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Henson v. Fidelity National Financial Inc.

United States District Court, C.D. California

March 21, 2014

MELISSA HENSON and KEITH TURNER on behalf of themselves and others similarly situated, Plaintiffs,
v.
FIDELITY NATIONAL FINANCIAL INC., Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT FIDELITY NATIONAL FINANCIAL INC.'S MOTION TO DISMISS [19]

OTIS D. WRIGHT, II, District Judge.

I. INTRODUCTION

The Real Estate Settlement Procedures Act ("RESPA") prohibits kickbacks and splits of unearned fees in connection with referring real-estate settlement business involving a federally related mortgage loan. 12 U.S.C. § 2607. Plaintiffs Melissa Henson and Keith Turner contend that Defendant Fidelity National Financial violated RESPA when it received "marketing" fees from UPS, Federal Express, and OnTrac in exchange for referring overnight delivery business to the carriers via Fidelity's escrow subsidiaries.

To establish that her claims are timely, Henson attempts to rely on tolling under the Supreme Court's decision in American Pipe & Construction Co. v. Utah , 414 U.S. 538 (1974). But the Court finds that a former putative class member may not rely on American Pipe tolling for the period commencing after a trial court dismisses the previous putative class action. RESPA's one-year statute of limitations therefore bars Henson's claims. Since Plaintiffs have alleged that Fidelity performed actual services for its marketing fees, Turner also cannot establish any prohibited fee splitting as a matter of law under § 2607(b). The Court accordingly GRANTS IN PART and DENIES IN PART Fidelity's Motion to Dismiss.[1]

II. FACTUAL BACKGROUND

Fidelity is the controlling parent of various escrow subsidiaries. (Compl. ¶ 13.) These escrow subsidiaries use UPS, Federal Express, and OnTrac (the "Delivery Companies") to handle overnight deliveries in connection with processing and closing federally related mortgage loans. ( Id. ) The subsidiaries charge escrow customers for these delivery services during closing of real-estate transactions. ( Id. )

Plaintiffs allege that Fidelity had separate, written "master" agreements with each of the Delivery Companies by which Fidelity-through a subsidiary called EC Purchasing-accepted a split of the charges received by the carriers and kickbacks in exchange for referring delivery services to the companies. ( Id. ¶ 14; Mizes Decl. ¶ 11.) Fidelity characterizes these payments as "marketing" fees from the Delivery Companies, which it receives in relation to the volume of business that Fidelity and its escrow subsidiaries transact with the carriers. (Compl. ¶ 15; Mizes Decl. ¶ 12.) Fidelity's compliance department has repeatedly instructed its escrow subsidiaries to use the Delivery Companies for overnight delivery services. (Compl. ¶ 17.) But Plaintiffs contend that Fidelity exercises such control over the subsidiaries that they did not need "marketing" services to ensure that they complied with the master agreements. ( Id. ¶ 18.)

On February 15, 2012, Henson closed escrow on a house in Bakersfield, California. ( Id. ¶¶ 4, 22.) The purchase involved a federally related mortgage loan. ( Id. ¶ 22.) Chicago Title Company, a Fidelity subsidiary, handled escrow for the transaction. ( Id. ¶ 23.) Chicago Title's "Buyer's Final Closing Statement" included a $13.81 charge for "Overnight Delivery Fee, " which Henson paid. ( Id. )

On September 11, 2012, Turner refinanced his house in Los Angeles, California, with a federally related mortgage loan. ( Id. ¶ 24.) Lawyers Title, another Fidelity subsidiary, handled the escrow. ( Id. ) Lawyers Title's "Final Settlement Statement (HUD-1)" included a $19.98 charge for overnight deliveries through Federal Express and OnTrac.

Plaintiffs allege that the amount the escrow subsidiaries charged Henson and Turner for overnight deliveries exceeded the net amount actually received by the Delivery Companies for the services they rendered. ( Id. ¶ 25.)

Plaintiffs further contend that they had no reason to know of Fidelity's alleged kickbacks and fee splits, because Fidelity omitted the Delivery Companies' payments from the itemized closing statements. ( Id. ¶ 26.) The master agreements also contained confidentiality provisions and were filed under seal in a related case. ( Id. ¶ 27.)

On June 12, 2012, Penelope Bergman filed a putative class-action complaint against Fidelity in Los Angeles County Superior Court, alleging that Fidelity violated RESPA through overnight-delivery charges. Bergman v. Fidelity Nat'l Fin., Inc. , No. BC486460 (L.A. Cnty. Super. Ct. filed Jun. 12, 2012). It is undisputed that Henson and Turner were members of the putative class Bergman sought to represent. Fidelity thereafter removed the action to this Court. No. 2:12-cv-05994-ODW(RZx). On December 3, 2012, the Court granted Fidelity's converted summary-judgment motion, finding that Bergman's loan was primarily commercial in nature and therefore did not fall within RESPA's ambit. The Court accordingly entered judgment in favor of Fidelity. Bergman appeal. But on August 30, 2013, the Ninth Circuit Court of Appeals granted the parties' stipulation to dismiss the appeal.

On September 9, 2014, Henson and Turner filed this putative class action against Fidelity, alleging that Fidelity received kickbacks and fee splits in violation of RESPA. (ECF No. 1.) Fidelity subsequently moved to dismiss the Complaint for failure to state a claim. Plaintiffs timely opposed. That Motion is now before the Court for decision.

III. LEGAL STANDARD

A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable legal theory or insufficient facts pleaded to support an otherwise cognizable legal theory. Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1990). To survive a dismissal motion, a complaint need only satisfy the minimal notice pleading requirements of Rule 8(a)(2)-a short and plain statement of the claim. Porter v. Jones , 319 F.3d 483, 494 (9th Cir. 2003). The factual "allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007). That is, the complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009).

The determination whether a complaint satisfies the plausibility standard is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. A court is generally limited to the pleadings and must construe all "factual allegations set forth in the complaint... as true and... in the light most favorable" to the plaintiff. Lee v. City of L.A. , 250 F.3d 668, 688 (9th Cir. 2001). But a court need not blindly accept conclusory allegations, unwarranted deductions of fact, and unreasonable inferences. Sprewell v. Golden State Warriors , 266 F.3d 979, 988 (9th Cir. 2001).

IV. DISCUSSION

Fidelity argues that Henson may not rely on American Pipe tolling for the period after the Court dismissed Bergman's putative class action-and therefore RESPA's one-year statute of limitation bars Henson's claims. It also contends that Plaintiffs have failed to properly allege a kickback or fee split in violation in § 2607(b). The Court agrees that Henson's claims are time-barred and that Plaintiffs' fee-splitting allegation fails as a matter of law.

A. Statute of limitations

While Henson filed suit over one year after escrow closed on her home purchase, she contends that either American Pipe or equitable tolling applies, thus ...


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