[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
October 24, 2003
No. 02-13930 THOMAS K. KAHN
CLERK
D. C. Docket No. 02-20285-CV-PAS
JACQUELINE SOSA, CAROL HUNTINGTON,
Plaintiffs-Appellants,
versus
CHASE MANHATTAN MORTGAGE CORPORATION,
a foreign corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of Florida
(October 24, 2003)
Before TJOFLAT and WILSON, Circuit Judges, and LIMBAUGH*, District
Judge.
*Honorable Stephen N. Limbaugh, United States District Judge for the Eastern District of
Missouri, sitting by designation.
TJOFLAT, Circuit Judge:
Section 8 of the Real Estate Settlement Procedures Act (“RESPA”)
provides, in pertinent part:
(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.A. § 2607. This case presents the question of whether Chase Manhattan
Mortgage Corporation, as a mortgage lender, violated subsection 8(b) of RESPA
when in connection with loan closings it charged borrowers a $50 fee for
“messenger”or “courier” services. Chase paid part of the fee to third-party
independent contractors that provided the messenger or courier services required
to complete the loan closing. Because Chase retained a portion of the $50 fee, but
did not make the actual deliveries, the borrower contends that Chase accepted a
portion of the charge “other than for services actually performed.”
The district court disagreed and therefore granted Chase’s motion to dismiss
the complaint for failure to state a claim for relief. In the district court’s view, to
be liable for violating subsection 8(b), Chase had to have shared the portion of the
fee it retained with a third party; because Chase did not do so, the court reasoned,
it did not violate the statute. We affirm the district court’s decision to dismiss the
complaint but we do so for a different reason.
I.
Congress passed RESPA in order to reduce the costs consumers pay to settle
their real estate transactions. The statute states:
(a) The Congress finds that significant reforms in the real estate
settlement process are needed to insure that consumers throughout the
Nation are provided with greater and more timely information on the
nature and costs of the settlement process and are protected from
unnecessarily high settlement charges caused by certain abusive
practices that have developed in some areas of the country.
12 U.S.C. § 2601.
One of the abusive practices that Congress sought to eliminate through the
enactment of RESPA was the payment of referral fees, kickbacks, and other
unearned fees. S. Rep. No. 93-866 (1974), reprinted in 1974 U.S.C.C.A.N. 6546,
6551. Of particular interest to Congress was the payment by settlement service
providers of commissions or fees in exchange for the referral of a consumer’s
business. Id. Congress similarly wished to eliminate fees for which no service
was performed and no goods were furnished. Id. These fees are passed along to
consumers and increase settlement costs without providing any benefits.
Section 8 of RESPA addresses kickbacks and unearned fees. Subsection
8(a) contains the general prohibition on making payments pursuant to any referral
fee arrangement. Subsection 8(b) attempts to close any loopholes by prohibiting
any person from giving or accepting any part of a fee unless services were actually
performed. Read together, the two subsections create a broad prohibition against
fees that serve solely to increase the cost of settlements to consumers.1
II.
The district court’s theory in this case was that subsection 8(b) requires two
culpable parties to split an unearned fee. According to the district court, the plain
language of the statute compels such an interpretation. The first part of the
subsection states that “no person shall give and no person shall accept” a part of a
fee other than for services actually performed. 12 U.S.C. § 2607(b). Emphasizing
the word “and,” the district court stated that there must be both a culpable giver
and a culpable acceptor of the unearned fee. The Fourth Circuit has similarly
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Subsections 8(c) and 8(d) complete the prohibition on kickbacks and unearned fees:
subsection 8(c) provides specific examples of the sorts of fees that are earned and not prohibited
by subsections (a) and (b), while subsection 8(d) provides criminal and civil liability against
persons who violate section 8. 12 U.S.C. § 2607(c), (d).
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expressed its opinion that the quoted language implies two culpable parties.
Boulware v. Crossland Mortgage Corp., 291 F.3d 261, 266 (4th Cir. 2002) (“The
use of the conjunctive ‘and’ indicates that Congress was clearly aiming at an
exchange or transaction, not a unilateral act.”).
The district court further reasoned that if Chase could be liable for accepting
the part of the charge that it did not pay to the third-party contractors, then the
borrower could be liable as the “giver” of the purportedly unearned part of the fee.
Two other circuits have come to a similar conclusion. The Seventh and Fourth
Circuits have held that a settlement service provider cannot be liable for accepting
a fee from the consumer, even if part of the fee was unearned. Krzalic v. Republic
Title Co., 314 F.3d 875, 879 (7th Cir. 2002); Boulware, 291 F.3d at 265. The
Boulware court reasoned that the consumer would necessarily violate subsection
8(b) by giving part of the unearned fee, and that such a result would be irrational.
Boulware, 291 F.3d at 265.
The district court’s reasoning does not withstand scrutiny, however. First,
the assertion that the language “no person shall give and no person shall accept”
means that both a giver and an acceptor are required for a violation of subsection
8(b) rests on a misunderstanding of English grammar. Second, a consumer could
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not be liable as the giver of an unearned portion of a fee because a consumer will
always intend to pay the fee for services that are actually rendered.
The district court’s conclusion that subsection 8(b) “plainly says that a
violation of the statute requires at least two people” is incorrect. In the English
language, the word “and” is “[u]sed to connect words, phrases, or clauses that
have the same grammatical function.” American Heritage Dictionary of the
English Language 49 (1976). Subsection 8(b) is comprised of a single sentence.
The “and” in the sentence connects the two phrases, “no person shall give” and
“no person shall accept.” Each of the connected phrases provides a separate
subject and verb for the sentence. The “and” in subsection 8(b) therefore operates
to create two separate prohibitions: First, “no person shall give any portion, split
or percentage of any charge . . . .”; and second, “no person shall accept any
portion, split or percentage of any charge . . . .” Giving a portion of a charge is
prohibited regardless of whether there is a culpable acceptor, and accepting a
portion of a charge is prohibited regardless of whether there is a culpable giver.
Extending liability only if there were both a culpable giver and acceptor of
an unearned fee would lead to irrational results. For example, one real estate
settlement service provider could decide to give a kickback to another. The
second provider, aware of RESPA’s prohibitions, might then refuse to accept the
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kickback. Under the district court’s reasoning, the first provider would not have
violated subsection 8(b), because there was no culpable acceptor of the kickback.
That the culpable giver’s liability would turn on whether the intended recipient
decided to accept the kickback is irrational.
Furthermore, a consumer could not be liable as the “giver” of an unearned
portion of a fee, because the statute only prohibits giving a portion of a fee “other
than for services actually performed.” 12 U.S.C. § 2607(b). That is, the payment
must be made for some reason other than in exchange for services actually
rendered. Absent any connivance, however, a consumer would always pay a fee to
a settlement service provider intending that it be used for a service actually
performed. A culpable provider could accept the entire fee, knowing that part of it
was not for services actually performed, however. In such a case the provider
could be liable as an acceptor, but the consumer would not be liable as the giver of
the unearned portion of the fee.
III.
Although we disagree with the district court as to whether a single party can
violate subsection 8(b), we nevertheless affirm its order. We review the district
court’s grant of a motion to dismiss de novo, taking as true the facts as they are
alleged in the complaint. Covad Communications Co. v. BellSouth Corp., 299
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F.3d 1272, 1276 n.2 (11th Cir. 2002). A correct judgment may be affirmed on any
ground regardless of the grounds addressed, adopted or rejected by the district
court. Johnson Enters. of Jacksonville v. FPL Group, 162 F.3d 1290, 1311 n.50
(11th Cir. 1998) (citations omitted). We find that even if a single party may
violate subsection 8(b) by marking up the charge of another settlement service
provider, the borrowers have nevertheless failed to state a claim upon which relief
may be granted.
To state a claim under the applicable part of subsection 8(b) of RESPA, the
borrowers must allege that Chase “accept[ed] any portion, split or percentage of
any charge . . . for the rendering of a real estate settlement service . . . other than
for services actually performed.” 12 U.S.C. § 2607(b). The borrowers have not
done so.
The complaint alleges, and we take as true, that Chase charged borrowers
$50 for courier or messenger fees, that Chase paid only a portion of that fee to
third-party contractors, and that Chase “created the misimpression” that the fees
were entirely paid to the third parties. The borrowers have thus contended that
Chase accepted a portion of a charge for real estate services. What is missing is an
allegation that the portion of the charge that Chase retained was accepted “other
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than for services actually performed,” i.e., that Chase performed no services that
would justify its retention of a portion of the fee.
Not only does the complaint fail to allege that Chase did not perform any
services, we do not believe that the borrowers could credibly make such an
allegation. It is undisputed that the charges were paid to Chase and that Chase
arranged to have items delivered to complete the closing. Through its agents,
therefore, Chase performed the deliveries that were the subject of the charges.
Moreover, even if Chase could not be credited with the actual delivery, Chase
benefitted the borrowers by arranging for third party contractors to perform the
deliveries. Under these circumstances, we find it impossible to say that Chase
performed no services for which its retention of a portion of the fees at issue was
justified.
IV.
Because we find that the borrowers have failed to allege that Chase accepted
a portion of a real estate settlement charge other than for services actually
performed, we do not address borrowers’ argument that subsection 8(b) is
ambiguous, and that Chevron U.S.A. Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837 (1984), commands that we defer to the Department of Housing
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and Urban Development’s interpretation of the subsection. Accordingly, the
district court was correct to dismiss the complaint, and its judgment is
AFFIRMED.
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