Miller et al v. US Bank, NA et al

Filing 26

REPORT AND RECOMMENDATION THAT DEFENDANTS MOTION TO DISMISS (DOC. 5) BE GRANTED IN PART AND DENIED IN PART. Signed by Magistrate Judge Michael J. Newman on 1/18/2018. (dm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
WILLIAM R. MILLER, et al.,
Plaintiffs,

Case No. 3:17-cv-55

vs.
U.S. BANK, N.A., et al.,

District Judge Walter H. Rice
Magistrate Judge Michael J. Newman

Defendants.
______________________________________________________________________________
REPORT AND RECOMMENDATION1 THAT DEFENDANTS’ MOTION TO DISMISS
(DOC. 5) BE GRANTED IN PART AND DENIED IN PART
______________________________________________________________________________
This civil case, brought against Defendants U.S. Bank, N.A. (“U.S. Bank”) and U.S.
Bank Home Mortgage (“Home Mortgage”) is before the Court on Defendants’2 Fed. R. Civ. P.
12(b)(6) partial motion to dismiss. Doc. 5. Plaintiffs filed a memorandum in opposition (doc. 9)
and Defendants submitted a reply (doc. 10).

The undersigned has considered all of the

foregoing, and Defendants’ motion is now ripe.
I.
Plaintiffs, William and Stacy Miller (the “Millers”), a husband and wife, reside in a home
in Waynesville, Ohio which, between June 2006 and August 2015, was subject to a mortgage
held by U.S. Bank. Doc. 1 at PageID 1-2. Until approximately January 2014, Plaintiffs’
mortgage was serviced by U.S. Bank itself. Id. at PageID 2-3. During the time the mortgage

1

Attached hereto is a NOTICE to the parties regarding objections to this Report and
Recommendation.
2
Plaintiffs allege that Home Mortgage is a subsidiary of U.S. Bank. Doc. 1 at PageID 3. In the
motion to dismiss, counsel state that the motion is filed by U.S. Bank and make no reference as to
whether it is also being filed on behalf of Home Mortgage. See doc. 5 at PageID 51. Because Home
Mortgage has neither filed a separate Rule 12 motion nor filed an answer, the Court assumes that the
motion to dismiss and reply were filed on behalf of both U.S. Bank and Home Mortgage. Absent such an
assumption -- and the further assumption that Home Mortgage is a separate entity from U.S. Bank -Home Mortgage would appear to be in default.

was serviced by U.S. Bank, payments were automatically deducted by U.S. Bank from Plaintiffs’
separate U.S. Bank joint checking account. Id. at PageID 2. From February 2012 until January
2014, at U.S. Bank’s request and with approval of Plaintiffs, U.S. Bank automatically withdrew
payments from Plaintiffs’ joint checking account on a bi-weekly basis and appropriately applied
the withdrawn sums toward the principal and interest owed on the note. Id.
Beginning in January 2014, the relationship between the parties changed and soured. Id.
Effective January 18, 2014, U.S. Bank transferred servicing of the mortgage to Home Mortgage.
Id. at PageID 3. Plaintiffs allege that shortly thereafter, a number of errors and irregularities
were made by both Defendants with regard to the administration and servicing of the mortgage.
Id. at PageID 3-9. In a thirteen count complaint, they allege:
Count 1:

Home Mortgage violated the terms of the note and mortgage (i.e.,
breached the parties’ agreements) by unilaterally creating an
escrow account for the payment of taxes on the property. Doc. 1 at
PageID 9-10. Plaintiffs further allege that such actions violated
RESPA, 12 U.S.C. § 2605;

Count 2:

The administration of the mortgage note by both Defendants was
improper in that they, inter alia, failed to withdraw the correct
amounts at the correct times for mortgage payments and
improperly establishing an escrow account for the payment of
property taxes. Id. at PageID 10-11. Plaintiffs allege that such
improper administration violated 12 U.S.C. § 2605;

Count 3:

Home Mortgage tortiously interfered with Plaintiff William
Miller’s ability to operate his law practice, resulting in Mr. Miller’s
decision to close a number of U.S. Bank accounts (including
accounts he managed on behalf of his clients), and resulted in the
loss of business (including the loss of at least one client);

Count 4:

Home Mortgage improperly applied the incorrect amounts toward
the principal and interest owed on the note, attempted to
unilaterally change the provisions of the original note and,
ultimately, charged interest on an incorrect principal balance;

Count 5:

Home Mortgage violated 12 U.S.C. § 2605(e) by failing to provide
a payment history as requested on numerous occasions;

Count 6:

U.S. Bank recorded numerous phone conferences with William
Miller between February 3, 2014 and August 2015, and violated 12
U.S.C. § 2605 by failing to provide copies of the telephone
conference recordings after they were requested in writing and
orally on numerous occasions;

Count 7:

Home Mortgage violated 12 U.S.C. § 2605(e) by failing to respond
at all, or within a reasonable time, to William Miller’s inquiries
regarding account errors;

Count 8:

Home Mortgage, without notice or explanation, withdrew amounts
from a separate checking account for mortgage payments at
irregular intervals and made other changes to the mortgage account
without notice or explanation. Id. at PageID 16-17. Because of
Home Mortgage’s conduct, Plaintiffs allege that they could not
properly determine their correct mortgage balance at any time after
January 21, 2014;

Count 9:

Home Mortgage failed to respond to requests regarding the payoff
amount of the mortgage, delaying Plaintiffs’ ability to refinance
their mortgage with another lender and causing them to pay
additional amounts of interest to Home Mortgage;

Count 10:

Defendants’ conduct was such that it impacted “the normal
husband-wife relationship” and, therefore, Stacy Miller alleges a
claim for loss of consortium;

Count 11:

U.S. Bank violated § 1024 of the Consumer Financial Protection
Servicing Code (“CFSB”);

Count 12:

U.S. Bank’s failure to provide an accurate mortgage payoff figure
violates § 1026.36(c)(3) of the CFSB; and

Count 13:

U.S. Bank violated § 1024.36(a) of the CFPB by failing to provide
a payment history, as well as copies or transcripts of audio
recorded phone conversations between the parties between January
and February 2014.

Id. at PageID 3-20.
II.
A motion to dismiss filed pursuant to Rule 12(b)(6) operates to test the sufficiency of the
complaint and permits dismissal for “failure to state a claim upon which relief can be granted.”
To show grounds for relief, Fed. R. Civ. P. 8(a)(2) requires that the complaint contain a “short

and plain statement of the claim showing that the pleader is entitled to relief.” While Fed. R.
Civ. P. 8 “does not require ‘detailed factual allegations’ . . . it demands more than an unadorned,
the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Pleadings offering mere “‘labels
and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’” Id.
(citing Twombly, 550 U.S. at 555). In determining a motion to dismiss, “courts ‘are not bound to
accept as true a legal conclusion couched as a factual allegation.’” Twombly, 550 U.S. at 555
(citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). Further, “[f]actual allegations must be
enough to raise a right to relief above the speculative level.” Id.
In order “[t]o 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.’” Iqbal, 556 U.S.
at 678. In addition to well-pleaded allegations in the complaint, the Court may also consider
“matters of public record, orders, items appearing in the record of the case, and exhibits attached
to the complaint,” as well as documents attached to a defendant’s motion to dismiss that are
important to the plaintiff’s claims or if referred to in the complaint. Amini v. Oberlin College,
259 F.3d 493, 502 (6th Cir. 2001) (citation omitted); Composite Tech., L.L.C. v. Inoplast
Composites S.A. de C.V., 925 F. Supp. 2d 868, 873 (S.D. Ohio 2013).
A claim is plausible where “plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S.
at 678. Plausibility “is not akin to a ‘probability requirement,’ but it asks for more than a sheer
possibility that a defendant has acted unlawfully.” Id. “[W]here the well-pleaded facts do not
permit the court to infer more than the mere possibility of misconduct, the complaint has alleged
-- but it has not ‘show[n]’ -- ‘that the pleader is entitled to relief.’” Id. at 679 (alteration in
original) (citing Fed. R. Civ. P. 8(a)(2)).

III.
In their partial motion to dismiss, Defendants argue that: (1) many counts -- namely,
Counts 1, 2, 5, 7, 11 and 13 -- are duplicative and merit dismissal on that basis; (2) Plaintiffs fail
to state a violation of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2605,
in Count One of the complaint; (3) Plaintiffs fail to state a claim of tortious interference with a
business relationship in Count Three of the complaint; (4) Count Nine, regarding the failure to
provide a loan payoff amount, is inadequately plead; and (5) Stacy Miller’s loss of consortium
claim, pled in Count Ten, fails as a matter of law in the absence of an allegation of bodily injury
to her husband. Id. at PageID 53-59.
In their memorandum in opposition, Plaintiffs agree that Counts Nine and Ten are subject
to dismissal under Fed. R. Civ. P. 12(b)(6), but otherwise oppose Defendants’ arguments. Id. at
PageID 87. Based upon Plaintiffs’ abandonment of Counts Nine and Ten, the undersigned
recommends that Defendants’ motion to dismiss be GRANTED with regard to Counts Nine and
Ten. The Court will address the remainder of Defendants’ arguments in turn.
A.

Duplicative Counts

Defendants move to dismiss a number of counts set forth in Plaintiffs’ complaint alleging
that those counts are duplicative.

Doc. 5 at PageID 53-54.

The undersigned concludes,

procedurally, that Rule 12(f) is the proper Federal Rule of Civil Procedure for seeking dismissal
of duplicative counts.

Rule 12(f) states that, “[t]he court may strike from a pleading an

insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.”
Generally, “[b]ecause striking a portion of a pleading is a drastic remedy, such motions
are generally viewed with disfavor and are rarely granted.” Watkins & Son Pet Supplies v. Iams
Co., 107 F. Supp. 2d 883, 887 (S.D. Ohio 1999), aff’d, 254 F.3d 607 (6th Cir. 2001). “In
deciding whether to strike a pleading or portions thereof, courts should consider (1) whether the

material has any possible relation to the controversy and (2) whether either party would be
prejudiced by allowing the pleading to stand as-is.” Amerine v. Ocwen Loan Servicing LLC, No.
2:14-CV-15, 2015 WL 10906068, at *1 (S.D. Ohio Mar. 31, 2015). Finding the allegations -duplicative or not -- bear relation to the controversy and that no prejudice will result from those
allegations remaining in the complaint, Defendants’ motion should be denied in this regard.
B.

RESPA

As noted supra, Plaintiffs allege in Count One that Home Mortgage violated the terms of
the note by unilaterally creating an escrow account for the payment of property taxes, thereby
violating RESPA, 12 U.S.C. § 2605. Doc. 1 at PageID 9-10. Plaintiffs allege that the improper
creation of the escrow account resulted in Home Mortgage withdrawing, without authorization,
funds from their U.S. Bank checking account and/or failing to properly apply the withdrawn
funds to the principal and interest owing on the note. Id. at PageID 10.3
Defendants move to dismiss Count One insofar as Plaintiffs allege that establishment of
the escrow account violated RESPA. Doc. 5 at PageID 55. In support, Defendants cite RESPA
regulations which state that, “[w]here [the mortgage loan] documents do not specifically
establish an escrow account, whether a servicer may establish an escrow account for the loan is a
matter for determination by other Federal or State law.” 12 C.F.R. § 1024.17(e)(8). Plaintiffs
cite no contrary authority in support of their proposition that the mere creation of the escrow
account amounts to a violation of RESPA, and the Court finds no such authority. Accordingly,
the undersigned recommends that the motion to dismiss be GRANTED in this limited regard,

3

Plaintiffs point to the specific language of the mortgage agreement and note between the parties,
which was attached to the Millers’ complaint as an exhibit. Doc. 9 at PageID 85; see also doc. 1-1 at
PageID 23-43. That agreement specifically states that “[u]nless otherwise provided in a separate
agreement, Mortgagor will not be required to pay to Lender funds for taxes and insurance in escrow.”
Doc. 1-1 at PageID 28. In light of these allegations, the undersigned concludes that Plaintiffs adequately
allege a breach of contract claim.

i.e., to the extent Plaintiffs allege that the mere creation of an escrow account amounts to a
RESPA violation.
Notably, Defendants do not address Plaintiffs’ contention that the unauthorized
withdrawal of funds from their U.S. Bank checking account to fund the escrow account amounts
to a violation of RESPA. In light of the lack of argument and citation to authority on this point,
the undersigned concludes that such a claim remains pending at this time subject to further
argument of counsel at the summary judgment stage. Notably, in the absence of argument or
citation set forth by the parties, the undersigned expresses no opinion at this time as to whether
such conduct is or is not a RESPA violation.
In addition, Defendants agree that any failure on their part to respond or correct error
concerning the creation of the escrow account may amount to a violation of RESPA. See doc. 10
at PageID 93. However, Defendants argue that Plaintiffs fail to adequately allege that they
notified Defendants of errors in that regard. Id. The undersigned concludes that Plaintiffs
sufficiently allege factual content upon which the Court can reasonably infer that they notified
Defendants of the alleged escrow error and the improper withdrawal of money to fund the
escrow. See doc. 1 at PageID 8 (alleging that, “[a]fter hundreds of phone calls, numerous letters
and realizing that U.S. Bank Home Mortgage was going to rectify errors . . .”). Accordingly,
Defendants’ motion to dismiss should be DENIED in this regard.
C.

Tortious Interference

“The elements of tortious interference with a business relationship are (1) a business
relationship; (2) the tortfeasor’s knowledge thereof; (3) an intentional interference causing a
breach or termination of the relationship; and (4) damages resulting therefrom.”

Dolan v.

Glouster, 879 N.E.2d 838, 847 (Ohio Ct. App. 2007). In moving to dismiss Plaintiffs’ tortious

interference claim, Defendants argue that Plaintiffs fail to allege facts to support the contention
that Defendants intentionally interfered with any relationship. Doc. 5 at PageID 55-57.
The undersigned agrees with Defendants that Plaintiffs allege no facts upon which the
Court can reasonably infer that they intentionally interfered with any business relationship
between Plaintiff William Miller and his law clients. See doc. 1 at PageID 11-12. Instead,
Plaintiffs allege that Defendants’ incompetence in administering the mortgage led to Mr. Miller’s
loss of confidence in Defendants’ ability to manage the accounts of his clients, for whom he acts
as a fiduciary, representative payee, guardian, or manager of funds. See doc. 1 at PageID 7.
Absent some factual averment regarding intentional conduct on the part of Defendants in
interfering with a particular business relationship, Defendants’ motion to dismiss should be
GRANTED with regard to this claim.
IV.
Based on the foregoing, the undersigned RECOMMENDS that Defendants’ partial
motion to dismiss (doc. 5) be GRANTED IN PART and DENIED IN PART as follows: (1)
Counts Nine and Ten be dismissed; (2) Count One be DISMISSED to the limited extent that
Plaintiffs contend that Defendants’ creation of an escrow account violated RESPA; and (3) Court
Three (tortious interference) be DISMISSED.

Date:

January 18, 2018

s/ Michael J. Newman
Michael J. Newman
United States Magistrate Judge

NOTICE REGARDING OBJECTIONS
Pursuant to Fed. R. Civ. P. 72(b), any party may serve and file specific, written
objections to the proposed findings and recommendations within FOURTEEN days after being
served with this Report and Recommendation. This period is not extended by virtue of Fed. R.
Civ. P. 6(d) if served on you by electronic means, such as via the Court’s CM/ECF filing system.
If, however, this Report and Recommendation was served upon you by mail, this deadline is
extended to SEVENTEEN DAYS by application of Fed. R. Civ. P. 6(d). Parties may seek an
extension of the deadline to file objections by filing a motion for extension, which the Court may
grant upon a showing of good cause.
Any objections filed shall specify the portions of the Report and Recommendation
objected to, and shall be accompanied by a memorandum of law in support of the objections. If
the Report and Recommendation is based, in whole or in part, upon matters occurring of record
at an oral hearing, the objecting party shall promptly arrange for the transcription of the record,
or such portions of it as all parties may agree upon or the Magistrate Judge deems sufficient,
unless the assigned District Judge otherwise directs.
A party may respond to another party’s objections within FOURTEEN days after being
served with a copy thereof. As noted above, this period is not extended by virtue of Fed. R. Civ.
P. 6(d) if served on you by electronic means, such as via the Court’s CM/ECF filing system. If,
however, this Report and Recommendation was served upon you by mail, this deadline is
extended to SEVENTEEN DAYS by application of Fed. R. Civ. P. 6(d).
Failure to make objections in accordance with this procedure may forfeit rights on appeal.
See Thomas v. Arn, 474 U.S. 140, 153-55 (1985); United States v. Walters, 638 F.2d 947, 949-50
(6th Cir. 1981).