# Barker v. Rokosz

> District Court, E.D. New York · March 18, 2021

URL: https://www.frixlaw.com/law-library/cases/10305858

## Case

- **Court:** District Court, E.D. New York
- **Decided:** March 18, 2021
- **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/10305858

## How later opinions describe it (automated extraction)

- affirming dismissal of claims and denial of cross-motion to amend as to claims that were time-barred
- stating that the imposition of sanctions under 28 U.S.C. § 1927 is only authorized when “there is a clear showing of bad faith”

## Opinion text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10305858. Public record. Not legal advice.