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Baehr v. Creig Northrop Team, P.C.

United States District Court, D. Maryland

December 7, 2018

PATRICK BAEHR, et al., Plaintiffs,
v.
THE CREIG NORTHROP TEAM, P.C., et al., Defendants.

          MEMORANDUM OPINION

          Richard D. Bennett United States District Judge

         The Plaintiffs Patrick and Christine Baehr, individually and on behalf of a class of consumers, bring this single-count class action[1] against the Defendants The Creig Northrop Team, P.C. (“The Northrop Team”), Creighton Edward Northrop, III (“Creig Northrop”), Lakeview Title Company (“Lakeview”), and Lindell Eagan (“Eagan”) (collectively, the “Defendants”), alleging that the Defendants violated the Real Estate Settlement Procedures Act of 1974, as amended, 12 U.S.C. § 2601, et seq. (“RESPA”) through an illegal kickback scheme whereby The Northrop Team received unearned fees from Lakeview Title in exchange for referring clients to Lakeview Title for settlement. Currently pending before this Court is the Defendants' Joint Motion for Summary Judgment, arguing that the Plaintiffs do not have standing to bring their claim, and that their claim is barred by RESPA's one year statute of limitations and equitable tolling does not apply. (ECF No. 158.)

         This Court reviewed the parties' submissions and held a motions hearing on November 20, 2018. For the following reasons, Defendants' Joint Motion for Summary Judgment (ECF No. 158) is GRANTED and Judgment is ENTERED in favor of Defendants.[2]

         BACKGROUND

         In ruling on a motion for summary judgment, this Court reviews the facts and all reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007); Hardwick ex rel. Hardwick v. Heyward, 711 F.3d 426, 433 (4th Cir. 2013). As explained below, in 2008 the named Plaintiffs Patrick and Christine Baehr (the “Plaintiffs” or “Baehrs”) retained Long & Foster Real Estate, Inc. (“Long & Foster”) as their real estate broker to assist them in finding a new home. Maija Dykstra, at the time a Long & Foster agent and member of the Defendant The Creig Northrop Team, P.C. (“The Northrop Team”), led by the Defendant Creighton Edward Northrop, III (“Creig Northrop”), referred the Plaintiffs to the Defendant Lakeview Title Company (“Lakeview Title”), run by its President Defendant Lindell Eagan (“Eagan”), for settlement. The Baehrs closed on the purchase of this home on July 25, 2008.

         On March 27, 2013, more than four and a half years after they settled on their home, the Plaintiffs filed the instant suit on behalf of themselves and a putative class, claiming that the Defendants violated Section 8(a) of RESPA by using a “sham” marketing agreement between The Northrop Team and Lakeview Title to disguise an illegal kickback scheme whereby The Northrop Team received unearned fees by referring the Plaintiffs and the putative class to Lakeview Title for settlement. This Court begins with a brief overview of RESPA before detailing the factual and procedural background of this case.

         I. The Real Estate Settlement Procedures Act (“RESPA”)

         Congress enacted the Real Estate Settlement Procedures Act of 1974, as amended, 12 U.S.C. § 2601, et seq. (“RESPA”) after it found that substantial reforms in the real estate settlement process were “needed to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country.” 12 U.S.C. § 2601(a). Accordingly, Congress enacted RESPA to effect “certain changes” that would result “in the elimination of kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services.”[3] Id. at § 2601(b)(2).

         One of RESPA's prohibitions is that “[n]o person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” Id. at § 2607(a). RESPA then provides for a specific set of remedies, including that “[a]ny person or persons who violate the prohibitions or limitations of this section shall be jointly and severally liable to the person or persons charged for the settlement service involved in the violation in an amount equal to three times the amount of any charge paid for such settlement service.” Id. at § 2607(d)(2). RESPA does not provide, however, an individual with a private right to injunctive relief. See Id. at § 2607(d)(4) (“The Bureau, the Secretary, or the attorney general or the insurance commissioner of any State may bring an action to enjoin violations of this section.”); see also Minter v. Wells Fargo Bank, N.A., 593 F.Supp.2d 788, 796 (D. Md. 2009) (“[T]his Court finds that there is no private right to injunctive relief under RESPA.”)

         II. The Marketing Agreement between The Northrop Team and Lakeview Title

         On April 10, 2008, Creig Northrop and The Northrop Team entered into a Marketing and Services Agreement. (ECF No. 210-10.) The Agreement provided that, among other things, Northrop agreed to designate Lakeview Title as its “exclusive preferred settlement and title company” and “to provide certain marketing services.” (Id. at ¶ 2.1.) In exchange, Lakeview would pay The Northrop Team a flat fee of $6, 000 per month, “not predicated on the volume of applications received by Lakeview from Northrop customers for settlement and title services.” (Id. at 14.) Finally, the parties agreed “that the terms of the transaction described herein is of a confidential nature and shall not be disclosed except to consultants, advisors and Affiliates, or as required by law. Neither the parties shall make any public disclosure of the specific terms of this Agreement, except as required by law.” (Id. At ¶ 9.21.)

         III. The Named Plaintiffs' purchase of their home with Long & Foster and The Northrop Team

         The Named Plaintiffs Patrick and Christine Baehr's RESPA claim stems from their purchase of a home in Glenwood, Maryland (“Glenwood home”) on July 25, 2008. (ECF No. 158-3.) In April of 2008, the Baehrs entered into an Exclusive Right to Represent Buyer Agreement with Long & Foster to assist them in selling their previous home and finding a new home. (ECF No. 158-8.) The Defendant Creig Northrop is a licensed real estate agent who provides real estate brokerage services under Long & Foster's real estate brokerage license.[4] Creig Northrop also runs The Northrop Team, a real estate agent team, along with his wife Carla Northrop. Maija Dykstra, a Northrop Team Member at the time, was the Long & Foster real estate agent who assisted the Baehrs in the selling and purchase of their home. (P. Baehr Dep., ECF No. 158-4 at 94.)[5]

         When the Baehrs began working with The Northrop Team, they received promotional materials for various companies, including Lakeview Title, and a folder of various forms to be signed. (ECF No. 158-12.) Among the forms to be signed were an Understanding Whom Real Estate Agents Represent Form and an Affiliated Business Arrangement (“ABA”) Disclosure Statement. (Id. at 8-9; ECF No. 210-31.) The ABA Disclosure Statement, given to the Baehrs by Dykstra, was a Long & Foster form which gave clients “notice that Long & Foster Real Estate, Inc. (‘Long & Foster') has business relationships (e.g., direct or indirect ownership interests, joint ventures and/or contractual relationships including marketing agreements and/or office leases) with the following mortgage, title, closing, and insurance service providers.”[6] (ECF No. 210-31.) Under closing and title insurance companies, the Long & Foster Disclosure Statement listed twelve companies and their affiliates in which Long & Foster had a business relationship.[7] (Id.)

         Maija Dykstra assisted the Baehrs in finding and ultimately making an offer for the purchase of the Glenwood home for $835, 000. (P. Baehr Dep., ECF No. 158-4 at 110; HUD-1, ECF No. 158-3.) From previous experience purchasing a home, the Baehrs understood that once a purchase price was agreed upon, they needed a settlement company and title insurance to complete the purchase.[8] (ECF No. 158-4 at 132; C. Baehr Dep., ECF No. 158-14 at 80, 82.) Both Patrick and Christine Baehr testified that while working with Long & Foster and The Northrop Team, they knew and understood that they could choose their own settlement and title company. (ECF No. 158-4 at 137; ECF No. 158-14 at 82.) Despite knowing that they were free to choose their own company, however, the Baehrs did not take any action to find their own settlement and title company. (ECF No. 158-4 at 134, 137.) Rather, Patrick Baehr testified that he expected his Northrop Team Member, Dykstra, to find him a settlement company. (Id. at 138.)

         Thereafter in July of 2008, the month the Baehrs closed on their home, Dykstra informed the Baehrs that Lakeview Title would handle their settlement. (P. Baehr Dep., ECF No. 158-4 at 138; C. Baehr Dep., ECF No. 158-14 at 98.) Specifically, Patrick Baehr testified that Dykstra stated “we do all of our settlements at Lakeview.” (ECF No. 158-4 at 139.) It is undisputed that when Dykstra informed the Baehrs that “we do all of our settlements at Lakeview, ” the Baehrs did not ask a single question regarding why a Northrop Team Member, associated with Long & Foster, would refer all settlements to Lakeview Title. They also did not ask whether Dykstra, Long & Foster, or The Northrop Team had an affiliation or some form of an agreement with Lakeview Title. (P. Baehr Dep., ECF No. 158-4 at 138-41.) This was despite the fact that Lakeview Title was not one of the twelve closing or title insurance companies listed on Long & Foster's ABA Disclosure Statement and that Lakeview Title was not the title company the Baehrs used when settling on their previous home. (ECF Nos 210-31; ECF No. 158-4 at 229, 230.)

         Rather, the Baehrs elected to proceed with Lakeview Title handling their settlement without objection. Subsequently, on July 25, 2008, the Baehrs obtained title insurance from and settled on the Glenwood home with Lakeview Title. (HUD-1, ECF No. 158-3.) Patrick Baehr testified that despite feeling comfortable and having the opportunity to ask questions during the closing process, he did not recall asking any questions. (ECF No. 158-4 at 167-68.) The Baehrs' HUD-1[9] for the purchase of their home then listed the following fees, among others, paid from borrower's funds at settlement:

Contract sales price:

$835, 000.00

Administrative Fee to Long & Foster:

$395.00

Title Examination to Lakeview Title Company:

$375.00

Title insurance binder to Lakeview Title Company:

$50.00

Title Insurance to Chicago Title Insurance Company:

$2, 990.00

Recording Services to Lakeview Title Company:

$50.00

         (HUD-1, ECF No. 158-3.) As Chicago Title Insurance Company was the title underwriter, that amount was also sent to Lakeview Title. (ECF No. 158-1 at 11 n. 11.)

         After the settlement process, Patrick Baehr testified that he was satisfied with the services that Lakeview Title provided. (P. Baehr Dep., ECF No. 158-4 at 164; C. Baehr Dep., ECF No. 158-14 at 128.) Accordingly, he believed that Lakeview Title deserved to be compensated in connection with the settlement services and did not object to paying Lakeview Title or Chicago Title Insurance Company's fee. Satisfied with their srvices, over the next four and a half years, the Baehrs did not contact Dykstra, Creig Northrop, anyone on the Northrop Team, Lakeview, or Long & Foster about whether The Northrop Team may have had a marketing agreement or other arrangement with Lakeview Title, or whether The Northrop Team may have received anything of value from Lakeview Title in connection with the Baehrs' purchase of the Glenwood home. (P. Baehr Dep., ECF No. 158-4 at 206.)

         IV. Four and a half years later, the Plaintiffs file the instant action

         On March 15, 2013, four and a half years after the Baehrs purchased their home, the Baehrs received a letter from their current counsel. (ECF No. 158-16.) The letter indicated that counsel was “investigating whether you and other persons similarly situated may have a legal claim based on illegal kickbacks paid for the referral of your business to a title company that settled your purchase. . . . I believe that you may be entitled to financial recovery under RESPA.” (Id.) Subsequently, the Baehrs received a written engagement letter to pursue the instant claim. (ECF No. 158-17.) On March 27, 2013, they filed the instant action, alleging that the Defendants violated Section 2607(a) of RESPA.[10] (Compl., ECF No. 1.)

         The Plaintiffs' Complaint named six Defendants: The Northrop Team, Creig Northrop, Carla Northrop, Lakeview Title, Lindell Eagan, and Long & Foster. (Id.) The Complaint alleged that Creig Northrop, Carla Northrop, and The Northrop Team-acting as agents on behalf of Long & Foster-referred the Plaintiffs and members of the Class exclusively to Defendant Lakeview Title Company for real estate settlement services as a quid pro quo for compensation by Lakeview Title and Lindell Eagan, President of Lakeview. The Plaintiffs alleged that the Defendants concealed this quid pro quo or kickback relationship first through a “sham” employment agreement between Carla Northrop and Lakeview Title from around 2001 through 2008, and then through the Marketing and Services Agreement described above from 2008 through 2013.

         With respect to the Marketing Agreement, the Plaintiffs' Complaint alleged that rather than Creig Northrop and The Northrop Team receiving a flat fee for marketing services of $6, 000 per month from Lakeview Title, the payments they received actually fluctuated from $6, 000 to $12, 000 based on how many clients The Northrop Team referred to Lakeview.[11] Therefore, the Plaintiffs alleged that the Marketing Agreement was a sham, designed to hide illegal kickback fees under Section 8(a) of RESPA.

         V. This Court's previous rulings

         On May 13, 2013, the Defendants filed two Motions to Dismiss the Plaintiffs' Complaint on various grounds. (ECF Nos. 23, 26.) Subsequently, the Plaintiffs filed a Motion to Amend the Complaint and Motion for Class Certification. (ECF Nos. 36, 44.) On January 29, 2014, the Honorable Judge William D. Quarles, Jr. ruled on the Motions. (ECF Nos. 57, 58; Baehr v. Creig Northrop Team, P.C., 2014 WL 346635 (D. Md. Jan. 29, 2014).) The relevant rulings are explained below.[12]

         a. The Plaintiffs adequately alleged that equitable tolling applied to their RESPA claim

         The Defendants moved to dismiss the Complaint on the ground that the Plaintiffs' claim was barred by RESPA's statute of limitations. Baehr, 2014 WL 346635, at *4. As this Court explained, a claim brought pursuant to Section 8 of REPSA, 12 U.S.C. § 2607, is subject to a one-year statute of limitations, which may be equitably tolled. Id. (citing 12 U.S.C. § 2614). Because the Plaintiffs closed on their home on July 25, 2008 but did not file their Complaint until March 27, 2013, their claim fell well outside the one-year statute of limitations. Id. To determine whether the Plaintiffs adequately pled that their claim was entitled to equitable tolling, this Court applied the following standard:

To invoke the doctrine of equitable tolling, the Plaintiffs must show that “(1) the party pleading the statute of limitations fraudulently concealed facts that are the basis of the plaintiff's claim, and (2) the plaintiff failed to discover those facts within the statutory period, despite (3) the exercise of due diligence.”

Id. (citing Minter v. Wells Fargo Bank, N.A., 675 F .Supp. 2d 591, 596 (D. Md. 2009)).[13]

         Applying this standard, this Court held that the Plaintiffs sufficiently alleged “that the Defendants engaged in affirmative acts to conceal the kickback scheme.” 2014 WL 346635, at *5. Specifically, the Plaintiffs alleged that the Defendants concealed the fact that the Northrop Defendants were receiving illegal referral fees by disguising the kickback payments in the sham employment and marketing agreements. Id. Moreover, this Court explained that whether the Defendants were required to disclose the “employment or affiliation agreements is irrelevant in determining whether the Defendants fraudulently concealed violations of RESPA by entering into sham agreements. The issue is not whether the agreements were disclosed, but whether they were created as shams to hide payments in violation of RESPA.” Id. at *5 n. 9. Briefly addressing due diligence, this Court reasoned that reasonable inquiry would not have revealed the RESPA claim because anyone who inquired into the agreements would have discovered only the seemingly valid employment or marketing agreements. Id. at *5.

         b. The Plaintiffs failed to state a claim against Carla Northrop and Long & Foster

         The Defendants also moved to dismiss Long & Foster and Carla Northrop for failure to state a claim. Baehr, 2014 WL 346635, at *5-6. As to Long & Foster, this Court held that the Plaintiffs' allegations concerning an agency relationship between the Northrop Defendants and Long & Foster were mere legal conclusions and failed to allege “the basis, nature, or extent of the relationship.” Id. at *6. As to Carla Northrop, this Court held that the proposed Amended Complaint failed to allege that Carla Northrop in fact gave or accepted a kick back in 2008 when the Baehrs purchased their home. Id. at *5. Therefore, this Court dismissed both Long & Foster and Carla Northrop.[14]

         c. Class certification was appropriate, but on narrower ...


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