Source: https://law.justia.com/cases/federal/appellate-courts/F2/695/1086/443548/
Timestamp: 2019-07-18 00:51:31
Document Index: 269074825

Matched Legal Cases: ['§ 2609', '§ 2609', '§ 2614', '§ 2602', '§ 2601', '§ 2607', '§ 2608', '§ 2605', '§ 2617', '§ 2603', '§ 2602', '§ 1607']

Karen Allison, Suing Individually and on Behalf of Allothers Similarly Situated, Plaintiff-appellant, v. Liberty Savings, Defendant-appellee, 695 F.2d 1086 (7th Cir. 1982) :: Justia
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Karen Allison, Suing Individually and on Behalf of Allothers Similarly Situated, Plaintiff-appellant, v. Liberty Savings, Defendant-appellee, 695 F.2d 1086 (7th Cir. 1982)
US Court of Appeals for the Seventh Circuit - 695 F.2d 1086 (7th Cir. 1982)
Argued Sept. 14, 1982. Decided Dec. 27, 1982. *
This action was brought under Sec. 10 of the Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. § 2609 (1976), and included a pendent state claim under Sec. 2 of the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill.Rev.Stat. ch. 121 1/2, Sec. 262 (1981). The district court, 535 F. Supp. 828, dismissed the complaint, concluding that there is no implied private right of action under Sec. 10 of RESPA. For the reasons below, we affirm.
The judiciary's approach to inferring private causes of action in the face of congressional silence has undergone significant changes in recent years. Prior to 1975, courts regularly recognized an implied remedy as long as the plaintiffs were members of a special class for whose benefit the statute was enacted. E.g., Texas & Pacific R. Co. v. Rigsby, 241 U.S. 33, 36 S. Ct. 482, 60 L. Ed. 874 (1916). As federal statutes became more comprehensive, this simplistic approach became outmoded. In 1975, the Supreme Court decided the pivotal case of Cort v. Ash, 422 U.S. 66, 95 S. Ct. 2080, 45 L. Ed. 2d 26 (1975), which set forth a four-part test for determining the propriety of implying a private cause of action. The four factors to be considered are: (1) whether the plaintiff is a member of a class for whose especial benefit the statute was enacted; (2) whether there is any explicit or implicit indication of congressional intent to create or deny a private remedy; (3) whether a private remedy would be consistent with the underlying purposes of the legislative scheme; and (4) whether the cause of action is one traditionally relegated to state law. Id. at 78, 95 S. Ct. at 2087. The Court has since explained and clarified the test's application. All four factors are not equally weighted; the central inquiry is whether Congress intended to create a private right of action. Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 15-16, 100 S. Ct. 242, 245, 62 L. Ed. 2d 146 (1979); Touche Ross & Co. v. Redington, 442 U.S. 560, 575, 99 S. Ct. 2479, 2488, 61 L. Ed. 2d 82 (1979). If Congress has indicated its intent, either expressly or by implication, the court's inquiry ends without consideration of the remaining Cort factors. See id. at 576, 99 S. Ct. at 2489. The Supreme Court's most recent case addressing the issue reaffirms the centrality of congressional intent. Merrill Lynch, Pierce, Fenner & Smith v. Curran, --- U.S. ----, ---- - ----, 102 S. Ct. 1825, 1838-39, 72 L. Ed. 2d 182 (1982).
We begin our inquiry with the language of the statute itself. Transamerica Mortgage Advisors, Inc. v. Lewis, supra, 444 U.S. at 16, 100 S. Ct. at 245; Touche Ross & Co. v. Redington, supra, 442 U.S. at 568, 99 S. Ct. at 2485. Section 10 of RESPA is silent on the subject of remedies, stating simply that a "lender, in connection with a federally related mortgage loan, may not require the borrower or prospective borrower ... to deposit in any escrow account which may be established in connection with such loan for the purpose of assuring payment of taxes, insurance premiums, or other charges with respect to the property," an amount in excess of that fixed by certain formulas. 12 U.S.C. § 2609. Section 10's silence on the subject of remedies is in sharp contrast to the remedial provisions of Secs. 6 (now repealed), 8 and 9, which explicitly create private causes of action.2 "Obviously, then, when Congress wished to provide a private damage remedy, it knew how to do so and did so expressly." Touche Ross & Co. v. Redington, supra, 442 U.S. at 572, 99 S. Ct. at 2487. We recognize that the private remedies provided in Secs. 8 and 9 are extraordinary, utilizing a treble liquidated damage formula that a court could not invoke unless explicitly created by Congress.3 But the remedy in Sec. 6 was a fairly straightforward private action, extraordinary only in setting $500 minimum damages and allowing recovery of reasonable attorney fees.4 The fact that Congress explicitly provided federal private remedies in three of the four sections immediately preceding Sec. 10 is evidence that Congress intended to deny such remedies by its silence in Sec. 10.
12 U.S.C. § 2614. Here again, congressional attention was focused on private remedies with no mention of private actions under Sec. 10, indicating that Congress did not intend a private action under Sec. 10. See Transamerica Mortgage Advisors, Inc. v. Lewis, supra, 444 U.S. at 21, 100 S. Ct. at 247.
Legislative history can be a key to interpreting congressional intent, but " [w]e must recognize that the legislative history of a statute that does not expressly create or deny a private remedy will typically be equally silent or ambiguous on the question." Cannon v. University of Chicago, 441 U.S. 677, 694, 99 S. Ct. 1946, 1956, 60 L. Ed. 2d 560 (1979). The parties' briefs, the district court's opinion and our own research disclose no legislative history on the issue of private remedies under Sec. 10. While this silence does not automatically require denial of a private right of action, Northwest Airlines v. Transport Workers Union, 451 U.S. 77, 94, 101 S. Ct. 1571, 1582, 67 L. Ed. 2d 750 (1981); Transamerica Mortgage Advisors, Inc. v. Lewis, supra, 444 U.S. at 18, 100 S. Ct. at 246, where analysis of the statute itself weighs against implication of a private cause of action and the legislative history is silent, we must conclude that Congress did not intend to create a private remedy. See Touche Ross & Co. v. Redington, supra, 442 U.S. at 571, 99 S. Ct. at 2486.
Allison argues that other Cort factors favor implication of a private remedy. However, once we have concluded that Congress did not intend to create a private remedy, our inquiry is at an end. Transamerica Mortgage Advisors, Inc. v. Lewis, supra, 444 U.S. at 24, 100 S. Ct. at 249; Touche Ross & Co. v. Redington, supra, 442 U.S. at 576, 99 S. Ct. at 2489. If our inquiry at this point had been inconclusive, Allison could have invoked the remaining Cort factors to demonstrate intent to create a private cause of action under Sec. 10. But as we explain below, consideration of the remaining Cort factors would not convince us that Allison should prevail.
Allison contends that she is a member of a class for whose especial benefit RESPA was enacted. But this, standing alone, would not be persuasive, especially if the rights of these especially benefited classes can be effectively vindicated by other means. Allison, however, contends that no other effective mechanism exists for the enforcement of Sec. 10 and therefore a private cause of action under Sec. 10 is necessary to effectuate the underlying purposes of RESPA.
Allison cannot argue that no enforcement mechanism exists for her, since she concedes that the Federal Home Loan Bank Board investigated her claim and ordered Liberty to refund to her over $200 in excess escrow deposits. Rather, she claims that the available nonjudicial enforcement mechanisms are incomplete and inadequate. This, Allison contends, indicates congressional intention to create a private cause of action under Sec. 10.
No enforcement agency is created by RESPA, and no agency is specifically charged with enforcement responsibilities.5 However, contrary to Allison's assertions, this is not inconsistent with congressional intent to provide only administrative enforcement of Sec. 10. Other provisions of RESPA are to be implemented by several agencies acting in concert, guided by the Secretary of Housing and Urban Development.6 The task of enforcement, like other responsibilities under RESPA, need not be vested in one agency. Lack of one comprehensive enforcement scheme under one agency should not lead us to conclude that Congress intended private judicial enforcement of Sec. 10.
Allison claims that some lenders covered by RESPA are not overseen by the Bank Board or any other administrative enforcement agency, so borrowers from these lenders have no recourse but private judicial enforcement. RESPA applies only in cases involving a "federally related mortgage loan," as defined in 12 U.S.C. § 2602(1). These loans fall into one of four categories.7 Lenders making loans in the first three categories are insured by, regulated by, or in some other way connected with a federal agency. Allison does not contend that these agencies cannot enforce RESPA with respect to the lenders that they oversee. She instead focuses on the lenders in the fourth category, who are essentially private lenders making residential real estate loans in excess of $1 million per year. Allison contends that borrowers from lenders in this fourth category are without administrative remedies, and this indicates congressional intention to provide private judicial enforcement for all borrowers.
We cannot say at this point whether Allison is correct in asserting that borrowers obtaining fourth category loans have no administrative avenue of asserting their rights under RESPA. Suffice it to say that even if a small group of borrowers would be unable to invoke RESPA protection absent private judicial enforcement, this is not the affirmative, persuasive evidence we would need to conclude that Congress intended to create a private right of action under Sec. 10 of RESPA for all borrowers, even those who can seek administrative enforcement.8
Allison finally contends that the remedy the Bank Board provided was inadequate in that the Board did not, and perhaps could not, compel Liberty to account for its alleged unjust enrichment and assess punitive damages. However, even if we were convinced that the remedy provided was inadequate, "the argument is made in the wrong forum, for we are not at liberty to legislate." Touche Ross & Co. v. Redington, supra, 442 U.S. at 579, 99 S. Ct. at 2490. "The federal judiciary will not engraft a remedy on a statute, no matter how salutary, that Congress did not intend to provide." California v. Sierra Club, 451 U.S. 287, 297, 101 S. Ct. 1775, 1781, 68 L. Ed. 2d 101 (1981). Our task is to determine congressional intent, not to review the wisdom of congressional actions.
In our decision to decline inferring a private right of action under Sec. 10 of RESPA we have considered the Sixth Circuit's opposite conclusion expressed in a footnote in Vega v. First Federal Savings and Loan Association, 622 F.2d 918, 925 n. 8 (6th Cir. 1980). That court concluded without analysis or discussion that the legislative history indicated that Congress intended to create a private remedy. Since we have been unable to find anything in the legislative history supporting this conclusion, and in view of that court's cursory treatment of the issue in a short footnote, we do not find the Sixth Circuit's position persuasive. Our analysis of the relevant considerations in determining congressional intent leads us to conclude that no implied private cause of action exists under Sec. 10 of RESPA.
Until quite recently, the test for whether a private damages action would lie for violation of a federal statute, if the statute made no explicit provision for such actions, was that stated in Texas & Pac. Ry. v. Rigsby, 241 U.S. 33, 39, 36 S. Ct. 482, 484, 60 L. Ed. 874 (1916): "A disregard of the command of the statute is a wrongful act, and where it results in damage to one of the class for whose especial benefit the statute was enacted, the right to recover the damages from the party in default is implied ...." Cort v. Ash, 422 U.S. 66, 95 S. Ct. 2080, 45 L. Ed. 2d 26 (1975), began a movement away from this approach that culminated in Touche Ross & Co. v. Redington, 442 U.S. 560, 575, 99 S. Ct. 2479, 2488, 61 L. Ed. 2d 82 (1979), which held that "the central inquiry" was "whether Congress intended to create, either expressly or by implication, a private cause of action."
I accept this formulation as absolutely binding upon me; and I accept that under it a court may not create a private right of action unless it has evidence--whether based on the language, structure, background, or history of the statute--that Congress, if it had thought about the issue, would have wanted the statute to be privately enforceable. But this approach implies also that a decision involving one statute is unlikely to decide a case involving a different one. The statute in Touche Ross, for example, just required brokers to keep certain records. There was no indication of "a class for whose especial benefit the statute was enacted," so even under Rigsby it is doubtful whether a private damages suit should have been allowed. But section 10 of RESPA protects mortgagors from being overcharged ("overescrowed") by their mortgagees. See also the statement of congressional purpose in 12 U.S.C. § 2601(b) (3). Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 100 S. Ct. 242, 62 L. Ed. 2d 146 (1979), does not decide this case either. The statute in Transamerica created several express remedies, and the issue was whether Congress would have wanted the courts to create still another one. RESPA creates no remedy for violations of section 10. Merrill Lynch, Pierce, Fenner & Smith v. Curran, --- U.S. ----, 102 S. Ct. 1825, 72 L. Ed. 2d 182 (1982), cannot carry the day for the panel either; for the Court in that case found an implied private right of action. These are the principal decisions that the panel cites in support of its result.
More important, the administrative remedy appears to be inadequate even for those borrowers who can invoke it. In the present case, for example, the agency made the defendant return to the plaintiff the money she had overpaid into the escrow account, but (she alleges, and we must assume for purposes of this appeal) not the interest that the defendant had earned on that money. The return of the interest is not some bagatelle, inessential to the adequacy of the administrative remedy. This is not a personal injury case, where interest accrues only from the date of the judgment, and not from the date of the tort itself. It is a suit based on unjust enrichment--a suit for restitution. The defendant took and kept money to which the plaintiff was entitled by section 10, and any interest that the defendant earned on the money while it was in its possession is recoverable by the plaintiff under the principles of unjust enrichment. See Goff & Jones, The Law of Restitution 479 (2d ed. 1978); cf. Prosser, Handbook of the Law of Torts 627-29 (4th ed. 1971). You may not steal a man's pregnant cow and after it has given birth return the cow and keep the calf. No more should the defendant in this case be allowed to keep the increase in its wealth from investing the plaintiff's money. An order to return just the principal is not an adequate remedy. Yet it may be the only remedy that this plaintiff has under the decision today. Whether she has a remedy under state law for violation of a federal law that the federal courts themselves refuse to enforce is mere speculation. Otto v. Specialties, Inc., 386 F. Supp. 1240, 1244-45 (N.D. Miss. 1974), implies she does not.
The fact that sections 7 and 8 of RESPA (and the repealed section 6) create express damage remedies does not show that Congress did not want victims of section 10 violations to be able to get their money back through suits in federal court. Sections 7 and 8 create treble damage remedies for offenses that Congress no doubt thought more serious than violations of section 10, and section 6 provided for minimum damages plus reasonable attorney fees. Federal courts cannot provide these extraordinary remedies--treble damages, minimum damages, and attorney fees--without express statutory authority. But there is nothing extraordinary about the remedy sought by the plaintiff in this case. Cf. Deckert v. Independence Shares Corp., 311 U.S. 282, 289, 61 S. Ct. 229, 233, 85 L. Ed. 189 (1940); SEC v. Texas Gulf Sulphur Co., 446 F.2d 1301, 1307-08 (2d Cir. 1971). Nor does section 16 of RESPA, by creating jurisdiction to enforce sections 6 through 8, exclude jurisdiction over suits under section 10. The main provision in section 16 is a one-year statute of limitations. It is a natural quid pro quo for the extraordinary types of relief that sections 6 through 8 give prevailing plaintiffs.
It is of course possible that the banking industry managed to get section 10 enacted without teeth; and if it did the panel decision is correct. But there is no indication that it did, and there is contrary evidence in Senator Proxmire's attack on the bill which became RESPA, a bill he described as "a major defeat for consumers and a stunning victory for the real estate settlement lobby." S.Rep. No. 866, 93d Cong., 2d Sess. 13 (1974), U.S.Code Cong. & Admin.News, pp. 6546, 6557. Senator Proxmire complained that the bill did not go far enough in dealing with abusive practices in real estate settlements. But he did not complain that section 10 lacked teeth. He would have done so if he had thought that the banking industry had succeeded in defanging the section.
This opinion has been circulated among all judges of this court according to Circuit Rule 16(e) since this opinion creates a conflict with the Sixth Circuit's position in Vega v. First Federal Savings and Loan Association, 622 F.2d 918 (6th Cir. 1980). A majority did not favor a rehearing en banc on this issue. Judges Cudahy and Posner voted to rehear this matter en banc
Liberty has refunded to Allison the excess escrow deposit as required by the Bank Board. However, because Allison has not received an accounting and other relief she seeks in excess of the refund, this case is not moot
The fact that Sec. 6 has been repealed does not prevent us from considering its significance in the statutory framework of RESPA as originally enacted
Under Sec. 8, persons who give or accept kickbacks or unearned fees or who split charges are jointly and severally liable for three times the value given or received. 12 U.S.C. § 2607(d) (2). Under Sec. 9, a seller who requires a buyer to purchase title insurance from a particular title company is liable to the buyer for three times the charges made for the title insurance. 12 U.S.C. § 2608(b)
Section 6 provided in relevant part:
If any lender fails to provide a prospective borrower or seller with the disclosure as required by subsection (a), it shall be liable to such borrower or seller, as the case may be, in an amount equal to--
(2) in case of any successful action to enforce the foregoing liability, the court costs of the action together with a reasonable attorney's fee as determined by the court ....
12 U.S.C. § 2605(b) (repealed 1976).
The Secretary of Housing and Urban Development is given rule making and interpretive powers, but no specific enforcement powers. 12 U.S.C. § 2617(a)
These agencies include the Federal Deposit Insurance Corporation, the Bank Board, the Administrator of Veterans Affairs, the Attorney General, the Board of Governors of the Federal Reserve System and the Secretary of Agriculture, 12 U.S.C. §§ 2603(a), 2607(c), and 2612(a)
A federally related mortgage loan must meet certain requirements not at issue here and must be a loan which:
(iv) is made in whole or in part by any "creditor", as defined in section 1602(f) of Title 15, who makes or invests in residential real estate loans aggregating more than $1,000,000 per year, except that for the purpose of this chapter, the term "creditor" does not include any agency or instrumentality of any state ....
12 U.S.C. § 2602(1) (B).
Liberty suggests that the Federal Trade Commission ("FTC") has administrative authority over fourth category lenders. The FTC does appear to regulate these lenders to some extent, 15 U.S.C. § 1607(c), but we cannot state with certainty that the FTC would enforce RESPA requirements. Even without administrative recourse, however, borrowers from fourth category lenders are not necessarily without any remedy. State common law provides a variety of remedies against those who wrongfully acquire and retain property to which they are not entitled