Tyson v. TD Services Co.

          ORDER DENYING MOTION FOR ORDER STOPPING TRUSTEE SALE RE: DKT. NO. 69

          HOWARD R. LLOYD UNITED STATES MAGISTRATE JUDGE

         Leonard and Mary Ann Tyson sued U.S. Bank and T.D. Services for alleged violations of state and federal law in connection with the non-judicial foreclosure of real property in Santa Cruz County, California.^[1] The subject property is a duplex. This court is told that Leonard Tyson lives in part of it as his primary residence and rents out the other. Along with several state law claims for relief, the Tysons asserted a Truth in Lending Act (TILA) claim (15 U.S.C. § 1601, et seq.) against U.S. Bank and a Fair Debt Collection Practices Act (FDCPA) claim (15 U.S.C. § 1692) against T.D. Services. After rounds of motions practice and amended pleadings, this court granted defendants’ Fed.R.Civ.P. 12(b)(6) motions to dismiss the federal claims asserted in the Tysons’ Second Amended Complaint (SAC). As for the state law claims, the court declined to exercise jurisdiction over them and dismissed those claims without prejudice.^[2] Judgment was entered accordingly. Leonard Tyson appealed the matter.^[3] The parties report that the appeal has been fully briefed and remains pending.

         U.S. Bank has since discharged T.D. Services as the foreclosure trustee and retained a different one that recorded a notice of default several months ago. A notice of trustee sale followed, and the sale has now been scheduled for August 17, 2016.

         Pursuant to Federal Rule of Appellate Procedure 8(a), ^[4] Tyson moves this court for an order stopping the trustee sale pending the resolution of his appeal. Tyson does not believe that any sort of payment should be required as a condition of stopping the foreclosure sale; however, at the motion hearing, his attorney said that Tyson is willing to make monthly payments to U.S. Bank’s counsel, in trust, in the amount of $4, 000.^[5]

         This matter was briefed and heard on shortened time. U.S. Bank opposes the motion. T.D. Services advises that, because it is not involved with the scheduled sale, it takes no position on Tyson’s motion. Upon consideration of the moving and responding papers, as well as the arguments of counsel, this court denies the motion.

         LEGAL STANDARD^[6]

         A stay or injunction pending appeal “is not a matter of right, even if irreparable injury might otherwise result.” Nken v. Holder, 556 U.S. 418, 433 (2009). Rather, such relief is “‘an exercise of judicial discretion, ’ and ‘[t]he propriety of its issue is dependent upon the circumstances of the particular case.’” Id. (quoting Virginian Ry. Co. v. United States, 272 U.S. 658, 672 (1952)). The requesting party “bears the burden of showing that the circumstances justify an exercise of that discretion.” Id. at 433-34.

         In determining whether to grant a stay or injunction pending appeal, the court conducts a balancing test that considers four factors, similar to the standard for issuing a preliminary injunction: (1) whether the applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent relief; (3) whether the balance of equities tips in the applicant’s favor; and (4) whether the requested relief is in the public’s interest. Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008); Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011). The first two factors are the most critical. Nken, 556 U.S. at 434.

         The Ninth Circuit has held that the “serious questions” version of the sliding scale approach to deciding motions for preliminary injunction and motions for stay survived the Supreme Court’s decision in Winter. Alliance for the Wild Rockies, 632 F.3d at 1134. Thus, “‘serious questions going to the merits’ and a hardship balance that tips sharply toward the plaintiff can support issuance of an injunction, assuming the other two elements of the Winter test are also met.” Id. at 1132.

         DISCUSSION

         A. Likelihood of Success on the Merits

         Tyson must make a “strong showing” that he is likely to succeed on the merits. Nken, 418 U.S. at 434. Although he is not required to show that it is more likely than not that he will win on the merits of his appeal, the mere possibility of success is not enough. Id.

         Tyson has not made a strong showing of success with respect to his TILA claim against U.S. Bank. The present motion indicates that the subject of his pending appeal concerns this court’s ruling as to whether his TILA claim for recoupment or set-off could be asserted affirmatively in this lawsuit as a “defense” to claims pending in state court. Relevant to the discussion here, this court concluded that Tyson’s TILA claim was time-barred. Although he was given an opportunity to do so, Tyson did not allege any facts to support tolling. Instead, he maintained that the limitations period did not apply because his TILA claim was being asserted in this court as a defense against state court unlawful detainer actions.

         As discussed in this court’s order of dismissal, TILA provides that the limitations period does not apply where violations are asserted “as a matter of defense by recoupment or set-off” in “an action to collect the debt . . . except as otherwise provided by State law.” 15 U.S.C. § 1640(e). However, “Section 1640(e) of TILA makes recoupment available only as a ‘defense’ in an ‘action to collect a debt.’” Ortiz v. Accredited Home Lenders, Inc., 639 F.Supp.2d 1159, 1164 (S.D. Cal. 2009); see also Molina v. OneWest Bank, 903 F.Supp.2d 1008, 1017 (D. Hawai’i 2012) (stating that recoupment under TILA “is a defense, not an affirmative claim for relief”); Tacheny v. M&I Marshall & Ilsley Bank, No. 10-cv-2067 (PJS/JJK), 2011 WL 1657877 at *5 (D. Minn., Apr. 29, 2011) (concluding that the limitations period applied where plaintiffs were not asserting recoupment as a matter of defense in an action that the lenders filed against them, but rather, asserted ...