This past week, a federal court in Maryland largely rejected arguments from various lenders and real estate companies seeking to dismiss a lawsuit involving the now-defunct title agency, Genuine Title, LLC. That lawsuit continues the efforts of federal and state regulators to crackdown on entities that did business with Genuine Title. The ruling offers several teaching moments.
This particular lawsuit, Fangman v. Genuine Title, LLC, was filed in January 2014, and followed on the heels of investigations conducted by the Consumer Financial Protection Bureau (CFPB) and Maryland authorities. The plaintiffs, like the public regulators, alleged that Genuine Title performed marketing services—like mailing letters and sharing consumer data—with various mortgage providers in exchange for monetary kickbacks. The consumers also alleged that Genuine Title paid cash sums in exchange for client referrals.
In January 2015, Wells Fargo and JPMorgan Chase agreed to pay $35.7 million in fines and restitution for their involvement with Genuine Title. High-ranking executives from Genuine Title were later fined $662,500 and banned from the industry.
In last week’s ruling, the Maryland court found, among other holdings, that the plaintiffs’ claims are not automatically barred by the one-year statute of limitations in the Real Estate Settlement Procedures Act (RESPA). The court also held that the limitations period can be extended based on equitable considerations.
The opinion furnishes members of the real estate industry with a few important take-aways:
- Alleged RESPA liability (whether civil or criminal) for providing marketing services can be so amorphous that it arguably infringes on people’s due process rights to known in advance the line between prohibited and permissible conduct. This point should be made in courts and to Congress.
- Eager plaintiffs’ attorneys will almost always try to capitalize on successful regulatory efforts, squeezing companies for every additional cent to be had. Businesses should keep that in mind if they intend to settle with public authorities.
- Judges in follow-on court proceedings will often assume wrongdoing on a defendant’s part (why else would the company have agreed to pay fines?) and will make trial success very difficult.