United States District Court, E.D. New York
MARGARITA DELGADO, WILLIAM SHEPPARD, GERALDINE MAHOOD, KEVIN CHOWNING, LYA CHOWNING, PAUL EMMERT, CAROLYN TOTH, BRIAN RAFACZ, JENNIFER HENDRICKS, CYNTHIA BENIWAL, KIMBERLY KAYES, JUSTIN WISNEWSKI, LAURIE CHEAMITRU, DALE ZIMMER, MICHAEL BENHAMU, MEGHAN FOX, DAN WILKINSON, KENT COLLIER, THERESA MCCULLOUGH, BEN ELLIOTT, JASON ABT, CAMIPELOZA, and TERRY OLIVER, Individually and on Behalf of All Others Similarly Situated, Plaintiffs,
OCWEN LOAN SERVICING, LLC, CROSS COUNTRY HOME SERVICES, INC., SANDRA FINN, and "JOHN DOES 1-10, " Defendants.
MEMORANDUM & ORDER
NICHOLAS G. GARAUFIS, United States District Judge.
bring this putative class action against Defendants Ocwen
Loan Servicing, LLC ("Ocwen"), Cross Country Home
Services, Inc. ("Cross Country"), Cross
Country's President Sandra Finn ("Finn"), and
John Does 1-10 (collectively, "Defendants"). (4th
Am. Compl. ("FAC") (Dkt. 293).) Plaintiffs claim
that Defendants engaged in a deceptive check solicitation
scheme that led Plaintiffs and other consumers unknowingly to
enroll in, and pay monthly fees for, Cross Country's
the court is Defendants' motion for partial dismissal of
the claims asserted in Plaintiffs' Fourth Amended
Complaint (the "Motion"). (Defs. Mot. to Dismiss
and Strike Class Allegations ("Mot.") (Dkt. 324).)
For the reasons stated below, the Motion is GRANTED IN PART
and DENIED IN PART.
the court has previously detailed Plaintiffs' essential
allegations as they appeared in prior iterations of the
Complaint (see Sept. 23, 2014, Mem. & Order (Dkt. 42)),
it reviews the allegations as presented in the challenged
pleading. Unless otherwise indicated, the following factual
allegations are drawn from the Fourth Amended Complaint (the
Ocwen is "the largest servicer of subprime mortgage
loans in the country" and "the nation's largest
non-bank mortgage servicer." (FAC ¶ 55.) In that
role, Ocwen "collect[s] mortgage payments and handle[s]
escrow accounts, delinquencies, loan modifications, and
foreclosures" on behalf of the mortgage holders
(id.), and services more than 600, 000 residential
home loans Id. ¶ 44). The plaintiffs in this
case are customers of Ocwen who reside in New York,
California, Alabama, Arizona, Colorado, Georgia, Indiana,
Maryland, Michigan, New Jersey, New Mexico, Ohio,
Pennsylvania, Tennessee, Texas, Virginia, and Washington.
(Id. ¶¶ 18-43.)
Cross Country "market[s] and sell[s] appliance warranty
plans, homeowner repair/referral plans, and related
maintenance plans, " and purports to be one of the
largest providers of such plans in the United States.
(Id. ¶ 58.) At all relevant times, Finn was the
president of Cross Country. (Id. ¶ 46.) Cross
Country operates subsidiaries and affiliates under different
names in various states. (Id. ¶¶ 48, 50.)
Cross Country operates through these subsidiaries and
affiliates to enroll customers in plans and policies provided
by Cross Country. (Id. ¶ 47.) Plaintiffs allege
that these subsidiaries and affiliate companies are
controlled and directed by Cross Country and
Finn. (Id. ¶ 49.)
The Alleged Scheme
allege that Cross Country markets its plans and policies in
part through lists of customers obtained from mortgage
servicing companies, including Ocwen. (Id.
¶¶ 59-60.) Cross Country approaches these companies
about providing their customers with Cross Country's
plans as "add-on products" for the mortgage-related
services those customers are already receiving. (Id.
¶ 59.) At an unspecified point prior to the events
described in the Complaint, Cross Country and Ocwen entered
into such an agreement, and Ocwen provided Cross Country with
a list of its customers. (Id. ¶ 60.)
gravamen of the Complaint is that Cross Country uses
misleading and fraudulent mailings to Ocwen customers in
order to trick them into enrolling in Cross Country-provided
plans. According to Plaintiffs, Cross Country sends Ocwen
customers mailings that are addressed to the individual
customer, display the Ocwen logo, and list Ocwen as a return
addressee on the outside of the envelope. (Id.
¶¶ 62, 68.) The outside of the envelope is also
prominently marked with a label that says "CHECK
ENCLOSED." (Id. ¶¶ 62, 66.)
The envelope does not state that it contains any
"solicitation" or "marketing material."
(Id. ¶ 65.)
within the envelopes are checks for a small amount (examples
provided in the Complaint show amounts of $2.50 and $3.50).
(Id. ¶ 69.) The fronts of the checks state in
small print that they are from "CCHS" and provide
an address similar to that of Ocwen. (Id. ¶
70.) The checks themselves are valid and may be deposited.
(Id. ¶ 71.) However, the checks state in small
print that "[b]y cashing or depositing this check, you
are purchasing the annual Systems MD Gold Home Warranty"
or a similarly named plan. (Id. ¶¶ 69,
71.) The backs of the checks contain signature lines for the
recipient, which read simply "[s]ignature of payee
required for processing." (Id. ¶ 76.)
Above these lines, the checks contain a statement, again in
small print, one iteration of which reads:
By cashing or depositing this check, I understand that I am
purchasing an annual Systems MD Gold Home Warranty Plan and
understand that $44.95 per month will automatically be
charged to my Ocwen Loan Servicing mortgage payment unless I
cancel my Plan by calling toll free 1.800.474.4047 within 30
days from the date this check is cashed or deposited. I
understand that this is an annually renewable plan and the
monthly cost of $44.95 will continue to be collected along
with my monthly mortgage payment until I cancel the plan.
(Id. ¶ 78.)
contained within the envelopes is a "solicitation
pitch" that "promote[s] the savings and benefits
customers [would] supposedly receive by cashing the
checks." (Id. ¶ 80.) Plaintiffs allege
that these solicitations do not "disclose the hidden
cost of accepting the checks, or the way to avoid the hidden
costs, " and instead "proclaim that the
checks' purpose is to 'pay you' and create
'savings' for customers." (Id.) In some
cases, these solicitations are attached to the checks along a
perforated line and direct the recipient by name to
"Sign and Deposit the Enclosed Check." Id.
¶ 81.) In other cases, the solicitations contain
language encouraging the recipient to "cash or deposit
your check to get $2.50 instantly and activate the benefits
of the Cross Country plan. (Id. ¶ 84.)
Plaintiffs contend that these solicitations are
"presented upside down, have confusing and barely
legible tiny footnotes which contain or refer to various
disclaimers and limitations, and are designed to be
overlooked." (Id. ¶ 85.) Moreover, in some
cases, the "terms, conditions, and limitations"
referenced in the solicitations are not contained in the same
mailing, but were promised in separate "service
agreements" or "membership materials" that
never in fact arrived. (Id. ¶ 86.)
allege that the nature of these mailings is such that a
reasonable customer would assume that both the mailing and
the check were sent by Ocwen and that they mislead
Ocwen's customers "into believing that they are
receiving some kind of refund or rebate from their mortgage
company." Id. ¶ 70.) Instead, by signing
and depositing the checks, Ocwen's customers are enrolled
into a Cross Country plan that causes them to incur a
recurring monthly fee. Id. ¶ 78.)
those cases in which check recipients cash or deposit the
checks and are thereby enrolled in a Cross Country-provided
plan, Plaintiffs allege that the charges were intentionally
obscured to prevent detection by the "customer."
(Id. ¶ 88.) Specifically, Plaintiffs contend
that subsequent mortgage billing statements by Ocwen-who
collects the payments for Cross Country (Id. ¶
89)-arrive after the 30-day cancellation window and omit any
mention that Ocwen splits receipts with Cross Country, that
customers might be charged more than the amount listed on the
initial check, or that the charges are attributable to Cross
Country (Id. ¶¶ 88 (i), (ii), (iv), 91).
Ocwen also allegedly "mask[s] the new charge under vague
names, " including the payments as line items on
mortgage and escrow statements labeled as, inter
alia, "optional insurance, " "Systems MD
Gold, " "Membership, " "Referral
Assistant, " and "Optional Products."
Complaint alleges that Defendants were aware that Ocwen
customers enrolled in Cross Country memberships did not use
those plans and, in many cases, complained about being
enrolled. (Id. ¶ 95.) In support of this claim,
Plaintiffs provide excerpts from consumer protection websites
in which Ocwen customers described being billed by Cross
Country for unwanted plans. (Id. ¶ 96.)
to Plaintiffs, Defendants have mailed "hundreds of
thousands, if not millions, of solicitation checks in
Ocwen's name." (Id. ¶ 79.) As a result
of these mailings, the Complaint alleges that more than 55,
000 homeowners were "victimized by the scheme" and
that they made payments totaling more than $35 million.
(Id. ¶ 1.)
addition to their factual allegations about Defendants'
practices in general, the Complaint details how, between 2011
and 2014, the named Plaintiffs entered into Cross Country
plans and made payments through their Ocwen-provided mortgage
billing and escrow statements. (Id. ¶¶
98-237.) Each of these allegations follows a similar pattern:
Plaintiffs received a mailing in an envelope marked
"Ocwen, " deposited the enclosed check, and,
several months later, realized they had been paying for a
Cross Country plan of which they were previously unaware.
(Id. ¶¶ 98-110.) In some instances, the
Complaint also details particular Plaintiffs' efforts to
extricate themselves from those plans. (See, e.g.,
Id. ¶¶ 107-110.)
on the claims described above, Plaintiffs bring class actions
for both a nationwide class and classes corresponding to each
of the named Plaintiffs' states of
residence. (Id. ¶¶ 239-241.)
Plaintiffs allege that the conduct of which they complain was
part of a "uniform and standardized" course of
conduct by Defendants that "did not meaningfully
differentiate among individual Class members."
(Id. ¶ 238.)
respect to the putative nationwide class, Plaintiffs define
the class as consisting of all Ocwen customers who (1)
enrolled in a Cross Country plan through a check solicitation
during the statutory period; (2) paid a plan premium; and (3)
never placed a claim under the plan. (Id. ¶
240.) Plaintiffs define the putative state classes in much
the same way, adding in the additional limitation that the
class extends only to Ocwen customers in each of the states
represented in this action. (Id. ¶
argue that "[q]uestions of law and fact are common to
the Class and predominate over any questions affecting only
individual class members, " specifically pointing to the
a. Whether Defendants participated in and pursued the common
Check Solicitation Scheme;
b. Whether Defendants' scheme is likely to mislead
c. Whether Defendants used the mails and/or wires through
interstate commerce in a Racketeering Enterprise to
accomplish their Check Solicitation Scheme;
d. Whether Defendants' conduct constitutes unfair,
unlawful and/or fraudulent practices prohibited by the laws
of New York and California;
e. Whether Defendant Ocwen breached its fiduciary duty to
Plaintiffs and the Class;
f. Whether Defendants were unjustly enriched as a result of
g. Whether, and to what extent, Defendants are liable to
Plaintiffs and the Class for damages; and
h. Whether, and to what extent, equitable relief should be
imposed on Defendants to prevent such conduct in the future.
(Id. ¶ 247.)
filed their initial complaint in this court on August 6,
2013. (Compl. (Dkt. 1).) The operative complaint is the
Fourth Amended Complaint, filed on April 14, 2017. (FAC.)
From the foregoing allegations, Plaintiffs bring putative
class claims against all Defendants for violations of the
Racketeer Influenced and Corrupt Organizations Act
("RICO"), 18 U.S.C. § 1961, based on predicate
acts of mail and wire fraud, 18 U.S.C. §§ 1341 and
1343, and RICO conspiracy in violation of 18 U.S.C. §
1962. (Id. ¶¶ 251-81.) Plaintiffs also
bring the following state-law-based claims against all
• Unjust enrichment under the laws of New York, Alabama,
Arizona, Colorado, Georgia, Indiana, Maryland, Michigan, New
Mexico, Ohio, Pennsylvania, Tennessee, Texas, Virginia, and
Washington. (Id. ¶¶ 282-91).
• Breach of fiduciary duty under the laws of Alabama,
Arizona, California, Georgia, Indiana, Michigan, New Jersey,
New Mexico, Ohio, Virginia, and Washington. (Id.
• Violation of New York General Business Law § 349.
(Id. ¶¶ 301-09.)
• Violation of the California Unfair Competition Law,
Cal. Bus. & Prof. Code §§ 17200 et
seq. (Id. ¶¶ 310-20.)
• Violation of the Alabama Deceptive Trade Practices
Act, Ala. Code §§ 8-19-1 et seq. (Id.
• Violation of the Arizona Consumer Fraud Act, Ariz.
Rev. Stat. Ann. § § 44-1521 et seq.
• Violation of the Colorado Consumer Protection Act,
Colo. Rev. Stat. Ann. §§ 6-1-101 et seq.
(Id. ¶¶ 342-51.)
• Violation of the Georgia Fair Business Practices Act,
Ga. Code Ann. §§ 101-1-390 et seq.
Id. ¶¶ 352-60.)
• Violation of the Georgia Uniform Deceptive Trade
Practices Act, Ga. Code Ann. §§10-1-370 et
seq. (Id. ¶¶361-67.)
• Violation of the Indiana Deceptive Consumer Sales Act,
Ind. Code Ann. §§ 24-5-0.5 et seq.
• Violation of the Maryland Consumer Protection Act, Md.
Code Com. Law §§ 13-101 et seq. (Id.
• Violation of the Michigan Consumer Protection Act,
Mich. Comp. Laws Ann. §§ 445.901 et seq.
• Violation of the New Jersey Consumer Fraud Act, N.J.
Stat. Ann. §§ 56:8-1 et seq. (Id.
• Violation of the New Jersey Truth-In Consumer
Contract, Warranty, and Notice Act, NJ. Stat. Ann.
§§ 56:12-14 et seq. ...