First Iowa State Bank obtained a foreclosure decree in September of 2008 for the residential homestead of Kim and Ronnie Hammond and the foreclosure sale was set for August 2010. The sale notice informed the public that the Hammonds had a one year right of redemption. On the day before the August 2010 sheriff’s sale, Kim Hammond filed for Chapter 7 bankruptcy. At sale, Jason Weems was the highest bidder and presumably had the right to take title to the property following the expiration of the redemption period. At the time of the sale, none of the interested parties were aware of or in receipt of notice of the bankruptcy filing. A week after the sheriff’s sale, First Iowa State Bank received notice of the bankruptcy, but took no corrective action regarding the sale. Ultimately, Mr. Weems attempted to remove the Hammonds from the property following the expiration of the redemption period, but Kim Hammonds filed a motion to set aside the sheriff’s sale due to the bankruptcy automatic stay.

The Court of Appeals affirmed the district court’s conclusion that this sheriff’s sale was VOID and without effect due to the automatic stay becoming effective upon the filing of the bankruptcy petition. Thus, despite the fact that actual notice is not formally given (or received ) prior to a sheriff’s sale, the automatic stay is still effective as of the date of the filing and thus any sheriff’s sale following the date the petition is filed may be deemed void. The bank was ultimately required to reimburse the sheriff sale’s highest bidder the amount paid to the bank along with the additional tax and insurance costs expended.

The bank then attempted to salvage the judgment by executing on the property again and setting a second sheriff’s sale for April 2012. The fate of this second sheriff’s sale carried the same as the first. The court determined that the 2 year statute of limitations set forth in Iowa Code section 615.1 was unambiguous and thus clearly barred execution on the judgment after 2 years. Thus, the Court of Appeals determined that both sheriff sales were null and void and returned legal title to the Hammonds and further declared the 2008 foreclosure judgment null and void. Ouch.

This case should certainly be a warning to all foreclosing lenders and their attorneys that a search should be done (if not already done) of the bankruptcy filings immediately prior to the sheriff’s sale. Further, lenders and their attorneys should not ignore any notices they receive from the Bankruptcy Court, no matter how late in the game they are received. First Iowa State Bank can request further review by the Iowa Supreme Court, so this may not be the end of this case. Stay tuned for updates.

The Dickinson attorneys listed in 2013 Best Lawyers in America are:

Howard Hagen (Banking Services Regulation Law; Banking and Finance Law), David Repp, (Tax Law; Trusts & Estates; Non-Profit/Charities Law), Ann Holden Kendell (Employment Law‐Management; Labor Law‐Management; Litigation-Labor & Employment), Jeffrey Krausman (Employment Law‐Management; Labor Law‐Management; Education Law), Dick Lyford (Commercial Litigation; Litigation-Land Use & Zoning), Rick Malm (Corporate Law; Derivatives and Futures Law; Eminent Domain and Condemnation Law, Litigation-Construction), Bridget Penick (Employment Law-Management; Litigation-Labor & Employment; Immigration Law), Russ Samson (Employment Law‐Management; Labor Law‐Management), Jon Sullivan (Banking and Finance Law; Bankruptcy and Creditor Debtor Rights/Insolvency and Reorganization Law; Real Estate Law; Mortgage Banking Foreclosure Law), Paul Tyler (Real Estate Law; Land Use & Zoning Law), John Vernon (Family Law), Marc Ward (Banking and Finance Law; Business Organizations Including LLCs and Partnerships; Corporate Law; Financial Services Regulation Law; Mergers & Acquisitions Law), Fred Schneider (Corporate Law), Bill Stiles (Land Use & Zoning Law), Jill Jensen-Welch (Litigation-Labor & Employment), Bill Serangeli (Litigation-Land Use & Zoning; Litigation-Real Estate; Real Estate Law), Ron Mountsier (Tax Law), and Christine Fleming Halbrook (Trusts & Estates).

To understand this case, a little background is helpful. RESPA prohibits the payment of “any fee, kickback, or thing of value” in exchange for business referrals of settlement service business involving a federally related mortgage loan. RESPA also prohibits sellers from requiring that buyers use a particular title insurance company. One of the purposes of these two provisions is to ensure that closing costs are not artificially inflated.

Individuals who are aggrieved under RESPA may bring a private lawsuit against the bank, mortgage company, or title company (among others) that may have violated the statute. There are also criminal penalties for violating the statute, which may be enforced by federal or state officials.

The issue in First American Corp was whether a plaintiff could still bring her lawsuit when there was no evidence that the closing costs associated with her purchase were increased as a result of RESPA violations. The United States Constitution requires that for plaintiffs to bring a lawsuit they must have suffered an “actual injury.”

The United States District Court for the Central District of California found in favor of the Plaintiff, concluding that even though there was no evidence of increased closing costs she had still suffered an “injury.” The Court of Appeals for the Ninth Circuit agreed and held that the plaintiff could bring her RESPA suit without any evidence of having actually paid more in closing costs due to the RESPA violation.

The Supreme Court then granted review of the case. The parties submitted briefs, and the case was argued before the Court on November 28, 2011. On June 28, 2012, the Court dismissed the case without any decision or opinion.

It is not uncommon for the Court to dismiss a case without providing any explanation. It is also impossible to know why the Supreme Court dismissed First National. It could be that the Court felt the arguments were not sufficiently well developed. The Court may have decided that the facts of the case were not well suited to resolving the issue, or some other reason. The effect of the ruling is to leave the Ninth Circuit’s decision in place.

Regardless, this case has important implications for other consumer financial protection statutes and regulations. CFPB is now responsible for promulgating regulations under RESPA. If the Ninth Circuit’s decision continues to be the law, then banks and financial institutions could face civil liability for a host of statutory and regulatory violations even if consumers are not directly harmed. The Ninth Circuit’s approach has already been adopted by the Third and Sixth Circuit Courts of Appeals, but not yet by the Eighth Circuit which covers Iowa.

The Court held that in order to establish a violation of 12 U.S.C. § 2607(b) – which provides that “[n]o person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service . . . other than for services actually performed” – a plaintiff must demonstrate that a charge for settlement services was divided between two or more persons. The Court does not interpret the subject provision of RESPA to generally prohibit “unearned fees”, but only states that such “unearned fees” may not be shared between two or more persons. This may seem odd, but the Court stated that the law Congress passed was strictly related to fee splitting and fee splitting only. In order to control the level of “unearned fees” that a single bank charges, Congress would have to be more specific in its prohibition of said fees. The Court noted that Congress may well have intended that existing remedies, like state-law actions for fraud, were sufficient to address entirely fictitious fees.

The Court’s unanimous decision may reopen the door to controversial “administrative” fees levied by real estate brokers, and may encourage mortgage lenders, settlement agents and others to mark-up their fees, a practice that had been banned by federal regulators for the past decade.

The business court concept is not new. According to the Task Force’s report, twenty states already have some kind of specialty business court, while another three states are in the process of introducing a specialized docket for business cases.

Before Iowa can launch its own business court system, however, two important issues must be addressed. The first is the scope of the court’s jurisdiction.  What kinds of cases will the business court hear?  The second issue involves judges.  How will the judges be chosen, and what rules will those judges use? 

Scope of the Court’s Jurisdiction
Different states have taken different approaches to business court jurisdiction. Some states, like North Carolina, limit the business court’s jurisdiction to “complex cases.” North Carolina defines complexity by the specific subject matter at issue: complex cases are ones involving corporations, securities, antitrust matters, state trademark disputes, unfair competition claims, intellectual property rights, the internet, or tax disputes. N.C. Gen. Stat. § 7A-45.4(a) (2012).  New York’s approach is similar to North Carolina’s, but also requires a specific dollar amount in controversy to trigger business court jurisdiction. N.Y. Comp. Codes R. & Regs. tit. 22, § 202.70(a) (2012).  Maryland, on the other hand, permits judges to exercise discretion, within a framework, in determining whether a case should be on the busines court docket.  Maryland judges consider factors such as the nature of the relief sought, the number of diverse parties, the novelty of the issues, and the degree to which business or technology issues predominate. Md. R. Cts. J & Attys. Rule 16-205 (2012).

The Iowa Civil Justice Task Force recommends an approach similar to North Carolina’s, with certain subject matter areas that would presumptively lead to business court jurisdiction, and without a minimum dollar amount that would determine a case’s qualification for the business docket.  A case falling into one of the categories listed below would presumptively be included in business court jurisdiction, although the Task Force points out that other states’ experience with business courts has made clear that flexibility will be key to the docket’s success.  In addition, the Task Force recommendations provide that certain cases not meeting the following criteria could opt in to the business docket.

1. Cases seeking remedies of more than $50,000 in compensatory damages;
2. Cases seeking preliminary injunctive or declaratory relief;
3. Disputes arising out of technology, software, biotechnology, and intellectual property licensing agreements;
4. Cases that relate to the internal affairs of businesses including the rights or obligations between or among shareholders, partners, and members;
5. Actions claiming breach of contract, fraud, misrepresentation, or statutory violations between businesses arising out of business transactions and relationships;
6. Shareholder derivative and commercial class actions;
7. Actions arising out of commercial bank transactions;
8. Commercial real property disputes;
9. Trade secrets;
10. Antitrust matters;
11. Securities litigation;
12. Breaches of business contracts;
13. Business torts between business entities or individuals as to their business or investment activities relating to contracts, transactions, or relationships between them.

The Task Force also recommends that the following types of cases be presumptively excluded from business court jurisdiction:

1. Personal injury or wrongful death matters;
2. Medical malpractice matters;
3. Residential landlord/tenant matters;
4. Professional fee disputes;
5. Professional malpractice claims, other than those brought with the rendering of professional services to a business enterprise;
6. Employee/employer disputes;
7. Administrative agency, tax, zoning, and other appeals;
8. Criminal matters;
9. Proceedings to enforce judgments of any type;
10. Residential foreclosure actions.

Judges and Court Rules
Iowa’s business court, as envisioned by the Task Force, would consist of one to three current district court judges. All judges would be invited to apply. The Iowa Supreme Court would select the judges for the pilot program after consulting with the chief judges in all of Iowa’s judicial districts.

Once the district court judges are selected, those judges would then have the authority to draft special rules for the new court. Task Force members anticipate that in drafting these rules, the business court judges will consult with attorneys who routinely represent clients in business matters.

It seems likely that many of the Task Force’s other recommendations would also be implemented in the specialty business courts. Some of these recommendations include assigning one judge to a single case for the entire duration of a litigation matter, strictly enforcing discovery deadlines through fines, and adopting initial disclosure requirements similar to Rule 26 in federal court.

Conclusion
These specialized courts should be of great interest to Iowa business owners – including community bankers, since commercial bank transactions would presumptively be included within business court jurisdiction. Litigation regarding securities and business contracts would also be steered toward the business docket.  If Iowa – like other states before it – is successful in creating a streamlined docket with expert judges who are able to issue consistent rulings, this may provide the state’s entrepreneurs an added measure of reliability when making business decisions.

The Court in Chipman v. Carney noted that the homeowners’ association had not properly perfected an attempt to preserve or extend the limit beyond the initial twenty-one year period. Thus it is important to be aware of not only the twenty-one year time limit in which to file a verified claim to extend, but also the requirements of a properly perfected verified claim to extend.  Those requirements are as follows:

1. Must be filed in the county recorder’s office;
2. Must set forth the nature of the interest;
3. Must set forth the manner in which the interest was acquired; and
4. Must set forth the time the deed, conveyance, or contract was recorded. 

Furthermore, the verified claim needs to be indexed under the description of the real estate involved in a book set apart and specially designed for that purpose to be known as the ‘claimant’s book.’  This book must be kept in the office of the recorder of the county where such real estate is situated, and said statement, when so indexed, shall be recorded as other instruments affecting real estate.

This case will have many homeowners’ associations and their members scrambling to check on the enforceability of their assessment rights covenants.

When the EPA believes a landowner is violating environmental laws, it may issue an administrative compliance order requiring the landowner to take certain actions.  The agency can then seek judicial enforcement of the order if the landowner fails to comply. Under the CWA, the EPA is not required to give the recipient a chance to challenge the order in court before the agency initiates a lawsuit for noncompliance. The primary issues in Sackett v. EPA are whether a property owner can obtain pre-enforcement judicial review of the EPA’s administrative compliance wetlands order and, if not, whether this violates the property owner’s rights under the Due Process Clause.

The Plaintiffs (the “Sacketts”) in this case sought to build their dream home on an undeveloped lot in a developed subdivision in the Idaho panhandle. Nearly all of the surrounding lots were developed.  The Sacketts obtained the proper permits and began grading the lot for construction of the home, but the EPA then issued an administrative compliance order informing them that the property was a “wetland” under the CWA’s definition and directing them to cease any and all construction.  Furthermore, they were directed to commence costly restoration or face the threat of substantial penalties (up to tens of thousands of dollars per day!).

The Sacketts strongly disagreed with the EPA’s determination that the property was a protected wetland and have ever since sought pre-enforcement judicial review by a federal court to resolve this dispute. Up to this point the Sacketts have failed in that regard, as both the district court and the U.S. Court of Appeals (Ninth Circuit) agreed with the EPA that the administrative order was not subject to a pre-enforcement challenge. Recently, however, the Sacketts had the opportunity to persuade the Supreme Court that a federal district court should in fact referee their dispute with the EPA.

Allowing pre-enforcement review of administrative compliance orders would not allow the subject parties to ignore and avoid compliance with such an order (i.e. continue to pollute, develop the “wetland,” etc.), but would allow them the opportunity to argue their case against the order. Permitting pre-enforcement review would prevent the EPA from hitting the subject parties with huge non-compliance penalties before the issue can be addressed and answered. A decision is expected by June.

• Banking and Finance Law
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• Education Law
• Employment Law – Management
• Family Law
• Financial Services Regulation Law
• Immigration Law
• Information Technology Law
• Labor Law-Management
• Land Use & Zoning Law
• Non-Profit / Charities Law
• Real Estate Law
• Tax Law
• Trusts & Estates Law

In addition, the firm received Tier 2 recognition in Appellate Practice; Commercial Litigation; Litigation – Labor & Employment; Litigation – Real Estate; and Mergers & Acquisitions.

The complete rankings, which include tiered rankings of 9,633 law firms in 119 legal practice areas, are posted online at http://bestlawfirms.usnews.com. Full data for the law firms that received rankings is also available online, from the largest firms in the country to hundreds of one-person and two-person law firms, providing a comprehensive view of the U.S. legal profession that is unprecedented both in the range of firms represented and in the range of qualitative and quantitative data used to develop the rankings.

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• Howard Hagen
  • 2012 Des Moines Financial Services Regulation Law Lawyer of the Year
  • Banking and Finance Law
• David Repp
  • 2012 Des Moines Tax Law Lawyer of the Year
  • Trusts & Estates
• Ann Holden Kendell
  • Employment Law-Management
  • Labor Law-Management
• Jeffrey Krausman
  • Employment Law-Management
  • Labor Law-Management
• Dick Lyford
  • Commercial Litigation
• Rick Malm
  • Corporate Law
  • Derivatives and Futures Law
• Bridget Penick
  • Immigration Law
• Russ Samson
  • Employment Law-Management
  • Labor Law-Management
• Jon Sullivan
  • Banking and Finance Law
  • Bankruptcy and Creditor Debtor Rights/Insolvency and Reorganization Law
  • Real Estate Law
• Paul Tyler
  • Real Estate Law
• John Vernon
  • Family Law
• Marc Ward
  • Banking and Finance Law
  • Business Organizations Including LLCs and Partnerships
  • Corporate Law
  • Financial Services Regulation Law
  • Mergers & Acquisitions Law