Bakko et al v. Quicken Loans, Inc.

Filing 30

MEMORANDUM OPINION AND ORDER. IT IS HEREBY ORDERED that Defendant Quicken Loans, Inc.'s Motion to Dismiss 19 is DENIED. (Written Opinion) Signed by Judge Michael J. Davis on 12/11/2018. (GRR)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Mary Bakko and Dawn White,
Plaintiffs,
v.

MEMORANDUM OPINION
AND ORDER
Civil No. 18-1566 (MJD/LIB)

Quicken Loans, Inc.,
Defendant.
Andrew C. Walker and Paul H. Weig, Walker & Walker Law Offices,
PLLC, Counsel for Plaintiffs.
Lousene Hoppe, Fredrikson & Byron, P.A. and Thomas N. Abbott, Perkins
Coie LLP, Counsel for Defendant.

This matter is before the Court on Defendant’s motion to dismiss the
Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6).
I.

Amended Complaint
Plaintiffs Bakko and White each filed for Chapter 7 bankruptcy – Bakko in

September 2017 and White in April 2018. (Am. Comp. ¶¶ 9, 10.) At the time of
Bakko’s bankruptcy filing, both plaintiffs owed a mortgage loan secured by their
homestead in Ramsey County, and serviced by Defendant Quicken Loans, Inc.
(“Quicken”). (Id. ¶ 11.)

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Plaintiff Bakko signed a reaffirmation agreement for the mortgage loan in
bankruptcy. (Id. ¶ 12.) Following the filing of this agreement, Quicken charged
$125 in attorney’s fees to Plaintiffs’ loan for what it described as “Bankruptcy –
Reaffirmation Agreement.” (Id. ¶ 13.)
Plaintiffs claim that a reaffirmation agreement is a simple document that is
routinely filed in bankruptcy cases, and that such form is available online from
the United States Bankruptcy Court website. (Id. ¶¶ 14, 15.) There is no filing
fee for such document. (Id. ¶ 16.) Plaintiffs further claim that the reaffirmation
form filed in this case could not reasonably have taken an attorney between 15
minutes and half an hour to complete – which would represent $125 in attorney’s
fees – therefore the fee charged to Plaintiffs was unreasonable. (Id. ¶¶ 18-20.)
Prior to filing suit, counsel for the parties exchanged correspondence as to
whether Quicken could charge attorney’s fees for the preparation of the
reaffirmation agreement. (Id. ¶¶ 23, 24.) Because the parties were not able to
reach an agreement on this issue, Plaintiffs filed the instant action.
In Count I, Plaintiffs claim that Quicken violated the Real Estate Settlement
Procedures Act (“RESPA”), 12 U.S.C. § 2605, by not removing and refunding the

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$125 attorney’s fee charge for the completion of the reaffirmation agreement. (Id.
¶ 32.)
In Count II, Plaintiffs claim that Quicken has engaged in a pattern or
practice of charging unauthorized unreasonable fees by charging other
consumers attorney’s fees for the preparation of a reaffirmation agreement that
was not negotiated or included changes to any information which would
ordinarily be provided by a loan servicer. (Id. ¶ 38.) RESPA provides for
additional damages in the case of a pattern or practice of noncompliance with the
requirements of § 2605. (Id. ¶ 43.)
In Count III, Plaintiffs claim that Quicken breached the terms of the
mortgage and note by charging Plaintiffs unreasonable fees in a legal proceeding
that might significantly affect Quicken’s interest in the property and/or rights
under the contract. (Id. ¶¶ 46-48.) Not only was the attorney’s fee unreasonable,
Bakko’s chapter 7 bankruptcy proceeding did not modify the secured status of
the mortgage and was therefore not a circumstance that might significantly affect
Quicken’s interest or rights under the contract. (Id. ¶¶ 48,49.)
In Count IV, Plaintiffs claim that Quicken violated Minn. Stat. § 58.13 by:
failing to perform in accordance with the terms of the mortgage; charging an

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unauthorized and unreasonable attorney’s fee; violating RESPA; and making
false or misleading representations when servicing the loan.
II.

Standard Motion to Dismiss
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may

move the Court to dismiss a claim if, on the pleadings, a party has failed to state
a claim upon which relief may be granted. In reviewing a motion to dismiss, the
Court takes all facts alleged in the complaint to be true. Zutz v. Nelson, 601 F.3d
842, 848 (8th Cir. 2010).
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. Thus, although a complaint need not include 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.
Id. (citations omitted).
III.

Analysis
A.

Violation of RESPA – Counts I and II

RESPA provides that loan servicers have certain duties to borrowers, one
of which is to provide a written response to a qualified written request (“QWR”)
within 5 days, unless the action requested is taken within such period. 12 U.S.C.
§ 2605(e)(1)(A). A QWR is defined as “a written correspondence . . . that-4

(i) includes, or otherwise enables the servicer to identify the name and account of
the borrower; and (ii) 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).
1. Whether March 6, 2018 Letter is a QWR
Plaintiffs claim that after they learned of the attorney’s fee charged to their
mortgage loan, they mailed a QWR to Quicken, dated March 6, 2018, in which
they challenged Quicken’s right to charge attorney’s fees to the borrowers for the
preparation of the reaffirmation agreement. (Am. Comp. ¶ 23.) Specifically, the
QWR included a portion described as “Servicing Errors” which provided “1.
Quicken Loans has wrongly charged attorney’s fees to the borrowers for the
preparation of a reaffirmation agreement. This constitutes the imposition of a fee
or other charges that the servicer lacks a reasonable basis to impose upon the
borrower. 12 CFR 1024.35(b)(5).” (Id., Ex. B.) Thereafter, Quicken failed to make
appropriate corrections in the borrower’s account in response to their QWR as
required under 12 U.S.C. § 2605(e)(2). (Id. ¶ 32.) Plaintiffs further claim Quicken
has repeatedly charged similar fees to other debtors. (Id. ¶ 38.)
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Quicken asserts the RESPA claim fails because the March 6, 2018 letter is
not a QWR because Plaintiffs did not explain why they believed the $125
attorney’s fee charge was wrongly assessed. Merely parroting the regulation
definition of “error” is not sufficient because it fails to provide sufficient
information from which to base its investigation and response. See Ovsepyan v.
OneWest Bank, FSB, Civ. No. 11-8714, 2012 WL 10423213, at * 2 (C.D. Cal. June
14, 2012) (finding that because plaintiff did not list specific reasons in support of
her belief that account was in error, the letter did not qualify as a QWR). If
Plaintiffs had provided the reasons for their belief, Quicken asserts it would have
addressed those concerns and provided more detail about its decision to hire
legal counsel in connection with Bakko’s bankruptcy and the reaffirmation
agreement.
The Court is not persuaded by this argument. As Quicken concedes, it
responded to Plaintiffs’ letter by informing them of the background and
circumstances of the fee; that it had retained legal counsel after learning of
Plaintiff Bakko’s bankruptcy, and that counsel charged $125 to prepare the
reaffirmation agreement. Quicken also informed Plaintiffs of the contractual
basis on which it relied to advance the fee on behalf of Plaintiff Bakko. Quicken

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did not articulate how their response would have been substantively different
had Plaintiffs provided a more detailed explanation for their position that they
were wrongly charged the attorney’s fee.
Next, Quicken argues that the RESPA claim fails because the March 6, 2018
letter does not raise an issue regarding the servicing of the mortgage. RESPA
defines “servicing” as “receiving any scheduled periodic payments from a
borrower pursuant to the terms of any loan, including amounts for escrow
accounts described in section 2609 of this title, and making the payments of
principal and interest and such other payments with respect to the amounts
received from the borrower as may be required pursuant to the terms of the
loan.” 12 U.S.C.A. § 2605 (i)(3). Quicken asserts that because the attorney’s fee
charge is neither a “periodic payment” nor an amount identified in the mortgage,
the letter exceeds the scope of RESPA by seeking information related to third
party fees. See Fleming v. U.S. Bank Nat. Ass’n, 2015 WL 505758 (D. Minn. Feb.
6, 2015) (finding plaintiff’s letter exceeded the scope of RESPA “by seeking, in
part, information related to insurance, property taxes, third party fees, property
inspection and appraisals, and pooling and service agreements.”)

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Quicken further asserts that whether or not the attorney’s fee charged was
reasonable does not come within the definition of “servicing” for purposes of
RESPA. The fee arose in connection with Bakko’s bankruptcy and the
completion of a reaffirmation agreement; not application of her periodic
payments on the account. A reaffirmation resembles a loan modification
agreement more than any periodic payment. As fees and costs associated with a
loan modification are not servicing for purposes of RESPA, see Sutton v.
CitiMortgage, Inc., 228 F. Supp.3d 254, 266 (S.D.N.Y. 2017), fees and costs
associated with reaffirmation agreements are not servicing either.
The Court is not persuaded by these arguments either. First, Sutton does
not hold that fees and costs associated with reaffirmation agreements do not fall
within the definition of servicer. Second, as Plaintiffs note, the definition of
servicing is receiving periodic payments from the borrower, and “making the
payments of principal and interest and such other payments with respect to the
amounts received from the borrower as may be required pursuant to the terms of
the loan.” 12 U.S.C. § 2605 (i)(3) (emphasis added). The regulations clarify that
“such other payments” includes principal, interest and other amounts to the
“owner of the loan or other third parties.” 12 C.F.R. § 1024.2 (emphasis added).

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Here, Quicken included the attorney’s fee charge in the monthly mortgage
billing statement sent to Plaintiffs. (Am. Comp., Ex. A.) Thus, application of
amounts paid by Plaintiffs to that fee would fall squarely within the plain
meaning of the term “servicing” as defined in RESPA.
2. Actual Damages
To prove a claim under RESPA, a plaintiff must show that a loan servicer’s
failure to comply with RESPA caused him/her harm. See Wirtz v. Specialized
Loan Serv., LLC, 886 F.3d 713, 718 (8th Cir. 2018) reh’g denied (May 29, 2018). As
applied in this case, Quicken asserts Plaintiffs have failed to show that they
suffered an injury as a result of Quicken’s failure to respond to their QWR.
Instead, they are trying to bootstrap the contention that the $125 fee was
wrongfully charged to their damages claim under RESPA. However, the $125
fee was the result of the attorney’s fee incurred for the retention of counsel and
the preparation of the reaffirmation agreement, and it existed prior to Plaintiffs
sending their QWR.
Plaintiffs allege they were damaged when Quicken failed to correct its
error, and not charge them the $125 fee for the completion of the reaffirmation
agreement. At this stage of the proceedings, the Court finds that Plaintiffs have
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sufficiently alleged damages under RESPA, and the issue of whether the fee
charged was reasonable should be determined once discovery is complete.
3.

Statutory Damages

Under RESPA, a plaintiff may be entitled to statutory damages if the
plaintiff can show a pattern or practice of noncompliance with the requirements
of RESPA. 12 U.S.C. § 2605(f)(1)(B). “To show a pattern or practice, a plaintiff
must show that noncompliance with the statute ‘was the company’s standard
operating procedure – the regular rather than the unusual practice.’” Wirtz, 886
F.3d at 720.
Quicken argues that Plaintiffs have failed to allege that Quicken engaged
in a pattern or practice of noncompliance with RESPA. The Court disagrees.
In paragraph 38 of the Amended Complaint, Plaintiffs allege:
Plaintiffs’ counsel represents a large number of consumers filing for
bankruptcy protection, among those clients Plaintiffs’ counsel has
identified at least four other instances in which Quicken Loans, Inc. has
assessed a fee for hiring an attorney to prepare a reaffirmation agreement
which did not involve any negotiation or changes to any information
which would ordinarily be provided b a loan servicer to a party filling in
the standard form provided by the bankruptcy court and used in the
bankruptcy case.
Plaintiffs further allege that “Servicer routinely charges borrowers
unauthorized and unreasonable fees for the preparation of reaffirmation
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agreements.” (Am. Comp. ¶ 40.) “Upon information and belief, Servicer
routinely refuses to correct the unauthorized unreasonable fees when borrowers
challenge the fees by QWR or Notice of Error pursuant to 12 U.S. § 2605(e).” (Id.
¶ 41.)
To determine whether such allegations sufficiently allege a pattern or
practice claim under RESPA, the Court recognizes that other courts have found
that allegations based on “information and belief” or conclusory allegations that
the defendant engaged in a pattern or practice of noncompliance with RESPA are
insufficient to establish a pattern or practice under RESPA. See Giordano v.
MGC Mortg., Inc., 160 F. Supp.3d 778, 785 (D. N.J. 2016) (finding that allegations
based on information and belief not sufficient to plead a pattern or practice
under RESPA); Sutton, 228 F Supp.3d at 276 (finding conclusory allegations
concerning defendant’s business practices not sufficient to state claim of pattern
or practice of RESPA violations); Gorbaty v. Wells Fargo Bank, N.A., 2012 WL
1372260, at * 5 (E.D.N.Y. April 18, 2012) (finding that “pattern or practice” means
a standard or routine way of doing things, and that alleging four examples of
RESPA violations does not qualify as a standard or routine way of doing things.)

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While the allegations based on “information and belief” are insufficient to
state a claim, the Court finds that Plaintiffs have sufficiently alleged a pattern
and practice claim under RESPA based on the allegations that counsel has
already identified at least four other instances in which Quicken has assessed an
attorney’s fee, as was done in this case. Discovery may uncover additional cases.
Accordingly, at this stage of the proceeding, the Court finds Plaintiffs have
properly alleged a pattern and practice claim under RESPA.
B.

Breach of Contract – Count III

Plaintiffs assert that Quicken is bound by the mortgage and note attached
to their homestead, and that under those contracts, Plaintiffs are only obligated
to pay reasonable attorney’s fees if there is a legal proceeding that might
significantly affect Quicken’s interest in the property and/or rights under the
contracts. (Am. Comp. ¶¶ 46, 47.) Plaintiffs allege the $125 fee charged for the
reaffirmation agreement in Bakko’s bankruptcy proceeding was not reasonable
for a number of reasons: the form reaffirmation agreement was not modified in
any material way; the information added to the form provided by the court was
of a type that is ordinarily and necessarily supplied by loan servicers; the
attorney added nothing in the way of analysis, negotiation or expertise to the

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information provided by Quicken; and Plaintiff Bakko stated her intention to
enter into a reaffirmation agreement at the time of filing and agreed to the
reaffirmation agreement as proposed by Quicken, without negotiation. (Id. ¶
48.)
Plaintiffs further allege that Plaintiff Bakkos’ chapter 7 bankruptcy, which
could not modify the secured status of the mortgage, was not a circumstance that
might affect Quicken’s interests or rights under the contracts. (Id. ¶ 49.)
Plaintiffs thus allege that by charging the $125 fee, Quicken breached the
mortgage and note contracts. (Id. ¶ 50.)
Quicken argues that Plaintiffs have failed to state a claim for breach of
contract because it had a right to hire counsel when Bakko filed for bankruptcy
to protect its interest in the property under the Mortgage and because the
attorney’s fee charge was reasonable. However, whether Quicken needed to hire
counsel to protect its interests in the property or whether the fee charged was
reasonable are questions of fact that are not decided on a Rule 12(b)(6) motion.
Based on the allegations in the Amended Complaint, the Court thus finds that
Plaintiffs have stated a claim of breach of contract.

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C.

Violation of Minn. Stat. § 58 – Count IV

Minn. Stat. § 58 regulates the actions of loan servicers like Quicken by
prohibiting certain business practices. Plaintiffs allege that Quicken violated the
following prohibitions set forth in Minn. Stat. § 58.13: failing to perform in
accordance with the written agreement between the parties in violation of § 58.13
subdiv. 1(a)(5); charging an unauthorized, unreasonable fee in violation of §
58.13 subdiv. 1(a)(6); violating RESPA in violation of § 58.13 subdiv. 1(a)(8); and
making a false or misleading representation when servicing its loan in violation
of § 58.13 subdiv. 1(a)(9).
The statute further provides that a borrower injured by a violation of the
standards set forth in § 58.13 has a right of action and may be entitled to actual,
incidental and consequential damages, statutory damages, punitive damages and
costs and attorney’s fees. Minn. Stat. 58.18, subdiv. 1. In addition, the statute
provides that the borrower “also may bring an action under section 8.31.” Minn.
Stat. § 58.18, subdiv. 2.
Plaintiffs allege that thousands of people file for bankruptcy each year, and
that a significant number of them will sign a reaffirmation agreement and that
most mortgage servicers do not retain attorneys for those agreements. (Id. ¶ 53.)

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Further, Plaintiffs allege that very few reaffirmation agreements are modified
from the form provided by the court and few contain any information other than
what is provided by the servicer to the attorney and that few reflect any exercise
of legal judgment, negotiation or analysis. (Id.) Finally, Plaintiffs allege this
action will benefit Minnesotans by establishing that it is not reasonable for
Quicken to pass along to the consumer the cost of its decision to hire an attorney
to fill in a form which does not require legal expertise. (Id.)
Quicken argues any claim under Minn. Stat. § 58.13 fails for several
reasons. First, this claim is derivative of Plaintiffs’ claims under RESPA and for
breach of contract and should therefore be dismissed for the same reasons as the
RESPA and breach of contract claims. Quicken further argues claim fails to
plead fraud with particularity and that Plaintiffs have failed to sufficiently allege
a public interest to sustain their claim.
In response, Plaintiffs assert they have not requested injunctive relief or
other remedies which would bring their claims under the ambit of the private
attorney general statute, Minn. Stat. 8.31. Next, Plaintiffs assert that Minn. Stat.
58.13, subdiv. 9 is the only prohibition subject to the heightened pleading
standard required under Fed. R. Civ. P. 9(b), and that such requirements have

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been met in the Amended Complaint. Plaintiffs have alleged that Quicken
charged Bakko an unreasonable attorney’s fees following her bankruptcy, and
falsely claimed that such fees were authorized under the terms of the loan in its
March 12, 2018 response to Bakko’s QWR.
Because the allegations must be construed in the light most favorable to
Plaintiffs at this stage of the proceedings, the Court will allow this claim to go
forward.
IT IS HEREBY ORDERED that Defendant Quicken Loans, Inc.’s Motion to
Dismiss [Doc. No. 19] is DENIED.
Date: December 11, 2018
s/ Michael J. Davis
Michael J. Davis
United States District Court

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