Marion v. Smith

• Decision Date: 11 March 2011
• Docket Number: Civil Action No. 2:10–cv–00354.
• Citation: 769 F.Supp.2d 1033
• Parties: Marion V. SMITH, Plaintiff,v.BAC HOME LOANS SERVICING, LP, et al., Defendant.
• Court: U.S. District Court — Southern District of West Virginia

769 F.Supp.2d 1033

Marion

v. SMITH, Plaintiff,

v.BAC HOME LOANS SERVICING, LP, et al., Defendant.

Civil Action No. 2:10–cv–00354.

United States District Court, S.D. West Virginia.

March 11, 2011.

Bren J. Pomponio, Daniel F. Hedges, Mountain State Justice, Inc., Charleston, WV, for Plaintiff.Jason E. Manning, John C. Lynch, Troutman Sanders, Virginia Beach, VA, for Defendant.

MEMORANDUM OPINION AND ORDER

JOSEPH R. GOODWIN, Chief Judge.

Pending before the court is the Motion for Summary Judgment filed by the defendant, BAC Home Loans Servicing, LP (“BAC”) [Docket 22]. BAC's position rests primarily on preemption, an important constitutional doctrine that draws its force from the Supremacy Clause of the U.S. Constitution. Preemption reflects the principle that, in the collective wisdom of Congress, the laws of the several States must sometimes give way to a set of nationally uniform rules and regulations. Nevertheless, because part of the genius of our constitutional Republic stems from its preservation of dual sovereigns, federal preemption of state law is not something to be undertaken lightly. BAC's briefing accords these principles little weight.

BAC's preemption theory is grounded, not on the text of the statute in question or the specific purposes set forth therein, but rather on an amalgamation of agency regulations, inapposite case law, and public policy arguments. In the face of statutory silence, BAC justifies the displacement of two state-law causes of action by reading an agency regulation in a way that does violence to both the statute authorizing the regulation and the relevant precedent. Because recent Supreme Court decisions undermine BAC's position, I reject it. Accordingly, BAC's Motion for Summary Judgment is DENIED.

I. Background

This case arises out of the servicing of a home loan agreement. On June 26, 2007, the plaintiff, Marion Smith, entered into a loan agreement with Countrywide Home Loans, Inc. (“Countrywide”). Pursuant to this loan agreement, the plaintiff executed a Note in the amount of $97,000 payable to Countrywide. The plaintiff also executed a Deed of Trust conveying her home, located in Ripley, West Virginia, as security for repayment of the Note. At some point, BAC became the servicer for the plaintiff's loan.

In 2008, the plaintiff fell behind on her payments, and she defaulted on her loan agreement in October 2008. In spring 2009, the plaintiff received two notices from Gordon & Amos, a law firm retained by Countrywide and Bank of America to conduct a “nonjudicial foreclosure.” (Defs.' Mot. For Sum. J. Ex. C [Docket 22–3], at 11–13.) The first letter, dated May 13, 2009, informed the plaintiff that her loan was in default and stated that “the creditor requests payment for the amount of ‘debt reinstatement’ listed above [$5,504.54] on or before June 12, 2009 to prevent foreclosure.” ( Id. at 11.) The second letter, dated June 25, 2009, notified the plaintiff that a trustee sale of her property was scheduled for July 20, 2009. ( Id.)

The plaintiff contacted BAC to request a loan modification and, on July 11, 2009, BAC sent the plaintiff a letter stating that loan modification had been approved and that “[i]n order for the modification to be valid, the enclosed documents need to be signed and returned.” (Pl.'s Resp. Mot. Sum. J. Ex. D [Docket 28–4], at 1.) The plaintiff completed and mailed the documents to BAC, which now concedes that it received these documents from the plaintiff. ¹

The plaintiff asserts that she made timely payments pursuant to the loan modification agreement beginning in September 2009. In December 2009, BAC contacted the plaintiff by phone to inform her that she was in default on the loan. The plaintiff then contacted Gordon & Amos, who informed her that her home was in foreclosure and set for foreclosure sale on February 8, 2010. The plaintiff also contacted Robert Fisher, the attorney who conducted the original loan closing. Mr. Fisher made inquiries of BAC on the plaintiff's behalf without success.

On February 9, 2010, the plaintiff filed suit in the Circuit Court of Jackson County, West Virginia against the defendants, BAC and John Doe Holder. ² The plaintiff's Complaint asserts three causes of action, one for breach of contract, and two for violations of the West Virginia Consumer Credit and Protection Act (the “WVCCPA”). Count One contains a claim for breach of the loan modification agreement. Count Two asserts that the defendants “failed to provide the Plaintiff with a Notice of Right to Cure and pursued foreclosure on the Plaintiff's home despite the fact that she was not in default,” and “made false and misleading representations in violation of West Virginia Code section 46A–2–127.” (Compl. [Docket 1–1] ¶¶ 25–26.) Count Three asserts that by “pursuing foreclosure when Plaintiff was not in default, Defendants used unconscionable means to collect a debt, in violation of West Virginia Code section 46A–2–128.” (Compl. [Docket 1–1] ¶ 28.) On March 18, 2010, BAC filed a timely notice of removal in this court asserting diversity of citizenship jurisdiction under 28 U.S.C. § 1332.³

On January 28, 2011, BAC filed a Motion for Summary Judgment on all of the plaintiff's claims.⁴ Subsequent discovery revealed that BAC had received a copy of the plaintiff's loan modification paperwork, and BAC then withdrew the portion of its Motion pertaining to the plaintiff's breach of contract claim. BAC maintains, however, that it is entitled to summary judgment on the plaintiff's two claims for statutory violations of the WVCCPA because they are preempted by federal law. BAC further contends that, even if the plaintiff's WVCCPA claims are not preempted by federal law, BAC is nonetheless entitled to judgment because these claims are not supported by the evidence.

II. Legal Standard

To obtain summary judgment, the moving party must show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In considering a motion for summary judgment, the court will not “weigh the evidence and determine the truth of the matter.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Instead, the court will draw any permissible inference from the underlying facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

Although the court will view all underlying facts and inferences in the light most favorable to the nonmoving party, the nonmoving party nonetheless must offer some “concrete evidence from which a reasonable juror could return a verdict in his [or her] favor.” Anderson, 477 U.S. at 256, 106 S.Ct. 2505. Summary judgment is appropriate when the nonmoving party has the burden of proof on an essential element of his or her case and does not make a showing sufficient to establish that element. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The nonmoving party must satisfy this burden of proof by offering more than a mere “scintilla of evidence” in support of his or her position. Anderson, 477 U.S. at 252, 106 S.Ct. 2505. Likewise, conclusory allegations or unsupported speculation, without more, are insufficient to preclude the granting of a summary judgment motion. See Felty v. Graves–Humphreys Co., 818 F.2d 1126, 1128 (4th Cir.1987); Ross v. Comm'ns Satellite Corp., 759 F.2d 355, 365 (4th Cir.1985), abrogated on other grounds, 490 U.S. 228, 109 S.Ct. 1775, 104 L.Ed.2d 268 (1989).

III. AnalysisA. Preemption Arguments

BAC seeks summary judgment on the plaintiff's two statutory claims under the WVCCPA. The plaintiff alleges that in foreclosing on her home when she was not in default, BAC made various misrepresentations in violation of West Virginia Code § 46A–2–127, and used unconscionable means to collect a debt in violation of § 46A–2–128 of the Code. BAC maintains that both of these claims are preempted by some amalgamation of the National Bank Act (the “NBA”) and the regulations promulgated thereunder by the Office of the Comptroller of the Currency (the “OCC”). In explaining why BAC's preemption argument is mistaken, I will address three topics: (1) the general principles governing federal preemption, (2) the preemptive aspects of the NBA and the OCC's regulations thereunder, and (3) the application of those principles to the plaintiff's WVCCPA claims.

1. General Principles Governing Federal Preemption

The concept of federal preemption originates in the Constitution's Supremacy Clause. See U.S. Const. art. VI, cl. 2.⁵ I will address three issues in describing the scope of this important constitutional doctrine. I begin with two cardinal principles underlying preemption law. I then summarize the various types of preemption. Finally, I discuss the role that agency regulations play in preemption analysis.

a. Cornerstones of Preemption Jurisprudence

The Supreme Court has recently reemphasized “two cornerstones” of its preemption jurisprudence. Wyeth v. Levine, 555 U.S. 555, 129 S.Ct. 1187, 1194, 173 L.Ed.2d 51 (2009). First, “the purpose of Congress is the ultimate touchstone in every preemption case.” Id. (internal quotation marks omitted). Although the text of the statute being interpreted is always the best evidence of Congress' purpose, the overall structure and purpose of a statute can also demonstrate Congress' intent to preempt state law. See Medtronic, Inc. v. Lohr, 518 U.S. 470, 486, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996).

Second, the Supreme Court has instructed courts considering federal preemption to assume that “the historic police powers of the States were not to be superseded by [federal law] unless that was the clear and manifest purpose of Congress.” Wyeth, 129 S.Ct. at 1194–95 (internal quotation marks omitted). That is because federal courts' “respect for the States...