Monday, January 29, 2007

No Rescission Class Cases in The First Circuit

The First Circuit Court of Appeals in McKENNA, v. FIRST HORIZON HOME LOAN CORP., 2007 WL 210850 (1st Cir. January 29, 2007) recently held that there is no right for a class of consumers to sue for rescission under the Truth in Lending Act ("TILA") and Massachusetts Consumer Credit Cost Disclosure Act ("MCCCDA"). Consumers may, of course, still bring individual cases for rescission and both individual and class cases for damages. However, class cases for rescission and corresponding declaratory relief is off-the-table in the First Circuit.

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Judge Somma Holds that Claim by Mortgage Lender for Post-Petition Legal Fees Barred by Laches

In a significant local opinion, Judge Somma held in the case of In re Sanders, 2007 WL 188676 (Bankr.D.Mass., Jan 23, 2007)(NO. 00-11842-RS) that a mortgage lender's claim for post-petition fees was barred by laches. Laches is an equitable doctrine that bars a party from asserting a right when he has delayed too long and this delay hurts others. In the Sanders case, the bankruptcy debtor fully satisfied the obligations under her confirmed Chapter 13 plan, including curing her pre-petition mortgage arrears. Ms. Sanders' attorney brought a motion to declare the mortgage current and the mortgage lender objected based on fees it claimed had accrued during the case. However, the mortgage lender was not able to consistently state the amount of its purported claim (which the Judge called "ever-morphing"). More significantly, however, for future cases, the Judge held that the mortgage lender's failure to raise its claim for almost four years was unreasonable. The reasoning of this case offers a remedy to the common problem of a debtor emerging from a Chapter 13 plan with burdensome, new mortgage arrears (based on post-petition charges) despite having satisfied all the requirements of their Chapter 13 plan.