“The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.”
How later courts described this case
- “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.”
Written by the judges who cited it.
The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
MARC G. BARBE CIVIL ACTION
v. NO. 18-14037
AMERICAN MODERN HOME
INSURANCE COMPANY SECTION “F”
ORDER AND REASONS
Before the Court is American Modern Home Insurance Company’s
motion to dismiss the plaintiff’s second amended complaint for
failure to state a claim. For the reasons that follow, the motion
is GRANTED.
Background
This lawsuit concerns allegations that a mortgage servicing
company and an insurance carrier conspired to issue a force-placed
insurance policy with inflated premiums and to withhold policy
proceeds.
Marc Barbe and his wife, Renada, are the mortgagors of a home
located in Metairie, Louisiana. Ocwen Loan Servicing, LLC services
their mortgage. Pursuant to the mortgage agreement, the Barbes
are required to insure the property, and if they fail to maintain
appropriate coverage, Ocwen is permitted to obtain insurance at
their expense. By letter dated December 31, 2015, Ocwen advised
Mr. Barbe that it had not received proof of coverage, as required
by the mortgage, and had therefore renewed a lender-placed policy
at his expense. Ocwen also encouraged Barbe to obtain his own
policy and warned about the cost of lender-placed coverage.
Finally, Ocwen attached to the letter a copy of the policy it had
obtained from American Modern Home Insurance Company, which named
Ocwen as the “insured” and the Barbes as “borrowers.”
On August 5, 2016, high velocity winds damaged the Barbes’
roof and exterior elevations, which allowed water to infiltrate
the home and damage the ceilings, walls, floors, and fixtures.
After assessing the damage, the Barbes notified American Modern
and filed a claim under the policy.
Displeased with the manner in which their claim was handled,
the Barbes sued American Modern Home Insurance Company and Ocwen
Loan Servicing, LLC in Louisiana state court on August 3, 2018.
Asserting various causes of action sounding in contract and tort,
the Barbes alleged that: (1) American Modern breached the insurance
policy and engaged in bad faith claims adjusting practices under
Louisiana law, (2) Ocwen breached the mortgage agreement by
overcharging for the insurance policy and by failing to help them
pursue insurance proceeds, and (3) American Modern and Ocwen
conspired to overcharge for the policy. After removing the lawsuit
to this Court, the defendants moved to dismiss the plaintiffs’
petition for failure to state a claim. On February 19, 2019, the
plaintiffs were granted leave to file an amended complaint, and
the defendants’ motions to dismiss were denied as moot.
In his first amended complaint1, Mr. Barbe asserted that he
is an insured or third-party beneficiary under the American Modern
policy, such that the insurer is liable to him for breaching the
terms of the policy and for engaging in bad faith claims adjusting
practices. With respect to Ocwen, Barbe alleged that his mortgage
servicer breached the mortgage agreement by overcharging for the
insurance policy and by failing to help him pursue policy proceeds.
Barbe also claimed that American Modern and Ocwen engaged in a
conspiracy, in which Ocwen would pass along an inflated premium to
the Barbes and receive “kickbacks” from American Modern. Finally,
he asserted an unjust enrichment claim against each defendant for
their role in the alleged kickback scheme.
Once again, the defendants moved to dismiss Mr. Barbe’s
amended complaint for failure to state a claim. On May 22, 2019,
the Court granted the motions to dismiss with prejudice, as to the
plaintiff’s unjust enrichment claims, and without prejudice, as to
his breach of contract and tort claims. Finding that the viability
of Mr. Barbe’s claims against American Modern hinge on his status
as a third-party beneficiary under the policy, the Court offered
the plaintiff “one final opportunity to amend his complaint to
1 Meanwhile, on April 23, 2019, plaintiff Renada Barbe voluntarily
dismissed her claims against both defendants with prejudice.
allege facts demonstrating that the value of his insurance claim
exceeds the current balance on his mortgage, if he can in good
faith do so.”
In his second amended complaint, the plaintiff reproduces his
first amended complaint nearly verbatim but removes allegations of
a civil conspiracy. Mr. Barbe also pleads two additional
allegations concerning the value of his interest in the property:
(1) as of July 2013, he owed $140,126.41 on the mortgage; and (2)
in a matter currently pending in state court, Ocwen alleges that
Barbe has breached the Loan Modification Agreement, but Barbe
“vigorously denies any obligation on the loan or mortgage to Ocwen
or any other party or entity.”
American Modern, the only defendant remaining in this action,2
now moves to dismiss the plaintiff’s second amended complaint.
I.
In considering a Rule 12(b)(6) motion, the Court “accept[s]
all well-pleaded facts as true and view[s] all facts in the light
most favorable to the plaintiff.” See Thompson v. City of Waco,
Texas, 764 F.3d 500, 502 (5th Cir. 2014) (citing Doe ex rel. Magee
v. Covington Cnty. Sch. Dist. ex rel. Keys, 675 F.3d 849, 854 (5th
Cir. 2012) (en banc)). But in deciding whether dismissal is
2 On July 5, 2019, upon the joint motion of Mr. Barbe and Ocwen,
all claims asserted against Ocwen in the plaintiff’s second amended
complaint were dismissed without prejudice.
warranted, the Court will not accept conclusory allegations in the
complaint as true. Id. at 502-03 (citing Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009)).
To survive dismissal, “‘a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that
is plausible on its face.’” Gonzalez v. Kay, 577 F.3d 600, 603
(5th Cir. 2009) (quoting Iqbal, 556 U.S. at 678) (internal
quotation marks omitted). “Factual allegations must be enough to
raise a right to relief above the speculative level, on the
assumption that all the allegations in the complaint are true (even
if doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555 (2007) (citations and footnote omitted). “A claim has
facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 556 U.S.
at 678 (“The plausibility standard is not akin to a ‘probability
requirement,’ but it asks for more than a sheer possibility that
a defendant has acted unlawfully.”). This is a “context-specific
task that requires the reviewing court to draw on its judicial
experience and common sense.” Id. at 679. “Where a complaint
pleads facts that are merely consistent with a defendant’s
liability, it stops short of the line between possibility and
plausibility of entitlement to relief.” Id. at 678 (internal
quotations omitted) (citing Twombly, 550 U.S. at 557). “[A]
plaintiff’s obligation to provide the ‘grounds’ of his
‘entitle[ment] to relief’”, thus, “requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause
of action will not do.” Twombly, 550 U.S. at 555 (alteration in
original) (citation omitted).
II.
“To state a claim under an insurance policy, the plaintiff
must be a named insured, an additional named insured, or an
intended third-party beneficiary of the policy.” Guthrie Brown v.
Am. Modern Home Ins. Co., No. 16-16289, 2017 U.S. Dist. LEXIS
80057, at *10-11 (E.D. La. May 25, 2017) (Lemmon, J.) (citing
Williams v. Certain Underwriters of Lloyd’s of London, 398 F. App’x
44, 47 (5th Cir. 2010)). Under Louisiana law, a contract for the
benefit of a third party is referred to a stipulation pour autrui.
See Joseph v. Hosp. Serv. Dist. No. 2 of the Parish of St. Mary,
939 So. 2d 1206, 1211 (La. 2006). The Louisiana Supreme Court has
articulated three criteria for determining whether a contract
stipulates a benefit for a third party: “1) the stipulation for a
third party is manifestly clear; 2) there is certainty as to the
benefit provided the third party; and 3) the benefit is not a mere
incident of the contract between the promisor and the promisee.”
Id. at 1212. The state high court has emphasized that a
“stipulation pour autrui is never presumed” and that “[t]he party
claiming the benefit bears the burden of proof.” Id.
In considering force-placed insurance policies nearly
identical to the one at issue here,3 other Sections of this Court
have held that a borrower whose insurance claim does not exceed
the value of the lender’s interest in the property does not qualify
as a third-party beneficiary under the policy. See Guthrie Brown,
2017 U.S. Dist. LEXIS 80057, at *14-17; Lee v. Safeco Ins. Co. of
Am., No. 08-1100, 2008 U.S. Dist. LEXIS 69817, *9-16 (E.D. La.
July 2, 2008). Notably, in Guthrie Brown v. American Modern Home
Insurance Co., another Section of this Court dismissed a breach of
contract claim against American Modern, without prejudice, where
the borrowers’ complaint contained “no information regarding the
amount of [the] insurance claim against American Modern or [the
borrowers’] mortgage balance.” 2017 U.S. Dist. LEXIS 80057, at
*14-16. In granting American Modern’s motion to dismiss, Judge
Lemmon reasoned:
Without allegations demonstrating that the condition
requiring American Modern to pay plaintiffs was
triggered, i.e., that the amount of the loss exceeds the
mortgage balance, plaintiffs’ complaint does not
sufficiently allege that there was a stipulation pour
autrui, and plaintiffs have not stated a claim against
American Modern for breaching the insurance contract.
3 The American Modern policy here designates Ocwen as the named
insured and refers to Ocwen as “you” and “your.” The “Loss
Payable” provision of the policy provides that any loss “shall be
made payable to you as your interest appears.” Paragraph AA(2) of
the policy, in turn, states: “If we pay you for any loss and do
not pay the mortgagor . . . .” When read together, these provisions
reveal that the policy contemplates payment of any benefits in
excess of Ocwen’s interest in the property to the Barbes.
Id. at *15-16. Ultimately, when the Guthrie Brown plaintiffs
failed to plead facts in their second amended complaint
demonstrating that the claimed property damage exceeded their
current mortgage balance, the court dismissed their third-party
beneficiary claim against American Modern with prejudice. Guthrie
Brown v. Am. Modern Home Ins. Co., No. 16-16289, 2017 U.S. Dist.
LEXIS 116842, at *4-6 (E.D. La. July 26, 2017).
Like the plaintiffs in Guthrie Brown, Mr. Barbe was granted
leave to amend his complaint (for a second time) to plead facts
that, if proved, would demonstrate that the value of the damage to
his home exceeds his current mortgage balance. Mr. Barbe filed
his second amended complaint on June 21, 2019.
III.
American Modern now moves, for a third time, to dismiss Mr.
Barbe’s breach of contract and bad faith insurance practices claims
for failure to state a claim. The defendant contends that Barbe’s
second amended complaint fails to comply with this Court’s May 22,
2019 Order and Reasons and continues to fall short of the Rule 8
pleading requirement. Once again, the Court agrees.
A.
With respect to third-party beneficiary status, Mr. Barbe
pleads the following allegations in his second amended complaint:
14. In this particular instance, Marc Barbe entered
into a Loan Modification Agreement with Ocwen on March
26, 2012. As part of the loan modification, and after
a “Trial Period” was completed, the amount owed on the
mortgage dropped to $149,150.00. By July of 2013, the
amount owed on the mortgage was $140,126.41.
15. The total insured damage to the Property is, at a
minimum $158,389.81. Barbe alleges that the amount of
damage actually exceeds this amount. In addition to
undercompensated damages from the initial loss, the
Property has suffered additional incidental damages
because of AMHIC’s refusal to adjust and pay this claim
in good faith.
16. As such, the amount of the loss to the Property
exceeds the mortgage balance.
17. Ocwen has subsequently alleged that Barbe breached
the terms and conditions of the Loan Modification
Agreement. However, that matter is currently in dispute
in Louisiana State Court, and Barbe vigorously denies
any obligation on the loan or mortgage to Ocwen or any
other party or entity.
In a nutshell, Mr. Barbe now alleges that, as of July 2013,
he owed $140,126.41 on his mortgage. The plaintiff also
acknowledges that Ocwen has initiated foreclosure proceedings in
state court but maintains that he “vigorously denies any obligation
on the loan or mortgage.”
B.
Accepting the complaint’s factual allegations as true, Mr.
Barbe’s mortgage balance as of July 2013 was $140,126.41, which
exceeds the value of damage to his home.4 But the complaint is
4 With respect to property damage, Mr. Barbe alleges that American
Modern’s initial estimate of $11,895.48 (ACV)/$12,360.56 (RCV) and
subsequent estimate of $7,303.08 (ACV)/$8,475.59 (RCV) were
“grossly inadequate,” in that “[a]dditional necessary repairs
would cost Plaintiff in excess of $139,191.25.”
devoid of any factual allegations concerning the mortgage balance
beyond July 2013. Although Mr. Barbe asserts that he now
“vigorously denies any obligation on the loan or mortgage,” he
fails to plead the current “disputed” balance or the factual
underpinnings for such dispute.
Without pleading the current balance on his mortgage or the
basis under which he “vigorously denies any obligation on the loan
or mortgage,” Mr. Barbe fails to raise a right to relief beyond
the speculative level. See Twombly, 550 U.S. at 555. The sparse
factual predicate alleged simply does not allow the Court to draw
the reasonable inference that Barbe’s current interest in the
property exceeds the value of the damage claimed under the American
Modern insurance policy. See Iqbal, 556 U.S. at 678.
Accordingly, IT IS ORDERED: that American Modern’s third
motion to dismiss is GRANTED. Because Mr. Barbe has been afforded
no less than two opportunities to remedy his pleading deficiencies,
his claims are hereby dismissed with prejudice.
New Orleans, Louisiana, July 25, 2019
\
MARTIN F □□ Ela
UNITED STATWS DISTRICT JUDGE
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