Shane Valdez v. Saxon Mortgage Services, Inc. et al

Filing 132

MINUTES (IN CHAMBERS): DEFENDANTS OCWEN LOAN SERVICING, LLC AND DEUTSCHE BANK NATIONAL TRUST COMPANYS MOTION FOR STAY AS TO CLAIMS AGAINST THEM ORDER 127 by Judge Christina A. Snyder. Because it appears that plaintiffs' action will proceed i n this Court regardless of whether the Lee settlement is ultimately approvedand because the only hardship proffered by moving defendants is the inconvenience of litigating two potentially duplicative actions - the Court DENIES defendants' request for a stay. In accordance with the foregoing, the Court DENIES Ocwen and Duetsche Bank's motion to stay the case as to claims asserted against them. (lom)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:14-cv-03595-CAS(MANx)

Title

SHANE VALDEZ V. SAXON MORTGAGE SERVICES, INC. ET AL.

Present: The Honorable

Date

‘O’

January 6, 2015

CHRISTINA A. SNYDER

Catherine Jeang
Deputy Clerk

Not Present
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiff:

Attorneys Present for Defendants:

Not Present

Not Present

I

Proceedings:

(IN CHAMBERS): DEFENDANTS OCWEN LOAN
SERVICING, LLC AND DEUTSCHE BANK NATIONAL
TRUST COMPANY’S MOTION FOR STAY AS TO CLAIMS
AGAINST THEM (filed December 15, 2014, dkt. 127)

The Court finds this motion appropriate for decision without oral argument. Fed.
R. Civ. P. 78; Local Rule 7–15. Accordingly, the hearing date of January 12, 2015 is
vacated, and the matter is hereby taken under submission.
I.

INTRODUCTION & BACKGROUND

On May 9, 2014, plaintiffs Shane and Cecilia Valdez filed this putative class action
against defendants Saxon Mortgage Services, Inc. (“Saxon”), Deutsche Bank Trust
Company Americas (“Deutsche Bank”), Ocwen Loan Servicing LLC (“Ocwen”), and
American Security Insurance Company (“ASIC.”). Dkt. 1.1 By order dated September
29, 2014, the Court granted in part and denied in part defendants’ several motions to
dismiss plaintiffs’ complaint. Dkt. 108. The Court dismissed the claims without
prejudice, granting plaintiffs leave to amend. Id. On October 14, 2014, plaintiffs
subsequently filed a first amended complaint (“FAC”) asserting the following claims: (1)
unfair business practices in violation of California’s Unfair Competition Law (“UCL”),
Cal. Bus. & Prof. Code §§ 17200, et seq., against all defendants; (2) breach of contract,
including the implied covenant of good faith and fair dealing, against Ocwen; (3) unjust
enrichment/disgorgement, against ASIC; (4) and declaratory and injunctive relief, against

1

On August 24, 2014, plaintiff voluntarily dismissed the following three
defendants that were named in the original complaint: Morgan Stanley, Ocwen Financial
Corporation, and Assurant, Inc. Dkts. 85-87. Cecilia Valdez, though not originally a
named plaintiff, has since joined her husband in this action. Dkt. 109.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

2:14-cv-03595-CAS(MANx)

January 6, 2015

Title

SHANE VALDEZ V. SAXON MORTGAGE SERVICES, INC. ET AL.

all defendants. Dkt. 109. The gravamen of plaintiffs’ complaint is that defendant lenders
and mortgage servicers—i.e., Deutsche Bank, Saxon, and Ocwen—entered into collusive
agreements with ASIC to force place inflated and unnecessary hazard insurance policies
on class members’ properties.2 Each defendant filed an answer to plaintiffs’ FAC on
October 31, 2014. Dkts. 115-118.
By order dated November 3, 2014, this Court granted plaintiffs’ unopposed
application for appointment of interim class counsel pursuant to Federal Rule of Civil
Procedure 23(g)(3). Dkt. 120. In so doing, the Court appointed Squitieri & Fearon, LLP
as interim class counsel and appointed Shepherd, Finkelman, Miller & Shah, LLP as
interim liaison counsel. Id.
On December 15, 2014, defendants Ocwen and Deutsche Bank filed a motion to
stay this action as to claims asserted against them for 90 days. Dkt. 127. Defendants
assert that a stay should be granted because Ocwen has reached a settlement in principle
in another class action involving force placed insurance policies—Lee v. Ocwen Loan
Servicing, LLC, Assurant, Inc. and American Security Insurance Co., Case No. 0:14-cv60649-JAL (“Lee”)—which is currently pending in the U.S. District Court for the
Southern District of Florida. Plaintiffs opposed this motion on December 22, 2014, dkt.
129, and defendants replied on December 29, 2014, dkt. 130. Having carefully
considered the parties’ arguments, the Court finds and concludes as follows.
II.

LEGAL STANDARD

Courts have the power to stay ongoing proceedings “incidental to the power
inherent in every court to control the disposition of the causes on its docket with
economy of time and effort for itself, for counsel, and for litigants.” Landis v. N. Am.
2

As a condition of funding borrowers’ loans, mortgagees require borrowers to
purchase and agree to maintain hazard insurance coverage on their secured property.
FAC ¶ 38. To ensure that the lender’s interest in the secured property is protected,
mortgage loan contracts typically allow the lender or third-party servicer to “force place”
insurance policies when the homeowner fails to maintain the required insurance. Id. ¶ 39.
The amounts disbursed for the procurement of such insurance becomes additional debt
secured by the mortgage. Id. These force-placed insurance (“FPI”) policies are also
referred to as lender-placed insurance (“LPI”) policies.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

2:14-cv-03595-CAS(MANx)

January 6, 2015

Title

SHANE VALDEZ V. SAXON MORTGAGE SERVICES, INC. ET AL.

Co., 299 U.S. 248, 254 (1936). The power to stay ongoing proceedings extends to stays
pending resolution of separate judicial proceedings, and does not require the issues in
such proceedings to be determinative of the action before the court. Leyva v. Certified
Grocers, 593 F.2d 857, 863–64 (9th Cir.1979). In determining whether a stay is
appropriate, the court must weigh various competing interests, including: (1) the possible
damage which may result from granting the stay; (2) the hardship to the parties if the suit
is allowed to proceed; and (3) the “orderly course of justice measured in terms of the
simplifying or complicating of issues, proof, and questions of law which could be
expected to result from a stay.” Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th
Cir.2005).
III.

DISCUSSION

Defendants argue that the instant proceedings should be stayed because the issues
in Lee are effectively the same as those here, such that a final settlement in Lee will
resolve many of the claims in this case, except insofar as individual plaintiffs opt out of
any Lee settlement. Mot. Stay at 1-3. Accordingly, defendants assert that a stay will
conserve judicial resources without causing prejudice to plaintiffs. Id. at 3-4. In
opposition, plaintiffs contend that the stay requested by defendants is functionally
indefinite, since the settlement has not been approved, thus prejudicing their ability to
obtain expedient discovery. Opp’n Stay at 11. Plaintiffs also assert that a stay would
result in piecemeal litigation of the instant action, since only two of the four defendants
seek a stay. Id. at 17. Finally, plaintiffs argue that Ocwen and Deutsche Bank’s desire
not “to litigate two cases at once” is an insufficient basis for a stay. Id. at 15-16.3

3

Plaintiffs’ opposition devotes significant attention to the argument that a stay
should be denied because the tentative Lee settlement is unfair and harms the interests of
the putative California class—interests which they are required to protect as interim class
counsel. See Opp’n Stay at 1-15. In turn, moving defendants assert that the alleged
unfairness of the proposed Lee settlement is irrelevant to the instant motion. See
generally Defs’ Reply. The Court agrees with defendants. The fairness of the Lee
settlement is not a proper subject for this Court’s consideration, and if plaintiffs’ counsel
believes that the interests of the putative California class are harmed by that settlement,
this issue should be presented to the Lee court by way of a timely objection.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

2:14-cv-03595-CAS(MANx)

January 6, 2015

Title

SHANE VALDEZ V. SAXON MORTGAGE SERVICES, INC. ET AL.

The Court concludes that a stay would be inappropriate in this instance. As
defendants must concede, the Lee settlement has not yet received final, let alone
preliminary, approval. Moreover, only Ocwen and Deutsche Bank—two of the four
named defendants in this action—have requested a stay. Plaintiffs’ claim for violation of
the UCL and request for declaratory relief, however, is common to all four defendants.
It thus appears that staying the claims against Ocwen and Deutsche Bank, while
proceeding with the claims against ASIC and Saxon, could indeed lead to piecemeal
adjudication of this action.
The Court recognizes that at least two other federal district courts have entered
stays in FPI cases where tentative class settlements involving FPI are pending in other
jurisdictions. See In re JPMorgan Chase LPI Hazard Litig., 2013 WL 3829271 (N.D.
Cal. July 23, 2013) (staying action for sixty days); Ali v. Wells Fargo Bank, N.A., 2014
WL 819385 (W.D. Okla. Mar. 3, 2014) (staying litigation pending approval of settlement
and closing the case). In both cases, the courts noted that approval of the settlements in
the parallel FPI proceedings was likely to resolve all the issues pending before them. In
re JPMorgan Chase LPI Hazard Litg., 2013 WL 3829271, at *5 (N.D. Cal. July 23, 2013)
(“[A] settlement . . . will obviate any further litigation of issues in this case.”); Ali, 2014
WL 819385, at *2 (W.D. Okla. Mar. 3, 2014) (“[I]f the settlement . . . is approved, it will
likely preclude all claims of the class Plaintiff seeks to represent in this case, and will
resolve Plaintiff's claims unless she opts out of the certified class.”). Here, in contrast,
the Lee settlement will not resolve all of plaintiffs’ claims; rather, as moving defendants
argue, the Lee settlement “if approved, will resolve claims against Ocwen [] and
Deutsche Bank [] . . . .” Mot. Stay at 1.
Moreover, it appears to the Court that the only hardship defendants assert they will
suffer is the cost of proceeding with the instant action. Although couched in terms of
judicial economy, defendants complain that plaintiffs have served them with “broad sets
of document requests and interrogatories,” rendering it likely that the parties “may soon
bring motions to compel or for protective order, or both.” Mot. Stay at 4. A party
seeking a stay, however, must rely on more than “the intrinsic inconvenience arising from
involvement in litigation.” Salinas v. City of San Jose, 2012 WL 2906052, at *2 (N.D.
Cal. July 13, 2012) (citing Lockyer , 398 F.3d at 1112) (“[B]eing required to defend a
suit, without more, does not constitute a ‘clear case of hardship or inequity’ within the
meaning of Landis.”).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

2:14-cv-03595-CAS(MANx)

January 6, 2015

Title

SHANE VALDEZ V. SAXON MORTGAGE SERVICES, INC. ET AL.

Because it appears that plaintiffs’ action will proceed in this Court regardless of
whether the Lee settlement is ultimately approved—and because the only hardship
proffered by moving defendants is the inconvenience of litigating two potentially
duplicative actions—the Court DENIES defendants’ request for a stay.
IV.

CONCLUSION

In accordance with the foregoing, the Court DENIES Ocwen and Duetsche Bank’s
motion to stay the case as to claims asserted against them.
IT IS SO ORDERED.
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Initials of Preparer

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CMJ

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