Patton v. Triad Guaranty Ins.
| Citation | 277 F.3d 1294 |
| Decision Date | 02 January 2002 |
| Docket Number | No. 01-11376,01-11376 |
| Parties | (11th Cir. 2002) JANET G. PATTON, on behalf of herself and all others similarly situated Plaintiff-Appellant, v. TRIAD GUARANTY INSURANCE, Defendant-Appellee |
| Court | United States Courts of Appeals. United States Court of Appeals (11th Circuit) |
Appeal from the United States District Court for the Southern District of Georgia
Before ANDERSON, Chief Judge, EDMONDSON and BARKETT, Circuit Judges.
Janet G. Patton ("Patton") appeals an adverse summary judgment in favor of Triad Guaranty Insurance Corporation ("Triad") on Patton's claim that Triad violated the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq., by giving illegal kickbacks to Premier Lending Corporation ("Premier"), from whom Patton obtained a home mortgage loan. Specifically, Patton claimed that she was wrongfully required to obtain mortgage insurance from Triad as a result of the illegal kickback scheme between Premier and Triad. The trial court granted summary judgment to Triad, finding that § 1012 of the McCarran-Ferguson Act, 15 U.S.C. § 1011-1015, barred Patton's RESPA claim against Triad. We reverse.
Patton obtained a home mortgage loan from Premier. Because Patton was financing more than 80% of the home's value, Premier required her to purchase mortgage insurance to protect it in the event of her default. Patton's loan agreement with Premier required her to obtain mortgage insurance from a company of Premier's choosing. Premier selected Triad and Patton accordingly purchased mortgage insurance from Triad.
Patton commenced a class action against Triad on behalf of herself and others who obtained mortgage insurance from Triad under like circumstances, alleging that Triad gave illegal kickbacks to Premier in exchange for Premier's referral to Triad of its mortgage insurance business. The savings generated for Triad by this scheme, Patton alleged, were never passed on to Triad's consumers, in violation of § 207(a) of RESPA, which provides, inter alia, that,
No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding . . . [in order] that business incident to or part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.
Without addressing the merits of Patton's RESPA claim, the district court determined that the claim was barred by § 1012 of the McCarran-Ferguson Act, which provides:
No Act of Congress shall be construed to invalidate, impair, or supercede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee upon such business, unless such Act specifically relates to the business of insurance.
Relying principally on Federal Trade Commission v. National Casualty Co., 357 U.S. 560 (1958) and Humana v. Forsyth, 525 U.S. 299 (1999), the district court held that allowing Patton's RESPA claim to proceed would "impair, invalidate, or supercede" the provisions of Georgia's detailed state insurance code, O.G.C.A. § 33-1-1 et seq. (the "Georgia Insurance Code"). Accordingly, the court granted Triad's motion for Summary Judgment.
We review the trial court's grant or denial of a motion for summary judgment de novo, viewing the record and drawing all reasonable inferences in the light most favorable to the non-moving party. See Arrington v. Cobb County, 139 F.3d 865, 871 (11th Cir. 1998).
Congress passed the Real Estate Settlement Procedures Act in 1974 to protect home buyers "from unnecessarily high settlement charges caused by certain abusive practices."1 12 U.S.C. § 2601(a). Specifically, Congress intended to eliminate "kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services." Id. § 2601(b)(2); see generally, Culpepper v. Inland Mortgage Corp., 132 F.3d 692, 694 (11th Cir. 1998). The Senate Report for RESPA explains that RESPA "is 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." S.Rep. 93-866, 93d Cong., 2d Sess. (1974), reprinted in 1974 U.S. C.C.A.N 6551. As noted above, § 207(a) of RESPA specifically provides that "[n]o person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding . . . [in order] that business incident to or part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person."
Patton argues that the kickback scheme allegedly maintained by Premier and Triad violated this section of RESPA. Triad denies that it engaged in any kickback scheme violative of RESPA, but argues that even if it did, § 1012 of the McCarran-Ferguson Act bars Patton's RESPA claim, leaving Patton with recourse only to the administrative remedies provided by the Georgia Insurance Code. Patton responds that § 1012 of the McCarran-Ferguson Act does not apply.
In United States v. South-Eastern Underwriters Assn., 322 U.S. 533 (1944), the Supreme Court held that regulation of interstate insurance business fell within the purview of Congress' commerce power.2 Nonetheless, because Congress intended the states to continue to regulate and tax the business of insurance, it sought to ensure that if it chose not to address insurance in a given statute, its silence would not be construed to impose any barrier to regulation or taxation of insurance by the states. In so doing, Congress intended to forfend "the possibility of inadvertent federal intrusion [into state regulation of insurance]-say, through enactment of a federal statute that describes an affected activity in broad, general terms, of which the insurance business happens to constitute one part." Barnett Bank of Marion County v. Nelson, 517 U.S. 25, 41 (1996). To prevent such inadvertent federal regulation of the insurance industry, Congress enacted the McCarran-Ferguson Act, explaining that:
Congress hereby declares that the continued regulation and taxation by the several states of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several states.
15 U.S.C. § 1011. In furtherance of this provision, § 1012 of the Act states that:
No Act of Congress shall be construed to invalidate, impair, or supercede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee upon such business, unless such Act specifically relates to the business of insurance.
15 U.S.C. § 1012 (emphasis supplied).
In interpreting the McCarran-Ferguson Act, the Supreme Court has recognized that the language of §§ 1011 and 1012 "indicates that the Act does not seek to insulate state insurance regulation from the reach of all federal law," but only from inadvertent federal regulation." Barnett Bank, 517 U.S. at 40. Accordingly, the McCarran-Ferguson Act "d[oes] not require avoiding federal pre-emption by future federal statutes that indicate, through their 'specific relat[ion]' to insurance, that Congress had focused upon the insurance industry." Id. The Supreme Court has explained that, in enacting the McCarran-Ferguson Act, Congress did not intend to cede the entire field of insurance regulation to the states, stating that "when Congress enacts a law specifically relating to the business of insurance that law controls." Humana v. Forsyth, 525 U.S. 299, 306 (1999).
The Court has also made clear that even if a federal statute does not "specifically relate to the business of insurance," § 1012 provides that it will still apply unless it "invalidates, impairs, or supercedes" state insurance regulation. See Humana, 525 U.S. at 307. Because we hold that RESPA "specifically relates to the business of insurance," however, we need not consider whether its application here would "invalidate, impair, or supersede" the Georgia Insurance Code.
As noted above, the McCarran-Ferguson bar does not apply where Congress explicitly reveals its intent to regulate the business of insurance. In Barnett Bank, supra, the Supreme Court explained that an act "specifically relates to the business of insurance" where "[t]he language of the Federal Statute . . . is not general [but] refers specifically to insurance." Barnett Bank, 517 U.S. at 41. This does not mean, however, that the statute must relate only to insurance. As the Court explained:
[A] statute may specifically relate to more than one thing. Just as an ordinance forbidding dogs in city parks specifically relates to dogs and to parks, so a statute permitting banks to sell insurance can specifically relate to banks and to insurance. Neither the McCarran-Ferguson Act's language, nor its purpose, requires the Federal Statute to relate predominantly to insurance. To the contrary, specific detailed references to the insurance industry in proposed legislation normally will achieve the McCarran-Ferguson Act's objectives . . . .
Id. at 41 (emphasis in original).
While RESPA does not relate predominantly to insurance, it does explicitly refer to mortgage insurance, defining the term "settlement services" to include:
[A]ny service provided in connection with a real estate settlement including, but not limited to, the following: title searches, title examinations, the provision of title certificates, title insurance, services rendered by an attorney, the preparation of documents, property surveys, the rendering of credit reports or appraisals, pest and fungus inspections, services rendered by a real estate agent or broker, the origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan...
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