Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-07243/USCOURTS-caDC-97-07243-0/pdf.json

Parties Involved:
First Government Mortgage and Investors Corporation
Appellee
Industry Mortgage Company
Appellee
Brad Williams
Appellant

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 11, 1998 Decided March 26, 1999

No. 97-7195

Brad Williams,

Appellee/Cross-Appellant

v.

First Government Mortgage and Investors Corporation,

Appellant/Cross-Appellee

Industry Mortgage Company,

Appellant/Cross-Appellee

Consolidated with

Nos. 97-7211 and 97-7243

Appeals from the United States District Court

for the District of Columbia

(No. 96cv00708)

(No. 96cv01993)

Nathan I. Finkelstein and Laurie B. Horvitz argued the

cause and filed the briefs for appellants/cross-appellees.

Rachel Mariner argued the cause for Brad Williams as

appellee. Nina F. Simon argued the cause for Brad

Williams as cross-appellant. With them on the briefs was

Jean Constantine-Davis.

Before: Wald, Tatel and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Tatel, Circuit Judge: A 61-year-old disabled, retired paintUSCA Case #97-7243 Document #425653 Filed: 03/26/1999 Page 1 of 6
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er and handyman, appellee Brad Williams has owned his

home in Northeast Washington, D.C. , for 28 years. Williams

retired in 1987 due to physical disability.

In 1994, Williams had a $42,000 mortgage from Central

Money Mortgage Company. He paid $587 per month. Because he owed $1,400 in unpaid property taxes, the D.C.

government advertised his house for auction in a tax sale.

Short on cash, Williams went to several lenders, including

seven banks, seeking a $1,400 loan to pay his taxes. Because

his income was too low, most would not give him credit.

Appellant First Government Mortgage and Investors Corporation offered to help Williams, though not by loaning him

the $1,400 he needed to make the payment. Instead, First

Government offered to refinance his entire mortgage through

a 30-year loan for $58,300 with a 13.9 percent interest rate

and $686 monthly payments. Although the monthly payment

was $100 more than he had been paying, and although the

term of the loan was longer than he wanted, Williams reluctantly took the loan, believing he had no other way to avert

foreclosure. Most of the loan, $42,913, paid off his existing

mortgage; $7,596 covered various fees; $1,609 covered his

taxes; $1,273 went to pay for a two-year life insurance policy;

the remaining $4,909 eventually went toward his monthly

payments.

At the time of the loan settlement, Williams was receiving

$1,072 a month in disability benefits, $100 of which went to

health insurance, plus up to $3,000 a year from part-time

work. At most he had roughly $1,200 a month in disposable

income, over half of which went to First Government to cover

his $686 monthly payments. This left little more than $500

each month to buy necessities for himself and his dependents.

With 11 children and 23 grandchildren, Williams testified, his

household had at least seven people in it at any given time.

Williams kept up with his loan payments for 12 months, but

his financial circumstances steadily worsened. He began to

run out of food by the latter part of each month. His

electricity, gas, and water were cut off. He fell behind on his

loan payments. In August 1996, Industry Mortgage Company (to whom First Government had assigned the loan) served

him with a foreclosure notice demanding $63,831.

Williams filed suit in the United States District Court for

the District of Columbia, seeking to enjoin the foreclosure, to

rescind the loan, and to recover damages pursuant to statutory and common law causes of action. Among other things, he

claimed (1) that First Government violated section 28-3904(r)

of the D.C. Consumer Protection Procedures Act ("CPPA")

by knowingly taking advantage of his inability to protect his

interests in the loan transaction or by knowingly making him

a loan whose payments he could not pay with any reasonable

probability; (2) that First Government violated the common

law doctrine of unconscionability articulated in Williams v.

Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965);

and (3) that First Government violated the federal Truth in

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Lending Act ("TILA") by failing to disclose the life insurance

premium as a finance charge and by failing to give him timely

notice of his right to cancel the loan. First Government

moved for summary judgment, arguing that the CPPA does

not apply to home mortgage loans. The district court denied

the motion. See Williams v. Central Money Co., 974

F. Supp. 22, 27 (D.D.C. 1997).

After a one-day trial, the jury returned an $8,400 verdict in

favor of Williams on his CPPA claim. Finding the evidence

sufficient to sustain the verdict, the district court denied First

Government's motion for judgment notwithstanding the verdict. See Williams v. First Gov't Mortgage & Investors

Corp., 974 F. Supp. 17, 22 (D.D.C. 1997). After trebling the

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jury's award to $25,200, as authorized by section

28-3905(k)(1) of the CPPA, the district court denied

Williams's common law unconscionability and TILA claims.

See id. at 18-22. Williams then filed a motion seeking

$199,340 in attorneys' fees. The district court awarded him

the entire amount. See Williams v. Central Money Co., No.

96-1993 (D.D.C. Jan. 28, 1998); Williams v. Central Money

Co., No. 96-1993 (D.D.C. Oct. 1, 1997). Both sides appealed.

First Government's primary claim is that section 28-3904(r)

of the CPPA does not apply to the transaction in this case. It

first argues that the district court should have applied Maryland law instead of the D.C. consumer protection statute

because First Government is not a D.C. corporation, its

offices are located in Maryland, the meetings with Williams

took place in Maryland, and the loan payments went to a

Maryland address. We review choice-of-law issues de novo.

See Felch v. Air Florida, 866 F.2d 1521, 1523 (D.C. Cir. 1989).

Because Williams's CPPA claim against First Government

is a diversity action, the law of the forum state supplies the

applicable choice-of-law standard. See Klaxon Co. v. Stentor

Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under D.C. law,

courts must "evaluate the governmental policies underlying

the applicable laws and determine which jurisdiction's policy

would be more advanced by the application of its law to the

facts of the case under review." District of Columbia v.

Coleman, 667 A.2d 811, 816 (D.C. 1995). "Where each state

would have an interest in application of its own law to the

facts ... the law of the jurisdiction with the stronger interest

will apply." Bledsoe v. Crowley, 849 F.2d 639, 641 (D.C. Cir.

1988). "If the interests of the two jurisdictions in the application of their law are equally weighty, the law of the forum will

be applied." Id. at 641 n.1 (citing Kaiser-Georgetown Community Health Plan v. Stutsman, 491 A.2d 502, 509 & n.10

(D.C. 1985)).

Maryland no doubt has an interest in ensuring that lenders

behave fairly, and the loan transaction in this case did have

contacts with Maryland. But the District of Columbia likewise has an interest in protecting its citizens from predatory

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loan practices, and the transaction also had significant contacts with the District. Without deciding which jurisdiction's

policy interests are stronger, we have no hesitation concluding that on the facts of this case the District's interests are at

least as strong as Maryland's--a conclusion that compels the

application of D.C. law. See id. As the district court explained, "by issuing a loan to a D.C. resident and taking his

D.C. home as collateral," First Government "availed [itself]

of, and subjected [itself] to, the consumer protection laws of

the District of Columbia." Williams I, 974 F. Supp. at 27.

"If the CPPA did not apply to cases like this one," said the

district court, "loan and mortgage companies could ... evade

D.C. consumer protection laws by locating themselves just

across the District line from the D.C. citizens they seek as

customers." Id.

Next, First Government offers the novel but meritless

argument that its compliance with the federal Truth in Lending Act shields it from CPPA liability. The two statutes have

quite different purposes and impose quite different requirements. TILA mandates the disclosure of certain documents

in lending transactions. See 15 U.S.C. ss 1631-1649 (1994).

The CPPA provides substantive protections for borrowers

against unconscionable loan terms and provisions. See D.C.

Code Ann. s 28-3904(r) (1996). Nothing in TILA or its

legislative history suggests that Congress intended the Act's

disclosure regime to provide the maximum protection to

which borrowers are entitled nationwide; states remain free

to impose greater protections for borrowers. First Government has identified no way in which the CPPA would defeat

TILA's purposes, nor has it suggested how joint applicability

of the two statutes would subject it to conflicting obligations.

We thus hold that TILA does not preempt the CPPA and

that TILA compliance does not immunize lenders like First

Government against CPPA liability. See Cippollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992) (discussing criteria

for finding preemption); California Fed. Sav. & Loan Ass'n

v. Guerra, 479 U.S. 272, 280-81 (1987) (same).

Finally, as in DeBerry v. First Gov't Mortgage & Investors

Corp., No. 97-7211 (D.C. Cir. Mar. 26, 1999), also released

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today, First Government argues that section 28-3904(r) of the

CPPA, which governs "terms or conditions of sales or leases,"

does not apply to home mortgage or refinancing transactions

like the one at issue here. D.C. Code Ann. s 28-3904(r). In

DeBerry, we noted that the contrary argument--that section

28-3904(r) does apply to real estate mortgage transactions--

"does not lack persuasive force" in light of the text, structure,

and legislative history of the CPPA. DeBerry, No. 97-7211,

at 11. Nevertheless, "because the local courts have not ruled

directly on this issue and because the answer will have

significant effects on District of Columbia mortgage finance

practice," we certified the issue to the D.C. Court of Appeals.

Id. We therefore decline to decide whether section 28-

3904(r) of the CPPA applies to home mortgage transactions

and instead await the D.C. Court of Appeals's response to the

certification of this issue in DeBerry. In the meantime, we

shall append to the certification in DeBerry the briefs and

record in this case.

Pending resolution of this issue by the D.C. Court of

Appeals, we hold in abeyance First Government's further

claims that the record evidence was insufficient to support the

jury's determination of liability and award of damages under

the CPPA, and that the $199,340 attorneys' fee award was

either disproportionate to the amount of damages recovered

or unreasonable in relation to Williams's success in the litigation. Given the possible implications of the D.C. Court of

Appeals's judgment on the certified issue, as well as our

desire to avoid deciding this case piecemeal, we also hold in

abeyance Williams's appeal from the district court's denial of

his common law unconscionability and TILA claims.

So ordered.

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