Bilderback v. Ocwen Loan Servicing, LLC

Filing 37

ORDER Granting Defendant's 24 Motion to Dismiss. Plaintiff's 30 Motion for Leave to File Supplemental Authority is Denied. The Clerk of Court is directed to enter judgment in Ocwen's favor and close this case. Signed by Judge Jennifer A. Dorsey on 9/14/2017. (Copies have been distributed pursuant to the NEF - SLD)

Download PDF
1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 4 Dianne Bilderback, 5 Plaintiff 6 Order Granting Dismissal and Denying Motion for Leave to File Supplement v. 7 2:16-cv-01954-JAD-VCF Ocwen Loan Servicing, LLC, [ECF Nos. 24, 30] 8 Defendant 9 10 Plaintiff Dianne Bilderback sues Ocwen Loan Servicing, LLC for inaccurately reporting 11 to credit-reporting agencies a mortgage account that Bilderback had allegedly settled. Bilderback 12 claims that Ocwen’s report has two inaccuracies that violate the Fair Credit Reporting Act 13 (FCRA): (1) the account is reported as charged off with a remaining balance due even though she 14 settled the account; and (2) Ocwen does not report that Bilderback disputed the account’s status 15 as a charge-off rather than paid-in-full. Ocwen moves to dismiss, arguing that: (1) the attempted 16 accord and satisfaction was ineffective, so the account was not settled and was indeed charged 17 off; and (2) any disputes regarding Ocwen’s characterization of the account are meritless, so they 18 don’t need to be reported.1 Because the attempted settlement of Bilderback’s mortgage is an 19 ineffective accord and satisfaction under Nevada common law, Ocwen’s reporting is accurate 20 and Bilderback fails to state a claim upon which relief can be granted. I therefore grant the 21 motion and dismiss Bilderback’s claims with prejudice. 22 Background 23 Like many Nevadans, Bilderback found herself “underwater” after the real-estate bubble 24 burst.2 She sent a check to Ocwen for 10% of the principal balance on a mortgage account as an 25 26 27 28 1 ECF No. 24. I find these matters suitable for disposition without oral argument. LR 78-1. 2 ECF No. 27 at 11. 1 offer to settle it.3 The check was accompanied by a letter explicitly stating that Ocwen was 2 “authorized to deposit the check, provided that [Ocwen] do so with the understanding that it 3 constitutes payment in full. Your negotiation and depositing of the check, even if ‘under 4 protest,’ would constitute your acceptance of our offer.”4 5 Ocwen deposited the check, subtracted its amount from the balance, reported that the 6 account had been charged off, and continued to report that the remaining balance was due and 7 owing on the account.5 Bilderback disputed Ocwen’s reporting with the credit-reporting agencies 8 (TransUnion, Equifax, and Experian) because Ocwen was not reporting that the account was paid 9 in full as conditioned by the letter.6 Eventually, after Ocwen investigated the disputes, it deleted 10 the account from its report to TransUnion but continued to report the account—without any 11 mention of a settlement or subsequent disputes—to the other reporting agencies.7 12 13 Discussion A. 14 Motion-to-dismiss standard Federal Rule of Civil Procedure 8 requires every complaint to contain “[a] short and plain 15 statement of the claim showing that the pleader is entitled to relief.”8 While Rule 8 does not 16 require detailed factual allegations, the properly pled claim must contain enough facts to “state a 17 claim to relief that is plausible on its face.”9 This “demands more than an unadorned, the- 18 defendant-unlawfully-harmed-me accusation”; the facts alleged must raise the claim “above the 19 20 3 Id. 4 ECF No. 23 at 9. 5 ECF No. 23 at 12. 24 6 ECF No. 23 at 3, ¶ 22. 25 7 ECF No. 23 at 3, ¶ 24. 26 8 21 22 23 27 28 Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). 9 Twombly, 550 U.S. at 570. 2 1 speculative level.”10 In other words, a complaint must make direct or inferential allegations 2 about “all the material elements necessary to sustain recovery under some viable legal theory.”11 3 District courts employ a two-step approach when evaluating a complaint’s sufficiency on 4 a Rule 12(b)(6) motion to dismiss. First, the court must accept as true all well-pled factual 5 allegations in the complaint, recognizing that legal conclusions are “not entitled to the 6 assumption of truth.”12 Mere recitals of a claim’s elements, supported only by conclusory 7 statements, are insufficient.13 Second, the court must consider whether the well-pled factual 8 allegations state a plausible claim for relief.14 A claim is facially plausible when the complaint 9 alleges facts that allow the court to draw a reasonable inference that the defendant is liable for the 10 alleged misconduct.15 A complaint that does not permit the court to infer more than the mere 11 possibility of misconduct has “alleged—but not shown—that the pleader is entitled to relief,” and 12 it must be dismissed.16 13 B. Ocwen’s report is not inaccurate under the FCRA. 14 To state a claim under the FCRA, Bilderback must show that: “(1) [s]he found an 15 inaccuracy in [her] credit report; (2) [s]he notified a credit reporting agency; (3) the credit 16 reporting agency notified the furnisher of the information about the dispute; and (4) the furnisher 17 failed to investigate the inaccuracies or otherwise failed to comply with the requirements of 15 18 19 20 10 Iqbal, 556 U.S. at 678. 21 11 22 23 Twombly, 550 U.S. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1989)) (emphasis in original). 12 Iqbal, 556 U.S. at 678–79. 13 Id. 14 Id. at 679. 27 15 Id. 28 16 Twombly, 550 U.S. at 570. 24 25 26 3 1 U.S.C. § 1681s-2(b)(1)(A)-(E).”17 The parties primarily disagree on whether the first and fourth 2 elements are satisfied, but because the fourth element is dependent on the first, I only thoroughly 3 discuss the first. 4 Bilderback claims that the credit report is inaccurate because she settled the account with 5 a valid accord and satisfaction. Ocwen disagrees and argues that the report is accurate because 6 the accord and satisfaction was ineffective, and the account truly was charged off as a loss. 7 Bilderback responds that Ocwen needs to report that she is disputing the charge-off label 8 (because, to her, it should say “paid in full for less than the full balance”); Ocwen counters that 9 the charge-off label is accurate, Bilderback’s dispute is therefore without merit, and the law does 10 not require it to report a meritless dispute. 11 Deciding this motion and the viability of Bilderback’s claims depends on the legal 12 significance of the check and accompanying letter. If Bilderback plausibly alleges that it 13 constituted an accord and satisfaction under Nevada contract law, then she also plausibly alleges 14 the “inaccuracy” element of her FRCA claim; otherwise her claim fails and must be dismissed.18 15 1. 16 In Nevada, an accord is “an agreement whereby one of the parties undertakes to give or Bilderback has not pled a plausible accord and satisfaction. 17 perform, and the others to accept, in satisfaction of a claim, liquidated or in dispute, and arising 18 either from contract or from tort, something other than or different from what he is, or considers 19 himself, entitled to.”19 The party claiming that an accord and satisfaction was reached “must bear 20 the burden of proof and must establish clearly that there was a meeting of the minds of the 21 parties, accompanied by a sufficient consideration.”20 22 23 17 24 Klaizner v. Countrywide, 2015 WL 627927, at *5 (D. Nev. 2015) (unpublished); see also Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1154 (9th Cir. 2009). 25 18 26 See, e.g., Schilling v. JPMorgan Chase & Co., 2017 WL 1479369, at *3 (W.D. Wash. 2017) (slip copy). 27 19 Walden v. Backus, 408 P.2d 712, 713 (Nev. 1965) (internal quotations omitted). 28 20 Id. at 713–14 (emphasis in original). 4 1 a. 2 Insufficient consideration Ocwen argues that the check was insufficient consideration to support a valid accord and 3 satisfaction, and I agree. “Consideration is not adequate when it is a mere promise to perform 4 that which the promissor is already legally bound to do.”21 It is undisputed that Bilderback 5 legally owed the balance on the mortgage; the check and accompanying letter were an offer to 6 satisfy 10% of her legal obligation as if it were 100%. Ocwen received nothing out of the “deal” 7 that it was not already entitled to, so the accord and satisfaction fails for insufficient 8 consideration. 9 b. 10 No meeting of the minds The accord and satisfaction also fails for the additional reason that Bilderback has not 11 pled a meeting of the minds between Ocwen and herself. Even at this motion-to-dismiss 12 stage—where I accept all of the non-moving party’s allegations as true—it is clear that Ocwen 13 did not accept the accord and satisfaction despite the language in the letter. 14 The Nevada Supreme Court’s decision in Pierce Lathing Co. v. ISEC, Inc. illustrates the 15 point.22 Pierce was hired to paint and install moldings at Caesar’s Palace.23 Because of 16 unforseen circumstances, Pierce had to perform additional work that was not initially 17 contemplated by the parties.24 Pierce submitted invoices for the extra work, and ISEC declined 18 to pay.25 A couple weeks later, ISEC sent Pierce two checks totaling $12,028.70 along with a 19 letter that stated, in relevant part: “Execution of this check will constitute full satisfaction of all 20 obligations owed by ISEC, Incorporated to Pierce Enterprises.”26 Pierce deposited the checks 21 22 21 Id. at 714. 22 Pierce Lathing Co. v. ISEC, Inc., 956 P.2d 93 (Nev. 1998) (per curiam). 23 Id. at 94. 24 Id. 27 25 Id. 28 26 Id. 23 24 25 26 5 1 along with a disclaimer that said: “The above terms are not accepted by payee, payee claims extra 2 work in the amount of $71,031.00.”27 Pierce eventually filed suit against ISEC for the remainder 3 and raised essentially the same argument that Ocwen raises here: the accord and satisfaction was 4 ineffective—despite the language in ISEC’s letter—so ISEC was still liable. 5 The Pierce court then considered whether there was a meeting of the minds to support an 6 accord and satisfaction and analyzed two approaches. “In some jurisdictions, conduct revealing a 7 subjective intent not to accept the lower payment as full discharge of their claims is deemed 8 immaterial. The common law in these jurisdictions is that negotiation ‘under protest’ of a 9 conditionally tendered check constitutes an accord and satisfaction as a matter of law.”28 Under 10 this approach, the creditor “can either accept the check on the debtor’s terms, or refrain from 11 negotiating the check and seek the entire disputed amount through the judicial process.”29 The 12 Pierce court declined to follow this approach because it “would often result in unnecessary 13 punishment [to] the creditor. Specifically, it would disallow any creditor access to funds which 14 the debtor already concedes is owed because . . . even a disclaimer would not assist in preserving 15 the creditor’s right to litigate.”30 16 The facts in this case, as alleged by Bilderback, clearly indicate that there was no meeting 17 of the minds between her and Ocwen. Although Ocwen did not include a disclaimer like Pierce 18 did when it deposited the check, Ocwen continued to report the account as charged off with a 19 balance still due and owing. Then, when Bilderback disputed the report, Ocwen verified that the 20 report was accurate. Based on these allegations, and applying Nevada’s subjective-intent 21 approach, I find that Bilderback has pled herself out of any inference that Ocwen agreed to an 22 accord and satisfaction. 23 24 27 Id. at 95. 28 Id. at 97 (internal citations omitted). 27 29 Id. 28 30 Id. 25 26 6 1 c. 2 The other mortgage settlement and TransUnion report Bilderback alleges two facts to show that Ocwen’s report is inaccurate: (1) she settled an 3 account with a separate lender for 10% of the outstanding balance, and that lender reported the 4 account as “paid in full”;31 and (2) the account was deleted from her TransUnion credit report 5 after she demanded a reinvestigation following the results of her first dispute. Neither of these 6 facts show that Bilderback and Ocwen reached an accord and satisfaction—which would render 7 her credit report inaccurate—because neither fact shows that Ocwen received something that it 8 wasn’t already entitled to. 9 2. The dispute was meritless and did not need to be reported. 10 Next, Bilderback claims that Ocwen violated § 1681s-2(b) because it did not report that 11 she disputed the charge-off label on the mortgage, which made her report inaccurate or at least 12 incomplete to the point that it is misleading. But “a furnisher does not report ‘incomplete or 13 inaccurate’ information within the meaning of § 1681s-2(b) simply by failing to report a 14 meritless dispute, because reporting an actual debt without noting that it is disputed is unlikely to 15 be materially misleading.”32 “It is the failure to report a bona fide dispute, a dispute that could 16 materially alter how the reported debt is understood, that gives rise to a furnisher’s liability under 17 § 1681s-2(b).”33 After receiving the notice of dispute from the credit-reporting agencies, Ocwen 18 verified that its reporting was accurate, so it did not report that Bilderback disputed some of the 19 information. As I discussed in section B(1), the parties did not reach an accord and satisfaction 20 under Nevada law, so Ocwen accurately continued to report the account as charged off with a 21 balance remaining. Any challenge to the charge-off label is, therefore, without merit. And 22 because meritless disputes do not need to be reported, Ocwen did not violate the FCRA by failing 23 to report Bilderback’s dispute. So I grant Ocwen’s motion to dismiss. 24 25 31 ECF No. 23 at 3, ¶¶ 16–20. See also id. at 17–20. 27 32 Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1163 (9th Cir. 2009). 28 33 Id. 26 7 1 C. 2 Leave to amend would be futile. Rule 15(a)(2) of the Federal Rules of Civil Procedure directs that “[t]he court should 3 freely give leave [to amend a complaint] when justice so requires.”34 The Ninth Circuit’s 4 amendment policy is generous; it requires a district court to grant leave to amend “even if no 5 request to amend the pleading was made, unless it determines that the pleading could not 6 possibly be cured by the allegation of other facts.”35 7 It would be futile for me to grant Bilderback leave to amend her complaint. Bilderback’s 8 credit report would only be inaccurate under the FCRA if she and Ocwen entered into a valid 9 accord and satisfaction under Nevada law. The letter to Ocwen36 tells me everything I need to 10 know: Bilderback offered to give Ocwen only a portion of what it was already entitled to. 11 Without completely changing the story, she cannot plead new facts that would allow me to infer 12 that the accord and satisfaction was supported by sufficient consideration. So my dismissal is 13 without leave to amend. 14 D. 15 Motion for leave to file supplemental authority Bilderback also moves for leave to file supplemental authority to support its argument 16 that Ocwen’s reporting is inaccurate because it fails to follow the industry standards outlined in 17 the Metro 2 guidelines—a standardized reporting format published by the Consumer Data 18 Industry Association. I need not address whether Ocwen must follow the Metro 2 guidelines 19 because I decide this case entirely on the basis that the parties did not come to an accord and 20 satisfaction. Because I decide the motion to dismiss on different grounds, I do not need 21 supplemental authority on the Metro 2 guidelines. Accordingly, I deny the motion because 22 considering the supplemental information would not affect this outcome. 23 24 25 26 27 28 34 Fed. R. Civ. P. 15(a). 35 Lacey v. Maricopa Cty., 693 F.3d 896, 926 (9th Cir. 2012) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995)). 36 I can consider the letter without converting this motion into a motion for summary judgment because it was included as an exhibit with the complaint, and it was referred to throughout the complaint. 8 1 Conclusion 2 Accordingly, with good cause appearing and no just reason to delay, IT IS HEREBY 3 ORDERED, ADJUDGED, and DECREED that Ocwen’s motion to dismiss [ECF No. 24] is 4 GRANTED. 5 IT IS FURTHER ORDERED that Bilderback’s motion for leave to file supplemental 6 authority [ECF No. 30] is DENIED. This action is DISMISSED with prejudice and without 7 leave to amend. 8 9 10 The Clerk of Court is directed to enter judgment in Ocwen’s favor and CLOSE THIS CASE. DATED: September 14, 2017. 11 _______________________________ ____ _______________ __ __ _________ __ ___ ___ Jennifer A. Dorsey nnifer A Dorsey f fe ors United States District Judge nited States District Judge d tate ate ic u 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?