NEW ORLEANS (LN) — U.S. District Judge Jane Triche Milazzo granted Pennymac Loan Services’ motion to dismiss for lack of subject matter jurisdiction but ruled that Louisiana Revised Statutes § 6:337 creates an implied private right of action, allowing homeowner Jared Hotard 20 days to amend his complaint to properly allege standing.
Hotard, who owns property in LaPlace, Louisiana, sued Pennymac after the servicer withheld insurance settlement proceeds following Hurricane Ida and a subsequent fire. The Louisiana Insurance Guaranty Association settled Hotard’s claim, naming Pennymac as an additional payee. Hotard alleged Pennymac refused to release the funds for three months and, upon release, failed to pay the interest required by state law.
Pennymac moved to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), arguing Hotard lacked Article III standing and that the statute does not provide a private right of action.
On the standing issue, the court found Hotard failed to state an injury for monetary relief because his complaint did not allege the interest he received was insufficient. Pennymac pointed to a check for $2.05 sent to Hotard on July 5, 2025. While Hotard argued the amount was far below what was owed based on a 0.01 percent rate, his complaint only alleged he did not receive interest, not that the payment was inadequate.
The court noted this pleading deficiency was "easily remedied by an amendment to his Complaint." If Hotard alleges the payment was insufficient, he will have stated an injury in fact, and leave to amend must be freely given.
However, the court dismissed the claim for injunctive relief without leave to amend, finding it futile. Hotard paid off his mortgage in August 2025, eliminating any threat of future injury. He argued that unnamed class members had standing, but the court rejected this, noting that class actions only preserve standing for the named plaintiff if the class is certified or a certification motion is pending. No class had been certified here.
Turning to the merits, the court ruled that § 6:337 does create an implied private right of action. The statute imposes duties on mortgagees regarding insurance proceeds, including the payment of interest, but is silent on whether borrowers can sue for violations. It allows the insurance commissioner to impose civil money penalties of up to $500 per day but does not expressly prohibit private suits.
Relying on the Louisiana Supreme Court’s decision in Anderson v. Ochsner Health, which found an implied right of action under the Balance Billing Act, the court applied a three-part test: the legislature’s failure to expressly prohibit an individual remedy, the legislative intent to protect consumers, and the constitutional right of access to courts.
The court distinguished Pennymac’s citations to cases involving the Louisiana Motor Vehicles Act and the Air Carrier Access Act, noting those statutes created robust, comprehensive administrative enforcement schemes. In contrast, § 6:337 provides no process for a borrower to complain to the commissioner and leaves penalty imposition to the commissioner’s discretion.
"This Court finds that in reliance on Anderson, § 6:337 creates a private right of action based on '(1) the legislature’s failure to expressly prohibit an individual remedy; (2) the legislative intent to protect consumers; and (3) the constitutional right of access to the courts in order to seek personal relief,'" Milazzo wrote. "The Court finds compelling the fact that the remedy created by § 6:337 provides no recourse to a borrower whose mortgage servicer violates its provisions."
The court ordered dismissal of the case but granted Hotard 20 days to file an amended complaint alleging sufficient standing for monetary relief. Failure to amend will result in final dismissal.