The opinion of the court was delivered by: AMY J. ST. EVE, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs have filed a two-count Second Amended Complaint ("SAC")
against multiple Defendants, including Community Bank of Northern
Virginia ("Community Bank"). Count I alleges violations of the Truth in
Lending Act, 15 U.S.C. § 1601 et seq. (`TILA"), as amended
by the Home Ownership and Equity Protection Act, 15 U.S.C. § 1639
("HOEPA"). Count II seeks recovery against Community Bank and Guaranty
National Bank for a violation of Section
4.1a of the Illinois Interest Act, 815 ILCS 205/4. la. Plaintiffs
seek rescission, statutory damages, and declaratory relief. Defendant
Community Bank has moved to dismiss Plaintiffs' complaint. For the
reasons set forth below, Defendant Community Bank's motion is granted.
I. Allegations in the SAC
Only certain Plaintiffs borrowed money from Community Bank and have
asserted claims against Community Bank: Stephanie Spann, Leonila T. Nini
and Eufronio Nini (the "Ninis"), John Hardt and Robbin Verbeck (the
"Hardt/Verbecks"), Lynell B. Wingfield, and Sharon Finerty (collectively,
the "Community Bank Plaintiffs"). The Community Bank Plaintiffs reside in
Illinois: Spann resides in Rockford; the Ninis reside in Darien; the
Hardt/Verbecks live in Collinsville; Wingfield lives in O'Fallon; and
Finerty resides in Homewood.
Each of the Community Bank Plaintiffs obtained a residential second
mortgage loan nominally made from Community Bank. Plaintiffs allege that
these loans had high "points and fees, typically amounting to 10% of the
loan balance." (R. 50-1, SAC ¶ 28.) They contend that these loans
were extensions of consumer credit subject to TILA and HOEPA. Plaintiffs
further allege that Community Bank actually did not make the loans at
issue in this case. Instead, EquityPlus Financial made the loans and in
effect "rented" Community Bank's banking charter to issue them.
(Id. ¶ 31.) Thus, Plaintiffs allege that the loans only
nominally originated from Community Bank.
The Community Bank Plaintiffs allege that the finance charges on their
second mortgage loans are understated and the amounts financed are
overstated on the TILA disclosures furnished to them in connection with
these second mortgages. (Id. ¶ 186.) They further allege
annual percentage rate was understated on the TILA financial
disclosures and the advance HOEPA disclosures "by an amount exceeding any
applicable tolerances." (Id. ¶ 187.)
The Community Bank Plaintiffs seek to rescind the loans made or held by
Defendants under TILA and Regulation Z of the Federal Reserve Board,
12 C.F.R. part 226. They also seek statutory damages available under both
TILA and HOEPA, and to obtain a declaratory judgment regarding their
obligations toward Defendants.
II. Related Class Action Complaints
Litigation has taken place in Pennsylvania that is relevant to this
case. On May 1, 2001, a class action complaint, entitled Davis et al.
v. Community Bank of Northern Virginia et al. was filed in the Court
of Common Pleas of Allegheny County, Pennsylvania, (G.D. 01-8643.) The
Davis plaintiffs commenced the case on behalf of themselves and
all person who received secondary mortgage loans funded by the Community
Bank of Northern Virginia where the loan was secured by real property in
Pennsylvania. On or about July 3, 2001, the Davis plaintiffs
filed an amended complaint on behalf of the same class. (R. 42-1, Sur
Surreply in Supp. of Mot. to Dismiss, Ex. A.) On July 27, 2001, the
Davis defendants removed the case to the United States District
Court for the Western District of Pennsylvania. (Civil Action, 01-1406
(W.D. Pa.)). The Western District of Pennsylvania remanded that case to
state court on April 25, 2002. (R. 42-1, Sur Surreply in Supp. of Mot. to
Dismiss, Ex. B,) On June 12, 2002, the Davis plaintiffs filed a Second
Amended Complaint ("Davis second amended complaint").
(Id. Ex. C). In the Davis second amended complaint, the
plaintiffs sought to represent a purported class of persons who received
a secondary mortgage from Community Bank where "(a) the loan is secured
by real property in Pennsylvania (the `Pennsylvania Class'), (b) the loan
is secured by real property
anywhere in the United States (the `National Class'), and where the
loan meets the definition of high-cost mortgage set forth at
15 U.S.C. § 1602(aa)(1)(A)-(B). (Id. Ex. C, ¶ 1.) On July 9, 2002,
the Davis defendants again removed the case to the Untied States
District Court for the Western District of Pennsylvania. (Civil Action
02-1201 (W.D. Pa.)). This time the case remained in federal court. On
July 25, 2002, the Davis plaintiffs filed a third amended
complaint on behalf of the same class. (R. 42-1, Sur Surreply in Supp. of
Mot. to Dismiss, Ex. D.) In or about November, 2003, a Consolidated
Amended Cass Action Complaint was filed in the Davis case in the
United States District Court for the Western District of Pennsylvania on
behalf of the National Class where the loan was repurchased by
Residential Funding Corporation. (Id. Ex. E. ¶ 369.)
The Western District of Pennsylvania consolidated Davis with
Kessler et al v. GMAC Residential Funding Corp., et al, sub nom In Re
Community Bank of Northern Virginia and guaranty National Bank of
Tallahassee Second Mortgage Loan Litigation, Civil Action No.
03-0425 (W.D. Pa.), in order to obtain certification of the settlement
class and approval of the settlement. Plaintiffs allege that they opted
out of the settlement in the Davis action, but the court
invalidated their opt-out submissions. The validity of Plaintiffs'
opt-out currently is on appeal in Davis.
The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test
the legal sufficiency of a complaint, not the merits of the case. See
Triad Assocs., Inc. v. Chicago Hous. Auth., 892 F.2d 583, 586 (7th
Cir. 1989). When considering a motion to dismiss, the Court considers
"whether relief is possible under [any] set of facts that could be
with [the] allegations." Bartholet v. Reishauer A.G.
(Zurich), 953 F.2d 1073, 1078 (7th Cir. 1992). The Court views the
complaint "in the light most favorable to the plaintiff, taking as true
all well-pleaded factual allegations and making all possible inferences
from those allegations in his or her favor." Lee v. City of
Chicago, 330 F.3d 456, 459 (7th Cir. 2003). See also Thomas v.
Law Firm of Simpson & Cybak, 354 F.3d 696, 697 (7th Cir. 2004).
The Court is not, however, "obliged to accept as true legal conclusions
or unsupported conclusions of fact." Hickey v. O'Bannon,
287 F.3d 656, 658 (7th Cir. 2002).
In deciding this motion to dismiss, the Court can consider any
documents incorporated or referenced in the complaint. See Tierney v.
Vahle, 304 F.3d 734, 738 (7th Cir. 2002); Menominee Indian Tribe
of Wis. v. Thompson, 161 F.3d 449, 456 (7th Cir. 1998), cert.
denied, 526 U.S. 1066 (1999).
Statute of limitations defenses are frequently inappropriate for
resolution on a motion to dismiss because their application often depends
upon factual determinations. Johnson Controls, Inc. v. Exide
Corp., 129 F. Supp.2d 1137, 1142 (N.D. Ill. 2001). If a plaintiff
alleges facts that show that his action is time-barred, however, he may
plead himself out of court. Id. All reasonable inferences must
be drawn in plaintiffs' favor when a defendant seeks a dismissal because
the claim is time-barred. Cornfield by Lewis v. Consol. High Sch.
Dist. No. 230, 991 F.2d 1316, 1324 (7th Cir. 1993).
The Community Bank Plaintiffs allege that the transactions at issue are
subject to rescission pursuant to 15 U.S.C. § 1635 and
12 C.F.R. § 226.23. Section 226.23 requires a
consumer to exercise her right to rescission within three business
days from either the date of consummation, delivery of notice of the
right to ...