Foreclosure Case Crumbles Because Bank Expressly Declined Consent to Proceed Before Magistrate Judge, Holds Fifth Circuit

In PNC Bank, NA v. Ruiz, No. 20-50255 (5th Cir. Mar. 2, 2021), the Fifth Circuit vacates a summary judgment because there was no record that the bank ever consented to the case proceeding before a U.S. magistrate judge.

Plaintiff “Ruiz and her husband … obtained a home equity loan (‘the loan’) from National City Mortgage Co. (‘National City’) on May 24, 2002. Later that same year the couple divorced, leaving the property that secured the loan to Ruiz.” Ruiz defaulted and the loan was eventually acquired by PNC.

“Seeking judicial foreclosure and declaratory judgment, PNC initiated the instant litigation against Ruiz in federal court on September 2, 2015. Thereafter, the district court issued a scheduling order requiring the parties to file a notice of consent to trial by magistrate judge. Ruiz did so, but PNC expressly declined to consent on the provided form. Yet, apparently because of an erroneous entry by the clerk’s office, the docket text reflected that PNC had consented. That error lay dormant for some time because for much of the next two years, proceedings in the case were stayed as the parties engaged in unsuccessful settlement discussions.”

The district court, believing that the parties consented, transferred the matter to the U.S. magistrate judge. “The magistrate judge then set and held a scheduling conference before entering an amended scheduling order. Again, neither party objected at any point; nor did PNC expressly consent. Ruiz then filed an amended answer and counterclaims and PNC filed a motion to substitute counsel—yet again, all without objection. Finally, both parties moved for summary judgment.” PNC prevailed, and Ruiz appealed.

The Fifth Circuit vacates the judgment, limiting itself to the jurisdictional issue. Under Federal Magistrate Act, a magistrate judge “may conduct any or all proceedings in a jury or nonjury civil matter and order the entry of judgment in the case” if he is specially designated by the district court and all the parties’ voluntary consent is obtained. 28 U.S.C. § 636(c)(1). Consent is thus “the touchstone of magistrate judge jurisdiction” (quoting Anderson v. Woodcreek Venture Ltd., 351 F.3d 911, 914 (9th Cir. 2003)).

While it is possible under Roell v. Withrow, 538 U.S. 580 (2003), for parties to impliedly consent to a magistrate, this case presents a novel issue: whether consent can be “implied by conduct alone trump a prior express and unambiguous statement of non-consent? In other words, can jurisdiction-by estoppel overcome a written, properly-filed statement of non-consent?”

The panel holds that, under the circumstances of this case, there was no “clear and unambiguous” consent because the bank’s “express statement of non-consent is flatly inconsistent with its subsequent conduct.”

Had the bank “simply failed to register any position about referral to a magistrate judge, the outcome here may well have been different. We agree that, absent its express refusal to consent, PNC’s course of conduct during all proceedings before the magistrate judge likely would imply its consent. PNC signaled consent by conspicuously declining to object at any of the numerous opportunities it had for doing so and affirmatively litigating before the magistrate judge. But its prior inconsistent statement, which it never expressly recanted, renders that subsequent conduct inconclusive and precludes us from inferring clear and unambiguous consent.”

While tweaking both parties for “gamesmanship” in not raising the issue until after summary judgment was decided, the panel observes that because the issue goes to the magistrate judge’s jurisdiction that it has no choice but to rule on it. The panel consoles itself that the issue is unlikely to reoccur. “[W]e have little concern of widespread inefficiency and gamesmanship because circumstances like these are bound to be quite infrequent. This case is an outlier. Generally, one party’s express refusal to consent is the end of the matter because, consistent with that refusal, the district court simply would not transfer the case to a magistrate judge.”

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