Case Information
*2 Before: McKEE, Chief Judge, AMBRO, and SCIRICA, Circuit Judges
(Opinion filed February 19, 2016)
Edward W. Ciolko, Esquire
Terence S. Ziegler, Esquire
Donna S. Moffa, Esquire
Natalie Lesser, Esquire
Kessler Topaz Meltzer & Check
280 King of Prussia Road
Radnor, PA 19087
Counsel for Appellants
David J. Bird, Esquire
Reed Smith
225 Fifth Avenue, Suite 1200
Pittsburgh, PA 15222
Andrew J. Soven, Esquire
Reed Smith
1717 Arch Street
Three Logan Square, Suite 3100
Philadelphia, PA 19103
Counsel for Appellees
________________ OPINION OF THE COURT ________________ *3
AMBRO, Circuit Judge
Judith Cunningham, Frederick Deimler III, and Carol Vanover (collectively, “Plaintiffs”) claim to represent a nationwide class of homeowners who were victims of a captive reinsurance scheme perpetrated by M&T Bank Corporation, M&T Bank, and M&T Mortgage Reinsurance Company (collectively, “M&T”). Plaintiffs filed this lawsuit several years after the applicable statute of limitations had expired. Aftеr allowing discovery related to the timeliness of Plaintiffs’ claims, t he District Court granted summary judgment for M&T. As the Court explained, Plaintiffs’ claims were untimely and not subject to equitable tolling. Because we agree that equitable tolling does not apply to these claims, we affirm.
I.
Plaintiffs obtained residential mortgage loans from M&T Bank to finance the purchasе of their homes. When a borrower seeks a mortgage loan that exceeds 80% of the value of the residence, he or she must ordinarily agree to pay for insurance to protect the lender from the risk of default. Private mortgage insurance thus permits lenders such as M&T Bank to extend credit at lower interest rates and to borrowers who might оtherwise not be able to get a mortgage loan. Each Plaintiff fell into this category and had to buy insurance as a condition of his or her mortgage. Each paid premiums to a private mortgage insurer and, in case of default, M&T Bank would be the beneficiary of the insurance agreement. As is customary in the industry, M&T Bank selected the insurers with whom the plаintiffs would contract.
Companies offering private mortgage insurance will often contract with others for “reinsurance” of the risk they *4 hold. Under a reinsurance agreement, the reinsurance company assumes a portion of the risk associated with default in exchange for a percentage of the mortgage insurance premiums рaid by the borrower. Reinsurance thus allows the insurer to manage its own risk and offer greater amounts of insurance at lower premiums. Many mortgage lenders operate their own “captive” companies that reinsure mortgages the lenders originated. In this case, M&T Bank referred Plaintiffs to private mortgage insurers who, in turn, reinsured the insurance policy with M&T Mortgage Reinsurance Company —M&T Bank’s captive reinsurer.
Beginning in late 2011, counsel sent letters to Plaintiffs advising that they were investigating claims concerning M&T Bank’s captive mortgage reinsurance. Plaintiffs agreed to be part of a lawsuit against M&T and filed a putative class action complaint alleging violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607, and unjust enrichment. [1]
In the complaint, Plаintiffs claimed to represent a nationwide class of persons who obtained residential mortgage loans from M&T Bank that were reinsured by M&T Mortgage Reinsurance Company. They alleged that M&T Bank and its reinsurer colluded with private mortgage insurers, referring customers to the private mortgage insurers and receiving in return reinsurance agreements that required M&T Mortgage Reinsurance to take on little or no actual risk. *5 This scheme аllegedly violated RESPA’s anti -kickback and anti-fee-splitting provisions. See 12 U.S.C. § 2607(a) – (b).
M&T moved to dismiss under Federal Rule of Civil
Procedure 12(b)(6), arguing that RESPA’s one -year statute of
limitations barred the claims of Plaintiffs and they were not
entitled to equitable tolling of the limitations period. The
District Court denied the motion, declining to resolve the
fact-bound issue of equitable tolling until the parties could
take discovery limited to that issue.
Cunningham v. M&T
Bank Corp.
, No. 12-cv-1238,
After discovery, M&T moved for summary judgment
and the Court granted the motion. With the benefit of a more
detailed factual record, it held that the claims were indeed
time barred and that Plaintiffs could not equitably toll the
limitations periоd.
Cunningham v. M&T Bank Corp.
, No. 12-
cv-1238,
II.
The District Court had jurisdiction under 28 U.S.C.
§ 1331. We have jurisdiction per 28 U.S.C. § 1291. Our
review of the District Court’s g rant of summary judgment is
plenary.
Seamans v. Temple Univ.
, 744 F.3d 853, 859 (3d
Cir. 2014). A moving party is entitled to summary judgment
only if “there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). A dispute about a material fact is “genuine”
only “if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party,”
Anderson v.
Liberty Lobby, Inc.
,
at *6 – 8; Hill v. Flagstar Bank , No. 12-cv-2770, 2014 WL 2892397, at *7 (E.D. Pa. June 26, 2014); Riddle v. Bank of Am. Corp. , No. 12-cv-1740, 2013 WL 6061363, at *9 (E.D. Pa. Nov. 18, 2013). Last year, we affirmed the grant of summary judgment in one of those three cases in a non- precedential opinion. Riddle v. Bank of America Corp. , 558 Fed. App’x 127, 130 (3d Cir. 2014). Finally, eight cases with substantially identical claims remain pending and have been stayed awaiting our decision in this appeal. Ba v. HSBC USA, Inc. , No. 13-cv-0072 (E.D. Pa.); Barlee v. First Horizon Nat’l Corp. , No. 12-cv-3045 (E.D. Pa.); Blake v. JPMorgan Chase Bank, N.A. , No. 13-cv-6433 (E.D. Pa.); Hall v. Wachovia Bank, N.A. , No. 13-cv-5994 (E.D. Pa.); Manners v. Fifth Third Bank , No. 12-cv-0442 (W.D. Pa.); Menichino v. Citibank, N.A. , No. 12-cv-0058 (W.D. Pa.); Thurmond v. SunTrust Bank , No. 11-cv-1352 (E.D. Pa.); White v. PNC Fin. Servs. Grp., Inc. , No. 11-cv-7928 (E.D. Pa.).
III.
Plaintiffs’ claims under RESPA have a one -year statute of limitations. 12 U.S.C. § 2614. It runs “from the date of the occurrence of the violat ion,” id. , which begins at the closing of the loan, Community Bank I , 622 F.3d at 281. Cunningham, Deimlеr, and Vanover closed on their home mortgage loans in May 2007, June 2008, and October 2007, respectively. They filed suit in June 2012, several years after the statute of limitations had expired.
Plaintiffs nonetheless argue that their RESPA claims
are not time barred because they have satisfied the
requirements to equitably toll the statute of limitations.
Equitable tolling “can rescue a claim ot herwise barred as
untimely by a statute of limitations when a plaintiff has been
prevented from filing in a timely manner due to sufficiently
inequitable circumstances.”
Santos ex rel. Beato v. United
States
,
Plaintiffs’ basis for tolling, also known as fraudulent
concealment, requires them to show three elements: “(1) that
the defendant actively misled the plaintiff; (2) which
preventеd the plaintiff from recognizing the validity of her
claim within the limitations period; and (3) where the
*8
plaintiff’s ignorance is not attributable to her lack of
reasonable due diligence in attempting to uncover the relevant
facts.”
Cetel v. Kirwan Fin. Grp., Inc.
,
Plaintiffs argue that M&T Bank actively misled them regarding the nature and existence of their claims. But before Plaintiffs closed on their respective loans as mortgagors, each person received a disclosure form separate from the mortgage explaining reinsurance in plain language, stating that reinsurance could be with a company affiliated with the lender, that the reinsurance company would receive a percentage of the mortgage, and that the mortgagor hаd the opportunity to opt out of captive reinsurance. It read:
Your lender or a subsequent holder of your loan (the “Lender”) may[,] directly or through an affiliated company (a “Reinsurance Company”), enter into a reinsurance agreement with the primary insurance company that will be providing the mortgage insurance covering your loan.
Under a reinsurance agreement, the Reinsurance Company may assume a portion of the risk associated with such Mortgage Insurance. In exchange for its assumption of such risk, the Reinsurance Company receives a percentage of *9 the mortgage insurance premium paid to obtain the mortgage insurance cоvering your loan. The reinsurance agreement does not increase the amount you have to pay for mortgage insurance or the length of time you must maintain the insurance.
If you do not want the mortgage insurance on your loan to be reinsured with Lender’s Reinsurance Company you may check the “opt out” box below when you sign and acknowledge receipt of this disclosure. Your election to opt in or out will not affect our credit decision regarding your loan.
Each Plaintiff signed and dated the disclosure and none elected to opt out from reinsurance with an affiliate of M&T Bank. The mortgage documents also disclosed the possibility of captive reinsurance on а page of the mortgage each person initialed. Plaintiffs confirmed during depositions that they were aware at the time of closing of the possibility of captive reinsurance, though none recalled asking any questions about the reinsurance agreement.
After the closing, Plaintiffs took no steps to investigate whether M&T Bank’s captive rеinsurance program might violate state or federal law. They did not, for example, ask their mortgage insurer if their particular insurance policy had been reinsured and, if so, with whom. They did not seek the advice of an attorney, research captive reinsurance, request documents related to their mortgage insurance, or take any steps to discover if they had a claim under RESPA. [3] *10 Plaintiffs claim simply that it was not until late 2011 or early 2012, when counsel asked them to join a lawsuit, that they became aware of the basis for a possible claim under RESPA.
On these undisputed facts, we conclude that Plaintiffs have failed to show due diligence and cannot use equitable tolling to rescue otherwise time-barred claims. At the closing, Plaintiffs were made aware that the mortgage insurance on their home might be reinsured with an affiliate of M&T Bank and, at that moment, they had all the facts necessary to develop their claims under RESPA. Yet they failed to take any steps to investigate during the approximately four-year period between the time of the closing and the time that they were approached by counsel. This inaction was not reasonable diligence.
Plaintiffs advance several arguments against summary
judgment, but none persuade us that the District Court got it
wrong. They first argue that they were, in fact, diligent.
According to their theory of diligence, M&T Bank’s
misrepresentations in the lengthy mortgage documеnts did not
give them any reason to investigate. And in the absence of
any “storm warnings” that would put them on notice of the
arrangements date back to the late 1990s. Lawsuits
challenging the arrangements as vehicles for illegal kickbacks
soon followed.
See, e.g.
,
Baynham v. PMI Mortg. Ins. Co.
,
No. 99-cv-241 (S.D. Ga. filed Dec. 17, 1999). And around
the time Plaintiffs closed on their mortgage loans with M&T
Bank, their current counsel had brought several nearly
identical lawsuits against lenders and captive reinsurance
companies in this area.
See, e.g.
,
Alston v. Countrywide Fin.
Corp.
,
need for follow up, Plaintiffs assert that we can excuse their inaction until they were put on notice by a letter from a lawyer. We disagree.
For one, most of the cases that Plaintiffs cite in support of this argument actually аddress the discovery rule, which relates to claim accrual (when the limitations period begins to run) rather than equitable tolling (the events that can stop the clock on a limitations period once it has begun to run). Under the discovery rule, a cause of action does not accrue until the plaintiff discovers or in the exercise of reаsonable diligence should have discovered the basis for her claim against the defendant. See DeBenedictis v. Merrill Lynch & Co. , 492 F.3d 209, 216 (3d Cir. 2007); Benak ex rel. All. Premier Growth Fund v. All. Capital Mgmt. L.P. , 435 F.3d 396, 400 (3d Cir. 2006); In re NAHC, Inc. Sec. Litig. , 306 F.3d 1314, 1325 (3d Cir. 2002). In deciding when a diligent plaintiff would have discovered the basis of a claim, courts look for “storm warnings” that would put the plaintiff on notice of her injury. However, the discovery rule is not apt for RESPA claims because Congrеss specifically provided that the limitations period begins to run on “the date of the occurrence of the violation.” 12 U.S.C. § 2614; see also Macauley v. Estate of Nicholas , 7 F. Supp. 3d 468, 487 n.16 (E.D. Pa. 2014) (“[C]ourts across the country have refuse d to apply the discovery rule to RESPA claims.”). It is thus irrelevant for purposes of the statute of limitations in RESPA when a reasonable plaintiff would have discovered her claim.
Setting aside that distinction, however, what Plaintiffs ask us to d o is to ignore the plain words of M&T Bank’s disclosure. Based on the disclosure, they were on notice that reinsurance for their mortgage loans was reasonably likely through an affiliate of M&T Bank. Armed with the facts necessary to allege their claim under RESPA, it is undisputed that they took no steps to investigatе whether the reinsurance *12 arrangement was fully valid. See Oshiver v. Levin, Fishbein, Sedran & Berman , 38 F.3d 1380, 1390 (3d Cir. 1994) (“Equitable tolling . . . keys on a plaintiff’s cog nizance, or imputed cognizance, of the facts supporting the plaintiff’s cause of action.”). Even if M&T Bank’s disclosure did not give Plaintiffs warning of the need to investigate, the onus is still on Plaintiffs in these circumstances to exercise some degree of diligence in order to receive the benefit of equitable tolling.
Plaintiffs’ reliance on our decision in Community Bank II is also misplaced. There, a class action brought on behalf of homeowners alleged that a residential mortgage loan business and two banks were involved in a predatory lending scheme in violation of RESPA. 795 F.3d at 385. Though some of the homeowners’ claims were barred by RESPA’s statute of limitations, class counsel argued that fraudulent concealment would toll the limitations period. On a motion to certify a class, defendants argued the issue of equitable tolling would be too individualized and too central to the litigation for certification under Rule 23(b)(3). See Fed. R. Civ. P. 23(b)(3) (class action may be maintained if, among other things, “the court finds that the questions of law or fact common to clаss members predominate over any questions affecting only individual members”).
We rejected the argument, holding that commonality was satisfied despite the need for some class members to rely on fraudulent concealment. Regarding the due diligence element of fraudulent concealment, we noted that “when a wrongful scheme is perpetrаted through the use of common documentation, such as the documents employed to memorial ize each putative class member’s mortgage loan, full participation in the loan process is alone sufficient to establish the due diligence element.” Community Bank II , 795 F.3d at 404. Plaintiffs focus on this language to argue that their *13 participation in the loan closing was sufficient to establish diligence. The decision made clear, however, that its discussion of fraudulent concealment was limited to the commonality question under Rule 23. It explicitly did not “not address whether the class members a re actually entitled to equitable tolling on the merits,” id. at 404 – 5; thus it does not control our analysis of the very fact-speсific doctrine of fraudulent concealment in this case.
Finally, Plaintiffs argue that the District Court could
not have properly resolved the question of equitable tolling by
considering the lack of diligence without also considering
M&T Bank’s misrepresentations. In effect, Plaintiffs argue
that courts must analyze all the elements of fraudulent
concealment before dismissing a time-barred claim. This is
incorrect. To repeat, there are three elements for fraudulent
concealment: “(1) that the defendant actively misled the
plaintiff; (2) which prevented the plaintiff from recognizing
the validity of her claim within the limitations period; and (3)
where the plaintiff’s ignorance is not attributable to her lack
of reasonable due diligence in attempting to uncover the
relevant facts.”
Cetel
,
* * * * *
Statutes of limitations are “designed to promote justice by preventing surprises through the revival of clаims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.” Order of R.R. Telegraphers v. Ry. Express Agency , 321 U.S. 342, 348 – 49 (1944). We will sometimes make an exception to the rule where its rigid application would be unfair because a defendant concealed its wrong and prevented a diligent plaintiff from bringing her claim within the limitations рeriod. This not such a case. Indeed, a ccepting Plaintiffs’ theory in this case — toll indefinitely the limitations period for claims under RESPA until a lawyer can find the right plaintiff to join a lawsuit and notify other putative plaintiffs — would effectively write the statute of limitations out of RESPA. We thus affirm the decision of the District Court granting summary judgment for M&T.
purposes of appeal.
See Kost v. Kozakiewicz
,
Notes
[1] Plaintiffs also named Mortgage Guaranty Insurаnce Corporation and Genworth Mortgage Insurance Corporation as defendants. After the District Court granted summary judgment for all defendants, Mortgage Guaranty and Genworth settled with Plaintiffs and they are not participating in this appeal.
[2] Plaintiffs’ counsel also filed nearly a dozen identical
lawsuits in this Circuit against mortgage lenders, private
mortgagе insurance companies, and mortgage reinsurance
companies. Three cases (including this one) have proceeded
to summary judgment, and in each the District Court has
entered summary judgment for the defendants and concluded
that the claims under RESPA were time barred and not
subject to equitable tolling.
Cunningham
,
[3] If Plaintiffs had taken some steps to investigatе captive reinsurance, they would have found breadcrumbs leading them toward a potential RESPA claim. Captive reinsurance
[4] The District Court also entered summary judgment against the Plaintiffs on their unjust enrichment claims. On appeal, they make no serious effort to challenge that decision. They simply allege that the District Court erred in dismissing the unjust enrichment claims for the same reasons it erred in dismissing the RESPA claims. They provide no authority for this argument and, in these circumstances, have waived it for