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Riley v. Bingham

August 19, 2008

DERRICK RILEY, PLAINTIFF,
v.
ROBERT BINGHAM, STATEWIDE FINANCIAL SERVICES LTD., THE FEDERAL DEPOSIT INSURANCE CORPORATION, OCWEN LOAN SERVICING, LLC. AND PREFERRED SURVEY, INC., DEFENDANTS.



The opinion of the court was delivered by: Judge George M. Marovich

MEMORANDUM OPINION AND ORDER

Plaintiff Derrick Riley ("Riley") filed suit against Robert Bingham ("Bingham"), Statewide Financial Services Ltd. ("Statewide"), NetBank, Inc., Ocwen Loan Servicing, LLC. ("Ocwen") and Preferred Survey, Inc. ("Preferred Survey"). The Federal Deposit Insurance Corporation ("FDIC") has been appointed receiver of NetBank, Inc. ("NetBank") and has replaced it as a party to this suit. Before the Court are four motions to dismiss. For the reasons set forth below, the Court grants FDIC's motion to dismiss, grants Ocwen's motion to dismiss and denies Statewide's motions to dismiss.

I. Background

The Court takes as true the allegations in plaintiff's amended complaint. Riley's case arises out of a real estate transaction.

Riley alleges that he was interested in purchasing a property on East 83rd Street in Chicago. Defendant Bingham, an employee of defendant Statewide Financial Services, however, convinced Riley to purchase a property on West 117th Street instead. Riley alleges that his purchase turned out to be a bad idea, and, for that, he blames several defendants.

Riley starts with Bingham and Statewide, which seems to be a mortgage broker. Riley asserts that Bingham and Statewide had a financial incentive to steer him into a bad deal because Statewide received more than $6,000.00 in loan origination fees and yield spread commissions when Riley purchased the property. Riley asserts that Bingham and Statewide connected him with an adjustable rate mortgage with a rate of 7.315% even though, at the time, conventional 30-year mortgages were available with rates of 5.5%. Riley asserts that Bingham also agreed to pay him $4,000.00 at the closing and that Riley never received the money.

Riley also takes aim at Preferred Survey, Inc., which appraised the property at $175,000.00 when the property was actually worth $113,000.00. Riley's amended complaint also named NetBank and Ocwen Loan Servicing, which services Riley's mortgage loan.

II. Standard on a Motion to Dismiss

The Court may dismiss a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure if the plaintiff fails "to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). In considering a motion to dismiss, the Court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in the plaintiffs' favor. McCullah v. Gadert, 344 F.3d 655, 657 (7th Cir. 2003). Under the notice-pleading requirements of the Federal Rules of Civil Procedure, a complaint must "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombley, 127 S.Ct. 1955, 1964 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint need not provide detailed factual allegations, but mere conclusions and a "formulaic recitation of the elements of a cause of action" will not suffice. Bell Atlantic, 127 S.Ct. at 1964-1965. A complaint must include enough factual allegations to "raise a right to relief above a speculative level." Bell Atlantic, 127 S.Ct. at 1965. "After Bell Atlantic, it is no longer sufficient for a complaint 'to avoid foreclosing possible bases for relief; it must actually suggest that the plaintiff has a right to relief, by providing allegations that raise a right to relief above the speculative level.'" Tamayo v. Blagojevich, 526 F.3d 1074, 1084 (7th Cir. 2008) (quoting Equal Employment Opportunity Comm'n v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007)).

In considering whether to dismiss a case pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction, a district court "may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists." Capitol Leasing Co. v. Federal Deposit Ins. Corp., 999 F.2d 188, 191 (7th Cir. 1993) (quoting Grafon Corp. v. Hausermann, 602 F.2d 781, 783 (7th Cir. 1979)).

III. Discussion

A. FDIC's Motion to Dismiss

The FDIC moves pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure to dismiss Riley's claims against it. The FDIC argues that, pursuant to the Financial Institutions Reform Recovery and Enforcement Act ("FIRREA"), the Court lacks subject matter jurisdiction over Riley's claims against the FDIC. The Court agrees.

FIRREA sets out a procedure for making claims against financial institutions that are in receivership by the FDIC. "FIRREA makes participation in the administrative claims review process mandatory for all parties asserting claims against failed institutions, regardless of whether lawsuits to enforce those claims were initiated prior to the appointment of a receiver." Marquis v. Federal Deposit Ins. Corp., 965 F.2d 1148, 1151 (1st Cir. 1992). The ...


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