A Howard County couple is suing one of the largest residential real estate brokerages in the state and a Columbia title company for more than $11 million, alleging that the firms had financial ties that violated federal law.
The case is a proposed class action that could involve thousands of plaintiffs, all home buyers who bought a home with the Creig Northrop Team of Long & Foster Real Estate since 2000 and used a settlement firm called Lakeview Title Company Inc.
Attorneys for Patrick and Christine Baehr of Glenwood allege in the federal suit filed in March that Northrop received more than $500,000 in kickbacks from Lakeview Title and its part owner, Lindell Eagan, during the past 13 years. The suit, filed against the companies and their principals, claims that the funds were payment for Northrop's referral of buyers to Lakeview for settlement services.
The defendants deny the allegations and will ask for the case to be dismissed, said Quincy Crawford, who is representing Long & Foster, the Creig Northrop Team and its executives, and Niccolo Donzella, who is representing Lakeview and Eagan. They also will request that the class certification be denied, Crawford said.
Neither Creig Northrop nor Eagan responded to messages seeking comment.
The Baehrs used Northrop to buy a home in 2008. The Northrop Team, which closed on transactions totaling $326 million in 2011, has one of the largest annual sales volumes in the country, according to Real Trends Inc., a real estate industry analytics company.
The Baehrs allege that payments made to Northrop and its officers — including company president Creig Northrop and vice president Carla Northrop — by Lakeview violate settlement disclosure requirements of the federal Real Estate Settlement Procedures Act. The law prohibits people from giving or accepting referral fees or kickbacks in relation to settlement services.
The undisclosed referral structure deprived home buyers "of an impartial and fair competition between settlement service providers," according to the suit.
From 2000 through 2007, the suit alleges that Northrop and Lakeview "created a sham employment arrangement … to disguise payments of illegal referral fees." Carla Northrop, the complaint states, was receiving payments from Lakeview during those years even though she "did not actually appear for work or maintain set hours, nor did she process or conduct any real estate closings or process any files for Lakeview."
In 2008, the payments to Carla Northrop stopped, replaced by what the suit called a "sham 'Marketing Agreement.'" Under the agreement, signed by Creig Northrop and Eagan, the Northrop Team agreed to "designate Lakeview as their exclusive settlement and title company" and provide marketing services on Lakeview's behalf, the complaint says.
Lakeview agreed to pay Northrop $6,000 each month for marketing services, according to the plaintiffs. But those payments reached as high as $12,000 a month, they say, and the "excess and fluctuation in the amounts paid each month" by Lakeview to Northrop are evidence that the compensation was based on the number of settlement referrals, not contracted marketing services.
The allegations in this case stem from information gathered during the proceedings of another lawsuit against Northrop, pending in Howard County Circuit Court, filed in December 2011.
Many of the claims in the 2011 case, which alleged that Northrop and several mortgage companies encouraged clients to buy new homes before their old homes were sold in order to generate additional fees and commissions, were dismissed in March — the judge decided that they were filed too late — and a request for class-action status was denied. The plaintiffs' lawyers plan to appeal those decisions.
An alleged violation of a Maryland false-advertising statute remains in that case, and plaintiffs recently filed a new claim under the federal settlement law, adding Eagan and Lakeview as defendants. The defendants have moved to have these remaining claims dismissed. A hearing is scheduled for mid-May.
Timothy G. Casey, an attorney representing the Northrop defendants and Long & Foster in the Howard County case, declined to comment on that litigation.
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