Federal Deposit Insurance Corporation v. US Mortgage Corporation

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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FEDERAL DEPOSIT INSURANCE
CORPORATION, in its capacity as
Receiver of AmTrust Bank,
Plaintiff, REPORT AND
RECOMMENDATION
-against- CV 13-517 (EK)(AYS)
US MORTGAGE CORPORATION,
Defendant.
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US MORTGAGE CORPORATION,
Third Party Plaintiff,
-against-
LAWRENCE CONDE, MARIAN CONDE AND
MICHAEL CONDE,
Third Party Defendants.
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SHIELDS, Magistrate Judge:
This case was commenced on January 29, 2013 by Plaintiff Federal Deposit Insurance
Corporation ("FDIC"). FDIC named as Defendant US Mortgage Corporation ("USM"). Shortly
after commencement of this action, USM commenced a third-party action against three
individuals, including Michael Conde.
Presently before this Court, upon referral of the Honorable Eric Komitee for Report and
Recommendation, is USM’s renewed motion for default judgment against Michael Conde.
For the reasons set forth below, this Court recommends that the motion for entry of a
judgment of default against Michael Conde be granted.
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BACKGROUND AND PRIOR PROCEEDINGS
FDIC is a corporation organized under the laws of the United States of America. Under
the Federal Deposit Insurance Act (the "FDIA") FDIC is authorized to be appointed as a receiver
for failed insured depository institutions. FDIC commenced this action in its capacity as receiver
for one of those failed institutions, AmTrust Bank ("AMT"). In that capacity, FDIC prosecutes
this action in the shoes of AMT.
When this lawsuit was commenced USM was a mortgage broker with its principal place
of business in this District. FDIC alleged herein that USM delivered to AMT a loan package that
misrepresented or omitted material information about a straw borrower, and the non-arms-length
nature of the transaction. The mortgage forming the basis of FDIC's claim against USM (the
"Mortgage") was funded by AMT on April 7, 2006, in the amount of $1.1 million (the "Loan").
The borrower on the Loan was Lawrence Conde ("Lawrence"). Lawrence stated that the Loan
was sought to finance the purchase of a home located in Port Jefferson, New York (the "Home").
According to the Loan and Mortgage documents, Lawrence was purchasing the Home from a
seller, named as Marian Campi ("Marian").
As noted, FDIC's complaint alleged that the Loan was a straw transaction. According to
the FDIC, Marian’s real last name is Conde - not "Campi". Marian was, at the time of the Loan,
married to Michael Conde (“Michael"). Marian and Michael were co-debtors in bankruptcy at
the time of the Loan. They are alleged to have hatched a scheme to sell the Home (where Marian
and Michael lived) to Lawrence, who, it turns out, was Michael's father. While Lawrence
represented that he would live in the Home, he never did and, according to FDIC, it was never
his intention to do so. The sale to Lawrence was alleged to have been made at the inflated price
of $1.5 million. This loan amount allowed Marian and Michael to maintain their residence in the
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Home, and generate sufficient excess proceeds to pay their bankruptcy trustee over $500,000 in
exchange for a global release of their bankruptcy debts. FDIC alleged that Lawrence obtained the
Loan with no intention of repayment, and knowing that Marian and Michael would remain in the
Home. In furtherance of this alleged scheme, it was agreed that Michael's surname (which is the
same surname as Lawrence) would be kept off of the Loan documents. Marian is alleged to have
been in on the scheme; she agreed to omit the name Conde from the Loan documents and instead
use her maiden name - "Campi." Ultimately, the Loan went into default. While the scheme was
alleged to have been hatched by Marian, Michael and Lawrence, FDIC never sued them. Instead,
based upon factual allegations regarding the alleged scheme, FDIC sued only USM for breach of
contract. Complaint (“Compl.”), Docket Entry (“DE”) [1]. It was FDIC's position that USM was
responsible for allowing the sham transaction to take place.
In March of 2013, USM brought Michael, Marian, and Lawrence into this action by
commencement of a third-party action naming them as third-party defendants. While none of
these individuals were named by FDIC, USM nonetheless consistently referred to them as
"cross-defendants." They were not - they were third-party defendants named only by USM.
USM's third-party complaint alleged claims for implied indemnity, comparative indemnity and
contribution, declaratory relief, and equitable indemnity. Third Party Compl., DE [6].
Essentially, all of the claims were based upon the theory that if the scheme alleged by FDIC were
true, that scheme was also perpetrated upon USM. Accordingly, any amounts that USM owed to
FDIC were, in turn, owed to USM by Marian, Michael and Lawrence. Michael and Lawrence
(but not Marian) timely answered USM's third-party complaint and asserted seventeen
affirmative defenses. DE [13]. Their lawyer at the time was John DeMaio ("DeMaio").
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When Marian failed to answer, USM moved for entry of a certificate of default against
her. DE [17]. That was denied because of a spelling mistake. Later, a certificate of default
against Marian was entered. DE [21]. Thereafter, USM moved for entry of a judgment of default
against Marian. DE [23]. That request was denied without prejudice by the then-assigned District
(and now Circuit) Judge Bianco. See Order dated August 16, 2013. USM then served an
amended motion for a judgment of default, and submitted a proposed judgment against Marian.
DE [25]-[26]. That judgment was never entered.
In the meantime, DeMaio filed discovery responses on behalf of his clients - Lawrence
and Michael - on the docket herein. DE [27]-[29]. DeMaio was reminded that the filing of such
discovery was improper, but those documents remain on the docket. In November of 2013, USM
filed a motion to compel the depositions of the non-defaulting third-party defendants. DE [30]. In
response, then-assigned Magistrate Judge Tomlinson set the matter down for a conference to be
held on November 15, 2013. DeMaio was unavailable and the conference was adjourned. The
motion to compel was not pursued further. Instead, USM pursued other litigation avenues,
seeking leave to amend its answer to file additional affirmative defenses and claims. DE [36].
New discovery deadlines were set, with a proposed joint pretrial order to be submitted by March
of 2014. DE [37].
Thereafter, DeMaio filed opposition to USM's motion to amend its answer and third-
party complaint, which pleading sought inter alia, to add Ira S. Ezratty ("Ezratty") as a defendant.
DE [40]. Judge Bianco set oral argument on the motion for January of 2014. After that argument,
Judge Bianco granted the motion to amend. In light of that order Magistrate Judge Tomlinson
scheduled a telephone status conference for February 18, 2014. The day after that conference
was held, a new discovery order was entered. DE [52]. On February 19, 2014, DeMaio filed an
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answer to the amended third-party complaint on behalf of Michael and Lawrence (styled as an
answer to the amended cross-complaint). DE [53]. Like the earlier pleading, that document
denied all of USM's claims against Lawrence and Michael and asserted seventeen affirmative
defenses. On February 24, 2014, Ezratty sought leave of Judge Bianco to move to dismiss all
claims against him. DE [54]. Judge Bianco scheduled oral argument for March 7, 2014. That
conference was held, DE [58], and the interested parties thereafter filed their motion papers. DE
[59]-[67].
In March of 2014 USM moved for entry of default against Edward A, Christiansen
("Christiansen"), who, like Ezratty, was added to this case in January of 2014. DE [61]. As later
became clear, such default was never noted and no judgment against Christiansen was ever
entered. In June of 2014, Ezratty sought a stay of discovery pending the outcome of his motion
to dismiss. DE [72]. Magistrate Judge Tomlinson granted that motion in part; the taking of
depositions was stayed, except for the deposition of Lawrence which the Court permitted. The
denial of the stay as to Lawrence was due to his age and ill health. DE [73]. The motion to stay
paper discovery was denied. Id. In response to an inquiry from Judge Tomlinson as to such paper
discovery, counsel for Ezratty stated that he did not serve any third-party demands for paper
discovery, but that counsel for the parties to the action had provided him with all documents
previously exchanged - which amounted to approximately 2500 pages. Thus, there were no
outstanding requests for documents from Ezratty. DE [74].
Judge Bianco held oral argument on Ezratty's motion to dismiss on July 17, 2014. During
that argument Judge Bianco granted the motion, but allowed USM leave to file a second
amended third-party complaint by August 22, 2014. Pre-motion letter requirements were waived
as to any motion to dismiss that Ezratty might make as to any subsequent pleading that USM
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might decide to file against him. DE [75]-[76]. USM then sought additional time in which to
serve an amended pleading against Ezratty, which request was granted by Judge Bianco. This
extended USM's time to amend to September 12, 2014. An amended pleading was served on that
date. The docket herein reflects filing of that document (which is the presently operative
pleading appearing at DE [82]) on September 12, 2015 - this docketing reflects a one-year error
on the docket that has never been corrected. Nonetheless, this Court is convinced that the
pleading was timely answered by DeMaio, on behalf of Michael and Lawrence, on September
23, 2014. See DE [83].
Filing a letter with Judge Bianco, Ezratty again moved to dismiss with briefing to be
completed by November 24, 2014. DE [84]. In an order dated October 6, 2014, while Ezratty's
dispositive motion was being briefed, Judge Tomlinson noted her earlier stay of depositions and
adjourned her next scheduled pretrial conference, without date, until resolution of motion
practice with respect to Ezratty's motion to dismiss the newly amended third-party complaint.
Ezratty's motion to dismiss was fully briefed when Judge Bianco was elevated to the Second
Circuit. The case was thereafter transferred to the Honorable Arthur D. Spatt. See Order dated
June 19, 2015. On September 15, 2015, Judge Spatt considered the briefing that took place
before Judge Bianco and granted Ezratty's motion to dismiss. DE [91].
On September 22, 2015, FDIC filed a letter seeking to schedule a settlement conference
before Judge Tomlinson. DE [92]. That letter stated, frankly, that "from a realistic standpoint",
with Ezratty "and his supposed insurance carrier no longer a part of the case, there were
presently 'dim' prospects for FDIC to obtain any meaningful recovery from any other named
parties". Id. FDIC thought it would therefore be a meaningful time to explore settlement in
earnest "before pouring more money and effort into at least four party depositions that were
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noticed but not taken." DE [92]. The next day Judge Tomlinson responded that the Court cannot
hold a settlement conference via telephone, but if the parties wished to participate in such a
conference they must file a joint letter requesting a conference and indicate their availabilities to
attend. DE [93].
On September 24, 2015, DeMaio advised Judge Tomlinson that his clients (Michael and
Lawrence) were in financial straits, and asked that they be allowed to participate in any
settlement conference via telephone. Judge Tomlinson repeated her unwillingness to conduct
settlement negotiations via telephone, but stated her continued willingness to conduct an in-
person settlement conference. She asked the parties to submit a joint letter by September 25,
2015, if they were willing to participate in a settlement conference. On September 29, 2015,
USM stated that since discovery was stalled because of the pendency of Ezratty's motion to
dismiss (which was ultimately granted), there were gaps in discovery that would make a
settlement conference unfruitful at that time. DE [94]. USM noted that the Home was under
foreclosure and for sale. Therefore, FDIC's damages were, at the present time, unclear. In light of
these facts, USM proposed that the Court set the case down for a status conference within 30
days, and a settlement conference 30 days thereafter. These time periods were stated to be
appropriate to "permit the parties to conduct additional discovery with the objective of a
settlement conference shortly on the horizon." DE [94].
In accord with USM’s request, Judge Tomlinson entered an order setting this case down
for a status conference to be held on November 19, 2015. A status conference was held on that
day during which Judge Tomlinson entered an order noting the progress of discovery and setting
deadlines. Judge Tomlinson noted that FDIC intended to depose a representative of USM.
DeMaio stated that his clients (which did not include Marian and Christiansen) did not intend to
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take any depositions. USM stated its intention to depose the FDIC, Marian, Michael, Lawrence
and Christiansen. As to the Home, it was noted that foreclosure proceedings were ongoing and
not yet complete. By this time, Marian and Michael were engaged in divorce proceedings.
Marian was in exclusive possession of the Home until the divorce was finalized. USM was
granted leave to serve additional discovery demands by December 1, 2015 with responses due by
December 31, 2015. The deadline for the taking of all fact discovery was set at January 31, 2016.
Expert discovery, if any, was ordered to be complete by April 29, 2016. Dispositive motion
practice was to begin with the service of any movant's Rule 56.1 statement by May 20, 2016 and
counter-statement by June 10, 2016. Any requests to engage in summary judgment motion
practice were scheduled to be addressed to Judge Spatt by June 21, 2016. A joint pretrial order
was to be submitted via ECF on August 22, 2016, and a final pretrial conference was scheduled
for August 30, 2016. DE [95]. On December 21, 2015, USM requested an extension of Judge
Tomlinson's discovery deadlines because of confusion regarding the mailing address of counsel
for the FDIC. DE [97]. The request was granted.
On June 23, 2016, FDIC wrote to Judge Spatt indicating its request to move for summary
judgment as to the liability of USM. DE [101]. Counsel for all parties were served with the letter
request. The "cc" on the letter indicates that Marian was appearing pro se at the time. Id. On June
16, 2016, DeMaio opposed the motion request by way of a counter-statement of material facts
submitted on behalf of Lawrence and Michael. DE [102]. Judge Spatt then set July 14, 2016 for a
pre-motion conference. DE [103]. Counsel for USM requested to appear telephonically, which
request was granted. DE [104]. Judge Spatt made it clear that the parties should be prepared to
discuss settlement at the conference. DE [105]. Neither DeMaio nor his client appeared at the
July 14, 2016 conference. On that same date, Judge Spatt's law clerk wrote to DeMaio at the
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direction of Judge Spatt. That letter stated the Judge's intent to find DeMaio's failure to appear at
the conference a potential violation of his duties as an officer of the Court. The letter also
advised DeMaio that a settlement conference was scheduled before Judge Tomlinson on August
10, 2016. DeMaio was warned that his failure to appear at the settlement conference (or at any
other court-ordered conference or trial) might result in the Court's consideration of the
imposition of sanctions. DE [106]. In a letter dated August 3, 2016 (a week ahead of the
settlement conference scheduled to take place before Judge Tomlinson) DeMaio wrote to Judge
Spatt indicating that neither Lawrence nor Michael would be contributing to any settlement, a
position which DeMaio stated was not negotiable. DeMaio also stated, briefly, his clients’
position on the merits. Thus, he stated that Michael never owed the Home and that all actions
taken with respect thereto were taken through, and with the approval of, the Bankruptcy Court.
DE [108].
On August 10, 2016 Judge Tomlinson held a settlement conference. DE [109]. The
minute order entered with respect thereto noted that progress was made, and scheduled a follow-
up settlement conference to be held on September 23, 2016. Judge Tomlinson noted that neither
DeMaio nor his clients (Lawrence and Michael) were in attendance at the August 10 conference.
She noted that DeMaio said that he had advised his clients of the conference but they declined to
attend. Judge Tomlinson's order directed Michael and Lawrence to appear at the September 23,
2016 conference. In response to a claim that Lawrence was elderly and ill and his request to
appear by telephone, Judge Tomlinson directed submission of a substantiating doctor's note by
September 15, 2016. Finally, Judge Tomlinson's order made clear that Michael and Lawrence
were put on notice that any failure to appear at the September 23, 2016 settlement conference
would "result in further action by the Court, up to and including the prospect of a contempt
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hearing and any other sanction which the Court deems appropriate." DE [109]. DeMaio
confirmed that Lawrence and Michael were served with Judge Tomlinson's order by way of a
letter dated August 22, 2016. DE [110].
In a letter dated August 25, 2016 counsel for the FDIC and USM advised Judge
Tomlinson that they were engaged in settlement discussions and were not yet ready to advise the
Court whether they were in a position to attend the scheduled September 23, 2016 settlement
conference. DE [113]. On the next day, those counsel advised that the Court that they remained
interested in settlement and asked that the Court continue to order that all parties appear at the
September 23, 2016 settlement conference. DE [114]. Judge Tomlinson therefore confirmed that
the conference would go forward. The conference was held and, after a full day of negotiations,
FDIC and USM had reached a framework for settlement. They were directed to inform the Court
of the status of that framework by October 7, 2016. Judge Tomlinson noted that any settlement
reached between FDIC and USM did not impact the claims against Marian, Michael and/or
Lawrence, and that such claims remained active. DE [115]. On October 11, 2016, counsel for
FDIC and USM requested an additional week in which to engage in settlement discussions. DE
[117]. In response thereto, Judge Tomlinson scheduled a further settlement conference via
telephone for October 21, 2016. DeMaio, Lawrence, Michael and Marian were excused from
appearing. At that conference, Judge Tomlinson gave the FDIC and USM one final extension of
time, until November 8, 2016, in which to settle with each other. She noted also that if there was
not a settlement this case would go back on the discovery track and that discovery would be
expedited. DE [118]. In a letter dated November 8, 2016 counsel for FDIC and USM advised
Judge Tomlinson that they had not settled. Judge Tomlinson thereafter gave all parties until
November 18, 2016 to renew any requests to move, before Judge Spatt, for summary judgment.
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On November 18, 2016 FDIC renewed its request to move for summary judgment. DE
120. On December 6, 2016, Judge Spatt scheduled a conference to be held on December 20,
2016. The parties were directed to appear and be prepared to engage in settlement discussions.
On December 12, 2016, after expressing some scheduling difficulties, USM informed Judge
Spatt that it had reached a settlement with USM. He therefore asked that the conference before
Judge Spatt be cancelled. DE [122]. Counsel for FDIC confirmed to Judge Spatt that a settlement
with USM had been reached. He also stated, consistently with the fact that FDIC had never
pursued any claim against third-party defendants, that once that settlement was consummated,
FDIC continued to have no interest in pursuing any claim against Marian, Michael or Lawrence,
all of whom had been brought into this case only by USM. DE [124]. Judge Spatt cancelled his
conference and Judge Tomlinson thereafter cancelled her previously scheduled conference to be
held on January 12, 2017.
Nothing transpired in this case for a period of two and one-half years following the stated
settlement reached between FDIC and USM in November of 2016. The case, however, remained
open (although dormant) on the docket. On June 4, 2019, in view of this prolonged period of
inactivity, Judge Spatt entered an order directing the parties to provide a status letter. On July 3,
2019, the FDIC informed Judge Spatt that the settlement between FDIC and USM was
consummated in April of 2019. FDIC asked that the Court keep the case open until full payment
was made, i.e., until November 1, 2019. That letter also informed Judge Spatt that USM's claims
against Lawrence, Michael and Marian remained pending, and that USM was contemplating its
pursuit of those claims. USM requested that a status conference be scheduled after September 30,
2019 in order to determine how it would proceed. DE [125].
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On July 8, 2019 Judge Spatt recused himself from this case and it was thereafter re-
assigned to District Judge Mauskopf. DE [126]. On July 9, 2019, Judge Mauskopf directed the
parties to file an order of conditional dismissal of the claim between FDIC and USM. She also
requested that the parties confer and provide her with a letter identifying the parties and claims
remaining in this case and information as to whether there were any motions pending. On July
18, 2019 counsel for the FDIC responded to Judge Mauskopf's order, indicating that the only
claims remaining were the third-party claims brought by USM against Lawrence, Michael and
Marian. It was noted therein that these three individuals continue to dispute the claims brought
by USM. Counsel stated that Marian had provided input for the letter. Despite the use of her
maiden name and her continued residence in the Home, Marian indicated to USM that Michael
and Lawrence procured the Loan without her input and that Christiansen (the lawyer who
represented them) was disbarred and jailed. She attributed the end of her marriage, the forced
sale of the Home, and the ruin of her credit rating to Michael's mounting debt and deceit. Marian
asked that USM take her version of the facts into account and not hold her responsible for the
acts of her now ex-husband Michael and her now ex-father-in-law Lawrence. While the status
letter to Judge Mauskopf reiterated DeMaio's consistently stated position that his clients
(Michael and Lawrence) were not liable for any of the claims asserted by USM, neither DeMaio,
Lawrence nor Michael participated in preparation of the letter. DE [127]. Even though the
deadlines imposed by Judge Tomlinson had passed, the status letter stated that there were “no
schedules presently pending” in this action. Id. This was not true, as the deadlines imposed by
Judge Tomlinson for the end of discovery had not changed, and had long since passed.
Once this matter was revived (at the request of Judge Spatt and followed up by Judge
Mauskopf - not pursuant to any action by either the FDIC or USM) Judge Tomlinson set the case
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down for an in-person status conference to be held on August 9, 2019. DE [128]. In light of the
order of conditional dismissal, Judge Tomlinson cancelled the conference. However, after
realizing that there remained unresolved third-party claims, Judge Tomlinson ordered that the
conference go forward. Neither DeMaio nor any of the third-party individual defendants
(including Marian who was proceeding pro se) appeared at the conference. Judge Tomlinson's
minute entry memorializing what occurred at that conference directed Marian to submit a letter
explaining her non-appearance, and warned her of the possibility of a default being entered for
failure to respond. Judge Tomlinson’s minute entry made a record of the positions USM took at
the conference. First, USM represented that neither Lawrence nor Michael had ever responded to
the presently operative pleading. As discussed above, this representation was not true.
Nonetheless, attorney Thomas, who made the representation, indicated that he would be seeking
a certificate of default against Lawrence and Michael by August 23, 2019. Judge Tomlinson
noted that Rule 37 would apply to any such motion since Michael and Lawrence had actually
participated in this case. She directed that any response thereto be filed by November 14, 2019,
or be waived. DE [131]. As to discovery, Judge Tomlinson noted attorney Thomas's
representation that all depositions were completed. She also stated USM’s unsurprising position
that it did not intend to move for summary judgment. This is consistent with prior proceedings in
this case when the deadline for the making of such motions passed with only the FDIC seeking
to move for summary disposition. It is also not surprising given the factually intensive nature of
USM's claims against third-party defendants. Although USM would not move for summary
judgment, its counsel indicated that he intended to file a motion for sanctions pursuant to Rule
37. Judge Tomlinson advised counsel that if he intended to do so, he would be required to
present a formal motion under the Federal Rules. Finally, Judge Tomlinson set December 18,
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2019 as the date for submission of a final pretrial order. Counsel for the FDIC was excused from
all further appearances. DE [131].
Marian responded to Judge Tomlinson's order in a letter dated August 19, 2019,
apologizing and noting that she had been in contact with counsel for USM. DE [133]. Judge
Tomlinson's responding order informed Marian that she was still engaged in this litigation, and
that she needed to confirm with the Court that all discovery, as far as she was concerned, was
complete. In a letter dated August 22, 2019 counsel for USM noted his mistake in stating that
Lawrence and Michael had not answered the second amended third-party complaint. He
explained, as explained by this Court above, that his confusion was caused by an error on the
docket stating that the third-party complaint was filed in 2015 - and not in 2014; which date was
a year after the docket reflects the filing of an amended answer. See DE [135]. In response to this
letter Judge Tomlinson scheduled a telephone conference. DeMaio failed to appear for the
conference. Judge Tomlinson's minute entry, appearing as DE [140] and dated September 5,
2019, noted that counsel for cross-defendants (DeMaio) had faxed a request for more time in
which to respond to the already-responded to amended pleading. Judge Tomlinson noted the
impropriety of seeking relief via an ex parte fax communication and stated that any requests for
relief must be filed on the Court’s ECF system. Judge Tomlinson further noted that no such
filing had been made. In view of these facts, as communicated to Judge Tomlinson by counsel
for USM (which, a detailed review of the docket makes clear were not correct) the Court
permitted USM to move for a judgment of default. Judge Tomlinson specifically noted, however,
that under the circumstances present here the “traditional vehicle for entering a default
judgment” pursuant to Rule 55 was not appropriate. Even if Michael and Lawrence had not
answered the operative pleading, they had undoubtedly appeared in this case and participated in
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the litigation - albeit in a “very limited manner”. As such, Judge Tomlinson advised counsel that
the proper application to be made was pursuant to Rule 37(b) seeking sanctions against Michael
and Lawrence in the form of a default judgment. Judge Tomlinson further advised counsel that
any such application, however, was required to be accompanied by the “same proofs required
under Rule 55.” Thus, Judge Tomlinson noted specifically that any motion for a judgment of
default must document damages and fees and costs. Finally, if USM decided to move for default
in the manner outlined by Judge Tomlinson, the motion was required to be filed within 45 days
of the September 5, 2019 conference. DE [140].
In a letter to Judge Tomlinson filed on the Court’s ECF system on November 6, 2020
(which letter is oddly dated November 6, 2016) DeMaio wrote to advise the Court that Lawrence
died on October 1, 2020. DeMaio stated that he had attended Lawrence’s wake and that it was
his belief that Lawrence died without any meaningful assets. DeMaio further stated his belief
that under applicable New York State law, no verdict or decision may be imposed upon a person
who has died without court appointment of a personal representative. DE [141].
On December 9, 2020, after the passage of the 45 day deadline imposed by Judge
Tomlinson on September 5, 2019, USM filed a motion to substitute the “Estate of Lawrence
Conde” as a party herein and to enter a judgment of default against Michael and Lawrence’s
estate. The latter branch of the motion sought entry of default pursuant to Rule 55(a) for the
failure of Michael and Lawrence to defend themselves in this action. Entry of a judgment of
default was sought pursuant to Rule 55(b). DE [142]. In support of the motion for a default USM
relied on Judge Tomlinson’s observations made regarding attorney DeMaio’s failure to appear at
the August 9 and September 5, 2019 conferences. DE [142-1]. USM argued that since 2019
(when activity herein was revived - not upon the request of USM - but on inquiry of the Court)
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neither Michael nor Lawrence, through DeMaio, had participated in this litigation. The motion
for a judgment of default was accordingly based on their failure to appear at two court-ordered
conferences. DE [142]. As to a judgment, USM sought reimbursement of the $200,000 it paid to
FDIC to settle this action, as well as $167,450.50 in attorneys’ fees, and costs in the amount of
$12,604.37 for a total judgment of $380,067.87, jointly and severally against Michael and
Lawrence’s estate. USM’s request to substitute the “estate” of Lawrence was not supported by
any documentation indicating that such an estate existed, or that an executor or administrator had
been appointed in the New York State Court system.
On March 15, 2021, while the motion was pending, USM followed up by way of a letter
addressed to Judge Tomlinson. That letter noted the pendency of the motion. DE [143]. After
being informed that its motion sought dispositive relief, (see Order of Tomlinson, M.J., dated
March 13, 2021) USM wrote to Judge Mauskopf requesting the same relief. DE [144]. On June
22, 2021, Judge Mauskopf terminated the motion, noting that this case was soon to be reassigned
to a different District Judge. Order of Mauskopf, J. dated June 22, 2021.
On June 30, 2021, this case was re-assigned to District Judge Komitee. On August 24,
2021, Judge Komitee requested that the parties file a status report. That report was filed by USM
on September 14, 2021. DE [145]. It noted the dismissal of its case against Ezratty. It also noted
the pendency of the motion previously filed on the docket herein as DE [142]. Finally, the status
report indicated Marian’s pro se status and her position on the merits, as summarized above, that
any impropriety herein is attributable to Michael and the now-deceased Lawrence. DE [145]. On
October 13, 2021, Judge Komitee held a status conference after which he required USM to move
to renew its prior motion (for a default and substitution of counsel) by October 15, 2021. USM
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was required to inform the Court by November 5, 2021 as to whether it intended to pursue its
claims against Marian. DE [146].
USM again filed a motion for default and substitution of Lawrence’s estate on October
15, 2021. That motion states that the default of Michael and Lawrence was being sought
pursuant to Rule 37(b)(2)(A)(vi) or, in the alternative, Rule 55. DE [147]. Unlike its previously
filed motion for default, USM’s renewed motion made particular reference to Judge Tomlinson’s
instructions as set forth in her minute entry of September 5, 2019. While the renewed motion
now made reference to Rule 37, the facts set forth in support of the renewed motion are the same
as those set forth in support of USM’s motion filed at DE [142]. Like the previous motion, the
renewed motion characterized the conduct of Michael and Lawrence, through DeMaio, as a
cavalier disregard for court orders justifying the ultimate sanction of default. See DE [147-1]
(relying on Eagle Assocs. v. Bank of Montreal, 926 F.2d 1305 (2d Cir. 1993)). On the same day
it filed its renewed motion USM wrote to Judge Komitee advising that it filed the motion, and of
its communications with Marian. As stated in the letter, Marian told counsel for USM that she
had heard that DeMaio was no longer representing Michael and Lawrence. DE [148]. She also
suggested to counsel that Michael was aware of the status of this case. Id.
On November 2, 2021, this Court was assigned as the Magistrate Judge herein. After that
assignment, on November 5, 2021, counsel for USM wrote to Judge Komitee regarding its
concerns that its motion for default sought entry of a discovery sanction for conduct that took
place before Judge Tomlinson, and not before this Court. DE [149]. Under these circumstances
USM was concerned that if default were entered against Michael and Lawrence (or, at that point
against his estate), that they would seek relief from the default. USM also stated its concerns
with dismissing Marian while the motion was still pending. Id. Nonetheless USM stated that if
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the Court were to grant its motion and enter default against Michael and Lawrence’s estate, it
would dismiss its claims against Marian. Id. On November 23, 2021 Judge Komitee addressed
the pendency of USM's claims against Christiansen. Judge Komitee ordered USM to file a
motion for default against Christiansen by December 7, 2021 or, in the alternative, move to
discontinue this matter against him. Order of Komitee, J. dated November 23, 2021.
On the date set by the District Court, USM moved for a Rule 55 default against
Christiansen. DE [151] (correcting typographical errors in DE [150]). On December 9, 2021,
Judge Komitee referred USM's renewed motion for default against Michael and Lawrence's
estate (and to substitute Lawrence's estate) as well as the motion for a default against
Christiansen to this Court for Report and Recommendations. On May 18, 2022, this Court
scheduled all pending motions for a telephone conference to be held on May 23, 2022.
As set forth on the record during the conference, USM agreed to withdraw the pending
motions seeking to substitute the Estate of Lawrence Conde and a default judgment pursuant to
Rule 37 of the Federal Rules of Civil Procedure against the Estate of Lawrence Conde and
Michael. Counsel also agreed to withdraw its motion for a default judgment pursuant to Rule 55
against Christiansen. As to its pleadings, USM agreed that its pleading should be labeled a third-
party complaint and not a cross-complaint - as it had been incorrectly labeled from its inception.
It was also agreed that the operative pleading in this matter is USM’s Second Amended Third-
Party Complaint (the “SATPC”) which was filed on September 12, 2014 and found at DE [82].
With respect to third-party defendant Christiansen, while the Court took no position as to
whether or not he was properly served the SATPC, it was clear from the docket that a notation of
default was never entered against him following any such service. Instead, the only notation of
default entered against Christensen is from service of the Amended Third-Party Complaint, and
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is dated May 2014. That notation is found at DE [68]. Therefore, USM was advised that before
proceeding with a motion for default judgment against Christiansen it must first obtain a notation
of default against him with respect to the SATPC. Accordingly, USM agreed to withdraw its
pending motion for default judgment as to Christensen found at DE [150], in order to obtain the
proper notation of default.
With respect to USM's request to substitute the Estate of Lawrence Conde, the Court
noted that there must be an administrator or other representative of an estate appointed in order
to properly request a substitution. Agreeing that no such individual or entity had been appointed,
USM withdrew its motion to substitute the “Estate of Lawrence Conde” while it presumably
engaged in proceedings in New York State Court to determine whether any appointment had
been made, or to obtain a proper appointment. USM was directed to submit a renewed
substitution motion, along with the proper documentation, no later than December 1, 2022. If
USM was unable to submit the motion by that date, counsel was directed to submit a letter
advising this Court as to the status of its process.
With respect to the request for a Rule 37 default judgment as a sanction against Michael,
this Court noted that the conduct underlying USM’s request, namely the non-appearances by
Michael and DeMaio, did not occur before this Court. As a default judgment is the most extreme
sanction that can be sought, and out of an abundance of caution, this Court scheduled a telephone
conference to be held on June 27, 2022. Michael, DeMaio, and Marian were all ordered to
appear. USM agreed to withdraw its then-pending motion against Michael and was given leave,
if appropriate, to submit a new Rule 37 motion after the June 27, 2022 conference. Consistent
with its representations made at the May 23, 2022 conference, USM's motions appearing at
docket entries [147], [150], and [151] were withdrawn. See Order dated May 23, 2022.
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This Court held the telephonic conference scheduled for June 27, 2022. Although served
(at his last-known address and through DeMaio) of notice of the conference, Michael did not
appear, but DeMaio did. He stated that he no longer represents Michael and wished to formally
cease representation. After hearing his application, this Court granted DeMaio's request to
withdraw, and directed the Clerk of the Court to terminate his appearance on the docket. The
Court noted Michael’s failure to appear and advised USM that it could again move for default
judgment pursuant to Rule 37 against Michael. This Court directed that any such motion was to
be served on Michael, who was granted at least fourteen days to submit a response, if any, to the
motion. Finally, the Court scheduled a telephonic motion hearing for August 8, 2022. Following
the June 27, 2022 conference this Court again arranged for service to be made on Michael at his
last known address.
On July 12, 2022, in accord with the deadline imposed by this Court, USM filed its now
third motion for default against Michael. DE [157]. That motion was made pursuant to Rule
37(b)(2)(A)(vi) and, in the alternative, pursuant to Rule 55(a). As discussed at the June 27, 2022
conference, the motion sought default as a sanction for Michael's failure to appear before this
Court on two separate occasions (in May and June of 2022). The Rule 55 motion sought default
for Michael's failure to defend himself herein. DE [157].
A motion hearing conference was held before this Court on August 8, 2022. Again,
Michael failed to appear. In light of the fact that he had been relieved as counsel, DeMaio did not
appear. In an order entered after the August 8, 2022 conference, this Court granted USM's Rule
37 motion for entry of default. Having obtained a default against Michael, USM was willing to
dismiss Marian. It was noted, however, that any such stipulation of dismissal was properly made
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only to the District Judge. DE [159]. Thereafter, and in accord with the order of this Court, entry
of judgment against Michael (as a Rule 37 sanction) was granted.
On August 26, 2022 Judge Komitee chose to construe this Court's Rule 37 sanction
imposing a judgment of default against Michael not as a final order, but as a Recommendation
that judgment against Michael be entered. Accordingly, the Clerk of the Court vacated the
judgment entered on August 11, 2022. Consistent with Rule 72(b)(2) of the Federal Rules of
Civil Procedure (which gives a party fourteen days in which to object to dispositive rulings of a
Magistrate Judge), Judge Komitee granted Michael fourteen days in which to file any objection
to this Court's Recommendation.
On September 1, 2022, DeMaio once again appeared in the case and, in accord with
Judge Komitee’s order, timely filed objections to this Court's Recommendation. DE [163].
DeMaio's objection includes an affidavit of merits which states that prior to entry of default he
had been relieved as counsel, and that Michael was therefore unrepresented at the time that the
default was entered. DeMaio further noted that Michael had previously participated in this
litigation by filing timely answers, asserting affirmative defenses and answering interrogatories.
In particular, DeMaio's objection notes that Michael has always taken the position that he never
owned the Home (it was likely owned by Marian who was the seller in the alleged straw
transaction). DeMaio further stated that the purchase of the Home by Lawrence took place not as
an act of fraud, but on the advice of bankruptcy counsel. Indeed, the appraisal accompanying the
sale was stated to have been approved by the bankruptcy trustee. Contrary to the allegation that
Marian used the name Campi to cover up a fraudulent scheme, DeMaio’s affidavit states that
Marian used that name during her marriage to Michael. Michael and Marian are stated to have
lawfully lived at the Home, and that after the sale (pursuant to the approval of the Bankruptcy
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Trustee) they were responsible for payment of the Mortgage in lieu of rent. DE [163]. DeMaio's
affidavit concludes that given these facts USM fails to state any cause of action against Michael
and that his long-stated defense of failure to state a claim is meritorious. In an affidavit of the
same date as that of DeMaio, Michael states that he reviewed DeMaio's affidavit and the facts set
forth therein are true to the best of his knowledge. Id.
On September 18, 2022 USM filed reply papers in opposition to Michael's objections to
this Court's Recommendation. DE [164]. Therein, USM again cites Michael's several failures to
appear, both before the previously assigned Magistrate Judge and this Court. It thus relies on
failures to appear before Judge Tomlinson (which were not the subject of the present
Recommendation) as well as the failures to appear before this Court. USM also states that
Michael had eight years in which to move to dismiss but chose not to make any such motion.
USM argues that if Michael were truly interested in litigating this case he has had, and
squandered, ample opportunity to do so. Finally, USM observes that this case has been pending
for over ten years and needs to conclude. USM would prefer that it concludes not by way of a
trial on the merits, by way of a judgment of default. DE [164].
Six months later, on March 15, 2023, USM made a follow up inquiry as to the status of
its motion and the objections to this court's Recommendation. Again, USM noted that the case
was pending since January of 2013. It requested either a hearing on its motion or the issuance of
a final order. DE [165]. On October 12, 2023 USM made the same request it made in March of
2023 to Judge Komitee, again noting that objections to its motion were pending and that the case
was over ten years old. DE [167].
On October 24, 2023 Judge Komitee noted the prior construction of this Court's order of
default as a Recommendation. He also acknowledged that the parties have requested status
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updates. Judge Komitee stated that no party herein "had briefed or argued the question of
whether a default judgment is appropriate here under the standard set out by the Second Circuit
in, for example, City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114 (2d Cir. 2011).
Judge Komitee cited also to Bricklayers & Allied Craftworkers Loc. 2, Albany, N.Y. Pension
Fund v. Moulton Masonry & Const., LLC, 779 F.3d 182, 187 (2d Cir. 2015), which "dictates that
'a district court is required to determine whether the [plaintiff's] allegations establish [the
defendant's] liability as a matter of law.'” Id. at 137. Characterizing the record as not fully
developed, Judge Komitee referred, again, USM's motion for default filed under DE [157] and
decided by this Court as DE [159] for Report and Recommendation. He also referred to this
Court USM's letters seeking follow-up information (appearing at DE [165] and [167]). See Order
of Komitee, J. dated October 24, 2023.
On October 30, 2023, this court issued a Report and Recommendation (“2023 R&R”)
recommending that the USM’s motion for entry of default and a default judgment, whether
construed pursuant to Rule 37 or 55 of the Federal Rules of Civil Procedure be denied. See DE
[168]. In view of the recommendation, this Court further recommended that USM’s letter
requests for follow-up information and/or hearing be denied as moot. Id.
On June 2, 2025, the District Court adopted the 2023 R&R in its entirety. See DE [176].
The District Court further directed that the parties appear for a status conference on June 27,
2025. Id. The order also set forth that “[i]f, Michael Conde, whether represented or not, fails to
comply with any other court orders or misses another scheduled conference, the Court will not
hesitate to enter default judgment under Rule 55 for failure to defend.” Id.
Michael failed to appear for the June 27, 2025 status conference. See Minute Entry dated
06/27/2025. In light of Michael’s failure to appear, USM was directed to submit a letter
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renewing its application for default judgment. Id. On June 30, 2025, USM submitted a letter
renewing their motion for judgment as a matter of law found at docket entry No. 157. DE [180].
On August 7, 2025, Judge Komitee directed that USM “file a supplemental submission
addressing why its allegation suffice to establish Conde’s liability as a matter of law.” Order
dated 08/07/2025. On September 15, 2025, USM filed their supplemental submission. DE [182].
The Court now turns to consider the merits of USM’s application.
DISCUSSION
I. Motions for Default under Rules 37 and/or 55
A. Legal Standards
A judgment of default may be entered against a defendant pursuant to Rule 37 and/or
Rule 55. See Guggenheim Capital, LLC v. Birnbaum, 722 F.3d 444 (2d Cir. 2013). While the
conduct underlying these motions may be the same, the procedures and standards for imposing a
judgment of default in the first place differ. As to Rule 37, a judgment of default may be entered
against a defendant as a discovery sanction. It is the most severe of such sanctions and is
properly entered only after four conditions are considered: (1) the willfulness of the non-
compliant party; (2) the efficacy of less severe sanctions; (3) the duration of the non-compliance
and (4) whether the non-compliant party was properly warned of the consequence of non-
compliance. The last condition is particularly important to consider in the case of a pro se
defendant. As noted by the Second Circuit, “a district court abuses its discretion if it dismisses a
case without first warning a pro se party of the consequences of failing to comply with its
discovery orders.” Guggenheim, 722 F.3d at 452.
Rule 55 may be relied upon to support entry of a judgment of default for the same type of
conduct alleged to support imposition of default as a Rule 37 sanction. The standards to be
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applied under Rule 55 while similar, differ from those applied in the context of Rule 37.
Specifically, a default judgment may be entered under Rule 55(a) not only where a defendant
fails to file an answer, but also where the conduct of the party against whom default is sought
rises to the level of failing to defend their position. Guggenheim, 722 F.3d at 454. If Rule 55(a)
is satisfied by a finding of failure to defend, the Clerk of the Court "must" enter the defaulting
party's default. Fed. R. Civ. P. 55(a). Thereafter, a judgment of default may be entered under
Rule 55(b). Fed. R. Civ. P. 55(b).
To determine whether a party has failed to defend an action within the meaning of Rule
55(a) (the first step of entry of a Rule 55 motion) a court must consider: (1) the willfulness of the
conduct; (2) whether the party against whom a default is sought has a meritorious defense to the
claims alleged and (3) prejudice to the non-defaulting party. Notably, a Rule 55 default motion
requires consideration of whether there is a meritorious defense. Id. at 454-55. Thus, Rule 55
employs a two-step process before entering a judgment of default against a party that fails to
respond or defend. See Fed. R. Civ. P. 55; see also Romero v. Floris Constr., Inc., 2017 WL
5592681, at *2 (E.D.N.Y. 2017). When considering the second step of the process under Rule
55(b), all of the well-pleaded factual allegations in the complaint pertaining to liability are
deemed to be true. See Qiu Hua Tan v. Voyage Express Inc., 2017 WL 2334969, at *2
(E.D.N.Y. May 25, 2017). However, it is up to the court to determine whether the unchallenged
facts constitute a legitimate cause of action. See Gunawan v. Sake Sushi Rest., 897 F. Supp. 2d
76, 83 (E.D.N.Y. 2012). Additionally, damages are not deemed admitted on account of a
defendant’s default. See, e.g., Greyhound Exhibitgroup v. E.L.U.L Realty Corp., 973 F.2d 155,
158 (2d Cir. 1992); Olvera v. Los Taquitos Del Tio Inc., 2015 WL 3650238, *1 (E.D.N.Y.
2015). Instead, a plaintiff seeking damages from a defaulting defendant must prove entitlement
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to damages to a “reasonable certainty.” Olvera, 2015 WL 3620364, at *1. Reasonable certainty
means that “damages may not be merely speculative, possible or imaginary, but . . . directly
traceable to the breach, not remote or the result of other intervening causes.” Credit Lyonnais
Sec. (USA) Inc. v. Alcantara, 183 F.3d 151, 153 (2d Cir. 1999). While the party seeking
damages is entitled to all reasonable inferences from the evidence it offers, a court must “ensure
that there is a basis for the damages sought by a plaintiff before entering judgment in the amount
demanded.” Avelar v. Quiros, Inc., 2015 WL 1247102, at *5. At the damages phase, courts have
discretion to hold an evidentiary hearing. See Fed. R. Civ. P. 55(b)(2). Such a hearing is not
required, however, so long as documents submitted, such as detailed affidavits, allow the court to
conduct an inquiry sufficient to establish damages to a reasonable certainty. See Avelar, 2015
WL 1247102, at *7.
B. Application of Rule 55 Standards
1. Entry of Default Pursuant To Rule 55(a)
In recognition that it could seek relief for Michael’s conduct under Rule 37 as well as
Rule 55, USM here moved (by way of different iterations of motions based upon the same
conduct) pursuant to both Rules. However, Judge Komitte’s order is clear that should Michael
fail to appear for scheduled conferences or comply with court orders, “the Court will not hesitate
to enter default judgment under Rule 55 for failure to defend.” DE [176]. Therefore, this Court
will only apply the Rule 55 standard to its analysis.
Rule 55 requires this Court to consider the willfulness of Michael's conduct. Application
of Rule 55 requires the Court to also consider whether Michael has set forth a meritorious
defense to USM's claims, as well as the prejudice that USM would suffer in the absence of a
default. Upon consideration of the record, namely - Michael’s failure to appear at the June 27,
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2025 status conference as directed by Judge Komitee – this Court finds such conduct to be
willful. The District Court specifically warned Michael that failure to appear at the conference
would result in the District Court not hesitating to enter default judgment. See DE [176]. Thus,
Michaels’ conduct was willful.
Relevant to any Rule 55 analysis is not only whether the party against whom default is
sought fails to file an answer, but also where the conduct of the party against whom default is
sought rises to the level of failing to defend their position. Guggenheim, 722 F.3d at 454. Here,
Michael has consistently denied liability. At every juncture in this case Michael has claimed that
all acts taken in connection with the Loan and Mortgage were legitimate and taken only under
the supervision of the bankruptcy court and trustee. Michael took this position early in the
litigation and has stuck with it throughout. He denies all claims of fraudulent conduct. While
Michael has previously set forth a meritorious defense to USM's claims, he has now failed to
defend his position after being explicitly warned that failure to appear would constitute a failure
to defend. As such, Michael’s actions, or more pointedly, lack of action, now rise to the level of
failing to defend his position.
Finally, under Rule 55 there is the question of prejudice to USM. The Court finds that
Michael’s failure to participate in the June 27, 2025 status conference did prejudice USM in a
manner that would make entry of default appropriate. This case has been pending for over 13
years. While both Michael and USM are at fault for the delay for bringing this matter to a
conclusion, the delay caused by Michael’s failure to attend the status conference, falls squarely
on Michael. This delay is solely attributable to Michael’s conduct. At this juncture in the
litigation, USM will incur prejudice if default is not entered - as without Michael’s appearance,
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there is no meaningful way for this litigation to move forward or conclude, absent an entry of
default against Michael.
In light of the foregoing facts and analysis, the Court recommends that default be entered
against Michael. In view of this finding, the Clerk of the Court should note the default of
Michael Conde.
The Court now turns to the analysis leading to entry of judgment under Rule 55.
2. Entry of Default Judgment Pursuant to Rule 55
The Second Circuit “generally disfavor[s]” default judgment and has repeatedly
expressed a “preference for resolving disputes on the merits.” Enron Oil Corp. v. Diakuhara, 10
F.3d 90, 96 (2d Cir. 1993). Nevertheless, in evaluating a motion for default judgment, a court
accepts as true the plaintiff's well-pleaded factual allegations, except those relating to damages.
Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); see
also Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974). A plaintiff bears the burden of alleging
“specific facts,” rather than “mere labels and conclusions” or a “formulaic recitation of the
elements,” so that a court may infer a defendant's liability. Cardoza v. Mango King Farmers Mkt.
Corp., No. 14-CV-3314 (SJ) (RER), 2015 WL 5561033, at *3 (E.D.N.Y. Sept. 1, 2015) (citing
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)), report and
recommendation adopted, 2015 WL 5561180 (E.D.N.Y. Sept. 21, 2015). The decision to grant or
deny a default motion is “left to the sound discretion of a district court.” Esquivel v. Lima Rest.
Corp., No. 20-CV-2914 (ENV) (MMH), 2023 WL 6338666, at *3 (E.D.N.Y. Sept. 29, 2023)
(quoting Shah v. New York State Dep't of Civ. Serv., 168 F.3d 610, 615 (2d Cir. 1999)); see
Chen v. Oceanica Chinese Restaurant, Inc., 2023 WL 2583856, at *7 (E.D.N.Y. March 21, 2023)
(the court “possesses significant discretion” in granting a motion for default judgment,
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“including [determining] whether the grounds for default are clearly established.”) (quotations
and citation omitted).
a. USM’s Causes of Action For Indemnity
USM’s ninth, tenth and twelfth causes of action seek implied indemnity, comparative
indemnity and contribution, and equitable indemnity against Michael.
Implied indemnity is an equitable doctrine recognized in the common law. Gillmore v.
Duke/Fluor Daniel et al., 221 A.D.2d 938, 634 N.Y.S.2d 588 (4th Dept 1995). “The general rule
is that common law indemnity (also called implied indemnity) will arise in favor of one who is
compelled to pay for another's wrong.” St. Nicholas Cathedral of Russian Orthodox Church in
North America v. Colonial Co-op. Ins. Co., 2008 WL 787267, at * 2 (March 25, 2008) (citing
Margolin v. New York Life Ins. Co., 32 N.Y.2d 149, 152, 344 N.Y.S.2d 336, 297 N.E.2d 80
(1973)). “Where payment by one person is compelled, which another should have made ... a
contract to reimburse or indemnify is implied by law.” McDermott v. City of NY, 50 N.Y.2d
211, 217, 428 N.Y.S.2d 643, 406 N.E.2d 460 (1980)).
“Implied indemnity is a restitution concept which permits shifting the loss because to fail
to do so would result in the unjust enrichment of one party at the expense of the other.” Mas v.
Two Bridges Assocs. by Nat'l Kinney Corp., 75 N.Y.2d 680, 690, 555 N.Y.S.2d 669, 554 N.E.2d
1257 (1990) (citing McDermott v. City of N.Y., 50 N.Y.2d 211, 216–17, 428 N.Y.S.2d 643, 406
N.E.2d 460 (1980)); accord Hernandez v. GPSDC (N.Y.) Inc., 2008 WL 220636, at *7
(S.D.N.Y. Jan.28, 2008). It is grounded in the “principle that ‘every one is responsible for the
consequences of his own negligence, and if another person has been compelled ... to pay the
damages which ought to have been paid by the wrongdoer, they may be recovered from him.’”
Raquet v. Braun, 90 N.Y.2d 177, 183, 659 N.Y.S.2d 237, 681 N.E.2d 404 (1997) (quoting
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Oceanic Steam Nav. Co. v. Compania Transatlantica Espanola, 134 N.Y. 461, 468, 31 N.E. 987
(1892)). Thus, indemnity may be implied “to prevent a result which is regarded as unjust or
unsatisfactory” and “is frequently employed in favor of one who is vicariously liable for the tort
of another.” Rosado v. Proctor & Schwartz, Inc., 66 N.Y.2d 21, 24, 494 N.Y.S.2d 851, 484
N.E.2d 1354 (1985) (citations and internal quotation marks omitted).... In general terms,
indemnity allows a defendant to recover for a loss occasioned solely “by imputation of law,”
Mas, 75 N.Y.2d at 690, 555 N.Y.S.2d 669, 554 N.E.2d 1257, that it would otherwise be forced to
bear on its own. Amusement Industry, Inc. v. Stern, 2010 WL 445900, at * 4 (S.D.N.Y. March 1,
2010).
“[A]n indemnity cause of action can be sustained only if the third-party plaintiff and the
third-party defendant have breached a duty to plaintiff and also if some duty to indemnify exists
between them.” Gillmore v. Duke/Fluor Daniel et al., 221 A.D.2d 938, 634 N.Y.S.2d 588 (4th
Dept 1995); see also Westport Marina, Inc. v. Boulay, 2010 WL 1223238, at *11 (E.D.N.Y.
March 24, 2010) (“Where one party is held liable solely on account of the negligence of another,
indemnification applies to shift the entire liability to the one who was negligent.”).
Further, “the predicate of common law indemnity is vicarious liability without actual
fault on the part of the proposed indemnitee.” Monaghan v. SZS 33 Assoc., L.P., 73 F.3d 1276,
1285 (2d Cir.1996) (quoting Trustees of Columbia Univ. v. Mitchell/Giurgola Assoc., 109
A.D.2d 449, 453, 492 N.Y.S.2d 371 (1st Dep't 1985)); see Rosado 66 N.Y.2d 21, 25, 494
N.Y.S.2d 851, 484 N.E.2d 1354 (1985) ((“[C]ommon-law indemnity is barred altogether where
the party seeking indemnification was itself at fault, and both tortfeasors violated the same duty
to the plaintiff.”). Thus, implied indemnity is not available where the party seeking
indemnification was itself at fault in causing the injury or damage upon which it seeks recovery.
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Boulay, 2010 WL 1223238, at * 11; see Trustees of Columbia Univ. v. Mitchell/Giurgola
Assocs., 109 A.D.2d 449, 492 N.Y.S.2d 371, 375 (1st Dep't 1985) (“Since the predicate of
common law indemnity is vicarious liability without actual fault on the part of the proposed
indemnitee, it follows that a party who has itself actually participated to some degree in the
wrongdoing cannot receive the benefit of the doctrine.”).
Here, USM alleges that the straw transaction at issue was orchestrated by Michael in
order to obtain funds to pay his bankruptcy debt. At the time of the closing, various closing
documents were executed in which USM relied upon, such as:
a. a final Uniform Residential Loan Application, which affirmed the
Borrower’s representation that the Property would be his primary
residence when, in fact, it was not;
b. a handwritten document entitled “Escrow Agreement” whereby the
Borrower, Seller Defendants, Christensen, and Ezratty each acknowledged
and agreed that each acknowledged and agreed that certain sums would
remain in escrow pending satisfaction of certain liens and judgments held
by RLI Insurance and Keystone Mechanical Corporation against the Seller
Defendants, each of which were identified as creditors in the Bankruptcy
Case;
c. a purchase affidavit where the Borrower represented that he resided at the
Property;
d. a property tax assessment disclosure wherein the Borrower and Ezratty
each endorsed and represented, among other things, that the transfer of
title to the Property did not involve a sale between relatives or former
relatives, when in fact they knew that was not the case; and
e. a document entitled “Notice of No Oral Agreements” wherein the
Borrower represented, without limitation, that “there are no oral
agreements between the parties.”
SATPC ¶ 29.
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USM alleges that the true nature of the transaction was not readily available or known to
the USM. However, USM alleges that Michael knew that USM
was acting on the basis of this mistaken knowledge because all of the loan
application documents contained representations that were either contrary to the
true facts and circumstances or omitted by reference or disclosure of them. As a
consequence of this superior knowledge, the Seller Defendants had a duty of
disclosure to both USMC and the FDIC to disclose said information.
SATPC ¶ 87.
The Application itself also provides for indemnity. Specifically,
Each of the undersigned specifically represents to Lender and to Lender’s actual
or potential agents, brokers, processors, attorneys, insurers, servicers, successors
and assigns and agrees and acknowledges that: (1) the information provided in
this application is true and correct as of the date set forth opposite my signature
and that any intentional or negligent misrepresentation of this information
contained in this application may result in civil liability, including monetary
damages, to any person who may suffer any loss due to reliance upon any
misrepresentation that I have made on this application.
DE [182] at p. 8-9.
As such, USM has properly alleged its indemnity clauses of action as to Michael.
Therefore, this Court recommends that USM is entitled to indemnification from Michael.
b. Fraud and Intentional Misrepresentation Claims
The elements of common-law fraud and intentional misrepresentation under New York
law are the same. Indep. Order of Foresters v. Donald, Lufkin & Jenrette, Inc., 157 F.3d 933, 940
(2d Cir.1998). In either case, a plaintiff must show that: “(1) the defendant made a material false
statement or omission; (2) the defendant intended to defraud the plaintiff; (3) the plaintiff
reasonably relied upon the representation or omission; and (4) the plaintiff suffered damage as a
result of such reliance.” Cent. Pacific, Inc. v. Hilton Hotels Corp., 528 F. Supp. 2d 206, 218
(S.D.N.Y. 2007).
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USM alleges that Michael orchestrated the transaction at issue so that he could extract the
proceeds from the sale to pay his bankruptcy debts. USM alleges that Michael recruited
Lawrence to stand-in as a straw borrower knowing that Lawrence had no intention of residing at
the Property but, instead, Michael would continue to do so.
Michael also promised that he would continue to retain all financial responsibility for the
Property. Michael also knew that because title to the Property was vested in his wife’s maiden
name, Campi, that the familial relationship with Lawrence, would be concealed. USM alleges
that all of these actions were in an effort to allow Michael to obtain funds to cover his debt from
bankruptcy. SATPC ¶¶ 9-14. As a result, USM relied upon these false statements and omissions
and suffered damages as a result if such reliance.
Thus, USM has plausibly alleged its fraud cause of action as against Michael.
Accordingly, this Court recommends that default judgment in favor of USM be entered as to the
fraud claims against Michael.
c. Negligent Misrepresentation and Negligence
To state a claim for negligent misrepresentation under New York law, “a plaintiff must
assert ‘(1) the defendant had a duty, as a result of a special relationship, to give correct
information; (2) the defendant made a false representation that he or she should have known was
incorrect; (3) the information supplied in the representation was known by the defendant to be
desired by the plaintiff for a serious purpose; (4) the plaintiff intended to rely and act upon it; and
(5) the plaintiff reasonably relied on it to his or her detriment.’” Eidelman v. Sun Prods. Corp.,
No. 16-CV-3914, 2017 WL 4277187, at *4 (S.D.N.Y. 2017) (quoting Anschutz Corp. v. Merrill
Lynch & Co., 690 F.3d 98, 114 (2d Cir. 2012)).
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The “duty” or “special relationship” element of negligent misrepresentation limits such
claims to “situations involving ‘actual privity of contract between the parties or a relationship so
close as to approach that of privity.’” Anschutz Corp., 690 F.3d at 114 (quoting In re Time
Warner Inc. Sec. Litig., 9 F.3d 259, 271 (2d Cir. 1993)). “[L]iability for negligent
misrepresentation has been imposed only on those persons who possess unique or specialized
expertise, or who are in a special position of confidence and trust with the injured party such that
reliance on the negligent misrepresentation is justified.” Kimmell v. Schaefer, 89 N.Y.2d 257,
263, 652 N.Y.S.2d 715, 675 N.E.2d 450 (1996).
To establish a prima facie case of negligence under New York law, “a plaintiff must
prove (1) that the defendant owed her a duty; (2) that the defendant breached that duty; and (3)
that she suffered injuries proximately resulting from that breach.’” Coyle v. United States, 954
F.3d 146, 148 (2d Cir. 2020) (quoting Solomon ex rel. Solomon v. City of New York, 66 N.Y.2d
1026, 1027, 499 N.Y.S.2d 392, 489 N.E.2d 1294 (1985)).
USM alleges that Lawrence is the agent of Michael for purposes of the transaction at
issue, and therefore, Michael as the principal, is liable for Lawrence’s conduct. SATPC ¶ 8. At
the pleading stage, “a complaint must contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173
L.Ed.2d 868 (2009) (citation omitted). To adequately allege an actual agency relationship, a
plaintiff need only allege facts sufficient to support a reasonable inference of actual authority,
and its pleadings may rely upon facts that would constitute circumstantial evidence of authority.
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“Authority is the power of the agent to affect the legal relations of the principal by acts
done in accordance with the principal's manifestations of consent to him.” Fletcher v. Atex, Inc.,
68 F.3d 1451, 1461 (2d Cir. 1995) (citing Restatement (Second) of Agency § 7 (1958)). “[A]n
agent has actual authority if the principal has granted the agent the power to enter into contracts
on the principal's behalf, subject to whatever limitations the principal places on this power, either
explicitly or implicitly.” Highland Capital Management LP v. Schneider, 607 F.3d 322, 327 (2d
Cir. 2010). “Actual authority is created by direct manifestations from the principal to the
agent[.]” Id. (citation omitted). Whether actual authority exists “depends on the actual interaction
between the putative principal and agent, not on any perception a third party may have of the
relationship.” Itel Containers Intern. Corp. v. Atlanttrafik Exp. Service Ltd., 909 F.2d 698, 702
(2d Cir. 1990).
USM pleads facts which together support a reasonable inference that Michael conferred
authority upon Lawrence to engage in the course of dealing described. All of the benefits of the
transaction flowed to Michael; Lawrence received nothing. Michael orchestrated the transaction
as a “sale” of the Property when Lawrence had no intention of residing in the Property. In fact,
Michael continued to occupy the Property. Michael received the benefit of the net proceeds of
the loan, which he used to pay off his bankruptcy debt. Michael also concealed Campi’s true
identity and the familial relationship with Lawrence. Had any of this information been disclosed
to USM, the loan would never have been approved and funded. SATPC ¶ 113.
USM has sufficiently pled its negligent misrepresentation, and negligence causes of
action as against Michael. Accordingly, this Court recommends that default judgment in favor of
USM be entered as to the negligent misrepresentation and negligence claims against Michael.
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RECOMMENDATION
For the reasons stated herein, it is respectfully recommended that USM's motion for entry
of default and a default judgment, appearing as Docket Entry 180, construed pursuant to Rule 55
of the Federal Rules of Civil Procedure be granted. In view of this Recommendation, should the
District Court ultimately adopt this recommendation, this Court further recommends that USM
be granted 30 days to submit evidence to the District Court in support of its damages
determination.
OBJECTIONS
A copy of this Report and Recommendation is being electronically served on counsel.
Further, the Court is directing USM’s counsel to serve a copy of this Report and
Recommendation by overnight mail and first-class mail to Michael Conde at his last known
address and to file proof of service on ECF by February 12, 2026. Any written objections to the
Report and Recommendation must be filed with the Clerk of the Court within fourteen (14) days
of service of this report. 28 U.S.C. § 636(b)(1) (2006 & Supp. V 2011); Fed. R. Civ. P. 6(a),
72(b). Any requests for an extension of time for filing objections must be directed to the district
judge assigned to this action prior to the expiration of the fourteen (14) day period for filing
objections. Failure to file objections within fourteen (14) days may preclude further review of
this report and recommendation either by the District Court or Court of Appeals. Thomas v.
Arn, 474 U.S. 140, 145 (1985) ( [A] party shall file objections with the district court or else
waive right to appeal.”); Caidor v. Onondaga Cnty., 517 F.3d 601, 604 (2d Cir. 2008) ( [F]ailure
to object timely to a magistrate s report operates as a waiver of any further judicial review of the
magistrate s decision.”).
SO ORDERED.
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Dated: Central Islip, New York
February 9, 2026
/s/ Anne Y. Shields
ANNE Y. SHIELDS
United States Magistrate Judge
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