Gray v. Ocwen Mortgage Servicing, Inc.

Background

Richard and Kimberly Gray brought a proposed class action against Ocwen Mortgage Servicing, Inc., Ocwen Financial Corporation, and Ocwen Loan Servicing, LLC. The claims concerned Ocwen’s reporting of Kimberly Gray’s debt to credit-reporting agencies. The third amended complaint asserted claims under the Fair Credit Reporting Act, the California Consumer Credit Reporting Agencies Act, and the California Unfair Competition Law.

The court had previously dismissed the Grays’ second amended complaint with permission to amend because it found that the claims depended on an inaccurate credit report and that the Grays had not plausibly alleged an inaccuracy. The Grays then filed the third amended complaint. Ocwen moved to dismiss it under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim.

Court’s analysis

The court first concluded that the third amended complaint and the Grays’ opposition effectively sought reconsideration of the earlier dismissal. The court said the Grays had not identified a material difference in fact or law, new material facts or a change in law, or a material fact or dispositive argument that the court had failed to consider. The court also found that the Grays repeated arguments made in connection with the second amended complaint, contrary to the local rule restricting repetition of arguments.

The court also held that the third amended complaint independently failed to state a plausible claim. The Grays alleged that Ocwen’s reporting was inaccurate because Richard Gray’s bankruptcy discharge had discharged Kimberly’s personal liability on the loan, and because California law barred collection of a deficiency judgment on the purchase-money loan.

The court rejected both theories. It stated that when only one spouse files for bankruptcy, the non-debtor spouse remains separately liable for community debts, and Richard Gray’s discharge did not eliminate Kimberly Gray’s personal liability for the joint loan secured by the property. The court therefore said Ocwen was reporting on an existing obligation and that the report was not misleading or inaccurate on that basis.

The court also stated that California Code of Civil Procedure section 580b did not eliminate the debt itself and did not address credit-reporting requirements for purchase-money loans or delinquencies on those loans. Because the debt continued to exist, the Grays had not plausibly alleged an inaccuracy in Ocwen’s credit reporting.

Disposition

The court granted defendants’ motion to dismiss and dismissed the third amended complaint. Because the Grays had filed three versions of their complaint, the court denied any further amendment. The third amended complaint was dismissed with prejudice, and judgment was to be entered for defendants. The order was issued by Judge James Donato.