Cannon v. Wells Fargo Bank N.A.
917 F. Supp. 2d 1025
N.D. Cal.2013Background
- Plaintiffs Stanley and Patricia Cannon sue Wells Fargo Bank N.A. (as loan servicer for Fannie Mae) and Assurant/ASIC, asserting improper force-placed flood insurance practices.
- The loan originated in 2005; Fannie Mae acquired the loan and engaged Wells Fargo to service it.
- Wells Fargo allegedly increased flood insurance coverage in 2006 and again in 2008, using ASIC/ASIC-affiliates for force placement.
- Plaintiffs allege kickbacks to Wells Fargo, coverage beyond the loan balance, and retroactive backdating of policies.
- Plaintiffs pursue multiple claims (breach of contract, unjust enrichment, conversion, fiduciary duty, TILA, UCL, RESPA) on behalf of nationwide class and California subclass.
- Court addresses 12(b)(6) motions and outlines overarching issues related to Assurant, Fannie Mae, and Wells Fargo across federal and state claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Merrill doctrine bars Fannie Mae liability | Plaintiffs argue Fannie Mae authorized Wells Fargo’s conduct. | Fannie Mae argues lack of agency and Merrill bars liability for unauthorized acts. | Merrill doctrine applies; Fannie Mae dismissed without prejudice, with leave to amend only if authorization is alleged. |
| Kickback theory viability under filed-rate/primary jurisdiction | Plaintiffs allege Wells Fargo received kickbacks from ASIC. | Wells Fargo contends filed-rate and primary jurisdiction bar or stay claims. | Filed-rate and primary-jurisdiction defenses rejected; kickback claims survive. |
| Excessive coverage theory viability under NFIA and mortgage terms | Wells Fargo allegedly required insurance beyond the loan balance. | Mortgage §5 allows coverage beyond balance; NSFH may limit discretion. | Pure excessive-coverage claims dismissed; kickback/backdating theories survive. |
| RESPA scope and timeliness for post-closing force-placed insurance | Post-closing force-placed insurance may implicate RESPA §2607. | Settlement services do not include post-closing force-placed insurance; statute of limitations issues. | RESPA claim dismissed (with prejudice) as to Wells Fargo. |
| State law claims and NBA preemption | California law claims (17200, etc.) applicable; potential California extraterritorial concerns. | NBA preempts state-law claims related to national-bank activities. | NBA preemption rejected; California choice-of-law rules apply; state claims analyzed on merits. |
Key Cases Cited
- Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380 (1947) (agency authority risk in government contracts; Merrill doctrine governs liability for agent acts)
- Lass v. Bank of Am., 695 F.3d 129, 695 F.3d 129 (1st Cir. 2012) (NSF notice differences affect contract interpretation of insurance requirements)
- Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459 (Cal. 1992) (contractual choice-of-law provision governs related tort claims; California approach to Nedlloyd)
- United States v. Georgia-Pacific Co., 421 F.2d 92 (9th Cir. 1970) (Ninth Circuit on agency/authority and government liability principles)