Goldman v. Aurora Loan Services, LLC et al

Filing 27

ORDER denying Defendants' 25 Motion to Strike. Defendants' Renewed Motion to Dismiss 20 as to Plaintiff's RESPA claim (Count III) is DENIED. Defendants' Renewed Motion to Dismiss 20 as to Plaintiff's claims for fraud an d fraud in the inducement (Count IV) and request for punitive damages (Count VII) is GRANTED. Plaintiff has stated a claim for violation of RESPA with regard to the QWR. This is Plaintiff's sole viable claim in this action, as all other claims have been dismissed, either by the Court's previous Order 17 or by this Order. Signed by Judge Richard W. Story on 8/29/11. (cem)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
HELEN C. GOLDMAN,
Plaintiff,
v.
AURORA LOAN SERVICES,
LLC, and MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC.,
Defendants.

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CIVIL ACTION NO.
1:09-CV-3337-RWS

ORDER
This case comes before the Court on Defendants’ Renewed Motion to
Dismiss Plaintiff’s (Amended) Complaint for Damages [20], and Defendants’
Motion to Strike Plaintiff’s Opposition to Motion to Dismiss [26]. After
considering the record, the Court enters the following order.
Background
This case arises out of Plaintiff’s March 4, 2004 refinancing of the
property located at 6476 Bellevue Drive, S.W., Conyers, Georgia 30094.
Plaintiff “is an elderly, financially unsophisticated woman, who relied on the
broker, the lender, and the closing attorney to deal fairly and honestly with her

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and to get her the best possible loan.” (Dkt. [19] at ¶ 22). Plaintiff asserts that
she was solicited by agents for Source Financial, a mortgage broker, to apply
for an adjustable rate, no document loan with Aegis Wholesale Corporation, the
original lender. (Id. at ¶ 14). She alleges that the Good Faith Estimate and
Truth in Lending disclosures provided to her by Source Financial did not
disclose that she was being charged “thousands of dollars in hidden yield spread
premiums, higher interest rates, and higher loan costs than her credit score
warranted.” (Id. at ¶ 16). Plaintiff alleges that she was a victim of predatory
lending and that an adjustable-rate, interest-only loan was not appropriate for
her. (Id. at ¶¶ 23, 24). In addition to a loan inappropriate for her credit score,
Plaintiff also alleges that “Defendants’” appraisal overvalued her home by
approximately $125,000. (Id. at ¶ 27).
Plaintiff alleges that she was not given the HUD Settlement Statement or
Truth In Lending statement sufficiently prior to closing, and when at closing
Plaintiff questioned the accuracy of some of her financial information that
appeared on closing documents, the closing attorney just gave her more
documents and told her to sign them. (Id. at ¶¶ 18, 20, 25). Plaintiff asserts that
because of “Defendants’ failure” to provide Truth in Lending disclosures as
required, she was entitled to rescind the loan and exercised her right to do so,
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but Defendants failed to take actions to respond appropriately to the rescission
notice. (Id. at ¶¶ 33-35). Rather, on October 2, 2009, Plaintiff received a letter
and a Notice of Foreclosure Sale. (Id. at ¶ 37, Dkt. [1-8]). The letter listed
Defendant Aurora Loan Services, LLC (“Aurora”) as the loan servicer and
Defendant Mortgage Electronic Registration Systems, Inc. (“MERS”) as the
creditor. (Id.). Neither Defendant was an original party to Plaintiff’s
refinancing.
On October 13, 2009, Plaintiff asserts that she sent a qualified written
request (“QWR”) to Aurora requesting a copy of the original note, any allonges,
assignments of security deed, and a copy of Aurora’s proof of right to service
the loan, but Aurora failed to timely respond. (Id. at ¶ 38, 39). Plaintiff asserts
that neither Aurora nor MERS is listed on the allonge, that it is undated, and is
signed by an individual who did not hold the position at the original lender that
is asserted on the allonge. (Id. at ¶¶ 42-44).
Plaintiff asserts that while Aurora claims to be the servicer, there is no
indication as to who it is serving the loan for. (Id. at ¶ 45). MERS is not a
lender and does not hold the note, but is rather the nominee for the original
lender, Aegis, and does not have the right to foreclose, claims Plaintiff. Based
upon these allegations, Plaintiff asserts causes of action for violations of the
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Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq. (Counts I, II), the Real
Estate Settlement Procedures Act of 1974 (“RESPA”), 12 U.S.C. § 2601 et seq.
(Count III), the Georgia Fair Business Practices Act (“FBPA”), O.C.G.A. § 102-390 et seq. (Count V), the Unfair or Deceptive Practices Toward the Elderly
Act (“UDPTA”), O.C.G.A. § 10-1-850 et seq. (Count VI), and for fraud and
fraud in the inducement (Count IV), and seeks punitive damages (Count VII) in
addition to other relief.
By prior Order [17] of the Court, Counts I, II, V, and VI were dismissed
pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be
granted. The Court, having dismissed these claims, will not consider Plaintiff’s
reassertion of Counts I, II, V, and VI in her Amended Complaint for Damages
[19]. By prior Order [17], the Court denied Defendants’ Motion to Dismiss as
to one aspect of Count III under RESPA, and as to Counts IV for fraud and
fraud in the inducement, and Count VII as to punitive damages. The Court
afforded Plaintiff an opportunity to file an amended Complaint in order to
satisfy F.R.C.P. 9(b) that fraud be plead with particularity. Further, the Court
stated that “[f]ollowing Plaintiff’s filing of an amended complaint . . .
Defendants may renew their motion to dismiss Plaintiff’s fraud claims.” (Dkt.
[17] at 13).
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Plaintiff filed an Amended Complaint for Damages [19] on October 8,
2010. Defendants filed a Renewed Motion to Dismiss [20] on October 22,
2010. Plaintiff’s Response [24] was filed on November 17, 2010. Defendants’
Motion to Strike [26] was filed on November 29, 2010.
Discussion
I.

Defendant’s Motion to Strike [26]
Defendants move the Court to strike Plaintiff’s Response [24] as

untimely. Defendants’ Motion to Dismiss [20] was filed on October 22, 2010.
Local Rule 7.1 required that Plaintiff’s Response to Defendants’ Motion to
Dismiss be filed within 14 days. Plaintiff filed a Motion for Extension of Time
[21] on November 6, 2010 requesting an extension to November 15, 2010 to
respond. On November 15, 2010 the Court issued an Order [23] granting
Plaintiff’s Motion for Extension of Time [21]. Plaintiff was afforded until
November 15, 2010 to file her response. Therefore, Plaintiff’s Response [24]
filed on November 17, 2010 was untimely. Although the Court recognizes the
merit of Defendants’ Motion to Strike [26], Defendants have not been
prejudiced by the filing of said Response. In the interest of deciding this case
on its merits, Defendants’ Motion to Strike [26] is DENIED.

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II.

Defendants’ Renewed Motion to Dismiss [20]
A.

Standard for Motion to Dismiss

Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain a
“short and plain statement of the claim showing that the pleader is entitled to
relief.” While this pleading standard does not require “detailed factual
allegations,” “labels and conclusions” or “a formulaic recitation of the elements
of a cause of action will not do.” Ashcroft v. Iqbal, 556 U.S. ----, 129 S. Ct.
1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). In order to
withstand 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.’”
Id. (quoting Twombly, 550 U.S. at 570). A complaint is plausible on its face
when the plaintiff pleads factual content necessary for the court to draw the
reasonable inference that the defendant is liable for the conduct alleged. Id.
At the motion to dismiss stage, “all-well pleaded facts are accepted as
true, and the reasonable inferences therefrom are construed in the light most
favorable to the plaintiff.” Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273
n.1 (11th Cir. 1999). However, the same does not apply to legal conclusions set
forth in the complaint. Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260
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(11th Cir. 2009) (citing Iqbal, 129 S. Ct. at 1949). “Threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Iqbal, 129 S. Ct. at 1949. The court does not need to “accept as true a
legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555.
B.

Plaintiff’s RESPA Claim (Count III)

By prior Order [17], the Court dismissed Plaintiff’s claim that Aurora
violated RESPA by failing to notify her of the transfer of servicing of the loan.
Therefore, Plaintiff’s reassertion of her RESPA claim in her Amended
Complaint [19] on that basis will not be addressed. The second basis for
Plaintiff’s RESPA claim is Aurora’s alleged failure to respond to a QWR she
sent to Aurora on October 13, 2009.
RESPA mandates that if a servicer of a federally related mortgage loan
receives a QWR from the borrower for information relating to the servicing of
such loan, the servicer shall acknowledge receipt within 20 days and take any
necessary action within 60 days. 12 U.S.C. §§ 2605(e)(1)(A), (e)(2). A QWR
is written correspondence that “includes a statement of the reasons for the belief
of the borrower, to the extent applicable, 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)(B)(ii) (emphasis added). Plaintiff’s asserted
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QWR is entitled a “Debt Validation Notice” pursuant to the Fair Debt
Collection Practices Act. Defendants assert that Plaintiff’s letter, is “by its own
terms, not a QWR under RESPA.” (Dkt. [5-1] at 14 (emphasis omitted)).
However, Defendants’ argument neglects the actual contents of the letter, which
inter alia, states:
Please provide a payment history for the life of the alleged dept
[sic], per the provisions of the Truth in Lending Act, and RESPA,
as this communication is considered a “Qualified Written
Request.”
Note: This is the 2nd Qualified Request for this information,
leaving Aurora Loan Services, currently in violation of Federal
Law, as the information was not received within the specified time
constraints of the law.
(Dkt. [1-9] at ¶ 8). Defendants allege that Plaintiff’s letter was not a QWR
because it did not set forth any reasons for why the account was in error, but
Defendants fail to recognize that the definition of a QWR is disjunctive and also
“includes a statement . . . [that] provides sufficient detail to the servicer
regarding other information sought by the borrower.” 12 U.S.C. §
2605(e)(1)(B)(ii).
In addition to arguing that Plaintiff’s letter was not a QWR, Defendants
argue that Plaintiff failed to deliver the letter to any of the three addresses
provided in the Notice of Transfer: (1) the Customer Care Department in
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Scottsbluff, Nebraska; (2) the Tax Department in Dallas, Texas; or (3) the
Insurance Center in Van Nuys, California. Instead, Plaintiff sent the QWR to
Aurora’s corporate headquarters in Littleton, Colorado. The Code of Federal
Regulations provides that: “[b]y notice either included in the Notice of Transfer
or separately delivered by first-class mail, postage prepaid, a servicer may
establish a separate and exclusive office and address for the receipt and
handling of qualified written requests.” 24 C.F.R. § 3500.21(e)(1) (emphasis
added). Although a loan servicer is permitted under RESPA to designate a
separate and exclusive address for a QWR, Defendants’ argument fails because
none of the addresses provided in the Notice of Transfer are designated as a
“separate and exclusive office and address for the receipt and handling of
qualified written requests.” Id.
Plaintiff’s Complaint adequately sets forth a RESPA claim for failure to
respond to a QWR. Count III of Plaintiff’s Amended Complaint makes it clear
that the alleged violation was committed by Aurora and specifies the conduct
that constitutes the violation. Therefore, Defendants’ Renewed Motion to
Dismiss [20] is DENIED as to Plaintiff’s RESPA claim for failure to respond to
a QWR.

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C.

Plaintiff’s Claim of Fraud and Fraud in the Inducement (Count IV)

Plaintiff alleges that MERS is liable for the fraud of the original lender
Aegis, as an assignee of Aegis. (Dkt. [19] at ¶¶ 75, 76). “In alleging fraud or
mistake, a party must state with particularity the circumstances constituting
fraud or mistake. Malice, intent, knowledge, and other conditions of a person's
mind may be alleged generally.” Fed. R. Civ. P. 9(b). A complaint that is
“devoid of specific allegations with respect to each defendant” fails to meet the
particularity standard of Rule 9(b). Ambrosia Coal & Const. Co. v. Pages
Morales, 482 F.3d 1309, 1317 (citation omitted). “In a case involving multiple
defendants the complaint should inform each defendant of the nature of his
alleged participation in the fraud.” Id. (citation omitted). The requirement of
pleading fraud with particularity necessitates that a Plaintiff set forth:
(1) precisely what statements were made in what documents or oral
representations or what omissions were made; (2) the time and place of
each such statement and the person responsible for making (or in the case
of omissions, not making) same; (3) the content of such statements and
the manner in which they misled the plaintiff; and (4) what the
defendants obtained as a consequence of the fraud.
Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1362, 1371 (11th
Cir. 1997).

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Plaintiff’s basis for asserting that MERS is liable for the fraud of Aegis is
that MERS is an assignee of Aegis. This claim is not factually supported in the
record. (Dkt. [19] at ¶ 67). MERS is not an assignee of Aegis, but rather, per
the terms of the Security Deed, a nominee of Aegis and its assigns that may
exercise the right to foreclose. Moreover, Plaintiff fails to satisfy the specificity
requirements for pleading a claim of fraud as against either of the Defendants.
Plaintiff asserts that she “alleged facts showing that [ ] Aegis, Source Financial,
the appraiser, and the closing attorney engaged in fraudulent acts by deceptively
convincing Plaintiff that it was in her benefit to apply for a high-risk loan, by
misrepresenting the true cost of the loan to the Plaintiff, by listing Plaintiff’s
income and assets as more than they were, and by providing an inflated
appraisal.” (Dkt. [24] at 3). Even assuming the veracity of Plaintiff’s claims,
the acts she alleges as the basis of her fraud claim were undertaken by Aegis,
Source Financial, the appraiser, and the closing attorney. None of these
individuals are a party to the action.
As the basis for her claim for fraud and fraud in the inducement (Count
IV), Plaintiff asserts that “Defendant MERS claims to be the creditor and as
such is liable to Plaintiff for the actions of its assignor, Aegis.” (Dkt. [19] at ¶
67). But as noted above, MERS is not legally responsible for the acts of Aegis,
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because it is not an assignee of Aegis. Plaintiff’s claim for fraud and fraud in
the inducement fails to state a claim as a matter of law. Defendants’ Renewed
Motion to Dismiss [20] as to Count IV of Plaintiff’s Amended Complaint [19]
is GRANTED.
D.

Plaintiff’s Claim for Punitive Damages (Count VII)

Plaintiff’s request for punitive damages is based upon her allegations of
fraud and fraud in the inducement. Punitive damages may be awarded only
where a “defendant’s actions show willful misconduct, malice, fraud,
wantonness, oppression, or conscious indifference to consequences.” O.C.G.A.
§ 51-12-5.1(b). Because the Court has dismissed Plaintiff’s claim for fraud and
fraud in the inducement for failure to state a claim, Defendants’ Renewed
Motion to Dismiss [20] as to Count VII of Plaintiff’s Amended Complaint [19]
is GRANTED.
Conclusion
For the aforementioned reasons, the Defendants’ Motion to Strike [26] is
DENIED. Defendants’ Renewed Motion to Dismiss [20] as to Plaintiff’s
RESPA claim (Count III) is DENIED. Defendants’ Renewed Motion to
Dismiss [20] as to Plaintiff’s claims for fraud and fraud in the inducement
(Count IV) and request for punitive damages (Count VII) is GRANTED.
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Plaintiff has stated a claim for violation of RESPA with regard to the QWR.
This is Plaintiff’s sole viable claim in this action, as all other claims have been
dismissed, either by the Court’s previous Order [17] or by this Order.

SO ORDERED, this 29th day of August, 2011.

_______________________________
RICHARD W. STORY
UNITED STATES DISTRICT JUDGE

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