United States District Court, D. Oregon
OPINION AND ORDER
MICHAEL MCSHANE UNITED STATES DISTRICT JUDGE.
observed by the First Circuit over a decade ago,
“[s]ome antitrust cases are intrinsically hopeless
because . . . they merely dress up in antitrust garb what is,
at best, a business tort or contract violation.”
Stop & Shop Supermarket Co. v. Blue Cross & Blue
Shield of R.I., 373 F.3d 57, 69 (2004). The same can be
said of allegations based on the Racketeer Influenced and
Corrupt Organizations Act 18 U.S.C. § 1962 et
seq (“RICO”). Here, in the course of
alleging that his deed of trust did not allow certain
third-party default-related service fees, plaintiff Melvin
Neagle dresses up his complaint in both antitrust and RICO
garb. While Neagle's complaint is long on pages and
conclusory allegations, it is short on specific factual
detail as to how these defendants violated antitrust or RICO
laws while servicing Neagle's loan. Although he relies
heavily on a Consent Order agreed to between his loan
servicer and New York state regulators, none of the acts
described in that case involve acts Neagle alleges the
servicer did here. Because Neagle fails to state an
antitrust, RICO, or financial elder abuse claim,
defendants' motions to dismiss are granted.
purchases foreclosed homes at auction and rents them or sells
them later for a profit. The Ocwen defendants engage in
mortgage loan servicing. Ocwen Loan Servicing, LLC is a
wholly owned subsidiary of Ocwen Mortgaging Servicing, Inc.,
which in turn is a wholly owned subsidiary of Ocwen Financial
Corporation. “Founded in 1988 by William C. Erbey,
Ocwen quickly became the largest non-bank loan servicer in
the United States, and the fourth-largest servicer of
mortgages generally.” Second Am. Compl. (SAC) ¶
14. “As a non-bank mortgage loan servicer, Ocwen is
responsible for the collection and remittance of principal
and interest payments, the administration of escrow accounts,
the collection of insurance claims, the management of loans
that are in default, and foreclosures.” SAC ¶ 19.
2009, defendant Altisource Solutions, Inc. “was spun
off from Ocwen and became a completely independent company.
Altisource is now the exclusive entity that provides Ocwen
with third-party services relating to Ocwen's practices
in the nonbank mortgage loan servicing market pursuant to a
series of exclusive dealing arrangements, with a specific
focus on subprime loans.” SAC ¶ 15. Defendant MTQLP
Investors, L.P. “primarily performs mortgage
liquidation[.]” SAC ¶ 16.
sets out the history of loans and the loan servicing
industry, including in the aftermath of the housing market
crash. Traditionally, banks serviced loans themselves and had
a financial interest in the repayment of the loan. After the
crash, servicing loans became unprofitable for banks.
“Today, banks are reluctant to enter the market as a
competitor of Ocwen, which has allowed Ocwen to dominate as a
non-bank mortgage loan servicer that specializes in subprime
loans.” SAC ¶ 22. Nonbank servicers like Ocwen
have “a cost advantage relative to bank servicers in
handling nonperforming loans. That cost advantage stemmed
from both their specialization in this type of servicing and
from their ability to harness technological innovations in
order to reduce costs.” SAC ¶ 22.
is paid in contractual monthly servicing fees by the owner of
the loan, often under a pooling and servicing agreement (PSA)
with investors or noteholders. “Ocwen and other loan
servicers asses fees on borrowers' accounts for services
provided by third-parties, or for Ocwen's servicing
itself. The fees and costs include, among other things,
broker's price opinion (“BPO”) fees,
appraisal fees, title search fees, various
‘technology' fees, late fees, escrow fees, and
other ancillary fees.” SAC ¶ 24. While a bank who
services its own loans is concerned with interest profit,
“Ocwen's primary concern as a loan servicer is to
generate as much revenue as possible from fees and costs
assessed against the mortgage accounts that it
services.” SAC ¶ 25.
the housing market crash, Ocwen rapidly grew its business,
going from $360 million in revenues in 2010 to $2.2 billion
in revenues in 2014. SAC ¶ 27. Much of Ocwen's
growth came from “massive acquisitions:”
Due to the massive amounts of acquisitions by Ocwen, coupled
with the reluctance of financial institutions to enter the
servicing market as a competitor, Ocwen rapidly exapanded as
a nonbank loan servicer that specialized in subprime loans.
But the end of 2014, Ocwen serviced over 50% of all subprime
mortgage loans in the nation.
SAC ¶ 29 (internal citation omitted).
developed technology services to reduce the cost of servicing
loans, including software programs designed to manage
homeowners' loan accounts and assess fees pursuant to
protocols and policies designed by the executives at
Ocwen.” SAC ¶ 30. “In August of 2009, Ocwen
spun-off its technology platforms business into a separate
company, Altisource.” SAC ¶ 31. Ocwen's
Chairman of the Board, who owned 13% of Ocwen's stock,
took the same position at Altisource. “Other key
executives shared positions with Altisource as well.”
SAC ¶ 31.
contracted with Altisource to purchase mortgage and
technology services under service agreements that extend
through 2025. Ocwen quickly became Altisource's largest
customer, accounting for over 80% of Altisource's total
revenue in 2014.” SAC ¶ 32.
“Altisource's revenues more than tripled between
2010 and 2014.” SAC ¶ 52.
close relationship between Ocwen and Altisource (and other
“closely affiliated” companies) led to an
investigation by the New York Department of Financial
Services.” See SAC ¶ 34 (quoting letter
from regulators stating an “ongoing review of
Ocwen's mortgage servicing practices has uncovered a
number of potential conflicts of interest between Ocwen and
other public companies with which Ocwen is closely
affiliated.”). Regulators questioned whether Ocwen had
an “arms-length business relationship” with the
affiliated companies and were “concerned that this
tangled web of conflicts could create incentives that harm
borrowers and push homeowners unduly into foreclosure.”
SAC ¶ 34. Quoting the regulators, Neagle alleges the
servicing industry “presents the extraordinary
circumstance where there is effectively no customer to select
a vendor for ancillary services” and “Ocwen's
use of related companies to provide such services raises
concerns about whether such transactions are priced fairly
and conducted at arms-length.” SAC ¶ 37.
point, Ocwen began serving Neagle's loan. “As a
loan servicer, Ocwen's interactions with a borrower are
governed by a mortgage contract.” SAC ¶ 39. These
contracts consist of the note and deed of trust and, at least
with loans serviced by Ocwen, are generally identical as they
follow the Fannie Mae template.
deed of trust provides that in the event of a default, the
lender will “pay for whatever is reasonable or
appropriate to protect Lender's interest in the Property
and rights under this Security Instrument, including
protecting and/or assessing the value of the Property, and
securing and/or repairing the Property.” Deed of Trust
¶ 9; ECF No. 57-1. “Any amounts disbursed by Lender
under this Section 9 shall become additional debt of
Borrower[.]” Deed of Trust ¶ 9. Neagle alleges
that nothing in the deed of trust discloses “that the
loan servicer or lender will engage in self-dealing or will
mark-up the actual cost of those third party services to make
a profit from the borrower's delinquency.” SAC
¶ 42. This undisclosed mark-up is the focus of
Pursuant to the conspiracy, Ocwen directs Altisource to order
and coordinate default-related services, and Altisource
places orders for such services with third-party vendors. The
third-party vendors charge Altisource for the performance of
the default related services, who then marks up the price, in
numerous instances by 100% or more, and passes it along to
Ocwen. Thereafter, Ocwen willfully accepts the inflated
charge from Altisource, and bills the marked-up fees and
costs to the borrower, increasing the balance owed.
SAC ¶ 45.
inflated fees drive borrowers further into default. “In
the present case, Plaintiff had incurred well over $14,
000.00 in debt as a result of artificially inflated fees and
costs.” SAC ¶ 70. At some point, Neagle defaulted
on his loan. In April 2012, One West Bank FSB filed a
foreclosure action against Neagle. SAC ¶ 80. On June 13,
2013, Ocwen purchased the mortgage servicing rights to
Neagle's loan as part of a deal to purchase servicing
rights on $78 billion in unpaid principal loans. SAC ¶
81. In October 2013, One West Bank FSB assigned the
beneficial interest in Neagle's deed of trust to Ocwen,
who moved to substitute itself into the foreclosure action.
On March 3, 2016, Ocwen assigned its rights to MTQLQ. SAC
survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a
complaint must contain sufficient factual matter that
“state[s] a claim to relief that is plausible on its
face.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007). A claim is plausible on its face when
the factual allegations allow the court to infer the
defendant's liability based on the alleged conduct.
Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). The
factual allegations must present more than “the mere
possibility of misconduct.” Id. at 678.
considering a motion to dismiss, the court must accept all
allegations of material fact as true and construe those facts
in the light most favorable to the non-movant. Burget v.
Lokelani Bernice Pauahi Bishop Trust, 200 F.3d 661, 663
(9th Cir. 2000). But the court is “not bound to accept
as true a legal conclusion couched as a factual
allegation.” Twombly, 550 U.S. at 555. If the
complaint is dismissed, leave to amend should be granted
unless “the pleading could not possibly be cured by the
allegation of other facts.” Doe v. United
States, 58 F.3d 494, 497 (9th Cir. 1995).
alleges the conspiracy to pass inflated fees to borrowers
violated the Sherman Act, RICO, and constitutes Financial
Elder Abuse under Oregon law in violation of ORS §
124.100. As discussed below, Neagle fails to state a valid
claim for any of his five claims. Ocwen and MTGLQ also argue
dismissal is appropriate because Neagle failed to comply with
the notice and cure provision of his deed of trust before
filing this action. I agree and begin with that argument.
NOTICE AND CURE PROVISION
deed of trust states, “The covenants and agreements of
this Security Instrument shall bind (except as provided in
Section 20) and benefit the successors and assigns of
Lender.” ¶ 13. Ocwen and MTGLQ are assigns of the
lender. See SAC ¶¶ 78, 79, 82, 94
(alleging the original lender assigned the deed to One West
Bank, FSB, who assigned the deed to Ocwen, who assigned the
deed to MTGLQ). Section 20 of Neagle's deed of trust
Neither Borrower nor Lender may commence, join, or be joined
to any judicial action (as either an individual litigant or
the member of a class) that arises from the other party's
actions pursuant to this Security Instrument or that alleges
that the other party has breached any provision of, or any
duty owed by reason of, this Security Instrument, until such
Borrower or Lender has notified the other party (with such
notice given in compliance with the requirements of Section
15) of such alleged breach and afforded the other party
hereto a reasonable period after the giving of such notice to
take corrective action.
did not allege that he provided Ocwen or MTGLQ with notice
and opportunity to cure but argues the provision does not
apply because: (1) neither Ocwen nor MTQLQ is the
“Lender;” (2) his claims are statutory, not
contractual; and (3) notice here would be futile.
Ninth Circuit considered, and rejected, the same arguments
Neagle raises when affirming the dismissal, on notice and
cure grounds, of a borrower's Fair Debt Collections
Practices Act (FDCPA) claim against a loan servicer (also
Ocwen). Giotta v. Ocwen Loan Serv., LLC,
706 Fed.Appx. 421, 422-23 (2017) (unpublished). Though I am
not bound by the unpublished Giotta opinion, I am
not prevented from being persuaded by its logic.
Giotta is directly on point and its reasoning is as
sound as it is concise.
borrowers there challenged the district court's dismissal
of their FDCPA claim for failing to provide their loan
servicer with notice and the opportunity to cure. Although
the district court in Giotta relied on a written
loan modification, the Ninth Circuit looked to the deed of
trust. The notice provision there is identical to the notice
provision here. In its brief discussion that applies equally
well here, the Ninth Circuit explained:
1. The Notice Provision's text covers this action. The
Notice Provision clearly applies to: (1) “any judicial
action . . . that arises from the other party's actions
pursuant to this Security Instrument;” or (2)
“any judicial action . . . that alleges that the other
party has breached any provision of, or any duty owed by
reason of, this Security Instrument.” The Giottas were
in default on their mortgage. Therefore, the Deed of Trust
authorized property inspections and valuations to protect the
Lender's interest in the property and to pass the fees
for those services on to the borrower: “Lender may
charge Borrower fees for services performed in connection
with Borrower's default, for the purpose of protecting
Lender's interest in the Property and rights under this
Security Instrument, including, but not limited to,
attorneys' fees, property inspection and valuation
fees.” In this case, the Giottas allege that Ocwen
violated the FDCPA when it billed the Giottas for those fees
without disclosing the profit structure of the third-party
entity that conducted the services. Accordingly, the instant
suit is a “judicial action . . . that arises
from the other party's actions pursuant to
this Security Instrument.”
2. The Notice Provision requires notice to Ocwen. Per its
text, the Notice Provision applies only to the
“Lender.” However, the Deed of Trust explicitly
provides that “[t]he covenants and agreements of this
Security Instrument shall bind (except as provided in Section
20) and benefit the successor and assigns of Lender.”
Further, it specifically notified the Giottas that the note
may be sold. Although Ocwen is not the “Lender”
as defined in the Deed of Trust, it is an assign. Per the
record, One West Bank assigned the servicing rights on the
Giottas' mortgage to Ocwen . . . . Providing notice
before filing an action is a benefit (as opposed to a binding
covenant or agreement), because it gives the Lender prior
notice and an opportunity to take corrective action before
litigation is formally commenced. Therefore, as an assign of
the Lender, the Notice Provision is a “benefit”
of the “covenants and agreements” in the Deed of
Trust, inuring to Ocwen.
706 Fed.Appx. at 422 (all but final alteration in original).
reasoning in Giotta is persuasive. Neagle alleges
that Ocwen and MTGLQ were (at least) assigns of the Lender.
See SAC ¶¶ 78, 79, 82, 94. Neagle's
claims arise from Ocwen and MTGLQ's actions pursuant to
the deed of trust; i.e., servicing the loan and charging
Neagle “fees for services performed in connection with
[Neagle's] default . . . including property inspection
and valuation fees.” Deed of Trust ¶ 14.
argues that because his claims arise from statute and not
contract, the notice provision does not apply.
Giotta considered, and rejected, that argument. 706
Fed.Appx. at 422-23 (concluding notice provision did not
contravene the purpose of the FDCPA and “thus does not
impermissibly abrogate” the statute). Although Neagle
does not bring a FDCPA claim, the notice provision does not
abrogate any of the claims he does bring.
purpose of the Sherman Act is “to protect trade and
commerce against unlawful restraints and monopolies.”
Miranda v. Selig, 860 F.3d 1237, 1240 (9th Cir.
2017) (quoting Sherman Act, ch. 647, 26 Stat. 209 (1890)).
RICO's purpose is to prohibit racketeering activity.
Reves v. Ernst & Young, 507 U.S. 170, 181-82
(1993). ORS 124.110 seeks to prevent financial abuse of a
vulnerable person via a wrongful taking of money or property.
Schmidt v. Noonkester, 287 Or.App. 48, 50 n.1
(2017). As in Giotta, “the Notice Provision
does not contravene the statute[s'] purposes and, thus
does not impermissibly abrogate the [statutes].” 706
Fed.Appx. At 422-23; see also Clark v. Capital Credit
& Collection Servs., Inc., 460 F.3d 1162, 1170 (9th
Cir. 2006) (noting party may generally waive statutory
protection if waiver does not “contravene the
statutory policy.”) (quoting New York v. Hill,
528 U.S. 110, 116 (2000)).
Neagle does not allege he provided Ocwen or MTGLQ with notice
and the opportunity to cure the alleged violations, his
claims against those defendants are dismissed. Because
Altisource does not argue the notice provision applies to it,
and because I assume Neagle could allege notice in an amended
complaint, I turn to the merits of Neagle's claims.
brings antitrust claims under sections 1 and 2 of the Sherman
Act, 15 U.S.C. §§ 1, 2. Section 1 of the Sherman Act
restricts unreasonable restraints on trade perpetrated by
distinct entities acting in concert, whether via,
“contract, combination . . . or conspiracy.”
See Copperweld Corp. v. Indep. Tube Corp.,
467 U.S. 752, 768 (1984) (quoting 15 U.S.C. § 1).
To successfully bring a claim under section 1 of the Sherman
Act, a plaintiff must prove three elements: (1) an agreement,
conspiracy, or combination among two or more persons or
distinct business entities; (2) which is intended to harm or
unreasonably restrain competition; and (3) which actually
causes injury to competition, beyond the impact on the
claimant, within a field of commerce in which the claimant is
engaged (i.e., “antitrust injury”).
McGlinchy v. Shell Chem. Co., 845 F.2d 802, 811 (9th
Cir. 1988) (internal citations omitted).
2 of the Sherman Act functions as a restraint against the
tendency in capitalistic economies for single firms to seek
and maintain monopoly power over a specific market. See
Verizon Commc'ns Inc. v. Law Offices of Curtis v. Trinko,
LLP, 540 U.S. 398, 407 (2004). Section 2 prohibits
monopolies as well as attempts or conspiracies to form
monopolies. Image Tech. Services, Inc. v. Eastman Kodak
Co., 125 F.3d 1195, 1202 (9th Cir. 1997); 15 U.S.C.
§ 2. Firms with monopoly power can set prices far above
where the rational forces of supply and demand in a
competitive marketplace would have them, to the detriment of
both consumers and the economy as a whole. See Rebel Oil
Co. v. Atl. Richfield Co., 51 F.3d 1421, 1433 (9th Cir.
enforcement mechanisms of section 2 of the Sherman Act
restricts the ability of firms to acquire monopoly power via
illegal, anticompetitive actions, but are not meant to
prevent a firm from acquiring an increased share of a
specific market via legitimate business practices. See
Verizon Commc'ns Inc., 540 U.S. at 407. To state a
claim under section 2, Neagle must allege the defendants
“(1) possessed monopoly power in the relevant market,
(2) willfully acquired or maintained that power through
exclusionary conduct and (3) caused antitrust injury.”
MetroNet Services Corp. v. Qwest Corp., 383 F.3d
1124, 1130 (9th Cir. 2004). ...