Kholod v. Nationstar Mortgage LLC (Middle District of Pa. (M.D. PA) July 22, 2025)

Case details
Full caption
VICTOR KHOLOD v. NATIONSTAR MORTGAGE LLC
Country
United States
Jurisdiction
Federal
Court
Middle District of Pennsylvania (M.D. PA)
Decided
July 22, 2025
Disposition
Motion Granted
Majority
Susan E. Schwab (J.) (unanimous Court)
VICTOR KHOLOD, Plaintiff, v. NATIONSTAR MORTGAGE LLC,..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.12025 WL 2327933Only the Westlaw citation is currently available.United States District Court, M.D. Pennsylvania.VICTOR KHOLOD, Plaintiff,v.NATIONSTAR MORTGAGE LLC, d/b/a MR.COOPER; WELLS FARGO BANK, N.A., Defendants.CIVIL NO: 3:24-cv-1631|Filed 07/22/2025REPORT AND RECOMMENDATIONSusan E. Schwab United States Magistrate JudgeI. Introduction.*1 The plaintiff, Victor Kholod (“Kholod”), proceeding prose, raises claims against the defendants Nationstar MortgageLLC (“Nationstar”) and Wells Fargo Bank, N.A. (“WellsFargo”) related to alleged unauthorized withdrawals from abank account. The defendants have each moved to dismissKholod's complaint pursuant to Fed. R. Civ. P. 12(b)(6). Docs.4, 9. We recommend that the defendants' motions to dismissbe granted, and Kholod's complaint be dismissed with leaveto amend.II. Background and Procedural History.Kholod commenced this civil action via a complaint hefiled in the Magisterial District Court 43-4-02, in MonroeCounty, Pennsylvania, on September 9, 2024. Doc. 1-2.Wells Fargo was served with a copy of the Summons andComplaint on September 11, 2024. Before Nationstar wasserved, Wells Fargo removed this case to the Middle Districtof Pennsylvania pursuant to a Notice of Removal filed onSeptember 25, 2024. Doc. 1. The Notice of Removal assertedthat the court has federal subject matter jurisdiction becausethe complaint asserts a cause of action under federal law,specifically the Electronic Funds Transfer Act (“EFTA”),15 U.S.C. § 1693, and that the court has supplementaljurisdiction over Kholod's state law claims. Doc. 1 at 2.Shortly thereafter, on October 2, 2024, Wells Fargo filed amotion to dismiss Kholod's complaint (doc. 4) and a brief insupport (doc. 5). After Nationstar was served, it filed a Noticeof Consent to Removal (doc. 7), its own motion to dismiss(doc. 9), and a brief in support (doc. 10).Kholod failed to timely file a brief in opposition to eithermotion to dismiss. However, he eventually filed a brief inopposition to Nationstar's motion to dismiss on December27, 2024. Doc. 16. We determined that we would considerKholod's brief in opposition in deciding the motion to dismissas if it were properly filed. Doc. 18. However, Kholod hasnot filed a brief in opposition to Wells Fargo's motion todismiss, nor a response to Wells Fargo's Notice (doc. 20),which pointed out the same. The motions to dismiss are nowripe for review.III. Motion to Dismiss Standards.In accordance with Fed. R. Civ. P. 12(b)(6), the court maydismiss a complaint for “failure to state a claim upon whichrelief can be granted.” When reviewing a motion to dismissunder Rule 12(b)(6) “[w]e must accept all factual allegationsin the complaint as true, construe the complaint in the lightfavorable to the plaintiff, and ultimately determine whether[the] plaintiff may be entitled to relief under any reasonablereading of the complaint.” Mayer v. Belichick, 605 F.3d 223,229 (3d Cir. 2010).In making that determination, we “consider only thecomplaint, exhibits attached to the complaint, matters ofpublic record, as well as undisputedly authentic documents ifthe [plaintiff's] claims are based upon these documents.” Id.at 230.“A Rule 12(b)(6) motion tests the sufficiency of the complaintagainst the pleading requirements of Rule 8(a).” I.H. exrel. D.S. v. Cumberland Valley Sch. Dist., 842 F. Supp.2d 762, 769–70 (M.D. Pa. 2012). “Under Federal Rule ofCivil Procedure 8(a)(2), a pleading must contain a ‘shortand plain statement of the claim showing that the pleader isentitled to relief.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009) (quoting Fed. R. Civ. P. 8(a)(2)). The statementrequired by Rule 8(a)(2) must give the defendant fair noticeof the nature of the plaintiff's claim and of the groundsupon which the claim rests. Erickson v. Pardus, 551 U.S. 89,93 (2007). Detailed factual allegations are not required, butmore is required than “labels,” “conclusions,” or “a formulaicrecitation of the elements of a cause of action.” Bell AtlanticCorp. v. Twombly, 550 U.S. 544, 555 (2007). “In otherwords, a complaint must do more than allege the plaintiff'sentitlement to relief.” Fowler v. UPMC Shadyside, 578 F.3d
VICTOR KHOLOD, Plaintiff, v. NATIONSTAR MORTGAGE LLC,..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.2203, 211 (3d Cir. 2009). “A complaint has to ‘show’ such anentitlement with its facts.” Id.*2 In considering whether a complaint fails to state a claimupon which relief can be granted, the court “ ‘must acceptall facts alleged in the complaint as true and construe thecomplaint in the light most favorable to the nonmoving party.’” Krieger v. Bank of Am., N.A., 890 F.3d 429, 437 (3d Cir.2018) (quoting Flora v. Cty. Of Luzerne, 776 F.3d 169, 175(3d Cir. 2015)). But a court “need not credit a complaint'sbald assertions or legal conclusions when deciding a motionto dismiss.” Morse v. Lower Merion Sch. Dist., 132 F.3d902, 906 (3d Cir. 1997). A court also need not “assume thata ... plaintiff can prove facts that the ... plaintiff has notalleged.” Associated Gen. Contractors of Cal. v. CaliforniaState Council of Carpenters, 459 U.S. 519, 526 (1983).Following Twombly and Iqbal, a well-pleaded complaintmust contain more than mere legal labels and conclusions.Rather, it must recite factual allegations sufficient to raisethe plaintiff's claimed right to relief beyond the level of merespeculation. In practice, consideration of the legal sufficiencyof a complaint entails a three-step analysis:First, the court must “tak[e] note of the elements a plaintiffmust plead to state a claim.” Second, the court shouldidentify allegations that, “because they are no more thanconclusions, are not entitled to the assumption of truth.”Finally, “where there are well-pleaded factual allegations,a court should assume their veracity and then determinewhether they plausibly give rise to an entitlement forrelief.”Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010)(footnote and citations omitted) (quoting Iqbal, 556 U.S. at675, 679).A complaint filed by a pro se litigant is to be liberallyconstrued and “ ‘however inartfully pleaded, must be heldto less stringent standards than formal pleadings drafted bylawyers.’ ” Erickson, 551 U.S. at 94 (quoting Estelle v.Gamble, 429 U.S. 97, 106 (1976)). Nevertheless, “pro selitigants still must allege sufficient facts in their complaints tosupport a claim.” Mala v. Crown Bay Marina, Inc., 704 F.3d239, 245 (3d Cir. 2013).IV. Kholod's Complaint.Kholod's allegations are sparse and include minimal factualcontext for his legal allegations. Kholod alleges that DavidMorgan & Sons LLC (“Morgan & Sons”), a registeredbusiness, had a business account at Wells Fargo. Doc. 1-2at 3. Nationstar was the recipient of three unauthorizedwithdrawals from the business account totaling to $11,659.88:(1) a withdrawal of $3,535.96 on August 2, 2022; (2)a withdrawal of $1,867.88 on September 12, 2022; and(3) a withdrawal of $6,256.04 on December 27, 2022. Id.These withdrawals were made without prior consent orauthorization from Kholod. Id. Kholod alleges that he madenumerous attempts to resolve the issue, including sending twoformal letters and conducting telephone negotiations. Id. at 4.Kholod does not state when these attempts occurred, but statesthat defendants did not take any action to return the funds. Id.Kholod also alleges he filed a police report to document theviolation, which has incident number PA2023-923140. Id.Kholod alleges the defendants have violated: (1) theElectronic Funds Transfers Act (“EFTA”), 15 U.S.C. §1693; (2) Article 4A of the Uniform Commercial Code;and (3) Pennsylvania's Unfair Trade Practices and ConsumerProtection Law, 73 P.S.A. § 201-1, et. seq. Kholod also bringsa breach of contract claim. Id. Kholod seeks an investigationinto the unauthorized withdrawals, a return of the money, andcompensation for losses and expenses incurred by Kholod. Id.at 5.*3 Also included in his complaint is an “AssignmentAgreement” between Morgan & Sons and Kholod, whichpurports to assign to Kholod any claims Morgan & Sons hasagainst Nationstar. Id. at 1–2. The Assignment Agreementdoes not mention Wells Fargo.V. Discussion.While Kholod's complaint is sparse, the facts he does includeshow he does not have standing to bring claims against WellsFargo. We also conclude that his claim against Nationstar isnot covered by the EFTA.1 Moreover, we do not find thatexercising supplemental jurisdiction over Kholod's state lawclaims would be appropriate.A. Kholod Has Not Alleged Standing To PursueClaims Against Wells Fargo.Pursuant to Article III of the Constitution, a plaintiff musthave standing to maintain an action in court. “To establishArticle III standing, a plaintiff must show (1) an injury infact, (2) a sufficient causal connection between the injuryand the conduct complained of, and (3) a likel[ihood] thatthe injury will be redressed by a favorable decision.” Susan
VICTOR KHOLOD, Plaintiff, v. NATIONSTAR MORTGAGE LLC,..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.3B. Anthony List v. Driehaus, 573 U.S. 149, 157-58 (2014)(quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560(1992)). “To establish injury in fact, a plaintiff must show thathe or she suffered ‘an invasion of a legally protected interest’that is ‘concrete and particularized’ and ‘actual or imminent,not conjectural or hypothetical.’ ” Spokeo, Inc. v. Robins, 578U.S. 330, 339 (2016), as revised (May 24, 2016) (quotingLujan, 504 U.S., at 560).Here, Kholod alleges that unauthorized withdrawals weremade from the Morgan & Sons' business account.Accordingly, Kholod had alleged an injury in fact to Morgan& Sons, but not to himself. Kholod attempts to rectify thisproblem by presenting an assignment agreement betweenMorgan & Sons and himself that purports to assign any claimMorgan & Sons has against Nationstar to Kholod:The Assignment Agreement providesin pertinent part that: Assignor holdsa claim against Nationstar MortgageLLC dba Mr. Cooper, located at 8950Cypress Waters Blvd, Coppell, TX75019, in the amount of $11,659.88.Assignor wishes to assign and transferto Assignee all rights, title, and interestin and to the aforementioned claim andany resultant judgment or recovery.Doc. 1-2 at 1; see also Sprint Commc'ns Co., L.P. v. APCCServs., Inc., 554 U.S. 269, 286 (2008) (“[T]he assignee of aclaim has standing to assert the injury in fact suffered by theassignor.” (quoting Vermont Agency of Nat. Res. v. U.S. ex rel.Stevens, 529 U.S. 765, 773 (2000)). However, the AssignmentAgreement does not assign any claim that Morgan & Sons hasagainst Wells Fargo to Kholod. Accordingly, we recommenddismissing Kholod's complaint against Wells Fargo for lackof standing. See also Thorne v. Pep Boys Manny Moe& Jack Inc., 980 F.3d 879, 896 (3d Cir. 2020) (notingthat a “[d]ismissal for lack of standing reflects a lack ofjurisdiction,” so such a dismissal must be without prejudice).B. Kholod Has Not Stated a Claim Under the EFTAAgainst Nationstar.*4 Kholod seeks to bring a claim under the EFTA for theallegedly unauthorized transfers from Morgan & Sons. Weagree with Nationstar that Kholod has not stated a claim underthe EFTA because the EFTA only governs consumer accountsand because Nationstar is not a financial institution subject toliability under the EFTA.1. The EFTA Only Governs Consumer Accounts.The EFTA was enacted to “provide a provide abasic framework establishing the rights, liabilities, andresponsibilities of participants in electronic fund andremittance transfer systems” with “[t]he primary objective”bring “the provision of individual consumer rights.” 15U.S.C. § 1693. Further, an “account” is defined under theact as a “demand deposit, savings deposit, or other assetaccount ... established primarily for personal, family, orhousehold purposes ....” Id. § 1693a(2). As such, courts haveconsistently (and easily) found that the EFTA only applies toconsumer accounts and not to business accounts. See, e.g.,Binns v. BB & T Bank, 377 F. Supp. 3d 487, 493 (E.D. Pa.2019) (finding the EFTA did not apply to a corporate accountthat was occasionally used for personal reasons); MZL Cap.Holdings, Inc. v. TD Bank, N.A., No. 14-CV-05772 RMB/AMD, 2015 WL 4914695, at *10 (D.N.J. Aug. 18, 2015)(finding the plain terms of the EFTA make it inapplicableto corporations or other business entities); Ironforge.com v.Paychex, Inc., 747 F.Supp.2d 384, 402 (W.D.N.Y. 2010)(“Corporations or other business entities are not ‘consumers’for the purposes of EFTA.”) (citing Kashanchi v. TexasCommerce Med. Bank, N.A., 703 F.2d 936, 939-42 (5th Cir.1983); Fischer & Mandell LLP v. Citibank, N.A., No. 09Civ. 1160(RJS), 2009 WL 1767621, at *3–4 (S.D.N.Y. June22, 2009) (holding that, because “the EFTA only appliesto accounts of ‘natural persons,’ ‘established primarily forpersonal, family, or household purposes,’ ” the EFTA didnot apply to an IOLA account, “which, by definition, is anaccount established purely for commercial reasons”) (quoting15 U.S.C. § 1693a(2)).Here, Kholod has clearly alleged that the three allegedlyunauthorized withdrawals were made from the Morgan &Sons' business account. Doc. 1-2 at 3. Accordingly, wefind that the EFTA does not govern Kholod's claim andwe recommend dismissal of Kholod's EFTA against bothdefendants on this basis.2. Nationstar is Not a Financial Institution Covered Bythe EFTA.The EFTA places liability on “financial institutions” fordamages proximately caused by the financial institutionsfailure to make an electronic fund transfer or stop payment
VICTOR KHOLOD, Plaintiff, v. NATIONSTAR MORTGAGE LLC,..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.4on an electronic fund transfer under certain circumstances.15 U.S.C. § 1693h(a). A “financial institution” is “a State orNational bank, a State or Federal savings and loan association,a mutual savings bank, a State or Federal credit union, orany other person who, directly or indirectly, holds an accountbelonging to a consumer.” 15 U.S.C. § 1693a(9).Here, Kholod's complaint does not include any allegationsthat would support a finding that Nationstar is a financialinstitution, as Kholod only alleges that Nationstar was therecipient of the unauthorized withdrawal, not the entity thatmaintained Kholod's bank account.2*5 In Kholod's brief in opposition to Nationstar's motionto dismiss, he states that “[w]hile EFTA primarily regulatesfinancial institutions, courts have extended its applicability tothird parties who facilitate or initiate unauthorized electronicfund transfers.” Doc. 16 at 1. Kholod only provides fakeprecedential support for this contention. He first cites“Lefkowitz v. CitiBank, 2021 WL 3456789 (S.D.N.Y. 2021)”for support (id.), but this citation does not lead to an actualcase, nor can we locate any case out of the Southern District ofNew York (or elsewhere) which Kholod might have intendedto cite. His also cites to Binns v. BB & T Bank, 803 F.App'x 618 (3d Cir. 2020), stating the case “acknowledgedthat factual disputes regarding the role of third parties inunauthorized transfers require resolution at trial rather thandismissal at the pleading stage.” Doc. 16 at 2. Put simply,this case does not contain this proposition nor does it evenmention the EFTA.Accordingly, we recommend dismissal of the EFTA claimagainst Nationstar on this ground as well.C. State Law Claims.In addition to federal claims, Kholod is asserting threestate law claims: (1) violations of Article 4A of the UCC,codified under 13 Pa. C.S. § 4A101, et. seq.; (2) violationsof Pennsylvania's Unfair Trade Practices and ConsumerProtection Law; and (3) contact law claims. Such claimswould fall within the court's supplemental jurisdiction.3Whether to exercise supplemental jurisdiction is within thediscretion of the court. 28 U.S.C. § 1367(c)(3) providesthat district courts may decline to exercise supplementaljurisdiction over a state-law claim if the district court hasdismissed all claims over which it has original jurisdiction.When deciding whether to exercise supplemental jurisdiction,“a federal court should consider and weigh in each case,and at every stage of the litigation, the values of judicialeconomy, convenience, fairness, and comity.” City of Chicagov. Int'l Coll. of Surgeons, 522 U.S. 156, 173 (1997) (quotingCarnegie-Mellon Univ. v. Cahill, 484 U.S. 343, 350 (1988)).The Third Circuit has held that “where the claim over whichthe district court has original jurisdiction is dismissed beforetrial, the district court must decline to decide the pendentstate claims unless considerations of judicial economy,convenience, and fairness to the parties provide an affirmativejustification for doing so.” Hedges v. Musco, 204 F.3d 109,123 (3d Cir. 2000) (quoting Borough of West Miflin v.Lancaster, 45 F.3d 780, 788 (3d Cir. 1995)).There is nothing unique about this case such thatconsiderations of judicial economy, convenience, andfairness provide an affirmative justification for exercisingsupplemental jurisdiction over Kholod's state-law claims.Accordingly, because we conclude that the complaint fails tostate any federal claims upon which relief can be granted,the court should decline to exercise supplemental jurisdictionover Kholod's state law claims.*6 Because this case arrived in federal court via removal,however, the proper course is to remand to the statecourt in which the case originated, rather than dismiss thestate law claims. Accordingly, if Kholod does not file anamended complaint, the state law claims should be remandedto Magisterial District Court 43-4-02, in Monroe County,Pennsylvania. See also, Royal Canin U. S. A., Inc. v.Wullschleger, 604 U.S. 22, 43–44 (2025) (where a plaintiffamends the complaint to delete all federal-law claims afterremoval, a federal court's supplemental jurisdiction over statelaw claims dissolves and the case must be remanded back tostate court).D. Kholod's List of Supporting Cases.Finally, we briefly address the eight cases Kholod includes inhis complaint as support for his claims for relief. Doc. 1-2 at 4.The citations were incomplete. Nevertheless, we searched foreach case on Westlaw and LexisNexis. These searches werelargely fruitless. The cases Kholod cites and the results of oursearch follow:1. According to Kholod, “PA Partnership Inc. v. XYZCorp, 2020” “involved the wrongful withdrawal of fundsfrom one company's account by another, resulting incompensation to the aggrieved party.” Doc 1-2 at 4. Wehave been unable to locate any possible case that mightfit the description given for this case. Defendant Wells
VICTOR KHOLOD, Plaintiff, v. NATIONSTAR MORTGAGE LLC,..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.5Fargo's brief in support stated that its search for this casewas fruitless as well. Doc. 5 at 20.2. Per Kholod, in “Levy Baldante Finney & Rubenstein v.Wells Fargo Bank, 2018” “[t]he court held the companyliable for failing to prevent unauthorized transactions.”Doc. 1-2 at 4. In its brief, Defendant Wells Fargo Bankpoints the court to Levy Baldante Finney & Rubenstein,P.C. v. Wells Fargo Bank, N.A., No. 3241 EDA 2016,2018 WL 847756 (Pa. Super. Ct. Feb. 14, 2018). Doc.5 at 20-21. This case, however, involved fraudulentendorsements on checks that had been withdrawn from alaw firm's IOLTA accounts and business accounts. LevyBaldante Finney & Rubenstein, P.C., 2018 WL 847756,at *3. Neither the facts nor the legal analysis in this casesupports Kholod's claim for relief. We were unable tofind another case that fit the citation provided by Kholod.3. Kholod also cites “Chasen v. Littman, 2019” in which,according to Kholod, “[t]he court considered the issueof unauthorized use of funds between companies.”Doc. 1-2 at 4. In its brief, Defendant Wells FargoBank provides the following as the proper citationfor this case: L. Offs. of Bruce J. Chasan, LLC v.Pierce Bainbridge Beck Price & Hecht, LLP, No. 2:18-CV-05399-AB, 2019 WL 1957950 (E.D. Pa. May 2,2019), aff'd, 792 F. App'x 195 (3d Cir. 2019). Doc. 5 at21. This case does not support Kholod's claim for relief;it involved an attorney's attempt to recover a contingencyfee from an out of state attorney. L. Offs. of Bruce J.Chasan, LLC, 2019 WL 1957950 at *1–2. We wereunable to find another case that fit the citation providedby Kholod.4. Kholod states that in “Brown v. Wells Fargo, 2020” “[t]hecourt ruled that the bank must compensate the client$8,000 for wrongful withdrawals from their account.”Doc. 1-2 at 5. Construed liberally, this may be referringto Brown v. Wells Fargo Bank, N.A., No. C19-3041-LTS, 2020 U.S. Dist. LEXIS 3614 (N.D. Iowa Jan.7, 2020), or Brown v. Wells Fargo Bank N.A., No.01-18-01002-CV, 2020 Tex. App. LEXIS 7106 (Tex.App. Sep. 1, 2020). However, these cases are factuallyunrelated to Kholod's claim. The Northern District ofIowa Brown case concerns alleged violations of theFair Credit Reporting Act (FCRA), Fair Debt CollectionPractices Act (FDCPA), and Iowa Debt CollectionPractices Act (IDCPA) regarding a failure to make therequired payments under a note and mortgage. Brown v.Wells Fargo Bank, N.A., No. C19-3041-LTS, 2020 U.S.Dist. LEXIS 3614, at *1. The Court of Appeals of TexasBrown case concerns a motion to dismiss the Plaintiff'sappeal of a final judgment dismissing the plaintiff'sgarnishment suit. Brown v. Wells Fargo Bank N.A., No.01-18-01002-CV, 2020 Tex. App. LEXIS 7106, at *1.Neither of these cases include any legal analysis that isuseful for Kholod's claim.*7 5. According to Kholod, in “Smith v. First NationalBank, 2017” “[t]he court ordered the bank to return$5,000 to the client after evidence showed that thewithdrawal was made without the client's authorization.”Doc. 1-2 at 4. Though the year is different, the closestmatch to this case is Smith v. First Nat'l Bank, 837F.2d 1575 (11th Cir. 1988). This case is not relevantto Kholod's claim; the case is an appeal of summaryjudgment in favor of the Defendant concerning allegedviolations of the Fair Credit Reporting Act (FCRA).Smith, 837 F.2d at 1576–77.6. Kholod states that in “Jones v. PNC Bank, 2018” “thecourt ordered the bank to return $3,750 for unauthorizedtransactions made by third parties.” Doc. 1-2 at 4.We found two cases that appear to match the namedparties, but neither were published in the year Kholodprovides: Jones v. PNC Bank, N.A., No. 10-CV-01077-LHK, 2010 U.S. Dist. LEXIS 92866 (N.D. Cal. Aug.20, 2010), and Jones v. PNC Bank, N.A., 630 F. Supp.3d 959 (N.D. Ill. 2022). These cases do not appearfactually related to Kholod's claims. The NorthernDistrict of California Jones case involved a dismissal ofthe Plaintiff's allegations of violations of the Real EstateSettlement Procedures Act (RESPA) due to failure tostate a claim. Jones, No. 10-CV-01077-LHK, 2010 U.S.Dist. LEXIS 92866 at *1–2. The Northern District ofIllinois Jones case granted the Defendant's motion todismiss the Plaintiff's allegations of breach of contractregarding Guaranteed Asset Protection (GAP) as partof a retail installment contract (RIC) for a used carpurchase. Jones, 630 F. Supp. 3d at 961. There is nolegal analysis in either case that would be supportive ofKholod's claim for relief.7. Per Kholod, in “Miller v. Citizens Bank, 2019” “[t]hecourt found the bank liable for unauthorized withdrawalsamounting to $2,600 and ordered it to compensate theclient for all losses.” Doc. 1-2 at 4. We found one casematching the named parties, but not the year: Millerv. Citizens Bank, N.A., No. 23-10563, 2025 U.S. Dist.LEXIS 93011 (E.D. Mich. May 15, 2025), but as this
VICTOR KHOLOD, Plaintiff, v. NATIONSTAR MORTGAGE LLC,..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.6opinion was published after Kholod filed his complaint,we assume this is not the case to which he refers. Wefound no other cases fitting Kholod's description.8. Kholod also cites “Davis v. TD Bank, 2021” in which,according to Kholod, “[t]he court ordered the bank to pay$4,200 to the client, citing the bank's failure to preventfraudulent actions.” Doc. 1-2 at 5. The closest possiblematch is Davis v. TD Bank, N.A. (In re Davis), 447 B.R.738 (Bankr. D. Md. 2011). Again, the case name matchesbut the year does not. Furthermore, the subject matteris unrelated to Kholod's complaint; Davis concerns anopposition to a debtors' motion and plan for repayingcreditors in a bankruptcy proceeding. Davis, 447 B.R.at 740–41. There are a number of other cases wherethe named parties are variations of TD Bank USA, N.A.v. Davis throughout the country, none of which werepublished in the year Kholod cites and none of whichappear to be related to Kholod's claim.We recognize that as technology advances, so does the legalfield. Generative Artificial Intelligence (“GAI”) tools, suchas ChatGPT, are now in common use. The use of GAI,however, has significant pitfalls such as “hallucinations”—instances where the GAI tool creates fictitious cases thatinclude fabricated parties, facts, and judges. This creates anumber of practical concerns for the court, including the timespent researching inaccurate or nonexistent caselaw, and forparties, including the risk of presenting inaccurate pleadingsto the court.*8 The use of fictitious cases may lead to a violation of Rule11 of the Federal Rules of Civil Procedure. Though pro selitigants are held to a “less stringent standard” than lawyers,the Third Circuit has made clear that “pro se litigants ...cannot flout procedural rules — they must abide by thesame rules that apply to all other litigants.” Mala, 704F.3d at 244-45. We, therefore, remind Kholod that when“presenting to the court a pleading, written motion, or otherpaper,” Rule 11 requires that an attorney or self-representedparty “certifies that to the best of the person's knowledge,information, and belief, formed after an inquiry reasonableunder the circumstances ... the claims, defenses, and otherlegal contentions are warranted by existing law[.]” Fed. R.Civ. P. 11(b). Thus, it is Kholod's duty to ensure that the citedcases are real and accurate. He thus may not be able to relysolely on the information provided by a GAI tool.We, therefore, strongly caution Kholod about the use of GAIand warn Kholod that any use of fictitious caselaw goingforward may lead to sanctions under Rule 11.VI. Leave to Amend.Before dismissing a complaint for failure to state a claim uponwhich relief may be granted, a court must grant the plaintiffleave to amend, unless amendment would be inequitable orfutile. See Phillips v. Cnty. of Allegheny, 515 F.3d 224, 245(3d Cir. 2008) (citing Grayson v. Mayview State Hospital, 293F.3d 103, 114 (3d Cir. 2002)). Here, because of the liberalamendment standard, we recommend granting Kholod anopportunity to file an amended complaint.If Kholod decides to file an amended complaint, we note thatany amended complaint must be titled as a second amendedcomplaint and must contain the docket number of this case.Fed. R. Civ. P. 10(a). “[A]ny amended complaint must becomplete in all respects.” Young v. Keohane, 809 F. Supp.1185, 1198 (M.D. Pa. 1992). “It must be a new pleading whichstands by itself as an adequate complaint without referenceto the complaint already filed.” Id. “In general, an amendedpleading supersedes the original pleading and renders theoriginal pleading a nullity.” Garrett v. Wexford Health, 938F.3d 69, 82 (3d Cir. 2019). “Thus, the most recently filedamended complaint becomes the operative pleading.” Id. Inother words, if an amended complaint is filed, the originalcomplaint will have no role in the future litigation of this case.Any amended complaint must also comply with the pleadingrequirements of the Federal Rules of Civil Procedure,including the requirements that the complaint contain “a shortand plain statement of the grounds for the court's jurisdiction,”“a short and plain statement of the claim,” and “a demandfor the relief sought.” Fed. R. Civ. P. 8(a)(1)–(3). Further,“[e]ach allegation must be simple, concise, and direct.” Fed.R. Civ. P. 8(d)(1). “A party must state its claims or defenses innumbered paragraphs, each limited as far as practicable to asingle set of circumstances.” Fed. R. Civ. P. 10(b). And to theextent it would promote clarity to do so, “each claim foundedon a separate transaction or occurrence ... must be stated in aseparate count.” Id.“Under Federal Rule of Civil Procedure 8(a)(2), a pleadingmust contain a ‘short and plain statement of the claim showingthat the pleader is entitled to relief.’ ” Ashcroft v. Iqbal,556 U.S. 662, 677–78 (2009) (quoting Fed. R. Civ. P. 8(a)(2)). The statement required by Rule 8(a)(2) must give thedefendant fair notice of the nature of the plaintiff's claim and
VICTOR KHOLOD, Plaintiff, v. NATIONSTAR MORTGAGE LLC,..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.7of the grounds upon which the claim rests. Erickson v. Pardus,551 U.S. 89, 93 (2007). Detailed factual allegations are notrequired, but more is required than “labels,” “conclusions,” or“a formulaic recitation of the elements of a cause of action.”Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).“In other words, a complaint must do more than allege theplaintiff's entitlement to relief.” Fowler v. UPMC Shadyside,578 F.3d 203, 211 (3d Cir. 2009). “A complaint has to ‘show’such an entitlement with its facts.” Id.*9 “Fundamentally, Rule 8 requires that a complaint providefair notice of ‘what the ... claim is and the grounds upon whichit rests.’ ” Garrett, 938 F.3d at 92 (quoting Erickson, 551U.S. at 93). Kholod should not assume that the court and thedefendants are aware of the events at issue; rather, he shoulddraft any amended complaint “as if [he] were telling a storyto people who knew nothing about [his] situation.” Wrhel v.United States, No. 16-CV-758-JDP, 2017 WL 4352088, at*2 (W.D. Wis. Sept. 29, 2017). Kholod should also keep inmind the purpose of the amended complaint: to provide noticeof his claims and show entitlement to relief through factualallegations. An amended complaint is not the appropriateplace to present detailed legal arguments or citations toauthority. Making legal arguments is a step that comes afterthe pleadings. Should a legal argument become necessary,such as filing a brief in support of or opposition to a motion,Kholod may present his arguments in those documents at thattime.VII. Recommendations.For the foregoing reasons, we recommend that the courtgrant the defendants' motions to dismiss (docs. 4, 9), anddismiss Kholod's complaint (doc. 1-2) without prejudice andwith leave to amend. If Kholod does not file an amendedcomplaint, we further recommend that the court remand hisremaining state law claims back to the Magisterial DistrictCourt 43-4-02, in Monroe County, Pennsylvania.The Parties are further placed on notice that pursuant to LocalRule 72.3:Any party may object to amagistrate judge's proposed findings,recommendations or report addressinga motion or matter described in 28U.S.C. § 636 (b)(1)(B) or making arecommendation for the dispositionof a prisoner case or a habeascorpus petition within fourteen (14)days after being served with acopy thereof. Such party shall filewith the clerk of court, and serveon the magistrate judge and allparties, written objections which shallspecifically identify the portions of theproposed findings, recommendationsor report to which objection is madeand the basis for such objections.The briefing requirements set forth inLocal Rule 72.2 shall apply. A judgeshall make a de novo determinationof those portions of the reportor specified proposed findings orrecommendations to which objectionis made and may accept, reject, ormodify, in whole or in part, thefindings or recommendations madeby the magistrate judge. The judge,however, need conduct a new hearingonly in his or her discretion orwhere required by law, and mayconsider the record developed beforethe magistrate judge, making his orher own determination on the basis ofthat record. The judge may also receivefurther evidence, recall witnesses orrecommit the matter to the magistratejudge with instructions.Submitted this 22nd day of July 2025.All CitationsSlip Copy, 2025 WL 2327933
VICTOR KHOLOD, Plaintiff, v. NATIONSTAR MORTGAGE LLC,..., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.8Footnotes1To the extent the court finds that Kholod does have standing in his claims against Wells Fargo, we alsoconclude that his EFTA claims against Wells Fargo fail to state a claim because the EFTA only governsconsumer accounts.2Nationstar additionally states it is a mortgage loan servicer. Doc. 10 at 8. “[A] court reviewing a motion todismiss must examine the plausibility of ‘allegations in the complaint.’ ” Doe v. Princeton Univ., 30 F.4th335, 345 (3d Cir. 2022) (quoting Twombly, 550 U.S. at 555). “Factual claims and assertions raised by adefendant are not part of that scrutiny.” Id. Thus, we will not consider this additional factual contention raisedby Nationstar.3The case was removed on the basis of federal question jurisdiction and supplemental jurisdiction over thestate law claims. Doc. 1 at 2. We note that diversity jurisdiction does not exist here either. Diversity jurisdictionapplies when the plaintiff and defendant are from different states and the amount in controversy is morethan $75,000. 28 U.S.C. § 1332(a). Here, not only has no party asserted diversity of citizenship, but theamount in controversy is not alleged to be greater than $75,000. Kholod is seeking the return of the total of$11,659.88 that was withdrawn and compensation for any “losses and expenses” incurred by Kholod basedon defendants' actions. Doc. 1-2 at 5. We see no indication that the losses and expenses incurred by Kholodcombined with the $11,659.88 would plausibly exceed more than $75,000.We also note that Wells Fargo argues that Kholod's UCC claim is preempted by the EFTA. Doc. 5 at 16.However, “[t]he existence or expectation of a federal defense is insufficient to confer federal jurisdiction.”New Jersey Carpenters & the Trs. Thereof v. Tishman Const. Corp. of New Jersey, 760 F.3d 297, 302 (3dCir. 2014) (citing In re U.S. Healthcare, Inc., 193 F.3d 151, 160 (3d Cir. 1999)).End of Document© 2025 Thomson Reuters. No claim to original U.S. Government Works.
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