IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 94-30343
STATE OF LOUISIANA,
Plaintiff-Appellant,
v.
LITTON MORTGAGE COMPANY, Class Representative, and all other similarly situated mortgage servicing companies,
Defendant,
BISYS LOAN SERVICES, INC., Class Representative, and all other similarly situated mortgage servicing companies fka Litton Mortgage Servicing Center, Inc., ET AL.,
Defendants-Appellees.
Appeal from the United States District Court for the Eastern District of Louisiana
(March 30, 1995)
Before VAN GRAAFEILAND*, JOLLY AND WIENER, Circuit Judges.
PER CURIAM:
Plaintiff-Appellant, the State of Louisiana ("the State")
appeals two district court orders, one granting the Defendants-
Appellees' Litton Mortgage Company, Inc. - now BISYS Loan Services,
* Circuit Judge, United States Court of Appeals for the Second Circuit, sitting by designation. Inc. - ("Litton/BISYS") and Magnolia Federal Bank for Savings
("Magnolia") (collectively "Defendants") motions to dismiss the
State's complaint for failure to state a claim, and the other
denying the State's subsequent motion for leave to amend its
complaint. The State asserts that the court erred in (1)
dismissing its complaint on the ground that Section 10 of the Real
Estate Settlement and Procedures Act ("RESPA"), 12 U.S.C. §
2609(a), does not imply a right of private action, and (2) denying
its motion to amend on alternative grounds: that the dismissal of
the State's complaint constituted a dismissal of the State's entire
action, and that the circumstances underlying the State's motion to
amend - particularly the State's effort to resurrect an abandoned
claim - did not justify allowing yet another amendment.
We agree with the district court's legal ruling that Section
10 of RESPA does not imply a private cause of action. It follows
that the court did not err in dismissing the State's complaint for
failure to state a claim under RESPA. With respect to the State's
motion for leave to amend, we conclude that the court erred in
denying the motion on the ground that the dismissal of the State's
complaint constituted a dismissal of the entire action. We are
satisfied, however, that this error is harmless by virtue of the
fact that the court also addressed the merits of the State's motion
to amend and did not abuse its discretion in denying that motion.
We therefore affirm the court's order to that effect.
2 I
FACTS AND PROCEEDINGS
In November 1993 the State filed an action on behalf of
Louisiana homeowners against Litton/BISYS and other similarly
situated mortgage companies, asserting claims under Section 10 of
the RESPA,1 the Racketeering Influenced and Corrupt Organizations
Act ("RICO"), the Louisiana Unfair Trade Practices and Consumer
Protection Act ("UTP"), and state antitrust laws. The State's
action stemmed from the mortgage companies' alleged practice of
requiring homeowners to deposit funds in mortgage escrow accounts
in amounts that exceed the amount permitted by federal law or by
the homeowners' mortgage contracts. Due to the number of common
claims against numerous mortgage servicers, the State in its
initial complaint sought to certify a class with Litton/BISYS named
as class representative. Prior to an answer being filed, the State
amended its original complaint to include federal antitrust claims.
After a preliminary court conference the State amended its
complaint a second time, asserting only the RESPA and UTP claims
against the defendants individually. Litton/BISYS and Magnolia
filed motions to dismiss the complaint. The court granted these
motions, concluding that Section 10 of RESPA does not provide a
private right of action and declining to exercise supplemental
jurisdiction over the remaining state UTP claim.
Following the court's dismissal but before final judgment was
1 See 12 U.S.C. § 2609(a) (1994) (limiting amount of advance deposit in escrow account that lender may require in connection with federally related mortgage loan).
3 entered, the State filed two motions for leave to amend its
complaint, - for the third and fourth times - asking to reassert
the RICO claim, reinstate the RESPA and state law claims, and add
additional defendants. The court denied these motions to amend,
reasoning that, as the earlier order of the court had dismissed the
State's entire action there was nothing left for the State to
amend. The court also concluded that the State's attempt to
reassert the abandoned RICO claim, when viewed in conjunction with
other circumstances surrounding the case, was indicative at worst
of possible bad faith or dilatory motive, or at best, of inartful
pleading, thus providing the court with substantial reasons for
denying the motions on the merits.
II
ANALYSIS
A. STANDARD OF REVIEW
We review de novo a dismissal of a compliant for failure to
state a claim.2 And, although we review a district court's denial
of a motion to amend for abuse of discretion,3 we review de novo
that portion of a district court's denial of the motion to amend
that rests on a question of law: here, whether the court's order
2 Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir. 1993); FDIC v. Ernst & Young, 967 F.2d 166, 169 (5th Cir. 1992) (citing Barrientos v. Reliance Standard Life Ins. Co., 911 F.2d 1115, 1116 (5th Cir. 1990), cert. denied, 498 U.S. 1072 1991)). 3 Whitaker v. City of Houston, Tex., 963 F.2d 831, 836 (5th Cir. 1992) (citing Gregory v. Mitchell, 634 F.2d 199, 203 (5th Cir. 1981)); Avatar Exploration, Inc. v. Chevron, U.S.A., Inc., 933 F.2d 314 (5th Cir. 1991).
4 constituted a dismissal of the State's entire action or merely
dismissal of specific complaints.
B. SECTION 10 OF RESPA
The State challenges the order dismissing its complaint based
on the court's conclusion that Section 10 of RESPA does not imply
a private cause of action. Relying on the Cort v. Ash4 standard
for determining whether a private right of action may be inferred
from a particular statute, the State insists that Section 10
clearly does imply a private cause of action.5
Applying Cort's four-part test to Section 10, the State
reasons that (1) the plaintiff is a member of the class for whose
special benefit the statute was enacted; (2) as § 2609(a) does not
provide any other remedy, the provision would be superfluous and
ineffective without a private cause of action; (3) an implied right
of private action is consistent with the purposes of the
legislative scheme; and (4) even though injured borrowers could
4 422 U.S. 66, 78 (1975) 5 See id. (establishing four-part test for determining whether private right of action is implicit in particular statute). The four-part test developed in Cort is as follows: First, is the plaintiff "one of the class for whose especial benefit the statute was enacted," that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law? Id. (citations omitted).
5 seek relief under state law, the likelihood of inconsistent results
is high. The State glosses over subsequent cases in which the
Supreme Court departed from Cort to conclude that the weightiest
factor in determining whether a statute implies a private right of
action is whether Congress intended to create one.6 Moreover, the
State apparently overlooks the fact that the absence of legislative
history regarding Congress' intent to create a private right of
action generally augurs against implying a private cause of action.
The circuits are split on this precise issue.7 After
considering the opposing position of Vega v. First Federal Savings
& Loan Association of Detroit,8 we find most persuasive the Seventh
Circuit's well-reasoned opinion in Allison v. Liberty Savings.9 In
reaching its conclusion that Section 10 of RESPA does not create a
private right of action, the Allison court acknowledged the Cort
test, yet recognized that the central inquiry for determining
6 See e.g., Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 15-16 (1979) (reiterating that, although prior opinions of Court place considerable emphasis on desirability of implying private right of action in order to effectuate purposes of statute, ultimate question is whether Congress intended to create private remedy); Touche Ross & Co. v. Redington, 442 U.S. 560, 568 575 (1979) (noting that Court's task is limited solely to determining whether Congress intended to create a private right of action).
7 See Allison v. Liberty Sav., 695 F.2d 1086, 1091 (7th Cir. 1982) (holding that no implied private cause of action exists under Section 10 of RESPA); contra Vega v. First Federal Sav. & Loan Ass'n of Detroit, 622 F.2d 918, 925 n.8 (6th Cir. 1980) (concluding that Congress intended to create private remedy for violation of RESPA). 8 622 F.2d 918 (6th Cir. 1980). 9 695 F.2d 1086 (7th Cir. 1982).
6 whether a statute creates a private cause of action is whether
Congress intended to create a private remedy.10 Observing that
Congress explicitly provided federal private remedies in other
sections of the Act but not in Section 10, and that there was no
legislative history on the issue, the Allison court concluded that
when "analysis of the statute itself weighs against implication of
a private cause of action and the legislative history is silent, we
must conclude that Congress did not intend to create a private
remedy."11 The court stopped its analysis at that point, noting
that "once we have concluded that Congress did not intend to create
a private remedy, our inquiry is at an end."12 In addition to
the reasoning of Allison, we are persuaded further by the fact that
when Congress did amend Section 10 - which occurred after Allison -
it added penalties for violations of a different provision of that
section but not for violations of the provision limiting escrow
deposit accounts.13 We also note in passing that four district
courts sitting in three additional circuits have adhered to Allison
when concluding or observing that Section 10 of RESPA does not
10 Id. at 1088 (citing Transamerica Mortgage Advisors, Inc., 444 U.S. at 15-16 and Touche Ross & Co., 442 U.S. at 575).
11 Id. at 1089 (citing Touche Ross & Co., 442 U.S. at 571). 12 Id. (citing Transamerica Mortgage Advisors, Inc., 444 U.S. at 24). 13 See 12 U.S.C. § 2609(b)-(d) (1994) (1990 amendments to Section 10: adding penalties for violation of subsection § 2609(c) (escrow account statements), but not penalties for violations of subsection § 2609(a) (limits on advance deposits)).
7 imply a private right of action.14 We are comfortable in deciding
for this circuit that there is no private right of action under
Section 10 of RESPA.
C. THE STATE'S MOTION TO AMEND
The State urges us to hold that the district court erred in
denying the State's motion for leave to amend on the ground that
the earlier dismissal terminated State's entire action, not merely
the RESPA and UTP complaints. The State contends that, as the
order granting the Defendants' motions to dismiss gave no
indication that the court intended to dismiss the State's entire
action, the order dismissed only the complaint; thus, it was proper
for the State to seek leave to amend its complaint.15
We stated in Whitaker v. City of Houston16 that, unless a
district court order states expressly or by clear indication
14 See Campbell v. Machias Sav. Bank, 865 F.Supp. 26, 31 (D.Me. 1994) (agreeing with Seventh Circuit; finding no implied private right of action under § 2609); Michels v. Resolution Trust Corp., Civ. No. 4-93-1167, 1994 WL 242162, at *3 (D.Minn. April 13, 1994) (concluding that Allison decision was correct; dismissing plaintiff's claim for violation of RESPA § 10); Bloom v. Martin, 865 F.Supp 1377, 1384-85 (N.D.Cal. 1994) (citing Allison - and criticizing Vega's unsupported contrary conclusion - to support its holding that, as § 2609 does not create a private remedy, neither does the RESPA § 2603); Bergkamp v. New York Guardian Mortgagee Corp., 667 F.Supp. 719, 723 (D.Mont. 1987) (concluding that no private remedy was intended under Section 10 of RESPA).
15 See e.g., Whitaker v. City of Houston, Tex., 963 F.2d 831, 835 (5th Cir. 1992) (holding that if district court order does not expressly or by clear implication dismiss entire action, order dismisses complaint only and plaintiff may amend pursuant to Rule 15(a)). See FED. R. CIV. P. 15(a) (establishing in part that party may amend pleading by leave of court and that leave shall be freely given when justice so requires). 16 963 F.2d 831 (5th Cir. 1992).
8 reflects the court's intention to dismiss an entire action, the
order dismisses only the complaint and a plaintiff may seek leave
of court to amend.17 Here, the dismissal order stated only that
"[i]T IS ORDERED that Defendant BISYS Loan Services, Inc.'s March
18, 1994 Motion to Dismiss, argued before this Court on April 6,
1994 is hereby GRANTED." A literal reading of this order reflects
that the court intended to grant the Litton/BISYS motion, which in
turn literally was a motion to dismiss the State's second amended
complaint. The docket sheet supports this literal reading in that
it records the dismissal order as granting BISYS' motion to
"dismiss the State's second amended complaint."
Finding that the court order dismissing the State's complaint
neither expressed nor indicated clearly that the court intended to
dismiss the State's entire action, we are constrained by the
teaching of Whitaker to conclude that the district court erred in
denying the State's motion for leave to amend on this procedural
basis. Our conclusion is bolstered by the additional facts that
(1) the dismissal order neither invited the State to amend its
complaint nor indicated that an amendment was not possible, (2) a
final Rule 58 judgment was not filed until almost two months later,
and (3) the court - after saying that there was nothing left for
the State to amend - went on to address the merits of the motion.18
17 Whitaker, 963 F.2d at 832. 18 See e.g., id. at 834 (noting that if court intended to dismiss entire action it surely would not have considered subsequent motion to amend because there would have been nothing left to amend and plaintiff's only options would have been motion for reconsideration or appeal).
9 We are equally convinced, though, that the district court's
error in denying the State's motion to amend based on that
procedural basis is nullified by the court's proper denial of the
same motion on its merits. The State challenges this "substantive
denial," arguing that the court abused it discretion in denying the
motion to amend because the State had abandoned the same RICO claim
that it was seeking to reassert in the amended complaint. We are
again unpersuaded by the State's argument; rather, we are satisfied
that the court did not abuse its discretion in denying the State's
motion on such grounds.
Rule 15(a) "evinces a bias in favor of granting leave [to
amend]," when justice so requires.19 A decision to grant leave is
within the discretion of the court, although if the court "lacks a
'substantial reason' to deny leave, its discretion 'is not broad
enough to permit denial.'"20 In exercising its discretion a court
may consider such factors as "'undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to
the opposing party by virtue of allowance of the amendment, [and]
futility of amendment.'"21
When it denied the State's motion to amend, the district court
19 Chitimacha Tribe of Louisiana v. Harry L. Laws Co. Inc., 690 F.2d 1157, 1163 (5th Cir. 1982), cert. denied, 464 U.S. 814 (1983)). 20 Jamieson By and Through Jamieson v. Shaw, 772 F.2d 1205, 1208 (5th Cir. 1985) (quoting Conley v. Gibson, 355 U.S. 41, 48 (1957)). 21 Whitaker, 963 F.2d at 836 (quoting Foman v. Davis, 371 U.S. 178, 182 (1962).
10 made three observations. First, it noted that the State proposed
to resurrect its abandoned RICO claim.22 The court essentially
determined that, as the substance of these "new" RICO allegations
that the State proposed to raise were conceptually identical to
those contained in the original complaint, the State's attempt to
resurrect the abandoned claim justified the court's decision to
deny the motion.
The State complains that the court erred in basing its denial
solely on "abandonment." The State argues that, because a
plaintiff is permitted to reassert an abandoned claim in a
subsequent amended complaint, the State's attempt to resurrect the
RICO claim was not indicative of bad faith or dilatory motive and
thus does not justify the court's denial. The State contends that
we rejected "abandonment" as a basis for denying a motion to amend
in Watkins v. Lujan,23 when we held that a plaintiff could reassert
a cause of action that was raised in an original complaint but
abandoned in a subsequent complaint.24
22 See e.g., Boelens v. Redman Homes, Inc., 759 F.2d 504, 508 (5th Cir. 1985) ("[A]an amended complaint ordinarily supersedes the original and renders it of no legal effect, unless the amended complaint specifically refers to or adopts the earlier pleading.") (citing Wilson v. First Houston Inv. Corp., 566 F.2d 1235, 1237-38 (Former 5th Cir. 1978), vacated on other grounds, 444 U.S. 959 (1979)).
23 922 F.2d 261 (5th Cir. 1991) 24 See id. at 265 (concluding that plaintiff did not waive right to reassert original Title VII claim in second amended complaint despite fact that plaintiff had replaced Title VII claim in favor of § 1981 claim in first amended complaint).
11 Despite the State's effort to analogize its situation to
Watkins, we perceive a distinguishing difference between the
Watkins circumstances and those before us today. Watkins involved
a pro se plaintiff seeking to reassert an abandoned Title VII
discrimination claim, the operative facts of which were the same as
those of her § 1981 discrimination claim. In addition, the
principal focus in Watkins was on whether the Title VII cause of
action related back to the original pleading under Rule 15(c),
thereby overcoming the Title VII thirty-day limitation period that
would otherwise bar the plaintiff's cause of action. We were
persuaded in Watkins that the plaintiff's second amended complaint
did relate back to the date of the original filing because both
causes of action were based on the same facts and allegations of
discrimination.25 We reasoned therefore that, even though the
plaintiff had replaced her original Title VII claim with a § 1981
claim, her so doing did not constitute an absolute waiver of her
right to reassert the Title VII claim because at all times the
operative facts on which her cause of action was based remained the
same.26 We concluded that this reasoning was "even more compelling
in light of [the plaintiff's] pro se status and the liberality
accorded the pleadings of such parties."27
Second, after observing that the State had abandoned its RICO
claim, the district court noted that the State had already amended
25 Id. 26 Id. 27 Id.
12 its complaint twice, and that the proposed amended complaints
represented the fourth and fifth complaints in that court. Third,
the court observed that the proposed amendments failed to raise any
new claims or factual allegations. We, too, note that not only was
the State attempting to reassert the same RICO claim that it had
abandoned - which purportedly was dropped after the initial court
conference during which the court expounded on the futility of the
claim - but the State was also seeking to reassert the same RESPA
and state law claims that the court had unconditionally dismissed
approximately two weeks prior to the State's motion.
Having thus determined that these three factors were
"indicative of possible bad faith and dilatory motive at the worst,
and weak attempts at artful pleading at best," the district court
concluded that it had substantial reason to deny the State's
motion. We agree. Given the circumstances underlying the State's
motion to amend, we are convinced that the district court did not
abuse its discretion in denying the motion. We affirm, therefore,
the district court's order denying the State's motion for leave to
amend its complaint, based on the merits.
III
CONCLUSION
The State urges us to hold that Section 10 of RESPA implies a
private right of action, and on that basis to reverse the order of
the district court dismissing the State's second amended complaint.
We hold, however, that Congress did not intend to create a private
right of action under Section 10 of RESPA. Consequently, the
13 district court committed no error in dismissing the State's
complaint asserting the RESPA claims.
With respect to the dismissal of the State's subsequent motion
to amend its complaint, we conclude that the court did err in
holding that the order dismissing the State's complaint constituted
a dismissal of its entire action. This error was harmless,
however, in light of the court's correct analysis of the State's
motion on the merits. As we find no abuse of discretion in the
denial of the State's motion based on substantive grounds, we
affirm the district court order to that effect.
AFFIRMED.