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Truth in Lending: 11.5.2.2.1 Nature of Younger abstention

The first hurdle to declaratory and injunctive relief when there is a related state court proceeding is the Younger abstention doctrine. The circumstances justifying Younger abstention are “exceptional,” and “[a]bstention is not in order simply because a pending state-court proceeding involves the same subject matter.”452

Truth in Lending: 11.5.2.2.4 How courts have applied Younger in TILA rescission cases

Since a TILA rescission case is solely between two private parties and is not a challenge to any state court procedure, Younger abstention should not bar a federal court from enjoining a pending state court foreclosure if the plaintiff can meet the other requirements for injunctive relief.485 The Ninth Circuit reached this conclusion in a case involving eviction of a tenant after foreclosure:

Truth in Lending: 11.5.2.4.1 The Act and its exceptions

Another potential impediment is the Anti-Injunction Act, which prohibits federal courts from granting injunctions to stay proceedings in state courts.506 Courts have ruled that the term “proceedings” includes foreclosure sales scheduled to enforce state court judgments.507 The Act applies only when there is a pending state proceeding, not where a state proceeding is merely threatened508 or has concluded.

Truth in Lending: 11.5.2.5.2 Where the consumer is the defendant in the federal case

According to the Supreme Court’s formulation, the doctrine applies only to federal cases “brought by” state court losers.534 Sometimes, the consumer will be the defendant rather than the plaintiff in the federal suit. For example, the doctrine would not apply if a creditor that won a state court foreclosure judgment then filed an action in federal court seeking a declaratory judgment that the consumer’s rescission attempt was invalid. In that case, the consumer could fully litigate their rescission claim in a defensive posture.

Truth in Lending: 11.5.2.5.5 Where the federal parties are different than the state parties

The Supreme Court has made it clear that the Rooker-Feldman doctrine does not apply if the federal plaintiff was not a party to the state case.550 Even if the federal plaintiff is in privity with a party to the state case, the doctrine does not apply.551 Thus, a prior state court judgment against one of two co-owners of a home will not be a basis for invoking the doctrine to bar a federal suit by the other co-owner.552 An inter

Truth in Lending: 11.5.2.5.4 Where state case had not reached final judgment before federal case filed

The doctrine does not apply at all if the state court case has not gone to judgment at the time the federal suit is filed.539 Thus, parallel cases in state and federal court are unaffected by the Rooker-Feldman doctrine, and the two cases may proceed simultaneously.540 And since foreclosure cases often go through a number of stages, the consumer may be able to avoid the doctrine by arguing that whatever ruling the state court has rendered is not a final state court judgment.

Truth in Lending: 11.5.2.5.3 Cases removed from state court

The interplay between the federal courts’ removal jurisdiction and the Rooker-Feldman doctrine presents at least two special issues. First is whether the doctrine prevents a federal court from reviewing or modifying orders or judgments that were entered by a state court before removal. The answer is clearly no.

Truth in Lending: 11.5.2.5.8 Other related obstacles

Even if the Rooker-Feldman doctrine is inapplicable, res judicata (claim preclusion) or collateral estoppel (issue preclusion) may prevent the consumer from litigating issues in federal court that were or could have been raised in the state court proceedings.585 A federal court is required to give a state court judgment the same preclusive effect as a state court would.586 In addition, comity or abstention may allow or require a federal court to stay or dismiss a federal court a

Truth in Lending: 11.6.5.1 Correction of Error As a Standard for Actual Damages

Even though Congress did not define “actual damages” at the time it added the phrase to the Act in 1974, one might assume, in the absence of any indication otherwise, that Congress intended to permit consumers to recover actual damages in the amount defined in preexisting 15 U.S.C. § 1640(b) for uncorrected errors.

Truth in Lending: 11.6.5.5 Reliance upon Fair Dealing by Creditor

Even if the consumer is required to prove reliance, it may be sufficient to show that they relied upon fair dealing by the creditor, rather than upon the particular disclosure. Courts have articulated this rule in consumer protection cases and securities law cases.

In State ex rel. Webster v. Areaco Inv. Co.,756 the court construed Missouri’s Unfair and Deceptive Acts and Practices (UDAP) statute to require only a showing of reliance upon the seller’s duty of fair dealing:

Truth in Lending: 11.6.7.2 Prejudgment Interest

Prejudgment interest on a consumer’s actual damages may be available. The general rule is that prejudgment interest is not allowed where the judgment is in the nature of a penalty, but is allowed for actual damages. While denying prejudgment interest on statutory damages, the Court of Appeals for the Seventh Circuit suggested that interest on actual TILA damages might be appropriate.788 A court granting prejudgment interest has some flexibility in determining the rate of interest.789

Truth in Lending: 11.6.7.3 Multiple Actual Damage Awards

In contrast to the statutory provision (and interpretive case law) limiting damage awards to one recovery of statutory damages,790 actual damages arising from a single transaction may be awarded to more than one person. The single recovery rule stated in 15 U.S.C. § 1640(d) refers to damages under (a)(2)—statutory damages. There is no such rule for actual damages authorized under (a)(1), so the creditor remains liable to “any person” who sustains actual damages.791

Truth in Lending: 11.6.7.4 Relation Between Usurious Interest and Actual Damages

Unlike state usury laws, TILA does not restrict the amount of interest that a creditor may charge. Its disclosure provisions only require that the credit terms—whatever they are—be accurately disclosed in uniform format. Nonetheless, interest that is considered excess under a state usury statute may often be a component of the consumer’s actual damages, because the TILA violations may have served the function of concealing the usurious interest.