SPELLS v. OCWEN LOAN SERVICING, LLC
OPINION filed. Signed by Judge Anne E. Thompson on 9/19/2017. (km)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
SEP 19 2017
WILLIAM T. WALSH
Civ. No. 17-4423
OCWEN LOAN SERVICING, LLC
This matter comes before the Court on a motion to dismiss brought by Defendant Ocwen
Loan Servicing, LLC ("Defendant"). (ECF No. 4.) Plaintiff Leroy Spells ("Plaintiff') opposes.
(ECF No. 8.) The Court has decided the Motion after considering the parties' written
submissions without oral argument pursuant to Local Civil Rule 78.l(b). For the following
reasons, Defendant's Motion is granted.
Plaintiff brings this action seeking injunctive relief and damages under the Fair Debt
Collection Practices Act ("FDCPA'), 15 U.S.C. § 1692. Plaintiff alleges that Defendant
attempted to collect a debt it was not owed. (Compl. ,, 14-15.) The relevant facts follow. On
August 18, 2005; Plaintiff executed a promissory note to secure a residential mortgage payable to
EquiFirst Corporation. (Compl. iMf 20-21.) The mortgage was duly recorded on August 29, 2005.
(Id.) The note was later assigned to U.S. Bank National Association ("U.S. Bank"). (Compl.,
14.) On January 28, 2016, Defendant sent Plaintiff a Notice of Intent to Foreclose (the "Notice"),
citing Plaintiffs default on the mortgage. (Compl., 13; Compl., Ex. B, ECF No. 1-1.) At the
time the Notice was sent, U.S. Bank was the mortgage lender and owner of the debt; at no point
did Defendant own the debt in question. (Compl. ,, 14, 19.) 1
Thereafter, U.S. Bank pursued a foreclosure action against Plaintiff in the Chancery
Division Court of the Superior Court of New Jersey in Somerset County. (Compl., 15; Compl.,
Ex. D, ECF No 1-1.)2 That court ultimately granted summary judgment in favor of U.S. Bank.
(Compl., 18.) Mr. Albert Gruber, an employee of Defendant, submitted a certification in
support of U.S. Bank's motion for summary judgment in which he asserted that the Notice had
been sent in accordance with the FFA. (Id.; see also Compl., Ex. C,, 11.) On December 29,
2016, counsel on behalf of U.S. Bank3 sent Plaintiff a letter informing Plaintiff of their intent to
submit the appropriate proofs for entry of a final judgment in the foreclosure action. (Compl. W
23-25; Compl., Ex. G, ECF No 1-1.)
Plaintiff alleges that, because the Notice was sent by Defendant and not by U.S. Bank,
the Notice was per se deficient under New Jersey's Fair Foreclosure Act ("FFA"), N.J.S.A.
2A:50-56. (Id.,, 15-16, 28-29, 33.) Since Defendant was not a "lender" within the meaning of
the FFA, Defendant did not have the right to send such a notice (id. , 19). Moreover, since the
In a letter sent by Defendant to Plaintiff on March 23, 2016, which Plaintiff appended to his
Complaint as Exhibit A, Defendant explains that the servicing rights of the loan were transferred
to Defendant on September 3, 2013, effective with the payment due October 1, 2013. (Compl.,
Ex. A at 1, ECF No. 1-1.) While Defendant serviced the loan, the owner of the loan remained
U.S. Bank National Association, as Trustee for Residential Asset Mortgage Products, Inc. (Id.)
Plaintiffs Complaint muddies whether Defendant was in fact a party to the state court
foreclosure action. (See, e.g., Compl. ,, 13-14, 17-18.) Based on Plaintiffs own exhibits,
Defendant was not a party to the action and did not personally or through its counsel file the state
complaint or litigate the foreclosure action. (See Compl., Exs. C, D, ECF No. 1-1.)
Plaintiffs Complaint seems to suggest this letter came from Defendant's counsel. (Compl.
,, 23-25.) However, the letter only references Defendant insofar as it lists "Ocwen Loan
Servicing, LLC" as "Lender's Mortgage Loan Servicer." (Compl., Ex. G.) It seems to have been
drafted and sent by U.S. Bank's attorneys in reference to the state court litigation.
lender must send such a notice before initiating a foreclosure proceeding, neither Defendant nor
U.S. Bank had the right to initiate a foreclosw:e proceeding. (Id.
ifif 28, 33.) Plaintiff also asserts
that both the Notice and the representation ofFFA compliance made by Mr. Gruber in the
underlying foreclosure litigation constitute false, deceptive, and misleading debt collection
practices in violation of the FDCP A, (id.
mf 24, 39), warranting damages and injunctive relief
W30, 33-34, "Prayer for Relief'). In particular, Plaintiff requests that this Court enjoin and
postpone the foreclosure of the property that was the subject of the mortgage and declare the
foreclosure illegal. (Id.) Plaintiff also asserts a negligence cause of action, presumably on the
basis of New Jersey common law, due to alleged emotional distress from Defendant's abusive
if 36.) Plaintiff filed this Complaint on June 14, 2017. Defendant filed the Motion
to Dismiss now before the court on July 7, 2017.
Federal Rule of Civil Procedure 12(b)(l)
Under Federal Rule of Civil Procedure 12(b)(l), a Defendant may move at any time to
dismiss the Complaint for lack of subject matter jurisdiction on either facial or factual grounds.
Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000) (citing Mortensen v. First
Fed. Sav. & Loan Ass 'n, 549 F.2d 884, 891 (3d Cir. 1977)). In analyzing a facial challenge, a
court ''must consider only the allegations of the complaint and documents attached thereto, in the
light most favorable to the plaintiff." Id.·( citing Mortensen, 549 F.2d at 891). In considering a
factual challenge, however, a court "may consider evidence outside of the pleadings." Id. (citing
Mortensen, 549 F.2d at 891). Regardless of the type of challenge, the plaintiff bears the "burden
of proving that the court has subject matter jurisdiction." Cottrell v. Heritages Dairy Stores, Inc.,
2010 WL 3908567, at *2 (D.N.J. Sept. 30, 2010) (citing Mortensen, 549 F.2d at 891).
Federal Rule of Civil Procedure 12(b)(6)
A motion under Federal Rule of Civil Procedure l2(b)(6) tests the sufficiency of a
complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). The defendant bears the burden
of showing that no claim has been presented. Hedges v. United States, 404 F.3d 744, 750 (3d Cir.
2005). When considering a Rule 12(b)(6) motion, a district court should conduct a three-part
analysis. See Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). "First, the court must 'take
note of the elements a plaintiff must plead to state a claim."' Id. (quoting Ashcroft v. Iqbal, 556
U.S. 662, 675 (2009)). Second, the court must accept as true all of a plaintiffs well-pleaded
factual allegations and construe the complaint in the light most favorable to the plaintiff.4 Fowler
v. UPMC Shadyside, 578 F .3d 203, 210-11 (3d Cir. 2009); see also Connelly v. Lane Const.
Corp., 2016 WL 106159 (3d Cir. Jan. 11, 2016). However, the court may disregard arty
conclusory legal allegations. Fowler, 578 F.3d at 203. Finally, the court must determine whether
the "facts are sufficient to show that plaintiff has a 'plausible claim for relief."' Id. at 211
(quoting Iqbal, 556 U.S. at 679). If the complaint does not demonstrate more than a "mere
possibility of misconduct," the complaint must be dismissed. See Gelman v. State Farm Mut.
Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009) (quoting Iqbal, 556 U.S. at 679).
While a district court considering a motion to dismiss must generally limit its an.alysis to the
pleadings, "an exception to the general rule is that a document integral to or explicitly relied
upon in the complaint may be considered without converting the motion [to dismiss] into one for
summary judgment." Sheldrick v. Wells Fargo Bank, N.A., 2016 WL 7325473, at *1 n.1 (D.N.J.
Dec. 16, 2016) (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.
1997) (emphasis and alteration in original)). The court may also look beyond a complaint to
public records, including judicial proceedings. Rycoline Prod., Inc. v. C & W Unlimited, 109
F.3d 883, 886 (3d Cir. 1997); S. Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Grp.
Ltd., 181F.3d410, 426 (3d Cir. 1999). Plaintiffs Complaint alleges deficiencies in the
foreclosure proceedings that resulted in a judgment in New Jersey State Court, referencing the
"Underlying Litigation" (the foreclosure action) throughout his Complaint. (See, e.g., Compl. ifif
15, 17, 19, 22.) Defendant has attached to its Motion the judgment rendered in that underlying
litigation (Def.'s Mem. Mot. Dismiss, Ex. A, ECF No. 4-1)-which is referenced throughout
Plaintiffs Complaint (Compl. ifif 24-25). The Court will accordingly consider this document.
Defendant makes four separate arguments in its Motion to Dismiss. Although Defendant
purports to challenge only the sufficiency of Plaintiff's Complaint under Federal Rule of Civil
Procedure 12(b)(6), Defendant's first argument questions the Court's subject matter jurisdiction
and therefore is governed by Rule 12(b)(l). The Court will address each argument in turn below.
This Court lacks subject matter jurisdiction under Rooker~Feldman.
Defendants first move to dismiss the complaint for lack of jurisdiction under the RookerF eldman doctrine. D.C. Court ofAppeals v. Feldman, 460 U.S. 462, 482 (1983); Rooker v.
Fidelity Trust Co., 263 U.S. 413, 416 (1923). Pursuant to this doctrine, federal district courts lack
subject matter jurisdiction to review state court judgments. Marks v. Stinson, 19 F.3d 873, 885
n.11 (3d Cir. 1994); see also Moncriefv. Chase Manhattan Mortg. Corp., 275 F. App'x 149, 152
(3d Cir. 2008). In order to avoid rendering a preexisting state court ruling void or ineffectual, a
district court cannot "entertain federal claims that (1) were previously adjudicated in state court
or (2) are inextricably intertwined with a prior state court decision." Otto v. Wells Fargo Bank,
N.A., 2016 WL 8677313, at *3 (D.N.J. July 15, 2016), ajjd, 2017 WL 2364377 (3d Cir. May 31,
2017). "If the relief requested in the federal action requires determining that the state court
decision is wrong or would void the state court's ruling, then the issues are inextricably
intertwined and the district court has no subject matter jurisdiction to hear the suit." FOCUS v.
Allegheny Cty. Court of Common Pleas, 15 F.3d 834, 840 (3d Cir. 1996) (quoting Charchenko v.
City ofStillwater, 41F.3d981, 983 (8th Cir. 1995)).
In the foreclosure context, the Third Circuit has repeatedly found that the RookerF eldman doctrine bars a plaintiffs federal claims seeking redress of a state court foreclosure
judgment. See, e.g., In re Madera, 586 F .3d 228, 232 (3d Cir. 2009); In re Knapper, 401 F .3d
573, 581 (3d Cir. 2005); Moncrief, 215 F. App'x at 152; Ayres-Fountain v. E. Sav. Bank, 153 F.
App'x 91, 92 (3d Cir. 2005); see also Otto, 2016 WL 8677313, at *3 (collecting cases). In view
of this precedent, Plaintiffs claims against Defendant are clearly barred. Plaintiff alleges
deficiencies in the foreclosure procedure and makes an explicit request that this Court stop the
foreclosure action. (Compl. ifif 28-34.) Plaintiff's request for injunctive relief would necessarily
require review of the judgment entered by the Superior Court of New Jersey in December 2016.
(See Def.' s Mem. Mot. Dismiss, Ex. A.) In that decision, the Superior Court determined that the
January 28, 2016 Notice which Defendant sent to Plaintiff as the loan servicer on behalf of
lender U.S. Bank satisfied the requirements of the FFA and was neither misleading nor otherwise
improper. (Def.'s Mem. Mot. Dismiss, Ex. A at 9-11.) Since Plaintiff urges the Court to find
otherwise (Compl. ml 28-39), this Court would be required to review that state court judgment
and potentially render it void. See, e.g., Sheldrick, 2016 WL 7325473, at *5. Accordingly,
Plaintiffs claims are inextricably intertwined with the state court decision and barred by Rooker-
F eldman. Defendant's Motion to Dismiss is granted.
Res Judicata and the Entire Controversy Doctrine
The Court also finds that resjudicata and New Jersey's expansive Entire Controversy
doctrine offer an alternative, sufficient ground for the dismissal of Plaintiff's Complaint. See
Ayres-Fountain, 153 F. App'x at 93. Under federal law, resjudicata, also known as claim
preclusion, determines whether a state court judgment has preclusive effect in a subsequent
federal action. See Sheldrick, 2016 WL 7325473, at *6-7; see also Moncrief, 275 F. App'x at
153. Three elements are required for preclusive effect: "( 1) a final judgment on the merits in a
prior suit involving (2) the same parties or their privies and (3) a subsequent suit based on the
same cause of action." Post v. Hartford Ins. Co., 501F.3d154, 169 (3d Cir. 2007) (quoting
Lubrizol Corp. v. Exxon Corp., 929 F.2d 960, 963 (3d Cir. 1991)). Resjudicata applies not only
to claims (or defenses) actually raised in the prior action, "but also claims that could have been
brought." In re Mullarkey, 536 F.3d 215, 225 (3d Cir. 2008).
New Jersey's unique brand of res judicata ·is the Entire Controversy doctrine, "an
extremely robust claim preclusion device that requires adversaries to join all possible claims
stemming from an event or s~ries of events in one suit." Paramount Aviation Corp. v. Agusta,
178 F.3d 132, 135 (3d Cir. 1999). In essence, the doctrine requires a party to bring all claims,
counterclaims, and cross-claims arising out of the same transaction or occurrence against all
relevant parties or risk losing those claims forever in a subsequent action. See Sheldrick, 2016
WL 7325473, at *7 (citingRyco/ine Prods., Inc., 109 F.3d at 885). N.J. Ct. R. 4:64-5 defines
permissible claims in mortgage foreclosure actions as those which are "germane" to the
foreclosure-claims which "arise out of the mortgage that is the basis of the foreclosure action."
Coleman v. Chase Home Fin., LLC ex rel. Chase Manhattan Mortg. Corp., 446 F. App'x 469,
472 (3d Cir. 2011); see also N.J. Ct. R. 4:30A. Thus, any claim arising out of the mortgage must
be precluded under the Entire Controversy doctrine.
All of Plaintiffs claims arise out of the mortgage which was the subject of the state court
foreclosure action. They are thus all "germane" to the foreclosure and precluded from this
Court's consideration. Indeed, it seems Plaintiff raised versions of some of these claims in the
state court foreclosure action as defenses. (Compare Compl. ifif 18-19, 24, 33-34, 39 (making
claims about improper conduct by U.S. Bank, a nonparty here), with Def. 's Mem. Mot. Dismiss,
Ex. A at 8-11 (addressing defenses raised by Plaintiff in the state court foreclosure action).)
Nevertheless, even those that were not raised-including specific allegations against Defendant,
who was·not a party to the foreclosure action-are precluded under the Entire Controversy
doctrine. Plaintiffs chief allegation is that Defendant, the loan servicer on Plaintiffs mortgage,
had no authority to collect Plaintiffs debt, and therefore that the Notice sent by Defendant on
January 28, 2016 was defective, tainting the rest of the foreclosure action. 5 This claim is
decidedly germane to the foreclosure action. New Jersey law assigns litigants the responsibility
to raise all claims and join all necessary parties in an action or otherwise risk forfeiting those
claims. Accordingly, were the Court not barred from hearing this Complaint under Rooker-
Feldman, Defendant's Motion to Dismiss would still be granted because Plaintiff's claims are
barred under New Jersey's Entire Controversy doctrine, a version of res judicata.
Defendant also argues that Plaintiff cannot seek damages under the FFA because the FFA
does not create a private right of action; that Plaintiff's claims are barred by New Jersey's
absolute litigation privilege because they derive in part from statements made in filings in the
foreclosure action; and that Plaintiff fails to state a claim under the FDCPA in not alleging facts
that show Defendant is a debt collector. Because the Rooker-Feldman doctrine and New Jersey's
Entire Controversy doctrine both bar consideration of any of Plaintiff's claims, the Court need
not consider Defendant's alternative grounds for dismissal under Rule 12(b)(6).
For the reasons stated herein, Defendant's Motion is granted, and Plaintiffs Complaint is
dismissed. An appropriate order will follow.
As discussed above, the state court already determined thatthe January 28, 2016 Notice
(Compl., Ex. B, ECF No. 1-1) satisfied the FFA (Def.'s Mem. Mot. Dismiss, Ex. A at 9-11), and
this Court will not disturb that judgment. The Court observes that the Notice was sent by
Plaintiffs loan servicer, named the lender, gave the lender's address, and made clear that
Defendant was merely the loan servicer. See Thomas v. U.S. Bank Nat. Ass 'n, 474 B.R. 450, 452
(D.N.J. 2012) ("Generally, under New Jersey law, a mortgage holder is a lender which owns a
homeowner' s mortgage whereas a servicer is a separate entity that acts as the mortgage holder's
agent to collect payments due on the mortgage.").
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