Vazquez v. J.P. Morgan Chase Bank National Assocation et al

Filing 43

MEMORANDUM Opinion and Order signed by the Honorable Andrea R. Wood on 9/8/2014. Mailed notice (ac, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
WILLIAM VÁZQUEZ,
Plaintiff,
v.
J.P. MORGAN CHASE BANK, N.A.,
Defendant.

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No. 13-cv-04749
Judge Andrea R. Wood

MEMORANDUM OPINION AND ORDER
Plaintiff William Vázquez brought this lawsuit against Defendant J.P. Morgan Chase
Bank, N.A. (“J.P. Morgan”) alleging fraudulent misrepresentation and a violation of the Illinois
Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq., in
connection with the servicing of Vázquez’s home mortgage loan. J.P. Morgan has now filed a
motion to dismiss Vázquez’s Second Amended Complaint (“SAC”) pursuant to Federal Rule of
Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction (the “Motion”) (Dkt. No. 27). For
the reasons explained below, the Motion is denied.
BACKGROUND
In April 2011, J.P. Morgan filed a foreclosure action (the “Foreclosure Action”) against
Vázquez in the Circuit Court of DuPage County, Illinois (the “State Court”) alleging that
Vázquez defaulted on his mortgage. 1 On March 11, 2013, the State Court entered a Judgment of
Foreclosure and Sale against Vázquez. After the State Court denied his motion to reconsider,
Vázquez appealed the decision to the Illinois Appellate Court. The Appellate Court then

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For purposes of the Motion, the Court takes judicial notice of the court filings in the Foreclosure Action.
See Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080-81 (7th Cir. 1997) (in
resolving a motion to dismiss, the district court is entitled to take judicial notice of matters in the public
record without converting the motion to a motion for summary judgment).

dismissed Vázquez’s appeal for lack of appellate jurisdiction, finding that the Foreclosure Action
would not be ripe for appeal until the sale of Vázquez’s property was confirmed. To date, the
State Court has not entered an order confirming the sale of the property.
On July 1, 2013, while the Foreclosure Action was pending, Vázquez filed a pro se
complaint in this Court against J.P. Morgan and the law firm Fisher & Shapiro, LLC, asserting
causes of action for fraudulent misrepresentation or concealment and violations of the ICFA. On
July 10, 2013, the Court sua sponte dismissed the complaint, without prejudice, for lack of
subject matter jurisdiction because the complaint did not allege the citizenship of all parties. At
that time, the Court noted that based on the jurisdictional allegations that were included in the
complaint, it appeared likely that both Vázquez and Fisher & Shapiro were citizens of Illinois,
which would prevent this Court from exercising federal diversity jurisdiction. Vázquez
subsequently filed an Amended Complaint on July 15, 2013 asserting the same claims against
J.P. Morgan but dropping Fisher & Shapiro as a defendant. On August 6, 2013, the Court
dismissed the amended complaint without prejudice for lack of subject matter jurisdiction, this
time noting that Vázquez did not include an explicit request for monetary damages. With no
indication from Vázquez regarding how much money he was seeking to recover from J.P.
Morgan, the Court could not determine that the lawsuit satisfied the amount in controversy
requirement for diversity jurisdiction.
Vázquez filed the SAC, which is the subject of the present Motion, on August 26, 2013.
In the SAC, Vázquez alleges that he became unemployed on March 31, 2008. (SAC ¶ 6, Dkt.
No. 12.) As a result of his unemployment, Vázquez requested help from his mortgage servicer,
Washington Mutual (“WaMu”), in late 2008. (Id. ¶ 7.) In response, WaMu offered him a
forbearance agreement for the period March 2009 through August 2009. According to Vázquez,

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he accepted the forbearance agreement on March 5, 2009 based on representations made by
WaMu. (Id. ¶ 9.) Vázquez alleges that at a certain point WaMu was sold to J.P. Morgan. (Id.
¶ 13.) 2 Vázquez claims that he continued to comply with demands from WaMu and then J.P.
Morgan, and that J.P. Morgan delayed filing for foreclosure against Vázquez to increase its fees
and penalties against him. (Id. ¶¶ 14-19.) Vázquez further claims he became employed again in
April 2011 and applied for a loan modification, but J.P. Morgan told him he could not get a
modification because of his prior acceptance of the forbearance agreement. (Id. ¶ 20.) Vázquez
also claims he complained to the Office of the Comptroller of the Currency (“OCC”) in
November 2012 about his treatment by J.P. Morgan, that the OCC “determined that indeed
[Vázquez] was not treated fairly,” and that he received $2,000 from J.P. Morgan “as an
admission of guilt.” (Id. ¶¶ 23-24, 36.)
Based on these allegations, Vázquez asserts two causes of action against J.P. Morgan. In
Count I, Vázquez asserts a claim for “Fraudulent Misrepresentation or Concealment,” alleging
that in February 2009 WaMu made statements to him regarding his forbearance agreement that
were false and untrue to induce him to sign the agreement. In Count II, Vázquez asserts a claim
for violations of the ICFA based on allegations that J.P. Morgan did not fulfill its obligations
during the forbearance agreement or when he applied for a loan modification.
In the Motion, J.P. Morgan raises three arguments challenging this Court’s jurisdiction.
First, J.P. Morgan argues that the SAC should be dismissed because Vázquez’s claims are barred
by the Rooker-Feldman doctrine. Second, J.P. Morgan contends that the Court should dismiss
the SAC because it is barred by the doctrine of res judicata. And third, J.P. Morgan argues that
the Court should dismiss the SAC because this case does not meet the requirements for the
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J.P. Morgan acknowledges that it acquired certain WaMu assets, including Vázquez’s loan and the right
to service it, on September 25, 2008. (Def. Memo. in Supp. of Mot. to Dismiss at 5, Dkt. No. 28.)

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exercise of federal diversity jurisdiction. However, the Court finds that, on his third attempt,
Vázquez has pleaded a complaint that survives a review for federal jurisdiction.
DISCUSSION
“Federal courts are courts of limited jurisdiction and may only exercise jurisdiction
where it is specifically authorized by federal statute.” Evers v. Astrue, 536 F.3d 651, 657 (7th
Cir. 2008) (internal quotation omitted). In considering a motion to dismiss for lack of subject
matter jurisdiction under Rule 12(b)(1), the Court must accept the complaint’s well-pleaded
factual allegations as true and draw all reasonable inferences from those allegations in the
plaintiff’s favor. Transit Exp., Inc. v. Ettinger, 246 F.3d 1018, 1023 (7th Cir. 2001). Because
Vázquez is proceeding pro se, the Court holds the SAC to a “less stringent standard than formal
pleadings drafted by lawyers, with the primary goal being to give pro se filings fair and
meaningful consideration.” Philos Tech. Inc. v. Philos & D, Inc., 645 F.3d 851, 858 (7th Cir.
2011).
I.

Res Judicata
J.P. Morgan argues that the claims asserted in the SAC are barred by the doctrine of res

judicata. Under that doctrine, when a final judgment has been entered on the merits of a case, “it
is a finality as to the claim or demand in controversy, concluding parties and those in privity with
them, not only as to every matter which was offered and received to sustain or defeat the claim
or demand, but as to any other admissible matter which might have been offered for that
purpose.” Highway J Citizens Grp. v. U.S. Dept. of Transp., 456 F.3d 734, 741 (7th Cir. 2006)
(quoting Nevada v. U.S., 463 U.S. 110, 129-30 (1983)). “Because an Illinois state court rendered
the . . . order at issue, we must apply Illinois law to determine whether res judicata bars [the]
claims.” Long v. Shorebank Dev. Corp., 182 F.3d 548, 560 (7th Cir. 1999). Under Illinois law,

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the doctrine of res judicata applies when: (1) the identity of the parties or their privies in the two
suits are the same; (2) the causes of action in the prior and current suit are the same; and (3) there
has been a final judgment on the merits in the prior suit. Rockford Mut. Ins. Co. v. Amerisure Ins.
Co. and Michigan Mut. Ins. Co., 925 F.2d 193, 195 (7th Cir. 1991).
In this case, res judicata does not bar Vazquez’s suit because there has been no final
judgment on the merits in the Foreclosure Action. While the State Court has entered an order of
foreclosure, such an order is not considered a final judgment under Illinois law. As the Illinois
Supreme Court has explained:
It is well settled that a judgment ordering the foreclosure of mortgage is not final
and appealable until the trial court enters an order approving the sale and directing
the distribution. The reason such a judgment is not final and appealable is because
it does not dispose of all issues between the parties and it does not terminate the
litigation. Specifically, although a judgment of foreclosure is final as to the
matters it adjudicates, a judgment foreclosing a mortgage, or a lien, determines
fewer than all the rights and liabilities in issue because the trial court has still to
enter a subsequent order approving the foreclosure sale and directing distribution.
Accordingly, it is the order confirming the sale, rather than the judgment of
foreclosure, that operates as the final and appealable order in a foreclosure case.
EMC Mortg. Corp. v. Kemp, 982 N.E.2d 152, 154 (Ill. 2012) (citations omitted); see also J.P.
Morgan Chase Bank v. Fankhauser, 890 N.E.2d 592, 599 (Ill. App. 2d Dist. 2008) (holding that
a final judgment in a foreclosure action cannot occur until the court confirms a sale of the
property).
At this point in the Foreclosure Action, there has been no judicial sale and thus no order
confirming a judicial sale. The judgment ordering foreclosure and sale entered in the Foreclosure
Action reflects this fact, stating that the State Court “shall conduct a hearing to confirm the sale”
of the foreclosed property once a purchaser is identified and that once this hearing is held the
State Court “shall then enter an order confirming the sale.” (Def. Memo. in Supp. of Mot. to
Dismiss Ex. D at 7, Dkt. No. 28.) Because only a judgment of foreclosure has been entered in the
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Foreclosure Action, and not a final order confirming sale of the subject property, res judicata
does not apply at this time. See Garavito v. Suntrust Mortg., Inc., No. 11-cv-6056, 2013 WL
856127, at *5 (N.D. Ill. Mar. 6, 2013).
Despite the standard set forth in Kemp, J.P. Morgan nonetheless urges this Court to
consider the judgment of foreclosure as a final judgment for res judicata purposes. In support of
this argument, J.P. Morgan cites Spencer v. Mortgage Acceptance Corporation, No. 05 C 356,
2006 WL 1302413 (N.D. Ill. May 4, 2006), which held that an Illinois state court foreclosure
judgment constituted “a final judgment on the merits of the case” that barred the mortgagee’s
subsequent federal action under the Truth In Lending Act. Id. at *5. However, in reaching that
conclusion, the Spencer court relied upon Joliet Federal Saving & Loan Association v. O’Hare
International Bank, 299 N.E.2d 350 (3rd Dist. 1973), which noted, in dicta, that “[i]f a decree of
foreclosure is entered in this case, then a final appealable order will have been entered.” Id. at
351. The Spencer court did not mention the Illinois Supreme Court’s decision in Kemp or any of
the many other decisions post-dating Joliet Federal that have held that a foreclosure judgment is
not a final and appealable order. Because Illinois courts have firmly established that a judgment
of foreclosure does not constitute a final judgment on the merits, the Court does not consider
Spencer persuasive for purposes of the instant Motion.
II.

Rooker-Feldman Doctrine
J.P. Morgan also argues that this Court should decline jurisdiction over this case based on

the Rooker-Feldman doctrine. The Rooker-Feldman doctrine derives its name from two Supreme
Court decisions: Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia
Court of Appeals v. Feldman, 460 U.S. 462 (1983). It holds that “the lower federal courts lack
subject-matter jurisdiction over actions that seek review of state-court judgments; only the

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United States Supreme Court has authority to review state judgments.” Dookeran v. Cnty. of
Cook, Ill., 719 F.3d 570, 574-75 (7th Cir. 2013). Rooker-Feldman is a narrow doctrine that
applies to “state-court losers complaining of injuries caused by state-court judgments rendered
before the district court proceedings commenced and inviting district court review and rejection
of those judgments.” Id. If the injury about which the plaintiff complains resulted from, or is
inextricably intertwined with, a state-court judgment, then lower federal courts cannot hear the
claim. Taylor v. Fed. Nat’l Mortg. Ass’n, 374 F.3d 529, 532-33 (7th Cir. 2004).
J.P. Morgan asserts that Vázquez’s claims are barred by the Rooker-Feldman doctrine
because the damages that he seeks are inextricably intertwined with the foreclosure order entered
by the State Court. But the Rooker-Feldman doctrine only applies “where ‘the losing party in
state court filed suit in federal court after the state proceedings ended,’ therefore, an
interlocutory ruling does not evoke the doctrine or preclude federal jurisdiction.” TruServ Corp.
v. Flegles, Ins., 419 F.3d 584, 591 (7th Cir. 2005) (emphasis in original) (quoting Exxon Mobil
Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 291 (2005)). As discussed above, a judgment
ordering the foreclosure of a mortgage is not a final judgment under Illinois law. EMC Mortg.
Corp., 982 N.E.2d at 154. Thus, the Rooker-Feldman doctrine does not apply here, as Vázquez
filed his complaint after an order of foreclosure but before the entry of an order approving the
sale of his property and directing the distribution of the resulting funds. See, e.g., Garavit, 2013
WL 856127 at *5; In re Hodges, 350 B.R. 796, 803 (Bankr. N.D. Ill. 2006).
III.

Diversity Jurisdiction
Finally, J.P. Morgan seeks dismissal of Vasquez’s lawsuit on the ground that it does not

meet the requirements for federal diversity jurisdiction. A litigant may invoke diversity
jurisdiction in federal court only when the matter in controversy exceeds the sum or value of

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$75,000, exclusive of interest and costs. 28 U.S.C. § 1332(a). “Generally the amount in
controversy claimed by a plaintiff in good faith will be determinative on the issue of
jurisdictional amount, unless it appears to a legal certainty that the claim is for less than that
required by the rule.” NLFC, Inc. v. Devcom Mid-Am., Inc., 45 F.3d 231, 237 (7th Cir. 1995)
(citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938)). However, “if the
court’s jurisdiction is challenged as a factual matter by either the court or the opposing party, the
party invoking the jurisdiction bears the burden of supporting its jurisdictional allegations by
‘competent proof.’” Id. (quoting McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178,
189 (1936)).
In the SAC, Vázquez lists only a few categories of compensatory damages and together
they amount to less than $75,000. Specifically, Vázquez alleges that he made a mortgage
payment of $2,959.61 in January 2009 in reliance on alleged misrepresentations by WaMu.
(SAC ¶ 8, Dkt. No. 12.) He further alleges that he paid another $1,506.22 in February 2009, and
$726.70 monthly from December 2009 through May 2010—or $4,360.20—based on a “demand”
by J.P. Morgan. (Id. ¶¶ 8, 16-17). Vázquez also alleges that as a result of unfair accounting by
J.P. Morgan, he was audited by the IRS and charged with a $1,392.47 tax deficiency. (Id. ¶
53(o).) These allegations of damages total $10,218.50. Although Vázquez alleges that he “is told
fees, interests [sic] and penalties in this foreclosure case are over $90,000 on a $154,900
mortgage” (id. ¶ 22), he never alleges what part of this amount he considers to be in controversy.
Vázquez also makes general allegations regarding his “lost time and opportunity costs” and his
inability to pursue other means of saving his home (see id. ¶ 45), but he fails to identify
particular amounts associated with these alleged costs. 3
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At a hearing on the Motion, Vázquez stated that he is seeking compensatory damages totaling $154,900,
which represents the amount of the original mortgage on the subject property plus $40,000 in costs.

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However, Vázquez’s prayer for relief asks the Court to grant not just compensatory
damages but also “punitive damages, equitable relief, attorneys’ fees, court costs, and all other
relief this Court deems appropriate.” (Id. ¶ 34.) When evaluating whether a suit exceeds the
amount-in-controversy threshold, courts consider all damages available to a plaintiff, including
punitive damages. See Oshana v. Coca–Cola Co., 472 F.3d 506, 512 (7th Cir. 2006). “Where
punitive damages are required to satisfy the jurisdictional amount in a diversity case, a two-part
inquiry is necessary. The first question is whether punitive damages are recoverable as a matter
of state law. If the answer is yes, the court has subject matter jurisdiction unless it is clear
‘beyond a legal certainty that the plaintiff would under no circumstances be entitled to recover
the jurisdictional amount.’” Cadek v. Great Lakes Dragway, Inc., 58 F.3d 1209, 1211-12 (7th
Cir. 1995) (quoting Risse v. Woodard, 491 F.2d 1170, 1173 (7th Cir. 1974)).
Vázquez satisfies both parts of the two-step inquiry. First, the ICFA provides for the
recovery of punitive damages, see Oshana, 471 F.3d at 512, as does the Illinois common law of
fraudulent misrepresentation. See Carter v. Mueller, 457 N.E.2d 1335, 1342-43 (1st Dist. 1983).
Second, in order to satisfy the amount in controversy requirement, Vázquez would need to be
awarded punitive damages in an amount slightly under $65,000 along with the $10,218.50 in
compensatory damages pleaded in his complaint. The Supreme Court has set constitutional limits
on the ratio of punitive damages to compensatory damages that may permissibly be awarded.
State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 410 (2003). While there is no precise

Vázquez did not articulate a legal theory under which he could be awarded these damages, nor has the
Court identified such a theory of recovery. Because Vázquez has failed to provide any competent proof
that he is entitled to these damages, the Court does not consider them in its analysis. See Atteberry v.
Esurance Ins. Svcs., 473 F.Supp.2d 876 (N.D. Ill. 2007) (asserted damages amounts that are unsupported
by the asserted cause of action cannot satisfy the amount in controversy requirement). Although Vázquez
ultimately may be able to establish that he is entitled to recover some portion of these amounts as
damages, for purposes of the Motion, the Court uses the more conservative figure of $10,218.50. As
discussed below, Vázquez meets the jurisdictional requirement even using the more conservative amount.

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mathematical formula to determine an appropriate ratio, the Supreme Court has held that “singledigit multipliers are more likely to comport with due process.” Philip Morris USA v. Williams,
549 U.S. 346, 351 (2007) (citing State Farm, 538 U.S. at 425)). Here, a punitive damage award
that would allow Vázquez to satisfy the amount in controversy requirement would be
approximately 6.5 times the amount of compensatory damages pleaded in the SAC. Because this
amount of punitive damages would not necessarily violate due process, the Court cannot say
beyond a legal certainty that a potential punitive damage award, combined with Vázquez’s
currently pleaded compensatory damages, would not exceed the $75,000 minimum. Therefore,
the Court finds that the amount in controversy requirement is satisfied.
CONCLUSION
For the foregoing reasons, the Court denies J.P. Morgan’s Motion. The denial is without
prejudice to J.P. Morgan asserting a res judicata defense at a later date, if and when the State
Court enters an order approving the sale of the subject property.

ENTERED:

Dated: September 8, 2014

__________________________
Andrea R. Wood
United States District Judge

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