Persaud v. Bank Of America, N.A. et al
Filing
41
ORDER granting in part and denying in part 22 Motion to Dismiss for Failure to State a Claim. Defendant Countrywide is dismissed. Count V is dismissed with leave to amend. Amended complaint due by 9/4/2014. Signed by Judge Cecilia M. Altonaga on 8/27/2014. (ps1)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
SAMUEL A. PERSAUD,
Plaintiff,
vs.
BANK OF AMERICA, N.A., et al.,
Defendants.
______________________________/
ORDER
THIS CAUSE came before the Court on Defendants, Bank of America, N.A. (“BOA”);
U.S. Bank, N.A., as Trustee (“U.S. Bank” or “Trustee”); Countrywide Home Loans, Inc.
(“Countrywide”); Nationstar Mortgage, LLC (“Nationstar”); and Lexington Insurance
Company’s (“Lexington[’s]”) (collectively, “Defendants[’s]”) Joint Motion . . . to Dismiss the
Second Amended Complaint with Prejudice (“Motion”) [ECF No. 22], filed June 13, 2014.
Plaintiff, Samuel A. Persaud (“Persaud”), filed his Response . . . (“Response”) [ECF No. 35] on
July 9, 2014.
Defendants filed their Joint Reply . . . (“Reply”) [ECF No. 37] on July 24, 2014.
The Court has carefully considered the parties’ written submissions, oral arguments, and
applicable law.
I. BACKGROUND1
This matter arises out of a promissory note (“Note”) and mortgage (“Mortgage”) on real
property in Miami-Dade County.
(See SAC ¶ 9; id., Ex. A). Plaintiff executed the Note and
Mortgage with Countrywide on February 7, 2005, agreeing to repay the debt in regular
installments by March 1, 2035. (See SAC ¶ 9; Ex. A, 1). The Mortgage was subsequently
1
The allegations of the Second Amended Complaint (“SAC”) [ECF No. 4-4]) are taken as true.
CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
transferred to BOA, Countrywide’s successor in interest.2
(See SAC ¶¶ 9–10).
According to
BOA, U.S. Bank owned the Note and Mortgage in 2005, while BOA serviced the loan as U.S.
Bank’s agent.
(See id. ¶¶ 14–16).
Subsequently, Nationstar became the servicer of the
mortgage as BOA’s successor in interest and currently services the loan.
(See id. ¶ 13).
Plaintiff’s Mortgage includes the following property insurance provision:
Borrower shall keep the improvements now existing or hereafter erected on the
Property insured against loss by fire, hazards included within the term “extended
coverage,” and any other hazards including, but not limited to, earthquakes and
floods, for which Lender requires insurance. This insurance shall be maintained
in the amounts (including deductible levels) and for the periods that Lender
requires. . . . If Borrower fails to maintain any of the coverages described above,
Lender may obtain insurance coverage, at Lender’s option and Borrower’s
expense. Lender is under no obligation to purchase any particular type or
amount of coverage. Therefore, such coverage shall cover Lender, but might or
might not protect Borrower, Borrower’s equity in the Property, or the contents of
the Property, against any risk, hazard or liability and might provide greater or
lesser coverage than was previously in effect. Borrower acknowledges that the
cost of the insurance coverage so obtained might significantly exceed the cost of
insurance that Borrower could have obtained. Any amounts disbursed by lender
under this Section 5 shall become additional debt of Borrower secured by this
Security Instrument. These amounts shall bear interest at the Note rate from the
date of disbursement and shall be payable, with such interest, upon notice from
Lender to Borrower requesting payment.
(Id. ¶ 41 (quoting Mortgage § 5)). The Mortgage also states, “Lender may do and pay for
whatever is reasonable or appropriate to protect Lender’s interest in the Property.”
(Id. ¶ 42
(emphasis in original) (quoting Mortgage § 9)).
At some time after entering into the Mortgage, Plaintiff’s insurance policy lapsed. (See
id. ¶ 51).
Plaintiff then paid the policy before the lender force-placed insurance on the property.
(See id.).
As a practice, “Lenders and mortgage servicers (here, BOA), purchase master or
“umbrella” insurance policies that cover the entire portfolio . . . . In exchange, [affiliated]
At the time Countrywide serviced Plaintiff’s Note and Mortgage, it underwent a name change,
becoming BAC Home Loans Servicing LP (“BAC”). (See SAC ¶ 11). BAC later merged with and
into BOA. (See id.).
2
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
insurance carriers . . . (here, [Lexington]) obtain the exclusive right to force place insurance on
property securing a loan within the portfolio when the borrower’s insurance lapses . . . .” (Id. ¶
44 (alterations added)).
BOA requires or permits its insurer Lexington to automatically
force-place insurance when a borrower’s insurance policy lapses.
(See id. ¶ 45).
In such
event, the mortgage agreement permits “the lender to obtain force-placed coverage and charge
the premium to the borrower rather than declare the borrow[er] in default.” (Id. ¶ 40 (alteration
added)).
If the borrower’s insurance lapse is not immediately discovered, the lender or servicer
charges the borrower “past premiums” for “retroactive coverage[,]” even in the “absence of any
claim or damage to the property during the period of lapse . . . .”
(Id. ¶ 45 (alterations added)).
“Once coverage is forced on the property, the lender or servicer charges the borrower for
the insurance premiums and automatically deducts the amount from the borrower’s mortgage
escrow account, or adds it to the balance of the borrower’s loan.” (Id. ¶ 46 (footnote call
number omitted)). Pursuant to this practice:
The lender or servicer then pays the premium to the insurer (Defendant
[Lexington] here) who then kicks back a portion of the premium to the mortgage
lender and/or servicer (Defendant BOA here) or an affiliate of the lender or
servicer as a “commission.” If to the lender’s or servicer’s affiliate, the affiliate
then shares a portion of that payment with the lender or servicer, sometime in the
form of “soft dollar” credits. The money paid back to the lender or serv[ic]er’s
affiliate is not given in exchange for any services provided by the affiliate; it is
simply grease to keep the force-placed machine moving.
(Id. ¶¶ 47–48 (capitalization deleted; alterations added)).
The lender’s actions “are unconscionable and done in bad faith with the sole objective to
maximize profits.” (Id. ¶ 51).
BOA is incentivized to force-place insurance policies “with
inflated premiums . . . because the higher the cost of the insurance policy, the higher the
kickback.”
(Id. ¶ 49 (alteration added)). Plaintiff “was charged hyper-inflated and illegitimate
non-competitive ‘premiums’ for the force-placed insurance that included undisclosed kickbacks
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
to the Defendant, BOA or [its] affiliates . . . .”
(Id. ¶ 51 (alterations added)).
After the borrower’s policy lapsed, BOA charged Plaintiff $16,858.36 for “subsidence
insurance” without notice on July 13, 2009.
(Id. ¶ 18). BOA created an escrow account with a
negative balance and charged Plaintiff’s account. (See id. ¶ 46 n. 5).
BOA failed to remove
the total charge for subsidence insurance from Plaintiff’s account and continued charging
Plaintiff. (See id. ¶ 21).
Because the cost of the force-placed insurance premium is added to
Plaintiff’s Mortgage balance, the total interest paid by the borrower to the lender over the life of
the loan is increased.
(See id. ¶ 50).
Upon learning of the charge, Plaintiff made various efforts to gather information from
BOA and dispute the unauthorized insurance charge.
(See id. ¶¶ 20–26).
Plaintiff called BOA
on multiple occasions and mailed BOA certified letters dated October 22, 2009; January 8, 2010;
February 4, 2010; March 9, 2010; April 27, 2010; and July 5, 2011. (See id.).
responded to or acknowledged receipt of Plaintiff’s correspondence.
BOA never
(See id. ¶ 27). “BOA
and the other Defendants by virtue of privity and/or agency relationship have failed to remove
the unauthorized charge,” continue to charge Plaintiff late fees and interest, and improperly
established an escrow account for Plaintiff’s account.
(Id. ¶ 28).
According to an American Banker article published November 10, 2010, mortgage
lenders and servicers have engaged in questionable practices concerning “force-placed
insurance.”
(Id. ¶ 29).
Lenders and servicers force-place insurance when a borrower’s
insurance policy lapses or the borrower fails to maintain sufficient hazard, flood, or wind
insurance coverage on the property securing the loan.
(See id. ¶ 30).
force-places a new policy on the property, it charges the borrower premiums.
When a lender
(See id.). The
practice of force-placed insurance is extremely profitable to mortgage lenders and servicers.
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(See id. ¶¶ 30–31).
Insurers and affiliates enter into exclusive relationships with major mortgage lenders and
servicers to provide force-placed insurance policies, often paying a percentage of the
force-placed premium later charged to the borrower and offering subsidized administrative
services to the lender or servicer.
(See id. ¶ 31).
Lenders often require borrowers to pay for
backdated insurance coverage, even if no claims were made or coverage exceeds the legal
requirements.
(See id. ¶ 32).
This practice artificially inflates the premiums charged to
borrowers, resulting in premiums up to ten times greater than those available to consumers in the
open market.
(See id. ¶ 34).
Plaintiff does not specifically challenge the practice of
force-placed insurance but contests the manner in which Defendants force-placed his insurance
without notice. (See id. ¶ 30).
The SAC contains seven counts. Count I is a claim for breach of contract against
Defendants for acting in violation of Plaintiff’s Mortgage.
(See id. ¶¶ 52–64). Count II is a
claim for breach of implied covenant of good faith and fair dealing in selecting a force-placed
insurance policy.
(See id. ¶¶ 65–73).
In Count III, Plaintiff seeks damages for unjust
enrichment against BOA, U.S. Bank, and Nationstar for retaining benefits from the force-placed
insurance policy at Plaintiff’s expense.
of fiduciary duty owed to the borrower.
(See id. ¶¶ 74–85).
Count IV states a claim for breach
(See id. ¶¶ 86–91). Count V states a claim for fraud
in the inducement against BOA and U.S. Bank for falsely representing to Plaintiff he would not
need to have an escrow account for insurance or tax purposes.
(See id. ¶¶ 92–97).
In Count
VI, Plaintiff raises an unjust enrichment claim against Lexington for retaining excess premiums
from Plaintiff’s force-placed insurance at Plaintiff’s expense.
(See id. ¶¶ 98–104).
Last,
Count VII states a claim against Lexington for tortious interference with a business relationship
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
for entering into an exclusive relationship with BOA and/or U.S. Bank, which interfered with
Plaintiff’s rights under his Mortgage.
(See id. ¶¶ 105–09).
Defendants request dismissal of all counts of the SAC for failure to state a claim under
Federal Rule of Civil Procedure 12(b)(6).
(See generally Mot.).
Plaintiff consents only to the
dismissal of Countrywide without prejudice. (See Resp. 10–11).
II.
LEGAL STANDARD
“To survive a motion to dismiss, a complaint must contain 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, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Pleadings must contain “more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.”
Twombly, 550 U.S. at 555 (citation omitted). Indeed,
“only a complaint that states a plausible claim for relief survives a motion to dismiss.”
Iqbal,
556 U.S. at 679 (citing Twombly, 550 U.S. at 556). To meet this “plausibility standard,” a
plaintiff must “plead[] factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Id. at 678 (alteration added) (citing
Twombly, 550 U.S. at 556).
On a motion to dismiss, the Court construes the complaint in the light most favorable to
the plaintiff and takes the factual allegations as true.
See Brooks v. Blue Cross & Blue Shield of
Fla., Inc., 116 F.3d 1364, 1369 (11th Cir. 1997).
The Court’s analysis of a Rule 12(b)(6)
motion “is limited primarily to the face of the complaint and the attachments thereto.”
Id. at
1368. The Court may also consider other documents to be part of the pleadings for purposes of
Rule 12(b)(6) where a plaintiff refers to the documents in the complaint and those documents are
central to plaintiff’s claim.
Id. at 1369.
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
III.
A.
ANALYSIS
Introduction
Defendants argue Plaintiff’s claims, based on allegations the force-placed insurance
premiums were too high, are barred by the primary agency jurisdiction doctrine and Florida
insurance statutes that set the amount of premium.
(See Mot. 3; see also id. 5–9; Reply 1–4).
Defendants contend their actions were valid and in compliance with the Mortgage because
Plaintiff failed to maintain continuous insurance on his property.
(See Mot. 3). They also
assert Plaintiff does not allege the elements of each of his state law claims.
(See id.).
Before
turning to these discrete arguments, the Court briefly addresses Defendants’ general challenge to
Plaintiff’s allegations of liability.
Defendants seek dismissal of certain claims where liability is contingent upon showing an
agency or successor-in-interest relationship.
(See Mot. 11–13, 17). A successor only assumes
the liabilities of its predecessor business if: “(1) the successor expressly or impliedly assumes
obligations of the predecessor; (2) the transaction is a de facto merger; (3) the successor is a mere
continuation of the predecessor; or (4) the transaction is a fraudulent effort to avoid liabilities of
the predecessor.” Cuervo v. Airport Services, Inc., 984 F. Supp. 2d 1333, 1340 (S.D. Fla. 2013)
(emphasis in original; other citation omitted) (quoting Bernard v. Kee Mfg. Co., 409 So. 2d 1047,
1049 (Fla. 1992)). Defendants argue they are not actual parties to the Mortgage (see id. 17);
BOA and Nationstar only acted as servicers of the Mortgage (see id.); Countrywide is not a
predecessor-in-interest to BOA, nor is BOA to Nationstar (see id. 12, 17); and no wrongdoing is
alleged against Nationstar (see id. 11–12).
Defendants claim Plaintiff’s allegations Nationstar is liable as a successor-in-interest to
BOA and BAC are “wholly” insufficient and “self-serving.”
7
(Mot. 11–12).
Plaintiff includes
CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
minimal allegations Defendants are successors-in-interest.
(See, e.g., SAC ¶¶ 9–13 (the “Note
and Mortgage were then transferred to BOA, as successor to Countrywide. . . .”; “Nationstar
became, and is currently, the servicer of the subject loan and, as the successor servicer in interest
to BOA, is liable for the conduct of BOA. . . .” (capitalization omitted; alterations added))).
Although these allegations lack detail, they allege a basis for finding successor liability —
successors expressly or impliedly assuming the obligations of the predecessor — and put
Defendants on notice they may be liable as successors-in-interest.
at 1340.
See Cuervo, 984 F. Supp. 2d
Cf. Oginsky v. Paragon Props. of Costa Rica LLC, 784 F. Supp. 2d 1353, 1368 (S.D.
Fla. 2011) (finding plaintiffs’ allegations LTS was “the managing and controlling member of
Paragon” and Paragon’s office had closed did “not put LTS on notice of why it was named as a
defendant[,]” particularly where successor liability was first argued in plaintiffs’ response to a
motion to dismiss (alteration added)); Infante v. Bank of Am. Corp., 680 F. Supp. 2d 1298, 1305
(S.D. Fla. 2009) (finding successor liability was not sufficiently alleged, where plaintiff’s “meager
allegations” that “Countrywide . . . is now owned by the Defendant” and “Countrywide . . . was
purchased by the Defendant” were inadequate to infer a merger, de facto merger, or other form of
successor liability for pre-acquisition torts committed by Countrywide (alterations added and in
original; citation omitted)). As in Cuervo, the SAC “is a little light on the specifics of how”
Nationstar took over BOA’s interest in the Mortgage, including the “purchase agreement, transfer
of assets, etc. But Plaintiff[] [is] not required to allege that level of detail to survive a motion to
dismiss.” 984 F. Supp. 2d at 1340 (alterations added; citation omitted).
With regard to BOA’s liability, Defendants contend Countrywide is a legally distinct
entity, was not BOA’s predecessor-in-interest, and thus cannot be liable for the acts or omissions
of Countrywide. (See Mot. 29; Reply 17). Defendants provide documentation from the State of
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
Florida Division of Corporations indicating Countrywide’s corporate status. (See Mot., Ex. A
[ECF No. 22-1]). The SAC alleges, however, that Countrywide is BOA’s predecessor-in-interest.
(See SAC 9–11, 93–97). The Court declines to consider Defendants’ evidence on a motion to
dismiss. See Brooks, 116 F.3d at 1368.
Defendants’ attempt to distinguish BOA and Nationstar as mere servicers of the Mortgage
to avoid liability is likewise unavailing on a motion to dismiss. See Williams v. Wells Fargo
Bank, N.A., No. 11–21233–CIV, 2011 WL 4901346, at *4 (S.D. Fla. Oct. 14, 2011) (“Whether
Wells Fargo Bank is the loan owner, servicer, or both, is irrelevant at this stage. Taking Plaintiffs’
allegations as true, Wells Fargo is bound by the mortgage contracts, and any argument to the
contrary fails at this motion-to-dismiss stage.” (emphasis in original)). In short, it is premature to
dismiss all claims predicated on a theory of successor liability “without allowing the facts to
develop” in discovery. Cuervo, 984 F. Supp. 2d at 1341.
B.
Primary Agency Jurisdiction Doctrine
Defendants argue Plaintiff’s claims are barred by the primary jurisdiction doctrine. (See
Mot. 5).
Pursuant to the doctrine of primary jurisdiction, when a party invokes “the original
jurisdiction of a trial court by asserting an issue which is beyond the ordinary experience of judges
and juries, but within an administrative agency’s special competence, the court should refrain from
exercising its jurisdiction over that issue until such time as the issue has been ruled upon by the
agency.” Flo-Sun, Inc. v. Kirk, 783 So. 2d 1029, 1037 (Fla. 2001) (footnote call number and
citations omitted). “[A] court of competent jurisdiction may dismiss or stay an action pending a
resolution of some portion of the actions by an administrative agency.” Smith v. GTE Corp., 236
F.3d 1292, 1298 n.3 (11th Cir. 2001) (alteration added) (quoting Wagner & Brown v. ANR
Pipeline Co., 837 F.2d 199, 201 (5th Cir. 1988)). The primary jurisdiction doctrine “is not
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
designed to secure expert advice from agencies every time a court is presented with an issue
conceivably within the agency’s ambit, but instead is to be used only if a claim requires resolution
of an issue of first impression, or of a particularly complicated issue that Congress has committed
to a regulatory agency.” In re Horizon Organic Milk Plus DHA Omega-3 Mktg. & Sales Practice
Litig., 955 F. Supp. 2d 1311, 1349 (S.D. Fla. 2013) (internal quotation marks omitted) (quoting
Clark v. Time Warner Cable, 523 F.3d 1110, 1114 (9th Cir. 2008)).
Florida’s Office of Insurance Regulation (“OIR”) regulates insurance polices and practices
and has the authority to determine insurance premium rates. (See Mot. 7; Reply 1). Defendants
contend “OIR is far better placed than a court or jury to evaluate the complex issues relating to the
actuarial justifications or other factors supporting the various components that are included in
Plaintiff’s premium at issue, and whether that premium is ‘inflated’ or ‘high-priced’ because it
includes commission and other costs.” (Mot. 7). To bolster their argument, Defendants cite to
cases emphasizing the complexities of the highly-regulated insurance industry and the expertise of
regulatory agencies in assessing the reasonableness of insurance rates. (See id.).
Plaintiff’s claims regarding his force-placed insurance do not constitute issues of first
impression. The cases in this District cited by the parties were not referred to the OIR for an
administrative decision when the practice of force-placed insurance or the reasonableness of the
premium rate was not specifically in question. See Abels v. JPMorgan Chase Bank, N.A., 678 F.
Supp. 2d 1273, 1277–78 (S.D. Fla. 2009) (finding the filed rate doctrine3 did not bar plaintiffs’
force-placed insurance claims where plaintiffs did not complain of the excessive insurance rate,
but rather that “defendant bank acted unlawfully when it chose this particular insurance company
“[T]he filed rate doctrine recognizes that where a legislature has established a scheme for utility
rate-making, the rights of the rate-payer in regard to the rate he pays are defined by that scheme. . . . [A]ny
‘filed rate’ — that is, one approved by the governing regulatory agency — is per se reasonable and
unassailable in judicial proceedings brought by ratepayers.” Abels, 678 F. Supp. 2d at 1277 (alterations
added; internal citations and quotation marks omitted).
3
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and this particular rate”); Kunzelmann v. Wells Fargo Bank, N.A., No. 9:11–cv–81373–DMM,
2012 WL 2003337, at *2–3 (S.D. Fla. June 4, 2012). Plaintiff’s claims do not implicate the
primary jurisdiction doctrine because Plaintiff does not contest the reasonableness of the premium
simply because of its high price. See In re Horizon Organic Milk, 955 F. Supp. 2d at 1349–50.
Instead, Plaintiff emphasizes the manner in which the affiliate insurance carrier and premium rate
were selected and fixed, including payment of impermissible kickbacks. (See SAC ¶ 30; see
generally Resp.). Further, as noted by Plaintiff (see Resp. 5), the primary jurisdiction argument is
unavailing as to BOA, U.S. Bank, and Nationstar because the Florida OIR does not regulate
financial institutions. See Abels, 678 F. Supp. 2d at 1277–78.
The Court declines to dismiss this action or refer it to the OIR pursuant to the primary
jurisdiction doctrine.
C.
Florida’s Unfair Insurance Trade Practices Act
Defendants contend Plaintiff’s claims are not permitted on the basis of Florida’s Unfair
Insurance Trade Practices Act (“FUITPA”), Florida Statute section 626.9541, which regulates
trade practices relating to the business of insurance. (See Mot. 8–9; Reply 3–4). Section
626.9541 defines certain unfair methods of competition and unfair or deceptive acts or practices,
including “Illegal dealings in premiums; excess or reduced charges for insurance.” Id. §
626.9541(o) (italics in original). An enumerated violation is:
Knowingly collecting as a premium or charge for insurance any sum in excess of or
less than the premium or charge applicable to such insurance, in accordance with
the applicable classifications and rates as filed with and approved by the office, and
as specified in the policy . . . . or premiums and charges collected from a Florida
resident in excess of or less than those specified in the policy and as fixed by the
insurer. This provision shall not be deemed to prohibit the charging and
collection, by surplus lines agents. . . of . . . taxes, or fees . . . , in addition to the
premium required by the insurer . . . .
Id. § 626.9541(o)2. (alterations added).
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Defendants assert the FUITPA applies to Plaintiff’s claims, and as a result, judgment for
Plaintiff would cause Defendants to violate Florida law. (See Mot. 9). According to Defendants,
pursuant to section 626.9541(o)2., “Lexington is required by Florida law to collect from the
Plaintiff exactly the premium specified in his lender-placed policy and fixed by Lexington. There
is no allegation in the SAC that . . . Defendant[s] charged the Plaintiff any amount as a premium
other than exactly what was specified in his policy.” (Id. (alterations added)). Defendants
explain if Lexington were to charge less than the premium stated in the policy issued to Plaintiff, it
would violate the FUITPA. (See id.).
Defendants’ rationale fails to persuade.
If the Court were to accept Defendants’
reasoning, any successful force-placed insurance claim would violate Florida law, and a plaintiff’s
claim would never survive a motion to dismiss. As the parties are aware and as is evident from
their briefing, such is not the case. Plaintiff’s allegations of bad faith and unconscionable conduct
call into question the legitimacy of Defendants’ actions pursuant to the Mortgage, as well as the
validity of Lexington’s insurance provider contract, including the premiums designated there.
Indeed, as discussed with regard to Count II, every contract is subject to an implied covenant of
good faith and fair dealing.
It follows the FUITPA provision in question was intended to
govern only legitimate premiums fixed by the Florida OIR or the insurance carrier in good faith.
See generally FLA. STAT. § 626.9541; cf. Abels, 678 F. Supp. at 1277 (“[T]he Supreme Court ‘has
emphasized the limited scope of the filed rate doctrine to preclude damage claims only where there
are validly filed rates.’” (emphasis added) (quoting Fla. Mun. Power Agency v. Fla. Power & Light
Co., 64 F.3d 614, 617 (11th Cir. 1995) (other citation omitted)). Accepting Plaintiff’s allegations
he was “charged hyper-inflated and illegitimate non-competitive ‘premiums’ for the force placed
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insurance that included undisclosed kickbacks” (SAC ¶ 51), it would be against public policy to
enforce an insurance premium that was the product of bad faith.
It is certainly not clear Plaintiff’s claims are barred by Florida Statute section 626.9541.
The Court declines to dismiss Plaintiff’s claims on this basis.
D.
Breach of Contract — Count I
Defendants argue Plaintiff does not state a claim for breach of contract where Plaintiff
breached the Mortgage first, and the express terms of the Mortgage allow the lender to force-place
insurance in the event of a lapse in the borrower’s coverage. (See Mot. 14). According to
Plaintiff, while the Mortgage may permit the practice of force-placed insurance, it does not
sanction unreasonable or inappropriate conduct in contravention of the Mortgage’s other
provisions. (See Resp. 13).
Contrary to Defendants’ argument, the fact Plaintiff initially breached the Mortgage when
his insurance policy lapsed does not preclude his breach of contract claim. When a lender opts to
continue a mortgage by force-placing insurance after a borrower’s coverage lapses, the lender
“waive[s] the right to rely upon [plaintiff’s] failure to maintain insurance as a defense to [his]
contract claims.” Mahdavieh v. Suntrust Mortg., Inc., No. 13–62801–CIV, 2014 WL 1365425, at
*3 (S.D. Fla. Apr. 7, 2014) (alterations added); see also Hamilton v. Suntrust Mortg. Inc., No. 13–
60749–CIV, 2014 WL 1285859, at *7 (S.D. Fla. Mar. 25, 2014) (hereinafter Hamilton I) (“‘There
are few principles of contract law better established, or more uniformly acknowledged, than the
rule that when a contract not fully performed on either side is continued in spite of a known excuse,
the right to rely upon the known excuse is waived . . . .’” (internal quotation marks and citation
omitted)). As in Mahdavieh and Hamilton I, the lender here opted to continue the Mortgage
despite Plaintiff’s breach, thus waiving this defense. And as of the SAC’s filing, Defendants are
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continuing to enforce the Mortgage and charge Plaintiff force-placed insurance.
Defendants next challenge whether there was in fact a breach of the Mortgage. (See Mot.
18). Defendants assert insurance companies regularly undertake the practice of force-placed
insurance; the Mortgage expressly permits force-placed insurance by an insurance carrier such as
Lexington; and the Mortgage discloses insurance may be force-placed, charging a borrower higher
costs “at Lender’s option” if the borrower’s coverage lapses. (Mot. 13). Defendants argue
“claims based on the alleged charging of a commission, ‘kickback,’ or ‘other compensation’ to a
borrower as part of an LPI premium fail ‘because [lender] disclosed that [borrower] would incur
higher costs if it force-placed the insurance for her.’” (Id. (alterations in original) (quoting Feaz
v. Wells Fargo Bank, N.A., 745 F.3d 1098, 1111 (11th Cir. 2014)).
calling a commission a kickback doesn’t make it one.
Defendants state, “‘simply
The defining characteristic of a kickback
is divided loyalties. But [the lender] was not acting on behalf of [the borrower] or representing
her interests. The loan agreement makes it clear that the insurance requirement is for the
lender’s protection.’” (Id. at 34 (alterations in original) (quoting Feaz, 745 F.3d at 1111)).
See also Cohen v. Am. Sec. Ins. Co., 735 F.3d 601, 611 (7th Cir. 2013).
The district court in Hamilton I discussed similar issues at length, explaining although
“Cohen and Feaz may have some factual similarity to this action — in that each involved
force-placed insurance claims — both cases involved different state law and materially distinct
claims than the case at bar.” 2014 WL 1285859, at *8. The plaintiffs in Hamilton I alleged
defendants never notified them as to how much more expensive the force-placed premiums would
be or that a portion of those premiums would be kicked back to the lender. See id. at *9. The
court characterized “the gravamen of [p]laintiffs’ claim” as a claim the lender “acted in bad faith
by entering into exclusive agreements with . . . [d]efendants to force-place excessive insurance on
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[p]laintiffs’ properties in exchange for receiving a portion of the artificially-inflated premiums as
unearned ‘kickbacks.’” Id. at *10 (alterations added). The lender’s “substantial discretion to
force-place insurance” was not so “absolute.” Id. Although Defendants here insist the express
terms of the Mortgage permit force-placed insurance, what Plaintiff protests, like the plaintiffs in
Hamilton I, is the manner in which Defendants force-placed the insurance.
Defendants further argue Plaintiff’s allegations the premiums include retroactive coverage
and thus are “excess[ive] or unnecessary,” do not constitute a breach of the Mortgage and are
conclusory.
(Mot. 18 (alteration added)).
Plaintiff alleges the force-placed insurance was
“excessive and unnecessary” because retroactive coverage does not protect Defendants’ interest in
the property, particularly in the “absence of any claim or damage to the property during the
period of the lapse . . . .”
(SAC ¶ 45; see id. ¶ 56). The Court has previously found these types
of claims based on retroactive or backdated coverage viable. See generally Williams, 2011 WL
4901346 (finding allegations of excessive force-placed insurance premiums that included
retroactive coverage and kickbacks sufficient to state claims for unjust enrichment and breach of
the covenant of good faith and fair dealing).
Plaintiff’s allegations he “was charged
hyper-inflated and illegitimate non-competitive ‘premiums’ for the force-placed insurance that
included undisclosed kickbacks to the Defendant, BOA or [its] affiliates” (SAC ¶ 49), are
sufficient to state a breach of contract claim.
Further, Plaintiff asserts BOA and/or U.S. Bank’s unconscionable conduct violated section
9 of the Mortgage authorizing the lender to “do and pay for whatever is reasonable or appropriate
to protect Lender’s interest in the Property.” (Resp. 13 (emphasis omitted); see SAC ¶ 51). For
the same reasons, Plaintiff has sufficiently alleged Defendants’ illegitimate premiums, including
kickbacks and retroactive coverage, are not “reasonable or appropriate” and constitute a breach of
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the Mortgage. Plaintiff satisfies the three basic elements of a breach of contract claim — a Note
and Mortgage, material breaches of the Mortgage, and damages to Plaintiff. See Merle Wood &
Assocs., Inc. v. Trinity Yachts, LLC, 857 F. Supp. 2d 1294, 1301 (S.D. Fla. 2012) (To prevail on
a claim for breach of contract, a plaintiff must establish “(1) the existence of a contract; (2) a
material breach of that contract; and (3) damages resulting from the breach.”) (quoting Vega v.
T-Mobile USA, Inc., 564 F.3d 1256, 1272 (11th Cir. 2009)).
E.
Breach of Implied Covenant of Good Faith & Fair Dealing — Count II
Plaintiff claims BOA and/or U.S. Bank and Nationstar breached the Mortgage’s implied
covenant of good faith and fair dealing. (See SAC ¶¶ 65–72). Defendants contend Count II must
be dismissed because Plaintiff has not identified any express terms breached; Plaintiff breached
the Mortgage first; section 5 of the Mortgage gave Defendants discretion to force-place insurance;
and allowing this claim would override section 5 of the Mortgage and materially alter the
Mortgage’s express terms. (See Mot. 19–21).
“Under Florida law, every contract contains an implied covenant of good faith and fair
dealing, requiring that the parties follow standards of good faith and fair dealing designed to
protect the parties’ reasonable contractual expectations.” Centurion Air Cargo, Inc. v. United
Parcel Service Co., 420 F.3d 1146, 1151 (11th Cir. 2005) (citation omitted). “[W]here the terms
of the contract afford a party substantial discretion to promote that party’s self-interest, the duty to
act in good faith nevertheless limits that party’s ability to act capriciously to contravene the
reasonable contractual expectations of the other party.” Cox v. CSX Intermodal, Inc., 732 So. 2d
1092, 1097–98 (Fla. 1st DCA 1999) (alteration added; citation omitted). To state a claim for
breach of the implied covenant of good faith in Florida, “a plaintiff must allege ‘an express term of
a contract was violated.’” Hamilton I, 2014 WL 1285859, at *8 (quoting Medinis v. Swan, 955
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So. 2d 595, 597 (Fla. 2d DCA 2007)); see Resnick v. AvMed, Inc., 693 F.3d 1317, 1329 (11th Cir.
2012) (same).
Plaintiff’s allegations relate to express provisions in the Mortgage. Plaintiff identifies a
breach of section 9 of the Mortgage, which states “Lender may do and pay for whatever is
reasonable or appropriate to protect the Lender’s interest in the Property.” (SAC ¶ 42 (emphasis
in original)). In Hamilton I, the court found plaintiffs sufficiently alleged the express terms of
their mortgages were violated where their claim related to the “express provisions in the Plaintiffs’
mortgage contracts that gave SunTrust discretion to force-place insurance on Plaintiffs’ properties
if coverage lapsed.” 2014 WL 1285859, at *8; see also Abels, 678 F. Supp. 2d at 1278–79
(holding plaintiffs stated a claim where they alleged facts showing lender acted in bad faith in
exercising its discretion to force-place insurance).
Simply because section 5 of the Mortgage is silent as to the standards the lender is to
employ in exercising its discretion to provide force-placed insurance does not excuse Defendants
from the obligation to act in good faith. See Cox, 732 So. 2d. at 1097 (“[T]he parties’ intent to be
bound by an enforceable contract raises an implied obligation of good faith to observe reasonable
limits in exercising that discretion, consistent with the parties’ purpose or purposes in contracting.”
(alteration added; citation omitted)). Plaintiff has sufficiently alleged Defendants’ actions were
“unconscionable,” motivated by “bad faith” and self-interest. (SAC ¶¶ 50–51); see also id. ¶ 71
(outlining sixteen breaches by BOA and/or U.S. Bank)).
Although “the implied obligation of good faith cannot be used to vary the express terms of
a contract,” Cox, 732 So. 2d at 1098, Plaintiff does not seek to alter the Mortgage’s terms.
Plainly, he seeks to hold Defendants accountable for not exercising their discretion in good faith.
(See SAC ¶ 70). Plaintiff’s allegations BOA and/or U.S. Bank, as a party to the Mortgage, and
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Nationstar, as the current servicer, acted in bad faith in contravention of Plaintiff’s reasonable
expectations under the contract sufficiently state a claim for breach of the implied covenant.
F.
Breach of Fiduciary Duty — Count IV
Defendants argue the four-year statute of limitations bars Plaintiff’s breach of fiduciary
duty claim in Count IV.
(See Mot. 26–27).
They also assert a lender does not owe a fiduciary
duty to a borrower in an arm’s length transaction.
(See id. 27–28).
Generally, the question of whether a claim is barred by the statute of limitations is best
raised as an affirmative defense in the answer, rather than in a motion to dismiss.
See Spadaro
v. City of Miramar, 855 F. Supp. 2d 1317, 1328 (S.D. Fla. 2012) (citing Cabral v. City of Miami
Beach, 76 So. 3d 324, 326 (Fla. 3d DCA 2011)).
“At the motion-to-dismiss stage, a complaint
may be dismissed on the basis of a statute-of-limitations defense only if it appears beyond a
doubt that Plaintiffs can prove no set of facts that toll the statute.”
Lindley v. City of
Birmingham, Ala., 515 F. App’x 813, 815 (11th Cir. 2013) (alteration added) (quoting Tello v.
Dean Witter Reynolds, Inc., 410 F.3d 1275, 1288 n.13 (11th Cir. 2005)).
Pursuant to Florida law, there is a four-year statute of limitations for “[a]n action founded
on negligence,” FLA. STAT. § 95.11(3)(a), “[a] legal or equitable action founded on fraud,” id. §
95.11(3)(j), and “[a]ny action not specifically provided for in these statutes” id. § 95.11(3)(p).
Absent certain exceptions, such as equitable tolling or delayed discovery, 4 “the time within
which an action shall be begun under any statute of limitations runs from the time the cause of
action accrues.” Id. § 95.031. “A cause of action accrues when the last element constituting
the cause of action occurs.”
Id. § 95.031(1). “The last element constituting a cause of action
for . . . breach of fiduciary duty is the occurrence of damages.”
Kelly v. Lodwick, 82 So. 3d
4 In Florida, “[t]he discovery rule delays the accrual of a cause of action until the happening of an event
likely to put the plaintiff on notice of the existence of a cause of action.” Thomas v. Lopez, 982 So. 2d
64, 67 (Fla. 5th DCA 2008) (alteration added; citation omitted).
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855, 857 (Fla. 4th DCA 2011) (alteration added; citations omitted).
Plaintiff alleges Defendants failed to remove the unauthorized charge, continued charging
him, and improperly established an escrow account to do so. (See SAC ¶¶ 21, 28, 46 n.5).
Plaintiff does not plead the dates the insurance premium payments were made or when the
escrow account was established.
If “an obligation is continuing in nature, a party’s ‘ongoing
nonperformance constitute[s] a continuing breach while the contract remain[s] in effect.’” Grove
Isle Ass’n, Inc. v. Grove Isle Assocs., LLLP, 137 So. 3d 1081, 1095 (Fla. 3d DCA 2014)
(alterations in original; citation omitted) (allowing breach of contract claims within the five-year
statute of limitations where complaint alleged defendant continually breached a declaration by
charging annual fees and dues in excess of an initial membership fee). It is not clear Plaintiff’s
claim is untimely.
See Omar ex rel. Cannon v. Lindsey, 334 F.3d 1246, 1252 (11th Cir. 2003)
(explaining the “statute of limitations issue” could not be resolved because it depended on “facts
not yet in evidence” or by “construing factual ambiguities in the complaint” in favor of the
defendants).
Because of the continuous nature of the alleged charges, and given Plaintiff does
not specify the date the escrow account was established, the Court declines to dismiss the breach
of fiduciary claim as time-barred.
Plaintiff asserts BOA’s unilateral creation and management of an escrow account to
charge Plaintiff force-placed insurance premiums established a fiduciary duty owed to him. (See
Resp. 26–27). The elements of a breach of fiduciary duty claim in Florida are: “the existence of
a fiduciary duty, and the breach of that duty such that it is the proximate cause of the plaintiff’s
damages.”
Gracey v. Eaker, 837 So. 2d 348, 353 (Fla. 2002) (footnote call number omitted).
As the parties note, a lender generally does not owe a fiduciary duty to a borrower under Florida
law.
See Jaffe v. Bank of Am., N.A., 395 F. App’x 583, 590 (11th Cir. 2010); Capital Bank v.
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
MVB, Inc., 644 So. 2d 515, 518 (Fla. 3d DCA 1994).
But a fiduciary duty may be found where
“the lender [1] takes on extra services for a customer, [2] receives any greater economic benefit
than from a typical transaction, or [3] exercises extensive control.” Mahdavieh, 2014 WL
1365425, at *5 (alterations and emphasis in original; internal quotation marks omitted) (quoting
Bld’g Educ. Corp. v. Ocean Bank, 982 So. 2d 37, 41 (Fla. 3d DCA 2008)). Further, “an escrow
holder generally owes a fiduciary duty to the parties to the escrow transaction.” Id. (citations
omitted).
Plaintiff alleges BOA and/or U.S. Bank took on extra services by unilaterally establishing
and managing an escrow account over which the lender exercised extensive control. (See SAC ¶¶
87–88).
BOA received a greater economic benefit in that the lender charged Plaintiff an
excessive amount of forced-placed premiums from which BOA and its affiliates then received
impermissible kickbacks or other compensation. (See id. ¶ 88). Plaintiff alleges this amount
was greater than what was contemplated in the Mortgage. (See id.). BOA allegedly breached its
fiduciary duty by intentionally charging and withdrawing from escrow amounts covering
kickbacks, fees, and other compensation, and by charging Plaintiff for backdated insurance
coverage.
(See id.; Resp. 26–27).
Viewed in the light most favorable to Plaintiff, these
allegations state a claim of breach of fiduciary duty. See Mahdavieh, 2014 WL 1365425, at *5
(Allegations “STM, as the escrow holder, breached its fiduciary duty to Plaintiffs by charging
them for unnecessary and excessive force-placed insurance . . . [and] STM received a greater
economic benefit than from a typical mortgage transaction because it received unearned kickbacks
in connection with its force-placed insurance scheme” were sufficient to sustain plaintiffs’ claim
of breach of fiduciary duty. (alterations added; citing cases)).
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G.
Fraud in the Inducement — Count V
Defendants challenge Plaintiff’s claim for fraud in the inducement in Count V against
BOA and U.S. Bank. (See Mot. 29). The parties agree Plaintiff has failed to raise sufficient
allegations against U.S. Bank to state a claim.
To state a cause of action for fraudulent inducement, a plaintiff must plead: “(1) the
defendant made a false statement about a material fact; (2) the defendant knew the statement was
false when he made it or was without knowledge of its truth of falsity; (3) the defendant intended
that the plaintiff rely and act on the false statement; and (4) the plaintiff justifiably relied on the
false statement to his detriment.” Barrett v. Scutieri, 281 F. App’x 952, 953 (11th Cir. 2008)
(citation omitted). Further, Florida law requires “a plaintiff plead an injury “[r]esulting [from]
acting in justifiable reliance on [a fraudulent] representation.” Odyssey Marine Exploration, Inc.
v. Unidentified, Shipwrecked Vessel or Vessels, 512 F. App’x 890, 894 (11th Cir. 2013)
(alterations in original; citation and internal quotation marks omitted). Under Federal Rule of
Civil Procedure 9(b), a plaintiff must also plead the circumstances constituting fraud with
particularity. See also Zarrella v. Pacific Life Ins. Co., 755 F. Supp. 2d 1218, 1223–24 (S.D. Fla.
2010).
As the basis for his claim, Plaintiff alleges BOA, via Countrywide, “made one or more
statements to Plaintiff to the effect that if Plaintiff agreed to pay a higher fee or rate, Plaintiff
would not be required to establish and maintain an escrow account for insurance and/or taxes.”
(SAC ¶ 93). Plaintiff alleges BOA via Countrywide “knew or should have known the statement .
. . was false” (id. ¶ 94), “intended to induce Plaintiff to rely and act on the statement” (id. ¶ 95),
Plaintiff relied on the statement in entering into the Mortgage and Note (see id. ¶ 96), and as a
result, Plaintiff suffered damages (see id. ¶¶ 96–97). These vague and conclusory allegations
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
simply mirror the elements of the tort and are insufficient to state a claim for relief, particularly
under Rule 9’s heightened pleading standard. Consequently, Count V for fraud in the inducement
is dismissed.
H.
Unjust Enrichment — Counts III and VI
Plaintiff alleges claims for unjust enrichment against BOA, U.S. Bank, and Nationstar in
Count III, and against Lexington in Count VI. Defendants allegedly received benefits from
inflated force-placed insurance premiums, kickbacks and commissions, captive reinsurance
arrangements, and subsidized loan servicing costs. (See SAC ¶ 75). Defendants will be unjustly
enriched if allowed to retain these benefits.
(See id. ¶¶ 84, 104). Defendants argue the unjust
enrichment claims fail because they are barred by the statute of limitations and the existence of
Plaintiff’s Mortgage and Note. (See Mot. 22–24). They further argue Plaintiff fails to satisfy the
elements to state a claim for unjust enrichment. (See id. 25–26).
A claim of unjust enrichment has four elements: “(1) the plaintiff conferred a ‘direct
benefit’ on the defendant, (2) the defendant had knowledge of the benefit, (3) the defendant
accepted or retained the benefit, and (4) it would be inequitable under the circumstances for the
defendant to retain the benefit without paying fair value for it.” Hamilton v. Suntrust Mortg. Inc.,
No. 13-60749-CIV, 2014 WL 1285868, at *3 (S.D. Fla. Mar. 28, 2014) (hereinafter Hamilton II)
(citing Merle Wood & Assocs., Inc. v. Trinity Yachts, LLC, 714 F.3d 1234, 1237 (11th Cir. 2013))
(other citations omitted). “[A] plaintiff must show that the defendant received a direct benefit
from the plaintiff.” Id. (alteration in original) (quoting Malamud v. Syprett, 117 So. 3d 434, 438
(Fla. 2d DCA 2013)).
The statute of limitations for unjust enrichment in Florida is four years. See FLA. STAT. §
95.11(3). Plaintiff’s unjust enrichment claim is not barred by the statute of limitations for the
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same reasons Plaintiff’s fiduciary duty is not. Defendants allegedly continue to charge excessive
premiums and retain the related benefits.
Defendants next argue the lender-placed insurance and any charges related to it are
governed by Plaintiff’s Mortgage, and therefore the quasi-contractual claims of unjust
enrichment fail as a matter of law.
(See Mot. 24–25).
Florida courts have held that “‘a
plaintiff cannot pursue a quasi-contract claim for unjust enrichment if an express contract exists
concerning the same subject matter.’”
1021018 Alberta Ltd. v. Netpaying, Inc., No.
8:10-CV-568-T-27MAP, 2011 WL 1103635, at *5 (M.D. Fla. Mar. 24, 2011) (quoting Diamond
“S” Dev. Corp. v. Mercantile Bank, 989 So. 2d 696, 697 (Fla. 1st DCA 2008)); see also
Zarrella, 755 F. Supp. 2d at 1227. However, causes of action may be pleaded in the alternative,
even if the legal arguments are inconsistent. See FED. R. CIV. P. 8(a), 8(d). But a claim of unjust
enrichment may only be pleaded in the alternative where one of the parties asserts the contract
governing the dispute is invalid.
See Zarrella, 755 F. Supp. 2d at 1227 (quoting In re Managed
Care Litig., 185 F. Supp. 2d 1310, 1337–38 (S.D. Fla. 2002)).
Defendants insist the unjust enrichment claims are based on an express written contract
and therefore fail. (See Mot. 25).
But nowhere in the SAC does Plaintiff state all Defendants
are parties to the Mortgage and Note and that these contracts expressly govern Defendants.
Plaintiff only alleges he entered into a Mortgage and Note with Countrywide; contracts
subsequently transferred to BOA.
And in their Motion, Defendants challenge the general
sufficiency of the allegations of successor liability against Defendants precisely because the
Mortgage may not expressly govern each of them.
To the extent Defendants challenge whether the Mortgage governs their relationships
with Plaintiff, Defendants are essentially contesting the validity of the contract.
23
See Williams,
CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
2011 WL 4901346, at *6.
While Plaintiff may certainly not recover under both theories against
the same Defendant, Defendants’ arguments that the unjust enrichment claims fail in light of the
existence of Plaintiff’s Mortgage are unavailing.
See Kunzelmann v. Wells Fargo Bank, N.A.,
No. 9:11–cv–81373–DMM, 2012 WL 2003337, at *6 (S.D. Fla. June 4, 2012).
Defendants next argue Plaintiff did not confer any benefit on them, and if a benefit was
conferred, retaining it is “not inequitable” because the Mortgage permitted the lender to
force-place insurance if the borrower’s policy lapsed. (Mot. 25–26). Defendants contend no
benefit was conferred by Plaintiff because the force-placed insurance was automatically imposed
without his consent or involvement. (See id. 25). The fact Plaintiff was unaware of or did not
consent to the force-placed insurance premiums does not make the commissions or kickbacks any
less a benefit conferred to Defendants at Plaintiff’s expense. Likewise, Defendants’ alleged
retention of benefits, including inflated premiums, commissions, and service fees, would be
inequitable. See Williams, 2011 WL 4901346, at *5 (finding plaintiffs directly conferred a
benefit where the bank received kickbacks and/or commissions taken from plaintiffs’ excessive
insurance premium payments).
I.
Tortious Interference with a Business Relationship — Count VII
Defendants argue Lexington did not interfere with Plaintiff’s business relationship with
BOA, nor induce BOA to breach its mortgage contract with Plaintiff.
(See Mot. 30).
Defendants also assert Lexington’s actions were privileged, as Lexington issued an insurance
policy pursuant to an agreement it had with BOA.
(See id. 31).
To state a claim of tortious interference with a business relationship a plaintiff must
allege: “(1) the existence of a business relationship under which the plaintiff has legal rights; (2)
knowledge of the relationship on the part of the defendant; (3) an intentional and unjustified
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
interference with that relationship by the defendant; and (4) damage to the plaintiff as a result of
the breach of the business relationship.”
Bortell v. White Mountains Ins. Grp., Ltd., 2 So. 3d
1041, 1048 (Fla. 4th DCA 2009) (citation and internal quotation marks omitted); see Gregg v.
U.S. Indus., Inc., 887 F.2d 1462, 1473 (11th Cir. 1989).
“[T]he tort of intentional interference
with contract is meant to protect the parties (including third-party beneficiaries, assignees, and
others having the rights of parties) to contracts. . . .” CSY Liquidating Corp. v. Harris Trust &
Sav. Bank, 162 F.3d 929, 932–33 (7th Cir. 1998) (alterations added; citations omitted).
“[I]nterference is unjustified where the interfering defendant is a stranger to the business
relationship[;]” in other words, the defendant lacks “any beneficial or economic interest in, or
control over, that relationship.” Hamilton II, 2014 WL 1285868, at *6 (alterations added; citation
and internal quotation marks omitted). Whether a defendant “‘acted without justification . . .
requires an examination of the defendant’s conduct, its motive, and the interests it sought to
advance.’” Duty Free Ams., Inc. v. Estee Lauder Cos., Inc., No. 12-60741-CIV, 2014 WL
1329359, at *16 (S.D. Fla. Mar. 31, 2014) (alteration added; citation omitted).
Defendants insist the tortious interference claim fails because Lexington’s conduct is
privileged.
(See Mot. 31–32; Reply 19–20). This privilege argument, however, is unavailing
on a motion to dismiss.
See Int’l Sales & Serv., Inc. v. Austral Insulated Prods., Inc., 262 F.3d
1152, 1161 (11th Cir. 2001) (“[After] a plaintiff pleads and proves a prima facie case for tortious
interference, the burden is on the defendant to avoid liability by showing his action is
privileged[,]” and “whether an action is privileged is a jury question.” (alterations added; citation
and internal quotation marks omitted)).
Further, the “privilege is not unlimited,” as “it does not afford an absolute shield to
liability.” Hamilton II, 2014 WL 1285868, at *7 (quoting CSDS Aircraft & Leasing, Inc. v. Lloyd
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
Aereo Boliviano Airlines, No. 09-CIV-22274, 2011 WL 1559823, at *5 (S.D. Fla. Apr. 22, 2011)).
“[E]ven for ‘non-strangers’ to a contract, the privilege to interfere is a valid defense only to the
extent the interference was done in good faith. In other words, parties are disqualified from
asserting the privilege if they act maliciously or with conspiratorial motives. . . .” Id. (alterations
added and in original; emphasis in original). According to Defendants, Plaintiff does not allege
“improper conduct by Lexington,” such as “physical violence, misrepresentations, illegal conduct
or threats of illegal conduct.” (Mot. 32). As discussed, Plaintiff alleges Defendants acted in bad
faith, colluding to receive kickbacks and reinsurance, and failing to disclose these self-serving
activities to Plaintiff.
In challenging whether Plaintiff’s allegations satisfy the elements of tortious interference,
Defendants contend Plaintiff must plead a “breach or termination of his Mortgage.” (Reply 18).
Defendants insist Plaintiff does not state a claim because he fails to allege “any business
relationship — prospective, ongoing, or otherwise — was not completed, [or was] terminated or
severed.”
(Id. (alteration added)).
The Court declines to construe a claim for tortious
interference so narrowly.
The “breach” Defendants refer to essentially encompasses the third and fourth elements of
this cause of action. “As a general rule, an action for tortious interference with a business
relationship requires a business relationship evidenced by an actual and identifiable understanding
or agreement which in all probability would have been completed if the defendant had not
interfered.” Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So. 2d 812, 815 (Fla. 1994)
(finding no claim for tortious interference where the underlying business relationship was
speculative). However, the breach of a business relationship does not specifically require the
relationship be severed or the contract not be executed, even though these facts may be indicative
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
of breach and resulting damages. Cf. Smith v. Ocean State Bank, 335 So. 2d 641, 643 (Fla. 1st
DCA 1976) (“Even though appellant asserts no cause of action against Welton Smith for breach of
contract, this in itself does not bar appellant from asserting a cause of action against appellee if the
latter’s conduct constitutes a tortious interference with appellant’s business relationship with
Welton Smith.” (citation and internal quotation marks omitted)).
Plaintiff alleges Lexington entered into an exclusive relationship with BOA and/or U.S.
Bank to force-place insurance on Plaintiff’s property at inflated and unnecessary premium rates.
Lexington allegedly provided compensation to BOA and/or U.S. Bank in exchange for exclusivity,
and purposefully and knowingly charged Plaintiff exorbitant premiums in contravention of his
rights under the Mortgage. Under this practice, the cost of insurance was allegedly up to ten times
more expensive than borrower-placed insurance.
These allegations are sufficient to show
Lexington, in executing the force-placed insurance scheme, acted in bad faith to interfere with
BOA and/or U.S. Bank’s business relationship with Plaintiff.
See Hamilton II, 2014 WL
1285868, at *7; Williams v. Wells Fargo Bank, N.A., No. 11–21233–CIV, 2011 WL 4368980, at
*12 (S.D. Fla. Sept. 19, 2011). Accordingly, Plaintiff sufficiently alleges Lexington’s actions
were not justified and constituted a breach of the business relationship. Likewise, Plaintiff has
adequately pleaded he suffered damages in the form of unnecessary and inflated premiums.
IV. CONCLUSION
Based on the foregoing, it is
ORDERED AND ADJUDGED that Defendants’ Motion [ECF No. 22] is GRANTED
in part and DENIED in part.
with leave to amend.
Defendant Countrywide is dismissed.
Count V is dismissed
Plaintiff has until September 4, 2014 to file an amended complaint.
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CASE NO. 14-21819-CIV-ALTONAGA/O’Sullivan
DONE AND ORDERED in Chambers at Miami, Florida, this 27th day of August, 2014.
___________________________________
CECILIA M. ALTONAGA
UNITED STATES DISTRICT COURT
cc:
counsel of record
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