Ruvalcaba v. Ocwen Loan Servicing, LLC. et al

Filing 201

ORDER granting 196 Joint Motion for Determination of Good Faith Settlement. All Cross-Claims by Ocwen Loan Servicing LCC (Ocwen) against the Settling Defendants are dismissed with prejudice. Ocwen's sole remaining cross-claims in this action a re against Plaintiff and Equity Title Company (Equity). Court bars any present or potential joint tortfeasor from bringing any future claims against the Settling Defendants for equitable contribution or partial or comparative indemnity based on compa rative negligence or comparative fault in connection with the conduct at issue in this litigation. The Settling Defendants and Plaintiff are ordered to carry out the terms of the Settlement. Settling Defendants shall pay the Plaintiff the agreed amount within 30 days of this Order. Plaintiff and Settling Defendants shall thereafter move to dismiss with prejudice their respective claims and cross-claims. Signed by Judge Cynthia Bashant on 1/26/2018. (jah)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CAMILA S. RUVALCABA, Plaintiff, 12 13 14 15 16 Case No. 15-cv-0744-BAS-DHB v. OCWEN LOAN SERVICING, LLC, et al., Defendants ORDER GRANTING JOINT MOTION FOR DETERMINATION OF GOOD FAITH SETTLEMENT PURSUANT TO CAL. CIV. CODE §877.6(a)(2) [ECF No. 196] 17 18 AND RELATED CROSS-CLAIMS 19 Defendants Prospect Mortgage, LLC (“Prospect”), People’s Escrow, Inc. 20 (“People’s”), and Dennise Gurfinkiel (“Gurfinkiel) (collectively “Settling 21 Defendants”) now move this Court to approve the settlement (the “Settlement”) they 22 have reached with Plaintiff Camila S. Ruvalcaba as a settlement made in good faith 23 pursuant to California Code of Civil Procedure Sections 877, et seq. (ECF No.196.) 24 They further seek (1) dismissal with prejudice all cross-claims by Ocwen against 25 them and (2) dismissal with prejudice of Plaintiff’s claim against them and their 26 cross-claims against each other, as set forth in the Settlement. (Id.) In support of the 27 motion, the Settling Defendants have filed a declaration, which includes a copy of 28 the Settlement Agreement. (ECF Nos. 197 (“Hilbert Decl.”); 197-1, Ex. 1 –1– 15cv744 1 (Settlement Agreement).) No opposition to the Settling Defendants’ motion has been 2 filed. For the reasons set forth herein, the Court GRANTS the motion. 3 I. BACKGROUND The Handling of Plaintiff’s Loan and Refinancing1 4 A. 5 In December 2005, Plaintiff Ruvalcaba purchased a home located at 3815 6 Hollyhock Lane, National City, CA 91950 (the “Property”), with a mortgage from 7 American Home Mortgage secured by a deed of trust (the “Mortgage”). (ECF No. 8 99 ¶35.) The Mortgage was transferred to Ocwen in March 2013 and became the 9 Ocwen Loan. (Id. ¶39.) To lower the amount of her mortgage, Plaintiff sought to 10 refinance the Mortgage. (Id. ¶42.) 11 Around August 2013, after communications with Gurfinkiel, Plaintiff received 12 a loan from Prospect (“Prospect Loan”) in the amount of $292,500.00 for her 13 Mortgage refinancing. People’s handled the refinance escrow and Equity handled 14 the sub-escrow function. After escrow on the Prospect Loan closed on November 15 27, 2013, the proceeds from the Prospect Loan were tended to Ocwen as payment on 16 the Ocwen Loan. Ocwen alleged that the payment was short of a full payoff by about 17 $4,000 and refused to apply the Prospect Loan funds to the balance due on the Ocwen 18 Loan. Plaintiff alleges that the shortfall was caused by the actions of Gurfinkiel, who 19 was an employee of Prospect at the time. While Ocwen refused to apply the proceeds 20 from the Prospect Loan, Ocwen held the $284,377.74 payment in a suspense account 21 for seven months before returning the funds to Equity. Ocwen also permitted interest 22 and late fees to continue to accrue on the Ocwen Loan and allegedly made a series of 23 adverse credit reports to credit agencies about the status of the Ocwen Loan. The 24 Settling Defendants assert that they had no role in the nature, timing, or content of 25 the alleged adverse credit reports. 26 In a payoff quote (the “Payoff Quote”) dated May 18, 2017 and valid through 27 28 1 These facts are taken from the operative pleading, the Third Amended Complaint (ECF No. 99) and the Settling Defendants’ motion (ECF No. 196). –2– 15cv744 1 June 16, 2017, Ocwen claimed that $366,417.03 was due on the Ocwen Loan, of 2 which $285,465.06 was principal. (ECF No. 197-1, Ex. 2.) In July 2017, Equity 3 once more tendered the Prospect Loan proceeds to Ocwen. On November 7, 2017, 4 the parties filed a stipulation in which Ocwen agreed to apply the Prospect Loan 5 proceeds to the principal amount due on the Ocwen Loan. (ECF No. 185.) 6 B. The Settlement 7 On November 13, 2017, Plaintiff and the Settling Defendants memorialized 8 the Settlement that is the subject of this motion. (Settlement ¶4.) The Settlement was 9 reached after multiple meet and conferrals between counsel for the Settling 10 Defendants and Plaintiff’s counsel, and participation in mediation by all parties in 11 this litigation. (Hilbert Decl. ¶¶5–6.) 12 Pursuant to the Settlement, the Settling Defendants agree to pay Plaintiff a total 13 of $80,000 in exchange for Plaintiff’s dismissal with prejudice of her claims against 14 them. (Settlement ¶¶1–2.) The settlement amount is derived in part from the alleged 15 interest and late fees due on the full amount of the Ocwen Loan as set forth in the 16 Payoff Quote. (Hilbert Decl. ¶7; see also ECF No. 197-1, Ex. 2 at 1.) The combined 17 amount of interest and late fees in the Payoff Quote was $65,771.83, with 18 miscellaneous charges bringing the total non-principal amount due to $80,951.97. 19 (ECF No. 197-1, Ex. 2 at 1.) In addition to the settlement amount, Plaintiff agrees to 20 indemnify Prospect, People’s and Gurfinkiel against any claims for any amounts still 21 due to Ocwen at the conclusion of this action. (Id. ¶5.) Prospect and People each 22 agrees to dismiss with prejudice their respective cross-claims against each other. (Id. 23 ¶¶4–5.) Finally, the Settlement is contingent upon a determination by the Court that 24 it was made in good faith and, based on such a finding, dismissal with prejudice of 25 Ocwen’s cross-claims against the Settling Defendants. (Id. ¶8.) No party to the 26 Settlement admits to liability. (Id. ¶17.) 27 C. Procedural History 28 Plaintiff Ruvalcaba initially commenced this action on April 6, 2015 against, –3– 15cv744 1 inter alia, Defendant Ocwen Loan Servicing, LLC (“Ocwen”), alleging violations of 2 federal and state statutory law and negligence in connection with the handling of her 3 home loan. (ECF No. 1.) In the time after Plaintiff filed the initial complaint, both 4 People’s and Prospect filed cross-claims against Ocwen for equitable indemnity, 5 contribution, apportionment of fault, and declaratory relief. (ECF Nos. 35, 45-1.) 6 Plaintiff subsequently added Defendants Prospect and People’s to the action in her 7 Second Amended Complaint. (ECF No. 64.) 8 In the Third Amended Complaint (“TAC”), Plaintiff’s operative pleadings, 9 Plaintiff added Equity Title Company (“Equity”) and Dennise Gurfinkiel 10 (“Gurfinkiel) as defendants. (ECF No. 99.) The TAC once more asserts causes of 11 action against Ocwen for violations of the Fair Credit Reporting Act, 15 U.S.C. 12 §§1681, et seq.; the California Consumer Credit Reporting Agencies Act, CAL. CIV. 13 CODE §1785.1, et seq.; and the Rosenthal Fair Debt Collection Practices Act, CAL. 14 CIV. CODE §§1788, et seq. (Id.) The TAC alleges a cause of action for negligent 15 hiring, supervision, and/or retention of employee against Prospect only, and a 16 negligence claim against all Defendants. (Id.) 17 After Plaintiff filed the TAC, Ocwen filed its cross-claim for equitable 18 indemnity, contribution, and equitable apportionment against Plaintiff and 19 Defendants Equity, Prospect, People’s and Gurfinkiel. (ECF No. 111.) On July 13, 20 2017, this Court granted Equity’s motion to dismiss Plaintiff’s claims against it in 21 the TAC, providing Plaintiff with leave to file a fourth amended complaint. (ECF 22 No. 156.) On July 26, 2017, Equity and Plaintiff agreed to dismiss all of Plaintiff’s 23 claims against Equity with prejudice, which this Court approved. (ECF Nos. 161, 24 162.) 25 The Court now turns to the Settling Defendants’ motion for determination of 26 good faith settlement pursuant to California Code of Civil Procedure §§ 877, et seq. 27 II. 28 LEGAL STANDARD “When a district court sits in diversity, or hears state law claims based on –4– 15cv744 1 supplemental jurisdiction, the court applies state substantive law to the state law 2 claims.” Mason & Dixon Intermodal, Inc. v. Lapmaster Int’l LLC, 632 F.3d 1056, 3 1060 (9th Cir. 2011). California Code of Civil Procedure sections 877 and 877.6(c) 4 constitute substantive law. Id.; see also Fed. Sav. & Loan Ins. Corp. v. Butler, 904 5 F.2d 505, 511 n. 6 (9th Cir. 1990). 6 Section 877.6(a)(2) provides that “a settling party may give notice of 7 settlement to all parties and to the court, together with an application for 8 determination of good faith settlement,” setting forth the settling parties, basis, terms, 9 and amount of the settlement, and a proposed order. CAL. CIV. PROC. CODE 10 §877.6(a)(2). “Within 25 days of the mailing of the notice, application, and proposed 11 order, or within 20 days of personal service, a nonsettling party may file a notice of 12 motion to contest the good faith of the settlement.” Id. “If none of the nonsettling 13 parties files a motion within 25 days of mailing . . . , or within 20 days of personal 14 service, the court may approve the settlement.” Id. 15 The court is given broad discretion in deciding whether a settlement is in good 16 faith for purposes of section 877.6. Cahill v. San Diego Gas & Elec. Co., 124 Cal. 17 Rptr. 3d 78, 94 (Cal. Ct. App. 2011). The court’s exercise of discretion to determine 18 good faith “should be exercised in view of the equitable goals of the statute, in 19 conformity with the spirit of the law and in a manner that services the interests of 20 justice.” Long Beach Mem’l Med. Ctr. v. Super. Ct., 91 Cal. Rptr. 3d 494, 500 (Cal. 21 Ct. App. 2009). To determine whether a settlement was entered into in good faith, 22 courts consider the Tech-Bilt factors, which include: (1) a rough approximation of 23 plaintiffs’ total recovery and the settlor’s proportionate liability; (2) the amount paid 24 in settlement; (3) a recognition that a settlor should pay less in settlement than he 25 would if he were found liable after a trial; (4) the allocation of settlement proceeds 26 among plaintiffs; (5) the settling party’s financial condition and the availability of 27 insurance; and (6) evidence of any collusion, fraud or tortious fraud between the seller 28 and the plaintiff aimed at requiring the non-settling parties to pay more than their fair –5– 15cv744 1 share. Tech-Bilt, Inc. v. Woodward-Clyde & Assocs., 698 P.2d 159, 166–67 (Cal. 2 1985)); see also Fed. Sav. & Loan Ins. Corp. v. Butler, 904 F.2d 505, 512 (9th Cir. 3 1990). The evaluation must be made based on the information available at the time 4 of the settlement. Tech-Bilt, 698 P.2d at 167. Once a settlor shows good faith, the 5 burden of proof to rebut good faith shifts to the nonsettlor who asserts that the 6 settlement was not made in good faith. City of Grand Terrace v. Superior Ct., 238 7 Cal. Rptr. 119, 124 (Cal. Ct. App. 1987). 8 “A party which receives court approval of a settlement is entitled to a dismissal 9 of the action.” Great W. Bank v. Converse Consultants, Inc., 58 Cal. App. 4th 609, 10 613 (Cal. Ct. App. 1997). Moreover, court approval of a settlement bars the claims 11 of any other joint tortfeasors against the settling tortfeasor for equitable comparative 12 contribution, or partial or comparative indemnity, based on comparative negligence 13 or comparative fault. See CAL. CIV. CODE §877.6(c). 14 III. DISCUSSION 15 A. 16 Settling Defendants move this Court to approve their settlement with Plaintiff 17 for $80,000, which they contend is proportionate to their possible liability in this case. 18 (ECF No. 196.) They further contend that there has been no collusion, fraud, or 19 tortious conduct amongst them in reaching the Settlement. (Id.) The Court finds that 20 the settlement is a good faith settlement. Of great weight to the Court is the fact that 21 no party opposes the motion. 22 23 Good Faith 1. Approximation of Proportionate Liability, Settlement Amount, and Allocation 24 The settling party’s proportionate liability is one of the most important factors. 25 Long Beach Memorial Med. Ctr. v. Superior Ct., 91 Ca. Rptr. 3d 494, 500–01 (Cal. 26 Ct. App. 2009). According to Settling Defendants, the only basis for liability against 27 them is that they acted negligently in connection with the payment of Plaintiff’s home 28 loan. (ECF No. 196 at 4–5.) The Court agrees. The only causes of action against –6– 15cv744 1 them concern negligence, whereas liability against Ocwen includes alleged violations 2 of fair credit reporting acts—violations which substantially increase Ocwen’s 3 potential liability in this action.2 The Settling Defendants’ proportionate liability is 4 therefore framed according to the negligence cause of action against them. Prospect’s 5 proportionate liability also includes Plaintiff’s negligent hiring, supervision, and/or 6 retention of employee claim related to Prospect’s employment of Gurfinkiel. 7 With respect to Plaintiff’s negligence cause of action, the Settling Defendants 8 estimate their maximum total liability as the amount of actual damages. That amount 9 is the $82,000 in interest and late fees allegedly due on the Ocwen Loan after the 10 proceeds from the Prospect Loan are applied to the principal due.3 The Settling 11 Defendants contend that their minimum potential liability would be under $10,000. 12 They arrive at this estimate by asserting that had Ocwen applied the proceeds from 13 the Prospect Loan in December 2013, Plaintiff’s actual damages would have been the 14 approximate $4,000 in principal due on the Ocwen Loan, with interest and late fees 15 on that amount bringing their liability to roughly under $10,000. The Settling 16 Defendants also contend that $82,000 is the maximum potential liability for 17 Plaintiff’s negligent hiring, supervision, and/or retention of employee claim against 18 Prospect. (ECF No. 196 at 5.) As to both causes of action, the Settling Defendants 19 assert that Plaintiff cannot cover emotional distress damages for the financial injury 20 she suffered. (Id. (citing Potter v. Firestone Tire & Rubber Co., 6 Cal. 4th 965, 985 21 (1983).) 22 The Court finds that the $80,000 settlement payment is “not out of proportion” 23 24 25 26 27 28 2 The Settling Defendants indicate that at the mediation in which all parties participated, it became evident that a global settlement could not be reached because Plaintiff sought separate amounts from Ocwen based on its alleged violations of various credit reporting statutes. (Hilbert Decl. ¶6.) 3 The Settling Defendants use $82,000 as a rough estimate. Reviewing the Payoff Quote, the Court has determined that the total non-principal amount that would be due is specifically $80,951.97. (ECF No. 197-1, Ex. 2 at 1.) –7– 15cv744 1 to what Plaintiff’s probable recovery from them would have been if she had proven 2 her case against them. Kohn v. Superior Ct., 191 Cal. Rptr. 78, 82 (Cal. Ct. App. 3 1983); see also Delis v. Sionix Corp., SACV 13-1547 AG (RNBx), 2014 U.S. Dist. 4 LEXIS 194705, at *7 (C.D. Cal. Oct. 27, 2014) (accounting for defendants’ 5 proportional share of comparative liability for Plaintiff’s liability). 6 settlement represents nearly all of Plaintiff’s overall damages, based on the 7 information available at the time of settlement. Thus, the settlement is more than a 8 rough approximation of the Settling Defendants’ potential liability. The allocation 9 of the settlement amount to the Plaintiff is also reasonable because she is the only 10 Here, the plaintiff in this litigation. 11 Moreover, in making these determinations, the Court is mindful that a settling 12 defendant should pay less in settlement than it would if it were found liable after a 13 trial. Although the settlement amount does not account for potential non-economic 14 damages, the Settling Defendants have come to an agreement after multiple meet and 15 conferrals with Plaintiff and a mediation sitting. Under these circumstances, a 16 settling defendant is allowed to receive a discount by settling, rather than proceeding 17 to trial. See Select Portfolio Servicing v. Valentino, No. C 12–0334 SI, 2013 WL 18 3956667, at *3 (N.D. Cal. July 30, 2013). 19 2. Financial Condition of Settling Defendants 20 Although the Settling Defendants have not provided evidence of their financial 21 and insurance policy limits, the fact that the Settling Defendants and Plaintiff agreed 22 to the settlement terms through counsel and after arm’s-length negotiations suggests 23 that any ability by them to pay more has been balanced against the facts of the case 24 and the degree to which the Settling Defendants are liable. See, e.g., Perez v. Ford 25 Motor Co., No. 1:10-cv-02213-LJO-SKO, 2012 WL 1119782, at *4 (E.D. Cal. April 26 3, 2012). Therefore, this factor is neutral in the Court’s assessment of good faith. 27 28 3. Collusion, Fraud or Tortious Conduct The final relevant factor is collusion, fraud, or tortious conduct aimed at –8– 15cv744 1 injuring the interests of the joint tortfeasors. N. Cty. Contractor’s Ass’n. v. 2 Touchstone Ins. Servs., 27 Cal. App. 4th 1085, 1089-90 (1994) (“Good faith may be 3 found only if there has been no collusion between the settling parties and where the 4 settlement amount appears to be within the ‘reasonable range’ of the settling party’s 5 proportionate share of comparative liability for a plaintiff’s injuries.”). Based on a 6 review of the Settlement and the moving papers, the Court finds that there is no 7 evidence of collusion, fraud, or tortious conduct. Nor has any other party to the 8 litigation raised the possibility of such conduct. 9 After considering all of the Tech-Bilt factors, the Court concludes the 10 settlement was reached in good faith under California Code of Civil Procedure 11 Section 877.6. 12 B. 13 The Settling Defendants also request (1) dismissal with prejudice all cross- 14 claims by Ocwen against them and (2) dismissal with prejudice of Plaintiff’s claims 15 against them and their cross-claims against each other, subject to the terms of the 16 Settlement. (ECF No. 196.) Dismissal of Claims and Cross-Claims 17 Because the Court finds the settlement to be in good faith, the Settling 18 Defendants are entitled to dismissal of Ocwen’s cross-claims against them and a bar 19 on similar claims from other joint tortfeasors. See Great W. Bank, 58 Cal. App. 4th 20 at 613. “A determination by the court that the settlement was made in good faith 21 shall bar any other joint tortfeasor or co-obligor from any further claims against the 22 settling tortfeasor or co-obligor for equitable comparative contribution, or partial or 23 comparative indemnity, based on comparative negligence or comparative fault.” 24 CAL. CIV. PROC. CODE §877.6(c); see also CAL. CIV. PROC. CODE §877(b) (“Where a 25 release . . . is given in good faith before verdict or judgment . . . [i]t shall discharge 26 the party to whom it is given from all liability for any contribution to any other 27 parties.”); Bay Dev., Ltd. v. Super. Ct., 791 P.2d 290, 293 (Cal. 1990) (claims seeking 28 implied contractual indemnity barred by finding of good faith); Far West Fin. Corp. –9– 15cv744 1 v. D&S Co., Inc., 760 P.2d 399, 413 (Cal. 1998) (all equitable indemnity claims, 2 including total equitable indemnity claims, barred by finding of good faith). Here, 3 Ocwen has asserted cross-claims for equitable indemnity, contribution, and equitable 4 apportionment against Prospect and People’s. These cross-claims fall directly within 5 the scope of Section 877.6(c) and its interpretation by California courts. Accordingly, 6 these cross-claims are hereby dismissed.4 7 With respect to dismissal with prejudice of Plaintiff’s claims against the 8 Settling Defendants and their cross-claims against each other, the Settlement 9 Agreement provides that Plaintiff and the Settling Defendants will dismiss their 10 claims and cross-claims with prejudice upon Plaintiff’s receipt of the settlement 11 payment. (ECF No. 197-1 at ¶¶2–4.) The Settling Defendants have thirty days from 12 the date of this Court’s good faith determination to pay Plaintiff. (Id. ¶¶1, 8.) 13 Although a finding of good faith entitles a party to dismissal of the action, the Court 14 will order the parties to comply with the terms of the settlement pertaining to payment 15 and the procedure for subsequent dismissal of their claims and cross-claims against 16 each other rather. 17 IV. CONCLUSION & ORDER 18 For the foregoing reasons, the Settling Defendants’ motion for determination 19 of good faith settlement (ECF No. 196) is GRANTED. It is further ORDERED that: 20 1. All Cross-Claims by Ocwen (ECF No. 111) against the Settling 21 Defendants are DISMISSED WITH PREJUDICE. Ocwen’s sole remaining cross- 22 claims in this action are against Plaintiff and Equity. 23 24 2. The Court HEREBY BARS any present or potential joint tortfeasor from bringing any future claims against the Settling Defendants for equitable 25 26 27 28 The Court observes that both Prospect and People’s have cross-claims against Ocwen. (ECF Nos. 35, 45-1.) Ocwen has answered both of these cross-claims. (ECF Nos. 46, 50.) If Prospect and People’s intend for their cross-claims against Ocwen to be dismissed in light of the dismissal of Ocwen’s identical cross-claims against them, Prospect and People’s should provide notice to the Court. 4 – 10 – 15cv744 1 contribution or partial or comparative indemnity based on comparative negligence or 2 comparative fault in connection with the conduct at issue in this litigation. 3 3. The Settling Defendants and Plaintiff are ORDERED to carry out the 4 terms of the Settlement. (ECF No. 197-1 Ex. 1.) Pursuant to those terms, within 30 5 days of this Court’s order, Settling Defendants shall pay Plaintiff the agreed upon 6 amount. The Plaintiff and Settling Defendants shall thereafter move to dismiss with 7 prejudice their respective claims and cross-claims against each other. 8 IT IS SO ORDERED. 9 10 DATED: January 26, 2018 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 – 11 – 15cv744

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