Court Opinion

ID: 4690135
Source: CourtListenerOpinion
Date Created: 2021-05-26 15:00:34.838423+00
Date Added: 2024-06-11T08:04:58.004516
License: Public Domain

20-3533
Margaret Shakespeare, et al. v. Live Well Financial, Inc., et al.

                                 UNITED STATES COURT OF APPEALS
                                     FOR THE SECOND CIRCUIT

                                              SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

        At a stated Term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York on the
26th day of May, two thousand twenty one.

Present:          GUIDO CALABRESI,
                  ROSEMARY S. POOLER,
                  WILLIAM J. NARDINI,
                              Circuit Judges.

_____________________________________________________

MARGARET SHAKESPEARE, ON BEHALF OF HERSELF AND ALL OTHERS
SIMILARLY SITUATED,

                                     Plaintiff-Appellant,

                           v.                                              20-3533-cv

COMPU-LINK CORPORATION, DBA CELINK,

                                     Defendant-Cross-Defendant-Appellee,

REVERSE MORTGAGE FUNDING LLC,

                        Defendant-Appellee. 1
_____________________________________________________

Appearing for Appellant:             Joseph S. Tusa, Southold, N.Y.

1
    The Clerk of Court is instructed to amend the caption as above.
                               Oren Giskan, Catherine E. Anderson, Giskan Solotaroff &
                               Anderson LLP, New York, N.Y. (on the brief).

                               Julie Nepveu, Senior Attorney, William Alvarado Rivera, AARP
                               Foundation Litigation, Washington, D.C.

Appearing for Appellees:       Jennifer L. Gray (Fernando Carlos Rivera-Maissonet, on the brief),
                               Hinshaw & Culbertson LLP, New York, N.Y., for Defendant-
                               Cross-Defendant-Appellee Celink.

                               Jennifer Fiorica Delgado (Reynold Lambert, on the brief),
                               Lowenstein Sandler LLP, Roseland, N.J., for Defendant-Appellee
                               Reverse Mortgage Funding, LLC.

       Appeal from the United States District Court for the Eastern District of New York
(Feuerstein, J.).

      ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the order of said District Court be and it hereby is AFFIRMED in part
and VACATED in part and the case is REMANDED.

        Margaret Shakespeare appeals from the September 15, 2020 order of the United States
District Court for the Eastern District of New York (Feuerstein, J.) dismissing her claims of
breach of contract and the covenant of good faith and fair dealing against Reverse Mortgage
Funding, LLC (“RMF”), deceptive business practices under New York General Business Law
Section 349 against RMF and Celink, and unjust enrichment against Celink. She further appeals
from the district court’s October 13, 2020, order denying leave to amend her complaint. We
assume the parties’ familiarity with the underlying facts, procedural history, and specification of
issues for review.

        As for the claims against RMF, the district court correctly dismissed them pursuant to
Federal Rule of Civil Procedure 12(b)(6). Shakespeare’s complaint states that she “does not
allege unlawful or inequitable acts committed by RMF.” App’x at 25. To the extent Shakespeare
claims that RMF and Celink have a principal-agent relationship, she alleged no facts in her
complaint raising a plausible inference that Celink “acts subject to [RMF’s] direction and
control,” which is “[a]n essential characteristic of an agency relationship.” In re Shulman Transp.
Enters., Inc., 744 F.2d 293, 295 (2d Cir. 1984). Therefore, dismissal was proper. In her
opposition to RMF’s motion to dismiss, Shakespeare introduced the theory that RMF is subject
to successor liability as the purchaser of the original lender’s assets, but the district court was not
obligated to entertain this argument because “a party is not entitled to amend its complaint
through statements made in motion papers.” Soules v. Conn., Dep’t of Emergency Servs. & Pub.
Prot., 882 F.3d 52, 56 (2d Cir. 2018) (citation and emphasis omitted). Moreover, the court
correctly observed that Shakespeare’s complaint contained no allegations supporting these
arguments.

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       We vacate in part and remand because the district court erred in dismissing the remaining
Section 349 and unjust enrichment claims against Celink at this early stage of the litigation.

        First, the district court’s consideration of many of the documents submitted by the parties
was erroneous. In resolving a motion to dismiss pursuant to Rule 12(b)(6), courts may consider
the pleading, documents attached to the pleading or incorporated by reference, matters of which
judicial notice may be taken, and documents in plaintiffs’ possession on which they relied in
bringing suit. Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002). For a document
to merit consideration at the pleading stage, the plaintiff must rely on its terms and effects in
drafting the complaint, not merely mention it. See id. Here, Shakespeare’s complaint
incorporated the contracts underlying her reverse mortgage agreement because she relied on their
terms in bringing this action. But the district court also considered several other documents,
including notice letters regarding certain house repairs mentioned in the contracts and the
dockets of two foreclosure actions on Shakespeare’s property. Shakespeare did not rely on these
documents in bringing her action; indeed, she barely referenced the first foreclosure action in her
complaint.

        The district court erred in considering these items extraneous to the complaint to draw
inferences against Shakespeare and resolve factual disputes. See Chambers, 282 F.3d at 152;
Friedl v. City of New York, 210 F.3d 79, 83-84 (2d Cir. 2000) (explaining that vacatur is required
where the district court improperly relies on defendants’ exhibits and factual representations);
see also Goel v. Bunge, Ltd., 820 F.3d 554, 560 (2d Cir. 2016) (explaining that references to
other litigations “does not open the door to consideration, on a motion to dismiss, of any and all
documents filed in connection with [those] litigation[s]”). The district court concluded that
consideration of these items in resolving the Rule 12(b)(6) motion was proper because the parties
agreed to do so. Yet the record does not establish that Shakespeare’s counsel consented to
consideration of all of Celink’s attached documents. Therefore, Shakespeare’s limited consent or
waiver to the traditional bar against considering documents external to the pleadings while
evaluating a Rule 12(b)(6) motion does not entirely cure the legal error, particularly given that in
bringing this action, she did not rely on the particular documents the district court relied on in
dismissing it. Cf. Cortec Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42, 48 (2d Cir. 1991)
(explaining that plaintiff’s notice that other documents would be considered may avoid the
necessity of translating a motion to dismiss into one for summary judgment where the plaintiff
“has actual notice of all the information in the movant’s papers and has relied upon those
documents in framing the complaint” (emphasis added)).

        Second, even if consideration of the external documents were proper, dismissing the
Section 349 claim was still error. Section 349 “prohibits deceptive acts or practices in the
conduct of any business, trade or commerce or in the furnishing of any service in this state.”
Orlander v. Staples, Inc., 802 F.3d 289, 300 (2d Cir. 2015) (alteration and quotation marks
omitted). “To successfully assert a claim under [Section 349], a plaintiff must allege that a
defendant has engaged in (1) consumer-oriented conduct that is (2) materially misleading and
that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice.” Id. (internal
quotation marks omitted). To have engaged in a misleading act, “the alleged act must be likely to
mislead a reasonable consumer acting reasonably under the circumstances.” Cohen v. JP Morgan
Chase & Co., 498 F.3d 111, 126 (2d Cir. 2007) (internal quotation marks omitted). The notice

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letters and foreclosure proceedings the district court relied on do not rebut the allegations
supporting Shakespeare’s deceptive business practice claim: that Celink did not provide notice to
Shakespeare prior to paying her property tax; that the contracts do not unambiguously permit
Celink to make property tax payments when that property is subject to a pending foreclosure
action that Celink itself initiated; and that the foreclosure actions on Shakespeare’s property were
improperly initiated. Critically, those documents offer no explanation at all as to why Celink
failed to notify Shakespeare that it planned to pay her upcoming property tax. We take no view
as to whether Celink’s actions were sufficiently misleading to violate Section 349, but we
conclude that the complaint raised sufficiently plausible claims under Section 349 to survive the
motion to dismiss and proceed to summary judgment.

        Third, the district court additionally erred in finding Shakespeare could not have
plausibly stated a Section 349 claim by alleging materially deceptive violations of notice
provisions and other regulations that do not independently provide private causes of action.
“New York courts have held that collecting fees in violation of other federal or state laws may
satisfy the misleading element of § 349.” Cohen, 498 F.3d at 126. Shakespeare has also satisfied
“the threshold test in that the acts [she] complain[s] of are consumer-oriented in the sense that
they potentially affect similarly situated consumers.” Nick’s Garage, Inc. v. Progressive Cas.
Ins. Co., 875 F.3d 107, 125 (2d Cir. 2017) (citation omitted). Therefore, we vacate the dismissal
of Shakespeare’s Section 349 claim.

         We also vacate the dismissal of Shakespeare’s unjust enrichment claim. To establish an
unjust enrichment claim, a plaintiff must allege “(1) that the defendant benefitted; (2) at the
plaintiff’s expense; and (3) that equity and good conscience require restitution.” Myun-Uk Choi
v. Tower Research Capital LLC, 890 F.3d 60, 69 (2d Cir. 2018) (citation omitted). Because the
district court used documents external to the pleadings to draw inferences against Shakespeare,
its conclusion that Shakespeare could not plausibly show that equity and good conscience
required restitution was misguided. We decline to address Celink’s other arguments advocating
for dismissal of this claim, as the district court has not yet ruled on them. See Bacolitsas v. 86th
& 3rd Owner, 702 F.3d 673, 681 (2d Cir. 2012) (explaining that we generally do not consider
arguments not addressed by the district court).

        Shakespeare argues that the district court exceeded its discretion in denying leave to
amend. We decline to rule on the merits of this argument, given that we have reinstated some of
Shakespeare’s claims. She is free to renew the motion, and we leave it in the capable hands of
the district court to manage the litigation in due course.

        We have considered the remainder of the parties’ arguments and find them to be without
merit. Accordingly, the order of the district court hereby is AFFIRMED in part, VACATED in
part, and the case is REMANDED for further proceedings consistent with this order.

                                                      FOR THE COURT:
                                                      Catherine O’Hagan Wolfe, Clerk

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