E-Alert Case Updates

Court Dismisses All Claims Against Bank in Connection with Foreclosure, Allows Fair Debt Collection Practices Act Claim to Go Forward Against Bank’s Attorneys

Crowley v. JP Morgan Chase Bank, Nat’l Assoc. et al.
No. RDB-15-00607 (November 9, 2015, U.S. District Court for the District of Maryland)
by Caroline E. Willsey, Law Clerk
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.mdd.uscourts.gov/Opinions/Opinions/Crowley
%20v.%20JP%20Morgan%20MEMO%20AND%20ORDER.pdf

Joann Crowley (“Plaintiff” or “Crowley”) filed suit against JP Morgan Chase Bank National Association (“JP Morgan”) and its attorneys (collectively, “Defendants”) alleging violations of the Fair Debt Collection Practices Act, the Maryland Consumer Protection Act, the Maryland Consumer Debt Collection Act, and the Maryland Mortgage Fraud Protection Act. JP Morgan and its attorneys separately filed motions to dismiss. The Court granted JP Morgan’s motion to dismiss in its entirety and granted the attorneys’ motion to dismiss only with respect to the Maryland Consumer Protection Act claims, and denied it with respect to the Fair Debt Collection Practices Act.

In 2008, Plaintiff obtained a mortgage for a property located in Hagerstown, Maryland. JP Morgan was the servicer of the mortgage note. When Plaintiff defaulted on the mortgage in May 2009, JP Morgan placed the note in default status. In November 2013, JP Morgan’s attorneys, acting as Substitute Trustees initiated foreclosure proceedings in the Circuit Court for Washington County. The attorneys sold the house at auction on March 12, 2014. In connection with the foreclosure proceedings in Circuit Court, the attorneys filed a Certificate of Public Sale in April 2015. The Certificate attested to a notice of the sale of Plaintiff’s property posted in the Herald-Mail daily newspaper three times, as required by law, on February 25, 2014; March 4, 2014; and March 11, 2014.

The problem, Plaintiff alleges, with the Certificate was that it was dated February 25, 2014, a date prior to the dates of publication it purported to certify. Plaintiff also alleged that notice was not actually published in the Herald-Mail on March 11, 2014. Based on these errors, Plaintiff objected to the foreclosure sale for failure to meet the presale publication requirements. In response, the Defendants submitted an Amended Certificate of Public Sale, which listed the same publication dates as the original. The Certificate itself was not dated, however. Ultimately, the Circuit Court for Washington County set aside the sale of Plaintiff’s property.

In March 2015, Plaintiff filed suit in U.S. District Court for the District of Maryland, alleging that the Certificates of Publication of Sale were false and misleading. Plaintiff alleged violations of the Fair Debt Collection Practices Act, the Maryland Consumer Protection Act, the Maryland Consumer Debt Collection Act, and the Maryland Mortgage Fraud Protection Act by JP Morgan. The only claims made against JP Morgan’s attorneys were brought under the Fair Debt Collection Practices Act and the Maryland Consumer Debt Collection Act. Defendants subsequently filed separate motions to dismiss.

With regard to Plaintiff’s Fair Debt Collection Practices Act (“FDCPA”) claims, the Court noted that to state a claim under FDCPA, Plaintiff must demonstrate that “(1) [she] has been the object of collection activity arising from consumer debt, (2) the defendant is a debt[] collector as defined by the FDCPA, and (3) the defendant has engaged in an act or omission prohibited by the FDCPA.” A creditor is not a debt-collector under the FDCPA definition. Because JP Morgan was a creditor, the court held that Plaintiff’s FDCPA claim against the bank could not succeed. In contrast, lawyers and law firms “who regularly, through litigation, try to collect consumer debts” are debt collectors under the FDCPA. The court held that the attorneys hired by JP Morgan were debt collectors and that Plaintiff sufficiently stated a claim for relief against them. Plaintiff’s claim that attorneys, in filing false Certificates of Public Sale, made “false, deceptive, or misleading representation in connection with the collection of the debt owed,” was sufficient to state a claim under the FDCPA. The attorneys’ allegations that the Herald-Mail completed the Certificates (and that therefore the attorneys were not responsible for any incorrect information therein) were not fatal to Plaintiff’s claims. Accordingly, the court granted JP Morgan’s motion to dismiss the FDCPA claims and denied the attorneys’ parallel motion.

As for the Maryland Consumer Debt Protection Act (“MCDPA”) claims, the court emphasized that the Act only allows for recovery against creditors when the creditors attempt to collect debts despite having no right to do so. The right to collect on a debt vests when the debtor defaults. Both Defendants argued that Plaintiff’s MCDPA claim was without merit because the underlying debt was valid and Plaintiff only alleged a procedural defect. Noting that Plaintiff did not dispute that her mortgage was in default, the court dismissed Plaintiff’s MCDPA claims against both Defendants.

Plaintiff only brought a claim under the Maryland Consumer Protection Act (“MCPA”) against JP Morgan. Lawyers, even those appointed as trustees in foreclosure proceedings, are exempt under the MCPA. To establish a claim under the MCPA, the Plaintiff needed to establish that JP Morgan’s conduct was “(1) an unfair or deceptive practice or misrepresentation that [was] (2) relied upon, and (3) cause[d] them actual injury.” The court found that Plaintiff failed to state a claim against JP Morgan, because she failed to establish that she “relied upon” the allegedly unfair or deceptive practice (i.e., the filing of a false Certificate of Public Sale).

The Maryland Mortgage Fraud Protection Act (“MMFPA”) prohibits the commission of fraud in the “mortgage-lending process.” The mortgage-lending process has been defined to include “post-closing servicing activities,” such as foreclosure proceedings. Plaintiff only brought an MMFPA claim against JP Morgan. In order to state a claim under the MMFPA, Plaintiff must allege facts establishing that the JP Morgan had knowledge of the falsity of its statements, and that the Defendant gained or attempted to gain something by making the alleged misrepresentation. The court concluded that Plaintiff failed to state a claim against JP Morgan under the MMFPA. Plaintiff did not allege any facts to plausibly suggest that JP Morgan knowingly made any misstatements or misrepresentations. The only false statements mentioned in Plaintiff’s complaint were those made in the Certificate of Public Sale. JP Morgan’s attorneys, however, filed the Certificate of Public Sale, not JP Morgan directly. Accordingly, the court dismissed Plaintiff’s MMFPA claim against JP Morgan.

In sum, the court granted JP Morgan’s motion to dismiss on all counts. The court granted in part, and denied in part, Plaintiff’s claim against the attorneys. Specifically, the only claim that survived the motion was Plaintiff’s Fair Debt Collection Practices Act claim against the attorneys.