Lindley v. American Home Mortgage Servicing, Inc.

Filing 39

MEMORANDUM OF THE COURT. Signed by District Judge Kevin H. Sharp on 11/20/12. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(rd)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
DENNIS S. LINDLEY,
Plaintiff,
v.
AMERICAN HOME MORTGAGE
SERVICING, INC. (a Delaware
Corporation,

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No. 3:10-1108
Judge Sharp

MEMORANDUM
This action for libel and violation of the Tennessee Consumer Protection Act (“TCPA”),
Tenn. Code Ann. § 47-18-104(a) and (b)(27), arose after his mortgage company allegedly falsely
reported “on divers days beginning in May, 2010” that “Plaintiff had failed to timely pay his
mortgage payment due on April 1, 2010, despite that [sic] Defendant having provided the Plaintiff
with a confirmation for the payment when it was made.” (Docket No. 1, Complaint ¶ 16). Plaintiff
claims this error has caused him financial harm, including making him ineligible to refinance other
property at a lower rate.
Defendant Homeward Residential, Inc. f/k/a American Home Mortgage Servicing, Inc.
(Defendant or “AHMSI”) has filed a Motion for Summary Judgment (Docket No. 23) to which
Plaintiff has responded in opposition (Docket No. 34), and Defendant has replied (Docket No. 37).
For the following reasons, the Motion for Summary Judgment will be granted with respect to
Plaintiff’s libel claim, but denied with respect to the TCPA claim.
I. FACTUAL BACKGROUND
In moving for summary judgment, Defendant sets forth the following as the relevant

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undisputed facts:
1. Plaintiff has a mortgage on certain real property located at 3411-3413 S.
Mendenhall Rd., Memphis, Tennessee 38115 (the “Property”).
2. Homeward services Plaintiff’s mortgage for the Property.
3. On April 29, 2010, i.e., twenty-eight (28) days after it was due, Plaintiff’s wife
orally authorized Homeward to debit Plaintiff’s bank account for the April 2010
mortgage payment via the Western Union telephone payment system.
4. On May 7, 2010, Homeward informed Plaintiff in writing that there had been an
error with his April 2010 payment.
5. Plaintiff resubmitted his April 2010 payment on May 21, 2010.
6. Plaintiff has alleged, among other things, a state-law claim of libel against
Homeward on the basis that it furnished false information about Plaintiff’s April
2010 mortgage payment to consumer reporting agencies.
7. Homeward conducted an investigation into Plaintiff’s inquiries about the 30-day
late report with respect to the April 2010 mortgage payment.
8. Homeward determined that it was unable to remove the derogatory credit reporting
for the month of April 2010.
9. Plaintiff habitually made late payments on his mortgage with Homeward and
routinely incurred late charges.
(Docket No. 25 at 1-3, citations to the record omitted).
In response to the foregoing statement of facts, Plaintiff only challenges two things. First,
he objects to the repeated references to Homeward, claiming that all of his dealings were with
AHMSI, and the events about which he complains were taken by that entity, not Homeward. This
“dispute” does not present a material issue of fact because, and as the record reflects, AHMSI
changed it name to Homeward Residential, Inc., effective May 29, 2012. (Docket No. 19).
Second, Plaintiff disputes that he “habitually made late payments on his mortgage.” Instead,
he claims he “did not make payments which exceeded thirty days from the date on [his] loan[.]”
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(Docket No. 35 at 3).
Apart from those two challenges, Plaintiff has submitted the following additional facts which
he contends are material to resolution of Defendant’s Motion for Summary Judgment:
1. That Stuart Clamp is a loan officer with Fifth Third Bank who is knowledgeable
of Dennis Lindley’s account, credit history and loan history.
2. That Dennis Lindley would have been approved for a mortgage rate of 5.625%
on a 30-yr. JUMBO loan and 4.875% on a 15-year JUMBO loan if the 30-day late
payment had not been on his credit report as reported by American Home Mortgage
Servicing, Inc. for the month of April, 2010.
3. That Dennis Lindley contacted Stuart Clamp at Fifth Third Bank in May, 2010
to refinance his existing mortgage which was at a rate of 6.875%.
4. That the late payment reported by AHMSI made Dennis Lindley ineligible to
refinance with Fifth Third.
(Docket No. 31 at 1-2).
Defendant’s only objection to those additional facts is Plaintiff’s reliance upon the
Declaration of Stuart Clamp (“Mr. Clamp”) to support the propositions that Plaintiff would have
been approved for certain loans at given percentage rates, and that Plaintiff would have been eligible
to refinance with Fifth Third Bank, were it not for the late payment report by Defendant. This
objection is based on Plaintiff’s failure to disclose Mr. Clamp as an expert witness. (Docket No.
38 at 2 & 3).
Against this backdrop, the Court considers Defendant’s Motion for Summary Judgment.
II. STANDARD OF REVIEW
A party may obtain summary judgment if the evidence establishes there are not any genuine
issues of material fact for trial and the moving party is entitled to judgment as a matter of law. See
Fed. R. Civ. P. 56(c); Covington v. Knox County School Sys., 205 F.3d 912, 914 (6th Cir. 2000).

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The moving party bears the initial burden of satisfying the court that the standards of Rule 56 have
been met. See Martin v. Kelley, 803 F.2d 236, 239 n.4 (6th Cir. 1986). The ultimate question to be
addressed is whether there exists any genuine issue of material fact that is disputed. See Anderson
v. Liberty Lobby, 477 U.S. 242, 248 (1986); Covington, 205 F.3d at 914 (citing Celotex Corp. v.
Catrett, 477 U.S. 317, 325 (1986)). If so, summary judgment is inappropriate.
III. APPLICATION OF LAW
A. Plaintiff’s Libel Claim
In moving for summary judgment on Plaintiff’s libel claim, Defendant argues that the same
is preempted by the Fair Credit Reporting Act (“the FCRA”), 15 U.S.C. §§ 1681-1681x. Plaintiff
argues this defense has been waived because it was not pled in Defendant’s Answer.
Federal preemption is an affirmative defense, Brown Earthboard Sports USA, Inc., 481 F.3d
901, 913 (6th Cir. 2007), and Rule 8(c) of the Federal Rules of Civil Procedure requires that “[i]n
responding to a pleading, a party must affirmatively state any avoidance or affirmative defense.”
Fed. R. Civ. P. 8(c). It is well established, however, that failure to raise an affirmative defense by
responsive pleading does not always result in waiver.” Moore, Owen, Thomas & Co. v. Coffey, 992
F.2d 1439, 1445 (6th Cir. 1993). This is because “[t]he purpose of Rule 8(c) is to give the opposing
party notice of the affirmative defense and a chance to rebut it.” Id. Therefore, “[a] defendant does
not waive an affirmative defense if the defense is raised at a time when plaintiff's ability to respond
is not prejudiced,”and even raising it in a motion for summary may not be too late. R.H. Cochran
& Assoc, Inc. v. Sheet Metal Workers Intern. Ass'n Local Union No. 33, 335 Fed. App’x 516, 519
(6th Cir. 2009).
Here, Defendant raised and argued the merits of its FCRA preemption defense in both its

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summary judgment motion and accompanying brief. Plaintiff certainly was placed on notice of the
defense in enough time to address its merits, and, did so, arguing in his response brief that “[e]ven
if it were not waived, however, the movant’s argument likewise fails because it has failed to support
its argument with competent evidence.” (Docket No. 34 at 2). Since Plaintiff had the opportunity
to respond, the Court finds that Plaintiff has not been prejudiced by the assertion of the preemption
defense in Defendant’s Motion for Summary Judgment. See, Huss v. King Co., Inc., 338 F.3d 647,
652 (6th Cir. 2003). (“If a plaintiff receives notice of an affirmative defense by some means other
than pleadings, the defendant's failure to comply with Rule 8(c) does not cause the plaintiff any
prejudice.”).
Turning to the merits, “the basic principles for successfully asserting federal preemption as
an affirmative defense on summary judgment are sufficiently clear: it is first incumbent on the party
moving for summary judgment to demonstrate that federal preemption potentially applies to the facts
and circumstances of the suit, and, if so, the movants must adduce sufficient evidence, interpreted
in a light most favorable to the non-moving party, to prove that there is no genuine issue of material
fact contradicting the claim that the case at bar actually and unquestionably qualifies for federal
preemption.” Brown, 481 F.3d at 913. Defendant has met its burden of establishing federal
preemption based upon the FCRA in this case.
“The FCRA was enacted ‘to promote efficiency in the Nation's banking system and to protect
consumer privacy.’” Briley v. Burns Int’l, 78 Fed. App’x 481, 483 (6th Cir. 2003) (quoting, TRW
Inc. v. Andrews, 534 U.S. 19, 23 (2001)). “The FCRA creates a uniform set of rules governing the
content of consumer reports and the responsibilities of those who maintain them,” and, “[t]ogether
with the Fair Debt Collection Practices Act, the FCRA is the source of most consumer credit rights

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in the United States.” Consumer Data Indus. Ass’n, 678 F.3d 898, 900 (9th Cir. 2012).
Given that “[t]he FCRA is a comprehensive statutory scheme designed to regulate the
consumer reporting industry,” Ross v. F.D.I.C.. 625 F.3d 808, 812 (4th Cir. 2010), it contains
preemption provisions. “[T]he original preemption provision, 15 U.S.C. § 1681t(a), preempted state
laws only ‘to the extent that those laws are inconsistent with any provision of [the FCRA].’” Id. at
812-13 (citation omitted). Also part of the original legislation was Section 1681h(e) which, so far
as relevant, provides:
[N]o consumer may bring any action or proceeding in the nature of defamation,
invasion of privacy, or negligence with respect to the reporting of information
against . . . any person who furnishes information to a consumer reporting agency,
. . . except as to false information furnished with malice or willful intent to injure
such consumer.
15 U.S.C. § 1681h(e). The plain language of this provision bars claims for defamation, absent a
showing of malice or willful intent. Id.; Macpherson v. JPMorgan Chase Bank, N.A., 655 F,3d 45,
47-48 (2nd Cir. 2011).
Libel is a species of defamation, Quality Auto Parts Co., Inc. v. Bluff City Buick Co., 876
S.W.2d 818, 820 (Tenn. 1994), and, therefore, to prevail on his libel claim in light of the preemption
provisions of the FCRA, Plaintiff must show that Defendant either acted with malice or with a
willful intent to injure when it reported to credit bureaus that Plaintiff had made a late payment in
April 2010. Plaintiff has failed to do so, and the summary judgment record establishes otherwise.
In moving for summary judgment, Defendant asserts that it investigated Plaintiff’s claim,
and points to an August 13, 2010 letter from Michael Salinas, a Research Supervisor for AHMSI
informing Plaintiff that AHMSI would not be able to remove the derogatory credit report for the
month of April 2010. (Docket No. 26-3). Further, in its statement of facts, Defendant claims that

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it “conducted an investigation into Plaintiff’s inquiries about the 30-day late report with respect to
the April 2010 mortgage payment,” and that it “determined that it was unable to remove the
derogatory credit reporting for the month of April 2010.” (Docket No. 25 at 2). In response,
Plaintiff does not challenge the accuracy of the contention that an investigation was undertaken, and,
as such, these factual assertions are accepted as true. L.R. 56.01 (c) & (g). Accordingly, summary
judgement will be granted on Plaintiff’s libel claim.
B. Plaintiff’s TCPA Claim
Defendant moves for summary judgment on Plaintiff’s TCPA claim, arguing Plaintiff cannot
establish damages.
Section 47–18–104(b) of the TCPA “provides a lengthy, non-exclusive list of practices that
are ‘unfair or deceptive’ under the TCPA,” and “Section 47–18–109(a)(1) creates a cause of action
for those who suffer damages as the result of practices in violation of section 47–18–104.” Morrison
v. Allen, 338 S.W.3d 417, 439 (Tenn. 2011). Section 47-18-109(a)(1) provides:
Any person who suffers an ascertainable loss of money or property, real, personal,
or mixed, or any other article, commodity, or thing of value wherever situated, as a
result of the use or employment by another person of an unfair or deceptive act or
practice declared to be unlawful by this part, may bring an action individually to
recover actual damages.
Tenn. Code Ann. § 47-18-109(a)(1).
“While the TCPA does not define ‘ascertainable loss,’” the Tennessee Supreme Court, in a
case of first impression, recently concluded that section 47-18-109(a)(1) “does not preclude actions
by consumers premised on loss of consumer credit.” Discover Bank v. Morgan, 363 F.3d 479, 496
(Tenn. 2012). In determining that “ascertainable loss” includes a loss of available credit, the court
in Morgan, also “discern[ed] three criteria necessary for recovery”: “First, a plaintiff must have

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suffered a demonstrable loss of credit”; “[s]econd, the defendant must have proximately caused the
loss of credit”; and “[t]hird, the loss of credit must have caused actual harm to the aggrieved party,
such as lost profits or added costs.” Id. at 497.
Plaintiff has forwarded sufficient evidence to survive summary judgment with respect to each
of those criteria. He claims that, in May 2010, he sought to refinance property which had an interest
rate of 6.875%, and that, but for the bad report of the single late payment, he would have been able
to refinance with Fifth Third Bank at a 30 year rate of 5.625%, or a 15 year rate of 4.875%. These
assertions are supported by Plaintiff’s declaration and the declaration of Mr. Clamp, the Fifth Third
Bank loan officer who was involved in Plaintiff’s request for refinancing. These assertions show
a demonstratable loss of credit caused by Defendant which caused actual harm to Plaintiff.
In arriving at this conclusion, the Court has considered Defendant’s argument that neither
Plaintiff nor Mr. Clamp can provide competent evidence on the issue of damages.
With respect to Plaintiff, Defendant argues that his testimony constitutes hearsay and is
based on speculation. Although what Mr. Clamp told Plaintiff about the reason for denial of his
request for refinancing would be hearsay, Mr. Clamp can testify to the reason. Further, while
Plaintiff’s assertion of the savings he would have received over the life of the loan may have some
uncertainty to it, such testimony is not entirely speculative because, if believed, it shows Plaintiff
was, in fact, damaged.
While “[t]he existence of damages cannot be uncertain, speculative, or remote,” . . . “[t]he
amount of damages may be uncertain, however, if the plaintiff lays a sufficient foundation to allow
the trier of fact to make a fair and reasonable assessment of damages.” Morgan, 363 S.W.3d at 496.
In a loss of credit case, “plaintiffs fail to recover when they proffer little or no evidence that the loss

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of credit caused by the defendant led to a subsequent, concrete injury,” but “[p]laintiffs may recover
for loss of credit when they can demonstrate how the credit they lost would have resulted in specific
profits or savings.” Id. at 498 (citing, Erdman v. White, 411 N.E.2d 653, 659 (Ind. App. 1980)
(plaintiff “testified as to the importance of having a large line of credit available in order to purchase
airplanes that suddenly became available”); Tempo, Inc. v. Rapid Elec. Sales & Serv., Inc., 347
N.W.2d 728, 733 (1984) (damages arose from withdrawn credit line that resulted in additional
interest); and EMC Mortg. v. Jones, 252 S.W.3d 857, 873 (Tex. App. 2008) (defendant’s reporting
foreclosure on credit report resulted in plaintiff having to pay higher interest)). Plaintiff will be
afforded the opportunity to present his evidence as to the amount of damages, and any deficiencies
will undoubtedly be the subject of extensive cross-examination.
Defendant also argues Mr. Clamp is not competent because he will be called upon to testify
as an expert, but has not been disclosed as required by Rule 26 of the Federal Rules of Civil
Procedure. In support, Defendant cites the following from Advisory Committee Notes to Rule 702
of the Federal Rules of Evidence: “Within the scope of the rule are not only experts in the strictest
sense of the word, e.g., physicians, physicists, and architects, but also the large group sometimes
called ‘skilled’ witnesses, such as bankers . . .” (Docket No. 37 at 5 n.28). This is a misleading use
of ellipses because the Advisory Committee Note speaks about “bankers or landowners testifying
to land values.” Fed. R. Evid. 702 Advisory Committee’s note.
Here, of course, Mr. Clamp will not be called to testify as to land values, but rather as to
whether Plaintiff would have been allowed to refinance at certain rates but for the bad report issued
to the credit bureaus by Defendant. This is properly the subject of lay opinion testimony under Rule
701 of the Federal Rules of Evidence which allows for testimony in the form of an opinion that is

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“(a) rationally based on the witness's perception; (b) helpful to clearly understanding the witness's
testimony or to determining a fact in issue; and (c) not based on scientific, technical, or other
specialized knowledge within the scope of Rule 702.” Fed. R. Evid. 701. See, United States v.
Munoz-Franco, 487 F.3d 25, 36 (2nd Cir. 2007) (loan officer could testify as to how loans were
classified, whether loan were expected to receive favorable treatment, and propriety of construction
loans based upon first-hand observations of bank’s practices); United States v. Kelley, 615 F.2d 378,
380 (11th Cir. 1980) (Rule 701 authorized bankers to testify as bank’s loan policies); United States
v. Whaley, 2012 WL 5463300 at *1 (E.D. Tenn. Nov. 8, 2012) (testimony was governed by Rule
701 and not 702 where witnesses testified “to the facts surrounding their investigation of the
approval of the loans at issue and to their lay opinion, resulting from their investigation and their
knowledge of their employers’ lending policies, as to whether their employer banks would have
approved the loans if the true nature of the down payments had been known”) .
Finally, Defendant argues Plaintiff was not damaged by the bad credit report because his
“credit was not excellent even before Homeward reported his April 2010 late payment,” as
evidenced by that fact that he had relatively low credit scores already, numerous delinquencies on
his accounts, ten other mortgages, balances on several credit cards, and a record of habitually
making late payments. These allegations are not facts properly before the Court because they were
not set forth in Defendant’s concise statement of facts as required by Local Rule 56.01(b).
Regardless, Mr. Clamp claims to have been familiar with Plaintiff’s credit and loan history,
yet pegs First Third Bank’s refusal to refinance based on the single late payment reported by
Defendant. Of course, if what Defendant says about Plaintiff’s credit is true, Plaintiff may have an
exceedingly tough row to hoe in convincing the jury that he was damaged by the bad credit report.

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IV. CONCLUSION
Based upon the foregoing, the Court will grant summary judgment in favor of Defendant on
Plaintiff’s libel claim, but deny summary judgment on Plaintiff’s claim under the TPCA.
An appropriate Order will be entered.

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KEVIN H. SHARP
UNITED STATES DISTRICT JUDGE

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