Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-00744/USCOURTS-casd-3_15-cv-00744-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1681 Fair Credit Reporting Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CAMILA S. RUVALCABA,

Plaintiff,

Case No. 15-cv-744-BAS-DHB

ORDER:

(1) DENYING PROSPECT AND 

ESCROW’S MOTIONS TO 

DISMISS, and

(2) DENYING IN PART AND 

GRANTING IN PART OCWEN’S 

MOTION TO DISMISS

v.

OCWEN LOAN SERVICING, LLC,

PROSPECT MORTGAGE, LLC, and 

PEOPLE’S ESCROW, INC.,

Defendants.

AND RELATED CROSS-CLAIMS

Plaintiff Camila Ruvalcaba filed her Second Amended Complaint (“SAC”) 

alleging four causes of action against Ocwen Loan Servicing, LLC (“Ocwen”), for 

violations of the California Fair Debt Collections Practices Act (“FDCPA”), the 

Federal Fair Credit Reporting Act (“FCRA”), the California Consumer Credit 

Reporting Agencies Act (“CCRA”), and negligence. (ECF No. 64.) Plaintiff also 

alleges counts of negligence against Prospect Mortgage, LLC (“Prospect”) and 

People’s Escrow, Inc. (“Escrow’). (Id.)

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All three Defendants filed Motions to Dismiss. (ECF Nos. 71, 74, 75.) 

Plaintiff opposes these Motions. (ECF Nos. 77, 78, 81.) For the reasons discussed 

below, the Court DENIES Prospect and Escrow’s Motions to Dismiss (ECF Nos. 

74, 75) and DENIES IN PART AND GRANTS IN PART Ocwen’s Motion to 

Dismiss. (ECF No. 71.)

I. STATEMENT OF FACTS1

Plaintiff entered into a mortgage loan with Ocwen (SAC ¶ 25.) In 2013, in 

order to reduce her mortgage payments, Plaintiff attempted to refinance the Ocwen 

mortgage loan with Prospect. (SAC ¶¶ 27–28.) In November 2013, when the 

refinancing was set to take place, Ocwen accidentally debited two mortgage 

payments, which caused Ocwen to send an incorrect payoff quote to the escrow 

company managing the refinance, Escrow. (SAC ¶¶ 29–34.) Ocwen corrected the

accidental debit and provided an updated payoff quote to Prospect, but failed to 

provide the updated quote to Escrow until three weeks after escrow closed. (SAC 

¶¶ 35, 42–43.) Alternatively, Plaintiff alleges Ocwen properly notified Escrow of 

the corrected payoff amount. (SAC ¶ 46.) 

Escrow incorrectly sent Plaintiff notice that the escrow on the refinancing had 

successfully closed, when in fact there was still approximately $5,000 owed to 

Ocwen. (SAC ¶¶ 38, 47.) Ocwen never issued and released the Deed of Trust. (SAC 

¶ 48.) Instead of applying the amount received as a payoff to the mortgage balance, 

Ocwen held the payoff funds in suspense for over seven months and sent mortgage 

statements to Plaintiff. (SAC ¶ 51.)

Plaintiff stopped paying Ocwen and began paying Prospect. (SAC ¶ 55.) 

When she received delinquency notices from Ocwen, she contacted Prospect, who 

assured her she could ignore the collection attempts “and that everything was fine.” 

 

1 All facts are taken from the SAC. See Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th 

Cir. 1996) (The court must accept all factual allegations pleaded in the complaint as true and must 

construe them and draw all reasonable inferences from them in favor of the nonmoving party.)

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(SAC ¶ 57.) None of the defendants informed Plaintiff that there was a problem 

with the payoff balance or the refinancing. (SAC ¶¶ 45, 58, 65.) Ocwen ultimately 

sent derogatory credit information to at least three consumer reporting agencies—

Equifax, Experian, and TransUnion—indicating that Plaintiff had failed to make 

payments on her Ocwen mortgage. (SAC ¶¶ 166–68.)

Plaintiff alleges Ocwen made false or misleading statements to her when it: 

(1) failed to disclose the ongoing payoff dispute with Prospect and simply continued 

to send monthly mortgage account statements (SAC ¶ 65); (2) requested payments 

in substantially higher amounts than the alleged $5000 deficiency (SAC ¶ 66); (3) 

failed to include information that might have helped Plaintiff have any context on 

the payoff dispute or information that could have led Plaintiff to potentially help 

facilitate a resolution of the dispute (SAC ¶ 67); (4) sent statements with wildly 

fluctuating balances without explanation and without referencing the $5000 

delinquency (SAC ¶ 76); (5) claimed Plaintiff could lose her home if she didn’t pay 

more than the $5000 she actually owed (SAC ¶ 82).

II. ANALYSIS

A. Legal Standard

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil 

Procedure tests the legal sufficiency of the claims asserted in the complaint. Navarro 

v. Block, 250 F.3d 729, 731 (9th Cir. 2001). To avoid a Rule 12(b)(6) dismissal, a 

complaint need not contain detailed factual allegations, rather, it must plead “enough 

facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. 

Twombly, 550 U.S. 544, 570 (2007). A claim has “facial plausibility when the 

plaintiff pleads factual content that allows the court to draw the reasonable inference 

that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 

662, 678 (2009) (citing Twombly, 550 U.S. at 556). “Where a complaint pleads facts 

that are ‘merely consistent with’ a defendant’s liability, it stops short of the line 

between possibility and plausibility of ‘entitlement to relief.’” Iqbal, 556 U.S. at 678 

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(quoting Twombly, 550 U.S. at 557). 

“When a pleader is in doubt about what actually occurred or what can be 

established by the evidence, the modern practice allows that party to plead in the 

alternative and make inconsistent allegations.” Mendoza v. Rast Produce Co., Inc., 

45 Cal. Rptr. 3d 525, 531 (Ct. App. 2006) (citing Adams v. Paul, 904 P.2d 1205 (Cal. 

2005)); see also Fed. R. Civ. P. 8(d)(2) (“A party may set out two or more statements

of a claim or defense alternatively or hypothetically[.]”). “If a party makes 

alternative statements, the pleading is sufficient if any one of them is sufficient.” 

Fed. R. Civ. P. 8(d)(2).

“[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to 

relief’ requires more than labels and conclusions, and a formulaic recitation of the 

elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (quoting 

Papasan v. Allain, 478 U.S. 265, 286 (1986) (alteration in original). A court need 

not accept “legal conclusions” as true. Iqbal, 556 U.S. at 678. Despite the deference 

the court must pay to the plaintiff’s allegations, it is not proper for the court to 

assume that “the [plaintiff] can prove facts that [he or she] has not alleged or that 

defendants have violated the . . . laws in ways that have not been alleged.” 

Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 

U.S. 519, 526 (1983).

As a general rule, a court freely grants leave to amend a complaint which has 

been dismissed. Fed. R. Civ. P. 15(a). However, leave to amend may be denied 

when “the court determines that the allegation of other facts consistent with the 

challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. 

v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986).

B. Request for Judicial Notice

Ocwen requests that the Court take judicial notice of the: (1) original note 

with Ocwen; (2) original payoff quote; (3) amended payoff quote; (4) first pay off 

quote after escrow closed; (4) second payoff quote after escrow closed; (6) letter 

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from Ocwen to Ruvalcaba indicating she had a delinquent account; (7) Deed of Trust 

recorded; (8) sample of monthly mortgage statements from Ocwen; (9) sample of 

delinquency notes from Ocwen; and (10) September 19, 2014 letter referenced in 

the Complaint. (ECF No. 72.) Plaintiff objects to this request claiming that it will 

convert the Motion to Dismiss into one for Summary Judgment. (ECF No. 77.) The 

Court disagrees. 

Generally, courts may not consider material outside the complaint when ruling 

on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 

1542, 1555 n.19 (9th Cir. 1990), superseded by statute on other grounds. However, 

documents specifically identified in the complaint whose authenticity is not 

questioned by parties may also be considered. Fecht v. Price Co., 70 F.3d 1078, 

1080 n.1 (9th Cir. 1995) (superseded by statutes on other grounds). Moreover, the 

court may consider the full text of those documents even when the complaint quotes 

only selected portions. Id. It may also consider material properly subject to judicial 

notice without converting the motion into one for summary judgment. Barron v. 

Reich, 13 F.3d 1370, 1377 (9th Cir. 1994).

All of the documents listed in Ocwen’s Request for Judicial Notice are 

referenced and identified in the complaint. Although Plaintiff objects to their 

consideration, she does not claim that the documents lack authenticity. Therefore, 

Ocwen’s Request for Judicial Notice will be GRANTED. (ECF No. 72.)

Escrow requests that the Court take judicial notice of the various Complaints 

filed in this case. (ECF No. 74-3) Although the Court believes such a request is 

unnecessary and would be automatically considered by the Court, the Court will 

GRANT this unopposed request as well. 

C. California FDCPA (Count One)

Plaintiff alleges Ocwen violated certain federal provisions of the FDCPA that 

are incorporated into the California FDCPA, including 15 U.S.C. §§ 1692d (sending 

debt collection letters that were “abusive, oppressive and harassing”), 1692e (using 

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“false, deceptive or misleading misrepresentations or means in connection with the 

collection of [a] debt”), 1692f (using “unfair and unconscionable means to collect or 

attempt to collection any debt”) and 1692c (“attempting to collect an alleged debt 

from a represented party.”) See Cal. Civ. Code § 1788.17 (incorporating these 

federal statutes into the California FDCPA). Plaintiff also alleges that Ocwen 

violated California Civil Code § 1788.14(c) (debt collector who initiates 

communications, other than statements of account, with debtor who debt collector 

has been notified is represented by counsel).

1. § 1692d

“A debt collector may not engage in any conduct [intended] to harass, 

oppress or abuse any person in connection with the collection of any debt.” 15 

U.S.C. § 1692d. The section lists six non-exhaustive examples of such conduct. 

These examples include, but are not limited to: (1) using or threatening to use 

violence, (2) using obscene or profane language, (3) publishing a list of consumers 

who refuse to pay a debt, (4) advertising the sale of any debt, (5) engaging any 

person in a telephone conversation repeatedly or continuously with the intent to 

annoy, abuse, or harass any person at the called number, and (6) calling any person 

without meaningful disclosure of the caller’s identity. Id. The debtor’s protection is 

limited, however, to “oppressive and outrageous” conduct. See Masuda v. Thomas 

Richards & Co., 759 F. Supp. 1456, 1466 (C.D. Cal. 1991) (citations omitted). The 

section does not protect a debtor from mere inconvenience or embarrassment that 

is the natural consequence of a debt collection. Id.

Plaintiff fails to allege any conduct that would fall under this code section. 

She alleges only receiving letters and bills from Ocwen. See Masuda, 759 F. Supp. 

at 1465 (letters represent the least intrusive means of communication with a 

debtor). Although she claims the bills were misleading and/or inaccurate, she does 

not allege any threats of violence, obscene or profane language or other conduct 

that might be construed as conduct intended to harass, oppress or abuse her. 

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Hence, Plaintiff fails to allege a violation of this section.

2. § 1692e

“A debt collector may not use any false, deceptive or misleading 

representation or means in connection with the collection of any debt.” 15 U.S.C. § 

1692e. The false statement must be material. See Donohue v. Quick Collect, Inc., 

592 F.3d 1027, 1034 (9th Cir. 2010) (“[W]e are not concerned with mere technical 

falsehoods that mislead no one, but instead with genuinely misleading statements 

that may frustrate a consumer’s ability to intelligently choose his or her response.”)

“The FDCPA is a strict liability statute that makes debt collectors liable for 

violations that are not knowing or intentional.” Id. at 1030 (quotations omitted); see 

also Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1176 (9th Cir. 

2006) (intent of the debt collector in making the misleading statement is only 

relevant to damages).

In determining whether Plaintiff has alleged sufficient misconduct, the Court 

must engage in an objective analysis “that takes into account whether the least 

sophisticated debtor would be misled by a communication.” Donohue, 592 F.3d at 

1030. “[A] literally true statement can still be misleading.” Gonzales v. Arrow Fin.

Servs., LLC, 660 F.3d 1055, 1062 (9th Cir. 2011). A debt collection letter violates 

this section when it sends a debt collection letter which “can be reasonably read to 

have two or more different meanings, one of which is inaccurate.” Id.

The statute includes a non-exhaustive list of examples of proscribed 

conduct—several of which are at issue in this case. See 15 U.S.C. §§ 1692e(2)(A) 

(misrepresenting amount or character of debt), 1692e(4) (misrepresenting that 

nonpayment of debt will result in sale of property, when such sale would either not 

be lawful or debt collector has no intention of acting on the threat), and 1692e(5) 

(threatening to take action that cannot legally be taken). Plaintiff alleges Ocwen 

falsely stated the amount of the debt, sending statements with wildly fluctuating 

balances which vastly exceeded the $5000 she owed after submitting the pay-off 

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amount. (SAC ¶¶ 66, 76.) Plaintiff also alleges that Ocwen falsely stated that she 

could lose her home if she didn’t pay more than the $5000 owed, even though this 

was legally untrue and Ocwen had no intention of foreclosing. (SAC ¶ 82.) Finally, 

Plaintiff alleges that Ocwen failed to explain or give context to the increasing bills 

she was receiving, despite the fact that it was engaged in a payment dispute with 

Prospect as to the pay-off balance. (SAC ¶¶ 65, 67.)

Under the least sophisticated debtor standard, the SAC adequately states a 

claim under this statute. Plaintiff alleges sufficient facts to support her claim that 

she could not intelligently choose a response because she did not have the context 

regarding the payoff dispute amount that Ocwen (and Prospect) did. 

Ocwen argues its debt collection letters were not deceptive because they 

accurately conveyed a debt that was owed by Plaintiff. However, the Act is designed 

to protect consumers “regardless of whether a valid debt actually exists.” Baker v. 

G.C. Servs. Corp., 677 F.2d 775, 777 (9th Cir. 1982). In this case, Plaintiff alleges 

sufficient facts that, although a debt may have existed, the reason for that debt and 

the amount of that debt was deceptively withheld and misrepresented to her.

Ocwen further argues that, even if its statements were deceptive, Prospect and 

Escrow had knowledge of the deception, and, as agents of Plaintiff, their knowledge 

should be imputed to Plaintiff. However, there is nothing in the SAC that would 

suggest that either Prospect or Escrow knew about the statements being sent by 

Ocwen to Plaintiff. Although they may have had word that the payoff balance was 

incorrect, there is nothing to suggest that they were privy to the communications 

Ocwen was having with Plaintiff. Since there is nothing to suggest in the SAC that 

either Escrow or Prospect had notice of Ocwen’s false, deceptive or misleading 

representations to Plaintiff, Ocwen’s argument on this point must fail.

3. § 1692f

“A debt collector may not use unfair or unconscionable means to collect or 

attempt to collect any debt.” 15 U.S.C. § 1692f. The FDCPA does not define “unfair 

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or unconscionable” but again provides a non-exhaustive list of examples of such 

conduct. 15 U.S.C. § 1692f.

In this case, Plaintiff realleges the false and misleading statements discussed 

above and alleges that this constituted “unfair or unconscionable means” to collect 

on the debt. The Ninth Circuit has found that “one action can give rise to multiple 

violations of the [FDCPA].” Clark, 460 F.3d at 1177. And it is not unusual for an 

action to violate more than one FDCPA provision. Id. 

“While ‘misleading’ practices under § 1692e and ‘unfair’ practices under § 

1692f reference separate categories of prohibited conduct, they are broad, potentially 

overlapping, and are not mutually exclusive. A debt collector’s action could be 

‘misleading’ under § 1692e, ‘unfair’ under § 1692f, or, as alleged here, both. The 

distinct characteristics of § 1692e and § 1692f can also confirm one another.” 

Currier v. First Resolution Inv. Corp., 762 F.3d 529, 536 (6th Cir. 2014).

In this case, Plaintiff alleges that Ocwen’s actions in sending incorrect bills 

were misleading, but Plaintiff also alleges that Ocwen’s actions were unfair: (1) it 

caused the problem in the first place with its erroneous payoff balance, (2) it failed 

to communicate the problem to Plaintiff, and (3) because it failed to explain the 

problem, Plaintiff did not understand she owed a debt, and (4) nonetheless Ocwen 

told the consumer reporting agencies that she was in default. This adequately states 

a claim for an unfair practice under § 1692f.

4. Contact with Represented Party

Plaintiff alleges that Ocwen violated both 15 U.S.C. § 1692c (incorporated by 

reference in the California FDCPA by California Civil Code §1788.17) and 

California Civil Code § 1788.14(c). These code sections, although similarly worded, 

have one distinct difference. Section 1692c(2) directs that:

[A] debt collector may not communicate with a consumer in connection 

with the collection of any debt . . . if the debt collector knows the 

consumer is represented by an attorney with respect to such debt. 

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Section 1788.14(c) states that:

A debt collector shall not initiate communications, other than statements 

of account, when the debt collector has been previously notified in 

writing by the debtor’s attorney that the debtor is represented by such 

attorney with respect to the consumer debt[.]

Cal. Civ. Code § 1788.14(c) (emphasis added). The former does not provide an 

exception for “statement of account” or billing statements. 

In a well-reasoned opinion, the Court in Marcotte v. General Elec. Capital 

Servs, Inc., 709 F. Supp. 2d 994 (S.D. Cal. 2010), discusses this anomaly and 

concludes ultimately that section 1692c, when it is applied via California Civil Code 

section 1788.17, should also provide an exception for billing statements. This Court 

adopts the reasoning and conclusion laid out in Marcotte and finds that a “statement 

of account” or billing statement sent to a represented debtor does not violate either 

section 1788.14(c) or section 1692c. 

In this case, Plaintiff alleges she retained an attorney to assist her in dealing 

with Ocwen’s debt collection who filed a Complaint and sent notice to Ocwen on 

April 6, 2015 that he was representing Plaintiff in connection with this debt. (SAC 

¶ 146.) Despite this notice, Plaintiff alleges Ocwen sent a “collection notice 

correspondence” to her directly requesting that she begin paying Ocwen $4532.45 

on April 27, 2016. (SAC ¶ 147.) Plaintiff also claims that on March 7, 2016, nearly 

a year after the lawsuit was originally filed, Ocwen sent her another “collection 

notice correspondence” instructing Plaintiff to pay Ocwen monthly mortgage 

payments of $4608.42 starting May 1, 2016. (SAC ¶ 156.) 

Ocwen requests that the Court take Judicial Notice of the “collection notice 

correspondence” and points out that this was simply the Escrow Analysis Results 

Ocwen was required to send under Title 12 U.S.C. § 2609(b). The Court agrees. 

The “collection notice correspondence” sent by Ocwen constitutes statutorily 

required “statements of account” and, for the reasons laid out in Marcotte, is not 

actionable under either section 1692c or 1788.14(c).

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D. FCRA, 15 U.S.C. §§ 1681s-2(b)(1) (Count Two)

Congress enacted the FCRA, 15 U.S.C. §§ 1681-1681x, “to ensure fair and 

accurate credit reporting, promote efficiency in the banking system and protect 

consumer privacy.” Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1153 (9th 

Cir. 2009) (quoting Safeco Ins. Co. v. Burr, 551 U.S. 47, 50 (2007)), cert. denied

562 U.S. 828 (2010). Section 1681s-2 lays out the duties with which a furnisher of 

information to credit reporting agencies (“CRAs”) must comply. Id. at 1154. Under 

section 1681s-2(b) a furnisher of information, like Ocwen, must comply with certain 

duties once it gets notice of a dispute from a CRA: (1) it must investigate the dispute, 

(2) it must review all relevant information from the CRA, (3) it must report the 

results of the investigation to the CRA, (4) if the information is incomplete or 

inaccurate it must notify the CRA of this fact, and (5) if the information is incomplete 

or inaccurate or it can’t be verified after investigation, the information must be 

modified or deleted. 15 U.S.C. § 1681s-2(b). 

The duty to report accurate information “not only requires that furnishers 

report information that is accurate, but . . . also requires that the information be 

complete so as to not be misleading.” Venugopal v. Dig. Fed. Credit Union, No. 

5:12-cv-6067 EJD, 2013 WL 1283436, at *3 (N.D. Cal. Mar. 27, 2013). “A claim 

of a violation of § 1681s-2(b) need not allege that the furnished information is 

‘patently incorrect,’ a pleading could sufficiently state a claim if it alleges that the 

report is ‘misleading in such a way and to such an extent that it can be expected to 

adversely affect credit decisions.’” Venugopal, 2013 WL 1283436, at *3 (quoting 

Gorman, 584 F.3d at 1163.) 

A private right of action may arise from the debtor to the furnisher of 

information on this duty to investigate and report laid out in section 1681s-2(b). 

Gorman, 584 F.3d at 1154. In Gorman, the Ninth Circuit concluded that, after 

receiving notice of a dispute from a CRA, a furnisher’s decision to continue 

reporting a disputed debt without any notation of the dispute could present a 

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cognizable claim. Gorman, 584 F.3d at 1164 (citing Saunders v. Branch Banking & 

Trust Co. of Va., 526 F.3d 142, 150 (4th Cir. 2008)). The dispute must be a bona 

fide dispute “that could materially alter how the reported debt is understood.” Id. at 

1163. 

In this case, Plaintiff sufficiently alleges that she notified the CRAs that she 

disputed the credit information furnished by Ocwen and that they timely notified 

Ocwen of this dispute. (SAC ¶¶ 174, 176, 178.) Thus, Ocwen’s duties under section 

1681s-2(b) were triggered.

Plaintiff also alleges that Ocwen’s subsequent investigation was unreasonable 

and failed to result in accurate information being reported to the CRAs. (SAC ¶ 

185). Specifically, Plaintiff alleges that Ocwen “inaccurately and misleadingly 

reported Plaintiff’s alleged debt as outstanding, even though Ocwen’s own . . . 

negligence led to the quote and receipt of the allegedly insufficient payoff funds.” 

(SAC ¶ 183.) “The reported information . . . did not provide any context to end 

users, including potential creditors, of the ongoing payoff dispute Ocwen was having 

with Prospect, while only suggesting that Plaintiff was not paying her mortgage.” 

(SAC ¶ 169.) At a minimum, Plaintiff claims, Ocwen should have notated the 

account as being in dispute. (SAC ¶ 185.)

These allegations are sufficient to state a claim for relief that is plausible on 

its face. The fact that Plaintiff may have owed some amount of money to Ocwen is 

not ultimately dispositive as to whether the failure to provide context, a notation that 

the account was in dispute, or background could be construed at this stage of the 

proceedings to be misleading in such a way, and to such an extent, that it could be 

expected to adversely affect credit decisions. Thus, Ocwen’s Motion to Dismiss this 

Count is DENIED.

E. CCRA, Cal. Civ. C. § 1785.25(a) (Count Three)

The CCRA, similar to the FCRA, requires both that a furnisher of information 

to a CRA not transmit information that is incomplete or inaccurate and complete an 

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investigation upon notice of a dispute. Cal. Civil. Code § 1785.25. Because this 

statute is “substantially based on the Federal Fair Credit Reporting Act, judicial 

interpretation of the federal provisions is persuasive authority and entitled to 

substantial weight when interpreting the California provisions.” Carvalho v. Equifax 

Info. Servs., LLC, 629 F.3d 876, 888 (9th Cir. 2010) (quoting Olson v. Six Rivers 

Nat’l Bank, 3 Cal. Rptr. 3d 301, 309 (Ct. App. 2003)). Thus, similar to the FCRA, 

Plaintiff must allege that the information furnished to the CRAs was either patently 

incorrect or materially misleading. Id. at 889; see also Cisneros v. U.D. Registry, 

Inc., 46 Cal. Rptr. 2d 233, 254 (Ct. App. 1995) (“[A] report violates [the CCRA] 

when it is misleading or incomplete even when it is technically accurate.”)

As discussed above, the allegations in the SAC are sufficient to state a claim 

for relief that is plausible on its face. Carvalho, in which the court refused to hold 

the CRAs responsible for inaccurate reporting when a consumer admitted she was 

in default but claimed the CRA should have included the reasons for the default, is 

distinguishable. The Court in Carvalho noted that CRAs were third parties, lacking 

any direct relationship to the consumer. As such, they were ill-equipped to 

adjudicate the default dispute; CRAs merely collect information and report it. Not 

so for a furnisher of information like Ocwen. In this case, assuming Plaintiff’s 

allegations are true, Ocwen was the cause of the default, failed to keep Plaintiff 

apprised of the context or reason for the default, and failed to note in any way that 

the default was disputed. This is sufficient to state a claim under the CCRA.

F. Negligence (Count Four)

All three Defendants move to dismiss the negligence count against them. 

(ECF Nos. 71, 74, 75.) In order to state a claim for negligence, Plaintiff must allege 

that: (1) Defendant owed her a duty to exercise due care; (2) Defendant breached 

that duty; (3) causation; and (4) damages. Merrill v. Navegar, Inc., 28 P.3d 116, 123 

(Cal. 2001). All three Defendants argue that Plaintiff has failed to allege that they 

owed a duty of care to the Plaintiff. In addition, Prospect argues that Plaintiff fails 

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to allege a causal link between the damages and the alleged actions of Prospect. 

(ECF No. 75.) 

1. Duty Owed by Financial Institutions

“[A]s a general rule, a financial institution owes no duty of care to a borrower 

when the institution’s involvement in the loan transaction does not exceed the scope 

of its conventional role as a mere lender of money.” Nymark v. Heart Fed. Savings 

& Loan Ass’n, 283 Cal. Rptr. 53, 56 (Ct. App. 1991). “Liability to a borrower for 

negligence arises only when the lender ‘actively participates’ in the financed 

enterprise ‘beyond the domain of the usual money lender.” Id. (quoting Wagner v. 

Benson, 161 Cal. Rptr. 516, 521 (Ct. App. 1980)). “In California, the test for 

determining whether a financial institution owes a duty of care to a borrower-client 

‘involves the balancing of various factors, among which are (1) the extent to which 

the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to 

him, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of 

the connection between defendant’s conduct and the injury suffered, (5) the moral 

blame attached to the defendant’s conduct, and (6) the policy of preventing future 

harm.’” Nymark, 283 Cal. Rptr. at 58 (quoting Connor v. Great Western Sav. & Loan 

Ass’n, 447 P.2d 609, 617 (Cal. 1968)). 

In the SAC, Plaintiff alleges that both Ocwen and Prospect knew there was a 

problem with the refinancing and negotiated with each other regarding the same, but 

failed to share the problems with her. (SAC ¶¶ 58–59, 65.) In fact, she alleges that 

she called Prospect multiple times and it assured her “everything was fine” and she 

could ignore the delinquency notices from Ocwen. (SAC ¶ 57.) At this point, 

Prospect’s conduct was intended to affect the Plaintiff and the harm of ignoring the 

delinquency notices would foreseeably cause her harm. She did, in fact, suffer harm 

when Ocwen reported her delinquency to credit reporting agencies. Assuming the 

allegations in the SAC are true, as the Court must do, Prospect assumed a duty of 

care at the point when it assured Plaintiff everything was okay despite knowing that 

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there was a problem with the refinancing.

With respect to Ocwen, the reason the payoff balance was incorrectly 

calculated, according to the SAC, was because Ocwen erred in debiting two 

mortgage payments. (SAC ¶¶ 29–33.) Ocwen then compounded the error by failing 

to send the amended payoff balance amount to Escrow. (SAC ¶¶ 42–43.) Most 

egregiously, however, Ocwen then proceeded to send delinquent notices to Plaintiff 

without explaining what it had done wrong causing the delinquency to occur. (SAC 

¶ 65.) Again, assuming these allegations in the SAC are true, Ocwen’s actions were 

intended to affect the Plaintiff, harm to her was foreseeable, and she suffered harm 

directly because of Ocwen’s multiple mistakes. The fact that Ocwen then proceeded 

to forward her delinquency to the credit reporting agencies increases the moral blame 

attached to the conduct.

According to the facts alleged in the SAC, both financial institutions assumed 

a greater role than just that of a financial institution in this case. Therefore, the Court 

finds both Ocwen and Prospect owed Plaintiff a duty of care.

2. Duty Owed by Escrow Company

“It is generally held that no liability attaches to the escrow holder for his 

failure to do something not required by the terms of the escrow or for a loss incurred 

while obediently following his escrow instructions.” Axley v. Transamerica Title 

Ins., Co., 151 Cal. Rptr. 570, 574 (Ct. App. 1978) (quoting Lee cv. Title Ins. & Trust 

Co., 70 Cal. Rptr. 378, 380 (Ct. App. 1968)). The escrow holder “has no general 

duty to police the affairs of its depositors.” Summit Financial Holdings, Ltd. v. 

Continental Lawyers Title Co., 41 P.3d 548 (Cal. 2002) (quotation marks omitted), 

cert. denied 537 U.S. 1001 (2002). However, “[a]n escrow holder is a fiduciary and 

like any other fiduciary is under a duty to communicate to his principal knowledge 

acquired in the course of his agency with respect to material facts which might affect 

the principal’s decision as to a pending transaction.” Axley, 151 Cal. Rptr. at 574

(citing Contini v. W. Title Ins. Co., 115 Cal. Rptr. 257, 263 (Ct. App. 1974)). The 

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escrow company has a duty “to exercise reasonable skill and ordinary diligence in 

its employment” and if it acts negligently “it is ordinarily liable for any loss 

occasioned by its breach of duty.” Axley, 151 Cal. Rptr. at 574.

In the SAC, Plaintiff alleges in the alternative that either Ocwen did not send 

Escrow the amended payoff balance until three weeks after escrow closed (SAC ¶¶

42–43) or Escrow knew the payoff balance had been changed but illegitimately 

closed escrow and told Plaintiff escrow had closed successfully when it had not 

received the correct payoff balance. (SAC ¶¶ 46–48.) If the former is true, Escrow 

has no liability. However, Plaintiff may allege theories of liability in the alternative, 

and if either theory is sufficient, there is no grounds for a motion to dismiss. See 

Fed. R. Civ. P. 8(d)(2).

Assuming the latter is true, Plaintiff has adequately alleged that Escrow failed 

to exercise reasonable skill and ordinary diligence in its employment and failed to 

communicate its knowledge as to material facts (that is, that the payoff balance it 

received was incorrect and escrow should not have closed) to Plaintiff. Hence, at 

this stage of the proceedings, Plaintiff has sufficiently stated Escrow’s breach of its 

duty.

3. Causation

Prospect claims that Plaintiff has failed to allege a causal link between the 

damages and alleged actions of Prospect. In addition, Prospect argues that any 

remedies for an erroneous payoff balance are governed by California Civil Code §

2943(d)(3). However, Plaintiff alleges more than an incorrect payoff balance in the 

SAC. Plaintiff alleges that when she received delinquency notices from Ocwen, she 

called Prospect, who knew there had been a problem with the payoff balance, but 

was told she could ignore the delinquency notices and that everything was fine. 

Assuming this is true, Plaintiff is not limited by Civil Code § 2943, and her damages, 

that is reporting the delinquency to credit reporting agencies, is a direct result of 

Prospect’s reassurances. Hence, Prospect’s argument on this ground must fail.

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III. CONCLUSION

For the reasons outlined above, the Court DENIES Prospect and Escrow’s 

Motions to Dismiss. (ECF Nos. 74, 75). The Court DENIES Ocwen’s Motion to 

Dismiss Count One to the extent it is based on California Civil Code § 1788.17, 15 

U.S.C. §§ 1692e or 1692f, but GRANTS the Motion to Dismiss Count One to the 

extent it is based on any other code section. Finally, the Court DENIES Ocwen’s 

Motion to Dismiss Counts Two through Four. (ECF No. 71.)

IT IS SO ORDERED.

DATED: December 9, 2016

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