Vieira v. First American Title Ins. Co., Civil Action No. 08-cv-11331-DPW.
| Decision Date | 08 October 2009 |
| Docket Number | Civil Action No. 08-cv-11331-DPW. |
| Parties | Adelino VIEIRA and Monica Medeiros, on behalf of themselves and others similarly situated, Plaintiffs, v. FIRST AMERICAN TITLE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Elizabeth A. Ryan, John J. Roddy, Roddy, Klein and Ryan, Boston, MA, Ingrid L. Moll, William H. Narwold, Motley Rice, LLC, Hartford, CT, for Plaintiffs.
Charles A. Newman, Elizabeth T. Ferrick, Michael J. Duvall, Sonnenschein, Nath & Rosenthal, LLP, Douglas W. King, James M. Weiss, Bryan Cave, LLP, St. Louis, MO, Michael D. Vhay, DLA Piper, Rudnick, Gray, Cary, US LLP, Zachary N. Coseglia, DLA Piper US LLP, Boston, MA, for Defendant.
Plaintiffs Adelino Vieira and Monica Medeiros pursue this action on behalf of themselves and all others similarly situated against Defendant First American Title Insurance Company, alleging that First American has "routinely overcharged Massachusetts homeowners by charging premiums for title insurance far in excess of First American's established Massachusetts rates, and by failing to disclose to these customers that they are entitled to hundreds of dollars in savings when they purchase title insurance in connection with a refinance transaction." (Am. Compl. ¶ 1.) This conduct is alleged to constitute a breach of contract and to give rise to violations of MASS. GEN. LAWS ch. 93A, § 2 and the common law. First American has filed a motion (Doc. No. 15) to dismiss these claims.
For purposes of this motion to dismiss, I must take as true all well-pleaded facts in the operative pleading (Plaintiffs' Amended Class Action Complaint) (Doc. No. 13) and draw all reasonable inferences arising therefrom in Plaintiffs' favor. Phoung Luc v. Wyndham Mgmt. Corp., 496 F.3d 85, 88 (1st Cir.2007). I do so in the following factual recitation.
Title insurance is an "unavoidable cost" of any mortgage refinancing. (Am. Compl. ¶ 2.) Lenders generally require title insurance in connection with a refinancing loan for a residential mortgage because title insurance protects lenders' collateral in the event of a title challenge. (Id.) First American's 2003 Massachusetts Rate Manual ("2003 Rate Manual") sets forth the premium rates for title insurance policies, and provides a refinancing discount that is 60% of the full rate when certain conditions are met. (Id. at ¶ 29.) The manual provides that "First American will grant a special refinancing premium to its insured . . . If the Borrower refinances within 15 years, for either the original loan amount, or less than the original loan amount the special refinancing premium charge will be 60% of the current premium based on the new loan amount." (Am. Compl., Ex. A at 4.) The rationale behind discounted refinance rates is that refinance policies involve less work for title companies and also insure against less risk than the original policy. (Am. Compl. ¶ 4.)
Plaintiffs allege that First American failed to disclose to Massachusetts homeowners that they qualified for the discounted rate when they purchased title insurance in connection with a refinance transaction, and consequently charged these customers rates in excess of First American's established rates. The overcharging and non-disclosure of discounted refinance rates in general is a "widespread practice" that has resulted in substantial profits for title insurers. (Id. at ¶¶ 5-6.) The discount could save a borrower hundreds of dollars in premiums. (Id. at ¶ 3.)
Plaintiffs Vieira and Medeiros, citizens of Massachusetts, purchased their home in Woburn, Massachusetts on or about August 10, 2005. (Id. at ¶¶ 12-13, 34.) Vieira entered into a mortgage loan with Countrywide Bank, FSB in the amount of $260,000. (Id. at ¶ 34.) Plaintiffs paid a total of $1,470.751 to purchase title insurance issued by Defendant First American, a California corporation with a principal place of business in California (Id. at ¶¶ 14, 35); the total premium included both lender's coverage and owner's coverage. (Id. at ¶ 35.) The loan closing was handled by First American's agent, Sharaf, Kelley, and Maloney, P.C. ("SKM"). (Id.)
On or about March 29, 2006, Plaintiffs refinanced their home mortgage and obtained a new loan from Countrywide for $301,500. (Id. at ¶ 36.) Plaintiffs again used First American as their title insurer, and SKM again handled the closing. (Id.) As part of the refinancing, Plaintiffs paid a premium of $830.50, the full rate for lender's coverage; they were not given the discounted refinance rate. (Id. at ¶ 37.) Prior to paying the title insurance premium at the closing, Plaintiffs reviewed the HUD-1 form (Am. Compl., Ex. C) which included a statement of the $830.50 premium for the title insurance policy. (Am. Compl., ¶ 38.)
First American's 2003 Rate Manual allegedly contained the company's rates in effect at the time of Plaintiffs' loan transaction. (Id. at ¶ 28.) First American furnished its agents with state-specific guidelines; in Massachusetts, a recorded institutional mortgage in the chain of title during the prior fifteen-year period is sufficient to qualify a borrower for the discounted refinance rate. (Id. at ¶ 33.) Plaintiffs allege they qualified for and were entitled to receive this discount because a loan policy had been issued and their home was previously insured within fifteen years from the date of issue of their new loan policy.2 (Id. at ¶ 40.) As a result, Plaintiffs contend they should have been charged a discounted refinance rate of $495.00 for title insurance. (Id. at ¶ 37.)
Plaintiffs claim that First American, through its agent SKM, concealed from Plaintiffs that they qualified for and were entitled to receive the discounted refinance rate, and supplied false, misleading, inaccurate, and incomplete information about the applicable rate for title insurance. (Id. at ¶ 39.) The non-disclosures and misinformation were material to Plaintiffs' transaction. (Id.) Because the refinancing was reflected in the chain of title and closing documents for Plaintiffs' and Class members' properties, First American knew or should have known that Plaintiffs and Class members qualified for, and were entitled to receive, a discounted refinance rate; particularly in Plaintiffs' case where First American had issued their prior loan policy. (Id. at ¶ 42.) First American consequently caused Plaintiffs financial harm by overcharging them for this premium when they were entitled to receive the discounted refinance rate. (Id. at ¶ 43.)
On August 5, 2008, Plaintiffs sent a demand for relief, pursuant to MASS. GEN. LAWS ch. 93A, to First American on behalf of themselves and a class of others similarly situated, seeking relief for First American's unfair and deceptive practices. (Id. at ¶ 44; Ex. D.) First American received the demand on August 8, 2008 and had thirty days to respond; but First American never responded or offered any relief. (Id. at ¶ 45.)
The operative pleading, the Amended Class Action Complaint,3 was filed by the Plaintiffs to recover for harm caused by First American's "pattern of deceptive acts and practices," and asserts claims for breach of contract, unjust enrichment, money had and received, and a violation of MASS. GEN. LAWS ch. 93A. (Id. at ¶ 15.)4 Plaintiffs allege that, from August 5, 2002 to the present, First American engaged in deceptive acts and practices and defrauded Plaintiffs and Class members by overcharging for premiums and/or by failing to disclose their entitlement to discounted premiums. (Id. at ¶ 16.) Plaintiffs and Class members seek, inter alia, damages for the difference between the amount of the title insurance premiums charged by First American without the discounted refinance rate and the amount of the title insurance premiums had the discount rightfully been applied. (Id. at ¶ 48.)
On October 20, 2008, First American filed the instant Motion (Doc. No. 15) to Dismiss Plaintiffs' Amended Complaint with prejudice for failure to state a claim under Fed.R.Civ.P. 12(b)(6), as well as for failure to plead a fraud claim with particularity under Fed.R.Civ.P. 9(b).5
Under the Federal Rules of Civil Procedure, a complaint must contain a "short plain statement of the claim showing that the pleader is entitled to relief. . . ." FED. R. CIV. P. 8(a)(2). To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim, the complaint must nevertheless allege "a plausible entitlement to relief," FitzGerald v. Harris, 549 F.3d 46, 52 (1st Cir.2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)), and contain factual allegations sufficient "to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal citations omitted).
The court considering the merits of a motion to dismiss "may look only to the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the complaint and matters of which judicial notice can be taken." Declude, Inc. v. Perry, 593 F.Supp.2d 290, 294 (D.Mass.2008). The court must take all factual allegations in the complaint as true and draw all reasonable inferences arising therefrom in the plaintiff's favor. Phoung Luc, 496 F.3d at 88. The allegations however, must be "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
Title insurance premiums and rates are not regulated in Massachusetts. Certain types of insurance companies have...
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