Kimtylery HENG, et al., Plaintiffs-Appellants, v. HEAVNER, BEYERS & MIHLAR, LLC, Defendant-Appellee.; Justin Gierke, on behalf of plaintiff and a class, Plaintiff-Appellant, v. Codilis & Associates, P.C., Defendant-Appellee.; Laura Zuniga, et al., Plaintiffs-Appellants, v. Pierce and Associates, Defendant-Appellee.
Nos. 16-1668, 16-2051 & 16-2052
United States Court of Appeals, Seventh Circuit.
Argued October 27, 2016. Decided February 17, 2017
849 F.3d 348
III. CONCLUSION
Roake failed to state a plausible claim to relief under the First and Fourteenth Amendments. He did not show that he was disciplined for engaging in constitutionally protected speech, or that he was deprived of a constitutionally protected liberty or property interest without due process. The district court properly dismissed Roake‘s action, and we AFFIRM.
Stephen R. Swofford, David M. Schultz, Attorneys, Hinshaw & Culbertson LLP, Chicago, IL, for Defendants-Appellees.
Before WOOD, Chief Judge, and BAUER and MANION, Circuit Judges.
BAUER, Circuit Judge.
In these three separate cases consolidated on appeal, appellants challenge the dismissal of their claims brought under the Fair Debt Collection Practices Act,
I. BACKGROUND
We need not discuss the specifics for each individual case because the underlying facts are consistent (the exception to this is the procedural history in Heng). Appellants obtained a Federal Housing Administration-insured residential mortgage loan and subsequently defaulted due to financial hardship.1 Appellees are law firms that represent the loan servicing agents; they filed foreclosure complaints in Illinois state court against appellants. These complaints generally followed the statutory complaint template set forth in Section 15-1504(a) of the Illinois’ Mortgage Foreclosure Law. See
Appellants filed suit against appellees, alleging violations of the FDCPA. According to the complaints, the FHA does not authorize deficiency judgments where, as here, appellants suffered a financial hardship. Attached as an exhibit to their complaints, appellants included a letter from the FHA responding to a Freedom of Information Act request. In part, the FHA‘s response provided:
There have been zero foreclosed FHA loans in Illinois in which the pursuit of a deficiency judgment was authorized. FHA is not currently pursuing deficiency judgments . . . . [T]he Department has determined it is not [in] the best
interests of FHA to routinely seek deficiency judgments in connection with [claims without conveyance of title or “CWCOT“] claims. Therefore, FHA is not requesting that the mortgagees pursue any deficiency judgments in connection with CWCOT claims, unless FHA makes a special request pursuant to 24 C.F.R. [§] 203.369 . . . . Since FHA is not currently pursuing deficiency judgments, we do not maintain any reports tracking deficiency judgments.
Appellees filed a motion to dismiss, which the district court granted under
We turn to certain facts pertaining only to the Heng case. As stated above, appellants filed a complaint and appellee filed a motion to dismiss. Shortly thereafter, appellants filed a first amended complaint on December 12, 2015. On December 23, 2015, appellee filed a motion to dismiss the amended complaint. Appellants received a letter dated December 23, 2015, from appellants’ loan servicing agent who was represented by appellee. This letter provided an explanation about deficiency judgments and an offer to waive a deficiency judgment.
On February 5, 2016, appellants filed a response to the second motion to dismiss, which included the letter as an exhibit and allegations concerning it. Appellee filed both a reply and a motion to strike on February 19, 2016. Appellants were not given an opportunity to oppose the motion to strike, which the district court granted without comment.
On February 25, 2016, appellants filed a motion to reconsider the district court‘s order granting appellee‘s motion to strike and, alternatively, requested leave to amend the first amended complaint to include the exhibit. On March 23, 2016, the district court denied appellants’ motion to reconsider and the alternative request for leave to amend, and granted appellee‘s motion to dismiss.
II. DISCUSSION
On appeal, appellants challenge the dismissal of their claims that were brought under the FDCPA. Appellants in the Heng case separately challenge the order granting appellee‘s motion to strike the exhibit attached to their response to appellee‘s motion to dismiss; they also challenge the denial of their request for leave to amend.
A. FDCPA Claim
We review de novo a district court‘s decision granting a motion to dismiss under
The main issue is whether appellants stated a plausible claim under the FDCPA. The FDCPA provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”
Appellants contend that appellees violated the FDCPA by alleging in their state-court foreclosure complaints that appellants are “claimed to be personally liable for the deficiency, if any,” and by requesting “[a] personal judgment for a deficiency, if sought.” See
As a preliminary matter, we note that the crux of appellants’ argument rests on the assumption that unless the FHA provides prior authorization to appellees to pursue a deficiency judgment against appellants, appellees are prohibited from engaging in the complained of conduct. We will therefore see if appellants have any plausible basis for this assumption.
First, the regulation governing deficiency judgments provides that “the Secretary may require the mortgagee diligently to pursue a deficiency judgment in connection with any foreclosure.”
Second, appellants provide references to HUD Mortgagee Notice 1994-89, and Mortgagee Letters 2006-15, and 2013–15. However, although neither party pointed this out, these documents are out-of-date; the letters and notice were superseded by HUD‘s FHA Single Family Housing Policy Handbook 4000.1 (or “Handbook“).2 These Mortgagee Letters and Notice also do not help appellants’ position.
Lastly, the Handbook provides that “[u]nless specifically requested by FHA,
Appellants have not identified any law, regulation, or FHA policy requiring a mortgagee to obtain authorization from the FHA prior to including the two allegations at issue in their state-foreclosure complaint.4 Appellants have failed to distinguish themselves from all other Illinois mortgagors who have defaulted on their payments and had Illinois-statutory-short-form complaints filed against them. Because the predicate to appellants’ arguments is absent, we need not address them. Appellants have failed to state a plausible claim under the FDCPA.
B. Procedural Claims in Heng
1. Motion to Strike
The Heng appellants contend that the district court erred in granting appellee‘s motion to strike an exhibit that was included in appellants’ response to appellee‘s motion to dismiss the amended complaint. “A district court‘s grant or denial of a motion to strike is reviewed for an abuse of discretion.” Zuppardi v. Wal-Mart Stores, Inc., 770 F.3d 644, 647 (7th Cir. 2014) (citation omitted).
The district court granted appellee‘s motion to strike the exhibit without comment, and it did not give appellants an opportunity to respond. However, the district court‘s reasoning for granting the motion to strike was provided in its order denying appellants’ motion to reconsider the order granting the motion to strike. The district court noted that the exhibit was sent by a non-party and that it was not mentioned in the complaint. The district court also found that the exhibit was not material to the complaint, and that the exhibit “did not comply with Rule 12(b)‘s requirement that the Court‘s consideration of motions to dismiss is limited to the facts alleged in the complaint.” The district court reasoned that because it did not construe the motion as one for summary judgment, it was required to disregard outside material submitted by appellants.
Appellants argue that they were entitled to offer the exhibit in response to appellee‘s motion to dismiss in light of our decisions in Defender Security Co. v. First Mercury Insurance Co., 803 F.3d 327 (7th Cir. 2015), and Early v. Bankers Life & Casualty Co., 959 F.2d 75, 79 (7th Cir. 1992). In Defender Security Co., we noted that “nothing prevents a plaintiff opposing dismissal from elaborating on the complaint or even attaching materials to an opposition brief illustrating the facts the
While our precedent makes it clear that appellants have “much more flexibility in opposing a Rule 12(b)(6) motion,” Geinosky v. City of Chi., 675 F.3d 743, 745 n.1 (7th Cir. 2012), the flexibility is not without limitations. Materials or elaborations in appellants’ brief opposing dismissal may be considered, so long as those materials or elaborations are “consistent with the pleadings.” Geinosky, 675 F.3d at 745 n.1; see also Early, 959 F.2d at 79 (“[A] plaintiff is free . . . to allege without evidentiary support any facts he pleases that are consistent with the complaint . . . [.]“).
The district court did not abuse its discretion when it granted appellee‘s motion to strike the exhibit. The district court found that the exhibit was not material to the complaint and was a letter sent by a non-party; in other words, those materials and elaborations were not consistent with the complaint. While the district court was incorrect in reasoning that it was required to disregard the outside material if it did not convert appellants’ response to a motion for summary judgment, it does not negate the overall finding that the exhibit was not material. Furthermore, as we have considered appellants’ exhibit and elaborations as part of our de novo review of the district court‘s futility-based denial of appellants’ request for leave to amend, “we are all the more at ease in holding that the district court properly exercised its discretion in striking [the exhibit].” McLeod v. Arrow Marine Transp., Inc., 258 F.3d 608, 617 (7th Cir. 2001).
2. Leave to Amend
As a general rule, a district court “should freely give leave [to amend] when justice so requires.”
At first glance, the district court‘s decision on this point is fuzzy. The district court mentioned only the “fail[ure] to cure the pleading‘s deficiency” category of denials. There is, however, no indication in the record that the district court ever pointed out any deficiencies to appellants. Appellants also appear to have filed the first amended complaint as a matter of course. See
Appellants contend that the exhibit shows how the false representations made in the foreclosure complaint may be misused to the detriment of an unsophisticated consumer. Appellants claim that this detriment would not have otherwise occurred had appellee accurately stated the need for FHA‘s authorization prior to seeking a deficiency judgment in the foreclosure complaint. In other words, appellee‘s false representations in the foreclosure complaint allowed the loan servicing agent to capitalize on those false representations.
Appellants’ argument is without merit. The proposed significance of the exhibit is premised on appellants’ failed assumption that a mortgagee of an Illinois, FHA-insured loan must have FHA authorization prior to including the two allegations at issue in their state-foreclosure complaint. Moreover, not only was the exhibit sent by a non-party to appellants, but it was sent over a year after the foreclosure complaint was filed. There is no basis in law for appellants’ theory on how a non-party‘s representations may be probative as to how an unsophisticated consumer perceives appellee‘s year-old foreclosure complaint. Because what appellants sought to include in an additional amended complaint would not make their FDCPA claim plausible, we conclude that an amendment would be futile.
III. CONCLUSION
For the foregoing reasons, we AFFIRM each district courts’ grant of appellees’ motion to dismiss the appellants’ complaints. We AFFIRM the district court‘s grant of appellee‘s motion to strike an exhibit that was included in appellants’ response to appellee‘s motion to dismiss the amended complaint. We AFFIRM the district court‘s denial of appellants’ request for leave to amend.