Wilmington Savings Fund Society, FSB v. Thomas

Background

Wilmington Savings Fund Society, FSB brought a mortgage foreclosure action under New York law against Arleen M. Thomson. The complaint concerned real property identified in the opinion as 38 Duncan Road, Beekman, New York. The opinion states that John Thomson, Jr., who is deceased, and Arleen Thomson executed a $315,000 note and mortgage in 2008. The mortgage was later assigned to Wilmington Savings Fund Society, FSB, doing business as Christina Trust, as trustee for Carlsbad Funding Mortgage Trust. The plaintiff alleged that payments stopped in June 2012 and that $298,365.19, plus additional charges and fees, was owed.

In June 2019, Judge Roman granted Thomson’s motion to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(1), ruling that the court lacked subject-matter jurisdiction because Wilmington had not established diversity jurisdiction. The court gave Wilmington permission to file a second amended complaint by July 15, 2019, and warned that failure to meet the deadline would result in dismissal with no further opportunity to correct the jurisdictional pleading.

Wilmington filed its proposed Second Amended Complaint 17 days late. The filing was marked deficient because court permission had not been obtained. Wilmington then took no further action to obtain permission or advance the case for more than seven months. Judge Roman later ordered Wilmington to explain why the case should not be dismissed for failure to prosecute under Rule 41(b). Wilmington opposed dismissal and also filed a proposed certificate of default, which was likewise marked deficient.

Rule 41(b) analysis

Rule 41(b) permits dismissal when a plaintiff fails to prosecute an action or comply with a court order. The court explained that a district court may also dismiss for failure to prosecute on its own initiative. The court considered five factors: the length of the failure to comply, notice that dismissal could result, likely prejudice to the defendant, the balance between docket management and the plaintiff’s opportunity to be heard, and whether a lesser sanction would be adequate.

The court found that the seven-month failure to advance the case weighed toward dismissal and that Wilmington had been clearly warned that missing the filing deadline would result in dismissal. The court did not presume prejudice to Thomson, however, because the delay was not sufficiently long, and the record did not show that Thomson had been prejudiced. The court also found that the case had not significantly burdened the court’s resources.

The fifth factor weighed against immediate dismissal because Wilmington’s proposed Second Amended Complaint appeared to address the jurisdictional defect identified in the earlier dismissal order, and Wilmington had opposed the Rule 41(b) dismissal. Considering the record as a whole, the court concluded that dismissal under Rule 41(b) was not appropriate at that time.

Disposition

Judge Philip M. Halpern granted Wilmington permission to file a Second Amended Complaint within 14 days of the order. The order states that if Wilmington does not file it within that period, the case will be dismissed under Rule 41(b) with no additional notice to the parties. The opinion did not decide the merits of the foreclosure claims.