Bakko v. Quicken Loans, Inc.

Background

Mary Bakko and Dawn White each filed for Chapter 7 bankruptcy. Both owed mortgage loans secured by their homestead in Ramsey County and serviced by Quicken Loans, Inc. Bakko signed a reaffirmation agreement for her mortgage loan. Quicken then charged $125 to the loan for what it described as “Bankruptcy – Reaffirmation Agreement.”

The plaintiffs alleged that a reaffirmation agreement is a routine form available from the bankruptcy court, that it has no filing fee, and that the form in this case could not reasonably have taken a lawyer 15 to 30 minutes to complete. They therefore alleged that the $125 attorney’s fee was unreasonable and unauthorized. Before filing suit, the parties exchanged correspondence about whether Quicken could charge the fee, but they did not resolve the issue.

Claims and Motion

The amended complaint asserted four counts:

Quicken moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when the complaint does not state a legally sufficient claim. At this stage, the court accepted the complaint’s factual allegations as true and asked whether they plausibly supported relief.

RESPA Claims

The court rejected Quicken’s argument that the plaintiffs’ March 6, 2018 letter was not a qualified written request, or QWR. A QWR is a written communication that identifies the borrower’s account and explains why the borrower believes the account is incorrect or provides enough detail about other requested information. The plaintiffs’ letter stated that Quicken had wrongly charged attorney’s fees for preparing a reaffirmation agreement and cited the regulation concerning fees that a servicer lacks a reasonable basis to impose.

The court noted that Quicken had responded to the letter by explaining why it retained legal counsel, how much counsel charged, and the contractual basis Quicken relied on to advance the fee. Quicken did not explain how a more detailed letter would have changed its response. The court also rejected Quicken’s argument that the letter did not concern mortgage “servicing.” Because Quicken included the attorney’s fee in the plaintiffs’ monthly mortgage billing statement, applying amounts paid by the plaintiffs to that fee fell within RESPA’s definition of servicing.

The court also found that the plaintiffs had sufficiently alleged actual damages. The plaintiffs claimed that Quicken harmed them by failing to correct its alleged error and by continuing to charge the $125 fee. The court stated that whether the fee was reasonable should be determined after discovery rather than on a motion to dismiss.

For the claim seeking additional damages based on a pattern or practice, the court found that allegations based only on “information and belief” were insufficient. But the plaintiffs also alleged that their counsel had identified at least four other instances in which Quicken charged an attorney’s fee for preparing a similar reaffirmation agreement. The court held that those allegations were sufficient at this stage, noting that discovery might reveal additional cases.

Breach of Contract

The plaintiffs alleged that the mortgage and note required them to pay only reasonable attorney’s fees for a legal proceeding that might significantly affect Quicken’s property interests or contractual rights. They alleged that the reaffirmation form was not materially changed, that the information supplied was ordinarily provided by loan servicers, and that the attorney added no analysis, negotiation, or expertise. They also alleged that Bakko’s bankruptcy did not alter the mortgage’s secured status and therefore did not significantly affect Quicken’s interests or rights.

Quicken argued that it had the contractual right to hire counsel and that the fee was reasonable. The court held that whether Quicken needed counsel and whether the fee was reasonable were factual questions that could not be resolved on a Rule 12(b)(6) motion. The court therefore found that the plaintiffs stated a breach-of-contract claim.

Minnesota Statutory Claim

The plaintiffs alleged that Quicken violated Minnesota Statutes section 58.13 by failing to perform under the written agreement, charging an unauthorized and unreasonable fee, violating RESPA, and making a false or misleading representation while servicing the loan. Quicken argued that this claim failed for the same reasons as the RESPA and contract claims, that fraud had not been pleaded with sufficient detail, and that the plaintiffs had not adequately alleged a public interest.

Because the allegations had to be viewed in the light most favorable to the plaintiffs at this stage, the court allowed the Minnesota statutory claim to go forward.

Disposition

The court denied Quicken Loans, Inc.’s motion to dismiss. The opinion did not decide whether the $125 fee was actually reasonable, whether Quicken was entitled to charge it, or whether the plaintiffs would ultimately prove their claims. Those issues remained for later proceedings.