Eloise Lockhart v. Hsbc Finance Corporation

United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted December 15, 2021*
Decided January 4, 2022
Before
DAVID F. HAMILTON, Circuit Judge
THOMAS L. KIRSCH II, Circuit Judge
CANDACE JACKSON-AKIWUMI, Circuit Judge
No. 20-3183
ELOISE LOCKHART,
Plaintiff-Appellant,
v.
HSBC FINANCE CORPORATION, et al.,
Defendants-Appellees.
Appeal from the United States District
Court for the Northern District of Illinois,
Eastern Division.
No. 13 C 9323
Thomas M. Durkin,
Judge.
* We have agreed to decide the case without oral argument because the briefs and
record adequately present the facts and legal arguments, and oral argument would not
significantly aid the court. FED. R. A PP. P. 34(a)(2)(C).
NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with FED. R. A PP. P. 32.1

-- 1 of 4 --

No. 20-3183 Page 2
O R D E R
Eloise Lockhart sued her home mortgage holder and several other defendants in
federal court over the efforts to foreclose on her Chicago house. She claims that the
original mortgage on her house and the foreclosure on her property violated consumer
protection laws. An Illinois state court was already hearing many of these claims, so the
district court stayed proceedings pending the outcome of the state litigation. Once the
state case ended, the federal court dismissed Lockhart’s claims as precluded by the
adverse Illinois judgment and defective in other ways. Because preclusion principles
alone bar this litigation, we affirm.
In 2007, the holder of Lockhart’s home mortgage (Household Financial
Corporation III) filed a foreclosure suit against Lockhart in the Circuit Court of Cook
County. Lockhart filed counterclaims against Household and its parent company
(HSBC Finance Corporation).
That litigation was ongoing in 2013 when Lockhart brought this suit in federal
district court, believing the state case had unduly stalled. She sued (as relevant here) her
mortgage holder, its parent company, their attorneys, and Arnold Kaplan, a lawyer
who briefly represented her in the state case. Her primary allegations here are nearly
identical to her counterclaims in state court: The lender defendants wrongly sought to
enforce her mortgage in violation of the Illinois Interest Act, 815 ILCS 205/0.01, and the
Federal Truth in Lending Act, 15 U.S.C. § 1601. Her federal suit applies other legal
theories to the same conduct, including a claim that the defendants—including
Kaplan—conspired to illegally collect on her mortgage in violation of the Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1962, 1964(c).
The district court stayed part of the case under Colorado River Water Conservation
District v. United States, 424 U.S. 800 (1976), awaiting the outcome of the state case. The
state court meanwhile ruled that the mortgage was valid, entered a judgment of
foreclosure for the lender, and entered summary judgment against Lockhart on her
counterclaims. An Illinois appellate court affirmed. Wilmington Sav. Fund, FSB v.
Lockhart, 2019 IL App (1st) 181180-U, 2019 WL 1462223 (Mar. 29, 2019). Eventually, the
district court dismissed Lockhart’s suit with prejudice. It reasoned that claim preclusion
(or res judicata) and issue preclusion barred all claims, that her “conclusory allegations”
did not state a RICO claim, and that her Truth-in-Lending-Act claims were time-barred.
Lockhart appeals and seeks to revive her Truth in Lending Act and Illinois
Interest Act claims against the lender defendants and their lawyers, and her RICO

-- 2 of 4 --

No. 20-3183 Page 3
claims against those defendants and Kaplan. (She has abandoned many other theories
that she pressed in the district court.) Because of preclusion, none of these claims can
proceed.
First, the district court properly concluded that claim preclusion bars Lockhart’s
Truth in Lending Act and Illinois Interest Act claims. A federal court must give a state
judgment the same preclusive effect as the rendering state would. 28 U.S.C. § 1738.
Under Illinois law, claim preclusion prohibits parties from relitigating claims that have
been resolved by a court with jurisdiction. Baek v. Clausen, 886 F.3d 652, 660 (7th Cir.
2018) (citing River Park, Inc. v. City of Highland Park, 703 N.E.2d 883, 889 (Ill. 1998)). The
doctrine has three requirements: (1) there must be a final judgment on the merits; (2) the
cause of action must be the same; and (3) the parties must be the same or in privity. Id.
We review dismissals based on claim preclusion de novo. Id.
Lockhart does not dispute that the last element is met—that the parties in the two
suits are the same or in privity—nor could she. The lender defendants or their corporate
relations are parties to both suits. They and their lawyers in the state suit are in privity
because they shared a common interest in its outcome. See Colagrossi v. Royal Bank of
Scot., 57 N.E.3d 601, 613 (Ill. App. Ct. 2016) (corporate relations); Henry v. Farmer City
State Bank, 808 F.2d 1228, 1235 n.6 (7th Cir. 1986) (lawyers).
Instead, Lockhart focuses on the first two requirements. She contends that there
was no final judgment on the merits for the Truth in Lending Act claim because the
state court struck it from her complaint as substantially deficient in law, see 735 ILCS
5/2-615(b) (2010), and she was denied leave to amend her complaint. But in Illinois, an
“involuntary dismissal of an action . . . operates as an adjudication upon the merits,”
with exceptions not relevant here. ILL . S. C T . R. 273; see also Ward v. Decatur Mem’l. Hosp.,
160 N.E.3d 1, 10 (Ill. 2019). The dismissal of a claim under § 2-615 counts as an
involuntary dismissal for purposes of Rule 273 “when the order specifies that it is ‘with
prejudice’ or when the trial court denies leave to file an amended complaint.” Ward,
160 N.E.3d at 10. In this case, the state court dismissed Lockhart’s Truth in Lending Act
claim under § 2-615 and denied her motion to amend her complaint. Thus, the dismissal
was a final judgment on the merits of this claim.
Lockhart next argues that claim preclusion cannot bar her Illinois Interest Act
claims because there is no identity of the causes of action. These claims were not—and
could not have been—part of the first suit, she says, because she did not think to raise
this legal theory until after the state court denied her leave to amend her complaint. We
disagree. In Illinois, if the same facts give rise to multiple legal theories of recovery, they

-- 3 of 4 --

No. 20-3183 Page 4
comprise just one cause of action. Wilson v. Edward Hosp., 981 N.E.2d 971, 975 (Ill. 2012);
see also Baek, 886 F.3d at 660. Claim preclusion blocks any claim based on the same facts
that could have been brought in the first suit, even if it involves a new legal theory.
Wilson, 981 N.E.2d at 975. This applies to the Illinois Interest Act claim. It is based on
Lockhart’s mortgage and efforts by Household Finance Corporation to collect on it
through the state foreclosure action. No barrier prevented Lockhart from raising this
legal theory with her state court counterclaims, so it is precluded.
Lockhart next argues that claim preclusion does not block her RICO claims. We
need not decide that question because issue preclusion clearly does. The core of the
alleged RICO conspiracy is that the defendants tried to collect on an illegal debt, her
mortgage. Under issue preclusion, when a party has litigated an issue in a previous suit
and lost, she may not relitigate the same issue, even as part of a new claim, hoping for
different results. Nowak v. St. Rita High Sch., 757 N.E.2d 471, 477 (Ill. 2001). The
requirements are: (1) the issues in the two suits are identical; (2) the prior suit ended in
a final judgment on the merits; and (3) the party to be estopped was a party in the prior
suit (or in privity with one). Id. at 478.
The elements of issue preclusion are met and the doctrine blocks Lockhart’s
RICO claims. The alleged illegality of her mortgage—central to her RICO claims—was
the core issue in state court as well. That court ruled that the mortgage was lawful, and
it entered a final judgment of foreclosure based on its ruling. And Lockhart, of course,
was a party in both suits. Lockhart is therefore precluded from contending that her
mortgage was unlawful and unenforceable, so her RICO claims cannot proceed.
Lockhart also purports to appeal the dismissal of her claims under the Fair
Housing Act and Fair Debt Collection Practices Act, but she does not make any
arguments on these points, so she forfeits these challenges. See Cloutier v. GoJet Airlines,
LLC, 996 F.3d 426, 450 (7th Cir. 2021).
Finally, Lockhart argues that she is entitled to punitive damages—separate and
apart from her other claims. But “[p]unitive damages are not an independent cause of
action. They represent a specific type of relief.” Dr. Franklin Perkins Sch. v. Freeman, 741
F.2d 1503, 1524 (7th Cir. 1984). Lockhart must identify a legal claim that allows her to
seek punitive damages, and she does not do so.
AFFIRMED

-- 4 of 4 --