MEMORANDUM OPINION AND ORDER SUSTAINING IN PART AND OVERRULING IN PART OBJECTION TO PROOF OF CLAIM 386
Bаrry and Cheryl Mack bought a home in Florida in 2006. By 2009, they realized that they could no longer afford their mortgage payments. They contacted their loan servicer — GMAC Mortgage LLC (“GMACM”) — to obtain a loan modification. Rather than working out a modification with the Macks, GMACM started foreclosure proceedings and hired a notorious Florida attorney (since disbarred) to bring the foreclosure action in the name of Deutsche Bank Trust Company Americas (“Deutsche Bank”), the trustee of the secu-ritization trust that owned the Macks’ loan. But the Macks had not defaulted on their loan payments. GMACM claims that when it learned of the “accidental” foreclosure action, it instructed its attorney to withdraw the action. The attorney neglected to withdraw, the case, so it continued. Meanwhile, the Macks repeatedly contacted GMACM to ask who Deutsche Bank was, when Deutsche Bank obtained an interest in the Macks’ loan, and why the foreclosure was proceeding at all. GMACM failed to respond to at least one of the Macks’ inquiries and in other instances told the Mаcks that the foreclosure was a mistake and should be ignored. But the foreclosure case carried on.
The Macks filed counterclaims against Deutsche Bank in the foreclosure action. The attorney GMACM hired to bring the foreclosure action defaulted on the counterclaims. A final judgment awarding the Macks damages against Deutsche Bank was entered, but then partially vacated—
The real horror of these events is that in October 2009, during the pendency of the foreclosure action, Mrs. Mack overdosed on sleeping pills, allegedly from the stress from the prospect of losing her home. She suffered severe kidney damage; and as a result of kidney damage, she died in October 2013. The Macks’ initial judgment on the counterclaims against Deutsche Bank includеd recovery on a claim under the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, et seq. (“RESPA”), among other things, for non-economic damages attributed to Mrs. Mack’s pain and suffering (she didn’t die until after the Macks collected their judgment against Deutsche Bank). GMACM remained an uninformed and apparently uninterested bystander throughout those proceedings. When Deutsche Bank finally learned about the judgment and moved to vacate it, the trial court vacated the portion of the judgment based on the RE SPA claim, concluding that the Macks could not maintain a cause of action against Deutsche Bank for violation of RESPA.
Before the Bar Date in these chapter 11 cases, the Macks filed proof of claim number 386 (the “Claim”) against GMACM, alleging more than $30 million in damages resulting mostly from the same conduct at issue in the counterclaims against Deutsche Bank.
The issue whether a plaintiff can recover non-economic damages from a loan servi-cer under RESPA has divided the courts, and there is no controlling authority in this Circuit. Even assuming that such damages may be recovered under RESPA, Mack may have a difficult time proving causation and damages — the RESPA violation identified by Mack occurred fairly late in the very bad chain of events in this case. The ResCap Borrower Claims Trust argues that the RESPA claim is barred by res judicata; that part is easy — the RES-PA claim is not barred. While the Court reserves the ability to revisit the issue of recovery of non-economic harm for a RES-PA violation before this claim is fully resolved, the Court concludes below that Mack can proceed with his claim for non-economic damages from GMACM for violation of RESPA. Other portions of the
I. BACKGROUND
A. Procedural History
Pending before the Court is the ResCap Borrower Claims Trust’s Objection to Proof of Claim No. 386 Filed by Barry and Cheryl Mack (the “Objection,” ECF Doc. # 6763). The Objection is supported by the Declaration of Lauren Graham De-lehey (the “Delehey Decl.,” ECF Doc. # 6763-3). Claimant Barry Mack filed an opposition to the Objection (the “Opposition,” ECF Doc. # 6834), and the ResCap Borrower Claims Trust (the “Trust”) filed a Reply (the “Reply,” ECF Doc. # 6893). The Trust seeks to expunge the $32,850,000 unsecured Claim filed against GMACM.
The Court heard argument of the Objection on May 15, 2014 (the “Hearing”). The parties disagreed whether a claim against GMACM for failure to respond to a QWR (1) had been properly raised in the Macks’ Claim, (2) was barred by res judicata, and (3) could support damages for emotional distress or pain and suffering. The Court directed the parties to brief these issues further, and the parties submitted simultaneous briefs on June 16, 2014 (ECF Doc. ##7112, 7118), along with simultaneous replies on June 30, 2014 (ECF Doc. ## 7203, 7205).
B. The Macks’ Loan
In 2006, the Macks borrowed $990,000 (the “Loan”) secured by a mortgage on their home in Florida. (Obj. ¶ 15; Dele-hey Decl. Ex. C at 7.) That Loan was securitized in a RALI Trust, with Deutsche Bank as Trustee. Residential Funding Company (“RFC”) was the master servicer, and GMACM was the subser-vicer. (ObjV 15.)
The Claim asserts that the Macks were struggling to make Loan payments. (De-lehey Decl. Ex. A, (the “Proof of Claim”).) The Macks only earned $5,800 per month in combined income, but by 2007, they were paying $5,100 per month on their subprime Loan. (Id.) They had to draw down on their retirement savings to make the Loan payments. On March 26, 2008, the Macks listed their home for sale for $1,969,000, but were unable to find a buyer. (See id. Ex. D ¶ 6.) They applied to GMACM for a Home Affordable Modification Program (“HAMP”) loan modification (id.), but were never approved. Instead, GMACM hired an attorney to file a foreclosure action, despite the fact that the Macks had never missed a Loan payment.
C.Foreclosure Initiation, Communications with GMACM, Prоperty Sale, and Emotional Distress
In August 2009, GMACM hired attorney David J. Stern to start foreclosure proceedings against the Macks. (Obj-¶ 17.) The case (the “Foreclosure Action”) named Deutsche Bank as the plaintiff; GMACM was not a party to the action. (Id.) The Trust asserts that thirteen days after Stern filed the case, GMACM realized its error in commencing the Action and instructed Stern to dismiss the complaint. (Id.) But Stern inexplicably did not immediately dismiss the action; instead, he left it open until he attempted to close the case in December 2009. (See Opp. at 6.) In the meantime, the Macks had answered the complaint and filed counterclaims. (ObjJ 18.) When Stern finally dismissed the foreclosure claim on December 9, 2009, the Macks’ counterclaims remained. (Opp. at 6.)
While the Foreclosure Action was pending, the Macks contacted GMACM several
The Macks continued to try to sell their home. After the Foreclosure Action was filed, the Macks reduced the asking price to $1,499,000 (from $1,969,000) on August 30, 2009. (Obj. Ex. D ¶ 7.) The property was sold in January 2010 for $1,156,500. (Id. ¶ 8.) The Macks had the property appraised at $1,275,000 on the day after selling them home. (Id. ¶ 9.)
Although the precise date is unclear, sometime in October 2009, Cheryl Mack took аn overdose of sleeping pills. (See Proof of Claim at 2.) The Claim alleges that Cheryl Mack was driven to the suicide attempt “[d]ue to the prospect of losing [her] home through the pending foreclosure.” (Id.; see also Opp. Ex. E (letter from Cheryl Mack’s doctor stating that as of December 1, 2009, Cheryl Mack’s “depression and drinking exacerbated secondary to facing potential foreclosure to the point of the patient becoming a danger to self and requiring hospitalization”).) She survived the attempt, but was hospitalized and suffered permanent kidney damage. (See id.) Cheryl Mack died on October 25, 2013; renal failure was listed on her death certificate as a contributing cause of death. (See Obj. Ex. F.)
D. The Counterclaims
The Macks’ counterclaims against Deutsche Bank alleged violations of RES-PA and slander of title. (Delehey Decl. Ex. C.) They claimed damages for economic losses due to the decline in value of their home — evidenced by the reductions in the sale price — as well as emotional distress and pain and suffering damages relating to Mrs. Mack’s overdose. (See Delehey Decl. Ex. D.) Deutsсhe Bank’s lawyer failed to respond to the counterclaims, and GMACM, which remained the loan servi-cer and hired the lawyer, failed to do anything either. The Trust blames this on Stern, claiming that he received the counterclaims but never forwarded them to Deutsche Bank or GMACM. (See Delehey Decl. ¶ 9.) The Florida court entered a default on the counterclaims on October 21, 2009. (Id. ¶ 10; id. Ex. D ¶ 2.) The Trust asserts that Stern never notified Deutsche Bank or GMACM of the default either. (Delehey Decl. ¶ 11.) From November 2009 until February 2011, the Macks repeatedly attempted to obtain discovery from Deutsche Bank by serving discovery requests and a motion to compel on David Stern. (See Opp. Ex. G ¶ 13.) These requests went unanswered.
Finally, on May 5, 2011, the Florida court conducted a hearing regarding the counterclaims, admitting documentary evi
According to the Trust, Deutsche Bank and GMACM only learned of the counterclaims after the final judgment was entered. (See Delehey Decl. ¶ 12.) GMACM filed a notice of appearance on June 29, 2011. (See Obj. Ex. E at 1.) On July 13, 2011, Deutsche Bank moved to set aside the final judgment and vacate the judgment on the RESPA claim on the merits. (See id.) Deutsche Bank argued that it could establish excusable neglect based on the “gross misconduct of its prior counsel.” (Opp. Ex. G at 7.) It also argued that it had meritorious defenses because (1) the Macks could not satisfy the requirements to show slander of title, and (2) Deutsche Bank never violated RESPA because RESPA only required notice to the Macks of a change in the servicer, and there was no change of servicer for the Macks’ loan. (See id. at 9-12.)
The Florida court conducted several hearings regarding Deutsche Bank’s motion, admitting additional evidence and witness testimony. (See Opp. at 8.) The Florida court heard evidence that Deutsche Bank first received notice of the final judgment on the counterclaims on May 11, 2011, and GMACM “as agent for [Deutsche Bank] had the responsibility to investigate the [f]inal [jjudgment and appropriately respond.” (See Obj. Ex. E at 1.)
On February 26, 2013, the Florida court issued a final order on Deutsche Bank’s motion. (See id.) The court found that the Macks could not maintain a RE SPA claim against Deutsche Bank, so the court vacated the RESPA damages, including the $150,000 in damages for Mrs. Mack’s pain and suffering. (Id. at 2-3.) But the court confirmed the judgment as to the loss in value of the Macks’ home resulting from slander of title. (Id. at 3.) The court reduced the Macks’ damages award to $321,970.77 plus attorneys’ fees. (Id.) At several points in its final order, the court referred to GMACM as Deutsche Bank’s agent. (See id. at 1-2.)
After both parties appealed, the Florida state appellate court affirmed the reduced judgment. (Obj. Ex. F.) Deutsche Bank moved for a rehearing, but that request was denied. (Id. Ex. G.) On March 20, 2013, the Macks acknowledged receipt of $321,970.77 in satisfaction of the judgment. (Id. Ex. H.)
E. The Objection
1. Res judicata
In their Proof of Claim, the Macks identify the basis of their Claim as “Personal Injury; Wrongful Death; Violation of RESPA; Malicious Prosecution.” (See Delehey Decl. Ex. A.) The Trust argues that recovery on these grounds is barred by res judicata. (See Obj. ¶¶ 32-39.) According to the Trust, the Claim arises out of the same nucleus of operative facts as the Florida proceeding (i.e., the alleged wrongful foreclosure and resulting damages). (Id. ¶ 36.) Even though GMACM was not a party to the Foreclosure Action, the Trust argues that GMACM was a privy of Deutsche Bank and would have faced the same potential liability as Deutsche Bank. (Id. ¶ 37.) The Trust as
2. Election of Remedies
The Trust also argues that the Macks are estopped by election of remedies. (Id. ¶¶ 40-43.) According to the Trust, Deutsche Bank’s liability was based solely on GMACM’s conduct in initiating the foreclosure. (Id. ¶ 42.) The Trust argues that Florida law prevents the Macks from obtaining a judgment against Deutsche Bank based on GMACM’s conduct and then initiating a later action against GMACM for the same conduct. (Id.) The Trust asserts that allowing the Claim would grant the Macks a double recovery. (Id.)
3. RESPA Claim
The Trust argues that the Claim does not allege plausible liability arising from a RESPA violation. RESPA provides limited private rights of action, and some are irrelevant here. (See id. ¶ 46.) A borrower does have a cause of action under RES-PA where a servicer fails to (1) notify the borrower of an assignment of servicing rights, or (2) respond to the borrower’s QWR.
F. The Opposition
1. Res judicata
Mack’s Opposition argues that res judi-cata does not bar the Claim because the Macks only received an award of economic damages for slander of title in the Foreclosure Action, and here, Mack is seeking non-economic damages for personal injury and punitive damages. (See Opp. at Ills.) Additionally, Mack argues the Claim here is based on theories of law that were not before the Florida court in the Foreclosure Action, including: (1) malicious prosecution, (2) intentional infliction of emotional distress, (3) failure to respond to a QWR in violation of RESPA,
Mack also argues that GMACM is not a privy of Deutsche Bank because GMACM was an independent contractor, not an agent. (See id. at 14.) Mack describes GMACM and Deutsche Bank as joint tort-feasors, rather than master/servant. (See id. at 15.) According to Mack, Florida law permits Mack to bring causes of action against joint tortfeasors separately. (See id. at 15-16.) Mack asserts that a judgment against one joint tortfeasor does not bar a plaintiff from relitigating all issues in a later suit against the other tortfeasor. (Id.)
2. The QWR Claim
Next, Mack argues that the alleged RE SPA liability here is based on GMACM’s failure to respond to Mrs. Mack’s October 26, 2009 letter (the “QWR Claim”). (Id. at 16-17.) The Trust agrees that the letter qualified as a QWR. (May 15, 2014 Tr. at 59:10-14 (ECF Doc. # 6998).) GMACM’s failure to respond to the letter would be a violation of RESPA. (See Opp. at 17.) Although the Macks alleged a RE SPA violation in the Foreclosure Action, that allegation did not involve a purported failure to respond to a QWR and instead centered on a different RES-PA provision.
G. The Reply
The Trust responds by arguing that even though Mack now articulates various theories of liability that were not raised in the Foreclosure Action, res judicata precludes all claims arising from the same nucleus of underlying facts, regardless whether specific causes of action were already alleged. This rule prevents a party from pursuing multiple lawsuits on the same facts when one suit could have resolved all disputes.
And even though GMACM was not technically a party to the Foreclosure Action, the Trust asserts that GMACM and Deutsche Bank shared an identity of interests. (Id. ¶ 13.) Where two parties’ interests are closely aligned, a judgment against one may extend to the other. (See id.) Contrary to Mack’s argument, GMACM was indeed acting as Deutsche Bank’s agent — a fact confirmed by the Florida court in its order modifying the judgment against Deutsche Bank. (See id. ¶ 14.) But even if GMACM and Deutsche Bank were joint tortfeasors, Florida law still precludes a plaintiff from suing one joint tortfeasor where the plaintiff has already оbtained and satisfied a judgment against the other joint tortfeasor. (See id. ¶ 15.)
Next, the Trust opposes Mack’s assertion of liability due to GMACM’s purported failure to respond to the October 2009 QWR. First, the Macks did not allege the QWR Claim in their Proof of Claim, and according to the Trust, the QWR Claim directly contradicts the Proof of Claim’s assertions that GMACM responded to the Macks’ inquiries. (See id. ¶¶ 19-21.) According to the Trust, the QWR Claim attempts to amend the Proof of Claim, but it does not arise from the same facts alleged in the Proof of Claim. Instead, the QWR Claim is premised on a new alleged fact that GMACM failed to respond to the Macks’ inquiries. (Id. ¶¶ 21-22.) The Trust also argues that even though the QWR Claim can only be stated against a servicer, the Macks could have lodged the claim in the Foreclosure Action because they were already suing Deutsche Bank exclusively for GMACM’s conduct. (See id. ¶ 20.)
At the Hearing, the Trust attacked Mack’s reliance on the QWR Claim, arguing that (1) even though he did not plead the claim in the Foreclosure Action, he could have, so it is barred by res judicata; and (2) Mack did not identify the QWR Claim in the Proof of Claim, and instead alleged that GMACM was responding to the Macks’ inquiries. (See May 15, 2014 Tr. at 27:5-24; 56:10-17.) Mack’s counsel responded that Florida courts do not treat res judicata uniformly, and some Florida courts may actually permit a plaintiff who has recovered a judgment against one joint tortfeasor to pursue a new action on the same facts against the other tortfeasor. (See id. at 44:16^49:1.) Mack’s counsel also argued that the Macks had no reason to believe that Deutsche Bank should be held responsible for GMACM’s failure to respond to a QWR, so the Macks did not lodge the QWR Claim against Deutsche Bank. (See id. at 54:3-15.) Additionally, Mack’s counsel asserted that though the Proof of Claim does not mention a QWR Claim, “the proof of claim is just a brief itemization; it was not the details that we have of everything required to prove a case.” (Id. at 61:12-15.) Mack’s counsel also discussed a Circuit split regarding whether a plaintiff can recover personal injury damages as part of a RESPA claim. (See id. at 34:4-10.)
At the conclusion of the argument, the Court directed counsel to submit supplemental briefs addressing whether the Macks’ Proof of Claim properly identifies the QWR Claim, and if not, whether the Court should permit Mack to amend the Claim now. (See id. at 68:3-12.) The Court also directed counsel to brief the Circuit split regarding recovery of non-economic damages on RESPA claims. (See id. at 68:13-17.)
I. The Supplemental Briefs
The Trust argues in its supplemental brief that the Proof of Claim did not raise the QWR Claim. (See ECF Doc. # 7118 ¶¶ 3-4.) The Trust also argues that the Court should not permit amendment now because the QWR Claim does not relate back to the facts alleged in the Proof of Claim, and instead conflicts with the Proof of Claim. (See id. ¶ 9.) Additionally, the Trust argues, allowing a claim amendment could diminish recoveries to other creditors, and the Macks had no reasonable excuse for failing to allege the QWR Claim in the Proof of Claim. (See id. ¶ 11.)
The Trust also argues that even though some Circuits allow non-economic damages for RESPA claims, the better rule is to preclude those damages because even though RESPA is remedial, the Act is intended to serve both consumer and industry purposes, as opposed to statutes with the sole purpose of protecting consumers. (See id. ¶¶ 17-19.) Moreover, other statutes that allow for personal injury damages protect vital interests like privacy and civil rights. (See id. ¶ 20.) Here, though, the Trust argues, the statute is protecting a borrower’s interest in receiving a response to a letter, and the failure to respond to the letter would not ordinarily be expected to trigger the type of emotional harm that would be implicated by a violation of privacy or civil rights. (See id.) Finally, the Trust argues that the alleged damages relating to the QWR Claim are simply implausible because Mrs. Mack overdosed in October 2009, but RESPA, as enacted at the time, only required GMACM to acknowledge receipt of the QWR by November 16, 2009, and GMACM did not actually need to respond to the QWR until December 28, 2009. (See ECF Doc. # 7205 at 8-9 n.7 (citing 12 USC §§ 2605(e)(1)(A), (e)(2) (2009) (amended in 2010 to reduce deadlines from
Mack responds that the Proof of Claim fairly put the Debtors on notice that the Macks were claiming injury due in part to a RESPA violation. (See ECF Doc. # 7112 at 7.) Even though the Proof of Claim did not identify the precise QWR as issue, the Proof of Claim alleged a pattern of misleading, possibly deceptive, communications from GMACM regarding the Foreclosure Action. (See id. at 7-8.) Failure to respond to a QWR about the Foreclosure Action, Mack argues, falls within that pattern of conduct. (See id. at 7.) Additionally, Mack argues that GMACM had actual knowledge of the QWR Claim because in November 2011, the Macks’ attorney and Deutsche Bank’s attorney asked Mrs. Mack about the QWR at a deposition in the Foreclosure Action. (See id. at 9 (citing ECF Doc. # 7112 Exhibit B (attaching excerpts from a transcript of Mrs. Mack’s deposition in the Foreclosure Action)).)
As for RESPA damages, Mack argues that the cases allowing emotional distress damages have compared RESPA with the Fair Debt Collection Practices Act (“FDCPA”). (See id. at 6.) Courts interpreting the FDCPA have allowed damages for emotional distress under 15 U.S.C. § 1692(k), which permits recovery of “actual damages.” (See id.) That same term — “actual damages” — is used in RES-PA and, Mack argues, should be interpreted similarly for RESPA to include emotional distress damages. (See id.) Mack also argues that GMACM itself has conceded in other cases that RESPA allows an award of emotional distress damages. (See id. (citing Catalan v. GMAC Mortg. Corp.,
II. DISCUSSION
A. Claims Objections
Claims objections have a shifting burden of proof. Correctly filed proofs of claim “constitute prima facie evidence of the validity and amount of the claim.... To overcome this prima facie evidence, an objecting party must come forth with evidence which, if believed, would refute at least one of the allegations essential to the claim.” Sherman v. Novak (In re Reilly),
Bankruptcy Code section 502(b)(1) provides that claims may be disallowed if “unenforceable against the debtor and property of the debtor, under any agreement or applicable law.” To determine whether a claim is allowable by law, bankruptcy courts look to “applicable nonbank-ruptcy law.” In re W.R. Grace & Co.,
Res judicata, or claim preclusion, provides that “a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.” Burgos v. Hopkins,
Florida courts apply res judicata to default judgments. See Wharton v. Shiver (In re Shiver),
For res judicata to apply, a court must find “(1) identity of the thing sued for; (2) identity of the cause of action; (3) identity of persons and parties; and (4) identity of the quality or capacity of the persons for or against whom the claim is made.” Holt v. Brawn's Repair Serv., Inc.,
To determine the identity of causes of action, courts “consider the relationship between the facts and issues asserted to constitute a single transaction.” DOT,
Even where the parties are not identical, a defendant in an action may be bound by an earlier judgment to which that defendant was not a party if the defendant participated in the earlier case or was virtually represented in the earlier action by the party of record. See Linn-Well Dev. Corp. v. Preston & Farley, Inc.,
Mack argues that even where parties are in privity, if they are joint tortfeasors, res judicata does not bar a suit against one tortfeasor after the other tortfeasor had already been sued. Mack cites Mitchell v. Edge,
Earlier eases from the same appellate district as the Mitchell court applied res judicata to bar a suit against one joint tortfeasor where an earlier judgment against the other joint tortfeasor had already been satisfied. See, e.g., Roberts v. Rockwell Int’l Corp.,
The master/servant nature of GMACM’s relationship with Deutsche Bank also weighs in favor of applying res judicata here. A judgment entered against a master also bars a plaintiff from bringing a new action on the same facts against the servant. See Hinton v. Iowa Nat. Mut. Ins. Co.,
As for the last prong, the quality of the parties against whom the claims are made will be identical if the first party “had the incentive to adequately litigate the claims in the same character or capacity as would the parties to the [first action].” Radle v. Allstate Ins. Co.,
Mack asserts various theories of liability springing from the initiation of the Foreclosure Action, including (1) personal injury, (2) wrongful death, (3) malicious prosecution, (4) intentional infliction of emotional distress, and (5) violation of RESPA for failure to notify the Macks of a change of the servicer their Loan. Each of these theories arises from the same nucleus of operative facts that gave rise to the Macks’ counterclaims against GMACM’s privy — Deutsche Bank — in the Foreclosure Action.
Even though Mrs. Mack had not yet died when the Macks pursued their counterclaims, Mack’s counsel concedes that where a party has taken a personal injury case to judgment, that party’s subsequent death from the personal injury does not give rise to a new cause of action. (See May 15, 2014 Tr. at 41:12-42:19.) Although the Macks did not allege a separate personal injury cause of action in their counterclaims, (1) they could have; and (2) they presented evidence about Mrs. Mack’s pеrsonal injury in connection with their RESPA claim. Mack’s personal injury and wrongful death claims here are barred by res judicata because the personal injury claim could have been lodged during the Foreclosure Action, and the wrongful death claim arises from the same nucleus of operative facts. The malicious prosecution and intentional infliction of emotional distress claims are similarly barred by res judicata; they undoubtedly relate to the initiation of the Foreclosure Action, which was explicitly at issue in the Macks’ slander of title counterclaim. Finally, any claim regarding a violation of RESPA for failure to notify the Macks of a transfer of servicing of their Loan was
C. The RESPA Claim Based on the QWR Is Not Barred by Res Judi-cata
The RESPA claim based on the QWR stands differently from the claims discussed above, however, and the Court concludes that res judicata does not apply to bar the QWR Claim. That claim does not arise from the same nucleus of opеrative facts as the Foreclosure Action. In the Foreclosure Action, the Macks alleged damages for slander of title and for an alleged failure to inform them that the owner or servicer of their Loan had changed — those claims arose from the initiation of the Foreclosure Action, and from an alleged non-disclosure before the Foreclosure Action was commenced. GMACM’s failure to respond to the Macks’ October 26, 2009 QWR does not arise from the same facts. The Macks sent the QWR well after GMACM initiated the Foreclosure Action with Deutsche Bank as the named plaintiff. The essential facts for the QWR Claim (a valid request was sent and GMACM failed to respond) are not the same as those essential to the Macks’ counterclaims in the Foreclosure Action, so there is no identity of the causes of action. See Cole v. First Dev. Corp. of Am.,
The Court is unpersuaded by the Trust’s argument that the Macks could have alleged the QWR Clаim in the Foreclosure Action, and are therefore barred from asserting it here. Deutsche Bank would not have been a proper subject of the QWR Claim because it was not the loan servicer. See McCarley v. KPMG Int’l,
D. Mack’s QWR Claim is Not Barred By the Election of Remedies
The Trust argues that the Macks’ Claims are also barred from recovery by the election of remedies. Election of remedies is a doctrine of estoppel that “prevent[s] double recoveries for a single wrong.” Ehrman v. Mann,
In Ehrma/n, the court gave an example of the inconsistency required to invoke the election of remedies. The Ehr-man court cited a case where a plaintiff sued two different parties regarding thе ownership of a yacht. See id. at 1013 (citing Barbe v. Villeneuve,
E. The Proof of Claim is Deemed Amended to Include the QWR Claim
The Macks did not describe a QWR Claim in their Proof of Claim. Even so, the Court will deem the Proof of Claim amended to assert the claim now. Federal Rule of Bankruptcy Procedure 3003(c)(3) directs bankruptcy courts “to establish a bar date beyond which proofs of claim are disallowed in a chapter 11 case.” In re Enron Creditors Recovery Corp.,
In the Second Circuit, amendment to a claim is
freely allowed where the purpose is to cure a defect in the claim as originally filed, to describe the claim with greater particularity, or to plead a new theory of recovery on the facts set forth in the original claim. However, the court must subject post bar date amendments to careful scrutiny to assure that there was no attempt to file a new claim under the guise of amendment.
Integrated Res., Inc. v. Ameritrust Co., N.A. (In re Integrated Res., Inc.),
Courts apply a two-step inquiry when considering whether to allow post bar date amendments to proofs of claim. See Midland Cogeneration Venture Ltd. P’ship v. Enron Corp. (In re Enron Corp.),
(1) undue prejudice to opposing party; (2) bad faith or dilatory behavior on the part of the claimant; (3) whether other creditors would receive a windfall were the amendment not allowed; (4) whether other claimants might be harmed or prejudiced; and (5) the justification for the inability to file the amended claim at the time the original claim was filed.
Integrated Res.,
The Trust argues that the QWR Claim does not relate back to the Proof of Claim because the Proof of Claim only alleged actual communications between the Macks and GMACM, not GMACM’s failure to resрond to the Macks. But the Proof of Claim alleges liability based on a RESPA violation and on GMACM’s deceptive communications with the Macks. (See Delehey Deck Ex. A.) Failing to respond to a QWR falls sufficiently within the same category of conduct to relate back to the Proof of Claim. The QWR Claim supplements the Macks’ description of GMACM’s conduct in communicating (or failing to communicate) with the Macks.
The Court also finds that it is equitable to allow Mack to assert the QWR Claim. GMACM’s RESPA violation for failure to respond the QWR is not disputed. The difficult issues here are whether Mack can recover non-economic damages for a RES-PA violation, and if the law permits such recovery, whether Mack can sufficiently establish causation and damages. The Court does not underestimate the difficulty of those issues. While the Proof of Claim takes an expansive view of what Mack believes he should be entitled to recover, the actual scope of the RESPA claim based on the QWR is fairly narrow. The Court does not underestimate the consequences that the Macks suffered as а result of GMACM’s failure to prevent the wrongful foreclosure from proceeding in the manner it did. But the only QWR— and, therefore, the only basis for the RES-PA claim—was sent by the Macks to GMACM on October 26, 2009; GMACM did not respond. As previously stated, GMACM had until November 16, 2009 to acknowledge receipt of the QWR, and until December 28, 2009 to respond to the request. Mrs. Mack’s overdose occurred on in October 2009, before the acknowledgement of receipt or the response to the QWR was required. In light of the timing, it is hard to see what damages Mack can recover relating to the consequences of the overdose, assuming that non-economic damages are recoverable. Still, the Court does not believe it can resolve the issue of causation and damages as a matter of law at this stage of the case.
F. Mack May Pursue Emotional Distress Damages in the QWR Claim
The QWR Claim arises under 12 U.S.C. § 2605(e). Damages for a violation of that provision are defined in section 2605(f) to include “any actual damages to the borrower as a result of the failure” to reply to a QWR. 12 U.S.C. § 2605(f)(1)(A).
The courts that allow for recovery of emotional distress damages note that RESPA has remedial purposes. See, e.g., Rawlings v. Dovenmuehle Mortg. Inc.,
Additionally, the Trust contrasts the interests at stake in RESPA with those in statutes allowing for emotional distress damages as “actual damages.” (See ECF Doc. #7118 ¶ 20.) For example, the Fair Housing Amendments Act protects individuals from housing discrimination and allows for emotional distress damages as “actual damages.” See United States v. Balistrieri,
The Court agrees with the Trust that the analysis does not end with the designation of RESPA as a remedial statute. But the Court also agrees with other courts that have allowed recovery of emotional distress damages in RESPA cases. First, although there are several district court opinions discussing RESPA and emotional distress damages, few circuit courts have addressed the issue. Of the circuits that have addressed the issue, two have indicated that emotional distress damages should be allowed, while no circuit appears to have ruled that emotional damages are not allowed. See Houston v. U.S. Bank Home Mortg. Wisconsin Servicing,
Second, looking beyond the mere designation of RESPA as remedial, the Court still concludes that the consumers’ interests at stake in RESPA warrant a consumer-oriented interpretation of “actual damages” to allow for emotional distress damages in appropriate cases. The statute requires servicers to provide a substantive response to borrowers who believe that their accounts are in error. 12 U.S.C. § 2605(B)(ii). This information is not trivial — an error on a borrower’s account can have significant consequences to a borrower, leading to improper charges, misapplied payments, or even wrongful foreclosure. The Court can imagine few things more important to borrowers than keeping their homes. Thus, interpreting “actual damages” in favor of consumers seems appropriate.
This case demonstrates exactly why responses to QWRs can be crucial. If GMACM had responded to the QWR, it could have saved all of the parties much grief. The Trust asserts that GMACM instructed its lawyer to dismiss the Foreclosure Action shortly after initiating the case in August 2009. GMACM should have been alarmed to learn from the QWR, sent in October 2009, that the Foreclosure Action was still continuing. If it had complied with its statutory duty, GMACM would have investigated and responded no later than December 28, 2009. Since GMACM had already allegedly acknowledged by telephone with Mrs. Mack that the Foreclosure Action was filed by mistake and should have be dismissed, there were no difficult or complex issues, or lender policies that could have made an appropriate response difficult or time-consuming to determine. GMACM has admitted that the Macks were not in default. What else did GMACM need to know to stop the chain of events that it set in motion? GMACM could and should have promptly investigated further, and perhaps most importantly, fired Stern, the lawyer GMACM had hired and who failed to carry out GMACM’s directive to dismiss the foreclosure action. Instead, GMACM, by its inaction, allowed the case to linger.
None of this is to say that Mack has an easy rоad ahead of him. He faces an uphill battle in demonstrating causation and damages — he must separate the emotional distress resulting from the failure to respond to the QWR from the emotional distress due to the Foreclosure Action. But the events here demonstrate why a borrower should be entitled to recover emotional distress damages under RES-PA. Faced with a maddening and admittedly unwarranted foreclosure, the Macks got nothing but silence or misinformation from GMACM.
III. CONCLUSION
Mack may not assert against GMACM any damages relating to the commencement of the Foreclosure Action or the decline in value of the Macks’ property for which the Macks have already been compensated by Deutsche Bank. Those claims are barred by res judicata. So, too, are claims that the Macks could have raised in their counterclaims. The Court sustains the Objection to the portions of the Claim arising from the initiation of the Foreclo
The Court therefore SUSTAINS IN PART AND OVERRULES IN PART the Objection. Only Mack’s QWR Claim survives. Counsel for the parties are directed within 14 days of the entry of this Opinion and Order to confer by telephone about the possibility of settlement, or entering into mediation. The Court will also hold a case management and scheduling conference, by telephone, on August 13, 2014, at 2:00 p.m. (Eastern Standard Time).
IT IS SO ORDERED.
Notes
. Mr. & Mrs. Mack together filed the proof of claim, but Mrs. Mack died on October 25, 2013, apparently from renal failure. Mr. Mack carries on the fight to recover on the Claim. The death certificate and other relevant documents are attached to the Opposition. Mr. Mack will be referred to in the singular for arguments made (after Mrs. Mack died) in the Opposition or during the hearing on the Objection; the Macks will be referred to in the plural for arguments made in the proof of claim.
. A Qualified Written Request is a "written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer that—
(i) Includes, or otherwise enables the servicer to identify, the name and account of the borrower; and
(ii) 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.”
12 U.S.C. § 2605(e)(1)(B). After receiving a Qualified Written Request, a servicer has thirty days to correct any errors identified by the borrower or provide the borrower with a written response including the reasons why the servicer believes that its determination rеgarding the borrower’s account is correct, and the name and telephone number of any employee of the servicer who can assist the borrower. Id. § 2605(e)(2)(A)-(B). The ser-vicer may extend this thirty-day period for an additional fifteen days if the servicer notifies the borrower and provides reasons for the delay. Id. § 2605(e)(4).
Failing to respond to a Qualified Written Request subjects a servicer to "actual damages to the borrower as a result of the failure” and "any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $2,000.” Id. § 2605(f)(1).
. The Macks alleged RESPA violations in the Foreclosure Action, but not this particular theory of liability. In addition, the state trial court vacated the RESPA judgment against Deutsche Bank, concluding that no RESPA claim could be asserted against Deutsche Bank.
. Mack concedes that he is unlikely to receive the punitive damages if he can only proceed with the QWR Claim, and the punitive damages comprise the vast majority of Mack's Claim amount. (See ECF Doc. # 7203.)