Guaranteed Rate, Inc. v. NHT Law Group

Filing 17

MEMORANDUM OPINION Signed by the Honorable John F. Grady on 7/5/2012. Mailed notice(cdh, )

12-81.121-JCD

July 5, 2012

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
GUARANTEED RATE, INC.,

)
)
)
)
)
)
)
)
)

Plaintiff,
v.
NHT LAW GROUP, APLC,
Defendant.

No. 12 C 81

MEMORANDUM OPINION
Before

the

court

is

defendant’s

motion

to

dismiss

the

complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and
(b)(2).

For the reasons explained below, the motion is granted.
BACKGROUND

This is an action for defamation per se, negligence, vicarious
liability, statutory fraud, and deceptive trade practices in which
jurisdiction is premised on diversity of citizenship.

Plaintiff,

Guaranteed Rate, Inc. (“Guaranteed Rate”), is a citizen of Delaware
and Illinois; defendant NHT Law Group, APLC (“NHT”) is a citizen of
California.

Plaintiff alleges that NHT and its marketing company1

sent a fraudulent and defamatory letter to certain of plaintiff’s
customers.

1/

Plaintiff originally included, but then voluntarily dismissed, the
“unknown marketing group” as a defendant. Since then, NHT has evidently provided
plaintiff with the name of this entity, but plaintiff has not sought to add it
as a defendant.

- 2 -

Guaranteed Rate is a “correspondent lender” that “work[s] with
customers to provide loans on residential real estate” and “sells
loans post-funding to its investors.”

(Compl. ¶¶ 8, 16.)

It

alleges that it has a “sterling reputation within the mortgage
business” and that it “prides itself on providing the highest
quality services and products for its customers.”

(Compl. ¶ 9.)

In December 2011, some of plaintiff’s clients received a
notice in the mail from “NHT Law Group” that was marked “personal
and confidential” and bore a warning stating that any person who
interfered with or obstructed delivery of the letter or otherwise
violated provisions of the United States Code could face “5 yrs.
imprisonment” or be fined $2,000.

(Compl. ¶ 11 & Ex. A.)

The

notice

that

are

contained

two

statements

plaintiff

claims

misleading and defamatory:
•

Why are you getting this notice? Court records
indicate that a recent lawsuit has been filed
against Guaranteed Rate Inc, with claims of
Foreclosure Fraud, Mortgage Misrepresentation, and
Unfair Business Practices.
Due to the serious
nature of this matter we ask that you respond
promptly.

•

What happens if you don’t respond by January 7th:
You may be eligible for representation in a case
against Guaranteed Rate Inc, don’t delay as only a
specific group of people may qualify.

(Compl., Ex. A.) Included was a “Summary Of Proposed Changes Based
On

Eligibility”

that

plaintiff

contends

was

a

“completely

fictitious calculation of the borrower’s new payment based upon
information that NHT” and its marketing company obtained from an

- 3 -

unknown source.

(Compl. ¶ 13 & Ex. A.)

The notices also provided

a phone number for the recipient to call in the event that he or
she had experienced “Sub Prime or Predatory Financing” or had been
declined a loan modification or “Ignored by Guaranteed Rate Inc.”
(Compl. ¶ 14 & Ex. A.)
Plaintiff alleges that the notices portray it as having
committed

“extensive

civil

and

criminal

wrongs

against

its

customers” when in fact it has not been involved in any lawsuit as
described

in

the

notices,

declined

modifications,

efforts by borrowers to modify their loans.

or

ignored

(Compl. ¶¶ 15-16.)

It

points out that as a correspondent lender, it does not maintain
loans on its books. According to plaintiff, the notice is “nothing
more than a craven effort on behalf of NHT to solicit business by
alarming [Guaranteed Rate’s] valued customers with patently false
and outrageous statements.”

(Compl. ¶ 17.)

Two of plaintiff’s customers who received the notice forwarded
it to plaintiff, which immediately contacted NHT in an effort to
prevent any additional notices from being disseminated.

NHT’s

principal, Paul Nguyen, responded that its marketing company had
sent out the notices without NHT’s approval.

Nguyen stated that

NHT had “fired” the marketing company as well as the employee who
had been responsible for marketing.

He also stated that the firm

would not accept any new clients who telephoned NHT based on the
notice and would notify these people that the notice was incorrect.

- 4 -

Plaintiff asked Nguyen to provide it with the distribution list
used for the notices, but Nguyen stated that he was unable to
obtain the list from the marketing company. (Compl., Ex. C.)
Plaintiff then filed this action, in which it alleges that it
has suffered “substantial financial harm” as a result of NHT’s
conduct.

(Compl. ¶ 36.)

It seeks damages, including punitive

damages, as well as attorney’s fees.
NHT moves to dismiss the complaint for lack of subject-matter
jurisdiction and for lack of personal jurisdiction.
DISCUSSION
Federal Rule of Civil Procedure 12(b)(1) allows a party to
raise by motion the defense of lack of subject-matter jurisdiction.
If the complaint is formally sufficient but the contention is that
there is in fact no subject-matter jurisdiction, we are free to
look beyond the complaint and view and weigh the evidence that has
been submitted on the issue.

Apex Digital, Inc. v. Sears, Roebuck

& Co., 572 F.3d 440, 444 (7th Cir. 2009).
Jurisdiction based on diversity exists if the amount in
controversy exceeds $75,000 and the suit is between citizens of
different states.

28 U.S.C. § 1332(a)(1).

There is no dispute

that the parties are of diverse citizenship, but the amount in
controversy is disputed.
When the jurisdictional threshold is uncontested, we generally
will accept the plaintiff’s good-faith allegation of the amount in

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controversy unless it appears to a legal certainty that the claim
is really for less than the jurisdictional amount.

McMillian v.

Sheraton Chicago Hotel & Towers, 567 F.3d 839, 844 (7th Cir. 2009).
But where, as here, the defendant challenges the plaintiff’s
allegation of this amount, the plaintiff cannot merely rest on its
complaint

alone.

As

the

proponent

of

federal

jurisdiction,

plaintiff has the burden of proving by a preponderance of the
evidence

facts

that

requirement is met.

suggest

that

the

amount-in-controversy

See Meridian Sec. Ins. Co. v. Sadowski, 441

F.3d 536, 543 (7th Cir. 2006).

The plaintiff must do more than

“point to the theoretical availability of certain categories of
damages”; it must support its assertion with “competent proof.”
McMillian, 567 F.3d at 844.

Once the plaintiff has met this

standard, the case may be dismissed only if it is “legally certain”
that the recovery or cost of complying with the judgment will be
less than the jurisdictional floor.
NHT

contends

that

the

Meridian, 441 F.3d at 543.

allegations

regarding

the

damages

suffered by plaintiff are too speculative and without adequate
foundation to support a finding that diversity jurisdiction exists.
NHT

points

out

that

the

complaint

fails

to

describe

the

“substantial financial harm” that plaintiff allegedly suffered and
that while plaintiff asserts that it its reputation was damaged
among its customers and potential customers, Compl. ¶ 30, there are
no facts alleged that would support a damage award in excess of

- 6 -

$75,000.
who

Attached to NHT’s motion is the affidavit of Mr. Nguyen,

states

that

NHT

was

not

involved

in

the

preparation

or

distribution of the notices by its marketing company.

Mr. Nguyen

also

concerning

states

Guaranteed

that

Rate

he

and

did
that

not
upon

approve

any

learning

notice

of

the

notices,

he

terminated the employment of the employee who had been responsible
for hiring the marketing company and advised his employees not to
accept any cases involving the notices and to tell anyone calling
in response to them that they were sent by mistake.

(Def.’s Mot.,

Ex. A, Aff. of Paul C. Nguyen ¶¶ 11, 16-18.)
In response, Guaranteed Rate does not attempt to “show how the
rules of law, applied to the facts of [its] case, could produce” an
award that satisfies the jurisdictional minimum, as it must do.
See Schlessinger v. Salimes, 100 F.3d 519, 521 (7th Cir. 1996).
Rather, it plunges into an unstructured discussion of possible
damages for reputational injury and lost business opportunities
(which, we have determined from our own research, could be bases
for damage awards on plaintiff’s defamation and statutory fraud
claims, see, e.g., Leyshon v. Diehl Controls N. Am., Inc., 946
N.E.2d 864, 874 (Ill. App. Ct. 2010) (defamation); Downers Grove
Volkswagen, Inc. v. Wigglesworth Imports, Inc., 546 N.E.2d 33, 41
(Ill.

App.

Ct.

1989)

(Consumer

Fraud

and

Deceptive

Business

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Practices Act)).2

Plaintiff contends that it processes more than

22,500 mortgage applications per year in 45 states and has an
annual revenue of about $180 million; that its reputation and good
will is the “only basis” upon which customers can “reasonably be
expected to choose” it over other businesses from whom they could
obtain a mortgage and that it relies on repeat customers and
referrals from current customers; that damage to its reputation
would “substantially impair the value of the business”; and that
“there is at least a reasonable probability that the damage done to
[its] reputation exceeds the jurisdictional minimum.” (Pl.’s Resp.
at 8-9.)

As to the jurisdictional minimum, plaintiff argues as

follows:
[Plaintiff] averages roughly $500 in after-tax profit per
loan. As a result, if [plaintiff] lost out on only 150
customers as the result of the defamatory statements in
the notices, [plaintiff] will have satisfied the $75,000
minimum; if only 50 people received these notices and
they in turn only told 2 other people that [plaintiff]
engaged in fraud and misrepresentation, the loss of those
loans would also satisfy the jurisdictional minimum.
. . .
If the notices in question convinced only .6% of those
individuals who have completed loans with [plaintiff]
within the last year not to proceed with another loan
[with plaintiff], then [plaintiff] has satisfied the
jurisdictional minimum.
(Pl.’s Resp. at 9.)

Plaintiff also points to its prayer for

punitive damages, asserting that its allegation of “actual malice

2/

Plaintiff does not raise the prospect of an award of presumed damages
on its claim for defamation per se, nor does the complaint contain a prayer for
such damages. Likewise, plaintiff does not mention injunctive relief or its
possible value.

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and willfulness” is sufficient and that “no proof” regarding
punitive damages is required at this stage.
Plaintiff relies upon only speculation that it can meet the
jurisdictional threshold; it has failed to support its arguments
with any “competent proof” whatsoever.

“Competent proof” means

“admissible evidence” that supports the plaintiff’s estimate of
recoverable damages. See Meridian, 441 F.3d at 542. (And contrary
to plaintiff’s assertion, the “competent proof” standard applies
equally to its request for punitive damages, see Anthony v. Sec.
Pac. Fin. Servs., Inc., 75 F.3d 311, 316-17 (7th Cir. 1996); In re
Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 60708 (7th Cir. 1997) (the proponent of federal jurisdiction must
present evidence as to each form of relief sought and “cannot
simply

wave”

the

punitive

damages

statute

“in

[the

court’s]

face[]”)). Plaintiff attaches a number of exhibits to its response
brief, but none of them are relevant to its arguments about the
amount in controversy, so there is no evidence as to the nature of
its business, reputation, or customers.

There is no evidence

regarding the size of the audience to whom the allegedly defamatory
statements were made or the purported lost business opportunities.
There is no evidence that plaintiff has suffered any concrete
injury.

And as for punitive damages, plaintiff offers no evidence

of NHT’s alleged “malice and willfulness” in making the statements,
nor does it

even cite

any

cases

addressing

whether

Illinois

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authorizes punitive damages awards as high as the jurisdictional
minimum in the absence of concrete injury.
Because plaintiff has failed to present competent proof that
this court has subject-matter jurisdiction over its claims, NHT’s
motion to dismiss the complaint pursuant to Rule 12(b)(1) will be
granted.

In light of this ruling, we need not address NHT’s

argument for dismissal based on lack of personal jurisdiction.
CONCLUSION
Defendant’s motion to dismiss the complaint for lack of
subject-matter jurisdiction [10] is granted.

DATE:

July 5, 2012

ENTER:

_________________________________________
John F. Grady, United States District Judge