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In re: Ameriquest Mortgage Co.

January 19, 2010

IN RE: AMERIQUEST MORTGAGE CO. MORTGAGE LENDING PRACTICES LITIGATION
AMERIQUEST MORTGAGE CO., A DELAWARE CORPORATION; TOWN & COUNTRY CREDIT CORPORATION, A DELAWARE CORPORATION; AND ARGENT MORTGAGE COMPANY LLC, A DELAWARE LIMITED LIABILITY COMPANY, DEFENDANTS/THIRD-PARTY CENTRALIZED BEFORE THE PLAINTIFFS,
v.
NORTHWEST TITLE AND ESCROW CORPORATION, A MINNESOTA CORPORATION; ET AL., THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Honorable Marvin E. Aspen U.S. District Court Judge

Honorable Marvin E. Aspen

MDL No. 1715

MEMORANDUM OPINION AND ORDER

MARVIN E. ASPEN, District Judge

Presently before us is Third-Party Defendants' Motion to Dismiss the Fifth Amended Consolidated Third-Party Complaint (Dkt. No. 2978), filed on July 31, 2009. As with earlier iterations of the Fifth Amended Consolidated Third-Party Complaint ("Complaint"), Ameriquest Mortgage Co. ("AMC"), Town & Country Credit Corporation ("T&C") and Argent Mortgage Company LLC ("Argent") (collectively, "Ameriquest") contend that Third-Party Defendants breached their contracts with Ameriquest and engaged in negligent conduct. Ameriquest claims that Third-Party Defendants-a group consisting of closing agents, title companies, title underwriters and mortgage brokers-are wholly responsible for any violations of the Truth In Lending Act ("TILA"), as asserted against Ameriquest by the individual borrower plaintiffs identified in Exhibits A and B of the Complaint. Ameriquest primarily seeks monetary damages as a remedy for Third-Party Defendants' breaches, negligent conduct and negligent misrepresentations. For the reasons set forth below, we grant the motion in part and deny it in part.

BACKGROUND

According to the Complaint, Ameriquest and each of the Title Defendants*fn1 (Closing Agents, Title Companies and Title Underwriters) "entered into an agreement wherein the Title Defendants agreed to close . . . loans in exchange for consideration to be paid from the loan proceeds." (Compl. ¶ 10.) These agreements "took various forms including . . . Escrow Lending Instructions, Closing Agent Agreements and Closing Instructions." (Id.) The Title Defendants also issued Closing Protection Letters on Title Underwriter letterhead, "whereby the Title Underwriters agreed to reimburse the lenders for actual loss incurred by the lenders in connection with the closings" conducted by the Closing Agents or Title Companies, including any failures to comply with closing instructions or any acts of fraud or dishonesty perpetrated by the Closing Agents or Title Companies. (Id. ¶¶ 4, 11.) In executing these agreements, the Title Defendants "warranted, among other things, that they would comply with Ameriquest's . . . instructions," including instructions to properly complete borrowers' Notice of Right to Cancel forms ("NORTC"), to distribute a sufficient number of copies thereof, and to have each borrower sign TILA disclosures. (Id. ¶ 14; see id. ¶ 26.) Ameriquest alleges that, if the plaintiffs' claims are successful, the Title Defendants breached their contracts.

Ameriquest further alleges that, in addition to their contractual obligations, Title Defendants had independent duties to act reasonably and "in accordance with the standards of care generally applicable to professionals rendering services of those types." (Id. ¶ 16.) More specifically, Ameriquest claims that Title Defendants had general duties to, inter alia,

(1) supervise all aspects of the escrow, title and closing processes, including execution and delivery of necessary closing documents; (2) communicate and disclose "all facts that might materially affect Ameriquest's . . . interests in the transactions"; (3) inform Ameriquest "whether the transaction was in compliance with all written and oral instructions" and certify to the proper execution and delivery of closing documents; and (4) "exercise care in procuring and providing material information and documents," especially where Ameriquest intended to rely on such information. (Id. ¶ 17.) Ameriquest alleges that, to the extent that plaintiffs' claims are proven true, the Title Defendants breached their duties "by failing to adequately supervise the loan closing process," and failing to disclose information to Ameriquest. (Id. ¶¶ 32--34.) As a result, by their negligence the Title Defendants induced Ameriquest to fund loans it otherwise would not have funded. (Id. ¶ 35.)

In addition to the contract and negligence claims, Ameriquest brings a cause of action for negligent misrepresentation. Ameriquest alleges that the Title Defendants made false representations of fact, by reporting that they had properly prepared, executed and delivered closing documents, including NORTCs, and otherwise complied with Ameriquest's closing instructions. (Id. ¶ 39.) Title Defendants also concealed material facts from Ameriquest by, for example, failing to report that NORTCs had not been properly prepared, executed and delivered. (Id. ¶ 40.) Ameriquest relied on these misrepresentations and consequently funded loans that it otherwise would not have funded. (Id. ¶ 44.)

In response to the Complaint, Third-Party Defendants filed the present motion to dismiss. Third-Party Defendants contend that Ameriquest failed to adequately plead the breach of contract claims in light of the Supreme Court's decision in Ashcroft v. Iqbal. 129 S.Ct. 1937 (2009). (Mem. at 4--6; Reply at 2--4.) They take particular issue with the allegations against recently-added Title Underwriters. (Mem. at 6--8; Reply at 4--6.) They further contend that the negligence claim must be dismissed, for a second time,*fn2 because Ameriquest has not identified any extracontractual duty owed by Third-Party Defendants and, moreover, that all tort claims are barred by the economic loss doctrine as interpreted under Illinois law. (Mem. at 8--13; Reply at 6--15.) We address each argument in turn below.

STANDARD OF REVIEW

A motion to dismiss is meant to test the sufficiency of the complaint, not to decide the merits of the case. Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). Accordingly, a court may grant a motion to dismiss under Rule 12(b)(6) only if a complaint lacks "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974 (2007); see Iqbal, 129 S.Ct. at 1949--50 (extending Twombly from antitrust to litigation generally and stating that a court's determination "whether a complaint states a plausible claim for relief will . . . be a context-specific task"); Killingsworth v. HSBC Bank Nev., N.A., 507 F.3d 614, 618--19 (7th Cir. 2007); EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776--77 (7th Cir. 2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. Although a sufficient complaint thus need not give "detailed factual allegations," it must provide more than "labels and conclusions, and a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555, 127 S.Ct. at 1964--65; see Iqbal, 127 S.Ct. at 1949(similarly noting that "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice"); see also Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009); Killingsworth, 507 F.3d at 618--19. These requirements ensure that the defendant receives "fair notice of what the . . . claim is and the grounds upon which it rests." Twombly, 550 U.S. at 555, 127 S.Ct. at ...


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