Alabi v. Homecomings Financial Network, et al
Filing
74
MEMORANDUM Opinion and Order Signed by the Honorable Robert M. Dow, Jr on 9/21/2011. Notices Mailed by Judge's Staff (tbk, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
OLATUNJI ALABI,
Plaintiff,
v.
HOMECOMINGS FINANCIAL LLC, and
MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC.
Defendants.
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Case No.: 09-cv-4757
Judge Robert M. Dow, Jr.
MEMORANDUM OPINION AND ORDER
This matter is before the Court on a motion to dismiss [67] filed by Defendants
Homecomings Financial LLC and Mortgage Electronic Registration Systems, Inc.
For the
reasons set forth below, the Court grants Defendants’ motion to dismiss [67].
I.
Background1
Plaintiff Olatunji Alabi immigrated to this country from Nigeria in 1999, along with his
wife and four children. (Am. Compl. ¶ 14). In August 2003, he purchased a home on Chicago’s
south side, paying approximately $70,500. (Id. ¶ 18). Mr. Alabi financed this purchase with a
mortgage loan assumed by Defendant Homecomings Financial LLC and serviced by Defendant
Mortgage Electronic Registration Systems, Inc. (“MERS”). (Id. ¶¶ 19-20, 26-27). Shortly
thereafter, Mr. Alabi’s wife was diagnosed with cancer. She died two months later. (Id. ¶ 22).
After his loss, Mr. Alabi struggled to earn enough money to make his mortgage payments while
taking care of his children alone. (Id. ¶¶ 23-25).
1
For purposes of Defendants’ motion, the Court assumes as true all well-pleaded allegations set forth in
Plaintiff’s amended complaint. See, e.g., Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618
(7th Cir. 2007).
1
On July 26, 2004, Defendants filed a foreclosure action against him. (Id. ¶ 26). A few
months later, Defendants presented Mr. Alabi with a proposed repayment agreement in lieu of
foreclosure—an agreement that Plaintiff alleges contained false and inaccurate statements as to
the amount owed. This agreement required acceptance in the form of a $1,000 payment to be
received by Defendants. (Id. ¶¶ 30-31, Ex. B). Mr. Alabi transferred the $1,000 payment, but
alleges that Defendants did not credit that payment or return the money and instead continued
with the foreclosure action. (Id. ¶¶ 32-37).
On March 4, 2005, less than a year after the foreclosure action was filed and shortly after
he learned that his thirteen year-old daughter was seriously ill with a brain tumor, Mr. Alabi filed
a voluntary Chapter 13 petition for bankruptcy in the United States Bankruptcy Court for the
Northern District of Illinois. The bankruptcy was confirmed, and on August 22, 2005, an order
was entered which directed Mr. Alabi to make monthly payments to Defendants in the amount of
$662.97. (Id. ¶¶ 40, 42). Despite his difficult circumstances, Mr. Alabi made payments to
Defendants and his other creditors pursuant to his Chapter 13 plan. Each payment was made to
Defendants by certified money order. Mr. Alabi’s amended complaint alleges that through his
September 2006 payments, he either was current on his mortgage payments pursuant to the
August 22, 2005 order, or nearly so. (Id. ¶¶ 43-44).
On October 27, 2006, Defendants filed a motion to modify the automatic stay to allow
foreclosure proceedings to move forward. Defendants’ motion asserted that Mr. Alabi’s postpetition mortgage payments were $1,195.59 per month (as opposed to $662.97), that Mr. Alabi
was in default with respect to the August 2005 order, that the post-petition payments through
November 2006 were delinquent by $9,187.18 (including attorneys fees and costs), and that Mr.
2
Alabi had no equity in his home for the benefit of unsecured creditors. (Id. ¶¶ 46-49, Ex. E).
Attached to the motion was a statement that estimated the value of the property to be $95,000.00.
In the months surrounding the filing of the stay motion, Plaintiff alleges that Defendants
made a series of misrepresentations. First, in a letter dated September 5, 2006, Defendants wrote
to Mr. Alabi maintaining that his monthly mortgage payment had been reset such that he would
now owe a monthly “escrow” payment of $20,060,201.2 (Id. ¶ 45, Ex. D). Then on December 4,
2006, three days before the hearing on the stay motion, Defendants’ attorneys sent Mr. Alabi a
letter setting forth another recalculation of his alleged default. The letter asserted that Mr.
Alabi’s monthly mortgage payments for the period May through September 2006 were
$1,121.63, and increased to $1,195.59 only in October 2006. (Id. ¶¶ 50-51, Ex. G). According to
Plaintiff’s amended complaint, this series of communications—each of which contained a new
miscalculation of Mr. Alabi’s mortgage payments—was highly misleading and left Mr. Alabi
concerned about whether and how he could possibly keep current on his mortgage. (Id. ¶¶ 44, 82,
85-88).
The bankruptcy court held a hearing on December 7, 2006.3 Mr. Alabi appeared in court
pro se, while Defendants were represented by counsel. Defendants’ attorney represented that,
since filing the stay motion, she had recalculated the default due and claimed that Mr. Alabi
owed $3,382.21 (not including fees and costs), not $9,351.70. The recalculated amount took into
account Mr. Alabi’s contention regarding what his monthly payment was.
Mr. Alabi still
contested the new calculation, and the bankruptcy judge directed the parties to discuss the issue
outside the courtroom. (Id. ¶ 52, Ex. H at 2-3, 5). There, counsel presented Mr. Alabi with some
2
Mr. Alabi does not allege that he believed the accuracy of that letter, which contained an error, or
incurred damages proximately cause by that letter, or that the letter influenced the bankruptcy court’s
decision to lift the automatic stay.
3
Mr. Alabi attached a transcript of the December 7 hearing to his amended complaint.
3
handwritten calculations, insisting that Mr. Alabi was delinquent by approximately $3,000.00.
Upon return to the courtroom, Defendants’ counsel admitted to having “kind of lost [her]
temper” with the pro se debtor because he was not understanding what she meant when she told
him that she had recalculated the default based on Plaintiff’s own figures and that there still was
a default. (Id. ¶ 53, Ex. H at 3). After additional back-and-forth, Mr. Alabi and Defendants’
counsel again left the court to attempt to reconcile Mr. Alabi’s payments. On their return to the
courtroom, the parties still were unable to reach a consensus on how much was due. Defendants’
counsel continued to insist that Mr. Alabi had missed two months’ payments and argued that he
also missed two additional months because his checks had been returned NSF – for “not
sufficient funds.” (Id. ¶ 54, Ex. H at 8-9). Mr. Alabi maintained that the checks had not been
returned NSF (id. ¶ 55, Ex. H at 9), but he was unable to present proof of payment in open court.
Mr. Alabi maintains that his checks could not have been returned NSF because they were
certified money orders. (Id. ¶ 55, Ex. J).
At that point, the bankruptcy judge questioned Mr. Alabi on what payments he had
made.4 Although Mr. Alabi continued to express his frustration that Defendants were unable to
determine how much was owed, he eventually admitted that, at the time Defendants filed the stay
motion in October, he was “down two months” and that at the time of the hearing, he had not
paid the October, November, or December payments. Although he reminded the court that he
had until December 15 to pay the December payment, he admitted that he was “two months
short, yes.” According to the transcript, Mr. Alabi notified the bankruptcy judge that he was
prepared to tender the October payment in open court, but did not have money to make the
November or December payments.
4
It appears that the bankruptcy court accepted Mr. Alabi’s position that the two payments could not have
been “NSF” because the judge stated, “All right. But you agree that you are short October, November
and December, correct?”
4
Relying on Mr. Alabi’s assertion that he was, at a minimum, “two months short,” the
bankruptcy judge modified the stay to allow Defendants’ foreclosure action to proceed. (Id. ¶ 56,
Ex. H at 10). According to the amended complaint, approximately two to three weeks after the
hearing, Mr. Alabi sent Defendants $2,000 sufficient to cover all three months, but this payment
was rejected.5 (Id. ¶¶ 49, 71-72). In January 2007, Mr. Alabi filed a motion to vacate the order
modifying the automatic stay, which the court denied on January 25. A foreclosure “sale” was
held on February 2, 2007, with the Judicial Sales Corporation selling Mr. Alabi’s house to
Defendant MERS for $84,183.58. (Id. ¶ 59). Mr. Alabi and his family were evicted, and their
belongings were removed from the home at the direction of Defendants on August 30, 2007. (Id.
¶¶ 60-61). Public records reveal that Mr. Alabi’s house was purchased approximately 10 months
later for $175,000. (Id. ¶ 62).
On August 4, 2009, Plaintiff filed a pro se complaint before this Court. On its own
motion, the Court appointed counsel for Plaintiff on February 11, 2010. Counsel withdrew on
March 9, 2010. On March 11, 2010, the Court appointed a second attorney for Plaintiff, but
Plaintiff’s second counsel withdrew due to a conflict in November 2010. The Court appointed a
third counsel on November 10, and on January 12, 2011, Plaintiff through counsel filed an
amended complaint against Defendants for relief under Rule 60(d) and for violations of the
Illinois Consumer Fraud Act, 815 ILCS 505/1 et seq. (“CFA”) and the Illinois Uniform
Deceptive Trade Practices Act, 815 ILCS 510/1 et seq. (“DTPA”).6
On March 8, 2011,
Defendants moved to dismiss all claims asserted in the amended complaint.
5
The money order is dated December 23, 2006. Plaintiff’s payments were due by the 15th of each
month.
6
The Court recognizes that pro bono appointed counsel have dedicated hundreds of hours to assisting
Mr. Alabi to develop and pursue this case and thanks counsel for their excellent service, both to their
client and to the Court.
5
II.
Legal Standard for Rule 12(b)(6) Motions to Dismiss
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the
sufficiency of the complaint, not the merits of the case. See Gibson v. City of Chicago, 910 F.2d
1510, 1520 (7th Cir. 1990). To survive a Rule 12(b)(6) motion to dismiss, the complaint first
must comply with Rule 8(a) by providing “a short and plain statement of the claim showing that
the pleader is entitled to relief” (Fed. R. Civ. P. 8(a)(2)), such that the defendant is given “fair
notice of what the * * * claim is and the grounds upon which it rests.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
Second, the factual allegations in the complaint must be sufficient to raise the possibility
of relief above the “speculative level,” assuming that all of the allegations in the complaint are
true. E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting
Twombly, 550 U.S. at 555, 569 n.14). “[O]nce a claim has been stated adequately, it may be
supported by showing any set of facts consistent with the allegations in the complaint.”
Twombly, 550 U.S. at 562. The Court accepts as true all of the well-pleaded facts alleged by the
plaintiff and all reasonable inferences that can be drawn therefrom. See Barnes v. Briley, 420
F.3d 673, 677 (7th Cir. 2005).
III.
Analysis
A.
Rule 60(d)
Approximately two and a half years after the bankruptcy court modified the automatic
stay that allowed Defendants to proceed with foreclosure, Plaintiff filed a complaint in this
Court. In his lawsuit, Plaintiff seeks to vacate the order of the bankruptcy court under Federal
Rule of Civil Procedure 60(d) because, according to Plaintiff, Defendants committed fraud upon
the bankruptcy court.
6
The normal procedure for attacking a judgment is by motion in the court that rendered the
judgment. 11 Charles Alan Wright et al., Federal Practice and Procedure § 2868 at 404 (2d ed.
1995). However, Rule 60(d)(1) allows a court to “entertain an independent action to relieve a
party from a judgment, order, or proceeding,” while Rule 60(d)(3) permits a judgment to be set
aside at any time based on a fraud on the court. Rule 60(d) is limited to injustices that are
sufficiently gross to permit departure from the usual rules. United States v. Beggerly, 524 U.S.
38, 46 (1998) (quoting Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 244
(1944)). An independent action is limited to preventing a grave miscarriage of justice. Beggerly,
524 U.S. at 47; Porter v. Chicago Sch. Reform Bd. of Tr., 187 F.R.D. 563, 566 (N.D. Ill. 1999);
see also Peach v. Laborers’ Intern. Union of North America, 2010 WL 502767, at *3 (S.D. Ill.
2010); Hasham v. California State Bd. of Equalization, 2008 WL 4091002, at *4 (N.D. Ill.
2008). It does not apply to failure of a party to furnish accurate information that could be a basis
for a Rule 60(b)(3) motion. Beggerly, 524 U.S. at 46. Where an independent action for relief
from a judgment is brought in a court other than the one that rendered judgment, independent
grounds of subject matter jurisdiction are needed. See Federal Practice and Procedure, § 2868
at 403-04; see also Block v. Block, 196 F.2d 930, 932 (7th Cir. 1952).
Additionally, “fraud on the court” is different from the fraud covered by Rule 60(b)(3).7
“The term [‘fraud on the court’] refers to conduct more egregious than anything here, conduct
7
Relief from judgment under Rule 60(b) is an extraordinary remedy and is granted only in exceptional
circumstances. See Del Carmen v. Emerson Electric Co., 908 F.2d 158, 161 (7th Cir. 1990). Rule 60(b)
motions exist to allow courts to overturn decisions where “special circumstances” justify an
“extraordinary remedy.” Cash v. Illinois Div. of Mental Health, 209 F.3d 695, 698 (7th Cir. 2000). Rule
60(b) motions premised upon fraud must be brought “no more than a year after the entry of the judgment
or order or date of the proceeding.” Fed. R. Civ. P. 60(c)(1). This time limit is jurisdictional and cannot
be extended. Arrieta v. Battaglia, 461 F.3d 861, 864 (7th Cir. 2006). Plaintiff’s lawsuit thus comes too
late to seek relief under Rule 60(b), because the judgment or order that Plaintiff seeks to vacate was
entered in December 2006, and Plaintiff did not file this lawsuit until August 2009.
7
that might be thought to corrupt the judicial process itself, as where a party bribes a judge or
inserts bogus documents into the record.” Oxxford Clothes XX, Inc. v. Expeditors Int'l of Wash.,
Inc., 127 F.3d 574, 578 (7th Cir. 1997); see also Boyer v. GT Acquisition LLC, 2007 WL
2316520, at *4-5 (N.D. Ind. Aug. 9, 2007). Fraud on the court also has been described as fraud
“directed to the judicial machinery itself, and which involves circumstances where the impartial
functions of the court have been directed corrupted.” In the Matter of Whitney-Forbes, Inc., 770
F.2d 692, 698 (7th Cir. 1985) (citing Bulloch v. United States, 721 F.2d 713, 718 (10th Cir.
1983), and noting that alleged conduct would have to rise to the level of “bribery of a judge” or
“improper influence with the court” to constitute fraud on the court) (internal citations omitted).
In Oxxford, the Seventh Circuit held that the defendant did not commit fraud on the court
when it misrepresented that it had valid liens. As further stated in Oxxford: “A lie uttered in
court is not a fraud on the liar’s opponent if the opponent knows it’s a lie yet fails to point this
out to the court. If the court through irremediable obtuseness refuses to disregard the lie, the
party has * * * a remedy by way of appeal. Otherwise ‘fraud on the court’ would become an
open sesame to collateral attacks, unlimited as to the time within which they can be made by
virtue of the express provision in Rule 60(b) on this matter, on civil judgments.” 127 F.3d at
578. The heightened standard applied in Rule 60(d) situations reflects the balancing of equitable
considerations with the finality of judgments:
equitable considerations often prevail over
considerations of finality of judgments in granting relief from a judgment within one year; the
finality of judgment prevails thereafter.
See Great Coastal Express, Inc., v. Int’l Bd. of
Teamsters, 675 F.2d 1349, 1356 (4th Cir. 1982).
Here, Mr. Alabi clearly alleges errors in calculating the post-petition delinquency. He
further alleges that he did not owe the amounts purported to be due in the motion presented to the
8
bankruptcy court and that a pre-petition payment he made to Defendants was not credited.
However, in the transcript attached to the amended complaint, the bankruptcy court credited his
assertions but still found that he owed more money than he was able to pay on the date of the
hearing. First, although Defendants’ counsel acknowledged that there was “an ongoing dispute
about the correct amount of the payment,” she conceded that “for the purposes of arguing it
today, I was calculating the default based on the $662.97.” The amount of $662.97 was the
amount Plaintiff that maintained he owed each month. Although defense counsel continued to
argue that Mr. Alabi owed more than two months, the transcript demonstrates that the
bankruptcy judge rested her decision on Mr. Alabi’s representation that he was short at least one
month (not counting December) in deciding to lift the stay. Mr. Alabi admitted that (1) he had
not made the October, November, or December 2006 payments, (2) at the time of the hearing he
had the funds available to pay only the amount due for the October payment, and (3) he hoped to
have funds to pay the December payment by December 15. The bankruptcy judge clearly stated,
“Two months are due, and December is due,” to which Mr. Alabi replied, “Yes.” She then
modified the stay.
Thus, notwithstanding Defendants’ alleged errors, the bankruptcy judge
lifted the stay based on the facts that Plaintiff believed (and acknowledged) to be accurate, not
based on the alleged errors.8
8
In his response brief, Plaintiff relies upon Lonsdorf v. Seefeldt, 47 F.3d 893, 897 (7th Cir. 1995), to
support his claim under Rule 60 for fraud on the court. But Lonsdorf addressed the requirements to
obtain relief from a final judgment under Rule 60(b)(3), which governs a motion for relief from judgment
filed within one year from the entry of the judgment based upon fraud (intrinsic or extrinsic),
misrepresentation, or misconduct by the opposing party, not Rule 60(d). See United States v. Beggerly,
524 U.S. 38, 46 (1998) (explaining the heightened standard that applies to independent actions to set aside
a judgment for fraud on the court over the standard applicable to Rule 60 motions brought within one
year: “Independent actions must, if Rule 60(b) is to be interpreted as a coherent whole, be reserved for
those cases of ‘injustice which, in certain instances, are deemed sufficiently gross to demand a departure
from rigid adherence to the doctrine of res judicata.” Having no need to address the issue, the court did
not find that the conduct constituted fraud on the court and did not address the requirements to state a
claim for an independent action to set aside a judgment for fraud on the court. Further, unlike the facts
disclosed in Lonsdorf, the facts alleged in the amended complaint and set forth in the December 7
9
Although the circumstances surrounding the foreclosure action and the result reached by
the bankruptcy court are extremely unfortunate in a multitude of ways, the allegations do not rise
to the level of “fraud on the court” such that the bankruptcy court’s decision could be vacated or
subject to collateral attack. That being said, the manner in which Defendants handled Mr.
Alabi’s mortgage, and the attendant circumstances, leaves much to be desired and casts the
mortgage industry in a poor light, even given the “harsh” reality of mortgage foreclosure actions.
See Defs. Reply at 7.
B.
State law claims9
In addition to seeking relief by way of Rule 60(d), Mr. Alabi also contends that
Defendants violated the Illinois Consumer Fraud Act (“ICFA”) and the Illinois Uniform
Deceptive Trade Practices Act (“IDTPA”). Counts II and III seek redress for three allegedly
transcript show that any alleged fraud did not prevent plaintiff from fully and fairly presenting his case
before Judge Sonderby.
9
The Court’s analysis of Plaintiffs’ state law claims applies equally to both Defendants. However, the
Court also notes that Plaintiff’s state law claims against Defendant MERS are time-barred. Section 10a(e)
of the ICFA establishes a three-year statute of limitations, and the three-year limitations period also
applies to claims under the Uniform Deceptive Trade Practices Act. See McCready v. Illinois Secretary
of State, 888 N.E.2d 702, 709-10 (Ill. App. Ct. 3d Dist. 2008). Mr. Alabi did not file any action against
MERS until he filed his amended complaint on January 12, 2011, at which time he added MERS as a
defendant. He alleges that the actionable conduct occurred on and prior to December 7, 2006, and that he
was evicted on August 30, 2007. More than three years passed between those events and the addition of
MERS as a defendant, and the state law claims against MERS do not relate back to his original, timelyfiled complaint. Relation back is not appropriate in this case because failing to name MERS—and instead
naming Accredited Home Lenders—does not constitute “a mistake concerning the party’s identity,” as
required by Federal Rule of Civil Procedure 15(c). Plaintiff asserts that when he brought his suit against
Homecomings, MERS should have suspected a mistake had been made, but Plaintiff does not allege how
MERS knew (or should have known) of this action. In Krupski v. Costa Crociere S.p.A., 130 S. Ct 2485
(2010), cited by Plaintiff, the Supreme Court held that the amended pleading related back because the
lower court found that the newly added defendant had constructive notice of the original complaint. 130
S. Ct. at 2492. Here, Plaintiff does not present any facts that MERS had any notice of this action prior to
service of the amended complaint. Furthermore, even if Plaintiff could demonstrate the absence of
prejudice to MERS, this alone does not permit an amendment. The absence of prejudice becomes an
issue only after the plaintiff shows that the new party knew or should have known that the plaintiff, but
for a mistake, would have sued it in the prior complaint. See Joseph v. Elan Motorsports Techs. Racing
Corp., 638 F.3d 555, 559-560 (7th Cir. 2011).
10
false statements made by Defendants in a letter to Mr. Alabi dated December 4, 2006, and
another false statement made in a letter to Mr. Alabi dated September 5, 2006. Defendants
contend, among other things, that the bankruptcy code preempts Mr. Alabi’s state law fraud
claims. 10
A state law claim will be preempted if it “arises under” the bankruptcy code, or if it is
related to a case under Title 11.11 See, e.g., In re Lenior, 231 B.R. 662, 675 (Bankr. N.D. Ill.
1999) (rejecting state law unjust enrichment counts premised on allegedly inflated proofs of
claim; noting that the bankruptcy code has “its own comprehensive scheme to guard against
fraud and remedy it”); Cox v. Zale Delaware, Inc., 1998 WL 397841, at *5 (N.D. Ill. 1998) (state
law consumer fraud counts were preempted by the bankruptcy code, whose “expansive reach * *
* preempts virtually all claims relating to alleged misconduct in the bankruptcy courts”).
Plaintiff contends that his ICFA and IDTPA claims are based only on statements made outside of
10
Many of the cases discussing the interplay between the bankruptcy code and consumer protection
statutes deal with the Fair Debt Collection Practices Act. When two federal statutes, such as the FDCPA
and the bankruptcy code, intersect, “[p]reemption is not the applicable doctrine under these
circumstances, since the question whether one federal law takes precedence over another does not
implicate the Supremacy Clause.” Coker v. Trans World Airlines, Inc., 165 F.3d 579, 583 (7th Cir. 1999).
But here, when the conflict is between federal and state law, preemption may be appropriate. In any
event, whether the Court uses the term preemption or preclusion, the analysis comes down to whether the
bankruptcy code provides sufficient protection for Plaintiff or whether resort to state law remedies is
appropriate to protect his interests.
11
Typically, “[d]ebtors in bankruptcy proceedings do not need protection from abusive collection
methods that are covered under [statutes governing debt collection practices] because the claims process
is highly regulated and court controlled.” B–Real LLC v. Rogers, 405 B.R. 428, 432 (M.D. La. 2009)
(footnote omitted) (internal quotation marks omitted). While the purpose of consumer protection statutes
is to protect unsophisticated consumers from unscrupulous debt collectors, that purpose is not implicated
when a debtor is instead protected by the court system and its officers. Id. “It is beyond cavil that past
bankruptcy practice, as well as explicit bankruptcy code provisions, have left the remedy for fraudulent
and otherwise defective proofs of claim to the bankruptcy code.” Baldwin v. McCalla, Raymer, Padrick,
Cobb, Nichols, & Clark, 1999 WL 284788, at *4 (N.D. Ill. Apr. 26, 1999); see also Walls v. Wells Fargo
Bank, N.A., 276 F.3d 502, 510 (9th Cir. 2002) (“Nothing in either [the bankruptcy code or the FDCPA]
persuades us that Congress intended to allow debtors to bypass the Code’s remedial scheme when it
enacted the FDCPA. While the FDCPA’s purpose is to avoid bankruptcy, if bankruptcy nevertheless
occurs, the debtor’s protection and remedy remain under the bankruptcy code.”).
11
the bankruptcy court and thus are not preempted by the bankruptcy code. However, Plaintiff’s
allegations in Counts II and III that Defendants misrepresented the equity in the property rely
primarily upon pleadings filed in the bankruptcy proceeding. Furthermore, the letter sent by
Defendants on December 4, 2006, clearly relates to the bankruptcy proceeding. The letter,
addressed to Mr. Alabi, states:
As you are aware, the pending Motion to Modify Stay was continued to
December 7, 2006. Enclosed please find a payment history reflecting payments
received by Homecomings Financial Networks from the commencement of this
case. If you have any proofs of payment that are not reflected on this enclosure,
please bring a copy of the front and back of the payment to court on December 7,
2006 so that I may investigate.
The letter then calculates the updated default and concludes by stating that the undersigned
“look[s] forward to resolving this motion at the hearing on December 7, 2006.” In essence,
Plaintiff is alleging that Defendants acted deceptively, or fraudulently, in misrepresenting (in the
December 2006 letter) the amount of Plaintiff’s payments, Plaintiff’s proofs of payment, the
principal amount, and the value of Plaintiff’s home—all issues that were before the bankruptcy
court when it decided whether Plaintiff was in default and resolved the motion to modify the
stay. The letter of December 2006 clearly was related to the bankruptcy and addressed issues
that were squarely before the bankruptcy court.
Furthermore, the bankruptcy court lifted the automatic stay based upon Plaintiff’s
acknowledgement of the default and not based on any representations by Defendants. In order to
state a cause of action under the ICFA, a plaintiff must plead actual damages proximately caused
by the deception. See Avery v. State Farm Mutual Automobile Insurance Co., 835 N.E.2d 801,
850 (Ill. 2005). In other words, a plaintiff must show that the conduct by which the defendant
intended to deceive the plaintiff proximately cause the plaintiff’s injury. See Connick v. Suzuki
Motor Co., 675 N.E.2d 584, 593 (Ill. 1996). Plaintiff cannot show that Defendants’ alleged
12
misrepresentations caused his injury, as the bankruptcy court explicitly accepted Plaintiff’s
representations, not Defendants’ alleged misrepresentations, in deciding to modify the stay.
The September 2006 letter is slightly different. Plaintiff maintains that the statement in
the letter that his monthly escrow installments increased to $20,060,201 constitutes a materially
false and deceptive statement. Because the letter does not reference the bankruptcy proceeding
and appears to be a form letter generated by Homecomings Financial to address the terms of
Plaintiff’s loan, its relationship to the bankruptcy proceeding is not as obvious. As with the
December letter, at the time of the September letter, Plaintiff’s mortgage payments were dictated
by the August 22, 2005 order entered by the bankruptcy court, which directed Mr. Alabi to make
monthly payments to Defendants in the amount of $662.97. Furthermore, in order to proceed
with foreclosure, Defendants would have had to go through the bankruptcy court. Thus, the
protections afforded by the Bankruptcy Code likely cover both letters, even if the September
letter does not evince as clear a nexus to the bankruptcy proceeding as the December letter.
However, at a minimum, Plaintiff’s ICFA claim based on the September letter fails
because the misrepresentation did not cause his injury. No reasonable person would have
believed, and Plaintiff does not allege that he actually believed, that the monthly escrow
payments increased to $20 million. Although a plaintiff need not show actual reliance (nor
diligence in ascertaining the accuracy of the misstatements) (see Harkala v. Wildwood Realty,
Inc., 558 N.E.2d 195, 199 (Ill. App. Ct. 1st Dist. 1990)), Mr. Alabi cannot show that this patent
error proximately caused his injuries.
Plaintiff maintains that “[o]bviously, Defendants’
misstatements to Mr. Alabi outside the hearing—as well as their repeated misstatements in the
hearing—played a critical role in these events.” But that argument simply is not persuasive.
Although Defendants’ alleged misstatements may have confused Plaintiff, they were not relied
13
upon by the bankruptcy court; rather, the court credited Plaintiff’s position, but still found that he
had defaulted on his obligations, which in turn caused his injury.12 While the letters may have
upset Plaintiff and caused him unnecessary stress, they did not proximately cause his injury—
Plaintiff’s failure to meet the minimum obligations required of him under the bankruptcy order
did, and Defendants’ refusal to give him any additional leeway (which they were not legally
required to do) led to Plaintiff’s injury.
Finally, to the extent that Plaintiff’s IDTPA claim is not preempted or precluded by the
Bankruptcy Code, Plaintiff’s IDTPA claim does not state a cause of action. “Although the
[IDTPA] was intended to protect business people, a consumer action is permissible if the
consumer can allege facts which would indicate that he is ‘likely to be damaged’ in the future.”
Greenberg v. United Airlines, 563 N.E.2d 1031, 1037 (Ill. App. Ct. 1st Dist. 1990). However,
the IDTPA allows only injunctive relief; money damages are not available. Kensington’s Wine v.
John Hart Fine Wine, 909 N.E.2d 848, 857-58 (Ill. App. Ct. 1st Dist. 2009); see also Glazweski
v. Coronet Insurance Co., 483 N.E.2d 1263, 1267-68 (Ill. 1985). Here, Mr. Alabi does not allege
any current conduct by Defendants that could cause him damages in the future. The alleged
misconduct occurred in 2006.
He does not allege that he has a current relationship with
Defendants. Instead, he alleges that his damages already have been incurred. Although he
maintains that he may suffer harm in the future based upon prior conduct, that allegation does
not support an action under the DTPA, given that only injunctive relief is available and there is
no conduct for the Court to enjoin. See Lawyers Title Insurance Corp. v. Dearborn Title Corp.,
904 F. Supp. 818, 822 (N.D. Ill. 1995) (no allegations that that the defendants’ acts, if not
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Plaintiff maintains that Defendants’ alleged misrepresentations caused him confusion and concern. To
the extent that Plaintiff maintains that he suffered emotional injuries as a result of Defendants’ conduct,
rather than the injury caused by defaulting on his obligations and losing his home, the ICFA allows
remedies only for economic injuries, not for emotional distress. See Morris v. Harvey Cycle & Camper,
Inc., 911 N.E.2d 1049, 1053 (Ill. App. Ct. 1st Dist. 2009).
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enjoined, will cause further injury to the plaintiff); Glazweski v. Coronet Insurance Co., 483
N.E.2d 1263 (1985) (plaintiffs failed to show that they are likely to be damaged by defendants’
conduct in the future).
IV.
Conclusion
For the reasons set forth above, the Court grants Defendant’s motion to dismiss [67] as to
all of Plaintiff’s claims and dismisses this case. In view of the discussion above, the Court
believes that it would be very difficult for Plaintiff to cure the deficiencies in his case through an
amended pleading. However, given that Plaintiff has only filed one prior complaint with the
assistance of counsel, Plaintiff is given 21 days to file an amended complaint if he (and counsel)
believe that such a complaint would not be futile. If no amended complaint is filed within that
time, the Court will enter judgment for Defendants and against Plaintiff.
Dated: September 21, 2011
____________________________________
Robert M. Dow, Jr.
United States District Judge
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