Pereira et al v. Ocwen Loan Servicing, LLC

Filing 16

ORDER ADOPTING REPORT AND RECOMMENDATIONS: SO ORDERED that Ocwen's motion to dismiss plaintiffs' FDCPA and RESPA claims are denied. Although Ocwen's motion is granted with respect to plaintiffs' remaining claims, plaintiffs are gr anted leave to file an amended complaint within fourteen ( 14) days in accordance with this order. A conference in this case is scheduled before the undersigned on Thursday, May 10, 2012 at 11:15 a.m. Ordered by Judge Sandra J. Feuerstein on 4/18/2012. (Florio, Lisa)

D/f:UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

----------------------------------------------------------)(
DOMINICK PEREIRA and ANITA PEREIRA,
Plaintiffs,

ORDER
11-CV-2672 (SJF)(ETB)

-againstOCWEN LOAN SERVICING, LLC,

FILED

IN CLERK'S a
U S DISTRICT cour:tf~ED N y

Defendant.

----------------------------------------------------------)(
FEUERSTEIN, J.

*

APR 18 2012

LONG

*

I~ 'AND OFFICE

On June 3, 20 II, plaintiffs Dominick Pereira and Anita Pereira ("plaintiffs") commenced
this action against defendant Ocwen Loan Servicing, LLC ("defendant" or "Ocwen"), alleging,
inter alia, violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.
("FDCPA") and the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq. ("RESPA").
Complaint [Docket Entry No. 1] at~~ 27-55. On October 12,2011, defendant filed a motion to
dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). [Docket Entry No.
10].
Before the Court is the Report and Recommendation of Magistrate Judge E. Thomas
Boyle, dated March 12, 2012 (the "Report"), recommending that defendant's motion to dismiss
be granted in part and denied in part. [Docket Entry No. 13]. The Court adopts the Report to the
extent indicated below.

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I.

Discussion
A.

Standards of Review
1.

Review of a Magistrate's Report and Recommendation

Rule 72 of the Federal Rules of Civil Procedure permits a magistrate judge to conduct
proceedings of dispositive pretrial matters without the consent of the parties. Fed. R. Civ. P.
72(b). Any portion of a report and recommendation on dispositive matters to which a timely
objection has been made is reviewed de novo. 28 U.S.C. § 636(b)(l); Fed. R. Civ. P. 72(b).
However, "when a party makes only conclusory or general objections, or simply reiterates the
original arguments, the Court will review the report strictly for clear error." Frankel v. City of
New York, Nos. 06 Civ. 5450, 07 Civ. 3436,2009 WL 465645, at *2 (S.D.N.Y. Feb. 29, 2009).
Whether or not proper objections have been filed, the district judge may, after review, accept,
reject, or modifY any of the magistrate judge's findings or recommendations. 28 U.S.C. §
636(b)(l); Fed. R. Civ. P. 72(b).

2.

Motion to Dismiss Standard

"To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is plausible on its face."' Ashcroft v. Iqbal, 556
U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell At!. Com. v. Twombly,
550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "A pleading that offers 'labels and
conclusions' or 'a 'formulaic recitation of the elements of a cause of action will not do."' Iqbal,
129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555). "Nor does a complaint suffice if it
tenders 'naked assertion[ s]' devoid of 'further factual enhancement."'
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.!.alli!!, 129 S.Ct. at 1949

(quoting Twombly, 550 U.S. at 557).
In deciding a motion pursuant to Rule 12(b)( 6), the Court must accept all factual
allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.
Matson v. Bd. ofEduc. of the City Sch. Dist. ofN.Y., 631 F.3d 57,63 (2d Cir. 2011); see also
Ruston v. Town Bd. for the Town of Skaneateles, 610 F.3d 55,59 (2d Cir. 2010) ("When there
are well-pleaded factual allegations, a court should assume their veracity and then determine
whether they plausibly give rise to an entitlement to relief."). "[T]he tenet that a court must
accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.
Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice." Iqbal, 129 S.Ct. at 1949. "While legal conclusions can provide the
framework of a complaint, they must be supported by factual allegations." Id. at 1950. "While a
complaint need not contain detailed factual allegations, it requires more than an unadorned, the
defendant-unlawfully-harmed-me accusation." Matson, 631 F.3d at 63 (internal quotation marks
and citation omitted).

B.

Defendant's Objections

Defendant objects to the Report on the following grounds: (I) that Ocwen is not a "debt
collector" as that term is defined in the FDCPA, see Plaintiffs Objections [Docket Entry No. 14]
("Pl. Obj. ") at 2-3; (2) that plaintiffs have failed to adequately allege a RESP A violation because
they have not identified any damages, id. at 3-4; and (3) that plaintiffs have not alleged a breach
of contract or a violation of New York State Banking Law Article 12-D because plaintiffs have
not alleged "that the note was assigned to Ocwen," id. at 4-5. Insofar as defendant simply

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reiterates the arguments from its motion to dismiss, the Report is reviewed for clear error. See
Frankel, 2009 WL 465645, at *2.

C.

Analysis
I.

Ocwen as a "Debt Collector" Under the FDCPA

According to Ocwen, plaintiffs have not adequately alleged that it is a "debt collector"
because "they do not allege that the loan was in default at the time the loan servicing was
transferred to Ocwen." Pl. Obj. at 2-3; see also 15 U.S.C. § 1692(a)(6)(F)(iii) (exempting from
the definition "any person collecting or attempting to collect any debt owed or due or asserted to
be owed or due another to the extent such activity ... concerns a debt which was not in default at
the time it was obtained by such person"). Indeed, plaintiffs specifically allege their debt was not
in default at the time the servicing rights were transferred to Ocwen. See. e.g., Compl.

at~

I0

(Plaintiffs' "monthly payment for April, 2010, like all payments before it, had been timely paid
in full."),~ 30 ("OCWEN is a third party debt collector attempting to collect a debt which it had
determined (wrongly) was already in default at the time of the assignment.").
Significantly, however, plaintiffs also allege that Ocwen believed them to be in default at
the time of assignment. See Compl.

at~

30. "A person collecting or attempting to collect a debt

which was not in default at the time it was obtained by that person, but which that person
believed was in default at that time, can also be a 'debt collector' under the FDCPA." Cyphers v.

Litton Loan Servicing. LLP, 503 F.Supp.2d 547,551 (N.D.N.Y. 2007) (emphasis in original)
(citing Scholsser v. Fairbanks Capital Com., 323 F.3d 534, 537-39 (7th Cir. 2003)). Thus,
plaintiffs have adequately alleged that Ocwen was a "debt collector" for purposes of the FDCPA.
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See Shugart v. Ocwen Loan Servicing. LLk 747 F.Supp.2d 938,942-43 (S.D. Ohio 2010)
(defendant Ocwen could qualify as "debt collector" under FDCP A when it "treated Plaintiff's
loan as if it were in default from the time it began to service the loan.'V
Accordingly, defendant's motion to dismiss the FDCPA claim is denied.

2.

Damages Under RESPA

Next, Ocwen argues that plaintiffs have failed to "establish damages" under RESPA. Pl.
Obj. at 3. The Report considered this argument and properly rejected it. Plaintiffs allege that
Ocwen' s actions have impaired their credit, leading to "an inability to borrow funds or to do so
only at higher, prohibitive interest rates.'' Compl. at '1[59. These allegations are sufficient to
plead damages under RESPA. See. e.g., Hutchinson v. Delaware Sav. Bank FSB, 410 F.Supp.2d
374,383 (D.N.J. 2006); Cortez v. Keystone Bank. Inc., No. 98-2457,2000 WL 536666, at *12
(E.D. Pa. May, 2, 2000). Accordingly, defendant's motion to dismiss the RESPA claim is
denied.

3.

Plaintiffs' Breach of Contract and Banking Law Article 12-D Claims

"In order to state a claim of breach of contract, the complaint must allege: (i) the
formation of a contract between the parties; (ii) performance by the plaintiff; (iii) failure of
defendant to perform; and (iv) damages.'' Johnson v. Nextel Communications, Inc., 660 F.3d
131, 142 (2d Cir. 2011) (citing cases). Plaintiffs "may not assert a cause of action to recover
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Ocwen also implies that it cannot be a "debt collector" because it was "merely the
servicer" of the loan. Pl. Obj. at 2. However, it cites no authority in support of that proposition,
and the Court has found none.
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damages for breach of contract against a party with whom it is not in privity." Yucyco. Ltd. v.
Republic of Slovenia, 984 F. Supp. 209,215 (S.D.N.Y. 1997) (citing cases).
The complaint does not allege that a contractual relationship ever existed between
plaintiffs and Ocwen; at most, plaintiffs allege that Ocwen became the servicer of their mortgage
loanonAprill6,2010. SeeCompl. at~~6,9, 17,42. For this reason, plaintiffs' breach of
contract claim is dismissed. Cf. Shugart, 747 F.Supp.2d at 941-42 (dismissing breach of contract
claim because plaintiff failed to allege contractual relationship with loan servicer).
Plaintiffs' claim under Article 12-D of the New York State Banking Law must also be
dismissed because: (I) as discussed above, plaintiffs have not adequately alleged a breach of
contract, and (2) plaintiffs have not alleged that Ocwen was a "licensee, registrant or exempt
organization" as defined under the statute. SeeN. Y. Banking Law § 598(3) (providing for
liquidated damages "against a licensee, registrant or exempt organization for breach of contract
or agreement to make a mortgage loan .... "); see also Parejas v. Gen. Elec. Capital Svcs., No.
10-CV-3348, 201 I WL 2635778, at *4 (E.D.N.Y. July 5, 201 1).
However, plaintiffs are granted leave to file an amended complaint correcting the
deficiencies in their breach of contract and New York State Banking Law claims within fourteen
(14) days of the date of this order. If plaintiffs fail to do so, these claims will be dismissed with
prejudice.
Neither party has objected to the remainder of the Report, and I find that it is not clearly
erroneous. If plaintiffs choose to file an amended complaint, they may also re-plead, in
accordance with the recommendations of Magistrate Judge Boyle's Report, their claim pursuant
to 3 N.Y.C.R.R. § 419 and their request for an accounting. If plaintiffs fail to do so, these claims
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will also be dismissed with prejudice.

II.

Conclusion
For the foregoing reasons, Ocwen's motion to dismiss plaintiffs' FDCPA and RESPA

claims are denied. Although Ocwen's motion is granted with respect to plaintiffs' remaining
claims, plaintiffs are granted leave to file an amended complaint within fourteen ( 14) days in
accordance with this order.
A conference in this case is scheduled before the undersigned on Thursday, May 10,
2012 at 11:15 a.m.

SO ORDERED.

Dated:

Aprill8, 2012
Central Islip, New York

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