David McANANEY, Carolyn McAnaney, John Reilly, Constance Reilly, Philip Russo, Cynthia Russo, and Geoffrey Horn, individually and on behalf of all others similarly situated, Plaintiffs,
v.
ASTORIA FINANCIAL CORP., Astoria Federal Savings Loan Assoc., Astoria Federal Mortgage Corp., Long Island Bancorp, Inc., and Long Island Savings Bank, FSB, Defendants.
United States District Court, E.D. New York.
*135 Joseph S. Tusa, Esq., and Paul C. Whalen, Esq., of Whalen & Tusa, New York, NY, and G. Oliver Koppell, Esq., of G. Oliver Koppell & Associates, New York, NY, for Plaintiffs.
Alfred W.J. Marks, Esq., Rosemary Q. Barry, Esq., and Lisa Pepe Whittaker, Esq., of Day Pitney LLP, New York, NY, for Defendants.
MEMORANDUM AND ORDER
JOSEPH F. BIANCO, District Judge:
Plaintiffs brought this class action against defendants Astoria Financial Corporation (hereinafter, "Astoria Financial"), Astoria Federal Savings and Loan Association (hereinafter, "Astoria Federal"), Astoria Federal Mortgage Corporation (hereinafter, "Astoria Mortgage"), Long Island Bancorp, Inc. (hereinafter "LIB"), and Long Island Savings Bank, FSB (hereinafter, "LISB") (collectively, "defendants"), alleging violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq., state consumer protection statutes, New York Real Property Law § 274-a, New York Real Property Actions & Proceedings Law 1921, and common law claims for breach of contract, fraud and unjust enrichment. Previously, this Court certified the following class of plaintiffs under Rules 23(b)(2) and (b)(3) of the Federal Rules of Civil Procedure:
All consumers or borrowers in the United States who had or currently have a mortgage or residential loan originated or purchased by any of the defendants and who wrongfully paid or will be demanded to pay closing fees, satisfaction fees, discharge fees, prepayment fees (or penalties), refinance fees (or penalties), attorney document preparation fees, facsimile fees, recording fees and any other fees, charges, false debts or finance charges in contravention of their mortgage or loan contracts or applicable laws.
Currently before the Court are the parties' renewed cross-motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, and plaintiffs' *136 motion for costs and fees. For the reasons set forth below, defendants' motion for summary judgment is granted with respect to defendants Astoria Financial and LIB, and, accordingly, those two parties are terminated as defendants from this case. In addition, defendants' motion for summary judgment as to the remaining defendants is partially granted with respect to the claim brought by named plaintiff Geoffrey Horn under the Home Ownership and Equity Protection Act of 1994 ("HOEPA"), 15 U.S.C. § 1639, and generally with respect to class plaintiffs' claims under New York Real Property Law § 274-a, New York Real Property Actions & Proceedings Law § 1921, and the common law claims for unjust enrichment and fraud. However, the Court denies defendants' motion for summary judgment as to plaintiffs' claims brought under TILA, breach of contract, and New York General Business Law § 349. Plaintiffs' motion for summary judgment is denied in its entirety. Finally, the Court defers plaintiffs' motion for costs, without prejudice for renewal following trial.
I. BACKGROUND AND PROCEDURAL HISTORY
A. Background
The underlying facts giving rise to this litigation are comprehensively described by the Honorable Arthur D. Spatt, United States District Judge, in a prior decision addressing defendants' motion to dismiss (hereinafter, "McAnaney I"), and by the undersigned in prior decisions granting plaintiffs' motion for class certification (hereinafter, "McAnaney II") and an earlier motion for summary judgment (hereinafter, "McAnaney III"). See McAnaney v. Astoria Fin. Corp.,
1. The McAnaneys
On February 4, 1993, David and Carolyn McAnaney ("the McAnaneys") obtained a residential loan relating to their residence located in Belle Terre, New York, in the form of a mortgage from LISB (hereinafter, "the McAnaneys' First Loan").[1] (Pls.' 56.1 ¶ 1.)[2] The McAnaneys' First Loan was serviced by defendant LISB until that entity was acquired by defendant Astoria *137 Federal and/or defendant Astoria Financial (Id. ¶ 3; Defs.' Am. Resp. 56.1 ¶ 3.)[3] Thereafter, Astoria Federal serviced the McAnaneys' First Loan until it was sold to the Federal National Mortgage Association ("Fannie Mae"). (Pls.' 56.1 ¶ 5.)
On November 18, 2002, Astoria Federal sent the McAnaneys a "payoff letter" via facsimile, which listed several fees to be paid by the McAnaneys which were "necessary to satisfy" the McAnaneys' First Loan. (Id. ¶ 6.) The amount listed on the payoff letter included: (1) an "Atty. Doc. Prep. Fee" of $125; (2) a "Facsimile Fee" of $25; and (3) a "Recording Fee" of $64.50.[4] (Id. ¶¶ 7, 14, 16; Pls.' Resp. 56.1 ¶¶ 67-69.)
It is undisputed that the McAnaneys should not have been charged the Atty. Doc. Prep. Fee by Astoria Federal with regard to the McAnaneys' First Loan. (Pls.' 56.1 ¶ 11; Defs.' Am. Resp. 56.1 ¶ 11.) According to defendants, Astoria Federal improperly demanded the Atty. Doc. Prep. Fee from the McAnaneys due to a "programming error" in an automated computer system used by Astoria Federal. (Pls.' 56.1 ¶ 9.)
Regardless of the reason for the error, plaintiffs assert that the McAnaneys paid the Atty. Doc. Prep. Fee to Astoria Federal, and that Astoria Federal retained the fee. (Defs.' Am. Resp. 56.1 ¶ 8.) However, defendants assert that, upon discovery of its error, Astoria refunded the fee to an escrow account held by the McAnaneys. (Id. ¶ 12; Defs.' 56.1 ¶ 61; Pls.' Resp. 56.1 ¶ 61.) In any event, it is undisputed that Astoria Federal did not inform the McAnaneys that it had improperly demanded or collected the Atty. Doc. Prep. Fee, or that it had refunded such a fee to the McAnaneys' escrow account. (Pls.' 56.1 ¶ 13; Defs.' Am. Resp. 56.1 ¶ 13; Pls.' Resp. 56.1 ¶ 76.) It is further undisputed that the McAnaneys paid the Facsimile Fee and the Recording Fee to Astoria Federal. (Pls.' 56.1 ¶¶ 15, 17.)
The McAnaneys obtained a second residential loan from LISB concerning a property located in Port Jefferson, New York (hereinafter, "the McAnaneys' Second Loan"). (Pls.' 56.1 ¶ 25.) On November 18, 2002, Astoria Federal sent the McAnaneys a "payoff letter" relating to the McAnaneys' Second Loan, which listed several fees to be paid by the McAnaneys which were "necessary to satisfy" the loan. (Id. ¶ 29.) The amount listed on the payoff letter included: (1) an "Atty. Doc. Prep. Fee" of $125; (2) a "Facsimile Fee" of $25; and (3) a "Recording Fee" of $64.50. (Id. ¶¶ 30, 36, 38.) It is undisputed that the McAnaneys paid each of these fees to Astoria Federal. (Id. ¶¶ 31, 37, 39.)
2. The Reillys
On or about March 28, 2002, John and Constance Reilly ("the Reillys") obtained a residential loan in the form of a mortgage from Astoria Federal (hereinafter, "the Reilly Loan").[5] (Pls.' 56.1 ¶ 47.) The Reilly Loan was serviced by Astoria Federal until the time it was repaid. (Id. ¶ 49.) On April 16, 2004, and April 19, 2004, respectively, Astoria Federal sent the Reillys two "payoff letters" which listed several fees to be paid by the Reillys that were *138 "necessary to satisfy" the loan, including: (1) an "Atty. Doc. Prep. Fee" of $125; (2) "Facsimile Fees" of $25 and $50; and (3) a "Recording Fee" of $44.50. (Id. ¶¶ 51, 53, 59, 62; Defs.' 56.1 ¶¶ 97-98.)
It is undisputed that the Reillys paid the Facsimile Fee to Astoria Federal, and that Astoria Federal deducted the Recording Fee from funds held in escrow by Astoria Federal for the Reillys. (Pls.' 56.1 ¶¶ 56, 61, 64; Defs.' Am. Resp. 56.1 ¶¶ 56, 61, 64; Defs.' 56.1 ¶¶ 46-47, 103; Pls.' Resp. 56.1 ¶¶ 46-47, 103.) Plaintiffs claim that they paid the Atty. Doc. Prep. Fee to Astoria Federal, but defendants dispute that and claim that the fee was never collected. (Pls.' 56.1 ¶ 55; Defs.' Am. Resp. 56.1 ¶ 55; Defs.' 56.1 ¶ 103; Pls.' Resp. 56.1 ¶ 103.) Defendants further dispute plaintiffs' contention that any collection of the Disputed Fees was in breach of the loan agreement. (Defs.' Resp. 56.1 ¶¶ 54-57.)
3. The Russos
On or about November 12, 1993, Philip and Cynthia Russo ("the Russos") obtained a residential loan from LISB in the form of a mortgage (hereinafter, "the Russo Loan").[6] (Pls.' 56.1 ¶ 72.) The Russo loan was serviced by LISB until the bank was acquired by Astoria Federal; thereafter, the loan was serviced by Astoria Federal until it was repaid. (Id. ¶¶ 74-75.) On June 2, 2004, Astoria Federal sent to the Russos a "payoff letter" which listed several fees to be paid by the Russos that were "necessary to satisfy" the Russo Loan, including: (1) an "Atty. Doc. Prep. Fee" of $125; (2) a "Facsimile Fee" of $25; and (3) a "Recording Fee" of $64.50. (Id. ¶¶ 77-78, 85, 87; Defs.' 56.1 ¶¶ 83, 85; Pls.' Resp. 56.1 ¶¶ 83, 85.) It is undisputed that the Russos paid the Disputed Fees to Astoria Federal. (Pls.' 56.1 ¶¶ 79, 86, 88.)
It is also undisputed that the Russos should not have been charged the Atty. Doc. Prep. Fee by Astoria Federal. (Id. ¶ 80; Defs.' Am. Resp. 56.1 ¶ 80.) According to defendants, Astoria Federal improperly demanded the Atty. Doc. Prep. Fee from the Russos due to a "programming error" in an automated computer system used by Astoria Federal. (Id. 56.1 ¶ 81.) In any event, plaintiffs assert that the Russos paid the Atty. Doc. Prep. Fee to Astoria Federal, and that Astoria Federal retained that fee. (Pls.' 56.1 ¶ 81; Defs.' Am. Resp. 56.1 ¶ 81.) However, defendants assert that, upon discovery of its error, Astoria Federal refunded the fee to an escrow account held by the Russos. (Defs.' Am. Resp. 56.1 ¶ 81; Defs.' 56.1 ¶ 61; Pls.' Resp. 56.1 ¶ 61.) Defendants also claim that they refunded the Recording Fee to the Russos. (Defs.' Am. Resp. 56.1 ¶ 88.) Astoria Federal did not inform the Russos that it had improperly demanded or collected the Atty. Doc. Prep. Fee, or that it had refunded such a fee to the Russos' escrow account. (Pls.' 56.1 ¶¶ 83-84; Defs.' Am. Resp. 56.1 ¶¶ 83-84.)
On May 8, 2002, the Russos also obtained a residential loan from Astoria Federal in the form of a Home Equity Line of Credit (hereinafter, "the Russos' HELOC").[7] (Pls.' 56.1 ¶ 95.) The Russos' HELOC was serviced by Astoria Federal until it was repaid. (Id. ¶ 97.) In two *139 "payoff letters" dated, respectively, June 2, 2004, and June 16, 2004, Astoria Federal listed the amounts "necessary to satisfy" the Russos' HELOC loan, including: (1) a "Satisfaction Fee/Atty Document Preparation Fee" of $125; and (2) a "County Clerk Fee/Recording Fee" of $64.50. (Id. ¶¶ 98-101, 107.) It is undisputed that the Russos paid both fees to Astoria Federal. (Pls.' 56.1 ¶¶ 106, 111; Defs.' Am. Resp. 56.1 ¶¶ 106, 111.)
Plaintiffs assert that Astoria Federal improperly demanded and collected the fees from the Russos. (Pls.' 56.1 ¶ 103; Defs.' Am. Resp. 56.1 ¶ 103; Defs.' 56.1 ¶ 92; Pls.' Resp. 56.1 ¶ 92.) Defendants dispute plaintiffs' contention that collection of any of the Disputed Fees was in breach of the loan agreement. (Defs.' Resp. 56.1 ¶¶ 105-06.)
4. Geoffrey Horn
On August 13, 2003, Geoffrey Horn and Elizabeth Tomlinson Horn ("the Horns") obtained a purchase money mortgage loan on their residence in Bedford, New York. (hereinafter, "the Horn Loan").[8] (Defs.' Supp. 56.1 ¶ 1.) Prior to closing, defendants provided a Federal Truth-In-Lending Disclosure (hereinafter, "TIL Disclosure"), which listed a $125 "Satisfaction Fee" amongst "prepaid" finance charges. (Defs.' Supp. 56.1 ¶¶ 5-6; Decl. of Alfred W.J. Marks, Apr. 17, 2008, Ex. F.) On January 24, 2005, Horn received a faxed payoff statement on the Horn Loan which listed several fees to be paid by the Horns, which were "necessary to satisfy" the loan. (Defs.' Supp. 56.1 ¶ 10; Decl. of Alfred W.J. Marks, Apr. 17, 2008, Ex. I.) The amount listed on the payoff letter included: (1) an "Atty. Doc. Prep. Fee" of $125; (2) a "Facsimile Fee" of $25; and (3) a "Recording Fee" of $36.50. (Defs.' Supp. 56.1 ¶ 10; Decl. of Alfred W.J. Marks, Apr. 17, 2008, Ex. I.) It is undisputed that the Horns paid each of these fees to Astoria Federal. (Defs.' Supp. 56.1 ¶ 11.)
B. Procedural History
Plaintiffs commenced this class action on March 16, 2004. The case was originally assigned to the Honorable Arthur D. Spatt, United States District Judge. On July 16, 2004, plaintiffs filed an amended complaint. Thereafter, defendants moved to dismiss the amended complaint. The motion was granted in part and denied in part by Memorandum & Order dated February 17, 2005, and the parties were directed to proceed with discovery. See McAnaney v. Astoria Fin. Corp.,
Thereafter, plaintiffs moved to certify a class. The motion was granted on September 19, 2006. See McAnaney v. Astoria Fin. Corp., No. 04-CV-1101 (JFB),
On December 3, 2008, plaintiffs renewed their motion for summary judgment, and defendants thereafter renewed their cross-motion for summary judgment on December 5, 2008. Plaintiffs filed opposition papers to defendants' motion on December 20, 2008, and defendants filed a supplemental reply memorandum in further support of their motion for summary judgment and in opposition to plaintiffs' motion for summary judgment on December 22, 2008. On March 17, 2009 and June 30, 2009, plaintiffs filed supplemental letters providing further argument, to which defendants replied on March 19, 2009 and July 2, 2009. This matter is fully submitted. All submissions, including materials submitted in connection with the initial motions for summary judgment incorporated by reference, have been considered by the Court.[10]
*141 II. STANDARD OF REVIEW
A. Summary Judgment Standard
The standards for summary judgment are well settled. Pursuant to Federal Rule of Civil Procedure 56(c), a court may not grant a motion for summary judgment unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c); Globecon Group, LLC v. Hartford Fire Ins. Co.,
Once the moving party has met its burden, the opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts. . . . [T]he nonmoving party must come forward with specific facts showing that there is a genuine issue for trial." Caldarola v. Calabrese,
B. Law of the Case Doctrine
Plaintiffs repeatedly argue that a number of the arguments raised by defendants are foreclosed pursuant to the "law of the case" doctrine, based upon decisions made by Judge Spatt in denying defendants' motion to dismiss in the instant case, as well as other decisions by the undersigned. Plaintiffs' specific assertions *142 regarding decisions that they claim are entitled to deference as law of the case are discussed in more detail infra, but the Court notes that plaintiffs are occasionally incorrect in relying on this doctrine, as certain issues were not in fact decided by Judge Spatt or this Court. Moreover, to the extent that plaintiffs are correct that some of defendants arguments were in fact raised to or addressed by Judge Spatt or the undersigned, the Court notes that "[a]pplication of the `law of the case' doctrine is `discretionary and does not limit a courts power to reconsider its own decisions prior to final judgment.'" RSL Comm'cns, PLC v. Bildirci, No. 04-CV5217 (RJS),
Of course, the discretionary law of the case doctrine applies to issues of law already decided by the Court. However, because of the divergent standard of review applicable to motions to dismiss and motions for summary judgment, the law of the case doctrine is inapposite to the Court's analysis of whether, after the close of discovery, genuine issues of fact have been raised which survive summary judgment. See Nobel Ins. Co. v. City of N.Y., No. 00-CV1328 (KMK),
In accordance with the foregoing, in each instance that prior decisions of Judge Spatt or the undersigned are invoked, the Court has carefully scrutinized the decision, and the evidence developed during discovery, to determine whether adherence to the law of the case doctrine is warranted.
III. DISCUSSION
A. Improper Defendants
Defendants claim that discovery has demonstrated that certain parties are not proper defendants to this action. Specifically, defendants argue that Astoria Financial and LIB are bank holding companies that did not originate or service the loans at issue, and are therefore not subject to potential liability for the claims alleged in this case.[11] (See Defs.' Mem. at 40; Defs.' Supp. Mem. at 25.) Plaintiffs do not dispute the fact that Astoria Financial and LIB (collectively, "bank holding *143 company defendants") were not involved in originating or servicing the loans, but rather assert that the bank holding company defendants may be held liable because they exercised control over their subsidiaries. (See Pls.' Opp. Mem. at 59-61.) As set forth below, the Court agrees with defendants that the bank holding company defendants should be dismissed from the instant case because there is no evidence indicating their direct involvement, and there is insufficient record evidence from which a finder of fact could reasonably conclude that the corporate veil should be pierced under an alter ego theory of liability.
As a baseline matter, parent companies are generally not liable for actions of their subsidiaries. See De Jesus v. Sears, Roebuck & Co., Inc.,
In support of their position that liability may be potentially imposed on the bank *144 holding company defendants, plaintiffs primarily point to undisputed facts that demonstrate that the bank holding company defendants owned controlling interests in the defendants whose direct involvement is alleged. Specifically, plaintiffs cite: (1) admissions that Astoria Financial is the parent company of Astoria Federal and that LIB was the parent company of LISB; and (2) undisputed record evidence that Astoria Financial and LIB consolidated the financial results of their subsidiaries in their publicly-filed financial statements. (Decl. of Joseph S. Tusa, Dec. 20, 2005, Ex. 2; Decl. of Joseph S. Tusa, Mar. 2, 2007, Ex. Y). However, it is well-settled that these facts, which simply demonstrate that the bank holding company defendants had controlling interests in the subsidiary defendants,[12] are insufficient, standing alone, to pierce the corporate veil. De Jesus,
In sum, the Court finds that on the record evidence, no finder of fact could reasonably determine that the bank holding company defendants could be held liable for the claims alleged in this case under an alter ego theory of liability. Accordingly, Astoria Financial and LIB are entitled to judgment as a matter of law, and shall be terminated as defendants from this case. See, e.g., Warburton v. Foxtons, Inc., No. 04-CV2474 (FLW),
B. Truth In Lending Act
Plaintiffs and defendants each cross move for summary judgment on Horn's claim brought pursuant to the Truth in Lending Act ("TILA"), 15 U.S.C. 1601, et seq., which alleges that the Disputed Fees constitute undisclosed finance charges or prepayment penalties.[15] As set forth in detail below, the Court has examined the *146 record and has determined that disputed issues of material fact exist with respect to Horn's claims under TILA, and that summary judgment must therefore be denied.
1. Statutory Framework
In denying the motion to dismiss in the instant case, Judge Spatt provided the following well-detailed summary of the statutory framework applicable to the TILA claim alleged against defendants:
[TILA] was enacted to assure meaningful disclosure of credit terms, avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices. 15 U.S.C. 1601-65(b) (2004); see also Ford Motor Credit Co. v. Milhollin,444 U.S. 555 , 559,100 S.Ct. 790 ,63 L.Ed.2d 22 (1980) (stating that TILA's purpose is to assure "meaningful disclosure of credit terms to consumers"); Stein v. JP Morgan Chase Bank,279 F.Supp.2d 286 , 291 (S.D.N.Y.2003). Failure to make a required disclosure and satisfy the Act may subject a lender to statutory and actual damages that are traceable to the lender's failure. Beach v. Ocwen Federal Bank,523 U.S. 410 , 412,118 S.Ct. 1408 , 1410,140 L.Ed.2d 566 (1998).
In enacting TILA, Congress delegated authority to the Federal Reserve Board of Governors to promulgate implementing regulations and interpretations known as Regulation Z. 15 U.S.C. § 1604(a). These regulations, which are located at 12 C.F.R. Part 226 may be relied upon by creditors for protection from any civil or criminal liability. See Household Credit Services, Inc. v. Pfennig,541 U.S. 232 ,124 S.Ct. 1741 , 1746,158 L.Ed.2d 450 (2004). According to Regulation Z, the provisions of TILA apply to creditors that regularly offer or extend credit for personal, family, or household purposes, and that is payable by agreement in more than four installments, or subject to a finance charge. 12 C.F.R. § 226.1 (2004). As such, TILA is applicable to loans that are secured by real property or a dwelling such as residential mortgage transactions and home equity loans. See id. § 226.3(b). "Any person who originates 2 or more mortgages . . . in any 12-month period or any person who originates 1 or more such mortgages through a mortgage broker shall be considered to be a creditor for purposes of [TILA]." 15 U.S.C. § 1602.
In general, TILA requires creditors to disclose, among other things, all finance charges and prepayment provisions. 12 C.F.R. § 226.18. The "finance charge" is defined as "the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit." 15 U.S.C. § 1605(a) (emphasis added). Regulation Z further explains that the finance charge is "the cost of consumer credit as a dollar amount." 12 C.F.R. § 226.4(a). Examples of finance charges in residential mortgage transactions include interest, points, loan fees, appraisal fees, credit report fees, mortgage insurance premiums, and debt cancellation fees. Id. 226(b). Regulation Z expressly exempts from disclosure certain charges, such as credit application fees charged to all applicants, unanticipated charges for late payment or default, fees charged for participation in a credit plan, and the seller's points. Id. 226(c).
In addition, the following fees related to residential mortgage transactions need not be disclosed if they are bona fide and reasonable: (1) fees for title examination, abstract of title, title insurance, property survey, and similar purposes; (2) fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents; *147 (3) notary and credit report fees; (4) property appraisal or inspection fees performed prior to closing; (5) amounts required to be paid into escrow or trustee accounts if the amounts would not otherwise be included in the finance charge. Id. Regulation Z also allows a creditor to exclude taxes and fees "that actually are or will be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest." Id. § 226.4(e) (1).
McAnaney I,
2. Section 1605(f) Accuracy Tolerance
As a threshold matter, a claim for undisclosed fees under TILA may only be sustained if the disputed fees are considered to be finance charges under the statute and applicable regulations. "In order to be considered a finance charge, a charge must be incident to, or a condition of, the extension of credit." Pechinski v. Astoria Fed. Sav. and Loan Assoc.,
The focal point of defendants' argument that summary judgment is warranted on Horn's TILA claim regarding accurate disclosure of the finance charge centers upon the statute's "tolerances for accuracy" provision, codified at 15 U.S.C. § 1605(f). That provision establishes a safe harbor for small errors in disclosures regarding the finance charge, providing, inter alia, that required disclosures of the finance charges "shall be treated as accurate" under TILA "if the amount disclosed as the finance charge . . . does not vary from the actual finance charge by more than $100." 15 U.S.C. § 1605(f)(1)(A); see also McCutcheon v. America's Servicing Co.,
First, plaintiffs' contention that TILA claims for misstatements of the finance charge may survive summary judgment regardless of whether the $100 accuracy tolerance threshold is surpassed is contrary to the plain language of the statute. Section 1605(f) explicitly provides that errors in the finance charge that do not exceed $100 shall be "treated as accurate." Plaintiffs have not and cannot point to any provision of TILA which provides for liability for accurate disclosures. See Sterten v. Option One Mortgage Corp.,
*149 The Court also rejects plaintiffs' assertion that the accuracy tolerance threshold under § 1605(f) includes a requirement that any variance under $100 be a non-intentional omission in order to be treated as accurate. In sole support of their argument that the accuracy tolerance provision incorporates a motive requirement, plaintiffs solely rely on a piece of TILA's legislative history, a statement issued by former Senator Paul Sarbanes of Maryland, who stated that § 1605(f) "is intended to protect lenders from . . . small errors of judgment . . . It is obviously not intended to give lenders the right to pad fees up to the tolerance limit of $100." 141 Cong. Rec. S. 14567 (daily ed. Sept. 28, 1995) (statement of Sen. Sarbanes). However, the Third Circuit has recently rejected plaintiffs' specific argument that the statute should be read to incorporate a motive requirement, based upon Senator Sarbanes' comment:
[T]here is nothing to suggest that applying the tolerances provision turns on the motives of the creditor. The sole support [plaintiff] provides for that proposition is one reference in case law to a statement by then-Senator Paul Sarbanes. . . . But there is nothing in the actual text of § 1605(f) to indicate that courts have authority to condition application of the provision on the reason for a particular disclosure error. On the contrary the provision clearly states that "the disclosure of the finance charge . . . shall be treated as accurate for the purposes of this subchapter if the amount disclosed as the finance charge falls within the specified tolerances."
In re Sterten,
Finally, the Court also finds that the § 1605(f) accuracy tolerance provision applies, even if entire components of the finance charge are omitted, so long as the total variance is less than $100. Plaintiffs do not cite any authority in favor of their position, and their argument disregards the applicable definition of the "finance charge" under TILA, which is "the sum of all charges . . . imposed directly or indirectly by the creditor as an incident to the extension of credit." 15 U.S.C. § 1605(a) (emphasis added); see also 12 C.F.R. § 226.4(a). Plaintiffs' argument also ignores the fact that other courts have granted summary judgment in cases where the sum of disputed undisclosed elements of the finance charge is less than the $100 accuracy tolerance threshold established by § 1605(f). See, e.g., Edwards v. Accredited Home Lenders, Inc., No. 07-CV-0160 (KD),
3. Atty. Doc. Prep. Fee
Defendants present alternative arguments as to why there is no error in the finance charge disclosed with respect to the Atty. Doc. Prep. Fee: (1) that the Atty. Doc. Prep. Fee was in fact disclosed to Horn as part of the finance charge; or alternatively, that (2) the Atty. Doc. Prep. Fee did not need to be disclosed to Horn as part of the finance charge, because either (a) it was not incident to the extension of credit; or (b) it falls under an exception for excludable document preparation fees.[18] For the reasons stated below, the *151 Court finds that upon examination of the record, there exist disputed issues of material fact with respect to each of the alternative theories, which preclude granting summary judgment in favor of defendants on the basis of either.
First, the Court finds that there is a material issue of disputed fact regarding whether the Atty. Doc. Prep. Fee was in fact disclosed to Horn prior to loan origination. It is undisputed that defendants provided Horn with a Federal Truth-In-Lending statement, dated July 1, 2003, which listed a "Satisfaction Fee" of $125 as an element of the finance charge. (See Decl. of Alfred W.J. Marks, Apr. 17, 2008, Ex. F (hereinafter, "TIL Disclosure Statement").) Defendants claim that the Satisfaction Fee mentioned in the TIL Disclosure Statement refers to the same Atty. Doc. Prep. Fee that was requested by the payoff letter sent to Horn, and offers affidavit testimony to that effect.[19] As a threshold matter, the Court agrees that if the affidavit testimony offered by defendants is believed, then that would compel a finding that the Atty. Doc. Prep. Fee was in fact disclosed as part of the finance charge, which would in turn entitle them to summary judgment as against Horn's TILA claim. See, e.g., Davis v. Deutsche Bank Nat'l Trust Co., No. 05-CV-4061,
Defendants are also not entitled to judgment as a matter of law based upon their argument that the Atty. Doc. Prep. Fee was not includable as part of the finance charge because it was not incident to the extension of credit, but rather related to the extinguishment of debt. Judge Spatt has already correctly rejected defendants' argument and held that the fact that the Atty. Doc. Prep. Fee was collected following origination of the loan does not prevent it from being includable in the finance charge under TILA, noting that Regulation Z specifically directs that various post-origination fees are included.[21] Similarly unavailing is defendants' apparent argument that the Atty. Doc. Prep. Fee was not incident to the extension of credit simply because it was related to the "extinguishment of debt" based on Horn's initiative to repay the loan, relying upon Pechinski v. Astoria Federal Savings and Loan Association,
Finally, the Court finds that there exist disputed issues of material fact which preclude granting summary judgment to defendants on the ground that the Atty. Doc. Prep. Fee should be excluded from the finance charge based upon the statutory exclusion for document preparation fees. The exclusion which defendants rely upon is codified at 15 U.S.C. § 1605(e), and provides that:
The following items, when charged in connection with any extension of credit secured by an interest in real property, shall not be included in the computation of the finance charge with respect to that transaction: . . . (2) Fees for preparation of loan-related documents.
15 U.S.C. § 1605(e). It is undisputed that the Atty. Doc. Prep. fee was related to a loan-related document, and the Horn Loan was secured by an interest in real property, so it is eligible for the § 1605(e)(2) exclusion, provided that additional requirements imposed by Regulation Z are satisfied, that the document preparation fee was both (1) bona fide; and (2) reasonable. See 12 C.F.R. § 226.4(c)(7) ("Real-estate related fees. The following fees in a transaction secured by real property or in a residential mortgage transaction [are excluded from the finance charge], if the fees are bona fide and reasonable in amount:. . (ii) Fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents.") (emphasis added); see also McAnaney I,
In sum, defendants are not entitled to summary judgment regarding Horn's TILA claim based on any of their alternative arguments. In addition, the Court finds that plaintiffs' cross-motion for summary judgment on Horn's TILA claim is also unwarranted, because a jury could reasonably determine that either: (a) the Atty. Doc. Prep. Fee was in fact disclosed to Horn as part of the finance charge as the "Satisfaction Fee" in the TIL Disclosure Statement; or (b) that it was not in fact double-charged to Horn and otherwise collected in compliance of the contract, therefore qualifying it to be a reasonable and bona fide fee for the preparation of loan-related documents under the § 1605(e)(2) exclusion. If either of these determinations are made, then the TILA claim falls within the 1605(f) accuracy tolerance threshold, and defendants would not be liable to Horn on his TILA claim as a matter of law.[25]
C. HOEPA Claim
Defendants move for summary judgment on named plaintiff Horn's claim alleged under the Home Ownership and Equity Protection Act of 1994 ("HOEPA"), 15 U.S.C. 1639 (a component of TILA), specifically asserting that the Horn loan does not qualify for protection under the plain terms of the statute.[26] (Defs.' Supp. Mem. at 13-14.) For the reasons stated below, the Court agrees.
HOEPA prohibits the attachment of prepayment penalties to certain types of mortgages, as defined by the statute. See 15 U.S.C. 1639(c)(1)(A) ("A mortgage referred to in section 1602(aa) of this title may not contain terms under which a consumer must pay a prepayment penalty for paying all or part of the principal before the date on which the principal is due.") The statutory definition of HOEPA-covered mortgages includes loans that are secured by a consumer's principal dwelling, but specifically carves out residential mortgage transactions under its plain terms, which includes purchase money mortgages. See 15 U.S.C. 1602(aa) ("A mortgage referred to in this subsection means a consumer credit transaction that is secured by the consumer's principal dwelling, other than a residential mortgage transaction, a reverse mortgage transaction, or a transaction under an open end credit plan . . .") (emphasis added); see also 15 U.S.C. 1602(w) (defining "residential mortgage transaction" as "a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is *156 created or retained against the consumer's dwelling to finance the acquisition or initial construction of such dwelling").
Because it is undisputed that the Horn loan is a purchase money mortgage loan, Horn's HOEPA claim fails as a matter of law. See, e.g., Llaban v. Carrington Mortgage Servs., LLC, No. 09-CV-1667-HPOR,
D. State Law Claims Preemption
Defendants argue that plaintiffs' state law claims are preempted by federal law, specifically by the Home Owners' Loan Act, 12 U.S.C. 1461-1468 (hereinafter, "HOLA"), and its implementing regulations, 12 C.F.R. 560.1, et seq. For the reasons set forth below, the Court agrees that plaintiffs' statutory claims under New York Real Property Law 274-a and New York Real Property Actions and Proceedings Law § 1921 are preempted against all remaining defendants.[27] However, the Court finds that plaintiffs' New York common law claims for breach of contract, unjust enrichment and fraud, and the statutory claim under New York General Business Law § 349 are not preempted by HOLA and its implementing regulations.
Federal preemption of state statutory and common law occurs "where Congress has expressly preempted state law, where Congress has legislated so comprehensively that federal law occupies an entire field of regulation and leaves no room for state law, or where federal law conflicts with state law." Wachovia Bank, N.A. v. Burke,
HOLA was enacted in 1933, as a reaction to the Great Depression, "to provide emergency relief with respect to home *157 mortgage indebtedness," as a "radical and comprehensive response to the inadequacies of the existing state systems." Fidelity Fed. Sav. and Loan Ass'n v. de la Cuesta,
The regulations set forth the analytical framework that should be utilized to determine whether a state statute, regulation, ruling, order or judicial decision is preempted. Pursuant to 12 C.F.R. § 560.2(a), state law that affects the activities of federal savings associations are broadly preempted, except where otherwise provided in the regulations. Subsection (b) proceeds to provide illustrative examples of state laws that are preempted, which include, inter alia, state laws that impose requirements upon "[l]oan-related fees, including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees," 12 C.F.R. § 560.2(b)(5), and also "[p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages," 12 C.F.R. § 560.2(b)(10). Subsection (c) then proceeds to expressly carve out certain classes of state laws from its preemptive reach where they "only incidentally affect the lending operations" of covered entities:
State laws of the following types are not preempted to the extent that they only incidentally affect the lending operations of Federal savings associations or are otherwise consistent with the purposes of paragraph (a) of this section: (1) Contract and commercial law; (2) Real property law; (3) Homestead laws specified in 12 U.S.C. 1462a(f); (4) Tort law; (5) Criminal law; and (6) Any other law that OTS, upon review, finds: (i) Furthers a vital state interest; and (ii) Either has only an incidental effect on lending operations or is not otherwise contrary to the purposes expressed in paragraph (a) of this section.
12 C.F.R. § 560.2(c). According to OTS, the preemption analysis under § 560.2 is intended to proceed as follows:
*158 [T]he first step will be to determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption.
Cedeno v. IndyMac Bancorp, Inc., No. 06-CV-6438 (JGK),
Analytical results under each prong are generally consistent, however, because subsection (c) does not confer broad immunity from preemption for all state laws based on the extremely broad categories listed; rather, that carve out only applies "to the extent that they only incidentally affect the lending operations of Federal savings associations." 12 C.F.R. § 560.2(c); see also In re Ocwen,
The Office of Thrift Supervision has exclusive authority to regulate the savings and loan industry in the sense of fixing fees (including penalties), setting licensing requirements, prescribing certain terms in mortgages, establishing requirements for disclosure of credit information to customers, and setting standards for processing and servicing mortgages. But though it has some prosecutorial powers ancillary to its regulator functions, the Office has no power to adjudicate disputes between the S & Ls and their customers.
In re Ocwen, 491. F.3d at 643 (internal citations and quotation marks omitted).
However, before proceeding to analyze plaintiffs' individual state law claims to determine whether they are preempted, the Court notes that plaintiffs have levied a number of general arguments that preemption does not apply at all in the instant case under HOLA and 12 C.F.R. § 560.2, specifically asserting: (1) preemption is not applicable to state law claims for conduct that is found to be in violation of federal law; (2) preemption under 12 C.F.R. § 560.2 only applies to the "lending" activities of HOLA-covered institutions, and defendants were only engaging in "servicing" activities; (3) defendants' agreements incorporate state law and so they cannot be immune from their effect because of federal preemption; and (4) recent United States Supreme Court authority undercuts the preemptive extent of HOLA and 12 C.F.R. § 560.2. For the reasons set forth below, all of these arguments are without merit.
First, the Court rejects plaintiffs' argument that state law claims regarding conduct which violates federal law cannot be preempted under § 560.2 as a matter of law. In making this argument, plaintiffs attempt to draw support from two sources: (1) a statement by the Second Circuit in *159 Flagg v. Yonkers Savings and Loan Association, FA,
*160 Similarly, contrary to plaintiffs' suggestions, defendants are immune from state law under the preemptive effect of HOLA and its implementing regulations, notwithstanding the fact that defendants sold some of the mortgages on the secondary market and only continued to service some of plaintiffs' loans. The remaining defendants are HOLA-covered entities, and 12 C.F.R. § 560.2(b) explicitly lists servicing activities as illustrative examples of functions that are protected from state regulations through preemption. See 12 C.F.R. §§ 560.2(b)(6) ("servicing fees"), (10) ("servicing"). Accordingly, to the extent that defendants only serviced some of the class members' loans after selling them on the secondary market, state laws may still be preempted, if otherwise warranted under the standards governing preemption.
The Court also rejects plaintiffs' assertion that defendants incorporated state law into their contracts, such that they are not entitled to avail themselves of the preemptive effect of HOLA and its implementing regulations. "While contracts may incorporate particular laws as contract terms, the contract must do so with specificity." Flagg,
Compliance under Applicable Laws (6/30/02): We require each Fannie Mae approved lender (and any subservicer or third party originator it uses) to be aware of, and in full compliance with, all federal, state, local laws (including statutes, regulations, ordinances, administrative rules and orders that have effect of law and judicial rules and opinions) that apply to any of its origination, selling or servicing practices or other business practices (including the use of technology) that may have a material effect on us.
(See Decl. of Joseph S. Tusa, Mar. 2, 2007, Ex. AA, Part I, Ch. 3, § 306 (emphasis added).) Further, plaintiffs point to Astoria Federal's agreement with Fannie Mae, which states that "[i]t is a breach if [Astoria Federal] does not comply with this Contract or [Fannie Mae's Selling] Guides through any act of omission . . ." and that Astoria Federal was required to comply with "applicable federal and state laws, regulations or other requirements on consumer credit, equal credit opportunity or truth-in-lending." (See Decl. of Joseph S. Tusa, Dec. 20, 2006, Ex. 43 at p. 8, § IV(A)(15) & p. 13, VIII(A)(2) (emphasis added).) The plain text of these provisions (assuming arguendo that they are binding upon defendants' lending activities with plaintiffs) only require compliance to the extent that such laws are applicable. State laws that are subject to preemption under the terms of HOLA and its implementing regulations are manifestly not applicable to federal savings associations, and not specifically incorporated into defendants' agreements.
Finally, the Court rejects plaintiffs' arguments that the preemptive effect of HOLA and its implementing regulations are limited by the recent Supreme Court decisions in Wyeth v. Levine, ___ U.S. ___,
Having rejected plaintiffs' general arguments against preemption, the Court proceeds to examine, on a claim by claim basis, within the 12 C.F.R. § 560.2 framework, "`which claims fall on the regulatory side of the ledger and which, for want of a better term, fall on the common law side.'" Cedeno,
1. New York Real Property Law § 274-a
Plaintiffs allege violation of Section 274-a of the New York Real Property Law, which entitles an owner of real property that is encumbered by a mortgage to receive, upon demand, payoff statements at no charge. See N.Y. Real. Prop. Law § 274-a (hereinafter, "NYRPL § 274-a"). See Dougherty v. N. Fork Bank,
Accordingly, plaintiffs' 274-a claim is preempted against Astoria Federal, Astoria Mortgage, and LISB, the remaining defendants in this action, and does not survive summary judgment.
2. New York Real Property Actions & Proceedings Law § 1921
Plaintiffs allege violations of section 1921 of the New York Real Property Actions & Proceedings Law (hereinafter, "NYRPAPL § 1921"), which provides that "[a]fter payment of authorized principal, interest, and any other amounts due . . . a mortgagee of real property . . . must execute and acknowledge . . . a satisfaction of mortgage" which is to be recorded. A lender may be subjected to monetary penalties for failing to present a certificate of discharge for recording in a timely manner under the terms of the statute. See id.; see also Cassese MTD Opinion at 30. This claim also imposes a substantive, affirmative requirement on lenders to complete the satisfaction of a mortgage within a specific time frame, a requirement that, when applied to federal savings associations, directly impacts their lending activities, particularly with respect to the processing and servicing of mortgages, thereby making preemption warranted pursuant to 12 C.F.R. 560.2(b)(10). See Cassese,
Accordingly, plaintiffs' § 1921 claim is preempted against Astoria Federal, Astoria Mortgage, and LISB, the remaining defendants in this action, and does not survive summary judgment.
3. Breach of Contract
Plaintiffs assert a cause of action for breach of contract, alleging that the collection of the Disputed Fees was prohibited by their mortgage agreements with defendants. As set forth below, the Court concludes that the breach of contract claim is not preempted, because it is a "[c]ontract and commercial" law that does not "more than incidentally impact lending operations," pursuant to 12 C.F.R. § 560.2(c)(1).
The breach of contract claim, as opposed to the statutory claims asserted under NYRPL § 249-a or NYRPAPL § 1921, does not seek to impose specific substantive requirements upon the operations of defendants, apart from compliance with specific contractual obligations. It cannot be fairly said that the common law claim for breach of contract, which merely seeks to make defendants live up to the word of their agreements they sign with their customers, "more than incidentally affects" lending operations. The claim is therefore not preempted, pursuant to 12 C.F.R. § 560.2(c)(1). See, e.g., Davis v. Chase Bank U.S.A., N.A.,
*165 Defendants correctly point out that some courts have found breach of contract claims preempted under HOLA, but such holdings are the exception to the majority rule, and distinguishable from the instant case because they do not involve allegations of breach of specific contractual provisions. For example, in Cedeno v. Indy-Mac Bancorp, Inc., No. 06-CV-6438 (JGK),
Accordingly, the Court concludes that plaintiffs' breach of contract claim is not preempted against Astoria Federal, Astoria Mortgage, and LISB, the remaining defendants in this action.
4. New York General Business Law 349
Plaintiffs allege a claim under New York General Business Law 349, which provides that "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in furnishing of any service in this state are hereby declared unlawful." N.Y. Gen. Bus. Law § 349 (hereinafter, "GBL § 349"). As set forth below, the Court finds that plaintiffs' claim brought under GBL § 349 is not preempted, because it is being asserted as a type of "[c]ontract and commercial law" and its application in this case does not "more than incidentally impact lending operations," pursuant to 12 C.F.R. § 560.2(c)(1).
In Binetti v. Washington Mutual Bank,
There is no indication that the law is aimed at any state objective in conflict with the safe and sound regulation of federal savings associations, the best practices of thrift institutions in the United States, or any other federal objective identified in § 560.2(a). In fact, because federal thrifts are presumed to act with their borrowers in a truthful manner, Indiana's general prohibition on deception should have no measurable impact on their lending operations.
Id. The Court found that as with the Indiana law, GBL § 349 "is not directly aimed at lenders, and has only an incidental impact on lending relationships" and is "precisely the type of general commercial law designed to `establish the basic norms that undergird commercial transactions' that OTS has indicated that it does not intend to preempt." Id. at 220 (quoting Opinion P-96-14,
In reaching the conclusion, however, the district court in Binetti was compelled to distinguish a more recent OTS Opinion letter, which analyzed the California Unfair Competition Act ("UCA"), and found that federal law preempted the application of certain provisions of the UCA with respect to "three specific areas of lending operations, including advertising, forced placement of hazard insurance, and the imposition of certain loan-related fees." *167 Binetti,
Our finding of preemption is only based on how the UCA has been used by private and governmental plaintiffs to set standards in three specific areas of a thrift's lending operations discussed herein, areas that have traditionally been governed by federal law. We do not preempt the entire UCA or its general application to federal savings associations in a manner that only incidentally affects lending and is consistent with the objective of allowing federal savings associations to operate in accordance with uniform standards.
Id. (quoting OTS Opinion Letter P-99-3,
On the other hand, in Cedeno v. Indy-Mac Bancorp., No. 06-CV-6438 (JGK),
Binetti and Cedeno are easily harmonized. First, Binetti stands for the proposition that, as a general matter, claims brought under broad consumer deceptive practices statutes such as GBL 349 are not preempted because they simply seek to enforce truthfulness in commercial transactions, which is expected of federal thrift institutions as a baseline matter. Implemented in such a fashion, § 349 is not inconsistent with a single uniform scheme of federal regulation over HOLA-regulated entities. However, Cedeno (consistent with the 1999 OTS opinion letter regarding the California UCA) stands for a limited exception to this general rule, under which plaintiffs are preempted from bringing GBL 349 claims which attempt to establish extra-contractual substantive requirements upon federal savings associations which more that incidentally affect lending operations. This exception is sensible because plaintiffs could otherwise achieve an end-around the preemptive effect of HOLA and its implementing regulations through artful pleading, and thereby impose requirements *168 on federal savings associations in a manner which could not be imposed directly through a specific state statute or regulation.
With that framework in mind, the Court finds that plaintiffs' § 349 claim is not preempted, to the extent that plaintiffs seek relief for deceptive acts and practices incident to the alleged breach of the mortgage agreements with defendants. (See Defs.' Opp. Mem. at 51 ("Defendants violated GBL § 349 and similar state consumer protection laws by demanding and collecting the Disputed Fees when they were not owed by Class members.").) Cedeno is plainly distinguishable, because plaintiff has asserted that specific contractual provisions have been breached when the Disputed Fees were collected from plaintiffs, and thus the GBL § 349 cause of action does not seek to "set substantive standards or establish particular requirements for lending operations in the state of New York." Binetti,
However, the Court notes that in their papers, plaintiffs have asserted that they also may recover on their GBL § 349 claim on the basis that defendants improperly collected fees pursuant to NYRPL § 274-a. (See Pls.' Supp. Opp. Mem. at 22.) Indeed, the Second Circuit has indicated that "collecting fees in violation of other federal or state laws may satisfy the misleading element of § 349." Cohen v. JP Morgan Chase & Co.,
Accordingly, the Court concludes that plaintiffs' GBL § 349 claim is not preempted against Astoria Federal, Astoria Mortgage, and LISB, the remaining defendants in this action, but only to the extent that plaintiffs are seeking recovery for alleged deceptive business practices incident to the alleged breach of contract.
5. Unjust Enrichment & Fraud Claims
Plaintiffs allege New York common law claims for unjust enrichment and fraud. Defendants do not assert any specific preemption arguments with respect to these claims and appear to rely upon the general preemption arguments asserted with respect to the other state law claimsnamely, they contend that the plaintiffs are attempting to use these claims to impose affirmative obligations that would more than incidentally impact their lending operations. For substantially the same reasons that the Court found the breach of contract and GBL § 349 claims to not be preempted, the Court also finds that the common law claims as alleged in this case are also generally not preempted. These claims are laws of general application, which simply seek redress for allegations that the plaintiffs were not treated honestly and fairly as customers under common law standards applicable to businesses. See, e.g., In re Ocwen,
Accordingly, the Court concludes that plaintiffs' fraud and unjust enrichment claims are not preempted against Astoria Federal, Astoria Mortgage, and LISB, the remaining defendants in this action.
6. Preemption Conclusion
For the reasons set forth above, the Court finds that HOLA and its implementing regulations preempt plaintiffs' claims arising under NYRPL 274-a and NYRPAPL § 1921 against all remaining defendants. However, plaintiffs' claims for breach of contract, GBL § 349, unjust enrichment and fraud are not preempted. The Court proceeds to examine defendants' motion for summary judgment on the merits of each of these remaining claims in the following section.
E. State Law Claims
As discussed supra, plaintiffs' breach of contract, violation of GBL § 349, unjust enrichment, and fraud claims survive federal preemption. Because plaintiffs have moved for summary judgment on the breach of contract, unjust enrichment and GBL § 349 claims, and defendants have alternatively moved for summary judgment on all the remaining claims on the merits, the Court proceeds to those portions of the parties' motions. For the reasons set forth below, the Court denies the cross-motions for summary judgment on the breach of contract and GBL § 349 claims, because material disputed issues of fact remain. On the other hand, defendants' motion for summary judgment on the unjust enrichment and fraud claims are granted, because the Court finds that the claims are merely duplicative of plaintiffs' contract claims.
1. Breach of Contract
The parties cross move for summary judgment on the breach of contract *170 claim. In order to prove such a claim under New York law, a plaintiff must demonstrate: "(1) a contract; (2) performance of the contract by one party; (3) breach by the other party;and (4) damages." Rexnord Holdings, Inc. v. Bidermann,
Defendants concede that they collected some of the Disputed Fees with respect to some of the named plaintiffs in contravention of their mortgage agreements. Specifically, they acknowledge that they improperly collected the Atty. Doc. Prep. Fee under the controlling language of both the McAnaneys' First Loan and the Russo Loan, which dictates that the borrower will "[n]ot be required to pay Lender for the discharge, but [borrower] will pay all costs of recording the discharge in the proper official records." (See Defs.' Supp. Mem. at 22 ("The McAnaney Investor Loan did not permit Astoria Federal Savings to charge the Atty. Doc. Prep. Fee because the loan was sold to FNMA and the Russo Loan also did not permit the fee."); see also Decl. of William Conboy, Dec. 15, 2006, Ex. E (hereinafter, "McAnaney Investor Loan Agreement") at § 22; Ex. L (hereinafter, "Russo Loan Agreement") at § 23).) Notwithstanding this admitted breach, defendants claim that they are nevertheless entitled to summary judgment on the basis that plaintiffs cannot prove any damages, based on their assertion that they refunded the Atty. Doc. Prep. Fee on the loans to the borrowers' escrow accounts on the same day that the fee was collected. (See Defs.' Mem. at 33; Defs.' Supp. Mem. at 22-23.) Defendants further contend that, although they concede that at least the Atty. Doc. Prep. Fee was improperly collected on a regular basis due to computer error, they had sufficient controls in place to ensure that this mistake was detected and proper refunds provided on a consistent basis. (See Aff. of William Conboy, Dec. 15, 2006, ¶ 44 (noting that payoff verification representative reviewed and applied the same confirmation and reconciliation procedures to all loan payoffs . . [a]ny similar errors affecting other customers should also have been identified and corrected the same day that a loan payoff came in"); Aff. of William Conboy, Mar. 5, 2007, ¶¶ 22 ("[P]ayoff representatives always recalculated the amounts due, including all fees, as of the date the loan payoff was received."), 23 ("Because the calculations done at payoff were not affected by the coding error . . the $125 Atty. Doc. Prep. Fee should not have been collected from any customer whose loan agreement did not permit the fee.") & Ex. 2 (Payoff Department Procedure Manual, instructing payoff representatives to "[e]nsure that fees are not improperly charged on an investor account").)
The Court finds, however, that there are disputed issues of material fact regarding whether the Atty. Doc. Prep. Fee was in fact refunded to the McAnaneys and Russos, as well as to other class members, as asserted by defendants. In support of this contention, defendants cite to the affidavit of William C. Conboy, who asserts that these refunds were made, as components of a $151.01 credit made by defendants to the McAnaneys' escrow account on December 4, 2002, and a similar $594.67 credit to the Russos' escrow account on June 15, 2004. (See Aff. of William Conboy, Dec. 15, 2006, at ¶¶ 57, 70.) However, although defendants submit documentary evidence that those credits were made, none of this evidence indicates that this credit in part *171 included any refund for improper collection of the Atty. Doc. Prep. Fee. (See id. at Exs. H-J, P.) Viewing this evidence in a light most favorable to plaintiffs, as the non-moving party, there is absolutely no indication in these documents that these refunds incorporated the Atty. Doc. Prep. Fee, particularly where, as here, there is no other documentary evidence that the Atty. Doc. Prep. Fee was included, and it is undisputed that the McAnaneys and Russos were never informed of the improper collection or alleged refund of the Atty. Doc. Prep. Fee. (See Pls.' 56.1 ¶¶ 34-35, 82-83.)[40] In addition, although defendants admit that the improper collection of at least the Atty. Doc. Prep. Fee was due to a computer error, and claim that they had proper controls in place which would detect these errors such that proper refunds could be regularly provided, plaintiffs have pointed to competent record evidence to put the quality and effectiveness of those purported controls in dispute. Specifically, plaintiffs point to deposition testimony that indicates that the computer error that caused the improper inclusion of the Atty. Doc. Prep. Fee may have existed for almost three years, that after the computer error was detected, no retroactive review was performed to determine whether other accounts were improperly charged with the Atty. Doc. Prep. Fee, and documentary evidence instructing review of accounts for improper charge of the Atty. Doc. Prep. Fee only upon customer or legal complaint. (See Tusa Decl., Dec. 20, 2006, Ex. 14 (Dep. of William Conboy) at 195-96 (noting that computer error resulted from upgrade to system in September 2001 and not detected until August 2004); Ex. 17 (Dep. of Cari Rederman) at 176 (deposition testimony of manager of payoff department that "[w]e didn't go and do a review of all accounts); Ex. 39 (e-mail dated October 10, 2000 from Andrew Frank to payoff department, noting that Atty. Doc. Prep. Fees are occasionally charged improperly in contravention of loan agreements, therefore directing employees to "[p]lease review the documents carefully on any customer/legal complaint issued.").) Accordingly, on this record, the Court cannot find that defendants have met their burden to demonstrate their entitlement to summary judgment on the basis that plaintiffs cannot prove damages by virtue of defendants' assertion that the Atty. Doc. Prep. Fee was refunded to the McAnaneys, the Russos, or members of the class generally.
Alternatively, the Court finds that there are disputed issues of material fact with respect to whether or not there was a breach with respect to defendants' collection of the Facsimile Fee. The Court notes that defendants do not contend that they refunded that feedefendants, rather, have contended that they were properly collected in all instances. Specifically, defendants assert that the Facsimile Fee was not collected in breach of contract because: (1) the Facsimile Fee was not contemplated by the mortgage contract, and did not need to be included in the contract because a lender "cannot anticipate every service request made by a borrower"; and (2) in any event, plaintiffs were informed that they would incur the Facsimile Fee when *172 requesting a payoff statement, and voluntarily assumed the charge. (See Defs.' Supp. Mem. at 23.) For the reasons stated below, the Court finds that there are disputed issues of material fact with respect to both of defendants' arguments.
First, the Court finds sufficient ambiguity in the terms of the various mortgage agreements such that whether the mortgage agreements contemplated and contained a prohibition on collection of the Facsimile Fee is a question of fact that should be resolved by the jury. In its most basic form, the McAnaneys' Second Loan and the Russo Loan included a broad prohibition on the collection of any fees in connection with loan discharge, other than charges explicitly carved out for recording the discharge in official records:
I will not be required to pay Lender for the discharge, but I will pay all costs of recording the discharge in the proper official records.
(McAnaney Investor Loan Agreement at 22; Russo Loan Agreement at § 22). Viewing this provision in a light most favorable to plaintiffs as the non-moving party, this restriction could be read to cover the Facsimile Fee, given that it is related to loan discharge insofar as it was incurred in connection with a payoff statement provided to plaintiffs for prepayment of their loan obligations, and is not related to official recordation. In a similar fashion, another standardized form of the loan agreements, including that found in the Horn Loan and the Reilly Loan, included language that contemplated other fees for discharge may be charged, but only if paid to a third party for services rendered:
I will pay all costs of recording the discharge in the proper official records. I agree to pay a fee for the discharge of this Security Instrument, if Lender so requires. Lender may require that I pay such a fee, but only if the fee is paid to a third party for services rendered and the charging of the fee is permitted by Applicable Law.
(Decl. of Alfred W.J. Marks, Apr. 18, 2008, Ex. C (hereinafter, "Horn Loan Agreement") at § 23; Decl. of William Conboy, Dec. 15, 2006, Ex. Y (hereinafter, "Reilly Loan Agreement"), at § 23.) This provision could also be reasonably interpreted to cover the Facsimile Feealthough it does allow for other fees to be paid in connection with discharge, it only contemplates payments to third parties, and the Facsimile Fee collected by defendants would not qualify as a payment to a third party for services rendered. Consequently, because of this ambiguity as to whether the various prohibitions on the collection of fees related to loan discharge cover the Facsimile Fee, summary judgment must be denied. See Hoyt v. Andreucci,
Likewise, the Court finds that there remains disputed issues of material fact regarding whether defendants' customers were adequately informed of the $25 Facsimile Fee for a payoff statement, and the option to receive the statement by regular mail at no charge. In support of their contention that plaintiffs were adequately apprised of and voluntarily accepted those *173 fees, defendants offer affidavit testimony that customer service representatives were instructed to inform customers of the option to receive the payoff statements by mail for no charge, and that the Autofax system automatically informed customers of this option. (See Decl. of William Conboy, Dec. 15, 2006, ¶¶ 24-26; Decl. of William Conboy, Mar. 16, 2007, ¶¶ 4-9.) In addition, defendants provide a script for the Autofax system dated 2000, which includes a prompt that advises customers of the $25 fee for faxing a payoff statement, and asks if they accept the fee and wish to continue. (See Decl. of William Conboy, Mar. 16, 2007, Ex. A.) As an initial matter, the Court notes that the Autofax script that defendants cite to does not inform individuals that they may receive the payoff statement for no fee by opting for the payoff statement to be sent by regular mail; rather, the script informs the caller that "[a] 25 dollar fee will be added to your payoff figure for this service," and then provides the following options: (1) "accept the fee and continue"; (2) "cancel the request and return to the main menu"; and (3) "speak with a Customer Service Representative." Id. In addition, plaintiffs have put in issue whether customer service representatives consistently inform customers of their ability to avoid the fee through the deposition testimony of Philip Russo, who stated that he was not informed about the applicability of the fee at all when he requested the payoff statement from a representative. (See Decl. of Joseph S. Tusa, Mar. 2, 2007, Ex. O at 73 ("Q. And were you advised by the individual you spoke with at Astoria Federal that you would incur a $25 fee for having the payoff letter faxed to your attorney? A. No.").) Summary judgment is thus not warranted on this ground.
Finally, defendants are also not entitled to summary judgment because plaintiffs have cited competent evidence on the record from which a reasonable jury could conclude that the Recording Fee was collection in breach of the contract. Specifically, all of the loan agreements contained a similar provision that the borrower "will pay all costs of recording the discharge in the proper official records." (See, e.g., McAnaney Investor Loan Agreement at § 22; accord Russo Loan Agreement at § 22; Reilly Loan at § 23.) Plaintiffs have pointed to evidence on the record which appears to indicate that: (1) the McAnaneys, Russos, and Reillys all informed defendants that they would have their title insurer file their loan satisfaction documents with the appropriate state officials on their behalf (See Decl. of Joseph S. Tusa, Mar. 2, 2007, Exs. P-T); (2) that defendants complied with this request by sending the satisfaction documents to the requested entity (Decl. of Joseph S. Tusa, Dec. 20, 2006, Ex. 2 at Nos. 20, 48, 79, 107, 135); yet (3) it is undisputed defendants still charged these named plaintiffs the Recording Fee, and defendants do not assert that they provided any form of refund or credit to plaintiffs' escrow accounts for this charge. On this record, a reasonable jury could find that defendants' breached the various loan agreements by charging for a Recording Fee which did not in fact reflect "the cost of recording the discharge in the proper official records," which forms yet another independent basis for denying summary judgment on the breach of contract claim.
For substantially the same reasons, the Court finds that plaintiffs' cross-motion for summary judgment on their breach of contract claim must also be denied. With respect to collection of the Atty. Doc. Prep. Fee, there are serious questions regarding whether they have sustained any damagesviewing the evidence in a light most favorable to the defendants as the nonmoving party on plaintiffs' summary judgment motion, a reasonably jury could determine that there were no damages; that prompt *174 refunds were credited to the escrow accounts for loan agreements which did not permit collection of the fee, and that defendants adequately addressed the computer error as to the class generally, by having employees verify payoff statements for accuracy. Similarly, with respect to the Facsimile Fee, a reasonable finder of fact could determine that collection of the Facsimile Fee was not contemplated by and covered by contractual restrictions regarding fees related to loan discharge, and that the plaintiffs in fact voluntarily assumed the fees after being informed of the cost and the opportunity to opt out and receive the payoff statement through other means.
Accordingly, the Court denies the parties' cross-motions for summary judgment on plaintiffs' claim for breach of contract.
2. GBL § 349
The parties cross-move for summary judgment on the claim brought pursuant to GBL § 349. In order to prove such a claim under New York law, a plaintiff must demonstrate that: "(1) the defendant's challenged acts or practices must have been directed at consumers, (2) the acts or practices must have been misleading in a material way, and (3) the plaintiff must have suffered injury as a result." Cohen v. JP Morgan & Chase Co.,
First, the Court finds that plaintiffs' motion for summary judgment on the GBL § 349 claim is unwarranted. The plaintiffs appear to be proceeding on two theories for recovery under GBL § 349:(1) that the defendants improperly collected the Disputed Fees in violation of the loan agreements with plaintiffs; and (2) defendants collected fees in violation of state law. (See Pls.' Opp. Mem. at 51-56; Pls.' Supp. Reply Mem. at 22.) However, the Court has found that only the claim incident to breach of contract would not be preempted. Summary judgment is accordingly denied to plaintiffs on their GBL § 349 claim on the same grounds that summary judgment was denied to them on their breach of contract claim, as discussed supra.
Defendants' motion for summary judgment is likewise defective. First, defendants move for summary judgment on the GBL § 349 claim based on arguments that they were allowed to collect the Disputed Fees under the agreements, and that the Facsimile Fee was disclosed to plaintiffs and voluntarily incurred. As discussed previously in the context of the breach of contract claim, disputed issues of material fact remain as to both of these defenses, and thus summary judgment is unwarranted on that basis. Additionally, defendants assert that they are entitled to a "complete defense" from liability under GBL § 349(d) as a matter of law, because they claim that their disclosures and collection of the Disputed Fees complied with federal law. See GBL § 349(d) ("In any action it shall be a complete defense that the act or practice is, or if in interstate commerce would be, subject to and complies with the rules and regulations of, and the statutes administered by, the federal trade commission or any federal department, division, commission or agency of the United States as such rules, regulations or statutes are interpreted . . ."). Defendants' entire argument is premised upon an assertion that they complied with TILA's disclosure requirements as a matter of law. As a threshold matter, this argument is defective on its face because the Court has found that there exist disputed issues of material fact regarding plaintiffs' TILA claims. In any event, defendants have not offered any explanation as to why TILA or any other federal law would sanction breach of contract, if found by a jury, and *175 thereby immunize a finding that defendants violated § 349 incident to that breach.[41]
Accordingly, the Court denies the parties' cross-motions for summary judgment on the GBL 349 claim.
3. Unjust Enrichment
The parties cross-move for summary judgment on plaintiffs' common law cause of action for unjust enrichment. In order to prove such a claim under New York law, a plaintiff must demonstrate: "(1) that the defendant benefitted; (2) at the plaintiffs' expense; and (3) that equity and good conscience require restitution." Beth Israel Med. Ctr. v. Horizon Blue Cross and Blue Shield of N.J., Inc.,
Accordingly, the Court grants summary judgment to defendants with respect to plaintiffs' common law claim for unjust enrichment under New York law.
4. Fraud
Defendants move for summary judgment on plaintiffs' common law cause of action for fraud. In order to prove such a claim under New York law, a plaintiff must demonstrate: (1) a false representation of material fact; (2) knowledge by the party who made the representation that it was false when made; (3) justifiable reliance by the plaintiff; and (4) damages. See Evans v. Ottimo,
Defendants claim that plaintiffs' fraud claim is deficient for a number of alternative reasons, including: (1) the third amended complaint does not allege the misrepresentations that form the basis of the fraud claim with sufficient particularity, as required by Rule 9(b) of the Federal Rules of Civil Procedure; (2) the fraud claim should be dismissed as duplicative of the breach of contract claim; (3) plaintiffs cannot demonstrate that defendants made any intentionally false statements of fact; (4) plaintiffs cannot show detrimental reliance or materiality; and (5) plaintiffs cannot demonstrate sufficient damages. (See Defs.' Mem. at 35-37; Defs.' Supp. Mem. at 24.) Although defendants have repeatedly asserted these specific defenses, however, plaintiffs have only offered a general argument in response that their "memoranda, declarations and evidentiary submissions in support of their Summary Judgment motion and in opposition to Defendants' motion roundly demonstrate that Plaintiffs have proven their claims," including fraud. (See Pls.' Opp. Mem. at 56.) That assertion solely references a 23-page portion of their memorandum in support of their motion for summary judgment (Pls.' Mem. at 22-45), a section which contains no discussion regarding whether the record evidence supports a claim for common law fraud under New York Law, and only asserts arguments that: (1) defendants breached their contracts with members of the class by collecting the Disputed Fees (see Pls.' Mem. at 22-23); (2) the Disputed Fees were wrongfully collected in contravention of their loan agreements for years without notifying plaintiffs, Fannie Mae, Freddie Mac or regulatory authorities (see Pls.' Mem. at 23-27); (3) the plaintiffs are entitled to attorneys' fees because defendants stopped collecting the Disputed Fees in contravention of the agreements as a result of the actions of class counsel (see Pls.' Mem. 27-32); and (4) all class members from which Disputed Fees were collected as prohibited by their loan agreements are entitled to summary judgment on their breach of contract and unjust enrichment claims (see Pls.' Mem. at 41); and (4) the Facsimile Fee was prohibited under New York statutes NYRPL § 274-a and GBL § 349 (see Pls.' Mem. at 42-45).
All of the foregoing arguments incorporated by reference either relate to defendants' collection of Disputed Fees in alleged breach of the contract, save for the claim that the Facsimile Fee was collected in violation of New York law, a claim that is preempted, as discussed supra. Consequently, it is plain to the Court that plaintiffs' fraud claim is merely duplicative of *177 the breach of contract claim. See Guilbert v. Gardner,
Accordingly, the Court grants summary judgment to defendants with respect to plaintiffs' common law claim for fraud under New York law.
F. Attorneys' Fees
Plaintiffs seek summary judgment on their claim for attorneys' fees, claiming that by filing and prosecuting the action they have conferred benefits to class members, because, inter alia, defendants have made some refunds as a result of this action and have changed some of their processes, which plaintiffs claim will prevent other borrowers from being injured. Because the Court has determined that defendants' motion for summary judgment must be denied in part, and a trial on the merits is therefore necessary, it exercises its discretion to defer ruling on plaintiffs' motion for attorneys' fees until after the conclusion of the trial. See, e.g., Bank of China, N.Y. Branch v. NBM L.L.C., No. 01-CV-0815 (DLC),
IV. CONCLUSION
For the foregoing reasons, it is hereby ordered that defendants' motion for summary judgment as to defendants Astoria Financial and LIB are granted, and, accordingly, the Clerk of the Court shall terminate Astoria Financial and LIB as *178 defendants from this case. Further, defendants' motion for summary judgment is granted with respect to named plaintiff Horn's HOEPA claim, as well as plaintiffs' claims alleging violation of New York Real Property Law § 274-a, New York Real Property and Proceedings Law 1921, and common law claims for unjust enrichment and fraud. However, defendants' motion for summary judgment is denied with respect to plaintiffs' TILA, New York General Business Law § 349, and breach of contract claims. Plaintiffs' cross-motion for summary judgment is denied in its entirety. Finally, plaintiffs' motion for attorneys' fees and costs is deferred until after trial, and is therefore denied without prejudice for renewal at a later juncture.
It is further ordered that the parties participate in telephonic pre-trial conference on Wednesday, October 7, 2009 at 4:00 p.m. Counsel for plaintiffs is directed to initiate the call by first getting counsel for defendants on the line, and then contacting Chambers at the scheduled time.
SO ORDERED.
NOTES
Notes
[1] In McAnaney III, this Court dismissed the TILA claims of the McAnaneys as untimely under the relevant statute of limitations. See McAnaney III,
[2] Where only one party's 56.1 statement is cited, the other party does not dispute the facts alleged, or there is no evidence controverting such fact, unless otherwise noted.
[3] In McAnaney III, the Court granted leave for defendants to amend their Local Rule 56.1 statement and their responses to plaintiffs' Local Rule 56.1 statement. See McAnaney III,
[4] The Court will hereinafter refer to these three types of fees collectively as the "Disputed Fees."
[5] In McAnaney III, this Court also dismissed the TILA claims of the Reillys as untimely under the relevant statute of limitations. See McAnaney III,
[6] In McAnaney III, this Court also dismissed the TILA claims of the Russos as untimely under the relevant statute of limitations. See McAnaney III,
[7] The Court notes that the Russos' TILA claims with respect to the HELOC loan are also time barred, as stated in this Court's Memorandum & Order dated January 25, 2008, which addressed plaintiffs' motion for reconsideration of the decision in McAnaney III. See McAnaney v. Astoria Fin. Corp., No. 04-CV-1101,
[8] By Order dated September 29, 2009, the Court granted the plaintiffs' motion to intervene Geoffrey Horn as a new named plaintiff. Because the Horn Loan originated after March 15, 2003, Horn's TILA claim is not time-barred under the relevant statute of limitations, as set forth in McAnaney III. See
[9] Plaintiffs later consented to hold the class notice and class notice plan motion in abeyance pending the resolution of the parties' cross-motions for summary judgment.
[10] During the conference held on September 29, 2008, the Court consented to allowing the parties to rely on prior submissions incorporated by reference. For citation purposes, the Court uses the following abbreviations in this Memorandum & Order to refer to the various memorandums of law submitted in the instant case: (1) Defendants' Memorandum in Support of their Motion for Summary Judgment, dated December 15, 2006, is hereinafter referred to as "Defs.' Mem."; (2) Plaintiffs' and Certified Classes' Memorandum of Law in Support of Motion for Partial Summary Judgment, dated December 20, 2006, is hereinafter referred to as "Pls.' Mem."; (3) Plaintiffs' and Certified Class' Memorandum of Law in Opposition to Defendants' Motion for Summary Judgment, dated March 2, 2007, is hereinafter referred to as "Pls.' Opp. Mem."; (4) Defendants' Memorandum and Opposition to Plaintiffs' and Class Members' Motion for Partial Summary Judgment, dated March 5, 2007, is hereinafter referred to as "Defs.' Opp. Mem."; (5) Defendants' Reply Memorandum in Support of their Motion for Summary Judgment, dated March 16, 2007, is hereinafter referred to as "Defs.' Reply Mem."; (6) Plaintiffs' and Certified Classes' Supplemental Memorandum of Law in Further Support of their Motion for Partial Summary Judgment and in Opposition to Defendants' Motion for Summary Judgment, dated December 3, 2008, is hereinafter referred to as "Pls.' Supp. Mem."; (7) Defendants' Supplemental Memorandum in Support of Renewed Motion for Summary Judgment and in Opposition to Plaintiffs' and the Class' Motion for Summary Judgment, dated December 5, 2008, is hereinafter referred to as "Defs.' Supp. Mem."; (8) Plaintiffs' and Certified Classes' Response to Defendants' Supplemental Summary Judgment Memorandum of Law, dated December 20, 2008, is hereinafter referred to as "Pls.' Supp. Opp. Mem."; and (9) Defendants' Supplemental Reply Memorandum in Support of Renewed Motion for Summary Judgment and in Opposition to Plaintiffs' and the Class' Motion for Summary Judgment, dated December 22, 2008, is hereinafter referred to as "Defs.' Supp. Reply Mem."
[11] Plaintiffs assert that this argument was already considered and rejected by this Court. Although defendants asserted that they were improper defendants in their initial motion to dismiss this action, Judge Spatt did not address this issue in either the Memorandum & Order denying defendants' motion to dismiss, or in the Memorandum & Order denying defendants' motion for reconsideration.
[12] The fact that the bank holding company defendants consolidated the financial results of their subsidiaries in publicly filed statements merely reflects compliance with the SEC requirement that corporations consolidate the results of subsidiaries for which they own a 50 percent or more interest in such statements, and is not probative of control for corporate veil piercing purposes. See Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp.,
[13] The only other evidence that plaintiffs point to are two press releases, issued by Astoria Financial, which include discussions regarding the lending activities of its subsidiaries. (Decl. of Joseph S. Tusa, Mar. 2, 2007, Exs. E, CC.) The cited press releases in no manner whatsoever represent Astoria Financial as being directly involved in the lending activities, and all accurately represent the fact that the services are performed by its subsidiaries. These statements are no more probative of dominion or control than publicly consolidated financial statements, and are even less probative than statements affirmatively referring to a subsidiary as a "department" or "unit" of a parent, which has been found, in combination with the other factors present in this case, to be insufficient as a matter of law to justify piercing the corporate veil. See, e.g., In re Ski Train Fire,
[14] Plaintiffs incorrectly cite Moses v. Citicorp Mortgage, Inc.,
[15] As stated supra, Horn is the only remaining named plaintiff alleging a claim under TILA.
[16] In fact, the Court notes that there are disputed material issues of fact regarding the Recording Fee and the Facsimile Fee components of Horn's TILA claim. It is undisputed that neither was disclosed in the finance charge for Horn or any other class members. However, with respect to the Recording Fee, such a fee may be properly excluded from the finance charge to the extent that that it comes under the exception for "[f]ees and charges prescribed by law which actually are or will be paid to public officials for determining the existence of or for perfecting or releasing or satisfying any security related to the credit transaction." 15 U.S.C. § 1605(d)(1). Plaintiffs have offered evidence that, although $36.50 was collected from Horn for the recording, the Westchester County filing fee was only $34. (See Pls.' Intervention Ex. 2). If true, the overpayment of $2.50 should have been included in the finance charge. See, e.g., Frazier v. Accredited Home Lenders, Inc.,
[17] Plaintiffs incorrectly cite Inge v. Rock Financial Corporation,
[18] Plaintiffs repeatedly insist that the fact that defendants argue in part that the Atty. Doc. Prep. Fee was disclosed operates as a concession that such charge was required to be disclosed as part of the finance charge under TILA, but that argument is beyond cavil. (Pls.' Supp. Mem. at 6-8; Pls.' Supp. Opp. Mem. at 7-8.) It is well-accepted that litigants may present conflicting alternative arguments, and it is often a sign of effective advocacy. See Greene v. United States,
[19] (Aff. of Christine Haase, Apr. 17, 2008, ¶ 5 ("The terms Atty. Doc. Prep. Fee, Attorney Document Preparation Fee and Satisfaction Fee are terms that are used interchangeably by Astoria Federal Savings to describe fees paid by Astoria Federal Savings to the law firm of Thomas & Graham LLP for preparing a borrower's Satisfaction of Mortgage after a loan is paid off or satisfied."); ¶ 9 ("The payoff statement and cashiering advice for the Horn Loan (Exs. I and J to Marks Decl.) indicate that the Horns were charged and paid three fees, including an `Atty. Doc. Prep. Fee' of $125, in connection with satisfaction of that loan. This fee is the same fee as the $125 Satisfaction Fee disclosed to the Horns on their Federal Truth-In-Lending Disclosure Statement.").)
[20] (Aff. of Christine Haase, Apr. 17, 2008, 8 ("Although the $2,039.36 in other charges was listed on the line of the Horn TIL Disclosure entitled Prepaid Finance Charge, the $125 Satisfaction Fee was not prepaid at the time of the loan origination and was not collected from the Horns until the payoff and satisfaction of their loan.").)
[21] See McAnaney I,
[22] Plaintiffs incorrectly assert that Judge Spatt has previously declared in this case that attorney document preparation fees must be included in the finance charge, as a matter of law. In fact, Judge Spatt explicitly acknowledged the availability of the exclusion for the preparation of loan-related documents when discussing the TILA statutory framework. See McAnaney I,
[23] (Aff. of John M. Graham III, Esq., Dec. 14, 2006, ¶¶ 3-9; Aff. of William Conboy, Dec. 15, 2006, ¶¶ 37-39.)
[24] As discussed infra, the Court finds that there exist disputed issues of material fact regarding whether the contracts of other class members were breached when the Atty. Doc. Prep. Fee was collected. To the extent that any other class members with timely TILA claims have a viable breach of contract claim, summary judgment would not be warranted on their TILA claims, because the collection of a document preparation fee would not be bona fide for the purposes of the § 1605(e)(2) exclusion when it is collected in violation of a contractual obligation.
[25] The Court notes that plaintiffs are also proceeding on the alternative theory that the Disputed Fees were undisclosed prepayment penalties. See McAnaney I,
[26] As stated supra, Horn is the only remaining named plaintiff alleging a claim under HOEPA.
[27] Plaintiffs assert that HOLA preemption only potentially applies to defendants that are federal savings associations, namely Astoria Federal and LISB. While plaintiffs are correct that HOLA governs the activities of federal savings associations, HOLA explicitly authorizes extension by Office of Thrift Supervision ("OTS") of regulation to subsidiaries of federal savings associations, and the implementing regulations specifically indicate that the identical preemption analysis would apply to Astoria Mortgage because it is an operating subsidiary of Astoria Federal. See 12 U.S.C. § 1464(d)(7)(D) ("[I]f a savings association, a subsidiary thereof, or any savings and loan affiliate or entity . . . that is regularly examined or subject to examination by the Director, causes to be performed for itself, by contract or otherwise, any service authorized by this chapter . . . whether on or off its premises(i) such performance shall be subject to regulation and examination by the Director to the same extent as if such services were being performed by the savings association on its own premises . . ."); see also 12 C.F.R. 559.3(n)(1) ("State law applies to operating subsidiaries only to the extent it applies to [a federal savings and loan association]."); cf. State Farm Bank v. Reardon,
[28] The Court also declines plaintiffs' invitation to interpret § 560.2(a) in a manner which would effectively turn the federal preemption doctrine on its head, particularly in an area in which it is well-settled that Congress explicitly provided broad preemptive authority. See 12 U.S.C. § 1463(a)(1) (conferring authority on OTS "preemptive of any state law purporting to address the subject of the operations of a Federal savings association"); see also 12 C.F.R. § 560.2(a) ("OTS hereby occupies the entire field of lending regulation for federal savings associations."). This Court intends to implement § 560.2(a) in the same manner as scores of other courts before it; HOLA-covered defendants may be found potentially liable for violations of federal law, but not potentially liable for state law claims regarding the same activity if the state law is preempted under 12 C.F.R. 560.2. See, e.g. Bassett v. Ruggles, No. CV-F-09-528 (OWW/SMS),
[29] Plaintiffs asserted their arguments under Wyeth and Cuomo in the supplemental letters sent to the Court, dated March 17, 2009 and June 30, 2009. The Court has considered those letters, as well as defendants' response letters, dated March 19, 2009 and July 2, 2009, respectively.
[30] In Wyeth, the Supreme Court noted that the FDCA had included an express preemption clause as of 1976 specifically regarding medical devices, but did not enact a broader preemption provision. See
Appellees, however, point to the various sections of the HOLA explicitly pre-empting and incorporating state law, and contend that [OTS' predecessor] has no additional authority to adopt regulations displacing state law. Although Congress made decisions about the applicability of certain aspects of state law to federal savings and loans, these provisions do not imply that Congress intended no further pre-emption of state law. Rather, Congress invested [OTS' predecessor] with broad authority to regulate federal savings and loans so as to effect the statute's purposes, and plainly indicated that [OTS' predecessor] need not feel bound by existing state law. 5(a) of the HOLA, 12 U.S.C. 1464(a). We cannot read this broad delegation of power as confining the [OTS' predecessor]'s authority to those areas `specifically described by the Act's other provisions.'
Fidelity,
[31] The Court has considered the remainder of plaintiffs' arguments that preemption is generally inapplicable, and has found them all to be without merit.
[32] The prior Memorandum & Order referenced by the Cassese opinion can be found as docket entry number 125, dated September 7, 2007, under index number 05-CV-2724 (ADS)(ARL) in the United States District Court for the Eastern District of New York (hereinafter, "Cassese MTD Opinion"). The relevant discussion regarding preemption of the NYRPL § 274-a claim can be found at pages 28-29 of that Memorandum & Order.
[33] The OTS Opinion specifically provides:
Here, the fee the Association charges for faxing loan payoff statements, at the borrower's request, is a loan-related fee. The Association charges this fee for providing its loan customers the convenience of rapid receipt of a payoff statement containing information concerning all outstanding amounts on, and the payoff value of, their loans. The payoff statement is an integral part of the lending process as it provides the information necessary to satisfy the debt and extinguish the extension of credit. Therefore, under 560.2(b)(5), to the extent 274-a(2) would prohibit the Association from charging a borrower for faxing a loan payoff statement requested by the borrower, 274-a(2) does not apply to the Association.
Opinion of OTS Chief Counsel, P-2000-6,
[34] As stated supra, because the Court has determined that the law imposes substantive requirements that call for preemption under 12 C.F.R. 560.2(b), the Court is not required to address subsection (c). However, if the Court were to reach that question, it would find that as applied to this case, although the statute falls broadly within the category of a "[r]eal property law," it is ineligible for the exclusion from preemption under 12 C.F.R. 560.2(c) because it plainly imposes particular requirements regarding the payoff statement that "more than incidentally affects" lending operations.
[35] As stated supra, because the Court has determined that the law imposes substantive requirements that call for preemption under 12 C.F.R. § 560.2(b), the Court is not required to address subsection (c). However, if the Court were to reach that question, it would find that as applied to this case, although the statute falls broadly within the category of a "[r]eal property law," it is ineligible for the exclusion from preemption under 12 C.F.R. § 560.2(c) because it plainly imposes particular requirements regarding loan discharge that "more than incidentally affects" lending operations.
[36] In fact, to hold otherwise would allow a federal savings association to use preemption as a shield to avoid adherence to its contractual commitments. As Judge Posner has remarked:
Suppose an S & L signs a mortgage agreement with a homeowner that specifies an annual interest rate of 6 percent and a year later bills the homeowner at a rate of 10 percent and when the homeowner refuses to pay institutes foreclosure proceedings. It would be surprising for a federal regulation to forbid the homeowner's state to give the homeowner a defense based on the mortgagee's breach of contract. Or if the mortgagee (or a servicer like Ocwen) fraudulently represents to the mortgagor that it will forgive a default, and then forecloses, it would be surprising for a federal regulation to bar a suit for fraud. Some federal laws do create such bars, notably ERISA, see 29 U.S.C. §§ 1132(a), (e), but this is recognized as exceptional. Enforcement of state law in either of the mortgage-servicing examples above would complement rather than substitute for the federal regulatory scheme.
In re Ocwen,
[37] Similarly, in Spears v. Washington Mutual, Inc., No. 08-CV-0868 (RMW),
[38] Defendants argue that the claim should be preempted because the contracts allowed collection of the Disputed Fees, and so there cannot be breach as a matter of law. The Court disagrees that this is a sound basis for arguing against preemption; the Court is satisfied for the purposes of the preemption issue that the plaintiffs are relying on an argument of breach of a specific explicit obligation in the contract. The issue of whether the claim is not viable as a matter of law based on the terms and conditions of the agreements is addressed in the context of addressing defendants' alternative argument that they are entitled to judgment as a matter of law on the merits of the breach of contract claim. In any event, as discussed infra, the Court concludes that defendants' position is incorrect, because disputed issues of material fact exist on the record which preclude granting defendants summary judgment on plaintiffs' breach of contract claims.
[39] As the Court discussed supra in the context of discussing the breach of contract and GBL 349 claims, a different result would be required if it was apparent that the plaintiffs were attempting to use these general common law causes of action as a back door to imply specific requirements outside of the contract that would more than incidentally impact lending operations, that the state could not otherwise enact directly through statute or regulation. Cf. Cedeno,
[40] Defendants denied the paragraphs in plaintiffs' Local Rule 56.1 statement regarding the factual allegation that they never informed the McAnaneys and Russos that they improperly collected the Atty. Doc. Prep. Fee or had provided them with refunds. Defendants did not, however, cite to any admissible evidence disputing this factual allegation, and plaintiffs provided a proper citation to defendants' responses to their Requests for Admission, in which defendants plainly conceded that they had not provided notice of the improper collection or alleged refund to at least the McAnaneys. (See Decl. of Joseph Tusa, Dec. 20, 2006, Ex. 2 at No. 40.)
[41] The Court finds inapplicable the line of cases that have dismissed GBL § 349 claims where they find the claims to be merely duplicative of a breach of contract claim between private parties, and fail to demonstrate that a particular act was misleading to the consumers at large. See Washington v. Kellwood Co., No. 05-CV-10034 (DAB),
[42] The Court notes that plaintiffs never submitted a response to defendants' argument that the unjust enrichment claim should be dismissed as duplicative of the breach of contract claim, notwithstanding the fact that defendants have consistently raised the argument in their papers. (See Defs.' Mem. at 34; Defs.' Supp. Mem. at 24.)
[43] Because the Court has determined that dismissal is warranted on this basis, it does not reach defendants' alternative arguments for summary judgment on the fraud claim on the merits, arguments that plaintiffs have completely failed to provide a response to. The Court also declines plaintiffs' invitation to otherwise scour the entire record, including "all memoranda, declarations and evidentiary submissions" to manufacture an argument that plaintiffs have developed sufficient evidence from which a reasonable finder of fact could determine that defendants are liable for fraud, independent of any breach of contract. Sioson v. Knights of Columbus,