Dees v. Nationstar Mortg., LLC

• Decision Date: 21 October 2020
• Docket Number: CIVIL ACTION NO. 2:19-CV-314
• Citation: 496 F.Supp.3d 1043
• Parties: Robert DEES, et al., Plaintiffs, v. NATIONSTAR MORTGAGE, LLC; dba Mr. Cooper, Defendant
• Court: U.S. District Court — Southern District of Texas

496 F.Supp.3d 1043

Robert DEES, et al., Plaintiffs,

v.NATIONSTAR MORTGAGE, LLC; dba Mr. Cooper, Defendant

CIVIL ACTION NO. 2:19-CV-314

United States District Court, S.D. Texas, Corpus Christi Division.

Signed October 21, 2020

Elizabeth Ann Ryan, Bailey Glasser LLP, Boston, MA, James Lawrence Kauffman, Bailey & Glasser LLP, Washington, DC, Randall Keith Pulliam, Edwin Lee Lowther, III, Joseph Henry Bates, III, Carney Bates & Pulliam, PLLC, Little Rock, AR, Abraham Moss, Attorney at Law, Corpus Christi, TX, for Plaintiffs.

Thomas George Yoxall, Madeleine Elise Brunner, Locke Lord LLP, Dallas, TX, Benjamin David Lee Foster, Daniel Glenn Durell, Locke Lord LLP, Austin, TX, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

DAVID S. MORALES, UNITED STATES DISTRICT JUDGE

Before the Court is Defendant Nationstar Mortgage, LLC's motion to dismiss (D.E. 19), Plaintiffs Robert and Angela Dees' response (D.E. 31), and Defendant's reply (D.E. 34). For the reasons stated below, Defendant's motion to dismiss is GRANTED in part and DENIED in part. (D.E. 19).

I. Background

Plaintiffs have a deed of trust insured by the Federal Housing Administration ("FHA") and serviced by Defendant. (D.E. 1, p. 2). To make their mortgage payments, Plaintiffs may choose from multiple payment options, including paying by mail, autopay, online, or over the phone. (D.E. 19, p. 1–2). Plaintiffs assert that Defendant charges users a "convenience fee" of roughly $ 10 for online payments and between $ 14 to $ 19 for phone payments. (D.E. 1, p. 2). These convenience fees—or "pay-to-pay" fees—are the heart of the parties' dispute. See id. Defendant provides other payment options free of charge. (D.E. 19, p. 1–2).

Plaintiffs bring a two-claim, class action complaint against Defendant because of the pay-to-pay fees. (D.E. 1). In claim one, Plaintiffs contend that Defendant charges these pay-to-pay fees in violation of the Texas Fair Debt Collection Practices Act ("TDCA") because the fees are incidental to their debt obligation and are not expressly authorized by the agreement creating the obligation. Id. at 11–12. In claim two, Plaintiffs bring a breach of contract claim by asserting that Defendant, as a servicer of FHA-insured loans, is bound by the regulations of the Secretary of Housing and Urban Development ("HUD"), and those regulations are incorporated by reference into all FHA-insured mortgages. See id. at 12–13. According to Plaintiffs, under FHA servicing regulations a mortgage servicer may not charge a borrower any fee not authorized by the FHA, and the FHA has not authorized pay-to-pay fees. See id. Thus, Plaintiffs allege that Defendant has breached the mortgage agreement by charging pay-to-pay fees. Id.

Defendant moved to dismiss both claims under Federal Rule of Civil Procedure 12(b)(6). (D.E. 19).

II. Legal Standard

To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). The facial plausibility standard is not a probability standard, but it requires the plaintiff's factual allegations "to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. While a court must take all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor, a court is not bound "to accept as true a legal conclusion couched as a factual allegation." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ). A complaint that "pleads facts that are merely consistent with a defendant's liability ... stops short of the line between possibility and plausibility of entitlement to relief." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (internal quotation marks omitted) (citing Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ).

In ruling on a motion to dismiss under Rule 12(b)(6), a court generally "must limit itself to the contents of the pleadings, including attachments thereto." Brand Coupon Network, L.L.C. v. Catalina Mktg. Corp. , 748 F.3d 631, 635 (5th Cir. 2014). A court may also consider documents attached to "a motion to dismiss or an opposition to that motion when the documents are referred to in the pleadings and are central to [the] plaintiff's claims." Id.

III. Analysis

A. Plaintiffs have stated a TDCA claim

The Court holds that Plaintiffs have plausibly stated a section 392.303(a)(2) violation under the TDCA. Under section 392.303, "a debt collector may not use unfair or unconscionable means" in the collection of debt, including "collecting or attempting to collect interest or a charge, fee, or expense incidental to the obligation unless the interest or incidental charge, fee, or expense is expressly authorized by the agreement creating the obligation or legally chargeable to the consumer." TEX. FIN. CODE § 392.303(a)(2). Plaintiffs contend in their complaint that Defendant violated the TDCA by "charg[ing] Plaintiffs pay-to-pay fees that were incidental to their debt obligation and were not expressly authorized by the agreement creating the obligation." (D.E. 1, p. 12). Thus, according to Plaintiffs, Defendant "employed unfair and unconscionable means in the collection of a consumer debt, in violation of the TDCA." Id.

In its motion to dismiss, Defendant argues that Plaintiffs' TDCA claim fails because: (1) a fee-based payment method cannot be "incidental" to the debt when it is optional and borrowers are given other, free options; (2) Plaintiffs allege no facts to show that a charge for an optional service—that Plaintiffs voluntarily purchased and agreed to pay for—is not "legally chargeable to the[m]," as required by section 392.303(a)(2) ; and (3) Plaintiffs fail to describe the unfair or unconscionable means by which the fees were collected or attempted to be collected. (D.E. 19, p. 9–12). Defendants also assert that the voluntary-payment doctrine bars Plaintiffs' TDCA claim. Id. at 12–13. The Court will address each of these arguments in turn.

a. Incidental relationship of the fees & express authorization

The Court first determines whether the pay-to-pay fees were "incidental" to the underlying debt when Plaintiffs were given other alternative methods to make their mortgage payments that did not require a fee. See TEX. FIN. CODE § 392.303(a)(2). Because the Fifth Circuit has yet to rule on this issue, the Court turns to other courts for guidance. District courts that have examined pay-to-pay fees in the related context of the Federal Debt Collection Practices Act ("FDCPA")¹ are split on whether payment-based convenience fees are "incidental" to the contractual debt when borrowers have other, fee-free payment options. See Lindblom v. Santander Consumer USA, Inc. , No. 1:15-CV-990-LJO-BAM, 2016 WL 2841495, at *4–7 (E.D. Cal. May 9, 2016) (analyzing district court split). After consideration of the record, the parties' briefing, and persuasive caselaw, this Court finds that the pay-to-pay fees in this case are "incidental" to the underlying debt. See, e.g., Caldwell v. Freedom Mortg. Corp. , No. 3:19-CV-2193-N, 2020 WL 4747497, *3 (N.D. Tex. Aug. 14, 2020) ("This Court is persuaded, like the majority of courts that have opined on the issue, that convenience fees derived from debt-payment methods are ‘incidental’ to the debt being paid."); Wittman v. CB1, Inc. , 2016 WL 1411348, at *1, 5 (D. Mont. 2016) (following "the majority of courts [that] have found that similar transaction fees are incidental"); Weast v. Rockport Fin. , 115 F. Supp. 3d 1018, 1023 (E.D. Mo. 2015) ("Offering a payment option that does not violate the statute does not save offering a payment option that would violate the statute, as the latter is still an attempt to collect a fee which is prohibited."); Quinteros v. MBI Assocs., Inc. , 999 F. Supp. 2d 434, 437–39 (E.D.N.Y. 2014) ("What matters is § 1692(f)(1)'s plain instruction that the collection of any amount incidental to the principal obligation ... violates the FDCPA."); Shami v. Nat'l Enter. Sys. , 2010 WL 3824151, at *3–4 (E.D.N.Y. 2010) (holding that convenience fees charged for some payment methods were "incidental to Plaintiff's purported actual debt," even though other payment methods existed). But see Flores v. Collection Consultants of Ca. , 2015 WL 4254032, at *10 (C.D. Cal. 2015) (holding an optional convenience fee legally insufficient to support a FDCPA claim).²

Having established that the pay-to-pay fees are incidental to the underlying debt, the Court must next determine whether the fees were "expressly authorized" by the parties' loan documents. See TEX. FIN. CODE § 392.303(a)(2) (providing that even if a fee is "incidental to the obligation," there is no TDCA violation if the incidental fee "is expressly authorized by the agreement creating the obligation or legally chargeable to the consumer"). Although Defendant does not argue that the pay-to-pay fees were "expressly authorized" by Plaintiffs' mortgage agreement, see (D.E. 19, p. 9–13), the Court observes that nowhere in the parties' loan documents are the pay-to-pay fees even mentioned, much less expressly authorized. See (D.E. 1-2; D.E. 19-1). As such, the Court finds that the TDCA's express authorization exception is not met in this case. See TEX. FIN. CODE § 392.303(a)(2).

b. Not legally chargeable

Defendant does argue that Plaintiffs fail to allege that the pay-to-pay fees are not otherwise "legally chargeable" to Plaintiffs in the absence of any state law...