Boulware v. Crossland Mortg. Corp., 01-2318.

• Decision Date: 22 May 2002
• Docket Number: No. 01-2318.,01-2318.
• Parties: Tyna L. BOULWARE, on behalf of herself and all others similarly situated, Plaintiff-Appellant, v. CROSSLAND MORTGAGE CORPORATION, Defendant-Appellee, United States of America, Amicus Curiae.
• Court: U.S. Court of Appeals — Fourth Circuit

291 F.3d 261

Tyna L. BOULWARE, on behalf of herself and all others similarly situated, Plaintiff-Appellant, v. CROSSLAND MORTGAGE CORPORATION, Defendant-Appellee, United States of America, Amicus Curiae.

No. 01-2318.

United States Court of Appeals, Fourth Circuit.

Argued April 4, 2002.

Decided May 22, 2002.

COPYRIGHT MATERIAL OMITTED

ARGUED: James Evan Felman, Kynes, Markman & Felman, P.A., Tampa, Florida, for Appellant. Christine N. Kohl, Appellate Staff, Civil Division, United States Department of Justice, Washington, D.C., for Amicus Curiae. Michael Schatzow, Venable, Baetjer & Howard, L.L.P., Baltimore, Maryland, for Appellee. ON BRIEF: Katherine Earle Yanes, Kynes, Markman & Felman, P.A., Tampa, Florida; Andrew N. Friedman, Gary E. Mason, Victoria S. Nugent, Cohen, Milstein, Hausfeld & Toll, Washington, D.C.; Lee S. Shalov, Shalov, Stone & Bonner, New York, New York; Peter D. Fastow, Steven B. Preller, Troese, Fastow & Preller, L.L.C., Annapolis, Maryland, for Appellant. Robert D. McCallum, Jr., Assistant Attorney General, Thomas M. DiBiagio, United States Attorney, Michel Jay Singer, Appellate Staff, Civil Division, United States Department of Justice, Washington, D.C.; Richard A. Hauser, General, Peter S. Race, Assistant General, Joan L. Kayagil, United States Department of Housing And Urban Development, Washington, D.C., for Amicus Curiae. Mark D. Maneche, Venable, Baetjer & Howard, L.L.P., Baltimore, Maryland, for Appellee.

Before WILKINSON, Chief Judge, and WILLIAMS and TRAXLER, Circuit Judges.

Affirmed by published opinion. Chief Judge WILKINSON wrote the opinion, in which Judge WILLIAMS and Judge TRAXLER joined.

OPINION

WILKINSON, Chief Judge.

Plaintiff Tyna Boulware claims that § 8(b) of the Real Estate Settlement Procedures Act ("RESPA") is a broad price control statute prohibiting any overcharge for real estate settlement services. Boulware seeks to certify a class to challenge Crossland Mortgage Corporation's alleged overcharge for credit reports. The district court found that Boulware did not allege any split or kickback of the overcharge from Crossland to a third party. It thus dismissed Boulware's complaint and denied class certification. We agree with the Seventh Circuit that § 8(b) is a prohibition on kickbacks rather than a broad price control provision. See Echevarria v. Chi. Title & Trust Co., 256 F.3d 623 (7th Cir.2001); Durr v. Intercounty Title Co., 14 F.3d 1183 (7th Cir.1994). We therefore affirm the judgment.

I.

In November 2000, Tyna Boulware, a Maryland consumer, obtained a federally related home mortgage loan from Crossland Mortgage Corporation.¹ In connection with this loan, Crossland purchased Boulware's credit report from a third-party credit reporting agency. On July 18, 2001, Boulware initiated this action, alleging that Crossland violated RESPA § 8(b), 12 U.S.C. § 2607(b) (2000), by charging her $65 for the credit report when it cost Crossland $15 or less to obtain it. Boulware claimed that Crossland kept the $50 overcharge for itself without performing additional services. She did not allege that the credit reporting agency or any other third party received payment from Crossland beyond that owed to it for services actually performed.²

Boulware sought civil remedies under RESPA, including treble damages, attorneys' fees, and costs. See 12 U.S.C. § 2607(d). In addition, she sought to certify a class of all parties who had received similar mortgages from Crossland in the past twelve months, and who had paid Crossland for a credit report in connection with their loans.

On October 2, 2001, the district court dismissed Boulware's complaint and denied class certification. Following two Seventh Circuit decisions, the district court held that the "plain words" of RESPA § 8(b) "support the proposition that the statute is only violated where there is a charge for a real estate settlement service that is split or kicked back, not simply where there has been an overcharge." See Echevarria, 256 F.3d 623; Durr, 14 F.3d 1183. The district court recognized that the Department of Housing and Urban Development was authorized to promulgate regulations and interpretations of RESPA, see 12 U.S.C. § 2617, and intimated that HUD's view of the statute was consistent with Boulware's. However, the court refused to adopt a construction of the statute that went beyond § 8(b)'s plain meaning, "whether condoned by administrative agency utterances or not." Boulware appeals.

II.

A.

RESPA § 8(b) 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). 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.³

Here, Crossland collected an overcharge and kept it as a "windfall" for itself. See Durr, 14 F.3d at 1187. We therefore reject Boulware's argument that § 8(b) applies, and conclude that the district court correctly dismissed her complaint under Rule 12(b)(6).

This very case demonstrates the problems with concluding otherwise. As previously noted, Boulware does not allege that Crossland's purported overcharge was kicked back to or split with the credit reporting agency or any other third party. Outside of a kickback or feesplitting situation, there is no way to make sense of the statutory directive that "[n]o person shall give and no person shall accept" any portion of an unearned fee. In fact, under Boulware's view, Boulware herself would have to be the giver contemplated by the statute in order for § 8(b) to apply.

It would be irrational to conclude that Congress intended consumers to be potentially liable under RESPA for paying unearned fees. In addition to civil penalties, RESPA § 8(d) establishes criminal sanctions for violations, including up to one year in prison. And it makes both the giver and the acceptor jointly and severally liable. See 12 U.S.C. § 2607(d)(1)-(2). It would be perverse to find that Congress intended to impose such liability on consumers — the very group it was trying to protect in enacting RESPA. See 12 U.S.C. § 2601. Accordingly, the giver in § 8(b) must be some party in the settlement process besides the borrower herself.

Boulware, joined by HUD as amicus curiae, contended at oral argument that the government would not prosecute consumers. However, it is unclear whether the government would be bound by HUD's statement that it is "unlikely to direct any enforcement actions against consumers for the payment of unearned fees." RESPA Statement of Policy 2001-1, 66 Fed.Reg. 53,052, 53,059 n. 6 (October 18, 2001). Moreover, it is insufficient for HUD to proclaim that the statute will not be enforced against consumers. We cannot interpret § 8(b) so as to compel the absurd conclusion that Congress drafted it to apply to consumers in the first place. See, e.g., United States v. Wilson, 503 U.S. 329, 334, 112 S.Ct. 1351, 117 L.Ed.2d 593 (1992) (citing United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981)).

Boulware cannot give a satisfactory explanation of what the phrase "[n]o person shall give and no person shall accept" means under her interpretation of the statute. She attempts to avoid the problem posed by the prospect of applying § 8(b) to consumers by asserting that a giver and acceptor do not both have to be present for the statute to apply. Alternatively she claims that § 8(b) only applies if the giver knows that services were not rendered. But Boulware's arguments are unpersuasive because these qualifications find no expression in the plain language of the statute. The use of the conjunctive "and" indicates that Congress was clearly aiming at an exchange or transaction, not a unilateral act.

Our interpretation of § 8(b) makes sense of all of the statute's terms and leaves a wide variety of conduct prohibited. For example, the provision would clearly apply to situations where a mortgage lender overcharges a consumer and splits the overcharge with a mortgage service provider, such as a credit reporting agency. In such a case, both the lender/giver and the credit-reporting agency/acceptor would violate § 8(b). In addition, the statute would apply if a mortgage service provider overcharged for its services and gave a mortgage lender a portion of the unearned fee.

In holding that § 8(b) requires fee-splitting or a kickback, our result is consistent with the only other federal appellate court that has addressed the question of whether § 8(b) requires unearned fees to pass from one settlement service provider to another. See Echevarria, 256 F.3d 623; Durr, 14 F.3d 1183; Mercado v. Calumet Fed. Sav. & Loan Ass'n, 763 F.2d 269 (7th Cir.1985). The Seventh Circuit has held on three occasions that § 8(b) does not apply to all overcharges for real estate settlement services. Instead, the court explained that § 8(b) "is an anti-kickback statute" which "requires at least two parties to share fees." Mercado, 763 F.2d at 270. And the court stressed that "under RESPA's express terms," the broad protection of the statute "extends only over transactions where the defendant gave or received any portion, split, or percentage of any charge to a third party." Durr, 14 F.3d at 1187 (internal quotation omitted)....