In the
United States Court of Appeals
For the Seventh Circuit
No. 11-1423
L ORI W IGOD ,
Plaintiff-Appellant,
v.
W ELLS F ARGO B ANK, N.A.,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:10-cv-02348—Blanche M. Manning, Judge.
A RGUED O CTOBER 26, 2011—D ECIDED M ARCH 7, 2012
Before R IPPLE and H AMILTON, Circuit Judges, and
M YERSCOUGH, District Judge.
H AMILTON, Circuit Judge. We are asked in this appeal
to determine whether Lori Wigod has stated claims
under Illinois law against her home mortgage servicer
for refusing to modify her loan pursuant to the federal
The Honorable Sue E. Myerscough of the Central District
of Illinois, sitting by designation.
2 No. 11-1423
Home Affordable Mortgage Program (HAMP). The
U.S. Department of the Treasury implemented HAMP to
help homeowners avoid foreclosure amidst the sharp
decline in the nation’s housing market in 2008. In 2009,
Wells Fargo issued Wigod a four-month “trial” loan
modification, under which it agreed to permanently
modify the loan if she qualified under HAMP guidelines.
Wigod alleges that she did qualify and that Wells Fargo
refused to grant her a permanent modification. She
brought this putative class action alleging violations
of Illinois law under common-law contract and tort
theories and under the Illinois Consumer Fraud and
Deceptive Business Practices Act (ICFA). The district
court dismissed the complaint in its entirety under
Rule 12(b)(6) of the Federal Rules of Civil Procedure.
Wigod v. Wells Fargo Bank, N.A., No. 10 CV 2348, 2011 WL
250501 (N.D. Ill. Jan. 25, 2011). The court reasoned
that Wigod’s claims were premised on Wells Fargo’s ob-
ligations under HAMP, which does not confer a pri-
vate federal right of action on borrowers to enforce
its requirements.
This appeal followed, and it presents two sets of is-
sues. The first set of issues concerns whether Wigod
has stated viable claims under Illinois common law and
the ICFA. We conclude that she has on four counts.
Wigod alleges that Wells Fargo agreed to permanently
modify her home loan, deliberately misled her into be-
lieving it would do so, and then refused to make good on
its promise. These allegations support garden-variety
claims for breach of contract or promissory estoppel.
She has also plausibly alleged that Wells Fargo com-
No. 11-1423 3
mitted fraud under Illinois common law and engaged in
unfair or deceptive business practices in violation of the
ICFA. Wigod’s claims for negligent hiring or super-
vision and for negligent misrepresentation or conceal-
ment are not viable, however. They are barred by Illinois’s
economic loss doctrine because she alleges only eco-
nomic harms arising from a contractual relationship.
Wigod’s claim for fraudulent concealment is also not
actionable because she cannot show that Wells Fargo
owed her a fiduciary or other duty of disclosure.
The second set of issues concerns whether these
state-law claims are preempted or otherwise barred by
federal law. We hold that they are not. HAMP and its
enabling statute do not contain a federal right of action,
but neither do they preempt otherwise viable state-
law claims. We accordingly reverse the judgment of
the district court on the contract, promissory estoppel,
fraudulent misrepresentation, and ICFA claims, and
affirm its judgment on the negligence claims and fraudu-
lent concealment claim.
I. Factual and Procedural Background
We review de novo the district court’s decision to
dismiss Wigod’s complaint for failure to state a claim.
E.g., Abcarian v. McDonald, 617 F.3d 931, 933 (7th Cir. 2010).
We must accept as true all factual allegations in the
complaint. E.g., Erickson v. Pardus, 551 U.S. 89, 94 (2007).
Under the federal rules’ notice pleading standard, a com-
plaint must contain only a “short and plain statement of
the claim showing that the pleader is entitled to relief.”
4 No. 11-1423
Fed. R. Civ. P. 8(a)(2). The complaint will survive a
motion to dismiss if it “contain[s] 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, ___ (2009),
quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
570 (2007). “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.” Id. A party who
appeals from a Rule 12(b)(6) dismissal may elaborate
on her allegations so long as the elaborations are con-
sistent with the pleading. See Chavez v. Illinois State
Police, 251 F.3d 612, 650 (7th Cir. 2001); Highsmith v.
Chrysler Credit Corp., 18 F.3d 434, 439-40 (7th Cir. 1994)
(reversing dismissal in relevant part based on such new
elaborations); Dawson v. General Motors Corp., 977 F.2d 369,
372 (7th Cir. 1992) (reversing dismissal based on new
elaborations).
In deciding a Rule 12(b)(6) motion, the court may also
consider documents attached to the pleading without
converting the motion into one for summary judgment.
See Fed. R. Civ. P. 10(c). Wigod attached to her com-
plaint her trial loan modification agreement with Wells
Fargo, along with a variety of other documents produced
in the course of the parties’ commercial relationship. The
court may also consider public documents and reports
of administrative bodies that are proper subjects for
judicial notice, though caution is necessary, of course. See
Papasan v. Allain, 478 U.S. 265, 268 n.1 (1986); 520 South
Michigan Ave. Associates, Ltd. v. Shannon, 549 F.3d 1119,
1137 n.14 (7th Cir. 2008); Radaszewksi ex rel. Radaszewski v.
No. 11-1423 5
Maram, 383 F.3d 599, 600 (7th Cir. 2004); Menominee Indian
Tribe of Wisconsin v. Thompson, 161 F.3d 449, 456 (7th Cir.
1998). We have done so here to provide background
information on the HAMP program.
A. The Home Affordable Mortgage Program
In response to rapidly deteriorating financial market
conditions in the late summer and early fall of 2008,
Congress enacted the Emergency Economic Stabilization
Act, P.L. 110-343, 122 Stat. 3765. The centerpiece of the
Act was the Troubled Asset Relief Program (TARP),
which required the Secretary of the Treasury, among
many other duties and powers, to “implement a plan that
seeks to maximize assistance for homeowners and . . .
encourage the servicers of the underlying mortgages . . .
to take advantage of . . . available programs to minimize
foreclosures.” 12 U.S.C. § 5219(a). Congress also granted
the Secretary the authority to “use loan guarantees and
credit enhancements to facilitate loan modifications to
prevent avoidable foreclosures.” Id.
Pursuant to this authority, in February 2009 the
Secretary set aside up to $50 billion of TARP funds to
induce lenders to refinance mortgages with more
favorable interest rates and thereby allow homeowners
to avoid foreclosure. The Secretary negotiated Servicer
Participation Agreements (SPAs) with dozens of home
loan servicers, including Wells Fargo. Under the terms
of the SPAs, servicers agreed to identify homeowners
who were in default or would likely soon be in default
on their mortgage payments, and to modify the loans
6 No. 11-1423
of those eligible under the program. In exchange, servicers
would receive a $1,000 payment for each permanent
modification, along with other incentives. The SPAs
stated that servicers “shall perform the loan modifica-
tion . . . described in . . . the Program guidelines and
procedures issued by the Treasury . . . and . . . any supple-
mental documentation, instructions, bulletins, letters,
directives, or other communications . . . issued by the
Treasury.” In such supplemental guidelines, Treasury
directed servicers to determine each borrower’s eligibility
for a modification by following what amounted to a
three-step process:
First, the borrower had to meet certain threshold re-
quirements, including that the loan originated on or
before January 1, 2009; it was secured by the borrower’s
primary residence; the mortgage payments were more
than 31 percent of the borrower’s monthly income; and,
for a one-unit home, the current unpaid principal
balance was no greater than $729,750.
Second, the servicer calculated a modification using a
“waterfall” method, applying enumerated changes in
a specified order until the borrower’s monthly mortgage
payment ratio dropped “as close as possible to 31
percent.” 1
1
The order of operations in the waterfall method is: (1) capital-
ize accrued interest and escrow advances to third parties;
(2) reduce the annual interest rate to as low as 2 percent;
(3) extend the term up to 40 years and reamortize the loan;
(continued...)
No. 11-1423 7
Third, the servicer applied a Net Present Value (NPV)
test to assess whether the modified mortgage’s value to
the servicer would be greater than the return on the
mortgage if unmodified. The NPV test is “essentially an
accounting calculation to determine whether it is more
profitable to modify the loan or allow the loan to go
into foreclosure.” Williams v. Geithner, No. 09-1959
ADM/JJG, 2009 WL 3757380, at *3 n.3 (D. Minn. Nov. 9,
2009). If the NPV result was negative — that is, the value
of the modified mortgage would be lower than the
servicer’s expected return after foreclosure — the servicer
was not obliged to offer a modification. If the NPV was
positive, however, the Treasury directives said that “the
servicer MUST offer the modification.” Supplemental
Directive 09-01.
B. The Trial Period Plan
Where a borrower qualified for a HAMP loan modifica-
tion, the modification process itself consisted of two
stages. After determining a borrower was eligible, the
servicer implemented a Trial Period Plan (TPP) under
the new loan repayment terms it formulated using the
waterfall method. The trial period under the TPP lasted
1
(...continued)
and (4) if necessary, forbear repayment of principal until the
loan is paid off and waive interest on the deferred amount.
U.S. Dep’t of the Treasury, Home Affordable Modification
Program Supplemental Directive 09-01 (Apr. 6, 2009) (hereinaf-
ter “Supplemental Directive 09-01”).
8 No. 11-1423
three or more months, during which time the lender
“must service the mortgage loan . . . in the same manner
as it would service a loan in forbearance.” Supple-
mental Directive 09-01. After the trial period, if the bor-
rower complied with all terms of the TPP Agreement — in-
cluding making all required payments and providing
all required documentation — and if the borrower’s rep-
resentations remained true and correct, the servicer had
to offer a permanent modification. See Supplemental
Directive 09-01 (“If the borrower complies with the terms
and conditions of the Trial Period Plan, the loan modifica-
tion will become effective on the first day of the month
following the trial period . . . .”).
Treasury modified its directives on the timing of the
verification process in a way that affects this case. Under
the original guidelines that were in effect when Wigod
applied for a modification, a servicer could initiate a
TPP based on a borrower’s undocumented representa-
tions about her finances. See Supplemental Directive
09-01 (“Servicers may use recent verbal [sic] financial
information to prepare and offer a Trial Period Plan.
Servicers are not required to verify financial information
prior to the effective date of the trial period.”). Those
guidelines were part of a decision to roll out HAMP very
quickly.2
2
Treasury changed this policy in 2010, however, to allow
servicers to offer a trial modification only after reviewing
a borrower’s documented financial information. The reason
for the change was that loan servicers were converting trial
(continued...)
No. 11-1423 9
C. Plaintiff’s Loan
In September 2007, Wigod obtained a home mortgage
loan for $728,500 from Wachovia Mortgage, which later
merged into Wells Fargo. (For simplicity, we refer only
to Wells Fargo here.) Finding herself in financial distress,
Wigod submitted a written request to Wells Fargo for
a HAMP modification in April 2009. At that time, Trea-
sury’s original guidelines were still in force, so Wells
Fargo could choose whether (A) to offer Wigod a trial
modification based on unverified oral representations, or
(B) to require her to provide documentary proof of her
financial information before commencing the trial plan.
Wigod alleges that Wells Fargo took option (B). Only
after Wigod provided all required financial documenta-
tion did Wells Fargo, in mid-May 2009, determine that
Wigod was eligible for HAMP and send her a TPP Agree-
ment. The TPP stated: “I understand that after I sign and
return two copies of this Plan to the Lender, the Lender
will send me a signed copy of this Plan if I qualify for
the [permanent modification] Offer or will send me writ-
ten notice that I do not qualify for the Offer.” TPP ¶ 2.
2
(...continued)
modifications to permanent ones at a rate far below Treasury’s
expectations. Treasury originally projected that 3 to 4 million
homeowners would receive permanent modifications under
HAMP. Yet one year into the program, only 170,000 bor-
rowers had received permanent modifications — fewer than
15 percent of the 1.4 million homeowners who had been
offered trial plans.
10 No. 11-1423
On May 28, 2009, Wigod signed two copies of the TPP
Agreement and returned them to the bank, along with
additional documents and the first of four modified
trial period payments. Wells Fargo then executed the
TPP Agreement and sent a copy to Wigod in early
June 2009. The trial term ran from July 1, 2009 to Novem-
ber 1, 2009. The TPP Agreement provided: “If I am in
compliance with this Loan Trial Period and my repre-
sentations in Section 1 continue to be true in all material
respects, then the Lender will provide me with a [perma-
nent] Loan Modification Agreement.” TPP ¶ 1.
Wigod timely made, and Wells Fargo accepted, all four
payments due under the trial plan. On the pleadings, we
must assume that she complied with all other obliga-
tions under the TPP Agreement. Nevertheless, Wells
Fargo declined to offer Wigod a permanent HAMP modifi-
cation, informing her only that it was “unable to get you
to a modified payment amount that you could afford per
the investor guidelines on your mortgage.” After the
expiration of the TPP, Wells Fargo warned Wigod that
she owed the outstanding balance and late fees and, in a
subsequent letter, that she was in default on her home
mortgage loan. Over the next few months, Wigod pro-
tested Wells Fargo’s decision in a number of telephone
conversations, but to no avail. During that time, she
continued to make mortgage payments in the reduced
amount due under the TPP, even after the trial term
ended on November 1, 2009. In the meantime, Wells
Fargo sent Wigod monthly notices threatening to fore-
close if she failed to pay the accumulating amount of
delinquency based on the original loan terms.
No. 11-1423 11
According to Wigod, Wells Fargo improperly
re-evaluated her for HAMP after it had already deter-
mined that she was qualified and offered her a trial
modification, and that it erroneously determined that
she was ineligible for a permanent modification by mis-
calculating her property taxes. Wells Fargo responds
that Treasury guidelines then in force allowed the
servicer to verify, after initiating a trial modification,
that the borrower satisfied all government and investor
criteria for a permanent modification, and that Wigod
did not. In the course of this proceeding, however,
Wells Fargo has not identified the specific criteria that
Wigod failed to satisfy, except to say that it could not
craft a permanent modification plan for her that would
be consistent with its investor guidelines. Because we
are reviewing a Rule 12(b)(6) dismissal, we disregard
Wells Fargo’s effort to contradict the complaint.3
D. Procedural History
On April 15, 2010, Wigod filed a class action complaint
in the Northern District of Illinois on behalf of all home-
owners in the United States who had entered into TPP
Agreements with Wells Fargo, complied with all terms,
3
Wells Fargo also asserted for the first time in oral argument
that Wigod had never actually been qualified for loan modifica-
tion. The assertion must be disregarded because it presents
a factual question that cannot be resolved in deciding a
Rule 12(b)(6) motion. E.g., Morrison v. YTB Int’l, Inc., 649 F.3d
533, 538 (7th Cir. 2011).
12 No. 11-1423
and were nevertheless denied permanent modifications.
Wigod’s complaint contains seven counts: (I) breach
of contract (and breach of implied covenants) for
violating the TPP; (II) promissory estoppel, also based on
representations made in the TPP; (III) breach of the
Servicer Participation Agreement; (IV) negligent hiring
and supervision; (V) fraudulent misrepresentation or
concealment; (VI) negligent misrepresentation or con-
cealment; and (VII) violation of the ICFA.
The district court dismissed Counts I, II, IV, and VI
because each theory of liability was “premised on
Wells Fargo’s obligations” under HAMP, which does not
provide borrowers a private federal right of action
against servicers to enforce it. In the district court’s view,
Wigod’s common-law claims for breach of contract,
promissory estoppel, negligent hiring and supervision, and
fraud were “not sufficiently independent to state . . .
separate state law cause[s] of action.” The district court
dismissed Count III because a borrower lacks standing
to sue as an intended third-party beneficiary of the
Servicer Participation Agreement. Count VI was dis-
missed because the district court concluded that
Wigod could not reasonably have relied on Wells Fargo’s
representation in the TPP that she would receive a perma-
nent modification so long as she made all four trial pay-
ments and her financial information remained true
and accurate, since elsewhere the TPP required Wigod
to meet all of HAMP’s requirements for permanent modifi-
cation. Finally, the district court dismissed Count VII
because Wigod had not plausibly alleged that Wells
Fargo acted with intent to deceive her, which the court
No. 11-1423 13
concluded was a required element under the ICFA.
Wigod appeals the district court’s decision as to all
claims but Count III.
We first examine whether Wigod has adequately pled
viable claims under Illinois law, and we conclude that she
has done so for breach of contract, promissory estoppel,
fraudulent misrepresentation, and violation of the ICFA.
We then consider whether federal law precludes Wigod
from pursuing her state-law claims, and we hold that
it does not.4
4
We have identified more than 80 other federal cases in which
mortgagors brought HAMP-related claims. The legal theories
relied on by these plaintiffs fit into three groups. First, some
homeowners tried to assert rights arising under HAMP itself.
Courts have uniformly rejected these claims because HAMP
does not create a private federal right of action for borrowers
against servicers. See, e.g., Simon v. Bank of Am., N.A., No. 10-cv-
00300-GMN-LRL, 2010 WL 2609436, at *10 (D. Nev. June 23,
2010) (dismissing claim because HAMP “does not provide
borrowers with a private cause of action against lenders
for failing to consider their application for loan modification,
or even to modify an eligible loan”).
In the second group, plaintiffs claimed to be third-party
beneficiaries of their loan servicers’ SPAs with the United States.
Most but not all courts dismissed these challenges as well,
holding that borrowers were not intended third-party beneficia-
ries of the SPAs. Compare Villa v. Wells Fargo Bank, N.A.,
No. 10CV81 DMS (WVG), 2010 WL 935680, at *2-3 (S.D. Cal.
Mar. 15, 2010) (granting motion to dismiss claims of plaintiff
pursuing third-party beneficiary theory), and Escobedo v.
(continued...)
14 No. 11-1423
4
(...continued)
Countrywide Home Loans, Inc., No. 09 cv1557 BTM (BLM), 2009
WL 4981618, at *2-3 (S.D. Cal. Dec. 15, 2009) (same), with
Sampson v. Wells Fargo Home Mortg., Inc., No. CV 10-08836 DDP
(SSx), 2010 WL 5397236, at *3 (C.D. Cal. Nov. 19, 2010) (“Here,
the court is persuaded that Plaintiff — an individual facing
foreclosure of her home — has made a substantial showing
that she is an intended beneficiary of the HAMP, a federal
agreement entered into by Defendants.”). The courts denying
motions to dismiss may have been led astray by County of
Santa Clara v. Astra USA, Inc., 588 F.3d 1237 (9th Cir. 2009),
which was reversed by the Supreme Court. See Astra USA, Inc.
v. Santa Clara County, 131 S. Ct. 1342 (2011). In Astra, the Su-
preme Court held that health care facilities covered by
§ 340B of the Public Health Services Act could not sue
as third-party beneficiaries of drug price-ceiling contracts
between pharmaceutical manufacturers and the government
because Congress did not create a private right of action
under the Act. Id. at 1345. Here, too, Congress did not create a
private right of action to enforce the HAMP guidelines, and
since Astra, district courts have correctly applied the Court’s
decision to foreclose claims by homeowners seeking HAMP
modifications as third-party beneficiaries of SPAs. See, e.g,
Boyd v. U.S. Bank, N.A. ex rel. Sasco Aames Mortg. Loan Trust,
Series 2003-1, 787 F. Supp. 2d 747, 757 (N.D. Ill. 2011).
Wigod is in the third group, basing claims directly on the
TPP Agreements themselves. These plaintiffs avoid Astra
because they claim rights not as third-party beneficiaries but
as parties in direct privity with their lenders or loan servicers.
In these third-generation cases, district courts have split.
Including first- and second-generation cases, about 50 of the
(continued...)
No. 11-1423 15
II. State-Law Claims
A. Breach of Contract
At the heart of Wigod’s complaint is her claim for breach
of contract. The required elements of a breach of contract
claim in Illinois are the standard ones of common law:
“(1) offer and acceptance, (2) consideration, (3) definite
and certain terms, (4) performance by the plaintiff of all
required conditions, (5) breach, and (6) damages.” Associa-
4
(...continued)
courts granted motions to dismiss in full. See, e.g., Nadan v.
Homesales, Inc., No. CV F 11-1181 LJO SKO, 2011 WL 3584213
(E.D. Cal. Aug. 12, 2011); Vida v. OneWest Bank, F.S.B., No.
10-987-AC, 2010 WL 5148473 (D. Or. Dec. 13, 2010). In 30 or so
cases, courts denied the motions in full or in part, allowing
claims based on contract, tort, and/or state consumer fraud
statutes to go forward. See, e.g., Allen v. CitiMortgage, Inc., No.
CCB-10-2740, 2011 WL 3425665 (D. Md. Aug. 4, 2011); Bosque v.
Wells Fargo Bank, N.A., 762 F. Supp. 2d 342 (D. Mass. 2011). For
particularly instructive discussions of some of the issues
involved in these cases, compare In re Bank of America Home
Affordable Modification Program (HAMP) Contract Litigation, No.
10-md-02193-RWZ, 2011 WL 2637222, at *3-6 (D. Mass. July 6,
2011) (multi-district litigation) (denying defendant’s motion to
dismiss claims for breach of contract and violation of state
consumer protection statutes), with Bourdelai v. J.P. Morgan
Chase, No. 3:10CV670-HEH, 2011 WL 1306311, at *3-6 (E.D. Va.
Apr. 1, 2011) (dismissing claims for breach of contract). See
generally John R. Chiles & Matthew T. Mitchell, Hamp: An
Overview of the Program and Recent Litigation Trends, 65 Consumer
Fin. L. Q. Rep. 194, 195 (2011) (examining the “current litigation
trends in this recent spate of HAMP-related lawsuits”).
16 No. 11-1423
tion Benefit Services, Inc. v. Caremark RX, Inc., 493 F.3d 841,
849 (7th Cir. 2007), quoting MC Baldwin Fin. Co. v. DiMag-
gio, Rosario & Veraja, LLC, 845 N.E.2d 22, 30 (Ill. App. 2006).
In two different provisions of the TPP Agreement,
paragraph 1 and section 3, Wells Fargo promised to offer
Wigod a permanent loan modification if two conditions
were satisfied: (1) she complied with the terms of the
TPP by making timely payments and disclosures; and
(2) her representations remained true and accurate.5
Wigod alleges that she met both conditions and accepted
the offer, but that Wells Fargo refused to provide a perma-
nent modification. These allegations state a claim for
breach of contract. Wells Fargo offers three theories,
however, to argue that the TPP was not an enforceable
contract: (1) the TPP contained no valid offer; (2) consider-
5
Paragraph 1 provided:
If I am in compliance with this Loan Trial Period and my
representations in Section 1 continue to be true in all
material respects, then the Lender will provide me with
a Loan Modification Agreement, as set forth in Section 3,
that would amend and supplement (1) the Mortgage on
the Property, and (2) the Note secured by the Mortgage.
Section 3 stated:
If I comply with the requirements in Section 2 and my
representations in Section 1 continue to be true in all
material respects, the Lender will send me a Modification
Agreement for my signature which will modify my Loan
Documents as necessary to reflect this new payment
amount and waive any unpaid late charges accrued to date.
No. 11-1423 17
ation was absent; and (3) the TPP lacked clear and
definite terms. We reject each theory.
1. Valid Offer
In Illinois, the “test for an offer is whether it induces a
reasonable belief in the recipient that he can, by
accepting, bind the sender.” Boomer v. AT&T Corp., 309 F.3d
404, 415 (7th Cir. 2002), quoting McCarty v. Verson Allsteel
Press Co., 411 N.E.2d 936, 943 (Ill. App. 1980); see also
Restatement (Second) of Contracts § 24 (1981) (“An offer
is the manifestation of willingness to enter into a bargain,
so made as to justify another person in understanding
that his assent to that bargain is invited and will conclude
it.”). To determine whether the TPP made a definite
(though conditional) offer of permanent modification, we
examine the language of the agreement itself and the
surrounding circumstances. See Restatement (Second) of
Contracts § 26, cmts. a & c (1981), citing R.E. Crummer &
Co. v. Nuveen, 147 F.2d 3, 5 (7th Cir. 1945).
Wells Fargo contends that the TPP was not an enforce-
able offer to permanently modify Wigod’s mortgage
because it was conditioned on Wells Fargo’s further
review of her financial information to ensure she
qualified under HAMP. Under contract law principles,
when “some further act of the purported offeror is neces-
sary, the purported offeree has no power to create con-
tractual relations, and there is as yet no operative offer.”
1 Joseph M. Perillo, Corbin on Contracts § 1.11, at 31 (rev. ed.
1993) (hereinafter “Corbin on Contracts (rev. ed.)”), citing
18 No. 11-1423
Bank of Benton v. Cogdill, 454 N.E.2d 1120, 1125-26 (Ill. App.
1983). Thus, “a person can prevent his submission
from being treated as an offer by [using] suitable
language conditioning the formation of a contract on
some further step, such as approval by corporate head-
quarters.” Architectural Metal Systems, Inc. v. Consolidated
Systems, Inc., 58 F.3d 1227, 1230 (7th Cir. 1995) (Illinois
law). Wells Fargo contends that the TPP did just that by
making a permanent modification expressly contingent
on the bank taking some later action.
That is not a reasonable reading of the TPP. Certainly,
when the promisor conditions a promise on his own
future action or approval, there is no binding offer. But
when the promise is conditioned on the performance
of some act by the promisee or a third party, there can be
a valid offer. See 1 Richard A. Lord, Williston on Contracts
§ 4:27 (4th ed. 2011) (hereinafter “Williston on Contracts”)
(“[A] condition of subsequent approval by the promisor
in the promisor’s sole discretion gives rise to no obliga-
tion. . . . However, the mere fact that an offer or agree-
ment is subject to events not within the promisor’s
control . . . will not render the agreement illusory.”);
compare McCarty, 411 N.E.2d at 942 (“An offer is an act
on the part of one person giving another person the legal
power of creating the obligation called a contract.”), with
Village of South Elgin v. Waste Management of Illinois, Inc.,
810 N.E.2d 658, 672 (Ill. App. 2004) (“A manifestation of
willingness to enter into a bargain is not an offer if
the person to whom it is addressed knows or has reason
to know that the person making it does not intend
to conclude a bargain until he has made a further mani-
No. 11-1423 19
festation of assent.”), quoting Restatement (Second) of
Contracts § 26 (1981).
Here the TPP spelled out two conditions precedent
to Wells Fargo’s obligation to offer a permanent modifica-
tion: Wigod had to comply with the requirements of the
trial plan, and her financial information had to remain
true and accurate. But these were conditions to be
satisfied by the promisee (Wigod) rather than condi-
tions requiring further manifestation of assent by the
promisor (Wells Fargo). These conditions were there-
fore consistent with treating the TPP as an offer for perma-
nent modification.
Wells Fargo insists that its obligation to modify
Wigod’s mortgage was also contingent on its determina-
tion, after the trial period began, that she qualified under
HAMP guidelines. That theory conflicts with the plain
terms of the TPP. At the beginning, when Wigod
received the unsigned TPP, she had to furnish Wells Fargo
with “documents to permit verification of . . . [her]
income . . . to determine whether [she] qualif[ied] for
the offer.” TPP ¶ 2. The TPP then provided: “I understand
that after I sign and return two copies of this Plan to
the Lender, the Lender will send me a signed copy of
this Plan if I qualify for the Offer or will send me
written notice that I do not qualify for the offer.” TPP ¶ 2
(emphasis added). Wigod signed two copies of the Plan
on May 29, 2009, and returned them along with addi-
tional financial documentation to Wells Fargo.
Under the terms of the TPP Agreement, then, that
moment was Wells Fargo’s opportunity to determine
20 No. 11-1423
whether Wigod qualified. If she did not, it could have
and should have denied her a modification on that basis.
Instead, Wells Fargo countersigned on June 4, 2009 and
mailed a copy to Wigod with a letter congratulating her
on her approval for a trial modification. In so doing,
Wells Fargo communicated to Wigod that she qualified
for HAMP and would receive a permanent “Loan Modifi-
cation Agreement” after the trial period, provided she
was “in compliance with this Loan Trial Period and
[her] representations . . . continue[d] to be true in all
material respects.” TPP ¶ 1.
In more abstract terms, then, when Wells Fargo
executed the TPP, its terms included a unilateral offer
to modify Wigod’s loan conditioned on her compliance
with the stated terms of the bargain. “The test for an
offer is whether it induces a reasonable belief in the
[offeree] that he can, by accepting, bind the [offeror].”
Architectural Metal Systems, 58 F.3d at 1229, citing
McCarty, 411 N.E.2d at 943; see also 1 Williston on
Contracts § 4.10 (offer existed if the purported offeree
“reasonably [could] have supposed that by acting in
accordance with it a contract could be concluded”). Here
a reasonable person in Wigod’s position would
read the TPP as a definite offer to provide a permanent
modification that she could accept so long as she
satisfied the conditions.
This is so notwithstanding the qualifying language
in section 2 of the TPP. An acknowledgment in that
section provided: “I understand that the Plan is not a
modification of the Loan Documents and that the Loan
No. 11-1423 21
Documents will not be modified unless and until
(i) I meet all of the conditions required for modification,
(ii) I receive a fully executed copy of the Modification
Agreement, and (iii) the Modification Effective Date has
passed.” TPP § 2.G. 6 According to Wells Fargo, this pro-
vision meant that all of its obligations to Wigod
terminated if Wells Fargo itself chose not to deliver “a
fully executed TPP and ‘Modification Agreement’ by
November 1, 2009.” In other words, Wells Fargo argues
that its obligation to send Wigod a permanent Modifica-
tion Agreement was triggered only if and when it
actually sent Wigod a Modification Agreement.
Wells Fargo’s proposed reading of section 2 would
nullify other express provisions of the TPP Agreement.
Specifically, it would nullify Wells Fargo’s obligation
to “send [Wigod] a Modification Agreement” if she
“compl[ied] with the requirements” of the TPP and if
her “representations . . . continue to be true in all mate-
rial respects.” TPP § 3. Under Wells Fargo’s theory, it
could simply refuse to send the Modification Agreement
for any reason whatsoever — interest rates went up, the
6
The immediately preceding paragraph of the TPP contains
a substantially similar acknowledgment: “If prior to the Modifi-
cation Effective Date, (i) the Lender does not provide me a
fully executed copy of this Plan and the Modification Agree-
ment; (ii) I have not made the Trial Period payments
required under Section 2 of this Plan; or (iii) the Lender deter-
mines that my representations in Section 1 are no longer true
and correct, the Loan Documents will not be modified and
the Plan will terminate.” TPP § 2.F.
22 No. 11-1423
economy soured, it just didn’t like Wigod — and there
would still be no breach. Under this reading, a borrower
who did all the TPP required of her would be entitled to
a permanent modification only when the bank exercised
its unbridled discretion to put a Modification Agree-
ment in the mail. In short, Wells Fargo’s interpretation
of the qualifying language in section 2 turns an other-
wise straightforward offer into an illusion.
The more natural interpretation is to read the provi-
sion as saying that no permanent modification existed
“unless and until” Wigod (i) met all conditions, (ii) Wells
Fargo executed the Modification Agreement, and
(iii) the effective modification date passed. Before these
conditions were met, the loan documents remained
unmodified and in force, but under paragraph 1 and
section 3 of the TPP, Wells Fargo still had an obliga-
tion to offer Wigod a permanent modification once she
satisfied all her obligations under the agreement.
This interpretation follows from the plain and ordinary
meaning of the contract language stating that “the Plan
is not a modification . . . unless and until” the conditions
precedent were fulfilled. TPP § 2.G. And, unlike Wells
Fargo’s reading, it gives full effect to all of the TPP’s
provisions. See McHenry Savings Bank v. Autoworks of
Wauconda, Inc., 924 N.E.2d 1197, 1205 (Ill. App. 2010) (“If
possible we must interpret a contract in a manner that
gives effect to all of the contract’s provisions.”), citing Bank
of America Nat’l Trust & Savings Ass’n v. Schulson, 714
N.E.2d 20, 24 (Ill. App. 1999). Once Wells Fargo signed
the TPP Agreement and returned it to Wigod, an objec-
tively reasonable person would construe it as an offer
No. 11-1423 23
to provide a permanent modification agreement if she
fulfilled its conditions.
2. Consideration
Under Illinois law, “consideration consists of some
detriment to the offeror, some benefit to the offeree, or
some bargained-for exchange between them.” Dumas v.
Infinity Broadcasting Corp., 416 F.3d 671, 679 n.9 (7th Cir.
2005), quoting Doyle v. Holy Cross Hospital, 708 N.E.2d
1140, 1145 (Ill. 1999). “If a debtor does something more
or different in character from that which it was
legally bound to do, it will constitute consideration for
the promise.” 3 Williston on Contracts, § 7:27.
Here the TPP contained sufficient consideration
because, under its terms, Wigod (the promisee) incurred
cognizable legal detriments. By signing it, Wigod agreed
to open new escrow accounts, to undergo credit coun-
seling (if asked), and to provide and vouch for the truth
of her financial information. Wigod’s complaint alleges
that she did more than simply agree to pay a discounted
amount in satisfaction of a prior debt. In exchange for
Wells Fargo’s conditional promise to modify her home
mortgage, she undertook multiple obligations above and
beyond her existing legal duty to make mortgage pay-
ments. This was adequate consideration, as a number
of district courts adjudicating third-generation HAMP
cases have recognized. See, e.g., In re Bank of America Home
Affordable Modification Program (HAMP) Contract Litigation,
No. 10-md-02193-RWZ, 2011 WL 2637222, at *4 (D. Mass.
July 6, 2011) (multi-district litigation) (“The requirements
24 No. 11-1423
of the TPP all constitute new legal detriments.”); Ansanelli
v. JP Morgan Chase Bank, N.A., No. C 10-03892 WHA, 2011
WL 1134451, at *4 (N.D. Cal. Mar. 28, 2011) (same).
3. Definite and Certain Terms
A contract is enforceable under Illinois law if from its
plain terms it is ascertainable what each party has
agreed to do. Academy Chicago Publishers v. Cheever, 578
N.E.2d 981, 983 (Ill. 1991). “A contract may be enforced
even though some contract terms may be missing or
left to be agreed upon, but if the essential terms are so
uncertain that there is no basis for deciding whether
the agreement has been kept or broken, there is no con-
tract.” Id. at 984. Wells Fargo contends that the TPP is
unenforceable because it did not specify the exact terms
of the permanent loan modification, including the
interest rate, the principal balance, loan duration, and
the total monthly payment.7 Because the TPP allowed
the lender to determine the precise contours of the perma-
nent modification at a later date, Wells Fargo argues,
7
The TPP stated that its monthly payment schedule “is an
estimate of the payment that will be required under the modi-
fied loan terms, which will be finalized in accordance with
Section 3 below.” TPP § 2. Section 3 provided: “I understand
that once Lender is able to determine the final amounts of
unpaid interest and any other delinquent amounts . . . and after
deducting . . . any remaining money held at the end of the
Trial Period . . . the Lender will determine the new payment
amount.” TPP § 3.
No. 11-1423 25
it reflected no “meeting of the minds” as to the
permanent modification’s essential terms, so that it was
an unenforceable “agreement to agree.”
It is true that Wigod’s trial period terms were an “esti-
mate” of the terms of the permanent modification and
that Wells Fargo had some limited discretion to modify
permanent terms based on its determination of the
“final amounts of unpaid interest and other delinquent
amounts.” TPP §§ 2, 3. But this hardly makes the TPP a
mere “agreement to agree.” This court, applying Illinois
law, has explained that a contract with open terms can
be enforced:
In order for such a contract to be enforceable,
however, it is necessary that the terms to be agreed
upon in the future can be determined “independ-
ent of a party’s mere ‘wish, will, and desire’ . . .,
either by virtue of the agreement itself or by com-
mercial practice or other usage or custom.”
United States v. Orr Construction Co., 560 F.2d 765, 769 (7th
Cir. 1977), quoting 1 Arthur Linton Corbin, Corbin on
Contracts § 95, at 402 (1960 ed.) (hereinafter “Corbin
on Contracts (1960 ed.)”) (internal quotation marks omit-
ted). Professor Corbin’s treatise continues: “This may
be the case, even though the determination is left to one
of the contracting parties, if he is required to make it
‘in good faith’ in accordance with some existing
standard or with facts capable of objective proof.” 1 Corbin
on Contracts § 95, at 402 (1960 ed.).
In this case, HAMP guidelines provided precisely
this “existing standard” by which the ultimate terms of
26 No. 11-1423
Wigod’s permanent modification were to be set. When
one party to a contract has discretion to set open terms
in a contract, that party must do so “reasonably and
not arbitrarily or in a manner inconsistent with the rea-
sonable expectations of the parties.” Cromeens, Holloman,
Sibert, Inc. v. AB Volvo, 349 F.3d 376, 395 (7th Cir. 2003)
(applying Illinois law). In its program directives,
the Department of the Treasury set forth the exact mecha-
nisms for determining borrower eligibility and for cal-
culating modification terms — namely, the waterfall
method and the NPV test. These HAMP guidelines un-
questionably informed the reasonable expectations of
the parties to Wigod’s TPP Agreement, which is
actually entitled “Home Affordable Modification Program
Loan Trial Period.” In Wigod’s reasonable reading of
the agreement, if she “qualif[ied] for the Offer” (meaning,
of course, that she qualified under HAMP) and complied
with the terms of the TPP, Wells Fargo would offer her
a permanent modification. TPP ¶ 2. To calculate
Wigod’s trial modification terms, Wells Fargo was obli-
gated to use the NPV test and the waterfall method to
try to bring her monthly payments down to 31 percent
of her gross income. Although the trial terms were just
an “estimate” of the permanent modification terms,
the TPP fairly implied that any deviation from them in
the permanent offer would also be based on Wells
Fargo’s application of the established HAMP criteria
and formulas.
Wells Fargo, of course, has not offered Wigod any
permanent modification, let alone one that is consistent
with HAMP program guidelines. Thus, even without
No. 11-1423 27
reference to the HAMP modification rules, Wigod’s
complaint alleges that Wells Fargo breached its promise
to provide her with a permanent modification once she
fulfilled the TPP’s conditions. Although Wells Fargo
may have had some limited discretion to set the precise
terms of an offered permanent modification, it was cer-
tainly required to offer some sort of good-faith permanent
modification to Wigod consistent with HAMP guide-
lines. It has offered none. See Corbin on Contracts § 4.1, at
532 (rev. ed.) (“Where the parties intend to contract
but defer agreement on certain essential terms until
later, the gap can be cured if one of the parties offers to
accept any reasonable proposal that the other may
make. The other’s failure to make any proposal is a clear
indication that the missing term is not the cause of the
contract failure.”). We must assume at the pleadings
stage that Wigod met each of the TPP’s conditions, and
it is undisputed that Wells Fargo offered no permanent
modification at all. The terms of the TPP are clear and
definite enough to support Wigod’s breach of contract
theory. Accord, e.g., Belyea v. Litton Loan Servicing, LLP,
No. 10-10931-DJC, 2011 WL 2884964, at *8 (D. Mass. July 15,
2011) (“At a minimum, then, the TPP contains all
essential and material terms necessary to govern the
trial period repayments and the parties’ related obliga-
tions.”), quoting Bosque v. Wells Fargo Bank, N.A., 762
F. Supp. 2d 342, 352 (D. Mass. 2011). Wigod’s complaint
sufficiently pled each element of a breach of contract
claim under Illinois law. The relevant documents do not
undermine her claim as a matter of law.
28 No. 11-1423
B. Promissory Estoppel
Wigod also asserts a claim for promissory estoppel,
which is an alternative means of obtaining contractual
relief under Illinois law. See Prentice v. UDC Advisory
Services, Inc., 648 N.E.2d 146, 150 (Ill. App. 1995), citing
Quake Construction, Inc. v. American Airlines, Inc.,
565 N.E.2d 990 (Ill. 1990). Promissory estoppel makes
a promise binding where “all the other elements of a con-
tract exist, but consideration is lacking.” Dumas v. Infinity
Broadcasting Corp., 416 F.3d 671, 677 (7th Cir. 2005), citing
Bank of Marion v. Robert “Chick” Fritz, Inc., 311 N.E.2d
138 (Ill. 1974). The doctrine is “commonly explained
as promoting the same purposes as the tort of misrep-
resentation: punishing or deterring those who mislead
others to their detriment and compensating those who
are misled.” Avery Katz, When Should an Offer Stick? The
Economics of Promissory Estoppel in Preliminary Negotiations,
105 Yale L.J. 1249, 1254 (1996). To establish the elements
of promissory estoppel, “the plaintiff must prove that
(1) defendant made an unambiguous promise to
plaintiff, (2) plaintiff relied on such promise, (3) plaintiff’s
reliance was expected and foreseeable by defendants, and
(4) plaintiff relied on the promise to its detriment.”
Newton Tractor Sales, Inc. v. Kubota Tractor Corp., 906
N.E.2d 520, 523-24 (Ill. 2009).
Wigod has adequately alleged her claim of promis-
sory estoppel. She asserts that Wells Fargo made an
unambiguous promise that if she made timely payments
and accurate representations during the trial period, she
would receive an offer for a permanent loan modifica-
No. 11-1423 29
tion calculated using the required HAMP methodology.
She also alleges that she relied on that promise to her
detriment by foregoing the opportunity to use other
remedies to save her home (such as restructuring her
debt in bankruptcy), and by devoting her resources to
making the lower monthly payments under the TPP
Agreement rather than attempting to sell her home or
simply defaulting. A lost opportunity can constitute a
sufficient detriment to support a promissory estoppel
claim. See Wood v. Mid-Valley Inc., 942 F.2d 425, 428 (7th
Cir. 1991) (noting that a “foregone . . . opportunity” would
be “reliance enough to support a claim of promissory
estoppel”) (applying Indiana law). Wigod’s complaint
therefore alleged a sufficiently clear promise, evidence
of her own reliance, and an explanation of the injury that
resulted. She also contends that Wells Fargo ought to
have anticipated her compliance with the terms of its
promise. This was enough to present a facially plausible
claim of promissory estoppel.8
8
Because Wigod has successfully pled a breach of contract
claim, including consideration, at this stage of the litigation
there is “no gap in the remedial system for promissory
estoppel to fill.” Dumas, 416 F.3d at 677, quoting All-Tech
Telecom Inc. v. Amway Corp., 174 F.3d 862, 869 (7th Cir. 1999).
One or more of Wells Fargo’s contract defenses may remain
in dispute for the remainder of the litigation. For this reason,
Wigod may preserve her promissory estoppel claim as an
alternative in the event the district court or a jury later con-
cludes as a factual matter that an enforceable contract did
not exist.
30 No. 11-1423
C. Negligent Hiring and Supervision
Wigod’s next claim is that Wells Fargo deliberately
hired unqualified customer service employees and
refused to train them to implement HAMP effectively “so
that borrowers would become too frustrated to pursue
their modifications.” Compl. ¶ 96. Wigod also alleges
that Wells Fargo adopted policies designed to sabotage
the HAMP modification process, such as a rule limiting
borrowers to only one telephone call with any given
employee, effectively requiring borrowers to start from
scratch with an unfamiliar agent in any follow-up call.9
The economic loss doctrine forecloses Wigod’s recovery
on this negligence claim. Known as the Moorman doctrine
in Illinois, this doctrine bars recovery in tort for purely
economic losses arising out of a failure to perform con-
tractual obligations. See Moorman Manufacturing Co. v.
Nat’l Tank Co., 435 N.E.2d 443, 448-49 (Ill. 1982). The
Moorman doctrine precludes liability for negligent
hiring and supervision in cases where, in the course of
performing a contract between the defendant and the
9
The Treasury directives require servicers to have “adequate
staffing, resources, and facilities for receiving and processing
HAMP documents” and to “ensure that . . . inquiries and
complaints are provided fair consideration, and timely and
appropriate responses and resolution.” Supplemental Directive
09-01. Additionally, in the Servicer Participation Agreement
it executed with the government, Wells Fargo agreed to “use
qualified individuals with suitable training, education, experi-
ence and skills to perform the services.”
No. 11-1423 31
plaintiff, the defendant’s employees negligently cause
the plaintiff to suffer some purely economic form of harm.
See, e.g., Freedom Mortg. Corp. v. Burnham Mortg., Inc., 720
F. Supp. 2d 978, 1002 (N.D. Ill. 2010) (plaintiff’s “negligent
retention and supervision claims violate Moorman be-
cause they relate to [its] contractual and commercial
relationship” with defendant); Soranno v. New York Life
Ins. Co., No. 96 C 7882, 1999 WL 104403, at *16 (N.D. Ill.
Feb. 24, 1999) (Plaintiffs’ negligent supervision claims
“cannot survive Moorman to the extent that they relate
to . . . [the] actions [of the defendant’s agent] in selling
the insurance contracts and annuities [to plain-
tiffs]. Those acts — and the related duty to supervise
them — appear to have arisen under the contract.”);
Johnson Products Co. v. Guardsmark, Inc., No. 97 C 6406, 1998
WL 102687, at *8 (N.D. Ill. Feb. 27, 1998) (economic
loss doctrine barred negligent hiring and supervision
claims against security firm whose guards stole from
the plaintiff because no Illinois case law imposed
“specific duties upon providers of security services
to employ honest personnel and to use reasonable care
to supervise them”).
There are a number of exceptions to the Moorman doc-
trine, each rooted in the general rule that “[w]here a
duty arises outside of the contract, the economic loss
doctrine does not prohibit recovery in tort for the
negligent breach of that duty.” Congregation of the
Passion, Holy Cross Province v. Touche Ross & Co., 636
N.E.2d 503, 514 (Ill. 1994). To determine whether the
Moorman doctrine bars tort claims, the key question is
whether the defendant’s duty arose by operation of
32 No. 11-1423
contract or existed independent of the contract. See
Catalan v. GMAC Mortg. Corp., 629 F.3d 676, 693 (7th
Cir. 2011) (“These exceptions [to the economic loss doc-
trine] have in common the existence of an extra-contractual
duty between the parties, giving rise to a cause of action
in tort separate from one based on the contract itself.”);
2314 Lincoln Park West Condominium Ass’n v. Mann, Gin,
Ebel & Frazier, Ltd., 555 N.E.2d 346, 351 (Ill. 1990) (“the
concept of duty is at the heart of distinction drawn by
the economic loss rule”). If, for example, an architect
bungles a construction design, the Moorman doctrine
bars the aggrieved owner’s suit for negligence. See id.
The shoddy workmanship is a breach of the design con-
tract rather than a failure to observe some independent
duty of care owed to the world at large.
To the extent Wells Fargo had a duty to service
Wigod’s home loan responsibly and with competent
personnel, that duty emerged solely out of its contractual
obligations. As we recently noted, a mortgage contract
itself “cannot give rise to an extra-contractual duty
without some showing of a fiduciary relationship be-
tween the parties,” and no such relationship existed here.
Catalan, 629 F.3d at 693 (applying Moorman doctrine).
Although Wigod has a legally viable claim that the
TPP Agreement bound Wells Fargo to offer her a perma-
nent modification, Wells Fargo owed her no independent
duty to employ qualified people and to supervise
them appropriately in servicing her home loan. Cf. Johnson
Products Co., 1998 WL 102687, at *9 (“The manufacturer
of a defective product that simply does not work
properly does not owe a duty in tort to the purchaser of
No. 11-1423 33
the product to use reasonable care in producing the
product. Rather, the purchaser’s remedy lies in breach
of contract or breach of warranty. . . . [Defendant] had
no obligation to use reasonable care in performing
its duties, for its only obligations arose under the con-
tract itself.”). Wigod’s rights here are contractual
in nature. If Wells Fargo failed to honor their agree-
ment — whether by hiring incompetents or simply
through bald refusals to perform — contract law pro-
vides her remedies.
Wigod argues that the Moorman doctrine does not bar
her negligent hiring and supervision claims because
she seeks equitable relief and therefore her asserted
harm goes beyond pure economic injury. But this
theory assumes that there is some necessary connection
between the nature of the loss alleged and the appro-
priate form of relief. This is not so. Purely economic
losses may sometimes be best remedied through in-
junctive relief — when, for instance, specific performance
of a contract is required to make the plaintiff whole, or
when the risk of under-compensation is very high. See
Anthony T. Kronman, Specific Performance, 45 U. Chi. L.
Rev. 351, 362 (1978) (theorizing that specific performance
is awarded where a court “cannot obtain, at reasonable
cost, enough information about substitutes to permit it
to calculate an award of money damages without
imposing an unacceptably high risk of undercompensa-
tion on the injured promisee”). Conversely, it is routine
for tort plaintiffs who have incurred non-economic
losses (such as physical injury) to seek and receive mone-
tary damages. Wigod has suffered no injury to person
34 No. 11-1423
or property. The harm she alleges is that Wells Fargo
did not restructure the terms of her mortgage and
thereby caused her to default. This is a purely economic
injury if ever we saw one. Wigod’s claim for negligent
hiring and supervision was properly dismissed.
D. Fraud Claims
Illinois courts expressly recognize an exception to the
Moorman doctrine “where the plaintiff’s damages are
proximately caused by a defendant’s intentional, false
representation, i.e., fraud.” Catalan, 629 F.3d at 693, quoting
First Midwest Bank, N.A. v. Stewart Title Guaranty Co.,
843 N.E.2d 327, 333 (Ill. 2006); see also Stein v. D’Amico,
No. 86 C 9099, 1987 WL 4934, at *3 (N.D. Ill. June 5, 1987)
(applying fraud exception to Moorman doctrine for claim
of fraudulent concealment). Because of this exception,
the economic loss doctrine does not bar Wigod’s claim
for fraudulent misrepresentation. She has adequately
pled the elements of fraudulent misrepresentation but
not fraudulent concealment.
1. Fraudulent Misrepresentation
The elements of a claim of fraudulent misrepresenta-
tion in Illinois are:
(1) [a] false statement of material fact (2) known or
believed to be false by the party making it; (3) intent to
induce the other party to act; (4) action by the other
party in reliance on the truth of the statement; and
No. 11-1423 35
(5) damage to the other party resulting from
that reliance.
Dloogatch v. Brincat, 920 N.E.2d 1161, 1166 (Ill. App. 2009),
quoting Soules v. General Motors Corp., 402 N.E.2d 599,
601 (Ill. 1980). Under the heightened federal pleading
standard of Rule 9(b) of the Federal Rules of Civil Pro-
cedure, a plaintiff “alleging fraud . . . must state with
particularity the circumstances constituting fraud.” See
Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507
(7th Cir. 2007) (“This heightened pleading requirement
is a response to the great harm to the reputation of a
business firm or other enterprise a fraud claim can do.”)
(internal quotation marks omitted). We have sum-
marized the particularity requirement as calling for the
first paragraph of any newspaper story: “the who,
what, when, where, and how.” E.g., Windy City Metal
Fabricators & Supply, Inc. v. CIT Technology Financing
Services, Inc., 536 F.3d 663, 668 (7th Cir. 2008).
Wigod’s complaint satisfies that standard. She identifies
the knowing misrepresentation as Wells Fargo’s state-
ment in the TPP that it would offer her a permanent
modification if she complied with the terms and condi-
tions of the TPP. She also alleges that Wells Fargo
intended that she would act in reliance on promises it
made in the TPP and that she reasonably did so to her
detriment. Fraudulent intent may be alleged generally,
see Fed. R. Civ. P. 9(b), so the only element seriously
at issue on the pleadings is reasonable reliance.
The district court held that “Wigod could not rea-
sonably have relied on” the TPP’s promise of a
36 No. 11-1423
permanent modification because this “would have re-
quired her to ignore the remainder of the contract which
required her to meet all of HAMP’s requirements.” We
disagree. Under Illinois law, justifiable reliance exists
when it was “reasonable for plaintiff to accept de-
fendant’s statements without an independent inquiry or
investigation.” InQuote Corp. v. Cole, No. 99-cv-6232, 2000
WL 1222211, at *3 (N.D. Ill. Aug. 24, 2000); see Teamsters
Local 282 Pension Trust Fund v. Angelos, 839 F.2d 366,
371 (7th Cir. 1988) (“the crucial question is whether
the plaintiff’s conduct was so unreasonable under the
circumstances and ‘in light of the information open to
him, that the law may properly say that this loss is his
own responsibility’ ”), quoting Chicago Title & Trust Co. v.
First Arlington Nat’l Bank, 454 N.E.2d 723, 729 (Ill. App.
1983). As explained above, the TPP as a whole supports
Wigod’s reading of it to require Wells Fargo to offer her
a permanent modification once it determined she was
qualified and sent her an executed copy, and she
satisfied the conditions precedent. Based on the
pleadings, we cannot say that her alleged reliance on
Wells Fargo’s promise was objectively unreasonable.
Wigod’s fraudulent misrepresentation claim at first
seems vulnerable on other grounds, however, since it
represents a claim of promissory fraud — that is, a “false
statement of intent regarding future conduct,” as opposed
to a false statement of existing or past fact. Association
Benefit Services, Inc., 493 F.3d at 853. Promissory fraud
is “generally not actionable” in Illinois “unless the
plaintiff also proves that the act was a part of a scheme
to defraud.” Id., citing Bradley Real Estate Trust v. Dolan
No. 11-1423 37
Associates, Ltd., 640 N.E.2d 9, 12-13 (Ill. App. 1994). But
this “scheme exception” is broad — so broad it “tends to
engulf and devour” the rule. Stamatakis Industries, Inc. v.
King, 520 N.E.2d 770, 772 (Ill. App. 1987). To invoke
the scheme exception, the plaintiff must allege and then
prove that, at the time the promise was made, the defen-
dant did not intend to fulfill it. Bower v. Jones, 978
F.2d 1004, 1011 (7th Cir. 1992) (“In order to survive the
pleading stage, a claimant must be able to point
to specific, objective manifestations of fraudulent in-
tent — a scheme or device. If he cannot, it is in effect
presumed that he cannot prove facts at trial entitling him
to relief.”), quoting Hollymatic Corp. v. Holly Systems, Inc.,
620 F. Supp. 1366, 1369 (N.D. Ill. 1985). Such evidence
would include a “a pattern of fraudulent statements, or
one particularly egregious fraudulent statement.” BPI
Energy Holdings, Inc. v. IEC (Montgomery), LLC, 664
F.3d 131, 136 (7th Cir. 2011) (internal citations omitted).
Wigod alleges that she was a victim of a scheme to
defraud: in her complaint, she accuses Wells Fargo of
deliberately implementing a “system designed to wrong-
fully deprive its eligible HAMP borrowers of an oppor-
tunity to modify their mortgages.” Compl. ¶ 8. Whether
she has alleged “specific, objective manifestations” of
this scheme is a closer question, but we think it likely
that Illinois courts would say yes.
The scheme alleged here does not rest solely on Wells
Fargo’s single broken promise to Wigod. She claims
that thousands of HAMP-eligible homeowners became
victims of Wells Fargo’s “intentional and systematic
38 No. 11-1423
failure to offer permanent loan modifications” after
falsely telling them it would. Compl. ¶ 1. Illinois courts
have found as few as two broken promises enough
to establish a scheme to defraud. See, e.g., General Elec-
tric Credit Auto Lease, Inc. v. Jankuski, 532 N.E.2d
361, 381-83 (Ill. App. 1988) (finding that plaintiffs pled
fraudulent scheme by alleging that auto dealership
falsely promised that (1) the “holding agreement” executed
with plaintiffs would be cancelled once their son signed
a lease for the vehicle; and (2) the son could cancel his
lease if he was later transferred overseas); Stamatakis
Industries, 520 N.E.2d at 772-74 (holding that plaintiff
properly pled a scheme to defraud by alleging that de-
fendant broke his promises to (1) make good on a con-
tract for the purchase of equipment; and (2) enter into
an employment contract for five years with a covenant
not to compete). But see Doherty v. Kahn, 682 N.E.2d
163 (Ill. App. 1997) (holding that plaintiff did not plead
scheme to defraud by alleging that defendant’s broken
promises that (1) plaintiff would be president of company,
(2) own 65 percent of the stock, and (3) earn a specified
monthly salary). In another case, the Illinois Supreme
Court found that a single false promise made to the
public at large satisfied the scheme exception to the
general rule against promissory fraud. See Steinberg v.
Chicago Medical School, 371 N.E.2d 634, 641 (Ill. 1977)
(finding a scheme to defraud alleged against a medical
school that promised in its catalog to evaluate and
admit applicants based on merit when in fact the
school intended to make decisions based on monetary
contributions). Wigod alleges that Wells Fargo made
No. 11-1423 39
and broke promises of permanent modifications to her
and to thousands of other potential class members as
well. If true, such a widespread pattern of deception
could reasonably be considered a scheme under Illinois
law and thus actionable as promissory fraud. See
HPI Health Care Services v. Mount Vernon Hospital,
Inc., 545 N.E.2d 672, 682 (Ill. 1989); Steinberg, 371 N.E.2d
at 641.
2. Fraudulent Concealment
The heightened pleading standard of Rule 9(b) also
applies to fraudulent concealment claims. To plead this
tort properly, in addition to meeting the elements of
fraudulent misrepresentation, a plaintiff must allege
that the defendant intentionally omitted or concealed a
material fact that it was under a duty to disclose to the
plaintiff. Weidner v. Karlin, 932 N.E.2d 602, 605 (Ill. App.
2010). A duty to disclose would arise if “plaintiff and
defendant are in a fiduciary or confidential relationship”
or in a “situation where plaintiff places trust and confi-
dence in defendant, thereby placing defendant in a posi-
tion of influence and superiority over plaintiff.” Connick
v. Suzuki Motor Co., 675 N.E.2d 584, 593 (Ill. 1996).
Wigod alleges that Wells Fargo knowingly concealed
that it would (1) report her to credit rating agencies as
being in default on her mortgage; and (2) reevaluate
her eligibility for a permanent modification in contra-
vention of HAMP directives. The district court dis-
missed this fraudulent concealment claim due to “the
absence of any fiduciary or other duty to speak” on the
40 No. 11-1423
part of Wells Fargo as a mortgagee. See Graham v. Midland
Mortg. Co., 406 F. Supp. 2d 948, 953 (N.D. Ill. 2005) (“A
mortgagor-mortgagee relationship does not create a
fiduciary relationship as a matter of law.”), quoting
Teachers Ins. & Annuity Ass’n of America v. LaSalle Nat’l
Bank, 691 N.E.2d 881, 888 (Ill. App. 1998). In the district
court, Wigod apparently conceded that Wells Fargo was
not a fiduciary under Illinois law, but she argued that
she placed a special trust and confidence in the bank as
her HAMP servicer. The district court rejected this
theory on the ground that any special trust relation-
ship between Wigod and Wells Fargo existed solely
through the lender’s participation in HAMP, which does
not provide the borrower with a private right of action.
For two reasons, we affirm the dismissal of the fraudu-
lent concealment claim. First, Wigod’s special trust argu-
ment is waived: in this appeal, Wigod raised the issue
only in her reply brief, and arguments raised for the
first time in a reply brief are waived. Padula v. Leimbach,
656 F.3d 595, 605 (7th Cir. 2011). Second, even if we over-
looked the waiver, we would agree with the district
court that no special trust relationship existed here. Wells
Fargo’s participation in HAMP is not sufficient to create
a special trust relationship with Wigod and the roughly
250,000 other homeowners with whom it entered TPP
Agreements. The Illinois Appellate Court has recently
stated that the standard for identifying a special trust
relationship is “extremely similar to that of a fiduciary
relationship.” Benson v. Stafford, 941 N.E.2d 386, 403 (Ill.
App. 2010).
No. 11-1423 41
Accordingly, state and federal courts in Illinois have
rarely found a special trust relationship to exist in the
absence of a more formal fiduciary one. See, e.g., Go For
It, Inc. v. Aircraft Sales Corp., No. 02 C 6158, 2003 WL
21504600, at *2 (N.D. Ill. June 27, 2003) (finding no con-
fidential relationship in sale of airplane because “the
parties’ relationship did not possess sufficient indicia
of disparity in experience or knowledge such that de-
fendants could be said to have gained influence and
superiority over the plaintiff,” since “a slightly dominant
business position does not operate to turn a formal,
contractual relationship into a confidential or fiduciary
relationship”); Benson, 941 N.E.2d at 403 (declining to
find special trust relationship between options traders
who had formed joint ventures because the plaintiffs
alleging fraud could not show “that they trusted defen-
dant” or that the defendant was in “a position of influence
and superiority”); Martin v. State Farm Mutual Auto. Ins.
Co., 808 N.E.2d 47, 52 (Ill. App. 2004) (finding that
holders of automobile insurance policy did not have a
special trust relationship with their insurer because
“[t]here are no allegations of a history of dealings or
long-standing relationship between the parties, or that
plaintiffs had entrusted the handling of their insurance
affairs to State Farm in the past, or that State Farm was in
a position of such superiority and influence by reason of
friendship, agency, or experience”); Miller v. William
Chevrolet/GEO, Inc., 762 N.E.2d 1, 13-14 (Ill. App. 2001)
(holding that the “arms length transaction” between a
car dealer and a prospective customer “did not give rise
to a confidential relationship sufficient to impose a
42 No. 11-1423
general duty of disclosure under the fairly rigorous
principles of common law” because “this dealer-cus-
tomer relationship did not possess sufficient indicia
of disparity in experience or knowledge such that
the dealer could be said to have gained influence and
superiority over the purchaser.”). But see Schrager v. North
Community Bank, 767 N.E.2d 376, 386 (Ill. App. 2002)
(finding, despite absence of fiduciary relationship, that
special trust relationship existed between the plaintiff,
an investor in a real estate venture, and the defendant
bank who had induced the plaintiff to invest, “because
defendants’ superior knowledge and experience of [the
developers’ problematic] financial history, as well as
the status of the . . . development project, including the
necessity of a fresh guarantor, placed defendants in
a position of influence over” the plaintiff).
The special relationship threshold is a high one: “the
defendant must be ‘clearly dominant, either because
of superior knowledge of the matter derived from . . .
overmastering influence on the one side, or from weak-
ness, dependence, or trust justifiably reposed on the
other side.’ ” Miller, 762 N.E.2d at 13 (internal quotation
marks omitted), quoting Mitchell v. Norman James Con-
struction Co., 684 N.E.2d 872, 879 (Ill. App. 1997). As
the Mitchell court explained:
Factors to be considered in determining the existence
of a confidential relationship include the degree
of kinship of the parties; any disparity in age, health,
and mental condition; differences in education and
business experience between the parties; and the
No. 11-1423 43
extent to which the allegedly servient party en-
trusted the handling of her business affairs to the
dominant party, and whether the dominant party
accepted such entrustment.
684 N.E.2d at 879. In short, the defendant accused of
fraudulent concealment must exercise “overwhelming
influence” over the plaintiff. Miller, 762 N.E.2d at 14.
In light of the weight of Illinois authority, Wells
Fargo’s role as a HAMP servicer was not sufficient to find
a special trust relationship with Wigod with respect
to negotiating any modification. She claims that “HAMP
requires servicers to provide borrowers with informa-
tion to help them ‘understand the modification terms’
and to ‘minimize potential borrower confusion,’ ” and
that she “relied on Wells Fargo to convey accurate infor-
mation about the Program.” Reply Br. at 33. That may
be so, but asymmetric information alone does not show
the degree of dominance needed to establish a special
trust relationship. See Miller, 762 N.E.2d at 13-14. Other-
wise, virtually any mortgage lender would have a
special trust relationship with its borrowers, regardless
of HAMP participation — a proposition Illinois courts
have clearly rejected. See, e.g., id., 762 N.E.2d at 14
(“Like the conventional mortgagor-mortgagee relation-
ship that the Mitchell court found to fall short of a confi-
dential relationship, this dealer-customer relationship
did not possess sufficient indicia of disparity in ex-
perience or knowledge such that the dealer could be
said to have gained influence and superiority over the
purchaser.”); Mitchell, 684 N.E.2d at 879 (“As a matter
44 No. 11-1423
of law, a conventional mortgagor-mortgagee relation-
ship standing alone does not give rise to a fiduciary or
confidential relationship.”).1 0 The HAMP modification
is an arm’s-length transaction between servicer and
borrower, no less than is a home mortgage loan itself. By
becoming Wigod’s HAMP servicer, Wells Fargo did
not assume significant additional responsibility for han-
dling Wigod’s business affairs. Like the original mort-
gagor-mortgagee relationship itself, the relevant aspects
of the HAMP servicer-borrower relationship do not
bear the fiduciary-like hallmarks of a special trust rela-
tionship under Illinois law. We affirm the dismissal
of Wigod’s fraudulent concealment claim.
E. Negligent Misrepresentation or Concealment
In the alternative to her fraudulent misrepresenta-
tion and concealment claims, Wigod alleges that Wells
Fargo negligently or carelessly (rather than intentionally)
misrepresented or omitted material facts. Negligent
10
Illinois recognizes that a mortgagee owes a fiduciary duty
to a mortgagor in some narrow aspects of the relationship, such
as when the mortgagor retains control of borrowed money to
pay expenses as an agent for the mortgagor, such as title
insurance costs, as in Janes v. First Federal Savings and Loan
Ass’n of Berwyn, 312 N.E.2d 605, 610-11 (Ill. 1974). See also
Orman v. Charles Schwab & Co., 688 N.E.2d 620, 621 (Ill. 1997).
Wigod’s claim does not implicate those aspects of the rela-
tionship where the mortgagee acts as an agent for the
mortgagor-principal and has a fiduciary duty to the mortgagor.
No. 11-1423 45
misrepresentation involves the same elements as fraudu-
lent misrepresentation, except that (1) the defendant
need not have known that the statement was false,
but must merely have been negligent in failing to
ascertain the truth of his statement; and (2) the defendant
must have owed the plaintiff a duty to provide accurate
information. See Kopley Group V., L.P. v. Sheridan Edge-
water Properties, Ltd., 876 N.E.2d 218, 228 (Ill. App. 2007).1 1
Whether or not Wigod has successfully pled the
elements of negligent misrepresentation and conceal-
ment, this claim is also barred by the economic loss doc-
trine. Any duty Wells Fargo may have had to provide
accurate information to Wigod arose directly from their
11
There is a dearth of Illinois case law on negligent conceal-
ment, and we can identify no cases that actually set forth the
elements of the tort. One state appellate judge has denied that
it is a distinct cause of action, at least in the context of contractor
liability. See Moore v. Everett Snodgrass, Inc., 408 N.E.2d 1166,
1172 (Ill. App. 1980) (Stouder, J., concurring in part and dis-
senting in part) (“it is obvious that merely negligent conceal-
ment, without some type of fraud or intent to deceive, is not
enough to make the contractor liable”). Nevertheless, the
Illinois courts do appear to accept it, at least in theory, even
if its contours remain nebulous. See id. at 1170 (majority opin-
ion). We assume the elements of negligent concealment
are equivalent to those of a negligent misrepresentation
claim, meaning the defendant must have negligently — but not
intentionally — failed to disclose a material fact, and that he
also must have owed some duty to the plaintiff to disclose
it (which is also a requirement of the fraudulent conceal-
ment tort).
46 No. 11-1423
commercial and contractual relationship. Wigod is right
that HAMP requires servicers to help borrowers under-
stand the modification terms. But this obligation is not
owed to the general public — only to mortgagors in the
HAMP modification process. If Wells Fargo had such
obligations to Wigod, then, it was only because it
executed a TPP agreement with her under HAMP. Any
disclosure duties owed here are contractual ones
and therefore do not sound in the torts of negligent
misrepresentation or negligent concealment. We affirm
the dismissal of these claims, and proceed to Wigod’s
final cause of action.1 2
F. The Illinois Consumer Fraud and Deceptive Business
Practices Act (ICFA)
The ICFA protects consumers against “unfair or decep-
tive acts or practices,” including “fraud,” “false promise,”
and the “misrepresentation or the concealment, suppres-
sion or omission of any material fact.” 815 ILCS 505/2.
The Act is “liberally construed to effectuate its purpose.”
12
The same analysis of course would apply to Wigod’s claim
for fraudulent concealment, which also requires the existence
of a duty to disclose. But recall that the Moorman doctrine
admits an exception for claims alleging fraud. This excep-
tion saves the fraudulent concealment claim but not the negli-
gent misrepresentation or concealment claim. See, e.g.,
Orix Credit Alliance, Inc. v. Taylor Machine Works, Inc., 125 F.3d
468, 475-77 (7th Cir. 1997) (applying Moorman doctrine to
bar claim for negligent misrepresentation).
No. 11-1423 47
Robinson v. Toyota Motor Credit Corp., 775 N.E.2d 951,
960 (Ill. 2002). The elements of a claim under the ICFA
are: “(1) a deceptive or unfair act or practice by the de-
fendant; (2) the defendant’s intent that the plaintiff rely
on the deceptive or unfair practice; and (3) the unfair or
deceptive practice occurred during a course of conduct
involving trade or commerce.” Siegel v. Shell Oil Co., 612
F.3d 932, 934 (7th Cir. 2010), citing Robinson, 775 N.E.2d
at 960. In addition, “a plaintiff must demonstrate that
the defendant’s conduct is the proximate cause of the
injury.” Id. at 935.
Wigod accuses Wells Fargo of practices that are both
deceptive and unfair. In her complaint, Wigod in-
corporates by reference her common-law fraud claims,
alleging that Wells Fargo’s misrepresentation and conceal-
ment of material facts constituted deceptive busi-
ness practices. Compl. ¶¶ 123-25. She also alleges that
Wells Fargo dishonestly and ineffectually implemented
HAMP, and that this conduct constituted “unfair, im-
moral, unscrupulous business practices.” Compl. ¶ 126.
The district court dismissed Wigod’s ICFA claim on
two grounds: first, because Wigod did not allege that
Wells Fargo acted with an intent to deceive her; and
second, because Wigod did not plausibly plead that
Wells Fargo’s conduct caused her any actual pecuniary
injury. On both points, we disagree.
First, “intent to deceive” is not a required element of a
claim under the ICFA, which provides redress “not only
for deceptive business practices, but also for business
practices that, while not deceptive, are unfair.” Boyd v.
48 No. 11-1423
U.S. Bank, N.A. ex rel. Sasco Aames Mortg. Loan Trust Series
2003-1, 787 F. Supp. 2d 747, 751 (N.D. Ill. 2011) (holding
that a loan servicer’s alleged failure to consider the plain-
tiff’s eligibility for a HAMP modification was a suf-
ficient predicate for an ICFA claim); see 815 ILCS 505/2
(“[U]nfair or deceptive acts or practices . . . are hereby
declared unlawful . . . .”) (emphasis added); Siegel,
612 F.3d at 934-35 (“A plaintiff may allege that conduct
is unfair under ICFA without alleging that the conduct is
deceptive.”), citing Saunders v. Michigan Ave. Nat’l Bank,
662 N.E.2d 602, 608 (Ill. App. 1996). Wigod alleges that
Wells Fargo engaged in both deceptive (fraudulent) and
unfair business practices. Moreover, even if she had
alleged only deceptive practices, pleading intent would
still be unnecessary, since a “claim for ‘deceptive’
business practices under the Consumer Fraud Act does
not require proof of intent to deceive.” Siegel v. Shell Oil
Co., 480 F. Supp. 2d 1034, 1044 n.5 (N.D. Ill. 2007), aff’d,
612 F.3d 932.13 It is enough to allege that the defendant
13
Accord Chow v. Aegis Mortg. Corp., 286 F. Supp. 2d 956, 963
(N.D. Ill. 2003) (“To satisfy [the ICFA’s] intent requirement,
plaintiff need not show that defendant intended to deceive
the plaintiff, but only that the defendant intended the plaintiff
to rely on the (intentionally or unintentionally) deceptive
information given.”); Capiccioni v. Brennan Naperville, Inc., 791
N.E.2d 553, 558 (Ill. App. 2003) (“A defendant need not have
intended to deceive the plaintiff; innocent misrepresentations
or omissions intended to induce the plaintiff’s reliance are
actionable under [the ICFA].”); Grove v. Huffman, 634 N.E.2d
(continued...)
No. 11-1423 49
committed a deceptive or unfair act and intended that
the plaintiff rely on that act, and Wigod has done so.
The district court also concluded that Wigod did not
identify any “actual pecuniary loss” that she suffered.
Because Wigod’s reduced trial plan payments were less
than the amount she was legally obliged to pay Wells
Fargo under the terms of her original loan documents,
the court reasoned that Wigod was better off than she
would have been without the TPP. This reasoning over-
looks Wigod’s allegations that she incurred costs and fees,
lost other opportunities to save her home, suffered a
negative impact to her credit, never received a Modifi-
cation Agreement, and lost her ability to receive incen-
tive payments during the first five years of the modifica-
tion. Prior to entering the trial plan, Wigod also
could have taken the path of “efficient breach” and de-
faulted immediately rather than executing the TPP and
making trial payments. By the time Wigod realized
she would not receive the permanent modification she
believed she had been promised, late fees had mounted
and she found herself in default on her loan and with
fewer options than when the trial period began. Whether
any of these alternatives might have saved her home, or
13
(...continued)
1184, 1188 (Ill. App. 1994) (“Courts of this State have consis-
tently held that [the ICFA] applies to innocent misrepresenta-
tions.”); Duran v. Leslie Oldsmobile, Inc., 594 N.E.2d 1355, 1361
(Ill. App. 1992) (“The Consumer Fraud Act eliminated the
requirement of scienter, and innocent misrepresentations
are actionable as statutory fraud.”).
50 No. 11-1423
at least cut her losses, is impossible to determine from
the pleadings. Her allegations are at least plausible. She
has alleged pecuniary injury caused by Wells Fargo’s
deception and successfully pled the elements of an ICFA
violation. Accord Boyd, 787 F. Supp. 2d at 754 (allegations
of “damage to [homeowner’s] credit” and “the inability
‘to fairly negotiate a plan to stay in [his] home’ ” suffi-
ciently pled economic damages under the ICFA); In re
Bank of America Home Affordable Modification (HAMP)
Contract Litigation, No. 10-md-02193-RWZ, 2011 WL
2637222, at *5-6 (D. Mass. July 6, 2011) (multi-district
litigation) (denying motion to dismiss claims under
fourteen states, consumer protection acts, including the
ICFA).14
14
In a number of third-generation HAMP cases, district courts
have found that plaintiffs successfully pled claims under other
states’ analogous consumer fraud statutes. See, e.g., Allen v.
CitiMortgage, Inc., No. CCB-10-2740, 2011 WL 3425665, at *10
(D. Md. Aug. 4, 2011) (“The plaintiffs have alleged that
CitiMortgage’s misleading letters led to the following
damages: damage to Mrs. Allen’s credit score, emotional
damages, and forgone alternative legal remedies to save their
home. Accordingly, at this stage, the plaintiffs have stated
sufficiently an actual injury or loss as a result of a prohibited
practice under [the Maryland Consumer Protection Act].”);
Stagikas v. Saxon Mortg. Services, Inc., 795 F. Supp. 2d 129, 137
(D. Mass. 2011) (“The complaint also alleges several injuries
resulting from defendant’s allegedly deceptive representa-
tions about plaintiff’s HAMP eligibility, including increased
interest on the debt, a negative impact on plaintiff’s credit
(continued...)
No. 11-1423 51
III. Preemption and the “End-Run” Theory
We have now determined that Wigod has plausibly
stated four claims arising under state law: breach
of contract, promissory estoppel, fraudulent misrepre-
sentation, and violation of the ICFA. We next examine
whether federal law preempts or otherwise displaces
them. “Preemption can take on three different forms:
express preemption, field preemption, and conflict pre-
emption.” Aux Sable Liquid Products v. Murphy, 526 F.3d
1028, 1033 (7th Cir. 2008). Wells Fargo concedes that
Wigod’s claims are not expressly preempted, but argues
for both field preemption and conflict preemption. Wells
Fargo also advances the novel theory that Wigod’s
claims are displaced because they attempt an “end-run”
on the lack of a private right of action under HAMP
itself. We reject this “end-run” theory, along with Wells
Fargo’s formal preemption arguments. Federal law does
not displace Wigod’s state-law claims.
A. Field Preemption
In all preemption cases, “we start with the assumption
that the historic police powers of the States were not to
be superseded by the Federal Act unless that was the
14
(...continued)
history, and the loss of other economic benefits of the loan
modification. That is enough to sustain a claim of injury under
[the Massachusetts Consumer Protection Act].”) (internal
citation omitted).
52 No. 11-1423
clear and manifest purpose of Congress.” Wyeth v. Levine,
555 U.S. 555, 565 (2009) (internal quotation marks omit-
ted), quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 485
(1996). Under the doctrine of field preemption, however,
a state law is preempted “if federal law so thoroughly
occupies a legislative field ‘as to make reasonable the
inference that Congress left no room for the States to
supplement it.’ ” Cipollone v. Liggett Group, Inc., 505
U.S. 504, 516 (1992) (internal quotation marks omitted),
quoting Fidelity Federal Savings & Loan Ass’n v. De la Cuesta,
458 U.S. 141, 153 (1982).
Wells Fargo argues that the Home Owners Loan Act
(HOLA) occupies the relevant field. Enacted to provide
emergency relief from massive home loan defaults
during the Great Depression, HOLA “empowered what
is now the Office of Thrift Supervision [OTS] in the Trea-
sury Department to authorize the creation of federal
savings and loan associations, to regulate them, and by
its regulations to preempt conflicting state law.” In re
Ocwen Loan Servicing, LLC Mortg. Servicing Litigation,
491 F.3d 638, 642 (7th Cir. 2007). In one of its regulations,
OTS announced that it “hereby occupies the entire field
of lending regulation for federal savings associations.”
12 C.F.R. § 560.2(a). In the same section, however, the
regulation contains the following saving clause: state
tort, contract, and commercial laws are “not preempted
to the extent that they only incidentally affect the
lending operations of Federal savings associations or are
otherwise consistent with the purposes of paragraph (a) of
this section.” 12 C.F.R. § 560.2(c). Read together, these
provisions mean that state laws that establish licensing,
No. 11-1423 53
registration, or other requirements specific to financial
institutions cannot be applied to national banks, while
laws of general applicability survive preemption so
long as they do not effectively impose standards that
conflict with federal ones. Cf. Watters v. Wachovia Bank,
N.A., 550 U.S. 1, 11 (2007) (“Federally chartered banks
are subject to state laws of general application in their
daily business to the extent such laws do not conflict with
the letter or the general purposes of [federal banking
law].”) (analyzing preemption under the National Bank
Act, which is applied analogously to HOLA).1 5
Arguing for field preemption, Wells Fargo contends
that HOLA and the corresponding OTS regulations
displace state common-law suits that effectively im-
pose any standards for the processing and servicing of
mortgage loans, whether they conflict with federal
policy or not. This argument is directly at odds with the
saving clause of 12 C.F.R. § 560.2(c), and inconsistent
with our decision in Ocwen. There we noted that HOLA
gave OTS the “exclusive authority to regulate the
savings and loan industry in the sense of fixing fees
(including penalties), setting licensing requirements,
prescribing certain terms in mortgages, establishing
requirements for disclosure of credit information to
15
Regulations, as much as statutes, may have preemptive
force. See Wyeth, 555 U.S. at 576 (“This Court has recognized
that an agency regulation with the force of law can pre-empt
conflicting state requirements.”); De la Cuesta, 458 U.S. at 153
(“Federal regulations have no less pre-emptive effect than
federal statutes.”).
54 No. 11-1423
customers, and setting standards for processing and
servicing mortgages.” 491 F.3d at 643. Despite its reg-
ulatory authority, however, OTS “has no power to adjudi-
cate disputes between [savings and loan associations]
and their customers,” and “HOLA creates no private
right to sue to enforce the provisions of the statute or
the OTS’s regulations.” Id. “Against this background of
limited remedial authority,” we held that HOLA and
the OTS regulations did not preempt suits by “per-
sons harmed by the wrongful acts of savings and loan
associations” seeking “basic state common-law-type
remedies,” and we allowed state-law claims like those
in this case — breach of contract, fraud, and violation of
consumer protection statutes — to go forward. Id. Some
federal statutes do receive such wide berths as to
displace virtually all state laws in the neighborhood. (The
National Labor Relations Act and ERISA are the best
examples.) Such laws are “exceptional,” though, and
HOLA is not one of them. Id. at 644. Ocwen thus stands
for the principle that HOLA preempts generally
applicable state laws only when they “could interfere
with federal regulation” — that is, those that actually
conflict with the regulatory program. Id. at 646. We
decline to disturb this holding, which forecloses
Wells Fargo’s argument for field preemption.
B. Conflict Preemption
The Supreme Court has “found implied conflict
pre-emption where” either (1) “it is impossible for a
private party to comply with both state and federal re-
No. 11-1423 55
quirements,” or (2) “where state law stands as an
obstacle to the accomplishment and execution of the
full purposes and objectives of Congress.” Freightliner
Corp. v. Myrick, 514 U.S. 280, 287 (1995) (internal quotation
marks omitted). Wells Fargo does not contend that
it would be impossible, without violating federal law,
for it to comply with the state-law duties Wigod’s suit
seeks to impose. Instead, it invokes the second species
of conflict preemption, which is known as “obstacle”
preemption. Wells Fargo says that entertaining Wigod’s
state-law claims here would undermine the purposes
of Congress in two ways: First, it would “substantially
interfere with Wells Fargo’s ability to service residential
mortgage loans” in accordance with HOLA and OTS
regulations.16 Second, it would “frustrate Congressional
objectives in enacting [the 2008 Act] . . . to stabilize the
economy and provide a program to mitigate ‘avoidable’
foreclosures.”
The first argument for obstacle preemption, like Wells
Fargo’s theory of field preemption, is inconsistent with
Ocwen. There we held that the plaintiff-mortgagors’
“conventional” state law claims against a federal savings
and loan association for breach of contract, fraud, and
deceptive business practices complemented rather than
conflicted with HOLA:
Suppose an S & L signs a mortgage agreement with
a homeowner that specifies an annual interest rate of
16
In Wells Fargo’s brief, this argument appears in the section
on field preemption. Because in substance it is an argument
for conflict preemption, we address it here.
56 No. 11-1423
6 percent and a year later bills the homeowner at a
rate of 10 percent and when the homeowner refuses
to pay institutes foreclosure proceedings. It would
be surprising for a federal regulation to forbid the
homeowner’s state to give the homeowner a defense
based on the mortgagee’s breach of contract. Or if
the mortgagee . . . fraudulently represents to the
mortgagor that it will forgive a default, and then
forecloses, it would be surprising for a federal regula-
tion to bar a suit for fraud. . . . Enforcement of state
law in either of the mortgage-servicing examples
above would complement rather than substitute for
the federal regulatory scheme.
Ocwen, 491 F.3d at 643-44. In our attempt to untangle in
that case the complaint’s “gallimaufry” of alleged “skull-
duggery,” we distinguished claims asserting “conven-
tional” misrepresentation or breach of contract (which
were not preempted) from those that would have effec-
tively imposed state-law rules governing mortgage ser-
vicing and thereby “interfere[d] with federal regulation
of disclosure, fees, and credit terms” (which were pre-
empted). Id. at 644-46. Thus a claim under Connecticut’s
consumer protection statute alleging “exorbitant and
usurious mortgages” was preempted, while “straight
fraud claims” arising under both state common-law and
consumer fraud statutes were not preempted. Id. at 647
(internal quotation mark omitted).
Wells Fargo appears to concede, as it must in light of
Ocwen, that HOLA does not preempt Wigod’s breach
of contract claim or her common-law fraudulent represen-
No. 11-1423 57
tation claim. Wells Fargo nevertheless maintains that
conflict preemption principles bar Wigod’s ICFA claims,
attempting to distinguish Ocwen by arguing that these
claims “would necessarily establish new standards for
servicers’ customer relation policies.” The argument
is not persuasive. The gist of Wigod’s ICFA claims
is that Wells Fargo failed to disclose that it was going
to reevaluate her eligibility for a permanent modifica-
tion — contrary to the terms of both her TPP and HAMP
program guidelines — and that it deceived her into
believing it would modify her mortgage. Allowing these
claims to proceed against Wells Fargo would not create
state-law duties for servicing home mortgages, let alone
ones that “actually conflict” with HOLA “or federal
standards promulgated thereunder.” See Geier v.
American Honda Motor Co., 529 U.S. 861, 869 (2000). In
Ocwen, we found that the “straight fraud claims” arising
under various state consumer protection statutes were
not subject to conflict preemption under HOLA.
491 F.3d at 644-45, 647. Here, too, Wigod’s ICFA
claims “sound[ ] like conventional fraud charge[s],” the
prosecution of which appears perfectly consistent with
federal mortgage rules. Id. at 645. HOLA does not
preempt them.
Wells Fargo’s second conflict preemption theory is that
a finding of liability in Wigod’s suit would frustrate
Congressional objectives in enacting the 2008 Act that
authorized HAMP. Wells Fargo argues that claims
like Wigod’s would generate such friction in three
ways: First, they would force servicers to modify mort-
58 No. 11-1423
gages in violation of both Treasury directives and the
servicers’ contractual obligations to the government.
Second, they would invite many uncoordinated law-
suits, exposing servicers to varying standards of con-
duct. Third, they would discourage servicers from partici-
pating in HAMP. The arguments are not persuasive.
The first theory is inapplicable because none of Wigod’s
claims, at least as she has framed them, would impose
on Wells Fargo any duties that go beyond its existing
obligations under HAMP. As Wigod puts it, “if Wells
Fargo followed the letter of the Program it would not
have breached its contracts, acted negligently or fraudu-
lently, or violated the ICFA.” The whole thrust of this
suit is that Wells Fargo failed to do what it agreed to do
and what HAMP required it to do. The breach of contract
and fraudulent misrepresentation claims allege that
the TPP Agreement required Wells Fargo to offer Wigod
a modification if she qualified under HAMP — and that
she did and it didn’t.
One Wells Fargo defense, among others, will be that
Wigod was not actually qualified, but that presents a
factual dispute that cannot be resolved now. Likewise,
the ICFA claim alleges that Wells Fargo failed to
disclose that it would not follow HAMP guidelines.
Again, it would be a complete defense that Wells Fargo
did follow HAMP guidelines as they were incorporated
into the terms of Wigod’s TPP, but that also presents
a factual issue. For each of these claims, the state-law
duty allegedly breached is imported from and delimited
by federal standards established in HAMP’s program
No. 11-1423 59
guidelines. Where federal law supplies the standard of
care imposed by state law, it is hard to see how they
could conflict. See, e.g., Bates v. Dow Agrosciences LLC, 544
U.S. 431, 448 (2005) (“a state cause of action that seeks
to enforce a federal requirement ‘does not impose a
requirement that is different from, or in addition to,
requirements under federal law.’ ”) (internal quotation
marks omitted), quoting Lohr, 518 U.S. at 513 (O’Connor, J.,
concurring in part and dissenting in part); Lohr, 518
U.S. at 495 (majority opinion) (“Nothing . . . denies
Florida the right to provide a traditional damages
remedy for violations of common-law duties when those
duties parallel federal requirements.”); Bausch v. Stryker
Corp., 630 F.3d 546, 556 (7th Cir. 2010) (holding that
the Food, Drug, and Cosmetic Act did not preempt the
plaintiff’s tort claims against medical device manu-
facturer because the state tort duty allegedly breached
was parallel to FDA regulations promulgated under
the Act; “claims are not . . . preempted by federal law to
the extent they are based on defendants’ violations of
federal law”).
For the same reason, we do not foresee any possibility
that permitting suits such as Wigod’s will expose
mortgage servicers to multiple and varied standards of
conduct. So long as state laws do not impose substantive
duties that go beyond HAMP’s requirements, loan
servicers need only comply with the federal program to
avoid incurring state-law liability. This is not a case in
which the federal requirements leave much room for
interpretation, but to the extent Wigod’s case hinges on
60 No. 11-1423
construing Treasury directives, they “present questions
of law for the court to decide, not questions of fact for
a jury to decide.” See Bausch, 630 F.3d at 556.
As for its contention that the potential exposure to
state liability may discourage servicers from par-
ticipating in HAMP, Wells Fargo may be right. But that
is hardly an argument for conflict preemption. “[T]he
purpose of Congress is the ultimate touchstone in every
pre-emption case.” Wyeth, 555 U.S. at 565, quoting Lohr,
518 U.S. at 485. “Because the States are independent
sovereigns in our federal system, we have long presumed
that Congress does not cavalierly pre-empt state-law
causes of action.” Bates, 544 U.S. at 449, also quoting Lohr,
518 U.S. at 485. We can reasonably assume that one pur-
pose of Congress in enacting the 2008 Act was to
ensure mortgage servicers participated in the fore-
closure mitigation programs it empowered Treasury to
set up. But another goal was surely to prevent these
banks from hoodwinking borrowers in the process. Noth-
ing in the 2008 Act suggests that Congress saw servicer
participation as the Act’s paramount purpose that would
trump any concerns about whether servicers were
actually complying with the program and with their
contractual obligations. See Rodriguez v. United States,
480 U.S. 522, 525-26 (1987) (“no legislation pursues its
purposes at all costs”). There is no indication that
Congress meant to foreclose suits against servicers for
violating state laws that impose obligations parallel
to those established in a federal program.
In addition, Treasury’s own HAMP directive states
that servicers must implement the program in com-
No. 11-1423 61
pliance with state common law and statutes. See Sup-
plemental Directive 09-01 (“Each servicer . . . must be
aware of, and in full compliance with, all federal state,
and local laws (including statutes, regulations, ordinances,
administrative rules and orders that have the effect of
law, and judicial rulings and opinions) . . . .”). This would
be an odd provision if Treasury had anticipated that
HAMP would preempt state-law claims, especially ones
that mirror its own directives. In this context, the
agency’s own tacit view of its program’s lack of preemp-
tive force is entitled to some weight. See Wyeth, 555 U.S.
at 577 (agencies “have a unique understanding of the
statutes they administer and an attendant ability to
make informed determinations about how state require-
ments may pose an ‘obstacle to the accomplishment
and execution of the full purposes and objectives of Con-
gress’ ”), quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941);
Geier, 529 U.S. at 883 (placing “some weight” on agency’s
interpretation of its own regulation’s objectives and
its conclusion “that a tort suit . . . would ‘stand as an
obstacle to the accomplishment and execution’ of those
objectives”) (internal citations and quotation marks
omitted).
C. The “End-Run” Theory
Finally, Wells Fargo insists that Wigod’s case cannot
go forward because her allegations are “HAMP claims
in disguise” and an “impermissible end-run around the
lack of a private action in [the 2008 Act] and HAMP.”
This “end-run” theory was the primary basis on which
62 No. 11-1423
the district court dismissed Wigod’s complaint. That
court explained that “ ‘the facts and allegations as
pleaded in this case are premised chiefly on the terms
and procedures set forth via HAMP and are not
sufficiently independent to state a separate state law
cause of action.’ ” Wigod, 2011 WL 250501, at *4, quoting
Vida v. One West Bank, F.S.B., No. 10-987-AC, 2010 WL
5148473, at *3-4 (D. Or. Dec. 13, 2010). Wells Fargo has
developed the same theory before this court, arguing:
“If Congress had intended courts to be adjudicating
whether a borrower qualified for a loan modification
under [the 2008 Act] or HAMP, it would have provided
a private right of action — but it chose not to do so.”
The end-run theory is built on the novel assumption
that where Congress does not create a private right of
action for violation of a federal law, no right of action
may exist under state law, either. Wells Fargo and the
district court appear to have conflated two distinct
lines of cases — one involving the existence of a federal
private right of action, see Touche Ross & Co. v. Redington,
442 U.S. 560 (1979), and the other about federal preemp-
tion of state law. Wells Fargo invokes Touche Ross for
the proposition that “when Congress wished to provide
a private damage remedy, it knew how to do so and did
so expressly.” Appellee’s Br. at 15, quoting Touche Ross,
442 U.S. at 572. If this case involved whether to recog-
nize a federal right of action under HAMP, Touche Ross
and its progeny would certainly weigh in favor of
judicial caution. See Karahalios v. Nat’l Federation of
Federal Employees, Local 1263, 489 U.S. 527, 533 (1989) (“It
is also an ‘elemental canon’ of statutory construction
No. 11-1423 63
that where a statute expressly provides a remedy,
courts must be especially reluctant to provide additional
remedies [under federal law].”), quoting Transamerica
Mortg. Advisors, Inc. v. Lewis, 444 U.S. 11, 19 (1979). The
issue here, however, is not whether federal law itself
provides private remedies, but whether it displaces
remedies otherwise available under state law. The
absence of a private right of action from a federal
statute provides no reason to dismiss a claim under a
state law just because it refers to or incorporates some
element of the federal law. See, e.g., Bates, 544 U.S. at 448
(“although [the Federal Insecticide, Fungicide, and
Rodenticide Act] does not provide a federal remedy to
farmers and others who are injured as a result of a manu-
facturer’s violation of FIFRA’s labeling requirements,
nothing in [the statute] precludes States from pro-
viding such a remedy”). To find otherwise would require
adopting the novel presumption that where Congress
provides no remedy under federal law, state law may not
afford one in its stead.
To appreciate the novelty of Wells Fargo’s argument,
consider the many cases in which the Supreme Court
has confronted issues of subject matter jurisdiction pre-
sented by state common-law claims that incorporate
federal standards of conduct, without so much as a peep
about whether state law may do so without being pre-
empted. See, e.g., Grable & Sons Metal Products, Inc. v. Darue
Engineering & Mfg., 545 U.S. 308, 312, 311, 315 (2005) (quiet
title action brought under state law “turn[ed] on substan-
tial question[ ] of federal law” because “the interpreta-
tion of the notice statute in the federal tax law” was
64 No. 11-1423
an “essential element of [plaintiff’s] quiet title claim);
Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S.
804, 805-07 (1986) (violation of federal labeling require-
ments in the Federal Food, Drug, and Cosmetic Act
created a rebuttable presumption of negligence and prox-
imate cause under state tort law); Moore v. Chesapeake
& Ohio Ry., 291 U.S. 205, 214-15 (1934) (Kentucky
worker’s compensation statute provided that employer
railroad’s violation of Federal Safety Appliance Acts
would constitute negligence per se under state law).
Of course, these well-known cases grappled with an
issue different from the one before this court: whether
the presence of a federal issue in a state-created cause
of action gives rise to federal question jurisdiction under
28 U.S.C. § 1331. In none of these cases has the
Supreme Court even suggested that the absence of a
private right of action under a federal statute would
prevent state law from providing a cause of action based
in whole or in part on violations of the federal law.
When the issue is whether “arising under” jurisdiction is
available, Congressional silence matters a great deal, for
our jurisdiction under § 1331 is determined by Congress.
See Merrell Dow, 478 U.S. at 812 (stating that it would
“undermine . . . congressional intent to . . . exercise fed-
eral-question jurisdiction and provide remedies for viola-
tions of [a] federal statute” that contains no private right
of action, “solely because the violation of the federal
statute” is an element of state law claim).
When the federal court’s jurisdiction over state-law
claims is based on diversity of citizenship, however, the
No. 11-1423 65
absence of a private right of action in a federal statute
actually weighs against preemption. See, e.g., Wyeth, 555
U.S. at 574 (“Congress did not provide a federal remedy
for consumers harmed by unsafe or ineffective drugs in
the 1938 statute or in any subsequent amendment. Evi-
dently, it determined that widely available state rights
of action provided appropriate relief for injured con-
sumers.”). We realize that Wells Fargo does not style
its “end-run” theory as a preemption argument. But in
the absence of any other doctrinal foundation for it, we
see no other way to classify it. As Judge Hibbler wrote
in one of the HAMP cases in which claims under
Illinois law survived a motion to dismiss,
[There is no] general rule that where a state common
law theory provides for liability for conduct that is
also violative of federal law, a suit under the state
common law is prohibited so long as the federal
law does not provide for a private right of action.
Indeed, it seems the only justification for such a
rule would be federal preemption of state law.
Fletcher v. OneWest Bank, FSB, No. 10 C 4682, 2011 WL
2648606, at *4 (N.D. Ill. June 30, 2011); see also Bosque,
762 F. Supp. 2d at 351 (“The fact that a TPP has a relation-
ship to a federal statute and regulations does not
require the dismissal of any state-law claims that arise
under a TPP.”). In short, a state-law claim’s incorpora-
tion of federal law has never been regarded as disabling,
whether the federal law has a private right of action or
not. See Grable & Sons, 545 U.S. at 318-19 (“The violation
of federal statutes and regulations is commonly given
66 No. 11-1423
negligence per se effect in state tort proceedings.”), quoting
Restatement (Third) of Torts § 14, Reporters’ Note, cmt. a,
p. 195 (Tent. Draft No. 1, Mar. 28, 2001); Merrell Dow,
478 U.S. at 816 (“violation of the federal standard as
an element of state tort recovery did not fundamentally
change the state tort nature of the action”); W. Keeton, D.
Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law
of Torts § 36, p. 221, n.9 (5th ed. 1984) (“the breach of
a federal statute may support a negligence per se claim
as a matter of state law”).
Wells Fargo has tried to find some support for its
end-run theory in two Second Circuit cases involving
very different statutes. In Grochowski v. Phoenix Construc-
tion, 318 F.3d 80 (2d Cir. 2003), a construction contract
between the City of New York and some general contrac-
tors required the latter to pay their laborers in ac-
cordance with the Davis-Bacon Act (DBA), a federal law
that accords no private right of action, at least under
Second Circuit precedent.1 7 The contractors did not do so,
and their laborers sued them under New York common
law for breach of contract as third-party beneficiaries.
The district court granted the contractors’ motion to
dismiss. A divided panel of the Second Circuit affirmed,
reasoning that “no private right of action exists under”
the DBA and that “the plaintiffs’ efforts to bring their
17
Compare Chan v. City of New York, 1 F.3d 96, 103 (2d Cir. 1993)
(holding that DBA confers no private right of action), with
McDaniel v. University of Chicago, 548 F.2d 689, 695 (7th Cir.
1977) (finding private right of action in the DBA).
No. 11-1423 67
claims as state common-law claims are clearly an imper-
missible ‘end run’ around the DBA.” Id. at 86 (emphasis
added). The majority’s only elaboration of this theory
was the following:
At bottom, the plaintiffs’ state-law claims are indirect
attempts at privately enforcing the prevailing
wage schedules contained in the DBA. To allow a
third-party private contract action aimed at enforcing
those wage schedules would be “inconsistent with
the underlying purpose of the legislative scheme
and would interfere with the implementation of that
scheme to the same extent as would a cause of action
directly under the statute.” Davis v. United Air Lines,
Inc., 575 F. Supp. 677, 680 (E.D.N.Y. 1983).
Grochowski, 318 F.3d at 86.
Judge Lynch dissented, criticizing the majority’s
reliance on the “proposition[ ] that the plaintiffs may
not make an ‘end-run’ around the absence of a private
right of action” in the DBA.
That, I respectfully submit, is a slogan, not an argu-
ment. And it is an erroneous slogan at that. . . .
. . . The majority fails to cite any actual evidence, in
the language or legislative history of the DBA, that
Congress intended to prevent state law contract suits
based on contractual promises to pay DBA prevailing
wages — promises that Congress specifically re-
quired to be written into contracts that it must have
assumed would be enforceable, like any other con-
tracts, under state law. . . .
68 No. 11-1423
. . . If New York law provides a right or remedy, any
plaintiff has an absolute right to invoke it, unless the
New York law is contrary to or pre-empted by
federal law. But the majority does not even make a
pass at demonstrating that the DBA displaces state
contract law, or that New York’s willingness to
enforce contractual promises to pay the prevailing
wage is contrary to, rather than supportive of, the
federal policy embodied in the DBA.
Id. at 90-91 (Lynch, J., dissenting in part). We think Judge
Lynch has the better of this argument.1 8 The end-run
18
As it happens, so did the New York Court of Appeals, which
unanimously endorsed Judge Lynch’s interpretation of New
York common law and held that “when a contractor has
promised to pay its workers the prevailing wages required by
the United States Housing Act, the workers may sue under
state law to enforce the promise” as a third-party beneficiary.
Cox v. NAP Construction Co., 891 N.E.2d 271, 273 (N.Y. 2008). The
court dismissed the end-run theory in Grochowski as “flawed”:
“We agree with Judge Lynch . . . . To say that Congress, in
enacting the DBA, did not intend to create a federal right of
action is not to say that Congress intended to prohibit, or
preempt, state claims.” This raises a further puzzle with
respect to the end-run theory. If a state court — or legislature,
for that matter — expressly creates a state-law remedy for a
violation of a federal law that lacks a private right of action,
do federal courts have the authority to abrogate it under the
Supremacy Clause? If the end-run theory were a species of
federal preemption, the answer would clearly be yes. See, e.g.,
Rose v. Arkansas State Police, 479 U.S. 1, 3 (1986) (per curiam)
(continued...)
No. 11-1423 69
theory, as it is described by the majority, bears a
striking resemblance to obstacle preemption, with its
reference to the state law’s “inconsisten[cy] with the
underlying purpose of the [federal] regulatory scheme.”
Id. at 86. Yet, as Judge Lynch pointed out, there is no
evidence that Congressional intent — the touchstone of
any preemption inquiry — was to preempt state law
with the DBA. It seems to us that the Grochowski
end-run theory is really just an “end-run” around well-
18
(...continued)
(“There can be no dispute that the Supremacy Clause invali-
dates all state laws that conflict or interfere with an Act of
Congress.”); Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 211 (1824)
(“In every such case, the act of Congress, or the treaty, is
supreme; and the law of the State, though enacted in the
exercise of powers not controverted, must yield to it.”). But the
interplay between the Second Circuit and the New York Court
of Appeals in Grochowski and Cox suggests that some other
legal principle was at work. The confusion further convinces
us that the end-run theory lies in a doctrinal no-man’s land,
and its adoption would upset a century or two of preemption
and arising-under jurisdictional precedents. See, e.g., Gully v.
First National Bank, 299 U.S. 109, 115 (1936) (“Not every ques-
tion of federal law emerging in a suit is proof that a federal
law is the basis of the suit.”); see also Smith v. Kansas City Title &
Trust Co., 255 U.S. 180, 215 (1921) (Holmes, J., dissenting) (“The
mere adoption by a State law of a United States law as a
criterion or test, when the law of the United States has no force
proprio vigore, does not cause a case under the State law to be
also a case under the law of the United States, and so it has been
decided by this Court again and again.”).
70 No. 11-1423
established preemption doctrine, and we decline to
adopt it.19
Wells Fargo also cites Broder v. Cablevision Systems Corp.,
418 F.3d 187 (2d Cir. 2005), which contains a brief and
tepid reference to Grochowski. The case involved a cable
television provider that extended a discounted rate
to certain customers without offering or disclosing it to
others — a practice the plaintiff alleged to violate both
19
To the extent the Supreme Court’s citation of Grochowski in
Astra USA, Inc. v. Santa Clara County, 131 S. Ct. 1342 (2011),
connotes an endorsement, we think it is limited to the
third-party beneficiary context. See Astra, 131 S. Ct. at 1348
(citing Grochowski as holding that “when a government contract
confirms a statutory obligation, ‘a third-party private contract
action [to enforce that obligation] would be inconsistent with . . .
the legislative scheme . . . to the same extent as would a cause
of action directly under the statute’ ”). In any third-party
beneficiary case, a “nonparty becomes legally entitled to a
benefit promised in a contract . . . only if the contracting
parties so intend.” Id. In Astra, the absence of a private right
of action in the federal program was important because
it showed that Congress did not intend plaintiffs to be
third-party beneficiaries. See id. In this case, however,
the question is not whether HAMP mortgagors were intended
third-party beneficiaries of the federal contracts with servicers
but whether Congress intended to preclude them from
enforcing contracts to which they themselves were parties.
That is a preemption question not addressed in Astra, which
mentions preemption only once, in a footnote dealing
with a tertiary issue on which the Court took no position.
Id. at 1349 n.5.
No. 11-1423 71
the federal Consumer Protection and Competition Act
(CPCA) and a New York state statute. Neither law, how-
ever, provided for a private right of action, so the
plaintiff sued for common-law breach of contract and
fraud and for deceptive practices under the New York
General Business Law. The Second Circuit affirmed the
dismissal of the plaintiff’s breach of contract claim on
the ground that “the contract language . . . unambiguously
foreclose[d] his claims.” Broder, 418 F.3d at 197. The
court did not rely on Grochowski, but noted that the
district court had embraced its end-run theory in an
“alternative ground of decision.” Broder, 418 F.3d at 198
(emphasis added). The panel wrote:
However narrow or broad the proper interpretation
of our holding in Grochowski may be, that case stands
at least for the proposition that a federal court
should not strain to find in a contract a state-law right
of action for violation of a federal law under which
no private right of action exists.
Broder, 418 F.3d at 198. Here, however, we have found
that Wigod has alleged a breach of contract claim
under the plain language of the TPP agreement, with no
“straining” required to reach this conclusion. Thus, even
if Broder had endorsed Grochowski’s end-run theory, and
even if it had done so in its holding rather than in dicta,
it would not apply to Wigod’s breach of contract claim.
The end-run theory made a second appearance in
Broder during the court’s discussion of the plaintiff’s
deceptive practices claims under the New York General
Business Law, although the court did not call it that or
72 No. 11-1423
even cite Grochowski. Instead, the court used the term
“circumvention,” holding that the plaintiff was not
allowed to “circumvent the lack of a private right of
action for violation of” the CPCA by alleging that
non-uniform rates were deceptive under state law. Id. at
199. From Congress’s omission of a private right of action
in the CPCA, the court inferred that it intended to fore-
close state remedies as well, and declined to “attribute[ ]
to the New York legislature an intent to thwart Congress’s
intentions.” Id.
We find that inference difficult to reconcile with cases
like Bates, 544 U.S. at 448, and Wyeth, 555 U.S. at 574, but it
matters little since this part of Broder’s holding is easily
distinguishable. Broder dealt with a different federal
law altogether and expressly confined its holding to
apply only to the CPCA. Broder, 418 F.3d at 199. Further-
more, Wigod’s ICFA claims do not allege that Wells
Fargo engaged in unfair or deceptive business practices
by violating HAMP guidelines. Rather, she contends
that Wells Fargo’s misrepresentation and omission of
material facts misled her to believe she would receive a
permanent modification under HAMP and that it imple-
mented its HAMP compliance procedures in a way de-
signed to thwart borrowers’ legitimate expectations. The
plaintiff in Broder, in contrast, alleged that Cablevision’s
violation of the CPCA’s uniform rate requirement
was itself a deceptive practice. In his reply brief to the
Second Circuit, he refined his argument along the lines
of Wigod’s. The court indicated that this “subtler argu-
ment” was more passable but declined to consider it
because it was waived. Id. at 202. Wigod has made
No. 11-1423 73
this argument all along, and so her ICFA claims are not
inconsistent with Broder.
IV. Conclusion
We predict that the Illinois courts would find some
of Wigod’s claims actionable under the laws of their
state, and we can find no basis in the law of federal pre-
emption that would bar those claims. The judgment of
the district court is therefore REVERSED as to Counts I, II,
and VII, and the fraudulent misrepresentation claim of
Count V, and A FFIRMED as to Counts IV, VI, and the
fraudulent concealment claim of Count V. The case is
R EMANDED for further proceedings on the surviving
counts.
R IPPLE, Circuit Judge, concurring. I am very pleased
to join the excellent opinion of the court written by
Judge Hamilton. I write separately only to note that, in
my view, our task of adjudicating this matter would
have been assisted significantly if the United States had
entered this case as an amicus curiae.
The Emergency Economic Stabilization Act, P.L. 110-
343, 122 Stat. 3765, and the programs implemented under
74 No. 11-1423
its authority are of vital importance to the economic
health of the Country. Prolonged litigation is hardly a
catalyst to the effective administration of these pro-
grams. As the opinion for the court details with great care,
the program at issue here has been the subject of many
cases in the district courts. Efficient and accurate resolu-
tion in this court is important to the effective administra-
tion of the legislative program and, in that respect, the
views of the executive department charged with the
administration of the statute undoubtedly would have
been of great assistance.
I hasten to add that, in suggesting that the participa-
tion of the United States would have been helpful to us,
I do not mean to criticize in the least the efforts of
counsel for the private parties before us. The perspective
brought to a case such as this by the Government is
simply different. It is uniquely qualified to express the
purpose and the operation of the statute and to repre-
sent the public interest.
I also must qualify my view in another respect. From
my vantage point, I am not privy, of course, to the
myriad of considerations that must govern the allocation
of legal resources in a Government whose legal talent is
certainly not under-used. Indeed, the demands on those
resources are overwhelming. It may well be that the
participation of the Government in a case such as this
one is simply not possible in the real world of limited
resources in which we live.
I note that it is possible for the court to invite the Gov-
ernment’s participation as an amicus in cases of such
No. 11-1423 75
public importance. Indeed, we do so with some reg-
ularity. There are, however, costs to proceeding in
that manner. The need for such participation often
becomes apparent only after there has been significant
judicial scrutiny of the case. Such scrutiny is possible,
at least in this circuit, only shortly before oral argument.
As a practical matter, seeking the participation of the
Government at that point in the life of an appellate
case inevitably increases, often significantly, the elapsed
time before final adjudication.
In this case, this last consideration justifies the
decision to proceed without further delay. Prompt res-
olution of this matter is necessary not only for the good
of the litigants but for the good of the Country. As the
quality of my colleague’s opinion reflects, moreover,
there is no reason for further delay. Nevertheless, the
salutary practice of the Government’s participating in
private litigation of public importance must remain
alive and well in the tradition of the court.
3-7-12