Yeager et al v. Ocwen Loan Servicing, LLC

Filing 70

OPINION. Signed by Honorable Judge Myron H. Thompson on 2/22/2017. (wcl, )

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IN THE DISTRICT COURT OF THE UNITED STATES FOR THE MIDDLE DISTRICT OF ALABAMA, SOUTHERN DIVISION RICHARD A. YEAGER and DEANA J. YEAGER, individually and on behalf of a class of similarly situated individuals, Plaintiffs, v. OCWEN LOAN SERVICING, LLC, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) CIVIL ACTION NO. 1:14cv117-MHT (WO) OPINION Plaintiffs Richard A. Yeager and Deana J. Yeager bring claims under the Fair Debt Collection Practices Act (FDCPA), defendant 15 Ocwen U.S.C. Loan §§ 1692, Servicing, et LLC seq., for against failing to provide a notice of debt validation by the deadline prescribed by the statute. court on the recommendation This case is before the of the United States Magistrate Judge that Ocwen Loan’s renewed motion for judgment on the pleadings be denied. Also before the court are Ocwen Loan’s objection to the recommendation. After an independent and de novo review of the record, the court is of the opinion that the objection should be sustained, the recommendation rejected, and the renewed motion granted. I. BACKGROUND A. Statutory Framework Congress enacted the FDCPA to “eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.” 15 U.S.C. § 1692(e). The FDCPA defines consumers’ rights, establishes requirements for debt collectors, and sets forth penalties for violations of the statute, including actual and statutory damages. See 15 U.S.C. §§ 1692 et seq. The validation-notice requirement of the FDCPA requires a debt collector to send a written notice to 2 the consumer with information about the debt, such as the amount of the debt and the creditor’s name, while providing notice about the consumer’s right to dispute the debt and the effects of the consumer’s failure to do so. The debt collector must send the validation notice to the consumer “[w]ithin five days after the initial communication with [the] consumer in connection with the collection of any debt ... unless the [] information is contained in the initial communication or the consumer § 1692g(a).1 The 1. In provides: full, has paid purpose the the of debt.” the 15 U.S.C. validation-notice validation-notice requirement “Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing-(1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (continued) 3 requirement is to “eliminate the recurring problem of debt collectors dunning the wrong person or attempting to collect debts which the consumer has already paid.” S. Rep. No. 95-382, at 4 (1977), as reprinted in 1977 U.S.C.C.A.N. 1695, 1699; accord FTC Staff Commentary, 53 Fed. Reg. 50,097, 50,108-50,109 (1988) (stating that validation-notice requirement “is intended to assist (3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; (4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.” 15 U.S.C. § 1692g(a). 4 the consumer contacts when wrong the a debt consumer collection efforts”). requirement is collector legislation.” a at the The inadvertently start of his validation-notice “significant feature of [the] S. Rep. No. 95-382, at 4 (1977), as reprinted in 1977 U.S.C.C.A.N. 1695, 1699. B. Factual Background Ocwen Loan is collection of debts. 2012, the Holdings, company Inc. and a corporation engaged in Compl. (doc. no. 1) ¶ 5. acquired its various Homeward the In late Residential residential mortgage loan-servicing and origination-operating subsidiaries. Id. ¶ 9. The servicing rights to the Yeagers’ mortgage loan was among those included in the acquisition. Id. ¶ 11. On or initially entitled WELCOME about March contacted “NOTICE TO OCWEN OF the 15 or Yeagers SERVICING LOAN 16, by Ocwen sending TRANSFER SERVICING, 5 2013, LLC.” a Loan letter (RESPA) Id. and ¶ 15; Compl. Ex. A (doc. no. 1-1) at 2. The letter informed the Yeagers that, effective April 1, 2013, Ocwen Loan would service their loan; provided contact information; made certain frequently that Ocwen disclosures; asked and answered collect a debt.” The “is Loan questions. collector a debt letter a list also of stated attempting to Compl. Ex. A (doc. no. 1-1) at 4. Ocwen Loan maintains that it sent the letter to comply with the Real Estate Settlement Procedures Act (RESPA), which mandates that a mortgage loan servicer shall notify the borrower in writing of a sale of the loan servicing “not less than 15 days before the effective date of loan.” transfer of the servicing of the mortgage 12 U.S.C. § 2605(b)(2)(A).2 2. Ocwen Loan has argued that, in its communications with the Yeagers, it was stuck between a rock and a hard place: RESPA required it to send the March 15, 2013, communication 15 days prior to the effective date of transfer. However, sending a validation notice before Ocwen Loan had a legal right to collect the debt on April 1, 2013, risked FDCPA liability for false or misleading representations pursuant to 15 U.S.C. § 1692e. See Ocwen Loan Motion (continued) 6 The letter did not set forth the FDCPA information: the amount of the debt or the name of the creditor to whom the debt was owed; a statement that, unless the consumer within 30 days after receipt of the notice disputed the validity of the debt, the debt would be assumed to be valid; a statement that, if the consumer notified the debt collector within the 30-day period that the debt was disputed, the debt collector would mail verification of the debt to the consumer; and a statement within that, the upon 30-day the consumer’s period, the debt written request collector would provide the consumer with the name and address of the original creditor. Yeagers received Compl. (doc. no. 1) ¶ 15. no other communication or written notice within five days after the initial letter. ¶ 16. The Id. The Yeagers claim that the above omissions in the initial letter, and Ocwen Loan’s failure to send for Judgment on the Pleadings (doc. no. 27) at 13-15. In other words, Ocwen Loan would have sent notice that it was the creditor when, in fact, it was not yet. 7 another communication within five days thereafter that contained the missing information, constitute a violation of the validation-notice requirement of the FDCPA, 15 U.S.C. § 1692g(a). Compl. (doc. no. 1) ¶ 20. On April 2, 2013, Ocwen Loan sent the Yeagers a letter that included the information missing from the initial contact necessary to validation-notice requirement. satisfy the FDCPA’s Answer (doc. no. 26) ¶ 15 & Answer Ex. A (doc. no. 26-1). C. Procedural Background In February 2014, the Yeagers filed a complaint against Ocwen Loan, asserting a putative class-action lawsuit that the company had violated the FDCPA. claim that Ocwen Loan violated their They statutory procedural right to timely receipt of the validation notice required § 1692g(a). They by the FDCPA. allege that the See 15 company U.S.C. did not provide all of the information in the validation notice within five days of the company’s initial contact on 8 March 15, 2013. They have not alleged any additional harm or material risk of harm beyond this statutory violation. provided The pleadings also reveal that Ocwen Loan the Yeagers with information sufficient to satisfy the validation-notice requirement by April 2, 2013. Thus, the Yeagers’ claim rests solely on the contention that the company failed to comply with the validation-notice requirement until 13 days after the statutory deadline. Ocwen Loan filed an answer and a motion for judgment on the pleadings pursuant to Rule 12(c) and 12(h)(2)-(h)(3) Procedure, of arguing the that Federal the Rules Yeagers lacked of Civil standing because the validation notice to which they say they were entitled was in fact sent to them by the company the day after it acquired servicing rights to their loan. On the magistrate judge’s recommendation, the court denied that motion “with leave to Ocwen Loan to renew its standing arguments at any time after the Supreme Court’s decision in [Spokeo, Inc. v. Robins, 9 135 S. Ct. 1892 (2015) (granting cert.)].” Order (doc. no. 39) at 2. After the Supreme Court released its decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), Ocwen Loan renewed its motion for judgment on the pleadings as to the issue of standing, the magistrate judge recommended denying the motion, and Ocwen Loan objected to the magistrate judge’s recommendation. II. LEGAL STANDARD Rule 12(c) permits a motion for judgment on the pleadings “[a]fter the pleadings are early enough not to delay trial.” 12(c). closed[,] but Fed. R. Civ. P. “Judgment on the pleadings is appropriate when there are no material facts in dispute, and judgment may be rendered by considering the substance of the pleadings and any judicially noticed facts.” Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367, 1370 (11th Cir. 1998) (internal citations omitted). In deciding a motion for judgment on the pleadings, the facts in the 10 complaint are accepted as true and viewed in the light most favorable to the nonmoving party. On a motion for judgment on Id. the pleadings, the court may consider documents attached to the pleadings, such as those documents attached to the complaint and answer in this case. Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002). III. DISCUSSION Article III of the Constitution limits the jurisdiction of the federal courts to litigants with standing to sue. Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). To establish standing, a “plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Id. And, “[w]here, as here, a case is at the pleading stage, the plaintiff must ‘clearly element.” ... allege facts demonstrating’ each Id. (quoting Warth v. Seldin, 422 U.S. 490, 518 (1975)). 11 This case turns on the standing, injury in fact. a plaintiff is first requirement for To establish injury in fact, required to show that he or she “suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’” 136 S. Ct. at 1548 (quoting Lujan v. Spokeo, Defenders of Wildlife, 504 U.S. 555, 560 (1992)). Ocwen Loan argues that the Yeagers have failed to satisfy the ‘concreteness’ requirement. requirement Concreteness that must particularization. concrete, the be 136 injury aspect is of an established S. must Ct. be at the injury “independent” in addition 1548.3 “‘real,’ To and to be not 3. For an injury to be “particularized,” it “must affect the plaintiff in a personal and individual way,” rather than reflect a generalized grievance. Spokeo, 136 S. Ct. at 1548 (quoting Lujan, 504 U.S. at 560 n.1). Because the Yeagers allege that Ocwen Loan failed to comply with statutory notice requirements in communications directed specifically at them concerning their individual mortgage loan, this requirement is not at issue here. 12 ‘abstract.’” Id. (quoting Webster’s Third New International Dictionary 472 (1971)). A harm may be concrete even if it is “intangible.” Spokeo, 136 S. Ct. at 1549. “[B]oth history and the judgment of Congress play important roles” in determining “whether an intangible harm constitutes injury in fact.” Id. Thus, “it is instructive to consider whether an alleged intangible harm has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in addition, English because or American Congress is courts.” well Id. “In positioned to identify intangible harms that meet minimum Article III requirements, its judgment important. Thus, status legally facto law.’” of injuries ... is Congress cognizable that were also may instructive ‘elevat[e] injuries previously to and the concrete, de inadequate in Id. (quoting Lujan, 504 U.S. at 578). Here, the Yeagers rely on “Congress’ role in identifying and 13 elevating intangible harms.” Spokeo, 136 S. Ct. at 1549. Relying on Congress’s role “does not mean that a plaintiff automatically requirement whenever a satisfies statute the injury-in-fact grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation.” Id. Thus, an allegation of “a bare procedural violation, divorced from any concrete harm,” would not necessarily “satisfy injury-in-fact requirement of Article III.” the Id. However, a “risk of real harm” associated with a “violation of a procedural right” can “in some circumstances” satisfy the requirement of concreteness. Id. In Spokeo, the Supreme Court explained: "[T]he law has long even if measure. permitted their See, recovery harms e.g., may be by certain difficult Restatement tort to (First) §§ 569 (libel), 570 (slander per se) (1938). 14 victims prove of or Torts Just as the common law permitted suit in such instances, the violation of a procedural right granted by statute can be sufficient in injury in fact. some circumstances to constitute In other words, a plaintiff in such a case need not allege any additional harm beyond the one Congress has identified.” Id. (emphasis in original). The Court then offered two examples: “Federal Election Comm’n v. Akins, 524 U.S. 11, 20–25 (1998) (confirming that a group of voters’ ‘inability to obtain information’ that Congress had decided to make public is a sufficient injury in fact to satisfy Article III),” and “Public Citizen v. Department of Justice, 491 U.S. 440, 449 (1989) (holding that two advocacy organizations’ failure to obtain information subject to disclosure under the Federal Advisory Committee Act ‘constitutes a sufficiently distinct injury to provide standing to sue’).” Because violation, the the Spokeo, 136 S. Ct. at 1549-50. Yeagers ultimate allege question merely for a this procedural court, as framed by the Spokeo Court when it remanded its case to 15 the lower court for reconsideration, is: “whether the particular procedural violation[] alleged in this case entail[s] a degree of risk concreteness requirement.” sufficient to meet the Id. at 1550.4 In answering this question, this court is guided by other language in Spokeo. In Spokeo, a consumer sued a website operator for an allegedly willful violation of the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681, et seq., for publishing inaccurate information about him. Id. at 1544. The complaint did not include any allegation that the false information was actually used to the plaintiff’s detriment. Id. The Supreme Court, after emphasizing defining the the harm, important stated role that, of with Congress the in FCRA, 4. Because the Yeagers allege a procedural violation, their reliance on Church v. Accretive Health, Inc., 654 Fed. App’x 990 (11th Cir. 2016), is misplaced. As it was undisputed that the alleged debt collector never provided information required by the FDCPA, Church concerned the alleged violation of a substantive right: consumers’ “right to receive the required disclosures in communications governed by the FDCPA.” Id. at 994, 995 n.2. 16 “Congress plainly sought to curb the dissemination of false information by adopting procedures designed to decrease that risk,” id. at 1550, and offered this important dictum in remanding the case to the lower court: any “[N]ot all inaccuracies cause harm or present material readily to risk mind difficult to incorrect zip of is an imagine code, concrete harm.” harm. An example incorrect how the without Id. zip that code. It dissemination more, could comes is of an work any With this, the Court clearly signaled that common sense should play a crucial role in determining whether there is standing to assert a violation of a procedural right. In other words, one should not be distracted by minnows when the aim of the statute is trout. Here, the Yeagers allege a notice delay of 13 days and nothing more. There is no evidence that the delay has in any way undermined the FDCPA’s goal of providing a consumer with notice of, and an opportunity challenge, a creditor’s debt information. 17 to Surely, the Spokeo common-sense principle dictates that this delay, unaccompanied by any harm or material risk of harm, does not “entail a degree of risk sufficient to meet the concreteness requirement.” Id. What the Yeagers have is a minnow; the trout are still out there. Yeagers, therefore, lawsuit. Cf. lack standing to bring The this Nicklaw v. Citimortgage, Inc., 839 F.3d 998, 1001 (11th Cir. 2016) (holding that, because there was no evidence of harm or material risk of harm, the plaintiff lacked standing to bring a suit for statutory damages based on the defendant’s belated recordation of a certificate of discharge of the plaintiff’s mortgage, which a New York statute required to be recorded within 30 days after satisfaction of the mortgage);5 Dutta v. 5. Ocwen Loan contends that Nicklaw is a spotted dog opinion, that is, that it is on all fours with their argument that the Yeagers lack standing. The court does not agree. That mere delay is insufficient to support standing to bring a claim under one statute does not mean that it is insufficient to support standing to bring a similar claim under a different statute. Whether delay is, by itself, sufficient to (continued) 18 State Farm Mut. Auto. Ins. Co., No. 3:14-cv-04292-CRB, 2016 WL 6524390, at *3 (N.D. Cal. Nov. 3, 2016) (Breyer, J.) (concluding that plaintiff lacked standing to sue insurance company under the FCRA where company’s disclosure of information to consumer three days after the statutory deadline caused no harm), appeal docketed, No. 16-17216 (9th Cir. Dec. 1, 2016).6 At oral argument on February 15, 2017, the court inquired of counsel for the Yeagers whether, if allowed to amend their complaint, they could allege any harm or material risk of harm that attended the delay. said no. Counsel Therefore, an amendment would be futile. *** support standing depends upon the aims and structure of, and the rights conferred by, the statute at issue. 6. The court need not reach whether any FDCPA validation-notice delay, no matter how long, would fail to support standing. It is merely saying that a delay as brief as the one alleged by the Yeagers, without any attendant harm or material risk of harm, does not. 19 Because the Yeagers have failed to establish they suffered Article their a concrete III FDCPA magistrate standing, suit.7 judge’s injury this Ocwen sufficient court Loan’s recommendation may to not sustain entertain objection will be to the sustained, the recommendation will be rejected, and Ocwen Loan’s renewed motion for judgment on the pleadings will be granted. An appropriate judgment will be entered. DONE, this the 22nd day of February, 2017. /s/ Myron H. Thompson UNITED STATES DISTRICT JUDGE 7. The court’s conclusion in this case does not necessarily foreclose alternative avenues for enforcement of the validation-notice requirement. Ocwen Loan argues that, in addition to those circumstances where consumers allege harm or material risk of harm sufficient to possess Article III standing, the validation-notice requirement may also be enforced by the Consumer Financial Protection Bureau (CFPB) through administrative adjudications or litigation. 12 U.S.C. §§ 5563(a) & 5564(a) (conferring enforcement authority over consumer financial laws to CFPB); 12 U.S.C. §§ 5481(12) & (14) (defining applicable laws to include FDCPA).

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