Mullinax v. Radian Guar., Inc.

311 F.Supp.2d 474

Richard C. MULLINAX, Jr., Perry Pike, Joseph Adams, and Verda Adams, on behalf of themselves and all other persons persons similarly situated, Plaintiffs, v. RADIAN GUARANTY INC. and Amerin Guaranty Corporation, Defendants.

No. 1:00 CV 01247.

United States District Court, M.D. North Carolina.

March 30, 2004.

Martha Melinda Lawrence, Patterson Harkavy & Lawrence, Raleigh, NC, Michael D. Calhoun, Gulley Eakes and Volland, Durham, NC, Melvyn I. Weiss, Michael C. Spencer, Anita B. Kartalopoulos, Milberg Weiss Bershad Hynes & Lerach, LLP, New York City, Larry I. Smith, Thompson & Smith, P.C., Thomas W. Tucker, John B. Long, Tucker Everitt Long Brewton & Lanier, Augusta, GA, for Plaintiffs.

Mack Sperling, Brooks Pierce McLendon Humphrey & Leonard, Greensboro, NC, David Smith, Wendy Beetlestone, Schnader Harrison Segal & Lewis, LLP, Philadelphia, PA, for Defendants.

MEMORANDUM OPINION

BEATY, District Judge.

This matter is before the Court on Defendants Radian Guaranty Incorporated and Amerin Guaranty Corporation's (collectively "Radian" or "Defendants") Motion to Dismiss [Document # 27] Plaintiffs' Amended Complaint (hereinafter "Second Motion to Dismiss"). Plaintiffs Richard C. Mullinax, Jr., Perry Pike, and Joseph and Verda Adams (collectively "Plaintiffs"¹) have alleged violations of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617. (Am. Compl. [Doc. # 26] ¶¶ 1-2.) In particular, Plaintiffs claim relief under § 2607 of that Act. In its January 25, 2002, Opinion [Document # 23], this Court held that, unless Plaintiffs Mullinax and Pike could adequately allege the doctrine of fraudulent concealment so as to equitably toll RESPA's one-year statute of limitations, their cause of action would be time barred. Mullinax v. Radian Guar. Inc., 199 F.Supp.2d 311, 335-36 (M.D.N.C.2002). While Mullinax and Pike in their original Complaint [Document # 1] alleged that the doctrine of fraudulent concealment tolled the statute of limitations so as to make their claims timely, the Court ruled that Mullinax and Pike had not alleged, with the particularity required by Federal Rule of Civil Procedure 9(b), that Defendants had fraudulently concealed the alleged kickback scheme. Mullinax, 199 F.Supp.2d at 326-32, 335. Although, this flaw warranted dismissal of Plaintiffs' Complaint, the Court granted Plaintiffs Mullinax and Pike a thirty-day extension for the sole purpose of allowing Mullinax and Pike to amend their Complaint to sufficiently state allegations of fraudulent concealment. Id. at 336.

Subsequently, Mullinax and Pike submitted their Amended Complaint. Without leave of court, however, Mullinax and Pike have attempted to add two new parties, Joseph and Verda Adams, to their lawsuit. (See Am. Compl.) Defendants then filed their Second Motion to Dismiss, raising three primary bases for dismissal of Plaintiffs' claims: (1) Plaintiffs Mullinax and Pike were required to seek leave of court to add Joseph and Verda Adams as additional parties to this cause of action; (2) regardless of the Adamses status as parties to this cause of action, no Plaintiffs have standing to bring these claims under RESPA; and (3) even if any Plaintiffs do have standing, Mullinax and Pike have failed to comply with the Court's Order [Document # 24] requiring them to allege fraudulent concealment with particularity.

I. FACTUAL AND PROCEDURAL BACKGROUND

The facts of this case were discussed in detail in this Court's previous opinion, Mullinax v. Radian Guaranty Inc., 199 F.Supp.2d 311 (M.D.N.C.2002). Accordingly, the Court will restate only the facts that are relevant to deciding Defendants' Second Motion to Dismiss, which is currently before this Court. Because this matter is before the Court on a motion to dismiss, the Court views the allegations in the light most favorable to Plaintiffs, and thus accepts as true all well-pleaded allegations. On or about June 2, 1999, Plaintiffs Mullinax and Pike obtained a home mortgage through Crestar Mortgage Corporation ("Crestar"). Under the terms of this mortgage, Crestar required that Mullinax and Pike purchase primary mortgage insurance and referred them to Defendants, providers of primary mortgage insurance. Mullinax and Pike then contracted with Defendants to purchase the needed primary mortgage insurance. On or about August 17, 2001, plaintiffs Joseph and Verda Adams obtained a home mortgage through Branch Banking and Trust Company ("BB & T"). Under the terms of this mortgage, BB & T required the Adamses to purchase primary mortgage insurance and referred them to Defendants, providers of primary mortgage insurance. The Adamses then contracted with Defendants to purchase the primary mortgage insurance they needed.

On December 15, 2000, Mullinax and Pike filed a Complaint alleging that Defendants violated RESPA by providing kickbacks to and splitting fees with lenders. Specifically, Mullinax and Pike contended (and all Plaintiffs, including the Adamses, now contend) that Defendants "systematically violated the anti-kickback and anti-fee-splitting provisions" of RESPA. (Compl.¶ 1.) Defendants allegedly provided these incentives to lenders through various mechanisms that Plaintiffs refer to as "kickback schemes."² Plaintiffs thus contend that they have been subjected to violations of RESPA because Radian obtained their business by providing illegal kickbacks to Crestar and BB & T. Notably, Plaintiffs do not contend (nor did they allege) that Radian overcharged them for mortgage insurance, only that Radian illegally provided kickbacks to Crestar and BB & T for referring Plaintiffs' business to Radian.

In the December 15, 2000, Complaint, Plaintiffs Mullinax and Pike requested various remedies, including damages and declaratory and injunctive relief. On February 15, 2001, Defendants filed their Motion to Dismiss [Document # 9] (hereinafter "First Motion to Dismiss") for failure to state a claim, arguing that Mullinax and Pike's claims were barred by the relevant statute of limitations and by the McCarran-Ferguson Act. Defendants further contended that even if Plaintiffs Mullinax and Pike's claims were not barred for those reasons, RESPA did not allow them to seek injunctive relief. On January 25, 2002, the Court granted Defendants' First Motion to Dismiss with respect to Mullinax and Pike's request for injunctive relief, holding that private litigants are not entitled to injunctive relief under RESPA. The Court further held that the McCarran-Ferguson Act did not bar Mullinax and Pike's claims and that Mullinax and Pike had sufficiently stated claims for relief under RESPA.³ However, the Court held that unless Mullinax and Pike could sufficiently allege that the doctrine of fraudulent concealment applied so as to equitably toll RESPA's one-year statute of limitations, their claims would be barred as untimely. The Court noted that to equitably toll the statute of limitations, Mullinax and Pike must show both that Radian fraudulently concealed its wrongdoing from Mullinax and Pike and that Mullinax and Pike exercised due diligence to discover any RESPA claims that they might have. While the Court found that Mullinax and Pike had adequately pled due diligence under the notice pleading standards of Federal Rule of Civil Procedure 8, the Court found that they had failed to properly plead fraudulent concealment under the heightened pleading standards of Rule 9(b). Therefore, although the Court noted that the Complaint was properly subject to dismissal for failure to state a claim,⁴ the Court in its discretion declined to dismiss the Complaint but instead granted Mullinax and Pike a thirty-day extension to amend their Complaint in order to sufficiently state allegations of fraudulent concealment. Defendants were then permitted to renew their Motion to Dismiss for failure to state a claim pursuant to Rule 12(b)(6).

On February 25, 2002, Plaintiffs filed their Amended Complaint. Defendants then renewed their Motion to Dismiss on March 11, 2002. The Court held a hearing on this matter on January 29, 2004. The relevant issues having been thoroughly briefed and argued by the parties, this matter is ripe for adjudication. The Court will first consider Defendants' arguments that the Adamses are not properly before this Court because Mullinax and Pike were required to seek leave of court to add the Adamses as parties. The Court will then consider Defendants' arguments that no Plaintiffs have Article III standing to pursue their RESPA claims against Defendants. Finally, this Court will consider Defendants' arguments that Mullinax and Pike have still failed to adequately plead fraudulent concealment so as to invoke the doctrine of equitable tolling and therefore Mullinax and Pike's claims are barred by the statute of limitations

II. WHETHER PLAINTIFFS MULLINAX AND PIKE COULD AMEND THEIR COMPLAINT TO ADD JOSEPH AND VERDA ADAMS AS PLAINTIFFS

As an initial matter, the Court must determine whether Plaintiffs Mullinax and Pike properly added Joseph and Verda Adams as Plaintiffs to this lawsuit. Defendants contend that Mullinax and Pike failed to seek leave to amend their Complaint to add the Adamses as Plaintiffs and therefore the Adamses should be dismissed from this suit. The Court notes that Plaintiffs did not file a motion for leave to amend to add parties to this suit. Further, the Court's January 25, 2002, Order clearly did not grant Plaintiffs such leave. In its Order, the Court stated "that Plaintiffs Richard C. Mullinax, Jr. and Perry Pike are GRANTED an extension of thirty (30) days from the date of this ORDER within which to amend their Complaint with respect to their allegations of equitable tolling on the basis of fraudulent concealment." Mullinax, 199 F.Supp.2d at 336. The Court did not contemplate that, based on its Order, in which it could have dismissed Mullinax and Pike's Complaint outright, that Mullinax and Pike would respond to the Court's mandate by...