Mathis v. United Homes, LLC
| Decision Date | 20 April 2009 |
| Docket Number | No. 05-cv-5679 (RJD)(KAM).,No. 05-cv-4386 (KAM)(RLM).,No. 05-cv-5362 (RJD)(KAM).,05-cv-4386 (KAM)(RLM).,05-cv-5362 (RJD)(KAM).,05-cv-5679 (RJD)(KAM). |
| Citation | 607 F.Supp.2d 411 |
| Parties | Dewitt MATHIS, Plaintiff, v. UNITED HOMES, LLC, United Property Group, LLC, Yaron Hershco, Galit Network, LLC, Alliance Mortgage Banking Corp., Joseph D. Gaeta, Marios Sfantos, U.S. Bank, N.A., and XYZ Corporation, Defendants. Miles McDale & Lisa McDale, Plaintiff, v. United Homes, LLC, et al., Defendants. Charlene Washington, Plaintiff, v. United Homes, LLC, et al., Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Jean Constantine-Davis, Nina Fay Simon, AARP Foundation Litigation, Washington, DC, Joshua Zinner, Brooklyn Legal Services, Navid Vazire, South Brooklyn Legal Services, Brooklyn, NY, Sara Linda Manaugh, Sullivan & Cromwell LLP, New York, NY, for Plaintiffs Dewitt Mathis, Miles McDale, Lisa McDale and Charlene Washington.
Richard S. Naidich, Naidich Wurman Birnbaum & Maday, LLP, Great Neck, NY, Stacy L. Bogert, Covington & Burling, New York, NY, Deborah J. Denenberg, Wilson Elser, West Harrison, NY, David M. Namm, Law Offices of David M. Namm, Andrew Michael Roth, Berkman, Henoch, Peterson & Peddy, P.C., Garden City, NY, Sanjay P. Ibrahim, Sheila Raferty Wiggins, Duane Morris LLP, Newark, NJ, Michael C. Manniello, Michael C. Manniello, P.C., Syosset, NY, for Defendants.
Marios Sfantos, Astoria, NY, pro se.
Pending before the court are defendants Michael Masciale's ("Masciale") and Joseph D. Gaeta's ("Gaeta") (collectively the "Appraisers") motions to dismiss all cross-claims asserted against them by their co-defendants, United Homes, LLC, United Property Group, LLC, Galit Network, LLC and Yaron Herscho (collectively, the "UH Defendants") and U.S. Bank in the Mathis, 05-cv-4386, McDale, 05-cv-5362, and Washington, 05-cv-5679, actions pursuant to Federal Rules of Civil Procedure 12(b)(6), 12(c) and/or 56.1
For the reasons set forth herein, if the Appraisers enter into binding settlement agreements with the plaintiffs, which include releases of the plaintiffs' claims, and the other defendants also stipulate to dismiss their cross-claims against the Appraisers, the court will grant the Appraisers' motions and the cross-claims asserted by the UH Defendants and U.S. Bank against the Appraisers will be dismissed.
The court assumes the parties' familiarity with the underlying facts and procedural history of the related cases. Moreover, a summary of the allegations in the complaints can be found at Barkley v. Olympia Mortgage Co., No. 04 Civ. 875, 2007 WL 2437810, at *1-9, 2007 U.S. Dist. LEXIS 61940, at *8-30 (E.D.N.Y. Aug. 22, 2007) (Dearie, J.). Accordingly, the court provides only a brief recitation of the allegations pertinent to the instant motions.
Plaintiffs Dewitt Mathis, Miles McDale, Lisa McDale and Charlene Washington (collectively "plaintiffs") bring suit against the UH Defendants, the lender, Alliance Mortgage Banking Corp. ("Alliance"), and the Appraisers, amongst others, claiming that the defendants targeted first-time minority home-buyers and conspired to sell them over-valued, defective homes financed with predatory loans. (Compl. ¶ 2).2 Plaintiffs allege that the defendants were engaged in a fraudulent property-flipping scheme wherein the UH Defendants were "the hub," buying damaged properties, performing cosmetic repairs, and then quickly re-selling the homes at often double the purchase price. (Id. at ¶¶ 31, 38-39).
According to plaintiffs, the UH Defendants worked with the Appraisers and Alliance, amongst others, who facilitated the sales by preparing significantly over-valued appraisals and correspondingly inflated loans and mortgages. (Id. at ¶¶ 32, 47, 51 & 73). Plaintiffs allege that Alliance further assisted the fraudulent scheme by manipulating the guidelines of the Fair Housing Act ("FHA") in order to provide plaintiffs with FHA-insured mortgages. With FHA insurance, Alliance or any subsequent holder of the mortgages can collect on the full over-inflated amounts of the loans in the event of default. (Compl. ¶¶ 2, 55; Mathis Compl. ¶ 118.)
Alliance sold the Mathis and Washington mortgages to U.S. Bank in the secondary market pursuant to an agreement dated February 24, 2000 ("Agreement") in which U.S. Bank agreed to purchase and/or service certain residential real estate mortgage loans from Alliance. (U.S. Bank's Answers to Plaintiffs Mathis's and Washington's Complaints, Affirmative Defenses and Cross-Claims ("U.S. Bank Answer"), dated September 21, 2007, Cross-Claims ¶ 2.)3 Although plaintiffs make no direct allegations or assert any affirmative causes of action against U.S. Bank in their complaints, U.S. Bank currently services plaintiff Mathis's and plaintiff Washington's mortgages. Thus, as the "court cannot accord complete relief" in the absence of U.S. Bank and U.S. Bank has an interest in defending the enforceability of the Mathis and Washington mortgages, U.S. Bank was joined as a necessary party pursuant to Federal Rule of Civil Procedure 19.4
Plaintiffs allege that as a result of defendants' fraud, they are burdened by mortgages they cannot afford and are at risk of losing their homes. Plaintiffs assert claims against the UH Defendants and Appraisers, amongst others, for violations of federal anti-discrimination statutes, including the Fair Housing Act ("FHA"), 42 U.S.C. §§ 3604, 3605 and the Civil Rights Acts, 42 U.S.C. §§ 1981, 1982 & 1985, New York's consumer protection statute, i.e. New York General Business Law § 349, state and local anti-discrimination statutes, including New York State Executive Law § 296(5) and Title 8 of the New York City Administrative Code, as well as asserting state-law claims of fraud, conspiracy to commit fraud, and negligence.5
In answering plaintiffs' complaints, the UH Defendants and U.S. Bank assert cross-claims against their co-defendants. The dismissal of their cross-claims against Gaeta and Masciale are the subject of the instant motions. The UH Defendants assert the same cross-claim against remaining co-defendants Alliance, Gaeta, Masciale, Michael Cheatham and Mario Sfantos in the three related actions. (UH Defendants' Answer to Plaintiffs' Amended Complaints and Cross-Claim ("UH Defendants Answer"), dated October 22, 2007.)6 Although denying liability to any of the plaintiffs or any other party for any amount, if the UH Defendants become obligated in any amount to any plaintiff or any other party, by judgment or otherwise, the UH Defendants seek contribution and/or indemnity for any judgment plus costs and expenses, including reasonable attorneys' fees incurred in the defense of plaintiffs' claims from the aforementioned co-defendants. (Id.)
Similarly, in the Mathis and Washington actions, U.S. Bank asserts cross-claims against the following named parties: the UH Defendants, Alliance, Gaeta, Masciale, Michael Cheatham and Mario Sfantos. U.S. Bank, however, seeks only indemnity (and not contribution) from its co-defendants. Although denying its liability to any plaintiff or any other party for any amount, in the event that U.S. Bank becomes obligated in any amount to any plaintiff or any other party, by judgment or otherwise, U.S. Bank seeks indemnity for any such liability found against it, including reasonable attorneys' fees and expenses, incurred in the defense of plaintiffs' claims. (U.S. Bank Answer, Cross Claims ¶ 2.)
U.S. Bank, however, also asserts two additional cross-claims solely against Alliance. First, U.S. Bank seeks contractual indemnity from Alliance, alleging that
The Agreement contains an indemnity provision which requires, in part, that: Alliance protect, indemnify and hold U.S. Bank harmless: (a) from all losses, liabilities, reasonable costs and expenses (including attorneys' fees) that are incurred by U.S. Bank with respect to or resulting from any breach of any representation, warranty or covenant of Alliance; (b) from any claim, loss or damage to U.S. Bank, including reasonable attorneys['] fees, resulting from any inaccuracy or incompleteness in the mortgage loan documents or any act or omission by alliance or its agents, including a failure to comply with applicable statutes or regulations; and; (c) from any such loss or damage, including reasonable attorneys['] fees, resulting from Alliance's actual wrong or error or omission in the preparation of the mortgage loan documents.
(U.S. Bank Answer, Cross Claims ¶ 3.) Thus, U.S. Bank claims that "if U.S. Bank is adjudged to be liable to plaintiff and/or others in this action . . . such will have been the result of the negligence, gross negligence, breach of contract, omission or other wrongful conduct of Alliance which is or will be liable to indemnify U.S. Bank for any and all alleged damages, along with the attorneys['] fees and expenses incurred herein." (Id., Cross Claims ¶ 5.) Second, U.S. Bank seeks damages from Alliance for breach of contract. U.S. Bank alleges that, based on plaintiffs' allegations in the amended complaints, Alliance breached the Agreement, including several specific sections requiring the use of generally accepted accounting practices, prohibiting discriminatory conduct and fraudulent practices, and making warranties about the legality of the mortgage loan. (Id., Cross Claims ¶¶ 7-16.) Thus, U.S. Bank asserts that it is entitled to damages, contractual relief, attorneys' fees and expenses from Alliance for the alleged breach. (Id., Cross Claims ¶ 17.) Alliance denies these allegations by U.S. Bank, asserts affirmative defenses against the cross-claims, and cross-claims against all of its co-defendants for contribution and/or indemnification. (Alliance's Answer to Cross-claims of U.S. Bank, dated November 12, 2007; Alliance's Answer to Plaintiff's Amended Complaint with Cross-Claim, dated September 20, 2007).
Over the course of several months, the court held several day-long...
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