Last year, the U.S. Supreme Court answered an important constitutional question: Can Congress authorize a lawsuit in which the plaintiff suffered no financial injury? The court’s disappointing answer (“it depends”) has perplexed courts across the nation. That confusion has spread to an area of vital interest to the real estate industry, the timely recording of satisfactions of mortgages.
The most recent skirmish in this war revisits an earlier one. Specifically, last year, in Nicklaw v. CitiMortgage, Inc., the United States Court of Appeals for the Eleventh Circuit affirmed a lower court’s decision holding that the bare violation of New York’s mortgage-satisfaction law is not enough to create standing in federal court. Its decision, the Nicklaw court ruled, was based on the Supreme Court’s opinion in Spokeo, Inc., v. Robins, which involved alleged violations of the Fair Credit Reporting Act.
The plaintiff in Nicklaw, seizing on differing decisions among federal courts, asked the Eleventh Circuit to reconsider the matter en banc—meaning, with all judges of the court. The Eleventh Circuit denied the request, which almost always happens to en banc requests. But what was most striking about the denial was the vigorous written opinions that accompanied it, on both sides, describing why the court was wrong or right to refuse to rehear the case.
The crux of the judges’ debate centers on whether the failure to timely record a satisfaction of mortgage is sufficiently similar to a violation of the Fair Housing Act, in which a prospective renter is lied to about the availability of housing—presumably on racial or other prohibited grounds. Supreme Court precedent holds that the FHA guarantees the dissemination of true information, even if the prospective renter has no interest in the property.
In Nicklaw, the majority judges argued that, even if New York’s recording statute creates a right to true information about the status of a mortgage, only would-be buyers have a right to that information, not someone like Nicklaw, who sold his house and encountered no titling problems during the 107 days it took for his prior lender to record the satisfaction of mortgage.
The dissenting judge disagreed and described the situation in a way I think would appeal to many consumer-friendly judges. Barring a person from brining a lawsuit that a statute authorizes violates the separation of powers, the dissenting judge asserted. “There should be no mistake here in what our Court is doing,” he wrote. “We are silencing the voice of the legislature by making it impossible to enforce a law enacted to address a harm it identified.”
Whether this spirited debate is enough to attract the attention of the Supreme Court remains to be seen. I’m betting “no.”