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Baxa v. Seterus, Inc.

United States District Court, E.D. Louisiana

July 30, 2018

JOHN BAXA ET AL.
v.
SETERUS, INC.

         SECTION: “H” (5)

          ORDER AND REASONS

          JANE TRICHE MILAZZO UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant's Motion to Dismiss the Amended Class Action Complaint (Doc. 23). For the following reasons, the Motion is GRANTED IN PART.

         BACKGROUND

         Plaintiffs John Baxa and Linda Baxa filed their Initial Complaint in this Court on May 31, 2017 asserting claims for state law breach of contract, negligence, conversion, and fraud, and for violations of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq., and Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq.[1] Plaintiffs alleged that Defendant, the servicer of Plaintiffs' home mortgage, failed to timely pay property taxes on their home resulting in the home being sold at a public tax sale, attempted to recover the resulting tax penalties from Plaintiffs via an increase in their escrow payment, failed to notify them of the increased payment, and improperly reported Plaintiffs' failure to pay that increase to credit agencies. Plaintiffs filed their First Amended Complaint on June 7, 2017, asserting the same claims.[2]

         On December 1, 2017, Plaintiffs sought and were granted leave of Court to amend their First Amended Complaint to assert the existence of a class of similarly situated plaintiffs and make claims on their behalf.[3] Plaintiffs filed their Amended Class Action Complaint on December 4, 2017.[4] The Amended Class Action Complaint does not include a statement incorporating either of the previous complaints filed by Plaintiffs. With respect to the named Plaintiffs, the Amended Class Action Complaint alleges that Defendant “negligently and fraudulently mismanaged Plaintiffs' loans, ” causing Plaintiffs to suffer mental anguish, negative impacts to their credit, and the improper default of their home loan.[5] The Amended Class Action Complaint reframes some of the factual allegations of the First Amended Complaint as allegations concerning the entire class.[6]

         Defendant now moves to dismiss the Amended Class Action Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for the failure to state a claim on which relief can be granted. Defendant argues that Plaintiffs fail to state a claim for breach of contract, fraud, or violations of RESPA or the FCRA, and that Plaintiffs' negligence and conversion claims are prescribed. Plaintiffs oppose the Motion.

         LEGAL STANDARD

         To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead enough facts “to state a claim to relief that is plausible on its face.”[7] A claim is “plausible on its face” when the pleaded facts allow the court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.”[8]A court must accept the complaint's factual allegations as true and must “draw all reasonable inferences in the plaintiff's favor.”[9] The Court need not, however, accept as true legal conclusions couched as factual allegations.[10]

         To be legally sufficient, a complaint must establish more than a “sheer possibility” that the plaintiff's claims are true.[11] “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action''' will not suffice.[12] Rather, the complaint must contain enough factual allegations to raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiff's claim.[13]

         LAW AND ANALYSIS

         I. Violations of the Fair Credit Reporting Act

         Defendant argues that Plaintiffs' claim for violations of the FCRA should be dismissed because Plaintiffs fail to allege the specific provision of the law that Defendant violated. Plaintiffs continue that silence in their response to Defendant's Motion. Accordingly, because Plaintiffs have not alleged which specific provision of the FCRA that Defendant violated, their claim under the FCRA is dismissed without prejudice.[14]

         II. Violations of the Real Estate Settlement Practices Act

         Defendant argues that Plaintiffs' claim for violations of RESPA should be dismissed because Plaintiffs fail to identify the specific provision of the law that Defendant violated and because the law does not provide a private right of action to challenge improper escrow calculations. In response, Plaintiffs state that they are asserting a claim pursuant to 12 U.S.C. §§ 2605(e), (f), and (g) for the failure to correct an escrow calculation incorrectly based on the amount of money required to redeem the property from a tax sale, rather than the actual amount of property taxes owed.

         Subsection (e) of 12 U.S.C. § 2605 requires a mortgage servicer to respond to a qualified request for information made by a borrower with either the information that the borrower requested, the correction to the mortgage account that the borrower requested, or a written explanation of why the servicer believes the account to be correct.[15] It also forbids a servicer from providing information to a consumer reporting agency about any overdue payment that was the subject of a qualified request for 60 days after the request was made.[16] Subsection (g) requires the servicer of a federally related mortgage to make payments from an escrow account in a timely manner.[17] Subsection (f) makes a servicer liable to an individual for actual and statutory damages resulting from the failure to comply with the provisions of § 2605.[18]

         None of Plaintiffs' complaints make any allegation that Plaintiffs sent a qualified written request for information as required under § 2605(e) and therefore Plaintiffs have failed to state a claim under that provision. Plaintiffs generally allege that Defendant failed to timely pay taxes out of their escrow account, as required by § 2605(g), but fail to allege all of the required elements of such a claim. In order to state a claim under § 2605(g), a plaintiff must allege that:

(1) the borrower had a federally related mortgage loan; (2) the terms of the loan agreement require the borrower to make payments to an escrow account; (3) the borrower owed taxes or premiums that were to be paid out of the escrow accounts; (4) the servicer failed to make such payments in a timely manner . . .; and (5) at the time the premium payment was due, the borrower was not more than 30 days delinquent in making mortgage payments.[19]

Plaintiffs fail to allege that their loan was federally related or that they were current in their mortgage payments.[20] Accordingly, Plaintiffs have failed to state a claim under § 2605(g). Having failed to sufficiently allege a claim under either § 2605(e) or § 2605(g), Plaintiffs' claim for violations of RESPA is dismissed without prejudice.

         III. ...


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