UNITED STATES OF AMERICA et al v. Ocwen Loan Servicing LLC
Filing
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MEMORANDUM OPINION AND ORDER - DENYING 231 MOTION to Dismiss under Rules 8, 9(b), and 12(b)(6) and Memorandum in Support filed by Ocwen Loan Servicing LLC. Signed by Judge Amos L. Mazzant, III on 11/10/2015. (baf, )
United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
UNITED STATES OF AMERICA
Ex rel., Michael J. Fisher, and Michael Fisher
Individually, and Brian Bullock, and Brian
Bullock, Individually
v.
OCWEN LOAN SERVICING, LLC, and
OCWEN FINANCIAL CORPORATION
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CIVIL ACTION NO. 4:12-CV-543
Judge Mazzant
MEMORANDUM OPINION AND ORDER
Pending before the Court is Ocwen Financial Corporation’s Motion to Dismiss Under
Rules 8, 9(b) and 12(b)(6) (Dkt. # 231). After reviewing the relevant pleadings, the Court finds
that the motion should be denied.
BACKGROUND
On August 20, 2012, Relator Michael J. Fisher (“Fisher”) filed his original complaint
under seal (Dkt. #1). In his original complaint, Fisher claimed Ocwen Loan Servicing, LLC’s
(“OLS”) Home Affordable Modification Program (“HAMP”) modifications violated the federal
Truth in Lending Act (“TILA”) because Ocwen did not provide a TILA notice of rescission in
connection with its loan modifications (See Dkt. #1).
On April 7, 2014, United States Magistrate Judge Don Bush ordered that the complaint
be unsealed and served upon Defendant, after the United States declined to intervene (Dkt. #19).
On August 1, 2014, Relator filed his Amended Complaint (Dkt. #23). On August 6, 2014,
Relator filed his Second Amended Complaint (Dkt. #29).
On November 13, 2014, Relators filed their Third Amended Complaint (Dkt. #59). The
Third Amended Complaint incorporated allegations including: (1) Federal Housing
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Administration (“FHA”) violations; (2) Dodd-Frank Act violations; (3) Real Estate Settlement
Procedures Act (“RESPA”) violations; and (4) Texas, New York and Massachusetts state law
violations (Dkt. #59). It also added a new Relator, Brian Bullock (“Bullock,” or collectively
with Fisher, “Relators”) (Dkt. #59).
On April 17, 2015, Relators filed their Fourth Amended Complaint (Dkt. #126). This
complaint added Ocwen Financial Corporation (“OFC”) as a defendant, alleging that OFC made
false representations to the government that induced the government to enter into Servicer
Participation Agreements (“SPA”) with OFC (See Dkt. #126). The Fourth Amended Complaint
also claims that OFC is the parent company of OLS (Dkt. #126).
The Fourth Amended Complaint evidences the relationship between OFC and OLS in
terms of overlapping leadership and control (Dkt. #126 at ¶ 8). For example, Ronald M. Faris is
the President and Chief Executive Officer (“CEO”) of OLS, and simultaneously served as OFC’s
President, CEO, and a Director (Dkt. #126 at ¶ 9). William C. Erbey served as both OLS’s and
OFC’s Executive Chairman, but has since resigned (Dkt. #126 at ¶ 9).
On August 10, 2015, Ocwen Financial Corporation filed its Rule 8, 9(b), and 12(b)(6)
Motion to Dismiss (Dkt. #231). On August 27, 2015, Relators filed their response (Dkt. #237).
On September 8, 2015, OFC filed its reply (Dkt. #247). On September 18, 2015, Relators filed
their sur-reply (Dkt. #248).
LEGAL STANDARD
Defendant OFC moves to dismiss under Federal Rule of Civil Procedure 12(b)(6). A
Rule 12(b)(6) motion to dismiss argues that, irrespective of jurisdiction, the complaint fails to
assert facts that give rise to legal liability of the defendant. The Federal Rules of Civil Procedure
require that each claim in a complaint include “a short and plain statement...showing that the
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pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). The claim must include enough factual
allegations “to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007). Thus, “[t]o 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, 678 (2009) (quoting Twombly, 550 U.S. at 570).
Rule 12(b)(6) provides that a party may move for dismissal of an action for failure to
state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). The court must accept
as true all well-pleaded facts contained in the plaintiff’s complaint and view them in the light
most favorable to the plaintiff. Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). In deciding a
Rule 12(b)(6) motion, “[f]actual allegations must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555; Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir.
2009).
“The Supreme Court expounded upon the Twombly standard, explaining that ‘[t]o
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.’” Gonzalez, 577 F.3d at 603 (quoting Iqbal,
556 U.S. at 678). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Id. Therefore, “where the well-pleaded facts do not permit the court to infer more than
a mere possibility of misconduct, the complaint has alleged – but it has not ‘shown’ – ‘that the
pleader is entitled to relief.’” Id.
In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency
of a complaint in the context of a Rule 12(b)(6) motion. First, the court should identify and
disregard conclusory allegations, for they are “not entitled to the assumption of truth.” Iqbal,
556 U.S. at 664. Second, the court “consider[s] the factual allegations in [the complaint] to
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determine if they plausibly suggest an entitlement to relief.” Id. “This standard ‘simply calls for
enough facts to raise a reasonable expectation that discovery will reveal evidence of the
necessary claims or elements.’” Morgan v. Hubert, 335 F. App’x 466, 470 (5th Cir. 2009). This
evaluation will “be a context-specific task that requires the reviewing court to draw on its
judicial experience and common sense.” Iqbal, 556 U.S. at 679.
In determining whether to grant a motion to dismiss, a district court may generally not
“go outside the complaint.” Scanlan v. Tex. A&M Univ., 343 F.3d 533, 536 (5th Cir. 2003).
However, a district court may consider documents attached to a motion to dismiss if they are
referred to in the plaintiff’s complaint and are central to the plaintiff’s claim. Id.
Defendant also moves to dismiss under Federal Rule of Civil Procedure 9(b). Rule 9(b)
“prevents nuisance suits and the filing of baseless claims as a pretext to gain access to a ‘fishing
expedition.’” United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 191 (5th Cir. 2009). It
is a heightened pleading standard that requires parties to “state with particularity the
circumstances constituting fraud or mistake.” FED. R. CIV. P. 9(b); see United States ex rel.
Steury v. Cardinal Health, Inc., 625 F.3d 262, 266 (5th Cir. 2010).
However, this requirement “does not ‘reflect a subscription to fact pleading.’” Grubbs,
565 F.3d at 186. Pleadings alleging fraud must contain “simple, concise, and direct allegations
of the circumstances constituting the fraud which . . . must make relief plausible, not merely
conceivable, when taken as true.” Id. (internal quotations omitted). The Fifth Circuit requires
plaintiffs to “specify the statements intended to be fraudulent, identify the speaker, state when
and where the statements were made, and explain why the statements were fraudulent.” Flaherty
& Crumrine Preferred Income Fund, Inc. v. TXU Corp., 565 F.3d 200, 207 (5th Cir. 2009)
(quoting Williams v. WMX Techs., Inc., 112 F.3d 175, 177 (5th Cir. 1997); Nathenson v.
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Zonagen, Inc., 267 F.3d 400, 412 (5th Cir. 2001)). Therefore, Rule 9(b) requires the complaint
to set forth “the who, what, when, where, and how of the alleged fraud.” United States ex rel.
Stephenson v. Archer W. Contractors, L.L.C., 548 F. App’x 135, 139 (5th Cir. 2013) (citing
United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir.
1997)).
Rule 9(b) “is context specific and flexible and must remain so to achieve the remedial
purpose of the False Claim[s] Act.” Grubbs, 565 F.3d at 190. Therefore, “a plaintiff may
sufficiently ‘state with particularity the circumstances constituting fraud or mistake’ without
including all the details of any single court-articulated standard[.]” Id. at 188. However,
“[f]ailure to comply with Rule 9(b)’s requirements authorizes the Court to dismiss the pleadings
as it would for failure to state a claim under Rule 12(b)(6).” United States ex rel. Williams v.
McKesson Corp., No. 12-0371, 2014 WL 3353247, at *3 (N.D. Tex. July 9, 2014) (citing
Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir. 1996)).
ANALYSIS
After reviewing the current complaint, the motion to dismiss, the response, the reply, and
the sur-reply, the Court finds that Relators have stated plausible claims for purposes of defeating
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a Motion to Dismiss under Rules 8, 9(b) and 12(b)(6).
CONCLUSION
It is therefore ORDERED that Ocwen Financial Corporation’s Motion to Dismiss Under
Rules 8, 9(b) and 12(b)(6) (Dkt. #231) is hereby DENIED.
SIGNED this 10th day of November, 2015.
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AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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