The plaintiffs filed a putative RESPA class action suit against Bank of America and various mortgage insurers claiming that the defendants engaged in an illegal scheme whereby Bank of America allegedly referred borrowers to private mortgage insurance providers in exchange for a kickback of the private mortgage insurance payment to Bank of America, while Bank of America did not actually assume any real risk in the transactions. The defendants moved to dismiss, arguing that the claims were barred by RESPA's one-year statute of limitations.
In opposing the motion to dismiss, the plaintiffs argued that the statute of limitations was due to be tolled under the doctrine of equitable tolling. The plaintiffs first had to prove that RESPA's statute of limitations was non-jurisdictional, such that equitable tolling could possibly apply. The defendants argued that the statute was jurisdictional because it was located in the section of the law that describes the jurisdiction of courts to hear certain RESPA actions and because the statute of limitations was "definite in scope."
Relying on Third Circuit precedent interpreting whether TILA's statute of limitations was jurisdictional, the court found Defendants' arguments unpersuasive. The court noted that RESPA is a remedial statute that should be construed in favor of the consumer, and that equitable tolling principles are read into all federal statutes of limitations absent express language by Congress. Accordingly, the court found that equitable tolling applied to RESPA.
Next, the plaintiffs had to prove that they pleaded sufficient factual allegations to show that the defendant actively misled the plaintiffs with respect to their claim. The plaintiffs alleged that "due to the complex, undisclosed and self-concealing nature of Defendants' scheme" the plaintiffs lacked the requisite expertise or information necessary to discover the true nature of the defendants' captive reinsurance arrangements. They claimed that they could only discover the underlying basis for their claims with the assistance of counsel, that they had contacted their lenders but were not given useful answers about the reinsurance programs, and that the defendants used form mortgage documents to affirmatively mislead class members.
The court found these allegations sufficient to defeat a motion to dismiss, stating, "Plaintiffs' allegations that Defendants dressed up an illegal scheme to appear as a legitimate transaction is sufficient to deny Defendants' motion to dismiss on the issue of equitable tolling." The court also found that the plaintiffs' allegation that they had "fully participated" in their loan transactions was sufficient to show the plaintiffs' due diligence. Accordingly, the court denied the motion to dismiss and granted the parties an opportunity to conduct limited discovery on the statute of limitations issue.
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PartnerMatt Mitchell is a partner in the firm’s financial services litigation practice group, where he defends financial institutions such as banks, mortgage lenders, credit card companies, auto finance companies and debt ...
PartnerAs a member of the Financial Services Litigation Practice Group, Rachel Friedman defends financial institutions from alleged violations of state and federal consumer protection laws at both the trial and appellate levels.
Rachel ...
