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McOmie-Gray Opinion 2 8 2012 TILA and Petition for Rehearing -Ninth Circuit

McOmie-Gray Opinion 2 8 2012 TILA and Petition for Rehearing -Ninth Circuit

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Published by 83jjmack
as of 3-8-2012
we now await the en banc decision upon rehearing:

from this opinion
In McOmie-Gray v. Bank of America (9th Cir. Feb. 8, 2012), the Ninth Circuit Court of Appeals held that under the Truth in Lending Act (“TILA”), 15 U.S.C. Section 1601 et seq., “rescission suits must be brought within three years from consummation of the loan, regardless whether notice of rescission is delivered within that three-year period”. It ruled that the three year period for rescission in Section 1635(f) is an absolute limitation on rescission actions and that the one year period for bringing claims under Section 1640(e) applies only to damages actions and does not extend the time to file a claim for rescission even where the borrower has sent the Bank a written notice of rescission within three years of loan signing or “consummation”. It also held that an agreement to toll the time to file a rescission action is ineffective, because Section 1635(f) is a statute of repose.

In McOmie-Gray, the borrower obtained a loan in April 2006. She sent a notice of rescission to the bank in January 2008, well within the three-year period provided in § 1635(f), claiming that the copies of the statutory Notice of Right to Cancel which she had received did not identify the exact date that her right to cancel would expire. The Bank denied her request because it had a completed copy of a Notice of Right to Cancel in its files, but at some point in time agreed to toll her time to file a lawsuit. The borrower filed suit in August 2009, outside the three-year period provided by § 1635(f). The district court granted the Bank’s motion to dismiss on the grounds that every TILA rescission claim is subject to the three-year period in 15 U.S.C. Section 1635(f) and that the period constitutes a statute of repose which cannot be tolled. The borrower opposed the motion on the grounds that sending a notice of intent to rescind the loan within the three years following loan signing satisfied § 1635(f) and automatically effectuated rescission, that the Bank then had twenty days to accept and comply with the demand under § 1635(b), and that under § 1640(e) the borrower had one year thereafter to file an action for rescission.

Prior decisions in the Ninth Circuit had left open the question of whether a rescission claim was barred if the borrower had given notice of rescission, but not filed suit, within the three-year period.

The Ninth Circuit’s decision affirms the district court’s dismissal. It relies in part on the Supreme Court’s decision in Beach v. Ocwen Fed. Bank, 523 U.S. 410 (1998). Beach addressed whether mortgagors, who never sent a notice of rescission to the lender, could nonetheless raise the right of rescission as “an affirmative defense in a collection action brought more than three years after the consummation of the transaction.” Id. at 411-12. Beach held that TILA “permits no federal right to rescind, defensively or otherwise, after the 3-year period of §1635(f) has run”. Id at 419.

The Ninth Circuit’s decision may be persuasive precedent in other Federal Circuits because of its reliance on Beach. It is authored by Judge Rebecca R. Pallmeyer of the Northern District of Illinois, sitting by designation, who had previously issued two opinions suggesting that if the borrower had mailed a rescission notice within three years, a rescission suit filed after three years would be timely.
as of 3-8-2012
we now await the en banc decision upon rehearing:

from this opinion
In McOmie-Gray v. Bank of America (9th Cir. Feb. 8, 2012), the Ninth Circuit Court of Appeals held that under the Truth in Lending Act (“TILA”), 15 U.S.C. Section 1601 et seq., “rescission suits must be brought within three years from consummation of the loan, regardless whether notice of rescission is delivered within that three-year period”. It ruled that the three year period for rescission in Section 1635(f) is an absolute limitation on rescission actions and that the one year period for bringing claims under Section 1640(e) applies only to damages actions and does not extend the time to file a claim for rescission even where the borrower has sent the Bank a written notice of rescission within three years of loan signing or “consummation”. It also held that an agreement to toll the time to file a rescission action is ineffective, because Section 1635(f) is a statute of repose.

In McOmie-Gray, the borrower obtained a loan in April 2006. She sent a notice of rescission to the bank in January 2008, well within the three-year period provided in § 1635(f), claiming that the copies of the statutory Notice of Right to Cancel which she had received did not identify the exact date that her right to cancel would expire. The Bank denied her request because it had a completed copy of a Notice of Right to Cancel in its files, but at some point in time agreed to toll her time to file a lawsuit. The borrower filed suit in August 2009, outside the three-year period provided by § 1635(f). The district court granted the Bank’s motion to dismiss on the grounds that every TILA rescission claim is subject to the three-year period in 15 U.S.C. Section 1635(f) and that the period constitutes a statute of repose which cannot be tolled. The borrower opposed the motion on the grounds that sending a notice of intent to rescind the loan within the three years following loan signing satisfied § 1635(f) and automatically effectuated rescission, that the Bank then had twenty days to accept and comply with the demand under § 1635(b), and that under § 1640(e) the borrower had one year thereafter to file an action for rescission.

Prior decisions in the Ninth Circuit had left open the question of whether a rescission claim was barred if the borrower had given notice of rescission, but not filed suit, within the three-year period.

The Ninth Circuit’s decision affirms the district court’s dismissal. It relies in part on the Supreme Court’s decision in Beach v. Ocwen Fed. Bank, 523 U.S. 410 (1998). Beach addressed whether mortgagors, who never sent a notice of rescission to the lender, could nonetheless raise the right of rescission as “an affirmative defense in a collection action brought more than three years after the consummation of the transaction.” Id. at 411-12. Beach held that TILA “permits no federal right to rescind, defensively or otherwise, after the 3-year period of §1635(f) has run”. Id at 419.

The Ninth Circuit’s decision may be persuasive precedent in other Federal Circuits because of its reliance on Beach. It is authored by Judge Rebecca R. Pallmeyer of the Northern District of Illinois, sitting by designation, who had previously issued two opinions suggesting that if the borrower had mailed a rescission notice within three years, a rescission suit filed after three years would be timely.

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11/12/2014

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
KATHRYN MCOMIE-GRAY, Plaintiff-Appellant, v. BANK OF AMERICA HOME LOANS, FKA Countrywide Home Loans, Inc., Defendant-Appellee.

  
No. 10-16487 D.C. No. 2:09-cv-02422MCE-EFB OPINION

Appeal from the United States District Court for the Eastern District of California Morrison C. England, District Judge, Presiding Argued and Submitted December 6, 2011—San Francisco, California Filed February 8, 2012 Before: Carlos T. Bea and Stephen S. Trott, Circuit Judges, and Rebecca R. Pallmeyer, District Judge.* Opinion by Judge Pallmeyer

* The Honorable Rebecca R. Pallmeyer, United States District Judge for the Northern District of Illinois, sitting by designation.

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COUNSEL Thomas A. Jenkins and Daniel Joseph Mulligan, San Diego, California; Larry Wayne Gabriel, Woodland Hills, California; Jenkins Mulligan & Gabriel LLP; Pamela Simmons, Simmons & Purdy, Soquel, California, for the plaintiff-appellant. James Goldbert, Bryan Cave LLP, San Francisco, California, for the defendant-appellee. Tara A. Twomey, Carmel, California, for the amicus.

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OPINION PALLMEYER, District Judge: Kathryn McOmie-Gray appeals the dismissal of her lawsuit for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). McOmie-Gray sought rescission of her loan secured by a trust deed with Bank of America Home Loans (“the Bank”) for alleged violations of disclosure requirements under the federal Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq. On the Bank’s motion, the district court dismissed the suit as untimely because it was filed after the three-year period set by 15 U.S.C. § 1635(f). McOmie-Gray argues that because she gave the Bank timely notice of rescission, she was not required to bring suit within the three-year period, and the district court erred in dismissing this case. For us, the question presented is a matter of first impression. McOmie-Gray cites decisions from several district courts in this circuit that apply the one-year statute of limitations set forth in 15 U.S.C. § 1640(e), measuring the time from the date on which the lender fails to respond to the borrower’s notice of rescission. We disagree with those courts, and conclude, as set forth below, that the time limit established by 15 U.S.C. § 1635(f) is applicable here. Moreover, as we explained in Miguel v. Country Funding Corp., 309 F.3d 1161 (9th Cir. 2002), 15 U.S.C. § 1635(f) is a three-year statute of repose, requiring dismissal of a claim for rescission brought more than three years after the consummation of the loan secured by the first trust deed, regardless of when the borrower sends notice of rescission. I On April 14, 2006, McOmie-Gray obtained a first trust deed loan from Paramount Equity Mortgage. At the closing, McOmie-Gray was presented with several loan documents to

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sign, including two Notice of Right to Cancel forms. McOmie-Gray alleges, however, that neither of these forms explained when the borrower’s right to cancel would expire. Subsequently, Paramount assigned its interest in the loan to Countrywide Home Loans, Inc., a company that the Bank later acquired. On January 18, 2008, McOmie-Gray, through her attorney, sent the bank notice of her intent to rescind the loan, citing the Bank’s failure to advise McOmie-Gray of the final date to cancel the transaction. The Bank refused rescission, asserting that McOmie-Gray had received proper notice of her right to rescind. According to McOmie-Gray, although the Bank initially refused to accept her notice of rescission, it “negotiated with [her] for over a year regarding the rescission.” McOmieGray’s Opening Brief at 5. McOmie-Gray further alleges that to facilitate this negotiation, the Bank agreed to toll the statute of limitations with respect to her TILA claims until August 30, 2009. On August 28, 2009, McOmie-Gray filed a complaint with the district court seeking rescission of the loan secured by a first trust deed. On the Bank’s motion, the district court dismissed the initial complaint with leave to amend because McOmie-Gray failed to allege tender. McOmie-Gray then filed her First Amended Complaint on March 30, 2010. The district court dismissed the First Amended Complaint as well. In its June 23, 2010 order, the court concluded that McOmieGray’s right to rescission was subject to a three-year statute of repose under 15 U.S.C. § 1635(f). Because this period expired on its face on April 14, 2009—three years after the consummation of the mortgage transaction—the court concluded that McOmie-Gray’s claim was time-barred. The court made no mention of the alleged tolling agreement. II [1] TILA protects consumers from fraud, deception, and abuse within the residential secured lending marketplace by

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mandating that lenders disclose certain information to borrowers. To ensure that lenders comply with these disclosure requirements, TILA grants borrowers the right to rescind a home-secured loan in the event the lender has failed to make the required disclosures. Specifically, § 1635(a) provides that a borrower shall have a right to rescind a loan secured by the borrower’s residence by providing prompt notice to the creditor: [T]he obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later, by notifying the creditor, in accordance with regulations of the [Federal Reserve Board], of his intention to do so. 15 U.S.C. § 1635(a). Regulation Z, promulgated by the Federal Reserve Board, confirms that notification is the means by which borrowers exercise their right to rescind: To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor’s designated place of business. 12 C.F.R. § 226.23(a)(2). Rescission is not automatic upon a borrower’s mere notice of rescission, as McOmie-Gray contends, however. Instead, where a lender fails to comply with § 1635(b), the statute and regulations contemplate that a borrower, who by sending notice of rescission has “advanced a claim seeking rescission,” will seek a determination that

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rescission is proper. Large v. Conseco Fin. Servicing Corp., 292 F.3d 49, 55 (1st Cir. 2002). [2] Section 1635 does not explicitly establish a time limit in which borrowers must bring suit for rescission if a lender does not comply with the rescission request. Indeed, it “says nothing in terms of bringing an action” or “a suit’s commencement.” Beach v. Ocwen Fed. Bank, 523 U.S. 410, 417 (1998). Where the borrower alleges, as McOmie-Gray has here, that “proper notice of rescission rights is not delivered to the consumer at the time of closing, and the lender fails to cure the omission by subsequently providing the proper information, the consumer’s usual right to rescind within three days of closing is extended to three years.” Miguel v. Country Funding Corp., 309 F.3d 1161, 1163 (9th Cir. 2002). Specifically, § 1635(f) provides: An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor. 15 U.S.C. § 1635(f). In another section of the Act, 15 U.S.C. § 1640, Congress created a claim for damages for a lender’s violation of TILA, adopting a one-year statute of limitations for such actions. This provision makes no mention of rescission which, as noted, is governed by § 1635 and its three-year statute of repose. III [3] Were we writing on a blank slate, we might consider whether notification within three years of the transaction could extend the time limit imposed by § 1635(f). But under the case law of this court and the Supreme Court, rescission

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suits must be brought within three years from the consummation of the loan, regardless whether notice of rescission is delivered within that three-year period. In Beach, the Supreme Court addressed whether mortgagors, who never sent a notice of rescission to the lender, could nonetheless raise the right of rescission as “an affirmative defense in a collection action brought more than three years after the consummation of the transaction.” 523 U.S. at 41112. The mortgagors conceded that any right they may have had to institute an independent proceeding for rescission under § 1635 lapsed . . . three years after they closed the loan with the bank, but they argue[d] that the restriction to three years in § 1635(f) is a statute of limitation governing only the institution of suit and accordingly has no effect when a borrower claims a § 1635 right of rescission as a “defense in recoupment” to a collection action. Id. at 415. The Court rejected this proposed reading of § 1635(f). Specifically, the Court observed that [s]ection 1635(f) . . . takes us beyond any question whether it limits more than the time for bringing a suit, by governing the life of the underlying right as well. The subsection says nothing in terms of bringing an action but instead provides that the “right of rescission [under the Act] shall expire” at the end of the time period. It talks not of a suit’s commencement but of a right’s duration, which it addresses in terms so straightforward as to render any limitation on the time for seeking a remedy superfluous. Id. at 417 (alteration in original). The plain meaning of the Act, the Court concluded, “permits no federal right to rescind, defensively or otherwise, after the 3-year period of § 1635(f)

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has run.” Id. at 419 (emphasis added). Thus, the Court held that the mortgagor could not raise the right to rescind as a defense to the mortgagee’s foreclosure action after the threeyear period had run. Id. The language the Court used, however, broadly assumes that a three-year limitation governs cases where a borrower, as plaintiff, seeks rescission of the mortgage transaction. Following the Supreme Court’s holding in Beach, we addressed the question whether a borrower may file a lawsuit seeking rescission beyond the three-year period if the borrower never sent a timely notice of rescission. Miguel, 309 F.3d 1161. In Miguel, the borrowers refinanced their home on December 1, 1994. On November 7, 1997, the borrowers sent notice of rescission to the mortgage servicer, an agent of the actual lienholder. The borrowers filed suit against the agent on December 1, 1997, exactly three years from the closing date. When the borrowers realized that they had sued the wrong entity, they filed an amended complaint that included the lienholder as a defendant on June 17, 1998, well after the three-year period had expired. The district court concluded that the borrower was entitled to rescission. Id. at 1162-63. [4] On appeal, we reversed and held that the borrowers’ right to rescission had expired because the bank did not receive a notice of rescission within three years from the consummation of the transaction. Id. at 1165. We relied on Beach and a Ninth Circuit opinion holding “that section 1635(f) represents an ‘absolute limitation on rescission actions’ which bars any claims filed more than three years after the consummation of the transaction.” Id. at 1164 (citing King v. California, 784 F.2d 910, 913 (9th Cir. 1986)). The Miguel court concluded in broad language that “§ 1635(f) is a statute of repose, depriving the courts of subject matter jurisdiction when a § 1635 claim is brought outside the three-year limitation period.” Id. at 1164. Section 1635(f) is therefore not merely a statute of limitations—it completely extinguishes the underlying right itself. The plaintiff in Miguel argued that her

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notice of rescission triggered an additional one-year period for filing suit under § 1640. We concluded, however, that § 1640 was irrelevant, and now hold that adopting § 1640’s one-year statute of limitations to rescission actions contradicts the plain language of the statute. [5] We are bound by Miguel, not only as to its “logically necessary” holdings but also as to its reasoned dicta. See U.S. v. Johnson, 256 F.3d 895, 914 (9th Cir. 2001) (en banc). “[W]here a panel confronts an issue germane to the eventual resolution of the case, and resolves it after reasoned consideration in a published opinion, that ruling becomes the law of the circuit, regardless of whether doing so is necessary in some strict logical sense.” Id. at 914. We thus adhere to Miguel’s conclusion that § 1635(f) is a statute of repose that represents an absolute three-year bar on rescission actions. We recognize, however, that the Supreme Court has established a clear-statement rule for treating a statutory limitation on coverage as jurisdictional. See Gonzalez v. Thaler, ___ S. Ct. ___, 2012 WL 43513, at *4 (Jan. 10, 2012); Arbaugh v. Y & H Corp., 546 U.S. 500, 515 (2006). Consistent with this intervening Supreme Court precedent, though the three-year statute is mandatory and enforceable, we withdraw our characterization of that bar as jurisdictional. [6] Because § 1635(f) is a statute of repose, it extinguished McOmie-Gray’s right to rescission on April 14, 2009, three years after the consummation of the loan. McOmie-Gray did not file her rescission suit until August 28, 2009. Therefore, the district court properly dismissed this case as untimely and, as McOmie-Gray herself conceded at oral argument, whether she and Bank of America Home Loans had an agreement tolling the statute of limitations is irrelevant. AFFIRMED.

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No. 10-16487

IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

KATHRYN MCOMIE-GRAY, Plaintiff-Appellant, v. BANK OF AMERICA HOME LOANS, Defendant-Appellee.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA No. 2:09-cv-02442

PETITION FOR PANEL REHEARING AND REHEARING EN BANC

Daniel J. Mulligan JENKINS MULLIGAN & GABRIEL LLP 10085 Carroll Canyon Road, Suite 210 San Diego, CA 92131 (415) 982-8500 Pamela D. Simmons LAW OFFICES OF SIMMONS & PURDY 2425 Porter Street, Suite 10 Soquel, CA 95073 (831) 464-6884

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TABLE OF CONTENTS I. INTRODUCTION AND RULE 35(b) STATEMENT ....................................i II. THE PANEL'S OVERREACHING INTERPRETATION OF MIGUEL UNDERMINES UNIFORMITY IN A CRITICAL AREA. ......... 2 A. By Requiring Borrowers To File A Lawsuit To Exercise The Right To Rescission, The Panel‟s Opinion Departs From The Plain Meaning Of TILA And Its Implementing Regulations. .................. 4 B. The Panel‟s Opinion Clearly Conflicts With Miguel And King, Creating Uncertainty In Truth In Lending Jurisprudence In This Circuit. ....................................................................................................... 6 III. THE QUESTION RAISED BY THIS CASE IS EXCEPTIONALLY IMPORTANT AND WARRANTS EN BANC REVIEW. ........................... 10 A. Litigation Across the Country Reflects The Nationwide Importance Of The Question Raised By This Case. ............................... 10 B. TILA Is A Critical Tool For The Protection Of Homeowners In Mortgage Transactions. ........................................................................... 11 IV. CONCLUSION. ............................................................................................... 13

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TABLE OF AUTHORITIES CASES Barnes v. Chase Home Finance, LLC, __ F. Supp. 2d __, 2011 WL 4950111 (D. Or. Oct. 18, 2011) ....................................... 4, 9 Beach v. Ocwen Fed. Bank, 523 U.S. 410 (1998) ............................ 3, 4, 6, 11 Briosos v. Wells Fargo Bank, 737 F. Supp. 2d 1018 (N.D. Cal. 2010) ... 4, 10 Buick v. World Sav. Bank, 637 F. Supp. 2d 765 (E.D. Cal. 2008) ............... 10 Burnett v. New York Central R.R. 380 U.S. 428 (1965) ............................... 11 Causey v. U.S. Bank Nat’l Ass’n, 2011 WL 6881787 (9th Cir. Dec. 29, 2011) ........................................................................ 6 Chase Bank USA, N.A., v. McCoy, 131 S. Ct. 871 (2011) ........................... 13 Hernandez v. Hilltop Fin. Mortg., 622 F. Supp. 2d 842 (N.D. Cal. 2007) ................................................................................. 10 Horton v. California Credit Corp. Retirement Plan, 2009 WL 700223 (S.D. Cal. Mar. 16, 2009) ........................................... 5, 10 Johnson v. Mortg. Elec. Registration Sys., Inc., 252 Fed. Appx. 293 (11th Cir. 2007) .................................................................................... 6 Jozinovich v. JP Morgan Chase Bank, 2010 WL 234895 (N.D. Cal. Jan. 14, 2010) .................................................................... 10 Keiran v. Home Capital, Inc., appeal docketed, No. 11-3878 (8th Cir. Dec. 30, 2011) ...................................................................... 13 King v. State of California, 784 F.2d 910 (9th Cir. 1986) .................... 1, 8, 11 Miguel v. Country Funding Corp., 309 F.3d 1161 (9th Cir.2002) ........ passim Mitchell v. Bank of Am., 2011 WL 711579 (S.D. Cal. Jan. 31, 2011) ........... 9 Pearce v. Bank of Am. Home Loans, 2010 WL 2348637 (N.D. Cal. June 8, 2010) ..................................................................... 10

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Rosenfield v. HSBC Bank, USA, appeal docketed, No. 10-1442 (10th Cir. Sept. 27, 2010) ................................................................... 13 Santos v. Countrywide Home Loans, 2009 WL 2500710 (E.D. Cal. Aug. 14, 2009)............................................................... 5, 10 Sherzer v. Homestar Mortg. Servs., appeal docketed, No. 11-4254 (3d Cir. Dec. 16, 2011) ................................................................. 12, 13 Sobieniak v. BAC Home Loans Serv., LP, appeal docketed, No. 12-1053 (8th Cir. Jan. 1, 2012); .................................................. 13 Stewart v. BAC Home Loans Serv., L.P., 2011 WL 862938 (N.D. Ill. Mar. 10, 2011) ...................................................................... 6 Wolf v. Fed. Nat'l Mortg. Ass'n, appeal docketed, No. 11-2419 (4th Cir. Dec. 23, 2011) ...................................................................... 13 Williams v. Homestake Mortg. Co., 968 F.2d 1137, 1139 (11th Cir.1992) ... 6

STATUTES 15 U.S.C. §§ 1601 et seq. ...................................................................... passim 15 U.S.C. § 1635 ......................................................................................... 5, 7 15 U.S.C. § 1635(f) ............................................................................. 2, 4, 7, 9 15 U.S.C. § 1640 ............................................................................................. 7 15 U.S.C. § 1640(e) .................................................................................... 3, 7 45 U.S.C. §§ 51 et seq. ................................................................................... 9

RULES Federal Rule of Appellate Procedure 35(b)(1)(A) .......................................... 1 Ninth Circuit Rule 35-1 .................................................................................. 1 iii

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REGULATIONS 12 C.F.R. § 226.23(a)(2) ................................................................................. 5

LEGAL TREATISES AND ARTICLES James M. Lacko & Janis K. Pappalardo, Fed. Trade Comm‟n, Improving Consumer Mortgage Disclosure; An Empirical Assessment of Current and Prototype Disclosure Forms, at ES-11 (2007), available at www.ftc.gov/os/2007/06 /P025505MortgageDisclosureReport.pdf ................................................. 11 William C. Apgar & Christopher E. Hebert, U.S. Dep‟t of Hous. & Urban Dev., Subprime Lending and Alternative Financial Service Providers: A Literature Review and Empirical Analysis § 2.2.3, at 1-15 (2006) ............................................................. 11

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I.

INTRODUCTION AND RULE 35(b) STATEMENT.

Appellant Kathyrn McOmie-Gray submits this Petition for Rehearing En Banc under Federal Rule of Appellate Procedure 35(b)(1)(A) and Ninth Circuit Rule 35-1. En banc review is warranted for several reasons. First because the panel‟s decision conflicts with this Court‟s prior decisions in Miguel v. Country Funding Corp., 309 F.3d 1161 (9th Cir. 2002) and King v. California, 784 F.2d 910 (9th Cir. 1986). Despite Judge Pallmeyer‟s1 opinion claiming that the panel was bound to follow Miguel and King, the decision completely misinterprets those cases. Second, the same issue is now pending before several circuit Courts. The case presents a question of exceptional and national importance being considered by those other Circuits. The governing agency has, for the first time, sought to be heard regarding a consumer‟s right to rescind a loan made in violation of the disclosure requirements of the federal Truth In Lending Act, 15 U.S.C. §§ 1601 et seq. (“TILA”). The Panel Opinion does what no published appellate opinion has ever done – hold that the right to rescind under TILA is extinguished if a lawsuit is not filed within three years, even if the borrower timely notified the creditor of the rescission within the same period. In so doing, the Panel

1

The Honorable Rebecca R. Pallmeyer is a District Court Judge sitting by designation from the Northern District of Illinois. 1

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Opinion completely upends consumers‟ expectations of how and when the right to rescission is exercised. Furthermore, a hearing en banc is warranted because, as noted, the government agency responsible for the rulemaking in TILA wishes to have itself heard on this question of law. The Consumer Financial Protection Bureau (“CFPB”) has recently filed requests for extensions of time to file amicus briefs in the three circuits in which there are pending appeals on this issue. The CFPB is charged with the rulemaking and enforcement of TILA and there is great need for national uniformity on this question. As such, it is necessary that the full Court have the opportunity to review this case to secure and maintain the uniformity of the Court‟s precedent, to be sure that important consumer protections be applied fairly and uniformly and in order to consider the views of the governing agency in charge of TILA. II. THE PANEL'S OVERREACHING INTERPRETATION OF MIGUEL UNDERMINES UNIFORMITY IN A CRITICAL AREA. In a dramatic departure from Circuit precedent, the panel dismissed Appellant‟s claim for rescission as untimely because it was brought more than three years after the consummation of the loan, even though she sent written notice of rescission to the lender before the expiration of the three year period. In so holding, the panel stated that it was bound by this Court‟s decision in Miguel v. Country Funding Corp., 309 F.3d 1161 (9th Cir. 2002) (“Miguel”). Slip op. at 1358. 2

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However, Miguel actually is to the contrary. Following the U.S. Supreme Court‟s decision in Beach v Ocwen Federal Bank, 523 U.S. 410 (1998), the Ninth Circuit panel in Miguel concluded that when a borrower fails to provide the lender with a written notice of rescission within three years, the borrower must bring suit for rescission within the three year period. The Court explicitly accepted the construction of rescission under TILA as enunciated by the Supreme Court in Beach; i.e., no suit is required within three years but a demand for rescission must be made within this time frame. In Beach, the Supreme Court examined the wording of the statute and specifically stated that “subsection [1635(f)] says nothing in terms of bringing an action but instead provides that the „right of rescission under the Act shall expire‟ at the end of the time period.” Beach, 523 U.S. at 417 (emphasis added and additions in original omitted). Based on this plain reading of the statute, a number of district courts in this Circuit have concluded that – following Miguel – a borrower has timely exercised the right to rescission if the notice was sent within three years, even if the lawsuit was filed outside the three year period. See Barnes v. Chase Home Finance, LLC, __ F. Supp. 2d __, 2011 WL 4950111, at *9 (D. Or. Oct. 18, 2011) (Miguel “strongly implied in its resolution of the issue that plaintiff‟s claim (which was filed more than three years after consummation of the transaction) would have been timely if the notice of rescission had been directed to the proper party within the three-year statute 3

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of repose”); Briosos v. Wells Fargo Bank, 737 F. Supp. 2d 1018, 1026 (N.D. Cal. 2010) (Miguel “recognized that § 1640(e) provides a borrower one year from the refusal of cancellation to file suit”); Santos v. Countrywide Home Loans, 2009 WL 2500710, at *5 (E.D. Cal. Aug. 14, 2009) (Miguel allows borrowers “an additional year to file suit if creditors fail to properly respond to a consumer‟s notice of rescission”); Horton v. California Credit Corp. Retirement Plan, 2009 WL 700223, at *5 (S.D. Cal. Mar. 16, 2009). The effect, then, of the Panel Opinion in McOmie-Gray is to deny borrowers the right of rescission granted to them by Congress. The decision contravenes the plain meaning of the statute, its implementing regulations, and circuit precedent, creating a serious threat to the uniformity of Ninth Circuit law on this critical issue. Moreover, because of the significant number of loans with TILA violations, the Panel Opinion, if left uncorrected, will have a broad application to the many cases still pending in the district courts.
A. By Requiring Borrowers To File A Lawsuit To Exercise The

Right To Rescission, The Panel’s Opinion Departs From The Plain Meaning Of TILA And Its Implementing Regulations. The Truth in Lending Act provides in simple terms that the right to rescind is exercised by providing notice to the creditor: The obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the materials disclosures required under 4

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this subchapter, whichever is later, by notifying the creditor, in accordance with regulations of the Bureau, of his intention to do so. 15 U.S.C. § 1635; see also Beach, 523 U.S. at 417 (§ 1635 “says nothing in terms of bringing an action”); cf. Causey v. U.S. Bank Nat’l Ass’n, 2011 WL 6881787 (9th Cir. Dec. 29, 2011) (unpublished2) (reversing dismissal of rescission suit to enforce three day unconditional right of rescission even though lawsuit was filed more than two years after consummation). Rather, Regulation Z states: To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor‟s designated place of business. 12 C.F.R. § 226.23(a)(2). Congress set up this statutory scheme to enable consumers to exercise the right of rescission by notice because it would be impractical, if not impossible, for the consumer to find an attorney, who must then prepare and file a rescission lawsuit, all within three days. Nothing in TILA or Regulation Z dictates a different result when the right of rescission is extended to three years as a result of the lender‟s failure to provide certain material disclosures at loan consummation. 15 U.S.C. § 1635(f). Merely extending a right does not change how the right is exercised. As one court recognized, it would be incongruous “to allow

2

A request to publish Causey v. U.S. Bank Nat’l Ass’n has recently been submitted to this court. 5

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rescission via letter during the „cool-off‟ period . . . but require a consumer to bring a suit to enforce that same right to rescind” during the extended three-year period. Stewart v. BAC Home Loans Serv., L.P., 2011 WL 862938 (N.D. Ill. Mar. 10, 2011). The statute is clear that homeowners need only notify the creditor of their intent to rescind within three years of consummation of the transaction to invoke the right to rescission. See Johnson v. Mortg. Elec. Registration Sys., Inc., 252 Fed. Appx. 293, 294 (11th Cir. 2007) (per curiam) (“A borrower can trigger rescission „solely by notifying the creditor within set time limits of [his or her] intent to rescind‟”) (quoting Williams v. Homestake Mortg. Co., 968 F.2d 1137, 1139 (11th Cir.1992)). Requiring anything more within three years other than notice to the creditor is a departure from TILA‟s plain statutory language.
B. The Panel’s Opinion Clearly Conflicts With Miguel And

King, Creating Uncertainty In Truth In Lending Jurisprudence In This Circuit. As noted above, the panel repeatedly states that its decision is controlled by Miguel. But in fact Miguel supports an outcome opposite to that reached by the panel. In Miguel, although the consumer sent a rescission notice to the loan servicer within the three-year period, she did not send a rescission notice to the lender. Nor did the consumer serve the lender with a lawsuit seeking rescission, which could have served as notice of rescission, within that period. While some language early in the opinion refers in passing to “claims filed” more than three years after consummation, 6

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the section of the opinion that addresses the heart of the question makes it crystal clear that the consumer has one year after sending the rescission notice to file suit, even if that means that suit is filed more than three years after consummation of the transaction: Miguel argues that she should have been allotted an additional year in which to file suit after the expiration of the three-year period afforded by the statute. While Miguel is correct that 15 U.S.C. § 1640(e) provides the borrower one year from the refusal of cancellation to file suit, that is not the issue before us. Rather, the issue is whether her cancellation was effective even though it was not received by the Bank-the creditor-within the three-year statute of repose. Nor do the facts that the Bank‟s servicing agent, Countrywide, was served within the “extended” three-year rescission period and that the Bank was added as a defendant well in advance of the expiration of § 1640's one-year statute of limitations for suing on a § 1635 failure-to-effect-rescission claim alter the jurisdictional landscape. The Bank was not required to cancel the loan because Miguel did not notify the Bank of cancellation within the limited three-year period. Because cancellation was not effected during the three-year period, the additional year statute of limitations provided by § 1640 is irrelevant; it relates to the time for filing suit once cancellation has been wrongly refused. 15 U.S.C. § 1635(f). In this case, Miguel did not provide the Bank with notice of cancellation within the three-year statutory period, so the Bank could not have wrongly refused Miguel's request to cancel. Therefore, § 1640 does not apply. Miguel, 309 F.3d at 1165 (emphasis added). A number of district courts have confirmed that under Miguel, cancellation of the loan may be effectuated by giving notice within the three-year period, and a borrower has another year to file suit if the creditor fails to comply with the borrower‟s 7

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invocation of the right of rescission. See Barnes, 2011 WL 4950111, at *9); Mitchell v. Bank of Am., 2011 WL 711579 (S.D. Cal. Jan. 31, 2011) (concluding that “when plaintiffs timely elected to rescind the loans and provided notice to the creditors, § 1635(f) did not create a limitation on the filing of suit to enforce that right”); Briosos, 737 F. Supp. 2d at 1026; Pearce v. Bank of Am. Home Loans, 2010 WL 2348637, at *4–5 (N.D. Cal. June 8, 2010) (concluding that “the statute of repose applies to the right of rescission under TILA and not the filing of a lawsuit”); Jozinovich v. JP Morgan Chase Bank, 2010 WL 234895 (N.D. Cal. Jan. 14, 2010) (rescission claim timely if loan closed on May 10, 2006, where consumer mailed rescission letter on Feb. 23, 2009, even though he filed suit only on June 1, 2009); Santos, 2009 WL 2500710, at *5; Horton, 2009 WL 700223, at *5 (S.D. Cal. Mar. 16, 2009); Buick v. World Sav. Bank, 637 F. Supp. 2d 765 (E.D. Cal. 2008) (rescission claim was timely where it was filed within a year after request for rescission); Hernandez v. Hilltop Fin. Mortg., 622 F. Supp. 2d 842 (N.D. Cal. 2007) (one-year period to file suit runs from 20th day after rescission notice, not later date when creditor faxed letter denying rescission, but equitable tolling makes suit timely). A second decision of this Court, King v. State of California, 784 F.2d 910 (9th Cir. 1986), is consistent with the view that the consumer must rescind within the three-year period, and has one year after that to file suit if the creditor refuses to perform its rescission obligations. In a brief passage, the decision states that King‟s claim for rescission of one of her loans was 8

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barred by the three-year limitation because “the period applicable to King began in June 1979 and expired in June 1982, more than a year before she filed suit.” Id. at 913 (emphasis added). While the opinion does not analyze the interplay between the three-year period and the one-year period in any detail, it explains that the consumer could have filed suit up to, but not more than, a year after rescinding.3
3

Even if the Panel Opinion were correct in its conclusion that the TILA statute of repose requires a lawsuit be commenced within three years, the Supreme Court has made clear, in a case cited by Beach) and Miguel , that even a statute of repose does not serve as an absolute bar to filing a lawsuit. Burnett v. New York Central R.R. 380 U.S. 428, 429 (1965). The Court must still weigh the rights of the parties, the intent of the legislation and the interests of justice: This policy of repose, designed to protect defendants, is frequently outweighed, however, where the interests of justice require vindication of the plaintiff's rights. Thus, this Court has held that an FELA action is not barred, though brought more than three years after the cause of action accrued, where a defendant misled the plaintiff into believing that he had more than three years in which to bring the action. Burnett, 380 U.S. at 429. Burnett acknowledges the difference between statutes of repose (substantive limitations) and statutes of limitations (procedural limitations), but concludes that the distinction is not always conclusive. Either way, the Court is obliged to weigh the purpose of the legislation and the parties‟ rights. Id. at 426-27 n. 2. Those interests here are remarkably similar to those in Burnett. There, as here, the purpose of the legislation is to create, protect and extend individual rights. There, as here, the plaintiff met the initial procedural requirements to “advance the claim”, but her actual filing of the federal lawsuit came after the proscribed three years. There, as here, the defendant misled the plaintiff into believing there was more time to file than there was. Here, Bank of America entered into tolling agreements with Plaintiff before the expiration of the three year period. Only once the three years had passed – not because Plaintiff was dilatory in exercising her rights in any way – did the Bank change its stated 9

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III. THE QUESTION RAISED BY THIS CASE IS EXCEPTIONALLY IMPORTANT AND WARRANTS EN BANC REVIEW.
A. Litigation Across the Country Reflects The Nationwide

Importance Of The Question Raised By This Case. Predictably, the prevalence of disclosure violations present in highcost loans has led to an abundance of pending litigation related to the availability of the extended right of rescission. While there is a dearth of appellate case law on the particular issue decided in this case, a number of cases in other circuits that raise the identical issue are pending appellate review. See, e.g., Sherzer v. Homestar Mortg. Servs., appeal docketed, No. 11-4254 (3d Cir. Dec. 16, 2011); Wolf v. Fed. Nat'l Mortg. Ass'n, appeal docketed, No. 11-2419 (4th Cir. Dec. 23, 2011); Keiran v. Home Capital, Inc., appeal docketed, No. 11-3878 (8th Cir. Dec. 30, 2011); Sobieniak v. BAC Home Loans Serv., LP, appeal docketed, No. 12-1053 (8th Cir. Jan. 1, 2012); Rosenfield v. HSBC Bank, USA, appeal docketed, No. 10-1442 (10th Cir. Sept. 27, 2010). Even the Consumer Financial Protection Bureau has recognized the importance of the central issue to this case. The CFPB has stated that they intend to file amicus briefs stating their position on this issue on April 13 in position on the effect of a tolling agreement, after Plaintiff had relied upon it. The Panel was required to review the parties‟ respective positions before absolutely imposing a statute of repose. The Panel Opinion‟s omission of this analysis is in contradiction to what Supreme Court precedent requires. 10

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three of the above cases on appeal: Wolf, Sherzer, and Sobieniak. See, e.g., Joint Motion filed by Amicus Curiae Consumer Financial Protection Bureau for Extension of Time, Sherzer, No. 11-4254 (3d Cir. Feb. 29, 2012) (attached as Appendix A). The CFPB‟s position is entitled to deference from this court. Chase Bank USA, N.A., v. McCoy, 131 S. Ct. 871, 881 (2011). Granting Appellant‟s rehearing request will allow the Court to consider the considerable knowledge and administrative expertise that the Bureau brings to this issue, something that had not been available before now.
B. TILA Is A Critical Tool For The Protection Of

Homeowners In Mortgage Transactions. Mortgages, and particularly the negatively amortizing, interest-only, hybrid and variable rate loans prevalent during the mortgage bubble of the previous decade, are exceedingly complex transactions. TILA, with its requisite disclosures and concomitant enforcement right, is virtually the only tool available to protect borrowers from mortgage fraud, deception and abuse. While TILA‟s disclosure-based regulations are often inadequate4,
4

William C. Apgar & Christopher E. Hebert, U.S. Dep‟t of Hous. & Urban Dev., Subprime Lending and Alternative Financial Service Providers: A Literature Review and Empirical Analysis § 2.2.3, at 1-15 (2006) (“Unfortunately, given the bewildering array of mortgage products available, even the most sophisticated borrower will find it difficult to evaluate the details of a mortgage.”); James M. Lacko & Janis K. Pappalardo, Fed. Trade Comm‟n, Improving Consumer Mortgage Disclosure; An Empirical Assessment of Current and Prototype Disclosure Forms, at ES-11 (2007), available at www.ftc.gov/os/2007/06 11

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they are nevertheless the only legally mandated means through which borrowers can understand the nature of their loans, in the face of “bait and switch” or other dissembling tactics by sometimes unscrupulous mortgage brokers and lenders. Given the requirement that TILA be liberally construed in favor of the consumer, the rescission right should be strictly enforced as a means of deterring irresponsible lending.

///

///

///

/P025505MortgageDisclosureReport.pdf (prime borrowers have difficulty answering questions about their loans; difficulty increases as loan becomes more complex). 12

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IV. CONCLUSION. For the reasons stated, rehearing en banc and/or panel rehearing should be granted.

WHEREFORE, Plaintiff respectfully requests that this matter be reversed and remanded.

Dated: March 1, 2012 Respectfully Submitted JENKINS MULLIGAN & GABRIEL LLP LAW OFFICES OF SIMMONS & PURDY

By: /s/ Daniel J. Mulligan

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CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME LIMITATION, TYPEFACE REQUIREMENTS, AND TYPE STYLE REQUIREMENTS 1. This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because this brief contains 3,100 words as counted by the Microsoft Word 2007 word processing system. 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using Microsoft Word and Times New Roman 14 point type.

/s/ Daniel J. Mulligan March 1, 2012

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CERTIFICATE OF SERVICE I hereby certify that I electronically filed the foregoing with the Clerk of the Court for the Unites States Court of Appeals for the Ninth Circuit by using the appellate CM/SCF system on March 1, 2012.

I certify that all participants in the case are registered CM.ECF users and that service will be accomplished by the appellate CM/ECF system.

/s/ Daniel J. Mulligan

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
KATHRYN MCOMIE-GRAY, Plaintiff-Appellant, v. BANK OF AMERICA HOME LOANS, FKA Countrywide Home Loans, Inc., Defendant-Appellee.

  
No. 10-16487 D.C. No. 2:09-cv-02422MCE-EFB OPINION

Appeal from the United States District Court for the Eastern District of California Morrison C. England, District Judge, Presiding Argued and Submitted December 6, 2011—San Francisco, California Filed February 8, 2012 Before: Carlos T. Bea and Stephen S. Trott, Circuit Judges, and Rebecca R. Pallmeyer, District Judge.* Opinion by Judge Pallmeyer

* The Honorable Rebecca R. Pallmeyer, United States District Judge for the Northern District of Illinois, sitting by designation.

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MCOMIE-GRAY v. BANK OF AMERICA

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COUNSEL Thomas A. Jenkins and Daniel Joseph Mulligan, San Diego, California; Larry Wayne Gabriel, Woodland Hills, California; Jenkins Mulligan & Gabriel LLP; Pamela Simmons, Simmons & Purdy, Soquel, California, for the plaintiff-appellant. James Goldbert, Bryan Cave LLP, San Francisco, California, for the defendant-appellee. Tara A. Twomey, Carmel, California, for the amicus.

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1358

MCOMIE-GRAY v. BANK OF AMERICA

OPINION PALLMEYER, District Judge: Kathryn McOmie-Gray appeals the dismissal of her lawsuit for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). McOmie-Gray sought rescission of her loan secured by a trust deed with Bank of America Home Loans (“the Bank”) for alleged violations of disclosure requirements under the federal Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq. On the Bank’s motion, the district court dismissed the suit as untimely because it was filed after the three-year period set by 15 U.S.C. § 1635(f). McOmie-Gray argues that because she gave the Bank timely notice of rescission, she was not required to bring suit within the three-year period, and the district court erred in dismissing this case. For us, the question presented is a matter of first impression. McOmie-Gray cites decisions from several district courts in this circuit that apply the one-year statute of limitations set forth in 15 U.S.C. § 1640(e), measuring the time from the date on which the lender fails to respond to the borrower’s notice of rescission. We disagree with those courts, and conclude, as set forth below, that the time limit established by 15 U.S.C. § 1635(f) is applicable here. Moreover, as we explained in Miguel v. Country Funding Corp., 309 F.3d 1161 (9th Cir. 2002), 15 U.S.C. § 1635(f) is a three-year statute of repose, requiring dismissal of a claim for rescission brought more than three years after the consummation of the loan secured by the first trust deed, regardless of when the borrower sends notice of rescission. I On April 14, 2006, McOmie-Gray obtained a first trust deed loan from Paramount Equity Mortgage. At the closing, McOmie-Gray was presented with several loan documents to

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MCOMIE-GRAY v. BANK OF AMERICA

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sign, including two Notice of Right to Cancel forms. McOmie-Gray alleges, however, that neither of these forms explained when the borrower’s right to cancel would expire. Subsequently, Paramount assigned its interest in the loan to Countrywide Home Loans, Inc., a company that the Bank later acquired. On January 18, 2008, McOmie-Gray, through her attorney, sent the bank notice of her intent to rescind the loan, citing the Bank’s failure to advise McOmie-Gray of the final date to cancel the transaction. The Bank refused rescission, asserting that McOmie-Gray had received proper notice of her right to rescind. According to McOmie-Gray, although the Bank initially refused to accept her notice of rescission, it “negotiated with [her] for over a year regarding the rescission.” McOmieGray’s Opening Brief at 5. McOmie-Gray further alleges that to facilitate this negotiation, the Bank agreed to toll the statute of limitations with respect to her TILA claims until August 30, 2009. On August 28, 2009, McOmie-Gray filed a complaint with the district court seeking rescission of the loan secured by a first trust deed. On the Bank’s motion, the district court dismissed the initial complaint with leave to amend because McOmie-Gray failed to allege tender. McOmie-Gray then filed her First Amended Complaint on March 30, 2010. The district court dismissed the First Amended Complaint as well. In its June 23, 2010 order, the court concluded that McOmieGray’s right to rescission was subject to a three-year statute of repose under 15 U.S.C. § 1635(f). Because this period expired on its face on April 14, 2009—three years after the consummation of the mortgage transaction—the court concluded that McOmie-Gray’s claim was time-barred. The court made no mention of the alleged tolling agreement. II [1] TILA protects consumers from fraud, deception, and abuse within the residential secured lending marketplace by

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mandating that lenders disclose certain information to borrowers. To ensure that lenders comply with these disclosure requirements, TILA grants borrowers the right to rescind a home-secured loan in the event the lender has failed to make the required disclosures. Specifically, § 1635(a) provides that a borrower shall have a right to rescind a loan secured by the borrower’s residence by providing prompt notice to the creditor: [T]he obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later, by notifying the creditor, in accordance with regulations of the [Federal Reserve Board], of his intention to do so. 15 U.S.C. § 1635(a). Regulation Z, promulgated by the Federal Reserve Board, confirms that notification is the means by which borrowers exercise their right to rescind: To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor’s designated place of business. 12 C.F.R. § 226.23(a)(2). Rescission is not automatic upon a borrower’s mere notice of rescission, as McOmie-Gray contends, however. Instead, where a lender fails to comply with § 1635(b), the statute and regulations contemplate that a borrower, who by sending notice of rescission has “advanced a claim seeking rescission,” will seek a determination that

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rescission is proper. Large v. Conseco Fin. Servicing Corp., 292 F.3d 49, 55 (1st Cir. 2002). [2] Section 1635 does not explicitly establish a time limit in which borrowers must bring suit for rescission if a lender does not comply with the rescission request. Indeed, it “says nothing in terms of bringing an action” or “a suit’s commencement.” Beach v. Ocwen Fed. Bank, 523 U.S. 410, 417 (1998). Where the borrower alleges, as McOmie-Gray has here, that “proper notice of rescission rights is not delivered to the consumer at the time of closing, and the lender fails to cure the omission by subsequently providing the proper information, the consumer’s usual right to rescind within three days of closing is extended to three years.” Miguel v. Country Funding Corp., 309 F.3d 1161, 1163 (9th Cir. 2002). Specifically, § 1635(f) provides: An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor. 15 U.S.C. § 1635(f). In another section of the Act, 15 U.S.C. § 1640, Congress created a claim for damages for a lender’s violation of TILA, adopting a one-year statute of limitations for such actions. This provision makes no mention of rescission which, as noted, is governed by § 1635 and its three-year statute of repose. III [3] Were we writing on a blank slate, we might consider whether notification within three years of the transaction could extend the time limit imposed by § 1635(f). But under the case law of this court and the Supreme Court, rescission

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suits must be brought within three years from the consummation of the loan, regardless whether notice of rescission is delivered within that three-year period. In Beach, the Supreme Court addressed whether mortgagors, who never sent a notice of rescission to the lender, could nonetheless raise the right of rescission as “an affirmative defense in a collection action brought more than three years after the consummation of the transaction.” 523 U.S. at 41112. The mortgagors conceded that any right they may have had to institute an independent proceeding for rescission under § 1635 lapsed . . . three years after they closed the loan with the bank, but they argue[d] that the restriction to three years in § 1635(f) is a statute of limitation governing only the institution of suit and accordingly has no effect when a borrower claims a § 1635 right of rescission as a “defense in recoupment” to a collection action. Id. at 415. The Court rejected this proposed reading of § 1635(f). Specifically, the Court observed that [s]ection 1635(f) . . . takes us beyond any question whether it limits more than the time for bringing a suit, by governing the life of the underlying right as well. The subsection says nothing in terms of bringing an action but instead provides that the “right of rescission [under the Act] shall expire” at the end of the time period. It talks not of a suit’s commencement but of a right’s duration, which it addresses in terms so straightforward as to render any limitation on the time for seeking a remedy superfluous. Id. at 417 (alteration in original). The plain meaning of the Act, the Court concluded, “permits no federal right to rescind, defensively or otherwise, after the 3-year period of § 1635(f)

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has run.” Id. at 419 (emphasis added). Thus, the Court held that the mortgagor could not raise the right to rescind as a defense to the mortgagee’s foreclosure action after the threeyear period had run. Id. The language the Court used, however, broadly assumes that a three-year limitation governs cases where a borrower, as plaintiff, seeks rescission of the mortgage transaction. Following the Supreme Court’s holding in Beach, we addressed the question whether a borrower may file a lawsuit seeking rescission beyond the three-year period if the borrower never sent a timely notice of rescission. Miguel, 309 F.3d 1161. In Miguel, the borrowers refinanced their home on December 1, 1994. On November 7, 1997, the borrowers sent notice of rescission to the mortgage servicer, an agent of the actual lienholder. The borrowers filed suit against the agent on December 1, 1997, exactly three years from the closing date. When the borrowers realized that they had sued the wrong entity, they filed an amended complaint that included the lienholder as a defendant on June 17, 1998, well after the three-year period had expired. The district court concluded that the borrower was entitled to rescission. Id. at 1162-63. [4] On appeal, we reversed and held that the borrowers’ right to rescission had expired because the bank did not receive a notice of rescission within three years from the consummation of the transaction. Id. at 1165. We relied on Beach and a Ninth Circuit opinion holding “that section 1635(f) represents an ‘absolute limitation on rescission actions’ which bars any claims filed more than three years after the consummation of the transaction.” Id. at 1164 (citing King v. California, 784 F.2d 910, 913 (9th Cir. 1986)). The Miguel court concluded in broad language that “§ 1635(f) is a statute of repose, depriving the courts of subject matter jurisdiction when a § 1635 claim is brought outside the three-year limitation period.” Id. at 1164. Section 1635(f) is therefore not merely a statute of limitations—it completely extinguishes the underlying right itself. The plaintiff in Miguel argued that her

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notice of rescission triggered an additional one-year period for filing suit under § 1640. We concluded, however, that § 1640 was irrelevant, and now hold that adopting § 1640’s one-year statute of limitations to rescission actions contradicts the plain language of the statute. [5] We are bound by Miguel, not only as to its “logically necessary” holdings but also as to its reasoned dicta. See U.S. v. Johnson, 256 F.3d 895, 914 (9th Cir. 2001) (en banc). “[W]here a panel confronts an issue germane to the eventual resolution of the case, and resolves it after reasoned consideration in a published opinion, that ruling becomes the law of the circuit, regardless of whether doing so is necessary in some strict logical sense.” Id. at 914. We thus adhere to Miguel’s conclusion that § 1635(f) is a statute of repose that represents an absolute three-year bar on rescission actions. We recognize, however, that the Supreme Court has established a clear-statement rule for treating a statutory limitation on coverage as jurisdictional. See Gonzalez v. Thaler, ___ S. Ct. ___, 2012 WL 43513, at *4 (Jan. 10, 2012); Arbaugh v. Y & H Corp., 546 U.S. 500, 515 (2006). Consistent with this intervening Supreme Court precedent, though the three-year statute is mandatory and enforceable, we withdraw our characterization of that bar as jurisdictional. [6] Because § 1635(f) is a statute of repose, it extinguished McOmie-Gray’s right to rescission on April 14, 2009, three years after the consummation of the loan. McOmie-Gray did not file her rescission suit until August 28, 2009. Therefore, the district court properly dismissed this case as untimely and, as McOmie-Gray herself conceded at oral argument, whether she and Bank of America Home Loans had an agreement tolling the statute of limitations is irrelevant. AFFIRMED.

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