Williams v. Lakeview Loan Servicing, LLC et al

Filing 91

ORDER ADOPTING MEMORANDUM AND RECOMMENDATIONS re: 86 Memorandum and Recommendations, 72 SEALED MOTION (Plaintiff's Motion for Class Certification) (Signed by Judge Charles Eskridge) Parties notified.(jengonzalez, 4)

United States District Court
Southern District of Texas

ENTERED
March 30, 2022
Nathan Ochsner, Clerk

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
URSULA N. WILLIAMS, § CIVIL ACTION NO.
Plaintiffs, § 4:20-CV-01900
§
§
vs.
§ JUDGE CHARLES ESKRIDGE
§
§
LAKEVIEW LOAN
§
§
SERVICING LLC and
LOANCARE LLC,
§
Defendants. §
ORDER ADOPTING
MEMORANDUM AND RECOMMENDATION
The Magistrate Judge recommends that the motion by
Plaintiff Ursula Williams for class certification as to the
Texas Debt Collection Act claim be granted as modified,
and class certification as to the breach of contract claim be
denied without prejudice to refiling. Dkt 86. The objections
by Defendants are overruled. Dkt 89. The memorandum
and recommendation of the Magistrate Judge is adopted as
the opinion and order of this Court.
1. Background
Plaintiff Ursula Williams obtained a Federal Housing
Authority-insured mortgage in 2010 for property located in
Bryan, Texas. Her mortgage is serviced by Defendant
Lakeview Loan Servicing LLC and subserviced by
Defendant LoanCare LLC. Dkt 86 at 2.
LoanCare allows mortgagors to make payments on
their loans via mail, phone (with a live agent or an
automated system), and website portal. Each option except
payment by mail requires the mortgagor to remit a pay-topay fee. Dkt 77 at 13. Williams preferred to pay by

automated phone system. And LoanCare charged her a $12
fee every time she made such payments. These fees totaled
$480 between 2017 and 2020. Dkt 77-1 at 8–9.
Williams brought this action on May 29, 2020. She
contends that these pay-to-pay fees breached her mortgage
contract and violated the Texas Debt Collection Act. Dkt 1.
Defendants refunded Williams $456 upon the outset of
this litigation. Dkt 79-1 at 16; Dkt 86 at 2. LoanCare filed
a motion to dismiss. Dkt 27. Plaintiff voluntarily dismissed
the breach of contract claim against LoanCare, and the
motion was denied as to the TDCA claim. Dkt 35 & 59. The
case was then transferred to Judge Sam S. Sheldon for full
pretrial management pursuant to 28 USC § 636(b)(1)(A)
and (B) and Rule 72 of the Federal Rules of Civil Procedure.
Dkt 45.
Williams now seeks certification of two classes:
Lakeview Class: All persons in the United
States (1) with an FHA-insured mortgage
securing a property located in the State of
Texas (2) originated or serviced by
Lakeview and (3) subserviced by LoanCare
and (4) who paid one or more Pay-to-Pay
fee to LoanCare during the applicable
statute of limitations period through the
date a class is certified.
LoanCare Class: All persons in the United
States (1) with an FHA-insured mortgage
securing a property located in the State of
Texas (2) serviced or subserviced by
LoanCare and (3) who paid one or more Payto-Pay fee to LoanCare during the
applicable statute of limitations period
through the date a class is certified.
Judge Sheldon issued a Memorandum and
Recommendation on February 8, 2022, recommending that
class certification as to the breach of contract claim be
denied without prejudice to refiling, and that class

2

certification as to the TDCA claim be granted as modified.
Dkt 86. Defendants filed timely objections. Dkt 89.
2. Legal standard
The district court conducts a de novo review of those
conclusions of a magistrate judge to which a party has
specifically objected. See 28 USC § 636(b)(1)(C); United
States v Wilson, 864 F2d 1219, 1221 (5th Cir 1989). To
accept any other portions to which there is no objection, the
reviewing court need only satisfy itself that no clear error
appears on the face of the record. See Guillory v PPG
Industries Inc, 434 F3d 303, 308 (5th Cir 2005), citing
Douglass v United Services Automobile Association,
79 F3d 1415, 1420 (5th Cir 1996); see also FRCP 72(b),
advisory committee note (1983).
District court review isn’t intended to be a second bite
at the apple. See Freeman v County of Bexar, 142 F3d 848,
852 (5th Cir 1998). Rule 72 instead allows a party to “file
specific written objections to the proposed findings and
recommendations.” This means that objections must
specifically identify those findings to which objections are
being made and provide argument with citations as to why
the Magistrate Judge purportedly erred. United States v
Ervin, 2015 WL 13375626, *13 (WD Tex) (collecting cases);
United States v Charles, 2010 WL 11707712, *1 (SD Tex);
Harbolt v Quarterman, 2009 WL 3496290, *1 & n 1 (ND
Tex). A district court needn’t consider frivolous, conclusive,
or general objections. Oubre v Schlumberger Ltd, 2016 WL
5334627, *1 (SD Tex), citing Mosley v Quarterman, 306 F
Appx 40, 42 n 2 (5th Cir, per curiam), and Nettles v
Wainwright, 677 F2d 404, 410 (5th Cir 1982), overruled on
other grounds by Douglass, 79 F3d 1415 (5th Cir 1996);
Jones v Bank of New York Mellon, 2015 WL 5725196, *1
(SD Tex); Mejia v Davis, 2017 WL 2274486, *1 n 2 (SD Tex).
3. Analysis
a. Objections as to commonality
The mortgages of all putative class members contain a
clause stating that “Lender may collect fees and charges
authorized by the Secretary” of the Department of Housing

3

and Urban Development (referred to as the fee clause). Dkt
89 at 9. Defendants acknowledge this, but they object to the
finding that the mortgages at issue aren’t materially
different. Id at 9–10. Specifically, they contend that there
are two categories of mortgages at issue, each with
different terms. And they suggest that these differences
vitiate commonality. Id at 9, 14.
First, category one mortgages contain an additional
clause that states, “Lender may not charge fees that are
expressly prohibited by this Security Instrument or by
Applicable Law.” Dkt 89 at 9. Defendants suggest that this
addition means category one and category two mortgages
materially differ. To the contrary, the putative class doesn’t
allege that Defendants charged fees that were expressly
prohibited by the security instrument or law. They instead
argue that the fee clause doesn’t expressly authorize payto-pay fees, as required by the TDCA. Dkt 1 ¶ 4; Dkt 90 at
11; see also Tex Finance Code § 392.303. This additional
provision isn’t material to that dispute.
Second, category one mortgages contain a clause that
states, “All rights and obligations contained in this
Security Instrument are subject to any requirements and
limitations of Applicable Law. Applicable Law might
explicitly or implicitly allow the parties to agree by contract
or it might be silent, but such silence shall not be construed
as a prohibition against agreement by contract.” Dkt 77-2
at 11. Category two mortgages don’t contain such a clause,
but they do contain prefatory language stating in pertinent
part, “This Security Instrument secures to Lender . . . the
performance of Borrower’s covenants and agreements
under this Security Instrument and the Note.” Dkt 72-1 at
6 (emphasis added). True, this language differs. But both
clauses go to the affirmative defense that putative class
members entered point-of-sale contracts when they
remitted the pay-to-pay fees. Dkt 86 at 8, 11. The clauses
thus don’t affect central issues of this suit, such as whether
the TDCA applies, whether the fee clause expressly
authorized pay-to-pay fees, or even whether the TDCA
allows for point-of-sale contracts. See Tyson Foods Inc v

4

Bouaphakeo, 577 US 442, 453 (2016); Eatmon v Palisades
Collection LLC, 2011 WL 147680, *8 (ED Tex).
Third, category one mortgages contain a provision that
states, “Neither Borrower nor Lender may commence, join,
or be joined to any judicial action (as either an individual
litigant or the member of a class) that arises from the other
party’s actions pursuant to the Security Instrument or that
alleges that the other party has breached any provision of,
or any duty owed by reason of, this Security Instrument,
until such Borrower or Lender has notified the other party
. . . of such alleged breach and afforded the other party
hereto a reasonable period after the giving of such notice to
take corrective action.” Dkt 77-2 at 12. Class members with
category one mortgages may need to provide notice prior to
joining as class members—should the Court determine
that this provision is even applicable. See Dkt 90 at 12;
compare Schmidt v Wells Fargo Home Mortgage, 2011 WL
1597658, *3 (ED Va) (collecting cases) with Kurzban v
Specialized Loan Servicing LLC, 2018 WL 1570370, *3 (SD
Fla) (collecting cases). But this provision doesn’t ultimately
affect the merits of their claims once they comply.
Defendants raise two additional objections related to
commonality.
First, Defendants object that the Magistrate Judge
failed to adequately address the effect of potential thirdparty modifications. Dkt 89 at 11–12; see also Dkt 86 at 8
n 5. They specifically contend that “putative class loans
came to LoanCare directly from PHH/Ocwen.” Dkt 89 at
11. And they argue that “thousands of Ocwen/PHH
borrowers modified mortgages in the ordinary course and
in the ‘McWhorter settlement.’” Ibid. To the contrary, HUD
regulations require all loans at issue to contain the fee
clause, which can’t be modified. 24 CFR § 203.17; 54 Fed
Reg 27596-01, 27599 (1989). Consequently, though a
modification could theoretically affect recovery by
individual mortgagors, this potential doesn’t undermine
the common legal questions that arise from the inclusion of
the fee clause in all mortgages at issue.
Second, Defendants object to the determination that

5

differences in payment methods don’t pose a barrier to
class certification. Dkt 89 at 15. Again, this issue goes to
the affirmative defense that mortgagors entered point-ofsale contracts when paying fees. It doesn’t affect the core
legal theories asserted by Williams and the putative class
members.
b. Objections as to predominance
First, Defendants object that the Memorandum and
Recommendation “errs in assuming each borrower has
‘consumer debt.’” Dkt 89 at 15. Specifically, they argue that
the issue can’t be determined without individualized proof.
Ibid. To the contrary, Texas Financial Code § 392.001
defines consumer debt, with emphasis added, as “an
obligation, or an alleged obligation, primarily for personal,
family, or household purposes and arising from a
transaction or alleged transaction.” “When determining the
type of debt at issue for the purposes of the [TDCA], courts
focus on the precise transaction for which the loan proceeds
were used, not the purpose for which an account was
opened or the label of the ongoing obligation.” Garcia v
Jenkins Babb LLP, 569 F Appx 274, 276–77 (5th Cir 2014);
Riviere v Banner Chevrolet Inc, 184 F3d 457, 462 (5th Cir
1999); Willis v Portfolio Recovery Associates LLC, 2019 WL
2565243, *2 (WD Tex). All FHA-insured mortgages require
the mortgagor to occupy the property purchased with the
funds as his or her principal residence for at least the first
year of the loan. Dkt 79-1 at 9; Dkt 79 at 18. Consequently,
every borrower of an FHA-insured mortgage necessarily
uses the loan proceeds for household purposes. These
mortgages therefore may be considered consumer debt. See
Miller v McCalla, Raymer, Padrick, Cobb, Nichols, & Clark
LLC, 214 F3d 872, 874–75 (7th Cir 2000); see also Calogero
v Shows, Cali & Walsh LLP, 970 F3d 576, 581 (5th Cir
2020); Eatmon, 2010 WL 1189571 at *6.
Second, Defendants object to the finding that an
interpretation of the debt collection requirement of the
TDCA can be determined on a class-wide basis. Dkt 89 at
17. To the contrary, though servicing isn’t “synonymous
with” collecting, whether LoanCare engaged in servicing or

6

collecting when borrowers remitted the pay-to-pay fees is a
class-wide question of law. Ibid; see also Dkt 59 at 6.
Third, Defendants object to the finding that the
voluntary-payment doctrine is inapplicable. Dkt 86 at 18–
19 & n 12; Dkt 89 at 18. Defendants primarily rely on BMG
Direct Marketing Inc v Peake for the contention that
voluntary payment may be grounds for decertification. 178
SW3d 763, 773 (Tex 2005). But in that very case, the Texas
Supreme Court noted that “the voluntary-payment rule
would not apply to situations in which the Legislature or
common law has provided a right of recovery even though
payment is voluntary.” Id at 776 n 9. The TDCA provides
such a right. Dees v Nationstar Mortgage LLC, 496 F Supp
3d 1043, 1049 (SD Tex); Barnett v Caliber Home Loans,
2020 WL 5494414, *3 (SD Tex).
Fourth, Defendants object to the finding that
“Plaintiff’s proposed method of calculating damages based
on Defendants’ own spreadsheet does not preclude
certification, even if some individual issues are involved.”
Dkt 86 at 19; Dkt 89 at 19. Specifically, Defendants contend
that the Magistrate Judge confused arguments addressing
liability with arguments addressing damages. Dkt 89 at 19.
True, liability issues may not be proven with the data
spreadsheets at issue. And calculating damages may be
individualized. But Defendants don’t articulate how these
possibilities affect the ultimate recommendation that the
class be certified. Ervin, 2015 WL 13375626 at *13
(collecting cases); Charles, 2010 WL 11707712 at *1;
Harbolt, 2009 WL 3496290 at *1 & n 1.
Fifth, Defendants contend that the Memorandum and
Recommendation “ignores bankruptcy issues.” Dkt 89 at
19. But bankruptcy is not a unique issue to this class. See
Eatmon, 2011 WL 147680 at *7; Wilborn v Dun &
Bradstreet Corp, 180 FRD 347, 356 (ND Ill 1998).
Sixth, Defendants object that the Memorandum and
Recommendation “fails to consider varying contract terms,
individual modification, and notice-and-cure requirements,
as well as waiver, mitigation of damages, and release.” Dkt
86 at 20. These arguments are addressed above. At most,

7

these individualized issues serve as affirmative defenses, a
secondary matter in this litigation. And the common
question of law—namely, the legality of the pay-to-pay
fees—predominates over these individualized issues. See
Guenther v BP Retirement Accumulation Plan, 2021 WL
1216377, *7 (SD Tex).
c. Objections as to typicality
First, Defendants object to the finding that the $456
refund to Williams doesn’t make her atypical. Dkt 89 at 20.
To the contrary, a class action doesn’t become moot “upon
tender to the named plaintiffs of their personal claims”
when the plaintiff is diligently pursuing class certification.
Serrano v Customs and Border Patrol, 975 F3d 488, 492 n 1
(5th Cir 2020), quoting Zeidman v J Ray McDermott & Co,
651 F2d 1030, 1051 (5th Cir 1981). Here, Williams received
her refund after she filed her complaint, which included
class allegations. Dkt 86 at 13; Dkt 1 at ¶¶ 69–80. And
regardless, Williams contends Defendants owe her
additional damages, and she requests interest, attorney
fees, and costs. Dkt 90 at 22. The proffered $456 neither
moots Williams’ claims nor undermines her position as
lead plaintiff.
Second, Defendants object that the Memorandum and
Recommendation “failed to address the cumulative impact”
of differences between the claim brought by Williams and
those of other putative class members. Dkt 89 at 21. But
typical “is not synonymous with” identical. Doe v First City
Bancorporation of Texas Inc, 81 FRD 562, 569 (SD Tex
1978). The typicality requirement “may be satisfied even
though varying fact patterns support the claims or
defenses of individual class members or there is a disparity
in the damages claimed by the representative parties and
the other class members.” Charles Alan Wright & Arthur
R. Miller, Federal Practice and Procedure § 1764 (Westlaw
2021); Eatmon, 2011 WL 147680 at *8. The claims by
Williams and those by putative class members are based
on the same legal theory and derive from a common
nucleus of fact. Williams has thus demonstrated that her
claims are “similar enough to the claims of the class so

8

that” she “will adequately represent them.” Wright &
Miller, Federal Practice and Procedure § 1764.
d. Objections as to adequacy of representation
Defendants object that the Memorandum and
Recommendation
“erroneously
credited
Plaintiff’s
conclusory, generic declaration over her sworn, contrary
testimony.” Dkt 89 at 22. Such general objections touch the
outer bounds of Rule 72. Oubre, 2016 WL 5334627 at *1,
citing Mosley, 306 F Appx at 42 n 2, & Nettles, 677 F2d at
410, overruled on other grounds by Douglass, 79 F3d 1415
(5th Cir 1996); Jones, 2015 WL 5725196 at *1; Mejia, 2017
WL 2274486 at *1 n 2. Regardless, the Memorandum and
Recommendation adequately addressed each concern
raised in Defendants’ response brief (which were similarly
generic), appropriately giving weight to all evidence
presented. Dkt 86 at 13–16; Dkt 77 at 36–37. To summarize
the findings of the Magistrate Judge, Williams is actively
involved, counsel is experienced in consumer class actions,
and potential conflicts with ongoing class actions in which
counsel is involved are minimal. Dkt 86 at 15–16.
e. Objections as to superiority
Defendants object on five different grounds to the
finding that “a class action is superior to other available
methods for fairly and efficiently adjudicating the
controversy.” Rule 23(b)(3); Dkt 89 at 22–24. None of their
objections in this regard have merit. To the contrary, the
relatively small amount of damages at issue for each
putative class member, the number of putative class
members with similar claims, and the common questions
of law all suggest that a class action is a superior means of
adjudicating this dispute. Dkt 86 at 19–21; see also
Mitchell v State Farm Fire & Casualty Co, 954 F3d 700,
712 (5th Cir 2020).
First, Defendants argue notice-and-cure provisions are
a superior dispute resolution method. But those with
category two mortgages can’t benefit from that provision.
And category one notice-and-cure provisions only provide a
remedy if Defendants intend to repay the fees upon

9

request. Otherwise, litigation will ensue regardless.
Second, Defendants contend that “fear of underenforcement is no justification for class certification.” Dkt
89 at 22, citing Flecha v Medicredit Inc, 946 F3d 762, 769
(5th Cir 2020). True, but the Magistrate Judge didn’t rely
on underenforcement. He instead found that individual
actions would result in negative-value suits. And he
appropriately incorporated this finding into his thorough
analysis of the Rule 23(b)(3) factors. See Dkt 86 at 19–21;
Flecha, 946 F3d at 769–70.
Third, Defendants contend that the Memorandum and
Recommendation improperly rejected “no suits” as an
acceptable or preferable alternative. Dkt 89 at 23. The
concept of “no suits” is no doubt an “acceptable” alternative
to Defendants, who’d rather not be sued. But the possibility
that some individuals may file their own suit while others
may take no action at all doesn’t undermine the economies
of time, effort, and expense that class certification here
provides. Dkt 86 at 21; Castano v American Tobacco Co, 84
F3d 734, 749 n 27 (5th Cir 1996).
Fourth, Defendants object to the finding that
“managing the class action does not appear unusually
difficult.” Dkt 86 at 20; Dkt 89 at 23. And they suggest that
“manageability problems abound with liability issues.” Dkt
89 at 23. But as addressed above, factual differences
neither undermine commonality nor predominate over this
action. And “many of the issues in the case involve
statutory interpretation that can be determined on a classwide basis with class-wide evidence.” Dkt 86 at 20.
Fifth, Defendants argue proper regulation is superior
to certification. Dkt 89 at 23. To the contrary, “any legally
cognizable and legitimately presented grievance placed
before a court is entitled to be adjudicated.” Wright &
Miller, Federal Practice and Procedure § 1779; Deposit
Guaranty National Bank v Roper, 445 US 326, 338 (1980).
4. Conclusion
The objections by Defendants Lakeview Loan Servicing
LLC and LoanCare LLC are OVERRULED. Dkt 89.

10

The Memorandum and Recommendation by the
Magistrate Judge is ADOPTED as the Memorandum and
Order of this Court. Dkt 86.
The motion by Plaintiff Ursula Williams for class
certification is GRANTED IN PART and DENIED IN PART. Dkt
72. As to certification of the Texas Debt Collection Act
claim, it’s GRANTED AS MODIFIED. As to certification of the
breach of contract claim, it’s DENIED WITHOUT PREJUDICE to
refiling.
The following classes are CERTIFIED:
Lakeview Class: All persons in the United
States (1) with an FHA-insured mortgage
executed on or after March 1, 1990,
securing a property located in the State of
Texas (2) originated or serviced by
Lakeview Loan Servicing LLC and (3)
subserviced by LoanCare LLC and (4) who
paid one or more pay-to-pay fee to
LoanCare during the applicable statute of
limitations period through March 30, 2022.
LoanCare Class: All persons in the United
States (1) with an FHA-insured mortgage
executed on or after March 1, 1990,
securing a property located in the State of
Texas (2) serviced or subserviced by
LoanCare LLC and (3) who paid one or
more pay-to-pay fee to Loancare during the
applicable statute of limitations period
through March 30, 2022.
SO ORDERED.
Signed on March 30, 2022, at Houston, Texas.
__________________________
Hon. Charles Eskridge
United States District Judge

11