Bohannon v. Phh Mortgage Corporation

REPLY BRIEF re MOTION for Summary Judgment

N.D. Ga.May 12, 2017

DMEAST #29433193 v1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION SARA BOHANNON, Plaintiff, vs. PHH MORTGAGE CORPORATION, Defendant. ) ) ) ) ) ) ) ) ) Case No. 1:15-CV-04312-CAP-JKL PHH MORTGAGE CORPORATION’S REPLY IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT I. INTRODUCTION In her Complaint, Plaintiff asserts a single claim for violation of the Fair Debt Collection Practices Act (“FDCPA”). This claim fails because PHH1 is not a debt collector as defined by the FDCPA. The undisputed facts show that PHH began servicing Plaintiff’s Loan in October 2002, shortly after the Loan was originated and long before Plaintiff defaulted on the Loan in 2009, and therefore, PHH is a loan servicer, and not a debt collector. In her response, Plaintiff fails to proffer any evidence sufficient to create a dispute of material fact regarding when PHH began servicing the Loan. Plaintiff does not proffer a declaration, and at most, she relies on unsupported statements in 1 Capitalized terms shall have the same meaning as defined in PHH’s Motion for Summary Judgment (Dkt. # 29), unless otherwise defined. Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 1 of 13 2 her briefing that she does not remember when PHH began servicing her Loan. By contrast, PHH has offered a declaration that affirmatively states that PHH began servicing Plaintiff’s Loan the month after it was originated. Moreover, Plaintiff continues to argue, despite clear case law to the contrary, that PHH is a debt collector because the “Loan” was assigned to PHH in June 2010 after her default, and that PHH had been servicing the Loan on behalf of an investor. These arguments lack merit. First, Plaintiff conflates the Assignment of the Security Deed with the assignment of the right to service the Loan. While the Security Deed was not assigned to PHH until June 2010, PHH had been servicing the Loan for nearly eight years by that time. Second, whether a loan or mortgage servicer also owns the debt, or is servicing a loan on behalf of an investor, is irrelevant. It is well-settled in the Eleventh Circuit that a mortgage servicer that begins to service a loan prior to default is not a debt collector as a matter of law, regardless of whether the debt is owned by another. Thus, PHH is not a debt collector subject to the FDCPA, and PHH is entitled to summary judgment as a matter of law on this claim. II. ARGUMENT AND CITATION OF AUTHORITY A. Plaintiff Fails to Create an Issue of Fact As to When PHH Began Servicing Plaintiff’s Loan. In support of its Motion, PHH proffered sworn testimony through the Declaration of Jane Spare that PHH began servicing Plaintiff’s Loan in October Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 2 of 13 3 2002, shortly after origination and long before Plaintiff defaulted in 2009. See Dkt. #29-2 at ¶¶ 5-6. In response, Plaintiff argues that when PHH began to service her Loan is disputed. However, Plaintiff failed to present any evidence sufficient to create a dispute of material fact at summary judgment on this issue. First, Plaintiff disputes the accuracy of the Spare declaration by arguing that Ms. Spare did not offer testimony regarding the amount necessary to reinstate the Loan, whereas an affidavit filed by PHH in a prior action did contain such information. See Dkt. # 38 at ¶ 1. However, the amount needed to reinstate the Loan is irrelevant to Plaintiff’s FDCPA claim and the main issue raised in PHH’s Motion, which is whether PHH is a debt collector as defined by the FDCPA. Otherwise, Plaintiff has identified no inaccuracies in the Spare Declaration, and her argument lacks merit. Second, notwithstanding that her attorney, acting on Plaintiff’s behalf, previously admitted in response to a discovery dispute that PHH began servicing the Loan shortly after origination (see Dkt. # 29-3), Plaintiff now claims there is a factual dispute regarding when PHH began servicing the Loan. However, Plaintiff offers no admissible evidence in support of this dispute whatsoever, and such unsupported assertions are insufficient to defeat summary judgment. Ellis v. England, 432 F.3d 1321, 1326 (11th Cir. 2005) (“[M]ere conclusions and Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 3 of 13 4 unsupported factual allegations are legally insufficient to defeat a summary judgment motion.”). Specifically, Plaintiff states in her response to PHH’s Statement of Material Undisputed Facts that she “does not remember when PHH began collecting the debt” but she is somehow sure that it was “not within two weeks of the closing.” Dkt. #38 at p. 2; see also id. p. 3. This statement is entirely unsupported. Plaintiff admits that she has no documentation to support this fact.2 Id. Moreover, Plaintiff fails to provide any admissible testimony in a supporting declaration or affidavit. Federal Rule of Civil Procedure 56(c) explicitly requires that all facts must be supported by materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations, admissions, interrogatory answers, or other materials,” and Plaintiff’s unsworn and unsupported statements in her briefing is admissible evidence in opposition to PHH’s Motion. Fed. R. Civ. P. 56(c) (emphasis added); Ellis, 432 F.3d at 1326. Finally, even taken at face value, Plaintiff state only that she does not remember when PHH began servicing her Loan. Her inability to remember is not sufficient evidence to create a dispute in response to Ms. Spare’s specific 2 Plaintiff blames her prior attorney for his alleged failure to return documents to her. While this may be unfortunate, it does not excuse Plaintiff from her burden to offer evidence in support of her statement that PHH did not begin servicing her loan prior to 2009. Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 4 of 13 5 testimony that PHH began servicing Plaintiff’s Loan in October 2002, approximately seven years before she defaulted. See, e.g., Garcia v. Schindler Elevator Corp., 459 Fed. Appx. 865, 867 n. 1(11th Cir. Mar. 2, 2012) (explaining that a failure to remember receiving a letter was insufficient to create a dispute of material fact regarding whether the letter was sent or received). Accordingly, there is simply no dispute of material fact regarding when PHH began servicing the Loan. The record before the Court establishes that PHH began servicing Plaintiff’s Loan in October 2002, shortly after the Loan was originated. See PHH’s SMF ¶ 4. B. Plaintiff’s FDCPA Claim Fails Because PHH Is Not a Debt Collector. Notwithstanding that PHH is a mortgage servicer, not a debt collector, Plaintiff continues to argue that PHH is subject to the FDCPA. First, Plaintiff continues to argue that because PHH did not own her mortgage, PHH was a debt collector regardless of when PHH began servicing the Loan. Second, Plaintiff argues that because the Security Deed was not assigned to PHH until 2010 (after Plaintiff defaulted), PHH lacked the authority to foreclose on the mortgage at the time of Plaintiff’s default and therefore, PHH is a debt collector. Both of these positions are contrary to well-settled law. Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 5 of 13 6 1. Whether PHH Owned the Mortgage or Serviced the Mortgage on Behalf of an Investor is Irrelevant. Plaintiff’s primary argument in response to PHH’s Motion is that PHH serviced her Loan on behalf of an investor, and therefore, PHH is a debt collector. However, the law is clear in the Eleventh Circuit that a mortgage loan servicer is not a debt collector even though it may service the loan on behalf of an owner or investor, provided that the servicer acquired the right to serve the loan prior to default. See e.g., McWeay v. Citibank, N.A., 521 Fed. Appx. 784, 787 (11th Cir. 2013) (holding that mortgage loan servicer was not debt collector within meaning of FDCPA); Brown v. Federal Nat. Mortgage Ass’n, 2011 WL 1134716, at *7 (N.D. Ga. Feb. 28, 2011) (“It is well established that the FDCPA applies only to ‘debt collectors’ and not to creditors or mortgage servicers.); Jenkins v. BAC Home Loan Servicing, LP, 822 F. Supp. 2d 1369, 1374 (M.D. Ga. 2011) (“It is well- established that mortgage servicers do not fall within the definition of debt collector.”); see also Barksdale v. Green Tree Servicing LLC, 2014 WL 7205009 (E.D. Mich. Dec. 17, 2014) (holding that because Green Tree serviced the plaintiff’s loan prior to default, the FDCPA is inapplicable); see also S.Rep. No. 95-382, 95th Cong., 1st Sess. 3, reprinted in 1977 U.S.Code Cong. & Ad.News 1695, 1698 (legislative history of section 1692a(6) explaining that a debt collector does not include a mortgage servicing company, as long as the debt was not in default at the time it was assigned.). Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 6 of 13 7 As sets forth in PHH’s Motion, the Eleventh Circuit’s holding in Diaz v. First Marblehead Corp., 643 Fed. Appx. 916 (11th Cir. 2016) is controlling. In Diaz, the Eleventh Circuit considered whether the district court properly imposed Rule 11 sanctions against the plaintiff for pursuing a FDCPA claim against his loan servicer. The Diaz defendant “became the servicer of [Plaintiff’s] loans, and remained the servicer through several changes in ownership of the loans.” Id. at 922. The Eleventh Circuit held that the defendant loan servicer was not a debt collector because it was collecting a debt it serviced, notwithstanding the fact that the ownership of the loans changed several times over a three-year period. Id. at 922-923. Accordingly, the Eleventh Circuit affirmed the award of sanctions against the plaintiff. Id. Therefore, the fact that another entity may have owned an interest in the Loan does not transform PHH, the servicer since 2002, into a debt collector. Plaintiff attempts to distinguish Diaz, arguing that it is inapplicable because the issue before the Eleventh Circuit was an appeal of an order granting Rule 11 sanctions and because the debt at issue was student loan debt, not a mortgage. With respect to Plaintiff’s first argument, it is correct that the primary issue before the Eleventh Circuit was whether to affirm the Rule 11 sanctions award. However, in reaching its decision, the Eleventh Circuit had to look to the merits of the plaintiff’s claim to determine whether the claim was frivolous or unjustifiable. As Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 7 of 13 8 discussed above, the plaintiff’s FDCPA claim was based on allegations that the defendant loan servicer was a debt collector because it did not own the debts it serviced, and the Eleventh Circuit held that this claim was so lacking in merit that it was “objectively frivolous.” Id. at 923-24 (emphasis added); see also id. (“[W]e affirm the district court's imposition of Rule 11 sanctions against Turner. Under a plain reading of § 1692a(6), AES cannot be a debt collector for FDCPA purposes, and thus it was not unreasonable for the district court to conclude that the claim was meritless and frivolous.”). Like the sanctioned plaintiff in Diaz, Plaintiff’s theory that PHH is a debt collector because an investor owned her mortgage is also frivolous. Second, the fact that the defendant in Diaz serviced a student loan instead of a mortgage is a distinction without a difference. The Eleventh Circuit’s holding in Diaz was not based on the type of debt at issue, but instead, was based on the fact that the defendant was the servicer of the debt. Diaz, at 922. Whether that debt is Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 8 of 13 9 a mortgage or a student loan (or any other type of debt) is irrelevant under the FDCPA.3 2. Plaintiff Conflates the Assignment of the Security Deed with the Assignment of the Right to Service the Loan. Plaintiff continues to argue that, because the Security Deed was not assigned to PHH until after her default, PHH is a debt collector. However, Plaintiff cites no authority to support the proposition that a mortgage servicer must be the assignee of a security deed (or have standing to foreclose under state law) in order to be considered a servicer exempted under the FDCPA. In fact, as discussed above, a mortgage servicer may service the debt on behalf of an investor regardless of whether the security deed has been formally assigned to the servicer. Because PHH was already servicing the Loan at the time of the 2010 Assignment (and had been the servicer for nearly eight years by that time), the date of the Assignment is irrelevant. See, e.g. Williamson v. Bank. of Am., N.A., Civ. Act. File No. 1:14-cv-02824, 2015 U.S. Dist. LEXIS 180586, *33- *34 (N.D. Ga. June 8, 2015), relevant portion adopted by 2015 U.S. Dist. LEXIS 3 Similarly, Plaintiff also appears to argue that Diaz is distinguishable because student loans are regulated by the federal Consumer Financial Protection Bureau, and mortgages are not. However, this is simply incorrect because the CFPB does have authority regulate consumer mortgage loans and mortgage servicing conduct, since a mortgage is a consumer financial product. 12 U.S.C. § 5481(15); 12 U.S.C. § 5511. In any event, even if the CFPB did not regulate mortgages, Plaintiff fails to explain how such a difference would be relevant to whether PHH is a debt collector as defined by the FDCPA. Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 9 of 13 10 180576 (N.D. Ga., July 13, 2015) (holding that when a loan servicer was a not a debt collector under the FDCPA because it began servicing the loan pre-default, even though the security deed was formally assigned to the servicer post-default); Smith v. Selene Fin., LP, Civ. Act. File No. 1:15-cv-01054, 2015 U.S. Dist. LEXIS 180765, * (N.D. Ga. Nov. 9, 2015), relevant portion adopted by 2015 U.S. Dist. LEXIS 180764 (N.D. Ga., Dec. 1, 2015) (explaining that if loan servicer defendant serviced the mortgage prior to default, the servicer was not a debt collector as defined by the FDCPA even if the security instrument was assigned post-default); Moreover, the Assignment of the Security Deed was not a post-default transfer of the underlying debt (which PHH was already servicing), but merely a transfer of title in the security interest required under Georgia law for PHH to foreclose. See O.C.G.A. § 44-14-162(b) (“The security instrument or assignment thereof vesting the secured creditor with title to the security instrument shall be filed prior to the time of sale in the office of the clerk of the superior court of the county in which the real property is located.”). Therefore, the fact that GTCU assigned the Security Deed to PHH after Plaintiff’s default does not constitute a post-default transfer of debt under the FDCPA and is irrelevant. Because the undisputed facts show that PHH is a loan servicer, and not a debt collector as that term is defined by the FDCPA, the FDCPA does not apply to Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 10 of 13 11 PHH. PHH is therefore entitled to summary judgment as a matter of law with respect to Plaintiff’s claim. III. CONCLUSION As set forth above and in PHH’s Motion, Plaintiff’s FDCPA claim fails as a matter of law. The FDCPA is inapplicable here because the undisputed facts establish that PHH is a loan servicer, not a debt collector. Therefore, PHH is entitled to summary judgment as a matter of law. Dated: May 12, 2017 Respectfully submitted, /s/ Sarah T. Reise Sarah T. Reise Georgia Bar No. 181567 BALLARD SPAHR LLP 999 Peachtree Street Suite 1000 Atlanta, GA 30309-3915 Telephone: 678-420-9300 Facsimile: 678-420-9301 reises@ballardspahr.com Counsel for Defendant, PHH Mortgage Corporation Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 11 of 13 12 CERTIFICATION OF COMPLIANCE WITH L.R. 5.1 I hereby certify that the foregoing has been computer processed with 14 point Times New Roman font in compliance with the United States District Court for the Northern District of Georgia Local Rule 5.1. Dated: May 12, 2017 Respectfully submitted, /s/ Sarah T. Reise Sarah T. Reise Georgia Bar No. 181567 BALLARD SPAHR LLP 999 Peachtree Street Suite 1000 Atlanta, GA 30309-3915 Telephone: 678-420-9300 Facsimile: 678-420-9301 reises@ballardspahr.com Counsel for Defendant, PHH Mortgage Corporation Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 12 of 13 CERTIFICATE OF SERVICE I hereby certify that on this day, I served a copy of the foregoing PHH MORTGAGE CORPORATION’S REPLY IN SUPPORT OF IT’S MOTION FOR SUMMARY JUDGMENT with the Clerk of Court using the CM/ECF system upon the following parties: Sam Levine 1014 Havenridge Drive NE Roswell, GA 30319 Counsel for Plaintiff Dated: May 12, 2017 /s/ Sarah T. Reise Sarah T. Reise Georgia Bar No. 181567 BALLARD SPAHR LLP 999 Peachtree Street Suite 1000 Atlanta, GA 30309-3915 Telephone: 678-420-9300 Facsimile: 678-420-9301 reises@ballardspahr.com Counsel for Defendant, PHH Mortgage Corporation Case 1:15-cv-04312-CAP-JKL Document 39 Filed 05/12/17 Page 13 of 13