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Corazzini v. Litton Loan Servicing LLP

March 23, 2010




Before the Court are Motions to dismiss brought by Defendants Litton Loan Servicing LP ("Litton") and HSBC Bank USA, National Association ("HSBC") (collectively, "Defendants"), which seek partial and full dismissal of Plaintiff Cindy Corazzini's ("Plaintiff") Complaint (Dkt. No. 1). Pursuant to Federal Rules of Civil Procedures 8(a), 9(b) and 12(b)(6), Litton moves to dismiss six of Plaintiff's nine Counts, and HSBC moves to dismiss all Counts against it. (Dkt. Nos. 21-2). Per Plaintiff's Complaint, the Court exercises jurisdiction over this case on the due to Plaintiff's federal claims under the Real Estate Procedures Act, 12 U.S.C. § 2601, ("RESPA"), Truth in Lending Act, 15 U.S.C. § 1601, ("TILA") and Fair Debt Collection Practices Act, 15 U.S.C. §1692, ("FDPCA"). See 28 U.S.C. §§ 1331, 1343, 1367; 15 U.S.C. 1692k.


Plaintiff brings this action on the basis of events surrounding the payment of her mortgage, particularly concerning fees and charges she alleges that she faced after a period of non-payment of the monthly amount due under the terms of her note and mortgage. Defendant Litton is the servicer of her mortgage loan during the relevant period for this action. Defendant HSBC, as Trustee under the Pooling and Servicing Agreement of August 1, 2006, ACE Securities Corporation Home Equity Loan Trust Series 2006-FM1, Asset Backed Pass-Through Certificates, is the underlying holder of Plaintiff's note and mortgage.

On April 12, 2006, Plaintiff executed an Adjustable Rate Note with Fremont Investment & Loan for a principal sum of $536,000. Compl. ¶¶ 34-35; Litton Mot. at 2. She alleges that the note provided that upon the non-payment of the full amount of a monthly payment by the end of 15 days from the due date for that payment, a late fee of 5% of the amount due of principal and interest would be imposed. Compl. ¶¶ 36-37. Plaintiff asserts that after she failed to make monthly payments in October through December of 2008, Defendant Litton imposed fees and charges substantially in excess of 5%. Id. ¶¶ 38-39. In November of 2008, Plaintiff asserts that she sent a letter to Litton which disputed these fees. The response she received from Litton, dated December 9, 2008, is alleged to have maintained that Plaintiff owed excessive fees and other charges and misstated Plaintiff's loan balance. Id. ¶¶ 41-50, 59-61.

Along with these factual allegations as to her dealings with Litton, Plaintiff contends that "Defendants have engaged in a uniform scheme and course of conduct to inflate its [sic] corporate profits by charging and collecting various fees not authorized by the loan documents or applicable law." While Plaintiff provides no factual basis for this allegation, she lists components of this scheme as: "failing to credit payments in a timely fashion," "failing to provide customers with timely or clear information about the timing and amount of payments owed," "misapplying payments received," "miscalculation of contractually due late fees," "failing to properly calculate late fees," and "reporting and threatening to report inaccurate information about borrower[s]' credit status and credit history to third parties . . . ." Compl. ¶ 32.

Based on these allegations, Plaintiff, under Federal Rule of Civil Procedure 23, purports to bring her suit as a class action, "individually and on behalf of all others similarly situated, whose loans were services by Litton Mortgage and or held by HSBC within one year of the date of filing" and whose loans were "in default or treated as being in default . . . and who incurred or were assessed late fees and or default related fees" and those "fees were incurred or were assessed in violation of law or contract . . ." or "who otherwise were affected . . . by one of the additional practices that are the subject of this complaint." Id. ¶ 16. Plaintiff variously argues in support of certification by the Court, asserting that her suit meets the prerequisites of Rule 23(a) as well as being appropriate under Rule 23(b).

Plaintiff's suit was filed on February 18, 2009. The following Counts are brought against both Defendants, unless differently noted: Count I, directed solely at Litton, alleges the Defendant violated the FDCPA; Count II alleges that Defendants violated RESPA; Count III asserts a violation of TILA; Count IV asserts a breach of contract claim; Count V alleges intentional misrepresentation by the Defendants; Count VI asserts a negligence claim, initially against both Defendants but, per Plaintiff's Response, is posed only against HSBC; Count VII, nonetheless, asserts a gross negligence claim against both Defendants; Count VIII alleges breach of an implied covenant of good faith and fair dealing; Count IX alleges a violation of New York General Business Law § 349; and Count X asserts a claim of negligent hiring against HSBC only. The instant Motions were brought by Defendants on June 11, 2009. At present, Litton has moved to dismiss the FDCPA, intentional misrepresentation, negligence, gross negligence, good faith and fair dealing, and GBL §349 claims. HSBC seeks dismissal of all claims made against it.


Under a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, a district court is required to "accept all allegations in the complaint as true and draw all inferences in the light most favorable to the non-moving party[ ]." Ruggles v. Wellpoint Inc., 253 F.R.D. 61, 65 (N.D.N.Y. 2008) (citing FED. R. CIV. P. 12(b)(6)); Charles W. v. Maul, 214 F.3d 350, 356 (2d Cir. 2000) (noting that Rule 12(b)(6) requires that the court "read the complaint liberally, drawing all reasonable inferences in plaintiff's favor."). Federal Rule of Civil Procedure 8(a) requires that a plaintiff's complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief." To withstand Defendants' Motions, the Plaintiff must plead facts sufficient to establish that her claim for relief is more than just conceivable, and is in fact "plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

Under the standards clarified by Ashcroft v. Iqbal, "[a] claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." 129 S.Ct. 1937, 1949 (2009). The "tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. Thus, in reviewing Defendants' Motions, the Court should "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. Next, if plaintiff provides well-pleaded factual allegations, the Court "should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Id. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not 'show[n]' -- 'that the pleader is entitled to relief.' Id. (quoting FED R. CIV. P. 8(a)(2)). Iqbal cautions that Rule 8 "does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Id.

In determining whether a complaint is sufficiently plausible, a district court is typically required to look only at "the allegations on the face of the complaint." Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007). Thus, matters outside the pleadings are normally excluded from review unless the court decides to treat the motion as one for summary judgment under FED. R. CIV. P. 56. FED. R. CIV. P. 12(b)(6). However, "[i]n certain circumstances, the court [may] permissibly consider documents other than the complaint [when]. . . [d]ocuments that are attached to the complaint or incorporated in it by reference are deemed part of the pleading." Roth, 489 F.3d at 509 (2d Cir. 2007).


a. Count I

Defendant Litton moves to dismiss Plaintiff's FDCPA claim on two grounds: that the Count fails to comply with the basic pleading requirements of Rule 8 by providing no factual allegations beyond a recitation of the elements of the claim, and that Plaintiff did not, in fact, receive any communication that could, as a matter of law, be viewed as a violation of the FDCPA. Defendant's challenge to the claim presents a close case. While Plaintiff's pleading as to Count I merely utters the generic elements of one or more FDCPA violations, the Court finds that, read in conjunction with Plaintiff's factual allegations directly relating to her interaction with the Defendant, the Count cannot be dismissed at this juncture. Section 1692(e) of the Act provides that "[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt" and names "the following conduct [as] a violation of this section: . . . (2) The false representation of-- (A) the character, amount, or legal status of any debt." Accepting as true Plaintiff's factual allegations and drawing all reasonable inferences in her favor, at least this portion of the FDCPA is grounds for Count I to survive a challenge based on deficient pleadings.

Nor can the Court conclude that Plaintiff did not receive any communication that could be found to violate the FDCPA. Plaintiff's claim alleges that Defendant's actions ran afoul of §§ 1692(d), 1692(e) and 1692(f), each of which necessarily require Defendant to have employed representation or means "in connection with the collection of a debt." Defendant argues that the letter from Litton, which Plaintiff asserts constitutes such a means, see Compl. Ex. A, was simply a response to Plaintiff's inquiry and did not demand payment. See Bailey v. Sec. Nat'l Servicing Corp., 154 F.3d 384 (7th Cir. 1998) ("Only communications 'in connection with the collection of any debt' fall under the ambit of the Act . . . [but the] important letter dated January 4 does not 'demand' any payment whatsoever, but merely informs the Baileys about 'the current status' of their account. The due dates listed in the letter are all prospective. Surely this is not the type of dunning letter that describes a communication related to 'the collection' of a debt."). Nonetheless, the letter exhibited by Plaintiff, while generally containing informational text and lacking explicit language seeking payment, prominently displays the following: "LITTON LOAN SERVICING IS A DEBT COLLECTOR. THIS LETTER IS AN ATTEMPT TO COLLECT YOUR DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE." Compl. Ex. 3 ...

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