United States District Court, N.D. Illinois, Eastern Division
Susan Michael, on behalf of herself and on behalf of all other similarly situated, Plaintiff,
CitiMortgage, Inc. and Safeguard Properties Management, LLC, Defendants.
MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, UNITED STATES DISTRICT COURT JUDGE.
August 10, 2016, Plaintiff Susan Michael brought the present
Complaint against Defendants CitiMortgage, Inc.
("CitiMortgage") and Safeguard Properties
Management, LLC ("Safeguard"), collectively,
"Defendants, " alleging violations of the Racketeer
Influenced and Corrupt Organizations Act ("RICO"),
18 U.S.C. § 1961(c)-(d), violations of the Fair Debt
Collection Practices Act ("FDCPA"), 15 U.S.C.
§ 1692, et seq., and violations of Illinois
law, including breach of contract, fraud, and violations of
the Illinois Consumer Fraud and Deceptive Practices Act
("ICFA"), 815 ILCS §505/2 et seq.
Both CitiMortgage and Safeguard moved to dismiss Plaintiffs
Complaint for failure to state a claim pursuant to Federal
Rule of Civil Procedure 12(b)(6). CitiMortgage,
alternatively, moved to strike the class allegations. For the
following reasons, the Court grants Defendants' motions
is a homeowner residing in the Village of Lake Bluff in the
Northern District of Illinois. (R. 10, Second Am. Compl.
¶ 13.) Defendant CitiMortgage, the mortgage lending
group of Citigroup, Inc., is a corporation organized under
the laws of the State of New York with its principal place of
business in O'Fallon, Missouri. (Id. ¶ 14.)
Defendant Safeguard is a mortgage field services vendor
headquartered in Valley View, Ohio and organized under the
laws of the State of Ohio. (Id. ¶ 15.)
Defendants administered and serviced Plaintiff's
mortgage. (Id. ¶ 1.)
alleges that CitiMortgage delegates default-related services,
primarily property inspections, to its vendor Safeguard.
(Id. ¶ 16.) Safeguard conducts default-related
property inspections on the majority of CitiMortgage's
loan portfolio, including on Plaintiff's home.
(Id. ¶ 16.) Plaintiff alleges that CitiMortgage
uses computer software programs to administer and manage its
mortgage loans, including to order default-related
inspections of Plaintiff's home and the homes of others
in the proposed class. (Id. ¶ 17.) Safeguard
uses a compatible computer program to generate
default-related work order updates and invoices, which
Plaintiff alleges are not made available to borrowers.
(Id. ¶ 18.) Plaintiff claims that
CitiMortgage's loans are automatically managed by its
computer program in accordance with predetermined guidelines.
(Id. ¶ 19.) If a loan in the system is past
due, for example, the computer program will automatically
schedule a “drive-by” property inspection.
(Id.) After the program receives a work order update
that the inspector has completed the property inspection, the
program automatically charges a fee to the borrower, which is
reflected in the monthly mortgage statement mailed to the
borrower. (Id. ¶ 20.) Plaintiff alleges that
CitiMortgage's system is programmed to order
default-related property inspections at predetermined
intervals. (Id. ¶ 21.)
addition, Plaintiff claims that her deed of trust
(“Security Instrument”) and promissory note
(“Note”) govern the actions CitiMortgage may take
pursuant to her mortgage contract. (Id. ¶
22-23.) Plaintiff's Security Instrument provides as
If Borrower fails to perform the covenants and agreements
contained in this Security Instrument, Lender may do and pay
for whatever is reasonable or appropriate to protect
Lender's interest in the Propery[.] . . Lender may charge
Borrower for services performed in connection with
Borrower's default, including, but not limited to,
attorneys' fees, property inspections and valuation fees.
(Id. ¶ 24.) The Security Instrument provides
that any service fees assessed by the lender shall become
additional debt and shall bear interest at the Note rate from
the date of disbursement. (Id. ¶ 26.) Plaintiff
alleges that paragraph 9 of the mortgage contract does not
permit inspection fees to be charged to borrowers'
accounts for unnecessary or unreasonable inspections.
(Id. ¶ 27.)
to Plaintiff, Defendants unlawfully assessed service fees for
unreasonable default-triggered inspections,  which consisted
of inspectors quickly driving past the property or up an
adjoining driveway. (Id. ¶¶ 28-29.)
Plaintiff further alleges that these unnecessary inspections
were intended to charge default-related service fees as often
as possible to as many accounts as possible. (Id.
¶ 29.) Plaintiff claims that Defendants concealed and
“camouflaged” the property inspection fees by
failing to provide sufficient information on borrowers'
mortgage statements to determine whether the inspections were
reasonable and necessary. (Id. ¶ 30.) Plaintiff
further claims that Defendants “implicitly
represent[ed] that the inspection fees were reasonable and
necessary” and were consistent with the mortgage
contract, which was false and misleading. (Id.
also asserts that Defendants' policy of conducting
unnecessary inspections is contrary to the guidelines in the
U.S. Department of Housing and Urban Development
(“HUD”) Handbook,  which require that a lender
attempt to contact the borrower when a mortgage becomes
delinquent to determine if the property is vacant or
abandoned. (Id. ¶¶ 31-32.) The HUD
guidelines state that when a property is occupied, a lender
can conduct inspections if within the past 30 days: (1) there
have been no mortgage payments; (2) the lender has been
unable to contact the borrower to determine occupancy status;
and (3) there is an increased risk of abandonment of the
property. (Id. ¶ 33.) Defendants conducted
inspections regardless of whether there had been mortgage
payments in the preceding 30 days and irrespective of the
occupancy status of the home. (Id. ¶ 34.)
alleges that Defendants conducted more than sixty drive-by
inspections of her residence over a period of five years, all
while Plaintiff and her family occupied the home.
(Id. ¶ 35.) Defendants' work order updates
provide no indication that inspectors ever observed any
indication that the home was abandoned. (Id.)
Nevertheless, Defendants charged Plaintiff an inspection fee
for every inspection. (Id. ¶ 36.) Plaintiff
alleges that Defendants' default-related inspections are
designed to maximize the service fees generated as long as
the borrowers' mortgage remained delinquent and
regardless of whether the inspections are necessary.
(Id. ¶¶ 37-38.) Plaintiff claims that fees
for default-related services could add thousands of dollars
to borrowers' mortgages, all with interest accruing,
making it increasingly difficult for borrowers to pay off
their loans because part of any mortgage payment is applied
to any default-related service fees. (Id.
¶¶ 41-42.) These unnecessary fees force borrowers
deeper into default, damage their credit scores, and reduce
the equity they have in their properties. (Id.
¶¶ 43-45.) Plaintiff alleges that the thousands of
borrowers that were assessed default-related service fees
form a class of similarly situated individuals, sharing
common questions of law or fact in the adjudication of
culpability and the assessment of damages. (Id.
¶¶ 47, 53.)
motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) challenges the viability of a complaint by arguing
that it fails to state a claim upon which relief may be
granted.” Camasta v. Jos. A. Bank Clothiers,
Inc., 761 F.3d 732, 736 (7th Cir. 2014). Under the
federal 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 (2009) (quoting
Twombly, 550 U.S. at 570). In determining the
sufficiency of a complaint under the plausibility standard,
courts must “accept all well-pleaded facts as true and
draw reasonable inferences in the plaintiffs'
favor.” Roberts v. City of Chicago, 817 F.3d
561, 564 (7th Cir. 2016). In ruling on a Rule 12(b)(6)
motion, district courts may also consider documents attached
to or referenced in the pleadings without converting the
motion into a motion for summary judgment, as long as the
documents are referred to in the complaint and central to the
claims. Citadel Grp. Ltd. v. Washington Reg'l Med.
Ctr., 692 F.3d 580, 591 (7th Cir. 2012).
the requirements of Rule 12(b)(6), Rule 9(b) requires all
allegations of fraud or mistake to be “stated with
particularity.” Borsellino v. Goldman Sachs Gro.,
Inc., 477 F.3d 502, 507 (7th Cir. 2007) (citing
Fed.R.Civ.P. 9(b)). This requires a party 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) (citation omitted). Applying this
standard to a RICO claim, the plaintiff must, at a minimum,
“describe the two predicate acts of fraud with some
specificity and state the time, place, and content of the
alleged false representations, the method by which the
misrepresentations were communicated, and the identities of
the parties to those misrepresentations.” Bible v.
United Student Aid Funds, Inc., 799 F.3d 633, 658 (7th