Court Opinion

ID: 3000772
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:08:57.49592+00
Date Added: 2024-06-11T11:45:42.745462
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                         ____________

No. 06-3132
IN RE:
    OCWEN LOAN SERVICING, LLC MORTGAGE
    SERVICING LITIGATION.

APPEAL OF:
    OCWEN LOAN SERVICING, LLC, and MOSS, CODILIS
    STAWIARSKI, MORRIS, SCHNEIDER & PRIOR, LLP.
                    ____________
             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
    No. 04 C 02714, MDL No. 1604—Charles R. Norgle, Sr., Judge.
                         ____________
         ARGUED MARCH 28, 2007—DECIDED JUNE 22, 2007
                         ____________

  Before POSNER, ROVNER, and SYKES, Circuit Judges.
  POSNER, Circuit Judge. The defendants in this class
action have been permitted to appeal under 28 U.S.C.
§ 1292(b) from the district judge’s refusal to dismiss, as
preempted by the Home Owners Loan Act (“HOLA”), 12
U.S.C. §§ 1461 et seq., and implementing regulations
promulgated by the Office of Thrift Supervision, 12 C.F.R.
§§ 560.1 et seq., the plaintiffs’ claims under California,
Connecticut, Illinois, New Mexico, and Pennsylvania law.
Pursuant to 28 U.S.C. § 1367 (supplemental jurisdiction),
2                                               No. 06-3132

the plaintiffs appended these state-law claims to their
federal-law claims, upon which the district court’s juris-
diction was premised; these are claims under the Fair
Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq., the
Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 et
seq., and the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq.
   The complaint is a hideous sprawling mess, 40 pages in
length with 221 paragraphs of allegations. We have found
it difficult and in many instances impossible to ascertain
the nature of the charges. It would have been better had
the defendants deferred their motion, and the district
judge his ruling, until either the defendants served con-
tention interrogatories designed to smoke out what exactly
the plaintiffs are charging, or better, because quicker
and cheaper, the judge told the plaintiffs to specify the
acts of the defendants that they are complaining about
so that he could decide how much of the complaint was
preempted. Still, the defendants can hardly be blamed
for wanting to strangle the monster in its crib.
  Ocwen, the principal defendant and the only one we
need discuss (the other defendant is a law firm charged
with having assisted Ocwen in the misconduct of which
the plaintiffs complain), was at the times relevant to this
case a federal savings and loan association engaged in
servicing home mortgages originated by other lenders.
When a loan is secured by a mortgage, the borrower may
be asked to sign various transfer agreements that allow
the mortgagee to assign not only the mortgage itself but
also or instead various rights that the mortgage grants the
mortgagee, such as the rights to collect monthly payments
from the mortgagor, collect late payments from him,
foreclose in the event of default, or place the mortgagor’s
payments for taxes and insurance premiums in escrow. The
No. 06-3132                                                  3

administration of these rights is called “servicing” the
mortgage. If the firm doing the servicing, such as Ocwen in
this case, exceeds its rights under the transfer agreements,
the mortgagor’s recourse is against that firm rather than
against the original mortgagee or the current holder of the
mortgage. See OTS Regulatory Handbook: Thrift Activities
571.1 (Jan. 1994), www.ots.treas.gov/docs/4/429128.pdf
(visited June 5, 2007); “Mortgage Servicing Rights: Traded
Like Baseball Cards?,” www.mortgagenewsdaily.com/
662005_Mortgage_Servicing.asp (visited June 5, 2007).
  Enacted in 1933, HOLA is “a product of the Great
Depression of the 1930’s, [and] was intended ‘to provide
emergency relief with respect to home mortgage indebted-
ness’ at a time when as many as half of all home loans
in the country were in default.” Fidelity Federal Savings &
Loan Ass’n v. de la Cuesta, 458 U.S. 141, 159 (1982) (citations
omitted). HOLA empowered what is now the Office of
Thrift Supervision in the Treasury Department to authorize
the creation of federal savings and loan associations, to
regulate them, and by its regulations to preempt conflict-
ing state law. Id. at 161-62. Ocwen has given up its fed-
eral thrift charter; but this does not affect its defense that
when it committed the acts for which the plaintiffs
are suing any state-law claims based on those acts were
preempted.
  One of OTS’s regulations, the validity of which is not
questioned, allows federal S&Ls to “extend credit as
authorized under federal law . . . without regard to state
laws purporting to regulate or otherwise affect their credit
activities.” 12 C.F.R. § 560.2(a). The regulation goes on to
provide:
    (b) Illustrative examples [of what federal S&Ls can do
    without regard to state laws]. Except as provided in
4                                                No. 06-3132

    § 560.110 of this part, the types of state laws preempted
    by paragraph (a) of this section include, without
    limitation, state laws purporting to impose require-
    ments regarding:
    (1) Licensing, registration, filings, or reports by credi-
    tors;
    (2) The ability of a creditor to require or obtain private
    mortgage insurance, insurance for other collateral, or
    other credit enhancements;
    (3) Loan-to-value ratios;
    (4) The terms of credit, including amortization of loans
    and the deferral and capitalization of interest and
    adjustments to the interest rate, balance, payments due,
    or term to maturity of the loan, including the circum-
    stances under which a loan may be called due and
    payable upon the passage of time or a specified event
    external to the loan;
    (5) Loan-related fees, including without limitation,
    initial charges, late charges, prepayment penalties,
    servicing fees, and overlimit fees;
    (6) Escrow accounts, impound accounts, and similar
    accounts;
    (7) Security property, including leaseholds;
    (8) Access to and use of credit reports;
    (9) Disclosure and advertising, including laws requir-
    ing specific statements, information, or other content to
    be included in credit application forms, credit solicita-
    tions, billing statements, credit contracts, or other
    credit-related documents and laws requiring creditors
    to supply copies of credit reports to borrowers or
    applicants;
No. 06-3132                                                5

    (10) Processing, origination, servicing, sale or purchase
    of, or investment or participation in, mortgages;
    (11) Disbursements and repayments;
    (12) Usury and interest rate ceilings to the extent
    provided in 12 U.S.C. 1735f-7a and part 590 of this
    chapter and 12 U.S.C. 1463(g) and § 560.110 of this
    part; and
    (13) Due-on-sale clauses to the extent provided in 12
    U.S.C. 1701j-3 and part 591 of this chapter.
    (c) State laws that are not preempted. State laws of the
    following types are not preempted to the extent that
    they only incidentally affect the lending operations of
    Federal savings associations or are otherwise consistent
    with the purposes of paragraph (a) of this section:
    (1) Contract and commercial law;
    (2) Real property law;
    (3) Homestead laws specified in 12 U.S.C. 1462a(f);
    (4) Tort law;
    (5) Criminal law; and
    (6) Any other law that OTS, upon review, finds:
    (i) Furthers a vital state interest; and
    (ii) Either has only an incidental effect on lending
    operations or is not otherwise contrary to the purposes
    expressed in paragraph (a) of this section.
   Ocwen makes much of the fact that the Office of Thrift
Supervision has said that in applying the regulation a
court should first decide whether the state law in question
is listed in subsection (b) and, if so, Ocwen argues, that is
6                                                No. 06-3132

the end of the case. “OTS Final Rule,” 61 Fed. Reg. 50951,
50966 (Sept. 30, 1996). Well, of course. And the OTS’s state-
ment further explains that subsection (c), the list of laws
that are not preempted, is designed merely “to preserve
the traditional infrastructure of basic state laws that
undergird commercial transactions, not to open the door
to state regulation of lending by federal savings associa-
tions.” Id. The list in subsection (c) is long and the catego-
ries it covers—contract and commercial law, tort law, and
so forth—are very broad. It would not do to let the broad
standards characteristic of such fields morph into a scheme
of state regulation of federal S&Ls. Hence the statement in
subsection (c) that state laws escape preemption only “to
the extent that they only incidentally affect the lending
operations of Federal savings associations or are other-
wise consistent with the purposes of paragraph (a) of this
section.” See also Bank of America v. City & County of San
Francisco, 309 F.3d 551, 557-61 (9th Cir. 2002); Haehl v.
Washington Mutual Bank, F.A., 277 F. Supp. 2d 933, 939-40,
942-43 (S.D. Ind. 2003); cf. Barnett Bank of Marion County,
N.A. v. Nelson, 517 U.S. 25, 33-34 (1996).
  The line between subsections (b) and (c) is both intuitive
and reasonably clear. The Office of Thrift Supervision has
exclusive authority to regulate the savings and loan
industry in the sense of fixing fees (including penalties),
setting licensing requirements, prescribing certain terms
in mortgages, establishing requirements for disclosure of
credit information to customers, and setting standards for
processing and servicing mortgages. See 12 U.S.C. §§ 1462,
1463, 1464; 12 C.F.R. §§ 500.1, 500.10; “OTS Final Rule,”
supra, 61 Fed. Reg. at 50965. But though it has some prose-
cutorial and adjudicatory powers ancillary to its regula-
tory functions, 12 U.S.C. § 1464(d); 12 C.F.R. § 509.1;
No. 06-3132                                                   7

Simpson v. Office of Thrift Supervision, 29 F.3d 1418, 1422 (9th
Cir. 1994), the Office has no power to adjudicate disputes
between the S&Ls and their customers. See OTS, “How to
Resolve a Consumer Complaint” 1-2, www.ots.treas.gov/
docs/4/480924.pdf (visited June 5, 2007). So it cannot
provide a remedy to persons injured by wrongful acts of
savings and loan associations, and furthermore HOLA
creates no private right to sue to enforce the provisions
of the statute or the OTS’s regulations. Burns Int’l Inc. v.
Western Savings & Loan Ass’n, 978 F.2d 533, 535-37 (9th Cir.
1992).
  Against this background of limited remedial authority,
we read subsection (c) to mean that OTS’s assertion of
plenary regulatory authority does not deprive persons
harmed by the wrongful acts of savings and loan associa-
tions of their basic state common-law-type remedies.
Suppose an S&L signs a mortgage agreement with a
homeowner that specifies an annual interest rate of 6
percent and a year later bills the homeowner at a rate of
10 percent and when the homeowner refuses to pay
institutes foreclosure proceedings. It would be surpris-
ing for a federal regulation to forbid the homeowner’s
state to give the homeowner a defense based on the
mortgagee’s breach of contract. Or if the mortgagee (or a
servicer like Ocwen) fraudulently represents to the mort-
gagor that it will forgive a default, and then forecloses, it
would be surprising for a federal regulation to bar a suit
for fraud. Some federal laws do create such bars, notably
ERISA, see 29 U.S.C. §§ 1132(a), (e), but this is recognized
as exceptional. American Airlines, Inc. v. Wolens, 513 U.S.
219, 232 (1995); Ingersoll-Rand Co. v. McClendon, 498 U.S.
133, 142-43 (1990). Enforcement of state law in either of the
mortgage-servicing examples above would complement
rather than substitute for the federal regulatory scheme.
8                                                  No. 06-3132

 This is well explained in “Preemption of State Laws
Applicable to Credit Card Transactions” ¶ IIC (Opinion of
OTS Chief Counsel, Dec. 24, 1996, 1996 WL 767462):
    State laws prohibiting deceptive acts and practices
    in the course of commerce are not included in the
    illustrative list of preempted laws in § 560.2(b) . . . . The
    [Indiana] DAP [deceptive acts and practices] statute
    prohibits specified acts and representations in all
    consumer transactions without regard to whether the
    transaction involves an extension of credit. Although
    not directly aimed at lenders, this law affects lending
    to the extent that it prohibits misleading statements
    and practices in loan transactions by a federal savings
    association. Accordingly, . . . a presumption arises that
    the DAP statute would be preempted in connection
    with loans made by the Association.
      The OTS has indicated, however, that it does not
    intend to preempt state laws that establish the basic
    norms that undergird commercial transactions . . . . The
    Indiana DAP falls within the category of traditional
    “contract and commercial” law under § 560.2(c)(1).
    While the DAP may affect lending relationships, the
    impact on lending appears to be only incidental to the
    primary purpose of the statute—the regulation of the
    ethical practices of all businesses engaged in commerce
    in Indiana. There is no indication that the law is aimed
    at any state objective in conflict with the safe and
    sound regulation of federal savings associations, the
    best practices of thrift institutions in the United States,
    or any other federal objective identified in § 560.2(a). In
    fact, because federal thrifts are presumed to interact
    with their borrowers in a truthful manner, Indiana’s
    general prohibition on deception should have no
No. 06-3132                                                 9

    measurable impact on their lending operations. Ac-
    cordingly, we conclude that the Indiana DAP is not
    preempted by federal law.
See also Courtney v. Halleran, No. 05-1244, 2007 WL
1309530, at *9 (7th Cir. May 7, 2007); Binetti v. Washington
Mutual Bank, 446 F. Supp. 2d 217, 220 (S.D.N.Y. 2006) (“the
New York Consumer Fraud Statute is precisely the type
of general commercial law designed to ‘establish the basic
norms that undergird commercial transactions’ that OTS
has indicated it does not intend to preempt”); cf. Cliff v.
Payco General American Credits, Inc., 363 F.3d 1113, 1124-25
(11th Cir. 2004); Bank of America v. City & County of San
Francisco, supra, 309 F.3d at 559.
  We must decide, insofar as it is possible to do so with
only the complaint to go on, which claims fall on the
regulatory side of the ledger and which, for want of a better
term, fall on the common law side.
  The first 19 pages of the 40-page complaint accuse Ocwen
of a variety of skullduggery, but do not indicate which bad
acts are being charged as a violation of federal law and
which as a violation of state law. Beginning at the bottom
of page 19, however, the complaint lists the actual claims
and indicates, though murkily, which are federal and
which are state law claims. The first apparent state law
claim is the third on the list and is entitled “fraudulent
concealment.” That term usually refers to a doctrine for
tolling statutes of limitations, but the complaint seems to be
using it to mean simply fraud. This claim alleges that
Ocwen “concealed material facts” from the plaintiffs and
the other members of the class, including “material terms
of the loans.” That sounds like a conventional fraud charge
(though an implausible one—how can the material terms
of the loan be concealed, when they are set forth in the
10                                               No. 06-3132

loan documents?), but there are also references to “unau-
thorized charges,” and it is not indicated whether they
are unauthorized by the loan agreements or forbidden by
state law.
   The breach of contract allegations are elaborated in the
fifth claim (the fourth seeks restitution as a remedy for
the third claim, the one we’ve just been discussing). Here
we read that Ocwen assumed the obligations in the plain-
tiffs’ loan agreements when it took over the loans for
servicing, that the “plaintiffs satisfied their obligations by
making timely payments of principal and interest on their
loans,” but that nevertheless “by charging late fees on
payments that were not late, Ocwen breached its contracts
with Plaintiffs and the Class” and also did so by “increas-
ing the monthly payment amount due without notice” and
“demanding payment of attorneys’ fees in connection
with legal proceedings that have not commenced and/or
have not yet been incurred” (meaning of course that the fees
have not yet been incurred, though the literal antecedent
is “legal proceedings”).
  Although these seem like conventional breach of contract
allegations, Ocwen argues that they are preempted by
subsection (b)(10) of the OTS regulation: “Processing,
origination, servicing, sale or purchase of, or investment or
participation in, mortgages” (emphasis added). At least
so far as bears on this case, servicing refers to the exercise
of rights that are conferred by a partial assignment of a
mortgage by the mortgagee. Instead of assigning the entire
mortgage to Ocwen, the mortgagee in this case assigned
some of the rights created by the mortgage contract—the
“servicing rights”—to Ocwen, which according to the
complaint proceeded to violate its contractual obligations.
It is no different than if the original mortgagee, or an
No. 06-3132                                                 11

assignee of the entire mortgage, had violated the terms of
the mortgage or defrauded the mortgagor. We would
have a different case if state law purported to forbid
servicing or prescribe the terms of the assignment—
suppose a state tried to limit the rights that the assignment
conferred on the servicing S&L. But nothing like that is
suggested here. If an original mortgagee can be sued under
state law for breach of contract, so may the partial assignee
if he violates the terms of the part of the mortgage con-
tract that has been assigned to him.
   The sixth claim is that Ocwen violated a “duty of good
faith and fair dealing.” Most state laws impose a duty of
good faith performance of contracts, meaning that a
party to a contract cannot engage in opportunistic behav-
ior. Martindell v. Lake Shore Nat’l Bank, 154 N.E.2d 683, 690
(Ill. 1958); Hentze v. Unverfehrt, 604 N.E.2d 536, 539-40 (Ill.
App. 1992); Lockwood Int’l, B.V. v. Volm Bag Co., 273 F.3d
741, 745 (7th Cir. 2001) (Wisconsin law); Original Great
American Chocolate Chip Cookie Co. v. River Valley Cookies,
Ltd., 970 F.2d 273, 280 (7th Cir. 1992) (Illinois law) (“con-
tract law imposes a duty . . . to avoid taking advantage of
gaps in a contract in order to exploit the vulnerabilities that
arise when contractual performance is sequential rather
than simultaneous”). An example of such behavior, from
the Lockwood case, is a liability insurance company’s paying
a person who has sued the insured to convert his claim to
one not covered by the insurance policy.
  The full name of the duty, both in the complaint and
in the cases—“duty of good faith and fair dealing”—could
be thought ominously open-ended. But the full name is
merely what is called a “doublet,” a form of redundancy in
which lawyers delight, as in “cease and desist” and “free
and clear.” Bryan A. Garner, The Redbook: A Manual on Legal
12                                                No. 06-3132

Style § 11.2(f) (2d ed. 2006). “Fair dealing” adds nothing
to “good faith.” See, e.g., Beraha v. Baxter Health Care Corp.,
956 F.2d 1436, 1443-44 (7th Cir. 1992) (Illinois law); Restate-
ment (Second) of Contracts § 205 (1979).
  The seventh claim charges Ocwen with “conversion of
funds.” If Ocwen converted borrowers’ funds that it was
holding in escrow to its own use, it would be guilty of
the tort of conversion, but for all we can tell the claim may
be nothing more than a rewording of the fraud claims.
  The eighth claim is purely remedial; it seeks injunctive
relief. Of course it is not a claim, that is, a cause of action,
and should not have been labeled as such; it is a further
example of how poorly drafted the complaint is.
  The ninth claim alleges violations of the California
Business & Professions Code §§ 17200 et seq. Not all state
statutes that might be invoked against a federal S&L are
preempted, any more than all common law doctrines are;
for remember that contract and commercial law are among
the laws listed in subsection (c) of the regulation, and all
states have adopted the Uniform Commercial Code. If
the California Business & Professions Code is some
modest supplement to the UCC, then presumably it is
not preempted. But it may be more, since it forbids
“unfair competition” defined as “any unlawful, unfair or
fraudulent business act or practice and unfair, deceptive,
untrue or misleading advertising.” Id. § 17200; see Commit-
tee on Children’s Television, Inc. v. General Foods Corp., 673
P.2d 660, 668 (Cal. 1983); People v. Duz-Mor Diagnostic
Laboratory, Inc., 68 Cal. App. 4th 654, 658 (1998). As inter-
preted by the complaint, this claim charges a gallimaufry—
a macédoine—of unlawful acts, including failing to provide
mortgagors with adequate monthly statements of their
account balances, assessing “excessive” late fees, and
No. 06-3132                                                13

“force placing insurance on properties that already have
insurance coverage.” There is no indication that these
practices involve either breach of contract or misrepresen-
tation, and it is apparent that prohibiting them could
interfere with federal regulation of disclosure, fees, and
credit terms.
  Other allegations in the ninth claim may not be pre-
empted, such as “failing to apply customers payments,”
“making improper negative reports about customers,” or
“forc[ing] customers to pay amounts they do not actually
owe under threat of losing their homes.” But one would
have to know more about the specific conduct being
charged to make a judgment. For example, those customers
who “do not actually owe” anything—is this by virtue of
the terms of the loan, or by virtue of some state law that
regulates credit terms? In the latter event, this part of the
claim would be preempted.
  The ninth claim also charges a violation of a provision
of another California statute, which forbids imposing a
late charge for an installment payment that is no more than
ten days late. Cal. Civ. Code § 2954.4(a). It is clearly pre-
empted.
   The tenth claim is based on still another California
statute, the Consumers Legal Remedies Act, Cal. Civ. Code
§§ 1750 et seq. The plaintiffs interpret the statute to forbid
deceptive practices, such as falsely representing sponsor-
ship or approval of Ocwen’s services. If this is like com-
mon law fraud, then it probably is not preempted. But is
it? One cannot tell from the complaint whether, for ex-
ample, the charge is limited to deliberate deception or
whether as interpreted by the plaintiffs the Act creates a
code of truthful marketing that would constitute the
regulation of advertising, which is one of the preempted
categories listed in subsection (b).
14                                              No. 06-3132

   The eleventh claim continues with the Consumers Legal
Remedies Act but adds that Ocwen has engaged in
“unfair” debt collection, specifically by misrepresenting
that it incurred fees or other charges for which it is en-
titled to reimbursement under its loan contracts. But the
specifics are offered merely as examples of Ocwen’s
“unfair” practices in violation of the Act, rather than as
the entirety of the allegations. Again we don’t know
whether the charge goes beyond common law fraud.
   The twelfth claim is based on the Connecticut Unfair
Trade Practices Act, Conn. Gen. Stat. §§ 42-110a et seq.
Some of the specific charges may well be preempted, such
as that Ocwen charged more for replacement hazard
insurance than what the insurance cost. If this is meant to
suggest that the Act can be used to impose a cost-plus
pricing scheme on federal savings institutions, it is pre-
empted, but maybe the loan contracts at issue forbade the
mortgagee to charge more than the cost of the insurance.
The other allegations in this claim are of abusive debt-
collection practices similar to those forbidden by the
federal Fair Debt Collection Practices Act, one of the plain-
tiffs’ federal claims; it is unclear what the Connecticut Act
adds that would not be preempted—probably nothing. The
claim that the plaintiffs “received exorbitant and usurious”
mortgages is preempted. A mysterious claim that Ocwen
knowingly concealed in its advertising “material facts
about the deceptive mortgages” may not be preempted,
depending however on what a “deceptive mortgage” is
(probably a misprint).
  The thirteenth claim repeats the charge of fraud, but this
time under New Mexico’s Unfair Trade Practices Act,
New Mexico Stat. Ann. §§ 57-12-1 et seq. It goes on to
charge “a gross disparity between the value received by the
No. 06-3132                                              15

[class] members [in New Mexico] and the price paid,” a
charge that clearly is preempted.
   The fourteenth claim is under the Illinois Consumer
Fraud and Deceptive Business Practices Act, 815 ILCS
505/1 et seq., and complains that Ocwen “demand[s] [from
the mortgagors] payments of fees for an entire foreclosure
case at its inception.” If this demand is forbidden by the
loan contract, then the charge is not preempted; otherwise,
it probably is.
  The fifteenth claim is under Pennsylvania’s Uniform
Trade Practices and Consumer Protection Law, 73 Pa. Stat.
§§ 201-1 et seq., and contains a number of preempted
claims, such as charging “unreasonable fees,” failing to
provide borrowers with itemizations, “coercing borrowers
to remit payments through EZ Pay,” and imposing
“predatory loan charges,” along with straight fraud
claims that probably are not preempted and charges that
cannot be classified because too little information is
provided, such as “applying loan payments to wrongful
fees and charges first.”
  The sixteenth claim is under another Pennsylvania
statute, the Fair Credit Extension Uniformity Act, 73 Pa.
Stat. §§ 2270.1 et seq. It is basically a claim of deceptive
practices in collection, but the frequent references to
“improper,” “unfair,” and “unconscionable” make classifi-
cation impossible.
  The seventeenth claim returns us to New Mexico law,
but this time with charges of slander of title—that, presum-
ably to obtain repayment, Ocwen filed a lis pendens (a
notice of litigation affecting real property, recorded in
the registry of deeds) without a valid basis. This would
not be preempted.
16                                             No. 06-3132

  The eighteenth claim is against a bank that is no longer
a defendant, or at least not a party to the appeal.
  The nineteenth claim alleges negligence, with no further
explanation. The twentieth alleges fraud, and does not
appear to be preempted, though this could depend on the
nature of the fraud, which is unexplained. This and other
claims of fraud may fail to comply with the requirement
in Rule 9(b) of the Federal Rules of Civil Procedure that
the complaint plead fraud with particularity, but the
issue is not before us on this interlocutory appeal.
  The twenty-first claim, which is similar to the seven-
teenth, charges Ocwen with having defamed some of the
plaintiffs by falsely representing that they were delinquent
in repaying their loans. A charge of defamation (which
would require, however, that Ocwen have made the false
representation to third parties, and not just to the borrow-
ers) is a good example of claim that the regulation does
not preempt.
  The twenty-second claim charges fraud, but without
specifying the misrepresentations (or misleading omis-
sions) constituting the fraud—and thus almost certainly
violates Rule 9(b). The twenty-third and last claim is
federal.
  This tedious recital shows that the case is largely unripe
for a determination of preemption. Despite its length, the
complaint is vague. Some of the charges are pretty clearly,
even certainly, preempted, as we have tried to indicate.
Others probably are not, though this may depend on
particulars omitted from the complaint. Many of the
charges are so vaguely worded that we cannot guess
whether they are preempted or not.
No. 06-3132                                               17

  The complaint was filed in April 2004 after the transfer
of the various suits against Ocwen to the Northern District
of Illinois. Rather than trying to rule on preemption on
the basis of an uninformative complaint, the district
judge should have required the plaintiffs to specify the
acts of Ocwen that they contend violate state law. Three
years have been wasted. On remand, the judge must focus
on the acts alleged in the complaint, seeking clarification
from the plaintiffs where necessary and deciding in
accordance with this opinion which are preempted and
which are not. He must avoid the further protraction of
this unwieldy litigation.
  He will also want to consider whether any portions of
the complaint should be dismissed for failure either to
comply with Rule 9(b) or to comply with the recent plead-
ing standard announced by the Supreme Court in Bell
Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1967-69 (2007).
The Court held that a complaint that charges an agreement
between firms not to compete, in violation of antitrust law,
must contain “enough factual matter (taken as true) to
suggest that an agreement was made . . . . An allegation of
parallel conduct and a bare assertion of conspiracy will not
suffice.” The Court rejected the heretofore canonical
formula of Conley v. Gibson, 355 U.S. 41, 45-46 (1957), “that
a complaint should not be dismissed for failure to state a
claim unless it appears beyond doubt that the plaintiff
can prove no set of facts in support of his claim which
would entitle him to relief.” The Court was concerned that
Conley’s formula might be invoked to condemn the defen-
dant in an antitrust case to conducting expensive pretrial
discovery, in order to demonstrate the groundlessness of
the plaintiff’s case. The present case is not an antitrust
case, but the district court will want to determine whether
18                                            No. 06-3132

the complaint contains “enough factual matter (taken as
true)” to provide the minimum notice of the plaintiffs’
claim that the Court believes a defendant entitled to.
  In the present posture of the litigation, however, the
denial of the motion to dismiss the complaint must be
                                               AFFIRMED.

A true Copy:
       Teste:

                        _____________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                  USCA-02-C-0072—6-22-07