Kadow v. Interest of First Fed. Bank
| Decision Date | 02 September 2020 |
| Docket Number | Case No.: 8:19-cv-00566-PWG |
| Parties | BENJAMIN KADOW, et al., Plaintiffs, v. FIRST FEDERAL BANK, Successor in Interest to CBC NATIONAL BANK, Defendant. |
| Court | U.S. District Court — District of Maryland |
This is a purported class action case brought by Plaintiffs Benjamin Kadow and Mary and Walsh Jones on behalf of themselves and others similarly situated against Defendant First Federal Bank. Plaintiffs allege that the Defendant and third-party All Star Title, Inc. ("All Star") engaged in an illegal kickback, price fixing, and refusal to deal scheme that resulted in Plaintiffs being overcharged on real estate title and settlement service fees. Plaintiffs bring claims under the Real Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2607; the Sherman Act, 15 U.S.C. § 1; and the Racketeer Influenced & Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962. Pending is Defendant's Motion to Dismiss.1 For the reasons discussed below, Defendant's motion to Dismiss the RESPA and Sherman Act price fixing claims is denied, but its motion to dismiss the Sherman Act refusal to deal and RICO claims is granted.
On May 31, 2019, Plaintiffs Benjamin Kadow and Mary and Walsh Jones filed an Amended Complaint on behalf of themselves and all those similarly situated. Am. Compl., ECF No. 15. The Amended Complaint alleges that CBC National Bank, predecessor to First Federal Bank, engaged in various unlawful schemes with All Star, a title and settlement services company. The alleged scheme has four key components: kickbacks, price fixing agreements, refusals to deal, and use of interstate wires.
First, Plaintiffs allege that beginning in at least 2008, All Star made agreements with various residential mortgage lenders and their agents (alleged "Participating Lenders"), including CBC National, for assignments and referrals to All Star of residential mortgage loans, refinances, and reverse mortgages, in exchange for "kickbacks" to the lenders. Am. Compl. ¶ 18. The alleged kickbacks would take different forms, including purchasing and delivering to the Participating Lender or a third party marketing company materials or postage to be used by a Participating Lender for marketing purposes. Id. ¶ 18-24. To allegedly conceal the kickbacks, the third party marketing companies would allegedly create fake payment records and fake invoices in which All Star and the Participating Lender would receive separate invoices. Id. ¶ 25-30.
Second, Plaintiffs allege that All Star and Participating Lenders conspired and agreed to fix the prices and set minimum prices for the title and settlement services that All Star charges the Participating Lenders' borrowers on the loans assigned and referred to All Star for which the lenders receive kickbacks. Id. ¶ 32-35. Notably, Plaintiffs do not allege that the Participating Lenders made agreements between one another. Rather the allegations indicate that each made a separate agreement with All Star.
Third, Plaintiffs allege that for any loans generated through the marketing paid for by the All Star kickbacks, the Participating Lenders refuse to deal with any other title and settlement services companies besides All Star. Id. ¶ 36.
Fourth, Plaintiffs allege that the Participating Lenders and All Star used the U.S. mail and wires to identify, solicit, and lure borrowers into their alleged scheme. Id. ¶ 41. Specifically, potential borrowers were identified in "lead lists" by the third party marketing companies that All Star and Participating Lenders allegedly used for the All Star marketing kickbacks. Id. ¶ 41. All Star and Participating Lenders then used these lead lists to solicit borrowers through direct mail and telephone calls. Id. ¶¶ 43-47. Further, Plaintiffs allege that All Star and Participating Lenders orchestrated the alleged kickbacks, price fixing, and refusals to deal by and through communications over interstate wires. Id. ¶¶ 49-50.
To summarize, the basic allegations are that the Participating Lenders and All Star entered into agreements, under which the lender refers title and settlement services to All Star and agrees with All Star on the price of those services. In exchange, All Star pays for marketing materials and postage for the Participating Lender to use. And on loans generated by the All Star marketing payments, the participating lenders refer the customers exclusively to All Star for title and settlement services. Plaintiffs allegedly accomplished all of the above, and lured customers into the scheme, through the use of interstate mail and wires.
As to the conduct of CBC National specifically, Plaintiffs allege that CBC National was a Participating Lender in the schemes described above since at least 2011. Id. ¶ 51. The schemes were allegedly carried out at CBC National branches in Towson, Maryland; Parkville, Maryland; Alpharetta, Georgia; Cumming, Georgia; Blacklick, Ohio; and Elmhurst, Illinois. Id. ¶¶ 55-170. Notably, Plaintiffs also allege that during this period CBC National maintained an "in house" titleand settlement services company that was a direct competitor with All Star for title and settlement services on residential mortgage loans brokered or originated by CBC. Id. ¶ 54. To support this allegation, Plaintiffs attach a CBC National email that states, Compl., Ex. 16, ECF No. 17-1.
Plaintiff Benjamin Kadow alleges he obtained a residential mortgage loan from a CBC National branch in Towson, Maryland. Id. ¶ 171. Similarly, Plaintiff Plaintiffs Mary and Walsh Jones allege they obtained a residential mortgage loan from a CBC National branch in Alpharetta, Georgia. Id. ¶ 179. Mr. Kadow and the Joneses each allege that CBC National assigned and referred their loans to All Star pursuant to the alleged kickback and refusal to deal agreements described above. Id. ¶¶ 172, 180. Mr. Kadow alleges he paid $2,300 and the Joneses allege they paid $2,299.07 in title and settlement service fees, which they claim are based on the alleged price fixing and minimum fee agreements and therefore paid supracompetitive rates. Id. ¶ 173, 181.
Based on the foregoing, Plaintiffs allege three counts: (1) violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2607; (2) violation of the Sherman Act, 15 U.S.C. § 1; and (3) violations of Racketeer Influenced & Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962. Id. ¶¶ 256-308. Pending is Defendant's motion to dismiss all of the claims against it.
I note that the allegations in this case are familiar ones, as Plaintiffs' lawyers in this case are counsel to other Plaintiffs who have filed suit in this Court against other alleged Participating Lenders based on the same underlying scheme. These cases are in various pretrial stages and in some of these cases the judges of this Court have issued memorandum opinions addressing similar arguments as those raised here. See Somerville v. West Town Bank & Trust, PJM-19-140 (); Walls v. Sierra Pac. Mortg. Co., Inc., GLR-19-595 (); Donaldson v. Primary Residential Mortg., Inc., ELH-19-1175 (); Remsnyder v. MBA Mortg. Servs., Inc., CCB-19-492 (); Williams, Sr. v. Maryland Mut. Mortg., LLC, SAG-19-1464 (case voluntarily dismissed).
Plaintiffs move to dismiss under Federal Rules of Civil Procedure 12(b)(1), (2), and (6). Under Fed. R. Civ. P. 12(b)(1), the plaintiff bears the burden of proving subject matter jurisdiction by a preponderance of the evidence. See Demetres v. E. W. Constr., Inc., 776 F.3d 271, 272 (4th Cir. 2015); see also Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999). In a facial challenge to subject matter jurisdiction, "the facts alleged in the complaint are taken as true, and the motion must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction." Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009). When the jurisdictional facts are challenged, the court "is to regard the pleadings as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Evans, 166 F.3d at 647; see also Williams v. United States, 50 F.3d 299, 304 (4th Cir. 1995).
Pursuant to Fed. R. Civ. P. 12(b)(2), a party may seek dismissal of a claim for want of personal jurisdiction. Where, as here, a defendant challenges this Court's personal jurisdiction under Fed. R. Civ. P. 12(b)(2), the jurisdictional question "is to be resolved by the judge, with theburden on the plaintiff ultimately to prove grounds for jurisdiction by a preponderance of the evidence." Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003)). If the Court considers the operative complaint and the parties' briefings but does not conduct an evidentiary hearing, then "'the burden on the plaintiff is simply to make a prima facie showing of a sufficient jurisdictional basis in order to survive the jurisdictional challenge.'" In re Celotex Corp., 124 F.3d 619, 628 (4th Cir.1997) (quoting Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989)); see Consulting Eng'rs Corp. v. Geometric Ltd., 561 F.3d 273, 276 (4th Cir.2009)). In taking this approach, a court "must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction." Mylan Labs., Inc. ...
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