Aghaeepour v. N. Leasing Sys., Inc.
| Decision Date | 08 May 2019 |
| Docket Number | 14 cv 5449 (NSR) |
| Parties | Elaine AGHAEEPOUR, Anne Barr, Bruce Drago, Julie Higgins, Shane Moore, Michele Norris, Jesus Rivera, and Hong Zhang, Plaintiffs, v. NORTHERN LEASING SYSTEMS, INC., MBF Leasing, LLC, Lease Finance Group, LLC, Louis Cucinotta, Jennifer Centeno a/k/a Jennifer Nugent, Jay Cohen, Sara Krieger, Joseph I. Sussman, and Joseph I. Sussman, P.C., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Krishnan Shanker Chittur, Chittur & Associates, P.C., New York, NY, for Plaintiffs.
Robert D. Lillienstein, Scott Evan Silberfein, Moses & Singer LLP, New York, NY, for Defendants.
NELSON S. ROMÁN, United States District Judge Elaine Aghaeepour ("Aghaeepour"); Anne Barr ("Barr"); Bruce Drago ("Drago"); Julie Higgins ("Higgins"); Shane Moore ("Moore"); Michele Norris ("Norris"); Jesus Rivera ("Rivera"); and Hong Zhang ("Zhang") (collectively, "Plaintiffs") filed the instant Complaint against Jay Cohen ("Cohen"); Sara Krieger ("Krieger"); Jennifer Centeno a/k/a Jennifer Nugent ("Centeno" or "Nugent"); and Louis Cucinotta ("Cucinotta") (collectively, "Individual Defendants"); Joseph I. Sussman ("Sussman"); Joseph I. Sussman, P.C. ("Sussman, P.C.") (collectively, "Sussman Defendants"); Lease Finance Group, LLC ("LFG"); MBF Leasing, LLC ("MBF"); and Northern Leasing Systems, Inc. ("NLS") (collectively, "Corporate Defendants") (Corporate Defendants with Individual Defendants and Sussman Defendants, collectively, "Defendants"), alleging claims under the Federal Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962, 1964 ; the Federal Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681b(f), 1681s-2(b)(A) ; New York's Anti–Deceptive Trade Practices Act ("NYFCRA"), N.Y. Gen. Bus. Law §§ 349, 380 ; and fraud. (Second Amended Complaint, ("SAC"), ECF No. 48.)
Before the Court is Defendants' Motion to Dismiss the SAC pursuant to Federal Rule of Civil Procedure 12(b)(6), federal preemption, and res judicata . (See Motion to Dismiss, ECF No. 54.) For the following reasons, Defendants' Motion is GRANTED in part and DENIED in part.
This is a case about greed, corruption, and impunity. Defendants purportedly operate a complex racketeering scheme through which they intimidate out-of-state individuals into paying unwarranted sums of money by commencing or threatening to commence fraudulent lawsuits in New York City Civil Court. The lawsuits involve efforts to collect relatively small sums of money, typically under $ 10,000, which Defendants claim is owed to them based on equipment lease agreements. Many of these agreements, however, contain forged signatures. Over the years, Defendants have persisted in small claims proceedings and even obtained fraudulent default judgments. They have used these judgments to harass, intimidate, and extort money from Plaintiffs, most of whom cannot afford expensive long-distance litigation in foreign venues. In furtherance of this scheme, Defendants have also improperly accessed and made inaccurate entries on Plaintiffs' credit reports.
Defendant NLS finances the equipment leases and manages and operates over 100 shell entities, including LFG and MBF, which are its subsidiaries. Individual Defendants are all principals and officers of the Corporate Defendants: Cohen is NLS's President and Chief Executive Officer; Krieger is NLS's Vice President for Operations; Cucinotta is NLS's Legal Collections Manager; and Centeno is NLS's Legal Administrative Manager.
Defendant Joseph Sussman is an attorney duly admitted to the Bar in New York. Sussman, through his law firm, Joseph I. Sussman, P.C., commenced and conducted litigation on behalf of the Corporate Defendants. This litigation was based on forged leases, refusals to vacate default judgments, concealed facts from the Court (including deposition transcripts), and affirmative representations made to the Court to mislead it during litigation.
With each Plaintiff, Defendants engaged in largely the same racketeering scheme, consisting of "systematic and repeated" intimidation in attempts to collect money from Plaintiffs to which Defendants were not entitled. More specifically, Defendants "bullied" Plaintiffs with threats of litigation over documents that Defendants knew were forged. In each case, Defendants would create a fraudulent financing lease with Plaintiffs as guarantors. Where Defendants had access to Plaintiffs' bank accounts, Defendants would wrongfully debit amounts under the forged leases. Where Defendants did not have such access or when a plaintiff closed the bank account, Defendants harassed Plaintiffs—through phone calls and mailings—over "amounts due" and threatened Plaintiffs with litigation to collect the debt in default. In most cases, Defendants commenced lawsuits in the New York City courts. Since Plaintiffs are all out-of-state individuals, the lawsuits were designed to ensure that Plaintiffs had no real opportunity to raise defenses to the racketeering enterprise's bogus lawsuits, so that the entry of a default judgment was all but certain. When Defendants were granted default judgments, many Plaintiffs were forced to hire attorneys in New York to attempt to set the judgments aside.
In the course of this scheme, Defendants also wrongfully accessed Plaintiffs' credit reports and, in some cases, made adverse entries in the credit reports. Plaintiffs allege that these actions had "significant impact on credit availability to Plaintiffs, including without limitation, denial of credit opportunities, increase in interest rates, and diverse other consequences."
As a result, Plaintiffs suffered significant economic and non-economic damages, including mental anguish, embarrassment, annoyance, and emotional distress.
Plaintiff filed the Complaint on July 18, 2014. (ECF No. 1.) Plaintiff filed the First Amended Complaint ("FAC") two months later on September 9, 2014. (ECF No. 6.) A few months later, Defendants moved to dismiss the FAC. (ECF No. 13.) This Court ruled on that motion on December 1, 2015, dismissing: (1) the RICO claims of plaintiffs Glasgow, Norris, and Moore; (2) all FCRA and NYFCRA claims of plaintiffs Moore and Rivera; (3) the FCRA and NYFCRA claims based on inaccurate reporting of plaintiffs Higgins and Norris; (4) the FCRA and NYFCRA claims based on negligence of plaintiffs Glasgow, Higgins, Schilber (no longer a defendant), and Schilco (no longer a defendant); and (5) the NYFCRA § 380-b claims based on impermissible access of credit reports of plaintiff Schilco. (See Opinion & Order, ("Order"), ECF No. 19.)
On January 17, 2017, Plaintiffs filed the SAC. On June 8, 2017, Defendants filed the instant Motion to Dismiss the SAC. (ECF No. 54.)
To survive a motion to dismiss, a complaint must supply "factual allegations sufficient ‘to raise a right to relief above the speculative level.’ " ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). In other words, the complaint must allege "enough facts to state a claim to relief that is plausible on its face." Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir.2010) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ). "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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In applying this standard, a court should accept as true all well-pleaded factual allegations, but should not credit "mere conclusory statements" or "[t]hreadbare recitals of the elements of a cause of action." Id.
Defendants first argue that the NY FCRA claims are preempted and, therefore, fail to state a cause of action. (Defendant's Memorandum, ("Def. Mem."), ECF No. 56, at 2.) Specifically, Defendants contend that Plaintiffs' claim that Defendants failed to notify them prior to obtaining their credit reports fails because FCRA § 1681(m) addresses the same notice obligations set out in GBL § 380-b(b). (Id. )
Plaintiffs argue that the FCRA only limitedly preempts GBL § 380-b(b) because it is silent on a notice requirement imposed by state law. They claim that because state law is simply broader than federal law, there is no true conflict between the FCRA and GBL § 380-b(b). (Plaintiffs' Opposition, ("Pl. Opp."), ECF No. 58 at 4.) The Court agrees with the Plaintiffs.
The Constitution's Supremacy Clause provides that "the Laws of the United States... shall be the supreme Law of the Land ... anything in the Constitution or Laws of any State to the Contrary nowithstanding." U.S. Const. art. VI, cl. 2. Because U.S. laws are to be the supreme law of the land, "[i]t follows that Congress may preempt (or invalidate) a state law by means of a federal statute." Galper v. JP Morgan Chase Bank, N.A. , 802 F.3d 437, 443 (2d Cir. 2015). "It may preempt state law expressly or it may preempt state law implicitly." Further "[f]or any preemption inquiry, the ultimate touchstone ... is the intent of Congress." Id. (emphasis added).
As this Court previously explained:
The Supreme Court has recognized three typical settings in which courts will find that Congress intended to preempt state law. First, when Congress expressly provides that a federal statute overrides state law, courts will find state law preempted if, applying standard tools of statutory construction, the challenged state law falls within the scope of congressional intent to preempt. Second, when Congress legislates so comprehensively in one area as to "occupy the field," courts may infer from the federal legislation that Congress intended to preempt state law in that entire subject area. Third, when neither of the first two categories applies but state law directly conflicts with the...
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