51 F. Supp. 3d 1157
N.D. Ala.2014Background
- Citizens Bank contracted in 2004 with Geotrac for flood zone determinations; LPS National Flood, LLC is a successor in interest to Geotrac and “stepped into the shoes” of Geotrac under the contract.
- The contract requires LPS to provide FEMA flood zone determinations, guarantees for accuracy, and to rely on specified outside sources; third-party sources are listed, but a general guarantee of accuracy remains.
- In 2007, LPS incorrectly determined that 440 Magnolia Drive was not in a flood zone due to Proxix’s mislocation; the Kelley property was later shown to be in a flood zone in 2010.
- Citizens Bank refinanced the Kelley loan in 2007 based on the incorrect determination; loan proceeded without a written flood-zone criteria and later foreclosed in 2010–2011 with damages alleged from the misdetermination.
- Citizens Bank and LPS cross-moved for summary judgment on two counts: breach of contract (Count I) and indemnification (Count II); the court granted in part and denied in part both motions, and granted in part the motion to strike the Lloyd’s quote and Payne appraisal while denying as to Patterson and Coate emails.
- The court entered summary judgment in Citizens Bank’s favor on liability for breach of contract (Count I) and against indemnification (Count II) against LPS; LPS’s indemnification claim was granted in its favor (indemnification in Count II).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach vs tort for misfeasance | Bank's duties arose from contract; misfeasance breaches contract. | Liability sounds in tort for negligent performance. | Breach of contract (not tort) pleaded; misfeasance governs contract-based duty. |
| Contractual accuracy guarantee and third parties | Contract guarantees accuracy despite third-party sources. | Third-party sources not enumerated; no guarantee beyond listed sources. | Contract guarantees accuracy; third-party error breached contract. |
| Indemnification scope | Indemnification covers losses from the breach of accuracy. | Indemnity confined to damages from flooding of property. | Indemnification does not apply to Kelley-type flooding damages; LPS liable for breach, indemnity denied. |
| Damages amounting from breach | Bank suffered loss from loan, foreclosure, and reduced sale value. | Damages limited to position had no breach; amounts disputed. | Liability established; damages remain to be proven. |
Key Cases Cited
- Hamner v. Mutual of Omaha Insurance Co., 49 Ala.App. 214, 270 So.2d 87 (Ala. Civ. App. 1972) (misfeasance may sound in contract or tort depending on gravamen of complaint)
- Ex parte Certain Underwriters at Lloyd's of London, 815 So.2d 558, 564 (Ala. 2001) (trusts on when tort claims based on fraud or suppressed claims; contract-based duties govern)
- U.S. v. Langford, 647 F.3d 1309 (11th Cir. 2011) (business records foundation; admissibility of third-party documents)