James v. Acre Mortg. & Fin., Inc.

306 F.Supp.3d 791

Renita JAMES, Plaintiff,

v.ACRE MORTGAGE & FINANCIAL, INC., Defendant.

Civil Action No. RDB–17–1734

United States District Court, D. Maryland.

Signed January 31, 2018

Megan Aileen Benevento, Timothy Francis Maloney, Veronica Byam Nannis, Joseph Greenwald and Laake, P.A., Greenbelt, MD, Melissa Lynn English, Michael Paul Smith, Sarah A Zadrozny, Smith Gildea & Schmidt LLC, Towson, MD, for Plaintiff.

Ari Karen, Offit Kurman, Maple Lawn, MD, Gregory P Currey, Wright, Constable & Skeen, L.L.P., Baltimore, MD, for Defendant.

MEMORANDUM OPINION

Richard D. Bennett, United States District JudgeThe Class Action Complaint in this case alleges in one count that the Defendant, Acre Mortgage & Financial, Inc. ("Acre" or "Defendant"), violated the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2607(a) and (b), by entering into a kickback scheme whereby the Defendant received unearned fees from Genuine Title, LLC for referrals.

Now pending is the Defendant's Motion to Dismiss and/or for Summary Judgment (ECF No. 7). This Court reviewed the parties' submissions and conducted a motions hearing on January 16, 2018.¹ For the reasons stated below, the Defendant's Motion to Dismiss (ECF No. 7) is GRANTED.

BACKGROUND

I. Fangman v. Genuine Title (RDB–14–0081)

The alleged kickback scheme in this case involves Genuine Title, LLC ("Genuine Title"), which has an extensive history with this Court. In December 2013, Edward and Vickie Fangman (represented by the same counsel involved in this case) filed a complaint against Genuine Title involving essentially identical allegations in the Circuit Court of Baltimore County that was removed to this Court in January 2014. (See Fangman v. Genuine Title, LLC , Case No. RDB–14–0081 (D. Md.), at ECF No. 1 ("Fangman ").) The Fangmans alleged that Genuine Title, in exchange for the referral of title services on their mortgage loan, paid cash kickbacks to loan brokers and provided "marketing materials for free or at a drastically-reduced rate (collectively ‘Free Marketing Materials’) for various loan officers who were part of the mortgage lending process." (Fangman, Compl. ¶¶ 19–23, ECF No. 2.)²

In 2014, Genuine Title went bankrupt, and Plaintiffs' counsel, Smith, Gildea, & Schmidt, began to obtain access from Genuine Title's Receiver to the company's documents and records, including its computer servers. (James , Mem. 3, ECF No. 7–1.) In early 2015, Plaintiffs' counsel used these records to identify and notify affected borrowers and prospective plaintiffs. (Id. 4.) By June 2015, Plaintiffs' counsel was "able to pull data ... that appears to represent ... buyers' names, addresses, telephone numbers, property addresses, settlement dates, lender and in some cases mortgage broker information." (Fangman , ECF No. 150–2 at 7.)

On January 2, 2015, plaintiffs in Fangman filed a First Amended Complaint naming other financial institutions, including E Mortgage Management, LLC. (See Fangman , ECF No. 47.) That First Amended Complaint in Fangman alleged violations of RESPA, Maryland's state-law analog to RESPA, and the Maryland Consumer Protection Act. (See id. ) The Fangman plaintiffs further alleged that Genuine Title and its affiliated marketing companies provided Free Marketing Materials and/or "Referring Cash" payments without disclosure on HUD–1 settlement documents. (Id. ¶ 3.) Plaintiffs in Fangman filed a Second Amended Complaint on May 20, 2015, adding additional parties and clarifying some of their previous allegations. (See Fangman , ECF No. 138.)

In addressing various motions to dismiss by defendants in the Fangman case, this Court ruled that equitable tolling may be available under RESPA and that those plaintiffs' claims were not time-barred. Fangman , 2015 WL 8315704, at *7. In so holding, this Court applied the equitable tolling test from Grant v. Shapiro , 871 F.Supp.2d 462 (D. Md. 2012) that provides, "a plaintiff must allege with specificity fraudulent concealment on the part of the defendants and the inability of the plaintiff, despite due diligence, to discover the fraud." Fangman , 2015 WL 8315704, at *7 (citing Grant , 871 F.Supp.2d at 470, n.10 ). This Court applied that test in the Fangman action in the context of Plaintiffs' counsel's significant investigatory efforts, which by June 2015 had successfully identified borrowers referred to Genuine Title between 2006 through 2013. (See Fangman v. Genuine Title, LLC , 2016 WL 6600509, at *2 (D. Md. Nov. 8, 2016).) Accordingly, this Court found in December 2015 that facts had been sufficiently concealed from the Fangman plaintiffs, who did not know about their claim until contacted by counsel. Fangman , 2015 WL 8315704, at *7. In terms of due diligence, this Court found:

Plaintiffs' counsel has undergone a large-scale review of Defendant Genuine Title's computer system. It is only through this review, aided by early discovery and a proprietary software system, that potential plaintiffs have been identified. The Second Amended Complaint, filed by Plaintiffs' counsel, clearly states that "[a]ll Plaintiffs learned of the illegal kickbacks less than one year prior to filing of the [Second Amended] Complaint and could not have known about the Kickback Scheme until contacted by undersigned counsel." Second Am. Compl. at ¶ 94, ECF No. 138. In light of these unique circumstances, Plaintiffs have demonstrated that equitable tolling is warranted in this case and that all Plaintiffs, with the exception of the Eagle National Plaintiffs, brought their claims within one year of the date they could have first known of their cause of action through due diligence.

Fangman, 2015 WL 8315704, at *7.

Following discovery concerning Genuine Title's business practices and relationship with other lenders, some defendants have struck class settlements which have been the subject of public filings and class notices. For example, Plaintiffs' counsel and E Mortgage Management, LLC requested preliminary approval of a settlement on October 27, 2016, proposing the following E Mortgage Settlement Class for settlement purposes only:

All individuals in the United States who were borrowers on a federally related mortgage loan (as defined under the Real Estate Settlement Procedures Act, 12 U.S.C. § 2602 ) from E Mortgage Management, LLC ("E Mortgage") that was closed through Genuine Title either (1) whose E Mortgage loan was originated by loan officers Jeffrey Krasner or Pat Walker ("Subclass 1"); or (2) whose E Mortgage loan was originated prior to May 14, 2012, or after July 2, 2013, and not by loan officers Jeffrey Krasner or Pat Walker ("Subclass 2"). The Settlement Class shall not include any employees of E Mortgage, or its related entities, any members or employees of Plaintiffs' Counsel, the Judge(s) presiding over this action, any members of the Judge's immediate family or staff, or any persons who submit a complete and valid Request for Exclusion by the Exclusion Deadline.

(Fangman , Mem. Prelim. Approval 6, ECF No. 394–1.) This Court granted final approval of the E Mortgage settlement on May 31, 2017. (Fangman , ECF No. 468.)

II. Enforcement Actions by the federal Consumer Financial Protection Bureau ("CFPB") and Maryland Attorney General

Meanwhile, the Consumer Financial Protection Bureau ("CFPB") and the Maryland Attorney General initiated an enforcement action in this Court on January 22, 2015 against Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. predicated on similar schemes involving Genuine Title. (See CFPB v. Wells Fargo Bank, N.A. , Case No. RDB–15–0179 (D. Md.) ("Lender Enforcement Action ").) The pendency and ultimate settlement of the Lender Enforcement Action in January 2015 was widely publicized. Specifically, the CFPB issued a press release on January 22, 2015, and local and national news media, including The Baltimore Sun , CNN, and the Wall Street Journal , published stories about the case. (See Dobbins, et al. v. Bank of America , N.A., RDB–17–540 (D. Md.), ECF Nos. 17–3, 17–4.)³

The CFPB and Attorney General also filed an enforcement action on April 29, 2015 directly against Genuine Title, its principals, and affiliates arising out of the same alleged scheme. (See CFPB v. Genuine Title LLC , Case No. RDB–15–1235 (D. Md.) ("Genuine Title Enforcement Action ") ). The CFPB issued a press release on April 29, 2015 in which the CFPB outlined the enforcement action against Genuine Title based on the same facts alleged by the Fangman Plaintiffs. On May 1, 2015, the CFPB and Maryland Attorney General announced a settlement with Genuine Title, and this Court entered a Stipulated Final Judgment and Order approving the settlement. (See Genuine Title Enforcement Action , ECF No. 18.) As with the Lender Enforcement Action , the Genuine Title Enforcement Action settlement was also reported by various news media outlets and other publications in May 2015. (See Dobbins, ECF No. 17–4.) The settlement orders in these enforcement actions explicitly contemplate related litigation by affected consumers (see, e.g., Genuine Title Enforcement Action , Genuine Title Order 5, ECF No. 18), but neither the Consumer Financial Protection Bureau nor the Office of the Attorney General of Maryland required that any financial institutions issue formal notices to the public (see Lender Enforcement Action , JPMorgan Chase Order, ECF No. 10; Lender Enforcement Action , Wells Fargo Order, ECF No. 11).⁴

III. James v. Acre Mortgage & Financial, Inc. (RDB–17–1734)

Plaintiff Renita James closed her loan with Acre Mortgage & Financial ("Acre") on or about December 21, 2012 and filed this action on June 23, 2017. Plaintiff's Class Action Complaint asserts a RESPA claim based on an alleged kickback scheme between Genuine Title and Brian and Jeffrey Krasner, who were employees of Acre from May 2012 to January 2013. The Krasners allegedly created their own company in 2008, Morgan Management, to receive these personal kickbacks. (See James , Compl. 9, ECF No. 1.) Plainti...