Wilson v. HSBC Bank, USA et al
Filing
48
OPINION & ORDER re: 25 MOTION to Dismiss the Complaint, filed by Mortgage Electronic Registration Systems, Inc., HSBC Bank, USA, 35 MOTION to Amend/Correct 21 Letter Plainitff's Cross-Motion to Amend the Complain t, filed by Mortgage Electronic Registration Systems, Inc., HSBC Bank, USA. Defendants' Motion to Dismiss the Complaint is granted, with leave to amend only the second part of Plaintiff's claim arising under the FCRA as explaine d above. The Clerk of Court is respectfully requested to terminate the motions at ECF Nos. 25 & 35, mail a copy of this Opinion and Order to pro se Plaintiff at the address below, and file proof of service on the docket. The Clerk of Court is also requested to terminate Defendants MortgageIT, Inc., Mortgage Electronic Registration Systems, Inc., Prudential Rand Realty, Inc., all persons with an interest in real property located at 4 William Street, Ossining, New York, and Does 1-100. Plaint iff is directed to file an Amended Complaint in conformance with the above on or before May 21, 2018. Failure to timely file an Amended Complaint will result in the dismissal of the complaint and termination of the action. The remaining Defendant, H SBC Bank, USA, shall answer or seek a pre-motion conference on any potential motion to dismiss by June 20, 2018. An in-person Initial Pre-trial Conference is scheduled for June 29, 2018, at 12:00 p.m., at the United States Courthouse, 300 Quarropas Street, Courtroom 218, White Plains, New York 10601. The parties shall confer in accordance with Fed. R. Civ. P. 26(f) at least 21 days prior to the conference and attempt in good faith to agree upon a proposed discovery plan that will ensure trial readiness within six months of the conference date. The parties shall also complete an amended Civil Case Discovery Plan and Scheduling Order and bring it to the conference. (Signed by Judge Nelson Stephen Roman on 3/22/2018) (ras)
USDCSDNY
DOCUMENT
. ELECTRONICALLY FILED
J>OC'JI:_.- - - - , - - ~ DATE FILED: 3/J'J
'6
UNITED STATES DISTRJCT COURT
SOUTHERN DISTRICT OF NEW YORK
lao1
SHERWIN WILSON,
Plaintiff,
-againstHSBC BANK, USA, as trustee ofBcap-2008-inl; a
securitized trust; MORTGAGEIT, INC., a corporation;
MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC., as nominee ofMortageit, Inc.;
PRUDENTIAL RAND REALTY, INC., a business;
ALL PERSONS AND ENTITIES WITH AN
INTEREST IN REAL PROPERTY LOCATED AT 4
WILLIAM STREET, OSSINING, NEW YORK, and
DOES 1-100, inclusively,
No. 16-cv-8405 (NSR)
OPINION & ORDER
Defendants.
NELSONS. ROMAN, United States District Judge
Plaintiff Sherwin A. Wilson, proceeding pro se, commenced this action against HSBC
Bank, USA, Mot'tgageIT, Inc., Mortgage Electronic Registration Systems, Inc., Pmdential Rand
Realty, Inc., all persons and entities with an interest in real property located at 4 William Street,
Ossining, New York, and Does 1-100. (See Comp!., ECF No. 1.) Plaintiff brings fourteen claims
sounding in: (I) negligence; (2) declaratory judgment; (3) temporary restraining order and
preliminary injunction; ( 4) fraudulent misrepresentation; (5) breach of duty of good faith and fair
dealing; (6) quiet title; (7) accounting; (8) violation of the Fair Debt Collection Practices Act
(FDCPA); (9) specific performance; (I 0) breach of written and/or oral contracts; (11) violation of
the Racketeer Influenced and Corrupt Organizations Act (RICO); (12) rescission of note and deed
of trust under the Truth in Lending Act (TILA) and restitution of sums paid; (13) violation of the
Fair Credit Repmting Act (FCRA); and (14) violation of 42 U.S.C. § 1983. Before the Comt are
1
Defendants’ Motion to Dismiss the Complaint pursuant to Federal Rules of Civil Procedure
12(b)(1) and (6), and Plaintiff’s Cross-Motion to Amend the Complaint. For the following reasons,
Defendants’ motion is GRANTED and Plaintiff’s motion is DENIED. Plaintiff, however, is
granted leave to amend part of the claim arising under the Fair Credit Reporting Act as described
below.
BACKGROUND
On or about May 4, 2006, Plaintiff, an African American male, executed a mortgage loan
on a one-family home located on 4 William Street, Ossining, New York (the “subject property”).
(Compl. ¶ 13(a).)1 The loan “consisted of a Note and Mortgage” that was “crafted” by First
Franklin, a division of National City Bank, Inc. (Id. ¶¶ 12, 13(a).)2 Plaintiff began making
payments on the mortgage pursuant to the agreement. After “escrow closed,” however, a dispute
arose concerning the terms and conditions of the agreement. (Id. ¶ 13(a).) According to Plaintiff,
the terms and conditions of the agreement did not match what was promised by First Franklin.
(Id. ¶ 13.) First Franklin purportedly promised lower monthly payments on the loan— a problem
that Plaintiff was unable to preempt because First Franklin did not provide the closing documents
to confirm the actual monthly payments. (Id. ¶ 76.) Plaintiff complained about the difference in
monthly payments (Id.) and “protested” the higher payments and interest rates on the loan. (Id. ¶
76a.) The outcome of the complaints is unknown.
1
Defendants claim that Plaintiff executed the mortgage loan on the subject property with another
individual, Robert Hum. Defendants also claim that Plaintiff did not sign the Note for the
principal amount of $305,000. (Mem. of Law in Supp. of Mot. to Dismiss Pl. Compl. (“Def.
Mot.”) 2, ECF No. 26.)
2
Defendant HSBC acquired the rights to the loan soon thereafter. (See Decl. of Shane M. Biffar
in Supp. of Mot. to Dismiss (“Biffar Decl.”), Exh. 3 (“Foreclosure Action Complaint”), ECF No.
27.)
2
On October 8, 2010, Defendant HSBC Bank, USA (“HSBC”) commenced a Foreclosure
Action on the subject property in New York State Supreme Court, County of Westchester.
(Mem. of Law in Supp. of Mot. to Dismiss Pl. Compl. (“Def. Mot.”) 2, ECF No. 26; Decl. of
Shane M. Biffar in Supp. of Mot. to Dismiss (“Biffar Decl.”), Exh. 3 (“Foreclosure Action
Complaint”), ECF No. 27.)3 The Complaint alleged that Robert Hum and Plaintiff Wilson failed
to comply with the conditions of the mortgage loan by failing to pay the required charges. (Id.)
Plaintiff Wilson answered the complaint and alleged that HSBC did not notify him of the default
nor provide the necessary information to cure it. (Biffar Decl., Exh. 4 (“Answer to Foreclosure
Complaint”), ECF No. 27.)
On or about October 2012, Plaintiff spoke to a representative of Defendant HSBC via
telephone about “reforming or ‘novating’ the Note to better terms and payments.” (Compl. ¶
76b.) A loan negotiator by the name of Carmela Diaz stated that she represented Plaintiff’s
lender and informed Plaintiff about a program for their “good paying borrowers.” (Id. 76b.) Diaz
informed Plaintiff that by missing payments for three consecutive months, the lender would
guarantee a new Note with “better terms” and that Plaintiff’s monthly payment would decrease.
When the Court assesses a 12(b)(6) motion “the court may consider the facts alleged in the
complaint, any document attached as an exhibit or incorporated by reference and matters of
which judicial notice may be taken.” Yeiser v. GMAC Mortg. Corp., 535 F. Supp. 2d 413, 420
(S.D.N.Y. 2008) (citing Fed. R. Civ. P. 10(c); Dangler v. N.Y. City Off Track Betting Corp., 193
F.3d 130, 138 (2d Cir.1999)); see also TechnoMarine SA v. Giftports, Inc., 758 F.3d 493, 498
(2d Cir. 2014) (“A court may consider a res judicata defense on a Rule 12(b)(6) motion to
dismiss when the court's inquiry is limited to the plaintiff's complaint, documents attached or
incorporated therein, and materials appropriate for judicial notice”). Accordingly, the Court takes
into consideration documents filed in, and the final judgment of, the state court Foreclosure
Action provided by the Defendants because they are integral to the complaint and are precisely
the type of documents which the Court may take judicial notice of. See e.g., Nath v. JP Morgan
Chase Bank, No. 15-CV-3937 (KMK), 2016 WL 5791193, at *1 (S.D.N.Y. Sept. 30, 2016)
(drawing facts from “the Complaint, as well as the various transaction documents and state court
documents attached to Private Defendants’ moving papers” in a federal court action stemming
from a state court Foreclosure Action).
3
3
If Plaintiff agreed, Diaz promised him that the home would not be foreclosed and that the loan
would not be considered defaulted. (Id. ¶ 76b.) Plaintiff agreed to participate in the program and
considered participation to be a novation of the loan. (Id. ¶¶ 76.a, 76b.) After missing payments
for three consecutive months, HSBC rejected Plaintiff’s payment on the fourth month. Plaintiff
called HSBC and was told by Diaz that they had no record of the loan novation, that Plaintiff
defaulted on the loan, and that the property would be foreclosed. (Id. ¶ 76.c.)
On March 31, 2016, the Supreme Court of New York, County of Westchester, issued a
judgment of foreclosure and sale concerning the subject property. (Biffar Decl., Exh. 5
(“Foreclosure Judgment”), ECF No. 27.) The Foreclosure Judgment found that Plaintiff HSBC
was entitled to judgment establishing the validity of the mortgage and that Plaintiff HSBC was
entitled to recover upon the mortgage the sum of $495,262.28. The court then ordered the
foreclosure sale of the subject property and that “each and all of the defendants in this action . . .
are forever barred and foreclosed of all right, claim, lien, title, interest and equity of redemption
in said premises and every part thereof.” (Id.) Notwithstanding the foreclosure judgment,
Plaintiff now claims sole ownership of the subject property by way of “Grant or Warranty
Deed.” (Id. ¶¶ 7–8.)
STANDARD ON MOTION TO DISMISS
“A case is properly dismissed for lack of subject matter jurisdiction under [Federal] Rule
[of Civil Procedure] 12(b)(1) when the district court lacks the statutory or constitutional power to
adjudicate it.” Nike, Inc. v. Already, LLC, 663 F.3d 89, 94 (2d Cir. 2011) (internal citation and
quotation marks omitted). “A plaintiff asserting subject matter jurisdiction has the burden of
proving by a preponderance of the evidence that it exists.” Morrison v. Nat'l Australia Bank Ltd.,
4
547 F.3d 167, 170 (2d Cir. 2008) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir.
2000)). In assessing whether there is subject matter jurisdiction, the Court must accept as true all
material facts alleged in the complaint, Conyers v. Rossides, 558 F.3d 137, 143 (2d Cir. 2009),
but “the court may resolve [any] disputed jurisdictional fact issues by referring to evidence
outside of the pleadings, such as affidavits . . .” Zappia Middle E. Const. Co. v. Emirate of Abu
Dhabi, 215 F.3d 247, 253 (2d Cir. 2000). “Courts should go to lengths to ensure that
inexperienced pro se litigants do not inadvertently forfeit rights or winning arguments; this
‘special solicitude’ includes a liberal construction of papers and a flexibility on some otherwiserigid procedural rules.” Robinson v. HSBC Mortg. Serv., Inc., 15-CV-5480 (VEC), 2017 WL
570935, at *2 (S.D.N.Y. Feb. 10, 2017) (quotations and citation omitted).
A Rule 12(b)(6) motion tests the legal sufficiency of a complaint and requires a court to
determine whether the facts alleged are sufficient to show that the plaintiff has a plausible claim
for relief. See Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). When ruling on a Rule 12(b)(6)
motion, a court must accept the factual allegations set forth in the complaint as true and draw all
reasonable inferences in favor of the plaintiff. See, e.g., Holmes v. Grubman, 568 F.3d 329, 335
(2d Cir. 2009). To survive such a motion, however, the plaintiff must plead sufficient facts “to
state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). A claim is facially plausible “when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678. In determining whether a complaint states a plausible claim for relief, a
district court must consider the context and “draw on its judicial experience and common sense.”
Id. at 679. In assessing whether this standard has been met, courts take “all factual allegations
contained in the complaint” as true, Twombly, 550 U.S. at 572, and “draw all inferences in the
5
light most favorable to the non-moving party[ ],” In re NYSE Specialists Sec. Litig., 503 F.3d 89,
95 (2d Cir. 2007) (citation omitted). A plaintiff must show “more than a sheer possibility that a
defendant has acted unlawfully,” id., and cannot rely on mere “labels and conclusions” to
support a claim. Twombly, 550 U.S. at 555. If the plaintiff's pleadings “have not nudged [his or
her] claims across the line from conceivable to plausible, [the] complaint must be dismissed.” Id.
at 570.
Rule 12(b)(6) warrants dismissal of a claim under the doctrine of res judicata where “it is
clear from the face of the complaint, and matters of which the court may take judicial notice, that
the plaintiff's claims are barred as a matter of law.” Conopco, Inc. v. Roll Int'l, 231 F.3d 82, 86
(2d Cir. 2000).
DISCUSSION
Plaintiff brings fourteen causes of action. Defendants move to dismiss all fourteen causes
of action on various grounds pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6).
Defendants’ first contention is that the Court lacks subject matter jurisdiction pursuant to the
Rooker-Feldman doctrine.4
Rooker-Feldman
The Rooker-Feldman doctrine “denies ‘federal district courts . . . jurisdiction over cases
that essentially amount to appeals of state court judgments.” Barbato v. U.S. Bank National
Association, 14-CV-2233 (NSR), 2016 WL 158588, at *2 (S.D.N.Y. Jan. 12, 2016) (citing
Vossbrinck v. Accredited Home Lenders, Inc., 773 F.3d 423, 426 (2d Cir. 2014)). To apply the
Rooker-Feldman doctrine, the Court must find that the following four requirements are met:
4
The Rooker-Feldman doctrine acquired its name from a set of Supreme Court cases: Rooker v.
Fidelity Trust Co., 263 U.S. 413 (1923) and District of Columbia Court of Appeals v. Feldman,
460 U.S. 462 (1983).
6
(1) the federal-court plaintiff lost in state court; (2) the plaintiff ‘complain[s] of
injuries caused by a state court judgment’; (3) the plaintiff ‘invite[s] . . . review and
rejection of that judgment’; and (4) the state judgment was ‘rendered before the
district court proceedings commenced.’
Vossbrinck, 773 F.3d at 426 (citing Hoblock v. Albany Cnty. Bd. of Elecs., 422 F.3d 77, 85 (2d
Cir. 2005)). The Second Circuit characterizes the first and fourth elements as “procedural” and
the second and third elements as “substantive.” Hoblock, 422 F.3d at 85.
The Doctrine is a narrow one and is “confined to cases of the kind from which the
doctrine acquired its name: cases brought by state-court losers complaining of injuries caused by
state-court judgments rendered before the district court proceedings commenced and inviting
district court review and rejection of those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus.
Corp., 544 U.S. 280, 284 (2005) Buttressing the doctrine is the principle “expressed by Congress
in 28 U.S.C. § [] 1257, that within the federal judicial system, only the Supreme Court may
review state-court decisions.” Webster v. Wells Fargo Bank, N.A., No. 08 Civ. 10145, 2009 WL
5178654, at *5 (S.D.N.Y. Dec. 23, 2009) (quotations omitted) (citing Green v. Mattingly, 585
F.3d 97, 101 (2d Cir. 2009)).
Federal suits that raise “independent claims”—meaning, claims that are not inextricably
intertwined with the state court judgment, Robinson, 2017 WL 570935, at *3— are not barred by
the Rooker-Feldman doctrine. Hoblock, 422 F.3d at 86–87. The Second Circuit made clear that
the “doctrine turns not on the similarity between a party’s state-court and federal-court claims
(which is, generally speaking, the focus of ordinary preclusion law), but rather on the causal
relationship between the state-court judgment and the injury of which the party complains in
federal court.” McKithen v. Brown, 481 F.3d 89, 97–98 (2d Cir. 2007); see also Nath v. JP
Morgan Chase Bank, No. 15-CV-3937 (KMK), 2016 WL 5791193, at *6 (S.D.N.Y Sept. 30,
2016) (noting that the “core requirement” of the doctrine is that “a plaintiff's injuries be caused
7
by the state judgment”); Peterson v. Wells Fargo Trustee, No. 16-3635-cv, 2018 WL 341734, at
*2 (2d Cir. Jan. 10, 2018) (summ. order) (noting that the Rooker-Feldman doctrine “deprive[s]
federal courts of subject-matter jurisdiction only to the extent [Plaintiff’s] prayer for relief seeks
vacatur of the state court’s foreclosure judgment, not to the extent []he seeks compensation for
defendants’ fraud while leaving the state judgment in place”). This causal requirement is
satisfied when the state court is the decision maker whose action produces the injury. Robinson,
2017 WL 570935, at *3 (citing Sindone v. Kelly, 439 F. Supp. 2d 268, 272 (S.D.N.Y. 2006)).
This is not the first time a mortgagor has filed suit in federal court following an adverse
state-court foreclosure judgment. In similar situations “[c]ourts in this Circuit have consistently
held that any attack on a judgment of foreclosure is clearly barred by the Rooker-Feldman
doctrine.” Webster, 2009 WL 5178654, at *5 (quotations and citations omitted); see also Davis v.
JP Morgan Chase Bank, No. 14-CV-6263 (KMK), 2016 WL 1267800, at *6 (S.D.N.Y. March
30, 2016) (collecting cases).
Here, the first and fourth elements of the doctrine are clearly met. Plaintiff “lost” in New
York State Supreme Court when that court ruled against Plaintiff in the foreclosure suit brought
by Defendant HSBC. (Foreclosure Judgment 1.) Second, the state court issued its decision on
March, 31 2016—several months before Plaintiff commenced this suit on October 28, 2016.
As a preliminary matter, the Court holds that the Rooker-Feldman doctrine clearly bars
pro se Plaintiff’s request that the Court review and reject the mortgage foreclosure decision,
restrain the foreclosure sale, cancel, set aside, vacate the notice of default, cancel and reform all
deeds in Plaintiff’s name, and invalidate the state court’s foreclosure decision. (See e.g., Compl.
at 32–33.) Simply stated, Plaintiff may not ask this Court to reverse the foreclosure judgment.
See Vossbrinck, 773 F.3d at 427 (“To the extent [Plaintiff] asks the federal court to grant him
8
title to his property because the foreclosure judgment was obtained fraudulently, Rooker–
Feldman bars [Plaintiff’s] claim”); Sylvester v. Bayview Loan Servicing LLC, 15-CV-1736
(JPO), 2016 WL 3566234, at *5 (S.D.N.Y. June 24, 2016) (“To the extent that Plaintiffs ask this
Court to reverse the foreclosure judgment, their claim cannot succeed”).
a. Claims Barred by Rooker-Feldman5
Addressing the substantive elements of the Rooker-Feldman doctrine, the Court finds that
Plaintiff’s claims seeking declaratory judgment, a temporary restraining order and preliminary
injunction, quiet title, accounting, specific performance, and rescission of note and deed of trust
under TILA, clearly invite this Court to review and reject the state court judgment, and all
complain of injuries caused by the state court foreclosure judgment, and are, thus, barred by the
Rooker-Feldman doctrine. See Vossbrinck, 773 F.3d at 426. The Court now turns to each of
Plaintiff’s claims.
Plaintiff’s second cause of action for declaratory judgment asks the court to make
findings on the “rights and duties arising under a promissory note and deed of trust[,] the
ownership of which may have been abrogated.” (Compl. ¶ 48.) Plaintiff argues that such a
finding will show that “HSBC cannot declare a default, sue to foreclose or continue its relentless
to do so in NY state courts illegally.” (Id.) Plaintiff’s third cause of action asks the Court to “stop
all further state litigation by TRO and injunction by writ of prohibition or mandate, of plaintiff’s
subject property.” (Id. ¶ 53.) More specifically, as the title of the section reads, Plaintiff asks the
Court to enjoin the foreclosure sale of the subject property. The Rooker-Feldman doctrine
patently prohibits review of both of these claims because it would require the Court to review
5
Alternatively, the Court also finds that these six claims are barred by the doctrine of res judicata
because they stem from the same transaction as the Foreclosure Action and should have been
raised as either defenses or counterclaims in state court.
9
and reject the state court ruling, and Plaintiff complains of an injury caused by the state court
judgment. See Wenegieme v. U.S. Bank National Association, 16 Civ. 6548 (ER), 2017 WL
1857254, at *3 (S.D.N.Y. May 4, 2017) (noting that the Rooker-Feldman doctrine prevents
federal district courts from exercising jurisdiction over a motion for a temporary restraining
order and preliminary injunction of a state court foreclosure ruling).
Plaintiff’s sixth cause of action, to quiet title, asks the Court to determine ownership of
the note, mortgage, and real property interest. Plaintiff seeks to “quite title . . . [as of] the date of
close of escrow and for a judicial declaration that the title to the Subject Property is vested in
Plaintiff alone and that any Defendant . . . be declared to have no interest estate, right, title, or
interest in the subject property” and that they “be forever enjoined from asserting any estate,
right title or interest in the Subject Property.” (Compl. ¶ 112.) Plaintiff again invites the Court to
find that “defendant does not own the Note or the Mortgage, thus invalidating the foreclosure
judgment and returning the property to Plaintiff[].” Barbato, 2016 WL 158588, at *3 (holding
that Plaintiff’s quiet title claim would require the court to review the state proceedings and
determine that the foreclosure judgment was issued in error); Nath, 2016 WL 5791193, at *7
(holding that Plaintiff’s quiet title claim “undeniablby complain[s] of, and seek[s] to have
remedied, the State Foreclosure Judgment”). Accordingly, because Plaintiff complains of an
injury caused by the state Foreclosure Action and asks this court to review and reject the
judgment, this claim is barred by the doctrine.
Plaintiff’s seventh cause of action for accounting against all the Defendants “demands an
accounting of the[] entire loan account from any and all defendants and Does.” (Compl. ¶ 124.)
Plaintiff seeks to “determine the correct amount of the loan, note, payments made, payments due,
credits due and payoff balance and that responsible defendants pay the cost of their cause of
10
action as part of the damages awarded to plaintiff.” (Id.) Not only does this claim invite this
Court to review and reject the state court’s finding, but the claim also complains about an injury
caused by the state court ruling, namely, the purported incorrect amount due on the loan. The
New York State Supreme Court appointed a referee to “ascertain and compute the amount due to
the plaintiff [HSBC] pursuant to the note and mortgage.” (Foreclosure Judgment 1.) The referee
found, and the state court adopted the finding, that a sum of $495,262.28 was due to HSBC as of
December 3, 2015 on the note and mortgage. (Id. at 2–3.) Therefore, because Plaintiff asks this
Court to review and reject the state court judgment, and Plaintiff complains of an injury caused
by the judgment, this claim is likewise barred.
Plaintiff’s ninth cause of action for specific performance is likewise barred by the
doctrine. Plaintiff claims that the oral contract to novate the loan should be enforced. The terms
of the purported contract called for “reduced monthly payments and that no foreclosure will be
imposed based on such promises.” (Compl. ¶ 148.) This claim would require the Court to reject
the state court judgment and halt the foreclosure sale of the subject property. Consequently, this
claim too is barred by the doctrine because it would require the Court to review the state court
judgment and the injury complained of—the foreclosure sale of the property— was caused by
the state court judgment.
Plaintiff’s twelfth cause of action for rescission of note and deed of trust under the Truth
in Lending Act (“TILA”) and restitution is also barred by the doctrine. Plaintiff claims that the
Note “was operatively cancelled” when “[w]ithin 3 years of the consummation of the loan . . . a
writing from plaintiff to defendant lenders was sent cancelling the Note obligation.” (Compl. ¶
164.) Consequently, Plaintiff alleges that “they have a right to rescind the active note and deed of
trust.” (Id. ¶ 165.) Plaintiff further seeks rescission of the Note and that restitution be ordered for
11
“all sums paid to defendant lender under the original note and subsequent payments amounting
to not less than $250,000.” (Id. ¶ 166.) This claim would certainly call the Court to review and
reject the state court judgment because it calls for a different finding on the Note’s viability and
sums due. Further, the injury claimed—that Plaintiff paid and continues to pay sums not due to
HSBC because Plaintiff rescinded the Note—was caused by the state court judgment. Plaintiff is
effectively asking the Court to find that the Note and loan were void and that this Court order
that HSBC return the sums that the state court found were due. This, the Court cannot do. See
Webster, 2009 WL 5178654, at *6 (noting that “Plaintiffs invite review and rejection of the
foreclosure judgment because they ask this Court to hold that the subject mortgage is void based
on” their claim).
b. Claims not barred by Rooker-Feldman
Plaintiff’s other eight claims are not barred by the Rooker-Feldman doctrine because they
do not invite this Court to review the state court judgment nor is the Plaintiff complaining of an
injury caused by the state court judgment. See Holmes v. Caliber Home Lo2017 ans, Inc., No.
16-CV-3344 (KMK), 2017 WL 3267766, at *7 (S.D.N.Y. July 31, 2017) (noting that the “core
requirement” of the Rooker-Feldman doctrine is that Plaintiff’s injuries be caused by the state
judgment). Thus, the doctrine “would not prevent Plaintiff from ‘raising federal claims based on
the same facts as a prior state case . . . so long as . . . [P]laintiff complains of an injury
independent of an adverse state court decision.’” Davis, 2016 WL 1267800, at * 6 (quoting Scott
v. Capital One, Nat. Associates, No. 12–CV–00183 (ER), 2013 WL 1655992, at *3 (S.D.N.Y.
April 17, 2013))).
Plaintiff’s first cause of action for negligence claims that the Defendants were negligent
in their servicing of Plaintiff’s loan. (Compl. ¶ 37.) Specifically, Defendant’s were negligent in
12
calculating the sums due under the loan and failing to properly credit payments made by Plaintiff
towards the loan. (Id.) As a result, Plaintiff seeks a sum of “not less than $500,000.” (Id, ¶ 43.)
This claim is not barred by the Rooker-Feldman doctrine because Plaintiff is not complaining of
an injury caused by the state court judgment since the “injury” in question was caused by the
servicing of the loan agreement, which occurred prior to the state court judgment. Thus, the
claim is not barred by the doctrine. Vossbrinck, 773 F.3d at 426.
Plaintiff’s fourth cause of action for fraudulent misrepresentation alleges that Defendants
engaged in two fraudulent schemes. First, Plaintiff alleges that the loan originator, First Franklin,
represented that monthly payments would be less than they ended up being. (Compl. ¶¶ 75.1,
76.) The Second scheme, executed by Defendant HSBC and its agents (Id. ¶ 75.1), involved a
telephone conversation between Plaintiff and an HSBC representative, Carmela Diaz, who
promised Plaintiff that by withholding loan payments for three months, he would qualify for a
new monthly payment rate and the subject property would not be foreclosed nor the loan
defaulted. (Id. ¶ 76b.) Plaintiff seeks “not less than five million dollars.” (Id. ¶ 77.) Here,
Plaintiff’s complaint can be liberally construed to allege injury stemming from the same factual
predicate as, but not caused by, the foreclosure judgment. Holmes, 2017 WL 3267766, at *7.
This claim would not require this Court to sit in review of, or reject, the state court judgment
because the Court, if it reached the merits, would have to determine whether Defendants engaged
in fraud prior to the commencement of the foreclosure proceeding. See Vossbrinck, 773 F.3d at
427–28. Further, the relief Plaintiff seeks evinces that the injury he complains of occurred prior
to the foreclosure judgment and was not caused by the judgment. Id. at 427.
The second part of this claim however, may require the Court to sit in review of the state
court judgment. If this Court were to reach the merits of HSBC’s purported fraud, the Court
13
would have to decide whether or not the default was fraudulently induced, which may call on
this Court to review the state Court judgment. Nevertheless, the injury complained of was not
caused by the state court judgment, but rather the fact that Defendants began foreclosure
proceedings in the first place. Here, the Court may be asked to deny a legal conclusion that the
state court may have reached, but it is not being asked to reverse the state court judgment. See
Exxon, 544 U.S. at 293 (“Nor does § 1257 stop a district court from exercising subject-matter
jurisdiction simply because a party attempts to litigate in federal court a matter previously
litigated in state court. If a federal plaintiff present[s] some independent claim, albeit one that
denies a legal conclusion that a state court has reached in a case to which he was a party . . ., then
there is jurisdiction and state law determines whether the defendant prevails under principles of
preclusion.) (quotations and citations omitted); Hoblock, 422 F.3d at 87 (“we know that an
independent (and therefore non-barred) claim may den[y] a legal conclusion reached by the state
court.”) (quotations and citations omitted). Thus, neither fraud claim is barred by the RookerFeldman doctrine.
Plaintiff’s fifth cause of action for breach of good faith and fair dealing against all
Defendants alleges that Defendants breached the promissory Note and secondary promises to
novate the loan. (Compl. ¶ 83.1.) Plaintiff alleges that the Note and novation had implied
covenants of good faith and fair dealing and the Defendants breached them through their
fraudulent conduct described in the fourth cause of action. (See id. ¶ 83.2.) Plaintiff seeks
damages in the sum of “in no case less than two million dollars.” (Id. ¶ 87.) This claim is not
barred by Rooker-Feldman because the injury complained of was not caused by the foreclosure
judgment. See Holmes, 2017 WL 3267766, at *7. Here, Plaintiff is not seeking the rejection of
the state foreclosure judgment, but rather, complains of a breach of contract that occurred prior
14
to the foreclosure judgment and seeks remedies independent of the judgment. Thus, the claim is
not barred.
Plaintiff’s eighth cause of action for violation of the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1601, claims that Defendants, as alleged debt collectors, demanded
sums for payments not due or owed by Plaintiff to Defendant prior to the foreclosure proceeding.
(Compl. ¶ 127.) Plaintiff seeks damages under the Act for expenses, fees incurred as well as
sanctions. (Id. ¶ 128.) This claim is not barred by the Rooker-Feldman doctrine because it does
not invite the Court to reject the state court judgment and the injury complained of was not
caused by the foreclosure judgment, but rather Defendants’ actions prior to the judgment. Thus,
the claim is not barred under this doctrine. See Schuh v. Druckman & Sinel, L.L.P., 602 F. Supp.
2d 454, 461 (S.D.N.Y. 2009) (holding that Plaintiff’s FDCPA claim was not barred by the
Rooker-Feldman doctrine because Plaintiffs did not complain of an injury caused by the state
court judgment); Francis v. Nichols, No. 16-CV-1848 (CS), 2017 WL 1064719, *8 (S.D.N.Y.
March 21, 2017) (holding that the Rooker-Feldman doctrine barred FDCPA claims because the
claims called for the Court to sit in review of the state court judgment and because the damages
sought were intertwined with questions of whether the Defendant owned the Note or the
Mortgage).
The tenth cause of action for breach of two independent written and/or oral contracts
against HSBC is not barred by the doctrine. Plaintiff alleges that Defendant HSBC breached two
contracts. The first concerns HSBC’s alleged promise that if Plaintiff stopped making payments
for 90 days, HSBC would reduce Plaintiff’s monthly payments. (Compl. ¶ 151.) The second
alleged agreement was HSBC’s promise not to foreclose or “declare a default” on the subject
property. (Id. ¶ 152.) Plaintiff suffered “loss of down payment, excess charges including
15
overpayment of principal and interest for each month after the agreed to reduction under the
novation agreement, excessive fees, charges, forced placed insurance, and miscellaneous fees.”
(Id. ¶ 152.) Plaintiff seeks damages in the sum of $500,000. (Id. ¶ 153.) This claim does not
invite the Court to review and reject the state court judgment. Further, the injury was caused by
the purported breach of contract that lead to the foreclosure proceedings, and does not complain
of the state court foreclosure decisions itself. Holmes, 2017 WL 3267766, at *7. Thus, this
independent claim is no barred.
Plaintiff’s eleventh cause of action claims violations of the Racketeering Influenced
Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962. Plaintiff alleges that “a false debt . . .
was being collected, that at least two efforts and attempts were made to falsely collect, that the
evidence shows intent to defraud and cheat plaintiff in a scheme to fabricate the truth of the error
then add additional charges to the loan, then and now, never due.” (Compl. ¶ 162.) Plaintiff seeks
damages “in no event, less than $50,000,000.” (Id. ¶ 163.) This claim is also not barred by the
Rooker-Feldman doctrine because even though the claim may invite the Court to review parts of
the state court judgment, the injury complained of was not caused by the state foreclosure
judgment. The alleged conduct occurred before the foreclosure action began, and does not seek
relief from the state court judgment.
Plaintiff’s thirteenth cause of action for violations of the Fair Credit Reporting Act
(“FCRA”), 18 U.S.C. § 1681s-2(b), alleges that Plaintiff’s credit score was damaged by
Defendants’ purportedly fraudulent actions which, in turn, prompted the loan default and
foreclosure proceeding. (See ¶ 171–72.) Plaintiff seeks “equitable relief” in the form of ordering
credit reporting agencies “to correct” their rating and damages against Defendants who caused
the harm. (Id. ¶ 173.) The FCRA claims are not barred by the doctrine because although they
16
certainly complain of an injury caused by the foreclosure suit, they do not invite the review and
rejection of the state court judgment. The claims would require the Court to analyze whether the
parties in question followed the proper procedures under the FCRA—inquiries the state court
was not called upon to make.
Plaintiff’s fourteenth cause of action for violation of 42 U.S.C. § 1983 claims that the
loan originator provided Plaintiff with less favorable “loan products” because of Plaintiff’s race.
(Compl. ¶ 178.) Those terms included “higher interest rates, higher payments due per month and
higher purchase price and added included charges classifying the loan in what was known as a
‘subprime’ loan.” (Id.) This claim does not invite the Court to review or reject the state court
judgment nor does it complain of injuries caused by the state court judgment. Plaintiff attempts
to address alleged civil rights violations that are independent of the foreclosure judgment and
would not cause this Court to reject that judgment, and thus is not barred.
Accordingly, the Court finds that the Rooker-Feldman doctrine does not bar the
adjudication of Plaintiff’s first, fourth, fifth, eighth, tenth, eleventh, thirteenth, and fourteenth
causes of action.
Res Judicata and Collateral Estoppel
Defendants argue that Plaintiff’s claims are barred by the doctrines of res judicata and
collateral estoppel because the claims arise from the same transaction at issue in the foreclosure
action, namely, the mortgage on the subject property and corresponding loan. (Def. Mot. 6.)
Plaintiff does not provide a robust opposition to this argument and merely rejects the proposition
that any of the claims are barred by res judicata or collateral estoppel. (Pl. Opp. Mot. to Dismiss
17
(“Pl. Opp.”) 2, ECF No. 29.)6 The Court finds that Plaintiff’s first, fourth, fifth, eighth, tenth, and
eleventh causes of action are all barred by res judicata.
The doctrine of res judicata, also known as claim preclusion, provides that “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.” Allen v. McCurry, 449 U.S. 90, 94 (1980);
Rates Tech. Inc. v. Speakeasy, Inc., 685 F.3d 163, 169 (2d Cir. 2012). Federal Rule of Civil
Procedure 12(b)(6) warrants dismissal of claims under the doctrine of res judicata where “it is
clear from the face of the complaint, and matters of which the court may take judicial notice, that
the plaintiff’s claims are barred as a matter of law.” Conopco, Inc. v. Roll Int'l, 231 F.3d 82, 86
(2d Cir. 2000).
Since the prior judgment in question was issued by a New York State Court, this Court’s
analysis is governed by New York State law “which has adopted a transactional approach to res
judicata, barring a later claim arising out of the same factual grouping as an earlier litigated
claim 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).
In New York, “once a claim is brought to a final conclusion, all other claims arising out
of the same transaction or series of transactions are barred, even if based upon different theories
or if seeking a different remedy.” Gianatasio v. D'Agostino, 862 F. Supp. 2d 343, 348 (S.D.N.Y.
2012) (quoting O'Brien v. City of Syracuse, 54 N.Y.2d 353, 357 (1981)). However, new claims
In fact, Plaintiff’s Opposition to the Motion to Dismiss largely focuses on two issues: (1)
Defendants’ Statute of Limitations argument; and (2) that this case should be referred to
arbitration. Plaintiff, for the first time, argues that this case should be referred to arbitration
pursuant to the Federal Arbitration Act. (Pl. Opp. 4.) Plaintiff also argues that the state court
foreclosure judgment was “void on its face” for violation of the FAA arbitration requirements.
(Pl. Opp. 8.) This argument is clearly barred by the Rooker-Feldman doctrine and, in any event,
should have been raised during the foreclosure proceeding.
6
18
arising subsequent to a prior action are not barred by res judicata, irrespective of whether or not
they are premised upon facts stemming from the same “course of conduct.” Storey v. Cello
Holdings, L.L.C., 347 F.3d 370, 383 (2d Cir. 2003). “Whether or not the first judgment will have
preclusive effect depends in part on whether the same transaction or connected series of
transactions is at issue, whether the same evidence is needed to support both claims, and whether
the facts essential to the second were present in the first.” Morales v. SUNY Purchase College,
14-cv-8193 (NSR), 2015 WL 7430864, at *3 (S.D.N.Y. Nov. 19, 2015) (quotations and citations
omitted).
Taking these principles together, res judicata applies where “(1) the previous action
involved an adjudication on the merits; (2) the previous action involved the plaintiff or those in
privity with [him]; (3) the claims asserted in the subsequent action were, or could have been,
raised in the prior action.” Monahan v. New York City Dep’t of Corr., 214 F.3d 275, 285 (2d Cir.
2000) (internal citations omitted).
“‘A judgment of foreclosure and sale entered against a defendant is final as to all
questions at issue between the parties, and concludes all matters of defense which were or might
have been litigated in the foreclosure action.’” Signature Bank v. Epstein, 95 A.D.3d 1199, 1200,
945 N.Y.S.2d 347 (2d Dept. 2012) (quoting Long Is. Sav. Bank v. Mihalios, 269 A.D.2d 502,
503, 704 N. Y.S.2d 483 (2d Dept. 2000)).
Collateral estoppel, or issue preclusion, is a companion doctrine that bars the re-litigation
of issues that were ““clearly raised in a prior action or proceeding and decided against that party .
. . , whether or not the tribunals or causes of action are the same.” Town of Ramopo, New York v.
Town of Clarkstown, No. 16 Civ. 2004 (NSR), 2017 WL 782500, at * 6 (S.D.N.Y. Feb. 27,
2017) (citing Leather v. Eyck, 180 F.3d 420, 425 (2d Cir. 1999)). Collateral Estoppel under New
19
York law is applicable upon a showing of two factors: “First, the identical issue necessarily must
have been decided in the prior action and be decisive of the present action, and second, 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, 455 (1985). The federal test for
the application of collateral estoppel distributes these same elements into a four-part test: “(1) the
identical issue was raised in a previous proceeding; (2) the issue was ‘actually litigated and
decided’ in the previous proceeding; (3) the party had a ‘full and fair opportunity’ to litigate the
issue; and (4) the resolution of the issue was ‘necessary to support a valid and final judgment on
the merits.’” Boguslavsky v. Kaplan, 159 F.3d 715, 720 (2d Cir. 1998) (citing Interoceanica
Corp. v. Sound Pilots, Inc., 107 F.3d 86, 91 (2d Cir.1997)).
Turning to the present case, it is clear that the foreclosure proceeding was an
“adjudication on the merits” and involved the plaintiff, Defendant HSBC and those in privity.
Pantoja v. Banco Popular, No. 11 CV 3636(VB), 2012 WL 4069297, at *4 (S.D.N.Y. Aug. 9,
2012) (noting that a “Foreclosure Action is a final judgment”); Gordon v. First Franklin
Financial Corp., 15-CV-0775 (SJF)(AKT), 2016 WL 792412, at *7 (E.D.N.Y. Feb. 29, 2016)
(noting that a “foreclosure judgment constitutes a final adjudication on the merits”).
Plaintiff’s first cause of action for negligence alleges that the Defendants were negligent
in servicing Plaintiff’s loan. (Compl. ¶ 37.) This claim arises out of the same transaction as the
state foreclosure action and should have been raised as a defense or counterclaim in that action.
Thus, the claim is barred. See Pantoja, 2012 WL 4069297, at *4 (holding that claims that “arise
squarely out of the terms of the Mortgage and the Realty, and clearly fit within the same factual
grouping surrounding the Foreclosure Action” were barred by res judicata).
20
Plaintiff’s fourth cause of action for fraudulent misrepresentation is comprised of two
schemes. First, Plaintiff alleges that because of the loan originator’s fraud, Plaintiff made higher
monthly payments than he was promised. Second, that due to HSBC’s fraud, Plaintiff defaulted
on the loan and HSBC commenced foreclosure proceedings. Plaintiff was aware of both of the
purported frauds during the state foreclosure action. This claim arises out of the same transaction
at issue in the foreclosure action and should have been raised as a defense. Thus, this claim is
barred. See Castellano v. JP Morgan Chase Bank, N.A., No. 13–cv–03390 (NSR), 2014 WL
988563, at *4 (holding that a claim “that Defendants breached their contract with [Plaintiff] by
increasing his monthly mortgage payments . . . arises out of the same transaction as was litigated
in the Foreclosure Action”).
Plaintiff’s fifth cause of action for breach of good faith and fair dealing against all
Defendants alleges that Defendants breached the promissory Note and secondary promises to
novate the loan. (Compl. ¶ 83.1.) Plaintiff alleges that the Note and novation had implied
covenants of good faith and fair dealing and the Defendants breached them through their
fraudulent conduct described in the fourth cause of action. (See id ¶ 83.2.) This claim should
have been raised as a defense during the state foreclosure action because it stems from the same
transaction and Plaintiff knew about the purported breach. Consequently, the claim is barred by
res judicata. Graham v. Select Portfolio Servicing, Inc., 156 F. Supp. 3d 491, 510 (S.D.N.Y.
2016) (holding that because Plaintiff could have brought his loan modification claims, including
a breach of covenant of good faith and fair dealing claim, in the state foreclosure action, the
claim was barred by res judicata).
Plaintiff’s eighth cause of action for violation of the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1601, claims that Defendants, as debt collectors, demanded sums for
21
payments not due or owed by Plaintiff to Defendant. (Compl. ¶ 127.) This claim is barred by res
judicata because it stems from the same transaction as the state foreclosure judgment and, thus,
should have been raised as a counterclaim.
The tenth cause of action alleges that Defendant HSBC breached two contracts. The first
concerns HSBC’s alleged promise that if Plaintiff stopped making payments for 90 days, they
would reduce Plaintiff’s monthly payments. (Id. ¶ 151.) The second alleged agreement was
HSBC’s promise not to foreclose or “declare a default” on the subject property. (Id. ¶ 152.) This
claim should have been raised as a defense in the state foreclosure action and is now barred.
Graham, 156 F. Supp. 3d at 510 (holding that because Plaintiff could have brought his loan
modification claims, including a breach of contract claim, in the state foreclosure action, the
claim was barred by res judicata).
Plaintiff’s eleventh cause of action sounding in a civil RICO violation alleges that “a
false debt . . . was being collected, that at least two efforts and attempts were made to falsely
collect, that the evidence shows intent to defraud and cheat plaintiff in a scheme to fabricate the
truth of the error then add additional charges to the loan, then and now, never due.” (Compl. ¶
162.) This claim is another legal theory arising out of the same transaction that could have been,
but was not, raised in the Foreclosure Action and is, thus, barred. Pantoja, 2012 WL 4069297, at
*4 (barring a civil RICO claim because Plaintiff could have raised it in the state Foreclosure
Action); see also Tafflin v. Levitt, 493 U.S. 455, 467 (1990) (“[W]e hold that state courts have
concurrent jurisdiction to consider civil claims arising under RICO”).
22
Plaintiff’s thirteenth cause of action for violations of the Fair Credit Reporting Act
(“FCRA”), 18 U.S.C. § 1681s-2(b)7, alleges that Plaintiff’s credit score was damaged by
Defendant HSBC’s purportedly fraudulent actions which, in turn, prompted the loan default and
foreclosure proceeding. (See ¶¶ 37, 171–72.) Plaintiff contacted Defendants to dispute the credit
scores and history. Sixty days passed without a response from Defendants, which allowed for
“the unlawful deterioration of the scores the credit reporting agency Defendants are required to
keep accurate.” (Compl. ¶ 173.) Defendant argues that this claim arises out of the same
transaction as the state foreclosure suit and could have been filed in the Foreclosure Action.
Defendants’ argument is correct, in part. A liberal reading of pro se Plaintiff’s complaint shows
that Defendants’ action in question began with the creation of the loan and culminated with the
foreclosure judgment. (See Compl. ¶¶ 37, 170–73.) Accordingly, Plaintiff’s claim is comprised
of two constituent parts: (1) harm resulting from Defendants’ behavior prior to the Foreclosure
Action; and (2) harm to Plaintiff’s credit score resulting directly from the foreclosure judgment.
Those harms resulting from Defendants’ behavior prior to the Foreclosure Action are barred by
res judicata because they should have been raised as a counterclaim during the foreclosure
action.
The second part of the FCRA claim—that the foreclosure judgment harmed Plaintiff’s
credit score—is not barred because Plaintiff was unaware of the damage to his credit at that time.
Liberally construing the complaint, the second part of the claim stems directly from the
foreclosure judgment. Consequently, Plaintiff could not have brought this claim in state court.
See Storey, 347 F.3d at 383 (noting that new claims arising subsequent to a prior action are not
7
A Plaintiff may bring a private right of action under § 1681s-2(b). Crawford v. Recovery
Partners, No. 12 Civ. 8520, 2014 WL 1695239, at *4 (S.D.N.Y. Apr. 28, 2014).
23
barred by res judicata even if they are premised upon facts stemming from the same “course of
conduct”); see also Pike v. Freeman, 266 F.3d 78, 91 (2d Cir. 2001) (“Whether a claim that was
not raised in the previous action could have been raised therein ‘depends in part on whether the
same transaction or connected series of transactions is at issue, and whether the same evidence is
needed to support both claims’”); see also Weitz v. Wagner, No. CV-07-1106 (ERK)(ETB), 2008
WL 5605669, at *3 (E.D.N.Y. July 24, 2008) (holding that Plaintiff could not have raised his
FCRA claim in small claims court because the claim was “separate enough in time, origin, and
motivation such that they need not have been raised below”). Thus, the second part of Plaintiff’s
FCRA claim is not barred by res judicata because Plaintiff had not yet suffered the harm to his
credit score resulting from the foreclosure judgment. The Court similarly finds that this claim is
not barred by collateral estoppel because it was not raised in the state court proceeding,
therefore, the issue was not decided in the prior action. See Kaufman, 65 N.Y.2d at 455.8
Motion to Dismiss
Plaintiff’s thirteenth and fourteenth causes of action are dismissed for failure to state a
claim under which relief can be granted. Plaintiff’s thirteenth cause of action, however, is
dismissed without prejudice, and accordingly, Plaintiff is granted leave to amend the second part
of his FCRA claim.
8
Defendant also argues that the FCRA claim should be dismissed because the claim falls outside
of the statute of limitations period. (Def. Mot. 9.) Neither Plaintiff’s Complaint nor Opposition
provide the date on which Plaintiff discovered the harm or when the purported harm occurred.
See 15 U.S.C. § 1681p. The Court finds that the surviving FCRA claim began to accrue when the
state court issued their foreclosure judgment. That date, March 31, 2016, would put the claim
well within either the two or five year limitations period because Plaintiff commenced this
federal action mere months after the decision in the Foreclosure Action, in October 2016.
Construing the claim liberally and assuming that Plaintiff claims that the damage to his credit
score resulted from the state foreclosure judgment itself, the Court finds that Plaintiff brought
this claim within the statute of limitations period.
24
FCRA
Liberally construing the Complaint, Plaintiff’s surviving cause of action alleges that
Defendant HSBC damaged Plaintiff’s credit by furnishing incorrect information to a credit rating
agency as a result of the foreclosure judgment.
The purpose of the FCRA is “to require that consumer reporting agencies adopt
reasonable procedures for meeting the needs of commerce for consumer credit . . . in a manner
which is fair and equitable to the consumer, with regard to the confidentiality, accuracy,
relevancy, and proper utilization of such information.” 15 U.S.C. § 1681(b). The relevant
provision, § 1681s-2(b) “provides that, when a furnisher of information is notified by the
consumer reporting agency that a consumer disputes the accuracy of the furnished information,
the furnisher has an obligation to investigate and undertake certain other actions.” Howard v.
Municipal Credit Union, No. 05 Civ. 7488(LAK), 2008 WL 782760, at *7 (S.D.N.Y. March 25,
2008); see also § 1681s-2(b); Mendy v. JP Morgan Chase & Co., No. 12 Civ. 8252(PGG), 2014
WL 1224549, at *5 (S.D.N.Y. March 23, 2014) (“However, the duty to investigate in Subsection
(b) is triggered only after a furnisher of information receives notice from a credit reporting
agency of a consumer’s dispute”) (quotations and citation omitted).
Defendant HSBC argues that Plaintiff failed to state a claim upon which relief can be
granted because Plaintiff does not allege that HSBC furnished information to a credit reporting
agency. Further, Defendant argues that Plaintiff failed to indicate what incorrect information
HSBC provided to the credit reporting agencies. (Def. Mot. 11–12.) Plaintiff retorts by stating
that it “is undisputed that the ‘furnisher’ of bad credit information [, such as HSBC,] is liable
under the FCRA.” (Pl. Opp. 18.)
25
Plaintiff fails to state a claim upon which relief can be granted for several reasons. First,
Plaintiff failed to allege that HSBC furnished information—incorrect or otherwise— to credit
reporting agencies. Second, Plaintiff “fails to allege that he ever notified the credit reporting
agencies of any dispute regarding the accuracy of reported information, or that the credit
reporting agencies ever then notified [HSBC] of any such dispute.” Howard, 2008 WL 782760,
at *8; Elmore v. North Fork Bancorporation, Inc., 325 F. Supp. 2d 336, 341 (S.D.N.Y. 2004)
(“The complaint fails to state a claim upon which relief may be granted because it fails to allege
that the bank violated the duties imposed upon it after receiving notice of the existence of a
dispute from a credit reporting agency”) (emphasis added). Here, Plaintiff first alleges that his
credit score was damaged as a result of the foreclosure judgment. Second, that Plaintiff contacted
HSBC and that “[o]ver 60 days passed without defendants making contact and without a
resolution of the unlawful deterioration of the scores the credit reporting agency” is required to
keep accurate. (Compl. ¶ 173.) Plaintiff does not allege that HSBC furnished information to any
credit reporting agencies, that HSBC furnished incorrect information to those agencies, that he
notified the credit reporting agencies of a dispute, or that that the agencies notified HSBC,
thereby triggering the requirements of § 1681s-2(b). Consequently, this cause of action must be
dismissed, without prejudice.
42 U.S.C. § 1983
Plaintiff’s fourteenth cause of action alleges a violation of 42 U.S.C. § 1983. Plaintiff
claims that the loan originator provided Plaintiff with less favorable “loan products” because of
Plaintiff’s race. (Compl. ¶ 178.) Those terms included “higher interest rates, higher payments
due per month and higher purchase price and added included charges classifying the loan in what
was known as a ‘subprime’ loan.” (Id.)
26
Defendant argues that this claim should be dismissed under res judicata or, alternatively,
for being brought after the statute of limitations tolled. The Court need not linger on these
questions, however, because it is abundantly clear from the face of the complaint that Defendants
are not state actors for purposes of § 1983. A private entity cannot be held liable under § 1983
unless it acted under color of state law. Graham, 156 F. Supp. 3d at 516. A private entity acts
under the color of state law for § 1983 purposes when “‘(1) the State compelled the conduct [the
‘compulsion test’], (2) there is a sufficiently close nexus between the State and the private
conduct [the ‘close nexus test’ or ‘joint action test’], or (3) the private conduct consisted of
activity that has traditionally been the exclusive prerogative of the State [the ‘public function
test’].’” McGugan v. Aldana-Bernier, 752 F.3d 224, 229 (2d Cir. 2014) (citing Hogan v. A.O.
Fox Memorial Hosp., 346 F. App’x. 627, 629 (2d Cir.2009)). “The fundamental question under
each test is whether the private entity’s challenged actions are fairly attributable to the state.”
McGugan, 752 F.3d at 229 (quotations omitted) (citing Fabrikant v. French, 691 F.3d 193, 207
(2d Cir. 2012)).
Reading the complaint liberally, accepting Plaintiff’s allegations as true, reading the state
foreclosure filings and decision, and drawing all reasonable inferences therefrom, there is no
indication whatsoever that Defendant HSBC was acting under the color of state law. The extent
of Plaintiff’s factual allegations show that HSBC funded Plaintiff’s mortgage loan on the subject
property and that HSBC initiated foreclosure proceedings after Plaintiff defaulted on the loan.
Taking this information, along with the factual findings of the state court, Plaintiff’s § 1983
claim must be dismissed because there is no factual basis on which to find that Defendants
plausibly acted under the color of state law for purposes of § 1983 in funding and servicing
Plaintiff’s loan. Graham, 156 F. Supp. 3d at 516 (holding that Defendant U.S. Bank—the
27
Trustee of the Trust that held and foreclosed the mortgage loan— was not a state actor under §
1983).9
Motion to Amend the Complaint and Leave to Re-Plad
Plaintiff filed a request to amend his complaint which this Court construed as a crossmotion to amend. (Motion to Amend Compl. 1, ECF No. 35.) Plaintiff requests to amend the
complaint in order to add Robert Hum as a Defendant. Robert Hum is the “obligor or signee on
the Note for the subject property.” (Id.) Plaintiff argues that “adding Mr. Robert Hum to the case
will bring full resolution for the Plaintiff to assume transfer [of] the loan fully in the Plaintiff[‘s]
name.” (Id.) Defendants oppose the motion, arguing that the proposed amendment would be
futile because, inter alia, “Plaintiff has failed to show any meritorious claim against Mr. Hum or
raise any legal argument that would controvert Defendants’ position that the proposed
amendment would be futile.” (Mem. of Law in Opp. to Plaintiff’s Cross-Motion to Amend
Compl. (“Def. Opp.”) 3–4, ECF No. 37.)
“Leave to amend may be denied on grounds of futility if the proposed amendment fails to
state a legally cognizable claim or fails to raise triable issues of fact.” AEP Energy Services Gas
Holding Co. v. Bank of America, N.A., 626 F.3d 699, 726 (2d Cir. 2010) (quoting Milanese v.
Rust–Oleum Corp., 244 F.3d 104, 110 (2d Cir.2001)); accord Ruotolo v. City of New York, 514
The Court is cognizant of Plaintiff’s concerns. It is well documented that African Americans
are more likely to receive a higher rate on their loan than white borrowers. See e.g. Robert G.
Schwemm & Jeffrey L. Taren, Discretionary Pricing, Mortgage Discrimination, and the Fair
Housing Act, 45 Harv. C.R.-C.L. L. Rev. 375, 376 (2010) (noting that African Americans and
Latinos “have often been charged substantially higher interest rates and closing costs than
comparable white borrowers, resulting in blacks and Latinos incurring billions of dollars in extra
payments for their mortgages”). In this case, however, there is no indication that HSBC was
acting under the color of state law as a run-of-the-mill loan provider. In any event, this claim is
likely precluded under res judicata because it stems from the same transaction and factual
grouping as the foreclosure proceeding.
9
28
F.3d 184, 191 (2d Cir.2008) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)). A proposed
amendment is futile if it “could not withstand a motion to dismiss pursuant to Rule 12(b)(6).”
Lucente v. Int'l Bus. Machs. Corp., 310 F.3d 243, 258 (2d Cir. 2002). While pro se plaintiffs are
held to less stringent standards, “even pro se plaintiffs asserting [] claims cannot withstand a
motion to dismiss unless their pleadings contain factual allegations sufficient to raise a right to
relief above the speculative level.” Jackson v. N.Y.S. Dep't of Labor, 709 F. Supp. 2d 218, 224
(S.D.N.Y. 2010) (quotations and citation omitted).
Plaintiff’s proposed amendment is denied. The request does not explain why Robert Hum
should be added to this case or what claims would be asserted against him. Further, given that
the only potential surviving claim is the FCRA claim, it would appear that Robert Hum’s
addition to the case is futile. AEP Energy Services Gas Holding Co., 626 F.3d at 726 (“Leave to
amend may be denied on grounds of futility if the proposed amendment fails to state a legally
cognizable claim or fails to raise triable issues of fact”).
Nevertheless, the Court grants Plaintiff leave to amend the Complaint in order to state a
valid FCRA claim against Defendant HSBC.10 Barms v. United States, 204 F. App’x. 918, 919
(2d Cir. 2006) (“‘[A] pro se complaint is to be read liberally,’ and should not be dismissed
without granting leave to re-plead at least once when such a reading ‘gives any indication that a
valid claim might be stated.’”) (quoting Gomez v. USAA Fed. Sav. Bank, 171 F.3d 794, 795 (2d
In this case, all but two of Plaintiff’s claims were dismissed on purely jurisdictional or res
judicata grounds. Where dismissal is based on jurisdictional or res judicata grounds, however,
the problem is substantive and re- pleading will not cure it. Francis v. Nichols, No. 16-CV-1848
(CS), 2017 WL 1064719, *8 (S.D.N.Y. March 21, 2017) (citing MacKinnon v. City of New York,
580 F. App’x. 44, 46 (2d Cir. 2014) (summ. order)). Further, as previously explained, the § 1983
claim is not salvageable because there is no indication that HSBC acted under the color of state
law.
10
29
Cir. 1999)). Specifically Plaintiff is granted leave to re-plead his FCRA claim concerning the
damage to his credit score as a direct result of the foreclosure judgment.
30
CONCLUSION
Defendants' Motion to Dismiss the Complaint is granted, with leave to amend only the
second patt of Plaintiffs claim arising nuder the FCRA as explained above. The Clerk of Court
is respectfully requested to terminate the motions at ECF Nos. 25 & 35, mail a copy of this
Opinion and Order to pro se Plaintiff at the address below, and file proof of service on the
docket. The Clerk of Court is also requested to terminate Defendants MortgageIT, Inc.,
Mo1tgage Electronic Registration Systems, Inc., Prudential Rand Realty, Inc., all persons with an
interest in real property located at 4 William Street, Ossining, New York, and Does 1-100.
Plaintiff is directed to file an Amended Complaint in conformance with the above on or
before May 21, 2018. Failure to timely file an Amended Complaint will result in the dismissal of
the complaint and termination of the action. The remaining Defendant, HSBC Bank, USA, shall
answer or seek a pre-motion conference on any potential motion to dismiss by June 20, 2018.
An in-person Initial Pre-trial Conference is scheduled for June 29, 2018, at 12:00 p.m., at
the United States Comthouse, 300 Quarropas Street, Courtroom 218, White Plains, New York
10601. The parties shall confer in accordance with Fed. R. Civ. P. 26(f) at least 21 days prior to
the conference and attempt in good faith to agree upon a proposed discove1y plan that will ensure
trial readiness within six months of the conference date. The parties shall also complete an
atnended Civil Case Discovery Plan and Scheduling Order and bring it to the conference.
Dated:
March 22, 2017
White Plains, New York
SO ORDERED:
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Service Address
Sherwin A. Wilson
4 William Street
Ossining, NY 10562
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