Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Edmonson v. Eagle National Bank

United States Court of Appeals, Fourth Circuit

April 26, 2019

MARY E. EDMONSON, Plaintiff - Appellant,
v.
EAGLE NATIONAL BANK; EAGLE NATIONWIDE MORTGAGE COMPANY; EAGLE NATIONAL BANCORP, INCORPORATED; ESSA BANCORP, INCORPORATED; ESSA BANK & TRUST, Defendants - Appellees. RENITA JAMES, Plaintiff - Appellant,
v.
ACRE MORTGAGE & FINANCIAL, INC., Defendant-Appellee. D'ALAN E. BAUGH; PENNY FRAZIER, Plaintiffs - Appellants,
v.
THE FEDERAL SAVINGS BANK, TRACIE PARKER DOBBINS; GLADYS PARKER, Plaintiffs - Appellants,
v.
BANK OF AMERICA, N.A., Defendant - Appellee. JILL BEZEK; MICHELLE HARRIS Plaintiffs - Appellants,
v.
FIRST MARINER BANK Defendant - Appellee.

          Argued: December 11, 2018

          Appeals from the United States District Court for the District of Maryland at Baltimore. Richard D. Bennett, District Judge. (1:16-cv-03938-RDB; 1:17-cv-00540-RDB; 1:17-cv-01734-RDB; 1:17-cv-01735-RDB; 1:17-cv-02902-RDB)

         ARGUED:

          William James Murphy, ZUCKERMAN SPAEDER LLP, Baltimore, Maryland, for Appellants.

          Ryan Thomas Becker, FOX ROTHSCHILD LLP, Philadelphia, Pennsylvania, for Appellees. Brian David Schmalzbach, MCGUIREWOODS LLP, Richmond, Virginia, for Appellee Bank of America National Association.

         ON BRIEF:

          Cyril V. Smith, Adam B. Abelson, ZUCKERMAN SPAEDER LLP, Baltimore, Maryland; Michael Paul Smith, SMITH, GILDEA & SCHMIDT, LLC, Towson, Maryland; Timothy F. Maloney, JOSEPH, GREENWALD & LAAKE, P.A., Greenbelt, Maryland, for Appellants.

          George J. Krueger, FOX ROTHSCHILD LLP, Philadelphia, Pennsylvania; Brian Moffet, MILES & STOCKBRIDGE P.C., Baltimore, Maryland, for Appellees Eagle Nation Bank, Eagle Nationwide Mortgage Company, Eagle National Bancorp, Incorporated, Essa Bancorp, Incorporated, and Essa Bank & Trust. Bradley R. Kutrow, MCGUIRE WOODS LLP, Charlotte, North Carolina, for Appellee Bank of America National Association. Ari Karen, OFFIT KURMAN, PA, Baltimore, Maryland, for Appellees Acre Mortgage & Financial, Inc, and The Federal Savings Bank. Michael E. Blumenfeld, NELSON MULLINS RILEY & SCARBOROUGH LLP, Baltimore, Maryland, for Appellee First Mariner Bank.

          Before KEENAN, WYNN, and HARRIS, Circuit Judges.

          WYNN, CIRCUIT JUDGE

         Each of the five Plaintiffs in this matter brought a putative class action alleging that between 2009 and 2014 certain lenders participated in "kickback schemes" prohibited by the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq. But the district court dismissed their claims because the first of the five class actions at issue in this appeal was not filed until June 23, 2016, well after the expiration of RESPA's one-year statute of limitations. We, however, hold that, under the allegations set forth in their complaints, Plaintiffs are entitled to relief from the limitations period under the fraudulent concealment tolling doctrine. Accordingly, we reverse the district court's dismissal of Plaintiffs' actions.

         I.

         Because the district court dismissed Plaintiffs' actions under Federal Rule of Civil Procedure 12(b)(6), we take the non-conclusory factual allegations in Plaintiffs' complaints as true and draw all reasonable inferences therefrom in Plaintiffs' favor. In re GNC Corp., 789 F.3d 505, 512 (4th Cir. 2015).

         Between 2009 and 2014, Defendants-several banks and mortgage companies (each, a "Lender," and collectively, the "Lenders")[1]-originated or serviced residential mortgages obtained by Plaintiffs. Mortgage brokers and loan officers employed by the Lenders referred Plaintiffs to Genuine Title, LLC ("Genuine Title") to procure title insurance and obtain escrow and settlement services. Plaintiffs allege that Genuine Title provided the Lenders with several forms of "unearned fees and kickbacks" to induce those referrals, J.A. 8, in violation of RESPA, which forbids, among other things, any person from "giv[ing or] accept[ing] any fee, kickback, or thing of value pursuant to any agreement or understanding . . . [as] part of a real estate settlement service involving a federally related mortgage loan," 12 U.S.C. § 2607(a).

         In the scheme's most basic form, Genuine Title transferred more than $4, 000, 000 to an entity named Brandon Glickstein, Inc. ("BGI"), which purportedly provided "advertising and marketing" services. J.A. 13-14. Brandon Glickstein, who founded BGI, had previously served as "Genuine Title's lead marketing and account representative." J.A. 13. Using the funds it received from Genuine Title, BGI made millions of dollars in direct cash payments to the Lenders' brokers and loan officers who made referrals to Genuine Title. Brokers and loan officers who referred more customers to Genuine Title received larger payments from BGI.

         Plaintiffs further allege that Glickstein founded a second company, Competitive Advantage Media Group, LLC ("Competitive Advantage"), that made in-kind payments to the Lenders' brokers and loan officers. In particular, Competitive Advantage provided "free or discounted leads, postage, and/or marketing materials and services and/or credits for mortgage brokers and lenders" associated with the Lenders. J.A. 14. Genuine Title allegedly paid for some or all of the promotional materials Competitive Advantage provided to the Lenders' brokers and loan officers.

          According to the complaint, the amount that Genuine Title paid Competitive Advantage for the promotional materials Competitive Advantage provided to the Lenders' brokers or loan officers varied with the number of referrals the broker or loan officer made to Genuine Title. "For example, if a [r]eferring [b]roker who used [Competitive Advantage] for his or her marketing materials referred five (5) mortgages that closed with Genuine Title in one month, and the agreement with Genuine Title was that each closing was valued at $200, Genuine Title would pay [Competitive Advantage] $1, 000 the next month to be applied to the [r]eferring [b]roker's marketing materials produced by [Competitive Advantage]." J.A. 15.

         Furthermore, Plaintiffs allege that Genuine Title entered into agreements pursuant to which a broker or loan officer associated with a Lender that refused to lend to a prospective borrower because the borrower failed to meet the Lender's underwriting standards would refer the borrower to another Lender that frequently worked with Genuine Title. That second Lender's broker or loan officer would refer the borrower to Genuine Title for title services. Under these agreements, Genuine Title would provide a cash or in-kind kickback to (1) the broker or loan officer of the Lender that referred the borrower to the second Lender and (2) the second Lender's broker or loan officer, who ultimately originated or serviced the borrower's mortgage and who referred the borrower to Genuine Title. Again, the payments to the brokers or loan officers employed by the two Lenders varied with the volume of referrals. Neither Genuine Title nor the Lenders disclosed the alleged kickbacks to Plaintiffs.

          Although the complaint alleges violations between 2009 and 2014, the first of the five class actions at issue in this appeal was not filed until June 23, 2016, well after the expiration of RESPA's one-year statute of limitations. Plaintiffs' complaints assert that Plaintiffs are entitled to relief from the limitations period, however, because the Lenders fraudulently concealed the alleged kickback scheme.

         To that end, Plaintiffs allege that BGI and Competitive Advantage were "sham" entities and that "the use of [BGI and Competitive Advantage] was intended to conceal, and did conceal, the Kickback Scheme from borrowers, including Plaintiff, Class Members, and regulators." J.A. 13. In support of the allegation that BGI and Competitive Advantage were "sham[s]," the complaints allege, for example, that "[t]he Resident Agent for [Competitive Advantage] at the time of organization was Jonathan S. Bach, Esq., the in-house attorney for Genuine Title" and that, at that time, "the address for [Competitive Advantage] was the same physical address [as] Genuine Title." J.A. 14.

         The complaints further allege that some of the brokers or loan officers employed by the Lenders "created shell companies to receive the [cash] payments" from BGI, whereas other brokers and loan officers used previously existing entities for the sole purpose of receiving the payments. J.A. 16. According to the complaints, the "[p]ayments were made and received in this way to conceal, and did conceal, the Kickback Scheme from borrowers, including Plaintiff and other Class Members, and regulators." Id. Once investigators began examining the payments from BGI to the Lenders' brokers and loan officers, "Genuine Title drafted sham Title Services Agreements for [r]eferring [b]rokers with the intent to disguise and conceal [cash] payments as legitimate fees for alleged title services provided by [r]eferring [b]rokers, and Genuine Title back-dated said agreements." J.A. 16-17. In support of the allegation that the Title Service Agreements were "sham[s]," the complaints allege that the cash payments from BGI to the Lenders' referring brokers and loan officers "were not made in accordance with the fee schedule in the Title Services Agreements and the [r]eferring [b]rokers performed no services for Genuine Title." J.A. 17.

         The complaints further alleged that the Lenders concealed the kickbacks by not reporting the payments from BGI on HUD-1 Settlement Statements[2] and other settlement documents the Lenders provided to Plaintiffs, notwithstanding that federal regulations require that HUD-1 Settlement Statements "include any amounts received for origination services, including administrative and processing services, performed by or on behalf of the loan originator," 12 C.F.R. § 1024, App. A, and provide a good faith estimate of "all charges that all loan originators involved in [the] transaction will receive," id. § 1024, App. C.

         Potentially complicating Plaintiffs' request for relief from RESPA's limitation period based on fraudulent concealment, however, is that Genuine Title, its officers, and brokers and loan officers employed by lenders not named as defendants in this case previously have faced legal actions premised on similar conduct. In 2013, for example, Edward and Vickie Fangman filed a complaint alleging that Genuine Title provided kickbacks to mortgage brokers and loan officers affiliated with several mortgage lenders and brokers in exchange for referrals. See Fangman v. Genuine Title, No. RDB-14-0081 (D. Md. 2014). Counsel for the Fangman plaintiffs-the law firms Smith, Gildea & Schmidt, LLC, and Joseph, Greenwald & Lake, P.A.-represented some of the Plaintiffs in the present action.

         Genuine Title filed for bankruptcy in 2014. Thereafter, Genuine Title's bankruptcy receiver provided counsel for the Fangman plaintiffs with access to Genuine Title's documents, records, and computer servers. From these records, Fangman counsel identified and located prospective class members as well as several additional lenders that allegedly received kickbacks from Genuine Title. Counsel then contacted these members and filed two Amended Complaints, naming several lenders as additional defendants, including, for a short time, two of the defendants in the instant case: Eagle National Bank and Bank of America, N.A.

         Like Plaintiffs, the Fangman plaintiffs sought relief from RESPA's one-year limitations period under the doctrine of fraudulent concealment. The district court in Fangman held the plaintiffs' allegations of fraudulent concealment-which track those asserted by Plaintiffs in the instant case-were sufficient to satisfy Federal Rules of Civil Procedure 9(b) and 12(b)(6). See J. v. Genuine Title, LLC, No. RDB-14-0081, 2015 WL 8315704, at *7 (D. Md. Dec. 9, 2015).

          In reaching that conclusion, the court first held that the Fangman defendants engaged in affirmative acts of concealment, including by concealing the business relationship between Genuine Title and the defendant lenders, failing to disclose the referral payments on the borrowers' HUD-1 Settlement Statements, and entering into sham Title Services Agreements. The court further held the Fangman Plaintiffs adequately alleged that they did not and "could not have reasonably known of their cause of action until contacted by [their] attorneys." Id. "Rather than sleeping on their rights, [the Fangman] 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 court held.[3] Id. The district court subsequently ruled that the evidence the Fangman plaintiffs adduced in discovery was sufficient to satisfy their burden to prove their entitlement to tolling based on fraudulent concealment. See Fangman v. Genuine Title, LLC, No. RDB-14-0081, 2016 WL 6600509, at *4-7 (D. Md. Nov. 8, 2016).

         Meanwhile, on January 22, 2015, the Consumer Financial Protection Bureau and the Maryland Attorney General initiated enforcement proceedings against Wells Fargo Bank, N.A. ("Wells Fargo") and JPMorgan Chase Bank, N.A. ("J.P. Morgan"), alleging those two financial institutions engaged in a similar kickback scheme with Genuine Title. Wells Fargo and J.P. Morgan entered into a settlement agreement with the enforcement agencies, agreeing to pay approximately $35 million dollars. That agreement received press coverage in, among other media outlets, The Wall Street Journal, The Baltimore Sun, and The Washington Post.

         Additionally, on April 29, 2015, the Consumer Financial Protection Bureau and the Maryland Attorney General brought a separate enforcement action against Genuine Title, alleging that Genuine Title, its principal, and affiliates engaged in cash payments and other kickbacks in exchange for referrals. Although the case settled, and the settlement orders contemplated additional private litigation by consumers, neither the Consumer Financial Protection Bureau nor the Maryland Attorney General required any of the financial institutions named in the enforcement actions to issue any formal notices to the public.

         During the pendency of the Fangman litigation and the federal and state enforcement proceedings, Plaintiffs' counsel further analyzed the materials provided by Genuine Title's bankruptcy receiver and identified additional borrowers potentially impacted by Genuine Title's alleged kickbacks to lenders and brokers. Based on that analysis, Plaintiffs filed the five putative class actions at issue in this appeal. Each putative class action names as defendant a separate financial institution or corporate family of financial institutions, which employed brokers and loan officers that allegedly received kickbacks from Genuine Title.

         Like the defendants in Fangman, the Lenders moved to dismiss on grounds that Plaintiffs failed to file their actions within RESPA's one-year limitations period and were not entitled to rely on the doctrine of fraudulent concealment to obtain relief from the limitations period. Unlike in Fangman, however, the district court refused to toll the limitations period based on fraudulent concealment and, therefore, dismissed ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.