August 23, 2019

Tenth Circuit: District Court’s Dismissal of Plaintiff’s Claims Against Loan Servicer for Overcharges and Fees Was Proper

The Tenth Circuit published its opinion in Berneike v. Citimortgage on Monday, February 25, 2013.

Over a six-month period in 2010, Adriana Berneike (“Berneike”) faxed more than one hundred letters to Citimortage (“Citi”), claiming that, despite paying in full every bill she received, she continued to be overcharged by Citi and was facing foreclosure and bankruptcy. Citi acknowledged Berneike’s inquiries and responded that it believed her account was correctly serviced.

Berneike filed suit in Utah state court alleging in part that Citi’s conduct violated the Real Estate Settlement Procedures Act (“RESPA”) and the Utah Consumer Sales Practices Act (“UCSPA”). Citi removed the case to federal court, and the court then granted Citi’s motion to dismiss Berneike’s claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Berneike appealed the district court’s dismissal.


Berneike raised two arguments: first, she argued the district court erroneously considered documents outside of the pleadings to find that Citi had provided notice of its qualified written request (“QWR”) address for these types of complaints; and, second, that Citi waived its right to receive QWRs at the designated address by responding to her first round of faxed letters. It was undisputed that Berneike failed to send her correspondence to the correct QWR address.

Documents Outside the Pleadings.  Berneike claimed the district court erred when it considered Citi’s Welcome Letter, which included notice to Berneike of a designated address for receipt of QWRs. Generally, a court considers only the contents of the complaint when ruling on a 12(b)(6) motion. Gee v. Pacheco, 627 F.3d 1178, 1186 (10th Cir. 2010). Although the Tenth Circuit concluded that the district improperly considered the Welcome Letter, it was not reversible error for the district court to do so because the same notice containing the correct QWR address was also set forth in the monthly billing statements, which were properly before the court.

Waiver.  Berneike next argued that Citi waived its right to receive QWRs at the designated address by corresponding with her. The Tenth Circuit concluded this was the incorrect inquiry. Rather, the correct inquiry was whether the correspondence satisfied the requirements of RESPA such that Citi’s duties thereunder were triggered. Because Congress has not directly addressed the precise question at issue, the Tenth Circuit proceeded to ask whether the agency’s interpretation was a permissible construction of the statute. HUD, the relevant agency, promulgated 24 C.F.R. § 3500.21, which granted servicers like Citi the authority to designate an exclusive address for receipt of QWRs.

The Tenth Circuit held that this grant of authority to servicers to designate an exclusive address was a permissible construction of the statute, since RESPA recognizes that servicers will not have a statutory duty to respond to all inquiries or complaints from borrowers, and that failure to send the QWR to the designated address does not trigger a servicer’s duties. Since receipt at the designated address is necessary to trigger RESPA duties, and it was undisputed that Citi did not receive Berneike’s letters at the designated address, the district court did not err in dismissing Berneike’s RESPA claim.


Berneike next contended that the district court erred by dismissing her state consumer protection claim. Specifically, she disagreed with the district court’s conclusion that UCSPA did not apply to mortgage loan transactions and that she was barred from asserting a UCSPA claim because the conduct she complained of is governed by other, more specific law. Since the Utah Supreme Court had not ruled on whether the UCSPA applies to loan servicing, the Tenth Circuit interpreted and applied the law of Utah as the Court believed the Utah Supreme Court would. While the Utah Supreme Court had not explicitly decided whether a borrower can assert a USCPA claim under these circumstances, it has ruled that a USCPA claim is barred when the complained-of conduct is governed by other, more specific law. Because the alleged wrongful conduct is governed by more specific statutes than the UCSPA, Berneike was barred from asserting a USCPA claim.

Dismissal AFFIRMED.

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