FYI: Fla Ct (19th Jud Cir) Holds Periodic Statements Sent to Borrower Following Dismissal of Foreclosure Not Actionable Under FCCPA

The County Court of the Nineteenth Judicial Circuit in and for St. Lucie County, Florida recently dismissed a borrower's amended complaint against a mortgage servicer alleging violations of the Florida Consumer Collection Practices Act, Fla. Stat. § 559.55, et seq. ("FCCPA") for sending mortgage statements to the borrower following involuntary dismissal, without prejudice, of a foreclosure action.

 

In dismissing the action with prejudice, the Court held that the statements sent by the defendant mortgage servicer were not attempts to collect a debt, and therefore not actionable under the FCCPA.

 

In addition, the Court held that the plaintiff borrower failed to state a cause of action because res judicata did not apply to the dismissal of the foreclosure action, the debt was not barred by the statute of limitations, and any alleged expiration of the statute of limitations would not change the balance due on the mortgage loan.  A copy of the order is attached.

 

The predecessor mortgagee filed a foreclosure action in 2013, which was involuntarily dismissed without prejudice in September 2015 for failing to appear at trial.  Following the dismissal of the foreclosure, the successor servicer of the mortgage ("servicer") mailed two periodic mortgage statements to the borrower. 

 

The borrower filed suit against the servicer alleging that the statements purportedly sought to collect amounts that were barred by the statute of limitations, and therefore supposedly violated the Florida Consumer Collection Practices Act, Fla. Stat. § 559.55, et seq. ("FCCPA") by claiming, attempting or threatening to enforce a debt it knew was not legitimate or asserting a legal right it knew did not exist.  Fla. Stat. § 559.72(9).  The servicer moved to dismiss for failure to state a cause of action under the FCCPA.

 

First, the Court considered whether or not the statements themselves even constituted debt collection under the FCCPA.

 

The Court acknowledged that sending periodic statements for residential mortgage loans is required by the federal Truth in Lending Act ("TILA") and Regulation Z.  See 15 U.S.C. § 1638(f); 12 C.F.R. § 1026.41.  The Court held excluding periodic statements from the reach of the FCCPA is consistent with the Consumer Financial Protecting Bureau's ("CFPB") interpretation of the analogous federal statute, the federal Fair Debt Collection Practices Act ("FDCPA"), which regards the animating purpose of sending periodic statements as compliance with federally mandated informational disclosures, and not the collection of a debt.

 

The Court rejected the borrower's argument that the inclusion of "mini-Miranda" language ("[t]his is an attempt to collect a debt.  All information will be used for that purpose,") transformed the statement into an attempt to collect a debt, as courts throughout the country have held that such language is not probative to the animating purpose of the letter.  See e.g. Maynard v. Cannon, 401 Fed. Appx. 389, 395 (10th Cir. 2010); Lewis v. ACB Bus. Services, Inc.,135 F.3d 389, 399 (6th Cir. 1998); Gburek, 614 F.3d at 386; Goodson v. Bank of Am., NA., 600 Fed. Appx. 422, 432 (6th Cir. 2015); Muller v. Midland Funding, LLC, 14-CV-81117-KAM, 2015 WL 2412361, at *9 (S.D. Fla. May 20, 2015). 

 

The Court noted that the FDCPA, in fact, requires the inclusion of the "mini-Miranda" disclaimer in various communications whose animating purpose is not to collect a debt.  See 15 U.S.C. 1692e(l l); Lewis, 135 F.3d at 399; Maynard 401 Fed. Appx. at 395; Gburek, 614 F.3d at 386; Goodson, 600 Fed. Appx. at 432.

 

Accordingly, the Court held that the periodic statements did not attempt to collect a debt, and were not subject to the FCCPA.

 

Next, the Court considered the borrower's arguments that the statements sought to collect amounts barred by res judicata and the statute of limitations.

 

The Court found that res judicata does not bar collection of the amounts due on the loan because: (i) res judicata does not apply do dismissals without prejudice, because such dismissals are not an adjudication on the merits (See Tilton v. Horton, 137 So. 801, 808 (Fla. 1931) and Markow v. Am. Bay Colony, Inc., 478 So. 2d 413, 414 (Fla. 3d DCA1985)), and; (ii) the doctrine of res judicata would not preclude the collection of these amounts in an acceleration and foreclosure premised on a new and different default even if the initial dismissal were with prejudice. See Singleton v. Greymar Associates, 882 So. 2d 1004, 1006 (Fla. 2004); Bartram v. US. Bank Nat. Ass'n, 41 Fla. L. Weekly S493, 2016 WL 6538647 (Fla. Nov. 3, 2016); Desylvester v. Bank of NY Mellon (Fla. App., 2017).

 

In addition, the Court rejected the borrower's argument that the statements sought to collect amounts barred by the statute of limitations for mortgage foreclosure. 

 

Primarily, the Court held that the borrower's argument was flawed because the debt had not been accelerated, such the statute of limitations had not begun to run.  See Locke v. State Farm Fire & Cas. Co., 509 So. 2d 1375, 1377 (Fla. 1st DCA 1987); Greene v. Bursey, 733 So.2d 1111, 1115 (Fla. 4th DCA 1999).  Even if the debt were once accelerated, the dismissal of the prior foreclosure unwound any prior acceleration, and the mortgagee is not time-barred by the statute of limitations from filing a new foreclosure which accelerates the debt.  See Bartram v. US. Bank Nat. Ass'n, 41 Fla. L. Weekly S493, 2016 WL 6538647, *1 (Fla. Nov. 3, 2016). 

 

Lastly, the Court held that even if the statute of limitations had in fact run, it would have no effect on the content or disclosures within the periodic statement.   See Danielson v. Line, 135 Fla. 585, 185 So. 332, 333 (1938). 

 

Because the statute of limitations is merely procedural in character, and has no bearing on the substance of the underlying contract and mortgage lien, the Court held the appropriate measure of the truthfulness of figures set forth in the statements would be governed by the Florida statute of repose, not the statute of limitations.  Id; Garrison v. Caliber Home Loans, Inc., 616CV9780RL37DCI, 2017 WL 89001, at *3 FN 19 (M.D. Fla. Jan. 10, 2017).

 

Accordingly, the servicer's motion to dismiss was granted, and the borrower's amended complaint was dismissed with prejudice.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
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FYI: 2nd Cir Upholds Dismissal of Data Breach Action for Lack of Standing, Distinguishes 7th Cir Rulings

The U.S. Court of Appeals for the Second Circuit recently affirmed the dismissal of a "data breach" lawsuit against a retailer, holding that the plaintiff lacked standing for failure to allege a cognizable injury.

 

A copy of the opinion is available at:  Link to Opinion

 

The plaintiff made credit card purchases at the retail store and, two weeks later, her credit card information was fraudulently presented to make purchases in a foreign country. The plaintiff immediately cancelled her credit card and the fraudulent charges were not incurred on the card, nor was she liable for them.  

 

Shortly thereafter, the retailer issued a press release concerning a possible data breach in its computer system that involved the theft of customers' credit card and debit card data and later confirmed the breach. The retailer offered twelve months of identity protection and credit monitoring services to affected customers.

 

The plaintiff sued the retailer alleging breach of implied contract and New York's deceptive business practices act, N.Y. General Business Law § 349, and the retailer filed a motion to dismiss.

 

The trial court granted the motion to dismiss holding that the plaintiff's allegations did not establish Article III standing because she did not incur any actual charges on her credit card and she did not allege with any specificity that she had spent time or money monitoring her credit to prevent identity theft or fraudulent credit activity.   The plaintiff appealed from the dismissal.

 

On appeal, the Second Circuit explained that Article III standing requires that a plaintiff allege an injury that is "concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling." 

 

The plaintiff's theory of liability asserted that she faced a risk of future identity fraud, and that she had lost time and money resolving attempted fraudulent charges and monitoring her credit.  The Second Circuit found that such a "future injury" had to be "certainly impending," not speculative.

 

The Court pointed out that the plaintiff's credit card had been cancelled, such that no further fraudulent charges were possible, and that none of her personal identifying information, such as her birth date or Social Security number were alleged to be stolen, such future identity theft was not alleged.

 

In addition, the plaintiff admitted that she had not paid any fraudulent charges, and she did not alleged any specific facts about the time or effort she purportedly spent monitoring her credit. Instead, the Court noted, she made general allegations about consumers expending "considerable time" on credit monitoring to avoid fraud and asserted class damages and did not seek leave to amend her complaint to add more specific allegations to sustain her claims.

 

The Second Circuit found the plaintiff's allegations insufficient to establish concrete, particularized injury, and therefore that the plaintiff failed to achieve Article III standing.

 

The Court noted that the plaintiff's lack of sufficient allegations distinguished her complaint from other retailer data breach cases, such as Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688 (7th Cir. 2015), and Lewert v. P.F. Chang's China Bistro, Inc., 819 F.3d 963 (7th Cir. 2016), in which the personal information of the class members was stolen such that a risk of future identity theft was possible, and the named plaintiffs asserted specific factual injuries concerning their expenses to monitor their credit reports for fraudulent activity. In each of those cases, the Seventh Circuit found that the plaintiffs had established Article III standing as their allegations supported the conclusion that their future informational injuries were "certainly impending."

 

Accordingly, the trial court's order granting the defendant retailer's motion to dismiss was affirmed.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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FYI: 8th Cir Holds Removal Proper Where Absence of CAFA Jurisdiction Not "Established to a Legal Certainty"

The U.S. Court of Appeals for the Eighth Circuit recently held that the requirements for the federal Class Action Fairness Act ("CAFA") were met and the matter was properly removed to federal court, where the plaintiffs could not "establish to a legal certainty" that their claims were for less than the requisite amount. 

 

A copy of the opinion is available at:  Link to Opinion

 

The plaintiff insureds ("Insureds") purchased automobile insurance from the insurer ("Insurer"). 

 

The Insureds' policies required deductible payments of $100 for medical expense payments and $200 for economic loss payments.  Both policies provided only the minimum coverage required by Minnesota law: $20,000 for medical expenses, and $20,000 for economic losses.

 

The Insureds both suffered covered losses and incurred more than $20,100 in medical expenses as a result. Because their policies included the $100 deductible for medical expense payments and a maximum coverage of $20,000, each insured received a payment of just $19,900 from the Insurer.

 

The Insureds subsequently filed suit in Minnesota state court alleging that the Insurer's practice of selling policies with deductibles which reduced benefit payments below $20,000 for medical expenses and for economic losses violated Minnesota law.  The Insureds sought to represent a class of all similarly situated individuals.

 

The Insurer timely removed the case to federal court, and the Insurers moved to remand to state court on the ground that CAFA's jurisdictional requirements were not met because the amount in controversy did not exceed $5,000,000. After the trial court denied the motion to remand, the Insurer moved to dismiss the case for failure to state a cause of action, which motion was granted.  The Insureds appealed.

 

On appeal, the Insureds first argued that the trial court should have remanded the case to state court because it lacked jurisdiction because the requirements of CAFA were not met.

 

As you may recall, under CAFA,  federal courts have original jurisdiction over class actions "where, among other things, 1) there is minimal diversity; 2) the proposed class contains at least 100 members; and 3) the amount in controversy is at least $5 million in the aggregate."

 

The Insureds argued that the trial court erred when it determined that the amount in controversy exceeded $5 million because as plaintiffs were "the master of the complaint," and the trial court therefore should have restricted its analysis of the amount in controversy to what could be recovered by the class of individuals identified in the complaint, which was only individuals who had actually made claims for covered losses and were paid less than the statutory minimum.

 

The Insurer stated some six hundred individuals fell within that class.  However, when the trial court calculated the amount in controversy, it relied on premiums collected on all the Insurer's policies which included the challenged deductibles, regardless of whether the policyholders had made claims which led to application of the deductibles.  The Insureds argued this figure was overinclusive.

 

In ruling against the Insureds, the Eighth Circuit first noted that where the party seeking to remove has shown CAFA's jurisdictional minimum by a preponderance of the evidence, "remand is only appropriate if the plaintiff can establish to a legal certainty that the claim is for less than the requisite amount."

 

The Eighth Circuit then held that the Insureds "failed to show that it is legally impossible for them to recover more than $5,000,000. While they put [the Insurer's] sales practices at issue and seek a refund of their premium payments, they have not offered evidence to establish the amount they collectively paid in premiums. Without such information, we cannot determine whether it would be legally impossible for them to recover $5,000,000. We therefore conclude that the district court properly denied the motion for remand."

 

The Eighth Circuit also affirmed the trial court's ruling granting the Insurer's motion to dismiss, finding that the Insured did not allege a violation of the Minnesota No Fault Act. 

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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FYI: SCOTUS Holds Cities Have Standing Under FHA for "Subprime Nuisance" Claims

The Supreme Court of the United States recently held that a city qualifies as an "aggrieved person" under the federal Fair Housing Act, 42 U.S.C. § 3601 et seq. ("FHA") and, thus that the plaintiff city in this action had standing to assert claims under the FHA against banks the city believed were engaging in unlawful discriminatory lending practices. 

 

According to the City, the unlawful lending practices caused, among other damages, a disproportionate number of foreclosures and vacancies in majority-minority neighborhoods, which impaired the City's effort to assure racial integration, diminished the city's property-tax revenue, and increased demand for police, fire, and other municipal services.  The Court concluded that such alleged damages are within the "zone of interests" designed to be protected by the FHA, and the city had the right to assert its claims. 

 

The Court also concluded that although the alleged damaging consequences of the banks' supposed discriminatory lending practices were foreseeable, that, alone, was insufficient for the city to establish proximate cause under the FHA, as required. 

 

The Court remanded the case to the trial court for that court to establish the parameters for sufficiently demonstrating proximate cause.

 

A copy of the opinion is available at:  Link to Opinion

 

As you may recall, the FHA makes it unlawful to "discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race . . . ." See 42 U. S. C. §3604(b).  The statute also prohibits "any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race . . . ." See 42 U.S.C. §3605(a).

 

The FHA allows any "aggrieved person" to file a civil action seeking damages for a violation of the statute. See 42 U.S.C. §§3613(a)(1)(A), 3613(c)(1).  It defines an "aggrieved person" to include "any person who . . . claims to have been injured by a discriminatory housing practice." 42 U.S.C. §3602(i).

 

Here, the city sued two different banks, alleging that they intentionally issued riskier mortgages on less favorable terms to minority customers than they issued to similarly-situated white, non-Latino customers, in violation of 42 U.S.C. §§3604(b) and 3605(a).

 

The city alleged that the discriminatory practices "adversely impacted the racial composition of the city," "impaired the city's goals to assure racial integration and desegregation," "frustrate[d] the city's longstanding and active interest in promoting fair housing and securing the benefits of an integrated community," and disproportionately "cause[d] foreclosures and vacancies in minority communities." The city further alleged that the increased foreclosures and vacancies caused (1) a reduction of the property tax revenues to the city, and (2) the city to spend more on municipal services that it provided for the vacant and dangerous properties.

 

The banks moved to dismiss the complaints, contending that the injuries the city alleged did not fall within the zone of interests the FHA was designed to protect and, as a result, the city does not qualify as an "aggrieved person" under the FHA.  The second argument the banks made in support of dismissing the complaints was that the city had not adequately alleged a proximate cause connection between the conduct complained of and the alleged damages.

 

The trial court granted the banks' motions to dismiss.  On appeal, the Eleventh Circuit reversed the trial court, finding that the city qualified as an aggrieved person under the FHA, and that the complaints adequately established proximate cause by alleging the alleged damages were foreseeable.

 

On appeal, the Supreme Court analyzed the two issues addressed by the Eleventh Circuit: (1) whether the city qualified as an aggrieved person under the FHA, and (2) what a plaintiff needed to establish in order to satisfy the proximate cause requirement of its claim. 

 

As to the first issue, the Supreme Court, relying on its own precedent, concluded that the definition of "person aggrieved" in the original version of the FHA "showed 'a congressional intention to define standing as broadly as is permitted by Article III of the Constitution,'" and that the FHA permits suits by parties similarly situated to the city. The Court then determined that "Congress did not materially alter the definition of person 'aggrieved' when it reenacted the current version" of the FHA.

 

The Court referenced several similar cases in which it allowed entities and/or organizations to bring claims under the FHA alleging discriminatory lending practices that allegedly caused the same damages the city alleged in this matter.  The Supreme Court relied on those prior cases to provide examples of the "zone of interests" the FHA protects. 

 

In comparing those cases to the City's allegations, the Court determined that the city's allegations of reduced property values, diminished property-tax revenues, and increased demand for municipal services were all within the protected zone of interests, and that stare decisis compelled the Court's adherence to those precedents.  As a result, the Court concluded the city was entitled to bring its claims against the banks under the FHA.

 

As to the second issue of proximate cause, the Court concluded that the Eleventh Circuit erred in ruling that the city's complaints met the FHA's proximate-cause requirement based solely on the finding that the alleged financial injuries were foreseeable results of the banks' misconduct.  According to the Court, foreseeability, standing alone, is insufficient to establish the required proximate cause element of an FHA claim.

 

The Supreme Court first established that a claim under the FHA is akin to a tort claim, which requires the plaintiff to establish the defendant's alleged conduct proximately caused plaintiff's alleged damages. According to the Court, alleged injuries that are "too remote" from the alleged unlawful conduct will not satisfy the requirement.

 

In attempting to define proximate cause, the Supreme Court held that the FHA proximate cause analysis addresses "whether the harm alleged has a sufficiently close connection to the conduct the statute prohibits." 

 

The Court then took issue with the Eleventh Circuit's holding that "the proper standard for proximate cause is based on foreseeability."  According to the Court, "in the context of the FHA, foreseeability alone does not ensure the close connection that proximate cause requires. The housing market is interconnected with economic and social life. A violation of the FHA may, therefore, 'be expected to cause ripples of harm to flow' far beyond the defendant's misconduct."

 

The Supreme Court held that, under the FHA, proximate cause "requires some direct relation between the injury asserted and the injurious conduct alleged." 

 

The Court, however, declined the opportunity to set the precise boundaries of proximate cause under the FHA.  According the Supreme Court, the Eleventh Circuit used the wrong standard, such that the Supreme Court did not have the benefit of its judgment on how the established principles apply to the FHA. 

 

The Supreme Court concluded that it should be the lower courts who establish the contours of proximate cause under the FHA.  Accordingly, the Court reversed the Eleventh Circuit's ruling and remanded the case to the trial court.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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