Hope et al v. BSI Financial Inc et al
MEMORANDUM OPINION AND ORDER: 3 , MOTION to Dismiss Complaint, IS GRANTED with regard to Plaintiffs' invasion of privacy claim under the GLBA, but DENIED in all other respects. Signed by Judge Abdul K Kallon on 10/26/12. (CVA)
2012 Oct-26 PM 01:31
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
JAMES HOPE and PAMELA
BSI FINANCIAL, INC., et al.;
Civil Action Number
MEMORANDUM OPINION AND ORDER
James Hope and Pamela Hope (“Plaintiffs”) bring this action for damages
under Alabama law and the Fair Debt Collection Practices Act (“FDCPA”),
alleging primarily that BSI Financial Inc. (“BSI”), First Bank of Richmond (“First
Bank”) and Federal National Mortgage Association (“Fannie Mae”) (collectively
“Defendants”) participated in a series of wrongful acts in connection with
Plaintiffs’ mortgage. See doc. 1-1; doc.10. Defendants now move for partial
dismissal of Plaintiffs’ claims, doc. 3, and Plaintiffs have responded. Doc. 11.
For the reasons stated below, Defendants’ motion is GRANTED as it relates to
Plaintiffs’ invasion of privacy claim arising under the Gramm-Leach-Bliley Act
and DENIED in all other respects.
I. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain “a
short and plain statement of the claim showing that the pleader is entitled to
relief.” “[T]he pleading standard Rule 8 announces does not require ‘detailed
factual allegations,’ but it demands more than an unadorned, the-defendantunlawfully-harmed-me accusation.” Ashcroft v. Iqbal, ---U.S.---, 129 S. Ct. 1937,
1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Mere
“labels and conclusions” or “a formulaic recitation of the elements of a cause of
action” are insufficient. Iqbal, 129 S. Ct. at 1949 (citations and internal quotation
marks omitted). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’
devoid of ‘further factual enhancement.’” Id. at 1949 (citing Bell Atl. Corp., 550
U.S. at 557).
Rule 12(b)(6) permits dismissal when a complaint fails to state a claim upon
which relief can be granted. “To survive 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.” Iqbal, 129 S. Ct. at 1949 (citations and internal quotation
marks omitted). A complaint states a facially plausible claim for relief “when the
plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. (citation
omitted). The complaint must establish “more than a sheer possibility that a
defendant has acted unlawfully.” Id.; see also Bell Atl. Corp., 550 U.S. at 555
(“Factual allegations must be enough to raise a right to relief above the speculative
level.”). Ultimately, this inquiry is a “context-specific task that requires the
reviewing court to draw on its judicial experience and common sense.” Iqbal, 129
S. Ct. at 1950.
On a motion to dismiss under Rule 12(b)(6), the court accepts the plaintiff’s
allegations as true. See, e.g., Grossman v. Nationsbank, N.A., 225 F.3d 1228,
1231 (11th Cir. 2000). However, legal conclusions unsupported by factual
allegations are not entitled to that assumption of truth. Iqbal, 129 S. Ct. at 1950.
II. FACTUAL BACKGROUND1
This dispute arises out of a mortgage loan Plaintiffs obtained in January of
2002. Doc.1-1 at 5 ¶ 9-10, 10 ¶ 57. BSI Financial, Inc. and First Bank of
Richmond both collected on the loan after BSI assigned at least part of its interest
in the loan to First Bank on May 1, 2009. Id. at 5 ¶ 17. Prior to the actual filing of
the assignment, First Bank and Plaintiffs entered into a loan modification
“When considering a motion to dismiss, all facts set forth in the plaintiff’s complaint
‘are to be accepted as true and the court limits its consideration to the pleadings and exhibits
attached thereto.’” Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000)
(quoting GSW, Inc. v. Long County, 999 F.2d 1508, 1510 (11th Cir. 1993)). However, legal
conclusions unsupported by factual allegations are not entitled to that assumption of truth. See
Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1950 (2009).
agreement on May 6, 2009, whereby Plaintiffs would make monthly principal and
interest payments of $424.19 to BSI beginning on June 1, 2009. Id. at 6 ¶ 23, 27,
29. Both the assignment from BSI to First Bank and the modification between
First Bank and Plaintiffs was recorded in Madison County Probate Court on June
25, 2009. Id. at 5-6 ¶¶ 18, 25. Plaintiffs allege that BSI holds equal responsibility
under the modification agreement because of its extensive involvement and receipt
of payments under the agreement. Id. at 6 ¶ 28-29.
According to Plaintiffs, some time between May 2009 and 2010, BSI and
First Bank began demanding payments above the amount set by the modification
agreement. Id. at 7 ¶ 32. When Plaintiffs failed to make the increased payments,
Defendants hired Moss Codilis to send default letters to Plaintiffs. Id. at 7 ¶ 33.
In response, Plaintiffs hired an attorney to write a letter to BSI demanding an
explanation for the alleged breach of the modification agreement. Id. at 7 ¶ 34.
Instead of responding to Plaintiffs’ attorney, Defendants allegedly hired a
foreclosure law firm to write Plaintiffs directly, stating that Plaintiffs had
defaulted, that Defendants had accelerated the loan, and that Plaintiffs had thirty
days to cure the default. Id. at 7 ¶ 35. Plaintiffs’ attorney responded with another
letter informing Defendants that they had violated the loan modification agreement
and requesting that Defendants cancel the foreclosure sale. Id. at 7-8 ¶¶ 37-38.
Ultimately, in November of 2010, BSI closed the foreclosure file and canceled the
foreclosure proceedings. Id. at 8 ¶ 39.
The next year, in December of 2011, Plaintiffs again received a notice of
acceleration and foreclosure from Defendants. Id. at 8 ¶ 40. This letter, which
was purportedly copied to BSI, informed Plaintiffs of a foreclosure sale scheduled
for January 12, 2012 and that the law firm writing the letter “represent[ed] Federal
National Mortgage Association [(“Fannie Mae”)], the creditor to whom the abovereferenced debt is owed.” Id. at 8 ¶ 42-45. Plaintiffs contend that they were
unaware of the assignment to Fannie Mae, but instructed their attorney
nonetheless to write to Fannie Mae demanding cancellation of the foreclosure and
a full accounting and payment history. Id. at 9 ¶ 46-47. Allegedly, this letter
triggered direct emails from a BSI Loss Mitigation Specialist and Fannie Mae’s
attorney informing Plaintiffs of a thirty day postponement. Id. at 9 ¶ 52. Although
Fannie Mae purportedly threatened foreclosure on January 12, 2012, First Bank
did not record a transfer and assignment of the mortgage to Fannie Mae until
January 13, 2012. Id. at 10 ¶ 54. This allegedly defective assignment was signed
on behalf of First Bank and BSI by two BSI assistant vice presidents. Id. at 10 ¶
Based on these purportedly wrongful communications, assignments, and
attempts to foreclose, Plaintiffs filed an action in the Circuit Court of Madison
County alleging various claims against Defendants under Alabama law and the
Fair Debt Collection Practices Act. See doc. 1-1. The Defendants subsequently
removed the action to this court on March 5, 2012. Doc. 1.
In their amended complaint, Plaintiffs raise four claims: breach of contract,
invasion of privacy by intrusion upon seclusion, violations of the FDCPA, and
defamation. Doc. 10. Defendants move to dismiss all claims, except the breach of
contract claim, alleging that (1) they are not “debt collectors” under the FDCPA;
(2) that Plaintiffs failed to allege facts to support an invasion of privacy claim; and
(3) Plaintiffs’ failed to allege “egregious circumstances” warranting damages for
emotional distress for the defamation claim. Doc. 3. These contentions are
addressed separately below.
A. The Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq)
Defendants challenge the FDCPA claims on three grounds: (1) that their
status as debt collectors is specifically limited to FDCPA § 1692f; (2) that even
under § 1692f, they are not debt collectors under these facts; and (3) that Plaintiffs
In the amended complaint, Doc.10, Plaintiffs withdrew Counts I, II, IV and V of the
original complaint, Doc 1-1, and thus Defendants motion is MOOT with respect to those claims.
failed to properly plead a cause of action under § 1692f(6). Doc. 3 at 8-10.
“Debt Collectors” Under the FDCPA
To hold an entity liable under the FDCPA, a plaintiff must first establish
that the entity is a “debt collector.” Birster v. American Home Mortgage Servicing,
Inc., No. 11-13574, 2012 WL 2913786 at *3 (11th Cir. July 18, 2012). A “debt
any person who uses any instrumentality of interstate commerce or the
mails in any business the principal purpose of which is the collection of
any debts, or who regularly collects or attempts to collect, directly or
indirectly, debts owed or due or asserted to be owed or due another.
Notwithstanding the exceptions provided by clause (F) of the last
sentence of this paragraph, the term includes any creditor who, in the
process of collecting his own debts uses any name other than his own
which would indicate a third person is collecting or attempting to collect
such debts. For the purposes of § 1692f(6) of this title, such term also
includes any person who uses any instrumentality of interstate
commerce or the mails in any business the principal purpose of which
is the enforcement of security interests. . .
15 U.S.C. § 1692a(6) (emphasis added). The FDCPA, thus, requires a person or
entity to engage in “debt collection activity” in order to qualify as a debt collector.
Using this definition, Defendants assert that, as entities in the business of
enforcing security interests like mortgages, their attempts to foreclose are not debt
collection activities and their potential status as debt collectors is therefore limited
to § 1692f of the FDCPA. To support this contention, Defendants rely on Warren
v. Countrywide Home Loans, Inc., 342 F. Appx. 458 (11th Cir. Aug. 14, 2009)
(unpublished), which states that “the plain language of the FDCPA supports the. . .
conclusion that foreclosing on a security interest is not debt collection activity”
sufficient to create debt collector status. Id. at 460 (emphasis added). This
argument misses the mark because Plaintiffs have not limited the alleged wrongful
conduct to foreclosure activity.3 Moreover, Defendants’ reliance on Warren
ignores that the Eleventh Circuit recently held, based on the reasoning of Reese v.
Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211 (11th Cir. 2012), that “it is
apparent that an entity that regularly attempts to collect debts can be a ‘debt
collector’ beyond § 1692f(6) of the FDCPA, even when the entity is also
enforcing a security interest.” Birster, 2012 WL 2913786 at *3 (emphasis added).
Specifically, the Birster court found that use of language in communications, like
foreclosure notices, the defendant sent to the plaintiff demanding payment and
referencing debt collection was sufficient to constitute debt collection activity and
make defendants debt collectors under all sections of the FDCPA. Id. at *3.
According to the court, “the fact that the letter and documents relate to the
For example, Plaintiffs allege that Defendants contacted them directly despite
knowledge Plaintiffs were represented by an attorney, breached the loan modification agreement
by demanding higher payments, and improperly assigned the note and mortgage – all in addition
to purportedly wrongful conduct based on foreclosure attempts. See generally doc. 10.
enforcement of a security interest do not prevent them from also relating to the
collection of a debt within the meaning of 1692e.” Id. (internal quotation marks
and citation omitted).
The facts alleged here mirror Birster. Allegedly, the communications
Plaintiffs received from all Defendants demanded payment and included language
plainly describing the communication as “an attempt to collect a debt.” Doc.10 at
8-9. Further, Plaintiffs contend that they received an email specifically stating that
“BSI Financial Services is a debt collector, and information you provide to us
may be used to collect a debt.” Id. In light of Reese and Birster, these alleged
facts are sufficient to survive a motion to dismiss and undermine Defendants’
contention that they were not engaged in debt collection activity.
Consequently, the only remaining question is whether Plaintiffs sufficiently
pled that Defendants are debt collectors under the general definition contained
within § 1692a(6). The statutory text clearly states that, to qualify as a “debt
collector,” the “principal purpose” of “any business” must be “the collection of
debts” or that the business must “regularly collect or attempt to collect...debts.”
15 U.S.C. § 1692a(6). Plaintiffs satisfied the pleading requirements by alleging
that the Defendants “are in the business of regularly collecting debts” and are not
otherwise subject to an exclusion contained in § 1692a(6)(F) because “[a]ll
Defendants allegedly received the loan, or account, of Plaintiffs when the loan or
account was allegedly in default.”4 Doc. 10 at 3. Therefore, Defendants’ motion to
dismiss on the basis that they are not debt collectors is denied.5
Sufficiently Pleading FDCPA Claims
Defendants also challenge the FDCPA claims on the basis that Plaintiffs
failed to allege that Defendants took or threatened to take any action to dispossess
them of the property as required by § 1692f(6).6 Doc. 3 at 10. Plaintiffs, in fact,
pled such an alleged violation. Specifically, Plaintiffs allege that the mortgage
assignments are not legally enforceable and that Defendants’ attempted
foreclosure before they even obtained the assignments. See e.g., doc. 10 at 11-12
¶¶ 72, 74. Put differently, Plaintiffs allege that Defendants had no present right to
A “debt collector” does not include the consumer’s creditors, a mortgage servicing
company, or an assignee of a debt, as long as the debt was not in default at the time of
assignment. 15 U.S.C. § 1692a(4).
Defendants assert that classifying them as debt collectors under these circumstances
would mean “the mere act of advising a consumer debtor that a foreclosure sale was scheduled
would violate the FDCPA because the grantee does not have the right to possession until after the
sale.” Doc. 3 at 10. This argument is tenuous in that the Defendants’ proposed interpretation
would instead create a loophole in the FDCPA that essentially would render it applicable only to
efforts to collect unsecured debts, see Reese, 678 F.3d 1211 at 1217-18, and it again ignores that
Plaintiff has alleged conduct exceeding merely informing a debtor of a foreclosure sale.
Section 1692f(6) states that “[a] debt collector may not use unfair or unconscionable
means to collect or attempt to collect any debt” such as by “[t]aking or threatening to take any
nonjudicial action to effect disposition or disablement of property if . . . there is no present right
to possession of the property claimed as collateral through an enforceable security interest.” 15
U.S.C. § 1692f(6)(A).
possession and lacked an enforceable security interest at the time they threatened
foreclosure. Further, Plaintiffs allege that “Defendants . . . have threatened
multiple times to foreclose on Plaintiffs.” Id. at 11 ¶ 72. Since mortgage
foreclosure is essentially termination of a mortgagor’s interest and repossession of
the mortgaged property, see BLACK’S LAW DICTIONARY (9th ed. 2009), the court
finds that Plaintiffs sufficiently allege that Defendants attempted to dispossess
them of their property. Additionally, although the statute specifies “nonjudicial
action,” the Eleventh Circuit has found a plaintiff’s claim to survive a motion to
dismiss where, as here, the plaintiff alleges that the defendant wrongfully
instituted foreclosure proceedings or had no legal right to foreclose. See
Minnifield v. Johnson & Freedman, LLC, 448 Fed.Appx. 914, 916 (11th Cir.
2011). Indeed, the facts Plaintiffs allege create a reasonable inference that
Defendants attempted non-judicial foreclosure.7 Therefore, Plaintiffs sufficiently
plead a cause of action under § 1692f(6).
B. Invasion of Privacy by Intrusion Upon Seclusion
Defendants contend next that the intrusion upon seclusion claim is based
In Alabama, non-judicial foreclosure generally involves simply giving the mortgagee
notice of foreclosure, providing public notice of sale, and ultimately a sale of the collateral
property. See generally McAleer v. Durry, 593 So. 2d 1021 (Ala. 1992). Judicial foreclosure, on
the other hand, requires the mortgagor to institute foreclosure proceedings through litigation.
upon language in the FDCPA, and that since Defendants are not “debt collectors,”
the claim fails to state a cognizable claim. Doc. 3 at 8-9. Defendants overlook
that Plaintiffs allege invasion of privacy under the FDCPA, 15 U.S.C. § 1692(a),
Alabama law, and the Gramm-Leach-Bliley Act (“GLBA”), 15 U.S.C. § 6801(a).
Doc. 10 at 15 ¶¶ 96-98. Because Defendants can, in fact, qualify as “debt
collectors” under the FDCPA, see supra, the court limits its discussion of the
sufficiency of Plaintiffs’ complaint to Alabama law and the GLBA.
Invasion of Privacy under Alabama Law
The tort of invasion of privacy includes “intruding into the plaintiff’s
physical solitude or seclusion[.]” Johnson v. Fuller, 706 So. 2d 700, 701 (Ala.
1997). Alabama has adopted the Restatement (Second) of Torts definition for this
type of invasion, i.e.
One who intentionally intrudes, physically or otherwise, upon the
solitude or seclusion of another or his private affairs or concerns, is
subject to liability to the other for invasion of his privacy, if the
intrusion would be highly offensive to a reasonable person.
See Phillips v. Smalley Maintenance Services, Inc., 435 So. 2d 705, 708 (Ala.
1983); Restatement (Second) of Torts § 652B (1977). To withstand a motion to
dismiss, a plaintiff may allege a “physical intrusion into a place in which the
plaintiff has secluded himself,” “an invasion of psychological solitude,” or
“examination into [the plaintiff’s] private concerns” – so long as the plaintiff also
asserts that the invasion would be offensive to a reasonable person. Phillips, 435
So. 2d at 710-11, quoting Restatement § 652B cmt. a. The Restatement further
provides that “hounding the plaintiff” to collect a valid debt can be a sufficiently
offensive intrusion to satisfy the elements for this form of invasion of privacy.
Restatement § 652B cmt. d.
To support their invasion of privacy claim, Plaintiffs assert that Defendants
“have threatened multiple times to foreclose on Plaintiffs when Defendants have
no right to do so” and cite multiple examples of Defendants’ collection attempts
that purportedly caused “mental anguish, damage to reputation, [and] economic
damages[.]” Doc. 10 at 11 ¶ 72; 14 ¶ 90. Based on these allegations, and the
reasonable inferences the court can draw from them, the complaint states a facially
plausible claim for relief. See Iqbal, 129 S. Ct. at 1949. Therefore, the motion to
dismiss this claim is denied.
Invasion of Privacy Under the Gramm Leach Bliley Act
Although the GLBA provides that “each financial institution has an
affirmative and continuing obligation to respect the privacy of its customers and to
protect the security and confidentiality of those customers’ nonpublic personal
information,” 15 U.S.C. § 6801(a), “no private right of action exists for an alleged
violation of the GLBA.” Downs v. Regions Bank, – F. Supp. 2d. –, No.
2:08cv758-MHT, 2010 WL 381116 at *5 (M.D. Ala. 2010) (quoting Dunmire v.
Morgan Stanley, 475 F.3d 956, 960 (8th Cir. 2007); see also 15 U.S.C. § 6805.
Therefore, Plaintiffs’ claim for invasion of privacy under the GLBA fails as a
matter of law and Defendants’ motion is granted as to this allegation.
Finally, relying on the elements of an outrage claim, Defendants challenge
the defamation claim on the basis that it “references non-specific conduct in the
form of a claim for emotional distress” and that “recovery for such claims should
be allowed only in extreme cases, amounting to egregious circumstances.” Doc. 3
at 7. A defamation claim, however, does not require a plaintiff to assert
“egregious circumstances,” rather, it requires only “that the defendant was at least
negligent . . .in publishing . . . a false and defamatory statement to another . . .
concerning the plaintiff, which is either . . . actionable per se . . . or . . . actionable
per quod.” Federal Credit, Inc. v. Fuller, 72 So. 3d 5, 9-10 (Ala. 2011). The
court presumes reputational damage and deems the alleged defamatory statement
actionable per se if it “exposes the plaintiff to public ridicule or contempt.” Gary
v. Crouch, 867 So. 2d 310, 316 (Ala. 2003). Otherwise, the defamation is
actionable per quod and the plaintiff must allege special harm. Federal Credit,
Inc., 72 So. 3d at 10. Moreover, when reviewing a motion to dismiss a defamation
claim, the court must look to the publication as a whole, including the
circumstances of its publication, and determine whether the language used is
capable of a defamatory meaning “according to the sense in which they appear to
have been used and the idea they are adapted to convey to those who read them.”
Campbell v. Seabury Press, 468 F.Supp. 298, 300 (N.D. Ala. 1979) (quoting
McGraw v. Thomason, 93 So.2d 741,744 (Ala. 1957)); Marion v. Davis, 114 So.
357, 359 (Ala. 1927).
Contrary to Defendants’ contention, Plaintiffs have sufficiently pled a prima
facie case of defamation. Plaintiffs assert that Defendants intentionally published
“false statements regarding defaults, foreclosures, and other aspects related to
Plaintiffs . . . in at least the newspaper of general circulation in Plaintiffs’ county.”
Doc. 10 at 17 ¶¶ 109-110. The allegation that these statements have caused
injuries including mental anguish, id. at 18 ¶ 112, appears to simply be an attempt
to meet the pleading standard for defamation actionable per quod – “special
harm.” Moreover, in construing the foreclosure publications in connection with
the rest of Plaintiffs’ assertions, and assuming the statements were indeed false,
the court finds that Defendants’ alleged false statements are capable of defamatory
meaning – namely, that Plaintiffs could not or would not make their mortgage
payments and were being rightfully dispossessed of their property. Therefore,
Plaintiffs have properly pled a claim for defamation.
For the reasons set forth above, Defendants’ motion to dismiss is
GRANTED with regard to Plaintiffs’ invasion of privacy claim under the GLBA,
but DENIED in all other respects.
DONE this 26th day of October, 2012.
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE
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