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Carter RESPA Suit

Carter RESPA Suit

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Published by 83jjmack
A pair of cases alleging violations of Real Estate Settlement Procedures Act anti-kickback provisions could impact relationships between title underwriters and agencies and how title policies are produced.A previous ruling by an appellate panel in the Third Circuit in one of these cases, Carter v. Wells-Bowen, was cited by a Ninth Circuit panel in its ruling in the case of Edwards v. First American. But when Carter v. Wells-Bowen was returned to the lower court for a hearing, the judge threw out the Department of Housing and Urban Development's 10-point test to determine whether an affiliated business arrangement is legit or a sham.Furthermore, there does need to be an allegation that the agency unduly financially benefited from the arrangement nor substandard service was provided, according to both circuits.Charles Cain, an attorney who also has a consulting practice, said the Appellate Court ruling in Carter, as well as the ruling in the Ninth Circuit case, shows that the consumer does not have to allege overcharges to bring these suits.Part of the problem, he said, is that RESPA is "an old statute." The way business is done today is much different than what was contemplated when RESPA was first written.


"The plain meaning of the statutory language and the persuasive authorities examined by the court indicate that Congress created a private right of action to impose damages where kickbacks and unearned fees have occurred—even where there is no overcharge. Accordingly, the district court's determination is REVERSED, and the case is remanded for action consistent with the conclusions herein."

RESPA defines "settlement services" as "any service provided in connection with a real estate settlement" including, but not limited to, title searches, title insurance, attorney services, appraisals, credit reports, pest and fungus inspections, real estate agent or broker services, loan processing, etc. See 12 U.S.C. § 2602(3).
A pair of cases alleging violations of Real Estate Settlement Procedures Act anti-kickback provisions could impact relationships between title underwriters and agencies and how title policies are produced.A previous ruling by an appellate panel in the Third Circuit in one of these cases, Carter v. Wells-Bowen, was cited by a Ninth Circuit panel in its ruling in the case of Edwards v. First American. But when Carter v. Wells-Bowen was returned to the lower court for a hearing, the judge threw out the Department of Housing and Urban Development's 10-point test to determine whether an affiliated business arrangement is legit or a sham.Furthermore, there does need to be an allegation that the agency unduly financially benefited from the arrangement nor substandard service was provided, according to both circuits.Charles Cain, an attorney who also has a consulting practice, said the Appellate Court ruling in Carter, as well as the ruling in the Ninth Circuit case, shows that the consumer does not have to allege overcharges to bring these suits.Part of the problem, he said, is that RESPA is "an old statute." The way business is done today is much different than what was contemplated when RESPA was first written.


"The plain meaning of the statutory language and the persuasive authorities examined by the court indicate that Congress created a private right of action to impose damages where kickbacks and unearned fees have occurred—even where there is no overcharge. Accordingly, the district court's determination is REVERSED, and the case is remanded for action consistent with the conclusions herein."

RESPA defines "settlement services" as "any service provided in connection with a real estate settlement" including, but not limited to, title searches, title insurance, attorney services, appraisals, credit reports, pest and fungus inspections, real estate agent or broker services, loan processing, etc. See 12 U.S.C. § 2602(3).

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Published by: 83jjmack on Aug 09, 2010
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12/11/2012

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553 F.3d 979 (2009)
Erick C. CARTER, et al., Plaintiffs-Appellants,United States of America, Intervenor,v.Welles-Bowen Realty, Inc., et al., Defendants-Appellees.
 No. 07-3965.
United States Court of Appeals, Sixth Circuit.
Argued: April 28, 2008.Decided and Filed: January 23, 2009.982*982 ARGUED: John T. Murray, Murray & Murray Co., L.P.A., Sandusky,Ohio, for Appellants. Richard H. Carr, Balk, Hess & Miller, Toledo, Ohio, AndrewS. Pollis, Hahn Loeser, Cleveland, Ohio, for Appellees. ON BRIEF: John T.Murray, Murray & Murray Co., L.P.A., Sandusky, Ohio, for Appellants. Richard H.Carr, Balk, Hess & Miller, Toledo, Ohio, Stuart J. Goldberg, Barry W. Fissel,Eastman & Smith, Toledo, Ohio, for Appellees. Christine N. Kohl, Michael JaySinger, United States Department of Justice, Washington, D.C., for Intervenor.Before BATCHELDER and SUTTON, Circuit Judges; BARZILAY, Judge.
OPINION
BARZILAY, Judge.This appeal involves the issue of whether an allegation that section 8 of the RealEstate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. § 2607, has beenviolated confers standing even if the consumer does not allege an above-market ratecharge for services,
i.e.
an "overcharge." The district court, in an opinion and order granting the Defendants-Appellees' Motion to Dismiss, held Plaintiffs-Appellantslacked standing to bring a claim under § 2607 because they did not allege anyovercharge or other concrete injury.
Carter I 
"). Appellants now appeal, arguingthat this court should reject the district court's "overcharge approach" to standing.For the reasons stated below, the court reverses the decision of the district court andremands the matter to the district court for further proceedings consistent with this
 
opinion.
I. BACKGROUND
On September 1, 2005, Appellants Erick and Whitney Carter ("the Carters") enteredinto a residential real estate purchase agreement for a home in Perrysburg, Ohio. TheCarters were represented in this transaction by the real estate agency of AppelleeWelles-Bowen Realty, Inc. ("WB Realty"). WB Realty is co-owned by AppelleesWelles-Bowen Investors, LLC ("WB Investors") and Chicago Title InsuranceCompany ("Chicago Title").
 Based on WB Realty's referral, the Carters utilizedWB Title at the close of their purchase agreement to perform real estate settlementservices. WB Title charged the Carters $946.28 for title insurance, which consistedof $696.28 for an owner's policy, $75.00 for a title commitment or binder, $100.00for survey coverage, and $75.00 for an Environmental Protection Lien ("EPL")endorsement. JA 221. Each of these charges was detailed in an Affiliated BusinessArrangement Disclosure Statement, which the Carters reviewed prior to closing.The Carters filed a complaint on November 9, 2005, alleging that the Appelleesviolated sections 8(a) and 8(b) of RESPA, codified at 12 U.S.C. § 2607(a) and (b).Specifically, the Carters alleged that WB 983*983 Title violates RESPA's anti-kickback and anti-fee-splitting provisions because the entity itself does not and cannot provide settlement services. WB Title is allegedly a sham title company whichdoes not perform any settlement work but still receives unearned revenues while thereal settlement work is actually performed by Chicago Title. Further, the Cartersclaim that the Appellees' arrangement allows Chicago Title to provide illegalkickbacks to WB Realty in exchange for the referral of settlement work; WB Realtywould receive kickbacks or splits in the form of their share of WB Title's profits,while Chicago Title would be paid for its work through its share of the ownership of WB Title. Crucially, the Carters do not allege that they were overcharged for thetitle insurance or settlement services. In December 2005, the Appellees respondedthat WB Title is permissible as an "affiliated business arrangement" as defined by 12U.S.C. § 2602(7). They further asserted that WB Title does not violate § 2607(a) or (b) because it satisfies the safe-harbor provision laid out in § 2607(c)(4). Nearly a year later, the Carters filed a Motion for Class Certification seeking to
 
certify a class which would include any other similarly situated persons. The proposed class would consist of any individuals who paid WB Title for real estatesettlement services if they were referred by WB Realty. In response to this motion,the Appellees filed a Motion to Dismiss, pursuant to Fed.R.Civ.P. 12(b)(1) and12(b)(6), alleging that the court lacks subject matter jurisdiction because the Cartershad suffered no injury-in-fact and thus have no standing.The District Court granted the Motion to Dismiss for lack of subject matter  jurisdiction. The court held that the Carters did not allege any concrete, particularized injury and thus lacked standing to bring a claim under § 2607(a) or (b).
. In so ruling, the court also denied theCarters' Motion for Class Certification as moot.
 Id.
The Carters now appeal.Although several United States district courts have addressed this issue—and arrivedat different conclusions—no circuit court has squarely confronted the issue of standing in the absence of monetary injury. Even among the district courts, noconsistent interpretation of the phrase "any charges paid" has emerged, with somecourts finding that the plaintiff need not pay an overcharge in order to have standingto bring suit
and others concluding the opposite.
Consequently, as part of itsdeliberations on this issue, the court notified the U.S. Department of Housing andUrban Development ("HUD") and the Attorney General that this case involves anas-applied constitutional challenge to RESPA.
See
28 U.S.C. § 2403(a); Fed.R.App.P. 44(a). Further, it solicited the government's views on whether consumers984*984 alleging a § 2607(a)-(b) violation, absent an overcharge, have standing andwhether RESPA, as applied in this case, violates Article III. The government,therefore, intervened in the case and filed a brief supporting Appellants'interpretation of the statute.
II. JURISDICTION AND STANDARD OF REVIEW
The Sixth Circuit has jurisdiction over this appeal pursuant to 28 U.S.C. § 1291,which provides that the courts of appeals "shall have jurisdiction of appeals from allfinal decisions of the district courts of the United States." § 1291.Where a district court rules on a 12(b)(1) motion to dismiss that attacks the claim of  jurisdiction on its face, this Court reviews the decision

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