United States District Court, W.D. New York
March 23, 2004.
THOMAS THOMPSON, on behalf of himself and others similarly situated, Plaintiffs,
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.
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 share fees."
Durr. 14 F.3d at 1187 (internal quotation omitted). See
also Echevarria, 256 F.3d at 626-27.
Similarly, in Boulware, the Fourth Circuit held the defendant
mortgage company did not violate RESPA when it charged her $65.00 for a
credit report, which only cost the mortgage company $15.00. The court
The plain language of § 8(b) makes clear that
it does not apply to every overcharge for a real
estate settlement service and that § 8(b) is
not a broad price-control provision.
Therefore, § 8(b) only prohibits
overcharges when a "portion" or "percentage" of
the overcharge is kicked back to or "split" with a
third party. Compensating a third party for
services actually performed, without giving the
third party a "portion, split, or percentage" of
the overcharge, does not violate § 8(b). By
using the language "portion, split, or
percentage," Congress was clearly aiming at a
sharing arrangement rather than a unilateral
Boulware, 291 F.3d at 265 (emphasis added). Several district
courts have also addressed this issue and reached the same conclusion.
See Welch v. Centex Home Equity Co., 262 F. Supp.2d 1263 (P.
Kan. 2003); Santiago v. GMAC Mortgage Group, Inc., 2002 WL 32173572 (E.D. Pa. Sept.
30, 2003); Willis v. Quality Mortgage USA. Inc., 5 F. Supp.2d 1306
(M.D. Ala. 1998).
This interpretation is bolstered by the express Congressional intent,
set forth in RESPA. In the "Congressional findings and purpose" section
of RESPA, 12 U.S.C. § 2601, Congress identified four specific areas
that the statute was intended to address:
It is the purpose of this chapter to effect
certain changes in the settlement process for
residential real estate that will result
(1) in more effective advance disclosure to home
buyers and sellers of settlement costs;
(2) in the elimination of kickbacks or referral
fees that tend to increase unnecessarily the
costs of certain settlement services;
(3) in a reduction in the amounts home buyers
are required to place in escrow accounts
established to insure the payment of real estate
taxes and insurance; and
(4) in significant reform and modernization of
local record keeping of land title information.
12 U.S.C. § 2601(b). Congress did not mention the imposition of
price controls as an intended consequence of RESPA. In fact, "Congress
considered and explicitly rejected a system of price control for fees; it
concluded that the price of real estate services should be set in the
market." Mercado v. Calumet FederalSavings & Loan
Association, 763 F.2d 269
, 271 (7th Cir. 1985)(citing S.Rep. 93-866, 93d Cong., 2d Sess. (1974), reprinted in 1974 U.S.C.C.A.N.
6549-6550)). Instead, Section 8 was intended
to prohibit all kickback and referral fee
arrangements whereby any payment is made or `thing
of value' furnished for the referral of real
estate settlement business. The section also
prohibits a person that renders a settlement
service from giving or rebating any portion of the
charge to any other person except in return for
services actually performed.
Id. (quoting 1974 U.S.C.C.A.N. at 6551): see also
Durr, 14 F.3d at 1186 ("At its core, RESPA is an anti-kickback
statute.") (internal quotation omitted).
Plaintiff cites HUD's Statement of Policy 2001-1, 66 FR 53052, in
support of his position. According to HUD's policy statement, § 8(b)
of RESPA is violated when one "service provider marks-up the cost of the
services performed by another settlement service provider without
providing additional, actual, necessary and distinct services, goods or
facilities to justify the additional charge . . ."Id. at 53057.
The policy statement further provides:
HDD, therefore, specifically interprets § 8(b)
as not being limited to situations where at least
two persons split or share an unearned fee for the
provision to be violated.
Id. Plaintiff argues that the decisions of the Fourth,
Seventh and Eighth Circuits are squarely at odds with HDD's policy
statement, and the Court should defer to the agency's interpretation of
When a statute administered by a federal agency is unclear and the
agency is authorized to interpret it, the agency's interpretation, unless unreasonable, is accorded deference by a reviewing court. See
Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837, 842-44 (1984). However, where the language of the statute is
clear and unambiguous, Chevron deference is not appropriate.
"If the intent of Congress is clear, that is the end of the matter; for
the court, as well as the agency, must give effect to the unambiguously
expressed intent of Congress." Id. at 842-43.
Here, the language of § 8(b) is clear and requires that the
unearned portion (i.e. the overcharge itself) be split with a third party
in order to violate the statute. See 12 U.S.C. § 2607(b)
(requiring that "no person shall give and no person shall accept
any portion, split, or percentage of any charge" other than for services
actually performed). Since the language of § 8(b) is clear, no
deference to the HUD policy statement is required. See Haug,
317 F.3d at 839; Krzalic v. Republic Title Co., 314 F.3d 875,
879-80 (7th Cir. 2002), cert. denied, 123 S.Ct. 2641 (2003);
Boulware, 291 F.3d at 267. Where, as is alleged in this case,
the mortgagor or title company simply retains the overcharge for itself,
§ 8(b) is not violated.
This conclusion is not altered by the fact that the courier fee was
collected by a settlement agent, ITA, and then remitted to the Bank.
Plaintiff does not allege that the Bank split the courier fee with ITA.
On the contrary, plaintiff alleges that the Bank retained the entire
overcharge for itself. See Compl., at ¶ 17. Moreover, even if the Court were to accept plaintiff's argument that
the unearned portion need not be split with a third party in order to
violate § 8(b), plaintiffs claim fails for yet another reason. The
plain language of § 8(b) requires that the "no person shall receive
any portion, split or percentage of any charge . . . other than for
services actually performed." 12 U.S.C. § 2607(b) (emphasis
added). In this case, the plaintiff does not claim that the courier
service was not performed. He merely complains that he overpaid for that
service. However, since the charge was for services that were actually
performed, § 8(b) of RESPA is not violated. See Sosa
v. Chase Manhattan Mortgage Corp., 348 F.3d 979. 983 (11th Cir.
Accordingly, the Court finds that the allegations in the plaintiff's
complaint fail to state a violation of RESPA.
C. Plaintiff's State Law Claims
Having dismissed plaintiffs RESPA claim, the Court finds it appropriate
to deny supplemental jurisdiction over plaintiff's remaining state law
claims. See 28 U.S.C. § 1367(c)(3).
For the reasons stated herein, the Court declines to adopt the
Magistrate Judge's Report and finds that the Bank's motion to dismiss
should be granted. Further, the Court denies supplemental jurisdiction over
plaintiffs remaining state law claims. The Clerk of the Court is directed
to take all steps necessary to close this case.
IT IS SO ORDERED.