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Ryman v. First Mortgage Corp.

United States District Court, D. Maryland

April 17, 2018

JOHN RYMAN, et al., Plaintiffs,


          Richard D. Bennett United States District Judge

         The Class Action Complaint in this case alleges that Defendant First Mortgage Corporation (“FMC”) 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. (ECF No. 1.) Plaintiffs also seek to pierce the corporate veil to hold Defendant Health One Credit Union (“Health One”) liable, and seeks to hold New England Federal Credit Union (“NEFCU”) liable by way of successor liability. (Id. ¶¶ 133-181.)

         Now pending are the Defendants' Motions to Dismiss (ECF Nos. 20, 26). This Court has reviewed the parties' submissions and no hearing is necessary. See Local Rule 105.6 (D. Md. 2016). For the reasons stated below, the Defendants' Motions to Dismiss (ECF Nos. 20, 26) are GRANTED.


         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 Plaintiffs' counsel in this case) filed a complaint in the Circuit Court of Baltimore County against Genuine Title involving essentially identical allegations as set forth in this case. (See Fangman v. Genuine Title, LLC, No. RDB-14-0081 (D. Md.), ECF Nos. 1, 2 (“Fangman”).) The case was removed to this Court in January 2014. (Fangman, ECF No. 1.) The Fangmans alleged that Genuine Title, in exchange for the referral of title services on their mortgage loan, paid kickbacks to loan brokers and provided “marketing materials for free or at a drastically-reduced rate (collectively ‘Free Marketing Materials') for various loan officers.” (Fangman, Compl. ¶¶ 19-23, ECF No. 2.)[1]

         As a part of discovery in the Fangman action, Plaintiffs' counsel served a document subpoena on First Mariner Bank on July 14, 2014. (Fangman, ECF No. 150-3 at 126-30.) That subpoena requested that First Mariner produce records relating to:

(1) First Mariner's employment of Angela Pobletts;
(2) marketing materials provided or paid for by Genuine Title;
(3) payments, incentives and/or prizes received from Genuine Title;
(4) communications with Genuine Title without any limitations; and
(5) First Mariner's relationship with Genuine Title.

(Fangman, ECF No. 150-3 at 126-30.)

         Genuine Title went bankrupt in 2014, and Plaintiffs' counsel, Smith, Gildea, & Schmidt, LCC began to obtain access from Genuine Title's receiver to the company's documents and records, including its computer servers. See Edmondson v. Eagle National Bank, No. RDB-16-3938, 2018 WL 582514 at *1 (D. Md. Jan. 29, 2018). In early 2015, Plaintiffs' counsel used these records to identify and notify affected borrowers and prospective plaintiffs. Id. 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, Pls.' Resp. Mem. Protective Order at 7, ECF No. 150-2.)

         On January 2, 2015, plaintiffs in Fangman filed a First Amended Complaint naming other financial institutions. (See Fangman, ECF No. 47.) That First Amended Complaint alleged violations of (a) RESPA, (b) Maryland's state-law analog to RESPA, Md. Code, Real Property § 14-127, and (c) the Maryland Consumer Protection Act, Md. Code, Comm. Law § 13-301. (See id.)[2] 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, this Court ruled that equitable tolling may be available under RESPA and that the Fangman 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. 1998) 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 (e.g., Wells Fargo, JP Morgan Chase, and PNC) have struck class settlements which have been the subject of public filings and class notices. (See, e.g., Fangman, Final Approval Order regarding PNC settlement, ECF No. 479 (Aug. 9, 2017); see also NEFCU's Mem. at 7 n.5, ECF No. 20-1.)

         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., 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 New York Times, published stories about the case. (See NEFCU's Exhibits 1-3, ECF Nos. 20-2 through 20-4.)

         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, 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 v. Bank of America, N.A., RDB-17-540 (D. Md.), ECF Nos. 17-3, 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 at 5, ECF No. 18), but it is important to note that neither the Consumer Financial Protection Bureau nor the Office of the Attorney General of Maryland required that any financial institutions issue additional formal notices to the public. Plaintiffs' counsel's oral argument to the contrary during the related consolidated hearing is belied by the plain text of the settlement orders, which did not compel any further public notice. (See Lender Enforcement Action, JPMorgan Chase Order, ECF No. 10; Lender Enforcement Action, Wells Fargo Order, ECF No. 11.)

         III. Second Wave of Genuine Title Litigation

         Plaintiffs' counsel, who has been in possession of Genuine Title's records since 2014 and who processed the data - including buyers' names - by June 2015, has filed the following seven class actions against other lenders who, like the defendants in Fangman, allegedly engaged in kickback schemes with Genuine Title.

1. Edmondson v. Eagle National Bank, Civil No. RDB-16-3938 (D. Md.)
2. Dobbins v. Bank of America, N.A., Civil No. ...

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