United States District Court, W.D. Virginia, Abingdon Division
JERRY VANCE, elal. Plaintiffs,
WELLS FARGO BANK, N.A., Defendant.
Michael F. Urbanski Chief United States District Judge
Jerry and Fran Vance (collectively, the "Vances")
filed their complaint (the "Complaint" or
"Compl."), ECF No. 1 Ex. A, against Wells Fargo
Bank, N.A. ("Wells Fargo") alleging that Wells
Fargo (1) violated Real Estate Settlement Procedures Act
("RESPA") regulations 12 C.F.R. §§
1024.39 and 1024.41, and (2) breached the implied covenant of
good faith and fair dealing under Virginia law. This matter
is before the court on Wells Fargo's Motion to Dismiss
the Complaint with prejudice pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure. ECF No. 3. For the reasons
discussed below, the court will DENY Wells
Fargo's motion to dismiss the Vances' claim for a
violation of 12 C.F.R. § 1024.39. But, the court will
DISMISS the Vances' claims for
violations of 12 C.F.R. § 1024.41 and breach of the duty
of good faith and fair dealing without prejudice.
Fargo moves to dismiss the Complaint under Federal Rule of
Civil Procedure 12(b)(6) for failure to state a claim. Rule
12(b)(6) permits a dismissal when a plaintiff fails "to
state a claim upon which relief can be granted."
Fed.R.Civ.P. 12(b)(6). To survive a Rule 12(b)(6) motion to
dismiss, a complaint must contain sufficient "facts to
state a claim to relief that is plausible on its face."
Bell Ad. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
The complaint's "[f]actual allegations must be
enough to raise a right to relief above the speculative
level." Id., at 555.
must construe factual allegations in the nonmoving
party's favor and will treat them as true, but is
"not so bound with respect to [a complaint's] legal
conclusions." Dist. 28, United Mine Workers of Am..
Inc. v. Wellmore Coal Corp., 609 F.2d 1083, 1085 (4th
Cir. 1979). Indeed, a court will accept neither "legal
conclusions drawn from the facts" nor "unwarranted
inferences, unreasonable conclusions, or arguments."
E. Shore Mkts.. Inc. v. J.D. Assocs. Ltd.
P'ship, 213 F.3d 175, 180 (4th Cir. 2000). Further,
"[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). Only after a claim is stated adequately may it then
"be supported by showing any set of facts consistent
with the allegations in the complaint."
Twombly, 550 U.S. at 563.
is "a consumer protection statute, which Congress passed
in order to reform the real estate settlement process. The
statute was intended to ensure that consumers received
information about settlement costs, and to protect them from
high setdement fees and the potentially abusive practices of
providers." Augenstein v. Coldwell Banker Real
Estate LLC, No. 2;lO-CV-l9l, 2011 WL 3837096, at *2
(S.D. Ohio Aug. 30, 2011) (citing 12 U.S.C. § 2601(a)).
Consumer Financial Protection Bureau ("Bureau")
"is authorized to prescribe such rules and regulations,
to make such interpretations, and to grant such reasonable
exemptions for classes of transactions, as may be necessary
to achieve the purposes" of RESPA. 12 U.S.C. §2617.
Section 1024.39 requires a service to "establish or make
good faith efforts to establish live contact with a
delinquent borrower not later than the 36th day of the
borrower's delinquency and, promptiy after establishing
live contact, inform such borrower about the availability of
loss mitigation options if appropriate." 12 C.F.R.
§ 1024.39(a). Nothing in Section 1024.39 explicitly
confers a private right of action to a borrower. See
generally id. But, as the Vances state, nothing
"categorically removes or denies a private right of
action." PL's Mem. Law Opp. Def.'s Mot. Dismiss
("MTD Opp."), ECF No. 12, at 2. So, Section 1024.39
is silent as to whether it conveys a private right of action.
courts must determine whether statutes or regulations convey
private rights of action, a few general principles apply.
"Like substantive federal law itself, private rights of
action to enforce federal law must be created by
Congress." Alexander v. Sandoval, 532 U.S. 275,
286 (2001). Further, "[l]anguage in a regulation may
invoke a private right of action that Congress through
statutory text created, but it may not create a right that
Congress has not." Id., at 291. And, "[w]hen an
agency interprets its own regulation, the Court, as a general
rule, defers to it 'unless that interpretation is plainly
erroneous or inconsistent with the regulation.'"
Decker v. Nw. Envtl. Def. Ctr., 568 U.S. 597, 613
(2013) (quoting Chase Bank USA. N. A. v. McCoy, 562
U.S. 195, 208(2011)).
Schmidt v. Pennymac Loan Servs., LLC, the court
decided this very issue for another section of Regulation X.
106 F.Supp.3d 859, 867 (E.D. Mich. 2015). In
Schmidt, the plaintiff filed a claim against the
defendant alleging a violation Regulation X's Section
1024.40 promulgated by the Bureau. The court turned to
Section 1024.40's regulatory history to determine whether
a private right of action existed. The court learned that in
the proposal to promulgate Section 1024.40, "the CFPB
relied upon legislation that arguably would have channeled a
statutory cause of action through regulation" by citing
subsection 6(k)(1)(E) of RESPA. IcL at 870. But, the court
stated, "[i]n its final ruling, the CFPB backed away
from this implication and, in fact, denied that the
regulation provided or channeled any private right of
action." LcL Important to the court's analysis was
the fact that the Bureau "dropped its reliance on RESPA
section 6(k)(1)(E)." Id. at 871. After
reviewing the regulatory history and the statutory authority
the Bureau relied on to promulgate the final rule, the court
concluded that Section 1024.40 did not "effectuate a
privately enforceable statutory right." Id.
case, conducting the same type of analysis as the
Schmidt court leads to the opposite conclusion for
Section 1024.39. The Bureau initially "proposed to
implement § 1024.39 pursuant to authority under sections
6(k)(1)(E), 60(3), and 19(a) of RESPA . . . ." Mortgage
Servicing Rules Under the Real Estate Settlement Act
(Regulation X), 78 Fed. Reg. 10696, 10790 (Consumer Fin.
Prot. Bureau Feb. 14, 2013) (to be codified at 12 C.F.R pt.
1024). The Bureau made this proposal during 12 C.F.R. §
1024's notice and comment period with the knowledge that
"[violations of section 6 of RESPA are subject to a
private right of action." Id. During the notice
and comment period, "[i]ndustry commenters, including .
. . several large bank servicers[, ] were concerned that a
private right of action would result in uncertainty for
servicers and could delay loss mitigation efforts and the
foreclosure process . ..." Id. The
"commenters requested that the Bureau issue the early
intervention [that is, Section 1024.39] . . . solely in
reliance on RESPA section 19(a) authority." RL
Nonetheless, after considering the industry comments, the
Bureau adopted "§ 1024.39 pursuant to its
authorities under sections 6®(3), 6(k)(1)(E), and 19(a)
of RESPA." l± at 10790-91.
granted the Bureau explicit authority to create regulations
under any RESPA section. 12 U.S.C. § 2617. RESPA Section
6(j)(3) grants the Bureau authority to "establish any
requirements necessary to carry out this section."
Id. § 26O5(j)(3). And, RESPA Section 6(k)(1)(E)
provides that a "servicer of a federally related
mortgage shall not. . . fail to comply with any other
obligation found by the Bureau ... by regulation, to be
appropriate to carry out the consumer protection purposes of
this Act." Id. § 26O5(k)(1)(E). The Bureau
thoroughly considered its options when deciding which RESPA
sections to rely on when promulgating Section 1024.39. In the
final version of Section 1024.39, the Bureau explicitly
relied on RESPA Section 6 as the legal authority for
promulgating the rule. The ...