Supreme Court, Rockland County, October 26, 2022

Legal Aid Society of Rockland County, Inc. (Derek Tarson of counsel) for Karen L. Altomonte, also known as Karen Lynn Altomonte, defendant.

Schiller, Knapp, Lefkowitz & Hertzel, LLP for plaintiff.

The motion by defendant Karen Altomonte for an order pursuant to CPLR 3211 (a) (1) dismissing this action for plaintiff's failure to comply with RPAPL 1304 is determined as follows.

Plaintiff commenced this residential foreclosure action in 2020 concerning the real [*2]property located at 34 Zugibe Court in West Haverstraw, New York, alleging that defendant borrower defaulted in payment on the parties' 2015 loan modification. Defendant brings this CPLR 3211 (a) (1) motion to dismiss alleging that plaintiff's RPAPL 1304 pre-commencement notice violated that statute's separate-envelope requirement (see Bank of Am., N.A. v Kessler, 202 AD3d 10 [2d Dept 2021]). Plaintiff concedes that its RPAPL 1304 notice included a "mini-Miranda" warning under the Fair Debt Collection Practices Act (FDCPA) (see 15 USC § 1692e [11]), but offers a raft of arguments why Kessler was wrongly decided, why the FDCPA preempts RPAPL 1304, and why this court should stay this action pending further appeal of Kessler.

[1] The court need not belabor the issues. Plaintiff's strict compliance with RPAPL 1304 was a condition precedent to{**77 Misc 3d at 705} commence this foreclosure action (see Kessler, 202 AD3d at 14; CV XXVII, LLC v Trippiedi, 187 AD3d 847, 850 [2d Dept 2020]; USBank N.A. v Haliotis, 185 AD3d 756, 758 [2d Dept 2020]). Plaintiff's RPAPL 1304 notice included extensive language that RPAPL 1304 (1) does not specify for inclusion in a pre-commencement notice. RPAPL 1304 (2) is clear that the pre-commencement notice "required by this section shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice." Additional language not "required by this section" violates the separate-envelope requirement as Kessler and its progeny have construed it over a dozen times in recent months (see e.g. Deutsche Bank Natl. Trust Co. v Ghosh, 208 AD3d 851 [2d Dept, Aug. 31, 2022]; JPMorgan Chase Bank, N.A. v Dedvukaj, 207 AD3d 532 [2d Dept, July 13, 2022]; US Bank N.A. v Lanzetta, 207 AD3d 501 [2d Dept, July 6, 2022]; Wells Fargo Bank N.A. v Bedell, 205 AD3d 1064 [2d Dept, May 25, 2022]; HSBC Bank USA, N.A. v Hibbert, 205 AD3d 783, 784 [2d Dept, May 11, 2022]; US Bank N.A. v Drakakis, 205 AD3d 756, 757 [2d Dept, May 4, 2022]; Bank of N.Y. Mellon v Govan, 204 AD3d 878 [2d Dept, Apr. 20, 2022]; HSBC Bank USA, N.A. v Jahaly, 204 AD3d 648 [2d Dept, Apr. 6, 2022]; U.S. Bank N.A. v Hinds, 203 AD3d 1210 [2d Dept, Mar. 30, 2022]; Deutsche Bank Natl. Trust Co. v Bancic, 203 AD3d 1130 [2d Dept, Mar. 30, 2022]; Deutsche Bank Natl. Trust Co. v Salva, 203 AD3d 700 [2d Dept, Mar. 2, 2022]; US Bank N.A. v Kaplan, 202 AD3d 1144 [2d Dept, Feb. 23, 2022]; Ocwen Loan Servicing, LLC v Sirianni, 202 AD3d 702 [2d Dept, Feb. 2, 2022]; Wells Fargo Bank, N.A. v DeFeo, 200 AD3d 1105 [2d Dept 2021]; Citimortgage, Inc. v Dente, 200 AD3d 1025 [2d Dept 2021]). As such, defendant carries her prima facie burden to demonstrate entitlement to judgment sustaining her RPAPL 1304 affirmative defense and, on that basis, obtain summary judgment dismissing this action.

In opposition, plaintiff argues that an additional notice conveying federally required materials inside an RPAPL 1304 envelope cannot violate Kessler and its progeny under two recent cases sounding in federal preemption (see CIT Bank, N.A. v Neris, 605 F Supp 3d 521 [SD NY, June 2, 2022, No. 18 Civ. 1511 (VM)]; Bank of N.Y. Mellon v Luria, 75 Misc 3d 1205[A], 2022 NY Slip Op 50384[U] [Sup Ct, Putnam County, May 11, 2022] [Luria I]). The thrust of Neris and Luria I was that a residential foreclosure plaintiff is a debt collector under the FDCPA (see 15USC § 1692a [6] [A], [F]; see also Cohen v {**77 Misc 3d at 706} Rosicki, Rosicki & Assoc., P.C., 897 F3d 75 [2d Cir 2018]; cf. Obduskey v McCarthy & Holthus LLP, 586 US —, 139 S Ct 1029 [2019]), and therefore must issue a so-called FDCPA "mini-Miranda" warning on its "initial communication" to the debtor to collect on that debt (see 15 USC § 1692e [11]; cf. 15 USC § 1692e [11] [excluding formal pleadings from FDCPA "mini-Miranda" requirement]). The argument continues that an RPAPL 1304 notice constituting a debt-collection communication therefore must convey this "mini-Miranda" warning, so under [*3]the Supremacy Clause (see US Const, art VI, cl 2), the separate-envelope requirement of RPAPL 1304 (2)—and Kessler and its progeny construing that requirement—must yield to the FDCPA.

Plaintiff's argument fails. Plaintiff fails to show that anything in RPAPL 1304, or any federal or state statute, requires that the 90-day pre-commencement notice of RPAPL 1304 (1) must be the first debt-collection notice that a foreclosure plaintiff sends a future defendant about an impending foreclosure action. Relatedly, plaintiff fails to show why it could not comply with the FDCPA by sending its "mini-Miranda" notice first, in a separate envelope from its RPAPL 1304 notice, and thereby comply with both statutes. By its terms, the FDCPA only preempts inconsistent state laws to the extent of the inconsistency (see 15 USC § 1692n). Because plaintiff fails to show—and this court perceives no reason—why plaintiff could not comply with the FDCPA "mini-Miranda" warning prior to sending an RPAPL 1304 notice, this court has no basis to find a facial conflict between the two statutes that would preempt RPAPL 1304.

[2] Moreover, even if theoretically there might be a facial conflict between the FDCPA's "mini-Miranda" requirement and RPAPL 1304, plaintiff fails to show the further preemption requirement of FDCPA remedial superiority. While the contours of FDCPA preemption have been hotly contested (see generally Arellano v Clark County Collection Serv., LLC, 875 F3d 1213 [9th Cir 2017]; Aker v Americollect, Inc., 854 F3d 397 [7th Cir 2017]), one clear agreement among reviewing courts takes at face value the FDCPA's plain language, and its corresponding congressional intent, not to preempt any state law whose protection "affords any consumer . . . greater than the protection provided by [the FDCPA]" (15 USC § 1692n). Thus, the typical section 1692n preemption analysis turns on which law{**77 Misc 3d at 707} accords superior protection to the class of consumers who are the respective laws' intended beneficiaries (see e.g. McDermott v Marcus, Errico, Emmer & Brooks, P.C., 775 F3d 109 [1st Cir 2014]; Desmond v Phillips & Cohen Assoc., Ltd., 724 F Supp 2d 562 [WD Pa 2010]; Yang v DTS Fin. Group, 570 F Supp 2d 1257, 1261 [SD Cal 2008]; Alkan v Citimortgage, Inc., 336 F Supp 2d 1061 [ND Cal 2004]).

Here, plaintiff fails to show that the FDCPA accords superior consumer protection relative to RPAPL 1304 to the class of residential foreclosure defendants who are the New York statute's intended beneficiaries. Moreover, this court is skeptical that any residential foreclosure plaintiff could make that showing. The FDCPA "mini-Miranda" warning requires only that a debt collector specify on "initial communication" with the alleged debtor "that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose," and that future communications specify their origin from a debt collector attempting to collect a debt (15 USC § 1692e [11]). These forced disclosures inform debtors about who the collector is and the purpose for which information will be used. By sharp contrast, the RPAPL 1304 notice gives alleged mortgage debtors concrete tools to avoid litigation and thereby retain their homes against foreclosure—including a payoff amount, a 90-day period in which to make workout options, a list of free and trained housing counselors in their area prepared to offer assistance, contact information for the Department of Financial Services and Office of the Attorney General, and a list of specific rights (see RPAPL 1304 [1]). The numerosity and breadth of these RPAPL 1304 protections accord far greater consumer protections than the FDCPA "mini-Miranda" warning alone, and thus the FDCPA does not preempt RPAPL 1304 under the FDCPA's own terms (see 15 USC § 1692n).

To be sure, two courts have credited the argument that RPAPL 1304 does not accord greater protections than the FDCPA in relation to mortgage debt collection, and therefore the latter preempts the former (see CIT Bank, N.A. v Neris, 605 F Supp 3d 521 [SD NY, June 2, 2022, No. 18 Civ. 1511 (VM)][*4]; Bank of N.Y. Mellon v Luria, 76 Misc 3d 724 [Sup Ct, Putnam County, July 18, 2022] [Luria II]). Leaving aside that plaintiff does not make a substantial record showing on this issue but mainly cites to these two cases, this court finds substantial prudential reasons why it could not follow Neris and Luria II even were it inclined to do so.{**77 Misc 3d at 708}

Before the Luria II court was the volume of Kessler case law binding on the trial courts of the Second Department, including Kessler itself, which addressed the FDCPA mini-Miranda issue in relationship with the RPAPL 1304 (2) separate-envelope requirement. Following fast on Kessler's heels, Lanzetta, Sirianni and Drakakis consistently reaffirmed that RPAPL 1304 notices transmitting the FDCPA "mini-Miranda" warning, or consumer information about bankruptcy, thereby violate the separate-envelope requirement. Neither plaintiff here, nor Luria II, addressed the prudential issues that would arise if this court, or any others bound to apply clear Appellate Division precedents, could set aside those precedents in the manner plaintiff requests.^[FN*]

As for Neris, if federal preemption considerations are to pull Kessler and its progeny from the ground root and branch, only the New York Court of Appeals can do so—a result the Kessler court itself invited that Court to consider (see NY Const, art VI, § 3 [b] [6]; CPLR 5602 [a] [1] [i]). Moreover, Kessler expressly relied on a line of appellate cases whose results and purposes this court also must honor. This appellate thrust began with the Court of Appeals articulating a formalist, "clear rule" approach to the law of de-accelerating mortgage debt to vindicate policy objectives of clarity, consistency and predictability in the law of residential foreclosures (see Freedom Mtge. Corp. v Engel, 37 NY3d 1, 32 [2021]). Months later, in a case of "first impression," the Second Department held that each borrower entitled to receive an RPAPL 1304 pre-commencement notice also has a right to receive such notice in a "separate envelope" {**77 Misc 3d at 709}from communications to any other borrower (Wells Fargo Bank, N.A. v Yapkowitz, 199 AD3d 126, 128 [2d Dept 2021]). Kessler then relied expressly on Engel, and particularly the Engel policy objectives, to extend the "separate envelope" mandate—even, as here, for a sole borrower—to bar any language beyond the exact language of RPAPL 1304 (1) itself (see Kessler, 202 AD3d at 18). Kessler even narrated the necessity of its own "bright-line rule" lest courts entangle themselves in "exactly the type of judicial scrutiny" concerning motive and context that Engel disallowed (Kessler, 202 AD3d at 16-17). [*5]

For all of the foregoing reasons, it is not for this court to predict how the Court of Appeals might decide the pending Kessler appeal, much less predict—as plaintiff appears to predict—that the Court of Appeals will overturn Kessler. The prerogative of prognostication lies not with this court but with federal courts that, in applying New York law, properly may disregard Appellate Division decisions upon "persuasive evidence that the New York Court of Appeals, which has not ruled on [the issues presented], would reach a different conclusion" (AEI Life LLC v Lincoln Benefit Life Co., 892 F3d 126, 139 n 15 [2d Cir 2018], quoting Pahuta v Massey-Ferguson, Inc., 170 F3d 125, 134 [2d Cir 1999]). Such is precisely what the U.S. District Court did in Neris, which predicted that the New York Court of Appeals would overturn Kessler and, on that basis, declined to follow Kessler and instead held that the FDCPA preempts the RPAPL 1304 (2) separate-envelope requirement (see Neris, 605 F Supp 3d at 527-529). Whether or not Neris was correct, this court must follow Kessler and its progeny unless and until the New York Court of Appeals determines otherwise.

For the above reasons, this court respectfully parts ways with Luria II and prudentially cannot follow Neris. Applying the law that this court is bound to follow, this court cannot grant plaintiff's preemption argument. Instead, under Kessler and its progeny, this court must conclude that plaintiff's RPAPL 1304 notice is fatally defective for failure to satisfy the separate-envelope requirement of RPAPL 1304 (2). Defendant therefore is correct that plaintiff cannot carry its burden to prove strict compliance with RPAPL 1304. On that basis, and because of the inherent prejudice that would inure to defendant while interest accrues and a notice of pendency remains on the subject property, the branch of plaintiff's motion to stay this action is denied. Because plaintiff's proof of its strict{**77 Misc 3d at 710} compliance with RPAPL 1304 is a condition precedent to commence this action, defendant's motion to dismiss this action is granted (see Prof-2014-S2 Legal Tit. Trust II v DeMarco, 205 AD3d 943, 945 [2d Dept 2022]; Deutsche Bank Natl. Trust Co. v Dennis, 181 AD3d 864, 866 [2d Dept 2020]; U.S. Bank N.A. v Offley, 170 AD3d 1240, 1241 [2d Dept 2019]; Hudson City Sav. Bank v DePasquale, 113 AD3d 595, 596 [2d Dept 2014]).

In the event that the Court of Appeals determines the pending Kessler appeal in a manner that bears on this action, plaintiff is invited to make a CPLR 2221 (e) motion for leave to renew this motion, deny dismissal and accord defendant reasonable time to answer the complaint.

The court has considered the parties' remaining contentions and deems them to be without merit or moot in light of the foregoing. Accordingly it is hereby ordered that defendant's motion is granted and this action is dismissed; and it is further ordered that the notice of pendency is cancelled, and the County Clerk of the County of Rockland is directed to notate such cancellation on the records of the property; and it is further ordered that if the Court of Appeals determines the pending Kessler appeal in a manner that bears on this action, plaintiff may move by order to show cause to renew this motion.