Beale et al v. Ocwen Loan Servicing LLC
MEMORANDUM OF OPINION AND ORDER re 4 MOTION to Dismiss filed by Ocwen Loan Servicing LLC. Signed by Judge L Scott Coogler on 6/17/2015. (PSM)
2015 Jun-17 AM 09:41
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
ELBERT L. BEALE, et al.,
OCWEN LOAN SERVICING,
MEMORANDUM OF OPINION AND ORDER
Before the Court is Defendant Ocwen Loan Servicing, LLC’s (“Ocwen”)
motion to dismiss. (Doc. 4.) The motion has been fully briefed and is ripe for review.
As further discussed below, the motion to dismiss is due to be granted in part and
denied in part.
Plaintiffs Elbert and Patricia Beale (“the Beales”) executed a mortgage on their
home, which Ocwen then began servicing on or around June of 2013. The Beale’s were
current on their loan when Ocwen began servicing it. However, after they began
The facts in this opinion are gleaned from the Plaintiff’s complaint, with all statements of
fact therein accepted as true. See Grossman v. Nationsbank, N.A., 225 F.3d 1226, 1231 (11th Cir.
2000). These may not be the actual facts.
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servicing the loan, Ocwen failed to properly and timely credit payments to the Beales’
account, miscalculated the amounts due on the account, and incorrectly told the
Beale’s that they were behind on their payments.
On December 5, 2013, the Beales sent a payment by check to Ocwen but Ocwen
informed the Beales that the payment had not been received. An Ocwen representative
told them to cancel the check and pay over the phone instead, or the payment would
be considered late and the Beales would be charged an appropriate fee. The Beales
allowed Ocwen to debit their checking account directly and then canceled the check.
Regardless, Ocwen later charged a check cancellation fee, despite telling the Beales
that cancelling the check payment would avoid such a fee.
On November 14, 2014, the Beales sent Ocwen a “Qualified Written Request”
under 12 U.S.C. § 2605(e) of the Real Estate Settlement Procedures Act (“RESPA”),
asking Ocwen to correct “certain errors.” (Doc. 1-1 at 10.) Ocwen responded to the
request on January 5, 2015, but did not make any corrections to the Beales’ account.
In addition, Ocwen continued to represent to the Beales that they were behind on their
payments, sent multiple notices of default to the Beales, threatened to foreclose on
their home, and improperly charged the Beales various fees and penalties.
Standard of Review
Rule 8(a) of the Federal Rules of Civil Procedure requires a pleading to contain
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“a short and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8(a)(2). “Rule 8 marks a notable and generous departure from
the hyper-technical, code-pleading regime of a prior era, but it does not unlock the
doors of discovery for a plaintiff armed with nothing more than conclusions.” Ashcroft
v. Iqbal, 556 U.S. 662, 678-679 (2009). Instead, “[t]o survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to state a claim for
relief that is plausible on its face.” Id. at 678 (internal quotations omitted). This is a
notable departure from the “no set of facts” standard; the Supreme Court has stated
that standard is “best forgotten as an incomplete, negative gloss on an accepted
pleading standard: once a claim has been stated adequately, it may be supported by
showing any set of facts consistent with the allegations in the complaint.” Bell Atl.
Corp v. Twombly, 550 U.S. 544, 563 (2007).
Iqbal establishes a two-step process for evaluating a complaint. First, the Court
must “begin by identifying pleadings that, because they are no more than conclusions,
are not entitled to the assumption of truth.” Id. at 679. A complaint is not sufficient
“if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id. at 678
(quoting Twombly, 550 U.S. at 555 (2007)). Second, “[w]hen there are well-pleaded
factual allegations, a court should assume their veracity and then determine whether
they plausibly give rise to an entitlement to relief.” Id. Factual allegations in a
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complaint need not be detailed, but they “must be enough to raise a right to relief
above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).2
The Beale’s complaint consists of seven counts. Count I alleges a breach of
contract against Ocwen. Count II alleges a RESPA violation by Ocwen. Count III
alleges negligence by Ocwen in the handling of the Beales’ loan, while Count IV alleges
wantonness. Count V alleges negligent and/or wanton hiring, training, supervision,
and/or instruction by Ocwen. Count VI alleges fraudulent misrepresentation, while
Count VII alleges defamation. Ocwen has moved to dismiss all of these counts. Each
will be addressed in turn.
Count I - Breach of Contract
The elements of a breach of contract claim under Alabama law are “(1) a valid
contract binding the parties; (2) the plaintiffs’ performance under the contract; (3) the
defendant’s nonperformance; and (4) resulting damages.” Reynolds Metals Co. v. Hill,
825 So.2d 100, 105 (Ala. 2002).
Count I of the Beales’ complaint simply states that “a contract existed between
the Beales and the Defendants,” Ocwen breached the contract, and that the Beales
The Court rejects the Beale’s argument that, because this case was removed from state
court, this Court should apply the Alabama pleading standard rather than the Federal pleading
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were damaged as a result of the breach. The complaint fails to provide any facts
detailing what contract existed between the Beales and the Defendants, and in what
way Ocwen did not perform under the contract. Therefore, the complaint fails to state
a valid claim for breach of contract.
Count II - RESPA claim
RESPA requires, in part, that a loan servicer respond to the “qualified written
request” of a borrower. 12 U.S.C. § 2605(e)(1). In response to a qualified written
request stating the borrowers belief that his account is in error, the loan servicer must
either “make appropriate corrections in the account of the borrower” or “provide the
borrower with a written explanation or clarification” that provides “to the extent
applicable, a statement of the reasons for which the servicer believes the account of the
borrower is correct as determined by the servicer” and contact information for the
borrower to obtain further support. 12 U.S.C. § 2605(e)(2) (emphasis added). See also
Bates v. JPMorgan Chase Bank, NA, 768 F.3d 1126, 1134-35 (11th Cir. 2014) (response
that provides an explanation to borrower for why servicer believes the account is
correct is sufficient to satisfy RESPA, even if the explanation is confusing or
unsatisfactory to the borrower).
The Beales’ complaint states that they made a qualified written request to
Ocwen demanding that it correct certain errors in their account, and that Ocwen
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responded to that request on January 5, 2015. The complaint does not state that the
response failed to provide an explanation of why Ocwen believed that the Beales’
account was correct; rather, it alleges that Ocwen violated RESPA by failing to correct
the alleged errors. However, the requirements of RESPA can be satisfied by either
correcting any errors or providing an explanation of why the servicer believes the
account is correct. Because the complaint fails to allege a deficiency in Ocwen’s
response, this count of the complaint is due to be dismissed.
Counts III and IV - Negligence and Wantonness
The Beales’ allege that Ocwen both negligently and wantonly serviced their
mortgage. As this Court has stated in the past, Alabama law generally does not
recognize a cause of action for negligent or wanton mortgage servicing. Prickett v. BAC
Home Loans, 946 F.Supp.2d 1236, 1244 (N.D. Ala. 2013); see also Blake v. Bank of Am.,
N.A., 845 F. Supp.2d 1206, 1210-11 (M.D.Ala. 2012); McClung v. Mortage Elec.
Registration Sys., Inc., 2:11-CV-03621-RDP, 2012 WL 1642209, at *7-8 (N.D.Ala. May
7, 2012); Jackson v. Countrywide Home Loans, Inc., 2:11-CV-327-MEF, 2012 WL
777180, at *6-7 (M.D.Ala. Mar. 7,2012). As explained in Blake, “Alabama does not
recognize a tort-like cause of action for the breach of a duty created by contract”
because “‘a negligent failure to perform a contract . . . is but a breach of the
contract.’” 845 F.Supp.2d at 1210 (quoting Vines v. Crescent Transit Co., 85 So.2d 436,
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440 (1956)). “A plaintiff can only sue in tort when a defendant breaches the duty of
reasonable care—the duty one owes to another in his day-to-day affairs—when such
a breach causes personal injury or property damage.” Id. (citing Vines, 85 So.2d at
440). While misfeasance in the performance of a contract may give rise to an action in
tort if it involves a breach of the duty owed to the general public, a mortgage servicer’s
obligations arise from the mortgage and promissory note, not the duty of reasonable
care generally owed to members of the public. Id. Therefore, a borrower cannot allege
a tort claim based on negligent or wanton servicing of the mortgage. Id.
The Beales contend that this situation is different from the cases cited above
because they are alleging that they suffered mental anguish, rather than simply
economic injuries. In support, the Beales cite to the Southern District case of Givens
v. Saxon Mortg. Serv., Inc., 2014 WL 2452891, at *14 (S.D. Ala. June 2, 2014), which
states that “this line of cases leaves open the possibility of a cognizable claim for
negligent/wanton mortgage servicing in cases involving personal injury or property
damage.” See also Blake, 845 F.Supp.2d at 1210 (“Under Alabama law, an agent, like
[the mortgage servicer], could only incur tort liability while servicing a mortgage by
causing personal injury or property damage,” not purely economic loss). However, as
the case cited by the Beales went on to recognize, allegations of mental anguish cannot
save the negligence claim “by bringing ‘personal injury’ damages into play,” because
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Alabama law forbids mental anguish damages for negligence “except when the plaintiff
has suffered a physical injury as a result of the negligent conduct or was placed in an
immediate risk of physical injury by that conduct.” Givens, 2014 WL 2452891, at *14
(citing Brown v First Fed. Bank, 95 So.2d 803, 818 (Ala.Civ.App. 2012); see also Wallace
v. SunTrust Mortage, Inc., 974 F.Supp.2d 1358, 1370 (S.D.Ala. 2013). Even if the Beales
are correct that Ocwen would be liable for a negligence claim that resulted in personal
injury, their claims of mental anguish are insufficient to qualify as a “personal injury.”
However, while damages for mental anguish are not permitted in the negligence
context, the Alabama Court of Civil Appeals has stated that such damages are
recoverable in claims for wantonness. Brown, 95 So.3d at 818. The Alabama Supreme
Court has defined wantonness as “the conscious doing of some act or the omission of
some duty, while knowing of the existing conditions and being conscious that, from
doing or omitting to do an act, injury will likely or probably result.” Stone v. Southland
Nat’l Ins. Corp., 589 So.2d 1289, 1291 (Ala. 1991). The Beales’ complaint fails to
provide sufficient facts to show that Ocwen acted consciously or with conscious
disregard for the consequences of improperly servicing the loan. Therefore, the Beales
have also failed to state a sufficient claim for wantonness, and both the Beales’ claims
for negligence and wantonness are due to be dismissed.
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Count V - Negligent and Wanton Hiring, Training, Supervision, and
The Alabama Supreme Court has described the elements of a negligent
supervision claim as follows:
In the master and servant relationship, the master is held
responsible for his servant’s incompetency when notice or
knowledge, either actual or presumed, of such unfitness has
been brought to him. Liability depends upon it being
established by affirmative proof that such incompetency
was actually known by the master or that, had he exercised
due and proper diligence, he would have learned that which
would charge him in the law with such knowledge.
Voyager Ins. Co. v. Whitson, 867 So.2d 1065, 1073 (Ala. 2003) (quoting Lane v. Cent.
Bank of Ala., N.A., 425 So.2d 1098, 1100 (Ala. 1983)).
In their complaint, the Beales wholly rely on the conclusory allegation that
Ocwen was “negligent and/or wanton in their hiring, training, supervision, and/or
instruction of” the individuals who serviced the Beales’ loan, handled the Beales’
payments, and handled the Beales’ account in general. (Doc. 1-1 at 11.) No facts in the
complaint point to any knowledge held by Ocwen of the improper acts of its employees
in servicing the loan or handling the Beales account or payments, or explain why
Ocwen should have had knowledge. The mere conclusory statement that Ocwen acted
negligently and wantonly is insufficient to state a claim for negligent and wanton
supervision, and therefore Ocwen’s motion is due to be granted as to Count V.
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Count VI - Fraudulent Misrepresentation
Count six of the Beales’ complaint asserts a claim for fraudulent
misrepresentation. Ocwen asserts that this claim is due to be dismissed because it fails
to meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b).
When “alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). This requirement
is satisfied when a complaint sets forth:
(1) precisely what statements were made in what documents
or oral representations or what omissions were made, and
(2) the time and place of each such statement and the
person responsible for making (or, in the case of omissions,
not making) same, and (3) the consent of such statements
and the manner in which they misled the plaintiff, and (4)
what the defendants obtained as a consequence of the fraud.
Ziemba v. Cascade Int’l Inc., 256 F.3d 1194, 1202 (11th Cir. 2001). However, the
Eleventh Circuit has emphasized that the application of Rule 9(b) “must not abrogate
the concept of notice pleading.” U.S. ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d
1301, 1310 (11th Cir. 2002).
In the complaint, the Beales assert that Ocwen (1) “misrepresented the fees,
finance charges, and penalties which were, were to be, or could be assessed and
collected from the Beales,” (2) “misrepresented the status of the Beales’ loan,
including telling the Beales that payments had not been received when, in fact, they
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had,” and (3) “misrepresented that the Beales would avoid late charges and other
penalties if they cancelled their December 2013 check payment and instead made their
December 2013 payment by phone.” (Doc. 1-1 at 12.)
The complaint also asserts that the Beales sent Ocwen a payment “on or about
December 5, 2013.” (Doc. 1-1 at 8.) At some point in time Mrs. Beale “contacted
Ocwen to confirm that they had received” the payment, and were informed they had
not. (Id.) “Ocwen told Mrs. Beale to cancel the check payment and to pay over the
phone, otherwise her payment would be considered late and the Beales would be
charged a late fee.” (Id.) Mrs. Beale agreed to pay over the phone and to cancel the
December 5 check, but Ocwen ultimately charged the Beales a fee for cancelling the
check, “despite Ocwen’s representation that cancelling the check payment would
avoid a fee.” (Doc. 1-1 at 9.)
While the first two allegations of general misrepresentations concerning fees and
penalties and concerning the status of the Beales account may not meet the heightened
standard of Rule 9(b), the allegations concerning the December 5, 2013 payment are
sufficient. The complaint sets out the statement that was made (that the Beales would
avoid “late charges and other penalties” if they cancelled the check and made the
payment by phone instead), how it was made (orally over the phone), the person who
made the statement (an “Ocwen representative”), the way in which the Beales were
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mislead by the statement, and what Ocwen thereby obtained (an additional fee). While
the complaint fails to state the date on which the statement was made, it does say that
the statement was made during the same phone call as when the Beales paid their
December 2013 bill. This sets out with sufficient particularity facts supporting the
alleged misrepresentations concerning the December 2013 payment, and therefore
Ocwen’s motion is due to be denied as to Count VI of the Beales’ complaint.
Count VII - Defamation
To establish a prima facie case of defamation in Alabama:
. . . the plaintiff must show  that the defendant was at
least negligent,  in publishing  a false and defamatory
statement to another  concerning the plaintiff,  which
is either actionable without having to prove special harm
(actionable per se) or actionable upon allegations and proof
of special harm (actionable per quod).
Delta Health Group, Inc. v. Stafford, 887 So.2d 887, 895 (Ala. 2004). Once again, the
Beales’ complaint alleges in a conclusory fashion that Ocwen “intentionally,
recklessly, wantonly, maliciously, and/or negligently caused negative and untruthful
information regarding Beales’ credit or financial condition to be published to third
parties.” (Doc. 1-1 at 13.) The complaint provides insufficient factual allegations
concerning how this allegedly negative or untruthful information was published or to
whom it was published. Thus Ocwens’ motion is due to be granted as to the Beales’
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Claims Against Fictitious Defendants
The Beales’ also assert claims against various fictitious defendants in many of
these counts. Fictitious party pleading is not permitted in federal court, outside of the
narrow exception where “the plaintiff’s description of the defendant is so specific as
to be at the very worst, surplusage.” Richardson v. Johnson, 598 F.3d 734, 738 (11th Cir.
2010). That is not the case here. Therefore, all claims against fictitious defendants are
The Court intends to GRANT Ocwen’s motion to dismiss as to Counts I, II, III,
IV, V, and VII, and intends to DENY the motion as to Count VI for fraudulent
misrepresentation. However, the Beales’ have requested that, in the event this Court
determined that they had not stated sufficient claims under the federal pleading
standards, they be given the opportunity to amend their complaint to conform to that
standard. Therefore, the Court will suspend that ruling for fourteen (14) days from the
entry of this Order, to allow the Beales’ to file an amended complaint. If the Beales’
file an amended complaint within that time, Ocwen’s motion to dismiss (Doc. 4) will
be mooted; otherwise the Court will rule on the motion in accordance with this Order.
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Done this 17th day of June 2015.
L. SCOTT COOGLER
UNITED STATES DISTRICT JUDGE
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