Lawyers eager to sue real estate companies are celebrating a recent decision involving Community Bank of Northern Virginia (CBNV), a financial institution that PNC Bank, N.A., acquired in 2007. The plaintiffs in the underlying case accuse CBNV of funneling excess settlement fees to a non-depository lender, whose earnings are capped by law. The opinion exposes real estate professionals to a significantly heightened risk of class liability.

The events at issue occurred more than 13 years ago and have been the subject of three separate rulings by the United States Court of Appeals for the Third Circuit. During the earlier two appeals, rogue borrowers successfully objected to class settlements of $33 million and $47.6 million. During the third go-around, the objectors joined forces with the original plaintiffs and together they convinced a federal judge in Pennsylvania to certify a much larger class. PNC appealed.

The prior objectors, with their new-found allies, continued their winning streak. The Third Circuit rejected PNC’s arguments, one after another—even those were based firmly on the appellate court’s earlier holdings. For example, conflicts of interest that had derailed an earlier settlement were, miraculously, “no longer a problem,” the Third Circuit ruled.

On its own, this opinion would be a model of a result-oriented outcome. That is where a court simply decides which side should win and then adopts that party’s arguments without evaluating their merit.

But, apart from its lazy reasoning and its repeated willingness to credit the plaintiffs’ unproven claims, this opinion portends particularly dire consequences for the real estate industry. That is because the Third Circuit found that figures on a HUD-1 settlement statement can represent a form of fraudulent concealment that affords borrowers a virtually unlimited amount of time to sue under various laws, including the Real Estate Settlement Procedures Act (RESPA), the Homeownership and Equity Protection Act (HOEPA), and the Truth in Lending Act (TILA).

HUD-1s that violate federal regulations, the Third Circuit wrote, “can be materially misleading because transmission of a HUD-1 impliedly warrants compliance” with those rules. Moreover, would-be plaintiffs need not investigate possible improprieties because, says the Third Circuit, “a borrower ought to be able to rely on the documents provided by a financial institution.”

Eager plaintiffs’ lawyers are likely to contend that this decision all but negates the statutes of limitations for RESPA, HOEPA, and TILA. If those advocates succeed, that will leave real estate companies exposed to massive amounts of liability for an indeterminate amount of time.