TILA SuppBrief PDF

Case: 13-35716, 10/11/2016, ID: 10155914, DktEntry: 29, Page 1 of 28
No. 13-35716
UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT
TIMOTHY BARNES,
Plaintiff - Appellant,
v.
CHASE HOME FINANCE, LLC, a Delaware corporation; CHASE BANK

USA, N.A., a subsidiary of JP Morgan Chase & Co., a Delaware corporation;
IBM LENDER BUSINESS PROCESS SERVICES, INC., a Delaware corporation;
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
Defendants - Appellees.
PLAINTIFF-APPELLANTS SUPPLEMENTAL OPENING BRIEF
Matthew A. Carvalho
YARMUTH WILSDON PLLC
1420 Fifth Avenue, Suite 1400
Seattle, WA 98101
206.516.3800
Pro Bono Counsel of Record for
Appellant Timothy Barnes
TABLE OF CONTENTS
INTRODUCTION .....................................................................................................1
JURISDICTIONAL STATEMENT ..........................................................................2
ISSUES PRESENTED...............................................................................................2
STATEMENT OF THE CASE ..................................................................................3
SUMMARY OF ARGUMENT .................................................................................8
STANDARD OF REVIEW .....................................................................................10
ARGUMENT ...........................................................................................................10
A. The District Courts Dismissal of Mr. Barness Rescission

Claim Should be Reversed Because That Claim was Timely
Filed. ....................................................................................................11
B. The District Court Erred by Granting Summary Judgment

for Defendants on Mr. Barness Claims for Declaratory and
Injunctive Relief. .................................................................................14
C. The District Courts Grant of Summary Judgment on

Mr. Barness Claims for Damages Should be Reversed. ....................14
D. The Judgment of the District Court Should be Reversed Against

All Defendant-Appellees to Ensure That the District Court, on
Remand, can Craft an Appropriate Remedy on a Complete
Record..................................................................................................18
CONCLUSION ........................................................................................................21
i
TABLE OF AUTHORITIES
Cases
Gilbert v. Residential Funding LLC,
678 F.3d 271 (4th Cir. 2012) ................................................................................13
Hauk v. JP Morgan Chase Bank USA,
552 F.3d 1114 (9th Cir. 2009) ....................................................................... 12, 17
In re Ferrell,
539 F.3d 1186 (9th Cir. 2008 ) ...................................................................... 17, 19
Jesinoski v. Countrywide Home Loans, Inc.,
135 S.Ct. 790, 190 L.Ed.2d 650 (2015) ....................................................... passim
Johnson v. Poway Unified Sch. Dist.,
658 F.3d 954 (9th Cir. 2011) ................................................................................11
Keiran v. Home Capital, Inc.,
720 F.3d 721 (8th Cir. 2013) ................................................................................13
McOmie-Gray v. Bank of America Home Loans,
667 F.3d 1325 (9th Cir. 2012) ..................................................................... 1, 7, 13
Miguel v. Country Funding Corp.,
309 F.3d 1161 (9th Cir 2002) ...............................................................................20
Paatalo v. JP Morgan Chase,
146 F. Supp.2d 1239 (D. Or. 2015) ......................................................................20
Rosenfield v. HSBC Bank, USA,
681 F.3d 1172 (10th Cir. 2012) ............................................................................13
Rubio v. Capital One Bank,
613 F.3d 1195 (9th Cir. 2010) ....................................................................... 12, 17
Semar v. Platte Valley Fed. Sav. & Loan Ass'n,
791 F.2d 699 (9th Cir.1986) .......................................................................... 12, 13
Sherzer v. Homestar Mortgage Servs.,
707 F.3d 255 (3d Cir. 2013) .................................................................................13
Statutes
15 U.S.C. 1601 ......................................................................................................12
ii
15 U.S.C. 1635(a) .................................................................................................12

15 U.S.C. 1635(b) .................................................................................................13
28 U.S.C. 1291 ........................................................................................................2
28 U.S.C. 1331 ........................................................................................................2
28 U.S.C. 1367 ........................................................................................................2
Regulations
12 C.F.R. 226, Appx. .................................................................................................4
12 C.F.R. 226.23(d)(2) ................................................................................ 18, 19, 22
26 C.F.R. 226.23(a)(2) .............................................................................................18
iii
INTRODUCTION
This appeal concerns an action filed pro se in the District Court by Plaintiff-
Appellant Timothy Barnes against certain financial institutions and their servicing
agents over a loan Mr. Barnes obtained to refinance his home. Mr. Barnes sought
to rescind the loan pursuant to the Truth in Lending Act based on anomalies in the
disclosures he received at closing. The Defendants argued that Mr. Barness
rescission claim was untimely. While the case was pending in the District Court,
this Court decided a case called McOmie-Gray v. Bank of America Home Loans,
667 F.3d 1325 (9th Cir. 2012), which supported Defendants position. The District
Court dismissed Mr. Barness rescission claim in reliance on that authority, and
later granted summary judgment on Mr. Barness remaining claims.
This appeal followed. On January 13, 2015, after the parties finished
briefing the issues, the Supreme Court decided Jesinoski v. Countrywide Home
Loans, Inc., 135 S.Ct. 790, 190 L.Ed.2d 650 (2015), which rejected the reasoning
of McOmie-Gray. Undersigned counsel was appointed by the Court as pro bono
counsel for Mr. Barnes and has been authorized by Mr. Barnes to supplement the
arguments made in his Opening and Reply Briefsparticularly regarding the
effect of Jesinoski on the District Courts judgment. As explained below, the
District Courts early dismissal of the rescission claim on timeliness groundsan
1
error under Jesinoskiprevented the District Court from adequately considering
Mr. Barness other claims on a fully-developed record. This Court should thus
reverse the judgment of the District Court and remand for further proceedings.
JURISDICTIONAL STATEMENT
The District Court had subject matter jurisdiction over Plaintiff-Appellant
Timothy Barness statutory claims pursuant to 28 U.S.C. 1331, and had subject
matter jurisdiction over his remaining claims under 28 U.S.C. 1367. He timely
appealed on August 8, 2013 from a final judgment disposing of all claims, and
accordingly this Court has jurisdiction pursuant to 28 U.S.C. 1291.
ISSUES PRESENTED
The issues presented for review, which are addressed in this Supplemental
Brief as well as Mr. Barness Opening Brief, are: (1) whether the District Court
erred in dismissing Mr. Barness rescission claim as untimely; (2) whether the
District Court erred in granting summary judgment for the Defendant-Appellees on
Mr. Barness claims for declaratory relief and statutory damages because these
claims depended on the timeliness of his rescission claim; (3) whether the
District Court erred in granting summary judgment for the Defendant-Appellees on
Mr. Barness claims for damages, and thus (4) whether the judgment should be
2
reversed as to all Defendant-Appellees and remanded to the District Court for
further proceedings.
STATEMENT OF THE CASE
Plaintiff-Appellant Timothy Barnes brought an action under the Truth in
Lending Act (TILA) in the District Court against Defendant-Appellants Chase
Home Finance, LLC (CHF), Chase Ban USA, N.A. (CBUSA), IBM Lender
Business Process Services, Inc. (LBPS), and ten John Doe defendants on
February 4, 2011. ER 312-60. Defendant-Appellee Federal National Mortgage
Association (Fannie Mae) was later added as a defendant in an amended
complaint. ER 259-309, 28-29.
The complaint arose from a loan agreement Mr. Barnes had entered into
with Defendant-Appellee Chase Bank USA, N.A. (CBUSA) on or about
November 15, 2007 to refinance his home in Independence, Oregon. ER 12. The
loan documents included a Note dated November 14, 2007 naming CBUSA as the
lender. ER 12, Supp. ER 3-7. In addition, Mr. Barnes signed a Deed of Trust
dated November 15, 2007 for the benefit of CBUSA to secure the Note. ER 12,
Supp. ER 8-22. Chase Home Finance, LLC (CHF) acted as the loan servicer on
behalf of CBUSA. ER 12.
3
At the time the loan closed, First American Title Company of Oregon, acting
as CBUSAs closing agent, provided Mr. Barnes with two unsigned copies of a
Notice of Right to Cancel, which stated that the loan closed on November 14,
2007. ER 12-13. Those notices used language which wasother than the dates
consistent with the model form notice of the right to rescission under TILA
provided by the Federal Reserve Board. ER 13 (citing 12 C.F.R. 226, Appx. H-8).
However, when Mr. Barnes later obtained copies of those notices from the closing
agent, he observed what appeared to be changed dates, interlineations, and forged
initials. ER 43-45.
Mr. Barnes mailed copies of an Actual Notice to Rescind the loan
transaction to CHF and CBUSA at those entities addresses of record on August 4,
2010. ER 14; ER 194-200. His notice invoked a right of rescission under TILA
that must be effected within three years of the loan transaction. The notice sent to
CHF was received. ER 14; 194-200. For reasons that are unclear from the record,
the notice sent to CBUSA was returned undelivered. Id.
In a letter dated September 13, 2010, CHF notified Mr. Barnes that it was
transferring the right to service the loan to LBPS effective October 1, 2010,
without acknowledging or addressing the rescission notice. LBPS in fact assumed
the role of servicer on that effective date. ER 12; ER 14; ER 201; ER 211-12.
4
Mr. Barnes followed up by sending a notice of intent to rescind to LBPS on
October 23, 2010, advising that he had rescinded the loan. ER 14; ER 211-12.
LBPS did not respond until January 21, 2011. In a letter on that date, LBPS
advised Mr. Barnes that his three-year right of rescission had expired. ER 14; ER
209-10. That letter also notified Mr. Barnes for the first time that his loan had
been assigned by CBUSA to Fannie Mae. Id.
Mr. Barnes filed his complaint on February 4, 2011. ER 312-60. In his
complaint, Mr. Barnes alleged violations of TILA and its implementing Regulation
Z, based on the defendants alleged failure to respond to his notice of intent to
exercise his statutory right to rescind a mortgage loan. Id.
The District Court construed Mr. Barness complaint as alleging claims for:
(1) rescission of the mortgage loan, (2) a declaratory judgment that the defendants
had no valid security interest in the subject property, (3) statutory and actual
damages in connection with defendants alleged failure to provide adequate notice
of Mr. Barness right to rescind at the time the loan documents were signed,
(4) statutory and actual damages in connection with the failure of CHF and
CBUSA to effect rescission of the mortgage loan, and (5) injunctive relief to enjoin
the defendants from initiating or prosecuting non-judicial foreclosure proceedings
on the property, from recording any deeds or mortgages regarding the property,
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or from taking any steps to deprive him of his ownership rights in the property.
ER 122.
Defendants filed motions to dismiss, and on June 10, 2011, the Magistrate
Judge hearing those motions recommended that the District Court dismiss Mr.
Barness rescission claim for lack of subject matter jurisdiction on the ground that
it was untimely, and that the court dismiss his remaining claims for failure to state
a claim. ER 114-34. The Magistrate Judge reasoned that the three-year limitations
period established by TILA required Mr. Barnes to file suit within three years, and
his complaint was thus untimely even though he had sent his rescission notices
within three years of the transaction. Id.
The District Court, in an order dated October 18, 2011, declined to follow
that aspect of the Magistrate Judges recommendation and determined that having
sent notice within three years, Mr. Barnes had timely effected rescission under
TILA. ER 79-113. The District Court instructed the Magistrate Judge to consider
the remaining issues. Id. Shortly thereafter, CHF and CBUSA voluntarily
withdrew their motion to dismiss, and the Magistrate Judge recommended that
LBPSs motion to dismiss be denied (a recommendation the District Court
adopted on March 6, 2012). ER 63-78, 59-61.
6
On November 10, 2011, Mr. Barnes filed a Second Amended Complaint, in
which he amended his complaint to add the Federal National Mortgage Association
(Fannie Mae) as an additional defendant and to remove a claim for statutory
damages dismissed by the District Court on October 18, 2011an amendment
deemed effective by the District Court. ER 259-309, 28-29.
Then, on February 8, 2012, this Court decided McOmie-Gray v. Bank of
America Home Loans, 667 F.3d 1325 (9th Cir. 2012). The Court rejected the
analysis relied upon by the District Court when it declined to adopt the Magistrate
Judges January 10, 2011 Findings and Recommendation. Based on that new
authority, the Magistrate Judge renewed his recommendation that Mr. Barness
rescission claim be dismissed against all defendants for failure to state a claim
upon which relief can be granted. ER 37-58. The District Court adopted that
recommendation on June 20, 2012 and dismissed Mr. Barness rescission claim as
to all defendants. ER 28-35.
Discovery followed, and the parties filed cross motions for summary
judgment on the remaining claims for declaratory and injunctive relief, and for
statutory damages. ER 135-216. The Magistrate Judge concluded that Mr.
Barness claims for declaratory and injunctive relief depend[ed] in their entirety
on the earlier-dismissed rescission claim, and recommended summary judgment
7
in favor of defendants on that basis. ER 19. With respect to Mr. Barness claims
for damages based on the defendants failure to rescind, the Magistrate Judge
recommended summary judgment be granted in favor of defendants because he
concluded that Fannie Maes obligation to rescind Mr. Barness loan was never
triggered, that CHF and LBPS could notas servicershave an obligation to
rescind under TILA, and that CBUSA did not violate TILA because it did not
receive the notice of rescission prior to the expiration of Mr. Barness rescission
right. ER 20-23. The District Court adopted the Magistrate Judges findings and
recommendation on July 8, 2013, and judgment of dismissal with prejudice was
entered the next day. ER 3-5.
Mr. Barnes timely appealed (ER 1), and the parties fully briefed the appeal
in this court. See Dkt. 3-17. On December 29, 2015, the Court entered an Order
directing the Clerk of the Court to appoint pro bono counsel for purposes of this
appeal. Dkt. 22. On August 3, 2016, the Clerk entered an Order appointing
undersigned counsel as pro bono counsel for Mr. Barnes. Dkt. 23.
SUMMARY OF ARGUMENT
This is a Supplemental Brief, not a Replacement Brief, and the arguments
herein supplement those made in Mr. Barness Opening Brief. This Supplemental
Brief makes four arguments:
8
First, the District Courts dismissal of Mr. Barness rescission claim as
untimely was based on now-abrogated authority. Under the United States Supreme
Courts decision in Jesinoski v. Countrywide Home Loans, Inc., 135 S.Ct. 790, 190
L.Ed.2d 650 (2015), Mr. Barnes did everything required to effect rescission of his
mortgage loan under TILA, and the District Courts judgment of dismissal of
Mr. Barness rescission claim against all defendants should thus be reversed.
Second, the District Court granted summary judgment on Mr. Barness
claims for declaratory and injunctive relief because those claims were dependent
on the earlier-dismissed claim for rescission. Because, under Jesinoski, the
dismissal of the rescission claim was error, the District Courts grant of summary
judgment on the declaratory and injunctive relief claims should likewise be
reversed as to all defendants.
Third, the District Court erroneously decided that neither CBUSA nor
Fannie Maeboth undisputedly creditors under TILAcould be liable for
statutory damages for failing to rescind the loan. With respect to both defendants,
the District Court concluded that the obligation to rescind was not triggered
because the notice of rescission was not received before the right of rescission
expired. This finding does not survive Jesinoski. In this circumstancewhere Mr.
Barness effected rescission of his loan, despite certain anomalies involving receipt
9
of notice by the lender and assignment of the loanthis Courts obligation to
construe the statute liberally in favor of consumers warrants construction of any
ambiguity in favor of Mr. Barnes.
Fourth, reversal and remand as to all Defendant-Appellees is important to
ensure that the District Court may craft a remedy with respect to Mr. Barness
rescission claim on a fully developed record. For practical and policy reasons,
none of the Defendant-Appellees should be permitted to avoid potential liability
for an equitable remedywhether rescission, declaratory relief, or an injunction
based on the current record. Deciding otherwise could result in an anomalous
outcome in which Mr. Barnes did everything required to effect rescission but a
remedy is foreclosed.
STANDARD OF REVIEW
The District Court granted the Defendant-Appellees motions for summary
judgment and denied Mr. Barness motion for summary judgment. ER 2-5. This
Court reviews that decision de novo. Johnson v. Poway Unified Sch. Dist., 658
F.3d 954, 960 (9th Cir. 2011).
ARGUMENT
This Supplemental Brief focuses on four arguments in addition to those
addressed in Mr. Barness Opening Brief. As explained below, the District Court
10
relied on authority subsequently abrogated by the United States Supreme Court in
Jesinoski v. Countrywide Home Loans, Inc., 135 S.Ct. 790, 190 L.Ed.2d 650
(2015) when it dismissed Mr. Barness claim for rescission under TILA. The
District Court also erred by later granting the Defendant-Appellees motions for
summary judgment on Mr. Barness claims for declaratory and injunctive relief
and damages. Accordingly, the District Courts judgment should be reversed and
remanded as to all defendants for further proceedings.
A. The District Courts Dismissal of Mr. Barness Rescission Claim

Should be Reversed Because That Claim was Timely Filed.
The purpose of the Truth in Lending Act is to assure a meaningful
disclosure of credit terms so that the consumer will be able to compare more
readily the various credit terms available to him and avoid the uninformed use of
credit, and to protect the consumer against inaccurate and unfair credit billing and
credit card practices. Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1118
(9th Cir. 2009) (quoting 15 U.S.C. 1601). Consistent with that purpose, courts
must construe the Acts provisions liberally in favor of the consumer. Rubio v.
Capital One Bank, 613 F.3d 1195, 1202 (9th Cir. 2010).
Where a loan is secured by a borrowers principal dwelling, the statute
grants the buyer the right to rescind within three days of either the consummation
of the transaction or the delivery of the information and rescission forms required
11
under this section together with a statement containing the material disclosures
required under this subchapter, whichever is later[.] 15 U.S.C. 1635(a); Semar
v. Platte Valley Fed. Sav. & Loan Ass'n, 791 F.2d 699, 701 (9th Cir.1986). The
right to rescind expires three years after the date of consummation of the
transaction or upon the sale of the property, whichever occurs first. Id. 1635(f).
The effect of this provision is to create both an unconditional right to
rescind, good for three business days after the transaction, and a conditional right
to rescind if the lender failed to meet its disclosure obligations. The conditional
right of rescission expires three years after the transaction or upon the sale of the
property.
When a borrower exercises his right to rescind, he is not liable for any
finance or other charge, and any security interest given by the obligor, including
any interest arising by operation of law, becomes void upon such a rescission.
15 U.S.C. 1635(b). Within 20 days after receipt of notice of rescission, the
lender must return to the obligor any money or property given as earnest money,
downpayment, or otherwise, and shall take any action necessary . . . to reflect the
termination of any security interest created under the transaction. Id. At that
point, the borrower is required to tender the property to the creditor[.] Id.
12
At the time of the District Courts judgment, this court and certain other
circuit courts interpreted TILA to require a borrower to file suit to enforce the right
of rescission within the three-year period. McOmie-Gray v. Bank of Am. Home
Loans, 667 F.3d 1325, 1326 (9th Cir. 2012); see also, e.g., Rosenfield v. HSBC
Bank, USA, 681 F.3d 1172, 1188 (10th Cir. 2012); Keiran v. Home Capital, Inc.,
720 F.3d 721, 727-728 (8th Cir. 2013); but see Sherzer v. Homestar Mortgage
Servs., 707 F.3d 255, 263 (3d Cir. 2013) (declining to follow McOmie-Gray and
holding that notice itself, rather than filing suit, effects rescission); Gilbert v.
Residential Funding LLC, 678 F.3d 271, 278 (4th Cir. 2012) (same).
On January 13, 2015, however, the Supreme Court decided Jesinoski v.
Countrywide Home Loans, Inc., rejecting the McOmie-Gray/Rosenfield
interpretation of the statute. In Jesinoski, the borrowers had given notice of
rescission within three years but waited until four years and one day after the
transaction to file suit. The district court ruled that the lawsuit was untimely and
granted judgment for the lender; the Eighth Circuit affirmed. The Supreme Court
disagreed, holding that a borrower need only provide written notice to a lender in
order to exercise his right to rescind. Because [t]he Jesinoskis mailed
respondents written notice of their intention to rescind within three years of their
loans consummation, and because this is all that a borrower must do in order to
13
exercise his right to rescind under the Act, the Court reversed and remanded for
further proceedings. Id. at 793.
As the Jesinoski decision makes clear, the District Court erred in concluding
that Mr. Barness right of rescission was extinguished before he filed suit, and in
dismissing Mr. Barness rescission claim against all defendants on that basis.
B. The District Court Erred by Granting Summary Judgment

for Defendants on Mr. Barness Claims for Declaratory and
Injunctive Relief.
The District Court granted summary judgment for the defendants on
Mr. Barness claims for declaratory and injunctive relief because it found that
those claims depend[ed] in their entirety on the dismissed rescission claim. The
District Court did not engage in any further construction or analysis of those claims
and the evidence supporting them. Accordingly, because (as explained in the
preceding section), dismissal of the rescission claims was error, this aspect of the
District Courts ruling should be reversed as well.
C. The District Courts Grant of Summary Judgment on

Mr. Barness Claims for Damages Should be Reversed.
The District Court granted summary judgment on Mr. Barness claims for
damages against CBUSA and Fannie Mae on the ground that those institutions did
14
not receive notice before Mr. Barness right of rescission expired. ER 20-23. 1 The
Supreme Courts decision in Jesinoski renders this conclusion error as well. In
addition to making clear when a borrower must exercise his right of rescission, the
Supreme Court also made clear in Jesinoski how that right is exercised: all that a
borrower must do to effect rescission is to mail notice to the lender. Id.
Here, the District Court acknowledged that notice of rescission is
considered given when mailed, quoting 26 C.F.R. 226.23(a)(2). ER 22 (emphasis
supplied by the District Court). However, the District Court concluded that such a
rule was in tension with 12 C.F.R. 226.23(d)(2), pursuant to which the twenty-
day period within which a creditor must effect the noticed intent to rescind does
not begin to run until after receipt of . . . notice of rescission. Id. Noting that
this Court does not appear to have resolved or to have expressly commented upon
that tension, the District Court went on to tip the scales of interpretation in favor
of the lender:
Material to the question of how the tension between the two provisions
should be resolved . . . is Barnes actual knowledge that CBUSA did not
open and did not receive Barnes written notice. Absent such knowledge,
it could fairly be said that, despite CBUSAs failure to receive the mailed
notice, Barnes had done all that he was reasonably required to do under
the governing statutory framework to effect his right of rescission.
1
Liability of a servicing agent like CHF or LBPS, including as a potential
assignee, is addressed in Mr. Barness Opening and Reply Brief.
15
However, Barnes actual knowledge that his written notice had not been
delivered, considered together with his subsequent failure to take any
steps to effect delivery or to make inquiry as to why his mailing had not
been received, provides no compelling ground for construing Section
226.23(d)(2) as imposing any greater burden than is suggested by its
plain language. By its plain language, Section 226.23(d)(2) obliges a
creditor to rescind a loan only after receipt of the loan consumers notice
of intent to rescind. Having never received notice of Barnes intent to
rescind prior to expiration of Barnes rescission right, CBUSA did not
violate Section 226.23(d)(2) when it failed to rescind Barnes loan.
ER 22-23.
Not only does this analysis fail in light of Jesinoskibecause it is not true
that CBUSA never received notice of Barness intent to rescind prior to expiration
of [his] rescission rightit expressly and inappropriately construes a perceived
ambiguity in favor of the lender. While reluctant to impos[e] any greater burden
than is suggested by [the] plain language on the lender, the District Courts
analysis does precisely that to the borrower. Mailing notice of rescission is all
that he was reasonably required to doand yet the District Court imposed the
additional burden of taking steps to effect delivery even though the postal
service apparently failed, and to make inquiry as to why his mailing had not been
received. Id. That analysis imposes a far greater burden on the borrower than is
suggested by the plain language.
16
This contravenes this Courts acknowledgement that courts should construe
TILAs provisions liberally in favor of the borrower. Rubio, 613 F.3d at 1202; see
also Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1118 (9th Cir. 2009)
(To effectuate TILA's purpose, a court must construe the Act's provisions
liberally in favor of the consumer) (quoting In re Ferrell, 539 F.3d 1186, 1189
(9th Cir. 2008 )).2 Here, Mr. Barnes mailed notice of rescission to the lender,
CBUSA, within three years of the transaction, and rescission was thus effective as
a matter of law on the date of the notice. CBUSAs position that it received notice
after Mr. Barness rescission right had expired was incorrect, and accordingly it
should not provide refuge from the consequences imposed by the statute.
The same analysis applies to Fannie Mae in a slightly different way. The
District Court concluded that Fannie Mae did not receive notice at any material
2
To the extent it is appropriate to consider what additional actions Mr. Barnes
could have taken, but did not, to ensure that CBUSA actually received the notice,
it is equally appropriate to consider what actions CBUSA and its servicer, CHF
(which undisputedly received the notice) could have taken. For example, CBUSA
could have required, in its servicing agreement with CHF, that any and all notices
received from borrowers be transmitted to CBUSA. Given the importance of a
rescission notice, CHFs own policies could have required immediate transmission
of such notice to CBUSA. It is unclear from the record whether such a
requirement existed, because the Defendant-Appellants refused to produce
servicing agreements. ER 143-74. To the extent the Court were to decide that
balancing of such facts is appropriate, the case should be remanded for further
proceedings sufficient to develop the record on such issues.
17
time. ER 20 (emphasis added). That finding, while not explained, presumably
means that Fannie Mae did not receive notice before the rescission right
supposedly expired. The record indicates that Fannie Mae was aware that
Mr. Barnes claimed to have rescinded the loan as early as January 21, 2011, when
its servicer, LBPS, notified Mr. Barnes in a letter that Fannie Mae was the owner
of his loan and stating that Mr. Barness rescission right has now expired.
ER 209. Apparently based on the same mistaken position advanced by CBUSA,
Fannie Mae did not take any action to fulfill the obligations of a creditor under
12 C.F.R. 226.23(d)(2). The District Courts grant of judgment on Mr. Barness
damages claim against Fannie Mae should likewise be reversed for further
proceedings.
D. The Judgment of the District Court Should be Reversed Against

All Defendant-Appellees to Ensure That the District Court, on
Remand, can Craft an Appropriate Remedy on a Complete
Record.
The Defendant-Appellees Joint Answering brief makes a number of
additional arguments, which, if accepted, could render Mr. Barness rights under
TILA meaningless. Fannie Mae, who did not become the creditor until after the
transaction was rescinded, argues that it should be dismissed because it did not
receive notice of rescission from Mr. Barneseven though Mr. Barnes effected
rescission before Fannie Mae was assigned the loan. See Joint Answering Br. at 7.
18
Both CHF and LBPS argue that they cannot be liable at all as servicers. Id.
CBUSA may argue that because it assigned Mr. Barness loan to Fannie Mae, it
cannot rescind the transaction.
And yet, because the District Court made its decision on timeliness grounds,
the record is undeveloped on several key factual matters. 3 It is not clear from the
record, for example, if: (a) CBUSA notified Fannie Mae at the time of assignment
that a notice of rescission had been received by its servicer; (b) Fannie Maes due
diligence prior to assignment revealed the notice of rescission; (c) the contracts
pursuant to which the assignment occurred contain provisions that would affect
CBUSAs and Fannie Maes respective obligations in the event of rescission;
(d) the servicing agreements under which CHF and LBPS served required them
to notify their respective principals when they received notice of rescission from
a borrower. All of these factual issues, which the District Court did not have
occasion to consider because of the threshold error of its ruling on timeliness,
should be developed and considered on remand.
Furthermore, regardless of whether CHF and LBPS can be liable for
rescission or statutory damages under TILA (the Defendant-Appellees argue they
3
It appears from the record that significant discovery occurred after the District
Court dismissed Mr. Barness rescission claim. See, e.g., ER 143-74.
19
cannot), they may have liability for some role in a rescissionary remedy, or liability
for declaratory and/or injunctive relief.4 The District Court on remand will need to
consider how, given the circumstances, to provide Mr. Barnes with a remedy given
his effective rescission. The record is insufficient to relieve any of the Defendant-
Appellees of potential liability in a declaratory or injunctive remedy, if one is
appropriate. See, e.g., Paatalo v. JP Morgan Chase, 146 F. Supp.2d 1239, 1245-
46 (D. Or. 2015) (It is unclear what should happen this many years down the
road, after the original lender has failed and been replaced in receivership, and the
property has been sold at a trustees sale, then re-sold following the trustees sale.
However, because Plaintiff has adequately alleged (1) he had a conditional right to
rescind, and (2) he exercised that right, he has stated a claim for at least some of
the relief he seeksa declaratory judgment deeming the foreclosure of the Deeds
of Trust null and void.).
Deciding otherwise could result in an anomalous outcome, whereby
Mr. Barness rescission was effective when the notice was sent, but his remedies
have been foreclosed by the subsequent actions of lenders and servicers. This
4
This Courts decision in Miguel v. Country Funding Corp., 309 F.3d 1161 (9th
Cir 2002) says nothing contrary. In that case, the Court held that notice to a loan
servicer does not suffice to effect rescission where the borrower did not send notice
to the lender. Here, notice was sent to both the servicer and lender, and rescission
was effective.
20
could render the statutory right illusory, enabling lenders to avoid their rescission
obligation by simply handing off the loan to another lender against whom the
borrower would have no right at all. Moreover, servicersregardless of whether
they may be principally liable under TILAcould assist lenders in avoiding
rescission by deliberately refusing to notify their lender-principals when they
receive notice of rescission from a borrower. None of this is consistent with
Congresss intent to protect borrowers and this Courts direction to construe TILA
liberally in favor of consumers.
CONCLUSION
For the reasons set forth above, in addition to those arguments made by Mr.
Barnes in his Opening Brief, Mr. Barnes respectfully submits that the Court should
reverse the judgment of the District Court and remand for further proceedings.
Dated: October 11, 2016.
By: s/Matthew A. Carvalho

Matthew A. Carvalho
YARMUTH WILSDON PLLC
1420 Fifth Avenue, Suite 1400
Seattle, Washington 98101
Phone: 206.516.3800
21
STATEMENT OF RELATED CASES
Plaintiff-Appellant is unaware of any cases that would be deemed related
under Ninth Circuit Rule 28-2.6.
22
CERTIFICATE OF COMPLIANCE WITH PAGE OR 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 4,679 words, excluding the parts of the
brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii).
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
2007 in 14-point Times New Roman.
Dated: October 11, 2016
s/Matthew A. Carvalho
Matthew A. Carvalho
23
CERTIFICATE OF SERVICE
When All Case Participants are Registered for the Appellate CM/ECF System
I hereby certify that I electronically filed the foregoing with the Clerk of the
Court for the United States Court of Appeals for the Ninth Circuit by using the
appellate CM/ECF system on October 11, 2016.
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/Matthew A. Carvalho
Matthew A. Carvalho
999.11 qj112501 24

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Case: 13-35716, 10/11/2016, ID: 10155914, DktEntry: 29, Page 1 of 28

UNITED STATES COURT OF APPEALS

CHASE HOME FINANCE, LLC, a Delaware corporation; CHASE BANK

PLAINTIFF-APPELLANTS SUPPLEMENTAL OPENING BRIEF

JURISDICTIONAL STATEMENT ..........................................................................2

STATEMENT OF THE CASE ..................................................................................3

SUMMARY OF ARGUMENT .................................................................................8

STANDARD OF REVIEW .....................................................................................10

A. The District Courts Dismissal of Mr. Barness Rescission

B. The District Court Erred by Granting Summary Judgment

C. The District Courts Grant of Summary Judgment on

D. The Judgment of the District Court Should be Reversed Against

15 U.S.C. 1635(a) .................................................................................................12

disclosures he received at closing. The Defendants argued that Mr. Barness

later granted summary judgment on Mr. Barness remaining claims.

of McOmie-Gray. Undersigned counsel was appointed by the Court as pro bono

arguments made in his Opening and Reply Briefsparticularly regarding the

effect of Jesinoski on the District Courts judgment. As explained below, the

District Courts early dismissal of the rescission claim on timeliness groundsan

error under Jesinoskiprevented the District Court from adequately considering

The District Court had subject matter jurisdiction over Plaintiff-Appellant

accordingly this Court has jurisdiction pursuant to 28 U.S.C. 1291.

District Court erred in granting summary judgment for the Defendant-Appellees on

District Court erred in granting summary judgment for the Defendant-Appellees on

reversed as to all Defendant-Appellees and remanded to the District Court for

STATEMENT OF THE CASE

Plaintiff-Appellant Timothy Barnes brought an action under the Truth in

Lending Act (TILA) in the District Court against Defendant-Appellants Chase

February 4, 2011. ER 312-60. Defendant-Appellee Federal National Mortgage

Association (Fannie Mae) was later added as a defendant in an amended

complaint. ER 259-309, 28-29.

with Defendant-Appellee Chase Bank USA, N.A. (CBUSA) on or about

behalf of CBUSA. ER 12.

agent, he observed what appeared to be changed dates, interlineations, and forged

Mr. Barnes mailed copies of an Actual Notice to Rescind the loan

transaction to CHF and CBUSA at those entities addresses of record on August 4,

the notice sent to CBUSA was returned undelivered. Id.

without acknowledging or addressing the rescission notice. LBPS in fact assumed

Mr. Barnes followed up by sending a notice of intent to rescind to LBPS on

been assigned by CBUSA to Fannie Mae. Id.

Mr. Barnes filed his complaint on February 4, 2011. ER 312-60. In his

Z, based on the defendants alleged failure to respond to his notice of intent to

exercise his statutory right to rescind a mortgage loan. Id.

damages in connection with defendants alleged failure to provide adequate notice

the defendants from initiating or prosecuting non-judicial foreclosure proceedings

within three years of the transaction. Id.

LBPSs motion to dismiss be denied (a recommendation the District Court

adopted on March 6, 2012). ER 63-78, 59-61.

On November 10, 2011, Mr. Barnes filed a Second Amended Complaint, in

(Fannie Mae) as an additional defendant and to remove a claim for statutory

damages dismissed by the District Court on October 18, 2011an amendment

deemed effective by the District Court. ER 259-309, 28-29.

Then, on February 8, 2012, this Court decided McOmie-Gray v. Bank of

to all defendants. ER 28-35.

statutory damages. ER 135-216. The Magistrate Judge concluded that Mr.

on the earlier-dismissed rescission claim, and recommended summary judgment

recommended summary judgment be granted in favor of defendants because he

triggered, that CHF and LBPS could notas servicershave an obligation to

recommendation on July 8, 2013, and judgment of dismissal with prejudice was

entered the next day. ER 3-5.

This is a Supplemental Brief, not a Replacement Brief, and the arguments

Brief makes four arguments:

First, the District Courts dismissal of Mr. Barness rescission claim as