Zink v. First Niagara Bank, N.A.

Filing 111

DECISION AND ORDER re Plaintiff's Uncontested Motion for Preliminary Approval of Class Action Settlement 101 . Signed by Hon. Jeremiah J. McCarthy on 3/1/16. (DAZ)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
_____________________________________
JEFFREY ZINK, on behalf of himself and
all others similarly situated,
Plaintiff,

DECISION AND ORDER
13-CV-01076-RJA-JJM

v.
FIRST NIAGARA BANK, N.A.,
Defendant.
_________________________________________
Before me is plaintiff’s “Uncontested Motion for Preliminary Approval of Class
Action Settlement” [101].1 Oral argument was held on February 22, 2016 [110]. For the
following reasons, I will temporarily stay consideration of that motion.2
BACKGROUND
Plaintiff Jeffrey Zink commenced this action on July 19, 2013, seeking to certify a
class and recover penalties from defendant First Niagara Bank, N.A. (“First Niagara”) pursuant
to New York’s Real Property Law (“RPL”) §275(1) and Real Property Actions and Proceedings
Law (“RPAPL”) §1921(1), for its allegedly “systematic failure to timely present to the county
clerks of New York State proof that mortgages have been satisfied”. Complaint [1], ¶ 1;
Amended Complaint [21], ¶ 1.

1

2

Bracketed references are to CM/ECF docket entries.

“The District Court has broad discretion to stay proceedings as an incident to its power to control
its own docket”, Clinton v. Jones, 520 U.S. 681, 706 (1997), and may do so “sua sponte”. City of New
York v. Gutlove & Shirvint, Inc., 2008 WL 4862697, *1 (E.D.N.Y. 2008). That decision is
nondispositive. Herko v. Metropoitan Life Insurance Co., 978 F. Supp. 149, 150 (W.D.N.Y. 1997)
(Arcara, J.).

On November 15, 2013, First Niagara moved to dismiss the Amended Complaint,
arguing, inter alia, that plaintiff lacked standing to seek relief because the statutes at issue “make
plain that they provide relief only to those borrowers whose satisfactions have not been recorded
at all. There is no dispute that Zink’s satisfaction has, in fact, been recorded.” First Niagara’s
Memorandum of Law [37-1], p. 8. In rejecting that argument, I reasoned that “[u]nder First
Niagara’s interpretation (namely that penalties are only available when the satisfaction of
mortgage is not recorded at all . . .), there could never be a penalty as long as the certificate of
discharge was eventually filed. That interpretation would effectively nullify the penalty
provisions (which increase commensurately with the period of delay in presenting the discharge
certificate) - and that I may not do.” Amended Report and Recommendation [51], p. 13
(subsequently adopted by Judge Arcara [59]).
The Uncontested Motion seeks the court’s preliminary approval of the parties’
agreement to settle this action, along with preliminary certification of a settlement class, subject
to final confirmation at a later date. However, in supporting that motion, First Niagara has raised
a new standing issue: “Another, perhaps even more significant, risk to Zink’s and affected
mortgagors’ claims, is a current review by the United States Supreme Court of a similar statute the Fair Credit Reporting Act. In Spokeo Inc. v. Robins, No. 13-1339, the Supreme Court is
considering whether a violation of a federal statute entitling a consumer to civil penalties where
no economic injury is suffered confers Article III standing. Spokeo could affect the viability of
Zink’s claims. In the event of a favorable decision on lack of standing, First Niagara would
argue here that the same reasoning should apply to Zink’s state statute claims.” First Niagara’s
Memorandum in Support of Approval of the Modified Settlement [102], p. 4.

-2-

The precise question before the Court in Spokeo is “[w]hether Congress may
confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore
could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of
action based on a bare violation of a federal statute”. Petition for a Writ of Certiorari, 2014 WL
1802228, *i. Certiorari was granted on April 27, 2015 (135 S.Ct. 1892), and oral argument was
held on November 2, 2015. A decision is expected by the end of the Court’s current term in June
2016.
By Order to Show Cause dated February 5, 2016 [104], I asked the parties to
address whether I should stay further proceedings in this case pending the Court’s decision in
Spokeo. Both parties urge me not to do so. See Plaintiff’s Memorandum of Law in Response
[105], p. 2 (“[f]ew Orders could be more prejudicial to the putative class. Indeed, one of the
reasons the settlement is fair and reasonable is the thread that an adverse decision from the
Supreme Court in Spokeo will result in the case being dismissed and the putative class receiving
nothing. This Court should not delay approval of the settlement until Spokeo is decided”); First
Niagara’s Memorandum in Response [107], p. 2 (“Spokeo could indeed affect the viability of
Zink’s and the class members[’] claims and could dispose of the claims entirely. But a stay
would simply drag out the litigation further, create more uncertainty, and resulting additional
fees and costs to First Niagara as Zink has promised to contest adverse rulings and appeal if
needed”).

-3-

ANALYSIS
First Niagara suggests that it “raised Spokeo . . . to illustrate the validity of one of
its defenses it would have maintained in the absence of the agreed settlement”. First Niagara’s
Memorandum in Response [107], p. 1 (emphasis added). While First Niagara may have decided
not to press the question of standing at this time, I may not ignore the issue.
Uncertainty as to subject matter jurisdiction cannot be treated merely as a factor
to be weighed in the settlement equation; for unless subject matter jurisdiction is established, I
cannot even consider the Uncontested Motion, much less approve it. See Steel Co. v. Citizens
for a Better Environment, 523 U.S. 83, 94 (1998) (“[w]ithout jurisdiction the court cannot
proceed at all in any cause”); Cave v. East Meadow Union Free School District, 514 F.3d 240,
250 (2d Cir. 2008) (“[i]f a court perceives at any stage of the proceedings that it lacks subject
matter jurisdiction, then it must take proper notice of the defect by dismissing the action”).
Therefore, courts “must raise and decide jurisdictional questions that the parties . . . elect not to
press”. Henderson ex rel. Henderson v. Shinseki, 562 U.S. 428, 434 (2011).
Because “standing is perhaps the most important of the jurisdictional doctrines”,
FW/PBS. Inc. v. City of Dallas, 493 U.S. 215, 231 (1990), courts “have an obligation to assure
ourselves that [plaintiff] had Article III standing at the outset of the litigation”. Friends of the
Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 180 (2000); Comer v.
Cisneros, 37 F.3d 775, 791 (2d Cir. 1994) (“standing is measured as of the time the suit is
brought”). The necessity of standing is “in no way diminished by the fact that the plaintiff filed
a class action suit . . . . Thus, if the named plaintiff lacks standing the entire class action fails”.
Vaccariello v. XM Satellite Radio, Inc., 295 F.R.D. 62, 71 (S.D.N.Y. 2013).

-4-

In order for Article III standing to exist, “the plaintiff must have suffered
an injury in fact - an invasion of a legally protected interest which is (a) concrete and
particularized . . . and (b) actual or imminent, not conjectural or hypothetical”. Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560 (1992). “[T]he requirement of injury in fact is a hard
floor of Article III jurisdiction that cannot be removed by statute.” Summers v. Earth Island
Institute, 555 U.S. 488, 497 (2009). “To have standing, the plaintiff must have suffered a
particularized injury, which means that the injury must affect the plaintiff in a personal and
individual way.” Raines v. Byrd, 521 U.S. 811, 819 (1997).
“An interest unrelated to injury in fact is insufficient to give a plaintiff
standing . . . . The interest must consist of obtaining compensation for, or preventing, the
violation of a legally protected right. ” Vermont Agency of Natural Resources v. United States
ex rel. Stevens, 529 U.S. 765, 772 (2000). I question whether the interest asserted by plaintiff in
this case fits either requirement of Vermont Agency. Rather than seeking compensation for the
violation of a legally protected right, he seeks a statutory penalty, which by definition is
“[p]unishment imposed on a wrongdoer . . . as distinguished from compensation for the injured
party's loss”. Black’s Law Dictionary (9th ed. 2009); National Federation of Independent
Business v. Sebelius, ___U.S.___, 132 S. Ct. 2566, 2596 (2012) (“if the concept of penalty
means anything, it means punishment for an unlawful act or omission”). See also City of New
York v. Milhelm Attea & Bros., Inc., 2012 WL 3579568, *18 (E.D.N.Y. 2012) (“[t]he Court also
rejects the City’s suggestion that the [statute’s] reference to ‘civil penalties’ somehow confers
upon plaintiffs ‘bounty hunter’ standing, apart from any other cognizable injury . . . . [S]tatutes
do not abdicate the standing requirements of the Constitution”).

-5-

Nor does it appear that plaintiff had a constitutionally sufficient interest in
“preventing the violation of a legally protect right” at the time the action was commenced. By
that time, his satisfaction of mortgage had been filed, albeit belatedly (Complaint [1], ¶14). He
does not allege that the belated filing injured him “in a personal and individual way” (Raines,
supra), or that as to him there was any danger of its recurrence. Therefore, he had no specific
interest in preventing further violations, and “[a] generalized interest in deterrence . . . is
insufficient for purposes of Article III”. Steel Co., 523 U.S. at 108-09.3 See also Lujan, 504
U.S. at 573 n. 8 (“[the dissent argues that the] violation of a certain (undescribed) class of
procedural duty satisfies the concrete-injury requirement by itself, without any showing that the
procedural violation endangers a concrete interest of the plaintiff (apart from his interest in
having the procedure observed). We cannot agree. The dissent is unable to cite a single case in
which we actually found standing solely on the basis of a ‘procedural right’ unconnected to the
plaintiff's own concrete harm”). “Deprivation of a procedural right without some concrete
interest that is affected by the deprivation - a procedural right in vacuo - is insufficient to create
Article III standing.” Summers, 555 U.S. at 496 (emphasis added).
While “statutes can create legal rights, the violation of which constitutes
sufficient injury to confer standing to sue”, Boelter v. Hearst Communications, Inc., 2016 WL
361554, *2 (S.D.N.Y. 2016) (emphasis in original), “[t]his does not mean that violating a statute
results per se in an injury-in-fact . . . . [I]n order to establish standing, a statutory violation must
constitute a palpable deprivation.” Id. (emphasis in original). I question whether the belated
filing of plaintiff’s satisfaction of mortgage amounts to a “palpable deprivation” sufficient for
Article III standing.
“Past exposure to illegal conduct does not in itself show a present case or controversy regarding
injunctive relief if unaccompanied by any continuing, present adverse effects.” Id. In fact, the Complaint
did not even seek injunctive relief.
3

-6-

Plaintiff argues that “once the Court signs the preliminary approval order, it will
have ancillary jurisdiction over the settlement, even if it would otherwise feel compelled to sua
sponte dismiss the action following a ruling in Spokeo . . . . Here, the Settlement Agreement
provides for the Court’s continuing jurisdiction”. Plaintiff’s Memorandum of Law in Response
[105], pp. 6, 7. I disagree. “The doctrine of ancillary jurisdiction . . . recognizes federal courts’
jurisdiction over some matters (otherwise beyond their competence) that are incidental to other
matters properly before them.” Kokkonen v. Guardian Life Insurance Co. of America, 511 U.S.
375, 378 (1994) (emphasis added). Therefore, “[w]henever a district court has federal
jurisdiction over a case, it retains ancillary jurisdiction after dismissal to adjudicate collateral
matters such as attorney's fees.” In re Austrian & German Bank Holocaust Litigation, 317 F.3d
91, 98 (2d Cir. 2003) (emphasis added).
Accordingly, ancillary jurisdiction cannot arise unless this court has subject
matter jurisdiction in the first place. The Settlement Agreement cannot furnish jurisdiction
which is otherwise lacking, since “no action of the parties can confer subject-matter jurisdiction
upon a federal court”. Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456
U.S. 694, 702 (1982); California v. LaRue, 409 U.S. 109, 112 n. 3 (1972) (“parties may not
confer jurisdiction either upon this Court or the District Court by stipulation”).
Plaintiff further argues that “[a] stay is also contrary to the public interest. The
purpose of the penalty provisions of New York’s mortgage satisfaction laws is to encourage
mortgagees lie Defendant to timely present certificates of discharge . . . . Staying this action, and
possibly subsequently dismissing it, would send a signal to lenders in New York that they need
not fear class actions seeking to hold them liable for failing to timely present certificates of
discharge, a result this Court should eschew.” Plaintiff’s Memorandum of Law in Response

-7-

[105], pp. 12, 13. However, it is an “age-old rule that a court may not in any case, even in the
interest of justice, extend its jurisdiction where none exists”. Christianson v. Colt Industries
Operating Corp., 486 U.S. 800, 818 (1988). See also Milhelm Attea, 2012 WL 3579568, *18
(“despite the broad remedial language of the CCTA, statutes do not abdicate the standing
requirements of the Constitution”).
“A court may . . . properly exercise its staying power when a higher court is close
to settling an important issue of law.” Acton v. Intellectual Capital Management, Inc., 2015 WL
9462110, *2 (E.D.N.Y. 2015). Although “numerous district courts . . . have reached different
conclusions on whether to stay bare statutory violation cases pending the Supreme Court’s
resolution of Spokeo”, Figueroa v. Carrington Mortgage Services LLC, 2016 WL 718289, *2
(M.D. Fla. 2016), I side with those courts opting in favor of a stay. While I can certainly
understand (and even sympathize with) the parties’ desire to resolve this case before the Supreme
Court decides the standing issue raised in Spokeo, “[e]ven where the parties are satisfied to
present their disputes to the federal courts, the parties cannot confer subject matter jurisdiction
where the Constitution and Congress have not”. Wynn v. AC Rochester, 273 F.3d 153, 157 (2d
Cir. 2001).
“[B]efore deciding any case we are required to assure ourselves that the case is
properly within our subject matter jurisdiction.” Id. I have no such assurance at this time,
particularly since both parties have expressed concern that this court’s subject matter jurisdiction
may not survive the Supreme Court’s decision in Spokeo. Therefore, a stay is appropriate. See
Figueroa, 2016 WL 718289, *3 (“[t]he Supreme Court's decision in Spokeo will likely settle the
issue . . . . If the Supreme Court determines there is no Article III standing where a plaintiff

-8-

brings an action based solely on a bare statutory violation, this Court will not have subject matter
jurisdiction”).
Plaintiff suggests that “[t]here can be no dispute that under current Second Circuit
law, Plaintiff now has standing for his claim for statutory penalties”. Plaintiff’s Memorandum of
Law in Response [105], p.6. I disagree. “[T]he Fourth Circuit has . . . squarely rejected the
argument that, in the absence of any concrete injury, the mere deprivation of a statutory right is
sufficient to constitute an injury-in-fact for Article III standing . . . . The Second Circuit has
reached the same conclusion”. Spokeo Certiorari Petition, 2014 WL 1802228, *10 (citing
Kendall v. Employees Retirement Plan of Avon Products, 561 F.3d 112, 121 (2d Cir. 2009)).
However, even if plaintiff were correct, a stay would still be appropriate. See Larroque v. First
Advantage Lns Screening Solutions, Inc., 2016 WL 39787, *2 (N.D. Cal. 2016) (“[t]o be sure,
the Ninth Circuit’s Spokeo decision holding that a statutory violation alone is enough to confer
standing remains binding precedent in this case. But the Supreme Court’s decision may deprive
Plaintiff of standing, eliminating the Court’s jurisdiction over this action”).
CONCLUSION
One way or the other, the parties are entitled to a resolution of this case. There
are several possible outcomes in Spokeo: (1) the Supreme Court may conclude by the end of its
current term that the availability of a statutory penalty by itself creates Article III standing; (2)
the Court may conclude by the end of its current term that it does not; (3) in view of Justice
Scalia’s recent passing, the Court may affirm by a 4-4 decision, which would have no
precedential effect (see Neil v. Biggers, 409 U.S. 188, 192 (1972)); or (4) the Court may defer
deciding the case until Justice Scalia’s replacement is confirmed (or hell freezes over, whichever
comes first).
-9-

While an indefinite stay of proceedings serves neither the parties’ nor the court’s
interest in a “just, speedy and inexpensive determination” of this action (Fed. R. Civ. P. 1), a stay
of limited duration is a proper exercise of this court’s discretion. Therefore, I will stay
consideration of the Uncontested Motion pending the earlier of the Supreme Court’s decision in
Spokeo or June 30, 2016, the end of the Court’s current term.
Dated: March 1, 2016
/s/ Jeremiah J. McCarthy
JEREMIAH J. MCCARTHY
United States Magistrate Judge

-10-