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Green v. Diamond

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

November 7, 2014

SUDIE M. GREEN, Plaintiff,
MARK S. DIAMOND, et. al, Defendants.


AMY J. ST. EVE, District Judge.

The Court grants in part without prejudice and denies in part Defendants Mark Diamond's and United Residential Services and Real Estate Inc.'s motion to dismiss [51]. Plaintiff's Amended Complaint as to Count IV is due on or before December 5, 2014.


On April 11, 2014, Plaintiff Sudie Green brought the present six-count Complaint against a reverse mortgage lender, a title company, a mortgage broker, and a home repair contractor, among others, seeking to rescind a mortgage pursuant to the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq. Plaintiff also alleges a race discrimination claim pursuant to 42 U.S.C. § 1981 and a Fair Housing Act ("FHA") claim under 42 U.S.C. § 3605, as well as state law claims pursuant to the Court's supplemental jurisdiction. See 28 U.S.C. § 1367(a). Before the Court is Defendant Mark Diamond's and United Residential Services and Real Estate, Inc.'s ("United") motion to dismiss Counts II, III, and IV of the Complaint brought pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the Court grants in part without prejudice and denies in part Defendants' motion.


I. Federal Rule of Civil Procedure 12(b)(6)

"A motion under Rule 12(b)(6) tests whether the complaint states a claim on which relief may be granted." Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir. 2012). Under Rule 8(a)(2), a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citation omitted). Under the federal notice pleading standards, a plaintiff's "factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. Put differently, a "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570). "In reviewing the sufficiency of a complaint under the plausibility standard, [courts] accept the well-pleaded facts in the complaint as true, Alam v. Miller Brewing Co., 709 F.3d 662, 665-66 (7th Cir. 2013), and draw "reasonable inferences in favor of the plaintiffs." Teamsters Local Union No. 705 v. Burlington No. Santa Fe, LLC, 741 F.3d 819, 823 (7th Cir. 2014).

II. Federal Rule of Civil Procedure 9(b)

In pleading fraud in federal court, Rule 9(b) imposes a higher pleading standard than that required under Rule 8(a)(2). See Bank of America, N.A. v. Knight, 725 F.3d 815, 818 (7th Cir. 2013); Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 446 (7th Cir. 2011). Specifically, Rule 9(b) requires a pleading to state with particularity the circumstances constituting the alleged fraud, which requires "the who, what, when, where, and how: the first paragraph of any newspaper story." Knight, 725 F.3d at 818 (quotation marks and citation omitted). "[T]he particularity requirement of Rule 9(b) is designed to discourage a sue first, ask questions later' philosophy." Pirelli, 631 F.3d at 441 (citation omitted). "Heightened pleading in the fraud context is required in part 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." Id. at 442.


Plaintiff is an 85-year-old widow who lives on a fixed income in a home that she owns at 741 N. Lockwood in the Austin neighborhood of Chicago. (R. 1, Compl. ¶¶ 4, 78.) Plaintiff has lived in her home, a two-flat apartment building, for over 40 years. ( Id. ¶ 31.) In addition, Plaintiff asserts that Diamond is a home improvement contractor and is the President of United, which is a home repair remodeling contractor and general contractor. ( Id. ¶¶ 5, 6.)

Further, Plaintiff alleges that Diamond has repeatedly engaged in a pattern and practice of fraudulently offering to perform home improvements and then arranging for the financing of those improvements with the intention of obtaining the maximum available mortgage loan proceeds without performing a commensurate amount of work. ( Id. ¶ 17.) Various individual homeowners, the Illinois Attorney General, and the Federal Trade Commission, among others, have sued Diamond and his companies, including United, in state and federal court. ( Id. ¶ 18.) Also, Plaintiff maintains that Diamond and his companies have a decades-long pattern and practice of targeting minority homeowners (especially elderly, African-American homeowners on the west side of Chicago), soliciting them in person through deceptive door-to-door sales techniques for mortgage products and overpriced home repair work that they do not need or cannot afford, and then doing incomplete, shoddy, and defective repair work. ( Id. ¶¶ 6, 25.)

At the time of the transaction at issue in this lawsuit, Plaintiff owned her home free and clear of all liens and mortgages. ( Id. ¶ 32.) In 2012, Plaintiff needed some minor repairs done on her property, including repairing a leaky roof, replacing gutters, and repairing the back porch stairs. ( Id. ¶ 33.) Around that time, Diamond visited Plaintiff and explained that he could make improvements to her home free of charge because there was a special government program for seniors that paid for any such repairs. ( Id. ¶¶ 35, 36.) Thereafter, Diamond arranged for Plaintiff to obtain a reverse mortgage loan obscuring the fact that Plaintiff's home was the asset that secured the loan and that Plaintiff was taking out a loan in the first instance. ( Id. ¶¶ 38, 43, 44.)

Plaintiff alleges that the remodeling work did not begin immediately, after which she called Diamond several times asking him to come start the work. ( Id. ¶ 62.) In late summer of 2012, Diamond had workers or a subcontractor remodel two bathrooms in Plaintiff's home. ( Id. ¶ 66.) According to Plaintiff, the remodeling work was defective. ( Id. ¶ 67.) After the two bathrooms were done, ...

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