The U.S. District Court for the District of Maryland has granted plaintiffs Edward J. Fangman and Vicki Fangman’s motion for class certification with respect to the West Town Class. The case alleges an illegal kickback scheme involving Wells Fargo; JPMorgan Chase Bank; PNC Mortgage and PNC Bank; Genuine Title, LLC; MetLife and other defendants.
The CFPB previously entered into a consent order in January 2015 against Chase, Wells Fargo and Genuine Title, which is now defunct.
The case is Fangman, et al. v. Genuine Title, LLC, et al. (Civil Action No. 14-0081).
All of the named defendants include Genuine Title, LLC; Brandon Glickstein, Inc.; Dog Days Marketing, LLC; Competitive Advantage Marketing Group, LLC (collectively “Genuine Defendants”); Wells Fargo Home Mortgage, Inc. and Wells Fargo, N.A.; West Town Bank & Trust; PNC Mortgage and PNC Bank, N.A.; MetLife Home Loans, LLC and MetLife Bank, N.A.; Net Equity Financial; Eagle National Bank; E Mortgage Management; and JP Morgan Chase Bank.
West Town is the only lender defendant moving forward with litigation. The court preliminarily has approved settlement agreements between the plaintiffs and Chase and Wells Fargo.
The Fangmans and 46 other plaintiffs allege that the defendants violated RESPA by engaging in a home mortgage kickback scheme in which Genuine Title, by itself and through sham companies, allegedly provided cash payments and marketing materials to mortgage lenders, including West Town Bank & Trust, representatives of which referred its clients to Genuine Title for settlement services.
The plaintiffs identified approximately 400 borrowers who secured federally-related mortgage loans from West Town and whose loans were referred to Genuine Title for settlement services.
“[T]here is no indication that they knew anything about West Town’s alleged kickback scheme with Genuine Title. The alleged kickback relationship between Genuine Title and West Town was not disclosed on the HUD-1 forms,” the court stated. “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.’”
The costs of these agreements were paid on a monthly basis based on the number of referred settlements in the previous month.
“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,’” the court added.
The court’s decision
To qualify for class certification, the plaintiffs must first establish the four requirements of Rule 23(a): Numerosity, commonality, typicality and adequacy of representation.
The court first considered the issue of whether the plaintiffs met RESPA’s statute of limitations.
The plaintiffs who closed on their loans prior to Jan. 2, 2014, sought equitable tolling of RESPA’s one-year statute of limitations. To toll RESPA’s statute of limitations, a plaintiff must allege fraudulent concealment on the part of the defendants and the inability of the plaintiff, despite due diligence, to discover the fraud.
West Town objected that the named West Town plaintiffs lacked standing to represent the proposed class because the evidence in the record did not support equitable tolling of the named plaintiffs’ individual claims. West Town further argued that even if the named plaintiffs did have standing, the remaining class members’ entitlement to equitable tolling was an individual inquiry rather than a class-wide question.
The court found, however, that the plaintiffs provided sufficient evidence that their individual claims should be equitably tolled and that the issue of equitable tolling was appropriate for class-wide adjudication.
The court found that the plaintiffs practiced due diligence because the second amended complaint indicated that they filed their lawsuit within one year of learning of the alleged kickback scheme from counsel. The Fourth Circuit Court of Appeals indicated in Brumbaugh v. Princeton Partners, 985 F.2d 157, 162 (4th Cir. 1993) that due diligence only requires investigation where “an individual has been placed on inquiry notice of wrongdoing.”
As for the fraudulent concealment requirement, the court turned to the HUD-1 forms the plaintiffs received at closing, which did not disclose that their West Town mortgage brokers were receiving any sort of payment or benefit from Genuine Title in exchange for loan referrals.
West Town objected that no concealment occurred with respect to the HUD-1 forms because they accurately stated the charges that the plaintiffs paid.
However, the Third Circuit Court of Appeals explicitly rejected that argument in the case of In re Cmty. Bank of N. Virginia Mortg. Lending Practices Litig., 795 F.3d 380, 403 (3d Cir. 2015). The Third Circuit reasoned: “Even assuming that a HUD–1 correctly summarizes the fees and charges actually paid by a borrower for settlement services in connection with a federally related mortgage loan, it does not follow that the HUD–1 should be viewed in isolation. Federal regulations associated with that form control the nature and quality of information that is supposed to be included in each HUD–1, and borrowers should be able to rely on that information in fact being of the requisite nature and quality....We therefore conclude that inclusion of misleading information in a HUD–1 can constitute an independent act of concealment.”
West Town then objected that “mere silence” did not itself establish fraudulent concealment “because a RESPA violation is not a ‘self-concealing wrong.’”
The plaintiffs, the court found, provided evidence of additional acts of concealment by Wells Fargo, beyond the incomplete HUD-1 forms. For instance, the plaintiffs alleged that West Town brokers received kickback payments not only from Genuine Title, but from a series of “sham” companies set up for that purpose.
The court then considered whether the plaintiff met the four Rule 23(a) requirements for class certification, making the following findings:
- Numerosity: The plaintiffs identified more than 400 West Town Class members.
- Commonality: The claims of the proposed class members rest on the same legal issues and similar facts.
- Typicality:The claims arose from the same alleged conduct, will seek relief under the same legal theory and will tend to advance the interests of the absent class members.
- Adequacy of Representation: The interests of the named plaintiffs and class members align.