Augenstein v. Coldwell Banker: Appraising the Decision

The Real Estate Settlement Procedures Act (RESPA) provides a framework for protecting home buyers. But the law, no matter how well-intended, can be effective only if the justice system reinforces legislation. The recent Augenstein decision demonstrates how this ought to work.

In 2009, when Jeffrey and Stephanie Augenstein purchased real estate in Delaware County, Ohio, they were billed for settlement services by NRT Columbus, LLC, doing business as Coldwell Banker King Thompson. Among the charges was an administrative fee of $199, separate from the broker commission of 3 percent of the sale price. When the lawsuit was filed in 2010, the Augensteins contended that the administrative fee was a charge for which no specific service was performed by the brokerage firm, and thus a violation of section 8(b) of RESPA (12 USC §2601-2617).

Coldwell Banker initially asked the U.S. District Court for the Southern District of Ohio to dismiss the lawsuit, but that motion was denied. Both sides then asked for summary judgment. The court agreed that, because the decision depended entirely on an interpretation of the statute, it was possible to forego a jury trial. The key element thus became the court’s judgment that “the text of RESPA §8(b) clearly and unambiguously prohibits undivided unearned fees.” Given that the defendant could not link the $199 administrative fee to any specific services performed on behalf of the Augensteins, the court issued a summary judgment for the plaintiff.

The Augensteins filed their lawsuit on behalf of a nationwide class of similarly situated borrowers who paid an administrative fee in connection with federally related mortgage
loans. In the future, then, this case becomes the vanguard of potential class-action lawsuits. Although the decision in the Augenstein case sets a precedent only in the Sixth Circuit (Kentucky, Michigan, Ohio, and Tennessee), rulings within other federal courts have often adopted a similar view of the RESPA law.

Anapol Schwartz hopes to continue its role in assisting consumer protection through class action lawsuits, and opposing these real estate “junk fees” will give substantial relief to new homeowners. If you believe you have been a victim of such a charge on your home purchase, call Anapol Schwartz partner Barry Hill toll-free at (866) 706-1477.