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Lombel v. Flagstar Bank F.S.B.

United States District Court, Fourth Circuit

October 11, 2013

BRIAN R. LOMBEL, et al., Plaintiffs,
FLAGSTAR BANK F.S.B., Defendant.


PAUL W. GRIMM, District Judge.

This Memorandum Opinion disposes of:

1) Defendant Flagstar Bank F.S.B.'s ("Flagstar") Motion to Dismiss ("Def.'s Dismiss Mot."), ECF No. 22, and supporting Memorandum ("Def.'s Dismiss Mem."), ECF No. 22-1; Plaintiffs Brian and Allison Lombel's Opposition ("Pls.' Dismiss Opp'n"), ECF No. 34; and Defendant's Reply ("Def.'s Dismiss Reply"), ECF No. 40;

2) Plaintiffs' Motion to Certify Questions of Law to the Court of Appeals of Maryland ("Pls.' Mot. to Certify"), ECF No. 27, and supporting Memorandum ("Pls.' Certify Mem."), ECF No. 27-1; Defendant's Opposition ("Def.'s Certify Opp'n"), ECF No. 32; and Plaintiffs' Reply ("Pls.' Certify Reply"), ECF No. 35;

3) Plaintiffs' Motion to Stay Briefing Pending Resolution of Motion to Certify Questions of Law ("Pls.' First Stay Mot."), ECF No. 28, and supporting Memorandum ("Pls.' First Stay Mem."), ECF No. 28-1; Defendant's Opposition ("Def.'s First Stay Opp'n"), ECF No. 33, and Plaintiffs' Reply ("Pls.' First Stay Reply"), ECF No. 36; and

4) Plaintiffs' Motion in the Alternative for a Stay of Proceedings Pending Appeal in Petry v. Prosperity Mortgage Company ("Pls.' Second Stay Mot."), ECF No. 41, and supporting Memorandum ("Pls.' Second Stay Mem."), ECF No. 41-1; Defendant's Opposition ("Def.'s Second Stay Opp'n"), ECF No. 43; and Plaintiffs' Reply ("Pls.' Second Stay Reply"), ECF No. 44.

A hearing is not necessary. See Loc. R. 105.6. For the reasons stated herein, Defendant's Motion to Dismiss is GRANTED, Plaintiffs' Motion to Certify is DENIED, Plaintiffs' First Motion to Stay is DENIED as moot, and Plaintiffs' Second Motion to Stay is DENIED.


This case represents at least the third attempt in this Court by Plaintiffs' skillful counsel to hold a mortgage lender liable for, inter alia, violations of the Maryland Finder's Fee Act (the "FFA"), Md. Code, Com. Law § 13-101 et seq. See Compl. ¶ 3, Marshall v. James B. Nutter & Co., No. RDB-10-3596 (D. Md. Dec. 23, 2010); Compl. ¶ 1, Petry v. Prosperity Mortg. Co., No. WMN-08-1642 (D. Md. June 23, 2008); see also Compl., Minter v. Wells Fargo Bank, N.A., No. WMN-07-3442 (D. Md. Dec. 26, 2007), ECF No. 1 (alleging RESPA and RICO violations arising out of table-funded mortgages).

For purposes of considering Defendant's Motion, this Court accepts the facts that Plaintiffs alleged in their Complaint as true. See Aziz v. Alcoac, 658 F.3d 388, 390 (4th Cir. 2011). Defendant is a federally chartered savings bank that, during the relevant time period, has "funded numerous types of mortgage loans in Maryland, " including making loans through "table-funding" arrangements. Class Action Compl. & Demand for Jury Trial ¶¶ 14-16, ECF No. 2. According to Plaintiffs, table funding refers to a practice by which a mortgage broker will identify itself to the borrower as the lender in a transaction but, in fact, serves as an intermediary for another undisclosed lender. Id. ¶ 3. The funding lender advances the loan funds to the broker at the time of settlement, and in return, the loan is assigned to the funding lender at or immediately after settlement. Id. According to Plaintiffs, table funding is a means to "conceal[] the true role of the mortgage broker/lender in the transaction as well as the identity of the funding lender" and also "aids predatory lending practices such as loan flipping." Id.

Plaintiffs entered into a "mortgage refinance transaction for their residence at 324 Ahearn Court" on or about May 16, 2012. Id. ¶ 27. To facilitate this transaction, Plaintiffs worked with a mortgage broker, Davlaw Enterprises, Inc. d/b/a Union First Mortgage ("Davlaw"). Id. ¶¶ 13, 28. Davlaw also was identified as the "lender" on the Note, Deed of Trust, and other loan documents, although the loan actually was table funded by Defendant. Id. ¶¶ 29-31. Plaintiffs allege that they paid "at least $9, 504.56 in closing costs and settlement fees" including "finder's fees of approximately $9, 366.40 in loan origination charges and yield spread premiums" paid to Davlaw. Id. ¶ 35.[1]

The crux of Plaintiffs' claims against Defendant is that Davlaw violated the FFA at Defendant's behest.[2] According to Plaintiffs, there either was a civil conspiracy or a principalagent relationship between Defendant and Davlaw because Defendant employed Davlaw to recruit borrowers for its loans, id. ¶ 39, which "nefariously switched [the] role[ of Davlaw] and instead rendered the broker/lenders as the agents of Flagstar in the transactions, soliciting loan originations on behalf of Flagstar and raising borrowers' interest rates, instead of soliciting multiple lenders for the best rate on behalf of borrowers." Id. According to Plaintiffs' allegations, Defendant had "a right of control" over Davlaw evidenced by the fact that Defendant "required the broker/lenders to use its closing package and underwriting services[, ]... to submit each loan for Flagstar's approval prior to closing or funding, required the broker/lender to follow its closing instructions, and required the broker/lender to assign each of the mortgages to it contemporaneously with closing" as well as "instruct[ing] the broker/lenders on how to prepare loan applications in order to ensure approval of the applications by Flagstar." Compl. ¶ 41. Plaintiffs allege that Davlaw "had a duty to act primarily for the benefit of Flagstar" in arranging loans and "had the power to alter the legal relations of Flagstar" as well as receiving several payments from and with the knowledge of Flagstar. Id. ¶ 42-44.

On December 20, 2012, Plaintiffs filed a Class Action Complaint in the Circuit Court for Montgomery County, see Notice of Removal, ECF No. 1 (setting forth date Complaint was filed), asserting five counts against Defendant: violation of Maryland's Finder's Fee Act, Md. Code, Com. Law § 12-804, Compl. 21; violation of Maryland's Consumer Protection Act (the "MCPA"), Md. Code, Com. Law § 13-101 et seq., Compl. 24; unjust enrichment, Compl. 29; negligent misrepresentation, Compl. 31; and negligence, Compl. 35. Plaintiffs also filed a Motion for Certification of the Class, ECF No. 4, which voluntarily was withdrawn without prejudice, Order, ECF No. 20. Defendant removed the case to this Court by Notice of Removal filed on March 5, 2013 claiming jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d). Notice of Removal ¶¶ 5-13.

Defendants filed a Motion to Dismiss for failure to state a claim on April 12, 2013. Shortly thereafter, and before responding to the motion to dismiss, Plaintiffs filed a Motion to Certify Questions of Law to the Court of Appeals of Maryland on April 24, 2013, seeking to have the Court of Appeals rule on certain "central issues" in this case. See Pls.' Certify Mem. 1. Five days later, on April 29, 2013, Plaintiffs filed a motion to stay briefing on the Motion to Dismiss until the Motion to Certify was resolved. Pls.' First Stay Mot. Because the Motion to Dismiss has now been fully briefed and the Motion to Certify is resolved by this Memorandum Opinion and the accompanying Order, that first motion to stay is now moot.

On July 2, 2013, Plaintiffs filed a second motion to stay, this time seeking to stay all proceedings pending the Fourth Circuit's ruling in the appeal of Petry v. Prosperity Mortgage Co., No. WMN-08-1642, 2013 WL 3179060 (D. Md. June 20, 2013). Pls.' Second Stay Mot.

Defendant's Motion to Dismiss, Plaintiffs' Motion to Certify, and Plaintiffs' Second Motion to Stay have all been fully briefed and are now ripe.


Federal Rule of Civil Procedure 12(b)(6) provides for "the dismissal of a complaint if it fails to state a claim upon which relief can be granted." Velencia v. Drezhlo, No. RDB-12-237, 2012 WL 6562764, at *4 (D. Md. Dec. 13, 2012). This rule's purpose "is to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.'" Id. (quoting Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006)). To that end, the Court bears in mind the requirements of Rule 8, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009) when considering a motion to dismiss pursuant to Rule 12(b)(6). Specifically, a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief, " Fed.R.Civ.P. 8(a)(2), and must state "a plausible claim for relief, " as "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice, " Iqbal, 556 U.S. at 678-79. See Velencia, 2012 WL ...

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