196 F.R.D. 496 | N.D. Ill. | 2000
MEMORANDUM OPINION AND ORDER
Ms. Antigone Christakos filed a class action against Intercounty Title Company of Illinois (“Intercounty”), alleging that, in connection with its role in the refinancing of her home, Intercounty violated the Real Estate Settlement Procedures Act, 12 U.S.C. § 2607 (“RESPA”), and the Illinois Consumer Fraud Act, 805 ILCS 505/2, et seq. (“ICFA”) by charging her a recording fee that was actually performed by someone else. Ms. Christakos has moved to certify the class, and I grant the motion. Intercounty has filed a motion to dismiss, which I deny.
I. Background,
Like many Americans, Ms. Christakos refinanced her home mortgage in late 1998. She sought a new loan from New America Financial, Inc. (“New America”), and Intercounty was retained to perform the settlement services associated with the refinancing transaction and to provide a lender’s title insurance policy to New America. Intercounty’s role as settlement agent was to receive and disburse the proceeds of Ms. Christakos’ loan from New America. In a refinancing transaction, the new lender must ensure that the mortgage held by the old lender — in this case Mellon Mortgage Company (“Mellon”), is properly paid off so that the new lender’s mortgage will have priority.
As requested, Mellon issued a “Payoff Statement” to Ms. Christakos on November 11, 1998 which showed the outstanding loan balance as of DATE and listed all other charges and costs necessary to pay off the loan. Included as one of the line items was a “Recording Fee” of $23.50. Mellon’s Payoff Statement also included a sentence that read:
*500 “We will record any Reconveyance/Release where required by law.” Intercounty was instructed to pay off the Mellon loan according to the terms of the payoff letter.
At closing, Intercounty prepared and provided Ms. Christakos with a HUD-1 Settlement Statement (“HUD-1”) which summarized the transaction and itemized all of Intercounty’s settlement charges, including a breakdown of its individual recording fees.
The second page of the HUD-1 detailed the settlement charges and included under “Government Recording and Transfer Charges” an amount of $29.00 for “Releases.” Intereounty acknowledges that the purpose of this fee was to record the release of the Mellon mortgage. These settlement charges were included in the “Gross Amount Due from Borrower” section and therefore were paid out of the loan proceeds of Ms. Christakos’ new loan with New America. However, it was Mellon that actually recorded the release and incurred the associated costs of recording; Intercounty concedes it did not record, or attempt to record, the release. After Ms. Christakos instituted this action, Intercounty sent Ms. Christakos a check to reimburse her for the $29 settlement charge.
II. Class Certification
In evaluating a motion for class certification, I take the allegations made in support of certification as true, Hardin v. Harshbarger, 814 F.Supp. 703, 706 (N.D.Ill. 1993), and as a general matter, do not examine the merits of the case, Retired Chicago Police Ass’n v. City of Chicago, 7 F.3d 584, 596 (7th Cir.1993). However, the “boundary between a class determination and the merits may not always be easily discernible,” id. at 599, because determining the propriety of class certification generally depends on factors ‘“enmeshed in the factual and legal issues comprising the plaintiffs cause of action,’ ” id. at 598 (quoting General Tel. Co. v. Falcon, 457 U.S. 147, 160, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982)).
To certify a class under Rule 23, a plaintiff must satisfy Rule 23(a)’s requirements of numerosity, commonality, typicality, and adequacy of representation, Harriston v. Chicago Tribune Co., 992 F.2d 697, 703 (7th Cir.1993), and one of the conditions of Rule 23(b). Alliance to End Repression v. Rockford, 565 F.2d 975, 977 (7th Cir.1977). The plaintiff bears the burden of showing that the proposed class meets the requirements for certification. Retired Chicago Police Ass’n, 7 F.3d at 596. Ms. Christakos seeks certification under Rule 23(b)(3) and seeks to certify a class consisting of “all persons upon whom Intercounty imposed duplicative or bogus governmental fees on or after December 22, 1998.” The defendant challenges only some of the Rule 23(a) requirements. Inter-county objects to certification on the grounds that: (1) the proposed class is too vaguely defined, (2) Ms. Christakos is not an adequate representative because her claims are atypical, and (3) numerosity has not been sufficiently shown.
A.
Although Federal Rule of Civil Procedure 23(a) does not expressly require that a class be “definite” in order to be certified, a requirement that there be an identifiable class has been implied by courts. Alliance to End Repression v. Rockford, 565 F.2d 975, 977 (7th Cir.1977); NOW v. Schei
B.
Intereounty claims that its standard business practice is to give the borrower a form transmittal letter which directs the old lender to send the release deed to Inter-county to be recorded; the borrower is then to give this letter to their old lender. Inter-county claims that Ms. Christakos did not execute this letter directing her old lender to send the release deed to Intereounty so that it could record it. Therefore, Intereounty claims that Ms. Christakos’ claim is atypical and that because it would have a defense in her case, she is precluded from being an adequate class representative. However, this is a contested, factual argument that goes to the merits of her claim, which is not so obvious so as not to warrant further investigation, so I cannot yet consider it.
With respect to the element of numerosity, certification is only appropriate where the class is so numerous that joinder of all members is impracticable. Fed. R.Civ.P. 23(a)(1). This requires some evidence or reasonable estimate of the number of class members, but a good faith estimate is sufficient when the precise number of class members cannot be determined. BuycksRoberson, 162 F.R.D. at 329. During the additional discovery period, plaintiffs counsel reviewed one hundred files. In seventeen of these, there was no recording release fee charged. Twenty-eight files did not contain the transmittal letter when Intereounty charged a recording release fee despite being contained on Intereounty’s computer system.
The defendants do not dispute that Ms. Christakos’ claim involves elements of law and fact which are common to the class, as they involve the same alleged business practice. The showing for a Rule 23(b)(3) certification is that: (1) common issues of law and fact predominate and (2) a class action is superior to other forms of adjudication. Wamell v. Ford Motor Co., 189 F.R.D. 383, 386 (N.D.Ill.1999). Moreover, this is a classic Rule 23(b)(3) class, with small or statutory damages brought by plaintiffs who allege similar mistreatment by a comparatively powerful defendant, one that, if the facts alleged were proved, otherwise might get away with piecemeal highway robbery by committing many small violations that were not worth the time and effort of individual plaintiffs to redress or were beyond their ability or resources to remedy. See In the Matter of American Reserve Corp., 840 F.2d 487, 489 (7th Cir.1988) (“[C]lass actions aggregate claims and permit both compensation and deterrence that are otherwise impossible.”). I therefore hold that Ms. Christakos has met the Rule 23 requirements for class certification.
III. Dispositive Motions
In order to have a claim dismissed under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the moving party must meet a high standard. On a motion to dismiss, I regard all of the well-pleaded factual allegations in the complaint as true, construe them in the light most favorable to the plaintiffs, and draw all reasonable inferences on the plaintiffs’ behalf. See Lanigan v. Village of E. Hazel Crest, 110 F.3d 467, 468 (7th Cir.1997). Dismissal is proper only if it appears beyond doubt that the plaintiff can prove no set of facts in support of her claim which would entitle her to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
A. RESPA Claim
In Count I, Ms. Christakos alleges that Intercounty violated the Real Estate Settlement Procedures Act, 12 U.S.C. § 2607(b) and 24 C.F.R. § 3500.14(c). RES-PA permits the payment of fees during the real estate settlement process only to persons and entities who actually render services or provide goods to the consumer. 12 U.S.C. § 2607(c)(2); see also 24 C.F.R. § 3500.14(g)(iii). Fundamentally, “RESPA is an anti-kickback statute.” Mercado v. Calumet Fed. Sav. & Loan Ass’n, 763 F.2d 269, 270-71 (7th Cir.1985). In accordance with its broad purpose, 12 U.S.C. § 2607(b) provides that “[n]o person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.” The implementing regulations add that “[a] charge by a person for which no or nominal services are performed or of which duplicative fees are charged is an unearned fee and violates this section.” 24 C.F.R. § 3500.14(c). RESPA goes on to provide treble damages for parties injured by violations of the statute. 12 U.S.C. § 2607(d)(2).
Intercounty contends that § 2607(b) is not implicated because it did not “split”' the $29 charge it imposed on Ms. Christakos as part
Intereounty next argues that the fee was not unearned because it had every intention of performing the settlement service. A fee is earned not when it is received but when the service for which it is paid is actually performed. At closing, the recording fee paid by Ms. Christakos was a prepaid unearned fee which would have been earned when Intereounty actually recorded the release. Moreover, Intereounty claims it did not discover until January 20, 2000 that Mellon had recorded the release, at which time it returned the plaintiffs money. Ms. Christakos’ refinancing closed on December 30, 1998. Sufficient time had passed for Inter-county to record the release — thereby earning its fee — or discover it had already been done and return Ms. Christakos’ money. Intercounty also raises issues of custom and industry practice regarding which party in a refinancing performs what functions, but these are questions of fact inappropriate for purposes of this motion.
The weight of Seventh Circuit case law requires payment to a third party to trigger 2607(b).
Although this is not the typical kickback situation envisioned by RESPA’s drafters, the plain language of the statute and regulations are broad enough to cover a situation where a borrower pays two amounts to two parties for the exact same service, one of whom performs the service, and one of whom receives the unearned fee while providing no service whatsoever.
Intercounty claims that Ms. Christakos cannot state a claim under the ICFA, “a regulatory and remedial statute intended to protect consumers, borrowers and business persons against fraud, unfair methods of competition, and other unfair and deceptive business practices.” Cripe v. Letter, 184 Ill.2d 185, 190-91, 234 Ill.DeC. 488, 703 N.E.2d 100 (1998). Section 2 of the Illinois Consumer Fraud and Deceptive Practices Act prohibits the use of unfair or deceptive practices by use of misrepresentation, fraud or the concealment of a material fact with the intent that others rely on the deception. 815 ILCS 505/2. To bring a claim under the ICFA, a plaintiff must set forth: (1) a deceptive act or practice by the defendant; (2) the defendant’s intent that the plaintiff rely on the deception; (3) that the deception occurred in the course of conduct involving a trade or commerce; and (4) that the consumer fraud proximately caused the plaintiffs injury. See Anderson v. Rizza Chevrolet, Inc., 9 F.Supp.2d 908, 915 (N.D.Ill. 1998). Despite the specificity requirement of pleading fraud, we have a notice pleading system, where “a suit should not be dismissed so long as it is possible to hypothesize facts, consistent with the complaint, that would make out a claim for relief.” Petri v. Gatlin, 997 F.Supp. 956 (N.D.Ill.1997) (refusing to dismiss an ICFA claim where plaintiffs generally alleged that defendants disseminated brochures with false information, approved the content of the brochures, and knew the content was false).
The parties dispute the presence of two of these elements. Ms. Christakos claims that Intereounty committed a deceptive act or practice by violating RE SPA and by charging a fee for recording a release it never recorded. That Intercounty intended Ms. Christakos to rely on its deception could easily be inferred from the contents on the face of the HUD-1, where it misrepresented that the $29 fee was for recording the release, which the plaintiff relied upon for accurate information and to allocate the proceeds from her new loan. Moreover, Ms. Christakos alleges that the fact that Intercounty did not seek to record the release until after this lawsuit was filed is further evidence of its intent not to do so and for both the plaintiff and New America to rely on its representation in the HUD-1. Essentially, Ms. Christakos’ theory is that Intercounty misrepresented that it would incur a recording cost so that she would pay them for this cost.
Intercounty claims that it fully disclosed, in accordance with HUD regulations, the amount of the recording fee it anticipated. Basically, Intercounty claims that it intended at the time of the disclosure to incur the fee, so the statement was true when made. The plaintiffs deny this, and intent is a question of fact not appropriate in a motion to dismiss. Had Intercounty deliberately charged Ms. Christakos for a service that it had no intent to provide or knew was unnecessary because Mellon would record the release, this could constitute a violation under the ICFA. Based on the contents of the payoff statement provided by Mellon, in accordance with which Intercounty received and paid out the funds, it is conceivable that Intercounty was aware that Mellon, not Intercounty, would incur the cost to record the release. Significant also is the fact that Intercounty either never sought to record the release or did not return the plaintiffs $29 until after this case was filed. Intercounty’s inclusion of the recording fee as part of its settlement charges which were paid out of Ms. Christakos’ loan proceeds was sufficient to induce the plaintiffs reliance.
IV.
Based on the foregoing, Ms. Christakos’ motion for class certification is GRANTED, as modified, and Intercounty’s motion to dismiss is DENIED.
. One of Congress’ stated purposes for enacting RESPA was to provide more effective advance disclosure to home buyers and sellers of settlement costs associated with residential real estate closings. 12 U.S.C. § 2601(b)(1) (1994). RESPA effectuates this purpose by requiring disclosure of settlement costs to the borrower both before and at closing, when the borrower must be provided with a uniform settlement statement. A uniform settlement statement is a standard form developed by HUD that itemizes all of a borrower's charges for settlement. 12 U.S.C. § 2603(a),(b) (1994).
. I indicated that this definition was too broad and permitted limited class discovery to determine whether a suitable class existed.
. Moreover, even if I could, Intereounty seems to have assumed the risk by placing the onus on borrowers to send letters that it presumably could have sent directly.
. To the extent Ms. Christakos argues to the contrary, that any unearned fee violated RESPA, she is wrong and her argument rejected,