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McNeal v. J.P. Morgan Chase Bank, N.A.

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

November 17, 2016

Merlyn McNeal, Plaintiff,
v.
J.P. Morgan Chase Bank, N.A., Chase Home Finance LLC, J.P. Morgan Chase & Co., and Federal National Mortgage Association, Defendants.

          MEMORANDUM OPINION AND ORDER

          Manish S. Shah United States District Judge

         Plaintiff Merlyn McNeal bought a home financed by an adjustable-rate mortgage loan. She alleges that the handling of her mortgage-assignment, assessment of fees, escrow calculations, foreclosure, and communication about the mortgage-was unlawful in a variety of ways and sues defendants JPMorgan Chase Bank, N.A., Chase Home Finance LLC, JPMorgan Chase & Co., and Federal National Mortgage Association (Fannie Mae).[1] She brings claims against the Chase defendants under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c), and the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(e). She brings claims against all defendants for violations of the Illinois Consumer Fraud and Deceptive Practices Act, 815 ILCS 505/2, violations of the Residential License Mortgage Act, 205 ILCS 635/1-3, breach of contract, and unjust enrichment. The defendants move to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6), and JPMorgan Chase & Co. also moves to dismiss the claims against it under Federal Rule of Civil Procedure 12(b)(1). For the following reasons, the defendants' motions to dismiss are granted.

         I. Legal Standards

         To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must contain factual allegations that plausibly suggest a right to relief. Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). Claims sounding in fraud are subject to the heightened pleading standard set forth in Federal Rule of Civil Procedure 9(b), which requires a plaintiff to describe the “who, what, when, where, and how of the fraud.” Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 948 (7th Cir. 2013). The court must construe all factual allegations as true and draw all reasonable inferences in the plaintiff's favor, but the court need not accept legal conclusions or conclusory allegations. Id. at 946. A plaintiff's failure to respond to an argument raised in a motion to dismiss forfeits any argument on that issue. See Alioto v. Town of Lisbon, 651 F.3d 715, 721 (7th Cir. 2011) (“[A] litigant effectively abandons the litigation by not responding to alleged deficiencies in a motion to dismiss.”); Lekas v. Briley, 405 F.3d 602, 614 (7th Cir. 2005); Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d 1039, 1041 (7th Cir. 1999) (“An unresponsive response is no response.”).

         McNeal has attached multiple documents to her complaint, including her mortgage, the note, an assignment of the mortgage, a loan modification agreement, and other communications between McNeal and “Chase.” (The letters refer to just “Chase” but appear to be from JPMorgan Chase Bank.) The documents will be considered because “documents that are attached to the complaint, documents that are central to the complaint and are referred to in it, and information that is properly subject to judicial notice” may be considered on a motion to dismiss. Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013); Fed.R.Civ.P. 10(c).[2] Two of JPMorgan Chase Bank's exhibits, which ordinarily would not be considered, see Levenstein v. Salafsky, 164 F.3d 345, 347 (7th Cir. 1998), are central to McNeal's claim that the Chase defendants failed to timely respond to her written requests, and so will be considered. McNeal attaches to her complaint her letters to JPMorgan Chase Bank, [1-4] and [1-10], [3] and JPMorgan Chase Bank attaches two letters in January and February 2016 responding to McNeal. [17-5]; [17-6]. McNeal does not dispute the response letters' authenticity or argue that they cannot be considered at this stage. A plaintiff cannot thwart consideration of a relevant, central document by failing to attach or reference it. See 188 LLC v. Trinity Indus., Inc., 300 F.3d 730, 735 (7th Cir. 2002).

         II. Background

         In June 2007, Merlyn McNeal obtained a $261, 000 adjustable-rate mortgage from BNC Mortgage, Inc. to purchase a residence in Country Club Hills, Illinois. The interest rate was set at 9.125% for the first two years and capped at 16.215% thereafter. Under the mortgage note, payments were to be made to Chase Home Finance, LLC. (Chase Home Finance merged with JPMorgan Chase Bank-the parties do not address any relevant distinction between the two for the purposes of these motions.) In February 2013, McNeal's mortgage was assigned from Mortgage Electronic Registration Systems, Inc.-as nominee for BNC-to JPMorgan Chase Bank in February 2013. [1-3]. McNeal alleges that this assignment was fraudulent and that soon after she entered into the mortgage, Fannie Mae became (and is currently) the owner of McNeal's loan. McNeal does not provide any factual detail to explain the basis for this allegation. However, attached to the complaint are JPMorgan Chase Bank communications (in 2015) that reference Fannie Mae as the owner of McNeal's mortgage loan. See [1-5] at 2; [1-6] at 5. (JPMorgan Chase Bank and Fannie Mae are notably silent on this issue in their briefs, but ultimately it is not relevant to the disposition of their motions.)

         In March 2013, JPMorgan Chase Bank filed a foreclosure complaint against McNeal in the Circuit Court of Cook County. McNeal responded to the lawsuit and applied to JPMorgan Chase Bank for assistance with a loan modification. Around a year later, summary judgment was entered against McNeal in the foreclosure action. In May 2015, JPMorgan Chase Bank offered McNeal a three-month trial period payment plan to begin in July 2015, which if successful would lead to a loan modification. When she was offered the trial period plan, McNeal was informed that her current escrow shortage was $773.78. [1-5] at 5. McNeal and JPMorgan Chase Bank entered into a loan modification agreement in early November 2015. [1-7]. A few weeks later, JPMorgan Chase Bank sent McNeal an escrow shortage statement, stating that her escrow would reach a $3, 989.74 shortage in 2016. [1-8]. A month later, McNeal sent JPMorgan a letter, seeking information on her mortgage servicing. [1-10]. JPMorgan Chase Bank responded in January 2016. [1-11]. McNeal also sent the bank two letters (one in December 2014, one in December 2015) which are the subject of her RESPA claim. [1-4]; [1-10]. JPMorgan Chase Bank responded in January and February 2016. [17-5]; [17-6].

         Although McNeal avoided foreclosure and received a loan modification, she alleges that the defendants' handling of her mortgage and loan modification was fraudulent, deceptive, and unfair, and she sued within a few months of entering into the loan modification agreement.

         III. Standing

         Under Rule 12(b)(1), “the district court must accept as true all material allegations of the complaint, drawing all reasonable inferences therefrom in the plaintiff's favor, unless standing is challenged as a factual matter.” Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688, 691 (7th Cir. 2015). As the party invoking federal jurisdiction, McNeal bears the burden of alleging that she has suffered a concrete and particularized injury that is fairly traceable to the challenged conduct and that is likely to be redressed by a favorable judicial decision. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992).

         JPMorgan Chase & Co. moves to dismiss all claims against it under Rule 12(b)(1), arguing that McNeal lacks standing to sue JPMorgan Chase & Co. because her alleged injuries are based on unauthorized fees, mortgage foreclosure, or escrow payments. Because there are no allegations tracing these injuries to JPMorgan Chase & Co. (as opposed to JPMorgan Chase Bank, as loan servicer, or Fannie Mae, as possible owner of the mortgage), JPMorgan Chase & Co. maintains that McNeal's alleged injuries are therefore not traceable to or redressable by JPMorgan Chase & Co., a holding company. McNeal offers no response and fails to acknowledge JPMorgan Chase & Co.'s separate motion to dismiss in its entirety. See [31] at 1. McNeal has failed to meet her burden to establish standing for her claims against JPMorgan Chase & Co., and she has forfeited any argument that she has standing for those claims. See Alioto, 651 F.3d at 721; Lekas, 405 F.3d at 614. However, courts have an independent obligation to assure that standing exists, Summers v. Earth Island Institute, 555 U.S. 488, 499 (2009), and “the standing inquiry requires careful judicial examination of a complaint's allegations to ascertain whether the particular plaintiff is entitled to an adjudication of the particular claims asserted.” Int'l Primate Prot. League v. Administrators of Tulane Educ. Fund, 500 U.S. 72, 77 (1991). McNeal does not have standing to bring her RESPA, ICFA, RMLA, breach of contract, and unjust enrichment claims against JPMorgan Chase & Co. because these claims all arise out of her mortgage, loan modification, and loan servicing, but her complaint lacks allegations tying JPMorgan Chase & Co. to these actions. In her RICO claim, however, McNeal alleges that JPMorgan Chase & Co. is part of an enterprise that caused her harm. These allegations are sufficient-albeit barely-to allege Article III standing. See Lujan, 504 U.S. at 561 (“At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss we presum[e] that general allegations embrace those specific facts that are necessary to support the claim.”) (marks omitted). McNeal has standing to assert the RICO claim against JPMorgan Chase & Co., but her other claims against JPMorgan Chase & Co. are dismissed without prejudice for lack of standing. See Remijas, 794 F.3d at 697.

         IV. Rule 12(b)(6)

         A. Racketeer Influenced & Corrupt Organizations Act

         McNeal asserts that the Chase defendants violated RICO, 18 U.S.C. § 1962(c), by engaging in an enterprise to create fraudulent mortgage assignments and collect improper fees through mail and wire fraud. RICO “is a unique cause of action that is concerned with eradicating organized, long-term, habitual criminal activity, ” and it “does not cover all instances of wrongdoing.” Gamboa v. Velez, 457 F.3d 703, 705 (7th Cir. 2006). Section 1962(c) makes it “unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.” To state a § 1962(c) claim, a plaintiff must “demonstrate (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Rao v. BP Prods. N. Am., Inc. 589 F.3d 389, 399 (7th Cir. 2009). The Chase defendants contend that McNeal fails to allege the conduct and enterprise elements and that she fails to satisfy the particularity requirement for alleging fraud under Federal Rule of Civil Procedure 9(b).

         McNeal's allegations are inconsistent, lack particularity, and fail to state a § 1962(c) claim. Under RICO, an “enterprise” includes “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). This definition is to be interpreted broadly but “requires a plaintiff to identify a ‘person'-i.e., the defendant-that is distinct from the RICO enterprise.” United Food & Commercial Workers Unions & Emp'rs Midwest Health Ben. Fund v. Walgreen Co., 719 F.3d 849, 853 (7th Cir. 2013) (citing Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001)). This is because RICO “liability depends on showing that the defendants conducted or participated in the conduct of the ‘enterprise's affairs, ' not just their own affairs.” Reves v. Ernst & Young, 507 U.S. 170, 185 (1993); see also Baker v. IBP, Inc., 357 F.3d 685, 692 (7th Cir. 2004) (“Without a difference between the defendant and the ‘enterprise' there can be no violation of RICO.”).

         In McNeal's RICO count, she alleges that “Chase and its employees” conducted the “Chase enterprise” to fraudulently assignment mortgages, to fraudulently foreclose on McNeal, and to charge McNeal improper fees through use of wire and mail fraud. [1] ¶¶ 80-83; see also [1] ¶¶ 70-71. Other allegations of her complaint, however, state that JPMorgan Chase & Co., JPMorgan Chase Bank, Chase Home Finance, and Fannie Mae are the “enterprise, ” plus their “directors, employees, and agents, ” property preservation vendors, and real-estate brokers who valued properties. [1] ¶ 68. McNeal also alleges that the “persons” involved were JPMorgan Chase & Co., JPMorgan Chase Bank, Chase Home Finance, and Fannie Mae.[4] [1] ¶ 67. But in response to the motions to dismiss-which argued that she improperly alleged persons indistinct from the enterprise-McNeal contends that she actually alleged that JPMorgan Chase Bank was the “person” and JPMorgan Chase & Co. was the “enterprise.” [31] at 3.

         In certain circumstances, a parent and subsidiary may be sufficiently distinct to satisfy the person-enterprise distinction, see, e.g., Haroco, Inc. v. American National Bank & Trust Co., 747 F.2d 384, 400 (7th Cir. 1984), but merely alleging that a pattern of predicate acts were committed by a corporation that has agents or affiliates is insufficient to state a RICO claim. Emery v. American Gen. Fin., Inc., 134 F.3d 1321, 1324 (7th Cir. 1998). Instead, “the firm must be shown to use its agents or affiliates in a way that bears at least a family resemblance to the paradigmatic RICO ...


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