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Fidelity Class Action Defense Case-Lentini v. Fidelity: Connecticut Federal Court Grants Defense Motion To Dismiss Class Action Complaint Claims For Fraud And Unfair Business Practices But Grants Leave To File Amended Class Action Complaint

Plaintiff Failed to Establish Membership in Class Defined by Class Action Complaint and Failed to Allege Adequately Entitlement to Reduced Insurance Rate Underlying Damage Claims thus Warranting Court Order Granting Defense Motion to Dismiss Class Action Claims, but Plaintiff Given Leave to Amend

Plaintiff filed a putative class action against defendant Fidelity National Title Insurance Company of New York on behalf of purchasers of title insurance who, in connection with refinance transactions, qualified for discounted refinance rates but did not receive them. Lentini v. Fidelity Nat’l Title Ins. Co. of New York, 479 F.Supp.2d 292, 295 (D. Conn. 2007). The class action complaint alleged violations of Connecticut’s Unfair Trade Practices Act (CUTPA) (Count I), fraudulent misrepresentation (Count II), negligent misrepresentation (Count III) and unjust enrichment (Count IV), id., at 296. Defense attorneys moved to dismiss Counts I-III of the class action complaint, id., at 295-96; the district court granted the motion as to certain claims for relief but granted plaintiff leave to amend, id., at 303.

According to the class action complaint, Fidelity’s title insurance rate schedule, approved by the Connecticut Insurance Department, provided for both “regular” and “reduced” rates in connection with refinance transactions; specifically, if a homeowner refinances within 10 years “and the premises to be insured are identical and there has been no change in the fee ownership,” then discounted premiums may apply. Lentini, at 296. Plaintiff alleges that he refinanced his mortgage and qualified for a discounted title policy rate but that Fidelity “(a) concealed from the Plaintiff that he qualified for and was entitled to receive the discounted refinance rate and (b) supplied false, misleading, inaccurate and incomplete information about the applicable rate for title insurance by charging the Plaintiff Six Hundred Fifty Dollars ($650.00) for title insurance.” Id. The class action allegations were that all class members qualified for discounted rates and that Fidelity should have known that the class members were eligible to receive reduced rates, but instead Fidelity charged class members the regular rate for their title policies. Id., at 297. Plaintiff alleged that the premiums Fidelity charged class members exceeded the statutorily mandated rates, id.

Defense attorneys moved to dismiss the class action complaint on the ground that plaintiff failed to allege facts sufficient to establish that he in fact was entitled to receive a reduced rate because under Second Circuit case authority “[a] plaintiff must allege … those facts necessary to a finding of liability” – mere conclusory allegations do not suffice. Lentini, at 297 (citations omitted). Plaintiff failed to allege facts sufficient to establish that he was a member of the class because he failed to demonstrate that his refinance transaction qualified for a reduced rate, id., at 298. The district court dismissed the class action complaint with leave to amend because “plaintiff’s eligibility is a prerequisite to a finding of liability on any of the claims at issue,” id.

Defense attorneys challenged also the adequacy of the class action fraud allegations, urging that the class action complaint failed to comply with FRCP Rule 9(b)’s heightened pleading requirements. Lentini, at 298. In the Second Circuit, fraud allegations must “allege facts that give rise to a strong inference of a fraudulent intent” and the plaintiff can meet this burden “(a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.” Id., (citation omitted). The district court concluded that while the allegations in the class action complaint adequately alleged defendant’s misrepresentations, “the plaintiff has failed to plead facts showing that the defendant had a duty to disclose his eligibility for the discounted rate.” Id., at 298-99. The district court therefore granted the defense motion to dismiss the fraud claim, but gave plaintiff leave to amend, id., at 299.

The federal court rejected defense arguments that the “filed rate” doctrine barred plaintiff’s fraud and negligence misrepresentation claims because that doctrine “conclusively establishes the plaintiff’s knowledge of the applicable rates” and because “a presumption that the plaintiff was aware of the rate” precludes a finding of the reasonable reliance prerequisite to these misrepresentation claims.” Lentini, at 299-300. The district court held that the filed rate doctrine did not apply because plaintiff was simply seeking to force the insurer “to adhere to the approved rate,” id., at 301.

NOTE: The district court rejected defense claims that plaintiff lacked standing under CUTPA because the title insurance policy runs in favor of the lender so plaintiff “is a third-party and not the insured,” Lentini, at 302-03. The court explained at page 303, “While the mortgagee is the insured party, it is the plaintiff who suffered the alleged injury.”

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