Coleman v. Lakeview Loan Servicing, LLC

Background

Kassia Coleman sued Lakeview Loan Servicing, LLC and Cenlar FSB over the servicing and collection of her mortgage loan. She asserted claims under the Fair Debt Collection Practices Act (FDCPA), a federal law regulating debt collection, and the Minnesota Residential Mortgage Originator and Servicer Licensing Act (MOSLA).

Coleman alleged that a May 2018 loan-modification agreement listed an unpaid principal balance of $133,829.36 and a monthly payment of $658.36. She alleged that an October 2018 mortgage statement instead listed a principal balance of $162,495.66, a monthly payment of $759.12, $12,762.38 in unapplied funds, and $43,636.05 as the amount claimed due. She also alleged emotional distress and related medical bills.

Coleman moved for permission to amend her complaint. Her proposed amendments alleged that Cenlar sent inaccurate mortgage statements from June 2017 through October 2018, failed to enter the loan-modification terms into its software system, reported incorrect information to national credit-reporting agencies, and failed to correct that information until February 2020. She also alleged that Cenlar sent letters and made or attempted in-person contacts at her home after Defendants knew she was represented by counsel.

Court’s analysis

The court applied Federal Rule of Civil Procedure 15, which generally directs courts to allow amendments when justice requires. The court rejected Defendants’ argument that Minnesota Statute § 549.191 supplied the governing amendment standard. It explained that the federal rule governed the proposed punitive-damages amendment, although the court still had to consider the substantive Minnesota standard for punitive damages on the MOSLA claim.

Under Minnesota Statute § 549.20, punitive damages require clear and convincing evidence that the defendant deliberately disregarded the rights or safety of others. At the amendment stage, the court considered whether the proposed complaint plausibly alleged facts supporting that standard, based on the allegations within the proposed complaint itself.

The court concluded that Coleman’s proposed allegations that Defendants knowingly and deliberately sent false or deceptive loan statements, reported false information, failed to correct it, and contacted her directly despite knowing she had counsel created a plausible inference of deliberate disregard for her MOSLA rights. The court therefore allowed the proposed punitive-damages claim relating to MOSLA.

Coleman also proposed two new FDCPA claims. One alleged direct contacts despite Defendants’ knowledge that she was represented by counsel, under 15 U.S.C. § 1692c(a)(2). The other alleged that inaccurate information was sent to credit-reporting agencies and not corrected, under 15 U.S.C. § 1692e(b)(8). Defendants challenged these amendments only on the issue of punitive damages and did not show that the new FDCPA claims themselves could not survive a motion to dismiss. The court granted leave to add both new FDCPA claims.

The court denied the request to add punitive damages to the existing and new FDCPA claims. It held that punitive damages are not available under the FDCPA.

Disposition

The court granted in part and denied in part Coleman’s Motion for Leave to Amend Complaint and for Punitive Damages. Coleman was ordered to file an amended complaint complying with the order by April 24, 2020. Judge Hildy Bowbeer signed the order as United States Magistrate Judge.