United States District Court, C.D. California
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Attorneys for Plaintiffs: Not Present.
Attorneys for Defendants: Not Present.
Honorable CHRISTINA A. SNYDER,
CIVIL MINUTES - GENERAL
Proceedings: DEFENDANTS' MOTION TO DISMISS AMENDED COMPLAINT (Dkt. 14, filed Dec. 17, 2014)
On October 21, 2014, plaintiff Carlene Longest filed a class action complaint against defendants Green Tree Servicing, LLC (" GT Servicing" ), and Green Tree Insurance Agency, Inc. (" GT Insurance" ). Dkt. 1. On November 6, 2014, plaintiff filed the operative first amended complaint (" FAC" ), adding Junxiu " Alex" Cai and Lifen " Regina" Cai as named plaintiffs and asserting claim on behalf of a proposed Florida class and a proposed California class. Dkt. 9. The FAC asserts the following claims: (1) breach of contract, in violation of California law; (2) breach of the implied covenant of good faith and fair dealing, in violation of California law; (3) violation of the California Unfair Competition Law (" UCL" ), Cal. Bus. & Prof. Code § 17200, et seq.; (4) money had and received (restitution), under California law; (5) breach of contract, in violation of Florida law; (6) breach of the implied covenant of good faith and fair dealing, in violation of Florida law; and (7) unjust enrichment, under Florida law. Id. As to the California class, plaintiffs assert claims 1 and 2 against GT Servicing, claim 3 against both defendants, and claim 4 against GT Insurance. Id. As to the Florida class, plaintiffs assert claims 5 and 6 against GT Servicing, and claim 7 against GT Insurance. Id.
Defendants filed a motion to dismiss plaintiffs' FAC on December 17, 2014. Dkt. 14. Plaintiffs opposed the motion on January 16, 2015, dkt. 18, and defendants replied on January 26, 2015, dkt. 20. The Court held a hearing on February 9, 2015. Having carefully considered the parties' arguments, the Court finds and concludes as follows.
As a condition for funding home loans, lenders require borrowers to purchase and agree to maintain hazard insurance coverage on the secured property. FAC ¶ 2. If
a borrower is unable to maintain such coverage, the lender or loan servicer will obtain a policy on behalf of the borrower. Id. ¶ 3. These policies are know as " force-placed" or " lender-placed" insurance (referred to herein as " FPI" and " LPI" ). Id. FPI policies provide less coverage than policies purchased by the borrower voluntarily, and are substantially more costly than such voluntary policies. Id.
Through this action, plaintiffs Carlene Longest, Junxiu Cai, and Lifen Cai challenge certain practices involving FPI. Specifically, plaintiffs allege that defendant GT Servicing, a residential mortgage loan servicer, and defendant GT Insurance, GT Servicing's affiliated insurance entity, " charg[e] residential borrowers for the 'cost' of procuring force-placed insurance from Assurant Inc. (" Assurant" ) and its subsidiaries . . . but a portion of such 'cost' is returned, transferred, kicked-back or otherwise paid to [defendants]. [Defendants] do no meaningful work for the sums received, and therefore the payments amount to an unearned kickback designed to encourage the referral of business at extraordinary high prices." Id. ¶ 1. " Essentially, Assurant is engaging in a form of commercial bribery in order to induce [defendants] to purchase high-priced force-placed insurance policies, and have [defendants] refrain from seeking competitive bids in the market." Id. ¶ 36. Plaintiffs further allege that the kickbacks received by defendants are passed along to the borrower in the form of inflated FPI costs, id. ¶ 42, which are typically added to the principal balance of the borrower's mortgage loan or debited from the borrower's tax and insurance escrow account, id. ¶ 44
In 2005, plaintiff Longest purchased real property located at 102 East Branch, Nipomo, California 93444 (the " California Property" ). Id. ¶ 64. To finance the purchase of the California Property, Longest executed a written thirty-year, adjustable rate mortgage with GMAC Mortgage Corporation on July 20, 2005 in the amount of $200,000. Id. ¶ 65. Longest's mortgage was memorialized on a Fannie Mae/Freddie Mac Uniform Instrument (Form 3010 dated 01/01). Id. ¶ 66. Longest's mortgage includes a provision requiring her to maintain adequate property insurance to protect the California Property against loss by fire and other hazards, and also provides that the lender has the right to force-place insurance in if Longest fails to secure such a voluntary policy or if Longest's voluntary policy lapses. Id. ¶ 67. Effective on or about February 1, 2013, GMAC Mortgage, LLC assigned, sold, or transferred all interest in Longest's mortgage to defendant GT Servicing. Id. ¶ 68. Between February 2013 and December 2013, Longest received several notices from defendants indicating that they had acquired FPI policies on her behalf and debited at least $1,406.20 from Longest's monthly mortgage payments. Id. ¶ ¶ 69-74.
In 2007, the Cai plaintiffs purchased real property located at 105 Blue Jay Way, Davenport, Florida 33896 (the " Florida Property" ). Id. ¶ 79. To finance the purchase, the Cais executed a written thirty-year, fixed rate mortgage with Countrywide Home Loans, Inc. on May 22, 2007 in the amount of $184,000. Id. ¶ 80. Like Longest's mortgage, the Cais' mortgage was memorialized on a Fannie Mae/Freddie Mac Uniform Instrument (Form 3010 dated 01/01). Id. ¶ 81. The Cais' mortgage also contains a provision requiring them to maintain adequate property insurance to protect the Florida Property against loss by fire and other hazards, and provides that the lender has the right to force-place insurance if the Cais fail to secure such a voluntary policy or if the Cais' voluntary policy lapses. Id. ¶ 82. Since 2012, the Cais allege that defendants have debited at least $4,809.39 in FPI
costs from their monthly mortgage payments. Id. ¶ 83.
III. LEGAL STANDARD
A motion pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in a complaint. Under this Rule, a district court properly dismisses a claim if " there is a 'lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.'" Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988)). " While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). " [F]actual allegations must be enough to raise a right to relief above the speculative level." Id.
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all material allegations in the complaint, as well as all reasonable inferences to be drawn from them. Pareto v. FDIC,139 F.3d 696, 699 (9th Cir. 1998). The complaint must be read in the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors,266 F.3d 979, 988 (9th Cir. 2001); Parks Sch. of Bus., Inc. v. Symington,51 F.3d 1480, 1484 (9th Cir. 1995). However, " [i]n keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Ashcroft v. Iqbal,556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); Moss v. United States Secret Service,572 F.3d 962, 969 (9th Cir. 2009) (" [F]or a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." ...