Class Action for Illegal Kickbacks by Sham Mortgage Company in violation of RESPA §8 Fails

Plaintiffs in Minter v. Wells Fargo Bank N.A. (2014 WL 3827671) brought a class action suit against the bank and an associated real estate company (collectively, “defendants”) for various violations of RESPA Section 8 (12 U.S.C. §2607).  The Plaintiffs alleged the Defendants created a sham Mortgage Company, Prosperity Mortgage Co., as a joint venture to avoid the prohibition on illegal kickbacks. Plaintiffs asserted violations for RESPA §§(8)(a), 8(c), and 8(c)(4); that Prosperity was created for illegal kickbacks between the defendants, Prosperity was not a bona fide settlement provider, and that the Defendants were required to disclose the business arrangement.  The district court only certified a class of timely brought §8(c) and §8(c)(4) claims. During pretrial, the Plaintiffs moved to exclude any evidence or argument of no economic injury.  The district court granted the request, but allowed the defense counsel to ask questions regarding background information distinct from lack of economic harm.

At trial, defense counsel asked questions regarding lack of economic harm, remarked that no dispute existed as to referrals between the Defendants, and commented on opposing counsel’s pecuniary interest.  The jury verdict rejected all of the Plaintiffs’ claims.  The Plaintiffs then moved for a new trial under Fed. R. Civ. P. 59(a) and appealed its denial.  The appeal challenged the Rule 59(a) denial, admitting testimony of improper evidence, and refusing to strike or instruct the jury to disregard the pecuniary interest statement.

The motion for a new trial under Rule 59(a) actually sought the adjudication of the excluded §8(a) claim. However, §8(a) required proof of referrals, an issue the jury verdict denied under the §8(c) and §8(c)(4) claims.  The appeal argued, under Rule 59(a), either a judicial admission from the defense counsel removed the issue from the jury or the clear weight of the evidence contradicted the verdict.  The Court rejected the admission claim because the Plaintiffs failed to address it at trial.  The Plaintiffs’ second argument also failed. Because the Plaintiffs did not move for judgment as a matter of law prior to the Rule 59(a) motion, the scope of review was limited to no evidence supporting the verdict. Witness testimony supported the verdict and the Fourth Circuit affirmed the ruling.

The Court also rejected the remaining claims. The questioning regarding lack of economic harm was relevant in determining the allegations and any potential prejudice was mitigated through a jury instruction. Finally, the Court rejected the failure to strike or instruct to disregard claim; although improper, the isolated nature of the statement made it unlikely to influence the jury in reaching its verdict.

The Fourth Circuit affirmed the judgment.