Lawsuit against Richmond’s eminent domain plan dismissed
on September 16, 2013
Richmond notched a victory in its effort to use eminent domain to seize underwater mortgages on Monday, as a federal court dismissed a lawsuit filed by Wells Fargo and Deutsche Bank against the city.
U.S. District Judge Charles Breyer wrote that the case is not “yet ripe for adjudication.” In other words, the banks can’t sue the city for something it hasn’t done yet.
The lawsuit challenged the constitutionality of using eminent domain to seize more than 600 underwater mortgages from banks and mortgage companies in order to help homeowners refinance. The proposal aims to prevent foreclosures and stabilize neighborhoods, but banks argue that it could set a dangerous precedent.
Judge Breyer chose to dismiss the case instead of granting a stay because it is uncertain that Richmond will ever actually use eminent domain to seize the homes.
“Ripeness of these claims does not rest on contingent future events certain to occur, but rather on future events that may never occur,” Breyer wrote in his decision. “Because there is no point at which it will be determined that Plaintiffs’ claims are not ripe and will never become ripe, the matter could linger in abeyance for an indefinite period of time. Under these circumstances, a stay is not appropriate.”
The ruling did not come as much of a surprise, as Breyer questioned the timing of the suit at a hearing on Friday.
Lawyers representing the city and its financial partner, Mortgage Resolution Partners, characterized the lawsuit as an attempt to intimidate Richmond lawmakers as well as other cities considering similar measures.
“Because it was so clear that this lawsuit was not ripe and could not be filed in federal court, the only purpose would seem to be to intimidate or pressure legislators,” said Stacey Leyton of Altshuler Berzon, the law firm representing Richmond.
In July, Richmond officials sent letters to 32 mortgage companies offering to purchase 624 mortgages for less than their market value. If the banks refuse to sell, the city is threatening to use eminent domain to seize them.
Richmond City Manager Bill Lindsay says he is still hopeful that the mortgage holders will be willing to negotiate and sell the city the loans.
“Any time we prevail in court, we’re happy, and this was no exception,” said Lindsay. “We are still hopeful that we can implement the program without ever using eminent domain through negotiation with the lenders.”
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