David Heinz v. Carrington Mortgage Services ( 2021 )

United States Court of Appeals
For the Eighth Circuit
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No. 19-3717
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David Heinz
Plaintiff - Appellant
v.
Carrington Mortgage Services, LLC
Defendant - Appellee
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Appeal from United States District Court
for the District of Minnesota
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Submitted: November 18, 2020
Filed: July 9, 2021
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Before SHEPHERD, STRAS, and KOBES, Circuit Judges.
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SHEPHERD, Circuit Judge.
David Heinz filed suit against Carrington Mortgage Services, LLC
(Carrington) asserting claims under the Fair Debt Collection Practices Act (FDCPA)
and Minnesota law after Carrington allegedly engaged in misrepresentations and
unfair conduct when processing Heinz’s application for loss mitigation assistance
and selling Heinz’s home through a foreclosure sale. After dismissing the state law
claims, the district court 1 granted summary judgment in favor of Carrington on the
FDCPA claim, concluding that Carrington’s alleged misrepresentations and unfair
conduct were not made or carried out in connection with an attempt to collect a debt,
and thus Heinz could not sustain a claim under the FDCPA. Heinz appeals, and
having jurisdiction under 28 U.S.C. § 1291, we affirm.
I.
In March 2008, David Heinz obtained a loan from Countrywide Bank, FSB,
in the amount of $247,344. The loan was evidenced by a promissory note and
secured by a mortgage on Heinz’s Eagan, Minnesota area residence. During the life
of the loan, Heinz defaulted several times. For example, in 2010, Heinz defaulted
on the loan, but after applying for loss mitigation assistance, he was granted a loan
modification which cured his default and brought him current on his payments. And,
in 2013, Heinz again defaulted on the loan and applied for loss mitigation assistance.
Heinz was granted a second loan modification which cured this default and brought
him current on his payments. In June 2016, both the mortgage and note were
assigned to Bank of America, N.A. (BANA).
In September 2016, after another default, BANA initiated a foreclosure
process and notified Heinz that the foreclosure sale of his home was scheduled to
occur on August 1, 2017. Heinz again applied for loss mitigation assistance. On
March 4, 2017, BANA notified Heinz by letter that his application for a loan
modification was no longer being reviewed because he had failed to provide the
requisite documents to complete his application. On May 18, 2017, BANA again
notified Heinz by letter that his application remained incomplete and was no longer
under review because of his failure to provide required documents to complete the
application.
1
The Honorable Susan Richard Nelson, United States District Judge for the
District of Minnesota.
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On July 11, 2017, Carrington became the servicer of Heinz’s loan. Heinz was
provided notice of the transfer from BANA to Carrington,2 after which he spoke to
a Carrington representative who confirmed that the foreclosure sale scheduled for
August 1, 2017, would proceed as scheduled. This representative also allegedly told
Heinz that if he wished to prevent the foreclosure sale, he would have to produce a
loss mitigation package by midnight that same evening. After the call, Heinz
contacted the Minnesota Attorney General’s Office for assistance in dealing with
Carrington regarding a new loss mitigation application. The Minnesota Attorney
General’s Office began to represent Heinz, and Heinz asserts that he relied on the
Office to relay to him communications and information it received from Carrington
regarding his loan.
On August 2, 2017, Heinz was notified by letter that the foreclosure sale had
been postponed to September 9, 2017, before he was later notified that the
foreclosure sale had been again postponed to November 14, 2017. Between August
and November 2017, Heinz made requests to Carrington for loss mitigation
assistance and loan modification. In connection with these requests, Heinz mailed
to Carrington financial information including tax returns, proof of income, and
statement of living expenses. In written communications and telephone calls,
Carrington advised Heinz that the information provided was incomplete and Heinz
made various attempts to provide the requested documentation.
In a letter dated November 8, 2017, a representative with the Minnesota
Attorney General’s Office notified Heinz that, on November 7, 2017, during a call
between the Attorney General’s Office and Carrington, a Carrington representative
allegedly confirmed that Heinz’s file had been sent to underwriting and was awaiting
a final determination. The representative explained that when the application was
sent to underwriting, it was considered complete and would force the postponement
of the foreclosure sale.
2
BANA apparently remained the promisee under the promissory note and the
mortgagee under the real estate mortgage, with Carrington assuming only the
servicing responsibilities.
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Nevertheless, Carrington proceeded with the scheduled foreclosure sale on
November 14, 2017. BANA purchased the property for $225,120. The foreclosure
sale was subject to a six-month redemption period, which would have allowed Heinz
to redeem the property any time before May 14, 2018. Prior to the sale, Heinz did
not receive a written denial of his second mortgage assistance application. In fact,
Carrington mailed Heinz a cancellation notice, dated two days after the foreclosure
sale, which advised Heinz for the first time that his second loss mitigation assistance
application had been cancelled and would no longer be considered. On April 2,
2018, through a representative from the Minnesota Attorney General’s Office, Heinz
requested that Carrington rescind the foreclosure sale. Despite twice telling the
representative from the Minnesota Attorney General’s Office that it would respond
to the rescission request, Carrington did not respond to Heinz until May 15, 2018—
one day after the redemption period expired—explaining that it was declining to
rescind the sale. In the letter explaining the basis for its decision, Carrington stated
that it would not rescind the sale because Heinz never provided all the requisite
documentation to complete the loss mitigation assistance application. The letter also
notified Heinz that the home had been sold to a third-party bidder at the foreclosure
sale, when the home had in fact been sold to BANA, the mortgagee.
On June 8, 2018, Heinz filed suit against Carrington in Minnesota state court,
alleging violation of the FDCPA and two claims under Minnesota law and seeking
rescission of the foreclosure sale, a temporary restraining order preventing eviction,
and damages. Carrington then removed the action to federal court based on federal
question jurisdiction. By the summary judgment stage, Heinz’s only remaining
claim was that Carrington violated the FDCPA by making false representations to
Heinz about the state of his loss mitigation assistance application and the foreclosure
sale, by ignoring his application, and by delaying communications so that Heinz
could not take advantage of his legal remedies. The district court granted summary
judgment in favor of Carrington, concluding that Carrington’s communications and
conduct in the course of its dealings with Heinz were not in connection with an
attempt to collect a debt. While the district court determined that Carrington
qualified as a debt collector, it stated that the dispositive inquiry at summary
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judgment was “whether a reasonable jury could conclude from the record that
Carrington’s communications and conduct related to the collection of a debt as the
FDCPA requires,” ultimately answering this question in the negative. In reaching
this conclusion, the district court applied the “animating purpose” test, which
considers the content of each communication individually, and determined that they
were not made in connection with the collection of a debt. Further, as to the
challenged communications that occurred after the foreclosure sale, the district court
also determined that they were immaterial because they had no impact on Heinz’s
legal rights. Heinz appeals the adverse grant of summary judgment.
II.
Heinz asserts on appeal that the district court erred in granting summary
judgment to Carrington because the evidence Heinz presented was sufficient to
allow a jury to conclude that Carrington used false, deceptive, and misleading
representations and unfair and unconscionable means to collect on the underlying
mortgage debt. Heinz further asserts that the district court erroneously narrowed the
“animating purpose” test. We review the grant of summary judgment de novo,
“viewing the evidence and drawing all reasonable inferences in the light most
favorable to . . . the nonmoving party.” Main v. Ozark Health, Inc., 959 F.3d 319,
323 (8th Cir. 2020) (citation omitted). “Summary judgment is proper if there are no
genuine issues of material fact and the moving party is entitled to judgment as a
matter of law. ‘Where the record taken as a whole could not lead a rational trier of
fact to find for the nonmoving party, there is no genuine issue for trial.’” Green
Plains Otter Tail, LLC v. Pro-Env’t, Inc., 953 F.3d 541, 545 (8th Cir. 2020) (citation
omitted).
The FDCPA, which is designed to prevent abusive debt collection practices,
governs the conduct of debt collectors in relation to any attempt to collect a debt.
See 15 U.S.C. § 1692(a). The FDCPA specifically prohibits “false, deceptive, or
misleading representation or means in connection with the collection of any debt”
and “unfair or unconscionable means to collect or attempt to collect any debt.” Id.
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§§ 1692e, 1692f. The parties agree that the dispositive issue in this case is whether
the challenged communications and conduct were made in connection with the
collection of a debt, acknowledging both that the promissory note constitutes a debt
and that Carrington is a debt collector under the FDCPA.
Heinz specifically identifies the following communications made by
Carrington as containing false, deceptive, or misleading representations or means:
• the letter from Carrington to Heinz dated October 8, 2017, stating that Heinz’s
loan modification application had been cancelled because Carrington had not
received all of Heinz’s application materials;
• the letter from Carrington to Heinz dated October 20, 2017, in response to a
complaint against Carrington through the Minnesota Attorney General’s
Office, detailing the factual background of Heinz’s efforts to complete a loss
mitigation assistance application and stating that Carrington had not received
all the documents necessary for the loss mitigation assistance application to
be complete;
• the phone call on November 7, 2017, between a Carrington representative and
the Minnesota Attorney General’s Office where the representative stated
Heinz’s application had been sent to underwriting and was awaiting a
decision; and
• the post-foreclosure sale letter from Carrington to Heinz, dated May 15, 2018,
stating that Carrington did not receive all necessary information for the
completion of Heinz’s loss mitigation assistance application before the
deadline when it had previously represented that the application had been sent
to underwriting; that Carrington sold the property to a third-party at the
foreclosure sale, when it actually sold the property to BANA; and that despite
Carrington’s repeated efforts to obtain all necessary information for the loss
mitigation assistance application, Heinz failed to provide it.
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Heinz also alleges that Carrington used unfair and unconscionable means to collect
the mortgage debt by informing Heinz it would review his loss mitigation assistance
application and collecting all the documents from Heinz before ignoring the
application and conducting the foreclosure sale. Heinz also alleges that Carrington
delayed its post-foreclosure communications with Heinz to preclude him from being
able to bring a claim under the Minnesota dual-tracking statute, Minn. Stat. Ann.
§ 582.043, subdiv. 6, which prohibits a servicer from referring a mortgage loan for
foreclosure when a loss mitigation application is pending.
In considering whether certain statements or conduct are in connection with
the collection of a debt for the purposes of § 1692e, we employ the “animating
purpose test.” McIvor v. Credit Control Servs., Inc., 773 F.3d 909, 914 (8th Cir.
2014) (adopting the animating purpose test). Under this test, “for 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.” Id. (citation omitted).
An explicit demand for payment is not required for a communication to satisfy the
animating purpose test; implicit demands for payment may satisfy the test based
upon the specific content of the communications. See id. “Though ‘[t]he “animating
purpose[]” of the communication is a question of fact that generally is committed to
the discretion of the jurors, not the court,’ where ‘a reasonable jury could not find
that an animating purpose of the statements was to induce payment,’ summary
judgment is appropriate.” Goodson v. Bank of Am., N.A., 600 F. App’x 422, 431
(6th Cir. 2015) (first alteration in original) (citations omitted).
Heinz asserts that the Supreme Court’s statement that nonjudicial foreclosure
is a debt collection activity renders each of the identified communications in
connection with the attempt to collect a debt, citing Obduskey v. McCarthy &
Holthus LLP, 139 S. Ct. 1029, 1036 (2019) (“Foreclosure, in turn, is ‘the process in
which property securing a mortgage is sold to pay off the loan balance due.’ In other
words, foreclosure is a means of collecting a debt.” (citation omitted)). However, in
Obduskey, the Supreme Court made this statement in considering whether a party
qualified as a “debt collector” for the purposes of the FDCPA and was not
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considering specific communications regarding foreclosure proceedings. Although
nonjudicial foreclosure is a debt collection activity, it does not follow that any
communication generated during a nonjudicial foreclosure is made “in connection
with the collection of a debt.” See McIvor, 773 F.3d at 915 (“[The debtor] contends
that any communication about a debt from a debt collector to a consumer reporting
agency is always intended to facilitate collection. We decline to draw such a
sweeping conclusion . . . .”). Thus, we must look at each communication
individually to determine whether it was made in connection with the collection of
a debt for purposes of the FDCPA.
Considering the content of each of the communications, we conclude that
none were made in connection with the collection of a debt. First, the October 8,
2017 letter was nothing more than a notification that Heinz’s loss mitigation
assistance application had been cancelled due to Heinz’s failure to provide the
required documentation. Although the letter stated, “if your loan is delinquent
collection activity may continue, including referral to foreclosure or foreclosure
sale,” this boilerplate, conditional reference to collection activities, which uses the
word “if,” does not mean that the letter was sent “in connection with the collection
of a debt,” particularly where the only reference to the loan was its identifying
information, including the property address and loan number, and the letter did not
contain any information about the loan, such as the principal amount remaining due,
the past due amount, or a request for payment. See Bailey v. Sec. Nat’l Servicing
Corp., 154 F.3d 384, 388-89 (7th Cir. 1998) (holding that the communication was
not made in connection with the collection of a debt because it merely described the
status of the debtor’s account and the consequences of missing future payments).
Similarly, the letter dated October 20, 2017, did not make any mention of the
loan apart from its identifying information and did not include a demand for payment
or statement of amounts due to bring the loan current. And the letter expressly stated
that “this letter is not an attempt to collect a debt from [the borrower] but merely
provides informational notice regarding the status of the loan.” The November 7,
2017 phone call between Carrington representatives and the Minnesota Attorney
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General’s Office, during which a Carrington representative falsely stated that
Heinz’s loss mitigation assistance application had been sent to underwriting,
included no discussion of the loan, its terms, any amount due, or any request or
demand for payment. We find there is no evidence from the record to conclude that
Carrington made these communications in an attempt to induce payment of the
mortgage debt. See, e.g., Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173
(6th Cir. 2011) (concluding that animating purpose of communication from debt
collector was not to collect debt even though communications stated a balance due
because statements did not demand payment or threaten consequences if debtor did
not pay and statements were in response to debtor’s inquiry regarding balance
statement, not as part of a strategy from debt collector to make payment on debt
more likely). To the contrary, the October 20 and November 7 communications
arguably served to thwart Heinz’s efforts to arrange for the payment of his mortgage
indebtedness.
Finally, the post-foreclosure sale letter, in response to Heinz’s complaint
against Carrington through the Minnesota Attorney General’s Office, again detailed
the factual history of Heinz’s efforts to apply for loss mitigation assistance and stated
that, despite Carrington’s attempts to obtain the documentation needed from Heinz
to complete the application, the information was never provided, so it proceeded to
sell the home at a foreclosure sale. The letter contained only basic identifying
information about the loan, including the loan number, and did not include details
about the loan such as the principal amount owing or amount in arrears. Further, the
timing of the letter supports the conclusion that it was not sent in connection with an
attempt to collect a debt because the property had already been sold at a foreclosure
sale and Carrington was no longer looking to Heinz for payment of the mortgage
debt. Because the foreclosure sale had already occurred, we agree with the district
court that any purported misrepresentations in this communication are immaterial.
See Hill v. Accounts Receivable Servs., LLC, 888 F.3d 343, 346 (8th Cir. 2018)
(“[B]ecause ‘[a] statement cannot mislead unless it is material, [] a false but non-
material statement is not actionable.’” (second and third alterations in original)
(citation omitted)).
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The substance of each of these communications demonstrates that none were
made in connection with an attempt to collect on the underlying mortgage debt.
More troublesome, however, is the inclusion in the disclosures section of each letter
of the so-called “Mini-Miranda” statement. This disclosure states:
This communication is from a debt collector and it is for the purpose of
collecting a debt and any information obtained will be used for that
purpose. This notice is required by the provisions of the Fair Debt
Collection Practices Act and does not imply that we are attempting to
collect money from anyone who has discharged the debt under the
bankruptcy laws of the United States.
At first glance, it may seem implausible that a communication labeled by the
sender as “for the purpose of collecting a debt” would, in fact, not be sent “in
connection with the collection of a debt”. But these types of boilerplate mini-
Miranda disclosures, see 15 U.S.C. § 1692e(11), “do[] not automatically trigger the
protections of the FDCPA, just as the absence of such [disclosures] does not have
dispositive significance.” Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 386
n.3 (7th Cir. 2010); see also Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 399-400
(6th Cir. 1998) (similar). Rather, we look to the substance of the letter—what
information it provides and what it asks the borrower to do—to determine whether
an “animating purpose” is “to induce payment by the debtor.” McIvor, 773 F.3d at
914 (citation omitted). And here, for the reasons we have already explained, the
letters did not try to induce Heinz to pay his outstanding debt. We thus conclude
that a routine disclosure statement that is at odds with the remainder of the letter
does not turn the communication into something that it is not—in this case, a
communication made in connection with the collection of a debt for the purposes of
the FDCPA.3 See Goodson, 600 F. App’x at 432 (“[T]he standard disclaimer
3
We note that there is no evidence in the record demonstrating that Heinz
relied on or understood Carrington’s communications as related to a debt collection
attempt. Indeed, there is nothing in the record to suggest that, in response to these
communications, Heinz took any action to procure the necessary funds or to remit
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language—which stated that BANA was ‘a debt collector attempting to collect a
debt’—did not, by itself, transform the informational letter into debt collection
activity. Courts have found that a disclaimer identifying the communication as an
‘attempt to collect a debt[] . . . does not automatically trigger the protections of the
FDCPA.’” (second and third alterations in original) (citation omitted)).
We are similarly unpersuaded by Heinz’s argument regarding Carrington’s
alleged unfair and unconscionable means in attempting to collect the underlying
mortgage debt pursuant to § 1692f. We also conclude that Carrington’s conduct in
allowing Heinz to submit an application and then ignore it as well as allegedly
delaying communications with Heinz to run out the statute of limitations on a
potential claim of a violation of the Minnesota dual-tracking statute was not done in
an attempt to collect upon a debt under § 1692f. Although Heinz was undoubtedly
frustrated with his repeated unsuccessful attempts to complete his loss mitigation
assistance application and Carrington’s apparently duplicative requests and belated
communications, the fact remains that Carrington did not at any point in these
communications discuss, reference, or request payment on the underlying mortgage
debt. Further, with respect to Heinz’s claim that Carrington delayed its
communications to preclude Heinz from asserting a dual-tracking claim, although
Carrington’s belated communications may leave something to be desired in terms of
customer communications, Heinz was aware that dual tracking was going on and
need not have waited for final communication from Carrington to preserve his ability
to pursue such a claim.
We are mindful that Heinz lost his home at a foreclosure sale after being
subjected to an extended back-and-forth with Carrington in which he apparently
made repeated efforts to comply with Carrington’s demands for information and
documents. While we are sympathetic to Heinz’s position, the record does not
demonstrate that Carrington’s communications were made in connection with the
any payment to bring his account current. Instead, Heinz continued to pursue the
loss mitigation assistance application.
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collection of a debt or that its actions were carried out in an attempt to collect the
underlying mortgage debt. For these reasons, we conclude the district court did not
err in granting summary judgment to Carrington.
III.
For the foregoing reasons, we affirm.
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