Clements v. LSI Title Agency, Inc.
779 F.3d 1269
11th Cir.2015Background
- Patricia Clements refinanced her mortgage; Wells Fargo hired LSI Title Agency (LSI) to provide settlement services for the transaction.
- Georgia requires licensed attorneys to perform closing services; LSI contracted the Law Offices of William E. Fair III, which arranged for attorney Sean Rogers to witness the closing.
- Clements alleged LSI and the Law Offices billed a $300 settlement fee and a $125 recording charge (although only $40 was paid to the recorder), and that defendants split/kept unearned fees in violation of RESPA and Georgia law.
- She sued in state court; defendants removed to federal court. The amended complaint alleged two RESPA claims and three Georgia-law claims (including unjust enrichment).
- The district court dismissed for lack of Article III standing because Clements received a credit equal to the closing costs. The Eleventh Circuit reversed on standing but affirmed dismissal of the federal RESPA claims for failure to state a claim and remanded the state-law claims for the district court to decide supplemental jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing (Article III injury) | Clements: she was injured because she paid $300 + $85 that she would have received back but for the charges. | Defendants: no injury because Clements received a credit equal to the closing costs. | Court: Plaintiff adequately alleged an injury; dismissal for lack of standing was error. |
| Whether splitting a settlement fee when non-attorneys performed services violates RESPA § 2607(b) | Clements: fee was unearned/nominal because Georgia law prohibited LSI from providing those services and Law Offices merely procured the closing attorney. | Defendants: the split was for services actually performed (including arranging a closing attorney), so not prohibited. | Court: No RESPA violation — arranging or procuring attorney services and performing settlement functions are actual (not merely nominal) services. |
| Whether marking up third-party recording fees violates RESPA § 2607(b) | Clements: LSI’s $85 markup constituted an unearned split/portion in violation of RESPA. | Defendants: markups are part of the charge between consumer and provider; § 2607(b) targets exchanges between provider and third parties, not markups to consumers. | Court: Markups do not violate RESPA under Supreme Court precedent — § 2607(b) prohibits giving/accepting portions between settlement-service providers and third parties unless the recipient performed services. Markups are not per se prohibited. |
| Supplemental jurisdiction over state-law claims after federal dismissal | Clements: state claims should proceed in federal court; alternatively remand to state court. | Defendants: dismissal appropriate with no federal claim. | Court: Vacated dismissal of state claims and remanded for district court to decide whether to exercise supplemental jurisdiction or remand. |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requires injury, causation, redressability)
- Resnick v. AvMed, Inc., 693 F.3d 1317 (general factual allegations of injury suffice at pleading stage)
- Friedman v. Market St. Mortgage Corp., 520 F.3d 1289 (RESPA claim requires alleging no services were rendered for the fee)
- Heimmermann v. First Union Mortgage Corp., 305 F.3d 1257 (interpreting “no services” to include no, nominal, or duplicative services)
- Hazewood v. Foundation Financial Group, LLC, 551 F.3d 1223 (services performed as factual question; ‘‘unearned’’ under state law not dispositive for RESPA)
- Sosa v. Chase Manhattan Mortgage Corp., 348 F.3d 979 (arranging third-party contractors can constitute services under RESPA)
- Freeman v. Quicken Loans, Inc., 626 F.3d 799 (later affirmed by the Supreme Court) (section 2607(b) confines the prohibitions to the exchange between settlement providers and third parties, not markups to consumers)
- Boulware v. Crossland Mortgage Corp., 291 F.3d 261 (markups generally left to the market; text of § 2607(b) does not prohibit markups)
- Krzalic v. Republic Title Co., 314 F.3d 875 (textual reading of RESPA rejects markup-as-violation theory)
- Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384 (contrasting circuit decision holding markups can violate RESPA)