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Edwards v. Bank of New York Mellon

United States District Court, E.D. Virginia, Norfolk Division

October 31, 2014

JAMES H. EDWARDS, III, and RACHEL F. EDWARDS, Plaintiffs,
v.
THE BANK OF NEW YORK MELLON, OCWEN LOAN SERVICING, LLC, and NECTAR PROJECTS, INC., Defendants.

OPINION AND ORDER

MARK S. DAVIS, District Judge.

This matter is before the Court on a Notice of Removal from the Circuit Court for the City of Virginia Beach, Virginia, ECF No. 1, a Motion to Dismiss with Prejudice or, in the Alternative for Summary Judgment, and Request for Attorneys' Fees ("Motion to Dismiss") by Defendants The Bank of New York Mellon ("BONY") and Ocwen Loan Servicing, LLC ("Ocwen" or, collectively with BONY, "Defendants"), ECF No. 6, a Motion to Remand filed by Plaintiffs James H. Edwards, III and Rachel F. Edwards (collectively "Plaintiffs"), ECF No. 9, and a Motion to Continue filed by Plaintiffs, ECF No. 10. A third Defendant, Nectar Projects, Inc. ("Nectar"), has not joined any of Defendants' motions. Defendants' Notice of Removal alleges that the Court has federal question jurisdiction over this matter pursuant to 28 U.S.C. § 1331 because Plaintiffs' Complaint contains a claim arising under the Fair Credit Reporting Act ("FCRA"), a federal statute governing credit reporting. 15 U.S.C. § 1681 et seq.

After examining the Complaint, the motions, and the associated memoranda, the Court finds that the facts and legal contentions are adequately presented and oral argument would not aid in the decisional process. Fed.R.Civ.P. 78(b); E.D. Va. Loc. Civ. R. 7(J). For the reasons set forth below, the Court DENIES Plaintiffs' Motion to Remand for lack of subject matter jurisdiction. In light of its decision on the Motion to Remand, the Court GRANTS IN PART and DENIES IN PART Plaintiffs' Motion to Continue, ECF No. 10. The Court DECLINES to convert, under Federal Rule of Civil Procedure 12(d), Defendants' Motion to Dismiss into a motion for summary judgment. Given the Court's other rulings, the Court TAKES UNDER ADVISEMENT Defendants' Motion to Dismiss, ECF No. 6, pending Plaintiffs' response thereto.

I. FACTUAL AND PROCEDURAL HISTORY[1]

In October 2011, Plaintiffs sued Defendants and Nectar in the Circuit Court for the City of Virginia Beach, alleging that Defendants and Nectar wrongfully foreclosed on Plaintiffs' residential real estate. Complaint ¶ 1, ECF No. 1-1. Plaintiffs, Defendants, and Nectar entered a Settlement Agreement, under which Defendants and Nectar "agreed to re-deed the property back to the Plaintiffs, [and] modify the loan by reducing the interest rate, balance, and payment." Id . ¶¶ 2-3. Pursuant to the Settlement Agreement, Plaintiffs were obligated "to make monthly loan payments in the amount of $926.43 on a new principle balance of $171, 203.65." Id . ¶ 3.

According to Plaintiffs, they have "fully performed their obligations under the Settlement Agreement, including the execution and delivery of certain documents to legal counsel for [Defendants and Nectar] and the payment of some $926.43 to Defendant Ocwen Loan Servicing, LLC for the benefit of Defendant The Bank of New York Mellon." Id . ¶ 3. However, Plaintiffs allege that Defendants and Nectar "failed and refused to apply the Plaintiffs' payments to the Moan on a timely basis in accordance with the Loan Modification" and "wrongfully demanded additional funds from the Plaintiffs in breach of the Settlement Agreement and Loan Modification Agreement." Id . ¶¶ 4-5. Plaintiffs claim that Defendants and Nectar also made false reports to the national credit reporting agencies "alleging the Plaintiffs' loan [was] in arrears, the payments were late, and an incorrect Moan balance." Id . ¶ 7. Plaintiffs assert that "[d]espite Plaintiffs making payments in excess of the required $926.43... each month in accordance with the Settlement, " Defendants did not apply Plaintiffs' payments to the loan. Id . ¶ 9.

Plaintiffs' Complaint includes three counts. In Count I, Plaintiffs allege a breach of contract claim based on Defendants' and Nectar's "failure to accept and apply Plaintiffs' payment to the loan, " in breach of the Settlement Agreement. See id. ¶¶ 11-14. In Count II, Plaintiffs allege that Defendants and Nectar violated the Fair Credit Reporting Act by reporting "derogatory payment history to the national credit reporting agencies." Id . ¶ 17. In Count III, Plaintiffs seek an award of attorney's fees pursuant to the Settlement Agreement. Id . ¶ 19.

On June 24, 2014, Defendants filed a Notice of Removal, removing the instant action to this Court.[2] In their Notice of Removal, Defendants assert that this Court has subject matter jurisdiction over the action pursuant to 28 U.S.C. § 1331 because Plaintiffs' claims arise under the laws of the United States, "specifically the FCRA." Notice of Removal ¶ 4. According to Defendants, the federal Fair Credit Reporting Act "completely preempts" any claim under a Virginia Fair Credit Reporting Act, thereby rendering Count II of the Complaint a federal claim. See id. ¶ 5.

On July 3, 2014, Defendants filed their Motion to Dismiss. Defendants argue that the Court should dismiss Plaintiffs' Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, convert their motion into a motion for summary judgment under Federal Rule of Civil Procedure 12(d). Defs.' Mem. Supp. Mot. to Dismiss with Prejudice or, in the Alternative, for Summ. J., & Req. for Att'ys.' Fees at 2, ECF No. 7. In support of their motion, Defendants rely on materials outside the pleadings and argue that Count I fails because Plaintiffs cannot prove that Defendants breached the settlement and release agreement or loan modification agreement, or that Defendants injured them. See id. at 7-8. With respect to Count II, Defendants argue that the Complaint, at most, establishes that Defendants are "furnishers" under the FCRA and that, as such, Plaintiffs' claim fails because the FCRA does not create a private right of action against furnishers based on the facts alleged in the Complaint. See id. at 9. Finally, Defendants contend that they, rather than Plaintiffs under Count III, are entitled to receive reasonable attorneys' fees under the settlement and release agreement. See id. at 10-11.

On July 14, 2014, Plaintiffs filed a Motion to Remand the instant action pursuant to 28 U.S.C. § 1447(c). In support of their motion, Plaintiffs argue that their Complaint does not involve a federal question. Mot. to Remand & Mem. Supp. Mot. to Remand at 2. More specifically, Plaintiffs argue that they limited their claims to a "state" FCRA claim and, therefore, regardless whether that claim has merit or a state FCRA even exists, it is for the "State Court" to decide the merits of the Plaintiff's "state" FCRA claim. Id. at 3. In response, Defendants contend that the federal FCRA completely preempts any state statute upon which Plaintiffs "state" FCRA claim might be based because the Fourth Circuit has held that 15 U.S.C. § 1681t(b)(1)(F) preempts any state statutory claim "concern[ing) a furnisher's reporting of inaccurate credit information." Defs.' Opp'n to Pls.' Mot. to Remand at 2-2, ECF No. 12.

On July 14, 2014, Plaintiffs filed a Motion to Continue and Memorandum in Support of Motion to Continue, ECF No. 10, seeking an extension of the deadline for Plaintiffs to respond to Defendants' Motion to Dismiss in the event the Court denied Plaintiffs' Motion to Remand. Plaintiffs purport to seek an extension of the deadline to respond to Defendants' motion pursuant to Federal Rule of Civil Procedure 56(f). However, the Court construes Plaintiffs' motion as pursuant to Federal Rule of Civil Procedure 56(d) because Federal Rule of Civil Procedure 56(f) does not concern the Court's ability to grant Plaintiffs additional time to respond to Defendants' motion.[3] In their motion, Plaintiffs argue that they cannot adequately respond to Defendants' Motion to Dismiss because they are "in the process of obtaining banking, electronic, and postal records of payments." Pls.' Mot. to Continue & Mem. Supp. Mot. to Continue at 3. Accordingly, Plaintiffs ask the Court either to "extend Plaintiffs' deadline to respond to the Motion until the parties engage in discovery" or to deny Defendants' motion. Id. at 4. In support of their motion, Plaintiffs attached an affidavit in which Plaintiffs aver that they "need additional time to secure the banking, electronic, and postal records documenting the payments we have made on the loan that is the subject of litigation." Id . Ex. A ¶ 2, ECF No. 10-1. Plaintiffs further aver that they made the payments "by electronic means through the online payment process and through the U.S. Postal Service and have to obtain several of the records from third parties and the Defendants." Id . Ex. A ¶ 3.

On July 25, 2014, Defendants filed a brief opposing Plaintiffs' Motion to Continue. Defs.' Opp'n to Pls.' Mot. to Continue, ECF No. 11. Defendants "consent to an extension of time between 30 and 90 days for Plaintiffs to respond to the Motion for Summary Judgment so that they can gather" "documents from their banks or from the Postal Service." Id. at 1. However, Defendants argue that Plaintiffs do not need the opportunity to take discovery prior to responding to their motion because "[t]he facts and evidence essential to Plaintiffs' opposition to summary judgment would be evidence that all payments were timely made, " facts which Defendants argue are already available to Plaintiffs. Id. at 3. Defendants contend that delaying resolution of their motion to permit Plaintiffs to conduct discovery "would serve only as a waste of the parties' and judicial resources." Id . In short, Defendants are willing to consent to an extension of time to allow Plaintiffs to file their opposition to the motion, but not a delay for the purposes of conducting discovery.

II. STANDARD OF REVIEW

A. Motion to Remand

Federal district courts are courts of limited subject matter jurisdiction. United States ex rel. Vuyyuru v. Jadhav , 555 F.3d 337, 347 (4th Cir. 2009) (citing Exxon Mobile Corp. v. Allapattah Servs., Inc. , 545 U.S. 546, 552 (2005)). They may exercise "only the jurisdiction authorized them by the United States Constitution and by federal statute." Id . (citing Bowles v. Russell , 551 U.S. 205 (2007)). Accordingly, this Court must determine first whether it has jurisdiction over the claims at issue. See Steel Co. v. Citizens for a Better Env't , 523 U.S. 83, 94-95 (1998) (quoting Manfield, C. & L.M.R. Co. v. Swan , 111 U.S. 379, 382 (1884)) ("The requirement that ...


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