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Gritters v. Ocwen Loan Servicing, LLC

United States District Court, N.D. Illinois, Eastern Division

December 31, 2014



EDMOND E. CHANG, District Judge.

Plaintiff Donna M. Gritters filed a complaint [R. 1] against Defendants Ocwen Loan Servicing, LLC, Nationstar Mortgage, LLC, Federal Home Loan Mortgage Corporation, and Pierce & Associates, P.C. (for convenience, referred to as "Defendants" when appropriate to refer to them collectively), seeking damages for alleged breaches of contract, breaches of fiduciary duties, and violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., the Illinois Consumer Fraud Act (ICFA), 810 ILCS 505/1 et seq., the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq., and the Truth in Lending Act (TILA), 15 U.S.C. § 1640, associated with the collection of Gritters' mortgage payments.[1] Defendant Ocwen now moves to dismiss [R. 25] Counts Two (FDCPA), Four (ICFA), Five (RESPA), and Six (breach of fiduciary duty) of the complaint under Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, the motion to dismiss is granted in part and denied in part.

I. Background

In evaluating the motion to dismiss, the Court must accept as true the complaint's factual allegations and draw reasonable inferences in Gritters' favor. Ashcroft v. al-Kidd, ___ U.S. ___, 131 S.Ct. 2074, 2079 (2011). Gritters is an Illinois resident, who defaulted on her monthly mortgage payments in June 2009. R. 1, Compl. ¶¶ 4, 23. On August 13, 2009, Ocwen acquired the servicing rights for Gritters' loan (which was owned by a third party at all relevant times). Id. ¶¶ 9, 24, 98. Ocwen filed a foreclosure action against Gritters on February 25, 2010. Id. ¶ 25. In March 2010, Gritters received a loan modification offer from Ocwen. Id. ¶ 26. The modification required Gritters to make an initial payment of $650.26 before April 1, 2010, and to agree to certain modifications to the terms of her loan obligations, in exchange for which her Note would become "contractually current." R. 1-3, Modification Agreement. Gritters accepted the modification agreement on March 20, 2010, and submitted her initial payment of $650.26 on March 29, 2010. Compl. ¶¶ 27, 35.

Gritters alleges that Ocwen incorrectly recorded her first payment as having been made on April 27, 2010-past the April 1 due-date set out in the modification agreement. Id. ¶ 36. Based on that mistaken premise, between April 1 and April 27, Ocwen assessed hundreds of dollars in fees and costs, which it deducted from Gritters' payments before applying those payments to principal, interest, and escrow. Id. ¶ 38. In other words, despite Gritters' timely acceptance of the loan modification, Ocwen continued to treat Gritters' loan as if it were in default. Id. ¶¶ 39, 40. In fact, although Gritters had been told that the foreclosure case against her had been dismissed after the modification agreement was executed, Gritters discovered in April 2011 that her home was still listed as "in foreclosure." Id. ¶ 56. On April 12, 2011, Ocwen sent Gritters a notice with "reinstatement" figures, claiming that Gritters owed $386.92 to cure a purported default. Id. ¶ 57. Gritters alleges that the $386.92 included April's monthly payment of $650.00, proving that she had actually overpaid her mortgage to date. Id. ¶¶ 57, 58. After Gritters made the payment, Ocwen sent Gritters a letter admitting that she was current on her payment and dismissed the foreclosure action-thirteen months after the loan modification. Id. ¶¶ 60-61.

In addition to fees and costs associated with a nonexistent default, Gritters also alleges that Ocwen overcharged her escrow account for property taxes and insurance costs that it did not actually pay. Id. ¶¶ 41-50. Specifically, for the 2010-2011 period, Ocwen notified Gritters that it had paid $6, 401.09 for taxes and insurance from Gritters' escrow account, when the true amount was only $4, 250.07. Id. ¶¶ 47, 49. Gritters alleges that Ocwen never returned the surplus. Id. ¶ 55. Moreover, Gritters alleges that Ocwen then attempted to charge her a $397.15 fee for the escrow shortage that Ocwen itself created with the overcharge. Id. ¶ 51. Similarly, for the 2011-2012 period, Gritters alleges that her escrow account should have had a positive balance of $645.93, but Ocwen again assessed an escrow shortage fee of $760.40 and treated her account as if it were in default. Id. ¶¶ 68-72. Following the 2012-2013 period, Gritters once again alleges that her escrow account should have had a positive balance that Ocwen never returned or applied to her mortgage contract, and that Ocwen continued to seek additional sums for escrow and to cure a nonexistent default. Id. ¶¶ 80-82.

From April 2011 through September 2013, Gritters alleges that she sent numerous "qualified written requests" (under RESPA) to Ocwen regarding her account. Id. ¶ 89. Despite Ocwen's responses claiming to have investigated her account and verified its own accounting as accurate, Gritters alleges that Ocwen did not investigate anything in response to her queries or address its mismanagement of her escrow, the reasons for the alleged "shortages, " the overcharging of taxes and insurance, the assessment of pre-modification charges to post-modification statements, withholding of escrow funds in excess of the one-sixth cushion, or the assessment of foreclosure charges one year after the loan modification. Id. ¶ 90. Instead, Ocwen reported Gritters' "default" to credit bureaus, affecting her ability to obtain credit. Id. ¶ 97.

In February 2014, Gritters filed this case against Ocwen and other parties associated with the collection of her mortgage loan payments. With regard to Ocwen specifically, the complaint alleges that Ocwen breached the parties' agreement (Count One), violated the FDCPA (Count Two), violated the ICFA (Count Four), violated the RESPA (Count Five), and breached its fiduciary duty to Gritters (Count Six). Ocwen now moves to dismiss Counts Two, Four, Five, and Six of Gritters' complaint.

II. Legal Standard

Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). This short and plain statement must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quotation marks and citation omitted). The Seventh Circuit has explained that this rule "reflects a liberal notice pleading regime, which is intended to focus litigation on the merits of a claim' rather than on technicalities that might keep plaintiffs out of court." Brooks v. Ross, 578 F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002)).

"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted." Hallinan v. Fraternal Order of Police Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). "[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citing Twombly, 550 U.S. at 555-56); McGowan v. Hulick, 612 F.3d 636, 638 (7th Cir. 2010) (courts accept factual allegations as true and draw all reasonable inferences in plaintiff's favor). "[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). These allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. The allegations that are entitled to the assumption of truth are those that are factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 678-79.

III. Analysis

Ocwen argues that Counts Two, Four, Five, and Six of the complaint should be dismissed for failure to state a claim. With regard to Count Two, the FDCPA claims, Ocwen contends that it is not a debt collector, that the claims are time-barred, and that Gritters has not identified any actionable attempts to collect a debt. R. 25, Def.'s Br. at 4-9. Regarding Counts Four and Six, Ocwen argues that Gritters' ICFA and breach-of-fiduciary-duty claims are duplicative of her breach-of-contract claim. Id. at 9, 14-15. Ocwen also argues that Gritters' ICFA claims fail because she has not adequately pled "deceptive practices" (under Rule 9(b)'s heightened pleading standard) or "unfairness." Id. at 11-12. As for Count Five, Ocwen argues that Gritters has not identified any qualified written requests or recoverable damages under RESPA. Id. at 12-14. Finally, regarding the complaint in its entirety, Ocwen contends that, by grouping Ocwen and Nationstar together in her allegations as "the Servicers, " Gritters has failed to meet Rule 8(a)'s notice requirements. Id. at 4. Each issue is addressed in turn below.

A. Rule 8(a) Pleading

At the outset, the Court addresses Ocwen's argument that the complaint fails to meet the notice requirements of Rule 8(a). Rule 8(a) requires that the complaint "give the defendant fair notice of what the claim is and the grounds upon which it rests." Twombly, 550 U.S. at 555 (quotation marks and citation omitted). Ocwen contends that "Gritters largely ignores Rule 8 and generically lumps Ocwen together with Nationstar under the term Servicers' in the counts asserted against Ocwen." Def.'s Br. at 4.[2] It is true that individual counts recite allegations against Ocwen and Nationstar collectively as "the Servicers, " but in the context of the complaint as a whole, Ocwen is incorrect.

In the complaint, before getting to the allegations that refer to Ocwen and Nationstar collectively, Paragraphs 9 through 97 describe each defendant's individual conduct as it related to Gritters' loan. The factual allegations contained in those paragraphs are grouped by type of offense and time period, and include the specific dates of alleged misconduct, the dollar amounts involved, and the contents of each defendant's false representations. Paragraph 101 incorporates those factual allegations into each count of the complaint. Where Gritters' allegations apply to both Ocwen and Nationwide, the complaint refers to them collectively as "the Servicers"; but where one is charged with conduct that the other is not, the complaint identifies that defendant individually. ...

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