Vaughn v. Consumer Home Mortg. Co., Inc., 01-CV-7937 (ILG).

• Decision Date: 22 January 2007
• Docket Number: No. 01-CV-7937 (ILG).,01-CV-7937 (ILG).
• Citation: 470 F.Supp.2d 248
• Parties: Paulette VAUGHN and Joy Vaughn, Plaintiffs, v. CONSUMER HOME MORTGAGE COMPANY, INC. (CHM), The Foreclosure Network of New York, Inc. (FNNY), Michael Ashley, individually and in his capacity as an officer and/or substantial shareholder of CHM, Jas Property Services a/k/a Jas LLC, ABN Amro Mortgage Group, Inc., as assignee of and successor to CHM, Michael Parker, individually and in his capacity as officer/ employee of CHM, Gary Lewis, individually and as President of FNNY, Joshua Smiling, Charles Salva Appraisals, Inc., Charles Salva, Martin Silver, Esq., Ann McGrane, Esq., Kenneth Golden, Esq. and Alphonso Jackson, as Secretary of the United States Department of Housing and Urban Development, Defendants. Dana Y. Banks and David B. Mounsey, Plaintiffs, v. Consumer Home Mortgage Company, Inc., et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

470 F.Supp.2d 248

Paulette VAUGHN and Joy Vaughn, Plaintiffs, v. CONSUMER HOME MORTGAGE COMPANY, INC. (CHM), The Foreclosure Network of New York, Inc. (FNNY), Michael Ashley, individually and in his capacity as an officer and/or substantial shareholder of CHM, Jas Property Services a/k/a Jas LLC, ABN Amro Mortgage Group, Inc., as assignee of and successor to CHM, Michael Parker, individually and in his capacity as officer/ employee of CHM, Gary Lewis, individually and as President of FNNY, Joshua Smiling, Charles Salva Appraisals, Inc., Charles Salva, Martin Silver, Esq., Ann McGrane, Esq., Kenneth Golden, Esq. and Alphonso Jackson, as Secretary of the United States Department of Housing and Urban Development, Defendants.

Dana Y. Banks and David B. Mounsey, Plaintiffs, v. Consumer Home Mortgage Company, Inc., et al., Defendants.

No. 01-CV-7937 (ILG).

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

January 22, 2007.

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Hugh A. Zuber, Jacob, Medinger & Finnegan, New York, NY, Richard J. Wagner, Brooklyn Legal Services Corporation "A", Brooklyn, NY, for Plaintiffs.

George G. Coffinas, Coffinas & Coffinas LLP, Michael F. McGowan, Boundas Skarzynsld Walsh & Black LLC, New York, NY, Robert Mauer, Garden City, NY, Carolyn Lisa Miller, Philip J. Miller, Edward K. Newman, United States Attorney's Office, Brooklyn, NY, for Defendants.

MEMORANDUM AND ORDER

GLASSER, District Judge.

The plaintiffs move, pursuant to Fed. R.Civ.P. 59, for reconsideration of this court's prior order, entered on August 4, 2006, granting the motion of defendant United States Department of Housing and Urban Development ("HUD")¹ to dismiss for lack of subject matter jurisdiction, granting the motion of defendant Martin Silver, Esq. ("Silver"), for summary judgment as to all of the claims remaining against him, and denying the plaintiff Paulette and Joy Vaughn's (collectively, "Vaughns") motion to file a Second Amended Complaint, so as to add claims against proposed defendants Sloan Cooper, Peter Cooper, Bank, Tanen & Bank, and Jeffrey Tanen, Esq. See Vaughn v. Consumer Home Mortgage, No. 01-cv-7937, 2006 WL 2239324 (E.D.N.Y. August 4, 2006) (slip copy) (hereinafter "Vaughn III"). For the reasons stated below, the plaintiffs' motion is granted in part and denied in part. To the extent that the court grants reconsideration of its prior order, it finds that defendant Silver is entitled to summary judgment on grounds other than those initially stated, and enters an order to that effect.

BACKGROUND

The instant motion follows several previous decisions, familiarity with which is assumed.² See Vaughn v. Consumer Home Mortgage, Inc., 293 F.Supp.2d 206 (E.D.N.Y.2003) (granting in part and denying in part HUD's motion to dismiss the plaintiffs' claims for injunctive relief) (hereinafter "Vaughn I"); Vaughn v. Consumer Home Mortgage Inc., No. 01-cv-7937, 2003 WL 21241669 (E.D.N.Y. March 23, 2003) (hereinafter "Vaughn II"); Vaughn III, supra. Only those facts relevant to the disposition of the pending motions for reconsideration will be restated here.

The Vaughns are joint purchasers of residential property located at 247 Cooper Street in Brooklyn, New York. Banks and Mounsey are the joint purchasers of residential property located at 415 Pennsylvania Avenue in Brooklyn, New York. Plaintiffs purchased their respective properties through Defendant Foreclosure Network of New York ("FNNY"). See Vaughn I, 293 F.Supp.2d at 208. Plaintiffs initiated suit against FNNY and other defendants affiliated with that company, the attorneys who represented the plaintiffs during closing proceedings,³ alleging that they made false representations with the intent to deceive them into purchasing properties at inflated prices. See id. As a component of the alleged scheme, FNNY steered the plaintiffs toward defendant Consumer Home Mortgage ("CHM"), a lender that the plaintiffs allege it consistently used to further the predatory lending scheme, in part by submitting fraudulent appraisal reports to HUD in order to obtain mortgage insurance available to qualifying low-income applicants under the Fair Housing Act ("FHA"). Id. at 209.⁴ Peter D. Cooper was the managing member, and Sloan Cooper managed the day-to-day operations, of defendant JAS Property Services LLC ("JAS"). JAS, through Sloane Cooper, invested in at least twenty properties which were marketed and sold by FNNY. Jeffrey Tanen and his law firm represented JAS through the filing of the complaint in this matter. JAS provided the financing for FNNY's purchase of distressed property in return for the payment, in the case of the home purchased by plaintiffs, of eighteen percent interest on the loan extended by JAS. The plaintiffs sought to amend their complaint for a second time so as to add claims against Peter and Sloan Cooper, Banks, Tanen & Bank, and Jeffrey Tanen (collectively, the "Proposed Tanen Defendants") for aiding and abetting the other defendants' fraudulent scheme and for deceptive trade practices

The plaintiffs also brought actions against HUD, asserting that HUD had a duty to prevent housing discrimination against plaintiffs as African-American home buyers, and that HUD's failure to institute policies to protect against manipulation by predatory lenders, including HUD's co-defendants, constitutes an abrogation of that duty. The plaintiffs' complaints allege violations of the National Housing Act, 12 U.S.C. §§ 1708-1709, as well as claims under the FHA, 42 U.S.C. §§ 3601 et seq., specifically § 3608(e), arguing that HUD has failed to meet its affirmative obligation to combat housing discrimination. Plaintiffs allege that HUD violated its obligations under those statutes by failing to: (1) exercise due diligence in the issuance of federally-insured mortgages; and (2) warn prospective purchasers/borrowers of a kribwn and substantial risk to them of the dangers of falling prey to predatory selling and lending schemes.

In Vaughn I, the court held that the Administrative Procedures Act ("APA") permits review of HUD's actions, but that the plaintiffs could not meet the rigorous standards for obtaining a mandatory permanent injunction, which requires a showing of "(1) irreparable harm and (2) either (a) likelihood of success on the merits or (b) sufficiently serious questions on the merits and a balance of hardships tipping decidedly in the movant's favor." Vaughn I, 293 F.Supp.2d 214. HUD subsequently moved to dismiss, arguing, inter alia, that the plaintiffs lack standing to seek declaratory relief against it because they have failed to allege a sufficiently credible future injury. The court granted HUD's motion to dismiss on that ground in Vaughn III.⁵ See 2006 WL 2239324, at *8-9 9. In that opinion, the court also granted Silver's motion for summary judgment as to the Vaughns' remaining claims against him, on the ground that they had failed to establish a prima facie case of actual injury, a common element to their claims of fraud, deceptive trade practices, and professional malpractice. The court granted that motion, finding that the plaintiffs had abandoned their claims of fraud and deceptive trade practices, and had failed to establish actual injury or damages as to the malpractice claim. See id. at 12-14. Finally, the court denied the plaintiffs' request to file a Second Amended Complaint alleging claims against the Proposed Tanen Defendants for aiding and abetting the defendants' fraudulent scheme and for deceptive trade practices, holding that the amendment would be futile because, having failed to establish the element of actual damages arising from the underlying transaction in their case against Silver; the plaintiffs could not hope to succeed on similar claims arising from the same transaction against the Proposed Tanen Defendants. See id. at 14-15.

The plaintiffs now move for reconsideration of each aspect of the court's decision in Vaughn III. They argue that the holding granting HUD's motion to dismiss for lack of standing overlooked controlling Supreme Court and Second Circuit precedent which supports the plaintiffs' position that they have standing to seek declaratory relief on the basis of HUD's alleged failure to adequately discharge its statutory obligations, and that the court overlooked substantial evidence in the record which establishes that the plaintiffs have suffered actual damages as a result of the defendants' allegedly fraudulent scheme, requesting that the court reverse its grant of summary judgment to. Silver and its denial of the plaintiffs' request to amend their complaint so as to add claims against the Proposed Tanen Defendants on that basis. HUD, Silver, and the Proposed Tanen Defendants oppose the plaintiffs' motion. HUD argues that the instant motion should be summarily denied because the cases cited by the plaintiffs in support of their argument that the court should reverse its prior order were before the court at the time it issued Vaughn III and were presumably considered by it at that time,. and that, in any event, Vaughn III was correctly decided because the cases relied upon by the plaintiffs do not support the conclusion that they have standing to seek prospective relief against HUD. Silver argues that the court should deny the plaintiffs' motion as untimely because it was filed more than ten days after the Vaughn III order was entered, and that the prior order was correct that the evidence in the record fails to establish a prima facie case of actual injury. The Proposed Tanen Defendants join Silver in arguing that the instant motion is untimely, and further argue that the plaintiffs cannot establish actual damages because the substantial settlement they have already received from other defendants makes up for any pecuniary loss they may have suffered due to the allegedly fraudulent scheme.

DISCUSSION

A. Standard of Review

Federal Rule of Civil Procedure 59(e) states simply that "[a]ny motion to alter...