White v. US Bank N.A. et al
Filing
102
ORDER Denying 60 Motion to Dismiss for Failure to State a Claim. Signed by Judge Thomas L. Parker on 9/14/18. (jgb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
CRYSTAL WHITE,
Plaintiff,
v.
U.S. BANK, NA, NATIONSTAR
MORTGAGE HOLDINGS, INC.,
NATIONSTAR MORTGAGE LLC,
SHAPIRO & INGLE LLP, WORLD WIDE
PROPERTY HUB, LLC, and GREGORY
GRIFFIN,
Defendants.
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No. 2:17-cv-02671-TLP-dkv
JURY DEMAND
ORDER DENYING SHAPIRO & INGLE LLP’S MOTION TO DISMISS
In this wrongful foreclosure action, Defendant Shapiro & Ingle, LLP, a Tennessee limited
liability partnership (“Shapiro”), moves to Dismiss (ECF No. 60) Plaintiff Crystal White’s
claims against it in the Second Amended Complaint. (ECF No. 59.) For these reasons, Shapiro’s
Motion is DENIED.
BACKGROUND
The operative complaint here is Plaintiff Crystal White’s (“White”) Second Amended
Complaint (“SAC”). (ECF No. 59.) For ruling on Shapiro’s Motion to Dismiss, the Court
assumes that the following well-pleaded facts taken from the SAC are true.
This action arises out of White’s attempt to modify her home mortgage. White was the
mortgagor of the property at 2964 Ridgeway Road, Memphis, Tennessee 38115 (the “property”),
and Defendant Nationstar Mortgage LLC (“Nationstar”) serviced the mortgage. (ECF No. 59 at
PageID 371–72.) White submitted a facially complete loan modification application on June 17,
2016, 1 and alleges that Nationstar failed to consider her application because of her race, violating
federal statutes and regulations. (Id. at PageID 374–75.) Nationstar, through Shapiro as
Substitute Trustee, sold the property in a foreclosure sale on September 12, 2017. (Id. at PageID
373.) White alleges that the foreclosure was a nullity because her loan modification application
was pending or had become enforceable and so she was not in default. (Id.) White also alleges
that Shapiro conducted the foreclosure sale knowing that her modification application was still
pending or had become enforceable. (Id.) White alleges that Defendants Worldwide Property
Hub LLC (“Worldwide”) and Gregory Griffin (“Griffin”) purchased the property, and that
Worldwide and Griffin wrongfully evicted her after the sale, by changing the locks on the house
located on the property. (Id.)
LEGAL STANDARD
The Federal Rules of Civil Procedure govern the Court’s standards of review. Federal
Rule of Civil Procedure 8(a)(2) requires that a complaint contain “a short and plain statement of
the claim showing that the pleader is entitled to relief.” The purpose of the rule is to “give the
defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
Although the complaint need not contain detailed factual allegations, a plaintiff’s “bare recitals
of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”
Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555) (“[T]he tenet that a court must accept as
true all of the allegations contained in a complaint is inapplicable to legal conclusions.”).
1
This document, labeled as a “Modification Application,” was attached as Exhibit 1 to Plaintiff’s
original Complaint (Doc. No. 1.) It contains a “Summary of [White’s proposed] Modified
Mortgage” and one unsigned “cop[y] of the Modification Agreement.” (Doc. No. 1-1)
2
When considering a motion to dismiss for failure to state a claim under Rule 12(b)(6), a
court “must construe the complaint in the light most favorable to the plaintiff, accept its
allegations as true, and draw all reasonable inferences in favor of the plaintiff.” DirecTV, Inc. v.
Treesh, 487 F.3d 471, 476 (6th Cir. 2007). To survive a Rule 12(b)(6) motion to dismiss, a
plaintiff must allege facts that, if accepted as true, are sufficient “to raise a right to relieve above
the speculative level” and to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S.
at 678; Twombly, 550 U.S. at 570.
ANALYSIS
White alleges that Shapiro’s knowledge that the modification application was still
pending when it sold the property in a foreclosure sale violated the Fair Debt Collection
Practices Act (“FCDPA”), specifically 15 U.S.C. § 1692f(6)(a). Shapiro argues in the Motion to
Dismiss that White’s cause of action fails because White has failed to allege: (1) her compliance
with the loan documents that led to the foreclosure of the property; (2) sufficient facts to
establish that Shapiro can be liable as a substitute trustee, given the immunity afforded it under
Tenn. Code Ann. § 35-5-116(f); (3) sufficient facts to establish that Shapiro is a “debt collector”
under the FDCPA; and (4) even if an “enforcer of a security interest” can be liable under the
FDCPA, White has failed to allege sufficient facts tending to show any violation of the FDCPA.
(ECF No. 60 at PageID 385.)
I.
Shapiro’s First and Second Arguments
Shapiro’s first two arguments fail. As for its first argument, White alleges that she
submitted a facially complete modification application to Nationstar. (ECF No. 59 at PageID
371–72.) She alleges that she “submitted payment to render the modification enforceable,” and
was “at all times qualified for the approval of her loan application.” (Id. at PageID 372.) And
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she alleges that Nationstar pointed to no deficiencies with the modification application in a letter
Nationstar sent her on October 26, 2016 (see ECF No. 1-2 at PageID 28). (Id.) While White
may not have alleged that she complied with the original promissory note on the property, the
Court finds for this Motion that she sufficiently alleges that her modification application was
pending or had become enforceable at the time of foreclosure, which would preclude foreclosure
proceedings. (See id.); 12 C.F.R. § 1024.41(f), (g).
Shapiro’s second argument fails because White alleges that Shapiro violated the FDCPA,
not Tennessee law. Under Tennessee law, “[a] trustee shall not be liable for any good faith error
resulting from reliance on any information in law or fact provided by the borrower or secured
party or their respective attorney, agent, or representative or other third party.” Tenn. Code Ann.
§ 35-5-116(f). Under the FDCPA, “[a] debt collector may not be held liable in any action
brought under this subchapter if the debt collector shows by a preponderance of evidence that the
violation was not intentional and resulted from a bona fide error notwithstanding the
maintenance of procedures reasonably adapted to avoid such error.” 15 U.S.C. § 1692k(c).
White alleges that Shapiro violated 15 U.S.C. § 1692f by conducting the foreclosure sale with
the knowledge that her modification application was pending or enforceable. 2 Thus, White
sufficiently alleges that Shapiro acted in bad faith when it sold the property in foreclosure.
Accepting these allegations as true and drawing all reasonable inferences in favor of Plaintiff, the
Court declines to grant Shapiro’s Motion to Dismiss based on its second argument.
II.
Shapiro’s Third and Fourth Arguments
2
15 U.S.C. § 1692f(6)(a) prohibits a debt collector from using “unfair or unconscionable means
to collect or attempt to collect any debt,” which includes “[t]aking or threatening to take any
nonjudicial action to effect dispossession or property if– (A) there is a no present right to
possession of the property claims as collateral through an enforceable security interest . . . ; or
(C) the property is exempt by law from such dispossession or disablement.”
4
Shapiro’s third and fourth arguments have more merit, but ultimately fail. In the Motion
to Dismiss, Shapiro argues that White has failed to allege sufficient facts to establish that it is a
“debt collector” under the FDCPA. (ECF No. 60.) 3 “The FDCPA regulates only the conduct of
‘debt collectors’ and only communications made ‘in connection with the collection of any debt.’”
Estep v. Manley Deas Kochalski, LLC, 552 F. App’x 502, 505 (6th Cir. 2014). In the
Memorandum in Support of the Motion to Dismiss, Shapiro more specifically argues that, under
Sixth Circuit authority, it is not a “debt collector” when acting as a substitute trustee under deed
of trust. (ECF No. 60-1 at PageID 395.) Shapiro relies heavily on Stamper v. Wilson & Assocs.,
P.L.L.C., No. 3:09-CV-270, 2010 WL 1408585, at *3 (E.D. Tenn. Mar. 31, 2010) and
Montgomery v. Huntington Bank, 346 F.3d 693, 700 (6th Cir. 2003) for this proposition. (See
ECF No. 60-1 at PageID 395.)
Even so, Shapiro also concedes that the Sixth Circuit expressly held the opposite in a
recent opinion. See Glazer v. Chase Home Fin. LLC, 704 F.3d 453 (6th Cir. 2013). In Glazer,
the court held that mortgage foreclosure is debt collection under the FDCPA, and that lawyers
who engage in debt collection must comply with the FDCPA when engaged in mortgage
foreclosure. Id. at 464. And the court also held that “a lawyer can satisfy that definition if his
principal business purpose is mortgage foreclosure or if he ‘regularly’ performs this function.”
3
Under the FDCPA,
The term “debt collector” means 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.A. § 1692a.
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Id. Thus, contrary to Shapiro’s argument, the firm may qualify as a debt collector under the
FDCPA.
That said, the Court agrees with Shapiro that White has provided no allegations that
Shapiro is a debt collector under the FDCPA. The case here is actually similar to the Stamper
case because all White has done—in her Second Amended Complaint—is make the conclusory
allegation that “[a]t relevant times to this action, Shapiro was a debt collector pursuant to the
FDCPA.” (ECF No. 59); see Stamper, 2010 WL 1408585, at *8 (reiterating that “the focus is
not on the events of the particular transaction but on the principal purpose of the defendant’s
business and/or the defendant’s regular activities,” and finding that conclusory statements that a
law firm is a “debt collector” is not enough to survive a motion to dismiss) (internal citation and
quotation marks omitted). “Conclusory allegations or legal conclusions masquerading as factual
allegations will not suffice.” Eidson v. State of Tennessee Dep’t of Children’s Servs., 510 F.3d
631, 634 (6th Cir. 2007) (citation omitted). Even in construing the SAC in the light most
favorable to Plaintiff, the Court finds that the SAC fails to state a claim that Shapiro was or
operated as a debt collector under the FDCPA in conducting the foreclosure sale of the property.
In spite of this, the Court finds that White has sufficiently alleged that Shapiro may be
liable under the FDCPA as a non-debt collector. Stamper is clear that non-debt collectors who
enforce the security interest of another party may be liable under § 1692f(6) of the FDCPA.
2010 WL 1408585, at *3; see also, Montgomery v. Huntington Bank, 346 F.3d 693, 700 (6th Cir.
2003). Such an enforcer may not “take any nonjudicial action to effect dispossession or
disablement of property if . . . there is no present right to possession of the property claimed as
collateral through an enforceable security interest . . . .” § 1692f(6)(A).
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Shapiro alleges in its Motion to Dismiss that it had a “present right to undertake the
nonjudicial foreclosure because [White] admitted a default by signing the Modification
Agreement.” (ECF No. 60 at PageID 395.) The Court finds, however, that White has
sufficiently alleged that Shapiro had no right to conduct a nonjudicial foreclosure on September
12, 2017. (ECF No. 35 at PageID 228.) White alleges that on June 17, 2016, she “submitted a
facially complete loan modification application to Defendant Nationstar Mortgage LLC.” (ECF
No. 35 at PageID 226–227.) 4 She also alleges that Shapiro “transmitted the Notice of Trustee’s
Sale knowing that the modification application was pending . . . .” (ECF No. 35 at PageID 230.)
These allegations, if proven true, could conceivably violate federal law. See § 1692f(6)(A); see
also 12 C.F.R. § 1024.41(f), (g). The Court, then, finds that dismissal of Shapiro and Ingle is
premature.
CONCLUSION
For these reasons, the Court DENIES Defendant Shapiro & Ingle LLP’s Motion to
Dismiss (ECF No. 60).
SO ORDERED, this 14th day of September, 2018.
s/ Thomas L. Parker
THOMAS L. PARKER
UNITED STATES DISTRICT JUDGE
4
Under 12 C.F.R. § 1024.41(f) and (g), a servicer shall neither “make the first notice or filing . . .
[for any] non-judicial foreclosure process,” nor “move for foreclosure judgment” unless one of
the statutory exceptions apply.
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