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THOMPSON v. FIRST UNION NATIONAL BANK OF DELAWARE

March 23, 2004.

THOMAS THOMPSON, on behalf of himself and others similarly situated, Plaintiffs,
v.
FIRST UNION NATIONAL BANK OF DELAWARE, Defendant



The opinion of the court was delivered by: RICHARD ARCARA, District Judge

DECISION AND ORDER

This case was referred to Magistrate Judge Hugh B. Scott pursuant to 28 U.S.C. § 636(b)(1). On May 20, 2002, the defendant filed a motion to dismiss the complaint. On March 21, 2003, Magistrate Judge Scott issued a Report and Recommendation ("Report") recommending that defendant's motion to dismiss be denied. The defendant filed timely objections to the Report, and the plaintiff filed a response thereto. Oral argument on the objections was held on January 22, 2004.

BACKGROUND

  Plaintiff filed this action on March 20, 2002, on behalf of himself and others similarly situated, alleging that the defendant, First Union National Bank ("Bank"), violated the Real Estate Settlement Practices Act of 1974 ("RESPA"), 12 U.S.C. § 2601 et seq. Specifically, the plaintiff alleges that he entered into a mortgage with the Bank and in connection with that mortgage, the Bank charged him a courier fee of $15.00. The courier fee was paid by the plaintiff to a settlement agent, Independent Title Agency, LLC ("ITA"), who forwarded that money to the Bank. The $15.00 charge was disclosed on the HUD-1 settlement statement.

  The plaintiff alleges that the Bank employed an independent courier service to perform the delivery, and that the courier service actually charged the Bank less than $15.00 to perform that service. The plaintiff alleges that the Bank violated RESPA when it overcharged him for the courier service and retained the balance of the overcharge for itself.

  The Bank moved to dismiss arguing that, even if all of the allegations in the complaint are assumed to be true,*fn1 the plaintiff has failed to state a cause of action under RESPA. DISCUSSION

  A. Standard of Review

  Pursuant to 28 U.S.C. § 636(b)(1), this Court must make a de novo determination of those portions of the Report to which objections have been made. Upon de novo review, and after reviewing the submissions and hearing argument from the parties, the Court finds that defendant's motion to dismiss should be granted. Accordingly, the Court declines to adopt the Magistrate Judge's Report.

  A motion to dismiss under Rule 12(b)(6) should be granted only if it appears "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Lyons v. Legal Aid Society, 68 F.3d 1512, 1514 (2d Cir. 1995) (quoting Conlev v. Gibson, 355 U.S. 41, 45-46 (1957)). In evaluating such a motion, this Court must "accept as true all the factual allegations in the complaint," Newman & Schwarz v. Asplundh Tree Expert Co., 102 F.3d 660, 662 (2d Cir. 1996) (citations omitted), and must "view the complaint in the light most favorable to the non-moving party." Id. The Court must also "limit itself to facts stated in the complaint . . ." Id.

  B. Plaintiff's RESPA Claim

  Congress enacted RESPA to protect home buyers from "unnecessarily high settlement charges caused by certain abusive practices." 12 U.S.C. § 2601(a). Among other things, Congress intended to eliminate "kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services." 12 U.S.C. § 2601(b)(2). The statute applies to "federally related" mortgage loans, such as the mortgage involved in this case.

  Section 8(b) of RESPA, 12 U.S.C. § 2607(b), prohibits "fee splitting" in connection with mortgage loans. It provides:
No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.
12 U.S.C. § 2607(b). Plaintiff alleges that the Bank violated § 8(b) when it charged him $15.00 for courier fees, which was more than the actual cost of the courier service to the Bank. By charging more than the actual cost of the courier service, plaintiff claims that the Bank accepted a portion of a charge other than for services that it actually performed, in violation of RESPA.

  The Second Circuit has not yet addressed the issue of whether a simple overcharge by a mortgagor, as is alleged in the complaint, violates § 8(b) of RESPA. However, the Fourth, Seventh and Eighth Circuits have addressed that issue and have concluded that it does not. See Haug v. Bank of America, 317 F.3d 832 (8th Cir. 2003); Boulware v. Crossland Mortgage Corp., 291 F.3d 261 (4th Cir. 2002); Echevarria v. Chicago Title & Trust Co., 256 F.3d 623 (7th Cir. 2001): Durr v. Intercounty Title Co., of III 14 F.3d 1183 (7th Cir. 1994). cert. denied. 513 U.S. 811 (1994).

  In Durr, the Seventh Circuit held that the defendant title company did not violate § 8(b) when it overcharged the plaintiff $8.00 for mortgage and deed recording services. The court reasoned that because the title company had simply kept the $8.00 overcharge for itself, and had not split it with any third party, there was no violation of RESPA because "RESPA requires at least two parties to ...


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