Antitrust Law Daily Wrap Up, RICO—N.D. Ill.: Homeowner’s claims against HSBC lacked specificity, (Aug 4, 2014)

By Greg Hammond, J.D.

An Illinois attorney/homeowner cannot pursue Racketeering Influenced and Corrupt Organization Act (RICO) claims against HSBC Finance Corp., arising from the third foreclosure of her property. In partially dismissing the attorney’s complaint, the federal district court in Chicago determined that she failed to sufficiently allege an enterprise or a pattern of racketeering activity (Lockhart v. HSBC Finance Corp., August 1, 2014, Durkin, T.).

Background. Eloise Lockhart is a licensed attorney in Illinois and Texas. In October 1973, she purchased a piece of property in Chicago, which was used as a residence. After refinancing her loan, a dispute arose with HSBC over the amount of her monthly payments, as well as escrow payments for taxes and insurance. HSBC filed its third foreclosure complaint, which is currently pending. Lockhart filed suit against HSBC, setting forth 15 claims, including three RICO claims. HSBC moved to dismiss.

RICO. To state a civil RICO claim, Lockhart was required to allege: (1) conduct, (2) of an enterprise, (3) through a pattern of (4) racketeering activity. In addition, to establish a pattern of racketeering activity, she needed to demonstrate that the defendants committed at least two acts of racketeering activity in a ten-year period. However, the court concluded that she failed to adequately allege an enterprise, or a pattern of racketeering activity.

First, the court noted that Lockhart’s blanket statement alleging an enterprise failed to identify with specificity: (1) the particular roles the defendants played in the alleged organization; (2) how particular individuals are joined together; (3) what orders came from the “top” of the structure; and (4) how the orders were relayed to other members of the organization. Consequently, it concluded that Lockhart failed to describe “the core of an organization.”

To support her allegations of a pattern of racketeering activity, Lockhart argued that “HSBC makes hundreds of billions of dollars annually[,] some of which is earned by illegally, fraudulently and discriminatorily foreclosing on homeowners across the United States using the same schemes used against Plaintiff and the thousands of other homeowners whose loans were the subject of the foreclosure review.” In addition, she alleged that to date, “the acts which are ongoing have lasted a substantial period of time and are pervasive as Defendants intend them to last indefinitely and to continue to victimize Plaintiff and on information and belief, thousands of other Illinois homeowners, attorneys and the judiciary by perpetuating their frauds and deceptions for profit.”

The court concluded that Lockhart’s allegations failed to establish a pattern of racketeering activity, because: (1) she could not use allegedly false statements contained in foreclosure complaints to establish predicate acts of racketeering, and (2) her conclusory and vague statement that the conduct happened to “thousands of other homeowners,” lacks the specificity required under Federal Rule of Civil Procedure 9. Consequently, Lockhart’s RICO claims were dismissed, but she was granted leave to re-plead the claims.

The case number is 13 C 9323.

Attorneys: Anna-Katrina S. Christakis (Pilgrim Christakis LLP) and Sulejman F. Dizdarevic for HSBC Finance Corp.

Companies: HSBC Finance Corp.

Cases: RICO IllinoisNews