308 F. Supp. 3d 1093
D. Haw.2018Background
- Plaintiff Julia Wieck, an 86-year-old Maui resident, had a reverse mortgage originated in 2006 and serviced by Financial Freedom (now part of CIT). The mortgage authorized the lender to obtain insurance “necessary to protect” its interest and to charge the borrower for such charges.
- From 2010–2016 CIT/Financial Freedom force-placed wind/hurricane insurance on Wieck’s property, in some instances backdating coverage and assessing large premiums that were later partly refunded; notices warned borrowers they would be charged and that servicer/affiliates “may receive compensation.”
- FAC alleges force-placed premiums were inflated through exclusive relationships among CIT, broker Seattle Specialty, and surplus-line insurers (Lloyd’s and Great Lakes), with kickbacks/reinsurance profits shared among defendants.
- CIT initiated foreclosure in 2016 based on accumulated LPI charges; foreclosure later dismissed after some refunds but plaintiff alleges foreclosure-related and other consequential damages remain.
- Plaintiff asserted claims for breach of contract, breach of implied covenant of good faith, Hawaii unfair/deceptive practices (HRS ch. 480) against defendants, RICO, tortious interference, and TILA violations; defendants moved to dismiss various counts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to bring LPI and foreclosure-related claims | Wieck argues she suffered concrete harm (foreclosure-related costs, consultant fees, inspection fee) even if some premiums refunded pre-suit | Defendants say full refunds before suit eliminated any Article III injury | Court: Wieck has standing; refunds do not conclusively eliminate all claimed injuries (foreclosure-related and consequential damages remain) |
| HOLA preemption of state-law claims (HRS ch. 480, breach) | Wieck: fraud/deceptive claims and contract-based claims are not preempted, especially where based on affirmative misrepresentations and post‑acquisition conduct | CIT: 12 C.F.R. §560.2 preempts state-law claims that regulate lending, including forced-placed insurance, disclosures, fees, and insurer choice | Court: Mixed. Breach-of-contract and claims based on affirmative misrepresentations survive; nondisclosure-based claims and claims that would limit ability to force-place or choose insurers are preempted as applied; preemption only covers conduct while entity was an FSA (pre-2/28/2014); plaintiff given leave to amend to clarify timing and bases |
| Merits of breach of contract and HRS ch. 480 claims | Wieck: charging inflated/backdated premiums and including kickbacks in ‘‘cost’’ breaches mortgage (only "necessary" charges) and constitutes deceptive acts | CIT: mortgage allows lender to do what is necessary; placing/backdating LPI and charging costs is contracted right and lawful; HOLA preempts many claims | Court: Plausible allegations survive dismissal. Language is ambiguous re: ‘‘necessary’’ and backdating; affirmative misrepresentation theory plausible; implied covenant claim dismissed as separate count but may inform contract claim |
| RICO, Tortious Interference, and TILA claims | Wieck: defendants engaged in scheme (kickbacks, inflated premiums, letters) constituting mail/wire fraud and RICO; tortious interference and TILA violations also alleged | Defendants: pleadings lump defendants, lack particularity for mail/wire fraud, no proximate causation for RICO, tortious-interference lacks malice/intent, and TILA claims are time-barred | Court: RICO dismissed for failure to plead enterprise/management, particularity, and proximate cause (leave to amend); tortious interference dismissed for lack of intent (leave to amend); TILA dismissed as time-barred (equitable tolling not shown) |
Key Cases Cited
- Lujan v. Defs. of Wildlife, 504 U.S. 555 (standing requires concrete and particularized injury)
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (concrete-injury requirement for Article III standing; intangible harms may qualify)
- Silvas v. E*Trade Mortgage Corp., 514 F.3d 1001 (HOLA preemption framework using 12 C.F.R. § 560.2)
- Campidoglio LLC v. Wells Fargo & Co., 870 F.3d 963 (HOLA preemption as-applied analysis; contracts-based claims may escape preemption)
- Auer v. Robbins, 519 U.S. 452 (deference to agency interpretations of their own regulations)
- Reves v. Ernst & Young, 507 U.S. 170 (RICO §1962(c) requires participation in operation or management of enterprise)
- Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258 (RICO proximate causation requires direct relationship between injury and conduct)
- Turner v. City & Cty. of San Francisco, 788 F.3d 1206 (pleading standards —court accepts material factual allegations as true on motion to dismiss)
- McCauley v. Home Loan Inv. Bank, F.S.B., 710 F.3d 551 (fraud/affirmative misrepresentation claims generally not preempted by HOLA)