Full opinion text
ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS [ECF Nos. 174, 175] LAUREL BEELER, United States Magistrate Judge INTRODUCTION In this putative class action, Plaintiffs . challenge their lender U.S. Bank’s business practices associated with force-placing flood insurance on their real property that was underwritten by Defendant American Security Insurance Company (“ASIC”). They also allege that U.S. Bank received kickbacks or other compensation from ASIC. Second Amended Class Action Complaint (“SAC”), ECF No. 169, ¶ 2. Plaintiffs states six claims in the SAC: (1) breach of contract against U.S. Bank; (2) breach of the covenant of good faith and fair dealing against U.S. Bank; (3) — (4) unjust enrichment against U.S. Bank and ASIC; and (5) — (6) violations of California Business & Professions Code section 17200 et seq. against U.S. Bank and ASIC. See id., ¶¶ 86-130. ASIC and U.S. Bank move to dismiss the SAC, arguing that certain claims are (1) moot, (2) barred by the filed rate doctrine, (3) barred by the express terms of the governing contracts, and (4) fail to state a claim. See ASIC Motion to Dismiss, ECF No. 175; U.S. Bank Motion to Dismiss, ECF No. 174. Ellsworth opposed the motions on February 14, 2014. See Opposition, ECF No. 180. ASIC and U.S. Bank filed replies on February 27, 2014. See ASIC Reply, ECF No. 181; U.S. Bank Reply, ECF No. 182. The court denies the motions to dismiss. STATEMENT Plaintiffs and the putative class members have mortgages secured by residential property and were charged for lender-placed (also called “force-placed”) flood insurance by U.S. Bank. SAC ¶ 1. Lenders generally have the right to force-place flood insurance where the property securing the loan falls in a Special Flood Hazard Area (“SFHA”) and is not insured by the borrower. Id. ¶ 2. Plaintiffs allege that U.S. Bank abused that right by (1) purchasing backdated policies, (2) charging borrowers for expired or partially expired coverage, and (3) arranging for kickbacks, commissions, qualified expense reimbursements, or other compensation for itself and/or its affiliates in connection with force-placed flood insurance coverage. See id. ¶ 2. Plaintiffs further allege that ASIC actively participated in this scheme by issuing backdated lender-placed flood insurance for U.S. Bank and by offering kickbacks, commissions, qualified expense reimbursements, or other compensation to U.S. Bank in return for the business. Id. ¶ 3. Plaintiffs allege that U.S. Bank and ASIC did this in bad faith and knowing that their actions were not authorized by the borrowers’ mortgage contracts or the National Flood Insurance Act and were inconsistent with applicable law. Id. ¶ 4. 1. THE PARTIES A. Defendants Defendant U.S. Bank is a national banking association headquartered in Cincinnati, Ohio that does business in California and throughout the United States. Id. ¶ 11. U.S. Bank Home Mortgage is one of U.S. Bank’s divisions. Id. Defendant ASIC is a Delaware corporation with its principal place of business in Atlanta, Georgia, is a subsidiary of Assurant, Inc., and does business in California and throughout the United States. Id. ¶ 12. B. Plaintiff Stephen Ellsworth On or about July 2, 2007, Plaintiff Stephen Ellsworth obtained a $393,892 mortgage loan from U.S. Bank that was secured by the deed of trust on his Napa County, California home. See SAC, ECF No. 169, ¶¶ 8, 18, Ex. 1 at 3-4. Ells-worth’s mortgage is a standard Fannie Mae/Freddie Mac Uniform Instrument. Id. ¶ 18. U.S. Bank is the lender-in-interest, and it services Ellsworth’s loan through its U.S. Bank Home Mortgage division. Id. ¶ 19. Ellsworth’s mortgage includes a provision that allows U.S. Bank, in its discretion, to require that Ellsworth maintain flood insurance on the property. Id. ¶ 20, Ex. 1 at 7. The provision states: 5. Property Insurance. Borrower shall keep the improvements now existing or hereafter erected on the Property insured against loss by fire, hazards included within the term “extended coverage,” and any, other hazards including, but not limited to, earthquakes and floods, for which Lender requires Insurance. This Insurance shall be maintained in the amounts (including deductible levels) and for the periods that Lender requires. What Lender requires pursuant to the preceding sentences can change during the term of the Loan. The insurance carrier providing the insurance shall be chosen by Borrower subject to Lender’s right to disapprove Borrower’s choice, which right shall not be exercised unreasonably. Lender may require Borrower to pay, in connection with this Loan, either: (a) a one-time charge for flood zone determination, certification and tracking services; or (b) a one-time charge for flood zone determination and certification services and subsequent charges each time remappings or similar charges occur which reasonably might affect such determination or certification. SAC Ex. 1, ECF No. 169-1 at 7. The same provision permits U.S. Bank to force-place flood insurance at Ellsworth’s expense if he fails to maintain the required amount of coverage. SAC ¶ 20, Ex. 1 at 7. If Borrower fails to maintain any of the coverages described above, Lender may obtain insurance coverage, at Lender’s option and Borrower’s expense. Lender is under no obligation to purchase any particular type or amount of coverage. Therefore, such coverage shall cover Lender, but might or might not protect Borrower, Borrower’s equity in the Property, or the contents of the Property, against any risk, hazard or liability and might provide greater or lesser coverage than was previously in effect. Borrower acknowledges that the cost of the insurance coverage so obtained might significantly exceed the cost of insurance that Borrower could have obtained. Any amounts disbursed by Lender under this Section 5 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment. Id. Ellsworth alleges that U.S. Bank’s discretion to force-place insurance is constrained by the mortgage’s paragraph 9, which provides: 9. Protection of Lender’s Interest in the Property and Rights Under this Security Instrument. If (a) Borrower fails to perform the covenants and agreements contained in this Security Instrument, ... then Lender may do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under this Security Instrument, including protecting and/or assessing the value of the Property, and securing-and/or repairing the Property. Id. Ex. 1 at 8; see SAC ¶ 20. Ellsworth’s mortgage also contains a provision titled “Loan Charges,” which provides that U.S. Bank “may charge Borrower fees for services performed in connection with Borrower’s default, for the purpose of protecting [U.S. Bank’s] interest in the Property and rights under this Security Instrument, including, but not limited to, attorneys’ fees, property inspection and valuation fees.” Id. at 11. When Ellsworth entered into the mortgage agreement, U.S. Bank did not require him to carry flood insurance. Id. at 5 n.2. On or about June 9, 2010, U.S. Bank sent Ellsworth a “Notice of Temporary Flood Insurance Placed by Lender Due to Cancellation, Expiration, or Missing Policy Information,” stating that “[o]ur records indicate your property is located in a Special Flood Hazard Area (SFHA) as determined by the Federal Emergency Management Agency (FEMA)” and that the Mortgage and the Flood Disaster Protection Act of 1973 required Ellsworth to purchase flood insurance. Id. ¶ 21, Ex. 2, ECF No. 169-2 at 2. The notice explained that U.S. Bank had purchased a 45-day flood insurance binder for Ellsworth’s property from ASIC. Id. ¶ 22. The binder was effective as of July 3, 2009, and would expire 45 days after the June 9, 2010 notice. Id. ¶ 22, Ex. 2 at 2-3. If Ellsworth failed to provide adequate proof of flood insurance within 45 days, “this temporary coverage will convert to a full year policy and the annual premium [$2,250] will be added to your escrow account.” Id. ¶ 23, Ex. 2 at 3. The notice also informed Ellsworth that “[i]n many instances, the insurance we purchase for you may be more expensive. than you are able to obtain on your own” and provided the telephone number of another insurance agency that (according 'to the First Notice) could also provide Ells-worth with adequate flood insurance. Id. ¶ 23, Ex. 2 at 2-3. On August 18, 2010, U.S. Bank sent Ellsworth a “Notice of Flood Insurance Placed by Lender Due to Cancellation, Expiration, or Missing Policy Information” informing him that it had not received evidence that he had purchased flood coverage. Id. ¶ 24, Ex. 3, ECF No. 169-3 at 2. In the August 18 notice, U.S. Bank stated that it had purchased a “full year flood insurance policy” from ASIC, and the charge for the policy was $2,250. Id. ¶ 24, Ex. 4. The force-placed flood insurance policy was backdated so that it was effective from July 3, 2009 to July 3, 2010 (although it was not issued until August 18, 2010). Id. ¶¶ 24-25, Ex. 4., ECF No. 169-4 at 2. There was no damage to the property or claims arising out of the property during that period. Id. ¶ 25. In other words, the coverage was expired on the date it was purchased and was worthless. Id. U.S. Bank and/or its affiliates received kickbacks from ASIC on lender-placed insurance (in the form of “expense reimbursements” and subsidized insurance tracking services), which is consistent with ASIC’s standard business practices. Id. ¶26. U.S. Bank did not subtract these kickbacks from the amount it charged Ellsworth. Id. ¶¶ 26-27. In August 2010, Ellsworth purchased a one-year flood insurance policy through State Farm effective September 1, 2010. See id. ¶28, Éx. 5, ECF No. 169-5. This policy (like the ASIC policy) provided $250,000 in flood insurance coverage, but it was not backdated and cost only $276. Id. On April 9, 2012, Ellsworth sent a letter to U.S. Bank stating that the force-placed flood insurance policies violated the deed of trust and requesting a refund of the premiums he paid. See id. ¶ 29; id. Ex. 6, ECF No. 169-6 at 2. Ellsworth did not receive a response from U.S. Bank. Id. ¶ 29. Ellsworth was reimbursed for these charges only after the initiation of this lawsuit, but he has not been reimbursed for his costs and expenses associated with bringing this lawsuit. Id. ¶ 27. C. Plaintiff Marilyn Weaver Plaintiff Marilyn Weaver is a California resident. Id. ¶ 9. On or about August 28, 2011, Weaver obtained a $435,000 mortgage loan from First Nations Home Finance secured by a deed of trust on her San Diego, California home. Id. ¶ 30, Ex. 7, ECF No. 169-7 at 2. Weaver’s mortgage also is a standard Fannie Mae/Freddie Mac Uniform Instrument. Id. ¶ 30. Ellsworth’s and Weaver’s mortgages contain identical provisions regarding flood insurance and U.S. Bank’s discretion to force place it. Compare id. Ex. 7, ECF No. 169-7 at 4-11 (Weaver’s mortgage), with id. Ex. 1, ECF No. 169-1 at 4-13 (Ellsworth’s mortgage). Weaver initially was not required to carry flood insurance on her property. Id. at 7 n.3. On or about November 2, 2011, Weaver received a letter from Freddie Mac stating that her mortgage had been sold to Freddie Mac and that the servicer of the mortgage would now be U.S. Bank. Id. ¶ 32, Ex. 8, ECF No. 169-8 at 2. On or about June 11, 2012, U.S. Bank sent Weaver a notice informing her that “[w]e have been notified of a Physical Map Revision issued by the Federal Emergency Management Agency which places your structure(s) in Special Flood Hazard Area ‘Zone A,’ ” Weaver had “45 days to purchase flood insurance, and if [she did] not provide adequate proof of flood insurance within 45 days of this letter, as a federally regulated lender, U.S. Bank, NA is required to lender place coverage.” Id. ¶ 33, Ex. 9, ECF No. 169-9 at 3. ■ On July 3, 2012, Weaver sold the property, and she finalized the sale papers on July 16, 2012. Id. ¶ 34. On July 18, 2012, Weaver notified U.S. Bank by letter and fax that she would not need flood insurance because the property had been sold and escrow would close on August 31, 2012. Id ¶ 34, Ex. 10, ECF No. 169-10 at 2-3. On or about August 13, 2012, Weaver received a response from U.S. Bank, stating that ASIC had issued lender-placed flood insurance for her property with an effective date of July 27, 2012. Id ¶ 34, Ex. 11, ECF No. 169-11 at 2. Then on or about August 21, 2012, Weaver received a “Notice of Flood Insurance Placed by Lender” that attached the declarations page for the flood insurance coverage on her property. Id ¶ 36, Ex. 12, ECF No. 169-12 at 2-3. This force-placed flood insurance had an effective date of July 27, 2012, provided coverage of $250,000, and had an annual premium of $2,250. Id ¶ 36, Ex. 12 at 2-3. ’ Weaver signed the final papers for the sale of her house on August 29, 2012. Id. ¶ 37. She was forced to pay $2,250 in “Escrow Overdraft” for the U.S. Bank-placed flood insurance. Id; see id. Ex. 13, ECF No. 169-13 at 2-3. Thereafter, Weaver made several attempts to contact U.S. Bank to ask about canceling the force-placed flood insurance. Id. ¶ 38, Ex. 14, ECF No. 169-14 at 2. On or about September 11, 2012, U.S. Bank sent Weaver a letter stating that the insurance coverage on her property had been partially cancelled effective August 30, 2012. Id. ¶ 38, Ex. 15, ECF No. 169-15 at 2. On or about September 22, 2012, Weaver received a check in the amount of $2,041 for a partial refund of the $2,250 that she initially paid for the force-placed flood insurance coverage. Id. ¶ 39, Ex. 16, ECF No. 169-16 at 2. Weaver has'yet to be fully reimbursed. Id. D. Plaintiffs Lawrence and Donene Skelley On or about February 21, 2002, Plaintiffs Lawrence and Donene Skelley obtained a $100,000 mortgage loan from Firstbank that was secured by a deed of trust on their Causey, New Mexico home. Id ¶ 40, Ex. 17, ECF No. 169-17 at 2. Their mortgage also is a standard Fannie Mae/Freddie Mac Uniform Instrument and contains the same provisions as the Weaver and Ellsworth mortgages. Id; compare id. Ex. 17, ECF No. 169-17 at 4-12, and id. Ex. 7, ECF No. 169-7 at 4-11, with id. Ex. 1, ECF No. 169-1 at 4-13. When they closed on their mortgage loan, the Skelleys’ home was not located in an SFHA, and they were not required to carry flood insurance on their property at that time. Id. ¶ 41. On or about September 7, 2011, the Skelleys received an “Assignment of Mortgage” document that stated that their mortgage had been assigned to 'U.S. Bank effective February 3, 2011. Id ¶ 42, Ex. 18, ECF No. 169-18 at 2-3. At the time of assignment, the Skel-leys were not informed of a flood insurance requirement on their property. Id. ¶ 42. On December 12, 2011, U.S. Bank sent the Skelleys a form letter claiming that their property was located in an SFHA and that they were required to purchase flood insurance on the property. Id. ¶ 43, Ex. 19, ECF No. 169-19 at 2. The letter further stated that U.S. Bank had placed temporary flood insurance on their property with a backdated effective date of June 1, 2011. Id. ¶ 43. An “Insurance Binder” document was attached to the Skelley Notice that showed that this force-placed flood insurance coverage was issued through ASIC, with an effective date of June 1, 2011, a coverage amount of $86,461, and an $778 annual premium. Id. ¶ 43, Ex. 19, ECF No. 169-19 at 3. On or about February 20, 2012, the Skelleys received a “Notice of Flood Insurance Placed by Lender” that had the declarations page for the force-placed flood insurance coverage attached. Id. ¶ 44. This force-placed coverage had a backdated effective date of June 1, 2011, provided effective coverage of $86,461, and had an annual premium of $778. See id. ¶ 44, Ex. 20, ECF No. 169-20 at 3. On or about February 21, 2012, - the Skelleys’ insurance agent, Lori Bohm, sent a letter to U.S. Bank stating that the Skelleys’ home was located in Flood Zone D and thus “flood insurance is NOT available nor should it be required.” Id. ¶ 45, Ex. 21, ECF No. 169-21 at 2. Attached to Ms. Bohm’s letter was a flood zone determination that was cotnpleted on February 21, 2012 and stated that the Skelleys’ home was not located in a SFHA. Id. ¶ 45, Ex. 21 at 3. The National Flood Insurance Program Map Panel effective date reflected on the form was October 6, 2010. Id. ¶ 45. On or about March 5, 2012, U.S. Bank sent the Skelleys a letter that stated “A recent review of your account revealed that the property structure secured by the above referenced loan is no longer located in a Special Flood Hazard Area (SFHA).” Id. ¶ 46, Ex. 22, ECF No. 169-22 at 2. The letter also stated that “[a]s a result [of the recent account review], U.S. Bank Home Mortgage no longer requires that you maintain flood insurance. Id. ¶ 46, Ex. 22 at 2. The Skelleys received another letter from U.S. Bank the same day that stated that its records showed “a lapse of insurance coverage from 06/01/11 to 03/0512.” Id., Ex. 23, ECF No. 169-23 at 2. The Skelleys received another letter from U.S. Bank on or about March 12, 2012 that stated the force-placed flood insurance coverage on their property would be cancelled and that they would receive a partial refund of $187. Id. ¶ 47, Ex. 24, ECF No. 169-24 at 2. Nonetheless, because “coverage was provided between the effective date of the coverage [U.S. Bank] obtained and the termination date,” $591 would be charged to their escrow account. Id. ¶ 47., Ex. 24 at 2. Ms. Skelley faxed a letter to U.S. Bank on or about July 5, 2012, reiterating that her home never was located in a flood zone. Id. ¶ 48, Ex. 25, ECF No. 169-25 at 2. Along with this letter, Ms. Skelley faxed a July 5, 2012 flood zone determination that showed that the Skelleys’ home was not located in a SFHA. Id. ¶ 48, Ex. 25, ECF No. 169-25 at 3. Like the February 21, 2012 determination, the July 5, 2012 flood zone determination showed a National Flood Insurance Program Map Panel effective date of October 6, 2010. Id. ¶ 48, Ex. 25. On or about July 16, 2012, the Skelleys received another letter from U.S. Bank repeating its earlier claim that their home was no longer in a flood zone as of March 5, 2012 and stating that “U.S. Bank still required you to have flood insurance for this period of time from 06/01-2011-03/05/2012.” Id. ¶ 49, Ex. 26, ECF No. 169-26 at 2. The $591 charge that U.S. Bank imposed for force-placed flood insurance coverage from June 1, 2011 to March 5, 2012 was added to the Skelleys’ escrow account and built into their monthly mortgage payment. Id. ¶ 50. To remain current on their mortgage, the Skelleys have been making increased payments against their will. Id. II. THE CHALLENGED CONDUCT Force-placing insurance is a lucrative business for U.S. Bank and other mortgage lenders and servicers (referred to generically as lenders). Id. ¶ 51. Commonly, the lender selects the insurance provider in accordance with an agreement whereby the insurance provider pays a percentage of the premium back to the lender as an inducement to do business with the insurance provider. Under such arrangements, the force-placed insurance provider pays a commission (also referred to as a “qualified expense reimbursement”) to the lender or a subsidiary that poses as an agent. Often, the insurance provider also gives discounted or subsidized insurance tracking services to the lender. Id. U.S. Bank has tried to keep its own compensation arrangement with ASIC secret, but discovery in this action has shown that ASIC paid so-called qualified expense reimbursements (which were not legitimate reimbursements for actual costs and were tantamount to commissions) to a U.S. Bank affiliate in connection with force-placed insurance. I,d. ¶ 52. ASIC also provided discounted insurance tracking services to U.S. Bank. Id. These compensation arrangements (including arrangements involving ASIC and its parent company) are the subject of court opinions, id. ¶ 53 (citing cases), publicly-filed deposition testimony, id. ¶ 54 (quoting a Chase representative who refers to these arrangements as “standard industry-wide practice”), an article in American Banker magazine, id. ¶ 55 & Ex. 28, and public regulatory filings, id. ¶ 56. For example, ASIC reported to the California Department of Insurance that it paid more than $1.8 million dollars in commissions and brokerage expenses in connection with its flood insurance program in 2010. Id. ¶ 56. According to an article in American Banker, the force-placed insurance business (for flood, hazard, and wind policies) “brings servicers hundreds of millions of dollars each year.” Id. ¶ 57, Ex. 30. In return for this compensation, ASIC and its parent company, Assurant, make billions of dollars in premiums. Id. ¶ 58. In 2010 alone, Assurant collected approximately $2.7 billion in premiums through its specialty insurance division, which is primarily is devoted to force-placed insurance. Id. ¶ 58, Ex. 30. A. Criticism of “Kickback Arrangements” in Force-Placed Insurance Plaintiffs argue that the “kickback arrangements”- between ASIC and its clients (including U.S. Bank) are unjust. Id. ¶ 59. Numerous courts have condemned self-dealing in connection with force-placed insurance. Id. ¶ 60 (collecting cases). Plaintiffs claim that the NFIA allows lenders and servicers only to “charge the borrower for the cost of premiums and fees incurred by the lender or servicer for the loan in purchasing the insurance.” Id. ¶ 61 (quoting 42 U.S.C. § 4012(e)(2)). On March 6, 2012, Fannie Mae issued a Request for Proposal (“RFP”) relating to lender-placed insurance. In the RFP, Fannie Mae stated that it had conducted an extensive internal review of the lender-placed insurance process and found that it could be improved through unit price reductions and fee transparency to the benefit of both the taxpayers and homeowners. Id. ¶ 63, Ex. 33. Fannie Mae made the following observations: • Lender Placed Insurers often pay commissions/fees to Servicers for placing business with them. The cost of such commissions/fees is recovered in part or in whole by the Lender Placed Insurer from the premiums[.]” • The existing system may encourage Servicers to purchase Lender Placed Insurance from Providers that pay high commissions/fees to the Servi-cers and provide tracking, rather than those that offer the best pricing and terms.... Thus, the Lender Placed Insurers and Servicers have little incentive to hold premium costs down. • [M]uch of the current lender placed insurance cost borne by Fannie Mae results from an incentive arrangement between Lender Placed Insurers and Servicers that disadvantages Fannie Mae and the homeowner. Id. ¶ 63 (quoting Ex. 33). Accordingly, Fannie Mae stated that it sought to “[r]e-structure the business model” in part to “[e]liminate the ability of Servicers to pass on the cost of commissions/fees to Fannie Mae” and to “[sjeparate the commissions and fees for Insurance Tracking Services from the fees for Lender Placed Insurance to ensure transparency and accountability.” Id. On March 14, 2012, Fannie Mae issued a Servicing Guide Announcement pertaining to lender-paced insurance. Id. ¶ 62, Ex. 31. In it, Fannie Mae clarified its requirements relating to reasonable reimbursable expenses for lender-placed insurance, and stated that “reimbursement of lender-placed insurance premiums must exclude any lender-placed insurance commission earned on that policy by the servicer or any related entity[.]” Id. ¶ 62 (quoting Ex.- 31 at 4) (emphasis in original quotation). The U.S. Department of Housing and Urban Development promulgated similar guidance in its Lender Manual. Id. ¶ 62 n.7, Ex. 32. Also on March 14, 2012, the California Department of Insurance announced that it had contacted the ten largest lender-placed insurers in California (including ASIC), and asked them to reduce their rates. Id. ¶ 64; see Exs. 34-35. The California Insurance Commissioner expressed concern about “questionable financial integration between mortgage lenders and insurers providing ‘forced-placed’ mortgage insurance.” Id. ¶ 64; see Ex. 34. The Commissioner also noted a “lack of arm’s length transactions between lenders and insurers and, in some cases, a financial relationship between the lender and the insurer” that results in higher premiums and prejudices homeowners. Id. In May 2012, the New York Department of Financial Services (“NYDFS”) held a three-day hearing regarding the force-placed insurance practices of mortgage lenders, servicers, and insurance companies. Id. ¶ 65 (citing http://www.dfs.ny. gov/insuranee/hearing/fp_052012_schedule. htm). On the opening day of the hearings, NYDFS Superintendent Benjamin Lawsky issued a statement, announcing that “our initial inquiry into the operation of the force placed insurance market has raised a number of serious concerns and red flags,” including: a web of tight relationships between the banks, their subsidiaries and insurers that have the potential to undermine normal market incentives and may contribute to other problematic practices. In some cases this takes the form of large commissions being paid by insurers to the banks for what appears to be very little work. Id. ¶ 65 (quoting Ex. 36 at 2). According to Superintendent Lawsky, “[tjhis perverse incentive, if it exists, would appear to harm both homeowners and investors while enriching the banks and the insurance companies.” Id. ¶ 65 (quoting Ex. 36 at 3). After these hearings, the NYDFS entered into a Consent Order with ASIC. Id. ¶ 65; see Ex. 37. The Consent Order (1) forbids ASIC from paying “commissions to a servicer or a person or entity affiliated with a servicer on force-placed insurance policies obtained by the servi-cer;” (2) characterizes qualified expense payments as “substitutes for commissions;” and (3) provides that ASIC “shall not provide free or below-cost outsourced services to servicers, lenders, or their affiliates.” Id. ¶ 65 (quoting Ex. 37). The National Association of Insurance Commissioners (“NAIC”) recently expressed its “regulatory concern,” as follows: A key regulatory concern with the growing use of lender-placed insurance is “reverse competition,” where the lender chooses the coverage provider and amounts, yet the consumer is obligated to pay the cost of coverage. Reverse competition is a market condition that tends to drive up prices to the consumers, as the lender is not motivated to select the lowest price for coverage since the cost is born by the borrower. Normally competitive forces tend to drive down costs for consumers. However, in this case, the lender is motivated to select coverage from an insurer looking out for the lender’s interest rather than the borrower. Id. ¶ 66 (quoting Ex. 38). B. Criticism of Backdating Insurance Policies Plaintiffs also cite authorities critical of backdating insurance. See id. ¶¶ 67-69. For example, according to the NAIC, insurance is “prospective in nature” and policies “should not be backdated to collect premiums for a time period that has already passed.” Id. ¶ 67 (quoting Ex. 28). Similarly, the Ohio Department of Insurance has specifically warned that “there’s no such thing as retroactive flood insurance.” Id. ¶ 67 (quoting Ex. 39). In the context of the National Flood Insurance Act of 1968, the Office of the Office of the Comptroller of the Currency (“OCC”) has stated: The ability to impose the costs of force placed flood insurance on a borrower commences 45 days after notification to the borrower of a lack of insurance or of inadequate insurance coverage. Therefore, lenders may not charge borrowers for coverage during the 45-day notice period. Id. ¶ 68 (quoting Flood Insurance Questions & Answers, 74 Fed.Reg. at 35,934). The OCC later proposed alternative language that would allow lenders to charge borrowers for flood insurance coverage during the 45-day notice period, if the borrower has given the lender “express authority”, to do so. Id. ¶ 68 n.9 (quoting Loans in Areas Having Special Flood Hazards; Interagency Questions & Answers Regarding Flood Insurance, 76 Fed.Reg. 64,175, 64,180-81 (Oct. 17, 2011)). Finally courts have upheld claims that backdating force-placed insurance policies is unfair and/or unlawful.” Id. ¶ 69 (collecting cases). III. PROPOSED CLASS DEFINITIONS The SAC defines several classes and sub-classes. See SAC ¶¶ 70-79. A. The Multi-State Lender-Placed Flood Insurance Classes Plaintiffs assert their breach of contract claims against U.S. Bank (claim 1) on behalf of the proposed “Multi-State Lender-Placed Class,” which is divided into two sub-classes: Proposed Multi-State Lender-Placed Class: All persons with a closed-end residential mortgage loan secured by a Fannie Mae/Freddie Mac Uniform Instrument, who were charged by U.S. Bank, N.A. for force-placed flood insur-anee on property in California, Alabama, Alaska, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, Missouri, New Jersey, New York, North Dakota, Oregon, Texas, Utah, West Virginia, New Mexico, Arizona, Arkansas, Delaware, Georgia, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Washington, Wisconsin, or Wyoming within the applicable statute of limitations, where such flood insurance was procured with the assistance of American Security Insurance Company or its affiliates, excluding persons whose force-placed flood insurance charges were completely refunded or extinguished through a bankruptcy, foreclosure judgment, loan modification, forbearance, short sale, or deed-in-lieu of foreclosure. (a) Proposed Ellsworth/Weaver Lender-Placed Sub-Class: All persons within the Multi-State Lender-Placed Class whose property is located in California, Alabama, Alaska, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, Missouri, New Jersey, New York, North Dakota, Oregon, Texas, Utah, and West Virginia. (b) Proposed Skelley Lender-Placed Sub-Class: All persons within the Mul-ti-State Lender-Placed Class whose property is located in New Mexico, Arizona, Arkansas, Delaware, Georgia, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Washington, Wisconsin, and Wyoming. Id. ¶ 71. B. The Multi-State Qualified Expense Reimbursement Classes To the extent that Plaintiffs’ breach of contract claims are based on allegations of improper qualified expense reimbursements, Plaintiffs assert these claims on behalf of a proposed “Multi-State QER Class,” which is divided into two subclasses: Proposed Multi-State QER Class: All persons with a closed-end residential mortgage loan secured by a Fannie Mae/Freddie Mac Uniform Instrument, who were charged by U.S. Bank, N.A. for force-placed flood insurance on property in California, Alabama, Alaska, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, Missouri, New Jersey, New York, North Dakota, Oregon, Texas, Utah, West Virginia, New Mexico, Arizona, Arkansas, Delaware, Georgia, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Washington, Wisconsin, or Wyoming within the applicable statute of limitations and prior to December 1, 2011, where such flood insurance was procured with the assistance of American Security Insurance Company or its affiliates, excluding persons whose force-placed flood insurance charges were completely refunded or extinguished through a bankruptcy, foreclosure judgment, loan modification, .forbearance, short-sale, or deed-in-lieu of foreclosure. (a) Proposed Ellsworth/Weaver QER Sub-Class: All persons within the Mul-ti-State QER Class whose property is located in California, Alabama, Alaska, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, Missouri, New Jersey, New York, North Dakota, Oregon, Texas, Utah, and West Virginia. (b) Proposed Skelley QER SubClass: All persons within the Multi-State QER whose property is located in New Mexico, Arizona, Arkansas, Delaware, Georgia, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Washington, Wisconsin, and Wyoming. Id. ¶ 72. C. The Multi-State Backdated Flood Insurance Classes To the extent that Plaintiffs’ breach of contract claims are based on allegations of improper backdating, Plaintiffs assert these claims on behalf of a proposed “Mul-ti-State Backdated Class,” which is divided into two sub-classes: Proposed Multi-State Backdated Class: All persons with a closed-end residential mortgage loan secured by a Fannie Mae/Freddie Mac Uniform Instrument, who were charged by U.S. Bank, N.A. for force-placed flood insurance on property in the United States before January 1, 2013 and within the applicable statute of limitations, where such insurance was backdated by more than 60 days, excluding persons whose force-placed flood insurance charges were completely refunded or extinguished through a bankruptcy, foreclosure judgment, loan modification, forbearance, short sale, or deed-in-lieu of foreclosure. (a) Proposed Ellsworth Backdated Sub-Class: All persons within the Mul-ti-State Backdated Class whose property is located in California, Alabama, Alaska, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, Missouri, New Jersey, New York, North Dakota, Oregon, Texas, Utah, and West Virginia. (b) Proposed Skelley Backdated Sub-Class: All persons within the Mul-ti-State Backdated Class whose property is located in New Mexico, Arizona, Arkansas, Delaware, Georgia, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Washington, Wisconsin, and Wyoming. Id. ¶ 73. D. The California Classes Ellsworth and Weaver assert their claims for breach of covenant of good faith and fair dealing (claim 2), unjust enrichment (claims 3-4), and violations of California’s Unfair Competition Law (claims 5-6) on behalf of three California classes. See id. ¶¶ 74-76. First, they seek to represent a proposed “California Lender-Placed Class:” Proposed California Lender-Placed Class: All persons with a • closed-end residential mortgage loan secured by a Fannie Mae/Freddie Mac Uniform Instrument, who were charged by U.S. Bank, N.A. for force-placed flood insurance on property in the State of California on or after May 16, 2008, where such flood insurance was procured with the assistance of American Security Insurance Company or its affiliates, excluding persons whose force-placed flood insurance charges were completely refunded or extinguished through a bankruptcy, foreclosure judgment, loan modification, forbearance, short sale, or deed-in-lieu of foreclosure. Id. ¶ 74. Second, to the extent their claims 2-6 are based on improper qualified expense reimbursements, Ellsworth and Weaver seek to represent a proposed “California QER Class:” Proposed California QER Class: All persons with a closed-end residential mortgage loan secured by a Fannie Mae/Freddie Mac Uniform Instrument, who were charged by U.S. Bank, N.A. for force-placed flood insurance on property in the State of California on or after May 16, 2008 and prior to December 1, 2011, where such flood insurance was procured with the assistance of American Security Insurance Company or its affiliates, excluding persons whose force-placed flood insurance charges were completely refunded or extinguished through a bankruptcy, foreclosure judgment, loan modification, forbearance, short sale, or deed-in-lieu of foreclosure. Id. ¶ 75. Third, to the extent Ellsworth’s claims 2-6 are based on allegations of improper backdating, Ellsworth asserts these claims on behalf of a proposed “California Backdated Class:” Proposed California Backdated Class: All persons with a closed-end residential mortgage loan secured by a Fannie Mae/Freddie Mac Uniform Instrument, who were charged by U.S. Bank, N.A. for force-placed flood insurance on property in the State of California on or after May 16, 2008 and before January 1, 2018, where such insurance was backdated by more than 60 days, excluding persons whose force-placed flood insurance charges were completely refunded or extinguished through a bankruptcy, foreclosure judgment, loan modification, forbearance, short sale, or deed-in-lieu of foreclosure. Id. ¶ 76. E. The New Mexico Classes Plaintiffs Lawrence and Donene Skelley assert their claims for breach of covenant of good faith and fair dealing (claim 2) and unjust enrichment (claims 3-4) on behalf of three New Mexico classes. First, the Skelleys assert claims 2-4 on behalf of a proposed “New Mexico Lender-Placed Class:” Proposed New Mexico Lender-Placed Class: All persons with a closed-end residential mortgage loan secured by a Fannie Mae/Freddie Mac Uniform Instrument, who were charged by U.S. Bank, N.A. for force-placed flood insurance on property in the State of New Mexico on or after May 16, 2008, where such flood insurance was procured with the assistance of American Security Insurance Company or its affiliates, excluding persons whose force-placed flood insurance charges were completely refunded or extinguished through a bankruptcy, foreclosure judgment, loan modification, forbearance, short sale, or deed-in-lieu of foreclosure. Id. ¶ 77. Second, to the extent the Skelleys’ claims 2-4 are based on allegations of improper qualified expense reimbursements, they seek to represent a proposed “New Mexico QER Class:” Proposed New Mexico QER Class: All persons with a closed-end residential mortgage loan secured by a Fannie Mae/Freddie Mac Uniform Instrument, who were charged by U.S. Bank, N.A. for force-placed flood insurance on property in the State of New Mexico on or after May 16, 2008 and prior to December 1, 2011, where such flood insurance was procured with the assistance of American Security Insurance Company or its affiliates, excluding persons whose force-placed flood insurance charges were completely refunded or extinguished through a bankruptcy, foreclosure judgment, loan modification, forbearance, short sale, or deed-in-lieu of foreclosure. Id. ¶ 78. Third, to the extent the Skelleys’ claims 2-4 are based on allegations of improper backdating, they seek to represent a proposed “New Mexico Backdated Class:” Proposed New Mexico Backdated Class: All persons with a closed-end residential mortgage loan secured by a Fannie Mae/Freddie Mac Uniform Instrument, who were charged by U.S. Bank, N.A. for force-placed flood insurance on property in the State of New Mexico on or after May 16, 2008 and before January 1, 2013, where such insurance was backdated by more than 60 days, excluding persons whose force-placed flood insurance charges were completely refunded or extinguished through a bankruptcy, foreclosure judgment, loan modification, forbearance, short sale, or deed-in-lieu of foreclosure. Id. ¶ 79. IV. PROCEDURAL HISTORY Ellsworth filed his original complaint on May 16, 2012 against U.S. Bank and filed a First Amended Complaint (“FAC”) against U.S. Bank and ASIC on July 23, 2012. Complaint, ECF No. 1; FAC, ECF No. 26. On August 6, 2012, U.S. Bank moved to compel arbitration based on the arbitration provisions in Ellsworth’s U.S. Bank checking account. See ECF No. 32. While that motion was pending, ASIC moved to dismiss the FAC. See ECF No. 52. On September 19, 2012, the court denied U.S. Bank’s motion to compel arbitration. ECF No. 64. U.S. Bank then moved to dismiss the FAC. ECF No. 68. The court denied ASIC’s and U.S. Bank’s motions to dismiss on December 11, 2012. See ECF No. 80. Defendants then answered the FAC, and the parties began discovery. See ECF Nos. 83 (U.S. Bank Answer), 84 (ASIC Answer), 91 (Pre-Trial Order). On September 24, 2013, Ellsworth moved for class certification. See ECF No. 135. In its opposition, U.S. Bank stated that at Ellsworth’s October 4, 2013 deposition, it “discovered” that Ellsworth’s property was never in a flood zone, it never should have force-placed flood insurance on his property, and it was refunding Ellsworth’s money. See U.S. Bank Class Certification Opp’n, ECF No. 132-5. In his class certification reply brief, Ellsworth characterized U.S. Bank’s late discovery as a “last-minute machination” and proposed new class definitions and adding additional class representatives. See Reply Supp. Motion for Class Certification, ECF No. 149-5. Four days later, on November 18, 2013, Ellsworth filed a motion to amend the complaint and an administrative motion to shorten the hearing schedule so that the motion to amend could be heard at the December 5, 2013 hearing on the class certification motion. See ECF Nos. 151-52. “Following Plaintiffs identification of Ms. Skelley as a proposed putative class representative and plaintiff to this action, U.S. Bank commenced an internal review and investigation of her records.” Wolfe Decl. Supp. U.S. Bank Opp’n to Motion to Amend, ECF No. 165-1, ¶7. U.S. Bank explained that it discovered that Ms. Skel-ley’s property was never in a flood zone either. Id. ¶ 9. “Accordingly, consistent with U.S. Bank’s.policies, on November 29, 2013, U.S. Bank issued to Ms. Skelley a complete refund” of the remaining premiums she had been charged. Id. On December 19, 2013, the court granted Ellsworth’s motion to file the SAC, vacated the class certification hearing, and ordered the parties to submit a proposed schedule regarding (1) discovery into new issues regarding the new Plaintiffs and proposed classes, (2) dispositive motions, and (3) supplemental class certification briefing. ECF No. 168 at 18-20. The court limited the scope of the issues the parties could address in any motions to dismiss to “new issues (such as the New Mexico law issues identified in ASIC’s opposition to the motion to amend) and [said that it] will not reconsider arguments raised in the last round of dispositive motions. Defendants may not argue new cases and old issues on summary judgment.” Id. at 19. Plaintiffs then filed the SAC with claims against U.S. Bank for breach of contract (claim 1) and breach of the covenant of good faith and fair dealing (claim 2) and claims against both Defendants for unjust enrichment/restitution (claims 3 and 4) and violation of California’s Unfair Competition Law (claims 5 and 6). See ECF No. 169. On January 17, 2014, U.S. Bank and ASIC filed separate motions to dismiss the SAC. See ECF Nos. 174-175. The court held a hearing on March 20, 2014. See Minute Order, ECF No. 184. ANALYSIS I. LEGAL STANDARDS A. Subject Matter Jurisdiction Dismissal of a claim is appropriate under Federal Rule of Civil Procedure Rule 12(b)(1) when the court lacks subject-matter jurisdiction over the claim. Morongo Band of Mission Indians v. California Bd. of Equalization, 858 F.2d 1376, 1380 (9th Cir.1988). A Rule 12(b)(1) motion may either attack the sufficiency of the complaint to establish federal jurisdiction (a facial challenge) or allege a lack of jurisdiction that exists despite the formal sufficiency of the complaint (a factual challenge). See White v. Lee, 227 F.3d 1214, 1242 (9th Cir.2000). A facial attack asserts lack of federal jurisdiction based on the complaint alone, and the court must accept all allegations of fact in the complaint as true and construe them in the light most favorable to the plaintiffs. See Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir.2003). By contrast, with a factual challenge, a court need not assume the truth of factual allegations but may hear additional evidence about jurisdiction and. resolve factual disputes when necessary. See Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.1987). If a defendant challenges jurisdiction by presenting evidence, then the party opposing the motion must present sufficient evidence to support the court’s subject-matter jurisdiction. See Savage v. Glendale Union High School, Dist. No. 205, Maricopa County, 343 F.3d 1036, 1040 n. 2 (9th Cir.2003). B. Failure to State a Claim Rule 8(a) requires that a complaint contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A complaint must therefore provide a defendant with “fair notice” of. the claims'against it and the grounds for relief. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quotation and citation omitted). To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). “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.” Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal citations and parentheticals omitted). In considering a motion to dismiss, a court must accept all of the plaintiffs allegations as true and construe them in the light most favorable to the plaintiff. See id. at 550, 127 S.Ct. 1955. In addition, courts may consider documents attached to the complaint. Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir.1995) (citation omitted). C. The National Flood Insurance Act Under the National Flood Insurance Act of 1968 (“NFIA”) and the Flood Disaster Protection Act of 1973, as amended, the Office of the Comptroller of Currency (“OCC”) is charged with promulgating regulations that require lending, institutions and servicers to' ensure that properties subject to their mortgage loans have adequate flood insurance. See 42 U.S.C. §§ 4012a(b)(l), 4003(a)(5). The OCC regulations that control a lender’s powers and obligations related to flood insurance provide that a national bank “shall not make, increase, extend, or renew any designated loan unless the building ... securing the loan is covered by flood insurance for the term of the loan.” 12 C.F.R. § 22.3(a) (also setting minimum coverage requirements); see also 42 U.S.C. § 4012a(b)(l) (substantially similar); 12 C.F.R. § 22.2(b) (regulations applicable only to national banks). The NFIA permits lenders to force-place flood insurance in areas with special flood hazards: If, at the time of origination or at any time during the term of a loan secured by improved real estate or by a mobile home located in an area that has been identified ... as an area having special flood hazards and in which insurance is available under the [NFIA], the lender or servicer for the loan determines that the building or mobile home and any personal property securing the loan is not covered by flood insurance or is covered by [inadequate flood insurance], the lender or servicer shall notify the borrower under the loan that the borrower should obtain, at the borrower’s expense, an amount of flood insurance for the building or mobile home and such personal property that is not less than the amount under subsection (b)(1) of this section, for the term of the loan. 42 U.S.C. § 4012a(e)(l). “If the borrower fails to purchase such flood insurance within 45 days after notification ... the lender or servicer for the loan shall purchase the insurance on behalf of the borrower and may charge the borrower for the cost of premiums and fees incurred by the lender or servicer for the loan in purchasing the insurance.” 42 U.S.C. § 4012a(e)(2). “If a bank requires the escrow of taxes, insurance premiums, fees, or any other charges ... the bank shall also require the escrow of all premiums and fees for any flood insurance required under § 22.3.” 12 C.F.R. § 22.5. II. DISCUSSION The three issues are as follows: whether the Skelleys’ claims are barred for lack of standing or mootness; whether the filed rate doctrine bars the kickback claims; and whether the amended complaint pleads plausible claims. A. Standing and Mootness The first issue is whether the Skelleys’ claims are moot or whether they lack standing. Standing is jurisdictional, cannot be waived, and is properly addressed under Rule 12(b)(1). See United States v. Hays, 515 U.S. 737, 742, 115 S.Ct. 2431, 132 L.Ed.2d 635 (1995); Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir.2010). The party asserting the claim has the burden of establishing standing. See Colwell v. Dept. of Health and Human Servs., 558 F.3d 1112, 1121 (9th Cir.2009). When ruling on a motion to dismiss for lack of standing, the court “must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.” Graham v. FEMA, 149 F.3d 997, 1001 (9th Cir.1998) (quoting Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)). From a constitutional perspective, Article Ill’s case-or-controversy requirement requires the following for each claim: (1) the party invoking federal jurisdiction must have suffered some actual or threatened injury; (2) the injury must be fairly traceable to the challenged conduct; and (3) a favorable decision would likely redress or prevent the injury. See Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), 528 U.S. 167, 180-81, 185, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000); Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472, 102 S.Ct. 752, 70 L.Ed.2d 700; Sahni v. American Diversified Partners, 83 F.3d 1057. “In a class action, standing is satisfied if at least one named plaintiff meets the requirements.” See Bates v. United Parcel Serv., 511 F.3d 974, 985 (9th Cir.2007). “[A] case is moot when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” County of Los Angeles v. Davis, 440 U.S. 625, 631, 99 S.Ct. 1379, 59 L.Ed.2d 642 (1979) (quoting Powell v. McCormack, 395 U.S. 486, 496, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969)). “[T]he question is not whether the precise relief sought at the time the application for an injunction was filed is still available. The question is whether there can be any effective relief.” West v. Secretary of Dept. of Transp., 206 F.3d 920, 925 (9th Cir.2000). “Mere voluntary cessation of allegedly illegal conduct does not moot a case; it if did, the courts would be compelled to leave [t]he defendant ... free to return to his old ways.” United States v. Concentrated Phosphate Export Ass’n, 393 U.S. 199, 89 S.Ct. 361, 21 L.Ed.2d 344 (1968) (quoting United States v. W.T. Grant Co., 345 U.S. 629, 632, 73 S.Ct. 894, 97 L.Ed. 1303 (1953)); see also, Adarand Constructors, Inc. v. Slater, 528 U.S. 216, 222, 120 S.Ct. 722, 145 L.Ed.2d 650, (2000). Voluntary cessation of illegal conduct does not render a challenge to that conduct moot unless “(1) there is no reasonable expectation that the wrong will be repeated, and (2) interim relief or events have completely and irrevocably eradicated the effects of the alleged violation.” Barnes v. Healy, 980 F.2d 572, 580 (9th Cir.1992); see also Lindquist v. Idaho State Bd. of Corrections, 776 F.2d 851, 854 (9th Cir.1985) (quoting Davis, 440 U.S. at 631, 99 S.Ct. 1379). “The burden of demonstrating mootness ‘is a heavy one.’” Davis, 440 U.S. at 631, 99 S.Ct. 1379 (quoting W.T. Grant, 345 U.S. at 632-33, 73 S.Ct. 894). Here, the relevant facts are that after Ellsworth moved for class certification, U.S. Bank deposed Ellsworth, purportedly discovered that his house never was in a flood zone, and refunded his money. At least partly in response, Ellsworth proposed revising the proposed class definitions and adding Weaver and Skelley as additional class representatives. See Statement. Several days later, he filed a motion to amend the complaint. See Statement. As required by this district’s Civil Local Rules, he attached a copy of the proposed second amended complaint to his motion. U.S. Bank then reviewed its files, discovered it never should have charged Ms. Skelley for flood insurance either, and issued a refund check to her for the $561.00 for the improper charges and $2.64 in interest. The court then granted Ellsworth’s motion for leave to amend.' Over Plaintiffs’ objections, the court continued the hearing on the class certification motion to allow Defendants to take discovery, draft these dispositive motions, and (if needed) file supplemental class certification briefing. Plaintiffs, including the Skelleys, filed the SAC on December 23, 2013. See ECF No. 169. U.S. Bank argues that the Skelleys’ claims are moot and ASIC argues that the refunds mean that the Skelleys lack standing. The court disagrees. In this circuit, an unaccepted settlement offer that would fully satisfy a plaintiffs claim does not render that claim moot. Diaz v. First American Home Buyers Protection Corp., 732 F.3d 948, 954-55 (9th Cir.2013). This is because “a case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” Id. (quoting Knox v. Serv. Employees Int’l Union, Local 1000, — U.S. —, 132 S.Ct. 2277, 183 L.Ed.2d 281 (2012) (internal quotation marks and alteration omitted)). In Diaz, the Ninth Circuit vacated the district court’s order granting a motion to dismiss where the plaintiff rejected the defendant’s Rule 68 offer of judgment. Id. The plaintiff purchased a home warranty plan from the defendant and filed a class action alleging the defendant refused to make timely repairs, used substandard contractors, and wrongfully denied claims. Id at 949. After the court denied class certification, the defendant made a Rule 68 offer of judgment that would have fully satisfied Diaz’s remaining individual claims. Lacking binding Ninth Circuit authority, the district court relied on Fourth and Seventh Circuit precedent and dismissed the plaintiffs claims as moot. Id. at 951. On appeal, the Ninth Circuit quoted the following passage from Justice Ka-gan’s dissent in Genesis Healthcare v. Symczyk: We made clear earlier this Term that “[a]s long as the parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot.” Chafin v. Chafin, — U.S. —, 133 S.Ct. 1017, 185 L.Ed.2d 1 (2012) (internal quotation marks omitted). “[A] case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” Ibid. (internal quotation marks omitted). By those measures, an unaccepted offer of judgment cannot moot a case. When a plaintiff rejects such an offer — however good the terms — her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer — like any unacceptéd contract offer — is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer “leaves the matter as if no offer had ever been made.” Minneapolis & St. Louis R. Co. v. Columbus Rolling-Mill, 119 U.S. 149, 151, 7 S.Ct. 168, 30 L.Ed. 376 (1886). Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that “[a]n unaccepted offer is considered withdrawn.” Fed. Rule Civ. Proc. 68(b). So assuming the case was live before— because the plaintiff had a stake and the court could grant relief — the litigation carries on, unmooted. For this reason, Symczyk’s individual claim was alive and well when the District Court dismissed her suit. Recall: Genesis made a settlement offer under Rule 68; Symczyk decided not to accept it; after 10 days, it expired and the suit went forward. Symczyk’s individual stake in the lawsuit thus remained what it had always been, and ditto the court’s capacity to grant her relief. After the offer lapsed, just as before, Symczyk possessed an unsatisfied claim, which the court could redress by awarding her damages. As long as that remained true, Symezyk’s claim was not moot, and the District Court could not send her away empty-handed. So a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don’t try this at home. Id. at 953-54 (quoting Genesis Healthcare Corp. v. Symczyk, — U.S. —, 133 S.Ct. 1523, 185 L.Ed.2d 636 (2013) (Kagan, J., dissenting)). In Diaz, the Ninth Circuit said that “Justice Kagan has articulated the correct approach” and held “that an unaccepted Rule 68 offer that would have fully satisfied a plaintiffs claim does not render that claim moot.” Id. at 954-55. The court explained that its holding was “consistent with the language, structure and purpose of Rule 68 and with fundamental principles governing mootness. These principles provide that “a case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party” Id. at 955 (quotation omitted). Here, as in Diaz, U.S. Bank attempted to refund the Skelleys’ money. Because the Skelleys did not accept U.S. Bank’s settlement offer, the attempted refund did not moot their claims. The analysis -in Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir.2011), supports this conclusion. There, the Ninth Circuit reversed the district court’s determination that a Rule 68 offer of a judgment to a named plaintiff mooted the putative class action. Id. The offer of judgment exceeded the amount of the named plaintiffs individual claim. See id. It also was made before the district court certified-the class (and before the class certification motion was even filed). Id. This procedural context was potentially relevant because once the district court has certified a class, mooting the class representative’s claim does not moot the class action. Id. at 1090. That is because the class acquires a legal status apart from the interest asserted by the class representative. Id. In holding that the claim was not moot, the Ninth Circuit observed that even where the district court denies a motion for class certification, mooting the class representative’s claim will not necessarily moot the class action because the putative class representative retains an interest in obtaining a final decision on class certification. Id. Also, where the offer precedes the filing of a class certification motion, a rejected offer of judgment for the full amount of a putative class representative’s individual claim does not necessarily moot a class action complaint. Id. at 1090. The Pitts court explained that where “a defendant seeks to ‘buy off the small individual claims of the named plaintiffs,” the class claims become analogous to “inherently transitory claims.” Id. at 1091 “An inherently transitory claim will certainly repeat as to the class, either because ‘the individual could nonetheless suffer repeated harm’ or because ‘it is certain that other persons similarly situated’ will have the same complai