Zahran v. Bank of Am., 15 C 1968
| Decision Date | 03 March 2016 |
| Docket Number | No. 15 C 1968,15 C 1968 |
| Parties | ROBIN ZAHRAN, KAREN ZAHRAN, and ABBAS ZAHRAN, as Trustee, 5457 Bay Shore Drive Trust, Plaintiffs, v. BANK OF AMERICA, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Plaintiffs Robin Zahran, Karen Zahran and Abbas Zahran have filed an amended complaint against defendant Bank of America, N.A. ("BANA") for its own acts, the acts of its agent Corelogic Corporation, and as successor-in-interest to MBNA America, N.A. ("MBNA"), and LaSalle Bank, N.A. ("LaSalle"), asserting various claims of fraud, breach of contract and defamation as well as violations of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq. Defendant moves to dismiss all counts. This Court grants the motion.
This case stems from a number of transactions involving the Zahrans and BANA or its predecessors-in-interest and how these transactions were reported to credit reporting agencies.
In February 2003, plaintiffs sought to purchase property in Door County, Wisconsin, located at 5457 Bay Shore Drive, in Sturgeon Bay.1 In connection with the purchase, they borrowed $506,000 from ABN/AMRO Mortgage Group., Inc., as evidenced by a promissorynote secured by a mortgage on the property. The note changed hands in a number of transactions, and BANA has held it since 2008.
Robin Zahran ("Robin"), individually, and Abbas Zahran as trustee of the 5457 Bay Shore Drive Trust, signed the note as borrowers. Karen Zahran did not sign the note, but she initialed each page, as did Robin. Only Abbas Zahran signed the mortgage. (Am. Compl. Ex. 1.)
Plaintiffs allege that, a few months after the transaction took place, Robin Zahran noticed that the lender had erroneously reported the debt as Robin and Karen Zahrans' personally, not the Trust's. The Zahrans complained to the lender, and the lender corrected the reporting accordingly. (Id. ¶¶ 8-9.) Sometime in or around 2011, after BANA had obtained the note, BANA began to report the debt as a personal obligation of Robin Zahran's. (Id. ¶ 16.)
Under the terms of the mortgage, the borrower must pay to the lender all amounts due for certain "escrow items" such as taxes and insurance, unless the lender waives the escrow obligation. (Id., Ex. 1 § 3, at 912-13.) However, the lender may revoke waiver of escrow "at any time" by giving notice in accordance with the terms of the mortgage. (Id.)
Robin paid for escrow items directly for a time, but he received a notice from BANA, dated September 24, 2014, notifying him that he would be required to pay taxes and insurance into an escrow account due to an arrearage. (Id. ¶¶ 32-34.) Robin attempted to continue paying taxes directly, but he learned that "Corelogic Tax Service LLC" had paid the taxes at BANA's direction. (Id. ¶¶ 36-37, 40-41.) The Zahrans claim that they were timely paying the taxes on this property and they object to the revocation of waiver as tortious and a breach of contract.
In 2007, Robin had run up more than $60,000 in credit card debt. After negotiating with his creditor (FIA Card Services, Inc., an entity that was formerly known as MBNA and has since merged into BANA) and its debt collector, Creditors Interchange, he settled the debt for $21,804, about 35% of the balance. (Id., Ex. 5.) In a December 29, 2007 letter to Robin confirming the settlement, Creditors Interchange wrote, (emphasis added). (Id., Ex. 5.) Plaintiffs claim that the lender had promised to report the debt as satisfied in full and to cease any attempts to collect the balance, but the debt appeared on Robin's credit report as settled for less than the amount owed or written off, and Robin continued to receive letters from debt collectors. (Id. ¶¶ 19, 21-26.) Plaintiffs allege that BANA and/or its predecessors-in-interest defrauded and defamed plaintiffs, breached the settlement agreement, and violated the Fair Credit Reporting Act by breaking promises with respect to the reporting of the debt.
In 2002, the Zahrans obtained from LaSalle2 a home equity line of credit ("HELOC") secured by a mortgage on their home at 718 Acorn Hill Lane, Oak Brook, Illinois. (Id. ¶ 6.) Plaintiffs allege that they sold their home in 2008 and used the proceeds to pay off the HELOC loan. (Id. ¶ 27.) However, according to plaintiffs, the lender continued to report to credit reporting agencies that this loan was paid for less than the amount owed, despite the Zahrans' protests that they had paid "the entire amount of the pay-off in full as requested." (Id. ¶¶ 28-30.)
This action was originally filed in state court, but defendant removed it to this Court on March 4, 2015, and subsequently filed a motion to dismiss. This Court denied the motion as to the FCRA claim and the defamation claim, but it granted the motion as to all other claims, without prejudice to the filing of an amended complaint. (Mem. Op. & Order, July 17, 2015, ECF No. 20.)
Plaintiffs have now filed an amended complaint, in which they reassert a number of the dismissed claims. In Counts I-IV, plaintiffs assert claims of fraud in the inducement (Count I), breach of contract (Count II), violation of the Illinois Consumer Fraud and Deceptive Practices Act (Count III), and fraud (Count IV), all of which relate to the 2007 credit card debt settlement and relevant credit reporting. In Counts V and VI, plaintiffs assert claims under the FCRA (Count V), and for defamation per se/libel/slander3 (Count VI); these claims may be read to refer to the banks' credit reporting related to the credit card debt involved in the 2007 settlement as well as other debts. In the remaining counts, plaintiffs assert claims for breach of covenant implied in note or mortgage (Count VII), violation of RESPA (Count VIII), and slander on title (Count IX), all of which relate to the 5457 Bay Shore Drive mortgage and the dispute over the escrow account.
"A motion under Rule 12(b)(6) tests whether the complaint states a claim on which relief may be granted." Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir. 2012). Under Rule 8(a)(2), a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must"give the defendant 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) (ellipsis omitted). Additionally, a plaintiff alleging fraud must "state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b).
Under federal notice-pleading standards, a plaintiff's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. Stated 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). "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." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). "In reviewing the sufficiency of a complaint under the plausibility standard, [courts must] accept the well-pleaded facts in the complaint as true, but [they] 'need[ ] not accept as true legal conclusions, or threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.'" Alam v. Miller Brewing Co., 709 F.3d 662, 665-66 (7th Cir. 2013) (quoting Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009)).
In the original complaint, plaintiffs' claims related to the 2007 credit card settlement relied heavily on the allegation that the agreement between Robin and his creditors was that the credit card debt would be reported as paid in full, but the Court dismissed these claims because it is apparent on the face of the December 29, 2007 Creditors Interchange letter that, even assuming that that letter represents the parties' full agreement, the agreement was that the debtwould be reported as "settled in full," not "paid in full." Changing tack, plaintiff now emphasizes that he was promised that the debt would be considered settled or "satisfied in full" (Am. Compl. ¶ 22), and defendant would make no attempts to collect the balance, but defendant continued to attempt to collect the debt through debt collectors. He attaches as Exhibit 7 a number of debt-collector communications. It is not clear on the face of these letters that they relate to the debt that was the subject of the 2007 agreement, but the Court assumes for purposes of this motion that they do.
There are no statements in the Creditors Interchange letter that might be read as a promise to cease debt collection attempts other than the statement that credit bureaus will be notified that the account is in a "settled in full" status. To the extent plaintiffs intend to allege that defendant or its predecessors made any other promises concerning debt collection, their allegations are made in only the most conclusory fashion and without sufficient detail to raise plaintiffs' claims above the speculative level.
The fraud claims asserted in Counts I, III, and IV must all comply with Federal Rule of Civil Procedure 9(b), which requires plaintiffs to describe the circumstances of the alleged fraud with particularity by providing the "who, what, where, when and how" of...
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