Pimental et al v. Wells Fargo Bank N.A. et al

Filing 26

ORDER adopting 20 Report and Recommendations; denying 13 Motion to Dismiss for Failure to State a Claim; granting 14 Motion for Judgment on the Pleadings. So Ordered by Chief Judge William E. Smith on 1/5/2016. (Jackson, Ryan)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
)
)
)
Plaintiffs,
)
)
v.
)
)
WELLS FARGO BANK, N.A., AND
)
HARMON LAW OFFICES, P.C.,
)
)
Defendants.
)
___________________________________)
BRENDA PIMENTAL AND LUIS
PIMENTAL,

C.A. No. 14-494 S

ORDER
WILLIAM E. SMITH, Chief Judge.
On September 4, 2015, United States Magistrate Judge Patricia
A. Sullivan issued a Report and Recommendation (“R&R”) in the
above-captioned matter.

(ECF No. 20.)

The R&R recommends that

the motion to dismiss filed by Defendant Wells Fargo Bank, N.A.
(“Wells Fargo”) (ECF No. 13) be DENIED and the motion for judgment
on the pleadings filed by Defendant Harmon Law Offices, P.C.
(“Harmon”) (ECF NO. 14) be GRANTED. 1

After careful consideration

of the R&R and Wells Fargo’s objection (ECF No. 23-1), the Court

1

The R&R only addresses Counts 1 and 2, which allege
violations of the Fair Debt Collections Practices Act, noting that
Plaintiffs had agreed on the record to voluntarily dismiss Count
3 (Invasion of Privacy) pursuant to Fed. R. Civ. P. 41(a)(2). (R&R
1 n.1, 5 n.7, ECF No. 20.) The Court entered Plaintiffs’ Notice
of Voluntary Dismissal as to Count 3 (ECF No. 21) on September 11,
2015.

hereby accepts, pursuant to 28 U.S.C. § 636(b)(1), the R&R for the
reasons that follow.

The relevant facts, procedural background,

and analysis are fully set forth in the R&R.

The Court limits its

discussion to and presents only those facts pertinent to Wells
Fargo’s objection.
The R&R found that Plaintiffs had sufficiently alleged that
Wells Fargo qualified as a “debt collector” under the Fair Debt
Collection
contends

Practices
that

Act

(“FDCPA”).

Magistrate

Judge

Wells

Fargo’s

Sullivan’s

objection

recommendation

“impermissibly lowers Plaintiffs’ burden” by failing to require
Plaintiffs to plead and establish: 1) that debt collection is “the
principal purpose” of Wells Fargo’s business; and 2) that Wells
Fargo deceived Plaintiffs into believing that a third party was
collecting the debt from them. (Wells Fargo’s Obj. to the R&R 1,
ECF No. 23-1.)

The Court will address each of these arguments in

turn.
The FDCPA defines a “debt collector” as “any person who uses
any instrumentality of interstate commerce or the mails in any
business the principal purpose of which is the collection of any
debts, or 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).

Although creditors are generally

not covered by the FDCPA, “any creditor who, in the process of
2

collecting his own debts, uses any name other than his own which
would indicate that a third person is collecting or attempting to
collect such debts” is considered a “debt collector.”

Id.

The R&R found that Wells Fargo “falls outside of the exemption
from the definition of an FDCPA debt collector available to a
creditor collecting its own debt” because Plaintiffs pled that the
name America’s Servicing Company (“ASC”) improperly suggested that
a third party was collecting Wells Fargo’s debt.
20.)
not

(R&R 14, ECF No.

Wells Fargo’s first argument that its “principal purpose” is
debt

collection

seems

to

misunderstand

Magistrate

Judge

Sullivan’s recommendation. She did not find that Wells Fargo meets
the general definition of a debt collector, but rather that, due
to its use of the ASC name, Plaintiffs have adequately pled that
it falls into the exception for a “creditor who, in the process of
collecting his own debts, uses any name other than his own which
would indicate that a third person is collecting or attempting to
collect such debts.”

See 15 U.S.C. § 1692a(6).

Wells Fargo is

correct that Plaintiffs did not plead that its principal purpose
is debt collection (nor could they), but this is irrelevant to
whether Wells Fargo nonetheless falls into the creditor exception,
as the R&R found.
Wells Fargo’s second argument does not fare much better.

As

an initial matter, “the FDCPA does not require that a plaintiff
3

actually

be

confused.”

Pollard

v.

Law

Office

of

Mandy

L.

Spaulding, 766 F.3d 98, 103 (1st Cir. 2014). Therefore, Plaintiffs
do not, as Wells Fargo claims, need to plead that “Wells Fargo
deceived

Plaintiffs

into

believing

collecting the debt from them.”
No. 23-1.)

that

a

third

party

was

(Wells Fargo’s Obj. to R&R 1, ECF

Instead, Plaintiffs must plead facts showing that a

“hypothetical unsophisticated consumer” would have been misled by
Wells Fargo’s use of the ASC name.

See Pollard, 766 F.3d at 103

(rejecting the “least sophisticated consumer” standard used in a
majority

of

the

circuits

in

favor

of

the

“hypothetical

unsophisticated consumer” standard).
Wells Fargo makes much of the allegation that ASC’s letter
“did not contain the words Wells Fargo anywhere on its front.”
(Compl. ¶ 42, ECF No. 1; see Wells Fargo’s Obj. to the R&R 4, ECF
No. 23-1 (“Indeed, the ‘anywhere on its front’ allegation is
particularly telling, as Plaintiffs are not in fact claiming that
nowhere did the letter identify that ASC is a part of Wells Fargo.”
(emphasis in original)).)

The Court is not persuaded.

The words

“anywhere on its front” are somewhat ambiguous as they could refer
to the front page of the letter only, or to the letter’s face more
generally;

however,

reading

the

Complaint

in

the

light

most

favorable to Plaintiffs - as the Court must at this stage –
Plaintiffs

plausibly

allege

that,
4

based

on

the

letter,

a

hypothetical unsophisticated consumer would not know that ASC was
affiliated with Wells Fargo.
Wells Fargo also rests heavily on its assertion that “courts
have uniformly held that Wells Fargo is not subject to liability
as under [sic] the FDCPA for servicing mortgage loan accounts,
notwithstanding its use of the ASC name.”
R&R 6-8, ECF No. 23-1.)

(Wells Fargo’s Obj. to

This statement is somewhat misleading.

First, several cases note that Wells Fargo/ASC could be a debt
collector if the debt was acquired after default, as Plaintiffs
allege here.

(Compl. ¶ 16, ECF No. 1); see, e.g., Dietz v. Quality

Loan Serv. Corp. of Washington, No. C13-5948 RJB, 2014 WL 29672,
at *4 (W.D. Wash. Jan. 3, 2014) (“Dietz argues that the loan was
in default at the time of assignment and thus, Wells Fargo is a
debt collector. . . . The undisputed facts, however, indicate that
Wells Fargo purchased the loan in 2008, prior to Dietz’s default.”
(citation omitted)); Famatiga v. Mortg. Elec. Registration Sys.,
Inc., No. 10-10937, 2011 WL 3320480, at *10 (E.D. Mich. Aug. 2,
2011) (“ASC began servicing Plaintiffs’ loan in July of 2005 and
Plaintiffs did not default on their loan until 2007. Plaintiffs’
debt was not in default at the time it was obtained by ASC, and
ASC is therefore not a ‘debt collector’ under the FDCPA.”); Robbins
v. Mortg. Elec. Registration Sys., Inc., No. 1:09-CV-295, 2009 WL
3757443, at *5 (W.D. Mich. Nov. 9, 2009) (“Defendants do not
5

contend that the mortgage was not in default at the time that ASC
began servicing the loan. Thus, Mortgage Defendants’ motion to
dismiss Count Four will be denied with respect to ASC.”).
Second, as Magistrate Judge Sullivan notes, “in none of these
cases did the court face the claim that the ASC name was used
falsely to cause the consumers to believe that the debt was being
collected, not by Wells Fargo to which it was owed, but rather by
an apparent third party.”

(R&R 16, ECF No. 20).

The case that

comes closest to addressing this issue is Johnson v. Wells Fargo
Home Mortg., Inc., No. 3:05-CV-0321-RAM, 2007 WL 3226153, at *10
(D. Nev. Oct. 29, 2007), aff’d in part, 635 F.3d 401 (9th Cir.
2011), where the plaintiff argued that he “did not discover ASC
was actually [the defendant] until prior to filing his complaint
and not knowing this relationship would lead a person to believe
the debts were being collected by a third party”; however, there,
the court rejected Plaintiff’s argument because of his failure to
make that allegation in his complaint.

Id. at *10 (“Plaintiff’s

Amended Verified Complaint fails to allege that Wells Fargo used
a name which would indicate a third person was collecting or
attempting to collect a debt.”).

Here, this is precisely what

Plaintiffs allege.
Wells Fargo further contends that “Plaintiffs are alleging in
their Complaint that Wells Fargo used the same name for servicing
6

their loan as it did while allegedly attempting to collect the
defaulted debt on their loan” and thus “[t]here is no deception of
pretending to be a third party debt collector claimed here.”
(Wells Fargo’s Obj. to R&R 5, ECF No. 23-1.)

Specifically, Wells

Fargo points to Plaintiffs’ allegation that “[a]t the time ASC
acquired the right to collect the payments from the Plaintiffs,
the Plaintiffs had not made at least one payment due under the
Promissory Note and Mortgage and the Debt was in default.”
at 4 (emphasis added) (quoting Compl. ¶ 16, ECF No. 1).)

(Id.

However,

the Complaint also defines ASC as “a fictious [sic] name for Wells
Fargo Bank, NA.”

(Compl. ¶ 10, ECF No. 1.)

Thus, although not a

model of clarity, the Complaint does arguably allege that the use
of the ASC name to collect the debt was deceptive. 2

2

Wells Fargo also states that “[m]ortgage loan servicers are
not debt collectors under the FDCPA.” (Wells Fargo’s Obj. to R&R
5, ECF No. 23-1.) Contrary to this blanket assertion, the case
law “does not hold that mortgage servicing companies are
categorically exempt from liability under the FDCPA.
It holds
that a mortgage servicing company is exempt if the mortgage was
not in default at the time that it began servicing the loan.”
Robbins v. Mortg. Elec. Registration Sys., Inc., No. 1:09-CV-295,
2009 WL 3757443, at *5 (W.D. Mich. Nov. 9, 2009) (emphasis in
original). As noted above, Plaintiffs have alleged that at the
time the debt was acquired, it was in default. (Compl. ¶ 16, ECF
No. 1.)
7

For these reasons, the R&R is ADOPTED, Wells Fargo’s Motion
to Dismiss is hereby DENIED, and Harmon’s Motion for Judgment on
the Pleadings is GRANTED.

IT IS SO ORDERED.

William E. Smith
Chief Judge
Date: January 5, 2016

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