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New York Court of Appeals Finds Loan Decelerated When Voluntary Discontinuance of Foreclosure Filed Banner Image

New York Court of Appeals Finds Loan Decelerated When Voluntary Discontinuance of Foreclosure Filed

Month: February 2021

New York Court of Appeals Finds Loan Decelerated When Voluntary Discontinuance of Foreclosure Filed

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In a ground-breaking case for lenders, the New York Court of Appeals recently added critical guidance and comfort for lenders as to what constitutes a proper de-acceleration of a loan after the filing of a foreclosure complaint. Namely, the Court of Appeals held that where the acceleration of a loan is triggered by the filing of a foreclosure complaint, a noteholder’s voluntary discontinuance of that action serves to revoke that acceleration unless it is accompanied by an “express, contemporaneous statement to the contrary,” and resets the six-year statute of limitations period for New York foreclosure actions. Freedom Mortg. Corp. v. Engel, 2021 WL 6238697 (N.Y. Feb. 18, 2021).

In Freedom Mortg., four cases were consolidated by New York State’s highest court on appeal: Engel, Ditech Financial, LLC v. Naidu (“Naidu”), Wells Bank v. Ferrato (“Ferrato”), and Vargas v. Deutsche Bank Natl. Trust Co. (“Vargas”). In Engel and Naidu, the cases revolved around the issue of whether a noteholder’s voluntary discontinuance of a foreclosure action after a complaint had been filed served to “revoke” the acceleration of the loan which occurred by virtue of the initial filing. In each case, the Appellate Division found that plaintiff lenders were time-barred from asserting a foreclosure action in situations where the lender had filed a complaint, voluntarily withdrew said complaint, and then filed a new complaint more than six years later, holding that such a withdrawal was not an affirmative action sufficient to revoke the initial acceleration. Ferrato and Vargas, relatedly, dealt with issues of whether specific actions taken by lenders were sufficient to accelerate a loan and “start the clock” on the statute of limitations in the first place.

Reconciling the four cases into one decision and most relevantly reversing the Appellate Division’s decisions in Engel and Naidu, the Court of Appeals held that plaintiff lenders’ voluntary discontinuance of their first foreclosure within the statute of limitations period was a valid revocation of the loan acceleration, and that the statute of limitations period was functionally “reset” when a later action was filed. The Court stated that a “post-hoc, case-by-case approach” evaluating whether any given discontinuance exhibited a valid intent on the part of a lender to decelerate a loan was “harmful to the parties . . . [and] suggests that a noteholder can retroactively control the effect of a voluntary discontinuance through correspondence it sends to the borrower after the case is withdrawn.” Rather, the Court decided to adopt “a clear rule that voluntary discontinuance evinces revocation of acceleration,” which “makes it possible for attorneys to counsel their clients accordingly,” as well as for “borrowers to take advantage of the opportunity afforded by the de-acceleration,” such as being given the opportunity to pay arrears or make installment payments as opposed to the entire outstanding principal amount. The Court also stressed that absent an “express, contemporaneous statement” that the voluntary discontinuance did not constitute a deceleration, the lender’s intent in filing the discontinuance (for example, to simply reset the statute of limitations) does not matter, as “a noteholder’s motivation for exercising a contractual right is generally irrelevant.”

This decision provides some much needed uniformity and clarity to both lenders and mortgagees in New York concerning the acceleration and deceleration of a loan, in addition to the attendant statute of limitations issues. Both now have a bright-line rule to follow: a loan is accelerated and the statute of limitations begins to run when a foreclosure action is filed, but, absent a statement to the contrary, decelerated when a voluntary discontinuance is filed, resetting the statute of limitations in the event another foreclosure complaint is filed later.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Andrew Raimondi at araimondi@riker.com.

Some Relief Provided – NJDEP Remediation Timeframes Extended for Certain Cases

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New Jersey is extending certain remediation timeframes as a result of the ongoing COVID-19 pandemic, but the availability of an extension is subject to some uncertainty. On February 8th, the New Jersey Department of Environmental Protection (“NJDEP”) published a Notice of Rule Waiver/Modification/Suspension (the “Notice”) extending certain timeframes effective February 1, 2021. As reported in our prior blog post, for a large segment of cases with contamination that pre-date 1999 (“Pre-1999 Contamination Cases”), the remedial action (“RA”) was to be completed by May 7, 2021. The Notice provides relief from that May deadline and also extends other timeframes that were or will be reached while Governor Murphy’s Executive Order 103 (“EO 103”) declaring a state of emergency due to the pandemic remains in effect. (The Governor’s order must be extended every thirty (30) days, and has been regularly extended since being issued early in 2020.) The Notice does not extend any timeframes for action necessary to mitigate immediate impacts to human receptors. Further, you must have retained a Licensed Site Remediation Professional (“LSRP”) for your case to take advantage of the extensions provided in the Notice.   

Extension of Remedial Action Timeframe for Pre-1999 Contamination Cases

For Pre-1999 Contamination Cases, the Notice extends the May 7, 2021 RA Regulatory Timeframe for one (1) year to May 7, 2022, if your case has not already missed an RA regulatory or mandatory timeframe. The Notice, however, does not expressly extend the RA Mandatory Timeframe for these cases, nor does it state what the effect of the extension of the RA Regulatory Timeframe is on the applicable RA Mandatory Timeframe, which may lead to some confusion. Although the Notice is not a model of clarity, NJDEP’s statements prior to the Notice were clear about its intent to extend the May 2021 RA timeframe for all compliant cases, whether it is a regulatory or mandatory timeframe. Indeed, a reading of the Notice that would extend the RA Regulatory Timeframe beyond the RA Mandatory Timeframe for some cases would not make sense. In response to a specific inquiry from our office, the Department advised that it considers the RA Mandatory Timeframe also to be extended by one year. Whether that extension is to May 2022 or a later date is case specific. In light of these ambiguities, we recommend that remediating parties that are subject to a May 2021 RA Timeframe (regulatory, mandatory or both) carefully evaluate the effect of the Notice on the completion of your case so that its remains compliant.

Extension of Timeframes That Have Been and Will Be Reached While EO 103 is in Effect

The Notice also extends remediation timeframes that are reached while the current state of emergency is in effect.  The Department already extended these timeframes by similar Notices issued in April and August, 2020. The current Notice lengthens the extension for these timeframes to a total of 455 days from the original timeframe. Further, for cases with timeframes that receive the 455-day extension, the Notice is explicit that all subsequent timeframes in the case are also extended for 455 days. 

While the Notice is helpful for timeframes that have already been or will be reached shortly, it leaves remediating parties guessing as to whether EO 103 will still be in effect when the timeframe in their case is reached. Accordingly, remediating parties should evaluate whether there is protective action to take to ensure your case remains in compliance. Complicating the situation, however, NJDEP, has said that it will not review extension requests submitted for timeframes that are subject to the Notice.   

While providing important and needed relief, the Notice is challenging to decipher in any number of specific circumstances. The legal questions and issues raised need to be evaluated on a case-by-case basis so that remediating parties and their LSRPs do not unwittingly miss a timeframe.

If you have any questions about this Alert, please contact the author Alexa Richman-La Londe, either of the department Co-Chairs, Jeffrey B. Wagenbach and Steven T. Senior, or any member of the Environmental Group.   

New Opioid and COVID-19 Reporting Developments

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, Labinot Alexander Berlajolli, or Daniel J. Parziale.

New Proposed Rules Limit Prescribing, Administering, or Dispensing Controlled Dangerous Substances

The New Jersey State Board of Dentistry, New Jersey Board of Nursing, and New Jersey State Board of Optometrists (collectively, the “Boards”) each released a proposed rule aimed at addressing New Jersey’s ongoing opioid epidemic and further increasing the public availability of the overdose‑reversal drug, naloxone. Each proposed rule would require co‑prescribing of an opioid antidote like naloxone if, as part of the treatment of chronic pain, the patient has one or more prescriptions totaling 90 morphine milligram equivalents or more per day, or is concurrently obtaining an opioid and a benzodiazepine. The proposed rules also would modify the timing of the requirement to enter into a pain management agreement prior to the commencement of an ongoing course of treatment for chronic pain. Currently, a pain management agreement is not required until issuance of the third prescription for a controlled dangerous substance or opioid drug.

Each proposed rule is available here: New Jersey State Board of Dentistry, New Jersey Board of Nursing, and New Jersey State Board of Optometrists. Comments are due by March 20, 2021.

Additionally, the New Jersey Board of Medical Examiners (the “BME”) has already adopted similar rules regarding limitations on prescribing, administering, or dispensing controlled dangerous substances and managing acute and chronic pain, applicable to physicians, podiatrists, physician assistants, and certified nurse midwives. The BME’s rules were effective January 19, 2021.

Biden Withdraws Guidelines Regarding the X-Waiver for Opioid Prescriptions

In one of our previous posts, we noted that the Department of Health and Human Services (“HHS”) released new practice guidelines that eliminate the requirement that physicians obtain a federal X-waiver to prescribe buprenorphine, commonly known as suboxone, a medication traditionally used to treat opioid use disorders.  President Biden, however, has recently withdrawn the guidelines.

Proposed Rules by New Jersey State Board of Physical Therapy Examiners

The New Jersey State Board of Physical Therapy Examiners (the “Board”) has proposed to readopt N.J.A.C. 13:39A with amendments, repeals, and new rules. Among other things, the proposed rules overhaul provisions regarding the licensing and credentialing of physical therapists and physical therapist assistants. Comments are due by March 20, 2021.

New Jersey Legislature Passes New Law Requiring healthcare Providers to Report COVID-19 Data Related to healthcare Workers and Certain First Responders

On Thursday, February 4, 2021, Governor Murphy signed into law a bill (A4129/S2384) establishing certain reporting requirements for healthcare facilities with regard to COVID-19. The new law specifically requires that general acute care hospitals, special hospitals, ambulatory care facilities, ambulatory surgical centers, assisted living facilities, home health agencies, nursing homes, and hospice programs (collectively “covered entities”) are required to report to the Department of Health (“DOH”) data on the number of healthcare professionals, ancillary healthcare workers, and emergency medical services personnel affiliated with the facility who tested positive for COVID-19 and who died from COVID-19. To that end, the new law requires the DOH to issue guidance concerning the specific healthcare professionals, ancillary healthcare workers, and emergency medical services personnel for whom reporting will be required.

Additionally, the new law requires the covered entities to adopt standards, procedures, and protocols to evaluate and mitigate the risk of exposure to, and spread of, COVID-19 in healthcare settings, which standards, protocols, and procedures are to be consistent with guidance currently published by the DOH and the federal Centers for Disease Control and Prevention.

Finally, the new law requires that, no later than 60 days after the end of the state of emergency declared in response to the COVID-19 pandemic, the covered entities are required to complete an analysis of COVID-19 exposures identified throughout their workforces during each month of the COVID-19 emergency, along with the measures taken by the covered entities to respond to or mitigate the risk of exposure. Similarly, the new law requires that no later than 120 days after the end of the state of emergency declared in response to the COVID-19 pandemic, the Commissioner of Health is required to submit a report to the Governor and to the Legislature outlining the aggregated data and findings in the confidential reports and outlining the commissioner’s findings and recommendations for legislation or other action to mitigate the risk of exposure and spread of communicable diseases among staff and personnel of the covered entities during a communicable disease outbreak, epidemic, or pandemic.

Vicarious Liability Claims and Affidavits of Merit

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, Labinot Alexander Berlajolli, or Daniel J. Parziale.

In Haviland v. Lourdes Med. Ctr. of Burlington County, Inc., the Appellate Division addressed, in a matter of first impression, whether an Affidavit of Merit (“AOM”) is required for vicarious liability claims against a licensed facility for the alleged negligence of an employee, where the Affidavit of Merit Statute (the “Statute”), N.J.S.A. 2A:53A-26-29, applies to the licensed facility, but not the employee.

Plaintiff Troy Haviland (“Plaintiff”) underwent a radiological exam at Lourdes Medical Center of Burlington County, Inc. (“Lourdes”). According to Plaintiff, during the exam, a radiology technician instructed him to hold weights, contrary to the ordering physician's instructions. Plaintiff claimed he was injured holding the weights and, thereafter, required surgical repair of his left shoulder.

Plaintiff filed a complaint alleging medical negligence against the radiology technician and Lourdes, claiming that Lourdes was responsible for the actions of the radiology technician.  After Plaintiff filed his complaint, the trial court advised Plaintiff that he is required to submit an AOM against Lourdes, which falls within the definition of “Healthcare facility” under the Statute.

Plaintiff never filed an AOM. Instead, Plaintiff argued that an AOM was not necessary for the radiology technician, because a radiology technician does not fall within the definition of “licensed person” under the Statute. Plaintiff also argued that he was only proceeding on a theory of vicarious liability, not negligence, against Lourdes and, therefore, an AOM was not required.

When the deadline for the AOM passed, Lourdes filed a motion to dismiss, which the trial court granted, holding that Plaintiff was required to obtain an AOM from a radiologist.

Plaintiff appealed, and the Appellate Division reversed the trial court’s decision. The Appellate Division noted that it was undisputed that a radiology technician was not listed among the medical professionals who qualified as a "licensed person" under the Statute. Thus, the Appellate Division held, Plaintiff could have asserted a negligence claim against the radiology technician without obtaining an AOM.  The Appellate Division then reasoned that no AOM was required against Lourdes, since Plaintiff was only asserting a vicarious liability claim arising from the alleged negligence of a healthcare professional not covered by the Statute’s definition of a licensed person.

Seventh Circuit Declines to Address Arbitration, Dismisses for Lack of Standing

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The United States Court of Appeals for the Seventh Circuit recently declined to address whether a FDCPA action should have been sent to arbitration, instead finding that plaintiff lacked standing and dismissing the case entirely.  See Nettles v. Midland Funding LLC, 983 F.3d 896 (7th Cir. 2020).  In the case, plaintiff defaulted on her debt and, after defendant brought a lawsuit, reached a settlement with reduced monthly payments.  After plaintiff defaulted again, defendant sent another letter, which overstated the amount due.  Plaintiff then filed this class action, claiming the letter was false, misleading, or otherwise unfair or unconscionable in violation of the FDCPA.  Defendant moved to compel arbitration based on an arbitration provision in the parties’ credit card agreement.  The District Court denied the motion and the defendant appealed.

On appeal, the Court reversed without even analyzing the arbitration issue.  Instead, the Court found that plaintiff lacked the standing to bring this claim.  Specifically, plaintiff had not pled a concrete harm traceable to the collection letter.  The Court held that the “complaint does not allege that the statutory violations harmed her in any way or created any appreciable risk of harm to her. Indeed, on appeal she admits that the letter didn't affect her at all and that her only injury is receipt of a noncompliant collection letter.”  Although no one raised this standing issue before the District Court, the Court found that standing is jurisdictional and cannot be waived.  Accordingly, it vacated the District Court’s prior order and remanded the action to the District Court to dismiss.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Andrew Raimondi at araimondi@riker.com.

New Incentives for NJ Brownfields Redevelopment

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An Overview of New Jersey’s Brownfields Redevelopment Incentive Program

New Jersey is rolling out a new tax incentive program for the redevelopment of underused, contaminated properties, known as “brownfield sites.”  In fact, on January 7, 2021, Governor Phil Murphy signed into law the New Jersey Economic Recovery Act of 2020, P.L.2020, c.156 (the “Economic Recovery Act”), a broad piece of legislation that provides support for a variety of programs and policies related to jobs, small businesses, sustainable energy, and many other areas.  Sections 9 through 19 of the Economic Recovery Act establish the Brownfields Redevelopment Incentive Program Act (the “Program”), which supplements the existing Brownfield and Contaminated Site Remediation Act.  Put simply, the Program allows the New Jersey Economic Development Authority (“EDA”) to award  up to $50 million in tax credits annually for six years to redevelopment projects in need of financial assistance to address environmental contaminants or hazardous building material, such as asbestos. 

This article provides an overview of the Program and certain issues that developers may face based on our experience with similar incentive programs, including the predecessor to the Brownfields Redevelopment Incentive Program.

Eligibility Requirements

Projects will be eligible for tax credits only if the redeveloper demonstrates the following in its application:

  1. The redeveloper has not conducted environmental remediation work at the site other than preliminary assessments or site investigations.  However, and while this concept will need to be more accurately defined through regulations or guidance, redevelopers who have begun remediation are eligible for tax credits if they can certify that they could not reasonably have known the extent of the contamination when they began the project;
  2. The project is located on a brownfield site;
  3. The project needs tax credits to be economically feasible;
  4. The project has a finance gap, which means the redeveloper itself has contributed at least 20 percent of the capital for the project, but is unable to raise the necessary funds for the project without tax credits;
  5. The municipality in which the project is located must provide a letter of support;
  6. Redevelopers must pay a prevailing wage to every worker performing remediation or construction on the project; and
  7. The redeveloper is not responsible for causing the contamination. 

Available Tax Credits

Redevelopers who are awarded tax credits and complete their redevelopment projects in compliance with the Program requirements will be awarded a tax credit equal to 40 percent of the remediation costs or $4 million dollars, whichever is less.  As noted above, however, only $50 million is available to be awarded on an annual basis.

Competitive Application Process

The EDA and the New Jersey Department of Environmental Protection (“NJDEP”) will adopt regulations describing how to submit applications requesting tax credits for brownfield redevelopment projects, and will set an annual application due date.  The EDA and the NJDEP will jointly review all applications and will consult with the Department of Labor and Workforce and the Department of the Treasury as to whether redevelopers seeking tax credits are in good standing with the respective departments.  We expect that there will be more applicants than available tax credits and, therefore, that the Program will be competitive.  In evaluating and prioritizing certain projects, the EDA and the NJDEP are authorized to use any of the following factors: the economic feasibility of the project; the degree to which the project promotes economic development and addresses environmental concerns in communities disproportionately impacted by environmental hazards; and, if the redeveloper has a board of directors, the extent to which the board of directors is diverse and represents the community in which the project is located.

Lessons from Prior Experiences

Based on our prior experience with similar programs, developers that are interested in the Brownfield Tax Incentive Program should begin planning early in the development process, especially given how competitive we expect the application process to be for these tax credits.  Developers also should ensure that they conduct a thorough environmental investigation in connection with acquisition of brownfields for which they plan to seek tax credits, as such an investigation may be a prerequisite to eligibility for such tax credits.  Lastly, early planning also is important under the Program because of its focus on community support and environmental justice.  Developers that want to be ready to seek tax credits as soon as the Program comes online fully may want to begin outreach to community groups now.

The Program is in its infancy, but the Brownfields Redevelopment Incentive Program Act builds on a legacy of incentives for remediation projects in New Jersey and promises to foster redevelopment projects that may change the course of many communities across the Garden State.

For more information, please contact the author Jason Boyle at jboyle@riker.com or any attorney in our Environmental Practice Group.

Regulatory Update, Including Changes to HIPAA and Opioid Treatment

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, Labinot Alexander Berlajolli, or Daniel J. Parziale.

HHS Proposes Changes to HIPAA/HITECH Privacy Rule

The United States Department of Health and Human Services (“HHS”) issued its Notice of Proposed Rule Making (“Proposed Rule”) to modify the Standards for the Privacy of Individually Identifiable Health Information (“Privacy Rule”) under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH Act”). The modifications proposed by HHS address standards that it believes may impede the transition to value-based healthcare by limiting or discouraging care coordination and case management communications among individuals and covered entities (including hospitals, physicians, and other healthcare providers, payors, and insurers) or posing other unnecessary burdens.

The proposed rule would achieve this by first clarifying that individuals’ right to inspect their Protected Heath Information (“PHI”) includes the right to view, take notes or photographs, and use other personal resources to capture their PHI free of charge, except that covered entities need not allow individuals to connect personal devices to electronic information systems and may impose safeguards to ensure that individuals see only their own PHI. Second, the Proposed Rule provides that although covered entities may require individuals to submit written access requests electronically or on paper, they may not impose measures that unreasonably impede access.  Third, the Proposed Rule provides that an individual’s right to direct transmission of PHI to a third party would apply only to electronic health records (“EHRs”) maintained by covered healthcare providers; it would not apply to other types of PHI or to health plans.  Health plan participants could, however, instruct their health plan to request EHRs from covered healthcare providers, which would then be required to disclose the requested EHRs directly to the plan.  Finally, the Proposed Rule requires that a covered entity, which charges for copies of PHI, has to post a fee schedule on its website and make the schedule available at the point of service and upon request. The schedule would need to specify (i) types of access available free of charge and (ii) standard fees in other situations.  Individualized fee estimates would have to be provided upon request, as would an itemized list of billed charges.

Comments on the proposed rule are open until March 22, 2021.

OCR Announces Relaxation of the Imposition of Penalties Related to Privacy Issues Involving Web‑Based Scheduling Applications

The Office for Civil Rights (“OCR”) at HHS recently announced that it will exercise its enforcement discretion and will not impose penalties for violations of the HIPAA Rules on covered healthcare providers or their business associates in connection with the good faith use of online or web‑based scheduling applications (collectively, “WBSAs”) for the scheduling of individual appointments for COVID‑19 vaccinations during the COVID‑19 nationwide public health emergency. The announcement has a retroactive effect back to December 11, 2020.

HHS Releases New Guidance to Improve Access to Medication‑Assisted Treatment of Opioid Use Disorder

HHS has released new practice guidelines that eliminate the requirement that physicians obtain a federal waiver to prescribe buprenorphine, commonly known as suboxone, a medication traditionally used to treat opioid use disorders.  In the past, HHS required physicians to complete an eight‑hour course before receiving a license, called an “X‑waiver,” to prescribe.

However, under these new guidelines, doctors who possess a Drug Enforcement Administration registration and exercise this exemption will be limited to treating no more than 30 in‑state patients with buprenorphine for addiction treatment at any one time. Nurse practitioners or physician assistants will still need to apply for separate waivers to prescribe buprenorphine.

The new practice guidelines can be found here.

CMS Issues Final Rule on Transparency for Out-of-Pocket Costs for Prescription Drugs

CMS issued a final rule, 86 FR 5864, which revises the regulations for the Medicare Advantage (Part C) program, Medicare Prescription Drug Benefit (Part D) program, Medicaid program, Medicare Cost Plan program, and Programs of All‑Inclusive Care for the Elderly (“PACE”) to improve transparency with regard to out‑of‑pocket costs for prescription drugs for seniors.

Among other things, effective January 1, 2023, the final rule requires Part D plans to offer a real‑time benefit comparison tool to allow enrollees to know the out‑of‑pocket costs for prescription drugs in advance and compare those prescription drugs with potential lower cost alternatives. The rule also allows Part D plans to have a second “preferred” specialty tier with a lower cost sharing level than their other specialty tier. This change gives Part D plans more tools to negotiate better deals with manufacturers on the highest‑cost drugs and lower out‑of‑pocket costs for enrollees in exchange for placing these products on the “preferred” specialty tier.

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