Saint-Jean v. Emigrant Mortgage Co.
2014 U.S. Dist. LEXIS 136546
E.D.N.Y2014Background
- Plaintiffs are eight current or former homeowners who obtained refinance mortgages from Emigrant (through a NINA — “No Income, No Assets” — program) between 2004–2009 and allege the program targeted Black and Latino borrowers with high-cost loans designed to fail.
- Plaintiffs allege Emigrant marketed in majority-minority NYC census tracts, steered borrowers via brokers (who received premiums), omitted or obscured material loan terms (notably an 18% default APR), and retained loans rather than selling them, profiting from defaults and foreclosures.
- Procedural posture: Plaintiffs filed suit in 2011 asserting FHA, ECOA, New York State and City anti‑discrimination claims, and TILA claims; Magistrate Judge Orenstein issued a Report recommending (inter alia) denial of dismissal on federal claims but dismissal of some state/municipal claims; the district court conducted de novo review.
- The court considered and adopted in part the Report: it denied the motion to dismiss federal claims (FHA/ECOA/TILA), found equitable tolling and the discovery rule could render civil‑rights claims timely, and granted Plaintiffs leave to file a Second Amended Complaint adding parties and claims.
- The decision addresses (1) timeliness (discovery rule/equitable tolling/continuing violation), (2) sufficiency of disparate impact and intentional targeting allegations, (3) viability and timeliness of TILA rescission claims, and (4) motion to amend to add parties/claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of civil‑rights claims (FHA/ECOA) — discovery rule & equitable tolling | Plaintiffs could not have discovered systemic discrimination until they consulted counsel; discovery rule and equitable tolling apply because scheme was self‑concealing and defensively concealed | Emigrant: accrual at default; discovery rule inapplicable to FHA/ECOA; no concealment; claims time‑barred | Court: discovery rule applies in this circuit; equitable tolling/fraudulent concealment plausibly pleaded; claims timely |
| Disparate impact / intentional targeting (pleading sufficiency) | Allegations + statistical/mapping evidence show neutral NINA program had predictably disparate impact on minorities and included intentional targeting via advertising and market analyses | Emigrant: plaintiffs failed to plead proper comparison groups; claims amount to a “racial quota” theory; insufficient to state impact | Court: allegations (including statistics and targeted marketing) suffice at motion‑to‑dismiss stage; disparate impact and targeting plausibly pled |
| TILA rescission: nature/timing of three‑year rescission right and adequacy of rescission notice | Plaintiffs: material TILA disclosure violations; three‑year rescission may be exercised by written notice (not necessarily lawsuit); Plaintiffs timely mailed rescission | Emigrant: three‑year right requires filing suit to rescind; rescission notice insufficient; no cognizable TILA violation | Court: follows regulation and several circuits — written notice can suffice; plaintiffs plausibly allege material TILA violations and timely rescission notice; TILA claims survive |
| Motion to amend — joinder of additional plaintiffs/defendants and new claims | Amendment sought to add related Emigrant entities, new plaintiffs, and intentional targeting claims; delay not prejudicial because discovery incomplete and Emigrant caused delays | Emigrant: amendment untimely, futile, prejudicial, and repeats time‑barred claims; credibility attack | Court: granted leave to amend; joinder appropriate under Rules 19/20; prejudice and futility arguments unpersuasive given discovery posture |
Key Cases Cited
- Merck & Co. v. Reynolds, 559 U.S. 633 (2010) (discovery rule tolling when fraud conceals claim)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions not entitled to assumed truth on 12(b)(6))
- Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998) (interpretation of TILA rescission and limits on invoking rescission as defense)
- City of Pontiac Gen. Employees’ Retirement Sys. v. MBIA, Inc., 637 F.3d 169 (2d Cir. 2011) (discovery for pleading accrual assessed by what a reasonably diligent plaintiff would be able to plead)
- Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926 (2d Cir. 1988) (disparate impact framework and statistical proof accepted at pleading or summary stages)
- Bates v. United States, 522 U.S. 23 (1997) (statutory construction principle: express inclusion/exclusion informs congressional intent)
- Murphy v. Empire of Am., 746 F.2d 931 (2d Cir. 1984) (discussed regarding consummation doctrine though inapposite to federal TILA three‑year rescission issue)