Llewellyn v. Shearson Financial Network, Inc., Civil Action No. 08-cv-00179-MSK-KLM.

• Decision Date: 31 March 2009
• Docket Number: Civil Action No. 08-cv-00179-MSK-KLM.
• Parties: Glen LLEWELLYN, Plaintiff, v. SHEARSON FINANCIAL NETWORK, INC., Allstate Home Loans, Inc. dba Allstate Funding, Equity Pacific Mortgage, Inc., Kevin E. Rider, Ocwen Loan Servicing, LLC., Nomura Credit and Capital, Inc., NCC Servicing, LLC., and Castle, Meinhold & Stawiarski, LLC., Defendants.
• Court: U.S. District Court — District of Colorado

622 F.Supp.2d 1062

Glen LLEWELLYN, Plaintiff, v. SHEARSON FINANCIAL NETWORK, INC., Allstate Home Loans, Inc. dba Allstate Funding, Equity Pacific Mortgage, Inc., Kevin E. Rider, Ocwen Loan Servicing, LLC., Nomura Credit and Capital, Inc., NCC Servicing, LLC., and Castle, Meinhold & Stawiarski, LLC., Defendants.

Civil Action No. 08-cv-00179-MSK-KLM.

United States District Court, D. Colorado.

March 31, 2009.

COPYRIGHT MATERIAL OMITTED

John Nathaniel McNamara, Jr., McNamara Law Firm, P.C., Denver, CO, for Plaintiff.

Kelly Sue Kilgore, Mark Cameron Willis, Kutak Rock, LLP, Denver, CO, Jeremy David Peck, Phillip A. Vaglica, Castle, Meinhold & Stawiarski, LLC, Denver, CO, for Defendants.

OPINION AND ORDER GRANTING, IN PART, MOTIONS TO DISMISS

MARCIA S. KRIEGER, District Judge.

THIS MATTER comes before the Court pursuant to Defendant Ocwen Loan Servicing, LLC's ("Ocwen") Motion to Dismiss (# 47), the Plaintiff's response (# 75), and Ocwen's reply (# 83); Defendant Castle, Meinhold & Stawiarski, LLC's ("CM & S") Motion to Dismiss (# 53), and the Plaintiff's response (# 79); and Defendant Nomura Credit and Capital, Inc.'s ("Nomura") Motion to Dismiss (# 61), the Plaintiff's response (# 77), and Nomura's reply (# 82).

FACTS

According to the Complaint (# 1) and as relevant herein, Plaintiff Glen Llewellyn borrowed a sum of money from Defendants Shearson and Allstate, giving a deed of trust on a parcel of real property to secure repayment. Mr. Llewellyn later attempted to refinance that loan, tendering the $ 600,000 principal balance to Allstate/Shearson's agent, Defendant Equity Pacific Mortgage, Inc. ("Equity"). However, Defendant Rider, an employee of Equity, failed to pay the loan, and instead converted the funds to his own use.

At some point, Ocwen undertook efforts to collect on the Allstate/Shearson loan. Because Mr. Llewellyn stopped making payments on the loan (believing it to have been repaid) and because Ocwen's records reflected that a balance remained (due to Mr. Rider's failure to credit the payment), Ocwen engaged its attorneys, CM & S, to begin foreclosure proceedings. The Complaint suggests that, at some point in time, Mr. Llewellyn contacted Ocwen, and its agent Nomura, to inform them that the loan had been paid in full. Nevertheless, Ocwen and Nomura proceeded to provide negative credit information regarding Mr. Llewellyn's payment history to various credit reporting agencies, thereby adversely affecting Mr. Llewellyn's credit rating.¹

The Complaint alleges six claims for relief, although only the following are asserted against movants here: (iii) a claim for outrageous conduct under Colorado law against Ocwen, Nomura, and CW & S for supplying of incorrect information to the credit reporting agencies, and against CW & S for commencement of foreclosure proceedings; (iv) a claim for violation of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681s-2(b) against Ocwen and Nomura for supplying inaccurate information to credit reporting agencies and failing to conduct a reasonable investigation into Mr. Llewellyn's dispute as to the accuracy of that information; (v) a claim for violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692e(8), against Ocwen and Nomura for engaging in false and deceptive collection practices by threatening to communicate false information to credit reporting agencies despite being advised that the loan had been paid off, and by failing to report to the credit reporting agencies that Mr. Llewellyn had disputed the legitimacy of the claimed debt; and (vi)² a claim for violation of the FDCPA, 15 U.S.C. § 1692e(5) against CW & S for threatening a foreclosure action on a nonexistent debt.

Ocwen moves to dismiss (# 47) the claims against it, arguing: (i) as to the FDCPA claim, the Complaint effectively admits that, because of Mr. Rider's conversion, Mr. Llewellyn never actually paid off the loan, and thus, Mr. Llewellyn has not adequately alleged that Ocwen's collection practices were false or deceptive; (ii) Mr. Llewellyn has failed to allege sufficient facts to demonstrate that Ocwen is a "debt collector" as defined by the FDCPA, 15 U.S.C. § 1692a(6)(F)(iii), insofar as the loan was not in default at the time it was obtained by Ocwen; (iii) the FDCPA claim is untimely, having been brought beyond the one-year statute of limitations in 15 U.S.C. § 1692k(d); (iv) with regard to the portion of the FCRA claim that challenges Ocwen's failure to investigate a dispute, Mr. Llewellyn does not allege the statutory predicate that the credit reporting agencies provided Ocwen with notice of the dispute as required by 15 U.S.C. § 1681s-2(b)(1); (v) because the Complaint admits that the loan was not paid off as a result of Mr. Rider's conversion, the information that Ocwen reported was correct, and thus, not in violation of the FCRA; (vi) the outrageous conduct claim is preempted by the FCRA, 15 U.S.C. § 1681h(e) and § 1681t(b)(1)(F); and (vii) the outrageous conduct claim fails to state a cause of action under Colorado law because the acts alleged are not sufficiently outrageous.

CM & S moves to dismiss (# 53) the claims against it, arguing: (i) as to the outrageous conduct claim, Mr. Llewellyn fails to state a claim because the acts were not sufficiently outrageous; (ii) the FDCPA claim is untimely; and (iii) the FDCPA claim fails to state a claim because CM & S never actually threatened litigation and, in any event, the foreclosure proceedings they initiated were legally proper because the Complaint admits that the loan had not actually been paid.

Nomura moves to dismiss (# 61) the claims against it, arguing: (i) the Complaint does not specifically allege any specific acts—much less unlawful acts—committed by Nomura; and (ii) to the extent that the claims against Nomura are predicated on Nomura's vicarious liability for the actions of Ocwen, Nomura adopts the arguments made in Ocwen's motion to dismiss.

ANALYSIS

A. Standard of review

In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept all well-plead allegations in the Complaint as true and view those allegations in the light most favorable to the nonmoving party. Stidham v. Peace Officer Standards and Training, 265 F.3d 1144, 1149 (10th Cir.2001), quoting Sutton v. Utah State Sch. For the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir.1999). The Complaint should not be dismissed for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Benefield v. McDowall, 241 F.3d 1267, 1270 (10th Cir.2001); GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir.1997). It is not necessary that the Complaint contain detailed factual allegations, but a plaintiff must provide more than "labels and conclusions" or a "formulaic recitation of the elements of a cause of action." See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007).

Both Mr. Llewellyn and the Defendants have supported their motion with a variety of exhibits. In considering a Rule 12(b)(6) motion, the Court must limit its review to the four corners of the Complaint, but may also consider documents attached to the Complaint as exhibits, Oxendine v. Kaplan, 241 F.3d 1272, 1275 (10th Cir.2001), as well as unattached documents which are referred to in the Complaint and central to the plaintiff's claim, so long as the authenticity of such documents is undisputed. Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 (10th Cir.2002); Dean Witter Reynolds, Inc. v. Howsam, 261 F.3d 956, 961 (10th Cir.2001). The Court finds that none of the tendered documents are specifically referred to in the Complaint, and thus, the Court has disregarded both the tendered exhibits and the factual averments in the parties' briefs that depend upon them. Fed.R.Civ.P. 12(b) (court may disregard tendered evidentiary material).

B. Whether the loan was repaid

Before the Court turns to specific arguments raised by the Defendants with regard to specific claims, it will address an overarching argument that informs all of the Defendants' motions. All of the Defendants argue in part that their conduct was lawful because the Complaint effectively acknowledges that the intervening act of Mr. Rider in absconding with the funds establishes that the Allstate/Shearson loan was never actually repaid.

On the surface, this argument has some appeal. In essence, Mr. Llewellyn tendered $600,000 to Mr. Rider, who was to tender the money to Allstate/Shearson, thereby paying off the loan. Although through no fault of Mr. Llewellyn, Mr. Rider did not carry out his role in the transaction, and as a consequence, Allstate/Shearson never received the money that would pay off the loan. Although Mr. Llewellyn may be perfectly justified in his belief that he paid off the loan, Allstate/Shearson (and the other Defendants whose rights and obligations flow from Allstate/Shearson) are also perfectly justified in believing that the loan was not paid.

This situation raises an awkward legal issue—as between the borrower and the lender, both of whom act in good faith, who bears the burden of an intermediary absconding with the funds? The 10th Circuit recently previously considered a somewhat similar set of facts:

In a world of instantaneous electronic fund transfers and online financial transactions, one would think that the old problems of disappearing checks, uncertain mail deliveries, and unknown thieves-long the staple of law school hypotheticals-would cease to have much practical significance. In this case, however, Defendant, the Variable Annuity Life Insurance Company ("VALIC"), opted to do it the old-fashioned way: It sent two checks via the postal service to its customer's broker in Houston, Texas. True to form, an unknown thief intercepted...