CFPB Suit Against Mortgage Servicer Dismissed in part as Shotgun Pleading

On September 5, 2019, the U.S. District Court for the Southern District of Florida granted in part and denied in part a mortgage servicer’s motion to dismiss from a 2017 suit brought by the CFPB.

In this case, the defendants were a mortgage servicer and its subsidiaries (mortgage servicer).  The parent corporation wholly owns the common stock of its primary subsidiary, which in turn, wholly owns the stock of the second subsidiary.

The CFPB alleged fourteen violations under the CFPA, FDCPA, TILA, RESPA, and HPA.  The Court dismissed three of the fourteen counts and agreed with the mortgage servicer’s characterization of the CFPB’s complaint as a shotgun pleading.  The Court concluded that the ninety-two page complaint, which incorporates all 220 paragraphs of allegations into each of the fourteen counts, is an improper pleading that violates the short and plain statement requirement of Rule 8 of the Federal Rules of Civil Procedure.  

The Court dismissed two counts without prejudice for failure to allege that the mortgage servicer qualified as a “debt collector” under the FDCPA reasoning that, while the complaint plausibly alleges that the mortgage servicer collected or attempted to collect its debts, it fails to plead factual allegations that the mortgage servicer regularly collected or attempted to collect debts owed to another.  The Court dismissed a third count without prejudice for failure to allege the essential elements of a claim under RESPA’s loss mitigation provisions, 12 C.F.R. §§ 1024.41(g),(i).  The Court permitted the remaining allegations to go forward, including alleged violations of UDAAP, TILA, HPA, and RESPA.  The Court also rejected arguments that the CFPB is unconstitutional.

Similarly, the Court addressed the mortgage servicer’s claim that certain counts are barred by expired statute of limitations.  The Court explained that, generally, the question of whether a claim is barred by the statute of limitations is best raised as an affirmative defense and dismissal is only appropriate if it is apparent from the face of the complaint that the claim is time-barred.  The Court held that the mortgage servicer failed to show that the running of the statute of limitations is apparent on the face of the complaint, and the CFPB allegations were sufficient to survive a motion to dismiss.

The Court provided the CFPB leave to amend the complaint by September 27, 2019.