Yoder v. MSO Legal Partners, LLC et al
Filing
39
MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 12/8/2017. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
ERIK YODER
:
v.
:
Civil Action No. DKC 16-0900
:
THE O’NEIL GROUP, LLC, et al.
:
MEMORANDUM OPINION
Presently
pending
and
ready
for
resolution
in
this
whistleblower retaliation case are a motion for summary judgment
filed by Defendants The O’Neil Group, LLC, MSO Legal Partners,
LLC,
and
William
O’Neil
(collectively,
“Defendants”)
and
a
motion for leave to file a surreply filed by Plaintiff Erik
Yoder (“Plaintiff”).
(ECF Nos. 33; 38).
The issues have been
fully briefed, and the court now rules, no hearing being deemed
necessary.
Local Rule 105.6.
For the following reasons, the
motions will be denied.
I.
Background
A.
Factual Background1
The O’Neil Group, LLC (“TOG”) was formed in 2011 to perform
foreclosure work for MCM Capital Partners, LLC (“MCM”), and its
related mortgage loan servicer BSI Financial (“BSI”).
33-2 ¶ 1; 36-2, at 8, 10).
1
(ECF Nos.
TOG created a national network of
Unless otherwise noted, the facts outlined here are
undisputed and construed in the light most favorable to
Plaintiff.
law firms to handle the legal work arising from MCM’s purchase
of
non-performing
investors.
mortgage
debts
on
(ECF No. 33-2 ¶ 1).
behalf
of
third-party
TOG hired the law firms,
oversaw their work, and reviewed and approved invoices for the
work that were then submitted to the loan servicer BSI.
The
standards
for
approval
or
rejection
of
(Id.).
invoices
provided by BSI to be implemented by Defendants.
were
(Id. ¶ 2).
BSI policy was that costs were to be billed as incurred and not
marked up.
(Id. ¶ 6).
In addition, BSI policy limited the
payment for title work to $350 for a full report and $175 for a
title update – known as the “allowable amount.” (ECF Nos. 33-2
¶¶ 2, 6; 33-5 ¶ 1; 36-7 ¶ 9).
law firms.
After BSI paid TOG, TOG paid the
(ECF No. 33-2 ¶ 1).
In late 2013, Defendant O’Neil and Terry Shanahan formed a
new
entity,
MSO
Legal
Partners,
LLC
(“MSO”),
foreclosure referrals in Maryland from BSI.
36-2, at 20, 25).
Defendants
handle
(ECF Nos. 33-2 ¶ 3;
In order to keep costs down, MSO used TOG
personnel for its staff.
2013,
to
hired
(ECF No. 33-2 ¶ 3).
Plaintiff,
an
In September
experienced
attorney, to run the foreclosure practice at MSO.
foreclosure
(ECF Nos. 33-
2 ¶¶ 4, 5; 36-2, at 24; 36-3, at 27-29; 36-5, at 9).
While
conducting an audit in early June 2014 to be filed in a mortgage
foreclosure
Defendants’
case
(the
administrative
“Windon
personnel
2
case”),
to
Plaintiff
provide
him
asked
with
the
relevant title report and title update invoices.
¶¶ 10, 12).
(ECF No. 36-7
Instead of providing the invoices as requested,
Sally Shanahan, an administrative employee and Mr. Shanahan’s
wife,
informed
Plaintiff
that
Defendants
billed
the
full
allowable amounts of $350 per title report and $175 per title
update.
employee,
(Id. ¶ 12).
confirmed
Kristin Ferraro, another administrative
that
information.
(Id.).
In
order
to
obtain the actual costs for title reports and updates in the
Windon case, Plaintiff contacted All Star Title, the company
that performed title reports and title updates in Defendants’
foreclosure cases.
Plaintiff was informed that All Star Title
billed $150 per title report until April 2014 when the price
increased to $250 per title report.
per title update.
(Id.).
All Star Title billed $15
With that information, Plaintiff
realized that Defendants had been billing BSI more than double
the actual cost for title reports and over 11 times the actual
cost for title updates.
Plaintiff
that
Defendants
(Id.).
billed
Mrs. Shanahan later informed
BSI
for
title
work
before
Defendants received any invoices from All Star, that BSI took 30
days to process and pay bills after receipt, and that Defendants
needed payments more quickly in order to pay their own expenses.
(Id. ¶ 14).
On June 12, 2014, Plaintiff sent an email to Mr. O’Neil
notifying him of the overbilling of costs and expressing his
3
belief that the practice was unlawful.
7 ¶ 13; 36-9).
(ECF Nos. 33-2 ¶ 12; 36-
That evening, Mr. O’Neil responded stating that
he was out of the office until the following week but that
“there should not be any mark up of costs . . . .
a look at this to make sure it’s right.”
So let’s take
(ECF No. 36-10).
Plaintiff and Mr. O’Neil had a meeting on June 17 to discuss the
billing error.
that
Defendants
(ECF No. 36-2, at 32).
“were
supposed
to
bill
Mr. O’Neil confirmed
the
actual
amount
charged,” as it had “always been the firm policy,” and that
“[Defendants] would have to refund the money [to BSI].”
(Id.).
Mr. O’Neil told Plaintiff that an investigation would be done to
“figure out how much the refund was supposed to be,” and that,
in regard to the process of creating invoices, “[Defendants] had
to change and/or implement a process since [Defendants] didn’t
appear to have one.”
(ECF Nos. 33-2 at 3, 24; 36-2, at 33).
That same day, Plaintiff sent an e-mail to Mr. O’Neil to ensure
that “within the next two weeks” BSI would be informed that
invoices for title work were submitted to them that did not
reflect actual costs, that BSI would be offered a refund, and
that BSI would agree to “remediate this billing error . . . by
correcting
or
reconciling
any
and
all
of
the
borrower’s
accounting of debt . . . so that none of the borrowers are
charged costs which were not actual.”
4
(ECF No. 36-13).
On June 18, Plaintiff sent an email to Mr. O’Neil regarding
a proposal by Mr. Shanahan to switch auctioneers from their
established vendor to an inexperienced vendor.
(ECF No. 36-14).
Plaintiff
stated
disagreed
with
the
proposal
and
that
if
Defendants were going to switch to an auctioneer that charged
higher costs and had less experience that it was appropriate
“within the rules of ethics” to obtain the consent of their
client BSI.
(Id.).
Mr. O’Neil became irate and requested that
Plaintiff “please refrain from the ethics lectures.”
36-15,
at
2).
Mr.
Shanahan
found
Plaintiff’s
(ECF No.
statements
“accusatory” and they “caused [him] considerable concern such
that [he] recommended to Mr. O’Neil that Plaintiff should be
asked to resign.”
(ECF Nos. 33-2 ¶ 21; 33-3 ¶ 8).
On June 27, Mr. O’Neil informed Plaintiff that he was not
firing him but that, due to the “financial condition of the
firm,” Defendants would not be able to continue paying Plaintiff
what they had been and that “[Plaintiff] would be better off
looking for another job.”
(ECF Nos. 33-2 ¶ 22; 36-2, at 39).
Mr. O’Neil told Plaintiff that he would not have to work while
he
was
looking
for
a
job,
and
Defendants
offered
to
pay
Plaintiff’s salary, commission, and benefits through the end of
July.
(ECF Nos. 33-2 ¶ 22; 36-7 ¶ 19).
by this news and walked out of the office.
36-7 ¶ 19).
Plaintiff was shocked
(ECF Nos. 33-2 ¶ 24;
Plaintiff did not tell Mr. O’Neil that he was
5
quitting his job.
(ECF No. 36-7 ¶ 20).
Subsequently, Plaintiff
and Mr. O’Neil arranged to meet on June 30 at the office.
No. 36-7 ¶ 21).
(ECF
However, Mr. Shanahan, rather than Mr. O’Neil,
was present at the meeting and informed Plaintiff that there was
no need for him to come into the office but that he could use
the office until the end of July.
(ECF Nos. 36-7 ¶ 21; 36-19).
Plaintiff subsequently e-mailed Mr. O’Neil regarding the meeting
with Mr. Shanahan.
(ECF Nos. 33-2, at 11; 36-19, at 2).
Mr.
O’Neil replied, attaching a resignation letter and stating, “you
will need to sign the attached. If you do not want to resign,
then I will accommodate your insistence that you be fired.
me know which of those two options you prefer.”
at
9-10;
36-18;
resignation letter.
36-19).
Plaintiff
refused
(ECF No. 36-7 ¶ 21).
Let
(ECF Nos. 33-2,
to
sign
the
Upon that action,
Defendants concluded that Plaintiff had quit and that his last
day of employment would be considered June 30, 2014.
Plaintiff
was paid his salary and commission up until June 30.
(ECF No.
33-2 ¶ 26).
B.
On
Procedural Background
March
25,
2016,
Plaintiff
filed
a
complaint
against
Defendants alleging unlawful termination of his employment in
violation of the employee protection (whistleblower) provision
of the Consumer Financial Protection Act of 2010, Section 1057
of the Dodd-Frank Wall Street Reform and Consumer Protection Act
6
(the “CFPA”), 12 U.S.C. § 5567.
(ECF No. 1).
for summary judgment on May 16, 2017.
Defendants moved
(ECF No. 33).
Plaintiff
submitted an opposition on June 19 (ECF No. 36), and Defendants
replied (ECF No. 37).
On July 17, Plaintiff filed the pending
motion for leave to file a surreply.
II.
(ECF No. 38).
Motion for Leave to File Surreply
Unless otherwise ordered by the court, surreply memoranda
are not permitted to be filed.
may
be
permitted
when
the
Local Rule 105.2(a).
moving
party
would
Surreplies
be
unable
to
contest matters presented to the court for the first time in the
opposing party's reply.
Lewis v. Rumsfeld, 154 F.Supp.2d 56, 61
(D.D.C. 2001).
In
his
motion
for
leave
to
file
a
surreply,
Plaintiff
contends that Defendants argue for the first time in their reply
that they held a subjective belief that their business faced
considerable
financial
and
personnel
issues
and
that
their
reasons for asking Plaintiff to look for another job should be
judged by what Defendants believed at the time to be true.
No. 38 ¶¶ 2-3).
(ECF
Plaintiff also argues that Defendants assert
for the first time in their reply that they never focused on the
economic impact of losing their client Woods Cove, but instead
on the fact that losing that client freed up Mr. Shanahan’s time
and Plaintiff’s services were no longer needed.
(Id. ¶¶ 4-5).
Defendants did not raise any new issues or legal theories in
7
their
reply
brief
and
merely
responded
to
arguments
in
Plaintiff’s opposition that “Defendants did not honestly believe
that their business was in decline” when Plaintiff was asked to
look for another job (ECF No. 36, at 33), and that “Defendants
cannot credibly maintain that Woods Cove had anything to do with
the . . . decision [to] terminate [Plaintiff]” (ECF No. 36, at
41).
Therefore, Plaintiff’s motion for leave to file a surreply
is denied.
III. Motion for Summary Judgment
A.
Standard of Review
A motion for summary judgment will be granted only if there
exists no genuine dispute as to any material fact and the moving
party
is
entitled
to
judgment
as
a
matter
of
law.
See
Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986);
Anderson
v.
Liberty
Lobby,
Inc.,
477
U.S.
242,
(1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008).
prevail
on
a
motion
for
summary
judgment,
the
moving
250
To
party
generally bears the burden of showing that there is no genuine
dispute as to any material fact.
248-50.
Liberty Lobby, 477 U.S. at
A dispute about a material fact is genuine “if the
evidence is such that a reasonable jury could return a verdict
for the nonmoving party.”
inquiry,
a
court
must
Id. at 249.
view
the
facts
In undertaking this
and
the
reasonable
inferences drawn therefrom “in the light most favorable to the
8
party
opposing
Zenith
Radio
the
motion,”
Corp.,
475
Matsushita
U.S.
574,
Elec.
587
Indus.
Co.
(1986)(quoting
v.
United
States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); see also
EEOC v. Navy Fed. Credit Union, 424 F.3d 397, 405 (4th Cir.
2005), but a “party cannot create a genuine dispute of material
fact
through
mere
speculation
or
compilation
of
inferences.”
Shin v. Shalala, 166 F.Supp.2d 373, 375 (D.Md. 2001) (citation
omitted).
B.
Analysis
The
CFPA
established
the
Bureau
of
Consumer
Financial
Protection (the “Bureau”) to promulgate regulations to enforce
“enumerated consumer laws”.
Calderone v. Sonic Houston JLR, LP,
2016 WL 6037239, at *3 (S.D. Tex. Oct. 14, 2016).
subject
to
the
Bureau’s
jurisdiction
.
.
.
“The laws
include,
among
others, . . . the Fair Debt Collection Practices Act (15 U.S.C.
§
1692,
et
seq.)[(the
“FDCPA”)].”
Procedures
for
Handling
Retaliation Complaints Under the Employee Protection Provision
of the CFPA, 81 Fed. Reg. 14374, 14375 (Mar. 17, 2016).
relevant
provision
of
the
CFPA
under
which
this
retaliation
claim was brought provides as follows:
No covered person or service provider
shall terminate or . . . cause to be
terminated . . . any covered employee . . .
by reason of the fact that such employee . .
. [has] provided, caused to be provided, or
is about to provide or cause to be provided,
information to the employer, the Bureau, or
any
other
State,
local,
or
Federal,
9
The
government authority or law enforcement
agency relating to any violation of, or any
act or omission that the employee reasonably
believes to be a violation of, any provision
of this title or any other provision of law
that is subject to the jurisdiction of the
Bureau, or any rule, order, standard, or
prohibition prescribed by the Bureau[.]
12 U.S.C. § 5567(a)(1).
In order to establish a prima facie
case of retaliation under the CFPA, a plaintiff has the burden
of
“showing
that
any
behavior
described
in
paragraphs
(1)
through (4) of subsection (a) was a contributing factor in the
unfavorable
personnel
5567(c)(3)(A)).
action
alleged
in
the
complaint.”
§
The plaintiff must establish a prima facie case
of retaliation by proving, by a preponderance of the evidence,
that “(1) he engaged in protected activity; (2) the employer
knew or suspected, either actually or constructively, that he
engaged
in
unfavorable
the
protected
personnel
or
activity;
employment
(3)
he
action;
suffered
and
(4)
an
the
protected activity was a contributing factor in the unfavorable
action.”
Rhinehimer v. U.S. Bancorp Investments, Inc., 787 F.3d
797, 805 (6th Cir. 2015); see also Feldman v. Law Enf’t Assocs.
Corp.,
752
F.3d
339,
344
(4th
Cir.
2014)
(setting
out
the
requirements for a retaliation claim under the Sarbanes-Oxley
Act
whistleblower
provision,
18
U.S.C.
§
1514A).
If
the
plaintiff makes out a successful prima facie case, the employer
must demonstrate, “by clear and convincing evidence, that the
10
employer would have taken the same unfavorable personnel action
in the absence of that behavior.”
Defendants
argue
that
they
12 U.S.C. § 5567(c)(3)(B).
are
entitled
to
judgment
in
their favor on Plaintiff’s retaliation claim because Plaintiff
cannot prove by a preponderance of the evidence that (1) he
engaged in protected activity; (2) he suffered an unfavorable
personnel action; and (3) that the protected activity was a
contributing factor in the unfavorable action.
(ECF No. 33-1,
at 5-6).
1.
Protected Activity
The FDCPA protects an employee who complains to an employer
about “any act or omission that the employee reasonably believes
to be a violation of [the FDCPA].”
Defendants
argue
that
Plaintiff
did
12 U.S.C. § 5567(a)(1).
not
engage
in
protected
activity because it was not objectively reasonable for Plaintiff
to believe that Defendants’ overbilling violated the FDCPA when
(1) “there is no evidence that any of the erroneous bills were
communicated
to
borrowers”;
(2)
“even
if
communicated,
the
errors were not material”; and (3) “the FDCPA contains a bona
fide error exception that applies here.”
(ECF No. 33-1, at 17).
“To satisfy the first element and establish that he engaged
in protected activity, an employee must show that he had both ‘a
subjective belief and an objectively reasonable belief’ that the
conduct he complained of constituted a violation of relevant
11
Welch v. Chao, 536 F.3d 269, 275 (4th Cir. 2008) (quoting
law.”
Livingston v. Wyeth, Inc., 520 F.3d 344, 352 (4th Cir. 2008)
(discussing
the
reasonable
belief
standard
under
analogous
language in the Sarbanes-Oxley Act whistleblower provision, 18
U.S.C.
§
Plaintiff
1514A)).
held
a
Here,
Defendants
subjective
do
belief
not
that
challenge
Defendants
that
were
violating the FDCPA when he sent an e-mail to Mr. O’Neil on June
12
regarding
the
overbilling
practice.
Instead,
Defendants
argue that it was not objectively reasonable for Plaintiff to
believe that Defendants’ overbilling violated the FDCPA.
[T]he issue of objective reasonableness
should be decided as a matter of law only
when
no
reasonable
person
could
have
believed that the facts [known to the
employee]
amounted
to
a
violation
or
otherwise justified the employee’s belief
that illegal conduct was occurring.
If, on
the other hand, reasonable minds could
disagree about whether the employee’s belief
was objectively reasonable, the issue cannot
be decided as a matter of law. . . . [T]he
reasonableness of the employee’s belief will
depend on the totality of the circumstances
known
(or
reasonably
albeit
mistakenly
perceived) by the employee at the time of
the complaint, analyzed in light of the
employee’s training and experience.
Rhinehimer, 787 F.3d at 811-12 (internal quotation marks and
citations omitted).
Plaintiff
prepared
in
explains
a
in
mortgage
his
declaration
foreclosure
case
that
“must
an
audit
include
documentation supporting all costs and expense[s],” including
12
the
costs
for
the
“quantify
title
remaining
mortgage holder.”
reports
and
sum
title
owed
by
updates,
the
(ECF No. 36-7 ¶ 11).
in
order
to
to
the
borrowers
The information is
important because “[n]o later than 24 hours before a sale, a
homeowner can reinstate his/her mortgage by paying the deficient
amount[]
[owed],”
and
“[c]osts
incurred
in
relation
to
the
foreclosure proceeding, such as title fees, would be included in
the amount required for reinstatement.”
(Id.).
Furthermore,
even if a borrower did not seek to reinstate the mortgage and
the
foreclosure
process
continued,
after
a
foreclosure
sale,
“[a] [j]udgment may then be entered against the borrowers for
any difference between the sale price and the amounts owed per
the audit,” resulting in a larger judgment due to the overstated
title fees.
(ECF No. 36, at 6).
Plaintiff stated in his email
to Mr. O’Neil that Defendants’ overbilling practice “[did] not .
. . fit into the regulatory environment in Maryland or Federal
lender oversight regarding its negative impact on the borrower’s
total debt,” and that from his experience “a no tolerance policy
exists
when
it
comes
to
inaccurate
fees
and
costs
ultimately accrue to a borrower’s deficiency judgment.”
No. 36-9).
included
at
that
(ECF
Not only could “nothing more than actual costs [] be
the
final
audit
stage,”
(ECF
No.
¶
11),
but
Defendants concede that this was BSI’s policy and “had always
13
been” their policy.
(ECF No. 33-2 ¶ 6; 33-3 ¶ 4; 36-2, at 32;
36-10).
Plaintiff
implicates
1692e(2)(A),
argues
at
least
that
four
1692e(2)(B),
Defendants’
separate
1692e(5),
overbilling
sections
and
of
1692f.2
practice
the
FDCPA:
The
FDCPA
prohibits a debt collector from using “any false, deceptive, or
misleading
representation
collection of any debt.”
or
means
§ 1692e.
in
connection
with
the
In this regard, the FDCPA
prohibits falsely representing the amount of any debt, falsely
representing any services rendered or compensation which may be
lawfully received by a debt collector for the collection of a
debt, and threatening to take legal action that cannot legally
2
The overbilling practice cannot alone violate both
sections 1692e and 1692f.
See Willis v. Green Tree Servicing,
LLC, No. WMN-14-3748, 2015 WL 1137681, at *7 (D.Md. 2015)
(stating that a complaint is deemed deficient under the FDCPA if
it does not identify any misconduct beyond that which the
plaintiff asserts violates other provisions of the FDCPA and
thus dismissing the plaintiff’s § 1692f claim); Penn v.
Cumberland, 883 F.Supp.2d 581, 594 (E.D.Va. 2012) (dismissing
the plaintiff’s § 1692f claim because the plaintiff did not
allege any conduct separate from the conduct that formed the
basis of his § 1692e claims); Johnson v. BAC Home Loans
Servicing,
LP,
867
F.Supp.2d
766,
782
(E.D.N.C.
2011).
Accordingly, the court will consider whether it was objectively
reasonable for Plaintiff to believe that Defendants’ conduct
violated § 1692e.
Plaintiff
also
states
incorrectly
that
Defendants’
overbilling is a violation of state law that is “made actionable
by the FDCPA” under § 1692e(5).
(ECF No. 36, at 19).
A
violation of state law “does not constitute a per se violation
of the [FDCPA]. . . . [T]he purported violation of a state []
law must violate the relevant FDCPA provision.”
Ademiluyi v.
PennyMac Mortg. Inv. Trust Holdings I, LLC, 929 F.Supp.2d 502,
524 (D.Md. 2013).
14
be taken.
§§ 1692e(2)(A); 1692e(2)(B); 1692e(5).
To trigger
civil liability against a debt collector, a consumer need only
prove one violation of the FDCPA.
Defendants
reasonable
first
for
argue
Plaintiff
FDCPA
that
to
because
§ 1692k(a).
it
was
believe
that
bills
payment.
Defendants state that they “submitted the erroneous
to
evidence
were
erroneous
presented
no
Defendants
the
ever
is
objectively
violating
were
there
not
any
that
the
borrowers
for
invoices to BSI for payment, not the debtor,” and “[w]hether BSI
chose to attempt to collect those amounts from the debtor was
not
Defendants’
Section
1692e
decision
does
not
to
make.”
require
(ECF
that
Loan
Mortg.
Corp.,
839
F.3d
33-1,
Defendants
erroneous amounts directly to the borrower.
Home
No.
354,
at
18).
present
the
See McCray v. Fed.
359
(4th
Cir.
2016)
(“[N]othing in [the] language [of the FDCPA] requires that a
debt collector’s misrepresentation [or other violative actions]
be made as part of an express demand for payment or even as part
of an action designed to induce the debtor to pay.”
omitted)).
(citation
“To be actionable under . . . the FDCPA, a debt
collector needs only to have used a prohibited practice ‘in
connection with the collection of any debt’ or in an ‘attempt to
collect any debt.’”
§ 1692e.
Id. (citations omitted); see also 15 U.S.C.
Although the billing errors identified by Defendants’
investigation ultimately were corrected before BSI collected or
15
attempted to collect the amount owed from the borrowers, the
temporal focus is at the time of the complaint.
The United
States Court of Appeals for the Fourth Circuit has construed the
reasonable
belief
of
a
violation
to
allow
for
a
reasonable
belief that the violation “may be complete, or it may be in
progress.”
See Boyer-Liberto v. Fountainbleau Corp., 786 F.3d
264, 282 (4th Cir. 2015) (construing the retaliation provision in
Title VII, 42 U.S.C. § 2000e-3(a)).
Plaintiff has presented
evidence that the overstated amount billed to BSI would have
ultimately
accrued
to
the
borrower
either
when
the
borrower
sought to reinstate the mortgage by paying the deficiency amount
owed or in the form of a deficiency judgment entered against the
borrower
after
a
foreclosure
sale.
Additionally,
there
is
evidence that once BSI received $17,225 from Defendants “as a
refund of improperly billed title report costs,” BSI “credited
each borrower’s account with the proper refund.”
at 26).
(ECF No. 33-2,
Thus, Plaintiff has put forth sufficient evidence that
the overstated costs did accrue to the borrowers’ BSI accounts
and would have remained on their accounts but for Plaintiff’s
detection of Defendants’ overbilling.
Drawing all reasonable
inferences in the light most favorable to Plaintiff, a jury
could find that it was objectively reasonable for Plaintiff to
believe
that
the
erroneous
bills
would
be
presented
to
borrowers, and thus, that an FDCPA violation was in progress.
16
the
Defendants
next
argue
that
it
was
not
objectively
reasonable for Plaintiff to believe that Defendants’ overbilling
violated the FDCPA because the billing errors were not material.
(ECF No. 33-1, at 19).
Plaintiff contends that, at the time he
engaged in his alleged protected activity, materiality was only
required as to § 1692e(2)(A).
(ECF No. 36, at 24).
The Fourth
Circuit recognizes that “[a]lthough Congress did not expressly
require that any violation of § 1692e be material, courts have
generally
held
representations’
that
must
violations
rest
on
grounded
material
in
‘false
representations,”
implicating a materiality requirement as to §§ 1692e(2)(A) and
1692e(2)(B) which both prohibit “false representations.”3
Warren
v. Sessoms & Rogers, P.A., 676 F.3d 365, 374 (4th Cir. 2012),
abrogated on other grounds by Campbell-Edwald Co. v. Gomez, 136
S.Ct. 663 (2016); see Hahn v. Triumph P'ships LLC, 557 F.3d 755,
757-58 (7th Cir. 2009) (“Materiality is an ordinary element of
any federal claim based on a false or misleading statement. . .
.
We do not see any reason why materiality should not be
equally required in an action based on § 1692e.”); Donohue v.
Quick
Collect,
3
Inc.,
592
F.3d
1027,
1033
(9th
Cir.
2010)
In Warren, the plaintiff’s allegations did not involve a
false
representation,
but
rather
a
failure
to
disclose
information.
Thus, the Fourth Circuit did not apply the
materiality requirement to the plaintiff’s claim, stating that
“whether a materiality requirement attaches to other violations
of § 1692e has no impact on [the plaintiff’s] allegations that
the defendants violated § 1692e(11).”
See Warren, 676 F.3d at
374.
17
(“[F]alse
but
non-material
representations
are
not
likely
to
mislead the least sophisticated consumer and therefore are not
actionable under §§ 1692e or 1692f.”); Miller v. Javitch, Block
& Rathbone, 561 F.3d 588, 596 (6th Cir. 2009) (rejecting the
plaintiff’s
§
1692e
claim
on
materiality
grounds).
Successively, in Lembach v. Bierman, 528 F.App’x 297, 303 (4th
Cir.
June
12,
2013),
the
Fourth
Circuit,
“persuaded
by
the
discussion in Warren and th[e] Court’s further citation to Hahn,
Donohue, and Miller,” concluded that “to plead a claim of false
representation under the FDCPA, the party must show that the
representations
extended
the
are
material.”
application
of
Another
the
judge
materiality
claims brought under §§ 1692e(5) and 1692f.
of
this
court
requirement
to
Stewart v. Bierman,
859 F.Supp.2d 754, 762 (D.Md. 2012)(“Although the Fourth Circuit
has not directly addressed the materiality requirement for FDCPA
claims arising under §§ 1692e(5) . . . or 1692f, this Court
concludes that a plaintiff bringing such a claim must plead
material violations in order to survive a motion to dismiss.”).
Accordingly,
materiality
is
required
in
order
for
it
to
be
objectively reasonable for Plaintiff to believe that Defendants’
overbilling practice violated the subsections of § 1692e cited
by Plaintiff.
If a representation would not mislead or deceive the least
sophisticated consumer with respect to the alleged debt, it is
18
not actionable under the FDCPA, even if it is technically false.
Penn v. Cumberland, 883 F.Supp.2d 581, 589 (E.D.Va. 2012); see
e.g., United States v. Nat’l Fin. Servs., Inc., 98 F.3d 131,
135-36, 139 (4th Cir. 1996); Stewart, 859 F.Supp.2d at 761.
For
a false representation to be material to sustain a claim under
the FDCPA, “it must affect [the least sophisticated] consumer’s
ability
to
make
alleged debt.”
intelligent
decisions
with
respect
to
the
Penn, 883 F.Supp.2d at 589; see Donohue, 592
F.3d at 1033-34; Hahn, 557 F.3d at 757-58.
The parties have not
cited
Plaintiff’s
to
any
authority
decided
before
alleged
protected activity that applies the materiality requirement to
an overstatement in the total amount of debt owed by a borrower.
In
the
cases
cited
by
Defendants,
Powell
v.
Palisades
Acquisition XVI, LLC, 782 F.3d 119, 127 (4th Cir. 2014), and
Conteh v. Shamrock Community Association, Inc., 648 F.App’x 377,
379-80 (4th Cir. May 19, 2016), the Fourth Circuit determined
materiality
by
first
calculating
the
difference
between
the
erroneous judgment and the correct judgment to calculate the
overstatement.
overstatement
The
by
the
court
then
actual
divided
amount
owed
the
to
amount
of
the
determine
the
overstatement as a percentage of the actual amount owed.
Using
that approach, the Fourth Circuit found the overstatements of
10.4% and 50% to be material.
See Powell, 782 F.3d at 127 (an
overstatement of more than 50 percent is “material under any
19
standard”); Conteh, 648 F.App’x at 379-80 (“While the degree of
the
alleged
overstatement
is
not
as
significant
as
the
overstatement in Powell, . . . an overstatement of 10.4% is
sufficient
to
be
important
to
how
the
least
sophisticated
consumer responds by causing confusion and a potential challenge
by the consumer to the writ.”).
In Powell, the Fourth Circuit
stated that “a de minimis misstatement of the total amount owed
might
not
amount.
be
actionable”
but
did
Powell, 782 F.3d at 127.
not
determine
a
threshold
Here, Plaintiff alleges that
Defendants charged BSI, and ultimately each mortgage borrower,
$350 for a title report and $175 for a title update when the
actual costs were $150 or $250 for a title report and $15 for a
title update.
Such overbilling would result in an overstatement
of $260 or $360 in the total amount of debt owed by a borrower.4
Defendants’ assumption that such an overstatement is immaterial,
without presenting any evidence of actual amounts owed, does not
demonstrate lack of materiality as a matter of law.
proper
context,
it
cannot
necessarily immaterial.
be
said
that
4
of
material
amounts
are
Moreover, Plaintiff’s complaint applied
to 106 borrower accounts, not just one.
dispute
these
Without the
facts
exists
as
Accordingly, a genuine
to
whether
it
was
Mr. O’Neil states in his declaration that, after
investigation into the total amount of erroneous billing, “the
largest overbilling amount was for one file at $350 and the
smallest overbilling error was $15. The most common error was
$100 to $200.” (ECF No. 33-2 ¶¶ 13-15).
20
objectively
reasonable
for
Plaintiff
to
believe
that
the
overstatements were material.
Defendants also argue that the overbilling errors were the
result of bona fide errors and thus are not actionable under the
FDCPA.
(ECF No. 33-1, at 22).
Section 1692k(c) of the FDCPA
provides that “[a] debt collector may not be held liable in any
action brought under this subchapter if the debt collector shows
by
a
preponderance
of
evidence
that
the
violation
was
not
intentional and resulted from a bona fide error notwithstanding
the maintenance of procedures reasonably adapted to avoid any
such error.”
15 U.S.C. § 1692k(c).
The bona fide error defense
is an affirmative defense that insulates debt collectors from
liability when they have in fact violated the FDCPA.
Webster v.
ACB Receivables Mgmt., Inc., 15 F.Supp.3d 619, 626 (D.Md. 2014).
It is not a defense to an action brought under the whistleblower
provision of CFPA.
protected
activity
To determine whether Plaintiff engaged in
under
the
CFPA,
the
relevant
inquiry
is
whether Plaintiff reasonably believed that Defendants’ conduct
violated the FDCPA, notwithstanding Defendants’ ability to avoid
liability for an actual violation.
Therefore, a genuine dispute
of material fact still exists as to whether Plaintiff engaged in
protected
activity
under
the
CFPA
entitled to judgment on that basis.
21
and
Defendants
are
not
2.
Unfavorable Personnel Action
Defendants
argue
that
they
are
entitled
to
judgment
in
their favor because “[Plaintiff’s] claims of retaliation cannot
be based on his voluntary quitting of his employment.”
(ECF No.
37, at 3).
The
CFPA
prohibits
the
termination
of
an
employee
who
provides information to his employer relating to an actual or
reasonably
perceived
5567(a)(1).
terminate
rather,
violation
of
the
FDCPA.
12
U.S.C.
§
Plaintiff has presented evidence that he did not
his
was
employment
terminated
with
by
Defendants
Defendants
voluntarily
involuntarily.
but,
After
Plaintiff e-mailed Mr. O’Neil regarding his June 30 meeting with
Mr. Shanahan, Mr. O’Neil responded by stating “you will need to
sign the attached [resignation letter]” and “[i]f you do not
want to resign, then I will accommodate your insistence that you
be fired.
Let me know which of those two options you prefer.”
(ECF No. 36-19).
Plaintiff did not sign the resignation letter
and Defendants considered Plaintiff’s employment terminated on
June
30.
Defendants
have
not
provided
any
evidence
Plaintiff terminated his employment voluntarily.
that
Mr. O’Neil’s
statements that Plaintiff could either resign or be fired are
evidence to the contrary.
fact
exists
as
to
whether
Thus, a genuine dispute of material
Plaintiff
22
suffered
an
unfavorable
personnel action and Defendants are not entitled to judgment on
that basis.
3.
Causal Connection Between Protected Activity and
Unfavorable Personnel Action
Defendants
next
argue
that
Plaintiff
cannot
prove
by
a
preponderance of the evidence that the protected activity was a
contributing
factor
in
his
alleged
personnel
action
because
“there is no evidence in the record other than proximity of
time.”
takes
(ECF No. 33-1, at 25-26).
the
about
adverse
the
employment
protected
action
activity,
connection between the two.
However, if the employer
“shortly
courts
may
after”
infer
learning
a
causal
Price v. Thompson, 380 F.3d 209,
213 (4th Cir. 2004), abrogation on other grounds recognized by
Waag v. Sotera Def. Sols., Inc., 857 F.3d 179, 192 (4th Cir.
2017).
Where
temporal
proximity
is
the
only
evidence
of
causation, however, “the temporal proximity must be very close,”
as it is here.
Clark Cty. Sch. Dist. v. Breeden, 532 U.S. 268,
273 (2001); see also Van Asdale v. Int’l Game Tech., 577 F.3d
989, 1001 (9th Cir. 2009) (concluding in a retaliation case under
the Sarbanes-Oxley Act that the plaintiffs “raised a genuine
dispute
of
material
fact
regarding
whether
their
protected
activity was a contributing factor to their terminations” based
on the proximity of their terminations “within weeks of their
alleged protected conduct”); Yartzoff v. Thomas, 809 F.2d 1371,
1376 (9th Cir. 1987) (holding that causation could be inferred
23
where the first adverse employment action took place less than
three months after an employee’s protected activity).
Here,
Defendants asked Plaintiff to look for another job on June 27
and considered his employment terminated on June 30, just weeks
after he notified Mr. O’Neil of Defendants’ overbilling practice
and
expressing
Therefore,
support
his
belief
Plaintiff
his
that
has
retaliation
put
it
was
forth
claim,
unlawful
sufficient
and
the
on
June
12.
evidence
to
shifts
to
burden
Defendants to demonstrate by clear and convincing evidence that
the employer would have taken the same unfavorable personnel
action in the absence of the plaintiff’s protected activity.
See 12 U.S.C. § 5567(c)(3)(B).
Defendants
personnel
argue
action
in
that
the
they
“would
absence
of
have
the
taken
protected
the
same
activity”
because, in June 2014, (1) “MSO faced dim prospects for future
work” when “MCM informed Defendants that it had been outbid” on
a large pool of loans, “so there would be no new referrals” (ECF
No. 33-1, at 27-28); (2) “a firm client for whom MSO did tax
lien foreclosure work told the firm to stop all work on their
behalf”
(ECF
No.
33-1,
at
28);
and
(3)
Plaintiff
raised
objections to Mr. Shanahan’s proposal to use the services of a
new auctioneer in which “the tone of his long screed emails and
suggestions
of
impropriety
raised
24
serious
concerns
among
the
partners
of
MSO
and
TOG
to
the
point
where
Mr.
Shanahan
recommended asking Plaintiff to resign” (ECF No. 33-1, at 28).
First, Defendants’ assertion that they would have taken the
same unfavorable personnel action because they lost a large pool
of MCM referrals in June 2014 is undermined by the evidence
presented
by
Plaintiff,
including:
Mr.
Shanahan’s
deposition
testimony that it is common for a foreclosure firm to have ebbs
and
flows
in
the
referral
process
(ECF
No.
36-3,
at
25);
Plaintiff’s declaration that, prior to June 27, he had a “full
case
load,”
“was
fully
occupied
with
foreclosure
work,”
and
“frequently worked long hours (beyond normal business hours)”
(ECF No. 36-7, at 9); and an e-mail from BSI Vice President and
Branch Manager Justin Wenk asking Mr. O’Neil, “What happen[ed]
with Erik and how are we proceeding to handle the pretty large
workload he had?”
(ECF No. 36-23).
Second, although Defendants
assert that Mr. Shanahan was devoting significant time to doing
tax lien foreclosure work for client Woods Cove and that “[w]ith
the cessation of this work, Mr. Shanahan, senior to Plaintiff,
would
have
more
time
available
for
the
Maryland
foreclosure
practice work, [] decreas[ing] the firm’s need for Plaintiff’s
services”
evidence
(ECF
that
No.
it
33-2
took
¶
20),
almost
18
both
parties
months
for
have
Mr.
presented
Shanahan
to
complete his existing work for Woods Cove (ECF Nos. 33-2 ¶ 20;
33-3
¶
7;
36-3,
at
32).
In
25
addition,
the
parties
have
stipulated that “[t]he loss of legal work from Woods Cove was a
peripheral point, and not a leading factor by any stretch, with
respect to [Mr. O’Neil’s] decision to request [Plaintiff] to
resign from his job.”
(ECF No. 36-26).
Lastly, Defendants
contend that a dispute between Plaintiff and partners Mr. O’Neil
and Mr. Shanahan about Mr. Shanahan’s proposal to use a new
auctioneer damaged the relationship between Plaintiff and the
partners.
(ECF Nos. 33-2 ¶ 21; 33-3 ¶ 8).
Mr. O’Neil testified
in deposition, however, that the sole justification for asking
Plaintiff to look for another job was economic (ECF No. 36-2, at
39, 40, 49, 50-51),
exists
as
to
and thus a genuine dispute of material fact
whether
the
dispute
Plaintiff to resign or be fired.
was
a
basis
for
asking
Defendants have failed to
present uncontradicted clear and convincing evidence that they
would have taken the same unfavorable personnel action in the
absence
of
Defendants’
Plaintiff’s
motion
for
protected
summary
activity.
judgment
on
Therefore,
Plaintiff’s
retaliation claim will be denied.
IV.
Conclusion
For the foregoing reasons, the motion for summary judgment
filed by Defendants and the motion for leave to file a surreply
filed by Plaintiff are denied.
A separate order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
26
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