The U.S. Court of Appeals for the Eleventh Circuit recently rejected a putative class action against a mortgagee based on the alleged late recording of satisfactions of mortgage in supposed violation of New York law.

Citing Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016), the Court held that, because the lead plaintiff did not allege the violations actually caused him any harm or could do so, he lacked standing to sue and the Court thus lacked subject matter jurisdiction.

A copy of the opinion in Nicklaw v. CitiMortgage, Inc. is available at: Link to Opinion.

A borrower sold his property located in New York, and used the proceeds to pay off his mortgage loan.

New York law generally requires the mortgage holder to file a certificate of discharge or satisfaction of mortgage with the county clerk within 30 days after the pay-off. See N.Y. Real Prop. Law § 275; N.Y. Real Prop. Acts. Law § 1921.

The mortgagee did not record the satisfaction of mortgage until more than 90 days after the date of payment and, when the borrower discovered this, he filed a putative class action alleging the mortgagee violated New York Law by routinely failing to record satisfactions of mortgages within the statutory period.

The district court dismissed the complaint because a prior lawsuit filed by the same plaintiff had become moot due to an offer of judgment. The plaintiff appealed. The mortgagee moved to dismiss the appeal based on lack of subject matter jurisdiction.

As you may recall, federal courts have limited jurisdiction under the U.S. Constitution’s Article III, which requires an actual “case or controversy” involving “adverse parties with personal interest in the matter.” “Article III restricts the jurisdiction of the federal courts to litigants who have standing to sue.”

Standing has “three elements: injury in fact, causation, and redressability.” The Eleventh Circuit explained that “[t]o determine whether [plaintiff] has standing, we must decide whether he alleges an injury in fact. Absent an alleged injury, [he] cannot make out a case or controversy under Article III. A plaintiff has injury in fact if he suffered an invasion of a legally protected interest that is concrete, particularized, and actual or imminent. … “[I]ntangible injuries may satisfy the Article III requirement of concreteness. … For example, a plaintiff who alleges a violation of a statutory right to receive information alleges a concrete injury.”

The Court then turned to “determine whether the intangible harm cause by the delay in recording the certificate of discharge constitutes a concrete injury in fact.”

The plaintiff argued that he suffered a concrete injury for two reasons: first, “the New York legislature intended to create a substantive right to have the certificate of discharge timely recorded. Second, the right to have a satisfaction of mortgage timely recorded has deep roots in American common law.”

The Eleventh Circuit rejected both arguments. First, the Court noted, the question was not whether New York law created a substantive right to timely recording of a satisfaction, but whether the plaintiff “was harmed when his statutory right was violated.”

Relying on the Supreme Court’s ruling in Spokeo, Inc. v. Robins that “not all statutory violations ‘cause harm or present any material risk of harm,’ the Eleventh Circuit concluded that the plaintiff “alleges neither a harm nor a material risk of harm that the district court could remedy.”

The Eleventh Circuit noted that the plaintiff did not allege that “he lost money because [the bank] failed to file the certificate.” He also did not allege any injury to his credit rating. Finally, he did not allege that he or anyone else knew that the certificate of discharge was not recorded timely and the lawsuit was not filed until two years after the bank recorded the satisfaction. Thus, the Court ruled, the plaintiff failed “to allege even a material risk of harm at this late date.”

The Eleventh Circuit explained that just because the plaintiff did not allege sufficient injury in fact under Article III does not mean he had no cause of action under New York law.

“But [he] chose to sue … in federal court, and the requirement of concreteness under Article III is not satisfied every time a statute creates a legal obligation and grants a private right of action for its violation. … A plaintiff must suffer some harm or risk of harm from the statutory violation to invoke the jurisdiction of a federal court.”

The Eleventh Circuit next rejected the plaintiff’s argument “that the right to have a certificate of discharge timely filed upon satisfaction of a mortgage has deep roots in remedies available at common law” because this argument “misapprehends the nature of those remedies.” The Court reasoned that the 19th century cases cited in support were inapposite because “these causes of action provided a remedy to prevent the risk of harm that occurred while title to property was wrongfully clouded, not a remedy after the cloud was lifted.”

The Court concluded that because the plaintiff alleged only that the mortgagee “recorded the certificate late and nothing else, [he] has failed to establish that he suffered or could suffer any harm that could constitute a concrete injury.”

Because the plaintiff lacked standing to sue, the Eleventh Circuit determined that it did not need to “decide whether the earlier order of dismissal as moot bars relitigation of that issue…” and dismissed the appeal for lack of jurisdiction.