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

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

December 22, 2017

Merlyn McNeal, Plaintiff,
J.P. Morgan Chase Bank, N.A., J.P. Morgan Chase & Co., Chase Bank, N.A., and Nationwide Title Clearing, Inc., Defendants.



         Plaintiff bought a home financed by an adjustable-rate mortgage. She sues defendants JPMorgan Chase Bank, N.A., JPMorgan Chase & Co., Chase Bank, N.A., [1] and Nationwide Title Clearing for their roles in administering that mortgage.[2] She alleges that the assignment, assessment of fees, escrow calculations, foreclosure, and communications regarding her mortgage were unlawful in a number of ways. She brings claims against all four defendants under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C § 1962(c). She brings a claim against “Chase”[3] for violation of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(e). She brings claims against Chase and NTC for violations of the Illinois Consumer Fraud and Deceptive Practices Act, 815 ILCS 505/2. Defendants move to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, defendants' motion to dismiss is granted.

         I. Legal Standards

         “A 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 notice pleading standards, a plaintiff must allege facts sufficient “to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). 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). 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. Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 946 (7th Cir. 2013). Under Federal Rule of Civil Procedure 9(b), a plaintiff alleging fraud must do so with particularity, which generally means a plaintiff must plead “the who, what, when, where, and how of the fraud.” Camasta, 761 F.3d at 737.

         II. Background

         Plaintiff Merlyn McNeal obtained an adjustable-rate mortgage for $261, 000 to purchase a home in June 2007. [49] ¶ 34-35.[4] The interest rate was set at 9.125% for two years and subject to change every six months thereafter, up to 16.215%. Id. ¶ 35. The mortgage provided that under certain circumstances the lender may take actions to protect its rights in the property, including “entering on the Property to make repairs, ” as long as the lender gave notice before taking such action. Id. ¶ 36. Initially, McNeal was to make payments to Chase Home Finance, LLC. Id. ¶ 37. Federal National Mortgage Association (Fannie Mae) later became the owner of the loan and assigned it to JPMorgan Chase Bank. Id. ¶ 38-39.

         JPMorgan Chase Bank filed a foreclosure complaint against McNeal in the Circuit Court of Cook County in March 2013. Id. ¶ 40. McNeal responded to the lawsuit and later applied to JPMorgan Chase Bank for loan modification assistance. Id. ¶ 41-42. JPMorgan Chase Bank approved McNeal for a trial period plan, effective July 1, 2015, and requiring three monthly trial payments. Id. ¶ 43-44. McNeal was informed at that time that her escrow shortage was $773.78. Id. ¶ 45. JPMorgan Chase Bank sent McNeal a final loan modification agreement in November 2015. [49-2] at 2. A few weeks later, Chase sent McNeal a statement showing that her escrow account would be $3, 989.74 short in 2016 and giving her three options for repayment. [49-2] at 13. McNeal also received a statement showing charges for corporate advance fees-one in the amount of $50, 438.09 and thirty-one separate fees, each for $999.99. [49] ¶ 52; [49-2] at 16-17. In December 2015, McNeal sent a letter requesting information about her loan, including an explanation about the corporate advance fees that had been assessed to her account. [49-2] at 18. In response, she received a list of all corporate advance balance fees charged to her account from November 2008 through January 2016. Id. at 19-24. The summary did not list either the $50, 438.09 fee or any of the $999.99 fees. Id. It stated that the listed fees had been waived, and showed McNeal's corporate advance fee balance as $0.00. Id. at 19, 24.

         McNeal filed a lawsuit against JPMorgan Chase Bank, JPMorgan Chase & Co., Fannie Mae, and Chase Home Finance LLC for their conduct in administering her mortgage. She alleged that the Chase defendants had violated RICO and RESPA. She also brought claims against all four defendants for violations of the Illinois Consumer Fraud and Deceptive Practices Act, the Residential Mortgage License Act, 205 ILCS 635/1-3, breach of contract, and unjust enrichment. Defendants moved to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6); their motion was granted, without prejudice.[5] McNeal filed an amended complaint, dropping defendants Chase Home Finance, LLC and Fannie Mae, and adding defendants Chase Bank, N.A. and Nationwide Title Clearing, Inc. McNeal again alleges that defendants violated RICO, RESPA, and the Illinois consumer-fraud statute. Defendants filed a second Rule 12(b)(6) motion to dismiss. Though McNeal made some changes from her original complaint, she failed to remedy the legal deficiencies laid out in the court's previous order.

         III. Analysis

         A. Racketeer Influenced & Corrupt Organizations Act

         Section 1962(c) of RICO 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). A plaintiff must “identify a ‘person'-i.e., the defendant-that is distinct from the RICO enterprise.” United Food & Commercial Workers Unions & Emp'rs Midwest Health Benefits 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.”). A parent and subsidiary may be sufficiently distinct to satisfy the person-enterprise distinction, see, e.g., Haroco, Inc. v. Am. Nat'l Bank & Trust Co., 747 F.2d 384, 402 (7th Cir. 1984), but “[t]he firm must be shown to use its agents or affiliates in a way that bears at least a family resemblance to the paradigmatic RICO case in which a criminal obtains control of a legitimate (or legitimate-appearing) firm and uses the firm as the instrument of his criminality.” Emery v. Am. Gen. Fin., Inc., 134 F.3d 1321, 1324 (7th Cir. 1998).

         In her original complaint, McNeal failed to identify a person that was distinct from the RICO enterprise. See McNeal v. J.P. Morgan Chase Bank, N.A., No. 16 CV 3115, 2016 WL 6804585, at *7-11 (N.D. Ill. Nov. 17, 2016). Her allegations were inconsistent, alleging that all four defendants were the persons; that all four defendants, plus their directors, employees and agents were the enterprise; and that Chase and its employees conducted the Chase enterprise. McNeal provided no information regarding the structure, duration, or organization of the enterprise. Her complaint further failed to assert that defendants were conducting the affairs of a separate criminal enterprise, rather than their own affairs. McNeal also failed to allege her RICO claim with sufficient particularity to satisfy Federal Rule of Civil Procedure 9(b).

         In her amended complaint, McNeal asserts a RICO claim against all four defendants.[6] A number of the allegations are identical to her original complaint, and though there are some differences between the two, McNeal has still failed to allege a distinct person and enterprise. In her amended complaint, it remains unclear who is the ‘person' distinct from the enterprise. McNeal asserts that JPMorgan Chase & Co., JPMorgan Chase Bank, and Chase comprise the enterprise and conduct its affairs. Id. ¶ 66, 83. She also alleges that each of these is a person responsible for operating and managing the affairs of the enterprise. Id. ¶ 67. She asserts that “[a]ll the enterprises described in this paragraph are an ‘individual, partnership, corporation, association or other legal entity' and are therefore valid legal enterprises within the definition of § 1961(4) of the RICO Act.” Id. ¶ 71. Later, however, she states that JPMorgan Chase & Co. is separate and distinct from the association of Chase Bank, JPMorgan Chase Bank, and NTC. Id. ¶ 87.

         McNeal goes on to describe the three Chase defendants and their different roles in the enterprise. See id. ¶ 63-65; 85-86. She alleges that JPMorgan Chase & Co. engaged in a scheme to defraud and make a profit by using JPMorgan Chase Bank to file a foreclosure complaint based on falsified, fraudulent, and deficient documents. Id. ¶ 58, 62. She asserts that JPMorgan Chase Bank, which provides consumer loans, hired NTC to create a fraudulent assignment, and that Chase Bank was responsible for servicing the loan, [7] ordering the property inspection fees, calculating the escrow statements, and mailing the statements containing misrepresentations and unlawful fees. Id. ΒΆ 68, 85-88. She also adds that Chase, in furtherance of the scheme, serviced McNeal's loan on behalf of the enterprise, routinely and systematically misrepresenting to borrowers that they had an escrow shortage after modifying their loans to ...

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