Honorable Louis H. Pollak, Senior Judge of the United States District Court for *

the Eastern District of Pennsylvania, sitting by designation.

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 09-2757

ARTHUR R. and JANE M. TUBBS, individually

and on behalf of all other similarly situated,

 Appellants

v.

NORTH AMERICAN TITLE AGENCY, INC., NORTH AMERICAN 

TITLE GROUP, INC and INDEPENDENCE 

ABSTRACT AND TITLE AGENCY

 On Appeal of a Decision of the United States District Court 

for the District of New Jersey (Civ. No. 08-3178)

District Judge: Joseph E. Irenas

Argued on February 2, 2010

Before: McKEE, Chief Judge, HARDIMAN, Circuit Judge,

and POLLAK, District Judge.

*

(Filed:August 5, 2010)

Robert J. La Rocca (argued)

Christina Donato Saler

Kohn, Swift & Graft, P.C.

One South Broad Street, Suite 2100
2

Philadelphia, PA 19107

Charles J. Bloom 

Neil C. Schur

Stevens & Lee, P.C.

1415 Marlton Pike East, Suite 506

Cherry Hill, NJ 08034

Attorneys for Appellant

Peter Buscemi (argued)

Paul D. Weller

Kristofor T. Henning 

Franco A. Corrado

Morgan, Lewis & Bockius, LLP

1701 Market Street

Philadelphia, PA 19103

Attorneys for Appellee

OPINION

POLLAK, District Judge

Arthur and Jane Tubbs appeal the District Court’s dismissal of their complaint for

failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Because the

District Court looked at matters outside the complaint, we will reverse.

I.

Appellants’ amended complaint alleges that, in the spring of 2008, they refinanced

two existing mortgages, held by Wachovia Bank, with defendant North American Title

Agency serving as the settlement agent for the refinancing. Appellants allege that they
 Section 8(b) states: “No person shall give and no person shall accept any portion, split, 1

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). 

2

paid for various services for which Title Agency charged them at the closing. Included in

these charges was a $150 fee ($75 per mortgage) labeled “Release Recording Fees.” 

These are averred to be fees for the recording of the release of the prior mortgages with

the county clerk’s office. Appellants further allege that Wachovia provided a payoff

statement to Title Agency stating that it was charging $80 ($40 per mortgage) for the

same recording of the release of the mortgages with the county clerk. Appellants allege

that Title Agency knew Wachovia was performing the recording of the release, and that

Title Agency performed no services for the $150 it charged. Appellants claim that this

violated § 8(b) of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §

2607(b).1

The District Court granted defendants’ motion to dismiss. Despite the allegations

in the amended complaint that “Title Agency performed no services to earn the $150.00

fee,” the District Court found that “Title Agency’s charge was not a markup of

Wachovia’s fees, but rather a charge for its own services.” The District Court listed a

range of potential services that Title Agency would have had to conduct, such as

obtaining payoffs statements from Wachovia, collecting money from the parties to the

settlement, making distributions to prior mortgagees, and verifying that Wachovia did
 In Santiago, we held that § 8(b) does not provide a cause of action for 2

“overcharges,”–where a single entity charges more than the reasonable value of the services it

provides–but does allow a cause of action for “markups”–where a settlement service provider

charges more for services than it pays to the third-party vendor who performs the services. 417

F.3d at 386-89.

2

prepare and record the release.

II.

We review de novo a district court's grant of a motion to dismiss for failure to state

a claim under Rule 12(b)(6). Vallies v. Sky Bank, 432 F.3d 493, 494 (3d Cir. 2006). In

evaluating the propriety of the dismissal, we accept all factual allegations in the complaint

as true, and construe the complaint in the light most favorable to the plaintiff. Pinker v.

Roche Holdings Ltd., 292 F.3d 361, 374 n. 7 (3d Cir. 2002). With limited exceptions, a

district court cannot consider materials outside the pleadings without first converting the

motion to dismiss into a motion for summary judgment. In re Rockefeller Ctr. Props, Inc.

Secs. Litig., 184 F.3d 280, 287-88 (3d Cir. 1999).

The District Court erred by going beyond the complaint to find that the $150 fee

was for services that Title Agency had in fact performed, when the complaint alleges that

“Title Agency performed no services to earn the $150.00 fee it charged Plaintiffs.” 

Because the question of whether Title Agency performed or did not perform services may

alter the analysis of whether the plaintiffs properly stated a claim under § 8(b) of REPSA,

as construed by this court in Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384 (3d

Cir. 2005), we will reverse the District Court’s order and remand the case to the District 2
2

Court for further proceedings.

III.

For the reasons stated, the order of the District Court is reversed and the case

remanded to that court for further proceedings.
 Because I would affirm the District Court’s dismissal of the Tubbses’ sole federal 1

claim, I would also affirm the District Court’s decision to decline supplemental

jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367©.

1

Tubbs v. North America Title, No. 09-2757

HARDIMAN, Circuit Judge, Dissenting

The majority holds that the District Court erred when, at the motion to dismiss

stage, it relied on materials outside the amended complaint to conclude that the Title

Agency performed services to earn the $150 fee at issue here. I agree that the District

Court erred in this regard. According to my colleagues, a remand is necessary because

“the question of whether Title Agency performed or did not perform services may alter

the analysis of whether the plaintiffs properly stated a claim under § 8(b)” of the Real

Estate Settlement Procedures Act (RESPA). I disagree that a remand is appropriate,

however, because the record and the briefs demonstrate that Plaintiffs cannot state a claim

under § 8(b) regardless of whether the Title Agency performed any services. In my view,

the Tubbses’ concession that the Title Agency did not split the $150 fee with any third

party dooms their RESPA claim. Accordingly, I respectfully dissent. 1

I.

The amended complaint avers that the Title Agency violated § 8(b) when it

charged an unearned $150 fee. Significantly, the amended complaint does not allege that

the Title Agency split or otherwise shared this $150 fee with Wachovia (or anyone else);

it merely avers that the Title Agency kept this fee entirely for itself. The amended

complaint further alleges that the Tubbses separately paid a total of $80 to Wachovia for
2

the same services. The text and structure of § 8(b) of RESPA, however, make clear that

such allegations are insufficient to state a claim for relief.

A.

Section 8(b) of RESPA prohibits the giving or receiving of “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.” 12 U.S.C. § 2607(b) (emphasis

added). The words “portion,” “split,” and “percentage” necessarily imply something less

than the whole amount. These three words, in turn, modify the “charge” or fee that one

receives in conjunction with real estate services. Thus, the plain language of § 8(b)

indicates that the statute prohibits receiving a portion of an unearned fee for real estate

settlement services; it does not prohibit the receipt of the entire, undivided fee.

Our prior cases interpreting § 8 of RESPA have recognized as much. See Santiago

v. GMAC Mortgage Group, Inc., 417 F.3d 384, 387 (3d Cir. 2005) (“Section 8(b) states

that no person can accept a fraction of a charge for services provided, unless they have

actually provided services.”) (emphasis added); Alston v. Countrywide Fin. Corp., 585

F.3d 753, 761 (3d Cir. 2008) (noting that the words “any portion, split or percentage

thereof” in § 8(b) indicated that Congress knew how to “differentiate between all charges

and a portion of those charges”). Indeed, to hold that § 8(b) prohibits the receipt of an

entire unearned fee would render the words “portion, split, or percentage” meaningless. 

See Erienet, Inc. v. Velocity Net, Inc., 156 F.3d 513, 516 (3d Cir. 1998) (we must give
3

effect to all provisions of a statute “so that no part will be inoperative or superfluous,

void, or insignificant”) (quoting Pa. Med. Soc'y v. Snider, 29 F.3d 886, 895 (3d

Cir.1994)) (internal quotation marks omitted). These precedents, along with the plain

language of § 8(b), confirm that a plaintiff must allege that a fee was split to state a claim

under RESPA.

My interpretation is buttressed by the structure of § 8. When interpreting a

particular subsection, we must evaluate its language in the broader context of “the

language and design of the statute as a whole.” Weil Ceramics & Glass, Inc. v. Dash, 878

F.2d 659, 671 (3d Cir. 1989) (quoting K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291

(1988)) (internal quotation marks omitted). Here, the operative language of § 8(b)

appears under the heading “Splitting charges.” See 12 U.S.C. § 2607(b). When read in

conjunction with the statutory language, Congress’s choice of a title for § 8(b) strongly

suggests that a plaintiff must allege that a defendant received some portion of a larger fee

to state a claim under the statute. See Santiago, 417 F.3d at 389 (“Section 8(b) is titled

‘Splitting charges,’ and prohibits the acceptance of ‘any portion, split, or percentage of

any charge.’”).

Moreover, if Congress wanted to extend § 8(b) to cover situations in which a

defendant kept an entire fee, it knew how to do so. Section 8(a), which immediately

precedes §8(b) and does not appear under the heading “Splitting charges,” does not

require a defendant to accept a “portion, split, or percentage” of an unearned charge. See
 In support of their argument that § 8(b) should be interpreted contrary to its text, 2

the Tubbses urge us to defer to HUD’s interpretation of the statute, which provides: “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” § 8(b). 24 C.F.R.

§ 3500.14(c). HUD has also issued a policy statement in which the agency “specifically

4

12 U.S.C. § 2607(a). Instead, § 8(a) imposes liability on a defendant who accepts “any

fee, kickback, or thing of value.” Id. When read together, these sections suggest that

Congress intended to punish different conduct when it included the language “portion,

split, or percentage” in § 8(b) but not in § 8(a). By giving full effect to the disparate

language of each subsection, my interpretation avoids rendering the other subsection

superfluous.

The text and structure of § 8(b) thus make clear that, to state a claim, the Tubbses

were required to allege that the Title Agency split the $150 fee with a third party. Instead

of doing so, the Tubbses alleged that the Title Agency received a $150 fee for which it

performed no services. In addition, the Tubbses averred that “Wachovia separately

charged Plaintiffs, and Plaintiffs paid Wachovia, $40 for each mortgage” to perform the

services for which they were billed by the Title Agency. Thus, the Tubbses alleged that

they paid two separate and distinct charges—one to Wachovia and the other to the Title

Agency—for the same service. Because the Tubbses did not—and cannot—allege that

the fee received by the Title Agency was a smaller “portion, split, or percentage” of a

larger charge, as § 8(b) requires, I would hold that they have failed to state a claim for

relief.2
interprets §8(b) as not being limited to situations where at least two persons split or share

an unearned fee for the provision to be violated.” 66 Fed. Reg. 53052, 53057. Because I

believe the “intent of Congress is clear, that is the end of the matter” and we need not

defer to HUD’s counter-textual interpretation of § 8(b). Santiago, 417 F.3d at 386 (citing

Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43

(1984)). Likewise, we need not consider the Title Agency’s argument that the legislative

history of § 8(b) makes clear that a defendant must split a fee with a third party to be

liable.

5

B.

 The Tubbses argue that our decision in Santiago made clear that a plaintiff need

not allege that a fee was split to state a claim under § 8(b). They claim the sole inquiry

under Santiago’s interpretation of § 8(b) is whether the Title Agency actually performed a

service to earn the fee at issue. But Santiago did not extend liability under § 8(b) that far. 

Santiago considered whether § 8(b) includes a cause of action for overcharges and

markups. In RESPA parlance, an overcharge occurs when one performs settlement

services itself but charges a fee that is substantially higher than its reasonable cost. 

Santiago, 417 F.3d at 387; Kruse v. Wells Fargo Home Mortgage, Inc., 383 F.3d 49, 53

(2d Cir. 2004). A markup occurs when one outsources a settlement service to a third

party and charges the consumer a fee that exceeds one’s actual costs without providing

any additional service. Santiago, 417 F.3d at 389; Kruse, 383 F.3d at 53.

In Santiago, we held that § 8(b) prohibits markups, but nowhere did we imply that

a plaintiff need not allege that a fee was split to state a claim under § 8(b). As the Title

Agency notes, the markup at issue in Santiago necessarily included a split fee: the
6

defendant charged the consumer an inflated fee, part of which was passed on to the

vendor who actually performed the service and part of which the defendant kept for itself. 

Indeed, the only practice that we found beyond § 8(b)’s grasp in Santiago was the

overcharge, which by definition included no splitting of fees. See 417 F.3d at 387.

The Tubbses’ reliance on Santiago is undercut further by our statement that “[a]s a

whole, Section 8(b) states that no person can accept a fraction of a charge for services

provided, unless they have actually provided services.” Id. (emphasis added). Our more

recent decision in Alston only confirms that Santiago cannot bear the weight that the

Tubbses place upon it. In Alston, we considered whether a mortgage insurance kickback

scheme was actionable under § 8 of RESPA even if the plaintiffs suffered no damages. 

585 F.3d at 755. Examining § 8(b) in the course of our interpretation of RESPA’s

damages provision, § 8(d), we noted:

It cannot seriously be contended that when Congress sought to differentiate

between all charges and a portion of those charges, it did not know how to

do so. In section 8(b), for example, Congress differentiated between the

overall charge for a settlement service and “any portion, split or percentage

thereof” . . . .

Alston, 585 F.3d at 761. Consistent with the foregoing quotation, I believe the plain

language of § 8(b) continues to refer to “a portion” of a settlement charge after Santiago.

C.

Although interpretations of § 8(b) vary slightly among courts of appeals, the

Tubbses have cited no appellate decision which has held that a plaintiff can state a claim
 The Tubbses argue that Santiago declined to follow the circuit courts which 3

require a defendant to allege a split and “rejected their reasoning.” This overstates the

nature and extent of Santiago’s disagreement with those decisions, however. Santiago

did not disagree with the portions of Boulware, Haug, or Krazlic v. Republic Title Co.,

314 F.3d 875, 879 (7th Cir. 2002), that hold a plaintiff must allege a split fee to state a

claim under § 8(b). Rather, we cited those decisions in Santiago to emphasize our

disagreement with their interpretation of the phrase “no person shall give and no person

shall accept” as creating a single prohibition that requires both a culpable giver and a

culpable receiver of an unearned fee. See 417 F.3d at 388-89. Like the Eleventh Circuit

in Sosa v. Chase Manhattan Mortgage Corporation, 348 F.3d 979 (11th Cir. 2003), we

interpreted that language as creating two independent prohibitions—one on giving, the

other on receiving—which in turn allowed us to find that markups, which by definition

include only a culpable receiver, are within the ambit of § 8(b). See Santiago, 417 F.3d at

388-89. We did not cite Boulware, Haug, or Krazlic to emphasize that we disagreed with

their assumption that § 8(b) requires a plaintiff to allege a split fee. In fact, it would have

been unnecessary to do so, since the markup theory we approved in Santiago necessarily

included a split fee.

7

for relief under §8(b) of RESPA absent an allegation that the defendant split the fee at

issue with a third party. As the Title Agency noted, the Courts of Appeals for the Fourth,

Seventh, and Eighth Circuits adhere to its view that a split fee is required. See Boulware

v. Crossland Mortgage Corp., 291 F.3d 261, 265 (4th Cir. 2002) (holding “§ 8(b) only

prohibits overcharges when a ‘portion’ or ‘percentage’ of the overcharge is kicked back

to or ‘split’ with a third party”); Mercado v. Calumet Fed. Sav. & Loan, 763 F.2d 269,

271 (7th Cir. 1985) (observing that §8(b)’s plain language requires a plaintiff to allege

that a defendant shared a “portion, split, or percentage” of an unearned portion of a fee

with some “other person” to state a claim); Haug v. Bank of Am., 317 F.3d 832, 836 (8th

Cir. 2003) (interpreting § 8(b) as “an anti-kickback provision that unambiguously requires

at least two parties to share a settlement fee in order to violate the statute”).3
8

The Tubbses rely principally on the Eleventh Circuit’s decision in Sosa v. Chase

Manhattan Mortgage Corp., 348 F.3d 979 (11th Cir. 2003), which they claim held that

§ 8(b) of RESPA does not require a defendant to split a fee to be liable. Sosa held no

such thing, however. Rather, the Eleventh Circuit seemed to assume that § 8(b) required

that a defendant accept something less than an entire fee to be liable, stating: “[g]iving a

portion of a charge is prohibited regardless of whether there is a culpable acceptor, and

accepting a portion of a charge is prohibited regardless of whether there is a culpable

giver.” Id. at 982 (emphasis added). Thus, Sosa requires a plaintiff to allege a split fee

with a third party to state a claim under § 8(b), even if the plaintiff need not allege that

both participants were culpable actors.

The Tubbses also rely heavily on the Second Circuit’s decision in Kruse, arguing it

held that § 8(b) does not require a defendant to allege a split fee to state a claim. 

Although Kruse did defer to HUD’s interpretation that § 8(b) covered markups, a markup

necessarily involves a split fee, since the defendant keeps a portion for itself and passes

the rest on to the third party that performed the service. See Kruse, 383 F.3d at 53. Thus,

nothing about Kruse’s approval of markups in the § 8(b) context can be read to eliminate

§ 8(b)’s textual requirement that a defendant receive only a “portion, split, or percentage”

of a fee to be liable. Indeed, the only theory of liability that the Second Circuit held to be

“clearly and unambiguously” beyond the reach of § 8(b) was the overcharge, which by

definition involves no split fee since the defendant is alleged only to have charged too
9

much for its own service. See 383 F.3d at 56. Accordingly, the Tubbses’ reliance on

Kruse is misplaced.

In sum, the Tubbses are unable to identify any persuasive authority in support of

their argument that they need not allege that the Title Agency split the $150 fee at issue to

state a claim under §8(b). This is unsurprising in light of the statutory text’s requirement

that one receive a “portion, split, or percentage” of an unearned fee to be liable.

D.

In a fallback argument, the Tubbses cite a portion of our analysis in Santiago for

the proposition that their $150 payment to the Title Agency should be combined with

their $80 payment to Wachovia and regarded as a single $230 payment. Such an

approach is required, argue the Tubbses, by the “economic reality analysis” of Santiago.

In holding that §8(b) covered both markups as well as kickbacks, Santiago noted

that “the parties would be in the same economic position” regardless of whether a

defendant engaged in a kickback or a markup scheme. 417 F.3d at 388. Irrespective of

how the defendant subsequently divided the fee received from the plaintiff, we noted, the

plaintiff would be charged the same amount at the outset of the transaction. Id. Santiago

thus did not mandate any “economic reality analysis” when assessing claims under § 8(b). 

Rather, the Court simply observed that to the consumer, there was little practical

difference between a kickback and a markup when concluding that § 8(b) prohibited both

types of conduct. Accordingly, Santiago does not require us to combine the two distinct
10

charges paid by the Tubbses into one under the vague rubric of “economic reality.”

The Tubbses’ attempt to aggregate several distinct fees into one single charge also

contravenes the text of § 8(b), which provides that “no person shall accept any portion,

split, or percentage of any charge made or received” without providing services. 12

U.S.C. § 2607(b) (emphasis added). The text of § 8(b) contemplates a single, discrete

charge that is subsequently split, not multiple charges paid to different entities at the

outset, before they ever pass through a common defendant, which are later combined only

for the purposes of litigation. Combining charges in this way would contradict the wellpleaded allegations of the Tubbses’ own amended complaint, where they averred that the

fees were separately charged and paid.

Accepting the Tubbses’ economic reality theory also would vitiate the requirement

that a defendant split a fee with a third party to be liable under § 8(b). The Tubbses

essentially ask the Court to aggregate multiple fees paid to different parties into a single

“charge.” Under this approach, a plaintiff could always manufacture a split charge—and

thus liability under § 8(b)—simply by picking and choosing various charges from a HUD1A form and combining them. I would not render § 8(b)’s requirement of a split charge

meaningless in this fashion.

II.

In conclusion, I believe the Tubbses were required to allege that the Title Agency

accepted a “portion, split, or percentage” of a fee without performing the corresponding
11

services in order to state a claim under § 8(b) of RESPA. Nothing in Santiago suggests

otherwise. Although the Tubbses alleged that the Title Agency received a $150 fee for

which it performed no services, they failed to allege that the Title Agency split that fee

with any third party. Therefore, the Tubbses’ claim under § 8(b) of RESPA was properly

dismissed. See, e.g., Donahue v. Gavin, 280 F.3d 371, 372 n.2 (3d Cir. 2002) (observing

that we may affirm for any reason supported by the record).

For the foregoing reasons, I would affirm the judgment of the District Court.