Ruvalcaba v. Ocwen Loan Servicing, LLC. et al

Filing 198

ORDER denying Ocwen Loan Servicing, LLC's 183 Motion for Leave to File Amended Cross-Claim. Cross-Defendant Equity Title Company shall file answer to the Cross-Claim by 1/15/2018. Signed by Judge Cynthia Bashant on 1/4/2018. (jah)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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CAMILA S. RUVALCABA,
Plaintiff,

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Case No. 15-cv-00744-BAS (DHB)

v.
OCWEN LOAN SERVICING, LLC,
et al.,

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ORDER DENYING MOTION
FOR LEAVE TO FILE
AMENDED CROSS-CLAIM
[ECF No. 183]

Defendants.

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Presently before the Court is a motion by Defendant/Cross-Claimant Ocwen

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Loan Servicing, LLC (“Ocwen”) for leave to file an amended cross-claim against

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Cross-Defendant Equity Title Company (“Equity”). (ECF No. 183) In compliance

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with Local Rule 15.1(b), Ocwen has filed a copy of the proposed amendment. (ECF

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No. 184.) Equity has opposed the motion (ECF No. 191) and Ocwen has replied

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(ECF No. 192). For the reasons stated herein, the Court denies Ocwen’s motion for

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leave to amend.

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I.

BACKGROUND

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Pursuant to this Court’s permission (ECF No. 98), Plaintiff Camila S.

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Ruvalcaba filed a Third Amended Complaint (“TAC”) on January 31, 2017, which

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added Equity and Dennise Gurfinkiel as defendants in the underlying case (ECF No.
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99). The Court instructed the parties to arrange for a new scheduling order with the

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magistrate judge to align the new parties and claims on the same litigation timetable

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with the pre-existing parties. (ECF No. 98) At the request of the parties, Magistrate

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Judge Louisa Porter vacated all deadlines in the pre-existing scheduling orders (ECF

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Nos. 89, 96) and directed the parties to submit a new proposed schedule by March

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3, 2017. (ECF No. 105.) On March 3, 2017, Ocwen filed its cross-claim (“Cross-

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Claim”) against People’s Escrow, Inc.; Prospect Mortgage, LLC; Equity; Gurfinkiel;

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and Plaintiff. (ECF No. 111.)

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Judge Porter subsequently held a case management conference on March 14,

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2017, at which Ocwen was represented by counsel. (ECF No. 116.) On the basis of

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the conference, Judge Porter entered a scheduling order (the “Scheduling Order”),

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which required that “any motion . . . to amend the pleadings, or to file additional

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pleadings shall be filed by May 15, 2017.” (ECF No. 117.) On March 21, 2017,

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Ocwen and Equity jointly agreed to extend Equity’s time to respond to the Cross-

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Claim from March 24, 2017 to May 29, 2017 to discuss potential settlement (ECF

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No. 121), which the Court granted (ECF No. 122). The May 15, 2017 deadline for

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amending pleadings expired with no amendment to Ocwen’s Cross-Claim, nor

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request to extend the deadline to amend. On June 1, 2017, Ocwen and Equity jointly

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requested a second extension of time for Equity to respond to Ocwen’s Cross-Claim

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in light of Equity’s pending motion to dismiss the TAC. (ECF No. 138) Pursuant

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to this Court’s order granting the request, Equity was required to respond to the

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Cross-Claim within 10 days of this Court’s ruling on Equity’s motion to dismiss

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Plaintiff’s TAC. (ECF No. 141.)

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On July 13, 2017, this Court granted Equity’s motion to dismiss, providing

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Plaintiff with leave to file a fourth amended complaint. (ECF No. 156.) Equity was

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thus required to respond to Ocwen’s Cross-Claim by Monday, July 24, 2017. (ECF

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No. 192 at 9.) Neither an answer, nor a motion to dismiss the Cross-Claim was filed

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by Equity by this deadline. On July 26, 2017, Equity and Plaintiff agreed to dismiss
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all of Plaintiff’s claims against Equity with prejudice, which this Court approved.

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(ECF Nos. 161, 162.)

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Subsequently, on August 31, 2017, all parties jointly moved to amend the

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Scheduling Order to extend certain pre-trial deadlines. (ECF No. 169.) The parties

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did not request extension of the deadline to amend pleadings. (Id.) After a hearing

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in chambers (ECF No. 176), this Court granted in part the parties’ request on

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September 27, 2017, and extended certain pre-trial deadlines based on a showing of

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good cause. (ECF No. 178.) The Court’s order did not extend any deadlines for

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motions to amend. (Id.) On November 3, 2017, Ocwen filed the present motion for

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leave to file an amended cross-claim. (ECF No. 183.) The Court now considers the

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merits of the motion.

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II.

LEGAL STANDARD

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Generally, Federal Rule of Civil Procedure 15(a) governs a motion for leave

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to amend pleadings when a party seeks to amend after twenty days from the date

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when the initial complaint was served. Under the Rule, “a party may amend [its]

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pleading only by leave of court or by written consent of the party; and leave shall be

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freely given when justice so requires.” FED. R. CIV. P. 15(a). However, where a

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motion for leave to amend is filed after entry of a Rule 16 scheduling order, the

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movant cannot “appeal to the liberal amendment procedures afforded by Rule 15[.]”

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AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946, 952 (9th Cir. 2006).

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Under such circumstances, “a motion seeking to amend pleadings is governed first

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by Rule 16(b), and only secondarily by Rule 15(a).” Jackson v. Laureate, Inc., 186

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F.R.D. 605, 607 (E.D. Cal. 1999) (citing Johnson v. Mammoth Recreations, Inc.,

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975 F.2d 604, 607–08 (9th Cir. 1992)). This is because considering a motion for

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leave to amend without regard to Rule 16(b) “would render scheduling orders

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meaningless and effectively would read Rule 16(b) and its good cause requirement

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out of the Federal Rules of Civil Procedure.” Sosa v. Airprint Systems, Inc., 133

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F.3d 1417, 1419 (11th Cir. 1998). Rule 16(b)(4) provides that “[a] schedule may be
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modified only for good cause and with the judge’s consent.” Fed. R. Civ. P.

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16(b)(4).

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AmerisourceBergen Corp., 465 F.3d at 952; Morgal v. Maricopa Cty. Bd. of

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Supervisors, 284 F.R.D. 452, 459 (D. Ariz. 2012). Whereas Rule 15(a) focuses on

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the bad faith of the party seeking to interpose an amendment and the prejudice to the

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opposing party, Rule 16(b)’s good cause standard primarily considers the diligence

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of the party seeking the amendment. Johnson, 975 F.2d at 609. “Only after a

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showing of good cause under Rule 16(b)(4) has been made will a court apply Rule

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15(a). Johnson, 975 F.2d at 609. Prejudice to the non-moving party, while not

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required under Rule 16(b)’s good cause assessment, can serve as an additional

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reason to deny a motion for leave to amend. See Coleman v. Quaker Oats Co., 232

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F.3d 1271, 1294 (9th Cir. 2000).

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III.

This standard is “more stringent” than that of Rule 15(a).

See

DISCUSSION

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Both Ocwen and Equity dispute at length whether Ocwen has sufficiently met

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the Rule 15(a) standard regarding a motion for leave to amend. The parties do not

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address the threshold issue which this Court must consider in deciding whether to

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grant or deny Ocwen’s motion: whether Ocwen has shown good cause under Rule

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16(b) to file an amended pleading after the May 15, 2017 deadline set by the existing

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Scheduling Order (ECF No. 117). The Court finds that Ocwen has failed to satisfy

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this threshold.

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Under Rule 16(b)’s good cause standard, the moving party is generally
required to show:

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(1) that the movant was diligent in assisting the Court in creating

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a workable Rule 16 Order; (2) that the movant’s noncompliance

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with a Rule 16 deadline occurred or will occur, notwithstanding

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the movant’s diligent efforts to comply because of the

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development of matters which could not have been reasonably

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foreseen or anticipated at the time of the Rule 16 scheduling
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conference; and (3) that the movant was diligent in seeking

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amendment of the Rule 16 Order once it became apparent that the

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movant could not comply with the Order.

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Jackson, 186 F.R.D. at 608. Ocwen has failed to show the diligence necessary to

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amend the Scheduling Order to permit its instant motion. Although Ocwen fails to

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expressly address good cause, it asserts that all of the events which gave rise to the

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need to amend its Cross-Claim occurred after the May 15, 2017 deadline to file an

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amended pleading. (ECF No. 183-1 at 9.) The Court construes this as Ocwen’s

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basis for good cause to support modifying the Scheduling Order to permit the

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amendment, and is not persuaded. Ocwen first points to Equity’s “unilateral[]

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transfer[]” of short payoff funds to Ocwen on July 6, 2017, after the deadline to

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amend as an event necessitating the current motion. (Id.) This alleged transfer,

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however, forms the basis of only two allegations out of the thirty new allegations

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contained in the proposed amended cross-claim. (ECF No. 184, Ex. 2 ¶¶58–59.) A

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delay of nearly three months to add these allegations does not support a finding of

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diligence necessary to amend the scheduling order.

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Ocwen further states that it met and conferred with Equity regarding Equity’s

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“planned MTD,” with Ocwen agreeing that it would prophylactically file the

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proposed amended Cross-Claim rather than having Equity file a motion to dismiss

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as a means of conserving judicial resources. (ECF No. 183-1 at 9.) Ocwen indicates

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that this meet and conferral is the primary reason why it seeks leave to amend. (Id.

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at 1, 9.) While the Court appreciates Ocwen’s concern with conserving judicial

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resources, the Court is not persuaded by Ocwen’s assertion that the issues discussed

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at the meet and conferral necessitated amending the Cross-Claim long after the May

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15, 2017 deadline. Pursuant to a second extension granted by the Court at the

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parties’ joint request, Equity’s deadline to answer the Cross-Claim or file a motion

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to dismiss expired on July 24, 2017. After Equity failed to meet that deadline,

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Ocwen had the right to file a motion for entry of default against Equity, see FED. R.
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CIV. P. 55(a), and, indeed, Ocwen indicates that it notified Equity on September 6,

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2017 of its intent to file such a motion. (ECF No. 183-2 ¶3.) Notwithstanding this,

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Ocwen did not file such a motion. Instead, Ocwen states that it met and conferred

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with Equity throughout August and early September 2017 regarding Equity’s

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apparent intent to file a motion to dismiss the Cross-Claim—a motion which Equity

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could not in fact file without a showing of good cause. See FED. R. CIV. P. 6(b)

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(showing of good cause required to extend deadlines set by Federal Rules of Civil

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Procedure). At no point since the expiration of the time period for Equity to respond

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to the Cross-Claim has Equity sought to file a motion to dismiss Ocwen’s cross-

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claim. Under these circumstances and in the absence of any responsive pleading by

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Equity to the Cross-Claim, the Court does not find persuasive Ocwen’s assertion that

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the meet and conferral necessitated its motion for leave to amend the Cross-Claim.

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The record otherwise shows that Ocwen has not been diligent in seeking leave

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to amend its Cross-Claim. The proposed amended Cross-Claim contains some thirty

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new factual allegations, the majority of which pertain to events that occurred in 2013

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and 2014. (See generally ECF No. 184 Ex. 2.) Ocwen states that most of the new

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factual allegations came to light during Plaintiff’s deposition on May 10, 2017, May

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11, 2017, and May 31, 2017, and Gurfinkiel’s deposition on June 1, 2017. (ECF No.

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183-1 at 9.) Even assuming that Ocwen did not learn the facts which form the basis

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of the new factual allegations until it obtained this discovery, Ocwen filed its motion

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five months after receiving this discovery. If Ocwen had moved earlier to file an

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amended cross-claim, the Court might be more sympathetic to Ocwen’s argument

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that it was not possible to amend the Cross-Claim by May 15, 2017. See, e.g.,

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Johnson, 975 F.2d at 608 (A court should modify a pretrial deadline if the deadline

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“cannot reasonably be met despite the diligence of the party seeking the extension.”).

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However, Ocwen itself represents that “we delayed filing the motion to amend on

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the Equity Title issue. . .” (ECF No. 183-2 ¶11.) This delay in seeking to amend the

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Cross-Claim long after taking the discovery on which Ocwen states it relied to
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formulate the proposed amendments cannot support a finding of diligence.

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Additionally, although all parties moved to extend certain deadlines in the

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Rule 16 Scheduling Order on August 31, 2017, Ocwen made no request to extend

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the deadline to amend pleadings. (ECF No. 169.) This was despite Ocwen’s

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assertion to the other parties in this case as early as August 11, 2017 that it would

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likely seek to amend its Cross-Claim. (ECF No. 183-2 ¶10.) This Court’s in-person

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hearing on the parties’ proposed modifications to the Scheduling Order provided an

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additional opportunity for Ocwen to notify the Court of any need for potential

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amendments to the Cross-Claim. The failure of Ocwen to raise to the Court the need

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to extend the Scheduling Order’s deadline for amended pleadings at this prior

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juncture, which occurred after Ocwen had the discovery underlying the proposed

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amendments, cannot support a finding that Ocwen was diligent in enabling this

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Court to create a workable Rule 16 order. See Jackson, 186 F.R.D. at 608; cf.

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Benchmark Young Adult Sch., Inc. v. Launchworks Life Servs., LLC, No. 12-cv-

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02953-BAS (BGS), 2014 WL 3014720, at *3 (S.D. Cal. July 3, 2014) (finding party

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was diligent in assisting court in creating a workable scheduling order by seeking to

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modify the order because of delays in document production).

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Lastly, the Court finds that granting Ocwen’s motion for leave to amend the

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Cross-Claim would be prejudicial. “The court enters scheduling orders to control

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its docket and parties who cavalierly disregard the deadlines established by the court

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delay proceedings, and congest the docket . . . disruption of the court’s discovery

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plan and order deadlines is not harmless.” Chem. Bank v. Star Dev. & Holding, LLC,

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No. 2:16-cv-01523-MMD-PAL, 2017 U.S. Dist. LEXIS 191252, at *12 (D. Nev.

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Nov. 17, 2017). Although discovery closed on December 31, 2017 (ECF No. 178

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¶4), granting Ocwen’s motion would require reopening discovery to enable Equity

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to address the new allegations, inevitably resulting in further delay of a case that has

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been pending for over two years. Such delay is clearly prejudicial not only to Equity

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but to all other parties, including the Plaintiff, because the Scheduling Order applies
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to all of them. This “supplies an additional reason for denying the motion.”

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Coleman, 232 F.3d at 1295.

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IV.

CONCLUSION & ORDER

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For the foregoing reasons, the Court DENIES Ocwen’s motion for leave to

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amend the Cross-Claim. (ECF No. 183.) In light of Equity’s failure to timely

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respond to Ocwen’s Cross-Claim (ECF No. 111) or otherwise seek an extension of

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the time to do so, it is FURTHER ORDERED that Equity shall file an answer to

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the Cross-Claim no later than January 15, 2018.

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IT IS SO ORDERED.

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DATED: January 4, 2018

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