MANNERS et al v. FIFTH THIRD BANK et al
Filing
180
MEMORANDUM. Signed by Judge Mark R. Hornak on 2/5/14. (bdb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
CHRISTOPHER MANNERS, et al.,
individually and on behalf of all others
similarly situated,
Plaintiffs,
v.
FIFTH THIRD BANK, et al.,
)
)
)
)
)
)
)
)
)
)
Civil Action No.2: 12-cv-00442
Judge Mark R. Hornak
Defendants.
MEMORANDUM
Mark R. Hornak, United States District Judge
This is a putative class action for mortgage services fraud pursuant to the Real Estate
Settlement and Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq.
Plaintiff Christopher
Manners, on behalf of himself and others similarly situated, alleges that Defendants Fifth Third
Bank and Fifth Third Mortgage Company (the mortgagee), Fifth Third Mortgage Insurance
Reinsurance Company (the captive reinsurer), Radian Guaranty Inc., and Mortgage Guaranty
Insurance Corporation (the primary mortgage insurers, or PMls) engaged in an unlawful feesplitting and kickback arrangement in connection with Plaintiffs' residential mortgages.
Plaintiffs also bring a state-law unjust enrichment claim pursuant to 28 U.S.C. § 1367. They
request treble damages, attorneys' fees, and costs. Defendants have filed Motions to Dismiss in
accordance with Federal Rule of Civil Procedure 12(b)(6) (ECF Nos. 167 and 169), arguing that
Plaintiffs' claims are untimely because they were brought outside of RESPA's one-year statute
oflimitations. See 12 U.S.C. § 2614.
This lawsuit is very closely related to another on this Court's docket, Menichino, et ai. v.
CWbank, N.A., et ai., No. 12-cv-0058 (W.D. Pa. filed Jan. 13,2012). The substantive claims and
factual allegations are nearly identical, and many of the same counsel are involved.
For
substantially the same reasons set forth in that Opinion, the reasoning of which the Court
incorporates by reference here, Plaintiffs have pled facts sufficient to equitably toll the statute of
limitations, and Defendants' Motions to Dismiss will be denied. l
I.
DISCUSSION
This action was originally filed on April 5, 2012.
Plaintiffs subsequently filed a First
Amended Complaint ("FAC") (ECF No. 75) on September 28,2012. Pursuant to Fed. R. Civ. P.
12(b)(6), Defendants moved to dismiss the F AC on November 28, 2012, which the Court granted
without prejudice on July 19, 2013 on the grounds that Plaintiffs had not set forth facts sufficient
to plead an entitlement to equitable tolling. See Memorandum, ECF No. 162; Menichino v.
Citibank, N.A., 2013 WL 3802451 (W.D. Pa. Jul. 19,2013). Consistent with the Court's Order
(ECF No. 163), Plaintiffs timely filed their Second Amended Complaint ("SAC"), ECF No. 164,
on August 16,2013, which Defendants moved to dismiss on September 17,2013.
In its previous Memorandum in this matter, this Court held, in conjunction with its Opinion
in Menichino, that Plaintiffs had adequately pled the active misleading component of equitable
tolling, but failed to plausibly show that they were not on inquiry notice or that their alleged due
diligence was reasonable. Memorandum, ECF No. 162, at 3-4; Menichino, 2013 WL 3802451,
at *9. Consequently, the Court granted Plaintiffs leave to re-plead these two elements in a SAC.
The parties have provided Notices of Supplemental Authority, ECF Nos. 174 and 176, identifying Cunningham v.
M&T Bank Corp., 2013 WL 5876337 (M.D. Pa. Oct. 30, 2013), and Riddle v. Bank of Am. Corp., 2013 WL
6061363 (E.D. Pa. Nov. 18,2013), as noteworthy decisions for the Court to consider as to the Motions to Dismiss.
For the reasons stated in the Court's Opinion in Menichino, neither case alters its conclusion.
I
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Plaintiffs made no changes to the facts pled with respect to active misleading. Thus, that ruling
need not be revisited. See Hamilton v. Leavy, 322 F.3d 776, 786 (3d Cir. 2003) ("The law of the
case doctrine 'limits relitigation of an issue once it has been decided' in an earlier stage of the
litigation." (quoting In re Continental Airlines, Inc., 279 F.3d 226, 232 (3d Cir. 2002)).
Unlike the F AC, the SAC sets forth the date that each Plaintiff received a notice of
investigation from counsel; the date that each Plaintiff consented to counsel's representation; the
date each Plaintiff consented to counsel's representation; the dates each Plaintiff contacted their
mortgagee and PMI to learn whether their mortgage had been reinsured; and what the Plaintiffs
were told (or, more to the point, not told) by their mortgagee and PMI's representatives in
response to the notice. ECF No. 164 at ~~ 145-195.
The SAC also alleges that none of the disclosures, correspondence, or monthly billing
statements that Plaintiffs received from either their mortgagee or PMI after closing advised them
that a portion of their monthly mortgage payments were financing reinsurance premiums or
indicated that mortgages were ever actually reinsured, which the mortgagee's own customer
service representatives could not confirm when Plaintiffs contacted them in response to receiving
the notice from counsel. /d. As this Court held in Menichino, viewed in the light most favorable
to Plaintiffs, these allegations are sufficient to plead that Plaintiffs were no on inquiry notice of
the possible existence of their claims and that their lack of due diligence during the limitations
period was reasonable under the circumstances. However, the Court's ruling on this issue does
not prejudice Defendants from re-raising the affirmative defense of the statute of limitations on a
more fully developed record at summary judgment.
As to Plaintiffs' substantive claim of a RESPA violation, as this Court held in Mentchino,
the SAC pleads such a violation that is plausible on its face. The SAC alleges that, in exchange
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for a steady stream of primary mortgage insurance business from the mortgagee, the PMIs
remitted kickbacks, dressed up as "reinsurance premiums," to the mortgagee through their
reinsurance subsidiaries.
The source of the purported kickback funds was a portion of the
monthly mortgage premium that the plaintiffs remitted to their mortgagees. In support of their
allegation that no real risk was transferred between the PMIs and captive reinsurers, the Plaintiffs
refer to the terms of the reinsurance contracts, which they contend provided no recourse to the
PMIs in the event that the reinsurers did not maintain adequate funds in reserve to pay claims, as
well as to the purportedly low dollar value of claims paid by the reinsurers versus the amount of
reinsurance premium remitted by the PMIs.
ECF No. 164 at
~~
4-6, 82-85, 108-09. The
Complaint supports these allegations with details from the Defendants' public filings. As in
Menichino, these factual allegations are sufficient at this stage of the litigation to plead a
violation ofRESPA's prohibition on kickbacks and unearned fees.
Finally, as was this Court's holding in Menichino, Plaintiffs' supplemental unjust
enrichment claim survives. Since Plaintiffs were only in privity of contract with the mortgagee,
and had no involvement in or rights or obligations under the subsequent contracts that give rise
to the crux of the dispute, they have sufficiently pled that there was no contract between
themselves and the parties to the purported kickback scheme that is on point or otherwise
governs the disputed transaction. Accordingly, Plaintiffs have met their pleading burden as it
exists at this point.
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II.
CONCLUSION
For the reasons discussed above and as set forth in this Court's opinion in Menichino,
Defendants' Motions to Dismiss (ECF Nos. 167 and 169) will be denied. An appropriate Order
will follow.
Dated:
February~ 2014
Mark R. Hornak
United States District Judge
cc: All Counsel of Record
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