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Smulley v. Mutual of Omaha Bank

United States District Court, D. Connecticut

August 10, 2017

MUTUAL OF OMAHA BANK, et al. Defendants.


          Jeffrey Alker Meyer, United States District Judge.

         Plaintiff Dorothy Smulley believes that various banks and related financial entities have engaged in a criminal racketeering enterprise under the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Her allegations stem from the defendants' involvement with the financing and servicing of plaintiff's mortgage loan for a condominium and a longstanding dispute that plaintiff has had with her condominium association about the assessment and payment of fines and fees.

         Defendants have moved to dismiss the complaint. Because I conclude that plaintiff has not alleged facts that give rise to plausible grounds to conclude that any of the defendants have taken part in a criminal racketeering scheme or any other violation of federal law, I will grant defendants' motions to dismiss plaintiff's federal law claims. I will decline to exercise supplemental jurisdiction over plaintiff's remaining state law claims and will therefore dismiss the complaint without prejudice to plaintiff's pursuit of any state law remedies in the state courts of Connecticut.


         Plaintiff's amended complaint alleges facts that I accept as true for the purposes of this motion to dismiss to the extent that such factual allegations are not legally conclusory. The complaint stems from a long-running dispute and other litigation between plaintiff and her condominium association, the Oronoque Shores Condominium Association No. 1 Inc. (Oronoque), in Stratford, Connecticut. Plaintiff alleges that in October 2011, she began receiving letters from attorneys for Oronoque-the law firm of Zeldes, Needle & Cooper (ZNC)- accusing plaintiff of violating Oronoque's bylaws and demanding payment of a fine. Between November 2011 and April 2012, plaintiff repeatedly contacted ZNC for clarification about which bylaws she had violated, but ZNC did not respond.

         At the end of April 2012, plaintiff received an invoice for a fine of nearly $10, 000 from Imagineers, which was Oronoque's property management company. This invoice indicated that the fine was being assessed for unauthorized additions and alterations to her condo. Plaintiff disputed the fine, and on June 15, 2012, she filed a lawsuit in Connecticut state court challenging the fine. Her state court lawsuit named as defendants ZNC, Imagineers, and certain individuals employed by ZNC and Imagineers.

         In July 2012, Oronoque returned plaintiff's annual common charge assessment, which she had made payable to Oronoque, and requested that she make it payable to ZNC. Plaintiff was also instructed to direct her monthly common charge assessments to ZNC. Because plaintiff believed she had no obligation to ZNC, she refused to reissue her checks to ZNC. Instead, she continued to make the checks payable to Oronoque and to mail them to Imagineers, and Oronoque continued to return the checks to her. In response, plaintiff began depositing the returned checks into Oronoque's bank account at Webster Bank.

         In August 2012, Oronoque filed suit against plaintiff in state court over plaintiff's alleged violations of Oronoque's bylaws. Then, in November 2012, Oronoque filed a foreclosure action against plaintiff, alleging non-payment of common charge assessments. Meanwhile, plaintiff continued to deposit her payments for the common charge assessments into Oronoque's account at Webster Bank. Plaintiff alleges that Oronoque's foreclosure lawsuit was false and misleading, because Oronoque knew that plaintiff was current in her payment of common charge assessments and that the allegation of non-payment was for other unpaid charges including the fine previously levied against her.

         The complaint goes on to describe various machinations designed to avoid accepting plaintiff's payment of her common charge assessments. In June 2013, Webster Bank suddenly refused to accept plaintiff's deposits into Oronoque's bank account, even though it had previously been accepting such payments. In response to Webster Bank's refusal, plaintiff began depositing her common charge assessments into Oronoque's account at People's United Bank. According to plaintiff, Oronoque subsequently closed its accounts at Webster and People's United Bank in order to prevent plaintiff from making any more payments. Oronoque also blocked plaintiff from making online payments to its account at Mutual of Omaha Bank. In November 2013, plaintiff began paying her common charge assessments via electronic wire transfers from her bank into Oronoque's account at Mutual of Omaha Bank.

         While enmeshed as described above in multiple state court lawsuits involving her condominium association payments, plaintiff filed this federal lawsuit in July 2014 against Oronoque, ZNC, Webster Financial Corporation (Webster), Imagineers, Mutual of Omaha Bank, and a bank employee, alleging a variety of state and federal claims, including a RICO claim. See Doc. #1. In October 2014, I dismissed the complaint under the Colorado River abstention doctrine, based on the fact that plaintiff had multiple pending state court actions arising from the same facts. See Doc. #53; see also Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976).

         Plaintiff appealed the dismissal. While her appeal was pending, plaintiff reached a settlement agreement with all of the many defendants except Webster. Plaintiff notified the Second Circuit of the settlement and moved to withdraw the defendants involved in the settlement as parties from the case, leaving Webster as the only defendant. The Second Circuit granted plaintiff's motion to withdraw the defendants and then found that the Colorado River abstention doctrine no longer applied, because plaintiff did not have any concurrent, parallel actions in state court pending against Webster. See Smulley v. Mut. of Omaha Bank, 634 F. App'x 335 (2d Cir. 2016). Accordingly, the Second Circuit vacated my order dismissing plaintiff's complaint and remanded to me the case against Webster-the sole remaining defendant-in April 2016. Id. at 337.

         A few months after the case was remanded to me, plaintiff decided to amend her complaint and to join four new defendants: JP Morgan Chase Bank (Chase), Fannie Mae, the Federal Housing Finance Agency (FHFA), and Mortgage Electronic Registration Systems (MERS). Doc. #75. I granted plaintiff's motions for joinder and to amend. Doc. #90.

         The amended complaint (now the operative complaint in this case) added allegations against the new defendants. The allegations relate primarily to actions taken by the defendants in accordance with a form that plaintiff signed about 12 years earlier when she refinanced her condominium in 2004. Webster was the mortgagee in this refinancing, and defendant MERS was Webster's nominee. At the time of the refinancing, plaintiff signed a boilerplate form known as “Form 3140, ” a Fannie Mae/Freddie Mac multistate condominium rider form. See Doc. #79 at 55-56; Paragraph F of Form 3140 includes standard language about the right of the lender to make necessary payments to third parties if the borrower fails to make such payments in the first place:

If Borrower does not pay condominium dues and assessments when due, then Lender may pay them. Any amounts disbursed by Lender under this paragraph F shall become additional debt of Borrower secured by the Security Instrument. Unless Borrower and Lender agree to other terms of payment, these amounts shall bear interest from the date of disbursement at the Note rate ...

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