Schmidt v. Pennymac Loan Services, LLC
106 F. Supp. 3d 859
E.D. Mich.2015Background
- Plaintiff Tamika Schmidt sued PennyMac Loan Services, LLC (servicer) and Bank of America, N.A. in Saginaw County Circuit Court after foreclosure and expiration of the statutory redemption period following a sheriff's sale.
- Schmidt alleged PennyMac violated the CFPB’s Regulation X continuity-of-contact rule (12 C.F.R. § 1024.40) by failing to provide consistent, live personnel and return calls during loss-mitigation contacts.
- Schmidt alleged Bank of America committed the state-law tort of silent fraud by failing to disclose that modification payments would not be accepted at the branch.
- PennyMac removed the case to federal court asserting federal-question jurisdiction over the Regulation X claim and supplemental jurisdiction over the state claim; Bank of America did not explicitly file written consent to removal.
- Magistrate Judge Morris recommended (and the district court adopted) that PennyMac’s motion to dismiss be granted because Regulation X does not create a private right of action; Bank of America’s motion to dismiss was denied without prejudice and the remaining state claim was remanded to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 12 C.F.R. § 1024.40 creates a private right of action | Schmidt: Regulation X imposes enforceable continuity-of-contact duties on servicers and she suffered harm when PennyMac failed to provide assigned personnel or return calls | PennyMac: No private right exists; the regulation does not create an independently enforceable private remedy | Held: No private right of action — Regulation X implements agency objectives and CFPB expressly declined private enforcement; federal claim dismissed (PennyMac's motion granted) |
| Whether Schmidt adequately pleaded a § 1024.40 violation | Schmidt: Alleged repeated transfers, inability to reach same person, and unreturned promised callbacks | PennyMac: Allegations are vague and do not show failure to adopt or follow policies or lack of live personnel | Held: Court doubted sufficiency but relied primarily on lack of private cause of action to dismiss federal claim |
| Whether federal court may retain the state-law silent fraud claim against Bank of America after dismissal of the federal claim | Schmidt: State claim is part of the same controversy and removal put all claims in federal court | PennyMac (removing party): Asserted supplemental jurisdiction; Bank of America raised defenses including pleading specificity and foreclosure-redemption limitations | Held: Court declined to exercise supplemental jurisdiction and remanded the state-law claim to state court (Bank of America’s dismissal motion denied without prejudice) |
| Whether removal was procedurally proper given lack of explicit written consent from co-defendant | Schmidt: (No contest in record) | PennyMac: Removal invoked federal question jurisdiction; notice indicated belief that Bank of America would consent but did not file written consent | Held: Court noted possible noncompliance with unanimity rule but treated the issue as waived because no party moved to remand on that ground; nonetheless the absence of explicit consent supported remand discretionarily |
Key Cases Cited
- Thomas v. Arn, 474 U.S. 140 (procedural waiver for failure to object to magistrate judge recommendation)
- Alexander v. Sandoval, 532 U.S. 275 (regulations cannot create private rights of action not authorized by Congress)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- United Mine Workers v. Gibbs, 383 U.S. 715 (common-nucleus test for supplemental jurisdiction)
- Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11 (framework for implied private rights of action)
- Parry v. Mohawk Motors of Michigan, Inc., 236 F.3d 299 (statutes framed as general agency mandates do not imply private causes of action)
- Bovee v. Coopers & Lybrand C.P.A., 272 F.3d 356 (standards for construing complaint on 12(b)(6) motion)