No Standing for Federal Lawsuit Based on Late Recording of Mortgage Satisfaction

The Eleventh Circuit Court of Appeals recently ruled that a plaintiff did not have standing to maintain a claim in federal court, even though state law provided for statutory penalties. For the late filing of mortgage satisfactions, New York law provides an escalating penalty based on the amount of time that passes between the payoff of the mortgage loan and the filing of the satisfaction. The mortgagor, however, did not allege potential or actual harm caused by the late filing of the satisfaction, other than the statutory penalty. This meant that he may have a viable claim in state court, but he did not have Article III standing under the Constitution to maintain his state law claim in federal court.

In Nicklaw v. CitiMortgage, plaintiff brought a putative class action for the late filing of mortgage satisfactions under the New York statute. CitiMortgage had failed to record plaintiff’s mortgage satisfaction until a little over 90 days had passed after the payoff of the mortgage loan. This time frame triggered a $1500 penalty under New York State law. Plaintiff did not commence his lawsuit until two years after CitiMortgage had recorded the satisfaction.

The district court originally dismissed the lawsuit because of mootness. On appeal, CitiMortgage argued for the first time that the federal courts did not have subject matter jurisdiction. Plaintiff lacked standing because he had not sustained an injury. The Eleventh Circuit agreed. Standing is a “bedrock requirement” that consists of “injury in fact, causation, and redressability.” Plaintiff could not meet the first requirement of injury in fact because he had not suffered a “concrete, particularized, and actual or imminent” “invasion of a legally protected interest.”

Relying on the Supreme Court’s recent decision in Spokeo, Inc. v. Robins, the Court of Appeals explained “Article III standing requires a concrete injury even in the context of a statutory violation.” A statutory violation alone was not sufficient to show “harm or material risk of harm.”

Intangible injuries can be sufficient to satisfy the Article III requirements, but in this lawsuit any intangible harm caused by the delay in recording was not sufficient. The Court of Appeals distinguished cases involving requests to execute and record mortgage satisfactions. Such cases provided remedies based on risks of harm that could occur because of the clouded title – not after the cloud had been lifted, which was the case for this Plaintiff. In addition, Plaintiff did not allege any lost money, damage to his credit, or even that he was aware of the late recording of the satisfaction at the time. Thus, there was no harm or material risk of harm that could be remedied by a lawsuit.

Although Nicklaw may have had a right to sue in a New York court, Article III had to be satisfied for him to maintain an action in federal court. Without some harm or risk of harm, federal courts are without jurisdiction to hear such a case. The Eleventh Circuit Court of Appeals therefore dismissed the appeal for lack of jurisdiction.

Weiner Brodsky Kider regularly represents clients against class action claims throughout the United States.