Judge declines to keep eminent domain case on tap
A federal judge on Monday dismissed a bank lawsuit challenging Richmond’s eminent domain quest for underwater mortgages on the grounds that it was premature.
U.S. District Court Judge Charles Breyer already said at a hearing on Thursday that he felt the case, brought by Wells Fargo and Deutsche Bank on behalf of holders of underwater mortgages, was not “ripe for determination” since Richmond had not exercised eminent domain and might never do so.
“Isn’t this, as we say in the trade, a no brainer?” he said in court.
But he gave both sides a chance to weigh in on whether he should hold the case in abeyance or dismiss it outright.
His Monday ruling agrees with points raised by attorneys for Richmond and Mortgage Resolution Partners, the private investment firm assisting its potential plan to seize and restructure underwater home loans.
The case is about “future events that may never occur,” his decision said. That would mean “the matter could linger in abeyance for an indefinite amount of time.”
Richmond resident Morris LeGrand (back to camera) speaks in favor of eminent domain for underwater mortgages at the City Council meeting on Tues., Sept. 10. (Carlos Avila Gonzalez/The Chronicle)
In late July Richmond sought to buy 624 underwater mortgages at steep discounts, and threatened that it might invoke eminent domain if its offers were refused. But using that municipal power of forced seizure would require the city council to pass a “resolution of necessity.”
No such resolution is currently on the council agenda. The resolution would require a supermajority of five votes to pass. At a City Council meeting last week, only four council members supported continued exploration of the eminent domain plan.
Richmond had argued that keeping the lawsuit on tap would “serve the banks’ purpose of chilling the political process” by discouraging other cities from joining a Joint Powers Authority to consider eminent domain, and by deterring the owners of underwater loans from negotiating with the city on principal reduction.
Attorneys for the banks, which were seeking a temporary injunction halting the plan, argued that holding the case in abeyance would give them a chance to present their arguments in federal court about why they consider the program unconstitutional before the city could seize the loans.
Carolyn Said is a San Francisco Chronicle staff writer. Twitter: @csaid
Investors' suit to block Richmond eminent domain plan dismissed in federal court
By Robert Rogers
Contra Costa Times
Posted: 09/16/2013 05:13:10 PM PDT | Updated: about 3 hours ago
SAN FRANCISCO -- A federal judge has dismissed a mortgage industry lawsuit that sought to derail Richmond's unprecedented plan to use eminent domain to seize underwater mortgages and refinance them to help homeowners avoid foreclosure.
U.S. District Court Senior Judge Charles Breyer ruled Monday that the case was not yet ripe to be heard because the city has not decided to act.
Breyer opted to dismiss the case rather than put it on hold until the City Council votes to use eminent domain, which would require a supermajority, per state law.
"Ripeness of these claims does not rest on contingent future events certain to occur but rather on future events that may never occur," Breyer wrote. "Plaintiffs are not, for example, challenging a proposal of the City Council that may or may not raise constitutional concerns depending on the contours of the final version -- put simply, there may never be a 'final version.'"
The lawsuit seeking a preliminary injunction was filed by Wells Fargo, Deutsche Bank AG and The Bank of New York Mellon on behalf of investors against Richmond and its investment firm partner, Mortgage Resolution Partners.
Monday's ruling came as little surprise following a Thursday hearing at which Breyer repeatedly brushed aside arguments by the investors' attorneys that eminent domain action was imminent.
Attorneys representing the city and its partners compared the suit to "challenging immigration reform long before Congress adopts it."
Reeling from foreclosures and with the city saying 51 percent of its residents owe more than their homes are worth, Richmond voted in April to enter a tentative agreement with MRP to explore the unprecedented plan of using eminent domain to seize mortgages and refinance them at current market rates. But final action requires five of the council's seven votes, which could be a tall order considering that only four of seven voted last week to continue to study the plan.
Plan supporters rejoiced Monday.
"Now that the court has dismissed Wall Street's frivolous lawsuit, we can get about the business of saving homes," Amy Schur, a campaign director for the national Home Defenders League, wrote in an email. "We expect more cities to now follow Richmond's lead and take steps to enact this local principal-reduction program."
John Ertman, an attorney for the plaintiffs, said in a statement: "Today's ruling addresses only the matter of timing before the courts. This is not a victory for the program and only postpones the day that Richmond and MRP will have to defend this program in court."Contact Robert Rogers at 510-262-2726 or firstname.lastname@example.org. Follow him at Twitter.com/roberthrogers.