William Marshall v. James B. Nutter & Company ( 2014 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-1940
WILLIAM AUBREY MARSHALL,
Plaintiff - Appellant,
v.
JAMES B. NUTTER & COMPANY,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Richard D. Bennett, District Judge.
(1:10-cv-03596-RDB)
Argued: May 14, 2014 Decided: July 10, 2014
Before NIEMEYER and WYNN, Circuit Judges, and Robert J. CONRAD,
Jr., United States District Judge for the Western District of
North Carolina, sitting by designation.
Affirmed by published opinion. Judge Niemeyer wrote the
opinion, in which Judge Wynn and Judge Conrad joined.
ARGUED: Martin Eugene Wolf, GORDON & WOLF, CHTD., Towson,
Maryland, for Appellant. Todd W. Ruskamp, SHOOK, HARDY & BACON
L.L.P., Kansas City, Missouri, for Appellee. ON BRIEF: Richard
S. Gordon, Benjamin H. Carney, Thomas M. McCray-Worrall, GORDON
& WOLF, CHTD., Baltimore, Maryland; Cyril V. Smith, William K.
Meyer, ZUCKERMAN SPAEDER LLP, Baltimore, Maryland, for
Appellant. Clayton T. Norkey, Benjamin M. Johnston, SHOOK,
HARDY & BACON L.L.P., Kansas City, Missouri, for Appellee.
NIEMEYER, Circuit Judge:
William Marshall, a resident of Baltimore, Maryland, who
borrowed $252,000 from Savings First Mortgage, LLC, in a reverse
mortgage transaction, commenced this action against James B.
Nutter & Company, which purchased the mortgage from Savings
First, alleging that Nutter was liable for conspiring with
Savings First to violate the Maryland Finder’s Fee Act.
Marshall alleged that Savings First collected $3,666 in fees
from him at closing, in violation of Md. Code Ann., Com. Law
§ 12-804(e), which prohibits a mortgage broker from “charg[ing]
a finder’s fee in any transaction in which the mortgage broker
. . . is the lender,” and that because Nutter funded the loan
pursuant to a preexisting agreement, it was liable as a civil
coconspirator.
The district court held that Nutter could not be a violator
of § 12-804(e) because that statute regulates only mortgage
brokers and Nutter was not a “mortgage broker” in the
transaction. The court concluded that because Nutter was not
“legally capable” of violating the Act, it could not, under
Shenker v. Laureate Education, Inc., 983 A.2d 408 (Md. 2009), be
held liable for conspiring with Savings First to violate the
Act. Accordingly, it granted Nutter’s motion for summary
judgment.
We agree and affirm.
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I
Following Savings First’s solicitation, Marshall entered
into a reverse mortgage transaction on September 11, 2008. A
reverse mortgage loan provides cash payments to the borrower
based on the equity that the borrower has in his house. At the
closing, Marshall executed a $252,000 note payable to Savings
First and a deed of trust on his house on Payson Street in
Baltimore to secure the note. Under the reverse mortgage, the
amount of the note covered the payment of Marshall’s prior
mortgage, a cash payment to him at closing of $6,639, and the
payment of future cash advances. It also covered the costs and
fees of the transaction, including the payment to Savings First
of a “loan origination fee” of $3,360 and a “correspondent fee”
of $305.56. All closing documents designated Savings First as
the lender.
During the closing, Savings First assigned the mortgage to
Nutter, which “table funded” the loan. Table funding is a term
of art referring to “a settlement at which a loan is funded by a
contemporaneous advance of loan funds and an assignment of the
loan to the person advancing the funds.” 12 C.F.R. § 1024.2.
Nutter’s table funding of Marshall’s loan was pursuant to its
prior agreement with Savings First “to underwrite and table fund
each Reverse Mortgage Loan” that Savings First made.
3
Marshall commenced this class action against Nutter in the
Circuit Court for Baltimore City on September 22, 2010, alleging
that Nutter had “conspired with mortgage brokers” to violate a
provision of the Maryland Finder’s Fee Act that prohibits a
mortgage broker from charging “a finder’s fee in any transaction
in which the mortgage broker . . . is the lender.” Md. Code
Ann., Com. Law § 12-804(e). He alleged that “Savings First
acted as both the mortgage broker and as the nominal mortgage
lender,” while “Nutter table-fund[ed] the mortgage loan and
act[ed] as the funding lender.” Thus, as alleged, the $3,665.56
in fees that Savings First charged Marshall were “finder’s fees”
collected in violation of § 12-804(e). Marshall did not,
however, name Savings First as a defendant. Rather, he sued
only Nutter, asserting that Nutter was liable for conspiring
with Savings First and other unnamed “mortgage brokers” to
violate the Act. Specifically, he alleged that Nutter conspired
“by reaching an agreement and understanding with mortgage
brokers to table-fund mortgage loan transactions . . . [in
which] brokers acted as both mortgage broker and lender, thereby
enabling brokers to charge unlawful finder’s fees.” 1 Marshall
1
Marshall also alleged that Nutter conspired to commit
unfair and deceptive trade practices, in violation of the
Maryland Consumer Protection Act, Md. Code Ann., Com. Law § 13-
303. That count, however, was voluntarily dismissed and is not
before us.
4
sought to represent a class of similarly situated borrowers and
demanded judgment of three times the amount of all finder’s fees
collected, plus attorneys’ fees and costs.
After removing the action to federal court and conducting
discovery, Nutter filed a motion for summary judgment on
Marshall’s conspiracy claim, which the district court granted.
In doing so, the court relied on Shenker, which held that “a
defendant may not be adjudged liable for civil conspiracy unless
that defendant was legally capable of committing the underlying
tort alleged.” 983 A.2d at 428. The district court concluded
that “only mortgage brokers are ‘legally capable’ of violating
the Maryland Finder’s Fee Act” and therefore that Nutter, which
the complaint alleged was a “funding lender” and not a mortgage
broker, could not be held liable for conspiring to violate the
Act.
From the district court’s final judgment dated July 22,
2013, Marshall filed this appeal. 2
2
Marshall has also filed a motion to certify the legal
questions addressed in this appeal to the Maryland Court of
Appeals. Because we find that Maryland law unambiguously
resolves those questions, we deny the motion. See Roe v. Doe,
28 F.3d 404, 407 (4th Cir. 1994) (“Only if the available state
law is clearly insufficient should the court certify the issue
to the state court”).
5
II
Marshall contends that the district court “misinterpret[ed]
and misappli[ed] [the] Maryland Court of Appeals’ decision in
Shenker” to conclude “that there [can] be no civil conspiracy
liability by a non-broker for violation of the [Finder’s Fee
Act].” He asserts that the district court’s ruling “undermines
the very nature of conspiracy as a means of imposing vicarious
liability upon parties for all acts committed pursuant to an
agreement to commit a tort or violate a statute.” He urges us
to hold instead that Nutter did not need to act as a mortgage
broker to be legally capable of violating the Finder’s Fee Act
and that the district court therefore erred in entering judgment
in Nutter’s favor.
Nutter contends, on the basis of Shenker, that “a civil
conspiracy claim requires proof that the defendant was ‘legally
capable’ of committing the wrongdoing underlying the
conspiracy.” It argues that, because § 12-804(e) only applies
to mortgage brokers and because it did not function as a
mortgage broker, it was not legally capable of violating the
provision, as necessary to support a conspiracy claim.
Thus, the sole question presented is whether, under
Maryland law, a non-broker may be held liable for conspiring
with a mortgage broker to violate § 12-804(e), which states that
“[a] mortgage broker may not charge a finder’s fee in any
6
transaction in which the mortgage broker . . . is the lender.”
Md. Code Ann., Com. Law § 12-804(e). 3
We begin by noting that the Finder’s Fee Act itself does
not prohibit conspiracy to collect unlawful finder’s fees, nor
does it provide a cause of action to recover for conspiracy to
violate the Act’s terms. Instead, the remedy section states
simply that “[a]ny mortgage broker who violates any provision of
this subtitle shall forfeit to the borrower the greater of: (1)
[t]hree times the amount of the finder’s fee collected; or (2)
[t]he sum of $500.” Md. Code Ann., Com. Law § 12-807 (emphasis
added). Thus, Marshall’s entitlement to relief must stem not
from the Finder’s Fee Act itself, but instead from Maryland
common law governing civil conspiracy.
Under Maryland law, civil conspiracy is defined as the
“combination of two or more persons by an agreement or
understanding to accomplish an unlawful act or to use unlawful
means to accomplish an act not in itself illegal, with the
further requirement that the act or the means employed must
result in damages to the plaintiff.” Hoffman v. Stamper, 867
A.2d 276, 290 (Md. 2005) (quoting Green v. Wash. Suburban
Sanitary Comm’n, 269 A.2d 815, 824 (Md. 1970)) (internal
3
We note that Nutter never argued that Savings First was
not a “mortgage broker” within the meaning of the Finder’s Fee
Act. Cf. Petry v. Prosperity Mortg. Co., ___ F.3d ___, No. 13-
1869 (4th Cir. July 10, 2014).
7
quotation marks omitted). In addition to proving an agreement,
“the plaintiff must also prove the commission of an overt act,
in furtherance of the agreement, that caused the plaintiff to
suffer actual injury.” Id. The agreement itself is not
actionable under Maryland law “but rather is in the nature of an
aggravating factor” with respect to the underlying tortious
conduct. Id. Indeed, the Maryland Court of Appeals has
consistently maintained that “conspiracy is not a separate tort
capable of independently sustaining an award of damages in the
absence of other tortious injury to the plaintiff.” Alleco Inc.
v. Harry & Jeanette Weinberg Found., Inc., 665 A.2d 1038, 1045
(Md. 1995) (quoting Alexander & Alexander Inc. v. B. Dixon
Evander & Assocs., 650 A.2d 260, 265 n.8 (Md. 1994)) (internal
quotation marks omitted). As the Alleco court explained:
There is no doubt of the right of a plaintiff to
maintain an action on the case against several, for
conspiring to do, and actually doing, some unlawful
act to his damage. . . . It is not, therefore, for
simply conspiring to do the unlawful act that the
action lies. It is for doing the act itself, and the
resulting actual damage to the plaintiff, that afford
the ground of the action.
Id. (quoting Kimball v. Harman, 34 Md. 407, 409-11 (1871))
(internal quotation marks and citation omitted); see also id.(“‘No action in tort lies for conspiracy to do something unless
the acts actually done, if done by one person, would constitute
a tort’” (quoting Domchick v.Greenbelt Consumer Servs., Inc., 87
8
A.2d 831, 834 (Md. 1952)). Thus, civil conspiracy requires an
agreement, and an overt act in furtherance of the agreed-to
unlawful conduct that causes injury, as well as the legal
capacity of the conspirators to complete the unlawful conduct.
Building on this understanding of civil conspiracy, the
Maryland Court of Appeals held in 2009 that “a defendant may not
be adjudged liable for civil conspiracy unless that defendant
was legally capable of committing the underlying tort alleged.”
Shenker, 983 A.2d at 428. In Shenker, shareholders of Laureate
Education, Inc., alleged that the members of the company’s board
of directors had breached their fiduciary duties when
negotiating the price that the shareholders would receive in a
“cash out merger,” a type of merger where minority shareholders
are forced to take cash for their shares, thus freezing them out
of the merger. The shareholders also sued several third-party
investors who had joined two defendant board members in
acquiring the company, alleging that the third-party investors
were liable for conspiring with the board members in their
breach of their fiduciary duties. In dismissing the civil
conspiracy claim against the third-party investors, the Shenker
court explained:
“[T]ort liability arising from a conspiracy
presupposes that the coconspirator is legally capable
of committing a tort, that is, that [the
coconspirator] owes a duty to the plaintiff recognized
by law and is potentially subject to liability for
9
breach of that duty.” . . . “[A] cause of action for
civil conspiracy may therefore not arise if the
alleged conspirator, though allegedly a participant in
the agreement underlying the injury, was not
personally bound by the duty violated by the
wrongdoing.”
Id. at 428-29 (quoting Bahari v. Countrywide Home Loans, No. 05-
2085, 2005 WL 3505604, at *6 (D. Md. Dec. 16, 2005); BEP, Inc.
v. Atkinson, 174 F. Supp. 2d 400, 409 (D. Md. 2001)).
Consequently, the Shenker court concluded that “in Maryland,
liability for civil conspiracy based on the underlying tort of
breach of fiduciary duty (were it recognized) would require
proof that the defendant, although not committing personally the
underlying tort, was legally capable of committing the
underlying tort.” Id. at 429. Thus, the court held that the
shareholders’ civil conspiracy claim against the third-party
investors had been properly dismissed because the investors owed
no fiduciary duties to the shareholders and therefore could not
be legally liable for civil conspiracy. Id.We conclude that the district court correctly applied
Shenker to Marshall’s civil conspiracy claim against Nutter.
Marshall sought to hold Nutter liable for conspiring with
Savings First and other mortgage brokers to violate § 12-804(e),
which prohibits mortgage brokers from charging finder’s fees in
any transaction in which they are also the lender. This
provision imposes a duty only on mortgage brokers, and therefore
10
only mortgage brokers are capable of violating it. Since it is
uncontested that Nutter was not functioning as a mortgage broker
but, as Marshall alleged in his complaint, as the “funding
lender,” Nutter was not legally capable of violating § 12-804(e)
and therefore, under Shenker, cannot be held liable for
conspiring to violate § 12-804(e).
To avoid this fairly straightforward conclusion, Marshall
contends that the district court improperly limited “conspiracy
claims solely to direct perpetrators of the underlying wrong.”
(Emphasis added). This argument, however, misconstrues the
district court’s ruling. The district court did not hold that
Nutter had to be a direct perpetrator of § 12-804(e); rather, it
held, in applying Shenker, that Nutter had to be “legally
capable” of committing such a violation before it could be held
liable for conspiracy. Because § 12-804(e) only regulates the
conduct of mortgage brokers, only mortgage brokers can violate
it.
Marshall also argues that the district court misapplied
Shenker because lenders like Nutter are in fact “legally
capable” of violating the Finder’s Fee Act. He contends, in
this regard, that the “[Finder’s Fee Act] regulates lenders, and
there is nothing standing in the way of a lender such as Nutter
acting as a ‘mortgage broker.’ Thus, Nutter is ‘legally
capable’ of violating the Act.” But the fact that Nutter could
11
hypothetically act as a mortgage broker in some transaction and
then be bound by § 12-804(e) is irrelevant. The duty alleged to
have been violated in this case was one imposed on mortgage
brokers to refrain from charging “a finder’s fee in any
transaction in which the mortgage broker . . . is the lender.”
Md. Code Ann., Com. Law § 12-804(e). As Nutter did not function
as a mortgage broker, but rather as a funding lender, Nutter was
“not personally bound by the duty violated by the wrongdoing”
and therefore could not be held liable for conspiring with
others to commit that wrongdoing. Shenker, 983 A.2d at 429
(quoting BEP, 174 F. Supp. 2d at 409) (internal quotation marks
omitted).
Finally, Marshall argues that Shenker’s “legally capable”
requirement is satisfied as long as the defendant owed the
plaintiff any duty of care. He maintains that Nutter owed him
and other borrowers duties of care in its capacity as a lender
under other provisions of the Finder’s Fee Act, as well as under
Maryland regulations and common law. But, as Shenker made
clear, the defendant must be “legally capable of committing the
underlying tort alleged.” 983 A.2d at 428 (emphasis added).
That Nutter was potentially subject to liability for breaching
other duties of care is irrelevant to whether it was legally
capable of committing the violation alleged by Marshall in this
case -- i.e., a violation of § 12-804(e).
12
We thus affirm the district court’s judgment dismissing
Marshall’s claim that Nutter conspired to violate § 12-804(e) of
the Finder’s Fee Act.
AFFIRMED
13