Dolegiewicz v. U.S. Bank Trust, N.A.
Filing
22
MEMORANDUM Opinion and Order. Signed by the Honorable Harry D. Leinenweber on 2/8/2018. Mailed notice. (pk, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MARIUSZ DOLEGIEWICZ,
Individually and on behalf of
all others similarly
situated,
Plaintiff,
v.
Case No. 17 C 4737
U.S. BANK TRUST, N.A., as
Trustee for LSF9 Master
Participation Trust; and
CALIBER HOME LOANS, INC., a
Delaware Corporation,
Judge Harry D. Leinenweber
Defendants.
MEMORANDUM OPINION AND ORDER
I.
BACKGROUND
The Plaintiff, Mariusz Dolegiewicz (“Plaintiff”), defaulted
on his mortgage loan by failing to make the required payments
and failing to maintain casualty insurance coverage.
The loan
is owned by U.S. Bank Trust, N.A. (“Trustee”) and serviced by
Caliber
Home
“Defendants”).
mortgage
and
Loans,
Inc.
(“Caliber”)
note,
purchased
“lender
is exactly what it sounds like:
to
the
Caliber, as it was authorized to do under the
ordered periodic property inspections.
lender
(collectively,
provide
protection
placed
insurance”
and
“Lender placed insurance
insurance purchased by the
for
the
mortgaged
property.
Plaintiff acknowledges that Defendants were within their rights
to
obtain
insurance
and
make
inspections,
but
contends
that
Defendants overcharged him for insurance which he says amounts
to
an
illegal
Complaint,
“kickback.”
were
in
the
The
form
kickbacks,
according
unearned
commissions,
of
to
the
false
expense reimbursements, payment of reinsurance premiums with no
transfer
of
risk,
and
performance
of
services
at
no
charge.
Plaintiff also alleges that the Defendants charged him fees for
unnecessary inspections, and fees for inspections that did not
occur.
putative
Based on the forgoing, Plaintiff has filed a five-count
class
action
Complaint
charging:
(1)
breach
of
contract (Count I); (2) implied covenant of good faith and fair
dealing (Count II); (3) unjust enrichment (Count III); (4) truth
in lending (Count IV); and (5) Federal Debt Collection Practices
Act (Count V).
II.
A.
DISCUSSION
Count I – Breach of Contract
Defendant has filed a Motion to Dismiss based in large part
on
the
Seventh
Circuit
case
of
Cohen
v.
Insurance Co., 735 F. 3d 601 (7th Cir. 2015).
American
Security
In this case, the
plaintiff, like the Plaintiff here, did not make his mortgage
payments
and
did
mortgaged property.
not
maintain
casualty
insurance
on
his
The defendant, as the Defendants did here,
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obtained lender placed insurance with an affiliate, and charged
him for the premiums.
were
substantially
paying.
higher
than
what
the
plaintiff
had
been
The plaintiff, as does the Plaintiff here, contended
that
the
(One
difference
charged
As is the case here, the premiums charged
excessive
the
premium
between
defendants
amounted
Cohen
with
and
to
this
statutory
an
illegal
case
is
consumer,
kickback.
that
Cohen
common
law
fraud, and breach of contract, while the Plaintiff in this case
did not charge the Defendants with either type of fraud but only
with breach of contract.
As we shall see, it doesn’t make any
difference.)
The Seventh Circuit affirmed the trial court’s dismissal
for the reason that “[the plaintiff] failed to state any viable
claim
for
contract.
relief”
which
included
both
fraud
and
breach
of
With regard to the plaintiff’s allegation that the
excessive premium constituted an illegal kickback, the court had
this to say:
But simply calling the commission a kickback doesn’t
make it one.
The examples listed in the foregoing
passage from Johnson all describe the traditional
understanding of a kickback:
an agent, charged with
acting for the benefit of a principal, accepts
something of value from a third party in return for
steering the principal’s business to the third party.
The defining characteristic of a kickback is divided
loyalties.
But Wachovia was not acting on behalf of
Schilke or representing her interests.
The loan
agreement
makes
it
clear
that
the
insurance
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requirement is for the lender’s protection:
“All of
these insurance policies and renewals of the policies
must include what is known as a Standard Morgtagee
Clause to protect Lender.
The form of all policies
and renewals must be acceptable to Lender.
Lender
will have the right to hold the policies and
renewals.” (Emphasis added.) The agreement also gives
the lender broad discretion to act to protect its own
interest in the property: “Lender may do and pay for
whatever it deems reasonable or appropriate to protect
the Lender’s rights in the Property.” (Emphasis
added.)
Wachovia’s
correspondence
with
Schilke
reiterated the point:
“Failure to provide [proof of
insurance] may result in a policy being purchased by
us at your expense to protect our interest.”
And
Wachovia conspicuously reminded Schilke that lenderplaced insurance would be much more expensive than her
own insurance coverage.
Wachovia was not subject to
divided loyalties; rather, it was subject to an
undivided loyalty to itself, and it made this clear
from the start.
The commission for the lender-placed
insurance was not a kick back in any meaningful sense.
This proved to be important to the Seventh Circuit when it
ruled on the claim for breach of contract.
noted that
plaintiff
based
his
claim
of
First the court
breach
by
asserting
“that there was no prevision in the mortgage agreement allowing
Wachovia [the lender] to receive kickbacks.”
Then it noted that
plaintiff’s claim “might loosely be read to allege . . . bad
faith, but it does not do so plausibly,” which put the claim in
violation of the plausibility standard explained in Iqbal and
Twombly.
See, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
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Here, as in Cohen, Defendants had a contractual right to
obtain insurance in the event the mortgagor failed to do so.
The Plaintiff, the mortgagor here, did not do so after multiple
notices,
received,
which
that
included
the
cost
the
of
warning,
insurance
similar
to
those
Cohen
would
be
considerably
higher than Plaintiff could himself purchase and he would not
receive
the
same
coverage.
He
was
further
advised
that
Defendants would receive (or pay) a commission which would be
chargeable to him.
He failed to heed the warnings so Defendants
purchased insurance to protect their interest in the property.
While Plaintiff argues that this is notice pleading so it
is not necessary for him to go into great detail as to the
kickback allegations, nevertheless the Seventh Circuit noted, to
satisfy Iqbal and Twombly, it is necessary to state facts that
are more than consistent with a defendant’s liability.
Here the
sum and substance of the Plaintiff’s kickback allegations are:
1.
The
“forced-placed”
insurance
is
not
individually under written and is placed without
regard to the borrower’s ability to afford the
coverage (Paragraph 13);
2.
The borrowers have no say in selection of
policies or insurers (Paragraph 14);
3.
The insurance charges are exorbitant, higher
than what a borrower would expect to pay and are less
comprehensive (Paragraph 15);
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4.
Instead of charging borrowers with the
actual cost, Defendants enter into agreements with
exclusive insurance companies which are disguised as
kickbacks (Paragraph 17); and
5.
The kickbacks include unearned commissions,
expense
reimbursements,
“payment
of
reinsurance
premiums that carry no commensurate transfer of risk,
and free or below cost mortgage servicing functions
that the insurance provider performs for Defendants
(Paragraph 18).
The
Seventh
Circuit
pointed
out
was
that
labeling a matter a “kickback” does not make it so.
court
further
noted
the
“traditional
merely
As the
understanding
of
a
kickback:
an agent, charged with acting for the benefit of a
principal,
accepts
something
of
value
from
a
third
party
in
return for steering the principal’s business to the third party.
The defining characteristic of a kickback is divided loyalties.”
But here, as in Cohen, the Defendants were not acting on behalf
of Plaintiff or representing his interests.
instead,
acting
in
their
own
interests
Defendants were,
which
they
had
a
contractual right to do and they clearly explained this to him.
Similarly
Plaintiff
is
in
trouble
in
his
claim
that
Defendants overcharged him for home inspections, which he also
labels
as
kickbacks.
Clearly
Defendants
had
the
right
to
inspect the property after default and charge the Plaintiff for
the cost.
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However,
Plaintiff
is
on
firmer
grounds
in
opposing
Defendants’ Motion to Dismiss on the breach of contract claim
that Defendants charged him with home inspections that did not
occur.
If it is true that Defendants charged Plaintiff with
inspection fees for fictitious inspections, such a claim could
easily stand as one for breach of contract.
that
Plaintiff
does
not
allege
sufficient
Defendants argue
facts
about
which
inspections did not occur and thus his Complaint does not give
fair notice.
2014
WL
Baronfeld
They cite Nationstar Mortgage, LLC v. Baronfeld,
5361890
was
(D.
a
New
fraud
Jersey,
case
Oct.
with
the
21,
2014).
heightened
However
standard
requirement of Rule 9, while this case is a breach of contract
case.
See, Paragraph E, infra.
The issue can be revisited at
the summary judgment stage.
Therefore,
the
Court
dismisses
the
breach
of
contract
claim, Count I, except to the extent that Plaintiff claims that
he was charged for non-existent, fictitious inspections.
B.
Count II – Implied Covenant of Good Faith
Count II, implied covenant of good faith and fair dealing
is likewise dismissed except to the extent of the claim for nonexistent inspections.
be
plausible
the
As the Seventh Circuit noted in Cohen, to
complaint
must
allege
“more
than
possibility that a defendant has acted unlawfully.
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a
sheer
When the
allegations are ‘not only compatible with, but indeed are more
likely explained by lawful conduct the complaint fails to state
a plausible claim for relief.”
As pointed out above, Defendants
clearly had the right to purchase lender-placed insurance and to
conduct
home
Count II
is
inspections
dismissed
and
with
charge
respect
Plaintiff
with
the
for
them.
overcharges
but
denied with respect to the fictitious inspections.
C.
Count III – Unjust Enrichment
The claim for unjust enrichment must likewise be dismissed
because Plaintiff has clearly pled the existence of a contract,
i.e., the mortgage and note.
Plaintiff argues that he has only
pled in the alternative but nowhere in his Complaint does he
bring into question the validity of his mortgage.
People ex
rel. Hartigan v. E & E Hauling, Inc., 153 Ill. 2d. 473, 497
(1992).
the
There also is no allegation that Plaintiff paid any of
fees
for
defendants.
inspection
or
insurance,
so
as
to
enrich
Count III is dismissed with prejudice.
D.
Count IV – Truth in Lending Act
Plaintiff claims that the Defendants violated the Truth in
Lending
Act
Placed
Insurance.
Complaint
(“TILA”)
clearly
by
the
However,
alleges
unauthorized
as
the
has
purchase
been
existence
shown
of
of
Lender
above,
the
contractual
provisions giving Defendants the contractual right to purchase
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insurance in the event borrower fails to maintain insurance.
As
Plaintiff admits, Regulation Z exempts insurance premiums from
the
“finance
charge”
disclosure
requirement
if
the
loan
documents allow the borrower to obtain insurance from an insurer
of his choice.
12 C.F.R. § 226.4(d)(2)(i).
and the note clearly allow this.
Here the mortgage
Adams v. GMAC Corp., 1994 WL
702639 (N.D, Ill. December 14, 1994).
Count IV (“TILA”) is
dismissed with prejudice.
E.
Count V - Federal Debt Collection Practices Act
Count V attempts to allege a violation of the Federal Debt
Collection Practices Act (the “FDCPA”) based on the inspection
fees and the alleged kickbacks.
no
better
contract
here
than
claim.
it
does
The “kickback” argument fares
with
Defendants
regard
argue
to
that
the
the
breach
of
“fabricated”
inspection fees do not amount to a violation of FDCPA because
they
were
fully
disclosed
in
the
loan
statements,
i.e.,
Defendants disclosed that they were charging for inspection fees
that were authorized by the mortgage agreement.
“Lender may
charge Borrower fees for services performed in connection with
Borrower’s
interest
default
in
Instrument,
the
for
the
Property
including,
but
purpose
of
and
Rights
not
limited
protecting
under
to,
Security
attorneys’
property inspection fees and valuations fees.”
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this
Lender’s
fees,
To the extent
that Plaintiff contends that the billing fees are false, based
on
his
argument
dismissed.
out
of
that
the
fees
were
unnecessary,
every
case
in
which
the
borrower
disagrees
is
with
the
This is not the
The FDCPA only makes illegal charges that are not owed
because the borrower never agreed to the debt.
Law,
V
To hold otherwise would create a triable FDCPA claim
Lender over the amount of an authorized charge.
law.
Count
P.C.,
118
F.Supp.3d
953,
960
(E.D.
Wilson v. Trott
Mich.
2015.
The
Plaintiff did not agree to pay for fictitious investigations
which is what the Complaint alleges.
However, the FDCPA is a
fraud statute and therefore Rule 9’s requirement of specificity
applies (unlike in the breach of contract claim, see, infra).
The Complaint is short on specifics with regard to the FDCPA
claim as it relates to the fictitious inspections.
shortcoming
is
the
lack
of
specifics
which
charges
as
were
to
the
for
The main
fictitious
inspections,
e.g.,
fictitious
inspections.
Therefore, unlike the Court’s ruling as to the
breach of contract, the Motion to Dismiss is granted without
prejudice.
III.
CONCLUSION
For the reasons stated herein, the Court rules as follows:
1.
Count I, except to the extent that Plaintiff claims
that he was charged for non-existent inspections, is dismissed;
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2.
but
Count II is dismissed with respect to the overcharges,
denied
with
respect
to
fees
charged
for
fictitious
inspections;
3.
Count III is dismissed with prejudice;
4.
Count IV is dismissed with prejudice; and
5.
Count V is dismissed without prejudice.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Dated:
2/8/2018
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