Scott Gizer, along with Diane Luczon, recently achieved an outstanding result on behalf of the firm’s client, defendant Sun West Mortgage Company, Inc., in lawsuit where the plaintiff had alleged that Sun West had violated certain RESPA provisions when it force-placed flood insurance on plaintiff’s behalf. Specifically, the plaintiff had alleged that Sun West failed to follow the requirements of the Florida Insurance Code when procuring the force-placed insurance, which in turn violated Section 2605 of RESPA. Following a Bench Trial in the United States District Court, Southern District of Florida, Judge Robin Rosenberg found in favor of Sun West holding that the plaintiff could not use section 2605 of RESPA to assert of violation of the Florida Insurance Code when the Florida legislature had not provided for a private right action. The decision, which was covered in RESPA News, was of critical importance to lenders because it limits the ability of plaintiffs to use RESPA to assert violations of State statutes that a plaintiff would not be able to sue directly under.
The full article from RESPA News is below.
Florida court rules on extent of RESPA private right of action
In a case involving a reverse mortgage which fell into foreclosure proceedings, a lender purchased forced-placed insurance on the property. After the borrower brought her account current through a Florida government program and the foreclosure complaint was dismissed, she sued the lender and the insurance intermediary for RESPA violations.
The borrower alleged to a Florida district court that the force-placed rates charged were not bona fide and reasonable under RESPA because the procedure for obtaining the rates violated state regulations.
The district judge ruled that RESPA contains only three private rights of action, and the borrower could not “bootstrap” the state regulations through another cause of action.
The case is Michelina Iaffaldano v. Sun West Mortgage Co. and Proctor Financial (U.S. District Court, Southern District of Florida, 17-cv-14222).
Scott Gizer, the lead attorney for Sun West on the case and a partner at Early Sullivan Wright Gizer & McRae LLP, told RESPA News the ruling was significant.
“If plaintiff’s argument was accepted, plaintiffs could use section 2605 of RESPA to assert claims far beyond those three areas,” he said. “The judge’s decision is important because it prevents plaintiffs from using state statutes to create new causes of action where no private right of action was intended.”
In the ruling, District Judge Robin Rosenberg described the three private rights of action in RESPA under established law:
Payment of a kickback and unearned fees for real estate settlement services;
Requiring a buyer to use a title insurer selected by the seller; and
The failure of a loan servicer to provide proper notice about the transfer of loan servicing rights or to respond to a qualified written request for loan information under Section 2605(e).
None of those acts were alleged by Iaffaldano, though, with the court saying the allegations were that Sun West failed to advance insurance premiums on her behalf through an escrow account in violation of 12 C.F.R. § 1024.17 and that the force-placed rates charged were not bona fide and reasonable because the procedure for obtaining those rates violated Florida Insurance Code Section 626.916.
“However, it has been expressly held that 12 C.F.R. § 1024.17, governing escrow accounts, does not create a private right of action for alleged negligence with respect to the administration and maintenance of an escrow account,” Rosenberg wrote, citing Perron v. JP Morgan Chase Bank, N.A, (S.D. Ind. Mar. 10, 2014). “Likewise, it has been held that 12 C.F.R. § 1024.37 does not create a private right of action. Wing Kei Ho v. Bank of Am., N.A., (S.D. Fla. June 21, 2016).”
That logic, Rosenberg wrote, extended to the allegation of bona fide and reasonable charges, because section 626.916 does not create a private right of action – which Iaffaldano did not dispute in the case.
“A plaintiff may not plead around this bar by trying to bootstrap section 626.916 through another cause of action,” Rosenberg wrote, citing Lemy v. Direct Gen. Fin. Co., (M.D. Fla. 2012). “In Lemy v. Direct General Finance Company, the court held that while certain sections of the Florida insurance code provide for a private remedy, section 626.916 is not one of those sections.”
Rosenberg wrote that the court in Lemy explained that “a plaintiff ‘may not evade the Florida legislature’s decision to withhold a statutory cause of action’ for a violation of the insurance code ‘by asserting common law claims based on such violations.’ ”
The Lemy decision focused on common law claims under Florida law, but Rosenberg ruled the reasoning applied would be applicable to a federal cause of action.
“In other words, the court fails to see how a federal RESPA claim could be premised upon an alleged violation of a Florida regulatory statute which contains no private right of action,” Rosenberg wrote.
In fact, the court asked for guidance to case law where it did, and found none.
“The court expressly asked counsel for Iaffaldano to provide case law for the proposition that her RESPA claim could be premised on a Florida statute which lacked a private right of action, and counsel was unable to provide any authority to the court,” Rosenberg wrote. “For these reasons, Iaffaldano has not established that a private right of action exists for any of the RESPA violations she alleges have occurred.”
Iaffaldano also brought an allegation of tortious interference with a business relationship against Proctor, but Rosenberg ruled the claim failed because “the record evidence shows that Proctor did not intentionally or unjustifiably interfere with Iaffaldano’s relationship with Sun West.”