Mr. Chow moves to dismiss the counterclaim, arguing that it would be
perverse to allow Aegis to sue him for fraud because he failed to disclose
payments that Future Bankers collected and that Aegis and Future Bankers
failed to disclose as required by TILA and RESPA. He says that the result
would be to overturn the disclosure rules under these statutes. He is
quite right, and I dismiss the counterclaim for lack of subject matter
jurisdiction under Fed. R. Civ. P. 12(b)(1)
In the first place, on the face of its complaint, Aegis lacks
standing, and therefore I lack subject matter jurisdiction. The point is
not raised by the parties, but I must raise subject matter jurisdiction
sua sponte. Garry v. Geils, 82 F.3d 1362, 1364 (7th Cir. 1996)
(Rooker-Feldman context). In order to sue in federal court, a plaintiff
must meet the constitutional requirements for standing: (1) the party
must have personally suffered an actual or threatened injury caused by
the defendant's illegal conduct; (2) the injury must be fairly traceable
to the challenged conduct; and (3) the injury must be one that is likely
to be redressed by a favorable decision. United Transp. Union v. Surface
Transp. Board, 183 F.3d 606, 611 n. 2 (7th Cir. 1999); Lujan v. Defenders
of Wildlife, 504 U.S. 555, 561 (1992). What is utterly crystal clear, as
repeatedly and recently reaffirmed by the United States Supreme Court, is
that attorneys' fees and litigation costs by themselves do not provide a
basis to sustain federal jurisdiction.*fn1 "If no injury is alleged
(or, if the allegation is contested, proved), and as a result there is no
case or controversy between the parties within the meaning of Article III
of the Constitution, the plaintiff cannot base standing on a claim for
attorneys! fees." Crabill v. Trans Union, L.L.C., 259 F.3d 662, 665 (7th
Cir. 2001); Steel Co. v. Citizens for a Better Environment, 523 U.S. 83,
107-08 (1998); Lewis v. Continental Bank, 494 U.S. 472, 480 (1990);
Diamond v. Charles, 476 U.S. 54, 70-71 (1986); Rhodes v. Stewart,
488 U.S. 1, 3 (1988) (per curiam); Sanfield, Inc. v. Finlay Fine Jewelry
Corp., 258 F.3d 578, 581 (7th Cir. 2001). "Otherwise the limitation of
federal jurisdiction to cases and controversies would be empty."
Crabill, 259 F.3d at 665. Aegis' counterclaim is therefore frivolous.
If I had jurisdiction, the allegation that Aegis's damages amounted to
litigation costs and attorneys' fees would mean that Aegis failed to
state a claim. The elements of common-law fraud are: "(1) a statement by
defendant; (2) of a material nature as opposed to opinion; (3) that was
untrue; (4) that was known or believed by the speaker to be untrue or
made in culpable ignorance of its truth or falsity; (5) that was relied
on by the plaintiff to his detriment; (6) made for the purpose of
inducing reliance; and (7) such reliance led to the plaintiff's injury."
Duran v. Leshe Oldsmobile, 594 N.E.2d 1355, 1360 (Ill. App. Ct. 1992).
"[S]uch reliance must be reasonable." Id.
Aegis offers no legal authority that its allegations of having incurred
attorneys fees and litigation costs satisfy the injury element required
for common law fraud in Illinois, and I hold that they do not. Attorney's
fees and costs do not appear to be even available to a prevailing
party under common law fraud, as opposed to the (inapplicable) Illinois
Consumer Fraud Act, 815 ILCS 505/1 et seq. ("ICFA"), which permits the
award of "reasonable attorney's fees and costs to the prevailing party."
Id. at 505/10a(c). Some immaterial exceptions aside, in Illinois "[a]
party may not recover attorney fees or costs unless provided for by
statute or agreement of the parties." Art v. State, 687 N.E.2d 126, 129
(Ill. App. Ct. 1997); State Farm Fire and Cas. Co. v. Miller Elec. Co.,
596 N.E.2d 169, 171 (Ill. App. Ct. 1992) (citing House of Vision, Inc.
v. Hiyane, 245 N.E.2d 468, 472 (Ill. 1969) ("[T]here is no common-law
principle allowing attorney fees either as costs or damages. . . . [T]he
`American' rule [is] consistently followed in Illinois. . . . The rule is
so ingrained in our system of jurisprudence that our supreme court has
repeatedly refused to change the rule even when constitutional grounds
have been argued.").*fn2 In addition I have found no Illinois case where
attorneys' fees and litigation costs, without any further allegation of
compensatory damages, were held to be sufficient to satisfy the element
of damages or injury in a fraud claim.
I DISMISS Aegis' Counterclaim for lack of standing, and in the
alternative for failure to state a claim.