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Snyder v. U.S. Bank N.A.

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

July 14, 2019

KEITH SNYDER, SUSAN MANSANAREZ, and TRACEE A. BEECROFT, individually an on behalf of all others similarly situated, Plaintiffs,
U.S. BANK N.A., WILMINGTON TRUST, N.A., and DEUTSCHE BANK NATIONAL TRUST COMPANY, individually and in their capacities as trustees, Defendants.



         The named plaintiffs in this case filed suit against U.S. Bank N.A., Wilmington Trust, N.A., and Deutsche Bank National Trust Company-collectively referred to as the banks or the bank defendants-on behalf of a putative class, alleging violations of the Telephone Consumer Protection Act (TCPA). Specifically, the plaintiffs allege that the banks owned certain mortgage loans upon which a third-party servicer (whom the plaintiffs also sued), Ocwen Loan Servicing, LLC, attempted to collect. In the course of those collection efforts, Ocwen and the defendants allegedly violated the TCPA by using automatic dialing technology to contact the named plaintiffs and the other members of the putative class.

         The plaintiffs recently reached a settlement in their suit with Ocwen on behalf of nearly 1.7 million class members. See Snyder v. Ocwen Loan Servicing, LLC (Ocwen III), No. 14 C 8461, 2019 WL 210339, at *1 (N.D. Ill. May 14, 2019). Soon after that settlement was approved, the bank defendants moved for summary judgment in this case on the grounds that (1) the Ocwen settlement extinguished the plaintiffs' vicarious liability claims against the banks; (2) the judgment entered in Ocwen has claim preclusive effect on the claims advanced in this suit; and (3) the plaintiffs have pointed to no evidence supporting direct liability. For the reasons stated below, the Court grants the motion on the claim of direct liability but otherwise denies it.


         In 2014 and 2016, the named plaintiffs in this case filed two suits against Ocwen Loan Servicing, LLC, which the Court consolidated and to which the Court will refer collectively as the Ocwen case. See Snyder v. Ocwen Loan Servicing, LLC, No. 14 C 8461 (N.D. Ill.); Beecroft v. Ocwen Loan Servicing, LLC, No. 16 C 8677 (N.D. Ill.). They challenged Ocwen's alleged practice of making debt-collection calls using an automated telephone dialing system without the call recipients' prior consent.

         In December 2016, the plaintiffs moved to amend their complaint to add the banks as defendants in the Ocwen suit. They argued in support of that motion that they had recently learned that Ocwen may be unable to fully compensate the putative class for its claims and that it was therefore necessary to include the banks to ensure compensation. The Court ultimately denied the plaintiffs' request to add the banks to the Ocwen suit. See Case No. 14 C 8461, Order of Dec. 21, 2016, dkt. no. 126. The plaintiffs then filed this suit. They allege that the illegal debt-collection calls they received from Ocwen were made on the banks' behalf, making them also liable for the resulting violations. The Court found the cases related under Local Rule 40.4, resulting in the transfer of this case to the undersigned judge's docket.

         A. Original Ocwen Settlement

         To understand the present motion, a bit more background on the Ocwen case is necessary. Several rounds of settlement negotiations occurred in the Ocwen case. A mediation in May 2016 with retired Judge James Holderman was unsuccessful. At a second mediation, this one facilitated by mediator Rodney Max in October 2016, Ocwen disclosed that its insurer had denied coverage for the claims asserted by the plaintiffs and suggested that it had a limited ability to finance the settlement on its own. These revelations led to the second mediation's unsuccessful termination.

         In late June 2017, the Court provisionally granted, in the Ocwen suit, the plaintiffs' motion for certification of a limited class under Federal Rule of Civil Procedure 23(b)(2) and for a preliminary injunction to prevent Ocwen from continuing certain practices that allegedly violated the TCPA. See Snyder v. Ocwen Loan Servicing, LLC (Ocwen I), 258 F.Supp.3d 893 (N.D. Ill. 2017). Before the Court's ruling on the motion for a preliminary injunction, the parties conducted extensive discovery, including exchanging information regarding calls made by Ocwen and on whose behalf those calls were made.

         In July 2017, shortly after the Court granted the motion for a preliminary injunction, a third mediation was held with retired U.S. Magistrate Judge Morton Denlow. The banks, by now defending this parallel suit, participated in the negotiation. This resulted in an agreement to settle the claims of the putative class. The original settlement agreement provided for the establishment of a fund of $17, 500, 000. This would have been used to pay costs of notice and administration ($1, 600, 000), attorneys' fees ($5, 289, 250), incentive awards for the three named plaintiffs (collectively $75, 000), and, finally, payment of the claims of class members who submitted claim forms (the remaining $10, 535, 150).

         The original settlement provided for dismissal of not only the Snyder and Beecroft suits against Ocwen, but also the present suit by the putative class against the banks. The banks offered no contribution to the settlement fund or any other consideration for the dismissal of the case against them.

         The plaintiffs moved for final approval of the proposed settlement, for incentive awards for the named plaintiffs, and for payment of administrative fees and an award of attorneys' fees from the settlement proceeds. In September 2018, the Court denied the motion for final approval for three reasons, including-most importantly for present purposes-because it would have released the claims against the bank defendants for nothing. See Snyder v. Ocwen Loan Servicing, LLC (Ocwen II), No. 14 C 8461, 2018 WL 4659274, at *5-6 (N.D. Ill. Sept. 28, 2018).

         B. Subsequent negotiations and amended settlement

         Following the Court's denial of the motion to approve the final settlement agreement, the parties returned to mediation. A fourth mediation session-the second with retired Judge Denlow-resulted in an improved settlement for the class in the Ocwen case. The banks again participated in the mediation. The most significant changes in this amended settlement were that class counsel sought $500, 000 less in attorney's fees; Ocwen offered $4, 000, 000 more in funds; and, critically, "the amended settlement also provide[d] for dismissal of only the Snyder and Beecroft suits against Ocwen and d[id] not seek to release the claims against the bank defendants." Ocwen III, 2019 WL 2103379, at *3. That is, the amended settlement expressly provided that "the class is free to pursue claims against the bank defendants if it chooses." Id.

         The Court ultimately approved the amended settlement. See generally Id. at *4-11. In so doing, the Court noted-more than half a dozen times and in various ways- that one of the key considerations in this approval was that "the amended settlement no longer concerns the bank defendants." Id. at *5. Indeed, addressing the strength of the plaintiffs' case as required under Wong v. Accretive Health, Inc., 773 F.3d 859, 865 (7th Cir. 2014), the Court explained that:

The parties have . . . addressed the Court's reservations regarding the bank defendants. . . . The original settlement agreement sought to release the claims against the banks for nothing and with no explanation. The amended settlement addresses this issue. Specifically, the plaintiffs, Ocwen, and the banks agreed during the fourth mediation that the amended settlement would not release the claims against the banks. In short, the banks have been carved out of the settlement, and the lawsuit against them is proceeding ahead. This change resolves the Court's concerns about the settlement's treatment of the bank defendants.

Id. at *7 (emphasis added). The Court placed special emphasis on the exclusion of the claims against the banks in its decision that no additional notice was necessary for class members. See Id. at *9.

         The Court's memorandum opinion and accompanying order finally approving the amended settlement were entered on May 14 and June 4, 2019, respectively. To address any remaining mystery about what the Court understood the parties to have agreed to, the Court included the following language in the order: "For the avoidance of doubt, no claims alleged in Snyder, et al. v. U.S. Bank, N.A., et al., No. 1:16-cv-11675 MFK (N.D. Ill.), are released." Order Granting Final Approval of Class Action Settlement, dkt. no.362, at 15.

         On June 6, the bank defendants appeared for a status conference and-for the first time before this Court-indicated that they believed, at the time the Court orally approved the amended settlement of the Ocwen class action, that the settlement extinguished the claims against the bank defendants. They conceded that they had not disclosed this understanding to the Court. On June 13, the banks filed this motion for summary judgment. At a status hearing on June 19, counsel for Ocwen confirmed that, even at the time the Court approved the settlement of the Ocwen class action, they agreed with the banks' understanding. They, too, conceded that they had not disclosed this understanding to the Court when it considered and approved the amended settlement. Indeed, even class counsel reluctantly admitted at the June 19 hearing that they had been aware of but had not indicated in any of their filings the banks' view that the Court's numerous, conspicuous, and frequent references to the amended settlement preserving the claims against the banks were legally ineffective. Dismayed, the Court stated-as it had on June 6 with respect to the bank defendants and their counsel-that it had been misled by the parties in connection with approval of the settlement. The Court noted that if, in fact, the amended settlement released the claims against the banks, that would have serious implications for the continued viability of the Ocwen settlement given the Court's expressed (and uncontradicted) contrary understanding at the time of approval.

         The Court ordered accelerated briefing on the banks' motion for summary judgment in order to consider their arguments before the Ocwen settlement became final ...

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