KAREN L. HAYES, Magistrate Judge.
Before the court is a motion to dismiss for failure to state a claim upon which relief can be granted [doc. # 8] filed by defendant Seterus, Inc.
On February 12, 2016, Robert Payne Jr., filed the instant suit against Seterus, Inc. ("Seterus") for violations of the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 et seq. ("RESPA"), the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. ("TILA"), and associated regulations. (Compl.). Payne alleges that on September 15, 2014, Seterus notified him that it had become the servicer and debt collector of his mortgage loan with Fannie Mae. Id. On an unspecified date thereafter, Payne requested a monthly statement from Seterus, but received no response. Id. He then faxed correspondence to Seterus on November 16 and 24, 2015. Id. He also uploaded the correspondence to Seterus's website on November 10, 17, 24, and December 2, 2015. Id. In addition, on November 24, 2015, Payne sent Seterus a copy of the correspondence by certified mail. Id. Aside from a payoff statement, Seterus did not respond to Payne's requests for information. Id.
Payne contends that all of his communications to Seterus seeking information about his mortgage loan constitute "qualified written requests" under RESPA, thus triggering a five day window for Seterus to provide a written response acknowledging receipt of the correspondence, 12 U.S.C. § 2605(e)(1)(A).
He further alleges that Seterus violated 12 U.S.C. § 2605(k)(1)(C) and 12 C.F.R. § 1026.36 by failing to take timely action to respond to his requests to correct errors relating to the allocation of payments. Seterus's failure to credit Payne's payments also purportedly constitutes a violation of TILA, 15 U.S.C. § 1639f.
Finally, Payne alleges that Seterus failed to provide him with an annual analysis of his escrow account as required by 12 U.S.C. § 2609(c)(2).
For his troubles, Payne seeks "such damages as to which he proves himself justly entitled," pursuant to 15 U.S.C. § 1640 and 12 U.S.C. § 2605(f). He also seeks costs and attorney's fees.
Seterus filed the instant Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted on March 21, 2016. Seterus argues that it did respond to Payne's requests for information. However, rather than send the responses, including an escrow account statement, directly to Payne, Seterus opted to send them to Payne's then bankruptcy attorney, E. Orum Young.
On April 13, 2016, plaintiff filed his out-of-time opposition to the motion to dismiss.
Plaintiff also adduced a copy of a monthly account statement dated March 16, 2016, which Seterus transmitted to plaintiff's current counsel. (Pl. Opp. Memo., Exh. A). The statement shows past due payment(s) of $2,796.53 and a suspense credit of $3,545.40. Id. Plaintiff argues
that the statement supports his claims that Seterus did not promptly credit payments on his mortgage loan as required by 15 U.S.C. § 1639f and 12 C.F.R. § 1026.36.
Seterus filed its reply brief on April 25, 2016. (Def. Reply [doc. # 16]). In addition to reemphasizing its original arguments, it further noted that the March 2016 billing statement submitted by plaintiff did not establish that the statement conveyed any incorrect information. Specifically, plaintiff did not allege the date or amount of any payments that Seterus failed to credit. Briefing is complete; the matter is ripe.
The Federal Rules of Civil Procedure sanction dismissal where the plaintiff fails "to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). A pleading states a claim for relief when, inter alia, it contains a "short and plain statement . . . showing that the pleader is entitled to relief . . ." Fed.R.Civ.P. 8(a)(2).
To withstand a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007)). A claim is facially plausible when it contains sufficient factual content for the court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Plausibility does not equate to possibility or probability; it lies somewhere in between. See Iqbal, supra. Plausibility simply calls for enough factual allegations to raise a reasonable expectation that discovery will reveal evidence to support the elements of the claim. See Twombly, 550 U.S. at 556, 127 S.Ct. at 1965. Assessing whether a complaint states a plausible claim for relief is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, supra (citation omitted). A well-pleaded complaint may proceed even if it strikes the court that actual proof of the asserted facts is improbable, and that recovery is unlikely. Twombly,
Although the court must accept as true all factual allegations set forth in the complaint, the same presumption does not extend to legal conclusions. Iqbal, supra. A pleading comprised of "labels and conclusions" or "a formulaic recitation of the elements of a cause of action" does not satisfy Rule 8. Id. Moreover, courts are compelled to dismiss claims grounded upon invalid legal theories even though they might otherwise be well-pleaded. Neitzke v. Williams, 490 U.S. 319, 109 S.Ct. 1827 (1989).
Nevertheless, "[t]he notice pleading requirements of Federal Rule of Civil Procedure 8 and case law do not require an inordinate amount of detail or precision." Gilbert v. Outback Steakhouse of Florida Inc., 295 Fed. Appx. 710, 713 (5
When considering a motion to dismiss, courts generally are limited to the complaint and its proper attachments. Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5
Payne alleges that Seterus violated RESPA by failing to respond to his "qualified written requests." Pursuant to RESPA, a loan servicer is required to respond within certain deadlines to a borrower's "qualified written request" ("QWR"). See 12 U.S.C. § 2605(e); Akintunji v. Chase Home Fin., L.L.C., 2011 WL 2470709, at *2 (S.D. Tex. June 20, 2011).
Upon receipt of a QWR, RESPA obliges the servicer to respond substantively, as follows,
12 U.S.C. § 2605(e)(2).
In order to survive a motion to dismiss, a RESPA failure to respond claim must include factual allegations to plausibly show that 1) defendant is a loan servicer; 2) defendant received a QWR from plaintiff; 3) the QWR relates to servicing of a mortgage loan; 4) defendant failed to respond adequately; and 5) plaintiff is entitled to actual or statutory damages. Hudgins v. Seterus, Inc., Civ. Action No. 16-80338, 2016 WL 3636859, at *3 (S.D. Fla. June 28, 2016) (and cases cited therein). Here, Seterus challenges the fourth and fifth elements of plaintiff's claim. The court addresses each argument, in turn.
As an initial matter, Seterus's argument that it responded to plaintiff's QWRs necessarily relies upon extrinsic evidence attached to its motion to dismiss. However, plaintiff did not refer to these responses in his complaint, and defendant does not provide any other basis for the court to consider this evidence in the context of the present 12(b)(6) motion. Of course, if evidence outside the pleadings is presented to, and not excluded by the court, then the court must convert the motion into a motion for summary judgment under Rule 56. FED. R. CIV. P. 12(d).
Here, the court declines to consider the extrinsic evidence. While this has the effect of undermining one of the grounds for defendant's motion, it preserves the Rule 12(b)(6) framework for disposition of the motion. See In re Thomas, No. 15-30401, 2016 WL 4199561, at *3 (Bankr. M.D. Ala. Aug. 5, 2016) (declining to consider creditor's letter to plaintiff's bankruptcy attorney that was attached to creditor's motion to dismiss). Regardless, as discussed below, the same result obtains even if the court were to consider the evidence.
Seterus maintains that it timely responded to plaintiff's QWRs via correspondence transmitted to his bankruptcy counsel. Seterus acknowledged receipt of plaintiff's requests and responded on December 16, 2015:
[doc. # 8-18; see also docs. # 8-7 through 8-16].
Seterus does not argue any other reason beyond the bankruptcy proceeding to justify its refusal to transmit its responses directly to Payne.
Conversely, plaintiff argues that "[t]here is no exception in the statute exempting discharged Chapter 13 debtors whose cases have not yet been closed from the requirements of responding to QWRs."
Courts are divided as to whether RESPA is preempted by the Bankruptcy Code. See, e.g., In re Figard, 382 B.R. 695, 2008 WL 501356 (Bankr. W.D. Pa. 2008) (court finds that Bankruptcy Code does not preempt provisions of RESPA, 12 U.S.C. § 2605(e)(2)); In re Holland, 374 B.R. 409 (Bankr. D. Mass. 2007) (Bankruptcy Code does not preempt RESPA); In re Nosek, 354 B.R. 331 (D. Mass. 2006) (court finds Bankruptcy Code preempts RESPA and state statutory and common law).
However, even if the Bankruptcy Code's automatic stay were to trump the response procedures under RESPA, defendant does not provide any support for the proposition that servicers may not respond to inquiries initiated by debtors. In re Henry, 266 B.R. 457, 473 (Bankr. C.D. Cal. 2001) (creditor may properly respond to communication initiated by the debtor). Seterus did not provide the information requested by Payne or otherwise explain why the monthly statements requested were either unavailable or unobtainable. See 12 U.S.C. § 2605(e)(2). Instead, Seterus cites the pending bankruptcy proceeding with no explanation as to why the proceeding would bar it from providing the requested information. Moreover, the pending bankruptcy proceeding apparently did not impede Seterus from directly notifying Payne that it had become the servicer and debt collector on his mortgage. See Compl., ¶ 2.
In sum, even if the court were to consider the evidence adduced by Seterus, it does not establish that Seterus responded adequately to plaintiff's requests. Rather, plaintiff has alleged sufficient facts to support this element of his claim for violation of 12 U.S.C. § 2605(e)(2).
Section 2605(f) imposes liability for "any actual damages to the borrower as a result of the [RESPA violation]." 12 U.S.C. § 2605(f)(1)(A). The burden is on the borrower to prove that he or she incurred actual damages in order to substantiate a RESPA claim. See Whittier v. Ocwen Loan Servicing, L.L.C., 594 F. App'x 833, 836 (5th Cir. 2014) ("To recover, a claimant must show that actual damages resulted from a RESPA violation."); see Caballero v. Wells Fargo Bank, N.A., 2011 WL 6039953, at *2 (N.D. Tex. July 25, 2011); Ricotta v. Ocwen Loan Servicing, LLC, 2008 WL 516674, at *5 (D. Colo. Feb. 22, 2008). The statute neither defines "actual damages" nor gives examples of what constitutes actual damages. Thus the court "look[s] to the plain meaning of the term." Hernandez v. U.S. Bank, N.A., 2013 WL 6840022, at *5 (N.D. Tex. Dec. 27, 2013) (O'Connor, J.) (citing Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 388 (1993)). "The term `actual damages' is synonymous with `compensatory damages,' which is defined as `such [damages] as will compensate the injured party for the injury sustained, and nothing more[.]'" Hernandez, 2013 WL 6840022, at *5 (quoting Black's Law Dictionary at 390 (6th ed. 1990)).
In order to establish actual damages under RESPA, a plaintiff must demonstrate that defendant's breach proximately caused the alleged damages. "While courts have interpreted this requirement liberally, the loss alleged must be related to the RESPA violation itself." Hopson v. Chase Home Fin. LLC, 14 F.Supp.3d 774, 788 (S.D. Miss. April 11, 2014) (quoting Hensley v. Bank of New York Mellon, 2011 WL 4084253, at *3-4 (E.D. Cal. Sept. 13, 2011).
In his opposition brief, plaintiff argues that, as a result of defendant's failure to respond to his QWRs, defendant reported delinquent payments to credit bureaus that possibly damaged his credit score. (Pl. Opp. Memo., pgs. 2-3). Yet even assuming that "possible" damage to a credit score is sufficient, there is nothing in the complaint or in plaintiff's opposition that links the alleged damage to defendant's alleged violation of RESPA. See Durland v. Fieldstone Mortgage Co., 2011 WL 805924, at *3 (S.D. Cal. Mar. 1, 2011) (mere allegations of damages, including fees assessed, negative credit reporting, and emotional distress, were insufficient to establish a causal link between the alleged RESPA violations and plaintiff's claimed damages).
Plaintiff fails to indicate how the inadequate response to the QWRs caused the reduction in his credit rating, and fails to allege damage caused by the alleged reduction in his credit rating. See Anokhin v. BAC Home Loan Servicing, LP, 2010 WL 3294367, at *3 (E.D. Cal. Aug.20, 2010) ("To constitute actual damages [under RESPA for failure to adequately respond to a QWR], the negative credit rating must itself cause damage to the plaintiff as evidenced by, for example, failing to qualify for a home mortgage. Plaintiff's conclusory statement that she suffered negative credit ratings does not itself establish actual damages."); see also Jones v. Vericrest Fin., Inc., 2011 WL 7025915, at *19 (N.D. Ga. Dec. 7, 2011) (finding that even if plaintiff had sufficiently alleged that defendant violated RESPA by failing to adequately respond to a written request, RESPA claim would still be dismissed since "the Plaintiff has not included any factual allegations explaining how [defendant's] failure to provide an adequate response to the qualified written response caused her to suffer any damages"); Phillips v. Bank of America Corp., 2011 WL 4844274, at *5 (N.D. Cal. Oct. 11, 2011) (dismissing plaintiff's RESPA claim because plaintiff failed to allege facts showing "that it is plausible, rather than merely possible," that the claimed damages resulted from defendant's alleged violation of RESPA).
In sum, plaintiff's RESPA claim for failure to adequately respond to the QWRs does not set forth sufficient facts to support the element of actual damages.
To recover statutory damages, a plaintiff must plead a pattern or practice of noncompliance with RESPA. See 12 U.S.C. § 2605(f)(1)(b). Courts have held that RESPA pattern-or-practice damages contemplate RESPA violations with respect to other borrowers. Renfroe v. Nationstar Mortgage, LLC, 822 F.3d 1241, 1247 (11th Cir.2016) (citations omitted). Here, however, plaintiff's complaint is devoid of such allegations.
Furthermore, to the extent that plaintiff seeks statutory damages for defendant's pattern or practice of noncompliance as to his own multiple requests, the court finds that this claim fails. While plaintiff sent several QWRs, they were all sent within a very short time period. Even if defendant's response were inadequate, the essentially one time refusal to provide the requested information does not plausibly show a pattern and practice of RESPA violations by defendant.
Plaintiff's complaint does not set forth a colorable claim for statutory damages as a result of defendant's alleged RESPA violation for failure to adequately respond to the QWRs.
Plaintiff alleges broadly that defendant failed to credit plaintiff's payments promptly in violation of 12 C.F.R. §§ 1024.35, 1026.36 and 15 U.S.C. § 1639f. Regulation Z, the Consumer Finance Protection Bureau's ("CFPB") implementation of TILA, normally requires a servicer to credit a periodic payment to the consumer's loan account on the date of receipt. 12 C.F.R. § 1026.36(c)(1).
Under "Regulation X," which is codified at 12 C.F.R. § 1024, a servicer must provide a timely response to a borrower's written notice of error with respect to certain enumerated issues, including, inter alia,
12 C.F.R. § 1024.35.
Courts, however, are split as to whether § 1024.35 provides a private right of action for damages. Compare Miller v. HSBC Bank U.S.A., N.A., Civ. Action No. 13-7500, 2015 WL 585589, at *11 (S.D. N.Y. Feb. 11, 2015) (§ 1024.35 does not provide a private cause of action for damages); Guccione v. JPMorgan Chase Bank, N.A., Civ. Action No. 14-4587, 2015 WL 1968114, at *11 (N.D. Cal. May 1, 2015) (§ 1024.35 is enforceable under 12 U.S.C. § 2605(f)). Even so, plaintiff did not identify any written notice of error that he provided to Seterus, to which Seterus failed to respond. Moreover, although Payne attached a copy of an account statement to his opposition memorandum that he alleges is inaccurate, he does not explain how it is inaccurate, or that he provided Seterus with a written notice of error that contained all of the information required by § 1024.35. In short, plaintiff's complaint fails to state a claim for relief under § 1024.35.
Plaintiff's final claim alleges that defendant failed to furnish an annual analysis of plaintiff's escrow account pursuant to 12 U.S.C. § 2609. RESPA requires a lender to provide an escrow account statement "not less than once for each 12-month period." 12 U.S.C. § 2609(c)(2)(A)-(B). Courts have held, however, that RESPA § 2609 does not provide for a private cause of action. Heffron v. Green Tree Servicing, LLC, Civ. Action No. 15-0996, 2016 WL 47915, at *4 (N.D. Ill. Jan. 5, 2016) (citation omitted). In any event, plaintiff had not alleged that he incurred any damages on account of not directly receiving an annual escrow account statement.
"District courts often afford plaintiffs at least one opportunity to cure pleading deficiencies before dismissing a case, unless it is clear that the defects are incurable . . ." Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir. 2002). Here, it is conceivable that plaintiff can cure at least some of his deficient claims via amendment. Therefore, while the court will provisionally grant the motion to dismiss, entry of judgment will be deferred to accord plaintiff a 14 day period in which to seek leave to amend his complaint (if he can in good faith do so), to provide the missing factual bases for any element(s) of a claim that is not precluded as a matter of law. Defendant, of course, will have the opportunity to address the sufficiency of any proposed amendment.
For the reasons provided herein,
IT IS ORDERED that defendant Seterus, Inc.'s motion to dismiss for failure to state a claim upon which relief can be granted [doc. # 8] is provisionally GRANTED.
IT IS FURTHER ORDERED that, within the next fourteen (14) days from the date of this ruling, plaintiff may seek leave of court to file an amended complaint to redress his deficient allegations as detailed herein. If no motion is filed within this fourteen (14) day period, then the court will enter judgment in accordance with the ruling.
Assuming that Seterus's responses to plaintiff's QWRs were sent by counsel for Seterus, then plaintiff's bankruptcy attorney arguably would have been the proper recipient, and not plaintiff. The Rules of Professional Conduct promulgated by the Louisiana State Bar Association provide the rules of conduct for attorneys practicing before this court. L.R. 83.2.4. Rule 4.2 of the Rules of Professional Conduct provides,
Here, however, there is no indication that Seterus's counsel responded to the QWRs rather than some other representative of Seterus, that Plaintiff was communicating with Seterus on behalf of his lawyer or about the subject of the representation, or even that Seterus was represented. In any event, the better practice would have been for Seterus to respond to plaintiff's QWRs directly, even if its response was simply to let him know that it would need to provide the information to his bankruptcy attorney.
