In Morgan v. Caliber Home Loans, Inc., 2022 U.S. Dist. LEXIS 208704 (D. Md., Nov. 16, 2022, No. 8:19-cv-02797-PX), the United States District Court for the District of Maryland (“the Court”) issued a November 16, 2022 opinion reaffirming fundamental principles of the Federal Real Estate Settlement Procedures Act (“RESPA”), and further demonstrating that the individualized nature of a servicer’s response to a borrower’s qualified written request (“QWR”) under RESPA is often fatal to class claims.

This matter concerned two Plaintiffs, Rogers Morgan (“Morgan”) and Patrice Johnson (“Johnson”).  Morgan had sent a letter to Defendant Caliber Home Loans, Inc. (“Defendant”), alleging that it had erroneously listed various debts on his credit report and requesting that it cease doing so.  Upon receiving this letter, Defendant continued to report these same debts unchanged for at least two months.  Johnson also sent Defendant a letter, challenging Defendant’s denial of her request for a loan modification and asking that Defendant cease reporting what she alleged to be negative credit information for sixty days.  Upon receipt, Defendant declined to consider the loan denial and continued reporting her credit information unchanged.

Based on these events, Morgan and Johnson (collectively “Plaintiffs”) brought suit against Defendant, alleging it had violated RESPA’s sections 12 U.S.C § 2605(e)(3) and (e)(1)(B), which requires loan servicers who receive a QWR disputing an issue with the servicing of a borrower’s loan to halt communicating any adverse credit information related to that payment for sixty days.  To qualify as a QWR, correspondence must allow the loan servicer to identify the name and account of the borrower and: (1) provide a statement of the reasons the borrower believes their account is in error; or (2) provide sufficient detail to the servicer regarding any other information sought by the borrower.  Servicers are also barred from reporting, for sixty days, any adverse information regarding payments in which a QWR asserts there has been an error.  12 CFR §§ 1024.35(a), 1024.35(i)(1).

Plaintiffs contended that their letters to Defendant constituted QWRs and that Defendant had violated the law by continuing to report adverse credit information after receiving the QWRs.  Plaintiffs also claimed they represented a putative class that was challenging Defendant’s “policy and practice” of continuing to report negative credit information after having received QWRs.  Defendant moved to dismiss the suit, arguing that Plaintiffs’ correspondence did not qualify as a QWR and that all claims, including the class claims, thus necessitated dismissal.  The Court agreed and dismissed Plaintiffs’ suit.

Plaintiffs appealed the Court’s dismissal to the Fourth Circuit, which affirmed the dismissal of Johnson’s claims, holding that she had never submitted a valid QWR because “correspondence limited to the dispute of contractual issues that do not relate to the servicing of the loan, such as loan modification applications, do not qualify as QWRs.”  However, the Fourth Circuit held that Morgan’s letter did constitute a QWR, as it “provided sufficient detail regarding the alleged payment servicing error.”  The matter was then remanded back to the Court for further proceedings.

On remand, Defendant moved to strike any remaining class allegations related to Morgan’s claims, contending that a proposed class was no longer ascertainable.  The Court agreed, noting that Plaintiffs’ Complaint identified the relevant class as “all residential loan borrowers for whom [Defendant] received a QWR . . . in the three years immediately preceding” the action.  The Court held that as determining “whether any particular correspondence qualifies as a QWR rests on the information included within it,” using this class definition would impermissibly require “individual examination of each correspondence”–in effect, “mini-trials” on each correspondence–and thus the class certification must fail, as Morgan had failed to provide an “administratively feasible way to proceed without a fact-intensive inquiry that would defeat the purpose of class certification.”

Morgan attempted to oppose this by seeking to “narrow the class definition to include only [] borrowers” whom Defendant had sent a letter “in a form substantially similar” to one Morgan had received from Defendant acknowledging receipt of his original correspondence.  However, the Court reviewed the letter Morgan had received, noting that it did not indicate it was only provided to parties who had sent a valid QWR, failed to indicate the purpose of the correspondence that had been received, and consisted only of a generic message that it was being sent “in accordance” with RESPA.  Thus, due to its “generic nature . . . it alone d[id] not make the class ascertainable.”  Indeed, the Court held that to “define the class as all customers who received [this] letter . . . [would] render[] the class definition too broad for class-wide treatment.”

Finally, the Court also held that Morgan’s class allegations had failed to demonstrate the existence of a singular unifying class-wide legal question, as while he had alleged that Defendant “maintained a practice and ‘policy’ of continued reporting of adverse and disputed credit information after receiving a QWR,” such allegation could not, alone, provide a “‘resolution of the litigation’ as to the class.”  Instead, for each purported class member, the Court will still be required to conduct an individual analysis to determine whether Defendant had “continued reporting information about a payment that was disputed in a QWR,” noting that this added “layer of transaction-specific inquiry–examining the content of the credit report and comparing it with the qualified written request–would dominate the litigation.”  Therefore, because “individual factual determinations” would still constitute the predominant portion of the action under this question, Morgan had failed to demonstrate that “a predominant legal question favors class-wide treatment.”

The Court thus granted Defendant’s motion to strike the class allegations, but did so without prejudice in order to allow Morgan an opportunity to “seek leave to amend the Complaint . . . if possible.”

Takeaways

This decision mainly serves to highlight the unique difficulties inherent in certifying a potential RESPA class action, as each potential member’s QWR correspondence is itself the primary form of evidence justifying their inclusion in the suit, yet a court is constrained from examining or relying on that correspondence.  It also reaffirms the prior settled holding that a valid QWR cannot consist of anything unrelated to the actual servicing of a loan itself, as even inquiries regarding loan-specific issues such as modifications, requests, or denials will not fall within the ambit of a QWR.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Kevin Hakansson at khakansson@riker.com, James Mazewski at jmazewski@riker.com or Kori Pruett at kpruett@riker.com.