United States District Court, W.D. Kentucky, Louisville
Charles R. Simpson III, Senior Judge
matter is before the Court on the motion of Defendants
Borders & Borders, PLC, Harry Borders, John Borders, Jr.,
and J. David Borders (collectively, “Borders &
Borders”) for summary judgment under Federal Rule of
Civil Procedure 56(a), ECF No. 128. Plaintiff the Consumer
Financial Protection Bureau (“the Bureau”)
responded, ECF No. 137. Borders & Borders replied, ECF
Bureau filed a motion for partial summary judgment, ECF No.
129. Borders & Borders responded, ECF No. 140. The Bureau
replied, ECF No. 148.
& Borders also moved to strike the declarations of
Kirsten Ivey-Colson and Ryan Thomas, which were submitted in
support of the Bureau's motion for partial summary
judgment, ECF No. 138. The Bureau responded, ECF No. 144.
Borders & Borders replied, ECF No. 151.
these motions concern similar facts and issues, the Court
will address them in a single memorandum opinion and order.
For the reasons explained below, the Court will grant Borders
& Borders' motion for summary judgment. The Court
will deny the Bureau's motion for partial summary
judgment. The Court will also deny Borders & Borders'
motion to strike the declarations as moot.
The Regulatory Framework of the Real Estate Settlement
Procedures Act (RESPA)
enacted the Real Estate Settlement Procedures Act (RESPA), 12
U.S.C. § 2601, et seq., in 1974. Carter v.
Welles-Bowen Realty, Inc., 736 F.3d 722, 725 (6th Cir.
2013). RESPA regulates real estate “settlement
services.” Id. Settlement services include
checking a real estate title for its validity, obtaining a
pest control company to check for termites on the property,
and retaining an attorney to check the sales contract for
leading provision, Section 8(a), prohibits people from giving
and receiving “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 involving a federally related mortgage loan shall be
referred in any person.” 12 U.S.C. § 2607(a).
Persons who violate the anti-kickback provision of RESPA face
up to one year in prison, civil liability, and/or public
enforcement actions. Id. § 2607(d). While the
United States Department of Housing and Urban Development
(HUD) once was responsible for public enforcement actions
under RESPA, later legislation transferred this role to the
Bureau. Carter, 736 F.3d at 725.
1983, in response to uncertainty about RESPA's
application to referrals among affiliated companies, Congress
enacted a safe harbor provision. Id. This provision
shelters “affiliated business arrangements.” 12
U.S.C. § 2607(c)(4). To qualify for the safe harbor
provision, the business arrangement must be disclosed to the
person being referred to an affiliated business, “such
person is not required to use any particular provider of
settlement services, ” and “the only thing of
value that is received from the arrangements . . . is a
return on the ownership interest or franchise
relationship.” Id. The safe harbor provision
[T]he following shall not be considered a violation of clause
(4)(B): (i) any arrangement that requires a buyer, borrower,
or seller to pay for the services of an attorney, credit
reporting agency, or real estate appraiser chosen by the
lender to represent the lender's interest in a real
estate transaction, or (ii) any arrangement where an attorney
or law firm represents a client in a real estate transaction
and issues or arranges for the issuance of a policy of title
insurance in the transaction directly as agent or through a
separate corporate title insurance agency that may be
established by that attorney or law firm and operated as an
adjunct to his or its law practice.
Id. § 2607(c).
Borders & Borders
& Borders is a family-owned law firm that primarily
performs residential real estate closings in Louisville,
Kentucky. Borders & Borders' Mem. Supp. Mot. J. on
the Pleadings 4, ECF No. 20-1. J. David Borders established
the law firm in 1971. Id. His sons, Harry Borders
and John Borders, Jr., currently manage and operate the law
firm. Id. Borders & Borders employs six
attorneys and nineteen staff members. John D. Borders, Jr.
& Harry B. Borders Decl. ¶ 2, ECF No. 128-3.
hire Borders & Borders to prepare real estate conveyance
and mortgage documents, and to conduct real estate closings.
Borders & Borders' Mem. Supp. Mot. J. Pleadings 4,
ECF No. 20-1. Borders & Borders is also an authorized
agent to issue title insurance policies for First American
Title Insurance Company, Old Republic National Title
Insurance Company, Chicago Title Insurance Company, and
Commonwealth Land Title Insurance Company. John D. Borders,
Jr. & Harry B. Borders Decl. ¶ 2, ECF No. 128-3. The
law firm is a member of the American Land Title Association.
John D. Borders, Jr. & Harry B. Borders Decl. ¶ 2,
ECF No. 128-3.
Borders & Borders' Relationship with the Title
2006, Borders & Borders established joint ventures with
principals of nine real estate service providers in
Louisville, id. ¶ 26, including (1) Associates
Home Title, LLC, (2) Catalyst Title, LLC, (3) East Title,
LLC, (4) KMT Title, LLC, (5) Leo Title, LLC, (6) My Kentucky
Home Title, LLC, (7) Opia Title, LLC, (8) TBD Title, LLC, and
(9) WS Title, LLC. Borders & Borders' Resp. HUD Info.
Request 2, ECF No. 129-5. Harry Borders was mostly
responsible for the creation of these nine joint ventures
(the “Title LLCs”). Harry Borders Dep. 17, ECF
No. 129-10. Harry Borders also identified at least one
principal as a good match for a joint venture partner. John
D. Borders, Jr. Decl. 25, ECF No. 129-8.
the joint venture partners testified that Borders &
Borders described the Title LLCs as partnership agreements
through which real estate title insurance would be offered to
home buyers. Parks Dep. 7, ECF No. 129-19. More specifically,
the Title LLCs served as title insurance agencies in real
estate closings when the lenders did not maintain an
internal, lender-owned title agency. John D. Borders, Jr.
& Harry B. Borders Decl. ¶ 27, ECF No. 128-3. When
Borders & Borders closed on a transaction for a lender
without an affiliated title agency, Borders & Borders
referred the title insurance underwriting to the Title LLC
affiliated with the real estate agent involved in the
underlying transaction. Id. ¶ 35.
relationship between Borders & Borders and the Title LLCs
was disclosed to the borrowers and buyers when Borders &
Borders referred them to the Title LLCs to obtain title
insurance. Id. ¶ 37. Borders & Borders gave
an Affiliated Business Arrangement Disclosure Form
(“the standard disclosure form”) to borrowers and
buyers at the closings. Id. ¶ 40. The borrowers
and buyers had 30 days from the date of the closings to
decide whether to purchase owner's title insurance from
the Title LLCs. Id. Between October 24, 2009 and
February 2011, the Title LLCs issued more than 1, 000 title
insurance policies for more than 700 real estate closings.
Id. ¶ 38.
Borders, Harry Borders, and John Borders, Jr. were 50% owners
of each of the Title LLCs. Id. ¶ 29. The
venture partners held the remaining 50% ownership in the
Title LLCs. Id. One venture partner explained that
the members of her affiliated Title LLC, including Borders
& Borders, would meet once a year to complete necessary
tax-related paperwork. Parks Dep. 8, ECF No. 129-19.
Title LLC had a written operating agreement, was authorized
to conduct business in Kentucky, was approved by either
Chicago Title Insurance Company or Old Republic National
Title Insurance to issue title insurance policies, was
subject to audit, had a separate operating banking account,
had a separate escrow banking account, maintained an errors
& omissions insurance policy, issued lender's and
owner's policies, had operating expenses, generated
revenue, made profit distributions, ...