Bolinger et al v. First Multiple Listing Service, Inc. et al

Filing 340

ORDER: Defendants 257 Motion to Strike Plaintiffs Sur-Rebuttal Expert Reports, Plaintiffs 289 Motion to Strike the Testimony of Plaintiffs Withdrawn Expert, Grant Mitchell, Plaintiffs 290 Motion to Strike Paragraphs Eleven (11) through Thirte en (13) of the Affidavit of Frederick G. Boynton, and Defendants 323 Motion for Order or for Leave to File a Reply to Plaintiffs Response to Statement of Undisputed Material Facts in Support ofDefendants Joint Motion for Summary Judgment are DENIED as moot. Plaintiffs 303 Motion for Oral Argument is DENIED and Defendants 272 Motion for Summary Judgment is GRANTED. Plaintiffs 266 Motion for Leave to File a Second Amended Complaint is DENIED, with right to re-file. Plaintiffs may file an amended motion to file second amended complaint within 30 days of the entry of this Order. Signed by Judge Richard W. Story on 09/26/14. (sk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
GAINESVILLE DIVISION
HEATHER Q. BOLINGER, et al.,
Plaintiffs,
v.
FIRST MULTIPLE LISTING
SERVICE, INC. et al.,
Defendants.

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CIVIL ACTION NO.
2:10-CV-211-RWS

ORDER
This case comes before the Court on Defendants’ Motion to Strike
Plaintiffs’ Sur-Rebuttal Expert Reports [257], Plaintiffs’ Motion for Leave to
File a Second Amended Complaint [266], Defendants’ Motion for Summary
Judgment [272], Plaintiffs’ Motion to Strike the Testimony of Plaintiffs’
Withdrawn Expert, Grant Mitchell [289], Plaintiffs’ Motion to Strike
Paragraphs Eleven (11) through Thirteen (13) of the Affidavit of Frederick G.
Boynton [290], Plaintiffs’ Motion for Oral Argument [303], and Defendants’
Motion for Order or for Leave to File a Reply to Plaintiffs’ Response to
Statement of Undisputed Material Facts in Support of Defendants’ Joint Motion

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for Summary Judgment [323]. After reviewing the record, the Court enters the
following Order.
Background
Plaintiffs Heather Q. Bolinger, Paul A. Terry, and Anne M. Terry assert
claims under the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C.
§ 2601 et seq., and under state law in regard to Defendants’ alleged unlawful
kickback and fee-splitting scheme. Plaintiffs bought and sold homes through
Defendant Brokers and Agents, who used a listing service provided by
Defendant First Multiple Listing Service, Inc. (“FMLS”). Plaintiffs allege that
Defendants engaged in a quid pro quo arrangement whereby the Brokers and
Agents referred business to FMLS in exchange for kickbacks in the form of
Patronage Dividends. Notwithstanding the voluminous record, the Court finds
only the following facts essential to resolving Plaintiffs’ claims.
I.

FMLS’s Business Model
First Multiple Listing Service maintains an electronic database on which

its members—licensed real estate brokers representing both buyers and
sellers—may list and find properties. (Defs.’ Statement of Material Facts
(“SMF”), Dkt. [272-1] ¶ 2.) FMLS does not market its services to individual
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buyers and sellers. (Id. ¶ 31.) Real estate brokers who pay to join FMLS are
known as Principal Members, and licensed real estate sales agents working with
Principal Members must also join FMLS as Associate Members. (Id. ¶¶ 4-5.)
Defendant Brokers and Agents were all Principal and Associate Members at the
time of Plaintiffs’ transactions in October and November 2009. (Id. ¶¶ 6-7.)
Generally, Principal Members like Defendant Brokers are required by
FMLS to list all real estate for sale in a particular geographic area on the FMLS
Database. (Id. ¶¶ 37-38.) When a property listed on FMLS is bought or sold,
each Principal Member involved in the transaction must pay FMLS a Sold Fee
equal to .12% of the sales price. (Id. ¶¶ 44, 47.) Thus, if one Principal Member
represents the buyer in a transaction and another Principal Member represents
the seller, both Principal Members pay FMLS a Sold Fee. These Sold Fees
form the basis of Plaintiffs’ fee-split claim.
Each month, FMLS pays its Principal Members Patronage Dividends
based on the amount of available cash from Sold Fees and other revenues
relative to its anticipated short-term expenses. (Id. ¶ 69.) The Patronage
Dividends are divided among Principal Members on a pro rata basis according
to each Principal Member’s pro rata contribution to the total amount of Sold
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Fees FMLS collected in the preceding twelve-month period. (Id. ¶ 70.)
Defendants assert that Patronage Dividends are a return of excess cash on hand,
but Plaintiffs characterize them as kickbacks. The Court next explains how the
FMLS model worked in connection to Plaintiffs’ real estate transactions. All
Brokers mentioned below are Defendants in this action and are Principal
Members of FMLS.
II.

Plaintiffs’ Transactions
A.

Heather Bolinger

In August 2009, Bolinger engaged Peggy Slappey Properties, Inc.
(“PSP”) to help her locate property to purchase, although they did not enter into
a written agreement. (Id. ¶ 82.) Bolinger later purchased a piece of property
that PSP located using FMLS. (Id. ¶¶ 83-84.) The sellers of that property had
agreed to pay their broker, Atlanta Partners, 6% of the sale price, and Atlanta
Partners in turn agreed to share 3% of the sale price with any cooperating
broker (here PSP). (Id. ¶ 87.) During negotiations, Atlanta Partners agreed to
reduce its share of the commission to 2% and thus charged the sellers a 5%
commission. (Id. ¶ 88.) Atlanta Partners shared an amount equal to 3% of the
sale price with PSP. (Id.) Bolinger paid no commission to either PSP or
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Atlanta Partners, and Plaintiffs do not dispute that Bolinger did not directly pay
anything to FMLS. (Id. ¶¶ 89-90.) Bolinger’s broker, PSP, received its share
of the commission from Atlanta Partners and deposited the commission in its
operating account. (Id. ¶ 97.) PSP then issued a check from its operating
account to FMLS for the Sold Fee. (Id. ¶ 98.)
B.

Paul and Anne Terry

The Terrys entered into two written agreements to buy and sell property
through Heritage Real Estate, Inc. (“Heritage”). (Id. ¶¶ 99, 126.) The listing
agreement for the sale of their house provided for a commission of $195 plus
6% of the gross sale price. (Id. ¶ 106.) Heritage also agreed to share 3% of the
sale price with a cooperating broker. (Id.) Under the agreement, Heritage
further agreed to list the Terrys’ home with FMLS and Georgia Multiple Listing
Service. (Exclusive Seller Listing Agreement, Dkt. [273-48] at 3.)
The ultimate buyers of the home later found the Terrys’ listing through
the FMLS Database. (Defs.’SMF, Dkt. [272-1] ¶¶ 102, 104.) The Terrys sold
their house, and Heritage ended up taking a lower commission of 6% of the net
sale price instead of 6% of the gross sale price. (Id. ¶ 107.) Heritage split half
that commission with Bueno and Finnick, Inc. (“B&F”), the buyers’ broker,
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while the Terrys’ sales agent covered the $195 fee. (Id.) Heritage deposited the
commission funds into its operating account. (Id. ¶ 113.) Heritage then paid a
Sold Fee to FMLS out of its operating account. (Id. ¶ 114.)
The same day the Terrys closed the sale of their home, they also finalized
the purchase of a new piece of property that Heritage had located through
FMLS. (Id. ¶¶ 123-28.) In their buyer brokerage agreement, the Terrys agreed
to pay Heritage a $195 commission if Heritage earned a cooperating-broker
commission of less than 3.5% of the sale price of the property. (Id. ¶ 127.) At
closing, the sellers paid a commission to their broker, Lanier Partners, and
Lanier Partners shared 3% of the sale price with Heritage. (Id. ¶ 131.) Because
that commission was less than 3.5%, the Terrys paid Heritage a flat commission
of $195 pursuant to the buyer brokerage agreement. (Id. ¶ 133.) Heritage then
paid FMLS a Sold Fee out of its operating account. (Id. ¶ 142.)
III.

Plaintiffs’ Allegations
Plaintiffs allege that FMLS’s payment of Patronage Dividends to its

members constitutes a kickback in exchange for referrals. Under Plaintiffs’
theory, Brokers referred Plaintiffs’ business by placing listings on the FMLS
Database and by paying Sold Fees after each sale. Plaintiffs argue, moreover,
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that Defendants split unearned commissions in violation of RESPA. First,
Plaintiffs contend that because the Sold Fees FMLS collects exceed FMLS’s
operating costs by between 74% to 83%, that excess portion is unearned (a
“front-end” split). (See Pls.’ Resp., Dkt. [295] at 65-66.) Second, Plaintiffs
state that because that excess portion of the Sold Fees is unearned, the use of
those funds to pay Patronage Dividends is a second split of unearned
commissions (a “back-end” split). Further, FMLS’s members perform no
service in return. (See id. at 71.)
Plaintiffs also assert that the Brokers and FMLS function together as
affiliated business arrangements (“ABA”) that Defendants failed to disclose in
violation of RESPA. (See id. at 72.) Finally, Plaintiffs bring state-law claims
of unjust enrichment, violation of Georgia’s Uniform and Deceptive Trade
Practices Act, O.C.G.A. § 10-1-370 et seq., and negligent misrepresentation.
Defendants move for summary judgment on all claims.
Discussion1
I.

Summary Judgment Legal Standard

1

Because the parties’ briefing is adequate to resolve the motions before the
Court, the Court finds oral argument unnecessary and therefore DENIES Plaintiffs’
Motion for Oral Argument [303].
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Federal Rule of Civil Procedure 56 requires that summary judgment be
granted “if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P.
56(a). “The moving party bears ‘the initial responsibility of informing the . . .
court of the basis for its motion, and identifying those portions of the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, which it believes demonstrate the absence of a genuine issue
of material fact.’” Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259
(11th Cir. 2004) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)
(internal quotations omitted)). Where the moving party makes such a showing,
the burden shifts to the non-movant, who must go beyond the pleadings and
present affirmative evidence to show that a genuine issue of material fact does
exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
The applicable substantive law identifies which facts are material. Id. at
248. A fact is not material if a dispute over that fact will not affect the outcome
of the suit under the governing law. Id. An issue is genuine when the evidence
is such that a reasonable jury could return a verdict for the non-moving party.
Id. at 249-50.
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Finally, in resolving a motion for summary judgment, the court must
view all evidence and draw all reasonable inferences in the light most favorable
to the non-moving party. Patton v. Triad Guar. Ins. Corp., 277 F.3d 1294, 1296
(11th Cir. 2002). But, the court is bound only to draw those inferences which
are reasonable. “Where the record taken as a whole could not lead a rational
trier of fact to find for the non-moving party, there is no genuine issue for trial.”
Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997) (quoting
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
“If the evidence is merely colorable, or is not significantly probative, summary
judgment may be granted.” Anderson, 477 U.S. at 249-50 (internal citations
omitted); see also Matsushita, 475 U.S. at 586 (once the moving party has met
its burden under Rule 56(a), the nonmoving party “must do more than simply
show there is some metaphysical doubt as to the material facts”).
II.

RESPA Claims
Congress passed RESPA in 1974 to regulate the costs to consumers in

closing real estate transactions. In that regard, Congress found:
[S]ignificant reforms in the real estate settlement process are
needed to insure that consumers throughout the Nation are
provided with greater and more timely information on the nature
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and costs of the settlement process and are protected from
unnecessarily high settlement charges caused by certain abusive
practices that have developed in some areas of the country.
12 U.S.C. § 2601(a).
“One of the abusive practices that Congress sought to eliminate through
the enactment of RESPA was the payment of referral fees, kickbacks, and other
unearned fees.” Sosa v. Chase Manhattan Mortg. Corp., 348 F.3d 979, 981
(11th Cir. 2003) (citing S. Rep. No. 93-866 (1974), reprinted in 1974
U.S.C.C.A.N. 6546, 6551). To that end, Congress addressed kickbacks and
splitting of unearned fees in RESPA § 8. See 12 U.S.C. § 2601(a)-(b).
Consumers may enforce these provisions through actions for damages. See 12
U.S.C. § 2607(d). Specifically, RESPA establishes that anyone who violates §
8 “shall be jointly and severally liable to the person or persons charged for the
settlement service involved in the violation in an amount equal to three times
the amount of any charge paid for such settlement service.” Id. § 2607(d)(2).
A.

Standing Issues Regarding Claims Against Lanier Partners, Atlanta
Partners, and B&F

Defendants argue that Plaintiffs lack constitutional and statutory standing
to bring claims against the above Brokers because Plaintiffs did not have a

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client relationship with them or pay them any fees. To possess Article III
standing, a plaintiff must have an injury in fact, there must be a causal
connection between the injury and the defendant’s conduct, and the injury must
be redressable by a court. See Lujan v. Defenders of Wildlife, 504 U.S. 555,
560 (1992). While the Brokers were parties to the transactions relevant to this
litigation, as explained more fully in Part II.B. below, Plaintiffs did not pay
them any commissions. In Bolinger’s transaction, the sellers paid a commission
to Atlanta Partners, their own broker, but Bolinger did not. In the Terrys’
transactions, they paid Heritage a commission for the sale of their house, which
Heritage in turn shared with B&F. And when they purchased their new home,
the Terrys again paid only Heritage a flat fee while the sellers paid Lanier
Partners a commission on the sale price. Therefore, Plaintiffs never paid
commissions to Lanier Partners, Atlanta Partners, or B&F.
Plaintiffs fail to respond to Defendants’ standing arguments with respect
to these Brokers. In Plaintiffs’ Response to Defendants’ Statement of Material
Facts [295-2], however, Plaintiffs do argue that they effectively paid these
Brokers’ commissions because they “funded the commissions paid by the
[sellers] through the money [they] used to purchase the property since the
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commissions were paid from the settlement proceeds of the transaction.” (Dkt.
[295-2] ¶ 89; see also id. ¶¶ 109, 111, 132.) That connection is a stretch. After
all, RESPA limits the availability of civil damages to a “person or persons
charged for the settlement service involved in the violation.” See 12 U.S.C. §
2607(d)(2). Therefore, simply paying the purchase price does not establish an
injury where Plaintiffs produce no evidence that these Brokers charged them for
any services; rather, these Brokers’ commissions were taken out of the sellers’
proceeds from the transaction. Nor do Plaintiffs show that they paid these
Brokers any fees that were illegally split with FMLS. Accordingly, Plaintiffs
lack standing to bring claims against Lanier Partners, Atlanta Partners, and
B&F, and they are entitled to summary judgment.
B.

Section 8(a)

Plaintiffs’ kickback claim against the remaining Brokers is rooted in
RESPA § 8(a). That provision provides:
No person shall give and no person shall accept any fee, kickback
or thing of value pursuant to any agreement or understanding, oral
or otherwise, that business incident to or part of a real estate
settlement service involving a federally related mortgage loan shall
be referred to any person.
12 U.S.C. § 2607(a). Plaintiffs allege that Defendant Brokers and Agents
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referred business to FMLS in the form of listings and Sold Fees. In exchange
for those referrals, FMLS paid kickbacks to the Brokers as Patronage
Dividends. For their part, Defendants argue that they did not violate § 8(a)
because the Brokers never referred any services to FMLS in the first place.
Both parties cite “Regulation X” for the definition of “referral”:
A referral includes any oral or written action directed to a person
which has the effect of affirmatively influencing the selection by
any person of a provider of a settlement service or business
incident to or part of a settlement service when such person will
pay for such settlement service or business incident thereto or pay
a charge attributable in whole or in part to such settlement service
or business.
12 C.F.R. § 1024.14(f)(1) (emphasis added).
Defendants insist that (1) they never influenced or required Plaintiffs to
do business with FMLS, and (2) Plaintiffs could not have been referred because
they did not pay for FMLS’s services. First, Defendants argue that they were
the only ones doing business with FMLS, not Plaintiffs, as the Brokers were in
an independent contractual relationship with FMLS under which the Brokers
were solely liable for the Sold Fees. Plaintiffs respond that they too were
responsible for paying Sold Fees under the language of the brokerage contracts,
so they were influenced or required to select FMLS as a settlement service
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provider. (See Pls.’ Resp., Dkt. [295] at 61-62.) For example, the Terrys’
Exclusive Seller Listing Agreement included this clause: “Seller agrees to
indemnify [FMLS] from and against any and all claims, liabilities, damages or
losses arising out of or related to the listing and sale of Property.” (Dkt. [27348] at 3.) But even if Plaintiffs could have been held liable for the Sold Fees, it
is undisputed that FMLS never invoked this clause to recover Sold Fees from
Plaintiffs.
In that vein, Defendants next emphasize that a referral under Regulation
X is only a referral “when [Plaintiffs] pay for such settlement service or
business incident thereto or pay a charge attributable in whole or in part to such
settlement service or business.” See 12 C.F.R. § 1024.14(f)(1). And here,
Defendants argue, Plaintiffs could not have been referred to FMLS because they
never paid for any services it provided.
The Court agrees. First, Bolinger could not have paid FMLS because
Bolinger did not pay any commission at all in connection with her single real
estate transaction. Notably, the HUD-1 Settlement Statement prepared for
Bolinger’s closing reflects several charges paid from Bolinger’s funds at
settlement, including document-preparation charges and a mortgage-insurance
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premium. (Dkt. [273-45] at 3.) The Statement further shows that the sellers
paid a single commission from their funds at settlement that was split between
PSP and Atlanta Partners. (Id.) Nowhere does FMLS appear on the HUD-1
Settlement Statement. Bolinger therefore did not pay a charge to FMLS.
Second, the Terrys’ HUD-1 Settlement Statements also reveal that they
paid no charges to FMLS. As sellers, the Terrys paid Heritage a commission
from their funds at settlement. (Dkt. [273-52] at 3.) And as buyers, the Terrys
paid a $195 commission to Heritage while the sellers paid a percentage saleprice commission to Heritage and Lanier Partners. (Id.) Yet the Settlement
Statements record no charge paid to FMLS.
Of course, it is undisputed that the Brokers later paid Sold Fees to FMLS
as a result of Plaintiffs’ transactions. And it is also undisputed that these fees
were paid from the Brokers’ general operations accounts, just like other
business expenses. But Plaintiffs’ insistence that they in effect paid the Sold
Fees by paying either the purchase price or commissions is unavailing.
According to the contract terms, Plaintiffs got the real estate services they
contracted for and paid the commissions they agreed to (if they paid a
commission at all). Plaintiffs thus attempt to reclassify the nature of their
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commission payments and Defendants’ payment of Sold Fees to create material
factual disputes about their § 8(a) claim. In doing so, Plaintiffs effectively rely
on their fee-splitting allegations to prove a payment under § 8(a)’s prohibition
against kickbacks for referred business when the consumer pays for that
business. The argument thus goes: because Plaintiffs paid the Brokers’
commissions, and because the Brokers paid FMLS Sold Fees, Plaintiffs paid for
FMLS’s services by paying commissions.2 But § 8(a) and Regulation X do not
contemplate an “effective referral,” in Plaintiffs’ words,3 due to a Broker’s
subsequent payment to a third-party service provider. The fact remains that no

2

Plaintiffs muddy the waters by arguing that Sold Fees are “deducted ‘off the
top’ ” from commissions through pay-at-close requests, thereby showing that
Plaintiffs paid Sold Fees to FMLS. (Pls.’ Resp., Dkt. [295] at 62-63.) Plaintiffs assert
that in this manner commissions were “split among the broker, the agent, and FMLS.”
(Id.) There is no evidence, however, that the Sold Fees were taken “off the top” of the
commissions here. While pay-at-close requests to issue checks to FMLS from
settlement proceeds might resemble a payment from Plaintiffs for FMLS’s services,
no Broker to whom Plaintiffs paid a commission issued such a request. (See Defs.’
Reply, Dkt. [324] at 23-24.) The HUD-1 Settlement Statements demonstrate this fact.
3

At one point in their Response, Plaintiffs expand on their referral theory by
arguing that buyers transacting business in the geographic area covered by FMLS
cannot “opt out” of a transaction involving FMLS. Thus, buyers in this area “are
effectively ‘referred’ to FMLS because [.12%] of the sales price will be split from the
commission and paid to FMLS, and 74-83% of such fee will be used to fund
Patronage Dividends.” (Pls.’ Resp., Dkt. [295] at 77.) As the Court explains, this
type of referral is not what RESPA and Regulation X contemplate.
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Plaintiff ever paid a Sold Fee for FMLS’s services; only the Brokers did.4
Consequently, Defendants are entitled to summary judgment on Plaintiffs’ §
8(a) claim.
C.

Section 8(b)

Plaintiffs next argue that Defendants split unearned fees because the Sold
Fees the Brokers remit to FMLS exceed FMLS’s operating costs, and the
Patronage Dividends in turn constitute a second illegal fee split of those
unearned fees because the Brokers perform no services in return.
Section 8(b) of RESPA provides:
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. § 2607(b).

4

Nor have Plaintiffs produced evidence that the commission was “a charge
attributable in whole or in part to” the services provided by FMLS. See 12 C.F.R. §
1024.14(f)(1). There is no evidence that the commissions were higher as a result of
the Sold Fees the Brokers paid. This speculative connection between the Sold Fees
and commissions is insufficient to create a genuine dispute of material fact over
whether Plaintiffs were referred to FMLS as defined by Regulation X in exchange for
a kickback.
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Defendants contend that even if they split fees with FMLS, FMLS
performed services for Sold Fees. Plaintiffs respond that FMLS pays Patronage
Dividends to Brokers in an amount equal to 74% to 83% of the Sold Fees it
collects. Because that percentage is the amount of Sold Fees left over after
paying operating costs and dividends to FMLS shareholders, Plaintiffs reason
that FMLS’s operating costs amount only to 17% to 26% of the Sold Fees it
collects. Plaintiffs therefore argue that 74% to 83% of the Sold Fees are
unearned.
Plaintiffs summarize their theory by asserting that they “are not
challenging the Sold Fees as excessive; Plaintiffs are challenging these
payments as the split of knowingly unearned fees.” (Pls.’ Resp., Dkt. [295] at
70-71.) Plaintiffs go on to explain that they are not trying to establish the
reasonable value of FMLS’s services. “Plaintiffs argue instead that 74% to
83% of the Sold Fees is for ‘no, nominal or duplicative work’ and is charged
solely to fund kickbacks to brokers—an imbedded fee split.” (Id. at 71.) That
distinction appears to be without meaning. Even if the Court parsed the Sold
Fees into earned and unearned components, Eleventh Circuit precedent
establishes that a plaintiff may not sustain a § 8(b) claim in this manner.
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In Friedman v. Market Street Mortgage Corp., 520 F.3d 1289 (11th Cir.
2008), the plaintiffs argued that they could maintain a § 8(b) claim for excessive
fees. Id. at 1297. The Eleventh Circuit rejected that argument, stating that the
plain and unambiguous language of the statute precludes such an interpretation
because § 8(b) only “prohibits the charging of fees other than for services
actually performed.” Id. The court explained: “[N]othing in the language
authorizes courts to divide a ‘charge’ into what they or some other person or
entity deems to be its ‘reasonable’ and ‘unreasonable’ components. Whatever
its size, such a fee is ‘for’ the services rendered by the institution and received
by the borrower.” Id. (quoting Kruse v. Wells Fargo Home Mortg., Inc., 383
F.3d 49, 56 (2d Cir. 2004)).
In Hazewood v. Foundation Financial Group, LLC, 551 F.3d 1223 (11th
Cir. 2008), the plaintiff sued under RESPA § 8(b) alleging she was charged an
unlawfully high premium on her title-insurance policy in violation of an
Alabama price-control law. Id. at 1224. Although she acknowledged that at
least a portion for the premium was for title insurance, she argued “that a
portion of the title insurance fee was unearned or not for services actually
performed.” Id. at 1226 (emphasis in original). But as the Eleventh Circuit
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observed, “Even if the excess portion of the premium was arguably ‘unearned’
as a matter of Alabama law, as a factual matter it was not in exchange for
nothing.” Id. Citing the plain meaning of the statute’s prohibition on the
acceptance of fees “other than for services actually performed,” the court held
that “for a settlement fee to be actionable, no services must be rendered in
exchange for it.” Id. at 1225. Because the plaintiff in fact received title
insurance in exchange for the premium, the Eleventh Circuit affirmed the
dismissal of her claim. Id.
Finally, in another fee-splitting case, Sosa v. Chase Manhattan Mortgage
Corp., 348 F.3d 979 (11th Cir. 2003), the Eleventh Circuit found that the
defendant did not retain an unearned fee when it charged borrowers a $50
courier fee but paid only a portion of that sum to third-party couriers it hired.
The court noted the plaintiff failed to allege that the defendant did not perform
any services; on the contrary, the court found that the defendant had performed
a service for the borrowers by hiring third parties to make the deliveries. Id. at
983-84. Sosa thus demonstrates that hiring a contractor to perform work for
which a borrower is charged is itself a service justifying a fee.

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At bottom, Friedman, Hazewood, and Sosa illustrate that as long as a
defendant performs actual services for a fee, there is no § 8(b) violation. To
that end, courts have declined to parse fees into components to assess either
their reasonableness or whether certain portions were unearned if “as a factual
matter it was not in exchange for nothing.” See Hazewood, 551 F.3d at 1226.
Here, it is undisputed that FMLS performed services for each transaction
at issue. In each case, the Brokers and Agents used FMLS to list or find the
properties that were ultimately sold. Thus, FMLS performed a service each
time by connecting sellers and buyers through its directory. And when the
Brokers remitted the Sold Fees to FLMS, those payments were “not in
exchange for nothing.” See Hazewood, 551 F.3d at 1226. The Court need not
inquire further because RESPA does not require courts to assess the
reasonableness of the fee or to divide the fee into earned or unearned
components, as Plaintiffs urge.
As for Plaintiffs’ theory that the Patronage Dividends establish a second
§ 8(b) violation by further splitting unearned fees, that claim also fails.
Plaintiffs rest their “back-end” split claim on their argument that the Sold Fees
are an unearned split. (See Pls.’ Resp., Dkt. [295] at 71.) Because the Court
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rejects this argument, Plaintiffs cannot establish a § 8(b) violation based on the
payment of Patronage Dividends, either. In sum, Plaintiffs produce no evidence
that FMLS received a fee without performing services in return. Defendants are
thus entitled to summary judgment on Plaintiffs’ § 8(b) claim.
D.

Section 8(c)(4)

Plaintiffs’ final RESPA claim arises out of § 8(c)(4), which Plaintiffs
argue establishes liability for an undisclosed affiliated business arrangement
(“ABA”). (See Pls.’ Resp., Dkt. [295] at 72.) Indeed, this Court held that §
8(c)(4) is independently actionable in its Order on Defendants’ motion to
dismiss. See Bolinger v. First Multiple Listing Serv., Inc., 838 F. Supp. 2d
1340, 1353-55 (N.D. Ga. 2012). Defendants urge the Court to reconsider its
ruling in light of subsequent case law holding that § 8(c)(4) is a safe harbor
from RESPA liability, not an independent cause of action. (See Defs.’ Br., Dkt.
[272-2] at 65-71.)
According to § 8(c)(4), “Nothing in this section shall be construed as
prohibiting . . . (4) affiliated business arrangements so long as” the arrangement
is disclosed and certain other conditions are met. 12 U.S.C. § 2607(c).
The Court need not determine whether § 8(c)(4) furnishes an independent cause
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of action, however, because even assuming it did, Plaintiffs fail to produce
evidence of an ABA.
RESPA defines an ABA as:
an arrangement in which (A) a person who is in a position to refer
business incident to or a part of a real estate settlement service
involving a federally related mortgage loan, or an associate of such
person, has either an affiliate relationship with or a direct or
beneficial ownership interest of more than 1 percent in a provider
of settlement services; and (B) either of such persons directly or
indirectly refers such business to that provider or affirmatively
influences the selection of that provider.
12 U.S.C. § 2602(7) (emphasis added). “Affiliate relationship means the
relationship among business entities where one entity has effective
control over the other . . . .” 12 C.F.R. § 1024.15(c).
Defendant Brokers and Agents assert that they have no ownership
interest in, affiliate relationship with, or effective control over FMLS, and
Plaintiffs produce no evidence to dispute this. In addition, Plaintiffs concede
that no named Defendant Brokers besides Atlanta Partners “has either a direct
or beneficial ownership interest of 1% or more in FMLS.” (Pls.’ Resp., Dkt.
[295] at 75, 76 & n.38.) Atlanta Partners, however, did not do business with
Plaintiffs, and Plaintiffs did not pay them a commission. Having found that

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Plaintiffs lack standing to pursue claims against Atlanta Partners, the Court
finds that no remaining Defendants were affiliated with FMLS or had a direct or
beneficial ownership interest of over 1% in FMLS. Consequently, even if §
8(c)(4) were an independent cause of action, Defendants are not ABAs and are
therefore entitled to summary judgment on this claim.
III.

State-Law Claims
A.

Unjust Enrichment

Plaintiffs state their unjust enrichment claim against FMLS alone,
arguing that “FMLS has been unjustly enriched at Plaintiffs’ expense through
its receipt of Sold Fees undisclosed to Plaintiffs and funded by commissions
Plaintiffs paid the Defendant Brokers and Agents.” (Pls.’ Resp., Dkt. [295] at
89.) “Unjust enrichment is an equitable concept and applies when as a matter
of fact there is no legal contract, but when the party sought to be charged has
been conferred a benefit by the party contending an unjust enrichment which
the benefitted party equitably ought to return or compensate for.” St. Paul
Mercury Ins. Co. v. Meeks, 508 S.E.2d 646, 648 (Ga. 1998). In other words,
“[t]he theory of unjust enrichment applies when there is no legal contract and
when there has been a benefit conferred which would result in an unjust
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enrichment unless compensated.” Smith Serv. Oil Co. v. Parker, 549 S.E.2d
485, 487 (Ga. Ct. App. 2001). Thus, to state a claim for unjust enrichment, a
plaintiff must allege that the defendants “have received money belonging to the
plaintiff or to which [the plaintiff] is in equity and good conscience entitled.”
Haugabook v. Crisler, 677 S.E.2d 355, 359 (Ga. Ct. App. 2009).
Defendants argue both that Plaintiffs did not confer a benefit on FMLS
and that it is not inequitable for FMLS to retain the Sold Fees because it
performed services for them. In response, Plaintiffs cite their previous
arguments that “sellers paid and buyers funded the commissions used to pay
Sold Fees.” (Pls.’ Resp., Dkt. [295] at 90.) But as discussed above, that is not
the same as paying Sold Fees to FMLS. Rather, Plaintiffs paid commissions to
their Brokers consistent with—or lower than—the commission rates agreed to
in the brokerage contracts. The Brokers then paid Sold Fees out of their general
operating accounts in relation to transactions for which FMLS provided listing
services. Plaintiffs thus cannot show that FMLS received money belonging to
them or that FMLS cannot in good conscience keep the Sold Fees. Defendant
FMLS is accordingly entitled to summary judgment on Plaintiffs’ unjust
enrichment claim.
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B.

Uniform and Deceptive Trade Practices Act

Plaintiffs allege that Defendant Brokers failed to disclose to Plaintiffs
FMLS’s rules with respect to its Principal Members and Associate Members, as
well as the existence of Sold Fees and Patronage Dividends, “thereby failing to
disclose to Plaintiffs the true amount and basis of calculating the Defendant
Brokers’ compensation and failing to disclose that they would benefit from a
financial transaction effectuated on behalf of [Plaintiffs].” (Pls.’ Resp., Dkt.
[295] at 85.) Plaintiffs argue that this conduct violates the Uniform Deceptive
Trade Practices Act (“UDTPA”), O.C.G.A. § 10-1-370 et seq.
Defendants note that the UDTPA does not apply to conduct that is
already subject to regulation by a state or federal regulatory agency. Plaintiffs
treat this as a preemption argument but fail to address that the UDTPA “does
not apply to . . . [c]onduct in compliance with the orders or rules of or a statute
administered by a federal, state, or local government agency.” O.C.G.A. § 101-374(a)(1). The Georgia Court of Appeals has addressed this provision with
respect to insurance transactions. The court noted that “the Insurance Code
contains its own statutory scheme that regulates unfair trade practices within the
insurance industry and gives the Insurance Commissioner the power to
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investigate and act upon such claims against an insurer.” Ne. Ga. Cancer Care,
LLC v. Blue Cross & Blue Shield of Ga., Inc., 676 S.E.2d 428, 434 (Ga. Ct.
App. 2009). Thus, the court reasoned, “claims of unfair trade practices in
insurance transactions are governed by the Insurance Code, not Georgia’s
UDTPA.” Id.
Plaintiffs cite in support of their UDTPA claim Defendants’ alleged
violations of rules promulgated by the Georgia Real Estate Commission
(“GREC”) pursuant to O.C.G.A. § 43-40-1 et seq. They further argue that only
the UDTPA provides them with the relief they seek, for “[n]o other claim in this
case affords the right to an injunction to stop the practices at issue or to require
disclosure thereof.” (Pls.’ Resp., Dkt. [295] at 87.) In deciding that insurance
transactions were exempt from the UDTPA, however, the Georgia Court of
Appeals did not analyze the availability of particular remedies under the
relevant regulations; the important factor was the existence of “an extensive
regulatory regime.” See Ne. Ga. Cancer Care, 676 S.E.2d at 434. In that
regard, Defendants correctly point out that the relevant conduct here is
regulated on the federal level by RESPA and the Consumer Financial Protection

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Bureau,5 and on the state level by GREC. As a result, the UDTPA does not
apply, and Defendants are entitled to summary judgment on this claim.
C.

Negligent Misrepresentation

Under Plaintiffs’ theory of negligent misrepresentation, Defendant
Brokers and Agents are liable for their failure to disclose information related to
FMLS, the Sold Fees, and Patronage Dividends because “[b]y failing to
disclose these critical elements of the transaction, the Defendant Brokers
understated their compensation and did not timely and properly account for all
money and property received in which Plaintiffs had an interest.” (Pls.’ Resp.,
Dkt. [295] at 92.)
The tort of negligent misrepresentation under Georgia law has three
essential elements: “(1) the defendant’s negligent supply of false information to
foreseeable persons, known or unknown; (2) such persons’ reasonable reliance
upon that false information; and (3) economic injury proximately resulting from
such reliance.” Hendon Props., LLC v. Cinema Dev., LLC, 620 S.E.2d 644,

5

See 12 C.F.R. § 1024.1 (issuing Regulation X “by the Bureau of Consumer
Financial Protection to implement the Real Estate Settlement Procedures Act”).
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649 (Ga. Ct. App. 2005). “Justifiable reliance is thus an essential element of a
claim asserting negligent misrepresentation.” Id.
Plaintiffs argue that Defendants had a duty to disclose adverse material
facts under the Brokerage Relationships in Real Estate Transactions Act
(“BRRETA”), O.C.G.A. § 10-6A-7(a)(2)(C). Plaintiffs further state that under
O.C.G.A. § 43-40-25(b)(6), Defendants had an obligation to disclose any fee,
rebate, or profit the Brokers would earn from the transaction.
Defendants assert that they did not supply false information to Plaintiffs
because the brokerage agreements accurately reflected the commissions the
Brokers received. (Defs.’ Reply, Dkt. [324] at 42.) In addition, Defendants
state that Plaintiffs cannot show they relied on any alleged false information or
show that their reliance proximately caused them any economic injury. (Id.)
The Court agrees. The brokerage agreements and HUD-1 Settlement
Statements discussed above accurately represented the Brokers’ commissions.
There is no evidence the Brokers understated their compensation. Furthermore,
Plaintiffs knew that under the agreements the Brokers would place listings with
FMLS. As stated throughout this Order, Plaintiffs fail to explain how the
Brokers’ payment of Sold Fees caused them economic injury. Finally, the duty
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to disclose any fee or rebate the Broker would earn, presumably referring to the
Patronage Dividends, applies only to “receipt of a fee, rebate, or other thing of
value on expenditures made on behalf of the principal for which the principal is
reimbursing the licensee.” O.C.G.A. § 43-40-25(b)(6). Plaintiffs did not
reimburse the Brokers for their Sold Fees. Defendants are therefore entitled to
summary judgment on Plaintiffs’ negligent misrepresentation claim.
IV.

Final Matters
The parties have also filed three motions to strike [257, 289, 290].

However, the Court did not rely on the evidence to which the parties object in
those motions. Therefore, the parties’ motions to strike [257, 289, 290] are
DENIED as moot. Defendants additionally seek leave to file a reply to
Plaintiffs’ Response to Defendants’ Statement of Material Facts. Defendants
contend that Plaintiffs advanced improper arguments and assertions in their
response instead of refuting Defendants’ facts by citing to the record. The
Court relied only on evidence cited in the record, and because the Court did not
find any genuine disputes of material fact, Defendants’ Motion for Leave to File
a Reply [323] is also DENIED as moot.

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Plaintiffs’ Motion for Leave to File a Second Amended Complaint [266]
remains pending. In its January 2, 2014 Order [270], the Court provided that
Defendants could file their response to the motion within 30 days of the entry of
this Order. In light of the Court’s ruling herein, Plaintiffs’ Motion for Leave to
File a Second Amended Complaint [266] is DENIED, with right to re-file.
Plaintiffs may file an amended motion to file second amended complaint within
30 days of the entry of this Order.
Conclusion
For the foregoing reasons, Defendants’ Motion to Strike Plaintiffs’ SurRebuttal Expert Reports [257], Plaintiffs’ Motion to Strike the Testimony of
Plaintiffs’ Withdrawn Expert, Grant Mitchell [289], Plaintiffs’ Motion to Strike
Paragraphs Eleven (11) through Thirteen (13) of the Affidavit of Frederick G.
Boynton [290], and Defendants’ Motion for Order or for Leave to File a Reply
to Plaintiffs’ Response to Statement of Undisputed Material Facts in Support of
Defendants’ Joint Motion for Summary Judgment [323] are DENIED as moot.
Next, Plaintiffs’ Motion for Oral Argument [303] is DENIED and Defendants’
Motion for Summary Judgment [272] is GRANTED. Plaintiffs’ Motion for
Leave to File a Second Amended Complaint [266] is DENIED, with right to
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re-file. Plaintiffs may file an amended motion to file second amended complaint
within 30 days of the entry of this Order.
SO ORDERED, this 26th day of September, 2014.

________________________________
RICHARD W. STORY
United States District Judge

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