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Burns v. Federal Deposit Insurance Corp.

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

February 15, 2018

MARY BURNS, et al., Plaintiffs,
v.
FEDERAL DEPOSIT INSURANCE CORP., et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Robert M. Dow, Jr., United States District Judge

         Before the Court are the motion to dismiss Plaintiffs' second amended complaint [50] filed by Defendant Federal Deposit Insurance Corporation, in its corporate capacity (“FDIC-C”) and the motion to dismiss and strike Plaintiffs' second amended complaint [51] filed by Defendant Federal Deposit Insurance Corporation, as Receiver of Covenant Bank (“FDIC-R”). For the reasons set forth below, the Court grants the motion to dismiss [50] filed by the FDIC-C. The Court grants in part and denies in part the motion to dismiss and strike Plaintiffs' second amended complaint [51] filed by the FDIC-R. Specifically, the Court dismisses the claims against the FDIC-R, but denies the FDIC-R's motion to strike Plaintiffs' second amended complaint as moot. The Court gives any real party in interest until March 13, 2018 to appear in this case and to file a motion for leave to file an amended complaint if any such party believes that the deficiencies identified below can be cured. If no such motion is filed by that date, this case will be dismissed and a final judgment will be entered.

         I. Background[1]

         Plaintiffs Mary Burns and Bob Burns-both now deceased-owned Mama's House Restaurant located in Chicago, Illinois. [48, at ¶6.] In May of 2001, the Community Bank of Lawndale (the “Bank”)[2] sent Plaintiffs letters indicating that two of Plaintiffs' loans were in default and demanding that Plaintiffs cure the default immediately. Id. at 71. During this same time period, the Federal Deposit Insurance Company (“FDIC”) and the Office of Banks and Real Estate (“OBRE”) were investigating the Bank for-among other things-unsafe banking practices and bookkeeping. Id. at ¶7. Plaintiffs, the FDIC, the OBRE, and the Small Business Administration (“SBA”) requested Plaintiffs' payment histories from the Bank, but this information was never provided. Id. at ¶8. On September 10, 2001, the Bank sent Plaintiffs a letter indicating that their payment dated August 21, 2001 was being returned because the account was seriously past due and had been assigned for legal action. Id. at 75. Pursuant to the terms of the Note, the Bank also elected to demand payment of the entire balance of the loan. Id. at 76. As a result of the Bank's foreclosure efforts, Mary Burns was forced to close her restaurant. Id. at ¶10.

         On June 25, 2003, Plaintiffs filed a lawsuit against the Bank in the Circuit Court of Cook County, Illinois, bringing claims of intentional infliction of emotional distress, breach of contract and accounting, defamation, interference with prospective advantage, and consumer fraud. Id. at 102-16. The Bank filed a counterclaim to foreclose the mortgages. Id. at 132-38. Around the same time that Plaintiffs initiated the state court lawsuit, the FDIC issued a cease and desist order to the Bank regarding its allegedly unsafe and unsound banking practices. Id. at 87-101.

         During the February 18, 2010 deposition of the Bank's President John Sorensen, Mr. Sorensen admitted that over $30, 000 in payments were not reflected in the Bank's payment histories for Plaintiffs' accounts. Id. at ¶¶26-30. Still, based on affidavits submitted by the Bank, the state court granted the Bank's motion for summary judgment on October 1, 2012. Id. at ¶¶33-34. The state court also denied Plaintiffs' motion to reconsider and/or for leave to file an amended complaint on February 15, 2013. Id. at ¶35. On March 11, 2013, Plaintiffs filed a notice of appeal to the Illinois Appellate Court. [50-1, at 3.][3] On December 31, 2014, the Appellate Court affirmed the trial court's decision. [Id. at 2.] The Appellate Court also denied Plaintiffs' petition for rehearing. [50-2, at 2.] On May 27, 2015, the Supreme Court of Illinois denied Plaintiffs' petition for leave to appeal. [50-3, at 2.] And on December 14, 2015, the Supreme Court of the United States denied Plaintiffs' petition for a writ of certiorari. [52, at 23.]

         While Plaintiffs' appeals were pending, Plaintiffs also challenged the state court foreclosure action with the FDIC and then in this Court. On February 15, 2013, the FDIC took over ownership of the Bank. Id. at 11, ¶36. Marilyn Burns filed an initial proof of claim with the FDIC on behalf of Mary Burns [52, at 25], but the FDIC requested additional information supporting her claim. Id. at 27. On June 29, 2013, Marilyn Burns filed an updated proof of claim, providing additional information as requested. [52, at 25.] The FDIC sent Mary Burns a notice of disallowance of claim on August 8, 2013, informing her that her claim was being disallowed as not proven to the satisfaction of the Receiver. [48 at 265.] The notice of disallowance provided that Mary Burns may file a lawsuit within 60 days after the date of the notice if she disagreed with the decision of the Receiver. Id. There are no allegations or evidence indicating that Bob Burns ever filed a proof of claim with the FDIC.

         On October 7, 2013, Marilyn Burns filed this lawsuit on behalf of Plaintiffs bringing claims against the FDIC and various banks[4] relating to loan payments that allegedly were never credited to Plaintiffs' accounts, resulting in thousands of dollars in losses and the closure of their business. [See 1.] Although Bob Burns was listed as a Plaintiff in the caption of the original complaint, he was deceased at the time the original complaint was filed. Id. at 1. Mary Burns passed away on June 21, 2016. [29, at 1.]

         On September 15, 2016, Marilyn Burns filed a motion to amend the complaint to add Mary Burns' estate as the Plaintiff in this case, id., which the Court granted. [32.] On November 10, 2016, Marilyn Burns filed a first amended complaint purportedly on behalf of Plaintiffs' estates [34], which the FDIC-C and the FDIC-R (collectively, the “Defendants”) moved to dismiss after being served. [37.] Among other arguments, Defendants argued that Plaintiffs' claims should be dismissed because no real party in interest had appeared on behalf of the deceased Plaintiffs. [37, at 6; 45, at 2.] Marilyn Burns did not respond to Defendants' motions to dismiss their second amended complaint. Instead, on January 19, 2017, Marilyn Burns orally moved for leave to file a second amended complaint. [47.] The Court granted her oral motion, giving her until February 21, 2017 to file a second amended complaint, which she did. [48.] Defendants again moved to dismiss the second amended complaint. [50; 51]. Pending before the Court are the motion to dismiss Plaintiffs' second amended complaint [50] filed by Defendant Federal Deposit Insurance Corporation, in its corporate capacity (“FDIC-C”) and the motion to dismiss and strike Plaintiffs' second amended complaint [51] filed by Defendant Federal Deposit Insurance Corporation, as Receiver of Covenant Bank (“FDIC-R”).

         II. Legal Standard

         The standard that the Court applies to a Federal Rule of Civil Procedure Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction depends on the purpose of the motion. See Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443-44 (7th Cir. 2009); United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003) (en banc), overruled on other grounds by Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012). If a defendant challenges the sufficiency of the allegations regarding subject matter jurisdiction, the Court accepts all well-pleaded factual allegations as true and draw all reasonable inferences in favor of the plaintiff. See Apex Digital, 572 F.3d at 443-44; United Phosphorus, 322 F.3d at 946. In ruling on the motion, the district court also may look beyond the jurisdictional allegations alleged in the complaint and take into consideration whatever evidence has been submitted on the issue to determine if subject matter jurisdiction exists. Cty. of Cook v. HSBC N. Am. Holdings Inc., 136 F.Supp.3d 952, 958 (N.D. Ill. 2015). Therefore, in ruling on Defendants' motions, the Court will consider both the allegations in Plaintiffs' second amended complaint and the documents attached to Defendants' motions. The burden of proof is on the party asserting that jurisdiction exists-here, Plaintiffs. Id.; see also Gonzalez v. Bank of Am., N.A., 2014 WL 26283, at *2 (N.D. Ill. Jan. 2, 2014) (“the plaintiff bears the burden of establishing the basis for the court's jurisdiction”).

         To survive a Federal Rule of Civil Procedure (“Rule”) 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, the complaint first must comply with Federal Rule of Civil Procedure 8(a) by providing “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), such that the defendant is given “fair notice of what the * * * claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)) (alteration in original). Second, the factual allegations in the complaint must be sufficient to raise the possibility of relief above the “speculative level.” E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). “A pleading that offers ‘labels and conclusions' or a ‘formulaic recitation of the elements of a cause of action will not do.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). Dismissal for failure to state a claim under Rule 12(b)(6) is proper “when the allegations in a complaint, however true, could not raise a claim of entitlement to relief.” Twombly, 550 U.S. at 558. In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court accepts as true all of Plaintiffs' well-pleaded factual allegations and draws all reasonable inferences in Plaintiffs' favor. Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007).

         III. Analysis

         The FDIC-C filed a motion to dismiss Plaintiffs claims, arguing that (1) no real party in interest has appeared in place of the deceased Plaintiffs, (2) the Rooker-Feldman doctrine bars federal jurisdiction over the claims raised in the second amended complaint, (3) the claims asserted in the second amended complaint are barred by issue preclusion, (4) the claims asserted in the second amended complaint are not cognizable under the Federal Tort Claims Act, (5) Counts IV and V fail to state a claim under Illinois law, and (6) Counts VI through XIII fail to state a claim under federal law.

         The FDIC-R filed a motion to dismiss joining these arguments and additionally arguing that (1) Plaintiffs failed to serve process on the FDIC-R during its receivership of Covenant Bank, (2) Counts II through XIII must be dismissed for failure to exhaust administrative remedies, and (3) Counts I, III, and VII-XII should be dismissed for failure to state a claim. The FDIC-R also moved to strike Plaintiffs' (1) demand for punitive damages and civil penalties, (2) demand for preliminary and permanent injunctive relief, and (3) demand for a constructive trust.[5]

         Although Plaintiffs filed a response to Defendants' motions to dismiss, Plaintiffs fail to adequately respond to the arguments raised by Defendants. Plaintiffs do not cite to a single case in their entire response to Defendants' motions to dismiss.[6] It is not the duty of the court to make parties' arguments for them. See Tyler v. Runyon, 70 F.3d 458, 466 (7th Cir. 1995); see also Heft v. Moore, 351 F.3d 278, 284 (7th Cir. ...


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