Burke v. Federal National Mortgage Association

MOTION for Judgment on the Pleadings

E.D. Va.October 6, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division ASHLEY BURKE, individually and on behalf of a class of similar situated persons Plaintiff, v. Civil Action No. 3:16-cv-00153−HEH FEDERAL NATIONAL MORTGAGE ASSOCIATION’S MOTION TO DISMISS PLAINTIFF’S COMPLAINT PURSUANT TO FED. R. CIV. PROC. 12(c) FEDERAL NATIONAL MORTGAGE ASSOCIATION, Defendants. Case 3:16-cv-00153-HEH-DJN Document 92 Filed 10/06/16 Page 1 of 4 PageID# 783 - 1 - PLEASE TAKE NOTICE that Defendant Federal National Mortgage Association (“Fannie Mae”) hereby moves this Court, pursuant to Federal Rules of Civil Procedure 12(c), for an order dismissing all claims brought against it by Plaintiff Ashley Burke pursuant to 15 U.S.C. § 1681n. The grounds in support of this motion are that Fannie Mae is entitled to judgment on the pleadings because the claims that Plaintiff asserts on her own behalf and on behalf of a putative class under 15 U.S.C. § 1681n are expressly precluded by the statute governing the Federal Housing Finance Agency’s conservatorship of Fannie Mae, as is set out in more detail in the brief in support of the Defendant’s motion filed herewith. This motion is based on this Motion to Dismiss Plaintiff’s Complaint Pursuant to Fed. R. Civ. Proc. 12(c), the supporting memorandum filed herewith, the pleadings and papers on file herein, and upon such other matters as may be presented to the Court at the time of the hearing. Pursuant to Local Rule 7(E), Defendant certifies that it met and conferred with Plaintiff regarding this Motion. Dated: October 6, 2016 Respectfully submitted, MORRISON & FOERSTER LLP By: /s/ John A. Trocki III______ Michael B. Miller (pro hac vice) MORRISON & FOERSTER LLP 250 West 55th Street New York, New York 10019-9601 Telephone: 212.468.8000 Facsimile: 212.468.7900 mbmiller@mofo.com Angela E. Kleine (pro hac vice) MORRISON & FOERSTER LLP 425 Market Street San Francisco, California 94105-2482 Telephone:415.268.7000 Facsimile: 415.268.7522 akleine@mofo.com Case 3:16-cv-00153-HEH-DJN Document 92 Filed 10/06/16 Page 2 of 4 PageID# 784 - 2 - John A. Trocki III (VA Bar No. 38656) Morrison & Foerster LLP 1650 Tysons Boulevard, Suite 400 McLean, Virginia 22102 Telephone: (703) 760-7712 Facsimile: (703) 760-7777 Email: JTrocki@mofo.com Attorneys for Federal National Mortgage Association Case 3:16-cv-00153-HEH-DJN Document 92 Filed 10/06/16 Page 3 of 4 PageID# 785 - 3 - CERTIFICATE OF SERVICE I hereby certify that on October 16, 2016, a true and correct copy of the foregoing FEDERAL NATIONAL MORTGAGE ASSOCIATION’S MOTION TO DISMISS PLAINTIFF’S COMPLAINT PURSUANT TO FED. R. CIV. PROC. 12(c) was filed electronically with the Clerk’s office by using the CM/ECF system and served electronically upon the parties below. Parties may also access this filing through the Court’s ECF system. Kristi Cahoon Kelly, Esq. (VSB # 72791) Andrew J. Guzzo, Esq. (VSB # 82170) Kelly & Crandall, PLC 4084 University Drive, Suite 202A Fairfax, Virginia 22030 (703) 424-7572 (Telephone) (703) 591-0167 (Facsimile) kkelly@kellyandcrandall.com aguzzo@kellyandcrandall.com James A. Francis, Esq. (admitted pro hac vice) John Soumilas, Esq. (admitted pro hac vice) Lauren KW Brennan (admitted pro hac vice) Francis & Mailman, P.C. Land Title Building, 19th Floor 100 South Broad Street Philadelphia, PA 19110 (215) 735.8600 (Telephone) (215) 940.8000 (Facsimile) jfrancis@consumerlawfirm.com jsoumilas@consumerlawfirm.com lbrennan@consumerlawfirm.com Counsel for Plaintiff /s/ John A. Trocki III______ John A. Trocki III Case 3:16-cv-00153-HEH-DJN Document 92 Filed 10/06/16 Page 4 of 4 PageID# 786 ny-1250037 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division ASHLEY BURKE, individually and on behalf of a class of similar situated persons Plaintiff, v. Civil Action No. 3:16-cv-00153−HEH FEDERAL NATIONAL MORTGAGE ASSOCIATION’S MEMORANDUM IN SUPPORT OF ITS MOTION TO DISMISS PLAINTIFF’S COMPLAINT PURSUANT TO FED. R. CIV. P. 12(c) FEDERAL NATIONAL MORTGAGE ASSOCIATION, Defendants. Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 1 of 23 PageID# 787 TABLE OF CONTENTS Page i ny-1250037 INTRODUCTION ......................................................................................................................... 1 BACKGROUND ........................................................................................................................... 1 A. Fannie Mae and the Conservatorship ............................................................................ 1 B. The Present Action ........................................................................................................ 2 LEGAL STANDARD .................................................................................................................... 2 ARGUMENT ................................................................................................................................. 3 I. 12 U.S.C. § 4617(j) Bars Plaintiff’s Claims for Punitive Damages, Statutory Damages, and Attorneys’ Fees against Fannie Mae while in Conservatorship ................. 3 A. Fannie Mae Cannot Be Held Liable For “Any Amounts in the Nature of Penalties” Because the Penalty Bar Protects the Conservatorship ........................ 3 B. The FCRA’s Punitive Damages Are in the Nature of Penalties ............................ 5 C. The FCRA’s Statutory Damages Are in the Nature of Penalties ........................... 6 1. Case Law and the Structure of the FCRA Establish That the FCRA’s Statutory Damages Are in the Nature of Penalties ...................... 6 2. Cases Suggesting that the FCRA Is “Remedial” Are Inapposite ............... 8 D. Attorneys’ Fees under the FCRA Are in the Nature of Penalties or Fines .......... 11 II. Fannie Mae May Assert the Penalty Bar Defense at This Stage of the Litigation, Regardless of Whether It Is Deemed an Affirmative Defense ........................................ 12 CONCLUSION ............................................................................................................................ 15 Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 2 of 23 PageID# 788 ii ny-1250037 TABLE OF AUTHORITIES Page(s) CASES Am. Family Mut. Ins. Co. v. C.M.A. Mortg., Inc., 682 F. Supp. 2d 879 (S.D. Ind. 2010) ........................................................................................7 Arismendez v. Nightingale Home Health Care, Inc., 493 F.3d 602 (5th Cir. 2007) ...................................................................................................14 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...................................................................................................................2 Ayissi-Etoh v. Fannie Mae, 49 F. Supp. 3d 9 (D.D.C. 2014); aff’d, 621 F. App’x 677 (D.C. Cir. 2015) ..................................................................................6 Baez v. U.S. Dep’t of Justice, 684 F.2d 999 (D.C. Cir. 1982) .................................................................................................11 Bank of the Ozarks v. Arco Cmty. Outreach Coalition, Inc., No. CV212-017, 2012 WL 2673246 (S.D. Ga. July 5, 2012) .................................................11 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ...................................................................................................................2 Burke v. Fannie Mae, No. 3:16cv153-HEH, 2016 WL 5662007 (E.D. Va. Sept. 29, 2016) ........................................5 Cassese v. Wash. Mut., Inc., 711 F. Supp. 2d 261 (E.D.N.Y. 2010) .......................................................................................6 Commercial Law Corp., PC v. FDIC, Case No. 10-13275, 2016 WL 4035508 (E.D. Mich. July 28, 2016), appeal docketed, No. 16-2342 (6th Cir. Sept. 27, 2016) .........................................................11 County of Fairfax v. FDIC, No. 92-0858, 1993 WL 62247 (D.D.C. Feb. 26, 1993) .............................................................4 Dalton v. Capital Associated Indus., Inc., 257 F.3d 409 (4th Cir. 2001) .....................................................................................................6 Deerborne Cottages LLC v. First Bank, No. 1:11cv178, 2012 WL 1835240 (W.D.N.C. Apr. 9, 2012) .................................................6 Defender Industries, Inc. v. Northwestern Mutual Life Insurance Co., 938 F.2d 502 (4th Cir. 1991) ...................................................................................................13 Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 3 of 23 PageID# 789 iii ny-1250037 Dinsmore-Thomas v. FDIC, 139 F.3d 904 (9th Cir. 1998) ...............................................................................................9, 10 Edwards v. City of Goldsboro, 178 F.3d 231 (4th Cir. 1999) .......................................................................................................2 Edwards v. County of Modoc, 2015 WL 4456180 (E.D. Cal. July 20, 2015) ..........................................................................12 FHFA v. City of Chicago, 962 F. Supp. 2d 1044 (N.D. Ill. 2013) .......................................................................................4 Frye v. Thompson Steel Co., 657 F.3d 488 (7th Cir. 2011) ...................................................................................................10 Gabelli v. SEC, 133 S. Ct. 1216 (2013) ...............................................................................................................7 Higgins v. BAC Home Loans Servicing LP, No. 12-cv-183-KKC, 2014 WL 1332825 (E.D. Ky. Mar. 31, 2014), rev’d on other grounds, 793 F.3d 688 (6th Cir. 2015) ............................................................10 Horsch v. Wells Fargo Home Mortg., 94 F. Supp. 3d 665 (E.D. Pa. 2015) ...........................................................................................7 In re Maddigan, 312 F.3d 589 (2d Cir. 2002).....................................................................................................10 In re Marshall, 970 F.2d 383 (7th Cir. 1992) .....................................................................................................9 In re Sterten, 546 F.3d 278 (3d Cir. 2008).....................................................................................................11 Ingraham v. United States, 808 F.2d 1075 (5th Cir. 1987) ...........................................................................................12, 14 Int’l Cablevision, Inc. v. Sykes, 172 F.R.D. 63 (W.D.N.Y. 1997) ................................................................................................8 Jakobsen v. Mass. Port Auth., 520 F.2d 810 (1st Cir. 1975), ..................................................................................................14 King v. Long Beach Mortg. Co., 672 F. Supp. 2d 238 (D. Mass. 2009) ........................................................................................6 Kiosk v. Nat’l Alliance on Mental Illness, No. 1:13-cv-1267, 2014 WL 8335996 (E.D. Va. July 16, 2014) .............................................10 Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 4 of 23 PageID# 790 iv ny-1250037 Kistler v. FDIC, No. CV411-024, 2013 WL 265803 (S.D. Ga. Jan. 23, 2013), aff’d, 531 F. App’x 1003 (11th Cir. Sept. 26, 2013)..................................................................6 Lowe v. Experian, 340 F. Supp. 2d 1170 (D. Kan. 2004) ........................................................................................8 Lucas v. United States, 807 F.2d 414 (5th Cir. 1986) ...................................................................................................14 Maiteki v. Knight Transp. Inc., No. 12-cv-2021-WJM-CBS, 2015 WL 328250 (D. Colo. Jan. 23, 2015) .................................7 Mehringer v. Vill. of Bloomingdale, No. 00 C 7095, 2003 WL 21506856 (N.D. Ill. June 27, 2003) ...............................................14 Murphy v. Household Fin. Corp., 560 F.2d 206 (6th Cir. 1977) .......................................................................................7, 8, 9, 10 Mwangi v. Fed. Nat’l Mortg. Ass’n, No. 4:14-CV-0079, 2015 WL 12434327 (N.D. Ga. Mar. 9, 2015) .......................................4, 5 Nev. ex rel. Hager v. Countrywide Home Loans Servicing, LP, 812 F. Supp. 2d 1211 (D. Nev. 2011) ........................................................................................4 Poku v. FDIC, No. RDB-08-1198, 2011 WL 1599269 (D. Md. Apr. 27, 2011) ...............................................6 Radatz v. Fed Nat’l Mortg. Ass’n, 50 N.E.3d 527 (Ohio 2016) .....................................................................................................10 Riggs v. Gov’t Emps. Fin. Corp., 623 F.2d 68 (9th Cir. 1980) .....................................................................................................10 RTC Commercial Assets Tr. 1995-NP3-1 v. Phoenix Bond & Indem. Co., 963 F. Supp. 706 (N.D. Ill. 1997), aff’d, 169 F.3d 448 (7th Cir. 1999) ....................................5 Sanders v. Jackson, 209 F.3d 998 (7th Cir. 2000) ...................................................................................................11 Saturno v. Dovenmuehle Funding, Inc., No. CV990169649, 2001 WL 236886 (Conn. Super. Ct. Feb. 21, 2001) .................................8 Shedrick v. Dist. Bd. of Trustees of Miami-Dade College, 941 F. Supp. 2d 1348 (S.D. Fla. 2013) ....................................................................................12 Suntrust Mortg., Inc. v. AIG United Guar. Corp., No. 3:09cv529, 2011 WL 1225989 (E.D. Va. Mar. 29, 2011) ................................................10 Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 5 of 23 PageID# 791 v ny-1250037 Taylor v. United States, 821 F.2d 1428 (9th Cir. 1987) .................................................................................................12 U.S. v. Petroff-Kline, 557 F.3d 285 (6th Cir. 2009) .....................................................................................................9 U.S. v. Witherspoon, 211 F.2d 858 (6th Cir. 1954) .....................................................................................................7 Valentine v. First Advantage Saferent, Inc., No. EDCV 08-142 VAP (OPx), 2009 WL 434969 (C.D. Cal. Nov. 23, 2009) .........................7 Van Straaten v. Shell Oil Prods. Co., 678 F.3d 486 (7th Cir. 2012) .....................................................................................................6 Wang v. Asset Acceptance, LLC, No. C 09-4797 SI, 2010 WL 4321565 (N.D. Cal. Nov. 1, 2010) ..............................................7 Westfarm Assocs. Ltd. P’ship v. Wash. Suburban Sanitary Comm’n, 66 F.3d 669 (4th Cir. 1995) .....................................................................................................12 Wilson v. H & R Block Enters., Inc., Nos. 07-0437-CV-W-ODS, 07-0599-CV-W-ODS, 2009 WL 32584 (W.D. Mo. Jan. 6, 2009) ............................................................................................................7 STATUTES 12 U.S.C. § 1716 ..............................................................................................................................1 12 U.S.C. § 1825(b) ............................................................................................................... passim 12 U.S.C. § 4617 .................................................................................................................... passim 15 U.S.C. § 1640(a) .....................................................................................................................8, 9 15 U.S.C. § 1681b(f) ........................................................................................................................2 15 U.S.C. § 1681n .................................................................................................................. passim 15 U.S.C. § 1681o ......................................................................................................................7, 11 Housing and Economic Recovery Act of 2008, Pub. L. No. 104-208, § 2412(b), 110 Stat. 3009-446 (1996).................................................................................................................1, 3, 8 OTHER AUTHORITIES Black’s Law Dictionary (10th ed. 2014) ..........................................................................................5 Fed. R. Civ. P. 8(b)(6)....................................................................................................................12 Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 6 of 23 PageID# 792 vi ny-1250037 Fed. R. Civ. P. 8(c) ..................................................................................................................12, 14 Fed. R. Civ. P. 12(b)(1)..................................................................................................................16 Fed. R. Civ. P. 12(b)(6)....................................................................................................................2 Fed. R. Civ. P. 12(c) ....................................................................................................................1, 2 Legislative History of the Currency and Foreign Transactions Reporting Act: P.L. 91- 508: Hearings before the Financial Institutions Subcommittee of the Senate Banking and Currency Committee on S. 823, May 19, 20, 21, 22, 23 of 1969, 91st Cong. 11b (1969) .........................................................................................................................................7 S. 823, 91st Cong. § 166(a)(2) (1969) .............................................................................................7 Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 7 of 23 PageID# 793 1 ny-1250037 INTRODUCTION This is a case that alleges against defendant Federal National Mortgage Association (“Fannie Mae”) a bare, technical statutory violation that did not cause Plaintiff or any member of the putative class any concrete harm. It asserts on behalf of a putative class of consumers only claims under 15 U.S.C. § 1681n-that is, it seeks not actual damages but only “statutory damages, punitive damages, costs, and attorneys’ fees.” (March 11, 2016 Complaint (“Compl.”) ¶ 35.) The relief Plaintiff seeks on behalf of the putative class is expressly precluded by the statute governing the Federal Housing Finance Agency’s conservatorship of Fannie Mae. Plaintiff’s claims can therefore be dismissed on the pleadings, subject to Federal Rule of Civil Procedure 12(c). BACKGROUND A. Fannie Mae and the Conservatorship Fannie Mae, a corporation organized and existing under the laws of the United States, was established as a government sponsored enterprise to provide stability and liquidity to the secondary housing market. 12 U.S.C. § 1716(1), (4). Pursuant to its statutory mission, Fannie Mae owns or guarantees millions of home loans throughout the United States. The Housing and Economic Recovery Act of 2008 (“HERA”), Pub. L. No. 110-289, 122 Stat. 2654, which Congress enacted on July 30, 2008, established FHFA as an independent federal agency. FHFA is the primary regulatory and oversight authority of Fannie Mae and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (together, “the Enterprises”). On September 6, 2008, pursuant to HERA, 12 U.S.C. § 4617(a), FHFA’s Director placed the Enterprises into conservatorships. In its capacity as Conservator, FHFA succeeded to “all Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 8 of 23 PageID# 794 2 ny-1250037 rights, titles, powers, and privileges” of the Enterprises and their respective stockholders, boards of directors and officers. See 12 U.S.C. § 4617(b)(2)(A)(i). In addition, when FHFA is acting as Conservator, it “shall not be liable for any amounts in the nature of penalties or fines.” 12 U.S.C. § 4617(j)(4). B. The Present Action Plaintiff filed this lawsuit on March 11, 2016. She alleges, on behalf of a putative class, that Fannie Mae violated the Fair Credit Reporting Act, 15 U.S.C. § 1681b(f), by obtaining credit reports about her after bankruptcy without a permissible purpose. (Compl. ¶ 33.) She asserts that Fannie Mae lacked a permissible purpose because its “account relationship” with Plaintiff had “terminated.” (Id.) She claims a private right of action to assert these claims under the FCRA, 15 U.S.C. § 1681n, which permits private plaintiffs to bring certain claims for willful violations of the statute. (Id. ¶ 34.) Plaintiff seeks on behalf of a class only the remedies provided for by the FCRA in the context of a willful violation of the statute: “statutory damages, punitive damages, costs, and attorneys’ fees.” (Id. ¶ 35.) LEGAL STANDARD Federal Rule of Civil Procedure 12(c) permits a party to move for judgment on the pleadings at any time “[a]fter the pleadings are closed- but early enough not to delay the trial.” Fed. R. Civ. P. 12(c). A motion for judgment on the pleadings under Rule 12(c) is assessed under the same standards as a motion to dismiss under Rule 12(b)(6). See Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). Thus, judgment on the pleadings is appropriate when the moving party clearly establishes on the face of the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 9 of 23 PageID# 795 3 ny-1250037 As shown below, because the relief Plaintiff seeks is barred by federal statute, judgment on the pleadings is proper. ARGUMENT I. 12 U.S.C. § 4617(j) BARS PLAINTIFF’S CLAIMS FOR PUNITIVE DAMAGES, STATUTORY DAMAGES, AND ATTORNEYS’ FEES AGAINST FANNIE MAE WHILE IN CONSERVATORSHIP Plaintiff’s claims for punitive damages, statutory damages, and attorneys’ fees under the FCRA must be dismissed because the federal statute governing FHFA conservatorships- HERA-precludes such relief. HERA unconditionally protects FHFA conservatorships from liability for any amounts in the nature of penalties or fines, stating: (1) Applicability The provisions of this subsection shall apply with respect to the Agency in any case in which the Agency is acting as a conservator or a receiver. . . . (4) Penalties and fines The Agency shall not be liable for any amounts in the nature of penalties or fines, including those arising from the failure of any person to pay any real property, personal property, probate, or recording tax or any recording or filing fees when due. 12 U.S.C. § 4617(j) (the “Penalty Bar”). Since September 2008, FHFA has acted as Conservator of Fannie Mae. Because the FCRA’s punitive damages, statutory damages, and attorneys’ fees and costs are all “in the nature of penalties or fines,” they cannot be imposed on Fannie Mae, and Plaintiff’s claims must be dismissed to the extent that they seek such amounts. A. Fannie Mae Cannot Be Held Liable For “Any Amounts in the Nature of Penalties” Because the Penalty Bar Protects the Conservatorship In its capacity as Conservator, FHFA “immediately succeed[ed]” by operation of law to “all rights, titles, powers, and privileges of” Fannie Mae, and may “take over the assets of and operate” Fannie Mae. See 12 U.S.C. §§ 4617(b)(2)(A)(i), (b)(2)(B)(i). Because FHFA as Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 10 of 23 PageID# 796 4 ny-1250037 Conservator has succeeded to Fannie Mae’s assets and rights, the Penalty Bar protects Fannie Mae to the same extent that it protects the Conservator. Indeed, every federal court to address the issue has held that Fannie Mae cannot be held liable for amounts in the nature of penalties, as this would be legally equivalent to holding the Conservator liable. See, e.g., Nev. ex rel. Hager v. Countrywide Home Loans Servicing, LP, 812 F. Supp. 2d 1211, 1218 (D. Nev. 2011) (“under conservatorship with the FHFA, Fannie Mae is statutorily exempt from taxes, penalties, and fines to the same extent that the FHFA is.”); FHFA v. City of Chicago, 962 F. Supp. 2d 1044, 1064 (N.D. Ill. 2013) (rejecting as “meritless” the argument that the Penalty Bar does not apply to Fannie Mae or Freddie Mac while in conservatorship); Mwangi v. Fed. Nat’l Mortg. Ass’n, No. 4:14-CV-0079, 2015 WL 12434327 (N.D. Ga. Mar. 9, 2015) (similar). These cases are consistent with case law interpreting a materially identical provision, 12 U.S.C. § 1825(b)(3),1 covering entities in Federal Deposit Insurance Corporation (“FDIC”) receiverships. For example, in County of Fairfax v. FDIC, the court flatly rejected the contention that Section§ 1825(b)(3) exempts only “the FDIC itself from penalty assessment but not the [entity] for which the FDIC assumes receivership.” No. 92-0858, 1993 WL 62247, at *4 (D.D.C. Feb. 26, 1993). Moreover, Fannie Mae has standing to assert the Penalty Bar. As FHFA noted in its motion to intervene, while “Fannie Mae has legal standing” to raise the Penalty Bar, FHFA’s intervention would “eliminate[] any need to litigate the point.” Mem. in Support of Mot. of 1 Section 1825(b)(3) provides in relevant part: “When acting as a receiver, . . . [t]he [FDIC] shall not be liable for any amounts in the nature of penalties or fines.” 12 U.S.C. § 1825(b)(3). Although Section 1825(b)(3) applies only to the receiver, Section 4617(j) copies the language of Section 1825(b)(3) but specifically extends its protection to the conservator as well. Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 11 of 23 PageID# 797 5 ny-1250037 FHFA to Intervene, at 9 (Sept. 2, 2016) (ECF No. 60). In her opposition to that motion, Plaintiff did not dispute Fannie Mae’s standing to raise the Penalty Bar but instead implicitly conceded it, arguing that FHFA’s was intervention was “unnecessary” given FHFA’s ability to direct Fannie Mae’s conduct of litigation. Pl.’s Mem. in Opp. to Mot. for Intervention, at 9 (Sept. 16, 2016) (ECF No. 68).2 Similarly, in denying FHFA’s motion to intervene, the Court deemed it “[s]ignificant[]” that another district court had recognized Fannie Mae’s standing to raise the Penalty Bar: “Significantly, the Mwangi court also found that the Federal National Mortgage Association was not subject to punitive damages under the same statute-without the FHFA’s intervention in the case-because it is under the conservatorship of the FHFA.” Burke v. Fannie Mae, No. 3:16cv153-HEH, 2016 WL 5662007, at *4 n.7 (E.D. Va. Sept. 29, 2016) (citing Mwangi, 2015 WL 12434327, at *4). Thus, Fannie Mae’s standing to assert the Penalty Bar is not in question here. B. The FCRA’s Punitive Damages Are in the Nature of Penalties Plaintiff requests punitive damages under 15 U.S.C. § 1681n(a)(2), (see Compl. ¶ 35), which provides that a person who fails to comply with the FCRA’s requirements is “liable” for “such amount of punitive damages as the court may allow.” 15 U.S.C. § 1681n(a)(2). As their name necessarily implies, punitive damages are designed to punish and are therefore “in the nature of penalties or fines.” See Black’s Law Dictionary (10th ed. 2014) (defining “punitive damages” as “damages assessed by way of penalizing the wrongdoer or making an example to others” (emphasis added)). Courts have consistently recognized that punitive damages are “amounts in the nature of penalties” within the meaning of 12 U.S.C. § 4617(j) and § 1825(b)(3). 2 Plaintiff’s apparent concession is correct; cases involving the virtually identical penalty-bar statute applicable to FDIC and RTC receiverships unequivocally confirm that the receiver itself need not be a party to a case in which the bar’s protection is applied. The Northern District of Illinois, for example, squarely held that a private “plaintiff, as assignee of RTC, can assert the rights set forth in § 1825(b)(3).” RTC Commercial Assets Tr. 1995-NP3-1 v. Phoenix Bond & Indem. Co., 963 F. Supp. 706, 711 (N.D. Ill. 1997), aff’d, 169 F.3d 448 (7th Cir. 1999). Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 12 of 23 PageID# 798 6 ny-1250037 See, e.g., Ayissi-Etoh v. Fannie Mae, 49 F. Supp. 3d 9, 11 (D.D.C. 2014) (“Plaintiff voluntarily dismissed his punitive-damage claims against Fannie Mae upon learning that such claims were barred by 12 U.S.C. § 4617.”), aff’d, 621 F. App’x 677 (D.C. Cir. 2015); Cassese v. Wash. Mut., Inc., 711 F. Supp. 2d 261, 273 (E.D.N.Y. 2010) (“The Court thus finds that Section 1825(b), by its plain language, bars punitive damages from being assessed against the FDIC after receivership has commenced.”); King v. Long Beach Mortg. Co., 672 F. Supp. 2d 238, 246 (D. Mass. 2009) (similar).3 Therefore, Plaintiff’s request for punitive damages must be dismissed. C. The FCRA’s Statutory Damages Are in the Nature of Penalties 1. Case Law and the Structure of the FCRA Establish That the FCRA’s Statutory Damages Are in the Nature of Penalties Plaintiff requests statutory damages under 15 U.S.C. § 1681n(a)(1)(A), (see Compl. ¶ 35), which provides that a person who willfully fails to comply with the FCRA’s requirements is “liable” for “damages of not less than $100 and not more than $1,000.” 15 U.S.C. § 1681n(a)(1)(A).4 Courts routinely characterize Section 1681n(a)(1)(A)’s “damages of not less than $100 and not more than $1,000” as penalties. See, e.g., Dalton v. Capital Associated Indus., Inc., 257 F.3d 409, 417 (4th Cir. 2001) (explaining that the “FCRA imposes liability for negligent noncompliance with the Act, and it allows for enhanced penalties for willful violations.”); Van Straaten v. Shell Oil Prods. Co., 678 F.3d 486, 489 (7th Cir. 2012) (“[Plaintiff and the class] have not claimed to suffer injury and do not want compensatory damages. Instead 3 See also Kistler v. FDIC, No. CV411-024, 2013 WL 265803, at *8 n.7 (S.D. Ga. Jan. 23, 2013) (similar), aff’d, 531 F. App’x 1003 (11th Cir. Sept. 26, 2013); Poku v. FDIC, No. RDB-08-1198, 2011 WL 1599269, at *4 (D. Md. Apr. 27, 2011) (similar); Deerborne Cottages LLC v. First Bank, No. 1:11cv178, 2012 WL 1835240, at *7 (W.D.N.C. Apr. 9, 2012) (report & recommendation) (similar), adopted by 2012 WL 1836093 (W.D.N.C. May 21, 2012). 4 Section 1681n(a)(1)(A) also provides for “actual damages” as an alternative to statutory damages. Although Plaintiff claims that she (but not the putative class) is entitled to “actual damages,” see Compl. ¶ 35, her Complaint contains no allegations that would support a conclusion that she has suffered any actual damages. Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 13 of 23 PageID# 799 7 ny-1250037 they seek the penalty provided by 15 U.S.C. § 1681n(a)(1)(A) . . . .”).5 This conclusion is consistent with the longstanding principle that penalties are amounts that “go beyond compensation, are intended to punish, and label defendants wrongdoers.” Gabelli v. SEC, 133 S. Ct. 1216, 1223 (2013) (emphasis added); see also U.S. v. Witherspoon, 211 F.2d 858, 861 (6th Cir. 1954) (a penalty “has no reference to the actual loss sustained by him who sued for its recovery.”). Here, Plaintiff alleges no actual loss, so any statutory damages have no reference to any actual loss. The contrast between Sections 1681n and 1681o underscores the punitive nature of these damages. Section 1681o applies only to “negligent” violations of the FCRA, and it allows a consumer to recover only “actual damages.” 15 U.S.C. § 1681o(a)(1). In contrast, Section 1681n applies to a person who “willfully” violates the FCRA, and it includes provisions for “damages of not less than $100 and not more than $1,000” (and for additional uncapped punitive damages) that are not present in Section 1681o. 15 U.S.C. § 1681n(a)(1)(A). The fact that Congress chose to provide only actual damages for negligent violations, but provided statutory and punitive damages for willful violations, indicates that Congress intended the additional damages in Section 1681n to be punishment for defendants with a more culpable state of mind.6 5 See also Horsch v. Wells Fargo Home Mortg., 94 F. Supp. 3d 665, 678 (E.D. Pa. 2015) (similar); Am. Family Mut. Ins. Co. v. C.M.A. Mortg., Inc., 682 F. Supp. 2d 879, 881 (S.D. Ind. 2010) (similar); Maiteki v. Knight Transp. Inc., No. 12-cv-2021-WJM-CBS, 2015 WL 328250, at *5 (D. Colo. Jan. 23, 2015) (similar); Wang v. Asset Acceptance, LLC, No. C 09-4797 SI, 2010 WL 4321565, at *4 (N.D. Cal. Nov. 1, 2010) (similar); Valentine v. First Advantage Saferent, Inc., No. EDCV 08-142 VAP (OPx), 2009 WL 4349694, at *15 (C.D. Cal. Nov. 23, 2009) (similar); Wilson v. H & R Block Enters., Inc., Nos. 07-0437-CV-W-ODS, 07-0599-CV-W-ODS, 2009 WL 32584, at *2 (W.D. Mo. Jan. 6, 2009) (similar). 6 Indeed, in a version of the bill that would be enacted as § 1681n, Congress expressly described these statutory damages of $100 to $1,000 as “punitive damages.” See S. 823, 91st Cong. § 166(a)(2) (1969) (willful violators of the statute may be liable for “such amount of punitive damages as the court may allow, which shall be not less than $100 nor greater than $1,000”). The final version of the bill removed the “not less than $100 nor greater than $1,000” language, apparently in response to the White House’s suggestion that punitive damages should not be capped but instead “should be left entirely to the discretion of the court . . . .” Legislative History of the Currency and Foreign Transactions Reporting Act: P.L. 91-508: Hearings before the Financial Institutions Subcommittee of the Senate Banking and Currency Committee on S. 823, May 19, 20, 21, 22, 23 of 1969, 91st Cong. Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 14 of 23 PageID# 800 8 ny-1250037 2. Cases Suggesting that the FCRA Is “Remedial” Are Inapposite To be sure, a few decisions deem a claim brought under the FCRA “remedial,” but those cases neither involve nor address a statutory penalty bar like the one at issue here and are therefore inapposite. In Lowe v. Experian, 340 F. Supp. 2d 1170 (D. Kan. 2004), and Saturno v. Dovenmuehle Funding, Inc., No. CV990169649, 2001 WL 236886 (Conn. Super. Ct. Feb. 21, 2001), the courts deemed the FCRA remedial for purposes of determining whether a claim survives the death of the plaintiff. But both cases lumped together several different types of FCRA damages and evaluated whether they were collectively penal or remedial, rather than examining specific “amounts,” as Section 4617(j) requires. Notably absent from these opinions is any discussion of whether the statutory damages in particular are penal. Moreover, Lowe, Saturno, and similar cases apply the three-factor “Murphy test,” named for Murphy v. Household Fin. Corp., 560 F.2d 206 (6th Cir. 1977), which held that the Truth in Lending Act (“TILA”) was remedial for a specific purpose-claim survival-that is not relevant here. Lowe, 340 F. Supp. 2d at 1175-76 (citing Murphy).7 (Saturno did not mention Murphy but applied a similar test. See Saturno, 2001 WL 236886, at *2.) Specifically, Murphy, addressed whether 15 U.S.C. § 1640(a) of TILA was “penal” for purposes of the rule that penal causes of action do not survive the original claim holder’s bankruptcy, whereas remedial causes of action 11b (1969). In 1996, Congress restored materially identical language to § 1681n (“not less than $100 and not more than $1,000”). Pub. L. No. 104-208, § 2412(b), 110 Stat. 3009-446 (1996). Although the statute no longer expressly defines the $100 to $1,000 amount as a component of punitive damages, the legislative history shows that Congress viewed the provision as fundamentally punitive in nature. 7 The three factors are “1) whether the purpose of the statute was to redress individual wrongs or more general wrongs to the public; 2) whether recovery under the statute runs to the harmed individual or to the public; and 3) whether the recovery authorized by the statute is wholly disproportionate to the harm suffered.” Murphy, 560 F.2d at 209. As explained in the text, the Murphy factors do not govern here. But even if they did, the statutory damages and attorneys’ fees Plaintiff seeks would properly be deemed penal, based primarily on the third Murphy factor, which courts have recognized as predominant. See Int’l Cablevision, Inc. v. Sykes, 172 F.R.D. 63, 69 (W.D.N.Y. 1997) (holding statutory damages claim “penal in nature” because award would be “disproportionate to the harm caused” even though statute at issue was “designed to redress individual wrongs and the recovery [was] intended to run to the aggrieved individual”). Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 15 of 23 PageID# 801 9 ny-1250037 do survive. In that context, the Murphy court followed authority “strictly” construing penal laws as those imposing criminal or quasi-criminal liability, and concluded that § 1640(a) is not penal for the limited purpose of determining claim survival. 560 F.2d at 208-10. But Murphy does not control where-as here-the question is not whether a claim survives but instead whether an award would violate a statutory penalty bar. In that different context, the “strict[]” definition of “penal” that Murphy applied need not, and does not, govern. Indeed, the same court that decided Murphy subsequently concluded-without applying the Murphy factors-that TILA § 1640(a) is penal for purposes of a statutory penalty bar. See U.S. v. Petroff-Kline, 557 F.3d 285, 297 (6th Cir. 2009). In Petroff-Kline, the Sixth Circuit explained that “[u]nder TILA § 1612(b) the Government is immune from any civil or criminal penalties for violations of its provisions,” and “[t]hat immunity extends to” damages under section 1640(a). Id. Petroff-Kline therefore confirms that Murphy does not control whether a monetary claim falls within a statutory penalty bar. Similarly, the Ninth Circuit has held- without invoking the Murphy framework-that the FDIC’s 12 U.S.C. § 1825(b) penalty bar, which is virtually identical to Section 4617(j), precluded a TILA § 1640(a) claim. Dinsmore- Thomas v. FDIC, 139 F.3d 904 (9th Cir. 1998) (mem.). Petroff-Kline and Dinsmore-Thomas confirm that penalty bar statutes preclude a far broader range of claims than those that Murphy would define as penal for purposes of survivability. And consistent with Petroff-Kline and Dinsmore-Thomas, the Seventh Circuit noted that it had previously held that TILA is “not penal for the purposes of survival,” but “it was careful to limit its holding to that particular issue and did not repudiate its characterization of the statute as a penalty . . . .” In re Marshall, 970 F.2d 383, 385 (7th Cir. 1992). Similarly, the Ninth Circuit deemed TILA remedial for survivability purposes but recognized that “statutes Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 16 of 23 PageID# 802 10 ny-1250037 such as [TILA] can be readily characterized as penal against the violator but remedial as to the victim.” Riggs v. Gov’t Emps. Fin. Corp., 623 F.2d 68, 72 (9th Cir. 1980). Indeed, while this Court has applied Murphy in addressing the survivability of claims (see, e.g., Kiosk v. Nat’l Alliance on Mental Illness, No. 1:13-cv-1267, 2014 WL 8335996, at *2 (E.D. Va. July 16, 2014)), Defendant is not aware of any case decided by this Court or the Fourth Circuit applying Murphy outside that context.8 In addition, the wording of Section 4617(j), which indicates that Congress intended the Penalty Bar to apply broadly, confirms that Petroff-Kline and Dinsmore-Thomas control and Murphy does not. Section 4617(j) bars liability for all amounts “in the nature of” penalties or fines. As numerous courts have recognized, the statutory phrase “in the nature of” indicates an intent to broaden a provision. See, e.g., Frye v. Thompson Steel Co., 657 F.3d 488, 496 (7th Cir. 2011) (“in the nature of” is “indicative of the drafters’ intent to widen the scope of [a] provision.”); In re Maddigan, 312 F.3d 589, 595 (2d Cir. 2002) (according a “broad interpretation” to a provision that precludes a party from discharging through bankruptcy any liability “in the nature of alimony, maintenance or support.”). The Court must consider not only whether § 1681n’s statutory damages are penalties in the strictest sense, but also whether they fit into the broader category of “in the nature of penalties.” Murphy’s analysis of claim survivability applies a “strict[]” definition of “penal,” and therefore provides no guidance on the more precise question of whether a specific statutory damages provision like § 1681n is “in the nature of a penalty” for purposes of a statutory bar on such awards. Because any statutory 8 Recently, two other courts applied the Murphy factors to determine if an amount was a penalty for purposes of Section 4617(j). See, e.g., Radatz v. Fed Nat’l Mortg. Ass’n, 50 N.E.3d 527 (Ohio 2016); Higgins v. BAC Home Loans Servicing LP, No. 12-cv-183-KKC, 2014 WL 1332825 (E.D. Ky. Mar. 31, 2014), rev’d on other grounds, 793 F.3d 688 (6th Cir. 2015). However, Higgins was reversed on other grounds, and Radatz concluded that even under the Murphy test, the amounts at issue were penal. In any event, their decision to apply Murphy to a statutory penalty bar is at odds with the approach taken by the court that decided Murphy. See Petroff-Kline, 557 F.3d at 297. Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 17 of 23 PageID# 803 11 ny-1250037 damages award here would amount to a bounty-Plaintiff pleads no facts that would support actual monetary damages-it is “in the nature of penalty,” and 12 U.S.C. § 4617(j)(4) bars the claim. D. Attorneys’ Fees under the FCRA Are in the Nature of Penalties or Fines Plaintiff requests attorneys’ fees under 15 U.S.C. §§ 1681n(a)(3) and 1681o(a)(2). (See Compl. ¶ 35.) But the Penalty Bar shields Fannie Mae from liability for attorneys’ fees, which are in the nature of penalties. See, e.g., Suntrust Mortg., Inc. v. AIG United Guar. Corp., No. 3:09cv529, 2011 WL 1225989, at *20 (E.D. Va. Mar. 29, 2011) (describing awards of attorneys’ fees as “fundamentally penal” (quoting Shepherd v. Am. Broad. Cos., 62 F.3d 1469, 1478 (D.C. Cir. 1995))); In re Sterten, 546 F.3d 278, 280 (3d Cir. 2008) (describing attorneys’ fees as part of the penalty under the Truth in Lending Act for inaccurate disclosure); Sanders v. Jackson, 209 F.3d 998, 1004 (7th Cir. 2000) (in the context of the Fair Debt Collection Practices Act, explaining that “attorneys’ fees are punitive in the broad sense of the term”); Baez v. U.S. Dep’t of Justice, 684 F.2d 999, 1003 (D.C. Cir. 1982) (statutes permitting attorneys’ fees “embody the notion[] that assessment of attorneys’ fees against the losers may be a form of penalty”). Thus, as the Eastern District of Michigan recently held, “an award of [attorneys’ fees] against the FDIC in this action, wherein it is acting as receiver of a failed bank, is prohibited by . . . 12 U.S.C. § 1825(b)(3), which provides that the FDIC, when acting as a receiver, ‘shall not be liable for any amounts in the nature of penalties or fines.’” Commercial Law Corp., PC v. FDIC, No. 10- 13275, 2016 WL 4035508, at *4 (E.D. Mich. July 28, 2016), appeal docketed, No. 16-2342 (6th Cir. Sept. 27, 2016).9 Likewise, an award of attorneys’ fees against the conservatorship is 9 Some courts have disagreed, concluding that certain attorneys’ fees are not in the nature of penalties or fines for purposes of a statutory penalty bar. See, e.g., Bank of the Ozarks v. Arco Cmty. Outreach Coalition, Inc., No. CV212-017, 2012 WL 2673246 (S.D. Ga. July 5, 2012) (because Georgia cases had characterized a Georgia statute’s attorneys’ fees provision as not penal, those attorneys’ fees are not barred by Section 1825(b)(3)). Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 18 of 23 PageID# 804 12 ny-1250037 prohibited by Section 4617(j), which is virtually identical to Section 1825(b)(3). Accordingly, this Court should hold that attorneys’ fees are in the nature of penalties and that liability for them cannot be imposed on Fannie Mae. II. FANNIE MAE MAY ASSERT THE PENALTY BAR DEFENSE AT THIS STAGE OF THE LITIGATION, REGARDLESS OF WHETHER IT IS DEEMED AN AFFIRMATIVE DEFENSE The Penalty Bar is not an affirmative defense within the scope of the pleading requirement of Federal Rule of Civil Procedure 8(c), and even if it were, Fannie Mae has not waived it. Fannie Mae is not aware of any case that treated the Penalty Bar (or its FDIC equivalent) as an affirmative defense. Moreover, statutory bars on punitive damages have been deemed not to be affirmative defenses. See, e.g., Shedrick v. Dist. Bd. of Trustees of Miami- Dade College, 941 F. Supp. 2d 1348, 1362 (S.D. Fla. 2013) (holding that statutory provisions that “present a complete bar to recovery of punitive damages . . . are not affirmative defenses that must be pled”); Edwards v. County of Modoc, 2015 WL 4456180, at **2-3 (E.D. Cal. July 20, 2015) (argument that punitive damages are barred “is not an affirmative defense”).10 Even if the Penalty Bar were an affirmative defense, it should not be deemed waived because (1) Fannie Mae pled it adequately, and (2) even if Fannie Mae did not plead it However, as explained above, attorneys’ fees imposed by federal law generally are considered penal. 10 Some courts have concluded that statutory caps on damages-which are similar in some respects to the Penalty Bar-are affirmative defenses. However, as Shedrick points out, “statutory damages caps are fundamentally different from an outright bar on punitive damages” because the former reduce damages while the latter categorically bars them as a matter of law. 941 F. Supp. 2d at 1361. In any event, it is “undecided in the Fourth Circuit” whether statutory caps are affirmative defenses under federal law, and there is a circuit split on the issue. See Westfarm Assocs. Ltd. P’ship v. Wash. Suburban Sanitary Comm’n, 66 F.3d 669, 689-90 (4th Cir. 1995) (citing cases). Even if the Court deems the Penalty Bar to be analogous to statutory caps, this Court should adopt the persuasive reasoning of those cases that have deemed statutory caps not to be affirmative defenses. See, e.g., Taylor v. United States, 821 F.2d 1428, 1433 (9th Cir. 1987) (holding that a California statute’s damages cap “is a limitation of liability, not an affirmative defense,” because then-Rule 8(d) (now Rule 8(b)(6)) specifies that allegations relating to the amount of damages are not deemed admitted even if they are not addressed in a responsive pleading); cf., e.g., Ingraham v. United States, 808 F.2d 1075, 1079 (5th Cir. 1987) (holding that “the Texas statutory limit on medical malpractice damages is an affirmative defense . . . .”). Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 19 of 23 PageID# 805 13 ny-1250037 adequately, the defense is not waived because Plaintiff would suffer no prejudice from addressing the issue now. First, Fannie Mae’s existing Affirmative Defenses encompass the Penalty Bar. Fannie Mae’s First Defense is that “[t]he Complaint fails to state a claim upon which relief may be granted,” (Answer & Affirmative Defenses, at 13 (April 25, 2016) (ECF No. 17) (emphasis added)); here, Fannie argues that the Complaint, as a result of the Penalty Bar, fails to state a claim upon which specific relief (statutory and punitive damages and attorneys’ fees) may be granted. Also, Fannie Mae’s Seventeenth Defense gives notice that Fannie Mae “intends to rely upon such other defenses as may become available at law or pursuant to statute . . . and hereby reserves the right to amend its answer and assert such defenses.” (Id. at 16.) Second, even if Fannie Mae were required to plead the Penalty Bar as an affirmative defense and did not do so adequately, courts (including the Fourth Circuit) have made clear that affirmative defenses are not waived when belatedly raising them would not cause any prejudice. In Defender Industries, Inc. v. Northwestern Mutual Life Insurance Co., the Fourth Circuit permitted a defendant to amend its answer after the close of evidence to assert an affirmative defense. 938 F.2d 502, 508 (4th Cir. 1991). The Fourth Circuit explained that the plaintiff “was unable to show any prejudice” because the plaintiff was aware prior to trial that the defendant intended to raise this defense, and the plaintiff “does not contend that it would or could have offered additional evidence to oppose this defense had the motion been made earlier.” Id. Here, Fannie Mae is raising the Penalty Bar defense more than two months before trial, and Plaintiff became aware that the Penalty Bar might be at issue in this case no later than September 2, 2016, when FHFA filed its Motion to Intervene. Moreover, because the Penalty Bar is a purely legal Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 20 of 23 PageID# 806 14 ny-1250037 issue, Plaintiff cannot “contend that it would or could have” sought additional evidence during discovery to oppose this defense. See id. Even courts that deem statutory caps on damages or bars on punitive damages to be affirmative defenses require much more than mere omission of the defense from an answer before such defenses can be deemed waived, especially where (as here) application of the defense presents a purely legal issue. Lucas v. United States, 807 F.2d 414, 418 (5th Cir. 1986) (no waiver where “plaintiffs were not prejudiced” by defendants failure to assert statutory cap on damages as an affirmative defense, because “applicability of the … cap … is purely a legal issue which can be resolved without the need for factual proof.”). Waiver is appropriate only where there is substantial prejudice, which is typically found only where, unlike here, a defendant seeks to assert a damages cap during or after trial. Compare Jakobsen v. Mass. Port Auth., 520 F.2d 810, 813, 815 (1st Cir. 1975) (holding defendant waived damages cap it “raised … for the first time in a motion for a directed verdict” when “the trial was virtually over,” but acknowledging that “[d]oubtless, when there is no prejudice and when fairness dictates, the strictures of this rule may be relaxed.”) with Arismendez v. Nightingale Home Health Care, Inc., 493 F.3d 602, 611 (5th Cir. 2007) (holding affirmative defense not waived where defendant raised it “[i]n a Joint Pretrial Order,” which court concluded was “a pragmatically sufficient time”).11 Accordingly, even if the Penalty Bar is deemed an affirmative defense that Fannie Mae should have raised pursuant to Rule 8(c), Fannie Mae should be permitted to raise the defense now. 11 See also, e.g., Ingraham, 808 F.2d at 1079 (declining to permit defendant to raise a statutory cap defense after trial and judgment but noting that where an affirmative defense “is raised in the trial court in a manner that does not result in unfair surprise, . . . technical failure to comply with Rule 8(c) is not fatal.” (citation and internal quotation marks omitted)); Mehringer v. Vill. of Bloomingdale, No. 00 C 7095, 2003 WL 21506856, at *8 (N.D. Ill. June 27, 2003) (although “immunity to punitive damages is an affirmative defense which must be timely raised by the defendant,” defendant’s failure to assert it in the answer did not result in waiver because belated assertion would not cause “undue surprise or prejudice”). Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 21 of 23 PageID# 807 15 ny-1250037 CONCLUSION Plaintiff and the putative class are seeking in this litigation only relief that they cannot obtain as a matter of federal law. As a result, the Complaint should be dismissed. Dated: October 6, 2016 Respectfully submitted, MORRISON & FOERSTER LLP By: /s/ John A. Trocki III Michael B. Miller (pro hac vice) MORRISON & FOERSTER LLP 250 West 55th Street New York, New York 10019-9601 Telephone: 212.468.8000 Facsimile: 212.468.7900 mbmiller@mofo.com Angela E. Kleine (pro hac vice) MORRISON & FOERSTER LLP 425 Market Street San Francisco, California 94105-2482 Telephone:415.268.7000 Facsimile: 415.268.7522 akleine@mofo.com John A. Trocki III (VA Bar No. 38656) Morrison & Foerster LLP 1650 Tysons Boulevard, Suite 400 McLean, Virginia 22102 Telephone: (703) 760-7712 Facsimile: (703) 760-7777 Email: JTrocki@mofo.com Attorneys for Federal National Mortgage Association Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 22 of 23 PageID# 808 16 ny-1250037 CERTIFICATE OF SERVICE I hereby certify that on October 6, 2016, a true and correct copy of the foregoing FEDERAL NATIONAL MORTGAGE ASSOCIATION’S MEMORANDUM IN SUPPORT OF ITS MOTION TO DISMISS PLAINTIFF’S COMPLAINT PURSUANT TO FED. R. CIV. P. 12(c) was filed electronically with the Clerk’s office by using the CM/ECF system and served electronically upon the parties below. Parties may also access this filing through the Court’s ECF system. Kristi Cahoon Kelly, Esq. (VSB # 72791) Andrew J. Guzzo, Esq. (VSB # 82170) Kelly & Crandall, PLC 4084 University Drive, Suite 202A Fairfax, Virginia 22030 (703) 424-7572 (Telephone) (703) 591-0167 (Facsimile) kkelly@kellyandcrandall.com aguzzo@kellyandcrandall.com James A. Francis, Esq. (admitted pro hac vice) John Soumilas, Esq. (admitted pro hac vice) Lauren KW Brennan (admitted pro hac vice) Francis & Mailman, P.C. Land Title Building, 19th Floor 100 South Broad Street Philadelphia, PA 19110 (215) 735.8600 (Telephone) (215) 940.8000 (Facsimile) jfrancis@consumerlawfirm.com jsoumilas@consumerlawfirm.com lbrennan@consumerlawfirm.com Counsel for Plaintiff /s/ John A. Trocki III______ John A. Trocki III Case 3:16-cv-00153-HEH-DJN Document 92-1 Filed 10/06/16 Page 23 of 23 PageID# 809