Aghaeepour et al v. Northern Leasing Systems, Inc. et al
Filing
19
OPINION & ORDER re: 13 MOTION to Dismiss - Notice of Motion to Dismiss the First Amended Complaint filed by Lease Finance Group, LLC, Joseph I. Sussman, P.C., Louis Cucinotta, MBF Leasing, LLC, Joseph I. Sussman, Jennifer Cente no, Northern Leasing Systems, Inc., Jay Cohen, Sara Krieger. For the foregoing reasons, the Defendants' Motion to Dismiss is GRANTED in part and DENIED in part. The following claims have been dismissed: (1) the RICO claims of plaintiffs Gla sgow, Norris, and Moore; (2) all FCRA and NYFCRA claims of plaintiffs Moore and Rivera; (3) the FCRA and NYFCRA claims based on inaccurate reporting of plaintiffs Higgins and Norris; (4) the FCRA and NYFCRA claims based on negligence of plaintiffs Gl asgow, Higgins, Schilber, and Schilco; and (5) the NYFCRA § 380-b claims based on impermissible access of credit repo1ts of plaintiff Schilco. The Clerk of Court is respectfully requested to terminate the pending Motion. (ECF No. 13.) Defendant s shall file an answer on or before January 5, 2016. An initial pretrial conference is scheduled for January 29, 2016 at 12:00 p.m. The parties are directed to bring a completed case management plan to this conference. SO ORDERED. (Signed by Judge Nelson Stephen Roman on 12/1/2015) (mml)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ELAINE AGHAEEPOUR, ASHLEY GLASGOW,
JULIE HIGGINS, SHANE MOORE, MICHELE
NORRIS, JESUS RIVERA, SCHILCO, INC. and
RAY SHILBER,
USDCSDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#:
·
DATE FILED: J .J..f f
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Plaintiffs,
14 CV 5449 (NSR)
-againstOPINION & ORDER
NORTHERN LEASING SYSTEMS, INC., MBF
LEASING, LLC, LEASE FINANCE GROUP, LLC,
LOUIS CUCINOTTA, JENNIFER CENTENO a/k/a
JENNIFER NUGENT, JAY COHEN, SARA
KRIEGER, JOSEPH I. SUSSMAN, and JOSEPH I.
SUSSMAN, P.C.,
Defendants.
NELSONS. ROMAN, United States District Judge:
Elaine Aghaeepour ("Aghaeepour"); Ashley Glasgow ("Glasgow"); Julie Higgins
("Higgins"); Shane Moore ("Moore"); Michele Norris ("Nonis"); Jesus Rivera ("Rivera");
Schilco, Inc. ("Schilco"); and Ray Schilber ("Schilber") (collectively, "Plaintiffs") filed the
instant Complaint against Jay Cohen ("Cohen"); Sara Krieger ("Krieger"); Jennifer Centeno
("Centeno"); Louis Cucinotta ("Cucinotta") (collectively, "Individual Defendants"); Joseph I.
Sussman ("Sussman"); Joseph I. Sussman, P.C. ("Sussman, P.C.") (collectively, "Sussman
Defendants"); Lease Finance Group, LLC ("LFG"); MBF Leasing, LLC ("MBF"); and Northern
Leasing Systems, Inc. ("NLS") (collectively, "Corporate Defendants") (with Individual
Defendants and Sussman Defendants, collectively, "Defendants"), alleging claims under the
federal Racketeer Influenced Conupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962, 1964; the
federal Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 168lb(l:), 1681s-2(b)(A); New York's
Anti-Deceptive Trade Practices Act ("NYFCRA"), N.Y. Gen. Bus. Law§§ 349, 380; and
common law fraud (See First Am. Compl. (“Compl.”), ECF No. 6.) Before the Court is
Defendants' Motion To Dismiss the Complaint pursuant to Federal Rules of Civil Procedure 8(a),
9(b), and 12(b)(6). (See Motion to Dismiss, ECF No. 13.) For the following reasons, Defendants'
Motion is granted in part and denied in part.
BACKGROUND
The following facts are drawn from Plaintiffs' Complaint and are taken as true for the
purposes of resolving the instant Motion. This action stems from Defendants’ racketeering
scheme to “intimidate out-of-state individuals into paying unwarranted sums of money by
commencing (or threatening) fraudulent lawsuits in New York City Civil Court” based on forged
documents. (Compl. ¶ 1.) In furtherance of this scheme, Defendants also made inaccurate entries
on and improperly accessed Plaintiffs’ credit reports. (Id. ¶ 2.)
Defendant NLS is in the business of financing equipment leases and manages and
operates the other Corporate Defendants, LFG and MBF. (Id. ¶ 14.) LFG and MBF are
subsidiaries of NLS. (Id. ¶¶ 15-16.) Individual Defendants are all principals and officers of the
Corporate Defendants: Cohen is the President and Chief Executive Officer of Defendant NLS;
Krieger is Vice President for Operations of NLS; Cucinotta is the Legal Collections Manager;
and Centeno is the Legal Administrative Manager. (Id. ¶¶ 17-20.) Defendant Joseph Sussman is
an attorney duly admitted to the Bar in New York. (Id. ¶ 21.) Sussman, through his law firm,
Joseph I. Sussman, P.C., commenced and conducted litigation on behalf of the Corporate
Defendants. (Id. ¶¶ 21-22.)
With regards to each Plaintiff, Defendants engaged in largely the same racketeering
scheme, consisting of “systematic and repeated” intimidation in attempts to collect money from
Plaintiffs to which Defendants were not entitled. (Id. ¶ 26.) More specifically, Defendants
2
“bull[ied]” Plaintiffs with threats of litigation over documents that Defendants “knew were
forged.” (Id.) In each case, Defendants would create an allegedly fraudulent financing lease, with
Plaintiffs as signed guarantors. (Id. ¶¶ 26, 68, 76, 91, 95, 108, 118.) Where Defendants had
access to Plaintiffs’ bank accounts, Defendants would wrongfully debit amounts under the
forged leases. (Id. ¶¶ 35, 77-78, 92, 109, 119.) Where Defendants did not have such access or
when a plaintiff closed the bank account, Defendants harassed Plaintiffs—through phone calls
and mailings—over “amounts due” and threatened Plaintiffs with litigation to collect for the debt
in default. (Id. ¶¶ 37, 122.) In most cases, Defendants commenced lawsuits in the New York City
courts. (Id. ¶¶ 45, 65, 79, 98, 110.) Since Plaintiffs are all out-of-state individuals, the lawsuits
were designed to “ensure that Plaintiffs had no real opportunity to raise defenses to the
[racketeering enterprise’s] bogus lawsuits, so that the entry of a default judgment was all but
certain.” (Id. ¶ 27.) When Defendants were granted default judgments, many Plaintiffs were
forced to hire attorneys in New York to attempt to set the judgments aside. (Id. ¶¶ 51, 71, 85,
104, 115.)
In the course of this scheme, Defendants also wrongfully accessed Plaintiffs’ credit
reports (Id. ¶¶ 39, 60, 87, 93, 105-06, 116, 120) and, in some cases, made adverse entries in the
credit reports. (Id. ¶¶ 40, 61, 88, 117, 121.) Plaintiffs allege that these actions had “significant
impact on credit availability to Plaintiffs, including without limitation, denial of credit
opportunities, increase in interest rates, and diverse other consequences.” (Id. ¶ 30.)
As a result of the foregoing, Plaintiffs suffered significant economic and non-economic
damages, including mental anguish, embarrassment, annoyance, and emotional distress. (Id. ¶¶
58, 74, 90, 94, 107, 124.)
3
LEGAL STANDARD
To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for
failure to state a claim upon which relief can be granted, a complaint must include “sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 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.”
Id. (citing Twombly, 550 U.S. at 556).
“When there are well-pleaded factual allegations [in the complaint], a court should
assume their veracity and then determine whether they plausibly give rise to an entitlement to
relief.” Iqbal, 556 U.S. at 679. The court must “take all well-plead factual allegations as true, and
all reasonable inferences are drawn and viewed in a light most favorable to the plaintiff[ ].”
Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir. 1996). However, the presumption of truth does not extend
to “legal conclusions, and threadbare recitals of the elements of the cause of action.” Harris v.
Mills, 572 F.3d 66, 72 (2d Cir. 2009) (quoting Iqbal, 556 U.S. 662) (internal quotation marks
omitted). A plaintiff must provide “more than labels and conclusions” to show he is entitled to
relief. Twombly, 550 U.S. at 555.
DISCUSSION
As an initial matter, the Court notes that the Southern District of New York has heard at
least three cases involving the same racketeering scheme alleged in the instant complaint against
the same defendants. See Ritchie v. N. Leasing Sys., Inc., 14 F. Supp. 3d 229 (S.D.N.Y. 2014);
Angermeir v. Cohen, 14 F. Supp. 3d 134 (S.D.N.Y. 2014); Serin v. N. Leasing Sys., Inc., No.
4
7:06-CV-1625, 2009 WL 7823216 (S.D.N.Y. Dec. 18, 2009). 1 In their motion to dismiss,
Defendants make a number of arguments that have already been addressed by the federal court
for the Southern District of New York. In light of the fact that these cases are solely persuasive
authority, the Court will nonetheless undertake its own analysis of the law with regards to the
repeated arguments.
A. Pleading Standards under Fed. R. Civ. P. 8(a) and 9(b)
Defendants first argue that the Complaint should be dismissed because it fails to
adequately plead the actions of multiple defendants with particularity and therefore fails under
Federal Rules of Civil Procedure 8(a) and 9(b). Though Defendants do not make the distinction
in their motion, Rule 9(b) only applies to the claims of mail fraud and wire fraud as predicate
acts for the RICO claims. See Angermeir, 14 F. Supp. 3d at 145 (citing First Capital Asset
Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159, 178 (2d Cir. 2004); Spool v. World Child Int'l
Adoption Agency, 520 F.3d 178, 185 (2d Cir. 2008)) (“In the context of a civil RICO claim, all
allegations of fraudulent predicate acts[ ] are subject to the heightened pleading requirement of
[Rule 9(b)].”) (internal quotation marks omitted). See also McLaughlin v. Anderson, 962 F.2d
187, 194 (2d Cir. 1992) (holding that “the more lenient pleading standards” of Rule 8(a) apply to
claims of extortion alleged as RICO predicate acts); Hecht v. Commerce Clearing House, Inc.,
897 F.2d 21, 26 n. 4 (2d Cir. 1990) (“On its face, Rule 9(b) applies only to fraud or mistake, not
to conspiracy. [A] pleading of a conspiracy, apart from the underlying acts of fraud, is properly
measured under the more liberal pleading requirements of Rule 8(a).”). Thus, only the
allegations of mail and wire fraud are subject to the heightened pleading requirements of Rule
9(b), and the remaining claims must only meet the more liberal requirements of Rule 8(a).
1
At least one New York State court has also heard a similar case: Aldrich v. Northern Leasing Systems,
Inc., 2009 WL 889959 (Sup. Ct. N.Y. Co. Mar. 12, 2009).
5
1. Rule 8(a)
Defendants contend that by “lumping defendants together,” Plaintiffs fail to provide a
factual basis to distinguish between the acts of each defendant. (Defendants’ Memorandum of
Law in Support of Motion to Dismiss the First Amended Complaint (“Def.’s Memo”), 7.) In
support of this argument, Defendants cite a number of cases that were similarly cited in
Angermeir: Marcilis v. Twp. of Redford, 693 F.3d 589 (6th Cir. 2012); Atuahene v. City of
Hartford, 10 Fed.Appx. 33, 34 (2d Cir. 2001); Ochre LLC v. Rockwell Architecture Planning &
Design, P.C., No. 12–CV–2837, 2012 WL 6082387 (S.D.N.Y. Dec. 3, 2012) aff'd, 530 F. App'x
19 (2d Cir. 2013); Elias v. City of New York, No. 10–CV–5495, 2010 WL 5475809 (E.D.N.Y.
Dec. 30, 2010); Southerland v. N.Y.C. Housing Auth., No. 10–CV–5243, 2010 WL 4916935
(E.D.N.Y. Nov. 23, 2010). (See Def.’s Memo, 8.) The Angermeir court previously distinguished
each of these cases:
In most of the cases Defendants cite, the court dismissed the
complaint because it failed to distinguish at all between any of the
Defendants in claims alleging discrimination or constitutional-rights
violations. See, e.g., Marcilis, 693 F.3d at 596 (dismissing a
complaint raising a Bivens claim where the complaint “ma[de] only
categorical references to ‘Defendants'” (emphasis added));
Atuahene, 10 Fed.Appx. at 34 (noting that the complaint “alleging a
host of constitutional and state common law claims” initially “failed
to differentiate among the defendants, alleging instead violations by
‘the defendants,’ ” and then later “still fail[ed] to identify which
defendants were alleged to be responsible for which alleged
violations” when the plaintiff “replaced the allegations against ‘the
defendants' with the names of all of the defendants”); Elias, 2010
WL 5475809, at *3 (dismissing complaint that “attribute[d]
discrimination, retaliation, and disparate treatment generally to
‘Defendants,’ without distinguishing their individualized conduct”
(internal citation omitted)); Southerland, 2010 WL 4916935, at *3
(dismissing complaint alleging constitutional-rights violations
where the complaint failed “[to] allege facts against any individual
defendant” (emphasis added)). In one case, the court dismissed a
copyright-infringement claim where the plaintiff sued four entirely
separate entities—a design firm, an architect, a hotel, and a
6
procurement agent—and the complaint “fail[ed] to isolate the key
allegations against each defendant.” See Ochre, 2012 WL 6082387,
at *6.
Angermeir, 14 F. Supp. 3d at 143. This Court agrees with the analysis in Angermeir. As it did in
that case, the Complaint in the instant case contains numerous allegations pleaded with
specificity as to particular defendants. First, the Complaint alleges the role each Individual
Defendant played in the scheme. (See Compl. ¶ 131 (alleging that Cohen is the President of NLS
and, as such, was in charge of all its day-to-day operations, including organization and
supervision of the racketeering scheme); id. ¶¶ 111-112, 132 (alleging that Krieger is the Vice
President for Operations of the Defendant NLS, that she was responsible for day-to-day
operations and lease originations, and that she verified numerous fraudulent complaints); id. ¶¶
20, 66-67, 80-81, 99-100, 134 (alleging that Centeno is the Legal Administrative Manager for the
Defendants and was one of the persons who verified many fraudulent complaints filed by the
Sussman Defendants); id. ¶¶ 53-55 (alleging that Cucinotta was a Legal Collections Manager
and, in that capacity, he signed and verified complaints filed by Sussman Defendants).) Second,
the Complaint explains the role played by the Sussman Defendants in commencing and filing
allegedly bogus lawsuits despite orders from the New York Civil Court denying jurisdiction. (Id.
¶¶ 45, 79, 98, 110, 139, 144.) See Northern Leasing Sys., Inc. v. Walton, CV049136/02NY, 2012
WL 2466977 (N.Y. Civ. Ct. June 25, 2012); Northern Leasing Systems, Inc. v. Soumastre, Civ
Ct, N.Y. Cty, January 26, 2005, Cooper, J., Index No. 13566/03. Finally, to the extent of its
knowledge, Plaintiffs have pleaded the actions with sufficient particularity to support a plausible
inference as to which Corporate Defendant—MBF, NLS, or LFG—injured each Plaintiff. (See
Compl. ¶¶ 32, 76-80, 95-97 (factual allegations involving Defendant MBF and Plaintiffs
Aghaeepour, Higgins, and Norris); id. ¶¶ 33-35, 41-43, 60-63, 108-109, 118-121 (factual
7
allegations involving Defendant NLS and Plaintiffs Aghaeepour, Glasgow, Rivera, and
Schilber/Schilco); id. ¶ 161 (factual allegations involving Defendant LFG and Plaintiff Moore).)
Thus, Plaintiffs’ Complaint does not “lump defendants together” impermissibly, but
instead alleges conduct as to each defendant sufficient to “give the defendant fair notice of what
the claim is and the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct.
2197, 167 L.Ed.2d 1081 (2007). See also Strunk v. U.S. House of Representatives, 68 F. App'x
233, 235 (2d Cir. 2003) (“the purpose of [Rule 8(a)] is to provide fair notice of the claims and to
enable the adverse party to answer the complaint and prepare for trial.”); Salahuddin v. Cuomo,
861 F.2d 40, 42 (2d Cir. 1988) (Rule 8(a) is violated if a complaint is “so confused, ambiguous,
vague, or otherwise unintelligible that its true substance, if any, is well disguised.”); Hudak v.
Berkley Grp., Inc., No. 13–CV–89, 2014 WL 354676, at *4 (D.Conn. Jan. 23, 2014) (“Nothing
in Rule 8 prohibits collectively referring to multiple defendants where the complaint alerts
defendants that identical claims are asserted against each defendant.”). The Court therefore
denies Defendants' Motion to Dismiss under Rule 8(a).
2. Rule 9(b)
Defendants next argue that Plaintiffs fail to allege mail and wire fraud with the
particularity required by Federal Rule of Civil Procedure 9(b). First, Defendants assert that the
Complaint does not allege with proper specificity the “content of the items mailed, [] how each
of the items was false and misleading, [and] who made the misrepresentations.” (See Def.’s
Memo, 9.) Next, Defendants claim that the Complaint does not sufficiently allege each
Defendant directed or controlled the affairs of the RICO enterprise. 2 (See Defendants’ Reply
2
The Court notes that this argument was raised by Defendants only in their Reply. To the extent Plaintiffs
were not given an opportunity to respond, this argument is invalid. The Court will nonetheless consider the
substance of the argument to preclude further discussion of the issue.
8
Memorandum in Further Support of Defendants’ Motion to Dismiss the First Amended
Complaint (“Def.’s Reply”), 9.) On both counts, Defendants are incorrect.
In pleading a claim of mail or wire fraud, a complaint must allege “(1) a scheme to
defraud, (2) money or property as the object of the scheme, and (3) use of the mails or wires to
further the scheme.” United States v. Shellef, 507 F.3d 82, 107 (2d Cir. 2007) (internal quotation
marks omitted). “In general, ‘[p]laintiffs must plead ... mail [or wire] fraud with particularity,
and establish that the [communications] were in furtherance of a fraudulent scheme.’”
Angermeir, 14 F. Supp. 3d at 145 (citing Lundy v. Catholic Health Sys. of Long Island Inc., 711
F.3d 106, 119 (2d Cir. 2013)). Though Defendant correctly notes that allegations of mail fraud
“should specify the fraud involved, identify the parties responsible for the fraud, and where and
when the fraud occurred,” that standard applies to per se mail fraud and does not apply to
allegations where the mail and wires are used in furtherance of fraud. Evercrete Corp. v. H-Cap
Ltd., 429 F. Supp. 2d 612, 624 (S.D.N.Y. 2006) (internal citations omitted). See also
McLaughlin, 962 F.2d 187, 191 (2d Cir. 1992); Luce v. Edelstein, 802 F.2d 49, 55 (2d Cir.
1986).
As Angermeir noted, courts in the Second Circuit have consistently applied a different
pleading standard in cases where the fraudulent predicate acts are used in furtherance of a greater
fraudulent scheme: “Southern District courts have previously articulated the different
requirements in either a per se or ‘in furtherance of fraud’ context: In cases in which the plaintiff
claims that the mails or wires were simply used in furtherance of a master plan to defraud, the
communications need not have contained false or misleading information themselves. In such
cases, a detailed description of the underlying scheme and the connection therewith of the mail
and/or wire communications, is sufficient to satisfy Rule 9(b).” Am. Med. Ass'n v. United
9
Healthcare Corp., 588 F. Supp. 2d 432, 442-43 (S.D.N.Y. 2008) (citing In re Sumitomo Copper
Litig., 995 F.Supp. 451, 456 (S.D.N.Y.1998) (internal citation omitted)); Aiu Ins. Co. v. Olmecs
Medical Supply, Inc., 2005 WL 3710370, *11 (E.D.N.Y. February 22, 2005) (finding that for
RICO claims alleging mailings in furtherance of fraud, plaintiff must “delineate, with adequate
particularity in the body of the complaint, the specific circumstances constituting the overall
fraudulent scheme” in order to satisfy Rule 9(b)) (internal citations omitted). Thus, “where the
plaintiff claims that the mail or wires were simply used in furtherance of a scheme to defraud, the
complaint ‘need not be specific as to each allegation of mail or wire fraud’ as long as ‘the nature
of the RICO scheme is sufficiently pleaded so as to give notice to the defendants.’” Evercrete
Corp., 429 F. Supp. 2d at 624 (citing First Interregional Advisors Corp. v. Wolff, 956 F.Supp.
480, 485 (S.D.N.Y. 1997) (internal citation omitted)). See also Serin, 2009 WL 7823216, at *7
(citing In re Sumitomo Copper Litig., 995 F.Supp. at 456 (internal citations omitted)) (“In
complex civil RICO actions involving multiple defendants, [] Rule 9(b) does not require that the
temporal or geographic particulars of each mailing or wire transmission made in furtherance of
the fraudulent scheme be stated with particularity. In such cases, Rule 9(b) requires only that the
plaintiff delineate with adequate particularity in the body of the complaint, the specific
circumstances constituting the overall fraudulent scheme.”).
In the instant case, Plaintiffs do not allege that the mailings and wire transmissions
themselves contain fraudulent misrepresentations. Instead, Plaintiffs argue that the
communications are part of an ongoing scheme to defraud Plaintiffs. On this point, the Court is
in agreement with Serin:
The Plaintiffs describe with the required amount of particularity the
details of the racketeering scheme: they describe in detail how the
Defendants allegedly forged leases in each Plaintiff's name; how the
Defendants made electronic deductions from the bank accounts of
10
Plaintiffs []; how the Defendants then called and/or mailed letters to
each Plaintiff demanding payment on the leases and threatening
litigation if the Plaintiffs refused to pay; how the Defendants
initiated litigation in New York City Civil Court against Plaintiffs
[]; how the[] Plaintiffs personally appeared and defended these
allegedly meritless lawsuits; and how the Defendants allegedly
made adverse entries in all of the Plaintiffs' personal credit reports.
The general allegations of mail fraud in [] the Amended Complaint,
when read in the context of the specific allegations the Plaintiffs
make earlier in the Amended Complaint, are sufficient to adequately
plead mail fraud.
Serin, 2009 WL 7823216 at *8. In the same fashion, Plaintiffs have provided detailed
information regarding the instant fraudulent scheme. In addition to the allegations outlined
above, Plaintiffs also explained how Defendants created fraudulent leases (Compl. ¶¶ 32-33, 62,
77, 91-92, 95-96, 108, 118); Defendants wrongfully debited amounts from Plaintiffs’ bank
accounts (id. ¶¶ 35, 78, 109, 119); Defendants contacted Plaintiffs demanding payment and
threatening litigation if Plaintiffs refused to pay (id. ¶¶ 37, 122); Defendants initiated litigation in
New York City Civil Court (id. ¶¶ 45, 65, 79, 98, 110); and Defendants fraudulently requested
Plaintiffs’ credit reports and made adverse entries in such reports (id. ¶¶ 38-40, 60-61, 93, 120121). Plaintiffs then explicitly allege mail and wire fraud to the best of their knowledge in
paragraphs 144 and 150 of the Complaint. Though the allegations in these paragraphs are
general, when viewed in light of the specifics of the fraudulent scheme, they are sufficient under
Rule 9(b). See Spira v. Nick, 876 F.Supp. 553, 559 (S.D.N.Y. 1995) (“Once the plaintiff alleges
with particularity the circumstances constituting the fraudulent scheme, neither the reputational
interests nor the notice function served by Rule 9(b) would be advanced in any material way by
insisting that a complaint contain a list of letters or telephone calls.”); Curtis & Assocs., P.C. v.
Law Offices of David M. Bushman, Esq., 758 F.Supp.2d 153, 177 (E.D.N.Y. 2010) (“[I]n cases
where plaintiffs allege that the mails or wires were simply used in furtherance of a master plan to
11
defraud, .... particularity as to the mailings themselves is unnecessary ....” (internal quotation
marks and citations omitted)).
Moreover, despite Defendants’ argument that the “allegations are insufficient to plausibly
allege that each of these defendants controlled the alleged fraudulent scheme,” Plaintiffs have
sufficiently described each defendant’s participation. (Def.’s Reply, 9.) Defendant misapplies the
control requirement. As outlined in the very case Defendant cites, “[o]f course, the word
‘participate’ makes clear that RICO liability is not limited to those with primary responsibility
for the enterprise's affairs, just as the phrase ‘directly or indirectly’ makes clear that RICO
liability is not limited to those with a formal position in the enterprise, but some part in directing
the enterprise's affairs is required.” Reves v. Ernst & Young, 507 U.S. 170, 179, 113 S. Ct. 1163,
1170, 122 L. Ed. 2d 525 (1993). A defendant, therefore, does not need to have complete control
over the affairs of the Enterprise—he or she must only play some part in directing the scheme.
The Complaint plainly meets this standard as to each defendant. As outlined above,
Plaintiffs provide the job titles of each Individual Defendant, as well as how their individual
responsibilities demonstrate their participation in the scheme. For example, the Complaint
describes how defendant Krieger, the Vice President of Operations for Defendant NLS, is
responsible for day-to-day operations and lease originations. (Compl. ¶¶ 111-112, 132.) Given
that the fraudulent scheme stems from the origination of leases, defendant Krieger’s direction in
the scheme is clear. In addition, the Complaint states both the Corporate Defendants and the
Sussman Defendants involvement in the scheme (i.e., the forging of leases and collections
practices, and the filing of fraudulent lawsuits, respectively). The allegations, when viewed in the
light most favorable to Plaintiffs, are sufficient to support an inference that each defendant
played some part in directing the scheme.
12
For the foregoing reasons, the Court finds that the allegations are sufficient to put
Defendants on notice of their allegedly wrongful conduct. “Furthermore, while Defendants are
correct that the Complaint contains a number of allegations against all Defendants in general, the
Complaint's other allegations specific to each Defendant are sufficient to give Defendants fair
notice of the claims against them and to accomplish the other goals of Rule 9(b)”. Angermeir, 14
F. Supp. 3d at 145 (citing GEM Advisors, Inc. v. Corporacion Sidenor, S.A., 667 F.Supp.2d 308,
332 n. 9 (S.D.N.Y.2009) (“Although the [complaint] repeatedly charge[d] the [fraudulent acts] to
‘Defendants,’ and [did] not charge the [acts] to one in particular, this was simply due to
[p]laintiff's understanding that [the defendants] should be treated as the same entity. At this stage
of the proceedings, then, [p]laintiff fairly charge[d] both [d]efendants with the [acts].
Accordingly, there can be no doubt that the [c]omplaint [gave] each defendant notice of precisely
what he [was] charged with. No more is required by Rule 9(b).” (internal citations and some
internal quotation marks omitted)); Green v. Beer, No. 06–CV–4156, 2009 WL 911015, at *6 n.
13 (S.D.N.Y. Mar. 31, 2009) (“[E]lsewhere in the ... complaint, Plaintiffs specify the who, what,
when, and where of their fraud claim with sufficient particularity to cure any confusion these
scattered clumped allegations may cause.”); Allstate Ins. Co. v. Ahmed Halima, No. 06–CV–
1316, 2009 WL 750199, at *5 (E.D.N.Y. Mar. 19, 2009) (finding that, because “requiring
[p]laintiffs to plead with more particularity would not further any of the policy goals of Rule
9(b),” the plaintiffs “properly pled a civil RICO claim under § 1964(c)”)). The Court therefore
denies Defendants’ Motion to Dismiss under Rule 9(b).
13
B. Res Judicata
Defendants next move to dismiss the RICO claims of plaintiffs Glasgow, Moore, and
Norris 3 because, under the doctrine of res judicata, each plaintiff is barred from raising claims
with regards to the fraudulent leases that were the subjects of default judgments in New York.
Under the doctrine of res judicata, a “final judgment on the merits of an action precludes the
parties or their privies from relitigating issues that were or could have been raised in that action.”
EDP Med. Computer Sys., Inc. v. United States, 480 F.3d 621, 624 (2d Cir. 2007) (internal
quotations omitted). “Res judicata will bar subsequent litigation if the earlier decision was (1) a
final judgment on the merits, (2) by a court of competent jurisdiction, (3) in a case involving the
same parties or their privies, and (4) involving the same cause of action.” Overview Books, LLC
v. United States, 438 F. App'x 31, 33 (2d Cir. 2011) (internal citations and quotation marks
omitted). Res judicata, or claim preclusion, is invoked when a party seeks to relitigate a claim, or
cause of action, arising out of the same transaction or a series of transactions which were raised
or could have been raised in a prior litigation. See In re Hunter, 4 N.Y.3d 260, 269, 827 N.E.2d
269, 274 (2005); Schuykill Fuel Corp. v. B. & C. Nieberg Realty Corp., 250 N.Y. 304, 306, 165
N.E. 456, 457 (1929).
In general, a default judgment is considered a final judgment on the merits sufficient to
invoke res judicata. See Omphil Care, Inc. v. Hertz Co., 48 Misc. 3d 131(A) (N.Y. App. Term.
2015) (citing Ava Acupuncture, P.C. v. NY Cent. Mut. Fire Ins. Co., 34 Misc. 3d 149(A), 950
N.Y.S.2d 490 (App. Term 2012)); Lazides v. P & G Enterprises, 58 A.D.3d 607, 871 N.Y.S.2d
357 (2009) (“It is well settled that default judgments can have res judicata effect.”); Eagle
Insurance Co. v. Facey, 272 A.D.2d 399, 400 (2d Dep't 2000) (“The doctrine [of res judicata] is
3
For the purpose of Subsection B – Res Judicata, “Plaintiffs” refers to plaintiffs Glasgow, Moore, and
Norris.
14
applicable to an order or judgment taken by default which has not been vacated.”); U.S. Sec. &
Futures Corp. v. Irvine, No. 00 Civ. 2322(RMB)(THK), 2002 WL 34191506, at *4 (S.D.N.Y.
May 13, 2002) (“A default judgment has the same preclusive effect for res judicata purposes as a
judgment on the merits.”) (citing N. Am. Foreign Trading Corp. v. Chiao Tung Bank, No. 95
Civ. 5189(LBS), 1997 WL 193197, at *5 (S.D.N.Y. Apr. 18, 1997)); EDP Med. Computer Sys.,
Inc., 480 F.3d at 626 (citations omitted) (“[r]es judicata does not require the precluded claim to
actually have been litigated; its concern, rather, is that the party against whom the doctrine is
asserted had a full and fair opportunity to litigate the claim. That is why it has long been the law
that default judgments can support res judicata as surely as judgments on the merits.”); 1B
Moore's Federal Practice, P 0.409(4) at 1025 (2d ed. 1980) (citation omitted) (“where the court
has the requisite jurisdiction, a default judgment is just as conclusive an adjudication between the
parties of whatever is essential to support a judgment as when rendered after answer and
complete contest in the open courtroom.”). The crux of res judicata is that the “party to be
precluded from relitigating the issue must have had a full and fair opportunity to contest the prior
determination.” Kaufman v. Eli Lilly & Co., 65 N.Y.2d 449, 456, 482 N.E.2d 63 (1985).
In the instant case, Plaintiffs Glasgow, Norris, and Moore were sued in New York Civil
Court by the Corporate Defendants 4 for amounts due under the leases that are in question here.
(See ECF No. 15, Exhibits A-C.) In each case before the Civil Court, Plaintiff failed to appear,
and a default judgment was entered enforcing the lease guaranty. (Id.) Following the default
judgments, each Plaintiff filed a motion to vacate, alleging that the lease was the product of fraud
and forgery, and the Court—in each case—denied Plaintiffs’ motions (See ECF No. 15, Exhibits
D-F.) Plaintiff Glasgow subsequently filed a motion to renew/reargue, which was also denied.
4
Each Corporate Defendant was the Plaintiff in a civil suit against Plaintiffs Glasgow, Norris, and Moore.
(See ECF No. 15, Exhibits A-C.)
15
(See ECF No. 15, Exhibit F.) Plaintiff Moore appealed the denial of his motion to vacate to the
First Department, and the Appellate Term affirmed the order. (See ECF No. 15, Exhibit G.)
Given that all three Plaintiffs had an opportunity to raise—and did in fact raise—the issue of
fraudulent leases, res judicata acts as a bar to litigating the instant claims. The New York
judgments are additionally conclusive upon issues that were essentially decided on the motions
to vacate (i.e., the validity of the guarantees). See Saud v. Bank of New York, 929 F.2d 916, 919
(2d Cir. 1991) (precluding RICO claims on res judicata grounds because “the essential facts
alleged in support of Saud's RICO claims, i.e., allegedly fraudulent conduct by the Bank in
connection with the Indeco loans, were not only present in the earlier Guaranty Action, but
raised therein by Saud himself”). See also Gaston v. Am. Transit Ins. Co., 40 A.D.3d 578, 579,
835 N.Y.S.2d 369, 370 (2007) aff'd as modified, 11 N.Y.3d 866, 901 N.E.2d 743 (2008); Tax
Lien Co. of New York v. Schultze, 213 N.Y. 9, 106 N.E. 751 (1914). In other words, the New
York judgments on the motions to vacate concluded that the leases that each Plaintiff signed as
guarantors were enforceable and not the product of fraud and forgery. Therefore, any claim in
this case that requires a different determination is barred under res judicata. Moreover, under
New York’s transactional approach to res judicata, “a later claim arising out of the same factual
grouping as an earlier litigated claim [is barred,] even if the later claim is based on different legal
theories or seeks dissimilar or additional relief.” Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir.
1994) (citing Clarkstown Recycling Ctr., Inc. v. Parker, Chapin Flattau & Klimpl, LLP, 1 F.
Supp. 2d 327, 329 (S.D.N.Y. 1998)) (citing Smith v. Russell Sage College, 54 N.Y.2d 185, 445
N.Y.S.2d 68, 429 N.E.2d 746 (1981); O'Brien v. City of Syracuse, 54 N.Y.2d 353, 357, 445
N.Y.S.2d 687, 429 N.E.2d 1158 (1981); Ventura v. M.A.F. Estates, Inc., 247 A.D.2d 378, 668
N.Y.S.2d 645, 646 (2d Dept. 1998)). Thus, to the extent the current claims arise out of
16
Defendants’ attempts to collect on allegedly fraudulent leases, they are barred. See Gianatasio v.
D'Agostino, 862 F. Supp. 2d 343, 349-50 (S.D.N.Y. 2012) (“Although the causes of action in the
federal complaint are styled in a somewhat different form from those in the state court complaint,
all the federal causes of action stem from the same [] claims asserted in the state court action.”).
Finally, Plaintiffs Glasgow, Norris, and Moore assert that their claims are not barred by
res judicata under an exception holding that a separate lawsuit may be brought where the alleged
perjury or fraud in the underlying action was “merely a means to the accomplishment of a larger
fraudulent scheme.” Newin Corp. v. Hartford Acc. & Indem. Co., 37 N.Y.2d 211, 217, 371
N.Y.S.2d 884, 333 N.E.2d 163 (1975). To invoke the fraud exception, Plaintiffs must show that
the instant alleged fraudulent scheme is “greater in scope than the issues determined in the prior
proceeding” and that “the [instant] cause of action did not arise out of the factual transaction
which was the subject matter of [the prior] action.” Specialized Indus. Servs. Corp. v. Carter, 68
A.D.3d 750, 752, 890 N.Y.S.2d 90, 92 (2009) (internal citation omitted). Plaintiffs have failed to
make this showing.
Plaintiffs claim the current scheme “is much greater in scope” than the issues determined
in state court, but the Court is unpersuaded. Plaintiffs have not shown that the alleged fraudulent
scheme is any greater—or even different—than the fraud alleged in their motions to vacate in
state court. In their motions, Plaintiffs argued that the default judgments should be vacated
because the leases are products of fraud and therefore Defendants cannot collect on them. The
Court fails to see how the instant alleged scheme is any greater than exactly that. Plaintiffs
themselves describe the scheme as one to “intimidate out-of-state individuals into paying
unwarranted sums of money with fraudulent lawsuits in New York City Civil Court.” (Plaintiffs’
Memorandum of Law in Opposition to Defendants’ Motion to Dismiss the First Amended
17
Complaint (“Pl.’s Memo”), 1.) The fraud that Plaintiffs seek to recover from here is the same
fraud that Plaintiffs alleged in their motions to vacate. See Specialized Indus. Servs. Corp., 68
A.D.3d at 751-52, 890 N.Y.S.2d at 92 (“Generally, a party who has lost a case as a result of
alleged fraud or false testimony cannot collaterally attack the judgment in a separate action for
damages against the party who adduced the false evidence, and the plaintiff's remedy lies
exclusively in moving to vacate the default judgment.”). The goals of the two schemes are the
same – to collect on allegedly fraudulent leases. The fact that Plaintiffs frame the scheme as one
based on “fraudulent lawsuits” rather than “fraudulent leases” is futile; the lawsuit is only
fraudulent if the underlying lease is fraudulent. Newins Corp., 37 N.Y.2d at 218 (“[i]f the total
objective of the scheme was the determined issue, then there is a bar.”). The Court therefore fails
to see how the current scheme is any broader in scope.
The Court additionally finds the Second Circuit case, Saud v. Bank of New York,
particularly instructive here. Saud, 929 F.2d 916. In Saud, Plaintiff alleged that he was
fraudulently induced to sign a personal guaranty for a real estate loan. The principal on the loan
defaulted, and the bank obtained a default judgment against the plaintiff/guarantor (the
“Guaranty Action”). Id. at 917. Plaintiff then brought a civil RICO action against the bank and
the former assistant bank vice-president, alleging that their fraudulent activity resulted in his
decision to guarantee the loan and his subsequent liability under that guaranty. Id. The Court
explained that “it does not matter that a RICO claim was not expressly asserted in the Guaranty
Action, for it is the facts surrounding the transaction or occurrence which operate to constitute
the cause of action, not the legal theory upon which a litigant relies.” Id. at 419 (internal citations
omitted). Because the facts essential to the RICO claim were present at the time of the Guaranty
Action, the Court dismissed the claim as barred by res judicata. Id. at 419-20. Plaintiff
18
additionally attempted to distinguish the fraud alleged in the Guaranty Action from the fraud
alleged in the RICO claim. Id. at 920. The court, however, found this argument unavailing:
“Saud's defenses to the Guaranty Action and his RICO claims asserted herein are both based on
alleged fraudulent conduct occurring in connection with the [] loan[]. As noted above, an
examination of Saud's affirmative defenses in the Guaranty Action belies Saud's claim that the
two frauds are ‘qualitatively different.’ Both are based on broad allegations of fraud in
connection with the same loan transaction.” Id. Plaintiffs Glasgow, Norris, and Moore present
the Court with the same issues here – both allegations of fraud connect with the same lease
guarantees. Because no additional fraudulent conduct is alleged and the facts essential to the
RICO claims were present at the time of the default judgments, their claims are barred.
For the reasons stated, the Court finds that Plaintiffs Glasgow, Norris, and Moore’s
claims are barred by res judicata, 5 and Defendants’ Motion to Dismiss on this basis is granted.
C. RICO Claims - Predicate Acts
Defendants argue that the Plaintiffs’ RICO claims should be dismissed to the extent they
are based on predicate acts of extortion because “meritless litigation does not amount to extortion
under federal or state law.” (Def.’s Memo, 16.) However, because the Court has determined that
Plaintiffs sufficiently pleaded a “pattern of racketeering in which the alleged enterprise
committed multiple predicate acts of mail and/or wire fraud in further[ance] of its allegedly
fraudulent and extortionate scheme, it finds that it is not necessary to consider whether the filing
5
Though Plaintiffs bring the current action against additional defendants (i.e., employees of Corporate
Defendants), the application of res judicata does not require “literal privity” of parties. Monahan v. New York City
Dep't of Corr., 214 F.3d 275, 285 (2d Cir. 2000). “The doctrine of res judicata also bars litigation of the same causes
of action against defendants who were known to plaintiff at the time the first action was filed but were not named
where the newly-added defendants have a sufficiently close relationship to the original defendant. Where the ‘new’
defendants are sufficiently related to one or more of the defendants in the previous action which arises from the
same transaction all defendants may invoke res judicata.” Official Publications, Inc. v. Kable News Co., 811 F.
Supp. 143, 147 (S.D.N.Y. 1993) (internal citations omitted).
19
of lawsuits could itself be considered a predicate act of extortion for RICO purposes.” Serin,
2009 WL 7823216, at *9. The allegations of mail and wire fraud are sufficient, at this stage, to
satisfy Plaintiffs’ burden to plead predicate acts. See Angermeir, 14 F. Supp. 3d at 153-54
(finding that Plaintiffs’ allegations of mail and wire fraud sufficient to uphold a RICO claim
even in the absence of acts of extortion). The Court therefore need not consider whether the
alleged acts of extortion are valid as a matter of law and denies this prong of Defendants’ Motion
to Dismiss.
D. FCRA and NYFCRA Claims
1. Statute of Limitations
Defendants next assert that the claims of Plaintiffs Moore and Rivera under the FCRA
and NYFCRA are untimely. Actions alleging FCRA violations must be brought “not later than
the earlier of (1) 2 years after the date of discovery by the plaintiff of the violation that is the
basis for such liability; or (2) 5 years after the date on which the violation that is the basis for
such liability occurs.” 15 U.S.C. § 1681p. Under the NYFCRA, actions must be brought “within
two years from the date on which the liability arises, except that where a defendant has
materially and willfully misrepresented any information required under this article to be
disclosed to an individual and the information so misrepresented is material to the establishment
of the defendant's liability to that individual under this article, the action may be brought at any
time within two years after the discovery by the individual of the misrepresentation.” N.Y. Gen.
Bus. Law § 380-n.
Counts III-X of the Complaint assert claims under the FCRA and NYFCRA concerning
allegations that Defendants’ wrongfully accessed Plaintiffs’ credit reports and made adverse
entries in Plaintiffs’ credit reports. (See Compl. ¶¶ 191-231.) Therefore, the dates of violations at
20
issue are the times at which Defendants allegedly accessed and made entries on Plaintiffs’ credit
reports. Defendants accessed Plaintiffs Rivera and Moore’s credit reports in July 2006 and
December 2008, respectively. (Id. ¶¶ 93, 116.) The Complaint does not allege any adverse
entries with regards to Plaintiffs Rivera and Moore.
The Court notes that Plaintiffs do not oppose dismissal under the FCRA in their motion,
presumably because the law is clear that such actions are untimely. The Complaint was filed in
July 2014, clearly more than 5 years after the date of the alleged violations in 2006 and 2008.
Under the NYFCRA, Plaintiffs claim that because “Defendants did not disclose material
information to Mr. Moore and Mr. Rivera timely,” the action is timely if brought within two
years after the discovery of the misrepresentation. (Pl.’s Memo, 23.) Plaintiffs do not explain,
however, what material information was undisclosed or what misrepresentation was made to
excuse the delay. Moreover, Plaintiffs do not cite any case to support their assertion. The Court
does not find in the record any misrepresentation that could have delayed Plaintiffs Rivera and
Moore’s discovery of the NYFCRA violations. Therefore, the NYFCRA violations must be
brought within two years from the date on which the liability arises (2006 and 2008), and
Plaintiffs Moore and Rivera’s claims are untimely. The Court dismisses Plaintiffs Moore’s and
Rivera’s claims under the FCRA and NYFCRA.
2. Inaccurate Reporting
Defendants move to dismiss Plaintiffs Higgins, Moore, Norris, Rivera, Schilber and
Schilco, Inc.’s claims for failing to investigate and/or correct an inaccurate entry on a credit
report because these Plaintiffs have not alleged that Defendants were notified of the error and
failed to correct the entry after having knowledge of the error. (Def.’s Memo, 17.) Plaintiffs do
not address this argument in their motion, and the Court therefore deems the claims abandoned:
21
“[P]laintiff’s failure to respond to contentions raised in a motion to dismiss . . . constitutes an
abandonment of those claims.” Youmans v. Schriro, No. 12 Cv. 3690 (PAE)(JCF), 2013 WL
6284422, at *5 (S.D.N.Y. Dec. 3, 2013) (citing M.M. ex rel. J.M. v. New York City Department
of Education, No. 09 Cv. 5236, 2010 WL 2985477, *6 (S.D.N.Y. July 27, 2010) (collecting
cases); Brandon v. City of New York, 705 F. Supp. 2d 261, 268 (S.D.N.Y. 2010) (same)).
The Court would reach the same conclusion if it were to consider the substance of
Defendants’ argument. The FCRA imposes, at a minimum, a duty to investigate and rectify
inaccurate information in a credit report. 15 U.S.C.A. § 1681s-2(b)(1). See Frederick v. Capital
One Bank (USA), N.A., No. 14-CV-5460 AJN, 2015 WL 5521769, at *6 (S.D.N.Y. Sept. 17,
2015) (citing § 1681s–2(b)(1)(A), (C), (E)) (“At a minimum, § 1681s–2(b) requires furnishers to
‘conduct an investigation with respect to the disputed information,’ ‘report the results of the
investigation to the consumer reporting agency,’ and modify or delete inaccurate information.”).
A cause of action under the FCRA for inaccurate reporting exists “only if the furnisher of
information received notice of the consumer dispute from a credit agency.” Neblett v. Chase
Bank, No. 09 CIV 10574 DAB, 2010 WL 3766762, at *5 (S.D.N.Y. Sept. 27, 2010). See also
Kane v. Guar. Residential Lending, Inc., No. 04-CV-4847 (ERK), 2005 WL 1153623, at *5
(E.D.N.Y. May 16, 2005) (“[U]nless and until a furnisher of information receives notice from a
credit reporting agency, no private right of action exists under section 1681s–2(b).”) Therefore,
to the extent Plaintiffs did not allege that the Defendants received notice of their disputes as to
the guaranty default entries, the FCRA claims cannot survive. With regards to Plaintiffs Higgins,
Moore, Norris, Rivera, Schilber and Schilco, Inc., any such allegation is missing from the
Complaint.
22
Moreover, courts generally have interpreted the federal and New York statutes similarly.
See Ali v. Vikar Mgmt. Ltd., 994 F.Supp. 492 (S.D.N.Y.1998); see also Scott v. Real Estate Fin.
Group, 956 F.Supp. 375, 384 (E.D.N.Y.1997), aff'd, 183 F.3d 97, 100 (2d Cir.1999). “Therefore,
the Court's conclusions as to the FCRA also apply to the NYFCRA,” and the pleadings are
equally insufficient as to the NYFCRA claims of failure to investigate and rectify disputed
entries. Stonehart v. Rosenthal, No. 01 CIV. 651 (SAS), 2001 WL 910771, at *7 (S.D.N.Y. Aug.
13, 2001). The Court finds that Plaintiffs Higgins, Moore, Norris, Rivera, Schilber and Schilco,
Inc.’s claims for failing to investigate and/or correct an inaccurate entry on a credit report under
the FCRA and NYFCRA are insufficient as a matter of law and are therefore dismissed without
prejudice.
3. Negligent Violations - Damages
It is well settled that a complaint alleging a claim for negligent violation of the FCRA
under § 1681o must allege actual damages. Braun v. Client Servs. Inc., 14 F. Supp. 3d 391, 397
(S.D.N.Y. 2014); Ritchie, 14 F. Supp. at 240; Perl v. Am. Exp., No. 11 CIV. 6899 KBF, 2012
WL 178333, at *4 (S.D.N.Y. Jan. 19, 2012) (dismissing the complaint because plaintiffs
“insufficiently pled actual damage in support of their negligent noncompliance claim”);
Caltabiano v. BSB Bank & Trust Co., 387 F. Supp. 2d 135, 141 (E.D.N.Y. 2005) (“To maintain a
claim under the FCRA, Plaintiff bears the burden of demonstrating “actual damages sustained”
as a result of the Defendants' activities.”). The Second Circuit has additionally held “that ‘actual
damages’ may include humiliation and mental distress, even in the absence of out-of-pocket
expenses.” Casella v. Equifax Credit Info. Servs., 56 F.3d 469, 474 (2d Cir. 1995). Though a
plaintiff may recover emotional damages, this does not remove the requirement that plaintiff
suffer an actual injury. See Caltabiano, 387 F. Supp. 2d at 142 (citing Patrolmen's Benevolent
23
Ass'n of New York v. City of New York, 310 F.3d 43, 55 (2d Cir. 2002) (“In order to support a
claim for emotional distress damages, a plaintiff must demonstrate they suffered an ‘actual
injury.’”). In Casella, the Second Circuit explained that, at a minimum, the plaintiff must show
that “any creditor or other person [] learned of the derogatory information from a credit reporting
agency.” Casella, 56 F.3d at 475. In so holding, the court rejected the plaintiff’s “bare contention
that he is entitled to damages for pain and suffering simply because he knew of an inaccurate and
potentially damaging item in his credit report.” Id. See also Jones v. Experian Info. Sols., Inc.,
982 F. Supp. 2d 268, 276 (S.D.N.Y. 2013) (“Courts have held that actual damages, in the form of
pain and suffering, are not available unless the CRA improperly discloses the credit report.”);
Fashakin v. Nextel Commc'ns, No. 05-CV-3080 (RRM), 2009 WL 790350, at *12 (E.D.N.Y.
Mar. 25, 2009) (holding that in order to recover damages for pain and suffering, a plaintiff must
“demonstrate that some creditors became aware of the allegedly inaccurate information”);
McMillan v. Experian, 170 F. Supp. 2d 278, n. 10 (D. Conn. 2001) (“recovery under the FCRA
for pain and suffering is precluded where the plaintiff cannot show that a creditor was aware of
the inaccurate information, because mere knowledge by a plaintiff of potentially damaging credit
information is insufficient FCRA damages.”). Thus, while emotional damages can sustain a
claim under the FCRA, a plaintiff must allege that a third party was aware of the inaccurate
information.
Here, Defendants move to dismiss the negligence claims under the FCRA and NYFCRA
of Plaintiffs Glasgow, Higgins, Rivera, Schilber and Schilco. 6 Though these plaintiffs have each
6
As in Ritchie, Defendants seek to dismiss both the FCRA and NYFCRA negligence claims, “but they cite
only to cases addressing the FCRA, and do not otherwise identify any distinctions between the FCRA and NYFCRA
claims. Keeping in mind the Second Circuit's recognition that ‘the[se] two statutes must be construed in the same
way’ in light of the similarities between many of their provisions, Scott v. Real Estate Fin. Grp., 183 F.3d 97, 100
(2d Cir.1999), the Court does not find it necessary to discuss separately the provisions of the NYFCRA referenced
in the Complaint.” Ritchie v. N. Leasing Sys., Inc., 14 F. Supp. 3d 229, 234 (S.D.N.Y. 2014).
24
alleged that they suffered “mental anguish, embarrassment, annoyance, and emotional distress,”
the Complaint lacks any factual allegation of an actual injury. (Compl. ¶¶ 74, 90, 117, 124.)
More specifically, these plaintiffs have not alleged that any third party or creditor was aware of
the inaccurate reporting, which is required in order for emotional damages to sustain an FCRA
claim. Additionally, any damages arising from these plaintiffs retaining attorneys arose from
conduct entirely separate from the FCRA violations and therefore are also insufficient to sustain
an FCRA claim.
The Court also notes that, with regard to Plaintiffs Rivera, Schilber, and Schilco, the
Complaint does contain an allegation that Plaintiffs suffered “loss of credit opportunities.” (Id. ¶¶
117, 124.) However, these are “nothing more than conclusory allegations that Plaintiff[s] [are]
entitled to actual damages from Defendants' alleged negligent FCRA violations.” Ritchie, 14
F.Supp.3d at 240. The Court therefore dismisses, without prejudice, the negligent NYFCRA and
FCRA claims of Plaintiffs Glasgow, Higgins, Rivera, Schilber and Schilco.
E. Violations of GBL § 380-b(b)
Defendants move to dismiss Plaintiffs’ claims under N.Y. Gen. Bus. Law § 380-b(b) on
the basis that the NYFCRA only affords protection to New York’s consumers. Though
Defendants have provided citations to and quotations from the Act’s legislative history
suggesting it may have been intended to protect New York consumers, the Court does not find
this argument persuasive for the reasons stated below.
First and foremost, the language of the statute is clear. Section 380-b(b) reads, “No
person shall request a consumer report.” A consumer, for purposes of the statute, is defined as
“an individual.” N.Y. Gen. Bus. Law § 380-a. Nothing in the statute suggests that the Legislature
intended to limit the definition of consumer to those who are citizens of or are residing in New
25
York State. In the absence of ambiguity, the Court need not, and should not, reference the
legislative history to expand a statute’s interpretation. As the Court in Matter of Daniel C.
explained:
A statute must be construed according to the ordinary meaning of its words and
resort to extrinsic matter, such as the legislative history, is inappropriate when the
statutory language is unambiguous and the meaning unequivocal. Where, as here,
a statute is clear, a court should not attempt to cure an omission in the statute by
supplying what it believes should have been put there by the Legislature for the
judiciary should not substitute its wisdom for that of the Legislature.
Matter of Daniel C., 99 A.D.2d 35, 41, 472 N.Y.S.2d 666, 671-72 aff'd sub nom. Matter of
Adoption of Daniel C., 63 N.Y.2d 927, 473 N.E.2d 31 (1984) (internal citations omitted). In this
case, the statute refers only to “consumers,” and the Court should not substitute its judgment for
that of the Legislature by adding the New York limitation.
Moreover, in other New York protection statutes, the Legislature has included language
limiting the reach of the statute to persons or transactions with some nexus to New York State.
See, e.g., N.Y. Gen. Bus. Law § 538 (“No person, firm, corporation, or other business entity,
regardless of its form of organization, shall deceptively cause computer software to be copied
onto the computer or internet-capable device of a consumer in this state.”) (emphasis added);
N.Y. Gen. Bus. Law § 455 (“For the purposes of this article, a person or entity shall be
considered as engaged in the business of budget planning in New York, and subject to this article
and the licensing and other requirements of article twelve-C of the banking law, if such person or
entity solicits budget planning business within this state and, in connection with such solicitation,
enters into a contract for budget planning with an individual then resident in this state.”)
(emphasis added); N.Y. Gen. Bus. Law § 480 (“The legislature hereby declares that this article
shall be deemed an exercise of the police power of this state for the protection of the lives, health
and safety of citizens in this state and of their property.”) (emphasis added). In the absence of
26
such limiting language, the Court will not limit the reach of the statute. 7 See also N.Y. Stat. Law
§ 94 (“The legislative intent is to be ascertained from the words and language used, and the
statutory language is generally construed according to its natural and most obvious sense”);
Pierse v. Zimmerman, 255 A.D. 708, 708, 5 N.Y.S.2d 703, 704 (App. Div. 1938) (holding that
the courts must take the language of a statute as they find it and may not read into it a meaning
not expressed by the Legislature).
Second, the NYFCRA regulates the conduct of credit reporting agencies and furnishers of
credit information. See generally N.Y. Gen. Bus. Law § 380. Presuming a nexus to New York
exists, the Court finds it inapposite that the Act was meant to distinguish the level of protection
provided to a consumer based on their residency. In particular, it would be inequitable to afford
out-of-state consumers less protection from New York creditors than that afforded to in-state
consumers. In this regard, the New York courts’ interpretation of the duties of the Attorney
General relating to consumer protection is a helpful analogy. Courts in New York have
consistently extended protection from illegal practices committed in New York to all consumers
regardless of their residency. See, e.g., New York v. Feldman, 210 F. Supp. 2d 294, 303
(S.D.N.Y. 2002) (finding that because the language of the statute does not bar recovery for outof-state residents, the Legislature intended that all consumers be protected from illegal practices
regardless of their residency); People by Vacco v. Lipsitz, 174 Misc.2d 571, 663 N.Y.S.2d 468,
474 (N.Y.Sup. 1997) (“[The] Attorney General has clear authority to seek to restrain illegal
business practices by a local business in relation to both in-state and out-of-state residents ....”).
For example, the Court in In re DeFelice explained, “New York does not and need not limit its
7
In addition, parallel provisions of credit reporting statutes in other states contain such limiting language,
suggesting that in New York, the Legislature did not intend to limit the reach of NYFCRA to New York consumers.
See, e.g., Vermont Statutes Annotated Title 9, section 2480a(1) (defining “consumer” as “a natural person residing
in this state”).
27
interest in consumer protection to its citizens. New York's quasi-sovereign interest is served
whenever the perpetrators of consumer fraud within its borders are brought to justice regardless
of whether their victims happen to be citizens.” In re DeFelice, 77 B.R. 376, 380-81 (Bankr. D.
Conn. 1987) (citing People of the State of New York by Abrams v. Camera Warehouse, Inc., 130
Misc.2d 498, 496 N.Y.S.2d 659, 660 (N.Y.Sup.Ct.1985) (internal citations omitted)). See also
State by Abrams v. Camera Warehouse, Inc., 130 Misc. 2d 498, 499, 496 N.Y.S.2d 659, 660
(Sup. Ct. 1985) (“It appears to this Court that had the Legislature intended to restrict its
application to transactions only with New York consumers it would have so restricted the
language contained therein. Based upon the language of the statute together with the abovestated authority, the Court is of the opinion that the State has the power to obtain restitution for
all consumers injured by a violation of this statute regardless of the residency of the
consumer.”) 8 The Court applies the same reasoning here. Where the statute is silent on protection
of out-of-state consumers and New York State has an interest in restraining illegal practices of
New York businesses, the NYFCRA seeks to protect both in-state and out-of-state consumers.
Therefore, because Defendants are residents of New York and the factual allegations concern
actions that were taken in New York, the NYFCRA will apply to their conduct even as to the
out-of-state Plaintiffs, and Defendants’ Motion to Dismiss on this prong is denied.
8
The Court additionally finds persuasive the case of Mlynek v. Household Fin. Corp., No. 00 C 2998, 2000
WL 1310666 (N.D. Ill. Sept. 13, 2000). In that case, the Northern District of Illinois interpreted Florida’s Consumer
Collection Practices Act (“FCCPA”). Finding that the express language in the text of the statute did not limit its
protection to Florida residents, the court held that the FCCPA extends to the protection of non-residents. As the
court explained: “[u]nder the FCCPA, ‘debtor’ and ‘consumer’ are defined as ‘any natural person obligated or
allegedly obligated to pay any debt,’ not as ‘any resident of Florida obligated or allegedly obligated to pay any debt.’
See § 559.55(2). Likewise, the definitions of ‘creditor’ and ‘debt collector’ do not contain any limitation that the
credit being extended, or debt being collected, must have been to or from a resident of Florida. See §§ 559.55(3) and
(6). … [Therefore,] Defendant's Florida office is a sufficient business presence in that state to render it answerable to
plaintiff's claim that defendant violated the FCCPA when its agents attempted to collect an erroneous debt from
plaintiff.” Mlynek, 2000 WL 1310666, at *5.
28
Finally, although the NYFCRA extends to nonresident consumers, the language of the
statute clearly limits the application of § 380-b(b) to individuals and not entities. N.Y. Gen. Bus.
Law § 380-a. For this reason, the NYFCRA § 380-b(b) claims of Plaintiff Schilco must be
dismissed.
F. Violations of GBL § 349
1. Consumers at Large
Section 349 of the GBL prohibits “[d]eceptive acts or practices in the conduct of any
business, trade or commerce or in the furnishing of any service....” N.Y. Gen. Bus. § 349(a).
New York courts have held that, “[t]o successfully assert a [§ 349] claim, a plaintiff must allege
that a defendant has engaged in (1) consumer-oriented conduct that is (2) materially misleading
and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice.” City of
New York v. Smokes–Spirits.Com, Inc., 12 N.Y.3d 616, 883 N.Y.S.2d 772, 911 N.E.2d 834, 838
(2009); accord Wilson v. Nw. Mut. Ins. Co., 625 F.3d 54, 64 (2d Cir. 2010). Plaintiffs claim that
Defendants violated Section 349 by “nonchalantly misus[ing] the court system of the State of
New York and the City of New York, and routinely mak[ing] false and baseless statements with
reckless abandon, and even after knowing the falsity of such statements” to obtain default
judgments against alleged debtors. (Compl. ¶ 234.) The Defendants argue that Plaintiffs’ claim
under Section 349 must be dismissed because they have failed to plead any conduct that impacts
“consumers at large.” (Def.’s Memo, 22.) The Court finds, however, that Plaintiffs have
sufficiently alleged consumer-oriented conduct within the ambit of the statute.
In New York, the requirement that defendants engage in consumer-oriented conduct has
been construed liberally. White v. Fein, Such & Crane, LLP, No. 15-CV-438-JTC, 2015 WL
6455142, at *6 (W.D.N.Y. Oct. 26, 2015) (citing New York v. Feldman, 210 F.Supp.2d 294, 301
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(S.D.N.Y. 2002)). It is clear that the requirement of consumer-oriented conduct means “the
gravamen of the complaint must be consumer injury or harm to the public interest.” Securitron
Magnalock Corp. v. Schnabolk, 65 F.3d 256, 264 (2d Cir. 1995) (citing Azby Brokerage, Inc. v.
Allstate Ins. Co., 681 F.Supp. 1084, 1089 n. 6 (S.D.N.Y. 1988)). Moreover, though “consumeroriented conduct” does “not require a repetition or pattern of deceptive behavior,” the plaintiff
“must demonstrate that the acts or practices have a broader impact on consumers at large.”
Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 25
(Cr.App. 1995). This does not mean that a plaintiff must allege other instances of misconduct; “a
plaintiff need not delay bringing his suit until a defendants' improper conduct harms other
individuals as long as the conduct has the potential to affect similarly situated consumers.” Id. at
25 (noting that legislative history demonstrates that statute was intended to “afford a practical
means of halting consumer frauds at their incipiency without the necessity to wait for the
development of persistent frauds”) (citation and internal quotation marks omitted). Instead,
Plaintiffs must only allege that “the same or similar actions [of defendants] are potentially (and
quite likely) directed toward numerous other consumers.” Shostack v. Diller, No. 15-CV-2255
GBD JLC, 2015 WL 5535808, at *8 (S.D.N.Y. Sept. 16, 2015). See also Midland Funding, LLC
v. Giraldo, 39 Misc. 3d 936, 961 N.Y.S.2d 743, 751 (Dist. Ct. 2013) (“a GBL § 349 pleading
need not allege a pattern of deceptive behavior. Rather, the consumer-oriented conduct
requirement simply contemplates a challenge to acts and practices which have a broader impact
on consumers at large.”) (internal quotation marks and citations omitted).
The critical question, therefore, is whether Defendants’ conduct affects the public interest
in New York. Defendants argue that this action concerns a “private dispute, unique to the
parties” and therefore does not affect the public interest. (Def.’s Memo, 22.) In Samms, the
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Southern District of New York held that the plaintiff’s complaint failed to allege consumeroriented conduct because the “conduct [complained of] consisted of filing a single complaint that
suffered from various alleged deficiencies, as described above. This conduct—the prosecution of
an individual lawsuit—was not commercial activity directed at consumers generally, nor did it
have any ‘ramifications for the public at large.’” Samms, 2015 WL 4079424, at *6 (citing Obal v.
Deutsche Bank Nat. Trust Co., No. 14 Civ. 2463, 2015 WL 631404, at *8 (S.D.N.Y. Feb. 13,
2015)). It is clear that filing an individual suit, unique to the parties thereto, does not satisfy the
consumer-oriented standard. On the other hand, the Southern District of New York has also held
that the persistent filing of fraudulent debt collection lawsuits against New York consumers does
fall within the scope of Section 349. Mayfield v. Asta Funding, Inc., 95 F. Supp. 3d 685, 700
(S.D.N.Y. 2015) (citing Sykes v. Mel Harris & Associates, LLC, 757 F.Supp.2d 413, 428
(S.D.N.Y. 2010); Midland Funding, LLC, 39 Misc.3d at 961 N.Y.S.2d at 752 (finding that
“‘routine filing’ of assigned debt lawsuits by plaintiff ‘despite a lack of crucial, legally
admissible information’ or ‘sufficient inquiry’ into whether the claims are meritorious” falls
within scope of GBL)). See also White, 2015 WL 6455142, at *6 (“While it is true that defendant
entered into private settlement agreements with the plaintiffs, defendant sought attorneys' fees
and costs in accordance with its established practice and policies. It is alleged that all debtors in
foreclosure actions brought by defendant would be subject to the same practices and policies.
Defendant's acts therefore arguably have a ‘broader impact’ on the consuming public.”).
Compare Thomas v. Altschul, No. 13 CIV. 8320 RA, 2015 WL 5165334, at *4 (S.D.N.Y. Aug.
21, 2015) (internal citations omitted) (dismissing a Section 349 claim where “there is no
allegation that this was a general practice, that it had ever occurred before or was likely to occur
again, or that anyone other than Plaintiff was or would be affected by such conduct”).
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Here, Defendants’ conduct is not limited to, nor is it unique to, the Plaintiffs in the instant
action. Defendants have routinely filed allegedly fraudulent lawsuits in New York courts and
obtained default judgments against various consumers. (See Compl. ¶ 234.) The Court is aware
of at least four other cases—Serin, Angermeir, Ritchie, and Aldrich—in which Plaintiffs
complain of the same conduct of Defendants. Clearly, these allegedly fraudulent practices are
affecting more than just the current Plaintiffs, and it appears likely that the conduct is a general
practice that could affect additional consumers. The Court therefore agrees with Mayfield that
“Defendants' deceptive conduct is consumer-oriented and harmful to the public interest in that
consumers are forced to respond to the fraudulent lawsuits or else face the penalty of wrongful
default judgments.” Mayfield, 95 F. Supp. 3d at 700.
2. Preemption
Under the FCRA, “[n]o requirement or prohibition may be imposed under the laws of any
State ... with respect to any subject matter regulated under ...section 1681s–2 of this title, relating
to the responsibilities of persons who furnish information to consumer reporting agencies.”15
U.S.C. § 1681t(b)(1)(F). See also 15 U.S.C. § 1681s–2; Barberan v. Nationpoint, 706 F. Supp.
2d 408, 429 (S.D.N.Y. 2010) (“As pled, Plaintiffs' tort claims fall squarely within the subject
matter regulated under § 1681s–2, which governs the furnishing of information to credit
agencies.... As a result, Plaintiffs' state common law claims are preempted by § 1681t(b)(1)(F)”).
Defendants argue that Plaintiffs’ § 349 claims must be dismissed because they are preempted
under the FCRA. As the Second Circuit has explained, “[Section] 1681t(b)(1)(F) preempts any
recovery for damages based on allegations of erroneous or otherwise improper furnishing” of
information to credit reporting agencies. Galper v. JP Morgan Chase Bank, N.A., 802 F.3d 437,
449 (2d Cir. 2015). The section, however, does not preempt all claims relating to furnishers of
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credit information but only claims based on “laws that regulate the responsibilities of persons
who furnish information to consumer reporting agencies.” Id. at 447. It does not, therefore, bar
all claims under § 349 but only those relating solely to the furnishing of information to consumer
reporting agencies. As explained above, Plaintiffs’ claims are based on a scheme of allegedly
forging leases and filing fraudulent lawsuits to recover on such leases. Plaintiffs’ claims are
therefore much broader than the scope of preemption under the FCRA and are not preempted by
the FCRA.
3. Consumers Outside of New York
Finally, Defendants argue that the out-of-state plaintiffs do not have standing to assert a
claim under § 349, which prohibits “[d]eceptive acts or practices ... in this state.” N.Y. Gen. Bus.
Law § 349(a) (emphasis added). In Goshen v. Mut. Life Ins. Co. of N.Y., 98 N.Y.2d 314, 746
N.Y.S.2d 858, 774 N.E.2d 1190 (2002), the New York Court of Appeals interpreted this
language in § 349 as “evinc[ing] a legislative intent to address commercial misconduct occurring
within New York.” Id., 746 N.Y.S.2d 858, 774 N.E.2d at 1195. The Second Circuit clarified this
territorial requirement and explained the test as one based on “the location of the transaction, and
in particular the strength of New York's connection to the allegedly deceptive transaction, rather
than on the residency of the parties.” Cruz v. FXDirectDealer, LLC, 720 F.3d 115, 122 (2d Cir.
2013) (internal quotation marks and citations omitted). In Cruz, the court found that the claim
“satisfied the territorial requirement because (1) the defendant was allegedly paid in New York,
(2) the defendant allegedly required that all customer communications be directed to a New York
location, and (3) its agreement with the consumers contained choice-of-law and forum-selection
clauses selecting New York law and New York courts for litigation arising out of the
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agreement." Ward v. TheLadders.com, Inc., 3 F. Supp. 3d 151, 167-68 (S.D.N.Y. 2014),
reconsideration denied (Apr. 21, 2014) (citing Cruz, 720 F.3d at 123-24).
In this case, the pleadings contain a number of connections to New York, including that
many communications stemmed from New York and the Defendants availed themselves of the
New York courts. The location of the allegedly deceptive transactions is a question of fact that
cannot properly be decided on a motion to dismiss. Therefore, at this stage of the litigation, the
out-of-state Plaintiffs have pleaded sufficient facts that, at the very least, give rise to a plausible
inference that the allegedly deceptive transaction occurred in New York, and the Coutt cannot
dismiss the claims as a matter of law.
CONCLUSION
For the foregoing reasons, the Defendants' Motion to Dismiss is GRANTED in pait and
DENIED in part. The following claims have been dismissed: (1) the RICO claims of plaintiffs
Glasgow, Norris, and Moore; (2) all FCRA and NYFCRA claims of plaintiffs Moore and Rivera;
(3) the FCRA and NYFCRA claims based on inaccurate reporting of plaintiffs Higgins and
Norris; (4) the FCRA and NYFCRA claims based on negligence of plaintiffs Glasgow, Higgins,
Schilber, and Schilco; and (5) the NYFCRA § 380-b claims based on impermissible access of
credit repo1ts of plaintiff Schilco. The Clerk of Court is respectfully requested to terminate the
pending Motion. (ECF No. 13.) Defendants shall file an answer on or before January 5, 2016. An
initial pretrial conference is scheduled for January 29, 2016 at 12:00 p.m. The parties are directed
to bring a completed case management plan to this conference.
Dated:
December _L, 2015
White Plains, New York
SO ORDERED:
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