In re Ocwen Loan Servicing LLC Litig.

• Decision Date: 03 March 2017
• Docket Number: Member Cases: 3:16–cv–00483–MMD–WGC, 3:16–cv–00603–MMD–WGC, 3:16–cv–00498–MMD–WGC,Lead Case: 3:16–CV–00200–MMD–WGC
• Parties: IN RE OCWEN LOAN SERVICING LLC LITIGATION This Document Relates to: All Actions
• Court: U.S. District Court — District of Nevada

240 F.Supp.3d 1070

IN RE OCWEN LOAN SERVICING LLC LITIGATION This Document Relates to: All Actions

Lead Case: 3:16–CV–00200–MMD–WGC

Member Cases: 3:16–cv–00483–MMD–WGC

3:16–cv–00498–MMD–WGC

3:16–cv–00603–MMD–WGC

United States District Court, D. Nevada.

Signed March 3, 2017

ORDER

MIRANDA M. DU, UNITED STATES DISTRICT JUDGE

I. SUMMARY

The four consolidated cases before the Court assert similar claims under the Fair Credit Reporting Act ("FCRA") to challenge a loan servicer's alleged practice of obtaining consumer credit information without authorization after the loans had been discharged in bankruptcy.¹ (ECF No. 47.) In each case, the loan servicer, Defendant Ocwen Loan Servicing, LLC's ("Ocwen"), has moved to dismiss ("Motions") based on lack of subject matter jurisdiction (Marino , ECF No. 23; Horton , ECF No. 18; Farrin , ECF No. 25; Hardin , ECF No. 27.) The Motions all raise the same issue—whether impermissibly obtaining a consumer's credit information under the FCRA results in a concrete harm for purposes of Article III standing. Plaintiffs each filed responses to the Motions (Marino , ECF No. 25; Horton , ECF No. 26; Farrin , ECF No. 37; Hardin , ECF No. 31) and Ocwen filed replies in three of the cases (Marino , ECF No. 32; Horton , ECF No. 28; Hardin , ECF No. 34).

The Court issued a minute order on February 10, 2017, (Marino , ECF No. 61) requesting supplemental briefing in light of a recently decided Ninth Circuit opinion, Syed v. M–I, LLC , 853 F.3d 492 (9th Cir. 2017), that addressed procedural standing and statutory damages under the FCRA. The Court has reviewed the parties' supplemental briefs (Marino , ECF Nos. 62, 65).

In addition, the parties have filed several motions to supplement. (Marino , ECF Nos. 54, 60, 63.) The Court has reviewed these motions as well as responses thereto (Marino , ECF Nos. 56, 64, 67). All three motions are granted pursuant to Local Rule LR 7–2(g).

For the reasons discussed below, the Motion in Horton is granted only with regards to the claim for negligent noncompliance with the FCRA. The Court will give Horton leave to amend to allege facts demonstrating a concrete injury and/or actual damages. The Motions in Marino, Hardin , and Farrin are denied.

II. BACKGROUND

Plaintiffs each bring a class action lawsuit against Ocwen based on almost identical factual allegations: each Plaintiff discharged in bankruptcy a prior loan that had been serviced by Ocwen, yet Ocwen continued, and possibly still continues, to obtain Plaintiffs' credit information from credit reporting agencies ("CRAs") without a legally permissible purpose and without Plaintiffs' authorization as required under the FCRA. See 15 U.S.C. § 1681b. All Plaintiffs allege that Ocwen obtained their credit reports under false pretenses or knowingly without a permissible purpose, each willful violations under the statute. See §§ 1681n & 1681q.

Marino alleges that he discharged a mortgage loan that had been serviced by Defendant in Chapter 7 bankruptcy. (Marino , ECF No. 1 at 3.) After his relationship with Defendant ended, Marino did not seek credit of any type from Defendant, Defendant knew of the discharge of the loan, and Defendant obtained information from a CRA twice about Marino without his authorization. (Id. ) Farrin's allegations are practically the same: Defendant knowingly accessed Farrin's credit report after his loan had been discharged and did so without Farrin's authorization or a permissible reason as required under the FCRA. (Farrin , ECF No. 1 at 3.)

Similarly, Horton asserts that his relationship with Ocwen was terminated after his mortgage loan was discharged in bankruptcy. Horton also includes allegations that Ocwen makes "batch" pulls of credit reports on a quarterly basis for "account review" purposes, regardless of whether the consumer still maintains a relationship with them. (Horton , ECF No. 13 at 4, 5.) Unique to Horton's complaint is a claim for negligent noncompliance with the FCRA.

The complaint in Hardin presents similar but distinguishable factual circumstances. While they similarly discharged a loan to secure a mortgage that Defendant had serviced, the Hardins also allege that Defendant harassed them, invaded their privacy, falsely reported their credit status, and violated their consumer protection rights. (Hardin , ECF No. 2 at 2.) Defendant, however, is moving only to dismiss Count I of their complaint—willful violation of the FCRA—which relates to the alleged impermissible credit pulls conducted after discharge of the loan and after termination of the Hardins' relationship with Ocwen. (Hardin , ECF No. 27–1 at 1.)

Ocwen's Motions assert that the Court lacks subject matter jurisdiction because a legally impermissible pull of an individual's credit report does not give rise to a concrete injury or actual damages that would give rise to Article III standing.

III. DISCUSSION

A. 12(b)(1) Standard

Rule 12(b)(1) of the Federal Rules of Civil Procedure allows defendants to seek dismissal of a claim or action for a lack of subject matter jurisdiction. Dismissal under Rule 12(b)(1) is appropriate if the complaint, considered in its entirety, fails to allege facts on its face that are sufficient to establish subject matter jurisdiction. In re Dynamic Random Access Memory (DRAM) Antitrust Litigation , 546 F.3d 981, 984–85 (9th Cir. 2008). Because Plaintiffs are invoking the court's jurisdiction, they bear the burden of proving that the case is properly in federal court. See In re Ford Motor Co./Citibank (South Dakota), N.A. , 264 F.3d 952, 957 (9th Cir. 2001) (citing McNutt v. General Motors Acceptance Corp. , 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936) ). Furthermore, federal subject matter jurisdiction must exist at the time an action is commenced. Mallard Auto. Grp., Ltd. v. United States , 343 F.Supp.2d 949, 952 (D. Nev. 2004).

Lack of standing is a defect in subject matter jurisdiction and may be challenged under Rule 12(b)(1). See Bender v. Williamsport Area Sch. Dist. , 475 U.S. 534, 541, 106 S.Ct. 1326, 89 L.Ed.2d 501 (1986). The standing doctrine has a constitutional and a prudential component. Elk Grove Unified Sch. Dist. v. Newdow , 542 U.S. 1, 11, 124 S.Ct. 2301, 159 L.Ed.2d 98 (2004) (citing Lujan v. Defenders of Wildlife , 504 U.S. 555, 559–62, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (constitutional standing), and Allen v. Wright , 468 U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984) (prudential standing)). To satisfy the constitutional component—the issue Ocwen raised in its Motions—a plaintiff must meet three requirements: (1) the plaintiff must have suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. Lujan , 504 U.S. at 560–61, 112 S.Ct. 2130. The plaintiff bears the burden of establishing these elements, FW/PBS, Inc. v. Dallas , 493 U.S. 215, 231, 110 S.Ct. 596, 107 L.Ed.2d 603 (1990), and must allege sufficient facts to demonstrate that each element has been met, Warth v. Seldin , 422 U.S. 490, 518, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975).

B. FCRA

Congress enacted the FCRA in 1970 to protect consumer privacy by requiring CRAs to ensure the accuracy of information contained in credit reports and to limit the furnishing of those reports to statutorily enumerated purposes only. See TRW Inc. v. Andrews , 534 U.S. 19, 23, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001). The statute was created in response to "concerns about corporations' increasingly sophisticated use of consumers' personal information in making credit and other decisions." Syed v. M–I, LLC et al. , 846 F.3d, at 1037 (9th Cir. 2017) (citing the FCRA, Pub. L. 91–508, Section 602, 84 Stat. 1114, 1128). Given the growing importance of consumer credit and consumers' lack of control over what information is contained in their credit reports, the FCRA intends to provide statutory protection for already recognized legal harms (albeit as applied to a new industry).

The FCRA provides that CRAs furnish consumer reports only under certain circumstances. Relevant to the Motions at issue here, CRAs may furnish consumer reports:

(a)(3) To a person which [the CRA] has reason to believe—

(A) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer or

[...]

(F) otherwise has a legitimate business need for the information—

(i) in connection with a business transaction that is initiated by the consumer; or

(ii) to review an account to determine whether the consumer continues to meet the terms of the account.

15 U.S.C. § 1681b(a)(3) (emphasis added).

Violation of § 1681b(a)(3) may occur in three ways. First, a consumer's credit information may be obtained under false pretenses:

Any person who knowingly and willfully obtains information on a consumer from a reporting agency under false pretenses shall be fined until Title 18, United States Code, imprisoned for not more than 2 years, or both.

15 U.S.C. § 1681q. If a person is found to have obtained a credit report under false pretenses or knowingly without a permissible purpose, then the FCRA provides that a consumer may get "actual damages ... or $1,000, whichever is greater" (§ 1681n(a)(1)(B)), as well as punitive damages if the court allows (§ 1681n(a)(2)).

Second, a person may be willfully noncompliant with a provision of the FCRA (for instance by obtaining a credit report without a legally permissible purpose). If the person is found to have willfully violated the statute, then the person is civilly liable for "any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000," § 1681n(a)(1), as well as punitive damages as the court deems appropriate, § 1681n(a)(2). Additionally, if civil...