Fuller v. MSR Asset Vehicle LLC et al

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
PETERICK FULLER,
Plaintiff,
v.
MSR ASSET VEHICLE LLC et al.,
Defendants.
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Case No. 3:25-cv-01242-E-BT
FINDINGS, CONCLUSIONS, AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
Before the Court are separate Motions to Dismiss filed by Defendants MSR
Asset Vehicle LLC and PHH Mortgage Services (ECF No. 16) and by Defendant PNC
National Bank Association (ECF No. 29). As explained below, the District Judge
should DISMISS with prejudice Plaintiff’s RESPA and Regulation X claim and
decline to exercise supplemental jurisdiction over any pendent state-law claims.
Background
This case arises from the attempted foreclosure of Plaintiff Peterick Fuller’s
home in Cedar Hill, Texas. See Pl. First Am. Compl. (ECF No. 11).
Succinctly stated, Plaintiff alleges that he obtained a mortgage loan to purchase
his home in August 2021. Id. ¶¶ 10–11. A year later, the original lender transferred
Plaintiff’s mortgage loan to MSR. Id. ¶ 12. In early 2025, PHH, the mortgage loan
servicer, approved Plaintiff for a loan modification. Id. ¶¶ 13 -14. Then, due to an error
by Plaintiff’s personal bank, PNC Bank, Plaintiff missed a mortgage payment under
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the loan modification. Id. ¶¶ 15 -17, 19. As a result, PHH initiated foreclosure
proceedings and scheduled a foreclosure sale. Id. ¶¶ 18, 22.
A few days before the scheduled foreclosure, Plaintiff sued MSR, PHH, and PNC
Bank in Texas state court to prevent the sale. Id. ¶¶ 1, 21. MSR and PHH timely
removed the lawsuit to federal court.1 See Not. Removal 2–5 (ECF No. 1).
In June 2025, Plaintiff filed an Amended Complaint asserting claims against
MSR and PHH for: (1) breach of contract; (2) common law fraud; (3) violation of
RESPA and Regulation X; (4) violation of the Texas Debt Collection Act; and (5)
promissory estoppel. Plaintiff also asserts one claim against PNC Bank: common law
fraud.
In response, MSR and PHH moved to dismiss the Amended Complaint under
Federal Rule of Civil Procedure 12(b)(6). See Mot. Dismiss (ECF No. 16). Later, PNC
appeared and filed its own motion to dismiss under Rules 12(b)(6) and 9(b). See Mot.
Dismiss (ECF No. 29). Both motions have been fully briefed and are ripe for
consideration.
Legal Standards
To survive a Rule 12(b)(6) motion, a plaintiff’s complaint must contain
sufficient factual matter to state a plausible claim for relief on its face. Bell Atl. Corp.
1 MSR and PHH removed based on diversity and federal question jurisdiction. See
Not. Removal 2–5 (ECF No. 1). But the jurisdictional allegations about MSR’s
citizenship were deficient, so the Court ordered Defendants to file an amended notice
of removal. See Not. Deficiency (ECF No. 6). The Amended Notice of Removal
abandoned diversity jurisdiction as a basis for removal and instead relied solely on
federal question jurisdiction. See Am. Not. Removal (ECF No. 8); see also Civil Cover
Sheet (ECF No. 8-1).
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v. Twombly, 550 U.S. 544, 570 (2007). “To be plausible, the complaint’s ‘[f]actual
allegations must be enough to raise a right to relief above the speculative level.’” In re
Great Lakes Dredge & Dock Co. LLC, 624 F.3d 201, 210 (5th Cir. 2010) (quoting
Twombly, 550 U.S. at 555).
This pleading standard does not require “detailed factual allegations,” but it
does demand more than an unadorned accusation devoid of factual support. Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to
draw a reasonable inference that the defendant is liable for the misconduct alleged.”
Id. at 678 (citing Twombly, 550 U.S. at 556). “[A] formulaic recitation of the elements
of a cause of action will not do.” Twombly, 550 U.S. at 555 (citing Papasan v. Allain,
478 U.S. 265, 286 (1986)). “While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations.” Iqbal, 556 U.S. at 679.
When the facts do not permit the Court to infer more than the mere possibility of
misconduct, the complaint has stopped short of showing that the plaintiff is plausibly
entitled to relief. Id. at 678 (citing Twombly, 550 U.S. at 557).
When applying the plausibility standard, the Court “accepts all well-pleaded
facts as true, viewing them in the light most favorable to the plaintiff.” In re Katrina
Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal quotation marks
and citations omitted). But a court may not look beyond the pleadings. Spivey v.
Robertson, 197 F.3d 772, 774 (5th Cir. 1999). Review is “limited to the complaint, any
documents attached to the complaint, and any documents attached to the [motion to
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dismiss] that are central to the claim and referenced by the complaint.” Lone Star
Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010).
ANALYSIS
I. Plaintiff fails to state a plausible claim for violating RESPA and Regulation X.
Regulation X regulates loss mitigation procedures provided by
loan servicers, see 12 C.F.R. § 1024, and RESPA provides a private right of action for
borrowers to enforce Regulation X, see 12 U.S.C. § 2605(f). Plaintiff alleges that MSR
and PHH violated RESPA and Regulation X by:
failing, neglecting, or refusing to send Plaintiff the Loan Modification
Agreement to sign and instead canceled the agreement and failed to
provide any written denial or approval to Plaintiff after Plaintiff had fully
performed and tendered the April 2025 trial payment under that
agreement, Defendants PHH and MSR wholly failed to provide him with
a loan modification agreement to execute, even though the Defendant
had received and accepted his accepted trial period payment for April
2025, and instead engaged in “dual-tracking” and proceeded to
accelerate the loan and post Plaintiff’s homestead property for
foreclosure sale.
See Am. Compl. ¶ 39 (ECF No. 11). Plaintiff further alleges that Defendants’ conduct
is the “producing cause of the actual damages sustained and incurred by Plaintiff in
excess of the minimum jurisdictional limits of this Court.” Id. ¶¶ 36, 39.
But RESPA applies only to mortgage loan servicers—not lenders. See, e.g.,
Christiana Tr. v. Riddle, 911 F.3d 799, 804 (5th Cir. 2018) (“By its plain terms,
[RESPA] imposes duties only on servicers.”); see also Robins v. PHH Mortg. Corp.,
No. 4:20-CV-1163, 2020 WL 5604042, at *3 (S.D. Tex. Sept. 18, 2020) (advising “[t]he
precedent is clear” that claims under RESPA and Regulation X against a mortgagee
fail as a matter of law”).
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Plaintiff specifically alleges that PHH is “the current servicer of [his] mortgage
loan.” Am. Compl. ¶¶ 4, 36 (ECF No. 11). As to MSR, Plaintiff alleges that MSR is “the
current mortgagee and owner and holder of Plaintiff’s mortgage loan.” Id. ¶ 3.
Accordingly, because Plaintiff’s allegations establish that MSR is a lender and not a
servicer, Plaintiff has failed to state a claim against MSR for violating RESPA and
Regulation X. See Christiana, 911 F.3d at 804.
Further, to survive a motion to dismiss under Rule 12(b)(6), a plaintiff must
plausibly allege that actual damages resulted from a RESPA violation. See Whittier v.
Ocwen Loan Servicing, L.L.C., 594 F. App’x 833, 836 (5th Cir. 2014)
(emphasis added). A conclusory statement regarding “actual damages” is
insufficient—the complaint must include “facts giving rise to a reasonable inference
that [Plaintiff] suffered actual damages from the alleged violation of RESPA.” See
Allen v. Wells Fargo Bank, Nat’l Ass’n, No. 3:16-CV-0249-D, 2017 WL 3421067, at *4
(N.D. Tex. Aug. 9, 2017); Hurd v. BAC Home Loans Servicing, LP, 880 F. Supp. 2d
747, 768 (N.D. Tex. 2012).
Here, Plaintiff alleges that the RESPA violations “are a producing cause of the
actual damages sustained and incurred by Plaintiff in excess of the minimum
jurisdictional limits of this Court.” Am. Compl. ¶ 40. But this conclusory statement is
insufficient to plausibly allege actual damages under RESPA. See Allen, 2017 WL
3421067, at *4; Hurd, 880 F. Supp. 2d at 768. Plaintiff fails to explain what his actual
damages are or how Defendants’ violation of RESPA caused those damages to occur.
In his response to the Motion to Dismiss, Plaintiff attempts to clarify that his
“actual damages” under RESPA were “in the form of attorney’s fees, costs and
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expenses to file suit to stop Defendant PHH’s illegal actions.” See Resp. Mot. Dismiss
¶¶ 25, 36, 52 (ECF No. 30). But this allegation does not appear in the Amended
Complaint, and counsel’s arguments in a brief are no substitute for properly pleaded
allegations. See Sheppard v. Cheeks, No. 6:19-CV-01366, 2020 WL 2301367 (W.D. La.
Apr. 13, 2020), rec. adopted, 2020 WL 2248134 (W.D. La. May 7, 2020), aff'd, No.
20-30355, 2022 WL 964202 (5th Cir. Mar. 30, 2022) (“The law is well-settled that
arguments in a brief are no substitute for properly plead allegations: it is axiomatic
that a complaint cannot be amended by briefs in opposition to a motion to dismiss.”);
In re Enron Corp. Sec., Derivative & ERISA Litig., 761 F. Supp. 2d 504, 566 (S.D. Tex.
2011) (accord).2 Moreover, the Fifth Circuit has expressly rejected this argument—
attorney’s fees and litigation expenses cannot, as a matter of law, satisfy the actual
damages requirement of a RESPA claim. Whittier, 594 F. App’x at 837 (citing Steele
v. Quantum Servicing Corp., No. 3:12-CV-2897-L, 2013 WL 3196544 (N.D. Tex. June
25, 2013) (Lindsay, J.) and agreeing that litigation fees and expenses are permitted in
addition to—but do not themselves constitute—actual damages under RESPA).
Thus, the District Judge should dismiss Plaintiff’s RESPA and Regulation X
claim against MSR and PHH.
2 See also Servicios Azucareros de Venezuela, C.A. v. John Deere Thibodeaux, Inc.,
702 F.3d 794, 806 (5th Cir. 2012) (noting that, because a Rule 12(b)(6) motion tasks
the Court with “assess[ing] the legal sufficiency of the complaint,” the Court does not
consider allegations that appear for the first time in plaintiffs’ briefing).
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II. The Court should decline to exercise jurisdiction over Plaintiff’s pendent state-
law claims.
As mentioned, Defendants MSR and PHH originally removed based on
diversity and federal question jurisdiction. See Not. Removal (ECF No. 1).
Upon review of the Notice of Removal, the Court noted that MSR and PHH had failed
to invoke the Court’s diversity jurisdiction because the pleadings failed to sufficiently
allege MSR’s citizenship. See Notice Deficiency (ECF No. 6). In their Amended Notice
of Removal, the removing defendants abandoned diversity as a basis for jurisdiction
and instead anchored removal solely on the Court’s federal question jurisdiction over
Plaintiff’s RESPA and Regulation X claim. See Am. Not. Removal (ECF No. 8); Civil
Cover Sheet (ECF No. 8-1). Plaintiff’s Amended Complaint, too, does not plead a basis
for this Court to exercise diversity jurisdiction, as it does not allege the Parties’
citizenship. See Am. Compl. ¶¶ 2–8 (ECF No. 11); See, e.g., Kerney v. Fort Griffin
Fandangle Ass'n, Inc., 624 F.2d 717, 719 (5th Cir. 1980). Thus, the Court has
jurisdiction over this case based only on federal question jurisdiction arising from the
RESPA and Regulation X claim against MSR and PHH. Plaintiff’s remaining claims
arise under state law and therefore the Court has only supplemental jurisdiction over
those claims. See generally Am. Compl. (Aside from RESPA, Plaintiff asserts claims
for breach of contract, common law fraud, promissory estoppel, and violations of the
Texas Debt Collections Act).
Where—as recommended here—a court dismisses all federal claims, “the court
must exercise its discretion whether to exercise supplemental jurisdiction” over the
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remaining state-law claims pursuant to 28 U.S.C. § 1367(c). Bass v. Parkwood Hosp.,
180 F.3d 234, 246 (5th Cir. 1999).
Under 28 U.S.C. § 1367(c), the Court may decline to exercise supplemental
jurisdiction if:
(1) the claim raises a novel or complex issue of state law;
(2) the claim substantially predominates over the claim or
claims over which the district court has original
jurisdiction;
(3) the district court has dismissed all claims over which it has
original jurisdiction; or
(4) in exceptional circumstances, there are other compelling
reasons for declining jurisdiction.
28 U.S.C. § 1367. According to the Fifth Circuit, “[t]he general rule is that a court
should decline to exercise jurisdiction over remaining state-law claims when all the
federal claims are eliminated before trial[.]” See, e.g., Brookshire Bros. Holding v.
Dayco Prods., Inc., 554 F.3d 595, 602 (5th Cir. 2009) (citing Batiste v. Island Recs.
Inc., 179 F.3d 217, 227 (5th Cir. 1999). Thus, where federal claims are dismissed before
trial, the relevant factors typically weigh heavily in favor of dismissing the state-law
claims. See Holland v. GEXA Corp., 161 F. App'x 364, 366 (5th Cir. 2005).
The Court’s decision to exercise supplemental jurisdiction is guided “by both
the statutory provisions of 28 U.S.C. § 1367(c) and the balance of the relevant factors
of judicial economy, convenience fairness, and comity.” Batiste, 179 F.3d at 227
(citations omitted) (citations omitted).
Here, the District Judge should exercise her discretion and decline to exercise
supplemental jurisdiction over the remaining state-law claims.
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First, the case is still in a nascent state, and the general rule is that a court
should decline to exercise supplemental jurisdiction over remaining state-law claims
when all the federal claims are eliminated before trial.
Second, the balance of factors weighs against exercising supplemental
jurisdiction. Although Plaintiff’s claims do not raise novel or complex issues of state
law, the undersigned has recommended the District Judge dismiss the federal claims,
and therefore the state-law claims now “substantially predominate.”
Comity, too, weighs against exercising supplemental jurisdiction because state
courts “often have superior familiarity with their jurisdictions’ laws.” See Williams v.
Does, No. 3:24-CV-02026-E (BT), 2024 WL 4375797, at *3 (N.D. Tex. Sept. 16, 2024)
(Rutherford, J.), rec. adopted, 2024 WL 4376282 (N.D. Tex. Oct. 2, 2024) (Brown, J.).
Finally, judicial economy is best served by declining jurisdiction because, as
stated, this case is in its early stages, discovery is still ongoing, and the deadline for
summary judgment motions has not passed. See Pretrial Sched. Order (ECF No. 15).
If the District Judge agrees that Plaintiff’s federal claims should be dismissed,
she should decline to exercise supplemental jurisdiction over any state-law claims.
And when a court declines to exercise supplemental jurisdiction, it should dismiss the
pendent state-law claims without prejudice. See Scranton Constr. Co. v. Litton Indus.
Leasing Corp., 494 F.2d 778 (5th Cir. 1974), cert. denied, 419 U.S. 1105 (1975).
III. Plaintiff is not entitled to leave to amend.
Plaintiff, who is represented by counsel, has already amended his complaint
and did not request leave to amend, even after Defendants pointed out many pleading
deficiencies in the Amended Complaint. Additionally, granting leave to amend would
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be futile, as Plaintiff has asserted that the basis for his damages under RESPA are his
attorney’s fees and litigation costs, which are, “as a matter of law,” not actual damages
capable of supporting a RESPA claim. Whittier, 594 F. App’x at 837; see also Rio
Grande Royalty Co. v. Energy Transfer Partners, L.P., 620 F.3d 465, 468 (5th Cir.
2010) (“The trial court acts within its discretion in denying leave to amend where the
proposed amendment would be futile because it could not survive a motion to
dismiss.”).
RECOMMENDATION
For the reasons stated, District Judge should GRANT in part Defendants MSR
Asset Vehicle LLC and PHH Mortgage Services’s Motion to Dismiss (ECF No. 16) and
DISMISS with prejudice Plaintiff’s claim under RESPA and Regulation X. The
District Judge should decline to exercise supplemental jurisdiction over any pendent
state-law claims against Defendants MSR, PHH, and PNC, and DISMISS those
claims without prejudice.
SO RECOMMENDED.
February 17, 2026.
______________________________
REBECCA RUTHERFORD
UNITED STATES MAGISTRATE JUDGE
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INSTRUCTIONS FOR SERVICE AND
NOTICE OF RIGHT TO APPEAL/OBJECT
A copy of this report and recommendation will be served on all parties in the
manner provided by law. Any party who objects to any part of this report and
recommendation must file specific written objections within 14 days after being
served with a copy. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). To be specific, an
objection must identify the specific finding or recommendation to which objection is
made, state the basis for the objection, and specify the place in the magistrate judge’s
report and recommendation where the disputed determination is found. An objection
that merely incorporates by reference or refers to the briefing before the magistrate
judge is not specific. Failure to file specific written objections will bar the aggrieved
party from appealing the factual findings and legal conclusions of the magistrate judge
that are accepted or adopted by the district court, except upon grounds of plain error.
See Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1417 (5th Cir. 1996).
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