Mercado v. Waterfall Victoria Master Fund Limited et al

Filing 6

ORDER granting 2 Motion for Leave to Proceed in forma pauperis; MEMORANDUM AND OPINION. For the reasons set forth above, plaintiff's application to proceed in forma pauperis is granted and the federal claims set forth in her amended complaint are dismissed with prejudice pursuant to Federal Rule of Civil Procedure 12(h)(3) and 28 U.S.C. §§ 1915(e)(2)(B)(ii). The Court declines to exercise supplemental jurisdiction over plaintiffs remaining state law claims and they are thus dis missed without prejudice. The Court certifies pursuant to 28 U.S.C. § 1915(a)(3) that any appeal from this Order would not be taken in good faith and therefore in forma pauperis status is denied for the purpose of any appeal.. Ordered by Judge Joseph F. Bianco on 4/29/2015. (Bollbach, Jean)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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JENNY J. MERCADO,

*

LONg \S\.ANC gf'!!\CQ

Plaintiff,
MEMORANDUM AND ORDER
15-CV-1500(JFB)(SIL)

-againstQUANTUM SERVICING CORPORATION,
WATERFALL VICTORIA MASTER FUND
LIMITED, WATERFALL VICTORIA MASTER
FUND, LTD., WATERFALL VICTORIA
MORTGAGE TRUST 2011-REO, LLC,
Defendant.

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JOSEPH F. BIANCO, District Judge:

On March 19, 2015,pro se plaintiff Jenny J. Mercado ("plaintiff') filed an in forma

pauperis complaint against Waterfall Victoria Master Fund Limited (the "Fund"), Waterfall
Victoria Master Fund, Ltd. (the "Fund Ltd." and together, the "Funds") and Waterfall Victoria
Mortgage Trust 2011-REO, LLC ("Trust") in this Court accompanied by an application to
proceed in forma pauperis. On March 25, 2015, plaintiff filed an amended complaint against the
Funds and the Trust, and added Quantum Servicing Corporation ("Quantum") as a defendant.
For the reasons that follow, plaintiffs application to proceed in forma pauperis is granted and the
complaint is dismissed pursuant to 28 U.S.C. §§ 1915(e)(2)(B)(ii) and Federal Rule of Civil
Procedure 12(h)(3).
DISCUSSION
I.

The Complaint 1
Plaintiff is no stranger to this Court. In December, 2014, p1aintifffiled a complaint in
1

The following facts are taken from plaintiffs complaint and are presumed to be true for
the purpose of this Memorandum and Order.

this Court against the Fund Ltd. and the Trust alleging that they had violated four federal statutes,
namely 18 U.S.C. §§ 1341, 1346, 1349 and 8 U.S.C. § 1324c. Because the first three statutes are
criminal mail fraud statutes with no private right of enforcement and the fourth statute provides
the penalties for document fraud in connection with immigration proceedings having no
application to plaintiff's allegations, the undersigned dismissed the in forma pauperis complaint
for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(h)(3) and
for failure to allege a plausible claim pursuant to 28 U.S.C. § 1915(e)(2)(B)(ii). 2 See Mercado v.
Waterfall Victoria Master Fund Ltd., eta/., 14-CV-7278 (JFB) (SIL), Mem. & Order, dated Dec.
31, 2014, Bianco, D.J. (Dkt. Entry No.5.)
The substance of the instant amended complaint is nearly identical to the original
complaint. Submitted on the Court's general complaint form, with an additional10 pages of
allegations and 116 pages of exhibits annexed thereto, the Amended Complaint again alleges that
this Court's federal question jurisdiction is invoked. However, this time, plaintiff alleges that her
claims arise under "Article I, Sec. 8, Clause 3 of the U.S. Constitution"; four federal statutes: 18
U.S.C. §§ 241,514, 1341 and 15 U.S.C. § 1692; N.Y. Tax Law§ 1410 and common law "fraud
on the Court." (Am. Compl. 'If II. A-B.) Plaintiff also alleges that she and the Fund Ltd. are
citizens ofNew York and that the Fund, the Trust and Quantum are citizens of Florida. (ld. 'If I.
A- B.) Like her earlier complaint, plaintiff seeks to challenge a 2010 Judgment of Foreclosure
and Sale entered against her in the New York State Supreme Court, Suffolk County. (ld. '1[1.)

2

The Court also considered whether this Court's diversity jurisdiction could be invoked
and concluded that it could not because plaintiff alleged that both she and the Fund Ltd. are
citizens ofNew York. See Mercado v. Waterfall Victoria Master Fund Ltd., eta/., 14-CV-7278
(JFB) (SIL), Mem. & Order, dated Dec. 31, 2014, Bianco, D.J. (Dkt. Entry No.5.)
2

According to the Amended Complaint, on September 7, 2010, the New York State
Supreme Court, Suffolk County, signed a "Short Form Order as well as a Judgment of
Foreclosure and Sale (the "Order and Judgment") in the foreclosure action, 'The Chase
Manhattan Bank, as Trustee v. Jenny J. Mercado, eta!. (02-07744),"' which were entered on
October 29,2010 by the Clerk of the Court. (!d. '1[1.) Plaintiff contends that there was fraud in
the procurement of the Order and Judgment in that her signature on a promissory note "was
forged in order to allow for the theft of my home." (!d. '1[2.) Plaintiff describes that she learned
of the forgery during the course of a bankruptcy proceeding she had commenced on September
13,2010 in an effort to stay the enforcement of the foreclosure sale. (!d. '1[2.) In response to her
bankruptcy petition, plaintiff alleges that the Fund Ltd. made a motion to vacate the automatic
stay, which was ultimately withdrawn. (!d.) On December 7, 2010, plaintiff claims that she
received a discharge and her bankruptcy case was closed on May 12, 2011. (!d. '1[4.)
Plaintiff appealed the Order and Judgment to the Appellate Division, Second Department,
and, by Order to Show Cause, requested a stay of the foreclosure sale. Because the Appellate
Division relied on an alleged misrepresentation made by the Fund Ltd., plaintiff alleges that her
request for a stay was denied, (!d. '1[8), and, on April 3, 2013, her appeal was decided in favor of
the respondents. (!d. '1[11.) Plaintiff also alleges that in August 2012, while the appeal was
pending, she made a motion in the New York State Supreme Court, Suffolk County, to vacate the
Order and Judgment, claiming that the "Referee's report and Referee's deed are both bogus."
(!d. '1['1[12, 15.). Plaintiffs motion to vacate was denied. (!d. '1[17.) Also at this time, a
judgment in the sum of $44,500 was entered against plaintiff in the hold-over proceeding that
had been commenced against plaintiff by the Trust. (!d. '1['1[18-19.)
3

According to plaintiff,
I do not owe defendants any money. They stole my home and then evicted me.
They evicted me from my home to benefit and enrich themselves. Defendants and
their attorneys conspired to forge my name on a mortgage note submitted in my
bankruptcy case as well as in the Appellate Court Second Department in order to
influence the courts' decisions []. Although in the bankruptcy case they
subsequently withdrew its motion to vacate the automatic stay (after I had filed
my opposition papers), they continued the fraud on the court in the Second
Department by submitting the same forged note there as well, except this time
they submitted two different allonges []. Defendants subsequently also submitted
the bogus Referee's deed .... The forged mortgage notes []were submitted to
the courts attached to the defendants' motion papers and/or opposition papers, and
a copy was sent to me by defendants' attorney using the United States mail which
constitutes mail fraud.
(!d.

~~

24-25.) Although plaintiff claims that she "is aware that this Court cannot overturn the

state court judgment or intervene in the bankruptcy case," she seeks an order: (I) "vacat[ing] the
judgement in the amount of$44,500.00 awarded to "waterfall Victoria Mortgage Trust 2011-1
REO, LLC by the First District Court"; (2) "void[ing] the referee's deed; (3) awarding punitive
damages in the amount of$500,00; and (4) awarding "$500,000 for treble damages to
compensate me for defts' wrongfully taking my home and evicting me."
II.

(!d.~

26, V.)

Application to Proceed In Forma Pauperis
Upon review of plaintiffs declaration in support of her application to proceed in forma

pauperis, the Court determines that plaintiffs financial status qualifies her to commence this
action without prepayment of the filing fees. See 28 U.S.C. § 1915(a)(l). Therefore, plaintiffs
request to proceed in forma pauperis is granted.
III.

Application of28 U.S.C. § 1915
Section 1915 of Title 28 requires a district court to dismiss an in forma pauperis

complaint if the action is frivolous or malicious, fails to state a claim on which relief may be

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granted, or seeks monetary relief against a defendant who is immune from such relief. See 28
U.S.C. § 1915(e)(2)(B)(i-iii). The Court is required to dismiss the action as soon as it makes
such a determination. Id
It is axiomatic that pro se complaints are held to Jess stringent standards than pleadings
drafted by attorneys and the Court is required to read the plaintiffs prose complaint liberally,
Erickson v. Pardus, 55! U.S. 89,94 (2007) (citing Estelle v. Gamble, 429 U.S. 97, 106 (1976));
Chavis v. Chappius, 618 F.3d 162, 170 (2d Cir. 2010), and to construe them '"to raise the
strongest arguments"' suggested. Chavis, 618 F.3d at 170 (quoting Harris v. City ofNew York,
607 F.3d 18,24 (2d Cir. 2010)). Moreover, at the pleadings stage of the proceeding, the Court
must assume the truth of "all well-pleaded, nonconclusory factual allegations" in the complaint.
Kiobel v. Royal Dutch Petroleum Co., 621 F.3d Ill, 123 (2d Cir. 2010), aff'd !33 S. Ct. 1659
(2013) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009)).
However, a complaint must plead sufficient facts to "state a claim to relief that is
plausible on its face." Bell At!. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "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." Iqbal, 556 U.S. at 679
(citations omitted). The plausibility standard requires "more than a sheer possibility that
defendant has acted unlawfully." Jd at 678; accord Wilson v. Merrill Lynch & Co., 671 F.3d 120,
128 (2d Cir. 2011). While "detailed factual allegations" are not required, "[a] pleading that
offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will
not do."' !d. (quoting Twombly, 550 U.S. at 555). Plaintiffs factual allegations must also be
sufficient to give the defendant "fair notice of what the ... claim is and the grounds upon which

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it rests," Twombly, 550 U.S. at 555 (internal quotation marks and citation omitted), and must
show that the court has subject matter jurisdiction. Ruhrgas AG v. Marathon Oil Co., 526 U.S.
574, 583 (1999); Fed. R. Civ. P. 12(h)(3).
A. Subject Matter Jurisdiction
As a threshold matter, the Court must determine whether it has subject matter jurisdiction
to adjudicate plaintiff's complaint. "Federal courts must determine that they have jurisdiction
before proceeding to the merits." Lance v. Coffman, 549 U.S. 437, 439 (2007). Notwithstanding
the liberal pleading standard afforded prose litigants, federal courts are courts of limited
jurisdiction and may not preside over cases if they lack subject matter jurisdiction. Lyndonville
Sav. Bank & Trust Co. v. Lussier, 211 F.3d 697, 700-01 (2d Cir. 2000). Lack of subject matter
jurisdiction cannot be waived and may be raised at any time by a party or by the Court sua
sponte. !d. If subject matter jurisdiction is lacking, the action must be dismissed. !d. at 700-01;
Fed. R. Civ. P. 12(h)(3).
Here, plaintiff seeks to invoke this Court's federal question subject matter jurisdiction
under 28 U.S.C. § 1331. (Compl.

at~

II. A.) Plaintiff alleges that her federal claims arise under

the Constitution and four federal statutes, namely: 18 U.S. C.§§ 241, 514, 1341 and 15 U.S.C. §
1692. (Compl.

~II.

A-B.) However, the first three statutes are criminal fraud statutes with no

private right of enforcement and the fourth statute sets forth the Congressional findings and
purpose of the Consumer Credit Protection Act. 3 Thus, as is readily apparent, these statutes have
3

See, e.g., Gutilla v. City ofNew York, 14-CV-156, 2015 WL 437405, *11 (S.D.N.Y.
Feb. 3, 2015) ("Generally, violations of Title 18 may not serve as the basis for a civil cause of
action unless the specific statute includes an express or implied private right of action.") (citing
Cort v. Ash, 422 U.S. 66,79 (1975)); see also Hill v. Didio, 191 F. App'x 13, 14 (2d Cir. 2006)
("Nothing in the language or structure of section[] 241 suggests that Congress intended to create
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no application to the present case and thus cannot support this court's subject matter jurisdiction.
And, the complaint suggests no basis for federal question jurisdiction since the facts set forth by
plaintiff do not give rise to a claim arising under the United States Constitution,' or federal
statutes or treaties. See 28 U .S.C. § 1331.
In an abundance of caution given plaintiffs pro se status, the Court has also considered
whether subject matter jurisdiction lies in this Court under 28 U.S.C. § 1332. However, because
plaintiff alleges that she and the Fund are both New York residents, complete diversity between
the parties is lacking and diversity jurisdiction may not be invoked. See 28 U.S.C. § 1332.
Accordingly, in the absence of any basis for this court to exercise jurisdiction in this matter, the
complaint must be, and is, dismissed. Such dismissal is without prejudice to plaintiff pursuing

a private right of action pursuant to th[at] statute[].") (summary order) (citing Newcomb v. Ingle,
827 F.2d 675, 676 n.l (lOth Cir. 1987) (per curiam)); see also Aboeid v. Saudi Arabian Airlines,
Inc., No. CV-10-2518(SJ)(VVP), 2011 WL 2470091, *2 (E.D.N.Y. June 17, 2011) ("To the
extent that the plaintiffs seek to assert a separate claim for mail fraud [under 18 U.S.C. § 1341 et
seq.], that amendment would be futile since there is no private right of action for violations of the
federal mail fraud statute.") (citing Pharr v. Evergreen Garden, Inc., 123 F. App'x 420,422 (2d
Cir. 2005) ("The law in this circuit is clear that this criminal statute [under 18 U.S.C. § 1341 et
seq.] does not support any private right of action.")) (additional citation omitted).
See 15 U .S.C. § 1692(e) Congressional Findings and Declaration of Purpose: "It is the
purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to
insure that those debt collectors who refrain from using abusive debt collection practices are not
competitively disadvantaged, and to promote consistent State action to protect consumers against
debt collection abuses." Here, plaintiff alleges no facts that might give rise to a Fair Debt
Collection Practices Act claim.
4

Although plaintiff alleges that her Constitutional claim arises under Article I, Section 8,
clause 3, such reliance is misplaced. The cited provision provides, in relevant part, "[t]he
Congress shall have the power to lay and collect taxes, duties, imposts and excises, to pay the
debts and provide for the common defence and general welfare of the United States; but all
duties, imposts and excises shall be uniform throughout the United States ... to establish
uniform rules ofNaturalization, and uniform laws on the subject of Bankruptcies throughout the
United States."
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any remedies she may have, if any, in the state and/or bankruptcy courts.
IV.

State Law Claims
Because all of the federal claims alleged in the complaint are dismissed, the court

declines to exercise supplemental jurisdiction over the plaintiff's state law claims and dismisses
them without prejudice. "[A] federal court should generally decline to exercise supplemental
jurisdiction over state law claims, if, as is the case here, the complaint asserts federal question
jurisdiction but not diversity jurisdiction and the complaint's federal claims are dismissed in the
litigation's 'early stages."' Pelt v. City ofNew York, I 1-CV-5633, 2013 WL 4647500, at *19
(E.D.N.Y. Aug. 28, 2013) (internal quotation marks and citations omitted); see Choe v. Fordham

Univ. Sch. of Law, 81 F.3d 319, 319 (2d Cir. 1996) (holding it is clear a district court holds
discretion to "decline supplemental jurisdiction [over state law claims] when all claims over
which the district court had original jurisdiction have been properly dismissed"); see also 29
U.S.C. § 1367(c)(3). While a court possesses the discretion to retain jurisdiction, "in the usual
case in which all federal- law claims are eliminated before trial, the balance of factors to be
considered under the pendent jurisdiction doctrine - -judicial economy, convenience, fairness,
and comity- - will point toward declining to exercise jurisdiction over the remaining state law
claims." Valencia ex rei. Franco v. Lee, 316 F.3d 299, 305 (2d Cir. 2003) (internal quotation
marks and citation omitted). Indeed, "[i]n the interest of comity, the Second Circuit instructs that
'absent exceptional circumstances,' where federal claims can be disposed of ... , courts should
'abstain from exercising pendent jurisdiction."' Birch v. Pioneer Credit Recovery, Inc., 06-CV6497T, 2007 WL 1703914, at *5 (W.D.N.Y. June 8, 2007) (quoting Walker v. Time Life Films,

Inc., 784 F.2d 44, 53 (2d Cir. 1986)).
8

In the instant case, the Court, in its discretion, declines to exercise supplemental
jurisdiction over plaintiff's remaining state law claims because "it 'has dismissed all claims over
which it has original jurisdiction."' Kolari v. N.Y. Presbyterian Hasp., 455 F.3d 118, 122 (2d Cir.
2006) (quoting 28 U.S.C. § 1367(c)(3)); see also Cave v. E. Meadow Union Free Sch. Dist., 514
F.3d 240,250 (2d Cir. 2008) ("We have already found that the district court lacks subject matter
jurisdiction over appellants' federal claims. It would thus be clearly inappropriate for the district
court to retain jurisdiction over the state law claims when there is no basis for supplemental
jurisdiction."); Karmel v. Claiborne, Inc., 99-CV-3608, 2002 WL 1561126, at *4 (S.D.N.Y. July
15, 2002) ("Where a court is reluctant to exercise supplemental jurisdiction because of one of the
reasons put forth by § 1367(c), or when the interests of judicial economy, convenience, comity
and fairness to litigants are not violated by refusing to entertain matters of state law, it should
decline supplemental jurisdiction and allow the plaintiff to decide whether or not to pursue the
matter in state court."). Accordingly, pursuant to 28 U.S.C. § 1367(c)(3), the Court declines to
retain jurisdiction over plaintiff's remaining state law claims, and dismisses these claims without
prejudice.
V.

Leave to Amend
In light of the pleading deficiencies set forth above, the Court has considered whether

plaintiff should be given an opportunity to re-plead. Leave to amend should be freely granted
when justice so requires. Fed. R. Civ. P. 15(a)(2). "This relaxed standard applies with particular
force to prose litigants." Pangburn v. Culbertson, 200 F.3d 65, 70 (2d Cir. 1999). The Second
Circuit has emphasized that a "court should not dismiss [a prose complaint] without granting
leave to amend at least once when a liberal reading of the complaint gives any indication that a
9

valid claim might be stated." Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000) (citations and
internal quotation marks omitted); see also Chappius, 618 F.3d at 170. Nevertheless, "[!]eave to
amend, though liberally granted, may properly be denied for: 'undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to cure deficiencies by amendments previously
allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility
of amendment, etc."' Ruotolo v. City ofNew York, 514 F.3d 184, 191 (2d Cir. 2008) (quoting
Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962)); see also Burch v.
Pioneer Credit Recovery, Inc., 551 F.3d 122, 126 (2d Cir. 2008).

Here, the deficiencies in plaintiffs claims are substantive in nature and, as such, cannot
be remedied by amendment. Accordingly, the court declines to grant plaintiff leave to file an
amended complaint.
VI.

The All Writs Act
The Court has the obligation to protect the public and the efficient administration of

justice from litigants who have a history of filing vexatious and harassing complaints because of
the needless expense imposed on the parties and the unnecessary burden on the court. Lau v.
Meddaugh, 229 F.3d 121, 123 (2d Cir. 2000). The All Writs Act, 28 U.S.C. § 1651, permits a

court, under certain circumstances, to sanction a vexatious litigant who abuses the judicial
process by enjoining him or her from pursuing future litigation without first obtaining leave of
the court. Malley v. New York City Bd. ofEduc., 112 F.3d 69, 69-70 (2d Cir. 1997) (per
curiam); Horoshko v. Citibank N.A., 373 F.3d 248,250 (2d Cir. 2004). Those circumstances

include cases where a litigant engages in the filing of repetitive and frivolous suits. See, e.g.,
Malley, 112 F.3d at 69-70 (filing injunction may issue if numerous complaints filed are based on

10

the same events). Such an injunction, while protecting the courts and parties from frivolous
litigation, should be narrowly tailored so as to preserve the right of access to the courts. In
addition, the Court must provide plaintiff with notice and an opportunity to be heard before
imposing a filing injunction. Moates v. Barkley, 147 F.3d 207, 208 (2d Cir. 1998) (per curiam);
MLE Realty Associates v. Handler, 192 F.3d 259,261 (2d Cir. 1999).
Although this is plaintiffs second frivolous lawsuit regarding the same subject matter,
the Court in its discretion does not believe that the drastic sanction of a litigation injunction, or
any other sanction, is warranted at this juncture, especially because the Court was able to dispose
of this lawsuit in a sua sponte order, without a formal motion by the defendants. However, the
Court is concerned, given the instant action, together with docket number, 14-CV-7278, that
plaintiff may try to file a new action against these defendants again seeking redress for the
alleged wrongdoing surrounding the underlying state and bankruptcy court proceedings. Of
course, plaintiffs continued filing of frivolous complaints relating to this issue would constitute
an abuse of the judicial process. Given the Court's "obligation to protect the public and the
efficient administration of justice from individuals who have a history of litigation entailing
vexation, harassment and needless expense to other parties and an unnecessary burden on the
courts and their supporting personnel," Lau, 229 F.3d at 123, plaintiff is warned that similar,
future complaints will not be allowed to continue. If plaintiff persists in this course of action, the
Court will require that plaintiff show cause why she should not first seek leave of Court before
submitting such filings.
Finally, plaintiff is cautioned that Federal Rule of Civil Procedure II applies to prose
litigants, Ginther v. Provident Life and Cas. Ins. Co., 350 F. App'x 494, 496 (2d Cir. 2009)
II

(upholding a district court's imposition of sanctions against a prose litigant), and that should she
file another frivolous complaint, it is within the Court's realm to also consider other sanctions,
including monetary sanctions. See Fed. R. Civ. P. II.
CONCLUSION
For the reasons set forth above, plaintiff's application to proceed in forma pauperis is
granted and the federal claims set forth in her amended complaint are dismissed with prejudice
pursuant to Federal Rule of Civil Procedure 12(h)(3) and 28 U.S.C. §§ 1915(e)(2)(B)(ii). The
Court declines to exercise supplemental jurisdiction over plaintiffs remaining state law claims
and they are thus dismissed without prejudice. The Court certifies pursuant to 28 U.S.C. §
1915(a)(3) that any appeal from this Order would not be taken in good faith and therefore in

forma pauperis status is denied for the purpose of any appeal. See Coppedge v. United States,
369 U.S. 438, 444-45, 82 S. Ct. 917, 8 L. Ed. 2d 21 (1962).
SO ORDERED

Dated:

ph F. Bianco
ted States District Judge

April-;)~, 2015
Central Islip, New York

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