Menichino v. Citibank, No. 2:12-cv-00058, 2017 U.S. Dist. LEXIS 86380 (W.D. Pa. Jun. 6, 2017).
A Pennsylvania federal court rejected a borrower group's request to amend its RESPA claims, and to add Racketeer Influenced and Corrupt Organizations Act (RICO) claims, in ongoing litigation against two mortgage lenders and their reinsurer. The claims revolved around allegations of illegal kickbacks paid by third-party insurers for nonexistent reinsurance services under a captive reinsurance program.
The timeline of the litigation was key to the result, as the underlying loans were obtained between 2005 and 2007, but the RESPA claims were not filed until 2012 and the RICO claims were not added to the suit until 2016.
In order to address RESPA's one-year statute of limitations, which runs from the time of the "triggering violation," the borrowers had previously argued that the lenders and reinsurer fraudulently concealed information, thereby justifying equitable tolling of the statute of limitations. After the court accepted the legal basis of this argument and allowed discovery to proceed, the Third Circuit issued an opinion in 2016, Cunningham v. M&T Bank Corp., 814 F.3d 156 (3rd Cir. 2016), which rejected a similar equitable tolling argument in a similar RESPA case. The borrowers sought to change their argument in the wake of this ruling, and argued that each mortgage payment constituted an independent violation of RESPA and reset the oneyear clock. The borrowers cited a 2015 CFPB advisory decision that endorsed this legal position. The court rejected this amendment as "futile" in light of the Third Circuit opinion, pointing out that the CFPB decision was only advisory, and was published months before the Third Circuit opinion.
The court also rejected the borrowers' RICO claims on the basis that they were "unduly delayed." The borrowers admitted that they were on notice of these claims as early as 2011, yet did not seek leave to file the RICO claims until 2016 four years after the RESPA claims were first filed. The court found no justification for the five-year delay, as no change in law and no recently discovered facts were alleged, and the borrowers had already amended their RESPA complaint twice without adding the RICO claims.