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Lorang v. Ditech Financial LLC

United States District Court, W.D. Wisconsin

September 5, 2017

JAMES LORANG and MARCIA LORANG, Plaintiffs,
v.
DITECH FINANCIAL LLC, Defendant.

          OPINION & ORDER

          JAMES D. PETERSON DISTRICT JUDGE

         This lawsuit arises from a long-running dispute involving a home owned by plaintiffs, James and Marcia Lorang. The Lorangs defaulted on their home loan, and the owner of the loan, Bank of America, initiated foreclosure proceedings in state court. At some point, the loan was transferred to Ditech Financial LLC, the defendant here. The state-court foreclosure action has nearly run its course, with Ditech securing a judgment of foreclosure against the Lorangs.

         This case involves Ditech's conduct during the foreclosure, which the Lorangs contend was dishonest and unfair. The Lorangs bring claims against Ditech for violations of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2605; the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq.; the Wisconsin Consumer Act, Wis.Stat. § 224.77; and the implied duty of good faith and fair dealing.

         The parties have filed cross-motions for summary judgment. Dkt. 15 and Dkt. 37.[1] The Lorangs have adduced evidence sufficient to raise a genuine dispute of material fact as to one claim under the FDCPA, so that claim will have to be resolved at trial. But the Lorangs have otherwise failed to adduce evidence to support their claims, and so the court will grant summary judgment in favor of Ditech on all the other claims.

         UNDISPUTED FACTS

         Except where noted, the following facts are undisputed.

         In 2004, the Lorangs got a loan to buy a house in Fort Atkinson, Wisconsin, and secured the loan with a mortgage. Eventually Bank of America acquired the loan. In 2009, the Lorangs defaulted on the loan, and in December 2012, Bank of America initiated state-court foreclosure proceedings. Soon after, Bank of America assigned the note and mortgage to Ditech. The ins and outs of the protracted state-court litigation are complicated and, for the most part, not relevant here. It suffices to say that Ditech secured a judgment of foreclosure against the Lorangs in May 2016, shortly before the Lorangs filed suit here, on June 16, 2016. (In November 2016, the Lorangs asked this court for a preliminary injunction barring confirmation of the sheriff's sale of their home. Dkt. 19. The court denied that motion. Dkt. 28.)

         The main issues in this case involve the communication between Ditech and the Lorangs during the state-court foreclosure action. As the state-court litigation ran its course, Ditech evaluated the Lorangs' “loss mitigation” options, which is to say, the ways in which the Lorangs' loan or payments might be modified to avoid foreclosure. The parties dispute whether the Lorangs submitted a complete loss mitigation application. The Lorangs rely on James's declaration testimony: “We applied for the modification and provided all required documentation for that application, sending everything the application requested.” Dkt. 17, ¶ 4. Ditech relies on its business records to show otherwise. Dkt. 33, ¶ 8. The parties agree that on November 4, 2015, Ditech sent the Lorangs a letter that said their application was incomplete and asked that specified documents be provided by December 4, 2015. Dkt. 1-1.

         The parties' communication was complicated by the fact that the Lorangs' counsel changed firms during the course of the case. Ditech sent the November 4 letter to Marcia Lorang, in care of Krekeler Strother, the Lorangs' counsel's former law firm. By November 2015, the Lorangs' counsel, Briane F. Pagel, had moved from Krekeler Strother to Kerkman & Dunn. (In January 2017, Pagel moved again to Lawton & Cates.) So Ditech sent the letter to the wrong address. But Krekeler Strother forwarded the letter to Pagel, and all agree that Pagel received the letter in time to respond. On December 2, 2015, Pagel forwarded the additional documents to Ditech's outside counsel. Ditech's counsel responded, “Thank you. We will forward this information to our client for review.” Dkt. 1-2.

         Ditech contends that, despite the additional documents, the Lorangs' application remained incomplete. On December 11, Ditech sent a second letter to the Lorangs (again addressed to Marcia Lorang, in care of Krekeler Strother, but this letter, too, was promptly forwarded). The letter said that Ditech had not received a complete loss mitigation application within the specified timeframe. As a result, Ditech would not review the application. Dkt. 1-3.

         The Lorangs had other loss mitigation options. On December 12, Ditech sent the Lorangs a letter informing them that they had options to “avoid foreclosure.” Dkt. 33-2, at 1. Ditech had approved the Lorangs for a “Trial Period Plan to modify [their] mortgage payment.” Id. If the Lorangs were able to follow the Trial Period Plan's terms, Ditech would permanently modify their mortgage. Id. Once again, Ditech sent the letter in care of Krekeler Strother. But the Lorangs contend that they did not receive this one. Dkt. 17, ¶ 19 (“Neither I [James Lorang] nor my wife ever received . . . a proposed trial modification packet from Ditech.”). The Lorangs did not make any trial payments, and Ditech denied the Lorangs a permanent modification based on the Trial Period Plan.

         On December 28, Pagel emailed Ditech's counsel and asked him (1) to make sure that Ditech had Pagel's current contact information, as he had left Krekeler Strother but that firm had received the November 4 letter; and (2) to confirm when Ditech had received the Lorangs' supplemental documents (sent via email on December 2) and that the Lorangs had timely submitted those documents. Dkt. 1-4. Pagel acknowledged that the Lorangs had received the December 11 letter declining to review their application. Ditech did not respond to the December 28 email.

         On January 20, 2016, James Lorang sent Ditech a letter requesting “a payoff amount in writing as of February 15, 2016.” Dkt. 1-5, at 1. James also requested that Ditech explain how it calculated the payoff amount. Id. The parties dispute whether Ditech responded to the letter. According to James, Ditech did not respond. Dkt. 17, ¶ 17. But Ditech says it did, on January 28, 2017. Dkt. 33, ¶ 12 and Dkt. 33-4 (noting payoff amount is $376, 935.56 and providing a breakdown of that number). Ditech sent the letter to Marcia Lorang, in care of Kerkman & Dunn. Dkt. 33-4, at 1. (Although by this time Pagel had moved again to Lawton & Cates, there is nothing in the record to show that Ditech had Pagel's newest contact information.)

         Ditech maintains a designated address for receiving, reviewing, and responding to qualified written requests for information. That address is P.O. Box 6176, Rapid City, South Dakota 57709-6176. The Lorangs concede that Ditech provided written notice of this address to them on various correspondences. Dkt. 45, ¶¶ 15-16.

         The court has subject matter jurisdiction over the Lorangs' RESPA and FDCPA claims pursuant to 28 U.S.C. § 1331, because they arise under federal law. The court may exercise supplemental jurisdiction over the Lorangs' state-law claims pursuant to 28 U.S.C. § 1367.

         ANALYSIS

         Summary judgment is appropriate if the moving party “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When the parties have filed cross-motions for summary judgment, the court “look[s] to the burden of proof that each party would bear on an issue of trial; [and] then require[s] that party to go beyond the pleadings and affirmatively to establish a genuine issue of material fact.” Santaella v. Metro. Life Ins. Co., 123 F.3d 456, 461 (7th Cir. 1997). If either party “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden at trial, ” summary judgment against that party is appropriate. Mid Am. Title Co. v. Kirk, 59 F.3d 719, 721 (7th Cir. 1995) (quoting Tatalovich v. City of Superior, 904 F.2d 1135, 1139 (7th Cir. 1990)). “As with any summary judgment motion, this [c]ourt reviews these cross-motions ‘construing all facts, and drawing all reasonable inferences from those facts, in favor of . . . the non-moving party.'” Wis. Cent., Ltd. v. Shannon, 539 F.3d 751, 756 (7th Cir. 2008) (quoting Auto. Mechs. Local 701 Welfare & Pension Funds v. Vanguard Car Rental USA, Inc., 502 F.3d 740, 748 (7th Cir. 2007)).

         “[S]ummary judgment ‘is the “put up or shut up” moment in a lawsuit, when a party must show what evidence it has that would convince a trier of fact to accept its version of events.'” Johnson v. Cambridge Indus., Inc., 325 F.3d 892, 901 (7th Cir. 2003) (quoting Schacht v. Wis. Dep't of Corr., 175 F.3d 497, 504 (7th Cir. 1999)). A mere “scintilla of evidence” is not enough to survive. Pugh v. City of Attica, 259 F.3d 619, 625 (7th Cir. 2001).

         A. RESPA

         “RESPA is a consumer protection statute that regulates the real estate settlement process, including servicing of loans and assignment of those loans.” Catalan v. GMAC Mortg. Corp., 629 F.3d 676, 680 (7th Cir. 2011) (citing 12 U.S.C. § 2601 (congressional findings)). Under RESPA, a servicer must respond to borrower inquiries:

If any servicer of a federally related mortgage loan receives a qualified written request from the borrower (or an agent of the borrower) for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 5 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken within such period.

§ 2605(e)(1)(A). A “qualified written request”-or QWR-is any “written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that . . . includes, or otherwise enables the servicer to identify, the name and account of the borrower; and . . . includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.” § 2605(e)(1)(B).

         Here, the Lorangs contend that Ditech did not respond to two QWRs: Pagel's December 28, 2015 email, and James Lorang's January 20, 2016 letter. The Lorangs further contend that Ditech did not reasonably evaluate their loss mitigation application, in violation of RESPA regulations, 12 C.F.R. § 1024.41.[2]

         1. ...


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