United States District Court, N.D. Ohio
LINDA A. CLARK, et al., Plaintiffs,
LENDER PROCESSING SERVICES, INC., et al., Defendants
Decided June 6, 2013.
[Copyrighted Material Omitted]
For Linda A Clark, John Whiteman, Michael C. Rysh, Dorothy L. Rysh, Laura Yeager, Michael Yeager, Plaintiffs: Mark N. Zanides, LEAD ATTORNEY, Laguna Niguel, CA; Steven S. Kaufman, LEAD ATTORNEY, Cleveland, OH; Grace M. Doberdruk, Dann, Doberdruk & Harshman, Cleveland, OH; Katherine M. Poldneff, Kaufman & Company, Cleveland, OH.
For Lender Processing Services, LPS Default Solutions, DOCX, LLC, Defendants: Alan G. Starkoff, John P. Gilligan, LEAD ATTORNEYS, Albert G. Lin, Jonathon W. Groza, Ice Miller - Columbus, Columbus, OH; Fred O. Goldberg, Michel O. Weisz, LEAD ATTORNEYS, Berger Singerman - Miami, Miami, FL; Mitchell W. Berger, LEAD ATTORNEY, Berger Singerman - Fort Lauderdale, Fort Lauderdale, FL; John F. McCaffrey, Tucker Ellis - Cleveland, Cleveland, OH.
For Lerner, Sampson & Rothfuss, Defendant: Rick D. DeBlasis, LEAD ATTORNEY, Cynthia M. Fischer, Lerner, Sampson & Rothfuss - Cincinnati, Cincinnati, OH; John P. Gilligan, Ice Miller - Columbus, Columbus, OH.
For Manley, Deas Kochalski, LLC, Defendant: Rodger L. Eckelberry, LEAD ATTORNEY, Elizabeth A. Braverman, Elizabeth A. McNellie, Baker & Hostetler - Columbus, Columbus, OH; Michael K. Farrell, Baker & Hostetler, Cleveland, OH.
MEMORANDUM OF OPINION AND ORDER
Dan Aaron Polster, United States District Judge.
Before the Court are the following: (1) Defendant Manley Deas Kochalski LLC's (" MDK" ) Motion to Dismiss the Second Amended Complaint (" SAC" ) (Doc. # 51), (2), Defendants Lender Processing Services, Inc., LPS Default Solutions, Inc., and DocX LLC's (collectively, " LPS" ) Motion to Dismiss the SAC (Doc. # 53) and (3) Defendant Lerner, Sampson & Rothfuss' (" LSR" ) Motion to Dismiss the SAC (Doc. # 58). The LPS Defendants filed a Partial Joinder in MDK's motion to dismiss (Doc. # 56). Plaintiffs filed a single Opposition brief opposing both MDK and LSR Defendants' motions to dismiss (Doc. # 65), and an Opposition brief to LPS Defendants' motion to dismiss (Doc. # 63). All Defendants filed a consolidated Reply in Support of their Motions to Dismiss (Doc. # 69). The parties also filed notices of supplemental authorities (Doc. #s 70-75). The Court has reviewed the motions, opposition and reply briefs, and notices of supplemental authorities. Defendants ask the Court to dismiss Plaintiffs' class action complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted. For the following reasons, the motions to dismiss are granted.
I. Factual Background
On December 7, 2012, four sets of Plaintiffs, Linda A. Clark (" Clark" ), John Whiteman (" Whiteman" ), Michael and Dorothy Rysh (collectively, " Rysh" ), and Laura and Michael Yeager (collectively, " Yeager" ) filed their SAC (Doc. # 46) against Defendants. Plaintiffs claim that Defendants violated the Fair Debt Collection Practices Act (" FDCPA" ), 15 U.S.C. § 1692 et seq . (Count I) and the Ohio Consumer Sales Practices Act (" OCSPA" ), O.R.C. § 1345 et seq . (Count II). Plaintiffs also seek injunctive relief against Defendants (Count III). On February 27, 2013, Plaintiffs moved to dismiss (1) Clark's FDCPA claim as to all Defendants,
(2) Whiteman's FDCPA claim as to all Defendants, and (3) all of Yeager's claims as to all Defendants. (Doc. # 61). The Court granted Plaintiffs' motion to dismiss certain claims in the SAC. (Doc. # 62). The claims that remain pending are:
o Count I, FDCPA: Rysh
o Count II, OCSPA: Clark, Rysh, Whiteman
o Count III, Injunctive Relief: Clark, Rysh, Whiteman
Each of the named Plaintiffs are individuals whose homes were foreclosed in cases where it appears beyond dispute that the mortgage assignments, affidavits, and transfers were fabricated by one or more of the loan processing Defendants, and the financial institutions bringing the foreclosure actions were represented by one of the law firm Defendants. Plaintiffs bring a putative class action claiming that Defendants violated the FDCPA and OCSPA by filing state court foreclosure lawsuits on behalf of trustees of securitized trusts. Plaintiffs' theory of the case is that the foreclosing trusts lacked standing to bring foreclosure actions against Plaintiffs because (1) the transfer of their mortgages to non-party securitized trusts did not comply with the alleged deadlines in the applicable Pooling and Servicing Agreements (" PSAs" ), and (2) Defendants conspired to create the appearance of standing, after the trusts had lost standing, by using allonges to notes, mortgage assignments, and other mortgage documents that were defectively executed, thereby breaking the chain of title. Plaintiffs bring this action on behalf of a proposed class consisting of:
All Ohio homeowners who were (a) defendants in judicial foreclosure actions on first lien mortgages that were purportedly held by securitization trusts, and that were knowingly initiated and prosecuted by Defendants on behalf of parties that lacked legal standing to do so, and (b) who were damaged by Defendants' abusive debt collection practices, including: (i) preparing, executing, and notarizing fraudulent court documents and assignments of mortgages and other property records that were used to initiate and prosecute such foreclosures, and (ii) imposing inflated, unfair, unreasonable and/or fabricated fees for " default management services" (the " Class" ).
(SAC, ¶ 1).
Plaintiffs allege that " [t]wo categories of defendants acted in concert and conspired in furtherance of the fraudulent scheme to generate enormous profits from default servicing fees by knowingly initiating foreclosure actions on behalf of entities that lacked standing to bring such actions." (SAC, ¶ 2). The first category of Defendants is the loan processing Defendants, LPS. Plaintiffs allege that the loan processing defendants are " vendors or sub-servicers to the vast majority of national mortgage services to manage all default servicing for those servicers." ( Id.) The second category of Defendants is an alleged network of law firms, here MDK and LSR. Plaintiffs allege that law firm Defendants " specialize in prosecuting a high volume of foreclosure cases, and are commonly known as 'foreclosure mills.'" ( Id.) Plaintiffs allege that the law firm Defendants entered into a " Network Agreement" with LPS which " requires these law firms to pay quid pro quo consideration to LPS for referrals of foreclosure cases and other default related matters . . ." ( Id.) Plaintiffs further allege that law firm Defendants
" were not only retained by defendant LPS, they were also supervised and directed by LPS, and knowingly used forged and fabricated documents created by or at the direction of LPS and/or its subsidiaries." ( Id.)
The SAC describes the national housing collapse, the mortgage foreclosure crisis, and the role of LPS Defendants who allegedly fabricated mortgage assignments, fraudulently endorsed affidavits, backdated mortgage transfers and did whatever was necessary to support standing for its clients (i.e., the financial institutions bringing foreclosure actions against defaulting mortgagors). The SAC also describes the role of the law firm Defendants who allegedly paid the LPS Defendants for foreclosure referrals and allegedly knew or should have known these standing-supporting documents were fabricated and their clients lacked standing. The crux of Plaintiffs' allegations is as follows:
The Defendants have engaged in a widespread conspiracy to deceive the Ohio courts and borrowers by engaging in unfair and deceptive debt collection practices, including fabricating thousands of mortgage assignments and affidavits. These fraudulent documents purported to establish the required intervening note endorsement and transfers of the mortgages to the trusts, thereby giving the illusion of " standing" . If these transfers had actually occurred on the dates the documents were fabricated, they would have been void inasmuch as they were not made pursuant to the terms of the governing documents and the Trustees were not permitted to accept late and out of time assignments.
In furtherance of this deceptive scheme, from at least 2006 until the present, Defendants have knowingly and intentionally prepared and filed or caused to be filed these fabricated mortgage assignments and other mortgage documents with courts and county recorder of deed's office across the country, including in ...