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Russo v. Bank of America, N.A.

United States District Court, N.D. Illinois, Eastern Division

August 1, 2014

BARBARA RUSSO, individually and on behalf of all others similarly situated, Plaintiff,
v.
BANK OF AMERICA, N.A., a Delaware Corporation, Defendant.

MEMORANDUM OPINION AND ORDER

MANISH S. SHAH, District Judge.

Barbara Russo obtained a home mortgage loan from Bank of America, N.A. Six years later, she received from the Bank a letter informing her that she had been approved to participate in a "trial period plan, " during which she could make reduced monthly payments on her mortgage. If Russo completed the trial program successfully, she would qualify for a permanent modification of her mortgage. Russo did obtain a permanent modification of her mortgage; however, she alleges that Bank of America failed to report her on-time trial payments and subsequent post-modification payments to the credit bureaus, and thus breached both the trial-period and modification agreements.[1] Russo also alleges that, because of the Bank's breach, she lost credit opportunities and has suffered damage to her credit rating. Bank of America moves to dismiss Russo's breach-of-contract claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons discussed below, I grant in part and deny in part defendant's motion.

I. Legal Standard

Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a claim for relief must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The purpose of the pleading requirements set forth in Rule 8(a) is to "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). To satisfy these "notice" pleading requirements, the complaint need not set forth detailed factual allegations. Id. (citation omitted). However, a "formulaic recitation of the elements of a cause of action" is insufficient. Id. (citing Papason v. Allain, 478 U.S. 265, 286 (1986)). A complaint must do more than imply a mere possibility that the defendant acted unlawfully. Ashcroft v. Iqbal, 556 U.S. 662, 668 (2009) (citation omitted). It must present enough "factual matter, accepted as true, [that the] claim to relief... is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570).

Motions under Rule 12(b)(6) are meant "to test the sufficiency of the complaint, not... the merits" of the plaintiff's case. Weiler v. Household Fin. Corp., 101 F.3d 519, 524 n. 1 (7th Cir. 1996) (quoting Triad Assocs., Inc. v. Chicago Hous. Auth., 892 F.3d 583, 586 (7th Cir. 1989)). Accordingly, in considering a Rule 12(b)(6) motion to dismiss, I must accept as true all well-pleaded factual allegations and draw all reasonable inferences in the plaintiff's favor. Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 946 (7th Cir. 2013) (quoting Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146 (7th Cir. 2010)).

II. Facts

In 2006, Barbara Russo, a citizen of Illinois, obtained from Bank of America a home mortgage loan secured by her primary residence. [19-1] ¶¶ 5, 7.[2] Bank of America is a national banking association headquartered in North Carolina. Id. ¶ 6. In August 2012, the Bank sent Russo a letter informing her that she had been approved to participate in a trial period plan ("TPP"), the successful completion of which would qualify Russo for a modification of her 2006 mortgage loan. [27-2] at 2.[3] To participate in the TPP and qualify for a loan modification, Russo was required to make three on-time monthly mortgage payments at a reduced rate, and to "continue to meet all of the eligibility requirements" of the modification program. Id. From October to December 2012, Russo successfully made all of the required TPP payments, and she subsequently qualified for a permanent modification of her mortgage. [19-1] ¶ 9.

Despite receiving a permanent loan modification, however, Russo alleges that Bank of America failed to meet some of its obligations under both the purported TPP contract and the loan modification agreement. According to Russo, the Bank breached both agreements by failing to report to credit agencies Russo's TPP and post-modification payments accurately. As a result, Russo was injured because she was unable to obtain another mortgage, her credit-card application was denied, her credit score decreased, and obtaining credit in general "bec[a]me more costly" for her. Id. ¶¶ 11-15, 28-29.[4]

III. Analysis

A. Choice of Law

Although this is a diversity action, neither party has affirmatively raised the choice-of-law issue. The parties have impliedly agreed that Illinois substantive law applies to Russo's suit, as each cites to Illinois law when describing the elements required for a breach-of-contract claim. See [27] at 4; [33] at 3. Because the parties do not dispute that Illinois law governs, and as the Court sits in the state of Illinois, it is appropriate to apply Illinois law in considering this motion. See GATX Leasing Corp. v. Nat'l Union Fire Ins. Co., 64 F.3d 1112, 1115 n. 6 (7th Cir. 1995) (observing that "if neither party raises a conflict-of-law issue in a diversity case, " the court "may apply the law of the state in which [it] sits" (citing Employers Ins. v. Bodi-Wachs Aviation Ins. Agency, Inc., 39 F.3d 138, 141 n. 2 (7th Cir. 1994))).

B. Bank of America's Motion to Dismiss

Bank of America moves to dismiss Russo's breach-of-contract claim as to both the alleged Trial Period Plan agreement and the subsequent ...


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