Mohamed v. Select Portfolio Servicing, Inc., Civil Action No. 15-1016 (JEB)

• Decision Date: 19 October 2016
• Docket Number: Civil Action No. 15-1016 (JEB)
• Citation: 215 F.Supp.3d 85
• Parties: Khalid MOHAMED, Plaintiff, v. SELECT PORTFOLIO SERVICING, INC., et al., Defendants.
• Court: U.S. District Court — District of Columbia

215 F.Supp.3d 85

Khalid MOHAMED, Plaintiff,

v.SELECT PORTFOLIO SERVICING, INC., et al., Defendants.

Civil Action No. 15-1016 (JEB)

United States District Court, District of Columbia.

Signed October 19, 2016

Richard Steven Stern, Law Offices of Richard S. Stern, Simon Chan, SBC Food Corporation, Washington, DC, for Plaintiff.

Michael Bertrand Roberts, Reed Smith LLP, Joseph Jason Patry, Blank Rome, LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

Plaintiff Khalid Mohamed claims he is in a bind. He knows he has an obligation to make payments on his mortgage, but alleges he does not know whom to pay. None of his purported loan servicers has sufficiently proven to him its authority to collect his payments. Concerned he might pay the wrong entity, he has conveniently chosen not to pay anyone for more than five years. His purported loan servicers, including Defendants JP Morgan Chase Bank and Select Portfolio Servicing, Inc., thus reported his mortgage account as delinquent to the national credit bureaus. Frustrated by the subsequent decline in his credit score and his inability to get a satisfactory answer to his questions about the owner and servicer of his mortgage, he filed this suit against Chase and SPS, alleging various statutory and common-law causes of action. SPS now moves to dismiss the counts against it, arguing both that Plaintiff lacks standing and that he has failed to state any claims upon which relief can be granted. As Mohamed has cleared some of the pleading hurdles, the Court will grant the Motion in part and deny it in part.

I. Background

Although SPS plausibly maintains that this is a case about someone looking for a way to avoid paying his mortgage, the Court must, at this stage, consider the facts as pled in the Amended Complaint. Mohamed begins by explaining that he owns a residential property in the District of Columbia that was subject to a mortgage, as evidenced by a promissory note payable to GreenPoint Mortgage Funding, Inc. See ECF No. 16 (Amended Complaint), ¶ 5. He initially made mortgage payments to EMC Mortgage Corporation, which claimed to have acquired servicing of the loan. Id. , ¶ 6.

For those unfamiliar with the concept, a mortgage-loan servicer "handles the day-to-day tasks of managing [the] loan." Consumer Financial Protection Bureau, What's the Difference Between a Mortgage Lender and a Servicer? , http://www.consumerfinance.gov/askcfpb/198/whats-the-difference-between-a-mortgage-lender-and-a-servicer.html (last visited Oct. 18, 2016). Typically, a loan servicer "processes your loan payments, responds to borrower inquiries, keeps track of principal and interest paid, manages your escrow account, and may initiate foreclosure if you miss too many loan payments." Id. While a servicer may be the same company that gave out and/or owns the loan, it need not be. Id. ; see also Parker v. Bank of America, N.A. , 99 F.Supp.3d 69, 72 n.2 (D.D.C. 2015) ("A mortgage servicer manages loans owned by third parties (hereinafter referred to as ‘noteholders') in exchange for a servicing fee and ancillary fees such as late fees charged to a borrower.") (citing Mortg. Bankers Ass'n, Residential Mortgage Servicing in the 21st Century 5 (2011)).

Mohamed stopped making mortgage payments after EMC "failed to establish it was a holder of the Note" in response to his request for such information. Id. ¶7. EMC then declared the Note in default and continued to try to collect the debt. Id. , ¶ 8. Mohamed, in turn, continued to request documentation proving that EMC was entitled to payment. Id. , ¶ 9. In April 2011, EMC responded to one of Mohamed's letters with a certified copy of the Note, which was payable to GreenPoint and "not [e]ndorsed." Id. , ¶¶ 10-11. EMC also informed Plaintiff that it was transferring servicing of the loan to JP Morgan Chase Bank and that Wells Fargo Trust was the new owner of the loan. Id. , ¶ 10. Mohamed requested proof of the transfers to these entities, but neither Chase nor EMC provided documentation to his satisfaction. Id. , ¶¶ 14-15.

In 2012, without first giving notice, Chase changed the locks on the residence and removed Mohamed's personal property. Id. , ¶¶ 16-17. Plaintiff continued to contact Chase to dispute its ability to collect mortgage payments. Id. , ¶ 18. In a letter sent in September 2014, he informed Chase that it could not declare him delinquent on his payments absent providing proof that it was entitled to enforce the Note and therefore should not report his account as delinquent to the credit bureaus. Id. , ¶ 19. He asked Chase to provide various documents, including a payoff statement and proof of Chase's authority to receive payments, and to provide him an opportunity to inspect the Note. Id. Mohamed explained that he "intend[ed] on satisfying th[e] debt obligation and it is essential that Chase show that it is the proper party to pay."Id. Chase did not respond with the requested information. Id. , ¶ 20.

On October 1, 2014, Plaintiff contacted three credit-reporting agencies (CRAs) to dispute the mortgage account. The CRAs informed Mohamed that they had forwarded the dispute to Chase, which had verified the information on the account as accurate. Id. , ¶ 21. Chase continued to report the mortgage account as being delinquent from April 2011 onward. Id. , ¶¶ 22-23.

On October 17, 2014, Chase sent Mohamed a letter informing him that Defendant Select Portfolio Servicing, Inc., would be his new loan servicer. Id. , ¶ 24. Several months later, in August 2015, Mohamed wrote to Chase and SPS and asked Chase—not SPS—to provide information about the amounts of his principal and interest payments. Id. , ¶¶ 25-26. He also stated that Chase was not a holder of the Note and therefore could not transfer it to SPS, and that SPS could not collect payments on the Note. Id. , ¶ 27. Finally, he asked SPS to identify the entity in possession of the original Note, send him a certified copy of the original Note, and "identify ... the lender or owner of the mortgage loan." Id. Neither Chase nor SPS responded to Plaintiff's inquiries. Id. , ¶ 28. SPS continued to report the account as delinquent and did not notate that the account was disputed. Id. , ¶ 29.

Mohamed then forwarded his August 2015 letter to the three CRAs. Id. , ¶ 30. They in turn passed on notice of the dispute to Chase and SPS, both of which verified that the information they had reported about Mohamed's delinquent mortgage payments was consistent with their prior reports. Id. Chase and SPS did not, however, otherwise investigate whether the account information they had reported was accurate. Id.

Mohamed's credit reports, which included the delinquent payments, were furnished to creditors. Id. , ¶ 31. His credit score subsequently declined "significantly," hindering his ability to obtain credit. Id. , ¶ 32.

In June 2015, Plaintiff filed this action against Chase in the Superior Court of the District of Columbia, alleging various statutory and common-law causes of action and seeking damages, costs, and declaratory relief. See ECF No. 1-1. Chase removed the case to federal court. See ECF No. 1. In February 2016, Plaintiff filed the operative Amended Complaint, which added SPS as a defendant. See ECF No. 15; Minute Order of Feb. 29, 2016; Am. Compl., ¶ 4. SPS then filed this Motion to Dismiss, see ECF No. 21, which is now ripe.

II. Legal Standard

In evaluating a motion to dismiss, the Court must "treat the complaint's factual allegations as true and must grant plaintiff the benefit of all inferences that can be derived from the facts alleged." Sparrow v. United Air Lines, Inc. , 216 F.3d 1111, 1113 (D.C. Cir. 2000) (citation and internal quotation marks omitted); see also Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). This standard governs the Court's considerations of Defendant's contentions under both Fed. R. Civ. P. 12(b)(1) and 12(b)(6). See Scheuer v. Rhodes , 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974) ("[I]n passing on a motion to dismiss, whether on the ground of lack of jurisdiction over the subject matter or for failure to state a cause of action, the allegations of the complaint should be construed favorably to the pleader."); Walker v. Jones , 733 F.2d 923, 925–26 (D.C. Cir. 1984) (same). The Court need not accept as true, however, "a legal conclusion couched as a factual allegation," nor an inference unsupported by the facts set forth in the Amended Complaint.

Trudeau v. Fed. Trade Comm'n , 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ).

To survive a motion to dismiss under Rule 12(b)(1), a plaintiff bears the burden of proving that the Court has subject-matter jurisdiction to hear his claims. See DaimlerChrysler Corp. v. Cuno , 547 U.S. 332, 342 & n.3, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006) ; Arpaio v. Obama , 797 F.3d 11, 19 (D.C. Cir. 2015). A court has an "affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority." Grand Lodge of Fraternal Order of Police v. Ashcroft , 185 F.Supp.2d 9, 13 (D.D.C. 2001). For this reason, " ‘the [p]laintiff's factual allegations in the complaint ... will bear closer scrutiny in resolving a 12(b)(1) motion’ than in resolving a 12(b)(6) motion for failure to state a claim." Id. at 13–14 (quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 (2d ed. 1987) ). Additionally, unlike with a motion to dismiss under Rule 12(b)(6), the Court "may consider materials outside the pleadings in deciding whether to grant a motion to dismiss for lack of jurisdiction." Jerome Stevens Pharms., Inc. v. FDA , 402 F.3d 1249, 1253 (D.C. Cir. 2005).

Under Federal Rule of Civil Procedure 12(b)(6), a court must dismiss a cause of action when the complaint "fail[s] to state a claim upon which relief can be granted." Although "detailed factual allegations" are not...