Plaintiffs fail to establish equitable tolling in another putative RESPA kickback case

By Monica C. Platt

In Riddle v. Bank of America, a judge in the Eastern District of Pennsylvania just granted summary judgment against the plaintiffs in a case alleging that banks and mortgage insurers participated in a “scheme” to pay purported kickbacks in violation of the Real Estate Settlement Procedures Act (RESPA). We have discussed other similar cases in prior posts on this blog.

RESPA prohibits giving or receiving “any fee, kickback, or thing of value” in exchange for a referral of settlement-service business. 12 U.S.C. § 2607(a). In Riddle, the plaintiffs alleged that their mortgage lender purchased mortgage insurance coverage on their loans in exchange for mortgage insurers’ agreement to reinsure that coverage with a reinsurance company affiliated with the bank.  The plaintiffs said that this agreement was a “thing of value” for the lender because the reinsurer supposedly was insulated from paying any real losses.

Plaintiffs brought their claims years after the statute of limitations had already run, but argued that the doctrine of equitable tolling saved their claims.

The Riddle court allowed the plaintiffs a limited period of discovery to try to establish a basis for equitable tolling, but the discovery was fruitless.  The plaintiffs could not show that they investigated their claims between the time their loans closed and the time their lawyers contacted them.  The court found that it was clear that plaintiffs were not diligent, and only elected to pursue litigation after they were solicited by their lawyers.  As the court put it, the plaintiffs did not proffer any evidence that they “did anything other than appear at their [loan] closings.”

The plaintiffs tried to argue that documents they received at their closings misled them about the reinsurance relationship between the mortgage insurers and the lender’s reinsurance company, but the court rejected that argument.  The court found that the plaintiffs’ real contention what that these documents “failed to disclose that [the Defendants supposedly] were violating RESPA.”  Thus, the plaintiffs, at bottom, were “trying to turn Defendants’ failure to inform them that they [allegedly] were running a scheme in violation of RESPA into an affirmative act of concealment.”  The court found that this argument was “circular and would eviscerate the statute of limitations.”

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