Opinion analysis: Shortest opinion of the year explains TILA rescission right
The argument in Jesinoski v. Countrywide Home Loans provided as clear a signal of the Court’s disposition as you can imagine. Justice Stephen Breyer suggested to Countrywide’s counsel that he would have to be “a Houdini” to escape what Justice Breyer saw as the clear implications of the relevant statute. Two months later, Justice Antonin Scalia’s terse opinion let us know that Countrywide’s counsel is not a Houdini: a unanimous Court agreed today that the statute means what it says. The brevity is remarkable. The opinion barely gets onto the fifth page, and includes only six paragraphs of analysis after describing the facts and proceedings below.
The case involves the right to rescind mortgage transactions in the Truth in Lending Act (commonly known as TILA). The statute allows a borrower to rescind any residential mortgage transaction until three days after the lender provides the disclosures that TILA requires. Thus, if the lender provides the disclosures at the closing (as it should), the right to rescind is gone three days later. But if the lender doesn’t provide the disclosures – or if the borrower claims that the lender doesn’t provide the disclosures – then the rescission period well might continue for three years after consummation of the transaction. At that point, the right to rescind definitively ends.
The question before the Court was what steps the borrower has to take to rescind within the three years. The lender argued that the borrower hasn’t rescinded unless it actually initiates litigation. Not so, the Court held today. The statute explains, in terms the Court regarded as “unequivocal,” how “the right to rescind is to be exercised: It provides that a borrower ‘shall have the right to rescind, by notifying the creditor, in accordance with regulations of the Board, of his intention to do so.’” Because that language “leaves no doubt that rescission is effected” by the borrower’s notice, the borrower does not also need to sue within the three years. The rest of the opinion swept aside all of the lender’s arguments as pointless in the face of the language.
Given the uphill battle the lender faced with the language, its only hope of prevailing was to put the case in some context that would make the result seem too unpalatable to tolerate. In my view, the strongest point the lender presented looked to the historical structure of rescission. Specifically, rescission at law required the borrower to tender the entire amount of the loan, while rescission in equity would have required a judicial decree. Countrywide suggested that a Congress concerned about practicalities could not have intended to remove both of those avenues for rescission and allow it to occur by a simple notice. This would allow, the lender emphasized, frivolous claims of rescission from borrowers motivated to avoid foreclosure as a response to their extended nonpayment. Think “deadbeats.” In the background, given what we know now about the recordkeeping propensity of entities like Countrywide, those claims will be most difficult to rebut three years after the fact.
Certainly a well-presented argument, but not enough. The Court responded: “Nothing in our jurisprudence, and no tool of statutory interpretation, requires that a congressional Act must be construed as implementing the closest common-law analogue.”
A skeptic would take heart from this decision. An impecunious home-mortgage borrower managed to persuade the Supreme Court to review and reverse a lower-court decision favoring the immense corporate lender. Because I’m not so skeptical, I’m more inclined to agree that the lender’s side of the statutory argument was a lot harder than the borrowers, and to notice the borrower’s ability to retain Court veteran David Frederick to present their side of the issue to the Justices. More instrumentally, the Justices might have thought it easier for the lender to get relief from an erroneous ruling against it than it would be for the homeowner: tie goes to the side with the least political heft!