Bernadin v. U.S. Bank Nat'l Ass'n (In re Bernadin)

Decision Date20 December 2019
Docket NumberBky. No. 18-12717 ELF,Adv. No. 18-281
Citation610 B.R. 787
Parties IN RE Geraldine BERNADIN, Debtor Geraldine Bernadin, Plaintiff U.S. Bank National Association, as Trustee, Successor in Interest to Wachovia Bank, National Association as Trustee for Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed Certificates, Series 2005-A6, and Ocwen Loan Servicing, LLC, Defendants
CourtU.S. Bankruptcy Court — Eastern District of Pennsylvania

Irwin Lee Trauss, Philadelphia Legal Services, Philadelphia, PA, for Plaintiff.

David A. Deflece, Blank Rome LLP, Princeton, NJ, Debra Djupman Warring, Blank Rome LLP, Philadelphia, PA, for Defendants.




In this adversary proceeding, Plaintiff Geraldine Bernadin ("the Debtor"), a chapter 13 debtor, seeks the entire or partial disallowance of a proof of claim ("the POC") filed by Defendant U.S. Bank National Association ("U.S. Bank"). The Debtor also seeks affirmative relief under the Fair Debt Collections Practices Act ("the FDCPA"), 15 U.S.C. §§ 1692 et seq.

U.S. Bank holds the mortgage on the Debtor's residential real property. Ocwen Loan Servicing, LLC ("Ocwen") services the mortgage and also is a named defendant.1 The law firm Phelan Hallinan Diamond & Jones, LLP ("Phelan Hallinan") signed and filed the POC on behalf of U.S. Bank. Phelan Hallinan was initially named as a co-defendant, but by agreement, has been dismissed as a defendant.

U.S. Bank and Ocwen filed a motion to dismiss the Complaint ("the Motion" or "Ocwen's Motion").

By Order dated October 24, 2019, as modified on October 28, 2019 (collectively, "the Order"), I granted the Motion in large part. I dismissed causes of action against U.S. Bank with prejudice, except for Count II. Count II was dismissed in part, but survived insofar as the Debtor seeks partial disallowance of the charges included in the POC for escrow advances made by U.S. Bank after it obtained a judgment in mortgage foreclosure against the Debtor's property.

With respect to Ocwen, the Order recommended that the district court dismiss Count IV of the Complaint, which asserts a claim for violation of the FDCPA.2

The Order was accompanied by a lengthy memorandum, now reported as In re Bernadin, 609 B.R. 26 (Bankr. E.D. Pa. 2019) ( Bernadin I ).3

On November 7, 2019, the Debtor filed a Motion to Reconsider the Order ("the Reconsideration Motion"), asking the court to reverse itself with regard to the disposition of Count IV against Ocwen.

Essentially, the Reconsideration Motion argues that I failed to consider certain facts alleged in the Complaint which the Debtor contends adequately state a claim for relief under the FDCPA. Alternatively, the Debtor argues that even if the facts alleged in the Complaint with regard to Count IV fell short, she should have been given the opportunity to file an amended complaint to supplement those facts.

Ocwen filed a response to the Reconsideration Motion on November 22, 2019. On December 10, 2019, a hearing on the Reconsideration Motion was held and concluded.

As explained below, upon further consideration of the allegations in the Complaint and the POC attached as an Exhibit to the Complaint, and after drawing reasonable inferences in favor of the Debtor, as I must,4 I conclude that the Complaint includes sufficient factual allegations suggesting that Ocwen participated in the course of conduct the Debtor claims violated the FDCPA (i.e., the filing of the POC that included, inter alia, a false representation of the character, amount, or legal status of the subject debt) and consequently is potentially liable under the statute.

Having reached this initial conclusion, it becomes necessary to consider a legal argument advanced in the Ocwen Motion and repeated in response to the Reconsideration Motion, i.e., that the Supreme Court's decision in Midland Funding, LLC v. Johnson, ––– U.S. ––––, 137 S. Ct. 1407, 197 L.Ed.2d 790 (2017) stands for the proposition that a debt collector cannot violate the FDCPA by filing a proof of claim in a bankruptcy case.5

As explained below, I am unpersuaded by Ocwen's "per se" argument; I conclude that the Supreme Court has not ruled on the issue that is before this court. Consequently, I hold that the outcome is controlled by the Third Circuit's decision in Simon v. FIA Card Servs., N.A., 732 F.3d 259 (3d Cir. 2013). Further, after applying the legal principles stated in Simon, I conclude that the Debtor is not categorically barred from asserting an FDCPA claim based on the conduct alleged in the Complaint related to the filing of a proof of claim.

For these reasons, the Reconsideration Motion will be granted. Paragraph 4 of the October 24, 2019 Order will be vacated and the Ocwen Motion will be denied insofar as it requests dismissal of Count IV of the Complaint.


In federal practice, the rules of court do not expressly provide for a "motion for reconsideration." Nevertheless, such motions are filed regularly, and if timely (i.e., filed no later than 14 days after the entry of judgment), are treated as motions to alter or amend a judgment under Fed. R. Civ. P. 59(e).6

In this adversary proceeding, the Reconsideration Motion was timely filed under Rule 59(e).7

Requests for reconsideration are "not to be used as a means to reargue matters already argued and disposed of or as an attempt to relitigate a point of disagreement between the Court and the litigant." Hill v. Tammac Corp., 2006 WL 529044, at *2 (M.D. Pa. Mar. 3, 2006) (quoting Ogden v. Keystone Residence, 226 F.Supp.2d 588, 606 (M.D. Pa. 2002) ). Reconsideration is considered an extraordinary remedy that should be granted sparingly. See, e.g., Van Buskirk v. United Group of Companies, Inc., 935 F.3d 49, 54 (2d Cir. 2019) ; accord In re Kuhar, 2007 WL 2245912, at *2 (Bankr. E.D.Pa. Aug.1, 2007).

The traditional requirement for reconsideration is either: (1) an intervening change in controlling law; (2) the existence of new evidence not previously available; or (3) the need to correct a clear error of law or fact or prevent manifest injustice. E.g., Max's Seafood Café ex rel. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) ; Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985) ; Allen v. J.K. Harris & Co., 2005 WL 2902497, at *1 (E.D. Pa. Nov.2, 2005).

That said, the court's authority to reconsider a prior order is not inflexibly circumscribed by the Rule 59(e) standard. The court possesses "inherent power" over its interlocutory orders "and can reconsider them when it is consonant with justice do so." In re Energy Future Holdings Corp., 904 F.3d 298, 310 (3d Cir. 2018) (quoting United States v. Jerry, 487 F.2d 600, 605 (3d Cir. 1973) ). The key consideration is whether the court overlooked facts or legal issues that were properly presented. See Blue Mountain Mushroom Co. v. Monterey Mushroom, Inc., 246 F. Supp. 2d 394, 398–99 (E.D. Pa. 2002) ; see also In re Stuart, 402 B.R. 111, 120 (Bankr. E.D. Pa. 2009).

A. Reconsideration Is Appropriate

In Bernadin I, I recommended that the district court dismiss the Debtor's claim against Ocwen because the POC was filed by Phelan Hallinan on behalf of U.S. Bank and "was not a communication from Ocwen ." 609 B.R. at 48-49 (emphasis in original). Further, I stated that the Complaint did not allege that Ocwen took any action in connection with or was responsible in any way for filing the POC or its contents. Id. at 48-49.8

Further review of both the Reconsideration Motion and the record in this proceeding leads me to conclude that I overlooked certain material alleged facts, and failed to make certain reasonable inferences therefrom, making it appropriate to reconsider the recommended dismissal of Count IV. After giving appropriate consideration to the Complaint and related exhibits, and drawing all reasonable inferences in favor of the Debtor, I conclude that the Debtor adequately pled that Ocwen participated in the filing of the POC that the Debtor contends violated the FDCPA.


In Bernadin I, I stated:

Ocwen is mentioned in the POC, but only passively as the party to whom notices and payments should be sent. The Debtor does not allege that Ocwen took any action in connection with or was responsible in any way for filing the POC or its contents. These facts fall short of alleging that Ocwen engaged in communication or other conduct that violated the FDCPA.

609 B.R. at 48-49.

The Debtor contends that the Complaint adequately alleges that Ocwen was involved in filing the POC.

In making this argument, the Debtor points to the following portions of the Complaint:

Paragraphs 5, 11 and 64, all of which state that Ocwen "filed" the POC on U.S. Bank's behalf;
Paragraphs 29 and 32, which state that Ocwen (and others) demanded payments in the POC that are legally uncollectible.

(See Reconsideration Motion at 3).

This part of the Debtor's argument is not persuasive.

It is an uncontestable fact that Ocwen did not file the POC. The court records irrefutably demonstrate that the POC was filed by Phelan Hallinan on behalf of U.S. Bank, not Ocwen. Just as the court is not bound to accept legal conclusions cast as factual allegations in a complaint, Fowler v. UPMC Shadyside, 578 F.3d 203, 210–11 (3d Cir. 2009), neither must the court accept facts that are contrary to those subject to judicial notice.9

But that does not end the inquiry. The Debtor suggests that, regardless of who actually filed the POC, its unlawful content was prepared or derived from information provided by Ocwen. (Reconsideration Motion ¶¶ 5, 13, 15).

Taking into account the requirement that all reasonable inferences be drawn from the allegations in the Complaint and viewed in the light most favorable to the plaintiff, one can reasonably infer that the Complaint alleges that Ocwen bore at least some responsibility for the content of the POC filed by Phelan Hallinan. I reach this conclusion for two (2) reasons.


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