Residential Capital, LLC

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
RESIDENTIAL CAPITAL, LLC, et al.
Debtors.
FOR PUBLICATION
Case No. 12-12020 (MG)
Jointly Administered
MEMORANDUM OPINION AND ORDER SUSTAINING IN PART AND OVERRULING
IN PART OBJECTION TO PROOF OF CLAIM 386
A P P E A R A N C E S:
MORRISON & FOERSTER LLP
Attorneys for ResCap Borrower Claims Trust
425 Market Street
San Francisco, CA 94105
By: 	Adam A. Lewis, Esq.
DAVID F. GARBER, P.A.
Attorneys for Mack Creditors
700 Eleventh Street South
Suite 702
Naples, FL 34102
By: 	David F. Garber, Esq.
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Barry and Cheryl Mack bought a home in Florida in 2006. By 2009, they realized that
they could no longer afford their mortgage payments. They contacted their loan servicer—
GMAC Mortgage LLC (“GMACM”)—to obtain a loan modification. Rather than working out a
modification with the Macks, GMACM started foreclosure proceedings and hired a notorious
Florida attorney (since disbarred) to bring the foreclosure action in the name of Deutsche Bank
Trust Company Americas (“Deutsche Bank”), the trustee of the securitization trust that owned
the Macks’ loan. But the Macks had not defaulted on their loan payments. GMACM claims that
when it learned of the “accidental” foreclosure action, it instructed its attorney to withdraw the
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action. The attorney neglected to withdraw the case, so it continued. Meanwhile, the Macks
repeatedly contacted GMACM to ask who Deutsche Bank was, when Deutsche Bank obtained an
interest in the Macks’ loan, and why the foreclosure was proceeding at all. GMACM failed to
respond to at least one of the Macks’ inquiries and in other instances told the Macks that the
foreclosure was a mistake and should be ignored. But the foreclosure case carried on.
The Macks filed counterclaims against Deutsche Bank in the foreclosure action. The
attorney GMACM hired to bring the foreclosure action defaulted on the counterclaims. A final
judgment awarding the Macks damages against Deutsche Bank was entered, but then partially
vacated—all of which is discussed below. GMACM was not a party to the action, although it
caused it to be commenced and didn’t stop it from continuing. The Macks collected a damages
award from Deutsche Bank in the amount of $321,970.77, plus attorneys’ fees, after the initial
judgment in the amount of $446,920.05 was reduced.
The real horror of these events is that in October 2009, during the pendency of the
foreclosure action, Mrs. Mack overdosed on sleeping pills, allegedly from the stress from the
prospect of losing her home. She suffered severe kidney damage; and as a result of kidney
damage, she died in October 2013. The Macks’ initial judgment on the counterclaims against
Deutsche Bank included recovery on a claim under the Real Estate Settlement Procedures Act,
12 U.S.C. § 2601, et seq. (“RESPA”), among other things, for non-economic damages attributed
to Mrs. Mack’s pain and suffering (she didn’t die until after the Macks collected their judgment
against Deutsche Bank). GMACM remained an uninformed and apparently uninterested
bystander throughout those proceedings. When Deutsche Bank finally learned about the
judgment and moved to vacate it, the trial court vacated the portion of the judgment based on the
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RESPA claim, concluding that the Macks could not maintain a cause of action against Deutsche
Bank for violation of RESPA.
Before the Bar Date in these chapter 11 cases, the Macks filed proof of claim number 386
(the “Claim”) against GMACM, alleging more than $30 million in damages resulting mostly
from the same conduct at issue in the counterclaims against Deutsche Bank.1 Mack’s counsel
recognizes that his surviving client cannot recover twice for the same injury. As explained
below, to the extent the claims and damages against Deutsche Bank and GMACM overlap, they
are barred by res judicata. But Mack also alleges one new theory of liability against GMACM
for which the Macks did not recover damages from Deutsche Bank. Mack alleges that
GMACM—the loan servicer—violated RESPA by failing to respond to a qualified written
request (“QWR”), a claim that could not be asserted against Deutsche Bank. Mack seeks to
recover non-economic damages from GMACM that the Macks were unable to recover from
Deutsche Bank, including for the harm that allegedly ultimately resulted in Mrs. Mack’s death.
The issue whether a plaintiff can recover non-economic damages from a loan servicer
under RESPA has divided the courts, and there is no controlling authority in this Circuit. Even
assuming that such damages may be recovered under RESPA, Mack may have a difficult time
proving causation and damages—the RESPA violation identified by Mack occurred fairly late in
the very bad chain of events in this case. The ResCap Borrower Claims Trust argues that the
RESPA claim is barred by res judicata; that part is easy—the RESPA claim is not barred. While
the Court reserves the ability to revisit the issue of recovery of non-economic harm for a RESPA
violation before this claim is fully resolved, the Court concludes below that Mack can proceed
1 	Mr. & Mrs. Mack together filed the proof of claim, but Mrs. Mack died on October 25, 2013, apparently
from renal failure. Mr. Mack carries on the fight to recover on the Claim. The death certificate and other relevant
documents are attached to the Opposition. Mr. Mack will be referred to in the singular for arguments made (after
Mrs. Mack died) in the Opposition or during the hearing on the Objection; the Macks will be referred to in the plural
for arguments made in the proof of claim.
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with his claim for non-economic damages from GMACM for violation of RESPA. Other
portions of the Claim are barred by res judicata. The Court therefore SUSTAINS IN PART
AND OVERRULES IN PART the Objection to the Macks’ proof of claim.
I. 	BACKGROUND
A. 	Procedural History
Pending before the Court is the ResCap Borrower Claims Trust’s Objection to Proof of
Claim No. 386 Filed by Barry and Cheryl Mack (the “Objection,” ECF Doc. # 6763). The
Objection is supported by the Declaration of Lauren Graham Delehey (the “Delehey Decl.,” ECF
Doc. # 6763-3). Claimant Barry Mack filed an opposition to the Objection (the “Opposition,”
ECF Doc. # 6834), and the ResCap Borrower Claims Trust (the “Trust”) filed a Reply (the
“Reply,” ECF Doc. # 6893). The Trust seeks to expunge the $32,850,000 unsecured Claim filed
against GMACM.
The Court heard argument of the Objection on May 15, 2014 (the “Hearing”). The
parties disagreed whether a claim against GMACM for failure to respond to a QWR (1) had been
properly raised in the Macks’ Claim, (2) was barred by res judicata, and (3) could support
damages for emotional distress or pain and suffering. The Court directed the parties to brief
these issues further, and the parties submitted simultaneous briefs on June 16, 2014 (ECF Doc.
## 7112, 7118), along with simultaneous replies on June 30, 2014 (ECF Doc. ## 7203, 7205).
B. 	The Macks’ Loan
In 2006, the Macks borrowed $990,000 (the “Loan”) secured by a mortgage on their
home in Florida. (Obj. ¶ 15; Delehey Decl. Ex. C at 7.) That Loan was securitized in a RALI
Trust, with Deutsche Bank as Trustee. Residential Funding Company (“RFC”) was the master
servicer, and GMACM was the subservicer. (Obj. ¶ 15.)
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The Claim asserts that the Macks were struggling to make Loan payments. (Delehey
Decl. Ex. A, (the “Proof of Claim”).) The Macks only earned $5,800 per month in combined
income, but by 2007, they were paying $5,100 per month on their subprime Loan. (Id.) They
had to draw down on their retirement savings to make the Loan payments. On March 26, 2008,
the Macks listed their home for sale for $1,969,000, but were unable to find a buyer. (See id. Ex.
D ¶ 6.) They applied to GMACM for a Home Affordable Modification Program (“HAMP”) loan
modification (id.), but were never approved. Instead, GMACM hired an attorney to file a
foreclosure action, despite the fact that the Macks had never missed a Loan payment.
C. 	Foreclosure Initiation, Communications with GMACM, Property Sale, and
Emotional Distress
In August 2009, GMACM hired attorney David J. Stern to start foreclosure proceedings
against the Macks. (Obj. ¶ 17.) The case (the “Foreclosure Action”) named Deutsche Bank as
the plaintiff; GMACM was not a party to the action. (Id.) The Trust asserts that thirteen days
after Stern filed the case, GMACM realized its error in commencing the Action and instructed
Stern to dismiss the complaint. (Id.) But Stern inexplicably did not immediately dismiss the
action; instead, he left it open until he attempted to close the case in December 2009. (See Opp.
at 6.) In the meantime, the Macks had answered the complaint and filed counterclaims.
(Obj.¶ 18.) When Stern finally dismissed the foreclosure claim on December 9, 2009, the
Macks’ counterclaims remained. (Opp. at 6.)
While the Foreclosure Action was pending, the Macks contacted GMACM several times
by phone and at least once by letter to understand what was happening. Deutsche Bank had been
a stranger to the Macks before the Foreclosure Action, so they wanted to know whether
GMACM had transferred their Loan to Deutsche Bank. (See Opp. at 5.) They certainly wanted
to know why the action continued despite their timely Loan payments. (See Opp. Ex. C.) The
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Proof of Claim asserts that when the Macks reached GMACM by telephone, GMACM told them
that “there was no foreclosure and Deutsche Bank ha[s] no interest in the [L]oan.” (Proof of
Claim at 1.) GMACM also allegedly “exerted pressure on the Macks to sell the property” and
“pay off the [L]oan.” (Id.) After these conversations, though, GMACM failed to ensure that the
Foreclosure Action was dismissed. So on October 26, 2009, the Macks sent a Qualified Written
Request (a “QWR”) to GMACM asking why the foreclosure was proceeding and stating that
“[y]our company has reassured us that our mortgage is current and that we were not in any
arrears with GMAC.” (Id.) GMACM did not send a written response to the QWR. (See Opp. at
6.)
The Macks continued to try to sell their home. After the Foreclosure Action was filed,
the Macks reduced the asking price to $1,499,000 (from $1,969,000) on August 30, 2009. (Obj.
Ex. D ¶ 7.) The property was sold in January 2010 for $1,156,500. (Id. ¶ 8.) The Macks had the
property appraised at $1,275,000 on the day after selling their home. (Id. ¶ 9.)
Although the precise date is unclear, sometime in October 2009, Cheryl Mack took an
overdose of sleeping pills. (See Proof of Claim at 2.) The Claim alleges that Cheryl Mack was
driven to the suicide attempt “[d]ue to the prospect of losing [her] home through the pending
foreclosure.” (Id.; see also Opp. Ex. E (letter from Cheryl Mack’s doctor stating that as of
December 1, 2009, Cheryl Mack’s “depression and drinking exacerbated secondary to facing
potential foreclosure to the point of the patient becoming a danger to self and requiring
hospitalization”).) She survived the attempt, but was hospitalized and suffered permanent kidney
damage. (See id.) Cheryl Mack died on October 25, 2013; renal failure was listed on her death
certificate as a contributing cause of death. (See Obj. Ex. F.)
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D. 	The Counterclaims
The Macks’ counterclaims against Deutsche Bank alleged violations of RESPA and
slander of title. (Delehey Decl. Ex. C.) They claimed damages for economic losses due to the
decline in value of their home—evidenced by the reductions in the sale price—as well as
emotional distress and pain and suffering damages relating to Mrs. Mack’s overdose. (See
Delehey Decl. Ex. D.) Deutsche Bank’s lawyer failed to respond to the counterclaims, and
GMACM, which remained the loan servicer and hired the lawyer, failed to do anything either.
The Trust blames this on Stern, claiming that he received the counterclaims but never forwarded
them to Deutsche Bank or GMACM. (See Delehey Decl. ¶ 9.) The Florida court entered a
default on the counterclaims on October 21, 2009. (Id. ¶ 10; id. Ex. D ¶ 2.) The Trust asserts
that Stern never notified Deutsche Bank or GMACM of the default either. (Delehey Decl. ¶ 11.)
From November 2009 until February 2011, the Macks repeatedly attempted to obtain discovery
from Deutsche Bank by serving discovery requests and a motion to compel on David Stern. (See
Opp. Ex. G ¶ 13.) These requests went unanswered.
Finally, on May 5, 2011, the Florida court conducted a hearing regarding the
counterclaims, admitting documentary evidence from the Macks and hearing Mrs. Mack’s
testimony. (See Opp. at 6.) Later that day, the court issued a Final Judgment on the
counterclaims, awarding the Macks (1) $296,920.05 for damages due to the loss in value of their
property, and (2) $150,000 for Mrs. Mack’s emotional anguish and pain and suffering. (See Obj.
Ex. D.) After calculating prejudgment interest, the award totaled $469,470.27 plus attorneys’
fees. (See id.) 	The court awarded the emotional distress damages as part of the RESPA claim,
not the slander of title claim. (See id.)
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According to the Trust, Deutsche Bank and GMACM only learned of the counterclaims
after the final judgment was entered. (See Delehey Decl. ¶ 12.) GMACM filed a notice of
appearance on June 29, 2011. (See Obj. Ex. E at 1.) On July 13, 2011, Deutsche Bank moved to
set aside the final judgment and vacate the judgment on the RESPA claim on the merits. (See
id.) Deutsche Bank argued that it could establish excusable neglect based on the “gross
misconduct of its prior counsel.” (Opp. Ex. G at 7.) It also argued that it had meritorious
defenses because (1) the Macks could not satisfy the requirements to show slander of title, and
(2) Deutsche Bank never violated RESPA because RESPA only required notice to the Macks of
a change in the servicer, and there was no change of servicer for the Macks’ loan. (See id. at 9–
12.)
The Florida court conducted several hearings regarding Deutsche Bank’s motion,
admitting additional evidence and witness testimony. (See Opp. at 8.) The Florida court heard
evidence that Deutsche Bank first received notice of the final judgment on the counterclaims on
May 11, 2011, and GMACM “as agent for [Deutsche Bank] had the responsibility to investigate
the [f]inal [j]udgment and appropriately respond.” (See Obj. Ex. E at 1.)
On February 26, 2013, the Florida court issued a final order on Deutsche Bank’s motion.
(See id.) The court found that the Macks could not maintain a RESPA claim against Deutsche
Bank, so the court vacated the RESPA damages, including the $150,000 in damages for Mrs.
Mack’s pain and suffering. (Id. at 2–3.) 	But the court confirmed the judgment as to the loss in
value of the Macks’ home resulting from slander of title. (Id. at 3.) The court reduced the
Macks’ damages award to $321,970.77 plus attorneys’ fees. (Id.) At several points in its final
order, the court referred to GMACM as Deutsche Bank’s agent. (See id. at 1–2.)
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After both parties appealed, the Florida state appellate court affirmed the reduced
judgment. (Obj. Ex. F.) Deutsche Bank moved for a rehearing, but that request was denied. (Id.
Ex. G.) On March 20, 2013, the Macks acknowledged receipt of $321,970.77 in satisfaction of
the judgment. (Id. Ex. H.)
E. 	The Objection
1. 	Res judicata
In their Proof of Claim, the Macks identify the basis of their Claim as “Personal Injury;
Wrongful Death; Violation of RESPA; Malicious Prosecution.” (See Delehey Decl. Ex. A.) The
Trust argues that recovery on these grounds is barred by res judicata. (See Obj. ¶¶ 32–39.)
According to the Trust, the Claim arises out of the same nucleus of operative facts as the Florida
proceeding (i.e., the alleged wrongful foreclosure and resulting damages). (Id. ¶ 36.) Even
though GMACM was not a party to the Foreclosure Action, the Trust argues that GMACM was
a privy of Deutsche Bank and would have faced the same potential liability as Deutsche Bank.
(Id. ¶ 37.) The Trust asserts that GMACM’s interests were identical to Deutsche Bank’s, which
is sufficient to satisfy res judicata standards. (Id. ¶ 38.) Even though the Macks may allege
certain theories here that they did not or could not assert in the Foreclosure Action, the Trust
argues, res judicata prevents the Macks from litigating issues that could have been decided in the
Foreclosure Action. (Id. ¶ 39.)
2. 	Election of Remedies
The Trust also argues that the Macks are estopped by election of remedies. (Id. ¶¶ 40–
43.) According to the Trust, Deutsche Bank’s liability was based solely on GMACM’s conduct
in initiating the foreclosure. (Id. ¶ 42.) The Trust argues that Florida law prevents the Macks
from obtaining a judgment against Deutsche Bank based on GMACM’s conduct and then
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initiating a later action against GMACM for the same conduct. (Id.) The Trust asserts that
allowing the Claim would grant the Macks a double recovery. (Id.)
3. 	RESPA Claim
The Trust argues that the Claim does not allege plausible liability arising from a RESPA
violation. RESPA provides limited private rights of action, and some are irrelevant here. (See
id. ¶ 46.) 	A borrower does have a cause of action under RESPA where a servicer fails to
(1) notify the borrower of an assignment of servicing rights, or (2) respond to the borrower’s
QWR. 2 See 12 U.S.C. § 2605. The servicing rights to the Mack’s Loan were never assigned,
and the Proof of Claim does not identify any QWRs. (See Obj. ¶ 46.)
F. 	The Opposition
1. 	Res judicata
Mack’s Opposition argues that res judicata does not bar the Claim because the Macks
only received an award of economic damages for slander of title in the Foreclosure Action, and
here, Mack is seeking non-economic damages for personal injury and punitive damages. (See
Opp. at 11–13.) Additionally, Mack argues the Claim here is based on theories of law that were
not before the Florida court in the Foreclosure Action, including: (1) malicious prosecution,
2 	A Qualified Written Request is a “written correspondence, other than notice on a payment coupon or other
payment medium supplied by the servicer that—
(i) 	Includes, or otherwise enables the servicer to identify, the name and account of the
borrower; and
(ii) 	Includes a statement of the reasons for the belief of the borrower, to the extent applicable,
that the account is in error or provides sufficient detail to the servicer regarding other
information sought by the borrower.”
12 U.S.C. § 2605(e)(1)(B). After receiving a Qualified Written Request, a servicer has thirty days to correct any
errors identified by the borrower or provide the borrower with a written response including the reasons why the
servicer believes that its determination regarding the borrower’s account is correct, and the name and telephone
number of any employee of the servicer who can assist the borrower. Id. § 2605(e)(2)(A)–(B). The servicer may
extend this thirty-day period for an additional fifteen days if the servicer notifies the borrower and provides reasons
for the delay. Id. § 2605(e)(4).
Failing to respond to a Qualified Written Request subjects a servicer to “actual damages to the borrower as
a result of the failure” and “any additional damages, as the court may allow, in the case of a pattern or practice of
noncompliance with the requirements of this section, in an amount not to exceed $2,000.” Id. § 2605(f)(1).
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(2) intentional infliction of emotional distress, (3) failure to respond to a QWR in violation of
RESPA, 3 and (4) wrongful death. (See id. at 12–13.) But the Proof of Claim did not identify
intentional infliction of emotional distress or failure to respond to a QWR as grounds for
recovery.
Mack also argues that GMACM is not a privy of Deutsche Bank because GMACM was
an independent contractor, not an agent. (See id. at 14.) Mack describes GMACM and Deutsche
Bank as joint tortfeasors, rather than master/servant. (See id. at 15.) According to Mack, Florida
law permits Mack to bring causes of action against joint tortfeasors separately. (See id. at 15–
16.) Mack asserts that a judgment against one joint tortfeasor does not bar a plaintiff from
relitigating all issues in a later suit against the other tortfeasor. (Id.)
2. 	The QWR Claim
Next, Mack argues that the alleged RESPA liability here is based on GMACM’s failure
to respond to Mrs. Mack’s October 26, 2009 letter (the “QWR Claim”). (Id. at 16–17.) The
Trust agrees that the letter qualified as a QWR. (May 15, 2014 Tr. at 59:10-14 (ECF Doc.
# 6998).) GMACM’s failure to respond to the letter would be a violation of RESPA. (See Opp.
at 17.) Although the Macks alleged a RESPA violation in the Foreclosure Action, that allegation
did not involve a purported failure to respond to a QWR and instead centered on a different
RESPA provision.
G. 	The Reply
The Trust responds by arguing that even though Mack now articulates various theories of
liability that were not raised in the Foreclosure Action, res judicata precludes all claims arising
from the same nucleus of underlying facts, regardless whether specific causes of action were
3 	The Macks alleged RESPA violations in the Foreclosure Action, but not this particular theory of liability.
In addition, the state trial court vacated the RESPA judgment against Deutsche Bank, concluding that no RESPA
claim could be asserted against Deutsche Bank.
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already alleged. This rule prevents a party from pursuing multiple lawsuits on the same facts
when one suit could have resolved all disputes.
And even though GMACM was not technically a party to the Foreclosure Action, the
Trust asserts that GMACM and Deutsche Bank shared an identity of interests. (Id. ¶ 13.) Where
two parties’ interests are closely aligned, a judgment against one may extend to the other. (See
id.) Contrary to Mack’s argument, GMACM was indeed acting as Deutsche Bank’s agent—a
fact confirmed by the Florida court in its order modifying the judgment against Deutsche Bank.
(See id. ¶ 14.) But even if GMACM and Deutsche Bank were joint tortfeasors, Florida law still
precludes a plaintiff from suing one joint tortfeasor where the plaintiff has already obtained and
satisfied a judgment against the other joint tortfeasor. (See id. ¶ 15.)
Next, the Trust opposes Mack’s assertion of liability due to GMACM’s purported failure
to respond to the October 2009 QWR. First, the Macks did not allege the QWR Claim in their
Proof of Claim, and according to the Trust, the QWR Claim directly contradicts the Proof of
Claim’s assertions that GMACM responded to the Macks’ inquiries. (See id. ¶¶ 19–21.)
According to the Trust, the QWR Claim attempts to amend the Proof of Claim, but it does not
arise from the same facts alleged in the Proof of Claim. Instead, the QWR Claim is premised on
a new alleged fact that GMACM failed to respond to the Macks’ inquiries. (Id. ¶¶ 21–22.) The
Trust also argues that even though the QWR Claim can only be stated against a servicer, the
Macks could have lodged the claim in the Foreclosure Action because they were already suing
Deutsche Bank exclusively for GMACM’s conduct. (See id. ¶ 20.)
H. 	The Hearing
At the Hearing, the Trust attacked Mack’s reliance on the QWR Claim, arguing that
(1) even though he did not plead the claim in the Foreclosure Action, he could have, so it is
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barred by res judicata; and (2) Mack did not identify the QWR Claim in the Proof of Claim, and
instead alleged that GMACM was responding to the Macks’ inquiries. (See May 15, 2014 Tr. at
27:5–24; 56:10–17.) Mack’s counsel responded that Florida courts do not treat res judicata
uniformly, and some Florida courts may actually permit a plaintiff who has recovered a
judgment against one joint tortfeasor to pursue a new action on the same facts against the other
tortfeasor. (See id. at 44:16–49:1.) Mack’s counsel also argued that the Macks had no reason to
believe that Deutsche Bank should be held responsible for GMACM’s failure to respond to a
QWR, so the Macks did not lodge the QWR Claim against Deutsche Bank. (See id. at 54:3–15.)
Additionally, Mack’s counsel asserted that though the Proof of Claim does not mention a QWR
Claim, “the proof of claim is just a brief itemization; it was not the details that we have of
everything required to prove a case.” (Id. at 61:12–15.) Mack’s counsel also discussed a Circuit
split regarding whether a plaintiff can recover personal injury damages as part of a RESPA
claim. (See id. at 34:4–10.)
At the conclusion of the argument, the Court directed counsel to submit supplemental
briefs addressing whether the Macks’ Proof of Claim properly identifies the QWR Claim, and if
not, whether the Court should permit Mack to amend the Claim now. (See id. at 68:3–12.) The
Court also directed counsel to brief the Circuit split regarding recovery of non-economic
damages on RESPA claims. (See id. at 68:13–17.)
I. 	The Supplemental Briefs
The Trust argues in its supplemental brief that the Proof of Claim did not raise the QWR
Claim. (See ECF Doc. # 7118 ¶¶ 3–4.) The Trust also argues that the Court should not permit
amendment now because the QWR Claim does not relate back to the facts alleged in the Proof of
Claim, and instead conflicts with the Proof of Claim. (See id. ¶ 9.) 	Additionally, the Trust
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argues, allowing a claim amendment could diminish recoveries to other creditors, and the Macks
had no reasonable excuse for failing to allege the QWR Claim in the Proof of Claim. (See id.
¶ 11.)
The Trust also argues that even though some Circuits allow non-economic damages for
RESPA claims, the better rule is to preclude those damages because even though RESPA is
remedial, the Act is intended to serve both consumer and industry purposes, as opposed to
statutes with the sole purpose of protecting consumers. (See id. ¶¶ 17–19.) Moreover, other
statutes that allow for personal injury damages protect vital interests like privacy and civil rights.
(See id. ¶ 20.) Here, though, the Trust argues, the statute is protecting a borrower’s interest in
receiving a response to a letter, and the failure to respond to the letter would not ordinarily be
expected to trigger the type of emotional harm that would be implicated by a violation of privacy
or civil rights. (See id.) Finally, the Trust argues that the alleged damages relating to the QWR
Claim are simply implausible because Mrs. Mack overdosed in October 2009, but RESPA, as
enacted at the time, only required GMACM to acknowledge receipt of the QWR by November
16, 2009, and GMACM did not actually need to respond to the QWR until December 28, 2009.
(See ECF Doc. # 7205 at 8–9 n.7 (citing 12 USC §§ 2605(e)(1)(A), (e)(2) (2009) (amended in
2010 to reduce deadlines from 20 days to 5 days in (e)(1)(A) and from 60 days to 30 days in
(e)(2))).)
Mack responds that the Proof of Claim fairly put the Debtors on notice that the Macks
were claiming injury due in part to a RESPA violation. (See ECF Doc. # 7112 at 7.) Even
though the Proof of Claim did not identify the precise QWR as issue, the Proof of Claim alleged
a pattern of misleading, possibly deceptive, communications from GMACM regarding the
Foreclosure Action. (See id. at 7–8.) Failure to respond to a QWR about the Foreclosure Action,
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Mack argues, falls within that pattern of conduct. (See id. at 7.) Additionally, Mack argues that
GMACM had actual knowledge of the QWR Claim because in November 2011, the Macks’
attorney and Deutsche Bank’s attorney asked Mrs. Mack about the QWR at a deposition in the
Foreclosure Action. (See id. at 9 (citing ECF Doc. # 7112 Exhibit B (attaching excerpts from a
transcript of Mrs. Mack’s deposition in the Foreclosure Action)).)
As for RESPA damages, Mack argues that the cases allowing emotional distress damages
have compared RESPA with the Fair Debt Collection Practices Act (“FDCPA”). (See id. at 6.)
Courts interpreting the FDCPA have allowed damages for emotional distress under 15 U.S.C.
§ 1692(k), which permits recovery of “actual damages.” (See id.) That same term—“actual
damages”—is used in RESPA and, Mack argues, should be interpreted similarly for RESPA to
include emotional distress damages. (See id.) Mack also argues that GMACM itself has
conceded in other cases that RESPA allows an award of emotional distress damages. (See id.
(citing Catalan v. GMAC Mortg. Corp., 629 F.3d 676, 696 (7th Cir. 2011) (“GMAC Mortgage
concedes that emotional distress damages are available as actual damages under RESPA, at least
as a matter of law . . . .”)).)
II. 	DISCUSSION
A. 	Claims Objections
Claims objections have a shifting burden of proof. Correctly filed proofs of claim
“constitute prima facie evidence of the validity and amount of the claim . . . . To overcome this
prima facie evidence, an objecting party must come forth with evidence which, if believed,
would refute at least one of the allegations essential to the claim.” Sherman v. Novak (In re
Reilly), 245 B.R. 768, 773 (2d Cir. B.A.P. 2000). By producing “evidence equal in force to the
prima facie case,” an objector can negate a claim’s presumptive legal validity, thereby shifting
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the burden back to the claimant to “prove by a preponderance of the evidence that under
applicable law the claim should be allowed.” Creamer v. Motors Liquidation Co. GUC Trust (In
re Motors Liquidation Co.), No. 12 Civ. 6074 (RJS), 2013 U.S. Dist. LEXIS 143957, at *12–13
(S.D.N.Y. Sept. 26, 2013) (internal quotation marks omitted). If the objector does not
“introduce[] evidence as to the invalidity of the claim or the excessiveness of its amount, the
claimant need offer no further proof of the merits of the claim.” 4 COLLIER ON BANKRUPTCY
¶ 502.02 (16th rev. ed. 2013); see also In re Residential Capital, LLC, 507 B.R. 477, 490 (Bankr.
S.D.N.Y. 2014).
Bankruptcy Code section 502(b)(1) provides that claims may be disallowed if
“unenforceable against the debtor and property of the debtor, under any agreement or applicable
law.” To determine whether a claim is allowable by law, bankruptcy courts look to “applicable
nonbankruptcy law.” In re W.R. Grace & Co., 346 B.R. 672, 674 (Bankr. D. Del. 2006).
B. 	Res Judicata Bars Most of Mack’s Claims (But Not the QWR Claim)
Res judicata, or claim preclusion, provides that “a final judgment on the merits of an
action precludes the parties or their privies from relitigating issues that were or could have been
raised in that action.” Burgos v. Hopkins, 14 F.3d 787, 789 (2d Cir. 1994) (quoting Allen v.
McCurry, 449 U.S. 90, 94 (1980)). “[T]he preclusive effect of a state court determination in a
subsequent federal action is determined by the rules of the state where the prior action
occurred . . . .” New York v. Sokol (In re Sokol), 113 F.3d 303, 306 (2d Cir. 1997) (citing 28
U.S.C. § 1738). “In applying the doctrine of res judicata, [a court] must keep in mind that a state
court judgment has the same preclusive effect in federal court as the judgment would have had in
state court.” Burka v. New York City Transit Auth., 32 F.3d 654, 657 (2d Cir. 1994) (citation
omitted). See also Residential Capital, 507 B.R. at 491–92.
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Florida courts apply res judicata to default judgments. See Wharton v. Shiver (In re
Shiver), 396 B.R. 110, 123–24 (Bankr. S.D.N.Y. 2008); Bay Fin. Sav. Bank, F.S.B. v. Hook, 648
So. 2d 305, 307 (Fla. Dist. Ct. App. 1995); see also Cabinet Craft, Inc. v. A.G. Spanos Enters.,
Inc., 348 So. 2d 920, 922 (Fla. Dist. Ct. App. 1977) (“[A] judgment entered upon default is just
as conclusive as one which was hotly contested.”). Res judicata will extend to “matters raised in
post judgment motions as well as to theories of recovery and defenses that could have been
presented in the prior litigation.” Bay Fin. Sav., 648 So. 2d at 307; see also AGB Oil Co. v.
Crystal Exploration and Prod. Co., 406 So. 2d 1165, 1167 (Fla. Dist. Ct. App. 1981) (adopting
rule that “issues determined on a motion to set aside a default judgment or to vacate a final
judgment are res judicata”).
For res judicata to apply, a court must find “(1) identity of the thing sued for; (2) identity
of the cause of action; (3) identity of persons and parties; and (4) identity of the quality or
capacity of the persons for or against whom the claim is made.” Holt v. Brown’s Repair Serv.,
Inc., 780 So. 2d 180, 181–82 (Fla. Dist. Ct. App. 2001) (citation omitted). The first prong is
satisfied if both actions seek money damages. See AMEC Civil, LLC v. DOT, 41 So. 3d 235, 242
(Fla. Dist. Ct. App. 2010) (“In both the initial action and the present case, the ‘thing sued’ for
was money damages allegedly sustained by [the plaintiff] as a result of the defendant’s] breach
of the indivisible contract.”). Although Mack argues that the identity of the thing sued for is
different here because he seeks general and personal injury damages, he provides no authority to
indicate that this distinction is relevant. Rather, the identity-of-the-thing-sued-for prong focuses
on the difference between money damages and injunctive relief—not on difference between the
type of monetary damages sought. See, e.g., Holt, 780 So. 2d at 182 (finding no identity in thing
sued for where first action sought equitable remedy and second action sought money damages).
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Moreover, as the Trust notes, the Macks actually did seek personal injury damages initially, and
they were awarded those damages before the ruling was vacated in part. (See Delehey Decl. Ex.
D at 2 ¶¶ 11, 13; 3 ¶ 1.)
To determine the identity of causes of action, courts “consider the relationship between
the facts and issues asserted to constitute a single transaction.” DOT, 41 So. 3d at 240; see also
Saadeh v. Stanton Rowing Found., Inc., 912 So. 2d 28, 31 (Fla. Dist. Ct. App. 2005) (“In
determining whether identity of causes of action exists, the court must compare the facts and
issues supporting the underlying transaction.”). Put another way, identity of causes of action
“means an identity of the facts essential to maintenance of the action.” M.C.G. v. Hillsborough
Cnty. Sch. Bd., 927 So. 2d 224, 227 (Fla. Dist. Ct. App. 2006).
Even where the parties are not identical, a defendant in an action may be bound by an
earlier judgment to which that defendant was not a party if the defendant participated in the
earlier case or was virtually represented in the earlier action by the party of record. See Linn-
Well Dev. Corp. v. Preston & Farley, Inc., 710 So. 2d 578, 580 (1998) (explaining that strict
identity of parties is not required, and a party may be bound by a prior judgment if that party
participated in the earlier proceeding or was virtually represented in the proceeding); see also
Progressive Am. Ins. Co. v. McKinnie, 513 So. 2d 748, 749 (Fla. Dist. Ct. App. 1987) (same).
Virtual representation—where a non-party’s interests are represented by a named party—may
exist where a non-party has indemnification obligations that could make it vicariously liable for
the named party’s actions. See Massey v. David, 831 So. 2d 226, 233 (Fla. Dist. Ct. App. 2002)
(“Virtual representation or privity may exist where a third party must indemnify and so is
vicariously liable for the acts of the party to the lawsuit.”) (citations omitted). Here, GMACM
participated in the Foreclosure Action even though it was not technically a named party. It was
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the inaction of the lawyer that GMACM hired and controlled that gave rise to the Macks’ claims
against Deutsche Bank. Not only did GMACM hire Stern to commence the suit, GMACM filed
a notice of appearance and submitted evidence at the hearing seeking to vacate the final
judgment in favor of the Macks. (See Delehey Decl. Ex. E § 2(b) (noting that GMACM
presented evidence in support of Deutsche Bank’s motion to vacate the judgment).) The Florida
court explicitly stated that its ruling would impact GMACM. (Id. (“Neither Plaintiff nor GMAC
is able to avoid the grossly negligent actions of [Stern].”) (emphasis added).) As subservicer of
the Macks’ Loan, GMACM owed indemnification obligations to RFC, which was the master
servicer, and to Deutsche Bank. (See Delehey Decl. Ex. B-1 § 12.05.) The Court concludes that
the identity of the parties prong is satisfied here.
Mack argues that even where parties are in privity, if they are joint tortfeasors, res
judicata does not bar a suit against one tortfeasor after the other tortfeasor had already been sued.
Mack cites Mitchell v. Edge, 598 So. 2d 125, 127–28 (Fla. Dist. Ct. App. 1992), in support of his
contention. In Mitchell, the plaintiff was not barred from pursuing an action against a joint
tortfeasor where the plaintiff had already obtained a judgment against the other joint tortfeasor.
The Mitchell court noted the Restatement (Second) of Judgments’ comment that a claimant “has
a claim against each of [the joint tortfeasors, so] a judgment for or against one obligor does not
result in merger or bar the claim that the injured party may have against another obligor.” 598
So. 2d at 128 (quoting RESTATEMENT (SECOND) OF J UDGMENTS § 49 cmt. a (1982)). But Mitchell
does not apply here for two reasons: (1) the Mitchell court explicitly noted that its holding was
influenced by the fact that the plaintiff’s judgment against the first joint tortfeasor had never
been satisfied, see 598 So. 2d at 127, whereas here, the Macks’ judgment against Deutsche Bank
was satisfied; and (2) the Mitchell court expressly stated that it was not deciding whether the
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Restatement’s rule that a judgment against one tortfeasor does not bar a claim against another
tortfeasor “is now the ‘weight of authority’ and should cause us to recede from” earlier holdings.
Id. at 128.
Earlier cases from the same appellate district as the Mitchell court applied res judicata to
bar a suit against one joint tortfeasor where an earlier judgment against the other joint tortfeasor
had already been satisfied. See, e.g., Roberts v. Rockwell Int’l Corp., 462 So. 2d 502, 505–06
(Fla. Dist. Ct. App. 1984) (“Satisfaction of a judgment against one of several persons jointly and
severally liable discharges the liability of the others.”) (internal quotations marks omitted). The
rule pre-Mitchell was that satisfaction of a judgment against one tortfeasor barred a later suit
against another tortfeasor; Mitchell explicitly stated that it was not overturning that standard.
The master/servant nature of GMACM’s relationship with Deutsche Bank also weighs in
favor of applying res judicata here. A judgment entered against a master also bars a plaintiff
from bringing a new action on the same facts against the servant. See Hinton v. Iowa Nat. Mut.
Ins. Co., 317 So. 2d 832, 835–36 (Fla. Dist. Ct. App. 1975) (“[T]he weight of authority is on the
side of barring a plaintiff from relitigating his claim against the servant when a judgment has
been entered in a prior suit against the master involving the same issues.”). The Court concludes
that this prong for applying res judicata is also satisfied.
As for the last prong, the quality of the parties against whom the claims are made will be
identical if the first party “had the incentive to adequately litigate the claims in the same
character or capacity as would the parties to the [first action].” Radle v. Allstate Ins. Co., 758 F.
Supp. 1464, 1468 (M.D. Fla. 1991) (applying Florida law). Since Deutsche Bank’s potential
liability derived from GMACM’s conduct, Deutsche Bank had as much incentive to litigate the
claims as GMACM does now. That prong is satisfied as well.
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Mack asserts various theories of liability springing from the initiation of the Foreclosure
Action, including (1) personal injury, (2) wrongful death, (3) malicious prosecution,
(4) intentional infliction of emotional distress, and (5) violation of RESPA for failure to notify
the Macks of a change of the servicer their Loan. Each of these theories arises from the same
nucleus of operative facts that gave rise to the Macks’ counterclaims against GMACM’s privy—
Deutsche Bank—in the Foreclosure Action.
Even though Mrs. Mack had not yet died when the Macks pursued their counterclaims,
Mack’s counsel concedes that where a party has taken a personal injury case to judgment, that
party’s subsequent death from the personal injury does not give rise to a new cause of action.
(See May 15, 2014 Tr. at 41:12–42:19.) Although the Macks did not allege a separate personal
injury cause of action in their counterclaims, (1) they could have; and (2) they presented
evidence about Mrs. Mack’s personal injury in connection with their RESPA claim. Mack’s
personal injury and wrongful death claims here are barred by res judicata because the personal
injury claim could have been lodged during the Foreclosure Action, and the wrongful death
claim arises from the same nucleus of operative facts. The malicious prosecution and intentional
infliction of emotional distress claims are similarly barred by res judicata; they undoubtedly
relate to the initiation of the Foreclosure Action, which was explicitly at issue in the Macks’
slander of title counterclaim. Finally, any claim regarding a violation of RESPA for failure to
notify the Macks of a transfer of servicing of their Loan was explicitly litigated and rejected in
the Foreclosure Action, so that, too is barred by res judicata.
C. 	The RESPA Claim Based on the QWR Is Not Barred by Res Judicata
The RESPA claim based on the QWR stands differently from the claims discussed above,
however, and the Court concludes that res judicata does not apply to bar the QWR Claim. That
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claim does not arise from the same nucleus of operative facts as the Foreclosure Action. In the
Foreclosure Action, the Macks alleged damages for slander of title and for an alleged failure to
inform them that the owner or servicer of their Loan had changed—those claims arose from the
initiation of the Foreclosure Action, and from an alleged non-disclosure before the Foreclosure
Action was commenced. GMACM’s failure to respond to the Macks’ October 26, 2009 QWR
does not arise from the same facts. The Macks sent the QWR well after GMACM initiated the
Foreclosure Action with Deutsche Bank as the named plaintiff. The essential facts for the QWR
Claim (a valid request was sent and GMACM failed to respond) are not the same as those
essential to the Macks’ counterclaims in the Foreclosure Action, so there is no identity of the
causes of action. See Cole v. First Dev. Corp. of Am., 339 So. 2d 1130, 1131 (Fla. Dist. Ct. App.
1976) (“Identity of the causes of action is established where the facts which are required to
maintain both actions are identical.”).
The Court is unpersuaded by the Trust’s argument that the Macks could have alleged the
QWR Claim in the Foreclosure Action, and are therefore barred from asserting it here. Deutsche
Bank would not have been a proper subject of the QWR Claim because it was not the loan
servicer. See McCarley v. KPMG Int’l, 293 Fed. App’x 719, 722 (11th Cir. 2008) (upholding
summary judgment for defendant on RESPA claims because defendant was not a loan servicer);
Pasillas v. Deutsche Bank Nat’l Trust Co., No. 5:12-CV-04123-LHK, 2014 WL 1006300, *5
(N.D. Cal. Mar. 12, 2014) (“[T]o state a claim based on a failure to respond to a QWR, Plaintiffs
must also allege that each defendant against whom the claim is brought was a loan servicer.”)
(citation omitted); Gibson v. Mortg. Elec. Registration Sys., Inc., No. 11-2173-STA, 2011 WL
3608538, *5 (W.D. Tenn. Aug. 16, 2011) (holding that only servicers have a duty to respond to a
QWR, so non-servicer defendants were not liable under RESPA). The Trust offers no authority
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for its position that the Macks can be bound by failing to assert the cause of action against the
improper party or that they had to name GMACM as a defendant in the same case. Because
there is no identity between the causes of action that were actually asserted in the counterclaims
and the QWR Claim, and because the Macks could not have properly alleged a QWR Claim
against non-servicer Deutsche Bank, the QWR Claim is not barred by res judicata.
D. 	Mack’s QWR Claim is Not Barred By the Election of Remedies
The Trust argues that the Macks’ Claims are also barred from recovery by the election of
remedies. Election of remedies is a doctrine of estoppel that “prevent[s] double recoveries for a
single wrong.” Ehrman v. Mann, 979 So. 2d 1011, 1012 (Fla. Dist. Ct. App. 2008). The
“doctrine applies only where the remedies in question are coexistent and inconsistent.” Id. The
Trust initially raised the election of remedies argument based on the allegations in the Macks’
Proof of Claim. The Trust did not argue that the election of remedies barred the QWR Claim
because Mack had not yet raised that claim. To be sure, if the Trust had advanced the argument
in relation to the QWR Claim, the argument would have failed because a finding in Mack’s favor
on the QWR Claim would not be inconsistent with any holding from the Foreclosure Action.
In Ehrman, the court gave an example of the inconsistency required to invoke the
election of remedies. The Ehrman court cited a case where a plaintiff sued two different parties
regarding the ownership of a yacht. See id. at 1013 (citing Barbe v. Villeneuve, 505 So. 2d 1331
(Fla. Dist. Ct. App. 2000)). After obtaining a judgment from one party to secure title, the
plaintiff could not then try to obtain the title from another party since that issue had already been
settled. Id. Here, the Florida court never determined that GMACM actually responded to the
QWR. Nor did the Florida court issue any kind of award that would be inconsistent with an
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award granted here for the QWR Claim. Thus, the election of remedies does not bar Mack’s
QWR Claim.
E. 	The Proof of Claim is Deemed Amended to Include the QWR Claim
The Macks did not describe a QWR Claim in their Proof of Claim. Even so, the Court
will deem the Proof of Claim amended to assert the claim now. Federal Rule of Bankruptcy
Procedure 3003(c)(3) directs bankruptcy courts “to establish a bar date beyond which proofs of
claim are disallowed in a chapter 11 case.” In re Enron Creditors Recovery Corp., 370 B.R. 90,
94 (Bankr. S.D.N.Y. 2007). The bar date “is critically important to the administration of a
successful chapter 11 case for it is intended to be a mechanism providing the debtor and its
creditors with finality.” Id. (internal quotations omitted). Where the bar date has passed and a
creditor seeks to file an amended proof of claim, “the decision to allow the amendment of the
claim is committed to the discretion of the bankruptcy judge.” In re Asia Global Crossing, Ltd.,
324 B.R. 503, 507 (Bankr. S.D.N.Y. 2005) (internal citations omitted).
In the Second Circuit, amendment to a claim is
freely allowed where the purpose is to cure a defect in the claim as originally
filed, to describe the claim with greater particularity, or to plead a new theory of
recovery on the facts set forth in the original claim. 	However, the court must
subject post bar date amendments to careful scrutiny to assure that there was no
attempt to file a new claim under the guise of amendment.
Integrated Res., Inc. v. Ameritrust Co., N.A. (In re Integrated Res., Inc.), 157 B.R. 66, 70
(S.D.N.Y. 1993) (citations omitted).
Courts apply a two-step inquiry when considering whether to allow post bar date
amendments to proofs of claim. See Midland Cogeneration Venture Ltd. P’ship v. Enron Corp.
(In re Enron Corp.), 419 F.3d 115, 133 (2d Cir. 2005); In re Barquet Grp. Inc., 477 B.R. 454,
464 (Bankr. S.D.N.Y. 2012), aff’d, 477 B.R. 454 (S.D.N.Y. 2012). First, the court must
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determine “whether there was a timely assertion of a similar claim or demand evidencing an
intention to hold the estate liable.” Enron, 419 F.3d at 133 (quotation omitted). A claim satisfies
this first prong if it: “1) corrects a defect of form in the original claim; 2) describes the original
claim with greater particularity; or 3) pleads a new theory of recovery on the facts set forth in the
original claim.” Id. (quoting In re McLean Indus., Inc., 121 B.R. 704, 708 (Bankr. S.D.N.Y.
1990)). In other words, the amendment must relate back to the original proof of claim.
If this “relation back” inquiry is satisfied, courts then examine whether it would be
equitable to allow the amendment. Id.; Integrated Res., 157 B.R. at 70. Courts consider the
following five equitable factors in determining whether to allow an amendment:
(1) undue prejudice to opposing party; (2) bad faith or dilatory behavior on the
part of the claimant; (3) whether other creditors would receive a windfall were the
amendment not allowed; (4) whether other claimants might be harmed or
prejudiced; and (5) the justification for the inability to file the amended claim at
the time the original claim was filed.
Integrated Res., 157 B.R. at 70 (citation omitted); Enron, 419 F.3d at 133. “The critical
consideration is whether the opposing party will be unduly prejudiced by the amendment.”
Integrated Res., 157 B.R. at 70 (citation omitted).
The Trust argues that the QWR Claim does not relate back to the Proof of Claim because
the Proof of Claim only alleged actual communications between the Macks and GMACM, not
GMACM’s failure to respond to the Macks. But the Proof of Claim alleges liability based on a
RESPA violation and on GMACM’s deceptive communications with the Macks. (See Delehey
Decl. Ex. A.) Failing to respond to a QWR falls sufficiently within the same category of conduct
to relate back to the Proof of Claim. The QWR Claim supplements the Macks’ description of
GMACM’s conduct in communicating (or failing to communicate) with the Macks.
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The Court also finds that it is equitable to allow Mack to assert the QWR Claim.
GMACM’s RESPA violation for failure to respond the QWR is not disputed. The difficult
issues here are whether Mack can recover non-economic damages for a RESPA violation, and if
the law permits such recovery, whether Mack can sufficiently establish causation and damages.
The Court does not underestimate the difficulty of those issues. While the Proof of Claim takes
an expansive view of what Mack believes he should be entitled to recover, the actual scope of the
RESPA claim based on the QWR is fairly narrow. The Court does not underestimate the
consequences that the Macks suffered as a result of GMACM’s failure to prevent the wrongful
foreclosure from proceeding in the manner it did. But the only QWR—and, therefore, the only
basis for the RESPA claim—was sent by the Macks to GMACM on October 26, 2009; GMACM
did not respond. As previously stated, GMACM had until November 16, 2009 to acknowledge
receipt of the QWR, and until December 28, 2009 to respond to the request. Mrs. Mack’s
overdose occurred on in October 2009, before the acknowledgement of receipt or the response to
the QWR was required. In light of the timing, it is hard to see what damages Mack can recover
relating to the consequences of the overdose, assuming that non-economic damages are
recoverable. Still, the Court does not believe it can resolve the issue of causation and damages
as a matter of law at this stage of the case.4
F. 	Mack May Pursue Emotional Distress Damages in the QWR Claim
The QWR Claim arises under 12 U.S.C. §2605(e). Damages for a violation of that
provision are defined in section 2605(f) to include “any actual damages to the borrower as a
result of the failure” to reply to a QWR. 12 U.S.C. § 2605(f)(1)(A). The statute does not define
“actual damages”—some courts have interpreted it to allow for emotional distress damages,
4 	Mack concedes that he is unlikely to receive the punitive damages if he can only proceed with the QWR
Claim, and the punitive damages comprise the vast majority of Mack’s Claim amount. (See ECF Doc. # 7203.)
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while others have only allowed for recovery of economic losses. Compare Ploog v. Homeside
Lending, Inc., 209 F. Supp. 2d 863, 869–70 (N.D. Ill. 2002) (“RESPA’s actual damages
provision includes recovery for emotional distress.”), with In re Tomasevic, 273 B.R. 682, 687
(Bankr. M.D. Fla. 2002) (“Actual damages [in RESPA] are limited to economic pecuniary
injury.”).
The courts that allow for recovery of emotional distress damages note that RESPA has
remedial purposes. See, e.g., Rawlings v. Dovenmuehle Mortg. Inc., 64 F. Supp. 2d 1156, 1165
(M.D. Ala. 1999) (“The court finds that . . . Congress intended RESPA to be a remedial
consumer-protection statute.”). The Trust concedes this point, but argues that this does not end
the inquiry. (See ECF Doc. # 7118 ¶ 16 n.7, ¶ 17.) According to the Trust, the Court must
examine the entire context of the statute to determine whether RESPA allows for emotional
distress damages. (See id. ¶ 17.) For example, in F.A.A. v. Cooper, 132 S. Ct. 1441 (2012), the
Supreme Court held that emotional distress damages were not available to a plaintiff who sued
under the Right to Privacy Act of 1974, a remedial act allowing recovery for “actual damages.”
Mack points out that the plaintiff in Cooper sued the federal government, so the Supreme Court’s
narrow interpretation of “actual damages” was guided by a strict interpretation in favor of the
sovereign in cases involving sovereign immunity. (See ECF Doc. # 7203 at 4–5.) Still, the point
according to the Trust is that a statute’s designation as “remedial” does not automatically resolve
the question of emotional distress damages.
Additionally, the Trust contrasts the interests at stake in RESPA with those in statutes
allowing for emotional distress damages as “actual damages.” (See ECF Doc. # 7118 ¶ 20.) For
example, the Fair Housing Amendments Act protects individuals from housing discrimination
and allows for emotional distress damages as “actual damages.” See United States v. Balistrieri,
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981 F. 2d 916, 931 (7th Cir. 1992). Plaintiffs claiming civil rights violations under 42 U.S.C.
§ 1983 may also recover for emotional distress. See Biggs v. Village of Dupo, 892 F.2d 1298,
1304 (7th Cir. 1990). Plaintiffs who have suffered housing discrimination or civil rights
violations, the Trust argues, are likely to suffer psychological harm. Although it is possible that
a borrower may experience psychological frustration or distress due to a servicer’s failure to
respond to a QWR, the Trust argues, distress is less likely and should not be compensable under
RESPA. (See ECF Doc. # 7118 at ¶ 20.)
The Court agrees with the Trust that the analysis does not end with the designation of
RESPA as a remedial statute. But the Court also agrees with other courts that have allowed
recovery of emotional distress damages in RESPA cases. First, although there are several district
court opinions discussing RESPA and emotional distress damages, few circuit courts have
addressed the issue. Of the circuits that have addressed the issue, two have indicated that
emotional distress damages should be allowed, while no circuit appears to have ruled that
emotional damages are not allowed. See Houston v. U.S. Bank Home Mortg. Wisconsin
Servicing, 505 Fed. App’x 543, 548, 548 n.6 (6th Cir. 2012) (remanding case for further fact
finding about alleged emotional damages arising from servicer’s failure to respond to QWR and
holding that “[w]e find nothing in the text of § 2605(f), or in RESPA more broadly, to preclude
‘actual damages’ from including emotional damages, provided that they are adequately proven”);
Catalan, 629 F.3d at 696 (acknowledging that GMACM conceded that RESPA allowed for
recovery of emotional distress damages). Additionally, the Eleventh Circuit explained that a
plaintiff alleging a RESPA violation “arguably may recover for non-pecuniary damages, such as
emotional distress and pain and suffering . . . .” McLean v. GMAC Mortg. Corp., 398 Fed.
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App’x 467, 471 (11th Cir. 2010) (rejecting emotional distress damages in RESPA claim because
plaintiffs failed to adequately demonstrate causation).
Second, looking beyond the mere designation of RESPA as remedial, the Court still
concludes that the consumers’ interests at stake in RESPA warrant a consumer-oriented
interpretation of “actual damages” to allow for emotional distress damages in appropriate cases.
The statute requires servicers to provide a substantive response to borrowers who believe that
their accounts are in error. 12 U.S.C. § 2605 (B)(ii). This information is not trivial—an error on
a borrower’s account can have significant consequences to a borrower, leading to improper
charges, misapplied payments, or even wrongful foreclosure. The Court can imagine few things
more important to borrowers than keeping their homes. Thus, interpreting “actual damages” in
favor of consumers seems appropriate.
This case demonstrates exactly why responses to QWRs can be crucial. If GMACM had
responded to the QWR, it could have saved all of the parties much grief. The Trust asserts that
GMACM instructed its lawyer to dismiss the Foreclosure Action shortly after initiating the case
in August 2009. GMACM should have been alarmed to learn from the QWR, sent in October
2009, that the Foreclosure Action was still continuing. If it had complied with its statutory duty,
GMACM would have investigated and responded no later than December 28, 2009. Since
GMACM had already allegedly acknowledged by telephone with Mrs. Mack that the Foreclosure
Action was filed by mistake and should have be dismissed, there were no difficult or complex
issues, or lender policies that could have made an appropriate response difficult or time-
consuming to determine. GMACM has admitted that the Macks were not in default. What else
did GMACM need to know to stop the chain of events that it set in motion? GMACM could and
should have promptly investigated further, and perhaps most importantly, fired Stern, the lawyer
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GMACM had hired and who failed to carry out GMACM’s directive to dismiss the foreclosure
action. Instead, GMACM, by its inaction, allowed the case to linger.
None of this is to say that Mack has an easy road ahead of him. He faces an uphill battle
in demonstrating causation and damages—he must separate the emotional distress resulting from
the failure to respond to the QWR from the emotional distress due to the Foreclosure Action.
But the events here demonstrate why a borrower should be entitled to recover emotional distress
damages under RESPA. Faced with a maddening and admittedly unwarranted foreclosure, the
Macks got nothing but silence or misinformation from GMACM.
III. 	CONCLUSION
Mack may not assert against GMACM any damages relating to the commencement of the
Foreclosure Action or the decline in value of the Macks’ property for which the Macks have
already been compensated by Deutsche Bank. Those claims are barred by res judicata. So, too,
are claims that the Macks could have raised in their counterclaims. The Court sustains the
Objection to the portions of the Claim arising from the initiation of the Foreclosure Action,
including allegations of (1) personal injury, (2) wrongful death, (3) malicious prosecution, (4)
intentional infliction of emotional distress, and (5) failure under RESPA to notify the Macks of a
transfer of servicing of their Loan. But Mack has alleged a plausible RESPA claim for
GMACM’s failure to respond to the October 2009 QWR. The Court will deem the Proof of
Claim amended to include the QWR Claim, and the Objection to that part of the Claim is
overruled. To receive any damages for the QWR Claim, Mack must demonstrate how the
requested damages arise from GMACM’s failure to respond to the QWR as opposed to its
initiation of the Foreclosure Action. This may be difficult, but Mack is entitled to make his case.
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The Court therefore SUSTAINS IN PART AND OVERRULES IN PART the
Objection. Only Mack’s QWR Claim survives. Counsel for the parties are directed within 14
days of the entry of this Opinion and Order to confer by telephone about the possibility of
settlement, or entering into mediation. The Court will also hold a case management and
scheduling conference, by telephone, on August 13, 2014, at 2:00 p.m. (Eastern Standard Time).
IT IS SO ORDERED.
Dated: July 24, 2014
New York, New York 	_____Martin Glenn____________
MARTIN GLENN
United States Bankruptcy Judge
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