Shetiwy v. Midland Credit Mgmt.
| Decision Date | 26 March 2014 |
| Docket Number | No. 12 Civ. 7068SAS.,12 Civ. 7068SAS. |
| Citation | 15 F.Supp.3d 437 |
| Court | U.S. District Court — Southern District of New York |
| Parties | Amal SHETIWY, Louis C. Yeostros, John Murphy, Plamen Pankoff, Spiros Argyros, Nicole Gagnon, Vielka Vargas, Rose Villaneuva, and others similarly situated, Plaintiffs, v. MIDLAND CREDIT MANAGEMENT, a/k/a Midland Funding LLC, Calvary SPV LLC, Cach, LLC, LVNV Funding, LLC, FIA Card Services, N.A., Portfolio Recovery Associates LLC, Associated Recovery Systems, Equable Assent Financial, LLC, Chase Bank, N.A., and Bank of America, N.A., Defendants. |
Phillip Jaffe, Esq., New York, NY, George Bassias, Esq., Astoria, NY, for Plaintiffs.
Casey D. Laffey, Esq., Brian S. Goldberg, Esq., Reed Smith LLP, New York, NY, for Defendant Midland Credit Management, Inc.
Donald S. Maurice, Jr., Esq., Rachel Marin, Esq., Thomas R. Dominczyk, Esq., Maurice & Needleman, PC, Flemington, NJ, for Defendants Calvary Portfolio Services, LLC and Equable Ascent Financial, LLC.
Jonathan J. Greystone, Esq., Spector Gadon & Rosen, PC, Philadelphia, PA, for Defendant CACH, LLC.
Gillian I. Biron, Esq., S. Elaine McChesney, Esq., Jonathan M. Albano, Esq., Bingham McCutchen LLP, New York, NY, for Defendants Bank of America, N.A. and FIA Card Services, N.A.
Concepcion A. Montoya, Esq., Hinshaw & Culbertson LLP, New York, NY, for Defendant LVNV Funding, LLC.
Christopher W. Madel, Esq., Jennifer M. Robbins, Esq., Robins, Kaplan, Miller & Ciresi LLP, Minneapolis, MN, Oren D. Langer, Esq., Robins, Kaplan, Miller & Ciresi LLP, New York, NY, for Defendant Portfolio Recovery Associates, LLC.
Andrew A. Ruffino, Esq., Covington & Burling LLP, New York, NY, Robert D. Wick, Esq., Laura Brookover, Esq., Henry Liu, Esq., Covington & Burling LLP, Washington, DC, for Defendant Chase Bank, N.A.
John E. Brigandi, Esq., Salvo Law Firm, Fairfield, NJ, for Defendant Associated Recovery Systems.
Plaintiffs are eight individuals who claim that defendants obtained tens of thousands of state court debt collection judgments against them using false affidavits, misleading evidence, and other improper litigation tactics. Defendants consist of two groups: creditors or their affiliates (“Creditor Defendants”);1 and businesses that collect or buy debts (“Debt Buyer Defendants”).2
In their Second Amended Complaint (“SAC”), plaintiffs request injunctive relief and damages based on a wide variety of legal theories, including: (1) the Racketeer Influenced and Corrupt Organizations Act (“RICO”); (2) the Fair Debt Collection Practice Act (“FDCPA”); (3) unjust enrichment; (4) intentional infliction of emotional distress; (5) Section 349 of the New York General Business Law ; and (6) Section 487 of the New York Judiciary Law.3
Plaintiffs also seek class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure.4
Defendants now move to dismiss plaintiffs' claims with prejudice under Rule 12(b)(6) and to strike the class allegations under Rule 12(f).5 For the reasons stated below, defendants' motion is granted.
Plaintiffs filed their initial Complaint on September 19, 2012 and their First Amended Complaint (“FAC”) on December 6, 2012. The FAC was filed by fifteen individuals purporting to sue on behalf of all “unknowledgeable citizens” in the United States who “were brought to Court and had their money taken (stolen) from them using illegal tactics—under the cover of so-called legality of process.”6
The FAC alleged that twenty defendants—nine Creditor Defendants and eleven Debt Buyer Defendants—conspired to collect debts through “fraudulently obtained judgments of default” in state courts throughout the country.7 Specifically, Creditor Defendants allegedly sold debt that they had previously written off for tax purposes.8 Debt Buyer Defendants then allegedly obtained default judgments through various fraudulent acts, including: (1) submitting affidavits containing false statements or facts beyond the affiant's personal knowledge; (2) failing to disclose how defendants calculated the amount of debt owed; (3) neglecting to notify plaintiffs that their debt had been assigned; (4) suing on the full amount of debt despite having “already charged off a good portion of the debt for [defendants'] tax advantage;” and (5) amending “the terms of [their] contract [s] with ... consumer[s] after the litigation [had] begun.”9 Finally, plaintiffs allege that defendants' conduct is part of a larger pattern whereby debt collectors and creditors harass debtors and overwhelm courts by filing thousands of debt collection suits based on false and inadequate documentation.10
On July 12, 2013, I granted a motion by four Creditor Defendants to compel arbitration and stay all remaining proceedings against them pending the completion of that arbitration.11 On September 20, 2013, I granted the remaining defendants' motion to dismiss the FAC because plaintiffs failed to state a plausible federal claim.12
I granted leave to amend except with regard to plaintiffs' legally invalid (1) federal due process claims, (2) FDCPA claims against Creditor Defendants, and (3) attempts to challenge and vacate state court judgments.13 I also warned plaintiffs that:
[The SAC] must comply in full with Rule 8 and Rule 9(b), as well as Rule 11, which prohibits frivolous legal arguments and sets minimum standards for factual contentions. If plaintiffs' [SAC] displays the confused, unintelligible, argumentative, speculative, or rambling qualities of plaintiffs' [FAC], the [SAC] will be dismissed without leave to amend.14
On October 18, 2013, eight of the original plaintiffs filed the SAC, asserting putative class action claims against three Creditor Defendants and seven Debt Buyer Defendants. Although plaintiffs have abandoned several of their legally invalid claims, the bulk of the SAC remains identical to the FAC.
As with the FAC, the factual allegations and legal arguments in the SAC are difficult to discern. In plaintiffs' words, “[e]very allegation is based upon the perjury by the conspiracy group's attorneys when they falsely swore to documents (Complaints) as being true when ... they had no knowledge as to the truth to which they were swearing.”16 The factual allegations in the SAC are still drawn mainly from newspaper articles—often without citation—and from decisions in unrelated cases.17 Plaintiffs continue to allege that defendants engaged in fraudulent acts during state court debt collection proceedings.18 The facts supporting plaintiffs' RICO and state law claims remain largely unchanged. Moreover, despite my prior ruling, plaintiffs continue to ask the Court to vacate prior state court judgments against them.19
Finally, plaintiffs still seek to certify a class consisting of “[a]ll persons in the United States who ... were brought to Court and had their money taken (stolen) from them using illegal tactics—under the cover of so-called legality of process.”20 The so-called “illegal tactics” are acts allegedly intended “to overburden the Courts so that judges ... found themselves impossible to stop the onslaught of hundreds of improper complaints and default [s] that [arrived] into every court in the country.”21
In deciding a motion to dismiss under Rule 12(b)(6), the court must “ ‘accept [ ] all factual allegations in the complaint as true, and draw[ ] all reasonable inferences in the plaintiff's favor.’ ”22 The court evaluates the sufficiency of the complaint under the “two-pronged approach” suggested by the Supreme Court in Ashcroft v. Iqbal.23 Under the first prong, a court may “begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.”24 Thus, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”25
Under the second prong, “[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.”26 A claim is plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”27 “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.”28
Under Rule 8, a pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” “Such a statement must ... ‘give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.’ ”30
“All claims sounding in fraud—including those under RICO—must comply with Rule 9(b)'s heightened pleading standard.”31 Under Rule 9(b), “a party must state with particularity the circumstances constituting fraud ....” This requires the plaintiff to: “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.”32 “Allegations that are conclusory or unsupported by factual assertions are insufficient.”33
RICO provides a private right of action for treble damages for a “person injured in his business or property by reason of a violation of section 1962.”34 To state a RICO claim under either section 1962(a) or 1962(c), a plaintiff must at least allege: (1) the existence of an “an enterprise,” (2) that engages in “a pattern of racketeering activity.”35
An enterprise “is an entity separate and apart from the pattern of activity in which it engages” and must be proven separately.36 It may consist of “a group of persons associated together for a common purpose of engaging in a course of conduct.”37 However, a plaintiff's “conclusory...
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