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Higgins v. Bac Home Loans Servicing, Lp

United States District Court, E.D. Kentucky, Centeral Division

July 3, 2014

LARRY HIGGINS, et al., Plaintiffs,
v.
BAC HOME LOANS SERVICING, LP, et al., Defendants.

OPINION AND ORDER

KAREN K. CALDWELL, District Judge.

This matter is before the Court on two motions for interlocutory appeal, the first of which was filed by all of the named defendants in this action (DE 80) and the second of which was filed by defendants Federal National Mortgage Association (Fannie Mae) and Federal Housing Finance Agency (FHFA) (DE 83).

I. Background

There are two opinions at issue, both of which involve Kentucky statutes requiring that mortgage assignments be filed with the county clerk.

The first statute provides that "[w]hen a mortgage is assigned to another person, the assignee shall file the assignment for recording with the county clerk within thirty (30) days of the assignment...." KRS 382.360(3). The second statute reiterates the recording requirement of the first providing that "[a]n assignee of a lien on real property shall record the assignment in the county clerk's office as required by KRS 382.360." KRS 382.365(2). A third statute provides a private right of action for any property owner against a mortgage assignee who fails to record a mortgage assignment. KRS 382.365(3). The statute further provides for an award of damages against the delinquent assignee stating "[d]amages under this subsection for failure to record an assignment pursuant to KRS 382.360(3) shall not exceed three (3) times the actual damages, plus attorney's fees and court costs, but in no event less than five hundred ($500)." KRS 382.365(5).

The first opinion at issue is docketed at docket number 75 and denied a motion to dismiss filed by all the named defendants. The defendants argue that the opinion is appropriate for interlocutory appeal because it concludes that the Kentucky recording statutes require the "creation" of a written mortgage assignment when the underlying note is assigned. (DE 80-1, Mem. at 1.) The Court did not reach this conclusion and, thus, declines to analyze it to determine if the opinion is appropriate for interlocutory appeal.

The Court did, however, conclude that the Kentucky recording statutes require that all mortgage assignments be recorded, including those that occur by operation of law when the underlying note is assigned. The Court will analyze this finding to determine if the opinion is appropriate for interlocutory appeal.

The defendants also argue that the opinion is appropriate for interlocutory appeal because it concludes that the statutes provide a private right of action for any property owner against a mortgage assignee who fails to record the mortgage assignment. The Court did reach this conclusion and, thus, will also analyze it to determine if the opinion is appropriate for interlocutory appeal.

The second opinion at issue is docketed at docket number 74. It denied a motion to dismiss filed by only defendants Fannie Mae and FHFA. These defendants argue that the opinion is appropriate for immediate appeal because it concludes that the minimum damages set forth in the Kentucky recording statutes for failure to record a mortgage assignment could be assessed against them. They argued in their motion to dismiss that these damages constitute a "penalty" and, thus, could not be assed against them pursuant to a federal statute, 12 U.S.C. § 4617(j)(4). That statute provides that "[t]he Agency shall not be liable for any amounts in the nature of penalties or fines, including those arising from the failure of any person to pay... recording or filing fees when due." The Court determined that, in referring to the "Agency, " the statute refers to both to Fannie Mae and FHFA but determined that the minimum damages provided for in the Kentucky recording statutes did not constitute a "penalty" for purposes of the federal statute.

II. Analysis

Title 28 U.S.C. § 1291 provides for appeal only from "final decisions of the district courts of the United States." Pursuant to 28 U.S.C. § 1292(b), however, a district court may certify an order for interlocutory appeal if the following conditions are met: "(1) a controlling legal question is involved; (2) there is substantial ground for difference of opinion regarding it; and (3) an immediate appeal would materially advance the litigation's ultimate termination." In re Baker & Getty Financial Services, Inc., 954 F.2d 1169, 1172 (6th Cir. 1992) (citation and quotations omitted). "Review under § 1292(b) is granted sparingly and only in exceptional cases." In re City of Memphis, 293 F.3d 345, 350 (6th Cir. 2002). "Certification under § 1292(b) requires the district court to expressly find in writing that all three § 1292(b) requirements are met." Couch v. Telescope, Inc., 611 F.3d 629, 633 (9th Cir. 2010).

As an initial matter, the Court finds that both requests for interlocutory appeal were timely made. Pursuant to Federal Rule of Appellate Procure 5(a)(3), a party may move the district court to amend an order to certify that the order is appropriate for interlocutory appeal. Accordingly, the plaintiffs' argument that the motions must be made before the district court issues its ruling is without merit.

The plaintiffs suggest that, instead of certifying the orders for interlocutory appeal, this Court should certify the questions regarding the interpretation of Kentucky's recording statutes to the Kentucky Supreme Court. The Court declines to do so. "The appropriate time to seek certification of state-law issues is before a District Court resolves the issue.... " Berrington v. Wal-Mart Stores, Inc., 696 F.3d 604, 610 (6th Cir. 2012) (quoting Geronimo u. Caterpillar, Inc., 440 Fed.App'x 442, 449 (6th Cir.2011)). No party asked this Court to certify the issues of statutory interpretation to the Kentucky Supreme Court. Instead, the parties asked this Court to resolve them. The Court did so and declines at this stage to certify the issues for a second resolution by the state courts.

As to the first condition of § 1292(b), the relevant issues in both opinions involve purely legal questions of statutory interpretation. The Court was not required to resolve any factual disputes. As it must on a motion to dismiss, the Court assumed the truth of the plaintiffs' ...


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