# Morris v. CrossCountry Mortgage, LLC

> District Court, E.D. North Carolina · October 24, 2023

URL: https://www.frixlaw.com/law-library/cases/10252894

## Case

- **Court:** District Court, E.D. North Carolina
- **Decided:** October 24, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:22-C V-336-BO-BM

AMANDA MORRIS, et al., )
Plaintiffs, )
)
V. ) ORDER
)
CROSSCOUNTRY MORTGAGE, LLC; _ )
RALEIGH REALTY, INC. (f/k/a Raleigh _ )
Realty, LLC), )
Defendants. )

This cause comes before the Court on motions to dismiss the amended complaint filed by
both defendants. The appropriate responses and replies have been filed, or the time for doing so
has expired, and in this posture both motions are ripe for ruling. For the reasons that follow, the
motions to dismiss are denied.
BACKGROUND
Plaintiffs, Amanda and Joshua Morris, commenced this action on August 25, 2022. [DE
I]. Their complaint alleged that defendants violated the Real Estate Settlement Procedures Act
(RESPA), 12 U.S.C. § 2607, by engaging in a “kickback” or “unearned fee” scheme prohibited by
RESPA. The Court incorporates by reference as if fully set forth herein the background provided
in its order granting defendants’ motions to dismiss but permitting plaintiffs leave to amend their
complaint. [DE 40].
The Court granted defendants’ motions to dismiss for lack of subject matter jurisdiction
after determining that plaintiffs had failed to allege an injury in fact sufficient to establish standing
under RESPA. Now, in their amended complaint, plaintiffs have alleged the following as injuries
sustained due to the alleged kickback scheme. In January 2021, plaintiffs were pre-approved for

two loans from another lender: a conventional loan at a 3.125% interest rate with a loan to value
ratio of 95% and a USDA loan with a 2.25% interest rate and a loan to value ratio of 95%. [DE
41] Amd. Compl. § 57. Plaintiffs allege that despite these pre-approvals, Raleigh Realty agents
instructed plaintiffs that CrossCountry was their “best and only option for their mortgage and was
highly recommended by Raleigh Realty’s owner, Mr. Fitzgerald.” /d. 4 58. Plaintiffs “complied”
and ultimately obtained a mortgage from CrossCountry. /d. { 61. Plaintiffs’ mortgage for their
Johnston County property is a 30-year, fixed rate FHA mortgage with a 3.625% interest rate. Id.
61-62. Plaintiffs allege that their CrossCountry mortgage is at a “significantly higher rate and
with less favorable terms than their pre-approvals.” /d. § 62. Plaintiffs further allege that mortgage
interest rates did not materially change between their pre-approval offers and their closing in
August 2021 and that there were no other material changes to plaintiffs’ finances during that
period. /d. 64, 70. Plaintiffs allege that they will pay an estimated $107,196 in interest over the life
of their loan, which is substantially higher than what they would have paid at their pre-approved
interest rates. Jd. {J 64-65. Plaintiffs further allege that CrossCountry charged them an additional
$3,758.87 in costs that they “did not shop for” and would not have paid to other lenders. Jd. § 67.
In sum, plaintiffs contend that due to the illegal kickback scheme between the defendants they
closed on their home with higher interest rates, higher closing costs, and higher costs over the life
of the loan. Id. {§ 70- 72.
In their amended complaint, plaintiffs have also alleged claims against defendants for
unfair and deceptive trade practices and civil conspiracy, both under North Carolina law.
Defendants have each moved to dismiss plaintiffs’ claims for lack of Article III standing. They
have also each moved to dismiss plaintiffs* state law claims for failure to state a claim upon which

relief can be granted. Defendants make identical or substantially similar arguments and the Court
considers their motions together.
DISCUSSION
Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of a claim for lack of subject
matter jurisdiction. “Subject-matter jurisdiction cannot be forfeited or waived and should be
considered when fairly in doubt.” Ashcroft v. Iqbal, 556 U.S. 662, 671 (2009) (citation omitted).
When subject-matter jurisdiction is challenged, the plaintiff has the burden of proving jurisdiction
to survive the motion. Evans v. B.F. Perkins Co., 166 F.3d 642, 647-50 (4th Cir. 1999). When a
facial challenge to subject-matter jurisdiction is raised, the facts alleged by the plaintiff in the
complaint are taken as true, “and the motion must be denied if the complaint alleges sufficient
facts to invoke subject-matter jurisdiction.” Kerns v. United States, 585 F.3d 187, 192 (4th Cir.
2009). The Court can consider evidence outside the pleadings without converting the motion into
one for summary judgment. See, e.g., Evans, 166 F.3d at 647.
A Rule |2(b)(6) motion tests the legal sufficiency of the complaint. Papasan v. Allain, 478
U.S. 265, 283 (1986). A complaint must allege enough facts to state a claim for relief that is facially
plausible. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “The plausibility standard is
not akin to a ‘probability requirement,” but it asks for more than a sheer possibility that a defendant
has acted unlawfully.” Jqgbal, 556 U.S. at 678. Facial plausibility means that the facts pled “allow[]
the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,”
and mere recitals of the elements of a cause of action supported by conclusory statements do not
suffice. Jd.
A. Standing

Under Article III of the U.S. Constitution, federal courts may consider only cases or
controversies, and “the doctrine of standing has always been an essential component” of the case
or controversy requirement. Marshall v. Meadows, 105 F.3d 904, 906 (4th Cir. 1997) (citing Lujan
v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). For an action to constitute a case or controversy
under Article III, a “plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to
the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial
decision.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016). At the pleading stage, a plaintiff must
“clearly allege facts demonstrating each element of [standing].” Spokeo, 578 U.S. at 338 (2016)
(internal quotation, alteration, and citation omitted); see also Overbey v. Mayor of Baltimore, 930
F.3d 215, 227 (4th Cir. 2019) (plaintiff must plausibly allege facts which, taken as true, establish
standing). '
CrossCountry Mortgage and Raleigh Realty both contend that plaintiffs have not plausibly
alleged that they suffered an injury in fact. “To establish injury in fact, a plaintiff must show that
he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’
and ‘actual or imminent, not conjectural or hypothetical.’” /d. (quoting Lujan, 504 U.S. at 560).
The provision of RESPA on which plaintiffs rely provides for a private right of action. 12 U.S.C.
§ 2607(d). However, an allegation of mere violation of a statute is insufficient to confer standing;
rather, plaintiffs must still sufficiently show they have been “concretely harmed by a defendant's
statutory violation”. TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2205 (2021) (noting further
that “an injury in law is not an injury in fact.”).
In Baehr v. Creig Northrop Team, P.C., 953 F.3d 244, 254 (4 Cir. 2020), the court of
appeals held, among other things, “that the deprivation of impartial and fair competition between

'In a class action, standing is analyzed “based on the allegations of personal injury made by the
named plaintiffs.” Beck v. McDonald, 848 F.3d 262, 269 (4th Cir. 2017).

settlement services providers—untethered from any evidence that the deprivation thereof
increased settlement costs—is not a concrete injury under RESPA.” Rather, a plaintiff must allege
that the statutory violation resulted in the type of harm that Congress passed the statute to prevent.
Id. at 253. “Congress specified in RESPA that by prohibiting kickbacks, the harm it sought to
prevent is the increased costs that ‘tend’ to result from kickbacks’ interference with the market for
settlement services.” Jd. at 254. Settlement services include “‘any service provided in connection
with a real estate settlement”. 12 U.S.C. § 2602(3).
Plaintiffs have alleged a concrete injury under RESPA sufficient to confer standing.
Plaintiffs allege generally that a lack of competition tends to increase settlement costs related to
mortgage loan products. Further, they allege specifically their own CrossCountry mortgage, in
fact, resulted in increased settlement costs, including higher interest rates, closing costs, and higher
ongoing payments over the life of the loan.
As to their interest rate, in their amended complaint plaintiffs now allege that there was no
material change in mortgage interest rates during the period between their pre-approval and closing
with CrossCountry and further that there was no material change to their financial status during
that time, supporting an inference that, despite the time lapse, they would still have qualified for a
lower rate with another lender. Defendants rely on the fact that only Mr. Morris was prequalified
with another lender and that those prequalifications were for different types of loans than what was
ultimately secured. However, absent discovery, there is no way to know whether, for example,
Mrs. Morris’ absence from the original prequalification or presence on the CrossCountry loan had
any material impact.
Plaintiffs also newly allege an injury based on closing costs. Though defendants may
ultimately be correct that these closing costs are “standard” and thus would have applied in the

same or similar amounts on any mortgage, the Court must take plaintiffs’ allegations that they
would not have paid these amounts with other lenders as true at this stage of the proceeding.
TransUnion, 141 S. Ct. at 2208 (“A plaintiff must demonstrate standing ‘with the manner and
degree of evidence required at the successive stages of the litigation.*”) (citation omitted).
Accordingly, the Court determines that the amended complaint alleges concrete injuries
sufficient to demonstrate standing to proceed on plaintiffs’ RESPA claim. Defendants’ arguments
that plaintiffs’ unfair and deceptive trade practices claim and civil conspiracy claim should be
dismissed for lack of standing based upon their purported failure to demonstrate RESPA standing
thus also fails.
B. Failure to state a claim
Defendants also contend that plaintiffs have failed to state an unfair and deceptive trade
practices claim. To establish a violation of North Carolina’s Unfair and Deceptive Trade Practices
Act, a plaintiff must show “(1) an unfair or deceptive act or practice, (2) in or affecting commerce,
and (3) which proximately caused injury to plaintiffs.” Gray v. N.C. Underwriting Ass’n, 352 N.C.
61, 68 (2000). “[W]hether an act or practice is an unfair or deceptive practice . . . is a question of
law for the court.” /d. “A practice is unfair when it offends established public policy as well as
when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to
consumers” and “a practice is deceptive if it has the capacity or tendency to deceive; proof of
actual deception is not required.” Marshall vy. Miller, 302 N.C. 539, 548 (1981).
Under North Carolina law, violation of a consumer protection statute may amount to a per
se unfair and deceptive trade practice, while violation of a regulatory statute may also in certain
circumstances constitute an unfair and deceptive trade practice. In re Fifth Third Bank, Nat. Ass’n-
Vill. of Penland Litig., 217 N.C. App. 199, 207 (2011). Plaintiffs here have alleged both that

defendants violated RESPA and the SAFE Act, consumer protection statutes, and that they have
violated the North Carolina Administrative Code for the Real Estate Commission as well as the
Secure and Fair Enforcement Mortgage Lending Act. Amd Compl. 36-41. This is sufficient to
nudge plaintiffs’ unfair and deceptive trade practices claim across the line from conceivable to
plausible. The Court will not dismiss the claim at this stage.
Finally, defendants seek to dismiss plaintiffs’ civil conspiracy claim. In order to prove civil
conspiracy in North Carolina, the plaintiff must show that there was “(1) an agreement between
two or more individuals; (2) to do an unlawful act or to do a lawful act in an unlawful way; (3)
resulting in injury to plaintiff inflicted by one or more of the conspirators; and (4) pursuant to a
common scheme.” Piraino Bros., LLC v. Atl. Fin. Grp., Inc., 211 N.C. App. 343, 350 (2011)
(quoting Privette v. University of North Carolina, 96 N.C.App. 124, 139 (1989)). Plaintiffs agree
that this is a “dependent claim” which can be successful “[o]nly where there is an underlying claim
for unlawful conduct...” BDM Invs. v. Lenhil, Inc., 264 N.C. App. 282, 300 (2019).
Plaintiffs have sufficiently alleged underlying claims for unlawful conduct. They have
further sufficiently alleged an overt act committed in furtherance of the alleged conspiracy,
specifically that Raleigh Realty required its agents to exclusively recommend CrossCountry to all
buyers in order to continue receiving kickback “referral fees” (which plaintiffs’ allege violated
RESPA and other laws) and that that conduct resulted in approximately $20,000 per month in
payments from CrossCountry to Raleigh Real Estate in unlawful kickback and referral fees. Amd.
Compl. 20-35; see also BDM Invs. 264 N.C. App. At 301 (noting failure to allege overt act
defeats civil conspiracy claim). The Court determines that this dependent claim has been
sufficiently pleaded and will permit it to go forward.

In sum, plaintiffs’ amended complaint has alleged facts sufficient to confer Article II]
standing for their RESPA and other claims. Plaintiffs have further plausibly pleaded claims for
unfair and deceptive trade practices and civil conspiracy. The motions to dismiss are therefore
denied.
CONCLUSION
Accordingly, for the foregoing reasons, the motions to dismiss plaintiffs’ amended
complaint [DE 43 & 45] are DENIED.

SO ORDERED, this xd day of October 2023.

TERRENCE W. BOYLE ( ¢
UNITED STATES DISTRICT JUDGE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10252894. Public record. Not legal advice.