916 F. Supp. 2d 537
D.N.J.2012Background
- Gallo brings a proposed class action against PHH Mortgage alleging pre-arranged arrangements with force-placed insurers to extract improper financial benefits and inflate borrower costs.
- Plaintiff contends PHH manipulated the force-placed insurance process to receive kickbacks, commissions, and other value from insurers such as American Security.
- PHH obtained a refinance mortgage in 2006 secured by a lien on the Norwood, PA property; a 2007 loan modification adjusted balance.
- Lititz Mutual’s homeowner’s policy lapsed in Feb 2008 for nonpayment, after which PHH secured force-placed insurance through American Security at a higher premium.
- Allstate policy obtained in Sept 2010 with reduced premium led PHH to cancel the force-placed policy and issue a partial refund; plaintiffs sue for breach of contract, unjust enrichment, and NJ CFA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Filed rate doctrine applies to all claims? | Gallo challenges PHH’s conduct, not the rates; doctrine should not bar claims. | Alleges plaintiffs challenge rates approved by the Pennsylvania Department of Insurance; thus barred. | Filed rate doctrine does not bar claims challenging conduct; not a rate challenge. |
| Breach of contract based on express vs implied duties | Plaintiff pled breach via implied covenant due to unreasonable force-placed insurance. | breach must arise from express contractual duties; implied covenant cannot stand alone. | Breach based on implied covenant may proceed; express-duty breach dismissed. |
| Unjust enrichment vs express contract | Plaintiff pleads alternative theories, including unjust enrichment. | Unjust enrichment barred by existing mortgage contract. | Unjust enrichment claim dismissed due to express contract. |
| New Jersey CFA choice-of-law and pleading standards | NJ CFA should apply; claims pled with adequate particularity. | PA law may govern; pleading under Rule 9(b) insufficient for CFA. | Choice-of-law undecided at this stage; pleading adequacy addressed later. |
Key Cases Cited
- Alston v. Countrywide Fin. Corp., 585 F.3d 753 (3d Cir. 2009) (filed rate doctrine does not apply when challenging conduct, not rates)
- Kamco Indus. Sales, Inc. v. Lovejoy, Inc., 779 F. Supp. 2d 416 (E.D. Pa. 2009) (implied covenant breach can survive without independent contract duty)
- Zaloga v. Provident Life and Accident Ins. Co. of Am., 671 F. Supp. 2d 623 (M.D. Pa. 2009) (covenant of good faith arises from contract; breach sounds in contract)
- Abels v. JPMorgan Chase Bank, N.A., 678 F. Supp. 2d 1273 (S.D. Fla. 2009) (claims not barred when challenge is to conduct, not rates)
- Gipson v. Fleet Mortg. Grp., Inc., 232 F. Supp. 2d 691 (S.D. Miss. 2002) (courts reject blanket filed rate doctrine immunity for conduct claims)
- Birth Center v. St. Paul Companies, Inc., 567 Pa. 386, 787 A.2d 376 (Pa. 2001) (covenant of good faith arises from contract; breaches sound in contract)