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Anctil v. Ally Fin., Inc.

United States District Court, S.D. New York

February 10, 2014

JOHN ANCTIL, LEE BABB, GISELE BARBOSA, CHRISTINE BERNAT, GEORGE BRANCH, GARY CROFOOT, PAUL DEMERS, CHARLES and CONSUELO FERRIS, JULIO GRILLO, MARTIN and JANICE HOGAN, MARY JONES, KARL and OKSANA JORGENSEN, DONALD KADLEC, SANDRA LAPIDEZ, JOHN LOPES, JAMES and PRISCILLA MCGOUGH, FRANCIS PARISEAU, MARK and LISA PERRY, REBECCA RALSTON, DOROTHY CARPENTER-REID, MICHAEL RYAN, BENITA and WILLIAM SCHRIEFER, MICHAEL SILVER, FLAVIO TERZIS, JONATHAN THURROTT, NANCY TROSKE, INGRID WEBER, KELLY WILLIAMS, and MATTHEW ZICARO, Plaintiffs,
v.
ALLY FINANCIAL, INC., AURORA LOAN SERVICES, LLC, BANK OF AMERICA, N.A., CHASE HOME FINANCE, LLC, CINCINNATI FEDERAL SAVINGS AND LOAN, CITIBANK, N.A., CITIGROUP, INC., CITIMORTGAGE, INC., COUNTRYWIDE HOME LOANS, INC., DEUTSCHE BANK, AG, DEUTSCHE BANK NATIONAL TRUST CO., DEUTSCHE BANK TRUST CO., FIRST FRANKLIN LOAN SERVICES, FLAGSTAR BANK, FSB, FREMONT INVESTMENT AND LOAN CORP., HOMEWARD RESIDENTIAL, JPMORGAN CHASE & CO., MONEY WAREHOUSE, MORTGAGEIT, INC., OCWEN FINANCIAL CORP., PHH MORTGAGE, THE PNC FINANCIAL SERVICES GROUP, INC., PROVIDENT FUNDING GROUP, INC., SIGNATURE GROUP HOLDINGS, INC., U.S. BANK, N.A., and WELLS FARGO, N.A., Defendants

Page 128

[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For Plaintiffs: Zoe J. Dolan, Law Offices of Zoe Dolan, New York, New York; Scott A. Kamber, KamberLaw, LLC, New York, New York.

For Bank of America, N.A., Countrywide Home Loans, Inc., and First Franklin Loan Services, Defendants: Jason O. Braiman, Goodwin Procter LLP, New York, New York.

For Homeward Residential, Defendant: Jonathan M. Robbin, Blank Rome, LLP, New York, New York.

For Ally Financial, Inc., Defendant: Richard G. Haddad, Otterbourg, Steindler, Houston & Rosen, PC, New York, New York.

For Ocwen Financial Corp., Defendant: Bruce Allensworth, Brian M. Forbes, Robert W. Sparkes, III, K& L Gates LLP, Boston, Massachusetts; David S. Versfelt, K& L Gates LLP, New York, New York.

For PNC Financial Services Group, Defendant: Julian W. Friedman, Stillman & Friedman, PC, New York, New York; David H. Pittinsky, Ballard Spahr LLP, Philadelphia, Pennsylvania.

For Aurora Loan Services, LLC, Defendant: Elliott C. Mogul, Arnold & Porter LLP, Washington, District of Columbia; Anthony D. Boccanfuso, Arnold & Porter LLP, New York, New York.

For Flagstar Bank, FSB, Provident Funding Group, Inc., U.S. Bank, N.A., and Wells Fargo, N.A., Defendants: Lisa J. Fried, Allison J. Schoenthal, Hogan Lovells U.S. LLP, New York, New York.

For Deutsche Bank National Trust Co., Defendant: Michael S. Kraut, Morgan, Lewis & Bockius LLP, New York, New York.

For MortgageIT, Inc. and Deutsche Bank A.G., Defendants: Joy Harmon Sperling, Michael A. Weiss, Day Pitney LLP, New York, New York.

For JPMorgan Chase & Co. and Chase Home Finance, LLC, Defendants: John M. Falzone, Parker Ibrahim & Berg LLC, New York, New York.

For PHH Mortgage, Defendant: Michael P. De Simone, Alston & Bird LLP, New York, New York.

For CitiMortgage, Inc., Citibank, N.A., and Citigroup, Inc., Defendants: Noah Weissman, Bryan Cave LLP, New York, New York.

For Cincinnati Federal Savings and Loan, Defendant: Harold F. Damm, Ciotti & Damm, LLP, Mineola, New York.

Page 131

OPINION AND ORDER

CATHY SEIBEL, U.S.D.J.

Before the Court are several Motions to Dismiss, including one Joint Motion filed by all Defendants and several additional Motions filed by individual Defendants. (Docs. 90, 93.)[1] For the reasons set forth below, the Joint Motion to Dismiss is GRANTED and the individual Motions are DENIED AS MOOT.

I. BACKGROUND

For purposes of the instant Motions to Dismiss, I accept as true the facts, but not the conclusions, as set forth in the Second Amended Complaint (" SAC" ). (Doc. 74.)[2]

Plaintiffs are former mortgagors of homes in New York, Massachusetts, and Maryland. (SAC ¶ ¶ 9-35.) Each Plaintiff's home was foreclosed upon between December 2006 and November 2010. ( Id. ¶ 138.) In essence, the SAC alleges that the entire mortgage industry is engaged in a massive racketeering scheme designed to mislead mortgagors, the public, and various government entities in order to illegally foreclose on homes. To support this conclusion, much of the SAC is devoted to recounting the history and development of the mortgage securitization industry, the creation of the Mortgage Electronic Registration System (" MERS" ), the role of the Mortgage Bankers Association (" MBA" ), and the development of certain accounting standards by the Financial Accounting Standards Board (" FASB" ).[3] ( See id .

Page 132

¶ ¶ 66-107.) This Opinion will recite only those facts that are necessary to understand my ruling.

MERS is a digital registration system designed to simplify the tracking of transfers in ownership of home mortgages and transfers in servicing rights to the associated loans. ( Id. ¶ ¶ 74, 77.) This system is administered by an entity composed of many players in the mortgage industry. ( Id. ¶ 75.) Prior to use of the MERS system, when a mortgage was issued, the lender would record its identity and interest in the local public land records for the mortgaged property, and if the mortgage was subsequently assigned to a different entity, the transfer (and the identity of the new holder) would also be recorded in the land records. ( Id. ¶ 78.) Lenders who participate in the MERS system, however, typically name MERS as the lender's nominee in the land records. ( Id. ¶ 79.) Assignments and transfers of the mortgage among MERS members are tracked in the MERS database, but those assignments are not recorded in the land records; MERS remains listed as the named nominee of the holder of the mortgage. ( Id.) Thus, " MERS acts as the designated common agent for the MERS member institutions in the land records, which means that MERS acts on its members' behalf as mortgagee." (Ds' Joint Mem. 7 (internal quotation marks and alterations omitted).)[4] The MERS system facilitates the securitization of mortgage loans. (SAC ¶ 103.)

The crux of Plaintiffs' allegations is that (1) Defendants used the MERS system to conceal transfers of Plaintiffs' mortgages among various companies, which transfers did not comply with state law; (2) as a result, the chains of title to the mortgages were broken; and (3) when Plaintiffs' homes were ultimately foreclosed upon, the entities that initiated those foreclosure proceedings (a) used false and misleading documents and affidavits to do so, and (b) did not hold valid title to the mortgages in question, thus rendering those foreclosures invalid. ( See id . ¶ ¶ 108-14.) Although the SAC contains a chart listing purported racketeering acts committed by each Defendant in connection with Plaintiffs' foreclosures, ( id. ¶ 162), detailed factual allegations are only included as to two of the individual Plaintiffs' mortgages by way of " example," ( id. ¶ ¶ 116-23 (regarding Plaintiff Troske and Defendant U.S. Bank); id. ¶ ¶ 124-37 (regarding Plaintiff Zicaro and Defendants Ocwen and Wells Fargo)).

Plaintiffs now assert several claims pursuant to the Racketeer Influenced and Corrupt Organizations Act (" RICO" ), 18 U.S.C. § 1961 et seq., as well as state law claims under New York, Massachusetts, and Maryland law for common law fraud and violations of those states' consumer protection statutes.

II. SUBJECT MATTER JURISDICTION


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