The opinion of the court was delivered by: Kiyo A. Matsumoto, United States Magistrate Judge
REPORT AND RECOMMENDATION
By order dated October 6, 2005, the Honorable Nina Gershon deferred a ruling on plaintiffs' motion for entry of default against certain defendants, including Fred D. Way, III, Esq. and referred the motion to the undersigned, pursuant to 28 U.S.C. § 636(b), for a report and recommendation to determine whether entries of default were proper and, if so, the scope of relief, including injunctive relief, damages, interest, costs, and attorney's fees, to be awarded to plaintiffs Gloria Johnson, Fred Johnson, and Bessie Chavous. On March 15, 2006, Judge Gershon amended the October 4, 2005 order to grant plaintiffs' motions for entry of default judgment against certain defendants, including Way.*fn1 Plaintiffs then filed a motion for default judgment against Way on May 1, 2006. (Docket no. 87.)
Plaintiffs commenced this action on December 15, 2004, serving Way with a summons and complaint on December 21, 2004, and a summons and amended complaint on July 1, 2005. (Docket nos. 16, 28.) The amended complaint alleges claims against Way based on the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601; the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601; New York General Business Law § 349 ("GBL § 349"); New York Executive Law § 135 ("N.Y. Exec. Law § 135"); and common law claims for fraud, civil conspiracy to commit fraud, and conversion. Way has failed to respond to either the original complaint or amended complaint, discovery requests, or to plaintiffs' motion for default judgment, and has failed to appear in this action in any manner despite numerous notices served upon him.
Having considered the submissions by plaintiffs, and for the reasons set forth below, the court respectfully recommends that a judgment be entered against Way in the sum of $10,720.75, inclusive of $2,500 in compensatory damages, $7,500 in punitive damages, and $720.75 in costs for service of a subpoena on Way.
Plaintiff homeowners Gloria Johnson, Fred Johnson and Bessie Chavous filed this action on December 15, 2004 alleging, upon information and belief, that they had fallen victim to a "foreclosure rescue scheme" orchestrated by the defendants. (See docket no. 25, Amended Complaint ("Am. Compl.") ¶¶ 1-2.) Gloria and Fred Johnson live at 246 Woodbine Street in Brooklyn, New York (the "subject property"). (Id. ¶ 10.) The Johnsons purchased the home in March 2001, along with help from Gloria Johnson's mother, Bessie Chavous, who is a co-owner of the property. (Id. ¶ 23.) The subject property was purchased with a $225,837 Fair Housing Act-insured mortgage, which was later assigned to Chase Manhattan Bank ("Chase"). (Id. ¶ 23.)
During the summer of 2004, faced with increasing financial burdens and the prospect of foreclosure on their home, plaintiffs began looking for a way to reduce their monthly mortgage payments. (Id. at ¶ 2.) In September 2004, they contacted defendant Home Savers Consulting Corporation ("Home Savers"), a company advertising its services as a foreclosure rescue specialist and mortgage broker, to inquire about refinancing their home. (Id.) Plaintiffs met with Phil Simon of Home Savers, who explained that Home Savers would submit applications for plaintiffs to obtain a new mortgage. (Id. ¶ 28.) On October 22, 2004, plaintiffs met again with Mr. Simon, who informed them that he had prepared an application for a $425,000 mortgage for plaintiffs. (Id. ¶ 30.) Although Ms. Johnson expressed numerous concerns regarding the documents, Mr. Simon told her not to worry about the considerable increase in debt over their existing mortgage; the fact that certain of the signing documents referred to plaintiffs as the "owner/seller" of the home; the fact that certain of the documents were back-dated to October 21, 2004; or the fact that a document titled "Checklist" set forth a number of charges associated with the $425,000 mortgage. (Id. ¶ 35.)
With regard to the Checklist, Mr. Simon stated that AGA Capital, which was designated on the checklist as receiving $13,750, was an insurance company; that a company named Core Abstract would receive $17,908.50 to pay off plaintiffs' outstanding debts; and that "all the money would go through Fred Way, an attorney for AGA Capital, and that he would make out the appropriate checks." (Id.) The Checklist contains an entry for a payment of $142,943.40 to "Fred Way, as Atty." (See docket no. 90, Supplemental Declaration of Jessica Attie ("Supp. Attie Decl."), Ex. B, Checklist.) Plaintiffs also later obtained and submitted with their default motion a copy of a check dated October 21, 2004 from the IOLA account of Ralph H. Pecorale, Esq. to "Fred Way, Esq. as Attorney" in the amount of $142,943.40. (Copy annexed as Ex. A to Supp. Attie Decl.)
Having never refinanced a mortgage, plaintiffs allege that they had no reason to doubt Mr. Simon's statements and signed the documents. (Am. Compl. ¶ 32.) In actuality, the documents they signed affected a transfer of ownership of their home to defendant Roger Rodriguez. The documents indicate that Rodriguez obtained a $425,000 mortgage from defendant Argent Mortgage Co. on October 21, 2004, the day before plaintiffs signed the documents transferring ownership of their home. (Id. ¶¶ 46, 47.) The October 21, 2004 closing for Mr. Rodriguez's mortgage was held at the office of Ralph Pecorale, Esq., an individual whom plaintiffs had never met. (Id.)
After learning that plaintiffs had actually sold their home rather than refinanced it, Ms. Johnson attempted to rescind the transaction and contacted Chase to request that Chase reject a payoff of the mortgage. (Id. ¶¶ 37-41.) Although Chase had already accepted the payment, an attorney for Chase investigated Ms. Johnson's request, and contacted Mr. Simon and Mr. Way. (Id. ¶¶ 43-44.) Mr. Simon told the Chase attorney that Fred Way had represented plaintiffs at the closing. (Id.) Fred Way also told the Chase attorney that he had represented plaintiffs during the sale and explained the sale and deed transfer documents to them, that they were not "illiterate," and that he could not understand why plaintiffs thought the sale was a refinancing. (Id.) Plaintiffs have asserted that Way signed and notarized numerous documents on their behalf and received a check for $142,943.40 from the proceeds of plaintiffs' mortgage, even though plaintiffs never met Mr. Way or retained him as their attorney. (Am. Compl. ¶ 15; Pltfs' Memo. of Law at 3%4.)
On February 7, 2005, nearly four months after the transactions involving plaintiffs' home and two months after the initial complaint was filed in this case, Way sent plaintiffs' counsel a letter enclosing a check payable from the IOLA account of Pecorale to plaintiffs in the amount of $140,443.40. (Am. Compl. ¶ 55; copy of letter and check annexed as Ex. A to docket no. 87, Attie Declaration ("Attie Decl.")). In his February 7, 2005 letter, Way stated that the check, which was ostensibly dated December 6, 2004, was sent to plaintiffs on December 14, 2004 but returned as undelivered. (Id.) He did not provide any supporting documentation for this assertion. (Id.) Way also stated: "I am seeking a resolution of this action as I was asked to attend the closing as a courtesy to another attorney. My attorney has been out of the country for some time and I respectfully request additional time within which to have an answer [sic] the complaint sent to your office." (Id.) Plaintiffs' counsel responded to Mr. Way's letter on March 2, 2005, informing him that he could have until April 1, 2005 to answer the complaint, that her office would hold the $140,443.40 check in escrow and that plaintiffs did not accept it as a waiver or settlement of their claims. (Attie Decl. ¶ 6 and Ex. B.)
On or about April 11, 2005, Way sent plaintiffs' counsel a second letter enclosing a set of unrecorded deed transfer documents purporting to return the subject property to plaintiffs. (Am. Compl. ¶ 57; Attie Decl. ¶ 7, Ex. C.) The deed transfer documents were signed on or about February 16, 2005 by Roger Rodriguez. (Am. Compl. ¶ 57.) On April 19, 2005, plaintiffs' counsel advised Mr. Way, in writing, that plaintiffs would not accept the unrecorded deed documents in lieu of an answer to the complaint or as a waiver or settlement of any of their claims against him. (Id. ¶ 58.) Plaintiffs' counsel also advised Mr. Way that if he did not respond to the complaint, they would move for a default judgment against him. (Id.)
In addition to service of the original and amended complaints on Way, plaintiffs have also served Way with notices of court conferences, a request to enter default, and a subpoena duces tecum directing Way to produce documents and appear for deposition. (Attie Decl. ¶¶ 12-18, 25-26.) The process server for the subpoena served Way at his office on November 14, 2005, after being forced to wait for forty minutes because of Way's refusal to accept service. (Id. ¶¶ 17-18; see also Ex. H, Affidavit of Service and Ex. I, Invoice.) Due to the evasion of service, the cost of service of the subpoena was $720.75. (Attie Decl. ¶¶ 17-18.) Way did not appear for the January 9, 2006 deposition noticed in the subpoena served upon him, nor did he produce any documents in response to the subpoena. (Id. ¶¶ 19, 21) Plaintiffs' counsel also spoke with an attorney named Domenik Napoletano on January 9 and 31, 2006, who inquired whether plaintiffs would consent to vacate the default against Way. (Id. ¶¶ 22-23.) Plaintiffs stated that they would not agree to vacate the default, and neither Napoletano nor Way moved to vacate the default, or made efforts to engage in settlement talks with plaintiffs or respond to the subpoena served upon Way. (Id.) Despite the numerous notices given to Way and his clear knowledge of the action against him, Way has still failed to appear in this action. Way also has a documented history of failing to appear in other litigation against him and defying court orders. (Attie Decl. ¶¶ 27%31; Ex. L, M.)
Although Way has returned the deed and some of the proceeds of the Argent mortgage to plaintiffs, he has retained $2,500 from the mortgage proceeds. (Pltfs' Memo. of Law at 7.) Plaintiffs have also incurred $720.75 in costs in serving Way with a subpoena. During the period of the pending litigation, as a result of the defendants' actions, plaintiffs feared eviction and were unable to rent out the apartment in their home because the property was no longer held in their name. (Am. Compl. ¶ 59.) In addition, even if plaintiffs had recorded the deed from Rodriguez and applied the ...