Fatal omission — UPDATED

Two cases warn against skipping foundational steps (or “not showing your work”):

1.  The dismissal of Garcia v. Jenkins Babb, LLP was affirmed for failure to allege facts sufficient under Iqbal to show that an FDCPA claim arose from a consumer transaction; more specifically, “giv[ing] no indication what item was purchased or what service was paid for, much less explain how the item or service was intended for personal or family use.”  No. 13-10886 (May 29, 2014, unpublished).  (The case returned, and dismissal was again affirmed, in Israel v. Primary Financial Services, No. 14-10012 (May 28, 2015, unpublished)).

2.  An award of sanctions was reversed and remanded in Arnold v. Fannie Mae when “the
district court abused its discretion by failing to adequately articulate the authority, the basis, and the reasoning for the sanctions” under Rule 11, inherent power, or 28 U.S.C. § 1927.

How much federal question allows removal

In the recent case of French v. EMC Mortgage Corp., No. 13-50417 (April 29, 2014, unpublished), these allegations were deemed to “reference[] the FDCPA by way of asserting a cause of action under this federal statute,” and thus allowing removal:

“V.  ILLEGAL MORTGAGE SERVICING AND DEBT COLLECTION PRACTICES.

. . .

Specifically in collection calls and notices, monthly statements, payoff statements, foreclosure notices, and otherwise, EMC routinely makes misrepresentations to borrowers about their loans, including: [6 topics]

. . .

Plaintiffs submit that Defendant EMC’s conduct in this matter is in direct violation of the Texas Fair Debt Collection Practices Act, the Federal Fair Debt Collection Practices Act and the above referenced stipulated injunction.”

This case rested on Howery v. Allstate Ins. Co., 243 F.3d 912 (5th Cir. 2001), in which the following allegations did not create federal question jurisdiction, because “[f]rom its context, it appears that Howery’s mention of federal law merely served to describe types of conduct that violated the DTPA, not to allege a separate cause of action under the FCRA”:

The acts, omissions, and other wrongful conduct of Allstate complained of in this petition constituted unconscionable conduct or unconscionable course of conduct, and false, misleading, or deceptive acts or practices. As such, Allstate violated the Texas Deceptive Trade Practices Act, Sections 17.46, et seq., and the Texas Insurance Code, including articles 21.21, 21.21-1, 21.55, and the rules and regulations promulgated thereunder, specifically including 28 TAC Section 21.3, et seq. and 21.203.

Allstate’s destruction of [Howery’s] file … constituted a further violation of the Texas Deceptive Trade Practices Act, for which plaintiff sues for recovery. Allstate also engaged in conduct in violation of the Federal Trade Commission rules, regulations, and statutes by obtaining Plaintiff’s credit report in a prohibited manner, a further violation of the Texas Deceptive Trade Practices Act….

While these holdings are consistent, the line between them is only a few words in a lengthy pleading.  They underscore the importance of detail in considering whether removal is appropriate.

What does the discovery rule require?

Congress amended the Fair Credit Reporting Act to have a limitations period of “2 years after the date of discovery by the plaintiff of the violation that is the basis for such liability.”   The plaintiff in Mack v. Equable Ascent Financial, LLC argued that this amendment meant that “he could not have ‘discovered’ the violation until he had researched the statute.”  No. 13-40128 (April 11, 2014).  The Fifth Circuit disagreed, finding that the amendment was made to equalize the treatment of different types of claims, and that the plaintiff’s reading “would indefinitely extend the limitations period.”

Partial Rule 68 offer does not moot case

Payne sued Progressive Financial for violations of fair debt collection statutes, seeking statutory damages, actual damages, attorneys fees, and costs.  Payne v. Progressive Financial Services, No. 13-10381 (April 7, 2014).  Progressive made a Rule 68 offer of $1,001 in damages and fees to the date of the offer, to which Payne did not respond.  The district court reasoned that Payne had not pleaded a basis to recover actual damages, and that the unaccepted offer mooted her claim for statutory damages because it exceeded the amount she could recover.  The Fifth Circuit reversed, finding that the district court’s analysis of the actual damages claim conflated jurisdiction with resolution of the merits; accordingly, Progressive’s offer was incomplete because it did not address actual damages.  A footnote reminds that a complete Rule 68 offer can moot a case, and that the Court did not reach the argument that the offer was incomplete because it did not include post-offer fees and costs.

CAFA reversal; not a “mass action”

Mississippi brought six parens patriae actions alleging inappropriate charges for credit card “ancillary services” in violation of state law.  Defendants removed under CAFA and on the ground of complete preemption, and the district court denied remand. Hood v. JP Morgan Chase & Co. (Dec. 2, 2013).  The Fifth Circuit reversed.  As to CAFA, it found that defendants (who have the burden) did not establish that any plaintiff had a claim of $75,000 – especially when Mississippi offered evidence that the average yearly charge at issue was around $100.  The Court also observed that the defendants likely had similar information in their records.  The Court acknowledged that federal usury laws have the effect of complete preemption, but found that the charges at issue in these cases could not be characterized as “interest” within the meaning of those laws.

Rooker/Feldman doctrine meets “Nice Try” doctrine in mortgage case

Washington Mutual (“WaMu”) failed; Chase took over its mortgage operations from the FDIC.  In the meantime, borrower Dixon (after receiving notice from Chase that it was replacing WaMu as mortgagee and servicer) obtained a default judgment in state court against WaMu for $2.8 million and a declaration that all liens were cancelled.  A year later, Chase foreclosed on the property and obtained title at a foreclosure sale.  Chase sued in federal court to quiet the cloud on title created by the recordation of the default judgment.  JP Morgan Chase Bank NA v. Dixon, No. 12-40590 (Oct. 7, 2013, unpublished).  The district court granted summary judgment to Chase.  Dixon argued that this ruling violated the Rooker/Feldman doctrine about federal review of state court judgments.  The Fifth Circuit disagreed, noting that the federal ruling did not technically “nullify” the state court judgment, and that Chase was not a party to the state proceedings and thus Rooker/Feldman was not implicated.

To file suit, perchance to bring suit; aye, there’s the rub.

In Serna v. Law Office of Joseph Onwuteaka, P.C., the plaintiff alleged that a debt collector had sued him in an impermissible venue under the FDCPA .  No. 12-20529 (Oct. 7, 2013). The defendants obtained summary judgment on limitations; the question was whether the offending act under the FDCPA — to “bring such action” — was filing of the suit or service. The Fifth Circuit found that the term “bring” is ambiguous in this context, which justifies consideration of the statute’s history and purpose.  It then concluded that “the FDCPA’s remedial nature compels the conclusion that a violation includes both filing and notice,” and reversed.  A dissent argued that the term was not ambiguous, since the term “brought” refers only to filing in another provision of the statute.

Yes, we have no jurisdiction

The Fifth Circuit affirmed the dismissal of several mortgage-related claims by a borrower against JP Morgan, based on the reasoning of the Court’s opinions in the area in 2013. Hudson v. JP Morgan Chase Bank NA, No. 13-50407 (Sept. 23, 2013, unpublished).  After the district court ruled, the Bank of New York (who had been sued but not served) entered an appearance in the case, and asked the Fifth Circuit to dismiss the claims against it as well.  Finding that BONY was not a party at the time of the district court’s dismissal ruling, the Court dismissed that request for lack of jurisdiction.

Debt Deception

The FTC sued debt negotiation companies, claiming that their ads deceptively promised substantial reductions in consumers’ credit card debt.  The district court concluded that “deception” under section 5 of the FTC Act should be evaluated on the basis of all information disclosed by the companies to consumers up to the point of purchase, and entered judgment for the defendants.  FTC v. Financial Freedom Processing Inc. No. 12-10520 (Aug. 12, 2013, unpublished). The Fifth Circuit thought that the district court’s analysis was “dubious,” noting authority in other circuits that holds “each advertisement must stand on its own merits.”  The FTC, however, elected to challenge the district court’s finding about deceptiveness at the point of purchase.  Here, “while the Companies’ radio ads and websites may be misleading–indeed, it is difficult to conclude that the websites are not deceptive–we are satisfied that substantial evidence supports the district court’s finding . . . .”

Surviving Rooker-Feldman, still failing to state a claim

After sidestepping an issue about the Rooker-Feldman doctrine in the context of mortgage servicing earlier this year, the Fifth Circuit revisited the topic in Truong v. Bank of America, 717 F.3d 377 (2013).  After a review of the doctrine (“‘Reduced to its essence, the Rooker/Feldman doctrine holds that inferior federal courts do not have the power to modify or reverse state court judgments’ except when authorized by Congress.”), the Court found that it did not prevent a claim arising from alleged misconduct during the course of a foreclosure case. On the merits, however, the claim failed because of an exemption in Louisiana’s unfair trade practices act for “[a]ny federally insured financial institution,” and the Court affirmed dismissal on that basis.

Credit reporting damages

Wagner v. BellSouth Telecommunications underscores a recent holding that a reduced credit rating is not enough to establish damage under the Fair Credit Reporting Act. 12-31080 (April 5, 2013, unpublished).  The opinion also reminds that to recover mental anguish damages under the FCRA, a plaintiff must offer “evidence of genuine injury, such as the evidence of the injured party’s conduct and the observations of others,” and to demonstrate “a degree of specificity which may include corroborating testimony or medical or psychological evidence in support of the damage award.” (quoting Cousin v. Trans Union Corp., 246 F.3d 359, 371 (5th Cir. 2001)).  The Court also reviewed basic limitations principles under the FCRA and its Louisiana state analog.