Hagy et al v. Demers & Adams, LLC et al

Filing 138

OPINION AND ORDER - 132 Second Motion for Reconsideration filed by David J. Demers, Demers & Adams, LLC is denied. Signed by Magistrate Judge Terence P Kemp on 11/21/2014. (agm1)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
James R. Hagy, III, et al.,
Plaintiffs,

:
:

v.

:

Case No. 2:11-cv-530

:
Demers & Adams, LLC, et al.,

Magistrate Judge Kemp
:

Defendants.
OPINION AND ORDER
This matter is before the Court on a second motion for
reconsideration filed by Defendants Demers & Adams, LLC and David
J. Demers (“the Law Firm Defendants”).

(Doc. 132).

Plaintiffs

James R. Hagy, III, on behalf of himself and Patricia R. Hagy1
(“the Hagys”) have filed an opposition to the motion.
134).

(Doc.

For the reasons set forth below, the second motion for

reconsideration will be denied.

(Doc. 132).

I. Background
The background of this case has been set forth in previous
orders of this Court and will not be set forth in great detail
here.

Briefly, for purposes of the current motion, this case

arises from a foreclosure action initiated by the Law Firm
Defendants on behalf of Green Tree against the Hagys.

The Hagys

allege that, after the foreclosure action was filed, they signed
a warranty deed in lieu of foreclosure, which the parties agreed
would prevent any attempt to collect a deficiency balance
remaining after the sale of the collateral.

The Hagys claim that

after the warranty deed in lieu of foreclosure was executed,
Green Tree began contacting them by telephone for the collection
1

On February 9, 2012, this Court granted James R. Hagy’s
motion requesting that he be substituted for his wife, Patricia
R. Hagy, following Mrs. Hagy’s death. (Doc. 47).

of an alleged deficiency.

Accordingly, on June 15, 2011, the

Hagys filed this case against the Law Firm Defendants and Green
Tree alleging violations of the Fair Debt Collection Practices
Act (“FDCPA”), 15 U.S.C. §§1692, et seq., the Ohio Consumer Sales
Practices Act (“OCSPA”), O.R.C. §§1345.01 et seq., and common law
invasion of privacy.
The Hagys’ claims against the Law Firm Defendants arising
under the OCSPA are the sole claims at issue in this Opinion and
Order.

In those claims, the Hagys allege that the Law Firm

Defendants knowingly committed unfair, deceptive, and
unconscionable acts and/or practices in violation of O.R.C.
§§1345.02 and/or 1345.03, and they are therefore entitled to
relief under O.R.C. §1345.09. (Amend. Compl., Doc. 18, ¶¶28-31).
On February 5, 2013, this Court issued an Opinion and Order
granting the Hagys’ partial motion for summary judgment on the
OCSPA claims.

(Doc. 95 at 16-19).

On May 16, 2013, the Law Firm Defendants filed a motion for
reconsideration, asking this Court to reconsider the portion of
its February 5 Opinion and Order relating to the OCSPA claims in
light of the Ohio Supreme Court’s decision in Anderson v.
Barclay’s Capital Real Estate, Inc., Slip Opinion No. 2013-Ohio1993, decided May 14, 2013.

The Law Firm Defendants argued that,

under Anderson, “when a party such as Law Firm Defendants is
working for and acting on behalf of a client, Green Tree in this
case, that first party does not become a ‘supplier’ to its
client’s customers or engage in a ‘consumer transaction’ with its
clients customers.”

(Doc. 105 at 5).

In a September 23, 2013

Opinion and Order, this Court held that the Law Firm Defendants’
position, if adopted, would extend the Anderson decision beyond
its facts.

The Court noted that Anderson involved a real estate

transaction, whereas this case involves a mixed transaction
including the transfer of both a mobile home and real property.

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The Court also noted that the Law Firm Defendants’ position
required an evaluation of whether one’s role in a given
transaction is so inconsequential as to fall outside the scope of
the OCSPA.

Unaware of any decision that supported such a broad

reading, this Court found that Anderson should be limited to its
facts.

Because those facts were readily distinguishable from the

facts in the instant case, the Court found the Law Firm
Defendants’ argument to be without merit and denied the motion
for reconsideration.

(Doc. 115).

On October 3, 2014, the Law Firm Defendants filed a motion
for leave to file a second supplement to the motion for
reconsideration filed May 16, 2013.

(Doc. 132).

In an Order

issued on October 6, 2014, this Court cited to its September 23
Opinion and Order denying the motion for reconsideration and
found that there was no pending motion to be supplemented.

The

Court, however, looked to the substance of the motion and noted
that the Law Firm Defendants were moving for reconsideration of
the decision on the OCSPA claims based upon two subsequent cases
from this Circuit.

Consequently, the Court construed the Law

Firm Defendants’ motion as a second motion for reconsideration,
rather than a supplement to the original motion for
reconsideration which had been decided previously.

The Court

allowed the Hagys twenty-one days from the issuance of the Order
to file a response to the second motion for reconsideration, and
allowed the Law Firm Defendants to file their reply fourteen days
thereafter.
The Hagys filed a response to the Law Firm Defendants’
second motion for reconsideration on October 7, 2014.
134).

(Doc.

Although the Hagys “did not oppose this Court reviewing”

the two decisions relied upon by the Law Firm Defendants, they
argue that, like Anderson, those decisions are “factually
distinguishable from the instant case.”

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Id. at 2 (internal

quotation omitted).

More specifically, the Hagys argue that

neither decision “raises any question” about this Court’s
determination that this case involves a “mixed use consumer
transaction.”

Id.

On this basis, the Hagys urge this Court to

deny the second motion for reconsideration.
The Law Firm Defendants filed a reply in support of their
second motion for reconsideration on October 20, 2014.
137).

(Doc.

In their reply, the Law Firm Defendants state that

“[t]hree cases decided since [their] prior motion for
reconsideration have clarified that: 1) a foreclosure lawsuit is
not a ‘consumer transaction’ under the [OCSPA], and; 2) law firms
representing plaintiffs in foreclosure are not ‘suppliers’ to
those they sue.”

Id. at 1.

For these reasons, the Law Firm

Defendants argue that the Hagys’ OCSPA claims against them should
be dismissed.
II. Discussion
As noted above, the Law Firm Defendants rely on three
decisions in support of their second motion for reconsideration.
The Law Firm Defendants set forth the first two decisions, namely
Clark v. Lender Processing Services, 562 Fed. Appx. 460 (6th Cir.
2014) and Kline v. Mortgage Electronic Security Systems, 2014 WL
4425820 (S.D. Ohio Sept. 8, 2014) in their motion, and they
provide the third decision, Slorp v. Lerner Sampson & Rothfuss,
2014 WL 4800100 (6th Cir. Sept. 29, 2014), in their reply brief.
The Court will set forth a summary of the relevant portions of
those cases and then will examine their applicability to the
facts of this case.
In their second motion for reconsideration, the Law Firm
Defendants first rely upon Clark v. Lender Processing Services,
562 Fed. Appx. 460 (6th Cir. 2014).

In Clark, the appellants

were homeowners who were defendants in foreclosure lawsuits.

The

homeowners brought the action against Lender Processing Services,

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a vendor which provided services to mortgage servicers and
lendors, its subsidiaries, and two law firms, alleging that a
series of mortgage assignments led to violations of, among other
laws, the OCSPA.

The district court granted the defendants’

motion to dismiss, finding that the OCSPA claims failed because,
inter alia, the defendants were not suppliers under the statute.
The homeowners appealed.
In evaluating the merits of the appeal, the Court of Appeals
looked to the relevant provisions of the OCSPA and set forth
those provisions as follows:
[t]he OCSPA forbids a ‘supplier’ from committing an
‘unfair or deceptive act or practice in connection with
a consumer transaction.’ ORC §1345.02. Supplier is in
turn defined as ‘a seller, lessor, assignor, franchisor,
or other person engaged in the business of effecting or
soliciting consumer transactions.’
Id. §1345.01(C).
Consumer transaction ‘means a sale, lease, assignment,
award by chance, or other transfer of an item of goods,
a service, a franchise, or an intangible, to an
individual for purposes that are primarily personal,
family, or household.’ Id. §1345.01(A).
Id. at 467-68.

The Court of Appeals then examined the Ohio

Supreme Court’s decision in Anderson and found it to be factually
distinguishable.

More specifically, the Court of Appeals noted

that Anderson “involved traditional mortgage servicers (i.e.,
businesses that collect monthly mortgage payments on behalf of
lenders),” whereas the case before it involved a vendor hired to
help manage the foreclosure process.

Id. at 468.

Although

Anderson was not controlling, the Court of Appeals found it to be
instructive in that it “teaches that the plain language of the
OCSPA should be taken seriously: companies not in the business of
‘effecting or soliciting consumer transactions’ are not suppliers
engaging in consumer transactions.”

Id.

The Court of Appeals

stated:
Like a traditional mortgage servicer, Lender Processing
falls into a category of businesses that do not seek to
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provide consumers with services. Rather, both mortgage
servicers and companies like Lender Processing offer
their services to lenders.
As is the case when a
mortgage servicer collects a monthly mortgage payment on
behalf of a financial institution, Lender Processing
helps initiate and manage foreclosure proceedings on
behalf of a financial institution. In fact, mortgage
servicers offer at least some marginal service to
consumers because they collect money from those consumers
on behalf of a lender. Consumers would only interact
with Lender Processing because its lender-client had
hired the company to help initiate and manage a
foreclosure.
Managing a process that ends with a
consumer losing her home could scarcely be considered a
“service for the consumer.”
Id.

Moreover, the Court of Appeals found that the reasoning in

Anderson applied “not just to Lender Processing, but also to its
subsidiaries and the defendant law firms.” Id.

Based upon its

determination that the defendants were not suppliers involved in
consumer transactions for purposes of the OCSPA, the Court of
Appeals affirmed the decision of the district court dismissing
the homeowners’ OCSPA claims.
The second decision which the Law Firm Defendants rely upon
in support of their second motion for reconsideration is Kline v.
Mortgage Electronic Security Systems, 2014 WL 4425820 (S.D. Ohio
Sept. 8, 2014).

In Kline, the Court examined whether the law

firm defendant, Lerner, Sampson and Rothfuss (“LSR”), which acted
in a foreclosure action on behalf of its client, a mortgage
servicer, could be liable under the OCSPA.

The Court found that

“[r]ecent holdings from the Sixth Circuit and the Ohio Supreme
Court appear to place LSR’s actions outside the reach of the
OCSPA, at least with regard to its representation of a mortgage
servicer in foreclosure proceedings.”

Id. at *6.

The Court

stated:
Here, like the mortgage servicer in Anderson and the
vendor of foreclosure-related services in Clark, the
service that LSR provided was to its client and not to
Kline.
LSR’s client, a mortgage servicer, is
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specifically exempt from the reach of the OCSPA under
Anderson. In extending that holding to the vendors of
foreclosure-related services and their attorneys, it is
unquestionable that Clark would also apply to the
attorneys of mortgage servicers.
Furthermore, under
Clark, LSR is not a “supplier” under the OCSPA, at least
with regards to foreclosures that it institutes on behalf
of its clients. See also Floyd v. Bank of Am., N.A., No.
1:13-cv-2072, 2014 WL 3732591 at *7 (N.D. Ohio July 25,
2014)(applying Anderson and Clark and dismissing OCSPA
claims against a bank and the law firm that represented
it in the foreclosure proceedings).
Id. at *6.

Based on its determination that, “[u]nder Clark and

Anderson, LSR was not a ‘supplier’ of a ‘consumer transaction,’”
the Court granted LSR’s motion for partial summary judgment as to
the plaintiff’s OCSPA claim.

Id. at *7.

Finally, the Law Firm Defendants rely on Slorp v. Lerner
Sampson & Rothfuss, 2014 WL 4800100 (6th Cir. Sept. 29, 2014).
In Slorp, the Court of Appeals held that the district court
properly dismissed the plaintiff’s OCSPA claim against LSR, the
law firm which filed the mortgage foreclosure lawsuit on behalf
of its mortgage servicer client.

The Court of Appeals found that

the state-court foreclosure action was not a “consumer
transaction” under the statute because “[l]awsuits do not involve
the transfer of goods or services for personal purposes.”
*9.

Id. at

The Court of Appeals explained:
When a debt collection agency files a lawsuit to enforce
a debt stemming from a consumer transaction, the consumer
may bring suit against the debt collection agency under
the CSPA.
Celebrezze v. United Research, Inc., 482
N.E.2d 1260, 1262 (Ohio Ct. App. 1984). This is because
“[s]ince the Act provides consumer protection through all
phases of the transaction, the seller cannot relieve
itself of its duty fairly by assigning its claim to an
agent or assignee and having that assignee conduct
practices prohibited by the Act.
Such a narrow
construction of [Ohio Rev. Code §] 1345.01(C)would defeat
the purpose of the Act.”
Id.
Here, LSR brought an
allegedly deceptive lawsuit on behalf of Bank of America,
a mortgage servicer. The Ohio Supreme Court recently
7

held that the servicing of residential mortgage is not a
consumer transaction under the CSPA “because there is no
transfer of an item of goods, a service, a franchise, or
an intangible, to an individual.” Anderson, 989 N.E.2d
at 1001 (quoting Ohio Rev. Code §1345.01(A)).
Id. (alterations in original).

Based on the fact that the

lawsuit at issue involved “a residential mortgage, which is not a
consumer transaction,” the Court of Appeals held that it was not
subject to regulation under the OCSPA.

Id.

Although the cases relied upon by the Law Firm Defendants
provide insight into the scope of the Ohio Supreme Court’s
decision in Anderson and the applicability of the OCSPA to
foreclosure actions more generally, each of those cases involved
a real estate transaction, as opposed to the mixed transaction at
issue in this case, which includes the transfer of both a mobile
home and real property.

To apply Clark, Kline, or Slorp to this

case would extend those decisions beyond their facts, which
involved real estate transactions and not mixed transactions.
Consequently, the Court will not reconsider its prior decision on
this basis.
III. Conclusion
For the reasons set forth above, the second motion for
reconsideration filed by the Law Firm Defendants is denied.
(Doc. 132).
/s/ Terence P. Kemp
United States Magistrate Judge

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