Hoving v. Transnation Title Ins. Co.

• Decision Date: 14 April 2008
• Docket Number: No. 07-15322.,07-15322.
• Citation: 545 F.Supp.2d 662
• Parties: James HOVING, Plaintiff, v. TRANSNATION TITLE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

545 F.Supp.2d 662

James HOVING, Plaintiff, v. TRANSNATION TITLE INSURANCE COMPANY, Defendant.

No. 07-15322.

United States District Court, E.D. Michigan, Southern Division.

April 14, 2008.

Thomas M. Wardrop, Wardrop & Wardrop, Grand Rapids, MI, Paul M. Weiss, William M. Sweetnam, Freed and Weiss, Chicago, IL, for Plaintiff.

David A. Ettinger, I. W. Winsten, Honigman, Miller, Detroit, MI, Kathryn H. Christian, Mac R. McCoy, Mark A. Brown, Marty J. Solomon, Carlton Fields, Tampa, FL, for Defendant.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS, AND SCHEDULING CLASS CERTIFICATION MOTION HEARING

DAVID M. LAWSON, District Judge.

The plaintiff, James Hoving, has brought this putative class action to challenge the practice of the defendant title insurance company of overcharging its premium on title insurance policies issued to mortgage lenders in transactions involving refinancing residential properties within two years of a previous loan where a mortgage title police was issued. The defendant has moved to dismiss the complaint on grounds of lack of standing and failure to state a claim for which this Court may grant relief. The Court heard oral argument on the motion on April 9, 2008 and finds that the plaintiff has standing to assert the claims in the complaint, the cause of action based on the Michigan Consumer Protection Act is barred by the specific provision rendering the Act inapplicable to unlawful conduct regulated by the Michigan Insurance Code, and the other counts of the plaintiffs complaint state claims cognizable by this Court. Therefore, the Court will grant in part and deny in part the motion to dismiss and set a schedule for determining class certification.

I.

According to the complaint, plaintiff James Hoving refinanced his Brighton, Michigan residence on February 23, 2006. As part of the settlement procedure, Hoving was charged $1397.50 for a title insurance policy for the benefit of the mortgage lender with a face value of $345,000 Defendant Transnation Title Insurance Company (Transnation) issued the policy and charged the premium: This refinancing apparently occurred less than two years after a prior financing transaction on the same property where title insurance was purchased, the plaintiff alleges that the States of Michigan, Arizona, Colorado, Maryland, Minnesota, Missouri, New Jersey, Tennessee and Washington all have laws that require insurance companies to file with the state insurance commissioner their title insurance rates. The plaintiff complains that defendant Transnation made its filing with the state of Michigan under state insurance law in which it committed itself to charging only fifty percent of its prior policy premium if the second transaction was within two years of a previous policy issuance.

The plaintiffs complaint seeks relief for himself and for a class of plaintiffs for the defendant's alleged overcharge. He defines the proposed class as follows:

Persons in the states of Michigan, Arizona, Colorado, Maryland, Minnesota, Missouri, New Jersey, Tennessee and Washington who, in connection with a mortgage refinancing, paid a title insurance premium for a Transnation title insurance policy the amount of which exceeded the rate on file in those states and/or exceeded a lower, reissue rate for which such persons qualified.

Compl. ¶ 14. The complaint alleges three counts and an amount in controversy over $5 million. Count I alleges a violation of the Michigan Consumer Protection Act and the "substantially similar laws of Class states Arizona, Colorado, Maryland, Minnesota, Missouri, New Jersey, Tennessee and Washington." Count II alleges unjust enrichment for the inequitable retention of insurance premiums. Count III seeks a declaration that the rate charged for the reissued mortgage title policy is excessive and an injunction barring the practice of overcharging for policies eligible for the reissue rate. The complaint expressly disavows that it is alleging a violation of the state insurance code.

II.

The defendant has filed a motion to dismiss the complaint under Fed.R.Civ.P. 12(b)(6). It claims that the plaintiff lacks standing to assert the rights of others under state laws other than Michigan's, the Michigan Consumer Protection Act does not allow for a cause of action when other regulatory schemes are in place (including actions deemed illegal by the state insurance code), and the plaintiff cannot recover under an unjust enrichment theory. The plaintiff contests each of these arguments.

Motions to dismiss are governed by Rule 12(b) of the Federal Rules of Civil Procedure and allow for dismissal for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). "The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true." Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir.1993). When deciding a motion under that Rule, the court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the complaint contains "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, ___ U.S. ___, ___, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). "[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint's factual allegations." Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir.1995). "However, while liberal, this standard of review does require more than the bare assertion of legal conclusions." Ibid. Federal Rule of Civil Procedure 8(a) requires that the complaint give the defendant fair notice of the nature of the claim and the factual grounds upon which it rests. Twombly, 127 S.Ct. at 1964. Therefore, "[w]hile a complaint attacked by a Rule 12(b) (6) motion to dismiss does not need detail factual allegations, a plaintiffs obligation to provide the `grounds' of his `entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 1964-65 (citations omitted) (alteration in original). "In practice, `a ... complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.'" In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir.1993) (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (1984)); see also Ana Leon T. v. Fed. Reserve Bank, 823 F.2d 928, 930 (6th Cir.1987) (per curiam) (mere conclusions are not afforded liberal Rule 12(b)(6) review).

A.

The defendant first observes that plaintiff Hoving's claims are centered exclusively on his refinancing of a Michigan residence under a Michigan contract governed by Michigan law, and therefore, The defendant argues, Hoving has no standing to bring claims arising under the laws of other states. The plaintiff responds that the circumstances would change if his proposed class were certified, but the defendant cites some authority for the argument that standing should be determined before turning to class certification, which precludes consideration of unnamed potential class members. See Parks v. Dick's Sporting Goods, Inc., 2006 WL 1704477, *2 (W.D.N.Y. June 15, 2006); Temple v. Circuit City Stores, Inc., 2007 WL 2790154, at *1 (E.D.N.Y. Sept. 25, 2007).

Of course, "individual standing is a prerequisite for all actions, including class actions." Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 423 (6th Cir.1998) (citing O'Shea v. Littleton, 414 U.S. 488, 494, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974); Sierra Club v. Morton, 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972)). Although "[a] potential class representative ... cannot acquire ... standing merely by virtue of bringing a class action, ... `once an individual has alleged a distinct and palpable injury to himself he has standing to challenge a practice even if the injury is of a sort shared by a large class of possible litigants.'" Fallick, 162 F.3d at 423 (quoting Senter v. General Motors Corp., 532 F.2d 511, 517 (6th Cir.1976)).

The Supreme Court has spoken on at least two occasions to the issue of which determination should come first, standing or class certification. In Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997), the district court certified a class of plaintiffs who had been exposed to asbestos by the defendants over the class members' objections to the adequacy of representation. The objectors to the class argued that "exposure-only claimants lack standing to sue" because they have not yet suffered an injury compensable by the proposed settlement and because they failed to meet the amount in controversy requirements of diversity jurisdiction. The Court concluded that addressing the requirements of Rule 23 before deciding the standing issues was appropriate: "We agree that the class certification issues are dispositive; because their resolution here is logically antecedent to the existence of any Article III issues, it is appropriate to reach them first." Amchem Prod., 521 U.S. at 612, 117 S.Ct. 2231 (citations, quotations, and alterations omitted).

The Court once again applied the "logical antecedent" test in Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999), which also involved an asbestos injury settlement class. The Court stated:

The nub of this case is the certification of the class under Rule 23(b)(1)(B) on a limited fund rationale, but before we reach that issue, there are two threshold matters. First, petitioners call the class claims nonjusticiable under Article III, saying that this is a feigned action initiated by Fibreboard to control its future asbestos tort liability, with the "vast majority" of the "exposure-only" class members being without injury in fact...