United States District Court, N.D. Illinois, Eastern Division
June 9, 2005.
IVANHOE FINANCIAL, INC., a Delaware corporation, Plaintiff,
HIGHLAND BANC CORP, an Illinois corporation; and WIESLAW DOMARADZKI, Defendants.
The opinion of the court was delivered by: JOHN W. DARRAH, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff, Ivanhoe Financial, Inc., filed suit against
Defendants, Highland Banc Corp and Wieslaw Domaradzki.
Presently before the Court is Defendants' Motion to Dismiss and
Strike Plaintiff's Second Amended Complaint.*fn1 The motion
to dismiss challenges Plaintiff's breach of contract claim,
(Count I) and Illinois Consumer Fraud and Deceptive Practices Act
claim, 815 ILCS 505/1 (Count IV). For the following reasons, the
motion is denied. LEGAL STANDARD
In reviewing a motion to dismiss, the court reviews all facts
alleged in the complaint and any reasonable inferences drawn
therefrom in the light most favorable to the plaintiff. See
Marshall-Mosby v. Corporate Receivables, Inc., 205 F.3d 323, 326
(7th Cir. 2000). A plaintiff is not required to plead the facts
or elements of a claim, with the exceptions found in Federal Rule
of Civil Procedure 9. See Swierkiewicz v. Sorema, 534 U.S. 506,
511 (2002); Walker v. Thompson, 288 F.3d 1005, 1007 (7th Cir.
2002). Dismissal is warranted only if "it appears beyond a 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). The "suit should not be dismissed if it is
possible to hypothesize facts, consistent with the complaint,
that would make out a claim." Graehling v. Village of Lombard,
Ill., 58 F.3d 295, 297 (7th Cir. 1995).
The facts, for the purposes of this motion, are taken as true
from Plaintiff's Second Amended Complaint. Plaintiff entered into
a Broker/Lender Agreement with Defendants, whereby Defendants, as
a service to Plaintiff, would package and submit to Plaintiff
certain residential mortgage loan applications that Defendants
originated and processed. Approved loans would then be funded and
accepted by Plaintiff in accordance with the Agreement. Plaintiff
would then provide Defendants with a broker's compensation on
Paragraph five of the Agreement requires, in pertinent part,
With respect to each loan package submitted to
[Plaintiff] for funding, [Defendants] hereby
represent? and warrant? that . . . d. All documents submitted by [Defendants] in
connection with each loan package submitted to
[Plaintiff] are in every respect valid and genuine,
being what on their face they purport to be, and all
information provided, including, but not limited to,
the credit report and appraisal, submitted in
connection with such loan package is complete, true
and accurate. . . .
f. No fraudulent or intentionally misleading
information has been provided to [Plaintiff] with
respect to a loan application submitted to
[Plaintiff] for funding. For purposes of this
paragraph, the term "information" shall mean any and
all information obtained from or about the borrower
or the property, including but not limited to, the
credit report and appraisal. . . .
In the Fall of 2002, Defendants submitted loan packages to
Plaintiff for two residential properties. The first loan, for
Kamil Spicak, was for a property located at 422 Blackhawk Drive
in Westmont, Illinois. The second loan, for Myroslaw Ruptash, was
for a property located at 836 N. Springfield Avenue in Chicago,
Illinois. Plaintiff later discovered that the loan packages were
fraudulent, in violation of the Agreement, by containing
fabricated sales comparables in the property appraisals and
fabricated tax return and income information for the prospective
purchasers. Incorrect photographs for the Blackhawk Drive
property were also submitted with that loan application.
After discovering this false information, Plaintiff sent
Defendants letters asking Defendants to repurchase the loans, as
is required under paragraph nine of the Agreement "if any
covenant, representation, or warranty made by the Lender/Broker
is breached." Defendants did not repurchase the loans. ANALYSIS
Defendants seek to dismiss Count I, the breach of contract
claim, and Count IV, the Consumer Fraud Act Claim. Defendants
also seek to strike certain allegations in the Complaint which
allege Defendants received a secret "kickback" in return for
submitting the fraudulent loan packages. Finally, Defendants
argue that the Complaint violated basic pleading requirements
because, in part, the claims are scattered across multiple
Defendants contend the breach of contract claim should be
dismissed because Plaintiff has not alleged the existence of a
valid contract, the terms of the contract, a material breach of
the contract, or any damages. The allegations of the contract
count adequately set out a claim when read in context of other
allegations in the Complaint.
Defendants next argue that the Consumer Fraud Act claim should
be dismissed because: (1) Plaintiff is not a consumer under the
Act and has failed to allege any consumer protection nexus, (2)
Plaintiff has failed to plead the fraud with the particularity
required under Federal Rule of Civil Procedure 9, and (3)
Plaintiff has not alleged an injury under the Act.
"A plaintiff must either allege a nexus with Illinois consumers
or allege it was a consumer of a defendant's merchandise."
Menard, Inc. v. Countryside Indus., Inc., 01 7142, 2004 Wl
1336382, at * 2 (N.D. Ill. Jun. 14, 2004) (citation omitted). A
consumer is "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). Business entities, such as
Plaintiff, may be considered persons under the Consumer Fraud
Act. 815 ILCS 505/1(c). Defendants contend that Plaintiff purchased loans with the
intent of reselling those loans. As evidence of this attempted
resale, Defendants cite a letter attached to Plaintiff's
Complaint which states that Plaintiff's "investor refused to
purchase this loan due to appraisal misrepresentation."*fn2
Defendants also argue that other allegations in the Complaint
demonstrate that Plaintiff was not the end-user of the loan.
Plaintiff, though, alleges that it purchased services from
Defendants relating to the origination, processing, and
submission of information contained in the loan packages. While
Defendants assert this allegation is inconsistent with other
allegations in the Complaint, Plaintiff is permitted to plead
inconsistent claims. Fed.R.Civ.P. 8(a), (e)(2). Further,
whether Plaintiff purchased loans or services from Defendants is
a factual matter not appropriate to resolve on a motion to
Defendants also argue that Plaintiff has failed to plead its
Consumer Fraud Act claims with particularity, as required under
Federal Rule of Civil Procedure 9(b). Consumer Fraud Act claims
which sound in fraud, as Plaintiff's claim does, must be pled
with particularity. Salon Group, Inc. v. Salberg, No. 00 C
1754, 2002 WL 1058125, at * 1 n. 1 (N.D. Ill. Mar. 29, 2002).
"[I]n all averments of fraud or mistake, the circumstances
constituting fraud or mistake shall be stated with
particularity." Fed.R.Civ.P. 9(b). In order to survive
dismissal, the plaintiff must plead the who, what, when, and
where of the alleged fraud. See Lachmund v. ADM Investor Serv.,
Inc., 191 F.3d 777, 782 (7th Cir. 1999) (quotations omitted).
"The allegations must be specific enough to provide the
defendants with a general outline of how the alleged fraud scheme
operated and of their purported role in the scheme." Rohlfing v.
Manor Care, Inc., 172 F.R.D. 330, 347 (N.D. Ill. 1997) (citations omitted). To determine
whether counts are sufficiently pled, a court will bear in mind
the purposes of Rule 9(b): "(1) protecting the defendants'
reputations; (2) preventing fishing expeditions; and (3)
providing adequate notice to the defendants." Rohlfing,
172 F.R.D. at 347 (citing Vicom, Inc. v. Harbridge Merchant Servs.,
Inc., 20 F.3d 771, 777 (7th Cir. 1994)).
Plaintiff has pled its Consumer Fraud Act claim with sufficient
particularity. As discussed above, Defendants allegedly defrauded
Plaintiff in the Fall of 2002 by preparing loan packages for
certain properties that contained fraudulent and incorrect
information. These allegations are sufficient to place Defendants
on notice of the fraud claim and to provide a general outline of
how the scheme worked.
Defendants further argue that Plaintiff has failed to plead an
injury under the Consumer Fraud Act. However, Plaintiff is not
required to plead an injury and has sufficiently pled that the
Act was violated regarding Plaintiff.
Defendants next contend that allegations that Defendants
received a secret "kickback" in return for submitting the
fraudulent loan packages should be stricken from the Complaint.
Plaintiff concedes these allegations are unnecessary to Counts I
and IV and does not object to such sentences being stricken.
Finally, Defendants argue that Plaintiff's Complaint should be
dismissed because it is not presented in a clear and concise
manner, as the claims are scattered across multiple documents.
Furthermore, some of the claims in the Complaint have been
voluntarily dismissed but still remain part of the operative
pleading. While this practice is not efficient, it does not
warrant dismissal of the Complaint. Therefore, Plaintiff is directed to
file an amended complaint within fourteen days of the date of
this order, consistent with this opinion, that pleads the two
remaining claims and deletes the allegations concerning the
For the foregoing reasons, Defendants' Motion to Dismiss is
denied. Plaintiff is directed to file an amended complaint
consistent with this opinion.