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Dowling v. Select Portfolio Servicing Inc.

March 27, 2007


The opinion of the court was delivered by: Judge Algenon L. Marbley

Magistrate Judge King



This matter comes before the Court on an Amended Motion for Summary Judgment filed by Defendants Select Portfolio Servicing Inc, f/k/a Fairbanks Capital Corporation and Select Portfolio Servicing Holding Corporation, (collectively, "Defendants"), on the claims filed by Cheryl K. March ("Plaintiff" or "March"). For the reasons set forth herein, this Court GRANTS Defendants' Motion for Summary Judgment.


a. Facts

Plaintiff brought action against Defendants, under several statutes, for Defendants' alleged wrongful servicing of Plaintiff's residential mortgage loan. Defendants assert that Plaintiff is a member of a class action group that settled with Defendants over the very claims Plaintiff now brings before the Court, and is, therefore, barred from filing suit based on the terms of the settlement agreement and principles of res judicata.

Loan Servicing

In 1997, Plaintiff refinanced her Zanesville, Ohio home through a $56,000 loan from ContiMortgage Corporation, using the same property as security for the loan (hereinafter, "Mortgage Loan"). The Mortgage Loan exempted March from prepaying or escrowing annual premium payments for fire and hazard protection on her home because March always had retained homeowner's insurance locally. Defendant Select Portfolio Servicing Inc., ("SPS"), under its former name Fairbanks Capital Corp. ("Fairbanks") began servicing March's Mortgage Loan for ContiMortgage in or around July 2000. Subsequently, SPS increased March's monthly payment from $505.99 to $589.32 to include the cost of fire and hazard insurance SPS had force-placed, because it alleged that March neglected to maintain insurance as required under the Mortgage Loan. March claims that this representation was in all regards false and in error, in that at no time had she ever allowed her insurance coverage to lapse.

Using the toll-free service number provided by SPS, March contacted SPS on July 24, 2000, explained her insurance status and exemption from the force-placed charges, and claimed that she was not responsible for the payment of the insurance. March claims that the customer service agent for SPS agreed that the insurance charge was an error and promised that the SPS escrow section would rectify the matter within six to eight weeks after March provided verification of insurance coverage. SPS, however, continued to request payment for forced-placed insurance, in addition to the principle and interest payments. March continued to pay the principle and interest only. SPS allocated portions of March's principal and interest payments to the forced-placed insurance charges, despite March's assertion that she was never responsible for such charges.

Consequently, SPS labeled March's Mortgage Loan as delinquent, and assessed late fees and other delinquency related charges, which were also collected from the principle and interest payments March continued to pay. March began receiving collection notices in the mail and, eventually, SPS reported to credit reporting agencies that March was delinquent on her home mortgage loan. March again contacted SPS via its toll-free customer number to explain the forced-placed insurance mistake and faxed in proof of insurance, but she continued to receive delinquency notices. As a result, a foreclosure action was commenced on January 24, 2001, which was voluntarily dismissed without prejudice.

As of February 2001, SPS began returning March's regular principal and interest payments. On March 13, 2001, March again called SPS's customer number and was directed to the Loan Servicing Center where she reviewed the account history and was asked again to fax in proof of insurance. March once again sent proof of insurance, this time via certified mail. Nonetheless, a second foreclosure action was commenced on April 5, 2001. March obtained counsel who provided SPS's counsel with proof of insurance, but SPS claimed -- supposedly for the first time -- that the alleged lapse in insurance coverage had occurred prior to SPS's acquiring responsibility for servicing the loan in July 2000.

In an attempt to end all dealings with SPS and to prevent the foreclosure action, March refinanced the Mortgage Loan with a Zanesville area bank, and the foreclosure action was dismissed. March filed this lawsuit against Defendants for the alleged wrongful servicing of her Mortgage Loan, which occurred between July 2000 and April 2001.

Curry Class Action

On May 15, 2003, a class action was filed in the Massachusetts Federal District Court, captioned Alanna L. Curry, individually and on behalf of all other similarly situated v. Fairbanks Capital Corporation, C.V. No. 03-10895-DPW ("Curry Class Action"). On December 10, 2003, the Honorable Douglas P. Woodlock of the United States District Court for the District of Massachusetts entered an Order in the Curry Class Action granting preliminary approval of a nationwide class action settlement of servicing disputes with SPS and a Preliminary Injunction staying all servicing disputes between SPS and class members (hereinafter, the "Curry Preliminary Injunction").

The settlement in the Curry Class Action, executed as of November 14, 2003, was part of a global resolution of private suits and class actions and investigations by the Federal Trade Commission and the Department of Housing and Urban Authority (hereinafter, "Curry Settlement Agreement"). On or about May 13, 2004, the Final Order certifying the Class and approving the final settlement was entered (hereinafter, "Curry Final Order"). The Curry Final Order approving the Curry Settlement Agreement found that members of the certified class had received sufficient notice of their rights in connection with the lawsuit. As approved by the court, the nationwide class action included SPS's consumers whose loans were serviced at any time from January 1, 1999 to December 10, 2004 (hereinafter, the "Curry Class Period"). The Class is specifically defined as follows:

[A]ll persons, other than the Excluded Persons, whose loans were serviced by SPS in the [Curry] Class Period, and:

(a) whose loans were (i) in Default or treated as being in Default by Fairbanks and

(A) who incurred or were assessed late feels and/or Default-Related fees including, without limitation, fees denominated by Fairbanks as "corporate" advances, or (B) who were affected by Default-Related conduct; and/or (ii) ones in which the Member incurred or was assessed payment penalties . . .

The Curry Settlement Agreement defines "Default-Related" conduct as: any and all acts, omissions, practices, conduct or behavior by Fairbanks or one of the Fairbanks-Related Parties that was taken at ay time with respect to a Serviced Loan that is or ever was in Default or treated by Fairbanks as being in Default, and, subject to the foregoing, shall include, but not be limited to those Servicing practices that are the subject of the [Curry Class Action]. . . .

The Curry Final Order also enjoined all class members from filing or pursuing any lawsuit in any jurisdiction based on, or relating to, the claims and causes of action or facts and circumstances relating to those in the Curry Class Action:

[A]ll Class members who have not timely excluded themselves from the Class, . . . are hereby enjoined from filing, commencing, prosecuting, intervening in, or participating as class members in, any lawsuit, arbitration, administrative complaint or similar contested proceeding against Fairbanks or a Fairbanks Releasee, in any jurisdiction, that is within the scope of the Released Claims or that is based on or relating to the claims or causes of action, or the facts and circumstances relating thereto, in the Curry Action.

Additionally, Curry Class Members specifically released SPS for any Covered Practice*fn1 and agreed that such release "shall specifically apply to bar any dispute about the Covered Practices and about the matters that are within the scope of the [Curry Settlement Agreement], whether, whenever and ...

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