United States District Court, E.D. Pennsylvania
LISA A. ABRAHAM, LISA CAVE and SCOTT CAVE, on behalf of themselves and all other similarly situated, Plaintiffs,
OCWEN LOAN SERVICING, LLC, Defendant.
JOHN R. PADOVA, District Judge.
Presently before the Court is a Motion by Defendant Ocwen Loan Servicing, LLC ("Ocwen") to dismiss Plaintiffs' Class Action Complaint ("CAC"). The CAC raises two claims, a violation of the Pennsylvania Unfair Trade Practices Act and Consumer Protection Law ("UTPCPL"), 73 Pa. Stat. Ann. § 201-2(xxi), and a violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692e(2)(A), f(1). For the following reasons, the Motion is granted in part and denied in part.
I. PROCEDURAL HISTORY
This action was filed on August 25, 2014, pursuant to an agreement of the parties intended to rationalize several class action cases instituted before this Court against Ocwen and Saxon Mortgage, Inc. ("Saxon"). Lisa and Scott Cave had been plaintiffs in Civ. A. No. 11-4586. Another case, Civ. A. No. 12-5366, was filed by William D. Cave and Pamela Smith. Both cases were filed as class actions, and each raised claims against both Saxon and Ocwen involving a temporary loan modification contract under the federal Home Affordable Modification Program ("HAMP"), as well as claims involving Ocwen's own in-house loan modification program. While HAMP-related claims against Saxon remain to be litigated in both actions, Ocwen has been dismissed as a defendant in Civ. A. No. 12-5366 (see Docket Entry No. 54), and no claims involving HAMP remain against it in Civ. A. No. 11-4586. A third civil action, No. 14-1776, styled Abraham v. Ocwen Loan Servicing LLC and brought by the same counsel, asserted class action claims against Ocwen based on its in-house modification program that were similar to Lisa and Scott Caves' in-house modification program claim in Civ. A. No. 11-4586. The Abraham action, while initially marked as a related action to the other two cases, was reassigned to the Hon. Lawrence F. Stengel. Pursuant to the parties' agreement: (1) Judge Stengel's case was voluntarily dismissed (see Civ. A. No. 11-1776, Docket Entry No. 16); (2) the Caves' in-house modification program claim in Civ. A. No. 11-4586 was severed from the claims against Saxon; and (3) that severed claim was consolidated with Plaintiff Abraham's in-house modification program claim from Civ. A. No. 11-1776 into a new pleading, the CAC, filed as Civ. A. No. 14-4977.
We have issued several opinions in Civ. A. No. 11-4586 involving the Caves' claims against Saxon and Ocwen. In Cave v. Saxon Mortg. Servs., Inc., Civ. A. 11-4586 , 2012 WL 1957588, at *10 (E.D. Pa. May 30, 2012) ("Cave I"), we refused, inter alia, to dismiss Lisa and Scott Caves' claim against Saxon under the UTPCPL on the ground that it was barred by the economic loss doctrine. We found that the claim was not barred because the Plaintiffs had alleged "a showing of harm that [was] distinct from the disappointed expectations evolving solely from an agreement." Id . at *11 (citing Sunburst Paper, LLC v. Keating Fibre Int'l, Inc., Civ. A. No. 06-3959 , 2006 WL 3097771, at *3 n.3 (E.D. Pa. Oct. 30, 2006)). For example, the Caves had asserted that Saxon had failed to provide the paperwork they needed to get a modification Id . In Cave v. Saxon Mortg. Servs., Inc., Civ. A. 11-4586, 2012 WL 6209891 (E.D. Pa. Dec. 12, 2012) ("Cave II"), we held that the allegations concerning the Balloon Disclosure in Lisa and Scott Caves' Ocwen in-house loan modification documents plausibly stated a claim under UTPCPL because the disclosure did not provide them with an estimate of the amount of the balloon payment, an explanation of how this payment would be calculated, or an amortization schedule for Plaintiffs' payments. See id. at *9. We also found that the Caves' allegation that Ocwen failed to provide this information was sufficient to state a claim based on a "false, deceptive, or misleading representation" of Plaintiffs' debt under the FDCPA. Cave II at *7 (citing 15 U.S.C. § 1692e).
We also issued an Opinion in Cave v. Saxon Mortg. Servs., Inc., Civ. A. No. 12-5366, 2013 WL 1915660 (E.D. Pa. May 9, 2013) ("Cave IV"), assessing the plausibility of William Cave's claim under the UTPCPL. We determined in that Opinion that the UTPCPL claim against Saxon was not barred by the economic loss doctrine since Plaintiff plausibly alleged damages that were separate and distinct from those resulting from his breach of contract claim. Id . at *11-12.
II. FACTUAL ALLEGATIONS
Plaintiffs Lisa and Scott Cave obtained a thirty year, fixed rate mortgage loan in the amount of $236, 300.00 from Saxon Mortgage, Inc. on November 23, 2005, at an interest rate of 8.65%. (CAC ¶ 28.) After experiencing financial difficulties, the Caves sought a loan modification from Saxon under HAMP. (Id. ¶ 31.) They entered into a Trial Period Plan ("TPP"). (Id. ¶ 32.) Although they successfully complied with their TPP obligations, Saxon denied them a permanent HAMP modification. (Id. ¶ 33.)
Ocwen began servicing the Caves' loan on May 16, 2011. (Id. ¶ 34.) At the time, they were in default on the loan. (Id. ¶ 35.) Ocwen advised them that they would need to again apply for a HAMP modification, but if they did not qualify under HAMP, they would be considered for a modification under one of Ocwen's in-house modification programs. (Id. ¶ 37.) Ocwen denied them a HAMP modification. (Id.) It did offer them an in-house modification at an introductory annual interest rate of 2%, after which the rate would increase to 4.5% until the loan reached maturity. (Id. ¶ 38.) The modification agreement contained a "BALLOON DISCLOSURE, " which advised the Caves that the modified loan had a balloon payment feature such that, even if they made all payments in full and on time, their loan would not be paid in full by the final payment date. (Id. ¶ 39.) Rather, the modification agreement stated that a single balloon payment would be due on December 1, 2035, but the agreement did not reveal the amount of the balloon payment or the method by which the payment would be calculated. (Id.) Prior to entering into the modification, Lisa Cave repeatedly attempted to ascertain the amount of the balloon payment. (Id. ¶¶ 40-41.) Ocwen's representatives refused to disclose the amount of the payment, despite the fact that they allegedly knew the exact amount the Caves would owe if they made all of their payments in full and on time. (Id. ¶¶ 41-42.) The Caves allege that they believed that the amount of the balloon payment would not be substantial and would be an amount they could afford. (Id. ¶ 43.) They accepted the modification. (Id. ¶ 44.) It was not until after the commencement of the related litigation against Saxon that Ocwen disclosed that the balloon payment would be $93, 524.46, an amount equal to 34% of the $272, 203.09 original principal of the modified loan. (Id. ¶¶ 45-46.) The CAC alleges that the Caves will be required to obtain a new loan in order to finance the balloon payment at a time when they will be in the sixties and have no way of knowing whether they will be able to obtain the financing needed to pay it off. (Id. ¶ 47.)
Plaintiff Lisa Abraham obtained a thirty year "fixed rate stepped payment" mortgage loan in the amount of $263, 500.00 on June 18, 2007 from non-party Delta Funding Corporation at an annual interest rate of 8.59%. (Id. ¶ 13.) Shortly after the origination of the loan, Ocwen began servicing her account. (Id. ¶ 15.) Abraham filed a Chapter 7 bankruptcy petition on August 20, 2009, which was converted to a Chapter 13 proceeding on September 30, 2010, and was terminated and discharged on February 1, 2011. (Id. ¶¶ 16-17.) She entered into a loan modification agreement with Ocwen on June 18, 2010, providing a new balance of $322, 838.81 at an annual interest rate of 6.4%. (Id. ¶ 18.) In February 2011, she again experienced financial problems. (Id. ¶ 19.) Ocwen repeatedly notified her of its intent to foreclose on her mortgage loan. (Id. ¶ 20.) She was told that she could apply for another loan modification to avoid foreclosure. (Id.) Ocwen offered her an in-house modification on November 23, 2012, at a new principal balance of $236, 040.80, and an annual rate of 2%. (Id. ¶ 21.) This modification included a "BALLOON DISCLOSURE" advising her that, even if she made all payments in full and on time her loan would not be paid off by the final payment date. (Id. ¶ 22.) The disclosure did not reveal the amount of the balloon payment or how it would be calculated. (Id.) She made repeated inquiries of Ocwen to find out the amount of the balloon payment, but Ocwen's representatives refused to disclose the information. (Id. ¶ 23.) The CAC alleges that she believed the amount would not be substantial. (Id. ¶ 24.) In February 2013, Ocwen disclosed that the amount of her balloon payment would be $114, 236.82, approximately 43% of the original principal of the loan, if she made all scheduled payments in full and on time. (Id. ¶ 26.) The CAC alleges that she will be required to obtain a new loan in order to finance the balloon payment at a time when she will be seventy-six years old, and that she has no way of knowing whether she will be able to obtain the financing needed to pay it off. (Id. ¶ 27.)
III. STANDARD OF REVIEW
When considering a motion to dismiss pursuant to Rule 12(b)(6), we "consider only the complaint, exhibits attached to the complaint, [and] matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents." Mayer v. Belichick , 605 F.3d 223, 230 (3d Cir. 2010) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc. , 998 F.2d 1192, 1196 (3d Cir. 1993)). We take the factual allegations of the complaint as true and draw all reasonable inferences in favor of the plaintiff. DelRio-Mocci v. Connolly Props., Inc. , 672 F.3d 241, 245 (3d Cir. 2012) (citing Warren Gen. Hosp. v. Amgen Inc. , 643 F.3d 77, 84 (3d Cir. 2011)). Legal conclusions, however, receive no deference, and the court is "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain , 478 U.S. 265, 286 (1986) (cited with approval in Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007)).
A plaintiff's pleading obligation is to set forth "a short and plain statement of the claim, " Fed.R.Civ.P. 8(a)(2), which gives the defendant "fair notice of what the... claim is and the grounds upon which it rests.'" Twombly , 550 U.S. at 555 (alteration in original) (quoting Conley v. Gibson , 355 U.S. 41, 47 (1957)). The complaint must contain "sufficient factual matter to show that the claim is facially plausible, ' thus enabling the court to draw the reasonable inference that the defendant is liable for [the] misconduct alleged.'" Warren Gen. Hosp. , 643 F.3d at 84 (quoting Fowler v. UPMC Shadyside , 578 F.3d 203, 210 (3d Cir. 2009)). "The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (citing Twombly , 550 U.S. at 556). In the end, we will dismiss a complaint if the factual allegations in the complaint are not sufficient "to raise a right to relief above the speculative level.'" W. Run Student Hous. Assocs., LLC v. Huntington Nat'l Bank , 712 F.3d 165, 169 (3d Cir. 2013) (quoting Twombly , 550 U.S. at 555).
IV. THE UTPCPL CLAIM
Ocwen first argues that the UTPCPL claim is barred by the economic loss doctrine. It contends that, because Plaintiffs do not allege anything other than economic damages, unaccompanied by physical injury or property damage, their UTPCPL is not plausible. It points out that the claim is predicated entirely on the alleged deceptive balloon payment disclosures that are part of the loan modification agreements, and argues that the claim is neither independent of nor extraneous to the agreements, but is instead inextricably intertwined with the agreements. It notes that the only losses articulated by Plaintiffs are references to "losses of money or property, " "obligations to pay substantial balloon payments, " "higher principle [sic] balances throughout the terms of their loans, " "deterrence from seeking other remedies to address default, " "damage to credit, " and "additional income tax liability." (Def. Br. at 11-12 (quoting CAC ¶ 68).) Because these are all forms of loss that are economic in nature, Ocwen argues that recovery is barred as a matter of law by the economic loss doctrine.
Plaintiffs respond that they have alleged deceptive conduct that is separate and distinct from a breach of contract. They draw our attention to the fact that they have not asserted a breach of contract claim based on Ocwen violating the balloon modification agreements and do not seek damages flowing from such a breach. Instead, they have alleged that Ocwen engaged in deceptive conduct by failing to estimate the amount of the balloon payments, explaining how they would be calculated, or providing an amortization schedule disclosing the amount of principal and interest the Plaintiffs would be paying over the life of the loan. (Pls.' Br. at 10-11.) They also argue that we have already found that identical ...