VALERIE CAPRONI, District Judge.
Plaintiff Doina Almazon has spent the past seven years fighting, in state court, to prevent JPMorgan Chase Bank, N.A. (Chase) from foreclosing on her home at 27 Grape Lane in Hicksville, New York (the Property). Notwithstanding her vigorous efforts, the New York Supreme Court, Nassau County (Nassau County Supreme Court) issued a foreclosure judgment (the Judgment) on December 14, 2018. Dkt. 8-22. Thereafter, Plaintiff filed an appeal, followed by a motion to the trial court to reconsider its underlying summary judgment decision and an emergency application for a temporary restraining order (TRO) against any foreclosure sale of the Property. Dkts. 8-20 to 8-23. On August 29, 2019, the trial court denied her reconsideration and TRO motions; her appeals remain pending in state court. Dkt. 42-5.
Plaintiff filed this action while her motions for reconsideration were pending in state court, seeking to re-litigate many of the issues that she unsuccessfully raised in the foreclosure proceeding. The Complaint (Dkt. 1), filed pro se, alleges ten causes of action and seeks damages for Chase's alleged foreclosure-related misconduct, as well as a declaration that the bank has no "title, lien, or interest in or to" the Property. Compl. at 18.
Defendant moved to dismiss the Complaint in its entirety for lack of subject matter jurisdiction, or, in the alternative, for failure to state a claim upon which relief can be granted. Dkt. 7. In her opposition memorandum ("Opp. Mem.")—filed by an attorney temporarily engaged for that purpose—Almazon withdrew four of the ten claims, leaving for disposition her federal claims under the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq. and the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq. and her state law claims for intentional infliction of emotional distress (IIED), breach of the implied covenant of good faith and fair dealing, conversion, and deceptive business practices in violation of N.Y. Gen. Bus. Law (GBL) § 349. See Opp. Mem. (Dkt. 22) at 14 n.11. Thereafter, Plaintiff filed a proposed Amended Complaint (Dkt. 34-1), augmenting her factual allegations, converting her RESPA claim into a damages claim for "dual tracking," and adding a new claim, pursuant to 42 U.S.C. § 1983, which alleges that Chase deprived her of procedural due process during the state court proceedings.
For the reasons that follow, Plaintiff's claims for declaratory relief are dismissed for lack of subject-matter jurisdiction; her damages claims are dismissed because they are barred by res judicata. Leave to amend is denied as futile because her proposed amended claims are similarly defective and fail to state claims upon which relief can be granted.
On or about December 21, 2000, Plaintiff executed a mortgage on the Property in favor of Flagstar Bank to secure a loan of $232,000. Compl. ¶¶ 1, 3
Sometime in late 2010, Plaintiff petitioned Chase for a modification to the CEMA; she was experiencing "severe financial hardship" and qualified for a federal loan modification program known as the Home Affordable Modification Program (HAMP). Compl. ¶¶ 9, 11. According to Almazon, however, Chase never initiated the "internal steps necessary" for her to be approved for relief under that program. Id. ¶ 11. During the pendency of her request for a HAMP modification, Plaintiff attempted to make partial payments on her mortgage, but Chase rejected those payments, "thereby creating further delinquency and negatively impacting her credit and account status." Id. ¶ 10.
Despite Almazon's reported requests to "modify the loan for the CEMA," Chase allegedly failed to provide her with "guidance letters as typically required under both Federal and State Law," made "contradictory and misleading statements," gave her "only partial information despite repeated requests for formal documentation," lost her modification paperwork sixteen times, and failed to explain "the workings of any modified loan transaction." Id. ¶¶ 19-21. According to Plaintiff, Chase "knowingly and intentionally" made "it impossible for Plaintiff to successfully negotiate terms for a successful loan transaction and modification" and did so "with the explicit purpose. . . of taking possession of Plaintiff's Property." Id. ¶¶ 31-32.
On October 29, 2012, Hurricane Sandy
On January 15, 2013, acting through the law firm of Fein, Such & Crane, LLP (the Firm), Chase initiated foreclosure on the property by filing a summons, complaint, and notice of pendency (also known as a lis pendens) in the Nassau County Supreme Court (the Foreclosure Action).
At some point after the Foreclosure Action was filed, Chase engaged the services of Safeguard Properties, LLC (Safeguard). Id. ¶ 13. In or about April 2018, Safeguard entered the Property, changed the locks, and removed Plaintiff's shed, destroying it and its contents. Id. ¶¶ 13, 22.
Many of the claims that Plaintiff raises in this Court were first raised in the Foreclosure Action. Peyzner Decl. Ex. B (State Court Answer). In her answer and counterclaim (filed by counsel), Almazon interposed eighteen affirmative defenses, including:
In addition, Almazon asserted six counterclaims, including: for "false implied promise of a modification," id. ¶¶ 116-22; for "misleading representations by [Chase] to obtain partial payments," id. ¶¶ 123-25; for improperly commencing the Foreclosure Action "during active modification negotiations," id. ¶¶ 126-29; and for violation of GBL § 349. Id. ¶¶ 136-37. Plaintiff also repeatedly complained that Chase was unlawfully withholding Hurricane Sandy funds. See, e.g., Peyzner Decl. Ex. D (Dkts. 8-6 at 115-17) (affidavit in support of request for TRO); Peyzner Decl. Ex. P at 5 (affidavit in support of reconsideration motion).
From November 27, 2013, through March 2017, the parties engaged in efforts to settle, in addition to litigating Almazon's unsuccessful requests for a stay and a TRO. See Peyzner Decl. Ex. D (Dkt. 8-6 at 113, 146-53); Chinta Decl. Ex. 21, ¶ 8. On June 15, 2017, Chase moved for summary judgment. Peyzner Decl. Ex. D (Dkt. 8-5 at 5-6). Its moving papers noted that Almazon had made no loan payments since February 1, 2010. Peyzner Decl. Ex. D (Dkt. 8-5 at 11) ¶ 13. Chase asserted that it had provided all required pre-litigation warnings and notices, and addressed and controverted each of Plaintiff's defenses and counterclaims. Id. ¶¶ 58-155. On September 18, 2017, after Plaintiff failed to oppose the motion, Justice Adams granted summary judgment in Chase's favor; struck Almazon's answer; dismissed her affirmative defenses and counterclaims with prejudice; and issued an Order of Reference appointing a referee to "ascertain and compute the amount due." Peyzner Decl. Exs. E-F.
Plaintiff appealed to the Appellate Division, Second Department. Peyzner Decl. Ex. H. Because Plaintiff had defaulted in the trial court, Chase moved to dismiss the appeal.
While the appeals process was proceeding, Chase moved to confirm the referee's report and for a judgment of foreclosure. Peyzner Decl. Ex. M at 18. Almazon opposed the motion on the grounds that (i) she was not timely served with the underlying motion for summary judgment; (ii) although she ultimately received the moving papers by email, she did not have enough time to prepare an opposition; (iii) Chase caused damage to a shed on the Property; (iv) Chase did not negotiate a settlement in good faith, and (v) the statute of limitations on the foreclosure claim had run.
On December 14, 2018, Justice Adams granted Chase's motion. Peyzner Decl. Ex. P at 29-30. In his Memorandum Decision, Justice Adams expressly rejected Almazon's argument that she had not been served with the summary judgment motion papers, concluding that her claim was "refuted by an affidavit of service stating that the motion papers were served on [Almazon] on June 15, 2017 by Federal Express at her current address" and by Plaintiff's admission that she received an emailed copy of the motion. Id. at 29. That same day, the state court issued its Order Confirming Referee Report and Judgment of Foreclosure and Sale, Peyzner Decl. Ex. M at 5-13. The court determined that the amount due on the mortgage was $369,879.02 and directed the Property to be sold at public auction within 90 days or as soon thereafter as reasonably practicable. Id. at 9.
Plaintiff appealed, Peyzner Decl. Ex. N, and asked the Second Department for a stay of the foreclosure sale pending her appeal. The appellate court denied the request for a stay. See Decision and Order, JPMorgan Chase Bank, N.A. v. Almazon, No. 2019-02456 (2d Dep't Apr. 9, 2019). Insofar as the record in this action discloses, that appeal is still pending before the Second Department.
On both March 9 and April 2, 2019, Plaintiff filed a "Re-Argument Motion for Reconsideration," seeking reconsideration of the September 18, 2017, summary judgment order underlying the Judgment. Peyzner Decl. Exs. O, P. Plaintiff again argued that she had not received notice of Chase's motion for summary judgment and therefore had no opportunity to be heard. Peyzner Decl. Exs. P at 4, O at 2. In addition, she sought reconsideration on various grounds previously alleged in her defenses and counterclaims, adding that Chase hired Safeguard to unlawfully trespass on the Property and damage her possessions and that it refused to release repair proceeds from her Sandy "payout." Peyzner Decl. Ex. P at 4-5. Almazon argued that the bank's foreclosure complaint, as well as the Judgment, should be "dismissed in its entirety due to such Unethical and Illegal Conduct." Id. at 5.
On May 22, 2019—with her motions for reconsideration pending and undecided— Plaintiff once again moved by OSC for a TRO staying the foreclosure sale of the Property, Peyzner Decl. Ex. Q, arguing that the sale could not go forward until her motions for reconsideration were "fully adjudicated." Id. at 8-9. In addition, she advised the state court that she was about to file a lawsuit in federal court that would include some of the same causes of action that were in her Answer and Counterclaim. Id. at 9, ¶ E.
The Nassau County Supreme Court entered a TRO in May 2019, temporarily staying the foreclosure sale until her pending motions were decided. Peyzner Decl. Ex. Q at 4. That relief was short lived, as the Nassau County Supreme Court denied Almazon's motions for reconsideration and for a further stay of foreclosure on August 29, 2019. Parker Letter Ex. F. The foreclosure sale of the Property was rescheduled for December 17, 2019. Parker Letter Ex. G. Almazon again appealed to the Appellate Division, Second Department. Winter Decl. (Dkt. 54) Ex. A. That appeal, along with Almazon's previous appeal of the judgment of foreclosure, remains pending.
Plaintiff filed her Complaint in this action on May 24, 2019, pro se. She asserted ten causes of action, including many of the claims previously raised as affirmative defenses or counterclaims in state court.
On September 3, 2019, an attorney retained by Almazon for the limited purpose of opposing Chase's motions in this action (Dkt. 35-1) filed a memorandum in opposition to Chase's motion to dismiss, Dkt. 22, supported by a lawyer's declaration attaching portions of the state court record, various letters and emails, hotel receipts, and photographs of the Property.
On October 1, 2019, Defendant replied and opposed Plaintiff's attempts to expand her claims through amendment. Def. Reply Mem. (Dkt. 30) at 3, 7-8.
Plaintiff requested and was granted an opportunity to file a sur-reply memorandum and a proposed Amended Complaint (see Dkts. 32, 33). Dkt. 34. In her proposed Amended Complaint (Dkt. 34-1), Plaintiff repleads all of the claims she did not withdraw, in some instances retaining their original labels but thoroughly overhauling their contents.
When a defendant moves to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction, and also moves to dismiss on other grounds, the Court must consider the Rule 12(b)(1) motion first. Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n, 896 F.2d 674, 678 (2d Cir. 1990). "A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). Here, Defendant asks the Court to dismiss Plaintiff's claims pursuant to Rule 12(b)(1) under Rooker-Feldman
The Rooker-Feldman doctrine bars "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, 544 U.S. at 284. The Second Circuit has articulated four requirements that must be met before a federal court may dismiss an action under Rooker-Feldman:
Hoblock v. Albany Cty. Bd. of Elections, 422 F.3d 77, 85 (2d Cir. 2005) (quoting Exxon Mobil, 544 U.S. at 284) (alterations in the original). Hoblock describes the first and fourth requirements as "procedural" and the second and third as "substantive." Id.
Here, the procedural elements of the Rooker-Feldman doctrine have been met. See id. at 85. Plaintiff lost in the foreclosure action in New York state court and the Judgment was issued before Plaintiff commenced this action.
To satisfy the substantive elements, the federal action must "complain[ ] of injury from a state-court judgment and seek[ ] to have that state-court judgment reversed." Hoblock, 422 F.3d at 86. If the federal plaintiff "present[s] some independent claim," even if that claim has been decided adversely to him in state court, "then there is jurisdiction and state law determines whether the defendant prevails under principles of preclusion." Exxon Mobil, 544 U.S. at 293 citation omitted). As the Second Circuit has explained, "federal plaintiffs are not subject to the Rooker-Feldman bar unless they complain of an injury caused by a state judgment." Hoblock, 422 F.3d at 87 (emphasis in original).
It is well settled that "an action seeking a declaration of property ownership after loss of title pursuant to a state-court foreclosure judgment [is] barred by Rooker-Feldman." Riley v. Comm'r of Fin., 618 F. App'x 16, 17 (2d Cir. 2015). Accordingly, this Court lacks jurisdiction to review or nullify the Judgment of Foreclosure, which it would have to do in order to provide Plaintiff the declaratory relief she seeks.
Plaintiff, however, seeks relief beyond title to the Property. Her remaining claims (for IIED, breach of the implied covenant of good faith and fair dealing, conversion, and violations of RESPA, TILA and GBL § 349) all seek monetary damages or restitution for injuries that are independent of the foreclosure judgment itself. See Compl. ¶¶ 47, 53, 63, 92, 98-99, 103. These claims do not require the Court to "review and reject the state foreclosure judgment" because they allege injuries caused by Chase's pre-judgment actions and do not assign error to the state court. See Graham, 156 F. Supp. 3d at 507-08 (holding that Rooker-Feldman did not bar claims sounding in fraud, breach of contract, breach of the implied covenant of good faith, unjust enrichment, conversion, and deceptive business practices against the loan servicer). Because Plaintiff's damages claims are not premised on any injuries "caused by" the Judgment itself, they are not barred by Rooker-Feldman.
Colorado River abstention allows a federal court, in "exceptional circumstances," to "abstain from exercising jurisdiction when parallel state-court litigation could result in `comprehensive disposition of litigation' and abstention would conserve judicial resources." Niagara Mohawk Power Corp. v. Hudson River-Black River Regulating Dist., 673 F.3d 84, 100 (2d Cir. 2012) (quoting Colorado River, 424 U.S. at 813, 817-18). In determining whether the doctrine applies, courts consider six factors:
Id. at 100-01 (quoting Woodford v. Cmty. Action Agency of Greene Cty., Inc., 239 F.3d 517, 522 (2d Cir. 2001)). "[T]he decision whether to dismiss a federal action because of parallel state-court litigation does not rest on a mechanical checklist, but on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16 (1983).
"[A] finding that the concurrent proceedings are `parallel' is a necessary prerequisite to abstention under Colorado River." Dittmer v. Cty. of Suffolk, 146 F.3d 113, 118 (2d Cir. 1998). "Lawsuits are considered parallel if substantially the same parties are contemporaneously litigating substantially the same issues in different forums." Roy v. Bank of New York Mellon, No. 17-CV-6729, 2018 WL 4771898, at *4 (E.D.N.Y. Sept. 30, 2018) (citation and internal quotation marks omitted). Additionally, actions are parallel "where there is a substantial likelihood that the state litigation will dispose of all claims presented in the federal case." Shields v. Murdoch, 891 F.Supp.2d 567, 577 (S.D.N.Y. 2012) (emphasis in original) (citation omitted). "Any doubt regarding the parallel nature of a federal and state action should be resolved in favor of the exercise of federal jurisdiction." Id. (quoting In re Comverse Tech., Inc. Derivative Litig., No. 06-CV-1849, 2006 WL 3193709, at *2 (E.D.N.Y. Nov. 2, 2006)).
The Foreclosure Action and the damages claims in this action are not "parallel" because the parties are not "contemporaneously litigating substantially the same issues," Roy, 2018 WL 4771898, at *4 (emphasis added), in a manner that could lead to future inconsistent resolutions.
The Court therefore grants Defendant's Rule 12(b)(1) motion to dismiss Plaintiff's claim for declaratory relief pursuant to the Rooker-Feldman doctrine; the Rule 12(b)(1) motion is denied as to Plaintiff's remaining claims, which will be evaluated under Rule 12(b)(6).
If a complaint fails to present "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face," the deficient claims may be dismissed pursuant to Fed. R. Civ. P. 12(b)(6). Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 65 (2d Cir. 2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). 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. Those factual allegations, however, "must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
When faced with a Rule 12(b)(6) motion, the trial court must "accept as true all factual statements alleged in the complaint and draw all reasonable inferences in favor of the non-moving party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). "A pleading that offers `labels and conclusions' or `a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders `naked assertion[s]' devoid of `further factual enhancement.'" Iqbal, 556 U.S. at 678 (internal quotation marks omitted) (quoting Twombly, 550 U.S. at 555, 557).
Where, as here, the Plaintiff commenced this action pro se, her Complaint (although not her proposed Amended Complaint, which was drafted by an attorney) must be construed "liberally, reading it with special solicitude and interpreting it to raise the strongest claims that it suggests." J.S. v. T'Kach, 714 F.3d 99, 103 (2d Cir. 2013) (quoting Harris v. City of New York, 607 F.3d 18, 24 (2d Cir. 2010)); see also Nicholas v. Bratton, No. 15-CV-9592, 2019 WL 2223407, at *3 (S.D.N.Y. May 23, 2019) ("[T]he majority of courts have continued to afford liberal construction to pro se pleadings even where counsel takes over the case at a later stage.") (collecting cases). Pro se status does not, however, "exempt a party from compliance with relevant rules of procedural and substantive law." Maisonet v. Metro. Hosp. & Health Hosp. Corp., 640 F.Supp.2d 345, 348 (S.D.N.Y. 2009) (citation omitted). Thus, even a pro se plaintiff "must state a plausible claim for relief." Walker v. Schult, 717 F.3d 119, 124 (2d Cir. 2013). Moreover, the court need not accept allegations that are "contradicted by other matters asserted or relied upon or incorporated by reference by a plaintiff in drafting the complaint." Fisk v. Letterman, 401 F.Supp.2d 362, 368 (S.D.N.Y. 2005).
Under the Full Faith and Credit Act, 28 U.S.C. § 1738, a federal court must apply New York res judicata law to New York state court judgments. Hoblock, 422 F.3d at 93. New York applies a transactional approach to the doctrine of res judicata. "[O]nce a claim or counterclaim 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." Parker v. Blauvelt Volunteer Fire Co., 93 N.Y.2d 343, 347 (1999) (quoting O'Brien v. City of Syracuse, 54 N.Y.2d 353, 357 (1981)); see also Maharaj v. Bankamerica Corp., 128 F.3d 94, 97 (2d Cir. 1997) ("Under both New York law and federal law, the doctrine of res judicata, or 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.'" (citing Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981) and Restatement (Second) of Judgments § 24(1) (1982))). "Thus, where a plaintiff in a later action brings a claim for damages that could have been presented in a. . . proceeding against the same party, based upon the same harm and arising out of the same or related facts, the claim is barred by res judicata." Parker, 93 N.Y.2d at 347-48.
Courts in this circuit have routinely applied res judicata to preclude claims that were or could have been raised in a prior foreclosure proceeding.
The Court notes, however, that other New York courts, both state and federal, have applied res judicata more narrowly, precluding only claims and theories that were actually raised in the prior proceeding or that would be inconsistent with the prior judgment. Those cases have pointed to New York's permissive counterclaim regime, explaining that a transaction-based approach effectively makes all counterclaims compulsory.
While that rationale is not without some force, Plaintiff has not argued that it controls, and the Court cannot adopt it. As the New York Court of Appeals has recently observed, the definition of a "cause of action" or a "claim" for res judicata purposes has expanded over time, which has, in turn, broadened the range of precluded claims. See Paramount Pictures Corp. v. Allianz Risk Transfer AG, 31 N.Y.3d 64, 75-76 (2018). More importantly, the Second Circuit has interpreted broadly New York's res judicata law, construing it to apply to all claims that "could have been raised" in a prior proceeding. See Maharaj, 128 F.3d at 97. While a federal court construing state law must follow the pronouncements of the state's highest court, a district court is also bound by the circuit court's interpretation of state law, at least until the state's highest court has clearly ruled otherwise or the federal appellate court has reconsidered. See, e.g., King v. Town of Wallkill, 302 F.Supp.2d 279, 296 (S.D.N.Y. 2004) (concluding that the Second Circuit's interpretation of state law is "binding" even though it has been criticized by state's intermediate appellate courts); Perks v. Town of Huntington, 251 F.Supp.2d 1143, 1160 (E.D.N.Y. 2003) (same); see also Factors Etc., Inc. v. Pro Arts, Inc., 652 F.2d 278, 281-83 (2d Cir. 1981) (holding that courts in the Second Circuit should defer to "a decision made by the court of appeals of another circuit on the law of a state within that other circuit," unless the decision inadvertently overlooked or was superseded by later state authorities). Thus, notwithstanding some authority to the contrary, Plaintiff's claims are barred by res judicata if they arose out of the same "transaction or series of transactions" as the Foreclosure Action, and were (or could have been) litigated in that proceeding.
Plaintiff does not dispute that her claims in this action all arose out of the "same transaction or series of transactions" that were at issue in the Foreclosure Action. See id. Nor does she deny—with the exception of her RESPA dual-tracking claim—that the claims she seeks to pursue here "could have been litigated" (and for the most part actually were litigated) in the Foreclosure Action, where they were "brought to a final conclusion" by the Judgment. Under New York law, nothing more is required to show that Plaintiff's non-RESPA claims are barred by res judicata. See, e.g., Senatore v. Ocwen Loan Servicing, LLC, No. 16-CV-8125, 2017 WL 3836056, at *1, 4 (S.D.N.Y. Aug. 31, 2017) (dismissing borrower's RICO, FDCPA, fraud, breach of contract, unfair competition, and unjust enrichment claims against lender on res judicata grounds because plaintiff was "clearly seeking to re-litigate the same transaction and series of events at issue in the prior state court litigation"); Trakansook, 2007 WL 1160433, at *6-7 (holding that res judicata barred plaintiff's § 1983 claims because they "arise from the same transaction or series of events" and could have been raised in state court).
Plaintiff seeks to defeat the res judicata effect of the Foreclosure Action by alleging procedural deficiencies in that proceeding. Thus, Plaintiff contends that her claims are not precluded because she did not receive Chase's summary judgment papers in time to respond, which deprived her of a "full opportunity to litigate the claims at issue here" in state court. Opp. Mem. at 8, 10.
Plaintiff is collaterally estopped from arguing that she was not properly served with Chase's summary judgment motion. Collateral estoppel, or issue preclusion, is a doctrine that bars the re-litigation of specific factual issues that were raised, litigated, and decided in previous litigation. "Under New York law, collateral estoppel bars claims where `(1) the issue in question was actually and necessarily decided in a prior proceeding, and (2) the party against whom the doctrine is asserted had a full and fair opportunity to litigate the issue in the first proceeding.'" Graham, 156 F. Supp. 3d at 505-06 (quoting Colon v. Coughlin, 58 F.3d 865, 869 (2d Cir. 1995)).
Justice Adams considered Plaintiff's inadequate notice claim on the merits and rejected it in his Memorandum Decision granting a judgment of foreclosure and sale. Peyzner Decl. Ex. P at 29. He concluded that Almazon was in fact served with the summary judgment motion papers, both by Federal Express on June 15, 2017, and thereafter by email. Id. Thus, the very issue that Plaintiff seeks to interpose as a defense to the application of res judicata was itself "actually and necessarily decided" against her in the Foreclosure Action after Almazon had a "full and fair opportunity" to litigate it. Plaintiff was free to appeal Justice Adams's Memorandum Decision (and did so), but she is collaterally estopped from re-raising it in this action.
Even if she were not collaterally estopped, Plaintiff's argument would still fail. State proceedings need only satisfy the minimum procedural requirements of the Fourteenth Amendment's Due Process Clause in order to be entitled to full faith and credit. Kremer v. Chemical Constr. Corp., 456 U.S. 461, 481 (1982). The requirements of due process are satisfied if the first court "provided an adequate opportunity to challenge the fairness of its procedures." 18 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4415 (3d ed. 2019). Here, the procedural defect that Plaintiff alleges— inadequate notice of Chase's 2017 summary judgment motion—did not render the state court's Judgment, issued some 18 months later, "constitutionally infirm." Kremer, 456 U.S. at 482. During those 18 months Plaintiff had ample opportunity to raise the alleged lack of notice and could have challenged the resulting summary judgment within the state court proceeding. Plaintiff could have moved to vacate the summary judgment order pursuant to N.Y. C.P.L.R. § 5015(a), which permits a state trial court to vacate an order for "excusable default." She chose not to do so, instead filing an unsuccessful appeal from the summary judgment decision, followed by a proposed OSC (which may also have served as her opposition to Chase's motion to confirm the referee's report) seeking relief based on her claim that she received defective notice of the summary judgment motion. Notwithstanding her procedural mistakes, Justice Adams considered her arguments regarding defective service on the merits and rejected them.
For these reasons, Plaintiff's renewed allegation that she was not properly served with Chase's state court summary judgment motion does not provide her with an "escape hatch" from the preclusive effect of the Judgment. See Yeiser, 535 F. Supp. 2d at 426 (where "issues were raised and addressed multiple times throughout the state court proceedings," re-litigation of those claims is barred by collateral estoppel notwithstanding that "plaintiffs do not agree with the state court's conclusion").
In New York, it is well-settled that "[t]he doctrine of res judicata applies to pro se litigants." Id. at 426 (collecting cases); see also Sosa v. JP Morgan Chase Bank, 33 A.D.3d 609, 611 (2d Dep't 2006) (applying res judicata against pro se litigant); Lake George Park Comm'n v. Salvador, 245 A.D.2d 605, 606 (3d Dep't 1997) ("A pro se litigant acquires no greater rights than any other litigant.").
Plaintiff claims in her opposition brief that she has uncovered "new evidence" concerning Defendant's "instructions to Safeguard during the pendency of the foreclosure action." Opp. Mem. at 9.
There is no allegation that Safeguard's conduct (or its relationship with Chase) was concealed from Plaintiff during the Foreclosure Action, fraudulently or otherwise. To the contrary: Plaintiff has been complaining about Safeguard since at least July 2018, see Parker Ltr. Ex. B at 3, and she described the Safeguard/Chase relationship in her April 2019 reconsideration motion, see Peyzner Decl. Ex. P at 5 (claiming that Chase "hired Safeguard" and thereafter "act[ed] by and through" Safeguard to "unlawfully Trespass[ ] and harass[ ] defendant's property"), much the way she now characterizes their relationship in her federal pleading. See Compl. ¶ 22 ("Safeguard, by and through the direction of the Defendant, visited Plaintiff's Property and both removed and destroyed her shed and its contents, thereby damaging such property, and Safeguard took other action creating damage and destruction to Plaintiff's Property."). Nor does Plaintiff point to any new evidence, previously unknown to her, that could call into question the preclusive effect of the Judgment. Plaintiff's contention that res judicata should not apply to one or more of her current claims because she "possesses new evidence" about Safeguard must, therefore, fail.
Plaintiff contends that her Eighth Cause of Action, brought under RESPA, is not barred by the Judgment because it states a "claim for `dual tracking' under `Dodd-Frank'" that "was never adjudicated nor ripe" in state court. Opp. Mem. at 8, 14; see also Sur-Reply Mem. at 1 (referring to plaintiff's "dual tracking claim under RESPA"). Plaintiff is correct that a dual tracking claim of the type she describes in her briefs would not be precluded by the Judgment. The Complaint, however, contains no such claim.
RESPA is "a consumer protection statute that was enacted by Congress to `insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges." Galli v. Astoria Bank, No. 16-CV-3549, 2017 WL 4325824, at *3 (E.D.N.Y. Sept. 27, 2017) (quoting 12 U.S.C. § 2601(a)). RESPA requires lenders, inter alia, to provide borrowers with standard disclosures that "conspicuously and clearly" itemize all closing charges. 12 U.S.C.A. §§ 2603(a), 2604. It also requires: lenders to disclose whether the servicing of the loan may be assigned, sold, or transferred, see 12 U.S.C. § 2605(a); servicers to provide prompt notice of any such assignment, sale, or transfer, id. §§ 2605(b)-(c); and servicers to respond promptly and in writing to any "qualified written request" from the borrower "for information relating to the servicing of such loan." Id. § 2605(e). None of these provisions prohibits, or provides a remedy for, dual tracking.
RESPA was amended, effective July 21, 2011, by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Pub. L. No. 111-203, 124 Stat. 1376 (2010). Dodd-Frank also created the Consumer Financial Protection Board (CFPB) and charged it with creating rules, regulations, and interpretations necessary to achieve RESPA's purpose. See 12 U.S.C. § 2617(a). The CFPB, in turn, adopted a series of regulations, effective January 10, 2014, that servicers must follow after a payment default. Galli, 2017 WL 4325824, at *4. One such regulation was "Regulation X," 78 Fed. Reg. 10696 (Feb. 14, 2013), now codified at 12 C.F.R. pt. 1024. Regulation X contains provisions governing "dual tracking" that prohibit a servicer from commencing a foreclosure proceeding or conducting a foreclosure sale if the borrower has submitted a "complete loss mitigation application" within specified timeframes. 12 C.F.R. §§ 1024.41(f)-(g). Borrowers have a private cause of action to enforce the dual tracking provisions and to recover actual damages, costs, and attorneys' fees. 12 U.S.C. § 2605(f); 12 C.F.R. § 1024.41(a); Sylvester, 2016 WL 3566234, at *2. RESPA violations, however, do not "affect the validity or enforceability of any sale or contract for the sale of real property or any loan, loan agreement, mortgage, or lien made or arising in connection with a federally related mortgage loan." 12 U.S.C. § 2615.
Because RESPA violations do not affect the validity or enforceability of a mortgage loan, a RESPA disclosure violation is not a defense to foreclosure, although it is frequently pleaded as a counterclaim in a foreclosure action. See, e.g., Deutsche Bank Nat. Tr. Co. v. Holler, 65 N.Y.S.3d 491 (Sup. Ct. Suffolk Co. 2017) (table; text at 2017 WL 3390578, at *13). Indeed, applying the transactional approach required by state law, federal courts in New York routinely hold that a plaintiff against whom a judgment of foreclosure has been obtained cannot thereafter pursue a RESPA disclosure violation claim arising out of the same mortgage loan.
Like a RESPA disclosure violation claim, a dual tracking claim brought pursuant to Regulation X is not a defense to foreclosure. See, e.g., Wilmington Tr., Nat'l Ass'n as Tr. of ARLP Sec. Tr., Series 2014-2 v. Garcia, No. 15-CV-00378, 2018 WL 7253970, at *8 (S.D. Tex. Dec. 19, 2018) ("[I]f Plaintiff impermissibly engaged in dual tracking. . . this will give rise to a private cause of action for damages, but it is not a basis to stop foreclosure."); HSBC Bank USA for Certificate Holders of ACE Sec. Corp. Home Equity Loan Tr., Series 2006-FM2 Asset-Backed Pass-Through Certificates v. Ahmad, 106 N.Y.S.3d 727 (N.Y. Sup. Ct. Suffolk Co. 2018) (table; text at 2018 WL 1831361, at *2) ("[A] violation by the servicer/lender of the prohibition against `dual tracking' merely affords a borrower a separate action in federal court against the servicer/lender for the assessment of a monetary penalty.").
Unlike a RESPA disclosure violation, however, a dual tracking claim is not ripe (and therefore cannot be asserted as a counterclaim in a foreclosure proceeding) as long as "foreclosure proceedings are still pending" and the plaintiff has not yet lost her property. See Wenegieme v. Bayview Loan Servicing, No. 14-CV-9137, 2015 WL 2151822, at *2 (S.D.N.Y. May 7, 2015) (holding that plaintiffs' "dual tracking claim under 12 C.F.R. § 1024.41(f) [was] premature" because "their claim for damages is contingent on a negative outcome in a proceeding that is currently ongoing—and that they may yet win"); see also Garcia, 2018 WL 7253970, at *8 ("If their dual tracking claim is legitimate, Defendants may file suit once the servicer has foreclosed on their property, or they are able to demonstrate other damages."), Thus, Plaintiff is correct that a Dodd-Frank dual tracking claim would not have been ripe during the Foreclosure Action and, therefore, is not now barred by res judicata. See Storey v. Cello Holdings, LLC, 347 F.3d 370, 383 (2d Cir. 2003) ("Claims arising subsequent to a prior action need not, and often perhaps could not, have been brought in that prior action; accordingly, they are not barred by res judicata.").
Plaintiff does not, however, plead anything resembling a Dodd-Frank dual tracking claim in her Complaint. Her Eighth Cause of Action, labeled "violation of RESPA," alleges that Chase "failed to account for and to provide Plaintiff with disclosures required under RESPA in connection with monies being held by Defendant for the benefit of Plaintiff that should have been lawfully returned to Plaintiff for Hurricane Sandy home repairs." Compl. ¶ 88; see also id. ¶ 90 (alleging that Chase violated RESPA by failing to provide "requisite details and disclosures as required under the law"). Even construed liberally, Plaintiff's allegations assert RESPA disclosure violations, which could have been and were asserted during the Foreclosure Action.
In her opposition and sur-reply briefs, prepared by counsel, Plaintiff attempts to recast her Eighth Cause of Action as a Dodd-Frank dual tracking claim, arguing that although the Complaint does not use the words "dual tracking," the "essence of that claim is included," because the Complaint alleges that Chase "move[d] forward with foreclosure proceedings while simultaneously working with the borrower on loan modification." Sur-Reply Mem. at 2; see also Opp. Mem. at 17 (arguing that Chase continued to engage in dual tracking after the Foreclosure Action was filed, including by "filing a lis pendes [sic] in March 2016 during active modification review, and serving discovery requests in August 2016 when a modification application was pending").
The Complaint does indeed allege (albeit not specifically in the Eighth Cause of Action) that Plaintiff sought a modification of the CEMA in 2010, but that, instead of working with her, Chase commenced foreclosure proceedings "during the pendency of [her] modification request." Compl. ¶¶ 9, 13. These vague and scanty factual allegations do not, however, add up to a Dodd-Frank dual tracking claim under 12 C.F.R. § 1024.41(f). Indeed, they could not constitute such a claim, no matter how detailed, because the bank "commenced foreclosure proceedings" on January 15, 2013, approximately one year before Regulation X was effective. See Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X) (Mortgage Servicing Rules), 78 Fed. Reg. 10696-708 (Feb. 14, 2013) ("[T]he Bureau is requiring that, as a general matter, creditors and other affected persons begin complying with the final rules on January 10, 2014.").
As a general rule, pro se litigants are liberally granted leave to amend their pleadings but, as with counseled litigants, leave to amend need not be granted when amendment would be futile.
In her proposed Amended Complaint, Plaintiff repleads five of her remaining claims—for IIED, breach of the covenant of good faith, conversion, violation of TILA, and unfair competition pursuant to GBL § 349—under the same legal theories. Although she has substantially augmented, updated, and (in some instances) reorganized the underlying factual allegations,
There are two new claims in the proposed Amended Complaint. The first alleges that Chase engaged in "dual tracking" in violation of Regulation X. Prop. Am. Compl. ¶¶ 61-78. The second alleges that Chase deprived Plaintiff of her procedural due process rights in violation of 42 U.S.C. § 1983. Id. ¶¶ 96-112. Because the proposed Amended Complaint was prepared by a licensed attorney, the Court need not review it with any special generosity. See Rose v. Garritt, No. 16-CV-3624, 2018 WL 443752, at *4 n.6 (S.D.N.Y. Jan. 16, 2018) (declining to apply liberal pleading standards to a pro se complaint that had been deemed sufficient by newly retained counsel); Williams v. City of New Rochelle, No. 13-CV-3315, 2014 WL 2445768, at *3 (S.D.N.Y. May 29, 2014) (holding that liberal pleading standard available for pro se litigants "no longer applies now that Plaintiff is represented by counsel"). Evaluating the new claims in the proposed Amended Complaint using the motion to dismiss standard, it is clear that leave to amend would be futile. Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83, 88 (2d Cir. 2002) ("An amendment to a pleading will be futile if a proposed claim could not withstand a motion to dismiss."),
Plaintiff alleges in her proposed Amended Complaint that Chase's "conduct of taking various actions in the foreclosure proceeding while Plaintiff's loan modification [request] was still pending constitutes dual tracking" in violation of Regulation X. Prop. Am. Compl. ¶¶ 63, 68, 77. The "various actions" that Plaintiff alleges Chase took while Plaintiff's loan modification application was pending include filing an amended lis pendens and making discovery requests. Id. ¶¶ 67, 70-71. Plaintiff does not specify which provision of Regulation X she contends those actions violated. Because she complains only about conduct that took place well after the commencement of the Foreclosure Action, however, the Court construes the claim to allege violations of 12 C.F.R. § 1024.41(g). That section provides, in relevant part:
12 C.F.R. § 1024.41(g) (emphasis added).
Plaintiff's dual tracking claim is deficient in at least three respects. First, she appears to interpret the regulation as prohibiting a servicer from taking any "action" in a pending foreclosure proceeding, no matter how minor, whenever the borrower seeks a loan modification. The Regulation X prohibition is not, however, that broad. It extends only to moving for a foreclosure judgment or order of sale, or conducting that sale. The CFPB has made clear that § 1024.41(g) does not prohibit a servicer from advancing the foreclosure process (if the first foreclosure notice or filing was made before the servicer received a complete loss mitigation application) so long as the servicer does not take action that will "directly result in the issuance of a foreclosure judgment or order of sale, or a foreclosure sale." Mortgage Servicing Rules, 78 Fed. Reg. 10834. Neither filing a lis pendens nor serving discovery requests is an action "that will directly result in the issuance of a foreclosure judgment or order of sale, or a foreclosure sale."
Second, Plaintiff fails to allege key facts about her own conduct that would be necessary to state a claim under § 1024.41(g). For example, she does not state when she completed a "complete loss mitigation application," except to allege, in conclusory terms, that she did so "years before, and much more than 37 days before, the scheduled foreclosure sale of her Property." Prop. Am. Compl. ¶ 66. This is insufficient. See Forscht v. Select Portfolio Servicing, Inc., No. 17-CV-2659, 2018 WL 1757610, at *2 (S.D. Tex. Apr. 12, 2018) ("[W]ithout some factual allegations on when a plaintiff submitted a complete loss mitigation application, a Regulation X claim does not rise beyond a speculative level."). Plaintiff does allege that she submitted a complete "loan application" on April 14, 2014, id. ¶ 65, but does not claim that it was a "complete loss mitigation application," which is the trigger for the dual tracking prohibition, and she does not allege any facts to suggest that such an application was still pending years later (and that none of the exceptions applied) in June 2017, when Chase moved for summary judgment, or in March 2018, when it moved for a final judgment of foreclosure.
Finally, Almazon fails to allege any actual damages proximately caused by Defendant's alleged dual tracking violations. See Hill v. DLJ Mortg. Capital, Inc., No. 15-CV-3083, 2016 WL 5818540, at *10 (E.D.N.Y. Oct. 5, 2016) ("[A] plaintiff bringing a[n individual] Section 2605 claim must, in addition to showing defendant's failure to comply with the provisions of Section 2605, identify damages that he or she sustained as a result of defendant's alleged violation(s).") (citation omitted), aff'd, 689 F. App'x 97 (2d Cir. 2017). Although 12 U.S.C. § 2605(f)(1)(B) permits a plaintiff to recover up to $2,000 in statutory damages when the lender has engaged in a "pattern or practice" of violations, an individual dual-tracking claim requires a plaintiff to allege and prove "actual damages" that were caused by the improper dual-tracking. 12 U.S.C. § 2605(f)(1)(A); see also Gorbaty v. Wells Fargo Bank, N.A., No. 10-CV-3291, 2012 WL 1372260, at *5 (E.D.N.Y. Apr. 18, 2012). To allege actual damages, Plaintiff must plead facts that link her injury to "defendant's alleged RESPA violations—rather than the underlying failure to pay her mortgage and the potential foreclosure sale." Ehrenfeld v. Wells Fargo, N.A., No. 19-CV-2314, 2019 WL 4933631, at *5 (E.D.N.Y. Oct. 7, 2019).
Because the dual tracking claim in Plaintiff's proposed Amended Complaint fails to plausibly allege that § 1024.41(g) was triggered, fails to plausibly allege that it was violated, and fails to plausibly allege damages caused by any violation, it would be futile to permit Plaintiff to file that claim.
To state a claim under § 1983, a plaintiff must allege that the defendant (1) was acting under color of state law and (2) deprived the plaintiff of rights, privileges or immunities secured by the Constitution or laws of the United States. Milan v. Wertheimer, 808 F.3d 961, 964 (2d Cir. 2015). To allege that a private actor, such as Chase, was "acting under the color of state law," a plaintiff must allege either joint activity between the private actor and the state or its agents or a conspiracy between the state or its agents and the private actor. Young v. Suffolk Cty., 922 F.Supp.2d 368, 385 (E.D.N.Y. 2013) (citing Ciambriello v. Cty. of Nassau, 292 F.3d 307, 324 (2d Cir. 2002)).
In her proposed Amended Complaint, Plaintiff alleges that "Defendant violated Plaintiff's due process rights by excluding Plaintiff from her Property[,] by commencing the State Court Action[,] and [by] repeatedly failing to provide her adequate notice and court filings in time to allow her to object and/or properly defend that Action." Prop. Am. Compl. ¶ 100. To the extent this claim arises out of matters previously raised or decided in state court—including Chase's allegedly improper commencement of the Foreclosure Action and its supposed failure to serve Plaintiff with the summary judgment motion papers—it is barred by res judicata or collateral estoppel.
More importantly, Almazon "fails to allege facts to establish that [Chase's] relevant conduct may be fairly attributable to the state as required to sustain a § 1983 claim." Best v. DiTech Holding Corp., 407 F.Supp.3d 210, 211-12 (E.D.N.Y. 2019); see also Trakansook, 2007 WL 1160433, at *5 n.4 (allegation that bank was "licensed by government agencies" and that it made "use of the New York State court system" to foreclose plaintiff's mortgage was not sufficient to state a § 1983 claim against it). Plaintiff's argument in sur-reply that Chase has continued to fail to serve Plaintiff after the entry of the foreclosure judgment, even if true, does not support a claim pursuant to § 1983. See Sur-Reply Mem. at 5. Accordingly, even if Plaintiff's § 1983 claim were not precluded by the state court Judgment, it would be futile to permit Plaintiff to plead it.
For the reasons stated above, Defendant's motion to dismiss is GRANTED. To the extent Plaintiff's claims seek declaratory relief, they are dismissed pursuant to Rule 12(b)(1). To the extent they seek monetary relief, they are dismissed, with prejudice, pursuant to Rule 12(b)(6). Leave to amend is denied as futile.
The Clerk of Court is respectfully directed to terminate all pending motions and deadlines and close the case. The Clerk is further requested to mail a copy of this Order to Ms. Almazon and to note mailing on the docket.
Under New York law, the tort of IIED has four elements: "(1) extreme and outrageous conduct, (2) intent to cause severe emotional distress, (3) a causal connection between the conduct and the injury, and (4) severe emotional distress." Bender v. City of N.Y., 78 F.3d 787, 790 (2d Cir. 1996) (citing Howell v. N.Y. Post Co., 81 N.Y.2d 115, 121 (1993)).
Plaintiff has not alleged non-conclusory facts from which the Court can infer that Chase committed IIED. Her allegations as to Chase's intent consist exclusively of legal conclusions. See Prop. Am. Compl. ¶ 35 ("Defendant committed the acts. . . with the intent to cause, as well as with complete utter and reckless disregard of the probability of causing, the Plaintiff to suffer severe emotional distress."). Furthermore, while the Court does not doubt that the foreclosure proceeding as a whole has taken a toll on Plaintiff, she has not adequately alleged that Safeguard's actions relative to her locks and her shed specifically caused her to suffer severe distress. Additionally, a claim based on property damage or trespass generally does not state an IIED claim because IIED is reserved for conduct that does not clearly fall within the ambit of another tort. Nelson v. Ulster Cty., New York, 789 F.Supp.2d 345, 358 (N.D.N.Y. 2010); Fischer v. Maloney, 43 N.Y.2d 553, 558 (1978). To the extent that Plaintiff claims that Chase committed IIED by initiating a foreclosure action while her loan modification application was allegedly pending, those allegations mirror her amended dual-tracking claim under Dodd-Frank, and, as discussed infra, are unfounded. See Prop. Am. Compl. ¶¶ 35, 67; see also Calizaire v. Mortg. Elec. Registration Sys., Inc., No. 14-CV-1542, 2017 WL 895741, at *8 (E.D.N.Y. Mar. 6, 2017) ("Debt collection or foreclosure—even when initiated improperly—will typically support an IIED claim only if accompanied by other `loathsome conduct.'" (quoting Assocs. First Capital v. Crabill, 51 A.D.3d 1186, 1188 (3d Dep't 2008))), aff'd, 763 F. App'x 124 (2d Cir. 2019). To the extent that Plaintiff bases her IIED claim on other allegedly unfair actions taken by Chase or its law firm during the foreclosure proceeding, such as failure to provide notice or to release funds, she previously raised those arguments in the state proceeding—the claim would be precluded even under a narrow view of res judicata. See, e.g., Almazon Order to Show Cause (Dkt. 8-23) at 2. Nor can the Court conclude that Chase's conduct, as alleged, rises to the level of "extreme and outrageous conduct." See Calizaire, 2017 WL 895741, at *8 (holding that knowing initiation of foreclosure proceedings without right to do so was not sufficiently "outrageous" to support IIED claim). Thus, even if Plaintiff's IIED claim were not barred by res judicata, she has failed to state a claim.