by Deepak Gupta
The Supreme Court this morning released its opinion in Freeman v. Quicken Loans, which presented the question whether consumers can sue under section 8(b) of the Real Estate Settlement Procedures Act for unearned fees associated with real-estate settlement services, or whether consumers may only sue if the fee is divided between two or more persons. The statute prohibits giving and accepting “any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service . . . other than for services actually performed.” The case involved a "loan discount" fee for a discount that was never provided, and the crux of the case concerns whether RESPA reaches such unearned fees or whether it is limited to charges that are split, in the nature of a kickback.
In a unanimous opinion by Justice Scalia, today's decision rejects the plaintiffs' position and holds that a plaintiff must demonstrate that a charge for settlement services was divided between two or more persons. The opinion relies on a pretty straightforward interpretation of the statute's structure and the phrase "portion, split, or percentage" that is unlikely to do much harm beyond this fairly narrow context.
I worked on the Freeman case when I was at the CFPB General Counsel's office -- here's the Brief for the United States -- and I attended the oral arguments. Based on the questioning, today's decision is a disappointment but not a surprise. The Court was pretty hard on the plaintiffs' lawyer, Kevin Russell, and Ann O'Connell, who argued for the Solicitor General's office. Both advocates did an excellent job, as did respondents' counsel Tom Hefferon, but this result seemed to be in the cards.
A significant skirmish in the case concerned the amount of deference to give to a Policy Statement supporting the plaintiffs' interpretation that had been issued in 2001 by the U.S. Department of Housing & Urban Development, the agency that had authority over RESPA until it was transferred to the CFPB by virtue of the Dodd-Frank Act. The Court ducked that question today:
The parties vigorously dispute whether the position set forth in HUD’s 2001 policy statement should be accorded deference under the framework announced by this Court in Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984). We need not resolve that dispute—or address whether, if Chevron deference would otherwise apply, it is eliminated by the policy statement’s palpable overreach with regard to price controls. For we conclude that even the more limited position espoused by the policy statement and urged by petitioners “goes beyond the meaning that the statute can bear,” MCI Telecommunications Corp. v. American Telephone & Telegraph Co., 512 U. S. 218, 229 (1994).
Here's an early AP story on the case. For those who are waiting: Still no decision in First American Financial v. Edwards!
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