United States District Court, C.D. Illinois
MACON COUNTY, ILLINOIS, by and through JACK W. AHOLA, STATES ATTORNEY FOR MACON COUNTY, and MARY A. EATON, MACON COUNTY RECORDER OF DEEDS, Plaintiffs,
MERSCORP, INC., MERSCORP HOLDINGS, INC., MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., BANK OF AMERICA, N.A., CITIMORTGAGE, INC., CREDIT SUISSE FINANCIAL CORP., HSBC FINANCE CORPORATION, EVERHOME MORTGAGE COMPANY, JPMORGAN CHASE BANK, STATE FARM BANK FSB, WELLS FARGO BANK, N.A., and JOHN DOE DEFENDANTS 1-100, Defendants
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For Macon County Illinois, by and through Jack W Ahola State's Attorney for Macon County, Mary A Eaton, Macon County Recorder of Deeds, Plaintiffs: Adam J Levitt, LEAD ATTORNEY, GRANT & EISENHOFER PA, Chicago, IL; Christopher M Ellis, LEAD ATTORNEY, Jon D Robinson, BOLEN ROBINSON & ELLIS, Decatur, IL; Demet Basar, Lydia Ann Keaney, WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP, New York, NY; Eric D Holland, HOLLAND GROVES SCHNELLER & STOLZE, St. Louis, MO.
For Mortgage Electronic Registration Systems Inc, Merscorp Inc, now known as Merscorp Holdings Inc, Defendants: Robert M Brochin, LEAD ATTORNEY, MORGAN LEWIS & BOCKIUS, Miami, FL; Romeo S Quinto, Jr.. LEAD ATTORNEY, Megan Rose Braden, MORGAN LEWIS & BOCKIUS LLP, Chicago, IL.
For HSBC Finance Corporation, Defendant: Christopher M Hohn, LEAD ATTORNEY, THOMPSON COBURN LLP, St Louis, MO; Gregory J Marshall, SNELL & WILMER LLP, Phoenix, AZ.
For Wells Fargo Bank N.A., Bank of America NA, Defendants: Thomas M Hefferon, LEAD ATTORNEY, Joseph F Yenouskas, GOODWIN PROCTER LLP, Washington, DC; Rhiana A Luaders, BRYAN CAVE LLP, St Louis, MO.
For Credit Suisse Financial Corp, Defendant: Michael Dockterman, LEAD ATTORNEY, WILDMAN HARROLD ALLEN & DIXON LLP, Chicago, IL; William R Lee, EDWARDS WILDMAN PALMER LLP, Chicago, IL.
For State Farm Bank FSB, Defendant: Joseph Anthony Cancila, Jr, LEAD ATTORNEY, David C Blickenstaff, SCHIFF HARDIN LLP, Chicago, IL.
For Citimortgage Inc, Defendant: Lucia Nale, LEAD ATTORNEY, Thomas V Panoff, MAYER BROWN LLP, Chicago, IL; Louis F Bonacorsi, BRYAN CAVE LLP, St Louis, MO.
REPORT AND RECOMMENDATION
DAVID G. BERNTHAL, UNITED STATES MAGISTRATE JUDGE.
Plaintiffs Macon County, Illinois, and Mary A. Eaton, Macon County Recorder of Deeds, filed a class action complaint in the Circuit Court for the Sixth Judicial Circuit, Macon County, Illinois, against Defendants Merscorp, Inc., et al. In August 2012, Defendants removed the case to federal court (Notice of Removal, #1), alleging federal jurisdiction based on diversity pursuant to 28 U.S.C. § 1332, 28 U.S.C. § 1441, and 28 U.S.C. § 1453. Plaintiffs subsequently filed an Amended Class Action Complaint (#34). In November 2012, Defendants filed a Joint Motion To Dismiss Plaintiffs' Amended Class Action Complaint (#36). After reviewing the parties' pleadings and memoranda, this Court recommends, pursuant to its authority under 28 U.S.C. § 636(b)(1)(B), that Defendants' Motion To Dismiss Plaintiffs' Amended Class Action Complaint (#36) be GRANTED.
Plaintiffs Macon County and Mary Eaton, Macon County Recorder of Deeds, filed this putative class action on behalf of
Macon County and other similarly-situated counties in the State of Illinois.
Defendants include Mortgage Electronic Registration Systems, Inc. (MERS), and its parent company, Merscorp, Inc., the owner and operator of a national registry that tracks ownership interest and servicing rights associated with residential mortgage loans. Defendants also include shareholders of Merscorp as well as various mortgage companies and John Doe Defendants who are alleged to be members of MERS (Member Defendants). Plaintiffs' amended complaint alleges claims of unjust enrichment and civil conspiracy, and requests for declaratory judgment and injunctive relief.
Plaintiffs' original complaint alleged that the Illinois recording statute, 765 ILCS 5/28, mandates recording of all mortgage assignments and that Defendants violated that statute by failing to record mortgage assignments among MERS members. The amended complaint has abandoned the position that Illinois law mandates recording and instead alleges that Illinois law encourages the recording of land instruments. (Amended Class Action Complaint, #34, ¶ 49.)
The amended complaint explains how the MERS system works, alleging that MERS members record initial mortgages naming MERS as the " nominee for the lender and the lender's successors and assigns," thereby perfecting the mortgages and ensuring first-lien priority. (#34, ¶ 5.) The mortgage is then registered on the MERS system. If the MERS member/lender subsequently assigns the mortgage to another MERS member, the mortgage note is transferred to the subsequent lender within the MERS system, but MERS remains the holder of the security interest and the beneficiary of record for both the lender and the transferee. These transfers or mortgages between MERS members, called " intermediate" transfers (#34, ¶ 5), are not recorded in the county land records; however, if the loan is transferred to a lender who is not a MERS member, that transfer is recorded in the county records.
The purpose of a motion to dismiss for failure to state a claim is to test the sufficiency of the complaint, not to decide the merits of the case. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). To state a claim under federal notice pleading standards, a complaint must set forth a " short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The complaint must give fair notice of what the claim is and the grounds upon which it rests. EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776-77 (7th Cir. 2007). However, fair notice is not enough by itself; the allegation must show that it is plausible--not merely speculative--that the plaintiff is entitled to relief. Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir. 2008).
The Seventh Circuit summarized the notice pleading analysis in Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009). First, a plaintiff must provide notice to defendants of her claims. Id. Second, courts must accept a plaintiff's factual allegations as true, unless the factual allegation is so sketchy or implausible that it fails to provide sufficient notice to defendants of the plaintiff's claim. Id. Third, courts should not accept as adequate abstract recitations of the elements of a cause of action or conclusory legal statements when considering a plaintiff's factual allegations. Id. Indeed, the plaintiff must " plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged . . . . Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).
When considering a motion to dismiss for failure to state a claim, the Court is limited to the allegations contained in the pleadings. Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993). The Court must accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the nonmoving party. McMillan v. Collection Prof'ls, Inc., 455 F.3d 754, 758 (7th Cir. 2006); see Bell Atl., 550 U.S. at 556 (requiring plausible grounds for inferences if those inferences are to sustain a complaint). A claim is sufficient only to the extent that it contains either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory. Bell Atl., 550 U.S. at 562 (citing Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)). Legal conclusions, unsupported by allegations of underlying facts, are not entitled to the " assumption of truth." Iqbal, 556 U.S. at 680-81; see Papasan v. Allain, 478 U.S. 265, 268, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) (stating that courts " are not bound to accept as true a legal conclusion couched as a factual allegation" ). Finally, a plaintiff can allege himself out of a claim by including allegations that establish his inability to state a claim. Head v. Chi. Sch. Reform Bd. of Trs., 225 F.3d 794, 801-02 (7th Cir. 2000); Henderson v. Sheahan, 196 F.3d 839, 846 (7th Cir. 1999) (stating that a plaintiff can plead himself out of court by alleging facts that undermine the validity of his claim).
Similarly, in ruling on a motion to dismiss for lack of standing, the Court must accept as true all material allegations of the complaint and must draw all reasonable inferences in favor of the plaintiff. Retired Chi. Police Ass'n v. City of Chicago, 76 F.3d 856, 862 (7th Cir. 1996) (citing Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)).
Defendants argue that the Court should dismiss the complaint for the following reasons. First, Defendants contend that Plaintiffs lack standing. Second, Defendants contend that Plaintiffs' unjust enrichment claim fails because Defendants had no legal duty to record assignments under Illinois statute or under any private securitization agreements. Third, Defendants contend that the remaining claims derive from ...