Clements v. LSI Title Agency, Inc. , 779 F.3d 1269 ( 2015 )


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  •                Case: 14-11636       Date Filed: 03/02/2015      Page: 1 of 11
    [PUBLISH]
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE ELEVENTH CIRCUIT
    ________________________
    No. 14-11636
    ________________________
    D.C. Docket No. 1:13-cv-01468-RWS
    PATRICIA L. CLEMENTS,
    Individually and on behalf of all others similarly situated,
    Plaintiff-Appellant,
    versus
    LSI TITLE AGENCY, INC.,
    a division of Lender Processing Services, Inc.,
    LAW OFFICES OF WILLIAM E. FAIR III, LLC,
    WILLIAM EVE FAIR III, ET AL.,
    Defendants-Appellees.
    ________________________
    Appeal from the United States District Court
    for the Northern District of Georgia
    ________________________
    (March 2, 2015)
    Before WILLIAM PRYOR and JORDAN, Circuit Judges, and HAIKALA, ∗
    District Judge.
    ∗
    Honorable Madeline Hughes Haikala, United States District Judge for the Northern District of
    Alabama, sitting by designation.
    Case: 14-11636     Date Filed: 03/02/2015    Page: 2 of 11
    WILLIAM PRYOR, Circuit Judge:
    This appeal requires us to decide three questions: (1) whether an allegation
    that a lender charged a borrower for unearned fees confers standing on the
    borrower; (2) whether a mortgage service provider performs only nominal services,
    
    12 U.S.C. § 2607
    (b), when it procures a closing attorney; and (3) whether a
    mortgage service provider “give[s or] . . . accept[s] any portion, split, or percentage
    of any [settlement] charge” when it marks up the price of a third-party service, 
    id.
    After Patricia L. Clements refinanced a mortgage, she sued LSI Title Agency, Inc.,
    the mortgage service provider that facilitated the refinancing; the Law Offices of
    William E. Fair III, LLC, which LSI hired to witness the mortgage closing; and
    William Eve Fair III, an attorney. Clements alleged two violations of the Real
    Estate Settlement Procedures Act, 
    id.
     §§ 2601–2617, and three violations of
    Georgia law. The district court dismissed the amended complaint for lack of
    standing. Fed. R. Civ. P. 12(b)(1). Although we conclude that Clements has
    standing to sue, we affirm in part the dismissal of her federal claims for failure to
    state a claim upon which relief can be granted, Fed. R. Civ. P. 12(b)(6), and we
    vacate in part and remand for the district court to decide whether to exercise
    supplemental jurisdiction over her claims under Georgia law.
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    I. BACKGROUND
    Clements refinanced a mortgage with Wells Fargo Bank, N.A., which hired
    LSI to provide mortgage refinancing services for the transaction. Because Georgia
    law requires all closing services to be performed by a licensed attorney, In re UPL
    Advisory Op. 2003-2, 
    588 S.E.2d 741
    , 741–42 (Ga. 2003), LSI contracted with the
    Law Offices to provide a closing attorney, and the Law Offices arranged for Sean
    Rogers to serve in that capacity.
    After the refinancing, Clements filed a putative class action in a state court
    against LSI, the Law Offices, Fair, and other unnamed defendants. The defendants
    removed the complaint to the district court, and Clements filed an amended
    complaint. Clements alleged that LSI routinely had non-attorneys prepare all of the
    documents for the closing and that the Law Offices and Fair arranged for a
    licensed attorney, Rogers, to witness the signing of the documents, in violation of
    Georgia law, 
    id.
    Clements alleged two violations of the Real Estate Settlement Procedures
    Act, 
    12 U.S.C. §§ 2601
    –2617, which makes it illegal for any person to accept any
    portion of a settlement charge unless that person rendered a service for the charge.
    
    Id.
     § 2607(b). First, Clements alleged that she paid a $300 settlement fee for
    services that LSI provided in violation of Georgia law, In re UPL Advisory Op.
    2003-2, 
    588 S.E.2d at
    741–42. Clements alleged that the defendants and Rogers
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    split the settlement fee in violation of the Act because the defendants “provided no
    actual services related to the closing of the loan.” See 
    12 U.S.C. § 2607
    (b). Second,
    Clements alleged that LSI violated the Act because LSI charged Clements $125 for
    “[g]overnment recording charges” even though LSI paid only $40. See 
    Id.
    Clements alleged that LSI provided no services for the $85 markup.
    Clements also alleged violations of Georgia law. Clements alleged that LSI,
    the Law Offices, and Fair violated sections 16-14-4 and 44-14-13 of the Georgia
    Code. And Clements alleged that LSI, the Law Offices, and Fair were unjustly
    enriched by the mortgage closing.
    LSI, the Law Offices, and Fair moved to dismiss the amended complaint on
    two grounds. First, they argued that, because Clements received a credit for the
    exact amount of the mortgage closing costs, which included the $300 settlement
    fee and the $125 recording charges, she failed to allege an injury and lacked
    standing. Fed. R. Civ. P. 12(b)(1). Second, they argued, in the alternative, that
    Clements failed to state claims upon which relief could be granted. Fed. R. Civ. P.
    12(b)(6).
    The district court ruled that Clements lacked standing and dismissed the
    amended complaint. Clements’s schedule of settlement charges, which was
    attached to the amended complaint, stated that Clements paid the settlement fee
    and recording charges “[f]rom [b]orrower’s [f]unds at [s]ettlement,” and that the
    4
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    credit Clements received was “for the specific interest rate chosen,” but the district
    court ruled that, because Clements received a credit for the exact amount of the
    closing costs, Clements did not allege an injury.
    II. STANDARD OF REVIEW
    A dismissal “for lack of subject matter jurisdiction presents a legal question
    that we review de novo.” Miccosukee Tribe of Indians v. U.S. Army Corps of
    Eng’rs, 
    619 F.3d 1289
    , 1296 (11th Cir. 2010). We “accept[] the allegations in the
    complaint as true and constru[e] them in the light most favorable to the plaintiff.”
    Hill v. White, 
    321 F.3d 1334
    , 1335 (11th Cir. 2003). “[W]e may affirm the
    dismissal of a complaint on any ground supported by the record[,] even if that
    ground was not considered by the district court.” Seminole Tribe of Fla. v. Fla.
    Dep’t of Revenue, 
    750 F.3d 1238
    , 1242 (11th Cir. 2014). “If [the] . . . complaint
    fails to state a claim . . . , then the dismissal of the . . . complaint must be
    affirmed.” Brown v. Johnson, 
    387 F.3d 1344
    , 1351 (11th Cir. 2004).
    III. DISCUSSION
    The parties present two issues. First, the parties dispute whether Clements
    has standing to sue in a federal court. Second, LSI, the Law Offices, and Fair argue
    that, if Clements has standing, we should affirm the dismissal of the amended
    complaint because Clements failed to state claims upon which relief could be
    granted. We address each issue in turn.
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    A. Clements Has Standing Because She Alleged an Injury.
    As a threshold matter, Clements must have standing to pursue her complaint
    in a federal court. Hollywood Mobile Estates Ltd. v. Seminole Tribe of Fla., 
    641 F.3d 1259
    , 1265 (11th Cir. 2011). “The Supreme Court has explained that the
    ‘irreducible constitutional minimum’ of standing under Article III [of the
    Constitution] consists of three elements: an actual or imminent injury, causation,
    and redressability.” 
    Id.
     (quoting Lujan v. Defenders of Wildlife, 
    504 U.S. 555
    , 560–
    61, 
    112 S. Ct. 2130
    , 2136 (1992)). Although the parties do not dispute causation or
    redressability, they do not agree that Clements has alleged an injury.
    Clements alleged an actual injury. Clements alleged in the amended
    complaint that, had she “not been charged [the settlement fee and government
    recording charges], . . . [she would have] receiv[ed] an additional $300 . . . [and] an
    additional $85.” And Clements’s schedule of settlement charges, which was
    attached to the amended complaint, stated that the $300 and $85 were paid “[f]rom
    [b]orrower’s [f]unds at [s]ettlement” and that the credit was “for the specific
    interest rate chosen.” Clements’s allegation that she would have received a $385
    refund is an actual injury. That Clements received a credit for an amount equal to
    the exact total of the closing costs undermines the credibility of Clements’s
    allegation, but it does not necessarily refute her allegation that she would have
    otherwise received that amount in addition to the credit for the interest rate chosen.
    6
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    Clements did not need to prove her allegations at the pleading stage, and her
    “general factual allegations of injury resulting from the defendant[s’] conduct . . .
    suffice to establish standing,” Resnick v. AvMed, Inc., 
    693 F.3d 1317
    , 1323 (11th
    Cir. 2012) (internal quotation marks and citation omitted). The district court erred
    when it dismissed Clements’s complaint for lack of standing, so we must consider
    whether the record supports an alternative ground for dismissal.
    B. Clements Failed to State a Claim under the Act.
    The Real Estate Settlement Procedures Act, 
    12 U.S.C. §§ 2601
    –2617,
    provides 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.” 
    Id.
     § 2607(b).
    To plead a violation of the Act, a plaintiff must “allege that no services were
    rendered in exchange for a settlement fee.” Friedman v. Mkt. St. Mortg. Corp., 
    520 F.3d 1289
    , 1298 (11th Cir. 2008). This Court has stated that “no services,” 
    id.,
    means “no, nominal, or duplicative” services. Heimmermann v. First Union Mortg.
    Corp., 
    305 F.3d 1257
    , 1263 n.8 (11th Cir. 2002) (internal quotation marks
    omitted).
    Clements contends that the defendants violated the Act in two ways. First,
    Clements argues that LSI, the Law Offices, and Fair violated the Act when they
    split the $300 settlement fee, because they provided only “nominal” services. She
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    maintains that the services were nominal because LSI provided services that only
    licensed attorneys can provide, In re UPL Advisory Op. 2003-2, 
    588 S.E.2d 741
    ,
    and the Law Offices and Fair provided only the service of “finding [Rogers] to
    provide the service [that the Law Offices and Fair were supposed to provide].”
    Second, Clements argues that LSI individually violated the Act when it marked up
    the price of the government recording charges from $40 to $125, because the
    markup was a “split” between “the government and LSI” and LSI provided no
    service for the additional $85. But neither argument describes a violation of the
    Act.
    Clements’s allegation that LSI, the Law Offices, and Fair split the settlement
    fee fails to allege a violation of the Act. A “nominal” service “[e]xist[s] in name
    only.” Black’s Law Dictionary 1148 (9th ed. 2009) (“nominal”). That Georgia law
    made it illegal for LSI to provide settlement services does not mean that the
    services “[e]xist[ed] in name only,” 
    id.
     Although the settlement fee “was arguably
    ‘unearned’ as a matter of [Georgia] law, as a factual matter it was not in exchange
    for nothing.” Hazewood v. Found. Fin. Grp., LLC, 
    551 F.3d 1223
    , 1226 (11th Cir.
    2008). And the Law Offices and Fair earned their portion of the settlement fee
    because “arranging for [a] third party contractor[] to perform [a service]” is itself a
    service. Sosa v. Chase Manhattan Mortg. Corp., 
    348 F.3d 979
    , 983–84 (11th Cir.
    8
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    2003). LSI, the Law Offices, and Fair “actually performed” “services” for their
    “portion[s], split[s], or percentage[s]” of the settlement fee. 
    12 U.S.C. § 2607
    (b).
    Clements’s allegation that LSI marked up the price of the government
    recording charges also fails to allege a violation of the Act. Clements argues that a
    markup of a charge to the consumer violates the Act when the mortgage service
    provider accepts an unearned portion of that charge, but the Supreme Court
    explained in Freeman v. Quicken Loans, Inc., that “[section] 2607(b) clearly
    describes two distinct exchanges.”      U.S.    ,   , 
    132 S. Ct. 2034
    , 2040 (2012).
    The Act requires that, “[f]irst, 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.” 
    Id.
    (second and third alteration in original) (quoting 
    12 U.S.C. § 2607
    (b)). The
    Supreme Court read the terms “give” and “accept” as referring to the second
    exchange between the service provider and the third party, not the first exchange
    between the consumer and the service provider. 
    Id. at 2041
    . When a service
    provider marks up a fee, the service provider “give[s]” a “portion, split, or
    percentage” to a third party, and the third party “accept[s]” that “portion, split, or
    percentage.” 
    12 U.S.C. § 2607
    (b). But the second exchange does not violate the
    Act when the third party has “actually performed” a “service.” 
    Id.
     And the third
    party “give[s]” nothing back to the service provider, so the service provider does
    9
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    not “accept” something for which it did not perform a service. 
    Id.
     Although we
    have stated in dicta that a markup violates the Act, Sosa, 
    348 F.3d at
    981–83, our
    dicta cannot be squared with the later reading of the text by the Supreme Court in
    Freeman, 
    132 S. Ct. 2034
    . LSI has neither “give[n] . . . [nor] accept[ed] any
    portion, split, or percentage of any charge . . . other than for services actually
    performed.” 
    12 U.S.C. § 2607
    (b).
    Our reading of the Act comports with the majority of the circuit courts that
    have addressed this issue and held that “Congress chose to leave markups . . . to
    the free market.” Boulware v. Crossland Mortg. Corp., 
    291 F.3d 261
    , 268 (4th Cir.
    2002); see also Freeman v. Quicken Loans, Inc., 
    626 F.3d 799
    , 804 (5th Cir.
    2010), aff’d 
    132 S. Ct. 2034
    ; Haug v. Bank of Am., N.A., 
    317 F.3d 832
    , 836 (8th
    Cir. 2003); Krzalic v. Republic Title Co., 
    314 F.3d 875
    , 880 (7th Cir. 2002). These
    sister circuits have held that the text of the Act is unambiguous, Krzalic, 
    314 F.3d at 879
    , and that, if Congress wanted to prohibit markups, it “could easily have
    written [section 2607(b)] to state that ‘there shall be no markups or overcharges for
    real estate settlement services[,]’ [o]r . . . that ‘a mortgage lender shall only charge
    the consumer what is paid to a third party for a real estate settlement service,’”
    Boulware, 
    291 F.3d at 267
    . These decisions also are consistent with the analysis in
    Freeman. Two of our sister circuits have held that markups are a violation of the
    Act, Santiago v. GMAC Mortg. Grp., Inc., 
    417 F.3d 384
    , 389 (3d Cir. 2005); Kruse
    10
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    v. Wells Fargo Home Mortg., Inc., 
    383 F.3d 49
    , 59 (2d Cir. 2004), but those
    decisions are unpersuasive and inconsistent with the later decision of the Supreme
    Court in Freeman.
    Because we conclude that Clements failed to state a claim for relief under
    federal law, we do not address her claims for relief under state law. See Carnegie-
    Mellon Univ. v. Cohill, 
    484 U.S. 343
    , 350, 
    108 S. Ct. 614
    , 619 (1988); Mergens v.
    Dreyfoos, 
    166 F.3d 1114
    , 1119 (11th Cir. 1999). We remand to the district court to
    decide whether to exercise supplemental jurisdiction over these claims or remand
    them to state court. Cook ex rel. Estate of Tessier v. Sheriff of Monroe Cnty., Fla.,
    
    402 F.3d 1092
    , 1123 (11th Cir. 2005).
    IV. CONCLUSION
    We AFFIRM the dismissal of Clements’s federal claims, VACATE the
    dismissal of her state claims, and REMAND for the district court to decide
    whether to exercise supplemental jurisdiction over her state claims.
    11
    

Document Info

Docket Number: 14-11636

Citation Numbers: 779 F.3d 1269, 2015 U.S. App. LEXIS 3144, 2015 WL 857964

Judges: Pryor, Jordan, Haikala

Filed Date: 3/2/2015

Precedential Status: Precedential

Modified Date: 11/5/2024

Authorities (19)

Carnegie-Mellon University v. Cohill , 108 S. Ct. 614 ( 1988 )

Tyna L. Boulware, on Behalf of Herself and All Others ... , 291 F.3d 261 ( 2002 )

Sosa v. Chase Manhattan Mortgage Corporation , 348 F.3d 979 ( 2003 )

Miccosukee Tribe of Indians v. United States Army Corps of ... , 619 F.3d 1289 ( 2010 )

Lonnie J. Hill v. Thomas E. White, Secretary of the Army , 321 F.3d 1334 ( 2003 )

Mergens v. Dreyfoos , 166 F.3d 1114 ( 1999 )

Nedzad Krzalic and Danijela Krzalic v. Republic Title Co. , 314 F.3d 875 ( 2002 )

Friedman v. Market Street Mortgage Corp. , 520 F.3d 1289 ( 2008 )

francis-santiago-on-behalf-of-himself-and-all-others-similarly-situated-v , 417 F.3d 384 ( 2005 )

wayne-a-kruse-lisa-m-mcleod-robert-schill-david-legro-barbara-legro , 383 F.3d 49 ( 2004 )

John Ruddin Brown v. Lisa Johnson , 387 F.3d 1344 ( 2004 )

Hazewood v. Foundation Financial Group, LLC , 551 F.3d 1223 ( 2008 )

Freeman v. Quicken Loans, Inc. , 626 F.3d 799 ( 2010 )

Lujan v. Defenders of Wildlife , 112 S. Ct. 2130 ( 1992 )

In Re Upl Advisory Opinion 2003-2 , 277 Ga. 472 ( 2003 )

amy-e-haug-peter-v-haug-individually-and-as-class-representatives-v , 317 F.3d 832 ( 2003 )

Hollywood Mobile Estates Ltd. v. Seminole Tribe , 641 F.3d 1259 ( 2011 )

Louise Cook v. Sheriff of Monroe County , 402 F.3d 1092 ( 2005 )

Freeman v. Quicken Loans, Inc. , 132 S. Ct. 2034 ( 2012 )

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