Barbe v. Ocwen Loan Servicing, LLC
2:18-cv-14037
| E.D. La. | May 22, 2019Background
- Marc Barbe (mortgagor) failed to maintain hazard insurance; mortgage allowed lender (Ocwen) to obtain force-placed insurance at borrower’s expense and warned such coverage could be much more expensive and might not protect the borrower’s interest.
- Ocwen force-placed a policy from American Modern and notified Barbe (Dec. 31, 2015), enclosing an evidence-of-insurance that named Ocwen as insured and listed Barbe as borrower.
- In August 2016 high-velocity winds damaged Barbe’s home; Barbe submitted a claim to American Modern, which he alleges underpaid and provided inadequate estimates.
- Barbe sued in state court alleging (1) American Modern breached the insurance contract and handled claims in bad faith; (2) Ocwen breached the mortgage by overcharging and taking kickbacks and failing to assist in pursuing proceeds; and (3) the defendants conspired and were unjustly enriched.
- Defendants removed to federal court and moved to dismiss under Rule 12(b)(6); Barbe filed a first amended complaint. The Court granted the motions: unjust enrichment dismissed with prejudice; breach/tort claims dismissed without prejudice and Barbe given leave to amend once.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Barbe is an insured or intended third-party beneficiary of the force-placed policy (breach vs American Modern) | Barbe: policy/evidence of insurance makes him an insured or at least a third-party beneficiary entitled to payment | American Modern: evidence certificate disclaims altering policy; policy names Ocwen as insured and payments prioritize Ocwen’s interest; no facts show loss exceeds mortgagee’s interest | Dismissed: Barbe failed to plead he is an insured or that loss exceeds mortgage balance to trigger third-party beneficiary rights; breach and statutory bad-faith claims dismissed without prejudice |
| Whether American Modern owed tort duties/bad-faith statutory liability | Barbe: insurer acted in bad faith by underpaying/poor adjusting | American Modern: plaintiff not an insured/beneficiary; no duty if not insured; statutory bad-faith depends on viable contract claim | Dismissed without prejudice for failure to state breach (thus no statutory bad-faith claim) |
| Whether Ocwen breached the mortgage by overcharging, taking kickbacks, or failing to assist in claims adjustment | Barbe: Ocwen passed inflated premiums, received commissions/kickbacks, and failed to pursue sufficient insurance proceeds | Ocwen: mortgage permits lender to obtain coverage at borrower’s expense, warns force-placed coverage may be more expensive, and contains no prohibition on receiving commissions; mortgage imposes no duty to pursue insurer payments | Dismissed without prejudice: mortgage authorizes force-placed coverage and does not limit premium charged or forbid commissions; Barbe did not identify a contractual duty Ocwen breached or plausibly allege Ocwen assumed a duty to pursue proceeds |
| Whether conspiracy / unjust enrichment claims survive | Barbe: Ocwen and American Modern conspired to inflate premiums and secretly pay kickbacks; defendants were unjustly enriched | Defendants: disclosures and mortgage terms negate fraud/kickback theory; contract controls relationship so unjust enrichment unavailable | Conspiracy/fraud/ unjust enrichment dismissed (unjust enrichment with prejudice): fraud/conspiracy inadequately pleaded (Rule 9(b) + implausible given disclosures); unjust enrichment barred where an enforceable contract governs |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: plausibility required)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility and dismissal standards)
- Dorsey v. Portfolio Equities, Inc., 540 F.3d 333 (5th Cir. 2008) (Rule 9(b) particularity for fraud pleadings)
- Robinson v. Standard Mortgage Corp., 191 F. Supp. 3d 630 (E.D. La. 2016) (similar force-placed insurance allegations; disclosures defeat fraud claim)
- Drs. Bethea, Moustoukas & Weaver, LLC v. St. Paul Guardian Ins. Co., 376 F.3d 399 (5th Cir. 2004) (unjust enrichment unavailable where relationship governed by enforceable contract)
- Schaumburg v. State Farm Mut. Auto Ins. Co., [citation="421 F. App'x 434"] (5th Cir. 2011) (breach of good faith requires underlying contract breach)