SUSAN J. DLOTT, District Judge.
This matter is before the Court on Plaintiffs' Second Amended Motion for Class Certification. (Doc. 325.) Defendant Emery Federal Credit Union ("Emery") opposes the Motion. (Doc. 330.) For the reasons that follow, the Court will GRANT the Motion.
Plaintiffs allege that between 2009 and 2014, Genuine Title, LLC ("Genuine Title"), pursuant to an agreement, paid kickbacks to Emery employees in exchange for referrals in connection with loan settlement services. (Fourth Am. Compl. at ¶ 4, PageID 9348, Doc. 324.) Plaintiffs also allege that Genuine Title split the fees it received for such settlement services with the Emery employees implicated in the alleged scheme, and that these kickbacks were not in exchange for services actually performed by these Emery employees. (Id. at ¶¶ 4, 66, PageID 9348, 9360.)
These kickbacks were orchestrated by and through certain principals and employees of Genuine Title and Emery, as well as through associated "sham" companies.
During discovery, both Emery and Genuine Title produced data
Named Plaintiffs Frank and Shelly Palombaro closed their VA
Named Plaintiff Gary Ratcliff closed his VA streamline home refinance on or about March 8, 2012. (Id.) Ellis brokered this closing. (Id.) The following month, Plaintiffs argue that Ellis received a check through his "sham" company, Mystion Abstracts, which included a kickback for the referral of Ratcliff's loan. (Id. at PageID 10446-47.)
Each of the HUD-1s
The Consumer Financial Protection Bureau ("CFPB"), aided by the Consumer Protection Division of the Office of the Attorney General of Maryland ("CPD"), filed a complaint against certain Emery employees and the entities that they created that were associated with receiving kickbacks. (Fourth Am. Compl. at ¶ 58, PageID 9358, Doc. 324.) Upon discovery of this investigation, Genuine Title began generating and backdating "sham" title services agreements.
The Court previously set forth the procedural history of this case in its Order Denying Defendant's Motion to Dismiss and Granting Defendant's Motion to Strike. (Doc. 242.) The present Motion is before the Court pursuant to its Order Granting in Part and Denying in Part Plaintiffs' Motion to Substitute Named Plaintiff and Putative Class Representative and to Amend the Complaint (Doc. 323), in which the Court directed Plaintiffs to file a new Class Certification Motion and Memorandum in Support. The Court specifically directed Plaintiffs to correct errors made in their prior submissions. (Id. at PageID 9346.)
A district court may certify a class only if:
Fed. R. Civ. P. 23(a). Implicit in this Rule is the requirement that the proposed class be "adequately defined and clearly ascertainable." Rose v. Saginaw Cnty., 232 F.R.D. 267, 271 (E.D. Mich. 2005) (quotation omitted). Certification is proper "only if `the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.'" Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350-351, 131 S.Ct. 2541, 2551 (2011) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982)); Sprague v. Gen. Motors Corp., 133 F.3d 388, 397 (6th Cir. 1998) (en banc).
In addition to meeting the Rule 23(a) criteria, the proposed class also must meet at least one of the requirements listed in Rule 23(b). Dukes, 564 U.S. at 345; Sprague, 133 F.3d at 397. Here, Plaintiffs seek certification under Rule 23(b)(3) on the basis that "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). Plaintiffs carry the burden of proving that the class certification prerequisites are met. In re Am. Med. Sys., Inc., 75 F.3d 1069, 1079 (6th Cir. 1996). Plaintiffs, as class representatives, also are required to establish that they possess the same interest and suffered the same injury as the class members that they seek to represent. Dukes, 564 U.S. at 348-49. "The trial court has broad discretion in deciding whether to certify a class, but that discretion must be exercised within the framework of Rule 23." In re Am. Med. Sys., Inc., 75 F.3d at 1079.
"For a class to be sufficiently defined, the court must be able to resolve the question of whether class members are included or excluded from the class by reference to objective criteria." Young v. Nationwide Mut. Ins. Co., 693 F.3d 532, 538 (6th Cir. 2012) (quoting MOORE'S FEDERAL PRACTICE § 23.21[3]). Defendant does not explicitly cite this implicit Rule 23(a) requirement as part of its opposition brief. Nevertheless, as part of the "rigorous analysis" required under Dukes, the Court evaluates this factor.
Plaintiffs propose the following class definition:
(Second Am. Mot. Class Cert. at PageID 10447, Doc. 326-1.).
Plaintiffs attach to their Motion spreadsheets produced by both Emery and by Genuine Title identifying loans that were referred to Genuine Title by Emery. (Id. at Exs. 5-6, Docs. 326-6-326-7.) These lists include the loan dates, names of borrowers, and property addresses. Plaintiffs also attach a list of the Matched Class Loans that Plaintiffs contend will represent the bulk of the borrowers in this class. (Id. at Ex. 7.) The parties do not appear to dispute that the Matched Class Loans are "federally related mortgage loan[s]" as that term is used in the proposed class definition and as defined by statute.
At the oral argument held July 18, 2017, Emery would not stipulate to the accuracy of the Matched Class Loans and argued that the verification of unmatched loans would be difficult. Without more, however, the Court is unwilling to deny Plaintiffs' Motion on this basis, where there appears to be significant data and relatively straightforward investigatory procedures (e.g., abstracts of title) that can be used to identify class members.
In view of the foregoing, the Court finds that Plaintiffs have sufficiently demonstrated that their proposed class is ascertainable.
Rule 23(a)(1) requires that "the class [be] so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a)(1); see also In re Am. Med. Sys., Inc., 75 F.3d at 1079. While the numerosity requirement is not tied to any fixed numerical threshold, "substantial" numbers usually satisfy this requirement. Daffin v. Ford Motor Co., 458 F.3d 549, 552 (6th Cir. 2006). Defendant does not challenge the numerosity requirement and the Court finds that the approximately 4,000-5,000-member class envisioned here satisfies Rule 23(a)(1). See, e.g., Baehr v. Creig Northrop Team, P.C., No. WDQ-13-0933, 2014 WL 346635, at *8 (D. Md. Jan. 29, 2014) (finding that a class of 3,000-4,000 satisfied numerosity).
Rule 23(a)(2) requires plaintiffs to show that "there are questions of law or fact common to the class." Plaintiffs should be able to demonstrate that the members of the class "have suffered the same injury." Dukes, 564 U.S. at 350. "Their claims must depend upon a common contention" and that contention "must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Id. "What matters to class certification . . . is not the raising of common `questions'—even in droves—but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation." Id. (quotation omitted).
Plaintiffs present the following common issues of fact with respect to class members' RESPA claims:
(Second Am. Mot. Class Cert. at PageID 10451, Doc. 326-1.) With respect to the threshold issue of equitable tolling for all class members, Plaintiffs present the following common issues of fact:
(Id. at PageID 10451-52.)
Emery spends little time on the commonality requirement relative to other arguments in its opposition brief—arguing, primarily, that Plaintiffs' recitation of the RESPA claim elements cannot be a substitute for the "common questions" required by this prong of Rule 23. The Court disagrees. The fact that these questions mirror the elements of RESPA claims does not make them less pertinent to the resolution of this lawsuit.
In Dukes, the Supreme Court declined to certify a class action of female Wal-Mart employees alleging sex discrimination under Title VII of the Civil Rights Act of 1964 due to lack of equal pay or promotion. 564 U.S. at 343. The Court decided that commonality was not met where there was neither evidence of a specific, biased employee evaluation procedure, nor evidence of a general employee evaluation policy that was discriminatory—either of which would have driven the litigation as affecting all putative class members. Id. at 353-54. By contrast, the essence of this case is a pervasive and, at least to a degree, confessed kickback scheme that would have affected nearly all putative class members in very similar—if not identical—ways. The existence and performance of such a widespread scheme undoubtedly generate common questions, eliciting common answers, that are highly relevant to Defendant's liability vis-à-vis the purported class members in this case. The common questions that Plaintiffs have proposed regarding equitable tolling are likewise relevant, on a class-wide basis, to the applicability of tolling in the face of Emery's alleged fraudulent concealment of the RESPA violations and to the corresponding level of due diligence required of class members.
Emery also advances three, additional brief arguments related to commonality. First, it argues that Plaintiffs have not fully corroborated the alleged kickback payments with evidence thereof. Second, it argues that Plaintiffs' class would to include twenty-seven Emery branches for which there is no evidence of the wrongdoing alleged. The Court finds these to be unwarranted invitations to pass on the merits of Plaintiffs' case, which is not necessary at this point in litigation.
Third, Defendant argues that varying damages among class members destroys commonality. It does not. The statutory framework for damages under RESPA ties penalties to the total settlement charges and not to the amount of each particular kickback. 12 U.S.C. § 2607(d)(2). While a degree of individual inquiry is necessary, it would not overwhelm the proceedings and damages could be determined easily by reference to objective, available evidence (i.e., class members' HUD-1s). See In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig., 722 F.3d 838, 861 (6th Cir. 2013) ("[R]ecognition that individual damages calculations do not preclude class certification . . . is well nigh universal.") (quoting Comcast Corp. v. Behrend, 133 S.Ct. 1426, 1437, 185 L.Ed.2d 515 (2013)).
For these reasons, the Court concludes that Plaintiffs' have met their burden as to Rule 23(a)(2).
Typicality is satisfied if "the claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed. R. Civ. P. 23(a)(3). The Sixth Circuit has explained:
In re Am. Med. Sys., Inc., 75 F.3d at 1082. "The existence of defenses against certain class members does not necessarily defeat typicality." NorCal Tea Party Patriots v. I.R.S., No 1:13cv-341, 2016 WL 223680, at *8 (S.D. Ohio Jan. 19, 2016). "Typical does not mean identical, and the typicality requirement is liberally construed." Id. (quotation omitted).
Plaintiffs argue that the class representatives assert the same violations of 12 U.S.C. § 2607 related to the same illegal kickback scheme and allege the same factual pattern for equitable tolling as all other class members. Emery argues that, because only two of the several Emery branches implicated in the "kickback" scheme worked with named Plaintiffs, their claims are not typical of the rest of the class, who may have dealt with some eleven—at minimum— other Emery employees. Emery further argues that the putative class may include some individuals who did not work with Emery employees who received kickbacks.
Emery's arguments are not persuasive. As to the latter, Emery appears to be arguing as to the class's overbreadth;
Rule 23(a)(4) requires that named Plaintiffs fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a)(4). Courts examine two criteria to determine adequacy: "1) the representative must have common interests with unnamed members of the class, and 2) it must appear that the representatives will vigorously prosecute the interests of the class through qualified counsel." In re Am. Med. Sys., 75 F.3d at 1083. Rule 23(a)(4) tests "the experience and ability of counsel for the plaintiffs and whether there is any antagonism between the interests of the plaintiffs and other members of the class they seek to represent." Cross v. Nat'l Trust Life Ins. Co., 553 F.2d 1026, 1031 (6th Cir. 1977).
These requirements are met. Emery does not dispute this element, and the Court finds that Plaintiffs have demonstrated that the named Plaintiffs' interests are aligned with those of the class as a whole and that Plaintiffs' counsel have the experience and competence to carry out the litigation. (See Second Am. Mot. Class Cert. at PageID 10453-54, Doc. 326-1 (and testimony/affidavits referenced therein).)
Under Rule 23(b)(3), a court may certify a class if Rule 23(a) is satisfied and if "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). Both the predominance and superiority requirements were added to the Federal Rules "to cover cases `in which a class action would achieve economies of time, effort, and expense, and promote . . . uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.'" Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 615, 117 S.Ct. 2231, 2246 (1997) (quoting Fed. R. Civ. P. 23(b)(3), Adv. Comm. Notes to 1966 Amendment). The predominance and superiority requirements are "far more demanding" than Rule 23(a)(2)'s commonality requirement. Id. at 624. It is under Rule 23(b) that proposed RESPA classes within this Circuit have been found deficient. See, e.g., Pettrey v. Enter. Title Agency, 241 F.R.D. 268, 283-84 (N.D. Ohio 2006), appeal dismissed, 584 F.3d 701 (6th Cir. 2009); Carter v. Welles-Bowen Realty, Inc., Nos. 3:05CV7427; 3:09CV400, 2010 WL 908464, at *2-3 (N.D. Ohio Mar. 11, 2010); Toldy v. Fifth Third Mortg. Co., No. 1:09 CV 377, 2011 WL 4634154, at *2-4 (N.D. Ohio Sept. 30, 2011). The Court will examine the two prongs of Rule 23(b) below.
Predominance "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." Amchem Prods., 521 U.S. at 623. "To meet the predominance requirement, a plaintiff must establish that issues subject to generalized proof and applicable to the class as a whole predominate over those issues that are subject to only individualized proof." Randleman v. Fidelity Nat. Title Ins. Co., 646 F.3d 347, 352-53 (6th Cir. 2011). Emery raises a number of issues that challenge a finding of predominance. The Court will address each in turn.
Emery argues that RESPA's one-year statute of limitations, running from the date of the closing of a litigant's loan, presents an insurmountable roadblock to certifying this class and—in particular—to meeting the predominance requirement of Rule 23(b)(3). Plaintiffs concede that all purported class members closed their loans more than one year prior to the filing of the Second Amended Complaint (Doc. 47) on January 2, 2015, thus invoking the doctrine of "equitable tolling" to the extent that such claims could nevertheless be permitted to proceed. (Second Am. Mot. Class Cert. at PageID 10451, Doc. 326-1.) Equitable tolling, as recently clarified by the Supreme Court, requires that a litigant show each of the following elements: "(1) that he has been pursuing his rights diligently, and (2) that some extraordinary circumstance stood in his way and prevented timely filing." Menominee Indian Tribe of Wisc. v. U.S., 136 S.Ct. 750, 755, 193 L. Ed. 2d 652 (2016) (quotation omitted). "[T]he propriety of equitable tolling is determined on a case-by-case basis and is to be narrowly applied." Egerer v. Woodland Realty, Inc., 556 F.3d 415, 424 (6th Cir. 2009).
Emery cites several cases that discuss the intersection between RESPA statute of limitations issues and predominance under Rule 23(b). In particular, it cites these cases to show that the applicability of equitable tolling requires investigation as to each Plaintiff on the required diligence and extraordinary circumstances faced in view of the specific information that they each may have received in connection with their loan closing. Plaintiffs argue that, if not wholly eliminating individual inquiry, the question of whether Emery fraudulently concealed the kickback scheme would be subject to generalized proof and is highly relevant to both Menominee prongs (i.e., the level of diligence required and the presence of extraordinary circumstances). (See, e.g., Second Am. Mot. Class Cert. at Exs. 15(A)-15(D), Docs. 326-16-326-19 ("sham" title services agreements created between Genuine Tile and certain implicated Emery employees upon discovering the CFPD/CPD investigations); id. at PageID 11355-56, Doc. 326-1 (Plaintiffs' discussion thereof); supra note eight (testimony regarding, and copies of, "sham" title services agreements).)
The first case cited by Emery, Contos v. Wells Fargo Escrow Company, LLC, No. Co8-838Z, 2010 WL 2679886 (W.D. Wash. July 1, 2010), dealt with a proposed class in which a substantial portion its members "had actual knowledge of [the facts giving rise to the alleged RESPA violation] prior to closing." Id. at *7. The Contos court, however, specifically contrasted its facts with those in another case dealing with equitable tolling in which class certification had been granted, Veal v. Crown Auto Dealerships, Inc., 236 F.R.D 572, 580 (M.D. Fla. 2006), where the "defendant fraudulently concealed information necessary to establish the plaintiffs' claims from the entire proposed class." Contos, 2010 WL 2679886, at *7. The Court finds fraudulent scheme discussed in Veal more akin to the facts before it.
In the second case, Pettrey, the district court expressly stopped short of holding that the applicability of defenses, such as statute of limitations, automatically barred a finding of predominance; but it concluded that a number of individualized issues in that particular case predominated—including those related to state law claims that are not present in the case at bar. Pettrey, 241 F.R.D. at 284 & n.18.
In the third, Minter v. Wells Fargo Bank, N.A., No. WMN-07-3442, 2013 WL 1795564 (D. Md. Apr. 26, 2013), the court concluded that a class action could not be sustained where the required due diligence of class members varied. Id. at *3-4. Emery then relies on Riddle v. Bank of America Corp., 588 F. App'x 127, 130 (3d Cir. 2014), for its strong language requiring affirmative investigation of potential RESPA claims between the closing of the plaintiffs' loans and the time that they were contacted by counsel. But subsequent authority in the Third Circuit has concluded that "when a wrongful scheme is perpetrated through the use of common documentation, such as the documents employed to memorialize each putative class member's mortgage loan, full participation in the loan process alone is sufficient to establish the due diligence element [of an equitable tolling argument]." In re Cmty. Bank of N. Virginia Mortg. Lending Practices Litig., 795 F.3d 380, 404 (3d Cir. 2015), cert. denied sub nom. PNC Bank v. Brian W., 136 S.Ct. 1167, 194 L. Ed. 2d 241 (2016).
In Cunningham v. M & T Bank Corporation, 814 F.3d 156 (3d Cir. 2016), the Court considered due diligence in the context of reinsurance agreements accompanied by lengthier and more specific disclosures "explaining reinsurance in plain language, stating that reinsurance could be with a company affiliated with the lender, that the reinsurance company would receive a percentage of the mortgage, and that the mortgagor had the opportunity to opt out of captive reinsurance." Id. at 161. The Cunningham court held—in that context—that the plaintiffs' diligence was insufficient; therefore, the plaintiffs' theory that the defendant's misrepresentations could lead to a class-wide finding regarding the level of due diligence required necessarily failed. Id. at 162. This Court finds that the HUD-1s here are distinguishable from the more detailed and explanatory paperwork at issue in Cunningham related to reinsurance.
Emery then attempts to head off any argument that due diligence need not be established on an individual basis, because due diligence would have been futile. It characterizes Egerer, 556 F.3d 415 (6th Cir. 2009) as rejecting the argument that a defendant's likelihood to lie if confronted with its misconduct would excuse the diligence requirement. 556 F.3d at 423. The Egerer court rejected that argument, however, because testimony from an officer of the defendant therein did not support the conclusion that the defendant's officers would have lied if confronted. Id. & n.16. Here, there is evidence that—confronted with investigations into their conduct—certain Emery employees executed "sham" title services agreements. (See, e.g., Second Am. Mot. Class Cert. at Exs. 15(A)-15(D), Docs. 326-16-326-19 ("sham" title services agreements created between Genuine Tile and certain implicated Emery employees upon discovering the CFPD/CPD investigations); id. at PageID 11355-56, Doc. 326-1 (Plaintiffs' discussion thereof); supra note eight (testimony regarding, and copies of, "sham" title services agreements).) Plaintiff also argues that Emery's failure to notify affected borrowers upon the initiation of the CFPB and CPD investigations represents concealment for purposes of the equitable tolling inquiry. (Pls.' Reply at PageID 11878-79.)
Contrasted with these cases cited by Emery, the Court finds most persuasive the recent decision in Fangman v. Genuine Title, LLC, No. RBD-14-0081, 2016 WL 6600509 (D. Md. Nov. 8, 2016)—the case from which this action was severed. The Fangman court certified a nearly identical class to that proposed here.
Aside from case law, Emery cites the differing documents that purported class members received in connection with their closings that, it argues, could have put them on notice of RESPA violations—such documents varying depending on the given borrower. (See Def.'s Opp'n at PageID 11355-56, Doc. 330.) The Court does not find that this, however, disrupts a finding of predominance where Plaintiffs' proposed class definition is solely based upon HUD-1s. Other documentation referring to affiliated business arrangements, disclaiming which service providers could be used, or confirming that a borrower carefully reviewed a HUD-1, do not change the fact that the face of the HUD-1s themselves did not give purported class members any reason to question or dispute amounts listed (or not listed) thereon.
In Egerer, the Sixth Circuit based its denial of class certification, as related to equitable tolling in particular, on the existence of a disclosure that specifically indicated that a "business relationship existed between [the defendant realty company] and [the defendant title company], and that [the defendant realty company] may receive a `financial or other benefit'" for their referral of business. Egerer, 556 F.3d at 422. Here, the closest that Emery comes to producing such a document is its reference to a "Business Relationship Disclosure" received by one putative class member. (Def.'s Opp'n at Ex. 10, PageID 11391, Doc. 330) This document states that WCS Lending, LLC, and not Emery, is a "Referring Party" to Genuine Title. This document also has a line where the preparer is to check whether the lender's referral either "provides" or "does not provide" a financial benefit to the referring party. Neither box is checked on this particular form. The Court does not find that such a document would serve to trigger a heightened level of diligence as to the scheme between Genuine Title and Emery. In addition, the Egerer court declined to find a "requirement that defendants inform plaintiffs that they may have a legal claim because of defendants' business relationship." Id. at 423. But Plaintiffs do not argue that such a disclosure is lacking; instead, they argue that disclosure of the kickback payments on the HUD-1s is lacking.
Alert to the Sixth Circuit's instruction in Egerer, that the application of equitable tolling be narrowly and individually applied, the Court does not here hold that no fact-specific inquiry will be necessary. Nevertheless, the Court finds that the cases cited by Emery are distinguishable and that the issues identified by Plaintiffs regarding the kickback scheme and the active concealment thereof predominate over individual questions. To the extent that Plaintiffs are successful in demonstrating active concealment by Emery of its employees' alleged conduct, the Court envisions a more streamlined analysis of equitable tolling for putative class members.
Beyond the threshold question of equitable tolling, Emery raises several other potentially individualized issues that arise in the context of Plaintiffs' RESPA allegations. It argues that they weigh against the appropriateness of class treatment under the predominance inquiry. The Court addresses each issue in turn.
Emery argues that a "federally related mortgage loan," as that term is used in the proposed class definition and defined in 12 U.S.C. § 2602, is not necessarily a RESPA-covered loan. In particular, RESPA expressly exempts from its coverage loans that are "primarily for business, commercial, or agricultural purposes[.]"
Plaintiffs point to available documentation regarding the purported class members' loans as providing much of the information needed to determine whether a loan is covered by RESPA. (See Def.'s Opp'n Mem. Exs. 15-16, Doc. 330-15-330-16 (Emery data including loan type (e.g., "cash out" or "no cash out" refinance) and collateral information (e.g., primary residence or investor)); Pls.' Reply at Exs. 31-33, Doc. 333 (Veteran's Administration pamphlet excerpts discussing eligibility for applicable loan programs and for receiving "cash out" as being limited to loans with a consumer purpose).) To the extent that this would prove insufficient, the Court finds that the suggestion in Spears v. First Am. eAppraiseIT, No. 5-08-CV-00868, 2014 WL 4647697, at *19 (N.D. Cal. Sept. 16, 2014)—the suggestion to employ a questionnaire for claimants regarding RESPA applicability—could be effective. While Emery cites one example of where this may prove ineffective due to inconsistent testimony by a putative class member, and speculates as to other reasons, the Court believes that this could be a simple and effective solution for a majority of the purported class members.
Emery also argues that the question of liability under RESPA § 8(a) requires individual inquiry.
Emery also cites deposition testimony from Emery employee Mandelberg, in which he recalls one borrower who had chosen Genuine Title prior to him making the referral. The referral required for purposes of the RESPA statue, however, does not necessarily need to be the sole reason that a particular title company is chosen. According to RESPA regulations, a referral "includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service[.]" 12 C.F.R. § 1024.14(f) (emphasis added). For this reason, the Court does not view this instance as dispositive of whether a referral was made over the class-wide inquiry urged by Plaintiffs.
As to the requirement that a "fee, kickback, or thing of value" be exchanged for the referral, Emery argues, again, that this inquiry must be made on a loan-by-loan basis. 12 U.S.C. § 2607(a). Without foreclosing the possibility that individual inquiry could be necessary, the Court is convinced that there are class-wide issues that could be relevant to this and to the referral element of RESPA liability. For example, Zukenberg testified that there were no loans offered by Emery that were not eligible for kickbacks from Genuine Title in exchange for referrals, which seems highly relevant to whether each and every class member would have been affected by an actual referral in exchange for a kickback. (Zukerberg Dep. 52:6-10 at PageID 6217, Doc. 300.)
Discussing the use of circumstantial evidence, Emery points out that RESPA regulations only cite "practice, pattern or course of conduct" evidence in the specific context of demonstrating an "agreement" to pay kickbacks. 12 C.F.R. 1024.14(e). This does not, however, establish that such evidence is irrelevant or prohibited with respect to other elements of RESPA liability, as Emery suggests. The Court is likewise not persuaded by Emery's citation to Carter v. Wells-Bowen Realty, Inc., 553 F.3d 979 (6th Cir. 2009).
Emery further notes that not all of Genuine Title's business came from referral agreements—certain states being subject to "workshare agreements" for which referral payments were not made. (Def.'s Opp'n at PageID 11366.) In the event that Plaintiffs can prove the widespread kickback scheme alleged, the determination of those particular Emery branches that did not participate is not likely to overwhelm the proceedings.
Emery next argues that Plaintiffs have not sufficiently articulated their § 8(b) claims.
Emery cites Klopp's testimony for its contention that an individualized inquiry is also necessary as to the availability of RESPA's safe harbor under § 8(c)(2).
Klopp also concedes in his testimony, however, that "[he was] paid on every single loan across the board, regardless of whether any services were performed or not." (Klopp Dep. at 77:5-7 at PageID 7864, Doc. 307.) He also testifies: "[I]f [he] didn't refer the deal to Genuine Title, [he] wouldn't get the $400. Yet [he] still may be required to perform the services." (Id. at 142:2-5, PageID 7881.) Further, Genuine Title president, Jay Zukerberg, stated in his affidavit that neither those who made referrals in exchange for marketing credit nor those who made referrals in exchange for cash "provided any title services associated with [those kickbacks]." (Second Am. Mot. Class Cert. at Ex. 3, PageID 10494, Doc. 326-4; see also id. at Ex. 17, Tabor Aff. ¶ 9, PageID 11077, Doc. 326-21 ("The Marketing Credits that Emery . . . received were solely for the referral of Emery borrowers and loans and were not related to any actual settlement services provided by me or any Emery employee.").)
Emery cites Kiefaber v. HMS National, Inc., 891 F.Supp.2d 796, 798 (E.D. Va. 2012), to support its argument that individualized inquiry is necessary to evaluate whether the § 8(c)(2) safe harbor applies to Klopp on each loan that he closed. In Kiefaber, a case considering whether kicking back a portion of a home warranty service fee to the referring real estate company was covered by this same safe harbor, the court looked to the "Warranty Rule"
Emery also cites O'Sullivan v. Countrywide Home Loans, Inc., 319 F.3d 732 (5th Cir. 2003), for its holding that determining the reasonableness of the kickbacks versus the actual services provided requires loan-by-loan inquiry. Id. at 742. In O'Sullivan, however, the plaintiffs conceded that the defendant had "performed some services." O'Sullivan, 319 F.3d at 741. No such concession is made here.
Relieved of an inquiry into the reasonableness of the alleged services provided, as suggested in Kiefaber, and in view of the factual distinction with O'Sullivan, the inquiry begins to look more binary than multi-faceted. At least one court of appeals has concluded that where the question is one of whether any title services at all were provided in exchange for kickbacks, as opposed to whether the fees for title services were compensable, then there is a sufficiently "binary and predominant" inquiry for purposes of class review. Busby v. JRHBW Realty, Inc., 513 F.3d 1314, 1325-26 (11th Cir. 2008).
In view of the foregoing, at this stage in the litigation, the Court concludes that the questions of RESPA application and liability are appropriate for class treatment. As the case progresses, should this conclusion prove no longer appropriate, the Court may alter, amend, or tailor this Order—including decertification of the class. Fed. R. Civ. P. 23(c)(1)(C), (c)(4), (c)(5).
Rule 23(b)(3) includes a non-exhaustive list of factors to be considered in determining the superiority of proceeding as a class action compared with other methods of adjudication:
Fed. R. Civ. P. 23(b)(3).
Other courts confronted with proposed RESPA classes, including some within the Sixth Circuit, have declined to certify such actions on the basis that they do not satisfy this requirement—in particular, that the fee shifting and treble damage provisions in the RESPA statute prohibit the finding that a class action is superior to individual suits. See, e.g., Carter, 2010 WL 908464, at *2 (collecting cases).
The Sixth Circuit, however, has not definitively ruled on this. The court in Powers v. Fifth Third Mortgage. Co., No. 1:09-cv-2059, 2011 WL 3811129 (N.D. Ohio Aug. 12, 2011), provides a helpful summary of the guidance that the Sixth Circuit has provided:
Id. at *19-20. The Powers court ultimately determined that individual inquiries in the case before it outweighed the potential benefits of class treatment—in particular, determining the application of RESPA to each individual loan. Id. In Powers, however, the putative class had between 15,000 and 17,000 members, and "the information maintained by defendants [was] insufficient to determine whether the vast majority of potential class members [were] covered by RESPA." Id. at *19. That does not appear to be the case here. (See Def.'s Opp'n Mem. Exs. 15-16, Doc. 330 (Emery data including loan type and occupancy information); Pls.' Reply Exs. 31-33, Doc. 33 (Veteran's Administration pamphlet excerpts discussing eligibility for applicable loan programs and for "cash out"); supra page 20 (discussing the potential use of a class member questionnaire).)
The Court is convinced that the predominance of common issues and the efficiencies achieved by trying such issues in one proceeding make certification of this class superior to maintaining separate actions. While certain Sixth Circuit precedent suggests that statutes providing financial incentives for private action may weigh against class treatment, the Court does not find that this avenue has been foreclosed, as explained in Powers. Based upon the allegations and evidence before it, the Court finds that the widespread, purposefully concealed scheme between Genuine Title and Emery is well-suited for class adjudication.
The Court finds that Plaintiffs have easily satisfied their burden under Rule 23(a). While Rule 23(b) requires a substantially more difficult showing, the Court is simply not persuaded that the potential for some individualized inquiry predominates over the overarching and consistent conduct by Emery to carry out and cover up the kickback scheme alleged in this case.
For the foregoing reasons, the Court hereby
(Zukerberg Dep. 46:3-18, 47:21-48:8 at PageID 5606-5608, Doc. 297; see also Second Am. Mot. Class Cert. at Exs. 15(A)-15(D), Docs. 326-16-326-19 (examples of "sham" title services agreements).)
Fangman, 2016 WL 6600509, at * 8.
12 U.S.C. § 2602(7).
(Def.'s Opp'n at PageID 11364.)
(Klopp Dep. 77:4-5, 10-15 at Page ID 7864, Doc. 307; see also id., 128:7-18 at PageID 7877 (Klopp testifying that he "provide[d] services for [the referral fee].").)
