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Alpert v. Nationstar Mortgage LLC

United States District Court, W.D. Washington, Seattle

September 12, 2019

SPENCER ALPERT, an individual, Plaintiff,
v.
NATIONSTAR MORTGAGE LLC, a Delaware limited liability company; HARWOOD SERVICE COMPANY, a Delaware corporation; AMERICAN SECURITY INSURANCE COMPANY, a Delaware corporation; STANDARD GUARANTY INSURANCE COMPANY, a Delaware corporation; and, ASSURANT, INC., a Delaware corporation, Defendants.

          ORDER REMANDING ACTION TO KING COUNTY SUPERIOR COURT

          Honorable Richard A. Jones United States District Judge

         The Honorable Richard A. Jones This matter comes before the Court on Defendants' Motion to Dismiss (Dkt. # 129). For the reasons stated below, the Court concludes that it does not have subject matter jurisdiction under 28 U.S.C. § 1332. Defendants' Motion to Dismiss (Dkt. # 129) is therefore terminated and this matter is remanded to King County Superior Court.

         I. BACKGROUND

         This case is about force-placed insurance. In 2006, Plaintiff obtained a mortgage loan. Dkt. # 43 (Amended Complaint) at ¶ 39. Aurora Bank (“Aurora”) was an early servicer of the loan until 2012, at which time Nationstar Mortgage LLC (“Nationstar”) took over as the loan servicer. Id. at ¶ 42. Plaintiff's mortgage agreement included a Property Insurance provision that required Plaintiff to maintain a certain level of insurance. Id. at 40. If Plaintiff's coverage lapsed, then the agreement authorized Nationstar to obtain the proper amount of coverage. Id. The agreement provided, in part, that:

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 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 insurance coverage so obtained might significantly exceed the cost of insurance that Borrower could have obtained.

Id. The agreement further provided that, “[i]f Borrower fails to perform the covenants and agreements contained in this Security instrument . . . then Lender may do and pay for whatever is reasonable and appropriate to protect the Lender's interest in the Property . . . including protecting and/or assessing the value of the Property . . . .” Id. at ¶ 41.

         Plaintiff claims that he had his own insurance policy with Safeco Insurance Company (“Safeco”) through July 2013, which Aurora can verify. Dkt. # 43 (Amended Complaint) at ¶ 42. Nonetheless, Nationstar force-placed insurance on his property beginning in July 2012. Plaintiff contests the force-placed policy from July 2012 to July 2013 but concedes that “[a]t some time, ” his voluntary insurance policy indeed lapsed. Id. at ¶ 42.

         According to Plaintiff, Nationstar and the insurance companies operate a kickback scheme that results in inflated premiums for borrowers who have force-placed insurance on their property. . Dkt. # 43 (Amended Complaint) at ¶ 9. In his Amended Complaint, Plaintiff explains that Assurant Inc. (“Assurant”) operates through its subsidiaries, American Security Insurance Company (ASIC) and Standard Guaranty Insurance Company (SGIC), to monitor loans. Id. When a borrower's coverage lapses, SGIC and ASIC work with Nationstar's broker, Harwood Service Company (“Harwood”), to place the proper insurance policy. Id. at ¶ 10. Once the policy is placed, Nationstar pays the associated premiums to the insurers and charges that premium to the borrower. Id. at ¶ 26. Plaintiff alleges that SGIC and ASIC would then pay commissions to Harwood and/or Nationstar, but these commissions were actually kickbacks used to secure an exclusive relationship. Id. at ¶ 9. Moreover, Plaintiff asserts that Nationstar maintains an “umbrella policy” with the insurers such that Harwood's services are unnecessary. Id. at ¶ 24.

         Plaintiff claims that the premiums include an extra amount designated for the kickbacks, as well as extra amounts for potential costs and charges associated with servicing. Id. at ¶ 30. This amount is paid back to Nationstar but not to the borrowers. Therefore, Plaintiff alleges that he paid “hyper-inflated premiums” for his force-placed insurance policy. Id. at ¶ 30.

         Along with the issue of inflated premiums, Plaintiff also alleges that the Defendants overvalued his property such that it would qualify for higher premiums. Id. at ¶¶ 133, 134. Plaintiff claims this pattern of overvaluation is a widespread and common practice for Defendants. Id. at ¶ 147. On June 10, 2015, Plaintiff “obtained a quote for standard insurance on his home from Commerce West Insurance Company, ” and found that this premium was less than his current force-placed insurance premium. Id. at ¶ 48. He also noticed that the quote from Commerce West Insurance Company was “similar to what he was previously paying to Safeco.” Id.

         On July 2, 2015, Plaintiff sued ASIC, SGIC, Assurant, Nationstar, and Harwood Service Company in King County Superior Court, alleging claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, violation of the Washington Consumer Protection Act (“CPA”), violation of the Truth in Lending Act (“TILA”), tortious interference, breach of fiduciary duty, and violations of the Racketeer Influenced and Corruption Act (“RICO”). Dkt. # 1-1. Defendants removed to this Court. Dkt. # 1.

         Defendants moved to dismiss in August 2015. Dkt. ## 17-23. While these motions were pending, Plaintiff moved to amend his Complaint. Dkt. # 34. The Court granted Plaintiff's motion to amend and dismissed the motions to dismiss filed by the Defendants. Dkt. # 42. On March 3, 2016, Plaintiff filed his Amended Complaint, asserting thirteen claims. Dkt. # 43. Defendants again moved to dismiss arguing that Plaintiff's claims were barred by the Filed-Rate Doctrine. Dkt. ## 46-48. The Court dismissed all but three of Plaintiff's claims: Count 11 (breach of contract), Count 12 (CPA), and Count 13 (breach of contract). Dkt. # 58.

         On June 1, 2018, Defendants Nationstar and Harwood moved for summary judgment, which Plaintiff countered by cross-moving for summary judgment. Dkt. ## 96, 101. On March 14, 2019, this Court entered an order granting Defendants' Motion for Summary Judgment as to Counts 12 and 13 and denying Defendants' Motion as to Count 11. Dkt. # 123. The Court denied Plaintiff's Motion for Summary Judgment. Id. Plaintiff's remaining breach of contract claim, Count 11, alleges that Nationstar breached the deed of trust when it “artificially selected an inflated value” of the Property which, in turn, allowed Nationstar to “charge higher premiums than it could have charged if it had correctly valued the [Property]”. Dkt. # 43, ¶¶ 131-39.

         Defendants Nationstar and Hardwood now move to dismiss Plaintiff's Amended Complaint for lack of subject matter jurisdiction. Dkt. # 129. Specifically, Defendants argue that the Court no longer has jurisdiction over this matter because the one remaining claim is a state law claim and diversity jurisdiction ...


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