Khan v. Bank of New York Mellon
849 F. Supp. 2d 1377
S.D. Fla.2012Background
- BoNY moved to dismiss a TILA claim brought by the Kahns arising from a mortgage loan, asserting it cannot be vicariously liable for BAC’s §1641(f)(2) violation.
- Plaintiffs allege BAC, as servicer, failed to provide owner/master servicer information upon request under §1641(f)(2).
- §1640(a) creates a private damages remedy against creditors for certain TILA violations, while servicers have liability only if they are or were owners of the loan under §1640(f)(1).
- Holcomb v. FH Mortgage Corp suggested no creditor liability for servicer §1641(f)(2) violations, prompting opposition by plaintiffs.
- Court analyzes whether agency principles extend liability to creditors to avoid rendering §1641(f)(2) meaningless and to satisfy TILA’s remedial purposes.
- Court DENIES BoNY’s motion to dismiss, holding creditors may be vicariously liable for servicer violations of §1641(f)(2).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether creditor can be vicariously liable for servicer’s §1641(f)(2) violation | Kahns advocate agency liability for creditor. | BoNY argues no vicarious liability; only servicers liable. | Creditor may be vicariously liable. |
| Whether Holcomb dictates denying agency liability | Holcomb should be distinguished; agency liability should apply. | Holcomb forecloses creditor liability. | Court rejects Holcomb’s limitation; agency liability may apply. |
| Does §1641(g) affect creditor liability for servicer violations | 1641(g) indicates Congress intended broader creditor obligations. | 1641(g) not extending liability to creditors. | 1641(g) supports creditor liability under agency theory. |
| What is proper interpretation of TILA’s remedial scheme | TILA should be liberally construed to remediate borrowers. | Remedial purpose does not override statutory structure. | Agency principles align with remedial intent; creditor liability allowed. |
| Is there explicit statutory bar to creditor liability | §1640(a) contemplates liability against creditors for §1641(f)(2) violations. | §1640(a) limits liability to owners/assignees. | Text and purpose permit creditor liability via agency principles. |
Key Cases Cited
- Ellis v. General Motors Acceptance Corp., 160 F.3d 703 (11th Cir. 1998) (emphasizes liberal remedial construction of TILA)
- Brown v. Citi-Mortgage, Inc., 817 F. Supp. 2d 1328 (S.D. Ala. 2011) (supports liberal construction of TILA and remedial goals)