Hallie v. Wells Fargo Bank NA et al

Filing 52

OPINION AND ORDER granting in part and denying in part 41 Motion to Suspend Briefing on Defendants Motion to Dismiss and Pursue Discovery. Theplaintiffs response to the motion to dismiss is due by 5/15/2013. The court STRIKES Wilson and Voyles affidavits, except for the attached rate filing schedule attached to Voyles affidavit, which can be considered as a public document. Signed by Magistrate Judge Andrew P Rodovich on 5/1/2013. (rmn)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
JUDITH HALLIE,
individually and on behalf of a class,
Plaintiff,
v.
WELLS FARGO BANK, N.A. et al.
Defendants.

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2:12-cv-235

OPINION AND ORDER
This matter is before the court on the Motion to Suspend Briefing on Defendant’s Motion
to Dismiss and Pursue Discovery [DE 41] filed on December 14, 2012. For the following
reasons, the motion is GRANTED IN PART and DENIED IN PART.
Background
On June 15, 2012, the plaintiff, Judith Hallie, filed a complaint alleging that the
defendants issued mortgages that included a forced-placed insurance clause, which gave the
defendants the right to obtain hazard insurance on the mortgaged property in the event the
borrower failed to maintain her own hazard insurance policy. The defendants entered into an
arrangement with American Security Insurance Company and Assurant Inc. to provide the forceplaced policies for its mortgages. Hallie alleged that under the agreement Wells Fargo charged
rates that were not arrived at on a competitive basis and were in excess of those that could have
been obtained in the open market. Hallie raised several counts in her complaint, including
breach of contract, fraud, unjust enrichment, tortious interference with a business relationship,
and violations of 12 U.S.C. § 2601 et seq. Hallie stated that the court has jurisdiction pursuant to
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28 U.S.C. § 1332(d), 28 U.S.C. § 1331, 28 U.S.C. § 1337, 28 U.S.C. § 1367, and 12 U.S.C. §
2614.
On November 30, 2012, the defendants filed a motion to dismiss and attached the
affidavits of Ronald K. Wilson and Rebecca H. Voyles. The defendants argue, among other
things, that the Indiana Department of Insurance (DOI) is entrusted with the power to regulate
insurance companies and has the sole power to determine the reasonableness of a rate. Because
of this exclusive power, the filed rate doctrine deprives the court of subject matter jurisdiction to
hear challenges to the reasonableness of an insurance rate. Additionally, the DOI provides an
administrative remedy that Hallie failed to exhaust. Because the defendants’ motion attached
supporting affidavits and evidence, Hallie moves to convert the motion to dismiss to a motion for
summary judgment, stay briefing on the motion to dismiss, and allow time for discovery, or
alternatively, to strike the affidavits and supporting exhibits from the defendants’ motion to
dismiss.
Discussion
Generally, the court is limited to considering only the allegations raised in the complaint
when ruling on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). See United
States v. $85,201.00 in U.S. Currency, 2011 WL 612067, *2 (S.D.Ill. Feb.15, 2011). When a
party seeks to introduce additional documents, the court may convert the motion to dismiss into a
motion for summary judgment and allow the responding side to produce evidence in support of
its contentions, or it may elect to disregard the extraneous evidence. Rule 12(d) (“If, on a motion
under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by
the court, the motion must be treated as one for summary judgment under Rule 56.”); Venture

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Associates Corp. v. Zenith Data Systems Corp., 987 F.2d 429, 431 (7th Cir. 1993) ( citing
Carter v. Stanton, 405 U.S. 669, 671, 92 S.Ct. 1232, 1234, 31 L.Ed.2d 569 (1972)); Employers
& Cement Masons # 90 Health & Welfare Fund v. Triple M. Contracting, Inc., 2007 WL
854004, *2, n. 1 (S.D.Ill. March 16, 2007) (finding that affidavits not referenced in the complaint
may not be considered in ruling on a motion to dismiss).
However, there are exceptions to the general rule that extrinsic evidence cannot be
considered. Documents that both are referred to in the complaint and are central to the claim
may be considered on a motion to dismiss. Albany Bank & Trust Co. v. Exxon Mobil Corp.,
310 F.3d 969, 971 (7th Cir. 2002); Venture Associates, 987 F.2d at 431–32. See also Wright v.
Associated Insurance Companies, Inc., 29 F.3d 1244, 1248 (7th Cir. 1994) (discussing Venture
Associates and determining that a contract on which the claim is based is central to the claim and
may be considered on a motion to dismiss). The court also can consider evidence of public
record by taking judicial notice of the documents without converting a motion to dismiss into a
motion for summary judgment. Ennenga v. Starns, 677 F.3d 766, 773-774 (7th Cir. 2012).
Additionally, the court may consider extrinsic evidence when the defendant challenges the
factual basis of subject matter jurisdiction. Apex Digital, Inc. v. Sears, Roebuck & Co., 572
F.3d 440, 444 (7th Cir. 2009) (explaining that a facial challenges requires the court to look at
only the face of the complaint to determine whether the plaintiff sufficiently alleged jurisdiction,
whereas with a factual challenge, jurisdiction is alleged on the complaint, but the court must
consider whether there are facts to support jurisdiction).
The defendants first argue that the affidavits can be considered because the filed rate
doctrine deprives this court of subject matter jurisdiction. The filed rate doctrine “forbids a

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regulated entity to charge rates for its services other than those properly filed with the
appropriate . . . regulatory authority.” Hill v. BellSouth Telecommunications, Inc., 364 F.3d
1308, 1315 (11th Cir. 2004)(citing Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577, 101
S.Ct. 2925, 2930, 69 L.Ed.2d 856 (1981)). The rate filed with the agency becomes the legal rate
and governs the rights and liabilities of the carrier to the customer. Hill, 453 U.S. at 577, 101
S.Ct. at 2930. Because of this, challenges to the nature or amount of a rate that has been filed
with a regulatory authority are barred by the filed rate doctrine. Taffet v. Soutehrn Co., 967
F.2d 1483, 1488 (11th Cir. 1992).
The Indiana Code imposes a rate reporting requirement on insurance companies. Indiana
Code § 27-1-22-1 “empower[s] the [C]ommissioner of insurance to regulate insurance rates to
the end that they shall not be excessive, inadequate, or unfairly discriminatory.” Insurers are
required to file every rate, rate schedule, rating plan, and modification that it proposes to use.
Ind. Code § 27-1-22-4(a). The Commissioner may investigate and direct the discontinuance of
any illegal or unauthorized practice. Ind. Code § 27-1-3-19. An insured may request review of
an insurer by filing a written complaint and request for a hearing with the Commissioner. Ind.
Code § 27-1-22-12.
Indiana courts have applied the filed rate doctrine to bar challenges to the reasonableness
of rates set by utility companies. State ex rel. Indianapolis Water Co. v. Boone Circuit Court,
307 N.E.2d 870, 872 (Ind. 1974). The Indiana Supreme court noted that “[r]ate making is a
legislative function in which courts are not concerned”. Indianapolis Water Co. v. Moynahan
Properties Co., 198 N.E. 312, 313 (Ind. 1935). See also Boone, 307 N.E.2d at 872. Other courts
similarly have determined that the court is without subject matter jurisdiction to hear challenges

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to the reasonableness of a rate set by a utility company. In National Teleinformation Network,
Inc. v. Michigan Public Service Com., 687 F.Supp. 330 (W.D. Mich. 1988), a telephone service
sought an injunction to compel the Michigan Public Service Commission to provide it with
access to the telephone company’s multicaller recorded program service so that the telephone
service could disseminate its sexually explicit messages. The court determined that it was not
permitted to interfere injunctively with any aspect of a state administrative regulatory order. In
reaching this conclusion, the court relied on 28 U.S.C. § 1342, which states that district courts
“shall not enjoin, suspend or restrain the operation of, or compliance with, any order affecting
rates chargeable by a public utility and made by a State administrative agency or a rate-making
body of a State political subdivision . . .”
The defendants argue that because insurance companies are required to file their rates
with the DOI, and they have done so, this court lacks subject matter jurisdiction to hear a
challenge to the reasonableness of the rate. Because subject matter jurisdiction is at issue, it is
the defendants’ position that the affidavits attached to their motion to dismiss may be considered.
In reply, Hallie states that she does not contest the consideration of the affidavits but that she is
entitled to time to conduct discovery on the limited issue of subject matter jurisdiction. Although
the rate-file doctrine may deprive state courts of jurisdiction to hear challenges to the
reasonableness of a rate set by a state utility company and 28 U.S.C. § 1342 strips federal district
courts of jurisdiction to hear challenges to the reasonableness of a rate that both is chargeable by
a public utility and set by a state agency, the court is not convinced that the defendants’
challenge is to the court’s subject matter jurisdiction rather than to Hallie’s failure to state a
claim upon which relief can be granted.

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Article III, Section 2 of the Constitution limits the federal courts' jurisdiction to cases
arising under the laws of the United States and between citizens of different states. Federal
courts have subject matter jurisdiction in all civil actions arising under the Constitution, laws, or
treaties of the United States, in addition to cases between citizens of different states where the
amount in controversy exceeds $75,000. 28 U.S.C. §§ 1331, 1332. The burden to prove subject
matter jurisdiction falls on the party seeking the federal forum. Chase v. Shop ‘N Save
Warehouse Foods, Inc., 110 F.3d 424, 427 (7th Cir. 1997).
The complaint must aver facts that support the existence of federal jurisdiction. Gully v.
First National Bank, 299 U.S. 109, 113, 57 S.Ct. 96, 97–98, 81 L.Ed. 70 (1936); Preston v.
Purtell, 410 F.2d 234, 236 (7th Cir. 1969). To sustain jurisdiction on the grounds of diversity,
there must be complete diversity between the parties at the time the complaint was filed,
meaning that “none of the parties on either side of the litigation may be a citizen of the state of
which a party on the other side is a citizen.” Howell v. Tribune Entertainment Co., 106 F.3d
215, 217 (7th Cir. 1997). The amount in controversy also must exceed $75,000, exclusive of
interest and costs. 28 U.S.C. § 1332. It is the duty of the district court to ascertain whether the
amount in controversy meets the jurisdictional amount. Batts Restaurant, Inc. v. Commercial
Ins. Co. of Newark, 406 F.2d 118, 120 (7th Cir. 1969). The court must conduct this assessment
according to the facts available on the day the federal jurisdiction was invoked. Oshana v.
Coca–Cola Co., 472 F.3d 506, 510–11 (7th Cir. 2006).
Review of the complaint reveals that Hallie satisfied the requirements for pleading
subject matter jurisdiction. Hallie both alleged violations of federal statutes in her complaint and
diversity jurisdiction. The complaint identifies the parties as citizens of different states and

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states that the amount in controversy exceeds $75,000. The affidavits do not show that Hallie
failed to satisfy either of these requirements, and neither the affidavits nor the defendants’ briefs
challenge the basis of citizenship of any party or the amount in controversy.
Hallie has pleaded sufficient facts to show that the court has jurisdiction. There is no
federal statute that deprives the district court of jurisdiction to hear challenges to the
reasonableness of a rate chargeable by an insurance company as there is with regard to the rates
charged by a public utility company. Title 28 U.S.C. § 1342 specifically limits the court’s
jurisdiction only in cases where the reasonableness of a rate chargeable by a public utility is in
question. Insurance rates do not fall within the scope of this statute. See Black’s Law
Dictionary 1686 (9th ed.) (defining public utility as “[a] company that provides necessary
services to the public, such as telephone lines and service, electricity, and water.”). The
defendants have pointed to no cases where a federal district court was deprived of jurisdiction
because a rate, other than for a public utility, had to be filed with a state agency. Other courts
that have applied the rate file doctrine to bar recovery have analyzed whether a plaintiff could
recover damages by considering the motion as a Rule 12(b)(6) challenge. See In re
Pennsylvania Title Ins. Antitrust Litigation, 648 F.Supp.2d 663, 671 (E.D. Pa. 2009), Winn v.
Alamo Title Ins. Co., 2009 WL 7099484, *3 (W.D. Tex. May 13, 2009). For these reasons, the
court finds that the defendants’ motion more appropriately is analyzed for failure to state a claim
upon which relief can be granted rather than as a challenge to jurisdiction. Therefore, the court
cannot consider the affidavits as support for lack of subject matter jurisdiction or allow Hallie to
conduct limited discovery on the issue of subject matter jurisdiction.
The defendants also argue that the Indiana Code provides an administrative remedy. It is

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true that failure to exhaust administrative remedies may be jurisdictional. See Blaney v. United
States, 34 F.3d 509, 511-512 (7th Cir. 1994)(finding that district court lacked jurisdiction where
employee failed to exhaust administrative remedies before Merit System Protection Board);
T.I.M.E.-DC, Inc. v. Management-Labor Welfare & Pension Funds, of Local 1730 Intern.
Longshoremen's Ass'n, 756 F.2d 939, 944-945 (2d Cir. 1985)(“As a general rule a party must
exhaust its administrative remedies before it can invoke the jurisdiction of the courts.”)(citing
Myers v. Bethlehem Steel Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 463, 82 L.Ed.
638 (1938)). But see Gibson v. West, 201 F.3d 990, 993 (7th Cir. 2000)(holding that failure to
exhaust administrative remedies is a precondition to a Title VII claim rather than a jurisdictional
requirement). However, the defendants concede that the administrative remedy provided by the
code is not the exclusive remedy. The relevant section provides that the insured “may” file a
complaint with the DOI. Ind. Code §27-1-22-12. Therefore, filing a complaint with the DOI
was not a mandatory condition and does not affect the court’s subject matter jurisdiction.
Additionally, the defendants briefly argue that the DOI is more specialized to handle
Hallie’s complaint and that the court should defer to the agency to resolve the dispute. Primary
jurisdiction “applies where a claim is originally cognizable in the courts, and comes into play
whenever enforcement of the claim requires the resolution of issues which, under a regulatory
scheme, have been placed within the special competence of an administrative body; in such a
case the judicial process is suspended pending referral of such issues to the administrative body
for its views.” United States v. Western Pac. R. Co., 352 U.S. 59, 63, 77 S.Ct. 161, 165, 1
L.Ed.2d 126 (1956). Although the court may defer to the agency to resolve some or all of the
issues, the court is not without jurisdiction. Rather, the court may stay the proceedings pending

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resolution by the administrative body.
The defendants characterize their challenge as one to the court’s subject matter
jurisdiction, but it does not appear that there is any viable argument challenging federal
jurisdiction. Although the rate file doctrine may bar damages, this argument is better
characterized as a challenge to the merits of Hallie’s claim, rather than to the court’s exercise of
subject matter jurisdiction. For this reason, the affidavits cannot be considered under the
exception to the general rule forbidding the consideration of extraneous evidence as proof that
the court lacks subject matter jurisdiction.
The defendants also argue that the rate filing attached to Voyle’s affidavit can be
considered because it is part of a public record. See Ennenga v. Starns, 677 F.3d at 773-774 (7th
Cir. 2012) (explaining that the court may take judicial notice of information that is public record
without converting a motion to dismiss into a motion for summary judgment). Hallie argues that
Voyle’s affidavit is not public record, nor is some of the information contained therein.
However, Hallie does not dispute that the attached rate filing was in fact made public record.
For this reason, the court will consider the rate filing attached to Voyle’s affidavit.
The defendants finally argue that both affidavits can be considered in their entirety
because the information is central to the claims Hallie made in her complaint. In order for the
court to consider such extraneous documents, the defendants must show that the affidavits were
both referenced in the complaint and are central to the dispute. See Albany Bank & Trust, 310
F.3d at 971 (explaining that documents that are both attached or referenced in the complaint and
central to the dispute may be considered on a motion to dismiss); Venture Associates, 987 F.2d
at 431–32 (same). A thorough review of the complaint does not reveal that the affidavits were

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incorporated, discussed, or in existence at the time Hallie filed her complaint, and thus cannot be
considered. See Triple M, 2007 WL 854004 at *2, n. 1 (declining to consider affidavits not
referenced in the complaint when ruling on a motion to dismiss). When a party seeks to
introduce additional documents that were not referred to in the complaint, the court may convert
the motion to dismiss into a motion for summary judgment and allow the responding side to
produce evidence in support of its contentions, or it may elect to disregard the extraneous
evidence. Rule 12(d) (“If, on a motion under Rule 12(b)(6) or 12(c), matters outside the
pleadings are presented to and not excluded by the court, the motion must be treated as one for
summary judgment under Rule 56.”); Venture Associates, 987 F.2d at 431 (citing Carter v.
Stanton, 405 U.S. 669, 671, 92 S.Ct. 1232, 1234, 31 L.Ed.2d 569 (1972)); Triple M., 2007 WL
854004, *2, n. 1 (finding that affidavits not referenced in the complaint may not be considered in
ruling on a motion to dismiss). For this reason, the court STRIKES Wilson and Voyle’s
affidavits, except for the attached rate filing schedule attached to Voyle’s affidavit, which can be
considered as a public document.
Based on the foregoing, the Motion to Suspend Briefing on Defendant’s Motion to
Dismiss and Pursue Discovery [DE 41] is GRANTED IN PART and DENIED IN PART. The
plaintiff’s response to the motion to dismiss is due within fourteen days.
ENTERED this 1st day of May, 2013

/s/ Andrew P. Rodovich
United States Magistrate Judge

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