What is now a certified, federal class-action lawsuit alleging a kickback scheme involving one of Maryland’s largest real estate groups began with a discovery request in Howard County Circuit Court.
Lawyers in the Howard County suit against The Creig Northrop Team P.C. issued a subpoena for documents from Lakeview Title Company Inc. The Northrop Team and its parent company responded with a request for a protective order because some documents mentioned compensation to their employees — including Carla Northrop, who is also vice president of her husband’s firm.
The plaintiffs lost the Howard County mortgage-fraud suit — it is now on appeal — but the disclosure led to the separate action brought by the same lawyers in U.S. District Court in Baltimore.
The federal lawsuit alleges the Northrop Team used Carla Northrop’s position at Columbia-based Lakeview, as well as a subsequent “sham” marketing agreement, to disguise kickbacks of more than $500,000 Lakewood paid Northrop for funneling title work to it.
U.S. District Judge William D. Quarles Jr. last week granted class certification to the plaintiffs, who are seeking more than $11 million in damages under the federal Real Estate Settlement Procedures Act. The law prohibits giving or accepting fees or gifts for referrals of settlement services.
Quarles limited the prospective class to home buyers who used the Northrop Team and Lakeview since Jan. 1, 2008. The plaintiffs’ lawyers had asked for the class to go back to 2000, while the defense said a one-year statute of limitations applied.
G. Russell Donaldson, one of the plaintiffs’ lawyers, estimated the class size would be between 1,500 and 2,200 plaintiffs.
The class certification “radically changes the case because now we represent all of the Northrop Team’s former clients who settled [their real estate transactions through] Lakeview,” said Gregory T. Lawrence, of Conti Fenn & Lawrence LLC in Baltimore, another lawyer for the plaintiffs.
Timothy G. Casey, a lawyer for the Northrop Team, said he “respectfully disagreed” with Quarles’ decision to allow the case to proceed.
He noted his client’s request to dismiss the Howard County class-action lawsuit was initially denied, as in the federal case, but then granted following discovery. That case is now before the Court of Special Appeals.
“There is a lot of water yet to go over the dam,” said Casey, a Rockville solo practitioner.
Andrew C. White of Silverman, Thompson, Slutkin & White LLC in Baltimore, one of Lakeview’s lawyers, did not return messages seeking comment Friday.
The Northrop Team has five offices across central Maryland and is part of Long & Foster Real Estate. Quarles dismissed Long & Foster and Carla Northrop as defendants in his ruling last week.
Patrick and Christine Baehr, the lead plaintiffs in the federal case, hired the Northrop Team in June 2008 and closed on their home a month later using Lakeview for title and settlement, according to court records. (The Baehrs were not involved in the Howard County lawsuit.)
Defense lawyers argued the lawsuit, filed last March, was barred by RESPA’s one-year statute of limitations.
The short window in which to sue presents challenges for RESPA suits, an observer said.
“It’s difficult to find the right circumstances in the right case,” said Marx David Sterbcow, a New Orleans lawyer who specializes in RESPA cases, including class actions. “A lot of folks don’t know there’s been something impure.”
In the Baehrs’ case, Quarles ruled that the allegations of fraudulent concealment could toll the statute of limitations.
According to the Baehrs’ lawsuit, Carla Northrop was put on Lakeview’s payroll from 2000 to 2007. They say it was a “sham” relationship, noting that Lakeview did not provide her with an office, phone number or email address.
In 2008, Lakeview and the Northrop Team entered a marketing agreement whereby Lakeview was designated as the exclusive settlement and title company of the Northrop Team in exchange for monthly payments of $6,000, according to the lawsuit. But Lakeview instead paid the Northrop Team up to $12,000 per month despite “no actual record or measure of any real joint marketing or services,” according to the lawsuit.
The plaintiffs say Lakeview’s employment of Carla Northrop and the subsequent marketing agreement were intended to hide the kickbacks from Lakeview.
If that proves to be true, Quarles wrote, “Anyone who checked would have discovered only the seemingly valid employment or marketing agreements; they would not be on notice that the agreements were designed to conceal kickback payments.”
Sterbcow said the statute of limitations ruling will have an impact on future RESPA cases.
“It’s going to allow more folks who were unaware of the alleged secret agreement to get their money,” he said.