United States District Court, D. Rhode Island
ARTUR and JULIA ANDRADE, on behalf of themselves and all others so similarly situated
OCWEN LOAN SERVICING, LLC, et al.
REPORT AND RECOMMENDATION
LINCOLN D. ALMOND, UNITED STATES MAGISTRATE JUDGE
before me for a report and recommendation (28 U.S.C. §
636(b)(1)(B)) are Defendants' Motion to Dismiss
Plaintiffs' Class Action Complaint (ECF Doc. No. 7) and
Plaintiffs' Motion for Leave to File an Amended Class
Action Complaint (ECF Doc. No. 13). A hearing was held on
July 22, 2019.
hearing, Plaintiffs' counsel indicated that he was no
longer pursuing Count I (a Declaratory Judgment claim) and
focused his request to amend and opposition to
Defendants' dismissal arguments on Count II of the
proposed Amended Class Action Complaint (a Breach of Contract
claim). Accordingly, the Court will consider Plaintiffs'
Motion to Amend (ECF Doc. No. 13) solely as to Count II and
whether or not such amendment would be futile (applying the
Rule 12(b)(6) standard) as argued by Defendants. Such
treatment moots Defendants' pending Motion to Dismiss
(ECF Doc. No. 7) as to the original Class Action Complaint.
is a putative class action challenging the validity of
mortgage foreclosures occurring between July 1, 2015 and
September 28, 2017. The representative Plaintiffs identified
in the Amended Class Action Complaint (the Andrades and
Dubois) were the subject of residential mortgage foreclosures
on June 1, 2017 and September 26, 2017, respectively. The
representative Plaintiffs sue Ocwen Loan Servicing, LLC
(“Ocwen”) as the third-party mortgage loan
servicer for their respective mortgagees, HSBC Bank USA, NA
as Trustee for Option One Mortgage Loan Trust 2007 - HL1
(“HSBC”), and Deutsche Bank Savings Fund Society,
FSB as Trustee for Argent Securities, Inc. Asset Backed
Pass-through Certificates 2006-M2 (“Deutsche
Count II, Plaintiffs allege that Defendants failed to
foreclose and sell in a manner prescribed by
“applicable law” in breach of the applicable
mortgage contracts. In particular, they allege that Ocwen was
not a licensed, third-party servicer in Rhode Island at the
time of the foreclosures in violation of R.I. Gen. Laws
§ 19-14.11-1 and an April 20, 2017 Emergency Cease and
Desist Order issued by the Rhode Island Department of
Business Regulation (“RIDBR”) and directed at
Defendants oppose Plaintiffs' Motion to Amend on futility
grounds, the Court will review Count II of the proposed
Amended Class Action Complaint in accordance with the Rule
12(b)(6), Fed. R. Civ. P., standard. In considering a Rule
12(b)(6) motion, the Court must accept as true all plausible
factual allegations in the Complaint and draw all reasonable
inferences in Plaintiffs' favor. Aulson v.
Blanchard, 83 F.3d 1, 3 (1st Cir. 1996). In
so doing, the Court is guided by the now-familiar standard
requiring the inclusion of facts sufficient to state a
plausible claim for relief:
To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face. A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged. 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)
(internal citations and quotations omitted). Put differently,
for a complaint to survive a motion to dismiss, its
“[f]actual allegations must be enough to raise a right
to relief above the speculative level.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Consistent with Erie R. Co. v. Tompkins, 304 U.S. 64
(1938), federal courts must apply the Twombly/Iqbal
standard even in cases where state law controls the
substantive claims. This includes cases like this one that
were removed from state court. Reilly v. Cox
Enters., Inc., C.A. No. 13-785S, 2014 WL
4473772, at *3 (D.R.I. Apr. 16, 2014).
II is a state law breach of contract claim. The
representative Plaintiffs allege that their mortgage
contracts (consistent with all standard mortgage contracts)
provide that “any foreclosure and sale be conducted in
a manner prescribed by applicable law.” (ECF Doc. No.
13-1 at ¶ 96). They describe Count II as “a
straightforward state law contract theory, alleging that the
Defendants failed to foreclose in the manner prescribed by
applicable law by foreclosing and conducting mortgagee sales
when not licensed to do so [in Rhode Island] and when under
an order by [the RIDBR] to cease and desist such
activity.” (ECF Doc. No. 19 at p. 3).
July 1, 2015, Rhode Island law required all third-party loan
servicers for a loan to a Rhode Island borrower to obtain a
license from the RIDBR. See R.I. Gen. Laws §
19-14.11-1. On April 20, 2017, the RIDBR issued an Emergency
Order to Ocwen pursuant to R.I. Gen. Laws § 42-35-14(c).
The RIDBR Order required Ocwen, inter alia, to
“immediately cease and desist from any and all
unlicensed activity in [Rhode Island], including, without
limitation, acting as a third party loan servicer.”
(ECF Doc. No. 1-3 at p. 28). On April 25, 2017, Ocwen sought
Judicial Review and a stay of the Emergency Order in the
Providence County Superior Court (PC-2017-1862). Id.
The RIDBR regulatory action was resolved by a Consent Order
dated September 28, 2017. (ECF Doc. No. 1-3 at pp. 23-36).
The Consent Order provided, in part, that “[s]ubject to
the condition precedent of the Respondents fulfilling any
outstanding application requirements and subject to the
continuing condition of the Respondents' compliance with
the ‘Global Minimum Settlement Terms'…the
[RIDBR] will vacate the denial of, reinstate and grant the
Third Party Servicer Applications.” Id. at p.
28, ¶ 27. It also provided that it was “entered
into for the purpose of resolving the issues raised in the
Emergency Order without any admissions or denials” and
“supersedes the prior Emergency Order in its entirety
and any and all understandings associated therewith.”
Id. at p. 29, ¶¶ 31-32. Defendants contend
that the Consent Order “retroactively abated” any
prior “violations, concerns and questions.” (ECF
Doc. No. 8 at p. 10). Plaintiffs dispute Defendants'
“retroactive abatement” argument as legally
unsupported and argue that, in any event, the operative issue
presented in Count II is compliance with applicable law
“at the time of the subject foreclosure and
sale.” (ECF Doc. No. 19 at p. 10).
first argue that Count II is precluded as a matter of law by
the Rhode Island Supreme Court's holding in Citizens
for Pres. of Waterman Lake v. Davis, 420 A.2d 53 (R.I.
1980). Defendants contend that Davis holds that
where a statute does not afford a party with a personal
remedy (as is the case with R.I. Gen. Laws §19-14.11-1),
a court may not ...