VOLUME 18 NUMBER 3 SPRING 2018 NO BRAKES: LOAN ACCELERATION AND DIMINISHING FORECLOSURE DEFENSES Eric A. Zacks & Dustin A. Zacks 389 UNDERSTANDING PATENT AND COMMERCIAL WARRANTY LIABILITY STEMMING FROM PENDING PATENT APPLICATIONS Austen Zuege 443 INVESTORS BANCORP: THE ROADS NOT TAKEN AND HOW TO MITIGATE THE CONSEQUENCES Andrew M. Holt 481 NOTE: FOR WHOM THE WHISTLE BLOWS: WHO QUALIFIES AS A DODD FRANK WHISTLEBLOWER? Issac Halverson 505 COMMENT: CORPORATE LIABILITY FOR DATA BREACHES: WILL EQUIFAX VICTIMS HAVE A LEG TO STAND ON? Emily Marcum 525 ABOUT THE JOURNAL The WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW is a student organization sponsored by Wake Forest University School of Law dedicated to the examination of intellectual property in the legal context. Originally established as the Wake Forest Intellectual Property Law Journal in 2001, the new focus and form of the Journal, adopted in 2010, provides a forum for the exploration of business law and intellectual property issues generally, as well as the points of intersection between the two, primarily through the publication of legal scholarship. The Journal publishes four print issues annually. Additionally, the Journal sponsors an annual symposium dedicated to the implications of intellectual property law in a specific context. In 2009, the Journal launched an academic blog for the advancement of professional discourse on relevant issues, with content generated by both staff members and practitioners, which is open to comment from the legal community. The Journal’s student staff members are selected for membership based upon academic achievement, performance in an annual writing competition, or extensive experience in the field of intellectual property or business. 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Manuscript submissions should be accompanied by a cover letter and curriculum vitae, and may be sent electronically to [email protected] or by mail to: Manuscripts Editor Wake Forest Journal of Business and Intellectual Property Law Wake Forest University School of Law P.O. Box 7206 Reynolda Station Winston-Salem, North Carolina 27109 BOARD OF ADVISORS DANNY M. AWDEH JAMES L. LESTER Finnegan Henderson Farabow MacCord Mason PLLC Garrett & Dunner LLP Greensboro, North Carolina Washington, DC MICHAEL S. MIRELES CHARLES W. CALKINS Professor, University of the Kilpatrick Townsend & Stockton Pacific, McGeorge School of Law LLP Sacramento, California Winston-Salem, North Carolina JUSTIN R. NIFONG TRIP COYNE NK Patent Law Ward and Smith, P.A. Raleigh, North Carolina Wilmington, North Carolina ALAN PALMITER RODRICK J. ENNS Professor, Wake Forest Enns & Archer LLP University School of Law Winston-Salem, North Carolina Winston-Salem, North Carolina EDWARD R. ERGENZINGER, JR., ABIGAIL PERDUE PH.D. Professor, Wake Forest Ward & Smith, P.A. University School of Law Raleigh, North Carolina Winston-Salem, North Carolina JASON D. GARDNER COE W. RAMSEY Kilpatrick Townsend & Stockton Brooks Pierce LLP Raleigh, North Carolina Atlanta, Georgia T. ROBERT REHM, JR. STEVEN GARDNER Smith, Anderson, Blount, Kilpatrick Townsend & Stockton, Dorsett, Mitchell, & Jernigan, LLP LLP Winston-Salem, North Carolina Raleigh, North Carolina ROB HUNTER SIMONE ROSE The Clearing House Payments Professor, Wake Forest Company, LLC University School of Law Winston-Salem, North Carolina Winston-Salem, North Carolina DIRK D. LASATER Williams Mullen Richmond, Virginia BARBARA LENTZ Professor, Wake Forest University School of Law Winston-Salem, North Carolina Editor-in-Chief ELIZABETH CASALE Managing Editor DAVID N. GIESEL Marketing & Online Editor Manuscripts Editor EMILY BURKE MARISA STERN Symposium Editor Executive Articles MARK G. HUFFMAN Editors ANDREW DINWIDDIE Development Editor COLIN FERRITER CHARITY BARGER AMANDA ROMENESKO Senior Notes and Comments Editor Articles Editors ANNA-BRYCE FLOWE MELANIE CORMIER Notes and Comments Editors MITCHELL DAVIS DAVID LAYMAN KATHERINE ESCALANTE SAMER ROSHDY BRIANA O’NEIL MARIA PIGNA Research Editor MICHAEL FLEMING Editorial Staff LUKE BASHA JOE KARAM GARRETT ROGERS ROBERT BOTKIN EMILY MARCUM MAKENNA ROGERS JACKY BRAMMER LEANNA MARINO JONATHAN SALMONS MEGAN DYER BRANDY NICOLOFF HANNAH SMITH KERRIE EDMONDSON ALFRED NORRIS, III JOSEPH SPEIGHT DORYION GLASS DEREK PADILLA COURTNEY WACHAL ISAAC HALVERSON KATE RIDDLE BRITTANY WAGES NAN HU ZACHARY D. YOUNG Staff Members AVERY BARBER MAUREEN M. GALLAGHER CHARLOTTE LOPER FRANCE BEARD MATTILE C. GIBBONS MORGAN N. MCPHERSON ALINA E. BOSANAC ANDREW W. HOMER GABRIELA A. MEIJAS ASHLEY BOUCHEZ WHITNEY L. HOSEY JUSTINE PARRY LUCAS W. BROWN JULIANA S. INMAN NITI PARTHASARATHY YUSUF A. BROWN ABIGAIL JACOBS WILLIAM REINGOLD JAMIE DANIEL BURCHETTE MICHAEL JOHNSON TRACEA RICE JORDAN A. BURKE CAMRYN KEETER JAMES R. SIPE III JESSICA L. CANNON E. CARSON LANE GREGORY M. VOLK GABRIELA S. COLON CRISTOPHER L. LEWIS SARAH R. WARREN RALPH J. D’AGONSTINO III KAYLEN R. LOFLIN PATRICK WILSON JOSEPH M. DOUGHERTY JUSTINE MARIE WRIGHT Faculty Advisors BARBARA R. LENTZ SIMONE A. ROSE WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW ! " NO BRAKES: LOAN ACCELERATION AND DIMINISHING FORECLOSURE DEFENSES Eric A. Zacks & Dustin A. Zacks† I. INTRODUCTION .......................................................... 390 II. STATE LAW TREATMENT OF ACCELERATION CLAUSES, RES JUDICATA AND THE STATUTE OF LIMITATIONS................................................................ 396 A.ONE BITE AT THE APPLE ......................................... 398 B.MULTIPLE AND NEARLY UNLIMITED BITES AT THE APPLE ...................................................................... 410 III. UNDERSTANDING ACCELERATION AND RES JUDICATA AND STATUTE OF LIMITATION CASES ........ 427 A.THE TYPICAL FRAME OF FORECLOSURE .................. 428 B.A NEW “SYSTEMIC” FRAME OF FORECLOSURE........ 432 C.AN EQUITABLE APPROACH WHERE EQUITY DOES NOT APPLY .............................................................. 434 D.INEFFICIENT EFFICIENCY......................................... 440 IV. CONCLUSION ........................................................... 442 † © 2018 Eric A. Zacks is an Associate Professor of Law, Wayne State University Law School. B.A., University of Michigan, 1998; J.D., Harvard Law School, 2002. Dustin A. Zacks is a member of King, Nieves, & Zacks PLLC in West Palm Beach, Florida. B.A., University of Michigan, 2004; J.D., University of Michigan Law School, 2007. The authors are grateful to Charles Roarty for superlative research assistance. ! #$%&'() +) ")*'))) The high volume of foreclosures during and following the Great Recession in the United States led to the revelation of many troubling lending practices. It also led to problematic judicial decisions that erode borrower protection by curtailing or eliminating procedural requirements and substantive defenses with respect to foreclosure. This Article examines the treatment of statute of limitation and res judicata defenses after a loan has been accelerated following a borrower default. Some courts ignore the traditional rule that acceleration under a contract starts the clock for statute of limitation purposes or that acceleration consolidates the loan instrument into a single obligation as opposed to an installment obligation. Instead, these courts have permitted lenders to accelerate loans repeatedly without triggering the statute of limitations or res judicata defenses. Consequently, lenders are permitted to assert foreclosure claims with respect to the same underlying debt amount over and over again. Rather than being used as a last resort, acceleration and the subsequent foreclosure process can now be wielded as a significant threat to borrowers throughout the life of their home loan. Consistent with favoritism demonstrated in our prior research, we argue that creating exceptions for lenders in the application of statutes of limitation and res judicata defenses provides little incentive for banks and servicers to reform questionable lending and collection practices. I.INTRODUCTION This Article examines the treatment of statute of limitation and res judicata defenses after a loan has been accelerated following a default and is in foreclosure. The Great Recession resulted in a sizable wave of foreclosures that led commentators to compare the era (and the policy responses) to the Great Depression.1 The enormous amount of cases filed placed a strain on courts, court administrators, legislators, and of course the parties to these suits.2 This strain meant delayed resolutions for thousands of cases.3 This increased caseload meant that many state 1 See, e.g., Monica D. Armstrong, From the Great Depression to the Current Housing Crisis: What Code Section 108 Tells Us About Congress’s Response