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US Bank, NA v. Manning

Superior Court of Maine, Cumberland

July 19, 2018

US BANK, NA Plaintiff
v.
THOMAS MANNING, Defendant

          ORDER ON MOTION FOR CONTEMPT/SANCTIONS

          Lance E. Walker, Justice Maine Superior Court

         Defendant contends that Plaintiff has failed to comply with the terms of the Court's Notice of Judicial Settlement Conference. Defendant filed a motion for contempt/sanctions and a testimonial hearing was held. The Court grants the motion insofar as it is a request for sanctions for failing to comply with the terms of the Judicial Settlement Conference. The Court finds and orders as follows.

         On September 19, 2016, this Court ordered the parties to attend the judicial settlement conference that was held on September 23, 2016 (the "JSC"). This was the fourth order concerning judicial settlement conferences and the third ordering the parties to attend the JSC. This Court ordered that "all parties ... must be present in person at the conference, must be vested with full settlement authority and must be prepared to make reasonable concessions and stipulations." The Order made clear that "Failure to comply with this notice in any respect may result in the imposition of sanctions."

         At the JSC, the Bank's representative was Katherine Ortwerth, an employee of Ocwen Financial Corporation ("Ocwen"), the servicer for the loan at issue in this case. Counsel for the Bank stated to the Court that Ms. Ortwerth did not have full and unilateral settlement authority. The Bank further represented to this Court that Ms. Ortwerth had some limited settlement authority but that it was constrained by the terms of the pooling and servicing agreement between the Bank and Ocwen. After those representations were made, counsel for Mr. Manning orally moved for sanctions. This Court counseled patience and, in reliance on the Bank's representation that its representative had some settlement authority, allowed the JSC to proceed in the hopes that settlement could be reached. The Bank made a single new offer during the JSC The New Offer was printed before the Bank came to the JSC. The Bank represented to this Court that the New Offer contained the best possible terms that Ocwen could offer under the PSA. The Bank represented to the Court that better terms could not be offered unless the PSA was reformed. This Court relied on the Bank's representations and terminated the JSC without reaching settlement.

         On April 11, 2017, this Court issued an order directing the parties to "negotiate fastidiously" and report back to the clerk "the results of their diligent efforts" by April 28, 2017. The April 11 Order makes clear that a testimonial hearing on Mr. Manning's original motion for contempt would be scheduled if the parties failed to settle by the deadline. The deadline in the April 11 Order was extended by two weeks, until May 12, 2017, because counsel for Mr. Manning was out of the country during the original two week period. On April 28, 2017, two days after counsel for Mr. Manning returned from overseas, Mr. Manning provided the Bank with a settlement proposal pursuant to the April 11 Order. That same day, counsel for the Bank acknowledged receipt of Mr. Manning's offer and stated that the Bank would "provide a response as soon as possible after review with our client." On May 4, 2017, counsel for Mr. Manning followed up on the settlement proposal. On May 5, 2017, counsel for the Bank responded that "We are still working with the client on a response. I will get back to you Monday or Tuesday if that works within your schedule." That following Monday, May 8, 2017, counsel for Mr. Manning again followed up with the Bank requesting a response to the settlement proposal. The Bank stipulated that it did not provide any settlement proposals before the (extended) deadline of May 12, 2017 as ordered by this Court. Mr. Manning introduced expert testimony from Jay Patterson, a forensic accountant. This Court finds Mr. Patterson's testimony and analysis to be credible and persuasive. The New Offer, which the Bank represented to this Court contained the best possible terms without a reformation of the PSA, offered a new interest rate of 3.48%. Mr. Patterson's analysis of the original and modified interest rates on the other loans in the same trust demonstrates that multiple loans had been offered modified rates of less than half of the original interest rate. In other words, Ocwen has been providing modifications on better terms than the PSA allows without reforming the PSA. After the JSC, the Bank made a settlement offer to Mr. Manning that contained more favorable terms than those contained in the New Offer. Those more favorable terms included a new interest rate of 3.0625%, which is less than the one-half reduction permitted under the PSA. The greatest reduction in interest rates offered to other loans in the same trust was a reduction of 75% from the original rate. Mr. Patterson was not aware of any limitations on Ocwen's ability to offer debt reduction under the PSA. The Bank's statement that the New Offer contained the best possible terms without reformation of the PSA was a misrepresentation to this Court. The Bank knew or should have known that this statement was a misrepresentation. Mr. Patterson's report was based on data made publicly available by Ocwen. Hearing Tr. 28:1-12. At some point after Mr. Patterson's report was provided to the Bank, the data regarding loan modifications on which Mr. Patterson had relied was no longer available from Ocwen's web portal, while other data involving the same loans remained available. If that data had been available, Mr. Patterson would have been able to determine what additional loan modifications had been offered and on what terms.

         A court "has the inherent authority to sanction a party's failure to comply with the rules." Baker's Table, Inc. v. City of Portland, 2000 ME 7, ¶ 17, 743 A.2d 237 (examining a dismissal with prejudice imposed as a sanction where the applicable rule did not explicitly provide for dismissal, and concluding that the court had authority to impose such a sanction). "In determining the appropriate sanction to be imposed upon a party for failure to comply with the rules, the court should take into account the purpose of the specific rule at issue, the party's conduct throughout the proceedings, the party's bona fides in its failure to comply, prejudice to other parties, and the need for the orderly administration of justice." Id. ¶ 17. The Court should also consider "the purpose to be served by imposing sanctions, including penalizing the noncompliant party and deterring similar conduct." Estate of Hoch, 2011 ME 24, ¶ 33, 16 A.3d 137; Harris v. Soley, 2000 ME 150, ¶ 10, 756 A.2d 499 (noting the important of "deterring similar conduct by the offending party, as well as by others").

         This Court concludes that Baker's Table applies in the context of overseeing a judicial settlement conference. In a judicial settlement conference, a judge who will not oversee the trial on the merits is assigned to the case to facilitate a mediation between the parties. Judicial settlement conferences are highly effective at efficiently resolving cases for a variety of reasons, chief among them is that they are judicial proceedings. They are overseen by a justice of the applicable court; they take place in court facilities; they utilize court resources. Parties are ordered to attend judicial settlement conferences under penalty of sanctions for failure to comply. See, e.g., Def. Ex. 10 ("Failure to comply with this notice in any respect may result in the imposition of sanctions.") (emphasis in original). When the parties to a case are ordered to attend a judicial settlement conference, the case is internally assigned to a new judge who is then tasked with overseeing the case until the judicial settlement conference is completed. While that new judge is not the judge who will oversee the trial, she or he is acting as a judge of this Court and overseeing the case.

         This Court takes seriously its role in the Judicial Settlement Process. The Court is persuaded beyond all doubt that Plaintiff, perhaps representative of a mistaken belief generally, does not. Despite the Court's repeated efforts to make plain its displeasure with Plaintiffs flouting of its Order(s), made abundantly clear that the parties had every motivation to resolve the case without further intervention by the court. What followed, as has been described, appears to have been some combination of bureaucratic rigor mortis and irrational resistance to good faith settlement efforts, the combination of which worked to thwart a reasonable resolution to this case. Indeed, Franz Kafka would have been embarrassed by the absurdity of this story.

The Court imposes the following sanctions:
1. Plaintiff shall pay all of Defendant's reasonable attorney's fees and costs associated with preparation for and attendance of both Judicial Settlement Conferences.
2. Plaintiff shall pay all of Defendant's reasonable attorney's fees and costs incurred by Defendant as a result of all work related to or arising out of the efforts to settle this case from the conclusion of the first Judicial Settlement Conference through the conclusion of the Second Judicial Settlement Conference, including all filings, court appearances, research and writing.

         It is beyond question that U.S. Bank NA failed to comply with the court's order regarding the judicial settlement conference, despite having had the ability to do so. The court, in its settlement capacity, stops short of issuing a sanction of dismissal with prejudice, as that ultimately and appropriately should be left to the trial judge in her discretion. The court does note, however, that the trial judge may consider the Plaintiffs conduct as herein described and during the ...


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