WHITE et al v. THE PNC FINANCIAL SERVICES GROUP, INC. et al
MEMORANDUM. SIGNED BY HONORABLE LAWRENCE F. STENGEL ON 1/9/2017. 1/10/2017 ENTERED AND COPIES E-MAILED.(amas)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
NELSON WHITE, JR., et al.,
THE PNC FINANCIAL SERVICES
GROUP, INC., et al.,
January 9, 2017
This is a putative class action brought by homeowners claiming violations of the
Real Estate Settlement Procedures Act, 12 U.S.C. § 2607 (RESPA). The plaintiffs claim
the defendants carried on a “captive reinsurance scheme” in which the defendants
enjoyed kickbacks, referrals, and fees that are prohibited by RESPA.
After I denied defendants’ motion to dismiss in 2014, this case was stayed pending
the U.S. Court of Appeals for the Third Circuit’s decision in Cunningham v. M & T Bank
Corp., 814 F.3d 156 (3d Cir. 2016). Both parties sought a stay pending the Cunningham
decision because the issue in that case was identical to an issue in this case: whether
equitable tolling applies to RESPA’s one-year statute of limitations. Now that
Cunningham has been decided, plaintiffs move to lift the stay. Plaintiffs also move for
leave to amend their complaint to modify their RESPA claim and add several entirely
new claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §
1961 et seq. (RICO). 1 For the reasons that follow, I will grant in part and deny in part
plaintiffs’ motion for leave to amend.
For purposes of this motion, it is important to understand both the substantive
nature of plaintiffs’ claims as well as the procedural posture of this case.
The Nature of Plaintiffs’ RESPA Claims
Understandably, when many people purchase a home, they cannot afford to make
a 20% down payment. To protect lenders in the event of default, homeowners who are
unable to make a 20% down payment are required to purchase private mortgage
insurance. Once a homeowner enters into a mortgage insurance contract with an
insurance company (an “insurer”), often times, the insurer then enters into a separate
“reinsurance” arrangement with another company (a “reinsurer”). In theory, and under
RESPA, the reinsurer is required to assume part of the risk that the insurer took on when
it entered into a contract with the homeowner.
In this case, plaintiffs allege that the defendant insurers, lenders, and reinsurers
have colluded to create a scheme that violates RESPA. Plaintiffs maintain that the
lenders, as a general practice, form subsidiary companies that become the reinsurers.
These lenders then systematically refer homeowners to the insurers to buy mortgage
insurance. In exchange for a constant stream of profit-producing homeowner-borrowers,
Both parties agree that the stay should be lifted. Thus, the only real issue at hand is whether the plaintiffs
should be permitted to amend their complaint.
the insurers then pay a kickback to the reinsurer who, as a subsidiary, is really just an
extension of the lender. 2 Plaintiffs claim this “pay-to-play” scheme harms homeowners
because, by colluding, the insurers, reinsurers, and lenders, were able to reduce
competition in the mortgage insurance market, thereby increasing the premium payments
the homeowner-plaintiffs are required to pay to maintain their mortgage insurance.
To be sure, there is nothing inherently wrong with—or unlawful about—
reinsurance contracts. However, RESPA prohibits certain captive reinsurance schemes
that result in “sham” service. See Alston v. Countrywide Fin. Corp., 585 F.3d 753, 755–
57 (3d. Cir 2009) (explaining how certain captive reinsurance schemes, like the one
alleged here, may violate RESPA). Specifically, Section 8(a) of RESPA prohibits fees
and kickbacks paid in exchange for business referrals involving federally related
mortgage loans. 12 U.S.C. § 1607(a). Section 8(b) prohibits unearned fees: “No person
shall give and no person shall accept any portion, split, or percentage of any charge made
or received for the rendering of a real estate settlement service . . . other than for services
actually performed.” Id. § 1607(b). Plaintiffs allege defendants violated these provisions
of RESPA because: (1) they systematically gave and received kickbacks; (2) the
reinsurers did not assume any real risk; and (3) the reinsurers never “actually performed”
any real services.
In theory the lender is using homeowners as forms of currency, so to speak; the more homeowners that the
lender refers to the insurer, the more money, in the form of kickbacks, the reinsurer (and necessarily the lender) gets
The plaintiffs filed their initial complaint on December 31, 2011. In it, they
brought two claims for: (1) a violation of § 2607 of RESPA; and (2) common law unjust
enrichment. (Doc. No. 1). Several months later, the parties filed a joint motion to stay all
proceedings pending the U.S. Supreme Court’s review of Edwards v. First American
Financial Corp., 610 F.3d 514 (9th Cir. 2010). 3 After the U.S. Supreme Court dismissed
the writ of certiorari in Edwards, the parties filed a joint motion to lift the stay. (Doc. No.
75). The stay was lifted and plaintiffs then filed an amended class action complaint. (Doc.
No. 83). In their amended complaint, plaintiffs reasserted the identical two claims they
had asserted in their original complaint. (Id.)
Defendants then moved to dismiss the plaintiffs’ RESPA claims as untimely.
Plaintiffs argued in response that their claims were timely based on principles of
equitable tolling. On June 20, 2013, I dismissed plaintiffs’ RESPA claims without
prejudice, finding that equitable tolling did not apply. (Doc. No. 145). A few weeks later,
plaintiffs filed a second amended complaint. (Doc. No. 148). In their second amended
complaint, plaintiffs reasserted the identical two claims they had asserted in their original
complaint and in their amended complaint: (1) a RESPA violation; and (2) unjust
enrichment. (Id.) Defendants then filed a second motion to dismiss, again arguing the
RESPA claims were time-barred. Plaintiffs renewed their equitable tolling argument, this
The issue in Edwards was whether a RESPA plaintiff has standing to sue under Article III, § 2 of the U.S.
Constitution. The U.S. Supreme Court dismissed the writ of certiorari as improvidently granted and never decided
the issue. First American Fin. Corp. v. Edwards, 132 S. Ct. 2536 (2012).
time stressing that they were reasonably diligent in discovering the RESPA claims. 4 I
denied defendants’ second motion to dismiss finding that, based on then-current
precedent, whether equitable tolling applied could only be decided at the summary
judgment stage after fact discovery had concluded. (Doc. No. 185 at 19).
A few weeks after I denied this motion to dismiss, the parties filed another joint
motion to stay all proceedings pending the Third Circuit’s decision in Riddle v. Bank of
America Corp., 588 F. App’x 127 (3d Cir. 2014). Riddle addressed the issue of equitable
tolling with respect to RESPA’s statute of limitations. After the Third Circuit decided
Riddle, the stay was lifted. (Doc. No. 195). The defendants then filed motions for
reconsideration of my Order denying their motion to dismiss. Before those motions were
decided, the parties filed yet another joint motion to stay all proceedings pending the
Third Circuit’s decision in Cunningham. (Doc. No. 219). In their third joint motion to
stay, the parties agreed that “the ultimate resolution of the central issue in the
Cunningham Action, i.e. the applicability and application of the doctrine of equitable
tolling, has a very reasonable likelihood of informing this Court on the resolution of such
matters in this case, and advancing the ultimate disposition of this action.” (Id. at 2).
Months later, during this Cunningham stay, the Consumer Financial Protection Bureau
(“CFPB”) issued a decision in a landmark RESPA case, holding that RESPA’s statute of
limitations did not bar claims for kickbacks that occurred after the closing of home loans.
Plaintiffs seeking to enjoy the benefit of equitable tolling due to fraudulent concealment—which the
plaintiffs argued in this case—must establish the following three elements: (1) the defendants actively misled the
plaintiff; (2) which prevented plaintiff from recognizing the validity of her claim within the limitations period; and
(3) the plaintiff’s ignorance is not attributable to her lack of reasonable due diligence in attempting to uncover the
relevant facts. Cunningham v. M & T Bank Corp., 814 F.3d 156, 161 (3d Cir. 2016).
Several months after this CFPB decision, the Third Circuit decided Cunningham.
The plaintiffs in Cunningham were homeowners who brought the same exact type of
RESPA claim—based on reinsurance kickbacks—that is brought here. 814 F.3d at 158.
They did not file their complaint until years after RESPA’s one-year statute of limitations
had expired. Id. The Cunningham plaintiffs relied on equitable tolling to argue that their
claims were timely. Id. In fact, they made the same exact argument that has previously
been made in this litigation: the first time they became aware of their RESPA claims was
when they received letters informing them of the potential viability of the claims. Id. at
162. The Third Circuit expressly rejected this equitable tolling argument. Id. at 160–62. It
found that the plaintiffs became aware of their RESPA claims much earlier: on the date
of closing when they read certain disclosures that explained reinsurance. Id. at 161–64.
Therefore, the Court held that the plaintiffs were not reasonably diligent in bringing their
claims, which is required of them to enjoy the doctrine of equitable tolling based on
The plaintiffs now move for leave to amend their complaint to modify their
RESPA claim and to add new claims under RICO.
Federal Rule of Civil Procedure 15 governs amendment of pleadings generally.
Fed. R. Civ. P. 15. The U.S. Court of Appeals for the Third Circuit has explained that a
district court’s inquiry is distinctly different under Rule 15(a) than it is under Rule 15(c).
Arthur v. Maersk, Inc., 434 F.3d 196, 202–03 (3d Cir. 2006).
Rule 15(a) applies to motions for leave to amend. “The Federal Rules of Civil
Procedure express a preference for liberally granting leave to amend.” Oran v. Stafford,
226 F.3d 275, 291 (3d Cir. 2000). A motion for leave to amend a complaint should be
granted “whenever justice so requires.” Fed. R. Civ. P. 15(a); Arthur, 434 F.3d at 202–03.
In determining whether “justice so requires,” courts consider a number of factors
including undue delay, bad faith, prejudice to the opposing party, and futility. Foman v.
Davis, 371 U.S. 178, 182 (1962). Delay alone is not sufficient to warrant denial of leave
to amend. Adams v. Gould Inc., 739 F.2d 858, 868 (3d Cir. 1984). However, when delay
becomes “undue,” it forms an adequate basis, on its own, for denial of a motion to
amend. Bjorgung v. Whitetail Resort, LP, 550 F.3d 263, 266 (3d Cir. 2008). “Delay
becomes ‘undue,’ and thereby creates grounds for the district court to refuse leave, when
it places an unwarranted burden on the court or when the plaintiff has had previous
opportunities to amend.” Id. Thus, an undue delay analysis requires courts to focus on
“the movant’s reasons for not amending sooner.” Id. (quoting Cureton v. Nat’l Collegiate
Athl. Ass’n, 252 F.3d 267, 273 (3d Cir. 2001)). A proposed amendment is futile “if the
amendment will not cure the deficiency in the original complaint or if the amended
complaint cannot withstand a renewed motion to dismiss.” Jablonski v. Pan Am. World
Airways, Inc., 863 F.2d 289, 292 (3d Cir. 1988).
Rule 15(c) addresses the issue of whether a proposed amended complaint “relates
back” to the filing of the original complaint. Under Rule 15(c)(1)(B), an amendment to a
pleading relates back to the date of the original pleading where “the amendment asserts a
claim or defense that arose out of the conduct, transaction, or occurrence set out—or
attempted to be set out—in the original pleading.” “Where an amendment relates back,
Rule 15(c) allows a plaintiff to sidestep an otherwise-applicable statute of limitations,
thereby permitting resolution of a claim on the merits, as opposed to a technicality.”
Glover v. FDIC, 698 F.3d 139, 145 (3d Cir. 2012). The Third Circuit has made clear that
“only where the opposing party is given fair notice of the general fact situation and the
legal theory upon which the amending party proceeds will relation back be allowed.” Id.
at 146. On the contrary, “amendments that significantly alter the nature of a proceeding
by injecting new and unanticipated claims are treated far more cautiously.” Id. When a
plaintiff’s original complaint does not provide a defendant “‘fair notice of what the
plaintiff’s [amended] claim is and the grounds upon which it rests,’ the purpose of the
statute of limitations has not been satisfied and it is ‘not an original pleading that [can] be
rehabilitated by invoking Rule 15(c).’” Id. (quoting Baldwin Cty. Welcome Ctr. v.
Brown, 466 U.S. 147, 149 n.3 (1984)).
Plaintiffs move for leave to amend their complaint to modify their RESPA claim
and to add two new RICO claims. Defendants oppose plaintiffs’ motion. Defendants
argue that the motion is unduly delayed, they would be prejudiced by amendment, and
the proposed amendment is futile. I will deny plaintiffs’ motion to amend the complaint
to add RICO claims because I agree the plaintiffs’ actions—and lack thereof—constitute
undue delay with respect to these claims. I also find that the RICO claims do not relate
back to the original complaint under Rule 15(c). Because I find the continuing violations
doctrine applicable to the plaintiffs’ RESPA claims, I will grant them leave to amend
their RESPA claims. 5
Plaintiffs’ Proposed Modified RESPA Claim
Plaintiffs concede that they are no longer relying on principles of equitable tolling
to support survival of their RESPA claims. Instead, plaintiffs argue that the continuing
violations doctrine applies to their RESPA claims. 6
RESPA’s Statute of Limitations
An action under Section 2607 of RESPA must be brought within “1 year . . . from
the date of the occurrence of the violation.” 12 U.S.C. § 2614. In Cunningham, the Third
Circuit noted that this statute of limitations begins running “from the date of the
occurrence of the violation . . . which begins at the closing of the loan.” 814 F.3d at 160
(citation omitted); In re Cmty. Bank of N. Va., 622 F.3d 275, 281 (3d Cir. 2010)
(“RESPA’s one-year statute of limitations . . . begins to run from the date of the
occurrence of the violation, . . . i. e., the date the loan closed”) (citation omitted).The
plaintiffs argue that the closing is not the only time that a RESPA violation can occur.
They maintain defendants violated RESPA each time they paid an illegal kickback or fee,
Although I am granting amendment to modify the RESPA claims, I do not find amendment necessary
since the plaintiffs are merely asserting a new legal argument—not new facts or a new legal claim. The plaintiffs’
second amended complaint, on its face, contains sufficient allegations to support a continuing violations argument.
See Second Am. Compl. ¶ 75 (“Each and every premium already ceded to NCMIC by the Private Mortgage
Insurers, as well as each and every premium that they will continue to cede to NCMIC in the future, constitutes a
separate illegal kickback”); id. ¶ 14 (alleging “the arrangements were part of a unitary scheme that was effectuated
over time”). Thus, what I am really deciding today is that the continuing violations doctrine applies to plaintiffs’
RESPA claims as they have been pled all along.
The Third Circuit has not yet addressed this doctrine in the context of RESPA.
or made an illegal referral. According to plaintiffs, each violation triggered a new statute
of limitations period.
The Continuing Violations Doctrine
“In most federal causes of action, when a defendant’s conduct is part of a
continuing practice, an action is timely so long as the last act evidencing the continuing
practice falls within the limitations period.” Brenner v. Local 514 United Bros. of
Carpenters of Am, 927 F.2d 1283, 1295 (3d Cir. 1991); 287 Corp. Ctr. Assocs. V.
Township of Bridgewater, 101 F.3d 320, 324 (3d Cir. 1996) (noting the same). As the
U.S. Court of Appeals for the Third Circuit has explained, “[t]he continuing violations
doctrine has been most frequently applied in employment discrimination claims.” Cowell
v. Palmer Twp., 263 F.3d 286, 292 (3d Cir. 2011). “However, this has not precluded the
application of the doctrine to other contexts.” Id.
The U.S. Supreme Court and Third Circuit have applied the continuing violations
doctrine in a wide variety of contexts. See, e.g., Zenith Radio Corp. v. Hazeltine
Research, Inc., 401 U.S. 321, 338 (1971) (applying the doctrine to an antitrust claim
under the Sherman Act); Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481,
502 n.15 (1968) (same); Toledo Mack Sales & Serv., Inc. v. Mack Trucks, Inc., 530 F.3d
204, 217–18 (3d Cir. 2008) (recognizing the continuing violations doctrine’s applicability
in antitrust cases); Brenner, 927 F.2d at 1283 (applying the doctrine to a claim brought
under the National Labor Relations Act); Centifanti v. Nix, 865 F.2d 1422, 1432–33 (3d
Cir. 1999) (applying the doctrine to a constitutional due process claim brought under 42
U.S.C. § 1983); Cowell, 263 F.3d at 292–93 (finding the doctrine generally applicable to
§ 1983 cases but not in the particular case at bar); Crawford v. Washington Cty. Children
& Youth Servs., 353 F. App’x 726, 729 (3d Cir. 2009) (same); In re Niaspan Antitrust
Litig., 42 F. Supp. 3d 735, 745–47 (E.D. Pa. 2014) (finding the doctrine applicable to
Sherman Act pay-for-delay and price-fixing claims based on a “continuing illegal
contract” under which the defendants continued to sell drugs “at an above-market price”).
The Third Circuit has also emphasized that “application of the continuing violations
doctrine is not dependent on which statute gives rise to the plaintiff’s claim.” Cardenas v.
Massey, 269 F.3d 251, 258 (3d Cir. 2001).
RESPA and the Continuing Violations Doctrine
Against this backdrop, defendants argue that amendment would be futile because
the continuing violations doctrine does not apply to plaintiffs’ RESPA claims. In support,
they note that RESPA’s statute of limitations begins to run on the date that plaintiffs
closed on their loans. Cunningham, 814 F.3d at 160. For a number of reasons discussed
in more detail below, this argument misses the mark. First, RESPA’s limitations period
only runs from the date of the closing if I assume the continuing violations doctrine does
not apply to plaintiffs’ claims. Second, RESPA’s statutory text clearly prohibits certain
post-closing kickbacks, fees, and referrals, and plaintiffs have offered persuasive
authority confirming the same. Third, applications of the continuing violations doctrine in
other analogous contexts support application of the doctrine to plaintiffs’ RESPA claims.
Fourth, the idea that there can be only one violation of RESPA (at the closing) contradicts
U.S. Supreme Court precedent. Finally, application of the continuing violations doctrine
does not affect Cunningham’s holding.
The Continuing Violation Doctrine’s Potential Effect on
When RESPA’s Statute of Limitations Expires
For starters, I agree that ordinarily RESPA’s statute of limitations begins running
on the date that a homeowner closes on his or her home loan. Id. However, the question
of when a statute of limitations begins to run (by default) is entirely separate from the
question of whether or not subsequent kickbacks, fees, and referrals are violations of
RESPA that can trigger new limitations periods. This is because, “under the continuing
violation theory, the statute of limitations runs from the date of the last alleged violation
rather than the first.” Burnette v. City of Phila., No. Civ. A. 02–cv–21293682, 2003 WL
21293682, at *2 (E.D. Pa. Jan. 14, 2003) (citing Cowell, 293 F.3d at 292). Under this
doctrine, RESPA’s statute of limitations will only begin to run upon the most recent
alleged RESPA violation committed by defendants. In other words, even though
RESPA’s statute of limitations begins to run at the moment the plaintiffs close on their
loan, this does not affect the possibility that a subsequent pattern of kickbacks and fees
(prohibited by RESPA) amounts to a “continuing violation,” thereby re-setting the statute
of limitations upon each new violation.
The CFPB Decision On RESPA’s Statute of Limitations
Plaintiffs have offered persuasive authority suggesting that the continuing
violations doctrine applies to their RESPA claims. In 2015, the CFPB brought an
enforcement action against a national mortgage lender for violations of RESPA based on
a captive reinsurance scheme. In the Matter of PHH Corp., No. 2014-CFPB-0002 (CFPB,
June 4, 2015) [Doc. No. 224-7]. This enforcement action resulted in a $109 million fine
to the lender. Id. at 26–27. In arriving at its decision, the CFPB concluded that the
defendant “violated RESPA every time it accepted a reinsurance payment.” Id. at 22. It
rejected the argument that there can be only one violation of RESPA. Id. at 23 (“[T]he
use of the singular ‘violation’ in the statute of limitations indicates only that there is one
limitations period for one violation, not that a transaction involving multiple kickback
payments would result in only a single violation”). It pointed out that “a single course of
conduct can result in multiple violations of a statute, regardless of whether the relevant
statute of limitations refers to a single cause of action.” Id. (citing Bay Area Laundry &
Dry Cleaning Pension Trust Fund v. Ferbar Corp., 522 U.S. 192, 201–02 (1997)). 7
Consequently, the CFPB held the defendant “liable for each payment it accepted on or
after [a certain date] even if the loan with which that payment was associated had closed
prior to that date.” Id. at 22.
The CFPB went out if its way to distinguish between situations where borrowers
pay insurance policies at one time “in full” as compared to captive reinsurance schemes
where borrowers pay for insurance as a part of each and every mortgage payment. Id. at
22. In the former situation, it makes sense to apply RESPA’s statute of limitations to that
one event: the payment of the policy in full. In the latter situation, however, it defies the
plain language of § 2607 to not consider each prohibited kickback or referral a separate
violation capable of resetting the limitations period. Since certain kickbacks, fees, and
referrals are unlawful under RESPA, the very nature of a reinsurance arrangement would
In Bay Area Laundry, the U.S. Supreme Court held that in an ERISA case, “each missed payment creates
a separate cause of action with its own . . . limitations period.” 522 U.S. at 195. The Court rejected the argument that
the plaintiffs’ failure to sue within the limitations period following the “first” missed payment time-barred the
plaintiffs’ claims for all subsequent missed payments. Id. at 195–96.
mean that the defendants “committed multiple violations over time in connection with a
single loan.” In the Matter of PHH Corp., at 25.
I agree with the CFPB’s distinction here. Some of RESPA’s statutory provisions
certainly relate to the closing of a home loan. This is because borrowers usually purchase
settlement services at closing. Id. Simply because the closing may be the first time that a
RESPA violation occurs, however, does not mean that other RESPA violations may not
subsequently occur. Section 8 clearly speaks in terms of each fee, kickback, or referral as
being its own violation of RESPA. 12 U.S.C. § 2607 (prohibiting the act of either
“accept[ing]” or “giv[ing]” a “fee, kickback, or thing of value”). If this were not the case,
then lenders, insurers, and reinsurers would be free to violate RESPA by accepting
kickback after kickback for years on end. When a borrower would sue under RESPA for
this conduct, the lenders, insurers, and reinsurers could avoid liability if the borrower did
not file suit within one year of the very first (of many) illegal acts. 8 Such a reading of the
statute would eviscerate the clear purpose behind RESPA, which aims to eliminate
“kickbacks or referral fees that tend to increase unnecessarily the costs of certain
settlement services.” 12 U.S.C. § 2601(b)(2). Accordingly, I find that defendants violated
RESPA each and every time they delivered or accepted an unlawful fee or kickback.
To offer an illustration, a lender could accept dozens of illegal kickbacks, starting on January 1, 2017 (the
date of the closing) and continuing through January 1, 2019. Under the defendants’ reading of RESPA, any
borrower who sued on January 3, 2018—for example—would be too late. This would be the case even if the most
recent illegal kickback had occurred a day before the borrower filed his or her complaint. It goes against basic
principles of fairness and logic to expect consumers to somehow understand the ongoing nature of a captive
reinsurance scheme on the day of their closing, before this scheme even takes effect. This is especially true
because—unlike at closing where consumers are present with the bank on the other side of the table—the plaintiffs
here had no way of knowing when the defendants were paying kickbacks as they are not privy to the inner workings
of defendants’ daily financial transactions.
Each alleged violation, in turn, reset RESPA’s one-year statute of limitations. Therefore,
plaintiffs’ claims would be untimely only if there had been no alleged kickback, fee, or
referral within the one year leading up to the day they filed their complaint. 9
The D.C. Circuit’s Remand of the CFPB Decision
Defendants argue that plaintiffs’ reliance on the CFPB’s decision is misplaced
because the U.S. Court of Appeals for the D.C. Circuit vacated in part and remanded that
decision. PHH Corp. v. CFPB, 839 F.3d 1 (D.C. Cir. 2016). Plaintiffs counter that
defendants have mischaracterized the import of the D.C. Circuit’s decision. I agree with
plaintiffs. The D.C. Circuit did vacate part of the CFPB’s decision, but it did so purely on
unrelated constitutional grounds. Specifically, it held that the CFPB’s structure violated
Article II of the U.S. Constitution because the CFPB is an independent agency that is
headed by one director rather than a multi-person commission. Id. at 12. In arriving at
this decision, however, it did not vacate part of the CFPB’s underlying decision on the
merits. In particular, the D.C. Circuit expressly reserved the very issue in this case to be
decided by the CFPB on remand:
RESPA explicitly prohibits certain kickbacks, fees, and referrals. 12 U.S.C. § 2607. Because these acts are
specifically prohibited by statute, they are not the “continual ill effects” of a prior violation but rather violations in
their own right. Cf. MacNamara v. Hess, 67 F. App’x 139, 143 (3d Cir. 2003) (explaining that the continuing
violations doctrine does not apply to situations where there are mere “ill effects stemming from an original
violation”). In MacNamara, the Third Circuit held, in the context of § 1983, that the government’s failure to return
plaintiff’s seized records was not a continuing violation but rather a mere “ill effect” of the original unconstitutional
search and seizure. 67 F. App’x at 144; see also Mumma v. High-Spec, Inc., 400 F. App’x 629, 632 (3d Cir. 2010)
(differentiating between “a new violation” to which the continuing violations doctrine applies and a “perpetuation of
the original violation” to which it does not apply); Tearpock-Martini v. Borough of Shickshinny, 756 F.3d 232, 236–
37 (3d Cir. 2014) (holding that, with respect to a street sign that violated the First Amendment, the continued
presence of the sign was not a continuing violation because the only affirmative act was the initial installation of the
sign). Here, the RESPA kickbacks and fees in this case are explicitly prohibited by statute. This makes them new
independent violations rather than perpetuations of a violation (such as the continuing presence of a street sign or
failure of the government to return one’s records after a constitutional violation). These ongoing violations are not
isolated or sporadic events. Rather, as alleged, they are all a part of one reinsurance scheme, the very nature of
which requires defendants to make continuous and periodic illegal kickbacks.
We do not decide here whether each alleged above-reasonable market value
payment from the mortgage insurer to the reinsurer triggers a new threeyear statute of limitations for that payment. We leave that question for the
CFPB on remand and any future court proceedings.
Id. at 55 n.30. 10 Having read the CFPB’s decision, it only follows that the D.C. Circuit at
the very least acquiesced in the CFPB’s holding that each RESPA violation triggers a
new limitations period. By “leav[ing] that question” for the CFPB to decide on remand,
the D.C. Circuit necessarily acknowledged that the CFPB has the authority to decide this
issue. The fact that the D.C. Circuit—having exhaustively reviewed the CFPB decision
for error—knows exactly how the CFPB already ruled on this issue is telling. The
defendants seem to acknowledge this, but then emphasize that the D.C. Circuit found the
CFPB to be “wrong” “on every substantive RESPA issue the Circuit decided.” (Doc. No.
227 at 22). This is a peculiar argument to make given that the D.C. Circuit explicitly
decided to not rule on the RESPA statute of limitations issue that is now before me. Since
the D.C. Circuit ruled on some of the CFPB’s substantive RESPA findings, then certainly
it could—and would—have reversed the CFPB on this issue had it disagreed with the
CFPB’s ruling on it. 11
Analogous Applications of the Continuing Violations
My finding today is bolstered by U.S. Supreme Court and Third Circuit case law
involving analogous ongoing unlawful schemes that result in civil liability. In Bay Area
In actions brought by the CPFB as opposed to a private person, a three-year—not one-year— statute of
limitations applies. 12 U.S.C. § 2614.
Even if the defendants were correct that the CFPB’s decision lacks any precedential value, that still
would not preclude me from finding, based on RESPA’s statutory language alone, that each violation of RESPA
triggers a new one-year limitations period.
Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corp., the U.S. Supreme Court
addressed a factually similar scenario in the context of ERISA. 522 U.S. at 195. Under a
certain ERISA statutory provision, an employer is required to make a series of periodic
payments into a trust fund. Bay Area Laundry, 522 U.S. at 196. The question was
whether the failure of an employer to make one of these required payments is an unlawful
event that triggers a new limitations period every time it happens. Id. at 195. The U.S.
Supreme Court, adopting the Third Circuit’s approach to the issue, answered this
question in the affirmative: “each missed payment creates a separate cause of action with
its own six-year limitations period.” Id. at 206 (citing Bd. Trs. Dist. No. 15 Machinists’
Pension Fund v. Kahle Engineering Corp., 43 F.3d 852, 857–61 (3d Cir. 1994)). In doing
so, the Court emphasized that the statute required employers to make each payment when
it became due. Id. at 208. Based on its finding, the Court allowed plaintiffs to pursue
recovery for missed payments that fell within the limitations period leading up to when
they filed suit. Id. at 206. It only barred recovery for the first missed payment, which
occurred outside the statute of limitations period. The same rationale applies here. Just as
each missed payment violates ERISA, each unlawful kickback, fee, or referral violates
RESPA. Accordingly, each unlawful fee, kickback, or referral carries its own statute of
limitations period that commences once the violation is committed. The nature of the
conduct in Bay Area Laundry is also similar to the alleged conduct here. Both situations
involve an ongoing series of statutory violations.
Similarly, in In re Niaspan Antitrust Litigation, our district court was confronted
with an antitrust claim based on drug manufacturers’ overpriced sales of pharmaceutical
drugs. 42 F. Supp. 3d at 746. The court agreed with every single other court to consider
the issue and held “that a new cause of action accrues to purchasers upon each overpriced
sale of the drug.” In re Niaspan Antitrust Litig., 42 F. Supp. 3d at 747. Therefore, “the
Court conclude[d] that plaintiffs’ claims are timely under the continuing-violation
doctrine.” Id. Just like the reinsurance arrangement between defendants here, the factual
basis for the plaintiffs’ claims in the above case rested upon their entering into, and
furtherance, of a continuing illegal scheme. Id. at 745. Just because that illegal scheme
was one between drug companies and here the alleged illegal scheme is between
mortgage companies does not eliminate the common thread between the two: both are an
ongoing and anticompetitive arrangement between companies that results in periodic
statutory violations. 12
Other Courts’ Interpretations
There has only been one other district court, within this Circuit, to consider the
issue before me today. In that case, the court held that the continuing violations doctrine
did not apply to the same type of RESPA claims brought here. Menichino v. Citibank,
N.A., Civ. Action No. 12–0058, 2013 WL 3802451, at *11 (W.D. Pa. July 19, 2013). In
doing so, that court did not rely on Third Circuit precedent (and it could not have because
the Third Circuit has never spoken on this point). Rather, it relied on Fifth Circuit case
law in concluding that RESPA only speaks of a “single violation” and, thus, the only
possible limitation-triggering event contemplated by RESPA is the closing. Id. I
In In re Niaspan Antitrust Litigation, the periodic violations were each sale of the illegally overpriced
drugs. Here, the periodic violations were each illegal kickback, fee, or referral.
respectfully disagree with this reasoning and see no reason to believe that the Third
Circuit would take such a narrow view of RESPA’s statutory language. 13
The district court above took its reasoning from the Fifth Circuit’s decision in
Snow v. First American Title Insurance Co., 332 F.3d 356 (5th Cir. 2003). In Snow, a
group of homeowners sued title insurance companies under RESPA. 332 F.3d at 357. The
plaintiffs had “paid for the insurance at their real estate closings.” Id. Because the
plaintiffs sued longer than one year after their closings, defendants argued the claims
were time-barred. Id. at 358. Plaintiffs argued that “the closing is not the only event that
triggers the one-year period.” Id.
The Fifth Circuit concluded that the claims were time-barred specifically because,
in that particular case, the defendants “earned the allegedly prohibited ‘thing of value’” at
the closing when the homeowners bought their title insurance. Id. at 359. However, the
court was careful to limit its holding to the particular circumstances of the case before it:
We use “closing” interchangeably with the date of plaintiffs’ payment for
the title insurance, because they are identical in this case, as they are in
most real estate transactions. We recognize, however, the possibility that
purchasers could pay for a settlement service subject to § 2607(a)-(b) at a
time other than the closing, in which case “the date of the occurrence of the
violation” presumably would be the date of payment, not the unrelated
I have previously held that RESPA’s statute of limitations barred a claim. Morilus v. Countrywide Home
Loans, Inc., 651 F. Supp. 2d 292, 306 (E.D. Pa. 2008). In Morilus, the plaintiffs claimed their mortgage company
violated RESPA when it did not disclose a property appraisal charge in their mortgage documents. 651 F. Supp. 2d
at 306. There, I held that the date of the violation was the closing. Id. In doing so, however, I was careful to point
out that the “violation” of RESPA is not always at closing—it depends on the case. Id. (“Here, the date of the
violation was the date of the closing”) (emphasis added). Unlike Morilus, the plaintiffs’ claims here are based—not
on the events that occurred the day they closed on their mortgages—but on the various kickbacks and referrals made
and received by defendants after the closing.
Id. at 359 n.3; see also id. at 360 (noting that a violation occurs “typically”—not
always—at the closing); Nelson v. Fidelity Nat’l Fin. Inc., No. 1:13–cv–1452, 2014 WL
641978, at *6–7 (E.D. Pa. Feb. 18, 2014) (same). Despite this limiting language, many
courts have assumed Snow stands for the wide-sweeping proposition that any RESPA
violation can only occur one time: at the closing.
The Third Circuit has never taken such a position, though it once cited Snow in
dicta. In re Cmty. Bank N. Va., 622 F.3d 275, 281 (3d Cir. 2010). The case involved a
settlement-only RESPA class action and the decision was not based at all on RESPA’s
statute of limitations, the continuing violations doctrine, or the statutory phrase
“violation” found in § 2607. The Third Circuit noted in passing that RESPA’s statute of
limitations begins running on “the date of the occurrence of the violation, i.e. the date the
loan closed,” but it did not decide that there can be only one single violation of RESPA at
the closing. Id. at 281 (quoting Snow, 332 F.3d at 359–61). Nor did it decide whether
RESPA violations that occur subsequent to the closing prevent the statute of limitations
from expiring. Nowhere did it address the continuing violations doctrine’s applicability to
RESPA. 14 Six years after the Third Circuit decided that case, however, it chose not to cite
Snow while directly addressing RESPA’s statute of limitations. See generally
Cunningham, 814 F.3d at 158–64. It also chose not to treat the “violation” as being
interchangeable with the closing. Instead, it merely stated that the statute of limitations
begins running at the closing: “[The statute of limitations] runs from the date of the
occurrence of the violation, . . . which begins at the closing of the loan.” Id. at 160
This is no surprise since none of those issues were before the court in that case.
(emphasis added) (citation omitted). Hence, under the Third Circuit’s most recent
precedent on the issue, a RESPA violation “begins” at the closing of the loan. This,
however, does not in any way mean that a subsequent violation—after the closing—is not
an independent actionable event carrying with it its own limitations period. More
importantly, even if the Third Circuit had followed Snow, this would not disrupt my
finding here since Snow explicitly “recognize[d] the possibility that purchasers could pay
for a settlement service subject to § 2607(a)–(b) at a time other than the closing, in which
case ‘the date of the occurrence of the violation’ presumably would be the date of
payment, not the unrelated closing.” Snow, 332 F.3d at 359 n.3. 15
The “One Violation” Reading of RESPA Contradicts U.S.
Supreme Court Precedent
Defendants’ arguments and some courts’ reasoning—that any RESPA “violation”
can only occur at a closing—also defies U.S. Supreme Court precedent. The U.S.
Supreme Court has only addressed RESPA in one case. In that case, the Court made
perfectly clear that a “violation” of RESPA can occur in many different ways at many
With that said, the instant case differs from Snow in three important ways. First, Snow did not involve a
captive reinsurance scheme whereby an insurance company pays a kickback to a reinsurer/lender. Rather, it involved
only the insurance company’s general practice of paying annual bonuses to its own employees—bonuses which did
not necessarily have any connection to the plaintiffs themselves. Snow, at 357 (noting that the insurance agents
would get bonuses based on their overall “high volumes of title insurance sales”). Second, unlike the borrowers in
Snow who paid for their insurance all at once at closing, here, the plaintiffs paid for it piecemeal, over time, in the
form of premium payments. This distinction is particularly relevant because, allegedly, defendants would then use
these premium payments to contribute to their illegal kickbacks. Lastly, here, the defendants’ alleged “violation” of
RESPA is not merely their acceptance of each premium payment from the plaintiffs. Plaintiffs also allege a violation
each time the insurer pays the reinsurer an illegal kickback. (Doc. No. 224-2 ¶ 310). The plaintiffs’ payment of
premiums, over a period of years, indisputably occurred “at a time other than the closing” and thus “the date of the
occurrence of the violation presumably would be the date of payment, not the unrelated closing.” Snow, 332 F.3d at
359 n.3. Likewise, the illegal kickback payments paid by the insurers to the reinsurers occurred “at a time other than
the closing” and are “unrelated [to the] closing.” Id. Clearly these alleged kickbacks are prohibited by RESPA and
thus amount to “violations” of RESPA. 12 U.S.C. § 2607(a) (“No person shall give and no person shall accept any
fee, kickback, or thing of value . . . .”). If Congress enacted RESPA to eliminate illegal kickbacks and fees, §
2601(b)(2), it is difficult to imagine why it would not make actionable the very type of conduct that the statute aims
different times. Freeman v. Quicken Loans, Inc., 132 S. Ct. 2034 (2012). Reading the
plain language of the statute, the Court explained that borrowers may sue any time
someone “violate[s] the prohibitions” of § 2607. Id. at 2038. Some of the “prohibitions”
of § 2607 include the very violations alleged in this case: kickbacks, fees, and referrals.
12 U.S.C. § 2607(a), (b). The Court also offered hypothetical “violations” of the statute
that have nothing to do with a real estate closing. Freeman, 132 S. Ct. at 2043 (“[A] a
settlement-service provider who agrees to exchange valuable tickets to a sporting event in
return for a referral of business would violate § 2607(a)”); id. (“[A] settlement-service
provider who gives a portion of a charge to another person who has not rendered any
services in return would violate § 2607(b)”). Accordingly, I cannot agree that a RESPA
violation only occurs at the closing because to do so would be to go directly against the
U.S. Supreme Court’s interpretation of RESPA.
Cunningham and the Continuing Violations Doctrine
Finally, my finding here does nothing to disrupt Cunningham or the state of the
law regarding RESPA’s relationship to the doctrine of equitable tolling. The equitable
tolling doctrine and the continuing violations theory are two separate and distinct legal
principles subject to entirely different analyses. E.g., Bennett v. Susquehanna Cty.
Children & Youth Servs., 592 F. App’x 81, 83–86 (3d Cir. 2014) (analyzing the equitable
tolling doctrine completely separate from the continuing violations doctrine); McAleese
v. Brennan, 483 F.3d 206, 217–20 (3d Cir. 2007) (same); Henchy v. City of Absecon,
148 F. Supp. 2d 435, 438–39 (D.N.J. 2001) (same). Indeed, courts have specifically
found that plaintiffs who failed to plead fraudulent concealment in support of equitable
tolling could nonetheless rely on a sufficiently alleged continuing violation. E.g., In re
Niaspan Litigation, 42 F. Supp. 3d at 746–49.
The Third Circuit, in Cunningham, spoke only to the application of equitable
tolling to RESPA’s statute of limitations. However, the Third Circuit has never spoken on
the continuing violations doctrine’s applicability to RESPA. Cunningham did not address
whether RESPA may be violated each time there is an illegal kickback, fee, or referral.
As stated above, this question is independent from the well-settled principle that the
limitations period begins to run at the closing of the loan.
Based on all the foregoing, I conclude that the continuing violations doctrine
applies to plaintiffs’ RESPA claims. 16
Undue Delay and Prejudice
Having found that the continuing violations doctrine supports plaintiffs’ RESPA
claims, I still must decide whether the instant motion to amend was unduly delayed or
will prejudice defendants. I find that the plaintiffs’ motion, with respect to their RESPA
There has been some confusion in the use of the phrase “continuing violations.” Kyle Graham, The
Continuing Violations Doctrine, 43 GONZ. L. REV. 271, 280–81 (2008). For example, in the CFPB’s decision, it
stated that it did not believe the continuing violations doctrine applied to the RESPA claims. However, it then held
that the enforcement action was timely because the defendant “violated RESPA every time it accepted a reinsurance
payment.” In the Matter of PHH Corp., at 22. As explained by commentators, there are two different types of
“continuing violation” theories that courts refer to. Graham, supra, at 280–81. With the first type of theory, “the
limitations period on a claim does not necessarily begin to run as soon as its essential elements first fall into place,
or when the plaintiff becomes aware that he or she has the makings of a valid cause of action. Instead, a claim
subject to this approach will continue to build and absorb new wrongful acts for so long as the defendant perpetuates
its misconduct.” Id. With the second type of theory, the limitations period begins to run again and again “on a dayby-day, act-by-act, or similarly parsed basis.” Id. at 281. Viewed in this light, the CFPB’s decision endorsed one
form (the second) of the continuing violations doctrine without calling it the “continuing violations doctrine;” the
CFPB found that the defendants violated RESPA on an “act-by-act . . . basis” each time there was a kickback. Thus,
its rejection of what it referred to as the “continuing violation” doctrine was really just a rejection of one form of the
claims, is not unduly delayed and that the defendants would not be prejudiced by
Defendants argue that plaintiffs have known about the legal basis for their
modified RESPA claims since June 2015 when the CFPB decision was issued. Because
plaintiffs did not present me with this legal theory (continuing violations) until now,
defendants argue the plaintiffs have exhibited undue delay. I disagree. The last stay in
this case was imposed on March 11, 2015. The purpose of this stay was to await the
Third Circuit’s decision in Cunningham, which related solely to equitable tolling. It was
not until months after this stay was entered that the CFPB issued its decision, which for
the first time—defendants admit—provided the plaintiffs with their continuing violations
argument. (Doc. No. 227 at 11) (“Plaintiffs’ counsel has known about the purported legal
basis for their ‘modified RESPA claim’ since June 2015”). Simply because the plaintiffs
waited until the Third Circuit decided Cunningham to assert their new legal argument
(which they acquired during the stay) does not mean they unduly delayed. At the time the
CFPB handed down its decision, neither plaintiffs nor defendants had any idea how the
Cunningham case would turn out. Hindsight is twenty-twenty for the defendants who
now argue the plaintiffs should have prematurely disrupted the stay to assert a new legal
argument. Such a premature tactical move would have been a waste of the court’s—and
the parties’—time and resources, especially if Cunningham had come out differently. 17
Under defendants’ logic, the plaintiffs should have moved to lift the stay thereby prompting a new
scheduling order with briefing and motions on the continuing violations issue. Given the unique procedural posture
of this case, and for all the reasons I have already stated, plaintiffs’ decision not to do so was a fair exercise of
discretion—not undue delay.
Contrary to defendants’ arguments, delay alone is not sufficient to warrant denial
of leave to amend. Adams, 739 F.2d at 868. It is only when delay becomes “undue” that
it forms an adequate basis, on its own, for denial of a motion to amend. Bjorgung, 550
F.3d at 266. “Delay becomes ‘undue,’ and thereby creates grounds for the district court to
refuse leave, when it places an unwarranted burden on the court or when the plaintiff has
had previous opportunities to amend.” Id. Thus, an undue delay analysis requires courts
to focus on “the movant’s reasons for not amending sooner.” Id. Here, the plaintiffs have
offered an adequate explanation for not amending sooner: there was a stay imposed in the
case, which both parties had jointly entered into, at the time plaintiffs learned of the
viability of their newfound legal argument. The plaintiffs’ “delay”—if one can even call
it that—was not “undue.”
Precedent strongly weighs in favor of allowing amendment of the plaintiffs’
RESPA claims in this situation. In relying on U.S. Supreme Court precedent, the Third
Circuit has cautioned that a district court may err by “not allowing plaintiffs an
opportunity to allege a new legal theory after the original theory was dismissed on a
[Rule] 12(b)(6) motion.” Adams v. Gould Inc., 739 F.2d 858, 868–69 (3d Cir. 1984)
(citing Foman v. Davis, 371 U.S. 178 (1962)). In Adams v. Gould Inc., the Third Circuit
extended this logic to an even later stage in the litigation: “Where the legal theory of a
complaint is rejected by the district court on a motion for summary judgment, but where
an alternative theory has been raised which, on the same facts, is legally sufficient, it
would be unusual for a district court not to allow the plaintiff leave to amend because of
‘undue delay.’” 739 F.2d 858, 868 (3d Cir. 1984). The Third Circuit in Adams reversed
the district court for depriving the plaintiffs of an opportunity to amend their complaint
even after summary judgment had been granted. Id. at 869. In this case, the parties have
not even proceeded to discovery. Even though the plaintiffs’ “original theory was
dismissed,” I will not deny “the plaintiffs an opportunity to allege a new legal theory.” Id.
Amendment of plaintiffs’ RESPA claims would not prejudice defendants. Like in
Gould, the defendants here “assert no particular prejudice except for additional counsel
fees, but argue there must be ‘finality’ in the litigation process.” Id. at 869. This argument
does not demonstrate prejudice. Id. Defendants also conflate the concept of a new legal
theory with that of a new legal claim. Plaintiffs’ underlying factual allegations in support
of their RESPA claims will stay the same. Consequently, defendants will not undertake
any new burden in grappling with new facts. They simply will be required to litigate a
different legal issue regarding the same claims. In addition, prejudice is typically found
only where a plaintiff moves to amend his or her complaint during or after discovery.
See, e.g., Cureton, 252 F.3d at 274–76 (affirming district court’s denial of leave to amend
when amendment would require the opposing party to “engage in burdensome new
discovery and significant new trial preparation”). In sum, the plaintiffs did not unduly
delay in moving to amend their complaint to make a new legal argument in support of
their RESPA claims. Defendants have similarly failed to show that amendment would
cause them prejudice.
For all the above reasons, I will grant plaintiffs’ motion to amend their complaint
to modify their RESPA claims. 18
Plaintiffs’ Proposed RICO Claims
Unlike with their RESPA claims, plaintiffs have unduly delayed moving to amend
to add claims under RICO. The new RICO claims also do not relate back to the original
complaint under Rule 15(c). For both of these reasons, I will deny plaintiffs’ motion to
amend their complaint to add new RICO claims.
As noted above, the “undue delay” analysis focuses on the plaintiff’s reasons for
not moving to amend sooner. With their RESPA claims, the plaintiffs are merely
asserting a new legal argument in support of the same claims—based on the same facts—
that have been asserted throughout this litigation. The assertion of entirely new RICO
claims, however, is much different because it involves the addition of brand new causes
Plaintiffs do not offer any reason for why they did not bring the RICO claims in
their original complaint. As noted by the plaintiffs, delay becomes undue “when the
plaintiff has had previous opportunities to amend.” Bjorgung, 550 F.3d at 266. In this
case, the plaintiffs have filed three complaints: (1) the original complaint in 2011; (2) the
amended complaint in 2012; and (3) the second amended complaint in 2013. Plaintiffs
Although I am granting the motion to amend, the plaintiffs’ second amended complaint, as written, is
sufficiently pled to support their continuing violations theory.
did not assert—or attempt to assert—RICO claims in any of these previous three
In arguing that they have not unduly delayed in moving to add their RICO claims,
plaintiffs point out that this case has been stayed several times. Although this is true, it
does not explain why the plaintiffs did not bring RICO claims against the defendants in
their original complaint, amended complaint, or second amended complaint. The stays
were certainly relevant to plaintiffs’ reasons for not amending their RESPA claims since
the stays related to the RESPA claims. But the stays had no bearing on plaintiffs’ ability,
at any point, to assert RICO claims.
In considering whether to allow amendment, “[t]actical decisions and dilatory
motives may lead to a finding of undue delay.” Synthes, Inc. v. Marotta, 281 F.R.D. 217,
225 (E.D. Pa. 2012). Plaintiffs’ proposal of brand new RICO claims suggests a purely
tactical decision. Without a doubt, Cunningham foreclosed the plaintiffs’ equitable tolling
argument in support of their RESPA claims. As already explained, their subsequent
assertion of the continuing violations theory was not unduly delayed or based on dilatory
motives because the plaintiffs first became aware—as defendant concede—of this theory
during the Cunningham stay in June 2015. (Doc. No. 227 at 11) (“Plaintiffs’ counsel has
known about the purported legal basis for their ‘modified RESPA claim’ since June
2015”). Plaintiffs cannot be said to have unduly delayed with respect to amending their
RESPA claims simply because they vigorously litigated the equitable tolling issue and
discovered a possible continuing violations argument (via the CFPB’s decision) at the
eleventh hour during the stay. On the contrary, plaintiffs have known about the existence
of the RICO statute from the very start of this case, but offer no reason for why they
never used it earlier. 19
Simply put, plaintiffs have provided no reason explaining why they now assert
brand new RICO claims five years into this litigation when it has already had three
opportunities to assert these claims. While the mere passage of time does not amount to
undue delay, I conclude that the passage of five years coupled with the plaintiffs’
inability to offer any reason for this delay, does.
Even if the plaintiffs had not unduly delayed, their RICO claims would not relate
back to their original complaint. For this reason alone, denial of the motion to amend to
add RICO claims is warranted.
The Third Circuit has made clear that “where the original pleading does not give a
defendant fair notice of what the plaintiff’s [amended] claim is and the grounds upon
which it rests, the purpose of the statute of limitations has not been satisfied and it is not
an original pleading that [can] be rehabilitated by invoking Rule 15(c).” Glover, 698 F.3d
at 146. A proposed amended claim only relates back if a party is given some sort of
notice—in the original pleading—of the legal basis upon which the proposed amended
claim is based. Id. (alterations in original). As here with plaintiffs’ proposed RICO
claims, “amendments that significantly alter the nature of a proceeding by injecting new
and unanticipated claims are treated far more cautiously.” Id. Here, plaintiffs’ proposed
Plaintiffs argue that they brought a RICO claim based upon a captive reinsurance scheme in an unrelated
action as recent as 2015. This argument is unavailing because it does not explain why the plaintiffs did not assert a
RICO claim until now.
RICO claims are surely “new” and “unanticipated” since there was never a hint they
would be brought in the last five years. Plaintiffs’ original complaint did not put
defendants on fair notice that plaintiffs could or would assert RICO claims. The original
complaint is void of any language suggesting an “enterprise” or any of the other buzz
words that attend a RICO claim. 20
Accordingly, I find plaintiffs’ proposed RICO claims do not relate back under
Defendants violated RESPA—assuming the veracity, at this stage, of plaintiffs’
allegations—each time an allegedly illegal kickback, fee, or referral was given or
received. This captive reinsurance scheme, as pled, constitutes a continuing violation of
RESPA. Because I find the continuing violations doctrine applicable, the statute of
limitations runs from the date of the last RESPA violation rather than the first. Burnette,
2003 WL 21293682, at *2 (citing Cowell, 293 F.3d at 292). 21 The amendment with
respect to RESPA was not unduly delayed and would not prejudice defendants. For the
reasons discussed above, I find that plaintiffs unduly delayed in moving to add RICO
claims and that these proposed RICO claims do not relate back to the original complaint.
An appropriate Order follows.
This problem is not present with the RESPA claims. The plaintiffs’ current use of a new legal argument
(continuing violations) does not change the fact that the defendants have had notice all along of the legal basis for
plaintiffs’ RESPA claims since these claims have been pled all along. Unlike the continuing violations theory,
though, plaintiffs’ proposed RICO claims are not new legal “theories”—they are new legal claims.
The parties have not briefed the exact filing dates that apply to plaintiffs’ RESPA claims under the
continuing violations doctrine. Thus, I will not decide, at this juncture, the exact filing dates that apply to plaintiffs’
RESPA claims. Such a decision at this stage would be premature. In re Niaspan Litig., 42 F. Supp. 3d at 747 n.7.
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?