In Re Community Bank of Northern Virginia (PNC Bank) | 3rd Cir. COA - Class Action - decision addresses the issues of commonality, TILA/HOEPA, RESPA, standing, active misleading/fraudulent concealment, and equitable tolling

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In Re Community Bank of Northern Virginia (PNC Bank) | 3rd Cir. COA – Class Action – decision addresses the issues of commonality, TILA/HOEPA, RESPA, standing, active misleading/fraudulent concealment, and equitable tolling

In Re Community Bank of Northern Virginia (PNC Bank) | 3rd Cir. COA – Class Action – decision addresses the issues of commonality, TILA/HOEPA, RESPA, standing, active misleading/fraudulent concealment, and equitable tolling

H/T Alina

Some snippets:

We agree with that conclusion. Due diligence does not mean that borrowers must presume their bank is lying or dissembling and therefore that further investigation is needed. Reading the blizzard of paper that sweeps before them is ample diligence in itself. In short, a borrower ought to be able to rely on the documents provided by a financial institution. Indeed, RESPA and TILA/HOEPA were passed, in large part, because Congress recognized that the average borrower is incapable of detecting many unfair lending practices, including fraud. “[W]hile the law of fraud does not endorse a ‘hear no evil, see no evil approach,’ neither does it require that an aggrieved party have proceeded from the outset as though he were dealing with thieves.” Jones v. Childers, 18 F.3d 899, 907 (11th Cir.1994) (additional quotation marks omitted). “A plaintiff ? cannot be expected to exercise diligence unless there is some reason to awaken inquiry and direct diligence in the channel in which it would be successful. This is what is meant by reasonable diligence.” Sheet Metal Workers, Local 19 v. 2300 Grp., Inc., 949 F.2d 1274, 1282 (3d Cir.1991) (internal quotation marks omitted). The Complaint here does not allege any facts disclosed on the face of the HUD–1s or that were otherwise provided to the Plaintiffs that should have awakened inquiry and demanded some further diligence. We conclude, therefore, that the Plaintiffs’ allegation that the class fully participated in all aspects of the mortgage loan transactions by “reviewing their loan documentation” is sufficient to satisfy the reasonable diligence requirement for equitable tolling in this case. (App. at 307, ¶ 409.) Cf. White, 2014 WL 4063344, at *5–6. In addition, proving that class members did, in fact, fully participate in the loan process in that fashion does not cause the issue of equitable tolling to predominate over issues common to the whole class.

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First, it asserts that, to litigate the RESPA claims, the putative class will be required to demonstrate on a loan-by-loan basis that no services were provided in exchange for the alleged kickbacks. But the Complaint alleges that Equity Plus performed absolutely no services to earn the transferred (i.e., kicked-back) portion of the fees, which is at least plausible in light of the contractual arrangement between Equity Plus and CBNV.23 While that allegation places a potentially onerous evidentiary burden on the Plaintiffs, it also leads us to conclude that, on the present record and at this stage of the case, PNC’s arguments fail to show that the District Court abused its discretion.

Second, PNC asserts that “there are several different types of [fees] that Plaintiffs are complaining about, and not all putative class members paid every such fee.” (Opening Br. at 48.) PNC contends that, as a result, the fact-finder will be required to determine what fees were assessed to each individual class member and whether Equity Plus performed services in exchange for each fee, and that such individual determinations would predominate in the litigation. That argument is also unpersuasive because, again, Equity Plus—the recipient of the settlement fees at issue in this case—allegedly performed no mortgage broker services in exchange for the fees and was contractually precluded from providing any services.

PNC’s third and fourth arguments can be addressed simultaneously. The third argument is that any claims premised on alleged violations of the affiliated business arrangement (“ABA”) disclosure requirements of RESPA would require loan-by-loan analysis of the ABA disclosures.24 The fourth argument is that any claims premised on CBNV’s alleged practice of charging “discount fees” without providing a discount interest rate in exchange would require an examination of each individual loan to see whether the borrower was charged a discount fee, and if so, whether the borrower obtained a discount or some other benefit as consideration for the fee. We need not address the merits of either of those arguments, however, because the alleged violations of the ABA disclosure requirements and the alleged discount fee practice are not essential to the Plaintiffs’ RESPA claims. The elements of the Plaintiffs’ RESPA claims that are “essential”—namely violations of the anti-kickback and unearned fee provisions of RESPA—can potentially be proven with common evidence. Hayes, 725 F.3d at 359 (“[T]he predominance requirement focuses on whether essential elements of the class’s claims can be proven at trial with common, as opposed to individualized, evidence.”).

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One Response to “In Re Community Bank of Northern Virginia (PNC Bank) | 3rd Cir. COA – Class Action – decision addresses the issues of commonality, TILA/HOEPA, RESPA, standing, active misleading/fraudulent concealment, and equitable tolling”

  1. Stupendous Man - Defender of Liberty, Foe of Tyranny says:

    I’m not sure what any of that means, but it sounds pretty bad.

    Thank you, Alina. I think.

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