), the court stated that The Haynes court based its decision on three factors: (1) that plaintiffs had long used class actions extensively in antitrust and securities litigation without special legislative authorization, and although cognizant of such activity, Congress in enacting TILA said nothing suggesting that it intended a different result under TILA; (2) that TILA had a dual purpose of providing incentives to private litigants and inducing creditor compliance, thus "creditors disregarding their responsibilities under the Act and causing damages to members of a class however limited or extensive should have no assurance that their accumulated responsibility cannot be enforced through this means"; and (3) that although it was important not to harm the credit industry, "it is at least equally important to prevent violators of the Act from limiting recovery to a few individuals where actual, widespread noncompliance is found to exist." Id. at 1163-64.
In 1974, Congress amended TILA, limiting the potential liability of' lenders by capping statutory damages in class actions. However, Congress did not bar TILA class actions either in damage cases or where the violation gives rise to a right of rescission. Subsequently, the Seventh Circuit reiterated its position that TILA does not bar class actions and that in determining whether to certify classes in TILA cases, district courts should only consider whether the requirements of Rule 23 are met. Goldman v. First Nat'l Bank of Chi., 532 F.2d 10, 14-15 (7th Cir.1976). Other circuits agree. See, e.g., Johnson v. West Suburban Bank, 225 F.3d 366, 371 (3d Cir.2000) ). Nevertheless, from the fact that the 1974 amendment imposed a cap on statutory damages in class actions seeking damages (but made no mention of class actions involving the right of rescission), the McKenna court inferred that Congress intended to bar class actions in TILA cases where rescission is the only available remedy. However, nothing in the text of the amendment justifies this inference. It is just as likely that Congress remained silent about class actions involving the right of rescission because it did not regard such actions as posing the same economic threat to the credit industry as class actions involving damages or because it never considered the issue.
Congress also amended TILA in 1995 in response to Rodash v. AIB Mortgage Co., 16 F.3d 1142 (11th Cir.1994), in which the Eleventh Circuit authorized a borrower to rescind based on a minor TILA violation. Specifically, Congress initially enacted a six month moratorium on class actions involving minor TILA violations and subsequently limited the grounds on which a borrower could rescind as well as making several other changes in the law. Again, however, Congress did not bar class actions involving the right of rescission. Nevertheless, the McKenna court relied on the 1995 amendment to bolster its conclusion that Congress intended to preclude TILA class actions involving the right to rescind. However, like the 1974 amendment, the 1995 amendment does not bear the weight the McKenna court placed on it.
The McKenna court inferred a congressional intent to bar district courts from certifying classes whose members may seek rescission based on what "it gleaned from the legislative history" of the 1974 and 1995 amendments. McKenna, 475 F.3d 418, 424-25. However, in seeking to ascertain legislative intent, the court misunderstood that "the search is not for the contents of the authors' heads," Matter of Sinclair, 870 F.2d 1340, 1342 (7th Cir. 1989), but for "what Congress meant by what it said." Id. at 1343 (emphasis added). Where the language of a statute is plain and does not lead to an absurd result, the language itself "is the sole evidence of the ultimate legislative intent." Id. at 1344 (quoting Caminetti v. United States, 242 U.S. 470, 490, 37 S.Ct. 192, 61 L.Ed. 442 (1917)). The language of TILA is plain. It does not bar courts from certifying classes whose members have a right to rescind. Nor is the absence of such a bar absurd. In sum, the McKenna court should have asked "what the statute means" rather than "what the legislature meant." Id. at 1343 .
The McKenna court also used legislative history improperly. Legislative history may illuminate the meaning of a text, but it cannot be used to create a rule not found in the text. See id. at 1344 (). Both the 1974 and 1995 amendments to TILA demonstrate that Congress chose to accomplish the goal of limiting lender liability by means other than prohibiting courts from certifying classes whose members may seek rescission. As the Seventh Circuit recently indicated, the fact that a statute subjects a party to severe liability does not give courts a license not to enforce it. See Murray v. GMAC Mortgage Corp., 434 F.3d 948, 953-54 (7th Cir.2006) (...
To continue reading
Request your trial
-
Andrews v. Chevy Chase Bank
...its class-certification order should stand, despite the reversal of the district court's decision in McKenna. Andrews v. Chevy Chase Bank, FSB, 474 F.Supp.2d 1006 (E.D.Wis.2007). Also, recognizing that it had failed to consider TILA provisions that prohibit certain debtors from rescinding, ......