Ferrell v. Ditech Financial Llc

MOTION for Partial Summary Judgment

W.D. Tex.April 28, 2017

MOTION FOR PARTIAL SUMMARY JUDGMENT PAGE 1 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION CRAIG S. FERRELL, Plaintiff, v. DITECH FINANCIAL LLC Defendant. § § § § § § § CIVIL ACTION NO. 5:17-cv-00051-FB DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT Pursuant to Rule 56 of the Federal Rules of Civil Procedure, Defendant Ditech Financial LLC (“Defendant” or Ditech”) files this Motion for Partial Summary Judgment (the “Motion for Partial Summary Judgment”), and respectfully shows the Court the following: I. INTRODUCTION This lawsuit is based on loan servicing activities that occurred after the origination of Plaintiff Craig S. Ferrell’s (“Plaintiff”) home equity loan. Plaintiff asserts an unsubstantiated claim for violation of the Deceptive Trade Practices-Consumer Protection Act (“DTPA”) based on his allegations that loan servicing errors were made regarding the payment of property taxes and addition of an escrow account for his home equity loan. Fifth Circuit authority and Texas law are clear, however, that Plaintiff is not a consumer under the DTPA because the basis of his claim is loan servicing activities. Consequently, Defendant is entitled to summary judgment dismissing the DTPA claim with prejudice. II. BACKGROUND FACTS Plaintiff’s claims arise from loan servicing activities related to his home equity loan (the “Loan”). See Comp. ¶¶ 17-43. Specifically, Plaintiff alleges that he paid property taxes related to the property that secures the Loan in June 2015, but that Defendant paid Plaintiff’s property Case 5:17-cv-00051-FB Document 19 Filed 04/28/17 Page 1 of 8 MOTION FOR PARTIAL SUMMARY JUDGMENT PAGE 2 taxes and added an escrow account to the Loan in error. See id. ¶¶ 21-43. Plaintiff further alleges that the alleged error was not resolved until January 2016. See id. at ¶¶ 21-131. According to Plaintiff, Ditech contacted Plaintiff between November 2015 and January 2016 requesting payment for the unpaid escrow.1 See id. at ¶¶ 44-109. Based on these allegations, Plaintiff asserts a claim for violation of the DTPA.2 III. DEFENDANT IS ENTITLED TO SUMMARY JUDGMENT DISMISSING THE DTPA CLAIM Plaintiff is not a consumer under the DTPA because the DTPA claim is entirely premised on alleged loan servicing activities. Consequently, Defendant is entitled to summary judgment dismissing the DTPA claim with prejudice. A. SUMMARY JUDGMENT STANDARD Summary judgment is proper when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(c). The moving party has the burden of demonstrating that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the nonmovant bears the burden of proof at trial, the movant need only point to the absence of evidence to support an essential element of the nonmovant’s case; the movant does not have to support its motion with evidence negating the nonmovant’s case. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994); see also Childs v. Thousand Oaks at Austin Ranch, No. 3:15- CV-2303-D, 2016 WL 4800339, at *2 (N.D. Tex. Sept. 14, 2016) (“When a party moves for summary judgment on a claim on which the opposing party will bear the burden of proof at trial, 1 Plaintiff does not allege that he made any payments for escrow charges. See generally Comp. ¶¶ 21-131. 2 At this juncture, Defendant is moving for summary judgment as to the DTPA claim only, but reserves the right to challenge the entirety of Plaintiff’s allegations and move for summary judgment on his other claims at a later date. Case 5:17-cv-00051-FB Document 19 Filed 04/28/17 Page 2 of 8 MOTION FOR PARTIAL SUMMARY JUDGMENT PAGE 3 the moving party can meet its summary judgment obligation by pointing the court to the absence of admissible evidence to support the opposing party’s claim.”). If the movant succeeds, the nonmovant must come forward with evidence “such that a reasonable party could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The nonmovant “must come forward with ‘specific facts showing there is a genuine issue for trial.’“ Matsushita Elec. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). “A factual dispute is deemed ‘genuine’ if a reasonable juror could return a verdict for the nonmovant, and a fact is considered ‘material’ if it might affect the outcome of the litigation under the governing substantive law.” Cross v. Cummins Engine Co., 993 F.2d 112, 114 (5th Cir. 1993). “The opposing party’s failure to produce proof as to any essential element of a claim renders all other facts immaterial.” Childs, 2016 WL 4800339, at *2 (citing TruGreen Landcare, L.L.C. v. Scott, 512 F. Supp. 2d 613, 623 (N.D. Tex. 2007)). Summary judgment is mandatory if the nonmovant “fails to make a showing sufficient to establish the existence of an element essential to that party’s case.” Celotex Corp., 477 U.S. at 322-23; see also Childs, 2016 WL 4800339, at *2 (“Summary judgment is mandatory if the opposing party fails to meet this burden.”). The nonmovant “cannot defeat summary judgment with conclusory, unsubstantiated assertions, or ‘only a scintilla of evidence.’“ Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007). A “district court may not make credibility determinations or weigh evidence when deciding a summary judgment motion.” EEOC v. Chevron Phillips, 570 F.3d 606, 612 n. 3 (5th Cir. 2009). Nor does the court have to sift through the record in search of evidence to support opposition to summary judgment. Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). Case 5:17-cv-00051-FB Document 19 Filed 04/28/17 Page 3 of 8 MOTION FOR PARTIAL SUMMARY JUDGMENT PAGE 4 B. PLAINTIFF IS NOT A CONSUMER UNDER THE DTPA As a threshold matter, to prevail on a DTPA claim, Plaintiff must establish that he is a consumer. E.g. Kennedy v. HSBC Mortg. Servs., Inc., No. SA-14-CA-1083-FB, 2015 WL 12734178, at *6 (W.D. Tex. Jan. 30, 2015) report and recommendation adopted, 2015 WL 12734179 (W.D. Tex. Feb. 24, 2015). To qualify as a consumer, Plaintiff must: (1) seek or acquire good or services by purchase or lease; and (2) the goods or services purchased or leased must form the basis of Plaintiff’s complaint. TEX. BUS. & COM. CODE § 17.45(4); Kennedy, 2015 WL 12734178, at *6; Rojas v. Wells Fargo Bank, N.A., 571 F. App’x 274, 279 (5th Cir. 2014). The DTPA’s requirement of being a “consumer” also applies to alleged violations of its tie-in provision. See Burnette v. Wells Fargo Bank, N.A., et al., 4:09–CV–370, 2010 WL 1026968, at *9 (E.D. Tex. Feb 16, 2010) (noting that § 17.50(h)—which provides “tie-in” relief under the DTPA for violations of other laws such as the Texas Debt Collection Act—”does not exempt claimants from showing that they qualify as a ‘consumer’ under § 17.45(4)”); Marketic, 436 F. Supp. 2d at 854-55 (“In all cases, a plaintiff must qualify as a ‘consumer’ in order to have standing to bring an action under the DTPA.”). Whether Plaintiff is a consumer is a question of law. See Porter v. Countrywide Home Loans, No. CV-07075, 2008 WL 2944670, at *3 (S.D. Tex. July 24, 2008). The Texas Supreme Court has plainly held that a person who seeks only to borrow money is not a consumer under the DTPA, because money is not a good or a service. See Riverside Nat’l Bank v. Lewis, 603 S.W.2d 169, 174-75 (Tex. 1980); Murphy v. Wells Fargo Bank, N.A., No. 14-11-00560-CV, 2013 WL 510129, at *7 (Tex. App.—Houston [14th Dist.] Feb. 12, 2013); see also Marketic v. U.S. Bank Nat’l Ass’n, 436 F. Supp. 2d 842, 854-855 (N.D. Tex. 2006) (“[O]ne who obtains a . . . loan does not obtain a ‘good’ or a ‘service’ to qualify as a consumer under the DTPA.”); Burnette v. Wells Fargo Bank, N.A., et al., 4:09–CV–370, 2010 Case 5:17-cv-00051-FB Document 19 Filed 04/28/17 Page 4 of 8 MOTION FOR PARTIAL SUMMARY JUDGMENT PAGE 5 WL 1026968, at *9 (E.D. Tex. Feb 16, 2010) (“[i]t is well recognized that borrowing money does not constitute the acquisition of a good or service.”); Baker v. Countrywide Home Loans, Inc., No. 3:08-CV-0916-B, 2009 WL 1810336, at *6 (N.D. Tex, June 24, 2009). Additionally, “[e]xtensive case law authority uniformly holds that loan servic[ing] . . . activities . . . do not satisfy the ‘goods and services’ element of a DTPA claim.” Kennedy, 2015 WL 12734178, at *6 (collecting cases); Calvino v. Conseco Fin. Servicing Corp., No. A-12-CA- 577-SS, 2013 WL 4677742, at *8 (W.D. Tex. Aug. 30, 2013) (holding that DTPA claim failed “because it is well-established under Texas law that servicing a mortgage is not a ‘service’ under the DTPA . . . .”). If a lender provides services that are incidental to the completed mortgage loan, the performance of such services does not transform the borrower into a “consumer” for purposes of the DTPA. See Broyles, 2011 WL 1428904, at *4 (stating that “subsequent actions related to mortgage accounts” . . . “do not satisfy the ‘good or service’ element of the DTPA”); Ayers v. Aurora Loan Servs., LLC, No. 6:10-cv-593, 2011 WL 2120000, at *3 (E.D. Tex. May 27, 2011) (holding subsequent actions relating to mortgage loans are not “goods or services” under the DTPA); Maginn v. Norwest Mortgage Corp., 919 S.W.2d 164, 166-67 (Tex. App.— Austin 1996, no writ); see also Porter, 2008 WL 2944670, at *3. The Fifth Circuit has also held that a mortgagor is not a consumer under the DTPA if “the basis of her claim is the subsequent loan servicing and foreclosure activities, rather than the goods or services acquired in the original transaction.” Rojas, 571 F. App’x at 279 (citing Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 725 (5th Cir. 2013)). Here, Plaintiff alleges that Defendant’s activities consisting of the payment of property taxes, the addition of an escrow account to the Loan, and related collection efforts that occurred during the servicing of his home equity loan violate the DTPA. Compl. ¶¶ 146-48. Thus, Plaintiff’s DTPA claim is clearly based on subsequent loan servicing activities, which neither Case 5:17-cv-00051-FB Document 19 Filed 04/28/17 Page 5 of 8 MOTION FOR PARTIAL SUMMARY JUDGMENT PAGE 6 constitute goods nor services under the DTPA. See Rojas, 571 F. App’x at 279; Kennedy, 2015 WL 12734178, at *6; Calvino, 2013 WL 4677742, at *8; Broyles, 2011 WL 1428904, at *4; Ayers, 2011 WL 2120000, at *3; Maginn, 919 S.W.2d 166-67 (Tex. App.—Austin 1996, no writ); Porter, 2008 WL 2944670, at *3. Consequently, Plaintiff is not a consumer under the DTPA and he has no evidence to the contrary. And because he is not a consumer under the DTPA, Plaintiff cannot recover under the DTPA’s tie-in provision and any attempt to seek damages under the DTPA through its tie-in provision fails as a matter of law. Kennedy, 2015 WL 12734178, at *6 (“Further, because plaintiffs have no standing to assert claims under the DTPA, they have no standing to assert ‘tie-in’ claims under the TDCA.”); Burnette, 2010 WL 1026968, at *9; Marketic, 436 F. Supp. 2d at 854-55. Therefore, Defendant is entitled to summary judgment dismissing the DTPA claim with prejudice. IV. CONCLUSION Based on the foregoing, Defendant respectfully requests that the Court grant its Motion for Partial Summary Judgment, dismiss the DTPA claim with prejudice, and for such other and further relief, at law or in equity, to which Defendant is entitled. Case 5:17-cv-00051-FB Document 19 Filed 04/28/17 Page 6 of 8 MOTION FOR PARTIAL SUMMARY JUDGMENT PAGE 7 Respectfully submitted, LOCKE LORD LLP By: /s/ Marc D. Cabrera Marc D. Cabrera Texas Bar No. 24069453 LOCKE LORD LLP 2200 Ross Avenue, Suite 2800 Dallas, Texas 75201 (214) 740-8000 (214) 740-8800 (Facsimile) mcabrera@lockelord.com Joel Thomason Texas Bar No. 24086612 LOCKE LORD LLP 600 Congress Ave., Suite 2200 Austin, Texas 78701 (512) 305-4700 (512) 305-4800 (Facsimile) jthomason@lockelord.com ATTORNEYS FOR DEFENDANT DITECH FINANCIAL LLC Case 5:17-cv-00051-FB Document 19 Filed 04/28/17 Page 7 of 8 MOTION FOR PARTIAL SUMMARY JUDGMENT PAGE 8 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing was served as indicated on this 28th day of April, 2017, to the following: VIA ECF Anthony P. Chester Kazerouni Law Group, APC 1910 Pacific Avenue, Suite 14155 Dallas, Texas, 75201 (952) 225-5333 (800) 635-6425 (Facsimile) tony@kazlg.com Abbas Kazerounian Kazerouni Law Group, APC 245 Fischer Avenue, Unit D1 Costa Mesa, California 92626 (800) 400-6808 Ext. 2 (800) 520-5523 (Facsimile) ak@kazlg.com Attorneys for Plaintiff /s/ Marc D. Cabrera_______ Marc D. Cabrera Case 5:17-cv-00051-FB Document 19 Filed 04/28/17 Page 8 of 8 ORDER GRANTING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT SOLO PAGE AUS:0106420/00323:693425V1 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION CRAIG S. FERRELL, Plaintiff, v. DITECH FINANCIAL LLC Defendant. § § § § § § § CIVIL ACTION NO. 5:17-cv-00051-FB ORDER GRANTING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT Having considered Defendant Ditech Financial LLC’s ("Defendant") Motion for Partial Summary Judgment, all responses and replies thereto, if any, the competent evidence, pleadings, arguments of counsel, if any, and all other matters properly before the Court, the Court finds that the Motion for Partial Summary Judgment should be, and hereby is, in all things, GRANTED. It is therefore ORDERED, ADJUDGED, AND DECREED Plaintiff Craig S. Ferrell’s claims against Defendant for violation of the Deceptive Trade Practices-Consumer Protection Act are hereby DISMISSED WITH PREJUDICE. SIGNED ON this _____ day of _____________________, 2017. _________________________________________ THE HONORABLE FRED BIERY UNITED STATES DISTRICT JUDGE Case 5:17-cv-00051-FB Document 19-1 Filed 04/28/17 Page 1 of 1