RESPA: FEDERAL COURT CERTIFIES MARKETING AGREEMENT CLASS ACTION

The United States District Court for the District of Maryland, Northern Division certified a Real Estate Settlement Procedures Act “RESPA” class action lawsuit on Tuesday, Jan. 28, 2014 involving marketing agreements between a “Team” of real estate agents “and Lakeview Title Company, Inc. The Creig Northrop Team, PC (a/k/a The Northrop Team) is a team of independent contractor real estate agents who work for Long & Foster Real Estate, Inc.. The class action lawsuit arises out of an alleged scheme for a team of real estate agents to receive over half million dollars in illegal kickbacks from a title insurance company for referrals over a period of 13 years.

Patrick Baehr, et al., v. The Creig Northrop Team, P.C., et al. (Civil No: 1:2013cv00933). Judge William D. Quarles is the presiding judge in this case.

The allegations specifically state that the defendants “used a ‘sham employment arrangement and a sham marketing agreement’ ‘to generate unearned fees and kickbacks.'” The employment agreement allegation involves Carla Northrop who was a full-time employee of the Northrop Team but secretly received payments from Lakeview Title under an employment agreement, even though Ms. Northrop allegedly did not perform any services or actual work for Lakeview Title nor was she provided an office, telephone number, or email address showing she was working for Lakeview Title. The employment agreement was not disclosed to the plaintiffs in this case. These allegations if proven would likely violate 12 U.S.C. §2607 of RESPA which is the prohibition against kickbacks and unearned fees section.

The Marketing Agreement allegation states that Lakeview Title began funneling illegal kickbacks through a sham Marketing Agreement or Marketing Services Agreement with Creig Northrup and The Northrop Team. The Marketing Agreement stated that Creig Northop and The Northrop Team would designate Lakeview Title as their “exclusive settlement and title company” and would “provide mostly unspecified marketing services.” The Marketing Agreement it is alleged also contained language that prohibited the endorsement of other title companies. The marketing agreement was originally $6,000 a month for marketing services but according to the complaint Lakeview Title paid as much as $12,000 per month to The Northrop Team. The court states that there is “no record of ‘any real joint marketing services reasonably related to actual amounts paid by Lakeview Title. These allegations if proven true would also violate 12 USC §2607 of RESPA.

The court also stated that because the Plaintiffs did not discover their claim until March 16, 2013, after the statute of limitation had run, that the plaintiffs had sufficiently pled their entitlement to equitable tolling.

The certification of this RESPA class action lawsuit is significant for any company who has a Marketing Agreement with individual agents or Teams of agents. If you have a Marketing Agreement with real estate agents individually or with teams of real estate agents you should seek legal counsel immediately.