Cardin v. Newrez LLC

637 F.Supp.3d 581

Gregg T. CARDIN, individually and on behalf of all others similarly situated, Plaintiff, v. NEWREZ LLC d/b/a Shellpoint Mortgage Servicing, Defendant

No. 21-cv-03350

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

Signed October 28, 2022

Mohammed Omar Badwan, Victor Thomas Metroff, Sulaiman Law Group, Ltd., Lombard, IL, for Plaintiff.

Rebekah A. Carpenter, Geneka Latresse Holyfield, Akerman LLP, Chicago, IL, James C. Ng, Pro Hac Vice, Akerman LLP, New York, NY, for Defendant.

MEMORANDUM OPINION AND ORDER

Franklin U. Valderrama, United States District Judge

Plaintiff Gregg Cardin (Cardin) brings this action against Defendant NewRez LLC d/b/a Shellpoint Mortgage Servicing (Shellpoint), a mortgage servicer, asserting that Shellpoint improperly bought and charged Cardin for property insurance on his home mortgage loan knowing that Cardin already maintained his own insurance. He asserts a claim on behalf of himself and members of a putative class for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), 815 ILCS 505/1 et seq. (Count I), as well as individual claims for breach of contract (Count II); violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq. (Count III); and unjust enrichment (Count IV). Before the Court is Shellpoint's motion to dismiss the First Amended Complaint (FAC). R. 39, Mot. Dismiss. For the following reasons, the motion is denied as to Counts I, II, and III and granted as to Count IV, which is dismissed without prejudice.

Background¹

Cardin owned the property located at 1550 S. Blue Island Ave, Unit 810, Chicago, Illinois, which was his principal residence. R. 38, FAC ¶¶ 9, 13. Having obtained a mortgage secured by the property, he refinanced the loan in 2014 with Quicken Loans. Id. ¶ 14. Pursuant to the terms of the loan, Cardin owed monthly payments of $1,205.00, and was required to (1) make real estate tax payments through an escrow account and (2) maintain property insurance. Id. ¶¶ 15-17. Cardin alleges that he maintained his own property insurance policy at all relevant times. Id. ¶ 18.

After the refinancing, Ditech Financial LLC serviced the loan until November 2019 when Shellpoint, a mortgage servicer that services mortgage loans nationwide, "acquired and/or began servicing the subject loan." FAC ¶¶ 10-11, 19, 21. Although Cardin was contractually current on the payments when Shellpoint took over the loan, Shellpoint treated the loan as being in default. Id. ¶¶ 23, 25. Specifically, on November 12, 2019, Shellpoint sent Cardin correspondence that (1) informed Cardin that Shellpoint was his new mortgage servicer, (2) stated erroneously that the loan had a negative escrow balance of $1,487.72, and (3) stated that Shellpoint was a "debt collector" that was attempting to collect a debt. Id. ¶¶ 26, 29-30. Cardin claims he had never been informed of a shortage before November 2019, as he was current on his payments. Id. ¶ 27.

From December 2019 through February 2020, Shellpoint sent Cardin mortgage statements that falsely alleged (1) an "overdue payment" fee of $25.00 and (2) an escrow shortage ranging from $1,166.24 to $1,380.56. FAC ¶ 34. During that time, Cardin continued making timely mortgage payments of $1205.23. Id. ¶ 35. In January 2020, Shellpoint began sending Cardin "correspondences requesting proof" that he maintained property insurance. Id. ¶ 32. Cardin responded by "promptly and repeatedly" providing proof of insurance, first sending Shellpoint "proof of insurance" in January 2020. Id. ¶ 33. Shellpoint continued to send statements in March 2020 and April 2020 falsely alleging overdue fees and escrow shortages. Id. ¶ 37. The April 2020 statement indicated that Shellpoint charged the loan $806.17 for forced-place² hazard insurance, and Cardin's monthly payments nearly doubled to $2,144.04. Id. ¶¶ 37, 39. Cardin alleges that, "[a]t the time Shellpoint forced-placed insurance, Shellpoint had actual knowledge that [Cardin] maintained his own insurance policy." Id. ¶ 38.

In May, June, and July 2020, Shellpoint continued to send Cardin statements seeking to collect inflated payments with forced-place insurance charges and increased escrow shortages. FAC ¶¶ 42, 44-45. Cardin responded in writing by sending Shellpoint a "copy of the insurance policy" in April, May, and July 2020. Id. ¶¶ 40, 43, 46-47 ("[Cardin] repeatedly disputed the forced-placed insurance charges . . . via written correspondences and phone calls . . . . Shellpoint failed to reverse the charges despite having a reasonable time period to do so.").

When Shellpoint bought the forced-place insurance in approximately April 2020, Cardin was in the process of selling the property. FAC ¶ 41. The improper insurance charges increased the amount of money needed to pay off Cardin's loan and effectuate a sale. Id. After Cardin repeatedly disputed the insurance charges, Shellpoint told him that it would refund the insurance charges once his proof of insurance was "processed." Id. ¶ 48. Under mounting pressure to complete the sale of the property and with Shellpoint's representations regarding a forthcoming refund, Cardin "reluctantly" paid the inflated amounts sought in the May, June, and July 2020 mortgage statements. Id. ¶ 49.

A closing for the sale of the property took place on July 21, 2020. FAC ¶ 51. Cardin remitted the payoff to Shellpoint by wire and gave the keys to the property to the buyer. Id. However, the sale was not completed because approximately one week after the closing, Shellpoint falsely claimed that Cardin still owed $1,200 in real estate taxes. Id. ¶ 52. Approximately four weeks after the July closing, in August 2020, Shellpoint sent Cardin a statement indicating an additional forced-place insurance charge and demanding $4,367.98 to bring the loan current. Id. ¶ 54. A similar statement from Shellpoint followed in September 2020. Id. ¶ 55 (demanding payment of $6,566.92). And, after the July closing, Shellpoint erroneously demanded an additional $4,297.66 for accrued interest on the loan. Id. ¶ 56. "Under duress to formally complete the sale of the subject property, [Cardin] paid the alleged outstanding interest." Id. ¶ 57.

Cardin filed this action bringing a claim on behalf of himself and all others similarly situated pursuant to the ICFA (Count I), and individual claims for breach of contract (Count II), violations of the FDCPA (Count III), and unjust enrichment (Count IV). Shellpoint moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).

Legal Standard

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint. Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). To survive a motion to dismiss, a complaint need only contain factual allegations, accepted as true, sufficient to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. 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, 129 S.Ct. 1937. Under Rule 8(a)(2), a complaint must include only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2).

Claims alleging fraud, on the other hand, must also satisfy the heightened pleading requirement of Federal Rule of Civil Procedure 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). 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). Generally speaking, Rule 9(b) requires a complaint to "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 citation omitted). Put differently, a 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).

Analysis

I. Notice and Cure

As an initial matter, Shellpoint argues that the complaint should be dismissed in its entirety because Cardin fails to plead compliance with the mortgage contract's pre-suit notice and cure clause. R. 40, Memo. Dismiss at 4. Shellpoint acknowledges that the mortgage contract is not attached to the complaint but attaches the mortgage contract to its motion to dismiss. Shellpoint contends that a court, in resolving a motion to dismiss, may consider "documents attached to the complaint, documents that are central to the complaint and are referred to it [sic], and information properly subject to judicial notice" and "may take judicial notice of recorded documents." Id. (citing Geinosky v. City of Chicago, 675 F. 3d 745 (7th Cir. 2012); Hardaway v. CIT Group/Consumer Fin. Inc., 836 F. Supp. 2d 677 (N.D. Ill. Aug. 1, 2011)). However, Shellpoint fails to assert on which basis the Court may consider the mortgage contract. No matter, as Cardin does not object. Therefore, the Court will consider the mortgage contract in resolving the motion to dismiss.

The notice/cure clause provides:

Neither Borrower nor Lender may commence, join, or be

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