McCarn v. HSBC USA, Inc.
(E.D.Cal.Nov. 9, 2012)
On November 13, 2012, Judge Lawrence J. O’Neill of California’s Eastern District dismissed claims of unjust enrichment and allegations of Real Estate Settlement Procedures Act (RESPA) violations levied against HSBC USA Inc.’s reinsurance unit. The complaint, brought by a borrower, alleged that HSBC extracted kickbacks, which resulted in steeper premiums for borrowers. Last month, Judge O’Neill determined that the plaintiff had not adequately demonstrated that the one-year statute of limitations for RESPA claims and three-year statute of limitations for unjust enrichment claims should be tolled.
The plaintiff claimed that as a condition of his loan with HSBC he was required to buy private mortgage insurance from United Guaranty Residential Insurance Co. (United). This coverage was intended to shift the risk of default. United then reinsured the policy with HSBC Reinsurance Inc. in order to limit its own exposure. Under this arrangement, the complaint alleges, HSBC reinsurance enjoyed the benefit more than $60 million in premiums while assuming very little risk. This, the plaintiff alleged, amounts to a breach of RESPA because HSBC enjoyed referral fees from the insurance companies that it required its borrowers to patronize.
According to Judge O’Neill, “because plaintiff fails to meet the requirements of equitable tolling, fraudulent concealment and delayed discovery, the statute of limitations for his RESPA claim was not tolled and his first cause of action under RESPA against all defendants is dismissed as time-barred.” Furthermore, the “plaintiff’s [unjust enrichment] cause of action, like his first cause of action, is also time-barred unless that statute of limitations has been tolled. According to the order, the plaintiff could not meet the requirements for equitable tolling of the applicable statutes of limitation because he failed to demonstrate he had exercised due diligence in pursuing his claims.