Heiman v. Bank of America, NA et al
MEMORANDUM Opinion and Order Signed by the Honorable Robert W. Gettleman on 11/21/2011. Mailed notice(vcf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
SCOTT HEIMAN, on behalf of himself and all
others similarly situated,
BANK OF AMERICA, N.A, and BAC HOME
LOANS SERVICING, LP, a wholly owned
subsidiary of Bank of America,
No. 11 C 4285
Judge Robert W. Gettleman
MEMORANDUM OPINION AND ORDER
Plaintiff Scott Heiman, on behalf of himself and all others similarly situated, has brought
a five count putative class action complaint against defendants Bank of America, N.A. and BAC
Home Loans Servicing, LP (jointly as “defendant”) alleging fraud or intentional
misrepresentation (Count I); constructive fraud and/or negligent misrepresentation (Count II);
unjust enrichment (Count III), violation of the Fair Debt Collection Practices Act (“FDCPA”)
(Count IV);1 and violation of the Illinois Consumer Fraud Act (Count V). Defendant has moved
to dismiss under Fed. R. Civ. P. 12(b)(6) and 9(b), for failure to state a claim upon which relief
can be granted, and failure to plead fraud with particularity . For the reasons that follow, the
motion is granted in part and denied in part.
According to the complaint, defendant offers two loan modification programs: (1) the
Home Affordable Modification Program (“HAMP”) which applies to mortgages serviced by
In response to defendant’s motion to dismiss, plaintiff has agreed to voluntarily dismiss
defendant but are owned or guaranteed by Fannie Mae or Freddy Mac; and (2) defendant’s own
private mortgage modification program. The complaint alleges generally that defendant has
engaged in a pattern or practice of routinely informing its borrowers that they must be
delinquent–or intentionally become delinquent–on their mortgage loans to be considered for loan
modifications under either plan. Delinquency is not a requirement under either plan, however,
and once consumers follow defendant’s instructions and become delinquent on their mortgage
payments, defendant reports the borrowers to the credit reporting agencies as either late or in
default, assesses late fees and other penalties, and routinely begins foreclosure proceedings,
forcing borrowers to pay attorneys’ fees and other foreclosure costs.
Plaintiff Heiman claims to have called defendant in July 2010, expressing interest in a
modification of his mortgage loan on his vacation home in Nevada that was serviced by
defendant. Defendant’s representative told him that he was not eligible for a modification unless
and until he became delinquent on his account. Following defendant’s instructions, plaintiff
intentionally failed to make to payments on his mortgage, and applied for a modification. While
his application for a modification was pending, defendant notified plaintiff that his loan was in
default and that it had commenced mortgage foreclosure proceedings against him. Defendant
had also assessed additional monetary penalties against plaintiff, including attorneys’ fees and
court costs which were added to his mortgage balance.
Defendant has moved to dismiss under Fed. R. Civ. P. 12(b)(6) and 9(b). A motion to
dismiss for failure to state a claim tests the sufficiency of the complaint, not its merits. Gibson v.
City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). To survive such a motion, the complaint
must allege sufficient facts which, if true, would raise a right to relief above the speculative
level, showing that the claim is plausible on its face. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555, 570 (2007). To be plausible on its face the complaint must plead facts sufficient for
the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.
Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1939 (2009). Additionally, under Rule 9(b),
allegations of fraud must be pled with particularity, which means the “who, what, when, where
and how: the first paragraph of any newspaper story.” DiLeo v. Ernst & Young, 901 F.2d 624,
726 (7th Cir. 1990).
As an initial matter, the parties do not agree on what law applies to plaintiff’s four
remaining state law claims. The Deed of Trust, which accompanies and incorporates the note on
plaintiff’s mortgage loan, contains a choice of law provision stating that it shall be governed by
federal law and the law of the jurisdiction in which the property is located. This court follows
Illinois’ choice of law principles to determine which substantive law applies. See Hoover v.
Franzen, 669 F.2d 433, 437 (7th Cir. 1982). Illinois courts honor a contractual choice of law
clause provided that: (1) it does not contravene a fundamental policy of Illinois; and (2) the state
chosen bears a reasonable relationship to the parties or the transaction.” LaSalle Bank Nat’l
Assoc. v. Paramont Props, 588 F. Supp.2d 840, 849 (N.D. Ill. 2008). The parties do not dispute
that under this standard Nevada law applies to any contractual claim between them. Plaintiff’s
state law claims sound in tort, however, and plaintiff asserts that the claims are not governed by
the contractual choice of law provision. In Illinois, tort claims that are dependent upon the
contract are subject to a contract’s choice of law provision. Amakua Development LLC v.
Warner, 411 F. Supp.2d 941, 955 (N.D. Ill. 2006). To decide whether a tort claim is dependent
on a contract, the court examines “whether: (1) the claim alleges a wrong based on the
construction and interpretation of the contract; (2) the tort claim is closely related to the parties’
contractual relationship; or (3) the tort claim could not exist without the contract.” Id. at 955.
In the instant case, plaintiff’s tort claims could not exist without the contract. Obviously,
absent the mortgage loan, there would be no request for modification and no intentional or
negligent misrepresentation by defendant causing foreclosure. Indeed, the damage plaintiff
claims to have incurred as a result of defendant’s conduct includes late fees and attorneys’ fees
that are assessed pursuant to the contract. Accordingly, the court concludes that Nevada law
applies to plaintiff’s state law claims. Because Count V asserts a claim under the Illinois
Consumer Fraud and Deceptive Business Practices Act, it is dismissed.
Counts I and II of the complaint allege claims for fraud/intentional misrepresentation
(Count I), and negligent misrepresentation (Count II). Defendant argues that plaintiff has failed
to plead these claims with sufficient particularity. The court disagrees.
Rule 9(b) states that “[i]n alleging fraud or mistake, a party must state with particularity
the circumstances constituting fraud or mistake.” The purpose of requiring that fraud be pleaded
with particularity is not to give the defendant enough information to prepare its defense. “A
charge of fraud is no more opaque that any other charge. The defendant can get all the
information he needs to meet it by filing a contention interrogatory. The purpose . . . of the
heightened pleading requirement in fraud cases is to force the plaintiff to do more than the usual
investigation before filing his complaint.” Ackerman v. Northwestern Mutual Life Ins. Co., 172
F.3d 467, 469 (7th Cir. 1999). Greater pre-complaint investigation is necessary in fraud cases
because public charges of fraud can harm the reputation of a business or individual, because
fraud is frequently charged irresponsibly by people who have suffered a loss and want to find
someone to blame, and because charges of fraud frequently ask the courts to rewrite the parties’
contract or otherwise disrupt established business relationships. Id. Requiring a plaintiff to
plead the who, what, where, and when of the alleged fraud simply forces the plaintiff “to conduct
a pre-complaint investigation in sufficient depth to assure that the charge of fraud is responsible
and supported, rather than defamatory and extortionate. Id.
The instant complaint reveals that plaintiff has complied with the pre-complaint
investigation. Plaintiff alleges that in July 2010 he called defendant to express interest in a loan
modification. Defendant’s representative told plaintiff he was not eligible for a modification
unless and until he became delinquent. Plaintiff relied on and followed these instructions,
became delinquent, and defendant commenced foreclosure against him. These allegations fairly
outline the alleged fraud. The name of the person with whom plaintiff spoke is within
defendant’s exclusive knowledge and need not be pled. Id. at 471.
In addition, as the complaint alleges, similar complaints about defendant by consumers
have been published across the country. Indeed, two states (Arizona and Nevada) have filed
lawsuits against defendant charging similar conduct. See
http://news.yahoo.com/blogs/lookout/dates-accused-bank-america-widespread-fraudhomeowners-20101221-0711-548.html. Because the allegations of the instant complaint satisfy
Rule 9(b), defendant’s motion to dismiss Counts I and II is denied.
Count III alleges a claim for unjust enrichment. Defendant argues that the count should
be dismissed because an express agreement exists between the parties. An action “based on a
theory of unjust enrichment is not available when there is an express, written contract, because
no agreement can be implied when there is an express agreement. Leasepartners Corp. v. Robert
L. Brooks Trust, 113 Nev. 747, 942 P.2d 182, 187 (1997). Unjust enrichment occurs when “a
person has and retains a benefit which in equity and good conscience belongs to another.” Id. It
applies only “to situations were there is no legal contract but where the person sought to be
charged is in possession in money or property which in good conscience and justice he should
not retain but should deliver to another . . ..” Id.
In the instant case, it is undisputed that plaintiff has a contract with defendant that
governs their relationship. Plaintiff’s claims, however, while dependent on the existence of the
contract, are not contract-based and do not depend on the terms of the written agreement.
Plaintiff’s claims are based on defendant’s fraudulent misrepresentations with respect to its loan
modification plans and, as such, are separate from the terms of the existing contract.
Accordingly, defendant’s motion to dismiss Count III is denied.
For the reasons described above, defendant’s motion to dismiss is granted by agreement
as to Count IV (FDCPA), granted as to Count V (violation of the Illinois Consumer Fraud and
Deceptive Business Practices Act), and denied as to Counts I through III. Defendant is ordered
to answer Counts I through III on or before December 19, 2011. The parties are directed to
prepare and file a joint status report using this court’s form on or before December 22, 2011. A
report on status is set for December 28, 2011, at 9:00 a.m.
November 21, 2011
Robert W. Gettleman
United States District Judge
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