The opinion of the court was delivered by: Sifton, Senior Judge.
Sylvia Cohen ("plaintiff") brings this proposed class action against J.P. Morgan Chase & Co. and J.P. Morgan Chase Bank ("Chase") (collectively, "defendant"), seeking damages for violations of Section 8(b) of the the Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. § 2607(b), and section 349 of the New York General Business Law (GBL). Presently before the Court is defendant's motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. For the reasons stated below, the motion is denied.
The following facts are taken from the parties' Local Rule 56.1 statements of material facts and submissions of the parties in connection with this motion. Disputes are noted.
In February 2003, plaintiff and her husband, Richard L. Cohen (collectively, "the Cohens") applied for a Chase loan in order to refinance their cooperative apartment in Brooklyn, New York. First Am. Compl. at ¶ 6 and ¶ 20 ("Compl."). On February 28, 2003, Mr. Cohen wrote a $425 check to Chase in payment of a non-refundable application fee. Id. Chase thereafter sent the Cohens several documents in connection with the loan, including a Good Faith Estimate of Settlement Charges. Deposition of Richard Cohen at 69 ("R. Cohen Dep."). In the section entitled "Items Payable in Connection with Loan," the words "delivery fees" were crossed out, and the words "Post Closing Fee to JP/Morganchase Bank" written in, together with the amount of $225. Anderson Decl. Ex. G., Plaintiff's Ex. 2. Another document, entitled "Good Faith Estimate of Settlement Charges ("GFE"), listed "Post Closing Fees" of $225 under the line "Additional Settlement Charges." Siopis Dec. ex. A., Defendant's Ex. 10. The mortgage transaction closed on September 23, 2003. Defendant's Ex. 5. Later that day, the Cohens reviewed the HUD-1 statement and for the first time noticed the post-closing fee. R. Cohen Dep. at 73-74; Sylvia Cohen Deposition at 107-110 ("S. Cohen Dep."). In response to questioning at their depositions, Mr. and Mrs. Cohen both testified that they did not feel coerced or pressured to pay the fees associated with the closing documents. S. Cohen Dep. at 88-89; R. Cohen Dep. at 87-89.
Chase maintains that it charged the post-closing fee to cover 'post-closing services.' Ward Decl. ¶ 17; Siopis Decl. ¶ 4. Plaintiff disputes this.*fn1 As described by Chase, post-closing services include: reviewing the documents received from the settlement agent to ensure that the agent followed the Chase closing instructions and that the file is complete, correcting mistakes in the documents, retrieving missing documents, combining the closing documents with the existing underwriting file in an organized fashion, sending that file to the National Post Closing center ("NPC"), and thereafter forwarding any late-arriving documents to NPC. Siopis Decl. ¶ 5, Ward Decl. ¶ 7-9. NPC employees thereafter review the files for any errors in collateral documents that might affect investors' willingness to purchase the loans. Id. at ¶ 11. The primary purpose of post-closing review of loans is to ensure their salability on the secondary mortgage market. Ward Decl. ¶ 15.
Plaintiff's loan file contains checklists and other documentation that indicate that post-closing review was performed on her loan at Chase's regional operations center and at NPC. Ward Decl. ¶ 9.
The post-closing fee was instituted sometime between the mid-1980s and the mid-1990's. Steinfeld Dep. at 29, Siopis Decl. ¶ 2, 4, Ward Decl. ¶ 3. It was charged from that point until April, 2007, when Chase shifted to a fee structure that did not include a post-closing fee. Ward Decl. ¶ 4. Chase states that the decision to charge the fee grew out of the desire to break up a large up-front fee and instead charge borrowers smaller fees throughout the loan process. Steinfeld Dep. 38-39., D. Reply at 16.
Chase states that post-closing services were and still are performed on all loans handled by Chase, even though the fee is no longer charged, and in the past was only charged on some loans. Ward Dep. at 26. The fee was only charged in the Northeast division of Chase, and only in two of the four states in that division. Steinfeld Dep. at 21, 22, Anderson Decl., Ex. D. Chase states that it did not charge the fee in all areas of the country in which post-closing services were performed because decisions about fee structures were decentralized at the time the fee was instituted. Ward Decl. ¶ 3, Ward Dep. at 28-29.
Plaintiff filed her complaint in this action on September 22, 2004. By Memorandum and Order dated March 16, 2005, I granted defendant's motion to dismiss plaintiff's complaint pursuant to Fed. R. Civ. Pro. 12(b)(6) on the ground that it failed to state a claim under RESPA § 8(b) because (1) the fee at issue was analogous to an "overcharge," which Kruse v. Wells Fargo Home Mortgage, Inc., 383 F.3d 49, 55-57 (2d Cir. 2004), held was not prohibited by § 8(b); (2) plaintiff failed to plead that the challenged fee represented part of a charge split between defendant and one or more third parties as required by § 8(b); and (3) the complaint failed to state a deceptive practices claim under §349 of the New York General Business law because the pleaded facts demonstrated that the challenged fee was disclosed. Cohen v. J.P. Morgan Chase & Co., 2005 U.S. Dist. LEXIS 45466 (E.D.N.Y. March 16, 2005). I subsequently denied plaintiff's motion for reconsideration. Cohen v. J.P. Morgan Chase & Co., 2006 U.S. Dist. LEXIS 597. (E.D.N.Y. January 4, 2006).
On August 6, 2007, the Court of Appeals vacated the judgment of dismissal and remanded the case for reinstatement of the complaint, on the grounds that Kruse does not control this case. Cohen v. J.P. Morgan Chase & Co., 498 F.3d 111, 113 (2007) (hereinafter "Cohen I"). The Circuit concluded that because RESPA §8(b) is ambiguous as to whether the section applies to undivided, as well as divided, unearned fees, the interpretation of the Department of Housing and Urban Development ("HUD")*fn2 that RESPA does apply to such fees should be accorded deference under Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 103 S.Ct. 2778, 81 L.Ed. 2d 694 (1984). Id. Regarding the GBL § 349 claim, the Court stated that New York law offers "some support" for the conclusion that a post-closing fee could not be objectively misleading (and therefore would not qualify as a deceptive act under the statute), if it was disclosed prior to closing. Id. at 126. Regardless, stated the court, collecting fees in violation of state and federal laws may satisfy the misleading element of the statute. Id. Therefore, this Court should not have concluded as a matter of law that the charge was not a deceptive practice under § 349.
On October 12, 2007, plaintiff filed her First Amended Complaint, setting forth the claims listed above. The defendant moved for summary judgment.
A. Summary Judgment Standard
A court must grant a motion for summary judgment if the movant shows that "there is no genuine issue as to any material fact" and that "the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. Pro. 56(c). Summary judgment is appropriate "[w]hen the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed. 2d 538 (1986).
The party seeking summary judgment has the burden of demonstrating that no genuine issue of material fact exists. Apex Oil Co. v. DiMauro, 822 F.2d 246, 252 (2d Cir. 1987). In order to defeat such a motion, the non-moving party must raise a genuine issue of material fact. "An issue of fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Elec. Inspectors, Inc. v. Village of East Hills, 320 F.3d 110, 117 (2d Cir. 2003). A fact is material when it "might affect the outcome of the suit under the governing law." Id. Although all facts and inferences therefrom are to be construed in the light most favorable to the non-moving party, the non-moving party must raise more than a "metaphysical doubt" as to the material facts. See Matsushita, 475 U.S. at 586; Harlen Assocs. v. Vill. of Mineola, 273 F.3d 494, 498 (2d Cir. 2001). The non-moving party may not rely on conclusory allegations or unsubstantiated speculation. Twin Labs., Inc. v. Weider Health & Fitness, 900 F.2d 566, 568 (2d Cir. 1990). In deciding such a motion the trial court must determine whether "after resolving all ambiguities and drawing all inferences in favor of the non-moving party, a rational juror could find in favor of that party." Pinto v. Allstate Ins. Co., 221 F.3d 394, 398 (2d Cir. 2000).
B. Plaintiff's RESPA Claim
Congress enacted RESPA in 1974 to protect home buyers from "unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country." 12 U.S.C. § 2601. RESPA's legislative history identifies major problem areas that had to "be dealt with if settlement costs are to be kept within reasonable bounds." HUD RESPA Statement of Policy 1999-1, 64 Fed. Reg. 10080, 10082 (1999) (quoting Senate Report No. 93-866 *6547 (1974) reprinted in 1974 U.S.C.C.A.N. 6548 (the "Senate Report")). One such problem area was the "[a]busive and unreasonable practices within the real estate settlement process that increase settlement costs to home buyers without providing any real benefit to them." Id. However, "reasonable payments in return for services actually performed or goods actually furnished" were not intended to be prohibited.
Id., quoting the Senate Report at *6551.
Plaintiff's claim against Chase is premised on RESPA § 8(b), which states:
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.
In a formal policy statement, HUD has interpreted this section to prohibit "unearned fees" in several situations, including those in which:
(1) one service provider charges the consumer a fee where no, nominal, or duplicative work is done, or (2) the fee is in excess of the reasonable value of goods or facilities provided or the services actually performed.
Statement of Policy 2001-1, 66 Fed. Reg. 53052, 53059 (Oct 18, 2001) (codified at 24 C.F.R. § 3500.14(c)) (numbers added) ("2001 HUD Policy Statement"). In Kruse v. Wells Fargo Home Mortgage, Inc., 383 F.3d 49, 57 (2d Cir. 2004), the Second Circuit invalidated the second part of this interpretation, holding that it was contrary to the plain meaning of the statute. Id. at 56. In Cohen I, the Second Circuit interpreted RESPA § 8(b) in light of Congress's statement that RESPA's "overall goal [is] to protect consumers from 'abusive practices' that result in 'unnecessarily high settlement charges.'" 498 F.3d at 122, quoting 12 U.S.C. § 2601(a). The Court accorded Chevron deference to the first part of HUD's interpretation (quoted above), finding that HUD reasonably construes RESPA § 8(b) to prohibit a sole settlement service provider from charging the consumer a fee when "no... work is done," rejecting the argument that § 8(b) only prohibits divided fees. Id. at 126.
2. Overview of the Arguments
In her complaint, plaintiff alleges that because Chase provided no settlement services to the consumer that would entitle Chase to collect the post-closing fee, the post-closing fee was an unearned fee that was prohibited by RESPA. First Am. Compl. ¶ 27, 29. She presents three arguments to support this claim, which I discuss in order below. First, plaintiff argues that there were no services provided "in exchange for" the post-closing fee, i.e., in a quid pro quo transaction. Defendant contends that the proper inquiry is whether there were any services performed that would "justify" the fee. Second, plaintiff argues that if there were any services performed for the fee, they were duplicative of services ...