Makhnevich v. MTGLQ Investors, L.P.

Background

Stacy Makhnevich, who was representing herself, sued MTGLQ Investors, L.P., Selene Finance, L.P., and Maria Sideris. She alleged violations of the Fair Debt Collection Practices Act (FDCPA), 42 U.S.C. § 1983, and New York General Business Law § 349. She also alleged that Sideris violated New York Judiciary Law § 487.

MTGLQ had filed a foreclosure action against Makhnevich in New York state court. Documents filed there included a note, mortgage, and mortgage-transfer records that Makhnevich disputed as unauthentic. She also alleged that an affidavit falsely stated that she had been personally served with the foreclosure papers, and that Sideris later affirmed that she had been served. Makhnevich alleged that she was not served and never spoke with the process server. The state court initially treated her as in default but later allowed her to defend the foreclosure case.

The defendants filed motions to dismiss the second amended complaint. Makhnevich also sought permission to amend her complaint and requested reimbursement for expenses related to serving the corporate defendants.

Procedural Issues

The court rejected Makhnevich’s argument that the defendants’ motions were too late under the rule generally limiting repeated dismissal motions. The court explained that an amended complaint replaces the earlier complaint and that the defendants’ arguments sought resolution of the claims rather than waiver of threshold objections.

The court took judicial notice of state-court filings to establish that the state litigation and filings occurred, but it would not consider the disputed mortgage documents for the truth of what they asserted. The court treated their authenticity as disputed and therefore did not resolve that factual dispute on a motion to dismiss.

FDCPA Claim Against the Corporate Defendants

The FDCPA prohibits debt collectors from using harassment, false or misleading representations, or unfair methods to collect debts. The corporate defendants argued that they were creditors rather than debt collectors and therefore were outside the relevant FDCPA definition.

The court held that Makhnevich had adequately alleged that MTGLQ and Selene were debt collectors. Her allegations that MTGLQ bought allegedly defective or delinquent mortgages, had filed many debt-collection lawsuits, and that Selene regularly collected debts were sufficient at the pleading stage. The court also concluded that the FDCPA could apply even though Makhnevich disputed whether the debt itself existed. The corporate defendants’ motion to dismiss the FDCPA claim was DENIED.

FDCPA Claim Against Sideris

The court treated Sideris’s arguments about the alleged mortgage documents as an untimely request to reconsider the court’s earlier decision. The court declined to reconsider that decision because the request came more than seven months after the earlier order and Sideris had not shown clear error. The court also declined to consider Sideris’s request to dismiss the FDCPA claim because that request was raised only in her reply brief. The opinion’s conclusion states that the defendants’ motions to dismiss the FDCPA claim were DENIED.

Section 1983 Claim

Section 1983 provides a cause of action when a person acting under state law deprives someone of federal constitutional or statutory rights. The court did not reconsider its earlier conclusion that Makhnevich had sufficiently alleged state action.

However, the court held that Makhnevich had not adequately alleged a legally recognized injury. Her amended allegations stated that the allegedly improper service caused her to be placed in default and prevented her from defending the state case. But the state court later removed the default, reinstated her defenses, and allowed her to litigate. The court therefore GRANTED the defendants’ motion to dismiss the § 1983 claim.

New York General Business Law § 349 Claim

Section 349 prohibits deceptive business practices that affect consumers. Makhnevich alleged that the defendants engaged in a repeated pattern of deceptive filings and had pursued hundreds of debt-collection lawsuits in New York.

The court held that these allegations were sufficient to plead consumer-oriented conduct—that is, conduct capable of affecting more than the individual plaintiff. It also held that the allegations concerning Sideris’s repeated filing of documents without meaningful review were sufficient at this stage. The defendants’ motions to dismiss the § 349 claim were DENIED.

New York Judiciary Law § 487 Claim

Section 487 permits a civil claim against an attorney who engages in deceit or collusion with the intent to deceive a court or party. Makhnevich alleged that Sideris knowingly filed or supported false service and foreclosure-notice assertions and regularly filed similar false documents.

The court held that Makhnevich had adequately alleged intentional, extreme, and repeated deceit, as well as a larger fraudulent scheme. It also held that her alleged costs of defending the state foreclosure action could qualify as damages if the alleged misrepresentation caused that action to proceed. Sideris’s motion to dismiss the § 487 claim was DENIED.

Motion to Amend

The court GRANTED Makhnevich’s request to amend, but only to add allegations concerning the defendants’ actions surrounding notices that the loan servicer was changing from Selene to SN Servicing and that Selene later signed a change-of-attorney notice. The court ordered her to file a third amended complaint by September 4, 2021.

Service Expenses and Disposition

The court awarded Makhnevich $181 for costs associated with effecting service. It allowed reimbursement for process-server costs and filing service affidavits but not expenses incurred in requesting waivers of service.

The court’s final disposition was that the defendants’ motions to dismiss were GRANTED in part and DENIED in part. Specifically, dismissal of the FDCPA, § 349, and § 487 claims was DENIED, while dismissal of the § 1983 claim was GRANTED. The motion for limited amendment was GRANTED, and Makhnevich was awarded $181 for service costs.

Judge

The order was issued by Analisa Torres, United States District Judge.