Nials et al v. Bank of America, N.A. et al
Filing
32
ORDER granting 7 Motion to Dismiss; granting in part and denying in part 13 Motion to Dismiss; denying 22 Motion to Remand to State Court. The Plaintiffs' motion to remand is DENIED. The FDIC's motion to dismiss is GRANTED. Bank of Am erica's and the JP Morgan Defendant's motions to dismiss are GRANTED IN PART as to Plaintiffs' RICO, FCRA, TILA, and RESPA claims, and are DENIED IN PART as to Plaintiffs' state law claims, without prejudice to raise the arguments made in the motions to dismiss in the future following the Court's assessment of whether jurisdiction over Plaintiffs' state law claims is appropriate in this Court. This decision resolves docket numbers 7, 13, 20, and 22. (Signed by Judge Alison J. Nathan on 3/21/2014) (ajs)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#: _ _ _ _ _ __
----------------------------------------------------------------------)(
DATE FILED:MAR
2 i 2014
SHAMAINE D. NIALS and MATTHEW A. NIALS
Plaintiffs,
13 Civ. 5720 (AJN)
-v-
BANK OF AMERICA, ET AL.
Defendants.
MEMORANDUM AND
ORDER
---------------------------------------------------------------------- )(
ALISON J. NATHAN, District Judge:
The Court has before it four motions to resolve in this matter. First, the Defendant
Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, ("FDIC")
moves to dismiss the claims against it based on this Court's lack of jurisdiction. Second,
Defendant Bank of America, N.A., moves to dismiss the Complaint for failure to state a claim
upon which relief can be granted. Third, Defendants JPMorgan Chase Bank, N .A.
("JPMorgan"), Federal National Mortgage Association, and Mortgage Electronic Registrations
Systems, Inc. (collectively, the "JP Morgan Defendants") have filed a copy of their state court
motion to dismiss, and Plaintiffs' opposition to that motion, and ask that it be considered in this
matter. Finally, Plaintiffs, proceeding prose, move to remand this matter to the Supreme Court
of New York, County of Orange.
I.
BACKGROUND
A. Allegations in Plaintiff's Complaint
1. Factual Allegations
This litigation concerns certain real property located in Middletown, New York, to which
Plaintiffs claim title. (Compl.
iii! 3-4).
In general terms, Plaintiffs contend that they are the
"lawful homeowners" of this property (Com pl.~ 11) and that the various Defendants have
unlawfully asserted ownership interests in the property.
The exact alleged roles and activities of the Defendants in this litigation are difficult to
discern from the allegations of the Complaint, but the crux of Plaintiffs' claims is that one or
more mortgages to their property have been issued by or are held by one or more of the
Defendants and subsequently "securitized," resulting into a '"note' bearing the MIN#: 10001590218303010-3 ."
(Compl.~~5,
11, 17-18). Specifically,Plaintiffsassertthatthe"alleged
originating 'mortgage lender' and others alleged to have ownership of plaintiffs mortgage and
note have unlawfully sold, assigned and/or transferred their ownership and security interests in
the Promissory Note and Mortgage related to the property in a secretive securitization
bargain/arrangement, and thus no longer have any cognizable legal or equitable interest in
plaintiffs home."
(Campi.~
11). Plaintiffs describe "'[s]ecuritization' [a]s the process whereby
'mortgage loans' are turned into securities, or bonds, and sold to investors by parties
participating in different capacities defined in a document known as [a] pooling and servicing
agreement" and characterize it as a "deceptive venture" intended to provide a "gigantic pool of
money to the parties participating" and those who buy into the venture.
(Campi.~~
17-18).
To the extent that the Complaint provides a specific theory as to how the securitization of
Plaintiffs' mortgage loans divested the Defendants of an interest in the property, Plaintiffs allege
that "[t]he loans ... were pooled together and then dumped inside a tax-free arrangement which
must remain 'bankruptcy remote' more specifically known as Real Estate Investment Conduct
(herein after, 'REMIC')." (Campi.
~
19). They claim that, for the IRS to recognize this tax-free
status, "the pooling parties must strictly adhere to the procedure of 'selling the loans' by
conveying 'without recourse' wherein the party who conveys any alleged interest it held to the
2
REMIC TRUST was forbidden from returning to assert any claims legal or equitable in the said
security interest in a process of false recoupment." (Compl.
~
20; see also Compl.
~~
29-30).
They further allege, for example, that Defendants
[swore] under oath with the Securities and Exchange Commission ("SEC") and
the Internal Revenue Service ("IRS"), that defendants ... as mortgage asset 'pass
through' entities,' wherein they can never own the mortgage loan assets in the
MBS, allows them to qualify as a Real Estate Mortgage Investment Conduit
("REMIC") rather than an ordinary Real Estate Investment Trust ("REIT").
(Compl.
~
56). In short, it appears that Plaintiffs allege that, by virtue of being pooled in a
REMIC, the Defendants sold these mortgage loans or otherwise surrendered their interest in
them.
2. Claims
Plaintiffs' Complaint distinctly brings four causes of action. As their First Cause of
Action, Plaintiffs assert a claim for "Predicate/overt acts within the civil RICO laws" and
"Violations of Civil RICO, 18 U.S.C. § 1961 et seq." (Complaint at 10, 17). Plaintiffs' three
other causes of action are for, respectively, "Defamation of Credit," "Violations of New York
State Consumer Fraud Act," and "Conspiracy to Defraud." (Compl. at 14-15). Construing the
Complaint liberally, the Court understands Plaintiffs to be asserting causes of action for a civil
violation of the Racketeer Influenced Corrupt Organizations Act, particularly under 18 U.S.C. §
1962(a); a violation of the Fair Credit Reporting Act ("FCRA"); violations of New York General
Business Law§ 349; and conspiracy to defraud. (See Compl. at 5, 10, 14-15, 17).
In addition to these four claims, Plaintiffs also recite a laundry list of other alleged legal
violations by the Defendants:
Quiet Title to property named in this action, Fraudulent/Unconscionable bargain,
Fraud in factum, Fraud in the Concealment, Fraud in the Inducement, Intentional
Infliction of Emotional Stress, Asserting claims to the title of property in this
action by false pretenses, slander of title, malicious dispossession of private
3
property, Declaratory Relief, Violations of TILA, Violations of RESP A,
Re[ s]cission, Deceptive Bargaining & Fiduciary Malfeasance, Deceptive trade
practices in violation ofN.Y. GBS § 349.
(Compl. at 5). Subsequent portions of Plaintiffs' Complaint suggest that they intend to
assert at least some of these causes of action, notwithstanding that they have not pleaded
them with the utmost clarity. For example, Plaintiffs allege that they "bring causes of
action against all named defendants for fraud, intentional infliction of emotional stress,
rescission, declaratory relief and violations of T.I.L.A. and R.E.S.P.A., upon the facts and
circumstances surrounding Plaintiffs original loan transactions [and] its subsequent
securitization." (Compl.
~
12). Likewise, due to these alleged violations they ask the
Court to "quiet title" in their property and award other relief. (Compl.
~
13). Beyond
listing these causes of action and referring generally to the allegations discussed above,
however, Plaintiffs do little to suggest the basis for these claims.
3. Procedural History
Plaintiffs filed this litigation in the Supreme Court of New York, County of Orange. On
August 15, 2013, the FDIC removed the case to this Court pursuant to 12 U.S.C. § 1819(b)(2)(B)
and 28 U.S.C. §§ 1331, 144l(a) and, on August 22, 2013, the FDIC and Bank of America filed
the motions to dismiss referenced above. In response, the Court ordered that Plaintiffs would be
allowed to amend their Complaint to correct any deficiencies raised by the motions to dismiss
and that, if they failed to do so, they would not be provided a further opportunity to amend to
address the issues raised in those motions. (Dkt. No. 17). On September 3, 2013, the JPMorgan
Defendants submitted a letter attaching briefing that they had submitted in New York State
Court, and a copy of Plaintiffs' opposition to that motion. (Dkt. No. 20). They asked that the
Court consider these papers as a fully briefed motion to dismiss. (Dkt. No. 20).
4
Rather than amend their Complaint or respond directly to the motions to dismiss,
Plaintiffs elected to file a motion to remand on September 11, 2013. (Dkt. No. 22). To ensure
that Plaintiffs were aware of the motions to dismiss and had an opportunity to amend their
Complaint or otherwise respond to these motions, the Court issued an order on October 15, 2013,
extending their time to respond. (Dkt. No. 28). Plaintiffs did not amend their Complaint, but did
submit a reply brief in support of their request that the case be remanded. (Dkt. No. 29).
Because Plaintiffs failed to avail themselves of the opportunity to amend their Complaint, to the
extent that the Court dismisses their claims, it does so with prejudice.
II.
MOTION TO REMAND
Plaintiffs move to remand this litigation to state court. Their primary contention-
articulated in several different ways-is that the Court lacks subject matter jurisdiction because
their quiet title claim and the validity of any assignments or mortgages at issue in this litigation
are governed by state law. (Mot. to Remand~~ 1-2, 6-12, 17-21). This Court, however, has
subject matter jurisdiction under 28 U.S.C. § 1331 both because the Court construes Plaintiffs'
Complaint as raising claims under federal law, including RICO, TILA, RESP A, and the FCRA,
and also because the FDIC is a party. See 12 U.S.C. § 1819(b)(2)(A) ("[A]ll suits of a civil
nature at common law or in equity to which the [FDIC], in any capacity, is a party shall be
deemed to arise under the laws of the United States."). That Plaintiffs also raise state law claims
does not preclude this Court from hearing this litigation because the existence of subject matter
jurisdiction over the federal claims in this matter empowers the Court to hear related state law
claims under 28 U.S.C. § 1367. See Russell v. Crossland Sav. Bank, 111F.3d251, 256 (2d Cir.
1997) (noting that federal questionjurisdiction based on 12 U.S.C. § 1819(b)(2) complies with
Article III of the Constitution and also that 28 U.S.C. § 1367(a) provides for supplemental
5
jurisdiction over state law claims in these circumstances); cf also Tamir v. Bank of N. Y. Mellon,
No. 12-cv-4780, 2013 U.S. Dist. LEXIS 122033, at *17-18 (E.D.N.Y. Aug. 27, 2013) (noting, as
an alternative to the court's decision, that the court would not exercise supplemental jurisdiction
over a quiet title action in the absence of a viable federal or state law claim). 1
Plaintiffs also argue that they did not consent to removal of this action and that not all
Defendants have consented to removal. (Mot. to
Remand~~
11, 14-16). As to the former point,
Plaintiffs' consent is not necessary to remove an action from state court to federal court. See 28
U.S.C. §§ 1441(a), 1446; 12 U.S.C. § 1819(b)(2)(B). As to the latter point, the Court construes
this as an argument that Defendants' unanimous consent for removal was not obtained pursuant
to 28 U.S.C. § 1446(b)(2). However, because this matter was removed pursuant to 12 U.S.C. §
18 l 9(b)(2)(B), such consent is not required. See Franklin Nat'! Bank Sec. Litigation v.
Andersen, 532 F.2d 842, 846 (2d Cir. 1976); Castrillo v. City of New York, 19 F. Supp. 2d 174,
175 (S.D.N. Y. 1998).
The remainder of Plaintiffs' arguments are also meritless. First, they contend that the
removal statute should be strictly construed, and all doubts should be resolved in favor of
remand. (Mot. to Remand ~13). While an accurate statement of the law, see Purdue Pharma
L.P. v. Kentucky, 704 F.3d 208, 220 (2d Cir. 2013), because jurisdiction here is clear, it does not
justify remand. Finally, Plaintiffs attack the attorney affirmations submitted in this matter as
"void, conclusory hearsay." (Mot. to
Remand~
22). The Court's decision to deny the motion to
1
Plaintiffs quote at length from American Ins. Co. v. 356 Bales of Cotton, 26 U.S. 511, 546 (1828) in arguing that
jurisdiction does not comply with the Constitution. The above analysis suffices to demonstrate the statutory and
constitutional basis for federal question jurisdiction. The quoted pmtion of 356 Bales of Cotton is not pe1tinent as it
was referring to courts created by a territorial legislature, not the jurisdiction of A1ticle III federal comts, and
whether those Comts could be vested with admiralty jurisdiction.
6
remand, however, is based on the allegations of Plaintiffs' Complaint, not these attorney
affirmations.
III.
MOTION TO DISMISS FOR LACK OF JURISDICTION
The FDIC moves to dismiss the claims against it for lack of jurisdiction under Federal
Rule of Civil Procedure 12(b)( 1). A case is properly dismissed under Rule 12(b)( 1) where the
district court lacks the statutory or constitutional power to adjudicate it. Brady v. Int'l Bhd. of
Teamsters, Theatrical Drivers & Helpers Local 817, 741F.3d387, 389 (2d Cir. 2014). "The
plaintiff bears the burden of proving subject matter jurisdiction by a preponderance of the
evidence." Liranzo v. United States, 690 F.3d 78, 84 (2d Cir. 2012) (quotation marks omitted).
A. Facts
The FDIC's involvement in this action is based on its status as Receiver for Washington
Mutual Bank ("WaMu"). (See, e.g., Compl. at 4; see also FDIC Mot. at 3-4). As noted above,
the Complaint is not abundantly clear as to the precise roles of the various Defendants, including
WaMu, but it appears that WaMu originated a mortgage loan for the Plaintiffs' property on or
about March 2002, prior to its failure and receivership. (Compl. Ex. A (deed of sale dated March
8, 2002); Comp!. Ex. B; Comp!. Ex. C (Purchase and Assumption Agreement between the FDIC
and JPMorgan as to assets ofWaMu); cf Nelson Deel. Ex. C (notice of claim); FDIC Mot. at 5).
On September 25, 2008, the Office of Thrift Supervision declared WaMu insolvent and
appointed the FDIC as Receiver for the failed institution. (Nelson
Deel.~
3 & Ex. A). On the
same day, the FDIC sold WaMu's assets and certain designated liabilities to JPMorgan pursuant
to a Purchase and Assumption Agreement ("P&A Agreement"). 2 (Nelson Deel.~ 4).
In
particular, that agreement provided:
2
A partial copy of this agreement is attached to Plaintiffs' Complaint as Exhibit C, and is found in full on the
FDIC's website at . (Nelson Deel. at~ 4).
7
2.5 Borrower Claims. Notwithstanding anything to the contrary in this
Agreement, any liability associated with borrower claims for payment of or
liability to any borrower for monetary relief, or that provide for any other form of
relief to any borrower, ... related in any way to any loan or commitment to lend
made by [WaMu] prior to failure ... or otherwise arising in connection with the
[WaMu] lending or loan purchase activities are specifically not assumed by
[JPMorgan].
(P&A Agreement § 2.5). The agreement also provided for certain liabilities and
obligations assumed by JPMorgan, including that it "specifically assumes all mortgage
servicing rights and obligations of [WaMu]." (P&A Agreement§ 2.1 ).
The FDIC's Claims Office then prepared and published in several major newspapers a
"Publication Notice to Creditors and Depositors of Washington Mutual Bank, Henderson, NV"
setting forth the requirement that claims against WaMu be submitted to the FDIC no later than
December 30, 2008. (Nelson
Deel.~
5 & Ex. B). After Plaintiffs filed this lawsuit, the FDIC
also mailed them a "Notice to Discovered Creditor to Present Proof of Claim" which explained
that, although the claims bar date had passed, the FDIC "may" consider their claim if they
submitted a Proof of Claim no later than October 15, 2013. (Nelson Deel.
~
6 & Ex. C).
Plaintiffs have not alleged, submitted any evidence, or made any representation that they have
filed a Proof of Claim and, at least as of August 22, 2013, the filing date of the FDIC's motion to
dismiss, they had not done so. (Nelson
Deel.~
8).
B. The Borrower Claims
Based on these facts, the FDIC's argument proceeds in two parts. First, they contend
that, as to the Borrower Claims, the FDIC is the only proper defendant and, in particular, that
JPMorgan may not be held liable on these claims. Second, the FDIC argues that no court can
exercise jurisdiction over the Borrower Claims because Plaintiffs did not comply with the
mandatory administrative claims process.
8
1. The FDIC is the proper defendant as to the Borrower Claims
As to the first part of the FDIC's argument, the Court agrees that, to the extent that the
Complaint seeks to impose liability in connection with WaMu's pre-failure lending activities, it
is the FDIC, not JPMorgan, who is the proper defendant. Numerous courts have analyzed
precisely the P&A Agreement that governs the allocation ofliability in this case and have held
that the FDIC is the proper defendant under these circumstances; the Court agrees with these
decisions. See, e.g., Yeomalakis v. FDIC, 562 F.3d 56, 60 (1st Cir. 2009) ("When Washington
Mutual failed, Chase Bank acquired many assets but its agreement with the FDIC retains for the
FDIC 'any liability associated with borrower claims for payment of or any liability to any
borrower for monetary relief, or that provide for any other form of relief to any borrower."');
JPMorgan Chase Bank, NA. v. Nell, No. 10-cv-1656, 2012 U.S. Dist. LEXIS 42173, at *10-11
(E.D.N.Y. Mar. 27, 2012); Diez v. Wash. Mut. Bank, No. 09-cv-2390, 2012 U.S. Dist. LEXIS
23335, at *9-10 (E.D.N.Y. Feb. 23, 2012); Caires v. JP Morgan Chase Bank, 745 F. Supp. 2d
40, 49-50 (D. Conn. 2010); Cassese v. Washington Mut., Inc., No. 05-cv-2724, 2008 U.S. Dist.
LEXIS 111709, 5-7 (E.D.N.Y. Dec. 22, 2008); cf also 12 U.S.C. § 1821(d)(2)(A)(i) (providing
that, as Receiver, the FDIC succeeds to the rights, titles, powers, and privileges of the insured
depository institution).
Thus, to the extent that Plaintiffs' claims relate to WaMu's pre-failure lending activities,
they must be asserted against the FDIC, not JPMorgan. 3 However, a liberal interpretation of
Plaintiffs' Complaint suggests that Plaintiffs have attempted to plead claims against JPMorgan in
3
Although the inartful pleading of the Complaint makes determining which claims assert liability for Borrower
Claims difficult, the Court notes that the RICO, NY GBL § 349, RESPA, TILA, and various fraud claims appear, at
least in part, directed toward such pre-failure lending activity. Ascertaining this point with certainty is complicated
by the Plaintiffs' failure to plead facts to supp01t many of these claims, but that issue relates to Plaintiffs' failure to
state a claim rather than the jurisdictional question the Court is presently discussing.
9
connection with JPMorgan's subsequent servicing of the mortgage and related activities. Such
claims include at least Plaintiffs' slander of title claim, and their claims under the FCRA and
RICO based on Defendants' allegedly false assertions that the Defendants hold an interest in the
Plaintiffs' property. It does not appear that any party argues that the FDIC is the proper
defendant for claims that do not arise from WaMu's pre-failure lending activity or asserts a
plausible basis for such liability. See, e.g., Caires, 745 F. Supp. 2d at 49-50 ("In considering the
Complaint pursuant to Rule l 2(b )(1 ), the Court must ... distinguish between claims relating to
lending activities as distinguished from claims relating to mo1tgage servicing."); cf Nell, 2012
U.S. Dist. LEXIS 42173, at *14-22 (dismissing borrower claims for lack of jurisdiction against
the FDIC due to failure to exhaust the claims process and dismissing non-borrower state law
claims in its discretion not to hear such claims under supplemental jurisdiction).
As such, the Court reaches the following three conclusions. First, to the extent that
Plaintiffs assert Borrower Claims against JPMorgan, these claims are improper and must be
dismissed. Second, to the extent that Plaintiffs assert claims against JPMorgan based on its later
activities in servicing of Plaintiffs' mortgage loans, it does not appear that the P&A Agreement
renders the FDIC, rather than JPMorgan, the proper defendant for those claims. The Court will
address below the motions to dismiss as to these claims. Third, the FDIC is the proper defendant
as to the Borrower Claims and, in addition, the Complaint does not appear to state any basis for
the FDIC's liability independent of the Borrower Claims or its status as Receiver for WaMu.
The Court will now turn to the question of whether the Plaintiffs may bring these Borrower
Claims against the FDIC.
2. This Comt cannot review the Borrower Claims against the FDIC
10
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
established a comprehensive scheme governing the FDIC's authority and powers as Receiver,
including a mandatory administrative claims process for filing and resolving claims against a
failed depository institution. See 18 U.S.C. § 1821 (d)(3)-(13); Resolution Trust Corp. v. Elman,
949 F.2d 624, 627 (2d Cir. 1991); Nell, 2012 U.S. Dist. LEXIS 42173, at* 14-15. In particular,
courts lack jurisdiction over all claims against the failed institution unless jurisdiction is
authorized by virtue of exhaustion of the claim through the mandatory claims process. See 12
U.S.C. § 1821(d)(13)(D) (limiting judicial review); id.§ 1821(d)(6)(A) (providing for agency
review of claims); Resolution Trust Corp., 949 F.2d at 627 (explaining that "a claimant must first
present its case to the RTC under the administrative procedure erected by FIRREA before
seeking relief in the federal courts"); Constas v. JP Morgan Chase Bank, NA, No. 11-cv-00032,
2012 U.S. Dist. LEXIS 85339, at *7-13 (D. Conn. June 20, 2012); Nell, 2012 U.S. Dist. LEXIS
42173, at *14-15 ("The FIRREA, at 12 U.S.C. § 182l(d)(13)(D), deprives courts of subject
matter jurisdiction over claims against an institution in FDIC receivership until the claimant
complies with a mandatory statutory claims procedure."). Notwithstanding that the FDIC
published notices in several newspapers and sent a notice directly to the Plaintiffs of this claims
process, it does not appear that Plaintiffs exhausted their claims against the FDIC. Nell, 2012
U.S. Dist. LEXIS 42173, at *17-18 (noting that it is plaintiffs burden to prove jurisdiction).
These claims are, therefore, not subject to the jurisdiction of this Court.
In the alternative, as the FDIC also notes, even if Plaintiffs had complied with the
mandatory claims procedure, this Court would not have jurisdiction over the claims against the
FDIC. This is because those claims can only be brought in the United States District Court for
the District of Columbia or the district court in which WaMu maintained its principal place of
11
business-the Western District of Washington. (Nelson
Deel.~
3). See 12 U.S.C. §
l 821(d)(6)(A); Jqffe v. Capital One Bank Servs., No. 09-cv-4106, 2010 U.S. Dist. LEXIS 18117,
at *7 (S.D.N.Y. Mar. 1, 2010). Moreover, FIRREA also precludes this Court from granting
equitable relief or punitive damages. See 18 U.S.C. §§ 1821 G), 1825(b)(3); Volges v. Resolution
Trust Corp., 32 F.3d 50, 53 (2d Cir. 1994); Cassese, 711 F. Supp. 2d at 273.
Because the only arguable basis for claims against FDIC revealed by the Complaint is its
status as Receiver for WaMu, the discussion above is fatal to the claims against that institution.
The claims against the FDIC are dismissed.
IV.
MOTIONS TO DISMISS FOR FAILURE TO STATE A CLAIM
Bank of America and the JPMorgan Defendants each submit motions to dismiss the
Complaint in its entirety. For the reasons discussed below, the Court dismisses the claims
arising under federal law, but does not reach the merits of the state law claims at this time.
A. Legal Standard
In deciding a motion to dismiss pursuant to Rule 12(b)(6), the allegations in the
complaint are accepted as true and all reasonable inferences must be drawn in favor of the nonmoving party. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). To
survive a motion to dismiss for failure to state a claim, the Plaintiff must plead "enough 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 conduct alleged."
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In considering a motion to dismiss for failure to
state a claim pursuant to Rule 12(b)( 6), a district court may consider "the facts alleged in the
12
complaint, documents attached to the complaint as exhibits, and documents incorporated by
reference in the complaint." DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010).
"[A] pro se complaint is entitled to a particularly liberal reading," Lopez v. Jet Blue
Airways, 662 F.3d 593, 596 (2d Cir. 2011), and is construed "to raise the strongest arguments
that [it] suggest[s]." Chavis v. Chappius, 618 F. 3d 162, 170 (2d Cir. 2010) (internal quotation
marks and citation omitted) (alteration in original)). However, prose submissions are not
exempted from the plausibility standard set forth in Iqbal and Twombly. See Hill v. Curcione,
657 F.3d 116, 122 (2d Cir. 2011). Moreover, the Court does not assume legal conclusions are
true and "threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice." Harris v. Mills, 572 F. 3d 66, 72 (2d Cir. 2009) (quotation marks
omitted).
In this case, Plaintiffs have failed to oppose Defendants' motion to dismiss.
Nevertheless, the Court must still "assume the truth of [the] pleading's factual allegations and
test ... its legal sufficiency." McCall v. Pataki, 232 F. 3d 321, 322 (2d Cir. 2000).
B. Analysis
1.
RICO
Defendants set forth numerous bases to dismiss Plaintiffs' RICO claim, of which the
Court need only consider one: Plaintiffs have failed to adequately plead any predicate RICO
violations because they have failed to meet the heightened pleading standard of Rule 9(b ). 4 In
4
Plaintiffs have not alleged any factual basis for the Comt to conclude that the transactions underlying issuance of
their mortgage loans or the securitization of those mortgage loans were unlawful or constitute a predicate act under
RICO. See, e.g., Rodenhurst v. Bank of Am., 773 F. Supp. 2d 886, 898 (D. Haw. 2011) ("[C]ourts have uniformly
rejected the argument that securitization of a mortgage loan provides the m01tgagor a cause of action."). To the
extent that Plaintiffs invoke 18 U.S.C. § l 962(a) in an effort to claim this case involves an unlawful debt, this
contention is meritless-that term refers debts incurred in connection with unlawful gambling activity or usurious
lending. See 18 U.S.C. § 1961(6).
13
particular, the extent of Plaintiffs' eff01is to plead any predicate acts under RICO is to state in
conclusory terms that the Defendants have fraudulently used the mails or email "to circulate
unfounded claims of' debt,"' have engaged in other acts of fraud in claiming an interest in
Plaintiffs' property, or have fraudulently damaged Plaintiffs' credit by making false reports.
(Comp!.~~
23-33, 49, 53-54, 56).
Plaintiffs' allegations do not meet the heightened pleading standard for claims of fraud.
Cruz v. Fxdirectdealer, LLC, 720 F.3d 115, 120 n.2 (2d Cir. 2013) (noting that Rule 9(b) applies
to RICO claims and requires the plaintiff to state with particularity the circumstances
constituting fraud). "To satisfy this requirement, a complaint must specify the time, place,
speaker, and content of the alleged misrepresentations, explain how the misrepresentations were
fraudulent and plead those events which give rise to a strong inference that the defendant[ ] had
an intent to defraud, knowledge of the falsity, or a reckless disregard for the truth." Cohen v.
S.A.C. Trading Corp., 711F.3d353, 359 (2d Cir. 2013). Plaintiffs' allegations meet none of
these requirements and Plaintiffs' RICO claim is, therefore, dismissed.
2. FCRA
Plaintiffs' claim under FCRA fares no better. Plaintiffs allege that "[a]s a direct result of
Defendants ... filing unfounded foreclosure lawsuits against the [Plaintiffs], they have defamed,
ruined, and irreparably damaged plaintiffs' credit as the lawsuit is a matter of public record" and
that Bank of America "fraudulently report[ ed] unfounded non-payment of mortgage to the
various credit bureaus against [Plaintiffs]."
(Comp!.~~
32-33). The Court construes this as an
attempt to plead a violation of 15 U.S.C. § 1681s-2, which governs the "[r]esponsibilities of
furnishers of information to consumer reporting agencies."
14
Again, this claim is not adequately pleaded. First, as a general matter, Plaintiffs'
allegations amount to little more than a recitation of legal conclusions without any factual
content from which the Court can determine that a plausible claim exists. More particularly,
Plaintiffs have not pleaded in even a conclusory fashion all of the elements of a FCRA violation
under 15 U.S.C. § 168ls-2(b). 5 In particular, Plaintiffs have not pleaded that they contacted a
consumer credit rating agency about any allegedly incorrect reports, that the agency notified any
of the Defendants regarding the dispute, or that Defendants failed to properly investigate. See
LaCourte v. JP Morgan Chase & Co., No. 12-cv-9453, 2013 U.S. Dist. LEXIS 129993, at *30
(S.D.N.Y. Sept. 4, 2013) ("Here, the First Amended Complaint does not allege that LaCourte
ever disputed any item in his file with a credit reporting agency, much less that any defendant
received notice of such a dispute and failed to take appropriate action."); Crawford v. Duncan,
No. l l-cv-3774, 2013 U.S. Dist. LEXIS 48368, at *10-12 (E.D.N.Y. Mar. 25, 2013) (explaining
that § 1681 s-2(b ), which governs the obligations of an entity who furnishes information to a
credit reporting service which is subsequently disputed by the consumer, requires notice of such
a dispute); cf Longman v. Wachovia Bank, NA., 702 F.3d 148, 150-52 (2d Cir. 2012)
(explaining that the district court did not err in denying leave to amend a complaint that did not
allege that the plaintiff had submitted a dispute to a credit reporting agency). As a result,
Plaintiffs have not properly pleaded the elements of a FCRA violation and the Court grants the
motion to dismiss as to this claim.
3. The Truth in Lending Act ("TILA") and Real Estate Settlement Procedures Act
("RESP A")
5
The Second Circuit has held that 15 U.S.C. § 168ls-2(a) does not give rise to a private cause of action. Longman
v. Wachovia Bank, NA., 702 F.3d 148, 151 (2d Cir. 2012).
15
Assuming that Plaintiffs intended to raise TILA and RESP A claims and that their
inclusion of these claims in a laundry list of causes of action is sufficient to do so, see, e.g., In re
Apple REITs Litig., No. 11-cv-2919, 2013 U.S. Dist. LEXIS 48565, at *61-62 n.14 (E.D.N.Y.
Apr. 3, 2013); Moore v. City of New York, No. 08-cv-2449 2011 U.S. Dist. LEXIS 20370, at
*19-20 (E.D.N.Y. Feb. 28, 2011), they have failed to adequately plead these claims. TILA was
enacted to promote the informed use of credit by consumers and assure the meaningful
disclosure of credit terms. See 15 U.S.C. §§ 1601, 1631-l 639h; Maas v. Spencer Leasing Corp.,
2013 U.S. Dist. LEXIS 134426, at *16-18 (E.D.N.Y. Aug. 19, 2013). RESPA was enacted to
provide consumers with timely information about the nature and costs of the real estate
settlement process and protect them from unnecessarily high charges caused by certain abusive
practices. 12 U.S.C. § 2601; Gorbaty v. Wells Fargo Bank, NA., 2012 U.S. Dist. LEXIS 55284,
9-12 (E.D.N.Y. Apr. 18, 2012). A review of the Complaint provides the Court with no basis to
even speculate as to the legal theory on which TILA and RESP A are invoked, let alone a basis to
find that the Complaint pleads facts sufficient to state a plausible claim for relief. These claims
are also dismissed.
4. State law claims
Although, as noted above, the Court has the authority to exercise supplemental
jurisdiction over Plaintiffs' state law claims, if the claims constituting the basis for federal
jurisdiction in an action have been dismissed, the decision whether to exercise such supplemental
jurisdiction is left to the discretion of the Court. See 13 U.S.C. § 1367; Lundy v. Catholic Health
Sys. of Long Island, Inc., 711F.3d106, 117-18 (2d Cir. 2013). Indeed, once the federal claims
in an action have been dismissed and all that remains are state law claims brought pursuant to the
Court's supplemental jurisdiction, courts usually decline to exercise that jurisdiction, considering
16
the values of judicial economy, convenience, fairness, and comity. See id. Moreover, this case
involves a unique circumstance in which the state court to which this action would be returned
has already expended substantial effort to resolve the state law causes of action, and remanding
the case would thus allow for both conservation of resources and the opportunity for the state
court to weigh in on issues of law on which it is an expert. 6
The Court's resolution of the federal causes of action and dismissal of the FDIC have
resolved the jurisdictional basis for maintaining this action in federal court under 28 U.S.C. §
1331. See, e.g., Parker v. Rocco, 252 F.3d 663, 665-66 (2d Cir. 2001); Nell, 2012 U.S. Dist.
LEXIS 42173, at *21-22 (citing Mizuna, Ltd. v. Crossland Fed. Sav. Bank, 90 F.3d 650, 657 (2d
Cir. 1996), and noting that courts in these circumstances also consider whether substantial
judicial resources have been expended, whether resolution is imminent, and whether remand
would facilitate a bald effort to escape an unfavorable outcome). It is unclear, however, whether
diversity jurisdiction exists or whether any adjudication of the remaining claims by this Court
would be pursuant to the Court's supplemental jurisdiction. (See Dkt. No. 1 (Notice of Removal;
Complaint)). Thus, the Court orders that Defendants submit to the Court and serve on Plaintiffs
a letter, no later than April 4, 2014, stating their position on whether this Court has jurisdiction
independent of its supplemental jurisdiction under § 1367 and, if so, the legal basis for this
jurisdiction. No later than April 4, 2014, Plaintiffs may also submit a letter to this Court through
the Pro Se Office addressing this point, if they choose to do so.
6
Due to an error, after the removal of this case to federal court, the judge to whom this case was previously assigned
in New York state court inadvertently issued an opinion disposing of the matter, which was subsequently recalled
due to lack of jurisdiction. (Dkt. Nos. 30-31 ).
17
CONCLUSION
The Plaintiffs' motion to remand is DENIED. The FDIC's motion to dismiss is
GRANTED. Bank of America's and the JP Morgan Defendant's motions to dismiss are
GRANTED IN PART as to Plaintiffs' RICO, FCRA, TILA, and RESPA claims, and are
DENIED IN PART as to Plaintiffs' state law claims, without prejudice to raise the arguments
made in the motions to dismiss in the future following the Court's assessment of whether
jurisdiction over Plaintiffs' state law claims is appropriate in this Court. This decision resolves
docket numbers 7, 13, 20, and 22.
SO ORDERED.
Dated: March --=---' 2014
\
New York, New York
18
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