Tracey v. First Am. Title Ins. Co., Civil No. WDQ–12–1329.

• Court: United States District Courts. 4th Circuit. United States District Court (Maryland)
• Citation: 935 F.Supp.2d 826
• Docket Number: Civil No. WDQ–12–1329.
• Parties: Patricia MITCHELL TRACEY, et al., Plaintiffs, v. FIRST AMERICAN TITLE INS. CO., Defendant.
• Decision Date: 28 March 2013

935 F.Supp.2d 826

Patricia MITCHELL TRACEY, et al., Plaintiffs,
v.
FIRST AMERICAN TITLE INS. CO., Defendant.

Civil No. WDQ–12–1329.

United States District Court,
D. Maryland,
Northern Division.

March 28, 2013.

[935 F.Supp.2d 832]

Richard S. Gordon, Benjamin Howard Carney, Martin Eugene Wolf, Gordon and Wolf Chtd., Towson, MD, Philip Scott Friedman, Friedman Law Offices PLLC, Washington, DC, for Plaintiffs.

Charles Andrew Newman, Jason E. Maschmann, Michael Joseph Duvall, SNR Denton U.S. LLP, St. Louis, MO, Ira L. Oring, Fedder and Garten PA, Baltimore, MD, for Defendant.

MEMORANDUM OPINION
WILLIAM D. QUARLES, JR., District Judge.

Patricia Mitchell Tracey and Larry Austin (collectively, the “Plaintiffs”), on behalf of themselves and others similarly situated, sued First American Title Ins. Co. (“First American”) ¹ for violating the Racketeer Influenced and Corrupt Organization Act (“RICO”), 18 U.S.C. § 1962, and other claims. For the following reasons, First American's motion to dismiss will be denied.

I. Background ²A. Factual Background

This case arises out of title insurers United General and First American's

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alleged scheme to systematically “cheat” Maryland homeowners by charging premiums for title insurance in excess of the rates permitted by Maryland law. Compl. ¶ 1.³ Specifically, instead of charging and collecting a 40% discounted premium—filed with and approved by the Maryland Insurance Administration (the “MIA”) ⁴—for purchasers of title insurance who refinanced their mortgages within 10 years of a previously issued title insurance policy (the “reissue rate”), First American collected the higher basic rate. Id. ¶¶ 3, 23–24. First American split the excess premiums with the local title company (the “insurance producers,” or “agents”) that had procured the policies on its behalf. Id. ¶¶ 2–3, 17–18, 25.

1. Mitchell Tracey

In September 2004, Mitchell Tracey purchased her home for $152,170.00. Compl. ¶ 27. In connection with her loan closing, she purchased an owner's title insurance policy. Id. ¶ 28. On March 1, 2005, Mitchell Tracey refinanced her home. Id. ¶ 29. The closing and settlement services were provided by Custom Title & Escrow (“Custom Title”), an agent of United General. Id. ¶ 29. The loan amount for the March 2005 refinance was $101,500.00. Id. ¶ 30. In connection with the March 1, 2005 refinance, and acting on behalf of United General, Custom Title issued a lender's title insurance policy with a face value of $101,500.00. Id. ¶ 31. United General charged and collected a premium of $319.26 for the policy. Id. ¶ 32. According to the Plaintiffs, Mitchell Tracey was eligible for the discounted reissue rate of $153.00 ⁵-a fact that would have been revealed through a title search of Mitchell Tracey's property. Id. ¶¶ 33, 35. Instead, United General “pocketed” the difference of $166.26, and “refused to credit any portion of it” to Mitchell Tracey's account. Id. ¶ 34.

2. Austin

In October 1999, Austin purchased his home for $70,000.00 Compl. ¶ 39. On June 19, 2007, Austin obtained a $140,000.00 loan on the property in connection with its refinancing. Id. ¶ 40. First American issued

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Austin a lender's title insurance policy with a face value of $140,000.00. Id. On June 16, 2008, Austin refinanced his home again. Id. ¶ 41. The closing and settlement services were provided by Endeavor Title, LLC (“Endeavor”), an agent of First American. Id. The loan amount for the June 2008 refinance was $155,396.00. Id. ¶ 42. In connection with the June 2008 refinance, and acting on behalf of First American, Endeavor issued a lender's title insurance policy with a face value of $155,396.00. Id. ¶ 43. First American charged and collected a premium of $390.00 for the policy. Id. ¶ 44. According to the Plaintiffs, Austin was entitled to the discounted reissue rate of $250.00 ⁶—a fact that would have been revealed through a title search of his property. Id. ¶¶ 45, 47. Instead, First American retained the difference of $140.00, and refused to credit Austin's account. Id. ¶ 46.

B. Procedural History1. Mitchell Tracey I

On April 14, 2005, Mitchell Tracey filed a class action complaint in the Circuit Court for Baltimore County alleging violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607, money had and received, negligent misrepresentation, and civil conspiracy. No. WDQ–05–1428, ECF No. 2. The Defendants removed the action to this Court. No. WDQ–05–1428, ECF No. 1. On July 19, 2005, Mitchell Tracey amended her complaint to add Milton Brown, Francine Byrd–Brown, and Helen Klatsky as named plaintiffs. No. WDQ–05–1428, ECF No. 41. On September 25, 2006, then-U.S. District Judge Andre M. Davis granted summary judgment for the defendants on the RESPA claim. No. WDQ–05–1428, ECF No. 91. The next day, Judge Davis granted class certification for:

All persons or entities in Maryland who within 10 years of having previously purchased title insurance in connection with their mortgage or fee interest, refinanced the identical mortgage or fee interest, and were charged a title insurance premium by [one of the Defendants] that exceeded the applicable premium discount or “reissue rate” for title insurance on file with the Maryland Insurance Administration that such persons are entities should have been charged.

No. WDQ–05–1428, ECF No. 93.

On October 28, 2009, the Plaintiffs moved to file a second amended complaint to add claims for negligence, breach of contract, and violation of RICO. No. WDQ–05–1428, ECF No. 138. On February 26, 2010, the Court denied the motion as futile, holding that because the proposed claims were dependent on the Maryland Insurance Code, and the Plaintiffs had not exhausted administrative remedies, Arthur v. Ticor Title Insurance Company, 569 F.3d 154 (4th Cir.2009), decided July 18, 2009, would require their dismissal.⁷ No. WDQ–05–1428, ECF Nos. 141, 142.

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On March 5, 2010, the Plaintiffs moved for reconsideration of the February 26, 2010 order. No. WDQ–05–1428, ECF No. 143. That day, the Defendants moved for judgment on the pleadings and to decertify the class. No. WDQ–05–1428, ECF No. 144. On May 5, 2010, the Court denied the plaintiffs' motion for reconsideration and granted the defendants' motion for judgment and to decertify the class. No. WDQ–05–1428, ECF No. 152. The Court held that the Plaintiffs had failed to state a claim because they had not exhausted administrative remedies, and “allow[ed] the MIA to determine whether the Insurance Code has been violated and the remedy, if any, to which the Plaintiffs are entitled.” ECF No. 151 at 11. Because the Plaintiffs were not properly before the Court, the Court decertified the class. Id. at 12.

On May 11, 2010, acting on Mitchell Tracey and Austin's administrative complaint, the MIA determined that United General and First American violated § 27–614(b) of the Insurance Code by not providing Mitchell Tracey and Austin a reissue rate for settlements conducted on their behalf. ECF No. 3–3 at 2–3. The MIA concluded that Mitchell Tracey had been overcharged by $166.26 for the title insurance premium, and found she was entitled to a refund in that amount, plus six percent per annum interest from February 22, 2005. Id. at 5. The MIA similarly concluded that Austin was entitled to a refund for a $199.00 overcharge, plus interest from June 16, 2008. Id. at 8. The MIA did not make findings as to absent class members on whose behalf Mitchell Tracey and Austin sought relief, concluding that it did not have “sufficient information ... to review the allegations with regard to unnamed and unspecified individuals.” Id. at 3; Compl. ¶ 37, 49.

On May 19, 2010, citing the MIA's decision, the plaintiffs, in Mitchell Tracey I moved for reconsideration of the Court's order granting judgment for the defendants and decertifying the class. No. WDQ–05–1428, ECF No. 155. On November 17, 2010, the Court denied the motion for reconsideration, concluding that the MIA decision was not new evidence because it arose after judgment. No. WDQ–05–1428, ECF No. 168; ECF No. 167 at 6. The plaintiffs appealed. No. WDQ–05–

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1428, ECF No. 169. On August 2, 2011, the Fourth Circuit affirmed, concluding that, on the facts alleged, “Arthur mandates dismissal to allow the MI[A] to assess, in the first instance, ‘whether the Insurance Code has been violated and the remedy, if any, to which the Plaintiffs are entitled.’ ” No. WDQ–05–1428, ECF–No. 173 at 8 ( quoting ECF No. 151 at 11). On August 29, 2011, United General and First American issued Mitchell Tracey and Austin refund checks covering the amount of their alleged overcharges and interest. See ECF No. 3–7. According to First American, Mitchell Tracey and Austin have “refused” to cash them. ECF No. 3–2 at 15.

2. Mitchell Tracey II (This Case)

On April 30, 2012, the Plaintiffs filed the present action against United General and First American for RICO violations and other claims. ECF No. 1. ⁸ On May 25, 2012, United General and First American moved to dismiss. ECF No. 3. On May 25, 2012, First American sought leave to defend the action as the sole remaining defendant. ECF No. 5. This Court granted the motion. ECF No. 27. On June 25, 2012, the Plaintiffs opposed the motion to dismiss. ECF No. 20. A reply followed. ECF No. 22.

II. Analysis

A. Legal Standards

Under Fed.R.Civ.P. 12(b)(1), the Court must dismiss an action if it discovers it lacks subject matter jurisdiction. The plaintiff has the burden of proving the Court has jurisdiction, and the Court must make all reasonable inferences in the plaintiff's favor. Khoury v. Meserve, 268 F.Supp.2d 600, 606 (D.Md.2003), aff'd,85 Fed.Appx. 960 (4th Cir.2004). The Court may “look beyond the pleadings” to decide whether it has subject matter jurisdiction, but it must presume that the factual allegations in the complaint are true. Id.

Under Fed.R.Civ.P. 12(b)(6), an action may be dismissed for failure to state a...