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Gray v. CIT Bank, N.A.

United States District Court, D. New Jersey

December 27, 2018

CIT BANK, N.A., ET AL., Defendants.

          LAW OFFICE OF ROOSEVELT N. NESMITH, LLC By: Roosevelt N. Nesmith, Esq. Counsel for Plaintiffs

          GREENBERG TRAURIG, LLP By: Louis Smith, Esq. Aaron Van Nostrand, Esq. Counsel for Defendants CIT Bank N.A., and Financial Freedom Senior Funding Corporation

          BUCKLEY SANDLER LLP By: Robyn C. Quattrone, Esq. Stephen M. LeBlanc, Esq. Mary C. Flemming, Esq. And SILLS CUMMIS & GROSS P.C. By: Charles J. Falletta, Esq. Counsel for Defendants QBE Insurance Corporation, QBE First Insurance Agency, Inc., and MIC General Insurance Corporation



         Plaintiffs bring this putative class action suit alleging that Defendants CIT Bank, N.A., a mortgage lender (“CIT”); Financial Freedom Senior Funding Corporation, a mortgage servicer (“Financial Freedom”); and insurance companies QBE Insurance Corporation, QBE First Insurance Agency, Inc., and MIC General Insurance Corporation (collectively “the Insurer Defendants”) conspired to: (1) overcharge Plaintiffs in connection with forced-placed hazard insurance; and (2) charge unnecessary property inspection fees.

         Defendants move to dismiss all claims asserted in the Amended Complaint.[1] For the reasons stated herein, the Insurer Defendants' motion will be granted as to the tortious interference claim and denied in all other respects; and the other Defendants' motion will be denied.

         I. Facts

         This suit concerns a reverse mortgage on a residential property located in Cinnaminson, New Jersey. (Amend. Compl. ¶¶ 1, 80) In 2008, Earl Gray Jr. obtained the reverse mortgage from Defendant Freedom Financial. (Id. ¶ 80-81) Gray failed to maintain hazard insurance coverage on his property as required by the mortgage documents, and so, in accordance with the loan documents, beginning in 2011, Defendant Financial Freedom began force-placing hazard insurance on the property. (Id. ¶ 83) Allegedly, “Financial Freedom imposed a charge [for the insurance premium] on Gray's mortgage account . . . in the amount of $3, 510.00.” (Id.)

         Thereafter, Plaintiffs allege, the same pattern continued from 2012 through 2017; Freedom Financial force-placed insurance on the subject property, then charged Gray-- and subsequently the new property owners upon Gray's death in 2016[2]-- for what Financial Freedom said was the cost of the insurance premiums.[3] (Amend. Compl. ¶ 83) According to Plaintiffs, however, what Financial Freedom represented what the cost of the insurance premiums was actually the cost plus an “unearned commission” or “kickback” that Financial Freedom obtained through its “interlocking agreements” with the Insurer Defendants. (Id. ¶¶ 59-64) The alleged misrepresentations as to the cost of the insurance allegedly were contained in various notices sent to the property. (Amend. Compl. ¶¶ 84, 89)

         Plaintiffs also allege that Financial Freedom obtained excessive-- and therefore, allegedly unnecessary-- insurance coverage for the property. For example, Plaintiffs allege that in 2013, Financial Freedom obtained insurance coverage in the amount of $330, 000 even though “the outstanding principle [sic] balance of Gray's loan was $235, 600, ”-- i.e., substantially less than the coverage amount. (Amend. Compl. ¶ 84)

         Lastly, Plaintiffs allege that Financial Freedom charged Gray's mortgage account for unnecessary inspections. The first of these charges occurred on March 25, 2011. (Amend. Compl. ¶ 86) The other 15 alleged unnecessary inspection fees were charged for inspections done after “Financial Freedom declared Gray's loan due and payable . . . on June 4, 2015.” (Id. ¶¶ 85-86) Plaintiffs contend that all of the inspections were unnecessary because the property was always “occupied” and “Monica Gray was in regular contact with Financial Freedom concerning the Gray Property.” (Id. ¶ 87) Plaintiffs allege that Financial Freedom ordered the property inspections “without a legitimate basis solely to generate fees.” (Id. ¶ 69)

         The Amended Complaint asserts nine counts: (1) Monica Gray, Executrix v. Financial Freedom and CIT-- breach of contract; (2) Monica Gray, Executrix v. Financial Freedom and CIT-- breach of the duty of good faith and fair dealing; (3) all Plaintiffs v. Financial Freedom and CIT-- violation of the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-2 (“NJ CFA”); (4) all Plaintiffs v. the Insurer Defendants-- violation of the N.J. CFA; (5) all Plaintiffs v. all Defendants-civil conspiracy; (6) Monica Gray, Executrix v. the Insurer Defendants-- tortious interference; (7) all Plaintiffs v. all Defendants-- violation of RICO, 18 U.S.C. § 1962(c); (8) all Plaintiffs v. all Defendants-- violation of RICO, 18 U.S.C. § 1962(d); and (9) Monica Gray, Executrix v. CIT-- violation of the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”).

         II. Motion to Dismiss Standard

         To withstand a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “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.” Id. at 663. “[A]n unadorned, the defendant-unlawfully-harmed me accusation” does not suffice to survive a motion to dismiss. Id. at 678. “[A] plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires 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 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)).

         In reviewing a plaintiff's allegations, a district should conduct a three-part analysis:

First, the court must take note of the elements a plaintiff must plead to state a claim. Second, the court should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth. Third, when there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.

Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011) (internal citations, quotations, and modifications omitted) (quoting Iqbal, 556 U.S. at 675, 679).

         Rule 12(b)(6) requires the district court to “accept as true all well-pled factual allegations as well as all reasonable inferences that can be drawn from them, and construe those allegations in the light most favorable to the plaintiff.” Bistrian, 696 F.3d at 358 n. 1. Only the allegations in the complaint and “matters of public record, orders, exhibits attached to the complaint and items appearing in the record of the case” are taken into consideration. Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n. 2 (3d Cir. 1994) (citing Chester Cty. Intermediate Unit. v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990)). A court may also “consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document.” Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).

         Additionally, Fed.R.Civ.P. 9(b) requires allegations of fraud to be pled with particularity. The rule applies to N.J. CFA claims as well as RICO claims. Jaye v. Oak Knoll Vill. Condo. Owners Ass'n, Inc., 2018 WL 4360901 at *2 (3d Cir. 2018); Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007).

         III. Analysis

         A. Standing

         Defendants assert that all claims asserted by Plaintiffs Justin Gray and Jasmine Gray-Oliver should be dismissed for lack of standing because the Amended Complaint does not allege that either Justin or Jasmine were the recipients of any allegedly false or misleading communications which form, in part, the basis of the N.J. CFA, conspiracy, and RICO claims.

         Plaintiffs respond that Defendants frame the claims too narrowly. According to Plaintiffs, the N.J. CFA and attendant conspiracy claim are based on the harm Plaintiffs suffered in the form of an “increased lien against their property” resulting from the alleged “inflated charges” associated with the force-placed insurance (Supp. Brief, Dkt 46, p. 12), not simply the allegedly misleading notices concerning the force-placed insurance sent to the address of the property at issue. According to Plaintiffs, the claims specific to them accrued in 2017-- after Earl Gray, Jr. died and Defendants CIT and Financial Freedom allegedly continued to charge the mortgage account for the costs associated with the force-placed insurance. (Id.)

         The Court concludes that Justin Gray and Jasmine Gray-Oliver have sufficiently pled that they have personally suffered injuries for which they may pursue the N.J. CFA and conspiracy claims for a limited time frame. The Amended Complaint alleges that in 2017, when Justin and Jasmine were the property owners and “responsible to satisfy Financial Freedom's mortgage lien, ” Financial Freedom charged the mortgage account for “‘insurance charges'” in the amount of “$2, 357.06 for the period 11/02/2017 to 11/02/2018.” (Amend. Compl. ¶ 89-91) Accordingly, the Motions to Dismiss Justin Gray and Jasmine Gray-Oliver's N.J. CFA and conspiracy claims for lack of standing will be denied.

         As to the RICO claims, Plaintiffs contend that it is not necessary that the allegedly misleading November 9, 2017 notice be addressed to Justin and Jasmine, rather, it is sufficient that the notice-- addressed to Earl Gray, who was then deceased-- was sent to the property at issue. Plaintiffs explain, “these Notice Letters directed to the Estate of Earl Gray were effectively sent to Justin and Jasmine Gray, given that they resided at the Gray Property and were the only ones with an insurable interest in the property and authority to obtain voluntary property insurance.” (Supp. Brief, Dkt 46, p. 13) Additionally, the parties agree that Monica Gray was simultaneously the Executrix of Earl Gray's estate and Jasmine Gray-Oliver's Trustee (Amend. Compl. ¶¶ 1-3, 88), and the Amended Complaint alleges that Monica Gray received and read the notice (Id. ¶ 89), effectively imputing direct receipt of the notice at least to Jasmine.

         The Court holds that these alleged facts are sufficient, at the pleadings stage, to establish the standing of Plaintiffs Justin Gray and Jasmine Gray-Oliver. The Motions to Dismiss for lack of standing will be denied.

         B. HOLA Preemption

         Financial Freedom and CIT assert that all of the state law claims asserted against them (Counts 1-3, and 5) are preempted by the Home Owners' Loan Act (“HOLA”), 12 U.S.C. § 1461, and its implementing regulations, specifically in this ...

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