Like many states, Louisiana has an unfair trade practices act. In Louisiana, it is known as the Louisiana Unfair Trade Practices and Consumer Protection Law. Just as the name implies, this law is meant to protect consumers from the unfair, misleading, or fraudulent acts of those provide services, goods, and financing. Any contract or agreement entered into in violation of this law is void. However, the Louisiana Unfair Trade Practices and Consumer Protection Law (“Law”) has a serious limitation; it does not apply to a financial institution that is federally insured, including most banks and lending institutions.
The Law’s limitation means that an average mortgage arrangement from a large or national financial institution will not be affected by the protection that the Law affords. The United States Court of Appeals for the Fifth Circuit provides an example of this exception in a recent decision. In that case, a woman arranged for a home mortgage through Bank of America. Bank of America then assigned the mortgage to Wells Fargo. Both of these companies are large financial institutions that are federally insured.
When the woman defaulted on her mortgage, Wells Fargo sought to foreclose on her home. She applied for assistance from a federal government program called Home Affordable Modification Program (“HAMP”) during the foreclosure process. HAMP is designed to help modify mortgages for those who are in foreclosure proceedings so that they can keep their homes and pay a more affordable monthly payment. While the woman’s HAMP application was pending, the foreclosure proceeding was supposed to be put on hold. However, despite this application, her home was sold at a foreclosure sale before she received word back from HAMP to determine whether he application had been approved. She also claimed that she did not receive notice of the sale. Essentially, she argued that her home was sold out from under her without her knowledge.
She attempted to sue both Bank of America and Wells Fargo. She argued that Bank of America should not have allowed Wells Fargo to purchase the mortgage. She also argued that the foreclosure proceedings violated the Louisiana Unfair Trade Practices and Consumer Protection Law. However, the state court determined that even if they did violate the Law, the Law did not apply to them because of the financial institutions exception.
After a loss in state court, the woman appealed the case to the federal district court. However, the district court pointed out that it cannot sit as a court of appeals for state-exclusive actions. That means that the federal district court cannot hear a case where the only arguments are based on state law. Instead, a district court can only hear a case where there is some sort of federal jurisdiction based on either federal law or involves parties from different states, unless Congress has authorized the district court to act otherwise. Nonetheless, where a case questions the procedures of the state court, instead of applying substantive state law, then the federal court could hear the case. For example, if the woman argued that he procedure violated her constitutional rights, then the district court would likely be able to hear the case. This concept is known as the Rooker-Feldman doctrine. As the court explains, “Reduced to its essence, the Rooker-Feldman doctrine holds that inferior federal courts do not have the power to modify or reverse state court judgments except where authorized by Congress.”
In this case, the woman complained that the proceedings in the state court were incorrect; therefore, she was not just asking the district court to review the state court decision. As a result, the district court had the authority to review the case. Despite that fact, the woman failed to state a claim because both Bank of America and Wells Fargo are federally insured financial institutions that are not subject to the Louisiana Unfair Trade Practices and Consumer Protection Law. That meant that the Court of Appeals had to affirm the lower court, and the woman failed in her efforts to appeal.
It may have been possible to assert other arguments based on federal law, but the woman failed to do so. In fact, there were several arguments that the woman waived because she failed to timely assert them. In an appeal, if you do not assert every argument that you have in your opening brief, then you effectively lose the ability to use that argument at any point in the rest of the appeal. In this case, this may have been crucial to the woman’s case because she failed on the arguments that she presented originally (the state law claims). That point highlights the importance of competent attorneys who can argue effectively for you.