Here at Howard Law, P.C., our Moreno Valley foreclosure defense lawyers have written recently about lawsuits by city governments seeking to hold foreclosing entities responsible for the devastating effects of foreclosures. This includes a lawsuit by the city of Los Angeles against Deutsche Bank, alleging that it made loans destined to fail and left the city to deal with blight caused by foreclosure. That suit shortly followed another from the city of Cleveland, which made similar allegations against mortgage lenders; Baltimore and Memphis have also sued lenders for causing blight with the practice of "reverse redlining." The Cleveland lawsuit was dismissed early, but not before lenders brought their own suit seeking a court order stating that the city's claim was preempted. The lenders' suit was on appeal in the Sixth U.S. Circuit Court of Appeals's decision in Chase Bank et al. v. City of Cleveland.
Cleveland's original suits (one in federal court and one in state court) alleged that major lenders contributed to the city's financial woes by securitizing subprime mortgages, foreclosing and failing to care for the properties, causing crime, blight and falling property values. The action seeking a court order was dismissed by the Ohio district court, which found that it lacked the authority to issue a court order, although it did have authority to issue an injunction, and ultimately dismissed without prejudice for failure to show irreparable harm. Chase appealed, arguing that there was jurisdiction; Cleveland cross-appealed, arguing that even if there was jurisdiction, the trial court had discretion and enjoining the suit would violate the federal Anti-Injunction Act. While the appeal was pending, appeals in Cleveland's first lawsuit were exhausted, leading to dismissal of several appellants.
The Sixth Circuit started by analyzing the jurisdictional issues at length. Federal courts have jurisdiction over suits seeking to defend state-law actions with federal preemption arguments. After dismissing several of Cleveland's attempts to distinguish its original lawsuit from past caselaw on federal preemption of state regulations, the Sixth ultimately decided there was federal subject-matter jurisdiction, because Chase had raised a federal question in its request for a court order with its preemption argument. Next, the appeals court reversed the district court's denial of an injunction. No party had raised this issue, the Sixth said, and thus it was not briefed. And because Cleveland's first lawsuit was ongoing when the case was filed, Chase did face alleged harm from "regulation." Finally, the appeals court declined to reach Cleveland's Anti-Injunction or discretion arguments because they were not brought up at trial, but suggested addressing them on remand.
This case means the federal district court will reconsider whether Chase and the other banks are entitled to a court order stopping Cleveland's lawsuits. However, the appeals court stopped short of ruling on the merits of the banks' claim, which gives Vincent Howard and our Costa Mesa foreclosure defense attorneys optimism about the chances of the similar lawsuits. Here in southern California, we've seen the harmful effects of foreclosures firsthand: families put out of their homes with ruined credit; and homes left unattended, leading to plummeting home values, eyesores and sometimes crime. To make matters worse, many foreclosures can be prevented if lenders and loan services are willing to consider each individual case, rather than simply throw another mortgage into their "foreclosure machines." If you're in this situation, you should call Vincent Howard and our San Bernardino County foreclosure defense lawyers to discuss your rights and your options.
Led by experienced bankruptcy attorney Vincent Howard, Howard Law represents clients across California who are facing preventable or unjust foreclosures. To learn more about your rights and your options, call us today at 1-800-872-5925 or send us a message online.