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Federal National Mortgage Association v. Olympia Mortgage Corp.

October 22, 2007

FEDERAL NATIONAL MORTGAGE ASSOCIATION, PLAINTIFF,
v.
OLYMPIA MORTGAGE CORPORATION, ET AL., DEFENDANTS.
OLYMPIA MORTGAGE CORPORATION, PLAINTIFF,
v.
LEIB PINTER, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Gershon, United States District Judge

OPINION AND ORDER

Defendant Samuel Pinter, Chairman and Senior Vice President of defendant Olympia Mortgage Corporation ("Olympia"), brings derivative and individual counterclaims against plaintiff Federal National Mortgage Association ("Fannie Mae") for Fannie Mae's failure to detect fraud perpetrated by Olympia. Pinter asserts claims for breach of contract, breach of fiduciary duty, negligent misrepresentation, fraudulent concealment, unjust enrichment, and civil and criminal conspiracy. Pinter also asserts affirmative defenses against Fannie Mae. Fannie Mae now seeks dismissal of Pinter's counterclaims for lack of standing and failure to state a claim. Fannie Mae also seeks to strike two of the ten affirmative defenses. For the reasons set forth below, Fannie Mae's motion is granted.

FACTS

The counterclaims arise from a suit brought on November 16, 2004, by Fannie Mae against defendants Olympia and various individuals and entities with an interest in that company, claiming fraud and breach of contract. The allegations of the underlying action by Fannie Mae against Olympia have been set forth in detail in previous decisions. See Fed. Nat'l Mortg. Ass'n v. Olympia Mortg. Corp., No. 04-4971, 2005 WL 2205335 (E.D.N.Y. Sept. 9, 2005); Fed. Nat'l Mortg. Ass'n v. Olympia Mortg. Corp., No. 04-4971, 2006 WL 2802092 (E.D.N.Y. Sept. 28, 2006). Briefly, 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. Fannie Mae purchased thousands of mortgages originated by Olympia, retaining Olympia to service those mortgages. Fannie Mae 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, Olympia failed to notify Fannie Mae. Instead, Olympia's principals 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 August 17, 2007, the court entered a consent judgment against Olympia in the amount of $44,800,000.

The court appointed a Receiver for Olympia on November 23, 2004 and empowered her to take all necessary and appropriate steps to secure and protect Olympia's assets. On July 29, 2005, Fannie Mae filed an Amended Complaint, asserting claims of negligent misrepresentation, aiding and abetting fraud, fraud through conspiracy, unjust enrichment, breach of fiduciary duty, and fraudulent conveyance against, among others, Samuel Pinter, one of Olympia's principals and founders who served as Senior Vice President and Chairman of the Board. In a previous decision, this court dismissed the claims of unjust enrichment and fraudulent conveyance against Samuel Pinter, with the exception of a claim concerning an alleged $300,000 transfer in 2002. Fed. Nat'l Mortg. Ass'n, 2006 WL 2802092, at * 14.

On October 24, 2006, Pinter filed his "Answer, Affirmative Defenses, Counterclaims, Crossclaims" ("Counterclaim"). In his Counterclaim, Pinter seeks to sue Fannie Mae derivatively on behalf of Olympia. Pinter also asserts six individual claims against Fannie Mae: 1) breach of contract, 2) breach of fiduciary duty, 3) negligent misrepresentation, 4) fraudulent concealment, 5) unjust enrichment, and 6) criminal and civil conspiracy under the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq., and New York law. In addition, he asserts ten affirmative defenses. Counterclaim at 17-18. Pinter's counterclaims and affirmative defenses are based on two theories. First, Pinter generally alleges misconduct by Fannie Mae with respect to its own internal control and accounting procedures. Second, Pinter asserts that Fannie Mae had a duty to audit, discover, and disclose Olympia's fraud to him. Fannie Mae seeks dismissal of Pinter's counterclaims for lack of standing under Fed. R. Civ. P. 12(b)(1) and 12(b)(6) and failure to state a claim under Fed. R. Civ. P. 12(b)(6). Fannie Mae also moves to strike the second and fifth affirmative defenses pursuant to Fed. R. Civ. P. 12(f).

DISCUSSION

I. Standard of Review

On a motion to dismiss, the allegations in the complaint are accepted as true. See Grandon v. Merrill Lynch & Co., 147 F.3d 184, 188 (2d Cir. 1998). The court's function is "not to weigh the evidence that might be presented at trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, 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." Bell Atlantic Corp. v. Twombly, --- U.S. ----, 127 S.Ct. 1955, 1964 (2007) (internal quotation marks, citations, and alterations omitted). Indeed, a plaintiff must assert "enough facts to state a claim to relief that is plausible on its face." Id. at 1974. This "plausibility standard" is a flexible one, "oblig[ing] a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 158 (2d Cir. 2007). Although the plaintiff is pro se and therefore the court will read his pleadings liberally, he does not dispute that his pro se status arises from choice and not indigence.

II. Shareholder Derivative Claim

Fannie Mae contends that Pinter lacks standing to bring a derivative suit. Pinter asserts that he is a proper party since he is a stockholder of Olympia Mortgage. Pinter is incorrect for several reasons. First, a court-appointed Receiver has been vested with all rights and powers to pursue litigation on behalf of Olympia and its shareholders. Accordingly, Pinter has no right to pursue litigation on Olympia's behalf. Even if a Receiver had not been appointed, Pinter, as a pro se litigant, could not represent Olympia or its shareholders. See, e.g., Lattanzio v. COMTA, 481 F.3d 137, 139-140 (2d Cir. 2007); Phillips v. Toobin, 548 F.2d 408, 411 (2d Cir. 1976).

Finally, Pinter has a profound conflict of interest. Pinter is currently a defendant in the suit brought by Fannie Mae. His personal stake in the outcome of this litigation precludes him from acting as a representative of Olympia or of Olympia's shareholders.

III. Plaintiff's Six Individual Claims

Pinter asserts six claims against Fannie Mae: 1) breach of contract, 2) breach of fiduciary duty, 3) negligent misrepresentation, 4) fraudulent concealment, 5) unjust enrichment, and 6) criminal ...


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