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Fangman v. Genuine Title LLC.

Court of Appeals of Maryland

May 20, 2016

EDWARD J. AND VICKI FANGMAN, ET AL.
v.
GENUINE TITLE, LLC, ET AL.

          Argued: March 31, 2016

         United States District Court for the District of Maryland Civil Action No. RDB-14-0081

          Barbera, C.J., [*] Battaglia, Greene, Adkins, McDonald, Watts, Hotten, JJ.

          OPINION

          WATTS, J.

         This case involves a purported class action lawsuit in the United States District Court for the District of Maryland ("the federal court") against a settlement and title services company, various mortgage lenders, and alleged sham companies that were formed by the settlement and title services company, for allegedly engaging in a home mortgage kickback scheme in which the settlement and title services company, by itself and through the sham companies, provided cash payments and marketing materials to mortgage brokers who referred clients to the settlement and title services company for settlement services. The federal court certified to this Court the following question of law: "Does Md. Code Ann., Real Prop. [(1974, 2015 Repl. Vol.) ("RP")] § 14-127 imply a private right of action?"

         We answer the certified question of law "no" and hold that RP § 14-127 does not contain an express or implied private right of action, as neither RP § 14-127's plain language, legislative history, nor legislative purpose demonstrates any intent on the General Assembly's part to create a private right of action.

         BACKGROUND

         In a memorandum opinion accompanying the certification order, the federal court stated the following facts, [1] which we summarize.

         Edward J. Fangman and Vicki Fangman (collectively "the Fangmans") seek to represent a class of approximately 4, 000 to 5, 000 individuals (collectively "Appellants") who, from 2009 to 2014, retained Genuine Title, LLC ("Genuine Title") for settlement and title services and utilized various lenders (collectively "the Lender Appellees") (together with Genuine Title, "Appellees")[2] for the purchase and/or refinancing of their residences. All Appellants allegedly used Genuine Title's settlement and title services as a result of referrals from the Lender Appellees. All of the Lender Appellees are servicers of federally related mortgage loans.

         In the second amended complaint, [3] the Fangmans alleged that they and all other class members "were victims of an illegal kickback scheme" in which the Lender Appellees received unearned fees and kickbacks from Genuine Title and "sham companies" that were created by Genuine Title (collectively, "the Genuine Title Appellees") for the purpose of distributing the kickbacks.[4] According to the second amended complaint, the Lender Appellees' employees and/or agents received and accepted cash payments, free marketing materials, and other things of value from the Genuine Title Appellees in exchange for referring borrowers to Genuine Title for settlement and title services.[5] The Genuine Title Appellees and Lender Appellees allegedly concealed these payments from Appellants and failed to disclose the payments on Appellants' HUD-1 settlement statements. Additionally, Appellants alleged that Genuine Title and the Lender Appellees failed to disclose that Genuine Title was participating with referring loan officers/banks and with the Genuine Title Appellees, and also failed to disclose their affiliated business relationships.

         As some point, regulators began to investigate the alleged scheme. Appellants alleged that, once the investigation began, Genuine Title drafted and back-dated sham title services agreements for the purpose of disguising cash payments as legitimate fees for alleged services provided. Appellants alleged that cash payments were not made in accordance with the fee schedule contained in the title services agreement. For example, in some instances, pursuant to the sham title services agreements, Genuine Title agreed to make cash payments to referring mortgage brokers for title services that were not actually performed. Appellants alleged that, as a result of the kickback scheme, they were deprived of "kickback[-]free settlement services and process" and their settlement fees would have been "much lower" had the kickback scheme not been in place.

         On December 6, 2013, the Fangmans filed in the Circuit Court for Baltimore County an initial class action complaint against Genuine Title. Genuine Title then removed the case to the federal court.[6] On January 2, 2015, the Fangmans, along with thirty other Appellants, filed the first amended complaint on behalf of themselves and the alleged class, adding as defendants the Genuine Title Appellees and all but one of the Lender Appellees. On May 20, 2015, Appellants filed the second amended complaint, adding as a defendant one Lender Appellee and adding sixteen additional plaintiffs.[7] In the second amended complaint, Appellants alleged that the Genuine Title Appellees and Lender Appellees violated 12 U.S.C. § 2607(a) and (b), part of the Real Estate Settlement Procedures Act ("RESPA");[8] RP § 14-127; and Md. Code Ann., Com. Law (1975, 2013 Repl. Vol.) ("CL") § 13-301, part of the Maryland Consumer Protection Act.[9]

         In response to the second amended complaint, the Genuine Title Appellees and Lender Appellees filed in the federal court eleven separate motions to dismiss. On November 24, 2015, the federal court conducted a hearing on the motions to dismiss.[10] On December 9, 2015, the federal court issued a memorandum opinion in which the federal court, with one exception, [11] denied the motions to dismiss the RESPA claims, granted the motions to dismiss the Maryland Consumer Protection Act claims, and stayed the motions to dismiss the RP § 14-127 claims so that this Court could determine whether RP § 14-127 permits a private right of action.[12] As to the RP § 14-127 claims, the federal court observed "that no Maryland state court decision has resolved the present issue, " and thus it was certifying the question of law to this Court. On the same day, December 9, 2015, the federal court issued a certification order and stayed Appellants' claims as to RP § 14-127 in the federal court pending this Court's response.

         DISCUSSION

         The Parties' Contentions

         Appellants contend that RP § 14-127 provides an implied private right of action. Appellants argue that RP § 14-127 was enacted to protect a narrow class of individuals- namely, consumers of residential title and settlement services-and that Appellants are in that class for whose benefit RP § 14-127 was enacted; i.e., they are consumers of residential title and settlement services. Appellants assert that the injuries that they suffered- including overcharges, lack of impartiality in the referral, and a reduction of competition among settlement service providers-constitute the exact type of harm that RP § 14-127 was designed to prevent. Appellants maintain that RP § 14-127's language focuses on, and RP § 14-127's purpose is, the protection of consumers in real estate transactions involving land in Maryland. According to Appellants, implying a private right of action under RP § 14-127 is consistent with RP § 14-127's language and purpose.

         Appellees[13] respond that there is no evidence that the General Assembly intended to create a private right of action under RP § 14-127 and that there is no basis in law or fact for implying a private right of action. Appellees contend that RP § 14-127 neither identifies a specific class of protected individuals nor confers a beneficial right on any specific class of individuals, let alone Appellants. Appellees argue that, on its face, RP § 14-127 does not confer any right at all, and instead is a broad prohibition on individuals who are involved in real estate transactions in Maryland from paying or receiving anything in exchange for settlement business. According to Appellees, RP § 14-127 simply prohibits a certain type of conduct and is designed to protect the public at large, not a narrow, specific class of individuals. Appellees assert that neither RP § 14-127's plain language nor its legislative history supports the position that RP § 14-127's purpose was to create a private right of action. Appellees point out that, when RP § 14-127 was amended in 2010, the General Assembly was aware that RESPA provided a private right of action, yet chose not to provide a similar private right of action under RP § 14-127. Appellees maintain that RP § 14-127's purpose is to criminalize certain conduct; in other words, according to Appellees, RP § 14-127 is a criminal statute with no private right of action.

         Standard of Review

         Pursuant to the Maryland Uniform Certification of Questions of Law Act, Md. Code Ann., Cts. & Jud. Proc. (1973, 2013 Repl. Vol.) ("CJP") §§ 12-601 to 12-613, this Court has the power to "answer a question of law certified to it by a court of the United States . . . if the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling appellate decision, constitutional provision, or statute of this State." CJP § 12-603. In considering a certified question of law, "this Court's statutorily prescribed role is to determine only questions of Maryland law, not questions of fact. . . . [And], we confine our legal analysis and final determinations of Maryland law to the questions certified." Parler & Wobbler v. Miles & Stockbridge, 359 Md. 671, 681, 756 A.2d 526, 531 (2000) (citations omitted).

         As to statutory interpretation, in Montgomery Cnty. v. Phillips, 445 Md. 55, 62-63, 124 A.3d 188, 192 (2015), we stated that "[t]he cardinal rule of statutory construction is to ascertain and effectuate the intent of the General Assembly[, ]" explaining:

[T]o determine that purpose or policy, we look first to the language of the statute, giving it its natural and ordinary meaning. . . . When the statutory language is clear, we need not look beyond the statutory language to determine the General Assembly's intent. If the words of the statute, construed according to their common and everyday meaning, are clear and unambiguous and express a plain meaning, we will give effect to the statute as it is written. In addition, we neither add nor delete words to a clear and unambiguous statute to give it a meaning not reflected by the words the General Assembly used or engage in forced or subtle interpretation in an attempt to extend or limit the statute's meaning. . . .
If the language of the statute is ambiguous, [] then courts consider not only the literal or usual meaning of the words, but their meaning and effect in light of the setting, the objectives and purpose of the enactment under consideration. . . .
If the true legislative intent cannot be readily determined from the statutory language alone, [] we may, and often must, resort to other recognized indicia-among other things, the structure of the statute, including its title; how the statute relates to other laws; the legislative history, including the derivation of the statute, comments and explanations regarding it by authoritative sources during the legislative process, and amendments proposed or added to it; the general purpose behind the statute; and the relative rationality and legal effect of various competing instructions.

(Citation and brackets omitted).

         RP § 14-127

         Unabridged, RP § 14-127 currently provides:

(a) Definitions. - (1) In this section the following words have the meanings indicated.
(2)"Consideration" includes:
(i) A fee;
(ii) Compensation;
(iii) A gift, except promotional or advertising materials for general distribution;
(iv) A thing of value;
(v) A rebate;
(vi) A loan; or
(vii) An advancement of a commission or deposit money.
(3) "License" has the meaning stated in § 10-101 of the Insurance Article.
(4)"Residential real estate transaction" means a transaction involving a federally related mortgage loan as defined in 12 U.S.C. § 2602 and 12 C.F.R. § 1024.2.
(5)"Title insurance producer" has the meaning stated in § 10-101 of the Insurance Article.
(b)Scope of section. - This section does not prohibit:
(1)The payment of a commission to a title insurance producer who has a license; or
(2)The referral of a real estate settlement business or a professional fee arrangement between attorneys, if the referral or professional fee arrangement does not violate § 17-605 of the Business Occupations and Professions Article.
(c)Payment or receipt of consideration prohibited. - (1) A person who has a connection with the settlement of real estate transactions involving land in the State may not pay to or receive from another any consideration to solicit, obtain, retain, or arrange real estate settlement business.
(2) A person may not be considered to be in violation of paragraph (1) of this subsection solely because that person is a participant in an affiliated business arrangement, as defined in 12 U.S.C. § 2602, and receives consideration as a result of that participation as long as that person complies with 12 U.S.C. § 2607(c)(4), 12 C.F.R. § 1024.15, and Appendix D to 12 C.F.R. Part 1024.
(d) Compliance with federal law regarding disclosure. - A person who offers settlement services in connection with residential real estate transactions involving land in the State shall comply with 12 U.S.C. § 2607(c)(4), 12 C.F.R. § 1024.15, and Appendix D to 12 C.F.R. Part 1024, as applicable, regarding disclosures of affiliated business arrangements, as defined in 12 U.S.C. § 2602.
(e)Violation; penalties. - A person who violates this section is guilty of a misdemeanor and on conviction is subject to imprisonment not exceeding 6 months or a fine not exceeding $ 1, 000 or both.
(f) Separate violations. - Each violation of this section is a separate violation.

         Implied Private Rights of Action

         In Baker v. Montgomery Cnty., 427 Md. 691, 708-11, 50 A.3d 1112, 1122-23 (2012), we discussed in detail how to assess whether a State statute contains an implied private right of action, stating:

A private cause of action in favor of a particular plaintiff or class of plaintiffs does not exist simply because a claim is framed that a statute was violated and a plaintiff or class of plaintiffs was harmed by it. Rather, the issue is a matter of statutory construction. . . .
The U.S. Supreme Court fashioned the prevailing test for determining whether a statute contains implicitly a ...

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