Adler et al v. Bayview Loan Servicing, LLC et al

Filing 28

MEMORANDUM Opinion: The Court grants the motion to dismiss. The Adlers' Amended Complaint is dismissed with prejudice. Signed by the Honorable Charles P. Kocoras on 9/18/2018. Civil case terminated. Mailed notice(vcf, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RONALD ADLER and LISA ADLER,
Plaintiffs,
v.
BAYVIEW LOAN SERVICING, LLC and
THE BANK OF NEW YORK MELLON,
Defendants.

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17-c-6735

MEMORANDUM OPINION
CHARLES P. KOCORAS, DISTRICT JUDGE:
Now before the Court is Defendants Bayview Loan Servicing, LLC (“Bayview”)
and Bank of New York Mellon’s (“BNY”) (collectively, “Defendants”), motion to
dismiss Counts I, II, and III of Plaintiffs Ronald and Lisa Adler’s (collectively, “the
Adlers”) Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(1)
and 12(b)(6). For the reasons set forth below, the motion is granted.
FACTUAL BACKGROUND
The following facts are taken from the Adlers’ Complaint and assumed to be true
for purposes of this motion. Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995). The
Court draws all reasonable inferences in the Adlers’ favor. Tamayo v. Blagojevich, 526
F.3d 1074, 1081 (7th Cir. 2008).

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The Adlers purchased a home at 2364 Sumac Drive, Yorkville, Illinois (“subject
property”). Bayview is a mortgage lender and servicer who previously serviced the
Adler’s mortgage on the subject property. On September 23, 2005, the Adlers executed
a $325,313 mortgage (“subject loan”), with BNY ultimately attaining the interest.1
Upon retaining interest, BNY employed Bank of America N.A. (“Bank of America”)
as the servicer.
In 2009, the Adlers defaulted, prompting BNY to file a foreclosure action on
September 16, 2010. On February 27, 2012, BNY obtained a judgment of foreclosure
and sale in Kendall County.
On or about January 12, 2013, Bank of America offered the Adlers an
opportunity to modify their subject loan. The Adlers subsequently submitted the
appropriate paperwork and application to Bank of America. On February 20, 2013,
Bank of America informed the Adlers that a decision on their pending loan modification
would be rendered within thirty days. The Adlers never received a response, however,
and BNY sold the subject property in a foreclosure sale sometime in February 2013.
On February 21, 2013, the Adlers filed for Chapter 7 bankruptcy, staying the
foreclosure proceedings. On May 20, 2013, the bankruptcy case was discharged and
subsequently closed on May 31, 2013.

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The subject loan was a federally related mortgage under 2602(1). The Adlers initially executed the subject loan
with KH Financial. KH Financial then assigned its interest to Countrywide, who assigned its interest to BNY.

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A.

Bayview Becomes The Loan Servicer
On or about October 21, 2013, Bayview informed the Adlers that it had

acquired servicing rights to the subject loan. Everett Beebee (“Beebee”), a Bayview
employee, informed the Adlers that they would be required to submit a new loan
application, irrespective of previous negotiations with Bank of America. Upon the
Adlers’ submission of a new application, Bayview canceled its upcoming foreclosure
sale. On December 3, 2013, Bayview approved the Adlers for a trial plan under the
Home Modification program. As required by the plan, the Adlers made three timely
payments of $2,718.20 in January, February, and March of 2014. On March 13, 2014,
the Adlers qualified for a Home Affordable Modification Program (“HAMP”), and
Bayview proposed terms for a new loan. The Adlers declined this offer and attempted
to negotiate for a better loan. The Adlers’ negotiation attempts went unanswered.
B.

The Adlers Restart Loan Modification Process with Bayview
After their negotiation attempts went unanswered, the Adlers attempted to follow

up with Beebee to inquire about a loan modification. Sometime in June of 2014, the
Adlers discovered that Beebee was no longer employed with Bayview and were
instructed to submit a new loan modification application. On or about July 3, 2014, the
Adlers again submitted a new application, which was approved on August 12, 2014 for
a trial plan. Under this trial plan, the Adlers made three timely payments of $2,590.93
in September, October, and November of 2014. On December 15, 2014, Bayview
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offered the Adlers a permanent loan modification. To the Adlers’ dismay, Bayview’s
offer failed to account for language preventing Bayview from re-establishing any
personal liability for the underlying debt acquired from their Chapter 7 bankruptcy
discharge. As a result, the Adlers declined Bayview’s offer.
C.

The Adlers Send The Defendants Qualified Written Requests To Negotiate
The December 15, 2014 Offer, But Bayview Fails To Timely Respond
On January 13, 2015, the Adlers sent Bayview a qualified written request

(“QWR”) seeking clarification of the December 15, 2014 modification offer. On March
12, 2015, Bayview responded with information that was false, confusing, and vexatious.
On March 26, 2015, the Adlers responded, noting the defects in Bayview’s response
and requesting clarification of the modification offer. Bayview responded on April 28,
2015 with a letter containing similar defects as before. On June 2, 2015, the Adlers sent
a third letter, again asking for clarification.
The Adlers did not receive a response to their June 2 letter. Instead, on August
18, 2015, Bayview sent the Adlers a notice informing them of a sheriff’s sale scheduled
for September 28, 2015.
D.

The Adlers File a Motion To Stay The Foreclosure Sale
The Adlers moved the state court to stay the sheriff’s sale and for leave to file

counterclaims. At a September 16, 2015 hearing on the motion, the Adlers alleged a
breach of contract stemming from the loan modification process. Specifically, the
Adlers alleged BNY refused to negotiate in good faith, resulting in a loss of $7,772.79.

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The Defendants argued that the Adlers’ proposed counterclaims were unrelated to
BNY’s right to foreclose, noting that the counterclaim only sought monetary damages.
The court denied the Adlers’ motion, stating that “[i]f this was a counterclaim
that was filed in [the Adlers’] motion with[in] the twenty days of pleading, I would still
hear the case because I do think this issue is germane to a foreclosure case.” However,
the court, citing judicial discretion, stated it could not “allow [the Adlers] to file a
counterclaim based on something that [the Adlers] [had] known from nine months
before.” Accordingly, the court declined to rule on the substance of the Adlers’
counterclaim, and denied the motion citing judicial discretion.
The foreclosure sale commenced on September 28, 2015, and on November 2,
2015, BNY moved to confirm the sale and take possession of the subject property. The
Adlers were subsequently evicted.
PROCEDURAL BACKGROUND
On December 4, 2017, the Adlers filed an Amended Complaint against Bayview
and BNY under the theory of vicarious liability. The Adlers’ three-count Complaint
against the Defendants set forth the following causes of action: Count I, violation of
the Real Estate Settlement Procedures Act § 10241(g) (“RESPA”), flowing from the
invalid foreclosure of their home; Count II, violation of RESPA under § 2605(e)(1)(B),
flowing from the Defendants’ failure to timely respond to the Adlers’ QWRs; and Count
III, violation of the Illinois Consumer Fraud Act (“ICFA”), alleging HAMP violations

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stemming from the Adlers paying $15,927.39 in trial payments, but not obtaining
permanent loan modification.
The Defendants filed the instant motion on January 8, 2018 under Federal Rule
of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and Federal Rule of
Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted.
The Defendants seek dismissal of all three counts.
LEGAL STANDARD
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) “tests
the sufficiency of the complaint, not the merits of the case.” McReynolds v. Merrill
Lynch & Co., 694 F.3d 873, 878 (7th Cir. 2012). The allegations in the Complaint must
set forth a “short and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8(a)(2). Plaintiffs need not provide detailed factual allegations,
but must provide enough factual support to raise their right to relief above a speculative
level. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
A claim must be facially plausible, meaning that the pleadings must “allow…the
court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The claim must be described
“in sufficient detail to give the defendant ‘fair notice of what the…claim is and the
grounds upon which it rests.’” E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773,
776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). “Threadbare recitals of the

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elements of a cause of action, supported by mere conclusory statements,” are
insufficient to withstand a 12(b)(6) motion to dismiss. Iqbal, 556 U.S. at 678.
A motion to dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil
Procedure challenges a court’s subject matter jurisdiction. Under Rule 12(b)(1), the
plaintiff bears the burden of establishing that the court has jurisdiction over its claims.
United Phosphorous Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003) (en
banc). The Court may consider matters outside of the Complaint in ruling on a motion
to dismiss for lack of subject matter jurisdiction. Ezekiel v. Michel, 66 F.3d 894, 897
(7th Cir. 1995).
DISCUSSION
I.

Subject Matter Jurisdiction
A.

The Rooker-Feldman Doctrine

The Defendants’ first contention is that this Court lacks jurisdiction to adjudicate
these claims under the Rooker-Feldman doctrine. The Rooker-Feldman doctrine,
derived from Rooker v. Fidelity Trust Company, 263 U.S. 413 (1923) and District of
Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983), “precludes lower federal
court jurisdiction over claims seeking review of state court judgments . . . [because] no
matter how erroneous or unconstitutional the state court judgment may be, the Supreme
Court of the United States is the only federal court that could have jurisdiction to review
a state court judgment.” See Brokaw v. Weaver, 305 F.3d 660, 664 (7th Cir. 2002).

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Thus, “if a claim is barred by the Rooker-Feldman doctrine, a federal court lacks subject
matter jurisdiction over the case.” Id.
The immediate inquiry in evaluating Rooker-Feldman is “whether the federal
plaintiff seeks to set aside a state court judgment or whether [they are], in fact,
presenting an independent claim.” Kamilewicz v. Bank of Boston Corp., 92 F.3d 506,
510 (7th Cir. 1996). Simply put, the Rooker-Feldman doctrine controls, and this Court
lacks jurisdiction, if “the federal plaintiff alleges [injuries] result[ing] from the state
court judgment itself.” Id. However, impermissible appellate review may also occur if
the claims “are inextricably intertwined with the state court determinations.” Long v.
Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999). Accordingly, if the claims
are inextricably intertwined, the next inquiry asks whether the Plaintiffs “had a
reasonable opportunity to raise the issues in state court proceedings.” Jakupovic v.
Curran, 850 F.3d 898, 904 (7th Cir. 2017).
“The ‘reasonable opportunity’ inquiry focuses not on ripeness, but on difficulties
caused by ‘factor[s] independent of the actions of the opposing part[ies] that precluded’
a plaintiff from bringing federal claims in state court, such as state court rules or
procedures.” Curran, 850 F.3d at 904 (quoting Long, 182 F.3d at 558). Therefore, we
must determine whether the Adlers’ claims are inextricably intertwined with the state
court’s judgments, and if so, whether the Adlers had a reasonable opportunity to raise
their issues in state court.

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The state court entered an order of foreclosure and sale on February 27, 2012,
and an order of possession on November 2, 2015. Now, the Adlers are attempting to
collaterally attack the state court’s judgment by arguing that the foreclosure sale was
improper under RESPA and ICFA violations.

The Adlers’ request for relief is

inextricably intertwined with the Defendants’ prior foreclosure proceedings.
The Adlers’ situation is similar to the plaintiff in GASH Assocs. v. Vill. of
Rosemont, Ill., 995 F.2d 726 (7th Cir. 1993), where a plaintiff filed a § 1983 suit after
being dissatisfied with the state court’s confirmation of the sale of its property. Id. at
729.

The Seventh Circuit determined that Rooker-Feldman applied because the

plaintiff was essentially seeking review of the foreclosure judgment. Id. Like the
GASH plaintiff, the Adlers “did not suffer an injury out of court and then fail to get
relief from state court; [their] injury came from the judgment confirming the sale” of
the property. Id.
In the foreclosure proceeding on September 16, 2015, the Adlers argued that the
sale of the subject property should be stayed because of the Defendants’ breach of
contract in the loan modification process. In this Amended Complaint, the Adlers
outright assert that “[a]s a direct and proximate result of Defendant’s misconduct,
Plaintiffs lost their family home.”

However, a district court cannot vacate the

foreclosure judgment, and the Adlers’ request for relief is putting this Court in a position
of appellate review, which Rooker-Feldman prohibits.

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We also find that the Adlers had a reasonable opportunity to raise their claims in
state court “because state and federal courts have concurrent jurisdictions over
RESPA.” Byrd v. Homecomings Fin. Network, 407 F. Supp. 2d 937, 943 (N.D. Ill.
2005) (citing Weatherman v. Gary-Wheaton Bank of Fox Valley, N.A., 186 Ill. 2d 472,
481 (1119)) (ruling on the merits of plaintiff’s RESPA claims). In fact, the Adlers did
raise their concerns to the state court in the foreclosure proceedings. The state court
denied these claims, in part because the Adlers had already been aware of them for nine
months. Even after the foreclosure sale on September 28, 2015, the Adlers had over a
month to raise their claims in state court before the state court entered its final judgment
confirming the sale on November 2, 2015. Now, instead of appealing the state court’s
decision, or filling these claims within those initial nine months, the Adlers are
attempting to collaterally attack the foreclosure judgment by filing these RESPA
claims.
Even assuming that the Adlers are asserting an independent cause of action,
because the claimed injuries resulted from the foreclosure proceedings, this court lacks
jurisdiction to adjudicate their claims. Accordingly, because the Adlers have not
demonstrated any barriers that prevented them from bringing their claims in state court,
this Court lacks jurisdiction under Rooker-Feldman.
II.

Count III - State Claims
Count III alleges that the Defendants violated the Illinois Consumer Fraud Act

and HAMP. Specifically, the Adlers paid $15,927.39 in trial payments, but failed to
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obtain a permanent loan modification because the Defendants negotiated in bad faith.
First, we note that HAMP does not confer a federal right of action. See Wigon v. Wells
Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012). Accordingly, 28 U.S.C. § 1367 of the
allows a federal district court to exercise supplemental jurisdiction over state law claims
only if the court has original jurisdiction. Because the Court is dismissing the Adlers’
federal claims, we decline to exercise supplemental jurisdiction over their state claims.
CONCLUSION
For the aforementioned reasons, the Court grants the motion to dismiss. The
Adlers’ Amended Complaint is dismissed with prejudice.

Dated: 9/18/2018

_____________________
Charles P. Kocoras
United States District Judge

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