Freeman v. Quicken Loans Inc.

CONSUMER PROTECTION — Real Estate Transactions

New Jersey Law Journal


Freeman v. Quicken Loans Inc., No. 10-1042; U.S. Supreme Court; opinion by Scalia, J.; decided May 24, 2012. On certiorari to the U.S. Court of Appeals for the Fifth Circuit.

The Real Estate Settlement Procedures Act (RESPA) provides, as relevant here, that "[n]o 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 ... other than for services actually performed." See 12 U.S.C. § 2607(b). Petitioners, three couples who obtained mortgage loans from respondent, filed separate state-court actions, alleging that respondent had violated § 2607(b) by charging them fees for which no services were provided in return. After the cases were removed to federal court and consolidated, respondent sought summary judgment, arguing that petitioners' claims were not cognizable under § 2607(b) because the allegedly unearned fees were not split with another party. The District Court agreed; and because petitioners had not alleged any splitting of fees, it granted respondent summary judgment. The Fifth Circuit affirmed.

Held: In order to establish a violation of § 2607(b), a plaintiff must demonstrate that a charge for settlement services was divided between two or more persons. Pp. 3-13.

(a) Section 2607(b) unambiguously covers only a settlement-service provider's splitting of a fee with one or more other persons; it cannot be understood to reach a single provider's retention of an unearned fee. Pp. 3-11.

(1) Section 2607(b) clearly describes two distinct exchanges. First, a "charge" is "made" to or "received" from a consumer by a settlement-service provider. That provider then "give[s]," and another person "accept[s]," a "portion, split, or percentage" of the charge. Congress' use of different sets of verbs, with distinct tenses, to distinguish between the consumer-provider transaction and the fee-sharing one would be pointless if, as petitioners contend, the two transactions could be collapsed into one. Their reading — that a settlement-service provider can "make" a charge and then "accept" the portion of the charge consisting of 100 percent — does not avoid collapsing the sequential relationship of the two stages and would destroy the tandem character of activities that the text envisions at stage two (i.e., a giving and accepting). And if the consumer were the person who "give[s]" a "portion, split, or percentage" of the charge to the provider who "accepts" it, consumers would become lawbreakers themselves. Pp. 3-8.

(2) The normal usage of the terms "portion," "split," and "percentage" — which, when referring to a portion or percentage of a whole, usually mean less than 100 percent — reinforces the conclusion that § 2607(b) does not apply where a settlement-service provider retains the entirety of a fee received from a consumer. The meaning is also confirmed by the "commonsense canon of noscitur a sociis, which counsels that a word is given more precise content by the neighboring words with which it is associated." United States v. Williams, 553 U.S. 285, 294. This connation is not undermined by the canon against surplusage. "Portion," "split," and "percentage" may all mean the same thing, but the canon merely favors that interpretation which avoids surplusage, see Microsoft Corp. v. i4i Ltd. Partnership, 564 U.S. —, and petitioners' interpretation no more achieves that end than the court's does. Pp. 8-11.

(b) Petitioners' arguments in favor of their contrary interpretation are unpersuasive. Section 2607(b), as interpreted here, is not rendered surplusage by § 2607(a)'s express prohibition of kickbacks, for each subsection reaches conduct that the other does not. RESPA's general purpose — to protect consumers from "certain abusive practices," § 2601(a) — also provides no warrant for expanding § 2607(b)'s prohibition beyond the field to which it is unambiguously limited: the splitting of fees paid for settlement services. And giving § 2607(b) its natural meaning would not lead to absurd results. Pp. 11-13.

626 F.3d 799, affirmed.

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