Simmons v. Reich

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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DAVIE SIMMONS, et al.,

Plaintiffs,

MEMORANDUM AND ORDER

-against-

19-CV-3316(EK)(ST)

ALEXANDER REICH, et al.,

Defendants.

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The Plaintiffs in this case are a group of homeowners

who obtained what they allege were predatory mortgage loans from

the Defendants. The Plaintiffs contend that the Defendants

misled them into agreeing to unfair terms, charged usurious

interest rates, concealed the true amount of interest charged,

engaged in extortionate tactics to compel payment, and brought

wrongful foreclosure actions when Plaintiffs were unable to pay.

The Plaintiffs bring claims under the Racketeer Influenced and

Corrupt Organizations (RICO) Act and federal civil rights law,

as well as state-law claims for deceptive business practices,

misrepresentation, and fraud. The Defendants now move to

dismiss for failure to state a claim, including on statute-of-

limitations grounds. They also invoke several grounds on which

they argue the Court should abstain from hearing this case.

For the reasons set forth below, the motions to

dismissed are granted. Although I conclude that the abstention

doctrines do not apply, I dismiss the RICO and RICO conspiracy

claims because they are time-barred (as currently pled) under

the RICO statute. I also dismiss Plaintiffs’ federal civil

rights claims for failure to state a claim. Because I dismiss

all federal claims, I decline to exercise supplemental

jurisdiction over Plaintiff’s state-law claims of fraud,

misrepresentation, and deceptive business practices.

I. Background

The Plaintiffs in this action are Davie Simmons,

Dwight Redley, Derrick Amos, Latanya Pierce, 559 St. John’s Pl.

LLC (an entity owned by Pierce), and Karl Terry. See Second

Amended Complaint, ECF No. 55 (the “Complaint” or “Compl.”).1

Defendants are Alexander Reich, a mortgage lender; three

corporate lenders Reich owned or co-owned with other Defendants,

Nechadim Corp. (“Nechadim”), Yeladim LLC (“Yeladim”), and Teves

Realty (“Teves”); and several lawyers who participated in

Reich’s lending scheme (Harold Schwartz, Alan Wohlberg, Searle

1 Plaintiffs filed their first amended complaint on September 4, 2019,

ECF No. 22, and the parties submitted the fully briefed motion to dismiss on

February 28, 2020. During oral argument, the Court allowed Plaintiffs an

opportunity to file a proposed second amended complaint to address recent

developments that Plaintiffs alleged had caused additional “new and

independent injuries” within the four-year statute of limitations for RICO

claims. The Second Amended Complaint, which was filed with the Court’s leave

on September 10, 2020, includes three new paragraphs (¶¶ 27, 77 and 86) and

one amended paragraph (¶ 46). Defendants filed a supplemental memorandum of

law in further support of their motion to dismiss to contest the new and

amended allegations. See Defendants’ Joint Supplemental Memorandum in

Support of the Motion to Dismiss, ECF No. 56. Accordingly, the Court

hereinafter refers to the Second Amended Complaint as the operative

complaint.

Selmon, and Solomon Rosengarten). Id. They move to dismiss the

Complaint under Federal Rule 12(b)(6) for failure to state a

claim.

Defendants bring a series of motions to dismiss. In a

joint motion, Reich, Schwartz, Selmon, Nechadim, Teves, and

Yeladim contend that every count in the Complaint fails to state

a claim upon which relief can be granted, making dismissal

appropriate under Rule 12(b)(6). See Memorandum of Law in

Support of Defendants’ Motion to Dismiss, ECF No. 41

(“Defendants’ Memorandum”). Wohlberg filed a separate motion to

dismiss all claims against him pursuant to Rule 12(b)(6),

joining in his co-defendants’ motion and supplementing it with

arguments specific to his alleged involvement. See Memorandum

of Law in Support of Defendant Wohlberg’s Motion to Dismiss, ECF

No. 44 (“Wolhberg Memorandum”). Rosengarten, appearing pro se,

did not file a motion to dismiss, but joined in Defendants’

supplemental memorandum filed on September 16, 2020. See

Defendants’ Joint Supplemental Memorandum in Support of the

Motion to Dismiss, ECF No. 56 (“Supplemental Memorandum”).2

2 In addition to submitting the supplemental memorandum along with other

moving defendants, Rosengarten filed a request for a pre-motion conference

and appeared at a pre-motion conference held on October 11, 2019. See ECF

No. 18; Minute Entry dated 10/11/2019. I treat this as joining the motion to

dismiss. See, e.g., Blackwell v. Town of Greenburgh, 13-CV-269, 2017 WL

1157168, at *1 n.2 (S.D.N.Y. Mar. 27, 2017) (deeming party joint movant

because it filed a request for a pre-motion conference, appeared at the

conference, and submitted a brief alongside the other movants).

The following facts, set forth in the Complaint and

attached exhibits, are presumed to be true for purposes of

Defendants’ motions. Plaintiffs allege that Defendants

orchestrated a predatory lending scheme aimed at African

American borrowers. Each Plaintiff closed on one or more

mortgage loans with Defendants.3 Defendants charged a higher

interest rate on the loans than they led borrowers to believe,

concealing the effective rate of interest by charging hidden

fees that were often first disclosed only when Plaintiffs

arrived at the relevant closing. Compl. ¶¶ 13, 18, 30, 45.

With these hidden fees included in the interest calculation, the

loans carried an effective interest rate that far exceeded the

maximum permissible under New York State usury laws, despite the

loan documents still showing a compliant interest rate on their

face.

The hidden fees included a broker’s fee that

Plaintiffs were required to pay at closing to an entity called

Advent Funding, even though they had not interacted with a

broker — indeed, had never heard of Advent — before. Id. ¶ 18.4

3 Defendants Reich, Schwartz, Nechadim, and Yeladim are the subjects of

Plaintiffs’ substantive RICO claims under 18 U.S.C. § 1962(c) and the RICO

conspiracy claims under 18 U.S.C. § 1962(d). The other defendants — Selmon,

Rosengarten, Wohlberg, and Teves — are named in the RICO conspiracy claims

only.

4 Plaintiffs were required to certify that Advent Funding was their

broker, even though they did not receive any brokerage services. Defendants’

They were additionally required to pay an “under-the-table cash

incentive” to Defendants, usually amounting to 10% of the loan

principal. See id. at ¶ 13 (Simmons); id. ¶ 18 (Redley); id.

¶¶ 29-30 (Pierce); id. ¶ 37 (Terry); id. ¶ 45 (Amos).

Defendants sometimes would not accept the cash payment in bulk

and required borrowers to pay in installments. See id. ¶ 29

(Pierce made several trips to the bank to withdraw cash and

dropped it off at Schwartz’s office prior to closing on a loan

in 2008). In the event a borrower was unable to make a 10%

payment “up front,” Defendants would “deduct 10% from the loan

proceeds.” Id.  ¶ 71. Some borrowers also paid additional

attorney’s fees and recording costs at closing. Id.

¶ 18 (Redley was required to pay attorney fees, recording

charges and closing costs, even though he met with Defendants

for a mortgage assignment and not a formal closing); id. ¶ 74

(Pierce paid $4,500 in attorney’s fees at one closing).

Many of the loans were for a term of only six months

to one year. Id. ¶ 13 (Simmons received a six-month loan); id.

¶ 30 (Pierce received a six-month loan); id. ¶ 17 (Redley’s loan

was unilaterally reduced from a term of twenty years to one year

upon the mortgage assignment to Reich). Plaintiffs refer to

these short-term loans as “balloon” loans, designed to make it

loan agreements all included the same mortgage rider: “The borrowers are

paying their mortgage broker (ADVENT FUNDING) various fees and points

origination fees for arranging this loan.” See id. ¶¶ 13, 13 n.3.

more difficult for borrowers to pay off principal and interest

before the loan term concluded. See id. ¶¶ 17, 19, 42, 78.

After the loan agreements were signed and fees paid,

Defendants failed to deliver the full amount of the loan

principal specified in the applicable agreement to some

borrowers. For example, the Complaint alleges that Pierce took

out a $450,000 loan but received only $374,000 from Defendants,

id. ¶ 30; and that Terry took out a loan of $100,000, but only

received $50,000, id. ¶ 37; see also id. ¶ 78 (“Typically,

mortgagors who seek loans from the defendants leave the closing

table with 60-65% of the loan amount on paper.”). Plaintiffs

nonetheless paid fees and interest based on the principal amount

listed in the applicable agreement, rather than the lower amount

received.

Defendants often required Plaintiffs to form, and co-

sign their mortgage with, a corporation to take out the

residential loans in question. The alleged purpose of this

requirement was to increase the maximum allowable interest rate

from the individual rate (16%) to the higher corporate rate

(24%) under New York’s usury law, and thus to limit the

Plaintiffs’ ability to assert a usury defense. See id. ¶ 35;5

5 See also N.Y. General Obligations Law §§ 5–501(2), 5-521(1)

(corporations can be charged a higher interest rate than individuals and are

prohibited from interposing defense of usury).

id. ¶ 29 (Pierce was “forced to form a corporation to receive

[a] home loan,” which led to the formation of 559 St. John’s Pl

LLC);6 id. ¶ 74 (Pierce was later required to use two corporate

entities to obtain a second loan); id. ¶ 13 (Simmons was

required to add a corporate entity as a co-mortgagor to his home

loan); id. ¶¶ 54, 82 (identifying other borrowers that were

asked to form a corporation before signing a residential

mortgage agreement).

As a result of these fees and tactics, Plaintiffs

allege, they paid interest rates significantly higher than the

agreed-upon rate and far in excess of the maximum rate permitted

under New York’s usury law. Id. ¶ 79. By way of example,

Plaintiffs describe a loan that Pierce took out in August 2008

for $290,000, for which she paid additional fees, including the

broker’s fee and 10% cash payment. Id. ¶ 74. Although the

interest rate in the loan agreement was 16%, Plaintiffs allege

that the “actual” interest rate on this loan was 54.6%, when

accounting for all fees she paid and the reduced principal

advanced to her at closing. Id. ¶¶ 79-80.

6 It bears noting that Pierce, a plaintiff in this action, was a

defendant — and recently convicted — in a criminal case alleging bank fraud

in the Southern District of New York. See United States of America v.

Latanya Pierce, No. 12-CR-0340. Her loan from Reich appears to be mentioned

in the indictment in that case. See Superseding Indictment at ¶ 9(b)(v),

ECF No. 74. It does not appear, however, that Reich was an alleged victim of

the scheme charged there. In any event, it is of course theoretically

possible that the same individual can defraud one lender and be defrauded by

another.

After closing, Defendants did not provide Plaintiffs

with mortgage statements or statements of account balance. Id.

¶¶ 59, 95. Without mortgage statements, Plaintiffs had

difficulty ascertaining the remaining balance on their loans, or

knowing when a default occurred. Still, the loan balance became

due immediately at the end of the loan term, and if Plaintiffs

were unable to pay the balance, a “default” interest rate of 24%

took effect. Id. ¶¶ 22, 30, 32, 47, 54, 56, 78.

Defendants waited for Plaintiffs’ debts to rise

significantly, even post-default, before taking aggressive

action to foreclose; they did this to “maximize [the]

foreclosure judgment amount.” Id. ¶ 22. In initiating

foreclosure actions, Defendants allegedly violated New York’s

foreclosure laws, which require, among other things, that a

lender provide the borrower with ninety days’ notice prior to

commencing a foreclosure action. Id. ¶ 34 (citing violations of

the New York State Real Property Actions and Proceedings Law

§§ 1303, 1304 and 1306). Borrowers often received no notice

before foreclosure actions were commenced, id. ¶¶ 31, 37, 55,

83; and, in some cases, learned of a foreclosure action only

after judgment had already been entered, id. ¶¶ 23, 46.

Additionally, because they withheld material

information like mortgage statements, Defendants could claim

that Plaintiffs owed more than they really did. Id. ¶ 84. For

example, as to Simmons, Defendants allegedly made such claims in

November 2015 when they “took title to his property; recorded

[an] escrow deed without his consent, and stated same was in

exchange for ‘a continuing lien on six mortgages totaling

$2,300,000’, which he did not owe them.” Id. ¶ 86. And upon

filing a foreclosure action against Simmons the same month,

Defendants falsely claimed that he owed a principal balance of

$1 million, even though Simmons had already “offset all or most

of this mortgage loan” by “handing over” another property to

Defendants, which they sold for $2,000,000 before initiating the

foreclosure action. Id. ¶ 86. Similarly, Defendants litigated

over debts owed by Pierce and Amos, even though, Plaintiffs

allege, they had not defaulted on the loans giving rise to the

claimed debts. Id. ¶ 46 (alleging that Amos “was making his

regular payments” when Defendants foreclosed on his property

without notice); id. ¶ 77 (alleging that Defendants continue to

litigate over a debt owed by Pierce “notwithstanding paying of

the mortgage loan that gave rise to the alleged debt”).

To procure foreclosure judgments against Plaintiffs,

the attorney defendants allegedly falsified documents and filed

fraudulent documents in court. Id. ¶ 65. For example, Wohlberg

is alleged to have filed a fraudulent mortgage assignment in the

foreclosure proceeding against Pierce on the property at 559 St.

John’s Place. Id. ¶ 68. Wohlberg is said to have filed a

document dated December 12, 2014, showing the assignment of

Pierce’s mortgage from Reich to an entity called Lenox Pacific

LLC (another entity Reich owned). Id. ¶¶ 66; 92 n.11. The

court dismissed the foreclosure action, finding that Reich was

not the holder or assignee at the time he commenced the action —

instead, as evidenced by the assignment that Wohlberg filed, the

entity with standing to bring the foreclosure action was Lenox

Pacific. See Defendants’ Memorandum, Ex. F. So, in 2019, Reich

commenced a second foreclosure action relating to the same

property, but in front of a different judge. There, Wohlberg is

alleged to have produced another assignment of the same

mortgage, dated the same date, but purporting to show that the

mortgage had been assigned to a different party than Lenox

Pacific. Id. ¶¶ 67-68. This assignment was executed by

Schwartz, id. ¶ 68, and the action remains pending in state

court, id. ¶ 32.

During the pendency of the foreclosure actions and

other proceedings, defendant Reich communicated with Simmons by

phone and email, attempting to coerce him into signing over a

property deed and making threats about personal and financial

consequences if he did not comply. Id. ¶ 96. Plaintiffs refer

to several emails sent from Reich to Simmons, which include: an

email dated May 29, 2016, in which Reich threatened to report

Simmons to “Child Support” and the Internal Revenue Service if

he did not agree to sell his house to Reich, id.; and an email

dated July 23, 2017 in which Reich threatened Simmons with

consequences including an IRS action and the “wrath” of Simmons’

parishioners if he did not cooperate, calling these consequences

the “tip of the iceberg.” Id.

Defendants also used the “threat” of foreclosure sale

to procure payments after obtaining a judgment of foreclosure

against a borrower. Id. ¶ 26. For example, Defendants, through

their attorneys Wohlberg and Rosengarten, scheduled and canceled

foreclosure auctions on Redley’s property eight separate times

after foreclosure judgment was entered in 2011. Id. This

allegedly enabled Defendants to make payment arrangements with

Redley that were “not recorded . . . to avoid detection.” Id.

Plaintiffs do not specify whether or how these arrangements

required payments that went beyond the terms of the original

loan agreements.

Most recently, the Complaint alleges, Redley was “re-

injured” when he was served with a “10-day Termination Notice”

dated January 7, 2020, intended to evict him from his property.

Id. ¶ 27. This notice followed the foreclosure sale of his

property, based on the 2011 judgment of foreclosure. Attached

to the notice was “a forged Referee’s deed granting [Defendants]

title to Redley’s property, which deed bore a forged Notary

stamp.” Id. ¶ 27. Plaintiffs allege the deed was “forged”

based on inconsistencies they claim to have identified with

respect to the notary stamp and signature.7

Defendants are alleged to have intentionally sought

out and targeted African Americans for discriminatory and

disparate treatment. Id. ¶ 58. They allege that the Defendants

charged them nominal interest rates of 14 to 24% annually (and

effective rates that were much higher, in some cases), while

charging similarly situated individuals of other races annual

interest rates of 10-12%. Id. They further contend that

Defendants subjected Plaintiffs to “more stringent” mortgage

loan conditions based on their race. Id.

In addition to their federal claims under RICO and

civil rights law, Plaintiffs bring state-law claims of fraud,

misrepresentation, and deceptive business practices based on the

same conduct.

7 With respect to the notary stamp, Plaintiffs allege that a review of

the New York State notary licensing system shows that the notary

identification number on the deed belongs to a different individual than the

notary whose name appears on the stamp, and that this individual is licensed

in a different county than the one listed on the deed. Id. ¶ 27. With

respect to the signature, Plaintiffs allege that, even though Reich’s name is

signed on the deed, he did not personally sign it based on a comparison of

the deed against a court-ordered signature sample he previously

provided. Id. Defendants respond that the Termination Notice and Referee

deed are the result of an auction sale, which was authorized by state court.

See Supplemental Memorandum at 2.

II. Legal Standards

In reviewing a Rule 12(b)(6) motion, the Court must

accept all factual allegations in the complaint as true and draw

all reasonable inferences in the plaintiff’s favor. See Lundy

v. Catholic Health Sys. of Long Island Inc., 711 F.3d 106, 113

(2d Cir. 2013). However, only “a plausible claim for relief

survives a motion to dismiss.” LaFaro v. N.Y. Cardiothoracic

Grp., PLLC, 570 F.3d 471, 476 (2d Cir. 2009). A claim is

plausible “when the plaintiff pleads factual content that allows

the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Matson v. Bd. of Educ., 631

F.3d 57, 63 (2d Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009)). Courts “are not bound to accept as true a

legal conclusion couched as a factual allegation.” Iqbal, 556

U.S. at 678.

Allegations of a scheme to defraud under RICO are

subject to the heightened pleading standard of Rule 9(b). First

Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159, 178

(2d Cir.2004). Under Rule 9(b), “[i]n alleging fraud or

mistake, a party must state with particularity the circumstances

constituting fraud or mistake.” Fed. R. Civ. P. 9(b). To state

a RICO claim, Rule 9(b) “requires the plaintiff to delineate,

with adequate particularity, the specific circumstances

constituting the overall fraudulent scheme.” Calabrese v. CSC

Holdings, Inc., 283 F. Supp. 2d 797, 808 (E.D.N.Y. 2003).

III. Discussion

The Court first addresses the preliminary issue of

abstention. As set forth below, the Court concludes that none

of the abstention doctrines raised prevent these claims from

going forward here. The Court then addresses the substantive

RICO, civil rights, and state-law claims, including the

applicable statutes of limitations, which (as discussed below)

require dismissal of Plaintiffs’ claims.

A. Abstention Doctrines

Defendants argue that this case should be dismissed,

or at least stayed, pursuant to the prior pending action

doctrine, Colorado River abstention doctrine, and the Rooker-

Feldman doctrine. The Court concludes that none of these

doctrines is applicable.

First, Defendants argue that this case should be

dismissed because it is duplicative of the pending foreclosure

actions filed in other courts.8 With respect to prior pending

8 Defendants refer to the “prior pending action doctrine” as applying to

all of the pending foreclosure actions involving the parties in this case, in

both state and federal court. See Defendants Memorandum at 24-26. The

applicable analysis for the cases pending in state court is the Colorado

River abstention doctrine. As for cases pending in federal court, a district

court ”may stay or dismiss a suit that is duplicative of another federal

court suit,” as “part of its general power to administer its docket.” Curtis

v. Citibank, N.A., 226 F.3d 133, 138 (2d Cir. 2000).

actions in federal court, under the Second Circuit’s “first

filed” rule, “a court has the power to dismiss a second

duplicative suit in favor of a prior pending action absent a

showing of balance of convenience or special circumstances

giving priority to the second suit.” Howard v. Klynveld Peat

Marwick Goerdeler, 977 F. Supp. 654, 664 (S.D.N.Y. 1997)

(dismissing a second duplicative suit in favor of a prior

pending action where plaintiffs’ claims in the two actions were

“virtually identical” and arose out of the same employment

relationship) (citing First City Nat. Bank & Tr. Co. v. Simmons,

878 F.2d 76, 79-80 (2d Cir. 1989)). One of the Plaintiff’s

foreclosure actions is pending before another judge in this

district and was filed prior to this action. See Teves Realty,

Inc. v. Karl Terry, No. 14-CV-3226. But this case is not a

foreclosure action; it is a RICO action by borrowers alleging

that they were injured by a predatory lending enterprise. The

prior pending action doctrine is inapplicable because, in

general, it applies only if “the claims, parties and available

relief do not significantly differ between the two actions.”

Curtis v. DiMaio, 46 F. Supp. 2d 206, 215 (E.D.N.Y. 1999).

Similarly, Defendants argue that this Court should

abstain pursuant to Colorado River because “parallel” state-

court proceedings are ongoing. But the Colorado River doctrine

applies only in “extremely limited circumstances.” Eagle One

Roofing Contractors, Inc. v. Acquafredda, No. 16-CV-3537, 2018

WL 1701939, at *4 (E.D.N.Y. Mar. 31, 2018) (quoting Jamaica

Hosp. Med. Ctr. v. United Health Grp., Inc., 584 F. Supp. 2d

489, 493 (E.D.N.Y. 2008)). First, the state and federal

proceedings must be “parallel,” which means that “substantially

the same parties are contemporaneously litigating substantially

the same issue in another forum.” Niagara Mohawk Power Corp. v.

Hudson River-Black River Regulating Dist., 673 F.3d 84, 100 (2d

Cir. 2012). And second, it must be the case that the parallel

state-court litigation could result in a “comprehensive

disposition of litigation.” Id.

Here, while the conduct challenged in this case might

provide the borrowers with a defense to foreclosure in the

pending actions, “the question of whether a RICO violation was

committed is not before the state court” and, even if the state

court found in plaintiffs’ favor, “there [would] be no liability

for RICO damages.” Eagle One, 2018 WL 1701939, at *5 (quoting

DDR Constr. Servs., Inc. v. Siemens Indus., Inc., 770 F. Supp.

2d 627, 643 (S.D.N.Y. 2011)). Because Plaintiffs’ RICO claims

are not before any state court, the pending foreclosure actions

will not, and cannot, “dispose of all claims presented in the

federal case.” Id.

Defendants identify other lending cases in which

district courts abstained pursuant to Colorado River

notwithstanding the fact that the plaintiffs attempted to bring

RICO claims. For example, in Roy v. Bank of New York Mellon,

the plaintiffs challenged a foreclosure action that was pending

in state court, alleging that the defendants engaged in “illegal

tactics . . . for the purpose of achieving one specific goal —

to foreclose on homeowners who defaulted on their loans.” No.

17-CV-6729, 2018 WL 3912281, at *2 (E.D.N.Y. Aug. 14, 2018),

report and recommendation adopted, No. 17-CV-6729, 2018 WL

4771898 (E.D.N.Y. Sept. 30, 2018). Similarly, in Krondes v.

Nationstar Mortg., LLC, plaintiffs challenged a foreclosure

action in state court by alleging that the mortgage and

subsequent assignment were invalid. No. 17-CV-4974, 2018 WL

2943774, at *4 (S.D.N.Y. June 12, 2018), aff’d, 789 F. App’x 913

(2d Cir. 2020). Unlike these cases, Plaintiffs here do not

merely challenge individual foreclosure actions in their own

right; they allege numerous RICO injuries arising out of an

ongoing course of unlawful conduct by Defendants that extends

well beyond the acts of foreclosure alone.

Finally, Defendants seek to dismiss the claims of

Plaintiffs Simmons and Redley under the Rooker-Feldman doctrine

because there were already judgments entered against them in the

state-court foreclosure proceedings. Under the Rooker–Feldman

doctrine, “federal district courts lack jurisdiction over cases

that essentially amount to appeals of state court judgments.”

See Vossbrinck v. Accredited Home Lenders, Inc., 773 F.3d 423,

426 (2d Cir. 2014) (citing Exxon Mobil Corp. v. Saudi Basic

Indus. Corp., 544 U.S. 280, 283–84 (2005)). Courts consider

four factors in determining whether a plaintiff is essentially

seeking appellate review of a state-court judgment: “(1) the

federal-court plaintiff must have lost in state court; (2) the

plaintiff must complain of injuries caused by a state-court

judgment; (3) the plaintiff must invite district court review

and rejection of that judgment; and (4) the state court judgment

must have been rendered before the district court proceedings

commenced.” Sung Cho v. City of New York, 910 F.3d 639, 645 (2d

Cir. 2018). Defendants’ argument fails at step three. Rooker-

Feldman does not apply because Plaintiffs’ RICO claims “speak

not to the propriety of the state court judgments, but to the

fraudulent course of conduct that defendants pursued in

obtaining such judgments.” Sykes v. Mel S. Harris & Assocs.

LLC, 780 F.3d 70, 94-95 (2d Cir. 2015).

B. RICO Allegations

To plead a viable RICO claim, a complaint must allege

“(1) a violation of the RICO statute, 18 U.S.C. § 1962; (2) an

injury to business or property; and (3) that the injury was

caused by the violation of Section 1962.” DeFalco v. Bernas,

244 F.3d 286, 305 (2d Cir. 2001) (quoting Pinnacle Consultants,

Ltd. v. Leucedia Nat’l Corp., 101 F.3d 900, 904 (2d Cir. 1996)).

Here, Plaintiffs bring two causes of action under 18 U.S.C.

§ 1962(c) against Defendants Reich, Nechadim, Yeladim, and

Schwartz: one for participating in an enterprise engaged in a

pattern of racketeering activity through fraudulent lending

practices, and one for participating in the conduct of an

enterprise engaged in the collection of unlawful debt.

Plaintiffs also bring two causes of action for RICO conspiracy

under 18 U.S.C. § 1962(d) against all Defendants.

A “pattern of racketeering activity” under Section

1962(c), requires “at least two acts of racketeering activity”

committed within a ten-year period. 18 U.S.C. § 1961(5). This

statutory requirement of two “predicate” acts “does not so much

define a pattern of racketeering activity as state a minimum

necessary condition for the existence of such pattern.” H.J.

Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 237 (1989). Here, the

Complaint specifies three types of predicate acts committed by

Defendants in furtherance of the alleged scheme to defraud

borrowers, beginning when the loan agreements were signed: mail

fraud in violation of 18 U.S.C. § 1341, wire fraud in violation

of 18 U.S.C. § 1343, and extortion in violation of 18 U.S.C.

§ 1951.

To establish a RICO violation based on collection of

unlawful debt, a plaintiff must show that (1) the debt was

unenforceable under state or federal usury laws; (2) the debt

carried at least twice the enforceable interest rate; and

(3) the debt was incurred in connection with defendants’

business of lending money at a usurious rate. 18 U.S.C.

§ 1961(6) (defining “unlawful debt”); see also Weisel v.

Pischel, 197 F.R.D. 231, 241 (E.D.N.Y. 2000). Under New York

law, a loan to an individual with an interest rate higher than

16% per annum is unenforceable. See N.Y. General Obligations

Law § 5–501(2); N.Y. Banking Law § 14-a. Here, Plaintiffs

allege that all the loans at issue were usurious, and that

Defendants took various steps to conceal the actual interest

rates charged.

Defendants contend that these RICO claims are all

barred by the applicable statute of limitations because they

arise out of loan agreements that were made between 2003 and

2010.9 Civil RICO claims are subject to a four-year statute of

limitations, which begins to run at the time that a plaintiff

discovered, or should have discovered, the RICO injury. See

Koch v. Christie’s Int’l PLC, 699 F.3d 141, 148 (2d Cir. 2012)

(citing Rotella v. Wood, 528 U.S. 549, 552 (2000)); see also

Tech. Opportunity Grp., Ltd. v BCN Telecom, Inc., 16-CV-9576,

9 “A motion to dismiss is often not the appropriate stage to raise

affirmative defenses like the statute of limitations,” but it may be raised

“as long as the affirmative defense is based on the facts alleged in the

complaint.” Ortiz v. City of New York, 755 F. Supp. 2d 399, 401 (E.D.N.Y.

2010). Accordingly, dismissal for untimeliness pursuant to Rule 12(b)(6) is

warranted where the “complaint shows clearly that a claim is not timely.”

Id.

2019 WL 4688628, at *6 (S.D.N.Y. Sept. 25, 2019) (“It is the

RICO injury that triggers the accrual, not the RICO violation.”)

(quoting Angermeir v. Cohen, 14 F. Supp. 3d 134, 158 (S.D.N.Y.

2014)). “An injury is ‘discoverable’ when a plaintiff has

constructive notice of facts sufficient to create a duty to

investigate further into the matter.” World Wrestling Entm’t,

Inc. v. Jakks Pac., Inc., 530 F. Supp. 2d 486, 525 (S.D.N.Y.

2007), aff’d, 328 F. App’x 695 (2d Cir. 2009) (quoting

Congregacion de La Mision Provincia de Venezuela v. Curi, 978 F.

Supp. 435, 444 (E.D.N.Y. 1997)). In other words, the statute of

limitations begins to run when a plaintiff has actual or inquiry

notice of the alleged injury. Koch, 699 F.3d at 150-51.

The question of inquiry notice “is an objective one,”

and “dismissal is appropriate when the facts from which

knowledge may be imputed are clear from the pleadings.” Jakks,

530 F. Supp. 2d at 525 (quoting Salinger v. Projectavision,

Inc., 934 F. Supp. 1402, 1408 (S.D.N.Y. 1996)). “[K]nowledge of

the fraud will be imputed to a plaintiff if there are

circumstances sufficient to alert a reasonable person to the

probability that he or she has been defrauded.” Id. (citing

Curi, 978 F. Supp. at 444).

Here, Plaintiffs allege that Defendants made

fraudulent misrepresentations in connection with their loan

agreements, causing them to take out loans with illegally high

interest rates. Assuming their allegations are true, Plaintiffs

sustained an injury when they assumed these loan obligations.

See Chainani v. Dime Sav. Bank FSB, No. 94-CV-7549, 1996 WL

622031, at *4 (S.D.N.Y. Oct. 28, 1996) (plaintiff that was

fraudulently induced into signing a loan agreement suffered RICO

injury at the time she assumed the loan obligation). Plaintiffs

are presumed to have been aware of the terms of their loan

agreements — all executed outside the RICO statute of

limitations — at the time of closing, even if they did not

appreciate their illegality at that time. See Done v. Option

One Mortg., No. 09-CV-4770, 2011 WL 1260820, at *8 n.5 (E.D.N.Y.

Mar. 30, 2011) (where the RICO injury asserted by plaintiff

related to the terms of a loan document, the plaintiff was

“clearly aware” of the terms at the time he signed it); see also

Med. Herald Publ’g Co. v. J.P. Morgan Chase Bank, N.A., No. 13-

CV-6979, 2014 WL 6769755, at *3 (S.D.N.Y. Nov. 25, 2014) (“That

Plaintiff signed these [loan] documents indicates that it read

and agreed to their terms.”). Plaintiffs were also aware, of

course, of the additional fees they were required to pay at

closing. Accordingly, any “injuries” that flowed from the loan

documents or the additional fees at closing are time-barred.

See Done, 2011 WL 1260820, at *8 n.5 (concluding that the RICO

limitations period began at the time plaintiff signed the

relevant loan document).

Plaintiffs argue, however, that they incurred certain

“new and independent” injuries within the statute of limitations

period, Plaintiffs’ Opposition at 12, and that, in any event,

the “fraudulent concealment doctrine” applies because Defendants

took steps to obscure the ways in which the loans violated state

usury laws — the critical component of Plaintiffs’ alleged

injury. Id. at 13. The Court addresses these arguments in

turn.

i. New and Independent RICO Injuries

With respect to Plaintiffs’ first argument, the Second

Circuit has adopted a “separate accrual rule,” under which a

“new claim accrues and the four-year limitation period begins

anew each time a plaintiff discovers or should have discovered a

new and independent injury.” In re Merrill Lynch Ltd. P’ships

Litig., 154 F.3d 56, 59 (2d Cir. 1998) (citing Bankers Tr. Co.

v. Rhoades, 859 F.2d 1096, 1103 (2d Cir. 1988)). Where

subsequent injuries “derive from” an earlier event, they cannot

be said to be “new and independent” of the core injury. See

Long Island Lighting Co. v. Imo Indus., Inc., 6 F.3d 876 (2d

Cir. 1993) (finding that RICO injury had occurred at the time

plaintiffs knew or should have known of a design defect in the

generators they had purchased, and that the later failure of the

generators and consequent financial losses did not give rise to

a new and independent RICO claim). On the other hand, where

subsequent injuries derive from separate unlawful acts, such as

multiple misappropriations of funds, they give rise to new and

independent injuries and begin a new four-year limitations

period. See Bingham v. Zolt, 66 F.3d 553 (2d Cir. 1995)

(finding new and independent injuries in subsequent diversions

of money from estate, even though the original fraudulent

transfer of assets and contract rights that enabled those

diversions occurred outside the statute of limitations).

As alleged, Defendants’ scheme was about making and

enforcing mortgage loan agreements that were unlawful by their

terms, with the ultimate objective of obtaining outsized

interest payments and, when a borrower defaulted, an interest in

their property. In furtherance of the scheme, Defendants

brought foreclosure and eviction proceedings against Plaintiffs

who were ostensibly in default. Plaintiffs contend that

proceedings initiated within the four-year limitations period

gave rise to new injuries, citing a foreclosure action against

Simmons filed in November 2015, Compl. ¶¶ 14, 86; an eviction

proceeding against Simmons filed in December 2015, id. ¶ 14; a

foreclosure action against Pierce filed in March 2019, id. ¶ 31;

and a termination notice served on Redley in January 2020,

following the foreclosure sale of his property, id. ¶ 27.

However, a foreclosure or eviction proceeding based on a

defaulted mortgage, without more, derives from the underlying

loan agreement, and cannot be the basis for a new and

independent injury. See, e.g., Rosenshein v. Meshel, 688 F.

App’x 60, 63 (2d Cir. 2017) (foreclosures on collateral

underlying plaintiff’s investment were “merely symptoms” of

underlying RICO injury, which occurred at the time that

plaintiff made allegedly fraudulent investment); Madison 92nd

St. Assocs., LLC v. Courtyard Mgmt. Corp., 624 F. App’x 23, 27

(2d Cir. 2015) (foreclosure of hotel and its subsequent sale at

auction were “direct consequences” of the original RICO injury,

which occurred when plaintiff started paying higher labor costs

to hotel workforce); Goel v. Am. Digital Univ., Inc., No. 14-CV-

1895, 2017 WL 1082458, at *10 n.13 (S.D.N.Y. Mar. 21, 2017)

(foreclosure was not a new and independent injury because

defendant “merely sought to enforce its security interest” in

the shares that were pledged to them earlier).

The Second Circuit addressed analogous factual

allegations in Merrill Lynch, 154 F.3d 56. In that case,

investors claimed that defendants made fraudulent

representations and omissions to induce them to invest in real

estate limited partnerships, even though defendants knew that

the investments could not produce the gains promised. Id. at

57, 59. The capital investments were made outside of RICO’s

statute of limitations, but the investors argued that they

suffered new and independent RICO injuries within the

limitations period when defendants disseminated performance

reports containing additional misrepresentations and collected

annual fees in furtherance of the scheme. The Second Circuit,

reviewing the statute-of-limitations issue de novo, disagreed,

concluding that the scheme was “fraudulent at the outset”; the

defendants’ later actions to conceal the fraud and collect more

money represented “continuing efforts” to carry out the scheme,

as opposed to “separate and distinct fraudulent acts resulting

in new and independent injuries.” Id. at 59-69. Similarly,

here, Defendants’ loan agreements were allegedly “fraudulent at

the outset,” and the actions Defendants later took to collect on

Plaintiffs’ defaulted loans were therefore “continuing efforts”

to carry out the underlying scheme.

The Complaint also alleges that Plaintiffs Redley and

Pierce were injured as a result of Defendants’ use of fraudulent

documents in court within the past four years, but it does not

plausibly allege that they sustained new and independent

injuries as a result of this conduct. First, the Complaint

alleges that Redley was “re-injured” when he was served with a

“10-day Termination Notice to Vacate Possession, dated January

7, 2020,” which attached “a forged Referee’s deed granting

[Defendants] title to Redley’s property, which deed bore a

forged Notary stamp.” Compl. ¶ 27. However, the Termination

Notice followed a foreclosure sale that was authorized by a

state-court judgment and therefore is derivative of the original

loan agreement underlying the foreclosure. The Complaint does

not plausibly allege how, specifically, the allegedly forged

deed caused an independent injury, or why the forgery would have

been necessary at all after the Defendants had successfully

obtained a foreclosure judgment from a court.

And the allegations concerning the fraudulent mortgage

assignment filed in the 2019 foreclosure action against Pierce

suffer from the same defects. The Complaint alleges that

Defendants “re-commenced” the foreclosure action against Pierce

in 2019, id. ¶ 31, using a different mortgage assignment than

was previously filed, id. ¶ 66.10 But the foreclosure action was

derivative of the underlying loan, regardless of which assignee

litigated the case, and, again, the Complaint does not plausibly

allege how the allegedly fraudulent mortgage assignment caused

an independent injury. Accordingly, under Merrill Lynch, these

alleged injuries are among the “continuing efforts” by

Defendants to recover on the debts incurred in connection with

the original loan agreements.

Plaintiffs identify other acts by Defendants that they

contend gave rise to new and independent injuries within the

10 Defendants allegedly produced two different mortgage assignments as

part of the first and second foreclosure actions against Pierce, both dated

December 12, 2014. Id. ¶ 66.

limitations period. The Complaint says that some Plaintiffs —

Simmons, Pierce, and Amos — sustained new and independent

injuries because the foreclosure actions against them were based

on new and false claims that they owed more than they really

did. See Compl. 46 ¶ (Amos); ¶ 77 (Pierce); ¶ 86 (Simmons). If

these Plaintiffs plausibly alleged that Defendants took

unilateral action, shrouded in secrecy, to increase their

outstanding loan obligations, that conduct might give rise to

new and independent injuries. Cf. Cent. Cadillac, Inc. v. Bank

Leumi Tr. Co. of N.Y., 808 F. Supp. 213, 225 (S.D.N.Y. 1992),

aff’d, 99 F.3d 401 (2d Cir. 1995) (finding plaintiffs plausibly

alleged that defendants “violated RICO by repeatedly and

arbitrarily altering the terms of payment and the amount owed,”

resulting in separate injuries).

But Plaintiffs make these allegations only in

conclusory fashion. Pierce allegedly incurred a new and

independent injury in September 2019 when Defendants sought to

recover an unpaid balance from her, despite her claim that she

had paid off the loan at issue. Id. ¶ 77. Amos alleges a new

and independent injury in early 2019, when he learned that

Defendants had obtained title to his property even though “he

was making his regular [mortgage] payments.” Id. ¶ 46. These

allegations offer no factual support for the contention that

Defendants unilaterally altered the outstanding balances. See

Iqbal, 556 U.S. at 678 (“A claim has facial plausibility when

the pleaded factual content allows the court to draw the

reasonable inference that the defendant is liable for the

misconduct alleged.”).

Simmons comes closer to plausibly alleging a new and

independent injury on this basis, but his allegations, too, fall

short. First, the Complaint alleges that Simmons “sign[ed] over

his deed” to Defendants in 2009, “to be held in escrow until the

mortgage [was] paid off.” Compl. ¶ 85. Defendants did not

record this deed until November 14, 2015. Id. In doing so,

Simmons claims that Defendants “took title to his property;

recorded [an] escrow deed without his consent, and stated same

was in exchange for ‘a continuing lien on six mortgages totaling

$2,300,000,’ which [Simmons] did not owe them.” Id. ¶ 86.

Although Simmons claims that he was “re-injured” by these

actions, his factual allegations are inadequate to establish a

new and independent injury. In particular, he does not explain

how he was newly injured when Defendants “recorded the escrow

deed” to his property in 2015, after he had already “signed

over” the deed to be held in escrow in 2009 (before the

limitations period). And, even though Simmons disputes that he

owed Defendants $2,300,000, he does not allege that Defendants

actually sought to recover this amount from him. (As described

below, he alleges that they sought to recover $1 million.)

Second, Simmons claims he was “further re-injured

when, in the same November of 2015, defendants filed a

foreclosure action against . . . the same property” and claimed

“that he owed the principal balance of $1,000,000.” Id. ¶ 86.

Simmons asserts that this claim was “clearly false” because he

“had offset all or most of this mortgage loan, in exchange for

his 5th Avenue house, located at 2001 5th Avenue, NY NY, which he

handed over to defendants, which property was later sold by

defendants for over $2,000,000, prior to the November 2015

foreclosure complaint.” Id. The statement that he “handed

over” property to offset “all or most” of his mortgage loan is

simply too nebulous to constitute a plausible allegation that

Simmons was in compliance with the written terms of his mortgage

when the Defendants declared him in default. If the property

transfer satisfied “most,” but not all, of his current

obligations, he would presumably remain in default. That he had

“offset” his mortgage balance does not sufficiently support an

inference that the Defendants brought a fraudulent foreclosure

action. Therefore, Simmons does not adequately allege a

“separate and distinct fraud.” Merrill Lynch, 154 F.3d at 60.

At most, as currently pleaded, he describes an ongoing dispute

over the unpaid balance on one or more mortgages. The Complaint

also does not identify what injuries to business or property, if

any, Simmons incurred as a result.

Finally, the Complaint also alleges that in 2016 and

2017, Defendants used threats to pressure Simmons into giving or

selling his property to Reich. Id. ¶ 96. Plaintiffs identify

emails from Reich to Simmons, during the pendency of a

foreclosure action, threatening Simmons with harmful personal or

financial consequences if he refused to cooperate (including

reporting him to “Child Support” or the IRS). Id. As alleged,

however, these threats relate back to the underlying loan

agreement and foreclosure action against Simmons; the separate

accrual rule does not apply where the complaint “alleges new

RICO violations that merely reinforce the same injury.” BCN

Telecom, Inc., 2019 WL 4688628, at *7-*8 (payments made in

response to extortionist threats within the RICO limitations

period did not represent new and independent injuries, where the

threats “reminded” plaintiff of the obligations imposed by the

underlying scheme). Moreover, the Complaint only alleges that

such threats were made; it is silent as to whether Simmons was

injured in his business or property as a result.11 Therefore,

there is no basis on which to conclude Simmons incurred new and

independent injuries as a result of this conduct.

11 For example, the Complaint does not allege that Simmons actually

transferred title to his property or made additional payments to Reich out of

fear that Reich would follow through on these threats.

Accordingly, the Complaint fails plausibly to allege

new and independent RICO injuries within the applicable statute

of limitations.

ii. Fraudulent Concealment Doctrine

Plaintiffs also argue that the statute of limitations

for their RICO claims should be deemed to have been tolled under

the fraudulent concealment doctrine because the Defendants

concealed the true interest rate and other key terms of the

loans, and because the Defendants failed to provide account

statements that might have assisted the Plaintiffs in

understanding the nature of the fraudulent conduct here.

Under federal common law, the statute of limitations

under RICO may be tolled due to the defendant’s fraudulent

concealment if the plaintiff establishes that (1) the defendant

wrongfully concealed material facts relating to defendant’s

wrongdoing, (2) the concealment prevented plaintiff’s discovery

of the nature of the claim within the limitations period, and

(3) the plaintiff exercised due diligence in pursuing the

discovery of the claim during the period plaintiff seeks to have

tolled. Tho Dinh Tran v. Alphonse Hotel Corp., 281 F.3d 23, 36-

37 (2d Cir. 2002), overruled on other grounds by Slayton v. Am.

Exp. Co., 460 F.3d 215 (2d Cir. 2006). Allegations of

fraudulent concealment, like other allegations of fraud, must be

pleaded with particularity in accordance with Rule 9(b). See

Aetna Cas. & Sur. Co. v. Aniero Concrete Co., Inc., 404 F.3d 566

(2d Cir. 2005) (per curiam).

With respect to the first element above — wrongful

concealment — a plaintiff must show either that the defendant

took “affirmative steps to prevent the discovery of the

plaintiff’s injury,” or that the nature of the wrong was “self-

concealing.” Butala v. Agashiwala, 916 F. Supp. 314, 319

(S.D.N.Y. 1996). The second and third elements are related;

recognizing that the plaintiff did not have complete information

as a result of the defendants’ wrongful concealment, the court

must determine “whether the information plaintiff did receive

sufficed to trigger a duty to inquire.” Lenz v. Associated Inns

& Restaurants Co. of Am., 833 F. Supp. 362, 373 (S.D.N.Y. 1993).

If there was a duty to inquire, plaintiffs “may not rely on

allegations of fraudulent concealment to avoid the limitations

bar unless they exercised due diligence in attempting to

ascertain the facts related to the alleged fraud, but were

nevertheless unable or prevented from discovering the nature of

their claim.” Butala, 916 F. Supp. at 320 (quoting Griffin v.

McNiff, 744 F. Supp. 1237, 1256 (S.D.N.Y. 1990), aff’d, 996 F.2d

303 (2d Cir. 1993)); see also Koch, 699 F.3d at 157 (“Reasonable

diligence is a prerequisite to the applicability of equitable

tolling.”) (citing Klehr v. A.O. Smith Corp., 521 U.S. 179, 194

(1997)).

In support of the doctrine’s application, Plaintiffs

allege that Defendants charged various fees at mortgage closings

to obscure the actual interest rates they charged, and that in

some instances, loan agreements omitted information about the

interest rate borrowers would be charged upon default.

Plaintiffs also allege that Defendants never provided Plaintiffs

with mortgage statements or statements of balance of account,

and that Defendants withheld this information so that Plaintiffs

never knew or could have known that the amount of the principal

owed was illegally increasing, that the interest rates charged

were usurious, or that other legal violations occurred during

the foreclosure process.

Although Plaintiffs allege that Defendants concealed

material information, they are nevertheless presumed to have

known the terms of the loans they signed. See Done, 2011 WL

1260820, at *8 n.5. And they knew the amount of the fees they

paid at the closings. Similarly, they knew the amounts of the

monthly payments they made. However, Plaintiffs make no

allegations with respect to their diligence in pursuing

additional information about the status of the loans in

question. No Plaintiff alleges that they requested mortgage

statements or balance information from Defendants, or took any

steps to investigate the interest rates they were being charged

or precise balances they owed. See Lenz, 833 F. Supp. at 373

(finding plaintiffs did not exercise diligence with respect to

the financial status of their investments, even where defendants

conceded that they failed to timely provide plaintiffs with

“significant documentation,” including annual financial

reports). To toll the statute of limitations, plaintiffs “must

demonstrate that the defendants prevented them from

investigating the fraud in spite of the plaintiffs’ exercise of

due diligence,” Butala, 916 F. Supp. at 320; the current

pleadings do not support such a finding.

C. Civil Rights Claims

Plaintiffs allege that the conduct described above

also gives rise to liability for civil rights violations

pursuant to 42 U.S.C. §§ 1981, 1983, and 1985, as well as the

United States Constitution, the New York State Constitution, and

the New York State Common Law. Compl. ¶ 128. Defendants argue

that Plaintiffs’ civil rights claims are time barred because the

statute of limitations for claims of race-based discrimination

run from the time the “plaintiff knows or has reason to know of

the injury giving rise to the harm.” Defendant’s Memorandum at

19 (quoting Milan v. Wertheimer, 808 F.3d 961, 963 (2d Cir.

2015)). They argue that the relevant statutes of limitations

for claims under 42 U.S.C. §§ 1981, 1983, and 1985 is three or

four years, which would run from the time the loan agreements

were made. Id. at 21. As set forth below, the Complaint does

not state a plausible claim for unlawful discrimination, and

therefore the Court need not reach the question of the statute

of limitations.

To state a claim under 42 U.S.C. § 1981, “a plaintiff

must allege facts in support of the following elements: (1) the

plaintiff is a member of a racial minority; (2) an intent to

discriminate on the basis of race by the defendant; and (3) the

discrimination concerned one or more of the activities

enumerated in the statute,” including the making and enforcement

of contracts. Fouche v. St. Charles Hosp., 64 F. Supp. 3d 452,

456 (E.D.N.Y. 2014). Essential to an action under § 1981 are

allegations that defendants’ acts were purposefully

discriminatory and racially motivated. Id. at 457. “Naked

assertions of race discrimination, without any supporting facts,

are insufficient to state a § 1981 claim.” Id.

The Complaint falls short of plausibly alleging that

Defendants’ acts were purposefully discriminatory and racially

motivated. Plaintiffs allege that Defendants intentionally

targeted African Americans for discriminatory and disparate

treatment based on their allegation that they, and additional

“unnamed victims,” are African American. Compl. ¶ 58.

Plaintiffs also allege in general terms that Defendants gave

them less favorable loan terms than individuals of other races,

but they do not offer factual allegations sufficient to support

an inference of discriminatory intent. See Jackson v. Wells

Fargo Home Mortg., 811 F. App’x 27, 29-30 (2d Cir. 2020)

(plaintiff made only “conclusory and speculative assertion that

she was targeted on the basis of her race,” where the sole

allegations of racial discrimination were “that plaintiff is

African American, she qualified for a mortgage refinancing, her

applications were denied, and all the decisionmakers at Wells

Fargo were white”); Rodriguez v. Bear Stearns Cos., Inc., No.

07-CV-1816, 2009 WL 995865, at *9 (D. Conn. Apr. 14, 2009)

(dismissing Section 1981 claim against mortgage servicers whose

predatory lending activities had a disparate impact on

minorities, because “differential treatment alone [was]

insufficient to show intentional racial discrimination”) (citing

James v. Valtierra, 402 U.S. 137 (1971)). As pleaded,

Plaintiffs’ allegations are too conclusory to state a claim for

relief. Cf. Barkley v. Olympia Mortg. Co., No. 04-CV-875, 2007

WL 2437810, at *11 (E.D.N.Y. Aug. 22, 2007) (finding plaintiffs

stated a Section 1981 claim where allegation of racially

discriminatory intent was supported by numerous, specific

factual allegations “describ[ing] how defendants conspired to

target minorities as well as how they executed the fraudulent

scheme”).

Plaintiffs’ conspiracy claim under 42 U.S.C. § 1985

fails for the same reason — namely, because Plaintiffs do not

provide any factual basis to support a finding that Defendants

entered into an agreement to discriminate based on race.

Finally, to establish a claim under 42 U.S.C. § 1983,

a plaintiff must show “the violation of a right secured by the

Constitution and laws of the United States,” and that “the

alleged deprivation was committed by a person acting under color

of state law.” Vega v. Hempstead Union Free Sch. Dist., 801

F.3d 72, 87–88 (2d Cir. 2015) (citations and internal quotation

marks omitted). Plaintiffs’ claim under Section 1983 fails

because none of the Defendants is alleged to have engaged in the

conduct at issue in the Complaint as a state official or

otherwise acting under color of state law.

D. State-Law Claims

Plaintiffs also bring state-law claims of common-law

fraud and misrepresentation, and deceptive business practices in

violation of New York General Business Law Section 349.

However, because the parties are not diverse (all are New York

residents, except Teves), jurisdiction in this case is based on

causes of action arising under federal law. Plaintiffs’ RICO

claims and civil rights claims are the only claims that arise

under federal law, and as set forth above, all such claims are

subject to dismissal.

A district court “may decline to exercise supplemental

jurisdiction over a claim” if “the district court has dismissed

all claims over which it has original jurisdiction.” 28 U.S.C.

§ 1367(c)(3); see also Carnegie-Mellon Univ. v. Cohill, 484 U.S.

343, 350 n.7 (1988) (“[I]n the usual case in which all federal-

law claims are eliminated before trial, the balance of factors

to be considered under the pendent jurisdiction doctrine . . .

will point toward declining to exercise jurisdiction over the

remaining state-law claims.”). Having dismissed all of

Plaintiffs’ federal claims, the Court declines to exercise

supplemental jurisdiction over the remaining state-law claims.

See Merrill Lynch, 154 F.3d at 61 (affirming district court’s

declination of supplemental jurisdiction where RICO claims were

dismissed as time-barred).

E. Defendants’ Request for Sanctions

Finally, Defendants argue that the Court should impose

sanctions pursuant to Fed. R. Civ. P. 11 on the ground that

Plaintiffs’ RICO claims are frivolous. Defendants’ Memorandum

at 49-50 (citing, inter alia, Dangerfield v. Merrill Lynch,

Pierce, Fenner & Smith, Inc., 02-CV-2561, 2003 WL 22227956

(S.D.N.Y. 2003)). Although the Court finds that Plaintiffs’

RICO claims are time barred as currently pled, the claims are

not frivolous. Accordingly, there is no basis to impose

sanctions.

IV. Conclusion

For the reasons set forth above, Defendants’ motions

to dismiss for failure to state a claim are granted as to all

causes of action in the Complaint, and Plaintiffs’ claims are

dismissed without prejudice.

SO ORDERED.

_/s/ Eric Komitee________________

ERIC KOMITEE

United States District Judge

Dated: November 30, 2020

Brooklyn, New York