Democracy Is on the Ballot: One Party Defends It, The Other Would Let It Die

AUSTIN SARAT

Austin Sarat—Associate Provost, Associate Dean of the Faculty, and William Nelson Cromwell Professor of Jurisprudence and Political Science at Amherst College—explains why the 2020 Democratic National Convention was unlike any other political gathering in American history for reasons beyond its virtual platform. Sarat argues that the future of American democracy lies in the balance, and when we vote in November, it will be up to us whether democracy lives or dies.

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In re: National Collegiate Student Loan Trusts

Court: US Court of Appeals for the Third Circuit

Docket: 18-3327

Opinion Date: August 19, 2020

Judge: Thomas L. Ambro

Areas of Law: Banking, Trusts & Estates

Six Delaware statutory Trusts acquired student loans, issued notes for the acquisitions, and pledged the student loans as collateral for the notes. This “securitization” works well when the students do not default. The Trusts initially did not provide for servicing delinquent loans; under a subsequent “Special Servicing Agreement,” U.S. Bank became the Indenture Trustee and the “Special Servicer” but allegedly failed to collect hundreds of millions of dollars in delinquent loans. The holders of the Trusts’ equity ownership interests hired an additional loan servicer, Odyssey, and submitted invoices from Odyssey for payment from the trust estate. The district court held that the Trust documents were not violated by hiring Odyssey and Odyssey’s invoices were payable. The Third Circuit reversed in part. Several provisions of the Odyssey Agreement violate the Trust documents by impermissibly transferring to the Owners of the Trusts rights reserved for the Indenture Trustee. The Odyssey Agreement supplements and modifies several provisions of the Trust documents, requiring consent not obtained from the Indenture Trustee. The court remanded for a determination of whether the Odyssey invoices are nonetheless payable, which may include reconsideration os a self-dealing issue.

Johnson v. Phelan Hallinan & Schmieg

Court: Supreme Court of Pennsylvania

Docket: 26 WAP 2019

Opinion Date: August 18, 2020

Judge: Wecht

Areas of Law: Banking, Real Estate & Property Law

In 2002, Edella and Eric Johnson executed a $74,000 mortgage and associated promissory note, secured by property in Pittsburgh. The instrument was recorded and later assigned to the Bank of New York Mellon Trust Company (“Mellon”). Six years later, the Johnsons defaulted on their mortgage. In March 2009, Mellon, through its debt-collection counsel Phelan Hallinan & Schmieg, LLP (“Phelan”), filed a complaint in mortgage foreclosure. In that complaint, Phelan included a claim for attorneys’ fees of $1,300. Following a non-jury trial, the court entered judgment for Mellon. In March 2012, while the underlying mortgage foreclosure case was still ongoing, the Johnsons filed the instant class action against Phelan. When the Pennsylvania Loan Interest and Protection Law ("Act 6") was enacted in 1974, a “residential mortgage” was defined as “an obligation to pay a sum of money in an original bona fide principal amount of fifty thousand dollars ($50,000) or less.” In 2008, however, the General Assembly amended Act 6’s definition of a “residential mortgage” to increase the principal-amount ceiling to $217,873 - a base figure that automatically was adjusted for inflation annually. This appeal centered on whether that increased principal-amount ceiling should apply to mortgages that were executed before the 2008 amendment to Act 6. Specifically, the question presented was whether the $74,000 mortgage the Johnsons executed should have been considered a "residential mortgage" under Act 6, given that when Appellants' lender initiated foreclosure proceedings in 2009, the increased principal-amount ceiling had gone into effect. Because the Pennsylvania Supreme Court concluded that nothing in the 2008 legislation amending Act 6 demonstrated that the revised figure should have applied retroactively, the Supreme Court affirmed the Superior Court's order.