Jackson v. Wells Fargo Bank, N.A.
| Decision Date | 06 November 2013 |
| Docket Number | 2:12cv1262 |
| Parties | THOMAS M. JACKSON and PATRICIA G. JACKSON, as individuals and as representatives of the classes, Plaintiffs, v. WELLS FARGO BANK, N.A. and WELLS FARGO INSURANCE, INC., Defendants. |
| Court | U.S. District Court — Western District of Pennsylvania |
Electronic Filing
Thomas and Patricia Jackson ("plaintiffs") commenced this action on behalf of themselves and as members of three putative classes seeking redress for alleged improper settlement charges and damages caused by defendant Wells Fargo Bank, N.A.'s ("W. F. Bank") demand that unnecessary flood insurance be acquired for improved real estate plaintiffs purchased with a mortgage from W. F. Bank. Presently before the court are W. F. Bank and Wells Fargo Insurance, Inc.'s ("W. F. Insurance") motions to dismiss plaintiff's first amended class action complaint. For the reasons set forth below, the motions will be granted in part and denied in part.
It is well-settled that in reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) "the court [is required] to accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party." Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir.1989). Under Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 561 (2007), dismissal of a complaintpursuant to Rule 12(b)(6) is proper only where the averments of the complaint fail to raise plausibly, directly or inferentially, the material elements necessary to obtain relief under a viable legal theory of recovery. Id. at 544. In other words, the allegations of the complaint must be grounded in enough of a factual basis to move the claim from the realm of mere possibility to one that shows entitlement by presenting "a claim to relief that is plausible on its face." Id. at 570.
"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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In contrast, pleading facts that are merely consistent with a defendant's liability is insufficient. Id. Similarly, tendering only "naked assertions" that are devoid of "further factual enhancement" falls short of presenting sufficient factual content to permit an inference that what has been presented is more than a mere possibility of misconduct. Id. at 1949-50. See also Twombly, 550 U.S. at 563 n. 8 () (quoting Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 347 (2005) & Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 741 (1975)).
This is not to be understood as imposing a probability standard at the pleading stage. Iqbal, 556 U.S. at 678 (); Phillips v. County of Allegheny, 515 F.3d 224, 235 (3d Cir.2008) (same). Instead, "[t]he Supreme Court's Twombly formulation of the pleading standard can be summed up thus: 'stating ... a claim requires a complaint with enough factual matter (taken as true) to suggest the required element ... [and that provides] enough facts to raise a reasonable expectation that discovery will revealevidence of the necessary element.'" Phillips, 515 F.3d at 235; see also Wilkerson v. New Media Technology Charter School Inc., 522 F.3d 315, 321 (3d Cir.2008).
The facts read in the light most favorable to the non-moving party are as follows. On August 31, 2011, plaintiffs obtained a mortgage loan from W. F. Bank for $107,500.00. Amended Complaint at ¶ 7. W. F. Bank charged plaintiffs $19.00 for a flood zone determination that was performed by W. F. Insurance prior to closing. Id. at ¶ 19. The charge was reflected on plaintiffs' HUD-1 settlement statement. Id.
In conjunction with the mortgage plaintiffs received a Truth-in-Lending Act ("TILA") Disclosure ("TILA Disclosure"). Id. at ¶ 8. The initial version of the TILA Disclosure erroneously stated that flood insurance was required for plaintiffs' property. However, this error was later corrected with both parties' consent. With approval and consent of W. F. Bank, the TILA Disclosure used at closing provided that flood insurance was not required for plaintiffs' property. Id.
Before closing plaintiffs obtained their own independent flood zone determination from CoreLogic Flood Services ("CoreLogic"). Id. at ¶ 17. CoreLogic determined that flood insurance was not required on plaintiff's property. Id.; Standard Flood Hazard Determination of August 26, 2011, Completed by CoreLogic (Doc. No. 18-9). This independent flood determination cost plaintiffs $6.00, which is the standard amount CoreLogic charges for this service. Id. at ¶¶ 17, 21.
At closing plaintiffs signed a Standard Flood Hazard Determination ("SFHD") which had been prepared by W. F. Insurance for W. F. Bank. Id. at ¶ 9. The parties at closing treated the SFHD as indicating that flood insurance was not required for any portion of plaintiffs' property. Id.
On November 7, 2011, W. F. Bank sent plaintiffs a form letter stating that flood insurance "is a requirement of your loan." Id. at ¶ 10; Letter of November 7, 2011 (Doc. No. 184). The letter indicated that if plaintiffs did not provide proof of flood insurance W. F. Bank would purchase it at plaintiffs' expense. Id. Plaintiffs repeatedly objected to this demand by calling the customer service number provided in the letter, but their calls were directed to voicemail and their messages were never returned. Id. at 11.
Plaintiffs wrote a letter to W. F. Bank on December 9, 2011, in which they informed it in clear and unequivocal terms that flood insurance was not required for their loan. As proof they enclosed a copy of the SFHD that they and W. F. Bank had signed at closing. Id.; Thomas Jackson's Letter of December 9, 2011(Doc. No. 18-5). W. F. Bank did not immediately respond to plaintiffs' letter. Feeling as if they had no choice, plaintiffs purchased a policy providing $250,000.00 in coverage from the National Flood Insurance Program ("NFIP") in order to comply with W. F. Bank's November 7, 2011, demand. Id. at ¶ 12.
After purchasing the insurance plaintiffs sent a second letter to W. F. Bank on December 19, 2011, informing it that they had acquired the demanded insurance and providing proof of the same. Id.; Thomas Jackson's Letter of December 19, 2011(Doc. No. 18-6). The letter further explained that plaintiffs' property was not in a Special Flood Hazard Area ("SFHA"); the loan would not have been taken out if it had been known that flood insurance was required; and at closing W. F. Bank had assured that plaintiffs were not required to obtain such insurance prior to signing the settlement documents. Id.
W. F. Bank responded to plaintiffs in a letter dated January 5, 2012. Id. at ¶ 13. Therein W. F. Bank acknowledged plaintiffs' concerns about the flood insurance requirement and contended that the SFHD used at closing was for plaintiffs' garage only, and included with theletter a separate SFHD for plaintiffs' home. Id.; Letter of January 5, 2012, by Christopher Cory (Doc. No. 18-7). Plaintiffs had not received this separate determination for their residence at closing. Id. Further, the comment section of the SFHD form indicated that W. F. Insurance had made the determination regarding the status of plaintiffs' residence on August 23, 2011; however, the date of determination listed on the form is August 17, 2011. Id.; Standard Flood Hazard Determination of August 23, 2011, Section E, Comments (Doc. No. 18-3).
Upon receiving this letter plaintiffs spoke to an executive mortgage specialist at W. F. Bank. Id. at ¶ 14. During the telephone conversation plaintiffs expressed their dismay that W. F. Bank had not disclosed its flood insurance requirement at closing. Id. Thereafter, W. F. Bank sent a letter to plaintiffs stating that "flood insurance was not required on your loan at the time of closing" and that this was reflected in both the SFHD and the TILA Disclosure provided at closing. Id.; Letter of February 17, 2012 (Doc. No. 18-8).
By the time plaintiffs received this letter they had already refinanced with another bank and paid off their mortgage with W. F. Bank in order to free themselves from W. F. Bank's flood insurance demand. Id. at ¶ 15. Plaintiffs' new lender did not require flood insurance for any part of plaintiffs' property, and specifically has determined that their home does not fall in a SFHA. Id.
Plaintiffs incurred substantial costs in refinancing their residence and paying off their loan with W. F. Bank. Id. at ¶ 16. W. F. Bank did not offer to reimburse plaintiffs for such costs, or for the flood insurance premiums that they incurred for the coverage purchased in response to W. F. Bank's November 7, 2011, form letter. Id.
Although W. F. Bank charged $19.00 for the SFHD, its actual cost to obtain the determination was closer to $5.00. Id. at ¶ 23. W. F. Insurance received this fee and kicked-back or split the charge with W. F. Bank or W. F. Bank received the fee and did not pay the full amount to W. F. Insurance. Id. at ¶¶ 24, 26. This practice repeatedly has been utilized by defendants. Id. at ¶¶ 25, 27. W. F. Insurance typically kicks back a portion of the charge it earns from referral business from W. F. Bank through its "soft dollars" program and the pass-back of these amounts is reflected on the general ledger and is reported on a "Profitability Passback Report." Id. at ¶ 25. This charge did not reflect a reasonable fee in compliance with those authorized under the National Flood Insurance Act ("NFIA") and the practice of kick-backs or fee-splitting constituted an illegal arrangement under the Real Estate...
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