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Woodside v. Pacific Union Financial, LLC

United States District Court, E.D. Louisiana

March 22, 2018

JOHN WOODSIDE, III
v.
PACIFIC UNION FINANCIAL, LLC

         SECTION "F"

          ORDER AND REASONS

          MARTIN[ L. C. FELDMAN UNITED STATES DISTRICT JUDGE

         Before the Court is Pacific Union Financial, LLC's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the motion is GRANTED.

         Background

         Home-mortgage lenders often require the borrower to maintain insurance on the mortgaged property. When the borrower fails to secure his own insurance, the mortgage agreement typically authorizes the lender to secure the insurance and pass the cost on to the borrower. This case is about whether the lender is authorized to select insurance, called lender-placed insurance, that is significantly more expensive than the insurance the borrower could obtain on his own.

         On May 6, 2014, John Woodside bought a home in Madisonville, Louisiana for $170, 000. He obtained a $157, 712 mortgage from American National Mortgage Co., Inc., which was immediately sold to Pacific Union Financial, LLC. Pacific Union currently services the mortgage. The mortgage agreement requires that Woodside insure his property “against any hazards, casualties, and contingencies, including fire, for which Lender requires insurance, ” and against floods. Additionally, if Woodside fails to obtain insurance, “then the Lender may do and pay whatever is necessary to protect the value of the Property and Lender's rights in the Property, ” including obtaining insurance. Pacific Union would withdraw funds from Woodside's escrow account to purchase the LPI policy. The parties agreed that Pacific Union may control and manage Woodside's escrow funds.

         Woodside obtained a policy that insured the property from May 2, 2014 until May 5, 2015. The flood insurance policy provided $207, 000 in coverage; the annual premium was $788. On May 7, 2015, Pacific Union sent a letter to Woodside stating that the policy lapsed on May 2, 2015, and that it had not received an acceptable renewal or replacement policy. The letter warned that if Pacific Union did not receive proof of flood insurance within 45 days, it would purchase coverage on Woodside's expense, and that it would cost “at least $8, 196.62 annually.”[1] Accordingly, on June 23, 2015, Pacific Union notified Woodside that it had acquired lender-placed insurance, also called force-placed insurance, for the property through Ironshore Europe Limited. The LPI policy provided $155, 646 in coverage and cost $8, 196.62 per year. The notice informed Woodside that the LPI policy would be cancelled as soon as Woodside obtained an acceptable policy. Pacific Union paid itself $8, 196.62 out of Woodside's escrow account on August 14, 2015. The following year, on March 16, 2016, Woodside obtained acceptable coverage. Accordingly, Pacific Union cancelled the LPI policy and credited Woodside's escrow account $1, 055.43, the prorated cost of the LPI policy for the remaining months.

         Woodside brought this proposed class action lawsuit against Pacific Union on November 10, 2017. He alleges that Pacific Union breached the explicit terms of the mortgage agreement, the implied covenant for good faith and fair dealing, and its fiduciary duties when it selected a LPI policy that was significantly more expensive than the policy he had originally selected. On January 11, 2018, Pacific Union moved to dismiss the complaint for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6).

         I.

         Rule 12(b)(6) of the Federal Rules of Civil Procedure allows a party to move for dismissal of a complaint for failure to state a claim upon which relief can be granted. Such a motion is rarely granted because it is viewed with disfavor. See Lowrey v. Tex. A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997)(quoting Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982)).

         Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009)(citing Fed.R.Civ.P. 8). "[T]he pleading standard Rule 8 announces does not require 'detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Id. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

         In considering a Rule 12(b)(6) motion, the Court “accept[s] all well-pleaded facts as true and view[s] all facts in the light most favorable to the plaintiff.” See Thompson v. City of Waco, Texas, 764 F.3d 500, 502 (5th Cir. 2014) (citing Doe ex rel. Magee v. Covington Cnty. Sch. Dist. ex rel. Keys, 675 F.3d 849, 854 (5th Cir. 2012)(en banc)). But, in deciding whether dismissal is warranted, the Court will not accept as true legal conclusions. Id. at 502-03 (citing Iqbal, 556 U.S. at 678).

         To survive dismissal, “‘a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009)(quoting Iqbal, 556 U.S. at 678)(internal quotation marks omitted). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555 (citations and footnote omitted). “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.” Iqbal, 556 U.S. at 678 (“The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.”). The Court's task “is to determine whether the plaintiff stated a legally cognizable claim that is plausible, not to evaluate the plaintiff's likelihood of success.” Thompson v. City of Waco, Texas, 764 F.3d 500, 503 (5th Cir. 2014)(citation omitted). This is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. “Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.” I ...


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