# Simmons v. Reich

> District Court, E.D. New York · November 30, 2020

URL: https://www.frixlaw.com/law-library/cases/10305272

## Case

- **Court:** District Court, E.D. New York
- **Decided:** November 30, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10305272

## How later opinions describe it (automated extraction)

- 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

## Opinion text

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-------------------------------------------x

DAVIE SIMMONS, et al.,

Plaintiffs,

MEMORANDUM AND ORDER
-against-
19-CV-3316(EK)(ST)

ALEXANDER REICH, et al.,

Defendants.

-------------------------------------------x

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10305272. Public record. Not legal advice.