United States District Court, E.D. California
MELISSA HENSON and KEITH TURNER, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs,
FIDELITY NATIONAL FINANCIAL, INC., Defendant.
ORDER GRANTING DEFENDNAT'S MOTIONTO CHANGE VENUE AND TRANFERRING VENUE TO THE CENTRAL DISTRICT OF CALIFORNIA (Document #6)
ANTHONY W. ISHII, Senior District Judge.
MELISSA HENSON and KEITH TURNER (collectively, "Plaintiffs") bring this class action against FIDELITY NATIONAL FINANCIAL, INC. ("Defendant") alleging violations of Sections 8(a) and 8(b) of the Real Estate Settlement Procedures Act ("RESPA"). Defendant has filed a motion pursuant to Federal Rule of Civil Procedure 12(b)(3) challenging venue. Defendant requests that the Court dismiss this action pursuant to 28 U.S.C. Section 1406(a). Alternatively, Defendant requests that the Court transfer this action to the Central District of California ("CDC") pursuant to either 28 U.S.C. Section 1406(a) or 1404(a). Alternatively, Defendant contends this action should be dismissed pursuant to the 12(b)(6) motion. For the reasons set forth below, Defendant's 12(b)(3) motion will be GRANTED and the case will be transferred to the CDC. The
The complaint alleges that Plaintiffs and the purported class members each utilized the services of at least one of several named title and/or escrow companies in connection with the purchase and/or refinancing of their homes. Compl. at ¶¶6-7. The complaint alleges that Defendant is the parent corporation of the title and/or escrow companies that provided settlement services to Plaintiffs. Compl. at ¶¶6-7. The title and/or escrow companies include Fidelity National Title Company, Chicago Title Company, Ticor Title Company, Security Union Title Company, Alamo Title Company, Lawyers Title Company, and Commonwealth Land Title Company. Compl. at ¶7. The complaint alleges that "in connection with the handling of the processing and closing of [the] real estate settlement[s] and escrows performed by [the] subsidiar[ies] of the Defendant, " Plaintiffs were required to pay fees for overnight delivery services by delivery companies chosen by the title and escrow companies. Compl. at ¶6. The delivery companies that the complaint alleges were used include UPS, Federal Express, and OnTrac. Compl. at ¶6. Plaintiffs allege that Defendant directed its subsidiaries to utilize those selected delivery companies for delivery services related to Plaintiffs' real estate settlements and escrows and that Plaintiffs were charged for those services. Compl. at ¶¶6-7. The complaint alleges that throughout this time Defendant had in effect "master agreements" with each delivery company regarding the real estate transaction delivery services. Compl. at ¶14.
The complaint alleges that Plaintiff Henson purchased a home located in Bakersfield, CA; the date of closing was February 15, 2012. Compl. at ¶22. Chicago Title Company handled the escrow for Plaintiff Henson's purchase and loan transaction. Compl. at ¶23. Plaintiff Henson was charged an "Overnight Delivery Fee" of $13.71 by UPS. Compl. at ¶23. Plaintiff Henson paid the charge when escrow closed on February 15, 2012. Compl. at ¶23.
The complaint alleges that Plaintiff Turner refinanced his home located in Los Angeles, CA; the date of closing was September 11, 2012. Compl. at ¶24. Lawyers Title Company handled the escrow for Plaintiff Turner's refinancing. Compl. at ¶24. Plaintiff Turner was charged a total of $19.98 for "overnight delivery services" by both Federal Express and OnTrac. Compl. at ¶24. Plaintiff Turner paid the charges when escrow closed on September 11, 2012. Compl. at ¶24.
Plaintiffs allege violations of RESPA's prohibition against kickbacks and splitting unearned fees. Compl. at ¶¶13-21, 25; see also 12 U.S.C. §2607. The complaint alleges that Defendant was provided a portion of the delivery charges paid by Plaintiffs pursuant to a master agreement with the delivery company as a referral fee or kickback in violation of RESPA Section 8(a) or provided to Defendant as a fee for services not actually rendered by Defendant in violation of RESPA Section 8(b). Compl. at ¶¶14, 18-21, 40-41.
III. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(3) allows a defendant to move for dismissal of the case on the basis of improper venue. See Fed.R.Civ.P. 12(b)(3); Abrams Shell v. Shell Oil Co. , 165 F.Supp.2d 1096, 1102 (C.D. Cal. 2001). The plaintiff bears the burden of showing that venue is proper in the chosen district. Koresko v. Realnetworks, Inc. , 291 F.Supp.2d 1157, 1160 (E.D. Cal. 2003); American Homecare Fed'n v. Paragon Sci. Corp. , 27 F.Supp.2d 109, 112 (D. Conn. 1998); see also Piedmont Label Co. v. Sun Garden Packing Co. , 598 F.2d 491, 496 (9th Cir. 1979) (holding that plaintiff bears the burden to show proper venue in context of summary judgment).
When there are multiple parties and/or multiple claims in an action, the plaintiff must establish that venue is proper as to each defendant and as to each claim. Pacer Global Logistics, Inc. v. AMTRAK, 272 F.Supp.2d 784, 788 (E.D. Wis. 2003); Bearse v. Main St. Invs. , 170 F.Supp.2d 107, 116 (D. Mass. 2001); Payne v. Marketing Showcase, Inc. , 602 F.Supp. 656, 658 (N.D. Ill. 1985). Unlike a motion for dismissal under Rule 12(b)(6), the court may consider supplemental written materials and consider facts outside of the pleadings in deciding a Rule 12(b)(3) motion to dismiss without transforming the motion into a motion for summary judgment. See Agueta v. Banco Mexicano, S.A. , 87 F.3d 320, 324 (9th Cir. 1996); Travelers Cas. And Sur. Co. of Am. v. Telstar Constr. Co. , 252 F.Supp.2d 917, 922 (D. Ariz. 2003). Furthermore, the court need not accept the plaintiff's pleadings as true, but the court must draw all reasonable inferences and resolve all factual conflicts in favor of the non-moving party. See American Home Assurance Co. v. TGL Container Lines, Ltd. , 347 F.Supp.2d 749, 755 (N.D. Cal. 2004).
If venue is improper, the district court has the discretion to dismiss the case under Rule 12(b)(3) or transfer the case in the interests of justice to an appropriate jurisdiction under 28 U.S.C. Section 1406(a). See King v. Russell , 963 F.2d 1301, 1304 (9th Cir. 1992); Kawamoto v. CB Richard Ellis, Inc. , 225 F.Supp.2d 1209, 1212 (D. Haw. 2002). However, even where venue is proper, the district court may still transfer the case to another jurisdiction where it may have been brought for the convenience of the parties and witnesses and in the interests of justice under 28 U.S.C. Section 1404(a). See Kawamoto , 225 F.Supp.2d at 1212.
Defendant challenges Plaintiffs' choice of the Eastern District of California ("EDC") as a proper venue for this case. "Except as otherwise provided by law, " the venue statute found at 28 U.S.C. Section 1391 governs venue for civil actions in federal district courts. 28 U.S.C. §1391(a). RESPA contains its own venue and statute of limitations provision, which states:
Any action pursuant to the provisions of section 2605, 2607, or 2608 of this title may be brought in the United States district court or in any other court of competent jurisdiction, for the district in which the property involved is located, or where the violation is alleged to have occurred, within 3 years in the case of a violation of section 2605 of this title and 1 year in the case of a violation of section 2607 or 2608 of this title from the date of the occurrence of the violation.
12 U.S.C. §2614. Venue for a RESPA claim is therefore proper in two possible districts: (1) The district where the property is located, and (2) The district where the RESPA violation allegedly occurred. Venue must be proper for all named plaintiffs in a class action. See Abrams Shell , 165 F.Supp.2d at 1107 n. 5. Proper venue for the RESPA claims cannot be determined solely by relying on the subject properties' location because Plaintiff Henson's property is located in Bakersfield-which is in the EDC-and Plaintiff Turner's property is located in Los Angeles- which is in the CDC. It is clear that venue is proper in this Court for Plaintiff Henson's claims because her property is located within this District and Division. The same cannot be said for Plaintiff Turner. The Court must determine where the alleged RESPA violation(s) occurred in order to determine whether this District and Division is a proper venue for Plaintiff Turner's claims.
Plaintiffs argue that this District is the proper venue for both Plaintiffs regardless of their respective properties' location because the RESPA violation on which their claims rely occurred in the EDC. Plaintiffs argue that the EDC "is the only district where jurisdiction and venue exists over both of the [P]laintiffs' claims." Pl. Opp. to MTCV, at p. 4 (italics added, underline in original). The complaint alleges violations of 12 U.S.C. Sections 2607(a) and (b). Compl. at ¶¶13-21, 25. Section 2607(a) provides that "[n]o person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding... that business incident to or a part of a real estate settlement service... shall be referred to any person." 12 U.S.C. §2607(a). Section 2607(b) provides that "[n]o 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... other than for services actually performed." 12 U.S.C. §2607(b). According to Plaintiffs, the RESPA violation that forms the basis of this complaint and establishes venue in this District is the referral to Defendant's subsidiaries that ultimately led to the unlawful payments made to Defendant. Pl. Opp. to MTCV, at p. 2, 4.
A. The Referral is Not a RESPA Violation
Defendant allegedly circulated a number of "Rate Compliance Memoranda" ("RC Memoranda") from its compliance department. The memoranda allegedly directed Defendant's subsidiaries to utilize the delivery services of UPS, Federal Express, and OnTrac. Compl. at ¶17. Gia Lonza, Senior Vice President and Director of Rate Compliance and AG Centralization at Fidelity National Title Group, Inc., prepared the memoranda. Compl., Ex. B, Lonza Decl. at ¶1. Ms. Lonza's declaration identifies herself as the author of the RC Memoranda "which are continually updated, revised, and when necessary replaced." Compl., Ex. B, Lonza Decl. at ¶2. A total of six RC Memoranda and RC Memoranda Amendments are identified in Ms. Lonza's declaration with dates ranging from December 1, 2005, to February 18, 2010. Compl., Ex. B, Lonza Decl. at ¶¶4-9. The RC Memoranda were apparently issued by Ms. Lonza from Rancho Cordova, California, which is located in Sacramento County in the Sacramento Division of the EDC. Plaintiffs argue that the issuance of the RC Memoranda is a "referral" and it is this referral that constitutes a RESPA violation. Pl. Opp. to MTCV, at p. 4-7. According to Plaintiffs, the referral was made within the EDC, which makes EDC the district "where the violation is alleged to have occurred." 12 U.S.C. §2614. The Court respectfully finds that Plaintiffs are incorrect.
Simply making a referral is not a RESPA violation. Section 2607 does not prohibit referrals for real estate settlement services altogether. See 12 U.S.C. §2607. Rather, Section 2607(a) makes it unlawful for a person to " accept any fee, kickback, or thing of value" in connection with a referral agreement. 12 U.S.C. §2607(a) (emphasis added). It is the acceptance of a fee, kickback, or thing of value that is prohibited, not the making of a referral itself.
The Supreme Court addressed a similar issue of statutory construction in determining the scope of Section 2607(b) in Freeman v. Quicken Loans, Inc. , 132 S.Ct. 2034 (2012). Section 2607(b) prohibits the acceptance of "any portion, split, or percentage" of a real estate settlement service fee unless services were actually rendered. 12 U.S.C. §2607(b). The question before the Supreme Court in Freeman was whether Section 2607(b) prohibited a single settlement service provider from collecting unearned fees-including overcharges for services-or whether the statute required the fee to be shared with one or more other persons who did nothing to earn the shared fee. Freeman , 132 S.Ct. at 2039. The Supreme Court held that "[Section] 2607(b) unambiguously covers only a settlement-service provider's splitting of a fee with one or more other persons." Freeman , 132 S.Ct. at 2040.
In reaching this conclusion, the Supreme Court examined the language of Section 2607(b) and identified two separate transactions that are necessary for Section 2607(b)'s operation. "First, a charge' is made' to or received' from a consumer by a settlement-service provider. That provider then give[s], ' and another person accept[s], ' a portion, split, or percentage' of the charge." Freeman , 132 S.Ct. at 2040. By not engaging in the second transaction, i.e., not splitting the unearned fee, a settlement service provider may keep the entirely of an unearned fee without violating RESPA. See Freeman , 132 S.Ct. at 2044 ("In order to establish a violation of [Section] 2607(b), a plaintiff must demonstrate that a charge for settlement services was divided between two or more persons"); see also Boulware v. Crossland Mortg. Corp. , 291 F.3d 261, 265 (4th Cir. 2002). Simply charging a fee and keeping it does not violate RESPA, even when no services are provided in connection with that charge.
Because it is not a violation of Section 2607(b) for a person to charge a fee without actually performing any services (so long as that fee is not split with another), it appears that simply making a referral is not a violation of Section 2607(a) unless a "fee, kickback, or thing of value" is "give[n]" or "accept[ed]" for the referral "pursuant to any agreement or understanding." 12 U.S.C. §2607(a); see Freeman , 132 S.Ct. at 2044; see also Boulware , 291 F.3d at 265 n. 3 ("the presence of an overcharge alone, without any portion of the overcharge being kicked back to or split with a third party, is not sufficient to fall within the purview of [Section 2607(b)]."). In contrasting the coverage of subsections (a) and (b), the Supreme Court has noted that Section 2607(a)'s prohibition "applies to the transfer of any thing of value'" and "requires an agreement or understanding' to refer business." Freeman , 132 S.Ct. at 2043. More is required for a violation of Section 2607(a) than a referral by itself; there must be a transfer of something of value, i.e., a kickback. See Freeman , 132 S.Ct. at 2043 ("Subsection (a) prohibits certain kickbacks (those agreed to in exchange for referrals).") (emphasis added). A Section 2607(a) violation is the acceptance of a kickback in exchange for a referral, not the referral standing alone.
This interpretation is bolstered by the fact that both subsections (a) and (b) begin with the same phrase: "[n]o person shall give and no person shall accept any...." 12 U.S.C. §2607. It is the "giv[ing]" or "accept[ing]" a portion of an unearned fee that is necessary to find a violation of Section 2607(b). Freeman , 132 S.Ct. at 2040. Likewise, it is the "giv[ing]" or "accept[ing]" a kickback that is necessary to find a violation of Section 2607(a). Both subsections require a defendant to "give" or "accept" something in order to find a RESPA violation. Plaintiffs seem to acknowledge this requirement in their complaint by framing the RESPA violations as follows:
40. [Defendant]'s acceptance of payments incident to or a part of real estate settlement services involving federally related mortgage loans pursuant to the "master" agreements between [Defendant's] chosen overnight delivery companies and [Defendant] constitutes an unlawful kickback or referral fee in violation of Section 8(a) of RESPA (12 U.S.C. §2607(a)). 41. [Defendant]'s acceptance from chosen overnight delivery companies of payments of a portion, split, or percentage of settlement service charges incident to or a part of real estate settlement ...