Voss v. Bank of America, N.A., et al

Filing 48

MEMORANDUM-DECISION and ORDERED, that Defendants Motion (Dkt. No. 34) for reconsideration is GRANTED in part as to Plaintiffs claim that she is a third-party beneficiary of Bank of Americas obligations under HAMP, and DENIED in part as to Plaintiffs breach of the implied covenant of good faith and fair dealing claim; and it is further ORDERED, that Plaintiffs Motion (Dkt. No. 40) to amend the Complaint is GRANTED; and it is further ORDERED, that the Proposed Amended Complaint (Dkt. No. 40-2) is now the operative pleading in this action. Signed by Senior Judge Lawrence E. Kahn on July 08, 2016. (sas)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
DEBORAH VOSS,
Plaintiff,
-against-

5:15-cv-0232 (LEK/TWD)

BANK OF AMERICA, N.A. et al.,
Defendants.

MEMORANDUM-DECISION and ORDER
I.

INTRODUCTION
This consumer protection action returns to the Court on Defendants Bank of America,

N.A.’s (“Bank of America”) and OCWEN Loan Servicing, LLC’s (“OCWEN”) Motion for
reconsideration of the Court’s Memorandum-Decision and Order dated December 30, 2015.1 Dkt.
Nos. 31 (“December Order”); 34 (“Motion-Reconsideration”); 34-1 (“MemorandumReconsideration”). Plaintiff Deborah Voss (“Plaintiff”) has filed a Response in opposition. Dkt.
No. 42 (“Opposition-Reconsideration”). In addition, Plaintiff has filed a Motion to amend the
Complaint. Dkt. Nos. 40 (“Motion-Amend”); 40-3 (“Memorandum-Amend”). Bank of America
filed a Response in opposition to Plaintiff’s Motion to amend, and OCWEN joined in the Response.
Dkt. Nos. 46 (“Bank of America Opposition-Amend”); 47 (“OCWEN Opposition-Amend”). For
the following reasons, Defendants’ Motion is granted in part and denied in part, and Plaintiff’s
Motion is granted.

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On January 15, 2016, OCWEN filed a Notice indicating that it intended to join Bank of
America’s Motion for reconsideration. Dkt. No. 36.

II.

BACKGROUND
The Court assumes the parties’ familiarity with the facts and history of this case and recites

only those facts necessary to the resolution of the pending Motions. For further background,
reference is made to the December Order.
Plaintiff commenced this action against Defendants alleging various causes of action relating
to Defendants’ servicing and modification of Plaintiff’s home mortgage. See Dkt. No. 1
(“Complaint”). On December 30, 2015, the Court granted in part and denied in part Defendants’
Motion to dismiss. Dec. Order. The Court dismissed Plaintiff’s breach of contract, tortious
interference with contract, negligent denial of Home Affordable Modification Program (“HAMP”)
applications, Truth in Lending Act (“TILA”), and Real Estate Settlement Procedures Act
(“RESPA”) claims on the basis that Plaintiff failed to state a claim for these causes of action. Id.
The Court denied Defendants’ Motion with respect to Plaintiff’s claim for breach of the implied
covenant of good faith and fair dealing, her claim that she is a third-party beneficiary of Bank of
America’s obligations under HAMP, and her claim under New York General Business Law § 349.
Id.
III.

MOTION FOR RECONSIDERATION
A. Legal Standard
A motion for reconsideration may be granted where there is “an intervening change of

controlling law, the availability of new evidence, or the need to correct a clear error or prevent a
manifest injustice.” Official Comm. of Unsecured Creditors of Color Tile, Inc. v. Coopers &
Lybrand, LLP, 322 F.3d 147, 167 (2d Cir. 2003) (quoting Virgin Atl. Airways, Ltd. v. Nat’l
Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992)). “The standard for granting a motion for
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reconsideration ‘is strict and reconsideration will generally be denied unless the moving party can
point to controlling decisions or data that the court overlooked—matters, in other words, that might
reasonably be expected to alter the conclusion reached by the court.’” Advanced Fiber Techs. Tr. v.
J&L Fiber Servs., Inc., 751 F. Supp. 2d 348, 382-83 (N.D.N.Y. 2010) (Kahn, J.) (quoting Shrader v.
CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995)). “[R]econsideration ‘should not be granted
where the moving party seeks solely to relitigate an issue already decided.’” Id. at 383 (quoting
Shrader, 70 F.3d at 257).
B. Discussion
1. Third-Party Beneficiary to SPAs
Defendants argue that the denial of their Motion to dismiss Plaintiff’s third-party beneficiary
claim was clear error of law. Mot.-Recon. at 2. In support of their position, Defendants cite to the
United States Supreme Court’s decision in Astra USA, Inc. v. Santa Clara County, 563 U.S. 110,
117-18 (2011). In Astra, the Court held that health care facilities covered under § 340B of the
Public Health Services Act could not sue as third-party beneficiaries of drug-price ceiling contracts
between the government and pharmaceutical companies because Congress did not create a private
right of action under the Act. Id.
Several courts have relied on Astra to foreclose claims by homeowners seeking to recover as
third-party beneficiaries of service participation agreements (“SPAs”) between loan servicers and
the government based on the theory that Congress did not create a private right of action under
HAMP. See Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 559 n.4 (7th Cir. 2012) (“Here, too,
Congress did not create a private right of action to enforce the HAMP guidelines, and since Astra,
district courts have correctly applied the Court’s decision to foreclose claims by homeowners
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seeking HAMP modifications as third-party beneficiaries of SPAs.”); see also Vuyyuru v. Wells
Fargo Bank, N.A., No. 15-CV-598, 2016 WL 356087, at *3 (E.D. Va. Jan. 28, 2016) (granting
motion to dismiss plaintiff’s claim as third-party beneficiary to SPA); Boyd v. U.S. Bank, N.A., ex
rel. Sasco Aames Mortg. Loan Tr., Series 2003-1, 787 F. Supp. 2d 747, 757 (N.D. Ill. 2011) (same);
Villa v. Wells Fargo Bank, N.A., No. 10-CV-81, 2010 WL 935680, at *2-3 (S.D. Cal. Mar. 15,
2010) (same); Escobedo v. Countrywide Home Loans, Inc., No. 09-cv-1557, 2009 WL 4981618, at
*2 (S.D. Cal. Dec. 15, 2009) (same). Although Defendants did not cite Astra in their initial Motion
to dismiss, the Court finds that the Supreme Court’s reasoning in Astra is controlling and therefore
forecloses Plaintiff’s claim that she is an intended third-party beneficiary of HAMP. To ignore the
Court’s holding in Astra would amount to clear error. Accordingly, Defendants’ Motion for
reconsideration is granted and Plaintiff’s third-party beneficiary claim is dismissed.
2. Breach of the Covenant of Good Faith and Fair Dealing
Defendants argue that the Court erred in denying their Motion to dismiss Plaintiff’s claim for
an alleged breach of the implied covenant of good faith and fair dealing. Mem.-Recon. at 6.
Defendants contend that the Court overlooked their arguments in support of dismissing Plaintiff’s
breach of the implied covenant of good faith and fair dealing claim. Id. The Court notes that it did
overlook these arguments when ruling on the Motion to dismiss and thus will consider them now.
Defendants argue that Plaintiff’s claim must fail because her breach of the implied covenant
of good faith claim is duplicative of her breach of contract claim. Dkt. No. 17 (“Bank of America
Motion-Dismiss”) at 6. However, the Court dismissed Plaintiff’s breach of contract claim on the
basis that Plaintiff failed to identify a specific contractual provision that was allegedly breached by
Defendants. Dec. Order at 14. Unlike a breach of contract claim, which requires a plaintiff to
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identify the specific contractual provision allegedly breached, see Paul v. Bank of Am. Corp., No.
09-CV-1932, 2011 WL 684083, at *5 (E.D.N.Y. Feb. 14, 2011), the covenant of good faith and fair
dealing applies to the contract as a whole, see Orange Cty. Choppers, Inc. v. Olaes Enter., Inc., 497
F. Supp. 2d 541, 559 (S.D.N.Y. 2007). “In most circumstances, claims for breach of contract and
the covenant of good faith and fair dealing are duplicative; however, in some cases ‘a party may be
in breach of its implied duty of good faith and fair dealing even if it is not in breach of its express
contractual obligations.’” Echostar DBS Corp. v. Gemstar-TV Guide Int’l, Inc., No. 05 Civ. 8510,
2007 WL 438088, at *7 (S.D.N.Y. Feb. 8, 2007) (quoting Chase Manhattan Bank v. Keystone
Distrib., Inc., 873 F. Supp. 808, 815 (S.D.N.Y. 1994)). Therefore, Defendants’ argument that
Plaintiff’s breach of the covenant of good faith and fair dealing claim should be dismissed as
duplicative of her breach of contract claim is unpersuasive.
In their Motion for reconsideration, Defendants argue that the allegations in the Complaint
amount to “frustration experienced by Plaintiff after her loan went into default,” rather than stating a
claim for breach of the implied covenant of good faith and fair dealing. Mem.-Recon. at 8. In
support of their argument, Defendants rely on Gorbaty v. Wells Fargo Bank, N.A., No. 10-CV-3291,
2012 WL 1372260, at *20 (E.D.N.Y. Apr. 18, 2012), and Costigan v. CitiMortgage, Inc., No. 10
Civ. 8776, 2011 WL 3370397, at *8 (S.D.N.Y. Aug. 2, 2011), where claims for breach of the
covenant of good faith and fair dealing were dismissed because the plaintiffs pleaded only general
allegations that the lenders failed to adequately perform their responsibilities.
Contrary to Gorbaty and Costigan, the Court finds that Plaintiff’s breach of the covenant of
good faith and fair dealing is supported by several factual allegations suggesting that Defendants’
conduct had the effect of “destroying or injuring the right of [Plaintiff] to receive the fruits of the
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contract.” Kirke La Shelle Co. v. Armstrong Co., 188 N.E. 163, 167 (N.Y. 1933). Plaintiff has
pleaded dozens of allegations suggesting that Defendants repeatedly ignored her requests for
clarification, refused to remedy perceived errors with her account, made changes to her account
without her permission, and were generally unresponsive to her requests. At the motion to dismiss
stage, Plaintiff has met her burden of alleging that Defendants acted in bad faith and abused their
discretion in the servicing of her mortgage. See Leghorn v. Wells Fargo Bank, N.A., 950 F. Supp.
2d 1093, 1120 (N.D. Cal. 2013) (“[T]he Plaintiffs here have stated a claim under the implied
covenant that Defendants abused this discretion by acting in bad faith and outside the reasonable
expectations of the parties. Whether Defendants’ acts were done in bad faith and not within the
reasonable expectations of the parties is a question of fact that cannot be decided at the pleading
stage.”). Accordingly, Defendants’ Motion for reconsideration of Plaintiff’s breach of the covenant
of good faith and fair dealing claim is denied.
IV.

MOTION TO AMEND
A. Legal Standard
Generally, a party may amend its pleading once as of right. FED. R. CIV. P. 15(a)(1). Once

an as-of-right amendment becomes unavailable, a party may amend only with the consent of the
opposing party or with leave of the court. FED. R. CIV. P. 15(a)(2). Leave to amend a pleading
should be “freely given when justice so requires.” Id. District courts are vested with broad
discretion to grant a party leave to amend, and should deny such a request only in the face of undue
delay, bad faith, undue prejudice to the non-movant, futility of amendment, or where the movant has
repeatedly failed to cure deficiencies in previous amendments. Foman v. Davis, 371 U.S. 178, 182
(1962); SCS Commc’n, Inc. v. Herrick Co., 360 F.3d 329, 345 (2d Cir. 2004). “The party opposing
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a motion for leave to amend has the burden of establishing that granting such leave would be unduly
prejudicial.” Media Alliance v. Mirch, No. 09-CV-659, 2010 WL 2557450, at *2 (N.D.N.Y. June
24, 2010) (Kahn, J.) (quoting New York v. Panex Indus., No. 94-CV-0400, 1997 WL 128369, at *2
(W.D.N.Y. Mar. 14, 1997)).
B. Discussion
1. New York General Business Law § 349
In the December Order, the Court granted Plaintiff’s request to file a motion to amend her
claim under New York General Business Law § 349 within thirty days. Dec. Order at 13. In doing
so, the Court rejected Defendants’ argument that allowing leave to amend would be futile. Id.
Instead, the Court found that allowing Plaintiff to amend the Complaint would not be futile as long
as Plaintiff “can show that Defendants were operating under a systemic policy that applied generally
to all consumers.” Id. On January 29, 2016, Plaintiff filed a Proposed Amended Complaint, and
Bank of America filed a Response arguing again that Plaintiff’s Motion should be denied as futile.
Dkt. No. 40-2 (“Amended Complaint”); Bank of America Opp’n-Amend at 2. Bearing in mind that
all reasonable inferences must be drawn in Plaintiff’s favor, the Court concludes that the
Section 349 allegations in Plaintiff’s Proposed Amended Complaint are sufficient to grant the
Motion for leave to amend.
Claims under Section 349 are subject to a three-year statute of limitations, which runs from
the time that a plaintiff is injured by the actions alleged to have violated the statute. See Statler v.
Dell, Inc., 841 F. Supp. 2d 642, 648 (E.D.N.Y. 2012) (“Actions brought pursuant to Section 349
must be commenced within three years of the date of accrual, which occurs when plaintiff is injured
by the deceptive act or practice that violates the statute.”). Here, the date of accrual is unknown

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because the exact dates of Plaintiff’s injuries are not identified in the Proposed Amended
Complaint. To the extent that Plaintiff’s allegations are related to injuries suffered more than three
years before the filing of the present action, Plaintiff’s claims are time-barred.
To state a claim under Section 349, “a plaintiff must demonstrate that (1) defendant’s
deceptive acts were directed at consumers, (2) the acts are misleading in a material way, and (3) the
plaintiff has been injured as a result.” Maurizio v. Goldsmith, 230 F.3d 518, 521 (2d Cir. 2000).
a. Consumer-Oriented Conduct
“Consumer-oriented conduct is ‘conduct that potentially affects similarly situated
consumers.’” Arroyo v. PHH Mortg. Corp., No. 13-CV-2335, 2014 WL 2048384, at *10 (E.D.N.Y.
May 19, 2014) (quoting Kapsis v. Am. Home Mortg. Servicing Inc., 923 F. Supp. 2d 430, 449
(E.D.N.Y. 2013). Private contract disputes that are unique to the parties “[do] not fall within the
ambit of [Section 349].” Id. (alterations in original) (quoting Oswego Laborers’ Local 214 Pension
Fund v. Marine Midland Bank, N.A., 647 N.E.2d 741, 744 (N.Y. 1995)). Consumer-oriented “acts
or practices must have a broad impact on consumers at large.” N.Y. Univ. v. Cont’l Ins. Co., 662
N.E.2d 763, 770 (N.Y. 1995).
Section 349 applies not only to “extensive marketing scheme[s]” directed at the public,
Gaidon v. Guardian Life Ins. Co. of Am., 725 N.E.2d 598, 603 (N.Y. 1999), but also to conduct
constituting “a standard or routine practice that [is] ‘consumer-oriented in the sense that [it]
potentially affect[ed] similarly situated consumers,’” N. State Autobahn, Inc. v. Progressive Ins.
Grp. Co., 953 N.Y.S.2d 96, 101 (App. Div. 2012) (alterations in original) (quoting Oswego, 647
N.E.2d at 745); see also Ural v. Encompass Ins. Co. of Am., 948 N.Y.S.2d 621, 625 (App. Div.
2012) (finding the plaintiff stated a cognizable claim under Section 349 by alleging a general

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practice of inordinately delaying the settlement of insurance claims); Elacqua v. Physicians’
Reciprocal Insurers, 860 N.Y.S.2d 229, 231 (App. Div. 2008) (a routine practice of failing to inform
consumers of their right to select independent counsel was sufficiently consumer-oriented to support
a finding that defendant violated Section 349); Makuch v. N.Y. Cent. Mut. Fire Ins. Co., 785
N.Y.S.2d 236 (App. Div. 2004) (allegations of consumer-oriented conduct were sufficient where
defendant was accused of regularly using the same misleading insurance policy forms).
In the Proposed Amended Complaint, Plaintiff’s allegations of consumer-oriented practices
are sufficient to state a claim under Section 349. Plaintiff alleges that at least five servicing officers
assigned to her loan followed the same practice of discussing Plaintiff’s loan over the phone,
encouraging her to apply for a loan modification based on their conversation, and then denying the
modification application due either to “missing documents” that Plaintiff alleges were in fact
provided or for other reasons that were inconsistent with the representations servicing officers made
to Plaintiff during their telephone conversations. Id. ¶ 74. Plaintiff contends that since her
experiences with multiple servicing officers were identical over a six-year period, she believes that
Defendants’ conduct was the result of Defendants’ standard practice, training, and policies regarding
the servicing of delinquent loans. Id. ¶ 75. Plaintiff asserts that she believes Defendants’ policies
and systems were targeted at similarly situated consumers who were delinquent on their mortgages.
Id. ¶ 77. Plaintiff also alleges that Defendants intentionally sent consumers form letters that were
designed to confuse delinquent borrowers, to deter them from pursuing their legal rights, to frustrate
their ability to obtain loan modifications, and to prevent them from being able to correct errors in
their loans. Id. ¶ 78.
There have been a series of cases in New York’s federal district courts in which plaintiffs

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have alleged that mortgagees engaged in similarly deceptive loan modification practices. One line
of cases found that the plaintiffs’ allegations stated a claim of consumer-oriented conduct for the
purposes of Section 349. Harte v. Ocwen Fin. Corp., No. 13-CV-5410, 2014 WL 4677120
(E.D.N.Y. Sept 19, 2014); see also Dumont v. Litton Loan Servicing, LP, No. 12-cv-2677, 2014 WL
815244, at *10 (S.D.N.Y. Mar. 3, 2014) (finding that the plaintiffs adequately alleged a consumeroriented practice where the defendant “knowingly maintained a loan modification process that was
riddled with flaws and systematically assess[ed] fees and increased borrowers principle balances”);
Arroyo, 2014 WL 2048384, at *11 (E.D.N.Y. May 19, 2014) (allegations of a policy of misleading
customers and a loan modification program that was a “ruse” were sufficient to state a claim of
consumer-oriented conduct); Pandit v. Saxon Mortg. Servs., Inc., No. 11-CV-3935, 2012 WL
4174888, at *6 (E.D.N.Y. Sept. 17, 2012) (finding plaintiffs stated a claim of consumer-oriented
activity where “defendant routinely asks homeowners to resubmit financial information on
pretextual grounds” and “misleads homeowners over the phone”).
Conversely, a second group of cases found that plaintiffs’ claims related to allegedly
deceptive loan modification programs were private contractual disputes that did not implicate the
consuming public at large. While this second group of cases may be at odds with some of the
aforementioned cases that found consumer-oriented conduct, they are distinguishable from the case
at bar. In two of the cases, the plaintiffs failed even to generally allege consumer-oriented conduct.
See Miller v. HSBC Bank U.S.A., N.A., No. 13 Civ. 7500, 2015 WL 585589, at *8 (S.D.N.Y. Feb.
11, 2015) (“Miller cannot maintain a claim under GBL § 349 because she has not alleged damage to
the consuming public at large.”); Knox v. Countrywide Bank, 4 F. Supp. 3d 499, 511 (E.D.N.Y.
2014) (dismissing plaintiffs’ Section 349 claim because “plaintiffs make no allegations about

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Countrywide’s broader practices”). In other cases, the plaintiffs made allegations of consumeroriented activity that were entirely conclusory or speculative, and they therefore failed to state a
claim under Section 349. See Kilgore v. Ocwen Loan Servicing, LLC, 89 F. Supp. 3d 526, 536
(E.D.N.Y. 2015) (“[T]he conclusory allegations of generalized consumer injury here are insufficient
to support a plausible Section 349 claim.”); Yanes v. Ocwen Loan Servicing, LLC, No. 13-CV2343, 2015 WL 631962, at *5 (E.D.N.Y. Feb. 12, 2015) (“Although Yanes speculates that other
consumers were treated similarly to him, he does not allege any facts to support that assertion.”).
Here, Plaintiff alleges practices and routines affecting consumers at large, and she provides
some non-conclusory bases for her allegations. In order to state a claim under Section 349, a
plaintiff must allege deceptive loan modifications that are routine and widespread and that affect
consumers at large. Plaintiff’s allegations—including that she had the same experience with at least
five servicing officers over multiple years, and that she received deceptive form letters in the
mail—allow a sufficient inference so as to state a claim of consumer-oriented conduct under Section
349. Thus, the Court finds that Plaintiff’s allegations of consumer-oriented conduct survive a
motion to dismiss. “The battle over whether plaintiff can meet her obligation of a ‘threshold
showing that [her] claim was predicated upon a deceptive act or practice that was consumer
oriented’ is best reserved for a motion for summary judgment after discovery.” Skibinsky v. State
Farm Fire & Cas. Co., 775 N.Y.S.2d 200, 201-02 (App. Div. 2004) (alteration in original) (quoting
Egan v. N.Y. Care Plus Ins. Co., 716 N.Y.S.2d 430 (App. Div. 2000)).
b. Materially Misleading Acts
In order to satisfy the second prong of a Section 349 claim, a plaintiff must allege that the
defendant engaged in “an act or practice that is deceptive or misleading in a material way.”

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Oswego, 647 N.E.2d at 744. A misrepresentation is materially misleading if it is “likely to mislead
a reasonable consumer acting reasonably under the circumstances.” Id. at 745. As discussed above,
Plaintiff alleges that Defendants engaged in unfair and deceptive practices, including intentionally
misplacing documents, pretextually denying loan modification applications, and misleading Plaintiff
over the phone. Am. Compl. ¶¶ 43, 58-60, 74. Under New York’s reasonable consumer standard,
Plaintiff has plausibly alleged that Defendants engaged in materially misleading practices.
Defendants argue that Plaintiff’s Section 349 claim should be dismissed because the
allegations of deceptive practices are really just an attempt to circumvent the lack of a private action
under HAMP. Bank of America Opp’n-Amend at 3. According to Defendants, “Plaintiff’s
proposed claim, which challenges Defendants’ review of HAMP loan modification applications
constitutes an impermissible end run around the absence of a private right of action under HAMP.”
Id. Indeed, a plaintiff may not use violations of HAMP rules as the basis of a Section 349 claim.
Seller v. Citimortgage, Inc., 988 N.Y.S.2d 32, 34 (App. Div. 2014). However, a plaintiff may still
maintain a cause of action under Section 349 if, as in this case, the allegations of deceptive business
practices do not depend upon the existence of HAMP rules and directives.
c. Injury
The third prong of a Section 349 claim requires an allegation that Defendants’ materially
misleading conduct resulted in an injury to Plaintiff. Although a plaintiff is not required to allege an
intent to defraud, a plaintiff “must show that defendant’s ‘material deceptive act’ caused the injury.”
Stutman v. Chemical Bank, 731 N.E.2d 608, 613 (N.Y. 2000). Here, Plaintiff alleges that
Defendants have improperly charged excessive fees and have miscalculated her equity. Am. Compl.
¶¶ 65-66. “[T]he loan’s balance continues to be improperly computed at near $300,000 due to

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improper fees that were assessed as well as continuing servicing errors.” Id. ¶ 67. Plaintiff has
sufficiently alleged injury for the purposes of her Section 349 claim.
V.

CONCLUSION
Accordingly, it is hereby:
ORDERED, that Defendants’ Motion (Dkt. No. 34) for reconsideration is GRANTED in

part as to Plaintiff’s claim that she is a third-party beneficiary of Bank of America’s obligations
under HAMP, and DENIED in part as to Plaintiff’s breach of the implied covenant of good faith
and fair dealing claim; and it is further
ORDERED, that Plaintiff’s Motion (Dkt. No. 40) to amend the Complaint is GRANTED;
and it is further
ORDERED, that the Proposed Amended Complaint (Dkt. No. 40-2) is now the operative
pleading in this action; and it is further
ORDERED, that the Clerk of the Court serve a copy of this Memorandum-Decision and
Order on all parties in accordance with the Local Rules.
IT IS SO ORDERED.

DATED:

July 08, 2016
Albany, New York

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