Robinson v. Fay Servicing, LLC

          MEMORANDUM OPINION

          Richard D. Bennett United States District Judge

         Plaintiffs William Robinson (“Mr. Robinson”) and Tracie Lyers (“Ms. Lyers”) (collectively, the “Named Plaintiffs” or “Plaintiffs”), on their individual behalf and behalf of three putative classes of similarly situated persons, bring this class action lawsuit^[1] against Defendants Fay Servicing, LLC (“Fay”), Servis One, Inc. d/b/a BSI Financial Services (“BSI”), and Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust, as Trustee for Ventures Trust 2013-I-H-R (“Ventures Trust”) (collectively, the “Defendants”). Plaintiffs allege that Ventures Trust has unlawfully profited from collection activities related to the Plaintiffs’ defaulted mortgage loans by failing to obtain the license required under the Maryland Collection Agency Licensing Act (“MCALA”), Md. Code Ann., Bus. Reg. § 7-101, et seq. and the Maryland Mortgage Lender Law (“MMLL”), Md. Code Ann., Fin. Inst. § 11-501, et seq. Additionally, Plaintiffs allege that BSI and Ventures Trust’s standard modification/forbearance agreements improperly capitalized inspection fees claimed due from Plaintiffs in violation of Com. Law § 12-121(b).

         Now pending before this Court is Defendants’ Motion to Dismiss Plaintiffs’ Amended Class Action Complaint for Failure to State a Claim and for Lack of Subject Matter Jurisdiction.^[2] (ECF No. 8). The Court has reviewed the parties’ submissions and no hearing is necessary. See Local Rule 105.6 (D. Md. 2018). For the reasons stated herein, Defendants’ Motion to Dismiss (ECF No. 8) is GRANTED. Plaintiffs’ claims are DISMISSED WITH PREJUDICE.

         BACKGROUND

         I. Factual Background.

         Plaintiffs allege that Defendants unjustly enriched themselves by engaging in mortgage debt collection practices which violated Maryland law. Defendants operate within the mortgage industry’s secondary market, which springs from mortgage lenders’ desire to offload the mortgages that they originate. (Am. Compl. ¶ 21.) In recent years, hedge funds and private equity funds have acquired thousands of defaulted consumer, mortgage loans. (Id.) The funds rely on collection agencies to extract profit from the mortgage loans they have acquired. (Id.)

         Defendant Ventures Trust is a Delaware statutory trust established for the primary purpose of acquiring defaulted mortgage debts owed by consumers in Maryland. (Id. at ¶ 15.) It is not licensed as a Maryland collection agency or mortgage lender. (Id. at ¶ 5.) The trust acquires the loans for amounts well below that which is claimed to be owed on the debt. (Id.) Defendant BSI allegedly served as Ventures Trust’s “debt collector” and “mortgage servicer” between 2013 and 2017. (Id. at ¶ 16.) BSI in turn retained attorneys, substitute trustees, and other collection agencies to initiate foreclosures and other proceedings against Maryland homeowners. (Id.) Since 2017, Defendant Fay has allegedly donned the mantle of “debt collector” and “mortgage servicer” for Ventures Trust. (Id. at ¶ 17.) Plaintiffs’ mortgage loan debts are among those which Ventures Trust obtained, and which BSI and Fay attempted to collect.

         In about June 2004, Mr. Robinson refinanced his home with the now-defunct BankUnited FSB. (Id. at ¶ 22.) Following a reduction in household income, his loan entered default. (Id. at ¶ 23.) On December 14, 2014, Ventures Trust acquired by assignment all right, title, and interest to the loan. (Id. at ¶ 25.) On or about January 2, 2015, BSI allegedly became the mortgage servicer for Mr. Robinson’s loan. (Id. at ¶ 24.) Neither Ventures Trust nor BSI informed Mr. Robinson that Ventures Trust was not licensed as a Maryland collection agency or mortgage lender. (Id. at ¶ 28.) Nevertheless, acting “on behalf of Ventures Trust, ” BSI collected from Mr. Robinson sums claimed due for interest, fees, and costs. (Id. at ¶ 32.) Also “on behalf of Ventures Trust, ” BSI entered into a modification agreement with Mr. Robinson which capitalized sums claimed due by BSI, including interest, fees, and costs. (Id. at ¶ 33.) Among these were property inspection fees originally imposed by BankUnited, FSB. (Id.) On February 9, 2017, Fay assumed BSI’s debt collection activities. (Id. at ¶ 34.) Fay also demanded interests, fees, and costs associated with the defaulted mortgage loan. (Id. at ¶ 35.) As of the date of the Amended Complaint, the mortgage debt remains outstanding. (Id. at ¶ 40.)

         The allegations with respect to Ms. Lyers’ mortgage loan are substantially the same. On October 24, 2005, Ms. Lyers refinanced her home with Bank of America, NA. (Id. at ¶ 41.) Between December 2009 and September 2010, Bank of America charged Lyers with property inspection fees. (Id. at ¶ 43.) On January 1, 2011, Ms. Lyers’ loan entered default. (Id. at ¶ 42.) On January 1, 2014, BSI acquired the mortgage servicing rights to the loan. (Id. at ¶ 44.) On January 30, 2014, Ms. Lyers’ loan was transferred to Ventures Trust. (Id. at ¶¶ 41, 45.) Ventures Trust never disclosed to Ms. Lyers that it was not licensed as a Maryland collection agency or mortgage lender. (Id. at ¶ 48.) BSI, “on behalf of ventures trust, ” nevertheless modified the Lyers Loan and capitalized the sums claimed due, including interest, fees, and costs. (Id. at ¶ 53.) Among these were the inspection fees imposed by Bank of America, NA. (Id.) On February 10, 2017, Fay became the mortgage servicer for the loan and resumed collection efforts. (Id. at ¶ 54.) Ms. Lyers’ loan is not satisfied. (Id. at ¶ 60.)

         II. Procedural Background.

         On July 30, 2018, Plaintiffs commenced this class action in the Circuit Court for Montgomery County, Maryland. On August 31, 2018, Defendants removed the case to this Court, asserting that jurisdiction was proper under the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d). (Notice of Removal, ECF No. 1.) Plaintiffs have not challenged this basis for removal. In their Original Complaint, Plaintiffs brought five Counts and alleged that Defendant Ventures Trust was required to obtain a license under the Maryland Collection Agency Licensing Act (“MCALA”).

         On August 8, 2018, the Maryland Court of Appeals determined that “foreign statutory trusts are outside of the scope of the collection agency industry regulated and licensed under MCALA.”^[3] Blackstone v. Sharma, 461 Md. 87, 147, 191 A.3d 1188 (2018). Subsequently, on September 14, 2018, Plaintiffs filed an Amended Complaint (ECF No. 5) which, despite the Court of Appeal’s ruling, continued to assert MCALA as a basis for holding Ventures Trust liable. Defendants moved to dismiss on September 28, 2018. (ECF No. 8.) On October 3, 2018, the Maryland Court of Appeals denied reconsideration of the Blackstone appeal. Subsequent to that decision, on October 18, 2018, this Court issued a Letter Order memorializing the result of a telephone conference with the parties in this case and two related cases, Altenburg v. Caliber Home Loans, Inc., et al., RDB-16-3374 (the “Altenburg Action”) and Suazo, et al. v. U.S. Bank Trust, NA, et al., RDB-18-1451 (the “Suazo Action”). The Letter Order dismissed with prejudice Plaintiffs’ declaratory judgment claim (Count I) and held that Plaintiffs’ remaining claims (Counts II-V) were “barred so far as they allege violations of the Maryland Collection Agency Licensing Act . . . but remain as to a theory under the Maryland Mortgage Lender Law.” (Letter Order, ECF No. 13.) On September 25, 2019, this Court dismissed the Suazo Action, which advanced claims almost identical to those presented here, holding in relevant part that foreign statutory trusts are not required to be licensed under the Maryland Mortgage Lender Law.

         Now pending are the following claims: a common law claim for unjust enrichment by all Named Plaintiffs on behalf of the BSI class against Ventures Trust and BSI (Count II); a common law claim for unjust enrichment by Named Plaintiffs on behalf of the Fay Class against Fay and Ventures Trust (Count III); an inspection fee claim under Com. Law § 12-121(a)(1)(II) by the Named Plaintiffs and the Inspection Fee Class against all Defendants (Count IV); and alleged violations of the Maryland Consumer Debt Collection Act (“MCDCA”), Com. Law § 14-201, et seq. asserted by the Named Plaintiffs on behalf of the BSI Class and the Fay Class against all Defendants (Count V).

         STANDARD OF REVIEW

         Under 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).

         The Supreme Court’s opinions in Bell 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.”).

         ANALYSIS

         I. Plaintiffs Fail to State a Claim under Counts II, III, and V.

         Plaintiffs’ allegations in Counts II, III, and V are premised on a faulty legal theory. Plaintiffs allege that Ventures Trust must either register as a debt collector under the Maryland Collection Agency Licensing Law (“MCALA”) or as a mortgage lender under the Maryland Mortgage Lender Law (“MMLL”). Plaintiffs allege that Defendants may be held liable for unjust enrichment and violations of the Maryland Consumer Debt Collection Act because Ventures Trust profited from mortgage loans with the assistance of BSI and Fay. These legal theories are foreclosed by the Maryland Court of Appeals, the plain language of the MMLL, and a recent opinion of this Court. The Maryland Court of Appeals has conclusively held that foreign statutory trusts, and in particular Ventures Trust, is not required to obtain a license under MCALA. Blackstone v. Sharma, 461 Md. 87, 147, 191 A.3d 1188 (2018). Contrary to the Plaintiffs’ assertions, Blackstone did not hold that Ventures Trust must therefore obtain a license under the MMLL. As this Court has recently held, foreign statutory trusts like Ventures Trust are not “mortgage lenders” as that term is defined in the MMLL and are therefore not required to obtain a license. See Suazo v. U.S. Bank Trust, NA, RDB-18-1451, 2019 WL 4673450 (D. Md. Sept. 25, 2019). As Plaintiffs’ claims under Counts II, III, and V rise and fall on this legal theory, Counts II, III, and V are DISMISSED WITH PREJUDICE.

         A. Ventures Trust is not Required to Obtain a License under the Maryland Collection Agency Licensing Act.

         In its Letter Order (ECF No. 13), this Court determined that Plaintiffs’ claims are barred in so far as they allege violations of the Maryland Collection Agency Licensing Act. Any such allegation is futile in light of the Maryland Court of Appeal’s decision in Blackstone. In that case, the Maryland Court of Appeals held that “foreign statutory trusts are outside of the scope of the collection agency industry regulated and licensed under MCALA.” Blackstone, 461 Md. at 147, 191 A.3d 1188. Accordingly, Plaintiffs may not pursue any claims on the theory that Ventures Trust was required to obtain an MCALA license.

         B. Ventures Trust is not Required to Obtain a License under the Maryland Mortgage Lender Law.

         Plaintiffs’ alternative theory for liability under Counts II, III, and V also fail. Foreign statutory trusts like Ventures Trust are not “mortgage lenders” and need not obtain a license under the MMLL. This Court has recently addressed this issue in a prior Memorandum Opinion entered in a related case. See Suazo, 2019 WL 4673450, at *4-9. This Court hereby adopts the reasoning presented in its prior ...