Lipson, Neilson, Cole, Seltzer & Garin, P.C. The Mortgage News A Mortgage Banking Newsletter Editor: Howard A. Lax hlax@lipsonneilson.com

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Contents

Articles

This is not a case in which the business subject to the Act had the benefit of guidance from the courts of appeals or the Federal Trade Commission (FTC) that might have warned it away from the view it took. Before these cases, no court of appeals had spoken on the issue, and no authoritative guidance has yet come from the FTC19 (which in any case has only enforcement responsibility, not substantive rulemaking authority, for the provisions in question, see 15 U. S. C. §§1681s(a)(1), (e)). Cf. Saucier v. Katz, 533 U. S. 194, 202 (2001) (assessing, for qualified immunity purposes, whether an action was reasonable in light of legal rules that were “clearly established” at the time). Given this dearth of guidance and the less-than-pellucid statutory text, Safeco’s reading was not objectively unreasonable, and so falls well short of raising the “unjustifiably high risk” of violating the statute necessary for reckless liability.

Respondent-plaintiffs argue that evidence of subjective bad faith must be taken into account in determining whether a company acted knowingly or recklessly for purposes of §1681n(a). To the extent that they argue that evidence of subjective bad faith can support a willfulness finding even when the company’s reading of the statute is objectively reasonable, their argument is unsound. Where, as here, the statutory text and relevant court and agency guidance allow for more than one reasonable interpretation, it would defy history and current thinking to treat a defendant who merely adopts one such interpretation as a knowing or reckless violator. Congress could not have intended such a result for those who followed an interpretation that could reasonably have found support in the courts, whatever their subjective intent may have been. Both Safeco and GEICO argue that good-faith reliance on legal advice should render companies immune to claims raised under §1681n(a). While we do not foreclose this possibility, we need not address the issue here in light of our present holdings.

Even though the Shaws breached the contract first and substantially, we agree with the trial court’s conclusion. The Patricks’ contention that their own breach, being in default on their taxes, was not substantial is erroneous. Aside from being a clear violation of a condition precedent to the right to refinance, a tax default can result in forfeiture of the property entirely. We therefore disagree that this was an insignificant breach. We further find a complete lack of evidence that the Patricks would have cured the default in time to take advantage of the right to refinance but for the Shaws’ failure to send them the sixty days’ notice. Therefore, the Shaws’ breach was ultimately irrelevant to whether the Patricks could have taken advantage of the right to refinance. Therefore, the damages the Patricks allege they suffered as a result of the failure to send notice are not supported by the evidence. The trial court properly dismissed the breach of contract claim.

This Court has found that 12 USC 1735f-7a did not preempt state regulation of prepayment penalty charges under MCL 438.31c(2)(c). Nelson, supra at 593-597. This is not directly applicable to increasing interest rates beyond the rate initially agreed on. However, this Court analyzed the purpose of 12 USC 1735f-7a, and it relied on other cases finding highly significant that the DIDMCA preempted state laws expressly limiting the rate of interest. Nelson, supra at 594-596. The DIDMCA was intended to prevent states from artificially restricting first mortgage home loan interest rates to below market rates. Id. The provision here contains no limitation on the initial interest rate and no express limitation on a future interest rate. The DIDMCA was particularly not intended to preclude any other protections a state might wish to extend to borrowers. Nelson, supra at 595-596. MCL 438.31c(2) does not restrict the interest rate parties may agree to, and although it restricts the parties from agreeing to explicit increases later, it does not prevent the interest rate from being increased on the basis of the prevailing market rate. MCL 438.31c(2) does not impose an impermissible “ceiling” on interest rates, it only requires parties to adhere to whatever interest rate they agree to at the outset unless the market rate increases, in which case the interest rate may increase along with the market. MCL 438.31c(2) is not preempted by 12 USC 1735f-7a.

The loan extension does not appear to be the kind of transaction Congress intended to preempt from state law by enacting the AMTPA. Again, preemption is construed narrowly, and “the purpose of Congress is the ultimate touchstone of interpretation of a federal statute preempting state law.” Nelson, supra at 594 (internal quotations omitted). The First Circuit explained that the purpose of the AMTPA “was to preempt State bans on alternative mortgage transactions.” Grunbeck v Dime Savings Bank of New York, FSB, 74 F 3d 331, 335, 343-344 (CA 1, 1996) (emphasis in original). The District of Columbia Circuit agreed that the AMTPA was not intended to preempt all state laws regarding alternative mortgage transactions. Nat’l Home Equity Mortgage Ass’n v Office of Thrift Supervision, 362 US App DC 308, 311-313; 373 F 3d 1355, 1358-1360 (2004). The Office of Thrift Supervision (OTS) is responsible for “apply[ing] to state chartered housing creditors only those core regulations that ‘authorize’ federally chartered housing creditors to ‘engage in’ AMTs, as opposed to those less central regulations that govern the terms upon which federally chartered creditors may do so; only state laws in conflict with such authorizing provisions are preempted.” Id. Significantly, the two letters found in the record from the OTS repeatedly emphasize that the AMTPA is concerned with the origination of loans, which is consistent with the stated purpose of the AMTPA, which explicitly extends coverage of the AMTPA to making, purchasing, and enforcing alternative loan transactions. 12 USC 3801(b).

The parties dispute whether the loan at issue here actually complied with the applicable federal requirements. However, this analysis is irrelevant. It is undisputed that the original loan and balloon note was not usurious, and therefore federal preemption is not at issue. The question is whether the usurious loan extension is preempted by federal law. The AMTPA, to the extent it preempts state laws governing loan transactions, is concerned with originating loans. Therefore, the AMTPA might have had a preemptive effect had the original loan been at issue. The extension, however, is not the kind of transaction the AMTPA was intended by Congress to address. Because it is outside the scope of Congress’ purpose in enacting the AMTPA, preemption does not apply. We therefore agree with the trial court’s conclusion that federal preemption does not affect the application of Michigan’s usury law in this case.

Because the alleged agreement regarding the end mortgage would expressly contradict the provision in the agreement that defendant was not obligated to refinance the loan, extrinsic evidence regarding the alleged end mortgage would not be admissible and this is so even though plaintiff claims she was induced to accept the loan agreement by the promise of the end mortgage. See UAW-GM Human Resource Ctr v KSL Recreation Corp, 228 Mich App 486, 502; 579 NW2d 411 (1998); Ditzik v Schaffer Lumber Co, 139 Mich App 81, 87-88; 360 NW2d 876 (1984).

Plaintiff also sought to allege a claim for promissory estoppel, again based on defendant’s failure to refinance the construction loan with a 30-year end mortgage. However, “[p]romissory estoppel is not a doctrine designed to give a party to a negotiated commercial bargain a second bite at the apple in the event it fails to prove breach of contract.” Gen Aviation, Inc v Cessna Aircraft Co, 915 F2d 1038, 1042 (CA 6, 1990) (internal quotation marks and citation omitted). Thus, if the performance which satisfies the detrimental reliance requirement of the promissory estoppel theory is the same performance which represents consideration for the written contract, the doctrine of promissory estoppel does not apply. Id. Because a written contract underlies this case and plaintiff’s performance in reliance on the alleged promise is the same performance required under the loan agreement, plaintiff’s promissory estoppel theory is inapplicable. An amendment is futile if it is legally insufficient on its face. PT Today, Inc v Comm’r of the Office of Financial & Ins Services, 270 Mich App 110, 143; 715 NW2d 398 (2006).

Finally, plaintiff alleged that defendant engaged in “predatory loan practices” by entering into the loan transaction, which was “commercially unreasonable” because she had no hope of paying the loan when due. However, defendant presented evidence in connection with its own motion that it had “followed all standard banking practices and procedures in this matter” and plaintiff did not identify any particular law or regulation that was violated. The court cannot relieve a party from the consequences of her contract simply because the agreement was ill advised. Isbell v Anderson Carriage Co, 170 Mich 304, 312; 136 NW 457 (1912).

Defendant admits that it did not own the mortgage at the time of publication on October 27, 2005, but appears to argue that having fulfilled the requirements of MCL 600.3204(3), it was not obliged to follow MCL 600.3204(1)(d). We disagree. “To the extent possible, each provision of a statute should be given effect, and each should be read to harmonize with all others.” Michigan Basic Property Ins Ass’n v Ware, 230 Mich App 44, 49; 583 NW2d 240 (1998). We do not read subsection (3) as allowing a successor mortgagee to disregard the requirements of subsection (1) for foreclosing by advertisement simply because he or she expects to have achieved a perfect chain of title by the time of sale. Subsection (1)(d) plainly requires that a party own the indebtedness or an interest in the indebtedness before undertaking to foreclose a mortgage by advertisement. Accordingly, defendant was not eligible to commence the foreclosure when it did so because it did not yet own the indebtedness. MCL 600.3204(1)(d).

We recognize that a defect in fulfilling the statutory notice requirements attendant to a foreclosure by advertisement renders the resulting sale voidable rather than absolutely void. Jackson Investment Corp v Pittsfield Products, Inc, 162 Mich App 750, 755-756; 413 NW2d 99 (1987).

However, what is at issue in the present case is not a mere notice defect. Instead, it is a structural defect that goes to the very heart of defendant’s ability to foreclose by advertisement in the first instance. Our Supreme Court has explicitly held that “[o]nly the record holder of the mortgage has the power to foreclose” under MCL 600.3204. Arnold v DMR Financial Services, Inc, 448 Mich 671, 678; 532 NW2d 852 (1995). It naturally follows from this pronouncement that one who is not the record holder of a mortgage may not foreclose the mortgage under MCL 600.3204. Id.; see also Fox v Jacobs, 289 Mich 619, 623-624; 286 NW 854 (1939) (holding that despite a notice defect in the foreclosure proceedings, the defendants “possessed the right to foreclose” because “there is no question but that the [defendants] at the time foreclosure was instituted owned all of the interest in the mortgage”).

This case is controlled by Ameriquest Mortgage Co v Alton, 273 Mich App 84; ___ NW2d ___ 2006, in which a special panel of this Court addressed the issue “whether the doctrine of equitable subrogation may be applied to grant the priority lien position of a prior lender to a mortgagee that loans money to finance a subsequent mortgage on real property, thereby giving the mortgagee a position superior to that held by an intervening junior mortgagee.” Id. at 92. The doctrine of equitable subrogation provides that one who pays a debt for which another is responsible is substituted to all the rights and remedies of the debtor. Id. at 94. The Court concluded that under MCL 565.25(4), “recordation of a mortgage charges third parties with constructive notice and serves to determine lien priority.” Id. The Court further held that in order to be entitled to rely on the doctrine of equitable subrogation, a party cannot voluntarily have paid the debt, but rather must have done so to fulfill a legal or equitable duty owed to the debtor, to preserve the property from foreclosure, or to protect a preexisting interest in the property. Id. at 94-98.

RESPA does not provide for any mechanism by which a court could determine what portion of any particular purported overcharge is excessive, nor does it appear Congress delegated to HUD authority to set price limitations on the prices charged by settlement service providers . See Kruse, 383 F.3d at 56-57 (citing 119 Cong . Rec. 26,548-49 (1973)) (observing that Congress declined to adopt a proposed bill "directing HUD to limit the amount of closing costs which can be charged in each section of the country") . Where the settlement service provider renders the service or provides the goods or facilities and overcharges, it nevertheless has provided a service, good, or facility in exchange for the fee. Therefore, any argument that an overcharge contains an unearned fee component boils down to a complaint that the settlement service provider's profit is too high, enforcement of which necessarily requires a price control mechanism. As the circuit courts who have considered section 8(b) in this context have also concluded, section 8(b) is not a price control statute and does not extend to overcharges......When Congress elaborated on the specific purposes of RESPA, it did not enumerate price control (or control of overcharges) as one of the purposes . See 12 U.S .C. § 2601(b). Thus, while Congress could have enacted RESPA to direct a cap on fees that may be charged by settlement service providers, it did not .

Here, plaintiffs' § 17200 claims are premised primarily upon allegations that defendants (1) improperly overcharge or mark up settlement service charges and (2) fail to disclose actual costs pursuant to 24 C.F.R. § 3500.8(b), Appendix A. See FAC ¶T 52, 58, 70-72.10 The OCC's regulations in section 7 .4001 establish that the setting of non-interest fees and charges for real estate loans are business decisions within a national bank's discretion and that such decisions are considered to fall within safe and sound banking principles if the decision considers certain factors. Here, the fees charged by Wells are not alleged to exceed the authority conferred by the National Bank Act and the regulations thereunder.

Settlement service means any service provided in connection with a prospective or actual settlement, including, but not limited to, any one or more of the following…..Provision of any other services for which a settlement service provider requires a borrower or seller to pay.

Our cases have placed different statutory treble-damages provisions on different points along the spectrum between purely compensatory and strictly punitive awards. Thus, in Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 784 (2000), we characterized the treble-damages provision of the False Claims Act, 31 U.S.C. §§3729—3733, as “essentially punitive in nature.” In Brunswick Corp. v. Pueblo Bowl&nbhyph;O&nbhyph;Mat, Inc., 429 U.S. 477, 485 (1977), on the other hand, we explained that the treble-damages provision of §4 of the Clayton Act, 15 U.S.C. § 15 “is in essence a remedial provision.” Likewise in American Soc. of Mechanical Engineers, Inc. v. Hydrolevel Corp., 456 U.S. 556, 575 (1982), we noted that “the antitrust private action [which allows for treble damages] was created primarily as a remedy for the victims of antitrust violations,” (emphasis added). And earlier this Term, in Cook County v. United States ex rel. Chandler, 538 U.S. ___ (2003) (Slip op., at 9), we stated that “it is important to realize that treble damages have a compensatory side, serving remedial purposes in addition to punitive objectives.” Indeed, we have repeatedly acknowledged that the treble-damages provision contained in RICO itself is remedial in nature. In Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 151 (1987), we stated that “[b]oth RICO and the Clayton Act are designed to remedy economic injury by providing for the recovery of treble damages, costs, and attorney’s fees,” (emphasis added). And in Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 241 (1987) we took note of the “remedial function” of RICO’s treble-damages provision.

The trial court, in exercising its powers of equity, could have either denied rescission or based the unwinding of the transaction on the borrowers’ reasonable tender of the loan proceeds. The equitable goal of rescission under TILA is to restore the parties to the "status quo ante." See Yamamoto v. Bank of New York, 329 F.3d 1167, 1172 (9th Cir. 2003); Williams v. Homestake Mortgage Co., 968 F.2d 1137, 1140 (11th Cir. 1992). The Sheltons appear to misconstrue the procedural mechanics of § 1635. Clearly it was not the intent of Congress to reduce the mortgage company to an unsecured creditor or to simply permit the debtor to indefinitely extend the loan without interest.

This Court adopts the majority view of reviewing courts that unilateral notification of cancellation does not automatically void the loan contract. As the Ninth Circuit observed in Yamamoto, "[o]therwise, a borrower could get out from under a secured loan simply by claiming TILA violations, whether or not the lender had actually committed any." Yamamoto, 329 F.3d at 1172. "The natural reading of [§ 1635(b)] is that the security interest becomes void when the obligor exercises a right to rescind that is available in the particular case, either because the creditor acknowledges that the right of rescission is available, or because the appropriate decision maker has so determined. . . . Until such decision is made, the [borrowers] have only advanced a claim seeking rescission." Large v. Conseco Fin. Servicing Corp., 292 F.3d 49, 54-55 (1st Cir. 2002). This Court declines to adopt the reasoning of the Eleventh Circuit in Williams v. Homestake Mortgage Co., espousing the minority position that rescission is automatic, but holding that the voiding of a security interest may be judicially conditioned on debtor’s tender of amount due under the loan. See Williams, 968 F.2d at 1141-42.

Once the trial judge in this case determined that the Sheltons were  unable to tender the loan proceeds, the remedy of unconditional rescission was inappropriate. Although the better practice may have been for the trial judge to set terms for rescission by allowing the Sheltons a time certain to tender the net loan proceeds, it was unnecessary under the facts of this case. Aside from the Sheltons’ acknowledged inability to repay the loan, almost a year had passed from the date of exercising the cancellation of the loan. During that year, the Sheltons made no payments of principal or accrued interest on the loan. The trial court properly exercised its discretion in denying rescission.

Although this Court believes that Amnet substantially complied with all requirements of TILA in notifying the Sheltons of their right of rescission, this Court need not address each alleged hyper-technical violation. Here, Amnet had no obligation under TILA to provide a renewed notice of right of rescission or to reopen the  cancellation period. This obligation is only triggered under TILA when the financial discrepancy is over $100. See 15 U.S.C. § 1605(f)(1)(A); 12 C.F.R. § 226.18(d)(1)(i). The notice provided to the Sheltons in this case was strictly voluntary and therefore needed not meet the technical requirements of 12 C.F.R. § 226.23(b).

In summary, we find that Amnet fully complied with all of the requirements of TILA in connection with this loan. The trial court properly denied rescission, given the appellants’ inability to tender payment of the loan amount. For the foregoing reasons, we affirm the judgment of the trial court.

Plaintiffs' first approach is a non-starter. They insist, despite clear statutory and regulatory language to the contrary, that "if the creditor does not provide the 'appropriate form,' the borrower 'shall have' rescission rights." This is simply incorrect. The statute permits the lender to inform consumers of their rescission rights by using "the appropriate form of written notice published and adopted by the [Federal Reserve] Board, or a comparable written notice of the rights of the obligor." 15 U.S.C. § 1635(h) (emphasis added). The plain meaning of the word "or" makes clear that the lender may comply with its disclosure obligations by using a model form or, alternatively, a comparable written notice. Regulation Z is equally clear that either type of notice will satisfy the lender's obligation: "To satisfy the disclosure requirement . . . the creditor shall provide the appropriate model form in Appendix H of this part or a substantially similar notice." 12 C.F.R. § 226.23(b)(2) (emphasis added). In addition, the TILA plainly states that use of the model forms is not obligatory. See 15 U.S.C. § 1604(b) ("Nothing in this subchapter may be construed to require a creditor or lessor to use any such model form or clause prescribed by the Board under this section.").

In sum, because the plain language of the statute and regulations does not require exclusive use of the model forms, plaintiffs are incorrect to insist that Doral's alleged failure to provide the appropriate FRB form is a per se violation of 15 U.S.C. § 1635 and Regulation Z....

Most courts have concluded that the TILA's clear and conspicuous standard is less demanding than a requirement of perfect notice. Footnote  <!--[if !supportEmptyParas]-->See, e.g., Veale v. Citibank, 85 F.3d 577, 581 (11th Cir. 1996), cert. denied 520 U.S. 1198 (1997) ("TILA does not require perfect notice; rather it requires a clear and conspicuous notice of rescission rights."); Smith v. Chapman, 614 F.2d 968, 972 (5th Cir. 1980) ("Strict compliance does not necessarily mean punctilious compliance if, with minor deviations from the language described in the Act, there is still a substantial, clear disclosure of the fact or information demanded by the applicable statute or regulation."); Dixon v. D.H. Holmes Co., 566 F.2d 571, 573 (5th Cir. 1978) ("The question is not whether [notice provided under the TILA] is capable of semantic improvement but whether it contains a substantial and accurate disclosure . . . ."); see also Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 568 (1980) ("Meaningful disclosure [under the TILA] does not mean more disclosure. Rather, it describes a balance between competing considerations of complete disclosure . . . and the need to avoid . . . [information overload].") (internal quotation and citation omitted) (emphasis in original). As this court has recently said, the 1995 TILA amendments, see Truth in Lending Act Amendments of 1995, Pub. L. No. 104-29, 109 Stat. 271, 272-73, were intended by Congress to "provide higher tolerance levels for what it viewed as honest mistakes in carrying out disclosure obligations." McKenna, 475 F.3d at 424.

..…it is true that the disclosure statement plaintiffs received did not affirmatively inform them, as the H-9 form would have, that rescission of the refinance transaction would not also rescind their original mortgage. Footnote  However, we do not require perfect disclosure. The question before us is not whether the notification in Form H-9 would have been more complete than the notification plaintiffs actually received, but only whether the notification plaintiffs actually received met the requirements of the clear and conspicuous standard laid out in Regulation Z. Evaluating, as we must, Doral's disclosure from the vantage point of the hypothetical average consumer, see Palmer, 465 F.3d at 28, we conclude that because plaintiffs were told, clearly and conspicuously, that rescission would only operate as to their pending refinance transaction, any conclusions that they might have drawn from that disclosure about their previously existing mortgages were unreasonable (and, thus, not a valid basis for any TILA claim). Footnote  See Gambardella v. G. Fox & Co., 716 F.2d 104, 118 (2d Cir. 1983) (TILA disclosure that "requires the consumer to exercise some degree of care and study" suffices and "perfect disclosure" is not required). Two other circuits (albeit only one in a published opinion) have reached this same conclusion, where Model Form H-8, or a form patterned on it, was used for a same-lender refinancing transaction. See Veale, 85 F.3d at 580 ("We hold that . . . the H-8 form provides sufficient notice that the current transaction may be canceled but that previous transactions, including previous mortgages, may not be rescinded."); Footnote  Mills v. EquiCredit Corp., 172 Fed. Appx. 652, 656 (6th Cir. 2006) (approving of the district court's conclusion that "assuming that the form used by EquiCredit was technically incorrect . . . the form nonetheless informed Appellants of their right to cancel the loan transaction") (unpublished opinion). Doral's disclosures were not perfect in this case, but they were sufficient to meet the statutory and regulatory requirements of the TILA and Regulation Z. See Palmer, 465 F.3d at 29 ("[A]ny creditor who uses plain and legally sufficient language ought to be held harmless.").

Discover further notes that even if MacDermid could properly state a claim against it under the TILA, this claim would be time-barred. See also Mag. J. Op., 9/20/2004 at 23 n.7. The TILA provides for a one-year statute of limitations. 15 U.S.C. § 1640(e) (“Any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation.”). Mrs. MacDermid actually obtained the Discover credit cards in August and September of 2002. If this is the date from which the one-year clock is to start ticking, then it would appear that the TILA claims, filed on October 9, 2003, are timebarred. On the other hand, Mr. MacDermid’s TILA claim is premised on the notion that he could not have been aware that he had not received the proper disclosures until such time as he found out about his wife’s deception. This does not appear to have occurred until February 14, 2003, when he intercepted checks sent to his residence by Discover, and after confronting to his wife began to figure out what she had done. Joint App’x at 505. And using this later date to start the limitations clock, Mr. MacDermid’s claim would clearly not be time-barred. However, because the statute-of-limitations issue is not particularly well-developed (the magistrate judge relegated it to a footnote, Discover mentions it in an “assuming arguendo” paragraph at the end of its TILA argument section, and MacDermid says nothing about it at all) nor is it necessary in our resolution of the TILA claim, we decline to decide it.

...nothing in TILA would seem to require a credit card company to investigate the legitimacy of an address provided in an application, especially where the two people listed on the application are presumed—and in this case, indeed are—members of the same household. We cannot expect Discover to have known that Mrs. MacDermid had schemed, unbeknownst to her husband, to create a post-office box to which the credit card (and disclosures) were to be sent. Mr. MacDermid certainly makes no allegation that the proper disclosures were not sent to this post-office box. He simply alleges that Discover violated TILA because he did not personally receive the proper disclosures. Unfortunately, this argument—that Discover violated TILA because it could not divine his actual address—finds no support in any law that we can discover.

This is not to deny that credit card providers’ current practice of issuing cards through on-line applications may well be overly aggressive, and their efforts to screen out “risky” applicants overly lax. Indeed, given Mrs. MacDermid’s poor credit history—she had recently emerged from personal bankruptcy, see MacDermid Aff., 2/28/2006, at 1—she would likely have been unable to be approved for a credit card without putting her husband’s name on the application. While Mr. MacDermid may well be justifiably angered by the predatory practices of many credit card providers, however, his anger in this case cannot be properly addressed (or assuaged) via a Truth in Lending Act claim.

Generally, “[u]nder the doctrine of respondent superior, an employer may be vicariously liable for the acts of an employee committed within the scope of his employment.” Helsel v Morcom, 219 Mich App 14, 21; 555 NW2d 852 (1996). Conversely, an employer cannot be held liable for an act committed by the employee that is beyond the scope of his or her employment. Borsuk v Wheeler, 133 Mich App 403, 410; 349 NW2d 522 (1984). “Intentional and reckless torts are generally held to be beyond the scope of employment.” Id. An employer may be held liable under the doctrine of respondent superior where the employee was promoting or furthering the employer’s business in some way, or if the employee committed a tort while involved in a service of benefit to the employer. Kester v Mattis, Inc, 44 Mich App 22, 24; 204 NW2d 741 (1972). But no vicarious liability exists if the employee steps aside from his employment in order to accomplish some purpose of his own or acts outside of the scope of the employee’s authority. Bryant v Brannen, 180 Mich App 87, 98-99; 446 NW2d 847 (1989).

In the instant case, the record reveals that Fleischmann entered into the attorney-client relationship with plaintiff while he was employed at defendant Brookover. There is no evidence that Secrest Wardle obligated itself on the contingency fee agreement between plaintiff and Fleischmann. Moreover, at no time did Fleischmann notify anyone at Secrest Wardle that he was purportedly representing plaintiff in connection with a lawsuit. In addition, the evidence supports a finding that Fleischmann had no authority from Secrest Wardle to represent plaintiff on any matter during the period of his employment with the firm. There can be no vicarious liability for the actions of a defendant-employee whose sole purpose is his own. Bryant, supra at 98-99.

“The Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003). In State Farm, the Supreme Court outlined three guideposts appropriate for consideration in determining whether a particular punitive damages award exceeds the boundaries of constitutional propriety. First, the court must assess the reprehensibility of the defendant’s misconduct, that is, whether

the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident.

Id. at 419. Second, a reviewing court should consider the disparity between the actual or potential harm suffered by the plaintiff – the injury covered by any compensatory damages award – and the punitive damages award. Id. at 424. Finally, the court may look to the difference between the relevant punitive damages award and the civil penalties authorized or imposed in similar cases. Id. at 428.

In Bach I, we relied upon the first two State Farm guideposts in determining that the punitive damages award exceeded constitutional boundaries. The record established the existence of only one of the reprehensibility factors identified in State Farm, that is, that Bach constituted a vulnerable victim. 149 F. App’x at 365. The absence of any of the other factors establishing reprehensibility cut in favor of reduction of the punitive damages award. Id. at 366. We further determined that the ratio of punitive damages to compensatory damages in this case, 6.6:1, was “alarming.” Id. The 6.6:1 ratio was of  particular concern because it appeared likely that the jury improperly duplicated the compensatory damages award in the punitive damages award. Id.

On remand, the district court attributed our reversal to two factors: the unacceptable ratio of punitive to compensatory damages and the jury’s seeming duplication of the compensatory damages award in the  amount of punitive damages. Bach, 2006 WL at 840381, at *5. The court reasoned that remittitur to $2,228,600 adequately addressed our concern that the jury had erroneously incorporated the compensatory damages award into the amount of punitive damages. Id. The award the district court proposed, it determined, “complie[d] with the specific findings of the Sixth Circuit while maintaining the sanctity of the initial jury award.” Id. The district court rejected FUNB’s argument that a reduction of the punitive damages award to $400,000, or a ratio of 1:1, was necessary to satisfy our mandate. It noted that “had the Sixth Circuit thought a 1:1 ratio was appropriate in this case, it surely would have said so.” Id. at *4. In this second appeal, FUNB  insists that the district court’s resolution did not adequately resolve the constitutional issues raised by the jury’s initial punitive damages award. We agree.

While the district court’s remedy on remand eliminated any concern regarding the potential duplication of compensatory damages and ultimately achieved a lesser ratio, of 5.57, it did not address our additional observation that, in light of the factors used in assessing reprehensibility, FUNB’s actions were comparatively less egregious. Bach I, 149 F. App’x at 366 (“[O]nly one of the five reprehensibility factors is present in this case. Such a finding does not support the large punitive damage award in this case.”). This element also informed our conclusion that a ratio of approximately 6.6:1 was “alarming.” See id. The district court failed to factor this portion of our decision into its analysis.

.....[T]he vulnerability of a victim, without more, ought not be the basis for “convert[ing] all acts that cause economic harm into torts that are sufficiently reprehensible to justify a significant sanction in addition to compensatory damages.” BMW, 517 U.S. at 576. Here, as we determined in Bach I, FUNB’s actions, while properly the basis for liability, were not particularly outrageous as judged by the reprehensibility factors set forth in State Farm. FUNB did not act with “reckless disregard for the health and safety of others,” engage in repeated instances of misconduct, or act with “intentional malice.” 149 F. App’x at 365. The absence of these factors substantially undercuts Bach’s attempts to justify the size of the punitive damages award in this case.

“[B]ased upon the facts and circumstances of the defendant’s conduct and the harm to the plaintiff,” State Farm, 538 U.S. at 425, a punitive damages award of slightly more than $2.2 million exceeds the boundaries of constitutionality in this case. Bach, for her part, seeks to justify the size of the punitive damages award by emphasizing First Union’s substantial wealth, which at the time of the violations in question included approximately $254,000,000 in assets. While a punitive damages award must remain of sufficient size to achieve the “twin purposes of punishment and deterrence,” Romanski, 428 F.3d at 649, a defendant’s wealth “cannot justify an otherwise unconstitutional punitive damages award,” State Farm, 538 U.S. at 427.

Let us suppose, for the sake of argument, that § 1692e applies to complaints, briefs, and other papers filed in state court. (We postpone to some future case, where the answer matters, the decision whether § 1692e covers the process of litigation.) Beler thinks that the Act requires everything from a debt collector's pen to be in plain language, but that's not so. Several parts of the FDCPA require notice about particular topics, and we have held that the required notices must be clear rather than muddy. That's some distance from saying that everything a lawyer writes during the course of litigation must be stated in plain English understandable by unsophisticated consumers. However desirable that might be, it is not a command to be found in the FDCPA.

Section 1692e does not require clarity in all writings. What it says is that "[a] debt collector may not use any false, deceptive, or misleading representation  [*6]  or means in connection with the collection of any debt." A rule against trickery differs from a command to use plain English and write at a sixth-grade level. Beler does not contend that the complaint was deceptive and that the Law Firm set out to trick her into paying money she does not owe, or to mislead her into paying the wrong person. Whatever shorthand appeared in the complaint -- the payments system through which credit-card slips flow is complex, and even many lawyers don't grasp all of its details -- was harmless rather than an effort to lead anyone astray. It was the judge, not Beler, who had to be able to determine to whom the debt was owed, for it is the judge (or clerk of court) rather than the defendant who prepares the judgment specifying the relief to which the prevailing party is entitled.