Opinion
1:18-CV-00514 (BKS/TWD)
10-31-2018
JEFFREY C. ARNOW and JILL A. ARNOW, Plaintiffs, v. OCWEN LLC, Defendant.
APPEARANCES: JEFFREY C. ARNOW JILL A. ARNOW Plaintiffs pro se 145 Maple Avenue Scotia, New York 12302 HINSHAW & CULBERTSON LLP Attorneys for Defendant 800 Third Avenue, 13th Floor New York, New York 10022 OF COUNSEL: SCHUYLER B. KRAUS, ESQ.
APPEARANCES: JEFFREY C. ARNOW
JILL A. ARNOW
Plaintiffs pro se
145 Maple Avenue
Scotia, New York 12302 HINSHAW & CULBERTSON LLP
Attorneys for Defendant
800 Third Avenue, 13th Floor
New York, New York 10022 OF COUNSEL: SCHUYLER B. KRAUS, ESQ. THÉRÈSE WILEY DANCKS, United States Magistrate Judge ORDER AND REPORT-RECOMMENDATION
The Hon. Brenda K. Sannes, U.S. District Judge, has referred Plaintiffs Jeffrey C. Arnow and Jill A. Arnow's pro se amended complaint (Dkt. No. 12) to this Court for a report and recommendation including: (1) initial screening pursuant to 28 U.S.C. § 1915(e) ; (2) Plaintiff's request for a temporary restraining order (Dkt. No. 6); and (3) the request filed by Hinshaw & Culbertson, LLP ("Hinshaw firm"), counsel for Defendant Ocwen Loan Servicing LLC ("Ocwen"), incorrectly sued as Ocwen L.S., for dismissal of Plaintiffs' amended complaint. (Dkt. No. 14.) Also before the Court is Plaintiff Jeffrey C. Arnow's second motion for appointment of counsel. (Dkt. No. 15.)
Jill A. Arnow was not included as a named Plaintiff in the original complaint (Dkt. No. 1), and although she is named as a Plaintiff in the caption of the amended complaint (Dkt. No. 12), she has not been listed as a Plaintiff on the docket. The Court will treat her as a party Plaintiff for purposes of screening the amended complaint. Jeffrey C. Arnow was granted in forma pauperis status upon initial review. (Dkt. No. 9.) Jill A. Arnow has not filed an application to proceed in forma pauperis. Nonetheless, the Court will, solely for purposes of the matters now before the Court, allow both Plaintiffs to proceed in forma pauperis. In the event this matter is not finally disposed of on the initial review of Plaintiff's amended complaint, Jill A. Arnow will be required to pay the filing fee or submit an application and be granted leave to proceed in forma pauperis before going forward with the action.
I. LEGAL STANDARD FOR INITIAL REVIEW
Inasmuch as Plaintiffs are presently proceeding in forma pauperis, the Court must consider the sufficiency of the allegations set forth in the amended complaint in light of 28 U.S.C. §§ 1915(e). Section 1915(e) directs that when a plaintiff proceeds in forma pauperis, "the court shall dismiss the case at any time if the court determines that . . . the action . . . (i) is frivolous or malicious; (ii) fails to state a claim on which relief may be granted; or (iii) seeks monetary relief against a defendant who is immune from such relief." 28 U.S.C. § 1915(e)(2)(B)(i)-(iii). Additionally, if a court "determines at any time that it lacks subject-matter jurisdiction, the Court must dismiss the action." Rule 12(h)(3) of the Federal Rules of Civil Procedure; see also Widad v. Brooklyn Public Library, No. 15-CV-4312 (MKB), 2015 WL 7159796, at *1 (E.D.N.Y. Nov. 13, 2015) (dismissing state law claims for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(h)(1) on initial review pursuant to 28 U.S.C. § 1915(e)).
To determine whether an action is frivolous, a court must look to see whether the complaint "lacks an arguable basis either in law or fact." Neitzke v. Williams, 490 U.S. 319, 327 (1989).
Copies of all unpublished decisions cited herein will be provided to Plaintiff in accordance with LeBron v. Sanders, 557 F.3d 76 (2d Cir. 2009) (per curiam).
In reviewing a pro se complaint, the Court has the duty to show liberality towards pro se litigants, see Nance v. Kelly, 912 F.2d 605, 606 (2d Cir. 1990), and should exercise "extreme caution . . . in ordering sua sponte dismissal of a pro se complaint before the adverse party has been served and both parties (but particularly the plaintiff) have had an opportunity to respond." Anderson v. Coughlin, 700 F.2d 37, 41 (2d Cir. 1983) (internal citations omitted). Therefore, a court should not dismiss Plaintiffs' amended complaint if they have stated "enough facts to state a claim that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Although the Court should construe the factual allegations in the light most favorable to Plaintiff, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555). "[W]here the well-pleaded facts do not permit the court to infer more than the possibility of misconduct, the complaint has alleged but it has not "show[n] that the pleader is entitled to relief." Id. at 679 (quoting Federal Rule of Civil Procedure 8(a)(2)). While Rule 8(a) of the Federal Rules of Civil Procedure, which sets forth the general rules of pleading, "does not require detailed factual allegations, . . . it demands more than an unadorned, the-defendant-harmed-me accusation." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). Thus, a pleading that only "tenders naked assertions devoid of further factual enhancement" will not suffice. Id. (internal quotations marks and alterations omitted). Allegations that "are so vague as to fail to give the defendants adequate notice of the claims against them" are subject to dismissal. Sheehy v. Brown, 335 F. App'x 102, 104 (2d Cir. 2009).
II. PROCEDURAL BACKGROUND
Plaintiff Jeffrey C. Arnow submitted his original complaint for filing on April 30, 2018. (Dkt. No. 1.) The named Defendants were Ocwen L.S. and its C.E.O., Ronald Faris, and V.P. Associate General Counsel, Eric Spett. Id. Plaintiff apparently jumped the gun on service of a complaint on the Defendants because attorney Schuyler Kraus, Esq., an attorney with the Hinshaw Firm, filed a notice of appearance on behalf of all three original Defendants on May 16, 2018, prior to the Court's initial review of the complaint under 28 U.S.C. § 1915(e). (Dkt. No. 5.) Defendants thereafter, on May 25, 2018, again before initial review by the Court, filed a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Dkt. No. 7.) The motion was denied as moot by Judge Sannes in her September 5, 2018, Order adopting this Court's recommendation allowing Plaintiff forty-five days to submit an amended complaint for court review. (Dkt. Nos. 9 at 11; 13.)
Page references to documents identified by docket number are to the numbers assigned by the CM/ECF docketing system maintained by the Clerk's Office.
Plaintiff Jeffrey C. Arnow made two filings with the Clerk after submission of his original complaint and prior to Judge Sannes's September 5, 2018, Order. On May 24, 2018, Plaintiff filed a letter motion asking to see all "papers and notes, assignments and deeds" and requesting that a temporary restraining order be issued because "there is something not right in this case." (Dkt. No. 6.) On August 22, 2018, Plaintiff filed an amended complaint adding Jill A. Arnow as a Plaintiff and naming Ocwen LLC as the sole Defendant. (Dkt. No. 12.) In her September 5, 2018, Order, Judge Sannes referred Plaintiffs' May 24, 2018, letter (Dkt. No. 6) to this Court, and also referred Plaintiff's amended complaint for initial review. (Dkt. No. 13.) On September 7, 2018, Ocwen's counsel submitted a premature letter motion to the Court requesting dismissal of Plaintiffs' amended complaint before the Court for report and recommendation. (Dkt. No. 14.) Plaintiff Jeffrey C. Arnow thereafter filed his second motion for appointment of counsel on September 17, 2018. (Dkt. No. 15.)
III. THE CLAIMS IN PLAINTIFF'S AMENDED COMPLAINT
Plaintiff Jeffrey A. Arnow's original complaint was so devoid of factual content the only thing the Court could glean from its sparse allegations, along with the Court's review of filings in both Plaintiffs' numerous Chapter 13 bankruptcy proceedings in the Northern District of New York, was that Plaintiff's claim involved foreclosure proceedings on real property owned by him and his wife at 145 Maple Avenue, Scotia, New York. (See Dkt. No 9 at 8-9, n.8 and n.9.)
In their amended complaint, Plaintiffs allege that in August 1998, after Coastal Capital Corp. had transferred the note on their mortgage to Wells Fargo Bank ("Wells Fargo"), Ocwen, as servicer of Plaintiff's mortgage for Wells Fargo, engaged in a fraudulent scheme whereby they attempted to change the terms of Plaintiffs note and mortgage by forcing them to pay excessive amounts into an escrow account for insurance. (Dkt. No. 12 at 2.) Plaintiffs claim that Ocwen's employees or agents threatened on numerous occasions to foreclose on their property if they did not comply with the escrow requirements imposed by Ocwen. Id. According to Plaintiffs, Ocwen refused to accept the lower amount Plaintiffs believed they were required to pay and ultimately brought a fraudulent and dishonest foreclosure action against them in New York State Supreme Court, Schenectady County. Id. Plaintiffs acknowledge that Wells Fargo was awarded a judgment of foreclosure in the proceeding. (Dkt. No. 12 at 2.)
Plaintiffs allege that the judgment of foreclosure was obtained fraudulently because of the escrow account issue and that Ocwen thereafter conducted a foreclosure sale based upon the fraudulently obtained judgment on April 18, 2018, in violation of the automatic stay provision of the Bankruptcy Act, 11 U.S.C. § 362, and the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq. Id. at 1. See Balarezo v. Ocwen Loan Servicing, LLC, No. 17 CV 3033 (VB), 2017 WL 4857598, at *4 (Oct. 25, 2017) (the elements of a claim under the FDCPA are that "(1) the plaintiff must be a 'consumer' who allegedly owes the debt or a person who has been the object of efforts to collect a consumer debt, and (2) the defendant collecting the debt is considered a 'debt collector,' and (3) the defendant has engaged in any act or omission in violation of FDCPA requirements.").
The Clerk's Docket for Plaintiff Jill A. Arnow's Chapter 13 bankruptcy proceeding filed on March 19, 2018 does not show that she ever challenged the alleged violation of the automatic stay during the course of the bankruptcy proceeding, which was dismissed by the Bankruptcy Court on July 16, 2018. See In re Jill A. Arnow, Bankruptcy Petition #: 18-10435-1-rel (Brktcy. N.D.N.Y., Mar. 19, 2018).
Plaintiffs also allege that the fraudulently obtained judgment of foreclosure and subsequent foreclosure sale violated New York General Business Law ("GBL") § 349. Id. at 2. GBL § 349 protects against "[d]eceptive acts or practices in the conduct of any business, trade[,] or commerce or in the furnishing of any service in New York State." In order "[t]o state a prima facie claim under [§ 349], a plaintiff must allege [facts plausibly showing] that the defendant [i] engaged in consumer-oriented conduct, [ii] that the conduct was materially misleading; and [iii] that the plaintiff suffered injury as a result of the allegedly deceptive act or practice." Weisblum v. Prophase Labs, Inc, 88 F. Supp. 3d 283, 292 (S.D.N.Y. 2015).
IV. ANALYSIS OF THE CLAIMS IN PLAINTIFFS' AMENDED COMPLAINT
Even assuming for purposes of this initial review that the Court, through an overabundance of liberality in its construction of Plaintiffs' amended complaint, were able to construe the amended complaint to state a claim under the FDCPA or GBL § 349, the Court finds that there is no subject matter jurisdiction in federal district court over Plaintiff's claims related to the judgment of foreclosure and sale and the subsequent foreclosure sale pursuant to the Rooker-Feldman doctrine. "The Rooker-Feldman doctrine provides that, in most circumstances, the lower federal courts do not have subject matter jurisdiction to review final judgments of state courts." Morrison v. City of New York, 591 F.3d 109, 112 (2d Cir. 2010). Rooker-Feldman applies to federal actions "brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005).
A federal court defendant may invoke the Rooker-Feldman doctrine without having been a party to the state court action. See Omotosho v. Freeman Investment and Loan, 136 F. Supp. 3d 235, 246-47 (D. Conn. 2016).
The four requirements for application of the Rooker-Feldman doctrine are:
First, the federal-court plaintiff must have lost in state court. Second, the plaintiff must complain of injuries caused by a state-court judgment. Third, the plaintiff must invite district court review and rejection of that judgment. Fourth, the state-court judgment must have been rendered before the district court proceedings commenced.Hoblock v. Albany Cty. Bd. of Election, 422 F.3d 77, 85 (2d Cir. 2005) (internal quotation marks, footnote, and alterations omitted). Rooker-Feldman bars federal claims, whether raised in state court or not, that allege injury based on a state court judgment and seek review and reversal of that judgment claims that are "inextricably intertwined with the state judgment." Id. (internal quotation marks omitted). Sua sponte dismissal of a complaint upon initial review under the Rooker-Feldman doctrine is proper. See, e.g., Koziel v. City Court of Yonkers, 351 F. App'x 470 (2d Cir. 2009) (affirming sua sponte dismissal of complaint on initial review for lack of subject matter based on the Rooker-Feldman doctrine); Brooks v. Ross, 76 F. App'x 356 (2d Cir. 2003) (same); Talley v. LoanCare Servicing, Div. of FNF, No. 15-CV-5017 (JMA) (AKT), 2018 WL 4185705, at *5 (E.D.N.Y. Aug. 31, 2018) (action challenging state court mortgage foreclosure judgment dismissed on initial review under the Rooker-Feldman doctrine).
Plaintiffs claim that Ocwen, in violation of the FDCPA, fraudulently obtained a judgment of foreclosure in Schenectady County Supreme Court which led to a fraudulent foreclosure sale. (Dkt. No. 12 at 2-3.) The Court takes judicial notice of the: (1) amended verified complaint in the Schenectady County Supreme Court foreclosure action involving the property at issue, filed by Wells Fargo Bank Minnesota, N.A., as Trustee, against Plaintiffs on or about June 13, 2006 (Dkt. No. 7-8 at 7-35); (2) amended judgment of foreclosure and sale in the foreclosure action, signed by the Hon. Barry D. Kramer, Acting J.S.C., on November 17, 2008, and entered on December 22, 2008 (Dkt. No. 7-10 at 2-8); and (3) Referee's Deed in the foreclosure sale of the property at issue made March 19, 2018, signed by the Referee on March 30, 2018, and recorded in the Schenectady County Clerk's Office on May 2, 2018. (Dkt. No. 7-11 at 1-4.)
Judicial notice may be taken of the state court complaint and foreclosure documents as they are matters of public record and incorporated by reference to the foreclosure proceeding and foreclosure sale in Plaintiffs' amended complaint. See, e.g., Kingston v. Deutsch Bank Nat. Trust Co., No. 12-CV-6257, 2013 WL 1821107, at *1 n.2 (E.D.N.Y. April 30, 2013) (citing Taylor v. Vt. Dep't of Educ., 313 F.3d 768, 776 (2d Cir. 2002)).
The Second Circuit has held that a claim that a foreclosure judgment was fraudulently obtained is barred by the Rooker-Feldman doctrine. See Vossbrinck v. Accredited Home Lenders, Inc., 773 F.3d 423, 427 (2d Cir. 2014) (claim that defendants engaged in fraud during foreclosure action by misrepresenting that they had standing to seek foreclosure barred under the Rooker-Feldman doctrine because fraud claim would require federal court to review state court proceeding and determine that the foreclosure judgment was issued in error).
Based upon the allegations in Plaintiffs' amended complaint and the documents of which it has taken judicial notice, the Court finds that the requirements for the application of the Rooker-Feldman doctrine are satisfied in this case as to Plaintiffs' claims for violation of the FDCPA and GBL § 349 with respect to the judgment of foreclosure and sale. Plaintiffs clearly lost in state court and are complaining of injuries caused by the state court foreclosure judgment, including the foreclosure sale that followed from the judgment, which is inextricably intertwined with the judgment of foreclosure sale and thus barred under the Rooker-Feldman doctrine. Plaintiffs are inviting district court review and rejection of the judgment of foreclosure and sale and subsequent foreclosure sale based upon Ocwen's alleged fraud, and the state court judgment of foreclosure and sale was entered on December 22, 2008, well before Plaintiffs commenced this action.
Based upon the foregoing, the Court finds that there is no subject matter jurisdiction over Plaintiff's FDCPA and GBL § 349 claims regarding the state court judgment of foreclosure and sale and the subsequent foreclosure pursuant to the Rooker-Feldman doctrine and recommends dismissal of Plaintiffs' amended complaint for lack of subject matter jurisdiction on initial review.
Plaintiffs have not alleged diversity jurisdiction with regard to their state law claim under GBL § 349. (See Dkt. No. 12.) Even if they had, courts in this Circuit have found that the Rooker-Feldman doctrine bars suits even where diversity jurisdiction otherwise exists. See Ford v. Dep't of Soc. Servs., No. 10 Civ 3800(RWS), 2011 WL 1458138, at *5 (S.D.N.Y. Mar. 22, 2011 (citing cases); Ballyhighlands, Ltd. v. Bruns, 1999 WL 377098, at *2 (2d Cir. May 28, 1999) (rejecting the argument that Rooker-Feldman did not apply because it was a diversity suit with a "separate action" for trespass and ejectment, explaining that "[s]imply stated, any action seeking to overturn a state court judgment, and any action that is 'inextricably intertwined" with a state court judgment . . . is barred from being brought in federal district court.") (unpublished); Papeskov v. Nitis, No. 12 Civ. 1740 (ARR), 2012 WL 1530731, at *3 (E.D.N.Y. April 27, 2012) (holding that "the court need not finally determine whether plaintiff has established diversity jurisdiction in this instance as plaintiff's claims are barred by the Rooker-Feldman doctrine.")
V. REMAINING ISSUES
In light of the Court's recommendation that Plaintiffs' amended complaint be dismissed for lack of subject matter jurisdiction under the Rooker-Feldman doctrine, the Court also recommends that Plaintiff Jeffrey C. Arnow's May 24, 2018, letter motion asking to see all "papers and notes, assignments and deeds" and requesting a temporary restraining order (Dkt. No. 6), and Defendant's letter motion requesting dismissal of Plaintiffs' amended complaint both be denied as moot. (Dkt. No. 14.) Finally, the Court denies Plaintiff Jeffrey C. Arnow's second motion for the appointment of counsel (Dkt. No. 15) as moot in light of its recommendation that Plaintiffs' amended complaint be dismissed for lack of subject matter jurisdiction. Even if the Court were not recommending dismissal, a more fully developed record would be necessary before an assessment can be made as to whether counsel should be appointed. See Hendricks v. Coughlin, 114 F.3d 390, 392 (2d Cir. 1997). The denial is without prejudice so that Plaintiffs will not be precluded from making a subsequent request for appointment of counsel in the event the District Court allows the action to proceed or grants Plaintiffs' leave to file a second amended complaint.
ACCORDINGLY, it is hereby
RECOMMENDED that Plaintiffs' amended complaint (Dkt. No. 12) be sua sponte dismissed for lack of subject matter jurisdiction pursuant to 28 U.S.C. § 1915(e) and Fed.R.Civ.P. 12(h)(3); and it is further
RECOMMENDED that Plaintiff Jeffrey C. Arnow's letter motion for documents and a temporary restraining order be DENIED as moot (Dkt. No. 6); and it is further
RECOMMENDED that Defendant's letter motion for dismissal of Plaintiffs' amended complaint (Dkt. No. 14) be DENIED as moot; and it is hereby
ORDERED that Plaintiff Jeffrey C. Arnow's second motion for the appointment of counsel (Dkt. No. 15) be DENIED as moot without prejudice; and it is further
ORDERED that the Clerk provide Plaintiff with a copy of this Order and Report-Recommendation, along with copies of the unpublished decisions cited herein in accordance with the Second Circuit decision in Lebron v. Sanders, 557 F.3d 76 (2d Cir. 2009) (per curiam).
Pursuant to 28 U.S.C. § 636(b)(1), the parties have fourteen days within which to file written objections to the foregoing report. Such objections shall be filed with the Clerk of the Court. FAILURE TO OBJECT TO THIS REPORT WITHIN FOURTEEN DAYS WILL PRECLUDE APPELLATE REVIEW. Roldan v. Racette, 984 F.2d 85 (2d Cir. 1993) (citing Small v. Secretary of Health and Human Services, 892 F.2d 15 (2d Cir. 1989)); 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72. Dated: October 31, 2018
If you are proceeding pro se and are served with this Order and Report-Recommendation by mail, three additional days will be added to the fourteen-day period, meaning that you have seventeen days from the date the Order and Report-Recommendation was mailed to you to serve and file objections. Fed. R. Civ. P. 6(d). If the last day of that prescribed period falls on a Saturday, Sunday, or legal holiday, then the deadline is extended until the end of the next day that is not a Saturday, Sunday, or legal holiday. Fed. R. Civ. 6(a)(1)(C).
Syracuse, New York
/s/_________
Thérèse Wiley Dancks
United States Magistrate Judge