Ocwen’s Brief in Response to CFPB
JUL 22, 2021 | REPUBLISHED BY LIT: AUG 25, 2021
The Consumer Financial Protection Bureau (“CFPB”) and Ocwen1 agreed to a three-year consent decree to resolve an enforcement action. The U.S. District Court for the District of Columbia entered that Consent Judgment, and Ocwen performed its obligations for the entire term.
But after CFPB had gotten the full benefit of the judgment, it sought to go back on the deal: CFPB sued Ocwen, contending that even during the decree’s term, it could bring enforcement proceedings anywhere it liked and concerning the precise conduct that the decree addressed, evading the exclusive, court-ordered framework set out in the consent decree it had negotiated.
As the district court here recognized, that was not the deal, and this suit is barred.
During the consent decree’s three-year term, Ocwen’s loan-servicing and foreclosure-processing activities were governed by a complex, carefully negotiated set of Servicing Standards.
Ocwen’s compliance was reviewed by an independent monitor, and enforcement was channeled through detailed procedures: CFPB would bring enforcement proceedings against Ocwen only if one of a defined set of violations occurred, and only if Ocwen failed to cure them; remedies were limited, but CFPB could obtain seven-figure monetary penalties; and exclusive jurisdiction was in the D.C. district court.
Ocwen agreed to pay or provide more than $2 billion in relief to consumers as part of the bargain. The question in this appeal is whether CFPB can disregard the bargain and sue outside the D.C. district court, outside the exclusive enforcement framework, for relief outside the specified limits, all for conduct that took place within the term of the decree. The district court correctly held that the answer is no.
The Consent Judgment bars this action.
Ocwen fully performed under the Consent Judgment until the provisions expired in February 2017, expending over $55 million on compliance (separate from the $2 billion Ocwen agreed to provide in relief) and hundreds of thousands of employee hours in the process. During this time, CFPB was actively involved in the oversight of Ocwen’s mortgage-servicing activities, as a member of an oversight committee that regularly conferred with the Monitor regarding Ocwen’s compliance. The monitoring committee, including CFPB, pursued the million- dollar penalty available under the Consent Judgment only once. CFPB never raised any other concerns with the Monitor regarding Ocwen’s compliance with the Servicing Standards. CFPB never complained to the D.C. district court. It received and enjoyed the full benefit of Ocwen’s performance under the Consent Judgment.
But less than two months after the Consent Judgment expired, CFPB brought this enforcement action seeking to have its cake again. As relevant to this appeal, CFPB asserted that Ocwen’s mortgage-servicing activities—the same ones that had just been subject to the detailed Servicing Standards and compliance regime for three years—violated various federal statutes and regulations during that same three-year period when the Consent Judgment was in effect.
In other words, CFPB sought to circumvent the narrow and exclusive enforcement regime for which the parties bargained and to which they agreed in the Consent Judgment. The district court held that CFPB’s attempt to unravel the Consent Judgment’s bargain is barred by res judicata.
CFPB contends on appeal that the district court applied the wrong form of res judicata, and that CFPB’s claims are not barred under the correct form. Pointing to this Court’s decision in Norfolk Southern Corp. v. Chevron, U.S.A., Inc., 371 F.3d 1285 (11th Cir. 2004), CFPB contends that the district court was required to assess the preclusive effect of the Consent Judgment based solely on the judgment’s terms, not traditional res judicata factors. And, CFPB contends, the Consent Judgment does not preclude its claims, because those claims were not specifically released.
Neither argument justifies reversal. CFPB’s first argument is little more than a quibble over form: the district court’s decision explicitly relied on the terms of the Consent Judgment—including the comprehensive Servicing Standards and the exclusive enforcement regime—to determine that CFPB’s claims are barred by res judicata. Not only that, the court also expressly applied Norfolk Southern to reach that conclusion. CFPB’s second argument also is wrong.
For the three-year period during which the Consent Judgment was in effect, CFPB agreed to the Servicing Standards and enforcement regime confining CFPB’s enforcement authority to that judgment’s framework. CFPB could obtain million-dollar penalties for certain violations of the Servicing Standards, through a streamlined process not otherwise available to the agency. But it could not bring enforcement actions like this one—i.e., based on conduct covered by the Servicing Standards, during the covered three-year period, but outside the limited enforcement framework and single venue permitted by the Consent Judgment.
Thus, CFPB’s objection that the Consent Judgment did not release the conduct at issue here is beside the point. The Consent Judgment barred CFPB from challenging the same conduct a second time, outside the exclusive framework. That is a function not of release, but of the law of judgments—res judicata.
CFPB argues in the alternative that the district court also misapplied the traditional res judicata factors. But because the district court correctly applied the terms of the Consent Judgment, CFPB’s claims are precluded under the Norfolk Southern test that CFPB itself prefers. In any event, this argument is meritless. CFPB argues that in assessing the scope of the prior judgment, the district court should not have looked at the Consent Judgment, but only at the allegations in the underlying complaint.
That is wrong.
“When assessing the res judicata effect of a prior action, [courts] are not limited to the allegations raised in a prior complaint.” TVPX ARS, Inc. v. Genworth Life & Annuity Ins. Co., 959 F.3d 1318, 1326 (11th Cir. 2020).
The barebones D.C. Complaint was filed together with the agreed-to Consent Judgment, and the district court appropriately looked to the latter to determine the preclusive effect of the judgment.
CFPB’s attempt to circumvent the Consent Judgment after enjoying its benefits for three years is impermissible for multiple reasons. The district court ruled on the first reason, res judicata; Ocwen’s alternative arguments for summary judgment remain valid as well.
Ain’t it amazin’ Ocwen/PHH have be fined $3 BILLION+ U.S. Dollars since 2008 and yet LIT cannot COUNT the cases homeowners have WON against either OCWEN or PHH on ONE Hand?
e.g. Where they’ve defeated a wrongful foreclosure ‘n received financial compensation for their troubles. pic.twitter.com/HX7oJKjNWR
— LawsInTexas (@lawsintexasusa) August 26, 2021
STATEMENT OF THE ISSUES
1. Whether the district court correctly held that the operative counts of CFPB’s complaint are barred by res judicata because the conduct at issue overlaps with the Consent Judgment, including its comprehensive mortgage-servicing standards and exclusive enforcement regime.
2. Whether the district court’s decision is consistent with traditional principles of res judicata because it determined the claim-preclusive effect of the Consent Judgment by examining the Consent Judgment, not just the barebones, perfunctory complaint that was simultaneously filed with the Consent Judgment.
— LawsInTexas (@lawsintexasusa) August 26, 2021
STATEMENT OF THE CASE
I. Ocwen and CFPB Entered Into A Consent Judgment Containing Comprehensive Servicing Standards And Exclusive Enforcement Provisions To Govern Ocwen’s Mortgage Servicing Conduct.
In 2013, CFPB, 49 states, and the District of Columbia sued Ocwen in the D.C. district court, alleging that certain of Ocwen’s “loan servicing” and “foreclosure processing” activities violated provisions of the Consumer Financial Protection Act, 12 U.S.C. §§ 5531(a) and 5536, as well as state law.
Supplemental Appendix (“SAppx”), Doc. 731-2 ¶¶28, 30.
The D.C. Complaint alleged, among other things, that Ocwen “fail[ed] to timely and accurately apply payments made by borrowers,” failed “to maintain accurate account statements,” provided “false or misleading information in response to borrower complaints,” and “fail[ed] to provide accurate and timely information to borrowers” regarding loss mitigation and foreclosure.
The D.C. Complaint was accompanied by a proposed Consent Judgment— referred to as the National Mortgage Settlement—to fully and finally “resolve [the plaintiffs’] claims” against Ocwen “without the need for litigation.”
CFPB’s Appendix (“Appx”), Doc. 32-1, at 8.
The District Court entered the Consent Judgment on February 26, 2014.
Id. at 14.
The Consent Judgment set out a comprehensive framework for resolving any and all claims based on Ocwen’s alleged past wrongdoing and any and all future claims alleging the same wrongdoing during the three-year duration of the Consent Judgment.
Id. at 13.
With respect to alleged past violations of law, the Consent Judgment required Ocwen to “pay … $127.3 million … [in] cash payments to borrowers whose homes were sold in a foreclosure sale,” as well as to pay or provide an additional “$2 billion … to consumers … to remediate [alleged] harms.”
Appx, Doc. 32-1, at 10-11.
In exchange, CFPB agreed to “fully and finally release [Ocwen] from all potential liability that has been or might have been asserted by the CFPB relating to the mortgage servicing practices described in the [D.C. Complaint]” up through the day before the D.C. Complaint was filed.
Id. at 162.
The Release does not extend to liability related to conduct other than that which was “asserted or that might have been asserted in the complaint.”
With regard to Ocwen’s future mortgage-servicing activities, the Consent Judgment established an intricate regulatory and enforcement framework to govern Ocwen’s mortgage servicing practices for three years following the district court’s entry of the Consent Judgment—i.e., through February 26, 2017.
Appx, Doc. 32- 1, at 13.
First, the Consent Judgment incorporated comprehensive Servicing Standards to govern Ocwen’s future mortgage-servicing activities. Appx, Doc. 32- 1, at 10.
Those Servicing Standards contained more than 300 discrete and exceptionally detailed requirements covering numerous categories of mortgage- servicing conduct, including standards governing
(a) the accuracy and completeness of information provided to borrowers, id. at 71-75;
(b) practices and procedures for resolving borrower complaints, id. at 73-74;
(c) procedures regarding borrower loss-mitigation efforts and foreclosure timing, id. at 84-103;
(d) oversight of foreclosure attorneys and other third-party providers utilized by Ocwen, id. at 79-82.
Second, the Consent Judgment appointed former North Carolina Commissioner of Banks Joseph Smith as an independent monitor, at Ocwen’s expense, and gave him broad and exclusive authority “to determine whether [Ocwen] is in compliance with the Servicing Standards.”
Appx, Doc. 32-1, at 11, 122, 124.
The Monitor was to “assess” Ocwen’s “compliance with the Servicing Standards” based on a series of complex “Metrics” incorporated into the Consent Judgment.
Id. at 125.
Those Metrics identified dozens of specific topics to be tested, the population of loans subject to each Metric, the specific test questions to be used to determine Ocwen’s compliance with the Servicing Standards, and the “Threshold Error Rate” applicable to each Metric—i.e., the error rate at which the Consent Judgment’s other enforcement provisions would be triggered.
Id. at 137-58.
Separately, the Servicing Standards required an “independent reviewer” to assess “[Ocwen’s] system [of] record … for accuracy and completeness.”
Id. at 74. 2
Ocwen was required to assemble an “Internal Review Group” to self-assess Ocwen’s compliance with the Servicing Standards, and to then report its findings to the Monitor on a quarterly basis.
Appx, Doc. 32-1, at 124-25, 129.
After reviewing the Internal Review Group’s findings, the Monitor was required to issue its own report “on [Ocwen’s] compliance with th[e] Consent Judgment,” which would include, among other things, whether Ocwen’s non-compliance with any of the Servicing Standards exceeded the Threshold Error Rate for a given Metric.
Id. at 125, 130.
The Monitor was required to confer with a “Monitoring Committee”—consisting of representatives of the State plaintiffs and CFPB— regarding its findings, and to share its report with the Monitoring Committee and the D.C. district court.
Id. at 122, 130.
Third, the Consent Judgment contained a set of Enforcement Terms that set forth a comprehensive and exclusive framework to govern Ocwen’s compliance with the Servicing Standards.
Appx, Doc. 32-1, at 11 (“The Servicing Standards … shall be enforced in accordance with the authorities provided in the Enforcement Terms.”).
LYIN’ BANKSTERS & THEIR ENTOURAGE OF LAWLESS LAWYERS: “Material misrepresentations to borrowers based on inaccurate or incomplete information (CFPA)”
And let’s not forget the “sharing is caring” revolving door between the Anti-Consumer Watchdog and the $3B admonished Non-Bank. pic.twitter.com/ZYsb7xyC4U
— LawsInTexas (@lawsintexasusa) August 26, 2021
Under the Enforcement Terms, if Ocwen committed a “Potential Violation”—i.e., a violation that “exceeded the Threshold Error Rate set for a Metric”—it had “a right to cure” that violation
(a) by implementing a “corrective action plan” with the Monitor,
(b) by remaining below the Threshold Error Rate for that Metric for a full quarter after the corrective action plan was completed.
Id. at 131-32.
If Ocwen successfully cured a Potential Violation, “no Party” to the Consent Judgment “ha[d] any remedy under the Consent Judgment … with respect to [that] Potential Violation.”
Id. at 132 (emphasis added).
But Ocwen was still required to “remediate any material harm to particular borrowers” resulting from any Potential Violations that it cured.
CFPB’s only enforcement authority arose if
(a) Ocwen committed a Potential Violation and failed to timely cure that violation,
(b) if, after curing a Potential Violation, Ocwen exceeded the Threshold Error Rate within a certain time period “with respect to the same Metric.”
Appx, Doc. 32-1, at 131-32.
In the event of such violations, “the sole relief available” to CFPB was to bring an enforcement action in the D.C. district court, seeking a narrowly defined set of remedies:
(a) “[a]n order directing non-monetary equitable relief,”
(b) “civil penalties … not more than $1 million per uncured Potential Violation,”
(c) in the event of an uncured Potential Violation of certain Metrics, “civil penalties … not more than $5 million.”
Id. at 135 (emphasis added).
This enforcement scheme allowed CFPB to obtain much larger penalties, much more quickly, than it could ordinarily obtain for a simple violation without proving recklessness or knowledge.
See 12 U.S.C. § 5565(c)(2), (5).
YET TO SEE ONE CASE AT THE FIFTH CIRCUIT (FOR EXAMPLE) RULE FOR A HOMEOWNER ON THIS CLAIM SINCE THE 2008 FINANCIAL CRISIS: “Foreclosing on borrowers after representing that borrowers had additional time to complete loss mitigation applications (CFPA)” ‘#judgment #Judge pic.twitter.com/Qzhyf1nLIT
— LawsInTexas (@lawsintexasusa) August 26, 2021
II. Ocwen Fully Performed Under The Consent Judgment For The Entire Three-Year Term.
From February 2014 until the Consent Judgment’s expiration in February 2017, Ocwen dedicated significant time and resources to complying with the rigorous requirements set forth in the Servicing Standards, including expending over $55 million and hundreds of thousands of employee hours on monitoring, reporting, and self-audits.
SAppx, Doc. 731-12, at 6-7.
As a result of these efforts, Ocwen consistently stayed below the Threshold Error Rate for each Metric.
SAppx, Doc. 731, at 10-11; SAppx, Doc. 742, at 12.
And when Ocwen exceeded a Threshold Error Rate, it cured the Potential Violation in accordance with the Enforcement Terms.
SAppx, Doc. 731, at 11; SAppx, Doc. 742, at 12-13.
Only once was Ocwen unable to cure a Potential Violation, and in that case the Monitoring Committee filed an unopposed motion to enforce the Consent Judgment and recover the $1 million penalty and equitable relief.
SAppx, Doc. 731-12, at 6; SAppx, Doc. 731-26; see SAppx, Doc. 731, at 11; SAppx, Doc. 742, at 12-13.
Throughout the Consent Judgment’s duration, CFPB participated in the oversight of Ocwen’s performance under the Servicing Standards.
As a member of the Monitoring Committee, it consulted with the Monitor before he issued his report, Appx, Doc. 32-1, at 122, 130, and was invited to participate in various monitor-related communications and meetings concerning Ocwen’s performance under the Consent Judgment.
SAppx, Doc. 731, at 9-10; SAppx, Doc. 742, at 11- 12.
LOSIN’ THE ACCOUNTING PAPERWORK WHEN THE NON-BANK KNOWS ITS CHARGIN’ UNCONSCIONABLE AND UNLAWFUL FEES: “Failure to send periodic account statements to borrowers (TILA)”
Remember a House Payment is Probably the Largest Outlay and Monthly Cost… pic.twitter.com/JV0XYiOiiX
— LawsInTexas (@lawsintexasusa) August 26, 2021
III. CFPB’s Present Enforcement Action
A. CFPB Sued Ocwen Based On Alleged Conduct Encompassed By The Consent Judgment’s Comprehensive Servicing Standards.
Less than two months after the Consent Judgment expired, CFPB commenced this enforcement proceeding against Ocwen in the Southern District of Florida.
Appx, Doc. 1, at 93.
The relevant First Amended Complaint alleged violations of the Consumer Financial Protection Act (“CFPA”), the Truth in Lending Act (“TILA”), the Fair Debt Collection Practices Act (“FDCPA”), and the Real Estate Settlement Procedures Act (“RESPA”), and related regulations.
Appx, Doc. 481 ¶¶205-77.3
Each of these counts alleged wrongdoing based on Ocwen’s mortgage servicing activities undertaken during the three-year period when Ocwen remained subject to the Consent Judgment’s comprehensive Servicing Standards and enforcement framework.
Id. ¶¶205, 214, 219, 229, 240, 247, 255, 262, 273.
Critically, each of the counts in CFPB’s complaint alleged violations of federal law based on categories of conduct specifically addressed by the Servicing Standards and Metrics, as Ocwen detailed to the district court. The overlap can be summarized as follows:
To take just one example, Counts III and IX allege that Ocwen foreclosed on borrowers who had made, or were supplementing, applications to restructure their loan obligations so as to avoid foreclosure.
Count III focuses on what borrowers were told, alleging that Ocwen foreclosed on borrowers after having represented that the borrower had additional time to supplement and complete their loss- mitigation applications.
Appx, Doc. 481 ¶¶218-22.
Count IX addresses application status, alleging that Ocwen foreclosed on borrowers while completed applications were pending for decision.
The Servicing Standards and the Metrics regulate and measure compliance with both of these categories of alleged conduct.
The Servicing Standards required Ocwen “to evaluate borrowers for all available loan modification options … prior to referring a borrower to foreclosure” and to “facilitate the submission and review of loss mitigation applications.”
Appx, Doc. 32-1, at 84.
To ensure accurate communications, the Servicing Standards required Ocwen to “disclose and provide accurate information to borrowers relating to the qualification process and eligibility factors for loss mitigation programs.”
Id. at 92.
Ocwen also was required to designate a “single point of contact” for each “potentially eligible” mortgage borrower, who was responsible for “
Id. at 89.
Further, Ocwen was required to ensure that the contact had prompt access to “relevant records relating to [a] borrower’s account,” so that the contact “c[ould] timely, adequately, and accurately inform the borrower of the current status of loss mitigation, loan modification, and foreclosure activities.”
Id. at 91.
The Standards also strictly regulated Ocwen’s ability to foreclose while a loss-mitigation application was pending. For borrowers who “ha[d] not already been referred to foreclosure,” the Standards provided that Ocwen “shall not refer … [the] account to foreclosure” if a complete, or substantially complete, loan modification was submitted within 120 to 130 days of delinquency.
Appx, Doc. 32-1, at 84-85.
For borrowers who submitted a loss-mitigation application after being referred to foreclosure, the Standards strictly limited Ocwen’s ability to “move for foreclosure judgment or order of sale” or “seek a foreclosure sale” while the application was pending.
Id. at 86-88.
The Monitor measured compliance with these Standards using multiple specific Metrics. Metric 1.A evaluated “error[s]” associated with “foreclosure sales.”
Appx, Doc. 32-1, at 138.
Metric 3 assessed whether Ocwen complied with pre-foreclosure requirements, and whether its records “accurately reflect that [it] ha[d] the right to foreclose[.]” Id. at 142; see also id. at 146 (Metric 5.C testing implementation of “single point of contact” requirement).
Metric 6.B assessed Ocwen’s compliance with loan modification requirements, including whether a “[l]oan was referred to foreclosure in error” because foreclosure was initiated when “[Ocwen] was in possession of an active, complete loan modification package.”
Id. at 152 (addressing whether “[f]oreclosure proceedings [were] allowed to proceed in error” and testing whether Ocwen “proceed[ed] to judgment or order of sale upon receipt of a complete loan modification package”).
Finally, Metric 30 measured Ocwen’s compliance with Standards governing the “[l]oan modification process,” and assessed whether Ocwen afforded borrowers the required time period to supplement an application.
Id. at 154.
As this example illustrates, CFPB’s allegations in this lawsuit closely track matters specifically regulated and measured under the Standards, governed by the Metrics, and enforced through the provisions of the Consent Judgment.
B. The District Court Granted Summary Judgment For Ocwen On Counts I-IX Of CFPB’s Amended Complaint.
1. Ocwen’s Motion For Summary Judgment
After extensive discovery, the parties submitted cross-motions for summary judgment. Ocwen argued that Counts I-IX of CFPB’s amended complaint were barred by (1) the terms of the Consent Judgment; (2) res judicata; and (3) waiver.4
Doc. 730, at 10-18.
First, Ocwen argued that Counts I-IX were barred because “all of the alleged conduct [underlying those counts] is covered by the terms of the [Consent Judgment],” which set out an exclusive enforcement regime to govern Ocwen’s mortgage-servicing conduct.
Doc. 730, at 10-12.
Second, Ocwen argued that CFPB had waived any right it might have to assert Counts I-IX by entering into the Consent Judgment, agreeing to its exclusive enforcement regime, and failing to raise any concerns regarding Ocwen’s alleged conduct with the Monitor.
Id. at 12-13.
Finally, Ocwen argued that Counts I-IX were barred by res judicata because the Consent Judgment “explicitly addresses Ocwen’s future conduct and governs resolution of any compliance violations within the covered servicing areas.”
Id. at 13-15.
2. The District Court Held That Counts I-IX Were Barred By Res Judicata.
The district court granted Ocwen’s motion for summary judgment as to Counts I-IX, holding that they are barred by res judicata.
Appx, Doc. 764, at 13-27.
The court acknowledged that Ocwen had raised several distinct procedural arguments, but concluded that these arguments rest on the common “theme” that the allegations underlying Counts I-IX were encompassed by the “mandatory dispute resolution procedures governing … compliance monitoring” under the Consent Judgment.
Id. at 14 n.10.
Thus, although the court framed its analysis in res judicata terms, its holding rested on the conclusion that Counts I-IX are barred because they are directed at the same category of conduct encompassed by the mandatory and exclusive provisions of the Consent Judgment.
Id. at 27.
The district court carefully reviewed the terms of the Consent Judgment, noting that its “detailed Servicing Standards” were “designed to prevent the same genre of loan servicing misconduct” at issue in CFPB’s complaint, and that the Consent Judgment “subject[ed]” the parties “to the exclusive dispute resolution procedures and enforcement mechanisms prescribed by the [Consent] Judgment” as the sole means of “test[ing] Ocwen’s compliance with [the] Servicing Standards.”
Appx, Doc. 764, at 21-22.
From this, the court concluded that the alleged conduct underlying Counts I-IX was “substantially the same as [that] covered by [the] Consent Judgment,” and did not involve “new matters that were not or could not have been subjected to the dispute resolution procedures and enforcement mechanism prescribed by the [Consent] Judgment.”
In fact, the district court correctly noted that CFPB “[did] not dispute that the subject matter of the … Servicing Standards overlap[ped] with the loan servicing activity and misconduct alleged” in the amended complaint.
Id. at 19.
The district court rejected CFPB’s efforts to find daylight between parts of the Consent Judgment and the allegations underlying Counts I-IX. CFPB had argued that its complaint is focused on the “accuracy” of information stored in Ocwen’s system of record, while the Metrics did not require the Monitor to assess the accuracy of Ocwen’s system of record.
Doc. 740, at 6-7.
The district court rejected this argument, because the plain terms of the Consent Judgment “‘require … an independent third party [to] periodically review those parts of the [system of record] that pertain to account information for accuracy and completeness,’” and Ocwen had provided the results of the independent reviews to the Monitor.
Appx, Doc. 764, at 18.
Thus, it was “apparent that [system of record] accuracy issues were specifically addressed in the … Servicing Standards and were part of the servicing activity routinely reviewed by the … Monitor.”
CFPB also argued that the Metrics did not test for Ocwen’s compliance with the Standards overlapping with the categories of conduct underlying Counts I-IX.
Doc. 740, at 12-13.
The district court rejected this argument, too.
Appx, Doc. 764, at 20-21.
The court assumed arguendo that the Metrics did not measure all possible non-compliance with the Servicing Standards, but concluded that this did not matter because CFPB had “agreed to test compliance with the Servicing Standards under [certain] Metrics agreed upon under the Consent Judgment.”
Id. at 21.
Thus, even if the Metrics were “insufficient” to “test Ocwen’s compliance with the Servicing Standards,” that “simply points to a limitation in the negotiated settlement between the parties,” and did “not defeat an overlap of claims or causes of action.”
Id. at 20-21.5
The district court also rejected CFPB’s argument that because the Release applies only to claims preceding the filing of the D.C. Complaint, claims that arose after the D.C. Complaint was filed were implicitly allowed.
Appx, Doc. 764, at 23.
The court held that “this contractual reservation” does not determine the full scope of the Consent Judgment’s preclusive effect. Id. (noting that the Release “does not operate as an exception to the principle of res judicata”).
Instead, determining the Consent Judgment’s preclusive effect as to claims arising after the filing of the D.C.Complaint—and thus outside the scope of the Release—required an assessment of all the Consent Judgment’s provisions, including the Servicing Standards and Enforcement Terms. Id.
FICTITIOUS: FAILURE TO DO YOUR JOB HONESTLY BECAUSE Y’ALL CAN’T WITHOUT A PHOTOCOPIER, LYIN’ LAWYERS ‘N OUTLAWS IN DIRTY BLACK ROBES: “Failure to timely pay hazard insurance, conduct escrow analyses, timely provide escrow statements; improperly collected escrow shortages (RESPA)” pic.twitter.com/407Sc0rViE
— LawsInTexas (@lawsintexasusa) August 26, 2021
Those provisions, the court reasoned, did not “release” the “Bureau’s enforcement authority”; they “simply limit[ed] it to the boundaries to which the Bureau itself agreed in the prior action.”
This action exceeded those boundaries.
Finally, the district court addressed CFPB’s argument that Norfolk Southern required the court to apply a “modified form of res judicata” by determining the preclusive effect of the Consent Judgment exclusively by its terms.
Appx, Doc. 764, at 24-25.
The court noted that Norfolk Southern involved different facts, but it then expressly applied that decision’s framework and concluded that it was “plainly discernable” from the “express terms of the [Consent Judgment]” that the parties intended and agreed that only departures from the Servicing Standards which exceeded the minimal Threshold Error Rates prescribed by the [Consent Judgment] would be actionable, and even then, would be actionable only within the narrow confines of the Enforcement Terms prescribed by the … Consent Judgment.
Id. at 25.
CFPB’s current claims, the district court concluded, were “
Id. at 25-26.
Accordingly, because the Consent Judgment “already established the means by which Ocwen’s noncompliance with federal law would be measured and redressed … as to matters controlled by the Servicing Standards,” CFPB’s “claims are precluded” under the “modified version of res judicata” articulated in Norfolk Southern.
Id. at 26.
For these reasons, the district court granted summary judgment in Ocwen’s favor as to Counts I-IX insofar as they were based on alleged conduct preceding the Consent Judgment’s expiration.
Appx, Doc. 764, at 27-31.
The district court allowed CFPB to clarify whether any issues remained for further litigation.
Id. at 27-28.
CFPB filed a Second Amended Complaint that dropped the only remaining count on which the district court did not grant summary judgment (Count X), and clarified that Counts I-IX were based solely on alleged conduct occurring before the Consent Judgment’s expiration.
Appx, Doc. 777, at 1.
The district court then entered Final Judgment in Ocwen’s favor, id. at 1-2, and CFPB appealed.
STANDARD OF REVIEW
The Court reviews the district court’s grant of summary judgment based on res judicata de novo. EEOC v. Pemco Aeroplex, Inc., 383 F.3d 1280, 1285 (11th Cir. 2004).
THE BLIND EYE: “Failure to maintain policies regarding (a) investigating and responding to borrower complaints; (b) maintaining accurate and complete information regarding activities of foreclosure attorneys; (c) transferring accurate borrower information to new servicer (RESPA)” pic.twitter.com/U4kwgcbnE5
— LawsInTexas (@lawsintexasusa) August 26, 2021
SUMMARY OF ARGUMENT
The district court correctly held that Counts I-IX of CFPB’s complaint are barred by res judicata, because the facts underlying those claims are encompassed by the comprehensive Servicing Standards and enforcement regime established by the Consent Judgment.
CFPB fails to identify any basis for reversal.
I. CFPB argues that Norfolk Southern required the district court to focus on the terms of the Consent Judgment, and specifically on the Release. CFPB then contends that the Consent Judgment permits this enforcement action because the Release only applied to claims preceding the D.C. Complaint. Neither argument has merit.
A. The district court held that Counts I-IX of the amended complaint are barred by res judicata based on a careful analysis of the Consent Judgment’s terms and the factual allegations underlying CFPB’s present claims—which is exactly what Norfolk Southern requires. The court held that the allegations underlying CFPB’s claims pertain to the same categories of conduct that the Servicing Standards encompass, and are subject to the exclusive enforcement regime the Consent Judgment established.
Although the district court addressed all the traditional elements of res judicata, it then expressly applied Norfolk Southern and held that CFPB’s claims are precluded under that decision’s framework. CFPB’s criticism boils down to a quibble about labels, not substance, and that is no basis on which to reverse the district court.
B. The district court correctly held that CFPB’s claims are precluded by the terms of the Consent Judgment. Like all contracts, settlement agreements must be interpreted to effectuate the intent of the parties.
Read as a whole and taking account of its structure, see Slater v. Energy Servs. Grp. Int’l, Inc., 634 F.3d 1326, 1330 (11th Cir. 2011), the Consent Judgment creates an exclusive enforcement regime.
The parties agreed that, for three years, that comprehensive framework would govern any challenge to Ocwen’s activities controlled by the Servicing Standards.
The Consent Judgment’s framework struck a balance. It was highly detailed and compliance was governed by quantitative metrics. The Monitoring Committee, including CFPB, could seek large penalties quickly and without regard to recklessness or intent.
But CFPB was not authorized to bring an enforcement action for any departure from the Standards it wished; instead, an enforcement action was allowed only if
(a) Ocwen’s violation exceeded the Threshold Error Rate for a given Standard;
(b) Ocwen failed to timely cure the violation. If Ocwen timely cured a violation, then “no Party … ha[d] any remedy” for that violation.
Appx, Doc. 32-1, at 132.
Even when CFPB was authorized to bring an enforcement action, it could do so only in the D.C. district court, and the only remedies were those listed in the Consent Judgment.
Those remedies were substantial—equitable relief and civil penalties of $1 million or, in some circumstances, $5 million—but they were also exclusive.
Id. at 135.
By adopting this carefully crafted framework, the parties plainly intended to, and did, preclude CFPB from bringing enforcement actions outside the Consent Judgment’s parameters, when the conduct at issue was of the type encompassed by the Servicing Standards.
CFPB’s claims here are impermissible because they concern the same categories of mortgage-servicing conduct as the Servicing Standards.
A contrary interpretation would defy common sense.
On CFPB’s theory, Ocwen paid or provided over $2 billion to resolve past and future claims, and agreed to expend tens of millions of dollars and thousands of hours of employee time to conform its future conduct to the exhaustively detailed requirements of the Consent Judgment, while receiving no benefit in exchange.
According to CFPB, despite the Consent Judgment’s precise and balanced terms addressing enforcement, the agency remained free to pursue an enforcement action based on the exact same conduct covered by the Servicing Standards, without giving Ocwen the right to cure or filing in the D.C. district court.
On CFPB’s view, Ocwen was exposed to multi-million dollar penalties in the D.C. district court under the Consent Judgment and additional penalties wherever else CFPB opted to bring an enforcement action. That could not have been what the parties intended.
C. CFPB contends that the preclusive effect of the Consent Judgment depends on a single term—the Release. That misconceives the district court’s claim-preclusion holding, this Court’s holding in Norfolk Southern, and the basic rule of contract interpretation requiring that the parties’ intent be discerned from the entire agreement.
The Servicing Standards and Enforcement Terms preclude CFPB from bringing this action not because CFPB released Ocwen from liability, but because CFPB agreed not to bring enforcement actions like this one outside the exclusive framework for conduct governed by the Standards during the three-year term.
That is entirely consistent with this Court’s decision in Norfolk Southern, which does not focus myopically on release terms to the exclusion of all else.
Rather, this Court made clear that preclusion was governed “by the terms of the Settlement Agreement, as interpreted according to traditional principles of contract law.”
371 F.3d at 1289.
In Norfolk Southern, a case involving a simple release in exchange for a single payment, the release was the only provision in the settlement agreement relevant to the preclusive scope of the resulting judgment.
Here, by contrast, the Consent Judgment includes a number of relevant provisions, including the exclusive Enforcement Terms. Nothing in Norfolk Southern calls for this Court to ignore them.
CFPB contends that its agreement about how to assert its “sovereign power” should be narrowly construed. But the case it cites addresses whether executive officials can bargain away Congress’s legislative power to amend statutes—a far cry from this case.
Here, CFPB and Ocwen made an agreement to resolve litigation, and the parties’ agreement should be enforced according to its terms and the parties’ intent.
Finally, CFPB argues that its claims are allowed because the Consent Judgment states that Ocwen is still required to comply with the law. But this conflates Ocwen’s obligation to comply with the law with the scope of CFPB’s ability to enforce the law and the remedies it can pursue in doing so. The two are not the same.
D. Alternatively, CFPB has argued that the district court’s decision was erroneous even if Norfolk Southern did not apply and traditional res judicata principles controlled. There is no need to reach this issue, because CFPB’s claims are barred by the terms of the Consent Judgment.
This objection provides no basis for reversal in any event.
This Court’s cases make clear that courts may consult the terms of a court-entered consent judgment to determine the full range of issues involved in the suit and, thus, the judgment’s claim-preclusive effect.
Barring courts from consulting anything but the complaint would be especially peculiar here, where the barebones D.C. Complaint was filed simultaneously with the Consent Judgment and was not intended to launch contested litigation.
II. If the Court were to reverse the district court’s res judicata ruling, it should remand for the district court to consider the additional grounds Ocwen raised in support of summary judgment.
In addition to res judicata, Ocwen sought summary judgment on Counts I-IX of the amended complaint based on principle of contract law and waiver and on several merits-based arguments.
All of these grounds remain available on any remand.
LIT HAS REVIEWED MANY FIFTH CIRCUIT APPEALS WHERE THIS HAPPENED. THE JUDGES DISMISS THESE CLAIMS AS AN ABUSE BY THE HOMEOWNERS AND SANCTIONABLE CONDUCT: “Foreclosing on borrowers when loss mitigation application is pending (RESPA)”https://t.co/PfhvIcp1Pg #corruption #outlaws pic.twitter.com/qih5Vh5uef
— LawsInTexas (@lawsintexasusa) August 26, 2021
I. The District Court Correctly Held That CFPB’s Claims Are Barred By Res Judicata.
CFPB’s primary argument is that the district court failed to apply this Court’s decision in Norfolk Southern and that its claims are not barred under that decision. Neither argument has merit.
The district court engaged in a thorough analysis of the Consent Judgment’s provisions in assessing their preclusive effect—exactly what Norfolk Southern requires—and it correctly held that by agreeing to the Consent Judgment’s Servicing Standards and Enforcement Terms, the parties intentionally prevented CFPB from bringing any enforcement action outside the Consent Judgment’s comprehensive framework based on conduct encompassed by the Servicing Standards.
A. The District Court Did Not Ignore Norfolk Southern.
CFPB first contends that the district court erred in “fail[ing] to recognize” that this Court’s decision in Norfolk Southern “dictates how it should have evaluated the res judicata effect of the Consent Judgment.”
CFPB Br. 22.
In particular, CFPB complains (at 22-24) that the district court referenced “the traditional four-part test” for res judicata, cited “cases that did not involve the res judicata effect of an earlier settlement reached by the same parties,” and “ignored the intent of the parties to the Consent Judgment,” which CFPB contends is embodied only “in the Release attached to the Consent Judgment.”
These criticisms are a classic attempt to elevate form over substance, and offer no ground for reversing the district court.
In Norfolk Southern, this Court addressed how to determine the preclusive effect of a Rule 41 judgment of dismissal that was entered after the parties settled their dispute.
371 F.3d at 1288.
The Court recognized that, “[i]n the absence of a settlement agreement …, a judgment of dismissal pursuant to Rule 41 should be given the same res judicata effect as any other judgment.”
However, because “[a] judgment dismissing an action with prejudice based upon the parties’ stipulation … receives its legitimating force from the fact that the parties consented to it,” the “expressed intent of the parties is also the determining factor in whether a consent-based judgment is given collateral estoppel effect.”
And because “[t]he best evidence of that intent is … the settlement agreement itself,” the preclusive “scope of the [settlement agreement] should not be determined by the claims specified in the original complaint, but instead by the terms of the Settlement Agreement, as interpreted according to traditional principles of contract law.”
Id. at 1289.
Although the district court discussed the traditional res judicata elements, its decision rested on the Consent Judgment’s terms—just as Norfolk Southern requires.
The court assessed the “detailed Servicing Standards” and “the exclusive dispute resolution procedures and enforcement mechanisms prescribed by the [Consent] Judgment” to conclude that they were “designed to prevent the same genre of loan servicing misconduct” underlying Counts I-IX, and that disputes over Ocwen’s compliance with those Servicing Standards only could be resolved through the “dispute resolution procedures and enforcement mechanism prescribed by the [Consent] Judgment.”
Appx, Doc. 764, at 21-22; see id. at 5-10.
The district court then considered and rejected CFPB’s argument that the Release defines the totality of the Consent Judgment’s preclusive effect.
Id. at 23.
The district court also expressly applied the “modified res judicata” approach outlined in Norfolk Southern. Appx, Doc. 764, at 25 (holding that “the Bureau’s current claims … would still be precluded” under the “modified res judicata analysis”). In doing so, the court held that it was “plainly discernable” from the “express terms of the [Consent Judgment]” that “the parties intended and agreed” that the Consent Judgment’s enforcement regime was exclusive and that the parties meant to preclude any other actions based on categories of conduct encompassed by the Servicing Standards.
Id. at 25-26.
Accordingly, because the Consent Judgment “already established the means by which Ocwen’s noncompliance with federal law would be measured and redressed …, as to matters controlled by the Servicing Standards,” CFPB’s “claims are precluded” under the “modified version of res judicata” from Norfolk Southern.
Id. at 26 (emphasis omitted).
The district court thus plainly relied on the Consent Judgment’s terms to determine that CFPB’s claims were precluded. CFPB’s criticism thus amounts to little more than an objection to the labels the district court used, but that is not a ground for reversal.
See SEC v. ETS Payphones, Inc., 408 F.3d 727, 736 n.10 (11th Cir. 2005) (“We review district court judgments; we do not grade the opinions.”).
To prevail, CFPB must demonstrate error in the substance of the district court’s holding, and, as explained below, CFPB has failed to do that.
HERE’S THE REALITY FOLKS: CORRUPT JUDGES AND LYIN’ BIGLAW LAWYERS GETTIN’ PAID BY BANKSTERS WITH DEEP POCKETS; When HOMEOWNER threatened legal action, PHH responded it was a multi-billion dollar company with deep pockets and a “bus load” of attorneys… https://t.co/eBf0hTb7t7 pic.twitter.com/PozZQ6sKqU
— LawsInTexas (@lawsintexasusa) August 26, 2021
B. CFPB’s Claims Are Precluded By The Terms And Structure Of The Consent Judgment’s Comprehensive Servicing Standards And Enforcement Terms.
CFPB’s primary argument is that the Consent Judgment’s preclusive effect must be determined solely from the Release, and that this action is not precluded because CFPB released only claims based on conduct preceding the filing of the D.C. Complaint.
See CFPB Br. 24-32.
That myopic focus on one portion of the Consent Judgment violates basic principles of contract interpretation because it ignores the Consent Judgment’s comprehensive Servicing Standards and Enforcement Terms.
“In cases governed by federal law, settlement agreements and consent decrees are interpreted according to ‘principles of contract law.’” Pottinger v. City of Miami, 805 F.3d 1293, 1298 (11th Cir. 2015); see Norfolk Southern, 371 F.3d at 1290.
Under traditional principles of contract law, a court must “constru[e] the contract to effectuate the parties’ intent,” and that intent is discerned “by reading the words of a contract in the context of the entire contract” and its structure.
Feaz v. Wells Fargo Bank, N.A., 745 F.3d 1098, 1104 (11th Cir. 2014); Slater v. Energy Servs. Grp. Int’l, Inc., 634 F.3d 1326, 1330 (11th Cir. 2011) (“The court must look at the contract as a whole …, and the purpose of the agreement to best determine the intent of the parties in interpreting the agreement.”).
It follows that courts may not interpret a contract by isolating words or portions of the agreement from the remainder.
Hegel v. First Liberty Ins. Corp., 778 F.3d 1214, 1221 (11th Cir. 2015) (“[t]erms and phrases” of a contract “cannot be viewed in isolation”) (applying Florida law).
The language and structure of the Consent Judgment clearly evince the parties’ intent to preclude enforcement actions outside the D.C. court that, like this one, are premised on categories of conduct governed by the Servicing Standards and Enforcement Terms.
Ocwen agreed to comply with more than 300 discrete Servicing Standards for the three-year duration of the Consent Judgment. At the same time, the Consent Judgment established an exclusive enforcement framework to redress any non-compliance with those Servicing Standards.
These provisions, taken together, create a comprehensive regulatory regime for conduct subject to the Servicing Standards, thus evidencing the parties’ intent to preclude CFPB from pursuing a separate enforcement proceeding outside that framework with respect to conduct encompassed by the Servicing Standards. And because the Servicing Standards encompass the precise categories of conduct underlying Counts I-IX of CFPB’s complaint, CFPB is prohibited from pursuing this enforcement action.
1. The Servicing Standards Encompass All Of The Categories Of Alleged Conduct Underlying CFPB’s Claims.
The Servicing Standards contain a comprehensive set of requirements governing many aspects of Ocwen’s mortgage servicing activities, covering the entire range of conduct underlying Counts I-IX of CFPB’s amended complaint.
See pp. 13-14, supra.
A majority of CFPB’s counts (Counts I, II, and IV-VI) are premised on alleged inaccuracies underlying Ocwen’s system of record, alleged misrepresentations made to borrowers based on inaccurate information, and alleged incomplete statements sent to borrowers.
See pp. 13-14, supra.
The Servicing Standards, however, imposed detailed requirements addressing the accuracy of borrower information held by Ocwen.
In particular, Section I.B of the Servicing Standards sought to ensure that Ocwen maintained accurate borrower information by requiring it to (a) “maintain procedures to ensure accur[ate] and timely updating of borrowers’ account information,” and (b) “maintain adequate documentation of borrower account information.”
Appx, Doc. 32-1, at 71.
Ocwen also was required to utilize an “independent reviewer” to evaluate “[Ocwen’s] systems [of] record … for accuracy and completeness,” and to “take appropriate action to remediate any inaccuracies in borrowers’ account information.”
Id. at 74.
Further, the Standards sought to ensure that borrowers received accurate and complete information by requiring that Ocwen provide “adequate information” on account statements, including “total amount due,” “unpaid principle,” “current escrow balance,” and “allocation of payments.”
Appx, Doc. 32-1, at 72-73; see also id. at 74-75 (requiring Ocwen to provide certain borrowers under threat of foreclosure “an itemized plain language account summary” listing detailed account information).
Several more of CFPB’s counts (Counts III and IX) alleged that Ocwen foreclosed on borrowers after misrepresenting that they had more time to complete loss-mitigation applications, and that Ocwen foreclosed on borrowers while an application was pending.
Appx, Doc. 481 ¶¶218-22, 274-76.
Again, the Servicing Standards speak to this precise category of conduct. See pp. 13-16, supra. For example, they required Ocwen to fully “evaluate borrowers for all available loan modification options” before “referring a borrower to foreclosure,” Appx, Doc. 32- 1, at 84, and prohibited Ocwen from “refer[ring] … [an] account to foreclosure” if a complete, or substantially complete, loan-modification application is submitted within 120 to 130 days of delinquency.
Id. at 84-85.
The Standards also strictly limited Ocwen’s ability to pursue foreclosure for post-referral borrowers if the borrower subsequently submitted a loss-mitigation application.
Id. at 84-88.
Further, to ensure accurate representations to borrowers and to avoid erroneous foreclosures, the Servicing Standards required Ocwen to “disclose and provide accurate information to borrowers relating to the qualification process and eligibility factors for loss mitigation programs.”
Appx, Doc. 32-1, at 92.
And the Standards mandated that an Ocwen customer representative be assigned to each borrower “potentially eligible” for loan modification, to be responsible for reviewing all “relevant records relating to borrower’s account,” and for “timely, adequately, and accurately inform[ing] the borrower of the current status of loss mitigation, loan modification, and foreclosure activities.”
Id. at 81-91 (requiring the single point of contact to “
Count VII also addressed categories of conduct encompassed by the Servicing Standards. Count VII alleged various errors related to the timely payment of hazard insurance for escrow borrowers and the maintenance of accurate escrow information.
Appx, Doc. 481 ¶¶257-59.
But Section I.B of the Standards already required Ocwen to “ensure accur[ate] and timely updating of borrower’s account information, including posting of payments,” and to “provide to borrowers … adequate information on monthly billing or other account statements,” including “clear and conspicuous language” indicating the borrower’s “current escrow balance.”
Appx, Doc. 32-1, at 71-73.
Additionally, for “escrowed accounts,” the Servicing Standards required Ocwen to “advance payments for the homeowner’s existing policy.”
Id. at 108-09.
Finally, Count VIII, which alleged various shortcomings in Ocwen’s “policies and procedures” related to processing borrowers’ complaints, maintaining accurate information regarding foreclosure attorneys, and the transfer of accurate information to new servicers, Appx, Doc. 481 ¶¶263-65, also is addressed by the Servicing Standards.
They required Ocwen to “adopt enhanced billing dispute procedures,” to “[e]stablish readily available methods for customers to lodge complaints,” to “[a]ssess and ensur[e] adequate and competent staff to answer and respond to consumer disputes promptly,” to “[e]stablish a process for dispute escalation,” and to “[t]rack the resolution of complaints.”
Appx, Doc. 32-1, at 73-74.
Ocwen also was required to “adopt policies” to “oversee and manage foreclosure firms, … and other … third parties” that it retained to “provide foreclosure, bankruptcy or mortgage servicing activities,” and to “conduct regular reviews” of foreclosure filings to “verify the accuracy of the statements” made in such filings.
Id. at 78-79.
The Servicing Standards further imposed requirements governing Ocwen’s “transfer of servicing rights … to a third party,” including requirements that Ocwen “inform the successor servicer … whether a loss mitigation request is pending.”
Id. at 101; see also id. at 102-03 (same for borrowers in bankruptcy).
The Servicing Standards thus imposed comprehensive and detailed requirements covering many of Ocwen’s mortgage-servicing activities, including the categories of conduct underlying Counts I-IX. Indeed, as the district court recognized, CFPB conceded that there was facial overlap between the Servicing Standards and the allegations underlying Counts I-IX.
Appx, Doc. 764, at 17.6
And the Monitor tested Ocwen’s compliance with each of the relevant Servicing Standards under the corresponding Metrics.
See pp. 13-14, supra.7
“Moreover, temporarily enjoining the In-Person Requirements plainly promotes “the public interest in … safeguarding public health” because it aligns with the public health guidance to eliminate unnecessary travel and in-person contact. Pashby , 709 F.3d at 331. ” pic.twitter.com/Pp3ZAZ1ZSv
— LawsInTexas (@lawsintexasusa) August 18, 2021
2. The Consent Judgment Established An Exclusive Enforcement Regime To Govern Ocwen’s Compliance With The Servicing Standards And CFPB’s Remedies In Case Of Violation.
The Consent Judgment also established an exclusive enforcement framework to govern Ocwen’s compliance with the Servicing Standards, which strictly limited the circumstances under which CFPB could pursue an enforcement action for a violation of the Servicing Standards and the remedies it could seek in that action.
See pp. 9-11, supra.
The Consent Judgment provides that the “Servicing Standards and Consumer Relief Requirements shall be enforced in accordance with the authorities provided in the Enforcement Terms.”
Appx, Doc. 32-1, at 11, (emphasis added).
Those Enforcement Terms, however, did not give CFPB authority to bring any enforcement action it saw fit; instead, they allow an enforcement action only after the Monitor had determined that Ocwen “exceeded the Threshold Error Rate set for a metric” and had failed to cure that violation in the manner specified by the Enforcement Terms.
Id. at 131-32; see p. 10, supra.
If Ocwen did not exceed the Threshold Error Rate for a given standard, or if it cured a violation that did exceed the Threshold Error Rate, the Enforcement Terms are clear that “no Party”—including CFPB—“shall have any remedy under the Consent Judgment.”
Appx, Doc. 32-1, at 132 (emphasis added).
Thus, CFPB’s only enforcement authority arose if Ocwen failed to cure a “Potential Violation”—
or repeated a Potential Violation of the same Metric after cure—but even then CFPB’s remedies were limited. “[T]he sole relief available” to CFPB was to bring an enforcement action in the Federal District Court for the District of Columbia for a narrow set of remedies:
(a) “non-monetary equitable relief,”
(b) “civil penalties … not more than $1 million per uncured Potential Violation,”
(c) in the event of uncured Potential Violations of certain Metrics, “civil penalties … not more than $5 million.”
Id. at 135 (emphasis added).
The Enforcement Terms therefore cabined CFPB’s authority to pursue an enforcement action based on conduct encompassed by the Servicing Standards to narrowly defined circumstances, and strictly limited the remedies CFPB could pursue in such an action.
3. The Consent Judgment’s Terms Taken Together Indicate The Parties’ Intent To Preclude Any Enforcement Action Outside The Consent Judgment’s Framework.
From this carefully crafted structure, the parties’ “intent is plainly discernable” to bar CFPB from bringing enforcement actions based on conduct encompassed by the Servicing Standards outside the parameters set by the Consent Judgment.
Appx, Doc. 764, at 26 (holding that, “as to matters controlled by the Servicing Standards,” the Consent Judgment “already established the means by which Ocwen’s non-compliance with federal law would be measured and redressed” (emphasis omitted)); see Feaz, 745 F.3d at 1104 (court must “constru[e] the contract to effectuate the parties’ intent”).
The Consent Judgment required Ocwen to abide by a set of more than 300 discrete Servicing Standards encompassing the same categories of mortgage-servicing conduct underlying CFPB’s complaint, while limiting CFPB’s ability to seek redress for violations of those Standards to the narrow set of circumstances specified in the Enforcement Terms.
The Consent Judgment’s detailed and comprehensive provisions evince the parties’ intent to preclude any enforcement proceedings outside the Consent Judgment’s parameters.
Accord Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 (1987) (holding that ERISA’s “detailed provisions,” “comprehensive civil enforcement scheme,” and “carefully integrated civil enforcement provisions” “argue strongly for the conclusion that ERISA’s civil enforcement remedies were intended to be exclusive”); Brown v. Gen. Servs. Admin., 425 U.S. 820, 832-33, 834 (1976) (holding that the “careful and thorough remedial scheme” created by Title VII’s provision for federal employees precluded any other remedy for federal employees’ claims of racial discrimination).
Courts have recognized the common-sense principle that when parties agree to a specific remedial framework, they agree not to pursue remedies outside that framework that would otherwise be available.
For example, in United States v. Paccione, 948 F.2d 851 (2d Cir. 1991), the Second Circuit held that the government could not pursue a statutory remedy that was otherwise available because the government had agreed to a defined set of remedies.
There, the parties had executed a “letter agreement” that was approved by the court to avoid a formal forfeiture hearing related to the defendants’ RICO conviction.
Id. at 854.
Under the agreement, the defendants were required to make installment payments totaling $22 million and to “deliver affidavits confessing judgment” in that amount.
“[I]n the event of default,” the government’s sole remedy was to “enter [the affidavits] as judgments against the defendants” and pursue collection. Id. The defendants defaulted, but rather than adhere to the sole remedy specified in the agreement, the government invoked its statutory authority to substitute certain property of the defendants for the unpaid $22 million.
Id. (citing 18 U.S.C. § 1963(m)(5)).
The Second Circuit held that the settlement agreement barred the government from exercising this statutory authority. The Court recognized that the government ordinarily had the right to “apply for an order forfeiting other property up to the value of the property forfeited in the original order,” but it recognized that “the agreement … provide[d] its own mechanism for separating the defendants from the $22 million cash payments due”—“filing the affidavits of confessions of judgment” and “enforc[ing] the money judgment thereby obtained.”
948 F.2d at 855.
The court thus rejected the government’s argument that it “acquired additional rights” through the agreement, holding instead that the agreement barred the government from invoking a statutory remedy that was “wholly inconsistent with the terms of the agreement.” Id. at 855, 857-58.
That reasoning applies with even greater force here. CFPB agreed to an intricate and comprehensive set of Servicing Standards and to a carefully crafted remedial structure—a far more complex regime than was at issue in Paccione. That agreement necessarily prevented CFPB from pursuing any other remedy related to conduct covered by the Servicing Standards.
Allowing CFPB to pursue an enforcement action outside the Consent Judgment’s framework would defy the parties’ clear expectations and common sense.
Fishman v. LaSalle Nat. Bank, 247 F.3d 300, 302 (1st Cir. 2001) (“Common sense is as much a part of contract interpretation as is the dictionary or the arsenal of canons.”).
As the Supreme Court has recognized in the case on which this Court relied in Norfolk Southern (see 371 F.3d at 1291), consent judgments (like all contracts) “normally embod[y] a compromise; in exchange for the savings of cost and elimination of risk, the parties each give up something they might have won had they preceded with the litigation.”
United States v. Armour & Co., 402 U.S. 673, 681 (1971); see also United States v. Bownes, 405 F.3d 634, 636 (7th Cir. 2005) (“In a contract … one binds oneself to do something that someone else wants, in exchange for some benefit to oneself.”).
CFPB received enormous benefits from the Consent Judgment: Ocwen agreed to “pay … $127.3 million … [for] cash payments to borrowers whose homes were sold in a foreclosure sale,” and to pay or provide an additional “$2 billion … to consumers… to remediate [alleged] harms.” Appx, Doc. 32-1, at 10-11 (emphasis added).
Ocwen also agreed to submit itself to the oversight of the Monitor and the extensive and onerous requirements of the Servicing Standards, Metrics, and Enforcement Terms for the three-year duration of the Consent Judgment—through at least February 2017.
See pp. 7-11, supra.
Complying with the Servicing Standards cost Ocwen another $55 million and hundreds of thousands of employee hours.
See p. 11, supra.
In exchange, CFPB released Ocwen from all claims that might have matured at the time the D.C. Complaint was filed, and agreed to confine its enforcement authority prospectively to the limited circumstances and remedies specified in the Enforcement Terms.
See pp. 7, 9-11, supra.
Thus, in exchange for its agreement to provide billions to consumers and to subject itself to the Consent Judgment’s requirements, Ocwen received certainty and predictability with respect to its obligations and liability exposure for the three-year duration of the Consent Judgment.
In CFPB’s view, however, Ocwen received nothing for its trouble: CFPB could utilize the Consent Judgment’s remedial scheme allowing up to $5 million in penalties while also bringing a full-fledged enforcement action against Ocwen based on the same conduct covered by the Servicing Standards—bypassing the Consent Judgment’s Threshold Error Rate and right to cure, and subjecting uncured violations to double liability.
And those penalties were considerably higher and easier to prove than the comparable civil penalties under the underlying statutes—an aspect of the bargain that benefited CFPB, enabling it to actually recover a high penalty ($1 million) for conduct that exceeded the error threshold without needing to prove that it was anything more than a mistake.
No rational company—particularly one that is publicly traded—would knowingly expose itself to the onerous requirements of the Servicing Standards and the liquidated penalties available under the Enforcement Terms while remaining subject to another suit by CFPB for the same conduct.
“This interpretation … is too absurd to be plausible.”
Johnson Enters. of Jacksonville, Inc. v. FPL Grp., Inc., 162 F.3d 1290, 1330 n.89 (11th Cir. 1998).8
It also would be strikingly unfair: CFPB should not be permitted to reap the benefits of a settlement and then sue for more.
C. The Release Does Not Determine The Preclusive Effect Of The Consent Judgment.
CFPB’s opening brief essentially ignores the Servicing Standards and Enforcement Terms, arguing instead that the preclusive effect of the Consent Judgment is determined exclusively by only one of its provisions—i.e., the Release.
CFPB Br. 29-30 (arguing that the preclusive scope of the Consent Judgment is based on the Release, not “other provisions of the [Consent Judgment]”).
The Release provides that CFPB “fully and finally releases” Ocwen “from all potential liability that has been or might have been asserted by CFPB” that “h[ad] taken place” before December 19, 2013.
Appx, Doc. 32-1, at 162.
The Release then provides that CFPB “reserves” and “does not release any liability” for any other conduct. Id. From this, CFPB contends (at 25-26) that the claims in the amended complaint necessarily fall outside the Consent Judgment’s preclusive scope—leaving CFPB free to bring any and all enforcement actions against Ocwen based on the exact same conduct covered by the Consent Judgment.
But CFPB’s argument conflicts with the fundamental principle that contracts must be interpreted based on “the words of a contract in the context of the entire contract,” and not a myopic focus on isolated provisions.
Feaz, 745 F.3d at 1104 (emphasis added); pp. 31-32, supra (collecting cases); see Norfolk Southern, 371 F.3d at 1288 (consent judgment must be interpreted “according to traditional principles of contract law”).
Thus, the district court appropriately looked beyond the Release to determine the Consent Judgment’s preclusive scope based on the entire agreement.
CFPB contends (at 27, 30) that the Release must define the entire scope of the Consent Judgment’s preclusive effect because it is the more “specific” provision.
Not so. The specific-controls-the-general rule applies “when there is a conflict” between two provisions covering the same subject matter.
Nat’l Cable & Telecomms. Ass’n, Inc. v. Gulf Power Co., 534 U.S. 327, 335-36 (2002); accord United States v. Pielago, 135 F.3d 703, 710 (11th Cir. 1998) (“When two contract terms conflict, the specific term controls over the general one.”).
There is no conflict here: the Servicing Standards and Enforcement Terms govern Ocwen’s mortgage-servicing activities post-dating the filing of the D.C. Complaint, whereas the Release exclusively applies to conduct before the filing.
See p. 7, supra.
The latter claims are released, i.e., extinguished; they cannot be brought even in the D.C. court. See Release, Black’s Law Dictionary (11th ed. 2019) (“release” is “the act of giving up a right or claim to the person against whom it could have been enforced”). By contrast, as the district court recognized, the Servicing Standards and Enforcement Terms did not release claims arising after the filing of the D.C. Complaint; they limited CFPB’s enforcement authority to address the specific future conduct encompassed by the Servicing Standards, channeling it through the procedures, venue, and limited remedies specified in the Enforcement Terms.
See Appx, Doc. 764, at 23 (“The preclusive effect of the [Consent Judgment] … does not negate the Bureau’s enforcement authority; it simply limits it to the boundaries to which the Bureau itself agreed in [the Consent Judgment].”).
Thus, CFPB is entirely incorrect in arguing (at 32) that giving effect to the exclusive Enforcement Terms serves to render the Release “meaningless.” The different provisions address different issues and accomplish different ends.9
CFPB objects (at 28 n.14) that the Servicing Standards and Enforcement Terms should not be read to cabin its enforcement powers because “waiver[s]” of “sovereign power” should be “narrowly construed.”
CFPB relies on Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41 (1986), but that decision says no such thing.
It merely holds that “contractual arrangements” involving a sovereign “‘remain subject to subsequent legislation’ by the sovereign,” unless the agreement says otherwise “in unmistakable terms.”
Id. at 52 (emphasis added).
That speaks only to whether a contract surrenders Congress’s legislative power to change the law; it says nothing about how to interpret an agency’s agreement to bind itself. Before and after Bowen, courts have applied the normal rules of contract interpretation to determine the scope of consent judgments to which the government is a party,
see Armour, 402 U.S. at 677-83; Monahan v. C.I.R., 321 F.3d 1063, 1068 (11th Cir. 2003) (interpreting settlement agreement between the government and a private party according to its plain terms), and agreements whereby the government limits its assertion of statutory authority, see Paccione, 948 F.2d at 857 (holding that government forfeited a statutory remedy by agreeing to narrower contractual remedy).
Relying on Norfolk Southern, CFPB argues (at 28-29) that because the Release is limited to conduct preceding the D.C. Complaint, it automatically follows that CFPB is free to bring any claim that arose after. But as the district court recognized, unlike this case, Norfolk Southern did not involve “the mandatory imposition of alternative dispute resolution procedures and an enforcement schematic governing any future instances of noncompliance” with a consent judgment.
Appx, Doc. 764, at 25.
Rather, in Norfolk Southern, the release was the only provision relevant to deciding the scope of the settlement agreement’s preclusive effect, and so the Court appropriately focused its analysis on that provision.
See 371 F.3d at 1290.
But nothing in Norfolk Southern suggests a rigid rule that courts should focus solely on a release in determining an agreement’s preclusive effect when other provisions of the contract speak to that issue; indeed, the Court said the opposite in requiring that the preclusive effect of settlement agreements be determined under “the traditional rules of contract interpretation.”
Id.; see In re Methyl Tertiary Butyl Ether (MTBE) Prods. Liab. Litig., No. 1:00- 1898, 2015 WL 5051660, at *3 (S.D.N.Y. Aug. 26, 2015) (holding that future claims were precluded based on the terms of the consent judgment even though the release did not cover future claims).10
Finally, CFPB relies (at 32) on the provision of the Consent Judgment providing that “[n]othing in this Consent Judgment shall relieve [Ocwen] of its obligation to comply with applicable state and federal law.” Appx, Doc. 32-1, at 13.
According to CFPB, this provision “emphasizes that nothing in the Release limits the Bureau’s authority to pursue Ocwen for any violations of applicable federal law” after the filing of the D.C. Complaint.
CFPB Br. 32.
That is wrong, for at least two reasons. First, the obligation on the part of Ocwen to “comply with … law” (id. at 31) does not speak to the separate issue of how, where, and to what extent CFPB will raise any failure by Ocwen to comply with the law during the next three years, and what remedies CFPB can pursue.
Second, there is no need to adopt CFPB’s unnatural reading—which negates the exclusivity of the Consent Judgment’s enforcement procedures—to give this provision some work to do.
The natural reading of this provision is that it simply rules out any negative implication about laws not implicated by the Consent Judgment or conduct occurring after it expires.
Even if that provision bore the meaning CFPB gives it, the very next paragraph of the Consent Judgment makes clear that the exhibits to the Consent Judgment—including the Servicing Standards and Enforcement Terms—“govern” in the event of a conflict.
Appx, Doc. 32-1, at 13.
And, as explained above, the Servicing Standards and Enforcement Terms plainly evidence the parties’ intent to limit CFPB’s enforcement powers for the duration of the Consent Judgment to the confines of the Servicing Standards and Enforcement Terms.
See pp. 32-44, supra; Internaves de Mexico s.a. de C.V. v. Andromeda Steamship Corp., 898 F.3d 1087, 1093 (11th Cir. 2018) (“[W]e are obliged to apply the contract’s internal conflict- resolution mechanism.”).11
Bribery, Corruption, Fifth Circuit, Louisiana, Bankers, Judges, Lawyers = Outlaws. Same ole, same ole.
— LawsInTexas (@lawsintexasusa) August 22, 2021
D. The District Court’s Application Of Res Judicata Principles Is No Basis For Reversal.
CFPB argues in the alternative (at 33-42) that if the Court considers traditional principles of res judicata (not just Norfolk Southern), the district court’s decision misapplied those traditional factors.
In particular, CFPB contends that the district court erred by looking to the terms of the Consent Judgment—including the Servicing Standards and Enforcement Terms—to determine which claims were barred, rather than focusing just on the allegations in the D.C. Complaint.
CFPB Br. 35-36, 39.
There is no need for this Court to address this issue, because the district court correctly held that CFPB’s claims were barred by the Consent Judgment’s terms. Still, if the Court chooses to reach it, this argument is wrong and offers no basis for reversal.
Res judicata requires, among other elements, an “identity of the causes of action.”
Adams v. S. Farm Bureau Life Ins. Co., 493 F.3d 1276, 1289 (11th Cir. 2007).
This requires the court to assess “‘the factual issues to be resolved [in the second cause of action], and compare them with the issues explored in’ the first cause of action.”
Manning v. City of Auburn, 953 F.2d 1355, 1359 (11th Cir. 1992).
CFPB appears to contend that courts conducting this analysis are restricted to comparing the allegations in the first complaint with those in the second potentially precluded action.
E.g., CFPB Br. 38, 39.
But as CFPB acknowledges (at 41), the barebones D.C. Complaint “included only the essential factual allegations,” precisely because the parties had agreed even before the D.C. Complaint was filed to resolve the lawsuit through the Consent Judgment. Especially in this context, where the defendant has no knowledge of the complaint’s allegations until a negotiated consent judgment is submitted to the court for approval, the substance of the negotiated resolution, not the pro-forma complaint, is the best indicator of how the parties understood the “issues to be resolved.”
Manning, 953 F.2d at 1359.12
In fact, this Court has looked to both the factual allegations in the complaint and the terms of the settlement agreement as part of the traditional res judicata analysis.
See TVPX ARS, Inc. v. Genworth Life & Annuity Ins. Co., 959 F.3d 1318, 1326 (11th Cir. 2020) (“When assessing the res judicata effect of a prior action, we are not limited to the allegations raised in a prior complaint.
We may also consider the parties’ settlement documents to determine the claims at issue in a prior action.” (citation omitted) (emphasis added));
Adams, 493 F.3d at 1290-91 (determining res judicata effect of prior settlement by examining complaint, class notice, and settlement).
Other circuits have held the same. E.g., Goldman v. Northrop Corp., 603 F.2d 106, 109 (9th Cir. 1979) (holding that res judicata applied even though “the claims in the present suit were not the subject of the [prior] complaint” because “[the allegations] were taken into consideration during the negotiations leading to settlement and the settlement and ultimate judgment took them into account”).
CFPB’s reliance (at 34, 39) on this Court’s decisions in Pleming v. Universal-Rundle Corp., 142 F.3d 1354, 1356-57 (11th Cir. 1998), and Maldonado
v. United States Att’y Gen., 664 F.3d 1369, 1376 (11th Cir. 2011), is thus misplaced.
Neither case involved a settlement agreement (or anything of the kind), and so neither decision holds that a district court is forbidden from referencing the terms of a Consent Judgment in the context of the traditional res judicata analysis.
See Pleming, 142 F.3d at 1356-57; Maldonado, 664 F.3d at 1371-73.
To the extent CFPB faults the district court for not specifically discussing allegations in the D.C. Complaint, its argument is both forfeited and without merit.
First, CFPB never argued below that the district court was required to consult the D.C. Complaint’s allegations, rather than the Consent Judgment’s terms, as part of a traditional res judicata analysis.
See Doc. 740, at 9-10 (resisting res judicata argument based on the timing of the amended complaint’s allegations);
Ledford v. Peeples, 657 F.3d 1222, 1258 (11th Cir. 2011) (“[W]e do not consider arguments raised for the first time on appeal”).13
Second, the criticism is wrong for the reason already given: the D.C. Complaint was filed as a procedural formality to allow for the entry of the detailed Consent Judgment negotiated by the parties, and so it “[l]ack[ed] detail” and “included only the essential factual allegations.”
CFPB Br. 41-42; see SAppx, Doc. 731-2 ¶20.
The district court appropriately focused its analysis on the Consent Judgment filed simultaneously with the complaint that was designed to “resolve [the] claims” in the D.C. Complaint, rather than that complaint’s skeletal allegations.
Appx, Doc. 32-1, at 8-9.
And, as already discussed, the terms of the Consent Judgment are sufficient to encompass the categories of conduct underlying Counts I-IX.
See pp. 13-14, supra.
Finally, CFPB makes a separate attack on the district court’s analysis with respect to Counts IV, VII, VIII, and IX, which are premised on RESPA regulations that took effect after the D.C. Complaint was filed.
See CFPB Br. 40-41 n.19.
According to CFPB, the district court’s application of res judicata to these counts is flawed because the “new regulatory requirements” underlying these counts were “not addressed in the D.C. complaint or in the Servicing Standards.”
CFPB Br. 41.
But as already explained and as CFPB well knows, these regulations were finalized before the D.C. Complaint was filed and went into effect before the Consent Judgment was entered, and the Servicing Standards do encompass the categories of conduct underlying those counts.
See pp. 13-14 & n.11, supra.
In summary, even under a traditional res judicata approach, the district court appropriately considered the terms of the Consent Judgment in concluding that CFPB’s claims are barred. CFPB’s criticisms offer no basis for reversal.
The above pic (State: MS);
Judge John Whitfield
Judge Wes Teel
Trial lawyer and financial donor; Paul Minor
Let’s not forget what @ChuckGrassley said about impeachment, 2 judges in 6 years.
Where were they from?
1. Porteous = LA
2. Kent = TX
All in Fifth Cir. pic.twitter.com/pRDTcgsmfG
— LawsInTexas (@lawsintexasusa) August 22, 2021
II. The District Court Has Not Yet Considered Ocwen’s Additional Grounds For Summary Judgment.
Even if this Court were to agree with CFPB on res judicata, Ocwen asserted several additional bases for summary judgment in the district court, which would require a remand.
First, Ocwen argued that CFPB waived its right to bring an enforcement action.
Doc. 730, at 13.
The Supreme Court has recognized that parties, including the government, can “waive their right to litigate … issues involved in [a] case” by entering into a settlement agreement.
Armour, 402 U.S. at 681.
Here, CFPB waived its right to bring this enforcement action, seeking penalties and other remedies to the full extent statutorily defined, by agreeing to the Consent Judgment’s comprehensive framework and its exclusive enforcement regime. Moreover, CFPB failed to raise any concerns regarding Ocwen’s mortgage- servicing conduct with the Monitor during the entire three-year duration of the Consent Judgment.
As a member of the Monitoring Committee, CFPB received the Monitor’s periodic reports and conferred with the Monitor regarding his periodic reviews of Ocwen’s compliance with the Servicing Standards.
See Appx, Doc. 32-1, at 122, 130.
CFPB also was invited to participate in numerous meetings concerning Ocwen’s performance under the Consent Judgment.
See pp. 11-12, supra.
And CFPB had its own supervisory authority over Ocwen.
12 U.S.C. § 5514.
Thus, CFPB was well-aware of Ocwen’s mortgage-servicing activities—including that Ocwen did not perfectly comply with the Servicing Standards—but it never raised any of the alleged conduct underlying Counts I-IX with the Monitor. By staying silent for the entire duration of the Consent Judgment when the conduct underlying the amended complaint was supposedly occurring, CFPB waived any right to bring this enforcement action.
See Doc. 730, at 9-10.
Second, in addition to res judicata, Ocwen argued that CFPB’s enforcement action breaches the Consent Judgment.
Doc. 730, at 10-12.
CFPB contends that Norfolk Southern requires the Court to assess the Consent Judgment’s claim- preclusive effect based solely on the Release and “not the nature of the other provisions of the settlement.”
CFPB Br. 29-30.
Even if res judicata required ignoring parts of the parties’ agreement, contract enforcement requires the court to “look at the contract as a whole”—which would include the Servicing Standards and Enforcement Terms.
See Slater, 634 F.3d at 1330.
And, as explained above, the Consent Judgment provides the complete set of standards and sole means of enforcement for Ocwen’s mortgage-servicing conduct during the three-year term.
Third, Ocwen sought summary judgment on several merits-based grounds. Ocwen argued that it was entitled to summary judgment because CFPB lacked sufficient proof of a violation with respect to any of the two million loans underlying CFPB’s claims.
Doc. 730, at 15-24.14
Ocwen also sought summary judgment on several claim-specific and defendant-specific grounds.
Id. at 27-33.
Because the court granted summary judgment for Ocwen based on res judicata, the court “reserve[d] ruling on the[se] alternative grounds,” Appx, Doc. 764, at 28, and so they remain available on remand if the Court were to reverse.
The 5th Cir. think time will allow the #corruption to fade away. Not so. We’ve compiled the largest dossier of Judicial Corruption in the USA and adding to it every day. Criminals on the Benches Must Go. We Call ’em Outlaws in Dirty Black Robes. Join Us. https://t.co/YMHOovpCMM pic.twitter.com/gPa8AMSJcs
— LawsInTexas (@lawsintexasusa) August 14, 2021
This Court should affirm the judgment of the district court.
/s/ William M. Jay
William M. Jay
GOODWIN PROCTER LLP
1900 N Street,
Dated: July 22, 2021
Counsel for Defendants-Appellees
CERTIFICATE OF COMPLIANCE
I certify that this brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because it contains 12,995 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(f).
I further certify that this brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6), because this brief has been prepared in a proportionally spaced 14-point Times New Roman typeface using Microsoft Word.
Dated: July 22, 2021
/s/ William M. Jay
William M. Jay
United States Court of Appeals for the Eleventh Circuit
United States Court of Appeals for the Eleventh Circuit
|CONSUMER FINANCIAL PROTECTION BUREAU,
Plaintiff – Appellant,
OCWEN FINANCIAL CORPORATION,
Defendants – Appellees.