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White v. PNC Financial Services Group, Inc.

United States District Court, E.D. Pennsylvania

August 24, 2017

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


          STENGEL, C. J.


         This is a putative class action brought by homeowners claiming violations of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2607 (RESPA). The plaintiffs filed a Motion to Strike several of the defendants' affirmative defenses.


         The plaintiffs claim the defendants carried on a "captive reinsurance scheme" in which the defendants enjoyed kickbacks, referrals, and fees that are prohibited by RESPA. Plaintiffs allege that the defendant insurers, lenders, and reinsurers have colluded to create a scheme that violates RESPA. Plaintiffs maintain that the lenders, as a general practice, form subsidiary companies that become the reinsurers. These lenders then systematically refer homeowners to the insurers to buy mortgage insurance. In exchange for a constant stream of profit-producing homeowner-borrowers, the insurers then pay a kickback to the reinsurer who, as a subsidiary, is really just an extension of the lender. Plaintiffs claim this "pay-to-play" scheme harms homeowners because, by colluding, the insurers, reinsurers, and lenders, were able to reduce competition in the mortgage insurance market, thereby increasing the premium payments the homeowner-plaintiffs are required to pay to maintain their mortgage insurance.

         Several months ago, in allowing plaintiffs to amend their claims, I held that RESPA was violated each time an allegedly illegal kickback, fee, or referral was given or received. White v. PNC Fin. Servs. Grp., Inc., 11-cv-7928, 2017 WL 85378, at *13 (E.D. Pa. Jan. 10, 2017). I also held that the continuing violations doctrine applied to plaintiffs' claims, thereby saving them from RESPA's one-year statute of limitations. Id. at *6. Following that decision, defendant The PNC Financial Services Group, Inc. ("PNC") filed an interlocutory appeal. The Third Circuit rejected PNC's attempt to appeal my decision. (Doc. No. 264). The case then proceeded to discovery, which is where it stands now.

         The plaintiffs move to strike PNC's following affirmative defenses:

First Defense Plaintiffs' claims and those of the putative class are or may be barred by the applicable statute of limitations. Without in any way limiting the foregoing, PNC specifically reserves all rights to challenge the Court's determination that RESPA's one-year statute of limitations is subject to the "continuing violation" doctrine. Further, even under the continuing violation theory asserted by Plaintiffs, PNC asserts that any period PMI premium paid prior to December 31, 2010 is barred by the RESPA limitations period. PNC asserts the same principles with respect to the unjust enrichment claim. (Doc. No. 265, Answer at 50-51).
Third Defense Plaintiffs' RESPA claims fail because PNC did not make any referrals to the Mortgage Insurers after December 31, 2010. (Answer at 51).
Seventh Defense Plaintiffs' claims against PNC are barred because Plaintiffs paid mortgage insurance rates filed with and/or approved by state regulators. (Answer at 52).
Eighth Defense Plaintiffs lack standing under Article III and RESPA to bring some or all of their claims in this case, including claims related to reinsurance agreements that are inapplicable to their loans. (Answer at 52).


         Pursuant to Rule 12(f) of the Federal Rules of Civil Procedure, a party may move to "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." The pleading standard for an affirmative defense is set forth in Rule 8(c), which requires a party to "affirmatively state any avoidance or affirmative defense." An affirmative defense is "[a] matter asserted by defendant which, assuming the complaint to be true, constitutes a defense to it." In re Sterten, 546 F.3d 278, 284 n.9 (3d Cir. 2008) (alteration in original) (citing BLACK'S LAW DICTIONARY 60 (6th ed. 1990)).

         The striking of a pleading is "a 'drastic remedy' to be used sparingly because of the difficulty of deciding a case without a factual record." Dann v. Lincoln NatT Corp., 274 F.R.D. 139, 142 (E.D. Pa. 2011) (quoting BJ Energy, LLC v. PJM Interconnection, LLC, Nos. 08-3649, 09-2864, 2010 WL 1491900, at *1 (E.D. Pa. Apr. 13, 2010)). Accordingly, a motion to strike will not be granted if "the sufficiency of a defense depends on disputed issues of fact. Even when the facts are not in dispute, Rule ...

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