PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 15-1412
_____________
JUDITH CUNNINGHAM;
FREDERICK D. DEIMLER, III;
CAROL VANOVER, individually and on behalf of all others
similarly situated,
Appellants
v.
M&T BANK CORP.; M&T BANK;
M&T MORTGAGE REINSURANCE COMPANY, INC.;
MORTGAGE GUARANTY INSURANCE CORP.;
GENWORTH MORTGAGE INSURANCE
CORPORATION
________________
Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civil Action No. 1-12-cv-01238)
District Judge: Honorable Christopher C. Conner
________________
Submitted Under Third Circuit LAR 34.1(a)
January 12, 2016
Before: McKEE, Chief Judge, AMBRO,
and SCIRICA, Circuit Judges
(Opinion filed February 19, 2016)
Edward W. Ciolko, Esquire
Terence S. Ziegler, Esquire
Donna S. Moffa, Esquire
Natalie Lesser, Esquire
Kessler Topaz Meltzer & Check
280 King of Prussia Road
Radnor, PA 19087
Counsel for Appellants
David J. Bird, Esquire
Reed Smith
225 Fifth Avenue, Suite 1200
Pittsburgh, PA 15222
Andrew J. Soven, Esquire
Reed Smith
1717 Arch Street
Three Logan Square, Suite 3100
Philadelphia, PA 19103
Counsel for Appellees
________________
OPINION OF THE COURT
________________
2
AMBRO, Circuit Judge
Judith Cunningham, Frederick Deimler III, and Carol
Vanover (collectively, “Plaintiffs”) claim to represent a
nationwide class of homeowners who were victims of a
captive reinsurance scheme perpetrated by M&T Bank
Corporation, M&T Bank, and M&T Mortgage Reinsurance
Company (collectively, “M&T”). Plaintiffs filed this lawsuit
several years after the applicable statute of limitations had
expired. After allowing discovery related to the timeliness of
Plaintiffs’ claims, the District Court granted summary
judgment for M&T. As the Court explained, Plaintiffs’
claims were untimely and not subject to equitable tolling.
Because we agree that equitable tolling does not apply to
these claims, we affirm.
I.
Plaintiffs obtained residential mortgage loans from
M&T Bank to finance the purchase of their homes. When a
borrower seeks a mortgage loan that exceeds 80% of the
value of the residence, he or she must ordinarily agree to pay
for insurance to protect the lender from the risk of default.
Private mortgage insurance thus permits lenders such as
M&T Bank to extend credit at lower interest rates and to
borrowers who might otherwise not be able to get a mortgage
loan. Each Plaintiff fell into this category and had to buy
insurance as a condition of his or her mortgage. Each paid
premiums to a private mortgage insurer and, in case of
default, M&T Bank would be the beneficiary of the insurance
agreement. As is customary in the industry, M&T Bank
selected the insurers with whom the plaintiffs would contract.
Companies offering private mortgage insurance will
often contract with others for “reinsurance” of the risk they
3
hold. Under a reinsurance agreement, the reinsurance
company assumes a portion of the risk associated with default
in exchange for a percentage of the mortgage insurance
premiums paid by the borrower. Reinsurance thus allows the
insurer to manage its own risk and offer greater amounts of
insurance at lower premiums. Many mortgage lenders
operate their own “captive” companies that reinsure
mortgages the lenders originated. In this case, M&T Bank
referred Plaintiffs to private mortgage insurers who, in turn,
reinsured the insurance policy with M&T Mortgage
Reinsurance Company—M&T Bank’s captive reinsurer.
Beginning in late 2011, counsel sent letters to
Plaintiffs advising that they were investigating claims
concerning M&T Bank’s captive mortgage reinsurance.
Plaintiffs agreed to be part of a lawsuit against M&T and filed
a putative class action complaint alleging violations of the
Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C.
§ 2607, and unjust enrichment. 1
In the complaint, Plaintiffs claimed to represent a
nationwide class of persons who obtained residential
mortgage loans from M&T Bank that were reinsured by M&T
Mortgage Reinsurance Company. They alleged that M&T
Bank and its reinsurer colluded with private mortgage
insurers, referring customers to the private mortgage insurers
and receiving in return reinsurance agreements that required
M&T Mortgage Reinsurance to take on little or no actual risk.
1
Plaintiffs also named Mortgage Guaranty Insurance
Corporation and Genworth Mortgage Insurance Corporation
as defendants. After the District Court granted summary
judgment for all defendants, Mortgage Guaranty and
Genworth settled with Plaintiffs and they are not participating
in this appeal.
4
This scheme allegedly violated RESPA’s anti-kickback and
anti-fee-splitting provisions. See 12 U.S.C. § 2607(a)–(b).
M&T moved to dismiss under Federal Rule of Civil
Procedure 12(b)(6), arguing that RESPA’s one-year statute of
limitations barred the claims of Plaintiffs and they were not
entitled to equitable tolling of the limitations period. The
District Court denied the motion, declining to resolve the
fact-bound issue of equitable tolling until the parties could
take discovery limited to that issue. Cunningham v. M&T
Bank Corp., No. 12-cv-1238, 2013 WL 5876337, at *7 (M.D.
Pa. Oct. 30, 2013); see also In re Cmty. Bank of N. Virginia,
622 F.3d 275, 301–02 (3d Cir. 2010) (“Community Bank I”)
(noting that the issue of equitable tolling is “not generally
amenable to resolution on a Rule 12(b)(6) motion”).
After discovery, M&T moved for summary judgment
and the Court granted the motion. With the benefit of a more
detailed factual record, it held that the claims were indeed
time barred and that Plaintiffs could not equitably toll the
limitations period. Cunningham v. M&T Bank Corp., No. 12-
cv-1238, 2015 WL 539761, at *6–8 (M.D. Pa. Feb. 10, 2015).
This was so because none of them had exercised reasonable
diligence in investigating any potential claims under RESPA.
Plaintiffs appeal that decision. 2
2
Plaintiffs’ counsel also filed nearly a dozen identical
lawsuits in this Circuit against mortgage lenders, private
mortgage insurance companies, and mortgage reinsurance
companies. Three cases (including this one) have proceeded
to summary judgment, and in each the District Court has
entered summary judgment for the defendants and concluded
that the claims under RESPA were time barred and not
subject to equitable tolling. Cunningham, 2015 WL 539761,
5
II.
The District Court had jurisdiction under 28 U.S.C.
§ 1331. We have jurisdiction per 28 U.S.C. § 1291. Our
review of the District Court’s grant of summary judgment is
plenary. Seamans v. Temple Univ., 744 F.3d 853, 859 (3d
Cir. 2014). A moving party is entitled to summary judgment
only if “there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). A dispute about a material fact is “genuine”
only “if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party,” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), as to whom all
reasonable inferences must be drawn, Prowel v. Wise Bus.
Forms, Inc., 579 F.3d 285, 286 (3d Cir. 2009).
at *6–8; Hill v. Flagstar Bank, No. 12-cv-2770, 2014 WL
2892397, at *7 (E.D. Pa. June 26, 2014); Riddle v. Bank of
Am. Corp., No. 12-cv-1740, 2013 WL 6061363, at *9 (E.D.
Pa. Nov. 18, 2013). Last year, we affirmed the grant of
summary judgment in one of those three cases in a non-
precedential opinion. Riddle v. Bank of America Corp., 558
Fed. App’x 127, 130 (3d Cir. 2014). Finally, eight cases with
substantially identical claims remain pending and have been
stayed awaiting our decision in this appeal. Ba v. HSBC USA,
Inc., No. 13-cv-0072 (E.D. Pa.); Barlee v. First Horizon Nat’l
Corp., No. 12-cv-3045 (E.D. Pa.); Blake v. JPMorgan Chase
Bank, N.A., No. 13-cv-6433 (E.D. Pa.); Hall v. Wachovia
Bank, N.A., No. 13-cv-5994 (E.D. Pa.); Manners v. Fifth
Third Bank, No. 12-cv-0442 (W.D. Pa.); Menichino v.
Citibank, N.A., No. 12-cv-0058 (W.D. Pa.); Thurmond v.
SunTrust Bank, No. 11-cv-1352 (E.D. Pa.); White v. PNC Fin.
Servs. Grp., Inc., No. 11-cv-7928 (E.D. Pa.).
6
III.
Plaintiffs’ claims under RESPA have a one-year
statute of limitations. 12 U.S.C. § 2614. It runs “from the
date of the occurrence of the violation,” id., which begins at
the closing of the loan, Community Bank I, 622 F.3d at 281.
Cunningham, Deimler, and Vanover closed on their home
mortgage loans in May 2007, June 2008, and October 2007,
respectively. They filed suit in June 2012, several years after
the statute of limitations had expired.
Plaintiffs nonetheless argue that their RESPA claims
are not time barred because they have satisfied the
requirements to equitably toll the statute of limitations.
Equitable tolling “can rescue a claim otherwise barred as
untimely by a statute of limitations when a plaintiff has been
prevented from filing in a timely manner due to sufficiently
inequitable circumstances.” Santos ex rel. Beato v. United
States, 559 F.3d 189, 197 (3d Cir. 2009). We have previously
held that the statute of limitations in RESPA is not
jurisdictional and is thus eligible for equitable-tolling
consideration. In re Cmty. Bank of N. Virginia Mortgage
Lending Practices Litig., 795 F.3d 380, 400 n.20 (3d Cir.
2015) (“Community Bank II”). But “[e]quitable tolling is an
extraordinary remedy which should be extended only
sparingly.” Hedges v. United States, 404 F.3d 744, 751 (3d
Cir. 2005); see also Wallace v. Kato, 549 U.S. 384, 396
(2007) (“Equitable tolling is a rare remedy to be applied in
unusual circumstances, not a cure-all for an entirely common
state of affairs.”).
Plaintiffs’ basis for tolling, also known as fraudulent
concealment, requires them to show three elements: “(1) that
the defendant actively misled the plaintiff; (2) which
prevented the plaintiff from recognizing the validity of her
claim within the limitations period; and (3) where the
7
plaintiff’s ignorance is not attributable to her lack of
reasonable due diligence in attempting to uncover the relevant
facts.” Cetel v. Kirwan Fin. Grp., Inc., 460 F.3d 494, 509 (3d
Cir. 2006). “To demonstrate reasonable diligence [which
means here, as noted below, to investigate possible claims], a
plaintiff must ‘establish[] that he pursued the cause of his
injury with those qualities of attention, knowledge,
intelligence and judgment which society requires of its
members for the protection of their own interests and the
interests of others.’” Mest v. Cabot Corp, 449 F.3d 502, 511
(3d Cir. 2006) (quoting Cochran v. GAF Corp., 666 A.2d
245, 250 (Pa. 1995)).
Plaintiffs argue that M&T Bank actively misled them
regarding the nature and existence of their claims. But before
Plaintiffs closed on their respective loans as mortgagors, each
person received a disclosure form separate from the mortgage
explaining reinsurance in plain language, stating that
reinsurance could be with a company affiliated with the
lender, that the reinsurance company would receive a
percentage of the mortgage, and that the mortgagor had the
opportunity to opt out of captive reinsurance. It read:
Your lender or a subsequent holder of your loan
(the “Lender”) may[,] directly or through an
affiliated company (a “Reinsurance Company”),
enter into a reinsurance agreement with the
primary insurance company that will be
providing the mortgage insurance covering your
loan.
Under a reinsurance agreement, the Reinsurance
Company may assume a portion of the risk
associated with such Mortgage Insurance. In
exchange for its assumption of such risk, the
Reinsurance Company receives a percentage of
8
the mortgage insurance premium paid to obtain
the mortgage insurance covering your loan.
The reinsurance agreement does not increase
the amount you have to pay for mortgage
insurance or the length of time you must
maintain the insurance.
If you do not want the mortgage insurance on
your loan to be reinsured with Lender’s
Reinsurance Company you may check the “opt
out” box below when you sign and
acknowledge receipt of this disclosure. Your
election to opt in or out will not affect our credit
decision regarding your loan.
Each Plaintiff signed and dated the disclosure and none
elected to opt out from reinsurance with an affiliate of M&T
Bank. The mortgage documents also disclosed the possibility
of captive reinsurance on a page of the mortgage each person
initialed. Plaintiffs confirmed during depositions that they
were aware at the time of closing of the possibility of captive
reinsurance, though none recalled asking any questions about
the reinsurance agreement.
After the closing, Plaintiffs took no steps to investigate
whether M&T Bank’s captive reinsurance program might
violate state or federal law. They did not, for example, ask
their mortgage insurer if their particular insurance policy had
been reinsured and, if so, with whom. They did not seek the
advice of an attorney, research captive reinsurance, request
documents related to their mortgage insurance, or take any
steps to discover if they had a claim under RESPA. 3
3
If Plaintiffs had taken some steps to investigate captive
reinsurance, they would have found breadcrumbs leading
them toward a potential RESPA claim. Captive reinsurance
9
Plaintiffs claim simply that it was not until late 2011 or early
2012, when counsel asked them to join a lawsuit, that they
became aware of the basis for a possible claim under RESPA.
On these undisputed facts, we conclude that Plaintiffs
have failed to show due diligence and cannot use equitable
tolling to rescue otherwise time-barred claims. At the
closing, Plaintiffs were made aware that the mortgage
insurance on their home might be reinsured with an affiliate
of M&T Bank and, at that moment, they had all the facts
necessary to develop their claims under RESPA. Yet they
failed to take any steps to investigate during the
approximately four-year period between the time of the
closing and the time that they were approached by counsel.
This inaction was not reasonable diligence.
Plaintiffs advance several arguments against summary
judgment, but none persuade us that the District Court got it
wrong. They first argue that they were, in fact, diligent.
According to their theory of diligence, M&T Bank’s
misrepresentations in the lengthy mortgage documents did not
give them any reason to investigate. And in the absence of
any “storm warnings” that would put them on notice of the
arrangements date back to the late 1990s. Lawsuits
challenging the arrangements as vehicles for illegal kickbacks
soon followed. See, e.g., Baynham v. PMI Mortg. Ins. Co.,
No. 99-cv-241 (S.D. Ga. filed Dec. 17, 1999). And around
the time Plaintiffs closed on their mortgage loans with M&T
Bank, their current counsel had brought several nearly
identical lawsuits against lenders and captive reinsurance
companies in this area. See, e.g., Alston v. Countrywide Fin.
Corp., 585 F.3d 753 (3d Cir. 2009) (complaint filed in August
2007).
10
need for follow up, Plaintiffs assert that we can excuse their
inaction until they were put on notice by a letter from a
lawyer. We disagree.
For one, most of the cases that Plaintiffs cite in support
of this argument actually address the discovery rule, which
relates to claim accrual (when the limitations period begins to
run) rather than equitable tolling (the events that can stop the
clock on a limitations period once it has begun to run). Under
the discovery rule, a cause of action does not accrue until the
plaintiff discovers or in the exercise of reasonable diligence
should have discovered the basis for her claim against the
defendant. See DeBenedictis v. Merrill Lynch & Co., 492
F.3d 209, 216 (3d Cir. 2007); Benak ex rel. All. Premier
Growth Fund v. All. Capital Mgmt. L.P., 435 F.3d 396, 400
(3d Cir. 2006); In re NAHC, Inc. Sec. Litig., 306 F.3d 1314,
1325 (3d Cir. 2002). In deciding when a diligent plaintiff
would have discovered the basis of a claim, courts look for
“storm warnings” that would put the plaintiff on notice of her
injury. However, the discovery rule is not apt for RESPA
claims because Congress specifically provided that the
limitations period begins to run on “the date of the occurrence
of the violation.” 12 U.S.C. § 2614; see also Macauley v.
Estate of Nicholas, 7 F. Supp. 3d 468, 487 n.16 (E.D. Pa.
2014) (“[C]ourts across the country have refused to apply the
discovery rule to RESPA claims.”). It is thus irrelevant for
purposes of the statute of limitations in RESPA when a
reasonable plaintiff would have discovered her claim.
Setting aside that distinction, however, what Plaintiffs
ask us to do is to ignore the plain words of M&T Bank’s
disclosure. Based on the disclosure, they were on notice that
reinsurance for their mortgage loans was reasonably likely
through an affiliate of M&T Bank. Armed with the facts
necessary to allege their claim under RESPA, it is undisputed
that they took no steps to investigate whether the reinsurance
11
arrangement was fully valid. See Oshiver v. Levin, Fishbein,
Sedran & Berman, 38 F.3d 1380, 1390 (3d Cir. 1994)
(“Equitable tolling . . . keys on a plaintiff’s cognizance, or
imputed cognizance, of the facts supporting the plaintiff’s
cause of action.”). Even if M&T Bank’s disclosure did not
give Plaintiffs warning of the need to investigate, the onus is
still on Plaintiffs in these circumstances to exercise some
degree of diligence in order to receive the benefit of equitable
tolling.
Plaintiffs’ reliance on our decision in Community Bank
II is also misplaced. There, a class action brought on behalf
of homeowners alleged that a residential mortgage loan
business and two banks were involved in a predatory lending
scheme in violation of RESPA. 795 F.3d at 385. Though
some of the homeowners’ claims were barred by RESPA’s
statute of limitations, class counsel argued that fraudulent
concealment would toll the limitations period. On a motion
to certify a class, defendants argued the issue of equitable
tolling would be too individualized and too central to the
litigation for certification under Rule 23(b)(3). See Fed. R.
Civ. P. 23(b)(3) (class action may be maintained if, among
other things, “the court finds that the questions of law or fact
common to class members predominate over any questions
affecting only individual members”).
We rejected the argument, holding that commonality
was satisfied despite the need for some class members to rely
on fraudulent concealment. Regarding the due diligence
element of fraudulent concealment, we noted that “when a
wrongful scheme is perpetrated through the use of common
documentation, such as the documents employed to
memorialize each putative class member’s mortgage loan, full
participation in the loan process is alone sufficient to establish
the due diligence element.” Community Bank II, 795 F.3d at
404. Plaintiffs focus on this language to argue that their
12
participation in the loan closing was sufficient to establish
diligence. The decision made clear, however, that its
discussion of fraudulent concealment was limited to the
commonality question under Rule 23. It explicitly did not
“not address whether the class members are actually entitled
to equitable tolling on the merits,” id. at 404–5; thus it does
not control our analysis of the very fact-specific doctrine of
fraudulent concealment in this case.
Finally, Plaintiffs argue that the District Court could
not have properly resolved the question of equitable tolling by
considering the lack of diligence without also considering
M&T Bank’s misrepresentations. In effect, Plaintiffs argue
that courts must analyze all the elements of fraudulent
concealment before dismissing a time-barred claim. This is
incorrect. To repeat, there are three elements for fraudulent
concealment: “(1) that the defendant actively misled the
plaintiff; (2) which prevented the plaintiff from recognizing
the validity of her claim within the limitations period; and (3)
where the plaintiff’s ignorance is not attributable to her lack
of reasonable due diligence in attempting to uncover the
relevant facts.” Cetel, 460 F.3d at 509. If a plaintiff with an
otherwise time-barred claim has not presented sufficient
evidence of even one of the three elements, summary
judgment may be entered for the defendant. 4
4
The District Court also entered summary judgment against
the Plaintiffs on their unjust enrichment claims. On appeal,
they make no serious effort to challenge that decision. They
simply allege that the District Court erred in dismissing the
unjust enrichment claims for the same reasons it erred in
dismissing the RESPA claims. They provide no authority for
this argument and, in these circumstances, have waived it for
13
* * * * *
Statutes of limitations are “designed to promote justice
by preventing surprises through the revival of claims that
have been allowed to slumber until evidence has been lost,
memories have faded, and witnesses have disappeared.”
Order of R.R. Telegraphers v. Ry. Express Agency, 321 U.S.
342, 348–49 (1944). We will sometimes make an exception
to the rule where its rigid application would be unfair because
a defendant concealed its wrong and prevented a diligent
plaintiff from bringing her claim within the limitations period.
This not such a case. Indeed, accepting Plaintiffs’ theory in
this case—toll indefinitely the limitations period for claims
under RESPA until a lawyer can find the right plaintiff to join
a lawsuit and notify other putative plaintiffs—would
effectively write the statute of limitations out of RESPA. We
thus affirm the decision of the District Court granting
summary judgment for M&T.
purposes of appeal. See Kost v. Kozakiewicz, 1 F.3d 176, 182
(3d Cir. 1993).
14