Court Opinion

ID: 2643774
Source: CourtListenerOpinion
Date Created: 2013-11-22 21:35:45.740237+00
Date Added: 2024-06-11T12:17:40.214099
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 12-1917

        EASTHAMPTON SAVINGS BANK; CHICOPEE SAVINGS BANK;
         HAMPDEN BANK; UNITED BANK; MONSON SAVINGS BANK;
                    COUNTRY BANK FOR SAVINGS,

                     Plaintiffs, Appellants,

                                v.

                       CITY OF SPRINGFIELD,

                       Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

          [Hon. Michael A. Ponsor, U.S. District Judge]

                              Before

                       Lynch, Chief Judge,
                Stahl and Howard, Circuit Judges.

     Tani E. Sapirstein, with whom Sapirstein & Sapirstein, P.C.
was on brief, for appellants.
     Brenda R. Sharton, Thomas M. Hefferon, William F. Sheehan, and
Goodwin Procter LLP on brief for Massachusetts Bankers Association,
Inc., amicus curiae.
     Thomas D. Moore, with whom Edward Pikula, Anthony Wilson, and
City of Springfield Law Department were on brief, for appellee.
     Lee D. Goldstein on brief for Harvard Legal Aid Bureau,
National Consumer Law Center, National Community Reinvestment
Coalition, Massachusetts Law Reform Institute, and Massachusetts
Alliance Against Predatory Lending, amici curiae.
November 22, 2013
          LYNCH, Chief Judge. This case presents facial challenges

under both state and federal law to two local Ordinances enacted by

the City of Springfield. In broad terms, the Ordinances impose new

legal duties on (1) property "owner[s]" to maintain property during

the foreclosure process and provide a $10,000 cash bond per

foreclosure    to    the   City   and   (2)   on   mortgagees   to   attempt   a

settlement through a new particular system of negotiations before

foreclosing.        As to the first Ordinance, the central point of

contention is that its definition of "owner" includes mortgagees

who are not in possession and have begun the foreclosure process,

and it appears to impose these duties on foreclosing mortgagees

regardless of whether the mortgagors are still in possession.

          Objecting to the imposition of these new duties, six

banks brought this suit in state court, seeking to have the

Ordinances invalidated as inconsistent with and preempted, under

both field and conflict preemption principles, by the comprehensive

state laws governing foreclosure and property maintenance, and as

inconsistent with federal and state constitutional guarantees. The

plaintiff banks seek declaratory and injunctive relief preventing

the City from enforcing the Ordinances.            The City removed the case

to federal court on the grounds of federal question jurisdiction.1

     1
         The complaint recited various federal constitutional
claims, including procedural and substantive due process,
vagueness, and unlawful takings.      These miscellaneous claims
quickly fell away and are no longer at issue in this case. The
only federal claim remaining is a Contracts Clause claim.

                                        -3-
The banks filed a motion for judgment as a matter of law, which the

City opposed and countered with a cross-motion to dismiss or for

summary judgment.     The district court decided that the Ordinances

were valid and granted the City's motion.               See Easthampton Sav.

Bank v. City of Springfield, 874 F. Supp. 2d 25 (D. Mass. 2012).

The banks now appeal, seeking reversal and entry of judgment in

their favor.     Because the outcome of this case turns on unresolved

questions   of    Massachusetts   law    and   raises    significant   policy

concerns better suited for resolution by the Massachusetts Supreme

Judicial Court, we certify the dispositive state law questions to

that court.      See Mass. S.J.C. R. 1:03.

                                    I.

            The housing market collapse of 2008 led to a significant

increase in the number of mortgage foreclosures, both nationally

and in Massachusetts.      The City of Springfield was particularly

hard-pressed by foreclosures and concluded that properties left

vacant during or after foreclosure can threaten the public safety

by, among other things, attracting criminal activity or drawing

squatters who, without any available utilities, may cause fires.

These harms can in turn lower the values of neighboring properties,

causing more foreclosures and creating a vicious circle.

            In response, the City enacted the two Ordinances relating

to foreclosures.     The first, the "Foreclosure Ordinance," requires

"owner[s]" of properties in the foreclosure process to provide

                                   -4-
24-hour on-site security personnel or else secure all doors and

windows, remove hazardous materials, turn off utilities, clear any

trash or standing water, and maintain liability insurance, among

other things.2   See Springfield, Mass. Ordinances ch. 285-8 et seq.

(2011). It also defines the term "owner" to include mortgagees who

have begun the foreclosure process, regardless of whether the

mortgagee is in possession.     Id. ch. 285-9.    We set forth the

Ordinance's full definition of "owner" in the Appendix.         The

Ordinance also requires owners to provide to the Springfield

Building Commissioner a cash bond of at least $10,000 within thirty

days of the property becoming vacant or within fifteen days of

initiating the foreclosure process.    If the owner fails to comply

     2
        Among the Ordinance's many requirements, in its own terms,
are the obligations for owners to: "file one set of space
utilization floor plans for any buildings on [vacant or
foreclosing] property with the Fire Chief and one set of said plans
with the Commissioner" and "certify space utilization plans as
accurate twice annually"; "[r]emove from the property, to the
satisfaction of the Fire Commissioner, hazardous material as that
term is defined in MGL c. 21K"; "secure all windows and door
openings and ensure that the building is secured from all
unauthorized entry continuously . . . or provide twenty-four-hour
on-site security personnel"; "post 'No Trespassing' signs" if the
property is vacant; "[m]aintain the property . . . free of
overgrowth, trash and debris, and pools of stagnant water, and
ensure that structures are maintained in a structurally sound
condition"; "drain all water from the plumbing and turn off all
electricity between September 15 and June 15 of each calendar year"
if the property is vacant; "[m]aintain the property in accordance
with the Massachusetts State Sanitary Code, the Massachusetts State
Building Code . . . and any Springfield ordinances concerning the
maintenance of property [or zoning]"; and "[m]aintain liability
insurance on the property and furnish the Director with a copy of
said certificate of insurance." Springfield, Mass. Ordinances ch.
285-10 (2011).

                                 -5-
with the Ordinance's terms, the cash bond will be used to defray

the City's cost of maintaining the property.                  If the owner does

comply, the bond is later returned, less some portion kept by the

City to cover its administrative expenses.3               The portion retained

by the City may be used to fund the City's expenses on other

properties,    including     properties     in    which    the      owner   has    no

interest.     See id. ch. 285-10(A)(11).

             The second Ordinance, the "Mediation Ordinance," requires

mortgagors     and   mortgagees    involved      in   a    foreclosure      of     an

owner-occupied residential property to participate in good faith in

an "approved" mediation program.            The mortgagee is subject to

paying about 85% of the cost of the mediation program.                            The

Ordinance says, inter alia, that a mortgagee must give good faith

consideration to loan restructuring or forgiveness.                 The Mediation

Ordinance     inhibits   a   mortgagee     from    moving      forward      with    a

foreclosure otherwise authorized by state law without presenting a

certificate from the mediator confirming that the mortgagee has

participated in the mediation in good faith.               It provides strong

incentives     to    participate   during    the      right    to    cure    period

     3
        The Foreclosure Ordinance does not state a specific amount
that will be retained, instead providing only that "[a] portion of
said bond shall be retained by the City as an administrative fee."
Springfield, Mass. Ordinances ch. 285-10(A)(11) (2011).       At a
hearing in the district court, counsel for the City represented to
the district court that the amount would likely be between $200 and
$500. At oral argument before this court, the City represented
that the amount would be between $500 and $1000.

                                     -6-
established by state law.    The penalty for noncompliance is a $300

per day fine for the duration of the right to cure period.      See

Springfield, Mass. Ordinances ch. 182 (2011).       Both Ordinances

apply retroactively to mortgages that existed on their effective

date of December 13, 2011.

           The banks brought suit for declaratory and injunctive

relief.   In its present posture, their case rests on three primary

arguments: (1) the Ordinances violate the Contracts Clause of the

U.S. Constitution; (2) under the Massachusetts Constitution, the

Ordinances are preempted by Massachusetts state law; and (3) the

Ordinances violate the Massachusetts Constitution by imposing an

illegal tax.   This opinion concerns certification of the last two

claims raised by the banks.

                                 II.

           The Massachusetts Supreme Judicial Court (SJC) permits a

federal court to certify a question to it "if there are involved in

any proceeding before it questions of law of this State which may

be determinative of the cause then pending in the certifying court

and as to which it appears to the certifying court there is no

controlling precedent in the decisions of this court."        Mass.

S.J.C. R. 1:03.4   This case meets those requirements.     And this

     4
       Although neither party requested certification, we have the
discretion to certify questions to the SJC sua sponte. See Ropes
& Gray LLP v. Jalbert (In re Engage, Inc.), 544 F.3d 50, 57 n.10
(1st Cir. 2008). We advised the parties at oral argument that we
were considering certification and gave them an opportunity to

                                 -7-
court has a long history of certifying appropriate questions to the

SJC.    See, e.g., Real Estate Bar Ass'n for Mass., Inc. v. Nat'l

Real Estate Info. Servs., 608 F.3d 110, 119-20 (1st Cir. 2010);

Ropes & Gray LLP v. Jalbert (In re Engage, Inc.), 544 F.3d 50, 57-

58 (1st Cir. 2008); Bos. Gas Co. v. Century Indem. Co., 529 F.3d 8,

23-24   (1st   Cir.   2008);   Globe   Newspaper   Co.   v.   Beacon   Hill

Architectural Comm'n, 40 F.3d 18, 24-25 (1st Cir. 1994).          The SJC

has affirmatively responded to those certified questions.

A.         "Which may be determinative"

           The issues of state law will be determinative in this

case.   The banks have raised two state claims as well as a claim

under the Contracts Clause of the U.S. Constitution. Regardless of

whether the Ordinances violate the Contracts Clause as applied to

pre-Ordinance contracts, only a decision based on state law or the

Massachusetts Constitution will give the banks the full measure of

present arguments and to propose questions to certify.
     Neither party objected to certification as to the preemption
question. However, both parties objected to certification of the
illegal tax question, arguing that Massachusetts law is
sufficiently clear that judgment should be entered in their favor.
We disagree with the notion that this issue is clear.
     The SJC has previously answered questions certified even over
the objections of both parties. See Knapp Shoes, Inc. v. Sylvania
Shoe Mfg. Corp., 640 N.E.2d 1101, 1102 (Mass. 1994) (answering
certified question); Knapp Shoes, Inc. v. Sylvania Shoe Mfg. Corp.,
15 F.3d 1222, 1224 (1st Cir. 1994) (noting objections to
certification). In any event, the SJC may not need to address the
illegal tax claim if the Foreclosure Ordinance is preempted by
state law.
     The banks also opposed certification of the Contracts Clause
issue. Because that issue is one of federal law, we do not certify
it.

                                   -8-
relief they seek. As the Ordinances are applied prospectively, the

only outcome-determinative issues are those of state law.5      This

satisfies the SJC's requirement that the state law issues "may be

determinative" of the case.   Mass. S.J.C. R. 1:03.   As a result, we

need not now reach the banks' Contracts Clause argument because the

state law issues, which will be determinative with respect to

mortgages created after the enactment date of the Ordinances, will

also be determinative as to those existing before the enactment

date.

B.          "No controlling precedent"

            We have interpreted the SJC's requirement that there be

"no controlling precedent" to prevent certification in cases when

"the course [the] state court[] would take is reasonably clear."

In re Engage, Inc., 544 F.3d at 53 (quoting Nieves v. Univ. of

P.R., 7 F.3d 270, 275 (1st Cir. 1993) (alterations in original))

(internal quotation marks omitted).      The course that the state

court would take is not reasonably clear when a case "presents a

        5
        The Contracts Clause provides: "No state shall . . . pass
any . . . Law impairing the Obligation of Contracts . . . ." U.S.
Const. art. I, § 10. We apply a two-pronged test to determine
whether a state law violates this provision, asking: (1) whether
the state law substantially impairs a contractual relationship, and
(2) if so, whether the impairment was reasonable and necessary to
serve an important government purpose. See, e.g., United Auto.,
Aerospace, Agric. Implement Workers of Am. Int'l Union v. Fortuño,
633 F.3d 37, 41 (1st Cir. 2011). Ordinarily, based on the first
prong of that test, a state law with only prospective effect will
not violate the Contracts Clause because it will not impair an
existing contractual relationship.

                                 -9-
close and difficult legal issue."           Id.   This case presents close

and difficult legal issues, and we cannot say that the course that

the SJC would take is reasonably clear.

           To be sure, the legal standards to apply are relatively

apparent with respect to the banks' field and conflict preemption

claims.   See St. George Greek Orthodox Cathedral of W. Mass., Inc.

v. Fire Dep't of Springfield, 967 N.E.2d 127, 132 (Mass. 2012)

("[L]ocal action is precluded either where the 'Legislature has

made an explicit indication of its intention in this respect,' or

'the purpose of State legislation would be frustrated . . . so as

to warrant an inference that the Legislature intended to preempt

the field.'" (quoting Town of Wendell v. Att'y Gen., 476 N.E.2d
585, 589 (Mass. 1985))); Tri-Nel Mgmt., Inc. v. Bd. of Health of

Barnstable,     741 N.E.2d 37,   43     (Mass.   2001)   (providing   for

preemption if there is a "sharp conflict" between local ordinance

and state law (quoting Take Five Vending, Ltd. v. Provincetown, 615
N.E.2d 576, 579 (Mass. 1993))); Fafard v. Conservation Comm'n of

Barnstable, 733 N.E.2d 66, 71-74 (Mass. 2000). But the application

of those standards is difficult, and the outcome far from certain

in this case.

           As to field preemption, Massachusetts has an extensive

network of mortgage foreclosure laws, embodied in Massachusetts

General Laws Chapter 244 and its numerous sections and subsections,

and there is no doubt statewide uniformity is an important goal.

                                     -10-
Cf. St. George Greek Orthodox Cathedral, 967 N.E.2d at 134 & n.14

(finding preemption of local ordinance based on state building

code,        while   emphasizing     the     state      law's       purpose    of    "having

centralized, Statewide standards in this area"); Town of Dartmouth

v. Greater New Bedford Reg'l Vocational Technical High Sch. Dist.,

961 N.E.2d 83, 92 (Mass. 2012) (finding preemption of local school

funding agreement based on state education law "designed to deal

uniformly with a Statewide problem" (quoting Bos. Teachers Union,

Local 66 v. City of Boston, 416 N.E.2d 1363, 1370 (Mass. 1981))).

And    Springfield's       problems     with      the    effects       of   the     mortgage

foreclosure          crisis,   while   serious,         are     far    from    unique     in

Massachusetts.

                As to conflict preemption, the banks and their amicus

point to specific state laws with which they say the Ordinances are

in direct conflict or at least inconsistent.6                       Cf. Town of Wendell,
476 N.E.2d at 589-90 (discussing considerations behind determining

whether local ordinance is "inconsistent" with state laws).

                On the other hand, the state's mortgage laws may have

been        designed   with    an   intent    to     allow      a    limited    amount    of

regulation by municipalities to meet local concerns, even if those

concerns are not unique.            Cf. Fafard, 733 N.E.2d at 74 (declining

        6
         To the banks' list of preemptive state laws, amicus
Massachusetts Bankers Association adds the state's trespass law and
a 2012 revision to the state's mortgage laws requiring certain
efforts to avoid foreclosure, see Mass. Gen. Laws ch. 244, § 35B.

                                           -11-
to find preemption of local permitting regime relating to state

tidelands protection law).            The SJC is also better situated to

determine   whether      there   is    field       preemption     or   conflict    or

inconsistency between these Ordinances and the state's own efforts

to respond to the 2008 mortgage crisis in its various communities,

and   whether    the    Ordinances    are     in    tension     with   the   state's

mortgage, sanitary, or hazardous materials laws.                       As the City

notes, the SJC has not yet interpreted the state statutes relevant

to the answers to the specific questions raised by this case.

            Similar reasons support certification of the banks' state

constitutional claim that the Foreclosure Ordinance imposes an

illegal tax. While we can identify the standard that the SJC would

use, we do not see a "reasonably clear" path that the SJC would

take to resolve the issue.       A proper regulatory fee, as opposed to

an improper tax, would be one providing particularized benefits to

the payors -- that is, the mortgagees -- and would be designed to

compensate the City rather than raise revenue for it. See Silva v.

City of Attleboro, 908 N.E.2d 722, 725 (Mass. 2009).                     We do not

find it reasonably clear, however, whether the benefits here are

particularized to the affected mortgagees.               On one hand, the banks

may receive the benefit of a locally regulated mortgage foreclosure

system   under    the    Ordinance,    and     the    SJC   has   recognized      the

existence of a regulatory system as a particularized benefit.                     See

id.   at 727.      On the other hand, the stated purpose of the

                                       -12-
Ordinances is "to promote the health, safety and welfare of the

public, to protect and preserve the quiet enjoyment of occupants,

abutters and neighborhoods, and to minimize hazards to public

safety   personnel   inspecting    or     entering    such    properties."

Springfield, Mass. Ordinances chs. 182-1, 285-8.             Especially given

that existing state laws already establish a regulated system of

mortgage foreclosures, it is possible that, as noted by the

Ordinances' statements of purpose, the true beneficiaries of the

Ordinances are mortgagors and the public at large.

C.         Additional considerations

           "That a legal issue is close or difficult is not normally

enough to warrant certification, or else diversity cases would

regularly require appellate proceedings in two courts."             Bos. Gas

Co., 529 F.3d at 15.    We    consider additional factors -- including

the dollar amounts involved, the likely effects of a decision on

future cases, and federalism interests -- in deciding whether to

certify questions to the SJC.      See id.    Those and other additional

considerations support certification here.

           First, the outcome of this case has the potential to

impact   thousands     of    outstanding     and     future    mortgages   in

Springfield. We are told other municipalities have followed or are

considering following Springfield's example by enacting their own

foreclosure-related ordinances.         The resolution of these issues

will have ramifications for thousands more mortgages throughout the

                                   -13-
Commonwealth.   Cf. Real Estate Bar Ass'n for Mass., Inc., 608 F.3d

at 119 ("[I]t is especially appropriate to certify this question to

the SJC because [the question presented] raises serious policy

concerns . . . that will certainly impact future cases.").

           We also note that "[t]his is also not a case in which the

'policy arguments line up solely behind one solution.'"       In re

Engage, Inc., 544 F.3d at 57 (quoting Bos. Gas Co., 529 F.3d at

14).   The Ordinances deal with significant problems that arise out

of foreclosures and could arguably help individuals keep their

homes.   On the other hand, the banks assert that the Ordinances

could have serious economic effects by making the state's mortgage

lending market more difficult and expensive for lenders to navigate

(possibly to the point of causing banks to cease lending in certain

areas altogether), and that the benefits of a single statewide

mortgage foreclosure system are considerable. And deciding between

these competing policy interests depends in part on identifying the

intent of the Massachusetts legislature in enacting its mortgage

statutes and other relevant laws. "[T]hose judgments are best made

by the SJC."    Id.

           This case also involves an area of traditional state

authority, coupled with purely state law issues of home rule and

internal state governmental organization.      We are mindful that

"[h]ome rule is a matter of peculiarly state and local concern.

Where possible, state courts should rule in the first instance on

                                -14-
the scope of local governmental authority."   Globe Newspaper Co.,
40 F.3d at 24.   Certifying questions about those issues promotes

"strong federalism interests."    Real Estate Bar Ass'n for Mass.,

Inc., 608 F.3d at 119.

                                 III.

          We therefore certify the following questions to the SJC:

          1.      Are Springfield's municipal ordinances
          Chapter    285,    Article  II,   "Vacant   or
          Foreclosing     Residential   Property"   (the
          Foreclosure Ordinance) or Chapter 182, Article
          I,    "Mediation      of    Foreclosures    of
          Owner-Occupied Residential Properties" (the
          Mediation Ordinance) preempted, in part or in
          whole, by those state laws and regulations
          identified by the plaintiffs?

          2.     Does the Foreclosure Ordinance impose
          an   unlawful  tax  in   violation   of  the
          Constitution   of   the    Commonwealth   of
          Massachusetts?

          We would also welcome any other comments that the SJC may

wish to offer on any relevant points of Massachusetts law.

          The Clerk of this court is directed to forward to the

Massachusetts Supreme Judicial Court, under the official seal of

this court, a copy of the certified questions and our opinion in

this case, along with copies of the briefs and appendix filed by

the parties and amici curiae.     We retain jurisdiction over this

appeal, and the Contracts Clause question, pending resolution of

the certified questions.

          So ordered.

                                 -15-
                             Appendix

Springfield, Mass. Ordinances ch. 285-9 (2011):

The following words and phrases, when used in this article, shall
have the following meanings: . . .
OWNER
Every person, entity, service company, property manager or real
estate broker, who or which, alone or severally with others:
          A. Has legal title to any real property, including but
          not limited to a dwelling, dwelling unit, mobile dwelling
          unit, or parcel of land, vacant or otherwise, including
          a mobile home park; or
          B. Has care, charge or control of real property,
          including but not limited to any dwelling, dwelling unit,
          mobile dwelling unit, or parcel of land, vacant or
          otherwise, including a mobile home park, or any
          administrator, administratrix, executor, trustee or
          guardian of the estate of the holder of legal title; or
          C. Is a mortgagee of any such property who has initiated
          the foreclosure process as defined in this article; or
          D. Is an agent, trustee or other person appointed by the
          courts and vested with possession or control of any such
          property; or
          E. Is an officer or trustee of the association of unit
          owners of a condominium. Each such person is bound to
          comply with the provisions of these minimum standards as
          if he were the owner. However, "owner" shall not mean a
          condominium association created pursuant to MGL c. 183A
          to the extent that such association forecloses on or
          initiates the foreclosure process for unpaid assessments
          due or owing to the association; or
          F. Every person who operates a rooming house; or
          G. Is a trustee who holds, owns or controls mortgage
          loans for mortgage-backed securities transactions and has
          initiated the foreclosure process.

                               -16-