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This article continues the article begun here on Monday, November 9, 2015, titled "ACTIONABLE KICKBACKS ARE UNEARNED CHARGES, NOT UNACTIONABLE "DIVIDED LOYALTIES".
Green Tree Servicing argued recently in the U.S. District Court for the Northern District of Florida that the District Court should dismiss Mr. and Mrs. Charles and Wendy Edwards's charges that Green Tree accepted "kickbacks" from a provider of force-placed insurance policies, and made Mr. and Mrs. Edwards pay for the cost of the kickbacks.
In its defense, Green Tree raised an out-of-Circuit decision by an appellate panel in Cohen v. American Security Insurance Co., 735 F.3d 601 (7th Cir. 2013), in which the Seventh Circuit panel ruled in a case decided under Illinois law that "kickbacks" are the product of nonactionable "divided loyalties" rather than the product of unauthorized charges unrelated to the costs of insurance. See "ACTIONABLE KICKBACKS ARE UNEARNED CHARGES, NOT UNACTIONABLE "DIVIDED LOYALTIES".
After rejecting this kind of revisionist justice, as most judges have, certainly most judges outside of the Seventh Circuit and also outside of Illinois, a District Judge in North Florida moved on to address a case decided by a panel of the Eleventh Circuit Court of Appeals under Alabama fiduciary law.
The District Judge "distinguished" an Eleventh Circuit panel's Feaz decision which rested on unique Alabama fiduciary law. In actuality, the District Court rightly distinguished Feaz completely out of relevance to lender force-placed insurance practices except, perhaps, those practices permitted under Alabama law, in Edwards v. Green Tree Servicing, LLC, No. 5:15cv148-MW/GRJ, 2015 WL 6777463, at pp. *7, *9 (N.D. Fla. October 22, 2015):
Moreover, Feaz [v. Wells Fargo Bank, N.A., 745 F.3d 1098 (11th Cir. 2014)] does not, as Green Tree Servicing argues, preclude the claim. Feaz did not address a claim similar to the Edwards', as Feaz's implied-duty claims against Wells Fargo concerned the amount of insurance that was force-placed, rather than the choice of a policy that included “kickbacks” in the price. Feaz, 745 F.3d at 1110. Moreover, Feaz was decided under Alabama law. Under Alabama law, unlike Florida law, “‘sole discretion’ means an absolute reservation of a right[;][i]t is not mitigated by an implied covenant of good faith and fair dealing in contracts.”
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Green Tree's reliance on Feaz is, again, unpersuasive. Feaz dealt with a claim of breach under fiduciary duty under Alabama law which, unlike Florida law, does not contain an exception for “special circumstances” that create a fiduciary relationship that would not otherwise exist.
Now Mr. and Mrs. Edwards have the opportunity to put on proof of their claims including proof of the existence and extent of the kickbacks that Green Tree allegedly accepted from the force-placing insurance company, and which Green Tree then allegedly made the homeowners pay as a part of their insurance premiums.
Please Read The Disclaimer. ©2015 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015). All rights reserved.
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