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Snyder v. U.S. Equities Corp.

United States District Court, Second Circuit

January 28, 2014



CHARLES J. SIRAGUSA, District Judge.


This is an action purporting to assert claims under the Fair Debt Collection Practices Act ("FDCPA"), the Racketeer Influenced and Corrupt Organizations Act ("RICO"), New York General Business Law § 349, and New York Judiciary Law § 487. The action also purports to assert a New York common-law claim for malicious prosecution. Now before the Court is Defendants' motion to dismiss. The application is granted.


Unless otherwise noted, the following facts are taken from the Complaint in this action and from documents in the underlying state-court litigation, [1] and are presumed to be true. The events leading up to this action began more than ten years ago. Generally, Plaintiff maintains that Defendants, based upon false affidavits, obtained a default judgment against her for a consumer debt that she did not owe. Plaintiff subsequently persuaded a New York state court to vacate the judgment. Plaintiff now seeks to maintain a class action against defendants on the grounds that they similarly obtained fraudulent default judgments against other persons.

More specifically, on or about September 4, 2003, Plaintiff received a dunning letter from defendant attorney Linda Strumpf, Esq. ("Strumpf"), sent on behalf of her client, defendant U.S. Equities Corp. ("U.S. Equities"), which is a debt collection agency. Plaintiff maintains that U.S. Equities is owned by Strumpf's husband, defendant Hal Siegal ("Siegal"), who uses the alias Ron West ("West"), and that defendant Wing Lam ("Lam") is the CEO of U.S. Equities. In connection with Strumpf's representation of U.S. Equities, she employed various process servers, including defendant Alex Shafran ("Shafran"). The dunning letter indicated that Strumpf and U.S. Equities were attempting to collect a debt that Plaintiff had incurred to Citifinancial. Plaintiff informed U.S. Equities that she did not owe such a debt.

Subsequently, unbeknownst to Plaintiff, Strumpf commenced a collection action on behalf of U.S. Equities against Plaintiff in New York State Supreme Court, Wayne County. In June 2004, Strumpf obtained a default judgment against Plaintiff, based in part on an affidavit from Shafran, in which he falsely swore that he had served Plaintiff with process. Strumpf also filed an affidavit from Lam, in which he falsely indicated that Plaintiff owed the aforementioned debt.

However, Shafran never actually served Plaintiff, and Plaintiff had no notice of the lawsuit or judgment until January 21, 2011, when she received an information subpoena in connection with Strumpf's and U.S. Equity's attempt to collect on the judgment. The information subpoena, dated January 11, 2011, bore the caption and index number of the state court action, and indicated, in pertinent part, that on June 22, 2004, a judgment had been entered against Plaintiff, in favor of U.S. Equities, in the amount of $13, 768.30. Scher Aff. [#11], Ex. 3. Upon receiving the information subpoena, Plaintiff telephoned Strumpf's office, spoke with Ron West, and "insisted that she did not owe the alleged debt." Complaint [#1] at ¶ 45. During the conversation, West admitted to Plaintiff that he did not have "any documentation" concerning the alleged debt. Id. Subsequently, Plaintiff retained an attorney, who made various inquiries concerning the alleged debt. As a result of his efforts, U.S. Equities agreed that the judgment should be vacated. On or about March 28, 2011, Strumpf applied to New York State Supreme Court, Wayne County, to vacate the judgment and discontinue the action against Plaintiff.

Around this same time, the New York State Attorney General and the New York State Unified Court System conducted an investigation into the fraudulent activities of a process-serving firm known as "Serves You Right" ("SYR") during the period January 1, 2007 to September 30, 2009. Strumpf had used SYR's services during that period, and on April 29, 2011, Strumpf entered into an "Assurance of Discontinuance" ("AOD") with the New York State Attorney General. See, Scher Affidavit [#11], Ex. 5. The AOD indicated that on a "persistent and repeated basis" during the relevant period, SYR had prepared false affidavits of service, and that Strumpf had used SYR's services on approximately 4, 020 occasions, and had obtained default judgments based on those false affidavits. The AOD did not indicate, however, that Strumpf was aware that SYR's affidavits were false. Nevertheless, in light of the fact that judgments had been obtained using false affidavits, Strumpf agreed to cooperate in identifying defendants in those cases, to give them an opportunity to have the judgments vacated.

As mentioned earlier, Strumpf had filed a motion to vacate the judgment against Plaintiff and dismiss the action. However, Plaintiff opposed Strumpf's attempt to merely discontinue the action, and instead sought to assert her own legal claims against Strumpf, U.S. Equities and Shafran. In that regard, on or about July 6, 2011, Plaintiff filed an application to set aside the judgment based on fraud, and for permission to file an answer and counterclaims seeking sanctions against Strumpf and U.S. Equities. Specifically, Plaintiff sought sanctions, including costs and attorney's fees, pursuant to 22 N.Y.C.R.R. § 130-1.1, as well as the opportunity "to assert counterclaims arising from the fraudulent commencement and prosecution of [the] action, and the unlawful enforcement of a void judgment." Scher Aff. [#11], Ex. 3, Hartett Aff. ¶ 38. In connection with her application, Plaintiff submitted evidence indicating both that Shafran's affidavit of service was fraudulent and that the alleged amount owed was false. Beyond that, Plaintiff alleged that Strumpf and Shafran regularly used fraudulent affidavits of service to obtain default judgments in other actions:

In cases filed in upstate counties by Ms. Strumpf on behalf of [U.S. Equities], it is commonplace that there is something not right.' There have been thousands of such cases.... I obtained copies of the Affidavits of Service from a random sample of the aforementioned cases from the Court Clerks. I found that in every case brought by [U.S. Equities], Ms. Strumpf was the attorney and [Shafran] was almost always the process server. In nearly every such case, [Shafran] performed nail and mail' substitute service.... Virtually all of those cases ended in default judgments for U.S. Equities.... [T]he conclusion is unavoidable that Mr. Shafran knowingly signed a false Affidavit of Service in this case, and Ms. Strumpf knowingly submitted false affidavit[s] to this Court.... [Snyder] respectfully submits that she should be allowed to appear and assert counterclaims arising from the fraudulent commencement and prosecution of this action, and the unlawful enforcement of a void judgment.... [D]ismissal or discontinuance... might prejudice [Snyder's] right to assert those claims[.]

Scher Affidavit [#11], Ex. 3, Hartnett Supporting Declaration. Plaintiff further maintained that Strumpf and Shafran should be required to show cause why the court should not impose monetary sanctions, "based on their fraud on the court, misrepresentation, and/or misconduct." Id.

In response to that application, Strumpf admitted that Shafran had not served Plaintiff, and that U.S. Equities had been mistaken about the amount of the debt owed, though she claimed that such error was due to a transcription error. However, Strumpf maintained that she had only recently become aware of those facts.

On January 3, 2012, New York State Supreme Court, Wayne County, denied Plaintiff's motion for leave to assert counterclaims against Strumpf, U.S. Equities and Shafran in that action, vacated the judgment against Plaintiff and dismissed the action. Additionally, Supreme Court directed U.S. Equities to pay attorney's fees and costs to Plaintiff.

On February 23, 2012, Snyder commenced this action. The Complaint purports to assert five causes of action: 1) a claim under the FDCPA, based Defendants' use of false and fraudulent means to collect debts; 2) a civil RICO claim, based on a conspiracy between the Defendants to obtain money through fraudulent means involving, inter alia, acts of mail and wire fraud; 3) a claim under New York General Business Law § 349, based on Defendants' use of deceptive acts against consumers; 4) a claim for malicious prosecution, based on Defendants' commencement of legal actions that had no probable chance of success; and 5) a claim for attorney misconduct against Strumpf pursuant to New York Judiciary Law § 487, based on Strumpf's alleged misconduct in obtaining fraudulent judgments. The unsworn Complaint, which purports to assert class-action claims, alleges that any applicable statute of limitations should be deemed to have been tolled by Defendants' concealment of the fraud being committed. See, Complaint [#1] at ¶ ¶ 165-170. In that regard, Snyder maintains that Defendants concealed the fact that Shafran was falsifying affidavits of service, until such fact was revealed by the Attorney General's investigation.

On May 2, 2012, Defendants filed the subject Motion to Dismiss (Docket No. [#10]). The motion makes the following assertions regarding Plaintiff's claims: 1) the FDCPA claims are time-barred under the relevant one-year statute of limitations; 2) the RICO claims must be dismissed due to Plaintiff's failure to file a RICO statement, and because they fail to state an actionable claim; 3) the claims are barred by the Rooker-Feldman doctrine; 4) the claims are barred by collateral estoppel; and 5) assuming that the federal claims are dismissed, the Court should decline to exercise supplemental jurisdiction over the state-law claims.

Defendants' motion is unopposed, due to a procedural default by Plaintiff.[2] However, Plaintiff's default is of little importance, since a court cannot grant a motion to dismiss merely because it is unopposed. See, McCall v. Pataki, 232 F.3d 321, 322-323 (2d Cir. 2000) ("We have held with respect to a motion pursuant to Fed.R.Civ.P. 12(c) to dismiss an action on the basis of the pleadings, that "[w]here... the pleadings are themselves sufficient to withstand dismissal, a failure to respond to a 12(c) motion cannot constitute default' justifying dismissal of the complaint." Maggette v. Dalsheim, 709 F.2d 800, 802 (2d Cir.1983). The same principle is applicable to a motion pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss an action on the basis of the complaint alone. Such motions assume the truth of a pleading's factual allegations and test only its legal sufficiency. See, e.g., De Jesus v. Sears, Roebuck & Co., Inc., 87 F.3d 65, 69 (2d Cir.1996). Thus, although a party is of course to be given a reasonable opportunity to respond to an opponent's motion, the sufficiency of a complaint is a matter of ...

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