High Court: Plaintiffs Must Show That Parties Split Fees To Pursue RESPA Claim

WASHINGTON, D.C. - (Mealey's) A unanimous U.S. Supreme Court on May 24 upheld a Fifth Circuit U.S. Court of Appeals majority decision to award summary judgment to Quicken Loans Inc. after finding that plaintiffs must show that parties split fees from settlement services in order to pursue a claim under the Real Estate Settlement Procedures Act (RESPA) (Tammy Freeman, et al. v. Quicken Loans Inc., No. 10-1042, U.S. Sup.; 2012 U.S. LEXIS 3940)[enhanced version available to subscribers]. 

(Opinion. Document #85-120622-001Z.) 

Justice Antonin Scalia, who wrote the opinion for the court, explained that the plaintiffs, led by Tammy and Larry Freeman, misinterpreted 12 U.S. Code Section 2607(b) when alleging that Quicken violated RESPA by charging them and others unearned fees when closing on their loans.   

Unearned Fees 

The Freemans, Paul and Irma Smith and John and Stacy Bennett alleged that Quicken violated RESPA Section 8(b) by charging them loan discount and loan origination fees.  The plaintiffs contended that the fees were unlawful because no services were performed.  The plaintiffs each filed suit in Louisiana state court, seeking statutory damages for violation of RESPA and state law claims.  Quicken removed the actions to the U.S. District Court for the Eastern District of Louisiana, and they were consolidated.   

Quicken moved for summary judgment, arguing that because the fees were not split with another party, the plaintiffs' RESPA and state law claims were not actionable.  Judge Carl Barbier agreed and awarded summary judgment to Quicken.  The plaintiffs appealed. 

A Fifth Circuit panel noted that there is a divide among the circuit courts on whether unearned, undivided fees are actionable claims under RESPA.  Upon review of the statutory language, the majority held that Section 8(b) "is unambiguous and does not cover undivided claims."   

Moreover, the majority, which comprised Chief Circuit Judge Edith H. Jones and Circuit Judge Jennifer Walker Elrod, held that Section 8(a) requires that a kickback involve "two culpable actors." 

The high court agreed, explaining that Section 2607(b) "unambiguously covers only a settlement -service provider's splitting of a fee with one or more persons; it cannot be understood to reach a single provider's retention of an unearned fee." 


Stanley P. Baudin of Pendley, Baudin & Coffin in Plaquemine, La., and Andre LaPlace of the Law Offices of Andre LaPlace in Baton Rouge, La., represented the plaintiffs. 

Anthony Joseph Rollo Jr. of McGlinchey Stafford in Baton Rouge and Lauren Elizabeth Campisi and Eric J. Simmons of McGlinchey Stafford in New Orleans are counsel for Quicken. 

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