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Diedrich v. Ocwen Loan Servicing, LLC

United States Court of Appeals, Seventh Circuit

October 6, 2016

OCWEN LOAN SERVICING, LLC, Defendant-Appellee.

          Argued January 5, 2016

         Appeal from the United States District Court for the Eastern District of Wisconsin. No. 2:13-cv-00693-NJ - Nancy Joseph, Magistrate Judge.

          Before WOOD, Chief Judge, and Kanne and ROVNER, Circuit Judges.

          ROVNER, Circuit Judge.

         The Real Estate Settlement Procedures Act (RESPA) sets forth specific procedures that a mortgage lender or mortgage servicing company must follow in response to a borrower's request for information. Ocwen Loan Servicing, LLC failed to follow the letter of the procedure when responding to the plaintiffs Daniel and Natalie Diedrichs' request for information. The Diedrichs sued, but the district court granted summary judgment for Ocwen, finding that the Diedrichs had failed to set forth sufficient facts, which, if taken as true, would establish that they were injured by the RESPA violation. The Diedrichs appealed and we affirm.


         In 2007, Natalie and Daniel Diedrich executed a note to Decision One Mortgage Company in the amount of $184, 000. To secure the note, they executed a mortgage. At the time of the relevant events, Ocwen serviced the Diedrichs' loan. Ocwen began foreclosure proceedings in September, 2010. The Diedrichs dispute that they defaulted under the terms and conditions of the note and mortgage, but that is not the subject of the dispute in this case. Ocwen and the Diedrichs entered into a loan modification agreement dated May 20, 2011, which was to be implemented beginning July 1, 2011. After the Diedrichs began making payments pursuant to the loan modification agreement, they alleged that they became concerned about whether their escrow account was being correctly administered and whether they were being charged improper litigation fees.

         On or around February 22, 2013, the Diedrichs sent Ocwen a letter in which they requested eight types of standard information about their account including the names of employees working on their account, the history of payments made from their escrow account including the date, amount and payee, a statement of interest rates applied to their account, and other general inquiries. (R. 37-3, p.35). Neither party disputes that this letter constituted a qualified written request for information under RESPA, 12 U.S.C. § 2605(e)(1)(B). [1] In a letter dated March 7, 2013, Ocwen responded to the Diedrichs' request with a form letter that set forth its policies regarding how and when it would respond to requests for information, but it did not directly respond with the information requested. Id. p.38. Ocwen sent another later dated March 30, 2013, stating that it would take another fifteen days, as permitted by RESPA, to review the inquiry. Id. p.39. Finally, on April 22, 2013, Ocwen sent the Diedrichs a letter stating that it could not identify a problem with their account and asking the Diedrichs to send another letter identifying which month and report they disputed, the explanation for the dispute, and all evidence showing that payment for the month was received on time or that the information reported was incorrect. Id. p.40.

         Based on Ocwen's failure to respond to their request for information, the Diedrichs filed a complaint against Ocwen alleging violations of Wisconsin laws regarding mortgage loans (Wise. Stat. § 224.77 and § 138.052) and the federal Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2605(e)(1) & (2), which sets forth in specific detail how a mortgage servicer such as Ocwen must respond to such an information request. The parties consented to disposition by the magistrate judge who granted Ocwen's motion to dismiss the claim under Wisconsin statute, § 138.052(7s)(a) and 12 U.S.C. § 2605(e)(1). That left in play RESPA § 2605(e)(2) and Wisconsin statutes § 224.77(1), and § 138.052(7) which became the subjects of dueling cross motions for summary judgment before a second magistrate judge.[2]

         RESPA § 2605(e)(2) requires a lender to respond to a qualified written request for information from a borrower within a particular time frame and in a particular manner. Wisconsin statute § 224.77(1) essentially points back to the alleged RESPA violation by prohibiting mortgage bankers and brokers from violating any federal statute that regulates their practice. Wise. Stat. § 224.77(1)(k). Both parties moved for summary judgment on these remaining claims, and the magistrate judge granted Ocwen's motion for summary judgment on all counts. The district court found that Ocwen's responses to the written inquiries were insufficient and therefore violated the RESPA requirements, but the court determined that the Diedrichs' allegations of damages were "conclusory and vague" and that they had "failed to come forth with any evidence that would connect their alleged [injury] to Ocwen's failure to respond to their qualified written request for information." Order at 14 (R. 59, p.14). The district court also dismissed the claim under Wisconsin law for the same reason, that is, that the Diedrichs failed to establish they were an aggrieved party as required under the Wisconsin statute. Order at 19 (R. 59, p.19). After filing an unsuccessful motion for reconsideration pursuant to Federal Rules of Civil Procedure 59(e) and 60(b)(6), the Diedrichs appealed and we affirm.



         We begin, as we always must, with the question of standing. The jurisdiction of federal courts is limited to "Cases" and "Controversies" as described in Article III, Section 2 of the Constitution. There is no case or controversy if the plaintiff lacks standing to challenge the defendant's alleged misconduct. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). In order to have standing, "[t]he plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016) (citing Lujan, 504 U.S. at 560-61).

         The plaintiff has the burden of establishing these elements and must support each element "with the manner and degree of evidence required at the successive stages of the litigation." Lujan, 504 U.S. at 561. The Supreme Court elaborated as follows:

At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss we "presum[e] that general allegations embrace those specific facts that are necessary to support the claim." In response to a summary judgment motion, however, the plaintiff can no longer rest on such "mere allegations, " but must "set forth" by affidavit or other evidence "specific facts, " which for purposes of the summary judgment motion will be taken to be true.

Lujan, 504 U.S. at 561 (internal citations omitted). In short, for purposes of demonstrating whether the plaintiffs have standing to assert their claims before this court, we look to see whether they have set forth sufficient factual allegations supporting their claim that they suffered an injury in fact, that was fairly traceable to Ocwen's violation of the RESPA statute. See Id. at 560-61.

         Whether raised by the parties or not, a court must assure itself that the plaintiff has standing, such that there exists a case or controversy as required by Article III of the Constitution. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998). Consequently, we asked the parties to submit supplemental briefing on the issue of standing in light of the Supreme Court's recent decision in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016), which was issued after the completion of briefing in this case. In Spokeo, the Supreme Court clarified the requirements for standing set forth in Lujan and noted that the injury must be concrete-that is "de facto ... it must actually exist." Spokeo, 136 S.Ct. at 1548. The Court elaborated that "concrete" is not necessarily "tangible, " but a plaintiff cannot "allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III." Id. at 1549.

         In order to survive dismissal for lack of standing, the plaintiffs' complaint must contain sufficient factual allegations of an injury resulting from the defendants' conduct, accepted as true, to state a claim for relief that is plausible on its face. Aschroft v. Iqbal 556 U.S. 662, 678 (2009), citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).[3] The alleged injury must be concrete and not just a procedural violation divorced from any harm. Spokeo, 136 S.Ct. at 1548.

         The requirement of facial plausibility means "enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. "The plausibility standard is not akin to a 'probability requirement/ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678. "[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely." Twombly, 550 U.S. at 556 (internal citations omitted). Legal conclusions or bare and conclusory allegations, however, are insufficient to state a claim. Iqbal, 556 U.S. at 678, 680. Nevertheless, even with the heightened pleading requirements of Iqbal and Twombly, the pleading requirements to survive a challenge to a motion to dismiss remain low.

         In this case, the injury requirement for standing overlaps with the injury requirement under the statute. In other words, as the court explained in Spokeo, the plaintiffs must have suffered a concrete injury in order to allege standing as a constitutional matter. Spokeo, 136 S.Ct. at 1548. And in this case, the statute does not grant statutory damages for bare procedural violations; it requires an actual injury. Consequently, there is no need to perform a separate Spokeo analysis to demonstrate whether a procedural injury alleged under the statute is sufficiently concrete to pass muster for Article III standing. The injury must be "actual, " both for standing purposes and for purposes of the statute.

         The RESPA section at issue, 12 U.S.C. § 2605, imposes a duty on loan servicers to respond to borrower inquiries.[4] The district court found that Ocwen "violated RESPA by failing to properly respond to the Diedrichs' qualified written request for information." Order at 19 (R. 59, p. 19). Ocwen does not dispute this portion of the court's finding. The district court, however, found that "the Diedrichs have failed to put forth evidence of damages stemming from the violation" Id. If they have no injury under the statute, then they fail the first part of the requirement for standing.

         The remedy portion of the statute indicates that the statute was intended to redress actual damages caused by the failure of the loan servicer to provide information to the borrower. It states as follows:

(f) Damages and costs
Whoever fails to comply with any provision of this section shall be liable to the borrower for each such failure in the following amounts:
(1) Individuals
In the case of any action by an individual, an amount equal ...

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