McNeary-Calloway v. JP Morgan Chase Bank, N.A.
2012 U.S. Dist. LEXIS 40989
N.D. Cal.2012Background
- Plaintiffs sue JPMorgan Chase, N.A. and Chase Bank USA, N.A. over force-placed hazard insurance (FPI) practices following loan closings beginning 2002-2008 and through 2011.
- Plaintiffs allege FPI was purchased from insurers providing benefit to Defendants, with backdating, duplicative coverage, and inflated premiums relative to borrower-purchased insurance.
- Plaintiffs seek class and two subclasses (California and New Jersey) with claims including RESPA, breach of contract, breach of implied covenant, UCL, NJCFA, unjust enrichment, and declaratory/injunctive relief.
- Wahl v. Am. Sec. Ins. Co. (California class action) resolved with a release that purportedly discharges released claims against Releasees, including lenders/servicers purchasing ASIC FPI, potentially precluding related claims here.
- Defendants move to dismiss under Rule 12(b)(6), arguing Wahl releases bar many California claims and RESPA claims are outside scope or time-barred; otherwise, contract and UCL/ NJCFA claims face various challenges.
- Plaintiffs oppose preclusion by Wahl and urge RESPA as a set of settlement services, timely/ tolled, and maintain viable contract and UCL/NJCFA claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Wahl preclude McNeary-Calloway and MacKinnon claims? | Wahl Release excludes only ASIC; Releasees include lenders/servicers; claims arise from different FPI practices not released. | Wahl's General Release covers claims against Releasees arising from the ASIC FPI scheme; plaintiffs are Releasees and claims are released. | Wahl precludes those California claims arising from ASIC-backed policies overlapping LLPE; non-overlapping FPI claims not released. |
| Are the RESPA claims viable under § 2607 for post-closing FPI? | FPI is a settlement service under Regulation X; backdated/post-closing fees fall within RESPA; timely as to certain plaintiffs and tolling applies. | FPI occurs after closing and covers services not provided at settlement; RESPA limited to closing-era settlement services; statute of limitations issues. | RES-PA claim not viable; FPI after settlement is not a ‘settlement service’ under RESPA; claim dismissed with prejudice. |
| Do California breach of contract and implied covenant claims survive? | Contract terms grant discretionary force-placing power but not unlimited; alleged backdating and high premiums breach express/implied terms; bad faith implied covenant applies. | Contract terms unambiguously authorize lender to force-place insurance; implied covenant cannot override express terms; claims fail. | California breach of contract and implied covenant claims survive; Mayko also states NJ law claims viable; disputes to be resolved on summary judgment as needed. |
| Is the California UCL claim viable, including unlawful/unfair/fraudulent prongs? | UCL remains viable under unlawful (via RESPA), unfair (three-part test), and fraudulent (reliance/9(b)) theories; seek disgorgement/restitution. | UCL unlawful prong fails with RESPA failure; fraudulent/unfair prongs fail for lack of particularity and failure to plead reliance or consumer injury. | UCL survives on the unfair prong; unlawful/fraudulent prongs are dismissed; remaining aspects to be litigated. |
| Should Mayko's NJCFA claim be dismissed for venue or retained? | California and New Jersey claims share nucleus of operative facts; pendant venue appropriate; transfer not warranted. | Venue improper for Mayko; NJCFA should be dismissed or transferred; New Jersey focus; forum non conveniens/pendant venue not favored. | NJCFA claim remains; court declines to dismiss on improper venue or mandate transfer; pendent venue appropriate. |
Key Cases Cited
- Catholic League for Religious and Civil Rights v. City and County of San Francisco, 464 F. Supp. 2d 938 (N.D. Cal. 2006) (court may consider public records on Rule 12(b)(6) motion)
- Hesse v. Sprint Corp., 598 F.3d 581 (9th Cir. 2010) (release may preclude only claims based on identical factual predicates)
- Reyn’s Pasta Bella, LLC v. Visa USA Inc., 442 F.3d 741 (9th Cir. 2006) (class settlement may release related claims against nonparties)
- Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (2011) (standing and reliance in UCL fraud claims; three-prong unfairness tests)
- Tobacco II Cases, 46 Cal.4th 298 (2009) (fraud-based UCL requires actual reliance for standing)
- Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal.4th 342 (1992) (implied covenant governs discretionary contract actions)
- Gennari v. Weichert Co. Realtors, 148 N.J. 582 (N.J. 1997) (NJCFA and reliance principles in New Jersey)
- Camp v. Bd. of Supervisors, 123 Cal. App. 3d 334 (Cal. App. 3d 1981) (injunctive relief is a remedy, not a separate claim)