Pennsylvania Federal Court: Plaintiff's Allegations of Concealment of RESPA Claim Sufficient to Survive Statute of Limitations Dismissal
In Riddle v. Bank of America Corp., et al., 2013 WL 1482668 (E.D. Pa. Apr. 11, 2013), the federal district court for the Eastern District of Pennsylvania held plaintiffs' allegation that the defendants actively concealed a reinsurance kickback scheme was sufficient to equitably toll the running of RESPA's one-year statute of limitations and, as such, that plaintiffs' RESPA claim could survive dismissal.

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.

For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.

Posted in: Pennsylvania, RESPA
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