Weir v. FSB
| Decision Date | 17 July 2018 |
| Docket Number | 16-CV-8650 (CS) |
| Parties | MICHAEL WEIR; ELAINE WEIR; JENNIFER STASUL; JOSE FRANCISCO; Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. CENLAR FSB, d/b/a CENTRAL LOAN ADMINISTRATION & REPORTING; and CENLAR AGENCY, INC., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Appearances:
Rick S. Cowle
The Law Office of Rick S. Cowle P.C.
Carmel, New York
Counsel for Plaintiffs
Casey B. Howard
Locke Lord LLP
New York, New York
Counsel for Defendants
Before the Court is the Motion to Dismiss of Defendants Cenlar FSB, d/b/a Central Loan Administration & Reporting, and Cenlar Agency, Inc. (Doc. 20.) For the foregoing reasons, Defendants' motion is GRANTED.
For purposes of this motion, I accept as true the facts, but not the conclusions, set forth in Plaintiffs' Amended Complaint. (Doc. 14 ("AC").)
This case arises out of Defendants' conduct in servicing Plaintiffs' mortgages. Plaintiffs allege that Defendants participated in a scheme "aimed at maximizing automated fees assessed on [mortgage] borrowers' accounts who had fallen into arrears on their mortgages." (Id. ¶ 1.) Defendants are one of the leading mortgage subservicing companies, and as of September 30, 2016, serviced approximately 2.3 million loans totaling $500 billion. (Id. ¶¶ 2, 26.) Plaintiffs bring this action on behalf of themselves and a class of similarly-situated persons, which is defined as "all persons who were charged computer-generated inspection fees by Defendants as a result of a late payment on their mortgage[s]." (Id. ¶ 39.) Plaintiffs do not know the class's exact size, but estimate that it is comprised of thousands of individuals across the United States. (Id. ¶ 41.)
Named Plaintiffs Michael and Elaine Weir (the "Weir Plaintiffs") purchased a home in Fishkill, New York, and the Security Instrument securing their mortgage with lender National City Mortgage, a division of National City Bank, was recorded on September 12, 2006. (Id. ¶ 13; Doc. 22 ("Howard Decl.") Ex. A at 1-2.)1 Among its terms, the Instrument provides that (Howard Decl. Ex. A at 9.) The Instrument further stipulates that in the event of default, "Lender may charge . . . fees for services performed in connection with [] default, for the purpose of protecting Lender's interest in the Property and rights under this Security Instrument, including, but not limited to, attorneys' fees, property inspection, and valuation fees." (Id. at 13.)
Named Plaintiffs Jennifer Stasul and Francisco Jorge ("Stasul/Jorge Plaintiffs") purchased a home in Carmel, New York and the Security Instrument securing their mortgage with lender 1st Alliance Lending, LLC was recorded on June 15, 2009. (AC ¶ 20; Howard Decl. Ex. B at 1.)2 It provides that "Lender may inspect the Property if the Property is vacant or abandoned or the loan is in default." (Howard Decl. Ex. B at 5.) It further provides that if the borrower misses payments, "Lender may do . . . whatever is necessary to protect the value of the property and Lender's rights in the property," and any amounts disbursed to do so "shall become an additional debt of Borrower." (Id. at 6.)
Both couples' mortgages were serviced by Defendants. (AC ¶¶ 13, 20.) Defendants are Cenlar FSB, which is alleged to be a loan servicing company, (id. ¶ 25), and Cenlar Agency, Inc., which is alleged to be a wholly owned subsidiary of Cenlar FSB and the instrumentality through which Cenlar FSB is authorized to do business in New York, (id. ¶¶ 25-28).
Over the life of their loans, Plaintiffs occasionally faced financial difficulty that caused them to miss payments. (Id. ¶¶ 14, 21.) When Plaintiffs failed to make timely payments, their monthly statements reflected additional amounts owed for late fees and inspections of their property. (Id. ¶¶ 15, 22.) For example, while they were working with Defendants on a loan modification and short sale of the premises, the Weir Plaintiffs were assessed inspection fees delineated as "FEE PROPERTY INSPECT" in the amount of $16.25. (Id. ¶ 16.) They were charged three such fees between April 22 and April 23, 2015. (Id. ¶ 17.) They were also charged for "Other Fees" ranging from approximately $120.00 to $275.00 per month, without further explanation. (Id.) The Stasul/Jorge Plaintiffs, who were also working with Defendantson a short sale of the property, were assessed numerous inspection fees also labeled "FEE PROPERY INSPECT" in amounts ranging from $15.00 to $20.00. (Id. ¶ 24.)3 Plaintiffs allege upon information and belief that Defendants did not always inspect Plaintiffs' properties, but charged them for these inspections nonetheless. (Id. ¶¶ 18, 23.)
Plaintiffs allege that the charges for inspections and other fees were applied through "an unjust scheme undertaken by the Defendants to maximize profit[s] by ordering repetitive, unfair and excessive property inspections which are then charged to defaulted borrowers' accounts." (Id. ¶ 29.) Defendants manage and administer their servicing tasks with an automated computer software program called LoanSphere MSP, which was designed to, among other things, "manage borrowers' accounts and assess fees." (Id. ¶ 31.) If a borrower defaults on a loan, LoanSphere MSP will automatically order property inspections "without regard to actual need," (id.), and without an employee's determination that a property inspection is "reasonably necessary to protect [Defendants'] interests in the subject property," (id. ¶ 32). The property inspections are "automatically ordered on a cyclical basis," "regardless of whether the property has been previously inspected, deemed occupied, well-maintained and in good condition," until the borrower is no longer in default. (Id. ¶ 33; see id. ¶ 34.) The inspections are completed by an inspector who drives by the property. (Id. ¶ 34.) Plaintiffs allege that the frequency of the property inspections is "excessive and neither reasonable nor appropriate," (id. ¶ 33), and that Defendants "knowingly misrepresented these unreasonable and excessive inspection fees . . . by portraying them as legitimate charges even though the Defendants knew that the inspections were not necessary to maintain or protect the properties or, at times, the inspections did not even occur," (id. ¶ 36).
Plaintiffs commenced this action on November 7, 2016. (See Doc. 1.) On March 13, 2017, Defendants filed a letter seeking a pre-motion conference to discuss their anticipated motion to dismiss. (Doc. 10.) Plaintiffs responded on April 10, 2017, (Doc. 13), and the parties appeared for a pre-motion conference to discuss the proposed motion on April 17, 2017, (Minute Entry dated Apr. 17, 2017). At that conference, the Court granted Plaintiffs leave to amend, and Plaintiffs filed their Amended Complaint on June 16, 2017, bringing seven causes of action. (Doc. 14.) Counts One and Two allege violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c), (a), and Count Three alleges a conspiracy to violate RICO pursuant to 18 U.S.C. § 1692(d). Plaintiffs allege that Defendants, including their directors, employees and agents, along with their property inspection vendors, formed an association-in-fact enterprise (the "Cenlar Enterprise"), and violated § 1962(c) through mail and wire fraud in violation of 18 U.S.C. §§ 1341, 1343, by charging Plaintiffs unnecessary fees. (AC ¶¶ 48-83.) Plaintiffs further allege that the income Defendants received from their scheme was reinvested to finance the continuing racketeering activity, violating 18 U.S.C. § 1962(a) (id. ¶¶ 84-87), and that Defendants conspired to violate §§ 1962(a) and (c), (id. ¶¶ 88-93).
Plaintiffs also bring claims for (1) violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692e(2), (10); (2) violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2605, 2607; (3) violation of New York General Business Law ("N.Y. G.B.L.") § 349(g); and (4) unjust enrichment. (AC ¶¶ 94-127.) In addition to federal question jurisdiction, Plaintiffs assert subject-matter jurisdiction under 28 U.S.C. § 1332(d)(2), known as the Class Action Fairness Act of 2005, Pub. L. 109-2 § 7, 119 Stat. 13 ("CAFA"). (AC ¶¶ 8, 11.)
Defendants filed their motion on December 15, 2017. (Doc. 20.) They argue that: (1) Plaintiffs' RICO claims should be dismissed because they fail to plausibly allege a RICO enterprise, a fraudulent misrepresentation, or an injury; (2) Plaintiffs' FDCPA claim fails because Plaintiffs have not plausibly alleged a misrepresentation or deception, or that Defendants are debt-collectors; (3) Plaintiffs' RESPA claim is barred by a one-year statute of limitations and the claim arose after the "inception of a mortgage," taking it outside the purview of the statute; (4) the N.Y. G.B.L. § 349 claim fails because Plaintiffs have not pleaded any deceptive or misleading act and do not address a "consumer-oriented" practice; and (5) Plaintiffs' unjust enrichment claim is improper because there is a contract governing the relevant issues. (See Doc. 21 ("Ds' Mem.").)
Plaintiffs respond that they have adequately pleaded the alleged enterprise as consisting of Defendants and their inspection vendors; that, by charging Plaintiffs for "FEE PROPERTY INSPECT," Defendants "create[d] the belief that the automatic and repetitive property inspections [were] reasonable and necessary to protect the lender's security" and that Defendants therefore fraudulently misrepresented "the true nature" of the fees as unreasonable and unnecessary to ensure the houses were occupied; and that they have adequately alleged claims under the FDCPA and N.Y. G.B.L. § 349, and for unjust enrichment. (Doc. 24 ("Ps' Opp.") at 7, 10-11, 15-25.)4
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