Silberstein et al v. Federal National Mortgage Association et al

Filing 23

OPINION AND ORDER granting 14 , and the Silbersteins' Motion Doc. 22 is MOOT. The Silbersteins' Arkansas Fair Debt Collection Practices Act claim is DISMISSED WITH PREJUDICE, and their Real Estate Settlement Procedures Act claim is DISMISSED WITHOUT PREJUDICE. Signed by Honorable Timothy L. Brooks on January 17, 2017. (rg)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FAYETTEVILLE DIVISION

BRITT SILBERSTEIN and AMANDA
SILBERSTEIN

v.

PLAINTIFFS

CASE NO. 5:16-CV-05331

FEDERAL NATIONAL MORTGAGE
ASSOCATION ("FANNIE MAE") and
DEFENDANTS

PHH MORTGAGE CORPORATION
OPINION AND ORDER

Currently before the Court is Defendant PHH Mortgage Corporation's ("PHH")
Motion for Partial Dismissal or, in the Alternative, for More Definite Statement (Doc. 14).
The Motion asks the Court to dismiss Counts Two and Three of Plaintiffs Britt and
Amanda Silbersteins' (collectively, "the Silbersteins") Amended Complaint (Doc. 6)
pursuant to Federal Rule of Civil procedure 12(b)(6). In the alternative, the Motion asks
the Court to order the Silbersteins to make a more definite statement as to Count Two,
pursuant to Rule 12(e). The Silbersteins filed an abbreviated and non-substantive
Response (Doc. 17) on

December 21, 2016. Then, on January 16, 2017, the Silbersteins

filed a Motion for Partial Dismissal (Doc. 22) as to certain of their own causes of action.
For the reasons discussed below, PHH's Motion (Doc. 14) is

GRANTED,

and the

Silbersteins' Motion (Doc. 22) is MOOT.
I. BACKGROUND

The following facts are recited in the light most favorable to the Silbersteins, the
non-moving party. On September 16, 2005, the Silbersteins executed a promissory note

1

and mortgage with PHH1 to facilitate their purchase of real property located at
Theodore Drive, Springdale, Arkansas. On August

26, 2013,

1623

the Silbersteins entered into

a loan modification agreement with PHH. Pursuant to the loan modification agreement,
the Silbersteins remitted payment to PHH for the months of September, October, and
November of

2013.

However, when the Silbersteins attempted to make payment for the

month of December, PHH declined receipt of the payment, and denied the validity of the
loan modification agreement. On April 8,

2014,

May

15, 2014,

and May

27, 2014,

the

Silbersteins sent letters to PHH requesting certain information about their account, and
requesting a response from PHH. The Silbersteins allege that PHH failed to respond to
any of these letters, other than one response stating that the May
a "qualified written request" as defined by

12

U.S.C.

15, 2014

letter was not

§ 2605.

At some point after that time, PHH transferred or assigned the Silbersteins'
mortgage and note to Defendant Federal National Mortgage Association ("Fannie Mae").
Then, on September 2,

2016, Fannie

Mae-through trustee Wilson & Associates, PLLC­

issued a Notice of Default and Intention to Sell (Doc.

7, 2016.

6-1) listing a sale date of

Before the foreclosure sale could proceed, on November

November

3, 2016,

the

Silbersteins filed a Petition for Temporary Restraining Order and Preliminary Injunction in
the Circuit Court of Washington County, Arkansas. The Circuit Court granted the TRO
and scheduled a hearing for November

17, 2016.

On November

16, 2016,

however, the

Circuit Court dismissed Wilson & Associates, PLLC-an entity with its principal place of
business in Arkansas-as a defendant in the case, creating complete diversity amongst
the parties. PHH accordingly removed the case to this Court on November

1 PHH is more commonly known as Coldwell Banker.

2

17, 2016.

The next day, the Silbersteins filed their First Amended Petition for Temporary
Restraining Order and Preliminary Injunction and Complaint for Breach of Contract (Doc.
6). The Court granted the Silbersteins a TRO and deferred ruling on their request for a
preliminary injunction until a hearing on the matter could be set. Before the scheduled
hearing date, the parties entered an agreement whereby the Silbersteins would deposit
with the Court the sum of $775.
65 every month during the pendency of this action and
Fannie Mae would be enjoined from foreclosing on their property until the final disposition
of the case.
On December 16, 2016, PHH filed the instant Motion, arguing that Counts Two
and Three of the Silbersteins' Amended Complaint fail to state a claim against them, and
that alternatively, the Silbersteins should be ordered to produce a more definite statement
as to Count Two. Count Two (,-r,-r 16-18) of the Complaint claims that PHH violated the
Real Estate

Settlement Procedures Act ("RESPA"), 12 U. S.C. § 2605, by failing to

respond to the Silbersteins' letters. Count Three (,-r 19) alleges that PHH violated the
Arkansas Fair Debt Collection Practices Act ("AFD CPA"), Ark. Code Ann. § 17-24-506.
In Response (Doc.17), the Silbersteins only state that they deny the material allegations
of PHH's Motion, and offer no substantive legal argument on the merits thereof.
II. LEGAL STAND ARD

To survive a motion to dismiss, a complaint must provide "a short and plain
statement of the claim showing that the pleader is entitled to relief. Fed.R. Civ.P.8(a)(2).
"
The purpose of this requirement is to "give the defendant fair notice of what the ...claim
is and the grounds upon which it rests." Erickson
(quoting Be// At/. Corp.

v.

v.

Pardus, 551 U.S. 89, 93 (2007)

Twombly, 550 U.S.544, 555 (2007)).The Court must accept all

3

of the Amended Complaint's factual allegations as true, and construe them in the light
most favorable to the Silbersteins, drawing all reasonable inferences in their favor. See
Ashley Cnty., Ark.

v.

Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009).

However, the Amended 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, 678 (2009) (quoting Twombly, 550 U.S. at 570). "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." Id. "A
pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a
cause of action will not do. Nor does a complaint suffice if it tenders 'naked assertion[s]'
'
devoid of 'further factual enhancement."' Id. In other words, while "the pleading standard
that Rule 8 announces does not require 'detailed factual allegations,' ...it demands more
than an unadorned, the defendant-unlawfully-harmed-me accusation." Id.
Ill. DISCUSSION

The Court will begin by addressing PHH's argument respecting the AFDCPA.
Specifically, PHH contends that the AFDCPA's statute of limitations has run, and
alternatively, that it cannot be liable under the AFDCPA because it is not a "debt collector "
as that statute defines the term. See Ark. Code Ann. § 17-24-502(5)(A). Pursuant to the
AFDCPA, a person may bring a cause of action against "a debt collector who fails to
comply " with the statute. Ark. Code Ann.§ 17-24-512(a). Such an action must be brought
"in a court of competent jurisdiction within one (1) year from the date on which the violation
occurs." Ark. Code Ann. § 17-24-512(d).

4

The conduct causing PHH's alleged failure to comply with the AFDCPA, per the
Silbersteins' Amended Complaint, occurred on December 11, 2013, and January 21,
2014. ( Doc. 6, � 19). Accordingly, the one-year statute of limitations had long expired by
the time the Silbersteins filed their original complaint in state court on November 3, 2016,
and their Amended Complaint in this Court on November 18, 2016.
Even had the statute of limitations not expired, moreover, the Court would find that
the Silbersteins' AFDCPA claim fails as a matter of law because PHH is not a "debt
collector" as defined by that statute. The AFDCPA defines that term as "a person who
uses an instrumentality of interstate commerce or the mails in a business whose principal
purpose is the collection of debts or who regularly collects or attempts to collect, directly
or indirectly, debts owed or due or asserted to be owed or due another. Ark. Code Ann.
"
§ 17-24-502(5)(A).2 This definition is materially identical to the federal F
air Debt Collection
Practices Act's definition of a debt collector. See In re Humes, 496 B.R. 557, 583 n.24
(Bankr. E.D. Ark. 2013); 15 U.S. § 1692a(6). And, "[m]any courts hold that mortgage
C.
lenders and servicers are not 'debt collectors' under the FDCPA in connection with
collecting their own consumer debts as opposed to claims owned by others." In re Larkin,
553 B.R. 428, 440 (Bankr. D. Kan. 2016). This includes "FDCPA decisions relating to loan
modification offers." Id. (discussing Thomas
781 (S.D.N.Y. 2011) and Polidori

v.

v.

JPMorgan Chase & Co., 811 F Supp. 2d
.

Bank of Am., N.A., 977 F Supp. 2d 754 (E. D. Mich.
.

2013)). These holdings are consistent with the plain language of the statute, which

2 As to AFDCPA claims brought under the portion of the statute codified at Ark. Code
Ann.§ 17-24-507(b)(6), the definition of "debt collector" is expanded to include "a person
...whose principal purpose is the enforcement of security interests." See Ark. Code Ann.
§ 17-24-502(5)(C). However, the Silbersteins' Amended Complaint alleges a violation of
§ 506 of the AFDCPA, ( Doc. 6, � 19), not§ 507, so the Court expresses no opinion on
whether PHH may be a "debt collector" as defined by§ 502(5)(C).
5

requires a "debt collector" to have as its "principal purpose" the "collection of debts," or,
that a "debt collector" regularly attempt to collect "debts owed ...or due another." Ark.
Code Ann.§ 17-24-502(5)(A) (emphasis added).Mortgage lenders and services have as
their principal purposes originating and servicing mortgage loans, respectively, not
collecting debt. And, to the extent that they regularly attempt to collect debt, they are
typically collecting debt owed to themselves, not owed to another.
For these reasons, though "the AFDCPA is a relatively new statute with virtually
no case law interpreting its provisions," In re Humes, 496 B.R. at 583, the Court is
confident that the Arkansas Supreme Court would interpret its definition of "debt collector"
to exclude typical mortgage lenders and servicers.PHH's Motion to Dismiss Count Three
of the Amended Complaint is therefore GRANTED because the AFDCPA's one-year
statute of limitations has run, and alternatively because PHH is not a "debt collector" as
defined by that statute.
Turning to PHH's position regarding the Silbersteins' RESPA claim, it contends the
claim fails to state that PHH's alleged violations of the RESPA caused the Silbersteins
actual damages, and must be dismissed for that reason.The Court agrees.The RESPA
imposes a duty on federally related mortgage loan servicers to respond to certain
borrower inquiries. 12 U.S.
C. § 2605(e). When a servicer receives a "qualified written
request" from a borrower, it must respond by acknowledging receipt within five days, and
by taking certain further actions with thirty days. Id. at (e)(1)-(2).A failure to comply with
these requirements makes the servicer liable for:
(A) any actual damages to the borrower as a result of the failure; and

6

(8) any additional damages, as the court may allow, in the case of a pattern
or practice of noncompliance with the requirements of this section, in an
amount not to exceed $2,000.
12 U.S.C. § 2605(f)(1). The Silbersteins allege that their letters of April 8, 2014, May 15,
2014, and May 27, 2014 constitute qualified written requests,3 and that PHH failed to
abide by § 2605 upon receiving them. This, their argument continues, caused them
damages "in the form of attorney's fees, mental anguish, damage to their credit and
reputation[,] as well as a potential decrease in property value and loss of intrinsic property
value." ( Doc.6, 1f 18).
Courts evaluating RESPA claims have consistently found that a complaint must
include both an allegation of "actual damages " and a causal relationship between the
RESPA violation and the damages. See, e.g., Hintz

v.

JPMorgan Chase Bank, N.A., 686

F.
3d 505, 510-11 (8th Cir. 2012) (affirming district court's dismissal of RESPA claims
after district court found that the complaint did not "show that a failure to respond or give
notice [pursuant to RESPA] has caused them actual harm " (quoting the district court));
Vesey

v.

Wells Fargo Bank, N.A., 2014 WL 11514499, at *12 ( S.D. Iowa Nov. 6, 2014)

("Plaintiffs have failed to demonstrate that they sustained any actual damages as a result
of Defendant's failure [to comply with RESPA]."); Givant v. Vitek Real Estate Indus. Grp.,
Inc., 2012 WL 5838934, at *4 (E
.D. Cal. Nov. 15, 2012) ("The allegations of a RESPA

QWR claim also must show that the RESPA violation proximately caused Plaintiff's
damages." (citation and alterations omitted)); Soriano

v.

Countrywide Home Loans, Inc.,

3 Under the RESPA, a "qualified written request" is a "written correspondence ...that (i)
includes ... the name and account of the borrower; and (ii) includes a statement of the
reasons for the belief of the borrower ...that the account is in error or provides sufficient
detail to the servicer regarding other information sought by the borrower." 12 U.S.C.
§ 2605(e)(1 )(8). The Court will assume for purposes of this Motion that the Silbersteins'
three letters to PHH constitute qualified written requests.
7

2011

WL

1362077, at *7 (N.D. Cal. Apr. 11, 2011) ("Plaintiff has failed to introduce any

evidence to show that some colorable relationship between his injury and the actions or
omissions that allegedly violated RESPA exists." (quotation omitted)). For purposes of
this Motion, the Court will assume that at least some of the damages listed by the
Silbersteins constitute "actual damages" as meant by the RESPA, though that is far from
verity.4 The Court will also assume that PHH did indeed violate the RESPA, though that
also lacks certainty. Even so, the Silbersteins' claim plainly fails to demonstrate a causal
connection between PHH's alleged RESPA violation and their enumerated damages, and·
must be dismissed for that reason.
Paragraph 18 of the Amended Complaint, which contains the damages allegation,
is no more than a "[t]hreadbare recital[] of the elements of a cause of action." Ashcroft,

556 U.S. at 678. It merely states that "as a result of' PHH's "failure to reply and respond
in accordance" with the RESPA, the Silbersteins have sustained certain damages. This
assertion is the epitome of a "legal conclusion" or "conclusory statementO" that the Court
need not accept as true for purposes of a motion to dismiss. Id. The Amended Complaint

4 Indeed, this Court's research indicates that courts are divided on the question of whether
the RESPA's "actual damages" requirement means only "pecuniary damages" or instead
includes non-pecuniary harms such as emotional distress. Compare Molina v. Wash. Mut.
Bank,

2010

WL

431439, at *7 (S.D. Cal. Jan. 29, 2010) ("Numerous courts have read

Section 2605 as requiring a showing of pecuniary damages in order to state a claim."),
with Carter v. Countrywide Home Loans, Inc., 2009 WL 1010851, at *3 (E.D. Va. Apr. 14,
2009) ("The courts that have examined § 2605(f) have consistently found that 'actual

damages' includes emotional distress damages."). Furthermore, the Supreme Court has
stated that the phrase "actual damages" is "a legal term of art,'' with a meaning that is "far
from clear." F.A.A.

v.

Cooper,

132 S. Ct. 1441, 1449 (2012). Its precise meaning "changes

with the specific statute in which it is found,'' and is "sometimes understood to include
nonpecuniary harm." Id. (quotation omitted). In deciding the instant Motion, the Court
need not weigh in on this split. As explained herein, regardless of the term's scope, the
Silbersteins have failed to demonstrate a causal relationship between the alleged RESPA
violations and their damages-"actual" or not.

8

does not contain a single factual allegation explaining how PHH's supposed violations of
the RESPA caused the Silbersteins any damages whatsoever.
The Court further notes that the Silbersteins' Amended Complaint fails to state a
claim for statutory damages under the RESPA. A court may award plaintiffs "any
additional damages, " not to exceed $2,000, "in the case of a pattern or practice of
noncompliance with the requirements " of the RESPA. 12 U.S.C. § 2605(f)(1)(B). While
the Amended Complaint does allege that PHH violated the RESPA on three occasions,
its only damages allegation pertains to the actual damages allegedly incurred by the
Silbersteins. To the extent the

Silbersteins sought to include a claim for statutory

damages under the RESPA, then, their Amended

Complaint falls short of the notice

pleading standard required by Federal Rule of Civil Procedure 8. See Erickson, 551 U.S.
at 93 (stating that a complaint must "give the defendant fair notice of what the ...claim
is and the grounds upon which it rests." (quoting Twombly, 550 U.S.at 555)).
For these reasons, PHH's Motion to Dismiss as to the Silbersteins' RESPA claim
is GRANTED. The Court therefore need not reach PHH's alternative request for a more
definite statement, made pursuant to Rule 12(e).

IV. CONCLUSION
As discussed above, PHH's Motion for Partial Dismissal (Doc.
14) is GRANTED,
and the Silbersteins' Motion (Doc.22) is MOOT.The Silbersteins' Arkansas Fair Debt
Collection Practices Act claim is DISMISSED WITH PREJUDICE, and their Real E
state
Settlement Procedures Act claim is DISMISSED WITHOUT PREJUDICE.

9

IT IS SO ORDERED on this

17� day of Janua

10

,

017.