|July 19, 2013|
Previously published on July 12, 2013
The U.S. Court of Appeals for the First Circuit held that the U.S. District Court for the District of Rhode Island erred by entering an order enjoining all foreclosure proceedings on property that is the subject matter of any contested foreclosure lawsuit filed in federal court without satisfying the requirements provided in Fed. R. Civ. P. 65 regarding injunctions.
In August 2011, the district court assigned all contested foreclosure lawsuits to one docket, stayed litigation of approximately 65 cases, and undertook consideration of how to handle these administratively consolidated cases. At that time, the magistrate judge had recommended dismissal of two cases assigned to the docket, one of which was Fryzel, based upon the borrowers’ lack of standing to challenge the assignment of their mortgage.
In January 2012, the district court issued an order requiring all cases assigned to the docket to participate in a mediation program with a court-appointed special master. The mediation order did not include any time or cost limits and continued the stay of litigation for any case assigned to the docket. In March 2012, the district court clarified its stay order by providing that the stay prevented defendants from foreclosing on properties that are the subject of a pending complaint. Subsequently, several defendants with cases assigned to the docket appealed the stay and mediation orders and filed a petition for writ of mandamus on several bases, including: (1) that the district court erred in requiring mediation of every case assigned to the docket without first establishing jurisdiction and without any time or costs limits; and (2) that the district court violated Fed. R. Civ. P. 65 by issuing a stay that was in practice an injunction prohibiting nonjudicial property foreclosures.
The First Circuit held that the “imposition of the injunction was error for failing to satisfy Rule 65” and that “[a]s a consequence, the terms of the mandatory mediation, which the injunction prevents from mootness, need not be addressed in detail except to note its failure to conform to the standard of reasonable trial court discretion. . . .” The court noted that correction of these errors was complicated by the district court’s failure to address the merits of the injunction in any case, upon filing, and that the consolidated docket had grown to more than 700 cases at the time of its decision. To avoid chaos, the First Circuit did not vacate the orders but instead remanded the cases on appeal with orders that the district court schedule a hearing to determine whether the existing injunction against foreclosure should be continued. The First Circuit further ordered that if the district court determined that any currently consolidated cases are to remain on the docket, a further hearing should be scheduled to establish reasonable limits on the mandatory mediation. Hinshaw & Culbertson LLP handled the underlying cases and served as lead counsel on the appeal.
Fryzel v. Mortgage Electronic Registration Systems, Inc., --- F. 3d ----, 2013 WL 2896794 (1st Cir. June 14, 2013)