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White v. The Pnc Financial Services Group, Inc.

United States District Court, E.D. Pennsylvania

August 18, 2014

NELSON WHITE, JR., et al., Plaintiffs,


LAWRENCE F. STENGEL, District Judge.

This is a putative class action brought by homeowners claiming violations of the Real Estate Settlement Procedures Act of 1974 (RESPA). Specifically, the plaintiffs claim the defendants carried out a "captive reinsurance scheme, " which allowed for fees or kickbacks prohibited by section 8 of RESPA. I previously dismissed the plaintiffs' First Amended Complaint. The Plaintiffs failed to provide enough factual information to show that equitable tolling of RESPA's statute of limitations could be warranted. I allowed the plaintiffs to amend the complaint to include this information. The defendants again move to dismiss the Second Amended Complaint. I will deny their motions.


a. Plaintiffs' Mortgages

Between January 2006 and December 2008, Nelson White, Jr., Lisa White, Charles Hightower, Colleen Hightower, Dan B. Johnston, Michelle B. Johnston, George G. Donald, Jr., Luz Garcia, Jill Crumpler, and Kevin Zielinski (collectively, the Plaintiffs) obtained residential mortgage loans from National City Mortgage (National City).

Because the Plaintiffs made down payments toward the purchase of their homes of less than 20%, they were required to obtain mortgage insurance from a private insurer selected by National City. National City had contracted with Mortgage Guaranty Insurance Corporation, Genworth Mortgage Insurance Corporation, Republic Mortgage Insurance Company, and Radian Guaranty, Inc. to provide such insurance.[2]

These primary insurers subsequently reinsured with National City's captive reinsurer, National City Mortgage Insurance Company, Inc. (NCMIC), pursuant to a "captive reinsurance arrangement." Under this arrangement, the primary insurers paid NCMIC a portion of the Plaintiffs' insurance premiums allegedly in exchange for NCMIC assuming some of the primary insurer's risk.[3] PNC Financial Services Group, Inc. (PNC) acquired National City in 2008 and became successor-in-interest to National City and NCMIC.

b. Plaintiffs' Discovery of Their Claims[4]

The Plaintiffs all completed their loan transactions between January 11, 2006 and December 24, 2008.[5] They each continued to pay their mortgage premiums and never defaulted on their loans. On September 16, 2011, they received a letter from Kessler Topaz Meltzer and Check LLP (KTMC) indicating they may have possible legal claims against the Defendants. Before receiving this letter, the Plaintiffs claim they were unaware of their possible RESPA claims. They allege that any information they received regarding their loans, private mortgage insurance, and reinsurance did not give an indication that their loans were a part of an illegal kickback scheme. The Plaintiffs subsequently contacted the firm about those claims within three weeks of receiving this letter.[6] They each agreed to be represented by KTMC within the next seven months.[7]

The Plaintiffs then attempted to get further information about whether their loans were reinsured and, if so, what these reinsurance arrangements entailed. In each case, the Plaintiffs made several contacts to PNC, their private mortgage insurer, and/or their loan servicer.[8] Each time they were given misinformation or no information at all.[9] Some were even told they were not entitled to this information.[10]

The Plaintiffs further allege PNC and/or National City's counsel refused to confirm that the Plaintiffs' loans were reinsured by National City's reinsurance program. It was only through information provided by counsel for the Insuring Defendants that the Plaintiffs were even able to determine that their loans were being reinsured as their mortgage agreements proscribed.

c. Plaintiffs' Lawsuit

The Plaintiffs claim this reinsurance arrangement violated RESPA's prohibition on kickbacks because premium payments from the primary insurers to NCMIC were made in return for National City's referral of business.[11] According to the Plaintiffs, this arrangement also violated RESPA's prohibition on fee-splitting because it was only sham reinsurance: NCMIC accepted a portion of the Plaintiffs' insurance premiums but provided no service in return.[12] The Plaintiffs also assert a state-law claim for unjust enrichment.

The PNC and the Insuring Defendants each move to dismiss the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).


A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) examines the legal sufficiency of the complaint. Conley v. Gibson , 355 U.S. 41, 45-46 (1957). The factual allegations must be sufficient to make the claim for relief more than just speculative. Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555 (2007). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.' A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Twombly , 550 U.S. at 570). "[C]onclusory or bare-bones' allegations will no[t]... survive a motion to dismiss." Fowler v. UPMC Shadyside , 578 F.3d 203, 210 (3d Cir. 2009).


a. Availability of Tolling RESPA Statute of Limitations

The Defendants again move to dismiss the Plaintiffs' RESPA claims as untimely under Rule 12(b)(6).[13] RESPA provides that an action under § 2607 must be brought "within... 1 year... from the date of the occurrence of the violation." 12 U.S.C. § 2614. The "date of the occurrence of the violation" is the date the loan closed. In re Cmty. Bank of N. Virginia , 622 F.3d 275, 281 (3d Cir. 2010). The Plaintiffs' loans closed at the latest on December 24, 2008, over three years prior to the filing of this lawsuit on December 31, 2011. The Plaintiffs ...

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