James et al v. Nationstar Mortgage, LLC et al

Filing 19

Order granting in part denying in part 8 MOTION to Dismiss filed by Federal National Mortgage Association, Nationstar Mortgage, LLC. Answer due from Federal National Mortgage Association & Nationstar Mortgage, LLC on 3/23/2015. Signed by Chief Judge William H. Steele on 3/9/2015. (tgw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
AARON LEE JAMES, SR., et al.,
Plaintiffs,
v.
NATIONSTAR MORTGAGE, LLC, et al.,
Defendants.

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CIVIL ACTION 14-0545-WS-N

ORDER
This matter comes before the Court on defendants’ Motion to Dismiss (doc. 8). The
Motion has been briefed and is now ripe.
I.

Background.
Plaintiffs, Aaron Lee James, Sr. and Willie Mae James (collectively, the “Jameses”),

brought this action against Nationstar Mortgage, LLC (“Nationstar”) and Federal National
Mortgage Association (“FNMA”). Although the Complaint spans 17 pages, the gist of it is
straightforward, to-wit: the Jameses contend that defendants failed to credit their mortgage
payments properly, setting off a chain of events culminating in cascading violations of federal
consumer protection statutes.
The Complaint’s well-pleaded factual allegations (which are accepted as true on Rule
12(b)(6) review) reflect that the Jameses entered into a home mortgage loan (the “Loan”) with
nonparty Homecomings Financial Network Inc. in September 2004, with the Loan secured by
the James’ longstanding residence. (Doc. 1, ¶ 6.) Servicing rights on the Loan were transferred
to Nationstar in January 2009, at which time the Loan was deemed to be in default. (Id., ¶ 8.)
When Mr. James filed a Chapter 13 bankruptcy petition in June 2011, Nationstar filed a proof of
claim pursuant to which more than $20,000 of pre- and post-petition arrearage (i.e., unpaid loan
payments and fees) were placed in his bankruptcy plan and ultimately paid through the
bankruptcy trustee. (Id., ¶¶ 9-11.) The Complaint alleges that the arrearage has been paid in

full, and that the Jameses simultaneously continued to make regular monthly payments on the
Loan. (Id., ¶¶ 11, 13.)
The problems giving rise to this lawsuit began on November 22, 2013, when Nationstar
sent a letter to Mr. James stating incorrectly, “You have not made payments on your loan since
12/01/2012.” (Doc. 1, ¶ 14.) The November 22 letter concluded with Nationstar threatening to
initiate foreclosure proceedings unless the Jameses immediately paid a nearly $12,000 arrearage.
(Id.) The Complaint alleges that the letter’s statements alleging nonpayment and arrearage “were
false and Nationstar knew they were false” because its own records confirmed that the Jameses
had made 28 regular payments on the Loan since December 2012. (Id., ¶ 15.) The Complaint
also alleges that Nationstar sent the November 22 letter directly to Mr. James, despite knowledge
that he was represented by counsel. (Id., ¶ 16.) The letter caused the Jameses to undergo
“extreme stress, worry and fear of losing their home.” (Id., ¶ 17.)
Follow-up communications by Mr. James proved ineffectual, as Nationstar persisted in
its incorrect assertion that the Jameses had made no Loan payments in nearly a year. (Id., ¶¶ 18,
26.) On January 16, 2014, Mr. James wrote to Nationstar disputing the company’s
representations in the November 22 letter and requesting specific information concerning his
account and the servicing of the Loan. (Id., ¶ 19.) Nationstar’s reply was nonresponsive in
multiple respects, contained formulaic and irrelevant objections, failed to provide requested
information and documentation, and did not correct the servicing error that Mr. James had
pointed out, even though Nationstar’s own payment history information conclusively established
the error of its November 22 letter. (Id., ¶¶ 21-27.) Northstar compounded these defects by
refusing to credit certain April 2014 payments to the Loan, and by reporting false and derogatory
information about the Jameses to consumer reporting agencies. (Id., ¶¶ 30-31.)
On the strength of these and other factual allegations, plaintiffs assert six causes of action
in their Complaint, to-wit: (i) breach of mortgage and note against both defendants; (ii) multiple
violations of the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 et seq. (“RESPA”),
against defendant Nationstar; (iii) multiple violations of the Fair Debt Collection Practices Act,
15 U.S.C. § 1692 (“FDCPA”), against defendant Nationstar; (iv) violation of the Truth in
Lending Act, 15 U.S.C. §§ 1601 et seq. (“TILA”), against defendant FNMA; and (v) negligence
and wantonness against both defendants. Defendants have moved pursuant to Rule 12(b)(6),
Fed.R.Civ.P., for dismissal of one subpart of the FDCPA claim, the entire TILA claim, and the

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state-law negligence / wantonness claims, all for failure to state a claim upon which relief can be
granted.1 Plaintiffs oppose the Rule 12(b)(6) Motion.
II.

Analysis.
A.

Legal Standard.

Defendants’ Motion asserts that portions of the Complaint fail to state claims upon which
relief can be granted, and therefore is properly analyzed under Rule 12(b)(6), Fed.R.Civ.P. To
withstand Rule 12(b)(6) scrutiny and comply with the minimum pleading requirements of Rule
8(a), a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face,” so
as to “nudge[ ][its] claims across the line from conceivable to plausible.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S.
662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). “This necessarily requires
that a plaintiff include factual allegations for each essential element of his or her claim.”
GeorgiaCarry.Org, Inc. v. Georgia, 687 F.3d 1244, 1254 (11th Cir. 2012). Thus, minimum
pleading standards “require[ ] more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Twombly, 550 U.S. at 555. As the Eleventh Circuit
has explained, Twombly / Iqbal principles require that a complaint’s allegations be “enough to
raise a right to relief above the speculative level.” Speaker v. U.S. Dep’t of Health and Human
Services Centers for Disease Control and Prevention, 623 F.3d 1371, 1380 (11th Cir. 2010)
(citations omitted). “To survive a 12(b)(6) motion to dismiss, the complaint does not need
detailed factual allegations, ... but must give the defendant fair notice of what the plaintiff’s

1

As originally presented, the Motion to Dismiss was far more extensive; indeed,
defendants initially sought dismissal of the entire RESPA cause of action found at Count II and
all of the FDCPA claims set forth in Count III. (See doc. 9, at 5-19.) In their reply brief,
however, defendants purported to “withdraw” their Rule 12(b)(6) Motion as it related to the
RESPA claims found at Count II and all FDCPA claims at Count III except for the subpart
alleging a violation of § 1692f(6). (See doc. 17, at 1-2.) To effectuate defendants’ wishes in this
regard, the Court deems the Motion to Dismiss moot as to Counts II and III, excepting the §
1692f(6) claim found in Count III. This Order will address the remaining portions of the Motion
to Dismiss, consisting of the § 1692f(6) claim at Count III, the TILA claim at Count IV, and the
negligence/wantonness claims at Counts V and VI.

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claim is and the grounds upon which it rests.” Randall v. Scott, 610 F.3d 701, 705 (11th Cir.
2010) (citations and internal quotation marks omitted).
For purposes of this Rule 12(b)(6) analysis, the Court accepts as true all well-pleaded
factual allegations of the Complaint, and draws all reasonable inferences in the plaintiffs’ favor.
See, e.g., Keating v. City of Miami, 598 F.3d 753, 762 (11th Cir. 2010) (in reviewing Rule
12(b)(6) motion, court must “accept[] the facts alleged in the complaint as true,” “draw[] all
reasonable inferences in the plaintiff’s favor,” and “limit[] our review to the four corners of the
complaint”). Notwithstanding this deference to a plaintiff’s pleading at the Rule 12(b)(6) stage,
it is also true that “[l]egal conclusions without adequate factual support are entitled to no
assumption of truth.” Mamani v. Berzain, 654 F.3d 1148, 1153 (11th Cir. 2011).
B.

Section 1692f(6) Claim (Count III).

Embedded in Count III of the Complaint is a FDCPA claim against Nationstar for
violation of 15 U.S.C. § 1692f(6). (See doc. 1, ¶ 56(E).) In relevant part, that subsection
prohibits debt collectors from “[t]aking or threatening to take any nonjudicial action to effect
dispossession or disablement of property if … there is no present right to possession of the
property claimed as collateral through an enforceable security interest.” § 1692f(6)(A).
Defendants maintain that this claim must be dismissed because well-pleaded allegations of the
Complaint reflect that FNMA, on whose behalf Nationstar was servicing the Loan, “had an
enforceable security interest in Plaintiffs’ property through its ownership of Plaintiffs’ mortgage
loan.” (Doc. 9, at 18.) Defendants rely on a strand of authority in which courts have recognized
that “Section 1692f(6) only forbids threats against a consumer’s property if there is no
enforceable security interest in the property.” Jenkins v. BAC Home Loan Servicing, LP, 822 F.
Supp.2d 1369, 1375 (M.D. Ga. 2011). So defendants’ position is that the mere existence of a
security interest, without more, insulates Nationstar from § 1692f(6) liability, as a matter of law.
The trouble with this argument is that it ignores the statutory requirement of a “present
right to possession of the property” by the debt collector threatening nonjudicial action. See §
1692f(6)(A). Of course, FNMA (by and through its servicer, Nationstar) would have had a
“present right to possession of the property” only if the Jameses were in default when the threat
of foreclosure was made. Stated differently, it is the combination of a security interest and a
present right to possession that precludes debt collector liability under § 1692f(6) for threatening
nonjudicial foreclosure proceedings. Abundant case authority supports this plain reading of the

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statute. See, e.g., Fenello v. Bank of America, NA, 577 Fed.Appx. 899, 902-03 (11th Cir. Aug.
12, 2014) (affirming dismissal of § 1692f(6) claim where defendants had right to foreclose under
security deed if plaintiffs defaulted, “[a]nd it is undisputed that the Fenellos have not made any
payments on the promissory note since 2008,” such that “the defendants have the present right to
possess the Fenellos’ property”).2 Here, the well-pleaded factual allegations of the Jameses’
Complaint reflect that the Loan was not in default when Nationstar threatened foreclosure via
letter dated November 22, 2013. Accepting those allegations as true (as the Court must for Rule
12(b)(6) purposes), the Complaint shows that Nationstar lacked a present right to possession of
the property when it made the threat.3 Thus, Nationstar is alleged to have threatened nonjudicial
forfeiture of the Jameses’ home even though it had “no present right to possession of the
property” because the Loan on which the security interest was predicated was not in default. In
2

See also Speleos v. BAC Home Loans Servicing, L.P., 824 F. Supp.2d 226, 233
(D. Mass. 2011) (“present right to possession” for § 1692f(6) found where loan documents gave
defendant right to foreclose, and plaintiffs had defaulted); Johnson v. Trott & Trott, P.C., 829 F.
Supp.2d 564, 571 (W.D. Mich. 2011) (plaintiff stated a § 1692f(6) claim where complaint
alleged that loan had already been paid off); De Souza v. JP Morgan & Chase Co., 2014 WL
1338762, *4 (N.D. Ga. Apr. 2, 2014) (dismissing § 1692f(6) claim where “the Plaintiff does not
dispute that Chase currently holds the security deed and that the Plaintiff is in default”)
(emphasis added); Collins v. Siani’s Salvage, LLC, 2014 WL 1244057, *3 (E.D. Pa. Mar. 26,
2014) (“because of Plaintiff’s default, Siani had a present right to possession” for § 1692f(6)
purposes); Patton v. American Home Mortgage Servicing, Inc., 2013 WL 1310560, *5 (S.D.
Miss. Mar. 28, 2013) (“The Trust had a ‘present right to possession of the [P]roperty’ because it
owned the Deed of Trust and Note at the time of Plaintiff’s default.”); Wideman v. Bank of
America, N.A., 2011 WL 6749829, *3 (M.D. Ga. Dec. 23, 2011) (concluding that plaintiff did
not state viable § 1692f(6) claim where she admitted “that there was an enforceable security
interest, and she admits that she defaulted on the loan”); Burnett v. Mortgage Electronic
Registration Systems, Inc., 2009 WL 3582294, *4 (D. Utah Oct. 27, 2009) (plaintiff failed to
state § 1692f(6) claim because “when Plaintiff defaulted on her contractual monthly payments,
MERS had authority under the Deed of Trust to initiate foreclosure proceedings”); Pistole v.
Mortgage Electronic Registration Systems, Inc., 2008 WL 2566366, *5 (E.D. Mich. June 24,
2008) (“The Court dismisses Pistole’s 15 U.S.C. § 1692f(6)(A) claim; there was a present right
to possession of the property because the security interest (i.e., the mortgage) was in default.”).
3

The Jenkins decision on which defendants rely is distinguishable because there
was no indication in that case that the loan was not in default. Here, by contrast, the Jameses
have pleaded that the Loan was not in default, such that defendants would not have had a present
right to possession of the collateral and Nationstar’s threats of nonjudicial foreclosure were
violative of § 1692f(6).

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short, plaintiffs have alleged a viable cause of action for violation of § 1692f(6), notwithstanding
defendants’ security interest in the Jameses’ home. The Motion to Dismiss will be denied as to
the § 1692f(6) cause of action.
C.

TILA Claim (Count IV).

In Count IV of the Complaint, the Jameses bring a TILA claim against defendant FNMA.
That cause of action is pleaded as follows: “Fannie Mae, as creditor, was required by 15 U.S.C. §
1639f to promptly and accurately credit the Plaintiffs’ account with the payments received. It
has failed to do so.” (Doc. 1, ¶ 62.) Section 1639f provides that “[i]n connection with a
consumer credit transaction secured by a consumer’s principal dwelling, no servicer shall fail to
credit a payment to the consumer’s loan account as of the date of receipt.” Id. As noted, the
Complaint alleges (and all parties agree) that Nationstar, not FNMA, was the “servicer” of the
Loan during the relevant time period (see doc. 1, ¶¶ 4, 8), yet Count IV is brought exclusively
against FNMA “as creditor.” Thus, plaintiffs seek to hold FNMA liable for Nationstar’s alleged
violation of § 1639f.
Defendants argue, without rebuttal from plaintiffs, that the Jameses’ claim against FNMA
for alleged violation of § 1639f necessarily proceeds under 15 U.S.C. § 1640(a), which is TILA’s
civil liability provision. That section provides that “any creditor who fails to comply with any
requirement imposed under this part … with respect to any person is liable to such person.” 15
U.S.C. § 1640(a) (emphasis added). “Creditor” is a term of art in the TILA framework, and is
statutorily defined as referring “only to a person who both (1) regularly extends … consumer
credit …, and (2) is the person to whom the debt arising from the consumer credit transaction is
initially payable on the face of the evidence of indebtedness.” 15 U.S.C. § 1602(g). “This
definition is restrictive and precise, referring only to a person who satisfies both requirements of
the provision.” Vincent v. The Money Store, 736 F.3d 88, 105 (2nd Cir. 2013) (citation and
internal quotation marks omitted). FNMA’s position is, quite simply, that it is not a “creditor”
under the TILA definition because the Complaint itself confirms that FNMA is not “the person
to whom the debt arising from the consumer credit transaction is initially payable on the face of
the evidence of indebtedness.” Indeed, the Complaint states that the Jameses initially entered
into the Loan with Homecomings Financial Network Inc. (see doc. 1, ¶ 6), so that entity – and
not FNMA – is the “creditor” for purposes of TILA.

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Plaintiffs’ counterarguments are both limited and unpersuasive. For starters, the Jameses
insist that defendants are wrong because “the Complaint clearly alleges that Fannie Mae is a
creditor,” and bluster that if FNMA does not really own the Loan, then plaintiffs may assert new
and additional claims against FNMA for playing “hide the ball.” (Doc. 15, at 21-22.) Such
rhetoric misses the point. To be sure, the Complaint labels FNMA as a “creditor.” (Doc. 1, ¶
62.) But in the context of TILA, “creditor” is a legal term with a specific meaning that diverges
from its ordinary, common-sense usage. Merely making a conclusory allegation in a complaint
that FNMA is a TILA “creditor” does not entitle the Jameses to a Rule 12(b)(6) determination
that it is so. See, e.g., Mamani, 654 F.3d at 1153 (“Legal conclusions without adequate factual
support are entitled to no assumption of truth.”). Moreover, the Jameses affirmatively pleaded
that Homecomings Financial Network was the entity to which their debt was initially payable;
therefore, FNMA cannot be a TILA creditor within the definition of § 1602(g). See, e.g.,
Vincent, 736 F.3d at 106 (where initial lenders were entities other than defendant, defendantassignee was “therefore not a ‘creditor’ under TILA with respect to the transactions at issue
here”).
Next, the Jameses advance the decidedly shaky proposition that, under TILA, “the term
‘creditor’ is not limited to the original extender of credit, but includes any assignee.” (Doc. 15,
at 22.) The statutory language itself precludes this Court from playing fast and loose with the
TILA definition of “creditor” in the manner that the Jameses propose. In particular, the TILA
scheme includes a provision governing “Liability of assignee for consumer credit transactions
secured by real property.” That subsection provides that a civil action against a “creditor” for a
TILA violation “with respect to a consumer credit transaction secured by real property may be
maintained against any assignee of such creditor only if … the violation for which such action
or proceeding is brought is apparent on the face of the disclosure statement.” 15 U.S.C. §
1641(e)(1)(A) (emphasis added). The Jameses’ TILA claim against FNMA does not involve a
violation that would have been apparent on the face of a disclosure statement. Because §
1641(e) provides that “[e]xcept as otherwise specifically provided in this subchapter,” this is the
“only” circumstance in which a TILA action with respect to a consumer credit transaction
secured by real property may be maintained against an assignee, it follows that assignee liability
is unavailable here and that plaintiffs cannot pursue their TILA claim against FNMA for
violation of § 1639f.

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In opposing this outcome, plaintiffs urge the Court to expand § 1640(a) civil remedies for
TILA violations to reach all creditors and assignees. They are absolutely correct that TILA is a
consumer protection statute to be construed liberally. See, e.g., Brown v. CitiMortgage, Inc., 817
F. Supp.2d 1328, 1334-35 (S.D. Ala. 2011) (recognizing “the strong remedial purpose of TILA”
and the obligation to “construe TILA … liberally in the consumer’s favor”) (citations omitted).
However, the liberal construction canon is not a judicial license to rewrite a statute to fit what a
court thinks Congress should or might have said, but did not. Federal courts are not at liberty to
second-guess or rewrite federal statutes merely because they disagree with legislative choices or
think they can capture congressional intent more accurately and artfully than Congress itself did.
See, e.g., Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 n.6, 129 S.Ct. 1896, 173 L.Ed.2d
832 (2009) (“It is not our role to conform an unambiguous statute to what we think Congress
probably intended ….”) (citation and internal quotation marks omitted).4 Here, Congress has
seen fit to define “creditor” in a narrow manner that excludes assignees; has generally provided
for civil liability under § 1640(a) only as to “creditors;” and has provided in § 1641(e) for
assignee liability for consumer credit transactions secured by real property only where violations
are apparent on the face of the disclosure statement, “[e]xcept as otherwise specifically
provided.” Such specific, unambiguous statutory language governs, and precludes expansion of
TILA liability to reach FNMA in the circumstances presented here.
To be sure, the Jameses have cited a handful of district court opinions endorsing this kind
of judicial rewrite of TILA to unlock the full panoply of § 1640(a) relief against any creditor or
assignee in any case.5 The Eleventh Circuit does not appear to have addressed this issue;
4

See also United States v. Crape, 603 F.3d 1237, 1244-45 (11th Cir. 2010) (“[w]e
are not at liberty to rewrite the statute to reflect a meaning we deem more desirable” and “we
will not attribute words to Congress that it has not written”) (citations omitted); In re Hedrick,
524 F.3d 1175, 1186 (11th Cir. 2008) (“We have no license to assume that Congress did not
mean what it said …, but we are instead bound to assume that it meant exactly what it said.”).
5

At least one of the cited decisions does not support the Jameses’ position. In
Squires v. BAC Home Loans Servicing, LP, 2011 WL 5966948, *3 (S.D. Ala. Nov. 29, 2011), the
undersigned considered a TILA claim brought under § 1641(g). That subsection imposes
particular obligations on “the creditor that is the new owner or assignee of the debt.” 15 U.S.C. §
1641(g). The Federal Reserve Board has decried the use of the traditional TILA “creditor”
definition as to that subsection. See 74 Fed.Reg. 60143-01, at 60145 (“The Board believes that
to give effect to the legislative purpose, the term ‘creditor’ in [§ 1641(g)] must be construed to
(Continued)
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however, the Second Circuit did so in compelling fashion in Vincent v. The Money Store, 736
F.3d 88 (2nd Cir. 2013). Vincent involved TILA claims brought against the assignee of a
mortgage loan based on the plaintiffs’ allegations that said assignee “had charged their accounts
for fees and expenses which it had no right to collect, and had failed to refund the overcharges as
required by TILA.” Id. at 95. The district court dismissed the TILA claims, finding that the
assignee did not qualify as a “creditor” within the statutory definition. On appeal, the Second
Circuit agreed. As an initial matter, the Vincent court observed that TILA “imposes general
liability only on creditors and greatly circumscribes the liability of assignees,” using a
“restrictive and precise” definition of “creditor.” Id. at 105. After surveying the Federal Reserve
Board’s Regulation Z, applicable case law, and the statutory language itself, Vincent agreed with
the district court that the assignee was not a “creditor” under the clear definition in TILA, and
therefore could not be liable under the specific TILA section at issue (which imposed certain
responsibilities on “creditors”). As for the plaintiff’s argument that it was unfair to allow an
assignee to get away with a violation for which the original creditor would have been exposed to
TILA liability had it retained the loan, the Second Circuit had the following to say:
“We may think it unwise to allow an assignee to escape TILA liability when it
overcharges the debtor and collects unauthorized fees, where the original creditor
would otherwise be required to refund the debtor promptly. But such a result is
not ‘absurd.’ We will not rewrite the text of the statute, nor will we refuse to
defer to the Federal Reserve’s consideration of the liability of assignees in
Regulation Z. We note this discrepancy, however, for the benefit of Congress and
the Federal Reserve. … For the reasons stated above, The Money Store is not a
‘creditor’ under TILA and the district court correctly dismissed the plaintiffs’
TILA claims.”

refer to the owner of the debt following the sale, transfer or assignment, without regard to
whether that party would be a ‘creditor’ for other purposes under TILA or Regulation Z.”). In
Squires, the Court found that the Board’s statement, the accompanying regulations, and the
statutory language itself, all examined through the lens of liberal construction of TILA,
precluded Rule 12(b)(6) dismissal of the plaintiff’s TILA claim. The distinctions between
Squires and the case at bar are glaring and significant. Moreover, in Squires, this Court neither
held nor intimated that “creditors” and “assignees” were terms that could be used
interchangeably throughout TILA to impose co-extensive liability on both sets of entities,
without regard to Congress’s clear statements to the contrary. Thus, Squires does not bolster
plaintiffs’ argument.

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Vincent, 736 F.3d at 109.6
The same is true here. Pursuant to the clear text of §§ 1602(g) (defining “creditor”),
1640(a) (creating civil liability only for “any creditor who fails to comply with any requirement
imposed under this part”), and 1641(e) (“[e]xcept as otherwise specifically provided,” allowing
civil action under TILA against assignee only if the violation was apparent on the face of the
disclosure statement), the § 1639f requirement that servicers credit payments to a consumer’s
loan account as of the date of receipt may allow vicarious liability for original lenders (i.e., TILA
“creditors”), but it does not create or allow a cause of action for damages against assignees.7
6

Vincent is by no means unique or an outlier in the caselaw. See also Taylor v.
Quality Hyundai, Inc., 150 F.3d 689, 694 (7th Cir. 1998) (“Only violations that a reasonable
person can spot on the face of the disclosure statement or other assigned documents will make
the assignee liable under the TILA.”); Signori v. Federal Nat’l Mortg. Ass’n, 934 F. Supp.2d
1364, 1368 (S.D. Fla. 2013) (“If the statute, as written, creates a loophole through which
assignees can avoid liability for failing to comply with TILA …, it is up to Congress, not this
Court, to close that loophole.”); Claude v. Wells Fargo Home Mortg., 2014 WL 4073215, *14
(D. Conn. Aug. 14, 2014) (“The Court fails to see how TILA is at all implicated in this matter
given that the Defendant is an assignee and the original debt instrument appears to be unrelated
to the Plaintiff’s claim.”); Selman v. CitiMortgage, Inc., 2013 WL 838193, *15 (S.D. Ala. Mar.
5, 2013) (dismissing TILA claim where defendants were not “creditors” within the TILA
definition, and where plaintiffs did not identify any provision other than § 1640(a) that might
reasonably give rise to a private right of action for § 1639f violations); Holcomb v. Federal
Home Loan Mortg. Corp., 2011 WL 5080324, *4 (S.D. Fla. Oct. 26, 2011) (“Section 1641(a)
plainly limits any civil actions under TILA against assignees to those in which the violation is
apparent on the face of the disclosure statements ‘[e]xcept as otherwise specifically provided,’”
and “the Court will not defy the plain meaning of a statute in an attempt to make it more
effective and thus take on a legislative rather than judicial function”); Bushong v. Paramount
Equity Mortgage, Inc., 2010 WL 3945410, *8 (D. Or. May 24, 2010) (“Had Congress intended
section 1640(a)’s remedies to apply to assignees, … then Congress would have made express
reference to assignees as well.”); Bills v. BNC Mortg., Inc., 502 F. Supp.2d 773, 776 (N.D. Ill.
2007) (reasoning that allowing direct TILA liability against assignee in circumstances presented
would be “simply an end run around § 1641(a)”); Briggs v. Provident Bank, 349 F. Supp.2d
1124, 1131 (N.D. Ill. 2004) (“an assignee’s liability, including statutory damages, is limited to
instances in which the TILA violation is apparent on the face of the documents”).
7

To be clear, the Court is not affirmatively declaring that vicarious liability is
available as a general proposition in TILA cases, nor is it holding that the Jameses have validly
pleaded such a theory in their Complaint for Twombly/Iqbal purposes. Rather, the Court’s
determination is that, even if the Complaint properly and sufficiently invokes a cognizable
vicarious theory of liability running against FNMA for the alleged servicing errors of Nationstar
in crediting payments on the Loan, FNMA cannot be held liable for the purported § 1639f
violation because it is not a TILA “creditor” with respect to the Loan.

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Arguably, this result may be viewed as unwise or unfair; however, it is not absurd. Congress
appears to have made a deliberate choice to treat original lenders and assignees differently with
respect to TILA liability. It is not the proper function of the federal district courts to revisit,
much less overrule, that legislative determination. Any perceived unfairness or imprudence in
the TILA framework is for Congress to correct, not the courts. Accordingly, Count IV of the
Complaint fails to state a viable TILA claim against FNMA for violation of § 1639f because
FNMA is not a “creditor” for § 1640(a) purposes. The Motion to Dismiss is granted as to that
cause of action.
D.

Negligence / Wantonness Claims (Counts V & VI).

In Counts V and VI of the Complaint, the Jameses allege state-law claims of negligence
and wantonness against both defendants. Those counts are pleaded with no specificity, and are
instead limited to generic allegations that “[t]he acts and omissions alleged herein by Defendants
constitute wantonness” and “negligence;” that “Defendants have also wantonly [negligently]
hired, trained and supervised its [sic] employees;” and that FNMA “is liable for Nationstar’s
tortuous [sic] acts and omissions” because Nationstar was acting as FNMA’s agent. (Doc. 1, ¶¶
65-67, 70-72.)
As defendants correctly point out in their Motion, a veritable avalanche of recent (and
apparently unanimous) federal precedent has found that no cause of action for negligent or
wanton servicing of a mortgage account exists under Alabama law. See, e.g., Ott v. Quicken
Loans, Inc., 2015 WL 248938, *5 (M.D. Ala. Jan. 20, 2015) (“Alabama law recognizes no such
form of action in this context. Specifically, there is an emerging consensus that Alabama law
does not recognize a cause of action for negligent or wanton mortgage servicing.”) (citations and
internal quotation marks omitted); Branch Banking and Trust Co. v. EBR Investments LLC, 2015
WL 225457, *3 (N.D. Ala. Jan. 16, 2015) (“Numerous federal courts, including the undersigned,
have concluded that Alabama law does not recognize a cause of action for negligent or wanton
mortgage servicing.”) (citations and internal quotation marks omitted); Alverson v. PNC Bank,
2014 WL 7146995 (S.D. Ala. Dec. 15, 2014) (“Alabama law does not recognize a tort-like cause
of action for breach of a duty created by contract, at least not between the parties to a contract;

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therefore, a mortgagor cannot maintain a cause of action against … a mortgagee for negligent or
wanton servicing of a mortgage contract.”).8

8

See also Deutsche Bank Trust Co. Americas v. Garst, 989 F. Supp.2d 1194, 1205
(N.D. Ala. 2013) (dismissing claims for negligence and wantonness because negligent failure to
perform a contract is but a breach of contract, damages for mortgage servicing are typically
economic, and there is a “plethora of alternative avenues for relief in ‘negligent mortgage
servicing’ cases”); Wallace v. SunTrust Mortg., Inc., 974 F. Supp.2d 1358, 1370 (S.D. Ala.
2013) (“To the extent, then, that Wallace seeks to derive tort claims of negligence and
wantonness to recover economic loss (no physical injuries) stemming from SunTrust’s purported
failure to perform contractual duties in the servicing of her mortgage, the Court finds that
Wallace’s negligence and wantonness claims fail to state claims upon which relief can be
granted.”); Costine v. BAC Home Loans, 946 F. Supp.2d 1224, 1234 (N.D. Ala. 2013) (holding
that “claims for negligent mortgage servicing are not legally cognizable under Alabama law”);
Prickett v. BAC Home Loans, 946 F. Supp.2d 1236, 1245 (N.D. Ala. 2013) (“Because all the
duties Plaintiffs contend BANA breached are based on contractual agreements between the
parties, Plaintiffs’ claim for wanton loan servicing and wanton foreclosure initiation are not
legally cognizable under Alabama law.”); Buckentin v. SunTrust Mortg. Corp., 928 F. Supp.2d
1273, 1290 (N.D. Ala. 2013) (“Because the duty Defendant allegedly breached is based on a
contract, and because Alabama law does not permit Plaintiff to assert a tort claim against
Defendants for their purported breach of a contract, both Plaintiffs’ negligence and wantonness
claims are not actionable under Alabama law.”); Blake v. Bank of America, N.A., 845 F. Supp.2d
1206, 1210-11 (M.D. Ala. 2012) (“Alabama law does not recognize a cause of action for
negligent or wanton mortgage servicing”); Duke v. JPMorgan Chase Bank Nat’l Ass’n, 2014 WL
5770583, *4 (N.D. Ala. Nov. 5, 2014) (“Alabama law does not recognize a cause of action for
negligent or wanton mortgage servicing”) (citation and internal quotation marks omitted); Givens
v. Saxon Mortg. Services, Inc., 2014 WL 2452891, *13 (S.D. Ala. June 2, 2014) (“Givens’s
claims for negligence and wantonness against Saxon for failing to properly credit Givens with
payments must fail because this is essentially alleging a breach of contract.”); Quinn v. Deutsche
Bank Nat’l Trust Co., 2014 WL 977632, *6 (S.D. Ala. Mar. 12, 2014) (“Quinn’s claims that
defendants negligently or wantonly serviced his mortgage loan (resulting in payments not being
accepted or properly applied to his account) are not viable under Alabama law.”); Selman, 2013
WL 838193, at *6 (“The Court agrees with these decisions’ construction of Alabama law, and
particularly their emphasis that the mortgage servicing obligations at issue here are a creature of
contract, not of tort, and stem from the underlying mortgage and promissory note executed by
the parties, rather than a duty of reasonable care generally owed to the public.”); Webb v. Ocwen
Loan Servicing, LLC, 2012 WL 5906729, *7 (S.D. Ala. Nov. 26, 2012) (“under Alabama law a
cause of action for negligent servicing of a mortgage against Ocwen cannot be maintained where
the damages are economic”); Forester v. Bank of America, N.A., 2012 WL 3206471, *5 (S.D.
Ala. Aug. 7, 2012) (“Under Alabama law, an agent, like BAC, could only incur tort liability
while servicing a mortgage by causing personal injury or property damage as a result of a breach
of the duty of reasonable care. Pure economic loss – which is what [Forester] claims – does not
suffice.”) (citations omitted); Fassina v. CitiMortgage, Inc., 2012 WL 2577608, *7 (N.D. Ala.
July 2, 2012) (“Plaintiff’s claim alleging negligent, reckless, and/or wanton mortgage servicing
(Continued)
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The point is simple. Every single one of these cases (and many others not cited herein)
rejects the availability of negligence and wantonness claims under Alabama law under
comparable circumstances to those identified by the Jameses. Every one of these cases
undercuts the legal viability of Counts V and VI, and rejects the very arguments articulated by
the Jameses in opposing dismissal of those causes of action. (See doc. 15, at 23-30.) This
ground having been thoroughly and exhaustively plowed in the aforementioned case authorities,
no constructive purpose would be served by re-plowing it here. Suffice it to say that the Court
agrees with these decisions’ construction of Alabama law, and particularly their recognition that
the mortgage servicing obligations at issue here are a creature of contract, not of tort, and stem
from the underlying mortgage and promissory note executed by the parties, rather than a duty of
reasonable care generally owed to the public.9 To the extent that the Jameses seek to hold

is not valid under Alabama law.”); McClung v. Mortgage Electronic Registration Systems, Inc.,
2012 WL 1642209, *8 (N.D. Ala. May 7, 2012) (“the court similarly concludes that there is no
cause of action for negligent or wanton mortgage servicing under Alabama law”).
9

Plaintiffs attempt to circumvent these principles by asserting that statutes, rather
than contracts, form the basis for the duties that plaintiffs claim were breached. (See doc. 15, at
25-26.) This argument is unpersuasive for a host of reasons. First, plaintiffs’ Complaint neither
provides an inkling that Counts V and VI are proceeding under a negligence per se theory nor
recites any statutes as being the source of the duties that they claim were breached; therefore, it
does not comport with Twombly/Iqbal pleading requirements. Even plaintiffs’ brief does not fill
in these gaps by articulating which statute(s) they contend provide the legal underpinnings for
their negligence and wantonness claims herein. (Had the brief included that information,
plaintiffs still would not prevail, as a party cannot amend its pleading via brief in response to a
dispositive motion.) Second, federal courts in Alabama have given short shrift to similar efforts
invoking the doctrine of negligence per se to outflank the phalanx of case authorities holding that
Alabama law does not recognize a cause of action for negligent or wanton mortgage servicing.
See Costine, 946 F. Supp.2d at 1233-34; Prickett, 946 F. Supp.2d at 1247. Third, the singular
case that plaintiffs cite in support their position, Rawlings v. Dovenmuehle Mortg., Inc., 64 F.
Supp.2d 1156, 1167 (M.D. Ala. 1999), was decided more than a dozen years before the
sprawling body of case law expressly concluding that Alabama law does not allow plaintiffs to
sue for negligent or wanton mortgage servicing. Not surprisingly, Rawlings in no way considers
(much less rebuts) the reasoning underlying such authorities, so it cannot support the proposition
that these numerous recent federal cases have all interpreted and applied Alabama law
incorrectly. Fourth, the Jameses’ appeal to negligence per se cannot help them because the legal
duties underlying their claims against FNMA and Nationstar arise in contract. The statutes in
play in this case regulate the contractual relationship between the Jameses and FNMA /
Nationstar, but do not eliminate or supplant that contractual relationship; therefore, the reasoning
(Continued)
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defendants liable on theories of negligent or wanton servicing of their mortgage, Counts V and
VI fail to state claims upon which relief can be granted.
Also included in Counts V and VI are subclaims that defendants negligently or wantonly
“hired, trained and supervised [their] employees.” (Doc. 1, ¶¶ 66, 71.) Under Alabama law,
such a claim requires a showing that “(1) the employee committed a tort recognized under
Alabama law; (2) the employer had actual notice of this conduct or would have gained such
notice if it exercised due and proper diligence; and (3) the employer failed to respond to this
notice adequately.” Lawrence v. Christian Mission Center Inc. of Enterprise, 780 F. Supp.2d
1209, 1218 (M.D. Ala. 2011); see also Costine v. BAC Home Loans, 946 F. Supp.2d 1224, 123435 (N.D. Ala. 2013) (same); Crutcher v. Vickers, 2012 WL 3860557, *13 (N.D. Ala. Sept. 5,
2012) (explaining that a critical element of either negligent supervision or negligent training
under Alabama law is “proof of the employer’s actual or constructive awareness of the
employee’s incompetency”). The Complaint alleges facts that would support none of these
elements (especially with regard to the elements of employer notice and failure to respond);
rather, Counts V and VI are simply conclusory, unsubstantiated allegations of negligent / wanton
hiring, training and supervision. That is not good enough to withstand Rule 12(b)(6) scrutiny.
See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)
(plaintiffs must plead “enough facts to state a claim to relief that is plausible on its face,” so as to
“nudge[ ] their claims across the line from conceivable to plausible”); GeorgiaCarry.Org, Inc. v.
Georgia, 687 F.3d 1244, 1254 (11th Cir. 2012) (Twombly / Iqbal pleading standard “necessarily
requires that a plaintiff include factual allegations for each essential element of his or her
claim”).
As presently constituted, then, Counts V and VI (including both the claims of negligent/
wanton servicing of plaintiffs’ mortgage account and the subsidiary claims of negligent/ wanton
hiring, training or supervision) are properly dismissed for failure to state a claim upon which
relief can be granted.

of the line of authorities beginning with Blake (i.e., that the obligations in question are rooted in
contract rather than tort) remains fully intact, even in the face of a negligence per se claim (had
plaintiffs properly presented one in their pleading, which they did not).

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III.

Conclusion.
For all of the foregoing reasons, Defendants’ Motion to Dismiss (doc. 8) is granted in

part, and denied in part. The Motion is granted with respect to Counts IV (TILA), V
(wantonness) and VI (negligence) of the Complaint. Those claims and causes of action are
dismissed for failure to state a claim upon which relief can be granted. In all other respects, the
Motion is denied. Defendants are ordered to file their answer(s) to the Complaint on or before
March 23, 2015.
DONE and ORDERED this 9th day of March, 2015.

s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

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