Alpert v. Nationstar Mortgage LLC

• Court: District Court, W.D. Washington
• Decided: September 12, 2019
• Docket: 2:15-cv-01164
• Status: Unknown

Opinion

1 The Honorable Richard A. Jones 2 3 4 5 6 7 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE 9

10 SPENCER ALPERT, an individual, Case No. 2:15-cv-01164-RAJ 11 Plaintiff, ORDER REMANDING ACTION TO 12 KING COUNTY SUPERIOR v. 13 COURT

NATIONSTAR MORTGAGE LLC, a 14 Delaware limited liability company; 15 HARWOOD SERVICE COMPANY, a Delaware corporation; AMERICAN 16 SECURITY INSURANCE COMPANY, a Delaware corporation; STANDARD 17 GUARANTY INSURANCE COMPANY, a 18 Delaware corporation; and, ASSURANT, INC., a Delaware corporation, 19 20 Defendants. 21

22 This matter comes before the Court on Defendants’ Motion to Dismiss (Dkt. # 23 129). For the reasons stated below, the Court concludes that it does not have subject 24 matter jurisdiction under 28 U.S.C. § 1332. Defendants’ Motion to Dismiss (Dkt. # 129) 25 is therefore terminated and this matter is remanded to King County Superior Court. 26 1 I. BACKGROUND 2 This case is about force-placed insurance. In 2006, Plaintiff obtained a mortgage 3 loan. Dkt. # 43 (Amended Complaint) at ¶ 39. Aurora Bank (“Aurora”) was an early 4 servicer of the loan until 2012, at which time Nationstar Mortgage LLC (“Nationstar”) 5 took over as the loan servicer. Id. at ¶ 42. Plaintiff’s mortgage agreement included a 6 Property Insurance provision that required Plaintiff to maintain a certain level of 7 insurance. Id. at 40. If Plaintiff’s coverage lapsed, then the agreement authorized 8 Nationstar to obtain the proper amount of coverage. Id. The agreement provided, in part, 9 that: If Borrower fails to maintain any of the coverages described above, Lender 10 may obtain insurance coverage, at Lender’s option and Borrower’s expense. 11 Lender is under no obligation to purchase any particular type or amount of coverage. Therefore, such coverage shall cover Lender, but might or not 12 protect Borrower, Borrower’s equity in the Property, or the contents of the 13 Property, against any risk, hazard or liability, and might provide greater or lesser coverage than was previously in effect. Borrower acknowledges that 14 the cost of insurance coverage so obtained might significantly exceed the cost of insurance that Borrower could have obtained. 15 Id. The agreement further provided that, “[i]f Borrower fails to perform the covenants 16 and agreements contained in this Security instrument . . . then Lender may do and pay for 17 whatever is reasonable and appropriate to protect the Lender’s interest in the Property . . . 18 including protecting and/or assessing the value of the Property . . . .” Id. at ¶ 41. 19 Plaintiff claims that he had his own insurance policy with Safeco Insurance 20 Company (“Safeco”) through July 2013, which Aurora can verify. Dkt. # 43 (Amended 21 Complaint) at ¶ 42. Nonetheless, Nationstar force-placed insurance on his property 22 beginning in July 2012. Plaintiff contests the force-placed policy from July 2012 to July 23 2013 but concedes that “[a]t some time,” his voluntary insurance policy indeed lapsed. 24 Id. at ¶ 42. 25 26 1 According to Plaintiff, Nationstar and the insurance companies operate a kickback 2 scheme that results in inflated premiums for borrowers who have force-placed insurance 3 on their property. . Dkt. # 43 (Amended Complaint) at ¶ 9. In his Amended Complaint, 4 Plaintiff explains that Assurant Inc. (“Assurant”) operates through its subsidiaries, 5 American Security Insurance Company (ASIC) and Standard Guaranty Insurance 6 Company (SGIC), to monitor loans. Id. When a borrower’s coverage lapses, SGIC and 7 ASIC work with Nationstar’s broker, Harwood Service Company (“Harwood”), to place 8 the proper insurance policy. Id. at ¶ 10. Once the policy is placed, Nationstar pays the 9 associated premiums to the insurers and charges that premium to the borrower. Id. at ¶ 10 26. Plaintiff alleges that SGIC and ASIC would then pay commissions to Harwood 11 and/or Nationstar, but these commissions were actually kickbacks used to secure an 12 exclusive relationship. Id. at ¶ 9. Moreover, Plaintiff asserts that Nationstar maintains an 13 “umbrella policy” with the insurers such that Harwood’s services are unnecessary. Id. at 14 ¶ 24. 15 Plaintiff claims that the premiums include an extra amount designated for the 16 kickbacks, as well as extra amounts for potential costs and charges associated with 17 servicing. Id. at ¶ 30. This amount is paid back to Nationstar but not to the borrowers. 18 Therefore, Plaintiff alleges that he paid “hyper-inflated premiums” for his force-placed 19 insurance policy. Id. at ¶ 30. 20 Along with the issue of inflated premiums, Plaintiff also alleges that the 21 Defendants overvalued his property such that it would qualify for higher premiums. Id. 22 at ¶¶ 133, 134. Plaintiff claims this pattern of overvaluation is a widespread and common 23 practice for Defendants. Id. at ¶ 147. On June 10, 2015, Plaintiff “obtained a quote for 24 standard insurance on his home from Commerce West Insurance Company,” and found 25 that this premium was less than his current force-placed insurance premium. Id. at ¶ 48. 26 1 He also noticed that the quote from Commerce West Insurance Company was “similar to 2 what he was previously paying to Safeco.” Id. 3 On July 2, 2015, Plaintiff sued ASIC, SGIC, Assurant, Nationstar, and Harwood 4 Service Company in King County Superior Court, alleging claims for breach of contract, 5 breach of the implied covenant of good faith and fair dealing, unjust enrichment, 6 violation of the Washington Consumer Protection Act (“CPA”), violation of the Truth in 7 Lending Act (“TILA”), tortious interference, breach of fiduciary duty, and violations of 8 the Racketeer Influenced and Corruption Act (“RICO”). Dkt. # 1-1. Defendants 9 removed to this Court. Dkt. # 1. 10 Defendants moved to dismiss in August 2015. Dkt. ## 17-23. While these motions 11 were pending, Plaintiff moved to amend his Complaint. Dkt. # 34. The Court granted 12 Plaintiff’s motion to amend and dismissed the motions to dismiss filed by the Defendants. 13 Dkt. # 42. On March 3, 2016, Plaintiff filed his Amended Complaint, asserting thirteen 14 claims. Dkt. # 43. Defendants again moved to dismiss arguing that Plaintiff’s claims 15 were barred by the Filed-Rate Doctrine. Dkt. ## 46-48. The Court dismissed all but 16 three of Plaintiff’s claims: Count 11 (breach of contract), Count 12 (CPA), and Count 13 17 (breach of contract). Dkt. # 58. 18 On June 1, 2018, Defendants Nationstar and Harwood moved for summary 19 judgment, which Plaintiff countered by cross-moving for summary judgment. Dkt. ## 20 96, 101. On March 14, 2019, this Court entered an order granting Defendants’ Motion 21 for Summary Judgment as to Counts 12 and 13 and denying Defendants’ Motion as to 22 Count 11. Dkt. # 123. The Court denied Plaintiff’s Motion for Summary Judgment. Id. 23 Plaintiff’s remaining breach of contract claim, Count 11, alleges that Nationstar breached 24 the deed of trust when it “artificially selected an inflated value” of the Property which, in 25 turn, allowed Nationstar to “charge higher premiums than it could have charged if it had 26 correctly valued the [Property]”. Dkt. # 43, ¶¶ 131-39. 1 Defendants Nationstar and Hardwood now move to dismiss Plaintiff’s Amended 2 Complaint for lack of subject matter jurisdiction. Dkt. # 129. Specifically, Defendants 3 argue that the Court no longer has jurisdiction over this matter because the one remaining 4 claim is a state law claim and diversity jurisdiction is lacking because the amount in 5 controversy is below the $75,000 threshold. Dkt. # 129 at 2. 6 II. DISCUSSION 7 A. Amount In Controversy 8 Under 28 U.S.C. § 1332, district courts “shall have original jurisdiction of all civil 9 actions where the matter in controversy exceeds the sum or value of $75,000 ... and is 10 between citizens of different states.” In general, a plaintiff need only include a plausible 11 allegation that the amount in controversy exceeds the jurisdictional threshold, unless it 12 appears to a legal certainty that the plaintiff cannot recover that amount. See Pachinger 13 v. MGM Grand Hotel-Las Vegas, Inc., 802 F.2d 362, 363-64 (9th Cir. 1986). The legal 14 certainty test applies “when a rule of law or limitation of damages would make it 15 virtually impossible for a plaintiff to meet the amount-in-controversy requirement.” 16 Pachinger, at 364. If the plaintiff alleges a sum that will, as a legal certainty, fall below 17 the jurisdictional threshold, then the court must dismiss the case. Naffe v. Frey, 789 F.3d 18 1030, 1040 (9th Cir. 2015) (adopting the “legal certainty” standard). 19 If the jurisdictional amount is challenged, then the party invoking the jurisdiction 20 of the federal court has the burden to support its allegations through the submission of 21 “summary-judgment type evidence relevant to the amount in controversy” as it existed at 22 the time of filing. See Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th 23 Cir. 1997); see also Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 403 (9th Cir. 24 1996) (quoting Hale v. Billups of Gonzales, Inc., 610 F. Supp. 162 (M.D. La. 1985)). 25 Defendants argue that the amount in controversy in this matter is not satisfied 26 because Plaintiff is only seeking damages in the amount of the difference between the 1 total premiums charged ($17,318.00) and what the premiums should have been had 2 Defendants properly valued the property. Dkt. # 129 at 12. Because this is clearly less 3 than the $75,000 threshold, Defendants contend that the amount in controversy 4 requirement is not met and the Court lacks subject matter jurisdiction under 28 U.S.C. § 5 1332. Id. Plaintiff concedes that the damages requested are not sufficient to establish 6 subject matter jurisdiction but argues that the Court should also incorporate attorneys’ 7 fees into its calculation. Dkt. # 133 at 11. 8 Although the diversity statute provides that calculations are made without regard 9 to interest or costs, there is an exception to this rule. “[A]ttorneys’ fees awarded under 10 fee-shifting statutes or contracts are included in the amount in controversy.” Fritsch v. 11 Swift Transp. Co. of Arizona, 899 F.3d 785, 793 (9th Cir. 2018) (citations omitted) 12 (emphasis added); see also Johnson v. Tractor Supply Co., No. 19-CV-0270, 2019 WL 13 2004436, at *3 (W.D. Wash. May 7, 2019), leave to appeal denied, No. 19-80064, 2019 14 WL 3916608 (9th Cir. July 31, 2019) (incorporating attorneys’ fees into amount in 15 controversy calculation where underlying wage and hour fee-shifting statute provided for 16 attorneys’ fees). 17 Plaintiff points to Washington statute RCW 4.84.330 to support his argument that 18 he is entitled to attorneys’ fees. Dkt. # 133 at 11. RCW 4.84.330 provides: 19 In any action on a contract or lease entered into after September 21, 1977, where such contract or lease specifically provides that attorney’s fees and 20 costs, which are incurred to enforce the provisions of such contract or lease, 21 shall be awarded to one of the parties, the prevailing party, whether he is the party specified in the contract or lease or not, shall be entitled to 22 reasonable attorney’s fees in addition to costs and necessary disbursements. 23 But Plaintiff’s reliance on RCW 4.84.330 is misplaced. The Washington Supreme Court 24 has previously held that RCW 4.84.330 “is not a fee-shifting statute” because a fee- 25 shifting statute is designed to “punish frivolous litigation and encourage meritorious 26 1 litigation” while the purpose of RCW 4.84.330 is to make unilateral contract provisions 2 bilateral. Wachovia SBA Lending, Inc. v. Kraft, 165 Wash. 2d 481, 489–90 (2009). As a 3 result, RCW 4.84.330 does not warrant the inclusion of attorneys’ fees into the amount in 4 controversy calculation. 5 Because RCW 4.84.330 is not a fee-shifting statute, the Court must consider 6 whether the relevant contract, the deed of trust (Dkt. # 98, Ex. B), provides for attorneys’ 7 fees. Here, Plaintiff points to two provisions in the deed of trust that he contends allow 8 for the award of attorneys’ fees. Dkt. # 133 at 8. Under Section 26 of the deed of trust, 9 the “[l]ender shall be entitled to recover its reasonable attorneys’ fees and costs in any 10 action or proceeding to construe or enforce any term of this Security Instrument.” Dkt. # 11 98, Ex. B. Similarly, under Section 9 of the deed of trust, “[i]f Borrower fails to perform 12 the covenants and agreements contained in this Security Instrument . . . then Lender may 13 do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the 14 Property . . . [including] paying reasonable attorneys’ fees . . . .” Dkt. # 133 at 8. While 15 each of these provisions allow for the award of attorneys’ fees to the lender (in this case 16 the Defendants), neither provision allows for the award of attorneys’ fees to the borrower 17 (in this case the Plaintiff). Dkt. # 98, Ex. B. 18 Plaintiff argues that he is still entitled to attorneys’ fees pursuant to the contract 19 because if he prevails in his breach of contract claim, he is entitled to fees under RCW 20 4.84.330. Dkt. # 133 at 12. Even if that is true, for the purposes of this jurisdictional 21 analysis, attorneys’ fees may only be included in the amount in controversy calculation if 22 they are provided under a contract or a fee-shifting statute. Fritsch, at 793. Because 23 RCW 4.84.330 is not a fee-shifting statute and Plaintiff has identified no provisions in the 24 contract awarding him (as the borrower) attorneys’ fees, the Court finds that it lacks 25 subject matter jurisdiction over this matter under 28 U.S.C. § 1332. 26 1 B. Supplemental Jurisdiction 2 In the event the Court determines that is does not have subject matter jurisdiction, 3 Plaintiff asks the Court to exercise supplemental jurisdiction over the remaining state law 4 claim. Dkt. # 135 at 14. Under 28 U.S.C. § 1367(a), the Court has supplemental 5 jurisdiction over all claims within the same case or controversy as a claim conferring 6 original jurisdiction. 28 U.S.C. § 1367(a). But it is within the discretion of the Court to 7 decline supplemental jurisdiction over remaining state claim(s) and remand the matter to 8 state court. See 28 U.S.C. § 1367(c)(3); see also Carnegie-Mellon Univ. v. Cohill, 484 9 U.S. 343, 350 (1988) (finding that “pendent jurisdiction is a doctrine of discretion, not of 10 plaintiff’s right.”) (citations omitted); United Mine Workers of America v. Gibbs, 383 11 U.S. 715, 726 (1966) (“Needless decisions of state law should be avoided both as a 12 matter of comity and to promote justice between the parties, by procuring for them a 13 surer-footed reading of applicable law.”). 14 The Court has now dismissed all of Plaintiff’s federal claims upon which removal 15 was originally based. Dkt. ## 58, 123. The Court declines to exercise supplemental 16 jurisdiction over Plaintiff’s remaining state law claim. In the interest of justice, rather 17 than dismissing the remaining state claim, the Court remands this matter to the state court 18 from which it was removed. See 28 U.S.C. § 1447(c). 19 The Court strongly encourages the state court to adopt this Court’s rulings and not 20 renew discovery or open the door for a new volley of motion practice. This matter is 21 ready for trial and should be resolved at trial. 22 III. CONCLUSION 23 For the foregoing reasons, the Court declines to exercise jurisdiction over this 24 matter due to a lack of subject matter jurisdiction under 28 U.S.C. § 1332. Defendant’s 25 26 1 Motion to Dismiss is terminated and the Clerk is directed to remand this action to King 2 County Superior Court. 3 4 DATED this 12th day of September, 2019. 5

6 A 7 8 The Honorable Richard A. Jones 9 United States District Judge 10

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26