Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-07195/USCOURTS-caDC-97-07195-1/pdf.json

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

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 11, 1998 Decided August 1, 2000

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

No. 97-7243

Appeals from the United States District Court

for the District of Columbia

(No. 96cv00708)

(No. 96cv01993)

---------

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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: Brad Williams refinanced his Washington, D.C. home with First Government Mortgage and

Investors Corporation. Unable to make his monthly payments and threatened with foreclosure, Williams sued First

Government, raising common law and both state and federal

statutory causes of action. A jury found First Government

liable under the D.C. Consumer Protection Procedures Act

and awarded damages. The district court trebled the damages, denied Williams's common law unconscionability and

federal Truth in Lending Act claims, and awarded him substantial attorneys' fees. Both sides appealed. Because the

District of Columbia Court of Appeals has squarely held that

the D.C. Consumer Protection Procedures Act applies to

home mortgage transactions, and because we find sufficient

evidence in the record to support the jury's verdict, we affirm

the award of damages. We also affirm the district court's

judgment that the attorneys' fee award, though disproportionate to the amount of damages recovered, was reasonable in

relation to Williams's success in the litigation. Finally, we

affirm the district court's dismissal of Williams's Truth in

Lending Act claims, but remand his common law unconscionability claim for the district court to clarify whether he lacked

"meaningful choice" when he agreed to the terms of the loan.

I

The facts of this case are set forth in detail in Williams v.

First Gov't Mortgage & Investors Corp., 176 F.3d 497 (D.C.

__________

* Former Circuit Judge Wald was a member of the panel at the

time of oral argument, but did not participate in the decision.

Cir. 1999). In summary, appellee and cross-appellant Brad

Williams, a 61 year old retired painter and handyman, has

owned his home in Northeast Washington, D.C. for 29 years.

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. Most

would not give him credit because his income was too low.

First Government Mortgage and Investors Corporation,

appellant and cross-appellee, 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

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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

that he had no other alternative to 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 that

his household had at least seven people in it at any given

time.

He 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 eventually fell behind on his

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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 obtain 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 he could not repay 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

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 did

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) ("Williams I").

After a five-day trial, the jury returned a verdict in favor of

Williams on his CPPA claim in the amount of $8,400. 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)

("Williams II"). After trebling the 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) ("Fees Order

II"); Williams v. Central Money Co., No. 96-1993 (D.D.C.

Oct. 1, 1997) ("Fees Order I"). Both sides appealed.

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Oral argument in this case was heard on the same day as

DeBerry v. First Gov't Mortgage & Investors Corp., 170 F.3d

1105 (D.C. Cir. 1999) amended, No. 97-7211, ___ F.3d ____

(D.C. Cir. 2000), a case also involving a claim by First

Government that the CPPA does not apply to home mortgage

transactions. Because local D.C. courts had "not ruled directly on this issue and because the answer will have significant effects on District of Columbia mortgage finance practice," we certified the following question to the D.C. Court of

Appeals: "Does D.C. Code s 28-3904(r) apply to real estate

mortgage finance transactions?" Id. at 1110. In the meantime, we disposed of First Government's claims that Maryland law, not the CPPA, governs the loan it made to Williams

and that TILA preempts the CPPA. See Williams, 176 F.3d

at 499-500.

On December 30, 1999, the D.C. Court of Appeals answered

the certified question, holding that section 28-3904(r) of the

CPPA does apply to real estate mortgage finance transactions. DeBerry v. First Gov't Mortgage & Investors Corp.,

743 A.2d 699, 703 (D.C. 1999), reh'g en banc denied (May 16,

2000). We address First Government's remaining claims in

section II of this opinion. In section III, we address

Williams's cross appeal.

II

First Government argues that the evidence is insufficient to

support the jury's finding of liability and award of damages

under the CPPA. It also challenges the award of attorneys'

fees to Williams. We discuss each argument in turn.

Sufficiency of evidence

The district court instructed the jury that it could find

CPPA liability on one of two grounds: either that First

Government made Williams a loan that it knew he could not

repay, see D.C. Code Ann. s 28-3904(r)(1), or that First

Government took advantage of Williams's inability to protect

his interests in the transaction, see id. s 28-3904(r)(5). Our

role in reviewing the jury's verdict in Williams's favor and the

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ment notwithstanding the verdict is "very limited." Ferebee

v. Chevron Chem. Co., 736 F.2d 1529, 1534 (D.C. Cir. 1984).

The jury's verdict must stand unless the evidence, together with all inferences that can reasonably be drawn

therefrom is so one-sided that reasonable [persons] could

not disagree on the verdict. The appellate court does

not assess witness credibility nor weigh the evidence, but

rather seeks to verify only that fair-minded jurors could

reach the verdict rendered.

Id. (citations and internal quotation marks omitted).

Applying this highly deferential standard, we think "fairminded jurors" could find First Government liable under

either subsection (r)(1) or subsection (r)(5). Williams testified

that he informed First Government that he received approximately $900 in monthly disability benefits and no more than

$3,000 a year from part-time work. See Trial Tr. 5/12/97

("Tr.") at 96-97. Although Williams's loan application indicated that he earned $500 a month in addition to his monthly

check, Williams testified not only that he never gave that

figure to First Government, but also that First Government

"lied" when it wrote that figure on his application. Id. at 100.

From this testimony, a reasonable jury could easily find that

First Government knew that Williams's income was no more

than $1,200 a month. From other evidence in the record, a

reasonable jury could also find that First Government knew

that Williams was disabled, that he was getting older, and

that he would be unable to supplement his fixed income with

earnings from part-time work throughout the 30-year term of

the loan. We find that a reasonable jury could conclude that

First Government made the loan to Williams knowing "there

was no reasonable probability of payment in full of the

obligation." D.C. Code Ann. s 28-3904(r)(1).

We likewise find that a reasonable jury applying subsection

(r)(5) could conclude that Williams was unable fully to understand the transaction and that First Government "knowingly

[took] advantage of [his] inability ... reasonably to protect

his interests." Id. s 28-3904(r)(5). Williams testified that he

had only a sixth-grade education from the segregated schools

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of Savannah, Georgia, see Tr. at 40-41, that he could read no

more than 40 percent of a newspaper, see id. at 90, that he

only recently learned through tutoring "what S means at the

end of the word" and "what a capital letter means," id. at 43-

44, that he thought an interest rate of 13.90 percent exceeded

13.9 percent, see id. at 173-74, and that when he bought his

house in 1970, he "depended on [his wife] basically to do most

of [his] reading [at the closing] 'cause she had an 11th grade

education," id. at 43. Williams also testified that during his

20-minute meeting with First Government to settle the loan,

the loan officers neither explained the papers he signed nor

gave him time to review the papers or any papers to take

home. See id. at 60-61, 142-44, 183. First Government

points to testimony suggesting that Williams had considerable

experience and familiarity with mortgage transactions. Our

role, however, does not include weighing the evidence. See

Ferebee, 736 F.2d at 1534. Instead, we need only satisfy

ourselves that "fair-minded jurors could reach the verdict

rendered." Id. In this case, the evidence is sufficient for a

reasonable jury to find liability under subsection (r)(5).

First Government next claims that the evidence does not

support the jury's award of damages, pointing out that the

terms of the loan were calibrated to the risk Williams posed

as a borrower and that Williams was unable to secure better

terms from other lenders. But the amount of damages turns

not on whether Williams had better options or whether the

terms of the loan met industry standards, but rather, as the

district court instructed the jury, on whether "Mr. Williams

lost money as a result of unlawful acts of First Government."

Tr. at 816 (emphasis added). Upon finding that First Government unlawfully made Williams a loan that he either could

not repay or did not understand, the jury had ample basis for

awarding $8,400 in damages. After all, First Government

collected over $7,500 in fees and expenses, and charged

Williams $100 per month more than he had been paying

under his previous mortgage.

Nor do we find merit in First Government's complaint that

the district court articulated no factual basis for trebling the

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ages and attorneys' fees. Once it is established that a

"consumer [has] suffer[ed] any damage," the CPPA authorizes courts to treble damages without further findings. D.C.

Code Ann. s 28-3905(k)(1)(A) (1996). Moreover, at the time

First Government made the loan, the CPPA provided that

plaintiffs may "recover or obtain any of the following: (A)

treble damages; (B) reasonable attorneys' fees; (C) punitive

damages; (D) any other relief which the court deems proper."

Id. s 28-3905(k)(1) (amended 1998). The word "any," together with the absence of the word "or" between options (A)

through (D), indicates that courts may award any one or any

combination of the listed remedies. See District of Columbia

Committee on Public Services and Consumer Affairs, Report

on Bill 1-253, the District of Columbia Consumer Protection

Procedures Act 23 (1976) ("Treble damages and reasonable

attorneys' fees are recoverable in order to encourage the

private bar to take such cases.").

Attorneys' fees

Williams's original suit in district court named four defendants (First Government, Industry Mortgage, Central Money,

and Charles Hardesty) and alleged five causes of action

(common law fraud, common law unconscionability, CPPA,

TILA, and D.C. usury law). After settling with two defendants (Central Money and Charles Hardesty), Williams went

to trial against First Government and Industry Mortgage, the

assignee of the loan. Following the jury verdict in his favor

and the district court's subsequent orders, Williams submitted a fee request calculated as follows: Starting with the total

amount of fees generated by the suit, Williams's attorneys cut

in half all fees incurred prior to settlement with Central

Money and Charles Hardesty, thus excluding fees attributable to work performed against the two settling defendants.

His attorneys then excluded fees associated with the TILA

and usury claims, as well as post-trial fees associated with the

unconscionability claim. Thus, according to Williams, the

$199,340 fee request, which the district court granted in full,

reflects half of all fees associated with the fraud, CPPA, and

unconscionability claims prior to settlement, plus the entire

amount of such fees after settlement up to the end of trial.

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"[A]n attorney's fee award by the District Court will be upset

on appeal only if it represents an abuse of discretion." Copeland v. Marshall, 641 F.2d 880, 901 (D.C. Cir. 1980) (en banc).

Under settled law, Williams may recover fees only for work

related to the claim on which he prevailed, and the fees

awarded on that claim must be reasonable in relation to the

success achieved. See Hensley v. Eckerhart, 461 U.S. 424,

434 (1983). Pointing out that Williams's fee request actually

included time for work on the TILA claims, First Government

argues that the TILA and fraud claims were unrelated to the

CPPA and unconscionability claims. The latter, it says,

involved Williams's ability to understand the transaction and

to pay off the loan, while the former involved the accuracy

and completeness of First Government's disclosures and representations to Williams. Disagreeing with First Government, the district court explained that "all the claims against

all defendants involved a 'common core of facts' and 'related

legal theories.' " Fees Order I at 3 (quoting Hensley, 461

U.S. at 435). "For example," the district court said, "the sale

of insurance to plaintiff ... was a common denominator of

plaintiff's [TILA] theory, its fraud theory, and its D.C. statutory claims. The overlap was certainly enough to justify the

basic approach of plaintiff's counsel [in calculating the fee

request]." Fees Order II at 1-2.

In Morgan v. District of Columbia, we said that "[f]ees for

time spent on claims that ultimately were unsuccessful should

be excluded only when the claims are 'distinctly different' in

all respects, both legal and factual, from plaintiff's successful

claims." 824 F.2d 1049, 1066 (D.C. Cir. 1987) (quoting Hensley, 461 U.S. at 434). Recognizing that "there is no certain

method of determining when claims are 'related' or 'unrelated,' " Hensley, 461 U.S. at 437 n.12, we find no basis for

believing that the district court abused its discretion in concluding that the TILA and fraud claims were not " 'distinctly

different in all respects' " from the CPPA and unconscionability claims. Fees Order II at 1 (quoting Morgan, 824 F.2d at

1066). Indeed, considering the overlap among Williams's

various common law and statutory causes of action, we agree

with the district court that "[m]uch of the work done by

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plaintiff's counsel would have been required to litigate any

one of his claims against any single defendant." Fees Order I

at 3.

First Government next argues that the district court

abused its discretion by awarding fees disproportionate to the

damages Williams recovered. Relying on pre-trial estimates

of the dollar value of the suit provided by Williams's attorneys, First Government argues that because the $25,200

award amounted to only 10 to 15 percent of Williams's

litigation objectives, the district court should have awarded no

more than 10 to 15 percent of the attorneys' fees requested.

Again, the district court disagreed, stating "while the relief

plaintiff obtained was not what he originally sought in dollar

terms, the fee requested is not unreasonable in relation to

that recovery." Id.

In Hensley, the Supreme Court rejected a " 'mathematical

approach' " similar to that proposed by First Government,

461 U.S. at 435 n.11 (citation omitted), noting that "[t]here is

no precise rule or formula" for determining the reasonableness of the relation between the fee requested and the relief

obtained, id. at 436. Here, the district court found the fees

reasonable, considering not only the damages Williams recovered, which will prevent his immediate expulsion from his

home and will likely help save his home in the long run, but

also "[t]he vindication of rights, whether constitutional or

statutory." Fees Order II at 2. Like the plaintiffs in City of

Riverside v. Rivera, who received a $245,000 fee award that

was more than seven times the $33,000 in damages they

recovered under a federal civil rights statute, Williams "seeks

to vindicate important civil ... rights that cannot be valued

solely in monetary terms." 477 U.S. 561, 574 (1986) (plurality

opinion). Affirming the fee award in Rivera, the Supreme

Court held that fees awarded under 42 U.S.C. s 1988 need

not be proportionate to the amount of damages recovered in

order to satisfy Hensley's reasonableness standard. See id.

at 580 (plurality opinion); id. at 585 (Powell, J., concurring in

the judgment). Given the public policy interests served by

the CPPA, see DeBerry, 743 A.2d at 703, we decline to read a

"rule of proportionality" into that statute. Such a rule "would

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make it difficult, if not impossible, for individuals with meritorious ... claims but relatively small potential damages to

obtain redress from the courts." Rivera, 477 U.S. at 578

(plurality opinion). Thus, although Williams's fee award is

disproportionate to the damages he recovered, the district

court did not abuse its discretion in concluding that the fees

requested were "reasonable in relation to the success

achieved." Hensley, 461 U.S. at 436.

First Government challenges the calculation of the fee in

several other respects, claiming among other things that

Williams's attorneys failed to exercise billing judgment, overstaffed the case, and incurred unnecessary costs due to their

alleged lack of trial experience. Having carefully considered

each claim, we think none requires discussion. As we have

said before, "[w]e customarily defer to the District Court's

judgment because an appellate court is not well situated to

assess the course of litigation and the quality of counsel."

Morgan, 824 F.2d at 1065. By contrast, the district court

"closely monitors the litigation on a day-to-day basis," id. at

1065-66, "presid[ing] at numerous motions, discovery disputes, and chambers conferences, as well as at the pretrial

conference and trial," id. at 1066 (internal quotation marks

and citation omitted). See also Hensley, 461 U.S. at 437

(district court has "superior understanding of the litigation").

"[I]ll-positioned to second guess [its] determination," Morgan,

824 F.2d at 1066, we need only verify that the district court

"provide[d] a concise but clear explanation of its reasons for

the fee award," Hensley, 461 U.S. at 437. Because the

district court in this case did just that, we see no basis for

disturbing Williams's fee award.

* * *

Having thoroughly considered First Government's other

claims, including its challenges to various evidentiary rulings

by the district court, and finding none persuasive, we affirm

the district court's judgments against First Government in all

respects.

III

As cross-appellant, Williams argues that the district court

violated his constitutional right to a jury trial by rejecting his

unconscionability claim after the jury had determined that the

loan was unconscionable under the CPPA; that the district

court misapplied the common law doctrine of unconscionability; and that it erred as a matter of law in dismissing his

TILA claims. Because these claims present issues of law, our

review is de novo. See Pierce v. Underwood, 487 U.S. 552,

558 (1988).

Common law unconscionability

After the jury found First Government liable under section 28-3904(r) of the CPPA, which prohibits sales or leases

with "unconscionable terms or provisions," the district court

rejected Williams's equitable claim of common law unconscionability. Relying on the proposition that the Seventh

Amendment right to trial by jury guarantees that a jury's

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determination of factual issues common to legal and equitable claims "governs the entire case," Bouchet v. National

Urban League, 730 F.2d 799, 803 (D.C. Cir. 1984), Williams

argues that the jury's finding of statutory unconscionability

compelled the district court to find common law unconscionability as well. We disagree.

Liability for common law unconscionability requires two

findings: "an absence of meaningful choice on the part of one

of the parties together with contract terms which are unreasonably favorable to the other party." Walker-Thomas, 350

F.2d at 449. Liability for statutory unconscionability in this

case required one of two findings: either that First Government knew Williams would be unable to repay the loan, see

D.C. Code Ann. s 28-3904(r)(1), or that it took advantage of

his inability to protect his interests in the loan transaction,

see id. s 28-3904(r)(5). Of course, a finding of liability under

either subsection (r)(1) or subsection (r)(5) would be highly

probative of common law unconscionability. But because the

jury was not asked to specify which provision it applied in

reaching its verdict (Williams never requested such an instruction), "nobody can say what the jury found the facts to

be." Williams II, 974 F. Supp. at 19. The jury's verdict can

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thus have no binding effect on the district court's subsequent

factfinding.

Independent of his Seventh Amendment claim, Williams

argues that the district court misapplied the "absence of

meaningful choice" standard articulated in Walker-Thomas.

That case identified a range of factors that courts should

consider in determining whether a party to a transaction

lacks "meaningful choice":

Whether a meaningful choice is present in a particular

case can only be determined by consideration of all the

circumstances surrounding the transaction. In many

cases the meaningfulness of the choice is negated by a

gross inequality of bargaining power. The manner in

which the contract was entered is also relevant to this

consideration. Did each party to the contract, considering his obvious education or lack of it, have a reasonable

opportunity to understand the terms of the contract, or

were the important terms hidden in a maze of fine print

and minimized by deceptive sales practices? Ordinarily,

one who signs an agreement without full knowledge of its

terms might be held to assume the risk that he has

entered a one-sided bargain. But when a party of little

bargaining power, and hence little real choice, signs a

commercially unreasonable contract with little or no

knowledge of its terms, it is hardly likely that his consent, or even an objective manifestation of his consent,

was ever given to all the terms.

350 F.2d at 449 (footnotes omitted); see also Diamond Housing Corp. v. Robinson, 257 A.2d 492, 493 (D.C. 1969) (allowing

factfinder to find " 'absence of meaningful choice' because of

appellee's unequal bargaining power and her ignorance of the

meaning of the lease provisions").

After finding the terms of the loan unreasonably favorable

to First Government, the district court offered the following

analysis of whether Williams lacked "meaningful choice":

Williams' argument on the lack of meaningful choice

proceeds from his assertion that he was under time

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pressure either to pay his D.C. property taxes or suffer

the tax sale of his home. The notice of an impending tax

sale undoubtedly motivated Williams' decision, but it did

not deprive him of meaningful choice. Williams had

known for weeks that a tax sale on his home was

scheduled. The sale was not proven to be imminent.

Williams II, 974 F. Supp. at 19. The district court went on

to say:

Moreover, Williams had substantial experience in finding

mortgage loans and had been actively shopping for a loan

in the weeks before his entry into the agreement with

First Government. Williams' testimony that he was

upset by the terms of the loan, which plaintiff now

argues demonstrates his lack of meaningful choice, actually tends to prove the contrary proposition: that he

knew what he was doing and did it voluntarily.

Id. According to Williams, the district court failed to consider "all the circumstances surrounding the transaction,"

Walker-Thomas, 350 F.2d at 449--in particular, his lack of

education and limited literacy.

We agree with Williams that Walker-Thomas required the

district court not only to have examined, as it did in the first

part of its analysis, whether he could have pursued other

options, but also to have inquired whether he gave meaningful

"consent" to the loan. Id. From the second part of its

analysis, especially its statement that "he knew what he was

doing and did it voluntarily," Williams II, 974 F. Supp. at 19,

we cannot be sure whether the district court considered, as

Walker-Thomas requires, Williams's lack of education, his

ability to understand the transaction, his overall bargaining

power, and the fairness of First Government's sales practices.

Nor can we be sure whether the district court's observation

that "Williams had substantial experience in finding mortgage

loans," id., was shorthand for a finding, again as required by

Walker-Thomas, that Williams understood the terms of his

loan with First Government, notwithstanding the appreciable

evidence of his limited literacy, see supra at 6-7.

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We thus remand the "meaningful choice" issue to the

district court. If the district court did in fact consider

Williams's lack of education and limited literacy in concluding

that Williams "knew what he was doing and did it voluntarily," Williams II, 974 F. Supp. at 19, that will be the end of

the matter. Otherwise, the district court should take such

action as it believes necessary consistent with this opinion.

Truth in Lending Act

Challenging the district court's denial of his TILA claims,

Williams first argues that the district court wrongly rejected

his claim that First Government unlawfully failed to disclose

the $1,273 life insurance premium as a finance charge associated with the loan. See 15 U.S.C. s 1605 (1994) (requiring all

costs of credit to be disclosed to borrowers as finance

charges); 12 C.F.R. s 226.4 (1998) (same). The life insurance

policy he bought had the following provision, known as an

"actively at work requirement":

Your insurance will take effect on the date shown above.

You must be regularly performing the duties of your

occupation on your last scheduled workday before this

date. If you are not, your insurance will take effect on

the date you resume such duties.

According to Williams, First Government knew that the

policy would never take effect because it was aware that he

had not "regularly perform[ed] the duties of [his] occupation"

since retiring in 1987 and that he could never "resume such

duties" due to his disability. Thus, Williams argues, the

insurance premium amounted to a hidden cost of credit that

First Government should have disclosed as a finance charge.

Although the language of the "actively at work requirement" could be read to prevent Williams's policy from taking

effect, we think ordinary principles of waiver and estoppel

would have barred any attempt by the insurance company to

deny coverage on this ground. Where an insurer accepts

premium payments from the insured with knowledge of facts

that would invalidate the policy, the insurer may not avoid

liability on the basis of those facts. See Britamco UnderwritUSCA Case #97-7195 Document #533152 Filed: 08/01/2000 Page 15 of 19
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ers, Inc. v. Nishi, Papagjika & Assocs., Inc., 20 F. Supp. 2d

73, 77 (D.D.C. 1998) (noting common law norm that waiver

and estoppel "bar[ ] an insurer who has knowledge of facts

that would exclude coverage, from seeking to avoid liability

on non-coverage grounds after acting as though the policy

were in force"); Diamond Serv. Co. v. Utica Mutual Ins. Co.,

476 A.2d 648, 654 (D.C. 1984) ("Waiver is an act or course of

conduct by the insurer which reasonably leads the insured to

believe that the breach will not be enforced. Estoppel ...

generally results when an insurance company assumes the

defense of an action or claim, with knowledge of a defense of

non-liability under the policy...."); see also 16C John A.

Appleman & Jean Appleman, Insurance Law & Practice

s 9273 (1981). Here, Williams wrote on his insurance application that he was a "Painter--Retired" and that he was not

"actively engaged full time in the duties of [his] profession."

Knowing this, the insurance company (through First Government) accepted Williams's $1,273 premium. Since these facts

would have barred the insurance company from invoking the

"actively at work requirement" to deny Williams coverage, we

agree with the district court that the insurance policy was not

worthless and that the premium was therefore not a finance

charge. See Williams II, 974 F. Supp. at 20 n.3.

Claiming that the life insurance policy he bought was

"credit life" (a policy that insures payment of the outstanding

balance on a loan if the borrower dies during the policy's

term), Williams next argues that First Government excluded

the premium from the finance charge without making disclosures required by TILA. See 12 C.F.R. s 226.4(d)(1)(ii).

The district court rejected this argument on the ground that

the insurance policy was not credit life. See Williams II, 974

F. Supp. at 20. Again, we agree.

The essential feature of a credit life insurance policy is that

the beneficiary must be the creditor or the credit account of

the insured. See 12 C.F.R. s 226(d), Supp. I, cmt. 6 (official

staff interpretations). Williams never designated a beneficiary on his insurance application, nor did he make a subsequent

endorsement. He did sign a disclosure form that said: "The

[insurance] [c]ompany will pay all insurance benefits to the

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Bank which will apply it to the unpaid balance of your Loan.

The excess, if any, will be paid to your designated Beneficiary." But the quoted language appears on the form under the

title "Multiple Life Coverage" and applies only to policies

covering two or more co-borrowers. The form contains no

such language under the title "Single Life Coverage." We

thus agree with the district court that "[h]ad Williams died

during the two-year term of the policy, his estate--not First

Government or its assignees--would have been entitled to the

proceeds of the life insurance policy." Id.

In the alternative, Williams argues that even if the policy

was not credit life, the evidence compelled the district court

to find that Williams did not buy the policy voluntarily and

that First Government therefore should have disclosed the

premium as a finance charge. See 12 C.F.R. s 226.4(d),

Supp. I, cmt. 6 (exempting insurance premiums from disclosures applicable to finance charges "[i]f such insurance is not

required by the creditor as an incident to or a condition of

credit"). When Williams bought the policy, however, he

signed a form titled "OPTIONAL LIFE INSURANCE DISCLOSURE STATEMENT," whose first sentence reads:

"Credit related life insurance is not required to obtain credit

and will not be provided unless you sign and agree to pay the

additional cost." We thus agree with the district court:

"[N]o reasonable juror could have concluded that [Williams's

purchase] was involuntary." Williams II, 974 F. Supp. at 20.

Finally, Williams argues that the district court wrongly

denied his claim that First Government failed to provide him

timely notice of his right to cancel the loan. Under TILA, a

borrower who uses his home as security for a loan is entitled

to a three-day "cooling off" period after settlement during

which he has an absolute right to cancel the transaction. See

15 U.S.C. s 1635; 12 C.F.R. s 226.23(a)(3). If a lender fails

to notify the borrower of the right to cancel three business

days before the "cooling off" period expires, then the borrower retains the right to cancel for three years after settlement.

See id.

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First Government issued Williams a notice stating that he

had until January 18, 1995 to cancel the loan. Counting

backward three days from January 18, the district court

assumed that if the notice reached Williams by January 15,

then First Government had satisfied its disclosure and delivery obligations. See Williams II, 974 F. Supp. at 21. But

"for purposes of rescission," TILA regulations define "business days" as "calendar days except Sundays and the legal

public holidays ... such as ... the Birthday of Martin

Luther King, Jr." 12 C.F.R. s 226.2(a)(6). January 16 was

the King holiday. January 15 was a Sunday. The January

18 expiration date thus meant that First Government had to

deliver notice of Williams's right to cancel no later than

January 13, the date of the loan settlement.

Notwithstanding this miscalculation of the notice delivery

date, we think the district court properly dismissed Williams's

claim. At the loan settlement on January 13, Williams signed

a document stating, "I acknowledge receipt of two copies of

NOTICE OF RIGHT TO CANCEL...." His signature

created a rebuttable presumption of delivery. See 15 U.S.C.

s 1635(c). To rebut this presumption, Williams relied on his

trial testimony stating that he received no papers to take

home at settlement and that he only received loan documents

in the mail some days later. See Tr. at 142-44. Rejecting

this argument, the district court concluded that "it is reasonable ... to require strict proof of a claim of non-delivery" and

that "Williams' testimony, on its own, is not sufficient."

Williams II, 974 F. Supp. at 22.

Although we disagree with the district court on the proper

legal standard for evaluating the sufficiency of Williams's

testimony--the presumption of delivery imposed on Williams

"the burden of going forward with evidence to rebut or meet

the presumption, but [did] not shift to [him] the burden of

proof," Fed. R. Evid. 301; see Legille v. Dann, 544 F.2d 1, 6

(D.C. Cir. 1976)--we agree with the court's ultimate conclusion. Even under Rule 301's more permissive standard,

Williams failed to satisfy his evidentiary burden. After

Williams testified that he received no papers during the loan

settlement, First Government's lawyer confronted him with

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his deposition in which he had stated that he "look[ed] at

those papers when [he] got home" on "the day of the settlement." Tr. at 143. Pointing to Williams's prior inconsistent

statement, the district court found his trial testimony not

credible, see Williams II, 974 F. Supp. at 21-22, observing

that "Williams failed to call the only other witness to the

actual closing, a friend who accompanied him and who might

have provided corroboration that the documents were not

handed to him," id. at 22 n.10. Because "the district court's

credibility determinations are entitled to the greatest deference from this court on appeal," Carter v. Bennett, 840 F.2d

63, 67 (D.C. Cir. 1988), and because Williams offered no

evidence of non-delivery beyond his trial testimony, we affirm

the district court's determination that Williams failed to rebut

the presumption of delivery.

Having affirmed the district court's dismissal of Williams's

TILA claims, we have no need to reach Industry Mortgage's

arguments denying assignee liability under 15 U.S.C. s 1641.

IV

We remand Williams's common law unconscionability claim

for further proceedings consistent with this opinion. On all

other claims, we affirm.

So ordered.

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