Montoya v. PNC Bank, N.A. (94 F. Supp. 3d 1293, 2015)

ORDER ON DEFENDANTS’ MOTIONS TO DISMISS THIRD AMENDED COMPLAINT

JONATHAN GOODMAN, United States Magistrate Judge.

Plaintiffs have filed four versions of their complaint in this proposed class action lawsuit concerning claims brought in connection with force-placed insurance coverage on homes with mortgages. Defendants, a bank and an insurance company, have filed motions to dismiss the Third Amended Complaint (“TAC”). Plaintiffs have responded and Defendants have filed replies. In addition, the Court held a lengthy hearing and the Parties submitted proposed final orders, which the Court considered.

For the reasons outlined in greater detail below, the Court grants in small part the bank’s motion to dismiss (on the Ohio law claim for breach of an implied covenant of good faith and fair dealing) but denies the rest of the bank’s dismissal motion and also denies the insurance company’s motion. Nevertheless, some of the rulings are premised on the procedural posture — evaluating motions to dismiss— and later evaluations made in different settings will likely be more exacting and probing.

I. BACKGROUND

PROCEDURAL HISTORY

The Undersigned previously entered a comprehensive order [ECF No. 124] on motions to dismiss an earlier version of the complaint. Much of the background comes from that earlier order, which evaluated Plaintiffs’ First Amended Complaint (“FAC”). The TAC [ECF No. 127-1] adds a new named plaintiff (i.e., Xi Chen Lauren) to the existing two plaintiffs (Enrique Montoya and Neyser Colonia) and also adds allegations for the existing RICO counts. The TAC is similar (but not identical) to the initial complaint at issue in the earlier order (which granted in part and denied in part the motions to dismiss). It does not pursue certain claims previously dismissed and it no longer names PNC Mortgage and Assurant, Inc. as defendants.

The three named Plaintiffs assert nine claims for: breach of the implied covenant of good faith and fair dealing against Defendant PNC Bank, N.A. (“PNC”) (Count I); unjust enrichment against PNC (Count II); unjust enrichment against Defendant American Security Insurance Company (“ASIC”) (Count III); violations of the New Jersey Consumer Fraud Act (“NJCFA”) against PNC (Count IV) and ASIC (Count V); tortious interference with a business relationship against ASIC (Count VI); breach of fiduciary duty against PNC (Count VII); civil RICO against all Defendants (Count VIII); and civil RICO conspiracy against all Defendants (Count IX). All three named Plaintiffs are pursuing claims in Counts I, II, III, VI, VII, VIII and IX. Colonia is pursuing claims alone in Counts IV and V. The FAC had twelve counts; the TAC has nine.

In its motion to dismiss the TAC [ECF No. 129], ASIC seeks to dismiss all of Lauren’s claims against ASIC and the re-pled RICO claims of Montoya and Colonia. In its partial motion to dismiss [ECF No. 133], PNC moves to dismiss with prejudice Counts VIII and IX in their entirety, Lauren’s claims in Counts I and VII and all of Plaintiffs claims on behalf of a putative nationwide class in Counts I, II and VII.

The Court initially declined to dismiss Plaintiffs Montoya’s and Colonia’s claims for breach of the implied covenant of good faith and fair dealing, unjust enrichment, and breach of fiduciary duty against PNC, and tortious interference with a business relationship against ASIC in an order entered on August 27, 2014 [ECF No. 124 (the “August 27th Order”) ]; Plaintiff Lauren, an Ohio resident, still has those claims pending. The Court also declined to dismiss Plaintiff Montoya’s unjust enrichment claim against ASIC and Plaintiff Colonia’s claims for violation of the NJCFA against both Defendants, but dismissed Plaintiff Colonia’s unjust enrichment claim against ASIC and both Plaintiffs’ federal RICO claims without prejudice. [Id.].

The order dismissing without prejudice the RICO claims was based on Plaintiffs’ failure to sufficiently allege how Defendants allegedly participated, directed and/or controlled the alleged RICO enterprise. In granting Plaintiffs leave to file an amended complaint, the order expressly stated that the Court was not ruling on Defendants’ other substantive arguments about why they believed the RICO allegations were deficient. The order gave Defendants the ability to reassert those other arguments if Plaintiffs filed an amended complaint containing RICO claims (which they did).

GENERAL FACTUAL OVERVIEW

Homeowners are often required by the terms of their mortgage contracts to maintain insurance coverage on the properties securing their loans. When the homeowner does not maintain the insurance, the lender is authorized by the mortgage contract to purchase new insurance to cover its interest in the property. Lenders do this by contracting with insurance providers. This is what is commonly referred to as lender-placed insurance (“LPI”), which is sometimes deemed (usually by plaintiffs) as force-placed insurance.

This case is one of many putative civil class actions that have been filed around the country against various lenders, servi-cers and insurance carriers regarding the LPI programs. Many of these suits, like the one here, allege that lenders and their insurance providers have colluded together to create a nefarious scheme of unearned kickbacks (disguised as commissions and other benefits) that artificially inflate LPI rates. [ECF No. 127, pp. 2-4]. According to Plaintiffs, this scheme results in inflated LPI premiums and, in many instances, backdated insurance coverage (which the borrowers must pay) to cover periods during which no claims were made or coverage exceeding the legal requirements. [ECF No. 127, ¶ 3].

RELEVANT FACTS ABOUT THE NAMED PLAINTIFFS

The facts concerning Montoya and Colo-nia are discussed in the earlier Order on the dismissal motions [ECF No. 124, pp. 4-7] and will not (other than specifically mentioned below) be repeated here. The facts alleged in the TAC relating to Plaintiff Lauren are outlined below.

A. Plaintiff Lauren

On October 15, 2003, Lauren obtained a $210,400 mortgage loan from PNC’s predecessor, National City Mortgage Company, secured by a duplex located at 5381-5383 McKitrick Blvd., Columbus, Ohio (the “Mortgage”). [ECF Nos. 127-1, ¶58]. The Mortgage is a standard Fannie Mae form mortgage contract, Form 3036, and the relevant provisions regarding LPI are identical to those in Plaintiff Montoya’s mortgage. [ECF No. 133-1; compare ECF No. 127-1, ¶ 46 with ¶ 59].

An Allstate hazard insurance policy that Lauren had purchased for the property expired on November 17, 2011. [ECF No. 127-1, ¶ 60]. Lauren failed to immediately obtain replacement hazard insurance coverage, leaving Lauren’s property uninsured for more than four months, until March 26, 2012, when Lauren purchased a State Farm Insurance policy. [M, ¶ 63].

On or about November 23, 2012, PNC sent Lauren a notice letter. [Id., ¶ 152], That letter is the sole letter identified in the TAC to support Lauren’s RICO allegations. [Id., ¶ 152; ECF No. 133-4], The November 23, 2012 letter to Lauren is the same form letter that PNC sent to Montoya on October 16, 2012, and provided Lauren with all of the disclosures that Montoya received. [Compare ECF Nos. 56-17; 133^].

As the TAC acknowledges, before PNC’s purchase of hazard insurance for Lauren’s property, Lauren did not have an escrow account for the payment of insurance premiums. [ECF No. 127-1, ¶ 60]. The November 23, 2012 letter stated that if PNC was required to purchase insurance for Lauren’s property, PNC would “establish an escrow account for the purpose of collecting funds for the payment of your insurance premium and your mortgage payments will be increased accordingly.” [ECF No. 133-4].

The TAC alleges that on or about December 25, 2012, PNC purchased from ASIC a 45-day insurance binder, indicating a retroactive inception date of November 22, 2011 — five days following the lapse of Lauren’s Allstate policy — and an annual premium of $3,334.00 on dwelling coverage of $328,200.00. [ECF No. 127-1, ¶61]. Lauren received notice of this temporary binder by a second notice letter from PNC dated December 25, 2012. [ECF No. 133-5]. The TAC alleges that Lauren’s lapsed Allstate policy had also provided dwelling coverage of $328,200.00, though at an annual premium of only $545.98. [ECF No. 127-1, ¶ 60]. The LPI premium was approximately six times as much as similar, homeowner-obtained coverage.

Lauren eventually provided evidence that she had purchased a hazard insurance policy from State Farm, effective March 26, 2012. [Id., ¶¶ 63-64]. The TAC does not allege how much Lauren paid for the State Farm policy. As the TAC acknowledges, PNC then cancelled the policy it had purchased for her and, consistent with the statements PNC had made in its November 23, 2012 letter to her, PNC charged her only for the premiums due for the period between November 22, 2011 and March 26, 2012, the period for which she had failed to maintain any hazard coverage for her property. [Id.].

As explained in the earlier order [ECF No. 124, pp. 4-7] concerning Montoya and Colonia, this LPI case is factually unique as to their specific situation. In particular, the LPI premiums Montoya paid were actually lower than the ones he purchased himself on the open market. And Colo-nia’s LPI premiums were at first more than the market rate insurance he obtained on his own, but his LPI premiums also ended up being slightly less than the market rate.

B. PNC’s LPI Disclosure Letters

PNC stresses several points about the notice letters [ECF No. 149, p. 4]:

After Plaintiffs’ respective insurance lapsed, but before PNC or National City purchased LPI for their properties and charged the cost of the premium to their escrow accounts, the bank sent each Plaintiff disclosure letters regarding LPI; an LPI disclosure letter was also sent with each yearly renewal of the LPI policy. Although the text and form of these LPI disclosure letters evolved over the years, they all contained the same material substance. Each letter reminded Plaintiffs of their contractual obligation to maintain insurance on their properties; warned them that the cost of LPI might be significantly more expensive than the insurance they could obtain on their own, that LPI might not provide the same coverage as the insurance they could obtain on their own and that a PNC affiliate might earn a profit via a commission or reinsurance premium through the bank’s purchase of LPI; expressly encouraged them to obtain their own insurance; and informed them that LPI would be cancelled and a refund given if they provided evidence of their own insurance coverage, with instructions on how to provide such evidence to the bank.

Aside from the initial letters following Plaintiffs’ respective insurance lapses, all of the LPI disclosure letters also specifically stated the term of the LPI coverage — either a 60-day temporary binder or a one-year annual policy — and the annual premium for that term. [See ECF Nos. 56-6 through 56-13; 56-15; 56-17 through 56-21; 56-28 through 56-83; 133-4; 133-5].

Not surprisingly, Plaintiffs have a far-different view of these notice letters:

According to Plaintiffs [ECF No. 159-1, p. 11 n. 4], the notice letters sent to borrowers were mailed in furtherance of Defendants’ scheme even though they expressly encouraged borrowers to procure their own insurance. Plaintiffs contend that the letters gave the scheme an air of legitimacy by suggesting that all charges connected with the forced coverage, should it be placed, went to coverage or other costs justifiably passed to the borrower. They suggested to borrowers that there was a legitimate reason for the inflated cost of LPI.

In Plaintiffs’ view, these letters also promoted the perception that PNC was acting in the borrower’s interest when, in fact, it was not, and offered Defendants plausible deniability regarding the fraudulent nature of their scheme. Under Plaintiffs’ interpretation of these letters, even though some borrowers might take heed and choose to procure their own insurance, others would not, placing trust in their mortgage lender’s reputation and representations.

Moreover, Plaintiffs allege further that Defendants intentionally did not disclose certain allegedly improper charges and sent misleading notices to borrowers suggesting that the charges were proper, giving the scheme an air of legitimacy. [ECF No. 127-1, ¶¶ 26, 51, 56, 143, 149-156], These allegations, Plaintiffs say, support their conclusion that they were damaged by reason of Defendants’ scheme — they paid charges they did not legitimately owe (or had such charges deducted from escrow), and thus suffered an economic loss, because Defendants buried those charges in the amounts invoiced to them for forced coverage. [ECF No. 159-1, p. 11].

Plaintiffs claim it is immaterial whether they relied on the notices, or even read them, for that matter — because they suffered a loss “by reason of’ Defendants’ scheme, which was furthered by the mailing of notices of insurance that included “half-truths” incorrectly suggesting that all charges were legitimate. [Id].

THE SPECIFICS OF THE ALLEGED SCHEME

Plaintiffs allege that the scheme begins when PNC purchases a master insurance policy that covers the entire PNC portfolio of mortgage loans. [ECF No..127-1, ¶ 29], In exchange, ASIC is given the exclusive right to force its own insurance on property securing a loan within the portfolio when the borrower’s insurance lapses or the lender determines the borrower’s existing insurance is inadequate. [Id.]. ASIC (and its affiliates). monitor PNC’s' entire loan portfolio for lapses' in borrowers’ insurance coverage. [Id]. Once a lapse is identified, ASIC sends notice to the borrower, on letterhead purporting to be from PNC, advising that insurance will be “purchased” and force-placed if the voluntary coverage is not continued. [Id.]. If a lapse continues, then the insurer notifies the borrower, again on PNC letterhead, that insurance is being force-placed at his or her expense. [Id.].

Plaintiffs allege that no individualized underwriting ever takes place for the force-=placed coverage. [Id, ¶ 30]. Instead, they say insurance is automatically placed on the property and after the servi-cer pays the premium, the servicer then passes along the charges to the borrower. [Id]. In many instances, Plaintiffs allege, the insurance lapse is not discovered for months or even years after the fact. [Id]. However, due to the terms of the master policy between the Defendants, coverage is placed on the date of the alleged lapse (despite what the notices state), and, even though there were no claims or damage to the property during the period of lapse, the borrower is billed retroactively for the insurance placed on the property and the borrower is charged for the “cost” of the past coverage. [Id].

Once coverage is forced on the property, PNC pays the insurer and charges the borrower for the payment, which is either deducted from the borrower’s mortgage escrow account, sometimes by PNC’s exclusive force-placed insurance vendors like ASIC, or added to the balance of the borrower’s loan. [Id, ¶ 31]. Plaintiffs say that the borrower’s escrow account is depleted regardless of whether other escrow charges, such as property taxes, are also due and owing. [Id].

PNC pays the premiums to the insurers, who then “kick back” a set percentage to PNC or their affiliates as a “commission.” [Id, ¶ 32]. Plaintiffs further allege, albeit upon information and belief, that a percentage of that payment is then shared with the lender or servicer, sometimes in the form of “soft dollar” or other credits. [Id.].

Plaintiffs claim that the money paid back to PNC and its affiliates is not given in exchange for any services provided by them; rather, the money is simply “grease” which is paid to keep the force-placed machine moving. [Id, ¶ 33]. In an attempt to mask the so-called kickback as legitimate, ASIC, while “masking itself as PNC on letters to the borrowers,” discloses to the borrower that PNC affiliates may earn commissions or income as a result of the forced placement of new coverage. [Id]. In reality, however, no work is ever done by PNC affiliates to procure insurance for that particular borrower because the coverage comes through the master policy already in place. [Id.]. As a result, no commission or income is “earned” and PNC does not incur any costs in relation to the force-placement of insurance for any particular borrower. [M].

Under this highly profitable LPI arrangement, which Plaintiffs brand as a “scheme,” Plaintiffs allege PNC is incen-tivized to purchase high-priced force-placed insurance for a borrowers’ properties because the higher the cost of the insurance policy, the higher the kickback. [Id., ¶ 34],

The TAC further alleges that Defendants also enter into agreements for ASIC and other affiliates to provide servicing activities on PNC’s entire loan portfolio at below cost. [Id., ¶ 35]. The servicing costs are added into the force-placed premiums, which are then unlawfully passed on to the borrowers, who have no obligation to pay such servicing costs. [Id.]. The insurers, are able to provide these services at below cost because of the enormous profits they make from the inflated premiums charged for force-placed insurance. [Id.].

However, because insurance-lapsed mortgaged property comprises only 1-2% of the lenders’ total mortgage portfolio, Plaintiffs allege that borrowers who pay these amounts unfairly bear the full cost to service the entire loan portfolio. [Id.]. These charges, Plaintiffs contend, which are passed on to Plaintiffs and the proposed class, are not properly chargeable to the borrower because they are expenses associated with the servicing of all the loans and the loan servicers are already compensated for these activities. [Id.].

Thus, Plaintiffs allege, the small percentage of borrowers who are charged for LPI shoulder the costs of monitoring PNC’s entire loan portfolio, effectively resulting in a kickback. [Id., ¶ 36].

In addition, Plaintiffs allege that ASIC enters into essentially riskless “captive reinsurance arrangements” with PNC affiliates to “reinsure” the property insurance force-placed on borrowers. [Id., ¶ 37]. Therefore, Plaintiffs conclude, PNC’s entire reinsurance program, like those of other lenders, is simply a way to funnel profits, in the form of ceded premiums, to PNC and its affiliates at the borrowers’ expense. [Id., ¶ 38].

Plaintiffs concede that reinsurance can, and often does, serve a legitimate purpose, but they contend it does not accomplish legitimate goals here. [Id.]. PNC affiliates enter into reinsurance agreements with ASIC or ASIC’s affiliates that provide that the insurer will return significant percentages of the amounts charged to borrowers by way of ceded reinsurance premiums to PNC affiliates. [Id.]. PNC affiliates in turn pass the ceded reinsurance premiums to PNC in the form of soft-dollar or other credits. [Id.]. Plaintiffs allege that the ceded premiums are, therefore, nothing more than a kickback to PNC and a method for Defendants to profit from the forced placement of new coverage. [/&]. Indeed, Plaintiffs allege, while PNC and/or their affiliates purportedly provided reinsurance, they did not assume any real risk. [Id.].

As they must, Plaintiffs acknowledge that the notice letters reveal that Defendants disclosed that the new forced placement may result in a “financial benefit or loss” to a PNC Mortgage affiliate because the insurer will transfer a portion of the risk covered to the affiliate in exchange for a portion of the premium. [Id., ¶39]. However, Plaintiffs allege, the notice letters then expressly misrepresent that this risk-sharing arrangement will not affect the amounts charged the borrower. [Id.]. In fact, Plaintiffs allege that reinsurance profits are, in fact, bundled into these amounts and passed on to the borrower as an insurance premium expense. , [Id.]. Moreover, Plaintiffs also object to the procedure because they say the notice letters fail to disclose that no real risk is assumed by the PNC entities. [7cL].

The TAC further alleges that PNC overcharges borrowers by disregarding the Standard Mortgage Clause or the Lender’s Loss Payable Endorsement (“LLPE”) in the standard form mortgage agreement. [Id., ¶ 40]. According to the TAC, either of these clauses typically protects the lender for a period of at least ten days after the termination of the homeowner’s voluntary insurance policy. [Id.]. Force-placed policies, however, take effect on the date of termination, and “double-cover” the property unnecessarily during the period covered by the LLPE or Standard Mortgage Clause. [Id.]. This, Plaintiffs say, means the borrower is charged for coverage for which the lender or servicer has no exposure. [Id].

Plaintiffs also allege that the amounts charged to borrowers are inflated by the interest that accrues on the amounts owed for force-placed coverage; when PNC adds the cost of the high-priced premium to a homeowner’s mortgage balance, it thereby increases the interest paid over the life of the loan by the homeowner to the lender. [Id., ¶ 41].

Plaintiffs emphasize that borrowers like themselves have no say in the selection of the force-placed insurance carrier or the terms of the force-placed insurance policies. [Id., ¶ 43], Plaintiffs stress that force-placed policies are commercial insurance policies intended to protect lenders or mortgage servicers and their terms are determined by the lender or servicer (PNC) and the insurer (ASIC). [Id.].

Plaintiffs say they do not challenge PNC’s right to force place insurance. Instead, they challenge the discretion provided to lenders and mortgage servicers to purchase force-placed insurance, as well as the Defendants’ purported manipulation of the force-placed insurance market, with an eye toward artificially inflating amounts for force-placed premiums and placing unnecessary coverage, which PNC purchases from ASIC and then chooses to charge to the borrower. [Id., ¶ 44]. Plaintiffs allege that servicers, like PNC, are financially motivated to use the insurer, like ASIC, that offers it the best financial benefit in terms of “commissions,” direct payments, discounted tracking services, or ceded reinsurance premiums. [Id].

DEFENDANTS’ EXPLANATION OF THEIR ACTIVITIES

At bottom, Defendants contend that the disclosure letters were more than adequate and were not fraudulent. In its motion to dismiss, PNC notes that “no disclosure letter could reasonably be expected to disclose all the facts that might be related to the lender-placed insurance program.” [ECF No. 133, p. 7 (emphasis in original) ]. PNC compared the disclosures made in this case with the disclosure letters in Cohen v. American Security Insurance Co., 735 F.3d 601 (7th Cir.2013), where the Seventh Circuit held that the “substance of the transaction was clearly and fully disclosed; no material fact was omitted.’ ” PNC classifies the letters here as being “even more detailed and robust” than the disclosure letters at issue in Cohen. [ECF No. 133, p. 7].

ASIC adopts these arguments, noting that “all material disclosures were made to the plaintiffs and there was no deception at work.” [ECF No. 157-1, p. 5].

Defendants also underscore the fact (which they deem significant) that Plaintiffs never alleged that they actually read any or all of the letters of which they complain. They also challenge the viability of Plaintiffs’ new allegation that they “would not have paid or would have contested the amounts for force-placed insurance” if only they had been aware of facts which they allege were not disclosed to them. [ECF No. 127-1, ¶ 149]. In addition to challenging the Plaintiffs’ interpretation of the facts (as being illogical and therefore not plausible), Defendants also raise specific legal arguments on a count-by-count basis, and the Court will also analyze the TAC on this basis.

II. LEGAL STANDARD AND APPLICABLE LAW

In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court must take all well-pleaded facts in the plaintiffs complaint and all reasonable inferences drawn from those facts as true. Jackson v. Okaloosa Cnty., Fla., 21 F.3d 1531, 1534 (11th Cir.1994). “A pleading must contain ‘a short and plain statement of the claim showing that the pleader is entitled to relief.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 677-78, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Fed.R.CivP. 8(a)(2)). While detailed factual allegations are not always necessary in order to prevent dismissal of a complaint, the allegations must “ ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

A complaint must provide “more than labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. See also Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (explaining that the Rule 8(a)(2) pleading standard “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation”). Nor can a complaint rest on “ ‘naked assertion[s]’ devoid of ‘further factual enhancement.’ ” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955 (alteration in original)).

The Supreme Court has emphasized that “[t]o survive a motion to dismiss a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955) (emphasis added); see also Am. Dental Assoc. v. Cigna Corp., 605 F.3d 1283, 1288-90 (11th Cir.2010).

Determining whether a complaint states a plausible claim for relief is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679, 129 S.Ct. 1937. Moreover, when the “well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not show[n] — that the pleader is entitled to relief.” Id. (internal quotations omitted).

While the court is required to accept as true all allegations contained in the complaint, courts “are not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955; Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. “Dismissal pursuant to Rule 12(b)(6) is not appropriate ‘unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.’ ” Magluta v. Samples, 375 F.3d 1269, 1273 (11th Cir.2004) (quoting Conley, 355 U.S. at 45-46, 78 S.Ct. 99). Although, as noted, a court must accept as true a plaintiffs allegations, a court may dismiss a complaint on a dispositive issue of law. Marshall Cnty. Bd. of Educ. v. Marshall Cnty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir.1993).

III. ANALYSIS

The arguments concerning the RICO counts took up the most amount of space in the motions and briefs and proposed orders, and the Court’s perception is that this issue also dominated the oral argument. Therefore, the Court will first analyze the motions to dismiss the RICO counts.

A. Plaintiffs Have Sufficiently Alleged That ASIC Participated in the Operation or Management of a RICO Enterprise.

As noted above, the Court’s earlier order on the motions to dismiss the FAC [ECF No. 124] dismissed without prejudice the RICO claims because Plaintiffs had not sufficiently pled who was directing the affairs of the alleged RICO enterprise. The Undersigned noted then that there are “scant allegations regarding whether ASIC, or even, for that matter, PNC, had any part in directing and controlling the alleged enterprise.” [Id. at p. 44]. The Court found that Plaintiffs “have not sufficiently pled how PNC and ASIC directed or managed the affairs of the enterprise.” [Id. at p. 45].

Plaintiffs beefed up their allegations in the TAC, but ASIC contends that Plaintiffs still have not adequately pled its participation in the operation or management of a RICO enterprise. [ECF No. 129, pp. 9-11].

ASIC concedes that the TAC provides a “laundry list of activities,” but argues that they are “nothing more than reformulated allegations that this Court has already found were insufficient to state” a substantive RICO claim. [Id. at p. 11]. Plaintiffs respond that allegations that ASIC paid kickbacks to PNC, and committed predicate acts by mailing notices that furthered the alleged RICO scheme, meet the applicable’standard. [ECF 139, pp. 9-12]. For purposes of evaluating a dismissal motion, Plaintiffs are correct.

Section 1962(c) makes it unlawful to “conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity.” 18 U.S.C. § 1962(c). To state a RICO claim, a plaintiff must plead facts to suggest that the defendants had “some part in directing the affairs of the enterprise.’ ” Super Vision Int’l, Inc. v. Mega Int’l Commercial Bank Co., Ltd., 534 F.Supp.2d 1326, 1338 (S.D.Fla.2008) (quoting Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1284-85 (11th Cir.2006)).

“[T]he word ‘participate’ makes clear that RICO liability is not limited to those with primary responsibility for the enterprise’s affairs, just as the phrase ‘directly or indirectly’ makes clear that RICO liability is not limited to those with a formal position in the enterprise, but some part in directing the enterprise’s affairs is required.” Reves v. Ernst & Young, 507 U.S. 170, 179, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993) (emphasis in original), see also, e.g., Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783, 792 (6th Cir.2012) (“Although Reves does not explain what it means to have some part in directing the enterprise’s affairs, ... our sister circuits have persuasively explained that it can be accomplished either by making decisions on behalf of the enterprise or by knowingly carrying them out”) (citation omitted; emphasis in original).

In Reves, the Supreme Court held that the operation or management test may be met by alleging that one associated with the enterprise “exerted control over it as, for example, by bribery.” 507 U.S. at 184, 113 S.Ct. 1163; see also Rothstein, 2013 WL 5437648, at *17 (courts “consistently recognize[ ]” that allegations of bribery or kickbacks satisfy the requirement). And in United States v. Starrett, 55 F.3d 1525 (11th Cir.1995), the Eleventh Circuit found the commission of predicate acts sufficient to “establish that each had some part in directing the affairs” of the enterprise. 55 F.3d at 1548.

Plaintiffs specifically allege that ASIC (and PNC) directed and controlled the enterprise. [ECF No. 127-1, ¶ 146]. They allege that ASIC managed the day-to-day operations of Defendants’ RICO scheme by, for example tracking PNC’s portfolio for lapses, [ECF No. 127-1, ¶¶ 29], mailing notices to borrowers that included misleading “half-truths” and lent the scheme an air of legitimacy [id., ¶¶ 29, 149-155], and distributing profits among the various players, [id., ¶¶ 27, 32-38, 147]. Cf. Resolution Trust Corp. v. Stone, 998 F.2d 1534, 1541-42 (10th Cir.1993) (parent company participated in operation or management of subsidiary’s enterprise where, inter alia, board chairman and CEO of both companies had managed day-to-day operations of subsidiary).

Plaintiffs also allege that ASIC paid kickbacks to PNC in order to secure its exclusive relationship with PNC and propel the scheme forward. [ECF No. 127-1, ¶¶ 26, 27, 32-33, 38]; see, e.g., Rothstein v. GMAC Mortg. LLC, No. 12 Civ. 3412(AJN), 2013 WL 5437648, at *17 (S.D.N.Y. Sept. 30, 2013) (courts “consistently recognize[]” that bribery or kickback allegations satisfy participation requirement). These allegations meet RICO’s pleading requirements, as outlined in Reves.

B. Plaintiffs Have Sufficiently Alleged RICO Causation.

Plaintiffs contend that a civil RICO claim does not require reliance by anyone, and they argue that they have sufficiently alleged their injury was caused “by reason of’ a RICO scheme. They advance the argument that reliance and causation are distinct concepts, even though reliance is frequently used to show causation. In other words, Plaintiffs say, their TAC need only allege that Defendants’ RICO activities caused their injury, not that they specifically relied on any particular false statement or other predicate act of racketeering activity.

Defendants, however, focus on the lack of a reliance allegation. In particular, they point to Plaintiffs’ failure to even allege that they read the supposedly false and misleading notice letters to support the notion that the RICO claim is defective.

Plaintiffs have the better argument, at least at the motion to dismiss stage. But the parties spent considerable time evaluating the causation/reliance concepts and the Court therefore believes it appropriate to discuss the arguments in some detail.

The analysis of the causation/reliance distinction begins with Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008). The parties also rely on Wallace v. Midwest Financial & Mortgage Services, Inc., 714 F.3d 414 (6th Cir.2013), though they adopt dramatically different interpretations.

Bridge concerned public auctions of tax liens by Cook County, Illinois. 553 U.S. at 642, 128 S.Ct. 2131. The auctions are marked by “stiff competition” because properties acquired through this process can often be sold at a significant profit over the amount paid for the lien. Id. To allocate properties fairly and to prevent bidders from placing multiple bids on the same parcel through agents, the county adopted the “Single Simultaneous Bidder Rule,” which prohibits bidders from submitting bids through agents, employees or related entities. Id. at 643, 128 S.Ct. 2131. Each bidder was also required to submit a sworn affidavit affirming that it complied with the Single Simultaneous Bidder Rule. Id.

In July 2005, Phoenix Bond & Indemnity Co. sued Bridge for RICO violations, alleging that Bridge had fraudulently participated in the auctions by having related firms submit bids, and directing them to file false attestations that they complied with the Single Simultaneous Bidder Rule. The District Court dismissed the complaint in part because Phoenix was not the “recipient” of the alleged misrepresentations — Cook County was. Id. at 644-45, 128 S.Ct. 2131. The Seventh Circuit reversed, and Bridge petitioned the Supreme Court, which granted certiorari to decide “whether first-party reliance is an element of a civil RICO claim predicated on mail fraud.” Id. at 646, 128 S.Ct. 2131. (emphasis supplied). Because the Supreme Court agreed “that a showing of first-party reliance is not required,” it affirmed the Court of Appeals. Id. at 642, 128 S.Ct. 2131.

The Supreme Court undertook an extensive analysis of first-party reliance, id. at 647-58, 128 S.Ct. 2131, and concluded that:

Of course, none of this is to say that a RICO plaintiff who alleges injury “by reason of’ a pattern of mail fraud can prevail without showing that someone relied on the defendant’s misrepresentations.

Id. at 658, 128 S.Ct. 2131 (italics the Supreme Court’s). In Bridge, that someone was Cook County.

Defendants focus on that one sentence, arguing that it means that reliance by someone is required. Defendants stress that Plaintiffs did not allege reliance by anyone, and, contend, instead, that a civil RICO claim can be asserted without showing reliance by anyone.

Plaintiffs, on the other hand, cite the penultimate sentence of Bridge for its position that reliance is not necessary: “For the foregoing reasons, we hold that a plaintiff asserting a RICO claim predicated on mail fraud need not show, either as an element of its claim or as a prerequisite to establishing proximate causation, that it relied on the defendant’s alleged misrepresentations.” Id. at 661, 128 S.Ct. 2131; [ECF No. 139, p. 5].

Defendants argue that Plaintiffs ignore the critical fact that the entire analysis in Bridge addressed Bridge’s contention that first-party reliance was necessary to state a civil RICO claim. The question presented in Bridge was “whether first-party reliance is an element of a civil RICO claim predicated on mail fraud.” Id. at 646, 128 S.Ct. 2131 (emphasis added). And Bridge held that “a showing oí first-party reliance is not required” to state a civil RICO claim. Id. at 642, 128 S.Ct. 2131 (emphasis added). Defendants contend that, when read as a whole, Bridge holds that a civil RICO claim need not allege first-party reliance, but, contrary to Plaintiffs’ contention, reliance by someone needs to be alleged.

Defendants also contend that Plaintiffs misread Wallace. In Wallace, the plaintiff sued his lender, mortgage broker and others concerning a subprime mortgage that was based on a fraudulently inflated appraisal of his home. 714 F.3d at 415-16. Wallace sought financing to build out his basement and was induced into a high-cost, adjustable rate mortgage (“ARM”) for a much higher loan amount than he wanted, and was “injured in the amount of the fees, interest costs, and other expenses tied to the option ARM.” Id. at 416-17, 420.

Wallace’s causation theory was that the defendants “committed fraud by producing and sending through the mail a false appraisal of his home that inflated its value ... [and] gave rise to the illusion of substantial equity against which Wallace intended to borrow[.] Based on that illusion, [a defendant] was able to convince Wallace to enter into a large option ARM....” Id. at 420. “[T]he inflated appraisal itself played a significant role in the negotiations between [the defendant] and Wallace. Indeed, one of Wallace’s first priorities was ‘seeing if [he] had enough equity in [his] home’ to finance the build-out project.” Id. (emphasis added). “The nub of this scheme was the apprais-' al,” which “induced [Wallace] and borrowers like him to enter into larger loans with higher interest rates than they could reasonably afford.” Id. at 418 (emphasis added). According to Defendants’ argument, the Sixth Circuit made clear that the fraudulent appraisal “induced” Wallace to enter into the transaction, proximately causing his injuries. Because Wallace’s complaint so alleged, the Sixth Circuit found he had sufficiently alleged a civil RICO claim. Id.

ASIC’s discussion of reliance is misplaced at the motion to dismiss stage, and Plaintiffs have the more-persuasive interpretation of Bridge. .

As the Supreme Court made clear in Bridge, “a plaintiff asserting a RICO claim predicated on mail fraud need not show, either as an element of its claim or as a prerequisite to establishing proximate causation, that it relied on the defendant’s alleged misrepresentations.” 553 U.S. at 661, 128 S.Ct. 2131 (emphasis added). See also United States v. Graham, 477 Fed.Appx. 818, 824 (2d Cir.2012) (after Bridge, common-law reliance “‘ha[s] no place in the federal fraud statutes[ ]’ ... because [they] criminalize the ‘scheme to defraud,’ rather than the completed fraud’ ”).

Defendants argued at the hearing on their pending motions (and again in their post-hearing proposed orders) that a party must plead at least third-party reliance— that someone (if not the plaintiff himself) relied on a misrepresentation by the defendant — in order to state a RICO claim, but Plaintiffs challenge this reading of Bridge. The Bridge Court was unequivocal: “[0]ne can conduct the affairs of a qualifying enterprise through a pattern of [racketeering activity indictable as mail fraud] without anyone relying on a fraudulent misrepresentation.” Bridge, 553 U.S. at 649, 128 S.Ct. 2131 (emphasis added).

To be sure, the Supreme Court in Bridge did in fact discuss third-party reliance, observing that “in most cases, the plaintiff will not be able to establish even but-for causation if no one relied on the misrepresentation[,]” but ultimately concluded that “the fact that proof of reliance is often used to prove an element of the plaintiffs cause of action, such as the element of causation, does not transform reliance itself into an element of the cause of action.” Id. at 658-59, 128 S.Ct. 2131 (emphasis supplied).

Therefore, Bridge establishes that the Supreme Court (1) views the requisite causation element as one involving proof at trial, and (2) recognizes the practical consequences of a plaintiff who cannot prove some type of reliance. These consequences may arise later, but they do not doom a RICO complaint which does not allege reliance (as long as proximate causation is appropriately alleged).

Other courts have followed this reading of Bridge. In Wallace, supra, the Sixth Circuit discussed proof of RICO proximate causation, and reasoned that, after Bridge, “[f]or RICO purposes, reliance and proximate cause remain distinct — if frequently overlapping — concepts[,]” and though reliance is often used to show causation, “that does not mean it is the only way to do so[.]” 714 F.3d at 419-20. Noting that the proximate cause requirement, “despite its flexibility,” tends to “invite confusion in cases involving mail and wire fraud as the predicate acts,” (like the TAC allegations here), id., the Sixth Circuit concluded: “A plaintiff need only show use of the mail in furtherance of a scheme to defraud and an injury proximately caused by the scheme.” Id. at 420.

Similarly, the Tenth Circuit recently adopted the Wallace Court’s reasoning, noting that “reliance is not an explicit element of a civil RICO claim.” CGC Holding Co., LLC v. Broad and Cassel, 773 F.3d 1076, 1089 (10th Cir.2014). But the CGC Holding Court also noted the practical ramifications of a civil RICO plaintiff who cannot show reliance in a fraud-based claim: “Put simply, causation is often lacking where plaintiffs cannot prove that they relied on defendants’ alleged misconduct.” Id. But, as noted, this potential consequence concerning actual proof of proximate causation is not an issue on a motion to dismiss.

Nevertheless, in the spirit of providing a complete evaluation of the competing arguments, the Court notes that Plaintiffs’ allegations barely nudge their RICO claims past the plausibility threshold. In its earlier order, the Court noted that Plaintiffs’ claim and causation theory seemed somewhat illogical, especially concerning Montoya, whose LPI premiums were less than the premiums on the policy he procured on his own. [ECF No. 124, p. 16]. Moreover, another district judge in this district very recently granted in part motions to dismiss and held that the RICO allegations were insufficient. Specifically, in Wilson v. EverBank, N.A., 77 F.Supp.3d 1202, 1225-26, No. 14-CIV-22264, 2015 WL 265648, at *14 (S.D.Fla. Jan. 6, 2015), the Court held that the RICO allegations are “implausible” because they did not demonstrate how the bank’s “ ‘scheme’ proximately caused injury to Plaintiffs.” Id.

Many of the lawyers representing Plaintiffs in the instant case also represent the plaintiffs in EverBank. In addition, ASIC is a defendant in both cases, with the same law firm representing it in both cases. The RICO allegations in both cases are substantially similar. The briefing is substantially similar. But in EverBank, U.S. District Judge Beth Bloom dismissed the claims based on an analysis which could well be applicable here.

Specifically, Judge Bloom held that the plaintiffs failed to state with particularity how the defendants’ conduct about the misrepresented or concealed kickback charges were “material to Plaintiffs’ decisions not to procure the voluntary insurance coverage required under their mortgage agreements but, instead, to default under their agreements and conceded to [the bank’s] forcibly placed insurance coverage and the ensuing charges.” Id. Similarly, Judge Bloom also held that the plaintiffs failed to state with particularity “how [the bank’s] communications were reasonably calculated to deceive its borrowers in making their decisions not to obtain coverage and to pay the amounts charged by [the bank] as force-placed insurance costs.”

To be sure, EverBank noted that another district (in California) held that similar allegations in another force-placed insur-anee case were plausible. Cannon v. Wells Fargo Bank, N.A., No. C-12-1376 EMC, 2014 WL 824556, at *3 (N.D.Cal. Jan. 29, 2014). But it also cited other district court cases agreeing that the causation allegations did not pass muster.

For purposes of a motion to dismiss, the Undersigned is adopting a flexible approach to the plausibility requirement for the proximate causation allegations necessary for the RICO counts. But Plaintiffs’ causation theory may confront strong headwinds, as recently noted in Circeo-Loudon v. Green Tree Servicing, LLC, No. 14-21384, 2014 WL 4219587, at *3 (S.D.Fla. Aug. 25, 2014) (concluding that plaintiffs in similar LPI class action case “fail to explain how or why Defendants’ purported mail and wire frauds proximately caused insurance to be placed when the same insurance would have been placed regardless of the alleged fraud”) (emphasis supplied). Moreover, the Circeo-Lou-don Court also explained that “the direct ‘cause’ of the alleged injury here is the LPI placement, not the supposedly inaccurate letters sent in the mail”. Id,.

Indeed, Judge Bloom’s cautionary comment in EverBank when discussing the breach of contract allegations (as opposed to the RICO claims, which the Court dismissed there) against the bank may well be appropriate here too: “Plaintiffs are forewarned, however, that the allegations and facts presented in their Complaint [or their TAC] may not suffice at later stages in this litigation.” EverBank, 77 F.Supp.3d at 1218, 2015 WL 265648, at *6.

Given that Plaintiffs have not alleged reliance on the purportedly fraudulent letters by anyone, their ability to establish proximate causation may well be tested later in this case. Cf. Gustafson v. BAC Home Loans Servicing, LP, No. SACV-11-915-JST, 2012 WL 7071488, at *7 (C.D.Cal. Dec. 26, 2012) (describing plaintiffs’ argument as “circular,” and dismissing with prejudice RICO claims against lender where lender warned borrowers that they would be charged for force-placed insurance costs and that lender and its affiliates would profit from the insurance placement). See also Weinberger v. Mellon Mortg. Co., No. CIV.A. 98-2490, 1998 WL 599192, at *5 (E.D.Pa. Sept. 10, 1998) (dismissing RICO claims and explaining that “the Court cannot see how letters that warn of an imminent bad deal and urge one to seek better, could possibly be calculated to deceive anyone.”).

For example, Plaintiffs likely will need to confront the argument that letters urging them to obtain their own insurance and warning them of the adverse financial consequences of LPI could be deemed the last thing a bank bent on perpetrating a fraudulent scheme based on its residential borrowers’ failure to maintain adequate insurance would pursue.

For now, though, the allegations, though problematic and not intuitively logical, are just sufficient to state a plausible causation theory for the two RICO counts. To use a sports metaphor, if Plaintiffs needed to achieve a first down in order to establish plausibility at the pleadings stage for the required RICO proximate causation, then the Court was required to bring out the chains for a measurement and found that a first down had been made by an eighth of an inch. This razor-thin margin suggests that another measurement with the chains and a different referee could result in a different conclusion about whether Plaintiffs had plausibly made a first down on the RICO causation issue.

As actor A1 Pacino said in his role as coach Tony D’Amato in the 1999 Oliver Stone-directed movie Any Given Sunday, “you find out life’s this game of inches. So is football. Because in either game, life or football, the margin for error is so small. I mean, one half step too late or too early, and you don’t quite make it. One half second too slow, too fast, you don’t quite catch it.” Plaintiffs could likely add the causation theory required for their RICO claims in this LPI litigation to the life/football group of scenarios where one inch either way could make the difference between success and failure.

On the other hand, there is case law suggesting that Plaintiffs’ theory may pass muster and may wind up on the claimant side of the inches analogy. For example, one district court explained that “payment [of inspection charges automatically imposed by mortgage servicer] may constitute circumstantial proof of reliance based on the reasonable inference that customers who pay the amount specified in an inflated invoice would not have done so absent reliance upon the invoice’s implicit representation that the invoice amount was honestly owed.” Huyer v. Wells Fargo & Co., 295 F.R.D. 332, 348 (S.D.Iowa 2013) (certifying RICO class suing mortgage servicer for excessive charges). Huyer, however, involved borrowers who paid fees for drive-by property inspections for certain delinquent mortgage loan accounts, not LPI involving allegedly false or misleading notice or disclosure letters. The claim there is that the borrowers were automatically charged for inspections without any prior determination that the inspections were necessary to protect the lender’s interest in the property.

At bottom, despite the factual distinction between this case and Huyer and despite the less-than-obvious causation theory, the TAC sufficiently alleges for now a plausible proximate cause theory for the RICO claims for the limited purpose of surviving motions to dismiss.

C. Plaintiffs Have Alleged the Organization of a RICO Enterprise Separate From the Pattern of Racketeering Activity in Which it Engaged.

In its motion to dismiss, ASIC argues that Plaintiffs have failed to plead the existence of a RICO enterprise separate from the pattern of racketeering activity in which it is alleged to have engaged. [ECF No. 129, pp. 11-12], But it seems as though ASIC may have now abandoned the argument. It did not assert the argument in its reply memorandum. [ECF No. 145]. Moreover, ASIC’s draft order summarizes the grounds upon which its dismissal motion should be granted, but the argument was not listed there either. [ECF No. 157-1].

On the other hand, ASIC has not formally withdrawn the argument, nor has it given notice that it is no longer pursuing it or that it considers the argument to be weak. Therefore, the Undersigned concludes that the argument needs to be addressed here. The mere fact that ASIC did not further discuss the argument in its reply or proposed order after raising it in the initial motion does not automatically mean that the Court can safely just ignore the argument.

As noted, ASIC contends that Plaintiffs have failed to plead the existence of a RICO enterprise separate from the pattern of racketeering activity in which it is alleged to have been engaged. In order to evaluate the argument, the Court must first see how Plaintiffs define the “enterprise” and the pattern of racketeering activity at issue.

A RICO plaintiff must plead an enterprise and a pattern of racketeering activity as two distinct elements, though the evidence used to prove them “may in particular cases coalesce.” Boyle v. U.S., 556 U.S. 938, 947, 129 S.Ct. 2237, 173 L.Ed.2d 1265 (2009) (citing United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981)).

The federal RICO statute defines an enterprise as “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). “The enterprise is an entity, for present purposes a group of persons associated together for a common purpose of engaging in a course of conduct[,]” Turkette, 452 U.S. at 583, 101 S.Ct. 2524, and “is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.” United States v. Goldin, 219 F.3d 1271, 1275 (11th Cir.2000) (citation omitted). A RICO enterprise “require[s] a certain amount of organizational structure which eliminates simple conspiracies from the Act’s reach. That is, simply conspiring to commit a fraud is not enough to trigger the Act if the parties are not organized in a fashion that would enable them to function as [a] racketeering organization for other purposes.” In re Managed Care Litig., 298 F.Supp.2d 1259, 1274 (S.D.Fla.2003).

However, a RICO enterprise need not have a “hierarchical structure or ‘chain-of-command’; decisions may be made on an ad hoc basis and by any number of methods, ... [and] [m]embers of the group need not have fixed roles[J” Boyle v. U.S., 556 U.S. 938, 941, 948, 129 S.Ct. 2237, 173 L.Ed.2d 1265 (2009) (affirming approval of jury instructions that led to RICO conviction, where enterprise at issue was “loosely and informally organized[,] ... did not appear to have had a leader or hierarchy[,]” and it did not “appear that the participants ever formulated any long-term master plan or agreement”).

The pattern of racketeering activity, on the other hand, is “a series of criminal acts defined by the statute.” Turkette, 452 U.S. at 583, 101 S.Ct. 2524 (citing 18 U.S.C. § 1961(1)). It “is proved by evidence of the requisite number of acts of racketeering committed by the participants in the enterprise .... The ‘enterprise’ is not the ‘pattern of racketeering activity’; it is an entity separate and apart from the pattern of activity in which it engages.” Id. “[T]he definitive factor in determining the existence of a RICO enterprise is the existence of an association of individual entities, however loose or informal, that furnishes a vehicle for the commission of two or more predicate [acts], that is, the pattern of racketeering activity requisite to the RICO violation.” Id.

In the TAC, Plaintiffs allege an enterprise comprised of PNC, Assurant (who is no longer a party, as the Court dismissed it in an earlier order on a prior version of the Complaint, ECF No. 124) and ASIC, who have associated to force insurance coverage on borrowers’ properties, thereby protecting PNC’s interest in the collateral for its mortgage loans. [ECF No. 127-1, ¶¶ 141, 148, 145]. They allege that ASIC, Assurant, PNC, and PNC affiliates joined forces on an ongoing basis for the common purpose of developing a force-placed insurance program that they would ultimately use to extract unearned profits from PNC borrowers. [Id., ¶¶ 2-4, 10, 27-44, 146-155],

As a continuing unit, they allegedly devised various mechanisms for passing the money among the participants to give the scheme an air of legitimacy and maintain the exclusive relationship between the lender and insurer — they implemented a riskless reinsurance scheme that passed profits to PNC, passed kickbacks disguised 'as commissions through ASIC to a PNC affiliate, and contracted for below-cost administrative services, among other things. [Id., ¶¶ 27-44, 146]; see, e.g., Perryman v. Litton Loan Servicing, LP, No. 14-cv-02261, 2014 WL 4954674, at *15-16, 2014 U.S. Dist. LEXIS 140479, at *45-46 (N.D.Cal. Oct. 1, 2014) (similar allegations sufficed to plead RICO enterprise in LPI case).

Plaintiffs have also alleged a distinct pattern of racketeering activity — mail and wire fraud. [ECF No. 127-1, ¶¶ 148-155]. They allege that ASIC mailed them multiple notices in furtherance of the enterprise’s purpose. Rothstein v. GMAC Mortg. LLC, No. 12 Civ. 3412(AJN), 2013 WL 5437648, at *10-19 (S.D.N.Y. Sept. 30, 2013).

ASIC contends that Plaintiffs have not alleged the existence of an organization separate from • a pattern of racketeering activity because they have not shown that Defendants are “organized in a fashion that would enable them to function as a racketeering organization for other purposes.” [ECF No. 129, p. 11 (quoting VanDenBroeck v. CommonPoint Mortg. Co., 210 F.3d 696, 699 (6th Cir.2000); Millette v. DEK Techs., Inc., No. 08-60639-CV, 2008 WL 5054741, at *4 (S.D.Fla. Nov. 25, 2008)) ]. They then argue that Plaintiffs have not alleged that the force-placed scheme described in the TAC was organized to function for other purposes, but rather to forge exclusive relationships that would allow its participants to artificially inflate insurance premiums and reap extraordinary profits. [Id.]

Not only is this not the case, but ASIC misunderstands the question presented — it is not for what purpose the enterprise was formed, but rather, it is whether the structure of the enterprise is definite enough to enable it to function as a racketeering organization for other purposes. See, e.g., Millette, 2008 WL 5054741, at *4 (asking if defendants “organized in a fashion that would enable them to function as a racketeering organization for other purposes”) (citation omitted).

Cases discussing this requirement, including those cited by ASIC, confirm this to be the correct reading. In In re Managed Care Litigation, the court analyzed the requirement more comprehensively than in Millette, explaining that a RICO enterprise “require[s] a certain amount of organizational structure which eliminates simple conspiracies from the Act’s reach. That is, simply conspiring to commit a fraud is not enough to trigger the Act if the parties are not organized in a fashion that would enable them to function as [a] racketeering organization for other purposes.” 298 F.Supp.2d at 1274 (emphasis added). The court concluded that the managed care enterprise described by the plaintiffs satisfied the RICO enterprise requirement on a motion to dismiss because the plaintiffs “ha[d] not bundled a random assortment of contracts and labeled it an enterprise^]” as “[e]ach of the entities [we]re tied together with the common purpose established by the Defendants.” Id. at 1275.

So too, here, Plaintiffs have described an organized system with multiple players bound by a common purpose. They allege that PNC and ASIC forged an exclusive relationship with the common purpose of artificially inflating force-placed charges, and enlisted their affiliates to forward that goal. [ECF No. 127-1, ¶¶ 2, 27-44, 145]. The structure of the enterprise is clear and each member’s role is defined: PNC pays ASIC premiums pursuant to a master policy, and ASIC then kicks back a portion of those premiums to PNC or an affiliate as an unearned “commission” or reinsurance payment, all of which is covered by the amounts charged the borrower. [Id., ¶¶ 27-44]. ASIC also moves the scheme forward by tracking PNC’s portfolio, providing this service below cost, and sending misleading notices to borrowers on PNC letterhead. [Id., ¶¶ 27, 29, 35-86, 149-155]. Moreover, PNC, ASIC, and their affiliates have not associated only to inflate force-placed charges — they have also associated to protect PNC’s interest in its collateral, [id., ¶¶ 1, 4-5, 25], monitor borrowers’ loans, [id., ¶ 27], implement a force-placed insurance program (which Plaintiff does not challenge in and of itself) [id., ¶ 44], and for other purposes — legitimate or illegitimate — that may be revealed through discovery.

In contrast to the allegations in the TAC, the enterprises alleged in the cases cited by ASIC were not defined sufficiently to pass the relevant test. In Miller v. Wells Fargo Bank, N.A., 994 F.Supp.2d 542, 551 (S.D.N.Y.2014), a force-placed insurance case, the court dismissed the RICO claim because the participants’ roles were not defined; the complaint “lacked allegations about the role of the other insurance producers and entities involved in force-placing insurance on behalf of the [lender]-defendants.” (internal quotations omitted).

Simil