The United States District Court for the Northern District of Illinois recently granted a title insurance company's motion to dismiss claims for aiding and abetting fraud, negligent misrepresentation, and negligence, finding that the plaintiffs had not alleged sufficient facts to sustain any of their claims. See Amran Prop. Invs., LLC v. Fid. Nat'l Title Grp., Inc., 2021 WL 3883087 (N.D. Ill. Aug. 31, 2021). In the case, plaintiffs purchased 20 properties from Chicago P.C., which had purchased those same properties from third parties using plaintiffs' funds with the assistance of an attorney before reselling to plaintiffs. The defendant served as the escrow and closing agent and provided title insurance for each of these transactions. One salesperson of the defendant worked on all 20 sales, and wrote a letter on October 11, 2019, affirming that the defendant had a long-standing relationship with Chicago P.C. After all transactions closed, Chicago P.C. informed plaintiffs that it would guarantee the properties' rent payments for the first year as well as manage the properties, but shortly after the closings, rent payments stopped and plaintiffs discovered that the properties were "in disrepair, mostly uninhabitable, and in violation of city building codes." Plaintiffs received estimates that it would cost over $1.1 million to make the properties habitable and rentable. Plaintiffs brought an action against the defendant seeking to recover their entire property investment amount, among other damages, amounting to $1,314,000.00, claiming that the defendant is liable for aiding and abetting Chicago P.C. and the attorney's fraudulent investment scheme, that the defendant negligently misrepresented information to plaintiffs by relying on the attorney's purported authority to act on plaintiffs' behalf based on forged powers of attorney documents, and that the defendant was negligent in failing to ensure that plaintiffs' funds were not misused. The defendant moved to dismiss.
The Court granted the motion. Regarding the aiding and abetting claims, the Court held that plaintiffs had not met the heightened pleading standard for fraud claims which requires that a complaint include the "who, what, when, where, and how" of the fraud. The Court held that plaintiffs' complaint lacked specifics about the investors behind or members of the plaintiff LLCs and particular of the promises made to them, lacked particulars as to whom promises were made, the time, place, and other circumstances, and lacked allegations that the defendant was aware that Chicago P.C. would make promises regarding the properties after the closing.
As to the tort claims for negligent misrepresentation and negligence, the Court rejected plaintiffs' contention that several alleged misrepresentations were made by the defendant, holding that none of the statements were false statements of material fact to sustain the misrepresentation or negligence claims. The Court further held that the defendant, as an escrow agent, did not have a tort duty under Illinois law to the buyer and seller, and that plaintiffs had not connected their damages to the defendant's alleged negligence and misrepresentation. The Court dismissed the aiding and abetting claims without prejudice, and the remaining clams with prejudice.
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