Pennsylvania Federal Court Dismisses RESPA Claim Arising Out of Captive Reinsurance Arrangements

The United States District Court for the Western District of Pennsylvania recently dismissed a putative class action that alleged violations of the Real Estate Settlement Procedures Act (“RESPA”) for a captive reinsurance arrangement.  See Menichino v. Citibank, N.A., 2018 WL 502728 (W.D. Pa. 2018).  In the case, plaintiffs obtained residential mortgage loans from the defendant mortgagee, and plaintiffs were required to purchase primary mortgage insurance (“PMI”) because their down payments were less than 20% of the property value.  The PMI providers then contracted with reinsurance companies who were affiliated with the mortgagee.  Plaintiffs brought this action more than a year after their closing alleging that “this scheme is really a form of collusion (prohibited by RESPA’s anti-kickback and anti-fee splitting provisions) between the mortgagee and the PMI insurer, in which the mortgagee is referring its borrowers to specific PMI companies in order to then cash in on reinsurance agreements without taking on any real risk.”  Defendants moved to dismiss based on RESPA’s one-year statute of limitations, and the parties agreed to stay the action pending the Third Circuit’s decision in Cunningham v. M & T Bank Corp., 814 F.3d 156 (3d Cir. 2016), as amended (Feb. 24, 2016), which had similar facts.

Based on the Third Circuit’s Cunningham decision, the Court here granted the motion to dismiss.  There was no question that more than a year had passed since the closings, so the central question was whether plaintiffs’ claims would be equitably tolled.  The Court found that, as in Cunningham, plaintiffs received disclosures at the time of their closing that revealed the captive reinsurance program, but did not elect to opt out or challenge the program.  Thus, they did not show “reasonable diligence” and their claims were not tolled but instead accrued at the time of the closing.  Additionally, unlike in Cunningham, the Court rejected plaintiffs’ request to allow discovery on their equitable tolling claims.  “Unfortunately for Plaintiffs, there are no answers to be had from discovery because there are no questions to ask. The similarities between this case and Cunningham cannot be overstated. The relevant disclosures were materially the same between the two cases.  Just like the plaintiffs in Cunningham, Plaintiffs had all the facts at the time of closing to allege their claim under RESPA, but their inaction during the limitations period bars the application of equitable tolling under a theory of fraudulent concealment.”

For a copy of the decision, please contact Michael O’Donnell at, Michael Crowley at, or Dylan Goetsch at