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First Circuit Remands for Hearings on Foreclosure Stays

The First Circuit has remanded 150 so-called "MERS" cases for action on a magistrate judge's recommendation that some be dismissed for lack of subject matter jurisdiction and for hearings on whether the district court should continue foreclosure  stays imposed in approximately 700 cases pending in the United State District Court for the District of Rhode Island.  The Circuit Court also ordered the district court to hold the hearing at the earliest reasonable date. 

The district court had imposed the stay in its so-called foreclosure docket in 2011 and then ordered the cases into mediation before a special master.  The defendants filed appeals and mandamus petitions in 150 of the cases. 

Retired Supreme Court Justice David Souter wrote the opinion.  The Court first concluded that the stay was effectively an injunction and, therefore, it had jurisdiction to consider an appeal of the stay.  It also held it had pendent jurisdiction to review the order referring the cases to mediation because the two orders were "inextricably intertwined." 

The Court then held that the district court had failed to follow the requirements of F.R.C.P. 65 when entering the stay.  The Rule requires that a preliminary injunction may only be entered following notice to the adverse party and after a finding the the favored party has a substantial likelihood of success on the merits, would suffer irreparable harm, can claim the greater hardship in the absence of an order and the order will not disserve the public interest. No notice was given and no findings were made. 

The Court said it could simply vacate the stay order, however, it was concerned about possible "chaos" in the district court given the number of pending cases.  Instead, it ordered the Court to proceed with the hearings described. 

Fryzel v. Mortgage Electronic Registration System, Inc., 2013 WL 2896794 (1st Cir. June 14, 2013)

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