Genuine Title, LLC; Brandon Glickstein; Gary Klopp; Adam Mandelberg; William J. Peterson, III; Angela Pobletts; Jay Zukerberg; All County Settlements, LLC; BTS Management and Consulting, LLC; Carroll Abstracts, Inc.; MARC, LLC; Mortgage Services, LLC; and
Documents in this case
- Complaint · · 20 p.
- Order · · 9 p.
- Order · · 9 p.
- Order · · 9 p.
- Order · · 9 p.
- Order · · 9 p.
- Order · · 10 p.
- Order · · 9 p.
- Order · · 16 p.
- Document · · 20 p.
- Order · · 8 p.
Case summary
R&R Marketing Group, LLC
On April 29, 2015, the Bureau and the State of Maryland filed a lawsuit against Genuine Title, LLC, a title company, its principals, and several loan officers and their affiliated companies for violating RESPA and the CFPA. The complaint alleged that Genuine Title and its principals provided cash or marketing services in exchange for the referral of settlement work. On May 5, 2015, the court approved settlements with ten of the thirteen defendants. On November 16, 2015, the court approved a settlement with the remaining defendants. Under the settlements, Genuine Title and its two principals were limited from participating in the mortgage industry for five years, three loan officers and four affiliated companies were limited from participating in the mortgage industry for two years, and the defendants are required to pay redress in the amount of $562,500 and penalties in the amount of $175,000.
On June 8, 2017, the Bureau and Maryland initiated a contempt proceeding against Gary Klopp alleging that he violated the November 2015 order by managing, owning, and controlling two branches of an Oklahoma bank that brokered mortgages, as well as by failing to comply with the order’s reporting requirements. On August 16, 2017, following a hearing, the court found Klopp violated the order and held Klopp in civil contempt. Following a sanctions hearing, the court ordered Klopp to pay $526,796.36 as disgorgement of wrongful profits. The 2017 order also completely barred Klopp from the mortgage industry for two years. Klopp appealed to the Fourth Circuit. On April 27, 2020, the Fourth Circuit affirmed three of the four grounds for contempt, and remanded the case for recalculation of the sanctions amount. On February 25, 2021, on remand, the district court ordered Klopp to pay $269,722.14 as disgorgement of wrongful profits.
Complaint ()
PDF of this document (20 pages)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552
CONSUMER PROTECTION DIVISION, Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202 Baltimore County
Plaintiffs,
v.
GENUINE TITLE, LLC 11155 Dolfield Blvd., Suite 100 Owings Mills, MD 21117 Baltimore County
BRANDON GLICKSTEIN 3 Valleys Crest Court Owings Mills, MD 21117 Baltimore County
GARY KLOPP 2915 Eden Drive Manchester, MD 21102 Carroll County
ADAM MANDELBERG 807 Dominion Lane Reisterstown, MD 21136 Baltimore County
Case No.
Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 1 of 20
Page 3
WILLIAM J. PETERSON, III 635 Prestwick Trail Bel Air, MD 21014 Harford County
ANGELA POBLETTS 1930 Castleton Road Darlington, MD 21034 Harford County
JAY ZUKERBERG 4714 Glenarm Avenue Baltimore, MD 21206 Baltimore County
ALL COUNTY SETTLEMENTS, LLC 2915 Eden Drive Manchester, MD 21102 Carroll County
BTS MANAGEMENT AND CONSULTING, LLC 929 Creek Park Road Bel Air, MD 21014 Harford County
CARROLL ABSTRACTS, INC.
2915 Eden Drive Manchester, MD 21102 Carroll County
MARC, LLC 1930 Castleton Road Darlington, MD 21034 Harford County
Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 2 of 20
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MORTGAGE SERVICES, LLC 4940 Campbell Blvd.
Suite 210 Nottingham, MD 21236 Baltimore County
R&R MARKETING GROUP, LLC 807 Dominion Lane Reisterstown, MD 21136 Baltimore County,
Defendants.
COMPLAINT
Plaintiffs, the Consumer Financial Protection Bureau (“Bureau”) and the Consumer Protection Division, Office of the Attorney General of Maryland (“CPD”), allege as follows: INTRODUCTION 1.
The Bureau and the CPD bring this action against Genuine Title, LLC (“Genuine Title”), Brandon Glickstein, Gary Klopp, Adam Mandelberg, William J. Peterson, III, Angela Pobletts, Jay Zukerberg, All County Settlements, LLC, BTS Management and Consulting, LLC, Carroll Abstracts, Inc., MARC, LLC, Mortgage Services, LLC, and R&R Marketing Group, LLC (collectively, “Defendants”) to address Defendants’ participation in an illegal scheme to exchange kickbacks or things of value for referrals of settlement-service business in connection with consumers’ home-mortgage transactions.
2.
The Real Estate Settlement Procedures Act (“RESPA”) prohibits giving or accepting a “fee, kickback, or thing of value” in exchange for a referral of business related to a real-estate- Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 3 of 20
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settlement service, including services ordinarily provided by title companies, such as title searches, title examinations, the provision of title certificates, and title insurance. 12 U.S.C. § 2607(a). 3.
A now-defunct Maryland title company, Genuine Title, LLC, from 2009 through 2013, gave things of value, including cash and marketing services, to loan officers for referrals of business.
JURISDICTION AND VENUE 4.
This Court has subject-matter jurisdiction over this action because the action is “brought under Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345. This Court has supplemental jurisdiction over the state-law claims because those claims are so related to the federal claims that they form part of the same case or controversy. 12 U.S.C. § 1367(a). 5.
Venue is proper in this district because a substantial amount of the transactions, acts, practices, and courses of conduct at issue occurred within this district, the Defendants all conducted business in this district, and resided in this district during the relevant period. 28 U.S.C. § 1391(b), (c); 12 U.S.C. §§ 2614, 5564(f).
PARTIES 6.
The Bureau is an agency of the United States charged with regulating the offering and providing of consumer-financial products and services under “Federal consumer financial laws,” 12 U.S.C. § 5491(a), including RESPA and the Consumer Financial Protection Act of 2010 (“CFPA”). 12 U.S.C. § 5481(12)(M), (14). The Bureau has independent litigating authority, 12 U.S.C. § 5564(a)- (b), including the authority to enforce RESPA and the CFPA. 12 U.S.C. § 2607(d)(4). Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 4 of 20
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7.
The CPD, part of the Office of the Attorney General of Maryland, enforces regulatory and consumer-protection laws, including the Maryland Consumer Protection Act., Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol.) (“CPA”). 8.
Genuine Title, LLC is a defunct title company that was headquartered in Owings Mills, Maryland. Genuine Title ceased operations in April 2014. Genuine Title offered and provided real-estate-settlement services to consumers primarily for personal, household, or family purposes, including but not limited to closing and settlement services, title searches, title examinations, and the provision of title certificates. See 12 U.S.C. § 2602(3). Genuine Title is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6), (15)(A)(iii). Genuine Title also is a “merchant” under CPA § 13-101(g) because it directly or indirectly offered or made consumer goods, services, or credit available to consumers.
9.
Brandon Glickstein, a resident of Reisterstown, Maryland, served as Director of Marketing for Genuine Title. Glickstein had managerial responsibility for Genuine Title and substantially and materially participated in the conduct of its affairs, including the schemes described in this Complaint. Glickstein is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i)-(ii). Because Glickstein is a “related person,” he is deemed a “covered person” under the CFPA. 12 U.S.C. § 5481(25). Glickstein also is a “merchant” under CPA § 13-101(g) because he directly or indirectly offered or made consumer goods, services, or credit available to consumers.
10.
Gary Klopp, a resident of Manchester, Maryland, participated in originating federally related mortgage loans to consumers primarily for personal, household, or family purposes. Klopp Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 5 of 20
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provided “real estate settlement services,” including but not limited to the taking of loan applications and loan processing. See 12 U.S.C. § 2602(3). Therefore, Klopp is a “covered person” under the CFPA. 12 U.S.C. § 5481(6), (15)(A)(iii). Klopp also is a “merchant” under CPA § 13- 101(g) because he directly or indirectly offered or made consumer goods, services, or credit available to consumers.
11.
Adam Mandelberg, a resident of Reisterstown, Maryland, participated in originating federally related mortgage loans to consumers primarily for personal, household, or family purposes. Mandelberg provided “real estate settlement services,” including but not limited to the taking of loan applications and loan processing. See 12 U.S.C. § 2602(3). Therefore, Mandelberg is a “covered person” under the CFPA. 12 U.S.C. § 5481(6), (15)(A)(iii). Mandelberg also is a “merchant” under CPA § 13-101(g) because he directly or indirectly offered or made consumer goods, services, and/or credit available to consumers.
12.
William J. Peterson, III, a resident of Bel Air, Maryland, participated in originating federally related mortgage loans to consumers primarily for personal, household, or family purposes. Peterson provided “real estate settlement services,” including but not limited to the taking of loan applications and loan processing. See 12 U.S.C. § 2602(3). Therefore, Peterson is a “covered person” under the CFPA. 12 U.S.C. § 5481(6), (15)(A)(iii). Peterson also is a “merchant” under CPA § 13-101(g) because he directly or indirectly offered or made consumer goods, services, and/or credit available to consumers.
13.
Angela Pobletts, a resident of Darlington, Maryland, participated in originating federally related mortgage loans to consumers primarily for personal, household, or family Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 6 of 20
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purposes. Pobletts provided “real estate settlement services,” including but not limited to the taking of loan applications and loan processing. See 12 U.S.C. § 2602(3). Therefore, Pobletts is a “covered person” under the CFPA. 12 U.S.C. § 5481(6), (15)(A)(iii). Pobletts also is a “merchant” under CPA § 13-101(g) because she directly or indirectly offered or made consumer goods, services, and/or credit available to consumers.
14.
Jay Zukerberg, a resident of Owings Mills, Maryland, served as Genuine Title’s president at all times during Genuine Title’s operations. Zukerberg had managerial responsibility for Genuine Title and substantially and materially participated in the conduct of its affairs, including the schemes described in this Complaint. Zukerberg is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i)-(ii). Because Zukerberg is a “related person,” he is deemed a “covered person” under the CFPA. 12 U.S.C. § 5481(25). Zukerberg also is a “merchant” under CPA § 13- 101(g) because he directly or indirectly offered or made consumer goods, services, and/or credit available to consumers.
15.
All County Settlements, LLC is an active Maryland entity in good standing. Its principal office is 2915 Eden Drive, Manchester, Maryland. Defendant Gary Klopp owns and controls All County Settlements, LLC and used the company in furtherance of his work to offer mortgage loans and real-estate-settlement services to consumers primarily for personal, household, or family purposes.
16.
BTS Management and Consulting, LLC is an active Maryland entity that is not in good standing. Its principal office is 929 Creek Park Road, Bel Air, Maryland. Defendant William J. Peterson, III owns and controls BTS Management and Consulting, LLC and used the company in Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 7 of 20
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furtherance of the Pay-to-Play Scheme described in the Complaint associated with the offering of mortgage loans and real estate settlement services to consumers primarily for personal, household, or family purposes.
17.
Carroll Abstracts, Inc. is a forfeited Maryland entity that is not in good standing. Its principal office was at 2915 Eden Drive, Manchester, Maryland. Defendant Gary Klopp owned and controlled Carroll Abstracts, Inc. and used the company in furtherance of his work to offer mortgage loans and real-estate-settlement services to consumers primarily for personal, household, or family purposes.
18.
MARC, LLC is a dissolved Maryland entity. Its principal office was at 1930 Casetleton Road, Darlington, Maryland. Defendant Angela Pobletts owned and controlled MARC, LLC and used the company in furtherance of her work to offer mortgage loans and real-estatesettlement services to consumers primarily for personal, household, or family purposes. 19.
Mortgage Services, LLC is an active Maryland entity in good standing. Its principal office is at 4940 Campbell Boulevard, Suite 210, Nottingham, Maryland. Defendant William J. Peterson, III owns a 50% interest in and controls Mortgage Services, LLC, and used the company in furtherance of the Payto-Play Scheme, described below, associated with the offering of mortgage loans and real-estatesettlement services to consumers primarily for personal, household, or family purposes 20.
R&R Marketing Group, LLC is an active Maryland entity in good standing. Its principal office is at 807 Dominion Lane, Reisterstown, Maryland. Defendant Adam Mandelberg and his wife each own 50% of R&R Marketing Group, LLC, and Mandelberg controlled the entity. Mandelberg used R&R Marketing Group, LLC in furtherance of his work to offer mortgage loans Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 8 of 20
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and real-estate-settlement services to consumers primarily for personal, household, or family purposes.
FACTS A.
Genuine Title gave kickbacks and things of value to loan offers in exchange for referrals of business.
21.
In 2005, Zukerberg founded Genuine Title, a title-service company that offered realestate-closing services for mortgage-origination and refinance transactions. Genuine Title conducted real-estate closings for federally related mortgages. Genuine Title ceased operations in April 2014.
22.
Genuine Title’s services included title searches, title examinations, the provision of title certificates and title insurance, and the handling of the processing and closing, or settlement, of real-estate transactions. The majority of Genuine Title’s settlement services were for refinance transactions.
23.
A consumer refinancing a mortgage ordinarily does not have a preferred title company; instead, a consumer typically relies on the loan officer processing the mortgage to recommend a title company.
24.
Genuine Title, through Zukerberg and Glickstein, developed and operated unlawful schemes to provide kickbacks that incentivized loan officers to refer consumers to close their federally related mortgage loans with Genuine Title.
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B.
Genuine Title provided marketing services to loan officers in exchange for referrals of business.
25.
From 2009 through 2013, Glickstein managed a scheme in which Genuine Title provided marketing services to loan officers and, in exchange, the loan officers referred settlementservice business for federally related mortgages to Genuine Title by recommending Genuine Title to borrowers (the “Marketing Services Scheme”).
26.
Through the Marketing Services Scheme, Genuine Title provided and paid for a variety of marketing services to loan officers. For example, Genuine Title purchased marketing leads – data on consumers likely to refinance a mortgage – from a third-party vendor and provided them to loan officers. In exchange, the loan officers referred loans for closing to Genuine Title. 27.
For other loan officers, Genuine Title provided additional marketing services. For these loan officers, Genuine Title not only analyzed and purchased leads from a third-party vendor, but it also paid for marketing letters directed to the consumer leads to be printed, folded, stuffed into envelopes, and mailed.
28.
Zukerberg participated in developing the Marketing Services Scheme and, as Genuine Title’s president, he directed the company to fund the scheme, but Glickstein oversaw its execution. Glickstein personally tailored many of the leads that Genuine Title provided to loan officers participating in the Marketing Services Scheme; directed the frequency and volume of letters mailed out on behalf of loan officers participating in the Marketing Services Scheme; and managed the relationships with third-party vendors that printed the materials used in loan officers’ direct-mail campaigns paid for by Genuine Title. In addition, Glickstein ensured that Genuine Title paid the Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 10 of 20
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invoices submitted by the third-party vendors who printed materials used in loan officers’ directmail campaigns.
29.
Although different loan officers negotiated specific marketing arrangements with Genuine Title, loan officers participating in the Marketing Services Scheme did not pay for the full cost of the leads, the printing and processing of the marketing materials, or the cost of postage to mail the materials to the leads.
30.
Through the Marketing Services Scheme, Genuine Title offered loan officers valuable services to increase their profits in a competitive environment. The scheme was also intended to increase the amount of business generated by the participating loan officers and, through referrals, to increase Genuine Title’s profits.
C.
Genuine Title paid loan officers for referrals of settlement service business. 31.
From 2009 through 2013, Genuine Title, through Zukerberg and Glickstein, also developed and operated a scheme in which Genuine Title entered into agreements or understandings with loan officers whereby the loan officers received cash payments from Genuine Title, generally ranging from about $175–$800, for each loan the loan officer referred to Genuine Title for settlement services (“Pay-to-Play Scheme”). From 2009 until 2013, Genuine Title paid loan officers for referrals of settlement business for federally related mortgage loans through the Pay-to- Play Scheme.
32.
Zukerberg knew that it would look “fishy” if Genuine Title paid cash directly to the loan officers from its operating account. So, instead, Genuine Title funneled the payments to loan officers through entities, typically limited-liability companies, created by the loan officers. In some Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 11 of 20
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cases, Genuine Title instructed the loan officers to set up these entities so that Genuine Title could make payments to the entity instead of directly to the loan officer. In other instances, Genuine Title made payments for referrals to entities the loan officers already used for other business purposes. 33.
Through the Pay-to-Play Scheme, Genuine Title gave something of value – cash – and the loan officers received the cash in exchange for the referral of business. The scheme was also intended to increase the amount of business generated by the participating loan officers and, through referrals, to increase Genuine Title’s profits. D.
Gary Klopp 34.
Gary Klopp has managed a team of loan officers at various financial institutions in the greater Baltimore area for more than 20 years.
35.
Beginning in about 2009, Klopp began receiving payments from Genuine Title for referrals of business made under the Pay-to-Play Scheme. Genuine Title paid Klopp roughly $400 for each loan Klopp, or a loan officer managed by Klopp, referred to Genuine Title. Rather than pay Klopp directly, Genuine Title made the payments to All County Settlements, LLC and Carroll Abstracts, Inc. – Maryland entities created by Klopp and controlled by Klopp. Neither Klopp nor these entities provided actual services in return for these payments. 36.
Klopp did not disclose his participation in the Pay-to-Play Scheme to consumers to whom he and his team offered or provided mortgage-loan services. 37.
Between 2011 and 2013, Klopp received more than $500,000 from Genuine Title through Carroll Abstracts, Inc. and All County Settlements, LLC for loans Klopp, or loan officers managed by Klopp, referred to Genuine Title for settlement services. Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 12 of 20
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E.
Adam Mandelberg
38.
Adam Mandelberg worked as a loan officer and managed a team of loan officers in the greater Baltimore area for more than 15 years. 39.
Mandelberg received payments from Genuine Title for referrals of business made under the Pay-to-Play Scheme. Genuine Title and Mandelberg had a profit-sharing agreement in which Genuine Title deducted its “hard” costs and split the remaining profits with Mandelberg. For example, if a consumer referred by Mandelberg, or someone managed by Mandelberg, paid Genuine Title $1,000 to close a loan and Genuine Title had $600 in costs, Mandelberg and Genuine Title split the $400 profit.
40.
Genuine Title did not pay Mandelberg his share of the profits directly. Instead, Genuine Title paid R&R Marketing Group LLC, a Maryland entity created and controlled by Mandelberg.
41.
Neither Mandelberg nor R&R Marketing Group, LLC provided actual services in consideration for his share of the profits.
42.
Mandelberg did not disclose his participation in the Pay-to-Play Scheme to consumers to whom he and his team offered or provided mortgage-loan services. 43.
Between 2011 and 2013, Mandelberg received about $250,000 from Genuine Title through R&R Marketing Group, LLC for loans Mandelberg, or loan officers managed by Mandelberg, referred to Genuine Title for settlement services. F.
William J. Peterson, III 44.
William Peterson is the president of a mortgage brokerage in Nottingham, Maryland. Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 13 of 20
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45.
Peterson received payments from Genuine Title for loans he referred to Genuine Title for settlement services, and for loans referred by loan officers he managed, under the Pay-to- Play Scheme.
46.
Genuine Title did not pay Peterson directly for the referrals. Instead Genuine Title made payments to BTS Management and Consulting, LLC and Mortgage Services, LLC, Maryland – entities created and controlled by Peterson.
47.
Neither Peterson, nor BTS Management and Consulting, LLC, nor Mortgage Services, LLC performed any services in consideration of the payments Peterson received from Genuine Title.
48.
Peterson did not disclose his participation in the Pay-to-Play Scheme to consumers to whom he and his team offered or provided mortgage-loan services. 49.
Between 2011 and 2013, Peterson received about $265,000 from Genuine Title through BTS Management and Consulting, LLC and Mortgage Services, LLC for loans Peterson, or loan officers managed by Peterson, referred to Genuine Title for settlement services. G.
Angela Pobletts 50.
Angela Pobletts is a loan officer and manages teams of loan officers in the greater Baltimore area.
51.
Pobletts received payments from Genuine Title for referrals of business made under the Pay-to-Play Scheme. Genuine Title paid Pobletts roughly $200–$800 for each loan she, or loan officers she managed, referred to Genuine Title.
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52.
Genuine Title did not pay Pobletts directly for the loans she referred. Instead, Genuine Title paid MARC, LLC, a Maryland entity created and controlled by Pobletts. 53.
Neither Pobletts nor MARC, LLC performed any services in consideration of the payments Pobletts received from Genuine Title.
54.
Pobletts did not disclose her participation in the Pay-to-Play Scheme to consumers to whom she and her team offered or provided mortgage-loan services. 55.
Between 2011 and 2013, Pobletts received about $130,000 from Genuine Title through MARC, LLC for loans Pobletts, or loan officers managed by Pobletts, referred to Genuine Title for settlement services.
CAUSES OF ACTION Count I: Violations of RESPA (by the Bureau against all Defendants)
56.
The allegations in paragraphs 1–55 are incorporated by reference. 57.
Genuine Title, Glickstein, Klopp, Mandelberg, Peterson, Pobletts, Zukerberg, All County Settlements, LLC, BTS Management & Consulting, LLC, Carroll Abstracts, Inc., MARC, LLC, Mortgage Services, LLC, and R&R Marketing Group, LLC gave and received fees, kickbacks, or things of value pursuant to an agreement or understanding in connection with real-estatesettlement services involving federally related mortgage loans, in violation of RESPA, 12 U.S.C. § 2607(a).
Count II: Violations of the CFPA (by the Bureau against all Defendants)
58.
The allegations in paragraphs 1–55 are incorporated by reference. Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 15 of 20
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59.
The RESPA violations of the covered persons described in Count I constitute violations of § 1036 of the CFPA. 12 U.S.C. § 5536(a)(1)(A). 60.
All County Settlements, LLC and Carroll Abstracts, Inc. knowingly or recklessly provided substantial assistance to Klopp and Genuine Title in their violations of the CFPA. Therefore, under 12 U.S.C. § 5536(a)(3), All County Settlements, LLC and Carroll Abstracts, Inc. are deemed to be in violation of the CFPA to the same extent as Klopp and Genuine Title. 61.
BTS Management and Consulting, LLC and Mortgage Services, LLC knowingly or recklessly provided substantial assistance to Peterson and Genuine Title in their violations of the CFPA. Therefore, under 12 U.S.C. § 5536(a)(3), BTS Management and Consulting, LLC and Mortgage Services, LLC are deemed to be in violation of the CFPA to the same extent as Peterson and Genuine Title.
62.
MARC, LLC knowingly or recklessly provided substantial assistance to Pobletts and Genuine Title in their violations of the CFPA. Therefore, under 12 U.S.C. § 5536(a)(3), MARC, LLC is deemed to be in violation of the CFPA to the same extent as Pobletts and Genuine Title. 63.
R&R Marketing Group, LLC knowingly or recklessly provided substantial assistance to Mandelberg and Genuine Title in their violations of the CFPA. Therefore, under 12 U.S.C. § 5536(a)(3), R&R Marketing Group, LLC is deemed to be in violation of the CFPA to the same extent as Mandelberg and Genuine Title.
Count III: Violations of the CPA (by the CPD against all Defendants)
64.
The allegations in paragraphs 1–55 are incorporated by reference. Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 16 of 20
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65.
Genuine Title, Glickstein, Klopp, Mandelberg, Peterson, Pobletts, Zukerberg, All County Settlements, LLC, BTS Management & Consulting, LLC, Carroll Abstracts, Inc., MARC, LLC, Mortgage Services, LLC, and R&R Marketing Group, LLC participated in the Marketing Services Scheme, the Pay-to-Play Scheme, or both. Their failure to disclose to consumers that they were participating in these schemes constitutes the omission of a material fact which deceives or tends to deceive consumers and constitutes an unfair or deceptive trade practice, as defined by § 13- 301 (3) of the CPA and is prohibited under § 13-303 of the CPA. 66.
Genuine Title, Glickstein, Klopp, Mandelberg, Peterson, Pobletts, Zukerberg, All County Settlements, LLC, BTS Management & Consulting, LLC, Carroll Abstracts, Inc., MARC, LLC, Mortgage Services, LLC, and R&R Marketing Group, LLC participated in the Marketing Services Scheme, Pay-to-Play Scheme, or both. Their failure to disclose to consumers that they were participating in these schemes constitutes an implied representation that they complied with applicable laws, which had the capacity, tendency or effect of deceiving or misleading consumers and constitutes an unfair or deceptive trade practice, as defined by § 13-301(1) of the CPA and is prohibited under § 13-303 of the CPA.
67.
Genuine Title, Glickstein, Klopp, Mandelberg, Peterson, Pobletts, Zukerberg, All County Settlements, LLC, BTS Management & Consulting, LLC, Carroll Abstracts, Inc., MARC, LLC, Mortgage Services, LLC, and R&R Marketing Group, LLC’s failure to advise consumers that they were in violation of RESPA in the offer and sale of mortgage services constitutes the omission of a material fact which deceives or tends to deceive consumers and constitutes an unfair or Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 17 of 20
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deceptive trade practice, as defined by § 13-301(3) of the CPA and is prohibited under § 13-303 of the CPA.
68.
Genuine Title, Glickstein, Klopp, Mandelberg, Peterson, Pobletts, Zukerberg, All County Settlements, LLC, BTS Management & Consulting, LLC, Carroll Abstracts, Inc., MARC, LLC, Mortgage Services, LLC, and R&R Marketing Group, LLC’s practices are unfair because they have caused and are likely to cause substantial injury to consumers, which consumers cannot reasonably avoid. The injuries that consumers have suffered as a result of the Marketing Services Scheme and Pay-to-Play Scheme are not offset by any benefit to consumers or to competition. 69.
Genuine Title, Glickstein, Klopp, Mandelberg, Peterson, Pobletts, Zukerberg, All County Settlements, LLC, BTS Management & Consulting, LLC, Carroll Abstracts, Inc., MARC, LLC, Mortgage Services, LLC, and R&R Marketing Group, LLC’s unfair and deceptive trade practices as described herein have been numerous and ongoing. DEMAND FOR RELIEF Plaintiffs request that the Court:
a. permanently enjoin Defendants from giving or receiving money or any thing of value pursuant to an understanding that any real-estate-settlement business will be referred to any person;
b. permanently enjoin Defendants from engaging in unfair or deceptive trade practices, including but not limited to violations of the CPA; c. award damages or other monetary relief against Defendants; d. order Defendants to pay redress to consumers;
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e. order disgorgement of ill-gotten revenues by Defendants; f. impose civil money penalties on Defendants under the CFPA; g. impose civil money penalties on Defendants under the CPA; h. order Defendants to pay the Bureau’s costs incurred in connection with prosecuting this action;
i. order Defendants to pay the CPD’s costs incurred in connection with prosecuting this action; and j. award additional relief as the Court may determine to be just and proper. Respectfully submitted,
ANTHONY ALEXIS Enforcement Director JEFFREY PAUL EHRLICH Deputy Enforcement Director JOHN C. WELLS Assistant Litigation Deputy
/s/
GENESSA STOUT (WA Bar No. 38410) (Fed. Bar No. 801353) LAWRENCE D. BROWN (TX Bar No. 24040586) (Fed. Bar No. 801343) BENJAMIN KONOP (OH Bar No. 0073458) Enforcement Attorneys Consumer Financial Protection Bureau 1700 G Street, NW Washington, D.C. 20552 Telephone (Stout): 202-435-7920 Telephone (Brown): 202-435-7116 Telephone (Konop): 202-435-7265 Facsimile: 202-435-7722 e-mail: [email protected] e-mail: [email protected] Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 19 of 20
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e-mail: [email protected]
Attorneys for Plaintiff Consumer Financial Protection Bureau
BRIAN E. FROSH
Attorney General of Maryland
/s/ _____________________ (signed by Genessa Stout with permission)
MICHAEL A. HOFFMAN (Md. Bar No. 7672)
LUCY CARDWELL (Md. Bar No. 7311)
Assistant Attorneys General
Office of the Attorney General
Consumer Protection Division
200 St. Paul Place, 16th Floor
Baltimore, MD 21202
Telephone (Hoffman): 410- 576-6952
Telephone (Cardwell): 410-576-6337
Facsimile: 410-576-6566
e-mail: mhoffman@ oag.state.md.us e-mail: [email protected]
Attorneys for Plaintiff Consumer Protection Division
Office of the Attorney General of Maryland Case 1:15-cv-01235-JFM Document 1 Filed 04/29/15 Page 20 of 20
Order ()
PDF of this document (9 pages)
Page 22
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552 CONSUMER PROTECTION DIVISION, Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202 Baltimore County Plaintiffs, v.
GENUINE TITLE, LLC 11155 Dolfield Blvd., Suite 100 Owings Mills, MD 21117 Baltimore County BRANDON GLICKSTEIN 3 Valleys Crest Court Owings Mills, MD 21117 Baltimore County GARY KLOPP 2915 Eden Drive Manchester, MD 21102 Carroll County ADAM MANDELBERG 807 Dominion Lane Reisterstown, MD 21136 Baltimore County
Case No. 1:15-cv-01235-JFM
Case 1:15-cv-01235-JFM Document 7-1 Filed 04/29/15 Page 1 of 9
Page 23
WILLIAM J. PETERSON, III 635 Prestwick Trail Bel Air, MD 21014 Harford County ANGELA POBLETTS 1930 Castleton Road Darlington, MD 21034 Harford County JAY ZUKERBERG 4714 Glenarm Avenue Baltimore, MD 21206 Baltimore County ALL COUNTY SETTLEMENTS, LLC 2915 Eden Drive Manchester, MD 21102 Carroll County BTS MANAGEMENT AND CONSULTING, LLC 929 Creek Park Road Bel Air, MD 21014 Harford County CARROLL ABSTRACTS, INC.
2915 Eden Drive Manchester, MD 21102 Carroll County MARC, LLC 1930 Castleton Road Darlington, MD 21034 Harford County Case 1:15-cv-01235-JFM Document 7-1 Filed 04/29/15 Page 2 of 9
Page 24
MORTGAGE SERVICES, LLC 4940 Campbell Blvd.
Suite 210 Nottingham, MD 21236 Baltimore County R&R MARKETING GROUP, LLC 807 Dominion Lane Reisterstown, MD 21136 Baltimore County, Defendants.
STIPULATED FINAL JUDGMENT AND ORDER WITH RESPECT TO GENUINE TITLE, LLC
The Consumer Financial Protection Bureau (“Bureau”) and the Consumer Protection Division, Office of the Attorney General of the State of Maryland (“CPD”), commenced this civil action against Defendant on April 29, 2015, to obtain injunctive relief, redress, and other relief. The Complaint alleges violations of § 8(a) of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607(a); § 1036(a)(1)(A) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. § 5536(a)(1)(A); and the Maryland Consumer Protection Act (“CPA”), Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol.). The Plaintiffs and Defendant Genuine Title, LLC have requested that the Court enter this Stipulated Final Judgment and Order (“Order”).
FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action. Case 1:15-cv-01235-JFM Document 7-1 Filed 04/29/15 Page 3 of 9
Page 25
2.
Plaintiffs and Defendant agree to entry of this Order, without adjudication of any issue of fact or law, to settle and resolve all matters in this dispute arising from the conduct alleged in the Complaint to the date this Order is entered. 3.
Defendant neither admits nor denies any allegations in the Complaint, except as specifically stated in this Order. For purposes of this Order, Defendant admits the facts necessary to establish the Court’s jurisdiction over Defendant and the subject matter of this action. 4.
Defendant waives service under Rule 4(d) of the Federal Rules of Civil Procedure and waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendant also waives any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each party will bear its own costs and expenses, including without limitation attorneys’ fees. 5.
Entry of this Order is in the public interest. DEFINITIONS 6.
The following definitions apply to this Order: a.
“Defendant” means Genuine Title, LLC.
b.
“Defendant’s Accounts” means any operating or non-escrow account used by Genuine Title, LLC, including but not limited to M & T Bank Accounts Numbered 9845502435, 9845502443, and 9845502468.
c.
“Effective Date” means the date on which the Order is issued. d.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his delegate. Case 1:15-cv-01235-JFM Document 7-1 Filed 04/29/15 Page 4 of 9
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e.
“Mortgage Industry” means any business that involves a federally related mortgage loan or loans as defined in 12 U.S.C. § 2602(1) or any business that involves settlement services as defined in 12 U.S.C. § 2601(3). f.
“Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts as described in this Order or the Complaint.
ORDER
IT IS ORDERED that:
I.
Conduct Prohibition 7.
Defendant shall not give and Defendant shall not accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real-estate-settlement service involving a federally related mortgage loan shall be referred to any person.
8.
Pursuant to 12 U.S.C. § 5565(a)(2)(G), Defendant is limited from participation in the Mortgage Industry in any professional capacity for five years from the Effective Date.
Case 1:15-cv-01235-JFM Document 7-1 Filed 04/29/15 Page 5 of 9
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II.
Monetary Provisions 9.
Any monies remaining in Defendant’s Accounts after claims arising out of Defendant’s title services have been paid must be turned over to the CPD as a civil money penalty. 10.
Defendant must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the State of Maryland ultimately uses those funds, Defendant may not:
a.
Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b.
Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. 11.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendant may not argue that Defendant is entitled to, nor may Defendant benefit by, any offset or reduction of any compensatory monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action (Penalty Offset). If the court in any Related Consumer Action grants such a Penalty Offset, Defendant must, within 30 days after entry of a final order granting the Penalty Offset, notify the CPD, and pay the amount of the Penalty Offset to the Maryland General Fund. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action.
Case 1:15-cv-01235-JFM Document 7-1 Filed 04/29/15 Page 6 of 9
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III.
Additional Monetary Provisions 12.
In the event of any default on Defendant’s obligation to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
13.
Defendant must relinquish all dominion, control, and title to the funds paid or to be paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendant.
14.
Under 31 U.S.C. § 7701, Defendant, unless it already has done so, must furnish to the Bureau and the CPD his taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 15.
Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendant must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendant paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. IV.
Reporting Requirements 16.
Defendant must notify the Bureau and the CPD of any development that may affect compliance obligations arising under this Order, including but not limited to the filing of any bankruptcy or insolvency proceeding by or against Defendant; or a change in Defendant’s name or Case 1:15-cv-01235-JFM Document 7-1 Filed 04/29/15 Page 7 of 9
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address. Defendant must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner. V.
Notices 17.
Unless otherwise directed in writing by the Bureau or the CPD, respectively, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “In re Genuine Title, LLC, Case No. 1:15-cv-01235-JFM” and send them to:
Assistant Director for Enforcement Consumer Financial Protection Bureau ATTN: Office of Enforcement 1700 G Street, NW Washington, DC 20552 [email protected]
Chief, Consumer Protection Division Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202
VI.
Cooperation with the Bureau and the CPD 18.
Defendant must cooperate fully with the Bureau and the CPD in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendant must provide to the Bureau or to the CPD truthful and complete information, evidence, and testimony. Defendant must appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau or the CPD may reasonably request upon 5 days written notice, or other reasonable notice, at such places and times as the Bureau or the CPD may designate, without the service of compulsory process.
Case 1:15-cv-01235-JFM Document 7-1 Filed 04/29/15 Page 8 of 9
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VII. Compliance Monitoring 19.
Within 14 days of receipt of a written request from the Bureau, Defendant must submit compliance reports or other requested information, which must be made under penalty of perjury; provide sworn testimony; or produce documents. 20.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6 or the CPD’s use of its subpoena power under the CPA § 13-404. VIII. Retention of Jurisdiction 21.
The Court will retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order. IT IS SO ORDERED.
DATED this ___ day of ______________, 2015.
_________________________________ United States District Court Judge
Case 1:15-cv-01235-JFM Document 7-1 Filed 04/29/15 Page 9 of 9
Order ()
PDF of this document (9 pages)
Page 31
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552 CONSUMER PROTECTION DIVISION, Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202 Baltimore County Plaintiffs, v.
GENUINE TITLE, LLC 11155 Dolfield Blvd., Suite 100 Owings Mills, MD 21117 Baltimore County BRANDON GLICKSTEIN 3 Valleys Crest Court Owings Mills, MD 21117 Baltimore County GARY KLOPP 2915 Eden Drive Manchester, MD 21102 Carroll County ADAM MANDELBERG 807 Dominion Lane Reisterstown, MD 21136 Baltimore County
Case No. 1:15-cv-01235-JFM
Case 1:15-cv-01235-JFM Document 2-1 Filed 04/29/15 Page 1 of 9
Page 32
WILLIAM J. PETERSON, III 635 Prestwick Trail Bel Air, MD 21014 Harford County ANGELA POBLETTS 1930 Castleton Road Darlington, MD 21034 Harford County JAY ZUKERBERG 4714 Glenarm Avenue Baltimore, MD 21206 Baltimore County ALL COUNTY SETTLEMENTS, LLC 2915 Eden Drive Manchester, MD 21102 Carroll County BTS MANAGEMENT AND CONSULTING, LLC 929 Creek Park Road Bel Air, MD 21014 Harford County CARROLL ABSTRACTS, INC.
2915 Eden Drive Manchester, MD 21102 Carroll County MARC, LLC 1930 Castleton Road Darlington, MD 21034 Harford County Case 1:15-cv-01235-JFM Document 2-1 Filed 04/29/15 Page 2 of 9
Page 33
MORTGAGE SERVICES, LLC 4940 Campbell Blvd.
Suite 210 Nottingham, MD 21236 Baltimore County R&R MARKETING GROUP, LLC 807 Dominion Lane Reisterstown, MD 21136 Baltimore County, Defendants.
STIPULATED FINAL JUDGMENT AND ORDER WITH RESPECT TO BRANDON GLICKSTEIN
The Consumer Financial Protection Bureau (“Bureau”) and the Consumer Protection Division, Office of the Attorney General of the State of Maryland (“CPD”), commenced this civil action against Defendant on April 29, 2015, to obtain injunctive relief, redress, and other relief. The Complaint alleges violations of § 8(a) of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607(a); § 1036(a)(1)(A) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. § 5536(a)(1)(A); and the Maryland Consumer Protection Act (“CPA”), Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol.). The Plaintiffs and Defendant Brandon Glickstein have requested that the Court enter this Stipulated Final Judgment and Order (“Order”).
FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action. Case 1:15-cv-01235-JFM Document 2-1 Filed 04/29/15 Page 3 of 9
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2.
Plaintiffs and Defendant agree to entry of this Order, without adjudication of any issue of fact or law, to settle and resolve all matters in this dispute arising from the conduct alleged in the Complaint to the date this Order is entered. 3.
Defendant neither admits nor denies any allegations in the Complaint, except as specifically stated in this Order. For purposes of this Order, Defendant admits the facts necessary to establish the Court’s jurisdiction over Defendant and the subject matter of this action. 4.
Defendant waives service under Rule 4(d) of the Federal Rules of Civil Procedure and waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendant also waives any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each party will bear its own costs and expenses, including without limitation attorneys’ fees. 5.
Entry of this Order is in the public interest.
DEFINITIONS 6.
The following definitions apply to this Order:
a.
“Defendant” means Brandon Glickstein.
b.
“Effective Date” means the date on which the Order is issued. c.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his delegate. d.
“Mortgage Industry” means any business that involves a federally related mortgage loan or loans as defined in 12 U.S.C. § 2602(1) or any business that involves settlement services as defined in 12 U.S.C. § 2601(3). Case 1:15-cv-01235-JFM Document 2-1 Filed 04/29/15 Page 4 of 9
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e.
“Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts as described in this Order or the Complaint.
ORDER
IT IS ORDERED that:
I.
Conduct Prohibition 7.
Defendant shall not give and Defendant shall not accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real-estate-settlement service involving a federally related mortgage loan shall be referred to any person.
8.
Pursuant to 12 U.S.C. § 5565(a)(2)(G), Defendant is limited from participation in the Mortgage Industry in any professional capacity for five years from the Effective Date. II.
Monetary Provisions 9.
A judgment for monetary relief is entered in favor of the Bureau and against the Defendant in the amount of $400,000.
10.
Within 20 days of the Effective Date, the Defendant must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, $400,000 in full satisfaction of the judgment.
11.
Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or by the Bureau’s agent according to applicable Case 1:15-cv-01235-JFM Document 2-1 Filed 04/29/15 Page 5 of 9
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statutes and regulations to be used for redress for injured consumers, including but not limited to refund of moneys, restitution, damages, or other monetary relief, and for any attendant expenses for the administration of any such redress.
12.
If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable, or if funds remain after redress is completed, the Bureau, in consultation with the CPD, may apply any remaining funds for such other equitable relief (including consumerinformation remedies) as determined by the Bureau to be reasonably related to the violations described in the Complaint. Any funds not used for such equitable relief will be deposited in the U.S. Treasury as disgorgement. The Defendant will have no right to challenge any actions that the Bureau, the CPD or their representatives may take under this paragraph. 13.
Payment of redress to any consumer under this Order will not limit consumers’ rights in any way.
III.
Additional Monetary Provisions 14.
In the event of any default on Defendant’s obligation to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
15.
Defendant must relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendant.
Case 1:15-cv-01235-JFM Document 2-1 Filed 04/29/15 Page 6 of 9
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16.
Under 31 U.S.C. § 7701, Defendant, unless he already has done so, must furnish to the Bureau his taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 17.
Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendant must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendant paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. IV.
Reporting Requirements 18.
Defendant must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to the filing of any bankruptcy or insolvency proceeding by or against Defendant; or a change in Defendant’s name or address. Defendant must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner. 19.
Within 10 days of the Effective Date, Defendant shall notify the Bureau and the CPD of (a) Defendant’s current residence, postal address, email address and telephone number; and (b) Defendant’s current role in any business activity, including any business for which he provides services, whether as an employee, officer, or otherwise, and any entity in which Defendant has any ownership interest, identifying for each its name, physical address, and internet address. 20.
For 2 years from the Effective Date, Defendant shall notify the Bureau and the CPD of (a) any change in name, including aliases or fictitious names; (b) any change in residence, postal Case 1:15-cv-01235-JFM Document 2-1 Filed 04/29/15 Page 7 of 9
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address, email address, or telephone number; or (c) any change in title or role in any business activity, including any business for which Defendant provides services, whether as an employee, officer, or any otherwise, and any entity in which Defendant has any ownership interest, identifying for each its name, physical address, and internet address. V.
Notices 21.
Unless otherwise directed in writing by the Bureau or the CPD, respectively, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “In re Genuine Title, LLC, Case No. 1:15-cv-01235-JFM” and send them to:
Assistant Director for Enforcement Consumer Financial Protection Bureau ATTN: Office of Enforcement 1700 G Street, NW Washington, DC 20552 [email protected]
Chief, Consumer Protection Division Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202
VI.
Cooperation with the Bureau and the CPD 22.
Defendant must cooperate fully with the Bureau and the CPD in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendant must provide to the Bureau or to the CPD truthful and complete information, evidence, and testimony. Defendant must appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau or the CPD may reasonably request upon 5 days written notice, or Case 1:15-cv-01235-JFM Document 2-1 Filed 04/29/15 Page 8 of 9
Page 39
other reasonable notice, at such places and times as the Bureau or the CPD may designate, without the service of compulsory process.
VII.
Compliance Monitoring 23.
Within 14 days of receipt of a written request from the Bureau, Defendant must submit compliance reports or other requested information, which must be made under penalty of perjury; provide sworn testimony; or produce documents. 24.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6 or the CPD’s use of its subpoena power under the CPA § 13-404. VIII. Retention of Jurisdiction 25.
The Court will retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order. IT IS SO ORDERED.
DATED this ___ day of ______________, 2015.
_________________________________ United States District Court Judge
Case 1:15-cv-01235-JFM Document 2-1 Filed 04/29/15 Page 9 of 9
Order ()
PDF of this document (9 pages)
Page 40
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552 CONSUMER PROTECTION DIVISION, Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202 Baltimore County Plaintiffs, v.
GENUINE TITLE, LLC 11155 Dolfield Blvd., Suite 100 Owings Mills, MD 21117 Baltimore County BRANDON GLICKSTEIN 3 Valleys Crest Court Owings Mills, MD 21117 Baltimore County GARY KLOPP 2915 Eden Drive Manchester, MD 21102 Carroll County ADAM MANDELBERG 807 Dominion Lane Reisterstown, MD 21136 Baltimore County
Case No. 1:15-cv-01235-JFM
Case 1:15-cv-01235-JFM Document 3-1 Filed 04/29/15 Page 1 of 9
Page 41
WILLIAM J. PETERSON, III 635 Prestwick Trail Bel Air, MD 21014 Harford County ANGELA POBLETTS 1930 Castleton Road Darlington, MD 21034 Harford County JAY ZUKERBERG 4714 Glenarm Avenue Baltimore, MD 21206 Baltimore County ALL COUNTY SETTLEMENTS, LLC 2915 Eden Drive Manchester, MD 21102 Carroll County BTS MANAGEMENT AND CONSULTING, LLC 929 Creek Park Road Bel Air, MD 21014 Harford County CARROLL ABSTRACTS, INC.
2915 Eden Drive Manchester, MD 21102 Carroll County MARC, LLC 1930 Castleton Road Darlington, MD 21034 Harford County Case 1:15-cv-01235-JFM Document 3-1 Filed 04/29/15 Page 2 of 9
Page 42
MORTGAGE SERVICES, LLC 4940 Campbell Blvd.
Suite 210 Nottingham, MD 21236 Baltimore County R&R MARKETING GROUP, LLC 807 Dominion Lane Reisterstown, MD 21136 Baltimore County, Defendants.
STIPULATED FINAL JUDGMENT AND ORDER WITH RESPECT TO ADAM MANDELBERG AND R&R MARKETING GROUP, LLC
The Consumer Financial Protection Bureau (“Bureau”) and the Consumer Protection Division, Office of the Attorney General of the State of Maryland (“CPD”), commenced this civil action against Defendants on April 29, 2015, to obtain injunctive relief, redress, and other relief. The Complaint alleges violations of § 8(a) of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607(a); § 1036(a)(1)(A) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. § 5536(a)(1)(A); and the Maryland Consumer Protection Act (“CPA”), Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol.). The Plaintiffs and Defendants Adam Mandelberg and R&R Marketing Group, LLC have requested that the Court enter this Stipulated Final Judgment and Order (“Order”). FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action. Case 1:15-cv-01235-JFM Document 3-1 Filed 04/29/15 Page 3 of 9
Page 43
2.
Plaintiffs and Defendants agree to entry of this Order, without adjudication of any issue of fact or law, to settle and resolve all matters in this dispute arising from the conduct alleged in the Complaint to the date this Order is entered. 3.
Defendants neither admit nor deny any allegations in the Complaint, except as specifically stated in this Order. For purposes of this Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over Defendants and the subject matter of this action. 4.
Defendants waive service under Rule 4(d) of the Federal Rules of Civil Procedure and waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each party will bear its own costs and expenses, including without limitation attorneys’ fees. 5.
Entry of this Order is in the public interest.
DEFINITIONS 6.
The following definitions apply to this Order:
a.
“Defendants” means Adam Mandelberg (Nationwide Mortgage Licensing System and Registry (“NMLSR”) unique identifier 368378) and R&R Marketing Group, LLC. b.
“Effective Date” means the date on which the Order is issued. c.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his delegate. Case 1:15-cv-01235-JFM Document 3-1 Filed 04/29/15 Page 4 of 9
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d.
“Mortgage Industry” means any business that involves a federally related mortgage loan or loans as defined in 12 U.S.C. § 2602(1) or any business that involves settlement services as defined in 12 U.S.C. § 2601(3). e.
“Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendants based on substantially the same facts as described in this Order or the Complaint.
ORDER
IT IS ORDERED that:
I.
Conduct Prohibition 7.
Defendants shall not give and Defendants shall not accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real-estate-settlement service involving a federally related mortgage loan shall be referred to any person.
8.
Pursuant to 12 U.S.C. § 5565(a)(2)(G), Defendants are limited from participation in the Mortgage Industry in any professional capacity for two years from the Effective Date. 9.
Within 20 days of the Effective Date, Defendants must disclose this action and Order to NMLSR and, in accordance with NMLSR procedure, upload an electronic copy of this Order. II.
Monetary Provisions 10.
A judgment for monetary relief is entered in favor of the Bureau and against the Defendants in the amount of $30,000.
Case 1:15-cv-01235-JFM Document 3-1 Filed 04/29/15 Page 5 of 9
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11.
Within 20 days of the Effective Date, the Defendants must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, $30,000 in full satisfaction of the judgment. 12.
Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or by the Bureau’s agent according to applicable statutes and regulations to be used for redress for injured consumers, including but not limited to refund of moneys, restitution, damages, or other monetary relief, and for any attendant expenses for the administration of any such redress.
13.
If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable, or if funds remain after redress is completed, the Bureau, in consultation with the CPD, may apply any remaining funds for such other equitable relief (including consumerinformation remedies) as determined by the Bureau to be reasonably related to the violations described in the Complaint. Any funds not used for such equitable relief will be deposited in the U.S. Treasury as disgorgement. The Defendants will have no right to challenge any actions that the Bureau, the CPD, or their representatives may take under this paragraph. 14.
Payment of redress to any consumer under this Order will not limit consumers’ rights in any way.
III.
Additional Monetary Provisions 15.
In the event of any default on Defendants’ obligation to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding Case 1:15-cv-01235-JFM Document 3-1 Filed 04/29/15 Page 6 of 9
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amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
16.
Defendants must relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendants.
17.
Under 31 U.S.C. § 7701, Defendants, unless they already have done so, must furnish to the Bureau their taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 18.
Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. IV.
Reporting Requirements 19.
Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to the filing of any bankruptcy or insolvency proceeding by or against Defendants; or a change in Defendants’ name or address. Defendants must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner. 20.
Within 10 days of the Effective Date, Defendants shall notify the Bureau and the CPD of (a) Defendants’ current residence, postal address, email address and telephone number; and Case 1:15-cv-01235-JFM Document 3-1 Filed 04/29/15 Page 7 of 9
Page 47
(b) Defendants’ current role in any business activity, including any business for which Defendants provide services, whether as an employee, officer, or otherwise, and any entity in which Defendants have any ownership interest, identifying for each its name, physical address, and internet address. 21.
For 2 years from the Effective Date, Defendants shall notify the Bureau and the CPD of (a) any change in name, including aliases or fictitious names; (b) any change in residence, postal address, email address, or telephone number; or (c) any change in title or role in any business activity, including any business for which Defendants provide services, whether as an employee, officer, or any otherwise, and any entity in which Defendants have any ownership interest, identifying for each its name, physical address, and internet address. V.
Notices 22.
Unless otherwise directed in writing by the Bureau or the CPD, respectively, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “In re Genuine Title, LLC, Case No. 1:15-cv-01235- JFM” and send them to:
Assistant Director for Enforcement Consumer Financial Protection Bureau ATTN: Office of Enforcement 1700 G Street, NW Washington, DC 20552 [email protected]
Chief, Consumer Protection Division Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202
Case 1:15-cv-01235-JFM Document 3-1 Filed 04/29/15 Page 8 of 9
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VI.
Cooperation with the Bureau and the CPD 23.
Defendants must cooperate fully with the Bureau and the CPD in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendants must provide to the Bureau or to the CPD truthful and complete information, evidence, and testimony. Defendants must appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau or the CPD may reasonably request upon 5 days written notice, or other reasonable notice, at such places and times as the Bureau or the CPD may designate, without the service of compulsory process.
VII.
Compliance Monitoring 24.
Within 14 days of receipt of a written request from the Bureau, Defendants must submit compliance reports or other requested information, which must be made under penalty of perjury; provide sworn testimony; or produce documents. 25.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6 or the CPD’s use of its subpoena power under the CPA § 13-404. VII. Retention of Jurisdiction 26.
The Court will retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order.
IT IS SO ORDERED.
DATED this ___ day of ______________, 2015.
_________________________________ United States District Court Judge Case 1:15-cv-01235-JFM Document 3-1 Filed 04/29/15 Page 9 of 9
Order ()
PDF of this document (9 pages)
Page 49
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552 CONSUMER PROTECTION DIVISION, Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202 Baltimore County Plaintiffs, v.
GENUINE TITLE, LLC 11155 Dolfield Blvd., Suite 100 Owings Mills, MD 21117 Baltimore County BRANDON GLICKSTEIN 3 Valleys Crest Court Owings Mills, MD 21117 Baltimore County GARY KLOPP 2915 Eden Drive Manchester, MD 21102 Carroll County ADAM MANDELBERG 807 Dominion Lane Reisterstown, MD 21136 Baltimore County
Case No. 1:15-cv-01235-JFM
Case 1:15-cv-01235-JFM Document 4-1 Filed 04/29/15 Page 1 of 9
Page 50
WILLIAM J. PETERSON, III 635 Prestwick Trail Bel Air, MD 21014 Harford County ANGELA POBLETTS 1930 Castleton Road Darlington, MD 21034 Harford County JAY ZUKERBERG 4714 Glenarm Avenue Baltimore, MD 21206 Baltimore County ALL COUNTY SETTLEMENTS, LLC 2915 Eden Drive Manchester, MD 21102 Carroll County BTS MANAGEMENT AND CONSULTING, LLC 929 Creek Park Road Bel Air, MD 21014 Harford County CARROLL ABSTRACTS, INC.
2915 Eden Drive Manchester, MD 21102 Carroll County MARC, LLC 1930 Castleton Road Darlington, MD 21034 Harford County Case 1:15-cv-01235-JFM Document 4-1 Filed 04/29/15 Page 2 of 9
Page 51
MORTGAGE SERVICES, LLC 4940 Campbell Blvd.
Suite 210 Nottingham, MD 21236 Baltimore County R&R MARKETING GROUP, LLC 807 Dominion Lane Reisterstown, MD 21136 Baltimore County, Defendants.
STIPULATED FINAL JUDGMENT AND ORDER WITH RESPECT TO WILLIAM J. PETERSON, III, BTS MANAGEMENT AND CONSULTING, LLC, AND MORTGAGE SERVICES, LLC
The Consumer Financial Protection Bureau (“Bureau”) and the Consumer Protection Division, Office of the Attorney General of the State of Maryland (“CPD”), commenced this civil action against Defendants on April 29, 2015, to obtain injunctive relief, redress, and other relief. The Complaint alleges violations of § 8(a) of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607(a); § 1036(a)(1)(A) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. § 5536(a)(1)(A); and the Maryland Consumer Protection Act (“CPA”), Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol.). The Plaintiffs and Defendants William J. Peterson, III, BTS Management and Consulting, LLC, and Mortgage Services, LLC have requested that the Court enter this Stipulated Final Judgment and Order (“Order”).
FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action. Case 1:15-cv-01235-JFM Document 4-1 Filed 04/29/15 Page 3 of 9
Page 52
2.
Plaintiffs and Defendants agree to entry of this Order, without adjudication of any issue of fact or law, to settle and resolve all matters in this dispute arising from the conduct alleged in the Complaint to the date this Order is entered. 3.
Defendants neither admit nor deny any allegations in the Complaint, except as specifically stated in this Order. For purposes of this Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over Defendants and the subject matter of this action. 4.
Defendants waive service under Rule 4(d) of the Federal Rules of Civil Procedure and waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each party will bear its own costs and expenses, including without limitation attorneys’ fees. 5.
Entry of this Order is in the public interest.
DEFINITIONS 6.
The following definitions apply to this Order:
a.
“Defendants” means William J. Peterson, III (Nationwide Mortgage Licensing System and Registry (“NMLSR”) unique identifier 104372), BTS Management and Consulting, LLC, and Mortgage Services, LLC.
b.
“Effective Date” means the date on which the Order is issued. c.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his delegate. Case 1:15-cv-01235-JFM Document 4-1 Filed 04/29/15 Page 4 of 9
Page 53
d.
“Mortgage Industry” means any business that involves a federally related mortgage loan or loans as defined in 12 U.S.C. § 2602(1) or any business that involves settlement services as defined in 12 U.S.C. § 2601(3). e.
“Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendants based on substantially the same facts as described in this Order or the Complaint.
ORDER
IT IS ORDERED that:
I.
Conduct Prohibition 7.
Defendants shall not give and Defendants shall not accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real-estate-settlement service involving a federally related mortgage loan shall be referred to any person.
8.
Pursuant to 12 U.S.C. § 5565(a)(2)(G), Defendants are limited from participation in the Mortgage Industry in any professional capacity for two years from the Effective Date. 9.
Within 60 days of the Effective Date, Defendants must disclose this action and Order to NMLSR and, in accordance with NMLSR procedure, upload an electronic copy of this Order. II.
Monetary Provisions 10.
A judgment for monetary relief is entered in favor of the Bureau and against the Defendants in the amount of $65,000.
Case 1:15-cv-01235-JFM Document 4-1 Filed 04/29/15 Page 5 of 9
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11.
Within 60 days of the Effective Date, the Defendants must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, $65,000 in full satisfaction of the judgment. 12.
Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or by the Bureau’s agent according to applicable statutes and regulations to be used for redress for injured consumers, including but not limited to refund of moneys, restitution, damages, or other monetary relief, and for any attendant expenses for the administration of any such redress.
13.
If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable, or if funds remain after redress is completed, the Bureau, in consultation with the CPD, may apply any remaining funds for such other equitable relief (including consumerinformation remedies) as determined by the Bureau to be reasonably related to the violations described in the Complaint. Any funds not used for such equitable relief will be deposited in the U.S. Treasury as disgorgement. The Defendants will have no right to challenge any actions that the Bureau, the CPD, or their representatives may take under this paragraph. 14.
Payment of redress to any consumer under this Order will not limit consumers’ rights in any way.
III.
Additional Monetary Provisions 15.
In the event of any default on Defendants’ obligation to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding Case 1:15-cv-01235-JFM Document 4-1 Filed 04/29/15 Page 6 of 9
Page 55
amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
16.
Defendants must relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendants.
17.
Under 31 U.S.C. § 7701, Defendants, unless they already have done so, must furnish to the Bureau their taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 18.
Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. IV.
Reporting Requirements 19.
Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to the filing of any bankruptcy or insolvency proceeding by or against Defendants; or a change in Defendants’ name or address. Defendants must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner. 20.
Within 10 days of the Effective Date, Defendants shall notify the Bureau and the CPD of (a) Peterson’s current residence, postal address, email address, and telephone number; and Case 1:15-cv-01235-JFM Document 4-1 Filed 04/29/15 Page 7 of 9
Page 56
(b) Peterson’s current role in any business activity, including any business for which he provides services, whether as an employee, officer, or otherwise, and any entity in which Peterson has any ownership interest, identifying for each its name, physical address, and internet address. 21.
For 2 years from the Effective Date, Defendants shall notify the Bureau and the CPD of (a) any change in name, including aliases or fictitious names; (b) any change in residence, postal address, email address, or telephone number; or (c) any change in title or role in any business activity, including any business for which Defendants provide services, whether as an employee, officer, or any otherwise, and any entity in which Defendants have any ownership interest, identifying for each its name, physical address, and internet address. V.
Notices 22.
Unless otherwise directed in writing by the Bureau or the CPD, respectively, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “In re Genuine Title, LLC, Case No. 1:15-cv-01235- JFM” and send them to:
Assistant Director for Enforcement Consumer Financial Protection Bureau ATTN: Office of Enforcement 1700 G Street, NW Washington, DC 20552 [email protected]
Chief, Consumer Protection Division Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202
Case 1:15-cv-01235-JFM Document 4-1 Filed 04/29/15 Page 8 of 9
Page 57
VI.
Cooperation with the Bureau and the CPD 23.
Defendants must cooperate fully with the Bureau and the CPD in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendants must provide to the Bureau or to the CPD truthful and complete information, evidence, and testimony. Defendants must appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau or the CPD may reasonably request upon 5 days written notice, or other reasonable notice, at such places and times as the Bureau or the CPD may designate, without the service of compulsory process.
VII.
Compliance Monitoring 24.
Within 14 days of receipt of a written request from the Bureau, Defendants must submit compliance reports or other requested information, which must be made under penalty of perjury; provide sworn testimony; or produce documents. 25.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6 or the CPD’s use of its subpoena power under the CPA § 13-404. VIII. Retention of Jurisdiction 26.
The Court will retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order.
IT IS SO ORDERED.
DATED this ___ day of ______________, 2015.
_________________________________ United States District Court Judge Case 1:15-cv-01235-JFM Document 4-1 Filed 04/29/15 Page 9 of 9
Order ()
PDF of this document (9 pages)
Page 58
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552 CONSUMER PROTECTION DIVISION, Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202 Baltimore County Plaintiffs, v.
GENUINE TITLE, LLC 11155 Dolfield Blvd., Suite 100 Owings Mills, MD 21117 Baltimore County BRANDON GLICKSTEIN 3 Valleys Crest Court Owings Mills, MD 21117 Baltimore County GARY KLOPP 2915 Eden Drive Manchester, MD 21102 Carroll County ADAM MANDELBERG 807 Dominion Lane Reisterstown, MD 21136 Baltimore County
Case No. 1:15-cv-01235-JFM
Case 1:15-cv-01235-JFM Document 5-1 Filed 04/29/15 Page 1 of 9
Page 59
WILLIAM J. PETERSON, III 635 Prestwick Trail Bel Air, MD 21014 Harford County ANGELA POBLETTS 1930 Castleton Road Darlington, MD 21034 Harford County JAY ZUKERBERG 4714 Glenarm Avenue Baltimore, MD 21206 Baltimore County ALL COUNTY SETTLEMENTS, LLC 2915 Eden Drive Manchester, MD 21102 Carroll County BTS MANAGEMENT AND CONSULTING, LLC 929 Creek Park Road Bel Air, MD 21014 Harford County CARROLL ABSTRACTS, INC.
2915 Eden Drive Manchester, MD 21102 Carroll County MARC, LLC 1930 Castleton Road Darlington, MD 21034 Harford County Case 1:15-cv-01235-JFM Document 5-1 Filed 04/29/15 Page 2 of 9
Page 60
MORTGAGE SERVICES, LLC 4940 Campbell Blvd.
Suite 210 Nottingham, MD 21236 Baltimore County R&R MARKETING GROUP, LLC 807 Dominion Lane Reisterstown, MD 21136 Baltimore County, Defendants.
STIPULATED FINAL JUDGMENT AND ORDER WITH RESPECT TO ANGELA POBLETTS AND MARC, LLC
The Consumer Financial Protection Bureau (“Bureau”) and the Consumer Protection Division, Office of the Attorney General of the State of Maryland (“CPD”), commenced this civil action against Defendants on April 29, 2015, to obtain injunctive relief, redress, and other relief. The Complaint alleges violations of § 8(a) of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607(a); § 1036(a)(1)(A) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. § 5536(a)(1)(A); and the Maryland Consumer Protection Act (“CPA”), Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol.). The Plaintiffs and Defendants Angela Pobletts and MARC, LLC have requested that the Court enter this Stipulated Final Judgment and Order (“Order”). FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action. Case 1:15-cv-01235-JFM Document 5-1 Filed 04/29/15 Page 3 of 9
Page 61
2.
Plaintiffs and Defendants agree to entry of this Order, without adjudication of any issue of fact or law, to settle and resolve all matters in this dispute arising from the conduct alleged in the Complaint to the date this Order is entered. 3.
Defendants neither admit nor deny any allegations in the Complaint, except as specifically stated in this Order. For purposes of this Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over Defendants and the subject matter of this action. 4.
Defendants waive service under Rule 4(d) of the Federal Rules of Civil Procedure and waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each party will bear its own costs and expenses, including without limitation attorneys’ fees. 5.
Entry of this Order is in the public interest.
DEFINITIONS 6.
The following definitions apply to this Order:
a.
“Defendants” means Angela Pobletts (Nationwide Mortgage Licensing System and Registry (“NMLSR”) unique identifier 142134) and MARC, LLC. b.
“Effective Date” means the date on which the Order is issued. c.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his delegate. Case 1:15-cv-01235-JFM Document 5-1 Filed 04/29/15 Page 4 of 9
Page 62
d.
“Mortgage Industry” means any business that involves a federally related mortgage loan or loans as defined in 12 U.S.C. § 2602(1) or any business that involves settlement services as defined in 12 U.S.C. § 2601(3). e.
“Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendants based on substantially the same facts as described in this Order or the Complaint.
ORDER
IT IS ORDERED that:
I.
Conduct Prohibition 7.
Defendants shall not give and Defendants shall not accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real-estate-settlement service involving a federally related mortgage loan shall be referred to any person.
8.
Pursuant to 12 U.S.C. § 5565(a)(2)(G), Defendants are limited from participation in the Mortgage Industry in any professional capacity for two years from the Effective Date. 9.
Within 20 days of the Effective Date, Defendants must disclose this action and Order to NMLSR and, in accordance with NMLSR procedure, upload an electronic copy of this Order. II.
Monetary Provisions 10.
A judgment for monetary relief is entered in favor of the Bureau and against the Defendants in the amount of $37,500.
Case 1:15-cv-01235-JFM Document 5-1 Filed 04/29/15 Page 5 of 9
Page 63
11.
Within 60 days of the Effective Date, the Defendants must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, $37,500 in full satisfaction of the judgment. 12.
Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or by the Bureau’s agent according to applicable statutes and regulations to be used for redress for injured consumers, including but not limited to refund of moneys, restitution, damages, or other monetary relief, and for any attendant expenses for the administration of any such redress.
13.
If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable, or if funds remain after redress is completed, the Bureau, in consultation with the CPD, may apply any remaining funds for such other equitable relief (including consumerinformation remedies) as determined by the Bureau to be reasonably related to the violations described in the Complaint. Any funds not used for such equitable relief will be deposited in the U.S. Treasury as disgorgement. The Defendants will have no right to challenge any actions that the Bureau, the CPD, or their representatives may take under this paragraph. 14.
Payment of redress to any consumer under this Order will not limit consumers’ rights in any way.
III.
Additional Monetary Provisions 15.
In the event of any default on Defendants’ obligation to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding Case 1:15-cv-01235-JFM Document 5-1 Filed 04/29/15 Page 6 of 9
Page 64
amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
16.
Defendants must relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendants.
17.
Under 31 U.S.C. § 7701, Defendants, unless they already have done so, must furnish to the Bureau their taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 18.
Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. IV. Reporting Requirements 19.
Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to the filing of any bankruptcy or insolvency proceeding by or against Defendants; or a change in Defendants’ name or address. Defendants must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner. 20.
Within 10 days of the Effective Date, Defendants shall notify the Bureau and the CPD of (a) Defendants’ current residence, postal address, email address and telephone number; and Case 1:15-cv-01235-JFM Document 5-1 Filed 04/29/15 Page 7 of 9
Page 65
(b) Defendants’ current role in any business activity, including any business for which Defendants provide services, whether as an employee, officer, or otherwise, and any entity in which Defendants have any ownership interest, identifying for each its name, physical address, and internet address. 21.
For 2 years from the Effective Date, Defendants shall notify the Bureau and the CPD of (a) any change in name, including aliases or fictitious names; (b) any change in residence, postal address, email address, or telephone number; or (c) any change in title or role in any business activity, including any business for which Defendants provide services, whether as an employee, officer, or any otherwise, and any entity in which Defendants have any ownership interest, identifying for each its name, physical address, and internet address. V.
Notices 22.
Unless otherwise directed in writing by the Bureau or the CPD, respectively, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “In re Genuine Title, LLC, Case No. 1:15-cv-01235- JFM” and send them to:
Assistant Director for Enforcement Consumer Financial Protection Bureau ATTN: Office of Enforcement 1700 G Street, NW Washington, DC 20552
Chief, Consumer Protection Division Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202
Case 1:15-cv-01235-JFM Document 5-1 Filed 04/29/15 Page 8 of 9
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VI.
Cooperation with the Bureau and the CPD 23.
Defendants must cooperate fully with the Bureau and the CPD in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendants must provide to the Bureau or to the CPD truthful and complete information, evidence, and testimony. Defendants must appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau or the CPD may reasonably request upon 5 days written notice, or other reasonable notice, at such places and times as the Bureau or the CPD may designate, without the service of compulsory process.
VII. Compliance Monitoring 24.
Within 14 days of receipt of a written request from the Bureau, Defendants must submit compliance reports or other requested information, which must be made under penalty of perjury; provide sworn testimony; or produce documents. 25.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6 or the CPD’s use of its subpoena power under the CPA § 13-404. VIII. Retention of Jurisdiction 26.
The Court will retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order.
IT IS SO ORDERED.
DATED this ___ day of ______________, 2015.
_________________________________ United States District Court Judge Case 1:15-cv-01235-JFM Document 5-1 Filed 04/29/15 Page 9 of 9
Order ()
PDF of this document (10 pages)
Page 67
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552 CONSUMER PROTECTION DIVISION, Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202 Baltimore County Plaintiffs, v.
GENUINE TITLE, LLC 11155 Dolfield Blvd., Suite 100 Owings Mills, MD 21117 Baltimore County BRANDON GLICKSTEIN 3 Valleys Crest Court Owings Mills, MD 21117 Baltimore County GARY KLOPP 2915 Eden Drive Manchester, MD 21102 Carroll County ADAM MANDELBERG 807 Dominion Lane Reisterstown, MD 21136 Baltimore County
Case No. 1:15-cv-01235-JFM
Case 1:15-cv-01235-JFM Document 6-1 Filed 04/29/15 Page 1 of 10
Page 68
WILLIAM J. PETERSON, III 635 Prestwick Trail Bel Air, MD 21014 Harford County ANGELA POBLETTS 1930 Castleton Road Darlington, MD 21034 Harford County JAY ZUKERBERG 4714 Glenarm Avenue Baltimore, MD 21206 Baltimore County ALL COUNTY SETTLEMENTS, LLC 2915 Eden Drive Manchester, MD 21102 Carroll County BTS MANAGEMENT AND CONSULTING, LLC 929 Creek Park Road Bel Air, MD 21014 Harford County CARROLL ABSTRACTS, INC.
2915 Eden Drive Manchester, MD 21102 Carroll County MARC, LLC 1930 Castleton Road Darlington, MD 21034 Harford County Case 1:15-cv-01235-JFM Document 6-1 Filed 04/29/15 Page 2 of 10
Page 69
MORTGAGE SERVICES, LLC 4940 Campbell Blvd.
Suite 210 Nottingham, MD 21236 Baltimore County R&R MARKETING GROUP, LLC 807 Dominion Lane Reisterstown, MD 21136 Baltimore County, Defendants.
STIPULATED FINAL JUDGMENT AND ORDER WITH RESPECT TO JAY ZUKERBERG
The Consumer Financial Protection Bureau (“Bureau”) and the Consumer Protection Division, Office of the Attorney General of the State of Maryland (“CPD”), commenced this civil action against Defendant on April 29, 2015, to obtain injunctive relief, redress, and other relief. The Complaint alleges violations of § 8(a) of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607(a); § 1036(a)(1)(A) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. § 5536(a)(1)(A); and the Maryland Consumer Protection Act (“CPA”), Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol.). The Plaintiffs and Defendant Jay Zukerberg have requested that the Court enter this Stipulated Final Judgment and Order (“Order”).
FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action. Case 1:15-cv-01235-JFM Document 6-1 Filed 04/29/15 Page 3 of 10
Page 70
2.
Plaintiffs and Defendant agree to entry of this Order, without adjudication of any issue of fact or law, to settle and resolve all matters in this dispute arising from the conduct alleged in the Complaint to the date this Order is entered. 3.
Defendant neither admits nor denies any allegations in the Complaint, except as specifically stated in this Order. For purposes of this Order, Defendant admits the facts necessary to establish the Court’s jurisdiction over Defendant and the subject matter of this action. 4.
Defendant waives service under Rule 4(d) of the Federal Rules of Civil Procedure and waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendant also waives any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each party will bear its own costs and expenses, including without limitation attorneys’ fees. 5.
Entry of this Order is in the public interest.
DEFINITIONS 6.
The following definitions apply to this Order:
a.
“Defendant” means Jay Zukerberg.
b.
“Effective Date” means the date on which the Order is issued. c.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his delegate. d.
“Mortgage Industry” means any business that involves a federally related mortgage loan or loans as defined in 12 U.S.C. § 2602(1) or any business that involves settlement services as defined in 12 U.S.C. § 2601(3). Case 1:15-cv-01235-JFM Document 6-1 Filed 04/29/15 Page 4 of 10
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e.
“Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts as described in this Order or the Complaint.
ORDER
IT IS ORDERED that:
I.
Conduct Prohibition 7.
Defendant shall not give and Defendant shall not accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real-estate-settlement service involving a federally related mortgage loan shall be referred to any person.
8.
Pursuant to 12 U.S.C. § 5565(a)(2)(G), Defendant is limited from participation in the Mortgage Industry in any professional capacity for five years from the Effective Date. II.
Monetary Provisions 9.
A judgment for monetary relief is entered in favor of the Bureau and against the Defendant in the amount of $30,000.
10.
Within 60 days of the Effective Date, the Defendant must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, $30,000 in full satisfaction of the judgment.
11.
Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or by the Bureau’s agent according to applicable Case 1:15-cv-01235-JFM Document 6-1 Filed 04/29/15 Page 5 of 10
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statutes and regulations to be used for redress for injured consumers, including but not limited to refund of moneys, restitution, damages, or other monetary relief, and for any attendant expenses for the administration of any such redress.
12.
If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable, or if funds remain after redress is completed, the Bureau, in consultation with the CPD, may apply any remaining funds for such other equitable relief (including consumerinformation remedies) as determined by the Bureau to be reasonably related to the violations described in the Complaint. Any funds not used for such equitable relief will be deposited in the U.S. Treasury as disgorgement. The Defendant will have no right to challenge any actions that the Bureau, the CPD or their representatives may take under this paragraph. 13.
Payment of redress to any consumer under this Order will not limit consumers’ rights in any way.
III.
Civil Money Penalty 14.
Defendant must pay a civil money penalty of $100,000 by wire transfer to the CPD or to the CPD’s agent in compliance with the CPD’s wiring instructions in 59 equal monthly installments of $1,666.00 and a final installment of $1,706, beginning within 90 days of the Effective Date.
15.
Defendant must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the State of Maryland ultimately uses those funds, Defendant may not:
Case 1:15-cv-01235-JFM Document 6-1 Filed 04/29/15 Page 6 of 10
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a.
Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b.
Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. 16.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendant may not argue that Defendant is entitled to, nor may Defendant benefit by, any offset or reduction of any compensatory monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action (Penalty Offset). If the court in any Related Consumer Action grants such a Penalty Offset, Defendant must, within 30 days after entry of a final order granting the Penalty Offset, notify the CPD, and pay the amount of the Penalty Offset to the Maryland General Fund. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. IV.
Additional Monetary Provisions 17.
In the event of any default on Defendant’s obligation to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
18.
Defendant must relinquish all dominion, control, and title to the funds paid or to be paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendant.
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19.
Under 31 U.S.C. § 7701, Defendant, unless he already has done so, must furnish to the Bureau and the CPD his taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 20.
Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendant must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendant paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. V.
Reporting Requirements 21.
Defendant must notify the Bureau and the CPD of any development that may affect compliance obligations arising under this Order, including but not limited to the filing of any bankruptcy or insolvency proceeding by or against Defendant; or a change in Defendant’s name or address. Defendant must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner. 22.
Within 10 days of the Effective Date, Defendant shall notify the Bureau and the CPD of (a) Defendant’s current residence, postal address, email address and telephone number; and (b) Defendant’s current role in any business activity, including any business for which he provides services, whether as an employee, officer, or otherwise, and any entity in which Defendant has any ownership interest, identifying for each its name, physical address, and internet address. 23.
For 2 years from the Effective Date, Defendant shall notify the Bureau and the CPD of (a) any change in name, including aliases or fictitious names; (b) any change in residence, postal Case 1:15-cv-01235-JFM Document 6-1 Filed 04/29/15 Page 8 of 10
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address, email address, or telephone number; or (c) any change in title or role in any business activity, including any business for which Defendant provides services, whether as an employee, officer, or any otherwise, and any entity in which Defendant has any ownership interest, identifying for each its name, physical address, and internet address. VI.
Notices 24.
Unless otherwise directed in writing by the Bureau or the CPD, respectively, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “In re Genuine Title, LLC, Case No. 1:15-cv-01235-JFM” and send them to:
Assistant Director for Enforcement Consumer Financial Protection Bureau ATTN: Office of Enforcement 1700 G Street, NW Washington, DC 20552 [email protected]
Chief, Consumer Protection Division Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202
VII.
Cooperation with the Bureau and the CPD 25.
Defendant must cooperate fully with the Bureau and the CPD in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendant must provide to the Bureau or to the CPD truthful and complete information, evidence, and testimony. Defendant must appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau or the CPD may reasonably request upon 5 days written notice, or Case 1:15-cv-01235-JFM Document 6-1 Filed 04/29/15 Page 9 of 10
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other reasonable notice, at such places and times as the Bureau or the CPD may designate, without the service of compulsory process.
VIII. Compliance Monitoring 26.
Within 14 days of receipt of a written request from the Bureau, Defendant must submit compliance reports or other requested information, which must be made under penalty of perjury; provide sworn testimony; or produce documents. 27.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6 or the CPD’s use of its subpoena power under the CPA § 13-404. IX.
Retention of Jurisdiction 28.
The Court will retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order. IT IS SO ORDERED.
DATED this ___ day of ______________, 2015.
_________________________________ United States District Court Judge
Case 1:15-cv-01235-JFM Document 6-1 Filed 04/29/15 Page 10 of 10
Order ()
PDF of this document (9 pages)
Page 77
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552
CONSUMER PROTECTION DIVISION, Office of the Attorney General of Maryland 200 St. Paul Place, 16th Floor Baltimore, MD 21202 Baltimore County, Case No. 1:15-cv-01235-RDB
Plaintiffs,
v.
GENUINE TITLE, LLC 11155 Dolfield Blvd., Suite 100 Owings Mills, MD 21117 Baltimore County
BRANDON GLICKSTEIN 3 Valleys Crest Court Owings Mills, MD 21117 Baltimore County
GARY KLOPP 2915 Eden Drive Manchester, MD 21102 Carroll County
ADAM MANDELBERG 807 Dominion Lane Reisterstown, MD 21136 Baltimore County Case 1:15-cv-01235-RDB Document 51-1 Filed 11/13/15 Page 1 of 9 Case 1:15-cv-01235-RDB Document 53 Filed 11/16/15 Page 1 of 9
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Case 1:15-cv-01235-RDB Document 53 Filed 11/16/15 Page 2 of 9 Case 1:15-cv-01235-RDB Document 51-1 Filed 11/13/15 Page 2 of 9
WILLLAM J. PETERSON, HI 635 Prestwick Trail
Bel Air, MD 21014
Harford County
ANGELA POBLETTS 1930 Castleton Road Darlington, MD 21034 Harford County
JAY ZUKERBERG 4714 Glenarm Avenue Baltimore, MD 21206 Baltimore County
ALL COUNTY SETTLEMENTS, LLC
2915 Eden Drive
Manchester, MD 21102
Carroll County
BTS MANAGEMENT AND CONSULTING, LLC
929 Creek Park Road
Bel Air, MD 21014
Harford County
CARROLL ABSTRACTS, INC.
2915 Eden Drive
Manchester, MD 21102
Carroll County
MARC, LLC
1930 Castleton Road Darlington, MD 21034 Harford County
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Case 1:15-cv-01235-RDB Document 53 Filed 11/16/15 Page 3 of 9 Case 1:15-cv-01235-RDB Document 51-1 Filed 11/13/15 Page 3 of 9
MORTGAGE SERVICES, LLC 4940 Campbell
Blvd. Suite 210
Nottingham, MD 21236 Balumore County
R&R MARKETING GROUP, LLC 807 Dominion Lane
Reisterstown, MD 21136
Baltimore County,
Defendants.
STIPULATED FINAL JUDGMENT AND ORDER
WITH RESPECT TO GARY KLOPP, ALL COUNTY SETTLEMENTS, LLC AND CARROLL ABSTRACTS, INC.
The Consumer Financial Protection Bureau (“Bureau”) and the Consumer Protection Division, Office of the Attorney General of the State of Maryland (“CPD”), commenced this civil action against Defendants on April 29, 2015, to obtain injunctive relief, redress, and other relief.
The Complaint alleges violations of § 8(a) of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607(a); § 1036(a)(1)(A) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. § 5536(a)(1)(A); and the Maryland Consumer Protection Act (“CPA”), Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol).
The Plaintiffs and Defendants Gary Klopp, All County Settlements, LLC and Carroll Abstracts, Inc. have requested that the Court enter this Stipulated Final Judgment and Order (“Order”).
FINDINGS
1. This Court has jurisdiction over the parties and the subject matter of this action.
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Case 1:15-cv-01235-RDB Document 53 Filed 11/16/15 Page 4 of 9
Case 1:15-cv-01235-RDB Document 51-1 Filed 11/13/15 Page 4 of 9 2. Plaintiffs and Defendants agree to entry of this Order, without adjudication of any
issue of fact or law, to settle and resolve all matters in this dispute arising from the conduct alleged in the Complaint to the date this Order 1s entered.
3. Defendants neither admit nor deny any allegations in the Complaint, except as specifically stated in this Order. For purposes of this Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over Defendants and the subject matter of this
action.
4. Defendants waive service under Rule 4(d) of the Federal Rules of Civil Procedure and
waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each party will bear its own costs and expenses, including without limitation attorneys’ fees.
5. Entry of this Order 1s in the public interest.
DEFINITIONS
6. The following definitions apply to this Order:
a. “Defendants” means Gary Klopp (Nationwide Mortgage Licensing System and Registry (NMLSR”) unique identifier___), All County Settlements, LLC and Carroll Abstracts, Inc.
b. “Effective Date” means the date on which the Order is issued.
C. “Mortgage Industry” means any business that involves a federally related mortgage loan or loans as defined in 12 U.S.C. § 2602(1) or any business that involves
settlement services as defined in 12 U.S.C. § 2601(3).
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Case 1:15-cv-01235-RDB Document 53 Filed 11/16/15 Page 5 of 9 Case 1:15-cv-01235-RDB Document 51-1 Filed 11/13/15 Page 5 of 9 d. “Related Consumer Action” means a private action by or on behalf of one
or more consumets ot an enforcement action by another governmental agency brought
against Defendants based on substantially the same facts as described in this Order or the
Complaint.
ORDER IT IS ORDERED that:
I, Conduct Prohibition 7. Defendants shall not give and Defendants shall not accept any fee, kickback, or
thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real-estate-settlement service involving a federally related mortgage loan shall be referred to any person.
8. Pursuant to 12 U.S.C. § 5565(a)(2)(G), Defendants are limited from participation in the Mortgage Industry for two years from the Effective Date as follows:
a. Defendants are prohibited from contacting, soliciting, or otherwise dealing with consumer borrowers or loan applicants in any capacity with regard to any mortgage business; and
b. Defendants are prohibited from contacting, soliciting, or otherwise dealing with any third party businesses engaged in offering any settlement service.
C. These limitations shall not prohibit Defendant Klopp from acting solely as a personnel or human-resources manager for a mortgage business operated by an FDICinsured banking institution, including providing personnel or human-resources-telated management and administrative functions with regard to National Mortgage Licensing
System-registered loan originators, as that term is defined in Md. Fin. Inst. Code Ann. §11-
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Case 1:15-cv-01235-RDB Document 53 Filed 11/16/15 Page 6 of 9 Case 1:15-cv-01235-RDB Document 51-1 Filed 11/13/15 Page 6 of 9 601.
9. Within 60 days of the Effective Date, Defendant Klopp must disclose this action and Order to NMLSR and, in accordance with NMLSR procedure, upload an electronic copy of this Order.
I. Monetary Provisions
10. Defendants, jointly and severally, must pay a civil money penalty of seventy-five thousand dollars ($75,000.00) by wire transfer to the CPD or the CPD’s agent in compliance with the CPD’s wiring instructions on or before December 1, 2015.
11. Defendants must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the State of Maryland ultimately uses those funds, Defendants may not:
a. Claim, assert ot apply for a tax deduction, tax credit, or any other tax benefit fot any civil money penalty paid under this Order; or
b. Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.
11. Payment of redress to any consumer under this Order will not limit consumers’ rights in any way.
III. Additional Monetary Provisions
12.
In the event of any default on Defendants’ obligation to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately becorne due
and payable.
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Case 1:15-cv-01235-RDB Document 53 Filed 11/16/15 Page 7 of 9
Case 1:15-cv-01235-RDB Document 51-1 Filed 11/13/15 Page 7 of 9 13. Defendants must relinquish all dominion, control, and ttle to the funds paid under
this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendants.
14. Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid.
IV. Reporting Requirements
15. Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to the filing of any bankruptcy or insolvency proceeding by or against Defendants; or a change in Defendants’ name or address. Defendants must provide this notice, if practicable, at least 30 days before the development, but in any event no later than 14 days after the development.
16. Within 10 days of the Effective Date, Defendants shall notify the Bureau and the CPD of (a) Defendants’ current residence, postal address, email address, and telephone number; and (b) Defendants’ current role in any business activity, including any business for which they provide services, whether as an employee, officer, or otherwise, and any entity in which Defendants have any ownership interest, identifying for each its name, physical address, and internet address.
17. For 2 years from the Effective Date, Defendants shall notify the Bureau and the CPD of (a) any change in name, including aliases or fictitious names; (b) any change in residence, postal address, email address, or telephone number; or (c) any change in ttle or role in any business
activity, including any business for which Defendants provide services, whether as an employee,
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Case 1:15-cv-01235-RDB Document 53 Filed 11/16/15 Page 8 of 9
Case 1:15-cv-01235-RDB Document 51-1 Filed 11/13/15 Page 8 of 9 officer, or any otherwise, and any entity in which Defendants have any ownership interest,
identifying for each its name, physical address, and internet address. V. Notices 18. Unless otherwise directed in writing by the Bureau or the CPD, respectively, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “In re Genuine Title, LLC, Case No. 1:15-cv-01235- JEM” and send them to:
a. By overnight courier (not the U.S. Postal Service), as follows:
Assistant Director for Enforcement
Consumer Financial Protection Bureau
ATTN: Office of Enforcement
1625 Eye Street, NW
Washington, D.C. 20006.
b. By first-class mail to the below address and contemporaneously by email to Enforcement [email protected]:
Assistant Director for Enforcement Consumer Financial Protection Bureau ATIN: Office of Enforcement
1700 G Street, NW
Washington, D.C. 20552
Enforcement [email protected]
Chief, Consumer Protection Division Office of the Attorney General of Maryland
200 St. Paul Place, 164 Floor Balamore, MD 21202. .
VI. Cooperation with the Bureau and the CPD 19. Defendants must cooperate fully with the Bureau and the CPD in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendants
must provide to the Bureau or to the CPD truthful and complete information, evidence, and
testimony. Defendants must appear for interviews, discovery, hearings, trials, and any other
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Case 1:15-cv-01235-RDB Document 53 Filed 11/16/15 Page 9 of 9 Case 1:15-cv-01235-RDB Document 51-1 Filed 11/13/15 Page 9 of 9 proceedings that the Bureau or the CPD may reasonably request upon 5 days written notice, or
other reasonable notice, at such places and tmes as the Bureau or the CPD may designate, without the service of compulsory process.
VII. Compliance Monitoring
20. Within 14 days of receipt of a written request from the Bureau, Defendants must submit compliance reports or other requested information, which must be made under penalty of petjury; provide sworn testimony; or produce documents.
21. Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6 or the CPD’s use of its subpoena power under the CPA § 13-404.
VIII. Retention of Jurisdiction
22. The Court will retain jurisdiction of this matter for purposes of construction,
modification, and enforcement of this Order.
IT IS SO ORDERED.
| an DATED this__ 46 dayof_Vevi§meea- 2015.
LLB.
United States Distnct Court Judge
Order ()
PDF of this document (16 pages)
Page 86
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
CONSUMER FINANCIAL
* PROTECTION BUREAU, et al.
Plaintiffs,
*
v.
* Civil Action No. RDB-15-1235
GARY KLOPP, et al.
* Defendants.
* * * * * * * * * * * * * *
MEMORANDUM ORDER Plaintiffs, the Consumer Financial Protection Bureau and the Consumer Protection Division of the Maryland Attorney General’s Office (together, “Plaintiffs” or “Regulators”), filed this action against Mr. Klopp and other individuals and entities to address the Defendants’ alleged participation in a kickback scheme in violation of federal and state consumer protection laws. (ECF No. 1.) On November 13, 2015, Plaintiffs and Defendants Gary Klopp, All County Settlements, LLC, and Carroll Abstracts, Inc., submitted a Stipulated Final Judgment and Order (ECF No. 51), which this Court approved and entered on November 16, 2015. (ECF No. 53.) On August 16, 2017, this Court conducted a hearing and held Mr. Klopp in civil contempt for violating the Stipulated Final Judgment and Order. (See ECF No. 59.) Pending now are Plaintiffs’ Motion for Sanctions (ECF No. 67) and Defendant Klopp’s Motion in Limine to Preclude Use of Deposition of Stacey Kearney (ECF No. 69). On May 16, 2018, this Court conducted a hearing, and for the reasons set forth on the record and for the reasons set forth below, Defendant Klopp’s Motion in Limine (ECF No. 69) is Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 1 of 16
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GRANTED,1 and Plaintiffs’ Motion for Sanctions (ECF No. 67) is GRANTED IN PART and DENIED IN PART. More specifically:
1. Mr. Klopp SHALL PAY $526,796.36 to the Plaintiffs. a. Any supersedeas bond to stay the enforcement of this monetary judgment must amount to $632,655.63 and be posted within 14 days of any notice of appeal. 2. Mr. Klopp is completely BARRED from the mortgage industry for a period of TWO YEARS, starting TEN DAYS after the entry of this Order. a. He may collect his base salary through the date of the sanctions hearing, May 16, 2018, but may not receive any compensation from Peoples Bank for work after that date.
b. This Order does not prohibit payments or reimbursements related to the requisite transfer of any assets or other interests in Peoples Bank. 3. Mr. Klopp SHALL POST this Sanctions Order to the Nationwide Mortgage Licensing System and Registry website within 60 days of this Order. BACKGROUND On April 29, 2015, Plaintiffs filed a Complaint against Mr. Klopp and other individuals and entities alleging violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607(a), the Consumer Financial Protection Act of 2010, 12 U.S.C. § 5536(a)(1)(A), and the Maryland Consumer Protection Act, Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol.). (ECF No. 1.) On November 13, 2015, Plaintiffs and Defendants 1 In this motion in limine, Mr. Klopp objects to the Kearney deposition as irrelevant and as having been conducted without leave of this Court. The deposition took place after the Plaintiffs filed their opening sanctions brief but before they filed their reply brief. The Plaintiffs have not opposed this motion in limine despite briefly citing Kearney’s testimony as to her interest in purchasing the Owings Mills branch. This Court hereby GRANTS this motion because the Plaintiffs have not opposed the motion and because this Court sees no need to rely on the Kearney deposition to resolve the issue of sanctions.
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Gary Klopp, All County Settlements, LLC, and Carroll Abstracts, Inc., submitted a Stipulated Final Judgment and Order (ECF No. 51), which this Court approved and entered on November 16, 2015. (ECF No. 53, hereinafter “Final Judgment Order.”) While these three Defendants neither admit nor deny the allegations (id. at ¶ 3), the Final Judgment Order, in relevant part, has imposed the following conduct requirements. 8. Pursuant to 12 U.S.C. § 5565(a)(2)(G), Defendants are limited from participation in the Mortgage Industry for two years from the Effective Date as follows:
a. Defendants are prohibited from contacting, soliciting, or otherwise dealing with consumer borrowers or loan applicants in any capacity with regard to any mortgage business; and b. Defendants are prohibited from contacting, soliciting, or otherwise dealing with any third party businesses engaged in offering any settlement service.
c. These limitations shall not prohibit Defendant Klopp from acting solely as a personnel or human-resources manager for a mortgage business operated by an FDIC insured banking institution, including providing personnel or human-resources-related management and administrative functions with regard to National Mortgage Licensing System-registered loan originators, as that term is defined in Md. Fin. Inst. Code Ann. §11- 601.
9. Within 60 days of the Effective Date, Defendant Klopp must disclose this action and Order to NMLSR and, in accordance with NMLSR procedure, upload an electronic copy of this Order.
(ECF No. 53 at 5-6.) The Final Judgment Order also includes various reporting requirements related to personal contact information and business activities. (Id. at ¶¶ 15-17.)
On June 7, 2017, the Plaintiffs filed an Application for an Order to Show Cause Why Gary Klopp Should Not Be Held in Contempt. (ECF No. 54.) This Court issued the requested Show Cause Order on July 18, 2017. (ECF No. 55.) On August 16, 2017, the parties offered testimony and documentary evidence regarding Mr. Klopp’s compliance – or lack thereof – with the reporting requirements and the conduct prohibitions. Mr. Klopp testified that he has Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 3 of 16
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been working for Peoples Bank & Trust Company (“Peoples Bank”) and that his management contract and compensation plan have not changed since the entry of the Final Judgment Order. He receives a small salary2 for his duties as an HR manager plus additional compensation based on the profitability of his branches. At the August 16, 2017 hearing, Stacey Kearney, an employee at the Peoples Bank branch in Owings Mills, Maryland, testified that Mr. Klopp had ultimate control of that branch, which employed over 100 people. The evidence at the hearing also established that Mr. Klopp has owned and operated a Peoples Bank branch in California. Both branches focus entirely on brokering mortgages.
At the conclusion of the contempt hearing on August 16, 2017, this Court held Mr. Klopp in civil contempt, for the reasons stated on the record, for violating numerous provisions of the Final Judgment and Order. (ECF No. 59.) Specifically, it held that Mr. Klopp violated Paragraph 8 of the Final Judgment and Order by continuing to own and operate Peoples Bank branches in Owings Mills, Maryland and in California and by engaging in all aspects of running his mortgage businesses. In this regard, this Court specifically stated, “It is undisputed that Mr. Klopp has continued to own and operate a mortgage business; in my opinion, in a clear violation of this Court’s [O]rder.” This Court also held that Klopp violated Paragraph 9 by failing to upload a copy of the Final Judgment and Order to the Nationwide Mortgage Licensing System and Registry (“NMLSR”), and that he violated the reporting requirements (see ECF No. 53 at ¶¶15-17) by failing to inform the Plaintiffs of his address in California and his ownership and control of a Peoples Bank branch in California.3 2 His compensation policy provides for a “base salary of $2,000 per month.” (ECF No. 57-3.) 3 The Plaintiffs also argued at the contempt hearing that Klopp violated Paragraph 7 of the Final Judgment Order by accepting kickbacks in the form of free lunches, but this Court found that Plaintiffs failed to establish such a violation. Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 4 of 16
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The Court then held sub curia the issue of sanctions. After jointly seeking an extension of time (ECF Nos. 63-64), the parties submitted their sanctions briefs (ECF Nos. 67-71). The Regulators seek (1) disgorgement of all of Klopp’s income from People Bank from the date of Judgment until the date of compliance, whenever that appears to be; and (2) a lifetime ban from the industry, without an exception for human resources (“HR”) work. Mr. Klopp argues that these proposed sanctions are inappropriately punitive. These initial briefs, however, did not fully address the Court’s concerns, so this Court requested brief status reports on Mr. Klopp’s efforts to comply with this Court’s Orders. Mr. Klopp’s Status Report states:
Since the Hearing and Order, Mr. Klopp has served as a personnel or human resources manager of the Owings Mills branch, a permitted activity under Paragraph 8(c) of the Stipulated Final Judgment. He has had no communications with consumers or title companies. He . . . has not originated any consumer loans.
(ECF No. 72.) The Plaintiffs contend that Mr. Klopp’s wage income “exceeds what might be expected of a personnel or human-resources manager.” (ECF No. 73.) After receiving the parties’ status reports, this Court scheduled a hearing for May 16, 2018, and requested that Mr. Klopp submit updated income information. On Friday, May 11, 2018, Mr. Klopp provided the requested income data.4 This data is summarized in Court’s Table A below.
4 This submission came in the form of three exhibits. Exhibit 1 featured pay stubs from Peoples Bank for the period November 16, 2015 through April 27, 2018, the most recent pay period. Exhibit 2 includes spreadsheets indicating Mr. Klopp’s earnings, tax withholdings, and benefits. The first spreadsheet covers the period November 16, 2015 through November 19, 2016. The second covers the period November 20, 2017 through April 27, 2018. Exhibit 3 provides a highlevel summary of the two spreadsheets in Exhibit 2. These documents were not formally introduced as exhibits during the hearing. Rather, Mr. Klopp affirmed the Court’s summary of the data therein.
To provide additional clarity, this Court notes that Mr. Klopp’s spreadsheets feature an “Earnings” column that does not include the 401(k) match benefits. Mr. Klopp’s spreadsheets also feature a “Net Pay” column that deducts benefits such as 401(k) and medical. (See Exs. 2-3.) This approach appears to reflect how the payments are labelled on the pay stubs, but Mr. Klopp does “not seek any credit for those deductions.” (ECF No. 71). Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 5 of 16
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Court’s Table A Peoples Bank Payroll Dates Earnings Taxes 11/16/2015 (Entry of Final Judgment Order) to 11/19/2017 (nearest payday to 2 years after Final Judgment Order) 401(k) deductions $50,000.00 ($389,749.58) 401(k) match $15,200.00 401(k) loan $0.00 Dental $1,080.75 Medical $8,145.00 Other Income $870,774.25 SUBTOTAL $945,200.00 11/20/2017 (beginning of next pay period) to 4/27/2018 (nearest payday to Klopp’s pre-hearing submission) 401(k) deductions $2,469.44 ($13,374.06) 401(k) match $1,643.10 401(k) loan $2,469.44 Dental $261.81 Medical $2,974.42 Other Income $32,901.79 SUBTOTAL $42,720.00 11/16/2015 - 4/27/2018 TOTAL $987,920.00 ($403,123.64)
At the hearing, Mr. Klopp affirmed the accuracy of the total amount of earnings and taxes in Court’s Table A. Mr. Klopp further testified at the sanctions hearing that he has filed extensions for the tax years 2015 through 2017, and that he received a federal tax refund of about $20,000 for the year 2014. He also testified that from February 2017 through September 2017 he invested $314,287.85 of his own money into the Owings Mills branch. These payments covered costs such as marketing services, phone bills, and even a $3,212 expense for the “Baltimore Ravens.” (Def. Ex. 1.)5 When asked about a lifetime ban, Mr. Klopp stated that Ms. Kearney could potentially manage the Owings Mills branch, but he has leases in his name and other obligations that would take some time – and Peoples Bank’s approval – to transfer. STANDARD OF REVIEW The Supreme Court in McComb v. Jacksonville Paper Co., 336 U.S. 187 (1949), recognized the courts’ broad authority to impose civil sanctions for violation of their orders. Id. at 193-94; see also United States v. United Mine Workers of America, 330 U.S. 258, 303-04 (1947); In re General 5 Klopp also estimated having invested some $100,000 in additional funding into the business, but he failed to provide any documentary evidence to support that assertion. He also did not include this sum in any proposed calculations. Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 6 of 16
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Motors Corp., 61 F.3d 256, 259 (4th Cir. 1995) (“The appropriate remedy for civil contempt is within the court’s broad discretion.”). Courts should fashion civil contempt sanctions to “serve either or both of two purposes: to coerce the contemnor into complying in the future with the court’s order, or to compensate the complainant for losses resulting from the contemnor’s past noncompliance.” Colonial Williamsburg Found. v. Kittinger Co., 792 F. Supp. 1397, 1407 (E.D. Va. 1992), aff’d, 38 F.3d 133 (4th Cir. 1994) (quoting Perfect Fit Industries, Inc. v. Acme Quilting Co., 673 F.2d 53, 56 (2d Cir.), cert. denied, 459 U.S. 832 (1982)). The remedy must be “remedial and compensatory and, unlike criminal contempt, nonpunitive.” In re General Motors, 61 F .3d at 258 (4th Cir. 1995); accord Carbon Fuel Co. v. United Mine Workers of America, 517 F.2d 1348, 1349 (4th Cir. 1975) (noting that civil contempt fines must not be “intended to vindicate the authority of the Court.”). To that end, the sanctions must reflect the “least possible power adequate to the end proposed.” Spallone v. United States, 493 U.S. 265, 280 (1990).
In determining what is necessary to enforce compliance, a court may consider “disgorgement of profits . . . as a means of deterring future violations” by the contemnor. Colonial Williamsburg, 792 F. Supp. at 1408 (citing Oral–B Labs., Inc. v. Mi–Lor Corp., 810 F.2d 20, 25–26 (2d Cir. 1987)). Furthermore, a civil contempt fine “need not always [be] depend[e]nt on a demonstration of actual pecuniary loss.” Colonial Williamsburg, 792 F. Supp. at 1407 (quoting Manhattan Indus., Inc. v. Sweater Bee by Banff, Ltd., 885 F.2d 1, 5 (2d Cir. 1989) cert. denied, 494 U.S. 1029 (1990)) (internal quotation marks omitted); see also Omega World Travel, Inc. v. Omega Travel and Shipping Agencies, 905 F.2d 1530 (Table), 1990 WL 74305 (4th Cir. 1990) (unpublished) (imposing monetary sanction based on unquantifiable, intangible harms to Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 7 of 16
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“good will and business reputation”); Manhattan Industries, Inc. v. Sweater Bee by Banff, Ltd., 885 F.2d 1, 6 (2d Cir. 1989) (“[A] contempt plaintiff is entitled to defendant’s profits without submitting direct proof of injury.”) (internal citations and quotations omitted); Dan B. Dobbs, in Law of Remedies § 2.8(2) (2d ed. 1993).
To establish the appropriate amount of monetary sanctions for civil contempt, the standard of proof is a preponderance of the evidence. General Motors, 110 F.3d 1003, 1016- 1018 (4th Cir. 1997). The moving party bears the initial burden of proving the amount of income “attributable” to the contemptuous conduct. Colonial Williamsburg, 792 F. Supp. at 1407-08; see also Nutramax Labs., Inc. v. Manna Pro Prod., LLC, No. 0:16-CV-01255-JMC, 2017 WL 3276284, at *5 (D.S.C. Aug. 2, 2017); Schwartz v. Rent-A-Wreck of Am., 261 F. Supp. 3d 607, 621 (D. Md. 2017) (observing that courts look to burden-shifting approach in substantive trademark infringement law when fashioning monetary sanctions for civil contempt). The contemnor then bears the burden “to prove any deductions . . . from the gross revenues attributable to its contempt.” Colonial Williamsburg, 792 F. Supp. at 1407; accord Nutramax Labs., 2017 WL 3276284, at *5.
ANALYSIS The Plaintiffs seek a multi-faceted approach to civil sanctions in this case. First, Plaintiffs argue that this Court should disgorge all of Klopp’s earnings from Peoples Bank since the entry of the Final Judgment Order. Second, Plaintiffs demand that Mr. Klopp be banned from the mortgage industry for life, with no exceptions for limited roles related to human resources.6 6 Plaintiffs have also suggested that this Court should extend the timeframe for Klopp’s reporting obligations. In their papers focused on contempt, Plaintiffs initially requested a three-year extension of the timeframe for Klopp’s reporting Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 8 of 16
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Mr. Klopp argues that the Plaintiffs’ requested sanctions are inappropriately punitive. Despite maintaining the right to appeal this Court’s finding of contempt and referencing his alleged misunderstanding of the scope of the Stipulated Final Judgment and Order, Mr. Klopp has not sought a complete revocation of the Stipulated Final Judgment and Order.
I.
Disgorgement Plaintiffs argue that Mr. Klopp has yet to comply with this Court’s Orders, and therefore disgorging all income earned from Peoples Bank during the period of contemptuous conduct is the only way to fulfill the compensatory and coercive objectives of civil sanctions. Alternatively, Plaintiffs argue that a post-tax calculation would be appropriate, but only after Mr. Klopp establishes – through finalized tax returns – the amount of taxes actually paid.7 The Plaintiffs have noted that his income appears to exceed that expected for an HR professional (see ECF No. 73), and they question whether he acted in an HR role in any fashion. Defendant Klopp contends that disgorgement in any form would be punitive because Plaintiffs have not identified any actual damages in need of compensation. (ECF No. 68 at 10.) If the Court intends to set a specific disgorgement amount, Mr. Klopp argues that the Court should deduct business expenses and personal tax payments, and should – given the Plaintiffs’ alleged inability to prove which income was attributable to his contempt – set the disgorgement at one-third of Klopp’s income. (ECF No. 68 at 7 (citing Colonial Williamsburg, 792 F. Supp. at 1408; Buffalo Wings Factory, Inc. v. Mohd, 574 F. Supp. 2d 574, 582 (E.D. Va. obligations. (Appl. Show Cause Order at 10, ECF No. 54.) Given this Court’s ruling as to his conduct requirements, see infra, ongoing reporting obligations will not be necessary. That said, this Court fully expects to be kept apprised of any difficulties Mr. Klopp may have with complying with this Court’s orders.
Plaintiffs also briefed an inability to pay defense, but Mr. Klopp has not advanced this defense. (See ECF No. 68 at 10.) 7 Plaintiffs even suggest a two-step Order to account for any post-disgorgement changes to Mr. Klopp’s tax liability, but such an approach would unnecessarily draw out these proceedings and undermine the compliance and compensation objectives of civil sanctions.
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2008)).) Mr. Klopp’s Status Report claims that since being held in contempt, he limited his role to “a personnel or human resources manager of the Owings Mills branch, a permitted activity under Paragraph 8(c) of the Stipulated Final Judgment.” (ECF No. 72.) Mr. Klopp concedes that his compensation as a manager was based on the profitability of business, but he asserts that he does not have an “ownership” stake in the business.8 As an initial matter regarding disgorgement in this case, the Defendant’s view that identified losses by specified consumers must undergird contempt sanctions would essentially render the Final Judgment Order in this case unenforceable. Furthermore, this Court has already recognized that “a disgorging of profits is warranted as a means of deterring future violations” by the contemnor and that a civil contempt fine may compensate intangible and unquantifiable harms. Colonial Williamsburg, 792 F. Supp. at 1407; see also Omega World Travel, 905 F.2d 1530 (Table), 1990 WL 74305; Manhattan Industries, 885 F.2d at 6. Similar to business reputation damages in Omega, 905 F.2d 1530, 1990 WL 74305, at *4, and Colonial Williamsburg, 792 F. Supp. at 1407, Klopp’s contemptuous conduct undermines the Plaintiffs’ regulatory authority. The Nationwide Mortgage Licensing System and Registry posting requirement and the limitations on Mr. Klopp’s participation in the mortgage industry are targeted at protecting borrowers from illegal kickback practices (see ECF No. 53 at ¶ 7), and Klopp’s conduct obviated those protections. Disgorgement of Mr. Klopp’s contemptuous 8 Mr. Klopp further argued that receiving profits from the mortgage business does not violate the Court’s Orders, but that view directly contradicts this Court’s ruling at the contempt hearing. In the absence of an attempt to rescind the entire Stipulated Judgment, the issue of profits has already been resolved and is no longer before the Court. Furthermore, while the terms “profit” or “ownership” are not separately listed in the Final Judgment Order, any income earned through contemptuous conduct is subject to disgorgement.
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income, to be paid to the Plaintiffs,9 will therefore serve both the compliance and the compensation objectives of civil contempt sanctions.
To establish the appropriate amount of disgorgement, the moving party must first identify any income that is causally related to the contemptuous conduct. Colonial Williamsburg, 792 F. Supp. at 1407-08; Schwartz, 261 F. Supp. at 621. The contemnor then bears the burden “to prove any deductions . . . from the gross revenues attributable to its contempt.” Colonial Williamsburg, 792 F. Supp. at 1407.
A. Contemptuous Income Plaintiffs have focused on proving and disgorging Klopp’s total income, and they have disregarded that Klopp’s contemptuous income should not include income properly earned in compliance with the Final Judgment Order. The first step in identifying the income that is causally related to Mr. Klopp’s contempt is to establish the time period during which Mr. Klopp violated this Court’s Orders. The evidence regarding his continued management activity and profits therefrom establishes that Mr. Klopp has yet to fully comply with this Court’s Orders. The relevant time period for any disgorgement therefore runs from the date of Judgment, November 16, 2015 to the most recent pay period, April 27, 2018. While Mr. Klopp objects to disgorgement of any income after November 16, 2017, the original expiration date of the Final Judgment Order (see ECF No. 53 at ¶¶ 6(b), 8, 17), this Court will not permit Klopp to be shielded by the expiration date of an Order with which he never complied. This Court’s Order of Contempt alone was clearly insufficient to bring his 9 “If the relief provided is a fine, it is remedial when it is paid to the complainant, and punitive when it is paid to the court.” Hicks on Behalf of Feiock v. Feiock, 485 U.S. 624, 632, 108 S. Ct. 1423, 1429, 99 L. Ed. 2d 721 (1988). Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 11 of 16
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conduct into compliance with the original Final Judgment Order. Granting Klopp’s request in this regard would fail to fulfill the coercive function of civil sanctions. Between November 16, 2015 and April 27, 2018, Peoples Bank paid him a total of $987,920.00. Mr. Klopp’s testimony and argument at both the contempt and sanctions hearings establish that – based on his contract and compensation agreement, which was not amended after the Final Judgment Order – Mr. Klopp received a base salary of $2,000 per month for his duties as an HR manager. From November 16, 2015 to April 27, 2018, this $2,000 monthly salary generated a total of $58,000.00 in income for Mr. Klopp. When this HR-based income is subtracted from the $987,920.00 in total earnings from Peoples Bank, the total amount of contemptuous income comes to $929,920.00. B. Deductions The next step is to identify any deductions proven by Mr. Klopp. Colonial Williamsburg, 792 F. Supp. at 1407. On this score, Mr. Klopp seeks deductions for at least $314,287.85 in expenses from February 2017 to September 2017 and for $403,123.64 in taxes withheld. Rather than warrant a deduction from the potential disgorgement, Mr. Klopp’s expenses provide further evidence of his contemptuous activity. Specifically, he paid for marketing services and for a $3,212 expense to the “Baltimore Ravens.” (Def. Ex. 1.) Personally paying for thousands of dollars of marketing services has nothing to do with serving in a personnel or HR role. Mr. Klopp’s decision to invest his own money on expenditures that in themselves violated the Court’s Order provides no basis for a deduction. In making each payment, he assumed the risk that he would not be given credit for such payments upon the Court’s discovery of his contemptuous activity. Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 12 of 16
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Regarding his taxes, Mr. Klopp’s records and testimony establish that Peoples Bank withheld $403,123.64 in taxes for the period November 16, 2015 to April 27, 2018. (See ECF No. 68 at 8-9; Def. Ex. 2, ECF No. 68-2.) The Plaintiffs note that these taxes have not been fully “paid” until Klopp receives finalized refunds from the government for years 2015 through 2017. Plaintiffs argue that at this stage Klopp’s withholdings are mere estimates that do not warrant any deduction at all. Plaintiffs’ complete disregard for Mr. Klopp’s tax payments would risk transforming the disgorgement remedy into a punitive sanction. Klopp has therefore met his burden in establishing a deduction for $403,123.64 in taxes.10 After deducting this amount from Klopp’s contemptuous income, the total amount subject to disgorgement comes to $526,796.36. The following table summarizes the analysis above. Court’s Table B Klopp’s Data Court’s Analysis Payroll Dates Earnings Taxes Base salary Contemptuous Earnings Post-Tax Contemptuous Earnings 11/16/15 to 11/19/17 $945,200.00 ($389,749.58) $48,000.00 $897,200.00 $507,450.42 11/20/17 to 4/27/18 $42,720.00 ($13,374.06) $10,000.00 $32,720.00 $19,345.94 TOTAL $987,920.00 ($403,123.64) $58,000.00 $929,920.00 $526,796.36
Under the burden-shifting approach to analyzing disgorgement, the parties have provided sufficient evidence of Mr. Klopp’s compensation for this Court to identify $526,796.36 as a justifiable amount of disgorgement. Mr. Klopp asks this Court to rely upon 10 The parties have not addressed whether deducting Klopp’s overall tax withholdings from the contemptuous income would give Klopp a double deduction for those taxes withheld from the $42,000.00 in HR-based salary income. This Court, however, will not engage in a hypothetical tax liability analysis, and whatever taxes can be said to have been withheld from the $42,000 would not change this Court’s discretionary analysis of whether $526,796.36 in disgorgement sufficiently serves the compensatory and compliance functions of civil contempt sanctions. Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 13 of 16
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cases where the court, faced with uncertainty as to the specific amount of contemptuous income, ordered that one-third of the proven revenues be disgorged. (ECF No. 68 at 5-6 (citing Colonial Williamsburg, 792 F. Supp. at 1407-08; Buffalo Wings Factory, 574 F. Supp. 2d at 582).) This Court need not fall back on an arbitrary fraction of Klopp’s income. Notwithstanding potential amendments to Klopp’s ultimate tax liability, the parties’ submissions sufficiently establish that $526,796.36 in disgorgement will fulfill the objectives of civil sanctions, especially when combined with the sanctions laid out below. C. Supersedeas Bond Under Rule 62(d) of the Federal Rules of Civil Procedure, Mr. Klopp may stay this Court’s monetary judgment to pursue an appeal if he posts a supersedeas bond. Local Rule 110 of this Court provides that, “the amount of any supersedeas bond filed to stay execution of a money judgment pending appeal shall be 120% of the amount of the judgment plus an additional $500 to cover costs on appeal.” L.R. 110.1(a) (D. Md. 2016). This Court sees no reason to depart from the Local Rule and will therefore require any supersedeas bond to be in the amount of $632,655.63, which is $500 more than 120% of $526,796.36. Such a bond must be posted within 14 days of any notice of appeal.
II.
Conduct Requirements Regarding Plaintiffs’ demand that Mr. Klopp be banned from the mortgage industry for life, Plaintiffs contend that such a ban is “the only way to ensure compliance.” (ECF No. 67 at 7.) Defendant Klopp again argues that such a penalty would be punitive, noting that other Defendants in this case were banned for three years. (ECF No. 68 at 10.) He also testified that extricating himself from the business would require some time and consultation with Peoples Bank.
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Plaintiffs have not convinced this Court that a lifetime ban represents the “least possible power adequate to the end proposed,” Spallone, 493 U.S. at 280, and such a sanction would appear to be designed to vindicate the authority of the Court, which is only permissible with criminal contempt, Carbon Fuel, 517 F.2d at 1349. Rather, to coerce Mr. Klopp to comply with the requirement that – for a period of two years – he strictly limit his participation in the mortgage industry, this Court will extend this requirement for another two years and remove the exception for work as a “personnel or human-resources manager” found in Paragraph 8(c) of the Final Judgment Order. Removing the source of Mr. Klopp’s alleged confusion will help him to bring his conduct in full compliance with this Court’s Orders. To ensure further clarity, this two-year absolute bar applies to any and all activity within the mortgage industry, including consulting and working for other mortgage banks. Mr. Klopp is forewarned that any questions about this ban should be immediately directed to his counsel or this Court. To further enable Mr. Klopp’s compliance, Mr. Klopp will have 10 days from the date of this Order to completely remove himself from any and all obligations within the mortgage industry. He may collect his base salary through the date of the sanctions hearing, May 16, 2018, but may not receive any compensation from Peoples Bank for work after that date. This Order is not meant to prohibit payments or reimbursements related to the requisite transfer of any assets or other interests in Peoples Bank. Consistent with Paragraph 9 of the Final Judgment Order, Mr. Klopp must also post this Sanctions Order on the Nationwide Mortgage Licensing System and Registry website within 60 days of this Order. Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 15 of 16
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CONCLUSION For the reasons set forth above and for the reasons set forth on the record at the hearing on May 16, 2018, Defendant Klopp’s Motion in Limine (ECF No. 69) is GRANTED, and Plaintiffs’ Motion for Sanctions (ECF No. 67) is GRANTED IN PART and DENIED IN PART. Specifically, this Court imposes the following civil sanctions. 1. Mr. Klopp SHALL PAY $526,796.36 to the Plaintiffs. a. Any supersedeas bond to stay the enforcement of this monetary judgment must amount to $632,655.63 and be posted within 14 days of any notice of appeal. 2. Mr. Klopp is COMPLETELY BARRED from the mortgage industry for a period of TWO YEARS, starting TEN DAYS after the entry of this Order. a. He may collect his base salary through the date of the sanctions hearing, May 16, 2018, but may not receive any compensation from Peoples Bank for work after that date.
b. This Order does not prohibit payments or reimbursements related to the requisite transfer of any assets or other interests in Peoples Bank. 3. Mr. Klopp SHALL POST this Sanctions Order to the NMLSR website within 60 days of this Order.
Dated: May 21, 2018
______/s/________________
Richard D. Bennett
United States District Judge Case 1:15-cv-01235-RDB Document 77 Filed 05/21/18 Page 16 of 16
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PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 18-1694
CONSUMER FINANCIAL PROTECTION BUREAU;
CONSUMER PROTECTION DIVISION, Office of the Attorney General of Maryland,
Plaintiffs – Appellees,
v.
GARY KLOPP
Defendant – Appellant,
and
GENUINE TITLE, LLC; BRANDON GLICKSTEIN; ADAM MANDELBERG; WILLIAM J. PETERSON, III; ANGELA POBLETTS; JAY ZUKERBERG; ALL COUNTY SETTLEMENTS, LLC; BTS MANAGEMENT AND CONSULTING, LLC; CARROLL ABSTRACTS, INC.; MARC, LLC; MORTGAGE SERVICES, LLC; R&R MARKETING GROUP, LLC,
Defendants.
Appeal from the United States District Court for the District of Maryland, at Baltimore. Richard D. Bennett, District Judge. (1:15-cv-01235-RDB)
Argued: October 29, 2019
Decided: April 27, 2020
Before HARRIS, RICHARDSON, and QUATTLEBAUM, Circuit Judges.
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Affirmed in part, vacated in part, and remanded in part by published opinion. Judge Richardson wrote the opinion, in which Judge Harris and Judge Quattlebaum joined.
ARGUED: Harry Levy, SHUMAKER WILLIAMS, PC, Towson, Maryland, for Appellant. Hanna Abrams, OFFICE OF THE ATTORNEY GENERAL OF MARYLAND, Baltimore, Maryland;
Joseph Anthony Frisone, CONSUMER FINANCIAL PROTECTION BUREAU, Washington, D.C., for Appellees. ON BRIEF: J. Steven Lovejoy, SHUMAKER WILLIAMS, PC, Towson, Maryland, for Appellant. Mary McLeod, General Counsel, John R. Coleman, Deputy General Counsel, Steven Bressler, Assistant General Counsel, CONSUMER FINANCIAL PROTECTION BUREAU, Washington, D.C.; Brian E. Frosh, Attorney General, Philip D. Ziperman, Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL OF MARYLAND, Baltimore, Maryland, for Appellees.
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RICHARDSON, Circuit Judge:
After finding Gary Klopp in violation of a consent order limiting his participation in the mortgage industry, the district court held him in contempt and ordered the disgorgement of over half-a-million dollars of his contemptuous earnings. Klopp appeals the district court’s contempt and disgorgement orders. The district court cited several proper reasons for holding Klopp in contempt. Because “[a] single violation [of an order] is sufficient to support a finding of contempt,” Rainbow School, Inc. v. Rainbow Early Education Holding LLC, 887 F.3d 610, 618 (4th Cir. 2018), we affirm the district court’s contempt decision. Yet the district court rested its disgorgement sanction on an erroneous legal interpretation of the terms of the underlying consent order. Since the disgorgement order rested on improper grounds, we vacate that order and remand for further proceedings. I.
Facts
A.
The pay-to-play scheme and Consent Order
Gary Klopp managed a mortgage brokerage branch of the Peoples Bank & Trust in Owings Mills, Maryland. A decade ago, Klopp started taking kickbacks from a titleservice company.1 According to regulators, for every loan that Klopp or his agents steered to a particular title company, he received roughly $400 in return. Between 2011 and 2013, the title company funneled more than half-a-million dollars to Klopp through two
1 Title service companies, in exchange for a fee, verify the legitimacy of a seller’s title to a parcel of real estate, and they sometimes insure that title. This service gives purchasers—and mortgage lenders—confidence in a property transaction. USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 3 of 20
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Maryland shell corporations that Klopp created and controlled. Neither of Klopp’s shell companies provided any genuine services for these payments, and Klopp concealed this kickback arrangement from his customers.
Klopp’s dealings were part of a grander “pay-to-play” scheme uncovered by federal and state regulators. In April 2015, the regulators began a civil action against Klopp and twelve codefendants in the District of Maryland for violating federal and state consumer finance laws. Some of Klopp’s codefendants quickly settled with the regulators. Those early settlements limited the codefendants’ “participation in the Mortgage Industry in any professional capacity” and imposed civil money penalties. E.g., Dist. Ct. Dkt. No. 14 at 5.
Klopp’s settlement was different. In November 2015, Klopp and the regulators negotiated and proposed a Stipulated Final Judgment and Order to the district court (“Consent Order”). The Consent Order levied a civil money penalty of $75,000. And it imposed various other non-monetary requirements and restrictions, two of which drive this appeal.
In the first set of requirements, Klopp agreed to restrictions on his activities in the mortgage industry. The Consent Order “limited [Klopp] from participation in the Mortgage Industry for two years . . . as follows:”
a. [Klopp is] prohibited from contacting, soliciting, or otherwise dealing with consumer borrowers or loan applicants in any capacity with regard to any mortgage business; and
b. [Klopp is] prohibited from contacting, soliciting, or otherwise dealing with any third party businesses engaged in offering any settlement service.
J.A. 49. A safe-harbor provision followed these prohibitions: USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 4 of 20
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c. These limitations shall not prohibit Defendant Klopp from acting solely as a personnel or human-resources manager for a mortgage business operated by an FDIC-insured banking institution . . . . Id.
In the second set of requirements, Klopp assented to various reporting measures. Klopp agreed to upload the Order to the Nationwide Mortgage Licensing System and Registry (“Registry”) within 60 days. He also promised to report any change in his residence, in his roles in “any business activity,” and in “any entity in which [he has] any ownership interest” to the regulators for two years. J.A. 51–52. And Klopp had to notify the regulators “of any development that may affect compliance obligations arising under” the Consent Order. J.A. 51. The district court accepted the Parties’ proposed resolution of Klopp’s case and issued the negotiated Consent Order.
Over the next two years, Klopp defied the Consent Order with aplomb. Without notifying regulators, he rented a house in California and opened a new branch of the Peoples Bank & Trust in Orange County. He continued to deal with third-party businesses engaged in settlement services. And he never uploaded the Consent Order to the Registry. B.
The 2017 civil contempt hearing
When the regulators learned of Klopp’s actions, they moved to hold him in contempt. The district court held a contempt hearing in August 2017.
At the hearing, regulators presented documentary evidence to support their assertions that Klopp had violated the order. Klopp took the stand in defense and made several admissions. He acknowledged that he never uploaded the Consent Order to the Registry. Klopp similarly admitted to continuing to deal with third-party settlement USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 5 of 20
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services. E.g., J.A. 146–47 (“Q: But the fact is that you were asking for a loan—an interest rate concession on a particular consumer loan; isn’t that right? A: It appears that way.”). And he admitted that he never notified regulators of his new office in California.
Klopp also described his employment agreement with Peoples Bank & Trust. The agreement compensated Klopp based on the greater of a $2,000 monthly salary or certain profits earned by his brokerage branches. Between January 2016 and March 2017, the business generated an estimated $765,000 in profit, $700,000 of which Klopp allocated to his own earnings.
Based on this evidence, the district court found Klopp violated both the activity restrictions and the reporting requirements of the Consent Order. For the activity restrictions, the court found that he impermissibly managed the business, profited from the mortgage industry, and communicated with settlement servicers. And the district court found that Klopp violated the reporting restrictions by failing to upload the Consent Order to the Registry and not informing the regulators of his California activities. C.
The 2018 sanctions hearing
After holding Klopp in civil contempt, the district court held a sanctions hearing. At the hearing, Klopp acknowledged $987,920 in profits from his business for the period between the effective date of the Consent Order, November 16, 2015, and April 27, 2018. Klopp argued that receiving profits from his business did not violate the Consent Order. But the district court rejected this argument because it “contradict[ed] [its] ruling at the contempt hearing.” J.A. 1041 n.8. The district court also rejected Klopp’s suggestion that the money he invested in the business should be deducted from that amount, seeing it as USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 6 of 20
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evidence of Klopp’s operation of his mortgage business. The court similarly refused Klopp’s contention that his earnings accruing after the expiration of the Consent Order in November 2017 should not be considered, reasoning that Klopp should not be “shielded by the expiration date of an Order with which he never complied.” J.A. 1042.
At the same time, the district court rejected the regulators’ position that all of Klopp’s earnings during this time should be disgorged. Instead, the district court deducted the $2,000 in monthly compensation that it believed Klopp was entitled to as humanresources manager, as well as Klopp’s tax withholdings, which reduced the profits to $526,796.36. The court ordered Klopp to disgorge that amount and expressly barred him from all involvement in the mortgage industry for another two years. Klopp timely appealed.2 II.
Discussion
When a litigant violates an order, the court generally may exercise its authority to hold the violator in civil contempt. Rainbow School, Inc. v. Rainbow Early Education Holding LLC, 887 F.3d 610, 617 (4th Cir. 2018). “The essence of civil contempt,” we have explained, “is to coerce” compliance with judicial orders. Consolidation Coal Co. v. Local 1702, United Mineworkers of America, 683 F.2d 827, 830 (4th Cir. 1982). And sometimes an award of damages is necessary to “incentivize” compliance. Rainbow School, 887 F.3d at 617 (citing Hutto v. Finney, 437 U.S. 678, 691 (1978)). Civil contempt orders—and the appropriate consequences for violating them—fall to the district court’s discretion.
2 On appeal, Klopp does not challenge the new two-year bar. USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 7 of 20
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Klopp challenges both the district court’s contempt findings and the amount of the disgorgement order. Because the sanctions for civil contempt must be causally related to contemptuous conduct, see Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1185−86 (2017), resolution of Klopp’s sanctions arguments depends on the violations found by the district court. We consider each issue in turn. A.
The contempt order was proper
We review the district court’s civil contempt order for an abuse of discretion. In re Under Seal, 749 F.3d 276, 285 (4th Cir. 2014). So we scrutinize factual findings for clear error and evaluate legal questions anew. Id.; see also Scott v. Family Dollar Stores, Inc., 733 F.3d 105, 112 (4th Cir. 2013). And when the district court cites multiple reasons for a contempt order, we need only to confirm the propriety of one of those reasons: “A single violation,” we have held, “is sufficient to support a finding of contempt.” Rainbow School, 887 F.3d at 618; see also In re Under Seal, 749 F.3d at 293.
Civil contempt hearings employ a burden-shifting framework. The party who moves for a civil contempt order must first prove each of these elements by clear and convincing evidence:
(1) the existence of a valid court order;
(2) the order was in the moving party’s “favor”;
(3) a knowing violation of the terms of the order; and (4) the moving party suffered harm from the violation. United v. Ali, 874 F.3d 825, 831 (4th Cir. 2017). Once the movant establishes these elements, the burden shifts to the defendant to show “good faith [in making] all reasonable USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 8 of 20
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efforts to comply with the enforcement order.” Id. A defendant who fails to meet this burden may be held in civil contempt.
Here, Klopp argues that the regulators failed to make their affirmative case: He asserts that the regulators failed to show that he violated the activity restrictions, and he contends that no harm resulted from any of the reporting violations. 1.
Activity restrictions
The district court found that Klopp violated the activity restrictions for two reasons. First, the court found that Klopp was profiting from and “running the [mortgage] business”—activities the court considered prohibited under the Consent Order. J.A. 219. Second, the court determined that Klopp “communicat[ed] with lender and title companies.” Id. Klopp admits to managing the business but disagrees with the district court’s interpretation of the Consent Order.
(a) Management of the mortgage business
Klopp argues that the Consent Order did not clearly prohibit him from earning a profit and managing the business. The Order “limited [Klopp] from participation in the Mortgage Industry for two years . . . as follows:” a. [Klopp is] prohibited from contacting, soliciting, or otherwise dealing with consumer borrowers or loan applicants in any capacity with regard to any mortgage business; and
b. [Klopp is] prohibited from contacting, soliciting, or otherwise dealing with any third party businesses engaged in offering any settlement service.
c. These limitations shall not prohibit Defendant Klopp from acting solely as a personnel or human-resources manager for a mortgage business operated by an FDIC banking institution . . . . USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 9 of 20
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J.A. 49.
Klopp reads these restrictions narrowly—he may manage the business so long as he does not deal in a prohibited manner with (a) consumer borrowers or (b) certain third-party businesses. So in Klopp’s view, management of his mortgage business did not violate the Consent Order. On the other hand, the district court adopted the regulators’ broad interpretation: Klopp may “act[] solely, solely, as a personnel or human resources manager.” J.A. 218 (emphasis added). So any other participation in the mortgage industry would violate the Consent Order.
The interpretation of a negotiated order is a legal question that we review de novo. See American Canoe Ass’n v. Murphy Farms, Inc., 326 F.3d 505, 512 (4th Cir. 2003); Willie M. v. Hunt, 657 F.2d 55, 60 (4th Cir. 1981).3 We interpret consent orders using “traditional rules of contract interpretation, and the district court’s authority is thus
3 Some of our cases have adopted a more deferential posture when reviewing a district court’s interpretation of its own orders. See, e.g., In re Grand Jury Subpoena (T- 112), 597 F.3d 189, 202 (4th Cir. 2010) (“When evaluating a district court’s interpretation of its own decree, we are properly respectful of the district court’s superior position to evaluate its order.”). And other circuits have suggested that appellate review of a district court’s interpretation of a consent order is both “deferential” and “de novo” at the same time. See Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 371–72 (6th Cir. 1998) (applying a “deferential de novo” standard when “reviewing the interpretation of a consent judgment by the district court that crafted the consent judgment”); Goluba v. Sch. Dist. of Ripon, 45 F.3d 1035, 1037–38 (7th Cir. 1995) (reviewing district court’s interpretation of a consent decree de novo but “nonetheless giv[ing] some deference to the court’s interpretation” when the court “oversaw and approved the consent decree”).
As our interpretation of the Consent Order would remain the same, we need not determine whether our plenary review incorporates some measure of deference. Cf. United States v. Boyd, 55 F.3d 239, 242 (7th Cir. 1995) (Posner, J.) (noting that there are more verbal formulations of the scope of appellate review than distinctions capable of being drawn).
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constrained by the language of the decree.” Thompson v. U.S. Dep’t of Housing & Urban Development, 404 F.3d 821, 832 n.6 (4th Cir. 2005); see also Willie M. v. Hunt, 732 F.2d 383, 386 (4th Cir. 1984). As the Supreme Court has explained, consent orders like the one at hand “are entered into by parties to a case after careful negotiation has produced agreement on their precise terms.” United States v. Armour & Co., 402 U.S. 673, 681 (1971). Thus, the consent orders themselves “cannot be said to have a purpose” but reflect the negotiations between adverse parties before approval of the court. Id. “For these reasons, the scope of a consent [order] must be discerned within its four corners, and not by reference to what might satisfy [its] purposes.” Id. at 682. And the district court “has no authority to expand or contract the judgment’s terms to reflect what might have been.” Willie M., 657 F.2d at 60.
Even so, the district court seemed to base its interpretation on its own understanding of the Consent Order’s purpose. See J.A. 207 (“I signed the order. I know what the case is about. I know what my intention was.”). This would be an error. Abiding by the court’s own subjective intent rather than an objective interpretation of the document would violate the first “cardinal principle[]” for interpreting consent orders: “meaning is properly to be sought within the confines of the judicially approved documents expressing the parties’ consent.” Willie M., 657 F.2d at 60.
With this interpretive principle in mind, we turn to the terms of the Consent Order, which “limited [Klopp] from participation in the Mortgage Industry . . . as follows[.]” J.A. 49 (emphasis added). By limiting Klopp’s participation “as follows[,]” the Order “confine[d]” or “set bounds to” Klopp’s involvement in the mortgage industry in specified USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 11 of 20
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ways, Limit, 8 Oxford English Dictionary 964 (2d ed. 1989); it did not erect a complete bar to his participation. Indeed, the Consent Order that applied to Klopp contrasts with the broader settlements reached by other codefendants.4 These orders limited defendants “from participat[ing]in the Mortgage Industry in any professional capacity.” E.g., Dist. Ct. Dkt. No. 14 at 5 (emphasis added); see also, e.g., In the Matter of William C. Gennity, Exchange Act Release No. 85,246, 2019 WL 1033860, at *2 (Mar. 4, 2019) (Respondent “is barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.”).
There is no similarly broad prohibition in the Consent Order that applies to Klopp, “and we will not read one into it.” Hitachi Credit America Corp. v. Signet Bank, 166 F.3d 614, 628 (4th Cir. 1999). First, the Parties knew how to draft a broad agreement but did not do so here. Words matter, particularly compared to those used in other orders in the same case. See Quadrant Structured Prod. Co. v. Vertin, 16 N.E.3d 1165, 1172 (N.Y. App. 2014) (“[I]f parties to a contract omit terms—particularly, terms that are readily found in other, similar contracts—the inescapable conclusion is that the parties intended the omission.”). And second, subjecting a litigant to contempt liability—whether civil or criminal—requires a clear indication of what is prohibited. See Acosta v. La Piedad Corp.,
4 “Obedience to the ‘four corners’ rule . . . does not make improper the use of certain aids to construction where necessary. The circumstances surrounding the formation of the consent order . . . may properly inform a court while it yet adheres to the ‘four corners’ rule.” Willie M., 657 F.2d at 60.
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894 F.3d 947, 951 (8th Cir. 2018) (“A party cannot be held in contempt for violating an ambiguous court order.”). An order limited “as follows” is hardly a clear imposition of a similarly comprehensive ban. J.A. 49.
The subparagraphs that follow delineate specific restrictions: Klopp is prohibited from “contacting, soliciting, or otherwise dealing with” borrowers or certain third-party servicers. Id. Again, the restrictions do not generally ban Klopp from the mortgage industry but limit his interactions with specific categories of individuals and business in specific ways.
Of course, one could read “otherwise dealing with” expansively to include any involvement in the mortgage industry. But the rules of interpretation counsel against this overbroad construction. The rule of ejusdem generis teaches that a general term at the end of a list refers to items of the same class as the specific terms. See Swift & Co. v. Columbia Railway, Gas & Electric Co., 17 F.2d 46, 48 (4th Cir. 1927); 11 Williston on Contracts § 32:10 (4th ed.). When we apply this rule to the list of prohibited activities, “contacting, soliciting, or otherwise dealing with,” the consent order looks much narrower. J.A. 49. The term “otherwise dealing with” appears to be a general term referring to business dealings that—like “contacting” and “soliciting”—involve direct communication with certain persons outside the business. Id. This interpretation is underscored by the context of this litigation. See Willie M., 657 F.2d at 60. Restricting outward-facing roles limits Klopp’s ability to solicit kickbacks; permitting inward-looking management roles allows Klopp to continue to run his business. Under this narrower interpretation, Klopp was not prohibited from running a mortgage-origination business or from managing its employees. USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 13 of 20
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The regulators argue that subparagraph (c) somehow expands the scope of subparagraphs (a) and (b). Since “the plain meaning of the provision is that the only role that Mr. Klopp could play in the mortgage industry was in a human resources capacity,” it supposedly reinforces the breadth of the Consent Order. Appellees’ Br. 17. We disagree. Subparagraph (c) begins with the words “[t]hese limitations shall not prohibit,” showing that subparagraph (c) itself confines the limitations given in subparagraphs (a) and (b). J.A. 49 (emphasis added). We fail to see how this safe harbor that by its own terms narrows the restrictions applicable to Klopp should instead be read to broaden them. So activities that were never within the scope of subparagraphs (a) and (b)—such as managing the entire business and profiting from his investment—do not fall within those subparagraphs when they are further tapered.
The regulators next argue that Klopp’s narrower reading would render subparagraph (c) superfluous. See Goodman v. Resolution Trust Corp., 7 F.3d 1123, 1127 (4th Cir. 1993). Not so. Subparagraph (c) would, for example, allow Klopp to contact lenders to investigate personnel complaints—a classic HR function. In contrast, the regulators’ broad interpretation would create the very superfluousness they seek to avoid. If Klopp was in fact limited to acting solely as an HR manager, there would be no need to prohibit him from “soliciting” consumer borrowers or servicers in subparagraphs (a) or (b). J.A. 49. So we reject the regulators’ overbroad interpretation.
For these reasons, Klopp’s management of the business was not categorically barred by the Consent Order, and the district court erred in finding it was a valid ground for contempt.
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(b) Communications with third parties
Although managing the business was not itself barred by the Consent Order, Klopp could still violate the specific activity limitations in subparagraphs (a) and (b) by his management conduct. And so the district court also found that Klopp continued to communicate impermissibly with third-party businesses engaged in settlement services.5 This violation of subparagraph (a) is supported by the record. See, e.g., J.A. 300 (“Q: how often in a month would you chime in on anything to do with a particular loan? A: probably less than a dozen.”); J.A. 138 (discussing repeated communications with lenders); J.A. 146–47 (requesting an interest rate concession from a lender for a particular consumer loan). So the court properly rested its contempt finding on Klopp’s communications. And, in any event, Klopp fails to explain on appeal why this contempt finding was erroneous. See United States v. Jones, 308 F.3d 425, 427 n.1 (4th Cir. 2002) (arguments not raised on appeal are waived).
2.
Reporting requirements
The district court also found violations of various reporting requirements in the Consent Order. First, Klopp had to upload a copy of the final order to the Registry. The
5 Settlement services include “any service provided in connection with a real estate settlement including, but not limited to . . . the origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans), and the handling of the processing, and closing or settlement.” 12 U.S.C. § 2602(3); see J.A. 48 (incorporating this statutory definition into the Consent Order).
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district court determined that Klopp “blatantly did not do it.” J.A. 220. And the court also found that Klopp “did not do so because he didn’t want to advertise [the Order].” J.A. 220.
On appeal, Klopp concedes that he failed to upload the Order but asserts that no harm came from his failure. Appellant’s Br. 33–34. In so doing, he suggests—as he did below—that regulators must prove a specific monetary harm arising from his violation. See J.A. 224 (“the argument of counsel is that unless there’s some kind of monetary harm that’s shown . . . there’s been no harm”). We reject the premise—our caselaw recognizes informational harms not connected to any specific monetary loss. In Rainbow School, the contemnor, like Klopp, argued that no harm was shown where the movant violated an order about an intangible trademark violation that did not lead to specified monetary damages. 887 F.3d at 619. But we explained that the harms in that case—confusion and mark dilution—were in fact sufficient to establish harm in the contempt analysis. Id.
Those harms, as here, are informational harms disconnected from exact monetary damages. As the district court noted, the Registry is “a nationwide platform that provides for improved coordination and information shared among regulators and increased efficiencies for the industry and enhanced consumer protection.” J.A. 226. When Klopp failed to upload the Consent Order, Klopp’s counterparties—and regulators in other jurisdictions—were disadvantaged from the lack of information in the Registry. See J.A. 156–58. Given these specific factual findings, the district court did not abuse its discretion when it found Klopp in violation for failing to upload the Consent Order. And in an industry where informational asymmetries are a predominant factor in product pricing and selecting counterparties, the importance of this form of harm should not be minimized. See USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 16 of 20
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United States v. Danube Carpet Mills, Inc., 737 F.2d 988, 993 (11th Cir. 1984) (where “information reaching the public posesse[s] the capacity to deceive, ‘the Government [is] not obligated to adduce evidence of specific injuries to consumers’”) (quoting United States v. Reader’s Digest Ass’n, Inc., 662 F.2d 955, 969 (3d Cir. 1981)).
Second, the Consent Order required Klopp to notify regulators of “any change in residence” or “any change in title or role in any business activity . . . and any entity in which [Klopp has] any ownership interest.” J.A. 51−52. Yet without giving any notice, Klopp rented a home in California and set up another branch of the Peoples Bank & Trust in Orange County. As to this provision, the district court found that “six months of residence in [California]” and “setting up the same kind of business that he has in Maryland . . . in the state of California [is a] clear violation” of the Order. J.A. 221. We agree with the district court’s legal interpretation here. And these findings are strongly supported by the record. See, e.g., J.A. 284 (“Q: Have you lived in California? A: I have a temporary residence in California. I rented a house . . . out there last year. And actually I still have a house rented there now, yes.”); J.A. 297 (“Q: Do you have a branch that you manage out there [in California]? A: Yes.”).
Klopp again argues that these violations caused no concrete harm. In Klopp’s view, although the Consent Order was written “to ensure the Regulators could track Mr. Klopp and his business activities,” they nevertheless caught him and “pursue[d] contempt proceedings against him.” Appellant’s Br. 33. The implications of this argument would effectively immunize Klopp from enforcement of this provision—either Klopp is never discovered or, if he is, no harm occurs. For the reasons given above, we find the USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 17 of 20
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informational harm here legally sufficient and supported by the record. So we likewise reject this argument.
For these reasons, the district court properly found Klopp in violation of the Consent Order’s reporting requirements. And, in sum, because the district court identified at least one violation of the Consent Order, it did not abuse its discretion by holding Klopp in contempt.
B.
The district court’s disgorgement order
As with the contempt order, we review the sanctions imposed by the district court for an abuse of discretion. See Rainbow School, 887 F.3d at 617; In re General Motors Corp., 61 F.3d 256, 259 (4th Cir. 1995). District courts enjoy wide latitude in imposing a sanction that is “compensatory,” “incentivizing,” or both. Rainbow School, 887 F.3d at 620. “‘[W]hen a court imposes fines and punishments on a contemnor, it is not only vindicating its legal authority to enter the initial court order, but it also is seeking to give effect to the law’s purpose of modifying the contemnor’s behavior to conform to the terms required in the order.’” International Union, United Mine Workers of America v. Bagwell, 512 U.S. 821, 828 (1994) (quoting Hicks ex rel. Feiock v. Feiock, 485 U.S. 624, 635 (1988)).
Disgorgement—the payment of profits arising from improper conduct—is one such sanction. See S.E.C. v. JT Wallenbrock & Associates, 440 F.3d 1109, 1113 (9th Cir. 2006). As the Supreme Court explained, “[t]he primary purpose of disgorgement” is deterrence “by depriving violators of their ill-gotten gains.” Kokesh v. S.E.C., 137 S. Ct. 1635, 1643 (2017) (internal quotations and citation omitted); see also Russell G. Ryan, The Equity USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 18 of 20
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Façade of SEC Disgorgement, 4 HARV. BUS. L. REV. ONLINE 2–5 (2013) (discussing disgorgement). Disgorgement is commonly understood as a form of restitution, “limited to restor[ing] the status quo.” Tull v. United States, 481 U.S. 412, 424 (1987).
Considering the purposes of a civil contempt sanction, a fine imposed by the district court must be causally connected to the reasons for contempt. See Goodyear, 137 S. Ct. at 1185−86; see also CFPB v. Gordon, 819 F.3d 1179, 1195 (9th Cir. 2016). As to the amount of disgorgement, Klopp argued that managing the business and receiving profits did not violate the Consent Order. But the court rejected that argument in calculating the contemptuous income because “that view directly contradicts this Court’s ruling at the contempt hearing.” J.A. 1041 n.8. Thus, the court assumed that managing the business was improper and set out identifying Klopp’s profits from his business because any such profit was contemptuous income. J.A. 1042–43.
But, as discussed above, the district court’s view that managing the business and accepting profits from the mortgage industry violated the Order depends on an overbroad interpretation of the Consent Order. Thus, the district court’s approach to calculating disgorgement hinged on activity that did not violate its order—it lacked the necessary causal connection between these profits and a violation. So we find that, justified on this basis, ordering disgorgement of the business profits was an abuse of discretion.6
6 Because the primary basis for the entire sanctions order was invalid, we need not address whether the profits that accrued to Klopp after the expiration of the Consent Order were causally connected to his contemptuous conduct. And we express no opinion on whether the disgorgement of those profits would be appropriate considering Klopp’s other violations of the Consent Order. We leave these questions to the district court on remand. USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 19 of 20
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*
*
*
District courts possess broad contempt authority to ensure that litigants respect and adhere to court orders. But broad authority is not unlimited authority. When a court enters a consent order, its power is constrained by the objective terms of that order. So the court may not find a party in contempt of that order unless its terms are violated. And when a court sanctions a litigant for contempt, it must connect those sanctions to an actual violation.
Here, the district court erred in its broad interpretation of the Consent Order: Klopp could properly manage the business and earn a profit from its operation. Klopp nevertheless violated other provisions of the district court’s order and so we affirm the district court’s contempt order. But because the district court based its sanctions on the improper contempt finding, we vacate the disgorgement order and remand for the court to reassess the consequences of Klopp’s contempt.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED USCA4 Appeal: 18-1694 Doc: 49 Filed: 04/27/2020 Pg: 20 of 20
Order ()
PDF of this document (8 pages)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
CONSUMER FINANCIAL
* PROTECTION BUREAU, et al.
Plaintiffs,
*
v.
* Civil Action No. RDB-15-1235
GARY KLOPP, et al.
* Defendants.
* * * * * * * * * * * * * *
MEMORANDUM ORDER Plaintiffs, the Consumer Financial Protection Bureau and the Consumer Protection Division of the Maryland Attorney General’s Office (collectively “Regulators”), filed this action against Defendant Gary Klopp (“Klopp” or “Defendant”) and other individuals and entities to address the Defendants’ alleged participation in a kickback scheme in violation of federal and state consumer protection laws. (ECF No. 1.) On November 13, 2015, Plaintiffs and Defendants Klopp, All County Settlements, LLC, and Carroll Abstracts, Inc., submitted a Stipulated Final Judgment and Order (ECF No. 51), which this Court approved and entered on November 16, 2015. (ECF No. 53.) This Court subsequently found that Klopp was in violation of that Order and held him in civil contempt on four separate grounds. (See ECF No. 59.) Ultimately, it was ordered that the Defendant Klopp was to pay $526,796.36 as disgorgement of profits wrongfully gained. (ECF No. 77.) The United States Court of Appeals for the Fourth Circuit affirmed this Court’s Order on three of those grounds but held one finding, that Klopp was in contempt for owning his mortgage business, was erroneous. See Consumer Fin. Protection Bureau v. Klopp, 957 F.3d 454, 465 (4th Cir. 2020). The Fourth Circuit Case 1:15-cv-01235-RDB Document 104 Filed 02/25/21 Page 1 of 8
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vacated this Court’s order and remanded the case for a recalculation of the contempt remedy. Id. at 467.
Presently pending is the Regulators’ Motion for Entry of Monetary Remedy (ECF No. 101) in which the Regulators move for a monetary remedy against Klopp requiring him to disgorge $269,722.14 in profits that he earned while acting in violation of the Consent Order. This figure represents almost a fifty-percent reduction in the earlier sanctions figure. The parties’ submissions have been reviewed and no hearing is necessary. See Local Rule 105.6 (D. Md. 2018). For the reasons that follow, the Regulators’ Motion for Entry of Monetary Remedy (ECF No. 101) is GRANTED.
BACKGROUND On April 29, 2015, the Regulators filed a Complaint against Klopp and other individuals and entities alleging violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607(a), the Consumer Financial Protection Act of 2010, 12 U.S.C. § 5536(a)(1)(A), and the Maryland Consumer Protection Act, Md. Code Ann., Com. Law §§ 13-101 through 13-501 (2013 Repl. Vol.). (ECF No. 1.) On November 13, 2015, Plaintiffs and Defendants Gary Klopp, All County Settlements, LLC, and Carroll Abstracts, Inc., submitted a Stipulated Final Judgment and Order (ECF No. 51), which this Court approved and entered on November 16, 2015. (ECF No. 53, hereinafter “Consent Order.”) While these three Defendants neither admitted nor denied the allegations (id. at ¶ 3), the Consent Order, in relevant part, imposed the following conduct requirements. 8. Pursuant to 12 U.S.C. § 5565(a)(2)(G), Defendants are limited from participation in the Mortgage Industry for two years from the Effective Date as follows:
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a. Defendants are prohibited from contacting, soliciting, or otherwise dealing with consumer borrowers or loan applicants in any capacity with regard to any mortgage business; and b. Defendants are prohibited from contacting, soliciting, or otherwise dealing with any third party businesses engaged in offering any settlement service.
c. These limitations shall not prohibit Defendant Klopp from acting solely as a personnel or human-resources manager for a mortgage business operated by an FDIC insured banking institution, including providing personnel or human-resources-related management and administrative functions with regard to National Mortgage Licensing System-registered loan originators, as that term is defined in Md. Fin. Inst. Code Ann. §11-601.
9. Within 60 days of the Effective Date, Defendant Klopp must disclose this action and Order to NMLSR and, in accordance with NMLSR procedure, upload an electronic copy of this Order.
(ECF No. 53 at 5-6.) The Consent Order also includes various reporting requirements related to personal contact information and business activities. (Id. ¶¶ 15-17.) Klopp agreed to report to the Regulators any changes in (1) his residence, (2) his roles in “any business activity,” and (3) “any entity in which [he had] an ownership interest” for two years. (Id.) Klopp also agreed to notify the Regulators of “any developments that [might] affect compliance obligations arising under the Consent Order.” (Id. ¶ 15.)
Throughout the two years following the filing of the Consent Order, Klopp, in the words of the Fourth Circuit, “defied the Consent Order with aplomb.” Klopp, 957 F.3d at 460. Without notifying the Regulators, he rented a house in California and opened a new branch of the Peoples Bank & Trust in Orange County. Id. Klopp never uploaded the Consent Order to the Registry and admittedly continued to engage with third-party settlement services. Id. His employment agreement with the People Bank & Trust compensated him based on the greater of a $2,000 a month salary or certain profits earned by his brokerage branches. Id. Case 1:15-cv-01235-RDB Document 104 Filed 02/25/21 Page 3 of 8
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Between January 2016 and March 2017, the business generated an estimated $765,000 in profits, $700,000 of which Klopp allocated to his own earnings. Id.
At the conclusion of a contempt hearing held on August 16, 2017, this Court held Klopp in civil contempt, for the reasons stated on the record, for violating numerous provisions of the Consent Order. (ECF No. 59.) Specifically, this Court found Klopp in contempt on four grounds: (1) for communicating with third parties involved in settlement services; (2) for failing to upload the Consent Order to the National Mortgage Licensing System; (3) for failing to notify the Regulators when he relocated to California and opened a mortgage business branch there; and (4) for owning and managing a mortgage business. (See ECF No. 77.) After holding Klopp in contempt, this Court held a sanctions hearing. (ECF 74.) At the hearing Klopp acknowledged $987,920 in profits from his business for the period between the effective date of the Consent Order, November 16, 2015, and April 27, 2018. Klopp, 957 F.3d at 460. This Court rejected Klopp’s arguments that receiving profits from his business did not violate the Consent Order, as well as his suggestion that money he invested in the business should be deducted from that amount. (ECF No. 77.) This Court also rejected Klopp’s argument that his earnings accruing after the expiration of the Consent Order in November 2017 should be considered, as Klopp should not be protected by the expiration of an Order with which he never complied. (Id.) On the other hand, this Court did not accept the Regulators’ argument that all of Klopp’s earnings during the relevant time period should be disgorged. (Id.) Instead, this Court deducted $2,000 in monthly compensation paid to Case 1:15-cv-01235-RDB Document 104 Filed 02/25/21 Page 4 of 8
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Klopp for his work as human resources manager in addition to Klopp’s tax withholdings, reducing the profits to $526,796.26 and ordering him to disgorge that amount. (Id.) On April 27, 2020, the Fourth Circuit affirmed this Court’s contempt ruling, finding that Klopp had knowingly violated three separate paragraphs of the Consent Order. See Klopp, 957 F.3d at 465-66. However, the Fourth Circuit disagreed with this Court’s holding that his management of the business was categorically barred by the Consent Order. Id. at 465. The Fourth Circuit remanded the matter for recalculation of the sanction amount consistent with its opinion. On August 14, 2020, the Regulators filed the presently pending Motion for Entry of Monetary Remedy (ECF No. 101), seeking Klopp’s disgorgement of profits earned while acting in violation of the three separate paragraphs of the Consent Order. ANALYSIS
As explained by the Fourth Circuit, district courts enjoy “wide latitude in imposing a sanction that is ‘compensatory,’ ‘incentivizing,’ or both.” Klopp, 957 F.3d at 466 (quoting Rainbow School Inc., v. Rainbow Early Education Holding LLC, 887 F.3d 610, 620 (4th Cir. 2018)). Disgorgement is a form of sanction used by courts which involves the payment of profits arising from improper conduct. See S.E.C. v. JT Wallenbrock & Associates, 440 F.3d 1109, 1113 (9th Cir. 2006). The primary purpose of such sanction is deterrence “by depriving violators of their ill-gotten gains.” Klopp, 957 F.3d at 467 (quoting Kokesh v. S.E.C., 137 S. Ct. 1635, 1643 (2017)). “Considering the purpose of a civil contempt sanction, a fine imposed by the district court must be casually connected to the reasons for contempt.” Id. (citing Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1185-86 (2017); CFPB v. Gordon, 819 F.3d 1179, 1195 (9th Cir. 2016)).
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In this case, the Fourth Circuit agreed with this Court’s findings that Klopp violated the Consent Order by (1) continuing to communicate impermissibly with third-party businesses engaged in settlement services, see id. at 465, (2) failing to upload a copy of this Court’s final order to the National Mortgage Licensing System, see id. at 465-66, and (3) failing to notify regulators of “any change in residence” or “any change in title or role in any business activity” when he began renting a home in California and setting up a branch of the Peoples Bank & Trust in Orange County without notice, see id. at 466. Each violation was significant. With respect to communications with third-party businesses, the record shows that Klopp was copied on several emails with third parties involved with settlement services and, at other times, actively negotiated with lenders regarding lending requirements and procedures. (See ECF Nos. 101-3, 101-4.) The Regulators have provided evidence of 164 separate instances of communications with third-party businesses in violation of paragraph 8(b) of the Consent Order. (See id.; see also Contempt Hr’g Tr. 83:7-15, ECF No. 101-1.) With respect to the failure to upload the Consent Order to the relevant registry, Klopp’s “counterparties—and regulators in other jurisdictions—were disadvantaged from the lack of information in the Registry.” Klopp, 957 F.3d at 465-66. As the Fourth Circuit noted, “in an industry where information asymmetries are a predominant factor in product pricing and selecting counterparties, the importance of this form of harm should not be minimized. Id. at 466 (citing United States v. Danube Carpet Mills, Inc., 737 F.2d 988, 993 (11th Cir. 1984) (internal citations omitted)). Finally, with respect to the failure to notify the Regulators of his change in residence and new business activity, again the Fourth Circuit found the resulting informational harm to be significant. Id.
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The Regulators contend that on the basis of this harm caused by Klopp’s violations, he should be ordered to disgorge $269,722.14, representing the amount he earned, after taxes, during the period he defied the three express provisions of the Consent Order. (ECF No. 101.) Klopp on the other hand contends that the Regulators have not produced evidence, on this record, of any damages directly attributable to his contemptuous conduct, and accordingly, this Court should enter a remedial, no-punitive disgorgement order. (ECF No. 102.) However, “a civil compensatory sanction need not always be dependent upon proof of actual loss.” In re General Motors Corp., 110 F.3d 1003, 1018 n.16 (4th Cir. 1997) (citing Manhattan Indus, Inc. v. Sweater Bee by Banff Ltd., 888 F.2d 1, 15 (2d Cir. 1988), cert. denied, 949 U.S. 1209 (1990)). In Klopp, the Fourth Circuit rejected the Defendant’s argument that the Regulators were required to prove a specific monetary harm arising from his reporting violations. Id. at 465-66. Further, other courts, including one within the Fourth Circuit, have specifically held that “[d]isgorgement of profits remains a viable remedy in civil contempt proceedings, even when a plaintiff cannot demonstrate ‘actual pecuniary’ loss.” ePlus Inc. v. Lawson Software, Inc., 946 F. Supp. 2d 449, 454 (E.D. Va 2013) (collecting cases). Harm having been established by the Regulators and affirmed by the Fourth Circuit, the only question remaining in this case is the appropriate sanction.
Exercising its “broad contempt authority,” see id. at 467, this Court finds the Regulators’ request of $269,722.14 is appropriate. Where harm is difficult to calculate, “a court is wholly justified in requiring the party in contempt to disgorge any profits it may have received that resulted in whole or in part from the contemptuous conduct.” General Motors, 110 F.3d at 1018 n.16. This is particularly true where a party has engaged in a “pattern or practice of Case 1:15-cv-01235-RDB Document 104 Filed 02/25/21 Page 7 of 8
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contemptuous conduct.” FTC. v. Kuykendall, 371 F.3d 745, 764 (10th Cir. 2004). In such cases, “the district court may use the defendants’ gross receipts as a starting point for assessing sanctions.” Id. (citing FTC v. Figgie Int’l, Inc., 994 F.2d 595, 605-06 (9th Cir. 1993); FTC v. Security Rare Coin & Bullion Corp., 931 F.2d 1312, 1316 (8th Cir. 1991)); see also FTC v. BlueHippo Funding, LLC, 762 F.3d 238, 244 (2d Cir. 2014). Between November 16, 2015 and September 21, 2016, Klopp regularly violated the Consent Order in the three different ways, each affirmed by the Fourth Circuit. During that time, he earned a total of $269,722.14 in profits after taxes. (See ECF No. 101-5.) That amount therefore reflects the income Klopp received during the period he concealed the Consent Order from the public and his whereabouts from the Regulators, as well as any additional income he received during the period he repeatedly violated the Consent Order’s communication restrictions. Disgorgement of this amount will properly vindicate this Court’s authority to enter the initial court order and will “‘give effect to the law’s purpose of modifying the contemnor’s behavior to conform to terms required in the order,’” Klopp, 957 F.3d at 466 (citing Int’l Union, United Mine Workers of America v. Bagwell, 512 U.S. 821, 828 (1994) (internal citations omitted)), while also furthering a return to “‘the status quo,’” id. (citing Tull v. United States, 481 U.S. 412, 424 (1987)). For these reasons it is HEREBY ORDERED this 25th Day of February, 2021 that: 1. Gary Klopp shall pay $269,722.14 to the Plaintiffs within 30 days of the entry of this Order;
2. The Clerk of this Court shall transmit copes of this Memorandum Order to the parties and counsel of record in the above captioned case.
______/s/______________ Richard D. Bennett United States District Judge
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