Martinez v. Capital One, N.A.

• Decision Date: 27 March 2012
• Docket Number: No. 10 Civ. 8028(RJS).,10 Civ. 8028(RJS).
• Citation: 863 F.Supp.2d 256
• Parties: Geraldo F. MARTINEZ and Joseph Cummings, Plaintiffs, v. CAPITAL ONE, N.A., Defendant.
• Court: U.S. District Court — Southern District of New York

863 F.Supp.2d 256

Geraldo F. MARTINEZ and Joseph Cummings, Plaintiffs,

v.CAPITAL ONE, N.A., Defendant.

No. 10 Civ. 8028(RJS).

United States District Court,

S.D. New York.

March 27, 2012.

Gabriel Oliver Koppell and Daniel Feist Schreck of the Law Offices of G. Oliver Koppell & Associates, Charles Wayne Juntikka, of Charles Juntikka & Associates, LLP, New York, NY, for Plaintiffs.

Robert Stuart Plotkin of McGuireWoods LLP, New York, NY, for Defendant.

opinion and order

RICHARD J. SULLIVAN, District Judge.

Plaintiffs Geraldo F. Martinez and Joseph Cummings bring this putative class action lawsuit against Defendant Capital One, N.A., asserting claims under New York's Exempt Income Protection Act (“EIPA”) and New York common law. Presently before the Court is Defendant's motion to dismiss the Amended Complaint on the grounds that there is no private right of action under EIPA. For the reasons that follow, Defendant's motion is granted.

I. Background

A. Exempt Income Protection Act

Article 52 of the CPLR, as amended by EIPA in 2008,¹ governs the enforcement and collection of money judgments in New York state courts. N.Y. C.P.L.R. § 5201 et seq. While CPLR § 5222(a) permits a judgment creditor to serve a restraining notice on a bank, thereby restraining a judgment debtor's account, CPLR § 5205 protects certain classes of funds—such as social security benefits, disability benefits, and public assistance—by exempting them from collection by judgment creditors. EIPA amended CPLR § 5205 to exempt the first $2,500 of “reasonably identifiable” exempt funds in the judgment debtor's account if the exempt payments were made electronically or via direct deposit 45 days prior to the date a restraining notice was served in the banking institution. Id. § 5205( l ). Section 5222 also prohibits restraint of the first $1,740, regardless of the source of the funds. Id. § 5222(a)- (b), (i).² Furthermore, “[i]n the event that a banking institution served with a restraining notice cannot lawfully restrain a judgment debtor's banking institution account, or a restraint is placed on the judgment debtor's account in violation of any section of this chapter,” the banking institution is not permitted to charge the judgment debtor fees. Id. § 5222(j).

EIPA added an entirely new section that became effective January 1, 2009, which, among other things, requires judgment debtors to be notified of available exemptions and the procedures by which they can claim those exemptions. Id. § 5222–a. Under the new section, a judgment creditor must serve the bank with two copies of the restraining notice, an exemption notice, and two exemption claim forms in order to impose a restraint on the judgment debtor's account. Id. § 5222–a(b)(1). This section also sets forth the content of the exemption notice and exemption claim form. Id. § 5222–a(b)(4). Failure to serve the exemption notice and forms along with the restraining notice renders the restraining notice void, and the banking institution is directed not to restrain the account. Id. § 5222a-(b)(1).

Section 5222–a also requires banks to mail copies of the restraining notice, exemption notice, and exemption claim forms to the judgment debtor. Id. § 5222–a(b)(3). If the judgment debtor completes an exemption form, the bank must notify the creditor, and unless the creditor makes a timely objection, the bank must release all exempt funds from restraint. Id. § 5222–a(c)(2)-(3). If the bank does not receive an exemption claim from the judgment debtor within 25 days, all funds in the account “remain subject to the restraining notice.” Id. § 5222–a(c)(5). Nevertheless, under § 5222–a(b)(3), “[t]he inadvertent failure by a depository institution to provide the notice required by this subdivision shall not give rise to liability on the part of the depository institution.”

Article 52 also sets forth procedures to resolve disputes that arise under it. Section 5239 states that

[p]rior to the application of property or debt by a sheriff or receiver to the satisfaction of a judgment, any interested person may commence a special proceeding against the judgment creditor or other person with whom a dispute exists to determine rights in the property or debt.... The court may vacate the execution or order, void the levy, direct the disposition of the property or debt, or direct that damages be awarded.

N.Y. C.P.L.R. § 5239. If there are disputed issues of fact, the court is directed to order a separate trial. Id. Furthermore, CPLR § 5240 allows the court, “on its own initiative or the motion of any interested person,” to “make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure.” The “special proceeding” takes place in a New York court that has competent jurisdiction and is familiar with the underlying judgment. Id. § 5221.

Section § 5222–a(h) provides that “[n]othing in this section shall in any way restrict the rights and remedies otherwise available to a judgment debtor, including but not limited to, rights to property exemptions under federal and state law.”

B. Factual Background

Defendant Capital One, N.A. (“Capital One” or “Defendant”) is a major national bank, incorporated under Virginia law and headquartered in Virginia.³ (Am. Compl. ¶ 10.) Plaintiffs Geraldo F. Martinez and Joseph Cummings, both New York residents, maintained accounts at various of Defendant's New York branches. ( Id. ¶ 11, 14.)

On April 29, 2010, Martinez received notice from Defendant that $316.15 in his checking account had been frozen because Defendant received a restraining notice from third-party creditors. ( Id. ¶ 12.) At the time, Martinez had $2,156.15 in his account. ( Id.) Defendant charged Martinez a $100 processing fee associated with the restraint. ( Id.) However, Martinez did not receive a copy of the restraining notice submitted by the creditor, nor did he receive an exemption notice or exemption claim form from Defendant. ( Id. ¶ 13.) Instead, Martinez received a single-page notice of the restraint from Defendant, which stated “You may access funds over the amount restrained, however, ATM, telephone transfer, [and] automatic debit will be restricted until the account is released.” ( Id.)

Likewise, on January 15, 2010, Cummings received notice that $5,630.16 in one of his savings accounts had been frozen due to a restraining notice by third-party creditors.⁴ ( Id. ¶ 15.) Defendant charged Cummings a $100 processing fee and paid the third-party creditor $1,087.43, and then closed the account. ( Id.) Another savings account in Cummings' name, which contained $240, was also restrained and funds from it were paid to Cummings' creditors. ( Id. ¶ 16) Cummings did not receive notice of restraint for this account. ( Id.) Defendant also restrained Cummings' checking account, which had less than $2,500 in it at the time of the restraint. ( Id. ¶ 17.) Defendant charged a $100 processing fee associated with the restraint on this account as well, and once again provided no notice of restraint on the account. ( Id.) As with Martinez, Defendant did not provide Cummings with a copy of the restraining notice, exemption notice, or exemption claim form in connection with the restraints on any of his accounts, and provided the same single-page notice of restraint that Martinez received in relation to the restraint placed on the first savings account only. ( Id. ¶ 18.)

C. Procedural History

Plaintiff Martinez initiated this lawsuit on October 21, 2010, alleging violations of EIPA and the common law. Defendant filed a motion to dismiss on December 20, 2010 in violation of the Court's individual practices. Accordingly, Defendant's motion was denied without prejudice on December 21, 2010. On February 7, 2011, Plaintiffs Martinez and Cummings filed their Amended Complaint, asserting that “Defendant has and continues to fail to abide by the terms of EIPA” by failing to ensure receipt of exemption notices and forms from judgment creditors, failing to mail notices and forms to putative Class Members, and imposing fees on putative Class Members' accounts in violation of EIPA. ( Id. ¶¶ 47–50.) Plaintiffs also made the following state law claims: conversion, breach of fiduciary duty, fraud, unjust enrichment, and negligence. Defendants again filed a motion to dismiss on March 9 2011, asserting that EIPA created no private right of action. The motion was fully briefed on April 15, 2011.

By letter dated April 18, 2011, Plaintiffs requested that the Court strike the Affidavit of Kathy Lynch (“Lynch Affidavit,” Doc. No. 28), submitted in connection with Defendant's reply brief on April 15, 2011, as well as portions of Defendant's reply brief that reference the Lynch Affidavit. Plaintiffs argued that “[t]he Affidavit of Ms. Lynch far exceeds the documents appropriately considered for purposes of a motion to dismiss.” Defendants replied by letter dated April 21, 2011.

At the time Plaintiffs filed their Complaint, the issue of whether a private right of action existed under EIPA was an issue of first impression. Since then, Judge Castel concluded that no such remedy existed in Cruz v. TD Bank, N.A., a companion case filed the same day as the above-captioned matter. 855 F.Supp.2d 157, No. 10 Civ. 8026(PKC), 2012 WL 694267 (S.D.N.Y. Mar. 2, 2012). For the reasons set forth below, the Court concurs with Judge Castel's conclusion and grants Defendant's motion.

II. Legal Standard

Rule 8(a) of the Federal Rules of Civil Procedure provides that a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” In order to survive a motion to dismiss, a complaint must “provide the grounds upon which his claim rests.” ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007). Plaintiffs must also allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167...