Lockhart v. HSBC Finance Corporation et al
Filing
186
MEMORANDUM Opinion and Order: For the reasons stated, Lockhart's motion to reconsider is denied, R. 168 , and all of the motions to dismiss are granted with prejudice, R. 155 , R. 157 , R. 159 , R. 160 . Civil case terminated. Signed by the Honorable Thomas M. Durkin on 10/19/2020. Mailed notice. (ecw, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ELOISE LOCKHART,
Plaintiff,
v.
HSBC FINANCE CORPORATION, et al.,
Defendants.
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13 C 9323
Judge Thomas M. Durkin
MEMORANDUM OPINION AND ORDER
Eloise Lockhart, an attorney representing herself, brings this action relating
to a mortgage loan she took out in 2003 and the efforts to foreclose on her home in
state court proceedings. She names a variety of defendants: HSBC Finance
Corporation (“HSBC Finance”), Household Finance Corporation III (“HFC”), and
HSBC Mortgage Services, Inc., incorrectly sued as “HSBC Mortgage Services Corp.”
(“HSBC Mortgage”) (together, “HSBC Defendants”); Pilgrim Christakis LLP, f/k/a
Grady Pilgrim Christakis Bell LLP (“Pilgrim Christakis”), and Jeffrey Pilgrim
(together, “Pilgrim Christakis Defendants”); Freedman Anselmo Lindberg, LLC,
n/k/a Anselmo Lindberg & Associates, LLC (“FAL”), and Steven C. Lindberg
(together, “FAL Defendants”); and Arnold G. Kaplan. A previous complaint also
named MERSCORP Holdings, Inc., incorrectly sued as MERSCORP, Inc.
(“MERSCORP”), and Mortgage Electronic Registration Systems, Inc. (“MERS”)
(together, “MERS Defendants”). On August 1, 2014, the Court dismissed significant
parts of Lockhart’s claims as plead in her First Amended Complaint, and stayed
others pending the resolution of a parallel state court action (such order, the “2014
Order,” and such complaint, the “FAC”). R. 71. When the stay was lifted, the Court
permitted Lockhart to amend her complaint. Lockhart’s new complaint (the “SAC”)
raises many of the claims the Court previously dismissed. Defendants now move to
dismiss the SAC. R. 155; R. 157; R. 159; R. 160. In addition, Lockhart moved for
reconsideration of the 2014 Order. R. 168. For the reasons that follow, the motions to
dismiss are granted, and Lockhart’s motion for reconsideration is denied.
Background 1
State court action. HFC initiated a state court foreclosure action against
Lockhart in September 2007 concerning a 2003 mortgage loan on her home. Lockhart
then filed counterclaims against HFC, alleging that: (1) HFC’s mortgage was not
valid because it was not recorded; (2) her loan violated the Illinois Interest Act
(“Interest Act”); (3) HFC lacked standing to foreclose the mortgage; and (4) HFC
violated the Truth in Lending Act (“TILA”), which entitled her to rescind the
mortgage and recover damages.
The state court granted HFC’s motion for judgment on the pleadings and
entered judgment in favor of HFC on several of Lockhart’s counterclaims on June 3,
2010, leaving only her claim to quiet title and for rescission of the loan. Lockhart
thereafter filed an amended counterclaim again asserting claims for violation of the
The Court assumes familiarity with the background of this case. For additional
information, see the Court’s 2014 Order granting in part and denying in part certain
defendants’ motions to dismiss the FAC, R. 71, and the Court’s September 30, 2014
memorandum opinion and order denying Lockhart’s initial motion for reconsideration
of that order, R. 86.
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Interest Act. On November 19, 2015, the state court granted HFC’s motion for
summary judgment on Lockhart’s claim to quiet title and amended counterclaims,
leaving only HFC’s claim to foreclose. Ultimately, the state court also granted HFC’s
motion for summary judgment on its foreclosure claim, and entered a judgment of
foreclosure and sale in HFC’s favor in April 2017. The property was subsequently sold
to a third party pursuant to that judgment, and the court approved and confirmed
that sale and a deficiency judgment against Lockhart in May 2018.
Lockhart appealed the judgments against her, which the Illinois Appellate
Court affirmed in March 2019 in all respects. In so doing, the court found that: (1)
HFC’s mortgage was valid and enforceable; (2) Lockhart’s Interest Act claims were
preempted by the Alternative Mortgage Transaction Parity Act of 1982 (“Parity Act”),
12 U.S.C. §§ 3801, et seq.; and (3) Lockhart’s TILA claims failed because she failed to
direct the court’s attention to any evidence that “the original lender . . . failed to
provide the requisite disclosures which would extend the rescission period from three
days to three years,” she could not identify “any portion of the record to suggest that
she sent a timely rescission letter” to HFC (and nor could the Court locate any), and
there was no suggestion “that [HFC] would be liable for any such failure to honor a
purported notice of rescission.” Lockhart did not seek further review. R. 158, Ex. 8.
Lockhart’s federal action. Lockhart filed this lawsuit in December 2013
while the state court case was pending. She sued numerous parties connected in
varying manner and degree to her mortgage or the foreclosure case, including: HFC
as mortgagee; HSBC Finance and HSBC Mortgage as related to the mortgagee;
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MERS as the original mortgagee; MERSCORP as MERS’s parent company; FAL as
HFC’s foreclosure counsel and Mr. Lindberg as an FAL named partner; Pilgrim
Christakis as HFC’s litigation counsel and Mr. Pilgrim as a Pilgrim Christakis named
partner; and Mr. Kaplan, her attorney in the state court proceedings.
Lockhart’s FAC was based on her claim that the defendants conspired to bring
“unlawful foreclosure actions which they had no standing to file,” and that they
“forged mortgage documents, fabricated assignments, perjured affidavits,” and
committed “fraud in their ongoing attempt to illegally foreclose on [her] property.” R.
6 ¶ 2. It asserted fifteen claims. Specifically, for: violations of the Racketeer
Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962; wire fraud;
fraud and deceit; false oaths; violation of the Real Estate Settlement Procedures Act
(“RESPA”), 12 U.S.C. § 2605; violation of the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. §§ 1692e, 1692j; violation of the Civil Rights Act, 42 U.S.C. §§
1981, 1982; violation of the Fair Housing Act (“FHA”), 42 U.S.C. §§ 3601, 3604, 3605;
violation of the Home Ownership Equity Protective Act (“HOEPA”), 15 U.S.C. §
1602(aa); violation of the Interest Act; and violation of TILA. The FAC also included
a standalone claim for punitive damages.
The Court dismissed nearly all of Lockhart’s claims on August 1, 2014, and
stayed those remaining pending resolution of the state court foreclosure action. More
specifically, the Court dismissed with prejudice Lockhart’s claims for wire fraud,
fraud and deceit, and “false oaths,” and for violations of RESPA, the FDCPA, the Civil
Rights Act, the FHA, and TILA. Lockhart’s HOEPA claims were also dismissed with
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prejudice as to all defendants except the HSBC and MERS Defendants, and
Lockhart’s Interest Act claims were dismissed with prejudice as to all but the HSBC
Defendants. Additionally, Lockhart’s RICO claims were dismissed without prejudice
for failure to state a claim, but the Court warned that if Lockhart sought to amend
her complaint, she should be aware of a recent order in which the Court granted the
defendants’ motion for sanctions because of an improperly filed RICO case. R. 71 at
18. Lockhart’s claim for punitive damages was also dismissed. Accordingly, only
Lockhart’s HOEPA claims against the HSBC and MERS Defendants and her Interest
Act claims against the HSBC Defendants remained. And the Court stayed those
claims under Colorado River since the “exact same claims” were pending in state
court. Id. at 33-38. The Court denied wholesale a motion for reconsideration that
Lockhart filed shortly thereafter as “border[ing] on frivolous.” R. 86 at 1.
The operative complaint. Once the state court foreclosure action concluded,
the Court lifted the stay on this case and granted Lockhart leave to file the Second
Amended Complaint (“SAC”). R. 148. The SAC—consisting of 24 pages and 117
paragraphs—purports to state ten claims, many of which were previously dismissed
with prejudice. And it again challenges the validity of HFC’s mortgage and the terms
of her loan, alleging that the defendants “conspired” to file a “fraudulent foreclosure”
and collect an “unlawful debt.” Indeed, the SAC repeats Lockhart’s previously
dismissed RICO claims largely verbatim (Counts I – III); asserts the same FDCPA,
FHA, and TILA claims the Court dismissed with prejudice (Count IV, V, and IX,
respectively); and asserts the same claims for HOEPA and Interest Act violations she
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raised before the state trial and appellate courts (Counts VI, VII and VIII). Finally,
the SAC once more includes a standalone claim for punitive damages (Count X).
Four motions to dismiss followed the SAC, and once those motions were fully
briefed, Lockhart filed a second motion for reconsideration of the 2014 Order
dismissing much of her FAC. The Court addresses those motions below, beginning
with the motions to dismiss.
Analysis
I.
Motions to Dismiss
A.
Standard
Defendants’ motions were brought pursuant to Federal Rules of Civil
Procedure 12(b)(1), 12(b)(6), or both. A Rule 12(b)(1) motion tests whether the Court
has subject matter jurisdiction. Hallinan v. Fraternal Order of Police of Chi. Lodge
No. 7, 570 F.3d 811, 820 (7th Cir. 2009). When evaluating a motion to dismiss under
Rule 12(b)(1), if there are no factual disputes, the Court accepts the allegations in the
complaint as true, and draws all reasonable inferences in the plaintiff’s favor. Bultasa
Buddhist Temple of Chi. v. Nielsen, 878 F.3d 570, 573 (7th. Cir. 2017). But “a plaintiff
faced with a 12(b)(1) motion to dismiss bears the burden of establishing that the
jurisdictional requirements have been met.” Ctr. for Dermatology and Skin Cancer,
Ltd. v. Burwell, 770 F.3d 586, 588-89 (7th Cir. 2014).
In contrast, a Rule 12(b)(6) motion challenges the “sufficiency of the
complaint.” Berger v. Nat. Collegiate Athletic Assoc., 843 F.3d 285, 289 (7th Cir. 2016).
Generally, a complaint must provide “a short and plain statement of the claim
showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), sufficient to
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provide defendant with “fair notice” of the claim and the basis for it. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an
unadorned, the-defendant-unlawfully- harmed-me accusation.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Iqbal, 556
U.S. at 678 (quoting Twombly, 550 U.S. at 570). “ ‘A claim has facial plausibility when
the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.’ ” Boucher v. Fin.
Sys. of Green Bay, Inc., 880 F.3d 362, 366 (7th Cir. 2018) (quoting Iqbal, 556 U.S. at
678). In applying this standard, the Court accepts all well-pleaded facts as true and
draws all reasonable inferences in favor of the non-moving party. Tobey v. Chibucos,
890 F.3d 634, 646 (7th Cir. 2018).
But “claims sounding in fraud are subject to a more stringent pleading
requirement.” Sadler v. Retail Props. of Am., Inc., 2014 WL 2598804, at *7 (N.D. Ill.
June 10, 2014). Federal Rule of Civil Procedure 9(b) requires plaintiffs alleging fraud
to state “with particularity” the circumstances constituting fraud; that is, the “who,
what, when, where, and how” of the fraud. Pirelli Armstrong Tire Corp. Retiree Med.
Benefits Trust v. Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011). This heightened
pleading standard applies to fraud claims brought under RICO. Vicom, Inc. v.
Harbridge Merch. Servs., Inc., 20 F.3d 771, 777 (7th Cir. 1994).
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B.
Analysis
1.
MERS Defendants
At the outset, the MERS Defendants contend that because the SAC makes no
specific allegation against them and does not include them in the “parties” section or
list them in the case caption, Lockhart has abandoned any claims against them. The
Court notes that the SAC’s Count IX—under TILA—does purport to be against both
the HSBC and MERS Defendants. But because Lockhart fails to respond to the MERS
Defendants’ argument, the MERS Defendants can be dismissed with prejudice on
that basis alone. See Alioto v. Town of Lisbon, 651 F.3d 715, 721 (7th Cir. 2011) (“a
litigant effectively abandons the litigation by not responding to alleged deficiencies
in a motion to dismiss”).
2.
Remaining Defendants
The Court analyzes each of the claims in the SAC as to the remaining
defendants below, beginning with those brought under RICO.
RICO (Counts I – III; all defendants). The SAC repleads Lockhart’s RICO
claims, the form and substance of which largely mirror the RICO claims this Court
previously dismissed. In sum, those claims assert that the defendants were part of a
“scheme” to deprive her of property in which they had no valid interest, and to collect
an “unlawful debt” via a “fraudulent foreclosure.” See generally R. 152-1. Defendants
contend that dismissal is proper because: the Rooker-Feldman doctrine prevents the
Court from hearing Lockhart’s claims; they are barred by res judicata; and the SAC
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fails to state valid RICO claims in any case. Because the Rooker-Feldman doctrine is
a limit on the Court’s subject matter jurisdiction, the analysis begins there.
Rooker-Feldman prohibits federal district courts from reviewing state court
civil judgments, including claims that are inextricably intertwined with those
judgments. See D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983); Rooker v.
Fidelity Trust Co., 263 U.S. 413 (1923). But it is a narrow doctrine, and may be
applied only in “cases brought by 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.” Kelley v. Med-1
Solutions, LLC, 548 F.3d 600, 603 (7th Cir. 2008). Further, “the Supreme Court has
warned not to confuse Rooker-Feldman with claim preclusion: ‘If a federal plaintiff
present[s] some independent claim that denies a legal conclusion that a state court
has reached in a case to which he was a part . . . , then there is jurisdiction, and state
law determines whether the defendant prevails under principles of preclusion.’ ”
Sykes v. Cook Cty. Circuit Court Prob. Div., 837 F.3d 736, 742 (7th Cir. 2016) (quoting
Exxon-Mobil v. Saudi Basic Indus. Corp., 544 U.S. 280, 284, (2005)).
Lockhart contends that Rooker-Feldman is inapplicable here, because she filed
this case while the state court case was still pending. The Court agrees. The Seventh
Circuit has applied Rooker-Feldman to federal cases initiated after certain
interlocutory state court orders, provided they are effectively final. And it most
recently applied the doctrine to a case concerning a foreclosure action that was, as a
technical matter, still pending. Bauer v. Koester, 951 F.3d 863 (7th Cir. 2020). But in
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Bauer, the state court had already entered a judgment of foreclosure when the suit
was filed in federal court. Id. at 867 (holding foreclosure case was “effectively final”
after entry of judgment of foreclosure). In contrast, here, the judgment of foreclosure
was not entered until years after this action was initiated. Accordingly, the Court
turns to preclusion principles.
In Illinois, res judicata bars a subsequent action if: “(1) there was a final
judgment on the merits rendered by a court of competent jurisdiction; (2) there is an
identity of cause of action; and (3) there is an identity of parties or their privies.”
Whitaker v. Ameritech Corp., 129 F.3d 952, 956 (7th Cir. 1997). Here, the state trial
court in the foreclosure action held that HFC had a valid and enforceable mortgage
on Lockhart’s property, and entered a deficiency judgment against her for the loan
balance remaining after the foreclosure sale; and the appellate court subsequently
affirmed. See R. 158, Exs. F, G, H. Accordingly, res judicata bars the relitigation of
those issues through Lockhart’s RICO claims. See Henry v. Farmer City State Bank,
808 F.2d 1228, 1235-36 (7th Cir. 1986) (RICO claims barred by res judicata because
they attempted to relitigate the validity of a mortgage and could “impair the rights
established in the state court mortgage foreclosure proceedings”).
Nevertheless, Lockhart argues: (1) that no “decision in the state court
proceeding constituted a final decision on the merits of [Lockhart’s] RICO collection
of unlawful debt claim;” and (2) HFC was the only plaintiff in the state case and the
remaining defendants are not all in privity with it. R. 163 at 3. Lockhart’s first
argument fails, because res judicata “extends to all questions actually decided in a
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previous action as well as to all grounds of recovery and defenses which might have
been presented in the prior litigation.” Whitaker, 129 F.3d at 956 (citing La Salle
Nat’l Bank v. Cnty. Bd. of Sch. Trustees, 337 N.E.2d 19, 22 (Ill. 1975)). Even though
Lockhart didn’t bring a RICO claim in the state case, she could have, so res judicata
applies.
Further, Lockhart is simply wrong about the privity among the defendants.
The HSBC Defendants are members of the same corporate family. 2 See Aetna Cas. &
Sur. Co. v. Kerr-McGee Chem. Corp., 875 F.2d 1252, 1257 (7th Cir. 1989) (“same
parties” element can be satisfied “even though technically distinct corporate entities
are involved in the various pending actions” when their interests are “sufficiently
congruent”). And as HFC’s counsel, the FAL and Pilgrim Christakis Defendants are
in privity with HFC, too. See Henry, 808 F.2d at 1231, 1235 n.6 (bank’s attorneys
were in privity with the bank in case in which plaintiffs “sued everyone even remotely
connected with the mortgage foreclosures,” and the bank was the only “actual party”
to the state court foreclosure proceedings).
But even if res judicata does not apply to all of the defendants, issue preclusion
bars the RICO claims against each of them. Those claims depend on the alleged
invalidity of the mortgage, and there can be no dispute that that issue was
adjudicated on its merits and against Lockhart. See Allison W. v. Oak Park and River
According to the HSBC Defendants’ corporate disclosures, HFC is a wholly-owned
subsidiary of an entity which in turn is a wholly-owned subsidiary of HSBC Holdings
plc. And HSBC Mortgage is a wholly-owned subsidiary of another entity, which in
turn is also a wholly-owned subsidiary of HSBC Holdings plc. R. 9.
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Forest H.S. Dist. 200, 193 F. Supp. 3d 894, 897-98 (N.D. Ill. 2016) (issue preclusion
bars a party from relitigating an issue already litigated and determined in a previous
suit in which the party it is being asserted against was also a party, there was a final
judgment on the merits, and a full and fair opportunity to litigate the issue); see also
R. 158, Ex. F (state court order holding mortgage lien was “valid and subsisting”).
Accordingly, Lockhart’s RICO claims are now dismissed with prejudice. 3
FDCPA (Count IV; all defendants except Kaplan). Defendants next seek
dismissal of Lockhart’s FDCPA claim, including because they contend it is barred by
res judicata and the statute of limitations. The Court previously dismissed Lockhart’s
FDCPA claim with prejudice as barred by the one-year statute of limitations because,
Finally, even if the RICO claims were not barred, they fail because the SAC’s
generalized and conclusory allegations regarding the defendants’ alleged fraudulent
behavior come nowhere close to satisfying the enterprise element or Rule 9(b). Indeed,
they do not describe the core of the organization, and impermissibly lump the
defendants together. See, e.g., R. 152-1 ¶¶ 47, 50, 58 (alleging that Mssrs. Lindberg
and Pilgrim “acting by themselves or through or with other persons, associations
and/or companies, have formulated, directed, controlled, or participated in the acts or
practices of . . . all other Defendants named herein,” “Defendants conspired to collect
unlawful debt,” and “Defendants follow the directions of Defendants Lindberg and
Pilgrim to file fraudulent foreclosures, [and] to collect unlawful debts”); see also
Richmond v. Nationwide Cassel L.P., 52 F.3d 640, 645 (7th Cir. 1995) (“nebulous,
open-ended description of the enterprise does not sufficiently identify this essential
element of the RICO offense”); Vicom, Inc., 20 F.3d at 778 (RICO claim deficient for
“lump[ing] together multiple defendants”). Nor do they sufficiently allege a pattern
of racketeering activity. As in Drobny v. JP Morgan Chase Bank, N.A., the SAC refers
in conclusory fashion to “loans throughout Illinois and throughout the United States
that violate the laws identified herein,” but the only alleged “scheme” concerns the
foreclosure of Lockhart’s mortgage, and a “pattern” cannot be founded on injuries to
a single victim. 929 F. Supp. 2d 839, 849 (N.D. Ill. 2013) (dismissing RICO action
where plaintiffs made “conclusory references to ‘thousands of foreclosures,’ [but] the
only scheme that is set forth in any detail in the complaint” was with respect to the
plaintiff’s own mortgage); R. 152-1 ¶¶ 6, 51.
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“at the absolute latest, the statute of limitations came and went on September 7, 2008,
a year after [the state court foreclosure action] was filed,” and this action was not
filed until December 2013. R. 71 at 25. Even as replead, that continues to be the case.
In support of her argument otherwise, Lockhart posits only that “Defendants” sent
“letters” during the twelve-month period “leading to the filing of the foreclosure
complaint.” R. 163 at 10-11. But because the most recent foreclosure complaint was
filed in September 2007, this does not change the analysis, and her claim is dismissed.
FHA (Count V; HSBC Defendants). Lockhart repleads her FHA claim
against the HSBC Defendants, despite that the Court previously dismissed it with
prejudice as time-barred also. The HSBC Defendants argue that the claim remains
time-barred and is inadequately plead (among other things). Lockhart’s response
brief does not address these arguments or discuss her FHA claim at all, so the Court
considers it abandoned. See Alioto, 651 F.3d at 721. Accordingly, it too is dismissed.
HOEPA (Count VI; all defendants) and TILA (Count IX; MERS and
HSBC Defendants). Lockhart’s HOEPA claim was previously dismissed with
prejudice as to all but the MERS and HSBC Defendants, and her TILA claim was
dismissed with prejudice as untimely. As plead in the SAC, the HOEPA and TILA
claims again allege that Lockhart never received a notice of her right to rescind her
mortgage as required, and seek rescission and damages (respectively) as a result. 4
HOEPA was enacted in 1994 as an amendment to TILA. Among other things,
together, HOEPA and TILA grant borrowers the unconditional right to rescind a loan
within three business days of “the consummation of the transaction,” 15 U.S.C. §
1635(a), provided that if the creditor fails to comply with TILA’s various disclosure
4
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See R. 152-1 ¶¶ 86-88. But as discussed, Lockhart has abandoned all claims against
the MERS Defendants. And to the extent Lockhart intended to bring these claims
against the FAL or Pilgrim Christakis Defendants, they fail for the same reasons they
did previously. See R. 71 at 29 (dismissing HOEPA and TILA claims as to the Pilgrim
Christakis and FAL Defendants because law firms and attorneys are not “creditors”).
The HOEPA and TILA claims also fail as to the HSBC Defendants. Indeed,
Lockhart’s TILA claim for damages remains subject to a one-year statute of
limitations and is thus time-barred. See R. 71 at 30-31. And because the state court
concluded that Lockhart failed to prove the timely rescission of her mortgage in
response to her allegation otherwise, her HOEPA claim for rescission is precluded,
even assuming the Court could grant Lockhart the relief she seeks. See R. 158, Ex. 8
at 2, 10 (state court decision holding that Lockhart’s rescission claim was moot for
failure to perfect a stay of the enforcement of the order for possession, and noting that
“it is clear that we cannot grant Lockhart any meaningful relief with respect to the
property, since she no longer has any right, title, or interest”).
Interest Act (Count VII and VIII; HSBC Defendants5). Count VII alleges
that the HSBC Defendants are liable as assignees of a mortgage note that bears an
requirements, the borrower’s conditional right to rescind is extended to three years
post-consummation, 15 U.S.C. § 1635(f).
The SAC specifically states that Count VII is as to the HSBC Defendants, but makes
no specific statement regarding Count VIII. Nevertheless, the Court assumes based
on several references to “HSBC Defendants” within Count VIII—and the context in
which the allegations generally arise as well as the fact that this Court previously
dismissed the claims as to all but the HSBC Defendants—that it also is against solely
the HSBC Defendants.
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interest rate that exceeds 8% and provided for a prepayment penalty, in each case in
violation of the Interest Act. See generally R. 152-1 at 18-19. And Count VIII alleges
that the HSBC Defendants violated the Interest Act by imposing late fees and
collecting unlawful interest. Id. at 19-21. As discussed, this Court previously stayed
Lockhart’s Interest Act claims against the HSBC Defendants under Colorado River
because the “exact same claims” were before the state court. The state trial court held
at summary judgment that Lockhart’s Interest Act claims were preempted by the
Parity Act, and the appellate court affirmed. See R. 158, Ex. H at 13-17. Accordingly,
the Interest Act claims are barred by res judicata.
Punitive damages (Count X; all defendants). Finally, Lockhart’s claim for
punitive damages is dismissed because as in the 2014 Order, the Court has
“dismissed each of the claims that would arguably support it.” R. 71 at 38.
II.
Motion to Reconsider
The motions to dismiss resolved, the Court turns to Lockhart’s motion for
reconsideration of its 2014 Order. As stated, Lockhart previously (and unsuccessfully)
moved for reconsideration of that order soon after the opinion was issued. But the
Court allowed Lockhart to file the SAC when it lifted the stay on this case. And it was
only after the defendants filed their various motions to dismiss the SAC that Lockhart
moved for reconsideration of the 2014 Order a second time, this time asserting
“manifest errors of law and fact due to the failure to recognize controlling precedent.”
R. 168. But the Court is not convinced.
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A.
Standard
An interlocutory order “may be revised at any time before the entry of a
judgment adjudicating all the claims and all the parties’ rights and liabilities.” Fed.
R. Civ. P. 54(b). Motions brought under Rule 54(b) are construed under the same
standard applicable to motions under Rule 59(e). Morningware, Inc. v. Hearthware
Home Prods., Inc., 2011 WL 1376920, at *2 (N.D. Ill. Apr. 12, 2011). That is, a motion
to reconsider is appropriate “to direct the court’s attention to manifest errors of fact
or law, a significant change in the law or facts, the court’s misunderstanding of a
party’s argument, or a party’s contention that the court ruled on an issue that was
not properly before it.” Janusz v. City of Chi., 78 F. Supp. 3d 782, 787 (N.D. Ill. 2015).
But such a motion may not be used to “relitigat[e] arguments that the Court
previously rejected or . . . argu[e] issues that could have been raised during the
consideration of the motion presently under reconsideration.” Caine v. Burge, 897 F.
Supp. 2d 714, 717 (N.D. Ill. 2012) (citing Caisse Nationale de Credit Agricole v. CBI
Indus., 90 F.3d 1264, 1270 (7th Cir. 1996)). Indeed, a party moving for
reconsideration bears a heavy burden, Caisse Nationale de Credit, 90 F.3d at 1269,
1270; appropriate issues for reconsideration “rarely arise and the motion to
reconsider should be equally as rare,” Bank of Waunakee v. Rochester Cheese Sales,
Inc., 906 F.2d 1185, 1191 (7th Cir. 1990).
“Reconsideration of an interlocutory order is committed to the sound discretion
of this Court, and is reviewed very deferentially and will only be reversed upon a
showing that the Court abused its discretion.” Caine, 897 F. Supp. 2d at 717 (citing
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Finnsugar Bioproducts, Inc. v. Amalgamated Sugar Co., LLC, 244 F. Supp. 2d 890,
891 (N.D. Ill. 2002)).
B.
Analysis
Lockhart makes three arguments in support of her motion for reconsideration:
(1) the Court erred in holding that she had to file her lawsuit within three years of
the consummation of her loan in order to seek relief under TILA/HOEPA, and because
she did timely rescind, the dismissal of her rescission and FDCPA claims was
improper; (2) the Court erred in holding that her FHA claim was untimely; and (3)
the Court erred in applying Colorado River to stay the claims not dismissed because
the state courts lacked jurisdiction over them.
Lockhart’s argument as to her timely rescission improperly characterizes the
2014 Order. In that Order, the Court expressly acknowledged that “the statute does
not set forth a deadline for filing suit to enforce an obligor’s right of rescission; it only
provides a timeframe for pursuing rescission under 15 U.S.C. § 1635—i.e., the steps
to provide notice of one’s intent to seek rescission.” R. 71 at 32 (emphasis in original).
And because Lockhart alleged that she did not receive the required notice of her right
to rescind and that she sought rescission within three years, the Court allowed her
claim to proceed (subject to a stay under Colorado River). Ultimately, the state courts
determined that Lockhart failed to present evidence of her timely rescission, and
dismissed her claim. As discussed above, Lockhart is thus barred from relitigating
that issue and claim. And because Lockhart’s argument regarding the FDCPA
depends on this Court concluding that she did timely rescind, it fails without further
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analysis. See R. 168 at 3 (motion for reconsideration arguing that the FDCPA claim
survived because “the mortgage was effectively cancelled on May 1, 2006 after the
Defendants received Plaintiff’s notice of rescission and ignored it”).
Lockhart’s argument regarding her FHA claim also fails. As discussed above,
and regardless of the merits of her timeliness argument, Lockhart abandoned this
claim by failing to respond to the motions to dismiss it as plead in her SAC. She may
not now revive it by way of a motion to reconsider a ruling issued six years ago
concerning an earlier version of her complaint.
Nor does her argument regarding Colorado River have merit. According to
Lockhart, the Court’s decision to stay the claims not dismissed was improper,
because: (1) the state court lacked jurisdiction over her federal claim for rescission
under HOEPA/TILA; and (2) the state court did not have jurisdiction to consider the
foreclosure case for a third time. R. 168 at 5. But as to the first argument, Lockhart
misses that state courts are courts of general jurisdiction, and may hear federal
claims so long as they are not committed to the exclusive jurisdiction of the federal
courts. See Blount v. Stroud, 904 N.E.2d 1, 17 (Ill. 2009). A claim under HOEPA/TILA
is not. Further, while Illinois’s single-refiling rule generally does permit a plaintiff to
refile a case only once after voluntarily dismissing the same case, Lockhart has not
shown how the rule applies here. According to the allegations in both the FAC and
SAC, the state court foreclosure action underlying this case was the third foreclosure
action filed against Lockhart with respect to her mortgage loan. See generally R. 6; R.
152-1. But for the single-refiling rule to bar the third foreclosure action, both of the
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previous foreclosure actions would have to be the same; that is, based on the same
default date and principal balance amount. See Wells Fargo Bank, N.A. v. Norris, 83
N.E. 3d 1045, 1051-52 (Ill. App. Ct. 2017) (third foreclosure action not barred where
the second foreclosure action was based on a different default date and principal
balance). Lockhart’s argument regarding the single-refiling rule consists of a single
sentence that lacks the detail necessary to evaluate it—even assuming it is
appropriate for the Court to do so in the first place.
But more to the point, nothing prohibited Lockhart from advancing this same
argument in the state court foreclosure action, or raising her arguments in support
of her motion for reconsideration more generally in response to the defendants’
original motions to dismiss, and/or when she initially moved for reconsideration of
the 2014 Order. Indeed, the cases she cites were years old even then. Accordingly,
regardless of whether Lockhart’s arguments have merit, she cannot satisfy the
standard for the Court to reconsider its ruling. See Ahmed v. Ashcroft, 388 F.3d 247,
249 (7th Cir. 2004) (“Reconsideration is not an appropriate forum for rehashing
previously rejected arguments or arguing matters that could have been heard during
the pendency of the previous motion.”). Lockhart’s motion is denied.
Conclusion
For the reasons stated, Lockhart’s motion to reconsider is denied, R. 168, and
all of the motions to dismiss are granted with prejudice, R. 155, R. 157, R. 159, R.
160. Civil case terminated.
ENTERED:
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_______________________
Honorable Thomas M. Durkin
United States District Judge
Dated: October 19, 2020
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