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Sellers v. Rushmore Loan Management Services, LLC

United States District Court, M.D. Florida, Jacksonville Division

May 3, 2017

RANDOLPH SELLERS, individually and on behalf of a class of persons similarly situated and TABETHA SELLERS, individually and on behalf of a class of persons similarly situated, Plaintiffs,



         This consumer credit putative class action is before the Court on: (1) Defendant Rushmore Loan Management Services, LLC's Motion for Summary Judgment (Doc. 33), to which Plaintiffs Randolph and Tabetha Sellers responded (Doc. 37); and (2) Plaintiffs' Motion for Class Certification (Doc. 28), to which Rushmore responded (Doc. 31). On March 30, 2017, the Court held a hearing on the motion for summary judgment, the record of which is incorporated herein.[1] (Doc. 53).

         I. BACKGROUND

         In April 2007, Plaintiffs borrowed $122, 459 from Premier Mortgage Funding, Inc. for a loan on their home in Keystone Heights, Florida. (Doc. 33-2). The loan was evidenced by a promissory note and secured by a mortgage on the property. (Id.). The loan went into default, and in September 2008, Taylor, Bean & Whitaker and GMAT Legal Title Trust 2013-1, the holders of the mortgage and note, filed a foreclosure action. (Doc. 37-1 ¶ 6). Plaintiffs moved out of the property and into Ms. Sellers's mother's residence. (Id. ¶ 7). On February 16, 2011, Plaintiffs filed a voluntary Chapter 7 bankruptcy petition, which triggered a stay of the foreclosure action.[2] (Id.¶ 9). Plaintiffs state that they did not reaffirm the debt due to the continuously increasing balance on the loan. (Id. ¶ 11). On June 2, 2011, Plaintiffs received a Chapter 7 discharge, which released them from personal liability for the loan on their home. (Doc. 33-3). Under the discharge order,

a creditor is not permitted to contact a debtor by mail, phone, or otherwise . . . or to take any other action to collect a discharged debt. . . . However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtors' property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case.

(Id. at 4).

         In August 2013, servicing of Plaintiffs' loan transferred from Bank of America to Rushmore. (Doc. 33-1 ¶ 5). Beginning in February 2014, Rushmore sent three written forms to Plaintiffs: Mortgage Statement I, Mortgage Statement II, and a Request for Taxpayer Identification Number (“Request for TIN”).

         First, from February 2014 through November 2014, on the first of each month, Rushmore sent Plaintiffs a copy of Mortgage Statement I.[3] Page one lists a “Payment Due Date” and an “Amount Due” in a box in the top right corner. Located directly beneath that box in a separate box is a disclaimer:

This communication is from a debt collector and any information received will be used for that purpose. This does not imply that Rushmore Loan Management Services is attempting to collect money from anyone whose debt has been discharged pursuant to (or who is under the protection of) the bankruptcy laws of the United States; in such instances, it is intended solely for informational purposes.

         Below the disclaimer box is another box entitled “Explanation of Amount Due, ” which itemizes the principal, interest, escrow, regular monthly payment, total fees and charges, and overdue payment on the loan. At the bottom of page one is a detachable payment coupon, which lists a “Due Date, ” “Amount Due, ” a “Late Payment Amount” and instructions to make checks payable to Rushmore.

         Next, beginning in December 2014 and through June 2015, on the first of each month, Rushmore sent Plaintiffs a new form of the mortgage statement.[4] Mortgage Statement II contains the same box at the top right corner listing a “Payment Due Date, ” “Amount Due, ” and a sentence informing the recipient that if payment is received after a certain date, a late fee will be charged. Directly below that box are two separate boxes, one showing the same disclaimer language as in Mortgage Statement I, and the “Explanation of Amount Due” information. However, Mortgage Statement II eliminates the payment coupon and replaces it with the following additional disclaimer language in a box at the bottom of page one:

This is an Information Statement for borrowers in bankruptcy or borrowers whose debt has been discharged in bankruptcy. It is not an attempt to collect a debt. Please note that even if your debt has been discharged in bankruptcy and you are no longer personally liable on the debt, the lender may, in accordance with applicable law, pursue its rights to foreclose on the property securing the debt. If you do not wish to receive informational statements in the future, please call Rushmore toll-free at (888) 504-6700.

The bottom of the last page also contains disclaimer language:

Rushmore Loan Management Services LLC is a Debt Collector, who is attempting to collect a debt. Any information obtained will be used for that purpose. However, if you are in Bankruptcy or received a Bankruptcy Discharge of this debt, this letter is being sent for informational purposes only, is not an attempt to collect a debt and does not constitute a notice of personal liability with respect to the debt.

         Finally, on March 5, 2014, Rushmore sent Plaintiffs a packet of information which, among other information, included a Request for TIN.[5] The first page of the packet notes that “We have enclosed important information regarding your loan.” The document does not specify the amount of Plaintiffs' loan, list a due date, request payment, or provide a method to do so. At the top of the Request for TIN, under the Privacy Act Statement heading, the document states:

Section 6109 of the Internal Revenue Code requires you to give your correct [TIN] to persons who must file information returns with the IRS to report interest, dividends and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt or contributions you made to an IRA.

         Upon receiving the monthly mortgage statements, Ms. Sellers called Rushmore to confirm that it had a copy of Plaintiffs' bankruptcy discharge order. (Doc. 37-3 at 46:23-47:4). During a call to Rushmore, she states that she “was then talked to about a deed in lieu [of foreclosure].” (Id. at 48:1-2). Ultimately, in May 2014, Plaintiffs declined Rushmore's offer to accept a deed in lieu of foreclosure. (Id. at 63:5-64:4). The state court entered a final judgment of foreclosure on August 28, 2014, (Doc. 37 at 5), and the property was sold at a foreclosure sale on October 4, 2014 (Doc. 33-5). Due to a clerical error, the sale proceeds were initially made payable to an incorrect party (Doc. 33-6), but were properly distributed in April 2015. (Doc. 33-7). Nevertheless, Plaintiffs continued receiving a monthly communication containing Mortgage Statement II through June 2015. (Doc. 37 at 5).

         Plaintiffs filed this putative class action, raising four claims. (Doc. 1). Count I alleges that Rushmore violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”), by sending monthly account statements which “attempted to collect a debt and represented that it had a legal right to collect upon discharged monetary amounts.” (Id. ¶¶ 32-51). Plaintiffs allege that this conduct violates § 1692e, which prohibits the use of false, deceptive, or misleading representations in connection with the collection of a debt, and § 1692e(2)(A), because the collection activities falsely represented the character, amount or legal status of a debt. (Id. ¶¶ 46-47). Count II alleges that Rushmore violated the Florida Consumer Collection Practices Act, Fla. Stat. §§ 559.55-559.785 (“FCCPA”), by sending the monthly account statements because, in doing so, Rushmore “claim[ed] and attempt[ed] to enforce a debt which was not legitimate and not due and owing” in violation of § 559.72(9). (Id. ¶¶ 52-69). Count III alleges that Rushmore violated the FCCPA by sending the Request for TIN. (Id. ¶¶ 70-86). Specifically, Plaintiffs allege that Rushmore violated § 559.72(9), because it had “no legal right to seek collection of these amounts . . . and was in fact enjoined from doing so pursuant to bankruptcy discharge of the subject amounts.” (Id. ¶ 83). In addition, Rushmore allegedly violated § 559.72(7) because Rushmore's “IRS threat is reasonably expected to abuse or harass the recipient.” (Id. ¶ 84). Finally, in Count IV, Plaintiffs seek a declaration that Rushmore's conduct was unlawful, an injunction prohibiting Rushmore from sending documents requesting payment on discharged debts, and an order requiring Rushmore to “disgorge all ill-gotten gains” under the Declaratory Judgment Act, 28 U.S.C. § 2201. (Id. ¶¶ 87-106). Plaintiffs have also filed a motion for class certification (Doc. 28), which Rushmore opposes (Doc. 31).


         Summary judgment is proper where “there is no genuine issue as to any material fact” and “the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). “The burden of demonstrating the satisfaction of this standard lies with the movant, who must present pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, that establish the absence of any genuine material, factual dispute.” Branche v. Airtran Airways, Inc., 342 F.3d 1248, 1252-53 (11th Cir. 2003) (internal quotations omitted). An issue is genuine when the evidence is such that a reasonable jury could return a verdict for the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986).

         In determining whether summary judgment is appropriate, a court must draw inferences from the evidence in the light most favorable to the non-movant and resolve all reasonable doubts in that party's favor. See Centurion Air Cargo, Inc. v. United Parcel Serv. Co., 420 F.3d 1146, 1149 (11th Cir. 2005). However, “Rule 56 mandates the entry of summary judgment, upon motion, against a party who fails to make a showing sufficient to establish an element essential to his case on which he bears the burden of proof at trial.” Schechter v. Ga. State Univ., 341 F. App'x 560, 562 (11th Cir. 2009) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)).


         A. FDCPA

         The FDCPA provides a civil cause of action against any debt collector who fails to comply with its requirements. See Bacelli v. MFP, Inc., 729 F.Supp.2d 1328, 1331-32 (M.D. Fla. 2010) (citations omitted). The FDCPA prohibits debt collectors from using any false representation as to the “legal status of any debt.” 15 U.S.C. § 1692e(2)(A). “A demand for immediate payment while a debtor is in bankruptcy (or after the debt's discharge) is ‘false' in the sense that it asserts that money is due, although, because of . . . the discharge injunction (11 U.S.C. § 524), it is not.” Bacelli, 729 F.Supp.2d at 1331-32 (quoting Randolph v. IMBS, Inc., 368 F.3d 726, 728 (7th Cir. 2004) (dicta); see also Ross v. RJM Acquisitions Funding LLC, 480 F.3d 493, 495 (7th Cir. 2007) (“Dunning people for their discharged debts” is prohibited by 15 U.S.C. § 1692e(2)(A)); cf. Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 991, 995 (7th Cir. 2003) (reversing summary judgment in favor of debt collector on claim under § 1692e(2)(A) in part because a reasonable jury could conclude debt collector's collection letter implied that the discharged debt was still payable)).

         In determining whether a debt collector's communication violates § 1692e, courts in the Eleventh Circuit employ the “least-sophisticated consumer” standard. See LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1193, 1201 (11th Cir. 2010). The “least sophisticated consumer” is “presumed to possess a rudimentary amount of information about the world and a willingness to read a collection notice with some care.” Id. However, the test is an “objective” one, designed both to protect naïve consumers and prevent “liability for bizarre or idiosyncratic interpretations of collection notices.” See id. However, “it is not necessary for a plaintiff to show that she herself was confused by the communication she received; it is sufficient for a plaintiff to demonstrate that the least sophisticated consumer would be confused.” Beeders v. Gulf Coast Collection Bureau, Inc., No. 809-CV-00458-EAK-AEP, 2010 WL 2696404, at *3 (M.D. Fla. July 6, 2010), aff'd, 432 F. App'x 918 (11th Cir. 2011) (quoting Jacobson v. Healthcare Fin. Servs., Inc., 516 F.3d 85, 91 (2d Cir. 2008)). “Additionally, the Court need not determine whether the named plaintiff or other putative plaintiffs read or were confused by the notice, as the standard is whether the least sophisticated consumer would have been misled.” Battle v. Gladstone Law Grp., P.A., 951 F.Supp.2d 1310, 1315 (S.D. Fla. 2013) (citation omitted).

         B. FCCPA

         The FCCPA provides that a debtor may bring a civil action against any person who violates its provisions. Fla. Stat. § 559.77. The FCCPA prohibits any person, in collecting consumer debts, from “claim[ing], attempt[ing], or threaten[ing] to enforce a debt when such person knows that the debt is not legitimate or assert[ing] the existence of some other legal right when such person knows that the right does not exist.” Id. § 559.72(9) (alteration added). “In contrast to the FDCPA, § 559.72(9) of the FCCPA requires a plaintiff to demonstrate that the debt collector defendant possessed actual knowledge that the threatened means of enforcing the debt was unavailable.” LeBlanc, 601 F.3d at 1192 (citing McCorriston v. L.W.T., Inc., 536 F.Supp.2d 1268, 1279 (M.D. Fla. 2008) (internal citations omitted)). The FCCPA also prohibits “willfully engag[ing] in . . . conduct which can reasonably be expected to abuse or harass the debtor. . . .” Fla. Stat. § 559.72(7). Finally, the FCCPA provides that in construing its provisions, “due consideration and great weight shall be given to the interpretations of the Federal Trade Commission and the federal courts relating to the [FDCPA].” Fla. Stat. § 559.77(5); Herrera v. Bank of Am., N.A., No. 15-CV-62156, 2016 WL 4542105, at *9 (S.D. Fla. Aug. 31, 2016).

         IV. ANALYSIS

         A. Motion for Summary Judgment

         1. Whether the Communications Violate the FDCPA and/or FCCPA a. Mortgage Statement I [6]

         i. FDCPA

         Plaintiffs argue that Mortgage Statement I violates § 1692e(2)(A) in that it “misrepresent[s] the character, amount, or legal status of the demands for the TOTAL AMOUNT DUE on its statements, ” and that the least sophisticated consumer could conclude that Rushmore was asserting that she was personally liable for the total amount due. (Doc. 37 at 16-17). Specifically, Plaintiffs identify demands for payment on the first page of the statement, including “Current Payment Due, ” “Other Amounts Due, ” and in bold letters and all capitals, “TOTAL AMOUNT DUE.”[7] (Id. at 16). They also quote the language in the “Important Information” box, which says, “IF YOU ARE [IN] FORECLOSURE OR BANKRUPTCY, the amount listed here may not be the full amount necessary to bring your account current. To obtain the most up-to-date amount due information, please contact us at the number listed on this statement.” (Id.; Doc. 33-8 at 2). According to Plaintiffs, this language undercuts the disclaimers upon which Rushmore relies. Plaintiffs also note the existence of the payment coupon “prominently featured” in Mortgage Statement I. (Doc. 37 at 18). Because they believe that a genuine issue of material fact exists as to whether Mortgage Statement I was “deceptive, confusing, and abusive” to the least sophisticated consumer, Plaintiffs request that the Court deny summary judgment.

         Rushmore argues that Mortgage Statement I is for informational purposes and does not seek to induce payment from Plaintiffs, noting the disclaimer at the top right corner of the first page; thus, Rushmore argues, it is not subject to the FDCPA. (Doc. 33 at 15). Moreover, given that creditors are permitted to communicate with debtors regarding security liens on property even after a discharge in bankruptcy, Rushmore argues that it was clear that the statement was not sent to induce payment of a debt. (Id. at 18).

         The FDCPA does not apply to every communication between a debt collector and a debtor. “[F]or a communication to be in connection with the collection of a debt, an animating purpose of the communication must be to induce payment by the debtor.” Parker v. Midland Credit Mgmt., Inc., 874 F.Supp.2d 1353, 1357 (M.D. Fla. 2012) (quoting Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th Cir. 2011)). “Obviously, communications that expressly demand payment will almost certainly have this purpose.” Id. (quoting Grden, 643 F.3d at 173). However, “an implicit demand for payment may exist where the letter states the amount of the debt, describes how the debt may be paid, provides the phone number and address to send payment, and expressly states that the letter is for the purpose of collecting debt.” Leahy-Fernandez v. Bayview Loan Servicing, LLC, 159 F.Supp.3d 1294, 1303 (M.D. Fla. 2016) (quoting Pinson v. Albertelli Law Partners LLC, 618 F. App'x. 551, 553 (11th Cir. 2015)). “On the opposite end of the spectrum, where a communication is ‘merely information' and explicitly informs the debtor that the communication or notice is not an attempt to collect a debt or a demand for payment, courts have held that these communications are not subject to the FDCPA.” ...

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