931 F.3d 109
1st Cir.2019Background
- Mark and Beth Thompson defaulted on mortgage payments; JP Morgan Chase served a default and acceleration notice and proceeded toward foreclosure.
- The notice stated the Thompsons could avoid foreclosure by paying the total past-due amount "before a foreclosure sale takes place."
- Under the mortgage contract, however, a mortgagor had to pay the amount due at least five days before the foreclosure date to stop foreclosure.
- The First Circuit panel initially held the notice defective because its language conflicted with the mortgage’s earlier deadline, and under Massachusetts precedent a misleading pre-foreclosure notice can void a sale irrespective of the particular mortgagor’s claimed prejudice.
- Chase sought panel rehearing/en banc, arguing for the first time that a Massachusetts banking regulation (209 C.M.R. § 56.04) required the precise notice language it used; it also urged certification to the Massachusetts Supreme Judicial Court (SJC) to reconsider controlling SJC precedents.
- The First Circuit withdrew its prior opinion, vacated the judgment, and certified to the SJC the question whether the notice language rendered the notice inaccurate or deceptive so as to void the foreclosure sale under Massachusetts law; the court retained jurisdiction pending the SJC’s answer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the notice phrase "you can still avoid foreclosure by paying the total past-due amount before a foreclosure sale takes place" was inaccurate or deceptive under Massachusetts law | The Thompsons argued the notice was defective because it conflicted with the mortgage requirement to pay at least five days before the foreclosure date, so the notice could mislead and render any subsequent sale void | Chase argued the notice complied with Massachusetts banking regulation 209 C.M.R. § 56.04 and that the regulation authorized or required the language used, undermining the claim the notice was deceptive | The panel did not decide on the merits; it certified the question to the Massachusetts SJC for authoritative resolution |
| Whether the First Circuit should overturn SJC precedent (Pinti/Ibanez) | Thompsons relied on SJC precedent holding that a misleading notice can void a foreclosure without a showing of actual prejudice | Chase urged the court to reconsider or seek clarification from the SJC because the banking regulation might require the contested language and because the precedents could be problematic in widespread application | The First Circuit concluded it could not overturn state precedent in a diversity case and certified the question to the SJC |
| Whether certification to the SJC was appropriate given potential statewide impact | Thompsons implicitly favored applying existing SJC precedent here | Chase argued certification was warranted to avoid broad harms to banks and to let the SJC reexamine its precedents in light of the regulation | The court exercised its discretion to certify the question to the SJC, citing potential real harms and the SJC’s capacity to clarify Massachusetts law |
| Whether procedural default of raising the regulation earlier barred Chase from relying on it | Thompsons noted Chase and its counsel had opportunities to raise the regulation earlier | Chase asserted the regulation was a legitimate legal defense despite its late prominence in rehearing materials | The panel did not resolve waiver; instead it certified the substantive question to the SJC and vacated the judgment pending that answer |
Key Cases Cited
- Pinti v. Emigrant Mortg. Co., 472 Mass. 226 (Mass. 2015) (SJC held foreclosure notice deficiencies can void sale without proof of actual prejudice)
- U.S. Bank Nat'l Ass'n v. Ibanez, 458 Mass. 637 (Mass. 2011) (SJC precedent on defects in extrajudicial foreclosure notices and title defects)
- Moore v. Dick, 187 Mass. 207 (Mass. 1905) (early Massachusetts authority on requirements for valid foreclosure process)
- Feeney v. Dell Inc., 454 Mass. 192 (Mass. 2009) (discussing Massachusetts consumer-protective posture)
- In re M3 Power Razor Sys. Mktg. & Sales Practice Litig., 270 F.R.D. 45 (D. Mass. 2010) (noting Massachusetts courts’ consumer-protective tendencies)