Union Cnty. v. Merscorp, Inc.

920 F.Supp.2d 923

UNION COUNTY, ILLINOIS; People of the State of Illinois ex rel; Tyler Edmonds State's Attorney for the County of Union; and Bobby Toler Clerk of the County of Union and on behalf of the County of Union, Illinois and all Counties in Illinois, Plaintiffs,

v.MERSCORP, INC.; Mortgage Electronic Registration Systems, Inc.; JP Morgan Chase Bank, N.A.; Bank of America Corporation; Bank of America N.A.; RBS Citizens, N.A.; RBS Securities, Inc.; Citigroup, Inc.; CitiMortgage, Inc.; Citibank, N.A.; Deutsche Bank National Trust Company; Everbank; GMAC Mortgage, LLC; HSBC Bank USA, N.A.; Keybank National Association; Nationwide Advantage Mortgage Corporation; Suntrust Mortgage, Inc.; U.S. Bank National Association; Wells Fargo Bank, N.A.; and Defendants Doe Corporations 1–100, Defendants.

Civil No. 12–665–GPM.

United States District Court, S.D. Illinois.

Jan. 30, 2013.

Elizabeth A. Fegan, Thomas E. Ahlering, Hagens Berman Sobol Shapiro LLP, Oak Park, IL, Sean R. Matt, Hagens Berman Sobol Shapiro LLP, Seattle, WA, Stephen W. Stone, Howerton, Dorris & Stone, Marion, IL, Paul T. Slocomb, Blunt Slocomb, Ltd., St. Louis, MO, for Plaintiffs.

Robert M. Brochin, Morgan, Lewis Bockius, LLP, Miami, FL, Rebecca R. Jackson, Rhiana A. Luaders, Darci F. Madden, Douglas W. King, Louis F. Bonacorsi, Bryan Cave, LLP, Christopher M. Hohn, Matthew D. Guletz, Thompson Coburn, Justin L. Assouad, Theodore J. MacDonald, Jr., Heplerbroom LLC, St. Louis, MO, Romeo S. Quinto, Jr., Morgan, Lewis et al., Lucia Nale, Thomas V. Panoff, Mayer Brown LLP, Jonathan M. Cyrluk, Steven C. Moeller, Carpenter, Lipps et al., P. Russell Perdew, Sherina E. Maye, Locke

Lord LLP, Chicago, IL, Joseph F. Yenouskas, Richard M. Wyner, Thomas M. Hefferon, Goodwin Procter, Washington, DC, Gregory J. Marshall, Snell & Wilmer, Phoenix, AZ, Lisa M. Ghannoum, Baker & Hostetler, Cleveland, OH, Katheryn Meagan Lloyd, Michael Hiram Carpenter, Tyler Kabaki Ibom, Carpenter Lipps et al., Columbus, OH, Erin R. McClernon, John M. McFarland, Kutak Rock LLP, Kansas City, MO, for Defendants.

MEMORANDUM AND ORDER

MURPHY, District Judge.

Defendants U.S. Bank N.A., CitiMortgage, Inc., Citigroup, Inc., JP Morgan Chase Bank N.A., RBS Securities, Inc., Everbank, Wells Fargo Bank N.A., MERSCORP, Inc., and Mortgage Electronic Registration Systems, Inc., removed this action from the First Judicial Circuit Court, Union County, Illinois on May 25, 2012, citing this Court's jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2) (Doc. 3). In their amended class action complaint, Plaintiffs define the basis of their action as “Defendants' failure to record all mortgage assignments with the Union County Clerk and all County recording offices across the state of Illinois, and pay the attendant recording fees, as required by Illinois law.” (Doc. 3–1, ¶ 1). In part because the Court finds that the recording statute does not impose a mandatory duty to record the assignments at issue here, Defendants' motion to dismiss the complaint is GRANTED. The Court also GRANTS Defendant KeyBank National Association's motion to join in the motion to dismiss (Doc. 104). Defendant GMAC Mortgage, LLC filed a Notice of Bankruptcy and Effect of Automatic Stay on May 25, 2012, the day this action was removed (Doc. 3). Accordingly, this action is DISMISSED with prejudice as to all Defendants except Defendant GMAC Mortgage, LLC. As to Plaintiff's only remaining claims, against Defendant GMAC Mortgage, LLC, the case is STAYED. Plaintiffs and Defendant GMAC Mortgage, LLC are ORDERED to file a status report on or before July 29, 2013, and biannually thereafter.

Plaintiffs' Complaint

Plaintiffs' removed “Amended Class Action Complaint” claims that Defendants, a “national registry that tracks ownership and servicing rights in residential mortgage loans” and its shareholders, failed to comply with Illinois's recording statute, 765 ILCS 5/28 (Doc. 3–1). Defendant MERS, a subsidiary of Defendant MERSCORP, is essentially alleged to be a front for the other Defendants' inter-mortgage assignments. Defendants describe the MERS-mortgaging structure as follows:

[MERS is] a corporate entity created to allow its members to track active residential mortgage loans. When a mortgage loan is originated, a borrower typically signs a mortgage, which grants a security interest in the borrower's property as security for the loan. When a loan is registered with MERSCORP, MERS is listed as mortgagee on the mortgage executed by the borrower. Thereafter, MERS serves as mortgagee in county land records on behalf of the lender and subsequent transferees or purchasers of the loan. When ownership of a mortgage loan is transferred among MERSCORP members, MERS remains the mortgagee of record, and no mortgage assignment is created or recorded.

(Doc. 3, ¶ 2). According to Plaintiffs, MERS “masquerades” as the title holder, while shareholders/members actually prepare “MERS's” initial mortgage assignments for record. If further mortgage assignments take place between MERS members/shareholders, however, those assignments are not recorded, as MERS acts “on behalf of both the assignor and assignee” (Doc. 3–1, ¶ 54). It is this failure to record that forms the crux of Plaintiffs' complaint. By creating an “alternative” recording system, Plaintiffs argue, Defendants have purposefully circumvented Illinois laws that mandate public county recording (and paying fees for that recording) (Doc. 70, p. 3). Plaintiffs seek relief on four claims: (1) declaratory judgment (declaring that Defendants are required by Illinois law to record and pay the recording fees for every mortgage and mortgage assignment on real property in Illinois) and permanent injunction (enjoining Defendants to so-record and pay); (2) restitution and civil penalties for violation of 815 ILCS 505/2, Illinois's consumer fraud act; (3) restitution for Defendants' unjust enrichment (unjustly retaining the money they were required to pay in recording fees); and (4) damages resulting from Defendants' civil conspiracy to violate the Illinois recording statute (Doc. 3–1).

Standard of Review on Motion to Dismiss

Under Federal notice pleading, a complaint need only “include a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). It only need include “factual allegations [that are] enough to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In other words, a “complaint must contain sufficient factual matter ... 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). Writing for the dissent in the Seventh Circuit's recent Vance v. Rumsfeld en banc opinion, Judge Rovner succinctly stated:

To survive a motion to dismiss, a complaint need not do more than enunciate a plausible claim for relief. The plausibility standard is not akin to a ‘probability requirement.’ It does not imply that the district court should decide whether the claim is true, which version of the facts to believe, or whether the allegations are persuasive. Provided the complaint invokes a recognized legal theory ..., and contains plausible allegations on the material issues, it cannot be dismissed under Rule 12.

701 F.3d 193, 226 (7th Cir.2012) (internal citations and quotations omitted). The plaintiff, however, must allege “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal at 678, 129 S.Ct. 1937. And “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Id. It is “not enough to give a threadbare recitation of the elements of a claim without factual support.” Bissessur v. Indiana Univ. Bd. of Trs., 581 F.3d 599, 603 (7th Cir.2009).

Defendants' Joint Motion to Dismiss Plaintiffs' Amended Class Action Complaint and Plaintiffs' Response

Defendants argue for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6) on the bases that: there is no private right of action available to Plaintiffs here; Plaintiffs have no standing; no duty to record exists under Illinois law; and Plaintiffs failed to adequately plead claims under the Illinois Consumer Fraud and Deceptive Business Practices Act, for unjust enrichment, for civil conspiracy, or for declaratory/injunctive relief (Doc. 63–2).

Defendants point to the language of Illinois's recording statute, 765 ILCS 5/28, and to the fees statute, 55 ILCS 5/3–5018, to argue that Plaintiffs have no private right of action. The recording statute reads:

Deeds, mortgages, powers of attorney, and other instruments relating to or affectingthe title to real estate in this state, shall be recorded in the county in which such real estate is situated; but if such county is not organized, then in the county to which such unorganized county is attached for judicial purposes. No deed, mortgage, assignment of mortgage, or other instrument relating to or affecting the title to real estate in this State may include a provision prohibiting the recording of that instrument, and any such provision in an instrument signed after the effective date of this amendatory Act shall be void and of no force and effect.

765 ILCS 5/28. The statute contains no provision for enforcement, argue Defendants, and neither does the fees statute (Doc. 63–2, p. 7). Defendants also argue that Plaintiffs' common law claims are attempts to sidestep the absence of private rights of action in the applicable statutes. In response, Plaintiffs contend that the broad powers of the State's Attorney to protect the public interest authorize the suit. Plaintiffs also argue that the county recorder has an implicit right of action, as the recorder's function depends on compliance with the recording statute.

Defendants' basic standing argument is that Plaintiffs lack an injury in...