Case: 16-11346 Document: 00514267728 Page: 1 Date Filed: 12/11/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 16-11346
Fifth Circuit
FILED
December 11, 2017
STEVEN STRONG; JANET STRONG, Lyle W. Cayce
Clerk
Plaintiffs - Appellants
v.
GREEN TREE SERVICING, L.L.C.,
Defendant - Appellee
Appeals from the United States District Court
for the Northern District of Texas
USDC No. 3:14-CV-1027
Before CLEMENT, PRADO, and HAYNES, Circuit Judges.
PER CURIAM:*
In this diversity-jurisdiction case, Steven and Janet Strong claim that
Green Tree Servicing, LLC, 1 violated the Texas Debt Collection Act (“TDCA”)
by informing Mr. Strong that he may be eligible to modify the mortgage on the
Strongs’ home despite a Green Tree policy indicating that a modification would
never be granted. The district court granted summary judgment to Green
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
1 Green Tree is now known as Ditech Financial, LLC. Because Ditech Financial never
moved to amend the caption of this case, the district court continued to refer to it as “Green
Tree.” To maintain consistency with both the district court order and the caption of this case,
this opinion refers to Ditech Financial as Green Tree.
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Tree. The Strongs appeal the adverse summary judgment and also assert that
the district court erred in denying both their motion for remand and their
motion for leave to amend. For the reasons explained below, we AFFIRM.
I. Background
In 2004, Mr. Strong took out a mortgage on the Strongs’ home in Dallas
County, Texas. Mr. Strong fell behind on the mortgage payments in June 2012,
and the mortgage servicer at the time, Bank of America, sent him a notice of
default and an application for the Home Affordable Modification Program. Mr.
Strong completed the application and returned it to Bank of America in August
2012. One month later, the mortgage was transferred to Green Tree.
Thereafter, the Strongs and Green Tree engaged in a back and forth
regarding bringing Mr. Strong’s loan current, during which Green Tree
indicated several times that Mr. Strong could apply for a loan modification.
Ultimately, Mr. Strong received a letter from Green Tree dated December 19,
2012, informing him that he was ineligible for a modification because the
“Texas constitution contains restrictions . . . related to loan-to-value ratio,
capitalization, and balloon payments.” The Strongs unsuccessfully appealed
this determination internally at Green Tree. Prior to a final determination of
the appeal, Green Tree sent a statement reflecting that the new monthly
payment was $1,518.80, which was the amount the Strongs had been
requesting to pay. The Strongs subsequently made a payment in that amount,
which Green Tree accepted. Nevertheless, less than a month later, Green Tree
sent a letter notifying the Strongs that the mortgage was still in default, the
property would be referred for foreclosure, and the amount needed to cure the
default was $35,979.01. The record indicates that the Strongs made no
additional payments, but their home was never referred for foreclosure.
The Strongs filed suit in Texas state court on December 20, 2013,
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alleging that Green Tree and Bank of America 2 violated three subsections of
the TDCA, TEX. FIN. CODE ANN. § 392.304(a)(8), (14), (19), namely by
misrepresenting that a modification to their mortgage might be an available
option to cure the default. In response to special exceptions, they filed an
amended petition stating the maximum amount of damages in controversy by
specifying that the Strongs sought “monetary relief of $100,000 or less.” Cf.
TEX. R. CIV. P. 169 (requiring the “$100,000 or less” language to allow for
expedited actions). The Strongs also sought injunctive relief ordering both a
loan modification to prevent further TDCA violation and “the arrearage . . . to
be deleted and/or capitalized . . . so that the loan is brought current.” Green
Tree did not remove to federal district court until after it received a response
to its request for disclosure in which the Strongs explicitly indicated that they
were seeking damages in excess of $75,000.
After the decision in Sims v. Carrington Mortgage Services, L.L.C., 440
S.W.3d 10 (Tex. 2014), in which the Texas Supreme Court held that certain
mortgage modifications were not barred by the Texas Constitution, the parties
entered into a trial modification period from September to November of 2014
and then negotiated a permanent modification, which took effect on January
1, 2015. Nevertheless, the Strongs persisted in this lawsuit because, since they
had gone some three years without making mortgage payments, there was a
past due balance that was added to the note’s principal, thereby causing the
note balance to increase by $65,683.23. In August 2015, the Strongs moved for
leave to amend their petition, but the district court denied their motion.
The Strongs subsequently learned in a deposition that Green Tree had
an internal policy beginning in February 2011 to deny modifications to Texas
home equity loans. The very next day, Green Tree moved for summary
2 Bank of America was subsequently dismissed from this suit and is not a party on
appeal.
3
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judgment, which the district court granted because Green Tree’s
communications with the Strongs neither qualified as “debt collection” nor
constituted misrepresentations about its services.
The Strongs now appeal, raising three issues: (1) whether the district
court erred in denying their motion to remand; (2) whether the district court
abused its discretion in denying their motion for leave to amend; and
(3) whether the district court erred in determining that Green Tree’s
modification communications neither qualified as “debt collection” under the
TDCA nor constituted misrepresentations about its services. 3
II. Standard of Review
“In reviewing a district court’s denial of a plaintiff’s motion to remand a
case from federal court to state court, the Court of Appeals applies a de novo
standard of review.” Scarlott v. Nissan N. Am., Inc., 771 F.3d 883, 887 (5th
Cir. 2014) (quoting Sherrod v. Am. Airlines, Inc., 132 F.3d 1112, 1117 (5th Cir.
1998)). De novo review also governs an appeal of a summary judgment. Cooley
v. Hous. Auth. of Slidell, 747 F.3d 295, 297 (5th Cir. 2014). A district court’s
denial of a motion for leave to amend is reviewed for abuse of discretion.
Filgueira v. U.S. Bank Nat’l Ass’n, 734 F.3d 420, 422 (5th Cir. 2013) (per
curiam).
III. Discussion
As a threshold matter, we are asked to determine whether we have
appellate jurisdiction over the first two issues on appeal—i.e., (1) whether the
district court erred in denying the Strongs’ motion to remand and (2) whether
the district court abused its discretion in denying the Strongs’ motion for leave
to amend—because these orders were not included in the original notice of
3 The Strongs also attempt to “move this Court to strike” the portion of Green Tree’s
brief discussing settlement negotiations. We do not resolve this purported motion, however,
because it is not properly before the court; it neither complies with Federal Rule of Appellate
Procedure 27 nor this Court’s Local Rule 27.4 regarding the proper form of motions.
4
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appeal. We conclude that, under the particular facts of this case, the appeal is
not barred as to these matters. See Turnbull v. United States, 929 F.2d 173,
177 (5th Cir. 1991); United States v. Rochester, 898 F.2d 971, 976 n.1 (5th Cir.
1990); see also Shaw v. Hardberger, No. 10-50136, 2011 WL 1519134, at *1 (5th
Cir. Apr. 21, 2011) (per curiam) (“[B]ecause the plaintiffs referenced the grant
of the defendants’ motion for summary judgment in their IFP motion and
because the Government does not allege any prejudice, the plaintiffs’ notice of
appeal should be liberally construed . . . , and it should not bar the plaintiffs’
appeal of any summary judgment-related issues.”). 4
A. Motion to Remand
The notice of removal was timely only if the disclosure response was the
earliest trigger. See Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 397–98
(5th Cir. 2013) (citing 28 U.S.C. § 1446(b)). The Strongs argue that because
both their Original and First Amended Petitions put Green Tree on notice that
foreclosure of the property was at issue and Green Tree waited to remove until
around three months after receiving these petitions, the district court erred in
determining that Green Tree’s notice of removal was timely. They also argue
that “Green Tree waived its right to removal by engaging in extensive
discovery in the state court.” We hold that Green Tree timely filed its notice of
removal and its discovery in state court did not waive that right.
For the initial pleading to trigger the thirty-day removal period, it must
“affirmatively reveal[] on its face that the plaintiff is seeking damages in excess
of the minimum jurisdictional amount of the federal court.” Id. at 399 (second
emphasis added) (quoting Chapman v. Powermatic, Inc., 969 F.2d 160, 163 (5th
Cir. 1992)). The Strongs’ primary argument is that Green Tree’s notice of
4 Although Shaw is not “controlling precedent,” it “may be [cited as] persuasive
authority.” Ballard v. Burton, 444 F.3d 391, 401 n.7 (5th Cir. 2006) (citing 5TH CIR. R. 47.5.4).
5
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removal noted that “[t]he allegations in the Petition relate to . . . foreclosure
proceedings on . . . the Property.” The Strongs contend that this statement
amounts to a “judicial admission” that foreclosure proceedings, and thus the
full value of the property, are at issue in this case.
This contention is belied by looking at the petitions, wherein the specific
allegations for relief reveal that the value of the property was not in
controversy because the Strongs were not seeking to prevent a foreclosure. Cf.
Farkas v. GMAC Mortg., L.L.C., 737 F.3d 338, 341 (5th Cir. 2013) (per curiam)
(“The purpose of the injunctive and declaratory relief, to stop the foreclosure
sale of the properties by GMAC and Deutsche Bank, establishes the properties
as the object of the present litigation.”). Indeed, the Strongs make no
allegation that Green Tree was seeking to foreclose on the property. Moreover,
as to the injunctive relief, the district court correctly observed that the First
Amended Petition specifically sought “an injunction preventing [Green Tree]
from committing any future violations of the TDCA and ordering them to
restore Plaintiffs’ mortgage balance to its pre-violations amount.” No specific
damages were claimed in the Original Petition and the “$100,000 or less”
language in the First Amended Petition did not affirmatively show “at least
$75,000.” Accordingly, we conclude that the petition did not “affirmatively
reveal[] on its face” that the Strongs sought damages in excess of $75,000. See
Mumfrey, 719 F.3d at 399.
The Strongs’ second argument—that Green Tree waived its right to
removal by engaging in extensive discovery in state court—lacks merit. “A
waiver of the right to remove must be clear and unequivocal; the right to
removal is not lost by participating in state court proceedings short of seeking
an adjudication on the merits.” Tedford v. Warner-Lambert Co., 327 F.3d 423,
428 (5th Cir. 2003). The district court did not err when it denied the Strongs’
motion to remand.
6
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B. Motion for Leave to Amend
The Strongs next argue that the district court abused its discretion in
denying their motion for leave to amend. The Strongs moved for leave to
amend on the last day permitted by the scheduling order. However, the district
court concluded that the motion was rendered untimely because the Strongs
failed to comply with the district court’s local rules by failing to include both a
Certificate of Conference and the proposed amended complaint with the
motion. The district court further determined that the Strongs unduly delayed
in moving for leave to amend because the motion was filed “after nearly two
years of litigation, a prior amendment to the complaint, and a missed filing
deadline.” Moreover, the Strongs offered no satisfactory explanation for the
delay. The district court also determined that granting leave to amend would
unduly prejudice Green Tree because (1) the motion was filed late and in the
middle of discovery; (2) the motion attempted to assert over a dozen new claims
based on the same events as the original complaint, including four new causes
of action; (3) the amended complaint would likely further extend the litigation
to accommodate discovery relating to the new claims; and (4) Green Tree would
be forced to reexamine its defense strategy in light of several different causes
of action after preparing for twenty-two months to defend against just one
cause of action. We perceive no abuse of discretion in the district court’s
determination. See Lozano v. Ocwen Fed. Bank, FSB, 489 F.3d 636, 644 (5th
Cir. 2007); Mayeaux v. La. Health Serv. & Indem. Co., 376 F.3d 420, 425–27
(5th Cir. 2004).
C. Modification Communications
Turning to the core issue of this appeal, the Strongs argue that Green
Tree violated three provisions of the TDCA by falsely representing a potential
mortgage modification. Those three TDCA provisions prohibit a debt collector
from engaging “in debt collection or obtaining information concerning a
7
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consumer” by (1) “misrepresenting the character, extent, or amount of
consumer debt,” TEX. FIN. CODE ANN. § 392.304(a)(8); (2) “representing falsely
the status or nature of the services rendered by the debt collector,” id.
§ 392.304(a)(14); or (3) “using any other false representation or deceptive
means to collect a debt or obtain information concerning a consumer,” id.
§ 392.304(a)(19). The Strongs’ First Amended Petition alleged that Green
Tree’s conduct “constitute[s] a deceptive means to collect a debt in violation of
[the TDCA].” (emphasis added). The district court granted summary
judgment against the Strongs because it concluded that Green Tree’s
communications about potentially modifying the mortgage (1) did not qualify
as “debt collection” and (2) did not qualify as a misrepresentation about its
services. We affirm the district court’s judgment because it correctly concluded
that the modification communications did not qualify as “debt collection” under
the TDCA. Accordingly, we do not decide whether Green Tree misrepresented
its services. 5
Generally, “[c]ommunications in connection with the renegotiation of a
loan do not concern the collection of a debt but, instead, relate to its
modification.” Fields v. JP Morgan Chase Bank, N.A., 638 F. App’x 310, 314
(5th Cir. 2016) (quoting Thompson v. Bank of Am. Nat’l Ass’n, 783 F.3d 1022,
1026 (5th Cir. 2015)). We have “not announced a rule that modification
discussions may never be debt collection activities.” Id. Instead, we have
previously indicated that modification discussions may constitute debt
collection activities under the TDCA when those discussions are used as a ruse
to collect debt. See Singha v. BAC Home Loans Servicing, L.P., 564 F. App’x
65, 71 (5th Cir. 2014) (per curiam); see also Thompson, 783 F.3d at 1028
5 Proving debt collection is part of the Strongs’ burden as plaintiffs, thus we reject
their frivolous argument that Green Tree had to plead and prove that it was not collecting a
debt. See TEX. FIN. CODE ANN. § 392.304(a).
8
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(Graves, J., concurring) (“[T]here may be circumstances in which
misrepresentations made during such [loan modification] discussions are
actionable.”).
However, without additional evidence indicating that the
misrepresentations were in fact a ruse to collect debt rather than merely poor
customer service, the Strongs cannot show that Green Tree made the
misrepresentation while engaged “in debt collection.” See, e.g., Singha, 564 F.
App’x at 71 (“[E]ven if there had been a promise to modify a loan when no such
modification decision had been approved, that at most would be a
misrepresentation. What the Singhas have failed to allege is any basis on
which to decide that their modification discussions were debt collection
activities for TDCA purposes.”); 6 cf. Chavez v. Wells Fargo Bank, N.A., 578 F.
App’x 345, 348 (5th Cir. 2014) (“Chavez alleges that Wells Fargo violated these
provisions by misleading him to believe that he qualified for and would be
approved for a loan modification, despite knowing that he was not eligible for
a loan modification. We do not condone Wells Fargo’s conduct as alleged, but
terrible customer service is not automatically the equivalent of ‘deceptive
means.’”). 7 Thus, the Strongs have no viable TDCA claim.
6 The Strongs attempt to distinguish Singha because it does not involve the exact
same facts as this case, i.e., it involved a false promise to modify the Singhas’ mortgage rather
than misrepresenting that a potential modification was an available option. This is not a
meaningful distinction because both instances involve a misrepresentation about receiving a
modification. In fact, the misrepresentation in Singha appears to be more suggestive of debt
collection practices because the plaintiffs alleged they were falsely promised that their
mortgage would be modified if they made six payments but, after making the six payments,
the defendant foreclosed upon their home. See 564 F. App’x at 67, 70–71.
7The Strongs also assert that Green Tree violated the TDCA by using the alleged
misrepresentations to obtain information. See TEX. FIN. CODE ANN. § 392.304(a) (prohibiting
misrepresentations related to either “debt collection or obtaining information concerning a
consumer”). However, this theory of recovery is not properly before the court because the
Strongs pleaded only the “debt collection” theory of recovery under the TDCA. The Strongs’
reference to this theory of recovery in their response to Green Tree’s summary judgment
motion does not remedy the defect. See Cutrera v. Bd. of Supervisors of La. State Univ., 429
F.3d 108, 113 (5th Cir. 2005) (“A claim which is not raised in the complaint but, rather, is
9
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Accordingly, we affirm the district court’s judgment in favor of Green
Tree.
AFFIRMED.
raised only in response to a motion for summary judgment is not properly before the court.”).
10