Edwards v. McMillen Cap., LLC ( 2022 )

21-1024-cv
Edwards v. McMillen Cap., LLC
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of
New York, on the 17th day of November, two thousand twenty-two.
PRESENT:
ROBERT D. SACK,
RICHARD C. WESLEY,
JOSEPH F. BIANCO,
Circuit Judges.
_____________________________________
Paul Edwards,
Plaintiff-Appellant,
v. 21-1024-cv
McMillen Capital, LLC,
Defendant-Appellee.
_____________________________________
FOR PLAINTIFF-APPELLANT: Paul Edwards, pro se, Cromwell, CT.
FOR DEFENDANT-APPELLEE: Ander S. Knott, Knott & Knott, LLC,
Cheshire, CT.
Appeal from a judgment of the United States District Court for the District of Connecticut
(Underhill, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED.
Appellant Paul Edwards, proceeding pro se, appeals the district court’s judgment
dismissing his claims. Based on alleged misconduct connected to a 2012 mortgage loan, Edwards
sued defendant McMillen Capital, LLC, (“McMillen”) in February 2018, asserting that McMillen
violated the Truth in Lending Act, 15 U.S.C. §§ 1601–1667f (“federal TILA”), the Connecticut
Truth in Lending Act, Conn. Gen. Stat. §§ 36a-675–36a-686 (“Connecticut TILA), and the
Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. §§ 42-110a–42-110q (“CUTPA”). He
also brought state law negligence, negligent infliction of emotional distress, and breach of the
implied covenant of good faith and fair dealing claims. The district court granted McMillen’s
motion to dismiss the amended complaint, under Federal Rule of Civil Procedure 12(b)(6), on the
grounds that Edwards’s federal and Connecticut TILA and CUTPA claims were untimely, and his
remaining causes of action did not state a claim for relief. We assume the parties’ familiarity with
the underlying facts and procedural history—which we already addressed in our prior precedential
opinion, see Edwards v. McMillen Capital, LLC, 952 F.3d 32, 33–35 (2d Cir. 2020) (per curiam)—
as well as the issues now on appeal, which we discuss only as necessary to explain our decision to
affirm.
I. Timeliness of Edwards’s TILA and CUPTA Claims
On an appeal from a Rule 12(b)(6) dismissal, this Court reviews a district court’s “legal
conclusions, including its interpretation and application of a statute of limitations . . . de novo.”
City of Pontiac Gen. Emps. Ret. Sys. v. MBIA, Inc., 637 F.3d 169, 173 (2d Cir. 2011). “Although
the statute of limitations is ordinarily an affirmative defense that must be raised in the answer, a
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statute of limitations defense may be decided on a Rule 12(b)(6) motion if the defense appears on
the face of the complaint.” Ellul v. Congregation of Christian Bros., 774 F.3d 791, 798 n.12 (2d
Cir. 2014). Moreover, “[w]hen a district court determines that equitable tolling is inappropriate,
we review the legal premises for that conclusion de novo, the factual bases for clear error, and the
ultimate decision for abuse of discretion.” DeSuze v. Ammon, 990 F.3d 264, 268 (2d Cir. 2021).
A. Federal and Connecticut TILA
Edwards’s federal and Connecticut TILA claims are time barred. Federal TILA aims to
protect consumers “by assuring a meaningful disclosure of credit terms.” Strubel v. Comenity
Bank, 842 F.3d 181, 186 (2d Cir. 2016) (internal quotation marks and citation omitted). Under
the federal law, many claims must be brought within “one year from the date of the occurrence of
the violation,” although certain actions are subject to a three-year statute of limitations. See 15
U.S.C. § 1640(e). Connecticut TILA’s statute of limitations is the same as the federal limitations
period. Conn. Gen. Stat. § 36a-683(b).
Even under the longer three-year limitations period, Edwards’s claims were brought too
late. The mortgage was executed on April 30, 2012, and Edwards filed his earliest lawsuit in state
court on June 24, 2015, three years and two months later. This suit was not filed until February
2018—significantly later still. Therefore, the federal and Connecticut TILA claims are barred by
the statute of limitations.
Edwards contends that these claims are nevertheless timely because of the “discovery rule,”
which allows the statute of limitations to commence on the date the plaintiff discovered, or
reasonably could have discovered, the alleged violation. Edwards does not challenge the district
court’s determination that the discovery rule applies only to open-end transactions and not closed-
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end transactions. See, e.g., Latouche v. Wells Fargo Home Mortg. Inc., 752 F. App’x 11, 13 (2d
Cir. 2018) (summary order) (“While this Court has not spoken directly on the issue, among lower
courts in this circuit, [i]t is well-settled law that in closed-end credit transactions, like [a mortgage
loan], the date of the occurrence of violation is no later than the date the plaintiff enters the loan
agreement or, possibly, when defendant performs by transmitting the funds to plaintiffs.” (internal
quotation marks and citation omitted)). Instead, Edwards argues that the district court erred in
concluding that his loan agreement was a closed-end transaction. We find his argument
unpersuasive. The district court correctly held that, because the alleged loan transaction at issue
did not contemplate future disbursals or repeated transactions, it was a closed-end transaction to
which the discovery rule does not apply.
These claims fare no better under the rescission-based statute of limitations. If a creditor
fails to “conspicuously disclose” rescission rights, a consumer has three years to rescind the
transaction. See 15 U.S.C. §§ 1635(a), (f); Conn. Gen. Stat. § 36a-683(e). The three-year
extension is measured from the “date of consummation of the transaction.” 15 U.S.C. § 1635(f).
This is defined as “the time that a consumer becomes contractually obligated on a credit
transaction, a matter decided by reference to state law.” Smith v. Wells Fargo Bank, N.A., 666 F.
App’x 84, 86 (2d Cir. 2016) (summary order) (internal quotation marks and citation omitted)
(finding under Connecticut law that the date of consummation was, at latest, plaintiff’s transmittal
of the executed documents to the lender). Here, Edwards was contractually obligated when he
executed the mortgage documents on April 30, 2012. Therefore, his claims would still be
untimely under the rescission-based statute of limitations.
Finally, the district court correctly determined that there was no basis for equitably tolling
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the statute of limitations. Equitable tolling is appropriate on a rare occasion where “extraordinary
circumstances prevented a party from timely performing a required act, and . . . the party acted
with reasonable diligence throughout the period he [sought] to toll.” Walker v. Jastremski, 430
F.3d 560, 564 (2d Cir. 2005) (internal quotation marks and citation omitted). Here, Edwards does
not allege any “extraordinary circumstances” warranting equitable tolling, and reasonable
diligence by Edwards would have revealed the alleged violation when he signed the mortgage note
in April 2012.
Accordingly, the federal and Connecticut TILA claims were properly dismissed as time
barred.
B. CUTPA
The CUTPA claim is also time barred. CUTPA prohibits “unfair methods of competition
and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Conn. Gen.
Stat. § 42-110b(a). A plaintiff may not bring a CUTPA claim “more than three years after the
occurrence of a violation.” Conn. Gen. Stat. § 42-110g(f). Edwards’s claim, stemming from the
2012 loan transaction, is clearly beyond this three-year period.
Moreover, the continuing course of conduct doctrine does not toll the statute of limitations
here. State law claims are governed by state tolling rules, see Schermerhorn v. Metro. Transp.
Auth., 156 F.3d 351, 354 (2d Cir. 1998) (per curiam), and Connecticut courts apply the continuing
course of conduct doctrine only where a defendant: “(1) committed an initial wrong upon the
plaintiff; (2) owed a continuing duty to the plaintiff that was related to the alleged original wrong;
and (3) continually breached that duty,” Witt v. St. Vincent’s Med. Ctr., 252 Conn. 363, 370 (2000).
A continuing duty exists where there is “evidence of either a special relationship between the
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parties . . . or some later wrongful conduct of a defendant related to the prior act [or omission].”
Fichera v. Mine Hill Corp., 207 Conn. 204, 210 (1988).
Here, there are no allegations that suggest Edwards and McMillen were in a special
fiduciary relationship beyond a standard borrower-lender arrangement. See Southbridge Assocs.,
LLC v. Garofalo, 53 Conn. App. 11, 19 (1999) (holding that, because a “lender has the right to
further its own interest in a mortgage transaction and is not under a duty to represent the customer’s
interest,” no fiduciary relationship exists in a borrower-lender relationship). Moreover, although
Edwards seeks to rely on McMillen’s alleged ongoing failure to make the requisite TILA
disclosures after advancements of the loan, that allegation of continuing omission does not
constitute additional misconduct from the time of the loan that would trigger application of this
doctrine. See Flannery v. Singer Asset Fin. Co., 312 Conn. 286, 312–13 (2014) (concluding that
continuing course of conduct doctrine did not apply where plaintiff “has not alleged or pointed to
any evidence of any duty owed by, or further misconduct [or a new omission] on the part of, the
defendant following [the principal] sale”). In sum, the district court correctly determined that no
exceptions to the limitation period apply that would render the CUPTA claim timely, and thus
properly dismissed the CUPTA claim.
II. Remaining State Law Claims
The district court granted McMillan’s motion to dismiss the remaining state law claims—
for negligence, negligent infliction of emotional distress, and breach of the implied covenant of
good faith and fair dealing—concluding that McMillan failed to state plausible claims upon which
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relief could be granted. We agree.1
As noted above, we review a district court’s dismissal under Rule 12(b)(6) de novo. See
Nicosia v. Amazon.com, Inc., 834 F.3d 220, 230 (2d Cir. 2016). To avoid dismissal, a complaint
must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In
making this plausibility assessment under Rule 12(b)(6), we may consider “facts alleged in the
pleadings, documents attached as exhibits or incorporated by reference in the pleadings[,] and
matters of which judicial notice may be taken . . . .” 2 Samuels v. Air Transp. Loc. 504, 992 F.2d
12, 15 (2d Cir. 1993). In addition, “[w]e liberally construe pleadings and briefs submitted by pro
se litigants, reading such submissions to raise the strongest arguments they suggest.” McLeod v.
Jewish Guild for the Blind, 864 F.3d 154, 156 (2d Cir. 2017) (per curiam) (internal quotation marks
and citation omitted). Our substantive analysis of a state-law claim is governed by the decisions
of a state’s highest court, although we also “look to the rulings of the state’s lower courts as
providing important data points for understanding state law.” Schwab Short-Term Bond Mkt.
Fund v. Lloyds Banking Grp., 22 F.4th 103, 120 (2d Cir. 2021), cert. denied, 142 S. Ct. 2852(2022).
1
McMillan argues, in the alternative, that these remaining state claims are also untimely. The district
court rejected that argument and determined that, although Edwards brought the claims outside the state’s
three-year statute of limitations for tort actions, he could avail himself of Connecticut’s savings statute to
the extent these claims arose out of the same causes of action asserted in his prior state court proceeding.
See Conn. Gen. Stat. § 52-592. Because we conclude that the district court properly dismissed these
remaining state causes of action for failure to state a plausible claim, we need not address McMillan’s
alternative argument on timeliness.
2
Here, Edwards referenced many documents in his amended complaint, including the mortgage note and
loan commitment letter, and thus the district court properly considered those documents in ruling on the
Rule 12(b)(6) motion.
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First, the amended complaint did not state a claim for negligence because it failed to
plausibly allege the existence of a duty of care based upon the mortgage agreement. See Grenier
v. Comm’r Transp., 306 Conn. 523, 538–39 (2012). In the alternative, Edwards argues that a duty
of care arises from the doctrine of statutory negligence—Connecticut’s term for negligence per se.
See Webb v. Czyr Const. Co., 172 Conn. 88, 93 n.3 (1976). “Two elements must coexist” before
a plaintiff can recover on the ground of statutory negligence: (1) “a plaintiff must be within the
class of persons for whose benefit and protection the statute in question was enacted”; and (2) “a
plaintiff must prove that the violation of the statute . . . was a proximate cause of his injuries.”
Coughlin v. Peters, 153 Conn. 99, 101 (1965). Edwards asserts that he can establish statutory
negligence because he is a consumer protected under several statutes that aim to prevent the injury
he suffered (i.e., McMillen’s “fraudulent scheme”), such as the Connecticut TILA and CUPTA.
However, as discussed above, we have already concluded these statutory claims are untimely, and
Edwards cannot re-cast these same claims as statutory negligence claims under Connecticut law
to circumvent the limitations period established by those statutes. To the extent Edwards relies
upon a list of other statutes to assert a statutory negligence claim, he has failed to set forth any
allegations that plausibly establish how he was within the class of persons protected by the
particular statute or how a violation of that statute proximately caused his injuries. Thus, the
negligence claim was properly dismissed.
Second, the amended complaint failed to state a claim for negligent infliction of emotional
distress, which requires a plaintiff to show that: “(1) the defendant's conduct created an
unreasonable risk of causing the plaintiff emotional distress; (2) the plaintiff’s distress was
foreseeable; (3) the emotional distress was severe enough that it might result in illness or bodily
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harm; and (4) the defendant’s conduct was the cause of the plaintiff’s distress.” Carrol v. Allstate
Ins, 262 Conn. 433, 444 (2003). In addition, a plaintiff must allege that the defendant owed the
plaintiff a duty to prevent the plaintiff from experiencing the alleged emotional distress. See
Perodeau v. Hartford, 259 Conn. 729, 754 (2002). Here, the conclusory allegations in the
amended complaint about McMillen threatening to exercise its foreclosure rights neither support
the plausible existence of duty that would give rise to a claim for negligent infliction of emotional
distress, nor do they plausibly support the other elements of such a claim. See Twombly, 550 U.S.
at 555 (emphasizing that, in assessing plausibility under Rule 12(b)(6), we “are not bound to accept
as true a legal conclusion couched as a factual allegation” (quoting Papasan v. Allain, 478 U.S.
265, 286 (1986))); accord Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not suffice.”). Accordingly, the district
court correctly dismissed the claim for negligent infliction of emotional distress.
Finally, the amended complaint did not state a claim for breach of the implied covenant of
good faith and fair dealing. This covenant aims to fulfill the reasonable expectations of the parties
and ensure that “neither party [will] do anything that will injure the right of the other to receive
the benefits of the agreement.” De La Concha of Hartford, Inc. v. Aetna Life Ins., 269 Conn. 424,
432 (2004) (internal quotation marks and citation omitted). Here, although Edwards does assert
that McMillen denied him the fruits of the agreement, he fails to explain how McMillen improperly
denied him the benefits of the contract he signed when the complained-of terms were clear and
explicit. See id. at 441 (rejecting plaintiff’s contention that the defendant violated the implied
covenant where the defendant refused to renew the plaintiff’s lease because the “defendant was
not responsible either for the plaintiff’s failure to pay rent or for its failure to attain [a minimum]
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gross annual revenue” and thus, the defendant “was entitled, under the express provisions of the
lease, to decline the renewal . . . for those reasons.”). To hold otherwise would “achieve a result
contrary to the clearly expressed terms of [the] contract.” Magnan v. Anaconda Indus., Inc., 193
Conn. 558, 567 (1984). In short, the district court properly dismissed the claim for the breach of
the implied covenant of good faith and fair dealing.
* * *
We have considered Edwards’s remaining arguments and find them to be without merit.
Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
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