Casey v. Citibank, N.A.
2013 U.S. Dist. LEXIS 36
N.D.N.Y.2013Background
- Plaintiffs allege the Citi defendants and MidFirst force-placed flood insurance beyond what their mortgage agreements contemplated and profited from related commissions.
- NFIA/NFIP framework requires lenders to maintain flood insurance up to certain minimums; here, plaintiffs claim extras were demanded.
- Casey’s mortgage was serviced by CitiMortgage (2002–2011) and then MidFirst; Skinner’s loan is serviced by CitiMortgage; both involved force-placed insurance.
- Plaintiffs claim kickbacks/commissions from ASIC were undisclosed and improper, with misuse of escrow funds.
- Amended complaint asserts twelve causes of action: two federal (TILA) and several state-law claims including breach of contract, fiduciary duty, unjust enrichment, and NYDPA.
- Court addresses Rule 12(b)(6) standards and analyzes contract interpretation, duties, and statutory/regulatory implications to determine plausibility of claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contract interpretation of flood insurance clause | Casey contends only HUD-minimum flood coverage is required | Lender may set insurance amounts beyond HUD minimum | Ambiguity; claims plausibly stated |
| Breach of contract and conversion | Casey/ Skinner allege force-placed insurance beyond contract scope and misused escrow | Contracts grant discretion to set insurance amounts | Claims survive; dismissal denied |
| Breach of good faith and fair dealing | Bad-faith force-placing and undisclosed kickbacks | No explicit independent duty; actions are within contract | Claims survive as plausibly alleged |
| Unjust enrichment | Equitable relief available due to undisclosed kickbacks | Contract governs subject matter; no unjust enrichment | Not precluded; claims may proceed in alternative |
| TILA and NYDPA claims | Force-placed insurance constitutes new credit transactions and deceptive practice | Insurance premiums may be exempt or within servicer scope | Claims survive; not dismissed at this stage |
Key Cases Cited
- Twombly, Bell Atl. Corp. v. Smithfield, 550 U.S. 544 (U.S. 2007) (pleading standard requiring plausible claims)
- Iqbal, Ashcroft v., 556 U.S. 662 (U.S. 2009) (clarified pleading rule; conclusory allegations insufficient)
- Kolbe v. BAC Home Loans Servicing, L.P., 695 F.3d 111 (1st Cir. 2012) (contract language ambiguous; plausible breach claim reinstated)
- Wulf v. Bank of Am., N.A., 798 F. Supp. 2d 586 (E.D. Pa. 2011) (ambiguity of contract language; denial of dismissal warranted)
- Hofstetter v. Chase Home Fin., LLC, 751 F. Supp. 2d 1116 (N.D. Cal. 2010) (agency recommendations do not authorize carte blanche in contracts)