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Case: 09-1096 Page: 1 Date Filed: 02/20/2009 Entry ID: 3518985

UNITED STATES COURT OF APPEALS


FOR THE EIGHTH CIRCUIT

Appeal No. 09-1096

Michael Casey, et al.,


Appellants,

— vs. —

Accel Mortgage Services, Inc.,


et al.,
Appellees.

Opening Brief
GREEN JACOBSON, P.C.
Joe D. Jacobson
Jonathan F. Andres
Allen P. Press
7733 Forsyth Blvd., Suite 700
Clayton, MO 63105
Tel: (314) 862-6800
Fax: (314) 862-1606
Email: jacobson@stlouislaw.com
Attorneys for appellants
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SUMMARY OF THE CASE

Missouri law prohibits anyone except a licensed attorney to engage

in “the drawing or the procuring of or assisting in the drawing for a valu-

able consideration of any paper, document or instrument affecting or relat-

ing to secular rights…” While Missouri law allows non-lawyers to prepare

documents for their own transactions, it does not allow them to charge

others for preparing the documents. This law is generally applied and

enforced against all types of persons engaged in all types of businesses.

While the law does not purport to regulate any lender’s lending activities,

it is enforced against lenders the same as it is against anyone else. Thus,

to the extent a lender attempts to charge a separate fee for documents

prepared by laymen in connection with its lending activities, the Missouri

law has an incidental affect on those lending activities.

A single issue is therefore presented: Does 12 CFR § 560.2 preempt

the Missouri law to prevent it from being enforced against Federal Savings

Associations regulated by the Office of Thrift Supervision?

This is a case of first impression presenting important issues of

federal preemption and a state’s power to regulate the practice of law

within its borders. Oral argument of 15 minutes per side is requested.

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TABLE OF CONTENTS

SUMMARY OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

JURISDICTIONAL STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ISSUE PRESENTED FOR REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . 3

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

STANDARD OF REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

The state trial court erred in holding 12 CFR § 560.2 preempts


Missouri law barring non-lawyers from engaging in the law
business by charging separate fees for the preparation of legal
documents because the Missouri law is outside the scope of
preemption under the regulation in that it is part of Missouri’s
general contract, tort, and commercial law and only incident-
ally affects the lending operations of Federal Lenders . . . . . . . . . . . . . 10

A. The law barring non-lawyers from charging document


preparation fees is part of Missouri’s generally-applicable
commercial law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

B. The remedies provided by Missouri law for violations of


its prohibition on non-lawyers charging document pre-
paration fees are part of Missouri’s generally-applicable
contract and tort laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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C. The text, history, statutory authority for, and scope of 12


CFR § 560.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

D. Missouri’s prohibition on non-lawyers charging document


preparation fees is part of the basic commercial law of
this state aimed at governing the practice of law in
Missouri; the prohibition is not aimed at regulating
lenders and has only an incidental affect on lending . . . . . . . . . . 29

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

CERTIFICATE OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 39

CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

ADDENDUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

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TABLE OF AUTHORITIES

Cases Pages

Baldanzi v. WFC Holdings Corp.,


2008 U.S. Dist. Lexis 95727 (S.D.N.Y. Nov. 14, 2008) . . . . . . 28–29

Binetti v. Washington Mutual Bank,


446 F. Supp. 2d 217 (S.D.N.Y. 2006) . . . . . . . . . . . . . . . . . . . . . . 28

Carpenter v. Countrywide Home Loans, Inc.,


250 S.W.3d 697 (Mo. banc 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Cedar Rapids Cellular Tel., L.P. v. Miller,


280 F.3d 874 (8th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Eisel v. Midwest BankCentre,


230 S.W.3d 335 (Mo. banc 2007) . . . . . . . . . . . . . . . . . . 3, 11, 12, 14

Fidelity Federal Savings & Loan Ass’n v. De la Cuesta,


458 U.S. 141 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Finnegan v. Old Republic Title Co. of St. Louis, Inc.,


246 S.W.3d 928 (Mo. banc 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Flanagan v. Germania, F.A., 872 F.2d 231 (8th Cir. 1989) . . . . 3, 31–32

Gadda v. Ashcroft, 377 F.3d 934 (9th Cir. 2004) . . . . . . . . . . . . . . . . . . 30

Gibbons v. J. Nuckolls, Inc., 216 S.W.3d 667 (Mo. banc 2007) . . . . 35–36

Gibson v. World Savings & Loan Assn.,


103 Cal. App. 4th 1291 (Cal. App. 4th Dist. 2002) . . . . . . . . . . . . 16

Horton v. Conklin, 431 F.3d 602 (8th Cir. 2005) . . . . . . . . . . . . . . . . . . . 2

Hulse v. Criger, 247 S.W.2d 855 (Mo. banc 1952) . . . . . . . . . . . . . . . . . 11


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In re First Escrow, Inc., 840 S.W.2d 839 (Mo. banc 1992) . . . . . . . . . . 11

In re Mid-America Living Trust Assocs., Inc.,


927 S.W.2d 855 (Mo. banc 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . 12

In re Ocwen Loan Servicing, LLC, Mortgage Servicing Litig.,


491 F.3d 638 (7th Cir. 2007) . . . . . . . . . . . . . . . . . . . . . . . . 3, 32–35

Investors Title Co. v. Hammonds,


217 S.W.3d 288 (Mo. banc 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Lynch v. Lynch, 260 S.W.3d 834 (Mo. banc 2008) . . . . . . . . . . . . . . . . . . 9

Marano Enters. of Kansas v. Z-Teca Rests., L.P.,


254 F.3d 753 (8th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Middlesex County Ethics Comm. v. Garden State Bar Ass’n,


457 U.S. 423 (1957) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Raster v. Ameristar Casinos, Inc.,


Appeal No. ED90984 (Mo. App. E.D., Feb. 17, 2009) . . . . . . . . . . 16

Schuchmann v. Air Services Heating & Air Conditioning, Inc.,


199 S.W.3d 228 (Mo. App. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . 16

United States ex rel. O’Keefe v. McDonnell Douglas Corp.,


132 F.3d 1252 (8th Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Zmuda v. Chesterfield Valley Power Sports, Inc.,


267 S.W.3d 712 (Mo. App. 2008) . . . . . . . . . . . . . . . . . 12, 14, 15–16

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Statutes

12 U.S.C. §§ 1461 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

12 U.S.C. § 1463(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

12 U.S.C. § 1464(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19–20

Section 407.010, RSMo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Section 407.020, RSMo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14–15

Section 407.025, RSMo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Section 484.010, RSMo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Section 484.020, RSMo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 14

Regulations

12 CFR § 560.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

NB: This regulation is quoted 20–22 and diagramed 26

12 CFR § 560.110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 21–23

Other Authority

61 Fed. Reg. 50,951 (Sept. 30, 1996) . . . . . . . . . . . . . . . . . . . . . . 3, 23–25

Opinion of OTS Chief Counsel: Preemption of State Laws


Applicable to Credit Card Transactions (Dec. 24, 1996) . . . . . . . 35

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JURISDICTIONAL STATEMENT

This appeal was pending before the Missouri Court of Appeals when

the Federal Deposit Insurance Corporation (“FDIC”) was appointed

Receiver of Washington Mutual Bank (“WaMu”), successor in interest to

defendant-appellee North American Mortgage Company (“NAMCO”).

The FDIC was appointed WaMu’s Receiver September 25, 2008.

Approximately one month later, on October 24, 2008, FDIC moved to be

substituted for NAMCO in the appeal and for a 90-day stay of the proceed-

ings, all as authorized by 12 U.S.C. § 1821(d). The FDIC’s motion was

granted October 31, 2008.

While the stay was in place, the FDIC removed the appeal to the

United States District Court for the Eastern District of Missouri. The

FDIC filed its notice of removal November 6, 2008. Removal was author-

ized by 12 U.S.C. § 1819(b)(2)(B), which allows the FDIC as Receiver to

remove to federal court any action in which it is substituted for a party

within 90 days of being substituted.

Once the appeal was removed to district court, appellant Crider —

the only appellant appealing the judgment in favor of NAMCO — moved

to dismiss his appeal. Simultaneously, the other appellants moved to

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remand their appeals to the state appellate court. The district court denied

the motions without prejudice, holding that its sole function when a state-

court appeal is removed to federal court is to rubber-stamp the judgment

and transmit the file to the United States Court of Appeals.

Upon transmittal of the appeal to this Court, Crider renewed his

motion to dismiss and the other appellants renewed their motion to

remand. The renewed motion to remand added a ground for remand not

available when the initial motion was filed in the district court — the

failure of the other appellees to join in the removal notice. This Court

routinely holds that all defending parties in a state-court case must join

in a notice of removal for that notice to invoke federal jurisdiction. Horton

v. Conklin, 431 F.3d 602, 604 (8th Cir. 2005); Marano Enters. of Kansas v.

Z-Teca Rests., L.P., 254 F.3d 753, 755 n.2 (8th Cir. 2001).

Here, none of the other appellees joined in the FDIC’s removal notice,

and thus the notice of removal was ineffective and remand is required.

Thus, although this is an appeal from a final judgment, there is no

jurisdiction in this Court because of appellees’ failure to join in the notice

of removal.

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The FDIC has been dismissed from this appeal on Crider’s motion.

The motion for remand is fully briefed. The Court has ordered that the

motion for remand be decided by the panel deciding the appeal.

ISSUE PRESENTED FOR REVIEW

Whether the state trial court erred in holding 12 CFR § 560.2 pre-
empts Missouri law barring non-lawyers from engaging in the law
business by charging separate fees for the preparation of legal
documents because the Missouri law is outside the scope of pre-
emption under the regulation in that the Missouri law (a) does not
purport to regulate lending activity, (b) is part of Missouri’s
general contract, tort, and commercial law, and (c) only inciden-
tally affects the lending operations of Federal Lenders.

Eisel v. Midwest BankCentre, 230 S.W.3d 335 (Mo. banc 2007)

Flanagan v. Germania, F.A., 872 F.2d 231 (8th Cir. 1989)

In re Ocwen Loan Servicing, LLC, Mortgage Servicing Litig.,


491 F.3d 638 (7th Cir. 2007)

Final Rule Issuance, 61 Fed. Reg. 50,951 (1996)

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STATEMENT OF THE CASE

Respondents were sued with other residential mortgage lenders in

the Circuit Court for St. Louis County, Missouri, by putative classes of

residential mortgage borrowers. Plaintiffs claimed lenders had engaged in

the law business in violation of Missouri law by charging borrowers a

separate fee for the preparation of legal documents by non-lawyers in

connection with their mortgages. The charging of document preparation

fees by non-lawyers is illegal in Missouri.

The claims against respondents were dismissed November 13, 2002,

with the trial court holding that 12 CFR § 560.2 preempted application of

the Missouri law against Federal Savings Associations. [LF 138-39]. Docu-

ments captioned “final judgment” or “final judgment of dismissal with

prejudice” were entered at the request of respondents December 16, 2002.

[LF 24-25, 142-45]. The dismissals were not final judgments for purpose

of appeal under Missouri law, however, because claims remained pending

against other defendants. The final remaining claim against the last

remaining defendant was voluntarily dismissed with prejudice August 28,

2007. [LF 77, 146]. Appellants’ notice of appeal was timely filed September

5, 2007. [LF 78, 147].

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When the Missouri Court of Appeals stated in an order dated

November 5, 2007 that it could not determine from the record whether the

dismissals in favor of respondents had become a final and appealable judg-

ment, the trial court at appellants’ request entered an order under Rule

74.01(b) of the Missouri Rules of Civil Procedure finding “there is no just

cause for delay of an appeal of the dismissal of the above-dismissed

claims.” Such an order allows an appeal to proceed as a final judgment

even if some of the claims in the case are still pending. The Rule 74.01(b)

order was entered November 15, 2007. [LF 148].

STATEMENT OF FACTS

The facts relevant to the appeal are undisputed.

Michael Casey and Julie Pennington borrowed money from North

American Savings, F.S.B., to purchase property in St. Louis County,

Missouri. North American charged Casey and Pennington a document pre-

paration fee of $250 in the transaction, which they paid. [LF 82].

Richard and Kathleen Keller borrowed money from North American

to purchase property in Jefferson County, Missouri. North American

charged the Kellers a document preparation fee of $250 in the transaction,

which they paid. [LF 86].

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The Kellers also borrowed money from Heartland Bank to purchase

property in Jefferson County, Missouri. Heartland charged them a docu-

ment preparation fee of $100 in the transaction, which they paid. [LF 86].

Richard and Heidi Piatchek borrowed money from ABN AMRO to

purchase property in St. Louis County, Missouri. ABN AMRO charged the

Piatcheks a document preparation fee of $150 in the transaction, which

they paid. [LF 88].

In this brief, appellants are referred to as the “borrowers” and

respondents are referred to as the “Federal Lenders.” The term “Federal

Lenders” is also used in this brief at times to refer generally to Federal

Savings Associations and their subsidiaries. The Federal Lenders are each

either a Federal Savings Association or a subsidiary of a Federal Savings

Association. The Federal Lenders are subject to regulation by the Office of

Thrift Supervision (“OTS”). [LF 138-39].

Borrowers brought suit against their respective Federal Lenders,

alleging it was “unlawful under Missouri law for Lenders to charge or

collect from their borrowers a separate Document Preparation Fee.” [LF

81-82]. The borrowers contended the Federal Lenders were liable “for

actual damages in the sum of the Document Preparation Fee charged” to

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each person whom they charged the fee [LF 106], and that under Section

484.020.2, RSMo., each of the Federal Lenders was “liable for treble

damages to each such borrower to whom it charged such a Document Pre-

paration Fee within two years prior to the date of the filing of [the] peti-

tion.” [LF 95, 98, 99, 100]. The borrowers also contended the Federal

Lenders’ conduct violated Missouri’s Merchandising Practices Act,

§ 407.010, et seq., RSMo. (the “MPA”). [LF 104].

Federal Lenders moved to have the claims asserted against them

dismissed on the basis of federal preemption. [LF 109-33]. The trial court

granted the motions, holding:

[T]he Director [of OTS] has elected to occupy the


field except for limited areas covered by (c) of the
regulations [12 CFR § 560.2(c)], none of which
appear to be relevant to this proceeding. Federal
regulations such as 12 CFR 560.2(a) have the same
effect as federal statutes. Regulation of fees related
to financial transactions is within the clear intent
of the regulations preempted. Therefore, this field
has been preempted by federal law and Plaintiff
fails to state a cause of action against those Defen-
dants.

[LF 139].

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When the claims brought by other borrowers against other defen-

dants were finally resolved, this appeal followed. The history of the appeal

is discussed in the jurisdictional statement and the statement of the case.

SUMMARY OF THE ARGUMENT

Missouri law prohibits anyone not a lawyer from charging others a

separate fee for the preparation of documents affecting legal rights. This

law is enforced in Missouri against a wide variety of persons engaged in

a wide range of activities, including real estate brokers, escrow agents, and

motor vehicle dealers. The law does not purport to impose requirements

on the lending activities of the Federal Lenders. Rather, it purports to

protect the public from the danger of having legal documents improperly

prepared by non-lawyers by reducing the financial incentive for lay

persons to prepare such documents.

Under 12 CFR § 560.2, courts engage in a multi-step analysis to

determine whether a state law is preempted by the regulation. Under that

multi-step analysis, which is summarized in a diagram below at page 26,

the Missouri law barring non-lawyers from charging document preparation

fees is not preempted because:

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(a) the law does not purport to impose requirements regarding the

Federal Lenders’ ability to charge loan-related fees or on other

aspects of their lending activity; and

(b) the law, and the statutory and common-law remedies provided

for violations of the law, are all part of Missouri’s generally-

applicable tort, contract, and commercial law, and any affect

the limitation on non-lawyers charging document preparation

fees may have on the Federal Lenders’ lending activity is

incidental to the law’s purpose.

STANDARD OF REVIEW

Under both federal and Missouri law, the standard of review of a

trial court’s grant of a motion to dismiss is de novo. Cedar Rapids Cellular

Tel., L.P. v. Miller, 280 F.3d 874, 878 (8th Cir. 2002); Lynch v. Lynch, 260

S.W.3d 834, 836 (Mo. banc 2008).

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ARGUMENT

The state trial court erred in holding 12 CFR § 560.2 preempts


Missouri law barring non-lawyers from engaging in the law
business by charging separate fees for the preparation of legal
documents because the Missouri law is outside the scope of pre-
emption under the regulation in that it is part of Missouri’s
general contract, tort, and commercial law and only incidentally
affects the lending operations of Federal Lenders.

A. The law barring non-lawyers from charging document


preparation fees is part of Missouri’s generally-applic-
able commercial law.

Missouri law prohibits anyone who is not a licensed attorney from

engaging in “the law business,” which includes “the drawing or the procur-

ing of or assisting in the drawing for a valuable consideration of any paper,

document or instrument affecting or relating to secular rights…” Section

484.010.2, RSMo.

The power to impose this prohibition comes from the Missouri

Supreme Court’s inherent power to control the practice of law within the

State. “The judiciary is necessarily the sole arbiter of what constitutes the

practice of law. Statutes may aid by providing machinery and criminal

penalties but may not extend the privilege of practicing law to persons not

admitted to practice by the judiciary.” Eisel v. Midwest BankCentre, 230

S.W.3d 335, 338 (Mo. banc 2007).

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This prohibition is not aimed solely at the Federal Lenders or,

indeed, specifically at lenders of any type. It is a general rule of law aimed

at all who would charge or increase a fee for services when the services

involves non-lawyers performing legal work within Missouri or affecting

Missouri property or other legal rights. See Eisel, 230 S.W.3d at 339.

The Missouri Supreme Court prohibits real estate brokers from

charging a separate, additional charge for the preparation of documents

affecting property rights. Hulse v. Criger, 247 S.W.2d 855, 863 (Mo. banc

1952). The Missouri Supreme Court prohibits escrow companies from

either charging a separate fee for document preparation or varying their

customary charges for closing services based upon whether documents are

to be prepared in the transaction. In re First Escrow, Inc., 840 S.W.2d 839,

849 (Mo. banc 1992). The Missouri Supreme Court prohibits commercial

businesses from charging for the drawing, preparing, or assisting in the

preparation of trust workbooks, trusts, wills, and powers of attorney for a

Missouri resident without the direct supervision of an independent

licensed attorney selected by and representing the resident. In re Mid-

America Living Trust Assocs., Inc., 927 S.W.2d 855, 871 (Mo. banc 1996).

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The Missouri Court of Appeals recently held that Missouri law

prohibits recreational vehicle dealers from charging a separate docu-

ment fee to prepare “purchase agreements, invoices, retail installment

contracts, title work, financing documents, and other instruments and

documents of legal significance, or that affect or relate to rights and title

to property” in connection with the sale of all-terrain vehicles, motorcycles,

or other recreational vehicles. Zmuda v. Chesterfield Valley Power Sports,

Inc., 267 S.W.3d 712 (Mo. App. 2008).

Moving to the lending arena, the Missouri Supreme Court prohibits

state-chartered banks from charging document preparation fees in

mortgage transactions to recoup the cost of preparing standard-form

documents necessary to facilitate the selling of mortgage loans on the

secondary market. Eisel, 230 S.W.3d at 338-39. The prohibition stated in

Eisel is the same prohibition that borrowers contend should apply to the

Federal Lenders here.

In short, Missouri’s prohibition on non-lawyers charging document

preparation fees is part of Missouri’s general commercial law, applicable

to all persons in Missouri.

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B. The remedies provided by Missouri law for violations of


its prohibition on non-lawyers charging document
preparation fees are part of Missouri’s generally-applic-
able contract and tort laws.

Missouri law provides several remedies, both statutory and common-

law, for those persons who are charged a document preparation fee by a

non-lawyer not authorized to engage in the law business in Missouri.

These remedies are all part of Missouri’s general law. None of the reme-

dies are specifically directed against Federal Lenders. While some of the

remedies available sound in contract and others in tort, and still others are

criminal in nature, all of them are equally applicable to all persons in

Missouri who violate the prohibition against the unauthorized engaging

in the law business. Any affect the imposition of any of these remedies

might have on the lending operations of the Federal Lenders is only

incidental.

One of the statutory remedies is an award of treble damages under

the “law business” statute, which provides in relevant part:

Any person, association, partnership, limited liabil-


ity company or corporation who shall violate the
foregoing prohibition of this section shall be guilty
of a misdemeanor … and shall be subject to be sued
for treble the amount which shall have been paid
him or it for any service rendered in violation here-

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of by the person … paying the same within two


years from the date the same shall have been
paid…

Section 484.020.2, RSMo. The applicability of this statute to the unlawful

imposition of document preparation fees in mortgage transactions was

recognized by the Missouri Supreme Court in Eisel, 230 S.W.3d at 339.

A second statutory remedy is provided by the Merchandising Prac-

tices Act. The MPA supplements common-law actions for fraud. The MPA’s

purpose is to “preserve fundamental honesty, fair play and right dealings

in public transactions.” Zmuda, 267 S.W.3d at 716 (citations omitted). The

MPA defines certain fraud-like conduct to be unlawful:

The act, use or employment by any person of any


deception, fraud, false pretense, false promise, mis-
representation, unfair practice or the concealment,
suppression, or omission of any material fact in
connection with the sale or advertisement of any
merchandise in trade or commerce … in or from the
state of Missouri, is declared to be an unlawful
practice.

Section 407.020.1, RSMo. The MPA provides penalties for these unlawful,

fraud-like practices:

Any person who purchases or leases merchandise


primarily for personal, family or household
purposes and thereby suffers an ascertainable loss
of money or property, real or personal, as a result of

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the use or employment by another person of a


method, act or practice declared unlawful by section
407.020, may bring a private civil action in either
the circuit court of the county in which the seller or
lessor resides or in which the transaction complain-
ed of took place, to recover actual damages. The
court may, in its discretion, award punitive
damages and may award to the prevailing party
attorney’s fees, based on the amount of time
reasonably expended, and may provide such equit-
able relief as it deems necessary or proper.

Section 407.025.1, RSMo.

The Missouri appellate court has recently held the MPA is available

as a remedy for consumers when a non-lawyer charges a document prepar-

ation fee:

Zmuda’s petition alleges that charging a document


preparation fee is a “deception and unfair practice”
as the terms are used in the MPA. In this case,
assuming all of Zmuda’s allegations are true,
especially in light of our conclusion that he
adequately pleaded a cause of action for improperly
engaging in the law business, Zmuda sufficiently
pleaded a cause of action for violation of the MPA.

Zmuda, 267 S.W.3d at 716.

The MPA has a scope far broader than misbehaving lenders or viola-

tions of restrictions on the unauthorized engagement in the law business.

It is a general part of Missouri’s commercial or business tort law. See, e.g.,

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Raster v. Ameristar Casinos, Inc., Appeal No. ED90984 (Mo. App. E.D.,

Feb. 17, 2009), slip op. at 16 (MPA applies to claim that casino gave mis-

leading description of changes to rules of compensation club; “a customer

placing a bet is owed a duty of fair play”); Finnegan v. Old Republic Title

Co. of St. Louis, Inc., 246 S.W.3d 928, 929 (Mo. banc 2008) (MPA applies

to notaries who charged for notarizations without recording the signa-

tures in their notary journals as required by the notary statute); Gibbons

v. J. Nuckolls, Inc., 216 S.W.3d 667 (Mo. banc 2007) (MPA applies to car

wholesaler who sold rebuilt car without disclosing that car had been in

an accident, even though there was no privity of contract between the

buyer and the wholesaler); Schuchmann v. Air Services Heating & Air

Conditioning, Inc., 199 S.W.3d 228, 233 (Mo. App. 2006) (MPA applies to

claim that an HVAC contractor would not honor “lifetime warranty” on

new equipment installed by the contractor).

A third remedy, which is a remedy under the common-law, is avail-

able to any person who has been charged a document preparation fee for

legal documents prepared by a non-attorney. “Any person engaged in the

unauthorized practice of law has no right to collect fees, and those who

16
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have been improperly charged these fees have the right to their return at

common law under the theory of money had and received.” Carpenter v.

Countrywide Home Loans, Inc., 250 S.W.3d 697, 703 (Mo. banc 2008).

“[A]n action of money had and received is based on an implied contract of

repayment…” Id. at 703 n.5.

This common-law theory of recovery for money had and received is

a generally-applied feature of Missouri contract law, and does not apply

solely to Federal Lenders, or even just to lenders generally:

The appropriate action when one party has been


unjustly enriched through the mistaken payment of
money by the other party is an action at law for
money had and received. Although the action is
purely one at law, it partakes of the nature of
equity, and whenever it is shown that one has
money in his possession which rightfully belongs to
another, the law establishes privity between the
parties, and implies the promise and obligation
upon which the action rests. The action for money
had and received has always been one favored in
the law and the tendency is to widen its scope — it
being a flexible form of action, levying tribute on
equitable, as well as strictly legal doctrines; so that,
it has become axiomatic that the action lies where
the defendant has received or obtained possession
of the money of the plaintiff, which, in equity and
good conscience, he ought to pay over to the
plaintiff.

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Investors Title Co. v. Hammonds, 217 S.W.3d 288, 293-294 (Mo. banc 2007)

(citations and internal quotations omitted) (county required to repay title

company money stolen over time by employee of county recorder of deeds

notwithstanding absence of an express contract between county and title

company).

Thus, the Missouri state laws applicable to this case — both the laws

prohibiting the charging of document preparation fees and the laws speci-

fying the remedies available in case of a violation of this prohibition — are

laws of general application falling within the normal course of Missouri’s

contract, commercial, and tort laws.

The question, therefore, is whether 12 CFR § 560.2 preempts these

aspects of Missouri’s general laws of contracts, tort, and commercial law

from being applied to prohibit Federal Lenders from engaging in the law

business by charging borrowers document preparation fees.

C. The text, history, statutory authority for, and scope of


12 CFR § 560.2.

The trial court found that Missouri’s prohibition on the charging of

document preparation fees by non-lawyers was preempted with respect to

the Federal Lenders by 12 CFR § 560.2. This regulation was promulgated

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under authority granted by the Home Owners Loan Act (“HOLA”), 12

U.S.C. §§ 1461, et seq., and in particular under the authority granted by

Sections 1463 and 1464 of Title 12.

Section 1463(a) authorizes the Director of OTS to “provide for the

examination, safe and sound operation, and regulation of savings associ-

ations,” and provides that, “[t]he Director may issue such regulations as

the Director determines to be appropriate to carry out the responsibilities

of the Director or the Office.” 12 U.S.C. § 1463(a).

Section 1464 states the matters to be regulated by the Director of

OTS and gives details for such regulations. Section 1464 begins generally:

“In order to provide thrift institutions for the deposit of funds and for the

extension of credit for homes and other goods and services, the Director is

authorized, under such regulations as the Director may prescribe … to

provide for the organization, incorporation, examination, operation, and

regulation of associations to be known as Federal savings associations

(including Federal savings banks)…” 12 U.S.C. § 1464(a)(1).

Among the many regulations issued by the OTS under the authority

of the above-cited statutory sections is the regulation relied on by the trial

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court in granting the motion to dismiss, 12 CFR § 560.2. This regulation

states in relevant part:

§ 560.2 Applicability of law.

(a) Occupation of field.… OTS hereby occupies the


entire field of lending regulation for federal savings
associations. OTS intends to give federal savings
associations maximum flexibility to exercise their
lending powers in accordance with a uniform
federal scheme of regulation. Accordingly, federal
savings associations may extend credit as author-
ized under federal law, including this part, without
regard to state laws purporting to regulate or other-
wise affect their credit activities, except to the
extent provided in paragraph (c) of this section or §
560.110 of this part. For purposes of this section,
“state law” includes any state statute, regulation,
ruling, order or judicial decision.

(b) Illustrative examples. Except as provided in


§ 560.110 of this part, the types of state laws pre-
empted by paragraph (a) of this section include,
without limitation, state laws purporting to impose
requirements regarding: …

(5) Loan-related fees, including without limitation,


initial charges, late charges, prepayment penalties,
servicing fees, and overlimit fees;…

(c) State laws that are not preempted. State laws of


the following types are not preempted to the extent
that they only incidentally affect the lending opera-
tions of Federal savings associations or are other-
wise consistent with the purposes of paragraph (a)
of this section:

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(1) Contract and commercial law; …

(4) Tort law;

(5) Criminal law…

12 CFR § 560.2 (emphasis added).

A second preemption regulation issued by OTS is 12 CFR § 560.110,

which is a regulation referenced in 12 CFR § 560.2. This second regulation

states in relevant part:

§ 560.110 Most favored lender usury preemption.

(a) Definition. The term “interest” as used in 12


U.S.C. 1463(g) includes any payment compensating
a creditor or prospective creditor for an extension of
credit, making available of a line of credit, or any
default or breach by a borrower of a condition upon
which credit was extended. It includes, among
other things, the following fees connected with
credit extension or availability: numerical periodic
rates, late fees, not sufficient funds (NSF) fees,
overlimit fees, annual fees, cash advance fees, and
membership fees. It does not ordinarily include
appraisal fees, premiums and commissions attri-
butable to insurance guaranteeing repayment of
any extension of credit, finders’ fees, fees for docu-
ment preparation or notarization, or fees incurred
to obtain credit reports.

(b) Authority. A savings association located in a


state may charge interest at the maximum rate
permitted to any state-chartered or licensed lending
institution by the law of that state. If state law
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permits different interest charges on specified


classes of loans, a federal savings association mak-
ing such loans is subject only to the provisions of
state law relating to that class of loans that are
material to the determination of the permitted
interest. For example, a federal savings association
may lawfully charge the highest rate permitted to
be charged by a state-licensed small loan company,
without being so licensed, but subject to state law
limitations on the size of loans made by small loan
companies. Except as provided in this paragraph,
the applicability of state law to Federal savings
associations shall be determined in accordance with
§ 560.2 of this part. State supervisors determine the
degree to which state-chartered savings associ-
ations must comply with state laws other than
those imposing restrictions on interest, as defined
in paragraph (a) of this section.…

12 CFR § 560.110 (emphasis added).

Because document preparation fees are among the fees outside the

definition of “interest” stated in 12 CFR § 560.110, that regulation is

inapplicable to this appeal. If, however, one considered document prepara-

tion fees to be “interest,” then 12 CFR § 560.110 would be applicable and

Federal Lenders would be limited in charging such fees to the same extent

as state-chartered lenders. In other words, if document preparation fees

were interest, then state-chartered lenders and Federal Lenders would

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Case: 09-1096 Page: 30 Date Filed: 02/20/2009 Entry ID: 3518985

both be prohibited in Missouri from charging borrowers a separate fee for

the preparation of legal documents by non-lawyers.

In its final rule issuance, the OTS explained the scope of the preemp-

tion it intended in issuing these regulations — and, in particular, its intent

when enacting 12 CFR § 560.2 to not preempt basic state laws that have

only an incidental affect on lending:

Paragraph (c) describes certain types of state laws


that OTS does not intend to preempt.…

OTS believes that paragraph (c) should be retained


in order to provide guidance regarding the scope of
preemption intended by paragraph (a). OTS wants
to make clear that it does not intend to preempt
basic state laws such as state uniform commercial
codes and state laws governing real property,
contracts, torts, and crimes. To reduce the potential
for misunderstanding, however, we have made
several changes to paragraph (c). First, we have
modified the regulatory language that precedes the
list of state laws that are not preempted. The intro-
ductory language now indicates that laws falling in
these areas are not preempted to the extent that
they either: (i) Have only an incidental impact on
lending; or (ii) are otherwise not contrary to the
purposes expressed in paragraph (a) of the regula-
tion.…

Adding this two-part test to the regulation will


provide an interpretive standard for identifying
state laws that may be designed to look like tradi-
tional property, contract, tort, or commercial laws,

23
Case: 09-1096 Page: 31 Date Filed: 02/20/2009 Entry ID: 3518985

but in reality are aimed at other objectives, such as


regulating the relationship between lenders and
borrowers, protecting the safety and soundness of
lenders, or pursuing other state policy objectives.

When confronted with interpretive questions under


§ 560.2, we anticipate that courts will, in accor-
dance with well established principles of regulatory
construction, look to the regulatory history of
§ 560.2 for guidance. In this regard, OTS wishes to
make clear that the purpose of paragraph (c) is to
preserve the traditional infrastructure of basic state
laws that undergird commercial transactions, not to
open the door to state regulation of lending by
federal savings associations. When analyzing the
status of state laws under § 560.2, the first step will
be to determine whether the type of law in question
is listed in paragraph (b). If so, the analysis will
end there; the law is preempted. If the law is not
covered by paragraph (b), the next question is
whether the law affects lending. If it does, then, in
accordance with paragraph (a), the presumption
arises that the law is preempted. This presumption
can be reversed only if the law can clearly be shown
to fit within the confines of paragraph (c). For these
purposes, paragraph (c) is intended to be inter-
preted narrowly. Any doubt should be resolved in
favor of preemption

61 Fed. Reg. 50,951, 50,966-67 (1996) (emphasis added).

In the state appellate court, the Federal Lenders focused their argu-

ment on the last portion of the OTS’s discussion in its final rule issuance

— the portion beginning, “When analyzing the status of state laws under

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Case: 09-1096 Page: 32 Date Filed: 02/20/2009 Entry ID: 3518985

§ 560.2…” — which they referred to as the OTS interpretative guidelines.

These OTS interpretive guidelines suggest a sequence for the analysis of

whether 12 CFR § 560.2 preempts any particular state law.

While the Federal Lenders contend that the interpretive guidelines

lead to the conclusion that the Missouri law is preempted, this contention

is not correct because the Federal Lenders consistently misstate the first

step of the analysis. The first step, as stated in paragraph (b) of the regula-

tion, is whether the state law is “purporting to impose requirements

regarding” the Federal Lender’s lending activity. It is not, as the Federal

Lenders have contended, whether the state law affects that lending

activity — that is the second step of the analysis, and is stated in para-

graph (a) of the regulation. (Whether the state law is of general application

and whether its impact is only incidental are stated in paragraph (c).) The

proper step-by-step analysis stated in the interpretive guidelines may

perhaps be most clearly presented in the form of a flow chart:

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Flow chart representing 12 CFR § 560.2


The decision boxes refer to paragraphs (a), (b), and (c) of the regulation

¶ (b)
Does the state law
purport to regulate Yes
lending activities?

No

¶ (a)
Does the state law Preempted
affect
lending activities?

No

Yes

No
¶ (c)
Is the state law one
of general application, Not Preempted
e.g. , contract, tort?

Yes

Yes
¶ (c)
Does the state law
only incidentally affect No
lending activities?

26
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As one can see from the flow chart, under the OTS interpretative

guidelines a state law that purports to impose requirements on or other-

wise regulate a Federal Lender’s lending activities is preempted. On the

other hand, a state law that (1) does not purport to regulate lending

activities, (2) is part of the state’s laws of general application (such as

contract, commercial, and tort laws), and (3) only incidentally affects a

Federal Lender’s lending activities, is not preempted under 12 CFR

§ 560.2.

The Missouri law falls into this latter group. As discussed in greater

detail below, there is nothing in the Missouri laws to which one can point

to support the contention that Missouri was purporting to impose require-

ments regarding loan-related fees. The laws in question are simply laws

of general application regulating the practice of law. It is not accurate to

suggest that Missouri was purporting to impose requirements affecting the

lending activities of Federal Lenders when it prohibited non-lawyers from

engaging in the law business. Nor has Congress or the OTS indicated an

intent to preempt state regulation of the practice of law within their

respective borders as an incident of regulating Federal Lenders.

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Consequently, the Missouri law here is not “the type of law” listed in

paragraph (b) of the regulation, and thus the analysis does not “end there”

with paragraph (b), but continues through the remaining steps of the

analysis to the conclusion that the Missouri law is not preempted.

Finally, in determining whether a state law’s possible impact on

lending operation is only incidental, “the question is whether any impact

on lending operations is incidental to the statute’s primary purpose — not

whether the impact of the statute on a bank’s lending operation is ‘inciden-

tal.’” Binetti v. Washington Mutual Bank, 446 F. Supp. 2d 217, 221

(S.D.N.Y. 2006); see also Baldanzi v. WFC Holdings Corp., 2008 U.S. Dist.

Lexis 95727 (S.D.N.Y. Nov. 14, 2008).

In Baldanzi, an action brought under the National Bank Act, the

court held that state-law claims for breach of contract and violation of a

state consumer protection act were not preempted, stating:

defendant’s ability to conduct its banking business


is no more than incidentally affected by the require-
ment that it comply with state laws that apply to all
industries and individuals alike. The plaintiffs’
claims in both cases fall squarely on the “incidental
effect” side of the equation, and in no way involve
principles of state law that would impair the ability
of the national bank to exercise its federally-
granted real estate lending powers
28
Case: 09-1096 Page: 36 Date Filed: 02/20/2009 Entry ID: 3518985

Id. at *8-*9 (emphasis added).

D. Missouri’s prohibition on non-lawyers charging docu-


ment preparation fees is part of the basic commercial
law of this state aimed at governing the practice of law
in Missouri; the prohibition is not aimed at regulating
lenders and has only an incidental affect on lending.

Numerous federal courts have considered the scope of federal pre-

emption under HOLA and the regulations issued thereunder. While the

courts agree that HOLA’s preemption provisions are broad, they also agree

that the regulations are not all-encompassing in scope. See, e.g., Fidelity

Federal Savings & Loan Ass’n v. De la Cuesta, 458 U.S. 141, 171 (1982)

(O’Connor, J., concurring ) (“the authority of [OTS’s predecessor] to pre-

empt state laws is not limitless … it is clear that HOLA does not permit

the Board to pre-empt the application of all state and local laws to such

institutions”).

Courts recognize that the key preemption provision, 12 CFR § 560.2,

excludes broad and important areas of state law from the scope of federal

preemption. While no federal court or state appellate court has yet consi-

dered whether a prohibition on non-lawyers charging document prepara-

tion fees is preempted under HOLA, the cases below demonstrate that

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borrowers’ claims against the Federal Lenders are not preempted under

HOLA or, more specifically, under 12 CFR § 560.2.

As a starting point, it is necessary to recognize the central impor-

tance to the states in controlling the practice of law within their respective

borders. “The Supreme Court of the United States has long recognized that

the several states have an important interest in regulating the conduct of

the attorneys whom they license.” Gadda v. Ashcroft, 377 F.3d 934, 944

(9th Cir. 2004) (rejecting contention that state cannot discipline the license

of an attorney who practices solely before the Board of Immigration

Appeals notwithstanding that federal immigration law has granted the

U.S. Attorney General exclusive authority to discipline immigration

lawyers), citing Middlesex County Ethics Comm. v. Garden State Bar

Ass’n, 457 U.S. 423, 434 (1957); accord United States ex rel. O’Keefe v.

McDonnell Douglas Corp., 132 F.3d 1252 (8th Cir. 1998) (rejecting Justice

Department regulation authorizing government attorneys to directly

contact persons represented by counsel in violation of state ethics rules

prohibiting such contacts).

This Court has rejected the contention that HOLA and the regula-

tions issued thereunder preempt tortious interference claims brought

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Case: 09-1096 Page: 38 Date Filed: 02/20/2009 Entry ID: 3518985

under Missouri law. Flanagan v. Germania, F.A., 872 F.2d 231 (8th Cir.

1989). In Flanagan, plaintiff contracted to purchase tanning beds from an

import company, Silver Sales. Silver Sales’ sister company defaulted on a

$550,000 loan from Germania, a Federal Lender. As part of the loan

workout, Germania became Silver Sales’ sole shareholder. Germania

appointed new management, which refused Flanagan’s demand for

delivery of the beds. Id. Plaintiff brought a tortious interference with

contract action against Germania, alleging it “engaged in loan collection

practices that prevented Silver Sales from performing its obligation to

deliver the tanning beds.” Id. at 232. Some of the evidence supporting this

claim showed that Germania provided false and fraudulent information to

its own attorney, and that a Germania officer “wrote a memorandum to his

superiors boasting that Germania would receive ‘excess value’ and ‘wind-

fall profits’ by collecting Silver Sales’ assets.” Id. at 233.

This Court held Germania’s preemption defense to Flanagan’s

tortious inference claim was “without merit,” id. at 232, stating:

Germania relies on regulations promulgated by the


Federal Home Loan Bank Board [predecessor to the
OTS], which has Congressional authority to control
the operations of all federal savings associations.
These regulations, however, have no direct bearing
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on the issues before us. [The regulations] deal[]


with a number of issues, including what loans can
be made by federal associations, but says nothing
about the collection practices of those associations.

Id. at 234.

Borrowers suggest that a Federal Lender’s collection practices, the

activity at issue in Flanagan, are more closely related to its core business

of lending money than is the charging of document preparation fees, the

activity at issue here. If a Federal Lender’s collection practices are outside

the scope of federal preemption and can be the subject of a common-law

action for tortious interference with contract, as held by this Court in

Flanagan, it is reasonable to conclude that a restriction on a Federal

Lender’s unauthorized practice of law — which, after all, is what the prohi-

bition on charging document preparation fees boils down to — is also

outside the scope of federal preemption.

The Seventh Circuit held in In re Ocwen Loan Servicing, LLC,

Mortgage Servicing Litig., 491 F.3d 638 (7th Cir. 2007), that because

HOLA and the OTS regulations provide no remedy to persons injured by

wrongful acts of Federal Lenders, “we read subsection (c) [of 12 CFR

§ 560.2] to mean that OTS’s assertion of plenary regulatory authority does

32
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not deprive persons harmed by the wrongful acts of savings and loan

associations of their basic state common-law-type remedies.” Id. at 643.

The Seventh Circuit also held: “Not all state statutes that might be

invoked against a federal S&L are preempted, any more than all common

law doctrines are; for remember that contract and commercial law are

among the laws listed in subsection (c) of the regulation…” Id. at 646.

Specifically, the Seventh Circuit held that various state deceptive acts and

practices (“DAP”) statutes — statutes similar to the Missouri MPA here —

are not generally preempted by HOLA and its regulations. Id. at 644.

The Seventh Circuit reached its holding that statutes like the MPA

were not preempted relying in part on the express language of subsection

(c) and in part on a formal opinion of the OTS chief counsel, in which the

agency opined:

State laws prohibiting deceptive acts and practices


in the course of commerce are not included in the
illustrative list of preempted laws in § 560.2(b). The
Indiana DAP deceptive acts and practices statute
prohibits specified acts and representations in all
consumer transactions without regard to whether
the transaction involves an extension of credit.
Although not directly aimed at lenders, this law
affects lending to the extent that it prohibits mis-
leading statements and practices in loan trans-
actions by a federal savings association. Accord-

33
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ingly, a presumption arises that the DAP statute


would be preempted in connection with loans made
by the Association.

The OTS has indicated, however, that it does not


intend to preempt state laws that establish the
basic norms that undergird commercial trans-
actions. The Indiana DAP falls within the category
of traditional “contract and commercial” law under
§ 560.2(c)(1). While the DAP may affect lending
relationships, the impact on lending appears to be
only incidental to the primary purpose of the statute
— the regulation of the ethical practices of all
businesses engaged in commerce in Indiana. There
is no indication that the law is aimed at any state
objective in conflict with the safe and sound
regulation of federal savings associations, the best
practices of thrift institutions in the United States,
or any other federal objective identified in
§ 560.2(a). In fact, because federal thrifts are
presumed to interact with their borrowers in a
truthful manner, Indiana’s general prohibition on
deception should have no measurable impact on
their lending operations. Accordingly, we conclude
that the Indiana DAP is not preempted by federal
law.

Ocwen, 491 F.3d at 644 (ellipses and brackets in original deleted, emphasis

added), quoting Opinion of OTS Chief Counsel: Preemption of State Laws

Applicable to Credit Card Transactions (Dec. 24, 1996) at pp. 9–10.1

1
The OTS Chief Counsel’s opinion is available on the internet at:
http://www.ots.treas.gov/docs/5/56615.pdf.
34
Case: 09-1096 Page: 42 Date Filed: 02/20/2009 Entry ID: 3518985

Gibson v. World Savings & Loan Assn., 103 Cal. App. 4th 1291 (Cal.

App. 4th Dist. 2002), is also on point. In Gibson, a Federal Lender was a

defendant in a class action accusing it of buying “forced insurance” on the

mortgaged properties securing its loans, including many properties where

the homeowners already had hazard insurance in place to protect the

Federal Lender’s interests. The Federal Lender was accused of charging

its borrowers a substantial mark-up over the actual insurance premiums.

The suit against the Federal Lender alleged this conduct violated the

California unfair trade practices act. The Federal Lender moved to dismiss

the suit, claiming the state-law claims were preempted under 12 CFR

§ 560.2. The California appellate court rejected Federal Lender’s

preemption defense, holding:

Moreover, none of the predicate duties are directed


toward federal savings associations. Instead, the
duties on which the plaintiffs’ claims are predicated
govern, not simply the lending business, but anyone
engaged in any business and anyone contracting
with anyone else. On their face, they do not purport
to regulate federal savings associations and are not
specifically directed toward them. Nor is there any
evidence that they were designed to regulate
federal savings associations more than any other
type of business, or that in practice they have a
disproportionate impact on lending institutions.
Any effect they have on the lending activities of a

35
Case: 09-1096 Page: 43 Date Filed: 02/20/2009 Entry ID: 3518985

federal savings association is incidental rather than


material.

Gibson, 103 Cal. App. 4th at 1302.

In light of the text of 12 CFR § 560.2, which excludes general laws of

contracts, torts, and commercial law from the scope of its preemption; in

light of the authoritative announcement of the opinion of the OTS chief

counsel; in light of the decisions of the Courts of Appeals in Flanagan and

Ocwen; in light of the nature and scope of Missouri’s prohibition of the

unauthorized practice of the law business through the charging of docu-

ment preparation fees by non-lawyers, the common-law contractual rule

of money had and received, and the statutory tort rules embodied in the

MPA — in light of all of this, it appears indisputable that the trial court

erred in holding borrowers’ claims against the Federal Lenders preempted.

In short, the laws that borrowers invoke against the Federal Lenders

are part of the general laws of the State of Missouri. These are laws that

are not aimed at promoting or enforcing any state policy about the lending

practices of Federal Lenders. Indeed, these laws are not particularly

directed at and have no special application to any lender, but are equally

directed at and enforced against all sorts of persons, from real estate

36
Case: 09-1096 Page: 44 Date Filed: 02/20/2009 Entry ID: 3518985

brokers to escrow agents, from commercial businesses to recreation vehicle

dealers, from notaries to car wholesalers, casinos, and HVAC contractors.

The Missouri laws bars anyone who is not an attorney licensed in the state

from preparing legal documents for money. The laws at issue in this case

are part of the general contract, tort, and commercial laws of the State of

Missouri and, therefore, are outside the scope of preemption claimed by

the OTS in 12 CFR § 560.2, and are not preempted by any other federal

law.

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Case: 09-1096 Page: 45 Date Filed: 02/20/2009 Entry ID: 3518985

CONCLUSION

The judgment of the trial court should be reversed. The case should

be remanded to state court to proceed to trial against appellees North

American Savings, Heartland Bank, and ABN AMRO with the direction

that appellants’ claims are not preempted by federal law.

Respectfully submitted,

GREEN JACOBSON, P.C.

By: ________________________________
Joe D. Jacobson
Jonathan F. Andres
Allen P. Press
7733 Forsyth Blvd., Suite 700
Clayton, MO 63105
Tel: (314) 862-6800
Fax: (314) 862-1606
Email: jacobson@stlouislaw.com
Attorneys for appellants

38
Case: 09-1096 Page: 46 Date Filed: 02/20/2009 Entry ID: 3518985

CERTIFICATE OF COMPLIANCE

Pursuant to Rule 32(a)(7)(C) of the Federal Rules of Appellate

Procedure and Local Rule 28A(c), the attorney signing this brief certifies

as follows:

Appellants’ Opening Brief complies with the type-volume limitations

set in Rule 32(a)(7)(B) in that, according to WordPerfect’s word-count

function, the brief contains 7,339 words, excluding those portions of the

brief excluded from the volume limitations under the rule.

The brief complies with the typeface requirements established by

Rule 32(a)(5) and the type style requirements established by Rule 32(a)(6)

because it has been prepared in a proportionally-spaced typeface using

WordPerfect word-processing software version X3 in 14-point Century

Schoolbook font.

The electronic copies of this brief provided to the Court and opposing

party, and the diskettes on which those copies are served, have been scan-

ned for viruses using Symantec Endpoint Protection anti-virus software,

version 11.0.1000.1375, updated to the most current virus definitions, and

have been found to be virus-free.

39
Case: 09-1096 Page: 47 Date Filed: 02/20/2009 Entry ID: 3518985

CERTIFICATE OF SERVICE

The attorney signing this brief certifies that two true and complete

copies of this Opening Brief, and a floppy disk containing an electronic

copy of this brief, have been served by mailing the same by U.S. Mail, first-

class postage prepaid, this 20th day of February, 2009, to each of the

following named counsel of record at the following addresses of record:

Sanford J. Boxerman
Capes Sokol Goodman & Sarachan PC
7701 Forsyth Blvd., 4th Floor
Clayton, MO 63105

Michael A. Campbell
Polsinelli Shalton Welte & Suelthaus
100 South Fourth Street, Suite 1100
St. Louis, MO 63102

Kenneth J. Mallin
Bryan Cave LLP
211 North Broadway, Suite 3600
St. Louis, MO 63102-2750
C:\Temp\09-1096 Appellants Opening Brief.wpd

40
Case: 09-1096 Page: 48 Date Filed: 02/20/2009 Entry ID: 3518985

STATE OF MISSOURI )
)ss
COUNTY OF ST. LOUIS )

IN THE CIRCUIT COURT OF THE COUNTY OF ST. LOUIS


STATE OF MISSOURI

MICHAEL CASEY, et aI,


Plaintiff
CAUSE NO. 02CC-1055

VB DIVISION 19

ACCEL MORTGAGE SERVICES! INC,


Et al
Defendants.

ORDER OF COURT

Defendants, Allegiant Mortgage Company, Countrywide Home Loans,


Inc., Chase Manhattan Mortgage Corporation, Heartland Bank,
Midwest BankCentre, Mortgage Resources Incorporated, North
American Savings Bank, F.B.B., Southwest Bank of St. Louis, Wells
Fargo Home Mortgage, North American Mortgage Company, ABN Amro
Mortgage Group, Inc, Cornerstone Mortgage, Inc, U.S. Bank
National Association, have each filed some form of Motion to
Dismiss. Within those various motions are some themes that are
common and there are some themes that are exclusive to that
Defendant's claim for relief. For purposes of judicial econ~my,
the court will first address and rule upon those claims that are
common to more than one Motion to Dismiss and then rule upon all
other claims for relief.

I.UNLAWFUL PRACTICE OF LAW OR DOING LAW BUSINESS

a. Violation of Section 484.020, RSMo.

In their Petition, Plaintiffs allege that each Defendant is


a lender engaged in the business of making or brokering home
loans in the State of Missouri. They also allege that" Each of
these home loans is secured by a deed of trust (or mortgage),
and, in some cases, releases of deeds of trust, variable rate
riders, a HUD-l Settlement Statement/ and other instruments and
documents of legal significancel/. Each lender is alleged to
Case: 09-1096 Page: 49 Date Filed: 02/20/2009 Entry ID: 3518985

charge a document preparation fee. Each Plaintiff alleges he or


she was charged such a fee for document preparation. In Count I
of the Petition, Plaintiffs allege that "Section 484.020, RSMo,
prohibits any association or corporation, except a professional
corporation organized pursuant to the provisions of Chapter 356,
RSMo, from engaging in the practice of law or doing law
business... Plaintiffs allege that each of the defendants is
JI

prohibited from engaging in the practice of law or doing law


business in the State of Missouri. Section 484.010, RSMo, defines
"practice of the lawu as "the appearance of an advocate in a
representative capacity or the drawing of papers, pleadings or
documents or the performance of any act in such capacity in
connection with proceedings pending or prospective before any
court of record, commissioner, referee or any body, board,
committee or commission constituted by law or having authority to
settle controversies." "Law business" is defined as "the advising
or counseling for a valuable consideration of any person, firm,
association, or corporation as to any secular law or the drawing
or the procuring of or assisting in the drawing for a valuable
consideration of any paper, document or instrument affecting or
relating to secular rights or the doing of any act for a valuable
consideration in a representative capacity, obtaining or tending
to obtain or securing or tending to secure for any person, firm,
association or corporation any property or property rights
whatsoever." Although the allegations of Plaintiffs fail to
allege that Defendants engaged in the practice of law as that
term is defined in Section 484.010, RSMo, the allegations do
state that Defendants were engaged in doing law business as
defined and as prohibited by Section 484.020, RSMo. Therefore,
Plaintiffs state a cause of action in Count I under the
provisions of Section 484.020,RSMo.

b. Common Law Unlawful Practice of Law

Plaintiffs also claim that, aside from the provisi~ns of


~
Section 484.020, RSMo, they have alleged a cause of actlon for
damages for unlawful practice of law under common law. The
Missouri Supreme Court has stated that "the judicial department
is necessarily the sole arbiter of what constitutes the practice
of law. n Hulse v. Criger, 247 S.W. 2d 855(Mo.1952). Ultimately,
it will be the Missouri Supreme Court that determines what mayor
may not constitute the unlawful practice of law. Suffice it to
say that the Supreme Court has already stated that although it is
not the unlawful practice of law for a party to fill out business
forms ancillary to the business of the person who did so, such
actions must be taken without separate charge. Hulse v. Criger,
supra. Therefore, this court finds that, until otherwise ruled by
the Missouri Supreme Court, it appears that Plaintiffs have
adequately alleged that Defendants have unlawfully practiced law.
2
Case: 09-1096 Page: 50 Date Filed: 02/20/2009 Entry ID: 3518985

The critical issue before this court is whether or not there


is a civil action for unlawful practice of law independent of an
action under Section 482.020, RSMo. See, Jansen v. Guaranty Land
Title Co, 571 S.W.2d 702(Mo. App. E.D. 1978). That case cites to
Rule 5.25. On the basis of that rule the court found that
"Plaintiffs simply have no standing to prosecute; their interest
in the purity of the legal profession is no greater than that of
the public at large. u Jansen, supra, 571 S.W.2d at 706. On that
basis the court found that the substantive suits based on the
illegal practice of law were properly dismissed by the trial
court. That rule does not appear to be the same Rule 5.25 that is
presently in existence. However, Rule 5.29(a) provides "For the
purpose of protecting the public, the chief disciplinary counsel
shall have the power and is charged with the duty on behalf of
the bar of investigating the unauthorized practice of law and of
instituting and prosecuting appropriate suits, actions, or
proceedings against any parties and in any forums within or
without the state of Missouri for the purpose. u There is nothing
within the Rules that appear to authorize independent civil
actions to seek damages independent of actions under Section
484.020,RSMo. Therefore, the court finds that Plaintiffs lack
standing to seek civil relief for the unlawful practice of law at
common law. To the extent their pleadings seek to do so they
should be dismissed. Wherefore, it is hereby ordered that the
claims of all Plaintiffs against all Defendants are hereby
dismissed for failure to state a cause of action to the extent
the Plaintiffs seek to claim a cause of action under Count I for
Unlawful Practice of Law at Common Law.

II. STATUTE OF LIMITATIONS AND STANDING

In some cases, the Plaintiffs clearly allege that the


charging of a fee for document preparation, which they allege is
the illegal practice of law giving rise to a caus~of action
under Section 484.020, RSMo, occurred more than two years prior
to the filing of the petition. Section 484.020.2 provides that
"Any person, ... or corporation who shall violate the foregoing
prohibition of this section shall be guilty of a misdemeanor ...
and shall be subject to be sued for treble the amount which shall
have been paid him or it for any services rendered by the ...
corporation paying the same within two years from the date the
same shall have been paid. n It further provides that "if within
said time such ... person... shall neglect and fail to sue for or
recover such treble amount, then the State of Missouri shall have
the right to and shall sue for such treble amount and recover the
same and upon the recovery thereof such treble amount shall be
paid into the treasury of the state of Missouri." Contrary to the
allegations of the Defendants in their Motions to Dismiss, this
3
Case: 09-1096 Page: 51 Date Filed: 02/20/2009 Entry ID: 3518985

statute is not a statute of limitations. However, as pointed out


in the oral arguments, this statute speaks to the issue of the
standing of a Plaintiff to claim rights to recover under the
provisions of Section 484.020, RSMo. This court finds that those
Plaintiffs who failed to file suit within two years from the date
the payments were made to the said Defendants, lack standing to
seek relief under Section 484.020. That right vests exclusively
with the State. Also, since the remedy afforded within Section
484.020, RSMo is a penalty} it is further covered by the three
year statute of limitations under Section 516.130, RSMo.

The claims of Plaintiffs, Michael Casey and Julie Pennington,


and Richard and Kathleen Keller against Defendant, North American
Savings Bank, Plaintiff, Michael T. Crider, Jr. against Defendant,
North American Mortgage Company} Plaintiffs, William and Patricia
Craft against Defendant, Southwest Bank of St. Louis, Plaintiff,
Mimi Fowler against Defendant, U.S. Bank National Association (as
to the claim of 3/24/99), Plaintiff, Tim Lore against Defendant,
Mortgage Resources r Plaintiff, Carl Makarewicz against Defendant,
Countrywide Home Loans, Inc r and Plaintiffs, Andrea and Michael
McCann against Defendant, Allegiant Mortgage Company were all J

filed more than two years after the named Defendants charged those
Plaintiffs a document preparation fee. Therefore, those actions
should be ordered dismissed for lack of standing by Plaintiffs to
bring chose actions.

Wherefore, it is hereby ordered that the above-listed claims


under Count I of the First Amended Petition be dismissed for lack
of standing under Section 484.020, RSMo.

III. MERCHANDISING PRACTICES ACT

a) SUFFICIENCY OF PLEADINGS
J
Plaintiffs have alleged in Count II of their Petition that
they are entitled to recover damages pursuant to the
Merchandising Practices Act, Section 407.010, RSMo. et seq. The
court finds that the Petitioner sufficiently alleges a violation
of that act by alleging "charging a Document Preparation Fee for
the preparation of Documents necessary to effectuate financing
transactions" as "a deception and an unfair practice."

b) EXCLUSIONS FROM LIABILITY UNDER THE MERCHANDISING


PRACTICES ACT

Section 407.020.2(2) provides that the provisions of this


act do not apply to "Any institution or company that is under the
direction and supervision of the director of the department of
4
Case: 09-1096 Page: 52 Date Filed: 02/20/2009 Entry ID: 3518985

insurance, director of the division of credit unions, or director


of the division of finance, unless the directors of such
divisions specifically authorize the attorney general to
implement the powers of this chapter or such powers are provided
to either the attorney general or a private citizen by statute."
Plaintiffs have acknowledged in their briefs that "State banks
regulated by the Missouri Division of Finance are exempt from
civil litigation or prosecution under the Merchandising Practices
Act." In Count II, paragraph 79, Plaintiffs allege "This count
is alleged against all defendants and all members of the
Defendants' Class who are not under the direction and supervision
of the director of the division of credit unions or the director
of the division of finance." The court discerns from the Motions
that have been filed that institutions other than State Banks
believe they are under the direction and supervision of the
division of finance. Plaintiffs do not specify which of the named
Defendants need to respond to that allegation. It is
inappropriate for Plaintiffs to require the court and the
Defendants to have to guess whether or not this allegation is
directed at a party defendant. Therefore, as to those Defendants
who have alleged they are within this exception, this count needs
to be dismissed to permit Plaintiffs to file a more specific
pleading to permit the court to rule on which Defendants should
remain subject to action on this count. Defendants Southwest J

Bank of St. Louis, Midwest BankCentre, Mortgage Resources


Incorporated, Cornerstone Mortgage Inc., allege that they are
J

under the direction and supervision of the Director of the


Missouri Division of Finance. Wherefore, it is hereby ordered
that Count II of Plaintiffs' Petition against Defendants,
Southwest Bank of St. Louis, Midwest BankCentre, Mortgage
Resources Incorporated, Cornerstone Mortgage, Inc. be and are
hereby dismissed without prejudice with leave to file an amended
Petition which alleges which, if any, of such Defendants is not
under the direction and supervision of the Director of the
Missouri Division of Finance. J

IV. PREEMPTION

Numerous Defendants have alleged that the causes of action


by Plaintiffs have been preempted by various federal laws. The
court finds no basis within any federal law to overcome the
presumption against preemption except within that federal law
applicable to Federal Savings Banks and their subsidiaries.

a. Federal Savings Banks

Pursuant to 12 U.S.C. 1463 (a) (2) the Director of the


Office of Thrift Supervision is authorized to \\issue
5
Case: 09-1096 Page: 53 Date Filed: 02/20/2009 Entry ID: 3518985

such regulations as the Director determines to be


appropriate to carry out the responsibilities of the
Director of the Office./I Pursuant to 12 U.S.C. 1464(a),
" ... the Director is authorized, under such regulations as
the Director may prescribe-(l) to provide for the
organization, incorporation examination, operation and
l

regulation of associations to be known as Federal


Savings associations (including Federal savings banks),
and... 11 Under 12 C. F. R. 560.2 (a), the Director I by
regulation has elected to occupy the field except for
limited areas covered by (c) of the regulation, none of
which appear to be relevant to this proceeding. Federal
regulations such as 12 C.P.R. 560.2(a) have the same
effect as federal statutes. Fidelity Federal Savings and
Loan Assn v. de la Cuesta, 458 U.S. 141,153, 73 L.Ed. 2d
664, 102 S. Ct. 3014 (1982). Regulation of fees related
to financial transactions is within the clear intent of
the regulations preempted. Therefore, this field has
been preempted by federal law and Plaintiff fails to
state a cause of action against those Defendants.

Defendants, Heartland Bank, North American Savings


Bank, F.S.B., ABN AMRO Mortgage Group, Inc., and North
American Mortgage Company, have each alleged that they
are Federal Savings Association or subsidiaries under
the exclusive regulatory authority of the Office of
Thrift Supervision and subject to statutory authority of
the Home Owners Loan Act, 12 U.S.C. 1462 et seq.
Plaintiffs have not challenged these claims.

Wherefore, it is hereby ordered that the First


Amended Petition of Plaintiffs, Richard and Kathleen
Keller, against Defendant, Heartland Bank, Plaintiffs,
Michael Casey and Julie Pennington and Richard and
Kathleen Keller against D@fendant, North American
Savings Bank, F.B.B., Plaintiffs, Richard and Heidi
Piatchek, against Defendant, ABN AMRO Mortgage Group,
Inc Plaintiff, Michael T. Crider, Jr. against
i

Defendant, North American Mortgage Company, be and are


hereby dismissed for failure to state a cause of action
as a result of federal preemption. Leave is hereby
granted to file an amended Petition which alleges that
any of these named defendants are not under the
statutory authority of 12 U.S.C. 1462, et seq.

V. REMAINING CLAIMS OF DEFENDANTS

The Court finds no merit in any of the other claims


for relief alleged in the Motions to Dismiss of the
6
Case: 09-1096 Page: 54 Date Filed: 02/20/2009 Entry ID: 3518985

various Defendants.

Wherefore, it is hereby ordered that all additional


and other grounds for relief, if any, requested by
Defendant, Midwest BankCentre, on the claims of
Plaintiff Patricia Eisel, by Defendant, Southwest Bank
of St. Louis on the claims of Plaintiffs William and
Patricia Craft, by Defendant, Countrywide Home Loans,
Inc. on the claims of Plaintiffs Cheryl Held and Carl
Makarewicz, by Defendant, Allegiant Mortgage Company, on
the claim of Plaintiffs, Andrea and Michael McCann, by
Defendant, U.S. Bank National Association, on the claim
of Plaintiff Mimi Fowler, Defendant, Chase Manhattan
Mortgage Corporation on the claims of Plaintiffs,
Timothy Hacker and Cathryn Senger and Ray and Constance
Raley, Defendant, North American Savings Bank, F.S.B. on
the claims of Plaintiffs,Michael Casey and Julie
Pennington, and Richard and Kathleen Keller, by
Defendant, Mortgage Resources Incorporated on the claim
of Plaintiff, Tim Lore, by Defendant, ·Cornerstone
Mortgage, Inco, on the claims of Plaintiffs, Mimi Fowler
and Richard and Jean M. Hynes, by Defendant/Wells Fargo
Home Mortgage, Inc. on the claims of Plaintiffs,Michael
Crider, Jr. and Cory L and Jeremy W. Timblin, by
Defendant, ABN AMRO Mortgage Group, on the claims of
Plaintiffs, Richard and Heidi Piatchek, by Defendant,
North American Mortgage Company, on the claim of
Plaintiff, Michael T. Crider, Jr. be and are hereby
denied.

VI. ADDITIONAL ORDERS OF COURT

a)It is further ordered that Defendants against whom


claims remain are granted 30 days from the date of this
order to file answer@ to the Petitions.

b. This cause is hereby set for an additional


scheduling conference for December 16/ 2002, at 9:00
a.m.

7
Case: 09-1096 Page: 55 Date Filed: 02/20/2009 Entry ID: 3518985

SO ORDERED:

MELVYN W. WIESMAN, JUDGE


~"- 7
/
Entered this Jlegd~y of November 2002.

cc: Martin Green and Thomas Federer, Attorneys for Plaintiffs


Sanford J. Boxerman, Attorney for ABN AMRO Mortgage Inc.
Michael Campbell, Attorney for Defendants, Mortgage
Resources, Inc., Cornerstone Mortgage, Inc, and North
American Savings F.S.B.

David Crane, Attorney for Defendant, Countrywide Home Loans,


Inc.
Gregory F. Herkert, Attorney for Defendant, Midwest
BankCentre
Chris Hohn, Attorney for Defendant, Chase Manhattan Mortgage
Corporation
Kenneth Mallin, Attorney for Defendant! Heartland Bank
Gary~ Mayes, Attorney for Defendants, Allegiant Mortgage
Company! and U.S. Bank National Association.
Phillip Morse, Attorney for Defendant, Accel Mortgage
Services, Inc.
Stephen Sanders, Attorney for Defendant, North American
Mortgage Co.
Jay Summerville, Attorney for Defendant, Southwest Bank of
St. Louis
David Wells, Attorney for Defendant, Wells Fargo Home
Mortgage, Inc.

8
Case: 09-1096 Page: 56 Date Filed: 02/20/2009 Entry ID: 3518985

IN THE CIRCUIT COURT FOR ST. LOUIS COUNTY J:,,::' . ,r'r


STATE OF IVrrSSOURI

l\1ICHAEL CASEY, et al., individually)


and on behalf of all others similarly ) JUAi
C!r~Gi...!n· GLL .
situated) )
)
Plaintiffs) ) Cause No. 02CC-OOI055
)
v. )
)
ACCEL 110RTGAGE SERVICES) ) Division 20
INC., et al.) )
r )
Defendants. )

VOLUNTARY DISMISSAL OF ACCEL MORTGAGE SERVICES, INC.


WITI-I PREJUDICE

Pursuant to Rule 67(a), Plaintiffs Janles D. Phillips and Deborah J. Phillips

hereby dislniss their claims against Defendant Accel 1\1ortgage Services, Inc. with

prejudice.

GREEN JACOBSON AND BUTSCH P.C.

BY:~ !.-Y1rc>
Tv'Iartin M. Green #16465
Joe D. Jacobson #33715
David T. Butsch #37539
Jonathan F. Andres #39531
Allen P. Press #39293
7733 Forsyth Blvd., Suite 700
St. Louis) Missouri 63105

Attorneys for Plaintiffs