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Federal Lawsuit Based on Mortgage Assignment Is Dismissed

The U.S. Court of Appeals for the Second Circuit has affirmed the dismissal of a complaint against several financial institutions arising from the assignment of a mortgage. Levin v. American Document Services, LLC, 2020 U.S. App. LEXIS 31931 (2d Cir. Oct. 6, 2020). The plaintiffs asserted that the assignment was effectuated by a forgery and was fraudulent. The court ruled that plaintiffs did not have standing to challenge the assignment because it did not affect their underlying debt obligations or the terms of their mortgage. Moreover, even if signatures on the assignment were allegedly unauthorized at the time they were made, under New York law an unauthorized signature on an instrument may be ratified after the fact.

The court also dismissed plaintiffs’ claims for fraudulent misrepresentation, because the alleged misrepresentations were made after plaintiffs had entered into the mortgage and therefore plaintiffs could not have relied upon them. Next, the court dismissed plaintiffs’ claim for intentional infliction of emotional distress. The court expressed skepticism that fear of a mortgage foreclosure could ever give rise to an emotional distress claim, and held that in any event, the allegedly improper assignment of the mortgage, which did not expose the plaintiffs to any additional liability, did not constitute extreme or outrageous behavior that could give rise to liability. Finally, the court also rejected plaintiffs’ request to amend their complaint, holding that the proposed amendments did not cure the deficiencies that the court had already identified. Ganfer Shore Leeds & Zauderer LLP successfully represented four of the defendants in this case.