Patel v. Specialized Loan Servicing, LLC

904 F.3d 1314

Pankaj PATEL, Laketha Wilson, Plaintiffs - Appellants,

v.SPECIALIZED LOAN SERVICING, LLC, American Security Insurance Company, Defendants - Appellees.

Richard L. Fowler, Glenda Keller, Yvonne Yambo-Gonzalez, on behalf of themselves and all others similarly situated, Plaintiffs - Appellants,

v.Caliber Home Loans, Inc., individually and as successor-in-interest to Vericrest Financial and Caliber Funding, American Security Insurance Company, Defendants - Appellees.

No. 16-12100

No. 16-16585

United States Court of Appeals, Eleventh Circuit.

Filed September 24, 2018

Adam Moskowitz, Rachel Sullivan, Robert J. Neary, Thomas Ronzetti, Kozyak Tropin & Throckmorton, PA, 2525 Ponce De Leon Blvd. Fl. 9, Miami, FL 33134-6037, Stephen F. Rosenthal, John Gravante, III, Aaron S. Podhurst, Peter Prieto, Matthew P. Weinshall, Podhurst Orseck, PA, One SE 3rd Ave. Ste. 2300, Miami, FL 33130, Howard Bushman, Sarah Clasby Engel, Lance Harke, Harke Clasby & Bushman, LLP, 9699 NE 2nd Ave., Miami Shores, FL 33138, Archie C. Lamb, Jr., Archie Lamb & Associates, LLC, THe Kress Bldg., 301 19th St. N Ste. 585, Birmingham, AL 35203-3145 for Plaintiffs - Appellants.

Franklin G. Burt, Carlton Fields Jorden Burt, PA, 100 SE 2nd St. Ste. 4200, Miami, FL 33131-2113, W. Glenn Merten, Brian Patrick Perryman, Carlton Fields Jorden Burt, PA, 1025 Thomas Jefferson St. NW Ste. 400 W, Washington, DC 20007 for Defendant - Appellee Specialized Loan Servicing, LLC.

Franklin G. Burt, Carlton Fields Jorden Burt, PA, 100 SE 2nd St. Ste. 4200, Miami, FL 33131-2113, W. Glenn Merten, Brian Patrick Perryman, Dawn B. Williams, Carlton Fields Jorden Burt, PA, 1025 Thomas Jefferson St. NW Ste. 400 W, Washington, DC 20007 for Defendant - Appellee American Security Insurance Company.

Robyn Cort Quattrone, Katherine Leigh Halliday, Stephen M. LeBlanc, Buckley Sandler, LLP, 1250 24th St. NW Ste. 700, Washington, DC 20037, Ross Eric Morrison, Buckley Sandler LLP, 1133 Avenue of the Americas Ste. 3100, New York, NY 10036 for Amicus Curiae Property Casualty Insurers Association of America.

Dennis J. Wall, Dennis J. Wall Law Office, Insurance Claims and Issues, Winter Springs, FL, for Amicus Curiae United Policyholders.

Before JORDAN, HULL, and BOGGS,^* Circuit Judges.

BOGGS, Circuit Judge:

When an individual takes out a mortgage, he or she secures the loan with real property. To protect its security interest, lenders usually require borrowers to maintain hazard insurance in an amount that is at least equal to the loan’s unpaid principal balance. Should a borrower fail to obtain or maintain adequate coverage, the mortgage may authorize the lender to purchase insurance for the property and to charge the borrower for the cost of coverage. Such coverage is known as "force-placed insurance" ("FPI") or "lender-placed insurance." Typically, the task of monitoring borrowers’ insurance coverage—and force-placing it when necessary—is farmed out to a loan servicer.

The plaintiffs in these consolidated cases are borrowers who allege that their mortgage servicers, Specialized Loan Servicing, LLC ("SLS") and Caliber Home Loans, Inc. ("Caliber"),¹ breached the plaintiffs’ loan contracts, as well as an implied covenant of good faith and fair dealing, by charging "inflated amounts" for FPI. Specifically, the plaintiffs claim that SLS and Caliber received "rebates" or "kickbacks" from the force-placed insurer, American Security Insurance Company ("ASIC"), but that they did not pass these savings on to the borrowers. As such, the plaintiffs allege that SLS and Caliber violated the terms of the mortgage contracts, which authorized the servicers to charge only for the "cost of the insurance." In the alternative to these contractual claims, the plaintiffs pleaded an unjust-enrichment claim against the servicers.

Additionally, because the plaintiffs claim that SLS and Caliber colluded with ASIC to disguise the alleged overcharges as legitimate expenses, they also accuse SLS and Caliber of violating the Federal Truth in Lending Act, 15 U.S.C. § 1601 ; ASIC of tortious interference with a business relationship and unjust enrichment; and all three companies of violating the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c), (d). Patel and Wilson further allege that SLS’s actions violated the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201.

Complicating this otherwise run-of-the-mill contract dispute is the fact that ASIC’s FPI rates have been filed with, and approved by, state regulators in the relevant jurisdictions.² Because of this, the possibility arises that the plaintiffs’ claims are barred by the filed-rate doctrine, which, inter alia, "precludes any judicial action which undermines agency rate-making authority." Hill v. BellSouth Telecomms., Inc. , 364 F.3d 1308, 1317 (11th Cir. 2004) (quoting Marcus v. AT&T Corp. , 138 F.3d 46, 61 (2d Cir. 1998) ). The issue before us now is whether the plaintiffs’ claims are so barred.

Because we conclude that the plaintiffs, in their complaints, challenge a rate filed with regulators, we hold that the filed-rate doctrine applies. We accordingly affirm the district courts’ dismissals of the cases under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.

I

A

In June 2005, Pankaj Patel, a Florida citizen, signed a mortgage agreement with nonparty IndyMac Bank, which required him to maintain hazard insurance on the subject property for the life of the loan. In pertinent part, the agreement stated:

5. Property Insurance . Borrower shall keep the improvements now existing or hereafter erected on the Property insured against loss by fire, hazards included within the term "extended coverage," and any other hazards including, but not limited to, earthquakes and floods, for which Lender requires insurance. This insurance shall be maintained in the amounts (including deductible levels) and for the periods that Lender requires. ...

If Borrower fails to maintain any of the coverages described above, Lender may obtain insurance coverage, at Lender’s option and Borrower’s expense. Lender is under no obligation to purchase any particular type or amount of coverage. Therefore, such coverage shall cover Lender, but might or might not protect Borrower, Borrower’s equity in the Property, or the contents of the Property, against any risk, hazard[,] or liability and might provide greater or lesser coverage than was previously in effect. Borrower acknowledges that the cost of the insurance coverage so obtained might significantly exceed the cost of insurance that Borrower could have obtained. Any amounts disbursed by Lender under this Section 5 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment.

...

9. Protection of Lender’s Interest in the Property and Rights Under this Security Instrument . If (a) Borrower fails to perform the covenants and agreements contained in this Security Instrument, (b) there is a legal proceeding that might significantly affect Lender’s interest in the Property and/or rights under this Security Instrument (such as a proceeding in bankruptcy, probate, for condemnation or forfeiture...), or (c) Borrower has abandoned the Property, then Lender may do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under this Security Instrument, including protecting and/or assessing the value of the Property, and securing and/or repairing the Property.

Patel Compl., Exhibit A, at 5–7.

In June 2014, Patel’s voluntary coverage lapsed. Shortly thereafter, ASIC—with whom SLS had subcontracted to monitor its loan portfolio—sent Patel a letter informing him that if proof of coverage was not provided, SLS would purchase insurance on his behalf. The notice advised Patel of his right to obtain coverage from an insurance agent or company of his choice, "urge[d] [him] to do so," informed him that insurance bought by SLS was "likely" to have a "much higher" cost and to provide less coverage than what he could obtain on his own, and stated that "[t]he insurance we obtain may provide benefits to you but is primarily for the benefit of SLS."³ ASIC Motion to Dismiss, Exhibit 1, at 4–5 (No. 0:15-cv-62600-JIC). It further disclosed that "if [SLS] purchase[d the] insurance ..., an affiliate of SLS [could] benefit" by receiving a commission and that "[t]he insurance company may factor such commission into the rate charged for the coverage." Id. at 5. The notice closed by "strongly recommend[ing]" that Patel obtain his own coverage.

One month later, SLS sent Patel a second notice, stating that it still had not received evidence of insurance. This letter included an insurance binder that disclosed the annual premium of the policy that SLS would purchase if it did not receive proof of coverage. On August 22, 2014, after Patel had yet again failed to provide proof of the contractually-required insurance, ASIC issued a one-year FPI certificate for the property, effective from June 2014. The policy "authorized [SLS] to advance all funds to be recovered from the borrower for the insurance afforded[.]" ASIC Motion to Dismiss, Exhibit 3, at 12 (No. 0:15-cv-62600-JIC). On June 5, 2015, Patel obtained voluntary coverage.

Patel’s experience is representative of that of the remaining plaintiffs. Wilson, Fowler, and Yambo-Gonzalez are Florida citizens whose mortgage contracts contained provisions that were identical to those quoted above, while Keller, a Pennsylvania citizen, signed a mortgage contract containing materially similar provisions.⁴ Each also received at least one notice from his or her servicer, which stated that hazard insurance would be force-placed if voluntary coverage was not obtained and that the cost of FPI was likely to be "much higher" or "substantially higher" than...