Lombel et al v. Flagstar Bank, F.S.B.
Filing
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MEMORANDUM OPINION Signed by Judge Paul W. Grimm on 10/11/13. (cags, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division
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BRIAN R. LOMBEL, et al.,
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Plaintiffs,
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v.
Case No.: PWG-13-704
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FLAGSTAR BANK F.S.B.,
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Defendant.
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MEMORANDUM OPINION
This Memorandum Opinion disposes of:
1) Defendant Flagstar Bank F.S.B.’s (“Flagstar”) Motion to Dismiss (“Def.’s Dismiss
Mot.”), ECF No. 22, and supporting Memorandum (“Def.’s Dismiss Mem.”), ECF No. 22-1;
Plaintiffs Brian and Allison Lombel’s Opposition (“Pls.’ Dismiss Opp’n”), ECF No. 34; and
Defendant’s Reply (“Def.’s Dismiss Reply”), ECF No. 40;
2) Plaintiffs’ Motion to Certify Questions of Law to the Court of Appeals of Maryland
(“Pls.’ Mot. to Certify”), ECF No. 27, and supporting Memorandum (“Pls.’ Certify Mem.”), ECF
No. 27-1; Defendant’s Opposition (“Def.’s Certify Opp’n”), ECF No. 32; and Plaintiffs’ Reply
(“Pls.’ Certify Reply”), ECF No. 35;
3) Plaintiffs’ Motion to Stay Briefing Pending Resolution of Motion to Certify Questions
of Law (“Pls.’ First Stay Mot.”), ECF No. 28, and supporting Memorandum (“Pls.’ First Stay
Mem.”), ECF No. 28-1; Defendant’s Opposition (“Def.’s First Stay Opp’n”), ECF No. 33, and
Plaintiffs’ Reply (“Pls.’ First Stay Reply”), ECF No. 36; and
4) Plaintiffs’ Motion in the Alternative for a Stay of Proceedings Pending Appeal in Petry
v. Prosperity Mortgage Company (“Pls.’ Second Stay Mot.”), ECF No. 41, and supporting
Memorandum (“Pls.’ Second Stay Mem.”), ECF No. 41-1; Defendant’s Opposition (“Def.’s
Second Stay Opp’n”), ECF No. 43; and Plaintiffs’ Reply (“Pls.’ Second Stay Reply”), ECF No.
44.
A hearing is not necessary. See Loc. R. 105.6. For the reasons stated herein, Defendant’s
Motion to Dismiss is GRANTED, Plaintiffs’ Motion to Certify is DENIED, Plaintiffs’ First
Motion to Stay is DENIED as moot, and Plaintiffs’ Second Motion to Stay is DENIED.
I.
BACKGROUND
This case represents at least the third attempt in this Court by Plaintiffs’ skillful counsel
to hold a mortgage lender liable for, inter alia, violations of the Maryland Finder’s Fee Act (the
“FFA”), Md. Code, Com. Law § 13-101 et seq. See Compl. ¶ 3, Marshall v. James B. Nutter &
Co., No. RDB-10-3596 (D. Md. Dec. 23, 2010); Compl. ¶ 1, Petry v. Prosperity Mortg. Co., No.
WMN-08-1642 (D. Md. June 23, 2008); see also Compl., Minter v. Wells Fargo Bank, N.A., No.
WMN-07-3442 (D. Md. Dec. 26, 2007), ECF No. 1 (alleging RESPA and RICO violations
arising out of table-funded mortgages).
For purposes of considering Defendant’s Motion, this Court accepts the facts that
Plaintiffs alleged in their Complaint as true. See Aziz v. Alcoac, 658 F.3d 388, 390 (4th Cir.
2011). Defendant is a federally chartered savings bank that, during the relevant time period, has
“funded numerous types of mortgage loans in Maryland,” including making loans through
“table-funding” arrangements. Class Action Compl. & Demand for Jury Trial ¶¶ 14–16, ECF
No. 2. According to Plaintiffs, table funding refers to a practice by which a mortgage broker will
identify itself to the borrower as the lender in a transaction but, in fact, serves as an intermediary
2
for another undisclosed lender. Id. ¶ 3. The funding lender advances the loan funds to the
broker at the time of settlement, and in return, the loan is assigned to the funding lender at or
immediately after settlement. Id. According to Plaintiffs, table funding is a means to “conceal[]
the true role of the mortgage broker/lender in the transaction as well as the identity of the
funding lender” and also “aids predatory lending practices such as loan flipping.” Id.
Plaintiffs entered into a “mortgage refinance transaction for their residence at 324 Ahearn
Court” on or about May 16, 2012. Id. ¶ 27. To facilitate this transaction, Plaintiffs worked with
a mortgage broker, Davlaw Enterprises, Inc. d/b/a Union First Mortgage (“Davlaw”). Id. ¶¶ 13,
28. Davlaw also was identified as the “lender” on the Note, Deed of Trust, and other loan
documents, although the loan actually was table funded by Defendant. Id. ¶¶ 29–31. Plaintiffs
allege that they paid “at least $9,504.56 in closing costs and settlement fees” including “finder’s
fees of approximately $9,366.40 in loan origination charges and yield spread premiums” paid to
Davlaw. Id. ¶ 35.1
1
Defendant asserts that the “yield-spread premium” actually was a credit deducted from the
amount owed by Plaintiffs, not a charge to Plaintiffs. See Def.’s Dismiss Mem. 9. Rather than
adding charges of $5,083.70 and $4,282.70 to total over $9,000, Defendant claims that Plaintiffs
should have subtracted the $4,282.70, yielding a total fee of $801.00 that was paid by Plaintiffs.
Id. Plaintiffs have not presented any facts or allegations to dispute this calculation, and it
appears to be borne out by the copy of the HUD-1 statement attached by Defendants to their
Dismissal Memorandum, which is more legible than the copy of that document attached to
Plaintiffs’ Complaint. See HUD-1 Settlement Statement 2–3, Def.’s Dismiss Mem. Ex. 3, ECF
No. 22-4; HUD-1 Settlement Statement 2–3, Compl. Ex. 1, ECF No. 2-2; see also Am.
Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004) (“[W]hen a
defendant attaches a document to its motion to dismiss, ‘a court may consider it in determining
whether to dismiss the complaint [if] it was integral to and explicitly relied on in the complaint
and [if] the plaintiffs do not challenge its authenticity.” (quoting Phillips v. LCI Int’l Inc., 190
F.3d 609, 618 (4th Cir. 1999) (emendations in original))).
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The crux of Plaintiffs’ claims against Defendant is that Davlaw violated the FFA at
Defendant’s behest.2 According to Plaintiffs, there either was a civil conspiracy or a principal–
agent relationship between Defendant and Davlaw because Defendant employed Davlaw to
recruit borrowers for its loans, id. ¶ 39, which “nefariously switched [the] role[ of Davlaw] and
instead rendered the broker/lenders as the agents of Flagstar in the transactions, soliciting loan
originations on behalf of Flagstar and raising borrowers’ interest rates, instead of soliciting
multiple lenders for the best rate on behalf of borrowers.”
Id.
According to Plaintiffs’
allegations, Defendant had “a right of control” over Davlaw evidenced by the fact that Defendant
“required the broker/lenders to use its closing package and underwriting services[,] . . . to submit
each loan for Flagstar’s approval prior to closing or funding, required the broker/lender to follow
its closing instructions, and required the broker/lender to assign each of the mortgages to it
contemporaneously with closing” as well as “instruct[ing] the broker/lenders on how to prepare
loan applications in order to ensure approval of the applications by Flagstar.” Compl. ¶ 41.
Plaintiffs allege that Davlaw “had a duty to act primarily for the benefit of Flagstar” in arranging
loans and “had the power to alter the legal relations of Flagstar” as well as receiving several
payments from and with the knowledge of Flagstar. Id. ¶ 42–44.
On December 20, 2012, Plaintiffs filed a Class Action Complaint in the Circuit Court for
Montgomery County, see Notice of Removal, ECF No. 1 (setting forth date Complaint was
filed), asserting five counts against Defendant: violation of Maryland’s Finder’s Fee Act, Md.
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Plaintiffs purport to represent a class of, in essence, all borrowers in table-funded loan
transactions funded by Flagstar, irrespective of the identity of the “broker/lender.” See Compl.
¶ 10. However, Plaintiffs have withdrawn, without prejudice, their motion to certify a class, see
Order, ECF No. 20, and in any event it is far from clear that Plaintiffs’ claim against various
mortgage brokers arising out of thousands of discrete transactions could satisfy the requirements
of Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). Accordingly, Plaintiffs’ individual
claims are the only ones currently before the Court.
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Code, Com. Law § 12-804, Compl. 21; violation of Maryland’s Consumer Protection Act (the
“MCPA”), Md. Code, Com. Law § 13-101 et seq., Compl. 24; unjust enrichment, Compl. 29;
negligent misrepresentation, Compl. 31; and negligence, Compl. 35. Plaintiffs also filed a
Motion for Certification of the Class, ECF No. 4, which voluntarily was withdrawn without
prejudice, Order, ECF No. 20. Defendant removed the case to this Court by Notice of Removal
filed on March 5, 2013 claiming jurisdiction under the Class Action Fairness Act, 28 U.S.C. §
1332(d). Notice of Removal ¶¶ 5–13.
Defendants filed a Motion to Dismiss for failure to state a claim on April 12, 2013.
Shortly thereafter, and before responding to the motion to dismiss, Plaintiffs filed a Motion to
Certify Questions of Law to the Court of Appeals of Maryland on April 24, 2013, seeking to
have the Court of Appeals rule on certain “central issues” in this case. See Pls.’ Certify Mem. 1.
Five days later, on April 29, 2013, Plaintiffs filed a motion to stay briefing on the Motion to
Dismiss until the Motion to Certify was resolved. Pls.’ First Stay Mot. Because the Motion to
Dismiss has now been fully briefed and the Motion to Certify is resolved by this Memorandum
Opinion and the accompanying Order, that first motion to stay is now moot.
On July 2, 2013, Plaintiffs filed a second motion to stay, this time seeking to stay all
proceedings pending the Fourth Circuit’s ruling in the appeal of Petry v. Prosperity Mortgage
Co., No. WMN-08-1642, 2013 WL 3179060 (D. Md. June 20, 2013). Pls.’ Second Stay Mot.
Defendant’s Motion to Dismiss, Plaintiffs’ Motion to Certify, and Plaintiffs’ Second
Motion to Stay have all been fully briefed and are now ripe.
II.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) provides for “the dismissal of a complaint if it
fails to state a claim upon which relief can be granted.” Velencia v. Drezhlo, No. RDB-12-237,
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2012 WL 6562764, at *4 (D. Md. Dec. 13, 2012). This rule’s purpose “‘is to test the sufficiency
of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the
applicability of defenses.’” Id. (quoting Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th
Cir. 2006)). To that end, the Court bears in mind the requirements of Rule 8, Bell Atlantic Corp.
v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009) when considering a
motion to dismiss pursuant to Rule 12(b)(6). Specifically, a complaint must contain “a short and
plain statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2),
and must state “a plausible claim for relief,” as “[t]hreadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not suffice,” Iqbal, 556 U.S. at 678–79.
See Velencia, 2012 WL 6562764, at *4 (discussing standard from Iqbal and Twombly). “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.” Iqbal, 556 U.S. at
663.
Where the allegations in a complaint sound in fraud, the plaintiff also must satisfy the
heightened pleading requirements of Fed. R. Civ. P. 9(b) by “stat[ing] with particularity the
circumstances constituting fraud.” This requires that the plaintiff allege “‘the time, place, and
contents of the false representations, as well as the identity of the person making the
misrepresentation and what he obtained thereby.’” Harrison v. Westinghouse Savannah River
Co., 176 F.3d 776, 784 (4th Cir. 1999).
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III.
DISCUSSION
A. Defendant’s Motion to Dismiss
1. FFA Violations
At the outset, Plaintiffs do not allege that Defendant directly charged or received any
finder’s fees in violation of the FFA. Rather, they allege that Davlaw received $9,366.40 in
finder’s fees “by or on behalf of the Lombels.” Compl. ¶ 35.3 Yet Plaintiffs have not sued
Davlaw itself, only Defendant, the lender that advanced the loan funds and eventually took
assignment of the mortgage. Id. ¶¶ 33–35. Therefore Plaintiffs have alleged only that Defendant
is vicariously liable for Davlaw’s conduct. This allegation relies on claims that Defendant
conspired with Davlaw, that Defendant aided and abetted Davlaw, or that Davlaw was acting as
an agent of Defendant when it violated the FFA. As explained herein, none of these theories
provides a basis for holding Defendant vicariously liable for any FFA violations that Davlaw
may have committed.4
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It is not material at this time whether or not the actual fee amount was $9,366.40 as alleged by
Plaintiffs, or $801 as demonstrated by Defendant’s documentary evidence. In either case,
Plaintiffs sufficiently have alleged that the fees in question were “finder’s fees,” see Compl. ¶ 35,
and either amount is less than eight percent of the total loan amount of $226,000. See Md. Code,
Com. Law § 12-804(a) (allowing a mortgage broker to charge a “finder’s fee not in excess of 8
percent of the amount of the loan”); Table Funding Request Form, Compl. Ex. 2, ECF No. 2-3
(mortgage loan amount is $226,000).
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This is not to say that Plaintiffs have not alleged a violation of the FFA. A plain reading of the
FFA would suggest that Davlaw (or, indeed, the broker in any table-funded loan transaction), by
serving as both the mortgage broker and the nominal lender, may well have violated the FFA.
See Md. Code Com. Law § 12-804(e) (“A mortgage broker may not charge a finder’s fee in any
transaction in which the mortgage broker . . . is the lender . . . .”). But see Petry v. Prosperity
Mortg. Co., No. WMN-08-1642, 2013 WL 3179060, at *1 (suggesting that “charges for work
actually performed were not impermissible finder’s fees”). If so, Plaintiffs may be generally
correct that a mortgage broker cannot collect a fee in a table-funded transaction. However,
because this case can be resolved solely on Plaintiffs’ failure to show that Defendant is liable for
any possible FFA violations, there is no need to address whether Davlaw’s conduct violated the
FFA.
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“‘The Maryland Finder’s Fee Law is very narrow in its scope: it applies only to mortgage
brokers and the fees they charge borrowers.’ Under the act, a mortgage broker is a person who,
for a fee or other valuable consideration assists a borrower in in obtaining a mortgage loan and is
not named as a lender in the transaction.” Fields v. Walpole, No. DKC-11-1000, 2011 WL
2669401, at *7 (D. Md. July 6, 2011) (quoting Sweeney v. Savings First Mortg., LLC, 879 A.2d
1037, 1048–49 (Md. 2005)). Accordingly, it is clear in this district that Defendant itself could
not have violated the FFA directly because it was not, and is not alleged to have been, a
“mortgage broker” with respect to Plaintiffs’ refinancing. See Minter v. Wells Fargo Bank, N.A.,
924 F. Supp. 2d 627, 647 (D. Md. 2013). To the extent that Plaintiffs rely on the language of
Md. Code, Com. Law § 12-804(e), barring brokers from charging a finder’s fee if they also are
the lender, this is a restriction on the conduct of brokers only, not on lenders who are not
brokers.
Acknowledging that Defendant did not “directly violate[] the FFA,” Pls.’ Dismiss Opp’n
13, Plaintiffs primarily assert that Defendant has conspired in Davlaw’s FFA violations. But
because Defendant cannot have committed the underlying violation of the FFA, it also cannot be
liable for conspiring to do so. Shenker v. Laureate Educ., Inc., 983 A.2d 408, 428 (Md. 2009)
(“[A] defendant may not be adjudged liable for civil conspiracy unless that defendant was legally
capable of committing the underlying tort alleged.”). Plaintiffs attempt to recharacterize the
holdings in Shenker and Minter by reading into them restrictions not stated by the Maryland
Court of Appeals or this Court, namely a limitation of civil conspiracy liability to parties that
have “directly violat[ed] the statute.” Pls.’ Dismiss Opp’n 13–14. Plaintiffs attack that straw
man with the obvious point that a defendant may be liable for civil conspiracy even where it has
not directly violated a statute, id., and the bewilderingly circular argument that the possibility
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that a defendant could be held liable for civil conspiracy without directly violating a statute is the
same as being “legally capable” of violating that statute. Id. at 13–14 & n.13. This attempt to
pull up Plaintiffs’ conspiracy claim by its own bootstraps amounts to little more than sophistry;
Shenker makes clear that the crucial question for civil conspiracy liability is whether a defendant
could be subject to liability had he committed the underlying action, not whether he committed
that action. See Shenker, 983 A.2d at 428.5
Nor have Plaintiffs shown that the FFA should be expanded to allow for aiding and
abetting liability. “Maryland courts have not yet extended the scope of aiding and abetting
liability or assignee liability to statutes providing for civil liability where the statute does not
expressly impose this additional avenue of liability.” Petry v. Wells Fargo, 597 F. Supp. 2d 558,
565 (Md. 2009). “[I]t is clear that the statutory language of [] the Finder’s Fee Act [does not]
specifically provide for such liability.
Accordingly, this Court will not imply expanded
liability . . . for aiding and abetting.” Id. (citing Baltimore–Washington Telephone Co. v. Hot
Leads Co., LLC, 584 F. Supp. 2d 736, 746 (D. Md. 2008)).
Plaintiffs attempt to rescue their claims under the FFA by relying on agency principles—
the only position taken by Plaintiffs that has not already been expressly rejected by this Court.
But here Plaintiffs simply fail adequately to plead a principal–agent relationship between
Defendant and Davlaw. A principal–agent relationship exists where “‘(1) the agent is subject to
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Plaintiffs also have argued that Defendant can be liable for conspiracy to violate the FFA
because it has the capacity to act as a broker in some other, hypothetical transaction, even though
it was not the broker here. See Pls.’ Certify Mem. 19. This argument wholly misrepresents the
law. The defendants at issue in Shenker were not alleged to be incompetent—they presumably
had the capacity to act as fiduciaries—they simply were not fiduciaries in the context of that suit
and did not owe the fiduciary duties alleged to be violated. See Shenker, 983 A.2d at 428. The
decisive fact is that Defendant was not a mortgage broker in this transaction; there is no need to
consider whether facts could ever arise that could render Defendant liable under the FFA.
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the principal’s right of control; (2) the agent has a duty to act primarily for the benefit of the
principal; and (3) the agent has the power to alter the legal relations of the principal.’” Harmon
v. BankUnited, No. WDQ-08-3456, 2009 WL 3487808 (D. Md. Oct. 22, 2009) (quoting Brooks
v. Euclid Sys. Corp., 827 A.2d 887 (Md. Ct. Spec. App. 2003)). Plaintiffs allege that Davlaw
was “subject to a right of control by” Defendant because Davlaw used Defendant’s forms and
underwriting services, was required to follow Defendant’s closing instructions, and was required
to assign mortgages to Defendant at closing. Compl. ¶ 41. In response, Defendant correctly
notes that “lenders use form documents in making mortgage loans . . . , and so the fact that
Flagstar wanted Plaintiffs to execute a standard form note and deed of trust does not convert
Davlaw from a supplier into Flagstar’s agent.” Def.’s Reply 13–14. Discovery may bear out
Defendant’s position; however, the facts pleaded by Plaintiffs are analogous to those that were
found sufficient to show the right to control in Harmon, and therefore Plaintiffs have satisfied
their burden on that element. See Harmon, 2009 WL 3487808, at *4. Plaintiffs allege that
Davlaw “had the power to alter the legal relations of Flagstar,” on the grounds that Davlaw was
authorized to make loan commitments and negotiate the terms of mortgage loans that Defendant
was obligated to take ownership of. Compl. ¶ 43.
With respect to Davlaw’s duties to Defendant, though, Plaintiffs make only conclusory
allegations that do not suffice to allege an agency relationship. See Iqbal, 556 U.S. at 663.
Plaintiffs allege that Davlaw “had a duty to act primarily for the benefit of Flagstar in the
transactions of” Plaintiffs, but the only fact to support this conclusion is that Davlaw was
“soliciting the mortgage loans of Named Plaintiffs and the Class solely for assignment to
Flagstar, and did not solicit other lenders for these transactions.” Compl. ¶ 42. This allegation
falls far short of alleging any duty owed by Davlaw, much less a duty to act for the benefit of
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Defendant. See Harmon, 2009 WL 3487808, at *4. As in Harmon, Plaintiffs do not show “an
exclusive brokerage relationship or plead facts showing that [Davlaw] had a duty to act
‘primarily’ for the benefit of [Defendant] in the transactions with [Plaintiffs].” Harmon, 2009
WL 3487808, at *4.6 Accordingly, Plaintiffs have failed to allege an agency relationship capable
of giving rise to vicarious liability, and their FFA claim should be dismissed.
2. MCPA Violations
Plaintiffs’ Count II alleges violation of the MCPA based upon allegedly false,
misleading, or deceptive statements or omissions by Defendant.
See Compl. ¶¶ 97, 119.
Because these allegations sound in fraud, Count II is subject to the heightened pleading standards
of Fed. R. Civ. P. 9(b). See Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769, 781 (4th Cir.
2013); Marshall v. James B. Nutter & Co., 816 F. Supp. 2d 259, 266–67 (D. Md. 2011). Rule
9(b) requires the Plaintiffs to allege “‘the time, place, and contents of the false representations, as
well as the identity of the person making the misrepresentation and what he obtained thereby.’”
Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999). Plaintiffs
correctly note that where a claim of fraud is based on an omission, “‘meeting Rule 9(b)’s
particularity requirement will likely take a different form.’” See Ademiluyi v. PennyMac Mortg.
Inv. Trust Holdings I, LLC, 929 F. Supp. 2d 502, 533 (D. Md. 2013); see also Pls.’ Dismiss
Opp’n 43. However, Plaintiffs allege the active misrepresentation of “the identity of the true
lender in the mortgage loan transactions and [] the terms and financial conditions applicable
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Defendant attempts to show that Davlaw was not working exclusively with Defendant by
pointing out that Davlaw has been sued in this Court in connection with mortgages it arranged
with other lenders. See Def.’s Dismiss Reply 15 & n.21; Compl., Taccino v. Bank of Am., No.
JFM-10-316 (D. Md. Feb. 9, 2010), ECF No. 1, Def.’s Dismiss Reply Ex. 1, ECF No. 40-1.
Although the existence of this lawsuit is judicially noticeable, Fed. R. Evid. 201, the fact that
another plaintiff made allegations against Davlaw in a case that involved none of the parties here
does not prevent Plaintiffs from alleging otherwise.
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to . . . [the] mortgage loan transactions,” Compl. ¶ 106, not mere omissions. And regardless,
Plaintiffs have failed to allege any specific misrepresentation or material omission by Defendant,
or indeed, any direct contact at all between Plaintiffs and Defendant, other than vaguely asserting
that Defendant generally concealed its role in Plaintiffs’ mortgage transaction.
Even had Plaintiffs satisfied the requirements of Rule 9(b), they also “‘must have
suffered an identifiable loss, measured by the amount the consumer spent or lost as a result of his
or her reliance on the [Defendant’s] misrepresentation.” Goss v. Bank of Am., N.A., 917 F.
Supp. 2d 445, 450 (D. Md. 2013) (quoting Lloyd v. Gen. Motors Corp., 916 A.2d 257, 277 (Md.
2007) (emphasis added)). The only specific harm that Plaintiffs allege is “payment of unlawful
finder’s fees.” See Compl. ¶¶ 101, 108. Not only do Plaintiffs fail to allege that they would not
have engaged in the loan transaction if they knew that it was being table funded, see generally
Compl., but to the extent that Defendant may have concealed its involvement in Plaintiffs’
mortgage transaction, Plaintiffs would have been under the belief that Davlaw was both its
broker and the actual lender. This would have made it more obvious that Davlaw’s fees may
have been prohibited by the FFA, see Md. Code, Com. Law § 12-804(e) (prohibiting a broker
from charging a finder’s fee if it is also acting as the lender), not less so. Thus any unlawful
finder’s fees that Plaintiffs may have paid were in spite of Defendant’s alleged
misrepresentations, not because of them, and Plaintiffs’ MCPA claims should be dismissed.
3. Common Law Claims
Plaintiffs’ common law claims also must be dismissed. As an initial matter, it is unlikely
that Plaintiffs could assert any of these common law claims insofar as they attempt to hold
Defendant liable for Davlaw’s purported FFA violations. “‘Ordinarily, where a statutory remedy
[such as those in the FFA] is provided, it will be deemed to be exclusive.’” Moose v. Fraternal
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Order of Police, 800 A.2d 790, 797 (Md. 2002) (quoting White v. Prince George’s Cnty., 387
A.2d 260, 265 (Md. 1978)). However, I need not reach the issue of whether the FFA preempts
Plaintiffs’ common law claims because those claims fail of their own accord.
Count III alleges unjust enrichment, Compl. ¶ 29, which requires Plaintiffs to show three
elements:
1. A benefit conferred upon the defendant by the plaintiff;
2. An appreciation or knowledge by the defendant of the benefit; and
3. The acceptance or retention by the defendant of the benefit under such
circumstances as to make it inequitable for the defendant to retain the benefit
without the payment of its value.
Hill v. Cross Country Settlements, LLC, 936 A.2d 343, 351 (Md. 2007). Here, Plaintiffs have not
alleged any benefit conferred upon Defendant—the only harm alleged and supported by factual
allegations is a purportedly unlawful finder’s fee paid to Davlaw. See Compl. ¶ 35 (“Davlaw
received finder’s fees”). It is dubious that “lowering the compensation Flagstar had to pay
directly to its agents” is a cognizable harm for the purpose of unjust enrichment. See Baltimore
City Bd. of School Comm’rs v. Koba Inst., Inc., 5 A.3d 400, 429 (Md. Ct. Spec. App. 2010)
(“The mere nonpayment for services does not constitute unjust enrichment.” (citation omitted)).
But even if it were, Plaintiffs have alleged that harm only in in a vague and conclusory fashion,
see Compl. ¶ 112, and therefore cannot survive a motion to dismiss, see Iqbal, 556 U.S. at 663.
Counts IV and V allege negligent misrepresentation and negligence, respectively.7
Compl. 31, 35. Plaintiffs’ claim for negligent misrepresentation, in essence, echoes their MCPA
7
Both claims also allege conspiracy to commit negligence. See Compl. ¶¶ 127, 141. This is a
logical impossibility and borders on the incoherent. Because civil conspiracy requires a
deliberate—i.e. intentional—agreement to accomplish a particular end, see Hoffman v. Stamper,
867 A.2d 276, 291 (Md. 2005), whereas negligence requires unintentional conduct, see, e.g.,
Restatement of Torts (Second) § 282 cmt. d (negligence “excludes conduct which creates
liability because of the actor’s intention to invade a legally protected interest), one cannot
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claim with the sole difference being that Defendant’s misrepresentations are alleged to be
inadvertent but negligent. It is true that “[n]egligent misrepresentation is a separate and distinct
tort from fraud under Maryland law.” Swedish Civil Aviation Admin. v. Project Mgmt. Enters.,
Inc., 190 F. Supp. 2d 785, 796 (D. Md. 2002). But like fraud, negligent misrepresentation
requires that a plaintiff rely on the misrepresentation and suffer harm as a result of her reliance.
See id. at 798 (the elements of negligent misrepresentation include that “the plaintiff, justifiably,
takes action in reliance on the statement; and [] the plaintiff suffers damage proximately caused
by the defendant’s negligence” (quoting Martens Chevrolet, Inc. v. Seney, 439 A.2d 534, 539
(Md. 1982)). The only harm alleged by Plaintiffs is that they paid an unlawful finder’s fee in
violation of the FFA. Compl. ¶¶ 112–13, 116. As with Plaintiffs’ MCPA claim, see supra,
Defendant’s alleged misrepresentation would have made the purported FFA violations more
obvious, not less so, and thus cannot support a claim for negligent misrepresentation.
Plaintiffs’ negligence claim is little more than an attempt to render Defendant vicariously
liable for Davlaw’s purported violations of the FFA.
However, for the same reason that
Defendant cannot be liable for a conspiracy to violate the FFA, see supra, it is plain that
Defendant also cannot be liable for negligently allowing the FFA to be violated. It is well-settled
that “[e]ssential to the proof of any cause of action for negligence is the establishment of a
legally cognizable duty owed by the defendant to the plaintiff.” Erie Ins. Co. v. Chops, 585 A.2d
232, 235 (Md. 1991) (citing Jacques v. Fist Nat’l Bank, 515 A.2d 756 (Md. 1986); see also W.
Va. Cent. & Pittsburgh Ry. Co. v. State, 54 A. 669, 671 (Md. 1903) (“Of course there can be no
negligence where there is no duty that is due; for negligence is the breach of some duty that one
conspire to be negligent. Cf. Orin S. Kerr, A Theory of Law, 16 Green Bag 2d 111 (2012)
(observing, albeit tongue in cheek, that some propositions are so obvious that they have never
been expressly stated).
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person owes to another.”). If Defendant is under no duty to refrain from deliberately conspiring
to cause another to violate the FFA, see Minter, 924 F. Supp. 2d at 647; cf. Shenker, 983 A.2d at
428 (holding that conspiracy liability cannot exist in the absence of a duty owed by defendant),
then it cannot possibly be under a duty to refrain from inadvertently facilitating such a violation.
To find otherwise would be to undermine this Court’s opinions in Minter, Marshall, and Petry,
as well as the Maryland Court of Appeals’s ruling in Shenker. There is no need to consider
whether Plaintiffs adequately have alleged an intimate nexus (or needed to do so), or any of
Defendant’s other contentions. See Def.’s Dismiss Mot. 31–32. Plaintiffs’ negligence claim
must be dismissed.
Because Plaintiffs have not made out a prima facie case against Defendant with respect to
any of the alleged counts, there is no need to consider Defendant’s preemption argument. See
Def.’s Dismiss Mot. 33–37.
B. Plaintiffs’ Motion to Certify
Plaintiffs seek to avoid (or at least delay) dismissal of their Complaint by asking this
Court to certify several questions to the Maryland Court of Appeals. Specifically, Plaintiffs seek
certification of the following questions:
1. Whether the decision in [Shenker] abrogated the rule that liability
for civil conspiracy may extend beyond direct perpetrators of the
underlying tort;
2. Whether a non-broker may be liable for common law conspiracy to
violate the [FFA], where the non-broker conspired with a Maryland
broker to violate the act;
and,
3. Whether the definition of a “finder’s fee” in [the FFA] to include
“any compensation or commission directly or indirectly imposed by
a broker and paid by or on behalf of the borrower for the broker’s
services in procuring, arranging, or otherwise assisting a borrower
in obtaining a loan or advance of money,” excludes fees for work
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actually performed by a broker, or includes all fees retained by the
broker and not expressly excluded by [the FFA].
Pls.’ Certify Mot. 1
In an earlier case, this Court observed:
First, this Court notes that in seeking to present these questions to the Court of
Appeals of Maryland, Plaintiff[s are] essentially requesting that this Court ask the
Maryland Court to affirm or displace its ruling in Petry[, Minter, and Marshall].
Second, “it is well established that the decision to certify a question to the Court
of Appeals of Maryland is not obligatory and ‘rests in the sound discretion of the
federal court.’” Hafford v. Equity One, Inc., Nos. AW-07-1633, AW-06-0975,
2008 WL 906015, at *4 (D. Md. Mar. 31, 2008) (quoting Lehman Bros. v. Schein,
416 U.S. 386, 391, 94 S. Ct. 1741, 40 L. Ed. 2d 215 (1974); Boyster v. Comm’r of
Internal Revenue Serv., 668 F.2d 1382 (4th Cir. 1981)). In exercising such
discretion, federal courts may decide not to certify a question to a state court
where the federal court can reach a “reasoned and principled conclusion.”
Hafford, 2008 WL 906015, at *4. “Only if the available state law is clearly
insufficient should the court certify the issue to the state court.” Roe v. Doe, 28
F.3d 404, 407 (4th Cir.1994) (citing Smith v. FCX, Inc., 744 F.2d 1378, 1379 (4th
Cir.1984), cert. denied, 471 U.S. 1103, 105 S. Ct. 2330, 85 L. Ed. 2d 848 (1985)).
“When this guidance is available the federal court should decide the case before it
rather than staying and prolonging the proceedings.” Arrington v. Coleen, Inc.,
2001 WL 34117735, at *5 (D. Md. Mar. 29, 2001).
Marshall, 2013 WL 3353475, at *7. Because I agree with the other Judges of this Court that this
Court is capable of resolving the state law issues before it, see Minter, 924 F. Supp. 2d at 648;
Marshall, 2013 WL 3353475, at *6–7; Petry, 2013 WL 3179060, at *2–3, Plaintiffs’ motion will
be DENIED.
First, certification is only appropriate where a question of state law “is determinative in
the case before it.” Grattan v. Bd. of School Comm’rs, 804 F.2d 1160, 1164 (4th Cir. 1986).
Because my ruling does not require a determination as to whether the fees complained of by
Plaintiffs are properly considered “finder’s fees” under the FFA, there is no conceivable reason
to seek the view of the Court of Appeals with respect to the definition of that term.
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Similarly, Plaintiffs’ first question, relating to how far Shenker goes to limit civil
conspiracy liability, also is not relevant to my ruling here. In holding that Defendant, under
these facts, could not have been liable for civil conspiracy, I have not read Shenker to eliminate
civil conspiracy liability entirely (which would be the result of eliminating it for anybody who
did not participate directly in the underlying tort). See Shenker, 983 A.2d at 428–429 (limiting,
but not eliminating, civil conspiracy liability). Contrary to Plaintiffs’ claims, see Pls.’ Certify
Mem. 25, Mintner did not hold otherwise. See Mintner, 924 F. Supp. 2d at 647 (holding that
defendants cannot be liable for conspiracy because “they are not capable of violating the FFA
directly,” not because they did not directly violate the FFA (emphasis added)). There is no need
to seek guidance from the Maryland Court of Appeals with respect to Plaintiffs’ over-reading of
Shenker.
With respect to the second question on which certification is sought, “[t]he absence of a
decision by the Court of Appeals that is directly on point does not equate to uncertainty in
Maryland law.” Snyder v. Phelps, 533 F. Supp. 2d 567, 586 (D. Md. 2008), rev’d on other
grounds, 580 F.3d 206 (4th Cir. 2009), aff’d 131 S. Ct. 1207 (2010). The Maryland Court of
Appeals has clearly stated that the FFA “applies only to mortgage brokers and the fees they
charge borrowers,” Sweeney v. Savings First Mortg., LLC, 879 A.2d 1037, 1048–49, so that
Defendant cannot be liable for an FFA violation in its own right, and that therefore cannot be
liable for conspiracy to violate the FFA under Shenker, see supra. Furthermore, the exact
question Plaintiffs seek to certify already has been resolved by two other Judges of this Court, in
three other opinions, without the need to seek specific guidance from the Maryland Court of
Appeals. See Minter, 924 F. Supp. 2d at 648; Marshall, 2013 WL 3353475, at *6–7; Petry, 2013
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WL 3179060, at *2–3. I see no reason why this case requires different treatment, and therefore
Plaintiffs’ motion to certify should be DENIED.
C. Plaintiff’s Motions to Stay
Plaintiffs have filed two motions to stay. The first, ECF No. 28, sought to stay briefing
of Defendant’s Motion to Dismiss while Plaintiffs’ Motion to Certify was pending. However,
the motions to dismiss and to certify have both now been fully briefed and are disposed of in this
opinion. As such, Plaintiffs’ First Stay Motion is DENIED as moot.
With respect to Plaintiffs’ Second Stay Motion, ECF No. 41, Plaintiffs are correct that the
Court has inherent power to stay proceedings to control its docket and allow for expeditious
resolution of the cases before it. See Pls.’ Second Stay Reply 3; see also Popoola v. MDIndividual Practice Ass’n, Inc., No. DKC-00-2946, 2001 WL 579774, at *2 (D. Md. May 23,
2001).
However, Plaintiffs have not shown hardship to themselves, lack of prejudice to
Defendant, or that a stay will conserve judicial resources. See Yearwood v. Johnson & Johnson,
Inc., No. RDB-12-1374, 2012 WL 2520865, at *3 (D. Md. June 27, 2012). This is particularly
so here, where the record reflects that Minter, Marshall, and Petry all have been appealed in the
last few months and may not be resolved for some time. See Notice of Appeal, Minter, No.
WMN-07-3442 (D. Md. Sept. 10, 2013), ECF No. 683; Order of USCA “Consolidating,” Minter,
No. WMN-07-3442 (D. Md. Oct. 1, 2013), ECF No. 690; Notice of Appeal, Marshall, No. RDB10-3596 (D. Md. July 24, 2013), ECF No. 120; Notice of Appeal, Petry, No. WMN-08-1642 (D.
Md. July 8, 2013), ECF No. 409. Plaintiffs had reason to expect that this case might be
dismissed in light of the rulings in Minter, Marshall, and Petry, whereas there is no reason to
leave this case pending against Defendant when it easily can be resolved under existing law. To
the extent that Plaintiffs may choose to appeal this case to the Fourth Circuit, it would be far
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more efficient to give the Fourth Circuit the opportunity to have all of the FFA cases brought by
Plaintiffs’ counsel before it at once, rather than to stay this case and run the risk that its ultimate
result may turn on some vagary that had not arisen in any of the other pending FFA cases,
leaving open the possibility of a wholly new appeal. Accordingly, Plaintiffs’ Second Stay
Motion is denied.
IV.
CONCLUSION
For the aforementioned reasons:
1) Defendant’s Motion to Dismiss is GRANTED;
2) Plaintiffs’ Motion to Certify is DENIED;
3) Plaintiffs’ First Motion to Stay is DENIED as moot; and
4) Plaintiffs’ Second Motion to Stay is DENIED.
A separate order shall issue.
Dated: October 11, 2013
_______ /S/________
Paul W. Grimm
United States District Judge
dsy
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