Barker v. Rokosz
| Decision Date | 18 March 2021 |
| Docket Number | 19-CV-00514(KAM) |
| Parties | CARLA BARKER, Plaintiff, v. IZIA ROKOSZ, JANELLE DEFREITAS, STEVEN G. LEGUM, FRANK RICHARD HURLEY, GREGG TELSEY, ROBERT FISHBEIN, BETTY J. HINGLE, ROYCE LLC, JACKIE MARKETING LLC, LOCKDECO A/K/A LODECO, "JOHN DOE #1" though "JOHN DOE #100," said names being fictitious and unknown, the parties intended being persons or corporations, if any, having participated in the enterprise described in the complaint, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Plaintiff Carla Barker ("Plaintiff") commenced this action on January 25, 2019 alleging that defendants committed violations of federal and New York state lending laws. (ECF No. 1, Complaint.) By Order dated January 2, 2020, this court granted defendants' Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)") motions to dismiss plaintiff's claims under New York's Deceptive Practices Act, N.Y. Gen. Bus. Law § 349 ("Section 349") and the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"). (ECF No. 119, Order Granting Motions to Dismiss.) On July 31, 2020, plaintiff filed a motion to amend the complaint pursuant to Federal Rule of Civil Procedure 15(a)(2) ("Rule 15(a)(2)"). (ECF No. 152, Motion to Amend.) Plaintiff seeks to add facts obtained through limited discovery to support her Section 349 and RICO claims against defendants. (ECF No. 152-2, Plaintiff's Memorandum in Support of Motion at 1.) Plaintiff also seeks to add a malpractice claim against Defendant Frank Richard Hurley, Esq., who represented plaintiff at the closing of the Subject Loans. (Id.) Separately, defendant, Steven G. Legum ("Legum") filed a cross-motion for sanctions pursuant to 28 U.S.C. § 1927 ("Section 1927") requesting the court to award fees against the attorneys for the plaintiff. (ECF No. 154, Legum Cross Motion for Sanctions.)
Presently before this court with respect to plaintiff's motion to amend are plaintiff's motion, defendant Legum's Memorandum in Opposition to plaintiff's motion, defendant Rokosz's Memorandum in Opposition to plaintiff's motion, defendants Telsey and Royce LLC's Memorandum in Opposition to plaintiff's motion, and plaintiff's replies to defendants' memoranda in opposition.1 (See ECF No. 152, Motionto Amend; ECF No. 153, Legum Memorandum in Opposition; ECF No. 157, Rokosz Memorandum in Opposition; ECF No. 160, Plaintiff's Reply; ECF No. 161, Plaintiff's Reply RE Hurley; and ECF No. 162, Telsey and Royce LLC Memrandum in Opposition.) With respect to Legum's cross motion for sanctions, the court considers Legum's motion, plaintiff's Memorandum in Opposition, and Legum's reply. (See ECF No. 154, Legum Cross Motion for Sanctions; ECF No. 156, Memorandum in Opposition; ECF No. 155, Legum Reply.) This Memorandum and Order will address both plaintiff's motion to amend her complaint and defendant Legum's motion for sanctions. For the reasons set forth below, plaintiff's motion is granted in part and Legum's motion is denied.
Plaintiff's proposed amended complaint re-alleges her Section 349 and RICO claims. The Court's January 2, 2020 order dismissed plaintiff's Section 349 claim against all defendants because plaintiff did not plead sufficient facts alleging that defendants' conduct was consumer-oriented. (ECF No. 119, OrderGranting Motion to Dismiss at 23-29.) Plaintiff's RICO claim was dismissed because plaintiff did not plead sufficient facts alleging the existence of an association-in-fact enterprise. (Id. at 32-36.) "As when considering a motion to dismiss under Rule 12(b)(6), [a] court" considering a motion for leave to amend "must accept as true all well-pleaded facts" in a plaintiff's proposed amended complaint "and draw all reasonable inferences in the [plaintiff's] favor." Artists Rights Enf't Corp. v. Estate of King, No. 16 Civ. 1121 (JPO), 2017 WL 2062988, at *3 (quoting Agerbrink v. Model Serv. LLC, 155 F. Supp. 3d 448, 456 (S.D.N.Y. 2016)); see also Zappia Middle E. Const. Co. Ltd. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir.2000) ()
In her amended complaint, Plaintiff alleges additional facts in support of her Section 349 and RICO claims. Supplementing the facts pled in her original complaint, plaintiff adds a lengthy new section in her proposed amended complaint titled "Defendants' Related Practices Involving Other Borrowers." (ECF No. 152-3, Proposed Amended Complaint ("PAC") at ¶¶ 154-178.) This section details that since 2011, defendant Rokosz "issued at least 26 other mortgage loans with similar terms" to that of plaintiff's loan, for which Legum acted asRokosz's attorney in 22 of the mortgage loans, including plaintiff's two mortgage loan transactions totaling $450,000. (PAC, ¶¶ 155, 157-158.) Legum was Rokosz's attorney for 22 of the 26 described mortgage loan transactions, (Id. ¶ 157.), and between November 2013 and October 2016, Telsey helped arrange at least 13 of these transactions, in which Legum served as the attorney, and Telsey and Royce LLC received proceeds. (Id. ¶ 158.) Around 2014, Fishbein assisted Telsey in arranging nine of the described mortgage loans originated by Rokosz. (Id. ¶ 159.) Defendants, Rokosz, Legum, Telsey, Royce LLC, and Fishbein, received proceeds from at least 10 of 14 the mortgage transactions between November 2013 and February 2017, (Id. ¶ 160.), and all fourteen of these loans "involved loan terms of between 356 days and two years, nominal interest rates of 12 or 13 percent per annum, and a balloon payment of the entire principal sum due on the date of maturity." (Id. ¶ 161.) In at least 10 of these transactions, loan proceeds were held in "escrow," and these funds were not returned to the borrower. (Id. ¶¶ 163-164.) The proposed amended complaint further details the events that occurred in ten of these mortgage loan transactions. (Id. ¶¶ 179-264.)
As in her first complaint, Plaintiff similarly alleges that defendants Rokosz, Legum, Telsey, and Royce LLC violated Section 349. (Id. ¶¶ 347-368.) However, plaintiff now addsthat she was misled that the funds held in escrow would be utilized in the event of "default on taxes, insurance, or interest payments," when in reality, the escrow funds were not used for this purpose when she so requested, and instead were used to hide the true interest rate of her loan, which rendered the loan usurious. (Id. ¶ 366.)
With respect to her RICO claim, plaintiff's proposed amended complaint adds that plaintiff's loan constituted "unlawful debt" under RICO § 1961(6) because, inter alia, "the usurious rate of the Subject Loan, of a least 37.87 percent, was at least twice the enforceable rate of 16 percent." (Id. ¶ 398.) Plaintiff also alleges that as of February 2017, the defendants were "engaged in the business of lending money at a usurious rate," and that at least the ten other loans detailed by the plaintiff, involved Defendant Rokosz and the other RICO Defendants. (Id. ¶ 399.) The proposed amended complaint details the manner in which defendants participated in the operation or management of the alleged enterprise in the collection of unlawful debt. (Id. ¶¶ 400-403.)
Plaintiff's proposed amended complaint also removes defendant Hurley from the RICO and Section 349 violations. Instead, plaintiff alleges in the proposed amended complaint that Hurley committed legal malpractice, (id. ¶¶ 408-419,) because, inter alia, he "fail[ed] to exercise the care, skill,and diligence commonly possessed and exercised by a member of the legal profession" by not informing plaintiff of the risks associated with the mortgage loan and not recognizing that the loan was suspect and "potentially dangerous to Ms. Barker." (Id. ¶ 413.) Plaintiff alleges that "defendant Hurley's negligence was a proximate cause of the damages sustained by Ms. Barker." (Id. ¶ 416.)
Defendant Legum submitted an affidavit in support of his motion for sanctions pursuant to 28 U.S.C. § 1927. (ECF No. 154-1, Legum Affidavit.) Legum states that with respect to plaintiff's motion to amend her complaint "there is not only no good faith for the motion, there is no basis for it at all." (Id. ¶ 3.) Legum also contends that the proceedings post this Court's January 2, 2020 order were "unreasonable and vexatious," and as such, "defendant [Legum] is entitled to be reimbursed for the fair value of time he expended in opposition thereto." (Id. ¶ 6.) Specifically, Legum requests that this court award costs in the sum of $54,144.00. (Id. at 5-7.)
The January 2, 2020 Memorandum and Order sets forth this case's procedural history in detail up to the date of the decision, which is incorporated by reference herein. (ECF No. 119, Order Granting Motion to Dismiss.) As such, this courtwill review in this section the procedural history post the January 2, 2020 Memorandum and Order.
Shortly after this court's order, plaintiff filed a motion to amend her complaint on March 13, 2020. (ECF No. 129, Motion to Amend.) On March 20, 2020, Defendant Legum filed a cross motion for sanctions. (ECF No. 130, Cross Motion for Sanctions.) In response to several motions being filed in violation of the court's motion practices, on July 17, 2020, this court issued an order denying without prejudice both plaintiff's motion to amend and Legum's cross motion for sanctions as they were improperly filed. (Dkt. Order 7/17/2020.) On July 31, 2020, plaintiff and defendant Legum re-filed their fully briefed motions as per this court's July 17, 2020 order. (See ECF No. 152, Motion to Amend; see also ECF No. 154, Cross Motion for Sanctions.)
On August 5, 2020, after improperly filing a motion to dismiss, defendant Janelle Defreitas, was ordered to file a pre-motion letter before filing her dispositive motion. (Dkt. Order 8/5/2020.) On...
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