The opinion of the court was delivered by: CHARLES NORGLE SR., Judge
Before the Court is Defendant Ocwen Loan Servicing, LLC's
Motion for a Preliminary Injunction.*fn1 For the following
reasons, the Motion is granted.
Plaintiffs in this Multi-District Litigation ("MDL") are
numerous individuals who hold home loans serviced by Defendant
Ocwen Loan Servicing, LLC ("Ocwen"). Defendants include Ocwen and
Moss, Codilis, Stawiarsky, Morris, Schneider & Prior, LLP
("Moss"). Moss is a partnership that acts as legal counsel and
debt collector for Ocwen. During the course of servicing
Plaintiffs' home loans, Ocwen determined that these loans were in
default. Ocwen then notified Moss. Moss then sent form letters to
Plaintiffs, advising Plaintiffs that (1) their loans were in
default, and (2) the loans would be accelerated and foreclosure
proceedings would be started, if Plaintiffs failed to cure the
defaults. Moss then charged Ocwen a "recoverable breach fee" of
$285 per homeowner for services related to, and the sending of,
these letters. Ocwen then charged the homeowners that same $285,
in addition to other fees and charges routinely assessed in the event of default and foreclosure proceedings.
Plaintiffs seek to hold Ocwen, Moss, and other Defendants
liable for these and other numerous alleged wrongdoings related
to Ocwen's servicing of Plaintiffs' home loans. For example.
Plaintiffs allege that Ocwen has failed to timely post
Plaintiffs' loan payments, causing Plaintiffs to erroneously
appear to be in default, and that Ocwen has forced Plaintiffs to
purchase insurance for properties that were already insured.
As of November 9, 2005, Plaintiffs have filed forty-eight
related Complaints in this matter. These cases have been
consolidated into the present MDL, and transferred to this court
for orderly and efficient disposition. See Transfer Order,
April 14, 2004 (establishing MDL No. 1604). Plaintiffs'
twenty-three count Consolidated Class Action Complaint alleges
generally that Defendants improperly initiated default and
foreclosure proceedings upon Plaintiffs, and engaged in various
unauthorized and unlawful mortgage servicing and debt collection
practices to the detriment of Plaintiffs (including, inter
alia, the imposition of the "recoverable breach fee").
Plaintiffs also allege violations of the Fair Debt Collection
Practices Act (15 U.S.C. § 1692 et seq.),*fn2 the Real
Estate Settlement Procedures Act (12 U.S.C. § 2601 et seq.),
and various state consumer protection statutes. In addition,
Plaintiffs bring several common law counts in their Consolidated
Complaint, such as unjust enrichment and breach of contract.
Plaintiffs ask that the court, inter alia, order that
Defendants pay damages and restitution to Plaintiffs, and also
order that Defendants be enjoined from any further similar
wrongful conduct. On April 25, 2005, the court granted Ocwen's Motion for Partial
Summary Judgment, holding that there was no genuine issue of
material fact as to whether the "recoverable breach fee" was
authorized by the loan contracts, but reserving judgment on the
merits of the remainder of Plaintiffs' claims. In re Ocwen
Federal Bank FSB Mortgage Servicing Litigation, MDL No. 1604,
Lead Case No. 04 C 2714, 2005 U.S. Dist. LEXIS 8274 (N.D. Ill.
Apr. 25, 2005).
Ocwen filed its Motion for a Preliminary Injunction on October
14, 2005. Ocwen initially asked the court to enjoin three law
firms, Pipkin, Oliver & Bradley; Hilliard and Munoz, LLP; and
Ellis, Castarphen, Dougherty, and Goldenthal, P.C. ("Texas
Counsel"), from litigating or participating in any pending or
future lawsuit in state or federal court that asserts mortgage
servicing allegations encompassed within the Consolidated
Complaint in MDL No. 1604, until pretrial proceedings in MDL No.
1604 are completed. Texas Counsel are presently attorneys of
record in MDL No. 1604, as the MDL Panel has transferred three of
their cases to this court. Texas Counsel filed their Response on
October 20, 2005, and Ocwen filed its Reply on October 24, 2005.
On November 7, 2005, however, Ocwen filed its Supplemental
Memorandum in Support of Preliminary Injunction. In that
Supplemental Memorandum, Ocwen asserts that Texas Counsel are
seeking to evade any injunction this court might issue by hiring
co-counsel to move ahead with state court action, in the event
that Texas Counsel are enjoined from doing so. By way of
affidavit, Ocwen represents that Robert Hilliard, of the Texas
Counsel firm Hilliard and Munoz, made the following statement on
Friday November 4, 2005, in open court in the 212th Judicial
District of Galveston County, Texas. "[I]f [Judge Norgle] rules
in favor of Ocwen . . . we will still go to trial, it will just
be different faces than us." Ocwen now asks the court to enjoin Texas Counsel, and their clients and co-counsel, from
litigating or otherwise participating in any pending or future
lawsuit in state or federal court that asserts mortgage servicing
allegations encompassed within the Consolidated Complaint in MDL
No. 1604, until pretrial proceedings in MDL No. 1604 are
completed. Texas Counsel filed their Reply to Supplemental
Memorandum on November 9, 2005. The matter is fully briefed and
before the court.
A. The Federal Courts' Power to Enjoin Parallel State Court
The power of a federal court to enjoin parallel state court
litigation flows from the interplay between two federal statutes,
the All Writs Act ("AWA") and the Anti-Injunction Act ("AIA").
The AWA, 28 U.S.C. § 1651(a), provides: "The Supreme Court and
all courts established by Act of Congress may issue all writs
necessary or appropriate in aid of their respective jurisdictions
and agreeable to the usages and principles of law." The AIA,
28 U.S.C. § 2283, provides: "A court of the United States may not
grant an injunction to stay proceedings in a State court except
as expressly authorized by Act of Congress, or where necessary in
aid of its jurisdiction, or to protect or effectuate its
judgments." The AWA thus gives federal courts broad authority to
issue whatever Writs may be necessary to preserve the courts'
jurisdictional powers. The AIA, however, acts as a counterbalance
to the sweeping powers granted to federal courts by the AWA. The
AIA "forbids any federal injunction or stay of state litigation"
unless such an injunction meets one of three exceptions: it is
expressly authorized by Congress, or is issued in order to aid
the jurisdiction of a federal court, or to protect or effecutate
the judgments of a federal court. In the Matter of:
Bridgestone/Firestone, Inc., 333 F.3d 763, 765 (7th Cir. 2003)
(enjoining members of putative classes and their attorneys, in a
federal MDL case involving defective tires, from attempting to have nationwide classes
certified in state courts).
The Seventh Circuit reads these two Acts together to provide
that while federal courts ordinarily may not enjoin state
actions, where a federal MDL court's jurisdictional power is
sufficiently threatened by a parallel state court action, such an
injunction may issue. In Winkler v. Eli Lilly & Co., a federal
MDL case involving injuries allegedly caused by the prescription
drug Prozac, the Seventh Circuit indicated that "an injunction
[of a parallel state court action] may be issued where `necessary
to prevent a state court from so interfering with a federal
court's consideration or disposition of a case as to seriously
impair the federal court's flexibility and authority to decide
that case.'" 101 F.3d 1196, 1201 (7th Cir. 1996) (quoting
Atlantic Coastline R.R. v. Brotherhood of Locomotive Engineers,
398 U.S. 281, 295 (1970)). In other words, in MDL cases like the
instant one, the jurisdictional exception within the AIA
"parallels the federal courts' power under the All Writs Act `to
issue such commands . . . as may be necessary or appropriate to
effectuate and prevent the frustration of orders it has
previously issued in its exercise of jurisdiction otherwise
obtained.'" Id. (quoting United States v. New York Telephone,
434 U.S. 159, 173 ...