Court Opinion

ID: 2658683
Source: CourtListenerOpinion
Date Created: 2014-03-31 10:12:25.056249+00
Date Added: 2024-06-11T12:35:27.628207
License: Public Domain

UNITED STATES DISTRICT COURT
                              FOR THE DISTRICT OF COLUMBIA

DAVID H. PARKER, JR.,
On behalf of himself and as a class,

       Plaintiff,
               v.                                         Civil Action No. 11-520 (JEB)
BAC HOME LOANS SERVICING LP,
f/k/a COUNTRYWIDE HOME LOANS
SERVICING LP,

         Defendant.

                          MEMORANDUM OPINION AND ORDER

       Plaintiff David H. Parker, Jr. brings this lawsuit, which he hopes to convert into a class

action on behalf of similar customers, against Defendant BAC Home Loans Servicing. He

claims that BAC unilaterally canceled a binding loan agreement with him, thereby causing him

to incur financial penalties and face the threat of foreclosure. While the parties are engaged in

discovery relating to class certification, Defendant has brought the instant Motion, seeking to

dismiss three of the counts in the First Amended Complaint. Because the Court determines that

BAC is not a “debt collector” within the meaning of the Fair Debt Collection Practices Act, it

will grant the Motion as to Counts III and IV, but deny it as to Count II’s claim of tortious

interference with contract.

I.     Background

       According to the First Amended Complaint, which must be presumed true for purposes of

this Motion, Plaintiff refinanced his mortgage in 2006, borrowing money from GreenPoint

Mortgage Funding, Inc. Id., ¶ 13. Facing financial difficulties, he sought to modify his loan and

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ultimately entered into a binding loan-modification agreement with Defendant BAC, “the loan

servicer for the current noteholder.” Id., ¶¶ 14-19. BAC is “a limited partnership and a distinct

entity within the Bank of America corporate family that specializes in residential mortgage loan

servicing.” Id., ¶ 8. As a loan servicer, BAC “provid[es] financial services to the third-parties

that own, or stand as agents or representatives for the owners of, the residential mortgage loans

that are the subject of the allegations.” Id., ¶ 9.

        Under the loan-modification agreement, Plaintiff’s new payments of $1,342.74 began in

September 2009, and he made these loan payments on time and in full every month from

September 2009 until November 2010. Id., ¶¶ 20-21. On August 2, 2010, Plaintiff received a

Notice of Intent to Accelerate stating that his loan was “in serious default” and giving him the

option to cure if he paid $23,431.94, which included late fees and penalties, by September 1,

2010. Id., ¶ 22. When Plaintiff contacted BAC to inquire about this Notice, BAC denied the

existence of the loan-modification agreement. Id., ¶ 23. On August 27, 2010, BAC sent Plaintiff

a letter that offered a new loan modification with monthly payments of $1,926.07 per month.

Id., ¶ 24. Plaintiff continued to make his mortgage payments until November 2010, when BAC

returned his payment on the ground that his mortgage was considered to be delinquent. Id., ¶¶

26, 28. BAC also wrote him that month to say it could not locate the 2009 loan-modifiction

agreement. Id., ¶ 28. Thereafter, BAC stopped accepting Plaintiff’s loan payments entirely, and

it also stopped passing his payments to Plaintiff’s lender. Id., ¶¶ 30-31. BAC also informed

Plaintiff that it had referred his property to the foreclosure department on September 30, 2010.

Id., ¶ 29.

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        In addition to breaching his loan-modification agreement, Plaintiff also contends that

BAC engaged in improper debt-collection practices by making debt-collection calls to him, even

after Plaintiff had sent BAC a formal cease-and-desist letter. Id., ¶¶ 34-36.

        Not only does Plaintiff allege improper behavior relating to himself individually, but, in

seeking to maintain a class action, Plaintiff makes allegations about BAC’s loan-servicing

operations generally. For example, Plaintiff asserts that BAC improperly tracks loans, unfairly

treating certain borrowers placed on the unfavorable track. Id., ¶¶ 41-43. BAC then subjects

these borrowers to “unlawful, harassing debt collection efforts.” Id., ¶ 44. Other deficient

practices include confusing program guidelines, including a failure to communicate program

changes, that have resulted in inappropriate fees and penalties and the treatment of modified

loans as in default. Id., ¶¶ 46-52. As a result, BAC “breached its contracts with borrowers

whose loans were either formally modified or were within a formal trial period plan.” Id., ¶ 51.

Plaintiff avers that BAC, in its “pursuit of profits derived from fees earned through servicing

agreements,” accumulated a servicing portfolio it could not handle. Id., ¶ 53. Plaintiff also

alleges that BAC evinced “willful blindness to systemic failures.” Id., ¶¶ 53, 55. In April 2011,

the Federal Reserve, Office of the Comptroller of the Currency, and Office of Thrift Supervision

jointly issued a report explaining the deficiencies of the largest loan servicers, including BAC.

Id., ¶ 55. Plaintiff contends that BAC did not seek to improve its servicing processes despite this

report. Id., ¶ 57.

        On February 8, 2011, Plaintiff brought suit against BAC in the Superior Court of the

District of Columbia, following which BAC removed the action to this Court. In his First

Amended Complaint, filed July 20, Plaintiff asserts four causes of action: breach of contract,

tortious interference with contract, and two violations of the federal Fair Debt Collection

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Practices Act (FDCPA). Although the parties are engaging in discovery regarding class

certification, BAC has now filed a Motion to Dismiss all but the first count of the First Amended

Complaint.

II.    Legal Standard

       Rule 12(b)(6) provides for the dismissal of an action where a complaint fails “to state a

claim upon which relief can be granted.” When the sufficiency of a complaint is challenged

under Rule 12(b)(6), the factual allegations presented in it must be presumed true and should be

liberally construed in plaintiff’s favor. Leatherman v. Tarrant Cty. Narcotics & Coordination

Unit, 507 U.S. 163, 164 (1993). The notice pleading rules are “not meant to impose a great

burden on a plaintiff,” Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 347 (2005), and he or she

must thus be given every favorable inference that may be drawn from the allegations of fact.

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 584 (2007). Although “detailed factual

allegations” are not necessary to withstand a Rule 12(b)(6) motion, Twombly, 550 U.S. at 555,

“a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that

is plausible on its face.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotation

omitted). Plaintiff must put forth “factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.” Id. Though a plaintiff may

survive a 12(b)(6) motion even if “recovery is very remote and unlikely,” Twombly, 550 U.S. at

555 (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)), the facts alleged in the complaint

“must be enough to raise a right to relief above the speculative level.” Id. at 555.

       A motion to dismiss under Rule 12(b)(6) must rely solely on matters within the

complaint, see FED. R. CIV. P. 12(d), which includes statements adopted by reference as well as

copies of written instruments joined as exhibits. FED. R. CIV. P. 10(c).

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III.    Analysis

        As BAC has mounted challenges both to Plaintiff’s tortious-interference claim and his

FCDPA counts, the Court will address them in turn, ultimately finding for Plaintiff on the former

and Defendant on the latter.

        A. Tortious Interference

        Plaintiff alleges that BAC tortiously interfered with his contract with his noteholder when

BAC began refusing his mortgage payments, which resulted in BAC’s ceasing to transmit

payments to the noteholder. First Am. Compl., ¶¶ 85-87. Plaintiff maintains that this caused

him to breach his contract with the noteholder. BAC argues that because it is an agent of the

noteholder, it cannot tortiously interfere with Plaintiff’s contract with its principal.   Def. Mot. at

6. Although the Court agrees with BAC that it is an agent of Plaintiff’s noteholder, the count

survives because Plaintiff has sufficiently alleged that BAC acted with malice in its interference

with Plaintiff’s contract.

        Under District of Columbia law, “a party, through the actions of its agents, cannot

interfere with its own contract.” Langer v. George Washington Univ., 498 F. Supp. 2d 196, 202

(D.D.C. 2007) (citing Press v. Howard Univ., 540 A.2d 733, 736 (D.C. 1988)). In other words,

tortious interference “only arises . . . if there is interference with a contract between the plaintiff

and some third party.” Bus. Equip. Ctr., Ltd. v. DeJur-AMSCO Corp., 465 F. Supp. 775, 788

(D.D.C. 1978) (citing W. Prosser, LAW OF TORTS § 123, at 952-70 (3d ed. 1964)).

        Plaintiff alleges in his First Amended Complaint that BAC does not “own any of the

residential mortgage loan products” at issue. Id., ¶ 9. Instead, it “is a loan servicer, providing

financial services to the third-parties that own [the loans].” Id. “As a servicer, BAC manages

the payment obligations of borrowers whose loans are actually owned by third-parties.” Id., ¶

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37. As such, it is “an intermediary” that “collects payments from borrowers and disburses them

to third-party noteholders.” Id. Plaintiff’s own allegations thus make clear that BAC acts as an

agent for noteholders; as such, it generally cannot have committed the tort of intentional

interference with its own principal. See, e.g., Newport/Granada L.L.C. v. Wachovia Bank, 2009

WL 3698126 (W.D. Okla. Nov. 2, 2009) (dismissing tortious-interference claim where loan

servicer was an agent of plaintiff’s lender); Wells Fargo Bank, N.A. v. The Ash Organization,

2010 WL 2681675 (D. Or. July 2, 2010) (granting motion for summary judgment to loan servicer

on tortious-interference claim because even if it was not necessarily an agent, it was not an

“intermeddling third-party stranger” to contract, and emphasizing that “[bank] interacted with

[the borrower] only through [the loan servicer], and in this respect [the bank’s] contractual

relationship with [the plaintiff] was inextricably linked to its contractual relationship with [the

loan servicer]”).

       This, however, is not the end of the analysis. As Plaintiff correctly points out, there is an

exception to this general rule where the agent acts in bad faith. See Opp. at 13. Under D.C. law,

an agent of a principal who “improper[ly] interfere[s] with contractual relations . . . with actual

malice or for his own benefit, rather than for the [principal’s] interest, deserves no protection.”

Nickens v. Labor Agency of Metropolitan Washington, 600 A.2d 813, 820 (D.C. 1991).

Liability may be found if the agent “acts against the corporation's interest, for his own pecuniary

benefit, or with the intent to harm the plaintiff.” Id. (citing Phillips v. Montana Educ. Ass’n, 610

P.2d 154, 158 (Mont. 1980). Stated differently, in order to find malice, a court must find an

“independently wrongful or illegal act.” Curaflex Health Servs., Inc. v. Bruni, 899 F. Supp. 689,

697 (D.D.C. 1995) (despite finding use of funds for personal gain and animus towards plaintiff,

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court held no agency liability for tortious interference because it could not be shown that

interference was not done in best interests of corporation).

        Whether the agent acted with malice or for an improper purpose is a factual question. Id.

“Proof of fraud or malice ‘need not be by direct evidence but may appear from all the facts and

circumstances of the case.’” Bay General Industries, Inc. v. Johnson, 418 A.2d 1050, 1058

(D.C.1980) (quoting Franklin Inv. Co., Inc. v. Smith, 383 A.2d 355, 359 (D.C. 1978) (citations

omitted). In addition, the “evidence that [the agent] acted with malice [need] not [be]

overwhelming.” Sorrells v. Garfinckel's, Brooks Bros., Miller & Rhoads, Inc., 565 A.2d 285,

292 (D.C. 1989) (allowing question of malice to go to jury when supervisor interfered with

employee’s ability to perform her job).

       At this stage of the proceedings, of course, the Court is bound by the allegations in the

First Amended Complaint. Here, Plaintiff alleges that BAC acted in bad faith when it tortiously

interfered with Plaintiff’s contract. More specifically, Plaintiff alleges that BAC “knowingly and

irresponsibly amassed a servicing portfolio that it simply could not handle.” First Am. Compl., ¶

53. Although it knew of its systemic failures, it still “knowingly and intentionally failed to

rectify [them.]” Id., ¶¶ 88-89. As a result, it “knew that it was wrongfully declaring loan

modifications to be void.” id., ¶ 89, and “intentionally procur[ing] breaches between the class

members and their noteholders.” Id., ¶ 90.

       Although this is a reasonably close call, the Court must, at this stage, draw inferences in

Plaintiff’s favor. It, accordingly, believes that Plaintiff has sufficiently made out its claim for

tortious interference. In the event that discovery determines that BAC was acting at the lenders’

behest in so treating borrowers, then the bad-faith exception would dissolve. That, of course, is

yet to be seen. Defendant’s Motion on this issue will be denied.

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            B. BAC not a “Debt Collector”

        Plaintiff’s third and fourth counts assert that BAC violated two provisions of the FDCPA.

Defendant argues that it cannot be held liable for any claims under the FDCPA because it is not a

“debt collector” under the Act. BAC relies on a specific exemption within the statute: “The term

[‘debt collector’] does not include — . . . any person collecting or attempting to collect any debt

owed or due or asserted to be owed or due another to the extent such activity . . . concerns a debt

which was not in default at the time it was obtained by such person.” 15 U.S.C. § 1692a(6)(F)

(emphasis added). Put another way, if BAC was handling the loan before it went into default, it

is not a debt collector in this case under the Act. While Plaintiff makes arguments about BAC’s

practices generally, the issue here is solely whether BAC acted as a debt collector in relation to

Plaintiff’s loan.

        In his First Amended Complaint, Plaintiff avers that he refinanced his mortgage on

December 22, 2006, and that his lender was GreenPoint Mortgage Funding, Inc. Id., ¶ 13. He

does not state precisely when BAC became the loan servicer, but he does assert that BAC acted

in this role in 2009 when Plaintiff first began to have difficulty making his monthly mortgage

payments and before any discussion of a loan modification occurred. Id., ¶¶ 15-16. Plaintiff

also states that he did not receive notice that his loan was in default until August 2, 2010. Id., ¶

22. In fact, in previous briefing, Plaintiff argued that “[a]t no point in the [Amended Complaint]

does Plaintiff assert that his loan was ever in default.” Reply to Def. Original Mot. to Dismiss

[ECF No. 17] at 6 n.2 The only reasonable interpretation available, therefore, is that BAC

serviced Plaintiff’s loan before he defaulted. This is fatal to his claim under the express

language of the FDCPA. See Edmond v. Am. Educ. Servs., 2010 WL 4269129, at *5 (D.D.C.

Oct. 28, 2010) (granting motion to dismiss on plaintiff’s FDCPA claims because “[a]bsent an

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allegation that plaintiff’s loan was in default when [the defendant] acquired it, [the defendant] is

not a debt collector and this is not subject to the FDCPA”) (citing Brumberger v. Sallie Mae

Servicing Corp., 84 Fed. Appx. 458, 459 (5th Cir. 2004) (affirming dismissal of FDCPA claim

against student loan servicer because “[b]y its plain terms the FDCPA does not apply” absent an

allegation that plaintiff “was in default at the time Sallie Mae began servicing his loans”));

Ramirez-Alvarez v. Aurora Loan Servs., LLC, 2010 WL 2934473, at *5 (E.D. Va. July 21, 2010)

(granting summary judgment for mortgage loan servicer, which was not debt collector for

purposes of FDCPA because it “received the debt in question while it was not in default”);

Mondonedo v. Sallie Mae, Inc., 2009 WL 801784, at *5 (D. Kan. Mar. 25, 2009) (granting

summary judgment for loan servicer that “obtained the loans originated by [a bank] for servicing

prior to default and is exempt from liability under the FDCPA”); Taggart v. Wells Fargo Home

Mortg., Inc., 2010 WL 3769091, at *11 (E.D. Pa. Sept. 27, 2010) (“Loan servicers are not ‘debt

collectors’ under the FDCPA unless the debt being serviced was in default at the time the

servicer obtained it.”).

        Plaintiff argues in response that the application of the exclusion under the statute is an

affirmative defense that may not be asserted in a motion to dismiss. See Opp. at 7 (citing Scott

v. Jones, 964 F.2d 314, 316 (4th Cir. 2010) (“[Defendant] asserted the affirmative defense that he

was not a ‘debt collector’ as defined in the FDCPA.”)). Where BAC does not rely on any

material outside of Plaintiff’s own First Amended Complaint, the face of which proves the

infirmity of his FDCPA counts, Defendant may prevail on a motion to dismiss. See Smith-

Haynie v. District of Columbia, 155 F.3d 575, 578 (D.C. Cir. 1998) (“[A]n affirmative defense

may be raised by pre-answer motion under Rule 12(b) when the facts that give rise to the defense

are clear from the face of the complaint.”); Thompson v. DEA, 492 F.3d 428, 438 (D.C. Cir.

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2007) (“Further, even when failure to exhaust is treated as an affirmative defense, it may be

invoked in a Rule 12(b)(6) motion if the complaint somehow reveals the exhaustion defense on

its face.”); Edmond, 2010 WL 4269129 at *5 (granting motion to dismiss FDCPA count where

no allegation plaintiff’s loan in default when defendant acquired it).

        The Court concludes that because Plaintiff has failed to plead sufficient facts to show

BAC is a debt collector under the FDCPA, the two counts relating to that Act must be dismissed.

IV.     Conclusion

        The Court, accordingly, ORDERS that:

        1.   Defendant BAC’s Motion is GRANTED IN PART and DENIED IN PART;

        2. Counts III and IV are DISMISSED; and

        3. Defendant shall file an Answer on or before Jan. 3, 2012.

        SO ORDERED.

                                                      /s/ James E. Boasberg
                                                      JAMES E. BOASBERG
                                                      United States District Judge
Date:   December 20, 2011

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