United States District Court Middle District of Florida Jacksonville Division
RANDOLPH & TABETHA SELLERS,
INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
V. NO. 3:15-CV-1106-J-PDB
RUSHMORE LOAN MANAGEMENT SERVICES, LLC,
Nearly five years ago, Randolph and Tabetha Sellers brought this unfair debt- collection action as a proposed class action. After much litigation, including a successful appeal, a failed mediation, and a settlement conference before the undersigned, the Sellers and Rushmore reached a settlement agreement on an individual basis. No class was ever certified.
The parties stated the material terms of the settlement agreement on the record at the conclusion of the settlement conference. Doc. 96. Considering the totality of the circumstances, including issues on standing and whether a class ultimately could be certified, the settlement is a fair and reasonable compromise of genuinely disputed issues and not the product of collusion. There is no apparent prejudice to those who may have been included in a class had one been certified.
Pursuant to the terms of the settlement agreement, this action dismissed with prejudice, subject to the right of any party to move the Court within 60 days for the purpose of entering a stipulated form of final order or judgment, or, on good cause shown, to reopen the case for further proceedings.* The Court directs the clerk to terminate the pending motion, Doc. 79, and close the case.
Ordered in Jacksonville, Florida, on September 3, 2020.
cc: Counsel of record
*The “with prejudice” dismissal affects only the Sellers individually, not any putative class member.
11th Cir. Reverses Denial of Class Cert in Challenge to Post-Discharge Mortgage Statements
In a putative class action of borrowers who received mortgage statements after a bankruptcy discharge, the U.S. Court of Appeals for the Eleventh Circuit recently reversed a trial court order denying certification for failure to establish predominance.
In so ruling, the Eleventh Circuit held that a mortgage servicer’s affirmative defense that it is not liable under the federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., and the Florida Consumer Collection Practices Act (FCCPA), Fla. Stat. § 559.55 et seq., because the only remedy for violating a discharge injunction is under the Bankruptcy Code requires no individualized inquiries and is common to all class members.
A copy of the opinion in Sellers v. Rushmore Loan Management Services, LLC is available at: Link to Opinion.
The named-plaintiff borrowers obtained a home loan secured by a mortgage. After the borrowers defaulted, the note holder filed foreclosure. The borrowers then filed for Chapter 7 bankruptcy protection.
The borrowers did not reaffirm the debt, vacated the property, and the bankruptcy court entered a discharge order pursuant to section 524(a)(2) that relieved them from any personal liability on the mortgage debt.
After the discharge order, the note holder’s mortgage servicer sent the borrowers multiple monthly statements for their mortgage loan. In response the borrowers sued the mortgage servicer on behalf of themselves and a putative class alleging claims arising out of the FDCPA and the FCCPA.
The named-plaintiff borrowers alleged that the servicer violated the FDCPA because the monthly mortgage statements “attempted to collect a debt and represented that it had a legal right to collect upon discharged monetary amounts.”
This allegedly violated the FDCPA’s prohibition against using “false, deceptive, or misleading representation[s]” including by making false representations about “the character, amount, or legal status of [a] debt.” 15 U.S.C. § 1692e(2)(A).
The named-plaintiff borrowers claimed that sending the monthly statements falsely represented that the servicer “had a legal right to collect the mortgage debt from the [borrowers] and also falsely represented the legal status of the debt.”
The named-plaintiff borrowers also claimed that the servicer violated the FCCPA as the mortgage statements allegedly “claim[ed] and attempt[ed] to enforce a debt which was not legitimate and not due and owing.” Fla. Stat. § 559.72(9).
Relevant to this appeal, the servicer raised an affirmative defense that the Bankruptcy Code precluded the FDCPA and FCCPA claims.
The borrowers moved for class certification and asked the trial court to certify the following class:
“All Florida consumers who (1) have or had a residential mortgage loan serviced by [the servicer], which [the servicer] obtained when the loan was in default; (2) received a Chapter 7 discharge of their personal liability on the mortgage debt; and (3) were sent a mortgage statement dated September 11, 2013 or later, in substantially the same form [as mortgage statements the borrowers received that] was mailed to the debtor’s home address in connection with the discharged mortgage debt.”
The trial court determined that the named-plaintiff borrowers failed to establish predominance as required under Federal Rule of Civil Procedure Rule 23(b)(3), and denied the motion for class certification.
The trial court found that the class included members who, like the named-plaintiff borrowers, vacated their homes, as well as members who did not leave their homes. The trial court determined that the servicer’s preemption defense would only apply when borrowers remained in their homes and the exception to discharge injunctions in section 524(j) applied. As such, the trial court then reasoned that it would be necessary to conduct individualized inquiries “for every class member to determine whether the § 524(j) exception applied, and if so, whether the Bankruptcy Code precluded and/or preempted the FDCPA and FCCPA.”
This interlocutory appeal followed.
The Eleventh Circuit framed the question before it as follows: “whether the district court abused its discretion in deciding that common issues did not predominate for the alleged claims.”
As you may recall, Rule 23(b)(3) requires a trial court to determine whether “the issues in the class action that are subject to generalized proof and thus applicable to the class as a whole . . . predominate over those issues that are subject only to individualized proof.”
To accomplish this, the court must “identify the parties’ claims and defenses and their elements” and “then classify these issues as common questions or individual questions by predicting how the parties will prove them at trial.”
“Common questions are ones where the same evidence will suffice for each member, and individual questions are ones where the evidence will vary from member to member.” The court then must “determine whether the common questions predominate over the individual ones.”
Regarding the FDCPA claim, the Eleventh Circuit found that the trial court erred when it found that the servicer’s Bankruptcy Code preemption affirmative defense only applied “to class members who remained in their homes.” Instead, because the servicer’s affirmative defense “potentially barred every class member’s FDCPA claim, the district court was required to treat the defense as raising a common issue.”
The Eleventh Circuit observed that section 1692e(2)(A) of the FDCPA bars a debt collector from making “any false, deceptive, or misleading representation . . . in connection with the collection of any debt,” which includes making a false representation about “the character, amount, or legal status of any debt.” Here, the named-plaintiff borrowers alleged that the servicer violated this section by attempting “to collect a mortgage debt that had been discharged.”
The servicer’s preemption affirmative defense asserted “that the Bankruptcy Code provides the only remedy for a claim that a creditor violated a bankruptcy court’s discharge injunction and thus bars an FDCPA claim resting on the creditor’s attempt to collect a debt in violation of a bankruptcy court’s discharge injunction.”
The Eleventh Circuit determined that the trial court erred because whether the Bankruptcy Code precludes an FDCPA “claim that a creditor engaged in false or deceptive conduct by trying to collect a debt in violation of a discharge injunction is common to all class members.”
Specifically, according to the Eleventh Circuit, the trial court wrongly ignored the borrowers’ allegations that the servicer violated discharge injunctions when it sent mortgage statements to class members who left their homes “as section 524(a) provides that a bankruptcy court’s discharge order operates as an injunction that bars any act to collect a discharged debt as a personal liability of the debtor.” 11 U.S.C. § 524(a)(2).
Thus, the servicer’s affirmative defense “that it is not liable under the FDCPA because the only remedy for violation of a discharge injunction is under the Bankruptcy Code applies to all class members,” regardless of whether they vacated their properties.
This error, the Eleventh Circuit held, requires vacating the class certification order because when a trial court “improperly categorizes a question as presenting a common or an individual issue” in determining predominance, it abuses its discretion.
The Eleventh Circuit did not decide whether the servicer’s preclusion affirmative defense is “meritorious — that is, whether the Bankruptcy Code actually precludes or displaces any remedy available under the FDCPA and FCCPA” and specifically noted that it has not yet “addressed this question, which has split the circuits.”
Compare, Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 511 (9th Cir. 2002) (“Because [the debtor’s] remedy for violation of § 524 no matter how cast lies in the Bankruptcy Code, her simultaneous FDCPA claim is precluded.”), with Garfield v. Ocwen Loan Servicing, LLC, 811 F.3d 86, 91 (2d Cir. 2016) (“the Bankruptcy Code does not broadly repeal the FDCPA for purposes of FDCPA claims based on conduct that would constitute alleged violations of the discharge injunction.”)
Turning to the alleged FCCPA claim, the Eleventh Circuit reached the same conclusion.
The servicer raised the same defense that the Bankruptcy Code preempted each class member’s FCCPA claim. For the same reasons that it used concerning the FDCPA claim, the Eleventh Circuit determined that the trial court abused its discretion in finding that the preemption affirmative defense raised an individualized issue instead of an issue common to all class members.
Therefore, the Eleventh Circuit reversed the trial court’s order denying class certification, and remanded for the trial court to reconsider whether common questions of law or fact predominate given that whether the Bankruptcy Code preempted the alleged claims raises a common, rather than an individualized, issue.
Acquisition of Highly Complementary Business Supports Rushmore’s Growth Strategy and Vision
Hires Patrick Reese as EVP, Capital Markets
IRVINE, Calif. — Aug. 2, 2019 – Rushmore Loan Management Services LLC (“Rushmore”), a leading residential mortgage servicer, announced today that it has closed on its acquisition of the Florida-based correspondent platform from FirstBank. The platform has been rebranded as Rushmore Correspondent Lending Services, a division of Rushmore Loan Management Services LLC.
Rushmore also announced today that it has hired Patrick Reese as EVP, Capital Markets. He will lead Rushmore’s capital markets team, including the correspondent lending business. Mr. Reese joins from Franklin American, where he was part of the team that started Franklin America’s correspondent business from scratch and ultimately built it into a top 10 national lender. He has 25 years of residential mortgage experience, including 20 years in capital markets and 18 years in correspondent lending.
“We are very excited about completing this transaction and launching a correspondent lending channel as part of our growing platform,” said Terry Smith, CEO of Rushmore. “By adding this highly complementary business, we expect to be able to take advantage of opportunities to grow the correspondent lending channel and our existing servicing and loan management businesses.”
Mr. Smith added, “We also are thrilled about bringing on Patrick to lead our capital markets business at this exciting time for the company. He brings extremely valuable industry experience and strong relationships with agencies and the broker-dealer community. His leadership and expertise will be instrumental in helping us drive growth opportunities, and it will help us offer outstanding pricing services to correspondent clients.”
Mr. Reese said, “I am really excited about joining Rushmore and having the opportunity to lead a component of the business that has so much potential for growth now that it is part of the broader Rushmore platform. I also am looking forward to working with Bill Scammell and his outstanding team as we pursue our objective to deliver the best products and services in the correspondence lending industry.”
Rushmore Correspondent Lending Services officially launches today – August 2 – and will immediately have the ability to accept new business while continuing to process and service the existing pipeline of loans. As part of the acquisition, Bill Scammell, who led the correspondent lending business at FirstBank, is joining Rushmore as SVP, Correspondent Lending.
“As always, serving our clients remains our top priority,” said Mr. Scammell. “We expect this to be a seamless transition to the Rushmore platform and look forward to the new opportunities we have to improve the ways we work with our clients and meet their needs. All of our Account Executives have transferred to Rushmore as part of the acquisition and remain available to our clients to answer any questions and provide service and support.”
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About Rushmore Loan Management
Rushmore Loan Management Services LLC is a multi-faceted residential mortgage servicer and residential mortgage lender located in Irvine, California; Oklahoma City, Oklahoma; Dallas, Texas; Pompano Beach, FL; Nashville, TN and San Juan, Puerto Rico. Rushmore has a strong foundation and bright future with significant capital backing and is led by a talented and innovative management team. For more information, visit https://www.rushmorelm.com or http://www.rushmorecorrespondent.com.
Craig Lackey, EVP, General Counsel
Why Rushmore Rushmore Loan Management Services LLC is a multi-faceted financial services company located in Irvine, California – Dallas, Texas and San Juan, Puerto Rico.
The Rushmore umbrella includes our parent company and the capital markets arm of our organization which is located in Mid-Town Manhattan and our REO Disposition Company is headquartered out of Houston, Texas.
Rushmore has a strong foundation and bright future with significant capital backing and is led by a talented and innovative management team.
At Rushmore, we offer incredible career opportunities in an exciting, fast-paced, innovative and service-oriented environment. We are a company with methodical and strategic growth plans and looking to fill many key positions.
Our employees come to work each day driven to create a valuable experience for our customers. If you are a person of integrity who thrives in a fast-paced, innovative and customer-focused climate, this may be the company for you. We offer our employees industry best benefits and have a competitive compensation plan.
Rushmore Culture Rushmore maintains a positive, results-oriented culture. We believe the employee is more than just the position, but truly Human Capital. Employees of Rushmore are the most valuable asset and hold the keys to our success. We have a positive work environment, treat each other professionally and are proud of the contributions each individual makes to the team.
At Rushmore, we are committed to providing our employees with the education, training and development that helps them grow as individuals. Rushmore believes in trust and open communication, innovative attitudes and a high level of professionalism. Being a team member of Rushmore is a career-changing opportunity you will not want to pass up.
15480 Laguna Canyon
Irvine, CA 92618, US
2000 N Classen Blvd
Oklahoma City, Oklahoma 73106, US
221 Ave Ponce de Leon, Suite 1600
San Juan, Puerto Rico 00917, US
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Dallas, TX 75234, US
Here’s One for Y’all, a Post Appointment Review. The Super-Fast Confirmation of Judge Robert Luck (Nov. 19. 2019) – a Trump/McConnell/ https://t.co/7dpyf1Q5HQ pick. Did he report the lawyer as he should after this oral agument at CA11? Nope….https://t.co/VXVZQ7kA8c https://t.co/uZXEOH1fVg pic.twitter.com/dSXKyNiwyA
— LawsInTexas (@lawsintexasusa) May 6, 2020