Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 1 of 14

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 REPLY BRIEF

Matthew A. Carvalho
YARMUTH WILSDON PLLC
1420 Fifth Avenue, Suite 1400
Seattle, Washington 98101
206.516.3800
Pro Bono Counsel of Record for
Appellant Timothy Barnes
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 2 of 14

TABLE OF CONTENTS

I. INTRODUCTION ...........................................................................................1

II. ARGUMENT ...................................................................................................2

A. Mr. Barnes Timely Mailed Notice of Rescission to his

Creditors Designated Place of Business as Required by the
Statute. ...................................................................................................2

B. Rescission is an Equitable Remedy, and Remand is Appropriate

as to All Defendant-Appellants to Enable the District Court to
Craft an Appropriate Remedy. ..............................................................7

III. CONCLUSION................................................................................................8

i
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 3 of 14

TABLE OF AUTHORITIES

Cases
In re Ferrell,
539 F.3d 1186 (9th Cir. 2008) ................................................................................6
Jesinoski v. Countrywide Home Loans,
135 S.Ct. 790 (2015)...........................................................................................1, 3

Miguel v. Country Funding Corp.,

309 F.3d 1161 (9th Cir. 2002) ....................................................................... 3, 4, 5

Sherzer v. Homestar Mortg. Servs.,

707 F.3d 255 (3d Cir. 2013) ...................................................................................7
Williams v. Homestake Mortg. Co.,
968 F.2d 1137 (11th Cir. 1992) ..........................................................................7, 8

Statutes
15 U.S.C. 1635(b) (1988) .......................................................................................8
Pub.L. No. 96-221 ......................................................................................................7

Rules
Fed. R. App. P. 32(a)(5) ...........................................................................................10
Fed. R. App. P. 32(a)(6) ...........................................................................................10

Fed. R. App. P. 32(a)(7)(B) .....................................................................................10

Fed. R. App. P. 32(a)(7)(B)(iii) ...............................................................................10

Fed. R. App. P. 32(a)(7)(C) .....................................................................................10

Regulations
12 C.F.R. 226.23(a)(2) ............................................................................................3

ii
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 4 of 14

I. INTRODUCTION
Defendant Appellees, in their Joint Answering Brief, do not dispute certain

key points at issue in this appeal:

They do not dispute that Mr. Barnes mailed notice of rescission

to his creditor, CBUSA, at its designated place of business before

TILAs statute of repose had run on that claim.

They concede that the Supreme Courts decision in Jesinoski v.

Countrywide Home Loans, 135 S.Ct. 790 (2015), renders the

District Courts dismissal of Mr. Barness rescission claim

erroneous. Joint Answering Brief (JAB) at 12 ([T]here is no

longer any dispute about the timeliness of Barness sending of his

rescission notice.).

Defendant-Appellees position boils down to two arguments: First, that an

alternate basis to affirm the District Courts judgment exists because even though

Mr. Barnes timely mailed his rescission notice to his creditor as required by the

statute, the unexplained failure of the postal service to deliver that notice to

CBUSA renders the notice invalid. Second, reversal and remand of Mr. Barness

claims as to all Defendant-Appellees is futile because further fact-finding is

unnecessary and due to subsequent actions of the Defendant-Appelleescertain

1
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 5 of 14

of them are not now in a position to rescind Mr. Barness loan. As explained in

Mr. Barness supplemental brief, and in this reply, Defendant-Appellees position

contradicts this Courts admonition that courts should construe TILA broadly in

favor of borrowers, and likewise construes the possible remedieswhich are

within the equitable powers of the courtso narrowly as to render TILAs

protections meaningless for a borrower like Mr. Barnes whose loan has been sold

to another creditor. Both arguments should be rejected.

II. ARGUMENT

A. Mr. Barnes Timely Mailed Notice of Rescission to his Creditors

Designated Place of Business as Required by the Statute.

The Supreme Court in Jesinoski made clear that all that a borrower must do

in order to exercise his right to rescind under the Act is to mail written notice of

his intent to rescind to the creditor. Defendant-Appellees dismiss this statement as

dicta. And while it is true that the Jesinoski Court was not considering whether

mailing a notice thatthrough no fault of the borroweris not delivered by the

postal service, the Court was basing its holding on a plain reading of the statute.

The Court reversed the circuit courts holding that a borrower must file suit within

the three-year statute of repose, because the plain language of the statute provides

that notification alone is required:

-2-
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 6 of 14

Section 1635(a) explains in unequivocal terms 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 (emphasis added). The language
leaves no doubt that rescission is effected when the borrower notifies
the creditor of his intention to rescind.

Jesinoski, 135 S.Ct. at 792 (additional bold emphasis added). Notably, the Court

emphasized that the right to rescind is exercised by notifying the creditor, in

accordance with regulations of the Board, of his intention to do so[.] Id.

(emphasis added). The regulations of the Board that the statute refers to and the

Court emphasized, provide in equally clear terms that [n]otice is considered given

when mailed.[.] 12 C.F.R. 226.23(a)(2).

Despite this clear statutory and regulatory language, Defendant-Appellees

repeatedly argue that Mr. Barnes failed to notify CBUSA of his intention to rescind

(see JAB at 13), characterizing the mailing of the rescission notice as an attempt

to notify the creditor. JAB at 13 (emphasis added). This distinction cannot be

squared with the regulatory language ([n]otice is considered given when mailed),

and finds no support in the statute or case law.

Defendant-Appellees mistakenly suggest that the Courts holding in Miguel

v. Country Funding Corp., 309 F.3d 1161 (9th Cir. 2002) is irreconcilable with

what it refers to as Barness notice-when-mailed theory. JAB at 17. The

-3-
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 7 of 14

argument that notice is given when mailed is not a theory hatched by Mr.

Barnes; as explained, it is the plain language used by the applicable regulation,

which the statute expressly incorporates. More importantly, Defendant-Appellees

misconstrue the Courts holding in Miguel when they characterize it as addressing

whether [] cancellation was effective even though it was not received by the

Bank. JAB at 17. The Court was addressing whether a rescission notice was

effective even though it was not received by the Bank because it was never mailed

to the Bank. In Miguel, the borrower mailed a rescission notice to the servicer but

not to the creditor. The Court held that such notice was ineffective. The Court in

Miguel did not address the instant scenario, where the borrower mailed a rescission

notice to the creditor, butfor reasons that are unclear from the recordthe notice

was not received. That issue, it appears, is presented to the Court in this case as a

question of first impression.

Notwithstanding the statutory languagewhich expressly requires notice in

accordance with the regulations of the BoardDefendant-Appellants attempt to

minimize those regulations by arguing that the clear language is best read as

governing only those notifications that are actually received by the creditor, and

that the regulation should be interpreted to govern when a valid notification

occurs, but does not speak to whether a notification happened at all. JAB at 19

-4-
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 8 of 14

(emphasis in original). And yet, the regulation nowhere suggests a distinction

between notifications that are sent and not received and notifications that are sent

and received. To the contrary, if the Board intended to distinguish between such

notifications, it would have addressed the distinction in the language of the

regulation. It did not.

In spite of Jesinoski and the applicable regulation of the Board, Defendant-

Appellees urge the Court to do what the District Court did and impose on Mr.

Barnes an obligation to take other steps to effect delivery of the notice, even

though no such burden is placed on a borrower by the statute or its implementing

regulations. Indeed, while the District Court recognized that mailing the rescission

notice to his creditor was all that the law required Mr. Barnes to do, it used his

failure to take any steps to effect delivery or to make inquiry as to why his

mailing had not been received as a basis to construe the ambiguity of the situation

against him. ER 22-23. And at the same time, the District Court expressed

reluctance to impos[e] any greater burden than is suggested by [the] plain

language on the lender. Id.

As explained in Mr. Barness Supplemental Opening Brief, if it is

appropriate to consider what other steps Mr. Barnes might have taken to effect

notice on CBUSA (which are not required by the statute or its implementing

-5-
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 9 of 14

regulation), it is equally appropriate to consider the facts concerning CBUSAs

actual receipt of the rescission notice. The Defendant-Appellees contend that such

factsas to which the record is undeveloped and could benefit from additional

discoveryare wholly irrelevant under Section 1635. And yet, whatever steps

Mr. Barnes could have taken to effect delivery apart from mailing the notice are

also irrelevant as far as the statute is concerned.

The precise situation presented in this casewhere the borrower

indisputably mailed notice of his intent to rescind to the creditor, but the creditor

for unknown reasons did not receive itis not explicitly addressed in the statute.

And yet, the Boards implementing regulation, construed liberally in favor of the

consumer (In re Ferrell, 539 F.3d 1186, 1189 (9th Cir. 2008)), should resolve any

ambiguity in favor of Mr. Barnes. The District Courts resolution of that

ambiguity in favor of the lender was error. Id.

Accordingly, because Mr. Barnes gave notice of his intent to rescind to his

creditor, rescission was effective and the District Courts judgment should be

reversed. 1

1
The District Courts grant of summary judgment on Mr. Barness declaratory and
injunctive relief claimswhich was expressly based upon the erroneous dismissal
of the rescission claimshould likewise be reversed. See Supplemental Opening
Brief at 14.

-6-
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 10 of 14

B. Rescission is an Equitable Remedy, and Remand is Appropriate as to

All Defendant-Appellants to Enable the District Court to Craft an
Appropriate Remedy.

Defendant-Appellees also argue that remand is futile because further fact-

finding is unnecessary and that the Court should not remand the case as to all of

the appellees because certain of the Defendant-Appellees cannot provide Barnes

the relief he can seek[.] JAB at 21-23. This argument ignores the nature of the

rescission remedy.

Rescission is an equitable remedy, and it was incorporated by Congress into

TILA to return the parties most nearly to the position they held prior to entering

into the transaction. Williams v. Homestake Mortg. Co., 968 F.2d 1137, 1140

(11th Cir. 1992). Notably, [t]o achieve this goal, courts are permitted to rearrange

the parties obligations to one another under 1635(b). Sherzer v. Homestar

Mortg. Servs., 707 F.3d 255, 265 (3d Cir. 2013).

The authority of a court to rearrange the parties obligations was

deliberately and expressly added to the statute to allow courts to modify the

statutory rescission process as necessary. The last sentence of 1635(b), which

reads: [t]he procedures prescribed by this subsection shall apply except when

otherwise ordered by the court, was added by the Truth in Lending Simplification

and Reform Act, Pub.L. No. 96-221, tit. VI. 612(a)(4), 94 Stat. 168, 175 (1980)

-7-
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 11 of 14

(codified as amended at 15 U.S.C. 1635(b) (1988)); see Williams, 968 F.2d at

1140. Prior to the statutes amendment, not all circuit courts permitted judicial

modification of the rescission remedy. Those that did relied on their equity

powers to fashion rescission procedures not contemplated by the Act. Id. To

resolve a circuit split, Congress amended the statute to make clear that the courts

have the power to fashion an equitable rescission remedy as appropriate. Id.

As explained in Mr. Barness Supplemental Opening Brief, reversing the

District Courts judgmentthe entirety of which was affected by the threshold

error of its timeliness rulingas to all Defendant-Appellees will enable the District

Court the exercise its equitable powers to craft an appropriate remedy in spite of

the subsequent transfer of Mr. Barness loan by his creditor. Further fact-finding

will enable the District Court to fully assess the equities, and remand as to all

Defendant-Appellees will ensure that the District Court has an opportunity to

enforce a complete remedy.

III. CONCLUSION
For all of the reasons set forth in Mr. Barness briefing, as well as this

Supplemental briefing, the District Courts judgment should be reversed and this

case remanded to the District Court for further proceedings.

-8-
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 12 of 14

Dated: January 13, 2017.

By: s/Matthew A. Carvalho

Matthew A. Carvalho
YARMUTH WILSDON PLLC
1420 Fifth Avenue, Suite 1400
Seattle, Washington 98101
Phone: 206.516.3800
Pro Bono Counsel of Record for
Appellant Timothy Barnes

-9-
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 13 of 14

CERTIFICATE OF COMPLIANCE

Pursuant to Fed. R. App. P. 32(a)(7)(C), I certify that:

1. This brief complies with the type-volume limitation of Fed. R. App. P.

32(a)(7)(B) because this brief contains 1,766 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

2013 in 14-point Times New Roman.

Dated: January 13, 2017.

s/Matthew A. Carvalho
Matthew A. Carvalho
Pro Bono Counsel of Record for
Appellant Timothy Barnes

-10-
 Case: 13-35716, 01/13/2017, ID: 10266106, DktEntry: 38, Page 14 of 14

CERTIFICATE OF SERVICE

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 January 13, 2017.

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

-11-
999.11 ra132501