Robinson v. Standard Mortgage Corp.
191 F. Supp. 3d 630
| E.D. La. | 2016Background
- Plaintiff Robinson alleges Standard Mortgage (servicer) and Standard Mortgage Insurance (SM Insurance) conspired to inflate "force-placed" insurance premiums and pay kickbacks/commissions to Standard Mortgage, depriving borrowers and loan owners.
- Robinson's mortgage required her to maintain hazard insurance; when her policy lapsed in 2012, Standard Mortgage sent letters warning it would force-place insurance and quoted premiums of ~$8,820–8,845.20.
- Standard Mortgage purchased force-placed coverage, charged the premium to Robinson's escrow, and (allegedly) received commissions from SM Insurance that were not disclosed to borrowers.
- Robinson filed an amended putative class complaint asserting RICO § 1962(c) (pattern of racketeering via mail/wire fraud, honest-services fraud, and Hobbs Act extortion), RICO conspiracy § 1962(d), and state claims; defendants moved to dismiss under Rule 12(b)(6).
- The district court accepted the force-placed letters into the record, found Robinson failed to plead predicate racketeering acts or proximate causation, and granted defendants’ motion to dismiss Robinson’s RICO and RICO-conspiracy claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Person/Enterprise distinctiveness under §1962(c) | Robinson: enterprise is association-in-fact (Standard Mortgage, SM Insurance, affiliates) distinct from the RICO "persons." | Defendants: corporations cannot serve simultaneously as the RICO person and the enterprise (distinctiveness fails). | Court: corporate defendants can be both persons and enterprise members in some contexts; distinctiveness challenge not dispositive here. |
| Mail and wire fraud predicates | Robinson: defendants sent materially false/misleading letters, statements, and reports that concealed kickbacks, constituting a scheme to defraud. | Defendants: letters plainly disclosed force-placed insurance, amounts, and that rates may be higher; allegations lack Rule 9(b) particularity and are implausible. | Court: dismissed mail/wire fraud claims for failure to plead fraud with particularity and because the letters disclosed the higher cost and risk, undermining fraudulent-intent inference. |
| Honest-services fraud (§1346) | Robinson: Standard Mortgage had a duty to borrowers/loan owners and misused its position to extract bribes/kickbacks. | Defendants: no scheme to deceive or divided loyalty; actions protected lender interest under mortgage contract. | Court: dismissed — claims mirror the fraud failures and lack plausible intent/divided loyalty needed for an honest-services theory. |
| Hobbs Act extortion (§1951) | Robinson: defendants used or threatened foreclosure/default to induce payment of inflated premiums. | Defendants: allegations are conclusory, no specific threats alleged; borrowers had a meaningful choice to avoid force-placed insurance by obtaining coverage. | Court: dismissed — pleading insufficient and extortion theory implausible because borrowers retained the ability to avoid force-placed insurance. |
| Causation / RICO proximate cause | Robinson: she relied on defendants’ misrepresentations and would have purchased her own insurance if aware of kickbacks. | Defendants: Robinson was warned repeatedly, quoted the premium, and had prior experience buying cheaper insurance; she failed to plausibly allege but-for/proximate causation or third-party reliance. | Court: dismissed — common-sense assessment rejected plaintiff’s reliance assertion and found causation not plausibly pleaded; conspiracy claim fails without underlying RICO predicate. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must state a plausible claim)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaints)
- Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (elements of civil RICO)
- H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (pattern of racketeering requires relatedness and continuity)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (person/enterprise distinctiveness)
- Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (causation and reliance in mail/wire fraud RICO cases)
- St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425 (fraud intent in RICO/mail-wire fraud context)
- Cohen v. Am. Sec. Ins. Co., 735 F.3d 601 (7th Cir.) (commissions are not "kickbacks" absent divided loyalty)
- Feaz v. Wells Fargo Bank, N.A., 745 F.3d 1098 (11th Cir.) (similar analysis on divided loyalty and force-placed insurance)
- Allstate Ins. Co. v. Plambeck, 802 F.3d 666 (RICO proximate cause requires but-for and proximate causation)