Points of Interest Summer 2019 Page 39 How Can Servicers Avoid Being Subjected to Attorneys’ Fees and Costs Under the Hardie Rule? TheHardiedecisionhighlightstheservicer’s need for internal procedures to quickly identify when a TRO is being noticed and to immediately funnel it to the legal department or other appropriate person so that they can hire counsel.  With the referral to outside counsel, we suggest including (1) the status of any current loss mitigation discussions; (2) if possible, copiesoflossmitigationnotes,applications, denials, etc.; (3) any known bankruptcy information;and(4)contactinformationfor thepersonresponsibleforpostponingthe sale. Withthisinformation,outsidecounsel can then quickly determine whether the TRO is likely to be granted, in which case counsel may recommend postponing the foreclosure sale.  Postponing the sale will allow counsel to argue that the TRO should be denied because there is no risk of “immediate” harm.  MostCalifornialawsuitsinclude,inaddition tothetypicalHOBRclaims,causesofaction for negligent loan modification review, promissoryestoppel,wrongfulforeclosure, etc. ATRObasedonnon-HOBRclaimsdoes not trigger the borrower’s immediately right to attorneys’ fees. With that in mind, if the court is inclined to grant the TRO, counsel should ask the court to clarify that the TRO is based on the non-HOBR claims. Judges often blindly grant TROs thinking there is no harm to the lender.  If thedistinctionispointedout,somejudges may still grant the TRO but NOT on the HOBR claims to avoid trigger Borrower’s right to attorneys’ fees.  Along the same lines, if the servicer cannot hire counsel in time to oppose the TRO, counsel can later argue, in opposition to the Preliminary Injunction,thattheTROwasgrantedbased on the non-HOBR claims. Final Thoughts and a (Small) Silver Lining: In recognition of the obvious negative implications of its ruling, the Hardie Court did provide one important, positive constraintonpotentialabuses. Specifically, the Court confirmed that an attorney fee award under HOBR is not mandatory just because injunctive relief was granted: “Furthermore, the award of attorney’s fees under section 2924.12 is discretionary. (§ 2924.12,subd.(h)[fees“may”beawarded].) Bypermitting,ratherthanrequiringacourt to award attorney’s fees, section 2924.12 allows courts to avoid awards that would be inequitable or unconstitutional. The ex parte nature of the proceedings, the relative merits of the TRO application, and aparty’sultimateabilitytoobtainstatutory compliance through imposition of an injunction are relevant factors the court may consider in determining whether to award fees.” Prior to the Hardie decision, many courts viewedanattorneyfeeawardasmandatory under HOBR. At least now, servicers can cite to Hardie for reasons why, even if a TRO or Preliminary Injunction is granted, the court should still deny the borrowers request for attorneys’ fees. Despite this “saving” clause, the Hardie decision increases the likelihood that borrowerswillseekTROsand,iftheyprevail, move for fees.  Again, the best recourse is to immediately hire counsel to oppose the TRO and, if it is going to be granted, seek to clarify that the TRO is based on thenon-HOBRclaims. Inaddition,counsel should always push the court to condition the TRO or Preliminary Injunction on the postingofabond. Thatway,iftheborrower fails to timely post the bond, counsel can arguethattheinjunctionnevertookeffect and, therefore, the borrower is not the prevailingpartyunderSection2924.12(i)or 2924.19(h). Another option, if subsequent facts are developed to show that the TRO was improperly granted (e.g. based on misrepresentations by the borrower that the short time frame for response did not allow the servicer or investor to present at the hearing, or where the TRO was issued withoutnoticeofthehearing),istomoveto dissolve the TRO or Preliminary Injunction. If all that fails, counsel can still argue that the court should exercise its “discretion” to deny all or a part of the borrower’s fee request. In conclusion, servicers and investors should make sure that their staff is trained on what constitutes ex parte notice in California and what to do when they receive notice. That is the first line of defense in seeking to avoid the risk of attorneys’ fees and costs under HOBR. If you have any questions regarding this article, a particular case or California’s Homeowner’s Bill of Rights (HOBR), please feelfreetocontactRobertFinlayatrfinlay@ wrightlegal.net. Endnotes 1 Civil Code Section 2924.12(i) applies to servicer’s who conduct more than 175 qualifying foreclosures a year. Section 2924.19(h)appliestothoseunder175annual qualifying foreclosures. 2 Monterossa v Superior Court, (2015) 237 Cal. App.4th 747. 3 Hardie v. Nationstar Mortgage LLC, 2019 WL 947085 (5th Dist., Feb. 27, 2019) T. Robert Finlay, Esq. is a founding partner of Wright Finlay & Zak LLP. HOBR – continued from page 38