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11th Cir. Rejects Borrower’s Attempt to Use All Writs Act in Contested Foreclosure

foreclosureThe U.S. Court of Appeals for the Eleventh Circuit recently affirmed the dismissal of a borrower’s petition seeking relief under the federal All Writs Act for purported violations of the automatic bankruptcy stay in continued foreclosure proceedings and purported violations of the borrower’s rights to remove the state court proceedings to the bankruptcy court.

In so ruling, the Eleventh Circuit concluded that the requested relief could not be granted under the All Writs Act, 28 U.S.C. § 1651, because there was no underlying proceeding over which the trial court had jurisdiction, the integrity of which the trial court would be in an appropriate position to protect by making such an order.

A copy of the opinion in Rohe v. Wells Fargo Bank, N.A. is available at:  Link to Opinion.

The holder of a mortgage note filed a second foreclosure action against the homeowner borrower-mortgagor after curing an issue that led the prior foreclosure case to be dismissed for lack of standing.  After judgment of foreclosure was entered, the borrower appealed the judgment to the Third District Court of Appeal of Florida, and separately filed for Chapter 13 bankruptcy to automatically stay creditors’ claims — including the foreclosure proceeding — pursuant to 11 U.S.C. § 362(a). 

While the state trial court responded by placing the foreclosure on inactive status and canceled the impending foreclosure sale, the Third DCA rejected the borrower’s motion for a stay or abatement of her appeal based on its precedent that the automatic stay does not apply to appeals brought by a debtor, on the ground that such an appeal is not a proceeding “against” the debtor within the meaning of § 362(a), see Shop in the Grove, Ltd. v. Union Fed. Sav. & Loan Ass’n of Miami, 425 So. 2d 1138, 1139 (Fla. 3d Dist. Ct. App. 1982). 

The bankruptcy court subsequently granted the mortgagee’s motion for relief from the automatic stay on the basis that the property was not in the Chapter 13 plan.  The borrower appealed that order to the trial court and filed a notice of removal with the bankruptcy court and the Third DCA to remove the foreclosure case to the bankruptcy court under 28 U.S.C. § 1452(a), thus divesting the state courts of jurisdiction unless and until the case was remanded. 

Nevertheless, the Third DCA issued a per curiam order affirming the state trial court’s judgment of foreclosure and granting the mortgagee’s motion for appellate attorneys’ fees. Two days later, the state trial court restored the foreclosure case to active status and rescheduled the foreclosure sale.

The borrower’s removal of the underlying foreclosure proceedings instituted a new adversary proceeding in the bankruptcy court, which the mortgagee moved to dismiss.  The bankruptcy court granted the motion and dismissed the adversary proceeding with prejudice nunc pro tunc to the date the notice of removal was filed but did not expressly remand the foreclosure proceedings back to state courts.  This order, too, was appealed to trial court by the borrower.

Next, the borrower filed a “Petition for Writ of All Writs” in federal court, framed as an independent civil action under § 1651 (the All Writs Act) against the mortgagee, and separate from the state court foreclosure and bankruptcy proceedings and appeals thereto.  

The petition alleged that (i) the mortgagee knowingly violated the automatic stay by continuing to litigate the foreclosure case after her bankruptcy was filed; (ii) the Third DCA knowingly violated the automatic stay; (iii) the Third DCA’s order disposing of her appeal was void insofar as that court lacked jurisdiction of the case after it was removed to the bankruptcy court, and; (iv) the mortgagee violated the borrower’s removal rights by arranging for a foreclosure sale in the state trial court, and sought entry of an order voiding the affirmed foreclosure judgment and order rescheduling foreclosure sale, and damages against the mortgagee. 

The trial court issued a sua sponte order dismissing the petition with prejudice, holding that it lacked jurisdiction to consider the petition under the Rooker-Feldman doctrine because it “expressly requested this Court to void state court decisions that [the borrower] perceives to violate federal law” and “effectively amounts to an appeal of a state court judgment, which this Court has no jurisdiction to entertain.”

This appeal followed.

On appeal, the Eleventh Circuit first examined whether the petition presented a case where the All Writs Act, which provides the U.S. Supreme Court and all courts established by Act of Congress authority to “issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law,” could be invoked.  28 U.S.C. § 1651(a). 

The Court noted that it has held that the Act “does not create any substantive federal jurisdiction,” but empowers courts to “safeguard not only ongoing proceedings, but potential future proceedings,” and to “protect or effectuate” their prior orders and judgments. Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1099 (11th Cir. 2004); Wesch v. Folsom, 6 F.3d 1465, 1470 (11th Cir. 1993).  As such, the Act constitutes a “legislatively approved source of procedural instruments designed to achieve ‘the rational ends of law’” (Harris v. Nelson, 394 U.S. 286, 299, 89 S. Ct. 1082, 1090 (1969)) and invests courts “authority to issue writs that are not otherwise covered by statute.  Penn. Bureau of Corr. v. U.S. Marshals Serv., 474 U.S. 34, 43, 106 S. Ct. 355, 361 (1985).

The Eleventh Circuit explained two distinguishable situations where All Writs Act orders may be employed: (1) the more common and widely discussed use of the Act in a court’s appellate capacity, generally to direct action by another court whose proceedings are subject to appellate review by the court issuing the order — a ‘“drastic and extraordinary” remedy’ that may be issued under well-established standards (United States v. Shalhoub, 855 F.3d 1255, 1263 (11th Cir. 2017) (citations omitted)), and; (2) the non-appellate use of the Act to directly protect the issuing court’s own proceedings and judgments. 

Here, the Court reasoned that the borrower’s petition did not call for the trial court to act in its appellate capacity in issuing the requested All Writs Act Order, because it did not request the court to direct any action by the bankruptcy court or otherwise intervene in the bankruptcy proceedings.  Even if it had, relief under the All Writs Act would be an inappropriate substitute for the regular appeals process because the borrower had alternative avenues of redress through the bankruptcy court and district court.  Cheney, 542 U.S. at 380-81, 124 S. Ct. at 2587.

Thus, the inquiry before the appellate court concerned the direct, non-appellate use of the Act which the Eleventh Circuit thoroughly explained in Klay v. United Healthgroup, noting that the Act does not require a party to “‘state a claim’ to obtain a ‘traditional’ injunction…it must simply point to some ongoing proceeding, or some past order or judgment, the integrity of which is being threatened by someone else’s action or behavior.” Klay at 1100. 

Thus, the threshold question was whether an underlying proceeding, order, or judgment existed over which the trial court has jurisdiction, such that the Court would be in a position to protect that proceeding or matter from some threat to its integrity by issuing the requested order.

Here, the Eleventh Circuit considered each of the petition’s alleged threats to judicial process — violations of the automatic stay and violations of the borrower’s removal rights. 

The Court held that, although a violation of the automatic stay would, indeed, be a threat to the integrity of the borrower’s bankruptcy case, the bankruptcy court possessed authority provided by the All Writs Act, (see Estate of Jackson v. Schron (In re Fundamental Long Term Care, Inc.), 873 F.3d 1325, 1338-41 (11th Cir. 2017)), and 11 U.S.C. § 105(a), which provides that the court “may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.” 

Thus, because the bankruptcy case falls within the purview of the bankruptcy court, which is well-equipped to protect the proceeding’s integrity, the Eleventh Circuit held that it was not a proceeding on which non-appellate use of the All Writs Act by the District Court could be predicated.

Similarly, as to the issue of the removal stay, the questions whether removal of the state foreclosure case was effective and, if so, whether the case remains within the bankruptcy court’s jurisdiction, did not need to be resolved by the Eleventh Circuit on appeal, because the removal of the foreclosure case was a proceeding before the bankruptcy court, who is well-equipped to safeguard that proceeding, and thus not a proper basis for entry of an order under the All Writs Act.

Because there was no underlying proceeding of which the trial court had jurisdiction and which it would have acted to protect by issuing the requested order, there was no basis for use of the All Writs Act in this case.  Accordingly, dismissal of the petition was affirmed.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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