Alpert v. Nationstar Mortg. LLC

• Decision Date: 21 March 2017
• Docket Number: CASE NO. C15–1164 RAJ
• Citation: 243 F.Supp.3d 1176
• Parties: Spencer ALPERT, Plaintiff, v. NATIONSTAR MORTGAGE LLC, a Delaware limited liability company; Harwood Service Company, a Delaware corporation; American Security Insurance Company, a Delaware corporation; Standard Guaranty Insurance Company, a Delaware corporation; and, Assurant, Inc., a Delaware corporation, Defendant.
• Court: U.S. District Court — Western District of Washington

243 F.Supp.3d 1176

Spencer ALPERT, Plaintiff,

v.NATIONSTAR MORTGAGE LLC, a Delaware limited liability company; Harwood Service Company, a Delaware corporation; American Security Insurance Company, a Delaware corporation; Standard Guaranty Insurance Company, a Delaware corporation; and, Assurant, Inc., a Delaware corporation, Defendant.

CASE NO. C15–1164 RAJ

United States District Court, W.D. Washington, at Seattle.

Signed March 21, 2017

Filed March 22, 2017

Jason E. Anderson, Seattle, WA, for Plaintiff.

Abraham K. Lorber, Andrew Gordon Yates, Lane Powell PC, Vernon L. Woolston, Jr., Breena Michelle Roos, Seattle, WA, Paul G. Williams, W. Glenn Merten, Carlton Fields Jorden Burt, P.A., Washington, DC, for Defendant.

ORDER

The Honorable Richard A. Jones, United States District Judge

This matter comes before the Court on Defendants' motions to dismiss. Dkt. ## 46, 47, 48.¹ Plaintiff opposes the motions. Dkt. ## 49, 50, 51. For the reasons that follow, the Court GRANTS in part and DENIES in part the motions.

I. BACKGROUND

This case is about force-placed insurance. In 2006, Plaintiff obtained a mortgage loan. Dkt. # 43 (Amended Complaint) at ¶ 39. Aurora Bank ("Aurora") was an early servicer of the loan until 2012, at which time Nationstar Mortgage LLC ("Nationstar") took over as the loan servicer. Id . at ¶ 42. Plaintiff's mortgage agreement included a Property Insurance provision that required Plaintiff to maintain a certain level of insurance. Id . at 40. If Plaintiff's coverage lapsed, then the agreement authorized Nationstar to obtain the proper amount of coverage. Id. The agreement provided, in part, that:

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 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 insurance coverage so obtained might significantly exceed the cost of insurance that Borrower could have obtained.

Id. The agreement further provided that, "[i]f (a) Borrower fails to perform the covenants and agreements contained in this Security instrument... then Lender may do and pay for whatever is reasonable and appropriate to protect the Lender's interest in the Property ..., including protecting and/or assessing the value of the Property...." Id. at ¶ 41; see also Dkt. # 28 at p. 16.

Plaintiff claims that he had his own insurance policy through Safeco Insurance Company ("Safeco") through July 2013, which Aurora can verify. Dkt. # 43 (Amended Complaint) at ¶ 42. Nonetheless, Nationstar force-placed insurance on his property beginning in July 2012. Plaintiff contests the force-placed policy from July 2012 to July 2013, but concedes that "[a]t some time," his voluntary insurance policy indeed lapsed. Id. at ¶ 42.

Plaintiff avers that Nationstar and the insurance companies operate a kickback scheme that results in inflated premiums for borrowers who have force-placed insurance on their property. In his Amended Complaint, Plaintiff explains that Assurant Inc. ("Assurant") operates through its subsidiaries, American Security Insurance Company (ASIC) and Standard Guaranty Insurance Company (SGIC), to monitor loans. Dkt. # 43 (Amended Complaint) at ¶ 9. When a borrower's coverage lapses, SGIC and ASIC work with Nationstar's broker, Harwood Service Company ("Harwood"), to place the proper insurance policy. Once the policy is placed, Nationstar pays the associated premiums to the insurers and charges that premium to the borrower. Id . at ¶ 26. Plaintiff alleges that SGIC and ASIC would then pay commissions to Harwood and/or Nationstar, but these commissions were actually kickbacks used to secure an exclusive relationship. Id . at ¶ 9. Moreover, Plaintiff asserts that Nationstar maintains an "umbrella policy" with the insurers such that Harwood's services are unnecessary. Id . at ¶ 24.

Plaintiff claims that the premiums include an extra amount designated for the kickbacks, as well as extra amounts for potential costs and charges associated with servicing. Id. at ¶ 30. This amount is paid back to Nationstar but not to the borrowers. Therefore, Plaintiff alleges that he paid "hyper-inflated premiums" for his force-placed insurance policy. Id . at ¶ 30.

Along with the issue of inflated premiums, Plaintiff also alleges that the Defendants overvalued his property such that it would qualify for higher premiums. Id . at ¶¶ 133, 134. Plaintiff claims this pattern of overvaluation is a widespread and common practice for Defendants. Id. at ¶ 147.

On June 10, 2015, Plaintiff "obtained a quote for standard insurance on his home from Commerce West Insurance Company," and found that this premium was less than his current force-placed insurance premium. Id. at ¶ 48. He also noticed that the quote from Commerce West Insurance Company was "similar to what he was previously paying to Safeco." Id . He subsequently served Defendants with a complaint on July 2, 2015, and Defendants removed to this Court. Dkt. # 1. Plaintiff then amended his complaint, and Defendants responded with the instant motions to dismiss.

II. LEGAL STANDARD

A. 12(b)(1)

Federal courts are tribunals of limited jurisdiction and may only hear cases authorized by the Constitution or a statutory grant. Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). The burden of establishing subject-matter jurisdiction rests upon the party seeking to invoke federal jurisdiction. Id . Once it is determined that a federal court lacks subject-matter jurisdiction, the court has no choice but to dismiss the suit. Arbaugh v. Y&H Corp ., 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) ; Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.").

A party may bring a factual challenge to subject-matter jurisdiction, and in such cases the court may consider materials beyond the complaint. PW Arms, Inc. v. United States , 186 F.Supp.3d 1137, 1142 (W.D. Wash. 2016) (citing Savage v. Glendale Union High Sch. , 343 F.3d 1036, 1039 n. 2 (9th Cir. 2003) ); see also McCarthy v. United States , 850 F.2d 558, 560 (9th Cir. 1988) ("Moreover, when considering a motion to dismiss pursuant to Rule 12(b)(1) the district court is not restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction.").

B. 12(b)(6)

Rule 12(b)(6) permits a court to dismiss a complaint for failure to state a claim. Fed. R. Civ. P. 12(b)(6). The rule requires the court to assume the truth of the complaint's factual allegations and credit all reasonable inferences arising from those allegations. Sanders v. Brown , 504 F.3d 903, 910 (9th Cir. 2007). A court "need not accept as true conclusory allegations that are contradicted by documents referred to in the complaint." Manzarek v. St. Paul Fire & Marine Ins. Co ., 519 F.3d 1025, 1031 (9th Cir. 2008). The plaintiff must point to factual allegations that "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). If the plaintiff succeeds, the complaint avoids dismissal if there is "any set of facts consistent with the allegations in the complaint" that would entitle the plaintiff to relief. Id . at 563, 127 S.Ct. 1955 ; Ashcroft v. Iqbal , 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

A court typically cannot consider evidence beyond the four corners of the complaint, although it may rely on a document to which the complaint refers if the document is central to the party's claims and its authenticity is not in question. Marder v. Lopez , 450 F.3d 445, 448 (9th Cir. 2006). A court may also consider evidence subject to judicial notice. United States v. Ritchie , 342 F.3d 903, 908 (9th Cir. 2003).

III. DISCUSSION

A. The Filed Rate Doctrine

Defendants argue that Plaintiff's lawsuit boils down to a complaint based on the amount of his premiums, and therefore the filed rate doctrine bars the lawsuit. Dkt. ## 46–48. The filed rate doctrine is a judicially created doctrine that bars plaintiffs from suing based on allegedly unreasonable rates if those rates were set by the governing regulating agency. See McCarthy Fin., Inc. v. Premera , 182 Wash.2d 936, 347 P.3d 872, 875 (2015) ; see also Wegoland, Ltd. v. NYNEX Corp ., 806 F.Supp. 1112, 1115 (S.D.N.Y. 1992), aff'd , 27 F.3d 17 (2d Cir. 1994) (finding that the filed rate doctrine applies equally "where state law creates a state agency and statutory scheme pursuant to which the state agencies determine reasonable rates."). In early applications, the Supreme Court cited the doctrine to find that a plaintiff was barred from suing under the Sherman Act based on rates that were approved by the Interstate Commerce Commission. Keogh v. Chicago & N.W. Ry. Co. , 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922). In Keogh , the plaintiff, a private shipper, complained that the defendant carrier conspired to fix rates and, even though the rates were approved by the Commission, the plaintiff may have benefited from lower rates had the carriers not colluded with each other. Id. at 161–162, 43 S.Ct. 47. The Supreme Court concluded that, though the government may have redress by criminal proceedings, the private shipper could not "recover damages ... because he lost the benefit of rates still lower, which, but for the conspiracy, he would have enjoyed." Id. at 162, 43 S.Ct. 47. The Supreme Court went on to find that, "[a] rate is not necessarily illegal because it is the result of a conspiracy in...