County of Cook v. HSBC North America Holdings, Inc. et al

Filing 175

MEMORANDUM Opinion and Order Signed by the Honorable John Z. Lee on 5/30/18.Mailed notice(ca, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
COUNTY OF COOK,

)
)
Plaintiff,
)
)
v.
)
)
HSBC NORTH AMERICA HOLDINGS
)
INC.; HSBC FINANCE CORPORATION; )
HSBC MORTGAGE CORPORATION
)
(USA); HSB MORTGAGE SERVICES
)
INC.; HSBC USA INC.; HSBC BANK
)
USA; NATIONAL ASSOCIATION;
)
BENEFICIAL COMPANY LLC;
)
DECISION ONE MORTGAGE
)
COMPANY, LLC; HFC COMPANY LLC, )
)
Defendants.
)

14 C 2031
Judge John Z. Lee

MEMORANDUM OPINION AND ORDER
Plaintiff County of Cook (“the County”) has filed claims under the Fair
Housing Act (“FHA”), 42 U.S.C. §§ 3601–19, against Defendant HSBC North
America Holdings, Inc., and its various subsidiaries and affiliates (together,
“HSBC”).

The County claims that HSBC discriminatorily targeted minority

homeowners in Cook County with high-priced predatory subprime mortgage loans
and has serviced and foreclosed on those loans in a discriminatory manner.
According to the County, these business practices harmed the County by imposing
on it out-of-pocket costs for governmental eviction and foreclosure processes, as well
as for various social services for evicted homeowners. The County also alleges it
lost out on property tax income from foreclosed, abandoned, and vacant properties,

1

as well as neighboring properties, and income from property recording taxes,
intangible taxes, and transfer fees. The County also asserts that HSBC’s practices
injured the fabric of its communities and caused general urban blight.
HSBC moves to dismiss the County’s Second Amended Complaint
(“Complaint”). For the following reasons, HSBC’s motion to dismiss is granted in
part and denied in part.
Factual Background 1
Beginning in 2003, HSBC engaged in a rampant predatory-lending business
program in the subprime mortgage market, which targeted African-American and
Latino borrowers in Cook County, Illinois. See generally 2d Am. Compl.; id. ¶¶ 1–
13, 50–58.

This program—which the County describes as “equity stripping,”

because it effectively diluted or eliminated the equity that borrowers had in their
homes—comprised numerous components.
A.

Discriminatory Marketing

First, HSBC intentionally targeted and marketed predatory loan offerings to
borrowers in predominantly minority areas.

See id. ¶¶ 53, 73, 77–79, 84–105.

HSBC used sophisticated algorithmic modeling to target minority borrowers, as
well as software programs to process credit bureau information, in an effort to
identify consumers likely to respond to subprime mortgage marketing materials.
See id. ¶¶ 84–94.

HSBC perceived minority borrowers as being particularly

The Court assumes the factual allegations in the Complaint are true and draws all
possible inferences in the County’s favor. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th
Cir. 2008).

1

2

susceptible to its predatory offerings, because such borrowers traditionally lacked
access to low cost credit, and because borrowers whose first language was not
English had more difficulty evaluating the terms, conditions, and risks of the loan
agreements. Id. ¶¶ 85, 87–88.
In addition to originating these subprime loans, HSBC also purchased them
from other subprime lenders. Id. ¶¶ 150–184, 198–99. Because the Home Mortgage
Disclosure Act (“HMDA”) did not require HSBC to report the ethnicity of borrowers
for loans that it purchased from third parties, it reported race or ethnicity on only
141 of the 19,384 mortgage loans it purchased for properties in Cook County
between 2004 and 2007, obscuring the racial impact of its practices. Id. Along
similar lines, the County also alleges that HSBC used the Mortgage Electronic
Registration System, Inc., (“MERS”) to hide its predatory practices. 2
B.

Discriminatory Pricing

After HSBC successfully generated leads, it charged minority borrowers
higher prices—even after controlling for variables such as credit risk—for mortgage
loans, as compared to similarly situated nonminority borrowers. See id. ¶¶ 9, 14,
83, 104–22, 136–49. HSBC accomplished this by, among other things, incentivizing
According to the Complaint, MERS is “an entity that Defendants and other industry
participants created to circumvent proper public recording processes, facilitate the transfer
and distribution of mortgage loans among Defendants’ corporate structure and
securitization instruments, and obfuscate the chain of liability in the foreclosure process.”
Id. ¶ 189. MERS “enable[ed] mortgage lenders to privately originate, track, assign and/or
trade mortgage loans, circumventing the entire public recording process.” Id. ¶ 205. This
in turn made it extremely difficult for the public “to determine from publicly available
data which Defendants hold the mortgages to, are in possession of, and/or are or may be
foreclosing on properties in Plaintiff’s communities and neighborhoods, further
obfuscating the predatory and discriminatory lending practices of Defendants and other
industry participants.” Id. ¶ 210.
2

3

its employees to ignore or circumvent conventional underwriting criteria to “steer”
minority borrowers to riskier and higher cost loan products, which often had higher
default rates. Id. ¶¶ 129–49.
Data collected pursuant to the HMDA and analyzed by the Federal Reserve
confirms these pricing disparities. See id. ¶¶ 56–66. The Federal Reserve analysis
shows that, on average, African-American borrowers were 3.1 times more likely
than nonminority borrowers to receive a higher-rate home loan; Latino borrowers
were 1.9 times more likely. See id. ¶ 61. Other statistics show similar patterns:
African-Americans were 37.5 percent more likely to receive a higher-priced
conventional home-purchase loan and 28.3 percent more likely to receive a higherpriced refinance loan. See id. ¶¶ 62–63. A U.S. Department of Housing and Urban
Development study found that, in neighborhoods where at least 80% of the
population was African-American, borrowers were 2.2 times more likely to refinance
with a subprime lender. See id. ¶ 64. Additionally, HSBC’s own publicly reported
HMDA data evidences similar disparities. Id. ¶¶ 67, 142–49.
C.

Discriminatory Foreclosure-Related Activities

While HSBC often sold the mortgage notes to third parties, it retained the
right to service and foreclose on the subprime loans it originated and purchased. Id.
¶ 283.

For loans that it serviced but did not own, HSBC had an incentive to

foreclose, rather than offer loss mitigation options (such as loan modifications),

4

because HSBC earned fees for doing so without having to bear the investment risk.
Id. ¶¶ 283–88. 3
HSBC foreclosed on minority homeowners at a higher rate than similarly
situated nonminority homeowners. Id. ¶¶ 262–305. For example, based on publicly
available data, during a period of twelve years prior to the County’s filing of the
Complaint, HSBC was 2.3 times more likely to foreclose on a home in a
neighborhood with 31–50% minority homeowners, as compared to a neighborhood
with 30% or fewer minority homeowners.

Id. ¶ 275.

As the concentration of

minority homeowners increased to 50–70%, HSBC was 3.8 times more likely to
foreclose. Id. The rate of foreclosures rose as the rate of minority home ownership
in a neighborhood rose. Id.
HSBC engaged in several business practices that contributed to these results.
For example, HSBC failed to adequately provide loss mitigation options to minority
homeowners, as compared to similarly situated nonminority homeowners.

Id.

¶ 292. HSBC also filed foreclosure lawsuits against minority borrowers, without
ensuring that the necessary mortgage loan documents were properly endorsed or
assigned and in the possession of the appropriate party. Id.
D.

Ongoing Practices

Although HSBC stopped originating and purchasing subprime loans in 2007,
the County claims that HSBC has continued to impose discriminatory pricing terms
For loans that HSBC retained, it had an economic incentive to avoid foreclosures so
that it could avoid writing down the value of its loan portfolio. Id. ¶ 289. In those
instances, HSBC did not foreclose even though borrower may have defaulted on the note
and abandoned the property. Id. ¶¶ 289–90.
3

5

and has serviced and foreclosed on the predatory loans in a discriminatory manner.
See id. ¶¶ 282–305. The County believes that this is borne out by publicly available
data regarding HSBC’s foreclosures in Cook County between March 2012 and
March 2014 and, again, between June 2015 and April 2017, which shows that
HSBC initiated foreclosure proceedings at a higher rate for minority borrowers. Id.
¶¶ 277–81.
E.

The County’s Alleged Injuries

As a result of HSBC’s conduct, the County claims that it has been harmed by
having to incur additional costs related to conducting judicial and non-judicial
foreclosure-related processes; serving eviction and foreclosure notices; registering
and monitoring foreclosed properties; inspecting, securing, maintaining, and/or
demolishing foreclosed properties; and providing various types of social services to
evicted or foreclosed homeowners. Id. ¶¶ 5, 33, 321, 348.
Additionally, the County seeks as damages the loss of tax and other income
related to foreclosed, abandoned, and vacant properties (as well as neighboring
properties that declined in value) and the resources that it had to provide to
communities that suffered from the resulting urban blight. Id. The County believes
that it will be able to prove these damages at trial with statistical evidence and
expert testimony. Id. ¶ 349.
Finally, the County seeks damages for the recording fees, transfer fees, and
intangible tax income it lost when HSBC used MERS to allegedly obscure its

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transactions from public recording systems in an effort to hide its race-based
activities. Id. ¶¶ 5, 33, 321.
F.

The County’s Claims

In Count I, the County claims that HSBC’s predatory program has
disparately impacted minority borrowers in violation of the FHA. Id. ¶¶ 350–73. In
Count II, the County alleges that the foreclosure component of HSBC’s program,
standing alone, has disparately impacted minorities in violation of the FHA. Id.
¶¶ 374–87.

In Count III, the County contends in the alternative that HSBC’s

practices have constituted disparate treatment of minority borrowers. Id. ¶¶ 388–
96.
HSBC has moved to dismiss all three counts. It argues that the County has
failed to adequately plead that HSBC’s conduct was the proximate cause of the
County’s injuries; state disparate-treatment and disparate impact claims; file its
claims in a timely fashion; and adequately plead that various HSBC subsidiaries
and affiliates named as Defendants were involved in the alleged conduct.
Legal Standards
To survive a motion to dismiss pursuant to Rule 12(b)(6), the complaint must
“state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The
factual allegations in the complaint must at least “raise a right to relief above the
speculative level.” Bell Atl. Corp., 550 U.S. at 555. The Court must accept as true
all well-pleaded allegations in the complaint and draw all possible inferences in the

7

plaintiff’s favor. See Tamayo, 526 F.3d at 1081. Mere legal conclusions, however,
“are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 679.
Moreover, the County must plausibly plead that its injuries were proximately
caused by a violation of the FHA. Bank of Am. Corp. v. City of Miami, Fla., 137 S.
Ct. 1296, 1306 (2017).
Analysis
I.

Proximate Cause
A.

City of Miami and Directness Principles

HSBC’s principal argument is that the County’s claims should be dismissed
because the County’s allegations are insufficient to show that HSBC’s challenged
conduct was the proximate cause of the County’s injuries. Defs.’ Mem. Supp. at 4–
12.

As both sides recognize, the controlling case is the Supreme Court’s recent

decision in Bank of Am. Corp. v. City of Miami, Fla., 137 S. Ct. 1296 (2017).
There, the City of Miami alleged that Bank of America and Wells Fargo
intentionally issued risky mortgages on terms less favorable to minority customers
than similarly situated white customers. Id. at 1301. Much like here, the city
alleged that these lending practices adversely impacted the racial composition of the
city; impaired its goals of promoting racial integration and desegregation; frustrated
its interest in promoting fair housing; and disproportionately caused foreclosures
and vacancies in minority communities. Id. The foreclosures, in turn, decreased
the property value of both the foreclosed homes and other homes in Miami

8

neighborhoods and, concomitantly, reduced tax revenues and forced the city to
spend more for municipal services in blighted neighborhoods. Id. at 1301–02.
Noting the “broad reach” of the term “aggrieved person” as defined in the
FHA, the Supreme Court reaffirmed its prior holding that Congress intended “to
define standing [in the FHA] as broadly as is permitted by Article III of the
Constitution.” Id. at 1303 (citations and internal quotations omitted). From this,
the Supreme Court held that the financial injuries alleged by Miami as a result of
the banks’ actions fell with “the zone of interest that the FHA protects,” id. at 1304.
As to the question of causation, however, the Supreme Court took a more exacting
approach.
The Eleventh Circuit had held that Miami’s allegations satisfied the
causation requirement, because the city had “plausibly alleged that its financial
injuries were foreseeable results of the Banks’ misconduct.”

Id. at 1305.

The

Supreme Court disagreed with this broad foreseeability test, holding that
“foreseeability alone is not sufficient to establish proximate cause under the FHA.”
Id.

This is because “[t]he housing market is interconnected with economic and

social life.” Id. at 1306. Thus, the Supreme Court observed, a FHA violation could
“be expected to cause ripples of harm to flow far beyond the defendant’s
misconduct.” Id. (internal quotations and citations omitted). And “[n]othing in the
statute suggests that Congress intended to provide a remedy wherever those ripples
travel.” Id.

9

Instead, the Court concluded, “[p]roximate cause under the FHA requires
‘some direct relation between the injury asserted and the injurious conduct
alleged.’” Id. (citing Holmes v. Secs. Investor Prot. Corp., 503 U.S. 258, 268 (1992)).
Noting its prior importation of directness principles from tort law to statutory
damages claims, id. (citing Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 457
(2006)), the Supreme Court observed that “[t]he general tendency in these cases, in
regard to damages at least, is not to go beyond the first step.” Id. (quoting Hemi
Group, LLC v. City of New York, 559 U.S. 1, 10 (2010)). And “[w]hat falls within
that ‘first step’ depends in part on the nature of the statutory cause of action,” id.
(citing Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1390
(2014), as well as “an assessment of what is administratively possible and
convenient,” id. (citing Holmes, 503 U.S. at 268). 4
As to how these directness principles might apply to Miami’s claims, the
Supreme Court declined to say, leaving for the lower courts to “define, in the first
instance, the contours of proximate cause under the FHA and decide how that
standard applies to the City’s claims for lost property-tax revenue and increased
municipal expenses.” Id. at 1306. And that is our task here. But, at the outset, it
is helpful to examine the trio of cases cited in City of Miami—Anza, Hemi Group,
and Lexmark.

The latter analysis includes whether better situated plaintiffs would have an
incentive to sue, whether there would be a risk of duplicative recoveries, and “the general
interest in deterring injurious conduct, since directly injured victims can generally be
counted on to vindicate the law as private attorneys general, without any of the problems
attendant upon suits by plaintiffs injured more remotely.” Holmes, 503 U.S. at 269–70.
4

10

In Anza, 547 U.S. 451, the plaintiff, Ideal, brought civil RICO claims against
its competitor, Anza, alleging that Anza had harmed Ideal when Anza “defraud[ed]
the New York tax authority” by failing to pay its share of state taxes. As Ideal saw
it, because Anza had paid lower taxes to the State of New York than it was legally
required to do, it was able to offer lower prices to customers, thereby taking
customers away from Ideal.

See id.

Although it acknowledged that Ideal had

alleged a real injury in the form of lost business, the Supreme Court nevertheless
found that Ideal had failed to allege that Anza’s purported violation of civil RICO
was the proximate cause of its harm.
In arriving at this conclusion, the Supreme Court applied the “common-law
foundations of the proximate-cause requirement” that it had articulated in Holmes,
503 U.S. 258, and “specifically the demand for some direct relation between the
injury asserted and the injurious conduct alleged.” Id. at 457 (quoting Holmes, 503
U.S. at 268).

Noting “the difficulty that can arise when a court attempts to

ascertain the damages caused by some remote action,” the Court observed the
“discontinuity” that “Ideal’s lost sales could have resulted from factors other than
[Anza’s] alleged acts of fraud.” Id. at 459. Finally, the Court also remarked that
the “requirement of a direct causal connection is especially warranted where the
immediate victims . . . can be expected to vindicate the laws by pursuing their own
claims”—which, in that case, was the State of New York. Id. at 460.
Later, in Hemi Group, 559 U.S. 1, the City of New York commenced a RICO
claim against certain out-of-state cigarette retailers, claiming that the defendants

11

had “committed fraud by selling cigarettes to city residents and failing to submit
the required customer information to the State.” Id. at 10. The City argued that it
was injured because, by keeping customer information from the State, the
defendants prevented the State from conveying the information to the City, and,
without the information, the City “could not determine which customers had failed
to

pay

the

[City’s

cigarette]

tax”

and

“could

not

pursue

them

for

payment.” Id. Pointing to its articulation in Holmes that “[t]he general tendency of
the law, in regard to damages at least, is not to go beyond the first step,” id. at 10
(citing Holmes, 503 U.S. at 271-272), the Supreme Court found that the city’s
allegations did not satisfy the proximate cause requirement. “Here, the conduct
directly responsible for the City's harm was the customers' failure to pay their
taxes,” while “the conduct constituting the [RICO violation] was Hemi’s failure to
file Jenkins Act reports.” Id. at 11. Thus, the Supreme Court concluded, the
conduct that directly caused the harm was distinct from the conduct that gave rise
to the fraud. Id.
The last in the trio of cases is Lexmark, 134 S. Ct. 1377. That case involved a
disputed between Lexmark, a manufacturer of printers and associated toner
cartridges, and Static Control, a supplier of certain components to companies that
remanufactured toner cartridges for Lexmark printers.

Id. at 1384.

These

“remanufacturers” purchased used Lexmark toner cartridges, refurbished them,
and sold them in competition with new and refurbished cartridges sold by Lexmark.
Id. at 1383. Lexmark sued Static Control, and in return Static Control countersued

12

Lexmark, claiming that Lexmark had violated § 43 of the Lanham Act, 15 U.S.C. §
1125(a), by misleading consumers into thinking that they had to return their used
Lexmark cartridges to Lexmark (as opposed to the remanufacturers) and by
misleading remanufacturers into believing that they were legally prohibited from
using Static Control’s products to refurbish used Lexmark cartridges. Id. at 1384.
In response, Lexmark argued that Static Control lacked standing, because the
statements at issue were directed at consumers and remanufacturers and, thus,
whatever injury Static Control may have suffered was too remote and not
proximately caused by Lexmark. Id. at 1385.
The Supreme Court disagreed. Recognizing the general presumption that “a
statutory cause of action is limited to plaintiffs whose injuries are proximately
caused by violations of the statute,” the Court first observed that “the proximatecause requirement generally bars suits for alleged harm that is ‘too remote’ from
the defendant’s unlawful conduct.” Id. at 1390. But it found that Static Control
satisfied the proximate cause requirement for at least two reasons. First, to the
extent that Static Control alleged that Lexmark’s statements harmed its reputation
with its customers (i.e., the remanufacturers), “the plaintiff’s injury flows directly
from the audience’s belief in the disparaging statements.” Id. at 1393. Second, the
Supreme Court held that “Static Control adequately alleged proximate causation by
alleging that it designed, manufactured, and sold microchips that both (1) were
necessary for, and (2) had no other use than, refurbishing Lexmark toner
cartridges.” Id. at 1394. This was so because “[t]aking Static Control’s assertions at

13

face value, there is likely to be something very close to a 1:1 relationship between
the number of refurbished . . . cartridges sold (or not sold) by the remanufacturer
and the number of . . . microchips sold (or not sold) by Static Control.” Id.
Notably, the Supreme Court recognized that, because the pathway from
Lexmark’s alleged fraudulent statements to Static Control’s injuries went through
“the intervening link of injury to remanufacturers,” the allegations “might not
support standing under a strict application of the ‘general tendency’ not to stretch
proximate causation ‘beyond the first step.’” Id. (quoting Holmes, 503 U.S. at 271).
But the Court nevertheless found that the “discontinuity” that typically existed
between the injury to the direct victim and the injury to the indirect victim was
absent, because “Static Control’s allegations suggest that if the remanufacturers
sold 10,000 fewer refurbished cartridges because of Lexmark's false advertising,
then it would follow more or less automatically that Static Control sold 10,000 fewer
microchips for the same reason, without the need for any speculative . . .
proceedings or intricate, uncertain inquiries.” Id. (internal quotations and citation
omitted).

Given these “relatively unique circumstances,” the remanufacturers

were not “more immediate victims[s] than Static Control.” Id. (internal quotations
and citation omitted).
All told, the directness requirement discussed in these cases “obviates the
difficulty in assessing damages from indirect injuries; avoids complicated rules for
apportioning damages among several injured parties with greater or lesser injuries;
and provides the requisite level of deterrence for . . . tortfeasors.” RWB Servs., LLC

14

v. Hartford Computer Grp., Inc. 539 F.3d 681, 688 (7th Cir. 2008); see James Cape &
Sons Co. v. PCC Const. Co., 453 F.3d 396, 403–04 (7th Cir. 2006) (stating that
injury was outside the scope of proximate cause where the plaintiff could not show
what portion of its lost market share was attributable to the defendant’s actions).
With these principles in mind, we turn to the County’s claims in this case.
B.

The County’s Alleged Injuries

As HSBC sees it, the various injuries alleged by the County are too
attenuated from HSBC’s alleged discriminatory loan origination practices to satisfy
the proximate cause requirement under the FHA. It is simply too “speculative,”
HSBC argues, to believe that the purported predatory lending practices would
inexorably lead to increased foreclosures, or that such foreclosures would lead to
vacant lots and urban blight, much less result in additional costs to the County.
For its part, the County counters that HSBC focuses too myopically on its
origination activities, while ignoring the other components of the alleged predatory
lending program, such as HSBC’s discriminatory servicing, loss mitigation, and
foreclosure practices, which are more closely linked to the resulting foreclosures and
alleged harms. And, where the relationship between the harms and the challenged
conduct may be more attenuated, the County urges the Court to be mindful of the
statutory purposes of the FHA, which are broader and more remedial than those of
RICO and the Clayton Act. To HSBC, it is the County that engages in a sleight of
hand, and HSBC argues that the Complaint lacks any allegations that it

15

discriminated against minority borrowers in servicing loans and prosecuting
foreclosures.
But the Complaint does assert that HSBC engaged in loan servicing and
foreclosure-related practices that discriminated against minorities. For example,
the County alleges that HSBC engaged in discriminatory loan servicing and loss
mitigation practices that resulted in more foreclosures for minority borrowers as
compared to nonminority borrowers. See, e.g., 2d Am. Compl. ¶ 292. The County
also claims that HSBC discriminated against minority borrowers in the way it
handled the resulting foreclosure proceedings. Id. Moreover, the County supports
these claims with preliminary HMDA data indicating—at least in the County’s
eyes—that HSBC foreclosed on minorities at higher rates than similarly situated
white homeowners. See id. ¶¶ 262–305.
What is more, according to the County, HSBC’s racially discriminatory loan
servicing and loss mitigation practices were “part and parcel” of its overall
predatory lending scheme directed at minority communities. See 2d Am. Compl. at
¶¶ 291, 350–73, 388–96; see generally 2d Am. Compl; see also Dekalb Cty. v. HSBC
N. Am. Holdings, Inc., 2013 WL 7874104, at *10 (N.D. Ga. Sept. 25, 2013)
(describing complaint as alleging that foreclosure and loan servicing were “the last
component” of a discriminatory subprime lending program). In short, as portrayed
in Counts I and II, HSBC engaged in a comprehensive equity-stripping program
targeted at minority borrowers by engaging in predatory loan origination practices
as well as discriminatory loan servicing practices (including less-favorable loss

16

mitigation and race-based foreclosure practices), all of which resulted in more
foreclosures for minority borrowers. See 2d Am. Compl. ¶¶ 350–73, 388–96. 5
In this way, the allegations differ materially from those in City of Miami,
where the City relied solely on the lenders’ initial loan origination practices. See
City of Miami, 137 S. Ct. at 1301; City of Miami, 2014 WL 3362348, at *5. That left
open the possibility that the foreclosures in Miami could have been caused by a
wide array of factors outside of the lenders’ control. In contrast, here, the County
has pointed to HSBC’s purportedly discriminatory loan servicing, loss-mitigation,
and foreclosure practices, which the County contends are more directly linked to the
greater number of foreclosures experienced by minority borrowers.
From this, the question becomes whether the County alleges a sufficiently
direct relationship between HBSC’s conduct and the various injuries it claims it has
suffered.

As explained below, the Court concludes that several of the County’s

claimed injuries are too attenuated from HBSC’s challenged conduct to proceed,
while others bear a sufficiently direct relationship to the alleged wrongs to survive
HSBC’s motion to dismiss.
1.

Certain “Out-of-Pocket” Costs

The County asserts that it has suffered damages in the form of certain out-ofpocket costs, including the costs associated with serving eviction notices, conducting

HSBC cites to Hemi, 559 U.S. at 13, for the proposition that a plaintiff may not simply claim
that a particular action was part of a general “scheme” to evade the proximate-cause requirement.
Defs.’ Mem. Supp. at 7. But, in Hemi, the plaintiff relied upon acts other than the predicate acts
that actually gave rise to the RICO claim in order to establish proximate cause. Here, the County
has alleged that HSBC’s servicing, loss mitigation, and foreclosure practices were, in and of
themselves, discriminatory.
5

17

judicial and administrative foreclosure procedures, and registering and inspecting
foreclosed homes. Assuming the truth of the County’s allegations, the relationship
between HSBC’s discriminatory actions (such as its servicing and foreclosure
practices related to minority borrowers’ loans) and these additional costs is clear:
HSBC’s discriminatory conduct forced more minority borrowers into foreclosure
proceedings, and this caused the County to incur more foreclosure-related costs
than it would have otherwise. The County is therefore within the “first step” of
injury. Cf., e.g., Hemi, 559 U.S. at 10–12.
A review of what is “administratively possible and convenient,” see City of
Miami, 137 S. Ct. at 1306; Holmes, 503 U.S. at 268, confirms this conclusion. There
is little risk of duplicative recovery because the injury flowed directly to the County.
Nor is there a better situated plaintiff that would have an incentive to sue or could
be counted on to vindicate the law. See Holmes, 503 U.S. at 269–70. Additionally,
the County plausibly alleges that statistical analysis of data obtained from HSBC in
discovery will allow it to prove which of HSBC’s foreclosures were discriminatory
and that it can tally its out-of-pocket expenses for those foreclosures.

Cf., e.g.,

Hartford Computer Grp., 539 F.3d at 688 (noting that indirect injuries are likely to
present difficulty in assessing and attributing damages). Of course, discovery may
reveal otherwise, but the County’s allegations as to these particular out-of-pocket
damages are sufficient to survive the pleading stage.

18

2.

Costs of Social Services to Foreclosed Homeowners

The County’s claim for the costs of social services it provided to foreclosed
minority homeowners is more complicated. Whether and to what extent the County
needs to provide services to foreclosed homeowners presumably depends on a
multitude of factors individual to each homeowner. For example, some borrowers
may have had other assets, continuing employment, or access to funds that allowed
them enough money for housing, food, and other necessities, even after foreclosure.
Others may have decided to move out of the County altogether looking for better
opportunities. Still others may have faced dire financial and personal hardship as a
result of the discriminatory practices and required a great deal of County
assistance. Whatever the case, to the extent that the County incurred additional
costs for social services, such injuries are derivative of the injury that HSBC caused
to the minority borrowers themselves and, therefore, insufficient to satisfy the
directness requirement. 6 See Mendelovitz, 40 F.3d at 187; see also Sidney Hillman,
192 F. Supp. 3d at 971–72 (finding proximate cause not satisfied where
“establishing damages would require individualized inquiries . . . creating
difficulties in assessing damages that the directness requirement was intended to
prevent”).
To the extent the County may be more or less automatically required to provide
certain services to foreclosed homeowners regardless of their injuries, that might change
the analysis. See BCS Servs., Inc., 637 F.3d at 757 (observing that a “straightforward”
intervening cause and effect did not “weaken the inference” of proximate causation); Sidney
Hillman, 192 F. Supp. 3d at 971 (citing BCS Servs, Inc. for the proposition that “automatic”
intervening events can be discounted in a proximate cause analysis). However, the County
does not make that allegation, nor does it allege sufficient facts to allow the Court to draw
that inference.
6

19

In response, the County argues that, by its terms, the FHA warrants a more
expansive definition of proximate cause than the definition utilized in the Supreme
Court cases discussed above and asks the Court to consider whether there are
better suited plaintiffs to recover for damages and whether the goal of deterrence
would be served. See Holmes, 503 U.S. at 269–70 (instructing courts to consider
these factors to help inform what falls within the “first step”).
As to the first inquiry, there is no obvious, better-suited plaintiff—
governmental or private—to recover the damages that the County seeks here. That
said, the goal of deterring similar discriminatory conduct would be adequately
served in this case, even if the County could not recover its costs of social services to
foreclosed homeowners. The County has other viable claims of injury, and HSBC
will be subjected to significant discovery, as well as the risk of significant financial
loss and public disrepute. Therefore, expanding proximate cause beyond the
traditional “first step” for this claim would only marginally, if at all, increase
deterrence and would likely be outweighed by the difficulties of establishing
causation as outlined above.

Accordingly, HSBC’s motion to dismiss as to the

County’s claim for increased social services costs is granted.
3.

Loss of Property Tax Revenue from Foreclosed
Properties

The County’s claim for lost property tax revenue on HSBC-foreclosed
properties 7 fares no better. To the extent the County is alleging that it suffered
The County alleges “lost property tax revenue on . . . properties that have not been
recovered via tax lien sales,” 2d Am. Compl. ¶ 321, and “the erosion of Plaintiff’s tax base
due to reduced property values on foreclosed properties . . .,” id.
7

20

because HSBC’s conduct harmed minority borrowers by causing unnecessary
foreclosures and, as a result, the minority borrowers no longer paid property taxes
to the County, this claim falls squarely within the Supreme Court’s holding in
Hemi. The harms caused by HSBC to the minority borrowers were direct, while the
injury of unpaid taxes to the County was indirect. Indeed, there could be a number
of intervening factors that would need to be accounted for.

For example, some

homeowners may have been behind in paying their real estate taxes (due to
financial difficulties) even before the foreclosures. There could be instances where
the property was purchased soon after the foreclosure and any outstanding property
taxes were then paid. There could be instances where the servicing company paid
the outstanding property taxes post-foreclosure. These are just a few illustrations
of the indirectness of the County’s harm.
To the extent the County’s claim of injury from lower tax revenue is
predicated not on a homeowner’s failure to pay, but rather on a diminishment in a
property’s value post-foreclosure, this introduces significant concerns about
measuring the diminishment in value attributable to HSBC’s conduct, as opposed to
other external factors, such as the state of the general real estate market and the
demand for houses on a neighborhood by neighborhood basis. See, e.g., James Cape
& Sons Co., 453 F.3d at 403–04 (“[Plaintiff] cannot show what portion of its ‘lost
market share’ is attributable to the bids lost to the bid-rigging scheme”); Cty. of
Cook v. Wells Fargo & Co., 115 F. Supp. 3d 909, 920 (N.D. Ill. 2015) (stating that

21

the County’s claim to a reduced property tax base “failed to plausibly allege that
[the] injur[y] w[as] proximately caused by” defendant lender’s actions).
For these reasons, the Court holds that the County has pleaded insufficient
facts to establish that its claim for lost property tax revenue is sufficiently direct,
and HSBC’s motion to dismiss this claim is granted.
4.

Loss of Property Tax Revenue from Abandoned and
Vacant Properties

The County also seeks to recover lost tax revenue from abandoned or vacant
properties.

Because the County distinguishes these properties from foreclosed

properties, see 2d Am. Compl. ¶ 321, the Court presumes that the County refers to
abandoned or vacant properties in the vicinity of homes foreclosed upon by HSBC.
The County’s causation theory as to these properties is similarly unilluminated by
the Complaint, and it is unclear how HSBC’s conduct would be the but-for cause of
the failure or inability of these homeowners to pay their property taxes. And, to the
extent the County’s claim of injury from lower tax revenue might instead be
predicated on a diminishment in the value of these properties, this claim too raises
a myriad of possible intervening causes. HSBC’s motion to dismiss this claim of
injury is accordingly granted.
5.

Loss of “Various Revenue” from Abandoned or Vacant
Properties

Additionally, the County seeks to recover for a loss of unspecified “various
revenue” (separate from property tax revenue) from abandoned or foreclosed
properties.

Id.

But it is unclear from the Complaint exactly what the County

22

means by “various revenue,” and the Court is unable to determine if this injury falls
within the scope of proximate cause of HSBC’s alleged conduct.

Thus, HSBC’s

motion to dismiss this claim of injury is granted.
6.

Diminution of Property Values of Other Homes

If the administrative difficulty in measuring and apportioning to the County
the damages from a reduction in property value on HSBC-foreclosed homes appears
daunting, the difficulties with surrounding homes is all the more so. The County’s
injuries would be derivative of any number of external factors as well as the conduct
of other homeowners and lenders. See, e.g., James Cape & Sons, 453 F.3d at 403–
04; Cty. of Cook, 115 F. Supp. at 920; see also Hartford Computer Grp., 539 F.3d at
688. HSBC’s motion to dismiss this claim of injury is accordingly granted.
7.

Costs of Demolishing Foreclosed Homes

The County asks the Court to award it the costs it incurred in demolishing
homes of minority borrowers that were subject to HSBC foreclosures.

But the

County’s decision to demolish a home also may be dependent upon any of number
intervening factors, such as the condition of the house pre-foreclosure, whether the
home was vandalized or otherwise in disrepair post-foreclosure while it was waiting
sale, and the strength of the local housing market. See, e.g., James Cape & Sons,
453 F.3d at 403–04; Cty. of Cook, 115 F. Supp. at 920; see also Hartford Computer
Grp.,, 539 F.3d at 688.

Furthermore, the Complaint does not provide any

description of how HSBC’s alleged conduct led to the demolitions.
HSBC’s motion to dismiss claims as to this injury is granted.

23

Accordingly,

8.

Urban Blight

The County also seeks damages for the “necessary reallocation” of its
resources and other injuries to the fabric of its communities arising from “the
resulting urban blight.” 2d Am. Compl. ¶ 33. But the line from HSBC’s alleged
discriminatory conduct to “urban blight” winds through too many other potential
causes—such as the economic downturn in 2008, the general state of the
communities before and after the foreclosures at issue, and the impact of the Great
Recession on these communities—to satisfy the proximate cause requirement.
HSBC’s motion to dismiss this claim of injury is accordingly granted.
9.

Recording, Transfer, and Intangible Fees

Lastly, the County claims that it lost recording, transfer, and intangible fees
due to HSBC’s practice of using the MERS database to track, transfer and trade
mortgage loans in furtherance of its discriminatory scheme.

Id. ¶¶ 204–13.

Assuming that HSBC’s use of the MERS database was improper, the County states
a squarely direct relationship between HSBC’s use of the MERS database and the
County’s resulting loss of recording income. As such, HSBC’s motion to dismiss as
to these injuries is denied. 8

HSBC also asserts, in passing, that the County is barred from recovering any costs
for municipal services under the “municipal cost recovery rule” (or “free public services
doctrine”). Defs.’ Mem. Supp. at 9 n.6. In support, HSBC cites to the Illinois Supreme
Court case City of Chi. v. Beretta U.S.A., 821 N.E.2d 1099, 1144 (Ill. 2004). But HSBC
provides no explanation as to why state law would govern this issue in an FHA case, nor
does it cite to any Seventh Circuit authority on this issue. See Defs.’ Mem. Supp. at 9 n.6.
Given the perfunctory nature of HSBC’s argument, the Court finds that it has been waived.
See, e.g., Kudlicki v. MDMA, Inc., No. 05 C 2589, 2006 WL 1308617, at *2 n.1 (N.D. Ill. May
10, 2006) (finding “cursory” argument “buried in footnote” waived) (citing Estate of
Moreland v. Dieter, 395 F.3d 747, 759 (7th Cir. 2005) (“Perfunctory or undeveloped
8

24

D.

Summary of Proximate Cause

In sum, the Court holds that the County has plausibly alleged that the
additional costs that it incurred to serve eviction notices, conduct judicial and
administrative foreclosure procedures, and register and inspect foreclosed homes
were proximately caused by HSBC’s alleged discriminatory conduct. Additionally,
the County has also plausibly alleged that its loss of recording, transfer, and
intangible tax income were proximately caused by HSBC’s allegedly improper use of
MERS as part of its predatory lending program. HSBC’s motion to dismiss the
County’s other alleged injuries is granted.
II.

The County’s Disparate-Treatment Claim
HSBC also seeks to dismiss the County’s disparate-treatment claim. Defs.’

Mem. Supp. at 3 n.3. In doing so, HSBC asserts in a cursory footnote that the
County’s disparate-treatment allegations “fail to meet applicable pleading
standards.” Id.

To find its argument, HSBC refers the Court to its motion to

dismiss the County’s Amended Complaint, ECF No. 49-1, which preceded the
Complaint now before the Court. In that motion, HSBC argued that the County
had not pleaded a disparate-treatment claim because it had alleged that HSBC’s
objective was to “maximize profits” rather than to render adverse effects upon an
identifiable group. Defs.’ Mem. Supp. Mot. Dismiss Am. Compl. at 19. In effect,
HSBC asks the Court to import its argument from a prior motion to dismiss and
arguments are waived.”)). In any event, as Beretta observes, the municipal cost recovery
rule has significant exceptions, requiring a fact-bound analysis beyond what is provided in
the pleadings. 821 N.E.2d at 427–31.

25

apply it to the County’s substantially revised 397-paragraph Complaint, which,
inter alia, includes a new, standalone disparate-treatment claim (Count III).
However, this is not the Court’s responsibility. See M.G. Skinner & Assocs. Ins.
Agency, Inc. v. Norman–Spencer Agency, Inc., 845 F.3d 313, 321 (7th Cir. 2017)
(“[P]erfunctory and

undeveloped

arguments

are waived,

as

are

arguments

unsupported by legal authority.”); see also, e.g., Godbole v. Ries, No. 15 C 5191, 2017
WL 219506, at *2 (N.D. Ill. Jan. 19, 2017) (“The Court is not required to construct
arguments for [parties].”) (citing Pine Top Receivables of Ill., LLC v. Banco de
Seguros del Estado, 771 F.3d 980, 987 (7th Cir. 2014)).

HSBC’s argument is

therefore waived, and its motion to dismiss the County’s disparate treatment claim
warrants rejection on this ground alone.
That said, the Complaint sufficiently states a claim for disparate treatment
under the FHA. Under the FHA, it is “unlawful for any person or other entity
whose business includes engaging in residential real estate-related transactions to
discriminate against any person in making available such a transaction, or in the
terms or conditions of such a transaction, because of race . . . .” 42 U.S.C. § 3605(a).
To state a disparate treatment claim under the FHA requires allegations “of
intentional discrimination, provable via either direct or circumstantial evidence.”
Daveri Dev. Grp., LLC v. Vill. of Wheeling, 934 F. Supp. 2d 987, 997 (N.D. Ill. 2013)
(citing Nikolich v. Vill. of Arlington Heights, Ill., 870 F. Supp. 2d 556, 562 (N.D. Ill.
2012)); see Swanson v. Citibank, N.A., 614 F.3d 400, 405 (7th Cir. 2010) (“[Plaintiff’s
FHA] complaint identifies the type of discrimination that she thinks occurs (racial),

26

by whom, and when. This is all that she needed to put in the complaint.”); see also
Wigginton v. Bank of Am. Corp., 770 F.3d 521, 522 (7th Cir. 2014) (stating that an
FHA plaintiff must allege that HSBC treated protected-status individuals
differently from others).
As described above, the County has identified specific practices by which
HSBC intentionally targeted, marketed, originated, serviced, and foreclosed on
predatory subprime loans provided to minority borrowers, on terms different from
loans provided to similarly situated non-minority borrowers. See, e.g., City of L.A. v.
Citigroup Inc., 24 F. Supp. 3d 940, 953 (C.D. Cal. 2014) (finding Los Angeles’s
allegations that “Defendants targeted minority borrowers for unfair loan terms
based on race or national origin” and “numerous allegations of statistical patterns of
discrimination” to “ampl[y]” state a disparate-treatment claim); City of L.A. v. Wells
Fargo & Co., 22 F. Supp. 3d 1047, 1059–60 (C.D. Cal. 2014) (same); City of L.A v.
Bank of Am. Corp., No. 13 C 9046, 2014 WL 2770083, at *11 (C.D. Cal. June 12,
2014) (finding allegations that “Defendants targeted African-American and Latino
borrowers for unfair loan terms on the basis of their race” sufficient at pleading
stage). Therefore, even if HSBC had not waived the argument, its motion to dismiss
the County’s disparate-treatment claim would be denied.
III.

The County’s Disparate Impact Claims
HSBC also challenges the County’s disparate impact claims. Specifically,

HSBC contends that Texas Dep’t of Hous. & Cmty. Affairs v. Inclusive Communities
Project, Inc., 135 S. Ct. 2507 (2015), created a four-part “prima facie” requirement to

27

plead disparate impact claims and that the County has failed to plead these
requirements. Defs.’ Mem. Supp. at 12. In support, HSBC cites to a district court
case which applied the four-part test and urges this Court to do the same. See Cobb
Cty. v. Bank of Am. Corp., 183 F. Supp. 3d 1332, 1346 (N.D. Ga. 2016). Moreover,
HSBC argues that the County has not stated a disparate impact claim because it
also alleges intentional discrimination by HSBC. Defs.’ Mem. Supp. at 13 (citing
City of Miami v. Bank of Am. Corp., 171 F. Supp. 3d 1314, 1320 (S.D. Fla. 2016)).
In Inclusive Communities, the Supreme Court held that disparate impact
claims are cognizable under the FHA and set out four requirements that plaintiff
must meet to make out a prima facie case of disparate impact. See 135 S. Ct. at
2523–24. But the requirement to establish a prima facie case applies only at the
summary judgment stage.

To adequately plead a disparate impact claim, the

Supreme Court in Inclusive Communities stated only that a plaintiff must allege
facts sufficient to support a causal connection between the challenged policy or
policies and a disparate impact upon members of a protected class. Id. at 2523; see
also Winfield v. City of New York, No. 15 C 5236, 2016 WL 6208564, at *5–6
(S.D.N.Y. Oct. 24, 2016) (“[A] prima facie case is an evidentiary standard, and not a
pleading requirement.

[Inclusive Communities] did not alter the plausibility

standard for pleading, which requires only the plaintiff plead allegations that
plausibly give rise to an inference that the challenged policy causes a disparate
impact.”). 9
In the Cobb County case, the district court applied the four-part test in dismissing
the plaintiff’s disparate impact claim. See Cobb Cty., 183 F. Supp. 3d at 1346-47. However,

9

28

To this point, HSBC raises two primary arguments. First, it contends that
the County failed to identify any particular policy employed by HSBC that caused a
disparate impact to minority borrowers.

But the Complaint is replete with

examples of HSBC policies that, according to the County, resulted in a disparate
impact on minority borrowers.

These include: HSBC’s mortgage lending and

services policies; pricing and marketing policies; various underwriting policies; loan
servicing and loss mitigation policies; and foreclosure-related policies.
Undeterred, HSBC contends that much of the challenged conduct was
“discretionary” and that “[d]iscretion alone may not form the basis of a disparate
impact claim.” Defs.’ Mem. Supp. at 12–13. But the Complaint includes many
policies that were not completely discretionary, and to the extent HSBC employees
were given a degree of discretion to implement these policies in any individual
instance, a uniform grant of discretion can form the basis of a disparate impact
claim. See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 355 (2011) (recognizing
that, in certain cases, “giving discretion to lower-level supervisors can be the basis
of Title VII liability under a disparate-impact theory”); 10 Watson v. Fort Worth Bank
& Trust, 487 U.S. 977, 991 (1988) (stating that the defendants’ “subjective or
discretionary . . . practices may be analyzed under the disparate impact approach”
in Title VII cases); City of Phila. v. Wells Fargo & Co., No. 17 CV 2203, 2018 WL
as discussed above, the only pleading requirement discussed in Inclusive Communities was
the need to plausibly allege a causal connection between a defendant’s conduct and the
alleged disparate impact. Accordingly, the Court respectfully disagrees with the district
court’s decision in Cobb County.
Title VII and the FHA are to “be given like construction and application.” Kyles v. J.K.
Guardian Sec. Servs., Inc., 222 F.3d 289, 295 (7th Cir. 2000).

10

29

424451, at *4 (E.D. Pa. Jan. 16, 2018) (rejecting the same argument made by
defendant lender based upon Dukes, 564 U.S. at 355, and Watson, 487 U.S. at 990–
91).
Second, HSBC argues that, to the extent the County has pointed to specific
policies, it has not sufficiently alleged a causal link between the policies and a
disparate impact. In support, HSBC points to the fact that the Complaint relied
upon “general allegations common to all lenders,” rather than HSBC-specific data.
But even assuming, arguendo, that statistics from multiple mortgage lenders would
be insufficient, HSBC’s argument is incorrect. In addition to offering statistics from
multiple mortgage lenders, the County also provides data particularized to HSBC
loans and foreclosures. See 2d Am. Compl. ¶¶ 262–305. Coupled with the extensive
allegations in the Complaint that describe how HSBC’s policies resulted in the
statistical disparities, the County has asserted sufficiently the existence of a causal
connection between the policies and the statistical data to survive a motion to
dismiss.
In addition, HSBC contends that the County’s disparate impact claims must
fail because the County also alleges that HSBC engaged in intentional
discrimination. Defs.’ Mem. Supp. at 13. But this, too, is unavailing for several
reasons.
First, a plaintiff may allege claims in the alternative. See Fed. R. Civ. P.
8(d)(2).

Second, although a plaintiff is not required to explicitly allege, or,

ultimately, to prove intent as part of a disparate-impact theory, a plaintiff is not

30

precluded from doing so.

In fact, one of the factors that a court considers to

determine whether a plaintiff has made a prima facie disparate impact case is “the
presence of some evidence of discriminatory intent, even if circumstantial and less
than sufficient to satisfy” the standards required for disparate treatment.

See

Metro. Hous. Dev. Corp. v. Vill. of Arlington Heights, 558 F.2d 1283, 1290 (7th Cir.
1977); Bloch v. Frischhlz, 587 F.3d 771, 784 (7th Cir. 2009); City of Joliet v. MidCity Nat'l Bank of Chi., No. 5 C 6746, 2014 WL 4667254, at *24 (N.D. Ill. Sept. 17,
2014), aff'd sub nom. City of Joliet, Ill. v. New W., L.P., 825 F.3d 827 (7th Cir. 2016).
It is not surprising, then, that numerous other courts have allowed similar
disparate impact claims to survive a motion to dismiss. See, e.g., Bank of Am.
Corp., 2014 WL 2770083, at *11 (permitting disparate impact claim to proceed
where municipality alleged, inter alia, that the defendants “targeted” minority
neighborhoods); City of Memphis v. Wells Fargo Bank, N.A., No. 9–2857–STA, 2011
WL 1706756, at *14 (W.D. Tenn. May 4, 2011) (same, where municipality alleged,
inter alia, that the defendants “steered” borrowers to its predatory loan offerings).
For these reasons, HSBC’s motion to dismiss the County’s disparate impact
claims is denied.
IV.

Statute of Limitations
HSBC also argues that the County’s claims are barred by the statute of

limitations. The FHA provides that “[a]n aggrieved person may commence a civil
action . . . not later than 2 years after the occurrence or the termination of an
alleged discriminatory housing practice . . . whichever occurs last.” 42 U.S.C. §

31

3613(a)(1)(A). The County filed its lawsuit on March 21, 2014, and therefore the
relevant two-year period reaches back to March 21, 2012. According to HSBC, the
County’s claims are “principally” based on loans originated between 2003 and 2007.
Defs.’ Mem. Supp. at 14. Moreover, HSBC asserts—again by referring the Court to
the prior motion to dismiss—that the continuing violation doctrine does not apply
here. 11 Id. at 15.
The County responds that the continuing violation doctrine brings its claims
within the statute of limitations for two reasons: (1) as to Counts I and III, HSBC’s
discriminatory conduct does not cease until the last payoff, default, or foreclosure as
to each of the loans initiated between 2003 and 2007; and (2) as to Count II, HSBC’s
discriminatory foreclosure activities continue to this day. Pls.’ Resp. at 2–3.
Dismissing a claim at the pleading stage based upon a statute of limitations
defense is typically disfavored. See Reiser v. Residential Funding Corp., 380 F.3d
1027, 1030 (7th Cir. 2004) (“[W]here a defendant raises the statute of limitations as
an affirmative defense at the motion to dismiss stage, a court can only dismiss a
claim when [the] complaint plainly reveals that an action is untimely under the
governing statute of limitations.”); Thompson v. City of Chi. Bd. Educ., No. 14 CV
6340, 2016 WL 362375, at *8 (N.D. Ill. Jan. 29, 2016) ) (“[A] district court may
dismiss a claim under Rule 12(b)(6) as untimely if the complaint reveals that the
claim is unquestionably untimely.”) (citing Small v. Chao, 398 F.3d 894, 898 (7th
Cir. 2015)); Jovic v. L-3 Servs., Inc., 69 F. Supp. 3d 750, 765 (N.D. Ill. Sept. 24,
The rest of HSBC’s argument on this issue is a rehash of its arguments for why the
County does not state a disparate impact or disparate treatment claim. Id.
11

32

2014) (quoting Andonissamy v. Hewlett–Packard Co., 547 F.3d 841, 847 (7th Cir.
2008)). This rule, of course, applies to FHA claims. See, e.g., Jafri v. Chandler LLC,
970 F. Supp. 2d 852, 865 (N.D. Ill. 2013) (stating that a “limitations defense fails at
the pleadings stage” where the complaint does not admit the ingredients of a
statute of limitations defense).
“[W]here a plaintiff, pursuant to the Fair Housing Act, challenges not just
one incident of conduct violative of the Act, but an unlawful practice that continues
into the limitations period, the complaint is timely when it is filed within 180 days
of the last asserted occurrence of that practice.” Havens Realty Corp. v. Coleman,
455 U.S. 363, 380–81 (1982).
Here, each of the County’s counts includes plausible allegations that HSBC
continues to service and foreclose on loans in a discriminatory manner.
Accordingly, adjudication of HSBC’s statute of limitations defense must await
summary judgment.

See Dekalb Cty., 2013 WL 7874104, at *11 (holding that

statute of limitations issue should be resolved at summary judgment, where
plaintiff municipality alleged discriminatory foreclosure and loan servicing as “the
last component” of defendants’ alleged predatory program); City of L.A., 24 F. Supp.
3d at 951–52 (finding, at motion-to-dismiss stage, that similar allegations fell
within the statute of limitations under the continuing violations doctrine); Bank of
Am. Corp., 2014 WL 2770083, at *7 (finding similar allegations “sufficient . . . to
support the continuing violations doctrine” at the pleading stage).

33

V.

Dismissal of Non-Originating Entities
HSBC also asks the Court to dismiss HSBC USA Inc., HSBC Finance

Corporation, HSBC North America Holdings Inc., HFC Company LLC, and
Beneficial LLC. See Defs.’ Mem. Supp. at 1 n.1. Again, HSBC simply refers the
Court, via a footnote, to its motion to dismiss the County’s preceding Amended
Complaint.

Id.

There, HSBC argued that these entities should be dismissed

because the County does not allege that the entities originated any mortgage loans.
Defs.’ Mem. Supp. Mot. Dismiss Am. Compl. at 19–20.
But, again, the County’s claims are not limited to these entities’ loanorigination practices. In any event, the Complaint does allege that three of the five
entities originated mortgage loans. 2d Am. Compl. ¶ 44 (HFC Company LLC); ¶ 20
(Household Finance Company, “now, Defendant HSBC Finance Corporation”); ¶ 43
(Beneficial LLC). And, given HSBC’s failure to address the specific allegations in
the Complaint with any particularity, the Court will not scour through it to
determine if the County has adequately pleaded a veil-piercing theory as to the
remaining two entities—HSBC USA Inc. and HSBC North America Holdings Inc.
HSBC’s argument for dismissal of non-originating entities is accordingly waived,
and HSBC’s request to dismiss these entities is denied. See M.G. Skinner, 845 F.3d
at 321; see, e.g., Kudlicki v. MDMA, Inc., No. 05 C 2589, 2006 WL 1308617, at *2 n.1
(N.D. Ill. May 10, 2006) (finding “cursory” argument “buried in footnote” waived).

34

Conclusion
For the reasons provided herein, the Court grants in part and denies in part
HSBC’s motion to dismiss [137] the County’s Second Amended Complaint. HSBC’s
motion is granted as to the following claimed injuries: the County’s costs of
providing social services to homeowners; costs of demolishing homes; loss of
property tax revenue from foreclosed, abandoned and vacant properties; loss of
“various revenue” from abandoned or foreclosed properties; diminution of the tax
base due to foreclosed homes and surrounding properties; and the costs associated
with urban blight.

The motion is denied with respect to the County’s claimed

injuries resulting from HSBC’s allegedly improper use of the Mortgage Electronic
Registration System, Inc., as well as the additional costs the County incurred for
the administration of foreclosure proceedings that resulted from the challenged
practices, including the costs of serving eviction notices, conducting judicial and
administrative foreclosure procedures, and registering and inspecting foreclosed
homes. The motion also is denied in all other respects.

SO ORDERED.

ENTERED: 5/30/18
______________________________________
JOHN Z. LEE
United States District Judge

35