United States District Court, E.D. New York
September 9, 2005.
FEDERAL NATIONAL MORTGAGE ASSOCIATION, Plaintiff,
OLYMPIA MORTGAGE CORPORATION; LIEB PINTER; ALAN J. BRAUN & COMPANY; MARCUS PINTER; ABE DONNER; ALAN J. BRAUN; MIRIAM GOLDSTEIN; BARRY GOLDSTEIN; ZESHA AUERBACH; 1716 REALTY CORPORATION; and SHAINDY PINTER, Defendant(s).
The opinion of the court was delivered by: NINA GERSHON, District Judge
The court-appointed Receiver for a mortgage company that is
alleged to have perpetrated a massive fraud seeks an injunction
restricting the forum in which claims against the company may be
litigated. For the reasons set forth below, the requested
injunctive relief is denied.
Plaintiff Federal National Mortgage Association ("Fannie Mae")
filed suit against defendants Olympia Mortgage Company
("Olympia") and various individuals and entities with an interest
in that company, claiming fraud and breach of contract. Fannie
Mae is a government-sponsored private corporation whose mission
includes increasing the availability and affordability of
homeownership for low-, moderate-, and middle-income Americans.
See 12 U.S.C. §§ 1716-1719. Fannie Mae does not originate mortgage loans, but, rather, purchases loans from
mortgage lenders in the secondary mortgage market. Olympia is a
mortgage lender and servicer. According to plaintiff, Fannie Mae
purchased thousands of mortgages originated by Olympia, retaining
Olympia to service those mortgages. Plaintiff alleges that
Olympia engaged in a fraudulent scheme, involving at least 260
loans, as follows: When borrowers attempted to pay off their
existing loans through refinancing, defendants failed to notify
Fannie Mae. Instead, they collected the pay off amounts for
themselves, but continued to make monthly payments on the loans
and reported the status of the loans as "active" in an effort to
prevent Fannie Mae from learning of the refinance.
On consent of the parties, the court appointed a Receiver for
Olympia and empowered her to take all necessary and appropriate
steps to secure and protect the assets and property of Olympia.
The Receiver now moves the court to enter an injunction that
would restrict any party given notice of it from initiating or
maintaining an action against Olympia in a forum other than this
court without first obtaining leave of this court. According to
the Receiver, the proposed injunction is designed to channel all
litigation against the assets of the receivership estate into one
forum to ensure an equitable and efficient administration of the
claims of all parties having an interest in the assets. At the
time of briefing, seven lawsuits, in addition to the instant
action, were pending against Olympia: three in the Eastern
District of New York, one in the District of New Jersey, and
three in New York Supreme Court, Kings County. An eighth lawsuit
against Olympia had already been settled. The Receiver believes
that additional lawsuits may be filed in the future.
The Receiver indicates that, should the requested relief be
granted, it is not her intention to enforce the injunction
against all litigants suing Olympia. Instead, she intends to
exercise discretion in such enforcement. She declares: "If the
Proposed Order is entered, it is not my intention to notify all litigants against Olympia of the injunction. It may be in the
interest of the Receivership to allow certain litigations against
Olympia to proceed in other forums. I will therefore consider all
of the circumstances on a case-by-case basis." Balmer Decl. ¶ 45.
Independence Community Bank ("ICB"), which has a lawsuit
pending against Olympia in state court, was granted leave to
intervene for the limited purpose of opposing the Receiver's
motion. ICB argues that the Anti-Injunction Act, codified at
28 U.S.C. § 2283, precludes this court from enjoining the pending
state court actions, and that, in any event, the court should
decline to issue the proposed injunction because it would be
unfair to ICB and other litigants with claims pending against
Among the inherent powers of a federal court is the authority,
codified in the All Writs Act, 28 U.S.C. § 1651, "to issue such
commands . . . as may be necessary or appropriate to effectuate
and prevent the frustration of orders it has previously issued in
its exercise of jurisdiction otherwise obtained." United States
v. New York Telephone Co., 434 U.S. 159, 172 (1977) (citations
omitted). Pursuant to this inherent power, a federal court may
enjoin actions in other jurisdictions that would undermine its
ability "to reach and resolve the merits of the dispute before
it." In re Baldwin-United Corporation, 770 F.2d 328, 338-39 (2d
Cir. 1985). When a court has appointed a receiver and obtained
jurisdiction over the receivership estate, the power to stay
competing actions falls within the court's inherent power to
prevent interference with the administration of that estate.
Securities and Exchange Commission v. Credit Bancorp, Ltd.,
93 F. Supp. 2d 475, 477 (S.D.N.Y. 2000) (Sweet, J.). This power,
however, is circumscribed by the Anti-Injunction Act,
28 U.S.C. § 2283, which prohibits a federal court from staying pending state court
proceedings "except as expressly authorized by Act of Congress,
or when necessary in aid of its jurisdiction, or to protect or
effectuate its judgments." 28 U.S.C. § 2283; see generally,
Standard Microsystems Corp. v. Texas Instruments, Inc.,
916 F.2d 58, 60 (2d Cir. 1990).
Without deciding whether the court has the authority to issue
the requested relief, I am denying the Receiver's motion for an
injunction because I am not persuaded that it will result in
either a more equitable or a more efficient administration of
claims against Olympia than exists under the status quo.
The Receiver expresses concern that the value of the claims
against Olympia may exceed the value of Olympia's assets, and
that, as a result, the first claimant to obtain a judgment may
recover a disproportionate share. But a receivership is not a
substitute for bankruptcy proceedings. See Securities and
Exchange Commission v. American Board of Trade, Inc.,
830 F.2d 431, 436-38 (2d Cir. 1987) ("[T]he functions undertaken by the
district court in this case demonstrate the wisdom of not using a
receivership as a substitute for bankruptcy.").
The Receiver also argues that defending multiple lawsuits is a
drain on her time, as well as Olympia's financial resources. But
the proposed injunction would not preclude pending lawsuits from
going forward, nor future lawsuits from being filed; it would
only restrict the forum in which such lawsuits could proceed.
Thus, the Receiver would have to defend the same number of
lawsuits whether the injunction issues or not. Moreover, all of
the pending lawsuits were filed in courts in the New York City
metropolitan area. Given the local nature of Olympia's former
business dealings, there is no reason to suppose that future
lawsuits, if any, would be geographically dispersed.
The facts before the court provide no basis for me to conclude
that the other lawsuits pending against Olympia, or similar lawsuits that may be filed in the
future, are likely to threaten the administration of the
For the reasons set forth above, the Receiver's motion for an
injunction is denied.
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