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Somerville v. West Town Bank & Trust

United States District Court, D. Maryland

November 19, 2019

JOSEPH SOMERVILLE, III, et al. Plaintiffs,



         This is a putative class action concerning an alleged illegal kickback scheme under which Defendant West Town Bank & Trust ("West Town") purportedly accepted payments, primarily in the form of U.S. postage stamps, from All Star Title, Inc. ("All Star") in exchange for referring mortgagors to All Star, a mortgage settlement services company. Plaintiffs are borrowers who either currently have or recently had a residential mortgage originated or brokered by West Town which All Star settled. As a result of the scheme, Plaintiffs assert, they were overcharged by All Star for settlement services. The payment of kickbacks, they allege, are a patent violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2607(a), and the scheme further violates the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962, and antitrust law pursuant to the Sherman Act, 15 U.S.C. § 1.

         The matter is before the Court on West Town's Motion to Dismiss, ECF No. 17. Plaintiffs' have filed a response, ECF No. 21, and West Town has replied, ECF No. 22. Oral Argument on the Motion was held on October 28, 2019. For the reasons stated below, the Court GRANTS-IN-PART and DENIES-IN-PART the motion.

         a. Standard of Review

         To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555).

         If pleadings allege fraud or mistake, as Plaintiffs here do concerning their RICO claim, "a party must state with particularity the circumstances constituting the fraud or mistake." Fed.R.Civ.P. 9(b). Under the heightened pleading standard of Rule 9(b), "[t]hese circumstances are 'the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentations and what [he or she] obtained thereby.'" Weidman v. Exxon Mobil Corp., 776 F.3d 214, 219 (4th Cir. 2015)

         b. Tolling of the Applicable Statutes of Limitations

         West Town argues that Plaintiffs' claims pursuant to RESPA, RICO, and the Sherman Act are barred because the statute of limitations for each law has run. Plaintiffs do not dispute that the time limits under these statutes - one year for RESPA and four years for RICO and the Sherman Act - did pass prior to the filing of their claim.[1] But, they argue, because West Town fraudulently concealed their allegedly illegal actions, the respective statutes of limitations were equitably tolled. ECF No. 1, ¶ 243. In other words, they say, West Town's active concealment of its alleged violations prevented the Plaintiff borrowers from being on notice of the bank's supposed wrongdoing until - in the case of some Plaintiffs - over eight years after their loan closing. See, e.g., ECF No. 17-1, p. 9.

         The Fourth Circuit recently addressed this very issue in a strikingly similar case, Edmonson v. Eagle National Bank. 922 F.3d 535 (4th Cir. 2019). As in the present case, plaintiffs in Edmonson were residential mortgagors who alleged their lenders received kickbacks for referrals to a title company for settlement services. 922 F.3d at 541. The Edmonson court reasserted the long-established standard that in order to "toll a limitations period based on fraudulent concealment, a plaintiff must demonstrate: (1) the party pleading the statute of limitations fraudulently concealed facts that are the basis of the plaintiffs claim, and (2) the plaintiff failed to discover those facts within the statutory period, despite (3) the exercise of due diligence." 922 F.3d at 548 (quoting Supermarket of Marlinton, Inc. v. Meadow Gold Dairies, Inc., 71 F.3d 119, 122 (4th Cir. 1995)).

         West Town argues, first that, as a factual matter, it did not fraudulently conceal pertinent facts from Plaintiffs. The Complaint points to an opposite conclusion.

         In the present context, affirmative acts of concealment "need not be separate and apart" from the acts of the underlying violation, "but instead may include acts of concealment involved in the alleged violation itself." Edmonson, 922 F.3d at 553 (quoting Marlinton 71 F.3d at 126) (markings omitted). Thus, "[a] plaintiff satisfies its burden to allege an affirmative act of concealment if, for example, it alleges that the defendant employed 'some trick or contrivance intended to exclude suspicion and prevent inquiry.'" Edmonson, 922 F.3d at 553 (quoting Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 446-47 (6th Cir. 2012)).

         Like the plaintiffs in Edmonson, Plaintiffs here allege that West Town concealed the kickbacks by not reporting the payments it received from All Star on the HUD-1 Settlement Statements and other settlement documents, including the Good Faith Estimate. ECF No. 1, ¶¶ 260-71; Edmonson, 922 F.3d at 542-543. Indeed, West Town concedes that Plaintiffs' allegations concerning the HUD-1 are indistinguishable from what the Fourth Circuit determined "constitute[d] an affirmative act of concealment for the purposes of the fraudulent concealment tolling doctrine" in Edmonson. 922 F.3d at 554; Oral Argument at 11:40 a.m. Moreover, West Town's concession that the kickbacks were paid in "postage stamps" as opposed to cash, or that the kickbacks were paid in standard currency transferred to West Town through a third-party company, are in-of-themselves evidence of the type of trickery that amounts to fraudulent concealment. See Carrier Corp., 673 F.3d 430, 447. The Court finds Plaintiffs have met their burden in showing the first element required to toll the limitation periods of the respective causes of action.

         As to the second and third elements relevant to tolling, West Town asserts that Plaintiffs failed to discover the alleged fraud during, or conduct any due diligence within, the limitations periods. ECF No. 17-1, pp. 22-26. Indeed, the bank declares Plaintiffs conducted no due diligence until each was contacted by their current attorneys. ECF No. 17-1, p. 27. Moreover, says the bank, on the date of their respective loan closings Plaintiffs knew what the cost of the allegedly above-market prices charged by All Star were and, further, that West Town had advertised that All Star's services were 30-40% lower than market rate. Id. Had Plaintiffs investigated this disconnect, West Town continues, "they would have found breadcrumbs leading them toward a potential RESPA claim." ECF No. 17-1, p. 26 (quoting Cunningham v. M&T Bank Corp., 814 F.3d 156, 162, n.3 (3rd Cir. 2016)). This is a rather breathtaking argument.

         In Edmonson, the lending bank also argued that the plaintiffs were on sufficient notice to conduct further inquiry because, for example, newspapers had published articles concerning the bank's fraudulent practices. 922 F.3d at 555. But the Fourth Circuit noted that there was no evidence that the plaintiffs there had access to or had read those articles, nor was it possible to decide at the motion to dismiss stage whether such information "would have prompted a reasonable person" to further investigate the lender's documentation and actions. Id. at 558 (quoting Go Computer, Inc. v. Microsoft Corp., 508 F.3d 170, 178 (4th Cir. 2007)). In the case at bar, there is a similar question as to whether Plaintiffs received, much less read, the advertisements promoting All Star's services.[2] Even if they had, it is not for the Court to determine at this stage that, if armed with such information, "one would expect a reasonable residential mortgage borrower" to conduct a further investigation into its lender's documents and fee structures. Edmonson, 922 F.3d at 558 (emphasis omitted). The appropriate level of due diligence "should be decided by the finder of fact and is not amenable to resolution on the pleadings or at summary judgment." Id.

         Plaintiffs have satisfied the Court that they have sufficiently pled that West Town fraudulently concealed evidence of its alleged scheme; that Plaintiffs plausibly allege that they did not discover the supposed fraud during the limitations period; and that whatever investigations Plaintiffs did or did not conduct into West Town's actions were not inconsistent with due diligence. Congress did not intend for entities that engage in unlawful kickbacks and conceal their schemes "to reap the benefits of the statute of limitations as a defense." Edmonson, 922 F.3d at 547. The Court finds that the applicable statutes of limitations should be tolled, and that Plaintiffs' RESPA, RICO, and Sherman Act claims are not barred by their respective statutes of limitations.

         c. ...

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