Hutter v. Countrywide Bank, N.A.

• Decision Date: 22 August 2014
• Docket Number: No. 09–cv–10092 NSR.,09–cv–10092 NSR.
• Citation: 41 F.Supp.3d 363
• Parties: Nance HUTTER, Plaintiff, v. COUNTRYWIDE BANK, N.A., a subsidiary of Countrywide Financial Corporation; Watermark Capital, Inc.; and Evolution Mortgage, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

41 F.Supp.3d 363

Nance HUTTER, Plaintiff

v.COUNTRYWIDE BANK, N.A., a subsidiary of Countrywide Financial Corporation; Watermark Capital, Inc.; and Evolution Mortgage, Inc., Defendants.

No. 09–cv–10092 NSR.

United States District Court, S.D. New York.

Signed Aug. 22, 2014.

Stephen A. Katz, Stephen A. Katz, P.C., New York, NY, for Plaintiff.

BJ Phoenix Finneran, David Barry Chenkin, Kenneth C. Rudd, Zeichner Ellman & Krause LLP, New York, NY, Mark I. Masini, Mark I. Masini, P.C., Michael Evan Janus, Janus Law, P.C., Scott Tod Ackerman, Scott Tod Ackerman, Sackstein Sackstein and Lee, LLP, Garden City, NY, John T. Serio, Grandinette & Serio, Mineola, NY, for Defendants.

MEMORANDUM OPINION AND ORDER

NELSON S. ROMÁN, District Judge:

On October 22, 2009, Plaintiff Nance Hutter (“Plaintiff”) commenced the instant action against, inter alia, Watermark Capital, Inc., a California mortgage broker (“Watermark”), Evolution Mortgage, Inc., a New York mortgage broker (“Evolution”) (together “Brokers”), and Countrywide Bank, N.A., which has been acquired by Bank of America, N.A. (“Countrywide”), (collectively “Defendants”), seeking monetary damages and rescission of a $1,785 million mortgage loan provided to her by Countrywide on December 11, 2006.

Plaintiff's Third Amended Complaint (“TAC”) alleges that (1) Countrywide violated the Truth in Lending Act, 15 §§ 1601–1607 (“TILA”), by failing to give her proper notice of her right to cancel the loan; (2) Defendants violated the New York Deceptive Practices Act, N.Y. Gen. Bus. Law §§ 349 to 350–e, (“GBL” or “GBL § 349 ”), by engaging in unfair and deceptive conduct aimed at consumers that was misleading in a material way; (3) Countrywide and Evolution violated the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 –2617 (“RESPA”), because Countrywide paid Evolution kickbacks and unearned fees; (4) and Watermark violated the New York Licensed Mortgage Bankers Law, N.Y. Banking Law §§ 589 –599 (“Banking Law”), by brokering Plaintiff's mortgage loan even though it was neither licensed by the State of New York nor exempt from the licensing requirement.

Now pending before the Court is Plaintiff's motion for leave to amend the TAC. Her Proposed Fourth Amended Complaint (“PFAC”) supplements factual allegations, alters factual allegations, adds new and previously dismissed parties, and apparently adds a new claim. As to joinder of parties, Plaintiff seeks to add former defendant Joseph Sciacca (“Sciacca”), President of Evolution, to Claims 2, 3, and 4; former defendant Nicholas Joutz (“Joutz”), President of Watermark, to Claims 2 and 4; and Charles Dragna (“Dragna”), Secretary and alleged principal of Watermark—who was not previously a named defendant—to Claims 2 and 4. Plaintiff also seeks to include Countrywide and Evolution as defendants on Claim 4.

In opposition, Defendants, Sciacca, Joutz, and Dragna assert that Plaintiff's proposed amendments are prejudicial at this late stage in the proceedings and that the proposed amendments would be futile. They also suggest Plaintiff's motion is brought in bad faith only in order to delay the inevitable resolution of the action. Additionally, Countrywide moves for sanctions (1) against Plaintiff's counsel pursuant to 28 U.S.C. § 1927 for unreasonably and vexatiously multiplying the proceedings, and (2) against Plaintiff and Plaintiff's counsel pursuant to Rule 11(c) for filing pleadings containing factually and legally unsupportable contentions.

For the following reasons, Plaintiff's motion to amend is denied, Countrywide's § 1927 motion for sanctions is denied, and Countrywide's Rule 11 motion for sanctions is granted. Knowledge of the factual background and procedural history is presumed.

I. LEGAL STANDARD FOR MOTION TO AMEND PLEADINGS

A party may amend a pleading once as a matter of course or at any time before trial with leave of the court. Fed.R.Civ.P. 15(a)(1)-(2). If a party seeks leave to amend a pleading, “[t]he court should freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(2). Nonetheless, “[r]easons for a proper denial of leave to amend include undue delay, bad faith, futility of amendment, and perhaps most important, the resulting prejudice to the opposing party.” State Teachers Ret. Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir.1981) (citing Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962) (“In the absence of any apparent or declared reason—such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.—the leave sought should, as the rules require, be ‘freely given.’ ”)).

A. Undue Delay and Prejudice

“The rule in this Circuit has been to allow a party to amend its pleadings in the absence of a showing by the non[-]movant of prejudice or bad faith.” AEP Energy Servs. Gas Holding Co. v. Bank of Am., N.A., 626 F.3d 699, 725 (2d Cir.2010) (quoting Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir.1993) ). “Mere delay, ... absent a showing of bad faith or undue prejudice, does not provide a basis for the district court to deny the right to amend.” Ruotolo v. City of New York, 514 F.3d 184, 191 (2d Cir.2008) (quoting State Teachers Ret. Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir.1981) ); accord Block, 988 F.2d at 350. Thus, if the underlying facts and circumstances upon which the moving party relies support a claim or defense sought to be added, the party should generally be allowed to test that claim or defense on the merits. United States ex rel. Maritime Admin. v. Cont'l Ill. Nat'l Bank & Trust Co. of Chicago, 889 F.2d 1248, 1254 (2d Cir.1989) (quoting Foman, 371 U.S. at 182, 83 S.Ct. 227 ); accord EEOC v. Nichols Gas & Oil, Inc., 518 F.Supp.2d 505, 508 (W.D.N.Y.2007).

On the other hand, a district court may “deny leave to amend where the motion has been made after an inordinate delay, no satisfactory explanation is offered for the delay, and the amendment would prejudice the defendant.” Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 72 (2d Cir.1990). Moving to amend pleadings after the close of discovery may constitute an inordinate delay even if certain testimony adduced during discovery purportedly gives the opposing party “full and fair notice” of a new theory not alleged in the operative complaint. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 201–02 (2d Cir.2007). This is because a defendant that received notice in the complaint of the asserted claims and the grounds on which they rest “may conduct ... trial preparation accordingly and is not required, based on the plaintiff's subsequent conduct in litigation, to anticipate future claims that a plaintiff might intend to pursue.” Id. at 202 ; cf. Berman v. Parco, 986 F.Supp. 195, 217 (S.D.N.Y.1997) (Peck, M.J.) (report and recommendation) (noting that a court “may deny a motion to amend when the movant knew or should have known of the facts upon which the amendment is based when the original pleading was filed, particularly when the movant offers no excuse for the delay”).

In determining whether the opposing party would be prejudiced, courts within the Second Circuit generally consider “whether the assertion of the new claim or defense would ‘(i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; (ii) significantly delay the resolution of the dispute; or (iii) prevent the plaintiff from bringing a timely action in another jurisdiction.’ ” Monahan v. N.Y.C Dep't of Corr., 214 F.3d 275, 284 (2d Cir.2000) (quoting Block, 988 F.2d at 350 ). “[T]he longer the period of an unexplained delay, the less will be required of the nonmoving party in terms of a showing of prejudice.” Block, 988 F.2d at 350 (quoting Evans v. Syracuse City Sch. Dist., 704 F.2d 44, 47 (2d Cir.1983) ).

B. Futility

Leave to amend may alternatively be denied “on grounds of futility if the proposed amendment fails to state a legally cognizable claim or fails to raise triable issues of fact.” AEP Energy, 626 F.3d at 725–26 (quoting Milanese v. Rust–Oleum Corp., 244 F.3d 104, 110–11 (2d Cir.2001) ); accord Ruotolo, 514 F.3d at 191 (quoting Foman, 371 U.S. at 182, 83 S.Ct. 227 ). To determine futility, courts apply the summary judgment standard “when the motion to amend is filed after the close of discovery and the relevant evidence is before the court.” Summit Health, Inc. v. APS Healthcare Bethesda, Inc., 993 F.Supp.2d 379, 403 (S.D.N.Y.2014) (citing Milanese, 244 F.3d at 110 ). Thus, courts may deny motions to amend where the “evidence in support of the plaintiff's proposed new claim creates no triable issue of fact and the defendant would be entitled to judgment as a matter of law” under Rule 56(a). Milanese, 244 F.3d at 110. A triable issue of material fact exists when “the evidence is such that a reasonable jury could return a verdict for the [party moving to amend her pleadings].” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “Statements that are devoid of any specifics, but replete with conclusions, are insufficient” to create triable issues of fact. Bickerstaff v. Vassar Coll., 196 F.3d 435, 452 (2d Cir.1999) ; see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (plaintiffs “must do more than simply show that there is some metaphysical doubt as to the material facts”); FDIC v. Great Am. Ins. Co., 607 F.3d 288, 292 (2d Cir.2010) (plaintiffs “may not rely on conclusory allegations or unsubstantiated speculation” (quoting Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir.1998) )).

II. PLAINTIFF'S PROPOSED AMENDMENTS

In considering the following proposed amendments, the Court is mindful of the circumstances in which Plaintiff expressed her desire to amend the complaint. The TAC was filed November 15, 2011. According to...