Kerr v. HSBC Bank, United States, N.A.

ANA KERR,¹ Plaintiff, v. HSBC BANK, USA, N.A., as Indenture Trustee for the registered note holdersof Renaissance Home Equity Loan Trust 2005-3, Renaissance Equity Loan Asset-Backed Notes, Series 2005-3,and OCWEN LOAN SERVICING, LLC, Defendants.

13-CV-68 (JMA)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

December 11, 2014

For Online Publication Only

AMENDED MEMORANDUM AND ORDER

APPEARANCES:

Michael Valentine

The Valentine Law Firm, PC

225 Broadway, 39th Floor

New York, NY 10007

Attorney for Plaintiffs

Sara Louise Markert

Houser & Allison, APC

60 E. 42nd Street, Suite 1148

New York, NY 10165

Attorney for Defendants

AZRACK, United States Magistrate Judge:

Plaintiffs Verna Kennedy and Ana Kerr filed this action against Ocwen Loan Servicing, LLC ("Ocwen") and HSBC Bank, USA, N.A., as Indenture Trustee for the registered note holders of Renaissance Home Equity Loan Trust 2005-3, Renaissance Equity Loan Asset-Backed Notes, Series 2005-3 ("HSBC") (collectively with Ocwen, "defendants"). Plaintiffs allege various claims under New York law arising out of Ocwen's modification of plaintiffs' mortgage loan. The parties have consented to me for all purposes including entry of final judgment. (ECF No. 11.)

Plaintiffs have settled their claims, except for the issue of attorney's fees, which the parties have submitted to me for determination. For the reasons stated below, I award plaintiffs $14,833.60 in attorney's fees.

I. BACKGROUND

Kennedy was the owner of a property in Brooklyn ("the Premises"), which served as both plaintiffs' primary residence. (Compl. ¶¶ 2, 5, Notice of Removal, Ex. A, ECF No. 1.)² In 2004, Kennedy executed a note and accompanying mortgage for the Premises. (2013 Loan Modification Agreement ("2013 Modification") at 1, ECF No. 20.) Kerr was later added as a borrower on the loan. (Id.) HSBC holds the note and mortgage. (Compl. ¶ 6.) Ocwen services the loan. (Id. ¶ 7.)

In July 2011, plaintiffs and Ocwen entered into a modification agreement (the "2011 Modification") that required plaintiffs to pay $2,115.75 per month, including an escrow of $231.00 for real estate taxes and hazard insurance. (Id. ¶ 8; 2011 Modification, ECF No. 21.) The 2011 Modification included a fixed interest rate of 2.24%. (2011 Modification.) Beginning in August 2011, Ocwen sent plaintiffs monthly coupons that each directed payment of $2,115.75. (Compl. ¶¶ 11-12.) Plaintiffs have paid this amount every month. (Id. ¶ 12.)

In August 2012, Ocwen increased plaintiffs' monthly payment. (Id. ¶ 14.) That month, Ocwen sent plaintiffs a monthly coupon that included a substantial increase in the monthly escrow charge. (Id. ¶ 14.) After plaintiffs contacted Ocwen about the increase, plaintiffs received an escrow account statement showing a special quarterly assessment of $1,333.40 for "POLICY #3000328851001." (Id. ¶ 17.) This quarterly assessment began in March 2011, prior to the 2011 Modification, and was imposed every three months thereafter. (Id. ¶¶ 17, 18.) However, the monthly coupons Ocwen provided to plaintiffs did not reflect this special assessment until August 2012. (Id. ¶ 21.)

Plaintiffs allege that Ocwen never disclosed the special quarterly assessment or included it in the 2011 Modification. (Id. ¶¶ 8, 19, 21.) Rather, Ocwen allegedly represented that the escrow listed was only for real estate taxes and hazard insurance. (Id. ¶ 8.)

In October 2012, Ocwen notified plaintiffs that they had to pay $8,909 stemming from the unpaid special quarterly assessments. (Id. ¶ 24.) If plaintiffs failed to make this payment by December 31, 2012, Ocwen would declare the mortgage in default and commence a foreclosure action. (Id.)

On December 20, 2012, plaintiffs filed the instant suit in Kings County Supreme Court. (Compl.) Plaintiffs' complaint alleges a violation of New York's consumer protection statute, N.Y. Gen. Bus. Law § 349 ("GBL § 349"), as well as breach of contract, fraud, and a claim of unconscionablity. (Id.) The complaint seeks: (1) a declaration that plaintiffs were not in default of the 2011 Modification; (2) a declaration that the note, mortgage and 2011 Modification were all unconscionable and void; and (3) not less than $150,000 in damages, including statutory and punitive damages under GBL § 349.

Along with their complaint, plaintiffs filed a motion for a temporary restraining order ("TRO") and preliminary injunction to prevent defendants from commencing a foreclosure proceeding. (Pls.' Mem. in Supp. of Order to Show Cause, Notice of Removal, Ex. B.) On December 26, 2012, the Honorable David Schmidt signed an order to show cause restraining defendants from foreclosing on the mortgage until a January 7, 2013 hearing. (Order to Show Cause, Notice of Removal, Ex. B.)

On January 4, 2013, defendants removed this action on the basis of diversity jurisdiction. (Notice of Removal.) At the March 7, 2013 initial conference, plaintiffs informed me that they intended to file a pre-motion conference letter for a proposed motion to have this action remanded to back to state court for lack of diversity. Rather than litigating the remand issue, I convinced the parties to discuss settlement. (Mar. 7, 2013 Minute Entry, ECF No. 5.) At the initial conference, defendants took the position that the 2011 Modification was only a temporary modification that was supposed to be replaced by a permanent modification with a higher interest rate. (See Pls.' Reply Ltr. in Supp. of Fees Appl. ("Pl. Reply Fees Ltr."), ECF No. 14.)

As part of the settlement discussions, defendants provided plaintiffs with a loan reconciliation and agreed not to proceed with the foreclosure. (Mar. 21, 2013 Minute Entry, ECF No. 6; see also Pl. Reply Fees Ltr. at 1.) The parties eventually agreed, in June 2013, to settle plaintiffs' underlying claims and to submit the issue of attorney's fees to the Court. (June 20, 2013 Minute Entry, ECF No. 9; Stipulation of Settlement, ECF No. 22.)

Although the parties submitted papers on the fee issue in June and July of 2013, those papers did not include a copy of the settlement agreement. After the Court directed the parties to file a stipulation of dismissal for the underlying claims, the parties informed the Court that they had not yet signed a final settlement agreement and that additional details of the settlement werestill in dispute. (Def.'s Nov. 4, 2013 Ltr., ECF No. 15.) At a November 22, 2013 court conference, the parties resolved their disputes. (Nov. 20, 2013 Minute Entry, ECF No. 17.) On December 23, 2013, the parties filed the signed settlement agreement and a new loan modification agreement (the "2013 Modification"). (Settl. Agreement & 2013 Modification, ECF No. 20.)

The 2013 Modification: (1) reduced the outstanding principal on the loan by $10,000, resulting in an outstanding principal of $384,745; (2) reduced the annual interest rate to 2%;³ and (3) set plaintiffs' total monthly payment at $2,095. (2013 Modification.) The 2013 Modification does not include the $1,333.40 special quarterly assessment at issue in this action.

Currently pending before the Court is plaintiffs' motion for fees, which seeks $27,720 in fees for roughly 60 hours of work by plaintiffs' counsel. Defendants contend that this fee request should be denied in its entirety. In the alternative, defendants argue that the fee request should be reduced by 75% to $6,745.50.

II. DISCUSSION

A. Basis for a Fee Award

In addition to plaintiffs' common law claims, plaintiffs alleged a violation of GBL § 349, which provides that "the court may award reasonable attorney's fees to a prevailing plaintiff." GBL § 349(h). Although fee awards under GBL § 349 are discretionary, the Court finds that a fee award is appropriate here.

Defendants argue that plaintiffs' fee request should be denied in its entirety. However, none of their arguments on this point are persuasive.

Defendants contend, without citation to any authority, that because this case settled plaintiffs do not qualify as "prevailing" parties. I disagree. One court has observed that "New York law is not clear whether a party who settles a case is entitled to attorney's fees under [GBL § 349]." Serin v. N. Leasing Sys., Inc., 06-CV-1625, 2011 WL 1467560, at *4 (S.D.N.Y. Apr. 19, 2011) (declining to decide this issue because defendants waived their right to contest plaintiffs' entitlement to attorney's fees as part of a settlement agreement), aff'd, 501 F. App'x 39 (2d Cir. 2012). However, fee-shifting statutes that use the term "prevailing party" are generally interpreted to include plaintiffs who obtain favorable settlements. See Perez v. Westchester Cnty. Dep't of Corr., 587 F.3d 143, 149 (2d Cir. 2009) (explaining that "in order to be considered a 'prevailing party'" under 42 U.S.C. § 1988(b), a plaintiff must "achieve some material alteration of the legal relationship of the parties" and the change must "be judicially sanctioned") (quoting Roberson v. Giuliani, 346 F.3d 75, 79 (2d Cir. 2003));⁴ cf. Aetna Cas. & Sur. Co. v. Liebowitz, 730 F.2d 905, 908 (2d Cir. 1984) ("[W]hen [Congress] desired to permit attorney's fees to be awarded to a plaintiff who does not litigate his claim through to trial, it knew how to say so, using such broad terms as "substantially prevails" or the "prevailing party.") Defendants have not offered any persuasive argument as to why I should read the "prevailing plaintiff" provision in GBL § 349(h) differently.

Defendants also assert—again without citation to any authority—that plaintiffs do not qualify as prevailing parties under GBL § 349 because they only received injunctive relief. This argument is meritless as GBL § 349 explicitly provides for injunctive relief. GBL § 349(h). Moreover, the loan modification is analogous, in some respects, to a monetary settlement.

Finally, defendants argue that no fees should be awarded because the relief plaintiffs obtained was de minimus. I disagree. However, as discussed infra, the nature and amount of the relief plaintiff obtained does...