Danise v. Saxon Mortgage Services, Inc. et alREPLY BRIEF to Opposition to MotionD.N.J.December 5, 2016140383.03067/104164166v.3 BLANK ROME LLP A PENNSYLVANIA LLP Donna M. Bates David A. DeFlece 301 Carnegie Center Princeton, NJ 08540 Phone: 609-750-7700 Fax: 609-750-7701 dbates@blankrome.com ddeflece@blankrome.com Attorneys for Defendant Ocwen Loan Servicing, LLC UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY TAMMY RIZZOLO DANISE, Plaintiff, v. SAXON MORTGAGE SERVICES, INC., OCWEN LOAN SERVICING, LLC, and JOHN DOES 1-10, et al., Defendants. Civil Action No. 2:15-CV-06062-JLL-JAD Electronically Filed ______________________________________________________________________________ DEFENDANT, OCWEN LOAN SERVICING, LLC’S, REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS PLAINTIFF’S AMENDED COMPLAINT ______________________________________________________________________________ Case 2:15-cv-06062-JLL-JAD Document 46 Filed 12/05/16 Page 1 of 9 PageID: 964 140383.03067/104164166v.3 TABLE OF CONTENTS Page(s) I. INTRODUCTION ...............................................................................................................1 II. ARGUMENT .......................................................................................................................1 A. Ocwen’s Motion to Dismiss is Proper Because the Amended Complaint is the Operative Pleading .............................................................................................1 B. Plaintiff’s Claims are Barred by Res Judicata and Judicial Estoppel Because Plaintiff Failed to Raise Her Claims During Her Bankruptcy Proceedings ..............................................................................................................2 C. Plaintiff’s Breach of Contract Claim Fails to State a Claim Against Ocwen ..........4 III. CONCLUSION ....................................................................................................................5 Case 2:15-cv-06062-JLL-JAD Document 46 Filed 12/05/16 Page 2 of 9 PageID: 965 140383.03067/104164166v.3 TABLE OF AUTHORITIES Page(s) Cases Diversified Indus., Inc. v. Vinyl Trends, Inc., No. 13-6194, 2014 U.S. Dist. LEXIS 61131 (D.N.J. May 1, 2014) ..........................................2 Dongelewicz v. PNC Bank Nat’l. Ass’n., 104 F. App’x 811 (3d Cir. 2004) ...............................................................................................5 In re Lampe, 665 F.3d 506 (3d Cir. 2011).......................................................................................................2 Mitchell v. Vincente, et al., No. 12-03394 (FLW), 2014 U.S. Dist. LEXIS 34728 (D.N.J. Mar. 18, 2014) .........................1 Rost v. Avelo Mortg. LLC, No. 15-3254, 2015 U.S. Dist. LEXIS 148703 (D.N.J. Nov. 3, 2015) .......................................5 Shaffery v. Bank of America, N.A., No. 3:14-cv-06123-JAP-TJB, 2015 U.S. Dist. LEXIS 31576, 2015 WL 1189622 (D.N.J. Mar. 16, 2015) ................................................................................................4 W. Run Student Hous. Assocs., LLC v. Huntington Nat’l Bank, 712 F.3d 165 (3d Cir. 2013).......................................................................................................1 Williams v. New Castle County, 970 F.2d 1260 (3d Cir. 1992).....................................................................................................5 Other Authorities Fed.R.Civ.P. 1 ..................................................................................................................................2 Fed. R. Civ. P. 12(b)(6)....................................................................................................................5 Case 2:15-cv-06062-JLL-JAD Document 46 Filed 12/05/16 Page 3 of 9 PageID: 966 1 140383.03067/104164166v.3 I. INTRODUCTION Defendant Ocwen Loan Servicing, LLC (“Ocwen”) submits this Reply Brief in further Support of its Motion to Dismiss Plaintiff’s Amended Complaint (the “Motion to Dismiss”) to address several inaccurate statements made by Plaintiff Tammy Rizzolo Danise (“Plaintiff”) in opposition to Ocwen’s Motion to Dismiss (the “Opposition”). Despite Plaintiff’s claim to the contrary, Plaintiff has presented no evidence that Ocwen was a party to the TPP and, therefore, cannot sustain any claims against Ocwen. For the reasons set forth herein, Ocwen’s motion to dismiss should be granted. II. ARGUMENT A. Ocwen’s Motion to Dismiss is Proper Because the Amended Complaint is the Operative Pleading. Plaintiff argues in the Opposition, with no legal support whatsoever, that Ocwen waived its right to respond to the Amended Complaint by filing its Motion to Dismiss. See Opposition at p. 8-9. Plaintiff is wrong. First, in addition to substantially supplementing claims on her own behalf, Plaintiff now includes claims on behalf of a class of consumers. Plaintiff’s assertions that no claims have been added is belied by the contents of the Amended Complaint. More importantly, the Amended Complaint supersedes Plaintiff’s original complaint, rendering it of no legal effect. W. Run Student Hous. Assocs., LLC v. Huntington Nat’l Bank, 712 F.3d 165, 171 (3d Cir. 2013); Mitchell v. Vincente, et al., No. 12-03394 (FLW), 2014 U.S. Dist. LEXIS 34728, at *12 (D.N.J. Mar. 18, 2014) (granting motion to dismiss). Just as facts that are neither repeated nor incorporated into the Amended Complaint no longer bind Plaintiff, the same is true with respect to Ocwen’s answer to the original complaint. See Huntington Nat’l Bank, 712 F.3d at Case 2:15-cv-06062-JLL-JAD Document 46 Filed 12/05/16 Page 4 of 9 PageID: 967 2 140383.03067/104164166v.3 171. Plaintiff’s Opposition has offered no controlling authority to the contrary. Accordingly, this Court may consider Ocwen’s Motion to Dismiss.1 B. Plaintiff’s Claims are Barred by Res Judicata and Judicial Estoppel Because Plaintiff Failed to Raise Her Claims During Her Bankruptcy Proceedings In her Opposition, Plaintiff argues that “there is no evidence in the record which demonstrates she had knowledge of her [breach of contract] claim prior to her bankruptcy discharge.” See Opposition at p. 5. Plaintiff’s argument is disingenuous and misleading and should be given no credence by this Court. Plaintiff asserts in the Amended Complaint that Ocwen attempted to collect amounts that were not authorized by the TPP loan modification offer that she allegedly entered into in August 2009. See Amended Complaint ¶ 139. On October 7, 2010, Plaintiff filed for bankruptcy. See Amended Complaint ¶ 37. Saxon filed its Proof of Claim in the bankruptcy proceeding, setting forth the amounts due under the loan documents (the note and mortgage-not a loan modification or TPP), and Plaintiff was provided an opportunity in the bankruptcy proceeding to object to the amount claimed due by Saxon. Indeed, a proof of claim filed in accordance with the Bankruptcy Code constitutes prima facie evidence of the validity and the amount of the claim. See In re Lampe, 665 F.3d 506, 514 (3d Cir. 2011). If, as Plaintiff posits in her Amended Complaint, there was a TPP agreement between Plaintiff and Saxon in effect as of August 2009, Plaintiff had knowledge during the bankruptcy proceeding that the TPP had been breached by Saxon. Yet, Plaintiff failed to object to Saxon’s Proof of Claim. Instead, Plaintiff moved 1 Fed.R.Civ.P. 1 dictates that the Federal Rules are to be construed and administered to secure the just, speedy and inexpensive determination of every action. Thus, in the interest of judicial economy, and the best interests of the parties who have now fully briefed the Motion to Dismiss, this Court may consider Ocwen’s Motion to Dismiss. See Diversified Indus., Inc. v. Vinyl Trends, Inc., No. 13-6194, 2014 U.S. Dist. LEXIS 61131, at *1 n.1 (D.N.J. May 1, 2014) (finding, "in the interest of judicial economy and in the absence of prejudice," that the amended counter-claim should be treated as the operative pleading for the purposes of a motion to dismiss despite the fact that the Court had not yet granted leave to amend). Case 2:15-cv-06062-JLL-JAD Document 46 Filed 12/05/16 Page 5 of 9 PageID: 968 3 140383.03067/104164166v.3 forward with the bankruptcy court confirming the Chapter 13 Plan, and paid the amounts as set forth in the Proof of Claim to cure and reinstate the original loan terms. See Opposition p. 6. Plaintiff then received her discharge in bankruptcy on March 11, 2015. See id. Plaintiff’s failure to object to the Proof of Claim during the bankruptcy proceeding is prima facie evidence that she agreed with the amount Saxon asserted was due as computed under the original loan documents.2 Plaintiff cannot now contend that her mortgage payments were modified by a TPP Agreement with Saxon, and that Saxon and Ocwen breached the terms of that agreement - those claims are barred by res judicata and judicial estoppel. In fact, in her Opposition, Plaintiff actually guides this Court through her timeline of when she acquired knowledge of her alleged breach of contract claims against Saxon and Ocwen. September 1, 2009 “Her breach of contract, promissory estoppel and NJCFA claims against Defendants arose on September 1, 2009 or a reasonable time thereafter, when Saxon failed to provide Plaintiff with the promised loan modifications. . . .” Opposition at p. 9; Amended Complaint ¶ 67 April 14, 2010 Plaintiff received notice “that Saxon had formally denied her loan modification [on] April 14, 2010.” Opposition at p. 9; Amended Complaint ¶ 70 October 7, 2010 Plaintiff “filed a voluntary petition under Chapter 13 of the Bankruptcy Code on October 7, 2010.” Opposition at p. 9-10; Amended Complaint ¶ 73 May 29, 2015 “Plaintiff commenced this action on May 29, 2015.” Opposition at p.10 2 A valid Loan Modification Agreement between Plaintiff and Saxon would have modified the amount due under the loan. Thus, Plaintiff’s objection to Saxon’s Proof of Claim would have been justified if in fact Plaintiff was entitled to a loan modification as alleged in the Amended Complaint. Case 2:15-cv-06062-JLL-JAD Document 46 Filed 12/05/16 Page 6 of 9 PageID: 969 4 140383.03067/104164166v.3 Thus, Plaintiff was aware of her claims at the time she was moving through the bankruptcy proceeding, and her claims are now barred by res judicata and judicial estoppel. Dismissal is warranted. C. Plaintiff’s Breach of Contract Claim Fails to State a Claim Against Ocwen Plaintiff cannot escape the fact that she failed to plead in the Amended Complaint a cause of action against Ocwen for breach of the TPP agreement, and her arguments in the Opposition are unavailing. Plaintiff now claims that her allegations that Ocwen purchased the assets of Saxon are sufficient to allege a breach of contract claim against Ocwen. See Opposition at p. 9. In Paragraph 2 of the Amended Complaint (the recitation of the parties to the Amended Complaint), Plaintiff states that “Saxon largely ceased operations after selling substantially all its assets to Ocwen Financial Corporation in or about April 2012.” In Paragraph 24 of the Amended Complaint, Plaintiff asserts that “[t]he Federal Reserve acknowledged that Morgan Stanley had transferred Saxon’s loan servicing business to Ocwen. Nonetheless, it required that Morgan Stanley continue to have access to the Saxon loan servicing portfolio after the transfer to Ocwen, and the Federal Reserve would review and verify Morgan Stanley’s compliance with the MS Consent Order.” Those allegations - the only allegations in the Amended Complaint addressing Ocwen’s purchase of assets from Saxon -- are simply insufficient to show, as Plaintiff must, that there is a contract between Plaintiff and Ocwen. Likewise, Plaintiff’s argument that Ocwen’s Servicer Participation Agreement (“SPA”) creates liability for Ocwen under the TPP ignores the fact that this Court has routinely rejected breach of contract claims pursued by homeowners alleging that they are third-party beneficiaries of servicers’ SPAs. See Shaffery v. Bank of America, N.A., No. 3:14-cv-06123-JAP-TJB, 2015 U.S. Dist. LEXIS 31576, 2015 WL 1189622, at *3-4 (D.N.J. Mar. 16, 2015) (“An SPA does not provide a vehicle for creating a cause of action under HAMP: the HAMP Guidelines, effectuated Case 2:15-cv-06062-JLL-JAD Document 46 Filed 12/05/16 Page 7 of 9 PageID: 970 5 140383.03067/104164166v.3 through the servicer's execution of an SPA, may not be enforced by a mortgagee under a third- party beneficiary theory.”); see also Rost v. Avelo Mortg. LLC, No. 15-3254, 2015 U.S. Dist. LEXIS 148703, at *13 (D.N.J. Nov. 3, 2015) (granting motions to dismiss).3 Finally, Plaintiff’s argument that the Limited Power of Attorney from U.S. Bank National Association to Ocwen, filed in the Bankruptcy Court with Ocwen’s Notice of Transfer of Claim, somehow makes Ocwen a party to the TPP agreement is nonsensical. See Opposition at p. 10. Plaintiff asserts that is a “reasonable inference” for this Court to draw. Not only is Plaintiff’s argument not a reasonable inference, but it is not even an allegation made in the Amended Complaint. Thus, Plaintiff’s attempt to argue additional facts in her Opposition which are not pled in the Amended Complaint is in clear contravention of Third Circuit law. See Dongelewicz v. PNC Bank Nat'l. Ass'n., 104 F. App'x 811, 819 n.4 (3d Cir. 2004) (quoting Williams v. New Castle County, 970 F.2d 1260, 1266 n.4 (3d Cir. 1992)) (“a contention in a brief clearly ... may not be used to substitute for an allegation in a complaint.”). Plaintiff fails to provide any evidence to support her claim that Ocwen was a party to the TPP or that Ocwen breached the TPP. Accordingly, Plaintiff’s breach of contract claim against Ocwen must be dismissed pursuant to F.R.C.P. 12(b)(6). Because Plaintiff’s causes of action for breach of good faith and fair dealing, promissory estoppel and violations of the Consumer Fraud Act are premised on Ocwen’s breach of the TPP, Counts II, III and IV of the Amended Complaint must also be dismissed. III. CONCLUSION For the reasons set forth above, Defendant’s motion to dismiss pursuant to F.R.C.P. 12(b)(6) should be granted and Plaintiff’s amended complaint be dismissed in its entirety. 3 Further, even if Plaintiffs possessed third-party beneficiary status, their claim would still fail because there is no guaranteed right to a loan modification under HAMP. Id. Case 2:15-cv-06062-JLL-JAD Document 46 Filed 12/05/16 Page 8 of 9 PageID: 971 6 140383.03067/104164166v.3 Dated: December 5, 2016 BLANK ROME LLP /s/ David A. DeFlece Donna M. Bates David A. DeFlece 301 Carnegie Center Princeton, NJ 08540 Phone: 609-750-7700 Fax: 609-750-7701 Attorneys for Defendant Ocwen Loan Servicing, LLC Case 2:15-cv-06062-JLL-JAD Document 46 Filed 12/05/16 Page 9 of 9 PageID: 972 140383.03067/104220733v.1 BLANK ROME LLP A PENNSYLVANIA LLP Donna M. Bates David A. DeFlece 301 Carnegie Center Princeton, NJ 08540 Phone: 609-750-7700 Fax: 609-750-7701 dbates@blankrome.com ddeflece@blankrome.com Attorneys for Defendant Ocwen Loan Servicing, LLC UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY TAMMY RIZZOLO DANISE, Plaintiff, v. SAXON MORTGAGE SERVICES, INC., OCWEN LOAN SERVICING, LLC, and JOHN DOES 1-10, et al., Defendants. Civil Action No. 2:15-CV-06062-JLL-JAD Electronically Filed CERTIFICATE OF SERVICE I hereby certify that on October 18, 2016, I caused a true and correct copy of the foregoing Reply Brief in Support of its Motion to Dismiss Plaintiff’s Amended Complaint to be served via ECF filing on the following: Russell S. Warren, Jr., Esq. 473 Sylvan Avenue Englewood Cliffs, New Jersey 07632 Attorney for Plaintiff, Tammy Rizzolo Danise Roosevelt N. Nesmith, Esq. Law Office of Roosevelt N. Nesmith, LLC 363 Bloomfield Avenue, Suite 2C Montclair, NJ 07042 Attorney for Plaintiff, Tammy Rizzolo Danise Case 2:15-cv-06062-JLL-JAD Document 46-1 Filed 12/05/16 Page 1 of 2 PageID: 973 140383.03067/104220733v.1 Drew C. Jordan, Esq. Morgan, Lewis & Bockius LLP 502 Carnegie Center Princeton, New Jersey 08540 Attorneys for Defendant Saxon Mortgage Services, Inc. Jason R. Scherr (admitted pro hac vice) Patrick A. Harvey (admitted pro hac vice) Morgan, Lewis & Bockius LLP 2020 K Street NW Washington, DC 20006 Attorneys for Defendant Saxon Mortgage Services, Inc. Dated: December 5, 2016 BLANK ROME LLP /s/David A. DeFlece David A. DeFlece 301 Carnegie Center Princeton, NJ 08540 Attorneys for Defendant Ocwen Loan Servicing, LLC Case 2:15-cv-06062-JLL-JAD Document 46-1 Filed 12/05/16 Page 2 of 2 PageID: 974