Even v. BAC Home Loans Servicing, LP FKA Countrywide Home Loans Servicing, LP
Filing
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ORDER Granting Defendant's 6 Motion to Dismiss. Signed by District Judge Victoria A. Roberts. (LVer)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
KIMBERLY EVEN,
Plaintiff,
vs
Case No: 12-12066
Honorable Victoria A. Roberts
BAC HOME LOAN SERVICING LP FKA
COUNTRYWIDE HOME LOANS
SERVICING LP,
Defendant.
__________________________________/
ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS COMPLAINT
I.
INTRODUCTION
This matter is before the Court on a motion to dismiss filed by Bank of America,
N.A., as successor by merger to BAC Home Loan Servicing, LP, formally known as
Countrywide Home Loans Servicing, LP (“Defendant”). The matter is fully briefed. The
legal arguments and factual allegations are sufficiently set forth in motion papers; oral
argument is unnecessary. The Court decides Defendant’s motion on the briefs. See
L.R. 7.1(f)(2).
The Court GRANTS Defendant’s motion to dismiss; some counts are dismissed
with prejudice; Plaintiff has the opportunity to file an amended complaint.
II.
BACKGROUND
This case involves real property at 30159 Hennepin Street, Garden City,
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Michigan, 48135 (“the Property”). On April 28, 2006, Kimberly Even (“Plaintiff”) and her
uncle entered into a mortgage with Approved Mortgages, Inc. (“Approved”) for
$101,500. The mortgage was recorded with the Wayne County Register of Deeds on
May 22, 2006. In August 2006, Plaintiff’s uncle died. She faxed Defendant a death
certificate to remove her uncle from the mortgage documents and transfer the mortgage
and deed to her. Plaintiff began to experience financial hardship in 2008. On March 10,
2010, Mortgage Electronic Registration System, Inc. (“MERS”), the nominee for
Approved, assigned its interest in the mortgage to Defendant, Bank of America, N.A., as
successor by merger to BAC Home Loans Servicing, LP. The assigned mortgage was
recorded with the Wayne County Register of Deeds on March 16, 2010. Plaintiff failed
to make payments and defaulted on her obligations under the note and mortgage. As a
result, the Property was sold at a Sheriff’s Sale on March 31, 2010. Defendant
purchased the property at the Sheriff’s Sale for $120,039.88. Plaintiff did not redeem
the Property before the redemption period expired on October 1, 2010.
According to Plaintiff, from 2008 until the redemption period expired on October
1, 2010, Defendant caused confusion that delayed her attempt to receive a loan
modification. Defendant assigned the note and mortgage containing her deceased
uncle’s name, incorrectly spelled her name on the loan modification documents, gave
Plaintiff conflicting information and advice, and could not locate missing documents that
Plaintiff forwarded.
Defendant took action to evict Plaintiff from the Property. Plaintiff’s Complaint
alleges ten claims: (1) Count 1- Violation of M.C.L. § 600.3205; (2) Count IIMisrepresentation and/or Fraud; (3) Count III- Quiet Title; (4) Count IV- Deceptive Act
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and/or an Unfair Practice (voluntarily dismissed); (5) Count V- Negligence; (6) Count VIUnjust Enrichment (voluntarily dismissed); (7) Count VII- Innocent/Negligent
Misrepresentation; (8) Count VIII- Fraud, based upon Silent Fraud and Unfair Practices;
(9) Count IX- Constructive Trust (voluntarily dismissed); (10) Count X- Injunctive Relief.
Defendant moved to dismiss the entire Complaint.
On May 8, 2012, Defendant removed the state court action to this Court under 28
U.S.C. § 1441 based on 28 U.S.C. § 1332. In its motion to dismiss, Defendant asserts
that (1) Plaintiff fails to state a claim for violation of M.C.L. 600.3205 (Count I), (2)
Plaintiff’s fraud-based claims should be dismissed because they are insufficiently pled
(Count II, VII, VIII), (3) Plaintiff fails to state a claim for quiet title (Count III), (4) Plaintiff
fails to state a claim for a deceptive act and/or unfair practice (Count IV), (5) Plaintiff’s
negligence claim fails (Count V), (6) Plaintiff’s unjust enrichment claim fails (Count VI),
(7) Plaintiff’s Claim for constructive trust is barred by the doctrine of unclean hands
(Count IX), and (8) Plaintiff fails to state a claim for injunctive relief (Count X).
III.
ANALYSIS
A.
Standard of Review
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests
the sufficiency of a complaint. The Court will grant a motion to dismiss under 12(b)(6) if
the complaint fails to state a claim upon which relief can be granted. G.M. Eng’rs and
Assocs, Inc. v. West Bloomfield Twp., 922 F.2d 328, 330 (6th Cir. 1990). To overcome a
Rule 12(b)(6) motion, “factual allegations must be enough to raise a right to relief above
the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “[O]nly a
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complaint that states a plausible claim for relief survives a motion to dismiss.” Ashcroft
v. Iqbal, 556 U.S. 662, 679 (2009). Although “a complaint attacked by a Rule 12(b)(6)
motion to dismiss does not need detailed factual allegations,” a plaintiff must do more
than state conclusions or recite the elements of a cause of action. Bell Atl. Corp., 550
U.S. at 555.
In ruling on a motion to dismiss, the court may consider the complaint as well as
(1) documents referenced in the pleadings and central to plaintiff’s claims, (2) matters of
which a court may properly take notice, (3) public documents, and (4) decisions of
government agencies. Tellabs, Inc.v. Makor Issues & Rights Ltd., 551 U.S. 308, 322-23
(2007). Here, the Court considered documents relating to the mortgage and foreclosure
which are referenced in the Complaint and central to Plaintiff’s claims.
B.
Count I- Violation of MICH. COMP. LAWS § 600.3205(a)
The Court finds there is no violation of MICH. COMP. LAWS § 600.3205(a);
Defendant gave Plaintiff notice under the statute.
Plaintiff alleges the foreclosure sale is invalid because Defendant did not provide
her with notices, mediation, and modification information and opportunities required by
MICH. COMP. LAW § 600.3205a. Plaintiff requests rescission of the foreclosure sale.
A party may not begin foreclosure by advertisement if notice was not mailed
according to MICH. COMP. LAWS § 600.3205(a). Pettey v. CitiMortgage, Inc., No. 1113779, 2012 WL 3600342, at *8 (E.D. Mich. Aug. 21, 2012). Included in the written
notice, the foreclosing party must send the contact information of the person with
authority to make agreements for a loan modification. MICH. COMP. LAWS §
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600.3205(a)(1)(c). The borrower may request a meeting to attempt to work out a
modification of the mortgage loan within 30 days after the foreclosing party sends
notice. MICH. COMP. LAWS § 600.3205(a)(1)(d). If the buyer requests a meeting,
foreclosure proceedings will not start until 90 days after the foreclosing party mails
notice. MICH. COMP. LAWS § 600.3205(a)(1)(e). Failure to comply with MICH. COMP. LAWS
§ 600.3205(a) does not invalidate a Sheriff’s Sale. Dingman v. OneWest Bank, No. 1115706, FSB, 2012 WL 884357, at *8 (E.D. Mich. Mar. 14, 2012). “The statute plainly
requires the borrower to seek his remedy prior to the completion of the foreclosure sale,
as it merely converts the proceeding into one of judicial foreclosure. A borrower may
not challenge a complete foreclosure sale under this statute.” Benford v. CitiMortgage,
Inc., 11-12200, 2011 WL 5525942, at *5 (E.D. Mich. Nov. 14, 2011).
Defendant’s Exhibit E is a notarized affidavit of compliance with MICH. COMP.
LAWS § 600.3205a. Defendant mailed the required Notice under MICH. COMP. LAWS §
600.32059(a)(1) and (2). It published the Notice according to MICH. COMP. LAWS §
600.3205(a)(4). The Notice of Foreclosure was not published until Defendant complied
with MICH. COMP. LAWS § 600.3205(a)(4). Plaintiff did not request to set up a meeting to
modify the mortgage according to MICH. COMP. LAWS § 600.3205(a)(1)(d). She also did
not request judicial foreclosure for failure to comply with loan modification provisions.
“[Her] complaint asks for an order to rescind the foreclosure sale, but she does not state
the authority under which the Court would be able to accomplish this. The only source
of authority [she] point[s] to is the statute itself.” Dingman, 2012 WL 884357, at *9. For
these reasons, Count I fails.
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C.
Count II- Misrepresentation and/or Fraud, Count VIIInnocent/Negligent Misrepresentation, Count VIII- Fraud, Based Upon
Silent Fraud and Bad Faith Promises
1.
Plaintiff’s Fraud Allegations are not pled with particularity
under the Fed. R. Civ. P. 9(b) heightened pleading standard.
Plaintiff alleges several fraud based claims: Misrepresentation and/or Fraud
(Count II), Innocent/Negligent Misrepresentation (Count VII), and Fraud, Based Upon
Silent Fraud and Bad Faith Promises (Count VIII). Defendant states that Plaintiff’s fraudbased claims should be dismissed because they are insufficiently pled.
A fraud count must state with particularity the circumstances constituting fraud or
mistake. Fed. R. Civ. P. 9 (b). The purpose behind the particularity requirement of Rule
9(b) is to provide a defendant fair notice of the substance of a plaintiff's claim so the
defendant may prepare a responsive pleading. Michaels Bldg. Co. v. Ameritrust Co.,
N.A., 848 F.2d 674, 679 (6th Cir. 1988). To meet the particularity requirements of Rule
9(b), the plaintiff must : “(1) specify the statements that he contends are fraudulent; (2)
identify the speaker; (3) state where and when the statements were made; and (4)
explain why the statements were fraudulent. At a minimum, plaintiffs must allege the
time, place, and contents of the misrepresentation on which they relied.” Frank v. Dana
Corp., 547 F.3d 564, 569-70 (6th Cir. 2008) (internal citations omitted). “[P]laintiff must
also allege why the statements were fraudulent.” Haigh, 2012 WL 1365081, at *5.
Where a party fails to meet its Rule 9(b) burden, dismissal is warranted. Id.
2.
Count II- Misrepresentation and/or Fraud
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Plaintiff’s fraudulent misrepresentation claims are not pled with particularity.
Plaintiff alleges fraud because of Defendant’s alleged reckless representations during
the loan modification process. In support, Plaintiff states Defendant represented to her
that Defendant would (1) advise her whether she qualified for a loan modification, (2)
postpone the Sheriff’s Sale until a decision was made on the loan modification, (3)
review the file, (4) evaluate her to determine if she qualified for a loan modification, and
(5) notify her if the loan modification was denied. Plaintiff also says Defendant told her
she qualified for a loan modification, her appeal was approved, and her deceased
uncle’s name would be taken off the loan and mortgage documents.
In Michigan, the elements for fraudulent misrepresentation are that the (1)
defendant made a material misrepresentation (2) that was false; (3) he knew when he
made it that it was false or he made it recklessly; (4) he intended the plaintiff to act on it;
(5) plaintiff relied on it and (6) suffered injury. Smith v. Bank of Am. Corp., No. 1014161, 2011 WL 653642, at *4 (E.D. Mich. Feb. 14, 2011) aff'd, 11-1406, 2012 WL
2301645 (6th Cir. June 18, 2012).
Plaintiff does not plead “time, place, or contents” of the alleged
misrepresentations. Id. Because Plaintiff did not plead the elements of fraud with
particularity, Count II fails. See id. (Plaintiff did not state the time, place, or contents of
the alleged misrepresentations.)
3.
Count VII- Innocent/Negligent Misrepresentation
Plaintiff did not plead the minimum required for innocent or negligent
misrepresentation. In support of this claim, Plaintiff states: (1) Defendant made
innocent and/or negligent representations of material facts by promising or representing
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that it would give a loan modification, (2) representations made by Defendant were
directed to her and were made in connection with the loan modification so that she
could remain in her home, (3) the representations were false because Defendant failed
to give her a loan modification, (4) Plaintiff would not have entered the loan modification
process if she had known she would not have received it, (5) and she suffered financial
loss that benefitted the Defendant.
Plaintiff’s seventh claim improperly combines two distinct causes of action. See
Sembly v. U.S. Bank Nat’l Assn., No. 11-12322, 2012 WL 32737, at *4 (E.D. Mich. Jan.
6, 2012). “A claim of innocent misrepresentation is shown if a party detrimentally relies
upon a false representation in such a manner that the injury suffered by that party
inures to the benefit of the party who made the representation.” Unibar Maint. Serv., Inc.
V. Saigh, 769 N.W.2d 911, 919 (Mich Ct. App. 2009). “A claim for negligent
misrepresentation requires [a] plaintiff to prove that a party justifiably relied to his
detriment on information prepared without reasonable care by one who owed the relying
party a duty of care.” Id.
These allegations “do not put Defendant on notice of the time, place, or contents
[of] the alleged misrepresentations.” Smith, 2011 WL 653642, at *4. Plaintiff does not
allege the minimum required under Rule 9(b). Count VII fails.
4.
Count VIII- Fraud, Based Upon Silent Fraud and Bad Faith
Promises
In support of this claim, Plaintiff alleges: (1) Defendant entered into the loan
modification process with her, knowing it would go forward with the Sheriff’s Sale, (2)
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Defendant failed to disclose to her its intention to go forward with the Sheriff’s Sale, (3)
she relied upon Defendant’s assurances, statements, promises, and guarantees relating
to the loan modification, and (4) Defendant knew or should have known that its failure to
disclose pertinent facts caused her to have a false impression.
“[T]o prove a claim of silent fraud, a plaintiff must show that some type of
representation that was false or misleading was made and that there was a legal or
equitable duty of disclosure.” M&D, Inc. v. W. B. McConkey, 585 N.W.2d 33, 39 (Mich.
Ct. App. 1998). Plaintiff falls short of meeting this standard.
“This is nearly the exact language confronted by Judge Edmunds in Smith. In
dismissing the claim, she wrote: ‘[N]ot only has Plaintiff not satisfied the fraud pleading
requirements, they also have not alleged facts that would support the element that
Defendants had a legal or equitable duty to disclose any supposed misrepresentation.’”
Haigh, 2012 WL 1365081, at *6. Count VIII fails.
Plaintiff’s fraud-based claims (Count II- Misrepresentation and/or Fraud, Count
VII- Innocent/Negligent Misrepresentation, Count VIII- Fraud, Based Upon Silent Fraud
and Bad Faith Promises) are not pled with sufficient particularity to survive a motion to
dismiss.
D.
Count III- Quiet Title
The Court dismisses Plaintiff’s claim for Quiet Title because she does not have
an interest in the Property and has not raised issues that rise to the level of fraud,
irregularity, or exigency sufficient to set aside the forfeiture sale.
1.
Plaintiff does not have an interest in the Property because she
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failed to redeem.
Plaintiff claims that the Property was illegally obtained and the Defendant should
have no interest. Defendant, relying on MICH. COMP. LAWS § 600.3236, claims Plaintiff
lost her rights to the Property on October 1, 2010, when the redemption period expired.
Defendant also states Plaintiff must establish a prima facie case of title. Plaintiff
requests legal title and that the Court void the Sheriff’s Sale.
“A quiet title action is an attempt to establish a substantive right in property.”
Sembly, 2012 WL 32737, at *3. “Under Michigan law, the plaintiff has the burden of
proof in an action to quiet title and must make out a prima facie case of title. If the
plaintiff makes out such a case, then the defendant has the burden of proving a superior
right or title in itself.” Brezzell v. Bank of America, N.A., No. 11-11467, 2011 WL
2682973, *3 (E.D. Mich. July 11, 2011) (internal citations omitted).
“Following a foreclosure, the rights and obligations of the parties are controlled
by statute.” Haigh, 2012 WL 1365081, at *3; Senters v. Ottawa Savings Bank, 503
N.W.2d 639, 642 (Mich. 1993). “After a [S]heriff’s [S]ale, a mortgagor is entitled to a
period of time to redeem the property by paying the required amount.” MICH. COMP.
LAWS § 600.3240(1); Haigh, 2012 WL 1365081, at *3. “At the expiration of the statutory
redemption period, the purchaser of the sheriff’s deed is vested with ‘all the right, title,
and interest’ in the property.” MICH. COMP. LAWS § 600.3236; Haigh, 2012 WL 1365081,
at *3. “[A] mortgagor who fails to redeem loses all rights in the property.” Haigh, 2012
WL 1365081, at *3; see also Sembly, 2012 WL 32737, at *1. Thus, “[t]he redemption
period generally serves as a mortgagor’s last chance to avoid losing [his or her] home
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after a valid foreclosure sale.” Sembly, 2012 WL 32737, at *1. However, the Court has
the power to set aside a foreclosure sale upon “a clear showing of fraud or irregularity.”
Moriarty v. BNC Mortg., Inc., No. 10-13860, 2010 WL 5173830, at *2 (E.D. Mich. Dec.
15, 2010); see also United States v. Garno, 974 F. Supp. 628, 633 (E.D. Mich. 1997)
(“The Michigan Supreme Court has held that it would require a strong case of fraud or
irregularity, or some peculiar exigency, to warrant setting a foreclosure sale aside.”)
Plaintiff cannot prove a prima facie case of title. After the Sheriff’s Sale on
March 31, 2010, Plaintiff had until October 1, 2010, to redeem the Property. The
redemption period expired 18 months before Plaintiff filed the Complaint. Because she
did not redeem, she lost all rights in the Property to Defendant, who purchased it. Her
“claim to quiet title ‘merely attacks the foreclosure process and does not address a
legitimate title dispute.’” Mekani v. Homecomings Fin., LLC, 752 F. Supp. 2d 785, 796
(E.D. Mich. 2010). Plaintiff missed her last chance to avoid losing her home, unless the
Court finds that there was irregularity and fraud sufficient to set aside the foreclosure
sale. The Court does not find that there was.
2.
Plaintiff does not raise issues that rise to the level of fraud,
irregularity, or exigency sufficient to set aside the foreclosure
sale.
According to Defendant, Plaintiff did not allege facts or defects rising to the level
of fraud or irregularity in the foreclosure process that would warrant setting aside the
foreclosure sale. It also asserts the fraud and irregularity must occur in the foreclosure
sale process. In response, Plaintiff alleges she has an interest in the Property and
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experienced irregularities during the foreclosure process sufficient to extend the
redemption period. She states that there was irregularity in the loan modification
process because her name was incorrectly put on documents, conflicting information
and advice was given to her from Defendant’s representatives, and Defendant could not
locate missing documents.
“[T]he type of fraud sufficient to set aside a foreclosure sale must generally relate
to the foreclosure sale or procedure itself.” Whitfield v. OCWEN Berkeley Fed. Bank &
Trust, No. 221248, 2001 WL 1699782, at *2 (Mich. Ct. App. Dec. 28, 2001). Federal
case law holds that when Plaintiff has admitted and received notice of default and failed
to show they had funds to outbid the highest bidder, she cannot show how she was
prejudiced by defects in notice. Brewster v. US Bank NA, No. 12-12185, 2012 WL
3779012, at *5 (E.D. Mich. Aug. 7, 2012). The “plaintiff cannot show prejudice resulting
from [an] alleged defect where [s]he did not attempt to redeem the property.” Galati v.
Wells Fargo Bank, No. 11-11487, 2011 WL 5178276, at *4 (E.D. Mich. Nov. 1, 2011).
“Michigan statutes ‘merely require a lender to consider a borrower for a loan
modification prior to commencing foreclosure by advertisement. These statutes do not
require a lender to modify a loan, nor do they give a plaintiff a cause of action for
damages.’” Brewster, 2012 WL 3779012, at *6.
Plaintiff’s allegations do not rise to the level of showing fraud, irregularity, or
exigency. The irregularities that Plaintiff alleges are a part of the foreclosure process
because they relate to the procedure for foreclosure by advertisement under MICH.
COMP. LAWS § 600.3205. Plaintiff admits default. She also claims she did not receive
written notice mailed to her by Defendant’s foreclosing law firm. However, she failed to
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show she had funds to outbid Defendant. Therefore, she cannot claim that she was
prejudiced by defects in notice. This is especially true since Plaintiff waited a year and
a half after the redemption period expired to file her Complaint and made no effort to
redeem the Property. Plaintiff alleges the irregularity sufficient to set aside the sale was
the conflicting information and advice Defendant’s representatives gave her during the
foreclosure period. However, from Plaintiff’s affidavit, the conflicting information
appears to be related to Plaintiff consulting over forty of Defendant’s representatives
about her case. Quite naturally, a large number of representatives serving in different
capacities would give conflicting information. The irregularities that Plaintiff alleges are
normal occurrences in the ordinary course of business.
About a year before the Sheriff’s Sale in 2009, Defendant began to consider
Plaintiff for a loan modification. Defendant ultimately did not modify the loan, but was
not required to. In the loan modification process, there was no irregularity or fraud. At
most, Plaintiff was led to believe that a modification was possible until and after the
foreclosure sale. Plaintiff does not allege that the Defendant promised a modification.
See Brewster, 2012 WL 3779012, at *4, *5. Plaintiff cannot show she was prejudiced by
any alleged defect. To the extent she relies on her fraud claims to set aside the
foreclosure, those arguments fail for reasons explained above. Count III fails.
E.
Count IV- Deceptive Act and/or an Unfair Practice
In her response, Plaintiff agrees to dismiss Count IV, Deceptive Act and/or Unfair
Practices; Count VI, Unjust Enrichment; and Count IX, Constructive Trust. Fed. R. Civ.
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P. 41(a)(2) declares that “an action may be dismissed at the plaintiff's request only by
court order, on terms that the court considers proper.” The Court dismisses Count IV,
VI, and IX.
F.
Count V- Negligence
Plaintiff did not attempt to redeem the Property. Therefore, even if the Court
were to find there was a duty breached and that breach was the actual and proximate
cause of the Plaintiff’s damages, she cannot claim any negligence of the Defendant
prejudiced her. See Galati, 2011 WL 5178276, at *4.
G.
Count X- Injunction
Plaintiff requests injunctive relief as a claim in her Complaint. However, “an
injunction is an equitable remedy, not an independent cause of action.” Terlecki v.
Stewart, 754 N.W.2d 899, 912 (Mich. App. 2008). The Court must consider the following
factors when determining whether to grant injunctive relief: (1) whether Plaintiff has
shown a likelihood of success on the merits; (2) whether she will suffer irreparable harm
absent the injunction; (3) whether the injunction would cause substantial harm to others;
and (4) whether the public interest would be served by issuing the injunction. Overstreet
v. Lexington-Fayette Urban County Gov’t, 305 F.3d 566, 573 (6th Cir. 2002).
Because the court finds all of Plaintiff’s claims to be deficient, she has no
likelihood of success on the merits. Count X fails.
H.
Leave to Amend
Plaintiff requests leave to amend Counts I, II, III, VII, VIII and X.
Fed. R. Civ. P. 15 “declares that leave to amend ‘shall be freely given when
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justice so requires.’” Foman v. Davis, 371 U.S. 178, 182 (1962). Local Rule 15.1
requires a motion to amend, along with a copy of the proposed amendment. L.R. 15.1.
The Court will not decide whether Plaintiff may amend until she has submitted
her motion and proposed complaint. Plaintiff must submit it within 30 days of entry of
this Order and be mindful that Fed. R. Civ. P. 11 applies. Defendant has 21 days to file
any opposition to Plaintiff’s proposed amendment. If Plaintiff does not file an Amended
Complaint, Defendant must submit a judgment on the outstanding counts.
IV.
CONCLUSION
The Court dismisses Counts IV, V, VI, IX, and X with prejudice; Count X, as
already stated, is not an independent cause of action. The Court will allow Plaintiff to file
a motion to amend Counts I, II, III, VII, and VIII. These Counts are dismissed without
prejudice.
Defendant’s motion to dismiss is GRANTED.
IT IS ORDERED.
/s/ Victoria A. Roberts
Victoria A. Roberts
United States District Judge
Dated: October 15, 2012
The undersigned certifies that a copy of this
document was served on the attorneys of
record by electronic means or U.S. Mail on
October 15, 2012.
s/Linda Vertriest
Deputy Clerk
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