Rhodes v. Ocwen Loan Servicing, LLC

ORDER AND MEMORANDUM OF DECISION

Background

Plaintiff, Lynn A. Rhodes (“Rhodes”), filed suit against Ocwen Loan Servicing LLC (“Ocwen”), Option One Mortgage Corp. (“Option One”), Sand Canyon Corporation (“Sand Canyon”) and U.S. Bank National Association, as Trustee For Structured Asset Securities Corporation, Mortgage Pass-Through Certificates, Series 2006-BC6 (“U.S. Bank”)1 in Worcester Superior Court alleging claims for unfair and deceptive business practices under the Massachusetts Consumer Protection Act, Mass.Gen.L. ch. 93A (“Chapter 93A”) and violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. Rhodes also alleges that U.S. Bank violated the court order issued in Comon-wealth v. H & R Block, Inc., 2008 WL 5970550, 2008 LEXIS 427 (Mass.Super.Ct. Nov. 24, 2008) (“II & R Block ”), which, she alleges, prohibited it from foreclosing on her property, and that it violated several licensing regulations by instituting foreclosure proceedings without having been previously licensed by the Nationwide Mortgage Licensing System (“NMLS”) or the Commonwealth of Massachusetts. Rhodes seeks injunctive relief and monetary damages.2

This Order and Memorandum of Decision addresses Defendants’ Motion To Dismiss Plaintiffs Complaint (Docket No. 15); the Motion To Correct Error In Name Of Defendants (Docket No. 25) filed by Rhodes; and (3) the Motion To Amend Complaint (Docket No. 27) filed by Rhodes. I have allowed the Motion To Correct Error In Name Of Defendants (Docket No. 25). See note 1, supra. For the following reasons, Defendants’ motion to dismiss the Complaint, is granted and Plaintiffs motion to amend her complaint is denied.

Discussion

The Motion To Dismiss

Standard Of Review

On a Rule 12(b)(6) motion to dismiss, the Court “must assume the truth of all well-plead[ed] facts and give plaintiff the benefit of all reasonable inferences therefrom.” Ruiz v. Bally Total Fitness Holding Corp., 496 F.3d 1, 5 (1st Cir.2007) (citing Rogan v. Menino, 175 F.3d 75, 77 (1st Cir.1999)). To survive a motion to dismiss, the plain*140tiff must state a claim that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). That is, “[fjactual allegations must be enough to raise a right to relief above the speculative level, ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. at 555, 127 S.Ct. 1955 (internal citations omitted). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955). Dismissal is appropriate if plaintiffs well-pleaded facts do not “possess enough heft to show that plaintiff is entitled to relief.” Ruiz Rivera v. Pfizer Pharm., LLC, 521 F.3d 76, 84 (1st Cir. 2008) (internal quotations and original alterations omitted). “The relevant inquiry focuses on the reasonableness of the inference of liability that the plaintiff is asking the court to draw from the facts alleged in the complaint.” Ocasio-Hernandez v. Fortuño-Burset, 640 F.3d 1, 13 (1st Cir. 2011).

The Motion to Dismiss, Which is Unopposed, is Granted

Defendants have filed a motion to dismiss Rhodes’s complaint for failure to state a claim. More specifically, they assert that Rhodes has failed to allege several material elements of her FDCPA claim and therefore, has failed to establish she is entitled to relief. As to her Chapter 93A claim, they assert it should be dismissed because she has failed to serve them with the statutorily required demand letter pri- or to bringing this action. Defendants assert that Rhodes’s claim that U.S. Bank violated the H & R Block order must be dismissed because she has failed to allege sufficient facts that would establish that her mortgage/loan came within the court’s order and/or that U.S. Bank failed to comply with the procedural requirements set forth in that order prior to instituting a foreclosure action against her property. Finally, Defendants assert that there is no registration or licensing requirement for U.S. Bank to commence foreclosure proceedings in Massachusetts and therefore, her claim for failure to register or have the appropriate license must fail. Plaintiff has not filed an opposition to the motion to dismiss and did not provide any substantive argument against the motion at the hearing. Therefore, Defendants’ motion to dismiss is allowed.3

The Motion To Amend the Complaint Standard Of Review

Under this Court’s rules of procedure, more specifically, Fed.R.Civ.P. 15(a), consent to file an amended pleading is to be “freely given when justice so requires.” Id. “This liberal amendment policy applies unless the plaintiff exhibited bad faith, undue delay, the amendment would work un*141due prejudice on the opposing party, or be futile.” Weinberg v. Grand Circle Travel, LCC, 891 F.Supp.2d 228, 236 (D.Mass. 2012). Rhodes has not unduly delayed her motion to amend (it was filed approximately one month after Defendants filed their motion to dismiss4), and there are no allegations of bad faith or undue prejudice. Thus, the only issue before the Court is whether allowance of the motion to amend the complaint would be futile.

As noted, Plaintiff did not file a written opposition to the motion to dismiss. She also provided no written legal argument in support of her motion to amend the complaint. In fact, the sum total of her reasons for allowing the motion to amend asserted in her written submissions are stated in one sentence: “AS GROUNDS THEREFORE, Ms. Rhodes states that since filing the initial complaint, new facts about Defendants’ conduct have emerged, and Ms. Rhodes states that justice requires this Court allow the Motion To Amend.” Motion To Amend Complaint In her reply brief to Defendants’ opposition to her motion to amend, Plaintiff addresses some but not all of the arguments concerning Defendants’ contention that allowing her to amend her Complaint would be futile. See Pl., Lynne A. Rhodes Reply to Defs’ Opp. To Mot. To Amend Complaint (Docket No. 37). With this background in mind, I will address the viability of each of the claims which Plaintiff asserts in her proposed amended complaint.

Whether Plaintiff’s Amended Complaint States a Claim for Violation of the FDPCA

In their motion to dismiss, Defendants alleged that Rhodes’s FDPCA claim fails because she did not allege all of the essential elements of such a claim, that is, she failed to allege that either Defendant is a “debt collector,” that she is a “consumer,” or that any Defendant sought collection of a “debt” within the meaning of the statute. Defendants assert that her efforts to amend her claim fare no better because she still fails to assert that either Defendant is a “debt collector,” or that they impermissibly sought collection of a “debt.” Rhodes submissions do not address the alleged shortcomings in her FDPCA claim and for this reason alone, her motion to amend is denied. Nevertheless, I will address whether her proposed amended complaint states a claim for violation of the FDCPA.

“A viable claim for violation of the FDCPA requires that a plaintiff establish three elements: ‘(1) that she was the object of collection activity arising from consumer debt, (2) defendants are debt collectors as defined by the FDCPA, and (3) defendants engaged in an act or omission prohibited by the FDCPA.’ Under the FDCPA, a debt is defined as ‘any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.’ The First Circuit has held that, although ‘the FDCPA’s definition of debt is broad,’ it ‘requires at least the existence or alleged existence of an obligation to pay money’ and ‘does not broadly forbid practices in connection with all payments of money.’ ” O’Connor v. Nantucket Bank, 992 F.Supp.2d 24, 30-31 (D.Mass.2014) (internal citations and citations to *142quoted authorities omitted). Additionally, “ ‘[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt,’ including ‘[t]he false representation of ... the character, amount, or legal status of any debt’. Further, ‘[a] debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.’ ” Id., at 31 (internal citations and citations to quoted authority omitted). However, “[t]he restrictions of the FDCPA only apply to those defendants who meet the definition of ‘debt collector.’ Under the statute, a debt collector is ‘any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.’ ” Id. “Where a Defendant is established as a debt collector and is alleged to have engaged in an act or omission prohibited by the FDCPA, all that remains is for the plaintiff to show ‘she was the object of collection activity arising from consumer debt.’ ” Id.

I agree with the Defendants that Plaintiffs proposed amended claim for violation of the FDPCA fails to allege all of the essential elements of such a claim. More specifically, she fails to allege facts which would establish that the Defendants are “debt collectors” or that she was the object of collection activity arising from consumer debt. Under the circumstances, I find that her proposed amended complaint fails to assert a viable claim under the FDCPA.

Whether Plaintiff’s Amended Complaint States a Claim for Violation of Chapter 93A

Defendants assert that Rhodes’s proposed amended complaint fails to state a claim under Chapter 93A because: (1) she failed to send the Defendants a demand letter (and failed to allege that she did so); (2) her Chapter 93A claims are substantively deficient as they are derivative of her flawed FDPCA claim; and (3) U.S. Bank is not engaged in trade or commerce for purposes of establishing liability under Chapter 93A. Rhodes does not address Defendants’ arguments, rather she simply sets forth the general law regarding liability under Chapter 93A for holding a defendant liable for engaging in unfair methods of competition or deceptive acts or practices. At the hearing, she indicated that a demand letter was not necessary because she is suing under Section 11 of Chapter 93A, not Section 9.

To prevail on a Chapter 93A claim, a plaintiff must show that a defendant engaged in “[ujnfair methods of competition and unfair or deceptive acts or practices” during the course of a business transaction. Mass. Gen. Laws ch. 93A, § 2(a). “A plaintiff under § 9 is, ‘[a] ny person, other than a person entitled to bring action under section eleven of this chapter....’ A plaintiff under § 11 is, ‘[a] ny person who engages in the conduct of any trade or commerce....''' Kerlinsky v. Fid. & Deposit Co. of Maryland, 690 F.Supp. 1112, 1117 (D.Mass.1987) aff'd, 843 F.2d 1383 (1st Cir.1988). Actions filed under Section 9 have a jurisdictional prerequisite: “ ‘At least thirty days prior to the filing of any such [unfair practices] action, a written demand letter for relief, identifying the claimant and reasonably describing the unfair or deceptive act or practice relied upon and the injury suffered, shall be mailed or delivered to any prospective respondent.’ Id. § 9(3).” Smith v. Jenkins, 777 F.Supp.2d 264, 267 (D.Mass.2011). “The purpose of the demand requirement is twofold: to encourage settlement and to limit the plaintiffs *143damages in the event that a reasonable settlement offer is rejected.” Burns ex rel. Office of Pub. Guardian v. Hale & Dorr LLP, 445 F.Supp.2d 94, 96 (D.Mass.2006). “Massachusetts courts have strictly adhered to Chapter 93A’s demand requirement.” Id., at 97. “Additionally, ‘as a special element’ of a Chapter 93A cause of action, the plaintiffs complaint must allege that the plaintiff sent [the] demand letter to the defendant.” O’Connor, 992 F.Supp.2d at 38. The mailing of a demand letter is irrelevant in a Section 11 action. Kerlinsky, 690 F.Supp. at 1117.

Initially, the Court must determine if Rhodes’s Chapter 93A claim is asserted under Section 9 or Section 11. “The dividing line between a consumer claim and a business claim for purposes of [Mass.GemL. ch.] 93A, §§ 9 and 11, is not always clear. A number of cases have attempted to define it. Ultimately, the choice appears to turn on whether a given party has undertaken the transaction in question for business reasons, or has engaged in it for purely personal reasons (such as the purchase of an item for personal use). While the character of the transaction will not always be easy to identify, the distinction is consistent with the language of the respective statutory sections. Whereas a defendant must be engaged in trade or commerce, i.e., acting in a business context, to be liable under either § 9 or § 11, a plaintiff who acts in a business context has a cause of action exclusively under § 11. Thus, any transaction in which the plaintiff is motivated by business considerations gives rise to claims only under the statute’s business section. That a transaction may be an isolated one not in the normal course of business does not insulate it from the reach of ... § 11.” Frullo v. Landenberger, 61 Mass.App. Ct. 814, 821, 814 N.E.2d 1105, 1112 (2004). Rhodes’s problem is she does not allege that she was engaged in a trade or commerce, or that she was engaged in a transaction for business purposes. On the contrary, the factual assertions make clear that she is attempting to forestall the Defendants from foreclosing on her personal residence and to recover money damages for actions taken against her as owner thereof. Therefore, I find that if she has a claim, it would be pursuant to Section 9 of Chapter 93A. Consequently, sending a demand letter to the Defendants is a prerequisite to her filing a Chapter 93A claim against them.

In support of their motion to dismiss Rhodes’s Chapter 93A claim asserted in her original complaint, Defendants argued that she had failed to serve them with the requisite demand letter. Despite being on notice of this alleged deficiency, Plaintiff apparently made no attempt to send the Defendants the requisite demand letter prior to . seeking to amend her complaint5 and her failure to allege in her proposed amended complaint that she did so dooms her claim. Accordingly, Rhodes has failed to assert a viable Chapter 93A claim.

Defendants’ Violation Of The Injunction Imposed By H & R Block

Rhodes asserts that the Defendants have violated their obligations under an injunction entered by the Massachusetts Superior Court in H & R Block. She also claims that U.S. Bank is not registered or licensed with NMLS and therefore lacks standing (presumably, to pursue *144a foreclosure action). The gravamen of this claim is not entirely clear to the Court. Rhodes seeks injunctive relief and damages for what she titles Defendants “unfair and deceptive business practices,” which suggests that this claim is also part of her Chapter 93A claim. To the extent that she is suing under Chapter 93A for Defendants’ alleged breach of their obligations under H & R Block, or U.S. Bank’s failure to be properly licensed and/or registered she has not stated a viable claim because she failed to plead she sent the requisite demand letter. Assuming this claim is distinct from Rhodes’s Chapter 93A claim, I find that it is not viable for the reasons set forth below.

On November 24, 2008, in H & R Block, the Massachusetts Superior Court issued an injunction (“Injunction”) with respect to home loans which were originated by Option One and were secured by a mortgage in favor of Option One (“Option One Mortgage”). The H & R Block Injunction established procedures to be followed when any entity, as assignee of an Option One Mortgage, sought to foreclose on an Option One Mortgage. The Injunction covered only certain types of mortgages referred to as “Reviewable Mortgage Loans.” A “Reviewable Mortgage Loan” was one defined as having been issued by Option One or H & R Mortgage, and meeting the following characteristics:

(1) The loan is an adjustable rate mortgage with an introductory period of three years or less;

(2) The borrower has a debt-to-income ratio that would have exceeded 50 percent if the lender’s underwriters had measured the debt, not by the debt due under the introductory rate, but by the debt due under the fully indexed rate, except when the borrower had a student loan in which payment had been deferred at least six months from the date of submission of the mortgage loan application, in which case the debt-to-income ratio need exceed only 45 percent;

(2) The loan has an introductory or “teaser” rate for the initial period that is at least 2 percent lower than the fully indexed rate, unless the debt-to-income ratio is 55 percent or above; and

(4) The loan-to-value ratio is 97% or the loan carries a substantial prepayment penalty or a prepayment penalty that extends beyond the introductory period.

See H & R Block, 2008 WL 5970550, 2008 LEXIS 427, at *93. If a loan is a “Reviewable Mortgage Loan,” the Injunction imposes a series of obligations and procedures with which Option One, its successors and assigns must comply when commencing foreclosure proceedings. For example, after the borrower has been provided with a statutory notice of default, Option One its successors or assigns must provide the Attorney General of Massachusetts (“AG”) 45 days advance written notice of any proposed foreclosure proceedings, copies of the loan documentation and other specified information in order that the AG may given written notice objecting to the foreclosure. Id., at *94. If the AG does not give written objection within 45 days, the foreclosure may proceed; if the AG timely objects and does not withdraw the objection, the foreclosure may proceed only with approval of the court. Id.

In her proposed amended complaint, Rhodes asserts that hers is a Reviewable Mortgage Loan. However, her legal and factual allegations in support of this claim are confusing and/or conclusory. Moreover, her allegations are insufficient, as a matter of law, to support her claim that her mortgage loan meets all of the criteria set forth by the court in H & R *145Block.6 Even if I were to find that her assertions are sufficient to allege that hers is a Reviewable Mortgage Loan, as noted above, the court did not bar Option One, its successors or assignees from foreclosing on properties subject to Reviewable Mortgages Loans, rather it set forth specific procedures and obligations which must be followed prior to foreclosure. Rhodes does not allege in her proposed claim that Defendants failed to follow the specified procedures. For these reasons, Plaintiff has failed to state a viable claim that Defendants violated the H & R Block Injunction.

As to Plaintiffs allegation that the U.S. Bank failed to register with the Commonwealth or to be licensed by NMLS, Defendants assert that the proposed claim fails because there is no such legal requirement. I agree. The statutory scheme cited by Rhodes in support of this claim, Mass.Gen.L. ch. 255E §§ 2, 37, by its terms does not appear to apply to U.S. Bank. Therefore, Rhodes has failed to state a viable claim challenging the authority of U.S. Bank to foreclose on her property.8

Whether the Proposed Amended Complaint States A Viable Claim ' For Negligent and Intentional Infliction of Emotional Distress

Rhodes has asserted a claim for negligent infliction of emotional distress as the *146result of the Defendants alleged actions in attempting to force her out of her residence, including allegedly severing her watér pipes, changing the locks to her home and appearing at her home in the early morning hours. Defendants contend that Rhodes’s proposed amended complaint fails to assert the essential elements of a claim for negligent infliction of emotional distress, or intentional infliction of emotional distress (assuming such a claim is even asserted—my reading of the proposed claims is that Rhodes is only asserting a claim for negligent infliction of emotional distress). Moreover, Defendants argue that the claim for negligent infliction of emotional distress fails because there is no duty owed to Rhodes by the Defendants.

Defendants are correct that a lender does not owe a general duty of care to a borrower and therefore, under the general rule, neither of these Defendants can be held liable to Rhodes for negligent infliction of emotional distress. See MacKenzie v. Flagstar Bank, FSB, 738 F.3d 486, 495 (1st Cir.2013) (dismissing negligence claim); Corcoran v. Saxon Mortg. Services, Inc., Civ. Act. No. 09-11468-NMG, 2010 WL 2106179 (D.Mass. May 24, 2010) (dismissing claim for negligent infliction of emotional distress). It is not clear to me that the general rule would apply in the context of this case where the allegations are that the lender/loan servicer has physically and emotionally harassed the borrower. However, the Court need not address this issue because Rhodes has not attempted to refute Defendants assertions that she has failed to assert viable claims for negligent or intentional infliction of emotional distress. Therefore, her motion to amend her complaint to assert such claims is denied.

Rhodes’s Claims For Punitive Damages, Attorney’s Fees and Damages

Rhodes’s proposed amended complaint asserts claims for punitive damages, attorney’s fees and damages. I agree with Defendants that such claims are not independent causes of action. Therefore, Rhodes’s motion to amend her complaint to add such claims is denied.

The Motion To Amend is Denied

For the reasons set forth above, I find that Rhodes’s proposed amended complaint fails to state viable claims against the Defendants. For that reason, her motion to amend is denied on grounds of futility. As to Rhodes’s claims for violation of the FDCPA, Chapter 93A and U.S. Bank’s alleged failure to register or be properly licensed, the denial is with prejudice, as she was alerted to the deficiencies in these claims by Defendants’ motion to dismiss and made no attempt to remedy such deficiencies in her proposed amended complaint. Otherwise, the denial of the motion to amend the complaint is without prejudice.9

Conclusion

It is hereby ordered that:

(1) Defendants’ Motion To Dismiss Plaintiffs Complaint (Docket No. 15) is allowed;

*147(2) the Motion To Correct Error In Name Of Defendants (Docket No. 25) is allowed; and

(3) the Motion To Amend Complaint (Docket No. 27) is denied, as provided herein.