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PERINO v. MERCURY FIN. CO.

September 21, 1995

JOSEPH PERINO, Plaintiff,
v.
MERCURY FINANCE COMPANY OF ILLINOIS, Defendant.



The opinion of the court was delivered by: ANDERSEN

 This case comes before the court on the 12(B)(6) motion of defendant, Mercury Finance Company of Illinois ("MFC Illinois"), to dismiss plaintiff Joseph Perino's complaint for failure to state a claim upon which relief can be granted. For the following reasons, we grant defendant's motion to dismiss.

 BACKGROUND

 Plaintiff's well-pleaded allegations, which the Court treats as true and views in a light most favorable to the plaintiff for purposes of this motion, are as follows. On May 20, 1993, the plaintiff, Joseph Perino of Burbank, Illinois, purchased a used 1990 Chevrolet Cavalier from Mancari's Chrysler Plymouth, Inc. ("Mancari Chrysler"). Amended Complaint P 20. Mancari Chrysler agreed to arrange financing for plaintiff with the defendant, MFC Illinois, a Delaware corporation with its principal place of business in Northbrook, Illinois. Id. at P 22. MFC Illinois is a "sales finance agency" whose primary business includes purchasing individual installment sales contracts from automobile dealers and retail vendors, extending installment loans directly to consumers, and selling credit insurance and related products. Id. at PP 5, 7.

 Mancari Chrysler informed plaintiff that MFC Illinois' annual percentage rate ("APR") was 41.04%. Id. at P 24. Plaintiff then executed a retail installment contract with Mancari Chrysler for the quoted APR of 41.04%. Id. at P 28; Exhibit B. In addition, plaintiff also purchased credit life and disability insurance which was included in the installment contract. Id. PP 33-34. The policy covered monthly payments on the installment contract in the event plaintiff became disabled and unable to pay. Id.

 MFC Illinois subsequently purchased the plaintiff's contract from Mancari Chrysler at a rate lower than the original 41.04% APR. Id. at PP 25-30. In addition, MFC Illinois then returned or credited part of the 41.04% rate to Mancari Chrysler. Id. at P 30. "For example, if MFC Illinois' 'buy rate' applicable to a contract was 30% and the dealer secured the consumer's signature on a contract providing for 40%, MFC Illinois and the dealer would split the 10% difference." Id. P 25. Neither MFC Illinois nor Mancari Chrysler disclosed this discounted transaction to plaintiff. Id.

 On June 17, 1994, plaintiff became disabled and was unable to make regular payments on the installment contract. Id. at P 45. Soon thereafter plaintiff informed MFC Illinois of his disability and filed a claim under the policy of disability insurance with the carrier, Crown Life. Id. at P 46. Crown Life honored plaintiff's claim and paid out the requisite benefits. Id. at PP 47-48. Unfortunately, the benefits were not paid to plaintiff until October 6, 1994. Id. As a result, plaintiff was unable to make payments on the installment contract for several months. On September 20, 1994, MFC Illinois repossessed plaintiff's car. Id. at P 50. Plaintiff again notified MFC Illinois of his disability and requested the return of his car. Id. at P 52. MFC Illinois refused to return the car unless plaintiff paid the past due amounts on the installment contract. Id.

 On January, 10, 1995, Plaintiff filed a four count amended complaint to which MFC Illinois' motion to dismiss is directed. In Count I plaintiff alleges that MFC Illinois violated the Racketeering Influenced and Corrupt Organizations Act ("RICO") and the mail fraud statute 18 U.S.C. § 1341 by paying secret "kickbacks" of finance charges to auto dealers. The remaining counts are state law claims before this Court pursuant to its supplemental jurisdiction under 28 U.S.C. § 1367. In Count II, plaintiff alleges that the same conduct violated the Illinois Consumer Fraud Act, 815 ILCS 505/2. Count III alleges that MFC Illinois violated the Illinois Consumer Fraud Act by repossessing plaintiff's car after he had become disabled and while his disability insurance claim was still pending. Finally, in Count IV plaintiff alleges that MFC Illinois' repossession notices violate § 9-504 of the Uniform Commercial Code ("UCC"). Further, plaintiff brings all four of these counts on behalf of a class pursuant to Fed.R.Civ.P. 23(a) and (b)(3).

 DISCUSSION

 In considering a motion to dismiss, the court must accept as true all the well-pleaded material facts in the complaint and must draw all reasonable inferences from those facts in the light most favorable to the plaintiff. Perkins v. Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). If fraud is alleged, Rule 9(b) of the Federal Rules of Civil Procedure requires the underlying facts of the lawsuit to be set out with particularity. Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 122 L. Ed. 2d 517, 113 S. Ct. 1160, 1163 (1993). Further, the complaint should not be dismissed unless it appears, beyond a doubt, that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957).

 I. RICO

 Count I alleges that MFC Illinois, an enterprise as defined by 18 U.S.C. § 1961(4), violated RICO by paying secret "kickbacks" of finance charges to auto dealers. Further, plaintiff alleges that this scheme to conceal the "kickbacks" to the dealers constituted a scheme or artifice to defraud within the meaning of the mail fraud statute, 18 U.S.C. § 1341. Defendant moves to dismiss Count I of the complaint for failure to state a claim for a RICO violation or mail fraud. Specifically, defendant contends that plaintiff has alleged no illegal acts by MFC Illinois.

 Defendant's conduct is neither fraudulent nor is it an illegal "kickback". The plaintiff's "kickback" allegations focus on nondisclosure of the transaction or discount between MFC Illinois and Mancari Chrysler which resembles a typical commission. The Truth-in-Lending Act does not require disclosures of this kind. The Act requires only that a consumer be informed of the name of the creditor, the amount financed, and the APR. See 12 C.F.R. § 226.17 et seq. MFC Illinois made all required disclosures to plaintiff. Repeated ...


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