Cohen v. Ditech Financial LLC et al

Filing 54

MEMORANDUM AND ORDER granting 29 Motion to Dismiss for Failure to State a Claim; granting 24 Motion to Dismiss for Failure to State a Claim. For the reasons stated herein, both Defendants' motions to dismiss are granted, and the case is closed. (Ordered by Judge Leonard D. Wexler on 3/24/2017.) (Fagan, Linda)

FILED
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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AARON COHEN, on behalf of himself and
all others similarly situated,

IN CLERK'S OFFICE
U.S. DISTRICT COURT E.D.N.Y.

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MAR 2 ~ 2017

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LONG ISLAND OFFICE

MEMORANDUM AND ORDER
Plaintiff,
15-CV-6828
(Wexler, J.)

-againstDITECH FINANCIAL LLC, and ROSICKI,
ROSICKI & ASSOCIATES, P .C.,
Defendants.

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APPEARANCES:

LAW OFFICES OF SHIMSHON WE)(LER, PC
BY: Shimshon Wexler, Esq.
Attorney for Plaintiff
315 W. Ponce de Leon Ave., Suite 250
Decatur, Georgia 30030
BALLARD SPAHR LLP
BY: Justin Angelo, Esq.
Attorneys for Defendant Ditech Financial LLC
919 Third Avenue, Floor 37
New York, New York 10022
RIVKIN RADLER, LLP
BY: Carol A. Lastorino, Esq.
Attorneys for Defendant Rosicki, Rosicki & Associates, P.C.
926 R)(R Plaza
Uniondale, New York 11556
WE)(LER, District Judge:
Plaintiff Aaron Cohen ("Cohen" or "Plaintiff') commenced this action, on behalf of
himself and as a putative class action, alleging violations of the Fair Debt Collection Practices
Act ("FDCPA"), 15 U.S.C. § 1692 et seq., by defendants Ditech Financial LLC ("Ditech") and
Rosicki, Rosicki & Associates, P.C. ("Rosicki"). Specifically, he seeks statutory damages,
attorneys' fees, and costs for violations to§ 1692e and§ 1692g(a)(2) ofthe FDCPA. Currently

before the Court are each defendant's motion to dismiss pursuant Rule 12 (b)(6) ofthe Federal
Rules of Civil Procedure. See Rosicki Motion, Docket Entry ("DE") [24]; Ditech Motion, DE
[29]. For the reasons set forth herein, both motions are granted and the complaint is dismissed.

I. BACKGROUND
A. Factual Allegations and State Foreclosure Action 1
On or about August 11, 2005, Cohen incurred a debt in the form of a mortgage loan.
Complaint, DE [1],

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15. The mortgage was assigned on more than one occasion, the last

assignment occurring on June 10, 2013 to Green Tree Servicing LLC ("Green Tree"). See
Foreclosure Complaint ~4, Declaration of Carol A. Lastorino ("Lastorino Decl."), Ex. B, DE
[25]. On March 11, 2015, Green Tree commenced a foreclosure proceeding in state court (the
"Foreclosure Action") upon Plaintiff's default on his mortgage payments in 2009. See
Foreclosure Compl.

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After the foreclosure action was filed, Green Tree changed its name to

Ditech. 2
After the foreclosure complaint was filed, Plaintiff received two additional documents in
furtherance of the Foreclosure Action: a Certificate of Merit Pursuant to CPLR 3012-b
("Certificate") and a request for judicial intervention ("RJI"). Compl.

~23.

The Certificate is

dated March 11, 2015, bears the same caption as the Foreclosure Complaint, and certifies that
plaintiff Green Tree "is the creditor entitled to enforce rights" under the pertinent documents.
Certificate ~2, Lastorino Decl. Ex. C. The RJI uses the same caption as the Foreclosure

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The facts are taken from the Complaint and from documents related to the state court foreclosure action.
See Curtis & Assocs., P.C. v. Law Offices of David M Bushman, Esq., 758 F. Supp. 2d 153, 158 n.4
(E.D.N.Y. 2010) (In deciding a motion to dismiss, the Court may, in addition to the complaint, consider
documents incorporated by reference into the complaint as well as "documents submitted by the parties
which are matters of public record or which are deemed included in the Complaint."), aff'd, 443 F. App'x
582 (2d Cir. 2011).
2
Ditech notes that Green Tree changed its name to Ditech effective August 31, 20 15, see Ditech
Memorandum of Law in Support at n.1, DE [30], a change acknowledged by Plaintiff in the complaint.
See Compl. ~18 ("Green Tree (which is now Ditech) ... ").

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Complaint, indicates that the nature of the action is a Real Property- Mortgage Foreclosure, and
purports to seek a "Residential Mortgage Foreclosure Settlement Conference." Lastorino Decl.
Ex. D. Green Tree is designated as the Plaintiff, but there is no language identifying it as the
"creditor."
In the Foreclosure Action, Green Tree seeks inter alia that the mortgaged premises be
sold, that plaintiff be paid monies owed from the proceeds of the sale, and that Aaron Cohen "be
adjudged to pay any deficiency which may remain." Foreclosure Compl., Wherefore Cl.

B. Complaint in This Action
The complaint in the case before this Court alleges a single cause of action for violations
oftwo sections ofthe FDCPA. Under §1692e, "[a] debt collector may not use any false,
deceptive, or misleading representation or means in connection with the collection of any debt."
15 U .S.C. § 1692e. Section 1692g provides in pertinent part as follows:
(a) Within five days after the initial communication with a consumer in
connection with the collection of any debt, a debt collector shall, unless the
following information is contained in the initial communication or the consumer
has paid the debt, send the consumer a written notice containing
(2) the name of the creditor to whom the debt is owed
15 U.S.C. §1692g(a)(2).
The basis of Plaintiffs complaint is that the creditor to whom the debt was owed at the
time ofthe filing ofthe foreclosure complaint was Fannie Mae, not Green Tree. Compl. ~~2122. Plaintiff claims that defendants violated § 1692e in that they "falsely stated that Green Tree
Loan Servicing LLC was the creditor to whom the Plaintiffs debt ... was owed when, in fact,
Green Tree Servicing, LLC was not the creditor to whom the Plaintiffs debt ... was owed."
Compl. ~31. In addition, after making an "initial communication," neither Rosicki nor Green

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Tree advised Plaintiff of the "correct name of the creditor to whom the debt is owed." Compl.
~33.

II. LEGALSTANDARDS
Defendants seek dismissal of the action pursuant to Rule 12(b)(6) for failure to state a
claim upon which relief can be granted. The standards for analyzing a motion to dismiss are
well-established. The court must accept the factual allegations in the complaints as true and
draw all reasonable inferences in favor ofthe plaintiff. Lundy v. Catholic Health Sys. of Long

Island Inc., 711 F.3d 106, 113 (2d Cir. 2013) (citations omitted). The court determines "whether
the 'well-pleaded factual allegations,' assumed to be true, 'plausibly give rise to an entitlement to
relief."' Hayden v. Paterson, 594 F.3d 150, 161 (2d Cir. 2010) (quoting Ashcroft v. Iqbal, 556
U.S. 662, 679 (2009)). "The plausibility standard is not akin to a probability requirement, but it
asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S at
678 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
The determination of "whether a complaint states a plausible claim for relief' is a
"context-specific task that requires the reviewing court to draw on its judicial experience and
common sense." Iqbal, 556 U.S at 679. A pleading that does nothing more than recite bare
legal conclusions, however, is insufficient to "unlock the doors of discovery." Iqbal, 556 U.S. at
678-679; see also Twombly, 550 U.S. at 555 (holding that a "formulaic recitation "formulaic
recitation of cause of action's elements will not do. Factual allegations must be enough to raise
a right to relief above the speculative level."). While Rule 8 does not require "detailed factual
allegations," it does require more than an "unadorned, the-defendant-unlawfully-harmed-me
accusation." Id at 678 (citing Twombly, 550 U.S. at 555).

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III. DISCUSSION
The FDCP A was enacted "with the aim of eliminating abusive practices in the debt
collection industry." Jacobson v. Healthcare Fin. Servs., Inc., 516 F.3d 85, 89 (2d Cir. 2008)
(quoting 15 U .S.C. § 1692e). This legislation and its history "emphasize the intent of Congress
to address the previously common and severe problem of abusive debt collection practices and to
protect unsophisticated consumers from unscrupulous debt collection tactics." Ehrich v. Credit
Prot. Ass 'n, L.P., 891 F. Supp. 2d 414,415 (E.D.N.Y. 2012) (citations omitted). The FDCPA
"focuses on regulating interactions between 'debt collectors' and 'consumers."' Ellis v. Solomon
and Solomon, P.C., 591 F.3d 130, 134 (2d Cir. 2010). To establish a claim under the FDCPA, a
plaintiff must establish that: (1) he is a person who was the object of efforts to collect a consumer
debt; (2) the defendant is a "debt collector"; and (3) the defendant has engaged in some act or
omission in violation ofthe FDCPA's requirements. See Scaturro v. Northland Grp., Inc., 16cv-1314, 2017 WL 415900, at* (E.D.N.Y. Jan. 9, 2017).
The threshold question here is whether the communications at issue, filings during a
foreclosure action, constitute an attempt to collect a debt within the meaning of the FDCPA.
The FDCP A defines "debt" as "any obligation or alleged obligation of a consumer to pay money
arising out of a transaction in which the money, property, insurance, or services which are the
subject ofthe transaction are primarily for personal, family, or household purposes, whether or
not such obligation has been reduced to judgment." 15 U.S.C. § 1692a(5). While the note is a
debt, the mortgage "'is a type of security interest with real property as the collateral,' that a
lender can take if a debtor does not fulfill a payment obligation; it 'is not a promise to pay a
debt."' Hill v. DLJ Mortg. Capital, Inc., 15-CV-3083, 2016 WL 5818540, at *7 (E.D.N.Y. Sept.
30, 2016) (quoting Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1216 (11th
Cir. 2012)). In other words, "[t]he note represents the primary personal obligation ofthe

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mortgagor, and the mortgage is merely the security for such obligation." Copp v. Sands Point
Marina, Inc., 17 N.Y.2d 291,293,217 N.E.2d 654,270 N.Y.S.2d 599 (1966).

In recognition of this distinction, a holder of a note secured by a mortgage has two
remedies under New York law: "one at law in a suit on the debt as evidenced by the note, the
other in equity to foreclose the mortgage." Copp, 17 N.Y.2d at 293; see also Westnau Land
Corp. v. US. Small Bus. Admin., 1 F.3d 112, 115 (2d Cir. 1993) ("under New York law, a

creditor is required to elect between the remedies of an action for money damages on a debt or an
equitable action to foreclose a mortgage that secures the debt."); Wells Fargo Bank, NA. v.
Goans, 136 A.D.3d 709, 24 N.Y.S.3d 386 (2d Dep't N.Y. App. Div. 2016) ("Where a creditor

holds both a debt instrument and a mortgage which is given to secure the debt, the creditor may
elect either to sue at law to recover on the debt, or to sue in equity to foreclose on the
mortgage."). It is also clear that under New York law, a mortgage foreclosure is an equitable
remedy and an action seeking that relief is equitable in nature. See 4 B 's Realty 1530 CR39, LLC
v. Toscano, 818 F. Supp. 2d 654,659 (E.D.N.Y. 2011); see also Notey v. Darien Constr. Corp.,

41 N.Y.2d 1055, 364 N.E.2d 833, 396 N.Y.S.2d 169 (1977) ("An action to foreclose a mortgage
is, of course, in equity).
Courts in this Circuit that have considered whether actions taken within a foreclosure
action constitute debt collection "have held that 'the enforcement of a security interest through
foreclosure proceedings that do not seek monetary judgments against debtors is not debt
collection for purposes ofthe FDCPA.'" Hill, 2016 WL 5818540, at *7 (quoting Boydv. JE.
Robert Co, No. 05-CV-2455, 2013 WL 5436969, at *9 (E.D.N.Y. Sept. 27, 2013), aff'd on other
grounds, 765 F.3d 123 (2d Cir. 2014)). This Court agrees with this reasoning. Here, Green Tree

elected to commence an action to foreclose on the mortgage and the "communications" at issue

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were made in the context of enforcing its security interest. As such, there was no attempt to
enforce a debt actionable under the FDCP A.
Plaintiff argues that the Foreclosure Action does seek a money judgment on the "debt"
because it seeks a deficiency judgment against Cohen in the event that the proceeds of the sale of
the mortgaged property are insufficient to satisfy the amount owed. Article 13 of the Real
Property Actions and Proceedings Law ("RP APL") governs actions to foreclose a mortgage in
New York. It expressly provides that a final judgment in a foreclosure action may include a
deficiency judgment against the person liable for the debt secured by the mortgage "of the whole
residue, or so much thereof as the court may determine to be just and equitable, of the debt
remaining unsatisfied, after a sale of the mortgaged property and the application ofthe
proceeds." RP APL § 13 71 ( 1). Plaintiff cites no case law to support the inference that this
provision somehow affects the nature of the Foreclosure Action or changes it from an equitable
proceeding to one at law. Indeed, such a result would violate New York's election of remedies
framework. See Boydv. Jarvis, 74 A.D.2d 937,937,426 N.Y.S.2d 142 (3rd Dep't 1980)
(rejecting plaintiffs' attempt to commence a second action at law and noting that as they had
elected to proceed in equity by seeking foreclosure, they should have sought a deficiency
judgment in the foreclosure action); see also Wyoming Cty. Bank & Trust Co. v. Kiley, 75
A.D.2d 477, 481, 430 N.Y.S.2d 900, 903 (41h Dep't 1980) ("when a mortgage-secured creditor
commences an equitable action to foreclose its mortgage, the action does not result in a 'money
judgment"').
In any event, under the facts presented in this case, the Court finds that the purposes of
the FDCPA are not furthered by continuation of this action. Acknowledging the procedures and
protections available in bankruptcy court, the Second Circuit has noted that given that "the

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FDCPA's purpose is to protect unsophisticated consumers from unscrupulous debt collectors,
that purpose is not implicated when a debtor is instead protected by the court system and its
officers." Simmons v. Roundup Funding, LLC, 622 F.3d 93, (2d Cir. 2010) (internal quotation
and citation omitted). Applying the same reasoning, a District Court in Connecticut analyzed
Connecticut law and determined that "mortgagors in a foreclosure proceeding likewise do not
need protection from abusive collection methods that are covered under the FDCPA because the
state foreclosure process is highly regulated and court controlled." Derisme v. Hunt Leibert
Jacobson P.C., 880 F. Supp. 2d 311, 327 (D.Conn. 2012). The same rationale is applicable to
foreclosure proceedings in New York courts.
In the aftermath of the mortgage foreclosure crisis, New York passed the Foreclosure
Prevention and Responsible Lending Act which strengthened and added protections for
borrowers in jeopardy of losing their homes. Stronger notice provisions were implemented,
covering a variety of circumstances and intending to protect borrowers. See RP APL § 1303
(requiring "Help for Homeowners in Foreclosure" notice); RP APL § 1304 (requiring additional
notices in connection with subprime or non-traditional home loans); RPAPL §1320 (requiring a
special summons in actions to foreclose a mortgage on private residences). Certain filings with
the Superintendent of Financial Services are also required. See RP APL § 1306. The parties are
now required to participate in mandatory, court-supervised settlement proceedings at which they
are required to "negotiate in good faith to reach a mutually agreeable resolution, including but
not limited to a loan modification, short sale, deed in lieu of foreclosure or any other loss
mitigation, if possible." RPAPL § 3408. The New York court system can amply protect
borrowers from any allegedly unscrupulous actions taken in the foreclosure proceeding.

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Accordingly, the purposes ofthe FDCPA are not implicated, especially where all the allegedly
impermissible conduct occurred within the context of the foreclosure proceeding.

IV. CONCLUSION
Both Defendants' motions to dismiss are granted, and the case is closed.
SO ORDERED.
I

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LEONARD D. WEXLER
UNITED STATES DISTRICT JUDGE
Dated: Central Islip, New York
March 24, 2017

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