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Media Alerts - Mik v. Federal Home Loan Mortgage -- Sixth Circuit
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March 4, 2014
  Mik v. Federal Home Loan Mortgage -- Sixth Circuit
Headline: No private right of action exists under the Protecting Tenants at Foreclosure Act of 2009 (PTFA). But violations of the Act can be used to establish the elements of a state-law claim.

Area of Law: Property Law, Landlord-Tenant Law

Issue Presented: Did the district court err in dismissing plaintiffs' complaint because it arose solely under the Protecting Tenants at Foreclosure Act of 2009, and that Act did not create a federal cause of action?

Brief Summary: Plaintiffs sued the Federal Home Loan Corporation (Freddie Mac), arguing that they were unlawfully evicted from their rental home after their landlord defaulted on her mortgage and the property was sold at a foreclosure sale. The district court granted Freddie Mac's motion to dismiss the complaint because the PTFA did not create a private cause of action. On appeal, plaintiffs argued that their three claims didn't arise under the PTFA but, instead, arose under Kentucky law. The Sixth Circuit held that plaintiffs stated a claim for wrongful eviction but failed to state claims for denial of due process and outrageous infliction of emotional distress. Therefore, the court reversed in part and affirmed in part.

Significance: The PTFA preempts state laws that are less protective of tenants.

Extended Summary: In 2010, plaintiffs rented a home. The lease included an option to purchase. The owner defaulted on her mortgage, and her lender foreclosed. Plaintiffs were not named as parties. The lender was the successful bidder at the April 2011 foreclosure sale and assigned its bid to Freddie Mac. Plaintiffs stopped paying rent after April 2011 because they did not know to whom rent should be paid.

In June 2011, plaintiffs informed Freddie Mac of their lease and their desire to stay in the home. They were told that they could avoid eviction if they participated in a program called "Cash for Keys," where they would be paid $1,500 to vacate the property. Plaintiffs signed the agreement but were never paid and never moved out.

In June 2011, Freddie Mac obtained a writ of possession, which evicted the owner from the property but did not mention the plaintiffs. In July, plaintiffs were informed that they could buy the home for $190,000 and avoid being evicted if they could demonstrate that they qualified for a loan by 5 p.m. on Friday, July 29, 2011.

Plaintiffs applied for a loan but were told it would take two weeks to have the home appraised. On July 31, 2011, Freddie Mac told plaintiffs that they would be evicted the following day.

On August 8, 2011, plaintiffs posted a copy of the lease on the door with a note stating: "We are asserting our rights under the lease agreement and object to entry by anyone." That day, sheriff deputies removed plaintiffs' personal property from the home and placed it outside. As a result, more than $38,000 of property was damaged or destroyed by rain. In November 2011, plaintiffs obtained a loan and purchased the home from Freddie Mac.

In May 2012, plaintiffs sued Freddie Mac, arguing that (1) Freddie Mac disregarded the PTFA, (2) they were wrongfully evicted from their home, and (3) Freddie Mac's actions were outrageous and inflicted severe emotional distress.

The district court granted Freddie Mac's motion to dismiss under Fed. R. Civ. P. 12(b)(6). It interpreted plaintiffs' complaint as asserting claims under the PTFA, which protects tenants by imposing certain requirements on successors-in-interest to foreclosed properties. The district court held that the PTFA does not provide a private right of action.

On appeal, plaintiffs argued that their claims did not arise under the PTFA and that their complaint asserted claims under Kentucky law for wrongful eviction, denial of due process, and outrageous infliction of emotional distress.

The Sixth Circuit agreed that the PTFA does not provide a private right of action. But it noted that the PTFA requires successors-in-interest to foreclosed properties to provide bona fide tenants with 90 days' notice to vacate and to allow them to occupy the premises until the end of their lease term unless certain conditions are met. Freddie Mac violated this provision.

While Freddie Mac's actions were tolerable under Kentucky law, they were not under the PTFA. The PTFA's requirements preempt state laws that provide less protection to tenants. While no federal cause of action for violations of PTFA exists, tenants may use PTFA violations to establish the elements of state-law claims. Here, Freddie Mac did not meet the conditions laid out by the PTFA, and plaintiffs could use this fact to support their state-law claims.

The Sixth Circuit held that plaintiffs stated a claim for wrongful eviction but failed to state claims for denial of due process and outrageous infliction of emotional distress. Therefore, the court reversed in part and affirmed in part.

Link to Full Opinion: http://www.ca6.uscourts.gov/op...s.pdf/14a0030p-06.pdf

Panel: Gibbons, Stranch, Hood*
*District Judge, sitting by designation

Argument: June 19, 2013

Date of Issued Opinion: February 7, 2014

Docket Number: No. 12-6051

Decided: Reversed in part, affirmed in part.

Case Alert Author: Jenna Adamson

Counsel: ARGUED: Alan W. Roles, COLEMAN, ROLES & ASSOCIATES, PLLC, Louisville, Kentucky, for Appellants. Rick D. DeBlasis, LERNER, SAMPSON & ROTHFUSS, Cincinnati, Ohio, for Appellee. ON BRIEF: Alan W. Roles, Theodore J. Palmer, COLEMAN, ROLES & ASSOCIATES, PLLC, Louisville, Kentucky, for Appellants. Rick D. DeBlasis, LERNER, SAMPSON & ROTHFUSS, Cincinnati, Ohio, for Appellee. Kent Qian, NATIONAL HOUSING LAW PROJECT, San Francisco, California, C. Matthew Hill, PUBLIC JUSTICE CENTER, Baltimore, Maryland, for Amici Curiae.

Author of Opinion: Circuit Judge Gibbons

Case Alert Circuit Supervisor: Professor Barbara Kalinowski

Edited: 03/14/2014 at 01:24 PM by Mark Cooney

    Posted By: Mark Cooney @ 03/04/2014 02:51 PM     6th Circuit  

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