Originally published on October 11, 2011
Keywords: Real estate settlement procedures act, RESPA, unearned charges, federal, mortgage loan,
Today the Supreme Court granted certiorari in one case of interest to the business community:
Real Estate Settlement Procedures Act — Prohibition on Unearned Charges
Section 8(b) of the Real Estate Settlement Procedures Act ("RESPA") provides that "[n]o person shall give [or] 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). The Supreme Court granted certiorari today in Freeman v. Quicken Loans, Inc., No. 10-1042, to decide whether this provision prohibits a real estate settlement services provider from charging an unearned fee only if the fee is divided between two or more parties.
Given the millions of real estate transactions that are governed by RESPA annually, and the significant volume of mortgage-related litigation in recent years, this case presents an issue of substantial importance to all real estate settlement services providers.
Petitioners, the plaintiffs in three consolidated cases, obtained residential mortgages from the respondent, Quicken Loans. At closing, Quicken allegedly charged petitioners a "loan discount fee" without giving them a lower interest rate in return. Petitioners filed suit, claiming that Quicken violated Section 8(b) of RESPA by imposing fees for which no services were performed. Petitioners did not allege that Quicken split the loan discount fees with another party.
The district court granted summary judgment in favor of Quicken, holding that "the plain language" of Section 8(b) "requires an allegation that the challenged fees have been split in some fashion." The Fifth Circuit affirmed, widening a circuit split on the issue of whether Section 8(b) is violated when a single settlement services provider retains unearned fees. 626 F.3d 799. The Fifth Circuit joined the Fourth, Seventh, and Eighth Circuits in holding that Section 8(b) of RESPA is violated only when two culpable parties share an unearned fee. In contrast, the Second, Third, and Eleventh Circuits have held that Section 8(b) is violated when a party charges a higher fee for a settlement service provided by a third party than is demanded by the third party and then retains the full difference. The Second Circuit has also held explicitly that Section 8(b) prohibits undivided, unearned fees charged by a single settlement services provider.
Absent extensions amicus briefs in support of the petitioners will be due on December 2, 2011, and amicus briefs in support of the respondent will be due on January 3, 2012.
Last week the Supreme Court invited the Solicitor General to file briefs expressing the views of the United States in the following cases of interest to the business community:
DirecTV, Inc. v. Levin, No. 10-1322: The questions presented are (1) whether, in upholding against a Commerce Clause challenge an Ohio statute imposing a sales tax on satellite TV services but not on cable TV services, the lower court erred in concluding that no examination of the statute's effects was necessary because a statute can be characterized as distinguishing between competitors based on their "different methods of operation," and (2) whether the lower court erred in concluding that no examination of effects was necessary because some of the beneficiaries of the scheme are major interstate companies.
Sandy Creek Energy v. Sierra Club, Inc., No. 10-1333: The question presented is whether, after construction of a power plant has begun in reliance on the issuance of a pre-construction permit reflecting that there was no "maximum achievable control technology" ("MACT") requirement then in force, a new MACT determination requirement can be compelled during construction.
Cook v. Rockwell Int'l Corp., No. 10-1377: The questions presented are (1) whether state or federal law controls the standard of compensable harm in suits under the Price-Anderson Act, which establishes a compensation regime for a "nuclear incident," and (2) whether, if a federal standard applies, a property owner whose land has been contaminated by radioactive plutonium must show some "physical injury" to the property beyond the contamination itself in order to recover.
Fein, Such, Kahn & Shepard v. Allen, No. 10-1417: The question presented is whether a communication from a debt collector to a debtor's attorney is actionable under the Fair Debt Collection Practices Act.
Pacific Merchant Shipping Ass'n v. Goldstene, No. 10-1555: The questions presented are (1) whether the Commerce Clause and Supremacy Clause prohibit California from requiring the use of specified low-sulfur fuels on foreign- and U.S.-flagged vessels engaged in foreign and interstate commerce while the ships are on the high seas and (2) whether the Submerged Lands Act preempts California regulations requiring foreign- and U.S.-flagged vessels engaged in international and interstate commerce to use specified low-sulfur fuels while the ships are navigating outside California's three-mile seaward territorial boundary.
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