Barker v. Rokosz

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

----------------------------------X

CARLA BARKER,

Plaintiff,

MEMORANDUM & ORDER

-against-

19-CV-00514(KAM)

IZIA ROKOSZ, JANELLE DEFREITAS,

STEVEN G. LEGUM, FRANK RICHARD

HURLEY, GREGG TELSEY, ROBERT

FISHBEIN, BETTY J. HINGLE, ROYCE

LLC, JACKIE MARKETING LLC, LOCKDECO

A/K/A LODECO, “JOHN DOE #1” though

“JOHN DOE #100,” said names being

fictitious and unknown, the parties

intended being persons or

corporations, if any, having

participated in the enterprise

described in the complaint,

Defendants.

----------------------------------X

MATSUMOTO, United States District Judge:

Plaintiff Carla Barker (“Plaintiff”) commenced this

action on January 25, 2019 alleging that defendants committed

violations of federal and New York state lending laws. (ECF No.

1, Complaint.) By Order dated January 2, 2020, this court

granted defendants’ Federal Rule of Civil Procedure 12(b)(6)

(“Rule 12(b)(6)”) motions to dismiss plaintiff’s claims under

New York’s Deceptive Practices Act, N.Y. Gen. Bus. Law § 349

(“Section 349”) and the federal Racketeer Influenced and Corrupt

Organizations Act (“RICO”). (ECF No. 119, Order Granting

Motions to Dismiss.) On July 31, 2020, plaintiff filed a motion

to amend the complaint pursuant to Federal Rule of Civil

Procedure 15(a)(2) (“Rule 15(a)(2)”). (ECF No. 152, Motion to

Amend.) Plaintiff seeks to add facts obtained through limited

discovery to support her Section 349 and RICO claims against

defendants. (ECF No. 152-2, Plaintiff’s Memorandum in Support

of Motion at 1.) Plaintiff also seeks to add a malpractice

claim against Defendant Frank Richard Hurley, Esq., who

represented plaintiff at the closing of the Subject Loans.

(Id.) Separately, defendant, Steven G. Legum (“Legum”) filed a

cross-motion for sanctions pursuant to 28 U.S.C. § 1927

(“Section 1927”) requesting the court to award fees against the

attorneys for the plaintiff. (ECF No. 154, Legum Cross Motion

for Sanctions.)

Presently before this court with respect to

plaintiff’s motion to amend are plaintiff’s motion, defendant

Legum’s Memorandum in Opposition to plaintiff’s motion,

defendant Rokosz’s Memorandum in Opposition to plaintiff’s

motion, defendants Telsey and Royce LLC’s Memorandum in

Opposition to plaintiff’s motion, and plaintiff’s replies to

defendants’ memoranda in opposition.1 (See ECF No. 152, Motion

1 Defendant Rokosz also submits affidavits in opposition to plaintiff’s motion

along with accompanying exhibits. (ECF No. 158, Rokosz Affidavit in

Opposition; ECF No. 159, Doberman Affidavit in Opposition w/ Accompanying

Exhibits.) This court, which will apply a Rule 12(b)(6) standard to

determine if the proposed amended claims would be futile, will not consider

the affidavits and accompanying exhibits in this Memorandum and Order. See

Lucente v. Int’l Bus. Machs. Corp., 310 F. 3d 243, 258 (2d Cir. 2002) (“An

amendment to a pleading is futile if the proposed claim could not withstand a

motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6).”)); see also J.S. ex

rel. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (2d Cir. 2004) (In a motion

to Amend; ECF No. 153, Legum Memorandum in Opposition; ECF No.

157, Rokosz Memorandum in Opposition; ECF No. 160, Plaintiff’s

Reply; ECF No. 161, Plaintiff’s Reply RE Hurley; and ECF No.

162, Telsey and Royce LLC Memrandum in Opposition.) With

respect to Legum’s cross motion for sanctions, the court

considers Legum’s motion, plaintiff’s Memorandum in Opposition,

and Legum’s reply. (See ECF No. 154, Legum Cross Motion for

Sanctions; ECF No. 156, Memorandum in Opposition; ECF No. 155,

Legum Reply.) This Memorandum and Order will address both

plaintiff’s motion to amend her complaint and defendant Legum’s

motion for sanctions. For the reasons set forth below,

plaintiff’s motion is granted in part and Legum’s motion is

denied.

BACKGROUND2

Plaintiff’s proposed amended complaint re-alleges her

Section 349 and RICO claims. The Court’s January 2, 2020 order

dismissed plaintiff’s Section 349 claim against all defendants

because plaintiff did not plead sufficient facts alleging that

defendants’ conduct was consumer-oriented. (ECF No. 119, Order

to dismiss, “we may not rely on conclusory or hearsay statements contained in

the affidavits”); see also Zappia Middle E. Const. Co. Ltd. v. Emirate of Abu

Dhabi, 215 F.3d 247, 253 (2d Cir.2000); Kamen v. Am. Tel. & Tel. Co., 791

F.2d 1006, 1011 (2d Cir.1986).

2 This Memorandum and Order draws on facts from Plaintiff’s original complaint

and incorporates by reference this court’s description of said facts found in

its January 2, 2020 Order. (ECF No. 1, Complaint; ECF No. 119, Order

Granting Motion to Dismiss.) This court will distinguish between the facts

presented in the original complaint and those added to plaintiff’s proposed

amended complaint.

Granting Motion to Dismiss at 23-29.) Plaintiff’s RICO claim

was dismissed because plaintiff did not plead sufficient facts

alleging the existence of an association-in-fact enterprise.

(Id. at 32-36.) “As when considering a motion to dismiss under

Rule 12(b)(6), [a] court” considering a motion for leave to

amend “must accept as true all well-pleaded facts” in a

plaintiff's proposed amended complaint “and draw all reasonable

inferences in the [plaintiff's] favor.” Artists Rights Enf't

Corp. v. Estate of King, No. 16 Civ. 1121 (JPO), 2017 WL

2062988, at *3 (S.D.N.Y. May 15, 2017) (quoting Agerbrink v.

Model Serv. LLC, 155 F. Supp. 3d 448, 456 (S.D.N.Y. 2016)); see

also Zappia Middle E. Const. Co. Ltd. v. Emirate of Abu Dhabi,

215 F.3d 247, 253 (2d Cir.2000) (“we may not rely on conclusory

or hearsay statements contained in the affidavits.”)

I. Proposed Amended Complaint

In her amended complaint, Plaintiff alleges additional

facts in support of her Section 349 and RICO claims.

Supplementing the facts pled in her original complaint,

plaintiff adds a lengthy new section in her proposed amended

complaint titled “Defendants’ Related Practices Involving Other

Borrowers.” (ECF No. 152-3, Proposed Amended Complaint (“PAC”)

at ¶¶ 154-178.) This section details that since 2011, defendant

Rokosz “issued at least 26 other mortgage loans with similar

terms” to that of plaintiff’s loan, for which Legum acted as

Rokosz’s attorney in 22 of the mortgage loans, including

plaintiff’s two mortgage loan transactions totaling $450,000.

(PAC, ¶¶ 155, 157-158.) Legum was Rokosz’s attorney for 22 of

the 26 described mortgage loan transactions, (Id. ¶ 157.), and

between November 2013 and October 2016, Telsey helped arrange at

least 13 of these transactions, in which Legum served as the

attorney, and Telsey and Royce LLC received proceeds. (Id. ¶

158.) Around 2014, Fishbein assisted Telsey in arranging nine

of the described mortgage loans originated by Rokosz. (Id. ¶

159.) Defendants, Rokosz, Legum, Telsey, Royce LLC, and

Fishbein, received proceeds from at least 10 of 14 the mortgage

transactions between November 2013 and February 2017, (Id. ¶

160.), and all fourteen of these loans “involved loan terms of

between 356 days and two years, nominal interest rates of 12 or

13 percent per annum, and a balloon payment of the entire

principal sum due on the date of maturity.” (Id. ¶ 161.) In at

least 10 of these transactions, loan proceeds were held in

“escrow,” and these funds were not returned to the borrower.

(Id. ¶¶ 163-164.) The proposed amended complaint further

details the events that occurred in ten of these mortgage loan

transactions. (Id. ¶¶ 179-264.)

As in her first complaint, Plaintiff similarly alleges

that defendants Rokosz, Legum, Telsey, and Royce LLC violated

Section 349. (Id. ¶¶ 347-368.) However, plaintiff now adds

that she was misled that the funds held in escrow would be

utilized in the event of “default on taxes, insurance, or

interest payments,” when in reality, the escrow funds were not

used for this purpose when she so requested, and instead were

used to hide the true interest rate of her loan, which rendered

the loan usurious. (Id. ¶ 366.)

With respect to her RICO claim, plaintiff’s proposed

amended complaint adds that plaintiff’s loan constituted

“unlawful debt” under RICO § 1961(6) because, inter alia, “the

usurious rate of the Subject Loan, of a least 37.87 percent, was

at least twice the enforceable rate of 16 percent.” (Id. ¶

398.) Plaintiff also alleges that as of February 2017, the

defendants were “engaged in the business of lending money at a

usurious rate,” and that at least the ten other loans detailed

by the plaintiff, involved Defendant Rokosz and the other RICO

Defendants. (Id. ¶ 399.) The proposed amended complaint

details the manner in which defendants participated in the

operation or management of the alleged enterprise in the

collection of unlawful debt. (Id. ¶¶ 400-403.)

Plaintiff’s proposed amended complaint also removes

defendant Hurley from the RICO and Section 349 violations.

Instead, plaintiff alleges in the proposed amended complaint

that Hurley committed legal malpractice, (id. ¶¶ 408-419,)

because, inter alia, he “fail[ed] to exercise the care, skill,

and diligence commonly possessed and exercised by a member of

the legal profession” by not informing plaintiff of the risks

associated with the mortgage loan and not recognizing that the

loan was suspect and “potentially dangerous to Ms. Barker.”

(Id. ¶ 413.) Plaintiff alleges that “defendant Hurley’s

negligence was a proximate cause of the damages sustained by Ms.

Barker.” (Id. ¶ 416.)

II. Defendant Legum’s Cross Motion for Sanctions

Defendant Legum submitted an affidavit in support of

his motion for sanctions pursuant to 28 U.S.C. § 1927. (ECF No.

154-1, Legum Affidavit.) Legum states that with respect to

plaintiff’s motion to amend her complaint “there is not only no

good faith for the motion, there is no basis for it at all.”

(Id. ¶ 3.) Legum also contends that the proceedings post this

Court’s January 2, 2020 order were “unreasonable and vexatious,”

and as such, “defendant [Legum] is entitled to be reimbursed for

the fair value of time he expended in opposition thereto.” (Id.

¶ 6.) Specifically, Legum requests that this court award costs

in the sum of $54,144.00. (Id. at 5-7.)

III. Procedural History

The January 2, 2020 Memorandum and Order sets forth

this case’s procedural history in detail up to the date of the

decision, which is incorporated by reference herein. (ECF No.

119, Order Granting Motion to Dismiss.) As such, this court

will review in this section the procedural history post the

January 2, 2020 Memorandum and Order.

Shortly after this court’s order, plaintiff filed a

motion to amend her complaint on March 13, 2020. (ECF No. 129,

Motion to Amend.) On March 20, 2020, Defendant Legum filed a

cross motion for sanctions. (ECF No. 130, Cross Motion for

Sanctions.) In response to several motions being filed in

violation of the court’s motion practices, on July 17, 2020,

this court issued an order denying without prejudice both

plaintiff’s motion to amend and Legum’s cross motion for

sanctions as they were improperly filed. (Dkt. Order

7/17/2020.) On July 31, 2020, plaintiff and defendant Legum re-

filed their fully briefed motions as per this court’s July 17,

2020 order. (See ECF No. 152, Motion to Amend; see also ECF No.

154, Cross Motion for Sanctions.)

On August 5, 2020, after improperly filing a motion to

dismiss, defendant Janelle Defreitas, was ordered to file a pre-

motion letter before filing her dispositive motion. (Dkt. Order

8/5/2020.) On August 11, 2020, Defreitas filed a letter motion

for a pre-motion conference. (ECF No. 165, Letter Motion.)

Plaintiff responded in opposition to Defreitas’ letter on August

14, 2020. (ECF No. 166, Reply in Opposition.) On August 19,

2020, this court held a pre-motion conference and set a briefing

schedule for Ms. Defreitas to serve her motion to dismiss by

September 9, 2020. (Minute Entry and Order, 8/19/2020.) On

September 3, 2020, Defreitas filed a motion for a second pre-

motion conference. (ECF No. 170, Motion for Second Pre-Motion

Conference.) On October 5, 2020, this court denied Defreitas’

motion for a second pre-motion conference, and ordered that

because Defreitas did not comply with the scheduling of her

motion to dismiss by the September 9, 2020 deadline, she was

foreclosed from moving to dismiss the complaint.3

LEGAL STANDARD

I. Rule 15(a)(2)

The court finds that plaintiff’s motion to amend the

complaint is properly brought pursuant to Federal Rule of Civil

Procedure 15(a)(2) (“Rule 15(a)(2)”). Both this court and

Magistrate Judge Gold specifically granted plaintiff leave to

amend. The leave to do so was granted pursuant to Federal Rule

of Civil Procedure 15 and not a Rule 16 scheduling order. “Rule

15(a)(2) allows a party to amend its pleading with the court’s

leave, which should be ‘freely give[n] ... when justice so

requires.’” Capital v. Pappas, 856 F.3d 61, 88-89 (2d Cir. 2017)

3 This court subsequently reviewed Defreitas’ second motion for a pre-motion

conference regarding her proposed motion to dismiss pursuant to Federal Rule

of Civil Procedure 12(b)(6). (See ECF No. 170, Motion for Pre-Motion

Conference.) Defreitas’ motion concerns factual disputes that are not

appropriate to consider in a motion to dismiss, and furthermore, Defreitas’

motion does not address plaintiff’s claims alleged in her proposed amended

complaint, and only addresses plaintiff’s claims alleged in her original

complaint. Defreitas’ motion is thus moot. Therefore, Ms. Defreitas is

foreclosed from moving to dismiss the amended complaint.

(quoting Fed. R. Civ. P. 15(a)(2)). The Rule embodies a “strong

preference for resolving disputes on the merits.” Loreley Fin.

(Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 190

(2d Cir. 2015)(internal quotation marks omitted) (quoting

Williams v. Citigroup Inc., 659 F.3d 208, 212-13 (2d Cir. 2011)

(per curiam)). Although Rule 15(a)(2) provides that a party

shall be given leave to amend “when justice so requires,” leave

to amend is not required where a proposed amendment would be

futile. Hill v. Curcione, 657 F.3d 116, 123–24 (2d Cir.2011);

see also Grullon v. City of New Haven, 720 F.3d 133, 140 (2d

Cir.2013).

Under Rule 15, leave to amend should be given “absent

evidence of undue delay, bad faith or dilatory motive on the

part of the movant, undue prejudice to the opposing party, or

futility....” Monahan v. N.Y.C. Dep't of Corrs., 214 F.3d 275,

283 (2d Cir. 2000) (citing Foman v. Davis, 371 U.S. 178, 182

(1962)). “Futility is a determination, as a matter of law, that

proposed amendments would fail to cure prior deficiencies or to

state a claim under Rule 12(b)(6) of the Federal Rules of Civil

Procedure.” Panther Partners Inc. v. Ikanos Communications,

Inc., 681 F.3d 114, 119 (2d Cir. 2012).

II. 28 U.S.C. § 1927

Pursuant to 28 U.S.C. Section 1927, courts have

authority to sanction attorneys for “unreasonabl[e] and

vexatious[]” conduct and to award the other party reasonable

costs and fees. 28 U.S.C. § 1927. The Section provides:

Any attorney or other person admitted to conduct

cases in any court of the United States or any

Territory thereof who so multiplies the proceedings

in any case unreasonably and vexatiously may be

required by the court to satisfy personally the

excess costs, expenses, and attorneys’ fees

reasonably incurred because of such conduct.

Id. The Second Circuit has repeatedly held that imposition of

sanctions under this section requires a showing of bad faith on

the part of the attorney. Schlaifer Nance & Co. v. Estate of

Warhol, 194 F.3d 323, 336 (2d Cir. 1999) (stating that the

imposition of sanctions under 28 U.S.C. § 1927 is only

authorized when “there is a clear showing of bad faith”)

(quoting Shafii v. British Airways, PLC, 83 F.3d 566, 571 (2d

Cir. 1996)(overruled on other grounds)); Oliveri v. Thompson,

803 F.2d 1265, 1273 (2d Cir. 1986) (“Imposition of a sanction

under § 1927 requires a clear showing of bad faith.”) (citation

and internal quotation omitted).

Thus, an award is “proper” under this Section only

“when the attorney's actions are so completely without merit as

to require the conclusion that they must have been undertaken

for some improper purpose such as delay.” Oliveri, 803 F.2d at

1273; Schlaifer, 194 F.3d at 336 (same); see also Int’l Techs.

Mktg., Inc. v. Verint Sys., Ltd., No. 19-1031-cv (2d Cir. Mar.

16, 2021) (noting under Rule 11 that a court’s inherent power

must be exercised with restraint and discretion; and should

sanction only “bad faith vexatious[], [or] wanton[]” acts

otherwise undertaken for “oppressive reasons.” (citations

omitted.))

DISCUSSION

I. Plaintiff’s Motion to Amend

Defendants Rokosz, Legum, Telsey, and Royce LLC object

to the proposed amended complaint, arguing that the amendment

would be futile because plaintiff has failed to cure the

deficiencies of the first complaint.4 (See ECF No. 153, Legum

Memorandum in Opposition; ECF No. 157, Rokosz Memorandum in

Opposition; and ECF No. 162, Telsey and Royce LLC Memorandum in

Opposition.) Separately, defendant Rokosz argues that plaintiff

should not be allowed to proceed with her amended complaint

because she failed to properly file a formal motion pursuant to

Local Civil Rule 7.1(d) and plaintiff’s usury-based claims are

pre-empted by the Depository Institutions Deregulation and

Monetary Control Act of 1980 (“DIDMCA”).

Plaintiff also now alleges that “in the course of

Defendant Hurley’s representation of Ms. Barker in the Subject

4 Defendant Rokoskz makes a brief mention to being “prejudiced” by plaintiff’s

“refusal to [file her amendment] timely.” (See ECF No. 157, Rokosz

Memorandum in Opposition at 15-16.) However, as detailed in this Memorandum

and Order’s Discussion Section I.A., this court finds that once plaintiff was

granted leave to file her motion, she properly and timely filed the motion to

amend her complaint.

Loan transaction, he committed legal malpractice.” Defendant

Hurley did not file a memorandum in opposition to this proposed

amendment.5

A. Plaintiff’s Adherence to Local Civil Rule 7.1(d)

Local Civil Rule 7.1(d) of the Local Rules of the

United States District Courts for the Southern and Eastern

Districts of New York provides that only “[a]pplications for

extensions or adjournments, applications for a pre-motion

conference, and similar non-dispositive matters as permitted by

the instructions regarding ECF published on the website of each

respective Court and any pertinent Individual Judge's Practices,

may be brought by letter-motion....” All other motions must be

brought upon a notice of motion or order to show cause and must

include a memorandum of law and supporting affidavits and

exhibits. Local Civil Rule 7.1(a).

Defendant Rokosz contends that plaintiff’s filing was

defective because plaintiff “filed a memorandum of law, without

a notice of motion, letter motion, or letter motion seeking

leave to file its motion informally as a letter motion.” (ECF

No. 157, Rokosz Memorandum in Opposition at 11-13.) At a

conference on February 14, 2020, Magistrate Judge Gold discussed

5 Plaintiff filed a reply to what this court can only assume is a response to

defendant Hurley’s affidavit in opposition to plaintiff’s originally filed

motion to amend. (See ECF No. 161, Plaintiff’s Reply RE Hurley; See also ECF

No. 135, Hurley’s Opposition to Plaintiff’s Motion.) This court will

consider plaintiff’s reply in its decision.

a procedure and schedule for circulating a proposed amended

complaint and a motion to amend if the defendants would not

consent to the amendment. (ECF No. 127, Minute Entry,

2/14/2020; ECF No. 136, Transcript for Proceedings held on

February 14, 2020.) Thus, defendants had notice of plaintiff’s

motion to amend, which was first filed on March 13, 2020, (ECF

No. 129, Motion to Amend the Complaint,) as scheduled by Judge

Gold. Thereafter, plaintiff advised Magistrate Judge Gold that

all parties did not consent to his adjudication of the

plaintiff’s motion to amend. (ECF No. 127, Minute Entry,

2/14/2020; ECF No. 128, Letter Regarding Consent to Adjudication

of Motion.) On July 17, 2020, this court terminated or denied

without prejudice several motions that were filed before they

were fully briefed, and set new dates for filing in logical

order, the fully briefed motion to amend and defendant Legum’s

motion for sanctions, as required by the court’s motion

practices. (Dkt. Order 7/17/2020.) The order stated that “a

revised memorandum of law conforming to this order shall be

filed with the fully briefed motion for leave to amend no later

than Friday, July 31, 2020.” (Id.) Thus, defendants had

received more than adequate notice of plaintiff’s motion to

amend. Plaintiff followed the court’s directive, and on July

31, 2020, filed her motion, the notice of motion, memorandum in

support, the proposed amended complaint, and the certificate of

service. (ECF No. 152, Motion to Amend.)

Although plaintiff originally failed to comply with

the District’s local rules regarding a notice of motion during

her initial filing of the motion to amend, this Court granted

leave for plaintiff to re-file her motion on July 17, 2020 and

she properly did so. (ECF No. 152, Motion to Amend.) Rokosz

was given notice and an opportunity to oppose the motion and has

done so. Under such circumstances, the Court will treat

plaintiff’s motion as a timely and properly filed motion seeking

leave to amend and will address the motion on the merits. Based

on the record, the court respectfully denies the defendants’

contention that they were not properly notified of the motion to

amend.

B. Whether Plaintiff’s Proposed Amendments are Futile

Defendants’ opposition focuses on the futility of the

proposed amended claims. An amendment is futile when the

proposed new claim would not withstand a motion to dismiss under

Federal Rule of Civil Procedure 12(b)(6). Milanese v. Rust-

oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001); see Whimsicality,

Inc. v. Battat, 27 F. Supp. 2d 456, 465 (S.D.N.Y. 1998). “As

when considering a motion to dismiss under Rule 12(b)(6), [a]

court” considering a motion for leave to amend “must accept as

true all well-pleaded facts” in a plaintiff's proposed amended

complaint “and draw all reasonable inferences in the

[plaintiff's] favor.” Artists Rights Enf't Corp. v. Estate of

King, No. 16 Civ. 1121 (JPO), 2017 WL 2062988, at *3 (S.D.N.Y.

May 15, 2017) (quoting Agerbrink v. Model Serv. LLC, 155 F.

Supp. 3d 448, 456 (S.D.N.Y. 2016)). The party opposing a motion

to amend bears the burden of establishing that an amendment

would be futile. See Blaskiewicz v. County of Suffolk, 29

F.Supp.2d 134, 137-38 (E.D.N.Y. 1998).

1. Consumer-Oriented Conduct under Section 349

In this court’s January 2, 2020 order, the court found

that defendants’ conduct was not “consumer-oriented” because

plaintiff’s complaint had not alleged that the “fraudulent

equity-stripping scheme” targeted any consumer other than Ms.

Barker. (ECF No. 119, Order Granting Motion to Dismiss at 23.)

Specifically, the court acknowledged plaintiff’s attempt to

characterize this scheme as widespread by referencing thirteen

other mortgage loans, but signaled that the allegations did not

“indicate whether or not defendants’ conduct with respect to

plaintiff was replicated elsewhere, or whether the other loans

issued by Rokosz involved a corporate intermediary, a critical

component of the Mortgage Loans issued to plaintiff.” (Id. at

27-28.)

In her proposed amended complaint, plaintiff alleges

that she was told that in order to obtain the Subject Loan, she

would be required to transfer her property to a corporation.

(PAC, ¶ 42.) She was advised that all interest in the property

and stock in the corporation, J&M Holdings, would be held in

escrow by Defendant Legum and released to Defendant Rokosz if

plaintiff defaulted on her loan. (Id. ¶ 78.) Plaintiff alleges

that defendants were involved in arranging “at least 14 mortgage

loan transactions” that resembled that of Ms. Barker between

November 2013 and February 2017. (PAC, ¶ 160.) Plaintiff also

alleges that “in at least 10 of these 14 mortgage loans, an

amount of the loan proceeds was withheld as escrow by Defendant

Legum as the ‘escrow agent.’” (Id. ¶ 163.) Plaintiff states

that “at least six of Defendant Rokosz’s other mortgage loans

with similar terms to the Subject Loan were made to corporations

or Limited Liability Companies (“LLCs”).” (Id. ¶ 172.)

Plaintiff explains the intricacies of ten transactions

in her proposed amended complaint. (Id. ¶¶ 179-264.) Plaintiff

describes the events which took place for the transaction

involving property owned by Ms. Campbell at 26 Kossuth Place,

Brooklyn, New York. (Id. ¶¶ 236-245.) Similar to plaintiff’s

Subject Loan transaction, Ms. Campbell’s loan involved the

creation of an LLC where “all stock and interest” in the

property was placed in escrow. (Id. ¶ 242.) Plaintiff also

alleges for the loan transaction involved in property owned by

Ms. Rainford, 15 Oriole Way, Dix Hills, New York, a corporate

intermediary was utilized. (Id. ¶¶ 250-264.) Like Ms. Barker,

Ms. Rainford was required to transfer her property to a

corporate entity, Gently, LLC, and “all stock and interest” was

placed in escrow. (Id. ¶¶ 255, 261.) Plaintiff also describes

that in four other transactions the defendants created an LLC.

(Id. ¶¶ 271-274).

The crux of Defendants’ opposition is that plaintiff’s

Section 349 claim must fail because the new facts in the

proposed amended complaint, which detail the defendants’

wrongful acts against other individuals besides the plaintiff,

“are all tailored to the unusual, if not unique circumstances of

this particular borrower.” (ECF No. 157 Rokosz Memorandum in

Opposition at 21; ECF No. 153, Legum Memorandum in Opposition at

25.) As the Second Circuit has noted, private contract disputes

that are unique to the parties do not fall within the range of

conduct proscribed by Section 349. See, e.g., Richmond v. Nat’l

Grid, 553 F. App’x 56, 57 (2d Cir. 2014); Schlessinger v.

Valspar Corp., 723 F.3d 396, 398 (2d Cir. 2013) (Section 349 “is

limited to those practices which may tend . . . to deceive

consumers.”) (internal quotations omitted).

In the proposed amended complaint, plaintiff alleges

that at least fourteen loan transactions were similar to hers,

and that six mortgage loans described in the proposed amended

complaint were made to LLCs, (PAC, ¶¶ 160, 163, 172 360,) thus,

plaintiff’s loan transaction was not unique. Plaintiff provides

details for two of these mortgage loans, 26 Kossuth Place and 15

Oriole Way, but does not provide the court with as many details

regarding the four other transactions where LLCs were used.

However, the Second Circuit has held that “an action under § 349

is not subject to the pleading-with-particularity requirements

of [Federal Rule of Civil Procedure] Rule 9(b) ... but need only

meet the bare-bones notice-pleading requirements of [Federal

Rule of Civil Procedure] Rule 8(a).” Pelman v. McDonald's

Corp., 396 F.3d 508, 511 (2d Cir.2005) (internal citations

omitted). The court finds that plaintiff has pled sufficient

facts in the proposed amended complaint to state a violation of

Section 349 and that amendment would not be futile.

This court finds the reasoning in Barkley v. Olympia

Mortg. Co. instructive. See Barkley v. Olympia Mortg. Co., No.

04 CV 875 RJD/KAM, 2007 WL 2437810 (E.D.N.Y. Aug. 22, 2007). In

that case, the plaintiffs alleged that “defendants orchestrated

all-inclusive home sales and steered plaintiffs to participating

lawyers, lenders, and mortgage brokers. Accordingly, the

alleged conduct is ‘consumer-oriented’ for the purposes of

Section 349.” (Id. at 18.) Similarly here, plaintiff describes

that defendants engaged in behavior, which included creating a

sham corporation to which the owner’s interest in the property

was transferred within two to seventeen days of the loan

closing. (PAC, ¶ 358.) Defendants allegedly “orchestrated a

system of providing services under which prospective [debtors]

were defrauded or misled every step along the way.” See

Polonetsky v. Better Homes Depot, Inc., 97 N.Y.2d 46, 53, 735

N.Y.S.2d 479, 760 N.E.2d 1274 (2001) (The New York Court of

Appeals held that plaintiffs successfully alleged consumer-

oriented conduct by pleading that defendants misled prospective

buyers at every juncture and “steered buyers to mortgage bankers

and attorneys who had connections to Better Homes.”)

Although this court noted in its January 2, 2020 order

dismissing the original complaint that a mortgage transaction

was not a classic example of a Section 349 claim, (ECF No. 119,

Order Granting Motion to Dismiss at 23,) the New York Court of

Appeals has explained that “[t]he reach of [GBL § 349]

provide[s] needed authority to cope with the numerous, ever-

changing types of false and deceptive business practices which

plague consumers in our State.” Karlin v. IVF America, Inc., 93

N.Y.2d 282, 291 690 N.Y.S.2d 495, 712 N.E.2d 662 (1999)). Thus,

courts have extended Section 349 to real estate transactions.

See Banks v. Consumer Home Mortgage, No. 01 Civ. 8508,2003 WL

21251584, at *9 (E.D.N.Y.2003); Canario v. Gunn, 300 A.D.2d 332,

751 N.Y.S.2d 310 (App.Div.2002). Here, plaintiff has shown that

defendants’ actions would be deceptive to the reasonable

consumer in that the individuals described, along with

plaintiff, were offered unaffordable interest-only loans on the

condition that they transfer their property to a sham

corporation, thereby losing “all stock and interest” upon

default, and resulting in a division of the proceeds among the

group of defendants. See Marcus v. A.T. & T. Corp., 138 F.3d

46, 63 (2d Cir.1998) (finding that the defendant’s actions would

be deceptive to the reasonable consumer in evaluating a Section

349 claim). This court finds that the alleged conduct by

defendants was “consumer-oriented” under Section 349. As such,

this court finds that the proposed amendment would not be futile

and that the Section 349 claim would withstand a motion to

dismiss.

2. RICO Allegations

Plaintiff’s RICO allegation against Defendants is

brought pursuant to 18 U.S.C. § 1962(c). Under § 1962(c), it is

“unlawful for any person employed by or associated with any

enterprise engaged in, or the activities of which affect,

interstate or foreign commerce, to conduct or participate,

directly or indirectly, in the conduct of such enterprise's

affairs through . . . a collection of an unlawful debt.” 18

U.S.C. § 1962(c). An “unlawful debt” as defined in 18 U.S.C. §

1961(6) is “(A). . .unenforceable under State or Federal law in

whole or in part as to principal or interest because of the laws

relating to usury, and (B) which was incurred in connection with

the business . . . lending money . . . at a rate usurious under

State or Federal law, where the usurious rate is at least twice

the enforceable rate. 18 U.S.C. § 1961(6); Durante Bros. &

Sons, Inc. v. Flushing Nat'l Bank, 755 F.2d 239, 249 (2d Cir.

1985). Currently under New York law, a loan to an individual

bearing an interest rate higher than 16% per annum is

unenforceable. See General Obligations Law § 5–501(2); Banking

Law § 14–a; Cohen v. Eisenberg, 265 A.D.2d 365, 366, 697

N.Y.S.2d 625 (2d Dept.1999); see also Durante Bros., 755 F.2d at

246. This court will address whether plaintiff’s Subject Loan

constituted “unlawful debt.” See infra I.B.2(b).

a. Association-in-fact Enterprise under RICO

As a threshold matter, a plaintiff asserting a civil

RICO claim must adequately allege the existence of either a

legal enterprise or an association-in-fact enterprise. The

Supreme Court has clarified that three characteristics are

required for an association-in-fact enterprise: (1) a purpose,

(2) relationships among the enterprise’s associates, and (3)

longevity sufficient to permit said associates to pursue the

enterprise’s purpose. Boyle v. United States, 556 U.S. 938, 944

(2009).

Plaintiff names the following RICO defendants: Rokosz,

Legum, Telsey, and Royce LLC. (PAC, ¶¶ 383-407.) Defendant

Rokosz6 contends that “no purpose for the enterprise is now

pleaded, let alone is it pleaded how the individual members have

been acting to advance the enterprise’s interest as opposed to

their personal interests.” (ECF No. 139, Rokosz Memorandum of

Law in Opposition at 23.) In her reply, plaintiff counters that

the proposed amended complaint is “replete with factual

allegations about numerous transactions, in addition to the

Subject Loan, through which Defendants and Fishbein worked

together to achieve a common purpose, and from which their roles

in the enterprise may be logically inferred.” (ECF No. 160-1,

Reply Memorandum in Support of Motion at 14.)

Plaintiff’s Reply Memorandum cites to Boyle v. United

States, in support of plaintiff’s contention that the defendants

constituted an association-in-fact enterprise under RICO. (ECF

No. 160-1, Reply Memorandum in Support of Motion at 11-12.) The

Supreme Court in Boyle made clear that an association-in-fact

enterprise, “need not have a hierarchical structure or a ‘chain

of command’; decisions may be made on an ad hoc basis and by any

number of methods–by majority vote, consensus, a show of

strength, etc. Members of the group need not have fixed roles;

different members may perform different roles at different

times.” Boyle v. United States, 556 U.S. 938, 948, 129 S. Ct.

6 Notably, in his Memorandum in Opposition, Defendant Legum does not dispute

the existence of an association-in-fact enterprise. (See generally ECF No.

153, Legum Memorandum in Opposition.)

2237, 2245, 173 L. Ed. 2d 1265 (2009). Plaintiff can prove an

enterprise “by evidence of an ongoing organization, formal or

informal, and by evidence that the various associates function

as a continuing unit.” Id. at 945, 129 S.Ct. 2237 (quoting

United States v. Turkette, 452 U.S. at 583, 101 S.Ct. 2524.

(1981).

This court finds that plaintiff’s enterprise

allegations are sufficient to survive a motion to dismiss. The

proposed amended complaint extensively sets forth facts

describing the Defendants’ roles and relationships and how

Defendants functioned over a period of years as an organized

unit that engaged in the underlying predicate acts in working

toward a common purpose, namely “to coordinate, enable, and

profiteer from hard money mortgage loans, most (if not all) of

which were usurious.” (PAC, ¶ 390.) Plaintiff alleges that

generally, Defendant Telsey recruited Fishbein who would bring a

prospective borrower to the attention of Defendants Telsey,

Legum, and Rokosz, and act as an intermediary between the

borrower and defendants. (Id. ¶ 165.) Telsey and Legum

communicated with Fishbein on behalf of Rokosz and themselves.

(Id. ¶¶ 158-172, 390-394, 400-401.) Defendants Telsey and

Rokosz would visit the properties that would secure the loan.

(Id. ¶ 167.) Legum would assess the debt obligations and

prepare the closing documents, including the escrow agreements.

(Id. ¶ 170.) Defendant Telsey was responsible for ensuring that

borrowers made their payments, “ultimately on behalf of and in

order to keep financing flowing from Defendant Rokosz.” (Id. ¶

390.) “These allegations identify the role of each Defendant

and the linkages among them.” Delgado v. Ocwen Loan Servicing,

LLC, No. 13-CV-4427 NGG RML, 2014 WL 4773991, at *17 (E.D.N.Y.

Sept. 24, 2014) (finding an association-in-fact enterprise where

plaintiff alleged that defendants worked as a unit for a common

purpose.)

As for the enterprise operating as a “continuing

unit,” plaintiff alleges that the Defendants worked together

“between November 2013 and February 2017” on at least 14 loan

transactions, which averaged one every three months. (PAC ¶¶

390-391.) Based on the extensive allegations regarding the

association-in-fact enterprise, the court finds that plaintiff

has sufficiently pled the existence of an enterprise consisting

of defendants Rokosz, Legum, Telsey, and Royce LLC, and that the

amendment as to the RICO claims would not be futile.

b. 18 U.S.C. § 1961(6)

As noted above, see supra I.B.2, an “unlawful debt”

for purposes of civil RICO liability is defined as “a debt ...

which was incurred in connection with ... the business of

lending money or a thing of value at a rate usurious under State

of Federal law, where the usurious rate is at least twice the

enforceable rate.” 18 U.S.C. § 1961(6)(B). Plaintiff alleges

that the enterprise engaged in the collection of unlawful debt.

Plaintiff alleges that her Subject Loan was usurious

because “the usurious rate of the Subject Loan, of at least

37.87 percent, was at least twice the enforceable rate of 16

percent,” (PAC ¶ 398,) and alleges that defendants “engaged in

the business of lending money at a usurious rate.” (Id. ¶ 399.)

Defendant Legum argues that plaintiff’s RICO claim should not

survive because “of the twenty-six Rokosz loans referenced in

the proposed amended complaint, it is alleged that only three

had interest rates more than double the usury rate.” (ECF No.

153, Legum Memorandum in Opposition at 18-19.) Plaintiff

contends in her Reply that she has alleged that defendants

arranged five loans with usurious interest rates more than twice

the enforceable rate. (ECF No. 160, Reply at 10.) This court

finds that plaintiff has sufficiently alleged that in four of

the ten described other loan transactions managed by defendants,

the interest rates for the loans were usurious, amounting to

37.17%, 34.45%, 33.33% and 45.69%, respectively. (See PAC ¶¶

183, 191, 204, and 264.) Therefore, in five of the loans in

which defendants engaged, including plaintiff’s Subject loan,

described in her proposed amended complaint, the interest rates

reported for each transaction were above 32%, which is more than

twice the enforceable interest rate under New York Law.

Defendant Rokosz does not dispute that these

particular loans had interest rates exceeding the enforceable

legal rate, but instead contends that plaintiff’s claims

“premised upon usury are preempted by the Depository

Institutions Deregulation and Monetary Control Act of 1980

(“DIDMCA”).” (ECF No. 157, Rokosz Memorandum in Opposition at

24.) The DIDMCA preempts “the constitution or the laws of any

State expressly limiting the rate or amount of interest,

discount points, finance charges, or other charges which may be

charged, taken, received, or reserved.” 12 U.S.C. § 1735f-

7a(a)(1). In order to qualify for preemption under the statute,

the lender must establish that he or she “ma[de] or invest[ed]

in loans aggregating more than $1,000,000 per year.” 12

U.S.C.A. § 1735f-7a.

As plaintiff correctly articulates in her Reply,

Defendant Rokosz attempts to establish preemption “based on an

affidavit describing his lending activities,” but as this court

already noted, it cannot and will not consider the affidavits

and accompanying exhibits in deciding plaintiff’s motion to

amend the complaint. See J.S. ex rel. N.S. v. Attica Cent.

Sch., 386 F.3d 107, 110 (2d Cir. 2004) (In a motion to dismiss,

“we may not rely on conclusory or hearsay statements contained

in the affidavits”); see also Zappia Middle E. Const. Co. Ltd.

v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir.2000); Kamen

v. Am. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir.1986).

Consequently, Defendant’s preemption defense may not be

considered at this time. The court finds that plaintiff has

pled sufficient plausible facts in the proposed amended

complaint to state a RICO claim for the collection of unlawful

debt.

3. Malpractice Claim against Defendant Hurley

To prevail on a claim for legal malpractice in New

York, a plaintiff must show: (1) that the attorney was

negligent; (2) that the negligence was a proximate cause of the

plaintiff's loss; and (3) proof of actual damages that were

caused by the attorney's negligence. Brooks v. Lewin, 21 A.D.3d

731, 734, 800 N.Y.S.2d 695 (1st Dep't 2005).

“An action to recover damages [under New York law]

arising from an attorney's malpractice must be commenced within

three years from accrual.” McCoy v. Feinman, 99 N.Y.2d 295,

301, 755 N.Y.S.2d 693, 785 N.E.2d 714 (2002); see N.Y.C.P.L.R. §

214(6). Typically, “this accrual time is measured from the day

an actionable injury occurs, ‘even if the aggrieved party is

then ignorant of the wrong or injury.’” McCoy v. Feinman, 99

N.Y.2d at 301, 755 N.Y.S.2d 693, 785 N.E.2d 714 (quoting

Ackerman v. Price Waterhouse, 84 N.Y.2d 535, 541, 620 N.Y.S.2d

318, 644 N.E.2d 1009 (1994)). [W]hat is important is when the

malpractice was committed, not when the client discovers it.”

Id. (internal quotation marks omitted); see Williamson v.

PricewaterhouseCoopers LLP, 9 N.Y.3d 1, 7–8, 840 N.Y.S.2d 730,

872 N.E.2d 842 (2007); Boyd v. Gering, Gross & Gross, 226 A.D.2d

489, 641 N.Y.S.2d 108, 108 (2d Dep't 1996) (“The law is well

settled that an action to recover damages for legal malpractice

accrues when the malpractice is committed.”).

The Subject Loan was entered into in February 2017.

Plaintiff filed her original complaint on January 25, 2019.

(ECF No. 1, Complaint.) Plaintiff filed her motion to amend to

add her malpractice claim against Mr. Hurley on July 31, 2020,

which exceeds the three-year statute of limitations. See

Goldman v. Barrett, 733 F. App'x 568, 569 (2d Cir. 2018)

(holding that the amended complaint, filed in October 2016,

alleging defamatory statements from April 2015, was

presumptively barred under New York’s one-year statute of

limitations.)

Contrary to plaintiff’s contention, the legal

malpractice claim is not saved by relation back to plaintiff’s

original complaint. “[T]he central inquiry is whether adequate

notice of the matters raised in the amended pleading has been

given to the opposing party within the statute of limitations by

the general fact situation alleged in the original pleading.”

Slayton v. Am. Express Co., 460 F.3d 215, 228 (2d Cir.2006). In

the instant action, plaintiff did not give notice of a

malpractice claim against Hurley in her original complaint. In

fact, plaintiff’s original complaint alleged only that Hurley

violated Section 349 and RICO, and in her proposed amended

complaint, plaintiff does not include Hurley in those

allegations. (See generally PAC.) There is nothing in the

original complaint which references a legal malpractice claim

against Hurley. (See ECF No. 1, Complaint.)

Therefore, amendment would be futile as to plaintiff’s

legal malpractice claim because the claim would be dismissed

pursuant to the three-year statute of limitations. See Twersky

v. Yeshiva Univ., 579 Fed. Appx. 7, 12 (2d Cir. 2014) (summary

order) (finding that “the district court correctly concluded

that amendment would have been futile” where the proposed

amendments involved untimely claims); Kassner v. 2nd Ave.

Delicatessen Inc., 496 F.3d 229, 238 (2d Cir. 2007) (affirming

dismissal of claims and denial of cross-motion to amend as to

claims that were time-barred).

II. Legum’s Motion for Sanctions

Defendant Legum moves for sanctions against

plaintiff’s counsel pursuant to 28 U.S.C. § 1927 for moving to

amend the complaint. Plaintiff argues in opposition that

“Defendant Legum does not set forth any evidence, much less

clear evidence, to indicate that Plaintiff’s motion for leave to

amend is meritless or brought in bad faith. Plaintiff’s counsel

has not multiplied the proceedings unreasonably or vexatiously

and this cross-motion for sanctions must be denied.” (ECF No.

156, Memorandum in Opposition at 3.) In response, Legum

provides a list of “misrepresentations” included in plaintiff’s

proposed amended complaint, which include Legum’s involvement in

holding funds in escrow accounts and Legum’s role in the “RICO

enterprise.” (ECF No. 155, Legum’s Reply at 2.)

Courts use the same standard for evaluating a

sanctions claim under either 28 U.S.C. § 1927 or the court’s

inherent power, and the Second Circuit has stated that “the only

meaningful difference between an award made under § 1927 and one

made pursuant to the court's inherent power is . . . that awards

under § 1927 are made only against attorneys or other persons

authorized to practice before the courts while an award made

under the court's inherent power may be made against an

attorney, a party, or both.” Oliveri v. Thompson, 803 F.2d

1265, 1273 (2d Cir. 1986).

Thus, “[t]o impose sanctions under either [1927 or the

court’s inherent power], a court must find clear evidence that

(1) the offending party’s claims were entirely without color,

and (2) the claims were brought in bad faith – that is,

motivated by improper purposes such as harassment or delay.”

Eisemann v. Greene, 204 F.3d 393, 396 (2d Cir. 2000) (citation

and internal quotation omitted). “The test is conjunctive and

neither meritlessness alone nor improper purpose alone will

suffice.” Sierra Club v. U.S. Army Corps of Engineers, 776 F.2d

383, 390 (2d Cir. 1985). A claim is deemed “colorable” when,

viewed in light of the reasonable beliefs of the party making

the claim, it has some amount of factual and legal support.

Revson v. Cinque & Cinque, P.C., 221 F.3d 71, 78-79 (2d Cir.

2000); see also Nemeroff v. Abelson, 620 F.2d 339, 348 (2d Cir.

1980) (overruled in part on other grounds) (“The question is

whether a reasonable attorney could have concluded that facts

supporting the claim might be established, not whether such

facts actually had been established.”) (emphasis added).

For the second element of bad faith, the Second

Circuit has “restrictively” interpreted this standard in

determining whether certain conduct merits sanction. Eisemann,

204 F.3d at 396. Thus, the Second Circuit has noted:

To ensure . . . that fear of an award of

attorneys' fees against them will not deter

persons with colorable claims from pursuing

those claims, we have declined to uphold awards

under the bad-faith exception absent both clear

evidence that the challenged actions are

entirely without color, and are taken for

reasons of harassment or delay or for other

improper purposes and a high degree of

specificity in the factual findings of the lower

courts.

Id. (quoting Dow Chem. Pacific Ltd. v. Rascator Maritime S.A.,

782 F.2d 329, 344 (2d Cir. 1986)). For a finding of bad faith,

a court must: (i) find that the challenged actions were taken

for improper purposes, such as harassment or delay; and (ii)

provide a high degree of specificity in the factual findings.

See Oliveri, 803 F.2d at 1272.

Under the “bad faith” standard, the type of conduct

found to merit sanctions in this Circuit includes:

[R]esubmitting a motion that had previously been

denied; bringing a motion based on ‘facts’ the

opposite of which were previously found by the

court; making several insupportable bias recusal

motions and repeated motions to reargue;

continually engaging in obfuscation of the

issues, hyperbolism and groundless presumptions

in addition to insinuating that the court was

biased; and waiting until the eve of trial

before making a jury demand.

Keller v. Mobil Corp., 55 F.3d 94, 99 (2d Cir. 1995) (quoting

Hudson Motors, 845 F. Supp. at 978) (internal quotation marks

omitted); see also Dow Chem., 782 F.2d at 345 (“The appropriate

focus for the court in applying the bad-faith exception to the

American Rule is the conduct of the party in instigating or

maintaining the litigation, for an assessment of whether there

has been substantive bad faith as exhibited by, for example, its

pursuit of frivolous contentions, or procedural bad faith as

exhibited by, for example, its use of oppressive tactics or its

willful violations of court orders.”).

Thus, in this Circuit, the bad faith standard is not

easily satisfied and sanctions are warranted only in extreme

cases. See, e.g., Revson, 221 F.3d at 77-78 (reversing trial

court's award of sanctions despite conduct by counsel including:

(i) sending letter to defendant attorney Cinque threatening to

tarnish his reputation; (ii) publicly accusing Cinque of fraud

without any concrete evidence to support the claim; (iii)

threatening to send a letter to the court accusing Cinque of

criminal conduct if he did not capitulate to [the plaintiff's]

demands; and (iv) repeatedly attacking Cinque in an offensive

and demeaning fashion) (internal citations and quotations

omitted); 60 E. 80th St. Equities, Inc. v. Sapir (In re 60 E.

80th St. Equities), 218 F.3d 109, 115-17 (2d Cir. 2000)

(imposing sanctions when the party in the prior bankruptcy

proceedings “clearly lacked standing,” then appealed the

decision of the Bankruptcy Court despite that court’s warning

that such an appeal was meritless, and then, on appeal before

the District Court, made claims having “absolutely nothing to do

with the merits of his case” and “disparaged and made

unsubstantiated allegations impugning the integrity of the

Bankruptcy Court”); Oliveri, 803 F.2d at 1276-78 (imposition of

sanctions reversed and no bad faith found despite District

Court’s holding that the Plaintiff was “unworthy of belief and

[that] his testimony was incredible”) (internal quotations

omitted).

A. Colorability

Here, regardless of the ultimate merits of plaintiff’s

claims, there “is no evidence to suggest that the [plaintiff or

her attorney] had utterly no basis for [her] subjective belief

in the merits of their case.” See Schlaifer, 194 F.3d at 340-

41. Accordingly, the claims alleged by plaintiff’s counsel

cannot be deemed entirely colorless and are sufficient to state

a claim. Cf. Mone v. Comm’r, 774 F.2d 570, 574-75 (2d Cir.

1985) (imposing sanctions and holding that “the utter

irrelevance of [counsel’s] arguments on behalf of [his client]

in this appeal constituted unreasonable and vexatious

litigation” where the asserted claims had not a “scintilla of

legal merit”).

B. Bad Faith

Similarly, under the second element, the court cannot

find with the required high degree of factual specificity that

plaintiff’s attorney’s decisions were “so completely without

merit as to require the conclusion that [they] must have been

undertaken for some improper purpose such as delay” giving rise

to an inference of bad faith. Oliveri, 803 F.2d at 1273.

Mr. Legum states that plaintiff’s motion to amend was

brought in “bad faith” and Legum has been “stigmitized by the

litigation . . . [and] abused by it.” (ECF No. 154-2,

Memorandum in Support of Cross Motion for Sanctions at 7.)

The court does not find that plaintiff’s claims are “so

completely without merit as to require the conclusion that they

must have been undertaken [in bad faith] for some improper

purpose.” Revson v. Cinque & Cinque, P.C., 221 F.3d 71, 79 (2d

Cir. 2000). Further, the court finds no basis to conclude that

plaintiff had any ulterior or improper motive for filing the

motion to amend her complaint. See Keller, 55 F.3d at 99

(finding no bad faith despite counsel’s “frustrating . . .

manner of conducting negotiations” over settlement agreement

where counsel appeared to have had a bona fide belief in her

demands and it did not appear that the attorney had “any

ulterior motive for insisting on different language” in the

agreement).

Under these facts, the court does not conclude with

the required high degree of factual specificity that plaintiff

or plaintiff’s counsel acted in bad faith. See, e.g., Dow

Chem., 782 F.2d at 344 (rejecting district court’s finding that

because counsel’s actions “put innocent parties to substantial

legal expense” justice required award of attorneys’ fees because

it amounted to no more than a restatement of criticisms of the

American Rule and did not provide sufficient factual support for

finding of bad faith or create entitlement to sanctions).

For the foregoing reasons, defendant Legum’s motion

for sanctions is denied.

CONCLUSION

For the reasons explained above, plaintiff’s motion to

amend or supplement the complaint is granted in part as

amendment would not be futile as to plaintiff’s Section 349 and

RICO claims. However, plaintiff’s malpractice claim against

Hurley would be futile because the claim is barred by the

statute of limitations and does not relate back. Legum’s motion

for sanctions is denied, and the court further declines to

impose sanctions. The parties are ordered to resume discovery

under the supervision of Magistrate Judge Reyes.

SO ORDERED.

Dated: March 18, 2021

Brooklyn, New York

/s/

KIYO A. MATSUMOTO

United States District Judge

Eastern District of New York