Summary
allowing a consumer to bring claims against defendant pursuant to both RESPA and RICO
Summary of this case from Empire Title Servs., Inc. v. Fifth Third Mortg. Co.Opinion
Civil No. WMN-03-3106.
March 3, 2009.
MEMORANDUM ORDER
Pending before the Court are two motions: (1) a Motion for Reconsideration and for Leave to File Fifth Amended Complaint filed by Plaintiff Darzel Robinson on behalf of herself and all Class members, Paper No. 120; and (2) a Motion for Leave to File Surreply filed by Defendants Fountainhead Title Group Corporation (Fountainhead), Assurance Title, LLC (Assurance), Long Foster Real Estate, Inc. (Long Foster), and Mid-States Title Insurance Agency, Inc. (Mid-States). Paper No. 125. The motions are fully briefed and ripe for decision. Upon a review of the pleadings and the applicable case law, the Court determines that no hearing is necessary (Local Rule 105.6) and that Plaintiffs' motion will be granted and Defendants' motion will be denied.
Many of the "new arguments" allegedly raised by Plaintiff in her Reply brief actually were raised in her opening brief. The remainder were raised in response to arguments raised by Defendants in their opposition. The Court is not persuaded that additional briefing would be helpful at this time.
The details of Plaintiffs' allegations have been outlined in prior opinions of this Court and will not be repeated here. See Paper Nos. 51 107. Briefly stated, however, Named Plaintiff, Darzel Robinson, initiated this putative class action alleging that she and a class of similarly situated homeowners were charged fees for title work through a sham entity as part of an illegal kickback scheme in which all Defendants participated. Since the case's inception, four amended complaints have been filed, the most recent of which brought six new charges against Defendants under the Racketeer Influenced and Corrupt Organization Act (RICO), pursuant to 18 U.S.C. § 1962(a), (c), and (d). In March 2008, this Court dismissed all six of these charges. Robinson v. Fountainhead Title Group Corp. (Robinson II), 252 F.R.D. 275 (D. Md. 2008). Robinson now asks this Court to reconsider that dismissal, grant Plaintiffs leave to file a Fifth Amended Complaint, and grant Plaintiff's motion for certification of the class, Paper No. 87, with respect to the RICO counts.
This Court has already granted class certification with respect to the claims brought under the Real Estate and Settlement Procedures Act, 12 U.S.C. § 2607 (Count I).
An order dismissing less than the entire complaint is an interlocutory order and may be reconsidered and "revised at any time before the entry of a judgment adjudicating all the claims. . . ." Fed.R.Civ.P. 54(b); Am. Canoe Ass'n v. Murpy Farms, Inc., 326 F.3d 505, 514-15 (4th Cir. 2003). "Motions for reconsideration of interlocutory orders are not subject to the strict standards applicable to motions for reconsideration of a final judgment," but instead, are "committed to the discretion of the district court." Id. Factors indicating that reconsideration is warranted include: (1) evidence not previously available becomes available; (2) an intervening change in the controlling law; (3) a clear error of law or manifest injustice; (4) mistake, inadvertence, surprise or excusable neglect; or (5) any other reason justifying relief from the operation of the judgment. Superior Bank v. Tandem Nat'l Mortg., 197 F. Supp. 2d 298, 331-32 (D. Md. 2000).
In this case, Plaintiffs argue that their motion for reconsideration and to file a Fifth Amended Complaint should be granted because the Supreme Court's decision in Bridge v. Phoenix Bond Indemnity Co., 128 S. Ct. 2131 (2008), issued on June 9, 2008, changed the controlling case law in a number of ways. Plaintiffs' first allegation is that Bridge changed Fourth Circuit precedent when it held that "a showing of first party reliance is not required" when pleading a RICO claim predicated on mail fraud. Pls.' Mot. at 7 (citing Bridge, 128 S. Ct. at 2134). This Court agrees with Defendants, however, that the Fourth Circuit, in Mid Atlantic Telecom, Inc. v. Long Distance Services, Inc., 18 F.3d 260 (4th Cir. 1994), had already determined that first-party reliance is not a necessary element of a RICO claim predicated on mail fraud. In that case, the Fourth Circuit held that a third-party reliance theory, i.e., that a civil RICO plaintiff be injured "by reason of" a pattern of racketeering activity, was sufficient to satisfy the proximate cause requirement in RICO assuming the plaintiff could prove he or she was a target of, and injured by, the activity. Id. at 263.
Plaintiffs also assert that Bridge stands for the proposition that one need not plead reliance at all when pleading RICO claims predicated on mail fraud. The Supreme Court, however, made clear that a plaintiff would have a very hard time pleading proximate cause, which is required by the "by reason of" language in the RICO statute, without alleging some degree of reliance. Bridge, 128 S. Ct. at 2144. In its March 2008 order, this Court based its dismissal of Robinson's RICO claims, in part, on the timeline of alleged events. This Court found that "the allegedly fraudulent scheme [perpetrated by Defendants] already was consummated by the time the title policies and attached correspondence were mailed out." Robinson II, 252 F.R.D. at 282. Accordingly, this Court concluded that "to the extent that Robinson believed, as a result of the mailing, that the fees charged to her by Assurance were legitimate, this `reliance' did not further the fraud-which already was complete. . . ." Id. at 282-83. Put another way, this Court found that Robinson was not directly injured by the allegedly fraudulent mailings and dismissed her RICO claims. Such a holding is in line with the Supreme Court's statement in Bridge that "the complete absence of reliance may prevent the plaintiff from establishing proximate cause." 128 S. Ct. at 2144.
When a court evaluates a RICO claim for proximate cause, the central question it must ask is whether the alleged violation led directly to the plaintiff's injury. Ideal Steel Supply Corp. v. Anza, 373 F.3d 251, 260-61 (2d Cir. 2004), rev'd and vacated in part on other grounds, 547 U.S. 451 (2006).
RICO's private right of action is contained in 18 U.S.C. § 1964(c), which provides in relevant part that "[a]ny person injured in his business or property by reason of a violation of 1962 of this chapter may sue. . . ."
Although this Court does not believe that Bridge changed the Fourth Circuit precedent in terms of reliance pleading requirements, this Court does find reason to grant Plaintiffs' motion for reconsideration. As Plaintiffs note, the Bridge opinion makes clear that a RICO claim predicated on mail fraud is based on the fraudulent scheme rather than on a particular fraudulent mailing. More specifically, the Supreme Court noted with respect to the mail fraud based RICO claims that "[t]he gravamen of the offense is the scheme to defraud, and any mailing that is incident to an essential part of the scheme satisfies the mailing element." Id. at 2138. Based on this clarification, Defendants' argument that Plaintiffs' Fifth Amended Claim fails to allege any specific misrepresentations within a particular mailing is irrelevant.
Given this Court's previous ruling regarding the timing of the predicate act mailings, the Supreme Court's findings in Bridge with regard to timing are of particular importance. In Bridge, the predicate act mailings directed to non-parties took placeafter the fraudulent scheme was implemented and even after the injury occurred, but the Supreme Court still found them sufficient to satisfy the mailing predicate act requirement of a RICO claim based on mail fraud. In this respect, under Bridge, Robinson's allegation that she and her lender each received a piece of correspondence and a copy of a title policy through the mail and in furtherance of the RICO scheme is sufficient in and of itself to allege a pattern of racketeering activity completed by mail fraud even though the mailings were sent to Robinson and her lender after the alleged injury took place.
Moreover, Plaintiffs' Fifth Amended Complaint adds allegations of other mailings and wires used by Defendants in: (1) setting up the enterprise (Assurance); (2) procuring title insurance producer licenses; and (c) attempting to secure a title insurance agency settlement. With respect to these new allegations, Defendants again assert that they are "deficient on their face, because not one of them alleges any actual misrepresentation or fraud." Opp'n at 10. As noted earlier, however, Bridge clarifies that no such allegations are necessary and the fact that Plaintiffs allege that these mailings were in furtherance of the scheme to defraud is sufficient to plead a RICO claim based on mail fraud.
Under Fed.R.Civ.P. 15, once a responsive pleading is served, "a party may amend the party's pleading only by leave of court or by written consent of the adverse party, and leave shall be freely given when justice so requires." Courts generally interpret Rule 15 to allow amendments so long as: (1) the party seeking the amendment has not unduly delayed; (2) when that party is not acting in bad faith or with a dilatory motive; (3) when the opposing party will not be unduly prejudiced by the amendment; and (4) when the amendment is not futile. Forman v. Davis, 371 U.S. 178, 182 (1962). With the new directives handed down by the Supreme Court in Bridge, this Court finds that all four factors are satisfied and will thus grant Plaintiffs leave to file their Fifth Amended Complaint.
Defendants argue that Plaintiffs have unduly delayed in seeking to amend. Opp'n at 7-9. The Court, however, need not even address this issue because Defendants have failed to show any prejudice caused by this alleged undue delay. See Deasy v. Hill, 833 F.2d 38, 41 (4th Cir. 1987) ("[d]elay alone, without prejudice, does not support the denial of a motion for leave to amend.") (citingSweetheart Plastics, Inc. v. Detroit Forming, Inc., 743 F.2d 1039, 1044 (4th Cir. 1984)).
Finally, this Court addresses Plaintiffs' request that their motion for certification of the RICO class be granted. Defendants, in arguing against such a decision, refer to their prior briefing on this issue. In this prior briefing, Defendants argued that neither Robinson nor the Class could prove first-party reliance on a class-wide basis and thus, individualized issues would predominate. Paper No. 90 at 56-63 (Defs.' Opp'n to Pl.'s Mot. to Certify Class). Given that Defendants assert no new arguments and that the Supreme Court specifically ruled in Bridge that first-party reliance is not necessary, this Court believes that class certification on the RICO claims should be granted. Neither party, however, has given this matter much attention in the pleadings and thus the Court will allow further briefing directed at this narrow issue. Defendants will have until March 12, 2009, to file further briefing in opposition to Plaintiffs' motion for certification of the RICO class and Plaintiffs will have until March 26, 2009, to file a reply.
Accordingly, IT IS this 3rd day of March, 2009, by the United States District Court for the District of Maryland ORDERED:
1. That Plaintiff's Motion for Reconsideration and to File Fifth Amended Complaint, Paper No. 120, is GRANTED;
2. That Defendants' Motion For Leave to File Surreply, Paper No. 125, is DENIED;
3. Defendants have until March 12, 2009, to file further briefing in opposition of certification of the RICO class;
4. Plaintiffs have until March 26, 2009, to file a reply to any briefing Defendants file in opposition of certification of the RICO class; and
5. That the Clerk of the Court shall transmit a copy of this Memorandum and Order to all counsel of record.