Thompson v. First Union National Bank of Delaware

Full title: THOMAS THOMPSON, on behalf of himself and others similarly situated…

Court: United States District Court, W.D. New York

Date published: Mar 23, 2004

02-CV-215A (W.D.N.Y. Mar. 23, 2004)

Opinion

02-CV-215A

March 23, 2004

DECISION AND ORDER

RICHARD ARCARA, District Judge

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,¹ the plaintiff has failed to state a cause of action under RESPA.

1 The Bank actually disputes that it overcharged the plaintiff for courier fees. However, for the purposes of this motion, the defendant assumes that fact to be true.

DISCUSSION

A. Standard of Review

Pursuant to 28 U.S.C. § 636(b)(1), this Court must make ade 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) (quotingConlev 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 reasoned:

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 overcharge.

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 RESPA.

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. 2003).

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).

CONCLUSION

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.