Levine v. First Am. Title Ins. Co.

682 F.Supp.2d 442

Bruce LEVINE and Daniel McCorkle, et al., Plaintiffs,

v.FIRST AMERICAN TITLE INSURANCE COMPANY, Defendant

Civil Action No. 09-842.

United States District Court E.D. Pennsylvania

Decided: Jan. 14, 2010

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Anthony P. Valach, Daniel M. Harris, The Law Offices of Daniel Harris, Chicago, IL, Elizabeth W. Fox, Todd S. Collins, Berger Montague PC, Ann Miller, Ann Miller, LLC, Philadelphia, PA, for Plaintiffs.

Charles A. Newman, Elizabeth T. Fer-rick, Sonnenschen Nath & Rosenthal, St. Louis, MO, Corey M. Shapiro, Sonnen-schein Nath & Rosenthal LLP, Chicago, IL, Todd S. Collins, Berger & Montague, P.C., Beth L. Weisser, Lauren P. McKen-na, Fox Rothschild, LLP, Philadelphia, PA, for Defendant.

OPINION

SLOMSKY, District Judge.

|        | TABLE OF CONTENTS                                                                                                                                 
-------------------------------------------------------------------------------------------------------------------------------------------------------------
| I.     | Introduction............................................................449                                                                       
-------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | Factual Background.....................................................450                                                                        
|        |  A. The Rate Manual in Pennsylvania.....................................450                                                                       
|        |  B. Levine/McCorkle Transaction.........................................452                                                                       
|        |  C. Singer Transaction..................................................452                                                                       
| II.    |  D. The Scheme to Defraud..............................................452                                                                        
-------------------------------------------------------------------------------------------------------------------------------------------------------------
| III.   | Standard of Review......................................................453                                                                       
-------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | Discussion..............................................................453                                                                       
| IV.    |  A. § 910-44(b) of TICA Does Not Bar Plaintiffs From Pursuing a Private Right of Action Before Exhausting Administrative Remedies...........453   
-------------------------------------------------------------------------------------------------------------------------------------------------------------

| B. Plaintiffs State a Valid RICO Claim...................................456                                                             
|  I. The Association-in-Fact Enterprise and the Distinctiveness Requirements...............................................457            
|  a. Plaintiffs Sufficiently Allege a "Person" Distinct From the "Enterprise"....457                                                      
|  b. Plaintiffs Sufficiently Allege an Organized "Enterprise" Structure...............................................460                 
|  c. Plaintiffs Sufficiently Allege an "Enterprise" Distinct From the Pattern of Racketeering Activity...461...........................   
|  II. Plaintiffs Sufficiently Allege Predicate Acts of Mail and Wire Fraud....462                                                         
|  a. The Scheme to Defraud......................................462                                                                       
|  i. The HUD-1 Statement Furthers the Scheme to Defraud....463                                                                            
|  ii. Defendant Owed Plaintiffs a Duty to Disclose...............464                                                                      
|  b. Use of Mail or Wires.............................................465                                                                 
|  c. Fraudulent Intent..............................................465                                                                   
|  III. Plaintiffs\' Claim is Not Pre-empted by the McCarran-Ferguson Act...465                                                            
-------------------------------------------------------------------------------------------------------------------------------------------
| C. Plaintiffs Assert a Viable Claim Under UTPCPL.........................466                                                             
-------------------------------------------------------------------------------------------------------------------------------------------
| 1).Plaintiffs\' Remaining Claims May Proceed..............................467                                                            
|  I.Fraudulent Misrepresentation....................................467                                                                   
|  II. Negligence....................................................467                                                                   
|  III. Unjust Enrichment.............................468                                                                                  
-------------------------------------------------------------------------------------------------------------------------------------------
| V. Conclusion..............................................................469                                                           
-------------------------------------------------------------------------------------------------------------------------------------------

I. INTRODUCTION

Before the Court is a case arising from an alleged fraudulent scheme in which Defendant First American Title Insurance Company ("First American"), through various title agents, misrepresented the amount of money due and owing for title insurance.¹ The crux of Plaintiffs' allegations is that Defendant overcharged thousands of Pennsylvania homeowners who purchased title insurance by charging a default "basic" rate of insurance rather than a special discounted "reissue" or "refinance" rate, which applied to the kind of title insurance required of a homeowner as part of a mortgage transaction. Through this alleged scheme, Defendant received considerable revenue to which it was not entitled.

Plaintiffs, individually and on behalf of others similarly situated, commenced this action on February 26, 2009. An Amended Complaint (Doc. No. 26) was filed on June 10, 2009.² Plaintiffs allege in the Amended Complaint that Defendant, through its title agents, engaged in the scheme described above as part of an ongoing racketeering enterprise in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Additionally, Plaintiffs claim Defendant employed unfair or deceptive acts prohibited by the Pennsylvania Unfair Trade Practices Act and Consumer Protection Law ("UTPCPL").

Plaintiffs also assert claims of fraudulent misrepresentation, negligence, and unjust enrichment, which stem from the RICO and UTPCPL counts.

Currently before the Court is Defendant First American's Motion to Dismiss Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), filed July 15, 2009 (Doc. No. 29). Plaintiffs filed their Opposition in Response to Motion to Dismiss on August 19, 2009 (Doc. No. 30). On September 1, 2009, First American filed a Reply in Support of the Motion to Dismiss (Doc. No. 34). On October 7, 2009, the Court held a hearing on Defendant's Motion. For reasons that follow, the Court will deny the Motion to Dismiss in its entirety.

II. FACTUAL BACKGROUND

This case is one of many cases brought against title insurance companies in which allegations are made of a pervasive pattern of overcharging for title insurance inconsistent with statutory rates. The parties cite and discuss several certified class actions filed within the last few years in which homeowners allegedly were overcharged for title insurance in Pennsylvania. The three related cases presently before this Court involve three separate title insurance companies. Individual plaintiffs in each case are different. However, each suit alleges the same basic grievance: unbeknownst to insurance purchasers, title insurance companies systematically misrepresented the amount of money due and owing for title insurance by failing to disclose that purchasers who paid an overcharged amount at settlement were entitled to a discounted rate based on the history of the property being insured.

A. The Rate Manual in Pennsylvania

In Pennsylvania, title insurance rates are regulated by the Title Insurance Com panies Act, 40 P.S. § 910 (1999) ("TICA"). TICA requires that title insurance rates be approved by and filed with the Insurance Commissioner of the Commonwealth of Pennsylvania. 40 P.S. § 910-37(a). As a title insurance company selling title insurance in Pennsylvania, Defendant is obligated not to "charge any fee for any policy or contract of title insurance except in accordance with filings or rates which are in effect for said title insurance company." 40 P.S. § 910-37(h). Defendant has received approval for its rates as a member of Title Insurance Rating Bureau of Pennsylvania ("TIRBOP"), an agency licensed by the Pennsylvania...