Eichner et al v. Ocwen Loan Servicing, LLC et al

Filing 70

MEMORANDUM OPINION AND ORDER. It is ORDERED that Defendants U.S. Bank National Association's, Deutsche Bank National Trust Company's, Wells Fargo Bank, N.A.'s, The Bank of New York Mellon Trust Company, N.A. F/K/A The Bank of New Y ork Trust Company, National Association's, The Bank of New York Mellon F/K/A The Bank of New York's, and The Bank Of New York Mellon Corporation F/K/A The Bank of New York Company's Motion to Dismiss on Behalf of Certain Trust Defen dants (Dkt. # 48 ) is hereby DENIED, and Ocwen Loan Servicing, LLC's and Ocwen Financial Corporation's Motion to Dismiss Relator's Complaint (Dkt. # 40 ) is hereby DENIED. It is further ORDERED that Ocwen Loan Servicing, LLC's a nd Ocwen Financial Corporation's Motion to Strike the Boyd and Sanders Declarations Submitted by Relators in Response to Motions to Dismiss (Dkt. # 60 ) is hereby DENIED as MOOT. It is further ORDERED that Defendants' Joint Motion Requesting an Oral Hearing (Dkt. # 66 ) is hereby DENIED as MOOT. Signed by District Judge Amos L. Mazzant, III on 2/13/2023. (mcg)

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United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

UNITED STATES OF AMERICA
ex rel. JEAN-MARC EICHNER, et al.,
Plaintiffs,
v.
OCWEN LOAN SERVICING, LLC, et al.
Defendants.

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Civil Action No. 4:19-CV-524
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court are Ocwen Loan Servicing, LLC’s and Ocwen Financial
Corporation’s Motion to Dismiss Relator’s Complaint (Dkt. #40), Defendants U.S. Bank
National Association’s, Deutsche Bank National Trust Company’s, Wells Fargo Bank, N.A.’s,
The Bank of New York Mellon Trust Company, N.A. F/K/A The Bank of New York Trust
Company, National Association’s, The Bank of New York Mellon F/K/A The Bank of New
York’s, and The Bank Of New York Mellon Corporation F/K/A The Bank of New York
Company’s Motion to Dismiss on Behalf of Certain Trust Defendants (Dkt. #48), Ocwen Loan
Servicing, LLC’s and Ocwen Financial Corporation’s Motion to Strike the Boyd and Sanders
Declarations Submitted by Relators in Response to Motions to Dismiss (Dkt. #60), and
Defendants’ Joint Motion Requesting an Oral Hearing (Dkt. #66).

Having considered the

motions and the relevant pleadings, the Court finds that the motions to dismiss should be
DENIED, the motion for a hearing should be DENIED as MOOT, and the motion to strike
should be DENIED as MOOT.

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BACKGROUND
In 2008, the United States faced a housing crisis caused, in part, by mortgage fraud and
predatory lending. The crisis caused home prices to plummet and foreclosures to skyrocket,
leaving homeowners with negative equity in their homes. Distressed homeowners were unable
to sell or refinance their homes to meet their mortgage obligations. In response to this crisis, the
Government enacted the Emergency Economic Stabilization Act of 2008 (“EESA”).
The Home Affordable Modification Program (“HAMP”), administered by the Treasury
Department, was a voluntary program under EESA designed to prevent avoidable foreclosures
by providing homeowners with affordable mortgage-loan modifications and other alternatives to
eligible buyers. HAMP’s primary goal was to relieve the burden on homeowners by lowering
their mortgage payments to 31% or less of their gross monthly income. Investors would receive
payments and a guarantee that no modification would result in a mortgage worth less than the
net-present value of the property. In return, mortgage servicers, in addition to their annual
servicing fees, received HAMP incentive payments to complete the modifications.

Each

successful modification entitled the servicer from $1,200–2,000 depending on how long the
mortgage was delinquent. From the program’s start in 2009 through the second quarter of 2016,
HAMP generated more than 1.6 million permanent modifications.
Defendants Ocwen Financial Corporation (“OFC”) and its subsidiary and alter ego
Ocwen Loan Servicing (“OLS”) (collectively, “Ocwen” or “Ocwen Defendants”) were and/or
are mortgage loan servicing agents for hundreds of trusts, for which Defendants U.S. Bank,
National Association, Trustee (“U.S. Bank”); Deutsche Bank National Trust Company, Trustee
(“Deutsche”); Wells Fargo Bank, N.A. Trustee (“Wells”); The Bank of New York Mellon Trust
Company, N.A. f/k/a The Bank of New York Trust Company, National Association, The Bank

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of New York Mellon f/k/a The Bank of New York, and The Bank of New York Mellon
Corporation f/k/a The Bank of New York Company, Inc., Successor-Trustees (“BONY”) to J.P.
Morgan Chase Bank, N.A., (collectively, the “Trust Defendants”) served as Trustees.
In 2009, Ocwen enrolled in the HAMP program. On April 16, 2009, Ocwen expressly
certified its compliance with HAMP guidelines and applicable federal laws in signing the initial
Servicer Participation Agreement (“SPA”). The SPA named Ocwen as the servicer and Fannie
Mae, solely as Financial Agent of the United States, as the administrator. The parties signed a
Financial Instrument on the same day, which details the representations, warranties, and
covenants that Ocwen is obligated to make in connection with participation in HAMP. The
Financial Instrument was fully incorporated into the SPA. On February 10, 2010, Ocwen signed
an Amended SPA. Ocwen also made annual certifications, a prerequisite to receiving HAMP
payments.
Ocwen expressly represented in the SPAs and annual certifications that: (1) it was in
compliance with the terms and guidelines of HAMP; (2) it was in compliance with all applicable
laws and requirements; (3) it created and maintained an effective HAMP program and committed
the resources needed to employ enough trained, experienced personnel with the tools and
technology necessary to provide quality service to homeowners; and (4) it had adequately
documented and monitored its compliance and immediately reported to the Government any
credible evidence of material violations of these certifications.

Each annual certification

included an express statement certifying that Ocwen continued to meet the terms and conditions
of the SPA, including the representation of compliance with applicable laws.

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On July 15, 2019, Relator Jean-Marc Eichner (“Eichner”) and Relator Brandon Loyd
(“Loyd”) (collectively, “Relators”) filed their Original Complaint under seal (Dkt. #1), alleging
causes of action for presenting false or fraudulent claims to the government, making express
and/or implied false certifications to the government, making or using false records or statements
material to false or fraudulent claims, fraudulent inducement, and reverse false claims under 31
U.S.C. §§ 3729(a)(1)(A), (a)(1)(B), and (a)(1)(G) (Dkt. #1 ¶¶ 221–28). More specifically,
Relators allege various instances of misconduct that resulted in the Ocwen Defendants violating
the Federal Housing Administration (“FHA”), the Dodd-Frank Act, the Real Estate Settlement
Procedures Act (“RESPA”), the Unfair, Deceptive, or Abusive Acts or Practice Laws
(“UDAAP” or “UDAP”), the Truth in Lending Act (“TILA”), Regulation Z, and Texas state law
(see generally Dkt. #1). Furthermore, Relators allege that the Ocwen Defendants made false
representations to the government regarding HAMP, which induced the government to enter
SPAs (see generally Dkt. #1). Additionally, Relators accuse the Trust Defendants as being
vicariously liable for the actions of the Ocwen Defendants (Dkt. #1 at ¶ 2).
On December 10, 2021, the government opted to not intervene in the case. And, on
December 14, 2021, the Court unsealed the case.
On May 6, 2022, Ocwen filed a motion to dismiss, arguing that the lawsuit should be
dismissed because (1) Eichner lacks standing because he signed a Separation Agreement and
release after disclosing “substantially all information” to the government and before filing this
lawsuit; (2) of settlement, release, and res judicata based on the conclusion of the Fisher Action;
(3) of the public disclosure bar because of the Fisher Action, the Consumer Finance Protection
Bureau’s (“CFPB”) lawsuit and investigation, and the Special Inspector General for the Troubled
Asset Relief Program; (4) of the government action bar because of the CFPB lawsuit;

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(5) Relators fail to state a claim under Rule 12(b)(6) and Rule 9(b); (6) the statute of limitations;
(7) Relators fail to state a viable reverse false claims violation; and (8) Relators fail to state any
claims in their individual capacity (Dkt. #40). Ocwen’s motion also includes a motion for
summary judgment because “the allegations in this case have been publicly disclosed, yet
relators have not and cannot meet their burden to qualify as original sources for issues properly
before the Court” (Dkt. #40 at pp. 27–28).
Additionally, on May 6, 2022, the Trust Defendants also filed a motion to dismiss,
arguing largely the same points as Ocwen (Dkt. #48). Specifically, the Trust Defendants argue
that the lawsuit should be dismissed because of (1) res judicata, (2) the public disclosure bar,
(3) the government action bar, (4) the first-to-file rule, (5) the statute of limitations, and
(6) Relators fail to plead trust liability as required by Rules 8(a) and 9(b) (Dkt. #48).
On June 24, 2022, Relators filed responses to both motions (Dkt. #53; Dkt. #54). On July
29, 2022, the Ocwen Defendants and the Trust Defendants filed replies (Dkt. #59; Dkt. #61).
And, on August 19, 2022, Relators filed sur-replies to both responses (Dkt. #64; Dkt. #65).
LEGAL STANDARD
I.

12(b)(1) Standard

Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of a case for lack of subject
matter jurisdiction when the district court lacks statutory and constitutional power to adjudicate
the case. Home Builders Ass’n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir.
1998). If a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the Court
will consider the jurisdictional attack under Rule 12(b)(1) before addressing any attack on the
legal merits. Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001).

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In deciding the motion, the Court may consider “(1) the complaint alone; (2) the
complaint supplemented by the undisputed facts evidenced in the record; or (3) the complaint
supplemented by undisputed facts plus the [C]ourt’s resolution of disputed facts.” Lane v.
Halliburton, 529 F.3d 548, 557 (5th Cir. 2008) (quoting Barrera-Montenegro v. United States,
74 F.3d 657, 659 (5th Cir. 1996)). The Court will accept as true all well-pleaded allegations set
forth in the complaint and construe those allegations in the light most favorable to the plaintiff.
Truman v. United States, 26 F.3d 592, 594 (5th Cir. 1994). Once a defendant files a motion to
dismiss under Rule 12(b)(1) and challenges jurisdiction, the party invoking jurisdiction has the
burden to establish subject matter jurisdiction. See Menchaca v. Chrysler Credit Corp., 613 F.2d
507, 511 (5th Cir. 1980). The Court will grant a motion to dismiss for lack of subject matter
jurisdiction only if it appears certain that the claimant cannot prove a plausible set of facts to
support a claim that would entitle it to relief. Lane, 529 F.3d at 557.
II.

12(b)(6) Standard

The Federal Rules of Civil Procedure require that each claim in a complaint include a
“short and plain statement . . . showing that the pleader is entitled to relief.” FED. R. CIV. P.
8(a)(2). Each 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).
A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the
complaint fails to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6).
When considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all
well-pleaded facts in the plaintiff’s complaint and view those facts in the light most favorable to
the plaintiff. Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may
consider “the complaint, any documents attached to the complaint, and any documents attached

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to the motion to dismiss that are central to the claim and referenced by the complaint.” Lone
Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court
must then determine whether the complaint states a claim for relief that is plausible on its face.
“A claim has facial plausibility when the plaintiff pleads factual content that allows the [C]ourt
to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). “But where the well-pleaded facts do not permit the [C]ourt to infer more than the mere
possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader
is entitled to relief.’” Iqbal, 556 U.S. at 679 (quoting FED. R. CIV. P. 8(a)(2)).
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
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)
(citation omitted). 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.
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.”‘ Id. at 678
(quoting Twombly, 550 U.S. at 570).

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III.

9(b) Standard

Rule 9(b) states, “[i]n alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of
a person’s mind may be alleged generally.” FED. R. CIV. P. 9(b).
Rule 9(b)’s particularity requirement generally means that the pleader must set forth the
“who, what, when, where, and how” of the fraud alleged. United States ex rel. Williams v. Bell
Helicopter Textron, Inc., 417 F.3d 450, 453 (5th Cir. 2005). A plaintiff pleading fraud must
“specify the statements contended to be fraudulent, identify the speaker, state when and where
the statements were made, and explain why the statements were fraudulent.”

Herrmann

Holdings Ltd. v. Lucent Techs. Inc., 302 F.3d 552, 564–65 (5th Cir. 2002). The goals of Rule
9(b) are to “provide[] defendants with fair notice of the plaintiffs’ claims, protect[] defendants
from harm to their reputation and goodwill, reduce[] the number of strike suits, and prevent[]
plaintiffs from filing baseless claims.” U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190
(5th Cir. 2009) (citing Melder v. Morris, 27 F.3d 1097, 1100 (5th Cir. 1994)). Courts are to read
Rule 9(b)’s heightened pleading requirement in conjunction with Rule 8(a)’s insistence on
simple, concise, and direct allegations. Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th
Cir. 1997). However, this requirement “does not ‘reflect a subscription to fact pleading.’”
Grubbs, 565 F.3d at 186. “Claims alleging violations of the Texas Insurance Code and the
DTPA and those asserting fraud, fraudulent inducement, fraudulent concealment, and negligent
misrepresentation are subject to the requirements of Rule 9(b).” Frith v. Guardian Life Ins. Co.
of Am., 9 F. Supp. 2d 734, 742 (S.D. Tex. 1998); see Berry v. Indianapolis Life Ins. Co., No.
3:08-CV-0248-B, 2010 WL 3422873, at *14 (N.D. Tex. Aug. 26, 2010) (“‘[W]hen the parties
have not urged a separate focus on the negligent misrepresentation claims,’ the Fifth Circuit has

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found negligent misrepresentation claims subject to Rule 9(b) in the same manner as fraud
claims.”). Failure 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. 3:12-CV-0371-B, 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
Relators bring this qui tam action pursuant to the False Claims Act (“FCA”). 31 U.S.C.
§ 3729(a)(1). “The [FCA] is designed to allow suits ‘by private parties on behalf of the United
States against anyone submitting a false claim to the government.’” United States ex rel. Fried
v. W. Indep. Sch. Dist., 527 F.3d 439, 441 (5th Cir. 2008) (quoting Hughes Aircraft Co. v. United
States ex rel. Schumer, 520 U.S. 939, 941 (1997)).

The FCA “promot[es] private citizen

involvement in exposing fraud against the government,” while “prevent[ing] parasitic suits by
opportunistic late-comers who add nothing to the exposure of fraud.” Id. (quoting Reagan, 384
F.3d at 174).
Defendants collectively argue that there are ten reasons the Court should dismiss this
case:
1. Eichner released his FCA claims in a separation agreement;
2. Relators’ FCA claims are barred by settlement, release, and res judicata;
3. Relators’ claims are subject to the public disclosure bar;
4. Relators’ claims are subject to the government action bar;
5. Relators’ post-Fisher claims do not state a viable claim under 12(b)(6) or 9(b);
6. Relators’ claims for earlier time periods are barred by statute of limitations;
7. Relators’ fail to plead a viable reverse false claims violation;

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8. Relators’ do not have any viable individual claims;
9. Relators’ complaint does not plead trust liability as required by 9(b); and
10. Relators’ fail to state a claim against BNYM Corp.
(Dkt. #40; Dkt. #48). Because of the substantial overlap between Defendants’ motions to
dismiss and Relators’ responses, the Court has considered all the briefing together.
The Court believes that several of Defendants’ arguments, although valid concerns, are
best dealt with after the parties have had an opportunity to conduct discovery, develop the facts,
and fully brief the issues under the requisite standard.1 Issues best left for a later date include
whether Eichner released his FCA claims pursuant to a separation agreement2 and whether some
or all of Relators’ claims are barred by res judicata, the public disclosure bar, the government
action bar, or the relevant statute of limitations.
As to Defendants’ arguments that are appropriately dealt with in these motions to
dismiss, after reviewing the current complaint and the arguments presented in briefing, the Court
concludes that dismissal is not warranted. Relators have stated plausible claims for relief against
Defendants under both the 12(b)(6) and 9(b) standards.

1

The Court acknowledges that the Ocwen Defendants requested that the Court convert their motion to dismiss into a
motion for summary judgment and that the Ocwen Defendants briefed their motion to dismiss, at least partially,
under a summary judgment standard. The Court also acknowledges that all parties in this case submitted evidence
outside of the pleadings for the Court’s consideration. However, the Court believes that allowing parties the benefit
of discovery and an opportunity to fully brief each issue under a summary judgment standard is appropriate and,
therefore, the Court did not consider any evidence outside the pleadings and will not treat either motion as one for
summary judgment.
Defendants argue that the Court should dismiss Eichner’s claims under 12(b)(1) because Eichner allegedly lacks
standing to bring this case. This is a jurisdictional issue. Relators, though, posit that discovery is necessary to
determine whether Eichner sufficiently disclosed his allegations of fraud to the government at the time he signed the
separation agreement, the scope of the separation agreement, and whether Eichner was actually permitted to have a
lawyer review the separation agreement. The Court can, and in this case will, permit parties to conduct discovery
and be heard on the factual matters underlying jurisdiction before considering the jurisdictional question. See
Freeman v. United States, 556 F.3d 326, 341–42 (5th Cir. 2009). The party seeking discovery must show its
necessity of discovery by alleging the specific facts which demonstrate a need for discovery. Id. Here, Relators
have articulated a discrete discovery request that might cure the jurisdictional deficiency. Accordingly, the question
of whether Eichner has standing to sue is best dealt with after discovery on these issues has been conducted. After
such discovery, Defendants may re-raise the issue with the Court.
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CONCLUSION
It is therefore ORDERED that Defendants U.S. Bank National Association’s, Deutsche
Bank National Trust Company’s, Wells Fargo Bank, N.A.’s, The Bank of New York Mellon
Trust Company, N.A. F/K/A The Bank of New York Trust Company, National Association’s,
The Bank of New York Mellon F/K/A The Bank of New York’s, and The Bank Of New York
Mellon Corporation F/K/A The Bank of New York Company’s Motion to Dismiss on Behalf of
Certain Trust Defendants (Dkt. #48) is hereby DENIED, and Ocwen Loan Servicing, LLC’s and
Ocwen Financial Corporation’s Motion to Dismiss Relator’s Complaint (Dkt. #40) is hereby
DENIED.
It is further ORDERED that Ocwen Loan Servicing, LLC’s and Ocwen Financial
Corporation’s Motion to Strike the Boyd and Sanders Declarations Submitted by Relators in
.

Response to Motions to Dismiss (Dkt. #60) is hereby DENIED as MOOT.
It is further ORDERED that Defendants’ Joint Motion Requesting an Oral Hearing
(Dkt. #66) is hereby DENIED as MOOT.
IT IS SO ORDERED.
SIGNED this 13th day of February, 2023.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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