Allison Harbin v. Roundpoint Mortgage Company

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-11565
Non-Argument Calendar
____________________
ALLISON HARBIN,
Plaintiff-Appellant-Cross Appellee,
versus
ROUNDPOINT MORTGAGE COMPANY,
a foreign corporation,
Defendant-Appellee-Cross Appellant,
FIRST GUARANTY MORTGAGE
CORPORATION,
a foreign corporation,
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2 Opinion of the Court 22-11565
Defendant.
____________________
Appeals from the United States District Court
for the Northern District of Alabama
D.C. Docket No. 2:15-cv-01069-SLB
____________________
Before R OSENBAUM , LAGOA , and BRASHER , Circuit Judges.
PER CURIAM:
Looking to save her home from an impending foreclosure
sale, Allison Harbin asked the servicer of her mortgage loan,
RoundPoint Mortgage Company (“RoundPoint”), to postpone the
sale so that she could finish an incomplete loan-modification appli-
cation she had submitted. She planned to file for bankruptcy as a
last resort. A RoundPoint employee initially told her the sale was
set to go forward, but, after looking into the matter and speaking
with other agents, he confirmed first orally and later in writing that
the foreclosure sale had been suspended, and he directed her to
submit the remaining documents necessary to review her applica-
tion. Believing the sale date had been pushed back, Harbin did not
file for bankruptcy and instead attempted to finish the application.
But the sale had not been postponed or delayed, and her home was
sold while she gathered the necessary documents.
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22-11565 Opinion of the Court 3
Harbin then sued both RoundPoint and the lender, First
Guaranty Mortgage Corporation, alleging fraud and breach of con-
tract, among other claims. The district court initially granted sum-
mary judgment for the defendants, but we vacated that ruling in
part on appeal, holding that sufficient evidence supported Harbin’s
claim of simple fraud under Alabama law.
Harbin v. RoundPoint
Mortg. Co., 758 F. App’x 753 (11th Cir. 2018).
On remand, the fraud claim was tried before a federal jury,
which returned a verdict in Harbin’s favor and awarded her $12,500
in damages. In particular, the jury found that the RoundPoint em-
ployee made a false statement by mistake or accident on which
Harbin reasonably relied to her detriment. The district court de-
nied the parties’ post-verdict motions for new trial or judgment as
a matter of law, and both parties appealed.
In her appeal, Harbin contends that the district court erred
by striking a prospective juror for cause, that the court misled the
jury as to the proper legal standard in its instructions and verdict
form, and that the verdict should be set aside as inconsistent, a
compromise, and against the great weight of the evidence as to her
damages. She seeks a new trial. For its part, RoundPoint maintains
that the jury’s finding that its employee made the alleged false rep-
resentation innocently and by mistake means it cannot be liable.
RoundPoint also asserts that Harbin failed to prove a false repre-
sentation or reasonable reliance, and that her own contributory
negligence bars recovery as a matter of law.
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4 Opinion of the Court 22-11565
After careful review of the record and the parties’ briefs, we
agree with Harbin that the district court reversibly erred when in-
structing the jury. Her remaining arguments are moot as a result.
We reject RoundPoint’s arguments that it was entitled to judgment
as a matter of law. We vacate and remand for further proceedings
consistent with this opinion.
I. HARBIN’S APPEAL
Harbin claims that the district court’s jury instructions and
verdict form improperly focused the jury’s attention solely on the
knowledge and intent of Daniel Gerstenfeld, the RoundPoint em-
ployee with whom she communicated. We agree that, under Ala-
bama law, this was error requiring a new trial.
A.
At trial, Harbin repeatedly sought to have the jury instruc-
tions and verdict form reflect that it was “RoundPoint making the
representation” about the foreclosure sale being suspended, not
Gerstenfeld, and that RoundPoint’s intent was at issue, not just
Gerstenfeld’s. Harbin’s position was that, even if Gerstenfeld acted
innocently, RoundPoint could still be liable for intentional fraud
under well-established Alabama law.
The district court denied this request and instructed the jury
as follows:
Ms. Harbin states and says in this case that the defend-
ant employee Daniel Gerstenfeld misrepresented the
state of a foreclosure to her. Misrepresentations of a
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22-11565 Opinion of the Court 5
material fact made intentionally to deceive or reck-
lessly without knowledge and acted on by the oppo-
site party or if made by mistake and innocently and
acted on by the opposite party constitutes legal fraud.
In this case, the plaintiff contends that the mis-
representations were made intentionally, recklessly
or by mistake. A false statement may be spoken or
written. Plaintiff Allison Harbin says that the false
statements are:
One, Daniel Gerstenfeld’s oral statement made
on May 29th, 2015 that it, quote, it looks like here it
has been suspended temporarily, end quote, when re-
ferring to the foreclosure sale; and
Second, an email from Daniel Gerstenfeld on
May 29th, 2015, when he wrote, quote, the foreclose,
foreclosure has been suspended temporarily, end
quote.
And as I stated in the beginning, when I say
Daniel Gerstenfeld, I’m not going to repeat it every
time I say his name, I’m referring to RoundPoint.
Then, in describing the elements of intentional, reckless, or
mistaken false statements, the district court centered the inquiry
solely on Gerstenfeld’s state of mind. To prevail, according to the
court, Harbin was required to prove, among other things, that (a)
“Gerstenfeld knew that the statement was false when he made it”;
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6 Opinion of the Court 22-11565
(b) “[Gerstenfeld] made the statement recklessly without knowing
whether it was true when he made it”; or (c) “Gerstenfeld’s state-
ment was made by mistake or innocently.” Likewise, in describing
punitive damages, the court charged the jury that Harbin must
prove that “Gerstenfeld consciously or deliberately acted toward
Ms. Harbin with fraud or malice.” Tracking these instructions, the
verdict form asked the jury to find whether “Daniel Gerstenfeld”
intentionally, recklessly, or mistakenly made a false representation,
though it advised at the outset that any reference to Gerstenfeld
should be interpreted as “referring to Defendant RoundPoint.”
In a post-verdict motion for new trial, Harbin raised the
same issue, contending that the court misled jurors by asking them
to base their decision solely on Gerstenfeld’s state of mind, when it
was RoundPoint’s knowledge that mattered. The court denied the
motion, reasoning that “[t]he only misrepresentations at issue in
the case were made by Gerstenfeld. The only relevant intent was
Gerstenfeld’s in making the statements at issue.” The court also
noted that it had made clear that “for all intents and purposes, Ger-
stenfeld and RoundPoint were interchangeable.”
B.
We apply the same deferential standard of review to jury in-
structions and verdict forms.
McNely v. Ocala Star-Banner Corp.,
99 F.3d 1068, 1072 (11th Cir. 1996). “So long as the jury instructions
and verdict form accurately reflect the law”—which we review
de
novo—“the trial judge is given wide discretion as to the style and
wording employed.”
Id. (quotation marks omitted). “Our practice
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22-11565 Opinion of the Court 7
is not to nitpick the instructions for minor defects.”
Morgan v.
Family Dollar Stores, Inc., 551 F.3d 1233, 1283 (11th Cir. 2008).
Nevertheless, we will reverse “where we are left with a substantial
and ineradicable doubt as to whether the jury was properly guided
in its deliberations.”
Id. (quotation marks omitted).
C.
In Alabama, “[t]he elements of fraud are (1) a false represen-
tation (2) of a material existing fact (3) reasonably relied upon by
the plaintiff (4) who suffered damage as a proximate consequence
of the misrepresentation.”
Exxon Mobil Corp. v. Ala. Dep’t of Con-
servation & Nat. Res., 986 So. 2d 1093, 1114 (Ala. 2007) (quotation
marks omitted). Ordinarily “intent is not an element” of a simple
fraud claim, but a finding of intent is necessary to award punitive
damages.
Id.;
see Ala. Code §§ 6-5-101, 6-11-20.
“[M]isrepresentations of material facts made by an agent,
which are made within the scope of the agent’s authority, are im-
putable to the principal.”
Leisure Am. Resorts, Inc. v. Knutilla, 547
So. 2d 424, 426 (Ala. 1989). But an agent’s individual “lack of intent
does not of itself end the inquiry with respect to the corporation’s
requisite intent to defraud.”
Id. In other words, a corporation can
still be liable for intentional fraud even though “the agent through
whom it acted was without knowledge of the true facts. The issue
. . . is whether the corporation had knowledge of the true facts.”
Birmingham News Co. v. Horn, 901 So. 2d 27, 60–61 (Ala. 2004)
(quoting
Shelter Modular Corp. v. Cardinal Enters., Inc., 347 So.2d
1334, 1338 (Ala. 1977)). The “analysis focuses on the conduct,
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8 Opinion of the Court 22-11565
particularly the intent, of [the] corporate entity, as made known
through the conduct of its agent[,] and not the intent of individual
agents themselves who are not defendants.”
Knutilla, 901 So. 2d at
60. In short, “it is [corporation’s] intent to deceive that is at issue—
not the intent of the company representative who made the state-
ment.”
Aldridge v. DaimlerChrysler Corp., 809 So. 2d 785, 797
(Ala. 2001).
In
Bolton Ford of Mobile, Inc. v. Little, for example, the
plaintiff bought a car in reliance on the salesman’s representation
that it had never been in a wreck, which turned out to be false. 344
So. 2d 1208, 1209–10 (Ala. 1977). While the salesman “did not
know that the car had been wrecked,” the Alabama Supreme Court
upheld an award of punitive damages based on intentional fraud.
See id. It explained that “[t]he evidence shows that several other
agents of Bolton knew that the demonstrator had been in a wreck,
and Bolton cannot escape liability merely because its salesman was
not informed of the true facts.”
Id. at 1210.
Similarly, in
AT&T Information Systems, Inc. v. Cobb Pon-
tiac-Cadillac, Inc., a company bought a new phone system in reli-
ance on an AT&T agent’s representation that the company was el-
igible for a substantial discount. 553 So. 2d 529, 532–33 (Ala. 1989).
While there was no evidence that the agent intended to deceive the
plaintiff company when he made that representation, the court up-
held a finding of intent to deceive against AT&T because “AT&T
(through its agent) represented that [the plaintiff] would receive
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22-11565 Opinion of the Court 9
the discount when [AT&T] knew that [the plaintiff was] not eligi-
ble for discounts.”
See id. at 533–34.
D.
Here, the district court’s instructions and verdict form did
not accurately reflect Alabama law. Harbin’s fraud claim is against
RoundPoint, not Gerstenfeld. And her theory is that, while Ger-
stenfeld may have acted innocently, RoundPoint still could be
found liable for intentional fraud because RoundPoint (through its
agent) represented that the upcoming foreclosure sale had been
suspended or postponed when it knew that was untrue.
Under Alabama law, whether RoundPoint had an intent to
defraud cannot be answered solely by reference to its agent’s in-
tent.
See Knutilla, 547 So. 2d at 426 (stating that an agent’s “lack of
intent does not of itself end the inquiry with respect to the corpo-
ration’s requisite intent to defraud”). That’s because “it is [Round-
Point’s] intent to deceive that is at issue—not the intent of the com-
pany representative who made the statement.”
Aldridge, 809 So.
2d at 797. Thus, the jury should have considered “whether the cor-
poration had knowledge of the true facts,”
Horn, 901 So. 2d at 60–
61, even if its agent, Gerstenfeld, did not. But by asking the jury to
find whether Gerstenfeld intentionally, recklessly, or mistakenly
made a false representation, the court gave the erroneous impres-
sion that Gerstenfeld’s intent was all that mattered.
We are not convinced that the district court cured the prob-
lem by clarifying that any reference to Gerstenfeld should be
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10 Opinion of the Court 22-11565
interpreted as referring to RoundPoint. That clarification simply
reflects that Gerstenfeld was acting as RoundPoint’s agent, such
that his conduct could be attributed to RoundPoint. The problem
remains, though, that the jury was directed to consider and make
findings about Gerstenfeld’s intent alone. Indeed, a key compo-
nent of RoundPoint’s closing argument to the jury was “[Gersten-
feld’s] state of mind when he was speaking with [Harbin],” and the
court overruled Harbin’s objection that the issue was actually
RoundPoint’s broader knowledge.
Nor are we persuaded by RoundPoint’s arguments in re-
sponse. RoundPoint claims that the caselaw we have described
does not apply because this case involves “a single employee that a
jury found mistakenly or innocently made a false statement,” so
there was no reason for the jury to “consider[] RoundPoint’s cor-
poration knowledge about the present state of the foreclosure
sale.”
But that was also true in
Cobb Pontiac-Cadillac, which
RoundPoint cites, where the jury exonerated AT&T’s agent for
making the sole false representation on which the plaintiff’s claim
was based.
See 553 So. 2d at 530–31, 534. And there was no evi-
dence of a broader deception by the corporate entity, as there was
in
Bolton Ford.
See Bolton Ford, 344 So. 2d at 1209–10. Neverthe-
less, the Alabama Supreme Court upheld the jury’s finding that
AT&T intended to deceive the plaintiff, not on the basis of vicari-
ous liability, but because “AT&T (through its agent) represented
that [the plaintiff] would receive the discount when it knew that
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22-11565 Opinion of the Court 11
[the plaintiff was] not eligible for discounts.”
Cobb Pontiac-Cadil-
lac, 553 So. 2d at 534 (“That is not to say that AT&T is vicariously
liable.”). Accordingly, despite RoundPoint’s reliance on general
principles of agency law, we see no grounds to deviate from the
ordinary rules established in caselaw specific to claims against a cor-
poration where intent to deceive is an element.1
Because the district court’s instructions gave the jury a mis-
leading impression of the law and the issues to be resolved, we are
left with a “substantial and ineradicable doubt as to whether the
jury was properly guided in its deliberations.”
Morgan, 551 F.3d at
1283. We therefore vacate the judgment and remand for a new
trial. Harbin’s other arguments are moot as a result.
1 For example, RoundPoint cites
Gowens v. Tys. S. ex rel. Davis, 948 So. 2d
513, 526 (Ala. 2006), for the proposition that “the imputation of the principal’s
knowledge to the agent is contrary to the general principles of agency.” But
that case was about whether individual state employees were entitled to state-
agent immunity for claims against them, which turned on whether the em-
ployees acted in bad faith or in disregard of clear rules.
See id. Where the
agent’s intent or conduct is all that matters, as in
Gowens, it makes sense not
to impute a principal’s knowledge to the agent. But as
Gowens itself noted,
“[a]s
against a principal, both principal and agent are deemed to have notice of
whatever either has notice of.”
Id. (quoting Ala. Code § 8-2-8) (emphasis in
original). Because Harbin’s claim was against the principal, RoundPoint, and
not its agent, RoundPoint’s reliance on
Gowens is misplaced.
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12 Opinion of the Court 22-11565
II. ROUNDPOINT’S CROSS-APPEAL
For its part, RoundPoint makes several arguments seeking
judgment as a matter of law, which we consider in turn.2 First,
RoundPoint argues that there was no evidence of a false represen-
tation, stressing that Gerstenfeld’s statement that the foreclosure
sale was “suspended” was literally true because, at the time he
made that statement, Harbin’s account was in a temporary forbear-
ance that ended on May 31, 2015. We rejected that argument in
the first appeal, though, and our decision is law of the case here.
See Culpepper v. Irwin Mortg. Corp., 491 F.3d 1260, 1271 (11th Cir.
2007) (“The law-of-the-case doctrine holds that subsequent courts
will be bound by the findings of fact and conclusions of law made
by the court of appeals in a prior appeal of the same case.” (quota-
tion marks omitted)). Notably, RoundPoint does not contend that
the trial produced substantially different evidence from what we
considered at summary judgment.
See id.
And as we previously explained, a reasonable jury could con-
clude from the context of Harbin’s communications with Gersten-
feld, which were entirely about postponing the upcoming sale, that
“Gerstenfeld was referring to the June 3 sale date and not to the
forbearance agreement” when he made the statements at issue.
2 We do not address its argument that, because the jury found that Gerstenfeld
acted innocently or by mistake, RoundPoint did not deviate from its duties as
mortgage servicer and so is not liable in tort. In light of our resolution of Har-
bin’s appeal, that issue on appeal is moot.
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22-11565 Opinion of the Court 13
Harbin, 758 F. App’x at 757–58. In other words, the falsity of the
statement comes from what a reasonable jury could conclude Ger-
stenfeld in fact said, not simply what Harbin understood Gersten-
feld to mean. For that reason, this case is not like
Nobility Homes,
Inc. v. Ballentine, 386 So. 2d 727, 730 (Ala. 1980), where the Ala-
bama Supreme Court held that no fraud can result from a state-
ment that is misleading but “literally true.” Here, sufficient evi-
dence supported the jury’s finding that Gerstenfeld’s statement was
not just misleading but actually false.
Second, RoundPoint maintains that Harbin failed to estab-
lish reasonable reliance. In RoundPoint’s view, Harbin failed to
take reasonable steps to discern the truthfulness of what Gersten-
feld said, and she should have known that the upcoming sale re-
mained unchanged. Again, though, we rejected this same argu-
ment in the prior appeal, and that decision is law of the case. Spe-
cifically, we found that, despite Gerstenfeld’s use of “suspend” ra-
ther than “postpone,” a reasonable jury could find reasonable reli-
ance given that Harbin repeatedly requested confirmation that her
understanding was correct and did not receive any contrary infor-
mation which would have led her to the true facts.
Harbin, 758 F.
App’x at 758. This was a factual question for the jury.
See Farmers
Ins. Exch. v. Morris, 228 So. 3d 971, 986 (Ala. 2016) (whether a
plaintiff “could have reasonably relied upon the repeated oral rep-
resentations made to him in direct response to his repeated inquir-
ies . . . was a factual question for the jury”).
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14 Opinion of the Court 22-11565
Third, RoundPoint contends that contributory negligence
bars Harbin’s claim. Even assuming contributory negligence could
apply to a fraud claim, however—we express and imply no opinion
about that issue—it would not entitle RoundPoint to judgment as
a matter of law on the facts of this case, as RoundPoint claims. At
best, contributory negligence would be an issue for the jury to re-
solve. Notably, part of RoundPoint’s argument on this point is in-
tertwined with whether Harbin reasonably relied on Gerstenfeld’s
statement, which presented a genuine issue of material fact and
which the jury resolved in Harbin’s favor.
Finally, based on our disposition of RoundPoint’s argu-
ments, we see no reason to certify any questions to the Alabama
Supreme Court at this time.
III. CONCLUSION
In sum, and for the foregoing reasons, we vacate the judg-
ment on the verdict and remand for further proceedings consistent
with this opinion.
VACATED AND REMANDED.
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