McGlinchey Commercial Law Bulletin
What damages are recoverable for a loan servicer’s failure to completely respond to a Qualified Written Request?Read Time: 7 mins
McGlinchey’s Commercial Law Bulletin is a biweekly update of recent, unique, and impactful cases in state and federal courts in the area of commercial litigation. We’re pleased to expand our Commercial Law Bulletin from its previous coverage of Ohio case law to include additional areas in McGlinchey’s footprint.
RESPA Actual Damages
Miller v. Bank of New York Mellon, 6th Cir. No. 21-1126, 2021 U.S. App. LEXIS 35755 (Dec. 1, 2021)
In this appeal, the Sixth Circuit affirmed the district court’s dismissal of the borrower’s RESPA claims, agreeing that since the loan servicers failure to provide all of the information sought in the QWR did not cause Plaintiff any damages to support a RESPA violation.
The Bullet Point: At issue in this case was whether the borrower suffered sufficient damages to support her claims under the Real Estate Settlement Practices Act (RESPA). Here, the borrower brought suit against her mortgagee and loan servicer, alleging that the defendants failed to adequately respond to her qualified written requests (QWR) as required by 12 U.S.C. § 2605(e). The district court determined the borrower failed to plead sufficient damages to constitute an injury-in-fact and dismissed her claims for lack of standing, after which the borrower filed the instant appeal. In the context of RESPA, “to establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’”
In this case, the borrower alleged violations of 12 U.S.C. § 2605(e), asserting “defendants did not provide all of the information sought in the letters,” and that she “was inconvenienced and incurred expenses in seeking the information that defendants refused to provide.” For that alleged violation, the borrower requested actual and statutory damages. Notably, the borrower did not assert that the defendants violated a statutory deadline or a procedural requirement, but that while the defendants replied to her QWR, they provided information responsive to only some of her requests. U.S.C. § 2605(e) does not require a servicer to respond in full to a borrower’s request. Rather, it requires a lender to provide “information requested by the borrower or an explanation of why the information requested is unavailable or cannot be obtained by the servicer.” 12 U.S.C. § 2605(e)(2)(C)(i). Therefore, as the Court explained, merely not providing some of the information sought in the QWR cannot be enough to seek damages. The Court noted that the borrower also failed to provide any theory for how the alleged violations caused her asserted actual damages. In fact, the borrower failed to “put forward anything resembling a misapplied payment or other error that [the defendants] failed to correct in its responses. Without more, [the borrower] has not adequately plead a concrete injury-in-fact to survive dismissal.”
City of Akron v. Baum, 9th Dist. Summit No. 29882, 2021-Ohio-4150
In this appeal, the Ninth Appellate District affirmed in part and reversed in part the trial court’s decision, agreeing that an implied-in-fact contract existed between the City and the property owner because it provided utility services to the property, which the property owner accepted.
The Bullet Point: In Ohio, an action on an account is founded on a contract, express or implied, and is appropriate where the parties have conducted a series of transactions for which a balance remains to be paid. To prevail on a claim for action on an account, a plaintiff must establish each of the essential elements of a contract claim. The difference between a contract claim involving an implied-in-fact contract as opposed to an express contract is the form of proof that is required to establish each contractual element. “In express contracts, assent to the terms of the contract is actually expressed in the form of an offer and an acceptance. On the other hand, in implied-in-fact contracts, the parties’ meeting of the minds is shown by the surrounding circumstances, including the conduct and declarations of the parties, that make it inferable that the contract exists as a matter of tacit understanding.” Stated simply, a plaintiff proves the existence of an implied-in-fact contract by demonstrating that circumstances surrounding the parties’ transactions make it reasonably certain that an agreement was intended.
COVID Insurance Claim
Nail Nook, Inc. v. Hiscox Ins. Co., 8th Dist. Cuyahoga No. 110341, 2021-Ohio-4211
In this appeal, the Eighth Appellate District affirmed the trial court’s decision, agreeing that the insured did not have a valid claim for coronavirus-related damages pursuant to the clear and unambiguous terms of the insurance policy.
The Bullet Point: In this matter, the plaintiff sought coverage under its commercial business owners insurance policy for coronavirus-related business interruption losses as a result of Ohio Governor Mike DeWine’s March 2020 executive order declaring a state of emergency due to the coronavirus; the order mandated the closing of certain businesses, including the plaintiff’s nail salon. Specifically, the plaintiff alleged that its “physical property was damaged” as it suffered business interruption losses. The insurance company denied coverage, and the plaintiff filed suit. The insurance company filed a motion for judgment on the pleadings, contending that under the policy’s “virus or bacteria” exclusion, the plaintiff was not entitled to coverage for its claim. The plaintiff did not address the policy’s “virus or bacteria” exclusion, but opposed the motion by arguing the policy was ambiguous because it does not define “direct” or “physical loss or damage.” In granting the motion, the trial court did not reach the issue of whether the plaintiff could prove “direct physical loss or damage to Covered Property” as it determined the policy’s clear and unambiguous virus exclusion precluded all potential coverage. The plaintiff appealed, arguing the policy was subject to multiple interpretations. The appellate court disagreed, finding the policy’s terms to be clear and unambiguous.
When the terms of a contract are clear and unambiguous, a court “cannot in effect create a new contract by finding an intent not expressed in the clear language of the contract.” As such, a court is limited to the plain language of a contract. The policy at issue contained a “virus or bacteria” exclusion, under which there was no coverage for loss or damage caused directly or indirectly by “any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” Notably, the exclusion further stated that “such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.” Pursuant to the clear and unambiguous exclusion, the plaintiff’s claims were not covered by the policy.
The appellate court further noted that even putting aside the virus or bacteria exclusion, the plaintiff still did not have a valid claim for coverage. The subject policy provided “Business Personal Property” coverage for things like “office equipment, furniture, and computers,” but it did not insure the plaintiff’s business activities generally. Under the policy, coverage for business interruption losses was available only if the insured could prove a “direct physical loss of or damage to Covered Property” (i.e., the equipment, furniture, and computers) caused a suspension of business operations. In its claims for coverage, the plaintiff did not allege that its business personal property had been physically lost or damaged. Rather, the plaintiff contended that its damages were “all due to the coronavirus.” The plain language of the policy excluded coverage for such a loss. Because there was no basis for coverage for coronavirus-related damages, the trial court properly granted the insurance company’s motion for judgment on the pleadings.
Waiving Personal Jurisdiction
Modway, Inc. v. OJ Commerce, LLC, No. 4D21-1147 (Fla. 4th DCA November 24, 2021).
The Fourth District Court of Appeal ruled that a party’s previous successful motion to vacate a default and motions to quash service of process did not waive its later challenge to personal jurisdiction.
The Bullet Point: In Florida, until service of process is properly made, a trial court does not obtain jurisdiction over a defendant. However, a defendant waives a challenge to personal jurisdiction by seeking affirmative relief in the lawsuit.
In this case, the trial court granted the defendant’s motion to vacate a default and quash service of the initial complaint due to improper service of process. The plaintiff then served the defendant with an amended complaint and, following non-evidentiary hearings, the trial court ruled that the defendant waived its challenge to personal jurisdiction when its previous motions to vacate the default and quash service failed to address personal jurisdiction in any detail. On appeal, the Fourth District reversed this decision, holding that by quashing the initial service of process, and requiring new service, the time for serving a response re-commenced. Additionally, when the plaintiff filed an amended pleading, which included an alternate basis for service of process, the defendant had a right to respond as though it were an original pleading. Accordingly, the defendant did not waive its jurisdictional challenge because it timely raised its jurisdictional defense once service of the amended pleading was perfected. Until then, the trial court did not obtain jurisdiction over the defendant.
Determining Attorney’s Fees Award
El Brazo Fuerte Bakery 2 v. 24 Hour Air Serv., Inc., No. 4D21-531 (Fla. 4th DCA November 24, 2021)
The Fourth District Court of Appeal found error with the Court’s reduction of the plaintiff’s requested attorney’s fees.
The Bullet Point: The plaintiff, after prevailing in a breach of contract action filed in County Court, was awarded its prevailing party attorney’s fees. However, the Judge reduced the plaintiff’s hourly rates, along with its expert rates, despite an absence of competent substantial evidence supporting such reductions, nor specific findings explaining the basis for such reductions. The Judge also made internally consistent findings supporting the application of a contingency-fee multiplier but then did not apply the multiplier, and also failed to award prejudgment interest from the date of the order determining that the plaintiff was entitled to attorney’s fees.
Under Florida law, an award of attorney’s fees must be supported by substantial competent evidence and contain express findings regarding the number of hours reasonably expended and a reasonable hourly rate for the type of litigation involved. Here, the Judge sua sponte reduced the plaintiff’s attorneys’ reasonable hourly rate without providing any explanation. The defendant did not present any expert or other evidence to refute the plaintiff’s expert’s opinion that the plaintiff’s attorneys’ rate was reasonable, and the rate ultimately set by the Judge was lower than the rate defendant argued was reasonable during closing argument. Moreover, the Judge did not indicate that her determination was rooted in her experience as a lawyer. In addition, despite making findings that supported the application of a contingency fee multiplier, the Court failed to apply the multiplier.
Appellate Expansion and Realignment
In Re: Redefinition of Appellate Districts and Certification of Need for Additional Appellate Judges, No. SC21-1543 (Fla. November 24, 2021)
The Florida Supreme Court has determined that a sixth appellate jurisdiction should be created in Florida and that accompanying changes should be made to the existing boundaries of the First, Second and Fifth District Courts of Appeal.
The Bullet Point: The Florida Supreme Court appointed a committee in May 2021 to evaluate the necessity for increasing, decreasing, or redefining the appellate districts. Based upon the committee’s report, the Court certified the need for the creation of a sixth appellate jurisdiction, the boundaries of the First, Second, and Fifth District Courts of Appeals should be adjusted, and six new appellate judgeships were needed.
The primary rationale for the recommendations was to promote public trust and confidence. In significant part, the Court found that there was a serious underrepresentation among district court judges of judges from the Fourth Judicial Circuit, which contains Jacksonville, one of Florida’s largest metropolitan areas. The Court also notes that due to the COVID-19 pandemic, an increase in district court workload is anticipated as trial courts fully return to normal operations. This certification is made to the Florida legislature which will decide whether to implement the recommendations.