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Kane v. Bank of America, National Association

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

August 25, 2014

THOMAS H. KANE, Plaintiff,


GEORGE M. MAROVICH, District Judge.

Plaintiff Thomas H. Kane ("Kane") has filed a 187-paged, seventeen-count complaint containing more than 1000 numbered paragraphs against defendants Bank of America, National Association ("Bank of America") and Wells Fargo Bank, NA d/b/a Wells Fargo Home Mortgage ("Wells Fargo"). Kane, whose claims arise out of a mortgage he could not pay, asserts claims under the Fair Debt Collection Practices Act, the Racketeer Influenced and Corrupt Practices Act and the Illinois Consumer Fraud Act, as well as claims for fraud, conspiracy and breach of contract.[1] Defendants have moved to dismiss. For the reasons set forth below, the Court grants in part and denies in part defendants' motion to dismiss.

I. Background

The Court takes as true the allegations in plaintiff's complaint. The Court also considers the documents attached to plaintiff's complaint. Fed.R.Civ.P. 10(c).

In June 2006, when he was 70 or 71 years of age, plaintiff Kane took out a 30-year mortgage in the amount of $470, 000.00. Wells Fargo originated and serviced the mortgage, and Bank of America eventually purchased the note. The reason Kane took out the mortgage was to pay his ex-wife for her share of their home, which was recently appraised at $910, 000.00. (Complt. ¶ 77). Things went fine with the mortgage until Kane was laid off from his job as an architect on February 4, 2009.

The next day, on February 5, 2009, Kane telephoned Wells Fargo to request loan counseling and modification. Thus began a series of communications between Wells Fargo and Kane. Wells Fargo sent Kane at least fifty items interstate via U.S. Mail, United Parcel Service ("UPS") or Federal Express ("FedEx"). Wells Fargo made at least fifteen interstate telephone calls to Kane. Kane asserts that many of these communications constituted mail or wire fraud and were part of a scheme to defraud him. The scheme "was designed to keep Plaintiff in his home for as long as possible, while [defendants] simultaneously denied Plaintiff every loan modification for which Plaintiff applied. In this way, Bank of America and Wells Fargo drove up their own fees while depleting Plaintiff's equity in his property." (Complt. ¶ 118). Specifically, Wells Fargo and Bank of America charged Kane more than $103, 685.00 in fees and interest charges. (Complt. ¶ 930). As of the date Kane filed this complaint, he was stilling living at the home on which he took out the mortgage.

Defendants move to dismiss.

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 plaintiff's 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. Twombly, 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. "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)). To survive a motion to dismiss, a claim must be plausible. Iqbal, 129 S.Ct. at 1950. Allegations that are as consistent with lawful conduct as they are with unlawful conduct are not sufficient; rather, plaintiffs must include allegations that "nudg[e] their claims across the line from conceivable to plausible." Bell Atlantic, 127 S.Ct. at 1974.

Certain allegations must be stated with particularity. For example, Federal Rule of Civil Procedure 9(b) mandates that all averments of fraud must be "state[d] with particularity." Fed.R.Civ.P. 9(b). This generally means that one must allege the "first paragraph of any newspaper story, " which is to say the who, what, when, where and how. Pirelli Armstrong Tire Corp. Retiree Med. Ben. Trust v. Walgreen Co., 631 F.3d 436, 441-442 (7th Cir. 2011). The reason for the heightened pleading requirement with respect to fraud is "because of the potential stigmatic injury that comes with alleging fraud and the concomitant desire to ensure that such fraught allegations are not lightly leveled." Pirelli, 631 F.3d at 442. As plaintiff points out in his brief, the rules about pleading fraud with particularly are occasionally relaxed where a plaintiff alleges some details of the fraud and also alleges that the missing details are in the hands of the defendant. Pirelli, 631 F.3d at 446. Of course, "flexibility in the face of information asymmetries should not be conflated with whistling past the rules of civil procedure." Pirelli, 631 F.3d at 446.

Flexibility with respect to the particularized pleading of fraud does not extend to flexibility in the pleading of all claims. Plaintiff takes this flexibility concept too far when he argues that he can get around all pleading requirements by alleging that information can be obtained in discovery. Plaintiff argues (repeatedly and seemingly whenever he has failed to allege an element of a claim) that his claims cannot be dismissed so long as he incants "information can only be obtained through discovery." The Court disagrees with plaintiff. "Only a complaint that states a plausible claim for relief survives a motion to dismiss." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). If a plaintiff's "complaint is deficient under Rule 8, he is not entitled to discovery, cabined or otherwise." Iqbal, 556 U.S. at 686.

III. Discussion

A. Plaintiff's FDCPA claims

In Counts XV, XVI and XVII, plaintiff asserts that defendant Wells Fargo violated the Fair Debt Collection Practices Act ("FDCPA") in three ways. Wells Fargo moves to dismiss all three counts on the grounds that it is not a "debt collector" for purposes of the FDCPA.

The Fair Debt Collection Practices Act imposes liability on "any debt collector who fails to comply with any provision of this subchapter with respect to any person." 15 U.S.C. § 1692k(a). The FDCPA is not aimed at creditors, who, according to Congress, "generally are constrained by the desire to protect their good will when collecting past due accounts." Schlosser v. Fairbanks Cap. Corp., 323 F.3d 534, 536 (7th Cir. 2002). Instead, the FDCPA is aimed at "debt collectors, " a term which the FDCPA defines and from which it lists exclusions. 15 U.S.C. § 1692a(6). "The term [debt collector] does not include... (F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity... (iii) concerns a debt which was originated by such person..." 15 U.S.C. § 1692a(6)(F)(iii).

Here, as defendant points out, plaintiff has included allegations in his complaint that Wells Fargo originated the mortgage loan to plaintiff. (See Complt. ¶ 80; Complt. Exh. 11). Accordingly, plaintiff has admitted facts that establish Wells Fargo is not a debt collector for purposes of the FDCPA and, therefore, cannot be held liable.

For these reasons, the Court grants defendants' motion to dismiss with respect to Counts XV, XVI and XVII. The Court dismisses with prejudice Counts XV, XVI and XVII.

B. Plaintiff's RICO claims

1. RICO § 1962(a) claims

Next, Kane asserts that Wells Fargo and Bank of America violated RICO § 1962(a). Congress passed RICO to "eradicate organized, long-term criminal activity." Midwest Grinding Co., Inc. v. Spitz, 976 F.2d 1016, 1019 (7th Cir. 1992). The statute provides a civil cause of action for violations of 18 U.S.C. § 1962. See 18 U.S.C. § 1964(c) ("Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee..."). Despite "widespread abuse" of civil RICO, RICO "has not federalized every state common-law cause of action available to remedy business deals gone sour." Midwest Grinding, 976 F.2d at 1025. "Rather, it is a unique cause of action that is concerned with eradicating organized, long-term, habitual criminal activity." Gamboa v. Velez, 457 F.3d 703, 705 (7th Cir. 2006).

In Counts V and XII, Kane asserts that Bank of America and Wells Fargo, respectively, violated 18 U.S.C. § 1962(a). That section provides:

It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity... to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in... the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.

18 U.S.C. § 1962(a). "This provision was primarily directed at halting the investment of racketeering proceeds into legitimate businesses, including the practice of money laundering." Brittingham v. Mobil Corp., 943 F.2d 297, 303 (3rd Cir. 1991).

a. Standing

Defendants first argue that Kane lacks standing to pursue a claim under § 1964(c) for a violation of § 1962(a). Kane may sue under § 1964(c) only if the alleged RICO violation was the proximate cause of her injury. Holmes v. Securities Investor Prot. Corp., 503 U.S. 258, 268 (1992). With respect to claims under § 1962(a) (which, again, prohibits the investment of racketeering proceeds into the operation of an enterprise), "the majority of circuits hold that the use or investment of the racketeering income must proximately cause the plaintiff's injury; injury caused by the predicate racketeering acts is inadequate." Vicom, Inc. v. Harbridge Merchant Serv., Inc., 20 F.3d 771, 779 n. 6 (7th Cir. 1994). Although the Seventh Circuit has not decided the issue (it merely stated the majority rule), this Court joins the courts in this district that have adopted the majority view. Starfish Investment Corp. v. Hansen, 370 F.Supp.2d 759, 779 (N.D. Ill. 2005); Early v. K-Tel Int'l, Inc., Case No. 97 C 2318, 1999 WL 181994 at *5 (N.D. Ill. March 24, 1999); Palumbo v. I.M. ...

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