Diaz v. FCI Lender Services, Inc.

Filing 41

MEMORANDUM OPINION & ORDER re: 31 MOTION to Dismiss First Amended Complaint. filed by FCI Lender Services, Inc. Defendant FCI Lender Services moves to dismiss the amended complaint for failure to state a claim as required by Rule 12(b)(6) of the Federal Rules of Civil Procedure. (As further set forth in this Order.) For the foregoing reasons, Defendant's motion to dismiss is DENIED. This resolves Docket Number 31. The Court will schedule an initial pretrial conference by separate order. (Signed by Judge Alison J. Nathan on 9/28/2018) (cf)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

Altagracia Diaz, on behalf ofplaintiff and all
others similarly situated,
17-CV-8686 (AJN)

Plaintiff,

-v-

MEMORANDUM
OPINION & ORDER

FCI Lender Services, Inc.,
Defendant.

ALISON J. NATHAN, District Judge:
Plaintiff Altagracia Diaz brings this putative class action against FCI Lender Services,
Inc. ("FCI") asserting a claim under the Fair Debt Collection Practices Act (the "FDCPA"), 15
U.S.C. §§ 1692 et seq. Defendant FCI Lender Services moves to dismiss the amended complaint
for failure to state a claim as required by Rule 12(b)(6) of the Federal Rules of Civil Procedure.
For the following reasons, Defendant's motion is denied.

I.

Background
The following facts are taken from the first amended complaint ("FAC"), Dkt. No. 27,

and assumed to be true for purposes of evaluating this motion to dismiss. See Gatt Commc 'ns,

Inc. v. PMC Assocs., L.L.C., 711F.3d68, 74 (2d Cir. 2013).
Plaintiff is an individual who resides in a single-family home she owns in Mineola, New
York. F AC at ~ 9. She brings this action against FCI, a California corporation "engaged in the
business of servicing residential mortgage loans" for their owners. FAC

at~~

10-11.

According to Plaintiff, FCI "holds itself out as a 'special servicer,' or 'specialty loan
servicer," which Plaintiff describes as having "expertise in handling defaulted loans for their

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owners and effectively integrating" such loans "onto its servicing platform." FAC at if 14; Dkt.
No. 27-1, Ex. A. Many of the loans in FCI's servicing portfolio "are in default when FCI first
becomes involved with them." FAC at if 12. In the past, FCI explained its activities on its
website as "rapidly tum[ing] Delinquent Loans and Loan Pools into cash by facilitation the
restructure of loans, or by foreclosing so the Lender can sell the properties." FAC at if 17. It
now describes its activities somewhat differently, including, inter alia: "acting at the direction of
its Lender Clients ... to address Delinquent Loans by facilitating the restructure of loans per
Lender directions" and "coordinating Lender's foreclosure of the Loan if workouts are not
possible" so that the Lender can sell the property. FAC at if 18.
This action arises out of Defendant's alleged attempts to "enforce against plaintiff a
residential mortgage loan" (the "Mortgage") entered into for the purpose of housing. FAC at

if 20.

At some point prior to 2013, this loan was accelerated. FAC at if 24. In 2013, a

foreclosure action was filed. FAC at if 23. In June 2017, FCI "became involved with the loan,"
evidently through transfer of the servicing of her Promissory Note (the "Note). FAC at if 21-22;
Dkt. No. 27-2, Ex. B. FCI sent Plaintiff a "Borrower Welcome Letter" dated June 13, 2017.
FAC at if 25; Dkt. No. 27-2, Ex. B. This letter provides: "Accrued Late Charges: $5,491.00."
FAC at if 25; Dkt. No. 27-2, Ex. B. It further states "[B]ecause of interest, late charges, and other
charges that may vary from day to day, the amount due on the day you pay may be greater."
Dkt. No. 27-2, Ex. B. On June 17, 2017, Plaintiff sent FCI a "request for validation of debt."
FAC at if 26; Dkt. No. 27-3, Ex. C. FCI then sent Plaintiff a "Demand Loan Payoff statement"
providing in part: "Acc. Late Charges(Calculated through Payoff Date): $5,652.50." FAC at

if 27; Dkt. No. 27-4, Ex. D.

The Demand Loan Payoff statement further shows "accrued late

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charges in the amount of $80.75" applied to Plaintiffs account on June 1, 2017 and July 1, 2017.
FAC at if 29.
Based on the foregoing, Plaintiff alleges one claim under the FDCP A. She claims that
FCI' s alleged statement that late charges may be imposed on a loan that has been accelerated is
false and therefore violates 15 U.S.C. § 1692e. FAC at ifif 37-39. According to the amended
complaint, the Note in connection with Plaintiffs Mortgage provided for late charges on an
"overdue payment of principal and interest" but "says nothing about late charges after
acceleration." FAC at if 31 (quoting in part Dkt. No. 27-5, Ex. E).
Additionally, Plaintiff seeks to have a Rule 23(b)(3) class certified consisting of"(a) all
individuals (b) with a loan that was over 90 days behind at the time FCI began servicing it,
according to the records of FCI, (c) with a correspondence address that is the same as the
'property address,' (d) that had been accelerated, ( e) where FCI sent the individual a document
that referred to late charges (f) accrued since acceleration (g) where the document was sent at
any time during a period beginning November 9, 2016 and ending November 29, 2017." FAC at

ir 41.
Plaintiff filed her complaint on November 9, 2017. Dkt. No. 4. On December 29, 2017,
Defendant moved to dismiss the complaint. Dkt. Nos. 19-20. On January 19, 2018, Plaintiff
subsequently filed her first amended complaint. Dkt. No. 27. On February 2, 2018, Defendant
moved to dismiss the first amended complaint. Dkt. No. 29-30. On March 2 2018, Plaintiff filed
an opposition to Defendant's motion. Dkt. No. 36. And on March 9, 2018, Defendant filed a
reply brief in support of its motion. Dkt. No. 38.

II.

Standing

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Article III restricts federal courts' authority to hearing only disputes involving "Cases"
and "Controversies." U.S. CONST. art. III, §2. Accordingly, a party invoking a court's
jurisdiction must have standing to sue. See, e.g., Friends of the Earth, Inc. v. Laidlaw Envtl.
Servs. (TOC), Inc., 528 U.S. 167, 188 (2000). In order to have standing, a plaintiff must
establish three elements. A plaintiff must have: "(1) suffered an injury in fact, (2) that is fairly
traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a
favorable judicial decision." Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (quotations
omitted).
Thus, a plaintiff has standing to sue in federal court only if she has suffered an "injury in
fact." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). "To qualify as a
constitutionally sufficient injury-in-fact, the asserted injury must be concrete and particularized
as well as actual or imminent, not conjectural or hypothetical." Baur v. Veneman, 352 F.3d 625,
631-32 (2d Cir. 2003) (quoting Lujan, 504 U.S. at 560) (quotation omitted). Additionally, a
plaintiff does not "automatically satisfy[y] the injury-in-fact requirement whenever a statute
grants a person a statutory right and purports to authorize that person to sue to vindicate that
right. Article III standing requires a concrete injury even in the context of a statutory violation."
Spokeo, 136S. Ct. at 1549. At the pleading stage, a plaintiff need only "clearly allege facts
demonstrating" injury. Id. at 1547 (quotation omitted).
Here, Plaintiff has plead an injury from Defendant's alleged misconduct that is sufficient
to confer standing. The FDCP A was enacted "to eliminate abusive debt collection practices by
debt collectors." Sykes v. Mel S. Harris & Associates LLC, 780 F.3d 70, 82 (2d Cir. 2015)
(citing 15 U.S.C. § 1692e). Section 1692e prohibits "debt collectors" from using "any false,
deceptive, or misleading representation or means in connection with the collection of a debt."

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Maguire v. Citicorp Retail Servs., 147 F.3d 232, 235 (2d Cir. 1998) (citing 15 U.S.C. § 1692e).
The Second Circuit has explained that "there can be no dispute that Sections 1692e ... of the
FDCPA protect[s] an individual's concrete interests." Papetti v. Does 1-25, 691 F. App'x 24, 26
(2d Cir. 2017) (summary order). And that "Section 1692e protects a consumer's ability to fully
avail himself of his legal rights .... " Id. Plaintiff alleges that she was "deprived of accurate
information concerning the amount of the debt that was required to be disclosed by the law."
FAC

at~

36. The Court agrees with the reasoning in Papetti and finds it applicable here. Thus,

Plaintiffs allegation, taken as true, "entail[s] the concrete injury necessary for standing. Strubel
v. Comenity Bank, 842 F.3d 181, 189 (2d Cir. 2016).

III.

Motion to Dismiss Standard
In considering a Rule 12(b)(6) motion, the Court must "accept all allegations in the

complaint as true and draw all inferences in the non-moving party's favor." LaFaro v. New York
Cardiothoracic Group, PLLC, 570 F.3d 471, 475 (2d Cir. 2009) (citation omitted). 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, 556 U.S. 662, 678 (2009). But
"conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice
to defeat a motion to dismiss." Achtman v. Kirby, Mcinerney & Squire, LLP, 464 F.3d 328, 337
(2d Cir. 2006) (citation omitted).
In resolving a motion to dismiss, review is generally limited to "the facts as asserted
within the four comers of the complaint, the documents attached to the complaint as exhibits,
and any documents incorporated in the complaint by reference." McCarthy v. Dun & Bradstreet
Corp., 482 F.3d 184, 191 (2d Cir. 2007).

IV.

Plaintiff's Claim

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Plaintiff alleges that Defendant's statements that late charges may be imposed on a loan
that has been accelerated are false and violates 15 U.S.C. § 1692e. In determining whether
language in a collection notice violates Section l 692e, the Second Circuit has applied the "least
sophisticated consumer" standard. Avila v. Riexinger & Assocs., LLC, 817 P.3d 72, 75 (2d Cir.
2016) (quoting Cloman v. Jackson, 988 P.2d 1314, 1318 (2d Cir. 1993)). "In other words, we
ask how the least sophisticated consumer ... would understand the collection notice." Id.

A.

Plaintiff's Mortgage

Plaintiff states in her amended complaint that the late fees she was charged after her loan
was accelerated are impermissible. PAC at if 33 (citing Carreras v. Weinrib, 33 A.D.3d 953, 955
(2d Dep't 2006); Green Point Sav. Bank v. Varana, 236 A.D.2d 443 (2d Dep't 1997)). This
forms the basis of her § 1692e claim, as she argues that Defendant falsely stated that it could
charge her late fees, when in fact, it could not. See PAC at ifif 35-36.
Defendant argues that in order for Plaintiff to sufficiently allege a violation § l 692e, it
would first have to be impermissible to charge late fees on Plaintiffs account following the
acceleration of the loan balance. Yet, Defendant correctly points out that there are certain
circumstances where late fees can be charged. Section l 692f of the PDCP A states that "a debt
collector may not use unfair or unconscionable means to collect or attempt to collect any
debt ... the following conduct is a violation of this section: (1) The collection of any amount
(including any interest, fee, charge, or expense incidental to the principal obligation) unless such

amount is expressly authorized by the agreement creating the debt or permitted by law."
(emphasis added). In Carreras, which Plaintiff cites in her amended complaint, the Court also
explained that only "[in] the absence of a provision in the mortgage to the contrary, the
collection of late fees after a mortgage note has been accelerated is impermissible." 33 A.D.3d

6

at 955 (emphasis added). The same principle was stated in Green Point, which was included in
Plaintiffs amended complaint as well. 236 A.D. at 443. Accordingly, the Court must turn to the
language of the Mortgage and determine whether it allows late fees on an accelerated loan. In
relevant part, Plaintiffs Mortgage 1 states:
Even if Lender has required Immediate Payment in Full, I may have the right to have
enforcement of this Security Instrument stopped. I will have this right at any time before
the earliest of: (a) five days before sale of the Properly under any power of sale granted
by this Security Instrument; (b) another period as Applicable Law might specify for the
termination of my right to have enforcement of the Loan stopped; or (c) a judgment has
been entered enforcing this Security Instrument. In order to have this right, I will meet
the following conditions:

(a) I pay to Lender the full amount that then would be due under this Security Instrument
and the Note as if Immediate Payment in Full had never been required;
(b) I correct my failure to keep any of my other promises or agreements made in this
Security Instrument;
(c) I pay all of Lender' s reasonable expenses in enforcing this Security Instrument
including, for example, reasonable attorneys' fees, properly inspection and valuation fees,
and other fees incurred for the purpose of protecting Lender's interest in the Properly and
rights under this Security Instrument; and
(d) I do whatever Lender reasonably requires to assure that Lender's interest in the
Property and rights under this Security Instrument and my obligations under the Note and
under this Security Instrument continue unchanged.

Dkt. No, 33-1, Ex. A at§ 19 (emphasis added).
Additionally, Plaintiffs Note permits the assessment of late fees when a monthly
payment has not been made within fifteen days of the due date. See Dkt. No. 27-5, Ex.Eat§ 6.

1
Plaintiff meant to attach her Mortgage to the first amended complaint, but mistakenly attached the wrong exhibit.
See Dkt. No. 32 at 8. Defendant attached as an exhibit to its opposition papers a true and correct copy of the
Mortgage. Dkt. No, 33-1, Ex. A. Plaintiff agrees that Exhibit A is her Mortgage. Dkt. No. 36 at n.1. The Court can
properly consider the Mortgage in resolving the motion to dismiss, as the first amended complaint incorporates the
Mortgage in the complaint by reference. See McCarthy, 482 F.3d at 191.

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The language of§ 19(a) of the Mortgage permits the lender to assess late fees on an
accelerated basis. The Mortgage requires full payment of monthly payments that would have
been due each and every month on the dates set out in the Mortgage and Note had the loan not
been accelerated. This would include late fees, which are explicitly allowed by the Note. See
Dkt. No. 27-5, Ex.Eat§ 6. This reading of the Mortgage is supported by persuasive authority.

See Rizzo v. Pierce & Associates, 351 F.3d 791, 793-94 (7th Cir. 2003) (finding similar language
to "unambiguously require plaintiffs to pay the late fees" on an accelerated loan when a borrower
sought to have the loan reinstated).
However, as Plaintiff correctly notes, the language in the Mortgage "allows assessment of
late charges only if the borrower seeks to reinstate the loan." Dkt. No. 36 at 21. The relevant
language from the Mortgage states that in order to "have the right to have enforcement of this
Security Instrument stopped, the borrower must "pay to Lender the full amount that then would
be due under this Security Instrument and the Note as if Immediate Payment in Full had never
been required." Dkt. No, 33-1, Ex. A at§ 19. Here, Plaintiff has not alleged that she requested
to reinstate her Mortgage. Rather, Plaintiff has only alleged that she sent Defendant a request for
validation of debt. See F AC at if 26. Accordingly, it is not clear from the language in the
Mortgage, that in this circumstance, late charges may be imposed on a loan that has been
accelerated.
Therefore, Defendant's motion to dismiss-to the extent it argues that as a matter of law,
there was no falsehood or inaccuracy that could furnish the basis for an FDCPA claim-is
denied.

B.

Borrower Welcome Letter and Demand Loan Payoff Statement

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Defendant also contends that the two documents it sent to Plaintiff, the "Borrower
Welcome Letter" (Dkt. No. 27-2, Ex. B), and the "Demand Loan Payoff statement" (Dkt. No.
27-4, Ex. D), do not qualify as "'statement[s] that late charges may be imposed on a loan that has
been accelerated"' in connection with the collection of debt under the FDCP A. Dkt. No. 32 at 2
(quoting FAC at il 38). Defendant argues that the Borrower Welcome Letter only states that
"your Creditor has provided FCI the following information regarding the Total Amount Due on
your Promissory Note ... Accrued Late Charges: $5,491.00." Dkt. No. 32 at 5 (citing FAC at il
25). According to the Defendant, the Borrower Welcome Letter is merely a recitation of
information that creditor provided to FCI. And Defendant argues that the Demand Loan Payoff
statement was created and transmitted at Plaintiffs request, see FAC at ilil 26-27, and therefore
was not a communication made in connection with the collection of a debt. Dkt. No. 32 at 7.
For these reasons, Defendant concludes that Plaintiff has not sufficiently alleged an allegation of
a false, deceptive, or misleading representation "in connection with the collection of any debt"
under§ 1692e.
First, Plaintiff has sufficiently alleged that the Demand Loan Payoff was not an
unsolicited request. In Carlin v. Davidson Fink LLP, 852 F.3d 207, 215 (2d Cir. 2017), the
Second Circuit held that a payoff statement sent by a debt collection law firm in response to a
request for debt verification by the plaintiff was an initial communication in connection with the
collection of debt. In Carlin, plaintiff had sent the request for debt verification because he was
under the impression that he had to dispute the debt within 3 0 days, based on a notice the law
firm had sent him.· Id. Similarly, here, Defendant's June 13, 2017 Borrower Welcome Letter
states "[u]nless you, the consumer, within thirty days after the receipt of this notice, dispute the
validity of the Debt, or any portion therefor, the Debt will be assumed to be valid by FCI as the

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Debt Collector ... If you notify FCI in writing ... that you dispute the Debt or any portion of the
Debt, we will, as required by law, obtain and mail to you verification of the debt .... " Dkt. No.
27-2, Ex. B. Plaintiffs June 18, 2017 letter stated that she was writing FCI "in accordance with
the Fair Debt Collection Practices Act," and requested verification of the debt. Dkt. No. 27-3,
Ex. C. Drawing all inferences in the non-moving party's favor, Plaintiffs letter could be
construed as a verification request solicited by the Borrower Welcome Letter. Thus, Plaintiff has
sufficiently alleged that the Demand Loan Payoff statement was not "merely a response to an
unsolicited request for information." Carlin, 852 F.3d at 215. Rather, it could be interpreted as a
communication initiated by Defendant.
Second, Plaintiff has sufficiently alleged that the communication was sent in connection
with the collection of debt. The Second Circuit has held "that whether a communication is in
connection with the collection of a debt is a question of fact to be determined by reference to an
objective standard." Hart v. FCI Lender Servs., Inc., 797 F.3d 219, 225 (2d Cir. 2015)
(quotation omitted). And that "in determining at the motion to dismiss stage whether [a] [l]etter
triggers the [FDCPA's] notice provisions, we must view the communication objectively, asking
whether [the plaintiff] has plausibly alleged that a consumer receiving the communication could
reasonably interpret it as being sent in connection with the collection of a debt, rather than
inquiring into the sender's subjective purpose." Id. Here, the Demand Loan Payoff statement
includes language that the borrower is "authorized to use the following amounts to payoff the
above-mentioned loan." Dkt. No. 27-4, Ex. D. It also includes language about who the borrower
should make disbursements payable to. See id. And it includes a P.O. Box number for FCI. See

id. In Carlin, the Second Circuit noted that providing an addresses to which the plaintiff was
instructed to mail or wire his payments was instructive that the letter was sent in connection with

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the collection of debt. 852 F.3d at 215. Taking the allegations in the amended complaint as true,
an unsophisticated consumer could certainly interpret the Demand Loan Payoff statement as a
communication in connection with the collection of debt.
Plaintiff has therefore sufficiently alleged that Defendant's statement that late charges
may be imposed on a loan that has been accelerated violates§ 1692e.

I.

Conclusion

For the foregoing reasons, Defendant's motion to dismiss is DENIED. This resolves
Docket Number 31. The Court will schedule an initial pretrial conference by separate order.

SO ORDERED.

Dated: September_ _, 2018
New York, New York

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