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Balogh v. Deutsche Bank National Trust Co.

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

November 28, 2017

LAWRENCE J. BALOGH, Plaintiff,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, OCWEN LOAN SERVICING, LAW OFFICES OF IRA T. NEVEL, Defendants.

          MEMORANDUM OPINION AND ORDER

          Honorable Edmond E. Chang United States District Judge

         Plaintiff Lawrence Balogh filed this action against Deutsche Bank, Ocwen Servicing, and the Law Offices of Ira Nevel, alleging a variety of federal and state claims, in connection with Deutsche Bank's foreclosure action brought against Balogh in Illinois State Court. R. 1, Compl.[1] In August 2016, Deutsche Bank received a Judgment of Foreclosure against Balogh in the Circuit Court of Cook County. R. 14, Def. Deutsche's Br., Exh. 2. Balogh alleges a variety of federal and state law claims: violations of the Real Estate Settlement Procedures Act (RESPA), 12 C.F.R. § 1024.36(d); the Truth in Lending Act (TILA), 15 U.S.C. § 1635; the Illinois Consumer Fraud Act (ICFA), 815 ILCS 505/2); and a conspiracy to commit fraud.[2] Now, Defendants move to dismiss all claims, arguing that (1) there is no subject matter jurisdiction under the Rooker-Feldman doctrine; and (2) even if there is jurisdiction, the allegations do not state a claim. Def. Deutsche Mot. Dismiss ¶¶ 3-4[3]; Def. Nevel's Br. at 1. For the reasons below, the motion to dismiss the federal law claims is granted, and the Court relinquishes supplemental jurisdiction over the state law claims.

         I. Background

         For the purpose of deciding this motion, the Court accepts the allegations in the Complaint as true. Erickson v. Pardus, 551 U.S. 89, 94 (2007). In May 2005, Balogh took out an adjustable-rate mortgage from IndyMac Bank, FSB to buy his Brookfield, Illinois home. Compl. ¶ 14. In July 2008, IndyMac Bank failed and closed, and the Federal Deposit Insurance Corporation (FDIC) was appointed as the receiver. Id. ¶ 17. In June 2012, the Law Offices of Ira T. Nevel prepared paperwork assigning and transferring Balogh's mortgage to Deutsche Bank. Compl. ¶ 22. Nevel attested that the Mortgage Electronic Registration Systems (MERS) assigned the note to Deutsche Bank in 2005, and that assignment paperwork was filed in the Cook County Recorder's office. Compl. ¶ 56. Because Nevel's office was not incorporated until 2008, Balogh alleges that a valid assignment is impossible. Id. ¶ 52.

         Meanwhile, Balogh made his scheduled mortgage payments up until his default in August 2008. Compl. ¶ 71; Def. Deutsche Br., Exh. A. ¶ 3(j).[4] In June 2012, Deutsche Bank, as the Trustee of the IndyMac INDX Mortgage Loan Trust, filed a state-court complaint to foreclose on the Brookfield property. Compl. ¶ 21. Balogh alleges that Deutsche and Ocwen did not review his mortgage for loss mitigation before Deutsche Bank filed its complaint for foreclosure. Compl. ¶¶ 23, 71.

         In June 2016, Balogh sent notice to Ocwen Servicing that he wanted to rescind the loan. Compl. ¶ 24. Ocwen did not return any money or property at issue in the loan transaction to Balogh after receiving notice of rescission, nor did it begin the process of formally rescinding the loan. Compl. ¶¶ 45-46. The same day, he sent an official Request for Information to Ocwen seeking details about his loan, including the owner of the note, proof of any assignments, and a breakdown of fee assessments. Id. ¶ 25. Ocwen did not deliver the information and failed to provide a written response to Balogh that fulfilled the statutory guidelines. Compl. ¶¶ 30-33.

         After the state court entered its initial judgment of foreclosure, and in light of Ocwen not responding sufficiently to his request, Balogh brought this suit in federal court in February 2017. Compl. ¶¶ 2, 3, 13. The crux of his claims is the allegation that Defendants, through a conspiracy, fraudulently “produced multiple assignments” of his mortgage and kept the true ownership information from him. Id. ¶ 13. The Illinois state foreclosure case remains ongoing. Def. Nevel's Br., Exh. A. Defendants move to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim. Def. Deutsche Mot. Dismiss ¶¶ 3-4; Def. Nevel's Br. at 1.

         II. Legal Standard

         Deutsche Bank and Ocwen Servicing bring their motion under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). A Rule 12(b)(1) motion tests whether the Court has subject-matter jurisdiction, Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009); Long v. ShoreBank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999), while a Rule 12(b)(6) motion tests the sufficiency of the complaint, Hallinan, 570 F.3d at 820; Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). In order to survive a Rule 12(b)(1) motion, the plaintiff must establish that the district court has jurisdiction over an action. United Phosphorous, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2011), overruled on other grounds by Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012). “If subject matter jurisdiction is not evident on the face of the complaint, [then] the ... Rule 12(b)(1) [motion is] analyzed [like] any other motion to dismiss, by assuming for the purposes of the motion that the allegations in the complaint are true.” United Phosphorus, 322 F.3d at 946. But “if the complaint is formally sufficient but the contention is there that there is in fact no subject matter jurisdiction, [then] the movant may use affidavits and other material to support the motion.” Id. (emphasis in original).

         The other ground that the defense advances is Rule 12(b)(6). “A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted.” Hallinan, 570 F.3d at 820. “[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 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). These allegations “must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. The allegations that are entitled to the assumption of truth are those that are factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 678-79.

         Ordinarily, claims only must meet the Rule 8(a)(2) standard. But claims alleging fraud must also satisfy the heightened pleading requirement of Federal Rule of Civil Procedure Rule 9(b), which requires that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b) (emphasis added). And Rule 9(b)'s heightened pleading standard applies to fraud claims brought under the ICFA. Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 441 (7th Cir. 2011) (citation omitted). Thus, Rule 9(b) requires that Balogh's complaint state “the identity of the person making the misrepresentation, the time, place, and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff.” Uni*Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 923 (7th Cir. 1992) (internal quotation marks and citation omitted). Put differently, his complaint “must describe the who, what, when, where, and how of the fraud.” Pirelli, 631 F.3d at 441-42 (internal quotation marks and citation omitted).

         III. Analysis

         A. Standing

         At the outset, Deutsche Bank and Ocwen Servicing question Balogh's ability to bring a claim at all because he lacks any Article III injury. Def. Deutsche's Br. at 10. To have standing to bring a suit, a litigant must have suffered an injury that is fairly traceable to the defendant's conduct and able to be redressed by a favorable judicial decision. Diedrich v. Ocwen Loan Servicing, LLC, 839 F.3d 583, 587-88 (7th Cir. 2016) (citing Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016)). Plaintiffs must allege a particularized injury-in-fact. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). Standing is a threshold showing, and a concrete injury must “actually exist” and not be “abstract.” Spokeo, 136 S.Ct. at 1548. For Balogh to demonstrate that he has standing, this Court looks to whether he has sufficiently alleged facts supporting concrete injuries that are fairly traceable to each of his claims. Lujan, 504 U.S. at 560-61.

         Balogh brings claims under several federal and state laws, but Deutsche and Ocwen argue that Balogh “fail[s] to articulate any concrete injury” from the alleged statutory violations. Def. Deutsche's Br. at 10. But this is not right. First, the section of RESPA at issue, 12 U.S.C. § 2605(e)(1)(A), “imposes a duty on loan servicers to respond to borrower inquiries.” Diedrich, 839 F.3d at 587-88. As the Seventh Circuit noted in Diedrich, RESPA does provide for “actual damages” caused by the loan servicer's failure to provide information to the borrower. Id. at 589 (emphasis in original) (citing 12 U.S.C. § 2605(f)(1)(A)). RESPA also provides for statutory damages, up to $2000, for a pattern or practice of failing to comply with the law. § 2605(f)(1)(B). Although Balogh does not plead factual basis to infer a pattern or practice of violations (he pleads only the conclusion of a “pattern, ” Compl. ¶ 34), he does assert that he hired an “auditor and lawyer to persist in these efforts to obtain critical information” on the account. Compl. ¶ 36. Giving Balogh the benefit of reasonable inferences, Balogh presumably found it ...


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