Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 80-C-5789 -- James B. Moran, Judge.
Eschbach, Circuit Judge, Swygert, Senior Circuit Judge, and Dumbauld, Senior District Judge.*fn** Posner, Circuit Judge, with whom Cudahy, Circuit Judge, joins, dissenting from the denial of rehearing en banc.
This action was brought under § 10 of the Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. § 2609 (1976), and included a pendent state claim under § 2 of the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stat. ch. 121 1/2, § 262 (1981). The district court, 535 F. Supp. 828, dismissed the complaint, concluding that there is no implied private right of action under § 10 of RESPA. For the reasons below, we affirm.
On October 16, 1980, the appellant, Karen Allison, purchased a home in Chicago, financed in part by a loan from Liberty Savings ("Liberty"), the appellee. At the closing, Liberty required Allison to deposit in a tax escrow account an amount which was approximately $250.00 more than allowed under § 10 of RESPA.
On October 29, 1980, Allison brought this action individually and on behalf of other similarly situated borrowers from Liberty forced to make excessive tax escrow deposits. The complaint was dismissed prior to class certification. Count one of her complaint was based on § 10 of RESPA; count two was a pendent state claim.
Liberty filed a motion to dismiss and a memorandum arguing, inter alia, that there is no private cause of action under § 10 of RESPA. Liberty later filed an affidavit from Roy Litten which stated that he was an examiner with the Federal Home Loan Bank Board ("Bank Board") and that the Bank Board examines federally insured savings and loan associations for compliance with RESPA. Allison moved to strike the affidavit. The trial court reserved ruling on the motion and granted Liberty's motion to stay discovery.
Allison sent a copy of her complaint to the Bank Board in March, 1981. In September, 1981, the Bank Board determined that Liberty had violated § 10 of RESPA and ordered Liberty to refund excess deposits to its borrowers, including Allison. Liberty moved to supplement its motion to dismiss with copies of correspondence with the Bank Board. Allison objected, requesting the court to strike all factual materials submitted by Liberty, or alternatively, to allow her to conduct discovery and to submit her own materials. The court did not rule on these motions, but instead dismissed the complaint, concluding that Allison had no private cause of action under § 10 of RESPA.
Allison raises two issues on appeal. She first contends that the district court erred in holding that there is no private cause of action under § 10 of RESPA. She also asserts that the district court erred in considering evidentiary materials submitted by Liberty in granting Liberty's motion to dismiss. We need not reach the second issue, since we hold that there is no private right of action under § 10 of RESPA without considering any of the evidentiary materials submitted by Liberty.*fn1
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, 60 L. Ed. 874, 36 S. Ct. 482 (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, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (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. 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, 62 L. Ed. 2d 146, 100 S. Ct. 242 (1979); Touche Ross & Co. v. Redington, 442 U.S. 560, 575, 61 L. Ed. 2d 82, 99 S. Ct. 2479 (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. The Supreme Court's most recent case addressing the issue reaffirms the centrality of congressional intent. Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 377-379, 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; Touche Ross & Co. v. Redington, supra, 442 U.S. at 568. 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 §§ 6 (now repealed), 8 and 9, which explicitly create private causes of action.*fn2 "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. We recognize that the private remedies provided in §§ 8 and 9 are extraordinary, utilizing a treble liquidated damage formula that a court could not invoke unless explicitly created by Congress.*fn3 But the remedy in § 6 was a fairly straightforward ...