Freeman v. Quicken Loans, Inc.

PETITIONER:Tammy Foret Freeman, et al.,
RESPONDENT:Quicken Loans, Inc.
LOCATION: United States District Court for the Eastern District of Louisiana

DOCKET NO.: 10-1042
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 566 US (2012)
GRANTED: Oct 11, 2011
ARGUED: Feb 21, 2012
DECIDED: May 24, 2012

Ann O’Connell – Assistant to the Solicitor General, Department of Justice, for the United States, as amicus curiae, supporting the petitioners
Kevin K. Russell – for the petitioners
Thomas M. Hefferon – for the respondent

Facts of the case

In 2007, the Freemans and two other couples, each secured a mortgage from Quicken Loans, an online mortgage lender. At the closing of the mortgage, Quicken charged the Freemans a “loan discount fee”, and charged the other couples similar fees including a “loan origination fee” and a “loan processing fee”. The three couples contended these fees were unearned fees in violation of the Real Estate Settlement Procedures Act (RESPA).

In 2008, each couple filed suit separately in state court. Quicken removed the cases to a federal district court where the three cases were consolidated. Quicken moved for summary judgment, claiming that the claims were not actionable under RESPA because the fees were not split with another party. The district court noted a circuit split on the issue of whether RESPA did not apply where fees were not spit with another party. Nonetheless, the district court granted Quicken’s motion. The couples appealed to the United States Court of Appeals for the Fifth Circuit, which affirmed the district court’s opinion. The appealed the Appeals Court’s opinion.


Does Section 8(b) of the Real Estate Settlement Procedures Act prohibit a real estate settlement services provider from charging an unearned fee only if the fee is divided between two or more parties?

Media for Freeman v. Quicken Loans, Inc.

Audio Transcription for Oral Argument – February 21, 2012 in Freeman v. Quicken Loans, Inc.

Audio Transcription for Opinion Announcement – May 24, 2012 in Freeman v. Quicken Loans, Inc.

John G. Roberts, Jr.:

Justice Scalia has our opinion this morning in case 10-1042, Freeman versus Quicken Loans.

Antonin Scalia:

This case is here on certiorari to the United States Court of Appeals for the Fifth Circuit.

A provision of the Real Estates Settlement Procedure’s Act, RESPA, which is codified at 12 U. S. C. Section 2607(b), states, “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 other than for services actually performed”.

Petitioners are three married couples who obtained mortgage loans from the respondent here, Quicken Loans, Inc.

They filed separate actions in Louisiana state court alleging that Quicken had violated Section 2607(b) by charging them fees for which no services were provided in return.

After the cases are removed to federal court and consolidated, Quicken sought summary judgment on the ground that petitioners’ claims were not cognizable under 2607(b) because the allegedly unearned fees were not split with any other party.

The District Court agreed and granted summary judgment for Quicken, a divided panel of the Fifth Circuit affirmed, we granted certiorari.

The question in the case boils down to whether 2607(b) prohibits the collection of an unearned charged by a single settlement service provider or rather, covers only transactions in which a provider shares a part of the settlement service charge with one or more other persons who did nothing to earn their share.

In urging the former interpretation, petitioners rely on a 2001 policy statement issued by the Department of Housing and Urban Development which they claim is entitled to deference under the framework announced by this Court in the case called Chevron.

We need not resolve the party’s dispute about the applicability of Chevron because we conclude that the position urged by petitioners “goes beyond the meaning that the statute can bear”, a phrase in one of our earlier cases.

In our view 2607(b) is unambiguous.

It covers only a settlement service providers splitting of the fee with one or more other persons.

By providing that no person shall give or shall accept a portion, split, or percentage of a charge that has been made or received, other than for services actually performed, 2607(b) clearly describes two distinct exchanges.

First, a charge is made to or received from a consumer by a settlement — by a settlement-service provider.

That provider then gives and another person accepts a “portion split or percentage of the charge”.

Congress’ use of different sets of verbs with the distinct tenses to distinguish between the consumer-provider transaction, the charge that is made or received, and the fee-sharing transaction, the portion, split, or percentage that is given or accepted, would be pointless if, as petitioners contend, the two transactions could be collapsed into one.

Petitioners contend that a provider can make a charge by demanding payment and then accept the portion of the charge consisting of 100 percent, but this does not avoid collapsing the sequential relationship of the two stages and it would destroy the tandem character of activities that the text envisions at stage two, that is, both of giving and accepting.

And if the consumer with a person who gives a portion, split, or percentage of the charge to the provider, who accepts it, consumers would become law breakers because it forbids both the giving and the accepting.

This statute subjects violators not only to monetary liability, but also the potential criminal prosecution.

We find it entirely unthinkable that Congress would have created that strange disposition, holding the consumers themselves liable through the language as obscure as that relied upon here.

The phrase, portion, split, or percentage reinforces the conclusion that 2607(b) does not cover the situation in which a settlement-service provider retains the entirety of the fee received from the consumer.

Although portion, the words “portion” and “percentage” can be used to include the entirety of something and we talk about 100 percent, 300 percent, dictionaries show that as used in the present context, they ordinarily mean a part of the whole to speak of the lion’s share of the kill, which means 100 percent, or all of it is wryly humorous because of the share does not usually mean 100 percent.

And it would be just as wryly humorous if the English translation of Aesop’s fable had been rendered the lion’s portion instead of the lion’s share.

That meaning is confirmed here by the common sense canon of noscitur a sociis which counsels that a word is given more precise content by the neighboring words with which it is associated.

And here, portion and percentage, the words that could possibly mean the entirety appear as part of a phrase in which they are joined together by the intervening words “split” which as petitioners acknowledge cannot possibly mean the entirety.

Petitioners invoke the canon against surplusage urging that if 2607(b) is not construed to prohibit all unearned fees it would be rendered superfluous in light of a neighboring provision, 2607(a) which expressly prohibits kickback arrangements.

But the prohibition in 2607(a) is at one in the same times broader and narrower.

It is broader because it applies to the transfer of anything of value rather than to the dividing of a charge which is all that (b) covers and it’s narrower because it requires an agreement or understanding to refer business between the parties to the kickback.

Because each Section reaches conduct that the other does not, there is no need to adopt petitioners’ improbable reading of 2607(b) in order to prevent super — superfluity.

We also reject petitioners’ appeal to statutory purpose because vague notions of statutory purpose cannot over come 2607(b)’s unambiguous text and we reject the related contention that our reading of 2607(b) will lead to absurd results because petitioners do not contend that Quicken — that Quicken split the challenge charges with anyone else.S

Antonin Scalia:

ummary judgment was properly granted in favor of Quicken.

The judgment of the Court of Appeals is affirmed.

The decision is unanimous.