United States District Court, D. Maryland
Richard D. Bennett United States District Judge
Reynaldo and Eva Sua2o ("Mr. and Mrs. Sua2o"),
Ronald Lewis ("Mr. Lewis"), and Catherine Martinson
("Ms. Martinson") (collectively, the "Named
Plaintiffs" or "Plaintiffs"), on behalf of
themselves and other similarly situated mortgage borrowers,
allege that Defendants Caliber Home Loans, Inc.
("Caliber") and U.S. Bank Trust, NA, solely in its
capacity as Trustee for LSF9 Master Participation Trust
("LSF9") (collectively, "Defendants"),
have unjustly enriched themselves by engaging in unlawful
debt collection practices. Caliber is alleged to have acted
as the debt collector for LSF9, a special purpose vehicle
holding title to high-risk mortgages. Through Caliber, LSF9
allegedly pursued outstanding mortgage obligations without
the appropriate license under Maryland law. Additionally,
Plaintiffs allege that the Defendants unlawfully charged
inspection fees as part of these collection efforts.
pending before this Court is the Plaintiffs' Motion for
Leave to File an Amended Complaint. (ECF No. 35.) The Amended
Complaint adds new factual allegations and changes the
Plaintiffs' theory of the case in an effort to comport
with the recent opinion of the Maryland Court of Appeals in
Blackstone v. Shama, 461 Md. 87, 191 A.3d 1188
(2018). Defendants oppose the amendment and seek dismissal of
this case with prejudice. This Court has reviewed the
parties' submissions and finds that no hearing is
necessary. See Local Rule 105.6 (D. Md. 2018). For
the reasons stated herein, Plaintiffs' Motion for Leave
to File Amended Complaint (ECF No. 35) is DENIED. This Court
finds that Plaintiffs have failed to state a claim under both
the Original and Amended Complaints. Accordingly, this case
is DISMISSED WITH PREJUDICE.
allege that Defendants unjustly enriched themselves by
engaging in mortgage debt collection practices which ran
afoul of Maryland law. Defendant LSF9 is a Delaware Statutory
Trust which belongs to a large family of private equity funds
owned by a private equity firm called Lone Star Funds
("Lone Star"). (Am. Compl. ¶ 23.)
Lone Star is organi2ed into sixteen private equity funds
which are structured as closed-end, private-equity limited
partnerships which include corporate and public pension
funds, sovereign wealth funds, university endowments,
foundations, funds of funds, and high net worth individuals.
(Id.) Although U.S. Bank, N.A. is named as the
trustee for LSF9, it does not manage the fund. (Id.)
Hudson Advisors L.P. performs that task; it conducts due
diligence, asset management, and other support services for
LSF9 and the assets the trust acquires. (Id.)
participates in the mortgage industry's secondary market,
which springs from mortgage lenders' desire to offload
the mortgages that they originate. See Blackstone,
461 Md. at 136, 191 A.2d 1188 (discussing the mortgage
industry's secondary market and mortgage-backed
securitization). In recent years, hedge funds and private
equity funds have acquired hundreds of thousands of defaulted
consumer mortgage loans. (Am. Compl.¶ 30.) The funds
rely on collection agencies to extract profit from their
mortgage portfolios. (Id.)
league with this trend, Plaintiffs allege that Lone Star and
LSF9 have acquired distressed and nonperforming home loans.
(Id. at ¶ 23.) LSF9 has acquired these loans
for an amount less than the value of the real estate secured
by the debt and less than the sum due on the loan balance.
(Id.) Defendant Caliber has allegedly served as
LSF9's "debt collector" since July 10, 2014.
(Id. at ¶ 24.) In turn, Caliber relies on law
firms, including the BWW Law Group, LCC and the Law Offices
of Jeffrey Nadel, to assist it with foreclosure proceedings.
(Id. at ¶ 25, 106.) Consumer advocates have
complained that Caliber lulls struggling borrowers into
"interest-only" payment plans which quickly balloon
into unaffordable payments. (Id. at ¶ 30.)
Plaintiffs allege that Caliber does not expect to convert
non-performing loans into performing loans, but rather uses
deceptive practices to obtain a greater profit through
foreclosure. (Id. at ¶ 107.) LSF9 is alleged to
profit from these practices; a "substantial
majority" of the properties related to each loan it
acquires are expected to be liquidated. (Id. at
and Caliber are alleged to have violated Maryland law, and
unjustly enriched themselves, at the expense of the Named
Plaintiffs and the proposed classes. The allegations vary
with respect to each Named Plaintiff, but Defendants are
alleged to have engaged in the following general pattern of
activity. First, LSF9 acquired each Plaintiffs mortgage loan
from a prior loan servicer, such as Bank of America or Ocwen
Loan Servicing, LLC, after the loans entered default.
(Id. at ¶¶ 39; 56; 79.) Next, Caliber
began its collection efforts and entered into standard
modification/forbearance agreements with the Named Plaintiffs
on behalf of LSF9. (Id. at ¶¶ 45-47,
64-65, 94.) In some cases, these collection efforts included
threats of foreclosure or the initiation of foreclosure
proceedings. (Id. at ¶59, 82.) Then, Caliber,
acting on behalf of LSF9, collected sums claimed due for
interest, fees, and costs unrelated to the principal loan
balance. (Id. at ¶¶ 47, 73, 98; 135.) Ms.
Martinson in particular alleges that Caliber charged her
various fees in violation of Maryland law, including property
inspection fees in violation of Md. Code Ann., Com. Law
§ 12-121 (b) and foreclosure costs and fees in violation
of a court order issued by the Circuit Court for Carroll
County, Maryland. (Id. at ¶ 58; 68.)
Ultimately, the Named Plaintiffs either refinanced their loan
or made payments under unfavorable "interest-only"
modification agreements. (Id. at ¶¶ 49-51;
commenced this putative class action lawsuit in the Circuit
Court for Montgomery County, Maryland on April 12, 2018. On
May 18, 2018, Defendants removed the case to this Court,
citing 28 U.S.C. §§ 1331, 1332, 1367, 1441, 1446,
1453 and the Class Action Fairness Act of 2005
("CAFA"), 28 U.S.C. § 1332(d). In their
Original Class Action Complaint (ECF No. 2), Plaintiffs
alleged that LSF9 had unlawfully extracted profits from
mortgage borrowers without obtaining a license to pursue debt
collection activities as required under the Maryland
Collection Agency Licensing Act ("MCALA"), Md. Code
Ann., Bus. Reg. § 7-301, et seq. (See, e.g.,
Compl. ¶¶ 111, 114.) On June 6, 2018, this Court
stayed this case pending the resolution of a consolidated
appeal of four Maryland Circuit Court cases before the Court
of Appeals of Maryland, Blackstone, et al. v. Sharma, et
at, Shanahan, et al. v. Marvastian, et al, Case
No. 40, Sept. Term, 2017; O'Sullivan, et al. v.
Altenburg, et al, Case No. 45, Sept. Term, 2017;
Goldberg, et al. v. Neviaser, et al, Case No. 47,
Sept. Term, 2017.
August 2, 2018, the Maryland Court of Appeals issued its
ruling in the consolidated appeal and held that a foreign
statutory trust, such as LSF9, is not required to obtain a
license as a collection agency under MCALA. See
Blackstone v. Sharma, 461 Md. 87, 191 A.3d 1188 (2018).
Following the Blackstone decision, this Court lifted
the Stay; dismissed with prejudice Plaintiffs'
declaratory judgment claim (Count I); dismissed without
prejudice Plaintiffs' unjust enrichment claims (Counts II
and III); clarified that Plaintiffs' inspection fee claim
under Md. Com. Law § 12-121 (a) (1) (ii) (Count IV)
remained pending; permitted Plaintiffs to file a Motion for
Leave to File an Amended Complaint; and dismissed with
prejudice all claims asserted against a third Defendant,
Select Portfolio Servicing, Inc. (Letter Order, ECF No. 34.)
November 9, 2018, Plaintiffs filed a Motion for Leave to File
an Amended Complaint (ECF No. 35.) The proposed Amended
Complaint (ECF No. 35-3) makes sweeping changes to the
Original Complaint. In light of the Blackstone
decision, Plaintiffs withdraw their allegation that
Defendants violated MCALA, and now asserts that Defendant
LSF9 violated the Maryland Mortgage Lender Law
("MMLL"), Md. Code, Fin. Inst. § 11-501,
et seq. by operating as an unlicensed mortgage
lender. (See, e.g., Am. Compl. ¶¶ 2-3,
5-12.) The Amended Complaint also adds new factual
allegations to support its inspection fee claim (Compl.
¶¶ 13-19, 54-76), and introduces a new claim
pursuant to the Maryland Consumer Protection Act, Com. Law
§ 13-101, et seq. and the Maryland Consumer
Debt Collection Act, Com. Law § 14-201, et seq.
The Amended Complaint now seeks to certify two classes (as
opposed to three classes sought in the Original Complaint)
comprised of consumers who allegedly suffered harm because of
Defendants' practices: the "Caliber Class" and
the "Inspection Fee Class." (Am. Compl. ¶ 1.)
the Amended Complaint asserts the following three counts: an
unjust enrichment claim on behalf of the Named Plaintiffs and
the Caliber Class against LSF9 and Caliber (Count I); a claim
arising from alleged violations of the Maryland Consumer Debt
Collection Act ("MCDCA"), Md. Code, Com. Law §
14-201, et seq. and the Maryland Consumer Protection
Act ("MCPA"), Md. Code, Com. Law § 13-101,
et seq., brought by the Named Plaintiffs and the
Caliber Class against all Defendants (Count II); and an
inspection fee claim based on violations of Md. Code, Com.
Law § 12-121 (a)(1) (it) on behalf of Ms. Martinson and
the Inspection Class against LSF9 and Caliber (Count III). In
a single filing, Defendants oppose the Amendment and seeks
dismissal of all of Plaintiffs' claims with prejudice.
(Defs.' Brief in Opposition, ECF No. 36.)
Motion for Leave to File an Amended Complaint.
Rule 15(a) of the Federal Rules of Civil Procedure, leave to
file an amended complaint "shall be freely given when
justice so requires." This "liberal rule"
reinforces the "federal policy in favor of resolving
cases on their merits instead of disposing them on
technicalities." Laber v. Harvey, 438 F.3d 404,
426 (4th Cir. 2006). As noted by the United States Court of
Appeals for the Fourth Circuit, Rule 15(a) ensures that the
"plaintiff [is] given every opportunity to cure a formal
defect in his pleading." Ostrzenski v.
Seigel, 177 F.3d 245, 252-53 (4th Cir.1999) (quoting 5A
Charles Allen Wright & Arthur R. Miller, Federal Practice
& Procedure § 1357 (2d ed.1990)).
"liberal rule" of Rule 15(a) is not absolute. A
court may deny leave to file an amended complaint when the
amendment "would be prejudicial to the opposing party,
there has been bad faith on the part of the moving party, or
the amendment would be futile." Johnson v. Oroweat
Foods Co., 785 F.2d 503, 509 (4th Cir.1986) (citing
Foman v. Dams, 371 U.S. 178, 182 (1962)). An
amendment is futile if its claims cannot survive a motion to
dismiss. Perkins v. United States, 55 F.3d 910, 917
(4th Cir. 1995). Prejudice is analy2ed with reference to the
"nature of the amendment and its timing, " as the
"further the case progressefs] before judgment [is]
entered, the more likely it is that the amendment will
prejudice the defendant or that a court will find bad faith
on the plaintiffs part." Faber, 438 F.3d at
Motion to Dismiss for Failure to State a Claim.
Rule 8(a)(2) of the Federal Rules of Civil Procedure, a
complaint must contain a "short and plain statement of
the claim showing that the pleader is entitled to
relief." Fed. R. Civ. P 8(a)(2). Rule 12(b)(6) of the
Federal Rules of Civil Procedure authorizes the dismissal of
a complaint if it fails to state a claim upon which relief
can be granted. The purpose of Rule 12(b)(6) is "to test
the sufficiency of a complaint and not to resolve contests
surrounding the facts, the merits of a claim, or the
applicability of defenses." Presley v. City of
Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006).
Supreme Court's opinions in Hell Atlantic Corp. v.
Twombly, 550 U.S. 544 (2007), and Ashcroft v.
Iqbal, 556 U.S. 662 (2009), "require that
complaints in civil actions be alleged with greater
specificity than previously was required." Walters
v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citation
omitted). In Twombly, the Supreme Court articulated
"[t]wo working principles" that courts must employ
when ruling on Rule 12(b)(6) motions to dismiss.
Iqbal, 556 U.S. at 678. First, while a Court must
accept as true all the factual allegations contained in the
complaint, legal conclusions drawn from those facts are not
afforded such deference. Id. (stating that
"[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice" to plead a claim). Second, a Complaint must be
dismissed if it does not allege a "plausible" claim
for relief. Id. at 678-79 ("A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct allege.").
seek to amend their Complaint and bring it within the ambit
of the Maryland Court of Appeals' decision in
Blackstone. This effort fails. Defendants petition
this Court to reject Plaintiffs' proposed Amended
Complaint and move this Court to dismiss Plaintiffs'
claims with prejudice. Plaintiffs' Motion for Leave to
File an Amended Complaint (ECF No. 35) is DENIED. The Amended
Complaint is futile because it fails to state a claim under
Counts I, II, and III in light of the Blackstone
decision. Accordingly, the Original Complaint remains
operative. The only remaining claim in the Original ...