Supreme Court rules on real estate fees

[JURIST] The US Supreme Court [official website] ruled unanimously [opinion, PDF] Wednesday in Freeman v. Quicken Loans Inc. [SCOTUSblog backgrounder] that to prove a violation of Section 8(b) of the Real Estate Settlement Procedures Act (RESPA) [text], a plaintiff must demonstrate that a fee was split between two or more persons, even though there appears to be no ostensible explanation for the fee. The goal of the statute was to prevent kickback and referral fees, but several couples sued under it after charges appeared on their mortgage loan agreements that they could not explain, as the fees indicated services that had never been rendered. Justice Antonin Scalia, writing for the court, rejected petitioners' argument that such charges violated the statute.

Nor is there any merit to petitioners' related contention that §2607(b) should not be given its natural meaning because doing so leads to the allegedly absurd result of permitting a provider to charge and keep the entirety of a $1,000 unearned fee, while imposing liability if the provider shares even a nickel of a $10 charge with someone else. That result does not strike us as particularly anomalous. Congress may well have concluded that existing remedies, such as state-law fraud actions, were sufficient to deal with the problem of entirely fictitious fees, whereas legislative action was required to deal with the problems posed by kickbacks and fee splitting. In any event, petitioners' reading of the statute leads to an "absurdity" of its own: Because §2607(b) manifestly cannot be understood to prohibit unreasonably high fees, a service provider could avoid liability by providing just a dollar's worth of services in exchange for the $1,000 fee. Acknowledging that §2607(b)'s coverage is limited to fee-splitting transactions at least has the virtue of making it a coherent response to that particular problem, rather than an incoherent response to the broader problem of unreasonably high fees.
This ruling affirmed a US Court of Appeals for the Fifth Circuit decision [opinion text].

The Supreme Court granted certiorari in the case in October and heard oral arguments [JURIST reports] in February. Quicken Loans [corporate website], the prevailing party in the case, praised [press release] the decision: "Quicken Loans has won this case at every step and in every court—the U.S. District Court in New Orleans and the US Court of Appeals for the Fifth Circuit—and now before the US Supreme Court. 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."

 

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