Kline v. Mortg. Elec. Sec. Sys.
| Decision Date | 18 September 2013 |
| Docket Number | Case No. 3:08cv408 |
| Parties | EUGENE KLINE, et al.. Plaintiffs, v. MORTGAGE ELECTRONIC SECURITY SYSTEMS, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
DECISION AND ENTRY OVERRULING DEFENDANT LERNER,
ALTERNATIVE, TO CERTIFY [A QUESTION OF LAW] TO THE OHIO
SUPREME COURT (DOC. #297)
In this putative class action, a number of individuals, including Plaintiff Eugene Kline ("Kline"), set forth claims against eleven defendants, including Defendants Lerner, Sampson & Rothfuss ("LS&R"). Plaintiffs sought monetary damages and injunctive relief based on claims under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692e, 1692f(1); the Truth in Lending Act ("TILA"), 15 U.S.C. § 1666d; the Ohio Consumer Sales Practices Act ("OCSPA"), Ohio Revised Code § 1345.01; and claims for unjust enrichment and breach of contract under the common law of Ohio. Plaintiffs' claims arose out of alleged misconduct in mortgage servicing, misrepresentation in foreclosure filings, and the charging and collecting of improper and excessive fees from borrowers. TheCourt's jurisdiction is based on federal question jurisdiction under 28 U.S.C. § 1331 and supplemental jurisdiction under 28 U.S.C. § 1367.
Pending before the Court is LS&R's Motion to Reconsider, or, in the Alternative, to Certify [a Question of Law] to Ohio Supreme Court (hereinafter, "Motion to Reconsider") (Doc. #297), filed in response to the Court's Decision and Entry of February 27, 2013 (Doc. #294) that overruled LS&R's Motion for Judgment on the Pleadings (Doc. #277). For the reasons set forth below, LS&R's Motion to Reconsider is OVERRULED, as is the alternative Motion to Certify a Question of Law to the Ohio Supreme Court.
Plaintiff Eugene Kline ("Kline") and his co-plaintiffs brought this putative class action on November 10, 2008, against eleven defendants, including LS&R. Doc. #1. LS&R represented the second mortgagee in a state foreclosure action filed against Kline after he became delinquent on his primary mortgage. Id. at 9, 13-14. Kline's allegations against LS&R claimed that the firm charged him attorney's fees and other costs that violated Ohio law and the FDCPA. Doc. #1 at 13-16. LS&R and other defendants filed multiple Motions to Dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, and at first succeeded in disposingof the plaintiffs' claims. Doc. #18, #30, #31, #35. However, after Kline filed several motions for reconsideration (Doc. #216 and #265), the Court reinstated Kline's FCDPA claims under 15 U.S.C. § 1692f(1) against LS&R and Defendant Reimer, Lorber, & Arnovitz Co., LPA ("RL&A"). Doc. #271. Thereafter, on June 19, 2012, LS&R filed a Motion for Judgment on the Pleadings as to Plaintiff Kline's Claims, pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. Doc. #277.
The Court overruled LS&R's Motion for Judgment on the Pleadings on February 27, 2013. Doc. #294. In its Decision and Entry, the Court first clarified that it did not reinstate Kline's FDCPA claim under 15 U.S.C. § 1 692e, only the claim under 15 U.S.C. § 1692f(1), id. at 7, given that the controlling law that motivated the reinstatement of Kline's FDCPA claim only applied to Section 15 U.S.C. § 1692f(1), and could not, therefore, support the reinstatement of a claim under another section of the statute. Id. at 7-8. The Court also clarified that, as a result of the reinstatement of the Section 1692f(1) FDCPA claim, Kline's supplemental state law claims of unjust enrichment and violations of the OCSPA were also reinstated. Id. at 8-9.
The Court then turned to LS&R's arguments. LS&R first argued that Kline's claims were not valid under the FDCPA, because they fell under the holding of Grden v. Leiken Ingber & Winters PC, 643 F.3d 169 (6th Cir. 2011). However, Grden's holding concerned a claim under 15 U.S.C. § 1692e, and the Court therefore determined that the case did not apply to Kline's reinstated FDCPA claim under 1 5 U.S.C. § 1692f(1). Doc. #294 at 1 5-1 6.
The remainder of the Court's decision analyzed Kline's claim under 15 U.S.C. § 1692f(1), a two-pronged analysis. Specifically, the Court had to determine whether the undisputed facts demonstrated that LS&R's collection of Kline's debt was 1) expressly authorized by the agreement that created the debt, or 2) permitted by law. The Court determined that the language of the mortgage agreement expressly authorized charging reasonable attorneys' fees. Id. at 16-20. However, on the limited evidentiary record before it, the Court could not rule that the attorneys' fees charged to Kline were reasonable as a matter of law, nor that they were actually incurred. Id. at 20-23. The Court could not, therefore, determine that Kline's mortgage agreement expressly authorized the attorneys' fees that LS&R collected, and, therefore, that the collection complied with the first prong of Section 1692f(1).
Applying the second prong of Section 1692f(1), the Court also determined that the fees were not permitted by law, based on Ohio case law that forbids the enforcement of a provision in a mortgage or promissory note that awards attorneys' fees upon the borrower's default.2 Id. at 23-28 (applying, e.g., Wilborn v. Bank One Corp., 906 N.E.2d 396, 401 (Ohio 2009)).
Finally, the Court applied Section 1962f(1)'s two-pronged analysis to the other factual basis for Kline's claim, the fees that LS&R allegedly collected on behalf of a third party for legal-related services. Doc. #294 at 28-32. As with the attorneys' fees, the Court could not determine, based on the pleadings alone, that the third-party fees were either 1) expressly authorized by the agreement or 2) authorized by law. Id. at 31. Specific activities for which Kline was charged were arguably outside the language expressly authorized by the agreement. Id. at 30. Furthermore, Kline alleged that legal fees were improperly shared, which, if true, would violate Ohio's Rule of Professional Conduct 5.4(a). Id. The Court was bound to construe the factual allegations in Kline's favor, and LS&R failed to point to anything in the pleadings to contradict those allegations. Id. at 31-32. Thus, the Court could not determine, based on the pleadings alone, that the fees charged to Kline for legal-related services incurred by a third party were either expressly authorized by the agreement or authorized by law. Id. As a result, the Court could not grant LS&R judgment as a matter of law, and overruled its motion. Id. at 32-33.
On March 27, 2013, pursuant to Rule 59(e) of the Federal Rules of Civil Procedure, LS&R filed a Motion to Reconsider. Doc. #297. Therein, LS&R argues that the contract provision authorizing it to collect attorneys' fees from Kline is, infact, enforceable under Ohio law, and that the Court should either reverse its previous decision, or certify the issue as a question of law to the Ohio Supreme Court. Id. at 4-10. LS&R also argues that Grden does apply to a Section 1692f(1) claim, and that there is no FDCPA claim based on the reasonableness of fees charged to a debtor. Id. at 10-13.
Plaintiff Eugene Kline filed a Response in Opposition to LS&R's Motion to Reconsider on April 26, 2013. Doc. #300. Kline agrees with the Court's conclusion that Grden is inapplicable to his Section 1692f(1) FDCPA claim. Id. at 4-5. Kline disagrees with LS&R's interpretations of Wilborn and Ohio law, but believes that regardless of whether the fees charged were illegal under state law, LS&R has failed to show that the fees collected were actually incurred or authorized by the agreement. Id. at 5-13. Thus, Kline urges the Court to overrule LS&R's Motion to Reconsider. Id. at 14.
LS&R filed a Reply in Support of its Motion to Reconsider on May 24, 2013 (Doc. #302), in which it recapitulated the arguments of its Motion to Reconsider. Accordingly, LS&R's Motion to Reconsider has been fully briefed and is ripe for a ruling by the Court.
LS&R argues that it was clear error for the Court to conclude that: 1) the fee provision of Kline's mortgage agreement under which the firm collected attorney's fees is not authorized under Ohio law; 2) Grden v. Le/ken Ingber & Winters PC,643 F.3d 169 (6th Cir. 2011), does not apply to Kline's surviving FDCPA claim under 15 U.S.C. § 1692f(1); and 3) Kline could bring an FDCPA claim based on the "reasonableness" of fees he was charged. LS&R requests either reconsideration of the Court's Decision and Entry of February 27, 2013 (Doc. #294), in which the Court overruled LS&R's Motion for Judgment on the Pleadings (Doc. #277), or, in the alternative, certification to the Ohio Supreme Court of the question of whether the attorneys' fees provision in Kline's mortgage is valid under Ohio law. After setting forth the applicable standard of review, the Court will address each of LS&R's arguments.
The Federal Rules of Civil Procedure do not formally recognize motions for reconsideration. However, in the Sixth Circuit, "a motion which asks a court to vacate and reconsider, or even to reverse its prior holding, may properly be treated under Rule 59(e) as a motion to alter or amend a judgment." Smith v. Hudson, 600 F.2d 60 (1979). Motions for reconsideration are not favored, as they inevitably conflict with the Federal Rules of Civil Procedure's stated goal of attaining the "just, speedy, and inexpensive determination of every action and proceeding." Fed. R. Civ. P. (1). A Rule 59(e) motion "is not an opportunity to reargue a case" after a decision adverse to the moving party. Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir. 1998) (citing FDIC v. World Univ. Inc., 978 F.2d 10, 16 (1st Cir. 1992)). Neither may a Rule 59(e)motion "be used to relitigate old matters, or to raise arguments or present evidence that could have been...
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