dismiss. Accordingly, because it appears that plaintiff does not seek to hold BAC liable with
regard to Count I, BAC’s motion to dismiss that count as to BAC is granted.

Even if plaintiff had not conceded this point and the Court were to read the Complaint as
including BAC in the RESPA claim, the Court would still reach the same conclusion. Congress
enacted RESPA to protect home buyers “from unnecessarily high settlement charges caused by
certain abusive practices.” 12 U.S.C. § 2601(a). Specifically, Congress intended to eliminate
“kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement
services.” 12 U.S.C. § 2602(b)(2). RESPA prohibits providers of settlement services from
paying referral fees and kickbacks, as follows:

No person shall give and no person shall accept any fee, kickback, or thing of

value pursuant to any agreement or understanding, oral or otherwise, that business

incident to or part of a real estate settlement service involving a federally related

mortgage loan shall be referred to any person.
Id. § 2607(a). A “settlement service” is “any service provided in connection with a
prospective or actual settlement.” 24 C.F.R. § 3500.2(b).

Plaintiff alleges in Count I of her Complaint that Equicredit paid, and The Loan
Professionals, Inc. received a $450.50 broker fee for referring business and convincing
the borrower to pay high interest rates. (Compl. 1] 23, 28.) Plaintiff alleges that
Equicredit is a subsidiary of BAC. (/d. 9 7)

BAC argues that plaintiff's RESPA claim fails because she does not allege that it
paid or received any fees in relation to the referral of a settlement service. The Court
agrees. Under 12 U.S.C. § 2602(b)(2), it clearly states that RESPA applies to parties that

have “received” or “given” fees or kickbacks in relation to the referral of settlement


D. Section 1981 Claim (Count VI)

BAC has moved to dismiss Johnson’s section 1981 claim against it because it argues that
she has not alleged that it engaged in any discriminatory practice. Equicredit has moved to
dismiss the section 1981 claim because it argues that Johnson does not allege intentional
discrimination and does not allege that she is a member of a racial minority.

Section 1981 guarantees to all persons in the United States “the same right . . . to make
and enforce contracts . . . as is enjoyed by white citizens. ...” 42 U.S.C. § 1981(a). As
amended by the Civil Rights Act of 1991, the phrase “to make and enforce contracts” includes
“the making, performance, modification, and termination of contracts, and the enjoyment of all
benefits, privileges, terms, and conditions of the contractual relationship.” Jd. § 1981(b).

Johnson alleges that “defendants purposefully discriminated against plaintiff on the basis
of race, by contracting with her on terms and conditions Jess favorable than similarly situated
Caucasian borrowers obtain from ‘Bank of America’ entities.”. (Compl. 7 121.) Johnson
alleges that BAC, through its subsidiary Equicredit, targets minority neighborhoods for
predatory lending based solely on race. (Id. 1] 32-38.) Contrary to BAC and Equicredit’s
averments otherwise, these allegations and the inferences raised by them sufficiently state a
claim against both BAC and Equicredit for a violation of section 1981.

Pursuant to Rule 12(b)(6), Tohnson simply has to state a claim upon which relief may be
granted. Under the notice pleading standard of the Federal Rules of Civil Procedure, the mere
allegation that defendants purposefully discriminated against Johnson based on race enables the
Complaint to withstand defendants’ motions to dismiss. Whether Johnson may be able to

establish as a matter of law that BAC and Equicredit are liable for violations of section 1981 is


facts stated in the complaint or in documents attached to the complaint as exhibits or
incorporated in the complaint by reference.” Kramer v. Time Warner Inc., 937 F.2d 767,
773 (2nd Cir. 1991).

The documents defendants would like the Court to consider were neither attached
to the Complaint nor incorporated in the Complaint by reference. However, defendants
nonetheless argue that the Court should consider these other documents.

In support, defendants rely on Caraluzzi v. Prudential Secs., Inc., 824 F. Supp.
1206, 1210 n.1 (N.D. Ill. 1993), which, in turn, relied solely on Kramer v. Time Warner,
Inc., 937 F.2d 767, 774 (2nd Cir. 1991). This Court finds that the Kramer exception to
the general rule that a court may only consider documents attached to the complaint or
incorporated by reference in the complaint does not apply to the case at hand. In Kramer,
the court “fashion([ed] a clear rule governing the consideration of publicly filed disclosure
documents when deciding motions to dismiss securities fraud actions.” See Kramer, 937
F.2d at 773. The reasoning behind this exception was that “a district court may take
judicial notice of the contents of relevant public disclosure documents required to be filed
with the SEC as facts ‘capable of accurate and ready determination by resort to sources
whose accuracy cannot reasonably be questioned.” See id. at 774 (quoting FED. R. Evip.
201(b)(2)). The Kramer court further stated that its holding “relates to public disclosure
documents required by law to be filed, and actually filed, with the SEC, and not to other
forms of disclosure.” Jd.

Because the “Mortgage Broker/Borrower Agreement” and “Mortgage


services. Plaintiff does not allege that BAC received or gave any fees or kickbacks.
Plaintiff merely states that BAC is the parent corporation of its subsidiary, Equicredit.
Even assuming this alleged fact is true, Johnson does not even hint that she seeks to hold
BAC liable for Equicredit’s conduct by piercing the corporate veil. Thus, the allegations
in Count I are not enough to state a sufficient RESPA claim against BAC . Accordingly,

the Court grants BAC’s motion to dismiss Count I.

B. Induced Breach of Fiduciary Duty and Conspiracy (Counts IV & V)

In support of her claims for inducement of a breach of fiduciary duty and
conspiracy, plaintiff alleges that her mortgage broker, The Loan Professionals, Inc.,
should have disclosed the facts that they “were receiving money from the other party
(Equicredit) to the transaction, that would in turn increase the interest rate, and the
pecuniary impact of the payment.” (Compl. 1] 87-89.) Equicredit has moved to dismiss
those claims because The Loan Professionals, Inc. disclosed that it would receive
additional compensation from Equicredit, as evidenced by the “Mortgage
Broker/Borrower Agreement” and a “Mortgage Origination Agreement” attached to
Equicredit’s motion to dismiss. Plaintiff has moved to strike those documents because
she argues that examination of those documents is inappropriate on a motion to dismiss.

Under the Federal Rules of Civil Procedure, the Court cannot look at such
documents on a motion to dismiss. “Documents attached to the complaint are considered
part of the pleadings for purposes of a motion to dismiss.” Caraluzzi v. Prudential Secs.,

Inc., 824 F. Supp. 1206, 1210 n.1 (N.D. Ill. 1993). “[A] district court must limit itself to


v. Brice Capital Corp., Civ. A No. 92-5078, 1993 WL 22182, at *2 n.5 (E.D. Pa. Jan. 26, 1993)
(quoting 12 C.F.R. § 202.2(1)).

Viewing all pleaded facts as true and reading all inferences in the plaintiff's favor,
Johnson alleges that BAC conducts a mortgage origination business and has schemed to direct
its “prime” mortgage transactions through BAC subsidiaries in neighborhoods primarily
comprised of Caucasians and its “subprime” mortgage transactions, which impose unfair and
predatory credit terms, through Equicredit subsidiaries in neighborhoods comprised primarily of
minorities. (Compl. 1] 32-38.) Johnson claims that “defendants discriminated against plaintiff
on the basis of race and color in violation of 15 U.S.C. § 1691(a).” (Ud. 1 111.) These facts and
inferences drawn therefrom are sufficient to state an ECOA claim against BAC because Johnson
has alleged that BAC is an entity that regularly arranges for the extension of credit.

Further, these facts are sufficient to state a claim against Equicredit. The reasonable
inference from the facts as pleaded is that, all other things being equal (such as credit history),
Equicredit targets neighborhoods comprised primarily of minorities and imposes predatory credit
terms on them, which results in discrimination based on race and color. Under the notice
pleading standard of the Federal Rules of Civil Procedure, Johnson’s allegations are sufficient to
put Equicredit on notice of her ECOA claim.

In light of the liberal notice pleading standard utilized on a motion pursuant to Rule
12(b)(6), the Court finds without merit defendants’ arguments in support of their motion to
dismiss Johnson’s ECOA claim. Accordingly, BAC and Equicredit’s motions to dismiss Count

VI are denied.


Minute Order Form (06/97)
x

United States District Court, Northern District of Mlinois

Name of Assigned Judge Sitting Judge if Other
or Magistrate Judge Ronald A. Guzman than Assigned Judge
CASE NUMBER 01.C 5197 DATE 3/21/2002
CASE VERLILER JOHNSON vs. EQUICREDIT CORP. OF AMERICA
TITLE
[ln the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.
DOCKET ENTRY:
eo) oO Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due
(3) Oo Answer brief to motion due. . Reply to answer brief due.
(4) Qo Ruling/Hearing on set for at
(5) | | Status hearing set for 4/5/2002 at 9:30 A.M..
(6) o Pretrial conference[held/continued to] [set for/re-set for] on set for _at
(7) oO Trial(set for/re-set for] on at
(8) Oo {Bench/Jury trial] [Hearing] held/continued to at
(9) QO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) (OGeneral Rule21 OFRCP41(a)(1)  FRCP41(a)(2).
ao [Other docket entry] The Court denies BAC and Equicredit’s motions to dismiss [18-1, 21-1] and
grants plaintiffs motion to strike [27-1]. Enter Memorandum Opinion and Order.
al ff [For further detail see order attached to the original minute order.]
No notices required, advised in open court,
No notices required. number of notices
Notices mailed by judge’s staff.
Notified counsel by telephone MAR, 2 2 2002
Y | Docketing to mail notices.
Copy to judge/magistrate judge.
yd
courtroom :
cG deputy’s Lee
initials o — :
“ " Date/time ed in
central Clerk’s Office ‘mailing deputy initials



actions which allegedly caused her to contract with Equicredit for a subprime mortgage
Joan.

Equicredit argues that Johnson has not explicitly alleged whether she is a
member of a protected class, and both Equicredit and BAC argue that Johnson fails to
allege that she was denied better interest rates than a similarly situated Caucasian
borrower. Accordingly, they argue, the Complaint must be dismissed.

Plaintiff alleges that BAC and Equicredit “discriminate on the basis of race, color
and national origin.” (Compl. { 37.) Plaintiff claims that BAC and Equicredit
discriminated against her by contracting with her on terms and conditions less favorable
than similarly situated Caucasian borrowers obtain from Bank of America entities. (Jd. 4
130,) Plaintiff attempts to illustrate the scheme by providing percentages of the types of
loans given by the Equicredit and Bank of America subsidiaries in different areas of the
Chicago metropolitan area, alleging that the Equicredit entities “make[] loans almost
exclusively in minority areas, while the Bank of America entities make loans in
predominantly Caucasian areas.” (Id. {| 35.) Johnson alleges that she “was one of the
individuals discriminated against.” (Jd. 38.) These allegations must be taken as true
and viewed in the light most favorable to the plaintiff. Although Johnson does not
explicitly state that she is a member of the protected class, the inferences raised by her
allegations are sufficient to conclude that she is, at least at this stage of the litigation.
Further, it is clear that Johnson is alleging that all other things being equal, the terms and
conditions of her mortgage loan from Equicredit were less favorable than those of

similarly situated Caucasian borrowers contracting with Bank of America entities.

11


not before us on a motion to dismiss. Such is the purpose of summary judgment. Therefore,

defendants’ motion to dismiss Count VII is denied.

E. Fair Housing Amendments Act Claim (Count VIM)

Both BAC and Equicredit have moved to dismiss Johnson’s FHA claim.
According to 42 U.S.C. § 3605, “[i]t shall be unlawful for any person or other entity
whose business includes engaging in residential real estate-related transactions to
discriminate against any person in making available such a transaction, or in terms or
conditions of such a transaction, because of race, color, religion, sex, handicap, familial
status, or national origin.” To state a prima facie case of racial discrimination under 42
U.S.C. § 3605, a plaintiff must establish: “(1) that she is a member of a protected class;
(2) that she applied for and was qualified for a loan; (3) that the loan was rejected despite
her qualifications; and (4) that the defendants continued to approve loans for applicants
with qualifications similar to those of the plaintiff.” Latimore v. Citbank, F.S.B., 979 F.
Supp. 662, 665 (N.D. Ill. 1997).

BAC argues that Johnson has failed to allege that she contracted with BAC, and
absent such an allegation BAC cannot be held liable for Equicredit’s alleged section 1981
violations. The Court disagrees. Reading Johnson’s allegations as true and drawing all
inferences in her favor, she alleges that BAC, through its BAC subsidiaries and
Equicredit subsidiaries, schemed to provide different types of loans depending on the
racial demographics of the area in which the borrower resides. Thus, she is not

attempting to hold BAC accountable for its subsidiaries’ actions, but rather for its own

10


Origination Agreement” are not publicly filed documents whose accuracy cannot
reasonably be questioned, the Court finds defendants’ argument unpersuasive. Therefore,
the Court will not consider those documents, and plaintiff's motion to strike defendants’
attached documents is granted. Because Equicredit’s argument in support of the
dismissal of Counts IV and V rests solely on the Court's consideration of such

documents, its motion to dismiss these counts is denied.

C. Equal Credit Opportunity Act Claim (Count VI)

Both BAC and Equicredit have moved to dismiss plaintiff's ECOA claim. BAC
argues that plaintiff fails to allege it is a “creditor” as defined by the ECOA, while
Equicredit argues that plaintiff's complaint fails to allege sufficient facts to provide it
with minimal notice of the claim.

The Equal Credit Opportunity Act provides “i]t shall be unlawful for any creditor
to discriminate against any applicant, with respect to any aspect of a credit transaction . .

. on the basis of race.” 15 U.S.C. § 1691(a)(1). Under 15 U.S.C. § 1691(e) the ECOA
states that:

The term “creditor” means any person who regularly extends, renews, or

continues credit; any person who regularly arranges for the extension, renewal, or

continuation of credit; or any assignee of an original creditor who participates in

the decision to extend, renew, or continue credit.

15 U.S.C. § 1691(e). Furthermore, “Regulation B, promulgated by the Federal Reserve Board

pursuant to the ECOA, defines ‘creditor’ as ‘a person who, in the ordinary course of business,

regularly participates in the decision of whether or not to extend credit.” S & G Petroleum Co.


areas. (/d. {| 35.) Equicredit allegedly imposes unfair credit terms on the borrowers to whom it
makes loans, including high interest rates, in part secured through the payment of yield spread

premiums to brokers to obtain loans at such rates. (Jd. | 36.)

DISCUSSION

On a motion to dismiss pursuant to Rule 12(b)(6), defendant must satisfy a stringent
standard in order to have a complaint dismissed for failure to state a claim. See Wilstein v. San
Tropai Master Ass’n, No. 98 C 6211, 1999 WL 262145, at *6 (N.D. Ill. Apr. 22, 1999). Thus,
the reviewing court “take[s] the allegations in the complaint to be true and view[s] them, along
with the reasonable inferences to be drawn from them, in the light most favorable to the
plaintiffs.” Elisworth v. City of Racine, 774 F.2d 182, 184 (7th Cir. 1985). “[A] complaint
should not be dismissed for failure to state a claim unless it appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”

Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

A. RESPA Claim (Count I)

BAC has moved to dismiss Count I, plaintiff's RESPA claim. Upon examination of the
Complaint, the Court finds that plaintiff raises this claim with respect to Equicredit and The
Loan Professionals, Inc., but not BAC. (See Compl. 1] 39-52 (stating “plaintiff request[s] that
the Court enter judgment in favor of plaintiff and the classes and against The Loan Professionals,
Inc. and Equicredit”).) The Court’s view of the Complaint is bolstered by the fact that plaintiff

opted to ignore BAC’s motion to dismiss Count I in its response brief to BAC’s motion to


Equicredit's motion to dismiss. For the reasons provided in this Memorandum Opinion and

Order, plaintiff's Motion to Strike is granted, and Equicredit and BAC’s motions are denied.

FACTS

On January 5, 2001, plaintiff Verliler Johnson obtained a $45,050.00 subprime mortgage
loan from Equicredit (which includes Equicredit Corporation of America and its subsidiaries).
(Compl. 1 14, 18.) The disclosed annual percentage rate was 14.1642%. (id. ] 18.) The Loan
Professionals, Inc. arranged the transaction for the plaintiff. (/d. 1 19.) It received from the
plaintiff a broker fee of $2,632.00, or 5.84% of the loan principal, paid from the loan proceeds.
(Id. J 22.) In addition, Equicredit paid The Loan Professionals, Inc. a “yield spread premium” of
$450.00 or 1% of the loan principal. (/d. 1 23.)

The effect of the “yield spread premium’ on the amount that the borrower pays is
substantial. (Jd. | 29.) Plaintiff did not understand the effect of the yield-spread premium. (/d.
1 30.) In connection with the January 5, 2001 transaction, Equicredit paid, and The Loan
Professionals, Inc. received, money for referring business and convincing the borrower to pay
high interest rates. (Id. | 28.)

The Bank of America Corp. and Equicredit allegedly discriminated against Verliler
Johnson on the basis of race by contracting with her on terms and conditions less favorable than
similarly situated Caucasian borrowers obtain from Bank of America. (Id. 1 130.) Equicredit
Corp. of America, which is owned by Bank of America Corp., is a parent corporation of
Equicredit Corp. of Illinois. (Id. 117.)

In the Chicago metropolitan area, Equicredit allegedly makes loans almost exclusively in

minority areas, while the Bank of America entities make loans in predominantly Caucasian


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

VERLILER JOHNSON,
Plaintiff,
v. Judge Ronald A, Guzman
EQUICREDIT CORP. OF AMERICA;
EQUICREDIT CORP. OF ILLINOIS;

BANK OF AMERICA CORP., and
THE LOAN PROFESSIONALS, INC.,

01 C 5197

DOCKETED

MAR 2 2 2002

Defendants.

weve

MEMORANDUM OPINION AND ORDER

This case involves alleged fraudulent and discriminatory lending practices in connection
with mortgage loans processed by Equicredit Corp. of America and Equicredit Corp. of Illinois
(collectively “Equicredit”), Bank of America Corp. (“BAC”), and The Loan Professionals.
Verliler Johnson (“Johnson”) has sued defendants for alleged violations of the Real Estate
Settlement Procedures Act of 1974 (“RESPA”) (Count I), 12 U.S.C. § 2601 er seq., the Illinois
Consumer Fraud Act, 815 ILL. Comp. STAT. 505/2 (Count Il), for breach of fiduciary duty
(Count II), inducement of a breach of fiduciary duty (Count IV), and conspiracy (Count V), for
violation of the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. § 1691 et seg. (Count VI),
42 U.S.C. § 1981 (“section 1981”) (Count VID), and the Fair Housing Amendments Act of 1988,
42 U.S.C. § 3601 et seg. (Count VII). Equicredit has moved to dismiss Counts IV-VH and BAC
has moved to dismiss Count I as well as Counts VI-VIII pursuant to Federal Rule of Civil

Procedure (“Rule”) 12(b)(6). Johnson has moved to strike the documents attached to


Because it is clear that plaintiff's allegations are sufficient to state a claim under 42

U.S.C. § 3605, defendants’ motions to dismiss are denied.

CONCLUSION
For the foregoing reasons, the Court denies BAC and Equicredit’s motions to dismiss
(doc. nos. 18-1 and 21-1] and grants plaintiff's motion to strike (doc. no. 27-1].

SO ORDERED ENTERED: 3/2//a

Lbbl

HON. RONALD A. GUZMAD
United States Judge

12