A foreclosure attorney who complained to one of the law firm’s partners about how the firm billed its client for title insurance costs, and who subsequently lost his job, will have the opportunity to show that he was fired in retaliation for his complaint. Rejecting a request for a pretrial judgment by the firm, the partner, and a company that referred foreclosure matters, a U.S. district judge for the District of Maryland said there was a genuine issue of material fact as to whether the attorney had been fired because he complained about a violation of a consumer financial protection law (Yoder v. The O’Neil Group, LLC, Dec. 8, 2017, Chasanow, D.).
According to the attorney, The O’Neil Group was created to handle foreclosure matters for mortgage loan buyer MCM Capital Partners and MCM’s servicer, BSI Financial. The O’Neil Group created a number of law firms to handle the foreclosures, one of which was MSO Legal Partners. MSO hired the attorney to manage its foreclosure case load.
MSO was required to comply with BSI’s policies on cost reimbursements and title report charges. Under the agreement, BSI would pay no more than $350 for a full title report and $175 for an update. The law firm’s costs, including title report costs, were to be submitted as they were incurred to The O’Neil Group for approval, and then were to be passed on to BSI. BSI would pay The O’Neil Group, which in turn would pay MSO. Title costs were not to be marked up.
Attorney’s concerns. The attorney claimed that, while he was working on a foreclosure case, he discovered that MSO was not following the required procedures. First, the firm was marking up the title costs, charging BSI for the maximum amounts while actually paying substantially less to the title company. Second, the law firm was billing BSI directly for the title costs before it received an invoice from the title company.
The attorney took what he had learned to one of MSO’s partners, who agreed that the firm was supposed to follow BSI policies and owed BSI a refund. In reply, the attorney pushed for a commitment that BSI would be informed of the problem within two weeks, offered a refund of the overcharges, and be expected to ensure that none of the overcharges were passed on to borrowers who already were in foreclosure.
Shortly thereafter, the attorney raised a concern about a plan to use a different auctioneer for foreclosure sales without BSI’s consent. MSO’s owners then decided they did not wish to continue employing him.
Job separation. The attorney first was told that, while he was not being fired, MSO could not afford to continue to pay his agreed compensation and he would be better off finding another job. After a second meeting, the attorney was sent a resignation letter for his signature and given the choice of resigning or being fired. He refused to sign the letter. MSO interpreted that as a resignation, although the attorney never told the firm that he was quitting.
Claimed retaliatory discharge. According to the attorney, MSO had fired him in retaliation for his complaints about the marked-up title costs. This violated the Dodd-Frank Act whistleblower protection provisions (12 U.S.C. §5567(a)). He sued MSO, the partner, and The O’Neil Group.
The judge said there were four steps for the attorney to establish a prima facie case of a retaliatory discharge. He had to show that:
- He had engaged in an activity that was protected by the Dodd-Frank Act.
- MSO knew that he had engaged in such an activity.
- He had suffered an unfavorable employment action.
- The protected activity was at least a contributing factor in the employment action.
The defendants did not contest the second element, but they disputed the other three.
Protected activity. The judge agreed that it was objectively reasonable for the attorney to believe that MSO’s alleged overbilling violated the Fair Debt Collection Practices Act, which would have made reporting it a protected activity.
A foreclosure proceeding must provide information on all of the loan owner’s costs in order to give the borrower a chance to reinstate the mortgage by paying the deficiency, the judge pointed out. Accurate cost information also would be needed if the loan owner sought a deficiency judgment after a foreclosure sale. Attempting to collect more than is owed and misrepresenting the amount owed would violate the FDCPA.
It was irrelevant that MSO submitted its bills to BSI rather than to borrowers, the judge said, as long as the overcharge would have been passed on to the borrowers. The violation would have been material, she added, because borrowers would have been charged up to $360 too much. More than 100 accounts were involved, the judge observed.
The defendants could not rely on the debt collection act’s bona fide error defense, the judge continued. That defense would shield a debt collector from liability under the FDCPA, but was irrelevant to whether the attorney objectively believed there had been a Dodd-Frank Act violation.
Unfavorable action. The defendants argued that the attorney had not been discharged; rather, he had voluntarily quit. The attorney, of course, argued to the contrary. Given that the attorney had refused to sign the resignation letter and that the defendants had offered no other evidence that he had quit, the judge said there was a genuine issue of fact as to whether he had been fired.
Causal connection. The close proximity in time between the attorney’s complaint and his job loss was enough to imply a causal connection, according to the judge. The sequence alleged by the attorney was that he raised his complaint on June 12, he was told to look for another job on June 27, and he was considered by MSO to have quit on June 30. Even in the absence of any other evidence of a causal connection, such a connection could be inferred.
The defendants’ claims that they would have released the attorney for other reasons, such as a reduced case load or the attorney’s tone when he complained about the change in auctioneers, were not supported by evidence that was sufficiently clear and convincing to overcome the implied causal connection, the judge decided.
The case is No. DKC 16-0900.
Attorneys: Howard Benjamin Hoffman (Howard B. Hoffman, Attorney at Law) for Erik Yoder. William Thomas O. Neil (The O'Neill Group, LLC) for The O'Neil Group, LLC, and MSO Legal Partners, LLC.
Companies: BSI Financial; MCM Capital Partners, LLC; MSO Legal Partners, LLC; The O’Neil Group, LLC
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