Financial Services

For every quarter, the six-quarters section above lists the orders in force on the quarter's first and last day, by issuer, date and terms, with exhibit identifiers. For the third quarter of 2021 alone the list runs to the federal foreclosure moratoria to July 31 and eviction moratoria to September 30 (Ex. FED-354; Ex. FED-364; Ex. FED-378; Ex. SEC-13-012; Ex. SEC-13-014; Ex. FED-379), the CDC's orders (Ex. FED-025; Ex. FED-026), the CARES Act's reporting mandate (Ex. SEC-13-017), the Bureau's rules and bulletin (Ex. FED-344; Ex. SEC-13-008; Ex. SEC-13-010), the ARPA subsidy and the coverage and tolling mandates (Ex. SEC-13-022; Ex. SEC-13-023; Ex. SEC-13-020), the foreclosure, eviction, garnishment and repossession instruments of nineteen States and the District, thirteen of them in force on every day of the quarter (Ex. CA-062; Ex. NY-086; Ex. NJ-054; Ex. IL-038; Ex. WA-069; Ex. OR-042; Ex. MN-042; Ex. MI-079; Ex. NM-009; Ex. CT-103; Ex. TX-040; Ex. AZ-062; Ex. KY-059; Ex. HI-023; Ex. VT-046; Ex. DE-038; Ex. CO-078; Ex. DC-059; Ex. MD-031; and Nevada's AB 486), the insurance instruments of eight States (Ex. NJ-012; Ex. IL-011; Ex. ME-002; Ex. GA-056; Ex. WV-078; Ex. VT-070; Ex. LA-056; Ex. DE-038), the workplace standards of six States and New York's plans (Ex. NJ-050; Ex. SEC-09-038; Ex. VA-037; Ex. VA-045; Ex. AGY-ST-LABOR-WORKPLACE-002; Ex. ECO-B-044; Ex. WA-072; Ex. AGY-ST-LABOR-WORKPLACE-055; Ex. MT-072; Ex. NY-133; Ex. ECO-B-120; Ex. OR-041; Ex. OR-049), the indoor face-covering orders of seven States and the District, the unvaccinated-person mandates of California and Connecticut and the orders of more than thirty metropolitan jurisdictions (Ex. NV-041; Ex. LA-036; Ex. OR-048; Ex. NM-067; Ex. WA-078; Ex. IL-042; Ex. IL-043; Ex. HI-023; Ex. DC-057; Ex. CA-036; Ex. CT-050), the supervisors' instruments (Ex. AGY-FED-FINANCIAL-048; Ex. AGY-FED-FINANCIAL-049; Ex. AGY-FED-FINANCIAL-073), the conveyance, entry and border orders (Ex. FED-020; Ex. FED-207; Ex. FED-233) and the court orders of at least twenty-nine States (Ex. MET-PIT-039; Ex. MET-PHL-060; Ex. MET-CLE-026; Ex. MET-CIN-007). A form sentence that no orders were in effect is not the "case-by-case" determination the United States described to the District Court.¹⁷⁵ The sentence describes a quarter that did not occur, and the Service's records, whatever they contain, do not contain the Federal Register.

The word "essential" is not in the statute. The essential-services designations permitted the branch to operate; they exempted no branch from the distancing, capacity, face-covering and telework conditions that applied to every business, no servicer from the moratoria, no insurer from the cancellation bars, and no lender from the closed recorder or the closed dealership.¹⁷⁶ The Notice itself provides that an employer so designated "may be considered to have a partial suspension of operations if, under the facts and circumstances, more than a nominal portion of its business operations are suspended by a governmental order," and the United States told the District Court:

[an employer] could be considered to have a partial suspension due to the governmental order if it was required to suspend certain operations for certain purposes.

Doc. 44 at 15

A servicer that remained open under an order forbidding it to foreclose, evict, repossess or garnish was open for every purpose but the one its collection department exists to perform; the Vermont list that named the industry essential is the same instrument that conditioned it to ATM-and-drive-through operation, and the Treasury statement of March 24, 2020 that designated its workers essential lifted none of the conditions the stay-at-home orders imposed on the branch.¹⁷⁷ The position mistakes a permission to operate under the orders for an exemption from them; an employer that "remained open" under an order fixing what it could collect, whom it could admit and how it could operate was partially suspended by that order.¹⁷⁸

The statute says nothing of the source or addressee of the order; it asks whether the order limited "commerce, travel, or group meetings." The Notice's own list of qualifying orders includes "A State's emergency proclamation that residents must shelter in place" and "An order from a local official imposing a curfew on residents," both addressed to the public, and the United States quoted that list to the District Court as the statute's meaning and told the Ninth Circuit that a business "may be suspended 'due to' a government order addressing a third party."¹⁷⁹ The orders that reached this industry were, moreover, directed at its operations in terms: "a servicer of a Federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process"; a regulated institution's refusal of forbearance "shall be deemed an unsafe and unsound business practice"; "No insurer may, without a court order, lapse, terminate or cause to be forfeited a covered insurance policy"; "Banks, currency exchanges, consumer lenders ... credit unions, appraisers, title companies, financial markets" essential only under Social Distancing Requirements; every person in every indoor space including "banks" under a face-covering requirement at $500 a day.¹⁸⁰ The position rewrites the statute and misdescribes the orders.

"Comparable operations" and "telework" are not in the statute; Tri-State defines a partial suspension as a temporary delay, interruption or termination of a portion of the business, and a contact center ordered to remote operation has had its in-person portion terminated for the duration of the order.¹⁸¹ The Notice's own words say the same. Q&A-15 provides that where "the closure of the workplace causes the employer to suspend business operations for certain purposes, but not others, it may be considered to have a partial suspension of operations due to the governmental order," and its Example 2 treats a business whose customers "cannot be served remotely" as partially suspended; Q&A-16 provides that where the physical work space is so critical that central tasks cannot be performed remotely "this factor alone indicates that the employer is not able to continue comparable operations"; Q&A-17 provides that a compelled modification with more than a nominal effect is a partial suspension.¹⁸² A teller line, a vault, a safe-deposit box, a drive-up lane, a closing table, a repossession, a sheriff's sale, an appraisal inspection and an eviction are not performed by telework; they are the branch, the collateral and the courthouse, and the orders closed or stayed each of them. Telework was the modification the orders compelled for the functions that could bear it, and a compelled modification of a more than nominal portion is a partial suspension, which is what Q&A-17 also says; for the functions that could not bear it, the orders terminated the operation outright.¹⁸³ The position substitutes a word Congress did not write for the one it did.

Q&A-13 addresses an employer that suspends operations because of "a reduction in demand." This analysis does not rest on a reduction in demand; it rests on orders. It cites orders that forbade the employer to foreclose, evict, repossess and garnish; that compelled it to forbear and to report accounts as current; that forbade it to cancel a policy and ordered it to refund premium; that closed the recorders, motor-vehicle offices, dealerships and courts through which its loans are made and enforced; and that placed its lobby under airborne-transmission controls fixing who could enter and on what conditions, and it treats the orders confining its customers as orders limiting commerce, travel and group meetings under the statute's text, Q&A-12's logic and the United States' representation that a third-party order counts.¹⁸⁴ A stay-at-home order on the customer base is itself an order limiting commerce, and the commerce it limited was this industry's; California's Insurance Commissioner ordered $1.75 billion of premium returned because "the statewide and local public health stay-at-home orders" had cut the miles his insureds drove.¹⁸⁵ Q&A-13 describes an employer that "responds to the lack of demand by suspending some or all of its operations." It does not describe a servicer forbidden by statute to collect, and the Service's invocation of it against this industry misdescribes both the orders and the industry.

A forbearance granted because CARES Act § 4022 required it, a foreclosure not begun because Mortgagee Letter 2021-15 forbade it, a policy not cancelled because the Sixth Modification forbade it, a lobby placed under OAR 333-019-1025's airborne-transmission controls (universal face coverings, with the operator's duty to ensure compliance and to post the requirement, at $500 a day) because the rule required it and a contact center emptied because Executive Order 202.8 required it are not voluntary. Q&A-14 describes an employer that closes without any order; every modification described here is traced to an order with an exhibit identifier.¹⁸⁶ Where an institution adopted a nationwide policy to comply with the orders of the jurisdictions that bound it, Q&A-20 makes it eligible "with respect to all of its operations in all locations."¹⁸⁷ A modification traced to an order with an exhibit identifier is not voluntary, and the position that it was describes an employer this analysis does not address.

Q&A-14 reaches only a suspension "not due to a governmental order" (Notice 2021-20, 2021-11 I.R.B. 922, Q&A-14, at 929), and the United States and the District Court have defined the excluded employer as one "not being ordered to do so" (Doc. 49 at 18; Br. for Appellees at 42). No employer in this industry answered that description in any of the six quarters. The reopening orders permitted a branch or an agency office to operate only on conditions with the force of law: in Texas, "shall operate at no more than 50 percent" and "shall wear a face covering" under Government Code § 418.173 (Ex. TX-021; Ex. TX-022; Ex. DUT-TX-012). The standing statutes commanded the same conduct independently: "Each person shall act responsibly to prevent and control communicable disease" (Tex. Health & Safety Code § 81.002, Ex. DUT-TX-001); "Each employer shall" provide "a place of employment that is reasonably safe and healthful" (Tex. Lab. Code § 411.103, Ex. DUT-TX-013); and the general duty clause, 29 U.S.C. § 654(a)(1), enforced by citation from September 2020 (Ex. DUT-FED-001; Ex. LAW-487; Ex. DUT-FED-069). The legislatures then fixed the standard of care as compliance with governmental standards, guidance and protocols, from the first days of the emergency (Ex. DUT-TX-015; Ex. DUT-AZ-010; Ex. DUT-MI-015; Ex. DUT-FL-012). The safe-workplace statutes had no COVID-19 content until the health authorities said what a safe workplace required; the measures were taken because those directives defined the duty and would not have been taken without them. "Due to" is but-for causation (Tri-State, ECF No. 38, at 17-19), and the causation here runs from the command to the measure without an intervening choice. The Notice's own words say the same: a modification "required by a governmental order as a condition of reopening a physical space for business or service to the public" is a partial suspension due to the order (Q&A-18, at 930). A statute that commands conduct is an order from an appropriate governmental authority, by the statute's terms and by the United States' own definition of the exclusion; the Service's premise that no command reached the employer fails wherever a command did, and in the instruments inventoried here one always did.¹⁸⁸

The ten percent figure is, in the United States' words, "not determinative," "[e]ffectively ... a safe harbor," "not an eligibility requirement," "a quintessential safe harbor," "a safe harbor rather than a hard floor"; the District Court held it "is not an exclusionary cut-off point"; and Tri-State held that the Notice "provides a method for the test to be met not as a requirement to meet the test" and that reading it as a requirement "would read requirements into the statute that do not exist."¹⁸⁹ The showing for this industry exceeds the safe harbor many times over: the collection of the mortgage and consumer portfolio, the origination chain, the branch network, the contact centers and the insurance book are each a portion of the business that no account of nominality reaches, and the Bureau's own count of 6.9 million forborne borrowers is the measure of one of them.¹⁹⁰ The position applies as a floor a figure the United States has told two federal courts is not one.

The modifications described here are the termination of foreclosure, eviction, repossession and garnishment, compelled forbearance and current reporting, the prohibition of cancellation, compelled refunds, closed and capped lobbies, remote operation, closed recorders and motor-vehicle offices, deferred appraisals and suspended notarial acts; the face-covering orders of July through September 2021 are treated as what they are, airborne-transmission controls imposed by appropriate governmental authorities, enforced by fine, that conditioned every branch lobby in the States and metros that issued them, fixed who could be admitted and what the operator was liable for. Q&A-18's deeming rule, which the United States has told two federal courts is a safe harbor and not a requirement, provides that a modification "that results in a reduction in an employer's ability to provide goods or services in the normal course of the employer's business of not less than 10 percent will be deemed to have more than a nominal effect"; the showing here exceeds it, and the United States told the District Court:

employees having to wear face masks may impact business operations.

Doc. 44 at 30

Tri-State held that "the required protocols and procedures to comply with the Proclamation" were suspensions the order caused and refused the argument that they were nominal.¹⁹¹ A servicer forbidden to foreclose for sixteen months is not a business with a face-covering requirement; it is a business with a collection department the law stopped.¹⁹²

This analysis relies on no bare declaration as a suspending order. Each instrument in the layers and quarters sections limited commerce, travel or group meetings in terms. Where an emergency declaration is cited, it is cited as the instrument under which those orders were issued and continued, or as proof of a period, which the Notice's own text allows; Maine's Proclamation of Insurance Emergency is cited because 24-A M.R.S. § 471 made it the legal predicate of the Bureau of Insurance's binding bulletins, and the States' emergency declarations are cited because the remote-notarization, moratorium and insurance instruments of Texas, Georgia, Mississippi, Kentucky, New Jersey and Delaware ran for their duration.¹⁹³ The ground answers an argument this analysis does not make.

Chief Counsel memoranda "may not be used or cited as precedent," by their own legend, which Tri-State quoted in declining to rely on the Chief Counsel advice the United States offered there.¹⁹⁴ The suppliers of this industry are the appraisers, notaries, recorders, motor-vehicle offices, dealerships, courts, clerks and sheriffs, and each was closed, suspended or conditioned by an order with a date and an exhibit identifier: the Fayette County Clerk limited its counters from March 16, 2020 and closed to the public from March 27, 2020 to April 12, 2021; the Dallas County Clerk closed every office to the public on March 24, 2020, as its notice records; Harris County cancelled or controlled the first-Tuesday foreclosure sales of twelve months between May 2020 and May 2021; the Allegheny County Sheriff was ordered not to execute writs of possession; Nebraska's Governor recited that closings "require physical presence" as the reason for his order.¹⁹⁵ Nothing here is attenuated. The United States told the Ninth Circuit that the supplier rule "never even mentions a 'physical[ ] clos[ure]' order against the supplier," and told the District Court that an employer is eligible where its operations are suspended "because of the supplier's inability to deliver."¹⁹⁶ Causation is but-for on the United States' own agreed definition: absent the order closing the recorder, no law kept the deed from being recorded; absent the order cancelling the sale, no law kept the trustee from selling.¹⁹⁷ The position describes an attenuated chain this analysis does not assert; a courthouse closed by administrative order and a sale cancelled by county order are not supply-chain effects, and a Chief Counsel memorandum that cannot be cited as precedent is not the statute.

For the third quarter of 2021 the orders had not lifted: subpart B of that quarter's section lists, with dates, the orders in force on July 1 and September 30, 2021, from the federal moratoria to July 31 and September 30 and the Bureau's rule from August 31 through the State statutes of August and September and the face-covering reinstatements of July through September, and the paragraph that follows it names the expired instruments on which the proof does not rest. Where the position means that a suspension compelled by an order that expired on June 30 ended at midnight, it misreads the clause, which asks whether the operation "is fully or partially suspended during the calendar quarter," and it contradicts Tri-State's definition of a suspension as a "delay," Q&A-22's whole-quarter rule and Q&A-16's transition rule.¹⁹⁸ A foreclosure pipeline frozen by law for sixteen months and then held by the Bureau's rule to December 31, 2021 was not restored on August 1; the orders' own dates fix the arithmetic. The position mistakes the date an order lapsed for the date the suspension it compelled ended; the clause asks about the second.

The gross-receipts prong is not relied on. The statute makes an employer eligible on either prong, and the United States agreed in Tri-State that the gross-receipts test is "another method to qualify," on which the court held "the fact an employer can be eligible and affected without partial or full suspension is reasonable."¹⁹⁹ The suspension prong asks about operations, not revenue, and a servicer whose fee income continued while its collection department was forbidden to act is the case the prong describes. The ground answers a prong this analysis does not invoke; Congress joined the two prongs with "or."

Every instrument this analysis relies on as a suspending order is a statute, rule, order, proclamation, directive, executive order or administrative order with the force of law, issued under a recited statutory or constitutional power and enforced by penalty, contempt, license, program condition or supervisory sanction: a public law of the United States (Ex. FED-340), a Federal Register rule of the Bureau (Ex. FED-344), an order of the CDC whose violation is a federal crime (Ex. FED-025), a program condition on every servicer of an insured mortgage (Ex. FED-364), an executive order of a governor under an emergency act (Ex. NJ-003), an emergency regulation of a State banking superintendent (Ex. NY-100), a statute of a State legislature (Ex. MA-052; Ex. NY-086; Ex. MN-042), an order of a State supreme court (Ex. TX-040; Ex. IL-067) and a health authority's rule with a civil penalty of $500 a day (Ex. OR-048).²⁰⁰ Where a regulator's instrument was hortatory (the interagency statements encouraging accommodation; the FFIEC pandemic-planning statement; FINRA's notices; the supervisors' letters and announcements of their own offsite policies; the closure notices of motor-vehicle agencies, clerks and test centers), it is described here as guidance, or as the agency's announcement implementing an order cited by its exhibit identifier, and grounds no finding; where a State made a federal guidance document binding by incorporating it into an order, the binding instrument is the order, and it is the order that is cited.²⁰¹ The Notice itself provides that whether an instrument is a governmental order "is determined without regard to the level of enforcement."²⁰² An instrument enforced by fine, contempt, license, program condition or supervisory sanction is not a recommendation, and the position that it is misdescribes every instrument this analysis names.

Agreed. An "order" is "a specific rule, regulation, or authoritative direction : command" and "a ruling or command made by a competent administrative authority" (Merriam-Webster, 2020), and "[a]n authoritative indication to be obeyed; a command or direction" (American Heritage); the United States agreed in Tri-State that the clause is read by "plain meaning."²⁰³ "A servicer ... may not initiate any judicial or non-judicial foreclosure process"; "A Mortgagee must not initiate or continue with an eviction"; "shall report the credit obligation or account as current"; "No insurer may ... lapse, terminate or cause to be forfeited"; "shall not evict any covered person." Every instrument in the finding for the third quarter of 2021 is a command from a competent authority to do or refrain from doing something on pain of sanction. That is the ordinary meaning, and it is satisfied.

The Service is free to disagree about the weight of these instruments. It is not free to say they did not exist.