O'FLYNN v. PHH MORTGAGE CORPORATION et al
Filing
57
ORDER - The Court GRANTS Defendants' Motion to Strike Certain Allegations from the Complaint, 35 , GRANTS Defendants' Motion to Strike Class Allegations, 36 , and STRIKES the following allegations from the Second Amended Complaint, 33 : SEE ORDER. The Court ORDERS Plaintiffs to file a Third Amended Complaint which reflects the Court's rulings within 7 days of this Order. See Order. Signed by District Judge Jane Magnus-Stinson on 10/23/2024. (KAA)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
DAVID ROBERT O'FLYNN, DONALD L. WILHOLD,
and JAMES ADDISON,
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Plaintiffs,
v.
PHH MORTGAGE CORPORATION and OCWEN
FINANCIAL CORPORATION,
Defendants.
1:22-cv-00335-JMS-MG
ORDER
Plaintiffs David O'Flynn and James Addison filed for Chapter 13 bankruptcy in the United
States Bankruptcy Court for the Southern District of Indiana (the "Bankruptcy Court"), and
Plaintiff Donald Wilhold filed for Chapter 13 bankruptcy in the United States Bankruptcy Court
for the Southern District of Illinois. Subsequently, together they filed an Adversary Proceeding in
the Bankruptcy Court against Defendants PHH Mortgage Corporation ("PHH") and Ocwen
Financial Corporation ("Ocwen") 1. [O'Flynn v. PHH Mortgage Corp., et al., Adversary No. 2150079 (S.D. Ind. Bk. Ct.) (the "Adversary Proceeding").] 2 In their Amended Complaint in the
Adversary Proceeding, Plaintiffs alleged that Defendants engaged in fraudulent practices in
1
Defendants refer to Ocwen as "Onity Group Inc., formerly known as Ocwen Financial Corp." in
recent filings. [See, e.g., Filing No. 35 at 1.] Ocwen is the entity named as a Defendant in this
case, so the Court will continue to refer to it as "Ocwen." To the extent Ocwen believes it is
improperly named, it is ORDERED to confer with Plaintiffs regarding that issue and to file the
appropriate motion to correct the discrepancy, if necessary. The Court will not change Ocwen's
name absent such a motion.
2
Plaintiffs also asserted claims against AltiSource Solutions, Inc. ("AltiSource"), but the Court
dismissed all claims against that entity in a May 31, 2024 Order. [Filing No. 24.]
1
connection with the servicing of home mortgage loans owed by individuals in Chapter 13
bankruptcy proceedings, and asserted various claims under the Racketeer Influenced and Corrupt
Organizations Act ("RICO"), the Fair Debt Collection Practices Act ("FDCPA"), the Real Estate
Settlement Procedures Act ("RESPA"), the Indiana Deceptive Consumer Sales Act, Ind. Code §
14-5-0.5, et seq. ("IDCSA"), and the Indiana Home Loan Practices Act, Ind. Code § 24-9-1, et seq.
("IHLPA"); and claims that Defendants violated a discharge injunction and automatic stay imposed
by the Bankruptcy Court. [Filing No. 19 at 69-87.] On May 31, 2024, the Court issued an Order
sustaining Ocwen's Objections to Proposed Findings of Fact and Conclusions of Law that the
Bankruptcy Court had issued on Motions to Dismiss filed by Defendants, and ultimately rejected
the Report and Recommendation in part and adopted it in part. [Filing No. 24.]
After the Court issued its May 31, 2024 decision – which significantly reduced the claims
that were to proceed in this Court – Plaintiffs, at the Magistrate Judge's direction, filed a Class
Action Complaint and Demand for Jury Trial (the "Second Amended Complaint"). [Filing No.
33.] Defendants have now filed a Motion to Strike Certain Allegations from the Complaint, [Filing
No. 35], and a Motion to Strike Class Allegations, [Filing No. 36], both of which are ripe for the
Court's decision.
I.
MOTION TO STRIKE CERTAIN ALLEGATIONS
A. Background
In its May 31, 2024 Order, the Court dismissed all claims asserted by Kenneth Novak, a
former Plaintiff in this case; found that Mr. O'Flynn's and Mr. Addison's claims for violation of the
discharge injunction, Fed. R. Bankr. P. 3002.1, and 11 U.S.C. § 362(a) (Count VII) would proceed
in the Bankruptcy Court; dismissed many of the remaining Plaintiffs' other claims; and set forth
the two claims that would proceed in this Court as follows:
2
•
Mr. O'Flynn's, Mr. Wilhold's, and Mr. Addison's FDCPA claim against Ocwen
(Count III); and
•
Mr. O'Flynn's and Mr. Addison's IDCSA claim (Count V) to the extent that it is
not based on conduct that violated the Bankruptcy Code or the Fair Credit
Reporting Act ("FCRA").
[Filing No. 24 at 26.] The Court requested that the Magistrate Judge "confer with the parties to
develop a case management plan and to discuss possible resolution of the claims that remain in
this Court as soon as practicable." [Filing No. 24 at 26.]
Subsequently, the Magistrate Judge held a status conference and on July 3, 2024, he issued
an Order noting that the Amended Complaint contained over 300 allegations, that "[s]ome of these
allegations are relevant to the Bankruptcy Count, and some are relevant to the District Court
Counts," and that "[t]o properly divide and streamline these separate proceedings, the Court orders
Plaintiffs [to] file two complaints, a Count VII complaint in the Bankruptcy proceeding, and a
Counts III and IV complaint in the District Court proceeding." [Filing No. 29 at 1.] Implied in
this Order was the directive that the new Complaint only contain allegations relevant to Counts III
and IV.
Plaintiffs filed the Second Amended Complaint on July 19, 2024. [Filing No. 33.] While
it only contains the FDCPA and IDCSA claims (re-numbered as Counts I and II, respectively), it
contains 267 paragraphs of allegations plus 31 paragraphs specific to the FDCPA and IDCSA
claims – even more than the First Amended Complaint, which contained 246 paragraphs of
allegations plus 26 paragraphs specific to those counts. [See Filing No. 19 at 26-68; Filing No. 19
at 77-79; Filing No. 19 at 80-82; Filing No. 33.]
B. Standard of Review
Federal Rule of Civil Procedure 12(f) provides that the Court "may strike from a pleading
an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R.
3
Civ. P. 12(f). In the Seventh Circuit, motions to strike are generally disfavored, but such a motion
"may serve to expedite, not delay, when it seeks to strike portions of a pleading to remove
unnecessary clutter from the case." Schmitz v. Four D Trucking, Inc., 2014 WL 309190, at *2
(N.D. Ind. Jan. 28, 2014) (quotations and citations omitted). The Court "has considerable
discretion" in evaluating and granting a motion to strike redundant material. Delta Consulting
Grp., Inc. v. R. Randle Const., Inc., 554 F.3d 1133, 1141 (7th Cir. 2009) (citation omitted).
C. Discussion
In their Motion to Strike, Defendants request that the Court strike allegations falling into
five categories: (1) those that relate to Mr. Novak, whose claims the Court has dismissed; (2) those
that relate to a "curable deceptive act" under the IDCSA because Plaintiffs have withdrawn that
claim; (3) those that relate to the IDCSA claims being based on violations of the Bankruptcy Code
and/or the FCRA because the Court dismissed those claims; (4) those regarding the relationship
between AltiSource and Ocwen because they relate to the RICO claims, which have been
dismissed; and (5) Plaintiffs' request for punitive damages, because none of the remaining claims
authorize that relief. [Filing No. 35 at 4-6.] Defendants attach a chart setting forth which
paragraphs in the Second Amended Complaint fall within which category of allegations that they
seek to strike. [Filing No. 35-1 at 2.] The Court addresses each category of allegations in turn.
At the outset, however, the Court addresses Plaintiffs' 3 argument in their response brief that the
Motion to Strike is untimely.
3
The response was filed on behalf of Mr. O'Flynn, Mr. Novak, and Mr. Wilhold – but not Mr.
Addison. As noted, Mr. Novak no longer has viable claims in this case. [See Filing No. 24.] Mr.
Addison does have viable claims, but the response was not filed on his behalf, [see Filing No. 48
at 1 (specifying that the response is filed on behalf of Mr. O'Flynn, Mr. Novak, and Mr. Wilhold)],
and he has not otherwise responded. For simplicity, the Court refers to Mr. O'Flynn and Mr.
Wilhold as "Plaintiffs," but notes that this does not include Mr. Addison since the response was not
filed on his behalf.
4
1. Timeliness of Motion to Strike
In its response to Defendants' Motion to Strike, Plaintiffs assert that a Rule 12(f) motion
must be filed either before responding to the pleading or within 21 days after being served with
the pleading. [Filing No. 48 at 2.] They argue that "despite having been served with the 'same'
pleading more than a year ago, and having already responded to the 'same' pleading by way of its
Motion to Dismiss, [Defendants] seek[ ] to parlay the Court's acquiescence in Ocwen's request that
Plaintiffs' (sic) file a revised complaint under this cause number so to 'properly divide and
streamline these separate proceedings' into an otherwise improper third crack at whittling down
[the] operative Complaint." [Filing No. 48 at 2, n.1.]
Defendants argue in their reply that the 21-day deadline in Rule 12(f) only applies if a
response to the pleading is not permitted, but a response to the Second Amended Complaint is
allowed here. [Filing No. 54 at 2.] They contend that they filed their Motion to Strike before their
response to the Second Amended Complaint was due, in compliance with Rule 12(f). [Filing No.
54 at 2.] Defendants note that Plaintiffs admit that they filed essentially the same complaint when
they were "directed by this Court to file something different," and that they "continue to brazenly
ignore" the Court's orders. [Filing No. 54 at 2.]
Rule 12(f)(2) provides that a motion to strike may be filed "before responding to the
pleading or, if a response is not allowed, within 21 days after being served with the pleading." Fed.
R. Civ. P. 12(f)(2). Plaintiffs' reliance on the 21-day deadline is misplaced because Defendants are
entitled to file a response to the Second Amended Complaint. Accordingly, the 21-day deadline
does not apply. Instead, Defendants were required to file the Motion to Strike before responding
to the Second Amended Complaint, which they have done. Their Motion to Strike is timely under
Rule 12(f)(2).
5
Further, any suggestion that the Motion to Strike constitutes an "improper third crack at
whittling down [the] operative Complaint," [Filing No. 48 at 2, n.1], is incorrect and disingenuous.
The Magistrate Judge specifically ordered Plaintiffs to file an amended complaint to "streamline"
the litigation in light of the Court's dismissal of Mr. Novak's claims and of many of the remaining
Plaintiffs' claims. Instead, Plaintiffs ignored that Order, filed essentially the same complaint, and
now accuse Defendants of wrongdoing. Defendants' Motion to Strike was timely filed and
appropriate under the circumstances, as discussed more fully below.
2. Allegations Related to Mr. Novak
In support of their Motion to Strike, Defendants argue that Plaintiffs "include five pages of
allegations that are specific to [Mr.] Novak…, plus others throughout the [Second Amended]
Complaint, and include him as a party to both [remaining] counts." [Filing No. 35 at 4.]
Defendants assert that "[t]here are no surviving claims with respect to which Novak-specific
allegations would be material or pertinent," so the Court should strike those allegations. [Filing
No. 35 at 4.]
Plaintiffs do not address Defendants' Novak-specific arguments in their response brief.
[Filing No. 48.] Instead, they set forth the following general arguments without any effort to tie
them to the specific allegations that Defendants seek to strike:
•
"Mere redundancy or immateriality of allegations is not enough to trigger the
drastic measure of striking the pleading or parts thereof; the pleading must be
prejudicial to the defendant."
•
"Here, [Defendants] only argue[ ] the allegations are irrelevant, [they] do not
make any requisite showing they have no possible relation to the controversy at
hand."
•
"[E]ach factual allegation does bear such a tangential relationship even though
they may be presently tied to a now dismissed claimant or cause of action."
6
•
"Plaintiffs' (sic) were not required to exhaustively plead all facts and conduct in
support of their claims."
•
"Similarly, discovery may result in Plaintiffs' (sic) seeking to raise additional
causes of action stemming from variations of conduct already alleged."
•
"[Defendants have] failed to demonstrate any of the allegations would result in
undue prejudice and [do] not otherwise argue they are scandalous."
•
"To be sure, the challenged allegations do not 'confuse[ ] the issues' and are
neither sufficiently complex nor so numerous as to place any meaningful burden
on [Defendants]."
[Filing No. 48 at 3-4.]
Defendants point out in their reply that Plaintiffs did not address the Novak-specific
allegations. [Filing No. 54 at 3.]
Because Plaintiffs did not address Defendants' argument that the Court should strike any
allegations related to Mr. Novak since all of his claims have been dismissed, they have waived any
opposition to it. See Bonte v. U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010) ("Failure to
respond to an argument…results in waiver."). In any event, Defendants are correct. The Court
dismissed all of Mr. Novak's claims in its May 31, 2024 Order, [see Filing No. 24], and Plaintiffs
do not even attempt to explain how any allegations related to him could be relevant to the
remaining claims in this case.
Rather, Plaintiffs argue that Defendants have not shown that any superfluous allegations
are prejudicial. But the case upon which Plaintiffs rely in arguing that Defendants must show
prejudice also instructs that allegations may be stricken if they "bear[ ] no possible relation to the
controversy." Talbot v. Robert Matthews Dist. Co., 961 F.2d 654, 664 (7th Cir. 1992). That is
certainly the case here. The Second Amended Complaint is in direct contravention of the
Magistrate Judge's July 3, 2024 Order, which directed Plaintiffs to file a new Complaint in order
to "streamline" the litigation going forward. This "streamlining" was necessary because the Court
7
had dismissed many of the claims, including all of Mr. Novak's claims. Instead, Plaintiffs included
over 40 paragraphs of allegations specific to a Plaintiff whose claims have been dismissed from
this litigation, and held steadfast in the inclusion of those allegations by not conceding in their
response brief that those allegations should not have been included. This has resulted in a waste
of time for Defendants' counsel and a waste of judicial resources for the Court.
Accordingly, the Court GRANTS Defendants' Motion to Strike as to all allegations related
to Mr. Novak, and STRIKES paragraphs 147-185, 252, 261, 269 (reference to Mr. Novak only),
and 282 of the Second Amended Complaint.
3. "Curable Deceptive Act" Allegations Under the IDCSA
In support of their Motion to Strike, Defendants argue that Plaintiffs withdrew their IDCSA
claim based on a "curable deceptive act" in their response to Defendants' Motion to Dismiss, but
still allege that Defendants committed curable deceptive acts in their Second Amended Complaint.
[Filing No. 35 at 4.] They request that the Court strike those allegations. [Filing No. 35 at 4-5.]
Again, Plaintiffs do not specifically address Defendants' arguments, [see Filing No. 48],
and Defendants point out that shortcoming in their reply, [see Filing No. 54].
Plaintiffs have waived any opposition to Defendants' argument, Bonte, 624 F.3d at 466, and
Defendants' argument is well-taken in any event. There is no dispute that Plaintiffs abandoned
their IDCSA claim based on a "curable deceptive act." [See Filing No. 19-3 at 32.] They have not
set forth any reason why allegations related to curable deceptive acts should remain in the Second
Amended Complaint, and the Court GRANTS Defendants' Motion to Strike those allegations and
STRIKES paragraphs 290 (reference to "both curable and" only) and 291 of the Second Amended
Complaint.
8
4. Allegations Related to IDCSA Claims Based on Bankruptcy Code or FCRA
Violations
In support of their Motion to Strike, Defendants argue that Plaintiffs' IDCSA claims to the
extent they were based on violations of the Bankruptcy Code or the FCRA have been dismissed,
and that "extraneous allegations" relating to violating the Bankruptcy Code or the FCRA
"confuse[] the issues and make[ ] it less clear to [Defendants] the nature of the claims against
[them] and how the alleged bankruptcy and credit reporting violations described in the [Second
Amended] Complaint are distinguished from the purported [IDCSA] claims." [Filing No. 35 at
5.]
Plaintiffs did not address this argument in their response, [Filing No. 48], as Defendants
point out in their reply, [Filing No. 54].
Again, Plaintiffs have waived any opposition to Defendants' argument. Bonte, 624 F.3d at
466. And Defendants are correct – the Court dismissed Mr. O'Flynn's and Mr. Addison's IDCSA
claims 4 to the extent they were based on conduct that violated the Bankruptcy Code or the FCRA,
[Filing No. 24 at 14], and Plaintiffs have not explained why those allegations are relevant to the
remaining claims. The Court GRANTS Defendants' Motion to Strike as to allegations related to
the IDCSA claims being based on violations of the Bankruptcy Code or the FCRA and STRIKES
paragraphs 293 (reference to "collecting or seeking to collect improper and inflated fees and
charges" and "reporting inaccurate credit information" only) and 297.
4
The Court also dismissed Mr. Wilhold's IDCSA claim no matter its basis, because the real estate
for which he held the mortgage relevant to this action is located in Illinois, so the IDCSA did not
apply.
9
5. Allegations Regarding Relationship Between AltiSource and Ocwen
Defendants argue in support of their Motion to Strike that AltiSource was a defendant in
this case only with respect to Plaintiffs' RICO and unjust enrichment claims, both of which were
dismissed. [Filing No. 35 at 5.] They note that "Plaintiffs supported their RICO claims in part
with extensive allegations regarding the relationship between [Ocwen] and Alti[S]ource," that
"[t]he only time Plaintiffs relied on those allegations in the motion to dismiss briefing…was in
support of their RICO claims," and that "[n]evertheless, Plaintiffs' [Second Amended] Complaint
contains dozens of the same allegations about the relationship between [Ocwen] and Alti[S]ource."
[Filing No. 35 at 5-6.]
Plaintiffs do not address this argument in their response brief, [see Filing No. 48], as
recognized by Defendants in their reply, [Filing No. 55].
Again, Plaintiffs have waived any opposition to Defendants' argument. Bonte, 624 F.3d at
466. Moreover, the Court finds that allegations regarding Ocwen's relationship with a party that
is no longer a defendant, which were made to support claims that are no longer a part of this
lawsuit, should be stricken. Accordingly, it GRANTS Defendants' Motion to Strike allegations
relating to the relationship between Ocwen and AltiSource and STRIKES paragraphs 3 (allegation
that "[t]o obtain these services Ocwen historically funneled all of the work through AltiSource who
then ordered the services using a network of third-party vendors" only), 5 (reference to "a program
maintained and provided by AltiSource" only), 39-74, 80, and 82-86.
6. Request for Punitive Damages
Finally, Defendants argue that neither the FDCPA nor the IDCSA authorize an award of
punitive damages, so the Court should strike Plaintiffs' request for punitive damages. [Filing No.
35 at 6.]
10
In their response, Plaintiffs do not address their request for punitive damages, [Filing No.
48], as Defendants point out in their reply, [Filing No. 54].
Because Plaintiffs do not set forth any argument regarding why their request for punitive
damages should not be stricken, they have waived such an argument. Bonte, 624 F.3d at 466. In
any event, punitive damages are not recoverable under the FDCPA or the IDCSA. See Saccameno
v. U.S. Bank Nat'l. Ass'n, 943 F.3d 1071, 1081 (7th Cir. 2019) (noting that only plaintiff's claims
under the Illinois Consumer Fraud and Deceptive Business Practices Act – and not her claims
under the FDCPA or RESPA – could result in punitive damages); Ind. Code § 24-5-0.5-4(a)
(IDCSA allowing recovery of "damages actually suffered" or $500, whichever is greater, and three
times the actual damages or $1,000, whichever is greater, for willful violations). The Court
GRANTS Defendants' Motion to Strike Plaintiffs' punitive damages request and STRIKES
paragraph H of the Prayer for Relief in the Second Amended Complaint.
In sum, the Court GRANTS Defendants' Motion to Strike Certain Allegations from the
Complaint, [Filing No. 35], and STRIKES the allegations noted above. Plaintiffs' inclusion of the
paragraphs in the Second Amended Complaint that are the subject of Defendants' Motion to Strike
demonstrates either a blatant disregard for the Court's 26-page May 31, 2024 Order or laziness –
neither is acceptable. This course of action has wasted Defendants' time and resulted in the
unnecessary expenditure of judicial resources. It is particularly disturbing that Plaintiffs did not
even take the time to address Defendants' specific arguments, instead maintaining that their
inclusion of the irrelevant paragraphs in the Second Amended Complaint is appropriate and
harmless. Perhaps if they had focused on Defendants' arguments, they would have realized that
they were well-taken and conceded that their superfluous allegations have no place in the Second
Amended Complaint. Instead, they attempted to shift the blame to Defendants by accusing them
11
of taking an "improper third crack at whittling down [the] operative Complaint." 5 [Filing No. 48
at 2.] The Court cautions Plaintiffs' counsel that this approach comes dangerously close to
"unreasonably and vexatiously" protracting this litigation, which could result in the imposition of
sanctions. See 28 U.S.C. § 1927.
II.
MOTION TO STRIKE CLASS ALLEGATIONS
A. Background
In order to evaluate Plaintiffs' class allegations, the Court first sets forth a summary of
Plaintiffs' individual claims. Plaintiffs allege as follows 6:
1. Defendants' Business and Use of REALServicing
Ocwen is a financial services company which focuses on servicing subprime loans owed
by borrowers who have experienced some manner of delinquency. [Filing No. 33 at 3-4.] In 2018,
Ocwen merged its mortgage servicing operations into PHH and began performing its mortgage
servicing operations in the name of PHH. [Filing No. 33 at 4.]
When debtors fell behind on their payments, in addition to assessing late fees, Ocwen
would obtain ancillary services "which are purportedly designed to protect the lender's interest in
the property and permitted by the underlying mortgage and note." [Filing No. 33 at 2.] Without
obtaining verification that the services were permitted by the underlying loan or without notifying
the Bankruptcy Court, Ocwen has collected and continues to collect reimbursement for these
5
The Court is puzzled regarding Plaintiffs' argument that "discovery may result in Plaintiffs' (sic)
seeking to raise additional causes of action stemming from variations of conduct already alleged."
[Filing No. 48 at 3.] The allegations that the Court strikes all relate to claims that have already
been asserted and dismissed. No discovery on already-dismissed claims will be permitted.
6
Plaintiffs' allegations are taken as true for purposes of evaluating the Motion to Strike Class
Allegations only, and do not constitute findings of fact.
12
services through alleged escrow deficiencies, payment delinquencies, and unilaterally increased
principal balances. [Filing No. 33 at 2.] In order to do so, Ocwen used REALServicing, a "system
of record" that helped Ocwen manage its servicing functions and record keeping, despite knowing
of the inherent deficiencies in REALServicing's program. [Filing No. 33 at 2.] Ocwen eventually
transitioned to using a different program, Black Knight MSP, and transferred approximately one
million loans to that servicing platform. [Filing No. 33 at 17-18.] However, the loan transfers "did
not include an audit or correction of the payment misapplications, continued collection of unlawful
fees and costs, collection of escrow deficiencies, and manufactured states of delinquency
experienced by borrowers and debtors such as the Plaintiffs." [Filing No. 33 at 18.]
Ocwen has utilized "Risk Convergence Reports/Spreadsheets" ("RCRs") to track its
collection of fees and charges and its improper servicing of loans in bankruptcy generally. [Filing
No. 33 at 24.] The RCRs show that Defendants' management knew of their failure to comply with
the FDCPA, attributed in part to systemic coding deficiencies with REALServicing. [Filing No.
33 at 24.] Defendants knew that these shortcomings would cause Ocwen "to misapply funds paid
during and after the Chapter 13 case, seek to collect upon fees, costs, and expenses for which it
had no legal right, report inaccurate information to credit reporting agencies, and fail to properly
manage escrow accounts." [Filing No. 33 at 25.]
2. Plaintiffs' Chapter 13 Bankruptcies
a. Mr. O'Flynn
Mr. O'Flynn owed amounts under a mortgage being serviced by Ocwen, filed a Chapter 13
bankruptcy case on November 6, 2012 in the Bankruptcy Court, and shortly thereafter proposed a
Chapter 13 Plan. [Filing No. 33 at 25.] Pursuant to the Chapter 13 Plan, Mr. O'Flynn was to make
regular monthly payments to the Chapter 13 Trustee, from which Ocwen would receive a portion
13
of the amount to maintain the monthly payments it was owed under the mortgage and to address
certain arrearage. [Filing No. 33 at 25-26.]
On December 13, 2017, the Chapter 13 Trustee filed a Notice of Final Cure Payment stating
that Mr. O'Flynn had completed all payments to Ocwen required under the Chapter 13 Plan. [Filing
No. 33 at 26.] Ocwen filed a Response to Notice of Final Cure Payment in which it agreed that
Mr. O'Flynn had paid the full amount required to cure the pre-petition default. [Filing No. 33 at
26.] Also in December 2017, Mr. O'Flynn began making timely and adequate monthly installment
payments on his mortgage. [Filing No. 33 at 26.] He obtained an Order of Discharge in the
Chapter 13 proceeding on February 2, 2018, and his mortgage was to be reinstated according to
the
original
terms
with
"any
amounts
alleged
to
have
arisen
prior
to
his
bankruptcy…extinguished." [Filing No. 33 at 26-27.] Instead, Mr. O'Flynn "exited bankruptcy
with his loan in a manufactured state of delinquency, with a negative escrow balance, and an
assortment of fees and costs for which no notice was provided previously." [Filing No. 33 at 27.]
Defendants then began "aggressive efforts to collect upon the foregoing amounts including without
limitation sending dunning letters, making automated collection calls, and inaccurately reporting
the loan to credit reporting agencies." [Filing No. 33 at 27.]
b. Mr. Wilhold
Mr. Wilhold filed for Chapter 13 bankruptcy on May 22, 2014 in the United States
Bankruptcy Court for the Southern District of Illinois. [Filing No. 33 at 33.] Shortly thereafter,
he proposed a Chapter 13 Plan by which he would make regular monthly payments to the Chapter
13 Trustee of which certain amounts would be forwarded to Ocwen in payment of delinquent
amounts Mr. Wilhold owed on his mortgage. [Filing No. 33 at 33.] Mr. Wilhold's bankruptcy
attorney filed a Proof of Claim on Ocwen's behalf, stating that Ocwen had a secured claim with an
14
arrearage amount of $14,905.67. [Filing No. 33 at 33-34.] Nearly three years later, Ocwen filed
a Proof of Claim asserting a secured claim with an arrearage amount of $13,700.90. [Filing No.
33 at 34.]
The Chapter 13 Trustee filed a Notice of Final Cure Payment on July 11, 2019, and Ocwen
filed a response shortly thereafter in which it agreed that Mr. Wilhold had paid in full the amount
required to cure his pre-petition default. [Filing No. 33 at 34.] In August 2019, Mr. Wilhold began
making timely and adequate post-petition monthly installment payments on his mortgage. [Filing
No. 33 at 34.] He obtained an Order of Discharge on August 14, 2019. [Filing No. 33 at 34.]
Mr. Wilhold's mortgage was to be reinstated according to the original terms, and any right
of Ocwen to recover amounts alleged to have arisen prior to his bankruptcy were extinguished.
[Filing No. 33 at 34-35.] However, Mr. Wilhold "exited bankruptcy with a negative escrow
balance of approximately $3,963.50 and fees and costs not reflected in the Proof of Claim…nor
for which any notice was provided." [Filing No. 33 at 35.] Ocwen then "began efforts to collect
upon the foregoing amounts and dramatically increased his monthly payment obligation,"
including "[sending] collection letters and reporting inaccurate information to credit reporting
agencies." [Filing No. 33 at 35.]
c. Mr. Addison
Mr. Addison filed for Chapter 13 bankruptcy in the Bankruptcy Court on August 21, 2014.
[Filing No. 33 at 37.] Pursuant to his Chapter 13 Plan, Mr. Addison made regular payments to the
Chapter 13 Trustee, from which Ocwen would receive a portion in order to cure arrearages in his
mortgage. [Filing No. 33 at 37.] On May 1, 2019, Defendants filed a Response to Notice of Final
Cure Payment in which they agreed that Mr. Addison had paid the full amount required to cure the
15
pre-petition default on his mortgage, and an Order of Discharge was entered on June 8, 2019.
[Filing No. 33 at 38.]
According to the Chapter 13 Plan, Mr. Addison's mortgage was to be reinstated to its
original terms. [Filing No. 33 at 38.] Mr. Addison continued making timely and adequate monthly
payments, but following his exit from bankruptcy, Defendants "began efforts to collect upon the
foregoing amounts," including "sending dunning letters, making automated collection calls, and
reporting inaccurate information to credit reporting agencies." [Filing No. 33 at 38.]
3. Plaintiffs' Individual Claims
a. FDCPA Claim
Plaintiffs allege that Ocwen violated the FDCPA when it "repeatedly misrepresented the
character, amount, or legal status of [their] loans." [Filing No. 33 at 46.] They allege that Ocwen
misrepresented to them that their loans were delinquent; that they were obligated to pay fees,
charges, or costs they did not in fact owe; or that they were obligated to immediately begin making
monthly payments to cure alleged escrow deficiency balances. [Filing No. 33 at 46-47.] Plaintiffs
allege that Ocwen also violated the FDCPA by inaccurately reporting their loans to credit reporting
agencies without noting that the debts had been disputed; when it used false representations,
through false loan statements reflecting that the loans were delinquent or had unpaid fees or unpaid
escrow deficiencies so as to collect those amounts; by attempting to collect fees and costs for which
notice was not provided as required by the Bankruptcy Code; by placing their loans "in a
manufactured state of delinquency or default"; and by providing inaccurate payoff statements.
[Filing No. 33 at 47.] Additionally, they allege that Ocwen violated the FDCPA by "employing an
unfair and unconscionable means to collect upon the subject debt including but not limited to filing
for foreclosure, concealing its identity via the use of the PHH trade name, making
16
misrepresentations that Plaintiff[s'] loans were audited or reconciled after bankruptcy or when
transferred from REALServicing to Black Knight MSP, and dramatically increasing their monthly
escrow payment obligations." [Filing No. 33 at 47.]
b. IDCSA Claim
Plaintiffs allege that Defendants violated the IDCSA by "capitalizing fees and charges they
knew to be improper via loan modifications, placing loans in manufactured states of delinquency
or default,…failing to perform escrow analysis and calculate proper escrow payments,
mismanaging escrow funds, failing to send interest rate and payment change notices, and failing
to notify Plaintiffs[ ] of alleged escrow shortages and deficiencies." [Filing No. 33 at 49.]
Plaintiffs allege that this conduct "caused borrowers like the Plaintiffs to experience large payment
shocks stemming from dramatic increases to their monthly payment obligations." [Filing No. 33
at 50.] They allege that they relied upon Defendants' conduct "in paying amounts they were not
legally obligated to pay, proceeding with loan modifications or refinances that capitalized amounts
that should not have been, filing tax returns based upon inaccurate documents, and in not formally
disputing or further disputing inaccurate amounts and credit reporting." [Filing No. 33 at 50.]
4. Plaintiffs' Class Claims
Mr. Wilhold and Mr. Addison bring the FDCPA claim on behalf of the following class:
All individuals who were debtors in a Chapter 13 bankruptcy proceeding wherein
an Order of Discharge was entered from August 27, 2015, to present whose first or
second residential mortgage loan was serviced by [Ocwen] during the pendency of
their bankruptcy proceedings, [Ocwen] or [PHH] at the time the Order of Discharge
was entered, and who thereafter received some form of communication from
[Ocwen] or [PHH] regarding any fees, costs, charges, escrow deficiency, or
delinquency predating or occurring within sixty (60) days of the Order of
Discharge.
[Filing No. 33 at 5 (the "Chapter 13 Class"); Filing No. 33 at 46 (omitting Mr. O'Flynn from the
list of Plaintiffs asserting FDCPA Chapter 13 Class claim).]
17
All Plaintiffs bring the IDCSA claim on behalf of the following class:
All individuals who were debtors in a Chapter 13 bankruptcy proceeding wherein
an Order of Discharge was entered in the Southern or Northern Districts of Indiana
from August 27, 2015, to present whose first or second residential mortgage loan
was serviced by [Ocwen] during the pendency of their bankruptcy proceedings,
[Ocwen] or [PHH] at the time the Order of Discharge was entered, and who
thereafter paid or contracted to pay any amounts to [Ocwen] or [PHH], whether
directly or via refinance or loan modification, associated with any fees, costs,
charges, escrow deficiency, increased principal balance, or delinquency predating
or occurring within sixty (60) days of the Order of Discharge.
[Filing No. 33 at 5-6 (the "Indiana Subclass"); Filing No. 33 at 48.]
B. Standard of Review
Federal Rule of Civil Procedure 12(f) allows the Court to "strike from a pleading an
insufficient defense or any redundant, immaterial or scandalous matter." A motion to strike class
allegations, however, is evaluated under Federal Rule of Civil Procedure 23, rather than Rule 12(f).
See Womick v. Kroger Co., 2022 WL 1266630, at *2 (S.D. Ill. Apr. 28, 2022) ("District courts
within the Seventh Circuit 'evaluate motions to strike class allegations under Rule 23, not Rule
12(f).'") (quoting Buonomo v. Optimum Outcomes, Inc., 301 F.R.D. 292, 295 (N.D. Ill. 2014)).
Rule 23 governs class actions, and provides the requirements for class certification. It also
provides that "[a]t an early practicable time after a person sues or is sued as a class representative,
the court must determine by order whether to certify the action as a class action." Fed. R. Civ. P.
23(c)(1)(A). This decision can be made "even before the plaintiff files a motion requesting
certification." Kasalo v. Harris & Harris, Ltd., 656 F.3d 557, 563 (7th Cir. 2011). While a
defendant seeking to strike class allegations before class discovery has taken place and before a
motion for class certification has been filed bears the burden of "proving that the proposed class is
not certifiable," Womick, 2022 WL 1266630, at *2, the plaintiff is "obliged in its complaint to
allege facts bringing the action within the appropriate requirements of [Rule 23]," Cook Cnty. Coll.
18
Tchrs. Union, Local 1600, Am. Fed'n of Tchrs., AFL-CIO v. Byrd, 456 F.2d 882, 885 (7th Cir.
1972).
In order to certify a class, the Court must first find that the putative class is identifiable.
Oshana v. Coca-Cola Co., 472 F.3d 506, 513 (7th Cir. 2006). Then, the Court must find that the
class satisfies the four prerequisites set forth in Rule 23(a), which are that: "(1) the class is so
numerous that joinder of all members is impracticable; (2) there are questions of law or fact
common to the class; (3) the claims or defenses of the representative parties are typical of the
claims or defenses of the class; and (4) the representative parties will fairly and adequately protect
the interests of the class." Fed. R. Civ. P. 23(a). Class certification is not appropriate unless the
named plaintiffs establish all four prerequisites. Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147,
156 (1982). If the putative class satisfies the prerequisites of Rule 23(a), the Court must
additionally find that it satisfies the requirements set forth in Rule 23(b), which vary depending
upon which of three different types of classes is proposed. Oshana, 472 F.3d at 513; Williams v.
Chartwell Fin. Servs., 204 F.3d 748, 760 (7th Cir. 2000). Plaintiffs appear to proceed under Rule
23(b)(3), which requires them to show that "questions of law or fact common to class members
predominate over any questions affecting only individual members, and that a class action is
superior to other available methods for fairly and efficiently adjudicating the controversy." Fed.
R. Civ. P. 23(b)(3).
C. Discussion
In their Motion to Strike Class Allegations, Defendants raise several arguments regarding
the scope of Plaintiffs' class definitions and regarding Plaintiffs' inability to satisfy Rule 23(b)(3)'s
requirements. The Court addresses the arguments in turn.
19
1. Scope of Plaintiffs' Class Definitions
a. The Chapter 13 Class
Defendants note that the Chapter 13 Class definition includes all debtors nationwide who
received "some form of communication" from Ocwen regarding "any fees, costs, charges, escrow
deficiency, or delinquency predating or occurring within sixty (60) days of the Order of
Discharge," and that Plaintiffs assert an FDCPA claim on behalf of the Chapter 13 Class related to
communications that contain "false representations" regarding class members' loans because the
communications represented that certain amounts were due despite them not being collectible
and/or not permitted by law due to the members' bankruptcy proceedings. [Filing No. 36 at 3-4
(emphasis omitted).] Defendants argue that the Chapter 13 Class definition is overly broad
because "not all amounts included on these unidentified 'some form of communication[s]' are
alleged to have been actually discharged in the purported class members' Chapter 13 cases," and
that some debtors who would be included in the class definition "received perfectly compliant
communications that are in some instances even required by several applicable regulations."
[Filing No. 36 at 3-4 (emphasis omitted).] Defendants argue further that the Chapter 13 Class
definition "lacks any objective criteria that would render [Ocwen] a debt collector subject to a
claim for violating the FDCPA," and that "[w]ithout limiting the class definition to those
bankruptcy debtors whose mortgage loans were in default at the time [Ocwen] obtained servicing
rights (thereby making [Ocwen] a 'debt collector' under the FDCPA), the class necessarily includes
individuals who could not have an FDCPA claim against [Ocwen]." [Filing No. 36 at 4.]
Defendants also argue that "some form of communication" is not specific enough to make the
communications sent "in connection with the collection of any debt" or "to collect or attempt to
collect any debt," such that the communication would fall within the FDCPA. [Filing No. 36 at
20
5.] They assert that the Chapter 13 Class definition is also overbroad because it does not exclude
individuals who may have already sought and obtained relief from Ocwen for bankruptcy-related
communications and does not limit class members to those who have complied with the noticeand-cure provisions in their mortgages. [Filing No. 36 at 7.] They contend that because the
Chapter 13 Class definition "includes people who received communications about fees or amounts
even when such communications did not violate any bankruptcy discharge or were not otherwise
wrongful," it is overbroad and the class allegations should be stricken. [Filing No. 36 at 5.]
Plaintiffs argue in their response that it is "purely speculative at this point in the
proceedings whether any…non-actionable communications were sent within the window of time
contained in the class definition," and that "it is just as plausible that all of Ocwen's
communications that fall within the class definition were improper and actionable." [Filing No.
45 at 5-6.] Plaintiffs suggest that they can narrow their class definition "to exclude certain types
of communications" after discovery and assert that "the fact that it is possible that [the] class
definition may need to be narrowed in the future is not a basis for striking their class allegations
now." [Filing No. 45 at 6.] As to Defendants' argument that the class definition does not contain
any criteria that would render Ocwen a debt collector under the FDCPA, Plaintiffs argue that "this
Court has already allowed Plaintiffs' FDCPA claims against Ocwen to proceed after Ocwen's Rule
12 motion," and, again, that Plaintiffs can modify their class definition later, when they move for
class certification. [Filing No. 45 at 6.]
In their reply, Defendants contend that the allegations in the Second Amended Complaint
"do not support an inference that every communication [Ocwen] sent to every Chapter 13 debtor
was somehow actionable," and that "[s]uch speculation cannot be a basis for maintaining a
nationwide class action, which would open the doors to discovery of all of the individual[ ] loan
21
files of all Chapter 13 borrowers nationwide." [Filing No. 52 at 2.] Defendants note that Plaintiffs
do not address several of their arguments and assert that "[t]he Court should not allow Plaintiffs to
proceed in this case purporting to represent a class of individuals who plainly do not have a claim
against [Ocwen]." [Filing No. 52 at 2-3.] Defendants argue that "the sweeping nature" of the
Chapter 13 Class definition is inconsistent with the Court's ruling that narrowed Plaintiffs' claims
and "do[es] not even include the named Plaintiffs themselves." [Filing No. 52 at 3.] They assert
that Mr. Addison did not respond to the Motion to Strike Class Allegations, that Mr. O'Flynn is not
a Chapter 13 Class representative, and that Mr. Wilhold did not comply with the notice-and-cure
provision in his mortgage and his FDCPA claim was dismissed except to the extent that it is based
on inaccurate credit reporting – but the Chapter 13 Class is not defined to include people who were
the subject of inaccurate credit reporting. [Filing No. 52 at 3.]
Rule 23 "requires that a class be defined…clearly and based on objective criteria." Mullins
v. Direct Digit., LLC, 795 F.3d 654, 659 (7th Cir. 2015); Fed. R. Civ. P. 23. Class definitions are
sufficient if they "identify a particular group, harmed during a particular time frame, in a particular
location, in a particular way." Mullins, 795 F.3d at 660. While motions to strike class allegations
are generally disfavored, "if the complaint clearly shows that a motion to certify the proposed class
would be futile, then a court may resolve the issue of class certification in the context of a motion
to strike." Russo v. BRP US Inc., --- F. Supp.3d ----, 2024 WL 2972701, at *3 (E.D. Wis. June 13,
2024); see also 5C Charles Alan Wright & Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE
§ 1383 (3d ed. 1998) ("It seems like the sensible approach here is to permit class allegations to be
stricken at the pleading stage – in part or in their entirety – if it is apparent from the pleadings that
the class cannot be certified or that the definition of the class is overbroad.").
22
The Court acknowledges that the usual practice when a class definition is overbroad is for
the Court to narrow the definition. But this case is significantly different from the usual situation.
Here, Plaintiffs have made no effort whatsoever to address Defendants' arguments regarding
overbreadth, instead simply stating that the problem can be fixed down the road, after discovery.
They should have recognized the overbreadth of their class definitions in light of the Court's May
31, 2024 Order and taken steps to narrow those definitions, but they did not. Indeed, the
overbreadth issues are numerous.
First, the Chapter 13 Class would include all Chapter 13 debtors nationwide who received
any communication from Ocwen regarding "any fees, costs, charges, escrow deficiency, or
delinquency" predating or occurring with 60 days of an Order of Discharge. This would include
those who received FDCPA-compliant communications regarding their ongoing mortgage
responsibilities (which debtors were required to satisfy according to their Chapter 13 plans) and
even communications Ocwen was required to send (including periodic loan statements). The
Chapter 13 Class would also include debtors who filed for Chapter 13 bankruptcy but who were
not in default on loans serviced by Ocwen, taking those communications from Ocwen outside of
the FDCPA's purview. These overbreadth issues make striking the class allegations appropriate.
Miles v. Am. Honda Motor Co., Inc., 2017 WL 4742193, at *5 (N.D. Ill. Oct. 19, 2017) ("[C]ourts
may strike class allegations at the pleading stage when they are facially and inherently deficient.")
(quotation and citation omitted).
Additionally, and significantly, although the Chapter 13 Class definition is overbroad, it
does not appear to include a named Plaintiff who asserts FDCPA claims on behalf of the Chapter
13 Class. The Chapter 13 Class only asserts an FDCPA claim, with Mr. Wilhold and Mr. Addison
as the only Plaintiffs asserting that claim on behalf of the class. [See Filing No. 33 at 46.] But Mr.
23
Addison did not respond to Defendants' Motion to Strike Class Allegations, [see Filing No. 45 at
1 ("Plaintiffs, David R. O'Flynn…, Kenneth Novak…, and Donald L. Wilhold…, themselves and
on behalf of all others similarly situated, by and through undersigned counsel, submit this
Response in Opposition to [the] Motion to Strike Class Allegations.").] 7 Accordingly, Mr. Addison
has waived any opposition to the Motion to Strike Class Allegations, Bonte, 624 F.3d at 466, and
the Court STRIKES his Chapter 13 Class allegations.
As for Mr. Wilhold, the Court notes that it appears that he did not satisfy the notice-andcure provision in his mortgage. [See, e.g., Filing No. 17 at 2-3 (Plaintiffs arguing in their response
to Defendants' Objection to the Bankruptcy Court's Report and Recommendation that even if Mr.
Wilhold failed to comply with the notice-and-cure provision in his mortgage, his RESPA claim
should not be dismissed).] That provision required Mr. Wilhold to first notify Ocwen of an alleged
breach of a mortgage provision (such as attempting to collect on a discharged debt) before
commencing litigation against Ocwen. [See Filing No. 2-7 at 20.] Failure to comply with the
notice-and-cure provision would bar Mr. Wilhold from asserting an FDCPA claim, to the extent it
is based on Ocwen's efforts to collect pursuant to the mortgage. So, his only FDCPA claim would
have to be based on Ocwen's inaccurate reporting to credit reporting agencies. 8 But significantly,
7
To the extent the reference to Mr. Novak is a typographical error (since the Court clearly
dismissed all of Mr. Novak's claims in its May 31, 2024 Order) and Plaintiffs meant to refer to Mr.
Addison instead, they could have filed a motion to correct their response – especially after
reviewing Defendants' reply, which points out the discrepancy. They did not do so, leading the
Court to presume that they did not intend their response to be on behalf of Mr. Addison.
8
Defendants state in their reply brief that Mr. Wilhold's FDCPA claim was dismissed except to the
extent that it is based on inaccurate credit reporting. [Filing No. 52 at 3.] The Court did not
explicitly reach that holding because it was not clearly reached by the Bankruptcy Court in its
Report and Recommendation and because it was not addressed in Defendants' Objection, [see
Filing No. 15; Filing No. 16; Filing No. 24], but acknowledges that if Mr. Wilhold did not comply
with the notice-and-cure provision of his mortgage, he can only bring an FDCPA claim based on
inaccurate reporting to credit reporting agencies.
24
the Chapter 13 Class definition does not refer in any way to inaccurate reporting to credit reporting
agencies, and focuses instead only on communications from Ocwen to the debtor. Mr. Wilhold
cannot represent individuals whose FDCPA claims rest only on those communications.
In short, the Chapter 13 Class is overbroad, Mr. Addison has waived any argument that the
Chapter 13 Class's allegations should not be stricken, and neither Mr. Addison nor Mr. Wilhold
can represent the Chapter 13 Class as it is currently defined.
b. The Indiana Subclass
In support of their Motion to Strike Class Allegations, Defendants argue that the Court has
dismissed the IDCSA claim to the extent it is based on violations of the Bankruptcy Code, yet the
Indiana Subclass definition includes debtors who paid charges that accrued prior to or just after
their discharge orders and "includes no criteria to exclude claims based on charges that violated
the Bankruptcy Code." [Filing No. 36 at 6.] They contend that the Indiana Subclass definition
does not "include any criteria to otherwise bring class members' claims within the scope of the
IDCSA based on conduct that did not violate the Bankruptcy Code." [Filing No. 36 at 6.]
Defendants also assert many of the same overbreadth arguments that they set forth in connection
with the Chapter 13 Class, and argue that the IDCSA claim is based on allegations that "[Ocwen's]
conduct was 'unfair, deceptive, and misleading' because it 'fail[ed] to perform escrow analysis and
calculate proper escrow payments,' 'fail[ed] to send interest rate and payment change notices,' [and]
'report[ed] inaccurate credit information,' among other things," but that "Plaintiffs do not allege
that every single amount paid by every purported class member was either not actually due or was
the subject of some 'unfair, deceptive, and misleading' act by [Ocwen]." [Filing No. 36 at 6.]
Plaintiffs argue in their response that the definition's inclusion of bankruptcy-related
conduct and individuals who were not injured "can be addressed after discovery, when both the
25
Plaintiffs and the Court have the benefit of evidence to craft an appropriately narrow class
definition." [Filing No. 45 at 6.] They assert that "[i]f this Court disagrees with Plaintiffs [after
discovery], then it can narrow the class definition itself." [Filing No. 45 at 7.]
In their reply, Defendants argue that Plaintiffs do not disagree with the assertion that the
Indiana Subclass includes bankruptcy-related conduct that the Court has found to be "an unviable
theory of recovery on [Ocwen's] motion to dismiss," that "this Court already ruled that Plaintiffs
cannot maintain a state-law claim based on alleged violations of the Bankruptcy Code," and that
"Plaintiffs are not entitled to take discovery on a theory that has been dismissed with prejudice."
[Filing No. 52 at 4.]
Plaintiffs' Indiana Subclass definition again reflects their refusal to accept the Court's May
31, 2024 rulings narrowing their claims. The only IDCSA claims that remain are those asserted
by Mr. O'Flynn and Mr. Addison and that are not based on conduct that violated the Bankruptcy
Code or the FCRA. [See Filing No. 24 at 26.] Yet the Indiana Subclass definition focuses on those
who took certain actions within 60 days of receiving their Chapter 13 discharge order. Since their
IDCSA claims cannot be based on violations of the Bankruptcy Code, this criteria no longer is
relevant to their IDCSA claims. Indeed, the Indiana Subclass definition in the Second Amended
Complaint is the same as that set forth in the First Amended Complaint. [Cf. Filing No. 19 at 31
and Filing No. 33 at 5-6.] This exhibits either a lack of attention to detail or a lack of effort on the
part of Plaintiffs' counsel – neither of which is acceptable. Because the Indiana Subclass definition
does not reflect the Court's May 31, 2024 ruling that the IDCSA claims cannot be based on
26
violations of the Bankruptcy Code, the definition is overbroad since it primarily includes
individuals who do not have viable IDCSA claims. 9
In sum, while motions to strike class allegations for overbreadth are often denied in favor
of narrowing the definition after class discovery, the circumstances of this case – including
Plaintiffs' failure to tailor their Chapter 13 Class or Indiana Subclass definitions in light of the
Court's May 31, 2024 rulings, which has resulted in definitions that do not accurately reflect the
claims that are left in this litigation – warrant STRIKING the class allegations due to overbreadth.
2. Individualized Issues of Law and Fact
Defendants argue in support of their motion that Plaintiffs cannot satisfy Rule 23(b)
because "the [Second Amended] Complaint demonstrates that individualized questions of law or
fact will invariably predominate over common ones." [Filing No. 36 at 8.] They assert that
"[d]iscovery as to every individual purported class member would be required to see if they
received communications, whether those communications said anything about the unspecified
'fees, costs, charges, escrow deficienc[ies], or delinquenc[ies]' referenced in the class definition,
the propriety of any of those amounts, and/or whether the borrower paid amounts that violated the
terms of his or her individual bankruptcy plan and discharge order." [Filing No. 36 at 9.] They
note that discovery would also be needed to determine whether, in light of the communications
each class member received, Ocwen was a "debt collector" for purposes of the FDCPA. [Filing
No. 36 at 9.] Defendants argue that, for example, adjudicating Mr. Addison's allegations that
Ocwen's proof of claim filed in his Chapter 13 bankruptcy was incorrect, that Ocwen sent him an
escrow statement which contained misrepresentations, and that he relied on those
9
The Court notes again that Mr. Addison did not respond to the Motion to Strike Class Allegations,
so has waived any arguments to the contrary. Bonte, 624 F.3d at 466. Consequently, the Court
STRIKES Mr. Addison's class IDCSA claims.
27
misrepresentations would "involve a specific analysis of [his] loan transaction, the amounts due,
the 'accuracy' of the amounts claimed, and subjective information about whether [Ocwen's]
communications were 'misrepresentations' or 'fraudulent.'" [Filing No. 36 at 9.] They also note
that "individualized issues would need to be examined as to each class member's mortgage contract
to determine [whether] it contains a [notice-and-cure] provision similar to…[Mr.] Wilhold's
mortgage[ ], which preclude[s] [his] claims in part both individually and as [a] class representative[
]." [Filing No. 36 at 10.] Defendants assert that these individualized issues lead to the conclusion
that a class action is not a superior method of adjudicating the controversy. [Filing No. 36 at 1112.]
Plaintiffs argue in response that "[i]t is practically axiomatic that in any class action there
will need to be some individualized fact-finding in order to determine who the class members are,"
but that "does not mean that those individual issues predominate over common issues; it may be
that there is no substantive disagreement between the parties concerning the identities of the class
members once an analysis of the relevant records is complete." [Filing No. 45 at 7-8.] They assert
that "[t]he fact that the parties will need to do the work to present this Court with…fully-fleshed
out class certification briefs is not a reason to strike the class allegations." [Filing No. 45 at 8.]
Plaintiffs also argue that class treatment is superior to individual cases. [Filing No. 45 at 8.]
In their reply, Defendants argue that "Plaintiffs do not dispute that [an] individualized
review of bankruptcy plans" would be required to adjudicate the claims, but rather "only
conclusively argue that that individualized review and the issues related to it do not predominate."
[Filing No. 52 at 5.]
Predominance "tests whether proposed classes are sufficiently cohesive to warrant
adjudication by representation." Butler v. Sears, Roebuck & Co., 727 F.3d 796, 803 (7th Cir. 2013)
28
(quotation and citation omitted). "[I]t is not bean counting," and "common issues need only
predominate, not outnumber individual issues." Id. (quotation and citation omitted). In evaluating
both predominance and the superiority of a class action, Rule 23(b)(3) instructs the Court to
consider:
(A)
the class members' interests in individually controlling the prosecution or
defense of separate actions;
(B)
the extent and nature of any litigation concerning the controversy already
begun by or against class members;
(C)
the desirability or undesirability of concentrating the litigation of the claims
in the particular forum; and
(D)
the likely difficulties in managing a class action.
Fed. R. Civ. P. 23(b)(3).
This is not a case where a plaintiff seeks to represent a class of individuals who all received
the same form letter from a creditor that they contend violated the FDCPA. See, e.g., Foley v.
Student Assistance Corp., 336 F.R.D. 445, 450-51 (E.D. Wis. 2020) (finding that common issues
predominated over individualized ones where "the issue is whether defendant violated the FDCPA
by sending form letters that sought email addresses of purported class members from third
parties"). Rather, for the Chapter 13 Class, the Court would need to evaluate the nature of the
communication from Ocwen to the class member, determine whether Ocwen was acting within the
scope of the FDCPA, determine whether Ocwen was attempting to collect debts that were actually
owed, and determine whether any payments violated the terms of the class member's Chapter 13
Plan or discharge order. Many of these same determinations would be needed for the IDCSA
claims – such as determining whether amounts Ocwen was attempting to collect were actually
owed, whether each class member's account was delinquent, and whether Ocwen's statements were
accurate – in addition to examining each class member's mortgage for notice-and-cure provisions.
29
And the common questions of fact that Plaintiffs set forth in the Second Amended Complaint
cannot be answered without engaging in these individualized inquiries first. [See Filing No. 33 at
6-8 (Plaintiffs alleging that common questions of fact exist including, for example, "[t]he
frequency at which debtors with loans serviced by Ocwen have exited successfully completed
Chapter 13 bankruptcy proceedings only to still be face[]d with some instance of general
delinquency in relation to fees, charges, costs, negative escrow accounts, negative suspense
balances, or an increased principal balance[ ]" and "[w]hether Defendants have made knowing
false or incomplete statements to bankruptcy courts or filed documents known to likely contain
material inaccuracies").]
The Court finds that these individualized issues, which must be answered particularly in
light of the overbroad class definitions in order to determine whether Defendants are liable under
the FDCPA or the IDCSA, predominate over any common ones. See Jacks v. DirectSat USA, LLC,
2024 WL 4380256, at *4 (7th Cir. Oct. 3, 2024) (common questions "must resolve an issue that is
central to the validity of the claims in 'one stroke'"); Boundas v. Abercrombie & Fitch Stores, Inc.,
280 F.R.D. 408, 415 (N..D. Ill. 2012) ("Predominance is not satisfied where liability
determinations are individual and fact-intensive.").
The Court STRIKES Plaintiffs' class
allegations for this independent reason. 10
In sum, Plaintiffs' Chapter 13 Class and Indiana Subclass definitions are overbroad, include
individuals who would not have viable claims, and would require the Court to engage in a highlyindividualized analysis of each class member's circumstances to determine liability. Moreover,
while striking class allegations is not always appropriate, the Court finds that the circumstances of
10
Because the Court finds that common issues do not predominate over individualized ones, it
need not consider whether a class action is a superior method of adjudicating the controversy but
notes that it would be difficult, if not impossible, to show the latter in the absence of the former.
30
this case warrant doing so in light of the fact that Plaintiffs did not even attempt to narrow their
class definitions based on the Court's May 31, 2024 rulings and have made no effort to respond to
Defendants' specific arguments or to alleviate the Court's concerns. The Court GRANTS
Defendants' Motion to Strike Class Allegations, [Filing No. 36], and STRIKES all class
allegations in the Second Amended Complaint.
III.
CONCLUSION
For the foregoing reasons, the Court GRANTS Defendants' Motion to Strike Certain
Allegations from the Complaint, [35], GRANTS Defendants' Motion to Strike Class Allegations,
[36], and STRIKES the following allegations from the Second Amended Complaint, [33]:
•
Paragraphs that relate to Mr. Novak: 147-185, 252, 261, 269 (reference to
"Novak" only), and 282;
•
Paragraphs that relate to a "curable" deceptive act: 290 (the reference to "both
curable and" only) and 291;
•
Paragraphs that relate to the IDCSA claims being based on violations of the
Bankruptcy Code or the FCRA: 293 ("collecting or seeking to collect improper
and inflated fees and charges" and "reporting inaccurate credit information"
only) and 297;
•
Paragraphs that relate to the relationship between AltiSource and Ocwen: 3 ("To
obtain these services, Ocwen historically funneled all of the work through
AltiSource who then ordered the services using a network of third-party
vendors" only), 5 ("a program maintained and provided by AltiSource" only),
39-74, 80, and 82-86;
•
Prayer for relief, ¶ H (requesting punitive damages); and
•
All class allegations.
The Court ORDERS Plaintiffs to file a Third Amended Complaint which reflects the
Court's rulings within 7 days of this Order. The Third Amended Complaint must reflect respect
for the Court's May 31, 2024 Order and this Order, and include only allegations that support claims
31
the Court has deemed can proceed. It is Plaintiffs' obligation to focus their amended complaint
on claims that the Court – through the expenditure of considerable time and effort – has found are
viable. The Court warns Plaintiffs that continued disrespect for Court orders and, specifically,
a failure to comply with the May 31, 2024 Order and this Order, will result in the dismissal of
this case. See Brown v. Columbia Sussex Corp., 664 F.3d 182, 192 (7th Cir. 2011) ("[W]e
encourage district courts to provide an explicit warning before…dismissal [as a sanction] is
ordered."); Fed. R. Civ. P. 16(f)(1)(C) (court may dismiss case as sanction for failing to obey a
pretrial order).
Date: 10/23/2024
Distribution via ECF to all counsel of record
32
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