Minter v. Wells Fargo Bank, N.A.

• Decision Date: 05 August 2014
• Docket Number: No. 13–2131.,13–2131.
• Citation: 762 F.3d 339
• Court: U.S. Court of Appeals — Fourth Circuit
• Parties: Denise MINTER, Individually and on behalf of a class of consumers similarly situated; Jason Alborough; Rachel Alborough; Lizbeth T. Binks, Plaintiffs–Appellants, and Frank Larocca; Catherine Larocca; Mehdi Nafisi; Forough Iranpour; Kenneth Pfeifer; Angela Pfeifer, Intervenors/Plaintiffs, v. WELLS FARGO BANK, N.A.; Long & Foster Real Estate, Inc.; Prosperity Mortgage Company; Walker Jackson Mortgage Corporation, formerly doing business as Prosperity Mortgage Corporation; Wells Fargo Ventures, LLC, Defendants–Appellees.

762 F.3d 339

Denise MINTER, Individually and on behalf of a class of consumers similarly situated; Jason Alborough; Rachel Alborough; Lizbeth T. Binks, Plaintiffs–Appellants,andFrank Larocca; Catherine Larocca; Mehdi Nafisi; Forough Iranpour; Kenneth Pfeifer; Angela Pfeifer, Intervenors/Plaintiffs,

v.WELLS FARGO BANK, N.A.; Long & Foster Real Estate, Inc.; Prosperity Mortgage Company; Walker Jackson Mortgage Corporation, formerly doing business as Prosperity Mortgage Corporation; Wells Fargo Ventures, LLC, Defendants–Appellees.

No. 13–2131.

United States Court of Appeals, Fourth Circuit.

Argued: May 14, 2014.

Decided: Aug. 5, 2014.

ARGUED:Cyril Vincent Smith, Zuckerman Spaeder LLP, Baltimore, Maryland, for Appellants. William M. Jay, Goodwin Procter LLP, Washington, D.C., for Appellees. ON BRIEF:William K. Meyer, Zuckerman Spaeder LLP, Baltimore, Maryland; Richard S. Gordon, Benjamin H. Carney, Gordon, Wolf & Carney Chtd., Baltimore, Maryland, for Appellants. Irene C. Freidel, Brian M. Forbes, K & L Gates LLP, Boston, Massachusetts; Andrew Jay Graham, John A. Bourgeois, Kramon & Graham, P.A., Baltimore, Maryland, for Appellees Wells Fargo Bank, N.A., and Wells Fargo Ventures, LLC. David L. Permut, Sabrina M. Rose–Smith, Goodwin Procter LLP, Washington, D.C., for Appellee Prosperity Mortgage Company. Jay N. Varon, Jennifer M. Keas, Foley & Lardner LLP, Washington, D.C., for Appellees Long & Foster Real Estate, Incorporated, and Walker Jackson Mortgage Corporation.

Before NIEMEYER and WYNN, Circuit Judges, and ROBERT J. CONRAD, Jr., United States District Judge for the Western District of North Carolina, sitting by designation.

Affirmed by published opinion. Judge WYNN wrote the opinion, in which Judge NIEMEYER and Judge CONRAD joined.

WYNN, Circuit Judge:

In this class action suit, Plaintiffs Denise Minter, Jason and Rachel Alborough, and Lizbeth Binks brought suit on behalf of a group of consumers alleging that Wells Fargo and Long & Foster Real Estate (collectively, “Defendants”) violated Section 8 of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607. Specifically, Plaintiffs allege that Defendants created a joint venture, Prosperity Mortgage Company (“Prosperity”), to skirt RESPA's prohibition on kickbacks while failing to disclose this business arrangement to its customers.

After a trial on a portion of Plaintiffs' claims, the jury returned a verdict that foreclosed Plaintiffs' untried kickback claims. Plaintiffs moved for a new trial on the kickback claims but were denied. Due in large part to Plaintiffs' failure to move for judgment as a matter of law before the jury reached its verdict, as well as the highly deferential lenses through which we must review the issues before us, we conclude that the district court did not abuse its discretion as to any of Plaintiffs' challenges. Accordingly, we affirm.

I.

In 1993, Wells Fargo and Walker Jackson Mortgage Corporation, a subsidiary and affiliate of Defendant Long & Foster Real Estate, formed Prosperity Mortgage Company as a joint venture.¹ Prosperity was created as “a mortgage lender that funded its loans via a wholesale line of credit provided by Wells Fargo[.]” J.A. 205.

Plaintiffs Denise Minter and Jason and Rachel Alborough, along with a class of similarly situated consumers, purchased their homes with a Long & Foster realtor and obtained mortgages through Prosperity in 2006 and 2007. In late 2007, Plaintiffs brought this class action suit alleging that Wells Fargo and Long & Foster created Prosperity as a “sham” or a front organization formed to facilitate unlawful referral fees and kickbacks in violation of RESPA, as well as a variety of other state and federal law claims.² In particular, Plaintiffs alleged that Defendants created Prosperity to allow Long & Foster to refer mortgage clients to Wells Fargo in exchange for kickbacks. Plaintiffs also alleged that Prosperity performed little to no real work in connection with the mortgage transactions and that Wells Fargo was the real lender. Plaintiffs asserted three RESPA violations:

1. The Section 8(a) claim alleged that Wells Fargo paid kickbacks to Long & Foster in exchange for settlement services.

2. The Section 8(c) claim alleged that Wells Fargo and Long & Foster operated Prosperity as a “sham” lender, i.e., not a bona fide provider of settlement services, to funnel Long & Foster real estate customers to Wells Fargo for mortgage products.

3. The Section 8(c)(4) claim alleged that Defendants, as members of an affiliated business arrangement as defined by RESPA, did not comply with RESPA's requirement to provide borrowers with valid affiliated business arrangement disclosures.

J.A. 206, 250, 292–301, 1036–37, 1095–97.³

Plaintiffs moved to certify a class for all of their claims. The district court bifurcated Plaintiffs' proposed class into two separate classes: (1) the Timely Class, including all the class members whose claims were brought within RESPA's one-year statute of limitations, and (2) the Tolling Class, for all class members whose claims were brought after the statute of limitations period expired.

Thereafter, the district court certified Plaintiffs' Section 8(c) and 8(c)(4) claims, but did not certify the Section 8(a) claims because “only those Prosperity clients who were referred [to Prosperity] by Long & Foster may proceed under [the Section 8(a) ] claim” and certifying a sub-class for that particular sub-set of members would “unnecessarily complicate and obscure” the central inquiry into Prosperity's legitimacy as a lender. J.A. 260–61. The district court noted that “[s]hould Plaintiffs fail under their Section 8(c) claims, the Court may entertain further briefing with respect to the Section 8(a) theory.” J.A. 261. The district court also chose not to certify the Tolling Class on any of the claims because it did not have a representative member.

In response, Plaintiffs amended their complaint to include a new named plaintiff, Lizbeth Binks, as a representative of the Tolling Class, and renewed their motion to certify the Tolling Class on all their claims. The district court reiterated that it would not certify the Section 8(a) claims for either the Tolling or the Timely Class. After completing a class certification analysis, the district court certified the Tolling Class on its Section 8(c) and 8(c)(4) claims only.

Defendants then moved for summary judgment on the Timely and Tolling Classes' claims. The district court denied their motions due to factual disputes that could not be resolved at the summary judgment stage.⁴ Before trial on the Section8(c) and 8(c)(4) claims, Plaintiffs suggested that the individual Section 8(a) claims, although not certified as a class, should be tried in the same trial. The district court rejected that request, stating that “[f]ollowing the upcoming trial, the Court will solicit proposals from the parties related to scheduling a trial of Plaintiffs' individual § 8(a) claims.” J.A. 1097. See also J.A. 1100 n. 2 (“Plaintiffs' individual claims under § 8(a) will be tried at a later date.”).

Before trial, Defendants moved to decertify both the Timely and the Tolling Classes. The district court decertified the Tolling Class due to the court's concerns about the tolling doctrine's individualized application.⁵ The district court also amended the Timely Class by limiting it to class members who were referred to Prosperity by Long & Foster and excluding any class members whose loans were not transferred to Wells Fargo but were instead sold to others.

Also before trial, Plaintiffs moved to exclude evidence and argument about whether Plaintiffs had suffered economic injury, including testimony from one of Defendants' experts, Dr. Marsha Courchane. The district court agreed, ruling that Dr. Courchane's testimony and other “evidence of a lack of economic damages” was minimally relevant and deemed the probative value of the expert testimony “substantially outweighed by a danger of unfair prejudice, confusion, misleading the jury, or delay.” J.A. 1119–20. However, the court stated that it would reconsider that ruling if Plaintiffs “open[ed] the door to evidence of economic injury during their case-in-chief[.]” J.A. 1120. Later, the district court ruled that Defendants would be allowed to ask about whether Plaintiffs “shopp[ed] around for their mortgages and whether they chose Prosperity because it was offering better rates[,] lower costs, or better service.” J.A. 1162 (quotation marks omitted). The court explained that this evidence “is relevant background on the Named Plaintiffs' claims[,]” distinct from unfairly prejudicial evidence of their lack of economic harm. Id.

After resolving these motions, the district court held the trial on Plaintiffs' Section 8(c) and Section 8(c)(4) claims. During this trial, several matters arose to become the bases for the issues now on appeal. First, throughout the trial, Plaintiffs objected to Defendants' questions regarding whether Plaintiffs suffered economic harm from using Prosperity, whether Prosperity's loans were competitive in the market, and whether Prosperity gave the named Plaintiffs the best deal. Second, during closing arguments, Long & Foster's counsel stated that “I think the only thing I agree [with] for sure is that Long & Foster did refer the named plaintiffs to Prosperity. There's no dispute about that.” J.A. 1686. Third, counsel for Prosperity and Wells Fargo stated that the named Plaintiffs received financially beneficial deals in their loans. And finally, during his closing argument, Wells Fargo's counsel implied that Plaintiffs'attorney had a financial interest in the case.

After the district court instructed the jury and deliberations concluded, the jury returned a verdict in favor of Defendants. Specifically, the jury decided that Plaintiffs did not prove by a preponderance of the evidence that Prosperity was a sham and not a bona fide provider of settlement services. In...