Effective March 23, 2010 Oregon’s Unlawful Trade practices Act (UTPA) was amended to include loans or extensions of credit. See ORS 646.605(6). Prior to that date, Oregon Supreme Court precedent dictated that a plaintiff could not bring a UTPA claim when the underlying conduct alleged to violate the act arose out of a loan or an extension of credit. See, e.g., Lamm v. Amfac Mortg. Corp., 44 Or. App. 203, 204-05 (1980). In part based upon the 2010 UTPA amendment, in 2012 the Oregon Attorney General adopted Oregon Administrative Rule (OAR) 137-020-0805, which prohibits certain conduct related to mortgage loan servicing, including failing to deal with a borrower in good faith.
In December 2017, Julie Collis (Collis) filed a lawsuit against her mortgage loan servicer, Rushmore Loan Management Services, LLC (Rushmore), in the Eugene Division of the District of Oregon court, captioned Collis v. Rushmore Loan Management Services LLC, Case No. 6:17-cv-02062. Collis, a home owner, alleged that Rushmore, her mortgage servicer, had failed to deal with her in good faith as prohibited by OAR 137-020-0805(6) and in violation of ORS 646.608(1)(u) of the UTPA. Rushmore filed a motion for summary judgment arguing that Collis’s UTPA could never succeed as a matter of law because the 2010 UTPA amendment incorporating loans and extensions of credit was not retroactive and Collis’s mortgage loan was entered into long before 2010, and her last modification of the loan occurred just weeks before the 2010 UTPA amendment became effective on March 23, 2010. Rushmore argued that no matter which date was used, Collis’s UTPA claim arose out of a mortgage loan that predated the non-retroactive 2010 UTPA amendment and thus her claim could not be viable. Rushmore relied on multiple District of Oregon decisions dismissing plaintiffs’ UTPA claims, which it argued were analogous to the facts underlying Collis’s claim. Rushmore was represented by attorney Michael Farrell and Thomas Purcell of MB Law Group LLP.
Collis was represented by Portland attorneys Michael Fuller and Kelly Jones (the author). In opposition, Collis argued that the conduct alleged to violate the UTPA, through OAR 137-020-0805, did not arise out of the mortgage loan, but instead arose out of Rushmore’s services in 2017, and “services” have always been covered by the UTPA, prior to the 2010 UTPA amendment. Collis also distinguished the previous District of Oregon cases that Rushmore relied on in support of its arguments. The Magistrate Judge agreed with Rushmore’s arguments, and in his findings and recommendations (F&R) suggested that Collis’s UTPA claim should be dismissed as a matter of law because the UTPA claim arose out of the mortgage loan which predated the 2010 UTPA amendment. In her objections to the F&R, Collis renewed her previous arguments and pointed out to the Article III Judge that the F&R completely ignored Collis’s reliance on what she believed was the most on point Oregon state court case on the issue, Cullen v. Investment Strategies, Inc., 139 Or. App. 119, 127 (1996). In Cullen, the Oregon Court of Appeals navigated the line between the “services” of a non-lender mortgage servicer, like Rushmore, which have always been within the ambit of the UTPA, and conduct arising out of the mortgage loan, which was not covered by the UTPA prior to the 2010 amendment. Collis argued that a close reading of the holding in Cullen, and the persuasive reasoning of an Eastern District of California court, in Contreras v. Nationstar Ltd. Liab. Co., No. 2:16-cv-00302-MCE-EFB, 2017 U.S. Dist. LEXIS 127357, at *13-14 (E.D. Cal. Aug. 9, 2017), that followed Cullen to reach the same conclusion on very similar facts, would in her case have led to an outcome that Rushmore’s conduct arose of its allegedly bad faith services in 2017, rather than out of the mortgage loan itself; therefore her claim was not prohibited by application of the pre-2010 amended UTPA.
The Article III Judge (Court) declined to adopt the F&R (order available here). The Court agreed with Collis that Cullen was the most on point Oregon case and that Cullen’s reasoning confirmed that “[a] determination that a plaintiff cannot pursue a claim under the UTPA based on a loan or loan modification, however, does not bar UTPA claims against the servicer of a loan. Allegations against the servicer of a loan by a non-lender are aimed at ‘those services [that] fall within the UTPA even though the loan itself does not.’” Collis v. Rushmore Loan Mgmt. Servs. LLC, Case No. 6:17-cv-02062-MK, slip op. at 3 (D. Or. Feb. 7, 2019) (second brackets in original) (quoting Cullen, 139 Or. App. at 127). In specific regard to Collis’s UTPA claim, the Court noted that her “claim does not relate to the loan or loan modification, but to Defendant’s actions—or lack thereof—in servicing the loan. Specifically, Plaintiff alleges that Defendant failed to pay her property taxes as promised, ensured her that it had paid the taxes, failed to return her phone calls, and refused to provide her an accounting.” Id. at 4. The Court also found that the decision in Contreras, relying in part on Cullen, holding that the servicing of a loan was subject to the UTPA although the loan itself was not, was persuasive.
Collis is continuing to litigate her claim. Collis is an important decision for several reasons. First, Oregon consumer plaintiffs (and the Oregon Department of Justice) can use it as support in future attacks to dismiss their UTPA claims based upon bad faith mortgage servicing conduct in violation of the OARs and UTPA. Second, if the F&R had been adopted, and its reasoning had spread, many Oregon home owners would have no claim for relief under the UTPA for a mortgage servicer’s unlawful mortgage servicing conduct if their mortgage or modification had been entered into prior to March 2010, even if the conduct complained of had occurred long after the 2010 UTPA amendment and adoption of the OAR regulating mortgage servicing in 2012. Clearly this would have negatively impacted many Oregonians who would have been left without a cause of action to seek redress for bad faith mortgage servicing conduct.