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Hegedus v. Nationstar Mortgage, LLC

United States District Court, W.D. Virginia, Harrisonburg Division

September 29, 2016

JAMES A. HEGEDUS, et al., Plaintiffs,
v.
NATIONSTAR MORTGAGE, LLC, Defendant.

          MEMORANDUM OPINION

          Michael F. Urbanski, United States District Judge.

         This is a mortgage servicing dispute. Pro se plaintiffs James and Virginia Hegedus ("plaintiffs") allege defendant Nationstar Mortgage, LLC ("Nationstar") violated various federal and state laws in its capacity as the servicer of a mortgage on a Delaware residence owned by plaintiffs. Plaintiffs cite a range of wrongdoing by Nationstar, centering on multiple alleged misrepresentations about the mortgage's status, failure to respond to plaintiffs' written requests for information, mishandling of payments, and wrongful assessments of fees and charges. Nationstar moved to dismiss, ECF No. 9, plaintiffs filed several motions to strike Nationstar's evidence and legal arguments, ECF Nos. 15, 16, and this matter was referred to United States Magistrate Judge Joel C. Hoppe for report and recommendation, pursuant to 28 U.S.C. § 636(b)(1)(B).

         In a report and recommendation issued on June 15, 2016, the magistrate judge recommended that the court grant Nationstar's motion to dismiss. ECF No. 26. The report gave notice to the parties that they had fourteen days within which to file any objections. The same day, the magistrate judge filed an order disposing of plaintiffs' motions to strike.[1]ECF No. 27. On June 23, 2016, plaintiffs filed a motion for extension of time to respond to the report and recommendation. ECF No. 28. By order entered the same date, the magistrate judge extended the time for objections until July 15, 2016. ECF No. 29. Plaintiffs thereafter timely filed objections to the report, [2] ECF No. 30, and Nationstar responded on July 29, 2016, ECF No. 31. For the reasons stated below, the court will OVERRULE plaintiffs' objections, ADOPT the report and recommendation in its entirety, and DISMISS this case.

         I.

         Rule 72(a) of the Federal Rules of Civil Procedure permits a magistrate judge to issue a written order on a matter "not dispositive of a party's claim or defense." Fed.R.Civ.P. 72(a); see 28 U.S.C. § 636(b)(1)(A). When such an order is objected to, the district judge should modify or set aside the order only if it "is clearly erroneous or is contrary to law." Fed. R Civ. P. 72(a). Under this standard, the reviewing court should not "decide factual issues de novo" but, rather, should decline to act unless the court "on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985) (internal quotation marks omitted) (citing Zenith Radio Corp. v. Hazeltine Research. Inc.. 395 U.S. 100, 123 (1969), and United States v. United States Gypsum Co.. 333 U.S. 364, 395 (1948)). If the order is "plausible in light of the record, " it should not be disturbed, even if the reviewing court "would have weighed the evidence differendy." Id. at 574.

         Under Rule 72(b), the magistrate judge issues a report and recommendation on dispositive matters to the district court. A party may then "serve and file specific, written objections" to a magistrate judge's proposed findings and recommendations within fourteen days of being served with a copy of the report. Fed.R.Civ.P. 72(b); see also 28 U.S.C. § 636(b)(1). The Fourth Circuit has held that an objecting party must do so "with sufficient specificity so as reasonably to alert the district court of the true ground for the objection." United States v. Midgette, 478 F.3d 616, 622 (4th Cir.), cert denied. 127 S.Ct. 3032 (2007).

To conclude otherwise would defeat the purpose of requiring objections. We would be permitting a party to appeal any issue that was before the magistrate judge, regardless of the nature and scope of objections made to the magistrate judge's report. Either the district court would then have to review every issue in the magistrate judge's proposed findings and recommendations or courts of appeals would be required to review issues that the district court never considered. In either case, judicial resources would be wasted and the district court's effectiveness based on help from magistrate judges would be undermined.

Id.

         The district court must determine de novo any portion of the magistrate judge's report and recommendation to which a proper objection has been made. "The district court may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed.R.Civ.P. 72(b)(3); accord 28 U.S.C. § 636(b)(1). "General objections that merely reiterate arguments presented to the magistrate judge lack the specificity required under Rule 72, and have the same effect as a failure to object, or as a waiver of such objection." Moon v. BWX Techs.. Inc., 742 F.Supp.2d 827, 829 (W.D. Va. 2010) (citing Veney v. Astrue, 539 F.Supp.2d 841, 845 (W.D. Va. 2008)), affd. 498 F.App'x 268 (4th Cir. 2012); see also Thomas v. Am. 474 U.S. 140, 154 (1985) ("[T]he statute does not require the judge to review an issue de novo if no objections are filed . . . .").

         II.

         To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint need only contain sufficient factual matter which, if accepted as true, "state[s] a claim to relief that is plausible on its face." Ashcroft v. Iqbal. 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly. 550 U.S. 544, 570 (2007)). A complaint is "facially plausible" when the facts alleged "allowQ the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. This "standard is not akin to a 'probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." IcL When ruling on a motion to dismiss, the court must "accept the well-pled allegations of the complaint as true" and "construe the facts and reasonable inferences derived therefrom in the light most favorable to the plaintiff." Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997).

         While the court must accept as true all well-pled factual allegations, the same is not true for legal conclusions. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678; see also Wag More Dogs. LLC v. Cozart. 680 F.3d 359, 365 (4th Cir. 2012) ("Although we are constrained to take the facts in the light most favorable to the plaintiff, we need not accept legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments." (internal quotation marks omitted)). To be sure, a plaintiff proceeding pro se is held to "less stringent standards" than counseled plaintiffs, and the court must construe his claims liberally. Erickson v. Pardus. 551 U.S. 89, 94 (2007). However, the court need not ignore a clear failure to allege facts that set forth a cognizable claim. Weller v. Dep't of Soc. Servs., 901 F.2d 387, 391 (4th Cir. 1990). Nor is a court required to recognize "obscure or extravagant claims defying the most concerted efforts to unravel them." Beaudett v. City of Hampton, 775 F.2d 1274, 1277 (4th Cir. 1985), cert, denied. 475 U.S. 1088 (1986).

         In considering a motion to dismiss, the court is "generally limited to a review of the allegations of the complaint itself." Goines v. Valley Cmty. Servs. Bd.? 822 F.3d 159, 165-66 (4th Cir. 2016). However, other evidence may sometimes be consulted:

[The court] also considers documents that are explicitly incorporated into the complaint by reference, Tellabs, Inc. v. Makor Issues & Rights. Ltd.. 551 U.S. 308, 322 (2007), and those attached to the complaint as exhibits, see Fed.R.Civ.P. 10(c). And . . . [the court] may consider a document submitted by the movant that was not attached to or expressly incorporated in a complaint, so long as the document was integral to the complaint and there is no dispute about the document's authenticity. [Sec'y of State for Defence v.] Trimble [Nav. Ltd.]. 484 F.3d [700], 705 [(4th Cir. 2007)]; Am. Chiropractic Ass'n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004); Phillips v. LCI Int'l. Inc.. 190 F.3d 609, 618 (4th Cir. 1999).

Id at 166.

         III.

         Plaintiffs allege that they entered a mortgage loan agreement with First Horizon Home Loans in 2006, for which they began making payments to Nationstar in 2011. ECF No. 1, ¶ 5. Thereafter, according to plaintiffs, "Nationstar immediately engaged in deceptive and unfair practices." Id. These practices include failure to provide required disclosures, failure to respond satisfactorily to correspondence, and a host of fraudulent accounting practices. Id. ¶¶ 5, 7-9, 14, 18, 23-26. In addtion, Nationstar variously identified itself as to plaintiffs as debt collector and mortgage servicer, and appeared as mortgagee on plaintiffs' homeowner's insurance policy-a "changing [of] positions" that plaintiffs allege is wrongful. Id. ¶¶ 10-13. Finally, plaintiffs complain that their mortgage note was wrongfully securitized, and that counsel for Nationstar corresponded with them in a deceptive manner, employing a "slight [sic] of hand tactic." Id. ¶¶ 13, 16-17 (internal quotation marks omitted). Plaintiffs allege that these actions violate several federal statutes: the Truth in Lending Act ("TELA"), 15 U.S.C. §§ 1601-1667f; the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692p; and the Real Estate Settlement Practices Act ("RESPA"), 12 U.S.C. §§ 2601-2610, 2614-2617.[3] In addtion, plaintiffs allege common law claims of fraud, unjust enrichment, and intentional infliction of emotional distress.[4] ECF No. 1, at 14.

         Nationstar subsequently brought a motion to dismiss, ECF No. 9, to which it attached a copy of plaintiffs' mortgage agreement, ECF No. 9-1. In its brief in support of die motion to dismiss, Nationstar construed plaintiffs' allegations of "deceptive trade practices, " see ECF No. 1, ¶¶ 6(b), 6(c), 6(f), 15, as "attempting to state a claim pursuant to Virginia's Consumer Protection Act" ("VCPA"), and argued against that claim. ECF No. 10, at 2. In response, plaintiffs filed motions to strike both the mortgage document and Nationstar's interpretation of its deceptive trade practices claim. ECF Nos. 15, 16.

         A. Nationstar's Motion to Dismiss

         In his report, the magistrate judge recommended that Nationstar's motion to dismiss be granted in its entirety. ECF No. 26. First, the report found that plaintiffs did not have standing to challenge any transfer or assignment of the note, mortgage or servicing rights, and that securitization of the mortgage did not relieve plaintiffs of their debt obligation. Id. at 9.

         Second, the report turned to Plaintiffs' federal statutory claims. It found that all Plaintiffs' claims under TILA, and all but one under FDCPA, are barred by these statutes' one-year limitations period, which runs from the date the alleged violations occurred.[5] Id. at 10. Plaintiffs' remaining FDCPA claim-relating to a July 2015 letter sent by Nationstar's counsel-was found to be so conclusory and lacking in proof as to fail to state a claim for relief. Id. The report recognized two categories of RESPA claims-Nationstar's failure to produce the original mortgage note, and its failure to respond to plaintiffs' purported qualified written requests ("QWRs"). Id. at 11. Neither was found to have merit: plaintiffs failed to allege why they were entitled to the original mortgage note (rather than a photocopy), and, even assuming the one letter plaintiffs actually produced[6] qualified as a QWR, plaintiffs failed to allege any pecuniary loss associated with this failure to respond. Id. at 11-12.

         Third, the report turned to plaintiffs' common law claims; acknowledging that the complaint "is somewhat confusing" in this area, it nonetheless found that plaintiffs failed to state adequate grounds for relief. Id. at 12. All claims regarding misrepresentations or material omissions failed because plaintiffs did not allege detrimental reliance, Id. at 12-13; unjust enrichment was found to be unavailable where, as here, defendant's actions were taken pursuant to a contract; and the intentional infliction of emotional distress claim was completely unsupported by any factual allegations. Id. at 13.

         Finally, the report declined to specifically construe plaintiffs' "unclear" claims regarding institution of a forced escrow, [7] but found that, given the fact that the mortgage document specifically authorized creation of an escrow account, any such claim would be without merit and should be dismissed. Id. 12-13.

         Plaintiffs brought a number of objections to the findings of the magistrate judge. Many of these objections do not warrant de novo review: some take issue with the precise wording of the report, e.g., ECF No. 30, at 14-15 (asserting that the court erred in using the term "pooled" to describe plaintiffs allegations of improper securitization), others imply bias on the part of the magistrate judge, e.g., Id. at 7, 10 ("[T]he [c]ourt has aligned itself with the [d]efendant. . . ."), while still others suggest changes to controlling precedent based on social trends, e.g., ...


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