Thursday, July 25, 2013

FYI: 9th Cir Holds No Private Right of Action Under Federal Protecting Tenants at Foreclosure Act

The U.S. Court of Appeals for the Ninth Circuit recently affirmed the lower court's dismissal of a tenant's post-foreclosure action for alleged violations of the Protecting Tenants at Foreclosure Act of 2009 ("PTFA"). 


In reaching its decision, the Court held that: (1) the voluntary dismissal of an eviction matter does not necessarily moot an action relating to alleged improprieties in the eviction;  (2) the principles of abstention first elucidated by the Supreme Court in Younger v. Harris, 401 U.S. 37 (1971), did not preclude subject matter jurisdiction for the federal courts concerning unlawful detainer actions; and  (3) the PTFA does not provide a private right of action.


A copy of the opinion is available at:



Following the foreclosure of the subject property, the successor owner provided the tenant with a three-day notice of termination.  The successor owner then initiated an unlawful detainer action in state court. 


The tenant filed suit in federal court seeking an injunction preventing the bank's state court action based upon an alleged violation of PTFA, as well as damages.  Specifically, the tenant alleged that the successor owner violated the PTFA by failing to provide a 90 day notice of termination as required by the statute.


The lower court dismissed the tenant's action based upon lack of subject matter jurisdiction under the abstention principle in Younger, and because it determined that the PTFA did not provide a private right of action.  The tenant appealed.


The successor owner argued that the tenant's action was moot, as it had voluntarily dismissed its unlawful detainer action.


As a preliminary matter, the Ninth Circuit determined that the issues presented by the tenant were not mooted merely by the successor owner's voluntary dismissal of its eviction action.  The Court noted that when the basis for mootness is the defendant's voluntary conduct, the defendant bears the burden of showing that the allegedly wrongful conduct could not reasonably be expected to recur.  The Court found that the successor owner failed to meet this burden and presented no evidence which demonstrated that the successor owner would not reinitiate the unlawful detainer action.  Accordingly, the Ninth Circuit held that the tenant's action presented an actual live controversy as required by Article III.


Next, the Court addressed the lower court's ruling that it lacked subject matter jurisdiction.  The Court disagreed that the principles of Younger and its progeny required the federal court to abstain from exercising jurisdiction over an action which implicates an on-going unlawful detainer action filed in a state court. 


As you may recall, the Supreme Court in Younger held that in certain circumstances the federal courts must abstain from adjudicating issues properly brought before it where it involves a pending state criminal prosecution.  Subsequent courts expanded this principle to include limited civil matters where (1) there is an ongoing state proceeding, (2) the state proceeding implicates important state interests, (3) the state proceeding provides an adequate opportunity to raise federal questions, and (4) the federal action would enjoin the state proceeding or have the practical effect of doing so. 


The Ninth Circuit applied these criteria to the state court unlawful detainer action and determined that abstention was not warranted.  Specifically, the Court held that an unlawful detainer action did not implicate important state interests.  In addressing this issue, the Court noted that "important state interests" did not implicate every action based upon state law or even involving a traditional state concern; rather, the Court interpreted the phrase narrowly to include only three types of non-criminal proceedings: (1) those that bear a close relationship to criminal proceedings; (2) those necessary for the vindication of important state policies; and (3) those necessary for the functioning of state judicial system.  The Court found that unlawful detainer actions did not fall into any of these three categories, and specifically noted that "the unlawful detainer action here is simply a private dispute between two private parties over possession of a property." Thus, the Ninth Circuit held that the lower court's determination to abstain from exercising subject matter jurisdiction was in error.


Nevertheless, the Ninth Circuit held that dismissal was appropriate as the PTFA does not provide a private right of action.  The Court noted that the parties conceded that the PTFA did not explicitly provide a private right of action, and it determined that there was no indication that an implied right of action was intended. 


As you may recall, private rights of action must be created by Congress.  In determining whether or not a private remedy is implicit in a statute which does not expressly provide one, the courts focus on whether Congress intended to create a private cause of action.  See Touche Ross & Co. v. Redington, 442 U.S. 560, 575 (1979). 


The Court held that nothing in the language of the PTFA provided any clear and ambiguous intent to create a private right of action.  In fact, the Court pointed out that the statute's entire focus is on the regulated party, i.e. the party seeking the eviction, and not the tenant. 


The Ninth Circuit held that general proscriptive and regulatory statutes do not indicate an intent to provide for private rights of action. 


The Court also rejected the tenant's argument that the statute's title -- "Protecting Tenants at Foreclosure Act of 2009" -- evidenced a Congressional intent to allow a private right of action.  The Court held that, although a statute's title can be used to resolve ambiguity, it cannot control the plain language of the statute. 






Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874


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