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More on the Protecting Tenants at Foreclosure Act No Private Cause of Action

by Keith Gantenbein
Castle Stawiarski, LLC – USFN Member (CO, WY)

With the enactment of the Protecting Tenants at Foreclosure Act (PTFA) in May 2009 comes a corresponding rise in litigation by tenants against lenders and servicers asserting the PTFA as a federal cause of action. The PTFA provides federal protections for eligible tenants residing in foreclosed residential properties. The aim of the PTFA is to shield bona fide tenants from imminent displacement as the result of a foreclosure action. The PTFA aids qualified tenants who are displaced by the foreclosure of a leased dwelling.

Despite the numerous claims advanced by tenants, federal courts routinely dismiss causes of action premised upon the PTFA. In order for a private right of action to exist, a statute must create an express or implied cause of action. Without such “rights-creating” language, a plaintiff cannot maintain a federal cause of action premised upon that statute. Zalemba v. HSBC Bank, USA, Nat’l Ass’n., 2010 U.S. Dist. LEXIS 104724, *2-6 (S.D. Cal. Sept. 1, 2010) (holding that the plaintiff could not state a claim for relief under the Protecting Tenants at Foreclosure Act because the Act does not provide an express or implied cause of action).

There is no explicit language creating a private right of action contained within the PTFA. See Martin v. LaSalle Bank N.A., 2011 U.S. Dist. LEXIS 61, *2 (S.D. Cal. Jan. 3, 2011). Moreover, “[n]othing in the express language of Section 702 contains a provision creating a right of action for violations of the section or establishes any remedy when the section is violated.”[Gullatt v. Aurora Loan Services, LLC, 2010 U.S. Dist. LEXIS 110440, *8-9 (E.D. Cal. Oct. 18, 2010); see Logan v. United States Bank Nat’l Ass’n., 2010 U.S. Dist. LEXIS 46314, *26-33 (C.D. Cal. Apr. 12, 2010); see also Cohn v. Bank of America, 2011 U.S. Dist. LEXIS 3076, *18-19 (E.D. Cal. Jan. 2011)]. As the PTFA does not contain an express right of action or remedy, courts have shifted their inquiry to whether the PTFA contains an implied federal cause of action.

The United States Supreme Court established a four-factor test in Cort v. Ash to determine the existence of an implied private right of action where a statute does not so expressly provide. 422 U.S. 66, 78; 95 S. Ct. 2080, 2088; 45 L. Ed. 2d 26 (1975). These factors are: (1) whether the plaintiff is a member of a class that the statute was enacted to benefit; (2) whether there is an indication of Congress’s intent to create or deny a private remedy; (3) whether the cause of action is consistent with the underlying purposes of the statute; and (4) whether the cause of action is traditionally relegated to state law.

Congressional Intent
Shortly after Cort, the U.S. Supreme Court shifted the focus to the second factor, “[t]he central inquiry remains whether Congress intended to create, either expressly or by implication, a private cause of action.” Touche Ross & Co. v. Redington, 442 U.S. 560, 575; 99 S. Ct. 2479, 248; 61 L. Ed. 2d 82 (1979). See also Thompson v. Thompson, 484 U.S. 174, 189; 108 S. Ct. 513, 521; 98 L. Ed. 2d 512 (1988). Therefore, it is the intent of Congress that controls whether the PTFA implicitly creates a private cause of action.

Several California courts have considered congressional intent and found that there is no implied private cause of action within the PTFA. In Nativi v. Deutsche Bank Nat’l Trust Co., the court addressed all four Cort factors and ultimately determined that, “Congress intended the PTFA to be used for protection in state court” and as a result, “a private right of action is not found to exist under the PTFA.” 2010 U.S. Dist. LEXIS 51697, *10 (N.D. Cal. May 2010). While the PTFA does not create a federal private right of action, it does provide directives to state courts. Accordingly, Congress’s intent is apparently limited to providing certain protections to affected tenants that may be asserted in state courts to combat inequitable evictions, as opposed to creating a separate legal remedy or cause of action under the PTFA. See Fannie Mae v. Lemere, 2010 U.S. Dist. LEXIS 67005 (E.D. Cal. July 2010).

California courts considering claims under the PTFA have applied the foundational analysis under Cort and found the requisite intent to create a private cause of action lacking, and other courts have addressed the issue in a similar fashion. In Florida, the court dismissed a federal action based on the PTFA, stating that the statute did not create a private right of action and, as such, the court lacked subject matter jurisdiction over the plaintiff’s claims. [Shaikh v. Fannie Mae, 2010 U.S. Dist. LEXIS 100812, *6 (M.D. Fla. Aug., 2010)]. Similarly, in Connecticut, the court held that a defense asserted under the PTFA does not confer federal subject matter jurisdiction, acknowledging that “although the circuit courts have not yet addressed the issue, numerous district courts have held that PTFA does not give rise to a private federal cause of action.” [Deutsche Bank Nat’l Trust Co. v. Doe, 2010 U.S. Dist. LEXIS 117479, *20-21 and n.16 (D. Conn. Nov. 2010)].

Due to the clear intent of Congress in limiting the reach of the PTFA, attempts by litigants to raise the Act as a federal cause of action have been largely unsuccessful. While the Dodd-Frank Wall Street Reform and Consumer Protection Act extended the expiration of the PTFA through the end of 2014, it did not expressly create a private cause of action under the PTFA. Presumably, if Congress intended such a right, it would have explicitly amended and clarified the PTFA to create a private remedy for tenants at that time. Therefore, unless Congress or the courts find to the contrary, tenant protections under the PTFA remain limited to the directives stated in the Act.

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Spring 2011 USFN Report

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