Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-1_07-cv-00680/USCOURTS-alsd-1_07-cv-00680-1/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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1

The plaintiff in her current brief purports to rely upon her brief in opposition to

U.S. Title’s previous motion to dismiss. (Doc. 76 at 1). However, principal briefs may

not exceed 30 pages, see Local Rule 7.1(b), and her two briefs combined approach 40

pages. Moreover, the plaintiff has made no effort to identify any relevant material from

her previous brief, which defended a complaint very different from the present one and

which appears to focus on an issue since definitively decided against her by the Eleventh

Circuit. For all these reasons, the Court confines its consideration to the plaintiff’s

current brief. 

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

CLARICE MALLORY, etc., )

 )

Plaintiff, )

 )

v. ) CIVIL ACTION 07-0680-WS-C

 )

GMS FUNDING, LLC, et al., )

 )

Defendants. )

ORDER 

This matter is before the Court on the motions to dismiss filed by defendants

United States Title Corporation and U.S. Title Corp., LLC (collectively, “U.S. Title”) and

GMS Funding, LLC (“GMS”). (Docs. 61, 66). The parties have filed briefs in support of

their respective positions, (Docs. 61, 66, 76, 78, 81, 84),1

 and the motions are ripe for

resolution. After carefully considering the foregoing and other relevant material in the

file, the Court concludes that U.S. Title’s motion is due to be granted in part and denied in

part and that GMS’s motion is due to be denied.

BACKGROUND

According to the amended complaint, (Doc. 57), the plaintiff obtained a real estate

mortgage loan from GMS, with U.S. Title acting as closing agent. Count One charges

GMS with violating the Truth in Lending Act, while Count Two accuses both defendants

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of violating Section 8(b) of the Real Estate Settlement Procedures Act (“RESPA”). 

Counts Three and Four seek class-wide relief for these alleged violations. The pending

motions address only the RESPA claims of Count Two.

DISCUSSION

In order to survive a motion to dismiss for failure to state a claim under Rule

12(b)(6), a complaint must as a threshold matter provide “a short and plain statement of

the claim showing that the pleader is entitled to relief” as required by Rule 8(a)(2). Bell

Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1964-65 (2007). Though they need not be

detailed, “[f]actual allegations must be enough to raise a right to relief above the

speculative level ....” Id. Thus, neither “labels and conclusions” nor “a formulaic

recitation of the elements of a cause of action” suffices to satisfy Rule 8(a)(2). Id. at

1965. “Stated differently, the factual allegations in a complaint must ‘possess enough

heft’ plausibly to suggest that the pleader is entitled to relief. ... Facts that are ‘merely

consistent with’ the plaintiff’s legal theory will not suffice when, ‘without some further

factual enhancement [they] stop short of the line between possibility and plausibility of

“entitlement to relief.”’” Weissman v. National Association of Securities Dealers, Inc.,

500 F.3d 1293, 1310 (11th Cir. 2007) (quoting Twombly, 127 S. Ct. at 1966). 

If “a claim has been stated adequately [under Rule 8(a)(2)], it may be supported by

showing any set of facts consistent with the complaint.” Twombly, 127 S. Ct. at 1969

(explaining Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). That is, “[a] motion to dismiss

[for failure to state a claim] may be granted only when a defendant demonstrates beyond

doubt that the plaintiff can prove no set of facts in support of his claim which would

entitle him to relief.” Kirwin v. Price Communications Corp., 391 F.3d 1323, 1325 (11th

Cir. 2004) (internal quotes omitted). “When considering a motion to dismiss, all facts set

forth in the plaintiff’s complaint are to be accepted as true and the court limits its

consideration to the pleadings and the exhibits attached thereto.” Grossman v.

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2

This Court has previously reached the same conclusion. E.g., Morrisette v.

NovaStar Home Mortgage, Inc., 484 F. Supp. 2d 1227 (S.D. Ala. 2007); Williams v.

Saxon Mortgage Services, Inc., 2007 WL 1845642 (S.D. Ala. 2007).

3

The HUD-1 attached to the amended complaint does not reflect all these charges,

and it reflects some of them in amounts different from those alleged. Resolution of the

motions to dismiss is unaffected by the disparity.

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Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000) (internal quotes omitted). 

Section 8(b) provides as follows:

(b) Splitting Charges. 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). 

“[S]ubsection 8(b) does not apply to settlement fees that are alleged to be

excessive.” Friedman v. Market Street Mortgage Corp., 520 F.3d 1289, 1291 (11th Cir.

2008).2

 Instead, “subsection 8(b) requires a plaintiff to allege that no services were

rendered in exchange for a settlement fee ...” Id. at 1298. A “service” for which a

defendant may charge includes “arranging for third party contractors to perform” the

service. Sosa v. Chase Manhattan Mortgage Corp., 348 F.3d 979, 983-84 (11th Cir.

2003). 

The amended complaint challenges seven fees charged by U.S. Title and one (tax

service) charged by GMS, each under a separate line item on the HUD-1 settlement

statement.3

 The allegations are summarized below.

Fee Charge Provider Cost to Defendant

Tax service $75 third party under $50

Title search $250 third party under $100

Title examination $150 third party under $100

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4

The amended complaint alleges that U.S. Title was fully compensated by its $175

settlement or closing fee, plus the portion of the title insurance fee representing its

commission from the insurer. (Id., ¶¶ 26, 59). The fees that fully compensated GMS are

not identified. 

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Notary fee $150 third party under $100

Title insurance $255.85 third party $179

Courier fee $75 third party “much less”

Wire fee $32 unspecified under $10

Recording fee $90 unspecified $50.50

Nominally, the amended complaint asserts that “[e]ach and every fee complained

of in the paragraphs above constituted charges other than fees for services actually

performed ....” (Doc. 57, ¶ 63). Likewise, “[e]ach and every sum charged in excess of

the charges of the third party vendors that actually performed the services listed above

constitutes a fee that is unearned by U.S. Title and U.S. Title performed no service in

exchange for said fees.” (Id., ¶ 27). But the actual allegation is not that GMS and U.S.

Title performed no service (not even that of arranging for performance by third parties)

with respect to the eight challenged line items. Instead, the allegation is that the

defendants, through fees charged on other line items, were “fully compensated for all

services [they] performed or arranged” in connection with the loan transaction, (id., ¶¶ 9,

12, 15, 16, 26, 59, 60), “including those [services] complained of above,” (id., ¶ 26),

which includes all eight challenged fees.4

 That is, the amended complaint admits or

assumes that the defendants performed services in connection with tax service, title

search, title insurance, recording, etc., but it insists that the defendants were “fully

compensated” for these services by payments on other line items and so cannot also be

compensated under the specific line item charges. 

To the extent the plaintiff’s claim is that the defendants have been adequately

compensated elsewhere for their services, such that additional compensation under the

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5

Because GMS defers to U.S. Title’s briefing, the Court cites only to the latter

defendant’s briefs.

6

The defendants do appear to assume that a plaintiff is not permitted to go behind a

HUD-1 to show that what is represented as a fee for a particular service is not. As they

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eight challenged line items would be excessive, the claim is barred by Friedman’s

holding that “subsection 8(b) does not apply to settlement fees that are alleged to be

excessive.” 520 F.3d at 1291. The plaintiff, however, disavows this construction of her

pleading. (Doc. 76 at 2). Instead, she argues that, because the defendants were fully

compensated for their services by other charges, there was nothing left to compensate

under the eight challenged line items (other than actual out-of-pocket payments to third

parties). Since there were no uncompensated services remaining, the charges on these

line items (above the third-party costs) could not be for those services and thus must

constitute illegal markups. (Id. at 2-3, 7).

The defendants argue that Friedman “made clear that the fact that a payment to a

defendant may occur on one line of a [HUD-1] does not mean that a defendant has been

fully compensated for all services.” (Doc. 61 at 3).5

 This may be so as far as it goes, but

it does not answer the question presented. In the segment of Friedman on which the

defendants rely, the Court accepted that services related to tax service monitoring could

be split between two fees: one for payment of the third-party monitor, and another for

arranging for the monitor’s services. 520 F.3d at 1295-96. Here, however, the plaintiff

does not allege that the defendants were compensated only for certain services on one

line, leaving open the possibility that other, related services could be compensated on

another line. Rather, she alleges that the defendants were compensated for all services on

other lines, leaving nothing (beyond third-party costs) to be compensated on the eight

challenged lines. Friedman does not address the ramifications of such an allegation, and

the defendants offer no other argument that such a situation, if proved, is non-actionable

as a matter of law.6

 

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offer no authority or even explanation in support of this assumption, the Court need not

consider it further.

7

See Mallory v. GMS Funding, Inc., 2008 WL 276578 (S.D. Ala. 2008). This

ruling appears to obviate consideration of the remaining arguments raised in the

defendants’ opening brief, (Doc. 61 at 20-29), which constitute an apparently verbatim

repetition of much of U.S. Title’s initial motion to dismiss directed to this claim.

8

E.g., Mariano v. Potter, 2006 WL 907772 at *3 & n.6 (S.D. Ala. 2006) (listing

cases).

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The defendants next pick at the pleading concerning particular line items. (Doc.

61 at 14-18). Their argument that several of them lack an allegation that no additional

services were provided cites only those paragraphs specifically mentioning the implicated

line items. Paragraphs that address all eight contested line items globally contain the

supposedly missing allegation. (Doc. 57, ¶¶ 26-27). Similarly, their argument that three

of the challenged line items are not specifically mentioned in Count Two ignores

allegations within Count Two re-alleging all preceding paragraphs and alleging that

“[e]ach and every fee complained of in the paragraphs above” is made the basis of the

claim. (Id., ¶¶ 55, 63). 

The defendants also attempt to characterize certain portions of the RESPA claim as

non-actionable overcharges rather than actionable markups. (Doc. 61 at 20). The effort

produces mixed results. To the extent the plaintiff’s claim as to title insurance rests on

the charging of an amount in excess of that allowed by Alabama law, (Doc. 57, ¶¶ 20-21,

35-36), it improperly attempts to resurrect a claim dismissed on the previous motion to

dismiss.7

 The defendants’ effort to construe the title examination portion of the claim as

an overcharge requires them to contradict the allegations of the amended complaint as to

who performed the examination, which is not permitted on motion to dismiss.

Finally, the defendants invoke Twombly. (Doc. 81 at 7-9). Because they did not

raise this argument until their reply brief, it comes too late and can be rejected on that

ground alone.8

 At any rate, the argument as articulated misses the mark. The defendants

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assert that the amended complaint’s usage of the word “therefore” renders the allegation

that they performed no services in exchange for the contested fees a mere conclusion,

insufficient under Twombly. The expression of conclusions, however, is not prohibited

by Twombly, but only the recitation of bald conclusions insufficiently backed by factual

material. In this case, that material is the allegation that the defendants were “fully

compensated” by other fees for their services in connection with the loan transaction, and

the defendants have not addressed the factual or legal sufficiency under Twombly of the

plaintiff’s reliance on this allegation.

For the reasons set forth above, U.S. Title’s motion to dismiss is granted to the

extent the amended complaint purports to re-assert the claim regarding title insurance that

was previously dismissed. In all other respects, U.S. Title’s motion to dismiss is denied. 

GMS’s motion to dismiss is also denied. 

DONE and ORDERED this 8th day of July, 2008.

s/ WILLIAM H. STEELE

UNITED STATES DISTRICT JUDGE

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