Connect with us

Bankers

Owl Creek v Ocwen, S.D. Fl. is a related Lawsuit to Brahman Partners Filed and by Same Law Firms

LIT has focused on the Magistrate Judge’s motion to dismiss findings and order. As with the Brahman Partners case, this law suit would be settled shortly after the motions to dismiss in both actions were released.

Published

on

Owl Creek I, L.P. v. Ocwen Financial Corporation (9:18-cv-80506)

District Court, S.D. Florida

Original Complaint by Owl Creek

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS (DE 43)

Currently before the Court is Defendants’ Motion to Dismiss certain factual allegations from the Complaint based on Rule 12(b)(6) and the heightened pleading standards of Rule 9(b) and the Private Securities Litigation Reform Act of 1995 (PSLRA). DE 43. This motion was referred to the undersigned for final disposition by the presiding District Judge, following the parties’ consent to have the undersigned Magistrate Judge decide the instant motion. DE 61, 64, 65.

The undersigned has reviewed the Complaint (DE 1), the Motion to Dismiss (DE 43), Plaintiffs’ response to the motion (DE 46), and Defendants’ reply. DE 47. The Court heard oral argument of the motion on August 29, 2018 (DE 62), and this matter is now ripe for decision.

For the reasons that follow, Defendants’ Motion to Dismiss certain allegations from the Complaint (DE 43) is GRANTED IN PART AND DENIED IN PART.

ALLEGATIONS IN THE COMPLAINT

The following constitute the material facts alleged in the Complaint.1 All paragraph citations (noted as “¶” or “¶¶”) are references to the numbered paragraphs in the Complaint:

Plaintiffs are investment funds that purchased the common stock of Defendant Ocwen Financial Corporation (Ocwen) beginning in February 2014 and throughout that year. ¶¶1, 3, 188, 190.

Ocwen is a mortgage servicing company founded by Defendant Erbey. ¶2.

He ran the company until he was “forced to resign,” at which time his “right-hand man” and “long time compatriot,” Defendant Faris, took over. Id.2

According to the Complaint, Defendants sought to induce Plaintiffs to invest “tens of millions of dollars” in Ocwen by “making false and materially misleading statements concerning the accuracy of Ocwen’s financial statements, its purported regulatory compliance, and the effectiveness of its internal controls and disclosure procedures.”

¶¶4, 5.

As a mortgage servicer, Ocwen was “required to service mortgage loans in compliance with a number of overlapping servicing standards set forth in a 2011 agreement with the New York State Department of Financial Services (NYDFS 2011 Agreement) and in the National Mortgage Settlement (NMS).” ¶7.3

These servicing standards govern, among other things, the timing of Ocwen’s communications with borrowers. Id. Particularly relevant here is NMS’s

1 For purposes of this Motion, the Court accepts all well-pled factual allegations in the Complaint, and the attached exhibits, as true and evaluates all plausible inferences derived from those facts in favor of the Plaintiffs. See Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 20112); AXA Equitable Life Ins. Co. v. Infinity Fin. Grp., LLC, 608 F. Supp. 2d 1349, 1353 (S.D. Fla. 2009) (“On a motion to dismiss, the complaint is construed in the light most favorable to the non-moving party, and all facts alleged by the non-moving party are accepted as true.”).

2 After Faris became CEO, Erbey remained on the executive board, with the title “Former Executive Chairman.” DE 43-4 at 3.

3 NMS was a 2012 global settlement, resulting from federal and state investigations of large mortgage servicers for improper practices. ¶58.

requirement that any denial of a homeowner’s request for an interest rate reduction be accompanied by written notice of the thirty-day appeal period. This notice was significant because failure to timely appeal a denial could result in a foreclosure action. Id. On October 21, 2014, the NYDFS revealed in an open letter that Ocwen had been “backdating . . . potentially hundreds of thousands of letters to borrowers,” thus, belatedly advising its borrowers of deadlines that had already passed. ¶¶9, 127.

Ocwen subsequently acknowledged in a consent order with the NYDFS that it had been backdating letters to borrowers “for years.”

¶¶9, 181.

This backdating issue also revealed a problem in Ocwen’s disclosure controls because an employee had discovered the problem in November 2013 and reported it to Ocwen’s Vice President of Compliance, but Ocwen “failed to investigate or disclose the problem.” ¶¶108, 123, 129. The same employee raised the backdating issue again in April 2014, but it was still not publicly disclosed by the company. Id.

Notwithstanding this history, on October 31, 2013, Defendant Faris, who was then serving as Ocwen’s CEO, President and Director, and also sat on Ocwen’s Compliance Committee, advised investors during a conference call that Ocwen had been “careful to assure . .. strong compliance” while it transferred nearly two million newly-acquired loans from Residential Capital, LLC (ResCap) to Ocwen’s electronic loan servicing platform, REALServicing. ¶¶8, 53, 74, 153, 178; DE 43-4 at 3.

Faris told investors that the transfer of the ResCap loans had been costlier than expected because of the company’s emphasis on compliance. ¶74.4

4 Although Ocwen initially was not a party to the National Mortgage Settlement, when it acquired the ResCap loans, it was required to service those loans in accordance with the NMS standards. ¶61. Thereafter, in December 2013, Ocwen reached a separate agreement with several governmental authorities to comply with the NMS. This agreement required Ocwen to service all of its loans, not just the ResCap loans, in accordance with the NMS.  ¶62.

Plaintiffs considered Ocwen’s compliance with the NYDFS 2011 Agreement and the NMS to be important because Ocwen’s failure to comply with their regulatory requirements could result in the imposition of substantial penalties that would adversely affect Ocwen’s business operations and results. ¶72, 90.   According to the Complaint, “[h]ad Faris acted with the standard of care required of a CEO of a public company . . . he would have been aware that Ocwen was not in compliance with regulatory requirements.” ¶186.

Exactly six months after Faris’ statement to investors, Erbey announced Ocwen’s operating results for the first quarter of 2014 in a press release dated May 1, 2014. The press release “touted [Ocwen’s] compliance with the [NMS].” ¶75. Specifically, Erbey stated:

Going forward, we believe compliance and counterparty strength will be among the most important factors determining long-term success in the servicing business. We consider our solid balance sheet, National Mortgage Settlement compliance and long history of success in large servicing transfers, where we are able to substantially reduce delinquencies and keep more people in their homes, to be substantial competitive advantages. ¶¶75, 154 (emphasis in Complaint).

Plaintiffs interpreted this as “statement of fact that Ocwen was in compliance with the [NMS]” (¶¶76, 154), and claim that “[h]ad Erbey acted with the standard of care required of a Chairman of a public company . . . he would have been aware that Ocwen was not in compliance with regulatory requirements . . .” ¶185. According to the Complaint, “Defendants Erbey and Faris knew of or recklessly disregarded Ocwen’s letter backdating and the issues with REALServicing throughout 2014.” ¶¶115, 177, 181.5

When several partial corrective disclosures concerning the above-described misrepresentations were released to the market, the price of Ocwen common stock dropped precipitously, and Plaintiffs suffered significant losses on their purchases of Ocwen stock. ¶125.

5 According to the Complaint, Ocwen’s Head of Servicing emailed Faris in 2014 to complain that REALServicing was “an absolute train wreck.”  ¶¶10, 113, 179.

The first disclosure occurred on August 12, 2014, when Ocwen issued a press release stating, among other things, that:

(a) its financial statements for 2013 and the first quarter of 2014 could no longer be relied upon;

(b) it had overstated its pre-tax income for the first quarter of 2014 by almost 20%; and

(c) its internal controls over financial reporting suffered from a material weakness.

On this news, Ocwen stock dropped 4.5%.

¶126.

The second disclosure occurred on October 21, 2014, when the NYDFS issued its open letter to Ocwen recounting the letter-backdating issue. ¶127.

The NYDFS letter stated that Ocwen “did not notify regulators, borrowers, or investigators of this significant issue, nor did Ocwen personnel conduct due diligence to ensure that the issue was firmly resolved . . .” ¶130.

Thus, Ocwen “was not meeting [its] obligations” under various agreements with state and federal authorities, “[a]nd given the issues with Ocwen’s systems, it may be impossible to determine the scope of Ocwen’s non-compliance.” ¶132.6

Ocwen issued a response admitting the backdating of letters “due to software errors in our correspondence systems,” and suggesting that only 283 borrowers in New York received backdated letters. ¶135.

As a result of the information released on October 21, 2014, Ocwen’s stock price fell dramatically by over 18%.

¶136.

After the markets closed on October 21, 2014, Ocwen issued another press release, stating that it wished “to correct its statement in a press release earlier . . . that 283 borrowers in New York received letters with incorrect dates” because it was “aware of additional borrowers in New York who received letters with incorrect dates” but did “not yet know how many such letters there were.” ¶137.

The next day, October 22, 2014, the price of Ocwen common stock dropped more than 11%.

Id..

6 This was a reference to the Consumer Financial Protection Bureau (CFPB) determination that Ocwen’s “REALServicing [electronic platform] suffers from fundamental system architecture and design flaws, including a lack of properly managed data, lack of automation, and lack of capacity.” ¶¶10, 112, 156. As a result of this criticism and the Head of Servicing’s email that REALServicing was “an absolute train wreck,” Ocwen began transitioning from REALServicing in late 2017 to a different electronic servicing platform licensed by an independent third party.  ¶114.

Overall, the price of Ocwen common stock lost almost 30% of its value on October 21-22, 2014, dropping from $26.26 per share to $19.04 per share.

¶138.

Plaintiffs “specifically relied on the representations set forth above prior to purchasing Ocwen stock.” ¶¶82, 187, 189, 190. Plaintiffs also relied on Defendants’ statements “concerning the effectiveness of Ocwen’s disclosure controls and procedures . . . because [they] would ensure that regulatory violations would be publicly disclosed by Ocwen.” ¶91. Plaintiffs did not know that these representations “were either false or omitted truthful information that rendered the representations materially misleading.” ¶93. “Had [Plaintiffs] known the truth . . . [they] would not have purchased Ocwen common stock . . . or, [at least] would not have paid the prices [they] did.” ¶¶92, 192.   The Complaint charges that Defendants Erbey and Faris acted with scienter when making the materially false and misleading statements described above, and that because they were senior executives at the company, their knowledge is imputable to Ocwen. ¶173, 176, 180.

LEGAL CLAIMS

Count One alleges violations of Section 10(b) of the Exchange Act and Rule 10b-5 against all three Defendants, claiming that they intentionally made materially false and misleading statements to artificially inflate Ocwen’s stock price and induce Plaintiffs to buy it.7

7 Section 10(b) states:

 

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, … any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors.

15 U.S.C. § 78j(b) (2012).

Rule 10b–5 provides:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

To employ any device, scheme, or artifice to defraud,

To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b–5 (2012).

Count Two alleges violations of Section 18 of the Exchange Act against all three Defendants, claiming that they negligently made misleading statements in their quarterly and annual reports upon which Plaintiffs relied.8

Count Three alleges violations of Section 20(a) of the Exchange Act against Defendants Erbey and Faris by virtue of their “controlling person” status at Ocwen, and claims that they substantially participated in the alleged wrongs.

Count Four alleges common law fraud against all three Defendants in that they knowingly made material misrepresentations and concealed material facts from Plaintiffs, knowing that Plaintiffs would rely on these misrepresentations and be induced to purchase Ocwen’s common stock at inflated prices.

Count Five alleges common law negligent misrepresentation against all three Defendants, claiming that Defendants Erbey and Faris breached their duty to exercise reasonable care and made statements that they knew, or should have known, to be false in order to induce Plaintiffs to purchase Ocwen common stock.

8 Under Section 18, a plaintiff must only plead and prove that the defendant made or caused to be made a material misstatement or omission in a document filed with the Securities Exchange Commission and that the plaintiff relied on the misstatement or omission. Magna Inv. Corp. v. John Does One Through Two Hundred, 931 F.2d 38, 39 (11th Cir. 1991). A Section 18 claim, however, does not require that defendants acted with scienter or any particular state of mind. Id.

Defendants seek to dismiss all five counts to the extent they raise issues concerning Ocwen’s disclosure controls and are predicated on Ocwen’s statements made on October 31, 2013, and May 1, 2014. Defendants contend that these claims do not state a claim for which relief can be granted under Rule 12(b)(6), and that they do not satisfy the heightened pleading requirements of Rule 9(b) or the PSLRA.

Specifically, Defendants argue that Faris’ October 31, 2013 statement constitutes “puffery” in that it was a “generalized and non-verifiable corporate statement[]” that is non- actionable. Defendants also claim that the Complaint fails to adequately allege Faris’ scienter when he made the statement, and that two facts actually negate his scienter, namely that (i) he did not sell any shares of Ocwen stock during the period at issue, and (ii) on the same day Faris made the statement, Ocwen announced a $500 million stock buyback program. DE 43 at 3-4.

With regard to Erbey’s May 1, 2014 statement, Defendants argue that the Complaint fails to allege that Ocwen’s compliance with the NMS was a not competitive advantage, and therefore, Plaintiffs have not demonstrated that the statement is false. Defendants also claim that the Complaint “omits any mention of Mr. Erbey’s state of mind” when he made the statement, and thus, Plaintiffs have not adequately alleged his scienter. As with Faris, Defendants contend that the facts actually negate scienter because Erbey did not sell any shares of Ocwen stock during the period at issue, and “the Ocwen stock buyback program . . . continued well after Mr. Erbey’s May 1, 2014 Statement.” DE 43 at 4.

LEGAL STANDARDS

Motion to Dismiss Standard

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a motion to dismiss will be granted if the plaintiff fails to state a claim for which relief can be granted. According to the

federal rules, a claimant must only state “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). When considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pled factual allegations in the complaint, as well as all attachments thereto, and evaluates all plausible inferences derived from those facts in favor of the Plaintiff. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 2012).

The plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).   Although a plaintiff need not state in detail the facts upon which he bases his claim, Rule 8(a)(2) “still requires a ‘showing,’ rather than a blanket assertion, of entitlement to relief.” Id. at 555 n. 3.

In other words, a plaintiff’s pleading obligation requires “more than labels and conclusions.” Id. at 555; see also Pafumi v. Davidson, No. 05–61679–CIV, 2007 WL 1729969, at *2 (S.D. Fla. June 14, 2007) (J. Cohn).

Heightened Pleading Standard for Fraud under Rule 9(b)

In addition to the usual the notice pleading standard under Rule 8, allegations of fraud require a plaintiff to state “with particularity the circumstances constituting the fraud.” 100079 Canada, Inc. v. Stiefel Labs., Inc., No. 11-22389-CIV, 2011 WL 13116079, at *6 (S.D. Fla. Nov. 30, 2011) (J. Scola) (citing Fed. R. Civ. P. 9(b)).

The Eleventh Circuit has interpreted this to mean that the complaint must set forth (1) precisely what statements or omissions were made in which documents or oral representations; (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) them; (3) the content of such statements and the manner in which they misled the plaintiff; and (4) what the defendant obtained as a consequence of the fraud. FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282, 1296 (11th Cir. 2011) (noting that while Rule 9(b) requires the circumstances of the fraud to be pled with particularity, “[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged generally”).

Here, Plaintiffs’ claims in Counts Four and Five for common law fraud and negligent misrepresentation are subject to Rule 9(b)’s heightened pleading requirements. Broadway Gate Master Fund, Ltd. v. Ocwen Fin. Corp., No. 16-80056-CIV-WPD, 2016 WL 9413421, at *3 (S.D. Fla. June 29, 2016) (J. Dimitrouleas).

Specifically, the elements of Florida common law fraud are that:

(1) the defendant made a false statement or omission of material fact;

(2) the defendant knew the statement was false;

(3) the statement was made for the purpose of inducing plaintiff to rely on it;

(4) plaintiff’s reliance was reasonable; and

(5) plaintiff suffered damages. Id.

The elements of Florida common law negligent misrepresentation are:

(1) the defendant made a misrepresentation of material fact;

(2) the defendant either knew of the misrepresentation, made the misrepresentation without knowledge of its truth or falsity, or should have known the representation was false;

(3) the defendant intended to induce another to act on the misrepresentation; and (4) an injury resulted to the plaintiff who acted in justifiable reliance upon the misrepresentation. Id.

Heightened Pleading Standard for PSLRA claims

The PSLRA imposes an even higher pleading requirement on Section 10(b) and Rule 10b-5 claims and requires the plaintiff to set forth with particularity “each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.” Id. (quoting 15 U.S.C. § 78u–4(b)(1)).

Further, the plaintiff must allege “with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind [i.e., scienter].” 15 U.S.C. § 78u–4(b)(2). “If these PSLRA pleading requirements are not satisfied, the court ‘shall’ dismiss” those counts. FindWhat Investor Group, 658 F.3d at 1296-97 (citing 15 U.S.C. § 78u– 4(b)(3)(A)).

Thus, to survive a motion to dismiss, a claim brought under Section 10(b) or Rule 10b–5 must satisfy (1) the federal notice pleading requirements of Rule 8; (2) the special fraud pleading requirements of 9(b); and (3) the additional pleading requirements imposed by the PSLRA.   In re: Altisource Portfolio Sols., S.A. Sec. Litig., No. 14-81156-CIV-WPD, 2015 WL 11988900, at *2 (S.D. Fla. Dec. 22, 2015) (J. Dimitrouleas).

In order to state a claim under Section 10(b) and Rule 10b–5, a plaintiff must allege the following: “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.” Amgen Inc. v. Connecticut Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1192 (2013).

The element of scienter, which is at issue here, requires a showing of either an “intent to deceive, manipulate, or defraud,” or “severe recklessness.”

“Severe recklessness” is a term reserved for those highly unreasonable omissions or misrepresentations that involve “extreme departure” from the standards of ordinary care and that present a danger of misleading buyers or sellers which is either known to the defendant or is “so obvious” that the defendant must have been aware of it.

In re: Altisource Portfolio Sols., S.A. Sec. Litig., 2015 WL 11988900, at *5 (quoting Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1238 (11th Cir. 2008).

Judicial Notice

In determining whether to grant a Rule 12(b)(6) motion, the Court primarily considers the allegations in the complaint, however, when a plaintiff refers to documents in the complaint that are “central to the plaintiff’s claims,” the Court “may consider the documents part of the pleadings for purposes of Rule 12(b)(6) dismissal, and the defendant’s attaching such documents to the motion to dismiss will not require the conversion of the motion into a motion for summary judgment.” In re: Altisource Portfolio Sols., S.A. Sec. Litig., 2015 WL 11988900, at *3 (quoting Brooks v. Blue Cross & Blue Shield of Florida, Inc., 116 F.3d 1364, 1369 (11th Cir. 1997)).

Additionally, the Eleventh Circuit has expressly held that a court may judicially notice relevant documents legally required by, and publicly filed with, the Securities and Exchange Commission (“SEC”). See Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1276–81 (11th Cir. 1999).

DISCUSSION

 At the outset, the Court finds that Defendants’ Motion to Dismiss does not implicate Count Two. That Count alleges that Defendants violated of Section 18 of the Exchange Act by filing misleading reports with the SEC upon which Plaintiffs relied. Count Two is not predicated on the allegedly false statements Defendants made on either October 31, 2013 or May 1, 2014.

Accordingly, Defendants’ Motion to Dismiss is denied as moot with regard to Count Two.

The October 31, 2013 Statement

On its face, the Complaint satisfies Rule 9(b)’s heightened pleading requirements as to this first statement because the allegations are made with the requisite specificity.

The Complaint alleges that on October 31, 2013, during an investor phone call, Faris stated that Ocwen had been “careful to assure . . . strong compliance” during its transfer of the ResCap loans. See Complaint at ¶¶8, 74, 153. The Complaint also alleges that Plaintiffs were misled by this statement because they later learned that Defendants had not complied with their regulatory requirements (id. at ¶¶9, 108, 123, 129), that Defendants knew or should have known that Ocwen was not in compliance, and that Defendants benefitted from this misrepresentation because it induced Plaintiffs to invest in Ocwen at inflated prices. Id. at ¶¶72, 90.

Thus, to the extent the October 31, 2013 statement is the predicate for Counts Four and Five (common law fraud and negligent misrepresentation), the Court finds that the allegations in the Complaint are sufficient.

See Hubbard v. BankAtlantic Bancorp, Inc., 625 F. Supp. 2d 1267, 1281–82 (S.D. Fla. 2008) (J. Ungaro) (Rule 9(b)’s heightened pleading requirement satisfied where the complaint pled in detail what statements were materially false (e.g., statements during investor conference calls that defendant was a conservative lender), why defendant knew or should have known that the statements were false (because defendant was making risky loans to borrowers without properly investigating their creditworthiness), and what defendant stood to gain in making the statements (e.g., artificially high stock prices)).

For the October 31, 2013 statement to be used as a predicate for Count One’s claims under Section 10(b) and Rule 10b-5, the Complaint must satisfy the additional criteria of the PSLRA. “Rule 10b–5 prohibits not only literally false statements, but also any omissions of material fact ‘necessary in order to make the statements . . . not misleading.’” In re Ocwen Fin. Corp. Sec. Litig., No. 14-81057-CIV-WPD, 2015 WL 12780961, at *2 (S.D. Fla. Dec. 22, 2015) (J. Dimitrouleas) (quoting 17 C.F.R. § 240.10b–5(b)). “A statement is misleading if in light of the facts existing at the time of the statement a reasonable investor, in the exercise of due care, would have been misled by it.” Id. (quoting FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282, 1305 (11th Cir. 2011)). Under Section 10(b) and Rule 10b–5, “a plaintiff must show that the [defendant’s] statements were misleading as to a material fact.” Id. (quoting Basic Inc. v. Levinson, 485 U.S. 224, 238 (1988)).

Defendants contend that Faris’ October 31, 2013 statement regarding Ocwen’s “strong compliance” cannot support a claim under Section 10(b) or Rule 10b-5 because it is mere puffery, not a statement of fact, and thus, it cannot be shown to be false.

Puffery

“A statement that is vague, generalized, non-verifiable, or mere corporate puffery is immaterial because a reasonable investor would not make a decision based on such a statement.” Thorpe v. Walter Inv. Mgmt., Corp., No. 14-CV-20880, 2014 WL 11961964, at *11 (S.D. Fla. Dec. 23, 2014) (J. Ungaro). As a result, such statements are inactionable as a matter of law and cannot provide a basis for maintaining a claim under Section 10(b) or Rule 10b–5.  Id.

In Thorpe, the court ruled that the following statements regarding the defendant’s compliance and internal controls constituted inactionable puffery:

Statement touting the Company’s “active portfolio management—to improve servicing, regulatory compliance and credit performance,” “grounded in the long- term value proposition we offer clients for improved credit performance and regulatory compliance;” and

Statement touting the Company’s “culture of compliance: regulatory compliance capabilities remain at the ‘top of list’ in terms of ability to win new ”

By contrast, the following are examples of statements the court in Thorpe deemed to be beyond mere puffery and thus, actionable:

Statement touting the Company’s “culture of compliance—strong independent controls and processes for monitoring and managing compliance;”

Company’s CEO stated “

[w]e have a solid platform with distinct advantages . . . [w]e continue to execute for our clients by delivering strong portfolio performance in a regulatory-compliant matter.”

Company’s CFO stated “[w]e’re very comfortable and confident that our business practices meet all the requirements out there. You can go through the CFPB’s examination manual or any of the other information you might read publicly about what the best practices are in this business and we follow those very, very ”

Company’s COO stated “[w]e put so much emphasis on our day-to-day activities of compliance” and “[s]o where there’s opportunities . . . [but] we don’t see that it’s well-defined within state regulatory requirements, we’re going to pass on ”

Company’s Chief Compliance Officer stated “we review law changes and go through implementation to make sure we remain on Next, we prepare policies and procedures, forms and employee alerts, and all of those are reviewed by the compliance department before they’re implemented.”

Company presentation stating “we aggressively maintain compliance with all federal and state requirements and laws.”

Company’s CEO stated “[w]e have achieved this while maintaining high standards of performance and compliance across the entire ”

Thorpe, 2014 WL 11961964, at *2-4, *12.

As the court in Thorpe noted, “[d]efendants are involved in a heavily regulated industry and their statements relating to compliance with various state and federal laws and the internal controls for ensuring compliance were more than mere puffery.” Id. at *12. See also In re Ocwen Fin. Corp. Sec. Litig., No. 14-81057-CIV-WPD, 2015 WL 12780961, at *3 (comparing aspirational statements of compliance with “affirmative misrepresentation[s] that the corporation is in compliance [which are] actionable”).

Similarly, here, Faris’ October 31, 2013 statement that Ocwen had been “careful to assure. . . strong compliance” during the transfer of the newly-acquired ResCap loans to its REALServicing platform, is a “verifiable and specific factual statement,” particularly when read in context. According to the Complaint, Faris made this statement to explain why the loan transfer was more expensive than expected.

Faris’ explanation that Ocwen’s emphasis on compliance resulted in a costlier loan transfer is the sort of factual averment upon which investors would reasonably rely in their decision-making and is not mere aspirational corporate puffery.

This Court also finds that Plaintiffs have adequately alleged why the October 31st statement was false when made.

In particular, the Complaint alleges that a subsequent investigation by NYDFS which revealed that Ocwen had been “backdating . . . potentially hundreds of thousands of letters to borrowers” (Complaint at ¶9), and that Ocwen ultimately acknowledged in a consent order that it had been backdating letters to borrowers “for years.” Id.

These claims are sufficient to support an allegation at this stage that Ocwen was in violation of the NMS at the time Faris made the October 31st statement.

Additionally, the Complaint alleges that Defendants ignored an employee when he reported the backdating problem in November 2013 and again in April 2014, thus revealing Ocwen’s failure to investigate or disclose the problem once it was on notice. Id. at ¶¶108, 123, 129.

The Complaint also supports the claim that Ocwen was not meeting its regulatory obligations by alleging that an Ocwen executive acknowledged in an email that its electronic loan servicing platform, REALServicing, was “an absolute train wreck.”

Id. at ¶10.

Thus, the Complaint adequately alleges facts to support the claim that Faris’ October 31, 2013 statement, upon which Plaintiffs relied in deciding to invest in Ocwen, was false. See Thorpe, 2014 WL 11961964 at *13 (plaintiffs properly relied on internet postings, consumer complaints, subsequent lawsuits and a government investigation to show that defendants’ statements regarding compliance were false).

Loss Causation

The Court rejects Defendants’ argument that Plaintiffs failed to adequately allege loss causation because the corrective disclosures on October 21, 2014 do not reference the transfer of the ResCap loans. The Court finds that viewed in the light most favorable to Plaintiff, the subsequent corrective disclosures did in fact refute the subject matter of Faris’ October 31st statement, namely, that Ocwen was not in compliance with its regulatory requirements. “To be corrective, [a] disclosure need not precisely mirror the earlier misrepresentation, but it must at least relate back to the misrepresentation . . .” Meyer v. Greene, 710 F.3d 1189, 1197 (11th Cir. 2013) (citation omitted).

Scienter

Defendants argue that the Complaint fails to adequately allege Faris’ scienter when he made the October 31, 2013 statement. This Court agrees. “[I]n order to sufficiently allege scienter, a plaintiff must allege facts from which a reasonable person would infer that it is at least as likely as not that the individual high-ranking defendants either orchestrated the alleged fraud (and thus always knew about it), learned about the alleged fraud, or were otherwise severely reckless in not learning of the alleged fraud when they made the purportedly false or misleading statements.” Thorpe, 2014 WL 11961964, at *15.

First, the allegation that Faris “knew that Ocwen was not in compliance with regulatory standards because he sat on Ocwen’s Compliance Committee” is insufficient.

Plaintiffs essentially allege that Faris “must have” received information about the back-dated letters or Ocwen’s general lack of compliance with regulatory regulations as a result of his position on the Compliance Committee, but the Complaint does not reference any specific report or statement that was produced to the members of that committee. In re Sanofi Sec. Litig., 155 F. Supp. 3d 386, 407 (S.D.N.Y. 2016) (court declined to infer that defendant had knowledge of an illegal marketing scheme by virtue of his membership on the compliance committee) (citing Novak v. Kasaks, 216 F.3d 300, 309 (2d Cir. 2000) (“Where plaintiffs contend defendants had access to contrary facts, they must specifically identify the reports or statements containing this information.”)).

Second, the timing of the Complaint’s allegations fail to establish that Faris operated with the requisite level of scienter on October 31, 2013.   In particular, Plaintiffs rely on the fact that an Ocwen employee discovered and reported the backdating scheme to Ocwen management as evidence of Faris’ scienter, but the Complaint states that this revelation did not occur until November 2013, the month after Faris made his statement regarding strong compliance on the investor conference call.

Thus, this allegation cannot form the basis of Faris’ scienter.

Moreover, the Complaint only makes the general allegation that Defendants knew or recklessly disregarded the fact that Ocwen was not in compliance with its regulatory requirements “throughout 2014.” There are no specific facts alleged in the Complaint to support the conclusory allegation that Faris acted with severe recklessness when he made his statement on October 31, 2013.

Since the Complaint as pled is insufficient to plausibly infer that Faris acted with the requisite intent under the PSLRA, the Court finds that Faris’ October 31st statement cannot be used as a predicate to support Counts One or Three.9

The May 1, 2014 Statement

Similar to Faris’ October 31st statement, this Court finds that the Complaint’s allegations regarding Erbey’s press release dated May 1, 2014 satisfy the heightened pleading standard of Rule 9(b) to provide the factual bases for Counts Four and Five (common law fraud and negligent misrepresentation). Specifically, in his May 1, 2014 press release, Erbey stated that Defendants considered their “National Mortgage Settlement compliance . . . to be [a] substantial competitive advantage[].”

The Complaint provides details regarding the speaker, date, and content of the statement, alleges that Plaintiffs were misled by this statement because they later learned that Defendants had not complied with regulatory requirements, that Defendants knew or should have known that they were not in compliance, and that Defendants benefitted from this misrepresentation because it induced Plaintiffs to invest in Ocwen.

Defendants contend that Plaintiffs failed to “offer allegations that would make the May 2014 statement false,” (i.e., that Ocwen’s compliance was not a competitive advantage), which “defeats the element of falsity.” DE 43 at 14.

This Court declines to adopt this narrow reading of Erbey’s statement.

The corrective disclosure “need not precisely mirror the earlier misrepresentation;” it must only relate back to the misrepresentation. Meyer, 710 F.3d at 1197.

Thus, Plaintiffs are not required to allege that regulatory compliance did not give Ocwen a competitive advantage for the statement to be false.

Rather, it was Erbey’s assertion that Ocwen was in fact complying with the NMS that constitutes the falsity.

The Court finds that these facts are sufficiently pled in the Complaint.

In Broadway Gate Master Fund, Ltd. v. Ocwen Fin. Corp., No. 16-80056-CIV-WPD, 2016 WL 9413421 (S.D. Fla. June 29, 2016), Judge Dimitrouleas was also confronted with Erbey’s May 1, 2014 press release in the context of a motion to dismiss Section 10(b) and Rule 10b-5 claims. Judge Dimitrouleas held that the alleged falsity of this very statement had been adequately pled where the complaint alleged, as it does here, that Ocwen had backdated letters in contravention of NMS standards. Id. at *8.

Moreover, given that the complaint in Broadway Gate alleged that the backdating was discovered by an Ocwen employee in November 2013, as is alleged in this case, Judge Dimitrouleas held that the plaintiffs in Broadway Gate adequately pled that Erbey and Ocwen had the requisite scienter when the May 1, 2014 press release was issued. Id. (finding that “Erbey’s knowledge and the Vice President of Compliance’s knowledge are imputable to Defendant Ocwen”).

Although, as Defendants point out, this Court is not bound by Judge Dimitrouleas’ opinion, the Court considers the reasoning to be persuasive, particularly in light of the additional legal authority regarding scienter cited below, and thus, will adopt it here.

As the United States Supreme Court has held, in determining whether the plaintiff “has alleged facts that give rise to the requisite ‘strong inference’ of scienter, a court must consider plausible, nonculpable explanations for the defendant’s conduct, as well as inferences favoring the plaintiff.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 323–24 (2007).

Here, the only nonculpable explanation for Erbey’s May 1, 2014 press release is that he did not know Ocwen was in violation of the NMS when he issued it. In light of the totality of the Complaint’s factual allegations, which must be accepted as true at this stage, the Court does not find this alternative explanation to defeat scienter.

It is well settled that in evaluating scienter under the PSLRA, “allegations must be considered collectively . . . the court’s job is not to scrutinize each allegation in isolation but to assess all the allegations holistically.” Id. at 325-26. “[T]he inference of scienter can arise from an aggregation of particularized facts, even if each individual fact standing alone does not create a sufficiently strong inference.” In re Spear & Jackson Sec. Litig., 399 F. Supp. 2d 1350, 1358 (S.D. Fla. 2005) (J. Middlebrooks) (citing Phillips v. Scientific–Atlanta, Inc., 374 F.3d 1015, 1017 (11th Cir. 2004)).

An inference of scienter may also arise where the defendants “knew facts or had access to information suggesting that their public statements were not accurate . . . or. . . failed to check information they had a duty to monitor.” Plumbers & Steamfitters Local 773 Pension Fund v. Canadian Imperial Bank of Commerce, 2010 WL 961596, at *10 (S.D.N.Y. Mar. 17, 2010) (plaintiff must specifically identify the reports or statements and the dates or time frame when defendants were put on notice of contradictory information) (quoting Novak, 216 F.3d at 306).

Here, the allegation that Defendants admitted in a 2014 consent order with the NYDFS that the backdating scheme had been going on “for years” is sufficient to infer that Erbey was aware of the scheme when he made the May 1, 2014 statement.

This inference is bolstered by the Complaint’s factual allegations that an employee reported the backdating problem to Ocwen in November 2013, and again in April 2014, one month before Erbey’s press release.

Although the Complaint does not specifically allege that Ocwen’s Vice President of Compliance conveyed the backdating discovery to Erbey, given Erbrey’s status as a high level executive, there is a plausible inference that he was aware of the backdating scheme.

“Determining whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. “[A] plaintiff may, under certain circumstances, successfully plead scienter as to an individual executive defendant without allegations regarding that defendant’s direct knowledge.” Robb v. Fitbit Inc., 2017 WL 219673, at *3 (N.D. Cal. Jan. 19, 2017).

The Ninth Circuit has held that courts may impute scienter to individual defendants in some situations, for example, where we find that a company’s public statements are so important and so dramatically false that they would create a strong inference that at least some corporate officials knew of the falsity upon publication.

Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 607 (9th Cir. 2014) (quotation and citation omitted) (emphasis in original).

The Ninth Circuit explained that “allegations regarding management’s role in a company may be relevant and help to satisfy the PSLRA scienter requirement” when the allegations, “read together, raise an inference of scienter that is cogent and compelling, thus strong in light of other explanations.” S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 785-86 (9th Cir. 2008) (quotation and citation omitted).

In the alternative, allegations against corporate executives “may independently satisfy the PSLRA where they are particular and suggest that [the individual] defendants had actual access to the disputed information.” Id. (emphasis added).

Here, the Court finds that viewed in the light most favorable to Plaintiffs, the particularized allegation about the November 2013 and April 2014 reports regarding the backdating issue, the claim that the discovery was reported to the Vice President of Compliance, and Erbey’s high-ranking position at Ocwen, suggest that at a minimum, Erbey would have had actual access to the reported discovery.

The facts alleged in the Complaint regarding the timing and significance of the backdating discovery, the importance of the May 1, 2014 press release in bolstering investor confidence, and that the statement was “so dramatically false” in claiming that Ocwen had been and continued to be in compliance with the NMS, raises an inference of scienter that is “cogent and compelling” compared to the alternative explanation — that Erbey was simply unaware of Ocwen’s noncompliance when he issued the May 1st press release.

See Or. Pub. Emps. Ret. Fund, 774 F.3d at 607. See also Robb, 2017 WL 219673, at *6 (“[t]hat plaintiffs’ allegations do not directly connect the dots between [the COO’s] knowledge and the individual defendants will not be grounds for dismissing the complaint” where there was “a ‘cogent and compelling’ argument that [the] information . . . would also have been known to the individual defendants”).

For these reasons, the Court finds that the allegations regarding the May 1, 2014 press release and Erbey’s scienter are a sufficient predicate for the PSLRA claims in Count One.

With regard to the Section 20(a) “control person” liability alleged in Count Three, “

[w]hile there is no simple formula for how senior an employee must be in order to serve as a proxy for corporate scienter, courts have readily attributed the scienter of management-level employees to corporate defendants.” In re Sanofi Sec. Litig., 155 F. Supp. 3d 386, 409 (S.D.N.Y. 2016) (quoting In re Marsh & McLennan Companies, Inc. Sec. Litig., 501 F.Supp.2d 452, 481 (S.D.N.Y. 2006).

Here, the Complaint alleges that Defendants Erbey and Faris are liable as “control persons,” and given that the Court has found that the Complaint properly alleges a cause of action under Count One with regard to the May 1, 2014 press release, and that Defendants do not specifically dispute Erbey and Faris’ control over Ocwen at this stage of the proceedings, the Court finds that the May 1, 2014 press release is a proper predicate for establishing control person liability under Count Three. See In re Spear & Jackson Sec. Litig., 399 F. Supp. 2d at 1359 (noting that “[o]ther courts in the 11th Circuit have held that allegations that individuals, because of their management and/or director positions, could control a company’s general affairs, including the content of public statements and financial statements disseminated by the company, are sufficient to state a cause of action for controlling person liability”) (collecting cases).

9 Given that Plaintiffs have failed to plead a primary violation under Section 10(b) or Rule 10b–5 of the Exchange Act with regard to Faris’ October 31st statement, it follows that to the extent the Section 20(a) claim in Count Three is also predicated on this statement, it must fail for the same reason. Marrari v. Med. Staffing Network Holdings, Inc., 395 F. Supp. 2d 1169, 1190 (S.D. Fla. 2005) (J. Dimitrouleas) (“to the extent that the Section 20(a) Count rests upon violations of Section 10(b) or Rule 10b–5 that have been dismissed . . . the Court must also dismiss the Section 20(a) Count”).

CONCLUSION

For the foregoing reasons, Defendants’ Motion to Dismiss (DE 43) is GRANTED IN PART in that Faris’ October 31, 2013 statement, as alleged, is not a proper predicate for Counts One and Three. Defendants’ Motion to Dismiss is DENIED in all other respects.

DONE AND ORDERED in Chambers this 4th day of October, 2018, at West Palm Beach in the Southern District of Florida.

BRUCE REINHART
UNITED STATES MAGISTRATE JUDGE

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Appellate Circuit

Constance Daniels, Student of Hard Knocks, Admonished Florida Lawyer and Friend of The Eleventh Circuit

LIF cannot comprehend how the People of Florida and the United States of America are so accepting of Brazen Corruption.

Published

on

LIF COMMENTARY

The article below starts with Constance Daniels failure to pay for her law school tuition loan issued in 2003. She defaulted in 2005 per the complaint. The USA won a judgment of $164k+ in 2011.

In 2010, Wells Fargo commenced foreclosure proceedings in state court, Hillsborough County.

While all this was going on, Ms Daniels, a Republican, was attempting to become a State judge in 2014, which failed.

In late November of 2017 a settlement was reached, dismissing the Wells Fargo foreclosure complaint.

In 2017-2018, lawyer Daniels was failing to look after her client(s). Many moons later, in 2021, that would result in a slap on the wrist by the referee, Hon. Daniel D. Diskey for Fl. Bar.

Then we move onto the June 2018 complaint, filed by Daniels against the mortgage servicer. It was removed to the lower court in Middle District  of Florida Federal Court.

The court, via one of the Moody clan of judges, sided with Select Portfolio Servicing, LLC and this formed the appeal which was decided this week by the 11th Circuit.

In Nov. 2020, Wells Fargo filed a renewed foreclosure complaint against Daniels and her homestead in State court. In Sept 2021, Wells Fargo voluntarily dismissed the case and terminated the lis pendens ‘due to loan modification’.

The issue for LIF in this case is quite clear. Who the 11th Circuit has chosen to upend it’s prior stance that mortgage servicers can do no wrong under the FDCPA, despite irrefutable facts confirming otherwise.

For example, LIF refers to the case we highlighted regarding a deficiency judgment (State case, March 2022):

Florida Lawyer Stephanie Schneider Appeals a Mortgage Foreclosure Deficiency Judgment

In that case, LIF investigated beyond the court opinions to discover the wife is a Florida Lawyer and her husband, Laurence Schneider is owner of S&A Capital, Inc., a mortgage investment company, has built a national portfolio of performing mortgages that have been written off by other financial institutions.

Our angst is clear. Lawyers are being treated preferentially by the courts over regular citizens and homeowners.

In the case of Daniels, whilst she may have legitimate arguments, there have been many citizens who have failed before her by the wordsmithing by the Federal and Appellate Court(s), which has refused to apply the correct legal interpretation of the FDCPA, or clarify the question(s) with the federal consumer agency, the CFPB.

Whilst LIF is unhappy with the anti-consumer watchdog, the Consumer Financial Protection Bureau (CFPB) which is a revolving door for staff to leave the Bureau and go work for a creditor rights law firm without any restriction or time limit (non-compete), the Daniels case should have been referred to the CFPB for interpretation about the matters of ‘first impression’.

The Second Circuit recently did so for a RESPA question in Naimoli v Ocwen and we highlighted the case on our sister website, LawsInTexas.com (Laws In Texas). Instead of doing so in Daniels, there is a dissenting opinion by Judge Lagoa, who’s father in law is a  senior judge in SD Florida (Paul C. Huck) and her hubby is a Jones Day Partner and apparently the leader of the Miami Chapter of the Federalist Society. Lagoa herself is a former Florida Supreme Court justice appointed by Gov DeSantis who ‘ensured he puts conservatives on the bench so that anyone coming to court knows how the court will rule’.

LIF anticipates the Daniels case will be subject to a rehearing petition and presented to the full en banc court for reconsideration. The opinion here is similar to the recent Newsom FDCPA opinion, which was too negative towards Wall St and the financial banking services community. As such, it was vacated by the en banc panel while they reconsider. The courts’ decision is currently pending.

In this case, there is still time for the 11th Circuit to correctly ask the CFPB to provide its opinion on the underlying facts raised on appeal and decided by the 3-panel.

However, what the judiciary won’t do is apply this retroactively to the thousands of cases which have been incorrectly tossed in the last 14 years, resulting in homeowners losing their homes to wrongful foreclosures.

United States v. Daniels (2011)

(8:11-cv-01058)

District Court, M.D. Florida

MAY 13, 2011 | REPUBLISHED BY LIT: MAY 26, 2022

USA Motion for Summary Judgment with Exhibits, Doc. 13, Aug 17, 2011

ORDER granting  Motion for summary judgment in favor of the Plaintiff and against the defendant in the amount of $109,813.74,

together with accrued interest in the amount of $54,097.10 as of February 28, 2011,

plus interested at the rate of 8.25 percent per annum and a daily rate of $24.80, until the date of judgment;

for post-judgment interest, at the legal rate, from the entry of final judgment until the date of payment;

and for such other costs of litigation otherwise allowed by law.

The Clerk of Court is directed to close the case.

Signed by Judge Elizabeth A. Kovachevich on 9/22/2011.

(SN) (Entered: 09/22/2011)

U.S. District Court
Middle District of Florida (Tampa)
CIVIL DOCKET FOR CASE #: 8:11-cv-01058-EAK-AEP

USA v. Daniels
Assigned to: Judge Elizabeth A. Kovachevich
Referred to: Magistrate Judge Anthony E. Porcelli
Demand: $164,000
Cause: 28:1345 Default of Student Loan
Date Filed: 05/13/2011
Date Terminated: 09/22/2011
Jury Demand: None
Nature of Suit: 152 Contract: Recovery Student Loan
Jurisdiction: U.S. Government Plaintiff
Plaintiff
USA represented by I. Randall Gold
US Attorney’s Office – FLM
Suite 3200
400 N Tampa St
Tampa, FL 33602-4798
813/274-6026
Fax: 813/274-6247
Email: FLUDocket.Mailbox@usdoj.gov
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
V.
Defendant
Constance Daniels represented by Constance Daniels
PO Box 6219
Brandon, FL 33608
PRO SE

 

Date Filed # Docket Text
05/13/2011 1 COMPLAINT against Constance Daniels filed by USA. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Civil Cover Sheet)(MRH) (Entered: 05/13/2011)
05/13/2011 2 Summons issued as to Constance Daniels. (MRH) (Entered: 05/13/2011)
05/13/2011 3 ORDER regulating the processing of civil recovery actions. Service must be perfected by 09/10/2011. Signed by Deputy Clerk on 5/13/2011. (MRH) (Entered: 05/13/2011)
05/13/2011 4 STANDING ORDER: Filing of documents that exceed twenty-five pages. Signed by Judge Elizabeth A. Kovachevich on 7/15/08. (MRH) (Entered: 05/13/2011)
05/19/2011 5 NOTICE of designation under Local Rule 3.05 – track 1 (CLM) (Entered: 05/19/2011)
05/20/2011 6 CERTIFICATE OF SERVICE re 3 ORDER regulating the processing of civil recovery actions by USA (Gold, I.) Modified on 5/20/2011 (MRH). (Entered: 05/20/2011)
05/25/2011 7 CERTIFICATE OF SERVICE by USA (Notice of Designation Under Local Rule 3.05) (Gold, I.) (Entered: 05/25/2011)
07/06/2011 8 RETURN of service executed on 7/5/11 (Marshal 285) by USA as to Constance Daniels. (MRH) (Entered: 07/06/2011)
07/27/2011 9 MOTION for default judgment against Constance Daniels by USA. (Gold, I.) Modified on 7/27/2011 (MRH). NOTE: TERMINATED. INCORRECT MOTION RELIEF. ATTORNEY NOTIFIED. ATTORNEY TO REFILE. (Entered: 07/27/2011)
07/27/2011 10 MOTION for entry of clerk’s default against Constance Daniels by USA. (Gold, I.) Motions referred to Magistrate Judge Anthony E. Porcelli. (Entered: 07/27/2011)
07/28/2011 11 CLERK’S ENTRY OF DEFAULT as to Constance Daniels. (MRH) (Entered: 07/28/2011)
07/29/2011 12 ANSWER to 1 Complaint by Constance Daniels.(BES) (Entered: 07/29/2011)
08/17/2011 13 MOTION for summary judgment by USA. (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Gold, I.) (Entered: 08/17/2011)
09/09/2011 14 ENDORSED ORDER TO SHOW CAUSE as to Constance Daniels.. The plaintiff filed a motion for summary judgment on 8/17/11. The defendant had up to and including 9/3/11 to respond to the motion. To date no response has been filed. Therefore, it is ORDERED that the defendant has up to and including 9/19/11 in which to show cause why the pending motion should not be granted. Signed by Judge Elizabeth A. Kovachevich on 9/9/2011. (SN) (Entered: 09/09/2011)
09/22/2011 15 ORDER granting 13 Motion for summary judgment in favor of the Plaintiff and against the defendant in the amount of $109,813.74, together with accrued interest in the amount of $54,097.10 as of February 28, 2011, plus interested at the rate of 8.25 percent per annum and a daily rate of $24.80, until the date of judgment; for post-judgment interest, at the legal rate, from the entry of final judgment until the date of payment; and for such other costs of litigation otherwise allowed by law. The Clerk of Court is directed to close the case.. Signed by Judge Elizabeth A. Kovachevich on 9/22/2011. (SN) (Entered: 09/22/2011)
10/12/2011 16 ABSTRACT of judgment as to Constance Daniels. (DMS) (Entered: 10/12/2011)

Order GRANTING Summary Judgment for $164k Student Loan Debt, Doc. 15, Sep 22, 2011

Daniels v. Select Portfolio Servicing, Inc.

(2018-Present)

(8:18-cv-01652)

District Court, M.D. Florida

ORDER

THIS CAUSE comes before the Court upon Defendant’s Motion to Dismiss Plaintiff’s Second Amended Complaint (Dkt. 24) and Plaintiff’s Response in Opposition (Dkt. 27).

The Court, having reviewed the motion, response, and being otherwise advised in the premises, concludes that Defendant’s motion should be granted.

Specifically, Plaintiff’s second amended complaint will be dismissed with prejudice because any further amendment is futile.

BACKGROUND

As the Court explained in its prior Order granting Defendant’s motion to dismiss, (see Dkt. 22), Plaintiff Constance Daniels initially filed suit in Florida state court against Defendant Select Portfolio Servicing, Inc. (“SPS”) alleging three Florida claims, which included a claim under Florida’s civil Racketeer Influenced and Corrupt Organizations (“RICO”) Act.

On July 10, 2018, SPS removed the case to this Court based on diversity jurisdiction.

On August 6, 2018, SPS moved to dismiss the entire complaint.

In relevant part, SPS argued that the complaint failed to allege any of the elements of a RICO claim.

On August 27, 2018, Daniels filed an amended complaint, which mooted SPS’s motion to dismiss.

Daniels’ amended complaint alleged two claims: a claim under the Fair Debt Collection Practices Act (“FDCPA”) and a claim under the Florida Consumer Collections Practices Act (“FCCPA”).

Both claims relied on the same allegations.

To summarize, Daniels alleged that SPS had “improperly servic[ed]” her mortgage loan “in reckless disregard” of her consumer rights. (Dkt. 12).

The amended complaint did not attach any mortgage statements.

SPS moved to dismiss Daniels’ amended complaint based on her failure to allege that SPS ever attempted to collect the mortgage balance.

The Court granted SPS’s motion.

The Court noted that the amended complaint did not identify or attach any communication from SPS to Daniels.

The Court also surmised that the dispute was more akin to a dispute about an improper accounting of Daniels’ mortgage.

The Court dismissed the FDCPA and FCCPA claims and provided Daniels a final opportunity to amend her complaint.

Daniels filed a second amended complaint.

The allegations are largely unchanged.

But, significantly, Daniels attaches multiple monthly mortgage statements that SPS sent to her.

She now claims that these mortgage statements constitute debt collection activity under the FDCPA and FCCPA.

SPS’s motion to dismiss argues that the monthly mortgage statements comply with Regulation Z of the Truth in Lending Act (the “TILA”)—they were not communications in connection with the collection of a debt—and therefore do not constitute debt collection activity under the FDCPA and FCCPA.

As explained further below, the Court agrees with SPS’s position based on the Court’s detailed review of the monthly mortgage statements.

Therefore, the second amended complaint will be dismissed with prejudice.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss a complaint when it fails to state a claim upon which relief can be granted.

When reviewing a motion to dismiss, a court must accept all factual allegations contained in the complaint as true.

Erickson v. Pardus, 551 U.S. 89, 94 (2007) (internal citation omitted).

It must also construe those factual allegations in the light most favorable to the plaintiff.

Hunt v. Aimco Properties, L.P., 814 F.3d 1213, 1221 (11th Cir. 2016) (internal citation omitted).

To withstand a motion to dismiss, the complaint must include “enough facts to state a claim to relief that is plausible on its face.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

A claim has facial plausibility “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Pleadings that offer only “labels and conclusions,” or a “formulaic recitation of the elements of a cause of action,” will not do.

Twombly, 550 U.S. at 555.

DISCUSSION

The FDCPA and FCCPA prohibit debt collectors from using a “false, deceptive, or misleading representation or means in connection with the collection of any debt.”

See e.g. 15 U.S.C. § 1692e (emphasis added);

Fla. Stat. § 559.72 (“In collecting debts, no person shall . . .”) (emphasis added).

It is axiomatic then that the “challenged conduct is related to debt collection” to state a claim under either statute.

Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1216 (11th Cir. 2012);

see also Garrison v. Caliber Home Loans, Inc., 233 F. Supp. 3d 1282, 1286 (M.D. Fla. 2017) (“the FCCPA is a Florida state analogue to the federal FDCPA.”) (internal citations omitted).

“[T]he Eleventh Circuit has not established a bright-line rule” as to what qualifies as “in connection with the collection of any debt.”

Dyer v. Select Portfolio Servicing, Inc., 108 F. Supp. 3d 1278, 1280 (M.D. Fla. 2015).

“As a general principle, the absence of a demand for payment is not dispositive,” and courts should “instead consider whether the overall communication was intended to induce the debtor to settle the debt.”

Wood v. Citibank, N.A., No. 8:14-cv-2819-T-27EAJ, 2015 WL 3561494, at *3 (M.D. Fla. June 5, 2015) (citations omitted).

The second amended complaint attaches multiple monthly mortgage statements.1

Because the communications at issue here are all monthly mortgage statements, a discussion of the TILA is necessary.

The TILA requires SPS, a servicer, to send monthly mortgage statements.

12 C.F.R. § 1026.41. Specifically, 12 C.F.R. § 1026.41(d) requires that servicers provide debtors with detailed monthly mortgage statements containing, among other things: the “amounts due;” the “payment due date;” “the amount of any late payment fee, and the date that fee will be imposed if payment has not been received;” “an explanation of amount due, including a breakdown showing how much, if any, will be applied to principal, interest, and escrow and, if a mortgage loan has multiple payment options, a breakdown of each of the payment options;” “any payment amount past due;” a breakdown of “the total of all payments received since the last statement” and “since the beginning of the current calendar year;” “a list of all transaction activity that occurred since the last statement;” “partial payment information;” “contact information;” and detailed “account information” and “delinquency information.”

The Consumer Financial Protection Bureau (the “CFPB”) has issued a bulletin providing that a

“servicer acting as a debt collector would not be liable under the FDCPA for complying with [monthly mortgage statement] requirements.”

Implementation Guidance for Certain Mortgage Servicing Rules, 10152013 CFPB GUIDANCE, 2013 WL 9001249 (C.F.P.B. Oct. 15, 2013).

Courts have largely followed this guidance.

See, e.g., Jones v. Select Portfolio Servicing, Inc., No. 18-cv-20389, 2018 WL 2316636, at *3 (S.D. Fla. May 2, 2018) (citing 12 C.F.R. § 1026.41(d));

Brown v. Select Portfolio Servicing, Inc., No. 16-62999-CIV, 2017 WL 1157253 (S.D. Fla. Mar. 24, 2017) (noting the guidance and finding that monthly mortgage statements in compliance with the TILA were not debt collection).

The monthly mortgage statements at issue here were in conformity with the TILA requirements.

Moreover, the subject statements were substantially similar to model form H-30(B) provided by Appendix X to Part 1026 of TILA Regulation Z.

See also Jones, 2018 WL 2316636, at *4 (noting the similarities between a monthly mortgage statement and the model form in concluding no debt collection).

Although the monthly mortgage statements may not be identical to model form H-30(B), the differences are not significant deviations.

Notably, the plaintiff in Brown brought a nearly identical lawsuit against SPS.

The court explained in detail why the plaintiff was unable to state a claim under the FDCPA and FCCPA because the monthly mortgage statement was required to be sent pursuant to the TILA.

The complaint in Brown was dismissed with prejudice because “amendment would be futile” given that the basis for the claims was a monthly mortgage statement that was not actionable as a matter of law.

See 2017 WL 1157253, at *2-*4.

Also, the Jones court discussed in detail the numerous prior decisions addressing this issue, including multiple cases from this district that have held that monthly mortgage statements

“are almost categorically not debt collection communications under the FDCPA.”

2018 WL 2316636, at *5 (citing cases).

The particular monthly mortgage statements before the court in Jones were also sent by SPS and were substantively identical to the statements at issue in this case and in Brown.

Most recently, in Mills v. Select Portfolio Servicing, Inc., No. 18-cv-61012- BLOOM/Valle, 2018 WL 5113001 (S.D. Fla. Oct. 19, 2018), the court “agree[d] with the reasoning in Jones and [concluded] that the Mortgage Statements at issue [were] not communications in connection with a collection of a debt.” Id. at *2.

In conclusion, the substance of the monthly mortgage statements at issue in this case is substantially similar to model form H-30(B).

Any minor discrepancies in the language—when taken in the context of the document as an otherwise carbon copy of form H-30(B)—do not take the statements out of the realm of a monthly mortgage statement and into the realm of debt collection communications.

It is therefore ORDERED AND ADJUDGED that:

1. Defendant’s Motion to Dismiss Plaintiff’s Second Amended Complaint (Dkt.

24) is granted.

2. Plaintiff’s Second Amended Complaint is dismissed with prejudice.

3. The Clerk of Court is directed to close this case and terminate any pending motions as moot.

DONE and ORDERED in Tampa, Florida on December 18, 2018.

 

 

 

 

Copies furnished to: Counsel/Parties of Record

Judge Bert Jordan’s “Reputation” Warning to New Florida Lawyers

Constance Daniels Admonished by the Florida Bar (2021)

Constance Daniels, P.O. Box 6219, Brandon, admonishment in writing and directed to attend Ethics School effective immediately following a November 24 court order.

(Admitted to practice: 1995)

Daniels failed to act with reasonable diligence and failed to communicate with her client in connection with a dissolution of marriage action.

Daniels also failed to timely respond to the Bar’s formal complaint.

(Case No: SC21-683)

Constance Daniels v. Select Portfolio Servicing, Inc. (2022)

11th Cir., Published Opinion

(19-10204, May 24, 2022)

“A matter of first impression” 14 Years after the great recession and greatest theft of citizens homes in the history of the United States.

It’s quite incredulous how the 11th Circuit selects a Sanctioned Fl. Republican Lawyer, a failed judicial candidate and one who is facing foreclosure, for this ‘landmark’ published opinion in 2022.

Panel Author, Judge Bert Jordan, joined by Judge Brasher with a dissenting opinion by Judge Babs Lagoa

11th Circuit revives FDCPA lawsuit over mortgage statement language

How Westlaw is Summarizing the Latest Eleventh Circuit Opinion

(May 26, 2022)

Resolving an issue of first impression, a divided federal appeals panel has held that mortgage servicers can be liable under the Fair Debt Collection Practices Act for inaccuracies in monthly mortgage statements that contain additional debt-collection language.

Daniels v. Select Portfolio Servicing Inc., No. 19-10204, (11th Cir. May 24, 2022).

In a 2-1 decision, the 11th U.S. Circuit Court of Appeals on May 24 reinstated Constance Daniels’ lawsuit against Select Portfolio Servicing Inc., in which she alleges the company used faulty mortgage statements to try to collect payments she did not owe.

Writing for the panel majority, U.S. Circuit Judge Adalberto J. Jordan acknowledged that Select Portfolio was required to issue the mortgage statements under the Truth in Lending Act, 15 U.S.C.A. § 1638.

However, the mortgage statements fell within the scope of the FDCPA’s prohibition on false or misleading representations, 15 U.S.C.A. § 1692e, because they included additional debt-collection language — “this is an attempt to collect a debt” — the opinion said.

Judge Jordan reasoned that “in determining whether a communication is in connection with the collection of a debt, what could be more relevant than a statement in the communication than ‘this is an attempt to collect a debt’?”

U.S. Circuit Judge Barbara Lagao dissented, saying the majority treated the language like “magic words” that could convert an otherwise routine mortgage statement into a communication covered by the FDCPA.

Judge Lagoa also argued that the decision created a circuit split, although the panel majority insisted that the facts of Daniels’ case distinguished it from others in which federal circuit courts seemed to reach a contrary result.

District Court tosses FDCPA claims

Daniels sued Select Portfolio in the U.S. District Court for the Middle District of Florida in July 2018.

According to the suit, Daniels had prevailed in a state court foreclosure action brought by lender Wells Fargo in 2015, with the judge sanctioning Wells Fargo and enforcing an earlier loan modification agreement between the parties.

But Daniels’ mortgage servicer, Select Portfolio, later issued several monthly mortgage statements misstating the principal balance and amount due, and falsely claiming that her loan was in arrears, the suit says.

At least three of the mortgage statements included the sentence, “This is an attempt to collect a debt,” according to the suit.
Daniels accuses Select Portfolio of using false or misleading representations in connection with the collection of a debt, in violation of the FDCA and the Florida Consumer Collection Practices Act, Fla. Stat. Ann. § 559.72.

Select Portfolio moved to dismiss, saying Daniels was attempting hold it liable for issuing mortgage statements that are required under the Truth in Lending Act.

U.S. District Judge James S. Moody Jr. agreed and dismissed the suit in December 2018. Daniels v. Select Portfolio Servs. Inc., No. 18-cv-1652, (M.D. Fla. Dec. 18, 2018).

Judge Moody said that any discrepancies in language between Select Portfolio’s monthly statements and what is required under TILA “do not take the statements out of the realm of a monthly mortgage statement and into the realm of debt collection communications.”

On appeal, Daniels argued that compliance with TILA does not make a mortgage servicer immune from suit under the FDCPA and, even if it did, the monthly statements at issue included language beyond what is necessary under TILA.

Kaelyn S. Diamond and Michael A. Ziegler of the Law Office of Michael A. Ziegler represented Daniels.

Benjamin B. Brown and Joseph T. Kohn of Quarles & Brady LLP represented Select Portfolio.

By Dave Embree

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Continue Reading

Appellate Circuit

Deutsche Bank and Nationstar Watch as 11th Circuit Discharge the Shotgun Despite Hunt’s Pleadings

There can be no doubt that this is a frivolous appeal and we would not hesitate to order sanctions if appellant had been represented by counsel.

Published

on

Hunt v. Nationstar Mortg., No. 21-10398

(11th Cir. May 27, 2022)

MAY 27, 2022 | REPUBLISHED BY LIT: MAY 30, 2022

Before ROSENBAUM, GRANT, and MARCUS, Circuit Judges. PER CURIAM:

Christopher M. Hunt, Sr., proceeding pro se, appeals following the district court’s dismissal of his civil complaint arising out of his 2006 purchase of residential property located in Atlanta, Georgia (the “Property”).

Hunt purchased the Property using proceeds from a loan that he eventually defaulted on, which prompted Nationstar Mortgage, LLC (“Nationstar”), then servicer of the loan, to seek a non-judicial foreclosure on the Property.

After filing or being named in a variety of related lawsuits,1 Hunt filed the instant pro se complaint in Georgia state court in June 2020 and named as defendants Nationstar, the Deutsche Bank National Trust

1 See, g., Hunt v. Nationstar Mortg., LLC, 684 F. App’x 938 (11th Cir. 2017) (unpublished) (“Hunt I”);

[MARCUS, ROSENBAUM AND ANDERSON]

Hunt v. Nationstar Mortg., LLC, 779 F. App’x 669 (11th Cir. 2019) (unpublished);

[PRYOR,W., GRANT AND ANDERSON]

Hunt v. Nationstar Mortg., LLC, 782 F. App’x 762 (11th Cir. 2019) (unpublished);

[PRYOR,W., GRANT AND ANDERSON]

Deutsche Bank Tr. Co. Am., as Tr. for Fifteen Piedmont Ctr. v. Hunt, 783 F. App’x 998 (11th Cir. 2019) (unpublished).

[TJOFLAT, JORDAN AND NEWSOM]

Companies (“Deutsche Bank”), and Jay Bray, the CEO of Nationstar.

He alleged that they had committed, inter alia, mortgage fraud and wrongful foreclosure in violation of federal laws, including the Sarbanes-Oxley Act and the Dodd-Frank Act.2

The district court denied a variety of preliminary motions filed by Hunt;

dismissed, without prejudice, the complaint as to defendant Bray for failure to effect proper service;

and

dismissed, with prejudice, the complaint as to Deutsche Bank and Nationstar, because it was a “shotgun” pleading, was barred by res judicata, and failed to state a claim upon which relief could be granted.3

After thorough review, we affirm.

I.

Whether a court has subject-matter jurisdiction, including removal jurisdiction, is a question of law that we review de novo.

See McGee v. Sentinel Offender Servs., LLC, 719 F.3d 1236, 1241 (11th Cir. 2013).

We also review de novo a denial of a motion to

2 Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745 (hereinafter “Sarbanes-Oxley Act”), and the Dodd-Frank Wall Street Reform and Con- sumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010) (hereinafter “Dodd-Frank Act”).

3 Hunt also named Christian Sewing, the Chief Executive Officer (“CEO”) of Deutsche Bank, as a defendant, but he later voluntarily dismissed him.

And after filing the complaint, Hunt sought to add yet another defendant, the Albertelli Law Firm (“Albertelli Law”).

Bray, Sewing and Albertelli Law have not filed any briefs on appeal.

remand to state court. Conn.

State Dental Ass’n v. Anthem Health Plans, 591 F.3d 1337, 1343 (11th Cir. 2009).

A district court’s decision regarding the indispensability of a party is reviewed for abuse of discretion.

United States v. Rigel Ships Agencies, Inc., 432 F.3d 1282, 1291 (11th Cir. 2005).

We will disturb a district court’s refusal to change venue only for a clear abuse of discretion.

Robinson v. Giarmarco & Bill, P.C., 74 F.3d 253, 255 (11th Cir. 1996).

We also review the district court’s denial of a motion for recusal for abuse of discretion.

Jenkins v. Anton, 922 F.3d 1257, 1271 (11th Cir. 2019).

We review a district court’s grant of a motion to dismiss for insufficient service of process, under Rule 12(b)(5), by applying a de novo standard to questions of law, and a clear error standard to the court’s findings of fact.

Albra v. Advan, Inc., 490 F.3d 826, 829 (11th Cir. 2007).

But when a party fails to object to a magistrate judge’s findings or recommendations in a report and recommendation, he “waives the right to challenge on appeal the district court’s order based on unobjected-to factual and legal conclusions.” 11th Cir. R. 3-1.

Under the circumstances, we review a claim on appeal only “for plain error,” if “necessary in the interests of justice.” Id.

We review the dismissal of a “shotgun” pleading under Rule 8 for abuse of discretion.

Vibe Micro, Inc. v. Shabanets, 878 F.3d 1291, 1294 (11th Cir. 2018).

When appropriate, we will review a district court’s dismissal for failure to state a claim under Rule 12(b)(6) de novo.

Am. United Life Ins. Co. v. Martinez, 480 F.3d 1043, 1056–57 (11th Cir. 2007).

We will also review a dismissal

based on res judicata de novo.

Jang v. United Techs. Corp., 206 F.3d 1147, 1149 (11th Cir. 2000).

We review de novo a district court’s conclusions on collateral estoppel, but review its legal conclusion that an issue was actually litigated in a prior action for clear error.

Richardson v. Miller, 101 F.3d 665, 667–68 (11th Cir. 1996).

While pro se pleadings are liberally construed, issues not briefed on appeal are normally forfeited and we will generally not consider them.

Timson v. Sampson, 518 F.3d 870, 874 (11th Cir. 2008).

An appellant can abandon a claim by:

(1) making only passing reference to it;

(2) raising it in a perfunctory manner without supporting arguments and authority;

(3) referring to it only in the “statement of the case” or “summary of the argument”;

or

(4) referring to the issue as mere background to the appellant’s main arguments.

Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678, 681– 82 (11th Cir. 2014).

In addition, if a district court’s order rested on two or more independent, alternative grounds, the appellant must challenge all of the grounds to succeed on appeal.

See id. at 680.

When an appellant fails to challenge on appeal one of the grounds on which the district court based its judgment, he is deemed to have abandoned any challenge of that ground, and it follows that the judgment is due to be affirmed.

See id.

II.

Liberally construed, Hunt’s brief on appeal seeks to challenge the district court’s decisions:

(1) denying remand of his case to state court

and

denying his request to file an amended complaint adding another defendant, Albertelli Law;

(2) denying his request

to transfer the case;

(3) denying his request to disqualify the judge;

(4) dismissing, without prejudice, his complaint as to defendant Bray for failure to effect proper service;

and

(5) dismissing his complaint, with prejudice, as to Deutsche Bank and Nationstar.

To be sure, Hunt’s arguments about these decisions by the district court are not clearly stated.

But even if we were to assume that he has preserved his arguments on appeal, they fail on the merits.

First, we are unpersuaded by Hunt’s arguments that the district court should have allowed him to file an amended complaint to add another party to the suit, which would have deprived the federal court of jurisdiction, and should have remanded the case to state court.

Federal courts have diversity-of-citizenship jurisdiction when the parties are citizens of different states and the amount in controversy exceeds $75,000.

28 U.S.C. § 1332(a)(1).

A corporation is a citizen of every state where it was incorporated and the one state in which it has its principal place of business.

Daimler AG v. Bauman, 571 U.S. 117, 133, 137 (2014); 28 U.S.C. § 1332(c)(1).

A defendant may remove any civil action brought in a state court to a federal district court that has original jurisdiction over the action.

28 U.S.C. § 1441(a).

The removing party bears the burden of proving that removal jurisdiction exists.

McGee, 719 F.3d at 1241.

Here, the district court did not err in denying Hunt’s motion to remand. As we’ve held in a previous appeal, his motion was based on his belated and fraudulent attempts to join Albertelli Law, in an effort to defeat the district court’s diversity jurisdiction.

See Hunt I, 684 F. App’x. at 942-44.

However, Hunt asserted federal

claims in his complaint, so the district court had jurisdiction in any event.

28 U.S.C. § 1441(a).

Accordingly, the district court correctly denied Hunt’s requests to remand the case and acted within its discretion to deny joinder.

Rigel Ships Agencies, Inc., 432 F.3d at 1291.

We also find no merit to Hunt’s claims that the district court should have transferred venue of his lawsuit.

A district court may transfer a civil action to any other district or division where it may have been brought “for the convenience of the parties and witnesses, and in the interest of justice.”

Robinson, 74 F.3d at 260 (quoting 28 U.S.C. § 1404(a)).

But in this case, the district court did not err because Hunt did not provide any cognizable reason for a transfer.

It appears that Hunt’s transfer request was based on his belief that case law in the United States District Court for the Middle District of Georgia would be more favorable to him – which is not a legitimate reason for transfer.

See 28 U.S.C. § 1404(a).

Similarly, we reject Hunt’s argument that the district court judge should have recused himself.

A judge must sua sponte recuse himself “in any proceeding in which his impartiality might reasonably be questioned” or “

[w]here he has a personal bias or prejudice concerning a party.”

28 U.S.C. § 455(a), (b)(1).

“The test is whether an objective, disinterested, lay observer fully informed of the facts underlying the grounds on which recusal was sought would entertain a significant doubt about the judge’s impartiality.”

Parker v. Connors Steel Co., 855 F.2d 1510, 1524 (11th Cir. 1988).

“Ordinarily, a judge’s rulings in the same or a related case may not serve as

the basis for a recusal motion.”

McWhorter v. City of Birmingham, 906 F.2d 674, 678 (11th Cir. 1990).

“The judge’s bias must be personal and extrajudicial; it must derive from something other than that which the judge learned by participating in the case.”

Id.

“The exception to this rule is when a judge’s remarks in a judicial context demonstrate such pervasive bias and prejudice that it constitutes bias against a party. Mere friction . . . however, is not enough to demonstrate pervasive bias.”

Thomas v. Tenneco Packaging Co., 293 F.3d 1306, 1329 (11th Cir. 2002) (quotation marks omitted).

As the record before us makes clear, no “objective, disinterested, lay observer fully informed of the facts underlying” these circumstances “would entertain a significant doubt about the judge’s impartiality.”

Parker, 855 F.2d at 1524.

Accordingly, the district court did not abuse its discretion in denying Hunt’s request for recusal or disqualification.

Nor do we find any merit to Hunt’s argument that the district court erred in dismissing the complaint against defendant Bray for lack of proper service.

When a federal court is considering the sufficiency of process after removal, it does so by looking to the state law governing process.

See Usatorres v. Marina Mercante Nicaraguenses, S.A., 768 F.2d 1285, 1286 n.1 (11th Cir. 1985).

Georgia law provides that service made “outside the state” of Georgia is to be done “in the same manner as service is made within the state.”

O.C.G.A. § 9-10-94.

Under Georgia law, service on natural persons is to be made “personally, or by leaving copies thereof at the defendant’s dwelling house or usual place of abode with some

person of suitable age and discretion then residing therein, or by delivering a copy of the summons and complaint to an agent authorized . . . to receive service of process.”

O.C.G.A. § 9-11-4(e)(7).

Notably, Hunt does not dispute these proposed findings set forth by the magistrate judge’s Report and Recommendation (“R&R”), that Hunt:

(1) mailed service to Bray;

and

(2) completed “corporate service” on Deutsche Bank, which Hunt asserted was also effective to serve Bray.

11th Cir. R. 3-1.

But, as the district court determined, Georgia law applied here and required personal service in these circumstances.

Albra, 490 F.3d at 829; O.C.G.A. § 9-11-4(e)(7).

Bray therefore was not properly served under Georgia law, and, for that reason, the district court did not err in dis- missing Hunt’s suit without prejudice as to Bray.

Finally, we find no error in the district court’s denial of injunctive relief and its dismissal of Hunt’s complaint against the two remaining defendants, Nationstar and Deutsche Bank.

A district court has the inherent authority to control its docket and ensure the prompt resolution of lawsuits, which includes the ability to dismiss a complaint on “shotgun” pleading grounds.

Shabanets, 878 F.3d at 1295.

We have described four types of “shotgun” com- plaints:

(1) those containing multiple counts where each count adopts all allegations of all preceding counts;

(2) those replete with conclusory, vague, and immaterial facts not obviously connected to any particular cause of action;

(3) those that do not separate each cause of action or claim for relief into different counts;

and

(4) those asserting multiple claims against multiple defendants without

specifying which of the defendants are responsible for which acts or omissions, or which of the defendants the claim is brought against.

Weiland v. Palm Beach Cnty. Sheriff’s Off., 792 F.3d 1313, 1321–23 (11th Cir. 2015).

“Shotgun” pleadings violate Rule 8, which requires “a short and plain statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), by failing to, in one degree or another, give the defendants adequate notice of the claims against them and the grounds upon which each claim rests.

Shabanets, 878 F.3d at 1294–96.

We generally require district courts to allow a litigant at least one chance to remedy any deficiencies before dismissing the complaint with prejudice, where a more carefully drafted complaint might state a claim.

See id.; Silberman v. Miami Dade Transit, 927 F.3d 1123, 1132 (11th Cir. 2019).

But it need not grant leave to amend the complaint when further amendment would be futile.

Silberman, 927 F.3d at 1133.

Under federal law, res judicata, or claim preclusion, bars a subsequent action if

“(1) the prior decision was rendered by a court of competent jurisdiction;

(2) there was a final judgment on the merits;

(3) the parties were identical in both suits;

and

(4) the prior and present causes of action are the same.”

Jang, 206 F.3d at 1148– 49 & n.1 (quotation marks omitted).

We have held that “if a case arises out of the same nucleus of operative facts, or is based upon the same factual predicate, as a former action, the two cases are really the same ‘claim’ or ‘cause of action’ for purposes of res judicata.”

Baloco v. Drummond Co., Inc., 767 F.3d 1229, 1247 (11th

Cir. 2014) (quotation marks omitted and alterations adopted).

“In addition, res judicata applies not only to the precise legal theory presented in the prior case, but to all legal theories and claims arising out of the nucleus of operative fact” that could have been raised in the prior case.

Id. (quotation marks omitted and alterations adopted).

Collateral estoppel, or issue preclusion, “refers to the effect of a judgment in foreclosing relitigation of a matter that has been litigated and decided.”

Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n.1 (1984).

Thus, “collateral estoppel is appropriate only when the identical issue has been fully litigated in a prior case.”

In re McWhorter, 887 F.2d 1564, 1567 (11th Cir. 1989) (quotation marks omitted).

“The party seeking to invoke collateral estoppel bears the burden of proving that the necessary elements have been satisfied.”

Id. at 1566.

“[C]hanges in the law after a final judgment [generally] do not prevent the application of res judicata and collateral estoppel, even though the grounds on which the decision was based [may be] subsequently overruled.”

Precision Air Parts, Inc. v. Avco Corp., 736 F.2d 1499, 1503 (11th Cir. 1984).

To safeguard investors in public companies and restore trust in the financial markets, Congress enacted the Sarbanes-Oxley Act of 2002, 116 Stat. 745.

See S. Rep. No. 107-146, pp. 2–11 (2002).

The Act contains several provisions, including a whistleblower protection provision which prohibits a publicly traded company or its officers from discharging an “employee” for providing information to a supervisory authority about conduct that the employee

“reasonably believes” constitutes a violation of federal laws against mail fraud, wire fraud, bank fraud, securities fraud, any SEC rule or regulation, or any provision of federal law relating to fraud against shareholders.

See 18 U.S.C. § 1514A(a)(1).

The Dodd-Frank Act whistleblower provision provides protection to individuals who provide “information relating to a violation of the securities laws to the” Securities and Exchange Commission (“SEC”).

15 U.S.C. § 78u-6(a)(6).

Thus, “[t]o sue under Dodd-Frank’s anti-retaliation provision, a person must first provide information relating to a violation of the securities laws to the [SEC].”

Dig. Realty Trust, Inc. v. Somers, 138 S. Ct. 767, 772–73 (2018) (quotation marks omitted and alterations adopted).

In his brief on appeal, Hunt does not expressly address the lower court’s “shotgun” pleading determination, and, as a result, the district court’s dismissal of the complaint is due to be affirmed.

Sapuppo, 739 F.3d at 681–82.

But in any event, the district court did not err in finding that his complaint was a “shotgun” pleading.

As the record reflects, the complaint consisted of three numbered paragraphs that spanned paragraphs and pages; failed to isolate claims by defendants;

and largely failed to discuss any facts — thereby falling into several of our identified categories of prohibited “shotgun” pleadings.

Weiland, 792 F.3d at 1321-23.

The district court also was correct that amendment would have been futile.

For one, res judicata and collateral estoppel barred Hunt’s claims for breach of contract and fraud, since Hunt sued the same parties for the same alleged breach of contract and fraud in several prior cases.

See, e.g., Hunt I, 684 F. App’x at 944.4

These decisions were final judgments and were “rendered by a court of competent jurisdiction,” “on the merits,” against the same parties, and “the prior and present causes of action [were] the same.”

Jang, 206 F.3d at 1149.

Moreover, even if some of Hunt’s claims had not been explicitly presented in any of his prior cases, they would still be barred by res judicata because every claim arose from the same facts as each of his prior cases, and he could have raised them in any of the prior proceedings.

Baloco, 767 F.3d at 1247.

Also, despite Hunt’s arguments, there have been no “changes in the law” that would “prevent the application of res judicata and collateral estoppel” in this case.

Precision Air Parts, 736 F.2d at 1503.

In addition, Hunt’s claims under the Sarbanes-Oxley Act and Dodd-Frank Act were futile because they fail to state a claim upon which relief could be granted.

As the record reflects, Hunt did not allege that he was an “employee” under the Sarbanes-Oxley Act, nor that he “provide[d] information relating to a violation of the securities laws to the [SEC]” as required under the Dodd-Frank Act.

4 To the extent that Hunt challenges the district court’s decisions under Fed. R. Civ. P. 60(b), we conclude that he has not identified any “extraordinary circumstances” entitling him to relief, and the district court did not abuse its discretion in this respect.

Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1316 (11th Cir. 2000) (quotation marks omitted).

Somers, 138 S. Ct. at 772–74.

Accordingly, Hunt did not state a cause of action under these statutes, and we affirm.

AFFIRMED.5

5 All of Hunt’s pending motions, which he filed after we imposed a filing restriction on him, are DENIED to the extent they request any relief.

For their part, Nationstar and Deutsche Bank have filed renewed motions for sanctions, requesting monetary sanctions against Hunt for his numerous motions before this Court under 11th Cir. R. 27-4.

Hunt is pro se and we DENY the motions for sanctions at this time.

See Woods v. I.R.S., 3 F.3d 403, 404 (11th Cir. 1993)

(“There can be no doubt that this is a frivolous appeal and we would not hesitate to order sanctions if appellant had been represented by counsel. However, since this suit was filed pro se, we conclude that sanctions would be inappropriate.”).

Although we are reluctant to impose sanctions on pro se appellants, we warn Hunt that our Court has imposed sanctions in circumstances like these, even for pro se litigants, and he is strongly cautioned against bringing any further frivolous motions or claims.

See Ricket v. United States, 773 F.2d 1214, 1216 (11th Cir. 1985)

(imposing sanctions on a pro se appellant who had been warned by the district court that the issues on appeal were frivolous).

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Continue Reading

Bankers

When the World’s Bankers and Governments Are Behavin’ Like Thieves and Criminals, It Really Is Time to Object, Vociferously

The appalling greed and corruption is playing out live since 2008 and without any accountability to the people. One Percenters are completely immune and laughing At You.

Published

on

Ukrainian who made appearance in Trump impeachment saga accused by U.S. of stealing, laundering billions

AUG 6, 2020 | REPUBLISHED BY LIT: MAY 17, 2022

The Justice Department on Thursday accused a Ukrainian oligarch who has been considered an ally of Ukraine’s president of stealing billions of dollars from a bank he once owned, then using a vast array of companies to launder that money in the United States and all over the world.

In a civil forfeiture complaint seeking to seize commercial properties in Kentucky and Texas, the Justice Department alleged that Ihor Kolomoisky and his business partner, Gennadiy Boholiubov, stole so much from PrivatBank that Ukraine’s national bank had to give the institution a $5.5 billion bailout “to stave off economic crisis for the whole country.”

Kolomoisky, one of Ukraine’s richest men, has ties to Ukrainian President Volodymyr Zelensky, and he played a role in the events that led to President Trump’s impeachment last year. He made a fortune in the rough-and-tumble capitalism that swept Ukraine after the Soviet Union’s collapse, amassing assets including airlines and financial institutions, and created a larger-than-life image for himself, going by the nickname “Benya,” and keeping a shark aquarium in his office.

Kolomoisky and Boholiubov were the two major owners of PrivatBank before it was nationalized in response to the fraud, the Justice Department said, and the men basically used it as a personal account to build a business empire in the United States. They requested money from PrivatBank — which they always received because they were owners — then moved the funds through a network of companies to “thoroughly disguise their nature, source, ownership, and control,” the Justice Department alleged.

Experts have expressed increasing concern that U.S. real estate — including factories and facilities important to American industry — has become a magnet for foreign money, including proceeds of criminal activities abroad. Among Kolomoisky’s and Boholiubov’s purchases were more than 5 million square feet of commercial real estate in Ohio; steel plants in Kentucky, West Virginia and Michigan; a cellphone manufacturing plant in Illinois; and commercial real estate in Texas, the Justice Department alleged. The forfeiture complaints sought to seize a roughly 19.5-acre office park in Dallas and the PNC Plaza building in Louisville.

Michael J. Sullivan, a lawyer for Kolomoisky, said in an email: “Mr. Kolomoisky emphatically denies the allegations in the complaints filed by the Department of Justice.” The allegations, which are not criminal charges, are similar to those in a lawsuit filed by the bank in a Delaware court. A lawyer for Boholiubov did not reply to an email seeking comment.

In a statement written in Russian, Kolomoisky said all the money used to purchase the U.S. properties was his own, received through a deal made with a mining company in 2007 and 2008 and from other businesses that banked with Privatbank.

Kolomoisky also has long been facing a criminal probe by the U.S. attorney’s office in Cleveland for possible money laundering. As a part of that case, the FBI raided the office of Optima Management Group in downtown Cleveland on Tuesday, as well as an Optima office in the Southeast Financial Center building in Miami.

In court documents, the Justice Department alleged Thursday that two Miami-based business associates of Kolomoisky and Boholiubov’s — Mordechai Korf and Uriel Laber — helped acquire and manage the oligarchs’ holdings in the United States, which often bear some version of the name “Optima.” Optima Ventures at one point became the “largest holder of commercial real estate in Cleveland,” using stolen funds to buy major downtown office buildings and a hotel, the Justice Department alleged.

Last year, Marc Kasowitz, a New York lawyer who also represents Trump, signed on to represent Kolomoisky and Boholiubov in the Delaware case. He did not immediately respond to a request for comment Thursday.

Under Ukraine’s last president, Petro Poroshenko, the government nationalized Privatbank, alleging that Kolomoisky and one of his business partners had defrauded the bank of billions of dollars. Kolomoisky denied those charges but decamped from Kyiv to Israel, where he also holds citizenship. He retained political power in Ukraine through his business holdings, which include a major Ukrainian television station.

Kolomoisky is seen as an ally to Zelensky, who was an actor before his election, starring in a comedy show that aired on Kolomoisky’s network. Zelensky’s election was widely seen as a boon for Kolomoisky, particularly after the new president made Kolomoisky’s personal lawyer the head of his administration. Some in the United States were suspicious of Zelensky’s ties to the mogul, thinking the connection ran counter to Zelensky’s promises to pursue an anti-corruption and reformist agenda.

Since then, however, Zelensky has not supported returning control of Privatbank to the oligarch, and he fired that top aide. Still, Kolomoisky has been comfortable enough with Ukraine’s current leadership that he returned from a self-imposed exile in Tel Aviv and is again based in Kyiv, where he maintains connections to members of the presidential administration.

In spring 2019, when Trump’s personal attorney Rudolph W. Giuliani embarked on a mission to press Zelensky to assist Trump by opening politically charged investigations into former vice president Joe Biden and his son, Giuliani’s associates met with Kolomoisky to request that Giuliani get a sit-down with the rising Ukrainian politician.

Giuliani associates Lev Parnas and Igor Fruman met with Kolomoisky in April 2019 in Tel Aviv, and, by all accounts, the meeting did not go well.

Giuliani associates claimed to have sway with both foreign billionaires and Trump administration officials

After the meeting, the two ­Florida-based business executives accused Kolomoisky of physically threatening them and filed a lawsuit against him in Ukraine. Parnas and Fruman, who assisted Giuliani in his Ukraine project, were charged in the United States with campaign finance violations last year. They have denied any wrongdoing.

Giuliani has said he provided legal advice to Parnas and Fruman in their fight against Kolomoisky. He also tweeted repeatedly about his displeasure with Kolomoisky in May 2019 just as he was pressuring Zelensky to assist Trump with a Biden investigation. At one point, Giuliani complained that Zelensky was being advised by “Kolomoisky’s representatives and enemies of President Trump.”

Meanwhile, a lawyer for Kolomoisky has told The Post that during the Tel Aviv meeting, Parnas and Fruman claimed that they could get top U.S. officials, including Vice President Pence and then-Energy Secretary Rick Perry, to travel to Ukraine around the time of Zelensky’s May 2019 inauguration — if Kolomoisky paid them several hundred thousand dollars. Kolomoisky did not pay the money, instead throwing the two men out of his office, his lawyer has said.

The attorney, Bruce Marks, told The Post that Kolomoisky had predicted to friends at the time: “This is going to end up in a bad scandal.”

Ukraine arrests ex-PrivatBank official as U.S. prioritizes criminal probe of former owners

FEB 26, 2021 | REPUBLISHED BY LIT: MAY 17, 2022

The National Anticorruption Bureau of Ukraine (NABU) has arrested the former deputy chairman of a Ukrainian bank at the heart of an FBI criminal investigation as he attempted to fly abroad in the latest sign Kyiv is taking steps to tackle corruption and lawlessness.

Volodymyr Yatsenko was detained at Boryspil Airport in Kyiv on February 22 after investigators forced the pilot of the private jet he was traveling on to land, the bureau announced in a tweet.

Mr. Yatsenko, who was on his way to Vienna after reportedly being tipped off about his arrest, was charged with the embezzlement of funds at PrivatBank, once the nation’s largest lender.

More arrests of management could follow, the Kyiv Post reported.

The FBI is investigating the two owners of PrivatBank – Ihor Kolomoisky and Gennadiy Boholiubov – in connection with accusations that more than $5 billion was stolen from the lender through fraudulent loans and that the money was then laundered.

In a move that made international headlines, Ukraine was forced to nationalize PrivatBank in 2016 and pump more than $5 billion into the lender in order to stave off its bankruptcy.

The U.S. accuses Messrs. Kolomoisky and Boholiubov of using some of the laundered proceeds to buy assets in the U. S., ranging from metals companies to commercial properties, with the help of two American associates based in Miami.

The Justice Department last year filed three civil forfeiture lawsuits in a Florida court against a U.S. real estate holding controlled by the two tycoons and run by the associates.

However, a judge agreed last week with a Justice Department request to temporarily suspend the civil forfeiture proceedings amid concerns it could harm the criminal investigation against the Ukrainian businessmen and their two American partners.

“Allowing [the tycoons] to conduct discovery would expose the identities of witnesses who have provided and will provide information and testimony in both the civil forfeiture actions and the criminal investigation,” the Justice Department said in its February 19 filing.

“If that occurs, the confidential informants may cease providing information, and, to the extent they are not reachable through process in the United States, they may make themselves unavailable for future testimony. Potential sources of information who have not yet been interviewed by the government would likely be deterred from coming forward” the Justice Department said in its filing.

The tycoons deny the accusations and neither Ukraine nor the United States has filed criminal charges against them.

Mr. Kolomoisky is one of the most influential tycoons in Ukraine and the U.S. government’s investigation into his activities is being closely followed.

The billionaire owns key media, energy, and metals assets and is believed to have outsized influence over the administration of President Volodymyr Zelenskyy.

Mr. Kolomoisky’s TV stations backed Mr. Zelenskyy’s successful presidential bid.

The U.S., one of Ukraine’s biggest backers financially and militarily, has repeatedly expressed concern about oligarchic influence over the nation’s government and economy.

Washington has also complained about the lack of investigations into corrupt tycoons and officials and has tied some aid to improvements in judicial reform.

The arrest of Mr. Yatsenko, who was flying on a private plane owned by Mr. Kolomoisky, is the latest in a series of moves by Kyiv to tackle cases that resonate with the U.S.

Mr. Zelenskyy last week approved sanctions on Viktor Medvedchuk, a tycoon and lawmaker with close ties to Russian President Vladimir Putin. Mr. Medvedchuk was sanctioned by the U.S. in 2014 for undermining democracy in Ukraine.

On February 2, Mr. Zelenskyy sanctioned three television stations believed to be owned by Mr. Medvedchuk. In late January he announced an investigation into Ukrainian individuals accused of interfering in the 2020 U.S. presidential elections.

The moves come after President Joe Biden was inaugurated on January 20. Mr. Biden knows Ukraine well, having served as the point man to Kyiv while serving as vice president from 2009 to 2017.

Political analysts say Mr. Zelenskyy is seeking to win over the Biden administration after a difficult relationship with the Trump administration caused by the 2019 impeachment investigation.

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Continue Reading

Most Read

Copyright © 2022 LawsInFlorida.com is an online brand name which is wholly owned by Blogger Inc., a nonprofit 501(c)(3) registered in Delaware | Caricatures by DonkeyHotey