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Catalan v. RBC Mortgage Co.

June 23, 2008


The opinion of the court was delivered by: Robert M. Dow, Jr. United States District Judge


I. Introduction

After the first of two pretrial conferences in this case, held on June 5, 2008, the parties filed additional motions in limine. Defendant RBC filed a motion in limine to bar references to or evidence of willful and wanton conduct and punitive damages [187]. Plaintiffs filed a motion in limine to exclude any evidence that RBC sent Plaintiffs a notice of a separate and exclusive office and address for the receipt and handling of "qualified written requests" under the Real Estate Settlement Practice Act ("RESPA") and its implementing regulations [189]. Both motions raised matters of importance to the conduct of the trial in this case. Not surprisingly, both motions have been hotly contested and heavily briefed -- including the filing of two surreply briefs on Plaintiffs' motion on the day before trial [207, 209]*fn1 -- and have required a substantial investment of the Court's resources to resolve. For the reasons explained below, the Court denies RBC's motion in limine [187] and provisionally grants Plaintiffs' motion [189].

II. Analysis

A.RBC's Motion in Limine Concerning Willful and Wanton Conduct and Punitive Damages

Between July 25, 2003, and September 15, 2004, Defendant RBC was the owner and servicer of Plaintiffs' mortgage loan on their residence. After RBC transferred the loan to GMAC Mortgage Company, Plaintiffs filed this action asserting four causes of action: Count I -- violations of the Cranston-Gonzales Amendments to the federal Real Estate Settlement Procedures Act ("RESPA"), Count II -- gross negligence, Count III -- wrongful foreclosure/breach of contract, and Count IV -- willful and wanton conduct.

In a memorandum opinion and order dated November 15, 2006, Judge Lindberg granted summary judgment in favor of GMAC on all counts and denied RBC's motion for summary judgment in its entirety. Judge Lindberg did, however, dismiss Plaintiffs' claim for gross negligence on the grounds that the claim for gross negligence was "duplicative" of the claim for willful and wanton conduct and that the claim for willful and wanton conduct "is more consistent with Illinois law." [118, at 5.] Judge Lindberg also held that there is no cause of action for wrongful foreclosure in Illinois, and thus he treated Count III solely as asserting a claim for breach of contract. [Id.]

As Judge Lindberg observed, although Illinois law generally forbids recovery of punitive damages for breach of contract, even if the breach is willful, an exception to the general rule obtains when "the conduct causing the breach is also a tort for which punitive damages are available." [118, at 6.] In denying RBC's motion for summary judgment on Plaintiffs' willful and wanton conduct claim (Count IV), Judge Lindberg noted that Plaintiffs contend that RBC "purposefully and deliberately fil[ed] foreclosure proceedings on plaintiffs' home despite assurances that it would resolve the problem and by refusing to accept plaintiffs' monthly mortgage payments that [were] timely submitted," and that RBC did so "for [its] own financial gain and at the expense of plaintiffs." [Id. at 6-7.] Judge Lindberg then explained that, on the basis of those contentions, "a reasonable juror could infer" that RBC's actions "constituted willful and wanton conduct sufficient to amount to a tort, justifying punitive damages." [Id. at 7.]

Notwithstanding Judge Lindberg's prior ruling, on June 11, 2008, RBC filed a motion in limine [187] seeking to bar Plaintiffs from introducing, testifying, or otherwise referring to or commenting on any allegations of willful and wanton conduct or requests for punitive damages. RBC insists that Judge Lindberg's ruling "should be construed to mean that plaintiffs' allegations -- viewed in the light most favorable to plaintiffs -- might give rise to conduct sufficient to justify a request for punitive damages, but it would remain incumbent on plaintiffs to establish the existence of an underlying tort." And based on that reading of Judge Lindberg's ruling, RBC requests that the Court bar Plaintiffs from commenting on willful or wanton conduct or punitive damages during voir dire or opening statements and bar Plaintiffs from introducing evidence or commenting on allegations of willful and wanton conduct or requests for punitive damages until "they have identified an independent tort (with the requisite factual and legal basis) sufficient to justify a claim for punitive damages."

As an initial matter, it is debatable whether RBC's motion in limine seeks reconsideration or clarification of Judge Lindberg's prior ruling. In either case, it would have been preferable for RBC to have filed its motion shortly after the summary judgment ruling was entered -- or, at a minimum, when motions in limine were filed before Judge Lindberg prior to the transfer of this case. Filing at this late date, before a different judge to whom the case has been transferred, creates extra complications, not the least of which is the law of the case doctrine. To the extent that RBC's motion seeks reconsideration, "the law of the case doctrine embodies the notion that a court ought not to re-visit an earlier ruling in a case absent a compelling reason, such as manifest error or a change in the law, that warrants re-examination." Minch v. City of Chicago, 486 F.3d 294, 301 (7th Cir. 2007); see also Mendenhall v. Mueller Streamline Co., 419 F.3d 686, 691 (7th Cir. 2005). The Seventh Circuit has made clear that the presumption that earlier rulings will stand "holds when a case is reassigned from one judge to another" (Minch, 486 F.3d at 301), and that a successor judge is not free to alter prior rulings "merely because he has a different view of the law or the facts from the first judge" (Mendenhall, 419 F.3d at 691). Accordingly, the Court must keep in mind law of the case considerations in ruling on RBC's motion.

Turning to the merits, as Judge Lindberg properly noted, under Illinois law, punitive damages generally are not available for a breach of contract -- even a willful breach of contract. Morrow v. L.A. Goldschmidt Associates, Inc., 112 Ill. 2d 87, 94 (1986). However, the Illinois courts have recognized an exception to that general rule "when the conduct causing the breach is also a tort for which punitive damages are recoverable." Id. (citing McIntosh v. Magma Systems, Inc., 539 F. Supp. 1185 (N.D. Ill. 1982) (applying Illinois law)). In other words, punitive damages may be available "where the breach amounts to an independent tort and there are proper allegations of malice, wantonness, or oppression." Id. at 95; see also Kelsay v. Motorola, Inc., 74 Ill. 2d 172, 186 (1978). Count IV of Plaintiffs' complaint is an effort to take advantage of the "independent tort" exception to assert a claim for which punitive damages might be available.*fn2

As a threshold matter, the Court respectfully disagrees with RBC's proposed construction of Judge Lindberg's prior ruling. After reciting the Illinois case law that both parties agree control the issue, Judge Lindberg concluded that "a reasonable juror could infer that RBC's failure to respond to plaintiffs' letters and its failure to discover its error relating to payment due date and monthly amount due constitutes willful and wanton conduct sufficient to amount to a tort, justifying punitive damages." [118, at 7.] Because that ruling was issued in denying a motion for summary judgment -- not at the pleadings stage -- it must be read as identifying a triable issue on Count IV. RBC's contention that the ruling "should be construed" to leave open the question of whether Plaintiffs have identified an independent tort cannot be sustained; if Judge Lindberg felt that Plaintiffs had not identified such a tort, he would have granted summary judgment for RBC on Count IV.

But what is the independent tort? Illinois does not appear to recognize an independent cause of action for "gross negligence" (see Instituto Nacional de Comercialization Agricola v. Continental Ill. Nat'l Bank, 530 F. Supp. 279, 283 (N.D. Ill. 1982)), for "willful and wanton conduct" (Ziarko v. Soo Line R.R., 161 Ill. 2d 267, 275-76 (1994)), or, as Judge Lindberg held, for wrongful foreclosure. The parties do not appear to dispute any of these propositions. Accordingly, Plaintiffs' independent tort claim, if any, must be a claim for negligence. Indeed, in the summary judgment briefing, the parties appeared to agree on that point -- although they disagreed as to whether Plaintiffs could raise a triable issue on such a claim. See RBC SJ Reply Br. at 11 (acknowledging that "Plaintiffs' only legally cognizable claim lies in negligence," but contending that such a claim fails because "absent from the record is evidence of damages, an essential element").

If Plaintiffs' "independent tort" claim is one for negligence, Plaintiffs must articulate a duty owed to them by RBC separate and apart from the statutory and contractual duties that Plaintiffs seek to enforce through Counts I and III. In their brief in opposition to RBC's motion in limine, Plaintiffs stress that they seek to recover against RBC as "note holder" through the breach of contract claim and against RBC as "mortgage servicer" through the RESPA and "willful and wanton" claims. [195, at 3.] The independent duty must therefore be based on RBC's conduct as "mortgage servicer." It cannot be the failure to respond to QWRs, however, since Plaintiffs are pursuing in Count I the remedy that Congress has provided under RESPA for such conduct. Nor can the independent duty be one that Plaintiffs seek to enforce through their breach of contract claim. That eliminates, for example, various duties identified by Plaintiffs in their summary judgment briefs and brief in opposition to RBC's motion in limine. Any duties to service the loan in accordance with the Note and Mortgage -- for example, duties to ...

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