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Francese v. American Modern Insurance Group, Inc.

United States District Court, D. New Jersey

October 25, 2017

AM. MODERN INS. GRP., INC., et al., Defendants.


          WILLIAM J. MARTINI, U.S.D.J.

         Defendants American Modern Insurance Group, Inc., and American Modern Home Insurance Company (collectively, “AMIG”); Residential Credit Solutions, Inc. (“RCS”); and Specialized Loan Servicing, LLC (“SLS”) (jointly, “Defendants”) move to dismiss Counts I and II in Plaintiff's Complaint for failure to plead fraud with heightened particularity. Next, Defendants RCS and SLS (“Loan Servicers”) seek to dismiss the remaining contract-based causes of action-Counts III, IV, and V-for failure to state a claim. The matter was taken on submission without oral argument. Fed.R.Civ.P. 78(b). For the reasons that follow, Defendants' Motions to Dismiss are GRANTED and Plaintiff's Complaint is DISMISSED WITHOUT PREJUDICE.

         I. BACKGROUND

         After purchasing a home (“Property”) and signing a Mortgage Agreement (“Agreement”), this dispute began when Plaintiff filed a claim for damage or loss to the Property. See AMIG's Notice of Removal, Ex. A, ¶¶ 6-21, ECF No. 1 [hereinafter “Compl.”]; Samon Decl., Ex. 1, ECF No. 18-3. AMIG's representatives then inspected the Property as to the claimed damage and assessed “the total damages at $53, 9433.14 [sic], ” Compl. ¶¶ 8, 14, while Plaintiff averred over $322, 000 in damages. Id. at ¶¶ 9, 16, 17. After an inspection, AMIG sent RCS, the then-Loan Servicer on Plaintiff's loan, $22, 468.72, and then again sent RCS, who forwarded it to SLS, the new Loan Servicer, $25, 750.62. Plaintiff argues the Loan Servicers wrongfully withheld these insurance proceeds, thereby unjustly enriching themselves. Id. at ¶¶ 38-40. Further, along with AMIG, Plaintiff contends the Loan Servicers conspired to offer a low dollar figure as to the Property damage claim, all part of an alleged unlawful kickback scheme. Id. at ¶¶ 24.e., 34.d.

         This dispute over a failure to forward Plaintiff the insurance proceeds stems from a lender, in a mortgage agreement, requiring a borrower to maintain hazard insurance on a mortgaged property to protect the lender's interest in said property. If the borrower fails to maintain insurance coverage, at its option, the lender may purchase, at a borrower's expense, a force-placed-or “lender-placed”-insurance policy (hereinafter “FPI”).

         After failing to provide proof of hazard insurance, Plaintiff alleges his Loan Servicers-the lenders and mortgage holders on his Property-wrongfully force-placed the required insurance in buying FPI at a premium that was likely more expensive than a borrower-purchased insurance policy. Through written warning notices, the Loan Servicers notified Plaintiff of its actions. The two notices included the annual premium, the effective insurance backdate, and advised that if Plaintiff provided proof of insurance, RCS and SLS would cancel its FPI and refund Plaintiff any premium payments made. Both notices explained in bold typeface how FPI would likely be more expensive than borrower-purchased coverage and how it represented limited coverage. See Pl.'s Decl., Exs. A-B, ECF No. 25-1. Although Plaintiff's Agreement allowed Defendants to procure FPI absent proof of insurance, Plaintiff contends Defendants had an exclusive arrangement to buy and sell high-premium FPIs which were unreasonable to protect the interest in the Property. Defendants then collected the FPI premiums and unknown excess amounts and redistributed the sums disguised as commissions and other fees not attributable to insuring the Property. Plaintiff labels the commission or fee a “kickback.” Compl. ¶ 24.

         Through its unlawful kickback scheme, Plaintiff alleges Defendants committed consumer fraud and engaged in and conspired to violate New Jersey's Civil RICO statute (“RICO”) through its unconscionable commercial practices in misleading unsophisticated borrowers into purchasing or agreeing to FPI. Also, although permitted under the Agreement to withhold the Property damage claim's insurance proceeds, Plaintiff asserts the Loan Servicers breached it and thereby unjustly enriched themselves.[1] In all, instead of purchasing hazard insurance, Plaintiff filed suit and Defendants timely removed.


         Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss, a court must take all allegations in the complaint as true and view them in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998).

         Although a complaint need not contain 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 Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual allegations must be sufficient to raise a plaintiff's right to relief above a speculative level, such that it is “plausible on its face.” See Id. at 570; see also Umland v. PLANCO Fin. Servs., Inc., 542 F.3d 59, 64 (3d Cir. 2008). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While “[t]he plausibility standard is not akin to a ‘probability requirement' . . . it asks for more than a sheer possibility.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). Apart from the complaint, a court may consider an “undisputedly authentic document” included as an exhibit in a party's motion to dismiss. Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).

         Under Federal Rule of Civil Procedure 9(b), “a plaintiff alleging fraud must state the circumstances of the alleged fraud with sufficient particularity to place the defendant on notice of the precise misconduct with which [it is] charged.” Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (citation and internal quotations omitted). That is, “the who, what, when, where, and how: the first paragraph of any newspaper story.” Institutional Inv'rs Grp. v. Avaya, Inc., 564 F.3d 242, 253 (3d Cir. 2009) (internal quotation marks and citation omitted).


         The Court will discuss, in turn, the state consumer fraud and RICO claims against all Defendants and then the contract-based claims against RCS and SLS.

         A. The New Jersey Consumer Fraud Act (“CFA”) Claim Against All Defendants (N.J. ...

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