Christenson v. Citimortgage, Inc.
Filing
50
ORDER denying 35 Motion for Reconsideration ; granting in part and denying in part 37 Motion to Dismiss for Failure to State a Claim. Plaintiffs' CCPA claim is DISMISSED WITHOUT PREJUDICE. Defendant's Motion to Dismiss the claim rel ated to Colorado Revised Statute § 38-40-103 is DENIED. Should Plaintiffs wish to file an Amended Complaint with respect to the CCPA claim, an Amended Complaint shall be filed no later than 10/7/2014. By Judge Christine M. Arguello on 09/16/2014. (athom, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 12-cv-02600-CMA-KLM
EUGENE CHRISTENSON, and
SHARON CHRISTENSON,
Plaintiffs,
v.
CITIMORTGAGE, INC.,
Defendant.
ORDER DENYING MOTION FOR RECONSIDERATION, AND DENYING IN PART
AND GRANTING IN PART MOTION TO DISMISS
This case revolves around a letter Plaintiffs Eugene and Sharon Christenson
sent to Defendant Citimortgage on March 31, 2011. Defendant is a mortgage servicer
that also holds the note securing the mortgage on Plaintiffs’ home. In the letter,
Plaintiffs, who had fallen behind on their mortgage payments, asked Defendant whether
it had considered certain loss mitigation measures to avoid a foreclosure. Defendant
never responded to the letter, which Plaintiffs allege violated a number state and federal
laws. In a prior order, this Court determined that Plaintiffs had provided insufficient
support to substantiate any legal claim. Plaintiffs have tried again in a second amended
complaint. This time, the Court concludes at least one state-law claim is sufficiently
pled to survive Defendant’s second motion to dismiss. At the same time, the other two
claims still fail, for largely the same reasons stated in this Court’s original order. 1
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.” “The
pleading standard Rule 8 announces does not require detailed factual allegations, but
it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.
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 assertions
devoid of further factual enhancement.” Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009)
(quoting and citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal
quotation marks and citations omitted; alterations incorporated)).
Further, “only a complaint that states a plausible claim for relief survives a motion
to dismiss. Determining whether a complaint states a plausible claim for relief will . . .
be a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense. But where the well-pleaded facts do not permit the
court to infer more than the mere possibility of misconduct, the complaint has alleged—
but it has not shown—that the pleader is entitled to relief.” Id. at 679 (internal citations
and quotation marks omitted; alterations incorporated). Thus, the burden is on the
1
This Court will not recite the factual and procedural background of this case, as the parties
are familiar with it and it has been described at length in prior proceedings. See Christenson
v. Citimortgage, Inc., No. 12-CV-02600-CMA-KLM, 2013 WL 5291947 (D. Colo. Sept. 18, 2013)
(affirming in part and rejecting in part Christenson v. Citimortgage, Inc., No. 12-CV-02600-CMAKLM, 2013 WL 5291943 (D. Colo. June 17, 2013)).
2
Plaintiffs to “nudge [their] claims across the line from conceivable to plausible.”
Twombly, 550 U.S. at 570.
The purpose of this pleading requirement is two-fold: “to ensure that a defendant
is placed on notice of his or her alleged misconduct sufficient to prepare an appropriate
defense, and to avoid ginning up the costly machinery associated with our civil
discovery regime on the basis of a largely groundless claim.” Kansas Penn Gaming,
LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011) (internal quotation marks and
citations omitted).
The Court applies this standard to the three claims on which the parties seek this
Court’s further review.
II. ANALYSIS
A.
MOTION FOR RECONSIDERATION OF RESPA CLAIM
First, Plaintiffs allege that when Defendant failed to respond to the March 2011
letter, it violated 12 U.S.C. § 2605(e)(1)(A) of the Real Estate Settlement Procedures
Act (RESPA). This statute requires Defendant to provide a written response to
“a qualified written request [QWR2] from [a] borrower . . . for information relating to
the servicing of [a] loan.” In the prior order, this Court determined that a letter inquiring
about efforts at loss mitigation does not qualify as a QWR for purposes of this portion of
RESPA.
2
A QWR must include certain identifying information about the borrower and a statement
particularizing the borrowers’ need for the requested information. See 12 U.S.C.A.
§ 2605(e)(1)(B)(i), (ii). These provisions—and their scope—are irrelevant for purposes
of resolving the instant claim.
3
Plaintiffs ask this Court to reconsider this decision based on their discovery of
a new authority: a regulation issued by the Consumer Financial Protection Bureau
(CFPB), concerning “error resolution procedures” related to loan servicers. 12 C.F.R.
§ 1024.35. In pertinent part, this regulation requires a “servicer” to respond to a QWR
identifying certain “errors,” including the “[f]ailure to provide accurate information to a
borrower regarding loss mitigation options and foreclosure, as required by [12 C.F.R.]
§ 1024.39.” 12 C.F.R. § 1024.35(b)(7).
Plaintiffs argue that because the regulation requiring responses to QWRs
related to alleged errors encompasses those related to the failure to provide
information regarding loss mitigation, it must follow that this Court should interpret the
separate statute mandating responses to QWRs related to loan servicing to include
queries about loss mitigation.
Plaintiffs’ argument fails because it conflates one statutory mandate for QWRs
related to loan servicing (“loan-servicing QWRs”) with a separate regulatory mandate
based on a later-enacted statute that governs QWRs related to the above-mentioned list
of errors (“error-resolution QWRs”). Cf. Medrano v. Flagstar Bank, FSB, 704 F.3d 661,
666 & n.4 (9th Cir. 2012) (noting how many courts conflate QWRs related to loan
servicing with other forms of QWRs), cert. denied, 133 S. Ct. 2800 (2013).
In short, all QWRs are not the same and this is a case about only loan-servicing
QWRs. As noted above, to trigger the loan-servicing QWR mandate, a borrower must
file a QWR that seeks “information relating to the servicing of a loan.” 12 U.S.C.
§ 2605(e)(1)(A) (emphasis added). In the prior order, this Court interpreted the term
4
“servicing” as used in this section not to include inquiries about loss mitigation. See
Christenson, 2013 WL 5291947, at *4-5. The Court will not reiterate its reasoning for
adopting such an interpretation of “servicing” but the analysis from that order clearly
shows that what drove the Court’s interpretation of the word “servicing” had nothing
to do with the separate (and largely irrelevant) question about what constitutes a QWR.
Further, nothing in the regulation that Plaintiffs have found affects the way this
Court interprets the word “servicing” in the prior order. Indeed, the error-resolution
QWR regulation derives from a different part of RESPA, which mandates that servicers
provide responses to much broader and varied types of requests: that other part of
RESPA prohibits a servicer from failing to “to take timely action to respond to a
borrower’s requests to correct errors relating to allocation of payments, final
balances for purposes of paying off the loan, or avoiding foreclosure, or other
standard servicer’s duties.” 12 U.S.C. § 2605(k)(1)(C) (emphasis added).
Congress added this separate part of RESPA pursuant to the Dodd-Frank Act,
Pub. L. No. 111-203, § 1463, 124 Stat 1376, 2182-83 (2010). Only after the statute
was enacted in 2010 did the CFPB start to solicit comments for how it should interpret
the types of errors that should be included as ones that Plaintiffs needed to provide
a “timely” response. The result is 12 C.F.R. § 1024.35, which includes the
aforementioned prohibition against providing inaccurate information about lossmitigation efforts relied upon by Plaintiffs. 3
3
That Congress and the CFPB sought to differentiate between the loan-servicing and errorresolution QWRs rules is readily apparent from a review of the different procedural rules used
for each type of QWR. For example, the rules governing when a servicer must respond to these
5
Plaintiffs ignore the legislative and regulatory provenance of 12 C.F.R.
§ 1024.35, and they fail to even make an argument about the issue central to changing
this Court’s opinion about their RESPA claim: namely, how 12 C.F.R. § 1024.35 should
change this Court’s interpretation of the term “servicing.” Further, because Plaintiffs
do not even cite 12 U.S.C. § 2605(k)(1)(C) in their briefing, they have forfeited any
argument that this Court should reinterpret that separate statute’s mandate as affecting
this Court’s interpretation of 12 U.S.C. § 2605(e)(1)(A).
In sum, Plaintiffs’ new authority would be helpful if they were raising an argument
about whether their inquiry constituted an error-resolution QWR. But it is unhelpful here
because this is a case about loan-servicing QWRs. 4
two different types of QWRs are different. On the one hand, a servicer must acknowledge
receipt of a loan-servicing QWR not later five days after receiving it, see § 12 U.S.C. §
2605(e)(1)(A), and respond to the QWR not later than thirty days after receipt, see § 12 U.S.C.
§ 2605(e)(2), unless the servicer asks the borrower for an extension and explains the reasons
for the delayed response, see id. § 2605(e)(4). On the other hand, for the error-resolution
QWRs, the statute requires servicers to take “timely action” in responding. Id. § 2605(k)(1)(C).
The CFPB has interpreted “timely action” to somewhat track the timeline for loan-servicing
QWRs, with some types of alleged errors requiring a response within seven days, see 12 C.F.R.
§ 1024.35(e)(3)(i)(A), and others requiring response within the same thirty-day period, id.
§ 1024.35(e)(3)(i)(C). The extension-of-time regime under the error-resolution regulation also
somewhat tracks—but does not mirror—the regime for loan-servicing QWRs. Compare, e.g.,
12 U.S.C. § 1024.35(e)(3)(ii) (allowing extensions only for certain types of error-resolution
QWRs), with 12 U.S.C. § 2605(e)(4) (allowing a fifteen-day extension for all types of loanservicing QWRs).
4
Defendant advances a number of arguments for why Plaintiffs have forfeited any argument
that relies on 12 C.F.R. § 1024.35, as this authority was available to Plaintiffs at the time they
were responding to the original motion to dismiss. This Court need not reach any of these
forfeiture arguments: for the reasons stated above, on the merits, Plaintiffs’ newly discovered
authority has no impact on this Court’s original interpretation of 12 U.S.C. § 2605(e)(1)(A).
6
B.
COLORADO REVISED STATUTE § 38-40-103
Plaintiffs also allege that Defendant’s failure to respond to the March 2011 letter
constituted a violation of Colorado Revised Statute § 38-40-103. This statute states in
relevant part: “The servicer of a loan shall respond in writing within twenty days from the
receipt of a written request from the debtor . . . for information concerning the debtor’s
loan, which is readily available to the servicer from its books and records and which
would not constitute the rendering of legal advice.” Colo. Rev. Stat. § 38-40-103(2).
It provides a cause of action for those who can show “actual damages have occurred”
as a result of the violation. Colo. Rev. Stat. § 38-40-104(1).
This Court granted Defendant’s motion to dismiss this claim without prejudice
based on Plaintiffs’ failure to plead with sufficient specificity that the answers to the
questions raised by Plaintiffs were “readily available” as that term is used in the statute.
Christenson, 2013 WL 5291943, at *15-16. Plaintiffs have filed an amended complaint
attempting to rectify this deficiency, and Defendant renews its motion to dismiss,
advancing a number of arguments for why, notwithstanding the amendment, the
complaint is still deficient. This time, Defendant’s arguments all fail—at least for
purposes of the motion to dismiss.
First, Defendant argues that it is not a “servicer” for purposes of § 38-40-103(2)
because Colorado law does not include in the definition of “servicer” those entities that
both hold an underlying promissory note for a mortgage and manage the payments
on that note. Defendant does not support its argument with any common-sense
explanation as to why the Colorado legislature would exempt from a law regulating
7
“servicers” those entities that also happened to hold the note they are servicing.
Rather, Defendant points to two portions of the Colorado Revised Statutes that appear
to assume that servicers are entities separate and apart from note holders: the first
authority states that “‘[s]ervicer’ means a person who collects . . . payments on behalf
of a holder,” Colo. Rev. Stat. § 38-40-103.5(e)(I) (emphasis added), and the second
applies certain requirements on “[a]ny person who regularly engages in the collection
of payments on mortgages and deeds of trust for owners of evidences of debt,” Id.
§ 38-40-103(1)(a)(I) (emphasis added).
Defendant’s argument fails because its reliance on these authorities is
misplaced. The first authority does define servicer as a person who collects payments
“on behalf of a holder,” but the very next provision states that the definition of servicer
“includes: [t]he person or entity to whom payments are to be sent, as listed on the most
recent billing statement or payment coupon provided to the borrower.” Colo. Rev. Stat.
§ 38-40-103.5(e)(II)(A). Defendant does not dispute that it is “the person or entity
to whom payments” for Plaintiffs’ mortgage “[we]re sent.” Defendant is therefore
“include[d]” in the definition of servicer for purposes of § 38-40-103(3).
Further, the scope of the actors regulated by Defendant’s second authority, Colo.
Rev. Stat. § 38-40-103(1)(a)(I), is irrelevant for present purposes. To be sure, that
authority regulates collectors who work for “owners of evidences of debt;” but the statute
at issue in this case specifically applies to the “servicer of a loan.” Colo. Rev. Stat.
§ 38-40-103(2). Plaintiffs do not appear to bring a claim under Colo. Rev. Stat. § 38-40-
8
103(1)(a)(I), 5 and for the reasons just explained, the definition of servicer in § 38-40103(3) includes those, like Defendant, who are sent mortgage payments. 6
Next, Defendant argues that this Court should interpret § 38-40-103 as coextensive in scope with the federal RESPA. Thus, because this Court has determined
that the failure to respond to an inquiry related to loss mitigation does not constitute a
violation of the federal RESPA, Defendant argues that the same should hold true for
violations of Colorado’s version of the same law.
This argument fails for a number of reasons. As an initial matter, Defendant cites
no authority for its position that the Colorado legislature intended § 38-40-103(2) to
perfectly mirror RESPA. Further, the language in the Colorado statute—which, again,
requires Defendant to respond to a request “for information concerning the debtor’s
loan”—is more expansive than the language in RESPA in that it does not limit inquiries
that require a response to those relating to the “servicing” of the loan, as that term is
more narrowly defined in RESPA. Finally, a question about loan mitigation is plausibly
for information “concerning the . . . loan” under the broadly-worded Colorado statute.
5
Plaintiffs reference § 38-40-103(1)(a)(I) at one point in the amended complaint (Doc. # 36,
¶ 19), but the thrust of the briefing and analysis in the complaint focuses § 38-40-103(2).
6
Defendant suggests that this construction violates the canon against surplusage because
it renders superfluous the language “on behalf of the holder” in § 38-40-103.5(e)(I). This
argument also fails. The “preference for avoiding surplusage constructions is not absolute.”
Lamie v. U.S. Tr., 540 U.S. 526, 536 (2004). Further, “the canon against surplusage has
substantially less force when it comes to interpreting a broad residual clause.” Begay v. United
States, 553 U.S. 137, 153 (2008) (Scalia, J., concurring). Here, this Court will not blindly obey
this statutory-interpretation canon in order to create a loophole for mortgage servicers who are
also holders of notes, especially when the Colorado legislature, in a provision that comes just
after the “on behalf” language, appended a commonsense additional definition that “includes”
all entities that “are to be sent” mortgage payments. Colo. Rev. Stat. § 38-40-103.5(e)(II)(A).
This residual catch-all definition takes all the force out of Defendant’s surplusage argument.
9
Lastly, Defendant suggests that Plaintiffs’ Colorado RESPA claim fails because
the information requested was not “readily available to the servicer” or would require a
response that constituted “the rendering of legal advice.” Defendant makes a related
argument that Plaintiffs’ claim fails because they cannot meet their burden, pursuant to
Colo. Rev. Stat. § 38-40-104(1), of showing that they suffered “actual damages” as the
result of the failure to respond.
All of these arguments fail for purposes of the motion to dismiss—where Plaintiffs
need only deploy enough factual support to “nudge [their] claims across the line from
conceivable to plausible.” Twombly, 550 U.S. at 570. First, Plaintiffs have plausibly
stated that the information Plaintiffs requested was readily available and would not
constitute legal advice: Plaintiffs have alleged (and Defendant does not dispute) that
Defendant had access to the regulations for FHA loans referenced in Plaintiffs’ letter.
Further, Plaintiffs have plausibly suggested that the answer to the principal
question Plaintiffs asked—“have you engaged in loss mitigation?”—was a simple oneword response—“no,”—that could have been easily provided. Finally, Plaintiffs have
plausibly stated that a forthright “no” from Defendant might have stopped or changed
the outcome of their foreclosure: as Plaintiffs allege, a “no” response would have
constituted a plausible violation of the terms of Plaintiffs’ FHA-backed loan and might
have forced Defendant to change course from pursuing a foreclosure, rather than
openly admit to the potential regulatory violation.
To be sure, Defendant raises good arguments that might undermine Plaintiffs’
position for why this claim could ultimately survive a motion for summary judgment.
10
For example, Defendant notes that it is uncertain that a simple response of “no” to
Plaintiffs’ questions about loss mitigation would have would have forced Defendant
to alter from their plan of foreclosing on Plaintiffs’ home. Defendant also points to the
fact that many of the damages allegedly caused by the failure to respond might be more
properly attributed to the entirety of the foreclosure proceeding and other financial
stresses Plaintiffs were enduring at the time.
These arguments may present problems for Plaintiffs on summary judgment.
Nevertheless, at this early stage of the proceedings, discovery is needed to determine
how the plausible counterfactual suggested by Plaintiffs could have unfolded.
C.
COLORADO CONSUMER PROTECTION ACT
Plaintiffs have also amended their claim under the Colorado Consumer
Protection Act (CCPA). To plead a claim under the CCPA, Plaintiffs must in part allege
Defendant “engaged in an unfair or deceptive trade practice.” Rhino Linings USA, Inc.
v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142, 146–47 (Colo. 2003). On review of
this claim in considering the first motion to dismiss, this Court determined that it failed
because Plaintiffs had not sufficiently explained how Defendant’s conduct was
deceptive in nature. Christenson, 2013 WL 5291943, at *19-20. Now, the problem
seems to be quite the opposite: Plaintiffs have advanced a hydra-headed theory of
the Defendant’s deceptive practices that this Court does not comprehend.
The Court has lost count as to how many different potential aspects there are to
Plaintiffs’ theory of Defendant’s deception. First, Defendant is deceptive by employing
maneuvers “both by affirmative statement and omission, that enables it to take people’s
11
homes, utilizing non-judicial foreclosure, when the contract does not entitle it to do so.”
(Doc. # 44 at 10.) Another aspect of this theory is Defendant’s deceiving of the “FHA
into thinking it engages in loss mitigation as required by FHA regulations,” which also
requires Defendant to “solicit and receive applications for loss mitigation which requires
deceiving consumers into believing they would be fairly evaluated so that homeowners
like Plaintiffs will take the time and energy to send complex but useless applications to
Defendant.” (Id. at 11.) Finally, as part of this scheme, “Defendant had to deceive the
trustee into believing it is entitled to foreclose for the trustee to act.” (Id. at 10.)
The allegations recited in the above paragraph are insufficient “to ensure that
a defendant is placed on notice of [its] alleged misconduct sufficient to prepare an
appropriate defense.” Kansas Penn Gaming, 656 F.3d at 1214. 7
Further, the allegations of fraud advanced by Plaintiffs are normally subject to
a heightened pleading requirement defined in Rule 9 of the Federal Rules of Civil
Procedure which states that “[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.” To survive a motion
to dismiss, an allegation of fraud must “set forth the time, place, and contents of the
false representation, the identity of the party making the false statements and the
consequences thereof.” Midgley v. Rayrock Mines, Inc., 374 F. Supp. 2d 1039, 1047
(D.N.M. 2005) (quoting Schwartz v. Celestial Seasonings, Inc., 124 F.3d 1246, 1252
7
Further, the above-quoted allegations, which the Court has pulled from Plaintiffs’ Response
to the Motion to Dismiss, present what is only a marginally more coherent narrative of the more
wide-ranging deceptive scheme alleged in the second amended complaint itself. In short, much
more road-mapping must be done by Plaintiffs on this claim—in the operative pleading rather
than in briefing—before they are entitled to discovery on it.
12
(10th Cir. 1997)). Because Plaintiffs do not meet the pleading standard outlined in Iqbal
and pursuant to Rule 8, Plaintiffs cannot meet this heightened standard. 8
This Court will permit Plaintiffs one last opportunity to cure this defect. If Plaintiffs
wish to raise this claim again in another amended complaint, they must:
1. Identify the legal obligations that apply to Defendant and are relevant to
this claim.
2. Point to specific statutory or regulatory provisions that give rise to these
legal obligations and explain concretely exactly what Defendant must
allegedly do to comply with those provisions.
3. Narrate the circumstances under which Defendant violated these legal
obligations when administering Plaintiffs’ loan (if applicable). This narration
should include approximate dates, approximate locations, key actors, and
sufficient additional context (i.e., exactly what was said, how it was a
misrepresentation, etc.). 9
4. Provide sufficient detail and factual support explaining how Defendant’s
misrepresentations are seemingly systemic or at least apply to large
numbers of Coloradoans. This Court is particularly concerned about
the dearth of factual support related to Plaintiffs’ claims of Defendant’s
systemic violations.
8
Plaintiffs rely on Judge Krieger’s opinion in Martinez et al. v. Nash Finch Company, No. 11-cv2092 (D. Colo. Aug. 13, 2012) (Doc. # 57), for the proposition that they need not provide more
detail about the time, place, and contents of the false representation. Plaintiffs’ reliance on
Martinez is misplaced as the false representation at issue in that case—which involved a
misleading advertisement that guaranteed a ten-percent discount that was in fact a ten-percent
increase in the price of goods—was a much simpler scheme than the one suggested in
Plaintiffs’ briefing.
9
As a concrete example of how Plaintiffs’ claim in present form is too vague, consider the
following statement in the Response to the Motion to Dismiss, where Plaintiffs argue that
“Defendant is aware of the exact language used in the correspondence to trustees, in reporting
to FHA, and in contacts with Courts and to borrowers.” (Doc. # 42 at 12.) Plaintiffs should set
forth the exact language used in the correspondence, rather than providing a vague allegation
that Defendant already knows what this is about and is merely hiding the ball.
13
Until Plaintiffs advance a coherent and particularized theory of liability for this claim,
it is difficult for this Court to fairly assess its validity. This claim is therefore dismissed
without prejudice. 10
III. CONCLUSION
For the foregoing reasons, it is ORDERED that Plaintiffs’ Motion for
Reconsideration (Doc. # 35) is DENIED and Defendant’s Motion to Dismiss (Doc. # 37)
is GRANTED IN PART AND DENIED IN PART. It is
FURTHER ORDERED that Plaintiffs’ CCPA claim is DISMISSED WITHOUT
PREJUDICE. It is
FURTHER ORDERED that Defendant’s Motion to Dismiss the claim related to
Colorado Revised Statute § 38-40-103 is DENIED. It is
FURTHER ORDERED that, should Plaintiffs wish to file an Amended Complaint
with respect to the CCPA claim, an Amended Complaint shall be filed no later than
October 7, 2014.
DATED: September
16
, 2014
BY THE COURT:
________________________________
CHRISTINE M. ARGUELLO
United States District Judge
10
Defendant raises a number of additional arguments that could plausibly call into question
many aspects of the alleged deceptive practices discussed by Plaintiffs in their amended
complaint and related briefing. The Court declines to address these arguments at this time:
it is difficult to assess the validity of Defendant’s arguments in light of the general incoherence
of Plaintiffs’ theory. Nevertheless, Plaintiffs should take account Defendants’ arguments in
considering to plead another amended claim under the CCPA.
14
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