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Fangman v. Genuine Title, LLC

United States District Court, D. Maryland

November 8, 2016

EDWARD J. AND VICKI FANGMAN, et al., Plaintiffs,
v.
GENUINE TITLE, LLC, et al. Defendants.

          MEMORANDUM OPINION

          Richard D. Bennett United States District Judge.

         Plaintiffs Edward J. Fangman and Vicki Fangman ("the Fangmans") and forty-six other Plaintiffs (collectively "Plaintiffs") have brought this purported class action lawsuit against Genuine Title, LLC ("Genuine Title"); Brandon Glickstein, Inc.; Dog Days Marketing, LLC ("Dog Days Marketing"); Competitive Advantage Marketing Group, LLC ("Competitive Advantage") (collectively "Genuine Defendants"); Wells Fargo Home Mortgage, Inc. and Wells Fargo, N.A. ("Wells Fargo"); West Town Bank & Trust ("West Town"); PNC Mortgage and PNC Bank, N.A. ("PNC"); MetLife Home Loans, LLC and MetLife Bank, N.A. ("MetLife"); Net Equity Financial ("Net Equity"); Eagle National Bank ("Eagle National"); E Mortgage Management ("E Mortgage"); and JP Morgan Chase Bank ("Chase") (collectively "Lender Defendants") alleging violations of the anti-kickback provisions of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2607(a), (b). Currently pending before this Court is Plaintiffs' Motion for Class Certification [SEALED] (ECF No. 320) with respect to the West Town Class.[1] The parties' submissions have been reviewed, and a hearing on the pending motion was held before this Court on October 27, 2016. For the reasons that follow, and for the reasons stated on the record at this Court's October 27, 2016 hearing, The West Town Plaintiffs' Motion for Class Certification [SEALED] (ECF No. 320) is GRANTED.

         BACKGROUND

         This purported class action lawsuit involves an alleged home mortgage kickback scheme in which Defendant Genuine Title, LLC ("Genuine Title"), by itself and through sham companies, allegedly provided cash payments and marketing materials to mortgage lenders, including Defendant West Town Bank & Trust ("West Town"), representatives of which referred its clients to Genuine Title for settlement services. Second. Am. Compl., ¶¶ 3-4, ECF No. 138. Plaintiffs allege violations of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2607(a), (b) (Count I). Id. at ¶¶ 241-54.

         Several of the mortgage lenders named as Defendants in connection with this alleged kickback scheme ("Lender Defendants") have entered into mediation with the Plaintiffs. This Court has preliminarily approved Settlement Agreements between the Plaintiffs and Defendants JPMorgan Chase Bank ("Chase") and Wells Fargo Home Mortgage, Inc. and Wells Fargo, N.A. ("Wells Fargo"). See Orders Granting Preliminary Approval, ECF Nos. 251, 286. This Court has certified "for settlement purposes" the class of Plaintiffs who obtained mortgages from Chase (the "Chase Class") and the class of Plaintiffs who obtained mortgages from Wells Fargo (the "Wells Fargo Class"). Id. at 1-2. Plaintiffs have indicated that West Town is the only Lender Defendant moving forward with litigation in this Court at this time. See Mem. Supp. Mot. for Class Certification, p. 2, ECF No. 320-1.

         Through discovery, the West Town Plaintiffs have identified approximately 400 borrowers who secured federally-related mortgage loans from West Town and whose loans were referred to Genuine Title for settlement services. Id. West Town has confirmed more than 200 of them as borrowers. Id. at 20. Named Plaintiffs and proposed Class Representatives Jameson Cooper, Katherine Cooper (the "Coopers"), and Geraldine Walters ("Walters") are three members of this putative class (the "West Town Class"). The Coopers refinanced their home mortgage with West Town in January of 2011. Id. at 13; J. Cooper Dep., Def. Ex. 5, p. 37:1-7, ECF No. 358-6. Their loan was brokered by West Town broker George Makout2. Broker Agmt, Def. Ex. 10, ECF No. 358-11. Genuine Title is listed as Settlement Agent on the Cooper's HUD-1 form[2]. Cooper HUD-1, Pl. Ex. 15, ECF No. 320-16. Geraldine Walters obtained a reverse mortgage loan from West Town in August of 2011. Her mortgage was handled by West Town broker Curtis Cullison. Walters Dep., Def. Ex. 7, p. 47:6-9, ECF No. 358-8. Genuine Title is listed as Settlement Agent on Walters' HUD-1 form. Walters HUD-1, Def. Ex. 6, ECF No. 358-7.

         Although Plaintiffs have indicated that they were dissatisfied with their settlement costs, there is no indication that they knew anything about West Town's alleged kickback scheme with Genuine Title. Def. Opp'n, p. 5-7, ECF No. 358. The alleged kickback relationship between Genuine Title and West Town was not disclosed on the HUD-1 forms. However, Genuine Title President Jay Zuckerberg has since stated that "[d]uring its existence, Genuine Title paid for marketing materials ... on behalf of brokers, managers, banks, and other lenders ... in exchange for an agreement... to refer borrowers to Genuine Title for title services." Zuckerberg Aff., Pl. Ex. 2, ¶ 4, ECF No. 320-3. Zuckerberg has further indicated that Genuine Title "pa[id] money to Referrers . . . for each borrower they, their office, or in some cases, their company referred to Genuine Title." Id. at ¶ 5. The costs of these "[a]greement[s] . . . were paid on a monthly basis based on the number of referred settlements in the previous month." Id. Zuckerberg indicated that "Genuine Title would have preferred to compete by providing lower pricing instead of paying Referring Agreement Costs and kickbacks, " but this scheme was "more effective . . . even though it was prohibited by law." Id. at ¶ 6. Brandon Glickstein, Genuine Title's Lead Account and Marketing Representative, confirmed that Genuine Title sent money, through sham marketing companies, to "loan officers that were getting direct payment to refer title work to Genuine Title." Glickstein Dep., Pl. Ex. 8, p. 214:5-215:3, ECF No. 320-9.

         In the wake of Genuine Title's insolvency, a receiver was appointed to secure Genuine Title's servers and electronic records. Mem. Supp. Mot. for Class Certification, p. 4, ECF No. 320-1. Plaintiffs' counsel extracted a spreadsheet ("TSS Spreadsheet") from Genuine Title's server, which documented loans referred to Genuine Title from roughly 2006 through 2013, including borrower names and referring loans officers. Id. Additionally, Plaintiffs have obtained more than 40, 000 pages of bank records that document millions of dollars in payments from Genuine Title and the allegedly "sham" marketing companies to loan officers, branch managers, and other employees of the Lender Defendants. See, e.g., Genuine Title Checks, Pl. Ex. 9, ECF No. 320-10. Similarly, Plaintiffs have uncovered checks from Genuine Title to third-party marketing companies to provide marketing materials for loan officers and employees of the Lender Defendants. See Genuine Title Checks, Pl. Ex. 10, ECF No. 320-11. F&N Mailing Services has produced sample invoices issued to Genuine Title for production of marketing materials, sample marketing materials, and an email from a Genuine Title employee ordering production of the marketing materials for delivery to a specific loan officer. See Marketing Docs., Pl. Ex. 11, ECF No. 320-12.

         Plaintiffs' counsel have represented that Defendants used various methods to hide this alleged kickback scheme, including some instances in which Genuine Title would issue checks to a spouse of a Lender Defendant's loan officer, who would in turn endorse the check to the loan officer for deposit in a personal bank account. Mem. Supp. Mot. for Class Certification, p. 7-8, ECF No. 320-1. In other cases, employees of the Lender Defendants would establish their own sham entity to receive payments from Genuine Title and the allegedly sham marketing companies. Id. at 8.

         Plaintiffs' counsel obtained the names of the members of the putative West Town Class from the TSS Spreadsheet and West Town's loan records. Id. West Town's records indicate that the West Town Class members are "disbursed in a relatively tight geographic area, primarily contained to the southern Mid-Atlantic states." Id. at 9. Plaintiffs' counsel have indicated that West Town has the HUD-ls for the members of the putative West Town Class, which will reflect the amount they paid for settlement services, the basis for RESPA's statutory measure of damages. Id.

         Evidence uncovered by Plaintiffs' counsel at this point in their investigation has revealed that West Town branch managers Chris Casa22a and Brent Erickson (through his wife, Jami Erickson) both received checks from Genuine Title and the allegedly "sham" marketing companies. See, e.g., Jami Erickson Checks, Pl. Ex. 19, ECF No. 320-20. Casa22a and Erickson maintained a joint bank account into which they deposited some of the checks and, in turn, made payments to themselves and other loan officers at West Town's Bel Air branch. See Casa22a/Erickson Checks, Pl. Ex. 20, ECF No. 320-21. West Town has identified five West Town loan officers who each referred a high volume of loans to Genuine Title during the time period alleged in the kickback scheme-Todd Tabor, Brian Portner, Jason McCotter, John Shiner, and Brian Brockmeyer-all of whom were employed at West Town's Bel Air office. See West Town Interrog., PL Ex. 13, p. 20-25, ECF No. 320-14. Furthermore, George Makout2, branch manager in West Town's Ellicott City/Westminster branch, received a series of payments from Genuine Title through an LLC named Cambridge Business Services, which he paid to himself and others, including Jeanne Forney, an employee who referred more than 100 loans to Genuine Title. See CBS Checks, PL Ex. 23, ECF No. 320-24.

         Plaintiffs have identified additional loan officers in West Town's Reisterstown, Abingdon, and Owings Mills branches who received checks from Genuine Title. Mem. Supp. Mot. for Class Certification, p. 11-12, ECF No. 320-1. Based on evidence they have uncovered thus far, Plaintiffs contend that the alleged kickback scheme was a "pattern of practice" that infected other branches in a similar fashion. Id. at 12. Discovery is ongoing.

         Plaintiffs allege that the West Town Class members all retained Genuine Title for settlement and title services and West Town on the purchase and/or refinance of their residences from 2009 to 2014. However, West Town was not named as a Defendant in this action until the First Amended Complaint was filed in January of 2015.

         STANDARD OF REVIEW

         To obtain class certification, the Plaintiffs must meet all four requirements of Rule 23(a) of the Federal Rules of Civil Procedure and at least one of the requirements of Rule 23(b). See Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 423 (4th Cir. 2003). Plaintiffs must first establish the four requirements of Rule 23(a): numerosity, commonality, typicality, and adequacy of representation. See Fed. R. Civ. P. 23(a). With respect to Rule 23(b), the Plaintiffs in this case seek certification of the proposed class under Rule 23(b)(3) which requires a finding that common questions "predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed.R.Civ.P. 23(b)(3). "Plaintiffs bear the burden of showing that a proposed class satisfies the Rule 23 requirements . . . but they need not make that showing to a degree of absolute certainty . . . [i]t is sufficient if each disputed requirement has been proven by a preponderance of evidence." Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 811 (7th Cir. 2012) (citations omitted). "[T]he court should not turn the class certification proceedings into a dress rehearsal for the trial on the merits." Id.

         "The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011) (internal quotation marks and citation omitted). "Rule 23 does not set forth a mere pleading standard ... [a] party seeking class certification must affirmatively demonstrate his compliance with the Rule-that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common issues of law or fact, etc." Id. at 350. In ruling on a class certification motion, a court must take a close look at the facts relevant to the certification question, even if those facts "tend to overlap with the merits of the case." Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 319 (4th Cir. 2006); accord Gariety v. Grant Thornton, LLP, 368 F.3d 356, 366 (4th Cir. 2004) ("[W]hile an evaluation of the merits is not part of a Rule 23 analysis, the factors spelled out in Rule 23 must be addressed through findings, even if they overlap with issues on the merits.").

         The Supreme Court has noted that " 'sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question, ' and that certification is proper only if 'the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.' " Wal-Mart, 564 U.S. at 350-51 (quoting Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 160 (1982)). However, "Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage." Amgen Inc. v. Connecticut Ret. Plans & Trust Funds, 133 S.Ct. 1184, 1194-95 (2013). "Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class." Id. at 1191.

         ANALYSIS

         I. Statute of Limitations Under the Real Estate Settlement Procedures Act

         Claims brought pursuant to Section 8 of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2607, must be asserted within one year "from the date of the occurrence of the violation, which generally refers to the date of closing for loan origination violations." Grant v. Shapiro & Burson, LLP, 871 F.Supp.2d 462, 470 (D. Md. 2012) (internal quotation omitted). Plaintiffs Jameson and Katherine Cooper (the "Coopers") settled on their West Town home mortgage loan in January of 2011, and Plaintiff Geraldine Walters ("Walters") settled on her West Town reverse mortgage in August of 2011. First Am. Compl., ¶¶ H1-112, ECF No. 47. However, the West Town Plaintiffs did not bring RESPA claims against West Town until the First Amended Complaint, naming West Town as a Defendant in this action for the first time, was filed on January 2, 2015. Id. Accordingly, the named Plaintiffs, and all class members who closed on their loans prior to January 2, 2014[3], seek equitable tolling of RESPA's one-year statute of limitations.

         In order to toll RESPA's statute of limitations, "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." Grant, 871 F.Supp.2d at 470, n. 10. (quoting Kerby v. Mortg. Funding Corp., 992 F.Supp. 787, 792-98 (D. Md. 1998)). Defendant West Town has previously moved to dismiss the West Town Plaintiffs' claims on the grounds that they had failed to state a claim for equitable tolling. See Fangman, et al. v. Genuine Title, LLC, et al, No. RDB-14-0081, 2015 WL 8315704, at *7 (D. Md. Dec. 9, 2015). Via Memorandum Opinion dated December 9, 2015, this Court held that Plaintiffs' averments were sufficient and that their claims were "[eligible for [e]quitable [t]oiling." Id. However, this Court did not decide whether RESPA's statute of limitations would in fact be tolled.

         West Town has now renewed its timeliness argument in opposition to the pending Motion for Class Certification (ECF No. 320). West Town objects that the named West Town Plaintiffs lack standing to represent the proposed class because the evidence in the record before this Court does not support equitable tolling of the named Plaintiffs' individual claims. Def. Opp'n, p. 20, ECF No. 358. West Town argues that even if the named Plaintiffs did have standing, the remaining class members' entitlement to equitable tolling is an individualized inquiry incapable of determination on a class-wide basis. However, for the following reasons, the named West Town Plaintiffs have provided sufficient evidence that their individual claims should be equitably tolled and that the issue of equitable tolling is appropriate for class-wide adjudication. Accordingly, the proposed West Town Class's reliance on equitable tolling with respect to certain class members' claims does not preclude certification of the class at this time. However, "an order certifying a class must be reversed if it becomes apparent, at any time during the pendency of the proceeding, that class treatment of the action is inappropriate." Stott v. Haworth, 916 F.2d 134, 139 (4th Cir. 1990).

         A. Due Diligence

         As discussed supra, a plaintiff seeking equitable tolling must produce sufficient evidence of (1) " 'fraudulent concealment on the part of the defendants' " and (2) "the inability of the plaintiff, despite due diligence, to discover the fraud." Grant, 871 F.Supp.2d at 470, n. 10. With respect to due diligence, named Plaintiff Walters indicated in her deposition that she "didn't really know that people would be giving kickbacks" and only learned of the alleged kickback scheme after being contacted by Plaintiffs' counsel. Walters Dep., Pl. Ex. 44, p. 59:2-4, 71:14-72:1, ECF No. 374-8. The Coopers have likewise indicated that they were unaware of the alleged kickback scheme until contacted by counsel. K. Cooper Dep., Pl. Ex. 43, p. 28:4-14, 93:21-94:22, ECF No. 374-7; J. Cooper Dep., Pl. Ex. 42, p. 69:11-18; 99:7-100:5, ECF No. 374-6. The ...


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