Rios et al v. Rushmore Loan Management Services, LLC

Filing 23

ORDER AND OPINION granting in part and denying in part 7 Motion to Dismiss for Failure to State a Claim. Amended Complaint due by 8/4/2017. Signed by Judge Kenneth A. Marra on 7/23/2017. (ir)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 16-81973-CIV-MARRA/MATTHEWMAN
MIGUEL RIOS AND
SHIRLEY H. RIOS,
Plaintiffs,
vs.
RUSHMORE LOAN
MANAGEMENT SERVICES, LLC,
Defendant.
__________________________/
ORDER AND OPINION ON MOTION TO DISMISS OR ABATE
THIS CAUSE is before the Court upon Defendant Rushmore Loan Management
Services, LLC’s Motion to Dismiss or, Alternatively, Motion to Abate Pending Outcome
of State Court Litigation [DE 7]. The Court has carefully considered the Complaint (DE
1), the motion (DE 7), response (DE 11), notice of filing exhibit (DE 8), and
supplemental authority (DE 17). No reply has been filed.
INTRODUCTION
Plaintiffs Miguel Rios and Shirley Rios (“Plaintiffs”) bring this suit against
Rushmore Loan Management Services, LLC (“Defendant”), a mortgage servicer, for
alleged violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692(e)
(“FDCPA) (Count I), and the Real Estate Settlement Procedures Act, 12 U.S.C. §§
2605(k)(1)(C) and 2605(k)(1)(E) (“RESPA”) (Counts II and III). Plaintiffs allege
Defendant failed to reasonably investigate problems and correct errors with Plaintiffs’

federally related mortgage loan. Defendant moves to dismiss the Complaint arguing it
has not committed any servicing errors in violation of RESPA;1 that Regulation X does
not provide Plaintiffs with a private right of action; that the allegation that Rushmore
violated Regulation X is contradicted by Exhibit O to the Complaint; that the alleged
errors pursuant to Regulation X do not state a valid cause of action for violation of the
statute; and, in the alternative, that the Court should abate this action pending the
outcome of the state court litigation.
LEGAL STANDARD
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires "a short and plain
statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P.
8(a)(2). The Supreme Court has held that "[w]hile a complaint attacked by a Rule
12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's
obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do. Factual allegations must be enough to raise a right to relief above the
speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal
citations omitted).

1

Defendant’s assertions, made throughout its motion, that it did not do what
is alleged, is a denial and not a basis to move to dismiss the complaint or to support
an argument that the claim fails to state a cause of action. A motion to dismiss is not
the proper vehicle to challenge the veracity of a Complaint’s well-pled allegations.
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"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."
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quotations and citations omitted). "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. When considering a motion to dismiss, the Court must accept all of the
plaintiff's allegations as true in determining whether a plaintiff has stated a claim for
which relief could be granted. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).
DISCUSSION
Count I alleges that Defendant violated the FDCPA, 15 U.S.C. § 1692(e)(2)(A),
which prohibits debt collectors from falsely representing the “character, amount, or
legal status of any debt.”2 Plaintiffs allege that Defendant repeatedly claimed that
Plaintiffs were indebted to Defendant for sums which had already been paid by
Plaintiffs, or for fees that were not permitted. By claiming that such sums were due,
Plaintiffs allege that Defendant “made false representations of the character, amount
and legal status of a debt in contravention of the FDCPA.” Compl. ¶ 142.

2

The FDCPA provides as follows:
A debt collector may not use any false, deceptive, or misleading representation or
means in connection with the collection of any debt. Without limiting the general
application of the foregoing, the following conduct is a violation of this section:
...
(2) The false representation of—
(A) the character, amount, or legal status of any debt[.]
15 U.S.C. §§ 1692(e)(2)(A).

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Defendant asserts that this fails to state a cause of action under the FDCPA
because all of the charges to Plaintiffs’ mortgage were authorized pursuant to the
terms of the Note, Mortgage and permanent loan modification. Defendant argues that
the Note and Mortgage specifically authorize the late fees and property inspection
fees, which Note and Mortgage Plaintiffs have not attached to their Complaint.3
The Plaintiffs’ allegations provide specifically what communications were
violative, from whom the communications originated, and how those communications
falsely represented the amount or legal status of the Plaintiffs’ mortgage loan.
Paragraphs 44-47, 100, and 138-150 clearly allege that Plaintiffs were never late on
their payments once the trial modification began, and that Defendant improperly
charged late fees, property preservation fees and property inspection fees that were
not due. The Court finds that the allegations supporting Count I are sufficient to
support a cause of action under § 1692(e)(2)(A) for FDCPA liability. Accordingly,
Defendant’s motion to dismiss Count I is denied.
Count II
RESPA is “a remedial consumer-protection statute,” and as such, it “should be
construed liberally in order to best serve Congress' intent.” See Renfroe v. Nationstar
Mortg., LLC, 822 F.3d 1241, 1244 (11th Cir. 2016); McLean v. GMAC Mortg. Corp., 398

3

Plaintiffs’ FDCPA claim flows, in large part, from the allegation that
Defendant improperly charged late fees to Plaintiffs’ mortgage account when their
loan was current. The Note and Mortgage are not necessary documents to support
this allegation.
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F.App’x 467, 471 (11th Cir. 2010). As relevant to this action, RESPA prohibits
servicers of a federally related mortgage from failing 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.” See 12 U.S.C. § 2605(k)(1)(C). If a servicer fails to
comply with any provision of § 2605, the borrower may sue for damages under RESPA.
See 12 U.S.C. § 2605(f). Counts II and III of the Complaint allege violations of RESPA
premised on Regulation X, 12 C.F.R. part 1024, which implements RESPA and took
effect on January 10, 2014.
Regulation X requires mortgage servicers to investigate and respond to any
written notice from borrowers that asserts an “error” related to the servicing of their
mortgage. See 12 C.F.R. § 1024.35(a)–(e); see also Lage v. Ocwen Loan Servicing LLC,
839 F.3d 1003, 1007 (11th Cir. 2016). Although the types of errors subject to this
provision are limited to certain identified categories, these covered errors are
“broadly defined,” see Nunez v. J.P. Morgan Chase Bank, N.A., 648 F.App’x 905, 907
(11th Cir. 2016) (citing 12 C.F.R. § 1024.35(b)), and Regulation X includes a “residual
category for ‘[a]ny other error relating to the servicing of a borrower's mortgage
loan,’” id. (quoting 12 C.F.R. § 1024.35(b)(11)). In response to a notice of error,
absent exceptions inapplicable here, “the servicer must either correct the errors the
borrower identified and notify the borrower in writing or, after a reasonable
investigation, notify the borrower in writing that it has determined no error occurred
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and explain the basis for its decision.” Lage, 839 F.3d at 1007 (citing 12 C.F.R. §
1025.35(e)(1)(i)); see also 12 U.S.C. § 2605(e)(2). Generally, a servicer has 30 days to
respond to a notice of error. 12 C.F.R. § 1025.35(e)(3)(i)(C); Lage v. Ocwen Loan
Servicing LLC, 145 F. Supp. 3d 1172, 1188 (S.D. Fla. 2015).
Count II alleges that Defendant violated RESPA at 12 U.S.C. § 2605(k)(1)(C) and
(E) by not complying with 12 C.F.R. 1024.35(d) when it failed to respond sufficiently
to Plaintiffs’ second Notice of Error (“NOE”) (attached to the Complaint as Exhibit M
(DE 1-13)) by not addressing the error asserted and not taking the corrective action
that a reasonable investigation would have otherwise shown was necessary. Compl.
¶¶ 152-154, Ex. M.
Defendant argues that Count II fails to state a cause of action because (1)
Regulation X does not provide Plaintiffs with a private right of action; (2) the claim
that Defendant failed to reasonably investigate and correct the concerns raised in
Plaintiffs’ second NOE is contradicted by Exhibit O attached to the complaint; and (3)
Defendant complied with Regulation X, which only requires Defendant to conduct a
reasonable investigation into Plaintiffs’ claims and communicate to Plaintiffs the
reasons Defendant concluded that there has not been a servicing error.
Defendant cites no authority for its first argument, that Plaintiffs’ RESPA claim
fails because Regulation X does not provide borrowers with a private right of action.
The plain language of the Regulation states the exact opposite however. “Whoever
fails to comply with any provision of this section shall be liable to the borrower for
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each such failure in the following amounts . . .” 12 U.S.C. § 2605(f); see also, Lage v.
Ocwen Loan Servicing LLC, 839 F.3d 1003, 1007 (11th Cir. 2016) (“[i]f the servicer fails
to respond adequately to the borrower's notice of error, then the borrower has a
private right of action to sue the servicer under RESPA”); Renfroe v. Nationstar
Mortg., LLC, 822 F.3d 1241, 1245-46 (11th Cir. 2016) (RESPA makes violators liable to
individual borrowers for any actual damages to the borrower and any additional
damages as the court may allow); Berene v. Nationstar Mortgage LLC, 2016 WL
3787558, at *2 (S.D. Fla. 2016).
Next Defendant argues that it complied with Regulation X, which only requires
it to conduct a reasonable investigation into Plaintiffs’ claims and communicate to
Plaintiffs the reasons it concluded that there has not been a servicing error.
Defendant further asserts that Plaintiffs’ claim that it failed to reasonably investigate
and correct the concerns raised in Plaintiffs’ second NOE (DE 1-13, Ex. M) is
contradicted by Exhibit O (DE 1-15) to the complaint, which is a copy of Defendant’s
response to Plaintiffs’ second NOE.
Plaintiffs respond that their requests asked for explanations of a narrow set of
fees and charges, including the basis for those charges as levied on Plaintiffs’
mortgage account, and in some cases asked for the receipts and invoices to support
those fees and charges. Plaintiffs allege that despite those specific requests,
Defendant did not explain any of the charges as requested, nor did the purported
breakdown provide any evidence or support for any of the charges alleged as due on
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Plaintiffs’ mortgage loan account. Compl. ¶¶ 62, 64, 102, 105, 122, 125, 153.
Accepting these allegations as true, they are sufficient to support a plausible claim
under RESPA. The determination of whether a reasonably sufficient investigation
occurred requires additional factual determinations that are not appropriate on a
motion to dismiss. See Renfroe v. Nationstar Mortg., LLC, 822 F.3d 1241, 1245 (11th
Cir. 2016) (“In reviewing Rule 12(b)(6) motions, courts are bound to accept the
plaintiff's allegations as true and to construe them in the light most favorable to her.
[The defendant] asks us to do the opposite. [The defendant] suggests we should
accept its contrary allegations—that it conducted a reasonable investigation into [the
plaintiff's] account and found no error—and then to grant its motion to dismiss on that
basis. We decline to do that.”). Accordingly, Defendant’s motion to dismiss Count II
must be rejected.
Count III
Count III alleges that Defendant violated RESPA at 12 U.S.C. § 2605(k)(1)(E) by
not complying with 12 C.F.R. 1024.36(c) and 12 C.F.R. 1024.36(d)(2)(i)(B) in that
Defendant “did not provide compliant responses to the requests for information, and
specifically failed to provide an accurate and up-to-date payoff request made
pursuant to 12 C.F.R. 1026.36(c)(3), within the required timeframe.” Compl. ¶ 156.
When a borrower requests information from a loan servicer, Regulation X
provides that the loan servicer shall provide “a written response acknowledging
receipt” of that request within five days of receiving the request. 12 C.F.R. §
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1024.36(c);4 Meeks v. Ocwen Loan Servicing LLC, 2017 WL 782285, at *1 (11th Cir.
2017). A loan servicer must respond to a request for information, other than
information about the identity and contact information of the owner or assignee of a
mortgage, within 30 days (excluding legal public holidays, Saturdays, and Sundays) of
receiving the request. 12 C.F.R. § 1024.36(d)(2)(i).
There are no allegations in Count III, or anywhere in the Complaint for that
matter, that any of Defendant’s responses to Plaintiffs’ requests for information were
untimely. Therefore, no claim is stated for violations of 12 C.F.R. 1024.36(c) and 12
C.F.R. 1024.36(d)(2)(i)(B). However, 12 C.F.R. § 1026.36(c)(3) is cited in paragraph
156, a regulation under the Truth in Lending Act ("TILA") which imposes the
requirement on servicers of home loans to provide payoff statements to borrowers.
See, 15 U.S.C § 1639(g).

The Truth in Lending Act (TILA), rather than RESPA, imposes the
requirement on servicers of home loans to provide payoff statements to
borrowers. 15 U.S.C § 1639(g). “A creditor or servicer of a home loan
shall send an accurate payoff balance within a reasonable time, but in
no case more than 7 business days, after the receipt of a written request
for such balance from or on behalf of the borrower.”• Id. There is no
similar inclusion of payoff statements in RESPA.

4

Section 1024.36(c) of Regulation X, under the title “Acknowledgment of receipt,” provides

that
Within five days (excluding legal public holidays, Saturdays, and Sundays) of a servicer receiving
an information request from a borrower, the servicer shall provide to the borrower a written
response acknowledging receipt of the information request.
12 C.F.R. § 1024.36(c).

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Bracco v. PNC Mortgage, 2016 WL 4507925, at *5 (M.D. Fla. 2016). According, the
motion to dismiss will be granted as to Count III, with leave to amend should Plaintiffs
wish to assert a claim for violation of TILA, 12 C.F.R. § 1026.36(c)(3), for failure to
provide a payoff statement.
Alternative Motion to Abate
Defendant requests that this Court dismiss this action on the alternative ground
of the Colorado River abstention doctrine. “Generally, as between state and federal
courts, the rule is that the pendency of an action in the state court is no bar to
proceedings concerning the same matter in the Federal court having jurisdiction.”•
Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)
(quotation omitted and alteration adopted). The “obligation of the federal courts to
exercise the jurisdiction given them”•is “virtually unflagging.”• Id. Thus, “Colorado
River abstention is particularly rare.” Jackson-Platts v. Gen. Elec. Capital Corp., 727
F.3d 1127, 1140 (11th Cir. 2013).
“The principles of [the Colorado River] doctrine rest on considerations of wise
judicial administration, giving regard to conservation of judicial resources and
comprehensive disposition of litigation.”• Moorer v. Demopolis Waterworks & Sewer
Bd., 374 F.3d 994, 997 (11th Cir. 2004) (per curiam) (quotation omitted and alteration
adopted). Colorado River abstention applies only “when federal and state
proceedings involve substantially the same parties and substantially the same

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issues.”• Ambrosia Coal & Const. Co. v. Pages Morales, 368 F.3d 1320, 1330 (11th Cir.
2004). If this threshold condition is met, then eight factors are weighed to analyze
the permissibility of abstention, with the balance heavily weighted in favor of the
exercise of jurisdiction. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 16 (1983).
The Court has carefully compared this case to the case pending in state court5
and finds that the two cases are not substantially similar, eviscerating the need to
perform the exercise of weighing the various factors. The state case is brought solely
on behalf of Mrs. Rios, whereas this case is brought by Mrs. Rios and her husband.
More significant, however, is that factually the two cases have nothing to do with one
another. The instant matter concerns alleged servicing errors and Defendant’s
alleged failure to comply with Regulation X servicing requirements. The state court
action, in contrast, is based on allegations that Defendant attempted to collect the
debt directly from Mrs. Rios when it knew that she was represented by counsel.

5

This Court may take judicial notice of public records without converting a
motion to dismiss into a motion for summary judgment. Universal Express, Inc. v. U.S.
S.E.C., 177 F. App’x 52, 53-54 (11th Cir. 2006). In considering Defendant’s Motion to
Abate Pending Outcome of State Court Litigation (as a part of the motion to dismiss),
this Court may, and does in this case, take judicial notice of the Complaint, Shirley
Rios v. Rushmore Loan Management Services, LLC, filed in the County Court of the
15th Judicial Circuit that is attached to Defendant’s Notice of Filing Exhibit A to
Defendant’s Motion to Dismiss or, Alternatively, Motion to Abate Pending Outcome of
State Court Litigation, DE 8. See Myrtyl v. Nationstar Mortg. LLC, Case No.
15-CIV-61206, 2015 WL 4077376, at *1 (S.D. Fla. July 6, 2015) (citing Bryant v. Avado
Brands, Inc., 187 F.3d 1271, 1278 (11th Cir. 1999)).
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It is clear that resolution of the state court case would not leave this Court
with “nothing further to do,”•Moses H. Cone Mem'l Hosp., 460 U.S. at 28, and
therefore the Court has more than a “substantial doubt” about whether this case and
the state court case have substantially similar issues. See Acosta v. James A. Gustino,
P.A., 478 F.App’x 620, 622 (11th Cir. 2012) (finding cases not parallel despite
overlapping issue); Reiseck v. Universal Communications of Miami, Inc., 141 F. Supp.
3d 1295, 1305 (S.D. Fla. 2015). Accordingly, the motion to abate based on the
Colorado River doctrine is denied.
According to the conclusions reached herein, it is hereby
ORDERED AND ADJUDGED that Defendant Rushmore Loan Management
Services, LLC’s Motion to Dismiss or, Alternatively, Motion to Abate Pending Outcome
of State Court Litigation [DE 7] is denied in part and granted in part. It is denied in all
respects except that Count III is dismissed without prejudice. If Plaintiffs wish to
replead Count III to assert a claim under the TILA, an Amended Complaint must be

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filed on or before August 4, 2017.
DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County,
Florida, this 23rd day of July, 2017.
_________________________
KENNETH A. MARRA
United States District Judge

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