Alkhatib v. New York Motor Group LLC et al

Filing 109

ORDER granting in part and denying in part 71 Motion to Amend/Correct/Supplement; REPORT AND RECOMMENDATIONS re 77 Notice of Motion to Dismiss for Failure to State a Claim filed by New York Motor Group LLC, Nada Eltouby, Planet Mo tor Cars, Inc., Mamdoh Eltouby ( Objections to R&R due by 6/22/2015). More specifically, plaintiffs' motion for leave to amend their complaints is granted except with respect to those claims I recommend be dismissed. I respectfully recommend t hat defendants' motions to dismiss be denied, except that the following claims be dismissed: 1) Plaintiffs' RICO claims against M&T Bank; 2) Plaintiffs' TILA claims for damages (but not rescission) against M&T Bank; 3) Plaintiff Tuhin's Magnuson-Moss Warranty Act claim; and 4) Plaintiffs' New York General Business Law claims against M&T Bank. Ordered by Chief Mag. Judge Steven M. Gold on 6/3/2015. (Jason, Kevin)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
------------------------------------------------------------X
ANWAR ALKHATIB,
Plaintiff,

- against -

MEMORANDUM
& ORDER AND
REPORT &
RECOMMENDATION
CV-13-2337 (ARR)

NEW YORK MOTOR GROUP LLC, et al.,
Defendants.
------------------------------------------------------------X
SHAHADAT H. TUHIN,
Plaintiff,
- against -

CV-13-5643 (ARR)

NEW YORK MOTOR GROUP LLC, et al.,
Defendants.
------------------------------------------------------------X
SIMON GABRYS,
Plaintiff,
- against -

CV-13-7290 (ARR)

NEW YORK MOTOR GROUP LLC, et al.,
Defendants.
------------------------------------------------------------X
BORIS FREIRE, et al.,
Plaintiffs,
- against -

CV-13-7291 (ARR)

NEW YORK MOTOR GROUP LLC, et al.,
Defendants.
------------------------------------------------------------X

-----------------------------------------------------------X
ZHENG HUI DONG,
Plaintiff,
- against -

CV-14-2980 (ARR)

NEW YORK MOTOR GROUP LLC, et al.,
Defendants.
------------------------------------------------------------X
NASRIN CHOWDHURY,
Plaintiff,
- against -

CV-14-2981 (ARR)

NEW YORK MOTOR GROUP LLC, et al.,
Defendants.
------------------------------------------------------------X
GOLD, S., Magistrate Judge:
INTRODUCTION
Plaintiffs in these six related cases allege, among other things, that they were defrauded
when they purchased automobiles and obtained financing from defendants. Plaintiffs allege
multiple causes of action, including violations of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), the Truth in Lending Act (“TILA”), the Magnuson-Moss Warranty
Act (“MMWA”), consumer protection laws of New York, and state common law.
Plaintiffs now move for leave to file Amended Complaints to bring the claims alleged in
the related cases into conformity, to refine already asserted claims, and to address issues raised
by defendants in pre-motion submissions. Docket Entry 71. 1 Defendants respond by crossmoving to dismiss the Proposed Amended Complaints pursuant to Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(6), in large part by arguing that the complaints fail to satisfy the

1

Unless otherwise indicated, all docket entry numbers listed in the text refer to docket entries in the first of these
related cases to be filed, Alkhatib v. New York Motor Group, LLC, et al., 13-cv-2337.

2

pleading standard of Rule 9(b). Docket Entry 77, Docket Entry 60 in 13-cv-5643. 2 Specifically,
the used car dealership defendants, New York Motor Group and Planet Motor Cars, Mamdoh
Eltouby, who owns and operates them, and Nada Eltouby, who was at relevant times employed
by them, seek dismissal of the RICO claims against them. 3 M&T Bank moves to dismiss the
RICO, TILA, MMWA, and state law consumer protection claims asserted by plaintiffs against it.
Plaintiffs have filed opposition to defendants’ cross-motions and a reply in support of their
original motion. Docket Entry 80, (“Pls. Reply”). The dealership defendants have filed a reply
on their motion, arguing that the RICO claims, as pleaded in the proposed Amended Complaints,
are legally deficient, Docket Entry 85, (“NYMG Reply”), as has M&T Bank, Docket Entry 66 in
13-cv-5643, (“M&T Bank Reply”), challenging the sufficiency of the RICO, TILA, MMWA,
and state law consumer protection claims made against it.
United States District Judge Ross has referred plaintiffs’ motion to amend to me for
decision and defendants’ cross-motions to dismiss for report and recommendation. Docket Entry
65. I heard oral argument on November 25, 2014. Docket Entries 88-89. Plaintiffs then filed a
supplemental letter with a revised proposed amended complaint attached. Docket Entry 92.
M&T Bank filed a letter in response. Docket Entry 75 in 13-cv-5643.
FACTS
The facts set out below are drawn primarily from plaintiffs’ Proposed Amended
Complaints and are deemed true for purposes of the pending motions. Facts drawn from the
2

Defendants Santander Consumer USA and Capital One Auto Finance, Inc. have settled with plaintiffs and have not
submitted any motions or briefing. Dealership defendants have not submitted any briefing on the pending motions
in the Tuhin matter and did not submit a letter joining in the other arguments submitted by M&T Bank or by the
dealership defendants in the other cases.
3
Although NYMG does not oppose amendment or seek dismissal of plaintiffs’ non-RICO claims, individual
defendants Mamdoh and Nada Eltouby challenge plaintiffs’ contention that they may be held personally liable on
several of plaintiffs’ claims. NYMG Mem. at 14-15. Plaintiffs have indicated that they do not seek personal
liability of these defendants on their claims under TILA, the New York Motor Vehicle Retail Installment Sales Act,
New York General Business Law and New York’s usury law, or their common law claims for fraud, breach of
contract or rescission. Pls. Reply at 23.

3

Proposed Amended Complaint (“PAC”) filed by Alkhatib explain the retail installment contract
(“RIC”) scheme in detail. Because the overall alleged scheme is similarly described in the
remaining complaints, the discussion of the pleadings filed by the other plaintiffs is more limited
and focuses on facts specific to their respective dealings with defendants. 4
The Parties
Defendant Mamdoh Eltouby owns and operates defendant New York Motor Group and
either owns or has an ownership interest in defendant Planet Motor Cars and non-party Hillside
Motors. These entities are dealerships that sell used cars and advertise cars for sale on various
Internet sites. A: ¶ 34; T: ¶ 16. Nada Eltouby is Mamdoh Eltouby’s daughter and was employed
at New York Motor Group and Planet Motor Cars at times relevant to plaintiffs’ claims. Nada
Eltouby assisted with the sale of automobiles and arranging financing for vehicle purchases. A:
¶ 28. Julio Estrada was an employee of the dealerships whose primary responsibilities included
arranging financing for customers buying cars from the dealerships. A: ¶ 30. M&T Bank,
Capital One Auto Finance, Inc. (“Capital One”), and Santander Consumer USA, Inc.
(“Santander”) are financial institutions that provided financing to plaintiffs pursuant to Retail
Installment Contracts fraudulently prepared by the dealership defendants.
The Fraudulent Retail Installment Contract Scheme
The following facts are drawn from the PAC filed by plaintiff Alkhatib and generally
resemble those alleged by the other plaintiffs. In December 2012, Anwar Alkhatib saw a 2008
Honda Odyssey mini-van advertised on cars.com for a purchase price of $14,995. A: ¶ 34. A
4

Paragraphs from Alkhatib’s PAC, Docket Entry 73-1, are referred to herein as A: ¶ __. The PACs filed on behalf
of the remaining plaintiffs, other than Tuhin, are similarly referenced: the Freire PAC, Docket Entry 73-2, as F:
¶ __; the Gabrys PAC, Docket Entry 73-3, as G: ¶ __; the Dong PAC, Docket Entry 73-4, as D: ¶ __; and the
Chowdhury PAC, Docket Entry 73-5, as C: ¶ __. Tuhin submitted a revised PAC after oral argument together with
a letter brief stating that all plaintiffs intend to file similarly revised proposed amended pleadings if permitted to do
so. This Tuhin PAC, Docket Entry 70-1 in 13-cv-5643, is referenced as T: ¶ __. When a single complaint is cited,
the Tuhin PAC is used because it is the most complete and most recently submitted complaint.

4

few days later, Alkhatib went to New York Motor Group to inquire about purchasing the vehicle
and saw the sale price advertised as $16,995 on the car’s window. A: ¶¶ 35-36. After some
negotiation, Alkhatib agreed to purchase the car for $14,995, with $10,000 down and the
remaining $4,995 financed. A: ¶¶ 37-38. A salesperson then agreed to lower the price to
$13,995 and prepared a purchase invoice listing this amount as the sales price. A: ¶¶ 39-40. The
salesperson asked Alkhatib to leave a deposit of $200 to keep the deal open and to return the next
day to make the financing arrangements. A: ¶¶ 41-42. Although he originally refused to do so,
the salesperson also provided Alkhatib with a photocopy of a portion of a service invoice that
reflected the $200 deposit. A: ¶¶ 43-44.
When Alkhatib returned the next day, the salesperson told him he had to pay the
remainder of the $10,000 down payment before he would be allowed to complete a loan
application. A: ¶ 46. After giving the salesperson $9,800, Alkhatib waited approximately two
hours before he was introduced to a man identified as “John Figueroa,” but who, plaintiffs
contend, was in fact defendant Julio Estrada. A: ¶¶ 47-50. Even though Alkhatib had not yet
signed a loan application, Figueroa/Estrada (referred to as “Figueroa” below) informed him that
two banks had already declined his credit request. A: ¶¶ 51-52. Figueroa refused to provide
Alkhatib with the rejection documents and assured him that the banks would send letters to him
directly by mail. A: ¶ 53. Alkhatib never received any such letters. A: ¶ 54. Figueroa then
reported that Alkhatib had bad credit, leaving him with two options for financing the vehicle,
each of which would result in a drastic increase in the car’s cost: one option included a $4,500
processing fee, an annual percentage rate of 15%, and a prepayment penalty, while the other
required a $1,750 processing fee, an annual percentage rate of 10%, a $2,700 insurance policy,
and a $3,000 service contract. A: ¶ 55.

5

At this point, Alkhatib sought to get his deposit back and go elsewhere, but Figueroa told
him that the financing process had begun and that Alkhatib could not cancel it or leave without
incurring a penalty equal to 35% of the car’s cash price. A: ¶ 56-57. Figueroa also asserted that,
if Alkhatib canceled the deal, the dealership would retain the $10,000 cash deposit and Alkhatib
would be required to hire a collection company to get even a portion of it back. A: ¶ 58.
Alkhatib then offered to pay the entire price for the car in cash. A: ¶ 59. Figueroa, though,
insisted that was no longer possible and that, if Alkhatib wished to buy the vehicle and avoid the
penalty, he would have to select one of the dealership’s financing options. A: ¶ 60.
Alkhatib reluctantly selected the second financing option and was told the $7,450 in
additional charges were “security conditions” necessary to obtain the loan. A: ¶¶ 62-63.
Figueroa prepared a retail installment contract and purchase agreement that stated the vehicle
price was $21,457.50 and failed to itemize the additional processing, insurance and service
contract charges. A: ¶ 64. The final retail installment contract indicated that the amount
financed was $13,309.53 with a $4,034.67 finance charge and an annual percentage rate of
10.76% – amounting to $17,344 in financing and fees and a total cost exceeding $27,000 for a
car that had been advertised for $14,995 and for which Alkhatib at one point offered to pay the
full amount in cash. A: ¶¶ 66-68. Although Alkhatib had responded to an Internet ad for New
York Motor Group and had traveled to a dealership by that name, the $3,000 service contract
indicated that the selling dealership was Planet Motor Cars and listed the vehicle’s purchase
price as $20,000. A: ¶¶ 76-77.
Figueroa represented to Alkhatib that the insurance policy for which Alkhatib was
charged $2,700 would mature into a policy with complete automobile insurance coverage after
six months. A: ¶ 72. However, the product was not in fact a replacement for car insurance, but a

6

“Theft Deterrent Product Protection policy.” A: ¶ 70. Although Figueroa promised Alkhatib
that an insurance card would be mailed to him, Alkhatib never received one. A: ¶¶ 73-74.
Moreover, when Alkhatib contacted the provider of the Theft Deterrent policy in attempt to
cancel it, he learned he could not do so because the providers of that plan had no record of him
having a policy with them in the first place. A: ¶¶ 80-81. Alkhatib contacted both NYMG and
Planet Motors Cars about cancelling the “insurance policy” and the service contract, but neither
responded to his inquiries. A: ¶¶ 82-86.
New York Motor Group sent the retail installment contract and other information to
Capital One via either fax or the Internet. A: ¶ 79. Capital One successfully became an assignee
of Alkhatib’s loan and continued to send him billing statements and receive monthly payments,
at least up to the time Alkhatib filed his complaint. A: ¶ 87.
The other plaintiffs had similar experiences with the dealership defendants. Some were
exposed to additional tactics, including promises that the financing discussions were being
recorded, G: ¶ 53; T: ¶ 28; pressure to sign the documents quickly, F: ¶ 68; G: ¶ 63; T: ¶ 31; and
false assurances or avoidance during subsequent visits, T: ¶ 48; C: ¶¶ 86, 92; F: ¶¶ 72, 76, 82-83;
G: ¶¶ 123-25.
On June 19, 2013, Shahadat Tuhin went to NYMG to purchase a vehicle he had seen
advertised on the dealership’s website for $14,995. T: ¶ 16. When he arrived there, Estrada told
Tuhin he would have to sign a sales contract before he could obtain financing, and that the car
would be financed at 5.84% interest for six months and at 2.17% interest for the remaining 54
months of the loan if Tuhin made the first six payments on time. T: ¶¶ 18, 23. Estrada falsely
explained that if Tuhin made these payments, he would pay $2,000 down and $9,529.86 in
financing payments for a car advertised at $14,995 on the Internet. T: ¶ 27. When Tuhin

7

questioned a sales contract showing $22,795.87 as the sales price, Estrada showed him a new
contract reflecting the lower agreed upon price of $12,000. T: ¶¶ 29-30. Estrada rushed Tuhin
to sign this document, obscured the areas surrounding the signature block, and refused to
immediately provide Tuhin with a copy. T: ¶¶ 30-31. When Tuhin returned home, he saw that
the document he signed was in fact the original sales contract with the higher sales price. T:
¶ 35. Tuhin had also unknowingly signed a retail installment contract for $26,209, which
included $4,997.96 in finance charges, a $3,000 service contract, and other unrequested and
previously undisclosed “add-ons.” T: ¶ 35. Moreover, the car itself was not merchantable in that
it shook violently when driven. T: ¶ 53. Tuhin tried to return the vehicle to NYMG but was met
with resistance from Nada Eltouby, Mamdoh Eltouby, and other NYMG employees. T: ¶¶ 5965.
In December 2012, plaintiff Simon Gabrys went to NYMG in response to an Internet
advertisement for a used car. G: ¶ 40. When he arrived, Gabrys agreed to pay $10,000 in a bank
check and borrow $9,000 to purchase a vehicle. G: ¶ 48. Gabrys met with Estrada, who told
Gabrys that he had poor credit and could only obtain a loan from M&T Bank at a rate of 5.7%.
G: ¶ 54. Estrada represented, however, that the loan could be refinanced at a rate of 2.13% if
Gabrys made the first eight loan payments on time. G: ¶ 55. Estrada also stated that this deal
required purchasing a package of additional products, including a $3,995 service contract, but
that Gabrys was entitled to a refund of $3,920 of that charge if Gabrys cancelled the service
contract after six months. G: ¶¶ 57-59. Gabrys signed a retail installment contract listing a
vehicle cash price of $30,895, a down payment of $10,000, and an unpaid balance of $20,895.
G: ¶¶ 63-65. Gabrys was able to receive only $2,2246.36 after cancelling the service contract,

8

and the loan was never refinanced at a lower rate as promised despite Gabrys’ payments and
multiple attempts to have Estrada process his refinancing application. G: ¶¶ 77, 101-06.
In February 2013, plaintiff Boris Freire sought to buy a vehicle after seeing it advertised
on NYMG’s website for $14,900. 5 F: ¶¶ 42-43. Freire met with a representative of the
dealership who identified himself as John Dos Santos, but who plaintiffs contend was in fact
defendant Estrada. F: ¶¶ 15-16, 49. Dos Santos presented Freire with two financing options
after telling Freire that he had a poor credit rating. F: ¶ 51. Freire agreed to the second option,
which Dos Santos represented would allow Freire to refinance his loan and reduce his monthly
payments from $624.72 to $155.27 after four payments. F: ¶ 51. Freire, having agreed to the
deal, made arrangements to return with a down payment of $7,500. F: ¶ 53. When Freire
returned the next day with the down payment, he questioned the RIC presented to him because it
listed a vehicle cash price of $30,199.96, showed a down payment of $10,500, and required
$22,999.96 to be financed. F: ¶¶ 56, 58. The contract also stated that Freire was obligated to
pay the higher payments over the entirety of the loan period and did not memorialize the
promised opportunity to refinance after four payments. F: ¶ 57. Additionally, Dos Santos told
Freire that the lender required Freire to purchase a package of products including insurance
priced at $5,500 and a service contract costing $3,000. F: ¶¶ 59-60. Dos Santos made a number
of fraudulent assurances to convince Freire to sign the contract. F: ¶¶ 61-64, 66-67. Four
months later, Dos Santos convinced Freire to pay an additional $3,000 to receive the refinancing
he had been promised earlier. F: ¶¶ 85, 87, 90. In this interaction, Dos Santos told Freire that if
he did not pay the additional $3,000, he would be bound by the terms of the high interest loan for

5

Freire and Miriam Osario, an unmarried couple, are both named as plaintiffs, but there are no facts specifically
involving Osario relevant to the pending motions.

9

another 56 months. F: ¶ 88. After paying the $3,000, Freire signed a new RIC providing for a
lower monthly payment, but the loan was never refinanced as promised. F: ¶ 90, 98-99.
In April 2013, plaintiff Zeng Hui Dong went to NYMG and inquired about a car she saw
on the lot. D: ¶ 43. After Dong put down $7,000 in cash towards the purchase of the car she had
selected, Estrada advised her she would have to purchase insurance and service contracts that
would add more than $6,000 to the price of the car. D: ¶ 51. When Dong said she was not
interested and wanted to leave, Estrada threatened that she would lose all but $2,000 of her
deposit if she declined to proceed with the purchase and arrange for financing. D: ¶¶ 54-55.
Although Dong proceeded to sign a RIC, it was never processed, and the lending bank, Capital
One, never contacted her. D: ¶¶ 57, 60-62. On July 30, 2013, Dong returned to the dealership at
Estrada’s request. D: ¶¶ 64-65. When she arrived, Estrada tried to present her with another RIC,
and Dong responded by offering to pay off the balance due for her car in cash. D: ¶¶ 66-67.
After some negotiations, Estrada accepted her cash and prepared a document crediting Dong for
her two lump sum payments, indicating $0 financed, 0% interest charged, and a total down
payment matching the car’s sale price. D: ¶¶ 68, 70-73. Despite this new arrangement, though,
in December 2013, Dong received a certificate of title for the purchased vehicle in the mail that
listed Santander Consumer USA as a lienholder. D: ¶¶ 81-82. Dong later learned that Santander
had received a third RIC in her name dated August 2013, bearing a signature distinctly different
from her own and indicating an unpaid balance of $18,041.23. D: ¶¶ 85, 88, 93. Dong returned
to the dealership in February 2014 and showed a copy of the third RIC to Nada Eltouby. D:
¶ 105. Nada Eltouby denied knowing about the RIC and advised Dong that the dealership could
not do anything to help her because Estrada no longer worked there. D: ¶ 105. On March 24,

10

2014, Santander repossessed Dong’s car for not making payments on the third RIC and returned
the car to Dong only after this lawsuit was filed. D: ¶¶ 119, 130.
In January 2013, plaintiff Nasrin Chowdhury went to NYMG after seeing an Internet
advertisement for a car for sale there. C: ¶ 41. A salesperson rejected her offer to pay for the car
in cash, and Chowdhury ultimately agreed to pay $10,000 in cash and to finance $3,500 of the
purchase price. C: ¶¶ 43, 44, 47. Estrada offered Chowdhury two financing options with the
shorter term, lower interest option requiring a warranty or service contract on the vehicle.
C: ¶¶ 61, 63-64. Chowdhury received a sales contract reflecting a sale price of $13,500 and
understood that the total price of the vehicle would be $16,556.10 including interest and the
service contract. C: ¶¶ 57, 67. However, when Chowdhury received the RIC, it stated a total
price of $24,471.00 with $14,911.99 of that amount financed. C: ¶ 77. Estrada assured
Chowdhury that a final lump sum payment on the seventh month would pay off the loan in full
and that their original agreement was not altered by the RIC. C: ¶ 82. In August 2013,
Chowdhury’s son gave Estrada the final lump sum payment and Estrada assured him, both
verbally and in writing, that the debt on the car had now been fully paid. C: ¶¶ 89-90. However,
the lender, M&T Bank, continued to bill Chowdhury and sent her a letter asserting that she was
behind in her payments. C: ¶ 96. Chowdhury’s son spoke with Nada Eltouby in early October
and explained to her that the loan had been paid, and Nada Eltouby assured him that the
dealership would take care of everything. C: ¶¶ 101-03. Nada Eltouby spoke with Chowdhury’s
son again in mid-October and told him that he should speak with the bank because there was
nothing she or the dealership could do to assist him. C: ¶¶ 104-05. In early November 2013,
Estrada called Chowdhury at her home and threatened to divulge her personal financial
information to others and to call her at work in possible retaliation for her persistence. C: ¶ 116.

11

After police intervention, Estrada had Nada Eltouby prepare a money order from the dealership
in the amount of the August 2013 lump sum payment. C: ¶¶ 124-25. Around this time,
Chowdhury also discovered that her signature had been forged on the service contract and that
the contract contained other falsified information. C: ¶¶ 131, 133-34. Chowdhury was able to
recover only 45% of the $2,314 she paid for the service contract despite Estrada’s earlier
assurance that she would be eligible for a full refund. C: ¶¶ 139-40.
Chowdhury, Tuhin, and Gabrys, the only plaintiffs suing M&T Bank, allege that M&T
Bank agreed to fund their loans despite knowing or recklessly disregarding that they had been
fraudulently induced to agree to financing agreements. G: ¶ 20. In June 2013, Tuhin called
M&T Bank immediately after NYMG electronically sent the assignment documents to M&T
Bank, but before the bank had paid any funds to NYMG. T: ¶¶ 44-45. Although Tuhin told an
M&T Bank representative he had been defrauded and wanted to cancel his loan, the M&T
representative responded that the Bank could not cancel the transaction once the dealership
submitted a RIC with his signature. T: ¶ 45. In October 2013, approximately ten months after
their loans had been processed and issued, Gabrys and Chowdhury contacted M&T Bank as well.
G: ¶ 126; C: ¶ 106. M&T Bank at first made assurances that it would investigate further, but
then generally told each plaintiff that there was nothing the bank could do to cancel the loans.
T: ¶ 46; G: ¶ 127; C: ¶¶ 107, 112-14. A bank representative suggested to Chowdhury, through
her son, that she should retain an attorney, and another bank representative advised Tuhin that he
could report any claim of fraud to the New York State Attorney General. C: ¶ 114; T: ¶ 45.
Plaintiffs allege that Nada Eltouby was a key participant who knowingly assisted the
dealerships’ fraudulent scheme throughout the relevant period. At separate points, plaintiffs
observed Nada Eltouby faxing documents to an apparently nonexistent person, G: ¶ 117, and

12

creating a money order at Estrada’s request, C: ¶ 125. Nada Eltouby served as a manager with
authority to act on behalf of the dealership. C: ¶ 122; T: ¶¶ 47, 61. For instance, she spoke with
police officers responding to a protest held by fraud victims, C: ¶ 122; D: ¶ 107, and received a
cash down payment made by one of the plaintiffs and signed a receipt for it, T: ¶ 18. Plaintiffs
further allege that Nada Eltouby often spoke on behalf of the dealership to the plaintiffs and, at
times, made assurances on NYMG’s behalf. C: ¶¶ 102-03; T: ¶ 19; F: ¶ 83.
Mamdoh Eltouby was present for various interactions between the dealerships and the
plaintiffs and also authorized numerous actions by his subordinates. Eltouby hired Estrada to
serve as a finance manager only weeks after Estrada had been indicted and arrested on multiple
counts of theft, larceny, forgery, and fraud related to his actions as the finance manager of
another dealership. T: ¶¶ 79, 82. Eltouby hired Estrada despite a public announcement from the
Queens County District Attorney that Estrada had defrauded more than 23 consumers out of
more than $115,000 with the promise that they could return to him to refinance their high interest
loans after six months of timely payments. T: ¶ 80. Plaintiffs allege that Mamdoh Eltouby
continues to operate the fraudulent scheme even after Estrada’s re-arrest in March 2014 and even
without Estrada’s continued participation. T: ¶ 85.
DISCUSSION
I.

Standards Governing Leave to Amend and Judgment on the Pleadings
Leave to amend a pleading “should [be] freely give[n] . . . when justice so requires.”

Fed. R. Civ. P. 15(a); see also Foman v. Davis, 371 U.S. 178, 182 (1962) (“In the absence of any
apparent or declared reason – such as undue delay, bad faith . . . undue prejudice to the opposing
party . . . futility of the amendment, etc. – the leave sought should, as the rules require, be ‘freely
given.’”). Amendments are generally favored because they “tend to facilitate a proper decision

13

on the merits.” Sokolski v. Trans Union Corp., 178 F.R.D. 393, 396 (E.D.N.Y. 1998) (internal
quotation marks and citations omitted). The party opposing an amendment to the pleadings has
the burden to establish “that leave to amend would be prejudicial or futile.” Id.; see also Block v.
First Blood Assoc., 988 F.2d 344, 350 (2d Cir. 1993) (“The rule in this Circuit has been to allow
a party to amend its pleadings in the absence of a showing by the nonmovant of prejudice or bad
faith.”); Harrison v. NBD Inc., 990 F. Supp. 179, 185 (E.D.N.Y. 1998). Thus, “[i]f the movant
has at least colorable grounds for relief, justice . . . requires that the court grant leave to amend
the complaint.” Sokolski, 178 F.R.D. at 396 (quoting Golden Trade, S.r.L. v. Jordache, 143
F.R.D. 504, 506 (S.D.N.Y. 1992)) (internal quotation marks and brackets omitted).
Whether a proposed amendment to a pleading would be futile is decided pursuant to the
same standard that applies to a motion to dismiss. “An amendment is considered futile if the
amended pleading fails to state a claim or would be subject to a successful motion to dismiss on
some other basis.” Chan v. Reno, 916 F. Supp. 1289, 1302 (S.D.N.Y. 1996). “In deciding
whether an amended complaint meets this threshold, the Court is required to accept the material
facts alleged in the amended complaint as true and draw reasonable inferences in the plaintiffs’
favor.” Mendez v. U.S. Nonwovens Corp., 2 F. Supp. 3d 442, 451 (E.D.N.Y. 2014) (citing
Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009)). These principles apply as well when
considering a motion to dismiss, whether under Rule 12(b)(6) or 12(c):
The standard for granting a Rule 12(c) motion for judgment on the pleadings is
identical to that of a Rule 12(b)(6) motion for failure to state a claim. In both
postures, the district court must accept all allegations in the complaint as true and
draw all inferences in the non-moving party’s favor. The court will not dismiss
the case unless it is satisfied that the complaint cannot state any set of facts that
would entitle [the plaintiff] to relief.
Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2011) (internal
citations omitted).
14

To survive a motion to dismiss, “the plaintiff must provide the grounds upon which his
claim rests through factual allegations sufficient to raise a right to relief above the speculative
level.” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (internal quotation marks omitted). In
other words, “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) (internal
quotation marks and citation omitted). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. While the court accepts all well-pleaded factual allegations as
true, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. Dismissal is appropriate if the well-pleaded allegations in the
complaint do not “nudge[] . . . claims across the line from conceivable to plausible.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).
Fraud claims are subject to a heightened pleading standard that requires plaintiffs to
“state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). “The
complaint must adequately specify the statements it claims were false or misleading, give
particulars as to the respect in which plaintiff contends the statements were fraudulent, state
when and where the statements were made, and identify those responsible for the statements.”
Lundy v. Catholic Health Sys. of Long Island Inc., 711 F.3d 106, 119 (2d Cir. 2013) (internal
quotation marks and citation omitted). “To survive a motion to dismiss, a complaint alleging
fraud must [also] ‘allege facts that give rise to a strong inference of fraudulent intent.’” Space
Hunters, Inc. v. United States, 500 F. App’x 76, 78-79 (2d Cir. 2012) (citation omitted).

15

Because defendants who oppose leave to amend on futility grounds face the same
standard as those who move for judgment on the pleadings under Rule 12, I address defendants’
motions to dismiss and their opposition to plaintiffs’ motion for leave to amend together.
II.

Plaintiffs’ RICO Claims
RICO provides a civil remedy to persons injured in their business or property by a

violation of the statute. 18 U.S.C. § 1964(c). Plaintiffs assert RICO and RICO conspiracy
claims pursuant to 18 U.S.C. §§ 1961(c) and (d) against the various dealership and financial
institution defendants. Alkhatib PAC Count 2; Tuhin PAC Counts 1-2; Freire PAC Counts 3-4;
Gabrys PAC Counts 2-3; Dong PAC Counts 1-2; Chowdhury PAC Counts 1-2.
A plaintiff asserting a civil RICO claim must allege “(1) a violation of the RICO statute,
18 U.S.C. § 1962; (2) an injury to business or property; and (3) that the injury was caused by the
violation of Section 1962.” Spool v. World Child Int’l Adoption Agency, 520 F.3d 178, 183 (2d
Cir. 2008) (quoting DeFalco v. Bernas, 244 F.3d 286, 305 (2d Cir. 2001)). A defendant may be
held liable for violating RICO if the defendant, through the commission of two or more acts
constituting a pattern of racketeering activity, directly or indirectly participated in the affairs of
an enterprise involved in interstate commerce. Hemi Group, LLC v. City of New York, 559 U.S.
1, 6 (2010); Allstate Ins. Co. v. Valley Phys. Med. & Rehab., P.C., 2009 WL 3245388, at *3
(E.D.N.Y. Sept. 30, 2009) (quoting United States v. Turkette, 452 U.S. 576, 583 (1981)).
Defendants challenge the sufficiency of plaintiffs’ RICO allegations on a number of grounds,
each of which is addressed below. 6

6

To establish a RICO conspiracy pursuant to Section 1962(d), a plaintiff must prove that a defendant entered into an
agreement to form a RICO enterprise and violate RICO’s substantive provisions. See United States v. Applins, 637
F.3d. 59, 74 (2d Cir. 2011). Defendants do not raise any arguments directed specifically to plaintiffs’ RICO
conspiracy claims, and I therefore do not separately address those claims here.

16

A. RICO Enterprise
In their proposed amended complaints, each plaintiff brings a RICO claim against
Mamdoh Eltouby, Nada Eltouby and Julio Estrada that alleges an association-in-fact enterprise
“comprised of the auto dealerships owned, operated, overseen or otherwise controlled by Mr.
Eltouby, or in which Mr. Eltouby is an officer. They include New York Motor Group, Planet
Motor Cars, and Hillside Motors, LLC.” T: ¶ 127. 7 This alleged enterprise is referred to below
as the “Dealership Enterprise.” In addition, plaintiffs Chowdhury, Gabrys, and Tuhin each assert
a RICO claim against New York Motor Group and M&T Bank that alleges an association-in-fact
enterprise comprised of these two named defendants. T: ¶ 96; G: ¶¶ 146-47 (including Planet
Motor Cars in addition to NYMG and M&T Bank), C: ¶¶ 148-49 (including Planet Motor Cars
in addition to NYMG and M&T Bank). This second alleged enterprise is referred to below as
the “M&T Enterprise.”
A RICO enterprise “includes any individual, partnership, corporation, association, or
other legal entity, and any union or group of individuals associated in fact although not a legal
entity.” 18 U.S.C. § 1961(4). An “association-in-fact” enterprise must have “at least three
structural features: a purpose, relationships among those associated with the enterprise, and
longevity sufficient to permit these associates to pursue the enterprise’s purpose.” Boyle v.
United States, 556 U.S. 938, 956 (2009); see also United States v. Turkette, 452 U.S. 576, 583
(1981) (describing an enterprise as “a group of persons associated together for a common
purpose of engaging in a course of conduct”); Hemmerdinger Corp. v. Ruocco, 976 F. Supp. 2d
401, 413 (E.D.N.Y. 2013) (same). Courts in this district have recognized that “Boyle establishes
a low threshold for pleading such an enterprise.” Delgado v. Ocwen Loan Servicing, LLC, 2014

7

Although the wording they use is slightly different, the other complaints include similar enterprise allegations. A:
¶ 105, F: ¶ 173, G: ¶ 178, D: ¶ 169, C: ¶ 180.

17

WL 4773991, at *16 (E.D.N.Y. Sept. 24, 2014) (quoting McGee v. State Farm Mut. Auto. Ins.
Co., 2009 WL 21232439, at *4 n.7 (E.D.N.Y. July 10, 2009)). Formal hierarchy, role
differentiation, regular meetings, or established procedures are not required; rather, an informal
group may constitute an enterprise as long as “the group . . . function[s] as a continuing unit and
remain[s] in existence long enough to pursue a course of conduct.” Boyle, 556 U.S. at 948.
A RICO enterprise must have an ascertainable structure distinct from the pattern of
racketeering activity in which its members engage. Turkette, 452 U.S. at 583 (holding that “[t]he
‘enterprise’ is not the ‘pattern of racketeering activity;’ it is an entity separate and apart from the
pattern of activity in which it engages”). Nevertheless, “the evidence used to prove the pattern of
racketeering activity, and the evidence establishing an enterprise ‘may in particular cases
coalesce.’” Boyle, 556 U.S. at 947 (quoting Turkette, 452 U.S. at 583); see also United States v.
Int’l Longshoremen’s Ass’n, 518 F. Supp. 2d 422, 473 (E.D.N.Y. 2007). Finally, the enterprise
as alleged must be distinct from the person or persons alleged to be conducting the affairs of the
enterprise. See Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001); Cruz v.
FXDirectDealer, LLC, 720 F.3d 115, 121 (2d Cir. 2013); Riverwoods Chappaqua Corp. v.
Marine Midland Bank, N.A., 30 F.3d 339, 343-45 (2d Cir. 1994). This requirement is satisfied
when an owner or employee of a corporation is the person alleged to be conducting the affairs of
the enterprise and the enterprise is the corporation itself. Kushner, 533 U.S. at 163-64; see also,
Palatkevich v. Choupak, 2014 WL 1509236, at *14-15 (S.D.N.Y. Jan. 24, 2014) (concluding,
after close analysis of relevant precedent, that, “[a]fter Kushner and Riverwoods/Cruz, the
distinctness rules are as follows: within the meaning of § 1962(c), a natural person named as the
defendant ‘person’ is inherently distinct from a corporate entity ‘enterprise’ for which he acts as
an agent; in such a case, the distinctness requirement is met”).

18

Defendants contend that plaintiffs’ enterprise allegations are insufficient. The dealership
defendants argue that the plaintiffs fail to allege that the Dealership Enterprise has any
hierarchical structure or an existence separate and apart from its alleged racketeering activity.
NYMG Memorandum of Law in Support of Cross-Motion (“NYMG Mem.”), Docket Entry 79,
at 12-13. This argument lacks merit for several reasons. First, “an established hierarchy is not
essential to the existence of an enterprise.” U.S. v. Burden, 600 F.3d 204, 215 (2d Cir. 2010)
(citing Boyle, 556 U.S. at 948). Even if it were, plaintiffs’ allegations would be sufficient;
plaintiffs allege that NYMG is a limited liability company owned and operated by defendant
Mamdoh Eltouby that employed defendants Nada Eltouby and Julio Estrada. T: ¶¶ 9, 11-13.
Plaintiffs’ factual allegations describe actions taken by each of the individual defendants on
behalf of NYMG from which their roles in the enterprise may be logically inferred. T: ¶¶ 23-34,
47-48, 56, 63, 65. Second, the facts alleged by plaintiffs indicate that NYMG and the other
dealerships owned and operated by Mamdoh Eltouby were ongoing businesses that, among other
things, advertised on the Internet, maintained lots where used cars could be viewed, and
employed personnel with whom purchases of cars could be arranged. To the extent plaintiffs’
complaints suggest that the dealerships owned by Eltouby engaged in fraud as a matter of course,
the alleged facts establishing the enterprise and the pattern of racketeering may “coalesce,” but
that is no obstacle to concluding that the enterprise allegations are sufficient. Boyle, 556 U.S. at
947. Finally, as noted above, a complaint satisfies RICO’s distinctness requirement if it alleges
an enterprise comprised of a corporation or related corporations and names as defendants natural
persons who own or work for the corporations and participated in the corporation’s affairs
through a pattern of racketeering. 8 That is certainly the case here. Accordingly, defendants’

8

The Alkhatib PAC appears to name the dealership entities as defendants alongside the natural persons in violation
of Kushner. I do not dwell on this deficiency because, if leave to amend is granted, the Alkhatib Amended

19

challenge to the sufficiency of the allegations describing the Dealership Enterprise should be
rejected.
Defendant M&T Bank similarly challenges the sufficiency of plaintiffs’ enterprise
allegations. M&T Bank Memorandum of Law in Support of Cross-Motion (“M&T Bank
Mem.”), Docket Entry 62 in 13-cv-5643, at 7-8. Here too, however, the allegations are
sufficient. NYMG and M&T Bank are distinct legal entities, separate and apart from each other
and hence from the alleged enterprise consisting of them both. Plaintiffs Chowdhury, Gabrys,
and Tuhin allege that these entities developed an ongoing relationship whereby NYMG would
arrange financing for its customers through M&T Bank. Even if most or even all of the
financing NYMG provided to its customers involved fraud, the result would be only
“coalescing” of the facts establishing the existence of the enterprise and those proving the pattern
of racketeering, and would not undermine the sufficiency of plaintiffs’ allegations concerning the
M&T Enterprise. Nor is it necessarily fatal to plaintiffs’ M&T Enterprise allegations that, as
discussed below, I conclude that plaintiffs’ allegations against M&T Bank as a RICO defendant
are insufficient. Courts have often found an association-in-fact enterprise to be properly pled
even if some members of the alleged enterprise are not named as defendants in the case. See,
e.g., City of New York v. Smokes-Spirits.com, Inc., 541 F.3d 425, 448, 451 (2d Cir. 2008), rev’d
on other grounds, Hemi Grp., LLC v. City of New York 559 U.S. 1 (2010); Mark v. J.I. Racing,
Inc., 1997 WL 403179, at *5 (E.D.N.Y. July 9, 1997); see also Three Rivers Provider Network,
Inc. v. Meritain Health, Inc., 2008 WL 2872664, at *14-15 (S.D. Cal. July 23, 2008); Titan Int'l,
Inc. v. Becker, 189 F. Supp. 2d 817, 820, 824 (C.D. Ill. 2001); Metrahealth Ins. Co. v. Anclote
Psychiatric Hosp., Ltd., 1997 WL 728084, at *4 (M.D. Fla. Oct. 23, 1997) (motion to dismiss
Complaint will be revised to conform to the most recent Tuhin PAC. This PAC, attached to the plaintiffs’ letter
submitted after oral argument, names the defendants in a manner consistent with Kushner.

20

denied as to question of enterprise, but granted to the extent of requiring a more detailed RICO
statement; Benard v. Hoff, 727 F. Supp. 211, 214-15 (D. Md. 1989). Accordingly, defendants’
challenge to the sufficiency of plaintiffs’ allegations with respect to the M&T Enterprise should
be rejected as well.
B. Conducting the Enterprise’s Affairs Through Racketeering Activity
RICO liability does not extend to all “persons” associated with an enterprise, but is
limited to those who “conduct or participate, directly or indirectly, in the conduct of such
enterprise’s affairs through a pattern of racketeering activity.” 18 U.S.C. § 1962(c). Defendants
challenge the sufficiency of plaintiffs’ allegations of racketeering activity. At least two
defendants – Nada Eltouby and M&T Bank – argue as well that plaintiffs’ allegations about their
participation in the conduct of an enterprise’s affairs through racketeering activity are
insufficient to support RICO claims against them. Finally, defendants argue that, even if
racketeering activity were otherwise properly alleged, plaintiffs’ RICO claims would be subject
to dismissal because plaintiffs fail to allege a pattern of racketeering that satisfies RICO’s
continuity requirement.
“Racketeering activity” is defined in the RICO statute as any of various state or federal
crimes, including mail fraud, 18 U.S.C. § 1341, and wire fraud, 18 U.S.C. § 1343. See 18 U.S.C.
§ 1961(1)(B). A “pattern of racketeering activity” requires at least two predicate acts of
racketeering activity committed within a ten-year period. 18 U.S.C. § 1961(5); First Capital
Asset Mgmt., Inc. v. Satinwood, 385 F.3d 159, 178 (2d Cir. 2004). “To establish a pattern, a
plaintiff must also make a showing that the predicate acts of racketeering activity by a defendant
are ‘related, and they amount to or pose a threat of continued criminal activity.’” Cofacrèdit,

21

S.A. v. Windsor Plumbing Supply Co., Inc., 187 F.3d 229, 242 (2d Cir. 1999) (quoting H.J., Inc.
v. Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989)).
1. Mail and Wire Fraud - Specificity
Mail and wire fraud under 18 U.S.C. §§ 1341 and 1343, respectively, require proof of
three elements: (1) the existence of a scheme to defraud, (2) the defendant’s knowing or
intentional participation in the scheme, and (3) the use of the mails or interstate transmission
facilities in furtherance of the scheme. S.Q.K.F.C., Inc. v. Bell Atl. TriCon Leasing Corp., 84
F.3d 629, 633 (2d Cir. 1996) (quoting United States v. Gelb, 700 F.2d 875, 879 (2d Cir. 1983)).
A scheme to defraud “has been described as a plan to deprive a person ‘of something of value by
trick, deceit, chicane, or overreaching.’” United States v. Autori, 212 F.3d 105, 115 (2d Cir.
2000) (citations omitted).
As noted above, claims of fraud are subject to a heightened pleading standard.
Allegations of predicate mail and wire fraud violations must state the “contents of the
communications, who was involved, [] where and when they took place, and [] explain why they
were fraudulent.” Spool, 520 F.3d at 185 (internal quotation marks and citation omitted). In
addition, while a defendant’s “intent to defraud may be averred generally under Rule 9(b), such
allegations of scienter must be supported by facts ‘giving rise to a strong inference that the
defendant knew the statements to be false and intended to defraud the plaintiff’ at the time they
were made.” U.S. Fire Ins. Co. v. United Limousine Service, Inc., 303 F. Supp. 2d 432, 443-44
(S.D.N.Y. 2004) (quoting Ouaknine v. MacFarlane, 897 F.2d 75, 79-80 (2d Cir. 1990)); see also
First Capital Asset Mgmt., 385 F.3d at 179.
Defendants argue that plaintiffs’ complaints fail to plead the predicate acts with sufficient
specificity and instead rely on mere “bare-boned conclusory allegations.” NYMG Mem. at 6;

22

see also M&T Bank Mem. at 15. As the facts recounted above demonstrate, though, plaintiffs’
Proposed Amended Complaints are anything but bare-boned. Plaintiffs describe in exhaustive
detail a sophisticated scheme pursuant to which the dealership defendants lure customers in with
low advertised prices, use aggressive sales tactics and false promises to induce customers to
enter into onerous financing agreements, and fraudulently conceal from customers that the
documents presented to them contain undisclosed charges. Plaintiffs identify the particular
individuals who made statements to them, what statements they made, and why the statements
were part of a fraudulent scheme.
Alkhatib, for example, alleges that he arrived at NYMG interested in a car that was
advertised for $14,995, only to be essentially coerced and defrauded into signing a retail
installment contract with a total cost exceeding $27,000. Alkhatib’s complaint describes how a
NYMG salesperson required that he turn over a $10,000 down payment that Estrada would later
refuse to return when Alkhatib – unwilling to enter into the financing arrangements proposed by
Estrada – asked for his deposit back. Alkhatib also alleges that Estrada falsely informed him that
two banks denied his loan application before he had even made one, and refused to provide any
documents evidencing the banks’ rejection, promising the bank would send the documents –
which never arrived – directly to Alkhatib. Finally, Alkhatib alleges that he was promised, and
paid for, insurance he never received, and was charged for processing, insurance and service fees
that were never itemized.
Tuhin’s complaint is similarly specific. Among other allegations, Tuhin asserts that
Estrada persuaded him to enter into a high-interest loan by falsely representing to him that the
interest rate would drop markedly after six months if Tuhin made his first six payments on time.
Tuhin also alleges that, when he questioned a sales contract showing a $22,795.87 sales price,

23

Estrada showed him a new contract reflecting a lower agreed-upon price of $12,000, but then
switched the documents, so that Tuhin ended up signing the first sales contract with the higher
sales price. Gabrys and Freire allege, among other things, similar false representations about a
reduction in the interest rates on their loans after a few months of timely payments. Dong alleges
that she paid Estrada a lump sum equal to the amount owed on her car loan, but that her signature
was forged on a retail installment contract and that she was provided a certificate of title
encumbered by a lien in favor of a lender to whom she owed nothing. Like the other plaintiffs,
Chowdhury found that she had signed a RIC with terms substantially different from those
described to her by Estrada, and continued to receive billing notices from her lender even after
paying off her loan in full by delivering cash directly to Estrada.
These are only some of the highly specific allegations of fraud set forth in plaintiffs’
complaints. Defendants’ contention that plaintiffs have failed to plead fraud with sufficient
specificity should therefore be rejected.
2. Mail and Wire Fraud – Use of the Mails and Interstate Wires
Defendants also challenge the adequacy of plaintiffs’ allegations that the mails or
interstate wire communications were used in furtherance of the alleged fraudulent scheme. As
defendants point out, while plaintiffs identify a large number of wire transmissions in their
complaints, they do not allege that these transmissions crossed state lines. T: ¶¶ 104(b)-(g).
Rather, the alleged wire transfers were between NYMG and M&T Bank, both of which are
located in New York. T: ¶¶ 9-10. These allegations are therefore not sufficient to plead
interstate use of the wires. See Bernstein v. Misk, 948 F. Supp. 228, 239 (E.D.N.Y. 1997)
(“[W]here all parties are New York residents, ‘all telephone calls are presumed to be intrastate

24

and, absent any indications otherwise, the predicate act of wire fraud is not stated.’” (citation
omitted)).
Plaintiffs, however, also allege that NYMG used the Internet to advertise and that several
of the plaintiffs came to the dealership in response to Internet ads. T: ¶ 104(a). The use of
advertising on the Internet in furtherance of an alleged fraud satisfies the interstate wire
requirement of § 1343. See DNJ Logistic Group, Inc. v. DHL Express (USA), Inc., 2010 WL
625364, at *6 n.4 (E.D.N.Y. Feb 19, 2010) (finding plaintiff adequately pleaded wire fraud even
though plaintiff and defendant were located in New York because “recent cases appear to treat
any use of the internet as sufficiently interstate in nature”). Because each plaintiff except Dong
responded to an Internet advertisement posted by the dealership defendants, plaintiffs allege a
pattern of use of the interstate wires in furtherance of the fraud occurring on multiple occasions
within a period of ten years.
Plaintiffs either allege, or indicate they will allege, having received billing statements in
the mail from the lender on their respective RICs. T: ¶ 104(h), (i), (k). While the dealership
defendants may not have mailed these billing statements, it is well-settled that a defendant may
be liable for mail fraud even if he or she did not personally use the mails; rather, a plaintiff need
only show that “defendants could reasonably have foreseen that [a] third-party would use the
mail in the ordinary course of business as a result of defendants’ act.” United States v.
Bortnovsky, 879 F.2d 30, 36 (2d Cir. 1989); see also Pereira v. United States, 347 U.S. 1, 8-9
(1954) (holding that, “[w]here one does an act with knowledge that the use of the mails will
follow in the ordinary course of business, or where such use can reasonably be foreseen, even
though not actually intended, then he ‘causes’ the mails to be used” (citation omitted)).
Certainly, repeated mailings of multiple billing statements by lenders to plaintiff borrowers were

25

a reasonably foreseeable consequence of a scheme to defraud plaintiffs into entering into onerous
retail installment contracts. The mailing to Dong of a certificate of title reflecting a lien despite
the fact that Dong did not finance her purchase was reasonably foreseeable as well. Plaintiffs’
allegations therefore satisfy the element of use of the mails.
3. Mail and Wire Fraud – Intent/Participation through a Pattern of
Racketeering
To be held liable under RICO, a defendant must be shown to have participated in the
conduct of the charged enterprise’s affairs through a pattern of racketeering activity. 18 U.S.C.
§ 1962(c). In the context of this case, then, plaintiffs must allege facts that, if true, establish that
each defendant participated in the conduct of the affairs of the relevant enterprise, and that each
did so at least in part by committing mail or wire fraud.
As noted above, to establish that a defendant committed mail or wire fraud, a complaint
must allege “facts giving rise to a strong inference that the defendant knew the statements to be
false and intended to defraud the plaintiff at the time they were made.” U.S. Fire Ins. Co., 303 F.
Supp. 2d at 444 (internal quotation marks and citation omitted). A plaintiff contending that a
defendant participated in conducting the affairs of an enterprise must allege that the defendant
“participated in the operation or management of the enterprise itself.” Reves v. Ernst & Young,
507 U.S. 170, 183 (1993). While a person who participates in the conduct of an enterprise “must
have some part in directing [the enterprise’s] affairs . . . RICO liability is not limited to those
with primary responsibility” for those affairs, but may extend to “lower rung participants in the
enterprise who are under the direction of upper management.” Id. at 179, 184; see also DeFalco
v. Bernas, 244 F.3d 286, 309 (2d Cir. 2001); United States v. Diaz, 176 F.3d 52, 92 (2d Cir.
1999) (holding that a RICO defendant need “not act[] in a managerial role,” but may be held
“liable for directing the enterprise’s affairs if he exercised broad discretion in carrying out the
26

instructions of his principal”). Nonetheless, “the simple taking of directions and performance of
tasks that are necessary or helpful to the enterprise, without more, is insufficient to bring a
defendant within the scope of § 1962(c).” Diaz, 176 F.3d at 92 (citing United States v. Viola, 35
F.3d 37. 41 (2d Cir. 1994)); see also, United States v. Allen, 155 F.3d 35, 42 (2d Cir. 1998) (“In
most of the cases in which we have held lower level employees to be RICO participants, the
defendant was shown to have played some management role in the enterprise.”) (collecting
cases).
a. Mamdoh Eltouby and Nada Eltouby
Mamdoh Eltouby and Nada Eltouby are alleged to have participated in the conduct of the
affairs of the Dealership Enterprise. T: ¶ 128. The facts alleged in the complaints with respect to
Mamdoh Eltouby and Nada Eltouby are sufficient to establish their participation in the conduct
of the charged enterprise and to give rise to a strong inference of intent to defraud.
Mamdoh Eltouby is alleged to have owned and operated NYMG at the time of the
transactions involving the plaintiffs. T: ¶ 11. This alone indicates that he participated in the
operation and management of the enterprise, and – particularly in light of the pervasiveness of
the fraudulent scheme suggested by the number of plaintiffs who had similar experiences – gives
rise as well to a strong inference that he knew of and abetted the scheme. In addition, plaintiff
Tuhin alleges that, when he came to the dealership to participate in an organized protest,
Mamdoh Eltouby identified himself as the owner of NYMG and attempted to assault the
protestors by hitting them with his car. T: ¶ 56. Mamdoh Eltouby also refused to make
arrangements for safekeeping of the car NYMG sold to Tuhin, even after Tuhin retained counsel
and alerted NYMG to his complaints. T: ¶ 65. Plaintiffs have also identified a NYMG customer
who has not filed suit but who met directly with Mamdoh Eltouby and was directed by Eltouby

27

to meet first with Estrada and later with an employee at Hillside Motors. This customer, like
plaintiffs, was urged to enter into a sub-prime loan and was falsely promised he could refinance
the loan within six months. T: ¶¶ 138(a), (j). Finally, plaintiffs allege that Mamdoh Eltouby
hired Estrada to work at NYMG even after Estrada had been indicted and arrested for defrauding
customers while working at other used car dealerships, and that Estrada continued to work for
NYMG even after the District Attorney for Queens County issued a press release announcing
Estrada’s indictment. T: ¶¶ 79-83. These allegations are more than ample to demonstrate
Mamdoh Eltouby’s participation in the conduct of the enterprise’s affairs and to give rise to a
strong inference of knowledge of the scheme and intent to defraud.
The allegations concerning Nada Eltouby are likewise sufficient. Plaintiff Tuhin alleges
that Nada Eltouby, after assuring Tuhin he was getting a good deal, took $2,000 from him and
provided him with a receipt. T: ¶¶ 18-19. On each of several occasions when Tuhin returned to
the dealership to complete his transaction, he observed Nada Eltouby there, interacting with
other employees in what appeared to be a supervisory role. T: ¶ 34. On another occasion when
Tuhin arrived at the dealership in an attempt to cancel the transaction, the employee he
approached called over Nada Eltouby and Julio Estrada. Nada Eltouby urged Tuhin to trust
Estrada and repeated the false representation, previously made by Estrada, that Tuhin’s interest
rate would be reduced after six timely payments. T: ¶¶ 47-48. Subsequently, after Tuhin left the
car he had purchased and the keys to it with NYMG, Nada Eltouby advised Tuhin’s attorney that
NYMG had driven the car back to Tuhin’s neighborhood and parked it in the street near Tuhin’s
home without license plates. T: ¶ 61. Plaintiff Chowdhury similarly alleges that, when her son
went to the dealership to complain, it was Nada Eltouby who met with him, and who at first
assured him the dealership “would take care of everything,” but later told him there was nothing

28

the dealership could do and that he should “speak to ‘the bank.’” C: ¶¶ 102-05. Plaintiff Dong
alleges that, upon returning to the dealership to complain about her transaction, she too met with
Nada Eltouby. Nada Eltouby told Dong that there was nothing the dealership could do to help
her. Dong then called for police assistance. When police officers arrived, Nada Eltouby met
with them and spoke to them on NYMG’s behalf. D: ¶¶ 104-07. Finally, plaintiffs Freire and
Gabrys also allege that Nada Eltouby was among the NYMG employees who met with them
when they returned to NYMG after completing their transactions to complain that the
representations made to them turned out not to be true. F: ¶¶ 83, 86; G: ¶¶ 116, 123.
Plaintiffs’ allegations give rise to a strong inference that Nada Eltouby’s role involved
more than simply taking directions and performing tasks helpful to the enterprise, and that she
was aware of the overall fraudulent scheme. By alleging that she spoke with disgruntled
customers and gave them false assurances, met with police officers and presented NYMG’s
position with respect to customer complaints to them, and even communicated with plaintiffs’
counsel about bringing a returned vehicle back to a customer’s neighborhood and leaving it there
without license plates, plaintiffs allege that Nada Eltouby played a significant part in directing
the affairs of the enterprise and advancing the goals of the scheme to defraud. Even if Nada
Eltouby’s role were less clear, dismissal of plaintiff’s RICO claim against her would not be
warranted at this stage of the case:
It is not always reasonable . . . to expect that when a defrauded plaintiff frames his
complaint, he will have available sufficient factual information regarding the
inner workings of a RICO enterprise to determine whether a defendant was
merely “substantially involved” in the RICO enterprise or participated in the
“operation or management” of the enterprise. Thus, where the role of the
particular defendant in the RICO enterprise is unclear, plaintiffs may well be
entitled to take discovery on this question.

29

Aiu Ins. Co. v. Olmecs Med. Supply, Inc., 2005 WL 3710370, at *8 (E.D.N.Y. Feb. 22, 2005)
(citing Friedman v. Hartmann, 1994 WL 376058, at *2 (S.D.N.Y. July 15, 1994)).
b. M&T Bank
Plaintiffs name M&T Bank and NYMG as defendants in a RICO count that charges an
association-in-fact enterprise comprised of the two defendants and a pattern of racketeering
activity consisting of mail and wire fraud. The allegations with respect to New York Motor
Group’s participation in the fraud are plainly sufficient, as demonstrated by the discussion above
of the facts asserted with respect to its owner and operator, Mamdoh Eltouby, and its employees,
Julio Estrada and Nada Eltouby. The facts alleged with respect to M&T Bank, however, fall
short.
Plaintiffs’ allegations with respect to M&T Bank’s scienter are limited. Plaintiffs suggest
that M&T Bank continued to process and fund loans even after it knew or should have known of
NYMG’s fraudulent scheme. Plaintiffs contend that M&T Bank should have known of the
scheme because several customers had made complaints about NYMG and because of how the
“value of the collateral . . . compared to the sale price and the amount of add-on charges.” T:
¶ 46. Plaintiffs’ specific allegations, however, simply do not give rise to a strong inference that
M&T Bank knew of any false statements or intended to participate in defrauding any of the
plaintiffs.
Plaintiffs place particular emphasis on M&T Bank’s decision to fund the Tuhin loan even
after Tuhin called the bank and complained he had been defrauded. Plaintiffs allege that M&T
Bank should have known when Tuhin called that NYMG was engaged in a fraudulent scheme
because of complaints from other customers. T: ¶ 46. The only other customers plaintiffs
specifically identify as having raised complaints with M&T Bank, however, are Gabrys and

30

Chowdhury. Tuhin made his call to M&T Bank on June 24, 2013. T: ¶ 45. Gabrys and
Chowdhury made their complaints to M&T Bank in October of 2013. G: ¶ 126, C: ¶ 106. Thus,
the complaints made by Gabrys and Chowdhury could not possibly have informed M&T Bank’s
response to Tuhin.
Moreover, plaintiffs do not adequately allege that any representative of M&T Bank made
any false representation to any plaintiff. Tuhin alleges that an M&T Bank representative told
him that the bank could not refuse to fund his loan once the dealership submitted an application
with his signature. T: ¶ 45. Plaintiffs do not contend that this statement was false; indeed,
although the complaint is not entirely clear in this regard, it appears that Tuhin left the dealership
with the car he purchased on June 22, 2013, and had thus been in possession of the vehicle for
two days when he asked M&T Bank not to fund his loan. T: ¶¶ 25-26. These circumstances
suggest that the bank’s hands might well have been tied. Moreover, when Tuhin complained to
M&T Bank about having been defrauded, the M&T Bank representative suggested that Tuhin
contact the office of the New York State Attorney General. T: ¶ 45. A representative of M&T
Bank who spoke to Chowdhury’s son similarly suggested that Chowdhury hire an attorney to
pursue her claims against NYMG. C: ¶ 114. Suggestions like these hardly give rise to a strong
inference of fraudulent intent.
Plaintiffs are also unable to point to anything about the Tuhin, Gabrys or Chowdhury
retail installment contracts that would have alerted someone reviewing them that they were
fraudulent. Although plaintiffs allege that the value of the cars sold was not consistent with the
sales prices charged, they do not allege that personnel at M&T Bank were familiar with used car
values or were called upon to verify them before approving loan documents. Moreover, to the
extent the value of collateral would be of interest to a lender, the lender’s concern would no

31

doubt be with the value of the collateral relative to the amount financed rather than the purchase
price. There is similarly no reason to infer that the “add-on charges” also pointed to by plaintiffs
would have alerted anyone at M&T Bank that the loan transactions were fraudulent.
Finally, the fact that the six transactions giving rise to these related lawsuits were
financed by three different lending institutions further undermines any inference that mere
participation as a lender in transactions conducted by NYMG is enough to suggest fraudulent
intent. Had there been a corrupt understanding or relationship between NYMG and M&T Bank,
it is unlikely that the dealership defendants would have steered purchasers to other banks to
obtain financing.
Plaintiffs invoke the well-settled principle that “deliberate disregard” for the truth may
satisfy the scienter requirement for fraud. See United States v. Precision Medical Laboratories,
Inc., 593 F.2d 434, 443-44 (2d Cir. 1978); United States v. Sarantos, 455 F.2d 877, 880-81 (2d
Cir. 1972). The facts alleged in plaintiffs’ complaint, though, fail to demonstrate that M&T
Bank deliberately disregarded earmarks of fraud or had any authority or responsibility to
intervene on plaintiffs’ behalf.
Plaintiffs’ RICO claims against M&T Bank fail for a second, related reason: the role in
the fraud attributed to M&T Bank in plaintiffs’ complaints does not rise to the level of
participating in the conduct of the affairs of an enterprise. 9 In Reves v. Ernst & Young, 507 U.S.
170 (1993), defendants were accountants who drafted misleading financial statements and were
subsequently sued under both the securities laws and RICO. The district court granted summary

9

Plaintiffs’ complaints define the relevant enterprise as comprised of M&T Bank and NYMG. M&T Bank of
course participated in the conduct of the affairs of M&T Bank, and therefore may be said to have participated in the
conduct of the affairs of the associated entities M&T Bank and NYMG. But Section 1962(c) requires that a
defendant participate in the conduct of the affairs of an enterprise through a pattern of racketeering activity, and
M&T Bank’s alleged role in the racketeering activity is too indirect to amount to participation in the conduct of the
affairs of the M&T enterprise.

32

judgment to defendants on RICO on the grounds that the accountants’ conduct did not amount to
participation in the operation or management of the claimed enterprise. The remaining securities
fraud claims proceeded to trial, and the jury found for plaintiffs. Despite the jury’s finding that
defendants had committed intentional fraud, the Supreme Court upheld the grant of summary
judgment in favor of the accountants on plaintiffs’ RICO claim, holding that the mere drafting of
statements based on misinformation supplied by the defendants’ clients did not rise to the level
of directing the enterprise’s affairs and therefore did not constitute sufficient participation in the
operation or management of the enterprise for RICO liability.
Reves involved a motion for summary judgment, and courts differ on the degree to which
Reves applies to a motion to dismiss. Compare City of New York v. FedEx Ground Package
System, Inc., 2015 WL 1013386, at *8 (S.D.N.Y. Mar. 9, 2015) (noting that, “[i]n this Circuit,
the operation or management test typically has proven to be a relatively low hurdle for plaintiffs
to clear, especially at the pleading stage.” (citations omitted)) with Zhu v. First Atlantic Bank,
2005 WL 2757536, at *5 (S.D.N.Y. Oct. 25, 2005) (stating, in the course of deciding a motion to
dismiss, that “[t]he ‘operation and management’ [sic] test set forth by the Supreme Court in
Reves is a very difficult test to satisfy,” and holding that providing banking services is
insufficient to state a claim under Section 1962(c)) (citation omitted)).
Regardless of the test applied, plaintiffs’ allegations are insufficient. Pleadings asserting
RICO claims against outside service professionals like banks, law firms, and accounting firms
have been held sufficient after Reves only when they have alleged more substantial involvement
by the outsider defendant in the charged racketeering activity than plaintiffs attribute to M&T
Bank here. For example, in Ifill v. West, 1999 WL 690144, at *8 (E.D.N.Y. Aug. 24, 1999), the
Court held that defendant bank employees provided services that were more than merely

33

incidental to the fraudulent scheme when they recruited prospective victims by distributing
brochures and conducting seminars the victims attended. Similarly, in Burke v. Dowling, 944 F.
Supp. 1036, 1055 (E.D.N.Y. 1995), the Court declined to dismiss a RICO claim against a bank
because of allegations that the bank helped initiate the alleged fraudulent syndication scheme and
took advantage of the fact that other defendants owed money to the bank to exercise control over
them. 10 See also Dep’t of Econ. Dev. v. Arthur Anderson & Co. (U.S.A.), 924 F. Supp. 449, 466
(S.D.N.Y. 1996) (noting that “[m]any other courts faced with post-Reves § 1962(c) claims
against outside professionals have agreed that providing important services to a racketeering
enterprise is not the same as directing the affairs of the enterprise”).
Here, plaintiffs allege that M&T Bank’s participation in the racketeering affairs of the
enterprise consisted only of summarily granting the loan applications created by the dealership
defendants, failing to investigate the plaintiffs’ claims of fraud, and collecting the payments due
under the allegedly fraudulent loans. Although plaintiffs allege the funding was an integral part
of the enterprise, these acts fall short of satisfying the “operation and management” test. See
Burke, 944 F. Supp. at 1055 (noting that even a bank that knowingly received diverted funds or
assisted in preparing a private placement memorandum did not operate or manage the
enterprise). Rather, the allegations against M&T Bank made by plaintiffs are analogous to those
described as inadequate in Arthur Anderson:
An accountant’s audit reports, or a lawyer’s opinion letters, are always “integral
to the continuing operation” of the enterprise in the sense that professional
services are essential to the continued existence of a business. But so is the
electricity supplied to the enterprises’ offices, and it would be absurd to say that
the public utility that provides the electricity participates in the operation or
management of the enterprise. . . . [T]he rule, uniformly applied by the lower
courts that have reached the issue, [is] that the provision of services – even

10

These cases may be further distinguished by their reliance on the pleading standard that prevailed before Iqbal and
Twombly were decided.

34

essential services – to a RICO enterprise is not the same as controlling the
enterprise’s affairs.
924 F. Supp. at 467-68 (citations omitted).
For all these reasons, I conclude that the allegations against M&T Bank are insufficient to
give rise to a strong inference of knowing and intentional participation in a fraudulent scheme or
to establish M&T Bank’s participation in the conduct of the affairs of an enterprise through a
pattern of racketeering. I therefore recommend that the § 1962(c) claims against M&T Bank be
dismissed.
C. Relatedness and Continuity of Pattern
To constitute a pattern of racketeering activity, predicate acts must be “related” and
“amount to or pose a threat of continued activity.” Cofacrèdit, 187 F.3d at 242 (emphasis
omitted); see also United States v. Daidone, 471 F.3d 371, 375 (2d Cir. 2006). The continuity
requirement may be satisfied by showing either close-ended continuity or open-ended continuity.
Cofacrèdit, 187 F.3d at 242. Defendants challenge the relatedness of the predicate acts, M&T
Bank Mem. at 10, and argue that plaintiffs have failed to establish continuity, NYMG Mem. at 912, M&T Bank Mem. at 12-15.
1. Relatedness
A plaintiff must demonstrate that predicate acts are related both horizontally and
vertically. Daidone, 471 F.3d at 375. Horizontal relatedness describes the relationship between
the predicate acts themselves, while vertical relatedness describes the relationship between the
predicate acts and the overall RICO enterprise. Id. In practice, these tests may be satisfied with
a single showing that each individual predicate act is related to the RICO enterprise. Id. Here,
the alleged predicate acts of mail fraud and wire fraud concern the sale of used cars and the
financing arrangements made in connection with those sales. The enterprises are comprised of
35

the used car dealerships that made the sales and the banks that provided the financing. The
predicate acts are thus each related to the RICO enterprises described in the complaints, and
plaintiffs therefore satisfy RICO’s relatedness requirement.
2. Close-Ended Continuity
To demonstrate “close-ended continuity, the plaintiff must prove ‘a series of related
predicates extending over a substantial period of time.’” Cofacrèdit, 187 F.3d at 242 (quoting
H.J. Inc., 492 U.S. at 242). “Although close-ended continuity is primarily a temporal concept,
other factors such as the number and variety of predicate acts, the number of both participants
and victims, and the presence of separate schemes are also relevant in determining whether
close-ended continuity exists.” Cofacrèdit, 187 F.3d at 242 (quoting GICC Capital Corp. v.
Tech. Fin. Group. Inc., 67 F.3d 463, 467-68 (2d Cir. 1995)). Since the Supreme Court’s decision
in H.J. Inc., the Second Circuit “has never held a period of less than two years to constitute a
substantial period of time.” Cofacrèdit, 187 F.3d at 242; Spool, 520 F.3d at 184 (finding a
sixteen-month period to be insufficient to establish close-ended continuity); DeFalco, 244 F.3d
at 321-22. The relevant period when evaluating continuity “is the time during which RICO
predicate activity occurred, not the time during which the underlying scheme operated or the
underlying dispute took place.” Spool, 520 at 184 (citations omitted).
Plaintiffs allege that the association-in-fact enterprise was operating since at least 2012,
Gabrys ¶ 40. However, time for purposes of close-ended continuity is calculated based upon
when defendants committed predicate acts. See Cofacrèdit, 187 F.3d at 243; Delgado v. Ocwen
Loan Servicing, 2014 WL 4773991, at *21 (E.D.N.Y. Sept. 24, 2014). Accordingly, the relevant
time period here must begin in December of 2012, the date of the earliest alleged Internet
advertisement. A: ¶ 34. Because the most recent of these related cases was filed in May 2014,

36

only seventeen months after that advertisement, plaintiffs have failed to allege a pattern of
racketeering activity occurring over a period of more than two years, and the allegations of their
complaints thus fail to demonstrate close-ended continuity.
3. Open-Ended Continuity
Plaintiffs do, however, plead facts supporting a finding of open-ended continuity. Openended continuity requires “a threat of continuing criminal activity beyond the period during
which the predicate acts were performed.” Cofacrèdit, 187 F.3d at 242 (citation omitted); see
also, GICC Capital, 67 F.3d at 466 (describing open-ended continuity as “past criminal conduct
coupled with a threat of future criminal conduct”). In considering whether a continuing threat
exists, a court looks at the nature of the enterprise and of the predicate acts. Cofacrèdit, 187 F.3d
at 242. “Where the enterprise is engaged primarily in racketeering activity, and the predicate
acts are inherently unlawful,” a threat of continued criminal activity is presumed. Id.; see also,
Spool, 520 F.3d at 185. However, where an enterprise is primarily engaged in legitimate
business practices, there is no such presumption, and courts look to “other external factors” to
determine whether a threat of continued criminal activity exists. GICC Capital Corp., 67 F.3d at
466. In such cases, “there must be some evidence from which it may be inferred that the
predicate acts were the regular way of operating that business, or that the nature of the predicate
acts themselves implies a threat of continued criminal activity.” Spool, 520 F.3d at 185 (quoting
Cofacrèdit, 187 F.3d at 243).
Whether predicate acts pose a threat of future conduct is evaluated as of the time the acts
are committed. See United States v. Aulicino, 44 F.3d 1102, 1110-14 (2d Cir. 1995) (finding
open-ended continuity despite the fact that scheme ended before any prosecution was
commenced). Open-ended continuity may be shown if, “at the time of occurrence,” the

37

racketeering activity threatens future criminal activity. City of New York v. LaserShip, Inc., 33 F.
Supp. 3d 303, 311 (S.D.N.Y. 2014) (quoting Morrow v. Black, 742 F. Supp. 1199, 1207
(E.D.N.Y. 1990)). Only if an activity has an “inherently terminable” goal, such as a sale of land,
is a threat of continued activity negated as a matter of law. DeFalco, 244 F. 3d at 324; Azrielli v.
Cohen Law Offices, 21 F.3d 512, 521 (2d. Cir. 1994) (series of fraudulent sales of securities over
at least one year, coupled with evidence that defendants were trying to continue to sell securities,
permitted a jury to find a RICO pattern).
The fraudulent scheme alleged by plaintiffs had no obvious ending point. The
dealerships were ongoing businesses that advertised used cars on the Internet to a virtually
endless supply of consumers. In this regard, they are similar to the defendants in Liberty Mut.
Ins. Co. v. Blessinger, 2007 WL 951905 (E.D.N.Y. Mar. 27, 2007). Defendants in Blessinger
owned and operated taxi and limousine companies that were alleged to have made
misrepresentations to their insurance carrier to obtain coverage without paying applicable
premiums. The Court held that plaintiff, the allegedly defrauded insurance company, established
open-ended continuity because defendants’ businesses had an ongoing need for insurance, and
concluded that “the nature of the predicate acts alleged weighs in favor of a finding of openended continuity as they suggest a threat of repetition continuing into the future.” Id. at *13.
Similarly, defendants here continue to operate dealerships, sell used cars to customers, and
arrange financing for them. The threat of repetition into the future therefore establishes openended continuity.
Although defendants argue that continuity is defeated by Estrada’s indictment, this
argument fails. First, as noted above, whether predicate acts pose a threat of future conduct is
evaluated as of the time the acts are committed. Moreover, while Estrada was certainly a key

38

player in the fraudulent scheme, he did not act alone. Plaintiffs make numerous allegations of
fraudulent behavior by other employees of the dealerships. See, e.g., T: ¶¶ 18, 47-48, 56-57, 61,
65, 138(a), 138(f), 138(j), 138(k). Plaintiffs also allege that Mamdoh Eltouby continues to
conduct the affairs of the enterprise as the president of non-party dealership Hillside Motors at an
address formerly associated with Planet Motor Cars, the dealership that appeared on the
plaintiffs’ service contracts. T: ¶ 127.
D. Conclusion With Respect to RICO
For the reasons stated above, I respectfully recommend that plaintiffs be permitted leave
to amend their claims under RICO against all defendants other than M&T Bank, and that the
RICO claims against M&T Bank be dismissed.
III.

Plaintiffs’ Truth in Lending Act Claims
Plaintiffs Gabrys and Tuhin assert claims against New York Motor Group and M&T

Bank pursuant to the Truth in Lending Act (“TILA”). T: ¶¶ 151-69; G: ¶¶ 132-42. Tuhin and
Gabrys claim they entered into consumer credit agreements but were not provided the
disclosures required by law. Each seeks statutory damages, costs and attorney’s fees, and Tuhin
also seeks rescission of his sales contract and voiding of any security interests in his car.
G: ¶ 142; T: ¶ 169.
M&T Bank moves to dismiss the TILA claims against it, arguing that the statute applies
only to creditors, a term defined by statute, and that it is not a creditor as defined by 15 U.S.C.
§ 1602(g) and Part 226 of Title 12 of the C.F.R., commonly known as Regulation Z. 11 M&T
Bank Mem. at 16-17; see 12 C.F.R. § 226.1 (“Regulation Z . . . is issued by the Board of

11

Although M&T Bank moves to dismiss TILA claims brought by both Gabrys and Tuhin, Docket Entry 60 in 13cv-5643, M&T Bank addresses only Tuhin’s claim in its memorandum. As mentioned above, the dealership
defendants have not submitted any motions in the Tuhin matter and NYMG does not move to dismiss Gabrys’ TILA
claim. Docket Entry 79.

39

Governors of the Federal Reserve System to implement the federal Truth in Lending Act.”);
Murphy v. Empire of Am., FSA, 746 F.2d 931, 933 (2d Cir. 1984).
M&T Bank relies upon Vincent v. Money Store, LLP, 736 F.3d 88 (2d Cir. 2013), to
support its position. In Money Store, the Court of Appeals for the Second Circuit noted that
TILA imposes general liability only on creditors and “greatly circumscribes the liability of
assignees” such as M&T. 736 F.3d at 105. The Court stressed the statute’s definition of a
creditor as
a person who both (1) regularly extends, whether in connection with loans, sales
of property or services, or otherwise, consumer credit which is payable by
agreement in more than four installments or for which the payment of a finance
charge is or may be required, and (2) is the person to whom the debt arising from
the consumer credit transaction is initially payable on the face of the evidence of
indebtedness or, if there is no such evidence of indebtedness, by agreement.
15 U.S.C. §1602. The Court also relied on Regulation Z, which “interprets the second prong of
this definition ‘as applying to only “[a] person ... to whom the obligation is initially payable,
either on the face of the note or contract, or by agreement when there is no note or contract.’”
736 F.3d at 105 (quoting 12 C.F.R. § 226.2(a)(17)(i)).
The question in Money Store was whether the assignee of a mortgage could be held liable
as a creditor within the meaning of 14 U.S.C. § 1602. The Court of Appeals affirmed the lower
court’s decision to dismiss the TILA claim against the assignee on summary judgment and held
that, even when the initial payment on a loan is made to the assignee, or even when a loan is
assigned before funds are disbursed, the assignee is not exposed to the general liability reserved
for the entity that appears on the face of the loan agreement. Id. at 107. The Court reasoned that
TILA is primarily concerned with disclosures by the initial creditor, although it also noted that
consumers could, under the statute, exercise their rights to rescission against assignees. Id. at
108. Liability may be imposed directly on an assignee, however, “only if the [TILA] violation
40

. . . is apparent on the face of the disclosure statement.” Id. at 107 (quoting Taylor v. Quality
Hyundai, Inc., 150 F.3d 689, 692 (7th Cir. 1998)); see also 15 U.S.C. § 1641 (“[A] violation
apparent on the face of the disclosure statement includes, but is not limited to a . . . disclosure
which can be determined to be incomplete or inaccurate from the face of the disclosure statement
or other documents assigned . . . .”).
In reaching its holding, the Second Circuit in Money Store relied on a decision with facts
similar to those presented here. In Riviere v. Baner Chevrolet, Inc., 184 F.3d 457 (5th Cir.
1999), plaintiff purchased a car from a dealer. Financing was arranged at the time of purchase,
and the dealer assigned its interest in the loan to the financing entity. The Court held that,
despite financing having been arranged at the time of purchase and the immediate assignment of
the loan, the dealer was the creditor obligated to make the disclosures required by TILA and the
only party that could be held liable for failing to make those disclosures. 184 F.3d at 460.
Riviere relied in turn upon the following commentary of the Federal Reserve Board:
If an obligation is initially payable to one person, that person is the creditor even if
the obligation by its terms is simultaneously assigned to another person. For
example: An auto dealer and a bank have a business relationship in which the
bank supplies the dealer with credit sale contracts that are initially made payable
to the dealer and provide for immediate assignment of the obligation to the bank.
The dealer and purchaser execute the contract only after the bank approves the
creditworthiness of the purchaser. Because the obligation is initially payable on
its face to the dealer, the dealer is the only creditor in the transaction.
12 C.F.R. pt. 226, supp. I, subpt. A, cmt. 2(a)(17)(i)(2) (emphasis added).
The example in the Federal Reserve Board commentary applies to the facts presented
here. Indeed, Gabrys and Tuhin do not contend that their loan documents indicated that their
debts were initially payable to M&T Bank. Instead, they argue that M&T Bank may be held
liable because the TILA violations they allege were apparent on the face of their loan documents.
Pls. Reply at 15. The only violation plaintiffs point to in support of this contention, however, is
41

their claim that the purchase price exceeded the advertised price or fair market value of their
cars. Pls. Reply at 16. As discussed above in connection with plaintiffs’ RICO claims, though,
plaintiffs do not allege facts suggesting that any discrepancy between the purchase price and the
advertised price or fair value of the cars they purchased would be apparent to persons at M&T
Bank examining the loan documents. See Taylor, 150 F.3d at 694 (holding that “[o]nly
violations that a reasonable person can spot on the face of the disclosure statement or other
assigned documents will make [an] assignee liable under the TILA”).
For all these reasons, M&T Bank’s motion to dismiss the TILA claims asserted against it
should be granted to the extent plaintiffs seek damages and attorney’s fees, but denied to the
extent plaintiffs seek rescission. Although only Tuhin explicitly seeks rescission as a remedy for
the TILA violations he alleges, Gabrys seeks “further relief as the Court deems appropriate,” G:
¶ 142, and should be afforded an opportunity to clarify whether or not he seeks rescission as a
remedy.
IV.

Tuhin’s Magnuson-Moss Warranty Act Claim
Plaintiff Tuhin contends the car he was sold was not fit to drive. Based on this

contention, he asserts a claim under the Magnuson-Moss Warranty Act (“MMWA”) against
NYMG and M&T Bank. M&T Bank argues that Tuhin has not adequately stated a claim under
the MMWA because he fails to allege a covered form of warranty, fails to establish a breach of
the implied warranty of merchantability, and fails to meet the statutory dollar amount threshold
under 15 U.S.C. § 2310(d)(3)(B). M&T Bank Mem. at 22-25. Because I conclude that Tuhin
has failed to meet the statute’s monetary threshold, I do not reach the other arguments raised by
M&T Bank. 12

12

NYMG has not moved to dismiss Tuhin’s MMWA claim. Because the deficiency in Tuhin’s claim identified by
M&T Bank applies as well to NYMG, though, I conclude that his MMWA claim should be dismissed in its entirety.

42

The Magnuson-Moss Warranty Act authorizes consumers to sue warrantors who fail to
comply with any written or implied warranty “for damages and other legal and equitable relief.”
15 U.S.C. § 2310(d)(1). A claim under the Act may be brought either in state or federal court.
15 U.S.C. § 2310(d) (1)(A)-(B). However, “[n]o claim shall be cognizable [in federal court] . . .
if the amount in controversy is less than the sum or value of $50,000 (exclusive of interests and
costs).” 15 U.S.C. § 2310(d)(3)(B). Tuhin paid substantially less than $50,000 for his car.
T: ¶ 35. It would seem, therefore, that Tuhin’s MMWA claim does not meet the statute’s
amount-in-controversy requirement.
Tuhin argues that his MMWA claim should proceed for two reasons. First, Tuhin
contends that his claim for punitive damages brings the amount in controversy over the statutory
threshold. Generally, however, punitive damages are not recoverable under the MMWA; “[i]n
breach of warranty suits, which is all that the MMWA permits, damages ordinarily are limited to
the difference between the value of the goods accepted and the value they would have had if they
had been as warranted.” Lieb v. Am. Motors Corp., 538 F. Supp. 127, 133 (S.D.N.Y. 1982).
Moreover, Tuhin does not assert a claim for punitive damages under the MMWA in his Proposed
Amended Complaint. T: ¶ 180.
Second, Tuhin argues that the statute’s $50,000 threshold must be satisfied only when the
MMWA provides the sole basis for federal court jurisdiction. Tuhin’s RICO and TILA claims
give rise to federal question jurisdiction. See 28 U.S.C. § 1331. Tuhin argues that this Court
may therefore exercise supplemental jurisdiction over his MMWA claim pursuant to 28 U.S.C.
§ 1367 even if he cannot satisfy the statute’s dollar amount threshold.
Federal courts considering whether they may hear MMWA claims involving less than
$50,000 pursuant to their supplemental jurisdiction have come to different results. Most courts

43

in this Circuit, however, have held that, “[i]n enacting Magnuson-Moss, Congress implicitly
negated pendent jurisdiction of claims made under the statute that amount to less than $50,000.”
Lieb, 538 F. Supp. at 140; see also Jager v. Boston Road Auto Mall, 2015 WL 235342, at *4
(S.D.N.Y. Jan. 16, 2015) (concluding that, “by enacting the specific jurisdictional limitations for
Magnuson-Moss claims in federal court, Congress foreclosed the exercise of supplemental
jurisdiction” over MMWA claims for less than $50,000). But see Diaz v. Paragon Motors of
Woodside, Inc., 424 F. Supp. 2d 519, 527 (E.D.N.Y. 2006) (concluding, albeit without analysis,
that supplemental jurisdiction could be exercised over MMWA claim that did not involve more
than $50,000); Barnes v. West, Inc., 249 F. Supp. 2d 737, 739 (E.D. Va. 2003) (holding that
“MMWA claims that cannot independently be heard in federal court owing to the absence of the
requisite amount in controversy, can still be heard in federal court in circumstances where
supplemental jurisdiction is properly exercised under 28 U.S.C. § 1367”); Samuels v. American
Motors Sales Corp., 1989 WL 95787, at *2-3 (N.D. Ill. Aug. 9, 1989).
I find the cases holding that supplemental jurisdiction is not available to be more
convincing, at least in part because 28 U.S.C. § 1367 itself provides for supplemental jurisdiction
“[e]xcept . . . as expressly provided otherwise by Federal statute.” Here, a federal statute
expressly provides otherwise, and Tuhin’s MMWA claim should therefore be dismissed.
V.

Plaintiffs’ State Law Claims and Remaining Proposed Amendments
A. Usury
Tuhin seeks to add a civil usury claim on the grounds that the loan created with NYMG

and assigned to M&T Bank provided for interest at a rate higher than the legal limit. Plaintiffs’
Memorandum of Law in Support of Motion to Amend (“Pls. Mem.”), Docket Entry 72, at 22.
This would conform Tuhin’s complaint to those filed by the plaintiffs in the related cases, each

44

of whom other than Dong asserts a usury claim. Like Tuhin, plaintiffs Gabrys and Chowdhury
obtained loans through NYMG that were assigned to M&T Bank, and each asserts a usury claim
against M&T Bank as well as NYMG. M&T Bank moves to dismiss each of the usury claims
pending against it. NYMG has not made a similar motion.
New York's usury statute bars loans carrying annual interest rates of more than sixteen
percent, subject to limited exceptions not relevant here. N.Y. Gen. Oblig. Law § 5-501; N.Y.
Banking Law § 14-a(1). A usurious debt “shall be void.” N.Y. Gen. Oblig. Law § 5-511. See
Gerstle v. Nat'l Credit Adjusters, LLC, 2015 WL 72789, at *6 (S.D.N.Y. Jan. 6, 2015). To
determine whether a transaction is usurious, a court “looks not to its form, but its substance, or
‘real character.’” O'Donovan v. Galinski, 62 A.D.3d 769, 769 (N.Y. App. Div. 2009) (citations
omitted). While the interest rate stated in the loan documents may be dispositive of whether a
loan is usurious, see Concord Fin. Corp. v. Wing Fook, Inc., 1997 WL 375679, at *5 (S.D.N.Y.
July 7, 1997), a court may properly consider whether a lender is extracting a usurious rate of
interest through deceptive means, such as by imposing excessive fees or inflating the loan’s
principal amount, see Hillair Capital Investments, L.P. v. Integrated Freight Corp., 963 F. Supp.
2d 336, 339 (S.D.N.Y. 2013).
M&T Bank contends that plaintiffs’ usury claims must be dismissed because each of the
relevant RICs provides for interest at a rate below sixteen percent and because there is “NO
substantive evidence submitted that M&T Bank has violated [New York’s usury law].” M&T
Bank Mem. at 21 (emphasis in original). Plaintiffs do not dispute M&T Bank’s contention that
the interest rates appearing on the RICs are below sixteen percent. Pls. Reply at 14. Plaintiffs
contend, however, that the RICs obscure the actual rate of interest charged because they are
based on higher sales prices for the purchased vehicles than agreed to and because they impose

45

fees for unwanted products and services that functioned in reality as additional finance charges.
T: ¶¶ 227-29; G: ¶¶ 218-20; C: ¶¶ 225-27.
Regarding fees, a lender may charge reasonable expenses “attendant on a loan without
rendering the loan usurious,” provided that the expenses charged are not “a pretext for higher
interest.” Lloyd Corp. v. Henchar, Inc., 80 N.Y.2d 124, 127 (1992). Reasonable expenses may
include, for example, attorney’s fees associated with making the loan. Durante Bros. & Sons,
Inc. v. Flushing Nat. Bank, 652 F. Supp. 101, 105 (E.D.N.Y. 1986). However, when fees do not
in fact reimburse a lender for expenses incurred in extending a loan but are instead “a disguised
loan payment,” the fees are appropriately considered when determining the effective interest rate.
Hillair, 963 F. Supp. 2d at 339 (denying summary judgment on usury defense because, among
other things, purpose of fee payments was unclear).
A court may also question the principal indicated in a loan agreement to determine
whether the loan is usurious. In Durante, the court examined a loan with a disputed principal
amount and granted summary judgment dismissing a usury claim only after concluding that the
interest charged did not reach a usurious level even under the borrower’s calculation of the
principal amount. 652 F. Supp. at 104; see also Hillair, 963 F. Supp. 2d at 339 (denying
summary judgment on usury defense because, among other things, borrowers asserted that
principal amount of loans was artificially inflated).
Here, plaintiffs argue that the difference between the prices they agreed to pay and the
principal amounts that appear on their RICs should be counted as interest in determining whether
their loans are usurious. Plaintiffs argue in addition that products and services that were
purportedly required for financing were in reality disguised loan payments that should also be
calculated as interest. If plaintiffs’ contentions are accepted, the figures that appear in plaintiffs’

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pleadings yield rates far above those that appear on their respective RICs, and far above sixteen
per cent per year. Tuhin, for example, claims that he agreed to purchase a car for $12,000, made
a $2,000 down payment, and agreed to borrow $10,000 over six years. T: ¶¶ 18, 23, 26, 29-30.
NYMG, however, had Tuhin sign a retail installment contract for $26,209. T: ¶ 35. Gabrys
alleges that he agreed to pay $19,000 for his car, putting down $10,000 in cash and financing the
remainder over five years. G: ¶¶ 48-49, 55. The RIC prepared by NYMG, however, listed a
cash price of $30,895 and a total sales price of $34,966.48. G: ¶¶ 65, 67. Finally, Chowdhury
agreed to a purchase price of $13,500 and made a down payment of $10,000. C: ¶¶ 55-57.
Unlike Tuhin and Gabrys, Chowdhury orally agreed to a short-term loan. C: ¶ 67. NYMG
nevertheless obligated her to a RIC with a cash price of $24,471 and an amount financed of
$14,911.99. C: ¶ 77.
Clearly, if the allegedly undisclosed increases in purchase prices and fees for services and
products are considered interest, each plaintiff was charged an annual rate far greater than
sixteen per cent. 13 For these reasons, I recommend that M&T Bank’s motion to dismiss the
usury claims asserted by Tuhin, Gabrys and Chowdhury against it be denied.
B. New York General Business Law Section 349
Plaintiffs Chowdhury and Tuhin assert claims under Section 349 of New York’s General
Business Law against NYMG and M&T Bank. Plaintiff Gabrys seeks to add a claim against
M&T Bank under this statute, and Tuhin seeks to clarify the basis upon which he asserts M&T

13

The total interest owed on Tuhin’s $10,000 loan would be $5,198.68 if amortized over five years at 16%.
Similarly, the total interest owed on Gabrys’ $9,000 loan would be $3,827.91 if amortized over six years at 16%.
The interest payments at 16% amount to only a fraction of each plaintiff’s agreed upon principal. Given that the
fees, interest, and difference in principal on the RICs require the plaintiffs to pay a figure more than double the
amounts financed, it is clear that the loans exceed 16%. As stated above, Chowdhury differs from Tuhin and Gabrys
in that she did not orally agree to a multi-year loan and arranged for only $3,500 in financing. However, it is equally
clear that the loan she received was usurious since the “amount financed” on the RIC, $14,911.99, is quadruple the
amount she actually agreed to borrow.

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Bank’s direct liability for his pending Section 349 claim. Pls. Mem. at 19. M&T Bank opposes
leave to amend and cross-moves to dismiss each of the Section 349 claims asserted against it.
M&T Bank Mem. at 21-22.
Section 349 prohibits “[d]eceptive acts or practices in the conduct of any business, trade,
or commerce or in the furnishing of any service.” N.Y. Gen. Bus. Law § 349(a). “To state a
claim under § 349, a plaintiff must allege: (1) the act or practice was consumer-oriented; (2) the
act or practice was misleading in a material respect; and (3) the plaintiff was injured as a result.”
Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir. 2009) (citing Maurizio v. Goldsmith, 230
F.3d 518, 521 (2d Cir. 2000) (per curiam)). Section 349 claims are not subject to Rule 9(b)’s
heightened pleading standard. Ackerman v. Coca-Cola Co., 2010 WL 2925955, at *22
(E.D.N.Y. July 21, 2010) (citing Pelman ex rel. Pelman v. McDonald's Corp., 396 F.3d 508, 511
(2d Cir. 2005)).
Plaintiffs allege that M&T Bank is liable under Section 349 because it claimed it could
not undo the fraudulent transactions plaintiffs entered into with NYMG, promised an
investigation it never conducted, and continued to collect on plaintiffs’ loans even after hearing
plaintiffs’ complaints of fraud. T: ¶ 192; G: ¶¶ 258-60; C: ¶¶ 263-65. Although M&T Bank’s
bases for challenging plaintiffs’ Section 349 claims are not articulated clearly in its submissions,
M&T Bank apparently contends that plaintiffs fail to allege that its actions were materially
misleading or that any actions it took were consumer-oriented. M&T Bank Mem. at 21-22;
M&T Bank Reply at 12.
The New York Court of Appeals considered whether certain conduct was consumeroriented and therefore within the scope of Section 349 in Oswego Laborers' Local 214 Pension
Fund v. Marine Midland Bank, 85 N.Y.2d 20 (1995). The court held that

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Consumer-oriented conduct does not require a repetition or pattern of deceptive
behavior. The statute itself does not require recurring conduct. Moreover, the
legislative history makes plain that this law was intended to “afford a practical
means of halting consumer frauds at their incipiency without the necessity to wait
for the development of persistent frauds” (see, Mem. of Governor Rockefeller,
1970 N.Y. Legis. Ann., at 472-73). Plaintiff, thus, need not show that the
defendant committed the complained-of acts repeatedly – either to the same
plaintiff or to other consumers – but instead must demonstrate that the acts or
practices have a broader impact on consumers at large. Private contract disputes,
unique to the parties, for example, would not fall within the ambit of the statute.
85 N.Y.2d at 25. The test is whether the actions complained of “potentially affect similarly
situated consumers.” Id. at 26-27; see also, Wilson v. Nw. Mut. Ins. Co., 625 F.3d 54, 64 (2d Cir.
2010); MaGee v. Paul Revere Life Ins. Co., 954 F. Supp. 582, 586 (E.D.N.Y. 1997) (“[T]he
injury must be to the public generally as distinguished from the plaintiff alone.” (citations
omitted)).
Plaintiffs in Oswego were union pension funds that opened accounts with the defendant
bank. Plaintiffs complained that the bank failed to pay appropriate interest on the balances in
their accounts. Although plaintiffs were pension funds and not individuals or consumers as that
term is typically used, the Court of Appeals held that plaintiffs satisfied the “consumer-oriented”
element of Section 349, reasoning that “defendant Bank dealt with plaintiffs’ representative as
any customer entering the bank to open a savings account, furnishing the [plaintiff] Funds with
standard documents presented to customers upon the opening of accounts.” 85 N.Y.2d at 26.
M&T Bank, it seems, likewise dealt with Tuhin, Gabrys and Chowdhury just like it would any
other customer seeking a car loan; indeed, M&T Bank argues in opposition to plaintiffs’ other
claims, at least implicitly, that there was nothing unusual about the RICs assigned to it by
NYMG that should have raised a red flag. See M&T Bank Mem. at 15. Moreover, the ordinary
meaning of the term “consumer” more clearly applies to plaintiffs here than to the pension funds
in Oswego. Finally, the fact that M&T Bank treated all three plaintiffs in a similar manner lends
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further support to the conclusion that the “consumer-oriented” prong of a Section 349 claim has
been sufficiently alleged. See Riordan v. Nationwide Mut. Fire Ins. Co, 977 F.2d 47, 53 (2d Cir.
1992) (holding that evidence of defendant insurance company’s similar practices in its dealings
with other policyholders satisfied Section 349’s consumer-oriented element).
Plaintiffs fare less well, though, in their efforts to allege that M&T Bank engaged in
materially misleading conduct that caused them injury. An act or practice is materially
misleading if it is “likely to mislead a reasonable consumer acting reasonably under the
circumstances.” Oswego, 85 N.Y.2d at 26. Proof of scienter, though, is not required. Id.; Watts
v. Jackson Hewitt Tax Serv. Inc., 579 F. Supp. 2d 334, 346 (E.D.N.Y. 2008). In addition to
establishing having been misled, “a plaintiff must prove ‘actual’ injury . . ., though not
necessarily pecuniary harm.” Stutman v. Chem. Bank, 95 N.Y.2d 24, 29 (2000) (citing Oswego,
85 N.Y. 2d at 26).
Plaintiffs fail to allege facts demonstrating that M&T Bank misled them or caused them
injury. As noted above, plaintiffs first contend it was misleading for M&T Bank to claim that it
could not cancel their loans based upon their complaints and to continue to collect payments
from them despite those complaints. However, plaintiffs neither explain why, nor provide
precedent establishing that, a consumer who is fraudulently induced by a retailer to make a
purchase, and who finances that purchase with a loan assigned to a bank, is entitled to cease
making loan payments prior to or while seeking legal redress from the retailer. Plaintiffs do not
allege that M&T Bank sought to hinder their attempts to pursue legal remedies that could result
in the rescission of their loans, and in fact acknowledge that M&T Bank suggested that plaintiffs
might consult a lawyer or report NYMG to the New York State Attorney General.

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M&T Bank’s representations about investigating plaintiffs’ complaints may or may not
have been accurate, but in either case plaintiffs fail to identify any injury they suffered as a result
of those representations. Plaintiffs do not point to any authority suggesting that M&T Bank
owed them a duty to investigate. Nor do they contend that, in reliance on M&T Bank’s
representations, they put off taking action to protect their rights, or if they did, that they were as a
result hindered in any way in asserting their rights later.
For all these reasons, Gabrys’ motion for leave to amend to add a Section 349 claim
against M&T Bank should be denied, and M&T Bank’s motion to dismiss the Section 349 claims
brought against it by Tuhin and Chowdhury should be granted.
C. Negligent Hiring
Plaintiff Tuhin moves for leave to add a negligent hiring claim against NYMG and
Mamdoh Eltouby. Pls. Mem. at 23; T: ¶¶ 245-97. The other plaintiffs also seek to assert
negligent hiring claims. A: ¶¶ 194-203; F: ¶¶ 301-09; G: ¶¶ 289-97; D: ¶¶ 272-80; C: ¶¶ 291-99.
A claim for negligent hiring requires a showing that “the employer knew or should have known
of the employee’s propensity for the conduct which caused the injury.” Dewitt v. Home Depot
U.S.A., Inc., 2012 WL 4049805, at *6 (E.D.N.Y. Sept. 12, 2012) (quotation marks and citations
omitted).
Mamdoh Eltouby opposes the motion on the ground that personal liability for corporate
acts requires proof that the individual engaged in wrongdoing, and that plaintiffs fail to allege
facts suggesting any malfeasance on his part. NYMG Reply at 3. Plaintiffs, however, do allege
facts giving rise to a plausible inference that Mamdoh Eltouby knew of Estrada’s propensity for
fraud, hired him anyway, and refused to consider complaints made against him. As discussed
above in connection with plaintiffs’ RICO claims, Mamdoh Eltouby is alleged to have owned

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and operated NNYMG at the time plaintiffs’ transactions took place, attempted to assault
customers complaining about having being defrauded, and hired Estrada after he had been
indicted and arrested for defrauding customers while working at other used car dealerships. It
is plausible to infer that an individual who owns a used car dealership would be aware that
someone working in the same field had been indicted for fraud in connection with the sale of
used cars. Indeed, plaintiffs allege that Eltouby hired Estrada despite a public announcement
from the Queens County District Attorney that Estrada had defrauded more than 23 consumers
out of more than $115,000 with the promise that they could return to him to refinance their high
interest loans after six months of timely payments. T: ¶ 80.
This aspect of plaintiffs’ motion should therefore be granted, and plaintiffs should be
permitted to pursue their negligent hiring claims against NYMG and Mamdoh Eltouby.
D. Remaining Issues
Tuhin seeks to add a negligence claim against M&T Bank based on information he
obtained after filing his complaint. Pls. Mem. at 24-25. Additionally, Tuhin, Gabrys, and
Chowdhury seek leave to identify properly as Manufacturers and Traders Trust Company the
entity they incorrectly sued as “M&T Bank Corporation.” Pls. Mem. at 24. M&T Bank has not
submitted any opposition to either of these applications, and these aspects of plaintiffs’ motion
should therefore be granted.
CONCLUSION
Plaintiffs’ motion for leave to amend their complaints is granted except with respect to
those claims I recommend be dismissed. For all the reasons stated above, I respectfully
recommend that defendants’ motions to dismiss be denied, except that the following claims be
dismissed:

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1) Plaintiffs’ RICO claims against M&T Bank;
2) Plaintiffs’ TILA claims for damages (but not rescission) against M&T Bank;
3) Plaintiff Tuhin’s Magnuson-Moss Warranty Act claim; and
4) Plaintiffs’ New York General Business Law claims against M&T Bank.
Any objections to the recommendations made in this Report must be filed within fourteen
days of this Report and Recommendation and, in any event, on or before June 22, 2015. Failure
to file timely objections may waive the right to appeal the District Court’s Order. See 28 U.S.C.
§ 636(b)(1); Fed. R. Civ. P. 72; Small v. Sec’y of Health & Human Servs., 892 F.2d 15, 16 (2d
Cir. 1989).

/s/
STEVEN M. GOLD
United States Magistrate Judge
Brooklyn, New York
June 3, 2015

U:\KJ 2014-15\New York Motor Group Cases\Motion to Amend-Cross Motion to Dismiss Final.docx

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