UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

NORTHERN DIVISION

TAMIKA SCHMIDT,

 CASE NO. 1:14-CV-14728

Plaintiff,

 DISTRICT JUDGE THOMAS L. LUDINGTON

v. MAGISTRATE JUDGE PATRICIA T. MORRIS

PENNYMAC LOAN

SERVICES, LLC, and

BANK OF AMERICA, NA,

Defendants.

/

MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION

I. Recommendation 

Before the Court are Defendants PennyMac’s and Bank of America’s motions to dismiss 

(Docs. 8, 9.) Plaintiff Tamika Schmidt has brought separate claims against each Defendant,

originally filing the case in the Saginaw County Circuit Court. (Doc. at Pg. ID 9-12.) She alleges

that PennyMac violated Regulation X’s continuity of contact requirements, 12 C.F.R. § 1024.40,

promulgated by the Consumer Financial Protection Bureau (“CFPB”) under the Real Estate 

Settlement Procedures Act of 1974, (“RESPA”) 12 U.S.C. § 2601 et seq., and that Bank of 

America committed the state law tort of silent fraud. (Doc. 1 at Pg ID 14-18.) PennyMac 

removed the case to this Court citing the federal question raised by Schmidt’s Regulation X 

claim and the supplemental jurisdiction covering the state claim. (Id. at Pg ID 1-3.) The motions 

have been fully briefed and are ready for Report & Recommendation without oral argument. I 

suggest that Schmidt lacks a private cause of action to enforce the federal regulation and that her 

state law claim should be remanded. Therefore, I recommend GRANTING PennyMac’s motion 

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(Doc. 8), DENYING Bank of America’s motion (Doc. 9), and remanding the remaining claim to 

Saginaw County Circuit Court.

II. Introduction

Schmidt’s case arises from an agreement she entered with Executive Mortgage of 

Michigan LLC in May 2010 in which she executed a promissory note for $41,047 and mortgaged 

her real property located in Saginaw Michigan. (Doc. 1 at Pg ID 12-13; Doc. 9, Exs. A-B.) In 

October 2011, Executive Mortgage of Michigan assigned the mortgage to Bank of America. 

(Doc. 9, Ex. C.) A year later, Bank of America and Schmidt agreed to a Home Affordable 

Modification Trial Period Plan requiring Schmidt to make payments on the first of the month 

from December 2012 through February 2013. (Id., Exs. C-D.) The Plan stated that “Time is of 

the Essence” in making the payments (id., Ex. C (emphasis omitted)), and the accompanying 

cover letter informed Schmidt that she could pay by mail or telephone. (Id., Ex. D.)

Schmidt asserts that she made the first payment on time and that in February, with the 

deadline impending, she attempted to make her payment at the local Bank of America branch.

(Doc. 1 at Pg. ID 13-14.) According to Schmidt, the bank teller could not find any modified 

payment plan “in their system and . . . [would] not accept anything less than the full payment 

amount.” (Id. at Pg ID 14.) The following day she mailed the modified payment to Bank of 

America, “but it was returned as being one . . . day late.” (Id.) Negotiations with Bank of 

America proved fruitless and she was told her only options were reinstating the original loan or 

applying for another modification. (Id.) By January 2014, Bank of America had assigned the 

mortgage to PennyMac (Doc. 9, Ex. F), and Schmidt began calling its loss mitigation 

department. (Doc. 1 at Pg ID 14.) She contends that from December 2013 to February 2014 she 

“made numerous attempts” to contact that department “but was transferred from person to 

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person” and “could never get through to a contact at Pennymac [sic] that could provide her any 

information or options.” (Id.) The mortgage contained a power of sale clause (Doc. 9, Ex. B), 

that PennyMac used in February 2014 to foreclose on Schmidt’s property and purchase it at the 

subsequent sheriff’s sale. (Doc. 8, Ex. 1.) The statutory redemption period expired six months 

later in August, Mich. Comp. Laws § 600.3240, without Schmidt redeeming the mortgage, (Doc.

1 at Pg ID 14; Doc. 9 at 3), and thus the deed vested in PennyMac. Mich. Comp. Laws § 

600.3236.

In October 2014, Schmidt brought suit in Saginaw County Circuit Court against Bank of 

America and PennyMac, alleging separate claims against each. (Doc. 1.) She claims that Bank of 

America committed silent fraud by failing to disclose that her loan modification payments would 

not be accepted at the branch office. (Id. at Pg ID 15.) The silence was reasonably misleading 

because Schmidt had made multiple payments at the office prior to the modification agreement, 

and she “acted in reliance on the misimpression created by Defendant” that she could continue 

doing so. (Id.) As for Bank of America, she contends that it violated the Consumer Finance 

Protection Bureau’s (“CFPB”) Regulation X dealing with mortgage servicing, specifically 12 

C.F.R. § 1024.40 requiring servicers to establish policies that will make personnel available by 

telephone to assist delinquent borrowers. (Doc. 1 at Pg ID 16-17.) During her attempts to discuss 

those options with PennyMac in late 2013 and early 2014, she asserts that she “was unable to 

ever speak to the same person twice.” (Id. at Pg ID 17.) Instead, PennyMac “transferred [her] 

from department to department to people who were supposed to ‘help’ her, but [she] was never 

given answers to her very simply questions,” and PennyMac never received return calls despite 

promises that someone would contact with answers. (Id.)

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PennyMac was served with the complaint on November 17, 2014, and within thirty days 

removed the case to this Court under 28 U.S.C. § 1441. (Id. at Pg ID 1-4, Ex. A.) The basis for 

removal was the Court’s original federal question jurisdiction, 28 U.S.C. § 1331, over Schmidt’s

Regulation X claim. (Id. at Pg ID 2-3.) The state law claim against Bank of America came within 

the Court’s supplemental jurisdiction, according to PennyMac’s removal notice. (Id. at 3.) Bank 

of America apparently did not give explicit consent to removal, as the notice indicates by stating

that “upon information and belief, co-defendant Bank of America, N.A. would agree to 

removal.” (Id.) Bank of America never subsequently filed written consent to the removal as 

required by 28 U.S.C. § 1446(b).

III. Analysis

A. Motion to Dismiss Standards

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency 

of the complaint and will be granted if the plaintiffs have failed “to state a claim upon which 

relief can be granted . . . .” “The court must construe the complaint in the light most favorable to 

the plaintiff, accept all the factual allegations as true, and determine whether the plaintiff can 

prove a set of facts in support of its claims that would entitle it to relief.” Bovee v. Coopers & 

Lybrand C.P.A., 272 F.3d 356, 360 (6th Cir. 2001). But the plaintiff must plead “enough facts to 

state a claim to relief that is plausible on its face,” otherwise the complaint will be dismissed. 

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The plausibility standard requires the 

plaintiff to “raise a right to relief above the speculative level on the assumption that all the 

allegations in the complaint are true (even if doubtful in fact).” Id. at 555. (citations omitted). 

The complaint must include more than “labels and conclusions” and “formulaic recitation[s] of 

the elements of a cause of action . . . .” Id.

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Because the dismissal standard scrutinizes the pleadings, the Federal Rules limit courts’ 

consideration of extraneous materials at this stage. Rule 12(d) provides the operative language: 

“If, on a motion under Rule 12(b)(6) . . . matters outside the pleadings are presented to and not 

excluded by the court, the motion must be treated as one for summary judgment under Rule 56.” 

The “pleadings” the rule refers to are seven narrow classes of documents defined in Rule 7(a). 

Motions and accompanying briefs are not pleadings, nor are responses to motions or other 

submitted memoranda. Fed. Rule Civ. P. 7(a). See also Moore v. Trott & Trott, P.C., No. 06-

11250, 2006 WL 3103671, at *1 n.1 (E.D. Mich. Oct. 31, 2006) (adopting Report and 

Recommendation); Miller v. Brown & Williamson Tobacco Corp., 679 F. Supp. 485, 487 (E.D. 

Pa. 1988); United States v. Plant, 56 F.R.D. 613, 616 (W.D. Ark. Oct. 19, 1972); Wholesale 

Supply Co. v. South Chester Tube Co., 20 F.R.D. 310, 315 (E.D. Pa. Feb. 14, 1957). It follows 

that the plaintiffs’ pleadings, and not their briefs, must contain the core legal contentions for the 

claims advanced. See Fifth Third Bank v. Double Tree Lakes Estates, LLC, No. 2:11-CV-233, 

2013 WL 587891, at *11 (N.D. Ind. Feb. 12, 2013) (noting that “all allegations of a claim of 

fraud must be in the pleading itself and cannot be supplemented by a responsive brief”).

Courts deluged with these outside “matters” can either exclude the materials and proceed 

under Rule 12(b)(6) or convert the motion. See Brigolin v. Blue Cross Blue Shield of Michigan, 

516 F. App’x 532, 536 (6th Cir. Mar. 4, 2013). Many courts have excluded such materials and 

considered the motion to dismiss without reference to them. See, e.g., In re Fagan, 465 B.R. 472, 

475 (E.D. Mich. Bankr. 2012) (“The Court will exclude the materials supplied by the debtors and 

treat the Defendant’s motion solely as a motion to dismiss under Rule 12(b)(6).”); Warsco v. 

Becton Dickinson & Co., No. 1:08-CV-5, 2009 WL 1874375, at *3 (N.D. Ind. June 30, 2009) 

(noting that court has discretion to exclude or convert). Using the materials to decide a motion to 

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dismiss constitutes error and sometimes leads to reversal. See Engleson v. Unum Life Ins. Co. of 

America, 723 F.3d 611, 616 (6th Cir. 2013) (noting that district court should have converted 

because it considered outside materials, but treating the decision as equivalent to a Rule 56 ruling 

and reviewing under that standard); Brigolin, 516 F. App’x at 536 (same).

However, the Rules allow courts to consider certain extrinsic documents at the dismissal 

stage. Pertinent to the present case, the Court can examine documents Defendants have attached 

to their motions to dismiss “‘if they are referred to in the plaintiff’s complaint and are central to 

her claim.’” Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir. 1997) Both conditions—

reference in the complaint and centrality to the complaint—are necessary for the rule to apply. 

Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514 (6th Cir. 1999) (analyzing whether the 

document was both integral to the complaint and referenced in it); Bassett v. Nat’l Collegiate 

Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008) (noting that a court can consider “exhibits 

attached to defendant’s motion to dismiss so long as they are referred to in the complaint and are 

central to the claims contained therein”); Weiner, 108 F.3d at 89 (same); Berry v. Main Street 

Bank, 977 F. Supp.2d 766, 771 (E.D. Mich. 2013) (same); Griffiths v. Ohio Farmers Ins. Co., 

No. 1:09-cv-1011, 2009 WL 3817592, at *1 (N.D. Ohio Nov. 13, 2009) (same). In addition, “A 

court that is ruling on a Rule 12(b)(6) motion may consider materials in addition to the complaint 

if such materials are public records or are otherwise appropriate for the taking of judicial notice.” 

New England Health Care Employees Pension Fund v. Ernst & Young, LLP, 336 F.3d 495, 501 

(6th Cir. 2003). See also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007);

Bassett, 528 F.3d at 430. Certain limitations apply when taking judicial notice, chief among 

which is that the court cannot accept the truth of the matters asserted in the documents. Passa v. 

City of Columbus, 123 F. App’x 694, 697 (6th Cir. 2005).

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Here, Defendants have attached various documents to their motions, none of which 

Schmidt has opposed. The list of exhibits is comprised of a notarized sheriff’s deed of the 

February 2014 foreclosure sale (Doc. 8, Ex. A; Doc. 9, Ex. G), the promissory note (Doc. 9, Ex. 

A), the agreement assigning the mortgage to Bank of America (id., Ex. B), the Trial Payment 

Plan and accompanying cover letter (id., Exs. D-E), and the assignment agreement between 

Defendants (id., Ex. G). All of these documents are properly within the Court’s purview. The 

complaint references each document, except the sheriff’s deed, and relies on them to press its

claims. (Doc. 1 at Pg ID 13-14.) The Court can also take judicial notice of the deed, along with 

the other materials. See Letvin v. Lew, No. 13-12015, 2014 WL 2865143, at *4 (E.D. Mich. June 

24, 2014) (taking notice of a promissory note, mortgage, assignment of mortgage, and sheriff’s 

deed).

B. Removal Procedures

At the outset, the Court briefly highlights Bank of America’s questionable compliance 

with 28 U.S.C. § 1446(b)(2)(A), which requires “all defendants who have been properly joined 

and served . . . [to] join in or consent to the removal of the action.” It applies where, as here, the 

removal is based “solely under [28 U.S.C. §] 1441(a).” Id. That section, in turn, allows 

defendants to remove any civil action brought in state court to the proper federal district court 

that has original jurisdiction over it. Id. § 1441(a). PennyMac’s removal notice was premised on 

the court’s original jurisdiction over a federal question, the Regulation X claim (Doc. 1 at Pg ID 

2-3), thus triggering § 1446(b)’s requirement that all defendants consent to the removal. Courts 

have dubbed this the “rule of unanimity,” which holds, as the Sixth Circuit explained when 

adopting it, that “all defendants in the action must join in the removal petition or file their 

consent to removal in writing within thirty days” of two alternative dates. Loftis v. United Parcel 

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Serv., Inc., 342 F.3d 509, 516 (6th Cir. 2003). Defendants can manifest consent even without a 

separate writing or signature if, for example, the notice of removal states that all defendants 

consent to it. See Harper v. AutoAlliance, 392 F.3d 195, 201-02 (6th Cir. 2004). Alternatively, 

the defendant can demonstrate consent by filing an answer that states jurisdiction is proper in the 

federal court. Id. at 202. Opposing a motion to remand also demonstrates sufficient consent. 

Cleveland v. Ameriquest Mortgage Securities, Inc., 615 F.3d 496, 501 (6th Cir. 2010).

The notice here did not boast that Bank of America had consented, only that PennyMac 

believed it would consent. (Doc. 1 at Pg ID 3.) Cf. Schayes v. T.D. Serv. Co. of Arizona, No. CV10-02658, 2011 WL 1793161, at *3 (D. Ariz. May 11, 2011) (finding that PennyMac’s assertion 

in its notice of removal that no defendant objected was insufficient); Knickerbocker v. Chrysler 

Corp., 728 F. Supp. 460, 462 (E.D. Mich. 1990) (holding that the removing defendant’s 

“unsupported assertion that [the co-defendant] ‘does not object to the removal’ clearly fails to 

satisfy this statutory filing requirement”). Nor does Bank of America’s motion to dismiss 

explicitly assert that this Court has jurisdiction; rather it simply mentions the fact that PennyMac 

has removed the case here. (Doc. 9 at 3.) Cf. Local Union No. 172 Int’l Ass’n of Bridge, 

Structural Ornamental & Reinforcing Ironworkers v. P.J. Dick Inc., 253 F. Supp. 2d 1022, 1025 

(S.D. Ohio 2003) (noting that courts should not “allow[] a defendant’s ambiguous actions, such 

as filing an answer which makes no reference to the removal of the case, to satisfy the clear 

requirements of the statute”); Hicks v. Emery Worldwide, Inc., 254 F. Supp. 2d 968, 975 (S.D. 

Ohio 2003) (noting that “a non-removing defendant’s filing of motions or pleadings in the 

federal court, without explicitly indicating consent to or joinder in the removal, is insufficient to 

satisfy the requirements of § 1446”). 

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Ultimately, this is a procedural rule and the Court cannot sua sponte dispose of the case 

on this ground even if the rule was violated.

1 Because no party has protested removal, any 

arguments based on the rule of unanimity have been waived. See Page v. City of Southfield, 45 

F.3d 128, 132-33 (6th Cir. 1995); Barber v. Zurich Am. Ins. Co., No. 14-12752, 2015 WL 93530, 

at *1 n.1 (E.D. Mich. Jan. 7, 2015); Luckow v. AXA Equitable Life Ins. Co., No. 08-CV-10475, 

2008 WL 495626, at *1 (E.D. Mich. Feb. 21, 2008). Nonetheless, the absence of any explicit 

consent in the record provides a persuasive reason to remand, as discussed more fully below.

C. Schmidt’s Regulation X Claim

Schmidt’s lone federal claim is that PennyMac violated 12 C.F.R. § 1024.40.2 (Doc. 1 at 

16-17.) The relevant portion of that regulation requires servicers of loans to 

maintain policies and procedures that are reasonably designed to achieve the 

following objectives . . . 

(1) Assign personnel to a delinquent borrower . . . not later than the 45th 

day of the borrower’s delinquency.

(2) Make available to a delinquent borrower, via telephone, personnel 

assigned to the borrower as described in paragraph (a)(1) [above] of this 

section to respond to the borrower’s inquiries, and as applicable, assist 

the borrower with available loss mitigation options until the borrower 

has made, without incurring a late charge, two consecutive mortgage 

payments in accordance with the terms of a permanent loss mitigation 

agreement.

(3) If a borrower contacts the personnel assigned to the borrower as 

described in paragraph (a)(1) [above] of this section and does not 

immediately receive a live response from such personnel, ensure that the 

servicer can provide a live response in a timely manner.

1 A few exceptions exist to the rule of unanimity; the only one potentially relevant here is where the nonremoving defendant was not served with process when the removal was filed. See First Independence 

Bank v. Trendventures, L.L.C., No. 07-CV-14462, 2008 WL 253045, at *5-6 (E.D. Mich. Jan. 30, 2008). 

Evidence regarding service on Bank of America is lacking. 

2 Nothing in the complaint suggests Schmidt is attempting to assert this claim against Bank of America as 

well, and Schmidt has failed to deny Bank of America’s assertion that the claim applies only to 

PennyMac. (Doc. 9 at 3 n.3; Doc. 14.)

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12 C.F.R. § 1024.40(a). This regulation took effect on January 10, 2014, in the middle of the 

period PennyMac was supposedly violating it. Mortgage Servicing Rules Under the Real Estate 

Settlement Procedures Act (Regulation X), 78 Fed. Reg. 10,696, 10,696 (Feb. 14, 2013) (codified 

at 12 C.F.R. pt 1024). Thus at least some of the alleged conduct could have come under its 

strictures. Schmidt offers two actions that contravened the regulation: PennyMac shuffled her 

between different personnel when she called, none of whom answered her “very simple 

questions,” and despite promising to contact her “with a person who could answer her questions 

and help her with loss mitigation efforts, Plaintiff never received a return phone call.” (Doc. 1 at 

Pg ID 17.) In her brief, she suggests this response was designed to “continue transferring her 

through departments in an effort to frustrate her and get her off the phone.” (Doc. 15 at 5.) No 

party disputes that PennyMac is a loan servicer, 12 U.S.C. § 2605(i)(2), or that Schmidt is a 

“delinquent borrower” under the regulation. 

As an initial matter, it is doubtful whether the complaint describes actual violations of the 

regulation. The regulation imposes on servicers such as PennyMac a duty to implement policies 

and procedures for communications with delinquent borrowers. Schmidt does not claim that 

PennyMac failed to enact such policies or that its actions breached those policies. She does not 

even claim that live personnel were unavailable. Perhaps she comes closest to properly stating a 

claim by asserting that none of those personnel answered her questions, but this vague contention 

does not clearly suffice.

In any case, her problems characterizing the claim are symptomatic not of a poorly 

worded pleading but of a pleading that alleges a claim she cannot privately enforce. That is, no 

private cause of action is available to enforce 12 C.F.R. § 1024.40. PennyMac arrives at the same 

conclusion, but for the wrong reasons. (Doc. 8 at 10-11; Doc. 17 at 5-6.) It interprets the 

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complaint as contending that “the regulation was violated because [Schmidt] was not provided a 

loss mitigation option by PennyMac.” (Doc. 8 at 11.) It then asserts that the next section in the 

regulations, 12 C.F.R. § 1024.41, does not impose any obligation on the servicer to offer loss 

mitigation options and that § 1024.41 does not create a private right allowing the borrower to 

enforce agreements between the servicer and the owner or assignee of the loan regarding loss 

mitigation options. (Doc. 8 at 11; Doc. 17 at 5-6.) That is an accurate recitation of § 1024.41, but

it is irrelevant: Schmidt is not bemoaning the lack of loss mitigation options or trying to enforce 

an agreement. Rather, she details errors in PennyMac’s communications practices that 

purportedly deviated from § 1024.40(a)’s specifications. That section’s requirements address a 

broad range of communications extending beyond those relating to loss mitigation agreements. 

Indeed, the servicers must have a policy for providing personnel that can answer “the borrower’s 

inquiries . . . .” Id. § 1024.40(a)(2).3 PennyMac’s emphasis on loss mitigation thus misreads the 

regulation and Schmidt’s complaint.

Nonetheless, Schmidt does not have a private right of action to bring this particular claim.

Such rights can be found only in statutes, and Schmidt cites none. As the Supreme Court 

explained, 

[l]anguage in a regulation may invoke a private right of action that Congress 

through statutory text created, but it may not create a right that Congress has not. . 

. . [I]t is most certainly incorrect to say that language in a regulation can conjure 

up a private cause of action that has not been authorized by Congress. Agencies 

may play the sorcerer’s apprentice but not the sorcerer himself.

3 PennyMac’s focus on loss mitigation options might emanate from the next portion of the sentence, 

which adds that the personnel must “respond to the borrower’s inquiries, and as applicable, assist the 

borrower with available loss mitigation options . . . .” Id. § 1024.41(a)(2). The reference to “loss 

mitigation options” does not modify or limit the types of inquiries the personnel must answer. Rather, it is 

a separate provision obligating the servicer to maintain policies under which personnel are available to 

assist with those options only if they apply.

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Alexander v. Sandoval, 532 U.S. 275, 291 (2001) (citations omitted); see also Smith v. Dearborn 

Fin. Servs., Inc., 982 F.2d 976, 979 (6th Cir. 1993) (“[F]ederal regulations cannot themselves 

create a cause of action; that is a function of the legislature.”). The right arises from the statute, 

and any “obligation or prohibition” the regulation imposes “that is not imposed generally by the 

controlling statute” is unenforceable by private suit. Ability Ctr. of Greater Toledo v. City of 

Sandusky, 385 F.3d 901, 906 (6th Cir. 2004). “On the other hand, if the regulation simply 

effectuates the express mandates of the controlling statute, then the regulation may be enforced 

via the private cause of action available under that statute.” Id. The plaintiff must be able to cite 

“a specific statutory provision . . . that confers a right relevant” to the violation of a regulation. 

Caswell v. City of Detroit Hous., 418 F.3d 615, 620 (6th Cir. 2005); see also Talton v. BAC 

Home Loans Servicing LP, 839 F. Supp. 2d 896, 911 (E.D. Mich. 2012) (dismissing claim that a 

mortgage servicing regulation created a private cause of action where the “plaintiffs [had] not 

pointed to a federal statute that supports their claim”); cf. Harris v. Olszewski, 442 F.3d 456, 

464-65 (6th Cir. 2006) (“Here, the authoritative regulation merely supplements the right 

identified in a specific statutory provision . . . .”). At most, then, the regulations applying a 

statute that contains a private right “are covered by the cause of action to enforce that section” 

since those regulations “authoritatively construe the statute itself . . . .” Sandoval, 532 U.S. at 

284.

Congress can create rights of action in statutes by express provision or by implication.

See Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 15, 18 (1979). While the 

former is the “far better course,” in “‘certain limited circumstances the failure of Congress [to 

expressly create a right] . . . is not inconsistent with an intent on its part to have such a remedy 

available to persons benefited by its legislation.’” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. 

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Curran, 456 U.S. 353, 374 (1982) (quoting Cannon v. Univ. of Chicago, 441 U.S. 677, 690-91 

(1979)). The Supreme Court has articulated various frameworks for finding implied rights of 

action, but the touchstone of all has been “determining whether Congress intended to create the 

private right of action,” and that determination begins and often ends with the statutory language 

and framework. Touche Ross & Co. v. Redington, 442 U.S. 560, 569 (1979). See also Sandoval, 

532 U.S. at 288 (“We therefore begin (and find that we can end) our search for Congress’s intent 

with the text and structure” of the statute.). An earlier case, Cort v. Ash, 422 U.S. 66, 78 (1975), 

posited factors relevant to the inquiry—such as whether the legislation sought to benefit or 

protect a discrete class or whether a private remedy would effectuate the statute’s underlying 

purposes—which the Court has later instructed are designed to discern legislative intent. Touche 

Ross, 442 U.S. at 575-76. Thus, the implication of a private right of action must come from a 

clear indication of Congress’s intent apparent from the statute’s text and structure. See Sandoval, 

532 U.S. at 287-88 (noting that the absence of “‘rights-creating’ language” indicated that 

Congress did not intend to create a private cause of action); Lewis, 444 U.S. at 18 (“We conclude 

that the statutory language itself fairly implies a right to specific and limited relief in a federal 

court.”).

Statutes that merely direct federal agencies to issue rules and regulations rarely create 

private causes of action. In Sandoval, for example, the statute instructed the agencies “‘to 

effectuate the provisions [§ 601] . . . by issuing rules, regulations, or orders of general

applicability.’” 532 U.S. at 288 (quoting 42 U.S.C. § 2000d-1). From this, the Court could not 

detect any of the “‘rights-creating’ language so critical to the Court’s analysis” in other cases 

finding implied rights. Id. For one thing, the “focus” of the statute was on “the person regulated 

rather than the individuals protected,” indicating no “‘intent to confer rights on a particular class 

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of persons.’” Id. at 289 (quoting California v. Sierra Club, 451 U.S. 287, 294 (1981)).

Legislation written as a general mandate to agencies provides “‘far less reason to infer a private 

remedy in favor of individual persons.” Id. (quoting Cannon, 441 U.S. at 690). Instead, what is 

needed to create a private right is text “‘phrased in terms of the persons benefited.’” Mik v.

Federal Home Loan Mortgage Corp., 743 F.3d 149, 159 (6th Cir. 2014) (quoting Gonzaga Univ. 

v. Doe, 536 U.S. 273, 274 (2002)). And even this will fail if the language does not in addition 

demonstrate intent to provide a private remedy. Geiling v. Hemlock, No. 12-13119, 2012 WL 

5265551, at *6 (E.D. Mich. Oct. 23, 2012).

The Sixth Circuit faced a statute-regulation grouping based on a broad legislative 

mandate to issue regulations in Parry v. Mohawk Motors of Michigan, Inc., 236 F.3d 299, 307-

09 (6th Cir. 2000). The plaintiff contended that the private right of action was implicit in a 

statutory grant of power to the Secretary of Transportation to “prescribe regulations to establish 

drug testing programs ‘[i]n the interest of commercial motor vehicle safety.’” Id. at 307-08 

(quoting 49 U.S.C. § 31306). The court found that the statute provided only “a general mandate” 

to promulgate regulations, and thus did not “evince a concern for the protection” of a discrete 

class. Id. The statute therefore was not privately enforceable.

In the instant case, Schmidt has not cited any statute undergirding his right to privately 

enforce his claim, nor could he. The CFPB crafted 12 C.F.R. § 1024.40 to preclude private 

causes of action. The regulation’s development shows why Schmidt’s claim fails. The primary 

statute underlying the regulation is RESPA, originally enacted in 1974 and amended in 1990 to 

include section 6, which imposed new responsibilities on persons servicing a “federally related 

mortgage loan.” Cranston-Gonzalez National Affordable Housing Act, Public Law 101-625, 104 

Stat. 4079, (1990) (section 941, codified at 12 U.S.C. § 2605). Among other things, that section 

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contains detailed information the servicer must provide to consumers at various times and 

requires the servicer to respond to a borrower’s “qualified written request . . . for information 

relating to the servicing of [the] . . . loan.” 12 U.S.C. §§ 2605(b), (c), (e). It also has an express 

provision for private actions: “Whoever fails to comply with any provision of this section shall 

be liable to the borrower for each such failure” in “any action by an individual” or in a class 

action. Id. § 2605(f).

Prior to the Dodd-Frank Act of 2010, the Department of Housing and Urban 

Development had rulemaking authority over RESPA and developed Regulation X, 24 C.F.R. pt. 

3500 (2009) to cover mortgage servicing. When the CFPB was given responsibility for RESPA 

rulemaking, it proposed the Continuity of Contact regulation at issue here. 2012 Real Estate 

Settlement Procedures Act (Regulation X) Mortgage Servicing Proposal, 77 Fed. Reg. 57200, 

57,202, 57,261-65, 57,305 (Sept. 17, 2012). The proposal stemmed from concerns that servicers 

“were ill-equipped to handle the high volumes of delinquent mortgages,” as seen by the recent 

mortgage crisis. Id. at 57,203-204. One of the resulting problems the CFPB sought to ameliorate 

was servicers’ often unresponsive communication practices with delinquent borrowers. Id. The 

proposed Continuity of Contact rule would have addressed this by imposing specific standards 

on servicers. Id. at 57,305. For example, it did not instruct the servicer to craft policies and 

procedures, but instead directly commanded that the servicer assign personnel to the borrower 

within five days of giving notice of delinquency. Id. In short, the CFPB hoped to “establish 

minimum staffing requirements that would apply to all mortgage servicers” and “minimum 

uniform national standards” that would force servicers to assign personnel to delinquent 

borrowers and provide “live, telephonic responses to inquiries . . . .” Id. at 57,261. 

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It is the statutory basis that is critical to the analysis, however, and in the proposal the 

CFPB relied upon legislation that arguably would have channeled a statutory cause of action 

through the regulation. To support its authority to enact the two relevant regulatory subsections, 

the CFPB cited, among other statutes, subsection 6(k)(1)(E) of RESPA, 12 U.S.C. §

2506(k)(1)(E). Mortgage Servicing Proposal, 77 Fed. Reg. at 57,262-63. Section 6(k) subsection 

listed various servicer prohibitions, and 6(k)(1)(E) in particular provided that a servicer “shall 

not . . . fail to comply with any other obligation found by the Bureau of Consumer Financial 

Protection, by regulation, to be appropriate to carry out the consumer protection purposes of this 

chapter.” 12 U.S.C. § 2605(k)(1)(E). By hitching the regulation to a privately enforceable statute, 

the CFPB raised the possibility that it could be enforced in private actions.

In its final ruling, the CFPB backed away from this implication and, in fact, denied that 

the regulation provided or channeled any private right of action. The notice announcing the final 

ruling stated, “The Bureau and the prudential regulators will be able to supervise servicers within 

their jurisdiction to assure compliance with these [Continuity of Contact] requirements but there 

will not be a private right of action to enforce these provisions.” Mortgage Servicing Rules, 78 

Fed. Reg. at 10,698. Various modifications display and explain the shift. As noted, the language 

changed from a direct mandate on the servicers to a general “objectives-based policies and 

procedures requirement” that gave the servicers “flexibility” in achieving those objectives. Id. at 

10,808. Subsections 1024.40(a)(1) and (2) were withdrawn, the CFPB explained, “because they 

[were] proposed as specific requirements,” and they were replaced with a more general 

requirement that servicers adopt policies to further the objectives that inhered in those rejected 

“specific requirements.” Id. at 10,810.

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More importantly, the CFPB dropped its reliance on RESPA section 6(k)(1)(E). Id. at 

10,808-09. The proposed regulation “would have been enforceable through private rights of 

action,” via section 6(k)(1)(E). Id. at 10,808. However, the final ruling states, “the Bureau is 

adopting § 1024.40 as an objectives-based policies and procedures requirement. . . . [and] the 

Bureau believes that private liability is not compatible” with such requirements. Id. Explaining a 

similar decision regarding another section, the CFPB elaborated that “the prospect that many 

individual suits could be filed could threaten to undermine the basic goal of an objectives-based 

system” and would lead to inconsistent court rulings that would inhibit the flexibility envisioned 

in the regulations. Id. at 10,778. Consequently, “supervision and enforcement by the Bureau and 

other Federal regulators” would preserve “robust consumer protection without subjecting 

servicers to the same litigation risk and concomitant compliance costs as civil liability . . . .” Id.

To remove the cause of action linked to the regulation, the CFPB looked to alternative 

statutory authority for issuing it. No longer relying on section 6(k)(1)(E) of RESPA, the CFPB 

cited three different statutory sections, none of which give rise to private enforcement of the 

regulation’s requirements. Id. at 10,809. The first section, 12 U.S.C. § 2617(a) provides the 

CFPB a general grant of authority to issue regulations “necessary to achieve the purposes” of 

RESPA. The second is similarly broad, listing the objectives for which the CFPB can exercise its 

authority. 12 U.S.C. § 5511(b). Finally, 12 U.S.C. § 5532(a) gives the CFPB power to enact 

regulations ensuring that disclosures made to consumers are comprehensible. All three sections 

are general mandates allowing the CFPB to promulgate regulations that further broad objectives. 

Statutes of this type do not create private causes of action. See Sandoval, 532 U.S. at 288-89;

Parry, 236 F.3d at 307-08. Only the last statute, 12 U.S.C. § 5532(a), arguably hints at a class of 

“‘persons benefited,’” Mik, 743 F.3d at 159 (quotation omitted), but it does not suggest a 

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remedy. See Geiling, 2012 WL 5265551, at *6. Nor do any of the statutes lay out the 

requirements the CFPB ultimately constructed. The regulation does not effectuate a privately 

enforceable statutory right, and consequently I suggest that Schmidt cannot rely on it to bring 

this claim.

D. Schmidt’s Silent Fraud Claim

This leaves Schmidt’s state law claim against a different Defendant, Bank of America. 

(Doc. 1 at Pg ID 15.) Bank of America raises a host of issues with the claim, including state law 

principles that preclude courts from overturning foreclosure sales after the statutory redemption 

period expires, Schmidt’s failure to plead fraud with particularity, and a state law economic loss 

doctrine that bars the claim. (Doc. 9 at 5-10.) The initial question facing the Court is the 

jurisdictional basis for deciding this claim. See In re Methyl Tertiary Butyl Ether Prods. Liab. 

Litig., 510 F. Supp. 2d 299, 305 (S.D. N.Y. 2007). PennyMac’s removal asserted that the Court 

could exercise supplemental jurisdiction over it pursuant to 28 U.S.C. § 1367 because it is part of 

the same case or controversy as the federal question. (Doc. 1 at Pg ID 3.) Whether supplemental 

jurisdiction is proper depends on whether the “state and federal claims . . . derive from a 

common nucleus of operative fact.” United Mine Workers of America v. Gibbs, 383 U.S. 715, 

725 (1966). Another consideration or factor is whether the “claims are such that [the plaintiff] . . 

. would ordinarily be expected to try them all in one judicial proceeding,” though the federal 

issues must be substantial. Id. While this test preceded § 1367, courts recognize that the statute 

codifies its principles. See City of Chicago v. Int’l College of Surgeons, 522 U.S. 156, 172-73 

(1997); Barnes v. Hayse, No. 10-12501, 2010 WL 3448377, at *1-2 (E.D. Mich. Aug. 30, 2010). 

I suggest that it is ultimately unnecessary to determine this issue because remand is 

proper whether the Court can exercise supplemental jurisdiction or not. If supplemental 

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jurisdiction over the claim does not exist, then the removal statute instructs the court to remand. 

28 U.S.C. § 1441(c). If such jurisdiction exists it is discretionary, and I recommend that the 

Court decline to exercise it and instead remand. Supplemental jurisdiction “is a doctrine of 

discretion, not of plaintiff’s right.” Gibbs, 383 U.S. at 726; see also Geiling v. Wirt Fin. Servs., 

Inc., No. 14-cv-11027, 2015 WL 1529866, at *11 (E.D. Mar. 31, 2015). The statute giving courts 

jurisdiction over supplemental claims also recognizes that courts have discretion to decline it if, 

among other reasons, “the district court has dismissed all claims over which it has original 

jurisdiction . . . .” 28 U.S.C. § 1367(c)(4). The Sixth Circuit “applies a strong presumption 

against the exercise of supplemental jurisdiction once federal claims have been dismissed—

retaining jurisdiction ‘only in cases where the interests of judicial economy and the avoidance of 

multiplicity of litigation outweigh our concern over needlessly deciding state law issues.’” 

Packard v. Farmers Ins. Co. of Columbus Inc., 423 F. App’x 580, 584 (6th Cir. 2011) (quoting 

Moon v. Harrison Piping Supply, 465 F.3d 719, 728 (6th Cir. 2006)). Other factors that could 

overcome this “strong presumption” include forum manipulation, the progress of discovery, and 

the ripeness of summary judgment motions. Gamel v. City of Cincinnati, 625 F.3d 949, 952 (6th 

Cir. 2010) (discussing Harper v. AutoAlliance Int’l, Inc., 392 F.3d 195, 211-12 (6th Cir. 2004)). 

In the typical case, however, supplemental jurisdiction is not invoked. See, e.g., CH Holding Co. 

v. Miller Parking Co., 973 F. Supp. 2d 733, 739 (E.D. Mich. 2013) (noting that dismissal or 

remand of the state law claims is usually warranted).

None of the factors favor retaining the case. No forum manipulation is apparent, the case 

has not progressed through discovery, and remand will not result in “multiplicity of litigation,” 

as only one claim remains. The entire dispute centers on state law issues that are more 

appropriately addressed by state courts. Further, the state and federal claims were lodged against 

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different parties and were largely based on separate facts. Though supplemental jurisdiction can 

extend to pendant parties such as Bank of America, Exxon Mobil Corp. v. Allapattah Servs., Inc., 

545 U.S. 546, 558 (2005), there is a clear division between the state law claim that allegedly 

arose under the modification plan, and the subsequent federal claim against PennyMac. In short, 

the state court on remand will not need to duplicate this Court’s work. The Court has the power 

to remand after declining supplemental jurisdiction, and I suggest this course is appropriate here. 

See Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 357 (1988); Hinson v. Norwest Fin. South 

Carolina, Inc., 239 F.3d 611, 616 (4th Cir. 2001).

I also note that none of the parties have provided any basis for finding diversity 

jurisdiction over the state law claim. The “party ‘seeking to bring a case into federal court carries 

the burden of establishing diversity jurisdiction.’” Coyne v. American Tobacco Co., 183 F.3d 

488, 493 (6th Cir. 1999) (quoting Certain Interested Underwriters at Lloyd’s London, England v. 

Layne, 26 F.3d 39, 41 (6th Cir. 1994)). When that party is a removing defendant, courts have 

scrutinized the complaint and the notice of removal, along with other evidence, to determine 

whether the party has affirmatively established jurisdiction. See Lyerla v. Amco Ins. Co., 461 F. 

Supp. 2d 834, 835-36 (S.D. Ill. 2006); Keller v. Honeywell Protective Servs., 742 F. Supp. 425, 

427 (N.D. Ohio 1990). Where the evidence is vague, a court cannot exercise jurisdiction. One 

court, for example, remanded were “it [was] simply unclear from the allegations in the Petition 

for Removal whether the requisite complete diversity exists.” Keller, 742 F. Supp. at 429.

Another concluded that “as currently pleaded, the allegations of [the defendant’s] notice of 

removal are inadequate to permit the Court to ascertain whether complete diversity of citizenship 

exists in this case.” Lyerla, 461 F. Supp. 2d at 836. Here, as described above, Bank of America 

has never explicitly consented to this Court’s jurisdiction, let alone provided a basis for diversity 

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jurisdiction. Neither the notice of removal nor the complaint details the amount in controversy or 

the citizenship of the defendants. I thus suggest that diversity jurisdiction has not been shown.4

IV. Conclusion

For the reasons above, I recommend granting PennyMac’s motion to dismiss (Doc. 8), 

denying Bank of America’s motion to dismiss (Doc. 9), and remanding the case to the Saginaw 

County Circuit Court.

V. Review

Rule 72(b)(2) of the Federal Rules of Civil Procedure states that “[w]ithin 14 days after 

being served with a copy of the recommended disposition, a party may serve and file specific 

written objections to the proposed findings and recommendations. A party may respond to 

another party’s objections within 14 days after being served with a copy.” Fed. R. Civ. P. 

72(b)(2); see also 28 U.S.C. § 636(b)(1). Failure to file specific objections constitutes a waiver 

of any further right of appeal. Thomas v. Arn, 474 U.S. 140, 155; Howard v. Sec’y of Health & 

Human Servs., 932 F.2d 505, 508 (6th Cir. 1991); United States v. Walters, 638 F.2d 947, 950 

(6th Cir. 1981). The parties are advised that making some objections, but failing to raise others, 

will not preserve all the objections a party may have to this Report and Recommendation. Willis 

v. Sec’y of Health & Human Servs., 931 F.2d 390, 401 (6th Cir. 1991); Smith v. Detroit Fed’n of 

4 I recognize that “[d]efective allegations of jurisdiction may be amended, upon terms, in the trial or 

appellate courts.” 28 U.S.C. § 1653. In the absence of any argument on the matter, I will not address 

whether this section applies to a party who never made any “allegations of jurisdiction” or whether the 

allegations here are “defective” under the statute. Cf. Brooks v. Rosiere, 585 F. Supp. 351, 354 (E.D. La. 

1984) (“There is, however, no defect in the allegations of the basis for federal jurisdiction in the removal 

petition which would call for amendment pursuant to section 1653. The petition clearly alleges the 

existence of a federal question in this case. The defect in the petition is the failure of all defendants to 

petition for removal in a timely manner. A defect of this nature in the removal petition is not curable by 

amendment under section 1653.”). Additionally, no party has requested a further factual development of 

the issue, and the allegations, as they stand, do not merit such development. Cf. Ski Shawnee, Inc. v. 

Commonwealth Ins. Co., No. 3:09-CV-02391, 2009 WL 4937306, at *2 (M.D. Penn. Dec. 14, 2009) 

(providing the parties the opportunity to present factual evidence on diversity where the defendant alleged 

diversity of citizenship but the pleadings rendered the matter unclear).

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Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). According to E.D. Mich. LR 

72.1(d)(2), a copy of any objections is to be served upon this magistrate judge.

Any objections must be labeled as “Objection No. 1,” “Objection No. 2,” etc. Any 

objection must recite precisely the provision of this Report and Recommendation to which it 

pertains. Not later than 14 days after service of an objection, the opposing party may file a 

concise response proportionate to the objections in length and complexity. Fed. R. Civ. P. 

72(b)(2); E.D. Mich. LR 72.1(d). The response must specifically address each issue raised in the 

objections, in the same order, and labeled as “Response to Objection No. 1,” “Response to 

Objection No. 2,” etc. If the Court determines that any objections are without merit, it may rule 

without awaiting the response.

Date: May 1, 2015 s/ Patricia T. Morris

Patricia T. Morris

United States Magistrate Judge

CERTIFICATION

I hereby certify that the foregoing document was electronically filed this date through the Court’s 

CM/ECF system which delivers a copy to all counsel of record.

Date: May 1, 2015 By s/Kristen Krawczyk 

 Case Manager to Magistrate Judge Morris

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