Graham et al v. HSBC Mortgage Corporation et al
Filing
38
OPINION AND ORDER re: 33 MOTION to Dismiss . filed by OCWEN Loan Servicing, LLC, HSBC Mortgage Corporation. For the foregoing reasons, Defendant's Motion To Dismiss is granted. Given Plaintiffs' pro se status and reques t to amend the Amended Complaint, (Pls.' Mem. 11), Plaintiffs may have a final opportunity to do so. See Fed. R. Civ. P. 15(a) (noting that leave to amend a complaint should be freely give[n]...when justice so requires). The Court notes, howe ver, that Plaintiffs have already had a second bite at the apple with their Amended Complaint, and therefore instructs Plaintiffs to include within their second amended complaint all changes to correct the deficiencies identified in this Opinion & Order that Plaintiffs wish the Court to consider. Plaintiffs are advised that the second amended complaint will replace, not supplement, all prior complaints and filings. The second amended complaint must contain all of the claims, factual alleg ations, and exhibits that Plaintiffs wish the Court to consider. If Plaintiffs fail to abide by the 30-day deadline, their claims may be dismissed with prejudice. The Clerk of Court is respectfully directed to terminate the pending Motion, (Dkt. No. 33), and to mail a copy of this Opinion & Order to Plaintiffs. SO ORDERED. (Signed by Judge Kenneth M. Karas on 9/23/2020) (jca) Transmission to Docket Assistant Clerk for processing.
Case 7:18-cv-04196-KMK Document 38 Filed 09/23/20 Page 1 of 19
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
IRIS GRAHAM and VICTOR GRAHAM,
Plaintiffs,
No. 18-CV-4196 (KMK)
v.
OPINION & ORDER
HSBC MORTGAGE CORPORATION, et
al.,
Defendants.
Appearances:
Iris Graham
Victor Graham
Mt. Vernon, NY
Pro se Plaintiffs
Brian S. Pantaleo, Esq.
Leah N. Jacob, Esq.
Patrick G. Broderick, Esq.
Greenberg Traurig
New York, NY & West Palm Beach, FL
Counsel for Defendants
KENNETH M. KARAS, United States District Judge:
Plaintiffs Iris Graham and Victor Graham (“Plaintiffs”) bring this Action against HSBC
Mortgage Corporation (“HSBC”), Ocwen Loan Servicing, LLC (“Ocwen”), and Stewart Title
Agency (“Stewart Title”; collectively, “Defendants”), alleging fraud, misrepresentation, and
other state law claims. (See Am. Compl. (Dkt. No. 26).) Before the Court is Defendants’
Motion To Dismiss the Amended Complaint (the “Motion”), pursuant to Federal Rule of Civil
Procedure 12(b)(6). (Not. of Mot. (Dkt. No. 33).) For the following reasons, Defendants’
Motion is granted.
Case 7:18-cv-04196-KMK Document 38 Filed 09/23/20 Page 2 of 19
I. Background
A. Factual Background
The following facts are drawn from Plaintiffs’ Amended Complaint and are assumed to
be true for the purpose of deciding the instant Motion.
On June 19, 2006, Plaintiffs executed a mortgage (the “Mortgage”) with Fremont
Investment (“Fremont”), pursuant to which Fremont extended to Plaintiffs a loan of $492,000
secured by property located at 320 South 9th Avenue, Apartment 1, Mount Vernon, New York
10550 (the “Property”). (Am. Compl. ¶¶ 3, 50.) 1 The Property was originally built in 1924 as a
two-family residence, with three apartments on three levels. (Id. ¶ 49.) On or about January 26,
1925, the Department of Public Safety Bureau of Buildings (the “PSBB”) issued a Certificate of
Occupancy (the “Certificate”) classifying the Property as a two-family dwelling. (Id.) At some
point afterward, but prior to Plaintiffs occupying the Property, the Property was “illegally
converted” to a four-unit dwelling “at no fault of . . . Plaintiffs.” (Id.) Fremont classified the
Property as a “[four]-unit dwelling” and did not disclose to Plaintiffs that the PSBB had
classified the Property as a two-family dwelling. (Id. ¶ 50.) Fremont subsequently assigned its
rights to the Mortgage to HSBC. (Id.) Stewart Title also approved refinancing for the Property
as a four-unit dwelling, “omitting the fact” that the Property was actually classified as a twofamily dwelling in the land records. (Id. ¶ 52.)
On or about December 9, 2010, the Department of Buildings of the City of Mount
Vernon (the “DOB”) issued to Plaintiffs a “Notice of Violation #37121” (the “Notice”), due to
1
The Amended Complaint is inconsistently numbered, jumping from paragraph number
six to paragraph number 49, and then from paragraph number 58 to paragraph number 12. (See
generally Am. Compl.) Despite these inconsistencies, the Court refers to the paragraph numbers
used by Plaintiffs herein.
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the Property having been improperly converted to a four-unit dwelling when the “land records”
classified it as a two-family dwelling. (Id. ¶ 51.) As a result of the violation, DOB “has been
fining Plaintiffs $1,000.00 per day and subjecting Plaintiffs to one year in prison.” (Id.)
HSBC is the current owner of the loan, and Ocwen is the current servicer. (Id. ¶ 53.)
Ocwen’s broker price option (“BPO”) and value inspection reports characterize the Property as a
four-family dwelling. (Id. ¶ 54.) In 2009, Plaintiffs became “delinquent on the Mortgage,” (id.
¶ 57), and HSBC, Ocwen, and Fremont have “brought forth multiple foreclosure actions against
Plaintiffs in an attempt to foreclose on the . . . Property,” (id. ¶ 56). Plaintiffs represent that
HSBC has “failed to fully prosecute[,] and each foreclosure action has been dismissed by the
Ninth Judicial District Court.” (Id.) For example, on September 12, 2017, the “Ninth Judicial
District Court” issued a “Notice to Resume Prosecution of Action and to File Notice of Issue”
against HSBC “due to its neglect to prosecute.” (Id. (quotation marks omitted).) Fremont
continues to attempt to foreclose on the Property, which Plaintiffs claim is “far beyond the state’s
six-year statute of limitations.” (Id. ¶ 57.) Alti-Source Solutions (“Alti-Source”), allegedly
Ocwen’s “sister company,” has also charged Plaintiffs “multiple excessive and unsubstantiated
‘junk fees’ ranging from $18.00 to $110.00 for BPO inspections, $300 to $500 for title searches,
and $8.00 to $15.00 for countless exterior property inspection fees.” (Id. ¶ 58.) According to
Plaintiff, Alti-Source and Ocwen have an “overlap of ownership, officers, directors, and
personnel,” the two entities have engaged in dealings that are “not . . . at arm’s length,” and in
2017, Ocwen was fined $2,000,000 by the Securities and Exchange Commission (the “SEC”) for
its relationship with Alti-Source “and other infractions.” (Id. ¶ 29.)
According to Plaintiffs, they have suffered “severe emotional distress at being assessed
millions of dollars in fines and facing the possibility of imprisonment,” and have lost “thousands
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of dollars in potential rental income” due to the legal issues with the Property, which have
prevented Plaintiffs from renting the Property to tenants. (Id. ¶ 15.) Plaintiffs also argue that
they have suffered reputational harm from “the slander of their representation due to the fact that
illegitimate foreclosure proceedings have been attributed to them and reported to credit reporting
agencies and bureaus.” (Id.) Plaintiffs assert three causes of action against Defendants—fraud,
misrepresentation, and violation of “New York Code” § 349. (Id. ¶¶ 11–29.) Construed
liberally, Plaintiffs may also seek to assert a claim of slander of title or defamation. Plaintiffs
seek injunctive relief, compensatory and punitive damages, release of all liens on the Property
held by Defendants, the “monetary equivalent of attorneys’ fees and costs,” and “[s]pecial
damages to account for Plaintiffs’ severe emotional distress due to Plaintiffs being subjected to
hefty finds and imprisonment.” (Id. at 13–14.)
B. Procedural Background
Because the procedural background of this Action has been summarized in this Court’s
previous Opinion & Order on Defendants’ Motion To Dismiss the Complaint (the “2019
Opinion”), the Court supplements the procedural history of the case since the issuance of the
2019 Opinion. (See Op. & Order (“2019 Op.”) (Dkt. No. 25).)
On July 12, 2019, the Court issued the 2019 Opinion dismissing Plaintiffs’ claims
without prejudice. (Id. at 16.) Plaintiffs were given 30 days to file an Amended Complaint.
(Id.) On August 12, 2019, Plaintiffs filed their Amended Complaint. (Am. Compl.) On August
23, 2019, Defendants filed a letter seeking to file a motion to dismiss the Amended Complaint.
(Dkt. No. 27.) As ordered by the Court, (Dkt. No. 28), Plaintiffs responded in a letter filed on
September 6, 2019, (Dkt. No. 29). The Court set a briefing schedule during a Pre-Motion
Conference on October 4, 2019, at which Plaintiffs did not appear. (See Dkt. (minute entry for
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Oct. 4, 2019); Dkt. No. 32.) On November 13, 2019, Defendants filed the instant Motion. (Not.
of Mot.; Defs.’ Mem. of Law in Supp. of Mot. (“Defs.’ Mem.”) (Dkt. No. 34).) On December
17, 2019, Plaintiffs filed a Response. (Pls.’ Mem. of Law in Opp’n to Mot. (“Pls.’ Mem.”) (Dkt.
No. 36).) On January 9, 2020, Defendants filed a Reply. (Defs.’ Reply Mem. of Law in Supp.
of Mot. (“Defs.’ Reply Mem.”) (Dkt. No. 37).)
II. Discussion
A. Standard of Review
The Supreme Court has held that although a complaint “does not need detailed factual
allegations” to survive a motion to dismiss, “a plaintiff’s obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(alteration, citations, and quotation marks omitted). Indeed, Rule 8 of the Federal Rules of Civil
Procedure “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). “Nor does a complaint suffice if
it tenders naked assertions devoid of further factual enhancement.” Id. (alteration, citations, and
quotation marks omitted). Instead, a complaint’s “[f]actual allegations must be enough to raise a
right to relief above the speculative level.” Twombly, 550 U.S. at 555 (citation omitted).
Although “once a claim has been stated adequately, it may be supported by showing any set of
facts consistent with the allegations in the complaint,” id. at 563 (citation omitted), and a plaintiff
must allege “only enough facts to state a claim to relief that is plausible on its face,” id. at 570, if
a plaintiff has not “nudged [his or her] claims across the line from conceivable to plausible, the[ ]
complaint must be dismissed,” id.; see also Iqbal, 556 U.S. at 679 (“Determining whether a
complaint states a plausible claim for relief will . . . be a context-specific task that requires the
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reviewing court to draw on its judicial experience and common sense. But where the wellpleaded facts do not permit the court to infer more than the mere possibility of misconduct, the
complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” (citation
omitted) (second alteration in original) (quoting Fed. R. Civ. P. 8(a)(2))); id. at 678–79 (“Rule 8
marks a notable and generous departure from the hypertechnical, code-pleading regime of a prior
era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than
conclusions.”).
In considering Defendants’ Motion, the Court is required to “accept as true all of the
factual allegations contained in the [C]omplaint.” Erickson v. Pardus, 551 U.S. 89, 94 (2007)
(per curiam) (citation omitted); see also Nielsen v. Rabin, 746 F.3d 58, 62 (2d Cir. 2014) (same).
And, the Court must “draw[ ] all reasonable inferences in favor of the plaintiff.” Daniel v. T &
M Prot. Res., Inc., 992 F. Supp. 2d 302, 304 n.1 (S.D.N.Y. 2014) (citing Koch v. Christie’s Int’l
PLC, 699 F.3d 141, 145 (2d Cir. 2012)). Where, as here, a plaintiff proceeds pro se, the Court
must “construe[ ] [the complaint] liberally and interpret[ ] [it] to raise the strongest arguments
that [it] suggest[s].” Sykes v. Bank of Am., 723 F.3d 399, 403 (2d Cir. 2013) (per curiam)
(quotation marks omitted). However, “the liberal treatment afforded to pro se litigants does not
exempt a pro se party from compliance with relevant rules of procedural and substantive law.”
Bell v. Jendell, 980 F. Supp. 2d 555, 559 (S.D.N.Y. 2013) (citation and quotation marks
omitted).
Generally, “[i]n adjudicating a Rule 12(b)(6) motion, a district court must confine its
consideration to facts stated on the face of the complaint, in documents appended to the
complaint or incorporated in the complaint by reference, and to matters of which judicial notice
may be taken.” Leonard F. v. Isr. Disc. Bank of N.Y., 199 F.3d 99, 107 (2d Cir. 1999) (citation
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and quotation marks omitted). However, when the plaintiff is pro se, the Court may consider
“materials outside the complaint to the extent that they are consistent with the allegations in the
complaint,” Alsaifullah v. Furco, No. 12-CV-2907, 2013 WL 3972514, at *4 n.3 (S.D.N.Y. Aug.
2, 2013) (citation and quotation marks omitted), including, “documents that a pro se litigant
attaches to his opposition papers,” Agu v. Rhea, No. 09-CV-4732, 2010 WL 5186839, at *4 n.6
(E.D.N.Y. Dec. 15, 2010) (italics omitted), and “documents that the plaintiff[ ] either possessed
or knew about and upon which [he or she] relied in bringing the suit,” Rothman v. Gregor, 220
F.3d 81, 88 (2d Cir. 2000) (citation omitted).
B. Analysis
As with their Motion To Dismiss the Complaint, Defendants argue that Plaintiffs’ claims
are barred by the respective statutes of limitations, that Plaintiffs fail to state a claim, and that
Plaintiffs released Defendants from liability for all of the claims in this Action in a prior
settlement. (See generally Defs.’ Mem.)
1. Statute of Limitations—Fraud and Negligent Misrepresentation
As the Court previously instructed, (2019 Op. 6–8), “[u]nder New York law, the time
within which an action based upon fraud must be commenced is ‘the greater of six years from
the date the cause of action accrued or two years from the time the plaintiff discovered the fraud,
or could with reasonable diligence have discovered it.’” Koch, 699 F.3d at 154 (alteration
omitted) (quoting N.Y. C.P.L.R. § 213(8)); see also United Teamster Fund v. MagnaCare
Admin. Servs., LLC, 39 F. Supp. 3d 461, 477 (S.D.N.Y. 2014) (same). Similarly, “New York
courts apply a six year statute of limitations to negligent misrepresentation claims sounding in
fraud.” United Teamster Fund, 39 F. Supp. 3d at 477 (citation omitted).
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A claim based on fraud “accrues as soon as ‘the claim becomes enforceable, i.e., when all
elements of the tort can be truthfully alleged in a complaint.’” Sejin Precision Indus. Co., Ltd. v.
Citibank, N.A., 235 F. Supp. 3d 542, 550 (S.D.N.Y. 2016) (quoting IDT Corp. v. Morgan Stanley
Dean Witter & Co., 907 N.E.2d 268, 273 (N.Y. 2009)). Where a plaintiff alleges that a
fraudulent statement induced that plaintiff to enter into an agreement or make a purchase, “[a]
fraud claim accrues . . . at the time the defendant makes a knowingly false statement of fact with
the intent to induce reliance on that statement.” Kwan v. Schlein, 441 F. Supp. 2d 491, 504
(S.D.N.Y. 2006) (citation omitted); see also Ingrami v. Rovner, 847 N.Y.S.2d 132, 134 (App.
Div. 2007) (finding that a fraud claim accrued “when the plaintiff transferred the money in
reliance upon the defendants’ allegedly false representations”).
The discovery rule “postpones the accrual of a cause of action from the time when the
tort is complete to the time when the plaintiff has discovered sufficient facts to make him aware
that he has a cause of action.” Ruso v. Morrison, 695 F. Supp. 2d 33, 45 (S.D.N.Y. 2010)
(citation and quotation marks omitted). “The statute of limitations period applicable to discovery
of the violation begins to run after the plaintiff obtains actual knowledge of the facts giving rise
to the action or notice of the facts, which in the exercise of reasonable diligence, would have led
to actual knowledge.” Hopkinson v. Estate of Siegal, No. 10-CV-1743, 2011 WL 1458633, at *5
(S.D.N.Y. Apr. 11, 2011) (alteration and quotation marks omitted) (quoting LC Capital Partners,
LP v. Frontier Ins. Grp., Inc., 318 F.3d 148, 154 (2d Cir. 2003)), aff’d, 470 F. App’x 35 (2d Cir.
2012). “Determining when discovery was reasonably possible turns on when Plaintiffs ‘were
possessed of knowledge of facts from which the fraud could be reasonably inferred.’” Ramiro
Aviles v. S & P Global, Inc., No. 17-CV-2987, 2019 WL 1407473, at *27 (S.D.N.Y. Mar. 28,
2019) (citation, alterations, and some quotation marks omitted) (quoting Sargiss v. Magarelli,
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909 N.E.2d 573, 576 (N.Y. 2009)). “Where the circumstances are such as to suggest to a person
of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arises, and if
he omits that inquiry when it would have developed the truth, and shuts his eyes to the facts
which call for investigation, knowledge of the fraud will be imputed to him.” Guilbert v.
Gardner, 480 F.3d 140, 147 (2d Cir. 2007) (citation, alteration, and quotation marks omitted).
Finally, “although the triggering of inquiry notice is an issue ‘often inappropriate for resolution
on a motion to dismiss,’ where ‘the facts needed for determination of when a reasonable investor
of ordinary intelligence would have been aware of the existence of fraud can be gleaned from the
complaint and papers integral to the complaint, resolution of the issue on a motion to dismiss is
appropriate.’” GVA Mkt. Neutral Master Ltd. v. Veras Capital Partners Offshore Fund, Ltd.,
580 F. Supp. 2d 321, 327 (S.D.N.Y. 2008) (alterations and some quotation marks omitted)
(quoting Masters v. GlaxoSmithKline, 271 F. App’x 46, 48 (2d Cir. 2008)).
The Court finds that Plaintiffs have failed to cure the deficiencies in their original
Complaint and that their claims remain time-barred for the reasons stated in the 2019 Opinion,
(2019 Op. 8–12), “regardless [of] whether the six-year limitations period dating from the fraud or
the two-year period dating from its discovery applies,” Pirri v. Cheek, No. 19-CV-180, 2019 WL
2472438, at *4 (S.D.N.Y. June 13, 2019). First, as the Court previously explained, under the sixyear statute of limitations, Plaintiffs’ claims accrued, at the latest, when they were induced to
purchase the Property, on June 19, 2006, and the six-year statute of limitations expired on June
19, 2012. (2019 Op. 8.) Second, under the two-year statute of limitations, “even construing the
[Amended] Complaint liberally, Plaintiffs had all the information necessary to discover their
causes of action on December 9, 2010, when DOB issued its Notice of Violation, and the statute
of limitations expired on December 9, 2012.” (Id.) Indeed, Plaintiffs allege that they have been
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fined $1,000 per day since receiving the Notice, thus dooming their argument that they were
unaware of their injuries at the time it was issued. (See id. (finding the same).) Instead,
Plaintiffs filed their original Complaint on May 9, 2018, over seven years after they received the
Notice and learned that the Property was improperly categorized as a four-unit dwelling.
Plaintiffs claim that they did not know of Defendants’ fraudulent actions at the time the
alleged misconduct occurred, and that they “conducted a reasonable investigation that a
borrower/homeowner in their situation would be expected to conduct,” which “did not reveal
Defendants’ misconduct.” (Am. Compl. ¶ 16.) Instead, in 2017, Plaintiffs learned of
Defendants’ alleged actions when they “consulted knowledgeable third parties who conducted a
separate thorough investigation.” (Id.) Although Plaintiffs have added to their Amended
Complaint the claim that they conducted their own “reasonable investigation,” (id.), they do not
explain what that investigation entailed, what they discovered, or whether it was even conducted
within two years after the Notice was received, and thus have not “establish[ed] that even if
[they] had exercised reasonable diligence, [they] could not have discovered the basis for [their]
fraud claim,” Aozora Bank, Ltd. v. Credit Suisse Grp., 40 N.Y.S.3d 407, 409 (App. Div. 2016),
leave to appeal denied, 74 N.E.3d 676 (N.Y. 2017); see also N.Y Univ. v. Factory Mut. Ins. Co.,
No. 15-CV-8505, 2018 WL 1737745, at *9 (S.D.N.Y. Mar. 27, 2018) (“To the extent that
inquiry was needed to discover [the defendants’] allegedly fraudulent intent, [the plaintiffs]
allege[] no facts that [they] conducted any inquiry . . . in the two years following [receipt of the
notice].”); Willensky v. Lederman, No. 13-CV-7026, 2015 WL 327843, at *9 n.17 (S.D.N.Y. Jan.
23, 2015) (noting that “to the extent that there was relevant information for [the] [p]laintiff to
ascertain . . . it [was] unclear why [the] [p]laintiff’s ‘internet investigation’ failed to expose [it]”);
Gander Mountain Co. v. Islip U-Slip LLC, 923 F. Supp. 2d 351, 364 (N.D.N.Y. 2013)
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(dismissing fraud claim based on two separate instances of flooding at leased property as timebarred where the plaintiff “d[id] not explain why the [first flood] did not cause [the] plaintiff to
‘discover’ [the lessor’s] alleged fraud or what steps . . . [the] plaintiff took to investigate the
issue”), aff’d, 561 F. App’x 48 (2d Cir. 2014); Butala v. Agashiwala, 916 F. Supp. 314, 320
(S.D.N.Y. 1996) (rejecting a fraudulent concealment claim where the “[c]omplaint [was] utterly
lacking in the details of what steps the plaintiffs took to investigate the condition of their
investment once they were on inquiry notice of the probability they had been defrauded”
(citations omitted)).
Further, despite generally stating that their own investigation “did not reveal Defendants’
misconduct,” (Am. Compl. ¶ 16), “Plaintiffs point to no fact required to bring this Action that
was not within their knowledge by December 9, 2010,” (2019 Op. 10 (citation omitted)), when
Plaintiffs, at the latest, became aware that land records classified the Property as a two-family
residence, (Am. Compl. ¶¶ 50–52). As this Court previously instructed, “‘positive knowledge of
fraud is not required to commence the running of the two-year [s]tatute of [l]imitations.’” (2019
Op. 9 (quotation marks omitted) (quoting Watts v. Exxon Corp., 594 N.Y.S.2d 443, 444 (App.
Div. 1993)). Instead, “for the purpose of determining when the statute of limitations begins to
run, the absence of conclusive evidence of actual knowledge is only the beginning of the inquiry,
since the statutory period does not await the leisurely discovery of the full details of the alleged
scheme.” Rusyniak v. Gensini, 629 F. Supp. 2d 203, 234 (N.D.N.Y. 2009) (citation, alteration,
and quotation marks omitted), reconsideration denied, 2009 WL 3672105 (N.D.N.Y. 2009).
Plaintiffs merely must have received sufficient information to place them “on notice that
something was amiss,” Georgiou v. Panayia of Mountains Greek Orthodox Monastery, Inc., 792
N.Y.S.2d 667, 669 (App. Div. 2005), and “[k]nowledge will be imputed to a plaintiff claiming
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fraud if, with reasonable diligence, [the] plaintiff could have discovered the fraud prior to its
actual discovery,” Topps Co., Inc. v. Cadbury Stani S.A.I.C., 380 F. Supp. 2d 250, 258
(S.D.N.Y. 2005) (citation and emphasis omitted).
Given that Plaintiffs do not specifically allege that Defendants knowingly made false
representations to induce Plaintiffs to purchase the Property as a four-dwelling unit, instead
relying on the fact of the misclassification to establish fraudulent intent, “[t]hey . . . cannot claim
to have diligently used the seven and a half years it took them to bring this Action to discover
additional facts demonstrating the alleged fraud,” (2019 Op. 11 n.1), particularly when Plaintiffs
do not explain what facts they did discover during their own investigation, how they were
impeded in discovering the misclassification, and why they were unable to seek advice from
“knowledgeable third parties” earlier than 2017, (see id. at 10–11). See also Hemmerdinger
Corp. v. Ruocco, 976 F. Supp. 2d 401, 408 (E.D.N.Y. 2013) (noting that “the date on which
knowledge of a fraud will be imputed to a plaintiff can depend on the plaintiff’s investigative
efforts” (citation and quotation marks omitted)); Aozora Bank, 40 N.Y.S.3d at 410 (noting that
although the plaintiff ultimately conducted an investigation into alleged misconduct, “it offer[ed]
no explanation why it could not have performed that investigation earlier” (citation omitted)).
Further, as with last time, Plaintiffs argue that the Notice could not have put them on notice of
Defendants’ alleged actions, as they “are laymen and were unaware of their legal rights until they
consulted knowledgeable third[]parties in 2017.” (Pls.’ Mem. 7 n.1.) However, “the relevant
inquiry is not when Plaintiffs became aware that they had a legal cause of action, but rather when
they had sufficient operative facts that indicate that further inquiry is necessary.” (2019 Op. 9
(quotation marks omitted) (collecting cases).)
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Plaintiffs assert that “[e]quitable tolling should be invoked because Plaintiffs were
prevented from exercising their rights due to the fact that they are laymen who would not have
discovered or understood that the [four]-unit . . . Property was classified as a two[-]family
dwelling by the PSBB.” (Am. Compl. ¶ 16.) However, as noted previously, “the Second Circuit
has uniformly held that equitable tolling will not be invoked unless . . . [P]laintiff[s] w[ere]
‘prevented in some extraordinary way from exercising [their] rights.’” LaBoy v. Better Homes
Depot, Inc., No. 03-CV-4271, 2004 WL 6393656, at *6 (E.D.N.Y. July 14, 2004) (alteration and
quotation marks omitted) (ultimately quoting Miller v. Int’l Tel. & Tel. Corp., 755 F.2d 20, 24
(2d Cir. 1985)). Here, Plaintiffs have not alleged that Defendants “acted to prevent [them] from
discovering their alleged claims,” id. (holding that equitable tolling was warranted where the
defendants “collectively conspired to steer [the] plaintiffs to attorneys who would pretend to
serve [the] plaintiffs but who were in fact a part of the fraudulent scheme”), and Plaintiffs’ pro
se, or “laymen,” status is, standing alone, insufficient to justify equitable tolling, see Driscoll v.
Rudnick, No. 13-CV-336, 2014 WL 1747027, at *2 (W.D.N.Y. Apr. 28, 2014) (noting that
although the plaintiff was a “layman” and “may not have known or understood when his claims
accrued . . . , mere ignorance of the law is not a basis for equitably tolling the statute of
limitations” (citation omitted)); see also Pearl v. City of Long Beach, 296 F.3d 76, 85 (2d Cir.
2002) (clarifying that with respect to equitable tolling, the Second Circuit has “made it clear that
[it] had in mind a situation where a plaintiff could show that it would have been impossible for a
reasonably prudent person to learn about his or her cause of action” (emphasis omitted) (citations
and quotation marks omitted)); DeSuze v. Carson, No. 18-CV-180, 2020 WL 1066760, at *9
(E.D.N.Y. Mar. 5, 2020) (noting that “equitable tolling may not be premised on pro se status, or
ignorance of the right to bring a claim” (alterations and quotation marks omitted) (quoting
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Watson v. United States, 865 F.3d 123, 133 (2d Cir. 2017)), filing appeal, No. 20-1141 (2d Cir.);
Stevenson v. N.Y.C. Dep’t of Corr., No. 09-CV-5274, 2011 WL 13175927, at *4 (E.D.N.Y. July
11, 2011) (“While courts generally treat pro se complaints more liberally, pro se status does not
by itself invoke equitable tolling without additional justification showing extraordinary
circumstances.” (collecting cases)), aff’d, 489 F. App’x 517 (2d Cir. 2012). Plaintiffs’ claims of
fraud and misrepresentation are therefore barred by the statute of limitations. As such, the Court
declines to address Defendants’ arguments that Plaintiffs have failed to state a claim, and that
their claims were released in a prior settlement. (See Defs.’ Mem. 10–13.)
2. New York General Business Law § 349 2
Liberally construed, Plaintiffs assert claims for violations of New York General Business
Law (“GBL”) § 349 based on the classification of the Property as a four-unit residence,
continued attempts to foreclose on the Property after the six year statute of limitations imposed
by New York Civil Practice Law and Rules (“CPLR”) § 213(4), and charges to Plaintiffs of
multiple “junk fees” for “BPO inspections,” “title searches,” and “countless exterior property
inspection fees,” which Plaintiffs represent are misrepresented and not owed. (Am. Compl.
¶ 26.) For similar reasons stated in the 2019 Opinion, Plaintiffs’ GBL § 349 claim based on
classification of the Property is barred by the statute of limitations, and Plaintiffs have failed to
state a claim under GBL § 349 with respect to their other allegations.
Because a claim under GBL § 349 “is subject to a three-year statute of limitations,”
Marshall v. Hyundai Motor Am., 51 F. Supp. 3d 451, 459 (S.D.N.Y. 2014) (collecting cases),
2
As the Court previously noted, (2019 Op. 12 n.3), although the Amended Complaint
cites “New York Code § 349,” Plaintiffs appear to assert a claim under New York General
Business Law (“GBL”) § 349. (See id.) The Court therefore analyzes this claim as one under
GBL § 349.
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“[a]ny § 349 claim predicated on Plaintiffs’ allegations that Defendants concealed the
misclassification of their Property as a two-family residence is therefore time-barred for the same
reason as their fraud and misrepresentation claim,” (2019 Op. 13). And, as with the initial
Complaint, Plaintiffs have included “insufficient detail” to state a claim under GBL § 349 with
respect to Defendants’ continued pursuit of foreclosure actions beyond the statute of limitations.
(Id.) As the Court previously explained, to state a claim under GBL § 349, “a plaintiff must
allege that the defendant has engaged in an act or practice that is deceptive or misleading in a
material way and that [the] plaintiff has been injured by reason thereof.” Gaidon v. Guardian
Life Ins. Co. of Am., 725 N.E.2d 598, 604 (N.Y. 1999) (citation and quotation marks omitted). A
“deceptive act or practice” is defined as a representation or omission “likely to mislead a
reasonable consumer acting reasonably under the circumstances.” Id. (citation and quotation
marks omitted). Plaintiffs’ Amended Complaint contains no allegations of misrepresentations or
omissions other than the misclassification of the Property. Instead, Plaintiffs continue to “merely
assert that the repeated foreclosure actions constitute ‘abuse and misconduct.’” (2019 Op. 13
(record citation omitted); see also Am. Compl. ¶ 26.) The Amended Complaint “fails to allege
any form of deception in connection with Defendants’ . . . pursuit of foreclosure,” and Plaintiffs
therefore fail to state a claim under GBL § 349 based on the foreclosure actions. (2019 Op. 13–
14.)
Lastly, Plaintiffs have not named Alti-Source as a defendant in this Action, alleging
instead that Alti-Source is a “sister company” to Ocwen, (Am. Compl. ¶ 26), and that the two
companies have an “overlap of ownership, officers, directors, and personnel” and do not engage
in arms’ length dealing, (id. ¶ 29). In support of these allegations, Plaintiffs note that in 2017,
Ocwen was fined $2 million by the SEC for its “relationship with Alti[-][S]ource, and other
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infractions.” (Id.) The Court previously instructed that “[u]nder New York law, a court may
pierce the corporate veil where [(]1) the owner exercised complete domination over the
corporation with respect to the transaction at issue, and [(]2) such domination was used to
commit a fraud or wrong that injured the party seeking to pierce the veil.” (2019 Op. 14
(quotation marks omitted) (quoting MAG Portfolio Consult, GMBH v. Merlin Biomed Grp. LLC,
268 F.3d 58, 63 (2d Cir. 2001)).) This standard is “very demanding” such that piercing the
corporate veil “is warranted only in extraordinary circumstances, and conclusory allegations of
dominance and control will not suffice to defeat a motion to dismiss.” Capmark Fin. Grp. v.
Goldman Sachs Credit Partners L.P., 491 B.R. 335, 347 (S.D.N.Y. 2013) (citation and quotation
marks omitted); see also EED Holdings v. Palmer Johnson Acquisition Corp., 387 F. Supp. 2d
265, 274 (S.D.N.Y. 2004) (“[I]t is well established that purely conclusory allegations cannot
suffice to state a claim based on veil-piercing . . . .” (citations and quotation marks omitted)).
“To avoid dismissal, a party seeking application of the doctrine must come forward with factual
allegations as to both elements of the veil-piercing claim.” EED Holdings v. Palmer Johnson
Acquisition Corp., 228 F.R.D. 508, 512 (S.D.N.Y. 2005) (citations omitted). Determining
whether veil-piercing is appropriate is a “fact specific” inquiry, and courts consider many
factors, including:
(1) disregard of corporate formalities; (2) inadequate capitalization; (3)
intermingling of funds; (4) overlap in ownership, officers, directors, and personnel;
(5) common office space, address[,] and telephone numbers of corporate entities;
(6) the degree of discretion shown by the allegedly dominated corporation; (7)
whether the dealings between the entities are at arms length; (8) whether the
corporations are treated as independent profit centers; (9) payment or guarantee of
the corporation’s debts by the dominating entity, and (10) intermingling of property
between the entities.
MAG Portfolio, 268 F.3d at 63 (citation omitted). Although the test for complete dominion over
a corporation is a fact-specific inquiry, here, Plaintiffs have failed to “‘nudge[] their claims
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across the line from the conceivable to plausible’ with respect to Ocwen’s liability for AltiSource’s conduct,” as Plaintiffs’ allegations are conclusory, and merely restate some of the
factors to be considered by the Court. (2019 Op. 15.) Additionally, Plaintiffs’ allegations of
Ocwen’s SEC fine due to its relationship with Alti-Source are too general to establish, inter alia,
a “lack of corporate formalities, comingling of funds, or self-dealing.” Mirage Ent., Inc. v. FEG
Entretenimientos S.A., 326 F. Supp. 3d 26, 34 (S.D.N.Y. 2018) (citation, alteration, and
quotation marks omitted). Further, Plaintiffs fail to plead the “causative element”—that
Defendants “use[d] . . . domination [of Alti-Source] to cause the injury . . . [the omission of]
which results in the dismissal of the corporate veil-piercing allegation.” EED Holdings, 228
F.R.D. at 513; cf. JSC Foreign Econ. Ass’n Technostroyexport v. Int’l Dev. & Trade Servs., Inc.,
295 F. Supp. 2d 366, 379 (S.D.N.Y. 2003) (holding that the plaintiff sufficiently alleged a basis
for piercing the corporate veil when the complaint stated that the defendants “exercised . . .
complete domination to abuse the corporate form in a manner that resulted in injury to the
plaintiff, namely by using assets for personal rather than corporate purposes and by placing
assets beyond the reach of creditors” (record citation omitted)). For these reasons, Plaintiffs’
claim under GBL § 349 is also dismissed.
3. Slander of Title
Construed liberally, Plaintiffs appear to have added allegations to the Amended
Complaint that they have been slandered through the continuous “illegitimate foreclosure
proceedings,” which have been “attributed to them and reported to credit reporting agencies and
bureaus.” (Am. Compl. ¶ 15.) Thus, Plaintiffs’ claims appear to be in the nature of slander of
title or defamation. See Barberan v. Nationpoint, 706 F. Supp. 2d 408, 429 (S.D.N.Y. 2010)
(construing the plaintiff’s claims of wrongful foreclosure and reporting of that foreclosure to
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credit reporting agencies as a “tort claim in the nature of slander of title or defamation”
(collecting cases)); see also Markowitz v. Republic Nat’l Bank of N.Y., 651 F.2d 825, 827–28 (2d
Cir. 1981) (finding that, under New Jersey law, the plaintiff’s claim that the defendant
wrongfully claimed a lien under a mortgage “must be construed as one for slander of title”
(citations omitted)); Ferber v. Citicorp Mortgage, Inc., No. 94-CV-3038, 1996 WL 46874, at *2
(S.D.N.Y. Feb. 6, 1996) (noting that the plaintiffs’ defamation claim was based on the defendant
reporting to credit bureaus that the plaintiffs had defaulted on their loans and that foreclosure
proceedings had been commenced). However, Defendants do not address this potential claim in
their Memoranda, and, accordingly, the Court does not address it further herein. (See generally
Defs.’ Mem.) To the extent Plaintiffs attempt to bring a claim of slander of title or defamation,
they may do so in a second amended complaint, and Defendants may address the claim in any
future motion practice.
III. Conclusion
For the foregoing reasons, Defendant’s Motion To Dismiss is granted. Given Plaintiffs’
pro se status and request to amend the Amended Complaint, (Pls.’ Mem. 11), Plaintiffs may have
a final opportunity to do so. See Fed. R. Civ. P. 15(a) (noting that leave to amend a complaint
should be “freely give[n] . . . when justice so requires”). The Court notes, however, that
Plaintiffs have already had a second bite at the apple with their Amended Complaint, and
therefore instructs Plaintiffs to include within their second amended complaint all changes to
correct the deficiencies identified in this Opinion & Order that Plaintiffs wish the Court to
consider. Plaintiffs are advised that the second amended complaint will replace, not supplement,
all prior complaints and filings. The second amended complaint must contain all of the claims,
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factual allegations, and exhibits that Plaintiffs wish the Court to consider. If Plaintiffs fail to
abide by the 30-day deadline, their claims may be dismissed with prejudice.
The Clerk of Court is respectfully directed to terminate the pending Motion, (Dkt. No.
33), and to mail a copy of this Opinion & Order to Plaintiffs.
SO ORDERED.
DATED:
September 23, 2020
White Plains, New York
____________________________________
KENNETH M. KARAS
UNITED STATES DISTRICT JUDGE
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