Frederick v. Wells Fargo N.A. ("WFNA") et al
Filing
61
ORDER granting Defendant's 44 Motion to Dismiss; denying Plaintiffs' 51 Motion to Dismiss -- For the reasons set forth in the ATTACHED WRITTEN OPINION AND ORDER, Defendants' motion to dismiss is granted and Plaintiffs' Cros s-motion is dismissed in its entirety. Accordingly, this action is dismissed in its entirety with prejudice. Defendants are directed to serve a copy of this Electronic Order and the Attached Written Opinion and Order to pro se Plaintiffs within five days of the date of this Order and immediately thereafter to file proof of such service via ECF. The Clerk of the Court is directed to close this case. SO ORDERED by Judge Dora Lizette Irizarry on 3/30/2015. (Irizarry, Dora)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------------------------- x
EZEKIEL FREDERICK, DANIEL I.
:
FREDERICK, and AARON T. FREDERICK, :
all pro se,
:
:
Plaintiffs,
:
:
-against:
:
WELLS FARGO HOME MORTGAGE,
:
FINANCIAL EQUITIES MORTGAGE
:
BANKERS, NEW PENN FINANCIAL, LLC, :
JEFF DOOCY, TOM MARINO, and
:
MERISSA SERNA,
:
:
Defendants.
---------------------------------------------------------- X
DORA L. IRIZARRY, U.S. District Judge:
OPINION AND ORDER
13-CV-7364 (DLI) (LB)
Pro se1 plaintiffs Ezekiel Frederick, Daniel I. Frederick, and Aaron T. Frederick
(collectively, “Plaintiffs”) brought this against defendants Wells Fargo Home Mortgage (“WF”),
Financial Equities Mortgage Bankers (“FEM”), and New Penn Financial, LLC (“NPF”)
(collectively, “Corporate Defendants”), and Jeff Doocy, Tom Marino, and Merissa Serna
(collectively,
“Individual
Defendants”)
(collectively
with
the
Corporate
Defendants,
“Defendants”), asserting twenty-three causes of action pertaining to the Corporate Defendants’
alleged denial of mortgage loan applications under the Federal Housing Administration’s 203(k)
program. Defendants jointly moved to dismiss Plaintiffs’ action pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted.
Plaintiffs filed
1
a motion for “dismissal,” but which was actually, inter alia, a motion for
In reviewing the complaint, the Court is mindful that, “[a] document filed pro se is to be liberally construed and a
pro se [pleading], however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted
by lawyers.” Erickson v. Pardus, 551 U.S. 89, 94 (2007). Accordingly, the Court interprets the complaint “to raise
the strongest arguments that [it] suggest[s].” Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 474 (2d Cir. 2006)
(emphasis omitted).
judgment on the pleadings and to strike various portions of Defendants’ motion. For the reasons
below, Defendants’ motion is granted, and Plaintiffs’ motion is denied.
BACKGROUND
In their complaint, Plaintiffs claim that the Corporate Defendants engaged in a concerted
effort, through their employees, the Individual Defendants, to deny wrongfully Plaintiffs’
mortgage loans under the Federal Housing Administration’s 203(k) program. (See generally
Second Amended Complaint (“SAC.”), Docket Entry No. 23.) More specifically, Plaintiffs
allege that the Corporate Defendants “knowingly and willfully designed, implemented and
maintained facially neutral Fair Housing Act (“FHA”) underwriting policy overlays that
effectively robbed [Plaintiffs] of their lawful entitlement to rental income credits[,] making FHA
mortgage loans and home ownership unavailable to otherwise qualified Plaintiffs, in furtherance
of a racially charged overarching scheme and conspiracy.” (Id. at 15.)
Plaintiffs have brought these same claims twice before. On February 3, 2012, Plaintiffs
simultaneously filed (1) complaints with the New York State Division of Human Rights
(“DHR”) and the United States Department of Housing and Urban Development (“HUD”),
alleging violations of Article 15 of the New York Executive Law and the federal Fair Housing
Act (“FHA”) as to each Corporate Defendant (the “Administrative Complaints”); and (2) a civil
complaint in this Court (Docket No. 12-cv-00553), alleging violations of the Racketeer
Influenced and Corrupt Organization Act (“RICO”); 42 U.S.C. §§ 1981, 1982, 1985, and 1988;
the FHA; the Equal Credit Opportunity Act (“ECOA”); and the New York State Consumer Fraud
Act; as well as common law claims for fraud, breach of fiduciary duty, conspiracy, and
negligence (the “2012 Action”). Plaintiff Ezekiel Frederick was the only named plaintiff in the
2012 Action, but (1) he purported to file the complaint in that matter on behalf of a putative class
2
that included Plaintiffs Daniel I. Frederick and Aaron T. Frederick, and (2) the purported
transactions and occurrences on which the complaint in that matter were based are the same as
those that allegedly give rise to the SAC. (See generally Complaint, Docket No. 12-cv-00553,
Docket Entry No. 1.) HUD referred the Administrative Complaints to the DHR, which issued a
“Determination and Order after Investigation” (“Determination and Order”) as to each Corporate
Defendant, finding that there was no probable cause to believe discrimination had occurred.
Plaintiffs did not exercise their right to appeal via a petition to the New York Supreme Court.
(See Declaration of Patrick J. Dempsey, Docket Entry No. 45, Exhibits 1-3.)2
The Court
dismissed the 2012 Action pursuant to 15 U.S.C. § 1915(e)(2)(B)’s frivolousness review,
concluding that Plaintiffs had failed to state claim for relief. (See Memorandum and Order,
Docket No. 12-cv-00553, Docket Entry No. 6.)
On June 11, 2014, Plaintiffs filed the SAC, again alleging similar violations of RICO;
Sections 1981, 1982, 1985, and 1986 of Title 42 of the U.S. Code, Title VI of the Civil Rights
Act of 1964 (42 U.S.C. §§ 2000d, et seq.); the FHA; the ECOA; and the New York Consumer
Fraud Act; as well as common law claims for fraud, breach of fiduciary duty, conspiracy, and
negligence.
Plaintiffs assert that from September 2011 to January 2012, they engaged in
“extensive discussions” with, and submissions to, Defendants regarding prospective loans for the
purchase of three and four-unit properties located in Brooklyn, Jamaica, Woodhaven, and Far
Rockaway, New York. (SAC at 1-2.) Plaintiffs further claim, that upon learning of their race
2
Although a court deciding a Rule 12(b)(6) motion generally is limited to considering the facts alleged in the
complaint, a district court may also consider documents appended to the complaint, documents incorporated by
reference, and matters of which judicial notice may be taken. Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44
(2d Cir. 1991). Further, a court “may take judicial notice of the records of state administrative procedures, as these
are public records, without converting a motion to dismiss to one for summary judgment.” Evans v. New York
Botanical Garden, 2002 WL 31002814, at *4 (S.D.N.Y. Sept. 4, 2002) (citations omitted). Accordingly, the Court
takes judicial notice of the DHR’s rulings on the Administrative Complaints at the Rule 12(b)(6) stage in this matter
because (1) Plaintiffs reference the Administrative Complaints in the SAC, and (2) administrative records are public
records. See Johnson v. County of Nassau, 411 F. Supp. 2d 171, 178 (E.D.N.Y. 2006) (considering DHR records on
defendants’ motion to dismiss).
3
and the racial composition of the neighborhoods where the properties were located, Defendants
engaged in a conspiracy to deny Plaintiffs, as African-Caribbean Americans, of their right to
these loans and the associated FHA 203(k) rental income credits associated with those loans.
(Id.at 1-2.) For similar reasons underlying the Court’s dismissal of the 2012 Action, the SAC is
devoid of the factual allegations required to state a claim and, therefore is dismissed with
prejudice.
DISCUSSION
I.
Motion to Dismiss Standard
Under Rule 8(a) of the Federal Rules of Civil Procedure, pleadings must contain a “short
and plain statement of the claim showing that the pleader is entitled to relief.” Pleadings are to
give the defendant “fair notice of what the claim is and the grounds upon which it rests.” Dura
Pharms., Inc. v. Broudo, 544 U.S. 336, 346 (2005) (quoting Conley v. Gibson, 355 U.S. 41, 47
(1957), overruled in part on other grounds by Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)).
“[T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations,’ but it
demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “A pleading that offers
‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not
do.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555).
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a defendant may move, in
lieu of an answer, for dismissal of a complaint for “failure to state a claim upon which relief can
be granted.” To resolve such a motion, courts “must accept as true all [factual] allegations
contained in a complaint,” but need not accept “legal conclusions.” Iqbal, 556 U.S. at 678. For
this reason, “[t]hreadbare recitals of the elements of a cause of action, supported by mere
4
conclusory statements, do not suffice” to insulate a claim against dismissal. Id. “[A] complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Id. (quoting Twombly, 550 U.S. at 570). Notably, courts may only consider the
complaint itself, documents that are attached to or referenced in the complaint, documents that
the plaintiff relied on in bringing suit and that are either in the plaintiff’s possession or that the
plaintiff knew of when bringing suit, and matters of which judicial notice may be taken. See,
e.g., Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007).
II.
Plaintiffs Fail to State a Claim Under the Anti-Discrimination Statutes
Plaintiffs assert their causes of action under myriad federal and state anti-discrimination
laws, namely the FHA, the ECOA, Sections 1981, 1982, 1985, and 1986 of Title 42 of the U.S.
Code, Title VI of the Civil Rights Act of 1964 (42 U.S.C. §§ 2000d, et seq.), and New York
Executive Law § 297. Plaintiffs fail to adequately plead any of these claims.
a. Failure to Allege Intentional Discrimination Bars Plaintiffs’ Civil Rights Claims
Plaintiffs have failed to allege sufficiently that Defendants intentionally discriminated
against Plaintiffs, which is fatal to their civil rights claims. “To establish a claim under § 1981, a
plaintiff must allege facts in support of the following elements: (1) the plaintiff is a member of a
racial minority; (2) an intent to discriminate on the basis of race by the defendant; and (3) the
discrimination concerned one or more of the activities enumerated in the statute (i.e., make and
enforce contracts . . .).” Mian v. Donaldson, Lufkin & Jenrette Secs. Corp., 7 F.3d 1085, 1087
(2d Cir. 1993) (per curiam).
To state a claim for relief under section 1982, a plaintiff must allege that he was
intentionally “deprived of a property right” because of his race. Grimes v. Fremont Gen. Corp.,
785 F. Supp. 2d 269, 295 (S.D.N.Y. 2011).
5
“Section 1985(3) prohibits two or more persons from conspiring for the purpose of
depriving any person of the equal protections of the laws.” Barkley v. Olympia Mortgage, Co.,
2007 WL 2437810, at *10 (E.D.N.Y. Aug. 22, 2007). The elements of a § 1985(3) claim are:
“(1) a conspiracy; (2) for the purpose of depriving, either directly or indirectly, any person or
class of persons of equal protection of the laws, or of equal privileges and immunities under the
laws; (3) an act in furtherance of the conspiracy; (4) whereby a person is either injured in his
person or property or deprived of any right of a citizen of the United States.” Mian, 7 F.3d at
1087. “[T]he conspiracy must also be motivated by some racial or perhaps otherwise classbased, invidious discriminatory animus behind the conspirators’ action.” Id. (citation and
internal quotation marks omitted). “[A] § 1986 claim must be predicated upon a valid § 1985
claim.” Id.
“To state a claim under Title VI, a plaintiff must plead, among other things, ‘that the
defendant discriminated against him on the basis of race, that the discrimination was intentional,
and that the discrimination was a substantial or motivating factor for the defendant’s actions.’”
Williams v. City Univ. of N.Y., 2011 WL 6934755, at *5 (E.D.N.Y. Dec. 30, 2011) (quoting
Tolbert v. Queens College, 242 F.3d 58, 69 (2d Cir. 2001)).
In short, to state a claim for violations of the civil rights statutes set out in Sections 1981,
1982, and 1985 of Title 42 of the U.S. Code, a plaintiff must “plead facts showing that the
defendants acted with discriminatory animus,” that is, an intent to discriminate. Morales v. City
of N.Y., 752 F.3d 234, 238 (2d Cir. 2014) (affirming dismissal of Section 1981 and 1985 claims);
accord McKnight v. Middleton, 699 F. Supp. 2d 507, 529, 531 (E.D.N.Y. 2010) (dismissing
Section 1981, 1982, 1985, and 1986 claims). Similarly, Title VI “prohibits only intentional
6
discrimination.” See Alexander v. Sandoval, 532 U.S. 275, 279-81, 288-93 (2001); see also
Kajoshaj v. N.Y. City Dep’t of Ed., 543 F. App’x 11, 14-15 (2d Cir. 2013) (affirming dismissal of
Title VI claim where plaintiff failed to allege intentional discrimination).
Here, Plaintiffs’ allegations that they suffered unconstitutional discrimination and their
claims of a conspiracy to deprive them of constitutional rights are vague and conclusory.
Plaintiffs fail to allege any facts adequate to show or raise a plausible inference of discriminatory
intent on the part of Defendants or of a conspiracy in violation of 42 U.S.C. §§ 1981, 1982, 1985,
and 1986. See Brito v. Arthur, 403 Fed. Appx. 620, 621 (2d Cir. 2010) (summary order)
(affirming dismissal of §§ 1985(3) and 1986 claims where, “[a]side from conclusory assertions,
[plaintiff] failed to provide any factual allegations that [defendants] engaged in a conspiracy, or
that they were motivated by unlawful discriminatory intent or animus”); see also Sajimi v. City of
N.Y., 2011 WL 135004, at *7 (E.D.N.Y. Jan. 13, 2011) (‘“[A] complaint containing only
conclusory, vague, or general allegations of conspiracy to deprive a person of constitutional
rights cannot withstand a motion to dismiss.’” (quoting Boddie v. Schnieder, 105 F.3d 857, 862
(2d Cir. 1997))). Plaintiffs’ failure to plead adequately that Defendants were motivated by a
discriminatory animus is similarly fatal to their Title VI claim. See Williams, 2011 WL 6934755
at *5 (dismissing a 42 U.S.C. § 2000d claim where it did “not contain any factual allegation
sufficient to allow a plausible inference that the [defendant’s] actions were motivated by
discriminatory animus”). Accordingly, Plaintiffs’ Title 42 claims are dismissed for failure to
state a claim upon which relief may be granted.3
3
The Court also notes claims under 42 U.S.C. § 1986 must be commenced within one year after the cause of action
has accrued. See 42 U.S.C. § 1986; see also Paige v. Police Dep’t of Schenectady, 264 F.3d 197, 199 n.2 (2d Cir.
2001). The alleged conduct of which Plaintiffs complain, by their own admission, ceased on or about January 8,
2012. (See SAC at 1.) Yet, Plaintiffs did not commence this action until December 30, 2013. Thus, Plaintiffs’
Section 1986 claim also is barred by the statute of limitations.
7
b. Plaintiffs’ NYHRL Claim Is Barred by the Doctrine of Election of Remedies
Plaintiffs purport to assert claims under New York Executive Law § 297, but do not
provide any further discussion of these claims. In order to liberally construe Plaintiffs’ pro se
complaint, the Court will consider Plaintiffs to be asserting their strongest possible claims under
New York State Human Rights Law (“NYHRL”). NYHRL, which creates a private right of
action for unlawful discriminatory practices, requires an allegedly aggrieved person to elect
between filing a civil suit or an administrative complaint, with the election of one remedy barring
the other. This “election of remedies” provision provides that an individual may bring suit in
court “unless such person had filed a complaint . . . with any local commission on human rights.”
N.Y. Exec. Law § 297(9). Here, Plaintiffs’ filing of the Administrative Complaints, which were
adjudicated and included the same alleged acts of discrimination that Plaintiffs assert in the
instant action, constitutes the election of a remedy that now bars this Court from adjudicating the
same claims. See id.; see also Moodie v. Fed. Reserve Bank of New York, 58 F.3d 879, 884 (2d
Cir. 1995) (holding that adjudication by DHR “poses an insuperable jurisdictional bar” to federal
litigation of NYHRL claim). Because the Court lacks subject matter jurisdiction over Plaintiffs’
NYHRL claims, these claims are dismissed.
III.
Plaintiffs Fail to Assert a Cause of Action Under the FHA or the ECOA
Plaintiffs assert claims under both the FHA and the ECOA. Section 3604(b) of the FHA
prohibits discrimination “against any person in the terms, conditions, or privileges of sale or
rental of a dwelling, or in the provision of services or facilities in connection therewith, because
of race, color, religion, sex, familial status, or national origin.” 42 U.S.C. § 3604(b). Section
3605(a) makes it unlawful for anyone “whose business includes engaging in residential real
estate-related transactions to discriminate against any person in making available such a
8
transaction, or in the terms or conditions of such a transaction, because of race, color, religion,
sex, handicap, familial status, or national origin.” Id. § 3605(a). A “[r]esidential real estaterelated transaction” means “(1) [t]he making or purchasing of loans or providing other financing
assistance . . . for purchasing . . . a dwelling” or “(2) [t]he selling, brokering, or appraising of
residential real property.” Id. § 3605(b). FHA claims may be prosecuted on the basis of
disparate treatment, i.e., that plaintiffs were treated differently because of their membership in a
protected class, or on the basis of disparate impact, i.e., that the defendant’s practices have a
proportionally greater negative impact on minority populations. LeBlanc-Sternberg v. Fletcher,
67 F.3d 412, 425 (2d Cir. 1995).
The ECOA states, in relevant part, that “[i]t shall be unlawful for any creditor to
discriminate against any applicant, with respect to any aspect of a credit transaction . . . on the
basis of race, color, religion, national origin, sex or marital status, or age.”
15 U.S.C. §
1691(a)(1) (2000). “The ECOA provides for a private cause of action based on disparate impact
or disparate treatment.” 15 U.S.C. § 1691e(c) (2000); see also Powell, 310 F. Supp. 2d 481, 487
(N.D.N.Y. 2004) (citing Jones v. Ford Motor Credit Co., 2002 WL 88431, at *2 (S.D.N.Y. Jan.
22, 2002), rev’d on other grounds, 358 F.3d 205 (2d Cir. 2004)). To state an ECOA claim, a
plaintiff must allege that (1) he was a member of a protected class, (2) he was qualified for the
loan requested, (3) the lender declined the loan, and (4) the lender showed a preference for a
non-protected individual. Powell, 310 F. Supp.2d at 487.
Here, Plaintiffs clearly acknowledge that they are proceeding on a disparate impact
theory. (See id. at 7 (discussing how Plaintiffs would establish “[t]he existence of a disparate
impact”).)
As Defendants note, Plaintiffs assert that their claims “arise from Corporate
Defendants’ use of a facially-neutral FHA overlay (and Individual Defendants’ implementation
9
of that overlay) which had the effect of discriminating against Plaintiffs because of their AfricanCaribbean American heritage.” (See Defendants’ Joint Motion to Dismiss, Docket Entry No. 46
(“Defs. Mem.” or “Joint Motion to Dismiss”), at 6 (emphasis in original); see also SAC at 15,
20, 30.) Accordingly, the Court will consider Plaintiffs’ claims under a disparate impact theory.
In order to assert a violation of the FHA or ECOA based on a disparate impact theory, a
plaintiff must “demonstrate that an outwardly neutral practice actually or predictably has a
discriminatory effect; that is, has a significantly adverse or disproportionate impact on
minorities, or perpetuates segregation.” Fair Housing in Huntington Committee Inc. v. Town of
Huntington, New York, 316 F.3d 357, 366 (2d Cir. 2003); see also Fair Hous. Justice Ctr., Inc. v.
Edgewater Park Owners Coop., Inc., 2012 WL 762323, at *10 (S.D.N.Y. Mar. 8, 2012) (“In a
disparate impact analysis case, a plaintiff need not show that the defendant acted with
discriminatory intent, rather, discriminatory effect is sufficient.” (citing United States v. Yonkers
Bd. of Educ., 837 F.2d 1181, 1217 (2d Cir. 1987))).
However, Defendants accurately state that “Plaintiffs fail to identify any such specific
policy or practice as to any of the Corporate Defendants. Rather, Plaintiffs contend that their
claims arise out of unspecified “‘FHA underwriting policy overlays.’” (Defs. Mem. at 7 (citing
SAC at 4).) This is insufficient for a disparate impact claim. See Powell, 310 F. Supp. 2d at 487
(holding that “[t]o establish a prima facie case under a disparate impact theory, a plaintiff must
identify a specific policy or practice which the defendant has used to discriminate”) (internal
citation omitted). While Plaintiffs use the correct legal and technical buzzwords, in the absence
of factual allegations, it is not enough to raise Plaintiffs’ claims above the speculative level. See
Ng v. HSBC Mortg. Corp., 2009 U.S. Dist. LEXIS 125711, at *26-31 (E.D.N.Y. Dec. 15, 2009)
(recommending dismissal of FHA claims because the facts were alleged in far too conclusory a
10
fashion and “the claims [were] alleged with little more than buzzwords and conclusory labels, in
the absence of the requisite factual allegations”), adopted, 2010 U.S. Dist. LEXIS (March 10,
2010). Accordingly, in light of the pleading requirements set forth by Iqbal and Twombly,
Plaintiffs’ failure to provide factual allegations of a specific or particular practice used by
Defendants requires dismissal of Plaintiffs’ FHA and ECOA discrimination claims. See Powell,
310 F. Supp. 2d at 487-88, 489 (“Although a motion for dismissal under 12(b)(6) tests only the
adequacy of a plaintiff’s complaint, Defendants are correct in their assertion that Plaintiff alleges
no specific policy to support her disparate impact [ECOA] claim;” “Plaintiff’s claims under the
FHA suffer from the same deficiencies as her claims under the ECOA.”).
Plaintiffs’ claims under a disparate impact theory also fail because Plaintiffs’ do not
plead any actual facts of discriminatory impact based on race; otherwise said, Plaintiffs have not
pled the requisite adverse effect on the protected group. See Powell, 310 F. Supp. 2d at 487
(holding that “plaintiff… must also demonstrate with statistical evidence that the practice or
policy has an adverse effect on the protected group”); see also Gorham-DiMaggio v.
Countrywide Home Loans, Inc., 421 F. App’x 97, 100 (2d Cir. 2011) (affirming dismissal of
FHA and ECOA claims where plaintiff pled no facts demonstrating a discriminatory effect). In
fact, Plaintiffs’ own pleadings reveal their lack of evidence of a discriminatory effect. Plaintiffs
present two different sources for “statistical evidence” for disparate impact, both of which fall
short. (See SAC at 6-7.)
First, Plaintiffs’ “invite the creation of a ‘per se’ evidentiary rule in that the [Defendants]
. . . are chargeable with purposeful knowledge of [the FHA’s] statutory goals and well
established mandatory FHA underwriting terms/criteria for 3 and 4 unit properties.” (Id. at 6.)
Without any further explanation, Plaintiffs contend that this so-called evidentiary rule “evidences
11
a ‘per se’ willful disparate impact on African-Caribbean American,” where there is either “[1]
“denial of Plaintiffs’ mortgage application without notice, or [2] application of subjective,
arbitrary and unlawful underwriting policy overlays in a racial discriminatory manner; and that
otherwise is in conflict FHA guidelines and directly contravenes the law pursuant to ECOA [and]
FHA.” (Id. at 6.) To the extent the Court is able to decipher what exactly Plaintiffs are
requesting, the Court declines this invitation to alter Plaintiffs’ pleading requirement as heaving
no basis in law. Plaintiffs may not avoid making a prima facia showing of discriminatory impact
by creating a nonsensical rule that would permit conclusory assertions to be disguised as
supported, factual allegations.
Second, Plaintiffs “offer[] to procure and provide statistical evidence of disparate impact
through a motion to discover,” because they currently lack the necessary information to support
their claim. (See SAC at 6.)4 In fact, Plaintiffs state that they seek discovery because the
detailed information they need to show disparate impact is within the possession and control of
the Corporate Defendants. (Id. at 7.) Plaintiffs even admit, “Plaintiffs’ mere assertion or general
perception that a policy or practice disproportionately excludes or injures people [like] them on a
prohibited basis may be insufficient for trial on the matter.
Therefore, Plaintiffs seek the
opportunity to establish disparate impact with particularized facts.” (Id. at 7.) These admissions
by Plaintiffs further support dismissal of these claims, as Plaintiffs cannot state a claim where
they rely on the vague hope that discovery may show facts on which the claim could be based.
See Iqbal, 556 U.S. at 678-79 (“Rule 8 … does not unlock the doors of discovery for a plaintiff
4
Plaintiffs separately filed a motion for discovery, which sought “a list of all 3 and 4 unit FHA and FHA look-a-like
mortgage acquisition loans/applications received by each of the Corporate Defendants in and from the New York
Metropolitan area.” (Motion for Discovery, Docket Entry No. 52, at 9.) (emphasis in original). Plaintiffs added that
such discovery would “identify the specific policies or practices, which the Corporate Defendants has used in their
race-based racketeering schemes and provide the statistical evidence, as is required, that these policies or actual
practices has an adverse effect on the protected group. (Id. at 10.) This is motion was denied. (See Order dated
January 16, 2015.)
12
armed with nothing more than conclusions”); S. Cherry St. LLC v. Hennessee Grp. LLC, 573
F.3d 98, 113-14 (2d Cir. 2009) (noting that plaintiff’s speculation that discovery would reveal
facts to support claims “underscores, rather than cures, the deficiency in the Complaint”); see
also Johnson v. County of Nassau, 411 F. Supp. 2d 171, 176 (E.D.N.Y. 2006) (finding that
plaintiff’s request that court deny motion to dismiss “until he has had an opportunity to conduct
further discovery . . . puts the cart before the horse and ignores the fact that discovery has to be
tied to a pleading which passes muster under Rule 12(b)(6)”).
Because Plaintiffs fail to
sufficiently plead a under a disparate impact theory, Plaintiffs’ claims under the FHA and the
ECOA are dismissed.
IV.
Plaintiffs Fail to Allege a RICO Violation Sufficiently
Plaintiffs’ twenty-first through twenty-third claims allege violations of RICO.
Defendants argue that Plaintiffs have failed to plead adequately the requisite elements of a RICO
claim. The Court agrees. RICO was enacted to “‘prevent organized crime from infiltrating
America’s legitimate business organizations.’” Manley v. Doby, 2012 WL 5866210, at *3
(E.D.N.Y. Nov. 19, 2012) (quoting Moccio v. Cablevision Sys. Corp., 208 F. Supp. 2d 361, 371
(E.D.N.Y. 2002)). RICO contains a criminal provision, see 18 U.S.C. § 1962, and a civil
provision, see 18 U.S.C. § 1964. The civil provision permits the recovery of treble damages and
reasonable attorney’s fees for any person who is “injured in his business or property by reason of
a violation of” the criminal provision. 18 U.S.C. § 1964(c). “‘Because the mere assertion of a
RICO claim has an almost inevitable stigmatizing effect on those named as defendants, courts
should strive to flush out frivolous RICO allegations at an early stage of the litigation.’” Allstate
Ins. Co. v. Valley Physical Med. & Rehabilitation, P.C., 2009 WL 3245388, at *3 (E.D.N.Y.
Sept. 30, 2009) (citation omitted).
13
“To establish a civil RICO claim, a plaintiff must allege ‘(1) conduct, (2) of an
enterprise, (3) through a pattern (4) of racketeering activity,’ as well as ‘injury to business or
property as a result of the RICO violation.’” Lundy v. Catholic Health Sys. of Long Island, Inc.,
711 F.3d 106, 119 (2d Cir. 2013) (quoting Anatian v. Coutts Bank (Switz.) Ltd., 193 F.3d 85, 88
(2d Cir. 1999). “The pattern of racketeering activity must consist of two or more predicate acts
of racketeering.” Lundy, 711 F.3d at 119 (citing 18 U.S.C. § 1961(5)). “Racketeering activity”
is defined to include a variety of federal and state crimes, including murder, kidnapping,
gambling, arson, robbery, bribery, extortion, wire fraud, and mail fraud. See 18 U.S.C. §
1961(1).
Here, in describing the alleged enterprise, Plaintiffs state, “HUD Association-in-Fact
RICO Enterprise is the passive national umbrella organization, headed by HUD Secretary Shaun
Donovan and consist[s] of the several Association-in-Fact RICO Enterprises named below,
which constitutes the active board of managers and moving forces within the HUD Associationin-Fact RICO Enterprise.”
(SAC at 39.)
Plaintiffs contend that each of the Corporate
Defendants is one of the “[c]onstituent members of the HUD Association-in-Fact RICO
Enterprises.” (Id.) Plaintiffs add that “[t]he HUD Association-in-Fact RICO Enterprise was
formed for the purpose of generating revenue and maximizing profits by engaging in schemes to
profile and rob FHA mortgage applicants with African Caribbean-American descent of their
lawful entitlement to rental income credits; bribe and extort unwarranted compensating financial
factors; notwithstanding the fact that they were otherwise qualified for the loans.” (Id.) Further,
Plaintiffs baldly claim Defendants committed mail and wire fraud, as well as acts of robbery,
bribery, and extortion. (Id. at 40-41.) However, none of Plaintiffs’ allegations amount to a
14
RICO predicate act, much less a pattern of racketeering activity or the existence of an enterprise,
and thus, Plaintiffs’ claims must be dismissed.
a. Plaintiffs Have Not Adequately Alleged Mail and Wire Fraud
Defendants correctly note, “When, as here, a plaintiff alleges that violations of the mail
or wire fraud statutes supply the racketeering activity element, the plaintiff must meet the
heightened pleading standards of Rule 9(b) of the Federal Rules of Civil Procedure.” (Defs.
Mem. at 12) (citing Spool v. World Child Int’l Adoption Agency, 520 F.3d 178, 185 (2d Cir.
2008).) “The elements of a mail or wire fraud violation are: (1) a scheme to defraud, (2) money
or property as the object of the scheme, and (3) the use of the mails or wires to further the
scheme.” Grimes, 785 F. Supp. 2d at 299 n.45. Such allegations of predicate mail and wire
fraud acts should state the contents of the communications, who was involved, and where and
when they took place, and should explain why they were fraudulent. Spool, 520 F.3d at 185
(citing Mills v. Polar Molecular Corp., 12 F.3d 1170, 1176 (2d Cir. 1993)). Lastly, a plaintiff
must also allege “the specific intent to deceive necessary to support the predicate acts.” McRae
v. Norton, 2011 WL 3625569, at *3 (E.D.N.Y. Apr. 11, 2011).
Here, Plaintiffs fail to allege a single fraudulent statement made by any Defendant, much
less where and when any fraudulent statement took place. Instead, Plaintiffs state generically
that Defendants “knowingly and willfully made materially false and fraudulent representations or
omissions they knew to be false at the times of utterances, in order to restrain [Plaintiffs’] pursuit
of the mortgage loans, upon which Plaintiffs relied to their injury.” (SAC at 40-41.) Moreover,
rather than alleging any fraudulent mail or wire transaction, or any facts suggesting that the
transactions were part of a fraudulent scheme, Plaintiffs instead assert that Defendants used a
web-based program, AppTaker, together with “interstate email,” the “U.S. mail,” and the “wires
15
for telephone communications in furtherance of the inherently unlawful acts.” (Id. at 41.) In
short, Plaintiffs fail to identify any specific fraudulent communications, who made the
communications, what was communicated, where or when the communications took place, why
the communications were fraudulent, or how the mails or wires were used to further an alleged
fraud. Moreover, Plaintiffs have not alleged any facts, as to any Defendant, establishing intent to
defraud. Consequently, Plaintiffs have failed to plead any predicate act of mail and wire fraud.
See Mills, 12 F.3d at 1176.
b. Plaintiffs Have Not Adequately Alleged Robbery, Bribery, or Extortion
With regard to the alleged predicate acts of robbery, bribery, and extortion, Defendants
argue that “Plaintiffs utterly fail to allege any facts that, if true, would show that such conduct
actually occurred.” (Defs. Mem. at 13-14.) The Court agrees. For example, Plaintiffs allege
that defendant Jeff Doocy “engaged in . . . an active extortionate threat of injuring the credit
profiles of Plaintiffs Daniel I Frederick and Aaron T Frederick, by reporting a loan denial to
credit bureaus.” (SAC at 20-21.) Plaintiffs also allege that defendant Merissa Serna used “the
robbery of rental income credits and mortgage loan credits . . . as the pretext for attempting to
extort unwarranted mortgage underwriting terms -- surtaxes and penalties under threat of official
denial and injury to the credit profiles of Plaintiffs Daniel I Frederick and Aaron T Frederick.”
(Id. at 27-28.) These sort of conclusory allegations, which make no mention of the substantive
criminal statutes that would underlie such liability, are plainly insufficient as predicate acts to
support a RICO claim.
Moreover, Defendants properly assert that “these purported ‘predicate acts’ are nothing
more than allegations that three separate and distinct businesses (and their employees)
independently concluded that Plaintiffs did not meet the underwriting requirements for the loans
16
Plaintiffs sought and attempted to work with Plaintiffs to try and get them approved.” (Defs.
Mem. at 14.) Plaintiffs may not support their RICO claim by generically labeling Defendants’
purported actions as the statutory predicate crimes without more facts about what makes the
actions in fact crimes. See Gregoris Motors v. Nissan Motor Corp. in U.S.A., 630 F. Supp. 902,
913 (E.D.N.Y. 1986) (dismissing RICO claims, stating that “the conclusory nature of the
allegations . . . parroting as they do statutory language without necessary facts, make them
plainly inadequate”); see also Twombly, 550 U.S. at 555 (“[A] plaintiff’s obligation to provide
the grounds of his entitlement to relief requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do.”) (internal quotations and
citations omitted); Fleming v. Hymes-Esposito, 2013 WL 1285431, at *11 (S.D.N.Y. Mar. 29,
2013) (dismissing defendant’s counterclaims for conspiracy and extortion, because they “are
vague and do not rise to the required level of specificity for such allegations.”).
c. Plaintiffs Fail to Allege the Existence of an Enterprise
In addition to the above-mentioned shortcomings, Plaintiffs also fail to allege adequately
the existence of an enterprise, which is a necessary element of a civil RICO claim. Moss v.
Morgan Stanley, Inc., 719 F.2d 5, 17 (2d Cir. 1983). An “enterprise” is defined under RICO to
include “any individual, partnership, corporation, association, or other legal entity, and any union
or group of individuals associated in fact although not a legal entity.” See Bankers Trust Co. v.
Rhoades, 741 F.2d 511, 515 (2d Cir. 1984) (citing 18 U.S.C. § 1961(4). The Supreme Court has
further explained that, under RICO, an enterprise is “a group of persons associated together for a
common purpose of engaging in a course of conduct,” proven by “evidence of an ongoing
organization, formal or informal, and by evidence that the various associates function as a
continuing unit.” United States v. Turkette, 452 U.S. 576, 583 (1981).
17
Where a complaint alleges an association-in-fact enterprise, courts in the Second Circuit
look to the “hierarchy, organization, and activities” of the association to determine whether “its
members functioned as a unit.” First Capital Asset Mgmt. v. Saitwood, Inc., 385 F.3d 159, 17475 (2d Cir. 2004) (citations and quotations omitted). The Second Circuit has made clear that
“the person and the enterprise referred to must be distinct,” and, therefore, “a corporate entity
may not be both the RICO person and the RICO enterprise under section 1962(c).” Riverwoods
Chappaqua Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d Cir. 1994).
Here, Plaintiffs rely on an association-in-fact theory, but their sparse allegations do not
suffice for establishing an association-in-fact enterprise. Plaintiffs allege that Defendants, in
combination with HUD, all “constitute[] the active board of managers and moving forces within
the HUD Association-in-Fact RICO Enterprise.” (SAC at 39.) Further, Plaintiffs allege that the
“HUD Association-in-Fact RICO Enterprise” consisted of smaller association-in-fact enterprises,
including: the “WF Association-in-Fact Enterprise,” consisting of WF and Mr. Doocy; the “NPF
Association-in-Fact Enterprise,” consisting of NPF and Ms. Serna; and the “FE Association-inFact Enterprise,” consisting of FEM and Mr. Marino. (Id.)
While Plaintiffs offer personalized names for these so-called enterprises, Plaintiffs
provide no facts indicating that Defendants associated together for a common purpose of
engaging in a course of conduct. The allegations in the SAC are so disjointed and confusing that
it is impossible to piece together any facts suggesting that Defendants functioned as a continuing
unit.
See First Capital Asset Mgmt., 385 F.3d at 174-75 (finding that plaintiffs failed to
adequately allege a RICO enterprises because they “failed to provide [the Court] with any solid
information regarding the hierarchy, organization, and activities of this alleged association-infact enterprise . . . from which [the Court] could fairly conclude that its members function as a
18
unit” (internal quotation marks and citation omitted)); Rosner v. Bank of China, 528 F. Supp. 2d
419, 429 (S.D.N.Y. 2007) (finding that plaintiffs failed to adequately allege RICO enterprise
because no facts alleged showed how defendants “improperly functioned as a unit”). Defendants
accurately note that “Plaintiffs nowhere even mention how or whether each of the Defendants
communicated with each other, nor how each of the sub-associations stands apart from their
purported racketeering activities.”
(Defs. Mem. at 16.) Accordingly, Plaintiffs have failed to
allege that Defendants “associated together for a common purpose of engaging in a course of
conduct” and, therefore, have not satisfied the “enterprise” element of a RICO claim. Turkette,
452 U.S. at 583. Because Plaintiffs have failed to plead the requisite RICO elements, Plaintiffs’
RICO claims are dismissed.
V.
Plaintiffs Fail to State a Claim Under Any Common Law Theory
Plaintiffs assert various common law claims, including fraud, constructive fraud,
fraudulent inducement, fraudulent misrepresentation, fraudulent concealment, aiding and
abetting, tortious interference with contract, civil conspiracy, negligent hiring and supervision,
and negligent misrepresentation. (SAC at 35-37.)
a. Plaintiffs Fail to Plead the Required Elements of Fraud with Particularity
Federal Rule of Civil Procedure 9(b) sets forth a heightened pleading standard for
allegations of fraud. Thus, the Second Circuit held that “[i]n all averments of fraud or mistake,
the circumstances constituting fraud or mistake shall be stated with particularity.” Mills, 12 F.3d
at 1175. The Second Circuit explained “that in order to comply with Rule 9(b), ‘the complaint
must: (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the
speaker, (3) state where and when the statements were made, and (4) explain why the statements
were fraudulent.’” Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006) (quoting Mills,
19
12 F.3d at 1175. Additionally, “‘plaintiffs must allege facts that give rise to a strong inference of
fraudulent intent.’” Lerner, 459 F.3d at 290 (quoting Acito v. IMCERA Group, Inc., 47 F.3d 47,
52 (2d Cir. 1995)). “The requisite ‘strong inference’ of fraud may be established either (a) by
alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b)
by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or
recklessness.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994).
With respect to Plaintiffs’ common law causes of action under fraud theories, Defendants
argue that “[c]ritically missing from the SAC are any allegations of fact that give rise to a strong
inference of fraudulent intent by the Defendants.” (Defs. Mem. at 20.) The Court agrees, as
Plaintiffs only assert a single conclusory statement regarding Defendants’ intent, namely that
Defendants intentionally made false representations regarding “FHA’s underwriting criteria for
mortgage qualifying purposes” for the purpose of defrauding Plaintiffs so as to prohibit their
qualification for mortgage loans. (See SAC at 36.) This conclusory allegation fails establish a
strong inference of fraudulent intent under Rule 9(b); see also Iqbal, 556 U.S. at 686 (“[T]he
Federal Rules do not require courts to credit a complaint’s conclusory statements without
reference to its factual context.).
Moreover, Plaintiffs fails to allege any facts: (1) that
Defendants had both motive and opportunity to commit fraud, or (2) constituting strong
circumstantial evidence of their conscious misbehavior or recklessness. See Shields, 25 F.3d at
1128. Indeed, as Defendants correctly state, “Plaintiffs neglect to articulate any [credible]
motivation as to why Defendants would make fraudulent misrepresentations that would result in
Defendants purposefully denying qualified applicants a loan. (Defs. Mem. at 21.) Plaintiffs’
allegations do not meet the heightened pleading requirements under Rule 9(b), and, therefore,
Plaintiffs’ claims sounding in common law fraud are dismissed.
20
b. Plaintiffs Fail to State a Claim for Aiding and Abetting
Plaintiffs also allege that the Corporate Defendants “each aided and abetted each other
and did verbally make material misrepresentations of fact.” (SAC at 36.) Plaintiffs do not
sufficiently allege their claim for aiding and abetting. “To establish liability for aiding and
abetting fraud under New York law, ‘the plaintiffs must show (1) the existence of a fraud; (2)
[the] defendant’s knowledge of the fraud; and (3) that the defendant provided substantial
assistance to advance the fraud’s commission.’” Krys v. Pigott, 749 F.3d 117, 127 (2d Cir. 2014)
(quoting Lerner, 459 F.3d at 292.) Lastly, as with fraud claims, the plaintiff’s aiding and
abetting claim must meet the particularity requirements under Rule 9(b).
See Wight v.
BankAmerica Corp., 219 F.3d 79, 91 (2d Cir. 2000).
Here, because Plaintiffs have not properly alleged the existence of the underlying fraud,
Plaintiffs’ claim for aiding and abetting must be dismissed. Dismissal of this claim is further
required because Plaintiffs make no allegations, much less with the particularity required under
Rule 9(b), that any Defendants had actual knowledge of the alleged underlying fraud or that any
Defendants provided substantial assistance to advance the fraud’s commission. Accordingly,
Plaintiffs’ claim for aiding and abetting is dismissed.
c. Plaintiffs Fail to State a Claim for Tortious Interference with Contract
To establish common law tortious interference with contract, a plaintiff must demonstrate
“(1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant’s
knowledge of that contract; (3) the defendant’s intentional procuring of the breach; and (4)
damages.” White Plains Coat & Apron Co. v. Cintas Corp., 460 F.3d 281, 285-286 (2d Cir.
2006).
Here, Plaintiffs assert various allegations of tortious interference throughout their
complaint, which are mostly incomprehensible. For example, Plaintiffs allege “acted within the
21
lawful scope of their employment or for the benefit of their employers or shareholders when they
robbed or otherwise deprived Plaintiffs of their contractual rights and lawful entitlement to rental
income credits, FHA mortgage loans and properties, supra, which constitutes tortuous [sic]
interference with contract.”
(SAC at 34.)
Similarly, Plaintiffs allege that the Corporate
Defendants “knew or should have known that Plaintiffs sought FHA insured mortgage contracts
to which they were lawfully entitled based on qualifying rental income credits but tortuously
[sic] interfered with Plaintiffs[’] contractual and due process rights to acquire said properties.”
(Id. at 12) (emphasis in original).
These conclusory statements are clearly insufficient to sustain a claim for tortious
interference. Iqbal, 556 U.S. at 678. Plaintiffs have failed to set forth any factual allegations
suggesting that Plaintiffs had a contract with a third party that Defendants knew about, or that
Defendants intentionally procured the breach of that contract. Accordingly, Plaintiffs fail to state
a claim for tortious interference with a contract. This claim is dismissed.
d. New York Law Does Not Recognize a Cause of Action for Civil Conspiracy
Plaintiffs purport to bring a claim for “Civil Conspiracy.” (SAC at 35, 37.) “It is a wellsettled and often repeated principle of New York law that no cause of action lies for civil
conspiracy.” Aetna Cas. & Sur. Co. v. Aniero Concrete Co., 404 F.3d 566, 591 (2d Cir. 2005)
(citing Durant Bros. & Sons, Inc. v. Flushing Nat. Bank, 755 F.2d 239, 251 (2d Cir. 1985)); see
also Romano v. Romano, 2 A.D.3d 430, 432 (2d Dep’t 2003) (“[A] cause of action sounding in
civil conspiracy cannot stand alone, but stands or falls with the underlying tort.”). Accordingly,
Plaintiffs’ claim for civil conspiracy fails to state a cause of action upon which they are entitled
to relief, and is dismissed.
22
e. Plaintiffs’ Claims for Negligent Hiring and Retention and Negligent
Representation Both Fail
Plaintiffs purport to bring a claim for “negligent representation” related to the
abovementioned common law fraud claims.
Plaintiffs also assert a claim for negligent
supervision and hiring. With regard to this claim, Plaintiffs argue that the Corporate Defendants
owed a duty to Plaintiffs to (1) “provide FHA rental income credits and mortgage loans in a
manner that was free from unlawful discrimination; (2) “to properly hire, train and supervise
employees/agents relative to compliance with the requirements of fair housing and other state
and federal laws; as well as, the proper investigation and referral for prosecution for violations of
same;” and (3) “to correct, disciple or terminate . . . employees/agents after Plaintiffs made
express written complaints about their conduct.” (SAC at 35.)
In general, to prevail on a negligence claim a plaintiff must establish: (1) the existence of
a duty on defendant’s part as to plaintiff; (2) a breach of that duty; (3) a resulting injury. See
Akins v. Glens Falls City School District, 53 N.Y.2d 325 (1981).
To establish a claim of negligent misrepresentation, a plaintiff must prove that: “(1) the
defendant had a duty, as a result of a special relationship, to give correct information; (2) the
defendant made a false representation that he or she should have known was incorrect; (3) the
information supplied in the representation was known by the defendant to be desired by the
plaintiff for a serious purpose; (4) the plaintiff intended to rely and act upon it; and (5) the
plaintiff reasonably relied on it to his or her detriment.” Hydro Investors, Inc. v. Trafalgar
Power Inc., 227 F.3d 8, 20 (2d Cir. 2000). This special relationship “requires a closer degree of
trust than an ordinary business relationship.” Fleet Bank v. Pine Knoll Corp., 290 A.D.2d 792
(3d Dep’t 2002) (citations omitted).
23
To state a claim for negligent hiring and retention, in addition to the standard elements of
negligence, Plaintiffs must plead that (1) the tortfeasor and defendant were in an employeeemployer relationship; (2) the employer knew or should have known of the employee’s
propensity for the alleged tortious conduct; and (3) the tort allegedly was committed on the
employer’s premises or with the employer’s chattels. Ehrens v. Lutheran Church, 385 F.3d 232,
235 (2d Cir. 2004).
Here, Plaintiffs incorrectly assert that Defendants owed them a fiduciary duty. (See SAC
at 37). There is no such general duty between a lender and borrower under New York law. See
Iannuzzi v. Am. Mortg. Network, Inc., 727 F. Supp. 2d 125, 137-38 (E.D.N.Y. 2010) (“As a
general matter, a lender is not a fiduciary of its borrower under New York law.”); see also Mfrs.
Hanover Trust Co. v. Yanakas, 7 F.3d 310, 318 (2d Cir. 1993) (“Under New York law, the usual
relationship of bank and customer is that of debtor and creditor, and does not create a fiduciary
relationship between the bank and its borrower or its guarantors.”) (internal citation and
quotation marks omitted)); Fallon v. Wall Street Clearing Co., 182 A.D.2d 245, 250 (1st Dept.
1992) (“A debtor-creditor relationship, standing alone, does not create a fiduciary duty of the
latter to the former.”).
Moreover, with regard to the negligent misrepresentation claim, Plaintiffs fail to allege
any special relationship with Defendants, which is fatal to this claim. See Calcutti v. SBU, Inc.,
223 F. Supp. 2d 517, 522 (S.D.N.Y. 2002) (dismissing negligence misrepresentation claim where
parties did not have a relationship with each other separate from dealings related to contract).
With regarding to their negligent hiring and retention claim, Plaintiffs, besides making mere
conclusory statements, do not allege any facts that would establish that the Corporate Defendants
knew, or had any reason to know, that any agents or employees had propensity to behave in a
24
negligent or wrongful manner. See Valentini v. Citigroup, Inc., 837 F. Supp. 2d 304, 330
(S.D.N.Y. 2011) (dismissing claim for negligent hiring and retention where plaintiffs did not
“allege[] any facts demonstrating that any of the named Defendants knew or should have known
of their [employees’] propensity for tortious conduct, prior to the wrongdoing alleged in the
Complaint”). Accordingly, Plaintiffs’ negligence-based claims are dismissed.
VI.
Plaintiffs Have Failed to Satisfy the Requirements for a Permanent Injunction
Plaintiffs request that the Court enter “a permanent mandatory injunction directing each
of the above named Defendants, their agents, employees and successors” to (1) “exercise such
reasonable care and due diligence as will prevent subjective application of FHA underwriting
policy overlays that are raced based [sic] discriminatory lending practices in contravention of
any/all laws enacted to prevent same;” (2) “make FHA 203(K) loans immediately available to
Plaintiffs for 3 and 4 unit properties pursuant to FHA underwriting criteria;” and (3) “take all
affirmative steps necessary to remedy the effects of their past unlawful, discriminatory conduct
described [in the complaint] and to prevent similar occurrences in the future.” (SAC at 44.)
Plaintiffs have not satisfied the requirements for a permanent induction. “An injunction
is a matter of equitable discretion.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 32
(2008). Nonetheless, a party seeking a permanent injunction first must show, “that it will be
irreparably harmed if an injunction is not granted,” and second, “actual success on the merits.”
N.Y. Civil Liberties Union v. N.Y.C. Transit Auth., 684 F.3d 286, 294 (2d Cir. 2011) (citing
Amoco Prod. Co. v. Village of Gambell, 480 U.S. 531, 546 n.12 (1987); Bronx Household of
Faith v. Bd. of Educ., 331 F.3d 342, 348-49 (2d Cir. 2003)) (internal quotation marks omitted).
In the instant action, Defendants contend that “Plaintiffs have utterly failed to establish the
requisite irreparable harm, likelihood of success on the merits, or lack of adequate remedy at
25
law.” (Defs. Mem. at 25.) The Court concurs. Indeed, Plaintiffs’ arguments do not even purport
to directly address these requirements. Moreover, the sparse allegations in the SAC fail to
establish any of the necessary requirements for preliminary injunctive relief.
See, e.g.,
Kalimantano GmbH v. Motion in Time, Inc., 939 F. Supp. 2d 392, 421 (S.D.N.Y. 2013)
(dismissing claim for injunctive relief). Plaintiffs’ request for a permanent injunction is denied.
VII.
Plaintiffs’ Opposition to the Joint Motion to Dismiss
Throughout their response to Defendants’ Joint Motion to Dismiss, Plaintiffs contend that
Defendants are seeking summary judgment. (See, e.g., Plaintiffs’ Opposition to Defendants’
Joint Motion to Dismiss (“Pls. Opp.”), Docket Entry No. 50, at 7, 9, 22, 26, 33.) Plaintiffs are
incorrect in their assertion. While Defendants do reference, in the Joint Motion to Dismiss, the
Administrative Complaints, the Determination and Orders, and Plaintiffs’ prior civil action, these
references do not convert the motion into a motion for summary judgment. It is well settled that
in disposing of a Rule 12(b)(6) motion to dismiss, a court’s review of DHR or judicial
proceedings (and to the papers filed or issued therein) does not trigger Rule 12(d)’s provision for
conversion of the motion into one for summary judgment. See Ferrari v. County of Suffolk, 790
F. Supp. 2d 34, 38 n.4 (E.D.N.Y. 2011) (“In the Rule 12(b)(6) context, a court may take judicial
notice of prior pleadings, orders, judgments, and other related documents that appear in the court
records of prior litigation and that relate to the case sub judice.”).
With regard to the scope of Plaintiffs’ opposition papers, Defendants complain that
“Plaintiffs themselves make repeated reference to facts that are not pleaded in the SAC and to
documents that are not incorporated into the SAC by reference or that are otherwise proper for
the Court to consider at the Rule 12(b)(6) stage.” (Defendant’s Reply in Support of Joint Motion
to Dismiss, Docket Entry No. 55, at 2-3; see, e.g., Pls. Opp. at 2 (assertions regarding non-FHA
26
loans), 4-5 (presenting hypothetical fact pattern), 11-12 (attempting to plead new facts regarding
NPF), 16-18 (asserting that Defendants fail to comply with the Home Mortgage Disclosure Act),
21-22 (referencing “transcribed email communiques,” many of which are not referenced in the
SAC, and a purported “discrimination letter,” which is similarly not referenced in the SAC), 24
(alleging that HUD somehow “deputized” the Corporate Defendants), and 31-32 (same).)
Plaintiffs also raise a new claim in their opposition that Defendants violated New York General
Business Law §349. (Defs. Opp. at 27-28.)
Defendants’ objections are well founded. A plaintiff may not amend his or her pleadings
through an opposition brief. See Wright v. Ernst & Young LLP, 152 F.3d 169, 178 (2d Cir.
1998); Willner v. Doar, 2013 WL 4010205, at *5 (E.D.N.Y. Aug. 5, 2013) (“These allegations
are nowhere to be found in plaintiff's amended complaint.
Plaintiff may not amend his
complaint through motion papers and the Court will not consider this newly raised claim.”)
Accordingly, the Court will disregard the abovementioned additional facts and newly raised
claim that Plaintiffs sought to introduce in their response papers. For the above stated reasons,
Defendants’ motion to dismiss is granted in its entirety.
VIII. Leave to Amend Would be Futile
Although Rule 15(a)(2) of the Federal Rules of Civil Procedure provides that a court
should freely grant a party leave to amend “when justice so requires,” leave to amend is not
required where, as here, a further amendment would be futile. Hill v. Curcione, 657 F.3d 116,
123-24 (2d Cir. 2011) (“Where a proposed amendment would be futile, leave to amend need not
be given.”) (citing Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 18 (2d Cir.
1997)).
27
The Court is aware that leave to amend must be granted where a pro se pleading “gives
any indication that a valid claim might be stated,” Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir.
2000), but the allegations here raise no hint of a viable claim. Plaintiffs have been given ample
opportunity to correct the deficiencies in their pleadings and have been unable to do so. Another
attempt by Plaintiffs to state a claim in this action would be futile. See In re Merrill Lynch &
Co., Inc. Research Reports Sec. Litig., 273 F. Supp. 2d 351, 390 (S.D.N.Y. 2003), aff’d sub nom.
Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161 (2d Cir. 2005), cert. denied, 546 U.S. 935
(2005) (plaintiffs had no right to amend and re-plead where they had “ample opportunity to craft
their complaints” and were on notice of pleading deficiencies). Therefore, because Plaintiffs’
deficient pleading cannot be remedied by amendment, the SAC is dismissed with prejudice. See
Konowaloff v. Metro. Museum of Art, 2011 WL 4430856, at *8 (S.D.N.Y. Sept. 22, 2011) aff'd,
702 F.3d 140 (2d Cir. 2012) (“This is [plaintiff's] second attempt to craft a viable complaint, and
its shortcomings are of the sort that cannot be remedied by amendment. Accordingly, I dismiss
the Amended Complaint with prejudice.”).
IX.
Plaintiffs’ Cross-motion to “Dismiss”
On August 22, 2014, Plaintiffs filed a cross-motion seeking an order: (1) striking exhibits
submitted with Defendants’ Joint Motion to Dismiss, (2) enjoining Defendants from proffering
certain evidence regarding non-discriminatory reasons for Defendants’ denial of Plaintiffs’ loan
applications because Defendants allegedly did not comply with ECOA requirements, (3) granting
Plaintiffs a judgment on the pleadings or summary judgment, and (4) granting leave for Plaintiffs
to add the DHR as a defendant. (See generally Plaintiffs’ Cross-motion (“Pls. Cross”), Docket
Entry No. 51). This motion is without merit.
28
As an initial matter, in light of the Court’s rulings discussed above, Plaintiffs’ crossmotion is moot. Even assuming Plaintiffs’ cross-motion is not moot, it lacks any substance.
First, as noted above, the Court is permitted to consider the Administrative Complaints and the
Determination and Orders. Moreover, Plaintiffs’ attempt to relitigate the DHR’s findings in this
cross-motion is both inappropriate and unpersuasive.
Second, the Court finds Plaintiffs’
argument against the consideration of Defendants’ non-discriminatory reasons for the denial of
Plaintiffs’ loan applications to be wholly unsupported. Plaintiffs provide no factual or legal
support for their argument that the Court should not consider Defendants’ evidence due to
Defendants’ purported non-compliance with an ECOA requirement that a lender send a written
statement of the reasons for denial of a loan within thirty days of the denial. Third, Plaintiffs’
motion for judgment on the pleadings and summary judgment is procedurally improper, because
no pre-motion conference was sought before making the motion, as required by this Court’s
rules.
The motion for summary judgment also is procedurally improper because it is
unsupported by a Rule 56.1 statement, which is required by this District’s Local Rules.
Substantively, it is without merit because it seeks to obtain judgment on Plaintiffs’ claims
regarding Defendants’ lending practices without providing undisputed facts on the basis of which
such a motion could be granted. Indeed, the Court has already found that Defendants are entitled
to a dismissal of the SAC for failure to state claim upon which relief may be granted, and there is
nothing in Plaintiffs’ motion for judgment on the pleadings or summary judgment that alters that
conclusion.
Lastly, Plaintiffs’ request for leave to amend their complaint to add the DHR is futile.
Plaintiffs seek to add the DHR because it is supposedly “a RICO Enterprise Government unit as
an indispensable party opponent and active member of the HUD Association-in-Fact RICO
29
Enterprise.” (Pls. Cross at 7.) Plaintiffs add, inter alia, “DHR is liable for state and federal law
violations against Plaintiffs including the commission of inter lia [sic], RICO predicate acts of
obstruction of justice and witness tampering during the pendency of federal judicial
proceedings.” (Id.) Given the Second Circuit’s guidance that a pro se complaint should not be
dismissed without leave to amend unless amendment would be futile, Cuoco, 222 F.3d at 112,
the Court has considered carefully whether leave to amend is warranted here to permit the
addition of DHR as a defendant. Because the defects in Plaintiffs’ claims are substantive and
would not be cured if afforded an opportunity to amend, leave to amend is denied. Accordingly,
Plaintiffs’ cross-motion is denied in its entirety.
CONCLUSION
For the reasons stated above, Defendants’ motion to dismiss is granted, Plaintiffs’ Second
Amended Complaint is dismissed in its entirety, and Plaintiffs’ Cross-motion is dismissed in its
entirety.
SO ORDERED.
Dated: Brooklyn, New York
March 30, 2015
/s/
DORA L. IRIZARRY
United States District Judge
30
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?