Opinion
23 Civ. 1385 (JPC) (GWG)
09-20-2023
ZONG LAU and HUI LAU, Plaintiffs, v. SPECIALIZED LOAN SERVICING, LLC, et al., Defendants.
REPORT & RECOMMENDATION
GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE.
Plaintiffs Zong Lau and Hui Lau brought this action seeking to enjoin the foreclosure sale of an apartment formerly belonging to Jsang Kei Lau, their deceased father. See First Amended Complaint, filed Mar. 17, 2023 (Docket # 22) (“FAC”). Plaintiffs assert claims arising under the Garn-St. Germain Depository Institutions Act of 1982, 12 U.S.C. § 1701j-3; the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601 et seq., and its implementing procedures under Regulation X, 12 C.F.R. §§ 1024.1 et seq.; the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601 et seq., and its implementing procedures under Regulation Z, 12 C.F.R. §§ 1026.1 et seq.; the Dodd-Frank Act, 12 U.S.C. §§ 5301 et seq.; and the Fifth and Fourteenth Amendments to the United States Constitution. See id. ¶¶ 56-80. Defendants Specialized Loan Servicing, LLC and Computershare Loan Services (collectively “Specialized”) and defendants U.S. Bank Trust, N.A., as Trustee for LSF10 Master Participation Trust (“US Bank Trust”), Fay Servicing, LLC (“Fay”), Caliber Home Loans, Inc. (“Caliber”), and Newrez, LLC (collectively “US Bank”), have moved to dismiss plaintiffs' First Amended Complaint. Plaintiffs have cross- moved, seeking declaratory judgment that they are entitled to assume Jsang Kei Lau's mortgage. See Lau Opp. For the reasons that follow, defendants' motions should be granted, and plaintiffs' cross-motion should be denied.
See Notice of Motion, filed Apr. 10, 2023 (Docket # 34) (“Specialized Mot.”); Memorandum of Law, filed Apr. 10, 2023 (Docket # 35) (“Specialized Mem.”); Declaration of Brian McGrath, filed Apr. 10, 2023 (Docket # 36) (“McGrath Decl.”); Notice of Motion, filed Apr. 11, 2023 (Docket # 39) (“US Bank Mot.”); Memorandum of Law, filed Apr. 11, 2023 (Docket # 39-1) (“US Bank Mem.”); Declaration of Michael J. Fitzpatrick, filed Apr. 11, 2023 (Docket # 39-2) (“Fitzpatrick Decl.”); Plaintiffs' Affidavit in Support of Their Cross-Motion for a Declaratory Judgment and in Opposition to the Defendants' Motions to Dismiss, filed May 23, 2023 (Docket # 53) (“Lau Opp.”); Reply Memorandum of Law, filed June 13, 2023 (Docket # 54) (“US Bank Reply”); Memorandum of Law in Further Support, filed June 13, 2023 (Docket # 57) (“Specialized Reply”); Plaintiffs' Reply Affirmation, filed June 20, 2023 (Docket # 58) (“Lau Reply”).
I. BACKGROUND
A. Factual Background
The factual background is derived from the complaint and documents of which we take judicial notice - specifically, the mortgage assignment, state court complaint, judgment of foreclosure and sale, and several prior case filings. Judicial notice is proper because these documents are either available in the public record or integral to plaintiffs' First Amended Complaint. See Deans v. Bank of Am., 2011 WL 5103343, at *1 & 1 n.2 (S.D.N.Y. Oct. 27, 2011) (documents including “public records, such as [plaintiff's] litigation history in state court” were “judicially noticeable”); see also Blue Tree Hotels Inv. (Can.), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004) (courts “may also look to public records, including complaints filed in state court, in deciding a motion to dismiss”); Tasaka v. Bayview Loan Serv'g, LLC, 2022 WL 992472, at *3 (E.D.N.Y. Mar. 31, 2022) (“the Court takes judicial notice of the Judgment of Foreclosure and Sale.”).
In September 2006, Jsang Kei Lau executed a mortgage (the “Mortgage”) on 62 Rivington Street, Apartment 8B in New York City (the “Property”). FAC ¶¶ 1, 17. Although the mortgage was initially held by HSBC Mortgage Corporation (“HSBC”), through a series of assignments it was transferred to Specialized Loan Servicing and is now held by U.S. Bank Trust. See Assignment of Mortgage, annexed as Ex. 3 to Fitzpatrick Decl. (Docket # 39-3), at *18-19.
The amended complaint and plaintiffs' papers express some uncertainty as to the current owner of the Mortgage. See, e.g., FAC ¶¶ 33, 35, 44; Lau Reply ¶ 12 (“It appears that the ownership of the subject Mortgage depends upon the type of court, i.e., Specialized (Computershare as Successor to Specialized) owns it in the state court and LSF10 [US Bank] owns it in federal-type courts.”). Given the vagueness of this allegation, we turn to documents as to which we may take judicial notice. The Assignment of Mortgage reflects that Jsang Kei Lau entered the Mortgage in 2006 with HSBC. Assignment of Mortgage at *19. In 2017, HSBC assigned the Mortgage to Nationstar Mortgage. Id. In 2018, Nationstar Mortgage assigned the Mortgage to Specialized. Id. In 2019, Specialized assigned the Mortgage to U.S. Bank Trust, as Trustee for LSF10 Master Participation Trust. Id. at *18.
As to the servicing of the loan, the complaint alleges that Caliber became the loan servicer in January 2019, FAC ¶ 33, and transferred these duties to Fay sometime in August 2021, see FAC ¶ 44. The complaint does not make clear whether a different servicer was involved prior to Caliber.
On February 9, 2009, HSBC filed a complaint in the Supreme Court of New York, County of New York, alleging that Jsang Kei Lau had failed to comply with the terms of the mortgage and seeking foreclosure of the Property. See Complaint, dated Feb. 9, 2009, annexed as Ex. 1 to Fitzpatrick Decl. (Docket # 39-3) (“Foreclosure Compl.”).
On September 14, 2018, the New York Supreme Court entered a foreclosure judgment against Jsang Kei Lau. See Judgment of Foreclosure and Sale, dated Sept. 14, 2018, annexed as Ex. 2 to Fitzpatrick Decl. (Docket # 39-3) (“JFS”). The state court entered a sale order on October 24, 2019, and the Appellate Division denied Jsang Kei Lau's motion to stay the sale pending appeal. See Order, dated Dec. 10, 2019, annexed as Ex. 5 to Fitzpatrick Decl. (Docket # 39-3).
On April 30, 2019, Jsang Kei Lau filed for Chapter 7 bankruptcy, but the case was dismissed on September 17, 2019. See Order Dismissing Chapter 7 Bankruptcy Case, dated Sept. 17, 2019, annexed as Ex. 6 to Fitzpatrick Decl. (Docket # 39-3). On December 10, 2019, Jsang Kei Lau again filed for Chapter 7 bankruptcy, and sought, among other things, an extension of the automatic stay and the vacatur of the JFS. See Affidavit, dated Dec. 30, 2019, annexed as Ex. 7 to Fitzpatrick Decl. (Docket # 39-3), ¶¶ 2-3. The court denied the application on February 20, 2020, see Order, dated Feb. 20, 2020, annexed as Ex. 9 to Fitzpatrick Decl. (Docket # 39-4), and on March 3, 2020, Jsang Kei Lau filed an appeal to the Southern District, see Notice of Appeal and Statement of Election, filed Mar. 3, 2020, annexed as Ex. 10 to Fitzpatrick Decl. (Docket # 39-4). On March 19, 2020, the bankruptcy court dismissed the second bankruptcy action. See Order, dated Mar. 19, 2020, annexed as Ex. 11 to Fitzpatrick Decl. (Docket # 39-4). On February 26, 2021, the district court dismissed Jsang Kei Lau's appeal of the second bankruptcy action. See Opinion & Order, dated Feb. 26, 2021 in In re: Jsang Kei Lau, No. 20-cv-1930 (Docket # 40).
In the meantime, on November 21, 2020, Jsang Kei Lau died. FAC ¶ 29. On March 22, 2021, a notice of appeal digitally signed by “Jsang Kei Lau” was filed appealing the district court's dismissal of the second bankruptcy action. See Notice of Appeal, dated Mar. 22, 2021, annexed as Ex. 14 to Fitzpatrick Decl. (Docket # 39-4). On August 26, 2022, the appeal was dismissed without prejudice due to Jsang Kei Lau's death. See Order, dated Aug. 26, 2022, annexed as Ex. 20 to Fitzpatrick Decl. (Docket # 39-7) (“2d Cir. Order”).
At some point after January 2022, plaintiffs attempted to apply for assistance from the New York State Homeowner Assistance Fund. FAC ¶¶ 31-32. Plaintiffs had not received any mortgage statements since March 2020, id. ¶ 35, and contacted both Caliber and counsel for Specialized to obtain backdated statements, but received nothing, Id. ¶¶ 35-36. In March 2022, plaintiffs' application was “deemed abandoned” because plaintiffs did not provide mortgage statements. Id. ¶¶ 32, 40.
On December 15, 2022, plaintiffs became aware of a foreclosure sale of the Property, id. ¶ 45, which was scheduled for March 29, 2023, id. ¶ 55. Plaintiffs contacted a representative for Specialized, who informed plaintiffs that “if [plaintiffs] wanted to keep the Property, . . . [they] needed to reinstate the Mortgage by paying all past due amounts,” id. ¶ 49, and that “prospective borrowers would need to be thoroughly evaluated as if a refinance took place,” id. ¶ 50. Plaintiffs then attempted to file a motion relating to the sale in New York state court, but “were barred from filing a motion” because the foreclosure action had not undergone “e-file conversion.” Id. ¶¶ 51-52.
Plaintiffs filed the instant action on February 17, 2023, see Complaint, filed Feb. 17, 2023 (Docket # 1), and sought a temporary restraining order enjoining the March 29, 2023 sale, see Proposed Order to Show Cause, filed Mar. 10, 2023 (Docket # 12). On March 23, 2023, the court denied plaintiffs' motion, see Order, dated Mar. 23, 2023 (Docket # 29). Plaintiffs then appealed the decision. See Notice of Interlocutory Appeal, filed Mar. 27, 2023 (Docket # 30).
On March 24, 2023, plaintiffs filed an order to show cause in the New York Supreme Court action where the foreclosure was pending. See Affidavit, annexed at *10 to Ex. 20 to Fitzpatrick Decl. (Docket # 39-7). On March 27, 2023, the state court granted the motion and ordered the cancellation of the scheduled sale on the ground that notice of the sale had not been properly given. See Decision + Order on Motion, annexed at *20 to Ex. 20 to Fitzpatrick Decl. (Docket # 39-7). On May 10, 2023, the Court of Appeals dismissed plaintiffs' appeal as moot in light of the cancellation of the sale. See Mandate, dated May 10, 2023 (Docket # 51).
Defendants now move to dismiss plaintiffs' amended complaint.
Specialized failed to serve a “hard copy, paper format” of its reply papers on plaintiffs and thus plaintiffs argue the Court should not consider them. See Lau Reply ¶¶ 2-5. But plaintiffs concede they were served in electronic form, id. at ¶ 3, and plaintiffs filed a response. We thus do not view it an appropriate remedy in this situation to ignore Specialized's papers. In any event, Specialized has since served plaintiffs with paper copies. See Docket # 62.
B. Plaintiffs' Complaint
Plaintiffs plead six claims in their amended complaint. Plaintiffs' first claim, brought under the Garn-St. Germain Depository Institutions Act of 1982, alleges that defendants “violated the [Act] by triggering the due on sale clause for which . . . the spouse or children of the borrower . . . [are] exempt.” FAC ¶ 57. The second, brought under RESPA, alleges that “[d]efendants withheld mortgage statements” to which plaintiffs were entitled “as Heirs-at-Law and Successors-in-Interest,” id. ¶ 61; “failed to notify [plaintiffs] of a mortgage servicing transfer from Caliber to Fay,” id. ¶ 62; and “disallowed [plaintiffs] to assume the Mortgage or pursue loss mitigation options, including a loan modification,” id. ¶ 63. Plaintiffs' claim under TILA alleges that “[d]efendants failed to notify [plaintiffs] of a mortgage servicing transfer from Caliber to Fay ....[and] wrongfully activated the Ability-to-Repay test on [plaintiffs], who are exempt as . . . surviving family members who acquired title . . . and now have the same rights as the consumer under Regulation Z.” Id. ¶¶ 66-67. Plaintiffs' claim under the Dodd-Frank Act alleges that “[d]efendants engaged in dual tracking when [plaintiffs] tried to engage them in a number of home retention proposals, including a loan modification, while they continued to foreclose on us . . . in the upcoming sale.” Id. ¶ 70. Plaintiffs' claim under the Fifth Amendment alleges that they were “unable to seek relief at the state court due to improper e-file case conversions and random case re-assignment on the part of the [d]efendants, who somehow [were] able to circumvent state court rules,” id. ¶ 73; “were unable to file a motion that was returned to [plaintiffs] as unfiled,” id. ¶ 74; and “were deprived of an opportunity to save our home which [was] illegally scheduled for a . . . sale,” id. ¶ 75. Their claim under the Fourteenth Amendment alleges that neither plaintiffs nor Jsang Kei Lau “receive[d] a mandatory settlement conference [as] required under New York[] CPLR § 3408” or a “mandated foreclosure conference per [] Administrative Order 157/20.” Id. ¶¶ 77-78.
II. LEGAL STANDARD
A party may move to dismiss a complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) where the opposing party's pleading “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). While a court must accept as true all of the allegations contained in a complaint, that principle does not apply to legal conclusions. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (“[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”) (citation, internal quotation marks, and brackets omitted). In other words, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice,” Iqbal, 556 U.S. at 678, and thus a court's first task is to disregard any conclusory statements in a complaint, id. at 679.
Next, a court must determine if a complaint contains “sufficient factual matter” which, if accepted as true, states a claim that is “plausible on its face.” Id. at 678 (citation and internal quotation marks omitted); accord Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir. 2007) (“[A] complaint must allege facts that are not merely consistent with the conclusion that the defendant violated the law, but which actively and plausibly suggest that conclusion.”). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. 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.” Iqbal, 556 U.S. at 678 (citations and internal quotation marks omitted). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct,” a complaint is insufficient under Fed.R.Civ.P. 8(a) because it has merely “alleged” but not “‘show[n]' - ‘that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).
In the case of pro se plaintiffs, “[a] document filed pro se is to be liberally construed, and a pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers.” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citations and internal quotation marks omitted); accord McPherson v. Coombe, 174 F.3d 276, 280 (2d Cir. 1999) (a pro se party's pleadings should be construed liberally and interpreted “‘to raise the strongest arguments that they suggest'”) (quoting Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir. 1994)). However, even pro se pleadings must contain factual allegations that “raise a right to relief above the speculative level.” Dawkins v. Gonyea, 646 F.Supp.2d 594, 603 (S.D.N.Y. 2009) (quoting Twombly, 550 U.S. at 555).
III. DISCUSSION
A. Jurisdiction
Both Specialized and U.S. Bank Trust argue that plaintiffs' claims cannot be heard by this Court under the Rooker-Feldman doctrine. See Specialized Mem. at 4-5; U.S. Bank Mem. at 1013. As the Second Circuit has explained:
The Rooker-Feldman doctrine is named for two Supreme Court cases, Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983). Together, those cases “established the clear principle that federal district courts lack jurisdiction over suits that are, in substance, appeals from state-court judgments.” Hoblock v. Albany [Cnty.] Bd. of Elections, 422 F.3d 77, 84 (2d Cir. 2005). The Rooker-Feldman doctrine, then, emerged as a response to complaints that “invited federal courts of first instance to review and reverse unfavorable state-court judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 283, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). Since federal district courts are granted original - and not appellate - jurisdiction, cases that function as de facto appeals of state-court judgments are therefore jurisdictionally barred.Sung Cho v. City of New York, 910 F.3d 639, 644 (2d Cir. 2018). This doctrine is generally applied in cases “in which error by state-court judges in state-court proceedings is asserted, frequently in the foreclosure process.” Id. at 645.
To determine whether a court lacks jurisdiction under the Rooker-Feldman doctrine, the Second Circuit has articulated a four-part test.
First, the federal-court plaintiff must have lost in state court. Second, the plaintiff must “complain[] of injuries caused by [a] state-court judgment[.]” Third, the plaintiff must “invit[e] district court review and rejection of [that] judgment[].” Fourth, the state-court judgment must have been “rendered before the district court proceedings commenced” - i.e., Rooker-Feldman has no application to federal-court suits proceeding in parallel with ongoing state-court litigation. The first and fourth of these requirements may be loosely termed procedural; the second and third may be termed substantive.Hoblock v. Albany Cnty. Bd. of Elections, 422 F.3d 77, 85 (2d Cir. 2005) (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005)). The Second Circuit has explained that the second element “is the core requirement” of Rooker-Feldman and is not satisfied absent a “causal relationship between the state-court judgment and the injury of which the party complains in federal court.” Hunter v. McMahon, 75 F.4th 62, 71-72 (2d Cir. 2023) (emphasis in original) (quoting Sung Cho, 910 F.3d at 646; McKithen v. Brown, 481 F.3d 89, 98 (2d Cir. 2007)).
The New York Supreme Court rendered its foreclosure decision on September 14, 2018, see JFS, and the instant case was filed on February 17, 2023, see Docket. Thus, the fourth element of Hoblock is satisfied.
As to the other elements, plaintiffs contend that this case does not satisfy Hoblock because plaintiffs “are not ‘state court losers'” and “are not complaining of injuries caused by the JFS” but instead “are complaining that [they] are precluded from assuming the mortgage, which is actually in deference to the state court judgment.” Lau Opp. ¶¶ 29, 37. Plaintiffs argue that they “are not inviting the Court to review and reject the state court judgment” and aver that they “are not disturbing or attacking the judgment, which automatically disintegrates upon a prima facie showing.” Id. ¶¶ 48-49. Thus, plaintiffs contest all but the fourth requirement under Hoblock. We consider each of these elements next.
1. State Court Loss
Plaintiffs argue that they did not lose in state court because they were “never made a part of the state foreclosure action” and privity with the state court party - their deceased father - is insufficient to justify the invocation of Rooker-Feldman. Id. ¶¶ 29-33 (emphasis in original). Both sets of defendants argue that plaintiffs are bound by the state court judgment as Jsang Kei Lau's estate or successors. U.S. Bank Reply at 4; see Specialized Reply at 2-3.
As to this element, at a March 23, 2023, preliminary injunction hearing, the district judge noted that “while the plaintiffs themselves were not parties to the foreclosure action in state court, their father was, and the plaintiffs frequently refer to themselves as heirs-at-law and successors-in-interest following the untimely death of their father.” Transcript, filed July 10, 2023 (Docket # 60) (“Mar. 23 Tr.”), at 20:14-18. Thus, the court found it was “likely” that this element would be satisfied. See Id. at 20:11-13. We concur.
Plaintiffs are correct that privity with the “state court loser” is insufficient to support the invocation of Rooker-Feldman. See Lance v. Dennis, 546 U.S. 459, 466 (2006) (“The Rooker-Feldman doctrine does not bar actions by nonparties to the earlier state-court judgment simply because, for purposes of preclusion law, they could be considered in privity with a party to the judgment.”). However, the Supreme Court in Lance declined to address “whether there are any circumstances, however limited, in which Rooker-Feldman may be applied against a party not named in an earlier state proceeding - e.g., where an estate takes a de facto appeal in a district court of an earlier state decision involving the decedent.” Id. at 466 n.2 (emphasis in original). This case falls within that exception.
The estate of a decedent stands in the shoes of that decedent. See, e.g., Graham v. Barriger, 699 F.Supp.2d 612, 620 (S.D.N.Y. 2009); accord Culwick v. Wood, 384 F.Supp.3d 328, 343 (E.D.N.Y. 2019) (“[T]he estate stands in the shoes of the decedent.”). Plaintiffs argue that they do not stand in Jsang Kei Lau's shoes with regard to the foreclosure and mortgage because they have filed as individuals and the current owners of Jsang Kei Lau's real property, rather than as his estate. Lau Opp. ¶¶ 35-36. The amended complaint, however, refers to plaintiffs as Jsang Kei Lau's “Heirs-at-Law” and “Successors-in-Interest,” see FAC ¶ 1, and - more to the point - plaintiffs seek to assume Jsang Kei Lau's rights as mortgagor, see, e.g., id. ¶ 81(b). Plaintiffs seek to vindicate the rights held by Jsang Kei Lau during his lifetime. Accordingly, for purposes of Rooker-Feldman, plaintiffs are “state court losers” for whom any challenges to the foreclosure action may be barred by the Rooker-Feldman doctrine.
2. Nature of Injuries Alleged
As to injury, the FAC alleges that plaintiffs were “deprived of an opportunity to save [their] home.” FAC ¶¶ 58, 64, 68, 71, 75, 80. Any injury arising from the sale of their home necessarily arises from the foreclosure order that allows that sale. However, plaintiffs also allege injury stemming from defendants' conduct in servicing the mortgage, for which they seek punitive and statutory damages. See Id. ¶ 81(c). These injuries do not arise from the state court judgment, but rather from acts independent of the foreclosure (or, in this case, the scheduled foreclosure sale). As a result, there is no causal relationship between these latter injuries and the state court judgment. See Hunter, 75 F.4th at 72. The Rooker-Feldman doctrine applies only to the injuries arising from the foreclosure and sale of the Property and does not extend to other injuries merely because they relate to the same mortgage. See Mareno v. Dime Sav. Bank of N.Y., 421 F.Supp.2d 722, 726 (S.D.N.Y. 2006) (“The doctrine may be invoked only when the state decision is itself the source of the harm.”) (emphasis in original).
3. Review and Rejection of State Court Judgment
The FAC seeks the following relief: an injunction preventing the March 29, 2023, sale of the Property (a request that was moot at the time the FAC was filed), and an order that plaintiffs may “assume the Mortgage, be offered loss mitigation options, receive monthly recurring mortgage statements, and any other borrower's rights,” statutory damages under RESPA and TILA, and “punitive, treble damages . . . for failing to engage in mandatory loss mitigation actions for the purpose of providing foreclosure alternatives allowable under 24 C.F.R. [§] 30 and 24 C.F.R. [§] 203.” FAC ¶ 81. As the district judge observed in the March 23, 2023 injunction hearing, any relief that changes the terms of the mortgage would be a modification of the state foreclosure judgment. See Mar. 23 Tr. at 20:24-21:1 (“I do not see how I can grant any relief to the plaintiffs [relating to the sale] without vacating or modifying that judgment of foreclosure and sale.”). In a similar vein, we conclude that a ruling allowing plaintiffs to “assume” the Mortgage would necessarily constitute a review of the state court order that foreclosed that Mortgage. To the extent that plaintiffs' request for such a ruling can be characterized as arising from a right or equity of redemption, we find that any order on this would similarly disturb the state court's foreclosure order, because redemption is inextricably linked to the foreclosure sale. See generally NYCTL 1999-1 Tr. v. 573 Jackson Ave. Realty Corp., 13 N.Y.3d 573, 579 (2009) (“equity of redemption . . . allows property owners to redeem their property by tendering the full sum at any point before the property is actually sold at a foreclosure sale”); Sufficiency of Manner and Timeliness of Redemption of Real Estate Contract from Foreclosure, 66 Am. Jur. Proof of Facts 3d 267 § 12 (2023) (“New York's real property law provides for a stay of all proceedings upon judgment in an action to foreclose a mortgage if payment is made into the court after judgment directing the sale and before sale.”).
But not all of plaintiffs' claims would require the Court to “review and reject” the state court judgment. Thus, Rooker-Feldman does not bar jurisdiction over such claims. Where “a federal plaintiff presents some independent claim,” a court is not deprived ofjurisdiction under Rooker-Feldman, even if the claim is “one that denies a legal conclusion that a state court has reached in a case to which he was a party.” Exxon Mobil, 544 U.S. at 293 (punctuation and quotation omitted). Here, the plaintiffs' request for certain kinds of statutory and other damages would not disturb the state court judgment. Instead, these claims would require this Court to decide whether defendants' conduct violated various consumer protection laws and whether plaintiffs are entitled to money damages. See McCann v. Rushmore Loan Mgmt. Servs., LLC, 2017 WL 1048076, at *4 (E.D.N.Y. Mar. 16, 2017) (“[p]laintiff's claims under RESPA [were] independent from the state court judgment” where “[p]laintiff [sought] only money damages for the actions or inactions of the loan servicer . . . and [did] not seek to challenge or overturn the foreclosure order.”); Tanasi v. CitiMortgage, Inc., 257 F.Supp.3d 232, 253 (D. Conn. 2017) (where plaintiffs “allege[d] that [d]efendants improperly processed their loan modification applications, failed to respond to their requests for information, and ‘engaged in a pattern or practice of non-compliance with RESPA and Regulation X[,]'” but “pointedly avoid[ed] arguing that their foreclosure was wrongly decided or seeking injunctive relief against the foreclosure,” the claims were “sufficiently ‘independent' from the [f]oreclosure [a]ction and [did] not invite the Court's ‘review and rejection of that judgment.'”) (quoting Hoblock, 422 F.3d at 85).
In sum, we find that the Rooker-Feldman doctrine deprives the court of jurisdiction only to order relief that alters the status of the Mortgage or affects the foreclosure (or any sale pursuant to the foreclosure), and that we have jurisdiction to render relief with regard to plaintiffs' remaining claims.
B. Preclusion
Defendants argue that plaintiffs' claims are barred by the doctrines of claim and issue preclusion. See U.S. Bank Mem. at 13-14 (claim preclusion); Specialized Mem. at 4 (claim and issue preclusion). They argue that plaintiffs, and previously Jsang Kei Lau, have raised or had the opportunity to raise the same claims in the state foreclosure proceedings. U.S. Bank Mem. at 13-14; Specialized Mem. at 5.
U.S. Bank argues only that the state foreclosure judgment should be given preclusive effect. See U.S. Bank Mem. at 13-14. Specialized, by contrast, states that “Jsang Kei Lau and subsequently [p]laintiffs have exhausted both state court and federal court venues . . . repackaging the same claims over and over.” Specialized Mem. at 5. Specialized makes no argument as to why the particular claims or issues raised in any prior federal actions should be given preclusive effect here. Because Specialized fails to make any specific arguments on this point, we do not address the notion that some unexplained prior “claims” should be accorded to preclusive effect.
Claim preclusion, often referred to as res judicata, provides that “a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.” Allen v. McCurry, 449 U.S. 90, 94 (1980). Issue preclusion - or collateral estoppel - “prevents parties or their privies from relitigating in a subsequent action an issue of fact or law that was fully and fairly litigated in a prior proceeding.” Phoenix Light SF Ltd. v. Bank of N.Y. Mellon, 66 F.4th 365, 371 (2d Cir. 2023) (quoting M.O.C.H.A. Soc'y, Inc. v. City of Buffalo, 689 F.3d 263, 284 (2d Cir. 2012)).
“Because the Full Faith and Credit Act, 28 U.S.C. § 1738, requires federal courts to accord state judgments the same preclusive effect those judgments would have in the courts of the rendering state, New York preclusion law applies” to defendants' arguments regarding the preclusive effect of the JFS. See Hoblock, 422 F.3d at 93. “In New York, res judicata, or claim preclusion, bars successive litigation based upon the same transaction or series of connected transactions if: (i) there is a judgment on the merits rendered by a court of competent jurisdiction, and (ii) the party against whom the doctrine is invoked was a party to the previous action, or in privity with a party who was.” People ex rel. Spitzer v. Applied Card Sys., Inc., 11 N.Y.3d 105, 122 (2008) (quotation omitted); accord Lipman v. Rodenbach, 852 Fed.Appx. 578, 580 (2d Cir. 2021) (summary order). “[I]f claims arise out of the same factual grouping they are deemed to be part of the same cause of action and the later claim will be barred without regard to whether it is based upon different legal theories or seeks different or additional relief.” Davidson v. Capuano, 792 F.2d 275, 278 (2d Cir. 1986) (quotation omitted); accord Harris v. BNC Mortgage, Inc., 737 Fed.Appx. 573, 575 (2d Cir. 2018) (summary order). “Res judicata does not require the precluded claim to actually have been litigated; its concern, rather, is that the party against whom the doctrine is asserted had a full and fair opportunity to litigate the claim.” EDP Med. Comput. Sys., Inc. v. United States, 480 F.3d 621, 626 (2d Cir. 2007); accord Harris, 737 Fed.Appx. at 575 (“[A]ctual litigation is not required for res judicata; it need only be shown that a party had the opportunity to litigate the claims.”) (citation omitted).
As to issue preclusion, “[u]nder New York law, collateral estoppel bars relitigation of an issue when (1) the identical issue necessarily was decided in the prior action and is decisive of the present action, and (2) the party to be precluded from relitigating the issue had a full and fair opportunity to litigate the issue in the prior action.” Plymouth Venture Partners, II, L.P. v. GTR Source, LLC, 988 F.3d 634, 642 (2d Cir. 2021) (citation omitted).
1. Garn-St. Germain
The Garn-St. Germain Act governs “due-on-sale” provisions in real property loans and prohibits lenders from “exercis[ing] [their] option pursuant to a due-on-sale clause upon . . . a transfer to a relative resulting from the death of a borrower.” 12 U.S.C. § 1701j-3(d)(5). Plaintiffs' claim under the Garn-St. Germain Act alleges that defendants “violated the [Act] by triggering the due on sale clause for which . . . the spouse or children of the borrower . . . [are] exempt.” FAC ¶ 57. Plaintiffs, in essence, argue that defendants unlawfully sought the full balance of the mortgage upon Jsang Kei Lau's death in violation of this Act. See Lau Opp. ¶¶ 122-24.
Under New York law, however, a mortgage is accelerated when a plaintiff seeks foreclosure and requests “payment of the full balance due.” Mejias v. Wells Fargo, N.A., 186 A.D.3d 472, 474 (2d Dep't 2020). The complaint initiating the foreclosure action here stated that “plaintiff has elected to accelerate the mortgage balance and declare the same to be immediately due and payable.” Foreclosure Compl. ¶ 11. This document, by its filing, initiated the acceleration of Jsang Kei Lau's mortgage. See Mejias, 186 A.D.3d at 474. The JFS recognized that “the whole amount secured by [the] [M]ortgage [was] due and payable,” as of the order's entry on September 14, 2018. See JFS at 3. Thus, these documents indicate that the acceleration of the mortgage occurred at some point prior to the JFS, and the validity of the acceleration could have been litigated in that case. This satisfies the first element of claim preclusion under New York law. See EDP, 480 F.3d at 626.
The remaining question is whether plaintiffs are in privity with their father, Jsang Kei Lau, who litigated the JFS. In light of the fact that plaintiffs allege that they are Jsang Kei Lau's “Successors-in-Interest” with regard to the Property, FAC ¶ 1, and seek to vindicate precisely the rights formerly held by Jsang Kei Lau, they must be deemed to be in privity for purposes of the preclusion analysis. See Yeiser v. GMAC Mortg. Corp., 535 F.Supp.2d 413, 423 (S.D.N.Y. 2008) (“New York law provides that privity extends to parties who are successors to a property interest[.]”) (quotation omitted); accord Nath v. Select Portfolio Serv., Inc., 2017 WL 782914, at *10 (S.D.N.Y. Feb. 28, 2017). Because plaintiffs are in privity with a party who could have raised this claim in the prior proceeding, the Garn-St. Germain claim is precluded under the doctrine of res judicata and should be dismissed.
2. RESPA
Plaintiffs' claim under RESPA alleges that “[d]efendants withheld mortgage statements” to which plaintiffs were entitled “as Heirs-at-Law and Successors-in-Interest,” FAC ¶ 61, “failed to notify [plaintiffs] of a mortgage servicing transfer from Caliber to Fay,” id. ¶ 62, and “disallowed [plaintiffs] to assume the Mortgage or pursue loss mitigation options, including a loan modification,” id. ¶ 63. Plaintiffs' allegations that mortgage statements were withheld from them and that defendants did not allow them to assume Jsang Kei Lau's mortgage arise from actions that necessarily occurred following their father's death when, as they argue, plaintiffs purportedly became the holders of the mortgage. Jsang Kei Lau died in November 2020, more than two years after the judgment of foreclosure. See FAC ¶ 29; JFS. Plaintiffs allege that the transfer from Caliber to Fay occurred in August 2021. FAC ¶ 44. Thus, each of these claims arises from actions that allegedly occurred after the judgment of foreclosure. As a result, they cannot be precluded under either the doctrines of res judicata or collateral estoppel. See TechnoMarine SA v. Giftports, Inc., 758 F.3d 493, 501 (2d Cir. 2014) (“[C]laim preclusion will not bar a suit . . . based upon legally significant acts occurring after the filing of a prior suit that was itself based upon earlier acts.”) (quotation omitted) (emphasis in original); accord Lucky Brand Dungarees, Inc. v. Marcel Fashions Grp., Inc., 140 S.Ct. 1589, 1596 (2020) (“Claim preclusion generally does not bar claims that are predicated on events that postdate the filing of the initial complaint.”) (quotation omitted); see also Davis v. Proud, 2 F.Supp.3d 460, 481-82 (E.D.N.Y. 2014) (“The third and fourth causes of action in the complaint challenge conduct occurring after the final disposition of the . . . state court proceedings . . . and, thus, do not involve issues previously raised and decided[.]”).
3. TILA
Plaintiffs' TILA claim alleges that “[d]efendants failed to notify [plaintiffs] of a mortgage servicing transfer from Caliber to Fay .... [and] wrongfully activated the Ability-to-Repay test on [plaintiffs], who are exempt as . . . surviving family members who acquired title . . . and now have the same rights as the consumer under Regulation Z.” FAC ¶¶ 66-67. As explained in the previous section, the allegation that defendants failed to notify plaintiffs of the transfer between Caliber and Fay could not have been litigated in the state court action, and thus is not precluded. Likewise, plaintiffs' “Ability-to-Repay” allegation concerns conduct that occurred after Jsang Kei Lau's death, and thus well after the conclusion of the JFS action. Thus, plaintiffs' TILA claims are not precluded.
4. Dodd-Frank
Plaintiffs' claim under the Dodd-Frank Act alleges that “[d]efendants engaged in dual tracking when [plaintiffs] tried to engage them in a number of home retention proposals, including a loan modification, while they continued to foreclose on us . . . in the upcoming sale.” FAC ¶ 70. “[A] dual tracking claim is not ripe (and therefore cannot be asserted as a counterclaim in a foreclosure proceeding) as long as ‘foreclosure proceedings are still pending' and the plaintiff has not yet lost her property.'” Almazon v. JPMorgan Chase Bank, N.A., 2020 WL 1151313, at *15 (S.D.N.Y. Mar. 9, 2020) (quoting Wenegieme v. Bayview Loan Serv., 2015 WL 2151822, at *2 (S.D.N.Y. May 7, 2015)). Thus, such a claim cannot be barred as res judicata. See id. (citing Storey v. Cello Holdings, LLC, 347 F.3d 370, 383 (2d Cir. 2003) (“Claims arising subsequent to a prior action need not, and often perhaps could not, have been brought in that prior action; accordingly, they are not barred by res judicata.”)).
5. Fifth Amendment
Plaintiffs' claim under the Fifth Amendment alleges that they were “unable to seek relief at the state court due to improper e-file case conversions and random case re-assignment on the part of the [defendants, who somehow [were] able to circumvent state court rules,” Id. ¶ 73; that they “were unable to file a motion that was returned to [plaintiffs] as unfiled,” id. ¶ 74; and that they “were deprived of an opportunity to save our home which [was] illegally scheduled for a . . . sale,” id. ¶ 75. Plaintiffs concede that since filing the amended complaint, they “were able to be assigned a judge and thus finally able to file a motion,” after paying a “Request for Judicial Intervention” fee. See Lau Opp. ¶¶ 141-42. Thus, it appears that a state court has addressed this issue, and we deem plaintiffs' filing to amount to an agreement that the Fifth Amendment Claim is moot. Accordingly, it should be dismissed. It also fails on the merits for reasons discussed in Section III.C.5 below.
6. Fourteenth Amendment
Plaintiffs' Fourteenth Amendment claim alleges that neither plaintiffs nor Jsang Kei Lau “receive[d] a mandatory settlement conference [as] required under New York[] CPLR § 3408” or a “mandated foreclosure conference per [] Administrative Order 157/20.” FAC ¶¶ 77-78. As to the settlement conference, “an allegation of noncompliance with New York CPLR [§] 3408 is an affirmative defense not an independent cause of action.” Durosene v. Bank of Am., N.A., 2020 WL 3403083, at *5 (E.D.N.Y. June 19, 2020) (citing OneWest Bank, N.A. v. Marchassalla, 2016 WL 8711438, at *3 (E.D.N.Y. Sept. 30, 2016)). Thus, this argument is one that could only have been brought in the JFS action and is precluded by the decision in that action. As to the foreclosure conference, this allegation relates to an Administrative Order issued by New York courts on July 23, 2020. See Admin. Order No. 157/20 (July 23, 2020), https://www.nycourts.gov/whatsnew/pdf/AO-157-20.pdf [https://perma.cc/B72N-Z4H5]. Given that this administrative order postdates the JFS, it could not have formed the basis of plaintiffs' claims or argument in the JFS action. Thus, we find that the claim alleging violation of Administrative Order 157/20 is not precluded.
C. Merits of Plaintiffs' Claims
We next address whether plaintiffs have stated a claim for relief on the remaining counts of their amended complaint.
1. RESPA & Regulation X
Plaintiffs' RESPA claim alleges that “[d]efendants withheld mortgage statements” to which plaintiffs were entitled “as Heirs-at-Law and Successors-in-Interest,” FAC ¶ 61, “failed to notify [plaintiffs] of a mortgage servicing transfer from Caliber to Fay,” id. ¶ 62, and “disallowed [plaintiffs] to assume the Mortgage or pursue loss mitigation options, including a loan modification,” id. ¶ 63. We consider each allegation next.
a. Mortgage Statements
RESPA provides a cause of action for three types of violations: loan servicing violations under 12 U.S.C. § 2605, kickback or unearned fee violations under section 2607, and title insurance violations under section 2608. See 12 U.S.C. § 2614. None of these sections impose a requirement upon servicers (or owners) of a mortgage loan to provide regular mortgage statements. RESPA does impose a duty on loan servicers to “respond to borrower inquiries,” but this duty attaches only where the servicer receives a “qualified written request from the borrower.” 12 U.S.C. § 2605(e). Plaintiffs do not allege that they have submitted a “qualified written request.” Plaintiffs therefore do not state a claim under RESPA for failure to provide mortgage statements.
b. Transfer of Servicing
As to the transfer notification, RESPA requires the transferor of loan servicing to “notify the borrower in writing of any assignment, sale, or transfer” within a fifteen-day period before the transfer is effective, 12 U.S.C. § 2605(b), and the transferee to “notify the borrower” within fifteen days after the effective date, 12 U.S.C. § 2605(c). Regulation X identifies the same requirements. See 12 C.F.R. § 1024.33(b)(1), (3)(i). Because only Caliber and Fay (the transferee and transferor) can be held liable under these provisions, the claim should be dismissed against the remaining defendants.
Specialized argues that violations of RESPA and Regulation X “are required to be brought within one year of the alleged violation.” Specialized Mem. at 7. In fact, RESPA provides that “[a]ny action pursuant to the provisions of [12 U.S.C. §] 2605 . . . may be brought . . . within 3 years[.]” 12 U.S.C. § 2614.
With regard to Caliber and Fay, plaintiffs have alleged that a transfer occurred from Caliber to Fay for which neither they nor Jsang Kei Lau received notice. FAC ¶ 62. RESPA authorizes two forms of damages for violations of section 2605. First, RESPA allows plaintiffs to recover “any actual damages to the borrower as a result of the failure,” along with costs and fees “[i]n addition to the amounts” otherwise allowed. 12 U.S.C. § 2605(f)(1)(A), (3). Second, RESPA allows plaintiffs to recover “any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $2,000.” 12 U.S.C. 2605(f)(1)(B).
Plaintiffs have not specified any actual damages in connection with their change-of service claim under RESPA, stating only that this violation “deprived [them] of an opportunity to save” the Property. FAC ¶ 64. No explanation is given for this conclusory assertion and thus the complaint fails to establish that defendants' alleged RESPA violations were the proximate cause of actual damages to plaintiffs. As a result, the complaint fails to state a claim for actual damages. See Gorbaty v. Wells Fargo Bank, N.A., 2012 WL 1372260, at *5 (E.D.N.Y. Apr. 18, 2012) (“A plaintiff seeking actual damages under § 2605 must allege that the damages were proximately caused by the defendant's violation of RESPA.”); accord Rosendale v. Mr. Cooper Grp., Inc., 2021 WL 4066821, at *12 (S.D.N.Y. Sept. 7, 2021). RESPA does not support a claim for statutory damages or fees in the absence of actual damages. See Dolan v. Select Portfolio Serv., 2016 WL 4099109, at *5 (E.D.N.Y. Aug. 2, 2016) (“[T]he plain language of Section 2605 indicates that an allegation of actual damages is necessary to state a claim for liability.”); Bonadio v. PHH Mortg. Corp., 2014 WL 522784, at *5 (S.D.N.Y. Jan. 31, 2014) (“Even assuming . . . a pattern of noncompliance . . . plaintiff has failed to state a RESPA claim because he has not alleged how defendant's failure to respond caused any actual damages.”); see also Jackson v. Caliber Home Loans, 2019 WL 3426240, at *8-9 (E.D.N.Y. July 30, 2019) (“[T]he costs of bringing a RESPA claim are insufficient to establish an entitlement to actual damages under § 2605.... Because plaintiff has not alleged any actual damages under the statute and therefore cannot establish liability, she cannot seek statutory damages.”). Thus, plaintiffs have failed to state a claim against Caliber or Fay under section 2605(b) and (c).
c. Loss Mitigation
As to loss mitigation, section 1024.41 of Regulation X outlines the “loss mitigation procedures” under RESPA. “Nothing in § 1024.41 imposes a duty on a servicer to provide any borrower with any specific loss mitigation option.” 12 C.F.R. § 1024.41(a). Nor do plaintiffs point to any portion of RESPA or Regulation X which requires a mortgagee or servicer to provide any loss mitigation options absent a completed application by the borrower.
Regulation X does require a servicer to:
maintain policies and procedures reasonably designed to ensure that servicer personnel assigned to a delinquent borrower . . . [p]rovide the borrower with accurate information about:
(i) Loss mitigation options available to the borrower from the owner or assignee of the borrower's mortgage loan; [and]
(ii) Actions the borrower must take to be evaluated for such loss mitigation options, including actions the borrower must take to submit a complete loss mitigation application[.]12 C.F.R. § 1024.40(b)(1)(i)-(ii). Courts have consistently held, however, that this portion of the regulation does not create a private right of action. See Wilson v. RoundPoint Mortg. Serv. Corp., 2022 WL 3913318, at *6 (D.N.J. Aug. 31, 2022) (“[Plaintiff's] claim under 12 C.F.R. § 1024.40 fails as a matter of law because it ‘is an administrative regulation only; there is no private cause of action available to enforce [it].'”) (citing Stefanowicz v. SunTrust Mortg., 2017 WL 1103183, at *7 (M.D. Pa. Jan. 9, 2017), adopted, 2017 WL 1079163 (M.D. Pa. Mar. 22, 2017), aff'd, 765 Fed.Appx. 766 (3d Cir. 2019)); Brown v. Bank of N.Y. Mellon, 2016 WL 2726645, at *2 (E.D. Va. May 9, 2016) (“[D]efendants correctly argue that . . . [section] 1024.40 do[es] not explicitly provide a cause of action to private individuals.”); Schmidt v. PennyMac Loan Servs., LLC, 106 F.Supp.3d 859, 867 (E.D. Mich. 2015) (“[N]o private cause of action is available to enforce 12 C.F.R. § 1024.40.”). Thus, plaintiffs' loss mitigation claim should be dismissed.
2. TILA & Regulation Z
Plaintiffs' TILA claim alleges that “[d]efendants failed to notify [plaintiffs] of a mortgage servicing transfer from Caliber to Fay .... [and] wrongfully activated the Ability-to-Repay test on [plaintiffs], who are exempt as . . . surviving family members who acquired title . . . and now have the same rights as the consumer under Regulation Z.” FAC ¶¶ 66-67.
As to the transfer, TILA requires notification of transfers of ownership, not transfers of servicing. See 15 U.S.C. § 1641(g)(i) (“[N]ot later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer.”) (emphasis added). Thus, the regulation is inapplicable to what the plaintiffs describe as a “mortgage servicing transfer.” FAC ¶ 66.
Furthermore, TILA imposes a one-year statute of limitations for suits as to the notice-of-transfer provisions. See 15 U.S.C. § 1640(e) (with exceptions not applicable here, “any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation”). Plaintiffs allege the transfer occurred in “August 2021,” FAC ¶ 44, and assert that they “should have received [notice] sometime in September 2021,” id. ¶ 62, but the instant action was not filed until February 17, 2023, see Docket. Assuming that plaintiffs' claim accrued on the latest date possible based on their allegations - that is, September 30, 2021 - plaintiffs' filing of this action on February 17, 2023, was more than four months outside of this statute of limitations. If, despite the phrasing of their complaint, plaintiffs instead intended to allege a failure to notify in connection with the change of ownership, the transfer of ownership occurred on February 11, 2019, more than four years before the filing of the instant action and is similarly outside the statute of limitations. See Assignment of Mortgage at *18.
Although plaintiffs argue that their claim should not be barred because “the violations persist,” Lau Opp. ¶ 100, a TILA notice claim “must be brought within one year and thirty days from the transfer of the mortgage loan,” Kuhl v. U.S. Bank Trust Nat'l Ass'n, 2022 WL 4088014, at *5 (S.D.N.Y. Sept. 6, 2022). In other words, the statute of limitations is not enlarged by a continued failure to notify the mortgagor of the transfer. To the extent that plaintiffs argue they are entitled to equitable tolling for TILA claims, the only misconduct by defendants that they identify is the failure to provide notice. See Lau Opp. ¶¶ 103-106. This is insufficient to entitle plaintiffs to equitable tolling. See Grimes v. Fremont Gen. Corp., 785 F.Supp.2d 269, 286 (S.D.N.Y. 2011) (“[I]n cases involving TILA, the courts have held uniformly that fraudulent conduct beyond the nondisclosure itself is necessary to equitably toll the running of the statute of limitations, because if the very nondisclosure or misrepresentation that gave rise to the TILA violation also tolled the statute of limitations, the effect of the statute of limitations would be nullified.”) (punctuation and quotation omitted) (emphasis in original). For these reasons, the TILA notice claim should be dismissed.
As to allegations that the defendants “wrongfully activated the Ability-to-Repay test,” FAC ¶ 67, this claim appears to be related to a conversation that occurred in January 2023, in which counsel for Specialized “said that prospective borrowers would need to be thoroughly evaluated as if a refinance took place....[and] the prospective borrowers' assets, debts, credit and income would all be considered against the Ability-to-Repay rule.” FAC ¶¶ 48, 50. Because this allegedly occurred in January 2023, it falls within the statute of limitations for TILA actions. However, we are unaware of what portion of TILA prohibits a creditor from assessing potential (or current) borrowers' ability to repay a mortgage loan. Thus, this portion of plaintiffs' amended complaint does not state a claim upon which relief may be granted.
3. Dodd-Frank Act
Plaintiffs' claim under the Dodd-Frank Act alleges that “[d]efendants engaged in dual tracking when [plaintiffs] tried to engage them in a number of home retention proposals, including a loan modification, while they continued to foreclose on us . . . in the upcoming sale.” FAC ¶ 70. We read this as asserting a claim under Regulation X, which was implemented in response to the Dodd-Frank Act. See Almazon, 2020 WL 1151313, at *14. “Regulation X contains provisions governing ‘dual tracking' that prohibit a servicer from commencing a foreclosure proceeding or conducting a foreclosure sale if the borrower has submitted a ‘complete loss mitigation application' within specified timeframes.” Id. (citing 12 C.F.R. §§ 1024.41(f)-(g)); see also Wenegieme, 2015 WL 2151822, at *2 (“According to the [Consumer Financial Protection Bureau], dual tracking is where a servicer moves forward with foreclosure proceedings while simultaneously working with the borrower to avoid foreclosure.”). Under Regulation X, “[b]orrowers have a private cause of action to enforce the dual tracking provisions and to recover actual damages, costs, and attorneys' fees.” Id.
Not included in the FAC is plaintiffs' assertion, first expressed in their opposition memorandum, that defendants engaged in “glaring disparate treatment in terms of fair lending practices and in violation of the Unfair, Deceptive, or Abusive Acts or Practices” section of Dodd-Frank. See Lau Opp. ¶ 128. These allegations are conclusory and appear nowhere in the FAC. We thus do not consider them.
Nowhere do plaintiffs allege that they submitted a “complete loss mitigation application” as required by 12 C.F.R. § 1024.41(c). See FAC. Indeed, plaintiffs state in their briefing that they “could not have submitted a loss mitigation application as [they] were never offered one despite asking for one several times,” although they state that Jsang Kei Lau, the owner at the time of the foreclosure, “was offered one.” Lau Opp. ¶ 128. In the absence of a completed application, plaintiffs have failed to state a claim under the dual tracking provisions of Dodd-Frank. See Galli v. Astoria Bank, 2017 WL 4325824, at *4 (E.D.N.Y. Sept. 27, 2017) (the dualtracking prohibition in Regulation X “applies only when a borrower submits a complete lossmitigation application thirty-seven days before the foreclosure sale”).
4. Constitutional Claims
Plaintiffs' fifth and sixth claims for relief allege violations of the Fifth and Fourteenth Amendments to the United States Constitution. See FAC ¶¶ 72-80. Plaintiffs' claim under the Fifth Amendment alleges that they were “unable to seek relief at the state court due to improper e-file case conversions and random case re-assignment on the part of the [d]efendants, who somehow [were] able to circumvent state court rules,” id. ¶ 73; that they “were unable to file a motion that was returned to [plaintiffs] as unfiled,” id. ¶ 74; and that they “were deprived of an opportunity to save our home which [was] illegally scheduled for a . . . sale,” id. ¶ 75. Plaintiffs' papers explain that they believe the “underlying state foreclosure action was illegally miscategorized as a tort case,” in such a way that plaintiffs were prevented from filing a motion regarding the scheduled March 2023 foreclosure auction. See Lau Opp. ¶¶ 138-39.
It appears plaintiffs seek no relief relating to this claim that has not already been granted because, as discussed in Section III.B.5 above, plaintiffs concede that they “were able to be assigned a judge and thus finally able to file a motion,” after paying a “Request for Judicial Intervention” fee. See id. ¶¶ 141-42. In any event, the complaint fails on the merits because none of the defendants are state actors, and the due process clause of the Fifth Amendment does not apply to private actors. See Barrows v. Burwell, 777 F.3d 106, 113 (2d Cir. 2015) (“To state a Due Process claim, a plaintiff must show that: (1) state action (2) deprived him or her of liberty or property (3) without due process of law.”) (emphasis added) (citing Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 59 (1999)).
Plaintiffs also plead a claim under the Fourteenth Amendment. See FAC ¶¶ 76-80. This claim alleges that neither plaintiffs nor Jsang Kei Lau “receive[d] a mandatory settlement conference [as] required under New York[] CPLR § 3408” or a “mandated foreclosure conference per [] Administrative Order 157/20.” Id. ¶¶ 77-78. As is true for the Fifth Amendment, the due process clause of the Fourteenth Amendment provides “no shield against merely private conduct, however discriminatory or wrongful.” Shelley v. Kraemer, 334 U.S. 1, 13 (1948); accord United States v. Morrison, 529 U.S. 598, 621 (2000). Because the defendants are not state actors, this claim too should be dismissed.
D. Defendant Newrez
US Bank argues that defendant Newrez should be dismissed with prejudice because plaintiffs have not alleged any involvement by Newrez beyond Newrez's acquisition of Caliber. See U.S. Bank Mem. at 14-15. Plaintiffs respond that Newrez “is a proper party by privity,” and that Newrez “continued to misrepresent that Caliber . . . serviced the Mortgage,” but cites only to the corporate disclosure statement listing Newrez as Caliber's parent company and the fact that both Newrez and Caliber are represented by the same counsel. See Lau Opp. ¶¶ 55-58. “It is of course the law that a parent is not automatically liable for the actions of its subsidiary.” Marvel Worldwide, Inc. v. Kirby, 756 F.Supp.2d 461, 475 (S.D.N.Y. 2010). Plaintiffs' amended complaint contains no allegation that Newrez, rather than Caliber, took any action that led to plaintiffs' injury. Accordingly, the claims against Newrez should be dismissed with prejudice.
E. Declaratory Judgment
Plaintiffs request that the Court issue a declaratory judgment “ordering that [plaintiffs] are entitled to assume the Mortgage.” Lau Opp. ¶ 24. While the claim fails for a host of reasons, it is sufficient to say at this stage that there is no request for declaratory judgment in the FAC and thus this request is not properly before the Court for this reason alone.
F. Leave to Amend
“When a motion to dismiss is granted, the usual practice is to grant leave to amend the complaint.” Hayden v. Cnty. of Nassau, 180 F.3d 42, 53 (2d Cir. 1999). However, leave need not be granted where amendment could not rectify the issues identified on a motion to dismiss. See generally Gallop v. Cheney, 642 F.3d 364, 369 (2d Cir. 2011) (proper to dismiss claim with prejudice “in the absence of any indication that [plaintiff] could - or would - provide additional allegations that might lead to a different result”). Here, no amendment would allow the Court to take jurisdiction over claims that challenge the state court judgment by asking that the Court issue any order with regard to the mortgage or any potential foreclosure. Likewise, no amendment would allow plaintiffs to plead their claim under the Garn-St. Germain Act such that it is not precluded, to revive the RESPA loss-mitigation claim for which there is no private right of action, to assert a claim under TILA regarding ability to repay, to circumvent the time-bar for the TILA notice-of-transfer claim, or to bring constitutional claims against non-state defendants for the conduct alleged here. Nor is there any reason to believe amendment could cure the absence of a “complete loss mitigation application” and revive the Dodd-Frank dual tracking claim. These claims should be dismissed with prejudice and without a grant of leave to amend.
Plaintiffs should be allowed leave to amend their RESPA claim if they are able to specify in non-conclusory form any damages that were proximately caused by the alleged failure to notify plaintiffs of the change of servicer from Caliber to Fay.
Conclusion
For the foregoing reasons, defendants' motions to dismiss (Docket ## 34, 39) should be granted, and plaintiffs' amended complaint should be dismissed. Plaintiffs' cross-motion for declaratory judgment (Docket # 53) should be denied. Plaintiffs should be granted leave to amend only as to the claim under RESPA that they were not notified of the change in service from Caliber to Fay.
PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file any objections. See also Fed.R.Civ.P. 6(a), 6(b), 6(d). A party may respond to any objections within 14 days after being served. Any objections and responses shall be filed with the Clerk of the Court. Any request for an extension of time to file objections or responses must be directed to Judge Cronan. If a party fails to file timely objections, that party will not be permitted to raise any objections to this Report and Recommendation on appeal. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72; Fed.R.Civ.P. 6(a), 6(b), 6(d); Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).