People ex rel. Madigan v. Wildermuth
91 N.E.3d 865
Ill.2018Background
- The Illinois Attorney General sued Wildermuth, Kleanthis, and Legal Modification Network alleging discriminatory practices (race and national origin) in providing loan-modification and short-sale services to predominantly African-American and Latino communities.
- Count IV alleged violations of section 3-102 of the Illinois Human Rights Act (discrimination in "real estate transactions") based on a reverse-redlining theory; plaintiffs claimed defendants provided loan-modification services and charged substantial, nonrefundable advance fees while misrepresenting results.
- Defendants moved to dismiss under section 2-615, arguing they did not engage in "real estate transactions" because they were not lenders or mortgage brokers and did not provide "financial assistance" as defined by the statute.
- The trial court denied dismissal and certified the question whether the State may proceed under a reverse-redlining theory without alleging the defendant acted as a mortgage lender; the appellate court answered yes.
- The Illinois Supreme Court reviewed de novo, focusing on whether defendants’ activities amounted to (1) providing "other financial assistance for maintaining a dwelling" under 775 ILCS 5/3-101(B) or (2) qualifying them as "real estate brokers" who engaged in a covered "real estate transaction."
- The Supreme Court held that the complaint failed to plead either theory sufficiently and vacated the appellate court’s broader analysis; Count IV was dismissed without prejudice and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants provided "other financial assistance" for maintaining a dwelling under 3-101(B) | AG: Loan-modification services are financial assistance connected to financing/maintaining a dwelling and fall within the Act; reverse-redlining need not be limited to lenders | Defs: They merely filled out paperwork and did not provide funds, extend credit, or act in the loan pipeline; statute targets lenders/brokers/applicants who affect loan terms | Court: "Other financial assistance" requires furnishing funds or acting as a necessary conduit affecting credit terms; allegations here do not meet that standard — claim fails |
| Whether defendants were "real estate brokers" who engaged in a covered "real estate transaction" | AG: Defendants held themselves out as negotiating short sales — a brokering function bringing them within the statute | Defs: Even if they represented brokering, there is no allegation they actually brokered short sales or altered terms because of discrimination | Court: Being a broker alone is insufficient; must allege an actual covered real estate transaction and discriminatory alteration of its terms — complaint does not allege this |
Key Cases Cited
- National Ass'n for the Advancement of Colored People v. American Family Mut. Ins. Co., 978 F.2d 287 (7th Cir. 1992) (insurer not "financial assistance" under FHA analog; statute should not be stretched to cover indirect actors)
- United States v. Massachusetts Indus. Fin. Agency, 910 F. Supp. 21 (D. Mass. 1996) (quasi-public agency issuing bond proceeds was a necessary conduit providing financial assistance)
- Eva v. Midwest Nat'l Mortg. Banc, Inc., 143 F. Supp. 2d 862 (N.D. Ohio 2001) (affiliate that managed and profited from loan-acceleration program could qualify as providing financial assistance)
- Davis v. Fenton, 26 F. Supp. 3d 727 (N.D. Ill. 2014) (legal services provider not a lender/broker/appraiser; §3605 analog did not apply)