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Fla. Fed. Court Holds Servicer Could Not Invoke Jury Waiver in Mortgage

The U.S. District Court for the Middle District of Florida recently held that a mortgage servicer did not have standing to invoke a jury trial waiver in a mortgage when the servicer was not a party to the mortgage.

A copy of the opinion in Shallenburg v. PNC Bank, NA is available at:  Link to Opinion.

The borrowers entered into a mortgage loan agreement.  The borrowers alleged that the mortgage servicer placed at least 94 telephone calls to them seeking to collect money owed under the mortgage.  The servicer was not a party to the mortgage, but the borrower alleged that the servicer was a creditor under the Florida Consumer Collection Practices Act, Florida Statutes § 559.55(5).

The borrowers sued the servicer alleging that it violated provisions of the FCCPA and the federal Telephone Consumer Protection Act, 47 U.S.C. §227(b)(1)(A).  The borrowers demanded a jury trial.

The mortgage contained a waiver that stated:  “Borrower hereby waives any right to a trial by jury in any action, proceeding, claim, or counterclaim, whether in contract or tort, at law or in equity, arising out of or in any way related to this Security Instrument or the Note.”  The servicer moved to strike the jury demand arguing that the language of the mortgage prohibits a jury trial.

The District Court first examined whether the servicer had standing to enforce the jury trial waiver in the mortgage as a non-party to the contract.  The Court noted that borrowers cited three Southern District of Florida cases for the position that the servicer lacks standing to invoke the clause, among them Williams v. Wells Fargo Bank., 2011 WL 4901346 (S.D. Fla. Oct. 14, 2011).  There, the court denied a servicer’s motion to strike a jury demand based on a mortgage jury trial waiver because the servicer was not party to the mortgage.

The District Court then noted that the servicer relied on cases that did not squarely address the issue of whether non-parties have standing to invoke jury trial waivers contained in a mortgage.  Consequently, the Court found that the servicer, as a non-party to the mortgage contract, did not have standing to invoke the jury trial waiver in the mortgage.

The Court then examined whether the servicer had standing to invoke the mortgage clause as a result of its status as a creditor.  The Court was not satisfied with the mere allegation in the complaint that the servicer was a creditor.  The Court noted that the servicer did not allege any facts or supply any documentation affirming this assertion.  More important to the Court, the servicer did not present any legal support for its conclusion that creditors are entitled to invoke a jury waiver in a mortgage.

Considering the historical importance of jury trials, and the general policy of “indulging every reasonable presumption against waiver,” the District Court held that the servicer failed to meet its burden in showing that the borrowers’ demand for jury trial should be stricken.

Based on this analysis, the Court did not have a need to address the issue of whether the borrowers’ TCPA and FCCPA claims against the servicer fell within the scope of the jury trial waiver.

Accordingly, the District Court denied the servicer’s motion to strike the borrowers’ demand for jury trial.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.