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Nichols v. Washington Mutual Bank

November 21, 2007


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



Plaintiff Jacqueline Nichols sues Washington Mutual Bank ("Washington Mutual"), National Foreclosure Relief, Inc. ("National Foreclosure Relief"), and Amit Louzon under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692p, and several New York laws. The claims arise out of the foreclosure sale of Nichols's co-op apartment. Nichols alleges that Washington Mutual improperly attempted to collect on its secured loan to her by referring her to National Foreclosure Relief, which represented that it would assist her in avoiding foreclosure of her apartment but failed to do so. She also claims that the foreclosure sale in which her co-op shares were sold to Louzon was not conducted in a commercially reasonable manner, in violation of Article 9 of New York's implementation of the Uniform Commercial Code, N.Y. U.C.C. §§ 9-613, 9-627. The defendants move to dismiss on various grounds. For the reasons stated below, Washington Mutual's motion to dismiss is granted, National Foreclosure Relief's motion to dismiss is denied, National Foreclosure Relief's motion to stay pending arbitration is granted, and Louzon's motion to dismiss is granted.


On February 21, 1986, Nichols took out a loan from Washington Mutual, secured by her shares in 345 Montgomery Owners Corp., an owner's cooperative. On or about June 6, 2006, Nichols sent Washington Mutual a payment on her loan, and the payment was rejected.*fn1

Compl. ¶ 9-10. That month, she called Washington Mutual, which informed her that her account had been transferred to a foreclosure department and that the bank could not help her reinstate her loan and avoid foreclosure. Id. ¶¶ 10-12. In July 2006, she called Washington Mutual again, which again told her that it could not help her reinstate her loan and avoid foreclosure. Id. ¶ 13. During this telephone call, however, Washington Mutual informed Nichols that National Foreclosure Relief was an affiliated company that could assist her in having her loan reinstated by Washington Mutual. Id. ¶ 14.

Nichols spoke to National Foreclosure Relief that month, and it indicated that it was affiliated with Washington Mutual and could prevent Washington Mutual from foreclosing on her apartment for a fee of $895. Id. ¶¶ 15-16. National Foreclosure Relief "sent deceptive notices" to Nichols. Id. ¶ 17. On November 8, 2006, Nichols received a fourteen-page fax from National Foreclosure Relief, the last three pages of which bore the Washington Mutual logo and contained sensitive account information regarding her Washington Mutual loan. Declaration of Jacqueline C. Nichols, Nov. 1, 2007, ¶¶ 6-10 & Ex. B. On November 10, 2006, Nichols paid National Foreclosure Relief an $895 fee. Compl. ¶ 19.

Nichols's contract with National Foreclosure Relief limits its liability to the total amount of fees paid, and provides that "[a]ny controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association or other arbitration resource if otherwise mutually agreed upon in accordance with the Commercial Arbitration Rules." Nichols Decl. Ex. B 8; accord Affidavit of David Ealy, Oct. 18, 2007, Ex. 1. Nichols, however, was unaware of these provisions when she entered into the agreement with Washington Mutual. Nichols Decl. ¶ 12.

On or about November 30, 2006, Nichols received a letter from Washington Mutual's counsel postponing the foreclosure sale of her apartment, originally scheduled for November 22, 2006, to December 7, 2006. Compl. ¶¶ 21, 70. On or about December 4, 2006, Washington Mutual's Loss Mitigation Department advised her that she was being considered for a loss mitigation assistance program as an alternative to foreclosure. Nichols Decl. Ex. C. This led Nichols to believe that Washington Mutual planned to reinstate her loan instead of foreclosing it. Compl. ¶ 22. She believed that the December 7, 2006 sale was cancelled as a result of National Foreclosure Relief's intervention. Id. ¶ 23.

Washington Mutual sold Nichols's apartment to Louzon at a foreclosure sale on April 19, 2007 without notifying Nichols. Compl. ¶¶ 25, 72; Nichols Decl. ¶ 14. Louzon purchased the apartment for $65,000, Plaintiff's Request for Injunction Staying State Housing Court Proceedings ¶ 30, and Nichols's loan balance was $13,688.66 on March 17, 2006, Compl. ¶ 28. On or about July 1, 2007, Nichols received a letter from Washington Mutual's counsel regarding the surplus proceeds of the sale, which she has yet to receive. Compl. ¶¶ 24, 26. In early August of 2007 Nichols had the apartment appraised at a value of $170,000. Pl.'s Req. Inj. ¶¶ 31-32 & Ex. H. Nichols believes that Louzon, who owns another apartment in the building, had inside information regarding the sale and purchased the apartment in bad faith. Compl. ¶¶ 74, 77-78; Pl.'s Req. Inj. ¶¶ 34-35.*fn2


A. Legal Standard for Motions to Dismiss

Motions to dismiss pursuant to Rule 12(b)(6) test the legal, not the factual, sufficiency of a complaint. See, e.g., Sims v. Artuz, 230 F.3d 14, 20 (2d Cir. 2000) ("At the Rule 12(b)(6) stage, '[t]he issue is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims.'" (quoting Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998))). The standards for reviewing a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) are the same. See Jaghory v. N.Y. State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997) (setting forth both standards).

Accordingly, I must accept the factual allegations in the complaint as true. Erickson v. Pardus, 127 S.Ct. 2197, 2200 (2007). However, I need not give effect to "legal conclusions couched as factual allegations." Port Dock & Stone Corp. v. Oldcastle Ne., Inc., ---F.3d ---, No. 06-4908-CV, 2007 WL 3071637, at *2 (2d Cir. Oct. 23, 2007) (citing Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007)). While generally "[s]pecific facts are not necessary" to state a claim so long as the statement gives the defendant "'fair notice of what the . . . claim is and the grounds on which it rests,'" Erickson, 127 S.Ct. at 2200 (quoting Twombly, 127 S.Ct. at 1959), in at least some circumstances a plaintiff must plead specific facts in order to survive a motion to dismiss. Twombly, 127 S.Ct. at 1964-65. The Second Circuit has interpreted this principle as a "flexible 'plausibility standard'" under which a plaintiff must "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, 157-58 (2d Cir. 2007) (italics omitted) (interpreting Twombly).

In deciding the defendants' motions, I may consider documents attached to the complaint as exhibits, or documents upon whose terms the complaint relies. Chambers v. Time ...

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