Dye v. MLD Mortg. Inc.

Decision Date16 July 2021
Docket NumberCivil Action No. ELH-19-3304
PartiesROGER AND LINDA DYE, et al., Plaintiffs, v. MLD MORTGAGE INC., d/b/a THE MONEY STORE Defendant.
CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)

This putative class action concerns an alleged kickback scheme between MLD Mortgage, Inc. d/b/a The Money Store ("MLD" or "The Money Store")1 and All Star Title, Inc. ("All Star"), a Maryland based title and settlement services company. Plaintiffs Roger and Linda Dye (the "Dye Plaintiffs"), Lynn Glasser and Nicole Cole (the "Glasser Plaintiffs"), and Larry Bussard, are borrowers in connection with residential mortgages. They have sued MLD in a Complaint that is 53 pages in length, supported by 12 exhibits, complaining that they are victims of an illegal kickback scheme. ECF 1 (the "Complaint").

According to plaintiffs, MLD made referrals of their loans and the loans of others to All Star for title and settlement services. In exchange, All Star allegedly laundered payments to MLD, largely through third-party marketing companies. All Star is not a defendant and is allegedly now defunct. ECF 27-1 at 1. According to plaintiffs, as a result of the scheme, they paid inflated settlement fees. Plaintiffs contend that the kickback scheme violated the RealEstate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 (Count I), and the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962 (Count II).

MLD has moved to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(6) (ECF 27), supported by a memorandum. ECF 27-1 (collectively, the "Motion"). Plaintiffs oppose the Motion. ECF 28. And, defendant has replied. ECF 29. Plaintiff has also submitted a notice of supplemental authority. ECF 30.

Although All Star is not a party to this case, All Star's conduct is at issue here and in other suits in this District. And, plaintiffs' lawyers in this case are counsel to plaintiffs in several other cases in this District involving All Star. See Brasko v. Howard Bank, SAG-20-3489; Ekstrom v. Congressional Bank, ELH-20-1501; Wilson v. Eagle National Bank, TDC-20-1344; Somerville v. West Town Bank & Trust, PJM-19-0490; Remsnyder v. MBA Mortg. Servs., Inc., CCB-19-492; Kadow v. First Federal Bank, PWG-19-0566; Walls v. Sierra Pacific Mortgage Co., Inc., GLR-19-595; Avery v. J.G. Wentworth, TJS-19-3303; and Donaldson v. Primary Residential Mortgage, Inc., ELH-19-1175.

No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, I shall deny the Motion.

I. Factual Background2
A. The Scheme

Plaintiffs allege that MLD, through its agents and employees, "received and accepted illegal kickbacks [from All Star] in exchange for the assignment and referral of residential mortgage loans, refinances and reverse mortgages to All Star for title and settlement services. . . ." ECF 1, ¶ 2. They contend that MLD concealed the scheme, inter alia, by "laundering kickbacks through third party marketing companies"; "false allocation of title and settlement fees"; and "false and fraudulent representations and omissions" in loan documents. Id. ¶ 5.

According to plaintiffs, since at least 2008, All Star "design[ed] and execut[ed] a scheme...to pay kickbacks to various mortgage lenders and their brokers, loan officers and other employees (collectively, 'Participating Lenders') in exchange for the Participating Lender's assignment and referral of residential mortgage loans, refinances and reverse mortgages to All Star for title and settlement services." Id. ¶ 15. In exchange for "assignment and referral of residential mortgage loans, refinances and reverse mortgages to All Star for title and settlement services," All Star allegedly paid "kickbacks" to mortgage lenders, based on the number of loans referred to All Star and the amount of profit All Star derived from the loan referrals. Id. ¶¶ 15-16.

These kickbacks took various forms, according to the allegations. For example, All Star sometimes purchased "marketing materials" for the mortgage lenders to "use in soliciting borrowers." Id. ¶ 18. On other occasions, All Star wrote checks directly to the mortgage lenders, which were deposited into a "sham entity used for the express purpose of receiving and accepting kickbacks and concealing the same." Id. ¶ 19. For the most part, however, All Star and the mortgage lenders agreed "to launder[] the kickback payment through a third-party marketing company." Id. ¶ 20. Mortgage lenders "and/or their branch managers, mortgage brokers, loan officers, or other employees frequently use[d] third party marketing companies...to provide marketing services aimed at soliciting borrowers to obtain residential mortgage loans, refinances and reverse mortgages...." Id. ¶ 21. These third-party marketing companies "specializ[ed]" in direct mail solicitations, production for direct mail solicitations, and "'live transfer' leads," in which potential borrowers who call a "centralized telemarketing company" are transferred "'live'" to a participating lender. Id. ¶ 22.

Under the kickback agreement, the participating mortgage lender receiving the kickback from All Star "identifie[d] a third party marketing company that" the lender was already using for its marketing services. Id. ¶ 23. Thereafter, All Star made "the kickback payment to the third party marketing company" and the participating lender "receive[d] and accept[ed] the kickback payment when the third party marketing company applie[d] All Star's payment for the benefit of the" lender. Id.

Using third-party marketing companies, according to plaintiffs, "creat[ed] the false impression that All Star" was purchasing marketing services for itself, rather than on behalf of the participating mortgage lender. Id. ¶ 24. Moreover, "to further conceal the kickbacks," plaintiffs maintain that All Star and the participating lenders "hoped to be able to use claims of'co-marketing' as a sham." Id. ¶ 25. But, plaintiffs allege that "All Star makes clear that the kickback payments are predicated on" the mortgage lender making a specific number of loans that are assigned to All Star. Id. ¶ 26.

Plaintiffs claim that "[o]ne of the purposes of the All Star Scheme is to defraud borrowers into paying for illegal kickbacks." Id. ¶ 27. To achieve that purpose, All Star and mortgage lenders "conspire to and agree to fix the prices All Star charges...borrowers for title and settlement services." Id. ¶ 28. According to plaintiffs, these "fixed prices are artificially inflated and higher than the prices that borrowers would be charged without the Kickback Agreement." Id. Plaintiffs refer to this as the "Fixed Price Overcharge." Id. The fixed prices also allegedly include "a sum certain that is not associated with any legitimate title or settlement service," because it is "charged for the sole purpose of forcing borrowers to pay for the cost of the illegal kickbacks." Id. ¶ 29. Plaintiffs refer to this charge as the "Kickback Overcharge." Id.

The participating mortgage lenders allegedly agreed to "refuse to deal with any other title and settlement services company on those loans generated by the kickbacks...." Id. ¶ 30. The lenders benefited from these agreements in various ways, including "substantial interest and commissions," and "the costs for title and settlement services fees [were] financed into the loan and paid for by borrowers from loan proceeds such that the [mortgage lenders] earn[ed] interest and other fees from the Fixed Price and Kickback Overcharges." Id. ¶ 31.

In addition, plaintiffs assert that All Star and participating lenders "use[d] the interstate mails and wires in furtherance" of the scheme. Id. ¶ 32. In particular, they chose "to transmit, receive and accept the illegal kickback payments over interstate wires." Id. ¶ 33. And, they "use[d] both interstate mails and wires to lure borrowers into the All Star Scheme." Id. ¶ 35. According to plaintiffs, some of the third-party marketing companies would generate "'leadslists,'" id. ¶ 37, which were then used to target borrowers through "printed direct mail pieces...that encourage borrowers to contact the [mortgage lenders] and apply for a residential mortgage loan, refinance or reverse mortgage." Id. ¶ 38.

Further, plaintiffs aver that the participating mortgage lenders "solicit[ed] borrowers over the telephone" and used "interstate wires to make these telemarketing calls to potential borrowers." Id. ¶ 40. Further, plaintiffs contend that the "'live transfer' leads" also utilized interstate wires. Id. ¶ 41. In sum, plaintiffs assert: "All Star's records document that [mortgage lenders] used illegal kickback payments to lure thousands of borrowers into the All Star Scheme using these borrower solicitation techniques." Id. ¶ 42.


Plaintiffs allege that by September 2014, defendant accepted and received "kickbacks paid by All Star in exchange for the assignment and referral of The Money Store loans to All Star for title and settlement services." Id. ¶ 44. According to plaintiffs, MLD initially agreed to refer loans from its branch in Leesburg, Virginia (the "Leesburg Branch"). Id. ¶¶ 44, 45.

"By October 2014," All Star and The Money Store agreed to "fix prices for title and settlement services" from the Leesburg Branch at "$1,500 plus title insurance." Id. ¶ 45. According to plaintiffs, this was "approximately $500 to $1,000 more than All Star is charging other" mortgage lenders on similar loans. Id. Plaintiffs allege that the price of $1,500 also includes a "Kickback Overcharge of $300 which...is not associated with any legitimate settlement service." Id. ¶ 46. According to plaintiffs, this $300 charge "is the minimum amount of actual damages" sustained by The Money Store borrowers during the relevant time period. Id. ¶ 47.

Plaintiffs claim that, during the first week of October 2014, All Star paid two kickback payments of $5,000 each to The Money Store, laundered through Titan List and Mailing ("Titan"), a ...

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