Williams v. First Government Mortgage & Investors Corp.

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 11, 1998 Decided March 26, 1999
No. 97-7195
Brad Williams,
Appellee/Cross-Appellant
v.
First Government Mortgage and Investors Corporation,
Appellant/Cross-Appellee
Industry Mortgage Company,
Appellant/Cross-Appellee
Consolidated with
Nos. 97-7211 and 97-7243
Appeals from the United States District Court
for the District of Columbia
(No. 96cv00708)
(No. 96cv01993)
Nathan I. Finkelstein and Laurie B. Horvitz argued the
cause and filed the briefs for appellants/cross-appellees.
Rachel Mariner argued the cause for Brad Williams as
appellee. Nina F. Simon argued the cause for Brad
Williams as cross-appellant. With them on the briefs was
Jean Constantine-Davis.
Before: Wald, Tatel and Garland, Circuit Judges.
Opinion for the Court filed by Circuit Judge Tatel.
Tatel, Circuit Judge: A 61-year-old disabled, retired paint-
er and handyman, appellee Brad Williams has owned his
home in Northeast Washington, D.C. , for 28 years. Williams
retired in 1987 due to physical disability.
In 1994, Williams had a $42,000 mortgage from Central
Money Mortgage Company. He paid $587 per month. Be-
cause he owed $1,400 in unpaid property taxes, the D.C.
government advertised his house for auction in a tax sale.
Short on cash, Williams went to several lenders, including
seven banks, seeking a $1,400 loan to pay his taxes. Because
his income was too low, most would not give him credit.
Appellant First Government Mortgage and Investors Cor-
poration offered to help Williams, though not by loaning him
the $1,400 he needed to make the payment. Instead, First
Government offered to refinance his entire mortgage through
a 30-year loan for $58,300 with a 13.9 percent interest rate
and $686 monthly payments. Although the monthly payment
was $100 more than he had been paying, and although the
term of the loan was longer than he wanted, Williams reluc-
tantly took the loan, believing he had no other way to avert
foreclosure. Most of the loan, $42,913, paid off his existing
mortgage; $7,596 covered various fees; $1,609 covered his
taxes; $1,273 went to pay for a two-year life insurance policy;
the remaining $4,909 eventually went toward his monthly
payments.
At the time of the loan settlement, Williams was receiving
$1,072 a month in disability benefits, $100 of which went to
health insurance, plus up to $3,000 a year from part-time
work. At most he had roughly $1,200 a month in disposable
income, over half of which went to First Government to cover
his $686 monthly payments. This left little more than $500
each month to buy necessities for himself and his dependents.
With 11 children and 23 grandchildren, Williams testified, his
household had at least seven people in it at any given time.
Williams kept up with his loan payments for 12 months, but
his financial circumstances steadily worsened. He began to
run out of food by the latter part of each month. His
electricity, gas, and water were cut off. He fell behind on his
loan payments. In August 1996, Industry Mortgage Compa-
ny (to whom First Government had assigned the loan) served
him with a foreclosure notice demanding $63,831.
Williams filed suit in the United States District Court for
the District of Columbia, seeking to enjoin the foreclosure, to
rescind the loan, and to recover damages pursuant to statuto-
ry and common law causes of action. Among other things, he
claimed (1) that First Government violated section 28-3904(r)
of the D.C. Consumer Protection Procedures Act ("CPPA")
by knowingly taking advantage of his inability to protect his
interests in the loan transaction or by knowingly making him
a loan whose payments he could not pay with any reasonable
probability; (2) that First Government violated the common
law doctrine of unconscionability articulated in Williams v.
Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965);
and (3) that First Government violated the federal Truth in
Lending Act ("TILA") by failing to disclose the life insurance
premium as a finance charge and by failing to give him timely
notice of his right to cancel the loan. First Government
moved for summary judgment, arguing that the CPPA does
not apply to home mortgage loans. The district court denied
the motion. See Williams v. Central Money Co., 974
F. Supp. 22, 27 (D.D.C. 1997).
After a one-day trial, the jury returned an $8,400 verdict in
favor of Williams on his CPPA claim. Finding the evidence
sufficient to sustain the verdict, the district court denied First
Government's motion for judgment notwithstanding the ver-
dict. See Williams v. First Gov't Mortgage & Investors
Corp., 974 F. Supp. 17, 22 (D.D.C. 1997). After trebling the
jury's award to $25,200, as authorized by section
28-3905(k)(1) of the CPPA, the district court denied
Williams's common law unconscionability and TILA claims.
See id. at 18-22. Williams then filed a motion seeking
$199,340 in attorneys' fees. The district court awarded him
the entire amount. See Williams v. Central Money Co., No.
96-1993 (D.D.C. Jan. 28, 1998); Williams v. Central Money
Co., No. 96-1993 (D.D.C. Oct. 1, 1997). Both sides appealed.
First Government's primary claim is that section 28-3904(r)
of the CPPA does not apply to the transaction in this case. It
first argues that the district court should have applied Mary-
land law instead of the D.C. consumer protection statute
because First Government is not a D.C. corporation, its
offices are located in Maryland, the meetings with Williams
took place in Maryland, and the loan payments went to a
Maryland address. We review choice-of-law issues de novo.
See Felch v. Air Florida, 866 F.2d 1521, 1523 (D.C. Cir. 1989).
Because Williams's CPPA claim against First Government
is a diversity action, the law of the forum state supplies the
applicable choice-of-law standard. See Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under D.C. law,
courts must "evaluate the governmental policies underlying
the applicable laws and determine which jurisdiction's policy
would be more advanced by the application of its law to the
facts of the case under review." District of Columbia v.
Coleman, 667 A.2d 811, 816 (D.C. 1995). "Where each state
would have an interest in application of its own law to the
facts ... the law of the jurisdiction with the stronger interest
will apply." Bledsoe v. Crowley, 849 F.2d 639, 641 (D.C. Cir.
1988). "If the interests of the two jurisdictions in the applica-
tion of their law are equally weighty, the law of the forum will
be applied." Id. at 641 n.1 (citing Kaiser-Georgetown Com-
munity Health Plan v. Stutsman, 491 A.2d 502, 509 & n.10
(D.C. 1985)).
Maryland no doubt has an interest in ensuring that lenders
behave fairly, and the loan transaction in this case did have
contacts with Maryland. But the District of Columbia like-
wise has an interest in protecting its citizens from predatory
loan practices, and the transaction also had significant con-
tacts with the District. Without deciding which jurisdiction's
policy interests are stronger, we have no hesitation conclud-
ing that on the facts of this case the District's interests are at
least as strong as Maryland's--a conclusion that compels the
application of D.C. law. See id. As the district court ex-
plained, "by issuing a loan to a D.C. resident and taking his
D.C. home as collateral," First Government "availed [itself]
of, and subjected [itself] to, the consumer protection laws of
the District of Columbia." Williams I, 974 F. Supp. at 27.
"If the CPPA did not apply to cases like this one," said the
district court, "loan and mortgage companies could ... evade
D.C. consumer protection laws by locating themselves just
across the District line from the D.C. citizens they seek as
customers." Id.
Next, First Government offers the novel but meritless
argument that its compliance with the federal Truth in Lend-
ing Act shields it from CPPA liability. The two statutes have
quite different purposes and impose quite different require-
ments. TILA mandates the disclosure of certain documents
in lending transactions. See 15 U.S.C. ss 1631-1649 (1994).
The CPPA provides substantive protections for borrowers
against unconscionable loan terms and provisions. See D.C.
Code Ann. s 28-3904(r) (1996). Nothing in TILA or its
legislative history suggests that Congress intended the Act's
disclosure regime to provide the maximum protection to
which borrowers are entitled nationwide; states remain free
to impose greater protections for borrowers. First Govern-
ment has identified no way in which the CPPA would defeat
TILA's purposes, nor has it suggested how joint applicability
of the two statutes would subject it to conflicting obligations.
We thus hold that TILA does not preempt the CPPA and
that TILA compliance does not immunize lenders like First
Government against CPPA liability. See Cippollone v. Lig-
gett Group, Inc., 505 U.S. 504, 516 (1992) (discussing criteria
for finding preemption); California Fed. Sav. & Loan Ass'n
v. Guerra, 479 U.S. 272, 280-81 (1987) (same).
Finally, as in DeBerry v. First Gov't Mortgage & Investors
Corp., No. 97-7211 (D.C. Cir. Mar. 26, 1999), also released
today, First Government argues that section 28-3904(r) of the
CPPA, which governs "terms or conditions of sales or leases,"
does not apply to home mortgage or refinancing transactions
like the one at issue here. D.C. Code Ann. s 28-3904(r). In
DeBerry, we noted that the contrary argument--that section
28-3904(r) does apply to real estate mortgage transactions--
"does not lack persuasive force" in light of the text, structure,
and legislative history of the CPPA. DeBerry, No. 97-7211,
at 11. Nevertheless, "because the local courts have not ruled
directly on this issue and because the answer will have
significant effects on District of Columbia mortgage finance
practice," we certified the issue to the D.C. Court of Appeals.
Id. We therefore decline to decide whether section 28-
3904(r) of the CPPA applies to home mortgage transactions
and instead await the D.C. Court of Appeals's response to the
certification of this issue in DeBerry. In the meantime, we
shall append to the certification in DeBerry the briefs and
record in this case.
Pending resolution of this issue by the D.C. Court of
Appeals, we hold in abeyance First Government's further
claims that the record evidence was insufficient to support the
jury's determination of liability and award of damages under
the CPPA, and that the $199,340 attorneys' fee award was
either disproportionate to the amount of damages recovered
or unreasonable in relation to Williams's success in the litiga-
tion. Given the possible implications of the D.C. Court of
Appeals's judgment on the certified issue, as well as our
desire to avoid deciding this case piecemeal, we also hold in
abeyance Williams's appeal from the district court's denial of
his common law unconscionability and TILA claims.
So ordered.