Glenn et al v. FNF Servicing, Inc. et al

Filing 47

ORDER granting in part and denying in part 32 Motion to Dismiss, denying as moot 41 Motion for Summary Judgment, and granting 44 Motion for Voluntary Dismissal. Signed by Chief Judge James C. Dever III on 8/13/2013. (Sawyer, D.)

Glenn et al v. FNF Servicing, Inc. et al

Doc. 47

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:12-CV-703-D

JAMES GLENN and BRENDA GLENN,

)
)

)
)
v.
)
)
FNF SERVICING, INC., et al.,
)
)
Defendants. )
Plaintiffs,

ORDER

On February 19, 2013, James and Brenda Glenn (collectively "Glenns") filed their amended
complaint, asserting claims against multiple defendants [D.E. 30]. On March 5, 2013, defendant
FNF Servicing, Inc. ("FNF") filed a motion to dismiss the amended complaint and a memorandum
in support [D.E. 32-33]. See Fed. R. Civ. P. 12(b)(6). The Glenns responded in opposition to the
motion to dismiss [D.E. 40]. On May 7, 2013, defendants United Lender Services Corp. and United
Lender Services, LLC (collectively "United Lender") filed a motion for summary judgment [D.E.
41]. See Fed. R. Civ. P. 56. In response, the Glenns filed a motion for voluntary dismissal with
prejudice of their claims against several defendants [D.E. 44]. See Fed. R. Civ. P. 41(a)(2). As
explained below, the court grants in part and denies in part FNF's motion to dismiss, grants the
Glenns' motion for voluntary dismissal with prejudice against several defendants, and dismisses as
moot United Lender's motion for summary judgment.
I.
In April1999, the Glenns purchased a home in Raeford, North Carolina. Am. Compl., 14;
see Deed [D.E. 30-2]. To finance the purchase, the Glenns took out a mortgage, which currently is
held by Bank of America. Am. Compl., 15; see [D.E. 30-3]. In 2009, the Glenns decided to

Dockets.Justia.com

refinance their mortgage through Ideal Mortgage Bankers, Ltd., doing business as Lend America
("Lend America"). Am. Compl. ,, 10, 16-17. On September 10, 2009, the Glenns signed the
documents to complete the mortgage refinancing with Lend America. Id. , 19. As part of the
refinancing, Lend America was to pay off the balance of the Glenns' original mortgage with Bank
of America. ld., 20; see [D.E. 30-4].
On October 2, 2009, the Glenns received a letter from Lend America informing them that the
flrst payment on the refmanced mortgage was due on November 1, 2009. Am. Compl., 27; see
[D.E. 30-9]. On October 27, 2009, the Glenns remitted a check for the payment amount, which Lend
America deposited. Am. Compl. , 28; see [D.E. 30-1 0]. In a notice dated November 2, 2009, Bank
ofAmerica informed the Glenns that they were delinquent on their mortgage payments. Am. Compl.
, 29; see [D.E. 30-11]. The Glenns, who believed that Lend America had paid the balance of their
Bank of America loan, investigated the issue in November and December 2009. Am. Compl. , 31.
The Glenns learned that Lend America was no longer in business and had not paid off the Bank of
America loan. ld. 1 The Glenns made no further payments on the Lend America mortgage after the
initial October 27, 2009 payment. Id. , 32. On November 30, 2010, Lend America flied for
bankruptcy. Id. , 11.
In a letter dated December 24, 2009, FNF informed the Glenns that FNF had assumed
responsibility for servicing the Lend America mortgage effective December 17, 2009. Id. , 41; see
[D.E. 30-16]. FNF acted on behalf of the Government National Mortgage Association ("Ginnie
Mae"), which had acquired the Glenns' loan from Lend America. See Am. Compl., 13; Ginnie Mae
Answer [D.E. 31] ,, 9, 13. As mortgage servicer, FNF has undertaken collection efforts for
1

In May 2010, Bank of America initiated foreclosure proceedings against the Glenns. See
Am. Compl. ,, 36-37. However, in August 2010, the Glenns paid the delinquent balance and
avoided foreclosure. See id., 39.
2

payments the Glenns allegedly owe on what had been the Lend America mortgage. See Am. Compl.
~ 43. Since January 2010, the Glenns have resisted FNF's collection efforts, contending that the

underlying Lend America transaction was fraudulent because Lend America never paid offthe Bank
of America mortgage. See id. ~ 42. The Glenns informed FNF and Ginnie Mae numerous times of
their position. See id.

In a letter dated January 19, 2012, FNF notified the Glenns that the loan was in default. See
id. ~ 46; [D.E. 30-19]. The letter indicated that the Glenns immediately owed $27,831.72, and had
a principal balanceof$143,426.08. [D.E. 30-19] 1. On January 23,2012, the Glenns wrote to FNF,
as well as the credit reporting agencies Equifax, Experian, and TransUnion, and requested that the
entries on their credit reports for FNF be removed and their credit score be raised. See Am. Compl.
~

47; [D.E. 30-20]. FNF's reports to the credit agencies, which state that the Glenns defaulted on

their mortgage, have adversely affected the Glenns' credit scores. See Am. Compl. ~~ 44-45. On
March 27, 2012, the Glenns, through counsel, informed FNF that Lend America never paid off the
Bank of America mortgage and requested further information from FNF. See [D.E. 30-17]. On
May 3, 2012, the Glenns, through counsel, wrote to Ginnie Mae, advising Ginnie Mae of their
position that the Lend America transaction was fraudulent. See [D.E. 30-18]. To date, FNF has
not modified its reporting about the Glenns to the credit agencies. See Am. Compl. ~ 48.
The Glenns allege five claims against FNF, some under North Carolina law and some under
federal law. As for the state law claims, the Glenns allege violations ofNorth Carolina's Unfair and
Deceptive Trade Practices Act ("UDPTA"), N.C. Gen. Stat. §§ 75-1.1 et seq., libel, and libel per se.
See Am. Compl. ~~ 67-71, 84-88. As for the federal law claims, the Glenns allege violations of the
Fair Credit Reporting Act ("FCRA''), 15 U.S.C. §§ 1681 et seq., and the Fair Debt Collection
Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq. See Am. Compl. ~~ 72-83. The Glenns seek
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damages and a declaratory judgment. See Am. Compl. 16-18.

II.
In analyzing a motion to dismiss under Rule 12(b)(6), a court must determine whether the
complaint is legally and factually sufficient to state a plausible claim for relief. See Ashcroft v.
Iqbal, 556 U.S. 662, 678-79 (2009); Bell Atl. Com. v. Twombly, 550 U.S. 544, 555-56 (2007);
Coleman v. Md. Court of Aru>eals, 626 F.3d 187, 190 (4th Cir. 2010), aff'd, 132 S. Ct. 1327 (2012);
Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). A court need not accept a complaint's
"legal conclusions, elements of a cause of action, and bare assertions devoid of further factual
enhancement." Nemet Chevrolet. Ltd. v. Consumeraffairs.com. Inc., 591 F.3d 250, 255 (4th Cir.
2009); see Iqbal, 556 U.S. at 678-79. Similarly, a court "need not accept as true unwarranted
inferences, unreasonable conclusions, or arguments." Giarratano, 521 F.3d at 302 (quotation
omitted); see Iqbal, 556 U.S. at 678-79. At the motion to dismiss stage, the court may consider
extrinsic documents that were explicitly discussed in the complaint. See,

~.

Am. Chiropractic

Ass'n v. Trigon Healthcare. Inc., 367 F.3d 212, 234 (4th Cir. 2004).
As for the Glenns' UDTPA claim, the UDTPA prohibits "unfair or deceptive acts or practices
in or affecting commerce." N.C. Gen. Stat.§ 75-1.1. However, to the extent the UDTPA claim is
based upon allegations ofFNF' s "acts of reporting false information about the [Glenns] to the credit
bureaus," Am. Compl. ~ 68, the FCRA preempts the claim. See Ross v. FDIC, 625 F.3d 808,813
(4th Cir. 2010). The FCRA provides that "[n]o requirement or prohibition may be imposed under
the laws of any State ... with respect to any subject matter regulated under ... section 1681 s-2 of
this title." 15 U.S.C. § 1681t(b)(1)(F). Section 1681s-2 prescribes detailed duties for those entities
who furnish information to credit reporting agencies, including obligations to not report inaccurate
information and, upon notice of a dispute, to investigate the dispute and report any corrections to
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credit reporting agencies. See 15 U.S.C. § 1681s-2(a)-(b). Thus, the FCRA preempts the Glenns'
UDTPA claim based upon furnishing inaccurate information to the credit reporting agencies. See,
~.

15 U.S.C. § 1681t(b)(1)(F); Ross, 625 F.3d at 813.
A UDTPA claim also encompasses violations ofArticle 2 ofthe UDTPA, the North Carolina

Debt Collection Act (''NCDCA"), N.C. Gen. Stat. §§ 75-50 to 75-56. The NCDCA "prohibits debt
collectors from engaging in unfair debt collection practices." Ross, 625 F.3d at 817; see N.C. Gen.
Stat. §§ 75-50 to 75-56. To state a claim under the NCDCA, a plaintiff must plausibly allege three
threshold requirements. See,~. Davis Lake Cm1y. Ass'n v. Feldman, 138 N.C. App. 292, 295-96,
530 S.E.2d 865, 868 (2000). First, the plaintiff must be a consumer, who "incurred a debt or alleged
debt for personal, family, household, or agricultural purposes." N.C. Gen. Stat. § 75-50(1). The
Glenns are consumers because they incurred a mortgage for family or household purposes. See Am.
Compl. ~~ 2, 14-19. Second, the claim must involve a debt, which includes "any obligation owed
or due or alleged to be owed or due from a consumer." N.C. Gen. Stat. § 75-50(2). The Lend
America mortgage qualifies as a debt because, at a minimum, FNF and Ginnie Mae allege that the
Glenns owe money. See Am. Compl. ~ 43. Third, the defendant must be a debt collector, which
includes "any person engaging, directly or indirectly, in debt collection from a consumer." N.C.
Gen. Stat. § 75-50(3). As a mortgage servicer seeking to collect on a debt, FNF qualifies as a debt
collector. See Am. Compl.

~~

41, 43; Williams v. HomEg Servicing Corp., 184 N.C. App. 413,

421-22, 646 S.E.2d 381, 386-87 (2007). Thus, the Glenns' allegations satisfy the NCDCA's
threshold requirements.
Beyond the NCDCA's threshold requirements, a plaintiff must allege the three standard
elements of a UDTPA claim: "( 1) an unfair act (2) in or affecting commerce (3) proximately causing
injury." Davis Lake, 138 N.C. App. at 296, 530 S.E.2d at 868; see Ross, 625 F.3d at 817. An act

5

"is unfair when it offends public policy and when the [act] is immoral, unethical, oppressive,
unscrupulous, or substantially injurious to consumers." Walker v. Branch Banking & Trust Co., 133
N.C. App. 580, 583, 515 S.E.2d 727, 729 (1999). "In the context of debt collection, these acts
include the use of threats, coercion, harassment, unreasonable publications of the consumer's debt,
deceptive representations, and unconscionable means." Davis Lake, 138 N.C. App. at 296, 530
S.E.2d at 868. The Glenns' allege that, since January 2010, FNF's failure to investigate the basis
for their denial of liability and FNF' s continuing attempts to collect the debt constitute unfair acts.
See,

~.

Am. Compl. ,, 42-43; see also [D.E. 40] 8. In Walker, the North Carolina Court of

Appeals concluded that a bank's collection effort of one demand letter and its failure to investigate
allegations of fraud within eleven days did not amount to unfair acts. See 133 N.C. App. at 584, 515
S.E.2d at 730. Walker is distinguishable, however, based on the two-year period that FNF had to
investigate the Glenns' allegations and FNF' s repeated collection attempts over that time. Although
the Glenns' theory is novel, the Glenns plausibly allege that FNF committed unfair acts. The Glenns
also plausibly allege thatFNF's actions affected commerce. See N.C. Gen. Stat.§ 75-1.1(a); Davis
Lake, 138 N.C. App. at 296, 530 S.E.2d at 869. Finally, the Glenns plausibly allege that FNF's
actions have proximately caused damage to their employment status and health, see Am. Compl. ,,
49, 53, which is sufficient to state a claim. See Davis Lake, 138 N.C. App. at 296-97, 530 S.E.2d
at 869; cf. Ross, 625 F .3d at 818. Thus, the Glenns have stated a claim under the NCDCA. Whether
the Glenns can prove the claim is an issue for another day.
As for the Glenns' FCRA claim, consumers may "bring private suits for violations of [15
U.S.C.] § 1681s-2(b)." Saunders v. Branch Banking& Trust Co. ofVa., 526 F.3d 142, 149 (4th Cir.
2008); cf. 15 U.S.C. §§ 1681n, 1681o. Section 1681s-2(b) prescribes the duties for entities that
provide information to credit reporting agencies, usually creditors or their agents, when the accuracy

6

of the reported information has been challenged. See 15 U.S.C. § 1681s-2(b). When a consumer
believes that information that a credit reporting agency published is incorrect, the consumer must
file a dispute with the credit reporting agency. See 15 U.S.C. § 1681i(a)(l). The credit reporting
agency then notifies the creditor or creditor's agent about the dispute. See id. § 1681 i(a)(2). Upon
receiving notification of the dispute, section 1681s-2(b)(1) requires the entity that provided the
information ''to conduct a reasonable investigation oftheir records to determine whether the disputed
information can be verified." Johnson v. MBNAAm. Bank. NA, 357 F.3d426, 431 (4thCir. 2004);
see Saunders, 526 F.3d at 149; Davis v. Trans Union. LLC, 526 F. Supp. 2d 577, 585 (W.D.N.C.
2007). At the conclusion of the investigation, the result must be disclosed to the credit reporting
agency and action must be taken to remedy inaccurate or incomplete information. See 15 U.S.C. §
1681s-2(b)(1)(C)-{E).
The Glenns allege that FNF, as mortgage servicer for Ginnie Mae, furnished information to
the credit reporting agencies about the Lend America mortgage. See, ~. Am. Compl. ~ 73. The
Glenns filed a dispute with the credit reporting agencies about the accuracy of the information that
FNF reported, and FNF received notice of the Glenns' dispute. See id. ~~ 46-47, 75; see also [D.E.
30-20]. The Glenns further allege that, despite receiving notice, FNF willfully or negligently failed
to conduct a reasonable investigation of the dispute and correct any inaccuracies. See Am. Compl.
~~ 75-76.

Thus, the Glenns have plausibly alleged an FCRA claim against FNF. See Saunders, 526

F.3d at 149; Johnson, 357 F.3d at 431. Again, whether the Glenns can prove the claim is an issue
for another day.
As for the Glenns' FDCPA claim, "a plaintiff must sufficiently allege that (1) he was the
object of collection activity arising from a consumer debt as defined by the FDCPA, (2) the
defendant is a debt collector as defined by the FDCPA, and (3) the defendant engaged in an act or
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omission prohibited by the FDCPA." Johnson v. BAC Home Loans Servicing. LP, 867 F. Supp. 2d
766, 776(E.D.N.C. 2011). The Glenns' LendAmericamortgagequalifiesasaconsumerdebtwithin
themeaningoftheFDCPA. See 15 U.S.C. § 1692a(5). FNF contends, however, that as a mortgage
servicer, it falls outside the FDCPA's definition of debt collector. See [D.E. 33] 9-12.
The FDCPA defines a debt collector as "any business the principal purpose of which is the
collection of any debts, or [one] who regularly collects or attempts to collect, directly or indirectly,
debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6). Creditors
generally are not debt collectors under the statute. See Johnson, 867 F. Supp. 2d at 777. The
statutory definition of debt collector also excludes "any person collecting or attempting to collect any
debt owed or due or asserted to be owed or due another to the extent that such activity ... concerns
a debt which was not in default at the time it was obtained by such person." 15 U.S.C. §
1692a(6)(F)(iii) (emphasis added). Thus, a mortgage servicer may qualify as a debt collector under
the FDCPA when the servicer acquires a loan that already was in default.

See,~' Boston v.

Ocwen

Loan Servicing. LLC, No. 3:12CV451, 2013 WL 122151, at *4 (W.D.N.C. Jan. 9, 2013)
(unpublished); Webb v. Green Tree Servicing. LLC, Civil Action No. ELH-11-2105, 2012 WL
2065539, at *3 (D. Md. June 7, 2012) (unpublished); Joy v. Merscom. Inc., No. 5:10-CV-218-FL,
2012 WL 7804203, at *14-15 (E.D.N.C. May 15,2012)(unpublished),reportandrecommendation
adopted in relevant pm:t, 2013 WL 1246856, at *7 (E.D.N.C. Mar. 27, 2013).
Here, FNF began servicing the Glenns' Lend America mortgage effective December 17,
2009. [D.E. 30-16] 1. According to the Lend America note, payments were due on the first day of
each month, beginning on November 1, 2009. [D.E. 30-5] 1. Penalties for late payment were
assessed "by the end of fifteen calendar days after the payment is due." Id. 2. Default occurred when
the Glenns "fail[ed] to pay in full any monthly amount." ld. The Glenns only made their first

8

monthly payment, which was due on November 1, 2009. Am. Compl. ~ 28. The Glenns did not
make the payment due on December 1, 2009. Id. ~ 32. FNF's January 19, 2012lettertothe Glenns
attributes their loan's default status to "failing to make the monthly payments due 12-01-09 through
01-19-12." [D.E. 30-19] 1. Thus, the Glenns plausibly allege that the mortgage was in default as
of December 1, 2009, when the second payment was due and unpaid, or as of December 16,2009,
when the fifteen-day late payment grace period ended. Either way, default occurred before FNF
began servicing the mortgage. Accordingly, the Glenns have plausibly alleged that FNF is a debt
collector within the meaning of the FDCPA.
The FDCPA prohibits a debt collector from using "any false, deceptive, or misleading
representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. This
prohibition encompasses "a debt collector's reporting of a consumer's debt to a credit reporting
agency ... if the communication is false, deceptive, or misleading." Akalwadi v. Risk Mgmt.
Alternatives. Inc., 336 F. Supp. 2d 492, 503 (D. Md. 2004); see Davis, 526 F. Supp. 2d at 586--87.
The Glenns have plausibly alleged that FNF' s communications with the credit reporting agencies
regarding the Lend America mortgage were false, deceptive, or misleading. See Am. Compl.

~~

47-48, 79-81. Thus, the Glenns have plausibly alleged an FDCPA claim against FNF. Again,
whether the Glenns can prove the claim is an issue for another day.
As for the Glenns' claim for declaratory judgment, the decision whether to grant a declaratory
judgment is committed to the sound discretion of the court. See Centennial Life Ins. Co. v. Poston,
88 F.3d 255,256--58 (4th Cir. 1996). On the current record, the court declines to dismiss the claim.
As for the Glenns' state-law claim against FNF for libel and libel per se, the Glenns concede
that the FCRA preempts this claim. See [D.E. 40] 5. Thus, the court dismisses the state-law claim
for libel and libel per se.
9

Finally, the court addresses the Glenns' motion under Rule 41(a)(2) for voluntary dismissal
with prejudice oftheir claims against defendants Worldwide Abstract Services Agency, LLC, United
Lender Services Corp., United Lender Services, LLC, and EAM Land Services, Inc. See [D.E. 44].
In reviewing a plaintiff's motion for voluntary dismissal, the court "must focus primarily on
protecting the interests of the defendant." Davis v. USXCorp., 819F.2d 1270, 1273 (4thCir. 1987);
see Bioxy. Inc. v. Birko Corp., 935 F. Supp. 737, 740 (E.D.N.C. 1996). The court concludes that
granting the Glenns' motion is in the interest ofWorldwide Abstract Services Agency, LLC, United
Lender Services Corp., United Lender Services, LLC, and EAM Land Services, Inc. Thus, the court
grants the motion for voluntary dismissal. Moreover, because the voluntary dismissal moots United
Lender's motion for summary judgment, the court dismisses it.
III.

In sum, FNF's motion to dismiss under Rule 12(b)(6) [D.E. 32] is GRANTED IN PART
and DENIED IN PART. The Glenns' UDTPA claim against FNF is dismissed as preempted to the
extent it is based upon furnishing inaccurate information to the credit reporting agencies. The
Glenns' state-law claim against FNF for libel and libel per se is dismissed. Also, the Glenns'
motion for voluntary dismissal with prejudice of certain defendants [D.E. 44] is GRANTED. The
court dismisses defendants Worldwide Abstract Services Agency, LLC, United Lender Services
Corp., United Lender Services, LLC, and EAM Land Services, Inc. from this action. United Lender
Services Corp. and United Lender Services, LLC's motion for summary judgment [D.E. 41] is
DISMISSED AS MOOT.
SO ORDERED. This _13_ day of August 2013.

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