King et al v. Homeward Residential Inc et al
ORDER granting 22 and 23 Motions to dismiss as to plaintiffs' ADTPA and unjust enrichment claims, and these claims are dismissed with prejudice. The motion filed by Homeward and Ocwen, 23 , however, is denied as to plaintiffs' breach of contract claim. QBE is therefore dismissed and Homeward and Ocwen remain defendants as to plaintiffs' breach of contract claim. Signed by Chief Judge Brian S. Miller on 11/18/2014. (jak)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF ARKANSAS
SAVOIL KING and DOROTHY KING,
for themselves and all Arkansas residents
CASE NO: 3:14CV00183 BSM
HOMEWARD RESIDENTIAL, INC.
f/k/a American Home Mortgage
Servicing, Inc., OCWEN LOAN
SERVICING, LLC, and QBE FIRST
INSURANCE AGENCY, INC.
The 12(b)(6) motions to dismiss [Doc. Nos. 22 & 23] filed by defendants QBE First
Insurance Agency, Inc., Homeward Residential, Inc., and Ocwen Loan Servicing, LLC, are
granted as to plaintiffs’ Arkansas Deceptive Practice Act (“ADTPA”) and unjust enrichment
claims and denied as to plaintiffs’ breach of contract claim. Accordingly, QBE is dismissed
as a defendant.
Viewing the record in the light most favorable to plaintiffs, the non-moving parties,
the facts are as follows. Plaintiffs purchased a home in Arkansas in 1994. Complaint ¶ 34.
Plaintiffs’ mortgage loan was serviced by Homeward. Id. ¶ 37. The mortgage contract gave
Homeward the right to purchase insurance for plaintiffs’ home (“force-place”) if plaintiffs
failed to maintain insurance or the insurance purchased by plaintiffs was insufficient. Id. ¶
¶ 1, 32. The contract did not require plaintiffs to place their insurance premiums in an
escrow account. Id. ¶ 36. Instead, plaintiffs purchased their own homeowners’ insurance and
sent proof of the paid premiums to Homeward. Id. Although plaintiffs had homeowners’
insurance, in 2011, Homeward purchased insurance for plaintiffs’ home from QBE with the
assistance of an affiliate of Homeward, which received a commission. Id. ¶ 37. The
insurance premium charged by QBE was highly inflated as a result of defendants’
manipulation of the force-placed insurance market. Id. ¶¶ 32, 60, 63.
When plaintiffs learned of the force-placed insurance, they presented Homeward with
proof of their existing homeowners’ insurance. Id. ¶ 38. Notwithstanding this, for two years,
plaintiffs were forced to pay premiums to both their insurer and to QBE. Id. ¶ 39, 40. In
2013, Homeward transferred plaintiffs’ mortgage loan servicing to Ocwen, which eventually
allowed plaintiffs to drop the force-placed insurance coverage. Id. ¶ 41.
Plaintiffs filed this lawsuit alleging violation of the ADTPA and unjust enrichment.
Defendants move to dismiss.
Federal Rule of Civil Procedure 12(b)(6) permits dismissal when the plaintiff fails to
state a claim upon which relief can be granted. To meet the 12(b)(6) standard, a complaint
must allege sufficient facts to entitle the plaintiff to the relief sought. See Ashcroft v. Iqbal,
556 U.S. 662, 663 (2009). Although detailed factual allegations are not required, threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements, are
insufficient. Id. In ruling on a motion to dismiss, materials embraced by the pleadings, as
well as exhibits attached to the pleadings and matters of public record, may all be considered.
Mills v. City of Grand Forks, 614 F.3d 495, 498 (8th Cir. 2010).
Plaintiffs’ ADTPA claim is dismissed because the ADTPA does not apply to actions
or transactions permitted under laws administered by the Arkansas Insurance Commissioner
or by any other officer or regulatory body acting under state or federal statutory authority.
Williams v. State Farm Mut. Auto. Ins. Co., No. 5:10CV00032 JLH, 2010 WL 2573196, at
*4 (E.D. Ark. June 22, 2010) (citing Ark. Code Ann. § 4-88-101(3)). This exception to the
ADTPA applies to all insurance activities in the State of Arkansas, whether permissible or
not. Id. Plaintiffs allege that the practices employed by defendants in their force-placed
insurance scheme subjected plaintiffs to excessive insurance premiums. The ADTPA does
not apply to these actions because they relate to activities that are excepted from the statute.
Unjust Enrichment Claim
An unjust enrichment claim usually does not apply when an express written contract
exists. Servewell Plumbing, LLC v. Summit Contractors, Inc., 210 S.W.3d 101, 112 (Ark.
2005). Exceptions to this general rule may arise when an express contract is void or does not
provide an answer. See Campbell v. Asbury Auto., Inc., 381 S.W.3d 21, 37 (Ark. 2011); see
also Klein v. Arkoma Prod. Co., 73 F.3d 779, 786 (8th Cir.1996) (noting that an exception
may arise if an express contract does not fully address a subject).
1. Plaintiffs’ claim is dismissed against Homeward and Ocwen
Unjust enrichment claims must generally be dismissed in a force-placed insurance
lawsuit against a mortgage company when it is undisputed that the mortgage contract was
valid and enforceable. See Gallo v. PHH Mortgage Corp., 916 F. Supp. 2d 537, 553-54
(D.N.J. 2012). The existence of a valid mortgage contract between Homeward and plaintiffs
is undisputed and plaintiffs concede that the force-placed insurance was obtained pursuant
to that contract. Therefore, plaintiffs’ unjust enrichment claim against Homeward and
Ocwen is dismissed for failure to state a claim upon which relief may be granted.
2. Plaintiffs’ claim is dismissed against QBE
Plaintiffs cannot recover against QBE on their unjust enrichment claim because
Homeward purchased force-placed insurance from QBE pursuant to a valid contract with
plaintiffs. Indeed, the existence of a valid and enforceable written contract usually precludes
recovery in quasi-contract, even against a third party. See Servewell, 210 S.W.3d at 112.
Therefore, plaintiffs’ unjust enrichment claim against QBE is dismissed for failure to state
a claim upon which relief may be granted.
3. Breach of Contract
Plaintiffs have stated a breach of contract claim against Homeward and Ocwen. This
is true because it is undisputed that plaintiffs and Homeward had a valid contract that Ocwen
assumed. It is clear that plaintiffs are actually alleging that Homeward and Ocwen breached
their contractual obligations.
A complaint should not be dismissed merely because its allegations do not support
the legal theory advanced when its allegations provide for relief on anoher theory. See
Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843, 848-49 (8th Cir. 2014). Under the
notice pleading standard, plaintiffs are not required to plead legal theories or cite appropriate
statutes so long as the pleading gives fair notice of the claims asserted. See Hopkins v.
Saunders, 199 F.3d 968, 973 (8th Cir.1999). The allegations in a complaint, not the legal
theories of recovery identified therein, must be viewed to determine whether a complaint has
provided the necessary notice contemplated by the federal rules. Parkhill v. Minnesota Mut.
Life Ins. Co., 286 F.3d 1051, 1057-58 (8th Cir. 2002).
The complaint alleges that Homeward force-placed insurance on plaintiffs’ home
while plaintiffs already had homeowners’ insurance in place. The complaint also alleges that
Homeward improperly chose QBE as the force-placed insurer although QBE’s premiums
were excessively higher than those of other existing insurers. Finally, it alleges that Ocwen
assumed Homeward’s contractual obligations. Accepting these allegations as true, plaintiffs
have sufficiently alleged that Homeward breached its contract with plaintiffs and that Ocwen
assumed Homeward’s obligations.
4. Filed Rate Doctrine
Contrary to defendants’ assertions, plaintiffs’ claims are not barred by the filed rate
doctrine. The filed rate doctrine (1) preserves a regulating agency’s authority to determine
the reasonableness of rates, and (2) insures that regulated entities charge only those rates that
the agency has approved. Id.; H.J. Inc. v. Nw. Bell Tel. Co., 954 F.2d 485, 488 (8th Cir.
1992). These two issues are not implicated by plaintiffs’ breach of contract claim because
plaintiffs are not challenging insurance rates. They are merely challenging (1) Homeward’s
decision to force-place insurance on their property when they already had insurance, and (2)
Homeward’s decision to purchase insurance from QBE when the premiums charged by QBE
were excessively higher than the premiums charged by other insurers.
For these reasons, the motions to dismiss [Doc. Nos. 22 & 23] filed by QBE,
Homeward, and Ocwen are granted as to plaintiffs’ ADTPA and unjust enrichment claims,
and these claims are dismissed with prejudice. The motion filed by Homeward and Ocwen
[Doc. No. 23], however, is denied as to plaintiffs’ breach of contract claim. QBE is therefore
dismissed and Homeward and Ocwen remain defendants as to plaintiffs’ breach of contract
IT IS SO ORDERED this 18th day of November 2014.
UNITED STATES DISTRICT JUDGE
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