Reed v. RBMS Reo Holdings, LLC

JOHN K. REED, Petitioner, v. RBMS REO HOLDINGS, LLC, Respondent.

Civil Action No. 20 Civ. 5891 (GBD) (SLC)

United States District Court, S.D. New York

July 12, 2021

John K. Reed

TO THE HONORABLE GEORGE B. DANIELS, United States District Judge

REPORT AND RECOMMENDATION

SARAH L. CAVE, UNITED STATES MAGISTRATE JUDGE.

I. INTRODUCTION

Pro se Petitioner John K. Reed filed a petition (the “Petition”) seeking to enforce an arbitration award (the “Award”) against Respondent RMBS REO Holdings, LLC (“RMBS”).^[1] (ECF No. 1). Reed alleges that unanswered mailings to RMBS created a contract to arbitrate and that RMBS failed to oppose arbitration or defend itself at an arbitration hearing, following which an arbitration panel issued the Award of $3.8 million dollars-$15.2 million with treble damages- against RMBS. (See id.)

RMBS moved to dismiss the Petition under Federal Rule of Civil Procedure 12(b)(6) and to vacate the Award (the “Motion”). (ECF No. 18). Reed opposed the Motion (the “Opposition”). (ECF Nos. 29, 31, 33).

For the reasons set forth below, the Court respectfully recommends that the Motion be GRANTED IN PART AND DENIED IN PART as follows:

(1) the Petition be DISMISSED WITH PREJUDICE; and

(2) RMBS's request to vacate the Petition be DENIED as untimely.

In addition, because Reed has not demonstrated that he could remedy the defects in the Petition, I respectfully recommend that leave to amend be DENIED.

II. BACKGROUND

A. Factual Background

The Petition appears to be the sixth in a series of legal actions in which Reed has sought to challenge foreclosure on a mortgage secured by Reed's real property located in Santa Barbara, California (the “Property”). The Court summarizes only the background necessary for analyzing the Motion.

RMBS alleges that it is the current beneficiary of a deed of trust concerning the Property (the “Deed of Trust”), which it holds pursuant to an Assignment of Deed of Trust recorded April 11, 2019, that assigned to RMBS “all interest under [the] Deed of Trust . . . in the amount of $999, 990.00 executed by JOHN K REED . . . Property Address: 1611 Olive St., Santa Barbara, CA, 93101[.]” ((ECF No. 19-19); see ECF No. 19 at 5). Reed disputes the authenticity of the Deed of Trust and argues that RMBS is fraudulently attempting to foreclose on the Property. (See ECF No. 29 at 2, 9). There have been five prior actions in which Reed unsuccessfully attempted to cancel the Deed of Trust. Reed v. Ohio Savings Bank, 2:19-cv-03019 (PSG) (MRW), No. 2019 WL 6608761, at *1-3 (CD. Cal. July 9, 2019) (“Reed V”) (dismissing Reed's complaint with prejudice and summarizing prior history).^[2]

Reed asserts that RMBS was subject to binding arbitration and defaulted by failing to appear at a properly noticed arbitration hearing. (See ECF No. 1). He attaches to the Petition: (i) a “Final Arbitration Award” dated December 3, 2019 (the “First Award”); (ii) a “Final Modified Arbitration Award” dated February 6, 2020 (the “Modified Award, ” together with the First Award, the “Award”); (iii) a two-and-one-half page transcript (the “Transcript”) of a December 2, 2019 arbitration hearing (the “Hearing”) before “Dalwickman Arbitration Services” (“Dalwickman”); (iv) a USPS tracking record dated December 12, 2019, indicating a Manhattan delivery, signed by “R Rob”; (v) an undated “Final Notice of Default Notice to Respond” from Reed to RMBS (the “Final Notice”);^[3] (vi) certified mail receipts to RMBS, one dated October 25, 2019, and a second with an illegible date; (vii) an “Arbitrators' Disclosure” dated December 2, 2019; and (viii) a November 19, 2019 “Notice of Arbitration Hearing” setting the Hearing for December 11, 2019 (the “Hearing Notice”). (Id. at 12-48). Not attached to the Petition is any agreement, contract, or other document between himself and RMBS containing an agreement to arbitrate. (See Id. at 1-51). Reed also references in the Petition an October 21, 2019 “Show Cause Proof of Claim Demand” (the “Demand Letter”) and a “Notice of Dishonor and Opportunity to Cure” dated November 4, 2019, neither of which is attached to the Petition. (See Id. at 7).

Although the Hearing Notice set the date of the Hearing as December 11, 2019, according to the Transcript, the Hearing took place on December 2, 2019 on Skype, hosted by Dalwickman before Anthony O'Quinn, Elliot Manning, and Debra Lohri (the “Panel”). (ECF No. 1 at 13, 23). Reed appeared at the Hearing pro se and RMBS did not appear. (Id. at 23). When asked, “[d]oes the contract submitted to this panel for arbitration contain arbitration clauses?”, Reed responded, “Yes.” (Id.) Manning asked, “have you received a response from [RMBS] from the mailing of the contract?”, to which Reed replied he had not. (Id.) Reed testified that the “contract submitted for arbitration” required a response from RMBS within a specified time frame, which had expired, and that he did not receive from RMBS a response to a “Request for Arbitration” or the Hearing Notice. (Id. at 23-25).

On December 3, 2019, the Panel issued the First Award awarding Reed $3.8 million and directing payment of an additional $11.4 million as “punitive treble damages” if RMBS failed to comply within 30 days. (ECF No. 1 at 34). In the First Award, the Panel determined that Reed and RMBS “entered into an agreement dated October 21, 2019 [] whereby they knowingly and intentionally [] agreed to [a]rbitration to settle all disputes, ” and that this was “a written, self-executing, binding, irrevocable, contractual agreement” permitting arbitration at Dalwickman. (Id. at 30-32).

On February 6, 2020, Dalwickman issued the Modified Award. (ECF No. 1 at 15). The Modified Award, issued “[u]pon request of [] Reed . . . to clarify the [First] Award[, ]” purports to be “binding on all the parties, in all jurisdictions, and shall take precedent over all collateral and/or related matters heretofore, at present and forthwith until the agreement is fully satisfied.” (Id.)

Reed alleges that the Award required RMBS “to release any and all claims against ‘any and all properties [belonging to] Reed[.]'” (ECF No. 1 at 3). Reed alleges that he served the Award on RMBS “at its New York Offices, ” and has submitted tracking receipts for a delivery signed for by “R Rob” on December 12, 2019. (Id. at 4, 7, 37).

B. Procedural Background

On July 23, 2020, Reed filed the Petition. (ECF No. 1). Reed bases venue in this District on RMBS's presence in Manhattan. (Id. at 4-5). Reed asks the Court to affirm a default judgment against RMBS in the amount of $15.2 million dollars, consisting of the $3.8 million Award, plus $11.4 million in “punitive treble damages.” (Id. at 2-3, 9).

On August 5, 2020, the Honorable George B. Daniels issued an Order of Service directing Reed to serve RMBS within 90 days and warned that his failure to comply could lead to the dismissal of the Petition for failure to prosecute. (ECF No. 5). The same day, Judge Daniels referred this action to the undersigned for general pretrial supervision and to issue a Report and Recommendation on any dispositive motions. (ECF No. 6).

On September 24, 2020, the Court issued an Order to Show Cause directing Reed to show cause why this action should not be dismissed for failure to prosecute under Federal Rules of Civil Procedure Rule 4(m) and 41(b). (ECF No. 12). On October 1, 2020, Reed filed an affirmation stating that he engaged a process server in his state of residence, California, who purported to serve RMBS by certified mail on August 3, 2020. (ECF No. 13 at 2-3). The Court “acknowledge[d] [Reed's] attempt to effect service[]” but explained that service of a New York corporation by mail was “invalid.” (ECF No. 14 (citing Fed.R.Civ.P. 4(h)(1)). In light of Reed's pro se status, the Court extended his deadline to serve RMBS to December 21, 2020. (Id.)

On August 31, 2020, Reed filed a “Request for Payment of Compounding Interest and Recovery of Costs and Expenses Regarding Default Judgment Pertaining to Arbitration Award” (the “Request” (ECF No. 9)). In the Request, Reed “appeared to be seeking to recover the expenses he incurred leading up to the filing of this action, as well as the full amount of the [] Award as described in his Petition and annualized compounding interest.” (ECF No. 17 at 1 (citing ECF No. 9 at 2-5)). On November 25, 2020, RMBS filed a motion to dismiss and vacate the Award (the “First Motion”). (ECF No. 16). In an order dated December 7, 2020, the Court deemed the Request “to be seeking the same relief as the Petition, that is, to enforce the [] Award, and to supplement the amount of damages he is claiming[, ]” and therefore denied the Request without prejudice in light of the pendency of the First Motion. (ECF No. 17 at 2). On January 14, 2021, ^[4]RMBS filed the Motion and a certification of service on Reed by first class mail. (ECF Nos. 18-20).

After some delay, on May 25, 2021, Reed filed his Opposition to the Motion.^[5] (ECF No. 29). On May 28, 2021, RMBS filed its Reply. (ECF No. 30). Reed filed a sur-reply, dated June 2, 2021, with the assistance of the Southern District's Legal Clinic for Pro Se Litigants. (ECF No. 31 (the “First Sur-Reply”)). RMBS opposed the First Sur-Reply as impermissibly filed, and responded to Reed's arguments. (ECF No. 32). Reed filed a second sur-reply, dated June 14, 2021. (ECF No. 33 (the “Second Sur-Reply”)).^[6]

III. LEGAL STANDARDS

A. Motion to Dismiss

In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court accepts as true all factual allegations in the complaint and draws all reasonable inferences in favor of the plaintiff. See N.J. Carpenters Health Fund v. Royal Bank of Scotland Grp., PLC, 709 F.3d 109, 119 (2d Cir. 2013); Blackson v. City...