BINNS v. OCWEN LOAN SERVICING, LLC et al

Filing 83

ORDER ADOPTING as Modified the Report and Recommendation on Defendants' Motion to Dismiss - The Court GRANTS IN PART and DENIES IN PART Nationstar's Objection. (Filing No. 56 .) Signed by Judge Tanya Walton Pratt on 9/30/2015. (See Order for details)(TRG)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
RAMONA BINNS,
Plaintiff,
v.
OCWEN LOAN SERVICING, LLC, and
NATIONSTAR MORTGAGE LLC,
Defendants.

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ORDER ADOPTING AS MODIFIED THE REPORT
AND RECOMMENDATION ON DEFENDANTS’ MOTION TO DISMISS
This matter is before the Court on Defendant Nationstar Mortgage LLC’s (“Nationstar”)
Objection to the Magistrate Judges’ Report and Recommendation. (Filing No. 56.) Plaintiff,
Ramona Binns (“Binns”) filed a complaint alleging numerous claims against Defendants, Ocwen
Loan Servicing, LLC (“Ocwen”) and Nationstar. (Filing No. 1.) Thereafter, Ocwen filed a motion
to dismiss the complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6) (Filing No. 18) and
Nationstar also filed a Rule 12(b)(6) motion to dismiss (Filing No. 20). The Court referred both
motions to dismiss to the Magistrate Judge for a Report and Recommendation. (Filing No. 52.)
On April 1, 2015, the Magistrate Judge submitted his Report and Recommendation recommending
dismissal of all but five claims against Nationstar. (Filing No. 55). Nationstar filed a timely
objection. The Court GRANTS IN PART and DENIES IN PART Nationstar’s objections and
adopts the Report and Recommendation as modified below.

I. LEGAL STANDARD
A.

Review of the Magistrate Judge’s Report and Recommendation
A district court may assign dispositive matters to a magistrate judge, in which case the

magistrate judge may submit to the district judge only a report and recommended disposition,
including any findings of fact. Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 760 (7th Cir.
2009).

See also, 28 U.S.C. § 636(b)(1)(B) (2012); Fed. R. Civ. P. 72(b)(1).

The magistrate

judge’s recommendation on a dispositive matter is not a final order, and the district judge makes
the ultimate decision to “accept, reject, or modify” the findings and recommendations, and the
district court need not accept any portion as binding. 28 U.S.C. § 636(b)(1) (2012) (“A judge of
the court may accept, reject, or modify, in whole or in part, the findings or recommendations made
by the magistrate judge. The judge may also receive further evidence or recommit the matter to
the magistrate judge with instructions”); Fed. R. Civ. P. 72(b)(3). See also Schur, 577 F.3d at 76061.
After a magistrate judge makes a report and recommendation, either party may object
within fourteen days of being served with a copy of the same. 28 U.S.C. § 636(b)(1); Fed. R. Civ.
P. 72(b)(2). When a party raises specific objections to findings and recommendations made within
the magistrate judge’s report, the district court is required to review those elements de novo,
determining for itself whether the magistrate judge’s decisions as to those issues are supported by
substantial evidence or were the result of an error of law. 28 U.S.C. § 636(b)(1) (2012); Fed. R.
Civ. P. 72(b)(3). See also Johnson v. Zema Sys. Corp., 170 F.3d 734, 739 (7th Cir. 1999). The
court may, however, defer to those conclusions to which timely objections have not been raised
by a party. Schur, 577 F.3d at 760-61. Further, if a party fails to object to a magistrate judge’s

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report and recommendation, or objects on some issues and not others, he waives appellate review
of the issues to which he has not objected. Zema Sys. Corp., 170 F.3d at 739.
B.

12(b)(6) Motion to Dismiss
Fed. R. Civ. P. 12(b)(6) authorizes dismissal if the complaint fails to set forth a claim upon

which relief can be granted. Fed. R. Civ. P. 12(b)(6). “The purpose of a motion to dismiss is to
test the sufficiency of the complaint, not to decide the merits.” Gibson v. City of Chi., 910 F.2d
1510, 1520 (7th Cir. 1990). Accordingly, when analyzing a Rule 12(b)(6) motion to dismiss, a
court construes the complaint in the light most favorable to the plaintiff, accepts all factual
allegations as true, and draws all reasonable inferences in favor of the plaintiff. Tamayo v.
Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).
Fed. R. Civ. P. 8 requires that a complaint set forth a short and plain statement of the claim
showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). At a minimum, the complaint
must give the defendant fair notice of what the claim is and the grounds upon which it rests; and
the factual allegations must raise a right to relief above the speculative level. See Bissessur v. Ind.
Univ. Bd. of Trs., 581 F.3d 599, 602-03 (7th Cir. 2009) (explaining that, consistent with the notice
pleading standard, the purpose of the statement required by Rule 8 is to provide the defendant with
fair notice of what the claim is and the grounds upon which it rests), Tamayo, 526 F.3d at 1081,
1083.
While a complaint need not include detailed factual allegations, a plaintiff has the
obligation to provide the factual grounds supporting his entitlement to relief; and neither bare legal
conclusions nor a formulaic recitation of the elements of a cause of action will suffice in meeting
this obligation. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). See also Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (“the pleading standard Rule 8 . . . demands more than an unadorned,

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the defendant unlawfully harmed-me accusation” and “(t)hreadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice”); Bissessur, 581 F.3d at
603.
Although this does not require heightened fact pleading of specifics, it does require the
complaint to contain enough facts to state a claim to relief that is plausible on its face. Twombly,
550 U.S. at 570; Tamayo, 526 F.3d at 1083 (“(a) plaintiff still must provide only enough detail to
give the defendant fair notice of what the claim is and the grounds upon which it rests, and, through
his allegations, show that it is plausible rather than merely speculative, that he is entitled to relief”);
Bissessur, 581 F.3d at 603 (“(a) claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.”).
II. BACKGROUND
The following facts, which the Magistrate Judge took from Binns’ Complaint, are accepted
as true for purposes of this motion to dismiss and all reasonable inferences are drawn in a light
most favorable to Binns. See Tamayo, 526 F.3d at 1081. Nationstar did not object to the
Magistrate Judge’s recitation of the facts and the Court repeats the facts in this Entry, with only
minor modifications for clarity.
On January 30, 2008, Binns signed a mortgage agreement for property located in
Indianapolis, Indiana. (Filing No. 1 at ¶ 8.) The original lender for the mortgage was Taylor, Bean
& Whitaker Mortgage Corp., and the current holder of the promissory note is the Federal Home
Loan Mortgage Corporation (“Freddie Mac”). Id. at ¶¶ 8-9. The note holder contracted to have
the mortgage agreement serviced by Ocwen. Id. at ¶ 11.

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In February 2013, Ocwen sent Binns a notification that she was eligible for a Home
Affordable Modification (“Loan Modification Agreement”). Id. at ¶ 12. The notice stated that if
Binns complied with the terms of the modification agreement, then Ocwen would modify her
mortgage and waive any prior late charges that Binns had incurred. (Id.; Filing No. 1 at 1-3.) The
agreement required Binns to make three “Trial Payments” of $887.20 on the first day of March,
April, and May of 2013. (Filing No. 1 at ¶ 13.)
Binns made all three payments at the proper times, and Ocwen cashed each check. Id. at
¶¶ 14-16. On the same day as the last payment, May 1, 2013, Ocwen sent Binns a letter stating
that the servicing of her mortgage had been transferred to Nationstar. Id. at ¶ 17. At this time, the
mortgage was already in default, Id. at ¶ 86, but Binns believed that, under the terms of the Loan
Modification Agreement, she could avoid foreclosure by continuing to pay $887.20 each month.
Id. at ¶¶ 20, 26.
On June 1, 2013, Binns sent her monthly mortgage payment to Nationstar. Id. at ¶ 20.
Having completed the trial period and Loan Modification Agreement, she paid $887.20 by check,
which was cashed by Nationstar on June 3, 2013. Id. On June 5, 2013, however, Nationstar sent
Binns a notice stating that she was delinquent in her payments. Id. at ¶ 21. Binns called Nationstar
to ask about the alleged delinquency, and a Nationstar employee told her that Nationstar had no
documentation related to a Loan Modification Agreement. Id. at ¶ 23.
On July 3, 2013, Binns faxed a completed copy of the Loan Modification Agreement to
Nationstar. Id. at ¶ 24. She also submitted her July mortgage payment in the amount of $887.20
by check, which was cashed by Nationstar on July 10, 2013. Id. at ¶ 26. Three weeks later, on
July 25, 2013, Nationstar sent Binns a notice, stating that, as of March 1, 2013, Binns was in

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default on her mortgage. Id. at ¶ 30. Nationstar added that Binns owed almost $4,977.05, and that
foreclosure proceedings could begin within 30 days of the notice. Id.
On July 30, 2013, Binns called Nationstar and asked about the default notice. Id. at ¶ 31.
Nationstar again denied that it had received any paperwork related to a Loan Modification
Agreement. Id. The next day, Binns faxed another copy of her completed Loan Modification
Agreement to Nationstar. Id. at ¶ 32. She also sent a completed copy through the mail and
submitted her August mortgage payment. Id. Binns paid $887.20 again. Id. at ¶ 33.
On August 5, 2014, Nationstar returned Binns’ August payment on the grounds that it was
insufficient to bring her account current. Id. at ¶ 34. Over the next two weeks, Binns repeatedly
called Nationstar to try to determine whether Nationstar had received the Loan Modification
Agreement documentation and to ask why Nationstar continued to claim that she was delinquent
in her payments. Id. at ¶¶ 35-38. Her efforts to resolve the dispute proved unsuccessful, and in
September 2013, Nationstar again notified Binns that she had an unpaid balance on her account.
Id. at ¶ 41. This process continued for the next eight months, with Binns contacting Nationstar
regarding the Loan Modification Agreement at least four more times and Nationstar denying that
it received the documentation each time. Id. at ¶¶ 42-71. At one point, Nationstar’s employees
advised Binns to stop making monthly payments until Nationstar confirmed that the modification
agreement was in place. Id. at ¶ 50. Nationstar, however, continued to send delinquency notices,
and Binns resumed making her monthly payments for $887.20. Id. at ¶ 51. Ultimately, Binns’
efforts to establish that she had completed her Loan Modification Agreement were unsuccessful;
and, in June 2014, Nationstar filed a complaint to foreclose on Binns’ property. Id. at ¶ 72.

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Binns alleges that her interactions with Defendants caused stress, depression, and weight
loss, and that she incurred medical costs, time lost, and pecuniary costs in the form of fuel, postage,
and mileage in corresponding with Defendants. Id. at ¶¶ 87-88.
III. DISCUSSION
A.

Preliminary Matters
In his Report and Recommendation, the Magistrate Judge recommended dismissal of all

claims against Ocwen. Binns did not object to this recommendation, and the Court considers
dismissal of these claims to be appropriate. Accordingly, the Court ADOPTS that portion of the
Magistrate Judge’s recommendation, and the Court DISMISSES WITH PREJUDICE all of
Binns’ claims against Ocwen. Consequently, Ocwen is no longer a defendant in this case.
The Magistrate Judge also recommended dismissal of the following claims against
Nationstar: intrusion upon seclusion, fraudulent misrepresentation, intentional infliction of
emotional distress, negligence, negligent infliction of emotional distress, wrongful interference
with contractual relations, and negligence per se. Binns similarly did not object to this
recommendation, and the Court considers dismissal of these claims to also be appropriate.
Accordingly, the Court ADOPTS that portion of the Magistrate Judge’s recommendation, and the
Court DISMISSES WITH PREJUDICE the aforementioned claims against Nationstar.
In addition, the Magistrate Judge recommended that Binns’ claim against Nationstar under
the Fair Debt Collection Practices Act remain pending because Nationstar did not move to dismiss
that claim. The Court agrees and also ADOPTS that portion of the Magistrate Judge’s
recommendation.
Finally, the Magistrate Judge recommended that four additional claims against Nationstar
should remain pending, including: violation of Indiana Home Loan Practices Act, violation of

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Indiana Crime Victim’s Relief Act, violation of the Uniform Commercial Code, and breach of the
Duty of Good Faith and Fair Dealing. Nationstar objects to the Magistrate Judge’s
recommendations regarding these four claims.
B.

Indiana Home Loan Practices Act Claim
Nationstar objects to the Magistrate Judge’s conclusion that Binns’ claim under the Indiana

Home Loan Practices Act (“IHLPA”) should remain pending. Specifically, Nationstar asserts that
it did not have “actual knowledge,” as required, that the Loan Modification Agreement was
enforceable. Specifically, Nationstar points to the Loan Modification Agreement attached to
Binns’ complaint and argues that because it is not signed by both Binns and Ocwen, Nationstar
was never provided a valid, complete and enforceable agreement. The Court is not persuaded.
The IHLPA provides that a person may not “[e]ngage in a deceptive act in connection with
a mortgage transaction”. Ind. Code § 24-9-3-7(c)(3). A “deceptive act” is “an act or a practice as
part of a mortgage transaction, . . . in which a person at the time of the transaction knowingly or
intentionally: (A) makes a material misrepresentation; or (B) conceals material information
regarding the terms or conditions of the transaction.” Ind. Code § 24-9-2-7(a)(1). “Knowingly”
means “having actual knowledge at the time of the transaction.” Ind. Code § 24-9-2-7(b).
The Magistrate Judge correctly notes that Binns sufficiently pled numerous facts which,
accepted as true, demonstrate that Nationstar had knowledge of Binns’ Loan Modification
Agreement. Specifically, Binns alleges that, on numerous occasions, she informed Nationstar
about the Loan Modification Agreement by telephone, by mail, and by facsimile. (Filing No. 1 at
¶¶ 23-24, 31-32, 38.) Accepted as true, Binns’ allegations plausibly support the conclusion that
Nationstar had actual knowledge of the Loan Modification Agreement. Twombly, 550 U.S. at 570;
Tamayo, 526 F.3d at 1083 (“[a] plaintiff still must provide only enough detail to give the defendant

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fair notice of what the claim is and the grounds upon which it rests, and, through his allegations,
show that it is plausible rather than merely speculative, that he is entitled to relief”); Bissessur, 581
F.3d at 603 (“[a] claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”).
To begin, the Court notes that the argument that the Loan Modification Agreement was
unsigned and was, therefore, unenforceable was not presented in Nationstar’s motion to dismiss
and is novel to its objection to the Report and Recommendation. (Filing No. 21 at 18-19 and Filing
No. 40 at 13 with Filing No. 56 at 5-7.) Accordingly, it would be prudent for the Court not to
consider it. See United States v. Melgar, 227 F.3d 1038, 1040 (7th Cir. 2000) (“arguments not
made before a magistrate judge are normally waived. . . . Failure to raise arguments will often
mean that facts relevant to their resolution will not have been developed; [and] one of the parties
may be prejudiced by the untimely introduction of an argument”). Nevertheless, even considering
Nationstar’s new argument, the Court still concludes that Binns’ IHLPA claim is plausibly pled.
Binns’ factual allegations plausibly support the conclusion that the Loan Modification
Agreement was enforceable. Initially, the Loan Modification Agreement required Binns to make
three “Trial Payments” of $887.20 on the first day of March, April, and May of 2013. (Filing No.
1 at ¶ 13.) Binns made all three payments at the proper times, and Ocwen cashed each check. Id.
at ¶¶ 14-16. After the servicing of Binns’ mortgage was transferred to Nationstar, Binns
communicated the existence of the Loan Modification Agreement to Nationstar and continued to
make payments in accordance with the Agreement. (Filing No. 1 at ¶¶ 20, 23-24, 26, 31-33, 38.)
Nationstar accepted several of these payments. (Filing No. 1 at ¶¶ 20, 26.) Finally, as evidenced
in Nationstar’s motion to dismiss reply brief, Nationstar “permitted the [Loan Modification

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Agreement] to take effect . . . and worked to apply the modification retroactively.” (Filing No. 40
at 3.)
Nationstar’s contrary argument, that the Loan Modification Agreement was not
enforceable because the document submitted by Binns purportedly lacks a signature, is a
contractual defense, similar to the statute of frauds. In the typical case, a court’s evaluation of a
motion to dismiss is carefully limited to the allegations found in the plaintiff’s complaint.
Hamilton v. Summers, 95 F. Supp. 2d 908, 911 (N.D. Ill. 2000); 5B Charles Alan Wright, Arthur
R. Miller, & Mary Kay Kane, Federal Practice & Procedure §§ 1356, 1357 (3d ed. 2015).
As a result, a court only considers defenses that are either directly pled by a plaintiff or are
otherwise obvious on the face of the complaint. Xechem, Inc. v. Bristol-Myers Squibb Co., 372
F.3d 899, 901 (7th Cir. 2004) (“[o]rders under Rule 12(b)(6) are not appropriate responses to the
invocation of defenses, for plaintiffs need not anticipate and attempt to plead around all potential
defenses,” and “only when the plaintiff pleads itself out of court-that is, admits all the ingredients
of an impenetrable defense-may a complaint that otherwise states a claim be dismissed under Rule
12(b)(6)”); U.S. Gypsum Co. v. Ind. Gas Co., 350 F.3d 623, 626 (7th Cir. 2003); Doe v. GTE Corp.,
347 F.3d 655, 657 (7th Cir. 2003) (“[a]ffirmative defenses do not justify dismissal under Rule
12(b)(6)”); Wright, Miller & Kane, supra, § 1357. Courts typically limit the scope of their analysis
in this way to avoid unnecessarily converting a motion to dismiss, which evaluates the formal
statement of the claim, into a summary judgment motion, which evaluates the substantive merits
of the claim. Wright, Miller & Kane, supra, § 1357 (“the district court in its discretion may decide
that a motion for summary judgment, which provides an opportunity for an investigation of the
facts surrounding the bare allegations in the pleading, is a more appropriate procedural device to
deal with the built-in defense than a motion to dismiss under Rule 12(b)(6).”).

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A statute of frauds defense is not obvious on the face of Binns’ complaint; and the Court
is, therefore, not at liberty to consider the defense when evaluating the sufficiency of Binns’ factual
pleadings.
In addition, Nationstar’s contention that the Loan Modification Agreement was not signed
is supported solely by the fact that the supporting documentation attached to Binns’ complaint did
not contain Ocwen’s signature. Nationstar is reminded, however, that, at this stage of the litigation,
Binns is not required to submit the full record of contractual documents to prove her claim. Indeed,
Binns was not required to submit any documents to support her claim and only had to present a
short plain statement that she is entitled to relief which is plausible on its face. Fed. R. Civ. P.
8(a)(2). Twombly, 550 U.S. at 570; Tamayo, 526 F.3d at 1083; Bissessur, 581 F.3d at 603.
Binns has succeeded in meeting that burden. Accordingly, the Court DENIES Nationstar’s
motion to dismiss Binns’ claim under the Indiana Home Loan Practices Act.
C.

Indiana Crime Victims Relief Act Claim
Nationstar also objects to the Magistrate Judge’s conclusion that Binns’ claim under the

Indiana Crime Victims Relief Act (“ICVRA”) remain pending. In this regard, Nationstar similarly
asserts that it did not engage in deception because Nationstar did not have knowledge that the Loan
Modification Agreement was enforceable.
The ICVRA provides that “(i)f a person . . . suffers a pecuniary loss as a result of a violation
of Ind. Code §§ 35-43; 35-42-3-3; 35-42-3-4; or 35-45-9, the person may bring a civil action
against the person who caused the loss”. Ind. Code § 34-24-3-1. To recover under the ICVRA, a
plaintiff must prove all the elements of the criminal act. Larson v. Karagan, 979 N.E.2d 655, 661
(Ind. App. 2012). Thus, to survive a motion to dismiss, Binns must adequately plead all elements
of the underlying criminal act. See Twombly, 550 U.S. at 562 (noting that a complaint must contain

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“either direct or inferential allegations respecting all the material elements necessary to sustain
recovery”).
Binns contends that she suffered loss on account of Nationstar’s acts of deception and
criminal mischief. A person commits “deception” when he “knowingly or intentionally makes a
false or misleading written statement with intent to obtain property”. Ind. Code § 35-43-5-3(a)(2).
Under the 2014 version of the statute, a person commits “criminal mischief” when he “knowingly
or intentionally causes another to suffer pecuniary loss by deception”. Ind. Code § 35-43-12(a)(2).
The Report and Recommendation correctly notes that Binns sufficiently pled numerous
facts which, accepted as true, demonstrate that Nationstar “knowingly or intentionally made a false
or misleading written statement with intent to obtain property”. Specifically, Binns’ alleges that
Nationstar received notice of the Loan Modification Agreement on numerous occasions, (Filing
No. 1 at ¶¶ 24, 32, 38), but that Nationstar continued to send notices stating that Binns owed an
amount that was higher than the amount owed under the terms of the Loan Modification
Agreement. (Filing No. 1 at ¶¶ 29, 40, 48.) Accepting these allegations as true, it is reasonable to
infer that Nationstar knew that Binns did not owe the amount Nationstar asserted; and, yet,
Nationstar continued to send Binns written statements with the intent to induce her to pay this
amount. As the Magistrate Judge correctly concluded, this addresses all elements of the statutory
definition of “deception,” such that Binns has adequately pled that Nationstar committed
deception.
In addition, Binns also alleges that she suffered pecuniary loss in the form of postage costs,
mileage costs, and fuel costs in her dealings with Nationstar. (Filing No. 1 at ¶ 126.) Binns has,

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therefore, sufficiently pled that she suffered “pecuniary loss”, necessary to also plead that
Nationstar committed criminal mischief.
In its objection, Nationstar repeats its argument that it did not have knowledge that the
Loan Modification Agreement was enforceable. However, for the same reasons discussed above,
the Court rejects this argument again. Accordingly, the Court DENIES Nationstar’s motion to
dismiss Binns’ claim under the Indiana Crime Victims Relief Act.
D.

Uniform Commercial Code Claim
Nationstar next objects to the Magistrate Judge’s conclusion that Binns’ claim under the

Uniform Commercial Code (“UCC”) should remain pending because Nationstar did not have
knowledge that the Loan Modification Agreement was enforceable.
The relevant section of the UCC provides, “(i)f tender of payment of an amount due on an
instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to
pay interest after the due date on the amount tendered is discharged.” Ind. Code § 26-1-3.1-603(c).
Nationstar does not object to the Magistrate Judge’s conclusion that, accepting Binns’
allegations as true, Binns sufficiently alleged that she paid the full amount due under the mortgage,
as modified by the Loan Modification Agreement. (Filing No. 1 at ¶¶ 26, 33, 41, 44, 54) (noting
that each payment of $887.20 was made “pursuant to the terms of the [Loan Modification
Agreement].”.) Further, Nationstar does not object to the Magistrate Judge’s conclusion that Binns
adequately alleged that she is entitled to recover interest for her timely-tendered but wronglyrejected payments of $887.20, made in August 2013, October 2013, May 2014, and June 2014.
(Filing No. 1 at ¶¶ 33-34, 44-45, 70-71, 133.)
Instead, Nationstar argues that the amount paid was not the full amount due because the
Loan Modification Agreement was not enforceable. Once again, the Court points to its previous

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analysis in this regard and rejects Nationstar’s argument. Accordingly, the Court DENIES
Nationstar’s motion to dismiss Binns’ claim under the Uniform Commercial Code.
E.

Good Faith and Fair Dealing Claim
Finally, Nationstar objects to the Magistrate Judge’s conclusion that Binns’ Good Faith

and Fair Dealing claim should remain pending. Specifically, Nationstar argues that the claim is
barred by Indiana’s economic loss rule, which prevents recovery in negligence cases involving
pure economic loss. In addition, Nationstar argues that the Magistrate Judge erred in concluding
that an escrow account creates a fiduciary relationship and that Binns has sufficiently pled an
escrow account violation.
1.

Indiana’s Economic Loss Rule is Not Applicable to Binns’ Claim

Indiana’s economic loss rule provides that “a defendant is not liable under a tort theory for
any purely economic loss caused by its negligence”. Indianapolis-Marion Cnty. Pub. Library v.
Charlier Clark & Linard, P.C., 929 N.E.2d 722, 729 (Ind. 2010) (“[t]he economic loss rule reflects
that the resolution of liability for purely economic loss caused by negligence is more appropriately
determined by commercial rather than tort law.”). A plaintiff suffers “purely economic loss” when
he suffers only “pecuniary loss unaccompanied by any property damage or personal injury.” Id.
at 730. Thus, as a general rule, a plaintiff who suffers no property damage or personal injury
cannot recover in tort. Id. at 729-30 (quoting Miller v. U.S. Steel Corp., 902 F.2d 573, 574 (7th
Cir. 1990) (“tort law is a superfluous and inapt tool for resolving purely commercial disputes. We
have a body of law designed for such disputes. It is called contract law.”).
This rule has several limitations. Id. at 730. First, it applies only where a plaintiff has
suffered “purely economic loss.” Id. Thus, property damage or personal injury which is distinct
from economic loss precludes application of the rule. Id. Second, the rule does not apply in certain

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situations where a plaintiff has suffered exclusively economic loss, including “lawyer malpractice,
breach of a duty of care owed to a plaintiff by a fiduciary, breach of a duty to settle owed by a
liability insurer to the insured, and negligent misstatement.” Id. at 742.
In her complaint, Binns alleges that she “has incurred and suffered through significant
emotional distress as a result of Nationstar’s wrongful collection actions and foreclosure lawsuit.”
(Filing No. 1 at ¶ 87.) In addition, she alleges that she “is currently fighting with debilitating
depression and severe weight loss as a direct result of Nationstar’s actions,” and that she has
“acquired medical assistance to tackle the aforementioned health problems.” Id. Binns argues that
these allegations demonstrate a “personal injury” sufficient to circumvent the economic loss rule.
(Filing No. 36 at 3.)
In its motion to dismiss, Nationstar argues that Binns’ alleged harm does not amount to
“personal injury” for purposes of the economic loss rule. Specifically, Nationstar cites Bamberger
& Feibleman v. Indianapolis Power & Light Co., wherein the court distinguished between
“intangible” and “physical harm” and defined the latter as “bodily injury, death, loss of services,
and rights arising from any such injuries, as well as sudden, major damage to property.” 665
N.E.2d 933, 936, 938-39 (Ind. App. 1996) (“when there is no accident and no physical harm so
that the only loss is pecuniary in nature, courts have denied recovery under the rule that purely
economic interests are not entitled to protection against mere negligence.”). Nationstar additionally
cites Stender v. BAC Home Loans Servicing LP, wherein injuries to plaintiffs’ credit scores and
reputations were considered intangible harms, such that plaintiffs’ tort claims were barred by the
economic loss rule. No. 2:12-CV-41, 2013 WL 832416, at *4 (N.D. Ind. Mar. 6, 2013).
In his Report and Recommendation, the Magistrate Judge interpreted Bamberger as “not
establish[ing] the outer bounds of what might constitute a personal injury”. (Filing No. 55 at 7-8.)

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In addition, the Magistrate Judge concluded that Binns’ alleged harm to her mental health, which
allegedly affected her body, went beyond the harms alleged in either Bamberger (interrupted
electrical power to a building resulting in the temporary inability to practice law) or Stender (lost
credit score and reputation). Id. at 8-9. As a result, the Magistrate Judge concluded that Binns’
mental health harms amounted to a personal injury, sufficient to circumvent the economic loss
rule.
As indicated by her pursuit of medical assistance, Binns currently fears for her
physical health and safety. . . . Her harms thus go beyond merely economic harms.
She is not suing only because Nationstar and Ocwen did not “perform as expected;”
rather, she has suffered physical distress above and beyond her economic loss, such
that seeking recovery in tort is appropriate.
Id.
What appears lost in the parties’ arguments and the analysis, however, is the fact that every
case used to explain and apply the economic loss rule in either the parties’ briefs or in the Report
and Recommendation, involved a negligence claim. See, e.g., Stender, 2013 WL 832416, at *4
(“claiming the defendants negligently failed to comply with the terms of the loan modification
agreements”); Indianapolis-Marion Cnty. Pub. Library, 929 N.E.2d at 726 (“alleging negligent
failure to perform engineering, administrative, and design work in a skillful, careful, workmanlike
manner”); Bamberger, 665 N.E.2d at 935 (“recovering economic losses arising from an electrical
power outage under a negligence theory”). See also Runde v. Vigus Realty Inc., 617 N.E.2d 572,
574 (Ind. App. 1993) (“[a]n examination of the Plaintiff’s Amended Complaint clearly discloses
that the theory of the Plaintiffs’ action is negligence”); Selman v. CitiMortgage, Inc., 2013 WL
838193, *5 (S.D. Ala. Mar. 5, 2013) (“common-law negligence and wantonness claims” against a
mortgage servicing lender).

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In striking contrast, Binns’ Duty of Good Faith and Fair Dealing claim is not akin to a
negligence claim but, instead, arises under contract law. Indeed, the parties agree, (Filing No. 21
at 17; Filing No. 36 at 11), that the Duty of Good Faith and Fair Dealing is “an implied covenant
that only arises in insurance and employment contracts or where contracts are ambiguous as to
the application of the covenants or expressly impose them”. Coates v. Heat Wagons, Inc., 942
N.E.2d 905, 918 (Ind. App. 2011) (emphasis added). See also Allison v. Union Hosp., Inc., 883
N.E.2d 113, 123 (Ind. App. 2008) (noting that the covenant arises under contract law and is not
extended to other types of unambiguous contracts); First Fed. Sav. Bank of Ind. v. Key Markets,
Inc., 559 N.E.2d 600, 604 (Ind. 1990); Selman, 2013 WL 838193, at *5 (noting that a mortgage
servicing agreement is a “creature of contract, not of tort, and stem[s] from the underlying
mortgage and promissory note executed by the parties, rather than a duty of reasonable care
generally owed to the public”); Galayda v. Wachovia Mortg., FSB, No. 10-1065 (FLW), 2010 WL
5392743, **15-16 (D.N.J. 2010) (“[i]t is axiomatic that a claim for the breach of the covenant of
good faith and fair dealing arises out of the contract itself”).
Nationstar presents no authority to suggest that the economic loss rule extends beyond
negligence claims or that the economic loss rule specifically applies to bar a Duty of Good Faith
and Fair Dealing claim. Instead, the Court notes that Indiana courts have been reluctant to expand
the economic loss rule beyond negligence claims. See, e.g., Runde v. Vigus Realty Inc., 617 N.E.2d
572, 574-75 (Ind. App. 1993) (declining to extend the economic loss rule to a negligence claim
against a gratuitous agent); A.I. Credit Corp. v. Legion Ins. Co., 265 F.3d 630, 636 (7th Cir. 2001)
(“Indiana courts have specifically explained that the [economic loss] rule does not apply outside
the product failure context.”).

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Accordingly, in the absence of authority to support Nationstar’s argument that the
economic loss rule has specific applicability to Binns’ Good Faith and Fair Dealing claim, the
Court considers the argument to be undeveloped and, therefore, waived. See United States v.
Tockes, 530 F.3d 628, 633 (7th Cir. 2008) (“[u]nsupported and undeveloped arguments . . . are
considered waived”); Curtis v. Earnest Mach. Prods. Co., No. 1:11-CV-951, 2012 WL 5879439,
at *4 (S.D. Ind. 2012). As a result, the Court concludes that Indiana’s economic loss theory is not
applicable to Binns’ Breach of the Duty of Good Faith and Fair Dealing claim.
2.

Binns’ Duty of Good Faith and Fair Dealing Claim is Insufficiently Pled

Both the parties in their briefs and the Magistrate Judge in his Report and
Recommendation, spend a significant amount of time discussing whether Binns sufficiently pled
a fiduciary relationship, sufficient to establish her Duty of Good Faith and Fair Dealing claim.
Similarly problematic, however, is the absence of any legal authority to suggest that the claim
arises in fiduciary relationships at all.
Prefacing his analysis of Binns’ Duty of Good Faith and Fair Dealing claim, the Magistrate
Judge began by noting the parties’ agreement that the duty only arises in limited contractual
circumstances. (See Filing No. 55 at 35.) However, the parties’ briefs misquote Coates when they
list “fiduciary relationships” as one of the limited contractual circumstances where the duty of
good faith and fair dealing might arise. A closer look at the case cited by both parties reveals that
“fiduciary relationships” is not listed as one of the limited contractual circumstances wherein
Indiana courts have recognized a Duty of Good Faith and Fair Dealing claim. Rather, the case,
Coates v. Heat Wagons, Inc., states “[i]n Indiana law, implied covenants of good faith and fair
dealing apply only to insurance and employment contracts or where contracts are ambiguous as to
the application of the covenants or expressly impose them.” 942 N.E.2d 905, 918 (Ind. App. 2011).

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See also Allison v. Union Hosp., Inc., 883 N.E.2d 113, 123 (Ind. App. 2008) (reciting the same
limited list of circumstances wherein the duty arises and noting that the Indiana courts have not
extended the covenant to other types of unambiguous contracts); First Fed. Sav. Bank of Ind. v.
Key Markets, Inc., 559 N.E.2d 600, 604 (Ind. 1990) ([i]t is only where the intentions of the parties
cannot be readily ascertained because of ambiguity or inconsistency in the terms of a contract . . .
that a court may have to presume the parties were acting reasonably and in good faith in entering
into the contract.”).
Consequently, in the absence of authority to support the parties’ assertion that the duty of
good faith and fair dealing arises under fiduciary relationships, the Court can only conclude that it
does not. As a result, the Court GRANTS Nationstar’s motion to dismiss Binns’ Good Faith and
Fair Dealing claim.
Further, the Court concludes that dismissal of the claim should be with prejudice. Fed. R.
Civ. P. 15 directs that courts should “freely” grant leave to amend a pleading “when justice so
requires”. Fed. R. Civ. P. 15(a)(2). Nevertheless, courts are instructed to deny leave to amend for
such reasons as “undue delay, bad faith or dilatory motive on the part of the movant, repeated
failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing
party by virtue of allowance of the amendment, and futility of [the] amendment.” Airborne
Beepers & Video, Inc. v. A T & T Mobility LLC, 499 F.3d 663, 666 (7th Cir. 2007).
Binns’ case clearly does not involve either an employment contract or an insurance
contract. In addition, Binns cannot plead that the contract is ambiguous without “pleading herself
out of court”. Indeed, Binns’ entire case is built upon her contentions that she had an unambiguous
and enforceable Loan Modification Agreement; that she made timely payments in accordance with

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the express terms of the Loan Modification Agreement; and that Nationstar wrongly refused to
recognize the Loan Modification Agreement as executed. (See Filing No. 62 at 8.)
Therefore, because Binns cannot demonstrate that her contractual situation falls into one
of the narrow circumstances identified by the parties in Coates, it appears that Binns cannot cure
her pleading deficiency through an amendment. As a result, affording Binns leave to refile her
Duty of Good Faith and Fair Dealing claim would be futile. See Airborne Beepers & Video, Inc.,
499 F.3d at 666. Consequently, the Court considers it appropriate to DISMISS WITH
PREJDUICE Binns’ Duty of Good Faith and Fair Dealing claim.
IV. CONCLUSION
For the reasons set forth above, the Court GRANTS IN PART and DENIES IN PART
Nationstar’s Objection. (Filing No. 56.)
The Court ADOPTS The Magistrate Judge’s recommendation that all of Binns’ claims
against Ocwen be dismissed, and the Court DISMISSES WITH PREJUDICE all of Binns’
claims against Ocwen. Consequently, because no claims remain pending, Ocwen is DISMISSED
as a defendant in this case.
Noting no objection from Binns, the Court also ADOPTS The Magistrate Judge’s
dismissal recommendation for the following claims against Nationstar: intrusion upon seclusion,
fraudulent misrepresentation, intentional infliction of emotional distress, negligence, negligent
infliction of emotional distress, wrongful interference with contractual relations, and negligence
per se, and the Court DISMISSES WITH PREJUDICE those claims against Nationstar.
The Court also ADOPTS the Magistrate Judge’s recommendation that Binns’ claim
against Nationstar under the Fair Debt Collection Practices Act should remain pending, as
Nationstar did not move to dismiss that claim.

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In addition, for the reasons stated in the Magistrate Judge’s Report and Recommendation
and in this Order, the Court ADOPTS the Magistrate Judge’s recommendation that the Indiana
Home Loan Practices Act claim, Indiana Crime Victim’s Relief Act claim, and the Uniform
Commercial Code claims against Nationstar remain pending.
The Court MODIFIES the Report and Recommendation with respect to Binns’ Duty of
Good Faith and Fair Dealing claim, as stated in this Order. Consequently, the Court DISMISSES
WITH PREJUDICE Binns’ Duty of Good Faith and Fair Dealing claim.
Final judgment on the dismissed claims will issue at a later time.

SO ORDERED.

Date: 9/30/2015

DISTRIBUTION:
Lucius James Wallace
HUMPHREYS WALLACE HUMPHREYS PC
[e-mail]
Robert David Humphreys
HUMPHREYS WALLACE HUMPHREYS PC
[e-mail]
Chase M. Haller
NEIGHBORHOOD CHRISTIAN LEGAL CLINIC
[e-mail]
Jessica Lauren Pixler
ROTHBERG LOGAN & WARSCO LLP
[e-mail]
Susan Elizabeth Trent
ROTHBERG LOGAN & WARSCO LLP
[e-mail]

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Mark W. Baeverstad
ROTHBERG, LOGAN & WARSCO LLP
[e-mail]
Thomas B. Trent
ROTHBERG, LOGAN & WARSCO LLP
[e-mail]
Syed Ali Saeed
SAEED & LITTLE LLP
[e-mail]
Zachary Myers VanVactor
STITES & HARBISON PLLC-Louisville
[e-mail]
Bruce Benjamin Paul
STITES & HARBISON, LLP
[e-mail]

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