The opinion of the court was delivered by: JAMES MORAN, Senior District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff brought an eight-count complaint against defendants alleging
that they conspired to submit fraudulent mortgage applications.
Defendants filed a motion to dismiss counts IV, V, VI and VIII of the
complaint. Plaintiff agreed to voluntarily withdraw counts V, VI and
VIII, leaving count IV as the sole remaining subject of this motion. For
the following reasons, defendants' motion is denied.
Plaintiff Ivanhoe Financial, Inc. (Ivanhoe) is an Illinois licensed
mortgage banker. Defendant Viki Hettinger is the president, secretary and
an owner of defendant Mortgage Essentials, an Illinois licensed mortgage
broker. In August 2002, the parties reached an agreement whereby Mortgage
Essentials would submit mortgage loan applications to Ivanhoe for
possible funding. The contract made Mortgage Essentials responsible for
the accurate preparation of the loan applications and allowed Ivanhoe to
require Mortgage Essentials to repurchase loans if any of the terms were
Plaintiff alleges that defendants engaged in a scheme to get Ivanhoe to
fund loan application packages containing false and fraudulent
information. According to Ivanhoe, it relied on false information provided by defendants when funding two
loans, but discovered the fraud before making any further loans. The
defendants have allegedly refused to repurchase the fraudulently obtained
In deciding a Federal Rule of Civil Procedure 12(b)(6) motion to
dismiss, the court assumes the truth of all well-pleaded allegations,
making all inferences in the plaintiff's favor. Sidney S. Arst Co. v.
Pipefitters Welfare Educ. Fund, 25 F.3d 417, 420 (7th Cir. 1994). The
court should dismiss a claim only if it appears "beyond doubt that the
plaintiff can prove no set of facts in support of his claim which would
entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
While the complaint does not need to provide the correct legal theory to
withstand a Rule 12(b)(6) motion, it must allege all of the elements
necessary to recover. Ellsworth v. City of Racine, 774 F.2d 182, 184 (7th
Cir. 1985), cert. denied, 475 U.S. 1047 (1986).
In count IV of its complaint, plaintiff alleges deceptive trade
practices pursuant to the Illinois Consumer Fraud and Deceptive Trade
Practices Act, 815ILCS 505/2 (ICFA). To state a claim pursuant to section
2 of the ICFA, plaintiff must plead (1) a deceptive act or practice by
defendants; (2) that defendants intended for plaintiff to rely on that
deception; (3) that it occurred in the course of commerce; and (4) that
the deception caused injury. DeLeon v. Beneficial Const. Co.,
55 F. Supp.2d 819, 825 (N.D. Ill. 1999). The only issue here is whether
plaintiff is protected as a consumer by the ICFA.
"The term `consumer' means any person who purchases or contracts for
the purchase of merchandise not for resale in the ordinary course of his
trade or business but for his use or that of a member of his household."
815 ILCS 505/1(e). The ICFA is intended to be liberally construed and may apply to businesses as well as individuals. See Downers
Grove Volkswagon. Inc. v. Wigglesworth Imports. Inc., 546 N.E.2d 33,
40-41 (Ill.App.2d Dist. 1989). When a plaintiff pleads that it was the
party actually harmed by the defendant, it does not need to show a nexus
between the alleged conduct and consumer protection concerns. Duchossis
Industries. Inc. v. Crawford & Co., 2001 WL 59031, *3 (N.D. Ill.).
Defendants argue that plaintiff essentially resold the services
provided by Mortgage Essentials to its customers. Merely purchasing
component parts for incorporation into a final product does not make a
party a consumer. Pressalite Corp. v. Matshusita Elec. Corp. of America,
2003 WL 1811530, *10 (N.D. Ill. 2003). In Stepan Co. v. Winter Panel
Corp., 948 F. Supp. 802 (N.D. III. 1996), the counter-plaintiff Hied a
claim against the plaintiff alleging that it fraudulently breached its
contract to supply counter-plaintiff with Stepanfoam chemicals necessary
to manufacture insulating panels. Id. at 805. Because the Stepanfoam was
incorporated into the panels that were sold to customers of Winter
Panel, the court determined that the counter-plaintiff was not a consumer
as defined by the ICFA. Id. at 806-07. Because the goods were purchased
primarily for the purpose of resale and there was no consumer nexus, the
claim was dismissed. Id.
Here, plaintiff did not incorporate Mortgage Essentials into any type
of a finished product. Instead, it used a mortgage broker to help find
suitable potential borrowers. Mortgage Essentials marketed these services
to plaintiff and other similar lenders. Essentially, Mortgage Essentials
had two groups of customers: potential borrowers who completed loan
applications and potential lenders who relied on Mortgage Essentials to
ensure that the information in those applications was reliable. Both
groups were consumers of Mortgage Essentials' services and could therefore bring suit pursuant to the
Defendants next argue that plaintiff does not have standing to sue
because the ICFA protects only Illinois residents. This argument,
however, rests on a misunderstanding of the case law. In Swartz v.
Schaub, 818 F. Supp. 1214 (N.D. Ill. 1993), the court stated that the
ICFA "is intended to deal only with the impact of the statutorily
prohibited practices on Illinois consumers" (emphasis in original). In
that case, Judge Shadur relied on his earlier decision in Seaboard Seed
Co. v. Bemis Co., Inc., 632 F. Supp. 1133, 1140 (N.D. Ill. 1986), in
which he granted the defendant's motion for summary judgment because
plaintiff could not show any impact to Illinois consumers. What is
important in determining whether a plaintiff has standing to sue under
the ICFA is not its residency, but the State of Illinois' interest in
protecting its consumers. Avery v. State Farm Mut. Auto. Ins. Co.,
746 N.E.2d 1242, 1254 (Ill.App.5th Dist. 2001) ("To deny an out-of-state
plaintiff a remedy against a resident of Illinois would violate the
legislative directive that the CFA be liberally construed to achieve its
remedial purposes."). Mortgage Essentials is licensed to do business in
Illinois and the application packages in question were filed in Illinois
and concerned Illinois property. As a result, Illinois' interest in
consumer protection is directly implicated.
For the foregoing reasons, defendants motion to dismiss ...