Montoya v. PNC Bank, N.A.
| Decision Date | 23 March 2015 |
| Docket Number | Case No. 14–20474–CIV. |
| Parties | Enrique MONTOYA, Neyser Colonia and XI Chen Lauren, on behalf of themselves and all others similarly situated, Plaintiffs, v. PNC BANK, N.A., et al., Defendants. |
| Court | U.S. District Court — Southern District of Florida |
Aaron Samuel Podhurst, John Gravante, III, Matthew Weinshall, Peter Prieto, Podhurst Orseck, P.A., Allan Aaron Joseph, Fuerst Ittleman David & Joseph, PL, Lance August Harke, Howard Mitchell Bushman, Harke Clasby & Bushman LLP, Tal J. Lifshitz, Kozyak Tropin Throckmorton, Miami, FL, Archie Cleveland Lamb, Jr., Archie Lamb, Associates, Birmingham, AL, Margery Ellen Golant, Margery E. Golant, P.A., Boca Raton, FL, Peter A. Muhic, Samantha E. Jones, Tyler S. Graden, Kessler, Topaz, Meltzer & Check, LLP, Radnor, PA, Rachel Sullivan, Robert J. Neary, Thomas A. Tucker Ronzetti, Adam M. Moskowitz, Kozyak, Tropin & Throckmorton, P.A., Coral Gables, FL, Roosevelt N. Nesmith, Law Offices Roosevelt N. Nesmith, LLC, Montclair, NJ, Jeffrey N. Golant, Pompano Beach, FL, Mary Kestenbaum Fortson, Sean Michael Shaw, William F. Merlin, Jr., The Merlin Law Group, Tampa, FL, for Plaintiffs.
Daniel I. Booker, Jack B. Cobetto, Kyle R. Bahr, Reed, Smith, LLP, Pittsburg, PA, Peter W. Homer, Homer Bonner Jacobs, P.A., Farrokh Jhabvala, Franklin G. Burt, Landon King Clayman, Irma T. Reboso–Solares, Carlton Fields Jorden Burt, P.A., Miami, FL, Denise A. Fee, Carlton Fields Jorden Burt, PA, Kristin A. Shepard, Jorden Burt, Washington, DC, for Defendants.
ORDER ON DEFENDANTS' MOTIONS TO DISMISS THIRD AMENDED COMPLAINT
Plaintiffs have filed four versions of their complaint in this proposed class action lawsuit concerning claims brought in connection with force-placed insurance coverage on homes with mortgages. Defendants, a bank and an insurance company, have filed motions to dismiss the Third Amended Complaint (“TAC”). Plaintiffs have responded and Defendants have filed replies. In addition, the Court held a lengthy hearing and the Parties submitted proposed final orders, which the Court considered.
For the reasons outlined in greater detail below, the Court grants in small part the bank's motion to dismiss (on the Ohio law claim for breach of an implied covenant of good faith and fair dealing) but denies the rest of the bank's dismissal motion and also denies the insurance company's motion. Nevertheless, some of the rulings are premised on the procedural posture—evaluating motions to dismiss—and later evaluations made in different settings will likely be more exacting and probing.
The Undersigned previously entered a comprehensive order [ECF No. 124] on motions to dismiss an earlier version of the complaint. Much of the background comes from that earlier order, which evaluated Plaintiffs' First Amended Complaint (“FAC”). The TAC [ECF No. 127–1] adds a new named plaintiff (i.e., Xi Chen Lauren) to the existing two plaintiffs (Enrique Montoya and Neyser Colonia) and also adds allegations for the existing RICO counts. The TAC is similar (but not identical) to the initial complaint at issue in the earlier order (which granted in part and denied in part the motions to dismiss). It does not pursue certain claims previously dismissed and it no longer names PNC Mortgage and Assurant, Inc. as defendants.
The three named Plaintiffs assert nine claims for: breach of the implied covenant of good faith and fair dealing against Defendant PNC Bank, N.A. (“PNC”) (Count I); unjust enrichment against PNC (Count II); unjust enrichment against Defendant American Security Insurance Company (“ASIC”) (Count III); violations of the New Jersey Consumer Fraud Act (“NJCFA”) against PNC (Count IV) and ASIC (Count V); tortious interference with a business relationship against ASIC (Count VI); breach of fiduciary duty against PNC (Count VII); civil RICO against all Defendants (Count VIII); and civil RICO conspiracy against all Defendants (Count IX). All three named Plaintiffs are pursuing claims in Counts I, II, III, VI, VII, VIII and IX. Colonia is pursuing claims alone in Counts IV and V. The FAC had twelve counts; the TAC has nine.
In its motion to dismiss the TAC [ECF No. 129], ASIC seeks to dismiss all of Lauren's claims against ASIC and the repled RICO claims of Montoya and Colonia. In its partial motion to dismiss [ECF No. 133], PNC moves to dismiss with prejudice Counts VIII and IX in their entirety, Lauren's claims in Counts I and VII and all of Plaintiff's claims on behalf of a putative nationwide class in Counts I, II and VII.
The Court initially declined to dismiss Plaintiffs Montoya's and Colonia's claims for breach of the implied covenant of good faith and fair dealing, unjust enrichment, and breach of fiduciary duty against PNC, and tortious interference with a business relationship against ASIC in an order entered on August 27, 2014 [ECF No. 124 (the “August 27th Order”) ]; Plaintiff Lauren, an Ohio resident, still has those claims pending. The Court also declined to dismiss Plaintiff Montoya's unjust enrichment claim against ASIC and Plaintiff Colonia's claims for violation of the NJCFA against both Defendants, but dismissed Plaintiff Colonia's unjust enrichment claim against ASIC and both Plaintiffs' federal RICO claims without prejudice. [Id. ].
The order dismissing without prejudice the RICO claims was based on Plaintiffs' failure to sufficiently allege how Defendants allegedly participated, directed and/or controlled the alleged RICO enterprise. In granting Plaintiffs leave to file an amended complaint, the order expressly stated that the Court was not ruling on Defendants' other substantive arguments about why they believed the RICO allegations were deficient. The order gave Defendants the ability to reassert those other arguments if Plaintiffs filed an amended complaint containing RICO claims (which they did).
Homeowners are often required by the terms of their mortgage contracts to maintain insurance coverage on the properties securing their loans. When the homeowner does not maintain the insurance, the lender is authorized by the mortgage contract to purchase new insurance to cover its interest in the property. Lenders do this by contracting with insurance providers. This is what is commonly referred to as lender-placed insurance (“LPI”), which is sometimes deemed (usually by plaintiffs) as force-placed insurance.
This case is one of many putative civil class actions that have been filed around the country against various lenders, servicers and insurance carriers regarding the LPI programs. Many of these suits, like the one here, allege that lenders and their insurance providers have colluded together to create a nefarious scheme of unearned kickbacks (disguised as commissions and other benefits) that artificially inflate LPI rates. [ECF No. 127, pp. 2–4]. According to Plaintiffs, this scheme results in inflated LPI premiums and, in many instances, backdated insurance coverage (which the borrowers must pay) to cover periods during which no claims were made or coverage exceeding the legal requirements. [ECF No. 127, ¶ 3].
The facts concerning Montoya and Colonia are discussed in the earlier Order on the dismissal motions [ECF No. 124, pp. 4–7] and will not (other than specifically mentioned below) be repeated here. The facts alleged in the TAC relating to Plaintiff Lauren are outlined below.
On October 15, 2003, Lauren obtained a $210,400 mortgage loan from PNC's predecessor, National City Mortgage Company, secured by a duplex located at 5381–5383 McKitrick Blvd., Columbus, Ohio (the “Mortgage”). [ECF Nos. 127–1, ¶ 58]. The Mortgage is a standard Fannie Mae form mortgage contract, Form 3036, and the relevant provisions regarding LPI are identical to those in Plaintiff Montoya's mortgage. [ECF No. 133–1; compare ECF No. 127–1, ¶ 46 with ¶ 59].
An Allstate hazard insurance policy that Lauren had purchased for the property expired on November 17, 2011. [ECF No. 127–1, ¶ 60]. Lauren failed to immediately obtain replacement hazard insurance coverage, leaving Lauren's property uninsured for more than four months, until March 26, 2012, when Lauren purchased a State Farm Insurance policy. [Id., ¶ 63].
On or about November 23, 2012, PNC sent Lauren a notice letter. [Id., ¶ 152]. That letter is the sole letter identified in the TAC to support Lauren's RICO allegations. [Id., ¶ 152; ECF No. 133–4]. The November 23, 2012 letter to Lauren is the same form letter that PNC sent to Montoya on October 16, 2012, and provided Lauren with all of the disclosures that Montoya received. [Compare ECF Nos. 56–17; 133–4].
As the TAC acknowledges, before PNC's purchase of hazard insurance for Lauren's property, Lauren did not have an escrow account for the payment of insurance premiums. [ECF No. 127–1, ¶ 60]. The November 23, 2012 letter stated that if PNC was required to purchase insurance for Lauren's property, PNC would “establish an escrow account for the purpose of collecting funds for the payment of your insurance premium and your mortgage payments will be increased accordingly.” [ECF No. 133–4].
The TAC alleges that on or about December 25, 2012, PNC purchased from ASIC a 45–day insurance binder, indicating a retroactive inception date of November 22, 2011—five days following the lapse of Lauren's Allstate policy—and an annual premium of $3,334.00 on dwelling coverage of $328,200.00. [ECF No. 127–1, ¶ 61]. Lauren received notice of this temporary binder by a second notice letter from PNC dated December 25, 2012. [ECF No. 133–5]. The TAC alleges that Lauren's lapsed Allstate policy had also provided dwelling coverage of $328,200.00, though at an annual premium of only $545.98. [ECF No. 127–1, ¶ 60]. The LPI premium was approximately six times as much as similar, homeowner-obtained coverage.
Lauren eventually provided evidence that she had...
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