Saccameno v. U.S. Bank Nat'l Ass'n

• Decision Date: 27 November 2019
• Docket Number: No. 19-1569,19-1569
• Parties: Monette E. SACCAMENO, Plaintiff-Appellee, v. U.S. BANK NATIONAL ASSOCIATION, as trustee for C-BASS Mortgage Loan Asset-backed Certificates, Series 2007 RP1, and Ocwen Loan Servicing, LLC, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

943 F.3d 1071

Monette E. SACCAMENO, Plaintiff-Appellee,

v.U.S. BANK NATIONAL ASSOCIATION, as trustee for C-BASS Mortgage Loan Asset-backed Certificates, Series 2007 RP1, and Ocwen Loan Servicing, LLC, Defendants-Appellants.

No. 19-1569

United States Court of Appeals, Seventh Circuit.

Argued September 16, 2019

Decided November 27, 2019

Rehearing and Rehearing En Banc Denied January 21, 2020^*

Nick Wooten, Attorney, NICK WOOTEN, LLC, Conway, AR, Mohammed O. Badwan, Attorney, SULAIMAN LAW GROUP, LTD., Lombard, IL, for Plaintiff-Appellee.

Anton Metlitsky, Attorney, O'MELVENY & MYERS LLP, New York, NY, Ephraim A. McDowell, Attorney, O'MELVENY & MYERS LLP, Washington, DC, for Defendants-Appellants U.S. BANK NATIONAL ASSOCIATION, as trustee for C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES, Series 2007 RP1, OCWEN LOAN SERVICING, LLC.

Evan M. Tager, Attorney, MAYER BROWN LLP, Washington, DC, for Amicus Curiae CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA.

Jeffrey R. White, Attorney, AMERICAN ASSOCIATION FOR JUSTICE, for Amicus Curiae AMERICAN ASSOCIATION FOR JUSTICE.

Before Bauer, Brennan, and St. Eve, Circuit Judges.

St. Eve, Circuit Judge.

Chapter 13 bankruptcy is a promise to a debtor: if you comply with the bankruptcy plan, then you can get a fresh start. That promise went unfulfilled for Monette Saccameno. She had done everything that was required of her: she cured the delinquencies in her mortgage and made 42 monthly mortgage payments under the court’s watchful eye. Near the end of her bankruptcy, she obtained statements from her mortgage servicer, Ocwen Loan Servicing, LLC, that she was paid up—that she was paid ahead even. The court granted her a discharge.

Ocwen, however, immediately began trying to collect money that it was not owed and threatening foreclosure. No problem, Saccameno thought, it must be a simple mistake. She sent Ocwen all the paperwork it could have needed to fix its records.

When that did not work, she sent it again. Then she sent it a third and fourth time, with a request from an acquaintance, a lawyer, for an explanation why Ocwen thought she owed money. Ocwen did not explain. Ocwen did not care. Ocwen did not truly grasp how wrong its records were until almost four years later, two days into Saccameno’s jury trial when its witness was testifying.

It is little wonder, then, that the jury awarded Saccameno substantial damages for the pain, frustration, and emotional torment Ocwen put her through. The jury ordered Ocwen to pay $500,000 in compensatory damages based on three causes of action that could not support punitive damages. A fourth claim, under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), 815 ILCS 505/1, did allow punitive damages, and for that claim the jury awarded them to the tune of $3,000,000, plus compensatory damages of an additional $82,000. Ocwen challenged this verdict on a variety of grounds, but the district court upheld the verdict in its entirety. On appeal, Ocwen has limited its arguments to the punitive damages award, which it contends was not authorized by Illinois law and is so large that it deprives the company of property without due process of law. We agree with the district court that the jury was well within its rights to punish Ocwen. We must, however, conclude that the amount of the award is excessive. We therefore remand to the district court to amend the judgment.

I. Background

Around 2009, Saccameno fell behind on her $135,000 home mortgage and her bank, U.S. Bank National Association (nominally a defendant but irrelevant for our purposes), began foreclosure proceedings. To keep her home, she sought the protection of the bankruptcy court and, in December 2009, began a Chapter 13 plan under which she was required to cure her default over 42 months while maintaining her ongoing monthly mortgage payments. See 11 U.S.C. § 1322(b)(5).

Saccameno first began having problems with Ocwen in October 2011, shortly after it acquired her previous servicer. Ocwen sent her a loan statement saying, inexplicably, that she owed $16,000 immediately. With her attorney’s advice, Saccameno ignored the statement and continued making payments based on her plan. Her statements continued to fluctuate: her February 2013 statement said she owed about $7500, her March statement, $9000. A month later, Ocwen now owed Saccameno about $1000 in credit, and Ocwen told her she did not need to pay again until September. Still, Saccameno continued making payments through June, the last month of her plan. At that time the bankruptcy court issued a notice of final cure, Fed. R. Bankr. P. 3002.1, informing Ocwen that Saccameno had completed her payments. Ocwen never responded to the notice, and the court entered a discharge order on June 29, 2013. Saccameno’s last statement pre-discharge showed that the credit in her favor had grown to $2800 and she was paying down her loan.

Within days, however, an Ocwen employee, whom Ocwen refers to only as "Marla," reviewed the discharge but mistakenly treated it as a dismissal. As far as Ocwen was concerned, then, the bankruptcy stay had been lifted and it could immediately start collecting Saccameno’s debts. This might not have been a problem—for Saccameno of course did not have a debt anymore—but Marla’s mistake was only the tip of the iceberg. Apparently, in March, Ocwen had manually set the due date for Saccameno’s plan payments to September 2013, hence the credit. That manual setting took place in a bankruptcy module that overrode and hid Ocwen’s active foreclosure module, which instead reflected that Saccameno had not made a single valid payment in 2013, as each check was being placed into a suspense account and not being applied to the loan. Marla’s dismissal entry deactivated the bankruptcy module and reactivated the foreclosure one. If Marla had properly marked Saccameno’s bankruptcy as a discharge, then someone in Ocwen’s bankruptcy department would have reconciled the plan payments with the suspense accounts before closing both modules.

Instead, on July 6 and 9, Ocwen sent Saccameno two letters saying it had not heard from her since its non-existent recent communication about her "severely delinquent mortgage." The letters offered the contact information of governmental and non-profit services for people unable to make their home mortgage payments. They also warned Saccameno that failure to respond could result in fees from foreclosure, sale of the property, and eviction, and that this process could ruin her credit, making it hard for her even to find a new rental property. Saccameno understandably dubbed these the "you’ll never rent in this town again" letters.

Before these letters arrived, Saccameno called Ocwen to ask about lowering her interest rate. An Ocwen employee said she was not eligible because she was several thousand dollars in default. Knowing this was a mistake, two weeks out from her discharge, Saccameno asked how to correct the records and was given a number where she could fax her documents. She did so a few days later, and with that paperwork Ocwen corrected Marla’s mistake before July was over.

If only that were the end of this story. With the corrected records, Ocwen’s bankruptcy department performed a reconciliation and recognized that Saccameno had made several payments in 2013, so her default was nowhere near as large as the employee had said. Nevertheless, it somehow determined that she had missed two payments during her bankruptcy, so she was still in default—albeit to a lesser extent—and the foreclosure module remained open. In August, Ocwen sent Saccameno a letter declaring that it had "waived" $1600 in fees (that had been discharged) and that it was missing two of her plan payments (which, even if true, would also have been discharged under the terms of the plan). Around this time Ocwen assigned Saccameno a "relationship manager," Anthony Gomes, who scheduled a call with Saccameno. He was not familiar with her file or the documents she had sent, and asked Saccameno to resend them. She did, and they never spoke again. Instead Saccameno would frequently call Ocwen’s customer service line and each time was directed to a new, similarly unhelpful person.

While this was all going on, Saccameno remained optimistic and continued to make her monthly payments. Ocwen had accepted her payments for July and August 2013 but began rejecting them in September because each payment was not enough to cure her supposed default. After a few months of rejection, more letters like those sent in July, and further futile phone calls, Saccameno recruited an acquaintance, an attorney named Susan Van Sky, to help. Van Sky wrote to Ocwen, explained how Saccameno had made all her payments during her bankruptcy, as confirmed by the court, and asked for an explanation how, then, Saccameno could be in default. She followed up with a phone call and an Ocwen representative insisted that the company never rejects payments and requested proof that it had done so. Van Sky followed directions and faxed 100 pages of Saccameno’s paperwork to the number Ocwen had provided. Somehow this paperwork was routed to the wrong department and the receiving department refused to do anything with it. Van Sky continued to call Ocwen, also reaching new people each time. Some asked her to fax the same papers again, so she sent them once more.

Eventually, Ocwen sent Van Sky something back, though calling it a response would be generous. The form letter referred to the dates of Saccameno’s bankruptcy but otherwise mentioned nothing about her loan and did not answer any of Van Sky’s questions. Ocwen had not even updated the form with Saccameno’s name. Instead it referred to another mortgagor. Attached was a spreadsheet that supposedly explained how Saccameno was behind in her payments; Van Sky, though, could not decipher the spreadsheet, and Ocwen did not elucidate. Exhausted from the lack of progress, and no longer having time to help, Van Sky dropped out...