May 18, 2021

Peruemb

The World's Local Health

Procedural Posture

2 min read
Procedural Posture

Plaintiff borrower filed a complaint in a California state court. The complaint alleged the defendant lender imposed an illegal prepayment penalty provision. The lender filed a notice of renewal shortly thereafter, and a corrected notice of removal two weeks later. The borrower filed a motion to remand and request for attorney’s fees.

Overview

The complaint alleged a violation of the California Consumer Legal Remedies Act, Cal. Civ. Code § 1770 et seq., averring that the lender’s mortgage documents contained prepayment penalty assessment provisions which required payment in excess of the amounts allowed by California law. The complaint also alleged unfair business practices. The lender argued federal jurisdiction was proper because the borrower’s claims were completely preempted by the Alternative Mortgage Transactions Parity Act of 1982, 12 U.S.C.S. § 3801 et seq., and applicable regulations. The borrower, on the other hand, argued the lender’s arguments went to a defense on the merits but failed to support removal jurisdiction. The court agreed with the borrower. It found the Parity Act did not control every alternative mortgage issued by every creditor in every situation. Accordingly, it could not be said that the Parity Act completely preempted California law for jurisdictional purposes. The lender did not, and presumably could not, provide any authority in support of its argument that the Parity Act completely preempted California law so as to justify removal. Attorney’s fees were awarded to the borrower. Parties’ litigation attorneys San Diego appeal.

Outcome

The case was remanded to the California trial court and the borrower’s request for attorney’s fees were granted.

Overview

Because nothing in the regulation, the official commentary, or the agency background materials indicated that 12 C.F.R. § 226.19(b) applied to fixed-rate mortgages, the disclosure requirements under 12 C.F.R. § 226.19(b) did not apply to plaintiff’s mortgage, and plaintiff could not state a claim for violations of that regulation.

Outcome

Motion granted.