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Tubwell v. Specialized Loan Servicing, LLC

United States District Court, N.D. Mississippi, Oxford Division

September 22, 2017




         Before the Court are Joe Tubwell's “Motion to Strike Defendant's Statement of Amendment of Allegations of Jurisdiction, ” Doc. #35; and Morgan Stanley Mortgage Capital Holdings LLC and Specialized Loan Servicing's motion to dismiss, Doc. #7.


         Procedural History

         On December 20, 2016, Joe Tubwell filed a “Verified Complaint” in the Circuit Court of DeSoto County, Mississippi, against “Specialized Loan Service LLC (SLS), Agents and Successors, Loan No. 1012441108;” and “Morgan Stanley Mortgage Capital Holdings LLC, Agents and Successors.” Doc. #2. In his twelve-count complaint, Tubwell alleges that the defendants collectively own a home refinance loan made to him and Willie L. Chalmer[1] and that, in servicing the loan, the defendants engaged in an array of wrongful conduct, including wrongfully refusing to accept his payments and “attempt[ing] to foreclose upon the property without having provided adequate notice or opportunity to the owner and co-borrower.” Id. at ¶¶ 13, 17, 23. Tubwell asserts numerous claims, including causes of action brought under the “Fair Debt Collection Act” and the Truth in Lending Act. Id. at ¶¶ 35, 48. Tubwell seeks (1) rescission of the loan; (2) $69, 515.00 in damages “which defendants caused plaintiff to loose [sic] in failing to acknowledge the plaintiff's status as a co-borrower on the lone [sic] and thereby prevented refinancing under lesser interest rate which has thereby cause [sic] plaintiff to fall behind on payments on home;” (3) injunctive relief; (4) “Actual Damages;” (5) punitive damages; and (6) attorney's fees, costs, and expenses. Id. at ¶ 54.

         On January 20, 2017, the defendants, asserting diversity and federal question jurisdiction, removed the action to this Court. Doc. #1. Five days later, the defendants filed a motion to dismiss. Doc. #7.

         Tubwell filed a motion to remand on January 26, 2017, arguing the defendants' removal was untimely. Doc. #10. On February 1, 2017, Tubwell filed a motion for entry of default. Doc. #12. The next day, Tubwell filed “Plaintiff's Supplemental Motion to Remand and Response to Defendants' Notice of Removal Filed in United States District Court”-which the Court construes as a supplement to his remand motion, Doc. #14; and a motion to strike the defendants' motion to dismiss, Doc. #13. On February 6, 2017, Tubwell filed a motion to extend the deadline to respond to the defendants' motion to dismiss, which this Court granted in part on April 12, 2017. Doc. #17; Doc. # 28.

         The defendants responded in opposition to the motion for entry of default on February 7, 2017, Doc. #18; to the motion to remand on February 2, 2017, Doc. #15; to the supplement to the motion to remand on February 16, 2017, Doc. #21; to the motion to strike on February 16, 2017, Doc. #20; and to the motion for extension on February 21, 2017, Doc. #23.

         On April 12, 2017, the Court denied Tubwell's motion to remand. Doc. #28. The Court found that it had federal question jurisdiction over the action but, because the defendants failed to allege their citizenships, that it lacked diversity jurisdiction. Id. at 4-7. The Court allowed the defendants fourteen days to file a statement of amendment pursuant to 28 U.S.C. § 1653 to adequately allege diversity jurisdiction should they wish to re-assert the existence of diversity jurisdiction. Id. at 10. Based on its finding that the removal notice failed to sufficiently allege complete diversity, the Court declined to address the subject of amount in controversy but stated that should the defendants re-assert diversity jurisdiction, the Court would do so then. Id. at 7.

         On April 26, 2017, the defendants filed a statement amending their allegations of diversity jurisdiction, alleging the citizenship of their members and including additional authority to establish the amount in controversy. Doc. #30. Tubwell moved to strike the statement of amendment on April 28, 2017, to which the defendants responded on May 3, 2017. Doc. #35; Doc. #38.

         On April 28, 2017, Tubwell filed a response to the defendants' motion to dismiss and the defendants replied on May 8, 2017. Doc. #37; Doc. #39. On June 2, 2017, the defendants filed an answer and affirmative defenses to Tubwell's complaint. Doc. #41.


         Motion to Strike

         Tubwell argues the defendants' statement amending their allegations of diversity jurisdiction should be stricken because it (1) “contains citations of case law in violation of L.U. Civ[.]R. 7(b)(2), ” and (2) was untimely filed. Doc. #35 at 1.

         In the Court's April 12, 2017, order, the Court allowed the defendants fourteen days to file a statement of amendment to adequately allege diversity jurisdiction. Because the defendants filed their statement fourteen days later on April 26, 2017, the statement was not untimely.[2]

         Local Civil Rule 7(b)(2)(B) provides that “a motion may not exceed four pages, excluding exhibits, may contain only the grounds for the request and may not contain legal argument or citations to case law or other secondary authority.” The defendants' statement was filed pursuant to 28 U.S.C. § 1653, which states that “[d]efective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.” Because the defendants' statement is directed to amending their jurisdictional allegations as permitted by the Court, the statement of amendment is not a motion under the local rules. Tubwell's motion to strike will be denied.


         Motion to Dismiss for Failure to State a Claim

         The defendants move to dismiss on grounds that Tubwell failed to state a claim for each count pled in his complaint. As a general matter, “[a] pleading that states a claim for relief must contain … a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). When a complaint falls short of this directive, a defendant may move to dismiss for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). In considering the interplay between Rule 8 and Rule 12, the United States Supreme Court has explained:

To survive a motion to dismiss [for failure to state a claim], a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations and punctuation omitted) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-58 (2007)). Under this standard, a “court must accept all well-pleaded facts as true and view those facts in the light most favorable to the plaintiff.” Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 803 n.44 (5th Cir. 2011) (internal quotation marks and punctuation omitted).

         A. “Count 1 - Gross Negligence”

         Tubwell alleges the defendants were grossly negligent in failing to report his loan payments to credit reporting agencies. Doc. #2 at ¶¶ 26-27. The defendants argue Tubwell's gross negligence claim must fail because (1) his claim is preempted by the Fair Credit Reporting Act (“FCRA”) for failure to allege the defendants reported him delinquent with malice or willful intent to injure him; (2) his allegations are too vague and conclusory to state a claim; and (3) his negligence claim should be rejected because his breach of contract claims stem from the same alleged conduct. Doc. #8 at 5.

         1. Preemption

         “Federal preemption is an affirmative defense that a defendant must plead and prove.” Fisher v. Halliburton, 667 F.3d 602, 609 (5th Cir. 2012) (citing Met. Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987) (other citations omitted)). “Unless the complaint itself establishes the applicability of a federal-preemption defense-in which case the issue may properly be the subject of a Rule 12(b)(6) motion-a defendant should ordinarily raise preemption in a Rule 12(c) motion for judgment on the pleadings or a Rule 56 motion for summary judgment.” Id. (internal citation omitted).

         The FCRA was enacted “to ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.” Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52, (2007). “The FCRA preempts state law ... negligent reporting claims unless the plaintiff consumer proves ‘malice or willful intent to injure' h i m . ” Young v. Equifax Credit Info. Servs., Inc., 294 F.3d 631, 638 (5th Cir. 2002) (citing 15 U.S.C. § 1681h(e) (emphasis added)); see Morris v. Equifax Info. Servs., LLC, 457 F.3d 460, 471 (5th Cir. 2006) (referencing “the ‘malice' exception to preemption under section 1681h(e)”). Therefore, for Tubwell's gross negligence claim to survive, he must have pled that the defendants acted with malice or willful intent to injure him in their failure to report his payments to the credit bureau.

         2. Allegations of malice and willful intent to injure

         Because “the FCRA does not define malice, ” the Fifth Circuit has “applied the common-law standard, ” which requires the plaintiff to show that the defendant “published the false statements about [him] knowing the statements were false or with reckless disregard of whether they were false.” Morris, 457 F.3d at 471 (citing Cousin v. Trans Union Corp., 246 F.3d 359, 375 (5th Cir. 2001)). Reckless disregard means that “the defendant in fact entertained serious doubts as to the truth of his publication.” St. Amant v. Thompson, 390 U.S. 727, 731 (1968). Accordingly, “[n]egligence, lack of investigation, or failure to act as a reasonably prudent person are insufficient to show actual malice.” Duffy v. Leading Edge Prods., Inc., 44 F.3d 308, 313 (5th Cir. 1995) (citation omitted). Lastly, “[t]he term ‘willful' in [the FCRA] context has been interpreted to require that a defendant knowingly and intentionally commit an act in conscious disregard to the rights of others.” Rivera v. Countrywide Fin. Corp., No. 1:04-cv-103, 2006 WL 2431391, at *4 (S.D.Miss. Aug. 21, 2006) (citation omitted).

         Tubwell alleges that the defendants knew he and Chalmer jointly entered into the loan and that Tubwell made all loan payments but that the defendants “intentionally and negligently failed to report such actions to the credit bureau which negligence caused plaintiff harm [and] disqualified him from securing refinancing and a lower interest rate.” Doc. #2 at ¶ 27. In his plea for damages, Tubwell alleges the defendants' actions were “wrongful, intentional and malicious.” Id. at ¶ 54. Based on these allegations, Tubwell has sufficiently alleged specific facts to support an inference that the defendants acted with malice. Because Tubwell alleges the defendants knew he made all loan payments, any reporting that Tubwell was not making payments implies the defendants knew the reporting was false. Construing the complaint liberally and taking Tubwell's allegations as true, Tubwell's gross negligence claim is sufficiently pled and not preempted.

         3. Same conduct as breach of contract claims

         “[T]he breach of a contract (whether described as ‘negligent' or not) is not actionable in tort under an ordinary negligence theory unless breaching the contract also breached a duty of care recognized by tort law. There must be a duty of care ‘fixed by law and independent of the contract.'” Clausell v. Bourque, 158 So.3d 384, 391 (Miss. Ct. App. 2015) (en banc) (quoting Hazell Mach. Co. v. Shahan, 161 So.2d 618, 624 (Miss. 1964)).

         A review of Tubwell's contract claims leads the Court to conclude that his gross negligence allegations are not founded on his breach of contract claims. Tubwell's negligence claim is based on the defendants' independent duty under the FCRA to accurately report his loan payments to credit reporting agencies; thus, the defendants' duty is fixed by law and independent of any contract. Accordingly, the defendants' motion to dismiss will be denied as to Tubwell's gross negligence claim in Count 1.

         B. “Count 2 - Fraud and Misrepresentation”

         As grounds for the dismissal of Tubwell's “fraud and misrepresentation” count, the defendants argue Tubwell has failed to plead such claims with particularly as required by Federal Rule of Civil Procedure 9(b). Specifically, the defendants argue Tubwell has not alleged a misrepresentation by SLS or Morgan Stanley, the individual responsible for the misrepresentation, and when or where the misrepresentation was made. Doc. #8 at 5-6.

         Tubwell does not specify whether Count 2 includes a claim for negligent misrepresentation or whether his misrepresentation claim is the same as his fraud claim. He simply “re-asserts” each preceding paragraph of the complaint, adding that the defendants' actions constitute a misrepresentation. Doc. #2 at ¶ 30. Whether negligent and/or fraudulent misrepresentation is alleged, Tubwell's Count 2 claims fail.

         1. ...

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