Murphy v. Ocwen Loan Servicing, LLC

• Court: U.S. District Court — Eastern District of California
• Writing for the Court: Troy L. Nunley
• Decision Date: 18 February 2014
• Docket Number: No. 2:13-cv-00555-TLN-EFB,2:13-cv-00555-TLN-EFB
• Citation: Murphy v. Ocwen Loan Servicing, LLC, No. 2:13-cv-00555-TLN-EFB (E.D. Cal. Feb 18, 2014)
• Parties: WARREN ROBERT MURPHY, JR. and LOAN T. NGUYEN MURPHY Plaintiffs, v. OCWEN LOAN SERVICING, LLC and EXPERIAN INFORMATION SOLUTIONS, INC., Defendants.

WARREN ROBERT MURPHY, JR. and LOAN T. NGUYEN MURPHY Plaintiffs, v. OCWEN LOAN SERVICING, LLC and EXPERIAN INFORMATIONSOLUTIONS, INC., Defendants.

No. 2:13-cv-00555-TLN-EFB

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

Dated: February 18, 2014

ORDER

This matter is before the Court on Defendant Ocwen's Motion to Dismiss (ECF No. 27) Plaintiffs' first and second claims of the Complaint (ECF No. 1). For the reasons set forth below, the Motion to Dismiss is granted with leave for Plaintiffs to amend.

I. Background

In June 2006, Plaintiffs Warren Murphy Jr. and Loan Murphy ("Plaintiffs") purchased a single-family residence located at 9254 Welford Ct., Sacramento CA 95829.¹ (ECF No. 1 ¶ 12.) They resided in the house from the date of purchase until foreclosure on the property in or about January 2010. (ECF No. 1 ¶ 12.) Plaintiffs financed the purchase with loans from Litton Mortgage and serviced by Little Loan Servicing. (ECF No. 1 ¶ 13.) The purchase was secured by first and second deeds of trust, the proceeds from which were used to pay part or all of thepurchase price of the house. (ECF No. 1 ¶ 13.) On September 1, 2011, Defendant Ocwen Loan Servicing, LLC ("Defendant") acquired ownership of Litton Loan Servicing, including Plaintiffs' loans, agreed to assume the liabilities on the loans, and continued to service the loans. (ECF No. 1 ¶ 13.)

Plaintiffs stopped making monthly payments on the loans in or about June 2008. (ECF No. 1 ¶ 14.) Thereafter, in or before January 2010, the holder of the first deed of trust initiated foreclosure proceedings that resulted in a trustee's sale. (ECF No. 1 ¶ 14.) Plaintiffs assert that the effect of the foreclosure was to extinguish the loan secured by the second deed of trust. (ECF No. 1 ¶ 14.)

In or around July 2012, Plaintiffs conducted a credit review with the three major consumer reporting agencies, Experian Information Solutions, Inc., Equifax LLC, and Trans Union LLC (the "CRAs"), and discovered that Defendant had been reporting that their loan account was due and owing a balance of $81,085.00 on the second mortgage. (ECF No. 1 ¶¶ 16-17.) Subsequently, in or around July 2012, Plaintiffs sent letters to the CRAs which stated that the information being reported by Defendant was inaccurate and the reasons why the information was inaccurate. (ECF No. 1 ¶ 23.) Plaintiffs state that the letters sent to the CRAs were actually "letters to Ocwen," but Plaintiffs do not indicate whether they additionally sent the same letters to Defendant in order to inform it of the dispute. (ECF No. 1 ¶ 23.) The CRAs then sent automatic customer dispute verification forms informing Defendant that the consumer was disputing the information Defendant had provided. (ECF No. 1 ¶ 24.) On or about August 2012, Plaintiffs received the results of the investigation from the CRAs. ² (ECF No. 1 ¶ 25.)

Plaintiffs now bring suit alleging: 1) violation of the Fair Credit Reporting Act ("FCRA"); 15 U.S.C. § 1681 et. seq.; and 2) violation of the California Consumer Credit Reporting Act ("CCCRA"), California Code of Civil Procedure § 1785.25(a). (ECF No. 1.)

The basis for both claims is California Code of Civil Procedure section 580b, which bars a purchase money mortgagee, following foreclosure, from seeking a deficiency judgment for thebalance owed on the mortgage. (ECF No. 1 ¶ 15.) Plaintiffs claim that section 580b, in addition to precluding a deficiency judgment, "obliterates" their debt such that information about it cannot be furnished to credit reporting agencies. (Plaintiffs' Opposition to Motion to Dismiss, ECF No. 34 at 8.) Defendant is thus inaccurately reporting a debt that does not exist, in violation of the federal and state credit reporting statutes.³

Defendant contends that Plaintiffs' Complaint is factually and legally deficient and thus moves the Court to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 27.)

II. Standard of Law

Federal Rule of Civil Procedure 8(a) requires that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief." See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). Under notice pleading in federal court, the complaint must "give the defendant fair notice of what the claim . . . is and the grounds upon which it rests." Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). "This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).

On a motion to dismiss, the factual allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege "'specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liablefor the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). Nevertheless, a court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."). Moreover, it is inappropriate to assume that the plaintiff "can prove facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged[.]" Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). Only where a plaintiff has failed to "nudge[] [his or her] claims . . . across the line from conceivable to plausible[,]" is the complaint properly dismissed. Id. at 680. While the plausibility requirement is not akin to a probability requirement, it demands more than "a sheer possibility that a defendant has acted unlawfully." Id. at 678. This plausibility inquiry is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679.

In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988J; Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998).

If a complaint fails to state a plausible claim, "'[a] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleadingcould not possibly be cured by the allegation of other facts.'" Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 484, 497 (9th Cir. 1995)); see also Gardner v. Marino, 563 F.3d 981 (9th Cir. 2009) (finding no abuse of discretion in denying leave to amend when amendment would be futile). Although a district court should freely give leave to amend when justice so requires under Rule 15(a)(2), "the court's discretion to deny such leave is 'particularly broad' where the plaintiff has previously amended its complaint[.]" Ecological Rights Found. v. Pac. Gas & Elec. Co., 713 F.3d 502, 520 (9th Cir. 2013) (quoting Miller v. Yokohama Tire Corp., 358 F.3d 616, 622 (9th Cir. 2004)).

III. Analysis

Claim 1: Violation of the FCRA § 1681s-2(b)

i. FCRA § 1681s-2(b)

Congress enacted the Fair Credit Reporting Act in 1970 to "ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy." Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52 (2007). Accordingly, the Act sought to insure that "consumer reporting agencies exercise their grave responsibilities [with respect to assembling, evaluating, and disseminating information about consumer credit] with fairness, impartiality, and a respect for the consumer's right to privacy." 15 U.S.C. § 1681(a)(4). In addition to the duties imposed upon consumer reporting agencies, the FCRA also imposes a set of duties upon "furnishers" of information to the CRAs; these duties are detailed in section 1681s-2.

In the instant case, Plaintiffs allege that Defendant violated section 1681s-2(b), which is triggered when a consumer disputes the information being reported by a CRA and the CRA subsequently notifies the entity (in this case Defendant Ocwen) that has furnished the information.⁴ Once the furnisher receives notice of dispute from the CRA, section 1681s-2(b) requires that the furnisher: 1) conduct an investigation; 2) review all relevant informationprovided by the CRA concerning the dispute; 3) report the results of the investigation to the CRA; 4) if there is a finding that the information is incomplete or inaccurate, report those results to all other [CRAs] to which the furnisher has provided the information; and 5) either modify, delete, or block further reporting of the information.⁵ 15...