Barbe v. Ocwen Loan Servicing, LLC
383 F. Supp. 3d 634
E.D. La.2019Background
- Marc Barbe (mortgagor) failed to provide proof of hazard insurance; Ocwen (loan servicer) purchased a force-placed policy from American Modern and billed Barbe’s escrow.
- Ocwen’s December 31, 2015 notice disclosed the premium, warned force-placed coverage may be more expensive, and identified Ocwen as the insured on the policy; Barbe was listed as borrower.
- In August 2016 high-velocity winds damaged Barbe’s home; Barbe alleges American Modern underpaid the claim and provided inadequate estimates.
- Barbe sued American Modern and Ocwen in state court asserting: breach of the insurance contract, bad-faith claims handling (against American Modern), breach of the mortgage and failure to assist/pursue proceeds (against Ocwen), conspiracy/kickbacks, unjust enrichment, and related torts.
- Defendants removed, moved to dismiss under Rule 12(b)(6); the district court considered the mortgage, force-placed policy, and Ocwen’s notice attached to the complaint.
- Court granted dismissal: unjust enrichment claims dismissed with prejudice; breach-of-contract and tort claims dismissed without prejudice with leave to amend limited to pleading the mortgage balance vs. claim amount where required.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Barbe may sue American Modern for breach of the force-placed policy | Barbe is an insured or, alternatively, an intended third‑party beneficiary whose claim was underpaid | Policy names Ocwen as insured; certificate disclaims coverage changes; Barbe did not plead that loss exceeds mortgagee’s interest so no stipulation pour autrui | Dismissed without prejudice as pleadings fail to allege that loss exceeds mortgage balance; leave to amend to allege that fact permitted |
| Whether bad‑faith statutory penalties under La. R.S. §22:1892/1973 lie against American Modern | Bad faith arises from allegedly inadequate adjustment and payment | Bad‑faith claim depends on a viable contract claim; plaintiff failed to plead standing under the policy | Dismissed without prejudice (bad‑faith claim relies on viable breach claim) |
| Whether Ocwen breached the mortgage or owed a duty to pursue insurance proceeds | Ocwen overcharged, took kickbacks/commissions, and failed to assist/pursue sufficient proceeds | Mortgage authorizes lender to obtain coverage at borrower’s expense, warns force‑placed coverage may be more expensive, does not limit commissions, and imposes no duty on lender to pursue insurer | Dismissed without prejudice for failure to plead breach of a specific contractual provision or an assumed duty; no good‑faith breach shown |
| Whether plaintiff plausibly alleged civil conspiracy and unjust enrichment based on kickbacks | Ocwen and American Modern conspired to inflate premiums and share kickbacks; defendants were unjustly enriched | Letters and disclosures negate fraud; mortgage governs insurance relationship so unjust‑enrichment is barred by contract remedy | Conspiracy/fraud dismissed (failure to plead fraud with particularity and implausibility); unjust enrichment dismissed with prejudice (contract governs relationship) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must contain factual allegations showing plausible entitlement to relief)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility and limits of discovery at pleading stage)
- Lowrey v. Tex. A & M Univ. Sys., 117 F.3d 242 (12(b)(6) motions disfavored)
- Robinson v. Standard Mortgage Corp., 191 F. Supp. 3d 630 (E.D. La.) (similar force‑placed insurance fraud/kickback allegations found implausible given disclosures)
- Dorsey v. Portfolio Equities, Inc., 540 F.3d 333 (Rule 9(b) requires particularity for fraud pleadings)
- Drs. Bethea, Moustoukas & Weaver, LLC v. St. Paul Guardian Ins. Co., 376 F.3d 399 (unjust enrichment unavailable when enforceable contract controls)