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Menichino v. Citibank, N.A.

United States District Court, W.D. Pennsylvania

June 6, 2017

LINDA MENICHINO, et al., Plaintiffs,
CITIBANK, N.A., et al., Defendants.


          Mark R. Hornak, United States District Judge

         This case alleging unlawful practices related to mortgage insurance is back front and center on the Court's docket after the named Plaintiffs, individually and on behalf of a putative class of mortgagors, filed the instant Motion seeking to lift the now two-year long stay that they requested and asking for leave to file a Third Amended Complaint. ECF No. 204.

         Plaintiffs allege that Defendants Citibank, N.A. and Citimortgage, Inc., mortgagees, along with ABN AMRO Mortgage Group, Inc., a reinsurer, set up a captive reinsurance scheme in which Defendants charged Plaintiffs monthly insurance premiums for private mortgage insurance and selected for Plaintiffs private mortgage insurers who illegally paid kickbacks to Defendants for non-existent reinsurance services. Plaintiffs' proposed Third Amended Complaint comes in four counts: violation of the Racketeer Influenced and Corrupt Organizations Act (RICO) (Count I), conspiracy to violate RICO (Count II), violations of the Real Estate Settlement Procedures Act (RESPA) (Count III), and unjust enrichment (Count IV). ECF No. 205-1 at 68-82.

         Defendants say Plaintiffs' proposed RESPA and RICO claims are time-barred. They urge the Court to deny Plaintiffs leave to file a Third Amended Complaint and allow the case to proceed. But if the Court grants leave to amend, Defendants want the Court to leave the stay in place pending final disposition of another, similar case brought by Plaintiffs' lawyers on behalf of other plaintiffs.[1]

         For the reasons that follow, Plaintiffs' Motion for Leave to Amend will be denied. The Court will set a status conference regarding the status of the current stay.


         Once a party has exhausted its opportunities to amend a pleading as a matter of course, it may amend a pleading "only with the opposing party's written consent or the court's leave. The court should freely grant leave when justice so requires." Fed.R.Civ.P. 15(a)(2). Although "the pleading philosophy of the Rules counsels in favor of liberally permitting amendments to a complaint, " such decision is left to the "sound discretion of the district court." CMR D.N. Corp. v. City of Philadelphia, 703 F.3d 612, 629 (3d Cir. 2013). "Among the grounds that could justify a denial of leave to amend are undue delay, bad faith, dilatory motive, prejudice, and futility." Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000).

         II. ANALYSIS

         A. Plaintiffs' Proposed Amendment to The RESPA Claim is Futile

         "'Futility' means that the complaint, as amended, would fail to state a claim upon which relief could be granted. In assessing 'futility, ' the District Court applies the same standard of legal sufficiency as applies under Rule 12(b)(6)." Id. at 115 (citations omitted). Amendment of the complaint is futile where the claim as amended would not survive a motion to dismiss because it is time-barred. Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 292 (3d Cir. 1988). In the context of a statute-of-limitations argument, dismissal is proper "where the complaint facially shows noncompliance with the limitations period and the affirmative defense clearly appears on the face of the pleading." Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n.l (3d Cir. 1994); see also Robinson v. Johnson, 313 F.3d 128, 135-36 (3d Cir. 2002). A facially-untimely pleading thus can be dismissed as time-barred if, for example, plaintiffs fail to "plead the applicability of the [tolling] doctrine" or if "it is plain on the face of the complaint that the limitations period cannot be tolled." Menichino v. Citibank, N.A., No. 12-cv-58, 2013 WL 3802451, at *6-7 (W.D. Pa. July 19, 2013) (collecting Third Circuit cases).

         Plaintiffs first seek leave to amend their RESPA claim. Each of the named Plaintiffs obtained their loans between 2005 and 2007, but they did not file their RESPA claim in this case until January 13, 2012. ECF No. 1; ECF No. 205-1 at 11-14. Defendants therefore say that Plaintiffs' proposed amendment to the RESPA claim is futile because it is facially untimely under RESPA's one-year statute of limitations.[2] ECF No. 214 at 12-14.

         Plaintiffs agree that RESPA's one-year limitations period applies, and they have previously acknowledged that unless such limitations period is tolled, the named Plaintiffs' claims fall outside of it.[3] But Plaintiffs say that their proposed amendment to the RESPA claim is an attempt to remedy the statute-of-limitations issue by limiting the alleged RESPA violations for which they seek relief to those that occurred within one year of the filing of this lawsuit. See ECF No. 205 at 4; ECF No. 205-1 at 47 ¶ 163(b).

         Here is the context for Plaintiffs' request. The Court dismissed the RESPA claim in Plaintiffs' First Amended Complaint because it was facially untimely under RESPA's limitations period and Plaintiffs had not pled enough facts to save their claims under any recognized tolling doctrine. ECF No. 124 at 2. Specifically, the Court concluded that there were insufficient facts to determine what led Plaintiffs to discover their RESPA claims, when such discovery occurred, and whether Plaintiffs exercised due diligence to attempt to discover such claims. Id. at 18-21.

         The Court also rejected Plaintiffs' "continuing violations" theory. Under that theory, each remittance of a monthly mortgage payment constituted a continuing violation of RESPA that reset the accrual date for their RESPA claim.[4] Id. at 22. In rejecting Plaintiffs' "continuing violations" theory, the Court explained that:

RESPA's statute of limitations speaks only of "a single triggering violation, not multiple violations." Snow, 332 F.3d at 359 (citing section 2614). Similarly, in "creating the private right of action for kickbacks and fee-splitting" in section 2607, "Congress also spoke of a single 'violation, '" thus implying that the statutory regime envisions a kickback scheme with ongoing payments as comprising a "single integrated transaction." Id. In this sense, the closing of the mortgage and continuous premium payments are more properly conceived of as "a single violation followed by continuing consequences, " where the closing of the mortgage is the single actionable violation and the recurring payments towards the mortgage balance are the continuing ill effects. Id. (citing United Air Lines, Inc. v. Evans, 431 U.S. 553, 558 (1977)); see also In re Smith, 737 F.2d 1549, 1552 (11th Cir. 1984) (in action involving TILA's one-year statute of limitations, "[nondisclosure is not a continuing violation for purposes of the statute of limitations.").

Id. at 23.

         Plaintiffs then filed a Second Amended Complaint, which added some meat to the bones. ECF No. 126. They pled facts making it plausible that Defendants' fraudulent concealment of information prevented them from bringing their claim earlier, that they were not on inquiry notice of the possible existence of their RESPA claims, and that their lack of due diligence during the limitations period was reasonable under the circumstances. Specifically, Plaintiffs set forth some of the language of the loan documentation, the date that each Plaintiff received a notice of investigation from counsel, the date that each Plaintiff consented to counsel's representation, the dates that each Plaintiff contacted their mortgagee and private mortgage insurer to learn whether their mortgage had been reinsured, and what Plaintiffs were told (or, in some cases, not told) by their mortgagee and private mortgage insurers' representatives in response. ECF No. 126 at ¶¶ 126-27, 138-84. Taken together, the facts alleged were ...

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