Published on: 5/25/2012
John Dollarhide, Butler, Snow, O'Mara, Stevens & Cannada, PLLC

On May 24, 2012, in a unanimous 9-0 decision authored by Justice Scalia, the U.S. Supreme Court decided Freeman v. Quicken Loans, Inc., No. 10-1042.  The question before the Court was whether, to establish a violation of the RESPA anti-kickback statute, a claimant must demonstrate that an unearned fee was split between two or more parties.  The Court affirmed the Fifth Circuit Court of Appeals and held that §2607(b) is limited to prohibiting fee-splitting transactions, rather than covering undivided unearned fees.

 

Section 2607(b) of the Real Estate Settlement Procedures Act (RESPA) states that: “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 Freemans and two other couples sued Quicken Loans, Inc. for violating §2607(b) by charging them fees for which no services were performed in connection with their respective mortgage loans.  The cases were removed to the U.S. District Court for the Eastern District of Louisiana and consolidated.  The District Court granted Quicken Loans’ motion for summary judgment on the basis that the mortgagors’ claims were not cognizable under §2607(b) because the plaintiffs did not allege that the unearned fees were split with another party.  A divided panel of the Fifth Circuit affirmed, holding “that the language of RESPA § 8(b) is unambiguous and does not cover undivided unearned fees.”  Freeman v. Quicken Loans, Inc., 626 F.3d 799, 803 (5th Cir. 2010). 

The Supreme Court affirmed, and thereby resolved a split among the circuits as to §2607(b)’s reach.  The Court, interpreting the plain language of the statute, concluded that “§2607(b) unambiguously covers only a settlement-service provider’s splitting of a fee with one or more other persons; it cannot be understood to reach a single provider’s retention of an unearned fee.”  This conclusion led the Court to require a §2607(b) plaintiff to demonstrate that an allegedly unearned fee was split between two or more parties.  Because the Petitioners did not contend that Quicken Loans split the allegedly unearned fee, summary judgment was appropriate.             

In a press release, Quicken Loans stated: “Although we always believed that we were on the right side of the law, it is especially gratifying to have the affirmation of the highest court in the country.”

John Dollarhide is a commercial and financial services litigator with Butler Snow in Jackson, Mississippi.