Mary Edmondson v. Eagle National Bank
922 F.3d 535
4th Cir.2019Background
- Between 2009–2014 plaintiffs obtained residential mortgages from various lenders; brokers/loan officers referred borrowers to Genuine Title for title and settlement services. Plaintiffs allege Genuine Title paid cash and in-kind kickbacks (via BGI and Competitive Advantage) to induce referrals, in violation of RESPA §2607.
- Payments were funneled through entities and sham agreements (BGI, Competitive Advantage, shell companies, back-dated Title Services Agreements) and omitted from HUD-1 Settlement Statements, allegedly to conceal the scheme from borrowers and regulators.
- The first of five putative class actions was filed on June 23, 2016, after RESPA’s one-year statute of limitations had expired for the alleged 2009–2014 violations.
- Plaintiffs invoked fraudulent-concealment tolling, alleging affirmative acts of concealment by Genuine Title and the lenders prevented discovery of claims within the limitations period.
- The district court dismissed under Rule 12(b)(6) reasoning Menominee’s two-part “equitable tolling” test required extraordinary circumstances and plaintiffs lacked those circumstances; plaintiffs appealed.
- The Fourth Circuit held the district court erred: RESPA’s one-year limitations is subject to equitable tolling (including fraudulent concealment); Menominee’s two-part equitable-tolling test does not supplant the Fourth Circuit’s three-part fraudulent-concealment framework; plaintiffs’ allegations plausibly alleged concealment and due diligence at the pleading stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RESPA §2614’s one-year limitation is subject to equitable tolling | RESPA’s one-year limit is not jurisdictional and therefore may be tolled for fraudulent concealment | Limit is jurisdictional or otherwise not tolled | Held: §2614 is non-jurisdictional and subject to equitable tolling, including fraudulent concealment |
| Applicable test for tolling (Menominee two‑part v. Fourth Circuit three‑part) | Apply Fourth Circuit’s three‑part fraudulent concealment test (affirmative concealment; lack of discovery despite due diligence) | District court applied Menominee’s two‑part equitable‑tolling test (diligence + extraordinary circumstances) | Held: Menominee’s two‑part equitable‑tolling test does not replace the established three‑part fraudulent‑concealment test |
| Whether plaintiffs sufficiently pleaded affirmative acts of concealment under Rule 9(b) and Rule 12(b)(6) | Allegations of sham entities, back‑dated sham Title Service Agreements, funneling of payments, and omission from HUD‑1s are particularized acts of concealment | Defendants argue public filings, enforcement actions, and media put plaintiffs on inquiry notice | Held: Plaintiffs pleaded particularized affirmative acts of concealment sufficient to survive motion to dismiss |
| Whether plaintiffs exercised due diligence (inquiry notice) such that tolling fails as a matter of law | Plaintiffs allege they did not and could not have known of the scheme until contacted by counsel; public materials did not necessarily put ordinary borrowers on inquiry notice | Defendants argue Fangman, CFPB/AG enforcement actions, and press coverage provided notice and plaintiffs failed to investigate | Held: On the limited record at pleading stage, due diligence is a fact question; public actions and press do not, as a matter of law, defeat concealment allegations |
Key Cases Cited
- United States v. Kwai Fun Wong, 135 S. Ct. 1625 (2015) (federal limitation periods are presumptively subject to equitable tolling analysis)
- Holmberg v. Armbrecht, 327 U.S. 392 (1946) (fraudulent concealment tolling is read into federal statutes of limitation)
- Menominee Indian Tribe of Wis. v. United States, 136 S. Ct. 750 (2016) (two‑part equitable‑tolling test for excusable delay: diligence and extraordinary circumstances)
- Supermarket of Marlinton, Inc. v. Meadow Gold Dairies, Inc., 71 F.3d 119 (4th Cir. 1995) (articulates the Fourth Circuit’s three‑part fraudulent‑concealment test)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: factual allegations must plausibly state a claim)