Anctil v. Ally Fin., Inc.

• Decision Date: 10 February 2014
• Docket Number: No. 12–CV–8572 (CS).,12–CV–8572 (CS).
• Citation: 998 F.Supp.2d 127
• Parties: John ANCTIL, Lee Babb, Gisele Barbosa, Christine Bernat, George Branch, Gary Crofoot, Paul Demers, Charles and Consuelo Ferris, Julio Grillo, Martin and Janice Hogan, Mary Jones, Karl and Oksana Jorgensen, Donald Kadlec, Sandra Lapidez, John Lopes, James and Priscilla McGough, Francis Pariseau, Mark and Lisa Perry, Rebecca Ralston, Dorothy Carpenter–Reid, Michael Ryan, Benita and William Schriefer, Michael Silver, Flavio Terzis, Jonathan Thurrott, Nancy Troske, Ingrid Weber, Kelly Williams, and Matthew Zicaro, Plaintiffs, v. ALLY FINANCIAL, INC., Aurora Loan Services, LLC, Bank of America, N.A., Chase Home Finance, LLC, Cincinnati Federal Savings and Loan, Citibank, N.A., Citigroup, Inc., Citimortgage, Inc., Countrywide Home Loans, Inc., Deutsche Bank, AG, Deutsche Bank National Trust Co., Deutsche Bank Trust Co., First Franklin Loan Services, Flagstar Bank, FSB, Fremont Investment and Loan Corp., Homeward Residential, JPMorgan Chase & Co., Money Warehouse, Mortgageit, Inc., Ocwen Financial Corp., PHH Mortgage, the PNC Financial Services Group, Inc., Provident Funding Group, Inc., Signature Group Holdings, Inc., U.S. Bank, N.A., and Wells Fargo, N.A., Defendants.
• Court: U.S. District Court — Southern District of New York

998 F.Supp.2d 127

John ANCTIL, Lee Babb, Gisele Barbosa, Christine Bernat, George Branch, Gary Crofoot, Paul Demers, Charles and Consuelo Ferris, Julio Grillo, Martin and Janice Hogan, Mary Jones, Karl and Oksana Jorgensen, Donald Kadlec, Sandra Lapidez, John Lopes, James and Priscilla McGough, Francis Pariseau, Mark and Lisa Perry, Rebecca Ralston, Dorothy Carpenter–Reid, Michael Ryan, Benita and William Schriefer, Michael Silver, Flavio Terzis, Jonathan Thurrott, Nancy Troske, Ingrid Weber, Kelly Williams, and Matthew Zicaro, Plaintiffs,

v.ALLY FINANCIAL, INC., Aurora Loan Services, LLC, Bank of America, N.A., Chase Home Finance, LLC, Cincinnati Federal Savings and Loan, Citibank, N.A., Citigroup, Inc., Citimortgage, Inc., Countrywide Home Loans, Inc., Deutsche Bank, AG, Deutsche Bank National Trust Co., Deutsche Bank Trust Co., First Franklin Loan Services, Flagstar Bank, FSB, Fremont Investment and Loan Corp., Homeward Residential, JPMorgan Chase & Co., Money Warehouse, Mortgageit, Inc., Ocwen Financial Corp., PHH Mortgage, the PNC Financial Services Group, Inc., Provident Funding Group, Inc., Signature Group Holdings, Inc., U.S. Bank, N.A., and Wells Fargo, N.A., Defendants.

No. 12–CV–8572 (CS).

United States District Court,

S.D. New York.

Feb. 10, 2014.

Zoe J. Dolan, Law Offices of Zoe Dolan, Scott A. Kamber, KamberLaw, LLC, New York, NY, for Plaintiffs.

Jason O. Braiman, Goodwin Procter LLP, New York, NY, for Defendants Bank of America, N.A., Countrywide Home Loans, Inc., and First Franklin Loan Services.

Jonathan M. Robbin, Blank Rome, LLP, New York, NY, for Defendant Homeward Residential.

Richard G. Haddad, Otterbourg, Steindler, Houston & Rosen, PC, New York, NY, for Defendant Ally Financial, Inc.

Bruce Allensworth, Brian M. Forbes, Robert W. Sparkes, III, K & L Gates LLP, Boston, MA, David S. Versfelt, K & L Gates LLP, New York, NY, for Defendant Ocwen Financial Corp.

Julian W. Friedman, Stillman & Friedman, PC, New York, NY, David H. Pittinsky, Ballard Spahr LLP, Philadelphia, PA, for Defendant PNC Financial Services Group.

Elliott C. Mogul, Arnold & Porter LLP, Washington, D.C., Anthony D. Boccanfuso, Arnold & Porter LLP, New York, NY, for Defendant Aurora Loan Services, LLC.

Lisa J. Fried, Allison J. Schoenthal, Hogan Lovells U.S. LLP, New York, NY, for

Defendants Flagstar Bank, FSB, Provident Funding Group, Inc., U.S. Bank, N.A., and Wells Fargo, N.A.

Michael S. Kraut, Morgan, Lewis & Bockius LLP, New York, NY, for Defendant Deutsche Bank National Trust Co.

Joy Harmon Sperling, Michael A. Weiss, Day Pitney LLP, New York, NY, for Defendants MortgageIT, Inc. and Deutsche Bank A.G.

John M. Falzone, Parker Ibrahim & Berg LLC, New York, NY, for Defendants JPMorgan Chase & Co. and Chase Home Finance, LLC.

Michael P. De Simone, Alston & Bird LLP, New York, NY, for Defendant PHH Mortgage.

Noah Weissman, Bryan Cave LLP, New York, NY, for Defendants CitiMortgage, Inc., Citibank, N.A., and Citigroup, Inc.

Harold F. Damm, Ciotti & Damm, LLP, Mineola, NY, for Defendant Cincinnati Federal Savings and Loan.

OPINION AND ORDER

SEIBEL, District Judge.

Before the Court are several Motions to Dismiss, including one Joint Motion filed by all Defendants and several additional Motions filed by individual Defendants. (Docs. 90, 93.) ¹ For the reasons set forth below, the Joint Motion to Dismiss is GRANTED and the individual Motions are DENIED AS MOOT.

I. BACKGROUND

For purposes of the instant Motions to Dismiss, I accept as true the facts, but not the conclusions, as set forth in the Second Amended Complaint (“SAC”). (Doc. 74.) ²

Plaintiffs are former mortgagors of homes in New York, Massachusetts, and Maryland. (SAC ¶¶ 9–35.) Each Plaintiff's home was foreclosed upon between December 2006 and November 2010. ( Id. ¶ 138.) In essence, the SAC alleges that the entire mortgage industry is engaged in a massive racketeering scheme designed to mislead mortgagors, the public, and various government entities in order to illegally foreclose on homes. To support this conclusion, much of the SAC is devoted to recounting the history and development of the mortgage securitization industry, the creation of the Mortgage Electronic Registration System (“MERS”), the role of the Mortgage Bankers Association (“MBA”), and the development of certain accounting standards by the Financial Accounting Standards Board (“FASB”).³ ( See id.¶¶ 66–107.) This Opinion will recite only those facts that are necessary to understand my ruling.

MERS is a digital registration system designed to simplify the tracking of transfers in ownership of home mortgages and transfers in servicing rights to the associated loans. ( Id. ¶¶ 74, 77.) This system is administered by an entity composed of many players in the mortgage industry. ( Id. ¶ 75.) Prior to use of the MERS system, when a mortgage was issued, the lender would record its identity and interest in the local public land records for the mortgaged property, and if the mortgage was subsequently assigned to a different entity, the transfer (and the identity of the new holder) would also be recorded in the land records. ( Id. ¶ 78.) Lenders who participate in the MERS system, however, typically name MERS as the lender's nominee in the land records. ( Id. ¶ 79.) Assignments and transfers of the mortgage among MERS members are tracked in the MERS database, but those assignments are not recorded in the land records; MERS remains listed as the named nominee of the holder of the mortgage. ( Id.) Thus, “MERS acts as the designated common agent for the MERS member institutions in the land records, which means that MERS acts on its members' behalf as mortgagee.” (Ds' Joint Mem. 7 (internal quotation marks and alterations omitted).) ⁴ The MERS system facilitates the securitization of mortgage loans. (SAC ¶ 103.)

The crux of Plaintiffs' allegations is that (1) Defendants used the MERS system to conceal transfers of Plaintiffs' mortgages among various companies, which transfers did not comply with state law; (2) as a result, the chains of title to the mortgages were broken; and (3) when Plaintiffs' homes were ultimately foreclosed upon, the entities that initiated those foreclosure proceedings (a) used false and misleading documents and affidavits to do so, and (b) did not hold valid title to the mortgages in question, thus rendering those foreclosures invalid. ( See id. ¶¶ 108–14.) Although the SAC contains a chart listing purported racketeering acts committed by each Defendant in connection with Plaintiffs' foreclosures, ( id. ¶ 162), detailed factual allegations are only included as to two of the individual Plaintiffs' mortgages by way of “example,” ( id. ¶¶ 116–23 (regarding Plaintiff Troske and Defendant U.S. Bank); id. ¶¶ 124–37 (regarding Plaintiff Zicaro and Defendants Ocwen and Wells Fargo)).

Plaintiffs now assert several claims pursuant to the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., as well as state law claims under New York, Massachusetts, and Maryland law for common law fraud and violations of those states' consumer protection statutes.

II. SUBJECT MATTER JURISDICTIONA. Legal Standard

“A federal court has subject matter jurisdiction over a cause of action only when it ‘has authority to adjudicate the cause’ pressed in the complaint.” Arar v. Ashcroft, 532 F.3d 157, 168 (2d Cir.2008) (quoting Sinochem Int'l Co. v. Malay. Int'l Shipping Corp., 549 U.S. 422, 425, 127 S.Ct. 1184, 167 L.Ed.2d 15 (2007)), rev'd en banc on other grounds,585 F.3d 559 (2d Cir.2009). “Determining the existence of subject matter jurisdiction is a threshold inquiry, and a claim 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.’ ” Id. (citation omitted) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000)). “When jurisdiction is challenged, the plaintiff bears the burden of showing by a preponderance of the evidence that subject matter jurisdiction exists, and the district court may examine evidence outside of the pleadings to make this determination.” Id. (citations and internal quotation marks omitted). “The court must take all facts alleged in the complaint as true and draw all reasonable inferences in favor of plaintiff, but jurisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it.” Morrison v. Nat'l Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir.2008) (internal quotation marks, citations, and alteration omitted), aff'd on other grounds,561 U.S. 247, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010). When a defendant moves to dismiss both for lack of subject matter jurisdiction and on other grounds such as failure to state a claim upon which relief can be granted, the Court must address the issue of subject matter jurisdiction first. See Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n, 896 F.2d 674, 678 (2d Cir.1990).

B. The Rooker–Feldman Doctrine

Defendants contend that this Court lacks subject matter jurisdiction over Plaintiffs' claims pursuant to the Rooker–Feldman doctrine, ( see Ds' Joint Mem. 7–13), which bars lower federal courts from reviewing judgments of state courts. See generally D.C. Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923). This doctrine recognizes that “federal district courts lack jurisdiction over suits that are, in substance, appeals from state-court judgments.” Hoblock v. Albany Cnty. Bd. of Elections, 422 F.3d 77, 84 (2d Cir.2005). “Underlying the Rooker–Feldman doctrine is the principle, expressed by Congress in 28 U.S.C. § 1257, that within the federal judicial system, only the Supreme Court may review state-court decisions.” Green v. Mattingly, 585 F.3d 97, 101 (2d Cir.2009). In 2005, the Supreme Court narrowed the previously held...