Alpert v. Nationstar Mortg., LLC ( 2021 )

FILE
THIS OPINION WAS FILED
FOR RECORD AT 8 A.M. ON
SEPTEMBER 2, 2021
IN CLERK’S OFFICE
SUPREME COURT, STATE OF WASHINGTON
SEPTEMBER 2, 2021
ERIN L. LENNON
SUPREME COURT CLERK
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
CERTIFICATION FROM THE UNITED )
STATES COURT OF APPEALS, NINTH )
CIRCUIT IN )
)
SPENCER ALPERT, )
)
Plaintiff-Appellant, ) No. 99377-7
) (certified C19-35867)
v. )
) En Banc
NATIONSTAR MORTGAGE, LLC, )
a Delaware limited liability company; ) Filed : September 2, 2021
HARWOOD SERVICE COMPANY, a )
Delaware corporation, )
)
Defendants-Appellees, )
)
and )
)
AMERICAN SECURITY INSURANCE )
COMPANY, a Delaware corporation; )
STANDARD GUARANTY INSURANCE )
COMPANY, a Delaware corporation; )
ASSURANT, INC., a Delaware corporation, )
)
Defendants. )
)
Alpert v. Nationstar Mortgage LLC, et al.
No. 99377-7
OWENS, J. ― This case arrives via certified questions from the Ninth Circuit
Court of Appeals and involves a homeowner who failed to insure his property. When
the homeowner failed to insure his property, the mortgage servicer purchased
insurance to cover the property pursuant to the mortgage agreement. This type of
policy is known as “force placed insurance” or “lender placed insurance.” Order
Certifying Questions to the Wash. Sup. Ct. at 2-3 (9th Cir. Dec. 31, 2020). The policy
was underwritten by the insurers and passed through a broker to the mortgage
servicer. The homeowner claims that these parties participated in an unlawful
kickback scheme that artificially inflated the premiums.
In Washington, insurers must generally file their rates and receive approval
from the Office of the Insurance Commissioner (OIC) before selling insurance. The
rates can be neither too high nor too low. Once the rates are filed and approved by the
governing agency, the rates are “per se reasonable” and claims that run squarely
against these rates must be dismissed. This prohibition against suit is known as the
“‘“filed rate” doctrine.’” McCarthy Fin., Inc. v. Premera, 182 Wn.2d 936, 942, 347
P.3d 872 (2015) (quoting Tenore v. AT&T Wireless Servs., 136 Wn.2d 322, 331-32,
962 P.2d 104 (1998)).
While the filed rate doctrine has historically applied to shield entities that file
rates, we are asked whether the filed rate doctrine also applies to bar suit against
intermediaries who do not file rates. In this case, the intermediaries are the mortgage
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servicer (Nationstar Mortgage LLC, or Nationstar) and broker (Harwood Service
Company, or Harwood) who participated in the procurement of the policy from the
insurers. If the filed rate doctrine applies to these intermediaries, we are then asked to
determine whether damages would be barred under our state’s only case applying the
doctrine, McCarthy.
The filed rate doctrine exists to ensure that agencies, such as the OIC, retain
primary jurisdiction in determining what rates are reasonable and to prevent rate filers
from unfairly discriminating among similarly situated customers. We recognize that
allowing suit against intermediaries in some cases undermines these principles in the
same way that suit against a rate-filer would.
Therefore, to ensure that the filed rate doctrine achieves its intended effect, we
hold today that the filed rate doctrine must also apply to bar suit against intermediaries
where awarding damages or other relief would squarely attack the filed rate. In light
of this holding, we return the second question pertaining to damages to the Ninth
Circuit Court of Appeals to first revisit and apply McCarthy to the specific allegations
of Alpert’s outstanding claims.
I. STATEMENT OF FACTS
This case involves a homeowner who claims that he was overcharged for “force
placed” home insurance (also known as lender placed insurance). “Force placed
insurance” is insurance that a lender or mortgage servicer procures on behalf of the
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homeowner, pursuant to a mortgage agreement, if the homeowner fails to insure the
property.
For three years the homeowner, Mr. Spencer Alpert, did not maintain
homeowner’s insurance as required by his mortgage agreement. As a result, his loan
servicer, Nationstar, obtained insurance and charged Alpert. 1 The insurers were
Assurant, American Security Insurance Company (ASIC) and Standard Guaranty
Insurance Company (collectively Assurant Defendants). Harwood acted as an
intermediary broker between the insurers and Nationstar. Harwood is a wholly owned
subsidiary of Nationstar. Only the claims against Nationstar and Harwood are the
subject of this appeal, and the claims against Assurant Defendants were dismissed by
agreement of the parties.
The heart of Alpert’s claims is that Assurant Defendants, Harwood, and
Nationstar operated an unlawful kickback scheme that inflated Alpert’s premiums.
Alpert alleges that Nationstar and ASIC misnamed payments to Nationstar as
“‘commissions,’ ‘expense reimbursements,’ or premiums for riskless reinsurance,”
and he asserts that these payments were actually “gratuitous payments constituting an
effective rebate on the cost of coverage to Nationstar.” Br. of Appellant at 14 (9th
Cir. No. 19-35867 (2020)). Nonetheless, defendants claim that “Nationstar paid to
1
Alpert asserts that Nationstar, and not Alpert, is the “insured” under this force placed insurance
agreement. However, we need not resolve this question whether Alpert, Nationstar, or both were
the “insured” to reach our decision today.
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No. 99377-7
ASIC the approved rate which was then passed to Mr. Alpert without adding a single
cent.” Opposing Br. of Defs.-Appellees’ Nationstar and Harwood at 11.
Alpert brought a total of 13 claims against defendants. Among these, Alpert
asserted federal claims arising under the Truth in Lending Act of 1968, 15 U.S.C.
ch. 41, and Racketeering Influenced and Corrupt Organizations Act (RICO), 18
U.S.C. ch. 96, as well as state law claims based in contract, tort, and the Consumer
Protection Act, ch. 19.86 RCW.
The federal district court dismissed counts 1-5 and 7-10 based on the filed rate
doctrine and counts 6, 12, and 13 on other grounds. Alpert settled all claims against
Assurant Defendants, and accordingly, counts 4 and 7 against these parties are no
longer at issue. Because only count 11 remained, the federal district court dismissed
the case due to lack of subject matter jurisdiction and remanded to the King County
Superior Court. Alpert then appealed to the Ninth Circuit Court of Appeals.
Accordingly, of Alpert’s numerous claims, counts 1, 2, 3, 5, 8, 9, and 10 are the
only remaining counts that are the subject of his appeal.2 Alpert broadly pleaded
damages that included general damages, actual damages, treble damages, statutory
damages, injunctive relief, and attorney fees.
2
These claims are as follows: count 1 (breach of contract), count 2 (breach of implied covenant
of good faith and fair dealing), count 3 (unjust enrichment), count 5 (violation of Washington
Consumer Protection Act), count 8 (breach of fiduciary duty), count 9 (violation of RICO, 18
U.S.C. § 1962(c)), count 10 (violation of RICO, 18 U.S.C. § 1962(d)).
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II. CERTIFIED QUESTIONS PRESENTED
1. Should the filed rate doctrine apply to claims by a Washington homeowner
against a loan servicer arising from the placement of lender placed insurance on
the Washington homeowner’s property where the servicer purchased the
insurance from a separate insurance company who filed the insurance product
with the Washington State Office of the Insurance Commissioner?
2. In the event the filed rate doctrine does apply to this type of transaction, do the
damages requested by Plaintiff fall outside the scope of the filed rate doctrine or,
rather, do they “directly attack agency-approved rates,” such that they are barred
under McCarthy Finance, Inc. v. Premera, 347 P.3d 872, 875 (2015)?
III. ANALYSIS
A. Background of the Filed Rate Doctrine
Historically, many state and federal laws have required certain utilities to submit
their rates for approval before offering those rates to the public. See, e.g., Keogh v. Chi.
& Nw. Ry. Co., 260 U.S. 156, 43 S. Ct. 47, 67 L. Ed. 183 (1922); RCW 48.19.040 (1)
(requiring insurers to file and maintain rates). In Washington, for example, once an
insurer files a rate with the OIC and the rate is approved, the insurer can sell insurance
only according to the parameters of that rate. RCW 48.19.040(6).
Keogh, a federal case, first established almost a century ago that once a filed rate
is approved, filers are immune from attacks on the approved rates. “The rights as
defined by the tariff cannot be varied or enlarged by either contract or tort of the carrier.
And they are not affected by the tort of a third party.” Keogh, 260 U.S. at 163 (citations
omitted). This prohibition against suit is known as the “filed rate” or “filed tariff”
doctrine. Tenore, 136 Wn.2d at 331-32.
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“The purposes of the ‘filed rate’ doctrine are twofold: (1) to preserve the agency's
primary jurisdiction to determine the reasonableness of rates, and (2) to insure that
regulated entities charge only those rates approved by the agency.” Id. (citing Ark. La.
Gas Co. v. Hall, 453 U.S. 571, 577-78, 101 S. Ct. 2925, 69 L. Ed. 2d 856 (1981)).
Despite the frequent application of the filed rate doctrine in federal courts, this
court has only once applied the filed rate to bar suit in McCarthy, 182 Wn.2d 936. In
McCarthy, we held that claims asserting damages under the Consumer Protection Act
were barred by the filed rate doctrine. Id. at 943-44. We reasoned that the filed rate
doctrine would apply only if the claims and damages directly attacked agency rates and
“would necessarily require courts to reevaluate agency-approved rates.” Id. at 942-43.
Damages were not barred, even if they were “related to agency-approved rates” so long
as they were “merely incidental” to the claims or were claims for general damages. Id.at 942 (citing Tenore, 136 Wn.2d at 344). With this background in mind, we turn to
address the two certified questions.
B. The Filed Rate Doctrine Applies to Intermediaries Where Awarding Damages
Runs Squarely against the Filed Rate
“Certified questions are matters of law we review de novo.” Frias v. Asset
Foreclosure Servs., Inc., 181 Wn.2d 412, 420, 334 P.3d 529 (2014).
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Alpert asserts that the filed rate doctrine is inapplicable to Nationstar and
Harwood because they are “intermediaries”3 who never filed a rate with the OIC. Alpert
points to Tenore where we stated that the filed rate doctrine “provides, in essence, that
any ‘filed rate’—a rate filed with and approved by the governing regulatory agency—is
per se reasonable and cannot be the subject of legal action against the private entity that
filed it.” 136 Wn.2d at 331-32 (emphasis added). Alpert emphasizes that neither
Nationstar nor Harwood were the private entity that filed the rate and, therefore, do not
fall within the doctrine’s reach.
Federal courts recently presented with similar scenarios have generally concluded
that the filed rate doctrine applies to transactions where the doctrine’s underlying
purposes, preserving agencies’ primary jurisdiction and preventing unfair
discrimination, are undermined. According to these courts, applicability of the doctrine
does not depend strictly on the identities of the plaintiff and defendant as ratepayers and
rate-filers. See Rothstein v. Balboa Ins. Co., 794 F.3d 256, 263-65 (2d Cir. 2015); Leo v.
Nationstar Mortg. LLC, 964 F.3d 213, 217 n.4 (3d Cir. 2020); Patel v. Specialized Loan
Servicing, LLC, 904 F.3d 1314, 1321-23 (11th Cir. 2018).
We agree that labels do not necessarily govern the doctrine’s applicability.
Where a rate filer and other intermediaries jointly act to artificially inflate the rate,
3
While Alpert asserts that the filed rate doctrine should not apply because the insurance code
does not apply to intermediaries, the insurance code generally extends to “all persons having to
do [with all insurance and insurance transactions].” RCW 48.01.020.
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allowing suit against any of these parties may still have the same effect of directly
attacking the rate and causing courts to “reevaluate agency-approved rates.” McCarthy,
at 942-43.4 If the suit does in fact run squarely against the rate, suit must logically be
barred, regardless of the party’s status as a rate-filer, so that the doctrine may serve its
intended purposes.5
Accordingly, we decline to recognize a categorical exemption from the filed rate
doctrine for intermediaries who do not file rates. Rather, the doctrine’s applicability to
nonfiling intermediaries turns on whether awarding damages squarely attacks the filed
rate. As the conduct at issue involves joint conduct between the rate-filer and
intermediaries, we hold that the filed rate doctrine may also apply where the allegations
run squarely against the filed rate. We therefore answer the first certified question in the
affirmative.
4
Alpert further asserts that barring suit against intermediaries would undermine the Department
of Financial Institution’s primary jurisdiction as well as other statutory schemes. However, the
filed rate doctrine will bar suit only if damages run squarely against the rate, and it would
generally not undermine agencies of their ability to enforce their regulations or provide redress
where they have express statutory authority to do so.
5
Alpert further relies on Smith v. SBC Communications Inc., 178 N.J. 265, 839 A.2d 850 (2004);
however, we find Smith unpersuasive. In Smith, the filed rate was applicable only to the first
transaction under the regulatory scheme and inapplicable to subsequent resales. Id. at 277-78.
Here, there was a singular sale for insurance as evidenced by the mortgage agreement that was
made “at Lender’s option and Borrower’s expense.” Opening Br. of Appellant at 12 (9th Cir.
No. 19-35867 (2020)).
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C. We Decline to Address the Second Certified Question and Ask the Court To First
Revisit and Apply McCarthy
The second question the Ninth Circuit asks is what damages are barred by the
filed rate doctrine. Alpert brings a variety of claims, some which have been settled,
dismissed, or are seemingly no longer at issue. This task requires analyzing the
allegations to determine whether the relief requested comports with McCarthy.
As we do not wish to unnecessarily expand our reasoning in McCarthy to analyze
claims that may fall squarely within its parameters, we respectfully ask the Ninth Circuit
Court of Appeals to first revisit and apply McCarthy in light of today’s opinion and so
decline to answer the second certified question at this time. “Whether to actually answer
a certified question that has been accepted for review is within the discretion of this
court.” United States v. Hoffman, 154 Wn.2d 730, 736, 116 P.3d 999 (2005) (citing
Hoffman v. Regence Blue Shield, 140 Wn.2d 121, 128, 991 P.2d 77 (2000)).
IV. CONCLUSION
In certain circumstances, awarding damages against intermediaries such as
mortgage brokers and servicers may directly attack the filed rate. When it does, the
doctrine must apply to bar suit, just as it would against the rate-filer. Accordingly, we
answer the first question in the affirmative. We respectfully decline to answer the
second question and ask the court to revisit and apply McCarthy.
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WE CONCUR:
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