The United States District Court for the District of New Jersey recently denied a lender’s motion to dismiss a putative class action complaint in which plaintiffs alleged violations of the Real Estate Settlement Procedures Act (“RESPA”) arising out of an alleged kickback scheme between the lender and the title agent. See Conover v. Patriot Land Transfer, LLC, 2019 WL 397978 (D.N.J. Jan. 31, 2019). Plaintiffs all closed on their loans with the defendant lender in 2014. In 2017, they brought an action alleging that the lender referred them to the defendant title agent for title and settlement services. According to the complaint, the title agent provided the lender with “borrower leads and data lists” in exchange for these referrals, and “these kickbacks were funded by systematically overcharging Plaintiffs ‘the maximum amount for settlement services, including special and/or extra charges and discretionary fees.’” Plaintiffs then brought this action, alleging that these kickbacks violated RESPA. After the Court dismissed the first complaint in 2018, plaintiffs filed this amended complaint and the lender again moved to dismiss. The lender argued that (i) RESPA’s one-year statute of limitations barred the claim; (ii) the amended complaint failed to state a claim; and (iii) the claims are too individualized to warrant a class.
The Court denied the motion. First, it found that plaintiffs had sufficiently pleaded equitable tolling of their claims because they alleged that the defendants “‘chose to omit the kickbacks and the facts of Defendants’ coordinated business relationship under the . . . Kickback Agreement’ from Plaintiffs’ loan documents and that the ‘purpose of these omissions was to conceal the kickbacks and Defendants’ coordinated business relationship under the . . . Kickback Agreement.’” The Court nonetheless ordered expedited discovery on this issue. Second, the Court rejected the lender’s argument that plaintiffs failed to state a claim because any fees charged were for services actually rendered. The fact that plaintiffs alleged a kickback scheme was sufficient to plead a claim under RESPA, and “there are disputes of material fact as to whether there was a link between fees charged to borrowers and the alleged kickback scheme, as well as whether Plaintiffs paid higher fees than they would have in the absence of a kickback scheme. These factual issues cannot be resolved on a motion to dismiss.” Finally, the Court found that the request to dismiss the class allegations was premature on a motion to dismiss.