Augustson v. Bank of Am., N.A.

• Decision Date: 29 March 2012
• Docket Number: No. 5:11–CV–2–D.,5:11–CV–2–D.
• Citation: 864 F.Supp.2d 422
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: Mark AUGUSTSON, Robert S. Kiel, Jeanne B. Kiel, and Joseph Prosser, Plaintiffs, v. BANK OF AMERICA, N.A., Defendant.

864 F.Supp.2d 422

Mark AUGUSTSON, Robert S. Kiel, Jeanne B. Kiel, and Joseph Prosser, Plaintiffs,

v.BANK OF AMERICA, N.A., Defendant.

No. 5:11–CV–2–D.

United States District Court,

E.D. North Carolina,

Western Division.

March 29, 2012.

James C. White, Law Office of James C. White, P.C., Chapel Hill, NC, Daniel Terry Blue, Jr., Dhamian A. Blue, Blue Stephens & Fellers LLP, Raleigh, NC, for Plaintiffs.

Bradley R. Kutrow, Brian Patrick Troutman, Angela Hardister Zimmern, McGuireWoods, LLP, Charlotte, NC, Justin David Howard, McGuireWoods LLP, Raleigh, NC, for Defendant.

ORDER

JAMES C. DEVER III, Chief Judge.

On January 4, 2011, Mark Augustson (“Augustson”), and Robert S. Kiel and Jeanne B. Kiel (“Kiels”) (collectively, “plaintiffs”) sued Bank of America, N.A. (“Bank of America” or “defendant”) on behalf of themselves and a class of similarly situated individuals. Compl. [D.E. 1].¹ On January 6, 2011, plaintiffs refiled their complaint with properly attached exhibits [D.E. 5]. On January 25, 2011, plaintiffs filed an amended complaint, adding Joseph Prosser (“Prosser”) as a named plaintiff. Am. Compl. On March 4, 2011, Bank of America moved to dismiss plaintiffs' amended complaint for failure to state a claim upon which relief can be granted, and filed a supporting memorandum [D.E. 23, 24]. On April 4, 2011, plaintiffs filed a memorandum in opposition to Bank of America's motion to dismiss. Pls.' Mem. Opp'n Mot. Dism. [D.E. 28]. On April 19, 2011, Bank of America replied [D.E. 30]. As explained below, the court grants in part and denies in part Bank of America's motion to dismiss.

I.

Plaintiffs' claims relate to the No Fee Mortgage Plus Loans (“NFMP loans”) that plaintiffs each received from Bank of America. See Am. Compl. ¶¶ 1–3. Bank of America began offering NFMP loans in approximately May 2007. Id. ¶ 10. In marketing these loans, Bank of America offered to “waive or pay all fees for services or products required by the Bank in order to provide a fixed mortgage to qualifying borrowers....” Id.; Pls.' Mem. Opp'n Mot. Dism. 8. Many home mortgage lenders, including Bank of America, “typically require[ ] a borrower to pay [for] private mortgage insurance when a home's loan-to-value ratio is greater than eighty percent of the collateral property's fair market value.” Am. Compl. ¶ 12; see also Pls.' Mem. Opp'n Mot. Dism. 8. Private mortgage insurance generally can be obtained in two ways: a borrower may pay an insurance premium directly to a mortgage insurer or a borrower may pay an insurance premium to the lender, with the lender then purchasing insurance on the borrower's behalf. Am. Compl. ¶ 13; Pls.' Mem. Opp'n Mot. Dism. 8. When a borrower obtains private mortgage insurance through a lender, “the lender usually pays a single premium at or after loan closing, and then passes that cost to the borrower by charging the borrower a higher interest rate.” Am. Compl. ¶ 15.

When offering NFMP loans, Bank of America promised to waive or pay the fees that it would ordinarily charge for private mortgage insurance. Id. ¶ 11. Plaintiffs allege that in 2007, a Bank of America official publicly stated that the “NFMP loans did not include any private mortgage insurance because of the Bank's vast reserves,” which allowed Bank of America to self-insure. Id. ¶ 17.

In 2007 and 2008, each of the named plaintiffs applied for and received NFMP loans from Bank of America. Id. ¶¶ 19–29, 44–52, 67–73; Pls.' Mem. Opp'n Mot. Dism. 9.² When Bank of America approved these loans, it informed plaintiffs that it would “waive or pay all fees for services or products required by Bank of America in order to grant credit to [plaintiffs] for the purchase of a primary residence.” Am. Compl. ¶¶ 22, 46, 69 (quotations omitted); id. Exs. B, G; Pls.' Mem. Opp'n Mot. Dism. 9 (quotation omitted). Before the loans closed, Bank of America told Augustson and the Kiels that there was no private mortgage insurance on their loans. Am. Compl. ¶¶ 24–25, 50–51.

Plaintiffs allege that despite Bank of America's pre-closing assertions, “at closing, and without each [p]laintiffs' [sic] knowledge or permission, Bank of America purchased [private mortgage insurance] policies on their respective homes.” Pls.' Mem. Opp'n Mot. Dism. 9; see Am. Compl. ¶¶ 31, 34–35, 54, 57–58, 74, 77–78. According to plaintiffs, upon information and belief, the interest rates that Bank of America charged on their loans subsidized Bank of America's purchase of private mortgage insurance. See Am. Compl. ¶¶ 32, 55, 75; Pls.' Mem. Opp'n Mot. Dism. 9–10.

In 2010, while attempting to refinance his or her loan through Bank of America, each plaintiff learned that Bank of America had purchased private mortgage insurance on his or her loan. See Am. Compl. ¶¶ 37–38, 60–61, 80–87 & Exs. O, P, Q; Pls.' Mem. Opp'n Mot. Dism. 10.³ Bank of America informed each plaintiff that he or she was not eligible for refinancing because Bank of America had purchased private mortgage insurance on each plaintiff's loan. Am. Compl. ¶¶ 39, 60, 87–88; Pls.' Mem. Opp'n Mot. Dism. 10. Plaintiffs then asked Bank of America to cancel the mortgage insurance policies on plaintiffs' loans and to refinance plaintiffs' loans at rates commensurate with existing market conditions, but Bank of America refused. Am. Compl. ¶¶ 42, 64–65, 91–92.

In their amended complaint, plaintiffs assert four claims. First, they allege that Bank of America violated the Homeowners Protection Act of 1998 (“HPA”), 12 U.S.C. §§ 4901–4910. Am. Compl. ¶¶ 104–10. In support, plaintiffs cite Bank of America's failure to inform them that it purchased private mortgage insurance, and allege that Bank of America thereby violated section 4905 of the HPA. Id. ¶¶ 106–08; see also12 U.S.C. §§ 4905, 4907(a). Second, plaintiffs allege that Bank of America committed fraud under North Carolina law. Am. Compl. ¶¶ 111–19. Third, plaintiffs allege that, in the alternative to fraud, Bank of America committed negligent misrepresentation under North Carolina law. Id. ¶¶ 120–25. Fourth, plaintiffs allege that Bank of America is liable for unjust enrichment under North Carolina law. Id. ¶¶ 126–29. Finally, plaintiffs seek damages and an injunction ordering Bank of America “to cancel any [private mortgage insurance] that it has placed on the properties of the [p]laintiff[s]....” Id. ¶¶ 130–33 & Prayer for Relief.

Bank of America moves to dismiss plaintiffs' amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. See Def.'s Mot. Dism. [D.E. 23]. Bank of America argues that plaintiffs' HPA claim fails because the HPA mandates that a lender disclose to a borrower its purchase of private mortgage insurance only when such purchase “is required in connection with a residential mortgage transaction.” Def.'s Mem. Supp. Mot. Dism. [D.E. 24] 5 (emphasis and quotation omitted). Bank of America contends that private mortgage insurance was not “required in connection with” any of plaintiffs' mortgage loans. Id. 7. Thus, Bank of America argues that plaintiffs' HPA claim fails. As for plaintiffs' fraud and negligent misrepresentation claims, Bank of America argues that the HPA preempts these state-law claims and, alternatively, that plaintiffs have failed to plausibly allege fraud or negligent misrepresentation. Id. 8–11, 15–24. As for plaintiffs' unjust enrichment claim, Bank of America argues that plaintiffs have failed to plausibly allege unjust enrichment. Id. 24–26. Finally, Bank of America seeks dismissal of plaintiffs' request for an injunction, arguing that an injunction is a remedy rather than a stand-alone cause of action, and that injunctive relief is inappropriate in this case. Id. 26–28.

II.

In considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court must determine whether the complaint is legally and factually sufficient. SeeFed.R.Civ.P. 12(b)(6); Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949–50, 173 L.Ed.2d 868 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); Coleman v. Md. Ct. of Appeals, 626 F.3d 187, 190 (4th Cir.2010), aff'd,––– U.S. ––––, 132 S.Ct. 1327, 182 L.Ed.2d 296 (2012); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir.2008); Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir.2007) (en banc); accord Erickson v. Pardus, 551 U.S. 89, 93–94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam). Although a court “assume[s] the facts alleged in the complaint are true and draw[s] all reasonable factual inferences in [plaintiff's] favor,” Burbach Broad. Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 406 (4th Cir.2002), a court need not accept a complaint's legal conclusions drawn from the facts. See Iqbal, 129 S.Ct. at 1949–50. Similarly, a court “need not accept as true unwarranted inferences, unreasonable conclusions, or arguments,” Giarratano, 521 F.3d at 302 (quotation omitted); see Iqbal, 129 S.Ct. at 1949–50.

A.

Section 4905 of the HPA states that in any case in which “lender paid mortgage insurance ... is required in connection with a residential mortgage transaction,” the mortgagee must provide written notice to the mortgagor of certain facts pertaining to lender-paid private mortgage insurance. See12 U.S.C. § 4905.⁴ Specifically, the mortgagee must inform the mortgagor, “not later than the date on which [the] loan commitment is made,” that the mortgagor cannot cancel the lender-paid private mortgage insurance and that the insurance will terminate only if the mortgage is refinanced. Id. § 4905(c)(1). Additionally, when lender-paid mortgage insurance “is required in connection with a residential mortgage transaction,” section 4905 requires a mortgagee to inform a mortgagor of the differences between lender-paid mortgage insurance and borrower-paid mortgage insurance. Id. The HPA defines “borrower paid mortgage insurance” as “private mortgage insurance that is required in connection with a residential mortgage transaction, payments...