BPI and Coalition of Trades File Brief in PHH Mortgage v Guthrie

The Mortgage Bankers Association (MBA) is a national association representing the real-estate finance industry, an industry that employs more than 300,000 people in virtually every community in the country. MBA works to ensure the continued strength of the nation’s residential and commercial real-estate markets, to expand homeownership, and to extend access to affordable housing to all Americans. Its membership of more than 2,200 companies includes all elements of real-estate finance: independent mortgage banks, mortgage brokers, commercial banks, thrifts, REITs, Wall Street conduits, life insurance companies, credit unions, and others in the mortgage lending field.

The Chamber of Commerce of the United States of America (the Chamber) is the world’s largest business federation. It represents 300,000 direct members and indirectly represents the interests of more than three million companies and professional organizations of every size, in every industry sector, and from every region of the country. An important function of the Chamber is to represent the interests of its members in matters before Congress, the Executive Branch, and the courts. To that end, the Chamber regularly files amicus curiae briefs in cases, like this one, that raise issues of concern to the nation’s business community.

The American Bankers Association (ABA) is the voice of the nation’s $23.4 trillion banking industry, which is composed of small, regional, and large banks that together employ approximately 2.1 million people, safeguard $18.6 trillion in deposits, and extend $12.3 trillion in loans. ABA regularly advocates on behalf of its members on important policy issues and through amicus curiae briefs on issues of importance to the industry.

USFN–America’s Mortgage Banking Attorneys (USFN) is a national, not-for-profit association of law firms that specialize in matters of real-estate finance. Founded in 1988, USFN consists of organizations that represent the nation’s largest banks, mortgage lenders, mortgage-servicing companies, and government-sponsored enterprises in connection with fore- closure, bankruptcy, loan modifications and other workouts, inventoried properties, and litigation relat- ed to those areas. USFN’s members also include industry-affiliated suppliers of products and services. USFN was established to promote competent, professional, and ethical representation by its membership and in the mortgage-servicing industry.

Founded in 1916, the American Financial Services Association (AFSA) is the national trade association for the consumer credit industry. AFSA works to protect access to credit and consumer choice. AFSA has a broad membership, ranging from large international financial services firms to single-office, independently owned consumer finance companies. AFSA members provide consumers with many kinds of credit, including traditional installment loans, mortgages, direct and indirect vehicle financing, payment cards, and retail sales financing.

The Bank Policy Institute is a nonpartisan public policy, research, and advocacy group that represents universal banks, regional banks, and the major for- eign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cyber- security, fraud, and other information security issues. Issues of focus include capital and liquidity regulation, anti-money-laundering, payment systems, consumer protection, bank powers, bank examination, and competition in the financial sector.

Amici’s members, which include businesses that engage in lending, debt collection, and foreclosure, have a powerful interest in reversal of the erroneous Fourth Circuit decision as to which petitioner seeks review in this case. Those businesses rely on the ability to collect duly owed debts in a predictable, cost-effective manner. But the decision below threat- ens onerous and unpredictable state-law liability for debt-collection efforts as to which federal law would impose no liability. Such liability would have numerous harmful effects, including chilling legitimate debt-collection activities and, therefore, chilling the provision of financial services, including lending. It also would undermine the uniformity that is one of the fundamental—and constitutionally prescribed— attributes of bankruptcy law.

Introduction and Summary of Argument

This case stands at the intersection of two basic but critical legal rules. First, bankruptcy law is federal and, by constitutional command, must be uni- form. See Int’l Shoe Co. v. Pinkus, 278 U.S. 261, 265 (1929); U.S. Const. art. I, § 8, cl. 4. Second, a judge that issues an injunction is “solely responsible for identifying, prosecuting, adjudicating, and sanction- ing” conduct in violation of that injunction. Int’l Un- ion, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 831 (1994).

As the petition explains, the Fourth Circuit ran afoul of both of those principles in allowing Mark Guthrie to pursue state-law claims against PHH Mortgage Corporation (PHH) based on an alleged violation of a bankruptcy court’s discharge order, which “operates as an injunction” under federal law.  11 U.S.C. 524(a)(2). The Fourth Circuit’s holding that preemption is no bar to such claims is manifestly in- correct, as the majority of circuits that have ad- dressed the issue have recognized. Those circuits have held that a debtor’s recourse for such an alleged violation is not an action asserting violation of state law, but rather a contempt action under federal law in the bankruptcy court that issued the injunction in the first instance.

Unless this Court intervenes, the Fourth Circuit’s erroneous holding also will give rise to a number of harmful practical consequences. Creditors trying to collect debts will face the threat of onerous and un- predictable liability under state law—even where those creditors operate not only in good faith but also in an objectively reasonable way. That heightened potential liability will, in turn, chill lawful debt- collection efforts, increase litigation surrounding dischargeability, and burden debt-related activities more generally. This Court’s review is urgently needed to stave off those highly undesirable results.

To read the full comment letter, please click here, or click on the download button below.


[1] Pursuant to Rule 37, counsel for amici curiae affirm that all parties were timely notified of the filing of this brief. No counsel for a party authored this brief in whole or in part and no entity or person, other than amici, their members, or their counsel, made any monetary contribution intended to fund the prepara- tion or submission of this brief.