In the
United States Court of Appeals
For the Seventh Circuit

No. 00-4087

Francisco J. Echevarria, Barbara Echevarria
and Bobbie L. Hall,

Plaintiffs-Appellants,

v.

Chicago Title & Trust Company,

Defendant-Appellee.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 00 C 3949--James B. Zagel, Judge.

Argued May 8, 2001--Decided July 5, 2001



  Before Bauer, Posner, and Coffey, Circuit
Judges.

  Bauer, Circuit Judge. Plaintiffs, home
buyers who hired Chicago Title & Trust
Company to record their home deeds and
mortgages, sued Chicago Title claiming
that it violated sec. 8(b) of the Real
Estate Settlement Procedures Act
("RESPA"), 12 U.S.C. sec. 2607(b), by
unlawfully splitting fees with the Cook
County Recorder. Chicago Title charged
Francisco and Barbara Echevarria $25.00
to record their deed and $45.00 to record
their mortgage. This charge did not match
the Cook County Recorder’s fees. The
County Recorder required $25.00 to record
the Echevarrias’ deed, but only $31.00 to
record their mortgage. Chicago Title
pocketed the $14.00 overcharge.
Similarly, Chicago Title charged Bobbie
Hall $25.00 to record her deed and $45.00
to record her mortgage. While the Cook
County Recorder charged $25.00 to record
Hall’s deed, it only required $37.00 to
record her mortgage. Again, Chicago Title
kept the extra $8.00.

  The Echevarrias and Hall filed a three-
count complaint in federal court. They
styled their only federal claim under
RESPA sec. 8(b), accusing Chicago Title
of splitting this amount with the Cook
County Recorder by paying the recorder
its fee and pocketing the overage.
Further, plaintiffs brought two state law
fraud claims, which we do not address.
Plaintiffs then filed a motion to have
the case certified as a class action.

  Less than a month later, Chicago Title
asked the court to dismiss the suit under
Fed. R. Civ. P. 12(b)(6) and 12(b)(1).
Chicago Title argued that plaintiffs
failed to state facts tending to prove
that Chicago Title gave an unearned fee
to a third party or received an unearned
fee from a third party, an essential
element of the RESPA claim. As support,
Chicago Title relied on Durr v.
Intercounty Title Co., 14 F.3d 1183 (7th
Cir. 1993) cert. denied 513 U.S. 811
(1994), in which we held on very similar
facts that the challenged behavior did
not constitute fee splitting under RESPA
sec. 8(b). Believing himself to be bound
by this precedent, the district judge
dismissed the RESPA claim. In addition,
he dismissed both state law claims
because the parties were not diverse and,
absent the RESPA claim, the court lacked
subject-matter jurisdiction. We affirm
the district court’s dismissal.

  We review de novo a dismissal for
failure to state a claim. See Transit
Express, Inc. v. Ettinger, 246 F.3d 1018,
1023 (7th Cir. 2001) (citation omitted).
Dismissal for failure to state a claim is
proper only where the court is convinced,
beyond a reasonable doubt, that the
plaintiff can prove no set of facts in
support of his claim that would entitle
him to relief. See Szumny v. American
Gen. Fin., Inc., 246 F.3d 1065, 1067 (7th
Cir. 2001) (citation omitted). We accept
well-pled factual allegations as true and
draw all reasonable inferences in the
plaintiffs’ favor. See Transit Express,
246 F.3d at 1023 (citation omitted).

  Plaintiffs appeal the dismissal of their
claims, taking two approaches. First,
they attempt to distinguish their case
from Durr and argue that they stated
facts showing illegal fee splitting.
Second, they contend that even if they
failed to state facts showing a splitting
of fees, their claim should not have been
dismissed because fee splitting is no
longer an element of RESPA sec. 8(b).
Plaintiffs reason that since the events
in Durr, HUD eliminated this element by
(1) amending Regulation X, 24 C.F.R. sec.
3500.14, and (2) issuing two opinion
letters and one special information
booklet to that effect.


  A.   Durr v. Intercounty Title

  RESPA sec. 8(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 in connection with a transaction
involving a federally related mortgage
loan other than for services actually
performed.

12 U.S.C. sec. 2607(b). Plaintiffs and
Chicago Title read the statute quite
differently. Chicago Title urges that to
avoid dismissal, plaintiffs must state
facts showing that Chicago Title either
received unearned fees from or paid
unearned fees to a third party, here, the
County Recorder. This is the position we
took in Durr, 14 F.3d at 1186-87. Chicago
Title argues that because it received the
extra money from plaintiffs and kept
these overcharges itself, rather than
sharing them with a third party, there
was no split. Plaintiffs, however, focus
on the whole $45.00 Chicago Title charged
as the purported mortgage filing fees.
According to plaintiffs, the $45.00 was
illegally split when Chicago Title paid a
third party, the County Recorder, a
portion of the fees ($31.00 and $37.00),
and retained the overcharges ($14.00 and
$8.00) for itself. Plaintiffs attempt to
distinguish their situation from that in
Durr.
  The facts in Durr are virtually
identical to the facts in this appeal. In
Durr, Intercounty Title Company charged
the plaintiff $25.00 to record the deed
and $37.00 to record the mortgage of his
new home, amounts which, after
subtracting the County Recorder’s fees
and Intercounty’s document-handling
charge, resulted in an overcharge of
roughly $8.00. See 14 F.3d at 1184.
Intercounty pocketed this overage. See
id. at 1184-85. Because Intercounty did
not give unearned fees to or accept
unearned fees from a third party, we held
that Intercounty merely received a
"windfall" and did not violate RESPA sec.
8(b) when it pocketed the overcharge. See
id. We did not count the County Recorder
as a third party for purposes of RESPA
sec. 8(b) because it had no involvement
whatsoever with the unearned fees. We
reached the same result in Mercado v.
Calumet Fed. Sav. & Loan Ass’n, 763 F.2d
269, 270-71 (7th Cir. 1985) (affirming
the dismissal under Fed. R. Civ. P.
12(b)(6) of a RESPA sec. 8(b) claim
because "the complaint [did] not allege
that [the defendant] gave or received
’any portion, split, or percentage of any
charge’ to a third party.").

  We are unable to distinguish the case at
hand from Durr. As in that case,
plaintiffs have failed to plead facts
tending to show that Chicago Title
illegally shared fees with the County
Recorder. The Cook County Recorder
received no more than its regular
recording fees and it did not give to or
arrange for Chicago Title to receive an
unearned portion of these fees. The
County Recorder has not engaged in the
third party involvement necessary to
state a claim under RESPA sec. 8(b).

  Plaintiffs also cite to United States v.
Gannon, 684 F.2d 433, 438-39 (7th Cir.
1981) (en banc) cert. denied 454 U.S. 940
(1981), in which we held that under
certain circumstances, one party could
act as both the giver and acceptor of an
illegal split for RESPA purposes. In
Gannon, an employee in the County
Recorder’s office, acting in his capacity
as the County’s agent, charged banks a
gratuity for "prompt service" in addition
to the regular filing fee and pocketed
the tip. See id. at 436. We found that
these gratuities were an unearned regular
portion of recording fees charged by the
employee in his official capacity and
accepted by him in his individual
capacity. See id. at 438. The case at
issue, however, is easily distinguished
from Gannon. Here, Chicago Title
collected the fees from plaintiffs in its
capacity as a title company and retained
the overcharges in that same capacity. We
cannot employ a legal fiction to treat
Chicago Title as both the giver and third
party receiver of unearned fees because
it acted in the same legal capacity when
it overcharged plaintiffs and when it
retained the monies in excess of the
recording fees.

  Plaintiffs further direct our attention
to a RESPA sec. 8(b) case that a district
court refused to dismiss because the
plaintiffs successfully marshaled
evidence showing a "split." See
Christakos v. Intercounty Title Co., 196
F.R.D. 496 (N.D. Ill. 2000). Christakos
is also distinguishable. In Christakos,
Intercounty Title was responsible for
handling the paperwork associated with
refinancing a home loan. See id. at 499-
500. The bank holding the initial
mortgage agreed to file the paperwork to
release the mortgage, but Intercounty
Title charged the plaintiff to have the
mortgage released twice, once by the bank
and once by Intercounty. See id. at 500.
The court found that plaintiffs alleged a
split because Intercounty shared the fee
with a third party, the bank. See id. at
503. The district court made a point of
stating:

The weight of Seventh Circuit case law
requires payment to a third party to
trigger 2607(b). . . . To the extent
[plaintiff] argues to the contrary, that
any unearned fee violated RESPA, she is
wrong and her argument is rejected.

Id. at 503 & n.4. There is no third party
in the case before us. Because plaintiffs
fail to accuse a third party of accepting
unearned fees, Durr compels the dismissal
of their RESPA claims.

  This result makes sense considering not
only RESPA’s plain language, but its
intended purpose. We stated in Durr:

At its core, ’RESPA is an anti-kickback
statute.’ Mercado v. Calumet Fed. Sav. &
Loan Ass’n, 763 F.2d 269, 270-71 (7th
Cir. 1985). Its purpose is to ’prohibit
all kickback and referral fee
arrangements whereby any payment is made
or ’thing of value’ [is] furnished for
the referral of real estate settlement
business.’ Id. (quoting Senate Report).

14 F.3d at 1186. If we subjected to RESPA
liability a title company that kept an
overcharge without requiring allegations
that it shared an unearned fee with a
third party, we would radically, and
wrongly, expand the class of cases to
which RESPA sec. 8(b) applies.


  B.   Regulation X

  Perhaps anticipating the above result,
plaintiffs argue that a HUD amendment to
regulation 24 C.F.R. 3500.14(c) (also
called "Regulation X"), which became
effective after the events in Durr,
eliminates the need to plead facts
suggesting that defendants split an
unearned fee with a third party. 12
U.S.C. sec. 2617(a) bestows upon HUD
broad power to "prescribe such rules and
regulations, [and] to make such
interpretations . . . as may be necessary
to achieve the purposes of this chapter."
We must give effect to a regulation
promulgated under such a broad grant of
power provided it is "reasonably related
to the purpose of the enabling
regulation." Mourning v. Family Publ’n
Serv., Inc., 411 U.S. 356, 369 (1972).
Regulation X now reads:

(c) No split of charges except for actual
services performed. 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
settlement service in connection with a
transaction involving a federally related
mortgage loan other than for services
actually performed. A charge by a person
for which no or nominal services are
performed or for which duplicative fees
are charged is an unearned fee and
violates this section. The source of the
payment does not determine whether or not
a service is compensable. Nor may the
prohibitions of this part be avoided by
creating an arrangement wherein the
purchaser of services splits the fee.

24 C.F.R. sec. 3500.14(c) (2000)./1
Plaintiffs argue that the second
sentence, added in 1992, expanded RESPA
liability to all unearned fees such that
stating a fee split with a third party is
no longer a necessary element of a RESPA
sec. 8(b) claim. We are mindful of the
holding in Chevron U.S.A., Inc. v.
Natural Resources Defense Council, Inc.,
which requires us to defer to an agency’s
regulations, unless they are contrary to
clear congressional intent, when Congress
has not addressed the relevant issue or
has done so ambiguously. See 467 U.S.
837, 842-43 (1983). Rather than
addressing Chevron deference, however, we
dispose of this issue on an alternate
ground that was the focus of the parties’
briefs: the meaning of the Regulation X
amendment and whether it would remove the
fee-splitting requirement should it be
entitled to deference.

  Plaintiffs argue that the second
sentence’s plain language clearly removes
the need to charge "some type of ’split’
or ’sharing’ of fees . . . ." Chicago
Title counters by relying on the only
case to address the effect of the
Regulation X amendments on the
requirement that a third party be
involved in an illegal fee split. See
Willis v. Quality Mortgage U.S.A., Inc.,
5 F. Supp. 2d 1306, 1308-09 (M.D. Ala.
1998). We find the Willis reasoning
persuasive and we adopt it. Evaluating
the same argument plaintiffs make to us,
the Willis court held that the amendments
to Regulation X did not scrap the third
party fee-splitting element of a RESPA
sec. 8(b) claim. The Willis court
evaluated the amendments to Regulation
3500.14(c) in context, reading the
subsection as a whole. See id. at 1309
("The court may not, by concentrating on
one sentence and ignoring its context,
create an entirely new zone of proscribed
conduct."). In light of this reading, it
concluded: "[S]ubpart (c) of Regulation
3500.14 prohibits . . . payments for
which no services are performed only if
those payments are split with another
party." Id. We note further that the new
heading added by the 1992 amendments, "No
split of charges except for actual
services performed," expresses clearly
that HUD did not attempt to expand
liability past situations involving fee
splitting between the fee collector and a
third party. The Willis court noted that
HUD’s stated purpose for amending
Regulation 3500.14 was "to clarify what
constitutes payments and services." Id.
(quoting 57 Fed. Reg. 49,605 (Nov. 2,
1992)). Neither HUD’s purpose nor the new
language explicitly refers to expanding
liability under RESPA sec. 8(b), and
given the repeated reference to fee
splitting and the purpose of the
amendment, we hold that the amendments to
Regulation X did not eliminate the
requirement of third party fee splitting.


  C. Opinion Letters and Special
Information Booklet

  Again relying on the HUD Secretary’s
authority to promulgate rules,
regulations, and interpretations
necessary to achieve the purposes of
RESPA, 12 U.S.C. sec. 2617, plaintiffs
argue that the statements of HUD policy
contained in two opinion letters and one
special information booklet express HUD’s
intent to remove fee splitting as a
required element of RESPA sec. 8(b). The
district court refused to consider these
statements because they are ultra vires.
HUD’s regulations themselves state
clearly in a section entitled "Reliance
upon rule, regulation or interpretation
by HUD" that HUD opinion letters and
information booklets do not constitute
rules, regulations, or interpretations of
the Secretary for purposes of RESPA. See
24 C.F.R. 3500.4(a)(ii)(2). The
regulation proceeds to warn that reliance
on unofficial statements such as these
will not constitute a defense to a RESPA
violation. See 24 C.F.R. 3500.04(b). We
are extraordinarily reluctant to follow
unofficial interpretations which the
agency itself does not view as binding.

  Recent Supreme Court precedent validates
our reluctance. In Christensen v. Harris
County, the Supreme Court distinguished
between the deference due regulations
promulgated by formal notice-and-comment
rulemaking or formal adjudications and
those made informally. See 120 S. Ct.
1655, 1662 (1999). It stated:

Interpretations such as those in opinion
letters--like interpretations contained
in policy statements, agency manuals, and
enforcement guidelines, all of which lack
the force of law--do not warrant Chevron-
style deference. . . . Instead,
interpretations contained in formats such
as opinion letters are "entitled to
respect" under our decision in Skidmore
v. Swift & Co., 323 U.S. 134, 140 . . .
(1944), but only to the extent that those
interpretations have the "power to
persuade."

Id. The Court goes on to note an
exception to this rule; when the language
of a regulation is ambiguous, we defer to
otherwise non-binding interpretations to
allow the agency to interpret its own
regulations. See id. (citing Auer v.
Robbins, 519 U.S. 452 (1997)). Although
plaintiffs cite a number of other cases
holding that we must defer to agency
policy statements unless they are
"demonstrably irrational," those cases
either deal with rules made through
formal procedures see Lifanda v. Elmhurst
Dodge, Inc., 237 F.3d 803, 809 (7th Cir.
2001) (discussing a final rule which
amended a regulation); special cases,
see, e.g., Stinson v. United States, 508
U.S. 36, 44-45 (1993) (holding that
amendments to the Sentencing Guidelines
Commentary should be treated as
legislative rule-making due to a unique
grant of power from Congress), or
precedent superceded by Christensen.
Plaintiffs argue that RESPA creates
ambiguity by not expressly defining who a
third party is in illegal fee splitting,
or how it triggers liability, but they do
not argue or point to any cases stating
that Regulation X is ambiguous. Reviewing
the language and the stated purpose of
Regulation X, we conclude that it is not
ambiguous, and we therefore owe the
opinion letters and special informational
booklet no extra deference.

  Two of the policy statements petitioners
reference tend to support their position.
One states in part:

It is also illegal for anyone to accept a
fee or part of a fee for services if that
person has not actually performed
settlement services for the fee. For
example, a lender may not add to a third
party’s fee, such as an appraisal fee,
and keep the difference.

62 Fed. Reg. 31982, 31998 (June 11,
1997). The second opines that it is
illegal for a settlement service provider
to mark up a third party’s fees for the
purpose of making a fee without providing
any goods or services in return. See 2000
FDIC Interp. Ltr. LEXIS 39, *24-*27.
However, we have analyzed RESPA sec. 8(b)
and rejected this position as expanding
RESPA liability past the point authorized
by Congress. See Mercado, 763 F.2d 269,
270-71. As we stated that case:

Doubtless RESPA is a broad statute,
directed against many things that
increase the cost of real estate
transactions. . . . But the objective of
a statute is not a warrant to disregard
the terms of the statute. Congress always
has some objective in view when it
legislates, and it is always possible to
move a little farther in the direction of
that objective. The fact that Congress
has pointed in a particular direction
does not authorize a court to march in
that direction without limit.
Id. at 271. Absent a formal commitment by
HUD to an opposing position, we decline
to overrule our established RESPA sec.
8(b) case law.

  We AFFIRM the district court’s dismissal
with prejudice of plaintiffs’ RESPA claim
under Fed. R. Civ. P. 12(b)(6) and its
dismissal of the state claims for lack of
subject-matter jurisdiction under Fed. R.
Civ. P. 12(b)(1).

FOOTNOTES

/1 Before it was amended, Regulation X read:

No person shall give and no person shall accept
any portion, split, or percentage of any change
made or received for the rendering of a real
estate settlement service in connection with a
transaction involving a federally related mort-
gage loan other than for services actually per-
formed. 24 C.F.R. 3500. 14(b) (1992).
