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Easthampton Sav. Bank v. City of Springfield

United States Court of Appeals, First Circuit

November 22, 2013

EASTHAMPTON SAVINGS BANK; Chicopee Savings Bank; Hampden Bank; United Bank; Monson Savings Bank; Country Bank For Savings, Plaintiffs, Appellants,
CITY OF SPRINGFIELD, Defendant, Appellee.

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Tani E. Sapirstein, with whom Sapirstein & Sapirstein, P.C. was on brief, for appellants.

Brenda R. Sharton, Thomas M. Hefferon, William F. Sheehan, and Goodwin Procter LLP on brief for Massachusetts Bankers Association, Inc., amicus curiae.

Thomas D. Moore, with whom Edward Pikula, Anthony Wilson, and City of Springfield Law Department were on brief, for appellee.

Lee D. Goldstein on brief for Harvard Legal Aid Bureau, National Consumer Law Center, National Community Reinvestment Coalition, Massachusetts Law Reform Institute, and Massachusetts Alliance Against Predatory Lending, amici curiae.

Before LYNCH, Chief Judge, STAHL and HOWARD, Circuit Judges.

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LYNCH, Chief Judge.

This case presents facial challenges under both state and federal law to two local Ordinances enacted by the City of Springfield. In broad terms, the Ordinances impose new legal duties on (1) property " owner[s]" to maintain property during the foreclosure process and provide a $10,000 cash bond per foreclosure to the City and (2) on mortgagees to attempt a settlement through a new particular system of negotiations before foreclosing. As to the first Ordinance, the central point of contention is that its definition of " owner" includes mortgagees who are not in possession and have begun the foreclosure process, and it appears to impose these duties on foreclosing mortgagees regardless of whether the mortgagors are still in possession.

Objecting to the imposition of these new duties, six banks brought this suit in state court, seeking to have the Ordinances invalidated as inconsistent with and preempted, under both field and conflict preemption principles, by the comprehensive state laws governing foreclosure and property maintenance, and as inconsistent with federal and state constitutional guarantees. The plaintiff banks seek declaratory and injunctive relief preventing the City from enforcing the Ordinances. The City removed the case to federal court on the grounds of federal question jurisdiction.[1] The banks filed a motion for judgment as a matter of law, which the City opposed and countered with a cross-motion to dismiss or for summary judgment. The district court decided that the Ordinances were valid and granted the City's motion. See Easthampton Sav. Bank v. City of Springfield, 874 F.Supp.2d 25 (D.Mass.2012). The banks now appeal, seeking reversal and entry of judgment in their favor. Because the outcome of this case turns on unresolved questions of Massachusetts law and raises significant policy concerns better suited for resolution by the Massachusetts Supreme Judicial Court, we certify the dispositive state law questions to that court. See Mass. S.J.C. R. 1:03.


The housing market collapse of 2008 led to a significant increase in the number of mortgage foreclosures, both nationally and in Massachusetts. The City of Springfield was particularly hard-pressed by foreclosures and concluded that properties left vacant during or after foreclosure can threaten the public safety by, among other things, attracting criminal activity or drawing squatters who, without any available utilities, may cause fires. These harms can in turn lower the values of neighboring properties, causing more foreclosures and creating a vicious circle.

In response, the City enacted the two Ordinances relating to foreclosures. The first, the " Foreclosure Ordinance," requires " owner[s]" of properties in the foreclosure process to provide 24-hour on-site security personnel or else secure all doors and windows, remove hazardous materials, turn off utilities, clear any trash or standing water, and maintain liability insurance, among other things.[2] See Springfield,

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Mass. Ordinances ch. 285-8 et seq. (2011). It also defines the term " owner" to include mortgagees who have begun the foreclosure process, regardless of whether the mortgagee is in possession. Id. ch. 285-9. We set forth the Ordinance's full definition of " owner" in the Appendix. The Ordinance also requires owners to provide to the Springfield Building Commissioner a cash bond of at least $10,000 within thirty days of the property becoming vacant or within fifteen days of initiating the foreclosure process. If the owner fails to comply with the Ordinance's terms, the cash bond will be used to defray the City's cost of maintaining the property. If the owner does comply, the bond is later returned, less some portion kept by the City to cover its administrative expenses.[3] The portion retained by the City may be used to fund the City's expenses on other properties, including properties in which the owner has no interest. See id. ch. 285-10(A)(11).

The second Ordinance, the " Mediation Ordinance," requires mortgagors and mortgagees involved in a foreclosure of an owner-occupied residential property to participate in good faith in an " approved" mediation program. The mortgagee is subject to paying about 85% of the cost of the mediation program. The Ordinance says, inter alia, that a mortgagee must give good faith consideration to loan restructuring or forgiveness. The Mediation Ordinance inhibits a mortgagee from moving forward with a foreclosure otherwise authorized by state law without presenting a certificate from the mediator confirming that the mortgagee has participated in the mediation in good faith. It provides strong incentives to participate during the right to cure period established by state law. The penalty for noncompliance is a $300 per day fine for the duration of the right to cure period. See Springfield, Mass. Ordinances ch. 182 (2011). Both Ordinances apply retroactively to mortgages that existed on their effective date of December 13, 2011.

The banks brought suit for declaratory and injunctive relief. In its present posture, their case rests on three primary arguments: (1) the Ordinances violate the Contracts Clause of the U.S. Constitution; (2) under the Massachusetts Constitution, the Ordinances are preempted by Massachusetts state law; and (3) the Ordinances ...

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