United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
G . FLEISSIG UNITED STATES DISTRICT JUDGE.
matter is before the Court on Defendant's motion to
dismiss counts II-IV of Plaintiff's amended complaint for
failure to state a claim pursuant to Rule 12(b)(6). ECF No.
51. For the reasons set forth below, the motion will be
granted in part and denied in part.
Delmar Financial Company (Delmar) is a mortgage lender.
Defendant Ocwen Loan Servicing (Ocwen) is a mortgage loan
servicer. In January 2014, Delmar and Ocwen entered into a
Subservicing Agreement, governed by New York law, pursuant to
which Ocwen was to act as Delmar's subservicer, providing
loan servicing support such as collecting payments from
borrowers and remitting those payments to secondary market
investors. The Agreement contains numerous representations
and warranties by which Ocwen affirmed its ability to perform
its obligations thereunder, i.e., its operational
capabilities, its good standing, compliance with applicable
laws, and the absence of litigation and other impediments to
December 2017, Delmar filed a lawsuit alleging that Ocwen had
breached the Agreement by failing to perform in numerous
respects. Specifically, Delmar claims that Ocwen
failed to initiate timely foreclosures, used an inadequate
service platform, violated regulatory rules, and committed a
variety of other operational errors that caused Delmar to
incur losses. In October 2018, Delmar amended its complaint
to add tort claims of fraudulent misrepresentation (count
II), fraudulent omission (count III), and negligent
misrepresentation (count IV), asserting that Ocwen knew
before signing the Agreement that it would be unable to
perform due to massive systemic deficiencies and resultant
relevant to these additional claims, Delmar's complaint
sets forth the following chronology of Ocwen's regulatory
problems. In 2011, Ocwen signed an agreement with the New
York State Department of Financial Services requiring Ocwen
to adhere to applicable industry regulations. After failing
to comply, in December 2012, Ocwen signed a consent order
imposing two years of compliance monitoring by an independent
compliance manager, which began in July 2013. According to
Ocwen's Form 10-Q for the quarter ending September 30,
2013, Ocwen was “subject to a number of pending federal
and state regulatory investigations.” In December 2013,
just days before Ocwen signed the Subservicing Agreement with
Delmar, the compliance manager retained in the New York State
matter reported that Ocwen's technology systems and
personnel were inadequate and ineffective, causing a backlog
of over 400, 000 loans. Around the same time, Ocwen was sued
by the Consumer Financial Protection Bureau (CFPB) and
forty-eight states, including New York and Missouri, citing
17 unfair or deceptive practices in violation of consumer
financial protection laws. Ocwen submitted to a consent
judgment in that suit on December 16, 2013.
pleads that Ocwen was aware of these problems when it
negotiated the Agreement and thus knew that it was incapable
of performing thereunder, both during negotiations in 2013
and upon execution of the Agreement January 1, 2014, thereby
fraudulently inducing Delmar to enter into it. Delmar further
pleads that it relied on Ocwen's representations of its
ability to perform and was unaware of their falsity.
filed the present 12(b)(6) motion seeking dismissal of counts
II-IV on the bases that: (1) Delmar's tort claims are not
cognizable because they merely duplicate its breach of
contract claim; (2) Delmar's pleadings are not
sufficiently specific to satisfy the heightened standards of
Rule 9(b); (3) with respect to count III (fraudulent
omission), Ocwen had no duty to disclose its circumstances to
Delmar before execution of the Agreement; and (4) with
respect to count IV (negligent misrepresentation), the
parties bargained at arm's length and had no special
relationship giving rise to a duty, and Delmar's claim is
barred by the doctrine of economic loss.
12(b)(6) pleading standard
purpose of a motion to dismiss under Rule 12(b)(6) is to test
the legal sufficiency of the complaint. Arthur v.
Medtronic, Inc., 123 F.Supp.3d 1145, 1148 (E.D. Mo.
2015). To survive a Rule 12(b)(6) motion to dismiss, “a
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face.'” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). Determining whether a complaint
states a plausible claim for relief is a context-specific
task that requires the reviewing court to draw on its
judicial experience and common sense. Id. at 679.
The court accepts the plaintiff's factual allegations as
true and draws all reasonable inferences in favor of the
nonmoving party. Torti v. Hoag, 868 F.3d 666, 671
(8th Cir. 2017). But “[c]ourts are not bound to accept
as true a legal conclusion couched as a factual allegation,
and factual allegations must be enough to raise a right to
relief above the speculative level.” Id.
tort claims are independent.
Ocwen asserts that Delmar's tort claims must be dismissed
because they merely duplicate its breach of contract claim.
Under New York law, “parallel fraud and contract claims
may be brought if the plaintiff: (1) demonstrates a legal
duty separate from the duty to perform under the contract;
(2) points to a fraudulent misrepresentation that is
collateral or extraneous to the contract; or (3) seeks
special damages that are unrecoverable as contract
damages.” Bridgestone/Firestone, Inc. v. Recovery
Credit Services, Inc., 98 F.3d 13, 20 (2d Cir. 1996).
New York distinguishes between a promissory statement of what
will be done in the future, which gives rise only to a breach
of contract cause of action, and a misrepresentation of a
present fact that gives rise to a separate cause of action
for fraudulent inducement. Merrill Lynch & Co. Inc.
v. Allegheny Energy, Inc., 500 F.3d 171, 184 (2d Cir.
2007). “A misrepresentation of present facts is
collateral to the contract (though it may have induced the
plaintiff to sign the contract) and therefore involves a
separate breach of duty.” Id. The fact that
the alleged misrepresentations also establish a breach of the
contractual representations and warranties does not alter the
result. Id. “A warranty is not a promise of
performance, but a statement of present fact.”
Id. A fraud claim should be dismissed as redundant
when it merely restates a breach of contract claim, i.e.,
when the only fraud alleged is that the defendant was not
sincere when it promised to perform under the
contract.” First Bank of Americas v. Motor Car
Funding, Inc., 257 A.D.2d 287, 291 (N.Y.App.Div. 1999).
“By contrast, a cause of action for fraud may be
maintained where a plaintiff pleads a breach of duty separate
from, or in addition to, a breach of the contract.”
Id. “For example, if a plaintiff alleges that
it was induced to enter into a transaction because a
defendant misrepresented material facts, the plaintiff has
stated a claim for fraud even though the same circumstances
also give rise to the plaintiff's breach of contract
claim.” Id. at 291-92.
these principles to Delmar's complaint, the Court
concludes that Delmar's tort claims are not redundant to
its breach of contract claim. Delmar centrally pleads that,
in negotiations leading up to and at the time of execution of
the Agreement, Ocwen misrepresented or omitted then-present
facts as to its technological and operational capacity to
perform the Agreement in order to induce Delmar to enter into
it. Though Ocwen asserts that Delmar's claims are
redundant because they involve assurances encompassed in the
representations and warranties section of the Agreement,
“it is of no consequence that some of the allegedly
false representations are also contained in the agreements as
warranties and form a basis of the breach of contract
claim.” MBIA Ins. Corp. v. Countrywide Home Loans,
Inc., 87 A.D.3d 287, 294 (N.Y.App.Div. 2011). “It
simply cannot be the case that any statement, no matter how
false or fraudulent or pivotal, may be absolved of its
tortious impact simply by incorporating it verbatim into the
language of a contract.” Id. (citing In ...