In re Carter

553 F.3d 979

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.

ARGUED:

John T. Murray, Murray & Murray Co., L.P.A., Sandusky, Ohio, for Appellants. Richard H. Carr, Balk, Hess & Miller, Toledo, Ohio, Andrew S. 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 Jay Singer, 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 Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. § 2607, has been violated confers standing even if the consumer does not allege an above-market rate charge for services, i.e. an "overcharge." The district court, in an opinion and order granting the Defendants-Appellees' Motion to Dismiss, held Plaintiffs-Appellants lacked standing to bring a claim under § 2607 because they did not allege any overcharge or other concrete injury. See Carter v. Welles-Bowen Realty, Inc., 493 F.Supp.2d 921, 927 (N.D.Ohio 2007) ("Carter I"). Appellants now appeal, arguing that 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 and remands 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") entered into a residential real estate purchase agreement for a home in Perrysburg, Ohio. The Carters were represented in this transaction by the real estate agency of Appellee Welles-Bowen Realty, Inc. ("WB Realty"). WB Realty is co-owned by Appellees Welles-Bowen Investors, LLC ("WB Investors") and Chicago Title Insurance Company ("Chicago Title").¹ Based on WB Realty's referral, the Carters utilized WB Title at the close of their purchase agreement to perform real estate settlement services. WB Title charged the Carters $946.28 for title insurance, which consisted of $696.28 for an owner's policy, $75.00 for a title commitment or binder, $100.00 for survey coverage, and $75.00 for an Environmental Protection Lien ("EPL") endorsement. JA 221. Each of these charges was detailed in an Affiliated Business Arrangement Disclosure Statement, which the Carters reviewed prior to closing.

The Carters filed a complaint on November 9, 2005, alleging that the Appellees violated sections 8(a) and 8(b) of RESPA, codified at 12 U.S.C. § 2607(a) and (b). Specifically, the Carters alleged that WB Title violates RESPA's anti-kickback and anti-fee-splitting provisions because the entity itself does not and can not provide settlement services. WB Title is allegedly a sham title company which does not perform any settlement work but still receives unearned revenues while the real settlement work is actually performed by Chicago Title. Further, the Carters claim that the Appellees' arrangement allows Chicago Title to provide illegal kickbacks to WB Realty in exchange for the referral of settlement work; WB Realty would 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 the title insurance or settlement services. In December 2005, the Appellees responded that WB Title is permissible as an "affiliated business arrangement" as defined by 12 U.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 estate settlement 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) and 12(b)(6), alleging that the court lacks subject matter jurisdiction because the Carters had 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). See Carter I, 493 F.Supp.2d at 927. In so ruling, the court also denied the Carters' Motion for Class Certification as moot. Id. The Carters now appeal.

Although several United States district courts have addressed this issue—and arrived at different conclusions—no circuit court has squarely confronted the issue of standing in the absence of monetary injury. Even among the district courts, no consistent interpretation of the phrase "any charges paid" has emerged, with some courts finding that the plaintiff need not pay an overcharge in order to have standing to bring suit² and others concluding the opposite.³ Consequently, as part of its deliberations on this issue, the court notified the U.S. Department of Housing and Urban Development ("HUD") and the Attorney General that this case involves an as-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 consumers alleging a § 2607(a)-(b) violation, absent an overcharge, have standing and whether 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 all final 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 de novo. Abbott v. Michigan, 474 F.3d 324, 328 (6th Cir. 2007); see Fed.R.Civ.P. 12(b)(1). In arguing that the Carters do not have standing to sue because they do not meet the constitutional Article III requirement of injury-in-fact, Appellees challenged the court's jurisdiction over the case. See Davis v. Federal Election Comm'n, ___ U.S. ___, 128 S.Ct. 2759, 2768, 171 L.Ed.2d 737 (2008) (Article III "requires that the party invoking federal jurisdiction have standing"). Accordingly, we review the district court's decision to dismiss the case de novo.

III. Discussion

At the heart of this controversy lies a single question: whether a plaintiff must allege a concrete injury such as an overcharge in order to have standing for a RESPA violation. The Carters contend that the district court erred in finding that they lack standing to sue under § 8 of RESPA because they "do not allege any overcharge or other concrete injury."⁴ Carter I, 493 F.Supp.2d at 927. Specifically, the Carters argue that the district court's interpretation of § 8 does not accord with the plain meaning of the statutory language and is inconsistent with Congress' intent. Appellant Br. 7-8. Further, the Carters believe that the court should have followed the reasoning in Kahrer. See Kahrer, 418 F.Supp.2d at 753 (holding that an overcharge is not necessary for a plaintiff to bring suit on a RESPA violation).

In contrast, Appellees rely on the Moore, Morales, and Durr line of cases to argue that "Congress did not grant a right of action to private plaintiffs to seek recovery of damages when private plaintiffs have not suffered any harm in the form of economic damages or in the form of inflated services without providing any benefits to home buyers." Appellees Br. 12-13; Moore, 233 F.Supp.2d 819; Morales, 983 F.Supp. 1418; Durr, 826 F.Supp. 259. Further, Appellees allege that because the Carters have not alleged either economic damages or an overcharge, they do not meet the Article III requirements of injury.

At issue in this case is § 8 of RESPA which prohibits kickbacks and unearned fees. In relevant part, the statute states the following:

(a) Business referrals

No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.

(b) Splitting charges

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(a)-(b). In addition, RESPA provides that defendants "who violate the prohibitions or limitations of this section shall be jointly and severally liable to the person or persons charged for the settlement service involved in the violation in an amount equal to three times the amount of any charge paid for such settlement service." § 2607(d)(2) (emphasis added).

A. Applicable Legal Standards

The court will first assess whether RESPA provides the plaintiffs a right to relief and then examine whether they have standing to pursue their claims. Congress unequivocally has the power to create new interests the invasion of which will...