785 F. Supp. 2d 269
S.D.N.Y.2011Background
- Plaintiffs Darrick and Yolanda Grimes, proceeding pro se, purchased a Newburgh, NY home financed by Fremont General Corporation and Fremont Investment and Loan and allegedly received a 100% no-doc ARM loan with undisclosed terms.
- Plaintiffs allege forged and falsified loan documents, misleading disclosures, high-pressure tactics, and race-based targeting in securing financing through Fremont and WCS Lending LLC.
- The loan closed October 12, 2005; servicing later transferred to American’s Servicing Company and the loan was allegedly securitized with U.S. Bank as trustee.
- Plaintiffs assert systemic racial discrimination in lending practices, alleging a pattern of unfair terms and marketing to minority borrowers via Fremont’s broker network.
- Plaintiffs filed an Amended Complaint in December 2008 asserting federal claims under TILA, HOEPA, RESPA, FHA, ECOA, Civil Rights, and RICO, plus state-law claims; defendants Fremont, WCS, and U.S. Bank moved to dismiss under Rule 12(b)(6).
- Court granted motions to dismiss most federal claims with prejudice but allowed Plaintiffs to amend Civil Rights Act claims against Fremont and WCS; state-law claims were held in abeyance or dismissed without prejudice pending federal action resolution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| TILA rescission viability | Grimes seek rescission under TILA § 1635 for residential mortgage. | Rescission rights do not apply to residential mortgages; disclosures/duties not triggered here. | Rescission not available for residential mortgage; TILA damages also time-barred. |
| TILA damages timeliness | Damages timely under tolling theories due to concealment. | Statute runs from loan closing; tolling not adequately pled or proven. | TILA damages time-barred; equitable tolling not established. |
| HOEPA applicability | Loans allegedly subject to HOEPA protections. | Loans are residential mortgages; HOEPA not applicable to principal residential mortgages. | HOEPA claim dismissed with prejudice. |
| RESPA timeliness | RESPA violations asserted and tolled by continuing conduct. | RESPA § 2607 claims must be timely; no tolling shown. | RESPA claim time-barred and dismissed with prejudice. |
| FHA/ECOA/Civil Rights Act timeliness and continuing violation | Discrimination claims alleged; continuing violations and tolling may apply. | Claims untimely; insufficient evidence of continuing violation or concealment; failure to plead racial animus with specificity. | FHA, ECOA, and Civil Rights Act claims untimely or inadequately pled; some may be amended (Fremont and WCS) but U.S. Bank dismissed with prejudice. |
Key Cases Cited
- Ashcroft v. Iqbal, 129 S. Ct. 1937 (U.S. 2009) (plausibility standard; fact pleading required)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading requires plausible claims, not mere conclusions)
- Spool v. World Child Int’l Adoption Agency, 520 F.3d 178 (2d Cir. 2008) (RICO pattern requires adequate pleading of continuity)
- H.J. Inc. v. Northwest Bell Tel. Co., 492 U.S. 229 (U.S. 1989) (continuity concept for RICO patterns)
- Dove v. Fordham Univ., 56 F. Supp. 2d 330 (S.D.N.Y. 1999) (plaintiff must plead facts supporting discrimination claims with specificity)
- Mian v. Donaldson, Lufkin & Jenrette Secs. Corp., 7 F.3d 1085 (2d Cir. 1993) (timeliness of civil rights claims under younger circuits)
- Sanders v. Grenadier Realty, Inc., 367 F. App’x 173 (2d Cir. 2010) (affirming dismissal for lack of factual discrimination allegations)