Schilke v. Wells Fargo & Co. et al

Filing 116

MEMORANDUM Opinion and Order Signed by the Honorable Robert M. Dow, Jr on 9/28/2011. Notices Mailed by Judge's Staff(tbk, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MARTHA SCHILKE, both individually and as
a representative of all other persons similarly
situated,
Plaintiff,
v.
WACHOVIA MORTGAGE, FSB f/k/a World
Savings Bank, FSB, and AMERICAN
SECURITY INSURANCE, INC.,
Defendants.

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Case No. 09-cv-1363
Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER
This matter is before the Court on Plaintiff’s motion for leave to file a third amended
complaint [80]. For the reasons set forth below, Plaintiff’s motion for leave to file a third
amended complaint [80] is denied and the claims against Defendants Wachovia Mortgage FSB
and American Security Insurance, Inc. are dismissed with prejudice.
I.

Background1
A.

Procedural Background

This putative class action arises out of a home mortgage loan that Plaintiff Martha
Schilke obtained from World Savings Bank FSB, now known as Wachovia Mortgage FSB
(“Wachovia”), and the subsequent purchase of hazard insurance for the mortgaged property by
Wachovia from American Security Insurance Company (“ASI”). On March 29, 2009, Plaintiff
filed a first amended class action complaint alleging various state law claims against Defendants
Wachovia and ASI based on the premiums that she was charged for the lender placed insurance.
1

For purposes of Plaintiff’s motion to amend, the Court assumes as true all well-pleaded allegations set
forth in the proposed third amended complaint. See, e.g., Killingsworth v. HSBC Bank Nevada, N.A., 507
F.3d 614, 618 (7th Cir. 2007).

Wachovia and ASI both filed motions to dismiss, which the Court granted on March 30, 2010.
In the opinion, the Court concluded that Plaintiff’s claims against Defendant Wachovia were
expressly preempted by the Home Owners Loan Act (“HOLA”), 12 U.S.C. §§ 1461 et seq., and
the implementing regulations promulgated by the Office of Thrift Supervision (“OTS”), 12
C.F.R. §§ 560.1 et seq. The Court further concluded that all of Plaintiff’s claims against
Defendant American Security Insurance Company (“ASI”)—apart from her claim for injunctive
relief under the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815
ILCS § 505/1, et seq.—were barred by the filed rate doctrine. The Court determined that
Plaintiff’s ICFA claim against ASI failed because Plaintiff was unable to establish the element of
proximate causation.
Plaintiff then filed a motion for leave to file a second amended complaint pursuant to
Federal Rules of Civil Procedure 15(a)(2) and to vacate the judgment pursuant to Rule 60(b)(6)
and a motion to alter or amend the judgment pursuant to Rule 59(e). In December 2010, the
Court granted Plaintiff’s motion to alter or amend the judgment, vacating the judgment entered
on March 30, 2010, and reinstating Plaintiff’s claim for injunctive relief against ASI under the
ICFA; however, the Court denied Plaintiff’s motion for leave to file a second amended
complaint. The Court advised Plaintiff that if she believed she could cure the deficiencies noted
in the Court’s two lengthy opinions, she had thirty days in which to file a motion for leave to file
another proposed amended complaint.
On February 10, 2011, Plaintiff filed a motion for leave to file third amended complaint,
to which both Defendants responded. Defendant ASI attached exhibits to their response brief,
maintaining that two of the exhibits establish the futility of the amendment based on a lack of
jurisdiction over a newly proposed Defendant, Assurant, Inc. Plaintiff responded with a motion

2

to strike ASI’s exhibits [88] as well as a motion for sanctions [93]. Plaintiff also seeks a stay of
any decision regarding personal jurisdiction as to Assurant until Plaintiff has completed
“jurisdictional” discovery. Finally, Plaintiff filed a motion to cite additional authority [113].
B.

Factual Background

In March 2006, Schilke entered into a home mortgage loan with World Savings Bank
FSB, which is now Wachovia. The mortgage agreement required Schilke to maintain hazard
insurance for the mortgaged property. The mortgage further provided that if Schilke failed to
maintain hazard insurance, Wachovia could “do and pay for whatever it deems reasonable or
appropriate to protect [its] rights in the Property,” including “purchasing [the] insurance
required.” The mortgage expressly advised Schilke that insurance purchased by Wachovia “may
cost more and provide less coverage than the insurance [plaintiff] might purchase.”
At closing, Schilke also signed a Notice of Fire/Hazard Insurance Requirement which
further explained her insurance obligations.

It provided that if Wachovia did not receive

evidence of insurance coverage, “we may at our sole option, obtain an insurance policy for our
benefit only, which would not protect your interest in the property or the contents.” This
disclosure also stated that in the course of purchasing such replacement insurance, Wachovia
“may assess a processing fee and our affiliated insurance agent could collect a commission from
the insurer. The cost of such insurance could be at least two to five times greater and provide
you with less protection than insurance you could purchase directly from an insurer.”
Schilke contracted to purchase hazard insurance for the mortgaged property through
Grange Mutual Insurance on January 1, 2008. Schilke paid a premium of $841 for the Grange
insurance policy, which had a $500 deductible.

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On May 9, 2008, Wachovia sent Schilke a letter requesting insurance information for the
property. The letter requested proof of insurance within 14 days, explained that “[f]ailure to
provide this information may result in a policy being purchased by us at your expense to protect
our interest,” and advised Schilke that the policy Wachovia would purchase would have a
premium of $2,034. The letter advised that Schilke’s monthly mortgage payment would be
adjusted to cover the cost of the insurance and disclosed that the “premium may include
compensation to the insurer and Wachovia Mortgage for tracking customers’ compliance with
Wachovia Mortgage Insurance requirements.” Id.
Schilke did not respond to Wachovia’s May 9, 2008 letter. On June 12, 2008, Wachovia
sent a second notice requesting evidence of insurance and informing Schilke that it had placed a
temporary insurance policy on the property. The June 12 notice contained the same disclosures
as the May 9 notice and also disclosed that the loan premium was higher than most other policies
because “the American Security Insurance Company will insure your property automatically
without inspecting it.” Again, Plaintiff did not respond or notify Wachovia that she had secured
property insurance.
On July 18, 2008, Wachovia sent Schilke a letter notifying her that it had purchased
insurance from ASI with an annual premium of $2,034.2 The letter advised Schilke that “[t]he
cost of this policy is probably greater than the cost of comparable coverage obtained through
your own insurance agency” and that “[t]he costs may include compensation to the Insurer and
Wachovia Mortgage.” The ASI policy had an effective date of April 8, 2008, the date on which

2

The Court will consider the May 9, June 12, and June 18 letters, despite the fact that not all were
attached to Plaintiff’s complaint, because they have been referred to in different versions of Plaintiff’s
complaints and are central to Plaintiff’s claims (which are based in part on the allegation that Defendants
misrepresented the nature of the insurance premium). There has been no objection to the authenticity of
the letters.

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Plaintiff’s private insurance had lapsed. The notice advised Schilke that she still could obtain her
own coverage, and that if she did so, Wachovia would return to her any premium paid to ASI
that proved to be unnecessary.
The ASI policy covered Schilke for a smaller loss than did her previous policy. Schilke
alleges that the insurance premium that she was charged for the ASI policy included undisclosed
fees – which Schilke terms “kickbacks” – paid to Defendants for the placement, maintenance,
and servicing of the insurance. Schilke alleges that she “could not know that the amounts being
billed as ‘insurance premiums’ were not, in fact, the true cost of the actual insurance coverage.”
Schilke also complains that Defendants knew that they were charging Plaintiff for “backdated
insurance” as they knew that no loss had been claimed since Plaintiff let her private insurance
lapse.
Schilke’s proposed third amended complaint organizes her claims into three separate
groups: (1) claims which only seek injunctive relief prohibiting alleged payments from ASI to
Wachovia (Counts 1-4), (2) claims which seek damages for such alleged payments (Counts 512), and (3) claims which seeks damages for the “backdating” of the ASI insurance (Counts 1321).

With respect to the injunctive relief claims, in her prior complaints, Plaintiff alleged that

Wachovia violated the Illinois Consumer Fraud Act (the “ICFA”). In the most recent complaint,
Plaintiff has dropped that claim as to Wachovia, and now asserts that claim only against ASI, and
seeks only injunctive relief, and not damages. However, Plaintiff now alleges that Wachovia
assisted ASI in committing consumer fraud, and asserts three additional claims for aiding and
abetting (Count II), acting “in concert” (Count III), and conspiracy (Count IV). These claims are
included in the section entitled “Counts for Injunctive Relief,” although Plaintiff has not
identified what injunctive relief, if any, she is seeking against Wachovia.

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Counts V – XII seek damages for the alleged “kickbacks” that were paid in connection
with the lender-placed insurance.

Plaintiff brings claims against Wachovia for conversion

(Count V), breach of contract (Count VI), unjust enrichment in quasi contract (VII), and unjust
enrichment in tort (VIII); the remainder of the counts are against ASI for aiding and abetting
(Count IX), acting “in concert” (Count X), conspiracy (Count XI), and intentional interference
(Count XII). Plaintiff’s breach of contract claim alleges that, because the mortgage does not
mention payment of any amounts to Wachovia, it was a breach of contract for Wachovia to
receive such payments.

See Third Amended Complaint (“TAC”) ¶¶ 186-88.

Plaintiff

acknowledges that the Court previously rejected this view of the contract. See TAC ¶ 187
(asserting allegation “[d]espite this Honorable Court’s December 14, 2010 ruling”).
In Counts XIII through XXI, Plaintiff alleges that Defendants acted improperly by
purchasing “backdated” insurance coverage. Plaintiff is not alleging that Wachovia purchased
insurance for a period that overlapped with any time during which Plaintiff’s private insurance
was in effect. Indeed, the documents show that the effective date of the ASI policy (April 8,
2008) was the same date that her own private policy lapsed. As a result, what Plaintiff alleges is
that Wachovia lacked the right to ensure continuous coverage during the period that it allowed
her the opportunity to demonstrate that Wachovia’s replacement insurance was unnecessary.
The specific claims asserted against Wachovia are conversion (Count XIII), breach of contract
(Count XIV), unjust enrichment in quasi contract (XV), and unjust enrichment in tort (XVI).
The remaining claims are against ASI for aiding and abetting (Count XVII), acting “in concert”
(Count XVIII), conspiracy (Count XIX), and intentional interference (Count XX). Finally,
Plaintiff brings a cause of action entitled “liability” (Count XXI) against Assurant and alleges
that Assurant is liable for each of the counts directed at ASI.

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II.

Legal Standard on a Motion to Amend
It is well-settled that a district court can deny a motion for leave to amend when the

amended pleading would be futile. Bethany Phamacal Co. v. QVC, Inc., 241 F.3d 854, 861 (7th
Cir. 2001). An amended complaint is considered to be futile if it could not withstand a motion to
dismiss. See Smart v. Local 702 Intern. Broth. Of Elec. Workers, 562 F.3d 798, 811 (7th Cir.
2009). To survive a Rule 12(b)(6) motion to dismiss, the complaint first must comply with Rule
8(a) by providing “a short and plain statement of the claim showing that the pleader is entitled to
relief” (FED. R. CIV. P. 8(a)(2)), such that the defendant is given “fair notice of what the * * *
claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Second, the factual allegations
in the complaint must be sufficient to raise the possibility of relief above the “speculative level,”
assuming that all of the allegations in the complaint are true. E.E.O.C. v. Concentra Health
Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). “Detailed
factual allegations” are not required, but the plaintiff must allege facts that, when “accepted as
true, * * * ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, --- U.S. ----, ---, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 555). “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.” Iqbal, 129 S.Ct. at 1949.
“[O]nce a claim has been stated adequately, it may be supported by showing any set of facts
consistent with the allegations in the complaint.” Twombly, 550 U.S. at 563.

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III.

Analysis
A.

Claims Against Wachovia

When considering Plaintiff’s previous request for leave to amend, the Court concluded
that permitting leave to amend as to Wachovia would be futile because
[a]s explained in the Court’s prior opinion [Doc. No. 51], Plaintiff’s state law
claims are preempted if allowing those claims to go forward would effectively
regulate the lending activities expressly contemplated by 12 C.F.R. § 560.2(b).
Section 560.2(b) provides that state laws purporting to impose requirements
regarding certain types of activities (enumerated in subsections (1)-(13) of the
provision) are preempted by OTS regulations pursuant to HOLA. 12 C.F.R. §
560.2(b). The ICFA claims against Wachovia in Plaintiff’s proposed second
amended complaint—even if based on conduct now described as “unfair” as well
as “deceptive”—would affect Wachovia’s “ability * * * to require or obtain
private mortgage insurance” (§ 560.2(b)(2)); its imposition of loan-related fees (§
560.2(b)(5)); and its disclosure of loan terms (§ 560.2(b)(9)).
As demonstrated below, Plaintiff’s latest effort to amend fails to cure the fundamental defects
and also fails to address the Court’s repeated explanations as to why the claims are deficient.
Plaintiff persists in referring to the payments that Wachovia receives from ASI in
connection with the purchase of replacement insurance as “kickbacks.” The Court previously
concluded that such allegations are preempted. The Court declines to again repeat the history of
HOLA and the preemption principles found in the Court’s two prior twenty-one page opinions.
Rather, the Court focuses on the Seventh Circuit’s decision in Ocwen, which clearly articulates
several considerations for district courts in performing the preemption analysis.

In re Ocwen

Loan Servicing, LLC, 491 F.3d 638, 641-42 (7th Cir. 2007).
In Ocwen, the Seventh Circuit interpreted § 560.2 as giving the OTS “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 customers, and setting standards for processing and servicing

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mortgages,” but “no power to adjudicate disputes between the S & Ls and their customers.” 491
F.3d at 643. The Seventh Circuit also concluded that § 560.2 “does not deprive persons harmed
by the wrongful acts of savings and loan associations of their basic state common-law-type
remedies.” Id. For example, the court explained that if an S & L were to sign a mortgage
agreement with a homeowner and charge the homeowner a higher annual interest rate than that
specified in the mortgage agreement, § 560.2 would not preempt a breach of contract claim by
the homeowner. Id. at 643-44. Similarly, the court opined that § 560.2 would not preempt a
mortgagor’s fraud claim where the mortgagee fraudulently represents to the mortgagor that it
will forgive a default, and then foreclosed. Id. at 644.
However, in analyzing the plaintiff’s claim that defendant “force plac[ed] insurance on
properties that already have insurance coverage,” the Seventh Circuit in Ocwen concluded there
was no indication that this practice involved either a breach of contract or misrepresentation and
thus “it is apparent that prohibiting [this practice] could interfere with federal regulation of
disclosure, fees, and credit terms.” Ocwen, 491 F.3d at 646. Here, Plaintiff does not even allege
that the insurance was “force placed” on a property that already had insurance coverage; instead,
the allegation is merely that Wachovia secured insurance when Plaintiff failed to maintain her
own.
In another instance, the Seventh Circuit stated that a claim that Ocwen charged “more for
replacement hazard insurance than what the insurance cost * * * may well be preempted.”
Ocwen, 491 F.3d at 647. The court indicated that it would be a different scenario if the loan
contract forbade the mortgagee to charge more than the cost of the insurance. Here, Plaintiff has
failed to point to any such language in her loan documents.

Rather, the loan documents

explicitly state that Wachovia may “do and pay for whatever it deems reasonable or appropriate

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to protect [its] rights in the Property,” including “purchasing [the] insurance required” and that
the insurance purchased by Wachovia “may cost more and provide less coverage than the
insurance [plaintiff] might purchase.” Furthermore, the insurance notice that Schilke signed at
closing provided that if Wachovia did not receive evidence of insurance coverage, it could obtain
an insurance policy for its benefit only, and that in the course of purchasing such replacement
insurance, Wachovia “may assess a processing fee and our affiliated insurance agent could
collect a commission from the insurer. The cost of such insurance could be at least two to five
times greater and provide you with less protection than insurance you could purchase directly
from an insurer.” Thus, rather than forbidding the mortgagee to charge more than the cost of the
insurance, Plaintiff should have been well aware of what would happen if she failed to maintain
her own coverage. There was no breach or misrepresentation. In fact, accepting the allegations
as true, it appears that Wachovia did exactly what it said it would do if Plaintiff failed to
maintain her mortgage insurance. To the extent that Plaintiff has a grievance, it may be that
HOLA allows mortgagees to include such terms in mortgage-related contracts. But Plaintiff has
not pointed to any law forbidding them, and if she thought the terms that would apply in the
event that she did not maintain her own mortgage insurance were too onerous or one-sided, she
was free to decline Wachovia’s offer and seek better terms elsewhere in the market.
Looking at the specific conduct being charged rather than the labels attached by Plaintiff,
as Ocwen instructs, the Court previously determined that the conduct alleged falls within the
scope of OTS regulation. Ocwen, 491 F.3d at 646 (explaining that whether claims are preempted
turns on “the specific conduct being charged”); see also Prince-Servance v. BankUnited, FSB,
2007 WL 3254432, at *5 (N.D. Ill. Nov. 1, 2007) (rejecting the argument that § 560.2 does not
preempt laws of general applicability). In her latest complaint, Plaintiff’s state law claims

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against Wachovia remain premised on the allegation that Wachovia failed to disclose that the
insurance premium that Plaintiff was charged for the ASI policy included fees paid to Wachovia
for the placement, maintenance, and servicing of the insurance. Thus, as before, Plaintiff is
seeking to use state laws to impose requirements on Wachovia’s “ability * * * to require or
obtain private mortgage insurance,” 12 C.F.R. § 560.2(b)(2); its imposition of loan-related fees,
id. § 560.2(b)(5); and its disclosure of loan terms, id. § 560.2(b)(9). Because each of these areas
is within the exclusive purview of the federal laws, Plaintiff’s state law claims are preempted to
the extent that they are based on Wachovia’s alleged failure to disclose the nature of the
insurance premiums.
In addition to alleging insufficient disclosures, the third amended complaint continues to
allege that Wachovia made false representations—specifically, that the amount Plaintiff was
charged for the ASI insurance was the cost of the insurance, when in fact Plaintiff also was
charged for additional fees. Once again, the Court already has addressed this argument in its
prior opinions. To the extent that Plaintiff’s claims are based on alleged false representations by
Wachovia, they may not be preempted. See Ocwen, 491 F.3d at 647 (common law fraud claim
alleging falsely representations “probably is not preempted”).

However, Plaintiff’s claims

nevertheless fail because Plaintiff has not identified an actionable misrepresentation. Contrary to
Plaintiff’s allegations, Wachovia did not represent that the amount Plaintiff was charged for the
ASI policy was the actual cost of the insurance coverage. The mortgage agreement between
Plaintiff and Wachovia provided that if Plaintiff failed to maintain hazard insurance, Wachovia
could “do and pay for whatever it deems reasonable or appropriate to protect [its] rights in the
Property,” including “purchasing [the] insurance required.” The loan documents also include the
following language: Wachovia “may assess a processing fee and our affiliated insurance agent

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could collect a commission from the insurer.” Then, to further clarify the terms of the loan
documents, in a letter dated May 9, 2008, Wachovia informed Plaintiff that “[f]ailure to provide
[proof of insurance] may result in a policy being purchased by us at your expense to protect our
interest,” and that the “premium may include compensation to the insurer and Wachovia
Mortgage.” Finally, the July 18, 2008 letter notifying Plaintiff that Wachovia had purchased
insurance from ASI stated that the cost of this policy “may include compensation to the Insurer
and Wachovia Mortgage.”
The “backdating” allegations found in the proposed third amended complaint, although
technically new, do not change the posture of this case. Ensuring that a property is adequately
insured is a core part of a bank’s lending activity. Try as she has over the course of four
complaints, Plaintiff does not claim that Wachovia has done anything other than what it was
entitled to do under the contract: ensure that its interest in the property was protected with
continuous, adequate insurance coverage. That was the conduct at issue before, and it remains
the conduct at issue now. In her reply brief, Plaintiff argues that “[e]ven if Plaintiff breached her
agreement by not maintaining insurance on her home, Wachovia doesn’t get to make up its own
remedy by backdating and charging Plaintiff for illusory coverage * * *.” But, setting aside the
superfluous language, that is exactly what Wachovia expressly reserved the right to do pursuant
to the terms of the agreement that Plaintiff signed. Furthermore, before charging her for the
continuous coverage that Wachovia’s loan required, Wachovia chose to give Plaintiff several
opportunities to prove that she had purchased her own coverage. Whether one calls that manner
of protecting Wachovia’s interest in the property “backdating” or just an effort at reasonable
customer relations is of no moment. Wachovia’s contractual right was to have continuous
coverage on the property. Wachovia was not under any obligation to determine whether the

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property had suffered any damage from the date that Plaintiff had allowed her coverage to lapse.
In fact, Wachovia explained to Plaintiff that the cost of replacement insurance is higher in part
because the policy is issued without any inspection of the property. The policy date is April 8,
2008—the same day that Plaintiff’s private insurance policy expired—and there are no
allegations that Wachovia’s coverage overlapped with Plaintiff’s.

Simply put, Plaintiff’s

“backdating” allegations ignore her contractual duty in her mortgage agreement to maintain
continuous, uninterrupted insurance on the property, which serves as security for the loan, and
also ignore the terms authorizing Plaintiff’s lender or servicer to “do and pay for whatever it
deems reasonable or appropriate to protect the Lenders’s rights in the Property.” (Emphasis
added).
At the end of the day, even putting aside the Court’s determination that Plaintiff’s claims
are preempted, the fundamental problem with Plaintiff’s allegations is that they are contradicted
by the documents that Plaintiff signed. The gravamen of Plaintiff’s claims is that Wachovia
somehow “knowingly or substantially assisted ASI in violating the Act” by “not disclosing the
kickbacks alleged in Count I.” See TAC ¶¶ 158, 164, 172. The allegations are undercut by the
documents showing that Wachovia did disclose the payment that Plaintiff refers to as a kickback,
as this Court noted in its first opinion. See DE 51 at 12 (rejecting the claim that Wachovia made
a false statement). Moreover, the third amended complaint—like the original, first, and second
amended complaints before it—does not point to any specific term of the contract that Wachovia
allegedly breached. In fact, the contract specifically discloses (1) that Wachovia would purchase
replacement insurance if Plaintiff failed to maintain insurance herself, (2) that Plaintiff would be
charged for that insurance, and (3) that the cost of the insurance likely would be higher than if
Plaintiff obtained private insurance and would include compensation to Wachovia. Wachovia’s

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conduct in purchasing the replacement insurance from ASI thus was entirely consistent with the
contract.
In sum, Plaintiff’s claims fail not only because Wachovia’s actions are specified in the
terms of the loan and thus preempted, but also because Plaintiff has not identified an actionable
misrepresentation or demonstrated that Wachovia breached the terms of the contract.

If

anything, Wachovia honored the agreement when it did exactly what it told Plaintiff it would
do—purchase an insurance policy at Plaintiff’s expense when Plaintiff failed to maintain its
obligations under the agreement by maintaining insurance on the property. The claims against
Wachovia are dismissed with prejudice.3
B.

Claims Against ASI

In accordance with the Illinois Administrative Code, which requires that insurance rates
be filed with the Illinois Department of Insurance (“DOI”), ASI filed the premium rates for the
policy purchased for Plaintiff by Wachovia with the DOI. Ill. Admin. Code tit. 50, §§ 754.10,
754.40.4 ASI’s filings set forth the formula used to calculate Plaintiff’s premium, and explain
that “commissions and brokerage fees” are part of the rate calculation. Throughout this case,
3

Plaintiff filed a motion to cite as additional authority Fletcher v. OneWest Bank, 2011 WL 2648606
(N.D. Ill. June 30, 2011). The Court grants Plaintiff’s request and has reviewed Fletcher; however, the
Fletcher decision does not change the Court’s conclusions in the present case. First, Fletcher did not
address HOLA, but rather the federal government’s Home Affordable Modification Program (“HAMP”).
But more importantly, Fletcher merely acknowledges what this Court consistently has recognized—
namely, that HOLA does not preempt “basic state common-law type remedies.” The disagreement with
Plaintiff’s argument comes not in the statement of this principle but in its application—Plaintiff’s causes
of action do not state a claim for any common-law type remedies. Although labeled as such, in substance
Plaintiff’s claims take issue with Defendants’ ability to require or obtain mortgage insurance, its
imposition of loan-related fees, and its disclosure of loan terms, all areas with the exclusive purview of
HOLA. See, e.g., Ocwen, 491 F.3d at 641-42. And to the extent that any part of the complaint is outside
of the scope of that preemption, Plaintiff has not identified an actionable misrepresentation, a breach of
contract, or any other colorable, non-preempted claim.

4

The Court takes judicial notice of ASI’s filings with the DOI, which ASI has submitted to the Court with
its motion to dismiss. See Exs. A-C to [27]; Menominee Indian Tribe of Wisconsin v. Thompson, 161
F.3d 449, 456 (7th Cir. 1998) (on a motion to dismiss, a court may consider judicially noticed documents,
including documents contained in the public record).

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ASI has maintained that all of Plaintiff’s claims against it are barred by the filed rate doctrine,
which forbids courts from invalidating or modifying rates that have been filed with regulatory
agencies. Goldwasser v. Ameritech Corp., 222 F.3d 390, 402 (7th Cir. 2000); Arsberry v.
Illinois, 244 F.3d 558, 562 (7th Cir. 2001).
Once again, the Court declines to repeat the history of the filed rate doctrine that can be
found in the Court’s two prior twenty-one page opinions. To summarize, the filed rate doctrine
bars courts from altering filed rates, and, by extension, prohibits a court from awarding a plaintiff
damages based on the difference between a filed rate and an allegedly lawful rate. The Court
also declines to revisit Plaintiff’s argument that the filed rate doctrine should not be applied in
the context of property insurance because doing so will not serve the purposes of the doctrine.
Numerous courts have held, contrary to Plaintiff’s contention, that the filed rate doctrine applies
to the insurance industry. See Richardson v. Standard Guar. Ins. Co., 853 A.2d 955, 964 (N.J.
Super. A.D. 2004) (holding that the filed rate doctrine applies to the insurance industry, and
noting “the considerable weight of authority from other jurisdictions that have applied the filed
rate doctrine to ratemaking in the insurance industry”); Schermer v. State Farm Fire and Cas.
Co., 702 N.W.2d 898, 907 (Minn. App. Ct. 2005) (collecting cases applying the filed rate
doctrine to the insurance industry). Similarly, Illinois courts have applied the filed rate doctrine
in the context of insurance premiums. See Anzinger v. Illinois State Medical Inter-Insurance
Exchange, 494 N.E.2d 655 (Ill. App. Ct. 1st Dist. 1986) (filed rate doctrine barred physicians’
suit to recover premiums paid to insurance carrier before carrier’s medical malpractice rates were
held to be excessive); Horwitz v. Bankers Life & Cas. Co., 745 N.E. 2d 591 (Ill. App. Ct. 1st
Dist. 2001) (filed rate doctrine barred insured’s breach of contract and ICFA claims against
insurer challenging the manner in which the insurer calculated health insurance premiums).

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Having determined that the filed rate doctrine is applicable in the insurance context, the
Court previously considered whether Plaintiff’s claims against ASI effectively challenge the
reasonableness of ASI’s insurance premium and whether the relief that Plaintiff seeks would
require this Court to determine the appropriate premium. In the latest proposed complaint, all of
Plaintiff’s claims against ASI continue to rest on the allegation that the insurance premium
charged to Plaintiff by ASI was unreasonable and unlawful because ASI failed to disclose that
the premium contained fees to be paid to Wachovia. As previously noted, at least four courts of
appeals have considered claims predicated on alleged failures to make certain disclosures in
connection with a filed rate, and each has found such claims to be barred under the filed rate
doctrine, at least to the extent that they sought monetary damages. See Evanns v. AT&T Corp.,
229 F.3d 837 (9th Cir. 2000) (filed rate doctrine bars claim that telecommunications carriers
were obligated to disclose that they passed-through certain FCC-imposed fees to consumers
where the fees were included in the carriers’ filed rates); Marcus v. AT&T Corp., 138 F.3d 46
(2d Cir. 1998) (filed rate doctrine bars claims alleging that company fraudulently concealed its
billing practice of rounding-up the length of customer’s long-distance calls to the next full
minute, where the company’s FCC-approved tariff provided that customers would be billed in
whole-minute increments); Hill v. BellSouth Telecommunications, Inc., 364 F.3d 1308 (11th Cir.
2004) (concluding that filed rate doctrine was implicated by plaintiff’s unfair trade practices and
fraud and negligent misrepresentation claims, which challenged defendant’s alleged practice of
misleading customers about the filed tariffs it charged to customers); Bryan v. BellSouth
Communications, Inc., 377 F.3d 424 (4th Cir. 2004) (filed rate doctrine bars unfair trade
practices claim alleging that company failed to make certain disclosures in connection with its
collection of certain fees as part of its tariff). As the Hill court explained, non-disclosure claims

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for damages implicate the purposes of the filed rate doctrine because an award of damages
effectively allows the plaintiff to pay a different rate than other customers and requires the court
to conclude that the filed rate was unreasonable. 364 F.3d at 1316-17. Consistent with those
cases, this Court found that Plaintiff’s claims for damages, disgorgement, and restitution—all of
which effectively seek a refund of a portion of the premiums paid by Plaintiff—to be barred by
the filed rate doctrine. Plaintiff’s proposed third amended complaint makes no attempt to “cure”
the “filed rate deficiencies” that led to the dismissal of all claims (except, as discussed below, for
the lone possibility of an ICFA injunctive relief). The Court’s conclusion regarding the filed rate
doctrine’s applicability in this case, articulated thoroughly in its two prior opinions, remains
unchanged after Plaintiff’s latest filings.
Plaintiff also sought, and continues to seek, injunctive relief pursuant to the ICFA. See
815 ILCS 505/10a(c).

In Marcus, the Second Circuit held that the plaintiff’s claims for

injunctive relief were not barred by the filed rate doctrine because an award of injunctive relief
would not implicate the purposes of the filed rate doctrine. 138 F.3d at 62. In that case, the
injunctive relief sought would not have altered the filed rate or the rate paid by the plaintiff, but
merely would have required the company to publicize its practice of rounding up. Id. To the
extent that Plaintiff here simply seeks to compel ASI to disclose publicly what portion of its
premiums constitute commissions and brokerage fees, its ICFA claim for injunctive relief is not
barred by the filed rate doctrine. See Green v. Peoples Energy Corp., 2003 WL 1712566, at *4
(N.D. Ill. March 28, 2003) (claims for injunctive relief not barred by filed rate doctrine where
injunctive relief can be enforced without tampering with the filed rates).
Even though the Court determined in its prior opinion that Plaintiff’s ICFA claim for
injunctive relief was not barred by the filed rate doctrine, the claim as articulated in the proposed

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third amended complaint still must survive a motion to dismiss. To state a claim under the
ICFA, a plaintiff must allege “(1) a deceptive act or practice by the defendant, (2) the
defendant’s intent that the plaintiff rely on the deception, (3) the occurrence of the deception in
the course of conduct involving trade or commerce, and (4) actual damage to the plaintiff (5)
proximately caused by the deception.” Oliveira v. Amoco Oil Co., 776 N.E.2d 151, 160 (Ill.
2002). Plaintiff continues to allege that ASI’s failure to disclose that the insurance premium
contained commissions and brokerage fees violated the ICFA.
Plaintiff’s ICFA claim against ASI fails because Plaintiff cannot show that ASI
proximately caused the injury that Plaintiff claims to have sustained. According to Plaintiff’s
allegations, had Plaintiff known that the cost of insurance was less than the premium charged by
ASI, she and the other purported class members would not have paid the insurance premium and
either could have attempted to negotiate a better overall price for the insurance or attempted to
purchase their insurance elsewhere. However, the documents properly before the Court establish
that Plaintiff was given the precise information that she claims would have enabled her to avoid
damages—namely, that the cost of the ASI insurance was less than the premium charged. The
mortgage provided that if Plaintiff failed to maintain hazard insurance, Wachovia could “do and
pay for whatever it deems reasonable or appropriate to protect [its] rights in the Property,”
including “purchasing [the] insurance required,” and expressly advised Plaintiff that insurance
purchased by Wachovia “may cost more and provide less coverage than the insurance [plaintiff]
might purchase.” Furthermore, the “Notice of Fire/Hazard Insurance Requirement” that Plaintiff
signed stated that in the course of purchasing such replacement insurance, Wachovia “may assess
a processing fee and our affiliated insurance agent could collect a commission from the insurer.
The cost of such insurance could be at least two to five times greater and provide you with less

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protection than insurance you could purchase directly from an insurer.” Also, the July 18, 2008
letter from Wachovia to Plaintiff stated that the cost of the ASI policy “may include
compensation to the Insurer and Wachovia Mortgage.”

And finally, ASI disclosed its

commissions as part of its rate filings with the DOI. As set forth in the Court’s prior opinion,
“ASI filed the premium rates for the policy purchased for Plaintiff by Wachovia with the DOI”
and “ASI’s filings set forth the formula used to calculate Plaintiff’s premium, and explain that
‘commissions and brokerage fees’ are part of the rate calculation.” March 2010 Order at 12-13.
Based on these disclosures, which were not deceptive but rather accurate, Plaintiff’s ICFA claim
fails as a matter of law. See Priebe v. Autobarn, Ltd., 240 F.3d 584, 589 (7th Cir. 2001) (to state
ICFA claim “the plaintiff must show that the defendant’s deception has caused his damages”).
In its December 2010 Order, the Court noted that Plaintiff also claimed that “any
payment of commissions or kickbacks from ASI to Wachovia constitutes an unfair trade practice
under the ICFA, regardless of whether the payments to Wachovia were disclosed.” As pointed
out by ASI in its response brief however, this allegation fails to provide a legitimate basis for the
ICFA injunctive relief claim. The Court’s prior orders recognized that Plaintiff was notified that
the premiums for her ASI policy may include compensation to Wachovia. The Court also found
that “Wachovia is not an unlicensed insurance agent or broker, but rather a savings institution
that engaged in an LPI transaction,” and that ASI had disclosed its commissions as part of its rate
filings with the DOI. Plaintiff’s contention that any payment of a “kickback” constitutes an
unfair practice rests on the allegation that 215 ILCS 5/500-80 “prohibits kickbacks to unlicensed
insurance agents or brokers.” However, because the Court has found that Wachovia was a
licensed agent, Plaintiff’s claims based on this contention must fail. Moreover, Plaintiff is
charged with constructive knowledge of the filed rate and the elements that make up that rate.

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See, e.g., Marcus, 138 F.3d at 60, 63; Olympia Holding, 88 F.3d at 956; Ropiy v. Hernandez, 842
N.E.2d 747, 754-55, (Ill. App. Ct. 2005) (since plaintiff had “constructive knowledge” of public
filings, “[w]e conclude the trial court did not err in dismissing his * * * action.”); Renth v.
Krausz, 579 N.E.2d 11, 13 (Ill. App. Ct. 1991) (“when a right to sue is based upon a statute or a
public record, Illinois courts have charged a party with constructive knowledge”); Payne v.
Williams, 414 N.E.2d 836, 842 (Ill. App. Ct. 1980) (“public records surrounding the bank’s
application for tax deeds, including * * * affidavits in support of such application, would
constitute constructive notice to [plaintiff]”). Accordingly, neither the alleged lack of disclosure
nor the payment of commission itself constitutes a deceptive or unfair act by ASI.5
C.

Claims Against Assurant

As set forth above, the Court concludes that the claims against ASI would not withstand a
motion to dismiss. And because the proposed claim against Assurant, Inc. is premised solely on
5

Plaintiff’s ICFA claim also cannot withstand a motion to dismiss because she cannot establish that she
suffered actual damages. It is well established under Illinois law that private rights of action for injunctive
relief under the ICFA require damages. As the court held in Duran v. Leslie Oldsmobile, “although a
violation of the Consumer Fraud Act may occur in the absence of damages, a private cause of action does
not arise absent a showing of both a violation and resultant damages. [There is] a distinction between a
violation absent damages, which the Attorney General may prosecute and a violation causing damages,
which either the Attorney General or a private party may pursue.” 594 N.E.2d 1355, 1361-62 (Ill. App.
Ct. 1992) (italics in original) (internal citations omitted). Moreover, as explained in Tarin v. Pellonari,
“[t]he Consumer Fraud Act provides a private cause of action in cases only where the plaintiff can show
that he suffered damage as a result of the unlawful conduct proscribed by the statute.” 625 N.E.2d 739,
747 (Ill. App. Ct. 1993) (citation omitted) (dismissing ICFA claim where plaintiff did not demonstrate
any damages resulting from defendants’ conduct); see also Smith v. Prime Cable of Chicago, 658 N.E.2d
1325, 1337 (Ill. App. Ct. 1995) (“[A] private cause of action under the Consumer Fraud Act cannot arise
absent a showing of both a violation of the Act and resultant damages”); Chicago’s Pizza, Inc. v.
Chicago’s Pizza Franchise Ltd USA, 893 N.E.2d 981, 999 (Ill. App. Ct. 2008) (holding that plaintiff’s
failure to prove actual damages precluded injunctive relief under the ICFA); Ewing v. Tilden Commercial
Alliance, Inc., 1995 WL 239375, at *3 (N.D. Ill. Apr. 21, 1995) (dismissing private cause of action for
violation of ICFA where plaintiff did not suffer damages). Here, as this Court twice has ruled, Plaintiff
has not suffered any damages because she paid exactly the filed rate and her damages claims are barred
by the filed rate doctrine. Because Plaintiff has suffered no damages, her ICFA injunctive relief claim
cannot withstand a motion to dismiss. See also Taffet v. S. Co., 967 F.2d 1483, 1494 (11th Cir. 1992)
(dismissing RICO action because plaintiff “suffered no legally cognizable injury by virtue of paying the
filed rate”).

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the defective claims against ASI, that claim likewise cannot withstand a motion to dismiss.
Accordingly, the Court denies leave to add Assurant as a party. The Court need not delve into
the heavily-contested issue of whether the Court has personal jurisdiction over Assurant, and
thus declines to do so. Plaintiff’s numerous filings pertaining to this issue—the portion of the
motion to strike ASI’s exhibits related to jurisdiction [88]6, the motion for sanctions [93], and the
motion to stay [102]—are denied as moot.
IV.

Conclusion
For the reasons stated above, Plaintiff’s motion for leave to file a third amended

complaint [80] is denied. The Court denies Plaintiff leave to add Assurant, Inc. as a defendant,
and the claims asserted against Defendants Wachovia and ASI are dismissed with prejudice.
Plaintiff’s motion for leave to cite additional authority [113] is granted, Plaintiff’s motion to
strike ASI’s exhibits [88] is granted in part and denied in part, and Plaintiff’s motions for
sanctions [93] and to stay [102] are denied as moot.

Plaintiff’s notice of motion date of

September 29, 2011, is stricken and no appearances are necessary on that date. Final judgment
will be entered for Defendants and against Plaintiff, thereby closing the case.

Dated: September 28, 2011

__________________________________
Robert M. Dow, Jr.
United States District Judge

6

To the extent that Plaintiff’s motion to strike seeks to strike Exhibit A—a two-page document
identifying, for the Court’s benefit, the similar allegations contained in the four complaints that Plaintiff
has proposed or filed to date in this case—the Court grants that portion of the motion. Although Exhibit
A simply identifies the allegations of the proposed third amended complaint that are exactly (or virtually)
the same as the allegations of the prior three complaints, the document was unnecessary as the Court
easily could see the similarities between the allegations in all four complaints. To the extent that
Plaintiff’s motion seeks to strike Exhibit B—a one-page document that Plaintiff attached to her first
amended complaint and is expressly referenced twice in the proposed third amended complaint—her
motion is denied.

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