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Mers Motion to Dismiss

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  • 8/2/2019 Mers Motion to Dismiss


    SUPREME COURT OF THE STATE OF NEW YORKKINGS COUNTY--------------------------------------------

    THE PEOPLE OF THE STATE OF NEW YORK,by ERIC T. SCHNEIDERMAN, Attorney General ofthe State of New York,

    Plaintiffs,-against- Index No. 2768/2012lAS Part 47 (Schmidt, J.)




    Defendants.-------------------------------------------- X

    PLEASE TAKE NOTICE, that upon the accompanying Memorandum of Law ofDefendants MERSCORP, Inc. and Mortgage Electronic Registration Systems, Inc. (together,"Defendants") In Support of Their Motion To Dismiss Plaintiffs Complaint, Defendants by theirundersigned counsel will move this Court before the Honorable David 1. Schmidt at theCourthouse of the Supreme Court of the State of New York, Kings County, located at 360Adams Street, lAS Part 47, Room 541, Brooklyn, New York 11201, on July 25,2012, at9:30 a.m., or as soon thereafter as counsel can be heard, for an Order, pursuant to CPLR3211(a)(7) dismissing the Complaint, and directing such other and further relief as the Courtdeems just and proper.

    Plaintiff and Defendants have stipulated that Plaintiff shall serve its opposition no laterthan June 22,2012 and that Defendants shall serve their reply within 30 (thirty) days afte;


    service of Plaintiff s opposition. ij f.', . J ~

  • 8/2/2019 Mers Motion to Dismiss


    Dated: April 20, 2012New York, New York


    Joanna C. HendonDavid A. Snider101 Park AvenueNew York, New York 10078(212) [email protected] M. BrochinBenjamin Weinberg200 South Biscayne BoulevardSuite 5300Miami, Florida 33131(305) [email protected] for DefendantsMERSCORP,Mortgage ElectronicRegistration Systems, Inc. and MERSCORP,INC., n/k/a MERSCORP Holdings, Inc.


    mailto:[email protected]:[email protected]:[email protected]:[email protected]
  • 8/2/2019 Mers Motion to Dismiss


    SUPREME COURT OF THE STATE OF NEW YORKKINGS COUNTY--------------------------------------------

    THE PEOPLE OF THE STATE OF NEW YORK,by ERIC T. SCHNEIDERMAN, Attorney General ofthe State of New York,

    Plaintiffs,-against- Index No. 2768/2012


    lAS Part 47 (Schmidt, J.)




    ,"\L ; I I f I.'j

  • 8/2/2019 Mers Motion to Dismiss




    A. HowMERS Works 6B. The Attorney General's Complaint 8



    Doctrine 13C. The Attorney General's Claims Are Barred By The Absolute Privilege For

    Statements Made In The Course Of Judicial Proceedings 16D. The Attorney General's Claims Are Barred By The Doctrine of ResJudicata Or Claim Preclusion , 18E. The Attorney General Lacks Standing To Enjoin Lawful ForeclosureProceedings That Could Provide the Aggrieved With Relief .21

    II . THE COMPLAINT FAILS TO STATE A CLAIM AGAINST THE MERSDEFENDANTS UNDER GENERAL BUSINESS LAW 349 .23A. The Standard Of Review 23B. The Complaint Fails Adequately To Plead MERS Engaged In ConsumerOriented Conduct 24C. The Complaint Fails Adequately To Allege MERS Engaged In Conduct

    That Is Deceptive Or Misleading In A Material Way 27D. The Complaint Fails Adequately To Plead MERS Has Caused Or Will


    EXECUTIVE LAW 63(12) 42A. The Attorney General Fails Adequately To Allege That MERS Engaged In

    Fraudulent Or Illegal Acts 43B. The Complaint Fails Adequately To Plead That MERS Engaged In"Business" Acts 45



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    420 East Associates v. Kerner,81 A.D.2d 545, 438 N.Y.S.2d 316 (1st Dep't 1981) 36

    Abrams v. Magley,105 A.D.2d 208, 484 N.Y.S.2d 251 (3rd Dep't 1984) 21,44Abrams v. Stevens,130 Misc. 2d 790, 497 N.Y.S.2d 812 (Sup. Ct. Oswego Cty. 1985) .43Aequitron Medical, Inc. v. Dyro,

    999 F. Supp. 294 (E.D.N.Y. 1998) 16Ahmad v. Wigen,726 F. Supp. 389 (E.D.N.Y. 1989) 12Airlines Reporting Corp. v. S &N Travel,238 A.D.2d 292, 735 N.Y.S.2d 13 (2nd Dep't 1997) 33Alfred Weissman Real Estate v. Big V Supermarkets,268 A.D.2d 101, 707 N.Y.S.2d 647 (2nd Dep't 2000) 14Ava Acupuncture, P.e. v. NY Central Mutual Fire Insurance Co., 34 Misc. 3d 149(A),2012 WL 502676, 2012 N.Y. Slip Op. 50233(U) (N.Y. App. Term Feb. 09,2012) 18Bain v. Metropolitan Mortg. Grp., No. C09-0149-JCC,

    2010 WL 891585 (W.D. Wash. Mar. 11, 2010) 38Bank of New Yorkv. Silverberg,86 A.D.3d 274,926 N.Y.S.2d 532 (2nd Dep't 2011) 20, 31, 33BBS Norwalk One, Inc. v. Raccolta, Inc.,60 F. Supp. 2d 123 (S.D.N.Y. 1999) 36Begelfer v. Najarian,

    381 Mass. 177,409 N.E.2d 167 (1980) 26,46Beltway Capital LLC v. Soleil, 2011 NY Slip Op 50064(U),30 Misc. 3d 1214(A) (Sup. Ct. Kings Cty. Jan. 7, 2011) .40Bildstein v. Mastercard International Inc.,

    329 F. Supp. 2d 410 (S.D.N.Y. 2004) 27

    - 1 1 -

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    Bisogno v. Borsa, 31 Misc. 3d 1203(A), 930 N.Y.S.2d 173,2011 WL 1168316 (Sup. Ct. Richmond Cty. Mar. 28, 2011) 16, 17

    Black v. Green Harbour Homeowners' Assn., Inc.,19 A.D.3d 962,798 N.Y.S.2d 753 (2005) 16

    Burch v. Trs. of Freeholders & Commonalty of Town of Southampton,47 A.D.3d 654,849 N.Y.S.2d 622 (2nd Dep't 2008) 19

    Caldwell v. Gutman, Mintz, Baker Sonnfeldt, P.e., No. CV-090357-07/KI,33 Misc. 3d 1226(A), 2011 WL 5903763,2011 N.Y. Slip Op. 52116(U) (Civ. Ct. Kings Cty. Nov. 25, 2011) 18

    California. ex. reI. Bates v. Mortg. Elec. Reg. Sys., Inc.,No. 2:10-cv-01429-GEB-CMK, 2011 WL 892646 (E.D. Cal. Mar. 11,2011) 30

    Caniglia v. Chicago Tribune-New York News Syndicate,204 A.D.2d 233,612 N.Y.S.2d 146 (1st Dep't 1994) 24Caprer v. Nussbaum,

    36 A.D.3d 176,825 N.Y.S.2d 55 (2006) 31Cervantes v. Countrywide Home Loans, Inc.,

    No. CV 09-517-PHX-JAT, 2009 WL 3157160 (D. Ariz. Sept. 24, 2009) 29, 30Cervantes v. Countrywide Home Loans, Inc.,656 F.3d 1034 (9th Cir. 2011) 37Chemical Bank of Rochester v. Haskell,

    51 N.Y.2d 85, 432 N.Y.S.2d 478 (1980) 32Cheminor Drugs, Ltd. v. Ethyl Corp.,

    168 F.3d 119 (3d Cir. 1999) 15Chicago & Southern S. Air Lines, Inc. v. Waterman Steamship Corp.,

    333 U.S. 103 (1948) 12Chua v. IB Prop. Holdings, LLC, No. CV 11-05894 DDP (SPx),

    2011 WL 3322884 (C.D. Cal. Aug. 1,2011) 37Ciardi v. Lending Co., No. CV 10-0275-PHX-JAT,

    2010 WL 2079735 (D. Ariz. May 24,2010) 30Citibank, NA. v. Collette, No. 10 MISC. 425412,

    2010 WL 7746835 (Mass. Land Ct. Dec. 23, 2010) 38


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    Cohen v. State94 N.Y.2d 1,698 N.Y.S.2d 574 (1999) 10

    College Management Co. v. Belcher Oil Co.,159 A.D.2d 339,552 N.Y.S.2d 616 (1st Dep't 1990) 33

    Commissioners of State Insurance Fund v. Low,285 A.D. 525, 138 N.Y.S.2d 437 (3rd Dep't 1955) 19

    Concourse Nursing Home v . Engelstein,278 A.D.2d 35, 717 N.Y.S.2d 154 (1st Dep't 2000) 15Craig v. Graphic Arts Studio, Inc.,

    39 Del. Ch. 447, 166 A.2d 444 (Del. Ch. 1960) 36Cuomo v. Gagnon Bus Company, 30 Misc. 3d 1225(A), 926 N.Y.S.2d 345,

    2011 WL 609869 (Sup. Ct. Queens Cty. Jan. 18, 2011) .41Cuomo v. Nationwide Asset Srvc., Inc.,

    26 Misc. 3d 258,888 N.Y.S.2d 850 (Sup. Ct. Erie Cty. 2009) .41CW Capital Asset Mgmt. LLC v. Charney-FPG 114 41st St., LLC,

    84 A.D.3d 506,923 N.Y.S.2dA53 (1st Dep't 2011) 33Daniels v. Southard,

    23 Misc. 235, 51 N.Y.S. 1136 (Sup. Ct. N.Y. Cty. 1898) 11Darns v. Sabol,

    165 Misc. 2d 77, 627 N.Y.S.2d 526 (Sup. Ct. N.Y. Cty. 1995) 10, 12Davin v. Isman,

    228 N.Y. 1, 126 N.E. 257 (1920) 34De Ran Landscaping Serv., Inc. v. De Ran Indus., Inc.,

    109 A.D. 2d 1040, 1041,487 N.Y.S.2d 160 (3rd Dep't 1985) 26, 46Deutsche Bank National Trust Co. v. Pietranico,

    33 Misc. 3d 528, 928 N.Y.S.2d 818 (Sup. Ct. Suffolk Cty. 2011) passimDirecTV, Inc. v. Rowland, No. 04-CV -297S,

    2005 WL 189722 (W.D.N.Y. Jan. 22, 2005) 15,25.Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc.,

    365 U.S. 127 (1961) 13


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    Fairbanks Capital Corp. v. Nagel,289 A.D.2d 99, 735 N.Y.S.2d 13 (2001) 33

    Federal National Mortgage Association v. Williams,34 Misc. 3d 1208(A), 2012 WL 75033 (Dist. Ct. Nassau Cty. Jan. 10,2012) 20-21Federal Financial Co. v. Levine,281 A.D.2d 454, 721 N.Y.S.2d 558 (2nd Dep't 2001) 26, 46Feinberg v. Federated Department Stores, Inc.,15 Misc. 3d 299,832 N.Y.S.2d 760 (Sup. ct. N.Y. Cty, 2007) 24Fils-Aime v. Ryder TRS, Inc.,40 A.D.3d 917,837 N.Y.S.2d 199 (2d Dep't 2007) 36First Enterprises, Ltd v. Cooper,

    425 Mass. 344,680 N.E.2d 1163 (1997) 26Flax v. Lincoln National Life Insurance Co.,

    54 A.D.3d 992,864 N.Y.S.2d 559 (2d Dep't 2008) 24, 26Gletzer v. Harris, 12 N.y'3d 468,882 N.Y.S.2d 386 (2009) 39Godfrey v. Spano,13 N.y'3d 358, 920 N.E.2d 328 (2009) 24Goshen v. Mutual Life Ins. Co of New York,

    98N.Y.2d314, 77N.E.2d 1190(2002) 41Haft v. Dart Group Corp.,841 F. Supp. 549 (D. Del. 1993) 36Havel! Capital Enhanced Municipal Income Fund, L.P. v. Citibank, NA.,84 A.D.3d 588, 923 N.Y.S.2d 479 (1st Dep't 2011) 28IG. Second Generation Partners, L.P. v. Duane Reade,17 A.D.3d 206,208, 793 N.Y.S.2d 379 (1st Dep't 2005) 13IGEN International, Inc. v. Roche Diagnostics GmbH,

    335 F.3d 303 (4th Cir. 2003) 15Icahn v. Raynor, 32 Misc. 3d 1224(A), 936 N.Y.S.2d 59,2011 WL 3250417 (Sup. Ct. N.Y. Cty. June 16,2011) 13Impal!omeni v. Meiselman,

    272 A.D.2d 579, 708 N.Y.S.2d 459, (2nd Dep't 2000) 17


  • 8/2/2019 Mers Motion to Dismiss


    In re City of New York,10 Misc. 3d 1060(A), 809 N.Y.S.2d 480 (Sup. Ct. Kings Cty. 2005) 39In re County of Oneida v. Berle,

    49 N.Y.2d 515, 427 N.Y.S.2d 407 (1980) 10In re Mortgage Electronic Registration Systems (MERS) Litigation., 09-md-2119-JAT,

    2010 WL 4038788 (D. Ariz. Sept. 30, 2010) 402011 WL 4550189 (D. Ariz. Jan. 28, 2011) 34, 4044 F. Supp. 2d 1018 (D. Ariz. 2011) 29, 30

    In re MERSCORP, Inc. v. Romaine,8 N.Y.3d 90,828 N.Y.S.2d 266 (2006) passimIn re New York State Labor Relations Board v Holland Laundry, Inc.,

    294 N.Y. 480, 63 N.E.2d 68 (1945) 19In re Nicholas v. Kahn,47 N.Y.2d 24,416 N.Y.S.2d 565 (1979) 10In re Reilly v. Reid,45 N.Y.2d 24,407 N.Y.S.2d 645 (1978) 19In re Tucker,441 B.R. 638 (Bankr. W.D. Mo. 2010) 29

    In re Zilkha,174 A.D.2d 331,570 N.Y.S.2d 807 (1st Dep't 1991) 21Insurance Company of Pennsylvania. v. HSBC Bank USA,10 N.Y.3d 32,852 N.Y.S.2d 812 (2008) 19Jackman v. Hasty, Civil Action No. 1:10-CV-2485-RWS,2011 WL 5599075 (N.D. Ga. Nov. 15, 2011) 38Jackson v. Deer Park Ventures, 9 Misc. 3d 1123(A), 862 N.Y.S.2d 808,2005 WL 2847265 (Sup. Ct. Kings Cty. Oct. 31, 2005) 18Kiah v. Aurora Loan Services, LLC, Civil Action No. 10-40161-FDS,2011 WL 841282 (D. Mass. Mar. 4, 2011) 31Ladino v. Bank of America,52 A.D.3d 571,861 N.Y.S.2d 683 (2d Dep't 2008) 23, 26


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    LaSalle Bank NA. v. Munoz,33 Misc. 3d 1203(A), 2011 WL 4507121 (Sup. Ct. Queens Cty. Sept. 21, 2011) 34

    Larabee v. Governor of New York,65 AD.3d 74, 880 N.Y.S.2d 256 (2009) 10, 12

    Lefkowitz v. Bull Investment Group, Inc.,46 AD.2d 25,360 N.Y.2d 488 (3d Dep't 1974) .44Lefkowitz v. Parker,

    38 AD.2d 542,327 N.Y.S.2d 277 (1st Dep't 1971) 21Lefkowitz v. South Haven Houses Housing Development Fund,

    63 A.D.2d 904, 406 N.Y.S.2d 296 (1st Dep't 1978) .45Loving v. United States,

    517 U.S. 748 (1996) 10Luscher v. Arrua,21 A.D.3d 1005, 801 N.Y.S.2d 379 (2nd Dep't 2005) 18M&T Bank Corp. v. Gemstone CDO VII, Ltd., 23 Misc. 3d 1105(A), 881 N.Y.S.2d 364,2009 WL 921381 (Sup. Ct. Erie Cty. Apr. 7, 2009) 27Town Board of Town of Southampton vMacPherson, Index No. 08-29742,2008 N.Y.

    Slip Op 71742(U) (2nd Dep't May 12, 2008) 35

    Marburyv. Madison, 5 U.S. 137 (1803) 10Marco Island Cable, Inc. v. Comcast Cablevision, Inc.,No. 2:04-cv-26-FTM-29DNF, 2006 WL 1814333 (M.D. Fla. July 3, 2006) 15Maron v. Silver,

    58 AD.3d 102, 107,871 N.Y.S.2d 404 (3d Dep't 2008) 11McGinnis v. GMAC Mortgage Corporation, No. 2:10-cv-00301-TC,

    2010 WL 3418204 (D. Utah Aug. 27,2010) 30Milliken & Co. v. Duro Textiles, LLC,451 Mass. 547, 887 N.E.2d 244 (2008) 46Mojica v. Reno,970 F. Supp. 130 (E.D.N.Y. 1997) 10Morrissey v. Nextel Partners, Inc.,

    22 Misc. 3d 1124(A), 2009 WL 400030 (Sup. Ct. Erie Cty. Oct. 9, 2009) .41


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    Mortgage Electronic Registration Systems, Inc. v. Coakley,41 A.D.3d 674,838 N.Y.S.2d 622 (2nd Dep't 2007) passim

    Mortgage Electronic Registration Systems, Inc. v. Korolizky,54 A.D.3d 737,862 N.Y.S.2d 917 (2008) 34

    NAR Apartments LLC v. Ippolito, Index No. 107866110, 2011 NY Slip Op 33056U,2011 N.Y. Misc. LEXIS 5575 (Sup. Ct. N.Y. Cty. Nov. 21, 2011) 13New York State Labor Relations Bd. v Holland Laundry, Inc.,294 N.Y. 480, 63 N.E.2d 68 (1945) 19New York University v. Continental Insurance Co,

    87 N.Y.2d 308,662 N.E.2d 763 (1995) 26

    Novartis Corp. v. F.TC.,223 F.3d 783 (D.C. Cir. 2000) 28O'Brien v. City a/Syracuse,54 N.Y.2d 353, 445 N.Y.S.2d 687 (1981) 18Ocwen Loan Servicing LLC v. Kroening, No. 10 C 4692,

    2011 WL 5130357 (D. Ill. Oct. 28, 2011) 37Oswego Laborers' Local 214 Pension Fundv. Marine Midland Bank, NA.,

    85 N.Y.2d 20,647 N.E.2d 741 (1995) passimPeople v. Apple Health & Sports Clubs, Ltd.,206 A.D.2d 266,613 N.Y.S.2d 868 (1st Dep't 1994) .43People v. Applied Card Systems, Inc.,

    11 N.y'3d 105, 863 N.Y.S.2d 615 (2008) 18, 19People v. Ashil Hyde Park, LLC,

    298 A.D.2d 393, 751 N.Y.S.2d 229 (2nd Dep't 2002) .44People v. City Model & Talent Dev., 29 Misc. 3d 1205(A),2010 WL 3899246 (Sup. Ct. N.Y. Cty. Sept. 28, 2010) 23, 41People ex reI. Bensky v. Warden of City Prison,

    258 N.Y. 55, 179 N.E. 257 (1932) 16People ex rei. Burby v. Howland,

    155 N.Y. 270,49 N.E. 775 (1898) 10


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    People v. Little,89 Misc. 2d 742, 392 N.Y.S.2d 831 (Sup. Ct. N.Y. Cty. 1977),affd, 60 AD.2d 797, 400 N.Y.S.2d 615 (4th Dep't 1977) 11, 24

    People (Lefkowitz) v. MacDonald,69 Misc. 2d 456,330 N.Y.S.2d 85 (Sup. Ct. N.Y. Cty. 1972) .45

    Petrone v. Miller,77 Misc. 2d 1028,355 N.Y.S.2d 287 (Sup. Ct. Nassau Cty. 1974) 12

    Rapuzzi Palumbo &Rosenberger, P.e. v. Gov't Emps. Ins. Co., Index No. 021415-10,2010 N.Y. Misc. LEXIS 3193 (Sup. Ct. Nassau Cty. May 2, 2011) 14Riccelli Enterprises., Inc. v. New York State Department of Environmental Conservation,30 Misc. 3d 573,915 N.Y.S.2d 439 (Sup. Ct. Onondaga Cty. 2010) 36

    Salvatore v. Kumar,45 A.D.3d 560,845 N.Y.S.2d 384 (2nd Dep't 2007) 24Santero v. Jack of Hearts Carpet Co., Inc., 6 Misc. 3d 1024(A),

    2005 WL 387963, 2005 N.Y. Slip Op. 50170(U) (N.Y. Sup. Ct. Jan. 19,2005) 35Sexter & Warmjlash, P.e. v. Margrabe,

    38 AD.3d 163, 828 N.Y.S.2d 315 (1st Dep't 2007) 16, 17, 18Silving v. Wells Fargo Bank, NA,No. CV 11-0676-PHX-DGC, 2012 WL 135989 (D. Ariz. Jan.18, 2012) 37Singh v. Sukhram,56 AD.3d 187,866 N.Y.S.2d 267 (2d Dep't 2008) 14Singleton Management, Inc. v. Compere"243 A.D.2d 213,673 N.Y.S.2d 381 (lst Dep't 1998) 18Sinrod v. Stone,

    20 A.D.3d 560, 799 N.Y.S.2d 273 (2nd Dep't 2005) 16Small v. Lorillard Tobacco Co. Inc.,

    94 N.Y.2d 43, 720 N.E.2d 892 (1999) 41, 42Sokoloffv. Harriman Estate Develop. Corp.,

    96 N.Y. 409, 729 N.Y.S.2d 425 (2001) 24Spitzer v. Applied Card Systems, Inc.,

    27 A.D.3d 104, 805 N.Y.S.2d 175 (3d Dep't 2005) 27, 41


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    Spitzer v. General Electric Co.,302 A.D.2d 314, 756 N.Y.S.2d 520 (1st Dep't 2003) .43

    Spitzer v. Schussel,48 A.D.3d 233,850 N.Y.S.2d 431 (1st Dep't 2008) .45State v. Grecco,21 A.D.3d 470,800 N.Y.S.2d 214 (2nd Dep't 2005) .45State v. Management Transition Resources, Inc.,115 Misc. 2d 489, 454 N.Y.S.2d 513 (Sup. Ct. N.Y. Cty. 1982) .43State v. New York City Conciliation and Appeals Board,123 Misc. 2d 47,472 N.Y.S.2d 839 (Sup. Ct. N.Y. Cty. 1984) 22State (Leftkowitz) v. Parkchester Apts. Co.,

    61 Misc. 2d 1020, 307N.Y.S.2d 741 (Sup. Ct. N.Y. Cty. 1970) .44State v. Seaport Manor A.CF,19 A.D.3d 609, 797 N.Y.S.2d 538 (2d Dep't 2005) 20Suburban Restoration Co. Inc, v. ACMAT Corporation,

    700 F.2d 98 (2d Cir. 1983) 15Swanson v. EMC Mortg. Corp., No. CV F-09-1507 LJO DLB,

    2009 WL 3627925 (E.D. Cal. Oct. 29, 2009) 30

    Taylor v. Sturgell,128 S. Ct. 2161 (2008) 20Town ofDeerfieldv. FCC,

    922 F.2d 420 (2d Cir. 1993) 12Trent v. Mortg. Electronic Reg. Systems, Inc.,288 F. App'x 571 (11th Cir. 2008) 30Tuosto v. Philip Morris USA Inc.,2007 U.S. Dist. LEXIS 61669 (S.D.N.Y. 2007) 14us. Bank, NA. v. Flynn,27 Misc. 3d 802,897 N.Y.S.2d 855 (Sup. Ct. Suffolk Cty. 2010) 20, 35Villanova Estates, Inc. v. The Fieldston Prop. Owners Ass'n, Inc.,

    23 A.D.3d 160, 803 N.Y.S.2d 521 (1st Dep't 2005) 14


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    Washington Mut. Bank, FA v. Peak Health Club, Inc.,48 A.D .3d 793, 853 N.Y .S.2d 112 (2d Dep 't 2008) .40

    Weiner v. Weintraub,22 N .Y .2d 3 30, 239 N .E.2d 540 (1968) 16

    Wells Fargo Bank Minnesota v. Mastropaolo,42 A .D .3d 239,837 N .Y .S.2d 247 (2nd Dep't 2007) 20, 31


    15 U .S.C . 45(a) ("FTC A") 27

    FED .R .C IV .P . 11(c) 12U .S. C ON ST ., A mend . I 13

    STATED EL . C OD E A NN . T IT . 8 , 122, 142 369-96 WA RR EN 'S W EE D N EW YORK R EA L PR OPER TY 96.05A 11McK INNEY'S BUSINESS CORPORATION LAW 1301 (b)(1) 25

    M cK INNEY 'S EXECUT IV E LAW 63(12) passimM cK INNEY 'S G ENERAL BUSIN E SS LAW 349(a) 23M cK INNEY 'S G ENERAL BUSIN ES S LAW 349(b) passimM cK INNEY 'S G ENERAL BUSIN ES S LAW 350d 9REAL PRO PERTY LAW 291 39,4022 NY CRR 130-1 . 1 (a) 12N .Y . C .L .S .Jud 753 12N .Y .C .P .L .R . 101 11N .Y . C .P .L .R . 507 11N .Y . C .P .L .R . 3211(a)(7) 1 ,9


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    N.Y. C.P.L.R. 5015(a)(3) 12OTHER AUTHORITY

    16 C.F.R. P 1990 WL 342991 (May 4, 1990) 25, 46


  • 8/2/2019 Mers Motion to Dismiss


    Defendants Mortgage Electronic Registration Systems, Inc. ("MERS") and MERSCORP,INC., nlk/a MERSCORP Holdings, Inc. ("MERSCORP") (together "the MERS Defendants")submit this memorandum of law in support of their motion to dismiss the Attorney General'sComplaint dated February 3, 2012 (the "Complaint"), pursuant to CPLR 3211(a)(7).

    PRELIMINARY STATEMENTIn disregard of settled law, the Attorney General seeks to recast lawful, privileged

    conduct of a party to litigation, in the course aflitigation, as fraudulent and deceptive tradepractices. The crux of the Attorney General's Complaint is that, by taking steps to confer

    standing as plaintiffs in judicial foreclosure actions, MERS and the other Defendants deceiveddebtors in those actions and the courts in which they were filed. The Attorney General aversgenerally that MERS "often lacked standing to foreclose" and engaged in conduct that "mayhave" confused defendants in foreclosure actions about the owner of the note associated with themortgage. Without specifying a single act that MERS allegedly undertook or failed to undertakein a particular lawsuit, and without pointing to any debtor harmed by MERS' acts, the Complaintgenerally concludes that MERS engaged in fraudulent or deceptive conduct by institutingforeclosure proceedings in its name; initiating foreclosure actions without holding the note or onbehalf of lenders no longer doing business; and relying upon signing officers who, in addition toacting for MERS, were employed by servicers or lenders and who, according to the AttorneyGeneral, "robosigned" affidavits and assignments of mortgage submitted in mortgage foreclosureactions.

  • 8/2/2019 Mers Motion to Dismiss


    This motion to dismiss is based on the following three independent grounds:1. The Attorney General Lacks Authority To Regulate Or Punish Litigation-Related


    The Attorney General has no right to bring a civil action that challenges and seeks topenalize the conduct of parties involved in countless lawsuits that are pending or where finaljudgments have been entered by courts of competent jurisdiction. The Attorney General'scomplaint raises factual and legal issues on behalf of litigants in foreclosure actions, and it seeksto sanction and impose fines upon parties to those lawsuits for conduct undertaken in ajudicialproceeding-effectively asking this Court to review judicial procedures and decisions under theguise of their constituting "deceptive and unfair trade practices." As such, the claims are barredby the separation of powers and Noerr-Pennington doctrines, res judicata, and the absoluteprivilege that protects statements made by parties in litigation.

    The doctrine of separation of powers bars the Attorney General's claims against MERSbecause the power to punish litigants' conduct, impose sanctions or grant relief from judgmentsbelongs solely and exclusively to the judiciary. New York courts may amend a prior judgment ifthat judgment was based on a party's fraud, misrepresentation, or misconduct, and, whether on amotion or its own initiative, courts may impose sanctions on attorneys and parties who makemisrepresentations during litigation. The Noerr-Pennington doctrine requires dismissal of theclaims against MERS because it bars the imposition of liability for petitioning activity beforegovernment agencies, including the prosecution and defense of foreclosure litigation, such as thatat issue here. The res judicata doctrine bars the Attorney General's lawsuit because it prohibitslitigation or re-litigation of claims that were or could have been litigated in prior lawsuits (hereforeclosure actions), on behalf of parties who had the opportunity to raise those claims, and mayin fact have done so, themselves. Separately, the litigation privilege requires dismissal of the


  • 8/2/2019 Mers Motion to Dismiss


    Complaint, because it shields parties from liability for exactly the conduct the Attorney Generalseeks to punish here-statements made in the course oflitigation. Finally, the Complaint shouldbe dismissed for the further reason that the Attorney General lacks standing to enjoin lawful,individual foreclosure proceedings which, themselves, could provide the borrower with relief.

    2. The Complaint Fails to State a Claim Under GBL 349(b)The claim under GBL 349(b) should be dismissed for the independent reason that it

    fails to state a claim for deceptive business practices under General Business Law 349(b). Forthe MERS Defendants to be liable, the statute requires a showing by the Attorney General of

    three elements, that the defendant engaged in: (a) materially deceptive or misleading (b)consumer-oriented conduct (c) causing injury. The Complaint pleads facts sufficient to establishnone of these required elements. Consumer-oriented acts are those "directed to consumers" whopurchase "goods, services or property for personal, family or household purposes." TheComplaint fails to allege MERS sold or marketed goods or services to consumers or that it billedor collected fees from consumers. The business of MERS, as the Attorney General concedes, isdecidedly not consumer oriented. MERS acts as the mortgagee of record for the lenders andservicers that are MERSCORP'S members. The business ofMERSCORP is to maintain theMERS System, a private database for its members designed to track the beneficial ownershipand servicing rights to loans registered in the database by its members. The conduct complainedof by the Attorney General-actions taken by MERS to enforce its rights in New York courts-as a matter of law is not consumer-oriented activity within the meaning of 349(b).

    The 349(b) claim fails for a second reason, namely, the Complaint fails to plead factsestablishing MERS engaged in materially fraudulent or deceptive conduct, as it must to state aclaim for deceptive trade practices. Although laced with conclusory allegations of deceptive andmisleading conduct, the Complaint fails to specify any deceptive act by MERS in any


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    foreclosure proceeding, much less conduct that is materially deceptive within the meaning of thestatute. The conduct about which the Attorney General complains, moreover, is neitherfraudulent nor deceptive as a matter oflaw. New York courts (and those in other states) haverepeatedly upheld MERS' authority to act as mortgagee of record, to institute foreclosurelawsuits, execute assignments of mortgage, and rely on signing officers who are employed byMERS CORP members as perfectly legal. With respect to the allegations-also conclusory-that MERS signing officers signed documents in litigation without first reading them and did sooutside the presence of a notary, the Complaint fails to plead facts tending to show any document

    submitted in any foreclosure action misstated the borrower's indebtedness or was otherwiseinaccurate, much less that it was materially fraudulent or deceptive. Nor has (or could) theAttorney General plead any facts tending to show MERS owed borrowers a duty to maintain theMERS System-a private database-or how an alleged failure to screen, train or monitorMERS signing officers resulted (or could result) in a material fraud or deception. Simply put,the Complaint fails to allege, as a matter oflaw, conduct that is materially deceptive orfraudulent.

    The 349(b) claim in the Complaint should be dismissed for the further reason that theComplaint fails to plead actual pecuniary injury to any consumer as a result of MERS' allegedmisconduct. Indeed, the Attorney General fails to allege that any defendant in any of the "over13,000 foreclosures" referenced in the Complaint was not in default when the foreclosure actionwas filed. The Attorney General avers MERS harmed debtors and courts by "creat[ing]confusion and uncertainty concerning property interests," "creat[ing] clouds on title [sic.]" andmaking it "difficult" for debtors to determine the owner of the note. Such allegations as a matterof law fail to establish the necessary injury within the meaning of Section 349(b).


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    3. The Complaint Fails to State a Claim UnderExecutive Law63(12)The Complaint likewise fails to state a claim under Executive Law 63(12). That

    provision requires the Attorney General to prove "repeated acts of illegality or fraud" by thedefendant "in the carrying on, conducting or transaction of business." As discussed supra,although riddled with conclusory allegations of deceptive and misleading conduct, the Complaintfails to allege any fact tending to show a single illegal or deceptive act by MERS in any judicialforeclosure proceeding. The alleged misconduct set forth in the Complaint has been approved byNew York courts and courts around the country. As pleaded, the Attorney General simply fails

    to establish any fraudulent conduct within the meaning of 63(12).The claim under Section 63(12) should be dismissed for the additional reason that the

    Attorney General has not pled (and could not plead) facts to show the alleged misconduct byMERS occurred "in the carrying on, conducting or transaction of business," as it must to survivea motion to dismiss. The Attorney General does not allege any fraudulent "business" activity byMERS. Rather, the Complaint focuses entirely on conduct allegedly engaged in by MERS

    iseeking to vindicate its rights through the filing and prosecution of foreclosure litigation, which,as a matter of law, is not "business" activity within the meaning of 63(12). Count Two shouldbe dismissed with prejudice on this ground as well.

    STATEMENT OF FACTSMERS' role in mortgage foreclosures is straightforward, narrow and perfectly legal. A

    summary of the relevant facts-many of which plaintiff alleges-may assist the Court indeciding this motion.


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    A. How MERS WorksWhen a mortgage lender loans money to a home buyer, two separate but related

    documents are obtained from the borrower: a promissory note and a mortgage. Cmplt. ~ 26.1The promissory note is a negotiable instrument under Article 3 of the Uniform Commercial Codethat effectuates and sets forth the terms of the borrower's promise to repay the loan. Id.; Mortg.Elec. Reg. Sys., Inc. v. Coakley, 41 A.D.3d 674, 675, 838 N.Y.S.2d 622,623 (2nd Dep't 2007)("[T]he promissory note was a negotiable instrument within the meaning of the UniformCommercial Code."). As such, the note (and the beneficial ownership interest in it) is frequently

    bought and sold. Id. The mortgage, as distinguished from the note, is a contract to establish alien on the property that secures repayment of the loan. Cmplt. ~ 26; Deutsche Bank Nat 'I TrustCo. v. Pietranico, 33 Misc. 3d 528,928 N.Y.S.2d 818, 836 (Sup. Ct. Suffolk Cty. 2011) (amortgage is a contract).

    At the origination of a loan, the lender takes possession of the note (and becomes theholder of the note), and the borrower and lender designate MERS (as the lender's nominee) toserve as the mortgagee, such that the lender's secured interest in the property is held by MERS.Id.; Cmplt. ~ 40. The borrower contractually agrees in the mortgage (the "MERS Mortgage")that it is MERS, as the nominee of the lender, who will serve as mortgagee, and that in the eventof a default on the repayment of the loan, MERS is authorized to foreclose on the property. Id. ~26; Coakley, 838 N.Y.S.2d at 623 ("Pursuant to the clear and unequivocal terms of the mortgageinstrument, [the borrower] expressly agreed without qualification that MERS had the right toforeclose upon the premises in the event of a default."). After the borrower signs the mortgage,it is recorded in the public local land records with MERS as the named mortgagee, as the

    "Cmplt." refers to the Complaint, dated February 3, 2012, filed by the New York Attorney General in thisaction.


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    nominee for the lender and the lender's successors and assigns. Cmplt. ~ 16; In re MERSCORP,Inc. v. Romaine, 8 N.y'3d 90, 96,828 N.Y.S.2d 266 (2006) (MERS Mortgages are "proper'conveyancers]' for purposes of the recording statute."). In its capacity as a mortgagee, and inorder to fulfill certain acts required of the mortgagee, MERS acts through its signing officers, asMERS' agents. Cmplt. ~ 17. MERS appoints signing officers to act on its behalf by issuing acorporate resolution appointing persons-who are officers of its Members-as assistantsecretaries and vice presidents ofMERS. Id.

    When the note is sold by the original lender to others, the various sales of the note are

    tracked on the MERS System. Cmplt. ~ 33; Romaine, 8 N.y'3d at 97. As long as the sale ofthe note involves MERSCORP members, MERS remains the named mortgagee and continues toact as the mortgagee as the nominee for the new beneficial owner of the note. Cmplt. ~ 16;Romaine, 8 N.y'3d at 96 ("Members contractually agree to appoint MERS as their commonagent on all mortgages they register in the MERS System."). The seller of the note does not andneed not assign the mortgage because MERS remains the mortgagee, as the nominee for thepurchaser of the note, who is then the lender's successor and assign. Id.; Pietranico, 928N.Y.S.2d at 835 ("[W]hen a lender that holds the note secured by the mortgaged premises, thenassigns that note to another member of the MERS system, it need not additionally assign themortgage because MERS, when it holds legal title to the mortgage lien, stands as common agentfor any member who holds the note."). This relationship is memorialized in the security

    instrument to which the borrower signs and is a party, as well as by the MERSCORPmembership agreements that are entered into between MERSCORP and its members (who aremostly mortgage lenders and servicersj' If, however, a MERS Member is no longer involved

    The MERSCORP membership agreement and rules and procedures available on the MERSCORP website.See

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    with the note after it is sold, an assignment of the mortgage from MERS to the non-MERSmember is provided by MERS, that assignment is recorded in the county where the real estate islocated, and the loan is deactivated from the MERS System. Romaine, 8 N.y'3d at 96.

    B. The Attorney General's ComplaintThe Complaint purports to state claims against the MERS Defendants and eight bank and

    servicer defendants under General Business Law 349(b) and Executive Law 63(12), arisingfrom judicial foreclosure proceedings brought by MERS, in instances where MERS was themortgagee of record, Cmplt. ~~ 125-30, and from foreclosure actions brought by lenders or

    servicers as assignees ofMERS' mortgagee interests. Id. ~~ 76,80,84,89. In addition, Plaintiffseeks to cast the structure and business model of MERS as itself deceptive or fraudulent. See,e.g., Cmplt. ~~ 17-18,24,46.

    With respect to foreclosures brought by MERS, Plaintiff contends "MERS often lackedstanding to foreclose." Cmplt. ~ 60; see also id. ~~ 21,64,67,69. With respect to foreclosureactions initiated by lenders or servicers, and not by MERS, Plaintiff contends (a) the "DefendantServicers made false and deceptive statements inpleadings and other court submissions eachtime they asserted that the foreclosing party held and/or owned the note and mortgage when, infact, it did not," Cmplt. ~ 76; (b) MERS executed assignments of mortgage (to the holder of thenote and party foreclosing) when MERS lacked authority to do so because the original lenderwas defunct, id. ~ 84; (c) MERS improperly executed mortgage assignments after the foreclosureaction was filed, id. ~ 80; (d) MERS "assignments were often automatically generated and'robosigned,'" id. ~ 22; and (e) "MERS certifying officers, including Defendant Servicers'employees and agents ... executed 'notarized' documents, such as mortgage assignments andaffidavits, outside the presence of the notary." Id. ~ 89. This conduct, Plaintiff contends,


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    deceived consumers and the courts, in violation of General Business Law 349(b) and ExecutiveLaw 63(12).

    As a result of this conduct, Plaintiff alleges, Defendants have "subj ected New Yorkhomeowners to improper foreclosures," "undermined the integrity of the court system andimpeded homeowners' ability to present potential legal defenses," "created clouds on title andinvalid liens, and have subjected foreclosure victims to the risk of subsequent proceedings toobtain monetary judgments," "confused, misled and deceived homeowners and the courts," and"deprived the public and homeowners of the ability to track real property ownership interests

    through publicly available records," id. , - r 124, all ostensibly in violation of General BusinessLaw 349 and Executive Law 63(12).

    The Complaint seeks declaratory and injunctive relief, damages, and an order awardingPlaintiff costs and directing the Defendants to pay civil penalties, pursuant to General BusinessLaw 350d. Id. at 42-44.

    ARGUMENTThe MERS Defendants move to dismiss the Complaint pursuant to CPLR 3211(a)(7) for



    now-complete and pending litigations, by purporting to state claims under General Business Law 349 and Executive Law 63(12), is barred by the doctrines of separation of powers, Noerr-Pennington and res judicata. The Attorney General's claims are also barred by the absoluteprivilege for statements made in the course of judicial proceedings.


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    A. The Separation Of Powers Doctrine Bars The Attorney General's ClaimsThe separation of powers doctrine is "fundamental in American jurisprudence," with

    "deep, seminal roots in the constitutional distribution of powers among the three coordinatebranches of government." Cohen v. State, 94 N.Y.2d 1, 11,698 N.Y.S.2d 574 (1999); Larabeev. Governor of New York, 65 A.D.3d 74,94,880 N.Y.S.2d 256 (2009) (quoting People ex rei.Burby v. Howland, 155 N.Y. 270, 282, 49 N.E. 775 (1898)). New York's State Constitutionestablishes a system in which legislative power to enact laws and make policy decisions is vestedin the Senate and Assembly. See Cohen, 94 N.Y.2d at 14. The "principal function of theexecutive branch" is "to carry out the laws of the State." In re County of Oneida v. Berle, 49N.Y.2d 515, 523,427 N.Y.S.2d 407 (1980). It is "'emphatically the province and duty of thejudicial department to say what the law is," and "[t]he function of the judges 'is to determinecontroversies between litigants." Mojica v. Reno, 970 F. Supp. 130, 156 (E.D.N.Y. 1997)(quoting Marbury v. Madison, 5 U.S. 137, 177 (1803)); Darns v. Sabol, 165 Misc. 2d 77,80,627 N.Y.S.2d 526 (Sup. Ct, N.Y. Cty. 1995).

    The separation of powers doctrine is "a basic principle of our constitutional scheme thatone branch of the Government may not intrude upon the central prerogatives of another." Lovingv. United States, 517 U.S. 748, 757(1996). It is "fundamental" that each branch of government"should be free from interference in the discharge of its peculiar duties, by either of the others."Howland, 155 N.Y. at 282. "It is equally obvious that one of these branches may not arrogateunto itself the powers residing wholly in another branch." In re Nicholas v. Kahn, 47 N.Y.2d 24,30-31,416 N.Y.S.2d 565 (1979).

    The conduct of judicial foreclosure actions of which the Attorney General complains fallssquarely within the province of the judiciary. See Darns, 165 Misc. 2d at 80; see Maron v.Silver, 58 A.D.3d 102, 108,871 N.Y.S.2d 404 (3d Dep't 2008) ("[T]hejudicial branch must


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    retain the inherent power to protect itself from the impairment of its ability to function if it is tocontinue in existence as an independent, coequal branch of government."). The power tosafeguard defendants' rights, punish litigants' conduct, impose sanctions and relieve defendantsfrom judgments based on misconduct belongs solely and exclusively to the judiciary. SeeDaniels v. Southard, 23 Misc. 235, 51 N.Y.S. 1136, 1138 (Sup. Ct. N.Y. Cnty. 1898) ("Courts ofgeneral jurisdiction have inherent authority to control and regulate their own process and recordswithin proper limits. "). The judiciary "has all powers reasonably required to enable a court toperform efficiently its judicial functions, to protect its dignity, independence and integrity, and to

    make its lawful actions effective." People v. Little, 89 Misc. 2d 742, 745, 392 N.Y.S.2d 831(Sup. Ct. N.Y. Cty. 1977), aff'd, 60 A.D.2d 797, 400 N.Y.S.2d 615 (4th Dep't 1977).

    In New York, judicial foreclosure actions are conducted in the Supreme Court andgoverned by the New York Civil Practice Law and Rules. See N.Y. C.P.L.R. 507; N.Y. C.P.L.R.101 ("The civil practice law and rules shall govern the procedure in civil judicial proceedings inall courts of the state and before all judges,");' The New York Civil Practice Law and Rulesprovide remedies in the event that, as the Attorney General alleges here, there is fraud ormisconduct in the course of judicial proceedings. A court which rendered a judgment or ordermay relieve a party from it, sua sponte or upon a motion by the party, in instances of fraud,misrepresentation, or other misconduct of an adverse party. See N.Y. C.P.L.R. 5015(a)(3).Orders and judgments of the Supreme Court may also be subject to appellate review. N.Y.

    C.P.L.R. 5513. And ajudge has the power to enforce its orders, conduct the business of thecourt in a proper manner and protect the court from conduct that obstructs the administration of

    Outside the City of New York, a New York County Court has concurrent jurisdiction with the New YorkSupreme Court with respect to foreclosure actions. 9-96 WARREN'SWEEDNEWYORKREALPROPERTY 96.0SA.


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    justice by imposing sanctions or holding parties or their attorneys in contempt. See 22 NYCRR 130-1.1; NY CLS Jud 753; see also Fed. R. Civ. P. 11(c).

    Courts "assess[] great weight to the principle that there should be no interference by theExecutive branch oflocal government with the operation of the Judicial branch." Petrone v.Miller, 77 Misc. 2d 1028, 355 N.Y.S.2d 287,291 (Sup. Ct. Nassau Cty. 1974). "see Larabee, 65A.D.3d at 95 ("The judicial system is at its best when it stands above and apart from the politicalinteractions that more typically characterize the other two branches of government. "). "Theexecutive may not foreclose the courts from exercising their responsibility to protect the integrity

    of the judicial process." Ahmad v. Wigen, 726 F. Supp. 389,412 (E.D.N.Y. 1989). Indeed, theAttorney General "abus[es] its power on a constitutional level," in violation of the separation ofpowers doctrine, "by acting in a manner likely to affect or impinge upon the independence of thejudiciary." Maron, 58 A.D.3d at 117 (internal quotations and citations omitted).

    Because the separation of powers doctrine "mandates that the legislative and executivebranches refrain from hindering the independence and proper functioning of the judicial branch,"the Attorney General's attempt in this case to litigate over the conduct of judicial foreclosureproceedings-a blatant violation of the doctrine-must be rejected and the Complaint dismissedwith prejudice in its entirety. Maron, 58 A.D.3d at 115; see Darns, 165 Misc. 2d at 88-89(dismissing claim for injunction barred by the separation of powers doctrine); see also Town ofDeerfieldv. FCC, 922 F.2d 420,428 (2d Cir. 1993) ("A judgment entered by an Article II Icourt ... is not subject to review by a different branch of government.") (quoting Chicago & s.Air Lines, Inc. v. Waterman Steamship Corp., 333 U.S. 103, 113 (1948)).


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    B. The Attorney General's Claims AreBarred By The Noerr-Pennington Doctrine

    The Attorney General's claims concerning Defendants' conduct in foreclosure actions are

    also barred by the Noerr-Pennington doctrine. The Noerr-Pennington doctrine derives from theFirst Amendment's guarantee of "the right of the people ... to petition the Government forredress of grievances." U.S. CONST.Amend. 1. The doctrine originated in the context of anaction by trucking companies claiming that certain railroad companies violated the Sherman Actby associating together to influence legislation. See E. R.R. Presidents Conference v. NoerrMotor Freight, Inc., 365 U.S. 127 (1961). In Noerr Motor Freight, Inc., the Supreme Courtrejected the trucking companies' claim because the railroad companies' conduct of petitioningthe government was protected by the First Amendment's Petition Clause. See id. at 138 ("Theright of petition is one of the freedoms protected by the Bill of Rights, and we cannot, of course,lightly impute to Congress an intent to invade these freedoms"). The Noerr-Pennington doctrine"holds, essentially, that parties may not be subjected to liability for petitioning the government."IG. Second Generation Partners, L.P. v. Duane Reade, 17 A.D.3d 206,208, 793 N.Y.S.2d 379(1st Dep't 2005). "In other words, the Noerr-Pennington doctrine grants a party immunity forseeking governmental redress or otherwise engaging a governmental agency." Icahn v. Raynor,32 Misc. 3d 1224(A), 936 N.Y.S.2d 59, 2011 WL 3250417, at *3 (Sup. Ct. N.Y. Cty. June 16,2011).

    "The filing oflitigation falls within the protection of the Noerr-Pennington doctrine."I G. Second Generation Partners, L.P., 17 A.D.3d at 208.4 Statements and allegations made in

    4 Accord NARApartments LLC v. Ippolito, Index No. 107866110,2011 NY Slip Op 33056U, 2011 N.Y.Misc. LEXIS 5575, at *6 (Sup. Ct. N.Y. Cty. Nov. 21, 2011) ("The commencement of litigation is a protectedactivity under the Noerr-Pennington doctrine."); Jcahn, 936 N.Y.S.2d at 59 ("The Noerr-Pennington doctrine holdsthat parties may not be subjected to liability for petitioning the government or a governmental agency, such as byfiling litigation.").


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    the course oflitigation, including allegedly false statements, also fall within the protection of theNoerr-Pennington doctrine. See Rapuzzi Palumbo &Rosenberger, P.e., v. Gov't Emps. Ins.Co., Index No. 021415-10,2010 N.Y. Misc. LEXIS 3193, at *21 (Sup. Ct. Nassau Cty. May 2,2011) ("Noerr-Pennington protection has been extended to all advocacy intended to influencegovernment action, including to allegedly false statements.") (quoting Tuosto v. Philip MorrisUSA Inc., 2007 U.S. Dist. LEXIS 61669, at *15 (S.D.N.Y. 2007)); Villanova Estates, Inc. v.Fieldston Prop. Owners Ass 'n, Inc., 23 A.D.3d 160, 161,803 N.Y.S.2d 521 (1st Dep't 2005)("Pursuant to the Noerr-Pennington doctrine, which protects the First Amendment right of

    petitioning the government, defendants are immune from liability for making those statements,regardless of the fact that the false statements may have been known to be false when made.").

    "The motives of the persons petitioning the government for relief are irrelevant." Singhv. Sukhram, 56 A.D.3d 187, 192866 N.Y.S.2d 267 (2d Dep't 2008). "In fact, courts haveupheld the application of the doctrine even when the petitioning activity included the use ofquestionable or underhanded activity." Alfred Weissman Real Estate v. Big V Supermarkets, 268A.D.2d 101, 107, 707 N.Y.S.2d 647 (2nd Dep't 2000). And "[a]lthough the Noerr-Penningtondoctrine initially arose in the antitrust field, the courts have expanded it to protect FirstAmendment petitioning of the government from claims brought under Federal and State law."Id at 107-8. "The body of case law dealing with the Noerr-Pennington doctrine has regularlybeen applied in disputes involving parties other than business competitors." Id at 108.

    The Noerr-Pennington doctrine has been applied to bar various state common law andstatutory claims arising from protected "litigation activities," including claims such as theAttorney General's alleging fraudulent and deceptive trade practices. Rapuzzi, 2010 N.Y. Misc.LEXIS 3193, at *13; see id. at *25 ("Where, as here, the conduct underlying the claims arises


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    from [defendants] petitioning the government through civil actions filed in the courts, and iseffectively a fraud claim to which the Noerr-Pennington doctrine applies, this cause of action isalso barred by the doctrine."); DirecTV, Inc. v. Rowland, No. 04-CV-297S, 2005 WL 189722, at*3--4 (W.D.N.Y. Jan. 22,2005) (Gen. Bus. L. 349 claim barred by Noerr-Penningtondoctrine); Suburban Restoration Co., v. ACMAT Corp., 700 F.2d 98, 102 (2d Cir. 1983) (underNoerr-Pennington, defendant's litigation activities could not form basis of a claim underConnecticut Unfair Trade Practices Act)."

    The filing and prosecution of the judicial foreclosure actions of which the Attorney

    General complains is litigation activity protected by the Defendants' First Amendment right topetition the courts for redress of grievances. Insofar as the Attorney General seeks to challengethis conduct, it is barred from doing so by the Noerr-Pennington doctrine. See, e.g., ConcourseNursing Home v. Engelstein, 278 A.D.2d 35,35717 N.Y.S.2d 154 (1st Dep't 2000) ("The actionwas properly dismissed on the ground that the tortious conduct alleged involved the petitioningof a governmental agency that is immune from suit under the First Amendment of the USConstitution."); Rapuzzi, 2010 N.Y. Misc. LEXIS 3193, at *19-20 ("Given that [plaintiff] basesits [claims] entirely on the allegations made by [defendants] in the two Federal Actions, and theCourt's conclusion that these allegations are constitutionally protected under Noerr-Pennington,the Court concludes that dismissal of [plaintiff's claims] is mandated.").

    5 Accord IGEN Int 'I, Inc. v. Roche Diagnostics GmbH, 335 F.3d 303, 312 (4th Cir. 2003) (holding that"Noerr-Pennington immunity applies to business torts like unfair competition"); Cheminor Drugs, Ltd. v. EthylCorp., 168 F.3d 119, 128 (3d Cir. 1999) (holding that Noerr-Pennington doctrine mandated dismissal of variousNew Jersey common law claims, including unfair competition); Marco Island Cable, Inc. v. Comcast Cablevision,Inc., No. 2:04-cv-26-FTM-29DNF, 2006 WL 1814333, at *11 (M.D. Fla. July 3, 2006) (holding that Noerr-Pennington barred claim for violation of Florida's Deceptive and Unfair Trade Practices Act based on defendant'slitigation activities) ..


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    C. The Attorney General's Claims Are Barred By The AbsolutePrivilege For Statements Made In The Course Of Judicial Proceedings

    Under New York law, statements made by parties, attorneys and witnesses in the course

    of judicial proceedings, such as the foreclosure actions challenged here, "are absolutelyprivileged, notwithstanding the motive with which they are made, so long as they are materialand pertinent to the issue to be resolved in the proceeding." Sinrod v. Stone, 20 A.D.3d 560, 561799 N.Y.S.2d 273 (2nd Dep't 2005); see Sexter & Warmflash, P.e. v. Margrabe, 38 A.D.3d 163,171,828 N.Y.S.2d 315 (1st Dep't 2007) ("The rule is that a statement made in the course oflegalproceedings is absolutely privileged if it is at all pertinent to the litigation.") (quotations andcitations omitted); Aequitron Med., Inc. v. Dyro, 999 F. Supp. 294, 297-98 (E.D.N.Y. 1998)("Under New York law, in the context of a legal proceeding, statements by parties and theirattorneys are absolutely privileged if, by any view or under any circumstances, they are pertinentto the litigation.")." "The principle underlying the absolute privilege for judicial proceedings isthat 'the proper administration of justice depends upon freedom of conduct on the part of counseland parties to the litigation,' which freedom 'tends to promote an intelligent administration ofjustice." Sexter, 38 A.D.3d at 171 (quoting People ex rei. Bensky v. Warden of City Prison, 258N.Y. 55, 59-60 (1932)); see Borsa, 2011 WL 1168316, at *2 (citing Weiner v. Weintraub,22N.Y.2d 330,332,239 N.E.2d 540 (1968) (referring to the absolute privilege for judicialproceedings and stating, "the proper administration of justice requires that there be a forum in

    6 "The test of pertinency is extremely broad and embraces anything that may possibly or plausibly berelevant or pertinent with the barest rationality, divorced from any palpable or pragmatic degree of probability."Aequitron Med., Inc., 999 F. Supp. at 298; see Sexter, 38 A.D.3d at 171 ("Whether a statement is 'at all pertinent tothe litigation' is determined by an 'extremely liberal' test.") (quoting Black v. Green Harbour Homeowners' Assn.,Inc., 19A.D.3d 962,963,798 N.Y.S.2d 753 (2005)). See also Bisogno v. Borsa, 31 Misc. 3d 1203(A), 930N.Y.S.2d 173,2011 WL 1168316, at *3 (Sup. Ct. Richmond Cty. Mar. 28, 2011) ("The question of whether astatement is privileged is a question of law for the court and proper to determine on a motion to dismiss.").


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    which clients or other persons ... may state their complaints, have them examined and, ifnecessary, judicially determined").

    The absolute privilege for judicial proceedings extends to "all pertinent communicationsamong the parties, counsel, witnesses, and the court." Borsa, 2011 WL 1168316, at *3(quotations and citations omitted). "Courts have recognized absolute privilege in a broad sensein all aspects of litigation." Id. (citing Impallomeni v. Meiselman, 272 A.D.2d 579, 708N.Y.S.2d 459, (2nd Dep't 2000). The absolute privilege extends, without limitation, tostatements made in "pleadings, affidavits, and briefs," as well as "statements made on the record

    during oral testimony or argument." Sexter, 38 A.D.3d at 174; see Borsa, 2011 WL 1168316, at*3 ("[T]his court finds that the documentary evidence submitted by the defendants ... [is]protected by absolute privilege."); Sinrod, 20 A.D.3d at 562 ("[S]tatements contained indocuments submitted in judicial proceedings fell within the ambit of the privilege as they werematerials relevant to the proceedings."). And statements made in the course of judicialproceedings are "afforded the protection of privilege, 'irrespective of the motive" with whichthe statements are made, and regardless of whether the statements are false or invalid. Sexter,38A.D.3d at 172; see, e.g., Borsa, 2011 WL 1168316, at *4 ("Whether or not the allegations by Ms.Borsa against Mr. Bisogno are valid is irrelevant, as the statements were made ... within thecontext of a litigation proceeding.").

    The alleged deceptive statements and misconduct in the course of judicial proceedingshere at issue are protected by the absolute privilege for judicial proceedings and, as such, cannotform the basis of any claim for relief. See Sinrod, 20 A.D.3d at 562; Sexter & Warmjlash, P.e.,38 AD3d at 172; Borsa, 2011 WL 1168316, at *4. The Complaint thus should be dismissed with


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    prejudice on this ground too. See, e.g., Sexter, 38 A.D.3d at 176 ("Accordingly, the absoluteprivilege for statements made in the course of judicial proceedings bars this action.").

    D. The Attorney General's Claims Are Barred ByThe Doctrine ofRes Judicata Or Claim Preclusion

    The Attorney General's claims that "Defendants have obtained foreclosure judgmentsagainst New York homeowners through fraudulent and illegal means" are also barred by thedoctrine of res judicata or claim preclusion. Cmplt. ~ 124.7 "In New York, res judicata, orclaim preclusion, bars successive litigation based upon the same transaction or series ofconnected transactions." People v. Applied Card Sys., Inc., 11 N.y'3d 105, 122,863 N.Y.S.2d615 (2008) (internal quotations omitted). "Under res judicata, a final judgment on the merits ofan action precludes the patties or their privies from relitigating issues of fact or law that were orcould have been raised in that action." Caldwell v. Gutman, Mintz, Baker Sonnfeldt, P. C, No.CV-090357-07/KI" 33 Misc. 3d 1226(A), 2011 WL 5903763, at *5, 2011 N.Y. Slip Op.52116(U) (Civ. Ct. Kings Cty. Nov. 25, 2011).8

    Res judicata "operates to preclude the renewal of issues actually litigated and resolved ina prior proceeding as well as claims for different relief which arise out of the same factualgrouping or transaction and which should have or could have been resolved in the priorproceeding." Luscher v. Arrua, 21 A.D.3d 1005, 1006,801 N.Y.S.2d 379,381 (2nd Dep't2005); see O'Brien v. City of Syracuse, 54 N.Y.2d 353,357,445 N.Y.S.2d 687 (1981) (Resjudicata "applies not only to claims actually litigated but also to claims that could have been

    See Singleton Management, Inc. v. Compere" 243 A.D.2d 213,215,673 N.Y.S.2d 381 (lst Dep't 1998)("The doctrine of res judicata [is] frequently referred to as 'claim preclusion. "'); Jackson v. Deer Park Ventures, 9Misc. 3d 1123(A), 862 N.Y.S.2d 808, 2005 WL 2847265, at *3 (Sup. Ct. Kings Cty. Oct. 31,2005) ("Res judicata isalso known as 'claims preclusion."').

    Notably, "res judicata applies to an order or judgment taken by default which has not been vacated." AvaAcupuncture, P.e. v. NY. Central Mut. Fire Ins. Co., 34 Misc. 3d 149(A), 2012 WL 502676, at *1, 2012 N.Y. SlipOp. 50233(U) (N.Y. App. Term Feb. 09, 2012); see Cmplt. ~ 23 ("a significant percentage offoreclosure actionsresult in default judgments").


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    raised in the prior litigation."). "[O]nce a claim is brought to a final conclusion, all other claimsarising out of the same transaction are barred, even if based upon different theories, or if seekinga different remedy." Burch v. Trs. of Freeholders & Commonalty of Southampton, 47 A.D.3d654,657,849 N.Y.S.2d 622 (2nd Dep't 2008).

    The principles underlying the res judicata doctrine are plain. "Res judicata is designed toprovide finality in the resolution of disputes." Reilly v. Reid, 45 N.Y.2d 24,28,407 N.Y.S.2d645 (1978). "The doctrine of res judicata rests not only on the principle of estoppel but alsoupon a consideration of sound public policy. There must be an end to litigation somewhere, and

    public policy requires that different decisions should not be rendered on the same state of facts asto the same parties and their privies." Comm 'rs of State Ins. Fund v. Low, 285 A.D. 525, 138N.Y.S.2d 437,440 (3rd Dep't 1955) (citations omitted); see New York State Labor Relations Bd.v Holland Laundry, Inc., 294 N.Y. 480,493,63 N.E.2d 68 (1945) ("[T]he public tranquilitydemands that, having been once ... tried, all litigation of [a] question, and between [the] parties,should be closed forever."); Ins. Co. ofPa. v. HSBC Bank USA, 10 N.y'3d 32, 38 852 N.Y.S.2d812 (2008) ("The doctrine of res judicata, or claim preclusion, is designed to relieve parties ofthe cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventinginconsistent decisions, encourage reliance on adjudication.").

    "[T]he doctrine of res judicata not only applies to the parties of record in the prior action,or administrative proceeding, but also to those in privity with them." State v. Seaport ManorA.CF., 19 A.D.3d 609,610, 797 N.Y.S.2d 538 (2d Dep't 2005). And the Court of Appeals hasheld that where, as here, the Attorney General sues on behalf of a party or parties to prior judicialproceedings, the Attorney General and such parties are in privity for purposes of res judicata orclaim preclusion. See Applied Card Sys., Inc., 11 N.y'3d at 124 (quoting Taylor v. Sturgell, 128


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    S. Ct. 2161, 2172 (2008) (holding that "there is privity" between the Attorney General and the"consumers ... on whose behalf the Attorney General sues" who "have already had their 'day incourt, '" explaining, "[o]ur conclusion is supported by a core principle of res judicata, a party'sright to rely upon the finality of the results of previous litigation" (citations omitted)).

    Here, the Attorney General sues on behalf of, and is in privity with, alleged defendants injudicial foreclosure actions, and purports to state claims challenging the standing of the plaintiffsin the foreclosure actions, who are the named Defendants in this case, and the sufficiency of theevidence produced by the Defendants, as foreclosing plaintiffs, to establish their standing. Such

    claims, as a matter of law, were or could have been raised in the foreclosure actions. See WellsFargo Bank Minn. v. Mastropaolo, 42 A.D.3d 239, 242837 N.Y.S.2d 247 (2nd Dep't 2007)("[A]n argument that a plaintiff lacks standing, if not asserted in the defendant's answer or in apre-answer motion to dismiss the complaint, is waived pursuant to CPLR 3211(e)."); Bank ofNew Yorkv. Silverberg, 86 A.D.3d 274, 283,926 N.Y.S.2d 532 (2nd Dep't 2011) (affirmingdismissal of foreclosure action upon defendant's challenge to plaintiffs standing). The AttorneyGeneral's claims concerning foreclosure actions in which final judgments were entered are

    .therefore also barred by the doctrine of res judicata, or claim preclusion. See, e.g., Fed Nat.Mortg. Ass 'n v. Williams, 34 Misc. 3d 1208(A), 2012 WL 75033, at *3 (Dist. Ct. Nassau Cty.Jan. 10,2012) ("[T]hejudgment of foreclosure and sale was final as to all issues and defensesthat might have been litigated in the foreclosure action, and the Supreme Court's determinationis not subject to collateral attack."); see also In re Zilkha, 174 A.D.2d 331,570 N.Y.S.2d 807(1st Dep't 1991) ("Res judicata precludes relitigation by the parties to an action and their priviesof any matters that were necessarily decided in the prior action .... [P]etitioners ... stand in hershoes and are estopped by her consent to, and participation in, the prior judicial proceedings.").


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    E. The Attorney General Lacks Standing To Enjoin LawfulForeclosure Proceedings That Could Provide the Aggrieved With Relief

    The Attorney General's authority to bring suit in this case is limited to seeking

    appropriate relief for materially deceptive or misleading "consumer oriented conduct" (for aclaim pursuant to GBL 349) and repeated fraudulent or illegal acts "in the carrying on,conducting, or transaction of business" (for a claim pursuant to Executive Law 63(12)). Asdiscussed in greater detail infra, at 23-47, the Attorney General's challenge to MERS' conduct inthe course of litigation, as a matter of law, fails to state a claim under either statute and theAttorney General thus lacks standing to bring this lawsuit against MERS. See Lefkowitz v.Parker, 38 A.D.2d 542, 543, 327 N.Y.S.2d 277 (1st Dep't 1971) (reversing trial court judgmentcompelling landlord to deposit tenant security in interest bearing account and holding "on thebasis of the present record, neither section 63(12) of the Executive Law nor section 349 of theGeneral Business Law confers standing upon him to maintain this action.").

    Consistent with the statutory limitations of GBL 349 and Executive Law 63(12), New

    York courts have barred the Attorney General from bringing suit where the proceeding sought tobe enjoined could, itself, afford the victims on whose behalf the Attorney General purported toact with relief. In Abrams v. Magley, the Attorney General sought a petition pursuant to 63(12)to enjoin eviction proceedings. 105 A.D.2d 208,209,484 N.Y.S.2d 251 (3rd Dep't 1984). TheCourt refused to grant the requested relief because the eviction proceedings were not in and ofthemselves deceptive (and thus the Attorney General lacked standing), but further noted that "thelegal and/or factual issues differed as to the various tenants and, therefore, could better beresolved in separate proceedings to which the tenants would be parties." Id. at 211. The courtfurther noted that because the tenants would be able to raise defenses in those proceedings, thetenants would not be irreparably harmed. Id. The court followed the same reasoning in State v.


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    New York City Conciliation and Appeals Board (hereinafter, "CAB"), an action brought by theAttorney General as parens patriae.' 123 Misc. 2d 47,50,472 N.Y.S.2d 839 (Sup. Ct. N.Y. Cty.1984). There, the Attorney General sought an order in the nature of a mandamus directing CABto comply with certain provisions of the Omnibus Housing Act. The court granted defendants'motion to dismiss, concluding the Attorney General lacked standing to maintain the action:

    ITJhe relief sought in the petition, viz., the allowance of rent reductions to tenantsin buildings where the CAB has found a diminution of services, was fullyavailable to the tenants and remains available to affected tenants in proceedingsbrought before the CAB. Litigants, even if they proceed pro se, are presumed toknow the law and are bound thereby regardless of the availability of revisedforms. In addition a tenant could seek a review of the CAB determination in anindividual proceeding brought pursuant to Article 78. Thus arguments forstanding become less compelling when private suits by the aggrieved parties arefeasible and would provide complete relief. As was indicated above, the statecannot proceed as parens patriae simply to vindicate the private claims ofindividual citizens .... Without a real interest in the litigation the state is merely anominal party without standing to bring or maintain this proceeding.

    Id. at 50 (internal citations omitted) (emphasis added).The reasoning in Magley and CAB applies with equal force here. Individual legal and

    factual issues (if any) that exist with respect to any of the 13,000 foreclosure actions referencedin the Complaint are (or were) exclusively to be resolved in those proceedings to which theborrowers on whose behalf the Attorney General purports to act would be parties and can (andcould) raise defenses. The Attorney General has no real interest in the underlying foreclosureproceedings and is without standing to maintain an action in which he seeks to enjoin MERS'commencement of those proceedings. Accordingly, the Complaint should be dismissed.

    9 In CAB, the Attorney General did not assert a claim pursuant to 63(12) because there were no allegationsof "any fraudulent practice which would justify an assertion ofjurisdiction pursuant to Executive Law 63(12)."123 Misc. 2d at 48 n.3.


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    II. THE COMPLAINT FAILS TO STATE A CLAIM AGAINST THEMERS DEFENDANTS UNDER GENERAL BUSINESS LAW 349The Complaint alleges MERS has engaged in deceptive acts and practices in violation of

    General Business Law 349. Cmplt. ~ 130. General Business Law 349 makes unlawful"[d]eceptive acts or practices in the conduct of any business, trade or commerce or in thefurnishing of any service in this state." McKINNEY'S GEN.Bus. L. 349(a). To state a claimunder GBL 349, the Attorney General must allege facts sufficient to establish the defendantengaged in conduct that is (1) consumer oriented; (2) materially deceptive; and (3) caused injuryto the plaintiff. Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85N.Y.2d 20,25,647 N.E.2d 741 (1995); accord Ladino v. Bank of Am., 52 A.D.3d 571,574,861N.Y.S.2d 683 (2d Dep't 2008) ("In order to establish a prima facie violation of General BusinessLaw 349, a plaintiff must demonstrate that a defendant is engaging in consumer-orientedconduct which is deceptive or misleading in a material way, and that the plaintiff has beeninjured because ofit."); People v. City Model & Talent Dev., 29 Misc. 3d 1205(A), 2010 WL

    3899246, at *2 (Sup. Ct. N.Y. Cty. Sept. 28, 2010) ("The Attorney General is required toestablish that the respondents engaged in an act or practice which was deceptive or misleadingand that the consumer was injured as a result." (emphasis added)).

    The Attorney General must plead facts sufficient to establish each of these elements, inorder to survive a motion to dismiss. Oswego, 85 N.Y.2d at 25. The Attorney General's 349claim fails to plead adequately any of these elements and therefore should be dismissed.

    A. The Standard Of ReviewTo survive a motion to dismiss for failure to state a cause of action under CPLR 3211

    (a)(7), the court must determine "whether from the four corners ofthe pleading 'factualallegations are discerned which taken together manifest any cause of action cognizable at law'"


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    Salvatore v. Kumar, 45 AD.3d 560, 563, 845 N.Y.S.2d 384 (2nd Dep't 2007). While the courtmust accept as true the facts alleged in the complaint and afford plaintiffs the benefit of everypossible favorable inference to determine if the allegations state a claim for relief, Sokoloffv.Harriman Estate Dev. Corp., 96 N.Y. 409,414, 729 N.Y.S.2d 425 (2001), it is equally clear that"bare legal conclusions with no factual specificity are insufficient to survive a motion todismiss." Godfrey v. Spano, 13 N.y'3d 358,373,920 N.E.2d 328, 334 (2009). Likewise,"allegations consisting of ... factual claims inherently incredible or flatly contradicted bydocumentary evidence are not entitled to such consideration." Caniglia v. Chicago Tribune-New

    York News Syndicate, 204 AD.2d 233,233-234,612 N.Y.S.2d 146, 146-47 (1st Dep't 1994).Under these standards, the Complaint fails to plead facts sufficient to establish a cause of actionunder either General Business Law 349 (Count Two) or Executive Law 63(12) (Count One)and should be dismissed in its entirety.

    B. The Complaint Fails Adequately ToPlead MERS Engaged In Consumer Oriented Conduct

    "[I]n order to satisfy General Business Law 349 plaintiffs' claims must be predicatedon a deceptive act or practice that is consumer oriented." Oswego, 85 N.Y.2d at 24-25(emphasis added); accord Flax v. Lincoln Nat 'I Life Ins. Co., 54 A.D.3d 992, 994,864 N.Y.S.2d559 (2d Dep't 2008). General Business Law 349 is "directed at wrongs against the consumingpublic," Oswego, 85 N.Y.2d at 24-25, and "was designed to protect 'the little guy' from falseadvertising, pyramid schemes, bait-and-switch sales tactics, and other mischievous machinationsby swindlers and scallywags.'" Feinberg v. Federated Dep 'tStores, Inc., 15 Misc. 3d 299,307,832 N.Y.S.2d 760 (Sup. Ct. N.Y. Cty. 2007). The Attorney General has not pled facts sufficientto establish that MERS engaged in consumer fraud or any other consumer-oriented conduct. TheComplaint fails to allege MERS transacted business with any consumer. Nor does the Complaint


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    allege that MERS sells, promotes, or advertises goods or services to consumers. In fact, theAttorney General pleads just the opposite, namely, that MERS has "long disclaimed any other,more material interest in horne loans." Cmplt."] 42. "[I]t does not own the underlying note orreceive any payments from homeowners under the note, and-despite being the technical'mortgagee'-it does not directly benefit from any of the substantive provisions of themortgage." Id . The Complaint acknowledges that to the extent the MERS Defendants have"customers," they are limited to MERSCORP's members, which include the co-defendants inthis case who stand accused of committing the same deceptive and fraudulent practices. I d.,- r 1 6 ,

    32,37. Similarly, the Complaint acknowledges the MERS System is a "private electronicregistry." Id , - r 33.

    Instead, the Attorney General attacks MERS' conduct in judicial foreclosure proceedings.Cmplt. , - r , - r 70,98-100, 124. But conduct by a party in the course a/litigation (or any other legalproceeding) as a matter of law is not consumer-oriented activity within the ambit of GBL 349.See DirecTV, Inc., 2005 WL 189722, at * 3 (holding that defendants' alleged mailing of lettersthreatening litigations fell outside the scope of 349 because such conduct was not consumer-oriented). As the Federal Trade Commission has stated, in the context of the Fair CreditReporting Act, "litigation is not a 'business transaction' involving the consumer." 16 C.F.R. Part600, 1990 WL 342991, at 26 (May 4, 1990). New York's Business Corporation Law providesthat, with respect to a foreign corporation, "maintaining or defending any action or proceeding,

    whether judicial, administrative, arbitrative or otherwise, or effecting settlement thereof or thesettlement of claims or disputes" does not constitute "doing business in this state." McKINNEY'SBUSINESSCORPORATIONLAW 1301(b)(I). See also Fed Fin. Co. v. Levine, 281 A.D.2d 454,455, 721 N.Y.S.2d 558 (2nd Dep't 2001) ("[T]he mere maintenance of an action by a foreign


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    corporation does not constitute 'doing business' within the State." (quoting De Ran LandscapingServ., Inc. v. De Ran Indus., Inc., 109 A.D. 2d 1040, 1041,487 N.Y.S.2d 160 (3rd Dep't1985).

    A defendant in a foreclosure action is a party to a private contract (i.e., the note andmortgage), and New York law is clear that "private contract disputes which are unique to theparties do not fall within the ambit of [GBL 349(b)]." Flax, 54 A.D.3d at 995 (quotingOswego, 85 N.Y.2d at 25); see also New York Univ, v. Cant 'I Ins. Co, 87 N.Y.2d 308,321,662N.E.2d 763 (1995) (striking 349 claim over policy coverage and processing of an insurance

    claim); Ladino, 52 A.D.3d at 574 (finding that issuing a loan to a third party without knowledgeof the Plaintiff did not constitute a violation of 349).10

    The trial court's decision in M&T Bank Corp. v. Gemstone CDO VII, Ltd., 23 Misc. 3d1105(A), 881 N.Y.S.2d 364, 2009 WL 921381, at *16-17 (Sup. Ct. Erie Cty. Apr. 7,2009) isinstructive. There, plaintiffs sought to plead a violation of GBL 349 against a fund from whichit purchased subprime-backed collateralized debt obligation ("CDO") bonds. In an effort toplead the necessary "consumer-oriented" activity, plaintiff-in terms similar to those of theAttorney General here-asked the court to take judicial notice of the fact that massive defaults inCDO obligations had caused billions of dollars in losses to those who bought the securities. ! 16. The court rejected the plaintiffs request and granted the defendant's motion to dismissreasoning that "[t]o allow this litigation to become some sort of cause celeb regarding themeltdown of the credit markets and the current severe recession would be to abdicate the Court's

    10 Courts outside New York have expressly rejected the claim that the pursuit of contractual or legal remediesconstitutes consumer oriented-conduct. See, e.g., Begelfer v. Najarian, 381 Mass. 177, 409 N.E.2d 167 (1980)(affirming dismissal of consumer protection action and holding that "a person is not engaged in trade or commercemerely by the exercise of contractual or legal remedies."); First Enters., Ltd v. Cooper, 425 Mass. 344,680 N.E.2d1163 (1997) (holding that attorney may not be liable to his client's adversary under consumer protection statute forfiling a false claim on his client's behalf because litigation is not "trade or commerce.")


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    sole responsibility to adjudicate the dispute between these parties." Id. at 17. The court furtherreasoned that "this litigation simply does not give rise to anything other than a private disputelacking allegations of wrongs directed against the consuming public." Id.

    Because Plaintiff fails to plead-and could not ever plead-facts sufficient to showMERS engaged in wrongs "against the consuming public," as a result of alleged misconduct byMERS in the course of filing and prosecuting foreclosure actions, the 349 claim must bedismissed.

    C. The Complaint Fails Adequately To Allege MERS EngagedIn Conduct That Is Deceptive Or Misleading In A Material Way

    In addition to pleading facts sufficient to establish "consumer oriented" conduct, aplaintiff alleging violations of GBL 349(b) must also plead facts sufficient to show thedefendant dealt with consumers in a manner that was "deceptive or misleading in a materialway." Oswego, 85 N.Y.2d at 25. The Legislature modeled Section 349 after the antifraudprovision (Section 5) of the Federal Trade Commission Act ("FTCA"), id." New York courtsassess materiality under 349 by reference to Section 5 of the FTCA. "Material" statements oromissions are limited to those "that involve information that is important to consumers and,hence, likely to affect their choice of, or conduct regarding, a product." Bildstein v. MastercardInt'/ Inc., 329 F. Supp. 2d 410,414 (S.D.N.Y. 2004) (quoting Novartis Corp. v. F.TC., 223 F.3d783, 787 (D.C. Cir. 2000.12

    Plaintiff complains about an array of conduct undertaken by MERS in order to conferstanding upon itself, or others, for purposes of filing and prosecuting foreclosure actions.11 Section S of the FTCA, IS U.S.C. 4S(a) provides: "the term 'unfair or deceptive acts or practices' includessuch acts or practices involving foreign commerce that (i) cause or are likely to cause reasonably foreseeable injurywithin the United States; or (ii) involve material conduct occurring within the United States."12 See also Spitzer v. Applied Card Sys. Inc., 27 A.D.3d 104, 107, 80S N.Y.S.2d 17S (3d Dep't. 200S)(recognizing that "interpretations of the Federal Trade Commissions Act are useful in determining [] violationsunder both the Executive law [ 63(12)] and General Business Law [ 349]").


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    Although the Complaint is rife with conclusory allegations that MERS' conduct deceived andmisled defendants in those actions and the courts in which they were filed, the Complaint isdevoid of any factual allegation establishing any such conduct.

    1. MERS Mortgages Are Not Materially DeceptiveThe Attorney General contends the act of serving as mortgagee of record, in and of itself,

    is deceptive within the meaning ofGBL 349(b). Cmplt. ~ 112 (MERS Mortgages "contain[]only minimal disclosures" that are allegedly "insufficient to inform borrowers of the real risksand consequences posed by allowing MERS to serve as mortgagee of record.") Plaintiff is

    wrong as a matter of law. New York law imposes no duty or obligation upon MERS (or anyother mortgagee) to disclose "risks" to the borrower of its serving as mortgagee. A duty todisclose does not arise absent a confidential or fiduciary relationship. See, e.g., Havel! CapitalEnhanced Mun. Income Fund, L.P. v. Citibank, NA., 84 A.D.3d 588, 923 N.Y.S.2d 479, 481 (1stDep't 2011) ("Absent a confidential or fiduciary relationship, defendant [secured creditor] wasnot under a duty to disclose. "). The Complaint fails to (and could not in any event) allege theexistence of a confidential or fiduciary relationship between a borrower and MERS.

    Nor does the Complaint allege how (or even that) any particular borrower was misled ordeceived by the language of any MERS Mortgage. "The designation of MERS is prominentlydisplayed on the mortgage document and is affirmatively approved by the borrower at closing."Pietranico, 928 N.Y.S.2d at 829. In MERS Mortgages, the borrowers and lenders agree to thedesignation ofMERS as the mortgagee, as the nominee for the lenders and the lenders'successors and assigns (who own the beneficial interest in the promissory notes secured by theMortgages). The borrowers contractually agree that it is MERS, as the lenders' nominee, whowill serve as the mortgagee, and as such, in the event of a default on the repayment of the loan,MERS is authorized to foreclose on the property. "It is well settled in New York that where," as


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    here, "a mortgage is signed by the mortgagor, delivered to and accepted by the mortgagee, or itsagent, the mortgage constitutes a valid contract and security or lien." Pietranico, 928 N.Y.S.2dat 833-34; see also Cervantes v. Countrywide Home Loans, Inc., No. CV 09-517-PHX-JAT,2009 WL 3157160 at *10 (D. Ariz. Sept. 24, 2009) (Motion to dismiss fraud claims grantedwhere "Plaintiffs have failed to allege what effect, if any, listing the MERS ... on the deed oftrust had upon their obligations as borrowers. Plaintiffs do not allege that they were somehowinduced to enter into their loans on the basis that MERS was a genuine and not a 'sham'beneficiary .... At most, Plaintiffs find the MERS system to be disagreeable and inconvenient to

    them as consumers. Such complaints, however, do not arise to the level of fraud.").Courts in New York and throughout the country have recognized that a lender who holds

    the beneficial interest in a loan lawfully may designate its nominee, MERS, to hold legal title tothe security instrument and serve as the mortgagee of record, and have routinely enforced theprovisions ofMERS Mortgages. See, e.g., Romaine, 8 N.y'3d at 97 (MERS is a "propermortgagee" and MERS Mortgages are "proper 'conveyance[s]' for purposes of the recordingstatute."); Coakley, 838 N.Y.S.2d at 624 (MERS has standing to commence a foreclosureaction.); Pietranico, 928 N.Y.S.2d at 832 (The mortgage "expressly grants MERS the right to acton behalf of the lender as required by law and custom, including, but not limited to, the right toforeclose and sell the property and the right to take any action required of Lender such asreleasing and canceling the mortgage."); Us. Bank, NA. v. Flynn, 27 Misc. 3d 802, 897N.Y.S.2d 855,857 (Sup. Ct. Suffolk Cty. 2010) ("MERS is acting as the nominee ofthe ownerof the note and mortgage in which MERS is additionally designated as the mortgagee ofrecord. "). 13

    Accord, e.g., Trent v. Mortg. Elec. Reg. Sys., Inc., 288 F. App'x 571 (lIth Cir. 2008) ("[MERS] is themortgagee."); In re MERS Litig., 44 F. Supp. 2d 1018, 1027 (D. Ariz. 2011) ("[F]rom the very language of the deeds13


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    And every court to have considered the issue has rejected the claim that MERSMortgages are somehow deceptive or fraudulent. See, e.g., In re MERS Litig., 44 F. Supp. 2d at1029 ("The MERS system is not fraudulent, and MERS has not committed any fraud."); In reMERS Litig., 09-md-2119 2011 WL 251453, at *8 (D. Ariz. Jan. 25, 2011) (same); Cervantes,2009 WL 3157160, at *11 ("Plaintiffs' argument that MERS is a 'sham' beneficiary isunconvincing. Otherwise, any situation where a beneficiary obtains less than the full rightspossessed by the entity or person granting the beneficiary status would likewise result in a'sham' beneficiary. The fact that MERS does not obtain such rights as to collect mortgage

    payments or obtain legal title to the property in the event of non-payment does not transformMERS' status into a 'sham."'); Kiah v. Aurora Loan Servs., LLC, Civil Action No. 10-40161-FDS, 2011 WL 841282, at *7 (D. Mass. Mar. 4, 2011) ("The MERS system is not fraudulent,and MERS has not committed any fraud."); Swanson v. EMC Mortg. Corp., No. CV F-09-1507LJO DLB, 2009 WL 3627925, at *10 (E.D. Cal. Oct. 29, 2009) ("MERS demonstrates that it is aqualified [deed of trust] beneficiary to defeat a fraud claim to the effect it is not.") McGinnis v.GMAC Mortg. Corp., No. 2:10-cv-00301-TC, 2010 WL 3418204, at *3 (D. Utah Aug. 27,2010) ("The court dismisses Mr. McGinnis' fraud claim and the portions of his claims for quiettitle and injunctive relief that rely on the argument that MERS lacks authority to foreclose on thesecurity interest.").of trust, to which Plaintiffs agreed in entering into their home loan transaction, MERS is still acting as the nomineefor the current holder of the promissory note .... Nevada case law universally holds that [MERS securityinstruments] are enforceable."); Calif. ex. reI. Bates v. Mortg. Elec. Reg. Sys., No.2: 1O-cv-O1429-GEB-CMK, 2011WL 892646, at *3 (E.D. Cal. Mar. 11,2011) (The mortgage is "recorded in the public land records, making MERSthe mortgagee of record."); In re Tucker, 441 B.R. 638, 645 (Bankr. W.D. Mo. 2010) ("The language of therecorded Deed of Trust clearly authorizes MERS to act on behalf of the Lender in serving as the legal title holder tothe beneficial interest under the Deed of Trust and exercising any of the rights granted to the Lender thereunder.");Wade v. Meridias Cap., Inc., No. 2:lOCV998 DS, 2011 WL 997161, at *2 (D. Utah Mar. 17,2011) ("MERS wasappointed as the beneficiary and nominee for the Lender and its successors and assigns and granted power to act intheir stead."); Ciardi v. Lending Co., No. CV 10-0275-PHX-JAT, 2010 WL 2079735, at *3 (D. Ariz. May 24,2010)("To the extent Plaintiffs rely on a theory that the beneficiary must have an interest in the actual note, Plaintiffs havefailed to cite any law so requiring.").


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    2. The Complaint Fails To Plead Facts Sufficient ToShow MERS Deceived Any Borrower By Lacking Standing to Sue

    Plaintiff alleges generally and "upon information and belief," that "MERS often lacked

    standing to foreclose." Cmplt. ~ 60. But the Complaint fails to allege-and could not allege-facts tending to show MERS' alleged lack of standing in any foreclosure action amounts tomaterially deceptive conduct within the meaning of 349. As an initial matter, Plaintiff fails toidentify any instance in which MERS in fact lacked standing to sue. Standing requires "aninterest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate fordetermining the issue at the litigant's request." Caprer v. Nussbaum, 36 A.D.3d 176, 182,825N.Y.S.2d 55 (2006). The lack of standing by a foreclosing plaintiff is a defense that can bewaived by the defendant if not raised timely. Mastropaoio, 42 A.D.3d at 242 ("[A] lack ofstanding is not such a fundamental defect that it cannot be waived. Where a defendant does notchallenge a plaintiff s standing, the plaintiff may be relieved of its obligation to prove that it isthe proper party to seek the requested relief."). Where a debtor does raise standing as a defense,the plaintiff is then required to prove its standing before it may be determined whether theplaintiff is entitled to relief. See id. If the plaintiff fails to then prove standing, its claim isappropriately dismissed. See, e.g., Silverberg, 86 A.D.3d at 283. Plaintiff does not-and couldnot-allege facts establishing how a lack of standing is or could be materially deceptive orfraudulent conduct.

    The Complaint asserts in wholly conclusory fashion that, even in cases where MERSsigning officers did physically possess notes properly endorsed in blank, MERS "still lackedstanding to foreclose" because, allegedly, "nothing in MERS' Rules of Membership, corporateresolutions, or membership agreements specifically authorized certifying officers to act on


  • 8/2/2019 Mers Motion to Dismiss


    MERS' behalf as a custodian oflegal documents, including promissory notes." Cmplt. ~ 67.14The Attorney General is wrong as a matter oflaw. For the purpose of proving standing, it is ofno relevance whatsoever whether MERS' Rules of Membership, corporate resolutions, ormembership agreements specifically authorized signing officers to act on MERS' behalf as acustodian of legal documents. It is the possession of the note that confers standing on a plaintiffwishing to foreclose and such standing is shown by producing the note. See, e.g., Chern. Bankv.Haskell, 51 N.Y.2d 85,90,432 N.Y.S.2d (1980) ("In order for [the plaintiff] to recover it firsthad to establish its status as a holder of the notes. This it did by production of the notes in its

    possession."). Where a plaintiff in a foreclosure action, such as MERS or any other entity, canand does produce the note, standing to foreclose is adequately shown. This is true regardless ofany specific authorization for a MERS signing officer to "act on MERS' behalf as a custodian oflegal documents."

    Such was the holding of the Appellate Division in Coakley. There, the SecondDepartment rejected a borrower's challenge to MERS' standing and affirmed the trial court'sdenial of the borrower's motion to dismiss a foreclosure action. See Coakley, 838 N.Y.S.2d at623 ("The record shows that the promissory note ... in blank, and ultimately transferred andtendered to MERS. Therefore, at the time of the commencement of this action, MERS was thelawful holder of the promissory note, and of the mortgage, which passed as an incident to thepromissory note. Accordingly, MERS had standing to bring this action."). "[F]urther support forMERS's standing to commence the action may be found on the face of the mortgage instrumentitself," the court held. "Pursuant to the clear and unequivocal terms of the MERS Mor