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Cunningham v. M&T Bank Corp.

United States District Court, M.D. Pennsylvania

February 10, 2015

JUDITH CUNNINGHAM, et al., Plaintiffs
M&T BANK CORP., et al., Defendants


CHRISTOPHER C. CONNER, Chief District Judge.

Presently before the court in this putative class action under the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq., is a motion (Doc. 197) for summary judgment pursuant to Federal Rule of Civil Procedure 56(a) filed by defendants M&T Bank, M&T Bank Corp., and M&T Mortgage Reinsurance Co., Inc. (collectively, "M&T"). M&T's motion follows a period of court-ordered discovery narrowly tailored to the issue of equitable tolling. The motion is fully briefed and ripe for review.

I. Factual Background[1]

Between May 2007 and June 2008, Judith Cunningham ("Cunningham"), Frederick D. Deimler, III ("Deimler"), and Carol Vanover ("Vanover") obtained residential mortgage loans from M&T Bank Corp. ("M&T Bank") to finance the purchase of their respective homes. (Doc. 199 ¶ 1; Doc. 209 ¶ 1). As a condition of their mortgage, each plaintiff was required to purchase private mortgage insurance in connection with their loan. (See Doc. 199 ¶ 2; Doc. 209 ¶ 2; also Doc. 56 ¶¶ 21-23). Consistent with custom in the residential mortgage industry, the private mortgage insurers[2] were selected by M&T. (See Doc. 56 ¶ 48). M&T is the beneficiary of the mortgage insurance agreements; the borrower pays the insurance premium, either directly through inclusion of premiums in his or her monthly mortgage payment or indirectly through higher interest rates on the loan. (See id. at ¶ 47).

Plaintiffs contend that M&T and its affiliate, M&T Mortgage Reinsurance Co., Inc., ("M&T RE"), colluded with the mortgage insurers to carry out a captive reinsurance scheme in violation of RESPA's prohibition against referral fees, kickbacks, and unearned fee-splitting in business incident to real estate settlement services. See 12 U.S.C. § 2607(a). Specifically, plaintiffs assert that M&T referred their loans to the primary insurers, who in turn reinsured the primary insurance policies with M&T's captive reinsurer, M&T RE. (See Doc. 56 ¶¶ 21-23, 69-71). These contracts required the primary insurers to cede a portion of plaintiffs' insurance premiums to M&T RE despite the fact that, according to plaintiffs, no risk was transferred between the primary insurers and M&T RE.[3]

Each plaintiff was advised at closing of both the need for primary mortgage insurance and the potential that their mortgage insurance would become part of M&T's captive reinsurance arrangement. (See Doc. 199 ¶ 11; Doc. 209 ¶ 11). Cunningham testified that she understood at closing that "there could be captive reinsurance provided on her loan, " meaning that M&T Bank "might have a reinsurer that could reinsure [her] mortgage insurance." (Doc. 209 ¶ 14). Deimler similarly noted this understanding, testifying that he knew "there could be captive reinsurance provided" by M&T and that his mortgage "could be part of a captive reinsurance agreement." (Id.) Vanover likewise agreed that she was "aware of captive reinsurance, and that there might be captive reinsurance on [her] loan" at the time of closing. (See Vanover Dep. 58:7-10, Jan. 30, 2014, ECF No. 92-2 at 23). Each plaintiff signed a private mortgage insurance disclosure which informed them that M&T Bank "may directly or through an affiliated company (a Reinsurance Company'), enter into a reinsurance agreement with the private insurance company that will be providing the mortgage insurance covering your loan." (Doc. 199 ¶¶ 21-22; Doc. 209 ¶¶ 21-22; see also Doc. 199-11 (Cunningham disclosure); Doc. 199-12 (Deimler disclosure); Doc. 199-13 (Vanover disclosure)).

Plaintiffs were cognizant of their right to opt out of the captive reinsurance program, but none elected to do so. (See Doc. 199 ¶¶ 26-30; Doc. 209 ¶¶ 26-30; see also Docs. 199-11, 199-12, 199-13). Nor did any plaintiff recall asking questions about the reinsurance arrangement at or prior to closing. (See Doc. 199 ¶ 12; Doc. 209 ¶¶12; see also Vanover Dep. 39:9-17, ECF No. 199-2 at 11 ("I don't remember asking any questions."); Cunningham Dep. 79:19-24, 86:10-22, Mar. 11, 2014, ECF No. 199-3 at 13, 16 (testifying that she does not recall "having any questions... [or] any discussions about this [mortgage insurance disclosure] document at any time"); Deimler Dep. 94:11-95:5, 95:21-96:11, Mar. 18, 2014, ECF No. 199-4 at 15-17 (stating that he had questions with respect to the distinction between homeowners and mortgage insurance, but no questions with respect to the captive reinsurance arrangement).

Finally, plaintiffs concede that they did not investigate whether their loans had been reinsured or look into the arrangement with M&T RE until they were solicited by current counsel. (See Doc. 199 ¶ 32; Doc. 209 ¶ 32 (noting that plaintiffs "did not discover the possibility that the mortgage documents were misleading until after they received the Notice from counsel")). Cunningham testified that she did not become aware of or look into the existence of her claims until September of 2011 when she received a notice from her current counsel. (See Doc. 210 ¶ 33). Similarly, Deimler did not learn of his potential lawsuit until "late 2011 or early 2012, " and Vanover "did not discover the basis of her claims until April 2012 when the lawyers explained it, this whole lawsuit, to me.'" (Id. ¶¶ 35-36).

II. Procedural History

Plaintiffs commenced this action with the filing of a three-count complaint (Doc. 1) on June 28, 2012. On October 9, 2012, with the consent of all defendants, plaintiffs filed the now-operative first amended complaint. (Doc. 56). Therein, plaintiffs assert claims for violation of RESPA (Count I) and unjust enrichment (Count II).[4] Defendants moved to dismiss plaintiffs' claims, primarily contending that the statute of limitations has expired and cannot be equitably tolled. (See Docs. 66, 67, 69). The court held oral argument on October 17, 2013, and, at the conclusion thereof, took the motions to dismiss under advisement.

On October 30, 2013, the court issued a memorandum and order (Docs. 132-33) denying defendants' motions and allowing plaintiffs to engage in a period of discovery narrowly tailored to the equitable tolling inquiry. The court underscored the fact-intensive nature of tolling determinations, following the course charted by the Honorable Judge Berle M. Schiller of the Eastern District of Pennsylvania, also at the Rule 12 stage, in Riddle v. Bank of America Corp., No. 12-1740, 2013 WL 1482668, at *7 (E.D. Pa. Apr. 11, 2013) (herein "Riddle I"). The court noted that plaintiffs' allegations " might support equitable tolling of their respective statutes of limitations, " but hesitated to allow the claims to proceed to full merits discovery, "consuming both the parties' and the court's time and resources, given defendants' articulated and legitimate concerns about the timeliness of plaintiffs' claims." Cunningham I, 2013 WL 5876337, at *10 (emphasis added).

Following a period of discovery, M&T moved for summary judgment on June 26, 2014.[5] The motion has been fully briefed, and the parties have filed several notices of supplemental authority. (See Docs. 197, 208, 215, 218, 223, 226, 227, 228, 233, 235, 237). M&T's motion is thus ripe for disposition.

III. Standard of ...

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