Edward Hill et al. v. Ocwen Financial Corp. et al. (2013)

MEMORANDUM OF DECISION (Motion to Strike—pleading # 140.00)

BACKGROUND

The plaintiffs, Edward Hill and Robin Hill, allege they and their three children were wrongfully evicted from their Norwalk residence on March 26, 2009.¹  The defendants are various lending and loan servicing companies and their successors, and Connecticut State Marshal Alan Freedman.  (There also are two non-appearing apportionment defendants.)

The revised complaint alleges that:  (1) plaintiffs were wrongfully evicted even though the Hills had filed for bankruptcy and there was an automatic stay in effect at the time;  (2) their furniture and belongings were loaded on an “open-air-truck” during a heavy snowstorm and were damaged;  (3) the plaintiffs suffered emotional harm;  (4) the defendants displayed reckless indifference to the plaintiffs' legal rights and acted despicably, and (5) the defendants violated the Connecticut Unfair Trade Practices Act Connecticut General Statutes § 42–110a et seq.  (CUTPA).

The revised complaint sets forth five counts directed at all defendants:  negligence, trespass, negligent infliction of emotional harm, “punitive damages” and a violation of CUTPA.

Marshal Freedman moved to strike the revised complaint in its entirety.   The motion was heard on November 19, 2012.   Freedman's motion was extensively briefed.   The plaintiffs filed a one-page objection and subsequently filed a “post hearing memorandum” on November 26, 2012 (to which counsel for Freedman objected).   The Court, Adams, JTR, granted the motion to strike as to all counts except the Fourth Count, which count was interpreted as alleging a legally-sufficient claim of recklessness.²

Defendants Ocwen and Litton have now filed their own motion to strike, attacking the sufficiency of all of the counts of plaintiffs' revised complaint as directed to them.   In part, defendants rely on arguments similar to those advanced by defendant Freedman;  in part, defendants rely on the legal insufficiency of counts directed to defendant Freedman to the extent that their claimed liability is derivative in nature;  and in part defendants assert claims specific to their situation.

The court heard argument on May 6, 2013.   Plaintiffs did not file any written opposition to the motion, but did argue against the granting of the motion.

SCOPE OF REVIEW

“A motion to strike attacks the legal sufficiency of the allegations in a pleading ․ In reviewing the sufficiency of the allegations in a complaint, courts are to assume the truth of the facts pleaded therein, and to determine whether those facts establish a valid cause of action ․ [I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied ․ Thus, we assume the truth of both the specific factual allegations and any facts fairly provable thereunder ․” Kumah v. Brown, 307 Conn. 620, 626 (2013) (internal quotation marks, omitted;  ellipses as in cited case).   “In ruling on a motion to strike the trial court is limited to considering the grounds specified in the motion”;  Meredith v. Police Commissioner, 182 Conn. 138, 140, 438 A.2d 27 (1980).  “A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged.”  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498 (2003).  (Internal quotation marks omitted.)

DISCUSSION

Preliminary considerations

In the earlier motion to strike, the court solely focused on the conduct of defendant Freedman.   Here, the court is required to consider the alleged conduct of defendant Freedman;  the extent to which these defendants may be vicariously liable for the conduct of defendant Freedman;  and the existence of any claims of conduct by these defendants that might result in liability without defendant Freedman as an intermediary.

Paragraph 6 of the latest version of the complaint provides:

6.  On or about March 26, 2009, Defendant Fremont breached its duty to follow 11 U.S.C. § 362 (11 U.S.C. § 362:  U.S.Code—Section 362:  Automatic stay) when it ignored the Hills' automatic stay from foreclosure ․

Paragraph 2 alleges that the moving defendants are successors to the interests of Fremont ³ —either implying a claim of successor liability with respect to ¶ 6 or, more likely, being a drafting error ⁴ in 116 (since at the time of the events described in 116, Fremont is alleged to have been “closed” for about two years, according to ¶ 2).

“Ignored”—the key verb in ¶ 6—implies conduct that disregarded actual or constructive knowledge.⁵  Under this allegation, then, plaintiffs could offer proof that defendants knew of the bankruptcy filing and the presumptive automatic stay, yet did nothing to stop the eviction from going forward.   Accordingly, to the extent that ¶ 6 is incorporated into all of the counts directed to these defendants, the court must analyze each issue and count from a perspective that incorporates such claimed conduct.

A. The automatic stay 6

Defendants first contend that the automatic stay that is a consequence of filing for bankruptcy does not apply because “[s]ection 362(b)(22) makes the automatic stay inapplicable to eviction proceedings whatever the basis for the judgment of possession if the judgment was obtained before the bankruptcy petition was filed” (citing In re Beverly C. Griggsby, 404 B.R. 83 (Bkrtcy.S.D.N.Y.2009)).   Perceiving that claim to be an essential underpinning to all of plaintiffs' claims, defendants assert that all counts should be stricken on this basis.

Assuming defendants to be correct as to the asserted general legal proposition,⁷ it is not apparent from the record—the complaint—that that provision applies here.   The complaint alleges the existence of a statutory stay.   Defendants' memorandum does not indicate whether they are contending that it would have been legally impossible for the stay to have been in effect or whether it is a factual matter (based on facts alleged in the complaint).   More significantly, it is not clear whether any statutory conditions or limitations on applicability of that provision apply here.   Notably, there is an explicit reference in § 362(b)(22) to subsection (I) as a qualification or limitation, and it is not a matter of record that that subsection does not or cannot apply.⁸  The alternative perspective would be that defendants are asking the court to assign to plaintiffs the burden of negating any qualification or condition to the existence of a stay or affirmatively alleging an exception to the exception invoked by defendants (even before defendants invoked it)—implying that in order to assert the benefit of an automatic stay, a pleading must negate all possible legal exceptions or qualifications that might impact its applicability to the existing set of facts.

Additionally, the argument as to the inapplicability of the stay does not address the legal sufficiency of the other aspects of negligent/tortious conduct alleged in the complaint.   Plaintiffs claim that there was, inter alia, negligence in the handling of the property being removed from the premises.   Defendants' contention as to the inapplicability of the automatic stay does not address the allegations of negligence (or other levels of tortious behavior) concerning the manner in which the eviction was conducted.

The claimed inapplicability of the stay, as argued by defendants, is not a basis for striking any of the counts identified by defendants.

B. and E. Vicarious liability

Defendants contend that there can be no vicarious liability on their part, based on the conduct of a state sheriff or marshal, because the state marshal is an agent of the state and not an agent of the party for whom services are being rendered.   Defendants further cite General Statutes § 6–38(a) which states that a marshal is an independent contractor in his/her dealings with the party for whom services are rendered.   Defendants note that generally, a party engaging the services of an independent contractor cannot be held vicariously liable for the tortious conduct of that contractor.

Defendants' argument that the State cannot be sued without its consent—invoking sovereign immunity—is of no moment, since the issue is not whether the State is or may be liable but rather whether a party engaging the services of such a State official might be legally responsible.⁹  Defendants are closer in invoking the principle that a party engaging the services of an independent contractor generally cannot be held liable for the conduct of an independent contractor.   Although courts have recognized exceptions to that general rule, e.g. nondelegable duty of a property owner with respect to safety of the premises, Gazo v. Stamford, 255 Conn. 245, 257 (2001), no exception to the rule has been claimed by plaintiffs nor is one facially apparent on the record.

Notwithstanding the issue of unavailability of vicarious liability for the conduct of defendant Freedman, the discussion in the “preliminary considerations” section of this memorandum identifies conduct that is separate from the issue of independent contractor status.   It is not for the court, at this juncture, to opine as to whether evidence is available (or its strength), but rather whether there might be evidence sufficient to establish a meritorious cause of action.   The court cannot ignore this aspect of the causes of action at issue.   The claimed inapplicability of vicarious liability for the conduct of defendant Freedman, as argued by defendants, is not a sufficient basis for striking any of the counts identified by defendants.¹⁰

C. Previous ruling of court

Defendants contend that the striking of all counts but the fourth as directed to defendant Freedman must, as a matter of law, inure to their benefit, since the claims against defendants Ocwen and Litton are derivative in nature (vicarious liability).¹¹  It is essential to note that this differs from the previous argument in a critical respect—the previous analysis addressed whether there is or might be vicarious liability, whereas this discussion effectively assumes that there is or might be vicarious liability but that the earlier disposition nonetheless dictates the outcome as a matter of law.

In Pinos v. Mystic Fire District, 2011 Ct.Sup. 8338 (Mar. 30, 2011) (J.D. New London, CV 09 5012096), the court held that the statutory immunity of an official did not automatically confer protection on a party allegedly vicariously liable for the immune actor's conduct.   The statutory immunity reflected a policy analysis favoring the identified actor, but that policy decision of the legislature was not necessarily intended to benefit anyone else.

This is consistent with the holding in Chase v. New Haven Waste Material Corp., 111 Conn. 377 (1930), whereby the immunity of an employee did not preclude liability of the principal.   Although the broader implications and statements in Chase were effectively overruled by Alvarez v. New Haven Register, Inc., 249 Conn. 709, 715–16 (1999), Alvarez concerned the effect of a release in a vicarious/derivative liability scenario.   Given the nature of the analysis in Alvarez, it is far from clear that the Supreme Court would apply its approach to releases—with respect to principal and agent, release of one automatically is a release of the other—to an immunity situation such as is under consideration here.   Instead of concern about double recoveries for plaintiffs or excessive liability exposure for employees as in Alvarez, 249 Conn. 724, the concern in an immunity situation would be whether an injured plaintiff has recourse against anyone.   That difference is sufficiently significant as to cast serious doubt on whether the Alvarez rule applies to immunities.

Further, defendants' argument is premised on the assumption that the various identified counts assert claims solely based on vicarious liability.   The “preliminary considerations” section of this decision, and Judge Adams' decision as discussed in footnote 11, indicate that non-vicarious claims also are present in these counts.

Coupled with the decision/analysis in Pinos, the striking of counts directed to defendant Freedman is an insufficient basis, by itself, to justify striking the same counts as directed to defendants Ocwen and Litton.

D. Statute of Limitations

Defendants claim that at least some of plaintiffs' claims are barred by the statute of limitations.   Recognizing that usually such a claim needs to be asserted by way of special defense, defendants invoke the exception when the applicability of the statute of limitations is apparent on the record and the opposing party essentially agrees that everything needed to resolve the issue is before the court.   Here, however, that does not seem to be the case—plaintiffs have not explicitly agreed that all facts necessary for resolution of this issue are before the court and the fact that there is some level of uncertainty as to the actual dates of relevant events merely compounds the problem.   See, e.g. DeCorso v. Watchtower Bible & Tract Society, 78 Conn.App. 865, 870 (2003) (improper to rule on statute of limitations via motion to strike when parties do not agree that complaint contains all necessary facts—especially when new dates being alleged).

In light of the current state of the pleadings and especially uncertainty (from the perspective of the pleadings) as to the correct dates of concern, addressing the statute of limitations at this time, in this context, would be inappropriate.¹²

F. Negligent Infliction of Emotional Distress

In evaluating the sufficiency of the allegations, the court must construe them in a manner most favorable to plaintiffs.   Notwithstanding defendants' repeated effort to claim that the stressful situation was simply a matter of litigation and that there is nothing here beyond the typical stress associated with an adversarial process, plaintiffs' complaint goes sufficiently beyond that threshold to withstand the motion to strike (on these grounds).   Plaintiffs allege that the eviction occurred in the middle of a snow storm;  that despite their having proof of what they believed to be an automatic stay that should have prevented the eviction from going forward, the marshal did not make any attempt to determine whether a stay was in effect and was operative for purposes of that proceeding.   Further, there are additional allegations of conduct arguably demonstrating arrogance and disrespect—unnecessarily so that can satisfy the requirement that the conduct be more than is ordinarily associated with eviction.   Still further, there is the conduct discussed in the “preliminary considerations” section of this memorandum.   Accordingly, despite the implication of defendants' motion and brief to the contrary, the allegations relating to negligent infliction of emotional distress are legally sufficient.

G. CUTPA

Defendants contend that the Fifth Count fails to state a legally sufficient claim of violation of the Connecticut Unfair Trade Practices Act (CUTPA).

Plaintiffs' complaint incorporates the first seven paragraphs used in all of the other counts, and adds several paragraphs particularly focused on the alleged CUTPA violation.   As relates to defendants Ocwen and Litton, ¶ 7 alleges a failure to pay for the damages done by defendant Freedman (as directed by these defendants);  ¶ 8 alleges that defendants were in the business of “lending money to consumers for the purchase of real property in return for either money plus interest payments or the foreclosure of that real property”;  and ¶ 9 alleges that they “hired State Marshal Freedman without performing the requisite due diligence to confirm that he had the proper information on the Hills and their protected status under the law before it sent him to kick the family out of their home in a foreclosure action during a heavy snowstorm on or about March 26, 2009.”

It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair:  (1)[W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] ․ All three criteria do not need to be satisfied to support a finding of unfairness.   A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.

(Citations omitted;  internal quotation marks omitted.)   IN Energy Solutions, Inc. v. Realgy, LLC, 114 Conn.App. 262, 273–74 (2009).

But for the discussion in the “preliminary considerations” section of this memorandum, the court might have some difficulty concluding that plaintiffs' allegations articulate a legally sufficient claim under CUTPA.   Obtaining the services of a marshal to effectuate an eviction in connection with a foreclosure is not unlawful, etc.—to the contrary, it is required (self-help being forbidden).   Declining to pay a disputed claim of damages (caused by another for whom responsibility is disputed) is not unfair, etc.;   engaging in the mortgage-loan business is not unethical, etc.;   and not ensuring that the state official charged with effectuating evictions has done his due diligence does not appear to be contrary to public policy, etc.   All of these alleged behaviors are impliciliy if not explicitly a consequence of our legal and financial systems.

Paragraph 6 (incorporated into the Fifth Count), however, states that Fremont—for whom these defendants are successors and therefore impliedly liable (assuming that “Fremont” is not a typo in ¶ 6 as discussed earlier)—” ignored” the stay.   Although there are gradations to the verb “ignore,” facts provable under such an allegation include intentional disregard for the existence of a stay, and that would seem to be sufficient to cross the line into an area potentially within the ambit of CUTPA.  (Ascertainable loss does not appear to be an issue.)

The issue is not the strength of plaintiffs' case nor the likelihood that the case can be proven.   Plaintiffs have alleged a legally sufficient CUTPA claim.

H. Recklessness/Punitive Damages

Defendants contend that the Fourth Count is legally deficient in that there is no cause of action for punitive damages.   Recognizing that the court, Adams, JTR, already denied the analogous contention in co-defendant's motion to strike, defendants also indicates that a claim for punitive damages cannot be premised on vicarious liability.

The court believes that the prior ruling constitutes the law of the case, and there does not appear to be any compelling reason why the court should now change direction on this issue, i.e. the court is not convinced that the prior ruling was in error.  Breen v. Phelps, 186 Conn. 86, 99–100 (1992).

As to defendants' alternate argument, the court does not read the count as premised solely on vicarious liability.   There are allegations of conduct by defendants (also see “preliminary considerations”), and to the extent that the motion does not claim much less attempt to demonstrate that the non-vicarious allegations are legally insufficient, the court cannot strike the count on that basis.

I. Claim for relief—punitive damages

Defendants correctly state that the rule in Connecticut is that common-law punitive damages are not available in cases involving negligence;  more egregious conduct needs to be alleged and proven.   Accordingly, the claim for common-law punitive damages as to the negligence-based counts—First, Second and Fourth—is stricken.

J. Claim for relief—attorneys fees

Defendants advance a similar argument as to attorneys fees—such fees are not available absent statutory or contractual provisions to the contrary.   Putting it differently, the so-called American rule requires parties to bear their own attorneys fees in the absence of a statute or contract shifting that responsibility.

Defendants correctly note that there is no claimed contractual provision for attorneys fees.   Not as accurately (substantively), defendants claim that there is no cited statutory authority.   Plaintiff specifically claims attorneys fees under CUTPA, and General Statutes § 42–110g(d) explicitly authorizes an award of reasonable attorneys fees.   Defendants' functionally anticipatory response to that observation is that plaintiffs did not allege the statute specifically as required by Practice Book § 10–3.   That rule, however, has been deemed to be directory rather than mandatory in nature;  see, e.g. Brewster Park v. Berger, 126 Conn.App. 630, 636 (2011).   While there may be situations where compliance with Practice Book § 10–3 might be deemed mandatory, e.g. if there had been a request to revise, explicitly asking for statutory authority for claims for relief (such that, absent an objection, the request would become the equivalent of a motion that had been granted;  Practice Book § 11–2), the court is unaware of any possibly-applicable special situation here.

Accordingly, the court grants the motion to strike the claim for attorneys fees as to the First, Second and Third Counts (no claim being made for attorneys fees as to the recklessness claim in the Fourth Count) and denies the motion as to the claim arising from the Fifth Count.

SUMMARY OF RULINGS

The claim for punitive damages with respect to the First, Second and Fourth Counts are stricken.   The claim for attorneys fees with respect to the First, Second and Third Counts are stricken.   The motion is denied in all other respects.

POVODATOR, J.

FOOTNOTES

FN1. During argument on May 6, 2013 on this and another motion, counsel for plaintiffs acknowledged that this date probably is incorrect.   However, the pleadings still reflect this as the date of the relevant events and therefore the court will continue to utilize this date (while recognizing the acknowledged uncertainty as to accuracy)..  FN1. During argument on May 6, 2013 on this and another motion, counsel for plaintiffs acknowledged that this date probably is incorrect.   However, the pleadings still reflect this as the date of the relevant events and therefore the court will continue to utilize this date (while recognizing the acknowledged uncertainty as to accuracy).

FN2. Simultaneous with argument on this motion, the court heard argument on a motion for summary judgment filed by defendant Freedman relating to that surviving fourth count.   In setting forth the background of this motion, the court has borrowed extensively from Judge Adams' earlier decision..  FN2. Simultaneous with argument on this motion, the court heard argument on a motion for summary judgment filed by defendant Freedman relating to that surviving fourth count.   In setting forth the background of this motion, the court has borrowed extensively from Judge Adams' earlier decision.

FN3. “The Defendant, Ocwen Financial Corporation (“Ocwen”), ․ has purchased, absorbed, merged with or otherwise gained control of the initial offending corporation, Fremont Investment & Loan and its successor, Litton Loan Servicing LP.”No appearance has been filed, to date, on behalf of Fremont..  FN3. “The Defendant, Ocwen Financial Corporation (“Ocwen”), ․ has purchased, absorbed, merged with or otherwise gained control of the initial offending corporation, Fremont Investment & Loan and its successor, Litton Loan Servicing LP.”No appearance has been filed, to date, on behalf of Fremont.

FN4. Although the court recognizes that “Fremont” could be a typographical error for “Freedman” the sentence contains two variations of the pronoun “it” suggesting that the wrong name for a corporate lender was used..  FN4. Although the court recognizes that “Fremont” could be a typographical error for “Freedman” the sentence contains two variations of the pronoun “it” suggesting that the wrong name for a corporate lender was used.

FN5. The Merriam Webster online dictionary defines ignore as “to refuse to take notice of” (http://www.merriam-webster.com/dictionary/ignore)..  FN5. The Merriam Webster online dictionary defines ignore as “to refuse to take notice of” (http://www.merriam-webster.com/dictionary/ignore).

FN6. The letter designations for the subsections of this memorandum attempt to track the arguments of defendants in their motion and brief..  FN6. The letter designations for the subsections of this memorandum attempt to track the arguments of defendants in their motion and brief.

FN7. 11 U.S.C. § 362(b)(22) applies to “the continuation of any eviction, unlawful detainer action, or similar proceeding by a lessor against a debtor involving residential property in which the debtor resides as a tenant under a lease or rental agreement ․” (emphasis added).   Based on the pleadings, plaintiffs were not tenants under a lease or rental agreement but the court, nonetheless, will treat the cited provision as potentially applicable..  FN7. 11 U.S.C. § 362(b)(22) applies to “the continuation of any eviction, unlawful detainer action, or similar proceeding by a lessor against a debtor involving residential property in which the debtor resides as a tenant under a lease or rental agreement ․” (emphasis added).   Based on the pleadings, plaintiffs were not tenants under a lease or rental agreement but the court, nonetheless, will treat the cited provision as potentially applicable.

FN8. Co-defendant, in his brief in support of his motion for summary judgment (pleading # 139.00) at footnote 3 discusses the possible application of subsection (I), at least immediately after the filing of the petition.   Although that brief characterized concern about possible applicability of the provision as an excess of caution, for purposes of this motion defendants would have to demonstrate its inapplicability as a matter of law..  FN8. Co-defendant, in his brief in support of his motion for summary judgment (pleading # 139.00) at footnote 3 discusses the possible application of subsection (I), at least immediately after the filing of the petition.   Although that brief characterized concern about possible applicability of the provision as an excess of caution, for purposes of this motion defendants would have to demonstrate its inapplicability as a matter of law.

FN9. Note that General Statutes § 6–30a requires marshals to maintain insurance and requires the State to protect the financial interests of marshals in a very limited manner.   To the extent that defendant's argument is intended to suggest that a suit against a marshal is a suit against the State—or at least will impact the State financially—this provision suggests that the contrary is true..  FN9. Note that General Statutes § 6–30a requires marshals to maintain insurance and requires the State to protect the financial interests of marshals in a very limited manner.   To the extent that defendant's argument is intended to suggest that a suit against a marshal is a suit against the State—or at least will impact the State financially—this provision suggests that the contrary is true.

FN10. The court recognizes that, in a sense, holding the principal liable for the eviction going forward seems analogous to vicarious liability.   A principal ordinarily is not liable for the conduct of an independent contractor because the nature of the relationship is such that the principal does not control the manner in which the work is performed.   In this context, however, there is an issue not as to the manner in which the eviction was conducted but rather the fact that it went forward at all—the principal did not stop the process (suspend or cancel), which presumptively as principal was still within its power and presumptively its legal obligation upon notice of the existence of a stay..  FN10. The court recognizes that, in a sense, holding the principal liable for the eviction going forward seems analogous to vicarious liability.   A principal ordinarily is not liable for the conduct of an independent contractor because the nature of the relationship is such that the principal does not control the manner in which the work is performed.   In this context, however, there is an issue not as to the manner in which the eviction was conducted but rather the fact that it went forward at all—the principal did not stop the process (suspend or cancel), which presumptively as principal was still within its power and presumptively its legal obligation upon notice of the existence of a stay.

FN11. In his memorandum of decision (at page 4), Judge Adams observed that the Third Count was primarily directed at defendant Ocwen—the necessary implication being that the vicarious component of claimed liability of defendant Ocwen in the Third Count is a minor-to-modest factor..  FN11. In his memorandum of decision (at page 4), Judge Adams observed that the Third Count was primarily directed at defendant Ocwen—the necessary implication being that the vicarious component of claimed liability of defendant Ocwen in the Third Count is a minor-to-modest factor.

FN12. The court recognizes that it recently granted a motion for summary judgment, filed on behalf of defendant Freedman, concerning the statute of limitations as applicable to the Fourth Count (recklessness).   While that decision might impact future proceedings relating to the statute of limitations as applicable to these defendants, the current motion is addressed only to the legal sufficiency of the complaint, and therefore the court is unwilling to (cannot) apply that decision to this motion, especially without notice to the parties..  FN12. The court recognizes that it recently granted a motion for summary judgment, filed on behalf of defendant Freedman, concerning the statute of limitations as applicable to the Fourth Count (recklessness).   While that decision might impact future proceedings relating to the statute of limitations as applicable to these defendants, the current motion is addressed only to the legal sufficiency of the complaint, and therefore the court is unwilling to (cannot) apply that decision to this motion, especially without notice to the parties.

Povodator, Kenneth B., J.